CONTENTS. Consilium s interim reports are available at

Transcription

1 ANNUAL REPORT 2016

2 CONTENTS 03 The year in brief 04 Group overview 06 Consilium s value creation 10 Consilium s market organisation 12 CEO statement 15 Marine & Safety business area 19 Safety Engineering business area 22 Share information 24 Multi-year overview and glossary 25 Key figures and definitions 26 History 27 Board of Directors report 30 Financial statements, Group 34 Financial statements, Parent 38 Accounting policies 42 Notes 55 Auditor s report 57 Corporate governance 61 Auditor s statement 62 Consilium s Board 63 Consilium s Management 64 Addresses Consilium s Annual Report is published in Swedish and English. The Annual Report is available for download at A printed version of the Report will be distributed to shareholders and other stakeholders who have registered their interest to the Company. The Annual Report can also be ordered from info@consilium.se. Consilium s interim reports are available at This annual report has been prepared in Swedish and translated into English. In the event of any discrepancies between the Swedish and the translation, the former shall have precedence.

3 THE YEAR IN BRIEF THE YEAR IN BRIEF +5 % -19 % +10 % Consilium s net sales increased by 5 percent to SEK 1,643.2 (1,565.5) million. Operating profit (EBIT) declined by 19 percent to SEK (175.2) million. The order intake increased by 10 percent to SEK 1,654.1 (1,497.7) million. The Board proposes a cash dividend of SEK 2.00 (2.00) per share. QUARTERLY OVERVIEW Q1 The order intake increased by 12 percent to SEK (407.0) million. Net sales increased by 8 percent to SEK (365.9) million. Operating profit (EBIT) amounted to SEK 38.4 (45.0) million. Consilium issued corporate bonds, with a nominal value of SEK million, to finance continuing growth and acquisitions. Q2 The order intake increased by 24 percent to SEK (306.5) million. Net sales increased by 1 percent to SEK (384.9) million. Operating profit (EBIT) amounted to SEK 34.1 (48.9) million. Consilium acquired 79 percent of the shares in the Scottish flame detection company Micropack, with an option to acquire the remaining shares. Q3 The order intake increased to SEK (363.0) million. Net sales increased by 11 percent to SEK (347.7) million. Operating profit (EBIT) amounted to SEK 34.2 (38.5) million. Consilium gains market shares in a weaker market. Q4 The order intake increased by 8 percent to SEK (421.2) million. Net sales increased by 1 percent to SEK (467.0) million. Operating profit (EBIT) amounted to SEK 35.1 (42.8) million. Consilium s large product and market investments in the oil and gas markets increased costs. 03

4 GROUP OVERVIEW A GLOBAL SAFETY COMPANY Consilium is a global safety company that develops, manufactures and markets products and systems in the area of fire safety. Operations are conducted in two business areas Consilium Marine & Safety and Consilium Safety Engineering. Consilium has operations in 26 countries around the world and more than 90 percent of sales are outside Sweden. Consilium has a world-leading position in several niches. OFFERING Consilium provides products and systems that are used to protect lives, material values and the environment. Consilium s entire offering is based on delivering high-quality products and systems to customers who need to protect large and complex environments with high material values or large numbers of people. With a global market organisation, Consilium can offer its customers local service and support wherever in the world they are. The Company s vision is for customers to make Consilium their choice when safety matters. Consilium Group Order intake, SEK million 1, , ,460.0 Net sales, SEK million 1, , ,255.3 EBITDA, SEK million EBIT (operating profit), SEK million EBT, SEK million 2) Operating margin, % Profit margin, % 2) Return on operating capital, % Return on equity, % 3) Equity/assets ratio, % Earnings per share, SEK 1) 4) Comprehensive income per share, SEK 1) 4) Capital expenditure, SEK million Number of employees Number of employees in associates ) Excl. non-controlling interests 2 Incl. non-recurring costs of SEK 17.5 million for early redemption of corporate bond in ) Adverse effect of 3.4 percentage points due to non-recurring costs for early redemption of corporate bond in ) Adverse effect of SEK 1.17 per share due to non-recurring costs for early redemption of corporate bond in MARINE & SAFETY Business area Marine & Safety specialises in products and systems for fire and gas detection on board vessels, offshore facilities in the oil and gas industry, trains and metros, and properties with high protection values. Consilium s solutions can detect and warn of heat, smoke, gas, flames and oil mist, and are aimed at preventing and controlling fires through early detection, thereby saving lives and material values. 04

5 GROUP OVERVIEW Consilium s overall strategy is to focus operations on selected niches and to achieve a world-leading position in those niches. SAFETY ENGINEERING The Safety Engineering business area mainly offers fire safety solutions for tank farms, refineries, oil and production platforms, petrochemical plants, power plants, hangars, terminals and warehouses with high protection values. Consilium s offering is focused on fire extinguishing using systems based on water, foam and gas, and special solutions for particularly complex environments. With the support of risk analysis and prevention systems, the goal is to prevent and control the effects of fires, thereby saving lives and large material values. GLOBAL PRESENCE Consilium has about 1,000 employees at 63 offices in 26 countries. The global market organisation provides Consilium s customers in each business area with products and systems, parts, service and support. In addition to Consilium s own organisation, operations are also supported by 90 employees in Consilium s different associates and by external sales and service representatives. Consilium is constantly strengthening its global presence through new market establishments as part of its business development. Marine & Safety Safety Engineering 1, , Order intake, SEK million Net sales, SEK million Operating margin, % Order intake, SEK million Net sales, SEK million Operationg margin, % 05

6 CONSILIUM S VALUE CREATION GOALS AND STRATEGIES BUSINESS CONCEPT Consilium s business concept is to develop and market products, systems and services that are used to protect lives, material values and the environment. The business concept is supported by the philosophy of global sales with a local presence, and offering customers the best service and support on the market. Consilium focuses its operations on areas where the Company can achieve a world-leading position. The Company s strategy is the basis for developing Consilium into a global growth company. Consilium currently has operations that primarily offer fire safety products and fire safety systems areas in which the Company has long experience, advanced knowledge and in many cases a leading position within selected niches. GOALS Background In its early years as a listed company, from 1994 onwards, Consilium developed a large number of different operations. In the period , the Company restructured its operations, with a focus VISION To be the customer s first choice When Safety Matters on growth in selected areas and from 2005 to 2008, Consilium achieved average annual growth of 20 percent. From 2009 to 2012, Consilium s markets were affected by a weakened global economy, which required efficiency improvements and cost control. At the same time, Consilium invested time and capital in a number of business development projects, the results of which included an expanded market organisation and a new business area. During the period , Consilium returned to growth, with an average of more than 20 percent. In 2016, Consilium noted weaker demand in several market segments, resulting in a weaker growth rate. However, Consilium has continued its investments in order to maintain sustainable profitable growth. 06

7 CONSILIUM S VALUE CREATION Consilium s overall goal is to create value for shareholders. GROWTH GOAL Consilium s goal is to increase net sales with average annual growth of over 10 percent during the period through a combination of organic growth, partnerships and acquisitions. Growth, % Target >10% on average, Overall goal Consilium s overall goal is to create value for shareholders. This will be achieved by building on the Group s expertise, global market organisation, long experience and innovative ability, and by being a leader within selected market and product segments. Qualitative goal Consilium s qualitative goal is to offer the best customer value on the market. The qualitative goal means that Consilium s offering must be characterised by high quality, good functionality, a high delivery performance, and global service and support. PROFITABILITY GOAL Operatin margin, % STRATEGIES Consilium s goal is to achieve an operating margin of at least 12.5 percent before RETURN GOAL Consilium s goal is to achieve an average annual return on operating capital of at least 17.5 percent in the period by improving operating profit and reducing tied-up capital Target 12,5% Return on operation capital, % Target 17.5% on average, Consilium has a strong base to grow on, with a market-leading offering and a global market organisation. Profitable growth will be created organically and through acquisitions, partnerships and alliances. Growth initiatives will be focused on product and market areas where Consilium has a world-class position or has the potential to take such a position. Consilium s overall strategies are to: stand for quality and reliability be an innovative supplier, at the forefront of technical development further develop and expand the global presence evaluate acquisitions and be an active part of structural changes in the market seek value-creating alliances and partnerships constantly strive to improve the Company s processes, productivity and efficiency be an attractive employer and continuously improve the Group s collective expertise. 07

8 CONSILIUMS VÄRDESKAPANDE ACQUISITIONS IN 2016 In April 2016, Consilium acquired percent of the shares in the Scottish fire safety company Micropack (Engineering) Ltd, with the subsidiary Micropack Detection (Americas) Inc. Micropack develops and sells flame detection systems and advanced fire and gas safety services to the oil and gas industry. The acquisition complements and strengthens Consilium s range of advanced fire safety systems in several market segments. Micropack also brings Consilium advanced safety expertise for fire and gas detection in demanding environments. The acquisition of Micropack also strengthens the Group s global market organisation, with new offices in Scotland and the United States. In April 2016, Consilium acquired a 30 percent shareholding in the Swedish electronics company Foab Production AB. Foab provides development, industrialisation and production of circuit boards, wiring and control panels and brings Consilium increased influence over key components in present and future offerings. In June 2016, Consilium increased its shareholding in the company Consilium Säkerhet Syd AB from 30 percent to percent. Consilium Säkerhet Syd AB sells, designs, installs and provides servicing for fire alarms for large buildings for clients with high safety and reliability requirements. The acquisition strengthens Consilium s position for future expansion in the land market. STRATEGIES FOR ACQUISITIONS AND PARTNERSHIPS Product and system organisation Product companies Backward integration CONSILIUM Forward integration Local sales and service companies Acquisitions / Partnerships Acquisitions / Partnerships Market organisation Consilium s strategy for acquisitions and partnerships is aimed at integrating operations, both forward and backward in the value chain. The majority of Consilium s growth should be organic. In addition to organic growth, Consilium may also grow through acquisitions and partnerships. Consilium primarily seeks acquisition candidates, or strategic partnerships, that meet one or more of the criteria listed below. 1. Offering products, systems or unique expertise that complement Consilium s offering in existing niche segments. 2. Market companies that can strengthen Consilium s global presence. In all acquisitions and partnerships, Consilium looks for opportunities to increase revenues and/or improve margins and profitability through synergies. Consilium prioritises companies with a turnover of between SEK 25 and 250 million when making acquisitions. Even small acquisitions can be made if they are strategically important. 08

9 CONSILIUM S VALUE CREATION Consilium s growth will be primarily organic. Organic growth is complemented by partnerships and acquisitions. BUSINESS DEVELOPMENT Consilium works actively on business development, which is a priority area and an important factor for the Company s sustainable development and growth. Business development is organised centrally, but is implemented using the Group s collective market and technology expertise. Consilium constantly conducts initiatives, based on its knowledge and experience, and invests major resources in selected focus areas. Consilium normally works on a number of business development projects in parallel. Previous projects include investments in products and services for the onshore oil and gas industry, which are now a separate business area in Consilium Safety Engineering. Other examples include the development of a strong global market organisation, development of fire alarms for trains and other rolling stock, development of a common technical platform for Consilium s offering and work to certify safety functions for future systems according to the SIL2 standard for the offshore industry and RAMS for the rail industry. JOINT VENTURES AND ASSOCIATES Some of Consilium s operations are conducted in jointly-owned companies. Several of these are joint ventures or associates. Joint ownership may be a result of the former owner s wish to continue as a joint owner or Consilium s assessment that it made business sense to retain the local contractor in the company in an acquisition. The model has been successful so far and represents a strategic option for all potential acquisitions. Consilium s existing joint ventures and associates are either local market companies or product companies. All jointly-owned companies are part of the Consilium family and they function, and are managed, in the same way as other Group companies. Consilium s joint ventures and associates have total sales of over SEK 200 million and 90 employees. Consilium s ownership of the jointly-owned companies is between 30 and 50 percent. In line with current financial reporting regulations, only the companies profit/loss after tax is reported in Consilium s financial statements. Consilium also has contractors as minority shareholders in some of its consolidated companies. MANAGEMENT OF BUSINESS RISKS Effective risk management is an important parameter for Consilium s sustainable growth and profitability development. In common with other companies, Consilium faces a number of different risk scenarios, and an overall description of management of the Group s risks can be found in note 13. Consilium s business risks include the risk of over-exposure to individual industries, companies or geographical markets. Risk management is a natural parameter in Consilium s business development and it is the Company s assessment that the operations of the Marine & Safety business area have a balanced risk spread across countries, regions, industries, segments and customers. Sales to the marine market have, for example, a good risk spread between new construction and the aftermarket, and between different types of vessels. Sales to trains and metros are another example where demand is not as cyclical as for the marine market, but is driven mainly by different countries infrastructure investments. In the Safety Engineering business area, the investment appetite of Consilium s customers is affected to a relatively large extent by the price of oil and gas. Sales of safety systems to the oil and gas industry were adversely affected by a decline in oil prices during The power industry has different drivers and the major need for electricity generation means that demand is increasing globally. Consilium invests continuously in new geographical markets and in new offerings in order to reduce its relative risk exposure in the business area and achieve a balanced risk spread. 09

10 CONSILIUM S MARKET ORGANISATION OPERATIONS IN 26 COUNTRIES AROUND THE WORLD Consilium s global market organisation is one of the Group s strongest competitive advantages, and about 93 percent of sales are to markets outside Sweden. The market organisation is under constant development and encompassed 63 offices in 26 countries around the world at the end of the year. Consilium s market organisation is responsible for marketing and customer development, and sales of products and systems, spare parts, services, project planning and local service and support. The process of building a global presence with Consilium s own companies and offices has been one of the key strategies for a long time and is an important part of the Group s business development. The market organisation currently encompasses 63 offices in 26 countries around the world. The market offices have at their disposal the business areas product organisations, which contribute with development, production, maintenance and purchasing of products and systems, and also Consilium s Group-wide administrative functions. GLOBAL OFFERING REQUIRES LOCAL PRESENCE Consilium is a global leader in several of its niche segments and the Company s offering extends to customers across the world. In many cases, global success requires representation in each local market, as business culture and traditions and market structure can differ from one part of the world to another. With its own offices, Consilium can offer high flexibility, short decision-making channels and a customer focus that is adapted to local conditions. Expanding the global reach is a key element of Consilium s business development and the Company endeavours to increase its presence through both organic and acquisitive growth. The market organisation is currently large enough to enable the establishment of new offices with the support of the existing organisation, which facilitates further organic expansion. Acquisitions may still take place when this is strategically appropriate and there is a clear business logic, such as entry into a new geographic market in parts of the world where Consilium is not established Geographical distribution of net sales 2016 Asia 54% Europe (excl. Sweden) 27% North America 8% Sweden 7% Other markets 4% with its own company. Consilium is already developing markets where it does not yet have its own presence, or has a limited presence, through sales and service representatives. TWO BUSINESS AREAS TWO ORGANISATIONS Consilium s global market organisation has been built up over a long period. Initially, work was concentrated on the Company s marine offering within the Marine & Safety business area, which was gradually supplemented by all the business area s applications. When Consilium established the Safety Engineering (formerly Fire safety & Automation) business area, Marine & Safety s organisation functioned as a base for the new business area s geographical expansion. Today, Consilium is investing in the development of two parallel market organisations. In some areas, there are 10

11 CONSILIUM S MARKET ORGANISATION Consilium s market organisation spans every time zone, and the Company conducts operations 24 hours a day, 7 days a week. synergies between the organisations, and although some business relationships can be shared, the business areas often have different end customers, with separate marketing, sales and delivery. Marine & Safety s businesses are mainly geared towards shipyards and shipping companies, offshore companies, manufacturers of trains and metros and large property owners. Shipyard customers often prefer to work with a local partner and in some cases this may be a requirement. This is also very much the case in the rail industry and protection of property. For their part, shipping companies have vessels that are normally in constant employment on the ocean, and therefore have an interest in expanded global service and support. Customers of Safety Engineering s businesses are primarily engineering companies and contractors in the oil and gas industry, tank terminal owners, oil and gas companies and power companies. The engineering companies and contractors are international players and Consilium s global presence is therefore a strength. The other customers are often state-controlled companies where a local presence, and a local network, is a prerequisite for being able to deliver safety systems and supplementary products and services. Within the offshore oil and gas industry, customers may also include large shipyards in some cases customers where Consilium has already built up a relationship from its marine operations and where the business logic is similar. 11

12 CEO STATEMENT CONSILIUM OFFERS SAFETY SYSTEMS FOR GLOBAL NICHE MARKETS WITH HIGH PROTECTION VALUES OPERATIONS IN 2016 Consilium continued to increase its business volume in 2016, despite a significantly weaker market in several of our market segments. In 2016, the order intake increased by 10 percent to SEK 1,654.1 (1,497.7) million, while net sales increased by 5 percent to SEK 1,643.2 (1,565.5) million. The order backlog increased to SEK million in The number of employees increased to 980 (793). Consilium also has joint ventures and associates, with sales of over SEK 200 million and 90 employees in In 2016, Consilium continued to develop new products and new technical solutions adapted to our niche markets, made acquisitions that complement our product portfolio, invested in new niche segments and established operations in new geographical markets. One example is our major product and market investment in the oil and gas market, which resulted in increased costs of more than SEK 30 million in Another example is our acquisition of the flame detection company Micropack. VISION Today, Consilium is primarily a global safety company in selected niche markets with high protection values, offering our customers innovative solutions with a high level of quality, reliability and service. Our vision is for Consilium to be the customer s first choice when safety matters. STRATEGY AND BUSINESS MODEL Consilium s main focus is on providing and high-quality safety solutions to customers with high safety requirements. We focus on selected niche markets and strive for global growth with high market shares. Consilium has extensive knowledge of fire safety and technical solutions within our niche areas. We have broadened our offering to include everything from consultancy services to complete safety systems, with both fire and gas detection and alarms, and active fire protection, and we also develop special system solutions for our customers. We are increasing our focus on the aftermarket. Consilium gradually integrates operations, both forward and backward, and makes complementary acquisitions of both product companies and market companies. We work in a structured and long-term perspective to develop Consilium s technical expertise and produce more of our own products for customers in our niche areas. We continuously strengthen the global market organisation and improve our customer support. We work continuously to improve cost efficiency. Although the main focus is on safety systems, there is a need for complementary products and systems. Navigation products are an important complement that increases the base for our global marine market organisation. Emission systems to measure exhaust gas emissions are a natural complement to the detection of explosive gases. Instrumentation and automation systems are supplied to large industrial plants. Utility systems are delivered to offshore platforms. GROUP STRUCTURE Operations within Consilium are divided into two business areas: Consilium Marine & Safety and Consilium Safety Engineering. The main markets for the Marine & Safety business area are large vessels, the onshore and offshore oil and gas industry, trains and metros, and properties with high protection values. The main focus is on detection and alarms in high-risk areas, based on the detection of heat, smoke, gas, flames, oil mist, etc., with special systems designed for selected niche markets, and with special certification and approval for the relevant niche markets. With its own global service organisation, Consilium can offer a high level of service. The aim is to prevent and control fires through early detection, thereby saving lives and material values. The main markets for the Safety Engineering business area are the onshore and offshore oil and gas industry, large industrial plants with high protection values and the power industry. The main focus is on extinguishing fires in high-risk areas, using extinguishing systems based on water, foam and gas, and special systems for fire protection in specific environments, and with special certification and approval for the relevant niche areas. The business area s sales of complete fire safety systems 12

13 VD-KOMMENTAR 1,700 1,500 1,300 1, Order intake in relation to net sales Order intake Net sales Xx also include detection and alarm systems. The aim is to prevent and control fires through risk analysis and early detection, and to limit the effects of fires by means of effective fire-extinguishing systems, thereby saving lives and material values. 14 MARKET DEVELOPMENT The order intake for the Marine & Safety business area increased by 8 percent in New orders of commercial vessels declined in 2016 due to current overcapacity. Growth in the global economy is expected to continue in the long term, and the majority of the world s freight is transported by sea. Consequently, the total number of sailing vessels in the world and the volume transported have increased steadily over the last 25 years. Sales to cruise ships and military vessels are expected to show positive growth. Sales to the oil and gas market represent future growth potential, although the market is currently weak. Sales to properties with high protection values are increasing year-on-year. Sales of fire alarms for trains and metros continue to grow. We have generally increased our market shares and built up a large order backlog. Sales to the aftermarket, which account for more than 50 percent of net sales in the Marine & Safety business area, provide a solid foundation and are constantly increasing. One in every two large vessels in the world has a Consilium product on board. With an increasing global transport volume and number of sailing vessels there is more demand for service and support. Old systems are constantly being replaced and upgraded, which in turn increases demand for parts, servicing and services. With specialised vessels having a lifespan of 25 years or more, the aftermarket is of more value than the newbuilding market. Net sales for the Safety Engineering business area increased by 17 percent in Sales mainly consist of fire safety systems for refineries, chemical plants, tank terminals, offshore and power plants. Low oil prices have had a very adverse effect on investments in the oil and gas industry, but global demand for oil and gas continued to increase in Demand for energy and electricity is expected to continue to increase outside the OECD countries. TECHNOLOGY INVESTMENTS A high degree of innovation is a key factor in our long-term competitiveness and continuing growth, and Consilium makes significant investments in product development on an ongoing basis in its niche areas. In the Marine & Safety business area, with the main focus on detection and alarms, a major project aimed at developing and marketing SIL2- and RAMS-approved fire alarm systems for the oil, gas and transport industries has been conducted in recent years. Investments in product development have continued in other niche areas. In 2016, Consilium acquired a flame detection company in Scotland, which further strengthens our competence. In the Safety Engineering business area, with the main focus on complete fire safety systems, work to develop more proprietary products and systems is in progress. We develop products and systems for extinguishing with water, foam and gas, special products in high-value materials and special systems for specific applications. In early 2017, Consilium acquired a US company that provides effective fire extinguishing using compressed air foam systems, which use less water and foam, and are quicker than conventional foam extinguishing systems. MARKET INVESTMENTS Consilium is continuously strengthening its existing global market organisation for sales and after-sales support. Through training and recruitment, we are continuously increasing expertise within the market organisation. Consilium establishes new market offices and makes complementary acquisitions in its niche areas. New market companies were established in South Korea, India and Oman in The acquisition of Micropack in Scotland also resulted in an additional market company in the United States. A new market company was established in Saudi Arabia in early Today, Consilium is a global company, with 93 percent of its sales in markets outside Sweden. We have 63 offices in 26 countries. We continuously adapt to global development. Europe and North America remain major markets for Consilium, but more than 54 percent of net sales in 2016 went to markets in Asia. We see continuing major potential for growth in Asia. Africa is gradually becoming an important market. ORGANISATIONAL DEVELOPMENT There are currently more than 1,000 employees in the Consilium Group, including joint ventures and associates. Consilium has increased its commitment to training. Increasing skills is important, 13

14 CEO STATEMENT New market companies were established in South Korea, India and Oman in but development of cooperation between businesses is equally important. With operations in 26 countries, encompassing many different cultures and languages, a common approach to strategy, goals and values is necessary. Staff are an important resource and success factor for a technical knowledge company like Consilium. Increased resources are invested in skills development within the global organisation. We have loyal employees and a low staff turnover. The strength of the global market organisation, with a large number of operations in many different countries, requires close daily interaction. We summarise our core values as follows: We are one global team, We take responsibility and We deliver. CONSTANT COST EFFICIENCY IMPROVEMENT Consilium constantly seeks to improve its cost structure through more efficient IT solutions and organisational solutions, and through increased production, assembly, project planning and development in low-cost countries. We are continuously looking to exploit the cost advantages that exist between our operations in different countries. Despite increased price competition, the gross margin improved in 2016 compared with the previous year, as a result of cost reductions and efficiency measures. The investment in the oil and gas market has resulted in significantly increased development and sales costs, and we have not been able to report a corresponding increase in revenue in the short term. Other fixed costs have increased less than net sales. While investing and growing, Consilium has made necessary adaptations of the operational organisation in areas with weaker growth, and redistributed marketing resources within and between our companies. INCREASED CONTROL OVER THE ENTIRE VALUE CHAIN Consilium has built up its own global market organisation for sales and after-sales support. We develop several proprietary products, while also acquiring complementary products. We ensure quality through in-house final assembly and testing. At the beginning of 2016, Consilium acquired part of one of our electronics suppliers, thereby increasing our own control over key components, and allowing better cost control of costs and innovation. STRONG FINANCIAL POSITION Consilium has a strong financial position. Cash & cash equivalents and short-term investments amounted to SEK (203.5) million at 31 December In addition, there are pledged cash assets of SEK 41.0 (35.9) million for credit facilities and guarantees. Inventories and trade receivables have decreased relative to net sales, and cash flow from operating activities is good despite capital requirements associated with the large volume increase. Our large investments in product development and acquisitions of companies have had an adverse effect on cash flow in the short term. CUSTOMER VALUE AND SHAREHOLDER VALUE It is our firm belief that our global niche strategy, with a combination of innovative high-quality products and systems, developed and adapted for our niche markets, together with the advanced application knowledge we have built up in these areas and our strong global market organisation, with local service and support, creates value for customers. We are equally convinced that this global niche strategy, and our market and technology investments in line with it, also creates value for shareholders. OUTLOOK FOR 2017 AND LONG-TERM FINANCIAL GOALS Consilium has a record order backlog and a strong financial position. We see continued growth potential for Consilium in the coming years. Safety requirements are increasing globally in all our areas. A large aftermarket and sales to market segments with completely different economic development and investment cycles, give Consilium relatively stable development over time. This stability enables long-term investments in new products and new markets. Consilium continues to create shareholder value through its operations. In the short term, large investments can affect earnings, but in the long term, we are working to achieve defined financial goals. Consilium continues to work in line with the long-term strategy and the long-term financial goals established by the Board. Consilium s growth goal is average annual growth in net sales of over 10 percent in the period Consilium s profitability goal is to achieve an operating margin of at least 12.5 percent by Consilium s return goal is to achieve an average return on operating capital of over 17.5 percent in the period Nacka, April 2017 Ove Hansson President and CEO 14

15 MARINE & SAFETY BUSINESS AREA MARINE & SAFETY BUSINESS AREA In the Marine & Safety business area, Consilium develops, manufactures and markets products and systems for fire and gas detection in high-risk environments. Operations are focused on niche markets with high safety requirements and high protection values, including the shipping industry, the offshore industry, the transport sector and large properties. The business area also includes a division that develops, manufactures and markets navigation products. 91 percent of sales are to markets outside Sweden. OFFERING Marine & Safety SEK millions Order intake 1, ,127.3 Net sales 1, ,100.8 EBITDA EBIT (operating profit) Assets 1, (of which non-current) (of which current) Equity and liabilities 1, (of which equity) (of which liabilities) Operating capital Key figures and financial ratios Share of Group's net sales, % 75,5 70,3 Share of Group's operating profit, % 101,9 93,0 Operating margin, % Return on operating capital, % Number of employees Number of employees in associates Consilium is a world-leading supplier of products and systems for fire and gas detection in different types of high-risk environments. The offering includes a broad portfolio of products that can detect and warn of heat, smoke, gas, flames and oil mist. The aim is to prevent and control fires through early detection, thereby saving lives and material values, and to prevent fires and minimise their negative impact on the surrounding environment. Consilium s products are developed to handle complex and demanding marine environments, and the Company offers detection of fire and gas on board all types of vessels, from small commercial vessels to large cruise ships. Consilium s products are also provided for other applications where the complexity is similar, and the Company has developed products adapted for trains and metro cars, and for properties with high protection values. Consilium has also recently developed a SIL2-approved fire alarm for applications in the offshore industry. The business area also has a division that develops, markets and services speed logs and marine voyage data recorders. 15

16 AFFÄRSOMRÅDE MARINE & SAFETY CONSILIUM CONCENTRATES ITS OFFERING ON FOUR NICHE MARKETS Market segment SHIPPING OFFSHORE INDUSTRY TRANSPORT SECTOR PROPERTY Applications Tankers Cruise ships Cargo vessels Military vessels Supply and support vessels Floating oil rigs Production and accommodation platforms Accommodation vessels Trains Metros Buses Trucks Hospitals and public spaces Large industrial properties Wind turbines CUSTOMERS Consilium concentrates its offering on four main niche markets shipping, the offshore industry, the transport sector and large properties. The largest market segment is the shipping industry and Consilium markets its products in both the newbuilding phase and the after market. Shipyards often make the investment decisions in the area of newbuilding and it is therefore important to appear on a shipyard s makers list. It is also important to have a good relationship with shipping companies in the newbuilding phase, as they often have views about the equipment on board. Virtually all major shipyards and shipping companies can be found on Consilium s customer list and the Company estimates that at least one in every two large vessels in the world has a Consilium product on board. The aftermarket phase consists of replacement products, spare parts, servicing, support and other services. In this phase, the customer is the shipping company that owns the vessel or the management company that is responsible for the vessel. Commercial vessels normally have a lifespan of about 25 years and for certain types of vessels considerably longer. Increased transportation volumes, a higher number of vessels on the seas, technical development and regulatory requirements all mean that demand is increasing continuously and more than half of the business area s net sales are from the aftermarket. Consilium s train and rolling stock customers consist of train manufacturers and different train operators. The offering Geographical distribution of net sales 2016 Sweden 9% Europe (excl. Sweden) 33% North America 10% Asia 47% Other markets 1% 16

17 MARINE & SAFETY BUSINESS AREA Consilium is a world-leading supplier in several of its selected niche segments. is marketed mainly to newbuilding, namely production of new trains, but Consilium also has a complete offering for the aftermarket. Consilium s customers in the area of protection of large properties consist of installation companies performing large construction contracts, large safety companies and companies that supply advanced fire-extinguishing and sprinkler systems. Type installations include protection of large industrial properties, hospitals, schools and hotels. MARKET The need for effective maritime transport is increasing in pace with globalisation and increased trade between emerging countries and other parts of the world. About 90 percent of world trade is transported by ship at some point and there is a close correlation between growth in merchant shipping and growth in world trade. There are about 100,000 commercial vessels in the world and 50,000 of them are part of the international merchant fleet, which is Consilium s main marine market. In addition to these, there are many of other types of vessels, which include cruise ships and ferries, military vessels and specialised vessels, such as supply and support vessels in the offshore sector. The newbuilding market is mainly concentrated on shipyards in Asia, where China, South Korea and Japan are the dominant shipbuilding countries. In certain special segments, there are also some important shipyards in Europe and the United States. The aftermarket is in all respects global, as shipping companies have fleets of vessels in constant motion on the oceans and a ship s needs for servicing and replacement products must be met wherever the ship is located at a particular time. Through its global market organisation, Consilium has a presence with its own personnel in all important shipbuilding and ship-owning countries and in countries that have the largest ports and the most traffic. Other markets are serviced by servicing and sales representatives. The market for trains and other rolling stock is global and the customers are international train manufacturers and train operators in different countries. The market is driven primarily by the establishment of new train systems, notably in emerging markets, and the phasing out of older train systems for replacement by new ones. The market for safety products for large properties is driven both by the need for new buildings and modernisation of existing ones. All Consilium markets are also affected, to different degrees, by regulatory changes and the introduction of various regulations and new legislation. POSITION Consilium is a world-leading supplier in several of its selected niche segments. With a long history, stable products, recognised brands and unique solutions, Consilium has succeeded in creating high or very high market shares. With its global market organisation, Consilium has also built a unique position in the market which covers all market phases, from newbuilding to aftermarket sales, servicing and support across large parts of the world. To maintain sustainable competitiveness, operations are focused on a number of areas that are aimed at offering the best customer value on the market. The overall philosophy is helping customers to succeed. The main components are: 1. Innovation in existing and new offerings. 2. Quality zero error vision through quality-assured development and production. 3. Reliability of supply in terms of effective production and distribution. 4. Service and support first-time fix and local support on a global basis. EVENTS DURING THE YEAR In April, Consilium acquired percent of the shares in the Scottish fire safety Micropack, which develops and sells flame detectors and advanced fire and gas safety services to the oil and gas industry. The acquisition complements and strengthens Consilium s range of advanced fire safety systems in several market segments. In April, Consilium acquired 30 percent of the shares in the Swedish electronics company Foab Production AB, which provides development, industrialisation and production of circuit boards, wiring and control panels. The acquisition brings Consilium increased influence over key components in present and future offerings. In June, Consilium increased its shareholding in the company Consilium Säkerhet Syd AB from 30 percent to percent. Consilium Säkerhet Syd AB sells, designs, installs and provides servicing for fire alarms for large buildings for clients with high safety and reliability requirements. The acquisition strengthens Consilium s position for future expansion in the land market. 17

18 MARINE & SAFETY BUSINESS AREA WORLD-LEADING NAVIGATION PRODUCTS speed indications that a ship uses. The acoustic solution also enables some of Consilium s logs to display the current bottom depth, and the Company was first in the world to introduce an approved combination log that met all regulations and requirements for both log and echo sounder functions. Consilium s solution also makes it possible for certain models to only require one hole in the hull which both increases cost-efficiency of installation and maintenance and provides greater freedom in the design of a ship. Consilium has long experience in developing, manufacturing, marketing and maintaining navigation products and the Company is one of the world s leading suppliers of speed logs and marine voyage data recorders. Consilium s navigation operations are a division in the Marine & Safety business area and the offering is focused on marine voyage data recorders and speed logs. The offering includes products for all types of vessels and environments from icebreakers and submarines to cruise ships and oil tankers. Consilium s products are developed with a focus on easy installation, high reliability and optimum cost efficiency and, if required, they can also be included with other suppliers products to form an integrated bridge system. Customers of Consilium s navigation products are international shipping companies and large shipyards, mainly in Asia and Europe. An important part of Consilium s offering is the sale of replacement products (retrofit), spare parts, servicing, support, and inspections. With deep product knowledge, long experience and global market organisation, Consilium is able to offer both new sales and aftermarket services for its own and external products and systems virtually throughout the world. SPEED LOGS A log is used to measure a vessel s speed and calculate the distance travelled. Consilium s speed logs date back to 1912 when Svenska Aktiebolaget Logg (SAL) established its business. Consilium has a broad portfolio that covers all types of vessels, and the Company s logs are installed on over 20,000 vessels around the world. Over the years, the Company has consolidated its leading position with an offering that is characterised by high quality and innovative solutions. Consilium s solution is based on an acoustic pulse that is sent from the ship. The time taken for the pulse to return in the form of an echo is then measured. Echoes from the seabed give bottom-track speed and echoes from particles in the water give water-track speed the two MARINA VOYAGE DATA RECORDERS A marine voyage data recorder (VDR) is the equivalent of the black box in an aircraft. International rules require ships of a certain size or ships employed for certain activities to be equipped with a VDR. The VDR records and saves important information on a ship s bridge, such as radar data, radio communication and commands on board. The saved data is then available if the ship is involved in an incident that requires investigation. The saved data can also be used for training purposes. Consilium has been one of the world s leading suppliers of marine voyage data recorders since Consilium s voyage data recorders are structured in modules based on the same technical platform, which allows a high degree of flexibility for customer-specific solutions. Easy installation and operation, and low ongoing maintenance needs characterise Consilium s offering. Consilium s marine voyage data recorders can also be monitored remotely, which makes it possible to quickly access information in the event of an incident and to receive ongoing reports on the system status and maintenance needs. 18

19 SAFETY ENGINEERING BUSINESS AREA SAFETY ENGINEERING BUSINESS AREA Within the Safety Engineering business area, Consilium develops, manufactures and markets complete safety systems for active firefighting in high-risk environments. Operations are focused on niche markets with high safety requirements and high protection values, such as the oil and gas, power and offshore industries. 98 percent of sales are to countries other than Sweden. OFFERING Safety Engineering SEK millions Order intake Net sales EBITDA EBIT (operating profit) Consilium is a leading supplier of complete security systems for active firefighting. Consilium s products and services covers everything from preventive solutions to detection, alarms, firefighting and support systems. Consulting services, such as technical calculations, design, risk analysis and training, and servicing and support are also offered in addition to fire safety systems. As a complement to the safety systems, Consilium can also supply automation solutions, instrumentation and electrical systems. Assets (of which non-current) (of which current) Equity and liabilities (of which equity) (of which liabilities) Operating capital Key figures and financial ratios Share of Group's net sales, % 24,5 29,7 Share of Group's operating profit, % 15,2 21,1 Operating margin, % 5 8 Return on operating capital, % 6 12 Number of employees Number of employees in associates 0 0 CUSTOMERS Consilium concentrates its activities on the oil and gas industry, the power industry and the offshore industry. Within each industry, there are a number of different niche markets and areas of application. Consilium offers its systems and services during new construction, extension or conversion of various types of large facilities. Consilium s new construction customers are typically international contractors with overall project responsibility. Several of the large contractors are global players represented by local companies. In the area of extensions, conversions and other services, the customers are often oil, gas or power and energy companies. The majority of these are state-owned. 19

20 SAFETY ENGINEERING BUSINESS AREA Consilium is a leading supplier of complete security systems for active firefighting. MARKET Global demand for energy and electricity drives investments in infrastructure. Oil, gas and coal are the largest sources of energy, and around the world a large number of facilities are being planned and designed. The investment appetite of the oil and gas industry s players decreases with falling oil prices, leading to longer decision-making processes and the postponement of investment decisions. The opposite is normally the case when oil prices rise, and the offshore market follow the same pattern. At the same time, demand for alternative energy sources is generally increasing and new projects are planned in several countries. To meet global demand for electricity, large investments in power plants to increase electricity production are also planned in many parts of the world. Demand for safety systems for different types of facilities remains high, partly because of their high financial value but also as a result of increased safety requirements. Consilium s operations are concentrated on countries and regions that have well-established industries in the areas of oil, gas and other energy sources, or countries that are developing their industry. Most of the world s oil and natural gas reserves are in the Middle East, and that is also where Consilium has large parts of its operations. India and China are planning major investments in power plants and Consilium services this segment from its operations in India. In the offshore segment, Consilium has operations based on extraction in the North Sea through its presence in Norway and through its market companies in China and South Korea. Consilium has invested in building up its global market organisation in the Safety Engineering business area for a number of years. These investments continue and new geographical markets are being added successively. In addition to expanding the presence in existing markets, the US and South America are interesting geographical markets to be evaluated for the future. Geographical distribution of net sales 2016 Sweden 2% Europe (excl. Sweden) 10% North America 3% Asia 74% Other markets 11% 20

21 CONSILIUM CONCENTRATES ITS OFFERING ON THREE NICHE MARKETS Market segment OIL AND GAS INDUSTRY POWER INDUSTRY OFFSHORE INDUSTRY Applications Refineries, petrochemical plants and chemical plants Tank terminals and oil wharves Petrochemical storage and disposal facilities Gas and oil power plants Coal power plants Nuclear power plants Solar, hydro and wind plants Substations and distribution plants Production and exploration platforms Accommodation platforms Floating support units, FPSO/FLNG Helicopter platforms POSITION Consilium has strengthened its market position in recent years as the business has expanded. Through a combination of organic growth and acquisitions, Consilium has gained significant market shares in certain sub-segments. From being a small player, the Company has evolved into an established and respected player, even on a global basis, where Consilium s systems and expertise have a high reputation in the market. An increased market presence through the establishment of more offices is gradually generating increased business opportunities. The Safety Engineering business area focuses on a number of areas in order to further develop its sustainable competitiveness and offer the best customer value on the market: 1. Quality systems with premium products. 2. Reliability with qualified personnel who understand and can resolve customers challenges. 3. Availability local presence combined with global reach. 4. Cost-efficiency through optimised system integration delivered by an efficient organisation. 5. Broad offering with a complete programme of safety systems and services. EVENTS DURING THE YEAR Consilium has continued its investments in the development of new products and systems. In addition, Consilium has invested further in its market organisation through the establishment of new offices in the Middle East, India and South Korea. 21

22 SHARE INFORMATION THE CONSILIUM SHARE Consilium s B shares were admitted to trading on the O list of the Stockholm Stock Exchange in May In 1995, the Company s shares were moved to the A list of the Stockholm Stock Exchange. The shares returned to the O list in spring Following the reorganisation of the Stockholm Stock Exchange, Consilium s shares are now quoted on the Nasdaq Stockholm Small Cap list. Consilium s share capital at 31 December 2016 amounted to SEK 58,511,015, divided into 11,702,203 shares (par value SEK 5). Class A shares (907,490) carry entitlement to 10 votes, while the entitlement for class B shares (10,794,713) is 1 vote. All shares carry equal entitlement to a share of the Company s assets and profits. Liquidity provider In 2008, Consilium signed an agreement with Remium Nordic AB for the purpose of improving the liquidity of the Consilium share. As liquidity provider, Remium ensures a specific spread the difference between the bid and ask price for the Company s shares. At the same time, liquidity is added to the order book by a guaranteed volume of trading in the shares. The aim of the guarantee is to minimise sharp price fluctuations caused by individual transactions and to stimulate trading. For the shareholders, this ultimately means better price information and a more accurate market valuation of the Consilium s shares. Under Nasdaq s regulations, liquidity providers are required to post bid and ask prices to ensure the spread does not exceed 4 percent. The rates must be posted during a minimum of 85 percent of regular trading hours. As the Company has a liquidity provider, the designation (LP) appears next to Consilium on stock exchange lists. The average closing spread was 1.04 percent in Share price development The share increased by 6 percent during the year, starting on SEK and ending on SEK at 31 December In the same period, Consilium s indexes increased as follows: OMX Stockholm (PI) 6 percent, OMX Stockholm Small Cap (PI) 8 percent and OMX Stockholm Industrial Goods & Services (PI) 22 percent. The highest price paid for the Consilium share during the year was SEK and the lowest was SEK At the end of 2016, Consilium s market capitalisation was SEK 1,028 (969) million. Turnover There were 11,141 Consilium B transactions during the year. A total of 1,770,063 shares were traded at a value of SEK 161,299,450. The turnover rate was 16 percent. Shareholders The number of shareholders at 31 December 2016 was 2,311 (2,371). Dividend policy Consilium s Board has decided that a cautious dividend policy will be adopted during an anticipated growth phase. The dividend will ultimately correspond to one-quarter of profit after net financial items and tax. Proposed dividend. The Board proposes a dividend of SEK 2.00 (2.00) per share. Dividend yield The proposed dividend of SEK 2.00 per share corresponds to a yield of 2.1 (2.2) percent based on the price at year-end. 22

23 SHARE INFORMATION Share price development Share price development , , , JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 0 Consilium B OMX Stockholm Small Cap PI Number of shares Traded per month, thousands Consilium B OMX Stockholm Small Cap PI Number of shares Traded per week, thousands OMX Stockholm PI OMX Stockholm PI OMX Stockholm Industrial Goods & Services PI Source: OMX Stockholm Industrial Goods & Services PI Source: Per-share data Share price Earnings, before and after dilution Comprehensive income, before and after dilution, SEK P/E ratio Equity, SEK Price/equity ratio Dividend, SEK Dividend yield, % P/S ratio Number of shares, listed 10,794,713 10,794,713 10,794,713 10,794,713 10,794,713 Number of shares, total 11,702,203 11,702,203 11,702,203 11,702,203 11,702,203 Largest shareholders A shares B shares Holding Votes Platanen Holding AB 1) 907,490 5,244, % 72.1% MCT Brattberg Aktiebolag 2,205, % 11.1% Magnus Vahlquist 530, % 2.7% Svenska Handelsbanken Markets 124, % 0.6% ABG Sundal Collier ASA 115, % 0.6% Ove Hansson 100, % 0.5% Lott och Nils Rosenblads stiftelse 96, % 0.5% Elementa 95, % 0.5% Försäkringsaktiebolaget, Avanza Pension 92, % 0.5% Unionen 77, % 0.4% Total 907,490 8,680, % 89.5% Share information Consilium B Listing, Nasdaq Stockholm, Small Cap Short name, CONS B ISIN code, SE ICB code, 2700 Sector, Industrial Goods & Services Total number of listed shares, 10,794,713 Highest price paid in 2016, SEK Lowest price paid in 2016, SEK Closing price 31/12/2016, SEK Market cap 31/12/2016, SEK 1,028 million IR Contacts Ove Hansson, President and CEO Tel: +46 (0) ove.hansson@consilium.se Anna Holmgren, Finance Manager and Treasurer Tel: +46 (0) anna.holmgren@consilium.se Financial information 2017 Year-end Report 2016, 23 Feb 2017 Interim Report Jan-Mar, 19 May 2017 Interim Report Jan-Jun, 28 Aug 2017 Interim Report Jan-Sep, 21 Nov 2017 In addition, Consilium publishes monthly information about the Group s orders and sales. 1) Rosenblad family related-party. 23

24 MULTI-YEAR OVERVIEW / GLOSSARY MULTI-YEAR OVERVIEW Consolidated income statement Amounts in SEK millions Net sales 1, , , Operating expenses -1, , , Operating profit/loss Financial items ) Profit/loss after financial items ) Incl. non-recurring costs of SEK million for early repayment of corporate bond. Consolidated balance sheet Amounts in SEK millions Assets Property, plant & equipment Intangible assets Financial assets Inventories Receivables Short-term investments Cash & cash equivalents Total assets 1, , , Equity Liabilities Non-interest-bearing non-current provisions Interest-bearing non-current liabilities Non-interest-bearing current liabilities Interest-bearing current liabilities Total liabilities 1, , Total equity and liabilities 1, , , GLOSSARY Business model A theoretical description of how a company or business is intended to work. Consolidated companies Subsidiaries in which Consilium s ownership exceeds 50 percent and which are included in the consolidated financial statements. LNG Liquefied natural gas. LP (Liquidity Provider) Liquidity provider. For explanation, see page 22. Makers list A shipyard s list of preferred suppliers. Project engineering The engineering design and supervision of a project. RAMS Reliability, Availability, Maintainability and Safety. A European safety standard (EN 50126) for the rail industry. Retrofit Aftermarket for the sale of replacement products. SIL Safety Integrity Level. An international functional safety standard (IEC 61508) for the development of safety systems for machines. VDR Voyage Data Recorder. Equipment to facilitate the investigation of vessel accidents. A VDR registers a vessel s position and speed, heading, depth, radio traffic etc. and is the equivalent of the black box in an aircraft. 24

25 KEY FIGURES AND FINANCIAL RATIOS / DEFINITIONS KEY FIGURES AND FINANCIAL RATIOS EBITDA, SEK million 1) EBIT (operating profit), SEK million 1) EBT, SEK million 1) 3) Operating margin, % 1) Profit margin, % 1) 3) Return on operating capital, % Return on equity, % 4) Dividend yield, % P/E ratio 2) Equity/assets ratio, % Net debt/equity ratio, % Quick ratio, % Earnings per share, SEK 1) 2) 5) Comprehensive income per share, SEK 2) 5) Equity per share, SEK Capital expenditure, SEK million Dividend per share, SEK Number of employees 1) Number of employees in associates 1) ) Continuing operations for the years 2012 and ) Excl. non-controlling interests. 3) Incl. non-recurring costs of SEK 17.5 million for early redemption of corporate bond in ) Adverse effect of 3.4 percentage points due to non-recurring costs for early redemption of corporate bond in ) Adverse effect of SEK 1.17 per share due to non-recurring costs for early redemption of corporate bond in DEFINITIONS Return on equity Profit/loss after financial items, less current tax, divided by average equity. Return on operating capital Operating profit/loss divided by average operating capital. Dividend yield Dividend adopted by the AGM, or proposed by the Board and CEO, for the financial year divided by the share price. EBITDA Earnings before interest, taxes, depreciation and amortisation. EBIT Earnings before interest and taxes. EBT Earnings before taxes. Equity per share Equity divided by the number of shares at the reporting date. Quick ratio Current assets (excl. inventories) divided by current liabilities. Net debt/equity ratio Interest-bearing liabilities and interest-bearing provisions, less short-term investments and cash & cash equivalents, divided by equity. Operating capital Total assets, less cash & cash equivalents (cash, bank deposits and other financial assets) and non-interest bearing liabilities, calculated as an annual average. P/E ratio Share price divided by earnings per share. P/S ratio Share price divided by sales per share. Earnings per share Profit from continuing operations after tax, attributable to owners of the parent, divided by the weighted average number of shares. Operating profit/loss Earnings before interest and taxes. Same as EBIT. Operating margin Operating profit divided by net sales. Equity/assets ratio Equity, including non-controlling interest, divided by total assets. Total earnings per share Comprehensive income after tax, attributable to owners of the parent, divided by the weighted average number of shares. Profit margin Profit after financial items divided by net sales. 25

26 ALTERNATIVE PERFORMANCE MEASURES CONSILIUM S USE OF ALTERNATIVE PERFORMANCE MEASURES The Consilium Group has disclosed a number of alternative performance measures in the annual report. The APMs have not been given a more prominent position than the standard key financial ratios for the financial statements. The APMs have been designated in such a way that their names reflect the content and basis of calculation. Consilium considers the APMs to be useful for monitoring and analysing operations and assessing the Group s ability to discharge its financial obligations. Amounts in SEK millions EBITDA Operating profit/loss (EBIT) Depreciation, amortisation and impairment EBITDA Return on operating capital Operating profit/loss (EBIT) Total assets 1, , , Cash & cash equivalents Short-term investments Restricted cash funds in current receivables Restricted cash funds in non-current financial assets Non-interest-bearing non-current provisions Non-interest-bearing current liabilities Total operating capital 1, Operating capital at beginning of year Average operating capital 1, Return on operating capital (%) Return on equity Profit/loss for the year Total equity Total equity at beginning of year Average equity Return on equity (%) Dividend yield Dividend per share for the financial year Share price at end of year Dividend yield (%) P/E ratio Share price at end of year Earnings per share P/E ratio Equity/assets ratio Total equity Total assets 1, , , Equity/assets ratio (%) Net debt/equity ratio Interest-bearing non-current liabilities Interest-bearing current liabilities Short-term investments and cash & cash equivalents Net debt Total equity Net debt/equity ratio (%) Quick ratio Current assets, excl. inventories Current liabilities Quick ratio (%) Earnings per share Profit after tax attributable to owners of the parent (continuing operations) Average number of shares (thousands) 11, , , , ,702.2 Earnings per share (SEK) Total earnings per share Profit after tax attributable to owners of the parent (total operations) Average number of shares (thousands) 11, , , , ,702.2 Total earnings per share (SEK) Equity per share Total equity Average number of shares (thousands) 11, , , , ,702.2 Equity per share (SEK)

27 BOARD OF DIRECTORS REPORT BOARD OF DIRECTORS REPORT The Board of Directors and CEO of Consilium AB (publ), reg. no , registered office in Nacka, Stockholm County, herewith present the consolidated and Parent Company s annual financial statements for the financial year Consilium s main focus is to develop and market products and systems in the area of fire safety. With a stable base of proprietary products, complemented by high-quality external brands, and a global marketing organisation, Consilium ranks among the world s leading suppliers to international shipping and the oil, gas and power industries. The guiding principle behind Consilium s products and systems is to help protect people, the environment and material values. Consilium also markets products and systems for other industries with applications which are well-suited to the Company s products, systems and application expertise. Proprietary and external complementary products and systems are also offered, as well as service and support. Consilium continued to increase its business volume in 2016, despite a significantly weaker market in several market segments. In 2016, the order intake increased by 10 percent to SEK 1,654.1 (1,497.7) million, while net sales increased by 5 percent to SEK 1,643.2 (1,565.5) million. The order backlog increased to SEK million in Consilium sees continued growth potential in the coming years. Safety requirements are increasing globally in the Group s areas of operation. A large aftermarket and sales to market segments with completely different economic development and investment cycles give Consilium relatively stable development over time. This stability enables long-term investments in new products and new markets. Consilium s major product and market investment in the oil and gas market has resulted in increased costs, with an adverse effect of more than SEK 30.0 million on operating profit in If this specific investment is disregarded, Consilium s operations in 2016 generated an operating profit in line with the previous year. Other product investments have also increased development costs by a further SEK 10.0 million during EBITDA amounted to SEK (211.5) million in 2016, while EBIT was (175.2) million. The EBITDA margin was 12.0 (13.5) percent and the EBIT margin was 8.6 (11.2) percent. Despite increased price competition, the gross margin improved compared with the previous year, as a result of cost reductions and efficiency measures. The investment in the oil and gas market has resulted in significantly increased development and sales costs, and Consilium has not been able to report a corresponding increase in revenue in the short term. Other fixed costs have increased less than net sales. While investing and growing, Consilium has made necessary adaptations of the operational organisation in areas with weaker growth, and redistributed marketing resources within and between the Group s companies. The currency effect on earnings was minimal in A large part of the order backlog for the product companies is continuously hedged. The weaker Swedish krona against the USD and EUR in the fourth quarter of 2016 is not expected to have a positive earnings impact until Consilium continuously develops new products and new technical solutions tailored for selected niche markets, makes complementary acquisitions of product companies, and exploits the Group s technical expertise for growth in new market segments. Consilium adopts a global market perspective for its investments and utilises the Group s global market organisation to market new products and systems. Consilium continuously establishes itself in new geographical markets, and makes complementary acquisitions of market companies. Consilium seeks to gain high market shares in global niche segments. Consilium s sales are distributed among several completely different market segments, which gives a good balance. As previously, sales to the aftermarket represent a stable basis for the operations, and continue to increase. A sharp decline in orders for new commercial vessels and significantly reduced demand in the oil and gas industry particularly in the offshore sector have had an adverse effect on the order intake and net sales, and brought increased price competition. At the same time, new orders for cruise ships have increased and are expected to remain good in the coming years. The order value for cruise ships is considerably higher than for commercial vessels. The order intake for the safety systems for military vessels remains good. Orders for fire alarms for trains and metros have shown a strong increase. Sales to hospitals and large industrial buildings in the land market continue to increase. Demand from the power industry has increased and is expected to remain high in the coming years. Underlying earnings from Consilium s operations remain strong, and cash flow from operating activities has increased. Working capital is relatively unchanged from the previous year. Inventories have increased, while operating receivables have declined and operating liabilities have increased. Cash flow from operating activities increased to SEK 93.1 (77.9) million in In 2016, the Marine & Safety business area reported an order intake that was 8 percent higher than the previous year, despite a much weaker new construction market for commercial vessels and a continuation of the weak market in the oil and gas industry. This was possible due to increased market shares for Consilium s safety systems for commercial merchant ships, continuing growth in sales to the aftermarket, an increase in new orders for cruise ships, strong growth in sales to trains and metros, and increased sales to military vessels and to buildings with high protection values. Acquisitions also had a positive effect. The order backlog remains strong. A predominance of smaller projects and a large aftermarket volume generally results in few quarterly volume and earnings fluctuations for the Marine & Safety business area. Net sales and EBITDA increased compared with the previous year, while EBIT declined due to increased amortisation of product development. 27

28 BOARD OF DIRECTORS REPORT Consilium has changed the name of the Consilium Fire safety & Automation business area to Consilium Safety Engineering. The business area mainly offers complete system solutions with a high engineering content, which is better reflected in the new name. In 2016, the Safety Engineering business area reported an order intake that was 17 percent higher than the previous year, despite oil price uncertainty having generally reduced demand and delayed decision-making processes for several major projects. Consilium s market focus on new geographical areas and new market segments has compensated for this. The order backlog has increased and remains strong. A decline in deliveries in the offshore segment and postponed deliveries to projects in the oil and gas industry resulted in lower sales and EBIT in 2016 than in the previous year. A predominance of large projects often results in significant quarterly volume and earnings fluctuations for the Safety Engineering business area. The order backlog has increased to SEK million and is mainly related to system deliveries, with long lead times, to new vessels and large facilities for delivery in The order backlog for the aftermarket is normally relatively small, with short lead times, although sales to the aftermarket have shown stable growth for more than 15 years. With its investments in new products and new markets, Consilium expects to be able to report volume growth again in 2017, despite a continuation of the weak market in several market segments. Marine & Safety business area The order intake for 2016 was 8 percent higher than in the previous year. Sales to the aftermarket account for more than half of net sales and continue to increase, providing a solid foundation. Consilium has gradually increased its market shares for new building of ships and built up a large order backlog. However, shipyards order intake showed a significant decline in 2016, although it is expected to increase again in the period up to Consequently, deliveries from shipyards are expected to decline in 2017 before increasing again. The order intake and deliveries of fire alarms to trains and metros showed a strong increase in Cruise ships orders are increasing. Sales to military vessels are also increasing. Sales of fire alarms to properties with high protection values continue to increase. The business area s sales to the oil and gas industry have represented a small part of the total volume so far, but Consilium sees considerable growth potential despite the current weak market. The order backlog remains strong. The main markets for the Marine & Safety business area are large vessels, the oil and gas industry, trains and metros, and properties with high protection values. The main focus is on detection and alarms in high-risk areas, based on the detection of heat, smoke, gas, flames, oil mist, etc., with special systems designed for selected niche markets, and with special certification and approval for the relevant niche markets. The aim is to prevent and control fires through early detection, thereby saving lives and material values. The majority of the world s freight is transported by sea. In an economy that is becoming more and more globalised, transportation by sea is increasing at a multiple of growth in the global economy. The total number of sailing vessels in the world and the volume transported have increased steadily over the last 25 years. Orders for new vessels may vary from year to year, while deliveries are more stable. Over the last 25 years, new vessel construction has always been higher than the number of scrapped vessels. One in every two large vessels in the world has a Consilium product on board. With an increasing global transport volume and number of sailing vessels there is more demand for service and support. Old systems are constantly being replaced and upgraded, which in turn increases demand for parts, servicing and services. With specialised vessels having a lifespan of 25 years or more, the aftermarket is of more value than the new construction market. Sales to the land market represent future growth potential. Consilium has made a few strategic acquisitions in recent years. Large global investments are being made in the transport market, where sales of fire alarms for trains and metros represent major growth potential. Consilium continues its global expansion within this market segment. Global demand for oil and gas is increasing, but the large supply and low oil prices have resulted in reduced investments and orders from the oil and gas industry. Consilium sees significant growth potential in the oil and gas industry, and is building a stronger global presence in this market segment. The acquisition of Micropack is a strategic investment that will strengthen the Group in this market area. The business area s order intake increased by 8 percent to SEK 1,221.8 (1,127.3) million in Net sales increased by 13 percent to SEK 1,240.7 (1,100.8) million. EBIT (operating profit) was SEK (163.0) million. Safety Engineering business area Consilium has changed the name of the business area from Consilium Fire safety & Automation to Consilium Safety Engineering. The business area mainly offers complete system solutions with a high engineering content, which is better reflected in the new name. The order intake for 2016 was 17 percent higher than in the previous year and the order backlog strengthened further. Investments in new markets have compensated for the decline in investments and postponed investment decisions in a weaker oil and gas market affected by considerable oil price uncertainty. Net sales and operating profit have been adversely affected by lower offshore deliveries and postponed deliveries to several major projects. Operating profit has also been charged with costs associated with establishment in new geographic markets. The main markets for the Safety Engineering business area are the onshore and offshore oil and gas industry, and the power industry. The main focus is on extinguishing fires in high-risk areas, using extinguishing systems based on water, foam and gas, and special systems for fire protection in specific environments, and with special certification and approval for the relevant niche areas. The business area s sales of complete fire safety systems include detection and alarm systems. The aim is to prevent and control fires through risk analysis and early detection, and to limit the effects of fires by means of effective fire-fighting systems, thereby saving lives and material values. Sales of fire safety systems are primarily directed to new construction and retrofitting of drilling and production platforms, tank farms, refineries, petrochemical plants, tank terminals, power plants, hangars and warehouses with high protective values. Systems for the protection of helicopter platforms, turbines and so on are also supplied. Consilium combines extensive knowledge of fire safety with technical solutions containing high-quality proprietary and external products. Consilium s offering includes everything from consulting services to complete safety systems with both fire and gas detection and active fire protection. Increased resources continue to be invested in developing more proprietary products, and obtaining international approval of these products. Investments in new markets continue. Further market company establishments are planned. Consilium is increasing its focus on aftermarket offerings and coordinating technical and marketing resources in the business area. The global economy continues to grow. Demand for oil and gas continues to increase, and there is a considerable need for increased energy production for many non-oecd countries. Low oil prices have adversely affected investments in the oil and gas market for a long period, and the uncertainty has delayed many decisions. Oil prices have increased and some improvement in the market is expected in Large investments in power plants to increase electricity production are planned in many parts of the world. The business area s order intake increased by 17 percent to SEK (370.4) million in Net sales declined by 13 percent to SEK (464.7) million and EBIT (operating profit) declined to SEK 21.6 (37.0) million. Consilium Group in 2016 Net sales increased by 5 percent to SEK 1,643.2 (1,565.5) million. EBITDA declined by 7 percent to SEK (211.5) million. Operating profit (EBIT) declined by 19 percent to SEK (175.2) million. The operating margin was 8.6 (11.2) percent. Profit before tax (EBT) declined by 17 percent to SEK 92.3 (110.8) million. The profit margin was 5.6 (7.1) percent. The order intake increased by 10 percent to SEK 1,654.1 (1,497.7) million. The return on operating capital was SEK 14.2 (22.5) percent. The return on equity was SEK 17.4 (23.5) percent. Personnel and training The number of employees at 31 December 2016 was 980 (793). In addition, there are 90 (106) employees in joint ventures and associates. Note 2 lists the number of employees in different countries, and salaries and remuneration. Consilium continuously invests in staff training. Training activities are conducted in each business area. Remuneration of the Board and key management personnel The 2016 annual general meeting adopted Board fees of SEK 800,000, distributed as follows: Chairman of the Board SEK 175,000, external Board members SEK 125,000 each. The meeting also adopted guidelines relating to the compensation of key management personnel, which are essentially in line with market salaries and other terms of employment. Key management personnel s compensation consists of the basic salary, including car allowance, and any bonuses earned. Pension is payable in accordance with the current ITP plan. Bonuses are linked to financial targets and may not exceed three monthly salaries. Financial position and cash flow The equity/assets ratio was 23 (25) percent. Cash & cash equivalents were SEK (69.3) million at 31 December Interest-bearing liabilities amounted to SEK (727.9) million. Cash flow was SEK 92.4 million. Investments Net investments in property, plant and equipment during the year amounted to SEK 74.6 (75.5) million. In Marine & Safety, investments related mainly to SIL approval and the acquisition of Micropack. In Safety Engineering, net investments in intangible assets related mainly to market investments. Research and development Consilium is a technical knowledge company which aspires to be at the forefront of technological development in selected niches. The development of products, systems and production techniques is therefore a priority area. The Company capitalises development expenses, with an amortisation period of 3-5 years. Quality All product companies are currently certified to ISO

29 BOARD OF DIRECTORS REPORT Environment Consilium will work to ensure its daily operations, products and manufacturing processes comply with national laws and international environmental regulations. The Company will ensure its products materials and manufacturing processes have minimal environmental impacts. Residual and waste products will be dealt with in an environmentally responsible way. The Company does not engage in any operations which are subject to permit and notification requirements under the Swedish Environmental Code. Financial risk management In the course of its operations, the Group is exposed to a large number of different financial risks. The Group s overall risk management policy focuses on the unpredictability of the financial markets and aims to minimise unfavourable effects on the Group s financial results. The Group uses derivative instruments to cover some of its risk exposure. Risk management is dealt with by each product-owning subsidiary according to policies defined by the Board. The Board formulates written policies for overall risk management and also for specific areas such as currency risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments and investment of surplus cash. Risks and uncertainties The Group s material risks and uncertainties consist mainly of business risks and financial risks. Business risks may be associated with large customer exposure to individual sectors or companies. Financial risks are mainly currency risks which arise due to the fact that over 90 percent of sales are outside Sweden while a large proportion of production is in Sweden. Management of financial risks is described in note 13. The Group has a relatively good risk spread across customers and markets, although the global financial crisis and slowdown in economic growth represent a risk and uncertainty. In general, the current economic situation in certain market segments has brought an increased risk of customer defaults for the Group. Otherwise, no significant risks arose during the year. Corporate governance report The corporate governance report can be found on page 57. Outlook for 2017 Consilium expects continued volume growth in Events after the reporting date In January 2017, Consilium acquired a majority shareholding in the US fire safety company ACAF Systems Inc. Parent Company Consilium AB, reg. no , is the Parent Company of the entities which make up Consilium, and encompasses Group-wide functions. The Parent Company s net sales amounted to SEK 1.0 (1.7) million and relate to time charged to Group companies. Operating expenses amounted to SEK (-24.9) million. Operating profit/loss was SEK (-23.2) million. Profit/loss after financial items amounted to SEK (12.9) million. Profit/loss after tax was SEK (10.0) million. The Consilium share Consilium s share capital on 31 December 2016 totalled SEK 58.5 (58.5) million, divided into 11,702,203 shares. Class A shares correspond to 10 votes and B shares to one vote. All shares carry equal entitlement to the Company s assets and earnings. There are no restrictions regarding the transfer of shares, voting rights or the right to participate in the annual general meeting. In the event of an increase in capital through a cash issue or offset issue, holders of A shares and B shares shall have preferential rights to subscribe for new shares of the same class in proportion to the number of shares already held (primary preferential rights). Shares not subscribed for on the basis of primary preferential rights will be offered to all shareholders for subscription (subsidiary preferential rights). If the number of shares offered in this way is insufficient for subscription based on subsidiary preferential rights, they will be allotted to subscribers in relation to the total number of shares already held, or, if this is not possible, by drawing lots. In the event of an increase in capital through a cash issue or offset issue of shares solely of class A or B, all shareholders, regardless of whether their shares are class A or B, shall have preferential rights to subscribe for new shares in proportion to the number of shares already held. If the Company decides to issue warrants or convertibles through a cash issue or offset issue, shareholders shall have preferential rights to subscribe for warrants as if the issue applied to the shares that may be newly subscribed for on the basis of the warrant rights, or shall have preferential rights to subscribe for convertibles as if the issue applied to the shares for which the convertibles may be exchanged. The aforementioned stipulations shall not constitute any restriction of the facility to make a decision regarding a cash issue with a derogation from shareholders preferential rights. If the share capital is increased through a bonus issue, new shares of each class shall be issued in proportion to the existing number of shares of the same class. In such cases, old shares of a specific class carry entitlement to new shares of the same class. The aforementioned stipulation shall not constitute any restriction of the facility to issue shares of a new class through a bonus issue, following a requisite amendment of the Articles of Association. The Company has not entered into any significant agreements that could be affected, changed or terminated if control of the Company were to change as a result of a public offer to acquire shares in the Company. The Company is not aware of any agreements between shareholders that might restrict the right to transfer shares. Nor are there any provisions in the articles of association regarding the appointment or dismissal of Board members, or agreements between the Company and Board members or employees regarding payment of compensation if such individuals leave their posts, or if employment is terminated due to a public offer to acquire the Company. Consilium has 2,311 (2,371) shareholders. The three largest shareholders as at 31 December 2016 in terms of votes were Platanen Holdings with 72.1 percent of the votes, MCT Brattberg AB with 11.1 percent and Magnus Vahlquist with 2.7 percent. Information about the major shareholders can be found on page 23. Financial instruments Financial instruments recognised in the balance sheet include cash & cash equivalents, trade receivables, current and non-current receivables, trade payables, loans and other liabilities. The Group classifies financial assets into the following categories: cash & cash equivalents, loans and receivables and available-for-sale financial assets. Financial assets are classified on the basis of the purpose for which they were acquired. Management makes a classification decision on initial recognition and reviews the decision at each reporting date. Statement by the Board pursuant to chapter 18, section 4, of the Swedish Companies Act After the proposed dividend, the equity/assets ratio for the Parent Company will be 13 percent and for the Group 22 percent. The equity/assets ratio is satisfactory considering that the Company and the Group continue to operate profitably. The liquidity of the Company and the Group is expected to be maintained at a satisfactory level. It is the Board s assessment that the proposed dividend will not prevent the Parent Company or other Group companies from discharging their obligations or making necessary investments. The proposed dividend can therefore be justified pursuant to the provisions of the Swedish Companies Act, Chapter 17, section 3 (2-3) (the precautionary principle). Proposed distribution of profits Amounts in SEK thousands The following amounts are at the disposal of the annual general meeting: Share premium reserve 130,435 Retained earnings -59,232 Profit/loss for the year -11,600 Total 59,603 The Board proposes that the profit be distributed as follows: Cash dividend of SEK 2.00 per share to shareholders -23,412 Carried forward 36,191 29

30 GROUP CONSOLIDATED INCOME STATEMENT AND OTHER COMPREHENSIVE INCOME SEK millions Note Sales revenue 1 1, ,565.5 Cost of sales 20-1, ,029.2 Gross profit Distribution and marketing costs 2, 9, Administrative expenses 2, 3, 4, 9, Research & development expenses 9, 10, Profit/loss from investments in associates Operating profit/loss Finance income and exchange gains Finance costs and exchange losses Other finance costs Profit/loss after financial items Income tax Profit/loss for the year Other comprehensive income: Items that may be reclassified subsequently to profit or loss Cash flow hedges Deferred tax on cash flow hedges Exchange differences Total other comprehensive income for the year, net of tax Total comprehensive income Profit/loss for the year attributable to: Owners of the parent Non-controlling interests Total profit/loss for the year Earnings per share (EPS), owners of the Parent Earnings per share, before and after dilution, SEK Total earnings per share ) 1) Total comprehensive income attributable to: Owners of the parent Non-controlling interests Total comprehensive income Proposed dividend per share, SEK ) Non-recurring costs for early repayment of the corporate bond had a negative effect of SEK 1.17 (per share) on earnings per share. 30

31 GROUP CONSOLIDATED BALANCE SHEET Assets, liabilities and equity at 31 December, SEK millions Note Non-current assets Property, plant & equipment Land and buildings, land improvements Plant and machinery Equipment, tools and fixtures & fittings Total property, plant & equipment Intangible assets Capitalised development expenditure Customer relationships Patents, licences and similar rights Goodwill Total intangible assets Financial assets Equity accounted holdings Non-current receivables Deferred tax assets Total financial assets (of which restricted funds in non-current receivables) 24 (38.2) (36.3) Total non-current assets Current assets Inventories Receivables Trade receivables Prepayments and accrued income Other receivables Short-term investments Cash & cash equivalents Total current assets 1, (of which restricted funds in other receivables) 24 (2.8) (3.2) Total assets 1, Equity and liabilities Equity Share capital Other paid-in capital Other reserves Retained earnings, incl. profit for the year Capital and reserves attributable to owners of the Parent Non-controlling interests Total equity Liabilities Non-current liabilities Liabilities to credit institutions Bond issues Non-current liabilities Retirement benefit obligations Other provisions Total non-current liabilities 1, Current liabilities Trade payables Current tax liabilities Liabilities to credit institutions Other liabilities Accruals and deferred income Total current liabilities Total equity and liabilities 1, ,

32 GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Note Share capital Other paid-in capital Other reserves Retained earnings, incl. profit for the year Total Noncontrolling interests Opening balance, 1 Jan Profit/loss for the period Other comprehensive income Comprehensive income for the period Owner transactions Dividends Acquisitions/disposals NCI share of equity Change in value, option Closing balance, 31 Dec Total equity Opening balance, 1 Jan Transfer of the JKK Group s non-controlling interest, which is recognised as an expense in the consolidated balance sheet Adjusted opening balance, 1 Jan Profit/loss for the period Other comprehensive income Comprehensive income for the period Owner transactions Dividends Acquisitions/disposals NCI share of equity Change in value, option Closing balance, 31 Dec

33 GROUP CONSOLIDATED CASH FLOW STATEMENT Note Operating activities Operating profit before financial items Depreciation/amortisation 9, Other non-cash items Interest received Other financial items Interest paid Income taxes paid Cash flow from operating activities before changes in working capital Increase/decrease in inventories Increase/decrease in trade receivables Increase/decrease in other current receivables Increase/decrease in trade payables Increase/decrease in other current operating liabilities Cash flow from operating activities Investing activities Investments in property, plant & equipment Investments in intangible assets Restricted funds Increase/decrease in other short-term investments Investments in associates Acquisitions of subsidiaries and other business units, net of cash acquired Cash flow from investing activities Financing activities Corporate bond issue and increase in other loans Issue of corporate bond and increase in other loans Non-recurring expenses for early redemption of corporate bond Dividend to joint ventures and minority owners Dividend to shareholders Cash flow from financing activities Cash flow for the year Cash & cash equivalents at beginning of year Exchange gains/losses Cash & cash equivalents at end of year

34 PARENT COMPANY INCOME STATEMENT, PARENT SEK millions Note Other operating income Gross profit Administrative expenses 2, 3, Operating profit/loss Other interest and similar income Profit/loss from investments in Group companies Interest and similar expense Other finance costs Profit/loss before tax Tax on profit/loss for the year 7, Profit/loss and comprehensive income for the year

35 PARENT COMPANY BALANCE SHEET, PARENT Assets, liabilities and equity at 31 December, SEK millions Note Non-current assets Property, plant & equipment Equipment, tools and fixtures & fittings Total property, plant & equipment Financial assets Investments in Group companies Receivables from Group companies Deferred tax assets Total financial assets Total non-current assets Current assets Receivables Receivables from Group companies Prepayments and accrued income Short-term investments Other current receivables Cash & cash equivalents Total current assets Total assets Equity and liabilities Equity Restricted equity Share capital Statutory reserve Total Unrestricted equity Share premium reserve Retained earnings Profit/loss for the year Total Total equity Liabilities Non-current liabilities Liabilities to credit institutions Liabilities to Group companies 20.6 Corporate bond issue Total non-current liabilities Current liabilities Trade payables Liabilities to credit institutions Liabilities to Group companies 5.8 Other liabilities Accruals and deferred income Total current liabilities Total equity and liabilities 1,

36 PARENT COMPANY STATEMENT OF CHANGES IN EQUITY, PARENT Share capital Statutory reserve Share premium reserve Retained earnings Total equity Opening balance, 1 Jan Dividend paid Profit/loss for the year Closing balance, 31 Dec Opening balance, 1 Jan Dividend paid Profit/loss for the year Closing balance, 31 Dec

37 PARENT COMPANY CASH FLOW STATEMENT, PARENT Note Operating activities Operating profit before financial items Non-cash items Interest received Interest paid Increase/decrease in other current receivables Increase/decrease in trade payables Increase/decrease in other current operating liabilities Cash flow from operating activities Investing activities Shareholder contributions Increase/decrease in other short-term investments Increase in financial assets Decrease in financial assets 42.5 Cash flow from investing activities Financing activities Corporate bond issues Repayment of corporate bond Repayment of loans Proceeds from borrowings Dividend paid Non-recurring expenses for early repayment of corporate bond Cash flow from financing activities Cash flow for the year Cash & cash equivalents at beginning of year Cash & cash equivalents at end of year

38 ACCOUNTING POLICIES ACCOUNTING POLICIES All amounts are in SEK millions unless otherwise stated. Accounting Policies The most important accounting policies applied in preparing the consolidated financial statements are described below. These policies have been applied consistently for all presented years unless otherwise stated. Basis of preparation The consolidated financial statements for the Consilium Group have been prepared in accordance with the Swedish Annual Accounts Act, RFR 1 Supplementary Accounting Rules for Groups, International Financial Reporting Standards (IFRS) and IFRIC interpretations as adopted by the EU. They have been prepared using the cost method, apart from the revaluation of land and buildings, available-for-sale financial assets and financial assets and liabilities (including derivatives) at fair value through profit or loss. Preparation of financial statements in accordance with IFRS requires use of critical accounting estimates. In addition, management is required to make certain judgements when applying the Group s accounting policies. Amendments to accounting policies and disclosures New standards and interpretations adopted by the Group A number of new standards and amendments to interpretations and existing standards effective for annual periods beginning on or after 1 January 2016 have been applied in preparing the consolidated financial statements. These have not had any material impact on the consolidated financial statements. New standards and interpretations not yet adopted by the Group A number of new standards and interpretations effective for annual periods beginning on or after 1 January 2016 have not been applied in the preparation of this annual report. These are not expected to have a material impact on the consolidated financial statements, with the following exceptions: IFRS 9 Financial instruments: Recognition and Measurement. This standard is part of a revision of the existing standard IAS 39. A complete version of the standard was issued in 2014, and the standard is effective from IFRS 9 is published in three parts: Classification and Measurement, Impairment and Hedge Accounting, and will replace the present IAS 39 Financial Instruments: Recognition and Measurement. The Group is evaluating the impact of the new standard. IFRS 15 Revenue from Contracts with Customers. The standard deals with revenue recognition and establishes principles for reporting information that is useful to users of financial reports regarding the nature, timing and uncertainty of revenue and cash flows arising in connection with the Company s contracts with customers. The standard replaces IAS 18 Revenue and IAS 11 Construction Contracts and related IFRIC interpretations. The mandatory effective date is 1 January The Group has started the process of identifying and evaluating customer contracts in order to evaluate the effects of IFRS 15. No other IFRS and IFRIC interpretations that are not yet effective are expected to have a material impact on the Group. IFRS 16 Leases IFRS 16 Leases was published in January, and will replace IAS 17 Leases and the associated interpretations IFRIC 4, SIC-15 and SIC-27. The standard requires assets and liabilities attributable to all leases, with certain exceptions (short lease terms and items of low value), to be recognised in the balance sheet. This reporting of leases is based on the approach that the lessee has a right to use an asset for a specific period of time and at the same time an obligation to pay for that right. Accounting for lessors is essentially unchanged, while accounting for lessees will change as there is no longer a distinction between operating and finance leases. The standard is effective for annual periods commencing on or after 1 January Early application is permitted in certain cases. The Group has a number of large leases, with a total cost of aprox. SEK 90.0 million, which are currently classified as operating leases. Under the new standard, they will be recognised in the balance sheet. Apart from the standards described above, no other IFRSs or IFRIC interpretations that are not yet effective are expected to have a material impact on the consolidated financial statements. Cash flow The cash flow statement is prepared using the indirect method. Reported cash flows only concern transactions that involve cash inflows and outflows. Cash & cash equivalents comprise cash and bank deposits. Basis of consolidation The consolidated accounts include subsidiaries in which the Parent Company directly or indirectly holds more than 50 percent of the votes, and companies over which the parent company otherwise has control, i.e., the power to govern the financial and operating policies of an entity so as to obtain benefits. The consolidated financial statements have been prepared in accordance with the acquisition method. The cost of an acquisition comprises the fair value of assets transferred, equity instruments issued and liabilities incurred or assumed at the transfer date. The subsidiary s equity is defined as the difference between the fair values of identifiable assets, and assumed liabilities and contingent liabilities based on a market valuation conducted at the date of acquisition. The subsidiary s equity is eliminated in its entirety, which means the Group s equity only includes the portion of equity arising after the business combination. Goodwill represents the excess of the cost of acquisition over the Group s interest in the net fair value of the identifiable assets of the subsidiary recognised at the date of acquisition. Business combinations during the year are consolidated from the date on which the Group gains control at amounts relating to the period after the acquisition. Subsidiaries which have been disposed of are deconsolidated from the date on which control ceases. Subsidiaries which have been portioned out to shareholders are deconsolidated from the distribution date. Internal transactions, balances and gains are eliminated in their entirety. Subsidiaries are all companies (including structured entities) over which the Group has control. The Group has control when it has exposure or rights to variable returns from its holding in an entity and the ability to affect those returns through power over the entity. Subsidiaries are consolidated from the date on which the Group obtains control. Subsidiaries which have been disposed of are deconsolidated from the date on which control ceases. Associates An associate is an entity over which the Parent Company has significant influence and is not a subsidiary. Holdings in associates are normally between 20 and 50 percent. Investments in associates are recognised in the consolidated financial statements using the equity method of accounting, and are initially measured at cost. The Group s share of the profit or loss of an associate after its acquisition is recognised in the income statement, and its share of changes in reserves is recognised under Reserves. Accumulated post-acquisition changes are reported as a change in the holding s carrying amount. When the Group s share of the losses of an associate amounts to or exceeds its holding, the Group does not recognise any subsequent losses. Any unrealised internal gains are eliminated to the extent of the Group s share of the gain. Unrealised losses are also eliminated. The share of profit or loss of associates is reported on separate lines in the consolidated income statement and balance sheet. The Group s share of the profit or loss of associates is recognised after tax. Foreign currency translation The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements are presented in Swedish kronor, which is the parent company s functional and presentation currency. The subsidiaries balance sheets are translated at the rates prevailing at the reporting date and the income statements are translated at the average rate for the year. Exchange differences are recognised directly in consolidated equity. Exchange differences attributable to the translation of foreign subsidiaries are recognised in other comprehensive income. Closing rate, 31 December Significant exchange rates USD EUR GBP Average rate Significant exchange rates USD EUR GBP Foreign currency assets and liabilities are measured at the closing rate. Exchange gains and losses on transaction payments and translation of monetary assets and liabilities are reported under net sales or cost of sales. Transactions entered into to hedge certain foreign currency risks are recognised in profit or loss until the hedging instrument expires. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities in the entity and are translated at the closing rate. Intra-group extended equity transactions in foreign currency, which concern long-term financing of subsidiaries, are not translated at the closing rate, but at the rate on the transaction date. Business areas Consilium has two business areas Marine & Safety and Safety Engineering (formerly Fire safety & Automation). The business areas are monitored internally by the chief 38

39 ACCOUNTING POLICIES operating decision maker, namely the President and CEO. Units within each business area have a similar risk profile and development. Consequently, the Group classifies the business areas as cash generating units when conducting goodwill impairment testing. Revenue recognition Revenue comprises the fair value of the sale of goods and services, net of valueadded tax and rebates, after elimination of intra-group sales. Revenue is recognised as follows. Sale of goods The Group s net sales comprise the fair value of the sale of goods. Consilium recognises revenue when the risks associated with the goods have been transferred to the customer under the terms of delivery and it is probable that payment of the trade receivable that arises from the sale will flow to the Group. Sales are recognised net of VAT, discounts, returns and exchange differences on foreign currency sales, and after elimination of internal Group sales. Rendering of services and construction contracts Revenue and costs relating to the provision of services and construction contracts are recognised by reference to the stage of completion at the reporting date, often referred to as the percentage of completion method. The stage of completion is measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs. Where the outcome of a contract to provide services or a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of the contract costs incurred that are likely to be recoverable. An expected loss is recognised as an expense immediately. Interest income Interest income is recognised over the relevant period using the effective interest method. Dividend income Dividend income is recognised when the dividend has been adopted and the shareholders rights to receive payment have been established. Government grants Government grants are recognised at fair value when there is reasonable assurance that the grant will be received and the Group will comply with the conditions attaching to it. Government grants related to expense items are deferred and recognised over the periods necessary to match them with the related costs which they are intended to compensate. Borrowing costs Borrowing costs are recognised in profit or loss in the period in which they are incurred. Consilium does not have any loans that are directly attributable to the Company s development expenditure. Taxes Deferred tax is recognised on all temporary differences between the carrying amounts of assets and liabilities and their corresponding tax bases, and is accounted for using the balance-sheet liability method. Unused tax losses are recognised as deferred tax assets to the extent that it is probable that taxable profits will be available against which they can be utilised. Unused tax losses include accumulated losses at the date of acquisition and subsequently arising losses. Deferred tax assets and liabilities are measured using tax rates that have been enacted by the reporting date, and are reported as financial assets or non-current liabilities in the balance sheet. Income tax for the year consists of current tax and deferred tax. If the outcome differs from the amounts initially recognised, these differences will affect the provisions for current and deferred tax and profit for the year. Deferred tax liabilities are recognised for temporary differences arising on investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Intangible assets The Group s intangible assets comprise capitalised development expenses, goodwill and patents, licences and similar rights. Goodwill Goodwill represents the difference between the cost of the shares in an acquired subsidiary and the acquisition-date fair value of the subsidiary s net assets. Goodwill arising on the acquisition of an associate is included in the carrying amount of the investment and is assessed for impairment as part of the total investment. Goodwill is reported separately and tested for impairment annually. Goodwill impairment is not reversed. A gain or loss on the disposal of an entity includes the residual carrying amount of the goodwill that relates to the entity. Goodwill is allocated at the date of acquisition to the cash generating units which are expected to benefit from the business combination that gave rise to the goodwill item. For a description of the methods and assumptions used for impairment testing, see note 10. Product development and research Expenditure relating to development projects for the construction and testing of new or improved products is capitalised under intangible assets to the extent that such expenditure is expected to generate future economic benefits. Other development expenditure is recognised as an expense in the period in which it is incurred. Development costs previously recognised as an expense are not capitalised in subsequent periods. Capitalised development costs are amortised using the straightline method over 3-5 years (the period in which future economic benefits are expected to flow to the company) from the date on which commercial production begins. In accordance with the IFRS transitional provisions in 2005, Consilium has reclassified the previously recognised goodwill arising from the acquisition of the net assets of Nittan and Servoteknikk in 2003 and The reclassification of the acquired net assets of Nittan and Servoteknikk means that Consilium s consolidated financial statements now show product development acquisitions. At the acquisition date, the estimated useful lives and amortisation schedules were defined as 20 and 10 years, respectively. As these amortisation schedules are the same as those for previously recognised goodwill, there is no difference in amortisation charges compared with previously. Amortisation is reported in the income statement under Research and development costs. Expenditure on research activities is recognised as incurred. Research in the strict sense of the word is not conducted to any great extent in the Group, but is an ongoing process which forms an integral part of day-to-day operations. This type of expenditure can be difficult to distinguish as research, and does not in any case represent any significant amounts. Patents, trademarks and licences Patents, trademarks and licences are recognised at cost. Patents, trademarks and licences have finite useful lives, and are recognised at cost less accumulated amortisation. Amortisation is applied to patents, trademarks and licences using the straight-line method over their estimated useful lives (5-10 years). Property, plant & equipment Items of property, plant & equipment, including land and industrial buildings, are stated at cost less subsequent depreciation. Cost includes costs directly related to the acquisition of the asset. Expenditure on improving an asset s performance from its original level increases the asset s carrying amount. Repair and maintenance costs are recognised as an expense. Depreciation is charged to operating profit in the income statement and is applied using the straight-line method over the assets useful lives, based on the difference between their cost and residual value. Consilium applies the following useful lives: Industrial buildings used in the course of business 25 years Plant and machinery 5-7 years Equipment, tools and fixtures & fittings 5 years The residual values and useful lives of assets are reviewed annually and adjusted if necessary. If an asset s carrying amount exceeds its estimated recoverable amount, it is written down to the recoverable amount immediately. Depreciation is not applied to land. Capital gains and losses are determined by comparing the selling price and the carrying amount. Capital gains and losses are recognised in profit or loss. Leases Lease contracts for non-current assets where the Group essentially has the same risks and rewards as those incidental to direct ownership are classified as finance leases. Assets held under finance leases are recognised at their fair value at the inception of the lease, or, if lower, at the present value of the minimum lease payments. Finance leases are reported under non-current assets and financial liabilities in the balance sheet. Future lease payments are apportioned between reduction of the lease obligation and finance charges so as to achieve a constant rate of interest on the remaining balance of the liability for each period. Depreciation of leased assets is on a basis consistent with the normal depreciation policy for similar assets. Costs of leases are reported under depreciation and interest in the income statement. The Group did hold any assets under finance leases in 2016 or in A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards of ownership. Lease payments are recognised as an expense on a straight-line basis over the term of the lease. Operating leases are reported under operating expenses in the income statement. Leased cars, computers and premises are normally classified as operating leases. Impairment Depreciation/amortisation is not applied to assets with an indefinite useful life, such as goodwill; instead, they are tested annually for impairment. The Group reviews the carrying amounts of assets whenever there is an indication that they may be impaired. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount is reduced to the asset s recoverable amount. 39

40 ACCOUNTING POLICIES The recoverable amount is the higher of the asset s fair value less costs to sell and its value in use. Impairment losses are recognised by cash-generating unit. Assets, other than financial assets and goodwill, for which impairment losses have previously been recognised are tested at each reporting date to determine whether there is any need for reversal of the previous impairment. Inventories Inventories consist of finished and semi-finished products and raw materials. Inventories are measured on a first-in first-out basis at the lower of cost and net realisable value at the reporting date. Finished and semi-finished products are measured at the manufacturing cost, including raw materials, direct labour, other direct overheads and production-related costs based on normal production. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated variable costs necessary to make the sale. Collective measurement is used for groups of products with similar characteristics. Inventory measurement does not include interest costs. A deduction is made for internal gains arising from intra-group deliveries. An obsolescence provision has been recognised. Financial instruments Financial instruments recognised in the balance sheet include cash & cash equivalents, trade receivables, current and non-current receivables, trade payables, loans, other liabilities and derivatives. The Group classifies financial assets into the following categories: cash & cash equivalents, loans and receivables, available-for-sale financial assets and derivatives. Financial assets are classified on the basis of the purpose for which they were acquired. Management makes a classification decision on initial recognition and reviews the decision at each reporting date. Derivative instruments Derivatives are recognised in the balance sheet on the contract date and are measured at fair value, both initially and in subsequent revaluations. The method of recognising the gain or loss arising on revaluation depends on whether the derivative is designated as a hedging instrument, and if so, on the nature of the hedged item. The Group recognises financial instruments that are forward exchange contracts as hedging instruments in cash flow hedges used to minimise the currency risk on future orders that have been signed. Changes in the fair value of derivatives used as cash flow hedges are recognised in other comprehensive income. Changes in the fair value of derivatives not used as cash flow hedges are recognised in profit or loss. The acquisition of shares with a put/call option is measured at fair value and results in a long-term liability and an increase in goodwill. Further information about this type of instrument can be found in notes 19 and 32. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are reported under current assets unless the settlement date is more than 12 months after the reporting date, in which case they are classified as non-current assets. Loans and receivables are reported under trade receivables and other current and non-current receivables in the balance sheet. Loan receivables are recognised at amortised cost using the effective interest method. Trade receivables are initially measured at fair value and thereafter at amortised cost using the effective interest method less any provision for impairment losses. A provision for impairment losses is recognised when there is objective evidence that the carrying amount of receivables will not be recovered, and an impairment loss is recognised when the loss is actually identified. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that have been designated as available for sale or have not been classified in any of the other categories. They are reported under non-current assets if management does not intend to dispose of them within 12 months of the reporting date. The assets are measured at fair value and any changes in fair value are recognised directly in other comprehensive income. An impairment loss is recognised if there is objective evidence of impairment. On disposal of the asset, the cumulative gain previously recognised in other comprehensive income is reclassified to profit or loss. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. Purchases and sales of financial assets are recognised at the trade date, i.e., the date on which the Group commits itself to purchase or sell the asset. Financial assets are derecognised when the right to receive cash flows from the instrument has expired or been transferred, and the Group has transferred substantially all the risks and rewards of ownership. Cash & cash equivalents Cash & cash equivalents comprise cash on hand, bank deposits and short-term investments with an original maturity of three months or less. Cash & cash equivalents are initially recognised at fair value and thereafter at amortised cost. Hedge accounting Consilium uses derivative financial instruments to cover risks associated with foreign currency exposure. Consilium designates certain derivatives as hedges of commercial foreign currency exposure in the form of highly probable forecast transactions (cash flow exposure) within the framework of the financial policy defined by the Board. Consilium applies hedge accounting for contracts which qualify for hedge accounting under IAS 39 Financial Instruments. At the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument used is highly effective. Unrealised gains and losses arising on the market valuation of hedging instruments and which meet the criteria for hedge accounting are recognised in comprehensive income. See also note 13. The entire fair value of a derivative which is a hedging instrument is reported under non-current assets or liabilities when the hedged item has a term to maturity of more than 12 months, and is reported under current assets or liabilities when it has a term to maturity of less than 12 months. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is reported in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss as finance income or expense. Amounts deferred in equity are recycled in profit or loss in the periods in which the hedged item affects profit or loss (e.g. when the forecast transaction occurs). Hedge accounting is discontinued when the hedging instrument expires or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is released to the income statement when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss as finance income or expense. Share capital Ordinary shares are classified as equity. Transaction costs directly attributable to the issue of new shares or options are recognised in equity, net of tax, as a deduction from the issue proceeds. Trade payables Trade payables are initially carried at fair value and thereafter at amortised cost using the effective interest method. Borrowing Borrowing costs are initially recognised at fair value, net of transaction costs. Borrowing costs are subsequently measured at amortised cost, and any difference between the amount received and the repayment amount is recognised in profit or loss over the term of the loan using the effective interest method. Provisions Provisions are recognised as current and non-current liabilities in the balance sheet when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Restructuring provisions are recognised when a detailed formal plan is in place and a valid expectation that the plan will be implemented has been raised in those affected. Provisions for future warranty claims concern the next two years and are based on historical warranty claim information and any trends indicating that future claims may deviate from the historical pattern. No provisions are recognised for future operating losses. Repurchase of treasury shares In the case of repurchase of treasury shares, the purchase consideration, including any directly attributable transaction costs (net of tax), i.e. the capitalised gain, is reduced until the shares are cancelled or sold. In the event of subsequent disposal of these shares, the proceeds (net of directly attributable transaction costs and tax effects) are recognised in retained earnings. Employee benefits Employee benefits are accounted for in accordance with IFRS 19 Employee Benefits. Group companies have different types of pension plans. The plans are normally funded by payments to insurance companies. The Group provides defined benefit and defined contribution pension plans. A defined benefit pension plan is a plan which defines the post-retirement benefit an employee receives, normally based on one or more factors such as age, length of service or salary. Under defined contribution plans, the Group pays fixed contributions into a separate entity (a fund). The pension plans are funded by payments from Group companies and employees. The defined benefit pension plans in Sweden relate to ITP plans, which are insured with Alecta. These are reported as defined contribution plans as Alecta is unable to provide sufficient information to allow them to be reported as a defined benefit plans. See also note 19. The Group s payments to retirement benefit plans are recognised as an expense in the period when employees have rendered service entitling them to the contributions. Defined benefit liabilities recognised in the balance sheet represent the present value of the defined benefit obligation at the reporting date less the fair value of plan assets. The defined benefit pension obligation is calculated annually by an independent actuary in accordance with the projected unit credit method. The present value of the defined benefit obligation is determined by discounting expected future cash flows by reference to market 40

41 ACCOUNTING POLICIES yields on high quality corporate bonds of a currency and term consistent with the currency and term of the retirement benefit obligation. Unrecognised actuarial gains and losses exceeding the greater of 10 percent of the present value of the obligation or the fair value of plan assets are distributed over the estimated average length of service. For defined contribution pension plans, the Group pays contributions into publicly or privately managed pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no additional payment obligations once the contributions have been paid. The contributions are recognised as personnel expenses when due for payment. Dividends Dividends are recognised as a liability when they have been adopted by the annual general meeting Accounting policies Parent Company The Parent Company s annual financial statements have been prepared in accordance with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board s recommendation RFR 2 Accounting for Legal Entities. RFR 2 requires the Parent Company to prepare separate financial statements in accordance with the International Financial Reporting Standards (IFRS) and statements adopted by the EU to the extent allowed within the framework of the Swedish Annual Accounts Act, and taking into account the relationship between tax expense and accounting profit. The recommendation also specifies exceptions from and additions to IFRS. Differences between the accounting policies of the Group and the Parent Company are described below. Financial instruments Financial instruments recognised in the balance sheet include cash & cash equivalents, trade receivables, current and non-current receivables, trade payables, loans and other liabilities. The Group classifies financial assets into the following categories: cash & cash equivalents, loans and receivables and available-for-sale financial assets. Financial assets are classified on the basis of the purpose for which they were acquired. Management makes a classification decision on initial recognition and reviews the decision at each reporting date. Leased assets In the Parent Company, all leases are reported as operating leases. Group contributions and shareholder contributions for legal entities Group contributions received are recognised in accordance with RFR 2 as finance income in the income statement. Investments in subsidiaries Shares in subsidiaries are recognised at cost less impairment losses. If there is an indication that shares and interests in a subsidiary or associate may be impaired, the recoverable amount is calculated. If this is lower than the carrying amount, an impairment loss is recognised. Impairment losses are recognised under financial items in the income statement. with the principles described under intangible assets. Cash flow projections are based on the best estimate of future income and operating expenses. Impairment testing has not identified any impairment of capitalised development expenditure. The margin used in the testing was such that company management does not believe any changes in individual variables will cause the value in use to fall below the carrying amount. Management also believes that even a certain amount of movement in the most critical variables will still not result in impairment losses. Assumptions used in impairment testing of deferred tax assets A deferred tax asset is recognised in the balance sheet for the carryforward of unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused losses can be utilised. The Group s forecasts are used as a basis for defining future profit. The carrying amount of a deferred tax asset is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the deferred tax asset to be utilised. Uncertainty regarding the future economic situation or other difficulties in the assessment of future profit may result in a lower taxable profit in subsidiaries which have unused tax losses. The probability of the Group being able to utilise unused tax losses is based on factors such as estimates and recent years results. All unused tax losses have been recognised as deferred tax assets. Put/call option JKK Group AS A put/call option was signed in connection with the acquisition of JKK Group AS in The estimated value of the option is initially recognised as a non-current liability. The option was remeasured in 2016, and the change in value of the liability has been recognised in equity. Put/call option Micropack A put/call option was signed in connection with the acquisition of Micropack in The estimated value of the option was initially recognised as a non-current liability. The option was remeasured in 2016, and the change in value of the liability has been recognised in equity. Trade receivables Receivables are recognised at net amounts due less any provision for doubtful debts, which are assessed on an individual basis. The net value reflects the amounts expected to be received based on the known circumstances at the reporting date. Changed circumstances, such as an increased number of defaults or a change in an existing customer s financial position, may result in deviations in the net value measurement. The current market situation has resulted in an increased focus on customer credit ratings and monitoring of trade receivables. Disputes Consilium is involved in disputes in the course of its normal business operations. Disputes may concern product liability, alleged errors in deliveries of goods and other issues connected with Consilium s operations. Disputes may prove costly, time-consuming and disruptive to normal business operations. At present, there are not considered to be any disputes of significance in progress. Investments in associates In the Parent Company s annual financial statements, investments in associates are recognised at cost less impairment losses. The Parent Company recognises income only to the extent that it receives distributions from the profits of the associate arising subsequent to the date of acquisition. Accounting estimates Significant accounting estimates and assumptions Preparation of the financial statements in accordance with IFRS requires use of critical accounting estimates. In addition, management is required to make certain judgements when applying the Group s accounting policies. Areas involving a significant amount of judgement, which are complex or require use of critical accounting estimates are as follows: Assumptions used in goodwill impairment testing The Group conducts annual goodwill impairment testing in accordance with the principles described under intangible assets. The assumptions and accounting estimates regarding projected cash flows and the discount rate using a weighted average capital cost are described in note 10. Cash flow projections are based on the best estimate of future income and operating expenses. Impairment testing has not identified any goodwill impairment and the margin used in the testing was such that Company management does not believe any reasonable changes in individual variables will cause the value in use to fall below the carrying amount. Management also believes that even a certain amount of movement in the most critical variables will still not result in impairment losses, apart from in the subsidiary JKK, where minor negative variances in cash flow expectations would result in impairment. Assumptions used in impairment testing of capitalised development expenditure The Group tests capitalised development expenditure for impairment in accordance 41

42 NOTES NOTES Note 1 Business areas The Group is organised in two business areas: Marine & Safety develops and markets fire alarm, gas detection and emission systems, marine voyage data recorders and speed logs primarily for international shipping. Safety Engineering provides complete fire protection systems for the oil, gas and power industry. The business area may also supply automation solutions, instrumentation and electrical systems. Other operations encompass Group-wide functions. Transfers or transactions between segments are conducted under normal market terms and conditions. This also applies to external parties. Operating segment assets attributable to the business areas consist mainly of intangible assets, property, plant & equipment, inventories, receivables and operating cash. Each business area reports an equity that corresponds to the Group s equity ratio. Operating segment liabilities attributable to the business areas consist of operating liabilities, but not items such as tax and certain company borrowing. Investments consist of purchasing of property, plant & equipment and intangible assets. The business areas accounts for 2016 and 2015 are shown below. SEK millions Financial year 2016 Marine & Safety Safety Engineering Other Elimination Group Net sales 1, ,643.2 Operating profit/loss Operating margin 12% 5% 9% Operating profit includes Depreciation/amortisation Assets Property, plant & equipment Intangible assets Intra-Group receivables Restricted cash Other financial assets Total non-current assets Inventories Receivables Cash and cash equivalents, restricted cash and investments Total current assets ,059.3 Total assets 1, ,960.2 Equity and liabilities Equity Bond issues Liabilities to credit institutions Intra-Group liabilities Other non-current liabilities Other current liabilities Total liabilities ,513.0 Total equity and liabilities 1, ,960.2 Operating capital ,139.5 Return on average operating capital 24% 6% 14% 42

43 NOTES SEK millions Financial year 2015 Marine & Safety Safety Engineering Other Elimination Group Net sales 1, ,565.5 Operating profit/loss Operating margin 15% 8% 11% Operating profit includes Depreciation/amortisation Assets Property, plant & equipment Intangible assets Intra-Group receivables Restricted cash Other financial assets Total non-current assets Inventories Receivables Cash and cash equivalents, restricted cash and investments Total current assets Total assets ,481.0 Equity and liabilities Equity Bond issues Liabilities to credit institutions Intra-Group liabilities Other non-current liabilities Other current liabilities Total liabilities ,104.7 Total equity and liabilities ,481.0 Operating capital Return on average operating capital 39% 12% 23% Net sales by geographical market Reconciliation with profit before tax Sweden 7% 3% Europe (excl. Sweden) 27% 26% America 8% 9% Asia 54% 59% Other markets 4% 3% 100% 100% Group SEK millions Operating profit as above Finance income and exchange gains Finance income and exchange gains Other finance costs Profit/loss before tax Net sales includes revenues from Goods 65.7% 60.3% Services 10.4% 13.6% Construction contracts 23.9% 26.1% 100.0% 100.0% Note 2 Salaries, other employee benefits and social security contributions Salaries and other remuneration Social security contributions (of which pension costs) Salaries and other remuneration Social security contributions (of which pension costs) Parent Company (2.2) (1.6) Subsidiaries (27.2) (16.8) Group (29.4) (18.4) 43

44 NOTES Note 2 Salaries, other employee benefits and social security contributions, cont d Salaries and employee benefits (Board, CEO and other employees) by country Board and CEO Other employees Board and CEO Other employees Parent Company Subsidiaries, Sweden Foreign subsidiaries Australia United Arab Emirates India Italy China Malaysia Morocco Netherlands Norway Oman Qatar Saudi Arabia Singapore UK Spain South Korea Germany USA Total, subsidiaries Total, Group Group Parent Company Personnel Swedish operations Parent Company Subsidiaries, Sweden Total, Sweden Employees in Sweden are distributed as follows: Group Parent Company Gothenburg Stockholm Malmö 20 Total Note 3 Remuneration of auditors Administrative expenses include the following fees paid to auditors. Group Parent Company PwC Audit Other auditing assistance Other services 0.5 Total Note 4 Operating leases The nominal value of future minimum lease payments under non-cancellable operating leases due for payment in the following periods: Group Parent Company Within one year Between one and five years After five years 63.7 Total Present value Operating lease costs and revenues for the year Foreign operations, subsidiaries: Australia Belgium 2 2 United Arab Emirates India Italy China Malaysia 3 Morocco 6 Netherlands Norway Oman 5 6 Qatar 8 10 Saudi Arabia 5 5 Singapore Spain 5 3 UK 24 4 South Korea Germany USA Total Total, Group Group Parent Company Lease costs Of which minimum lease payments contingent rents Apart from normal premises rental, ground rent and car leasing contracts, the Group has no other operating leases of significance. Note 5 Finance income Group Parent Company Interest Interest income from subsidiaries Exchange differences Total (18) percent of the Group s employees in 2016 were female. The Parent Company has 5 (5) employees, 1 (1) of whom is female. 44

45 NOTES Note 6 Finance costs Note 9 Property, plant & equipment Group Parent Company Interest expenses Exchange differences Other 1) Total ) Including non-recurring cost of SEK 17.5 million in 2015 for early repayment of corporate bond. Note 7 Tax on profit for the year Group Parent Company Current tax for the year Change in deferred tax Current tax attributable to prior years Total Difference between tax expense and 22 percent tax Profit/loss before tax percent tax Tax on profit/loss for the year Difference Specification of difference Effect of Foreign tax, prior years Foreign tax rates Non-taxable income Non-deductible expenses Other Total Note 8 Deferred tax Deferred tax assets relate to unused tax losses and deferred tax on cash flow hedges. There are no other taxable temporary differences. Group Parent Company Tax effect of Cash flow hedges Unused tax losses in Swedish operations Unused tax losses in foreign operations Through acquisition of subsidiaries Total Deferred tax, opening Deferred tax, change through income statement Deferred tax, change through comprehensive income Deferred tax, closing No deferred tax assets have expired. Reported in the consolidated income statement: Deferred tax attributable to cash flow hedges SEK 1.2 (-4.7) million, tax loss carryforwards SEK -1.8 (-0.8) million. Land and buildings Machinery Equipment Total At 1 January 2015 Cost of acquisition Accumulated depreciation Carrying amount January 31 December 2015 Opening balance Exchange differences Investments Acquisitions Disposals Depreciation Closing balance At 31 December 2015 Cost of acquisition Accumulated depreciation Carrying amount At 1 January 2016 Cost of acquisition Accumulated depreciation Carrying amount January 31 December 2016 Opening balance Exchange differences Investments Acquisitions Disposals Depreciation Closing balance At 31 December 2016 Cost of acquisition Accumulated depreciation Carrying amount Parent Company Equipment Opening cost Investments Disposals Closing cost Opening depreciation Depreciation for the year Closing depreciation Carrying amount Depreciation of buildings is divided equally between Cost of sales, Distribution costs, Administrative expenses and Research and development expenses. Depreciation of machinery is charged to cost of sales. The measurement of each cash generating unit is based on the calculation of value in use. The value in use is obtained from projected cash flows, with the forecast for first year being based on the budget defined by the Board. Three-year forecasts based on business plans for each cash-generating unit are then used. Growth for subsequent years is expected to be in line with the long-term level of inflation (2%). Budgeted operating margins are defined on the basis of previous results and expectations of future market development. Reported in the Parent Company s income statement: Deferred tax attributable to cash flow hedges SEK 0.1 (0.0) million, tax loss carryforwards SEK 3.3 (-2.9) million 45

46 NOTES Note 10 Intangible assets, Group Goodwill Customer relationships Capitalised development Patents, trademarks and licences At 1 January 2015 Cost of acquisition Accumulated amortisation Carrying amount Total Carrying amount 1 January 31 December 2015 Opening balance Exchange differences Investments Acquisitions Disposals Amortisation Closing balance At 31 December 2015 Cost of acquisition Accumulated amortisation Carrying amount At 1 January 2016 Cost of acquisition Accumulated amortisation Carrying amount Carrying amount 1 January 31 December 2016 Opening balance Exchange differences Investments Acquisitions Disposals Amortisation Closing balance At 31 December 2016 Cost of acquisition Accumulated amortisation Carrying amount Goodwill impairment testing Distribution of goodwill in the Group at market area level: Marine & Safety Safety Engineering Units in Consilium s two business areas have a similar risk profile and development. Consequently, the Group classifies the business areas as cash-generating units for goodwill allocation and impairment testing. Goodwill is allocated to the two cash-generating units based on goodwill identified according to acquisition analyses for the companies in each of the units. The pre-tax discount rate used is ( ) percent. The measurement of each cash generating unit is based on the calculation of value in use. The value in use is obtained from projected cash flows, with the forecast for first year being based on the budget defined by the Board. For subsequent years, the pre-tax discount rate is expected to be in the range of ( ) percent with an inflation rate in the range of ( ) percent. Budgeted operating margins are defined on the basis of previous results and expectations of future market development. It is the Company s assessment that the effects of reasonable changes in annual growth, the operating margin, the pre-tax discount rate and other assumptions would not be sufficient to cause the value in use to fall below the carrying amount. Annual impairment testing did not identify any impairment losses. Cash flow expectations for the cash-generating units are an important variable in the impairment testing. The cash flows used are based on management s best estimate of future cash flows for each cash-generating unit. There is a risk that these cash flows will be lower than expected over time, particularly in the long term. In 2016, the subsidiaries JKK and Micropack experienced a decline in demand in the oil and gas industry, notably in the offshore sector, which had a negative effect on the order intake and net sales. Low oil prices have adversely affected investments in the oil and gas market for a long period. Demand for oil and gas continues to increase and a certain improvement in the market is expected in 2017, while in the long term, the cash generating units see significant growth potential in the oil and gas industry. For JKK, negative variances in cash flow expectations could result in an impairment loss. 46

47 NOTES Note 11 Investments in subsidiaries Parent Company Opening cost Shareholder contributions Acquisition of shares Internal disposal/acquisition of shares Carrying amount Share of capital Share of votes Number of shares Carrying amount Consilium Marine Group AB 100% 100% 500, Consilium Marine & Safety AB 100% 100% 220, Company/reg. no. Swedish subsidiaries Consilium Building Safety AB Reg d office Number of shares/ interests Share of capital/ votes, % Västra Frölunda 2, Consilium Säkerhet Syd AB Malmö Consilium Säkerhet Väst AB Gothenburg 3, Consilium Säkerhet Öst AB Stockholm 2, China Marine Techtrade AB Nacka 1, Consilium Incendium AB Kungälv Consilium Marine Group AB Nacka 500, Consilium Marine & Safety Group AB Nacka 30, Consilium Marine & Safety AB Gothenburg 220, Consilium Security Group AB Nacka 10, Consilium Navigation Group AB Nacka 1, Consilium Research & Development AB Nacka 1, Consilium Marine Safety & Sales & Support AB Gothenburg 1, Markground Industri AB Nacka 2, Storm & Co. Skeppsradio AB Gothenburg 2, Foreign subsidiaries Buveco Gasdetection B.V. Bleiswijk/Netherlands 100 Consilium Building Safety AS Oslo/Norway 100 Consilium Control Systems AS Kristiansand/Norway 70 Consilium JKK Group AS Kristiansand/Norway 60 Fireproducts AS Kristiansand/Norway 60 Slokkedesign AS Kristiansand/Norway 60 SmartForskaling AS Kristiansand/Norway 60 Consilium Marine Aps Copenhagen/Denmark 100 Firenor Firefighting Engineering Co., Ltd Dalian/China 80 Consilium Hongkong Ltd Hong Kong/China 100 Consilium GmbH Hamburg/Germany 100 Consilium Italy Srl Florence/Italy 100 Consilium Shanghai Co. Ltd Shanghai/China 100 Consilium Trading Co. Ltd Shanghai/China 100 Consilium Norway AS Oslo/Norway 100 Consilium BV Schonhoven/Netherlands 100 Consilium Marine US Inc. Fort Lauderdale/USA 100 Consilium Marine Korea Ltd Pusan/South Korea 100 Consilium FireNor Korea Ltd Pusan/South Korea 75 Consilium Novamarine Pty Ltd Maryville/Australia 100 Company/reg. no. Reg d office Share of capital/ votes, % Foreign subsidiaries (cont d) Consilium Micropack Ltd Aberdeen/Scotland 79 Micropack (Engineering) Ltd Aberdeen/Scotland 79 Micropack Detection (Americas) Inc. Fort Collins/USA 79 Consilium Marine Singapore Ltd Singapore 75 Consilium Saudi Arabia Trading EST Dammam/Saudi Arabia 70 Consilium Middle East (FZC) Dubai/United Arab Emirates 70 Consilium Automation Kochin/India 70 & Fire protection Pvt Ltd Consilium Engineers India Pvt Ltd Kochin/India 70 SFS Fire & Security Pvt Ltd New Delhi/India 70 Tritek Power & Automation (FZC) Sharjah/United Arab Emirates 70 Consilium Engineering & Trading LLC Muscat/Oman 70 Consilium Engineering Sdn Bhd Kuala Lumpur/Malaysia 70 Consilium Solutas Sdn Bhd Kuala Lumpur/Malaysia 70 Consilium Middle East General Contracting LLC Abu Dhabi/United Arab Emirates Consilium Tharawat LLC Muscat/Oman 70 Consilium Technologies LLC Dubai/United Arab Emirates 70 Consilium Automation Casablanca/Morocco 70 & Fire protection Pvt SARL Tritek Power & Automation (FZC) Dubai/United Arab Emirates 70 Consilium Qatar LLC Doha/Qatar 70 Consilium Marine India Pte Ltd Mumbai/India 70 Consilium RMI Spain SA Bilbao/Spain 51 Note 12 Equity-accounted holdings Group Opening cost Reclassification Acquisitions Change in equity shares for the year after dividend Closing cost The amount recognised as reclassification in 2016 relates to the carrying amount of the 50-percent holdings in the joint venture companies Consilium Säkerhet Väst AB and Consilium Säkerhet Öst AB, and the carrying amount of the 50-percent holding in the company Consilium Säkerhet Syd AB, in which Consilium acquired an additional 20 percent of the shares in June These companies are now consolidated, as Consilium has control of all three companies. The cost of 30 percent of the shares in Foab Production AB is recognised as an acquisition. Dividends from equity accounted holdings amounted to SEK 3.4 (3.9) million in Company Share of capital/ votes, % Carrying amount of shares 70 Carrying amount of share of capital CN System Scandinavia AB Foab Production AB Consilium Marine Oy Microdata Due Srl Consilium Marine Hellas Ltd Consilium Marine Cyprus Ltd Consilium Vietnam J.S.C Consilium Nittan Marine Ltd Norcott Technologies Limited The associates do not have any liabilities, contingent liabilities or commitments for which the Group may have a pecuniary obligation. 47

48 NOTES Note 13 Financial risk management Financial risk management Consilium Group is exposed to various types of financial risk in the course of its operations. Group policies defined by the Board form the basis of management of these risks at different levels in the Group. The policies are designed to provide an integrated picture of the risk situation, minimise negative impacts on earnings and clarify responsibility and authority in the Group. Defined policies are monitored regularly at local and central level, with reporting back to the Board. Currency risk Transaction exposure As the Group s companies have revenues and expenses in different currencies, it is exposed to risks associated with currency fluctuations. This risk, which affects operating profit, is referred to as transaction exposure. Net currency exposure converted to SEK millions (net exposure refers to revenues less costs) Total Other foreign 2016 USD EUR NOK GBP currencies currencies SEK Total The Group s operating profit The aim of currency risk management is to minimise the effects of exchange rate movements on the Group s results in the short term. Each subsidiary manages its transaction risks locally. Consilium applies hedge accounting using cash flow hedges where forward exchange contracts are used as hedging instruments and agreed future orders in foreign currency are used as hedged items. Consilium regularly hedges all foreign currency orders apart from regular servicing and spare parts sales. The hedges are designated as highly effective, as only signed contracts are hedged and not expected orders. The table below shows foreign exchange contracts at the reporting date translated to SEK millions. All amounts are due within 24 months. Group Forward exchange contracts cash flow hedges EUR USD GBP YEN Due within 12 months The effect of cash flow hedges on comprehensive income after tax is SEK -4.5 (15.7) million. Gains and losses on forward exchange contracts at 31 December 2016 will be transferred from equity to the income statement at various dates between 3 months and 2 years after the reporting date Average prices of forward contracts EUR USD GBP YEN The Group applies IAS 39 with effect from 1 January It is Consilium s assessment that all derivative instruments, hedging instruments and hedging relationships fulfil the requirements for hedge accounting and are highly effective. Changes in the fair value of the Group s derivative instruments are therefore reported in other comprehensive income under Items that may be reclassified subsequently to profit or loss. At 31 December 2016, there was a negative change of SEK 10.6 million in the fair value of the derivative instruments. At the end of 2015, the instruments had a negative change in value of SEK 6.0 million. Values relating to cash flow hedge reported in other comprehensive income at 31 December 2016 will be transferred to the income statement at various dates between 3 months and 2 years after the reporting date. Sensitivity analysis Net exposure is highest in USD. Factor Change, +/- Effect on operating profit, SEK million Net sales 1% +/ Interest expenses 1% +/- 9.8 Personnel expenses 1% +/- 4.0 Depreciation/amortisation 1% +/- 0.5 Exchange rate movements, USD 1% +/- 4.7 Exchange rate movements, EUR 1% +/- 2.4 The forward contracts move the earnings effect forward in time, as the majority of the forecast flows for the coming twelve-month period are covered by signed contracts. During that time, measures can be taken to minimise the effects. Translation exposure Consilium presents its income statements and balance sheets in SEK. Several Group companies have a different presentation currency. This means the Group s earnings and equity are exposed during consolidation when foreign currencies are translated to SEK. This exposure, referred to as translation exposure, mainly affects equity and is not normally hedged. Price risk Consilium is exposed to price risk associated with the purchase of components. Purchases of components amounted to SEK (762.3) million and consist of a wide variety of inputs with differing price trends over time. For lasting material changes, companies can in most cases obtain compensation in the price, although clauses allowing such compensation are an exception. Interest rate risk As Consilium does not have any significant interest-bearing assets, the Group s revenues and cash flow from operating activities are essentially unaffected by changes in market rates. Consilium s net financial items and earnings are affected by fluctuations in borrowing interest rates. The Group is also indirectly affected by the effects of interest rates on the overall economy. It is Consilium s opinion that shortterm fixed interest bears a risk which is commensurate with the Group s operations. Consequently, borrowings normally have a fixed-interest period of between up to 12 months and 5 years. Short-term interest rates have also been lower than long-term rates over the last decade, which has had a positive effect on the Group s results. Outstanding loans and overdraft facilities are listed below. Borrowing Liabilities to credit institutions consist of a few small borrowing facilities in different currencies with different terms and conditions. Interest rates vary between 1.50 percent and 5.75 percent. The average interest on overdrafts is 1.50 percent. There is an additional limit charge on the granted borrowing facilities. The average for this charge is 0.2 percent. The Company is currently using a derivative instrument of approx. SEK 40.0 million. All loans carry variable interest rates with fixed-interest periods of up to 90 days. See also note 21. Net debt at the end of the year amounted to SEK (524.4) million. A one-percent change in interest rates would affect earnings by SEK 9.8 (7.3) million. Credit risk Credit risk is the risk that receivables due from customers will not be settled. The size of each customer s credit is assessed individually. All new customers undergo a credit check. The idea is that the credit limits will reflect the customer s ability to pay. The Group has a good risk spread, with sales encompassing different sectors and companies. In general, the weak economic development in certain market segments has brought an increased risk of customer defaults. Consilium s customer defaults have historically been low. Losses on receivables arise when customers are declared bankrupt or are unable to fulfil their payment commitments for some other reason. Consilium does not believe there to be any significant credit risk associated with any particular customer, counter-party or geographical region. Cash & cash equivalents consist entirely of cash and bank deposits, and total SEK (69.3) million. In the subsidiaries, SEK 41.0 (39.5) million of cash & cash equivalents are pledged as collateral for bank guarantees and letters of credit. Liquidity risk Consilium has loans which mature at various dates. A large proportion of the liabilities are overdraft facilities with contractual terms of one year. Refinancing risk is the risk that Consilium will be unable to fulfil its commitments due to cancellation of loans and difficulties in setting up new loans. Consilium manages this risk by ensuring it has good cash preparedness. In order to monitor liquidity development, Consilium prepares quarterly liquidity forecasts. 48

49 NOTES Group Parent Company Available cash Credit facilities Utilised credit facilities Current liquidity Maturity analysis of liabilities, including interest due for each period under the loan agreement. 31/12/ months 6 months -1 year 1-2 years 2-5 years Borrowing Trade and other payables Forward exchange contracts Management of capital risk The Group s goal for capital structure is to continue to expand operations so that they generate a return to shareholders, while keeping capital costs at a reasonable level. The capital structure can be changed by raising or lowering the dividend, issuing new shares, repurchasing shares and selling assets. Capital risk is expressed as the net/debt equity ratio, which is interest-bearing liabilities less cash & cash equivalents divided by equity. The aim is to create manoeuvrability by having a low debt/equity ratio. The net debt/equity ratio at the last two year-ends was as follows: Group Interest-bearing liabilities Cash and short-term investments Net debt Equity Net debt/equity ratio, % Financial assets and liabilities per category within the Group 31/12/2016 Receivables Derivatives designated as hedging instruments Availablefor-sale financial assets Other financial assets and liabilities Total Other non-current receivables Trade and other receivables Short-term investments Cash & cash equivalents Derivatives Corporate bond issue Liabilities to credit institutions Non-current liabilities, put/call option Trade payables Other operating liabilities /12/2016 Level 1 Level 2 Level 3 Total Financial assets and liabilities at fair value through profit or loss Derivatives held for trading Currency derivatives Securities held for trading Financial institutions Derivatives held for hedging Currency derivatives Available-for-sale financial assets Short-term investments Financial liabilities Put/call option /12/2015 Receivables Derivatives designated as hedging instruments Availablefor-sale financial assets Other financial assets and liabilities Total Other non-current receivables Trade and other receivables Short-term investments Cash & cash equivalents Derivatives Corporate bond issue Liabilities to credit institutions Trade payables Other operating liabilities /12/2015 Level 1 Level 2 Level 3 Total Financial assets and liabilities at fair value through profit or loss Derivatives held for trading Valutaderivat Derivatives held for hedging Currency derivatives Available-for-sale financial assets Short-term investments Financial liabilities Put/call option Note 14 Inventories Group Raw materials Products in progress Finished products Advances from customers Impairment of inventories Carrying amount Note 15 Trade receivables Group Trade receivables Provision for doubtful debts Carrying amount Group Maturity structure of trade receivables Not past due Past due 1-30 days Past due days Past due over 90 days The amounts are for customers who do not have payment defaults. As payment times vary according to culture and country, and historically there have been no impairment losses, no impairment has occurred. Group Provision for doubtful debts Opening balance Reversal of previous provisions Transfers during the year Closing balance

50 NOTES Note 16 Contract work in progress Note 19 Provisions Group Contract revenue recognised during the period Accumulated contract costs and recognised profit less recognised losses Advances received Retentions Amounts due from client for contracts in progress Amounts due to client for contracts in progress Note 17 Prepayments and accrued income Group Parent Company Prepaid rents Prepaid lease payments Prepaid insurance premiums Derivative instruments Percentage of completion, projects in progress Bond expenses Other Total Note 18 Share capital development Date Transaction Increase in share capital, SEK Total share capital, SEK Number of shares 1993 Establishment of Company 50,000 10, New share issue 20,575,000 20,625,000 4,125, New share issue 4,375,000 25,000,000 5,000, Conversion 7,500 25,007,500 5,001, Conversion 60,900 25,068,400 5,013, Conversion 5,000 25,073,400 5,014, New share issue 5,500,000 30,573,400 6,114, Conversion 2,100 30,575,500 6,115, Conversion ,576,050 6,115, Conversion 4,915,805 34,491,855 6,898, Warrants 12,160 35,504,015 7,100, New share issue 11,834,665 47,338,680 9,467, Conversion 266,660 47,605,340 9,521, Conversion 4,905,675 52,511,015 10,502, Non-cash issue 1,500,000 54,011,015 10,802, New share issue (registered 03/01/2008) 500,000 54,511,015 10,902, New share issue 4,000,000 58,511,015 11,702,203 The par value of the share is SEK 5. The shares comprise class A and class B shares. Votes A shares 907, votes 9,074,900 B shares 10,794,713 1 vote 10,794,713 11,702,203 19,869,613 Group Provisions Provisions for pensions etc Provision for warranty obligations Other provisions Total The subsidiaries provide a certain type of warranty service and undertake to repair or replace parts not performing satisfactorily. A provision of SEK 8.6 (7.8) million for expected warranty claims was recognised at the reporting date, based on previous experience of the level of repairs and replacement parts. Warranty obligations are normally valid for two years. Group Provisions for pensions etc Provisions at beginning of period Provisions during the period Repayments Provisions at end of period Group Pensions Provisions for pensions and similar obligations: Italy South Korea Total Group The main actuarial assumptions used Discount rate 1.5% 1.5% Future salary increases 1.5% 1.5% Inflation 2.0% 2.0% Group Amounts recognised in the income statement Current service cost Interest expenses Actuarial losses Total Amounts recognised in the balance sheet, calculated by reference to: Group Present value of unfunded obligations Fair value of plan assets Total Pension provisions Opening balance, 1 Jan Provisions during the year Sale of operations Reversals during the year Translation differences Closing balance, 31 Dec Defined benefit pension plans The Group has defined benefit pension plans, under which employees are entitled to post-employment benefits based on the final salary and length of service. Defined benefit pension plans exists in Italy and South Korea At 31 December Present value of defined-benefit obligations Fair value of plan assets Deficit/surplus in the plan Experience adjustments of defined-benefit obligations 50

51 NOTES Pension expenses Total pension expenses recognised in the consolidated income statement are as follows: Total cost of defined benefit plans Total cost of defined contribution plans Total pension expenses Contractual renegotiation dates Within 6 months 6-12 months 1-5 years After 5 years Total At 31 December 2016 Total borrowing Pension expenses Allocation of pension costs in the consolidated income statement: Cost of sales Distribution costs Administrative expenses Total Pension insurance with Alecta For salaried employees in Sweden, the ITP 2 plan s defined-benefit retirement and family pension obligations are covered by insurance with Alecta. According to the Swedish Financial Reporting Board s statement UFR 3, Classification of ITP Plans Financed by Insurance in Alecta, this is a multi-employer defined-benefit pension plan. The Company did not have access to sufficient information for the 2016 fiscal year to report its proportionate share of the plan s obligations, plan assets and costs, which meant that it was not possible to report the plan as a defined-benefit plan. Consequently, the ITP 2 pension plan insured through Alecta is reported as a defined contribution plan. The premium for the defined-benefit retirement and family pension is calculated individually and is dependent on factors that include salary, previously earned pension and expected remaining service. Expected contributions in the next reporting period for ITP 2 insurance covered by Alecta are SEK 8.7 (7.9) million. The collective consolidation level is the market value of Alecta s assets as a percentage of its insurance obligations calculated by reference to Alecta s actuarial methods and assumptions. This is not consistent with IAS 19. The collective consolidation level is normally allowed to vary between 125 and 155 percent. If Alecta s collective consolidation level falls below 125 percent or exceeds 155 percent, measures must be taken to create the right conditions for the level to return to the normal range. If the funding ratio is too low, an appropriate measure could be to increase the agreed price for new insurance and extension of existing benefits. If the funding ratio is too high, premium reductions could be introduced. Post-employment medical benefits The Group s employees do not have any post-employment medical benefits. Note 20 Costs by nature of expense Group Raw materials and consumables used Changes in inventories of finished goods and products in progress Personnel expenses Marketing expenses Rental costs Transport and travel expenses Depreciation/amortisation Other external services Other costs Total 1, ,402.2 At 31 December 2015 Total borrowing Maturity of long-term borrowing Group Parent Company years years After 5 years Effective interest at reporting date Group Parent Company Percent Overdraft facilities Bank loans Other loans Corporate bond On 1 November 2012, Consilium AB (publ) issued a 5-year unsecured bond totalling SEK 325 million. Consilium exercised the right to issue a further SEK 75 million in On 24 April 2015, the bond of SEK 400 million was repaid early. A new 5-year unsecured bond of SEK 600 million was issued on 25 March 2015, with an option to issue a further SEK 300 million. On 26 February 2016, Consilium exercised its right to issue a further SEK 150 million, which means that there is still an option to issue a further SEK 150 million. Interest is paid quarterly and is subject to three months STIBOR plus 5.75 percent. The maturity structure of Consilium s total borrowing at the end of the year is as follows Maturity structure of Consilium s borrowing Note 22 Non-current liabilities Group Put/call option in Consilium JKK Group AS Put/call option and purchase consideration in Micropack (Engineering) Ltd Total Note 21 Borrowing Group Parent Company Non-current Bank loans Corporate bond Maturity structure of Consilium s non-current liabilities JKK, put/call SEK 42.0 million due after the end of 2018 Micropack, put/call and the purchase consideration SEK 44.7 million due after the end of 2019 SEK 23.1 million due after the end of 2021 SEK 49.2 million due after the end of 2019 Current Bank loans Unutilised borrowing facilities at the end of the year amounted to SEK 51.5 (33.0) million. The carrying amount is the same as the fair value. Consilium AB (publ) fulfilled all loan covenants during the 2016 and 2015 reporting periods. 51

52 NOTES Note 23 Accruals and deferred income Note 27 Board members and senior executives Group Parent Company Accrued interest expense Holiday pay Accrued social security contributions Warranty provisions Other items Total Note 24 Pledged assets Group Parent Company Own liabilities and provisions Floating charges 51,4 54,5 Property mortgages 3,2 3,5 Investments in subsidiaries 16,0 16,0 Pledged net assets in subsidiaries 0,2 0,2 Cash & cash equivalents 41,0 39,5 Total own liabilities and provisions 95,8 97,7 16,0 16,0 Note 25 Contingencies and guarantee commitments Group Parent Company Guarantee commitments on behalf of other Group companies Bank guarantees Sureties for associates Total contingencies The Group rents a number of office premises. The Group also holds various types of plant and machinery and cars under leases. The rental contracts and leases are subject to different terms and conditions and include a renewal option. in any significant liabilities. Number at reporting date Of which male Number at reporting date Of which male Group (with subsidiaries) Board members 56 (95%) 60 (97%) CEOs and other senior executives 44 (89%) 28 (95%) Parent Company Board members 7 (71%) 7 (71%) CEO and other Senior executives 4 (75%) 4 (75%) Board fees are defined at the annual general meeting of shareholders. No other special fees are paid. No fees are paid to the Group s employees for board assignments in the subsidiaries. Remuneration of the CEO and management group comprises the basic salary, including car allowance, and bonuses. Pension is payable in accordance with the current ITP plan. The management group consists of the President & CEO, the managers of the two business areas, and the Parent Company s Finance Manager and Treasurer and Group Controller. Bonuses are linked to financial targets and may not exceed three monthly salaries. The remuneration arrangements for the CEO are determined by the Board. The remuneration arrangements for senior executives are determined by the Chairman of the Board and the CEO. Board fees of SEK 800 (650) thousand were paid during the year. SEK 175 (150) thousand of this amount was paid to the Chairman. Payment for management services is described in note 26. There are no pension obligations to the Chairman for 2015 or The CEO received an annual salary of SEK 2,557 (2,567) thousand. No bonus was paid for Bonuses for 2015 amounted to SEK 630 thousand. including a car allowance. Pension is payable in accordance with the current ITP plan. The retirement age for the President & CEO and the CEOs of the subsidiaries is 65 years, while the period of notice is 12 months. No special termination or retirement benefits are paid. Senior management in Consilium AB and its subsidiaries have normal salary agreements without any special retirement benefits in the event of termination. In the event of involuntary termination, members of senior management receive up to one annual salary, including normal pension costs. No bonuses were paid during the year. Note 28 Remuneration and benefits during the year Note 26 Related party transactions Intra-group purchases and sales 100 (100) percent of the Parent Company s sales for the year were to its subsidiaries. Intra-group purchases and sales are subject to the same pricing principles as transactions with external parties. No goods or services were purchased from associates during the year. Purchase of goods and services from related parties Group Parent Company Platanen AB, management and administrative services Management services Administrative services Fastighetsbolag Henriksborg HB, rent Total Board fees/ 2016 basic salary Bonus Pension costs Car allowance Total Board Chairman, Carl Rosenblad Board Member, Fredrik Nygren Board Member, Peter Carlberg Board Member, Ann-Marie Åström Board Member, Erik Lindborg Board Member, Thomasine Rosenblad Nomination committee Chairman, Lennart Norling Rasmus Palmqvist Management (of which CEO) (2.6) (0.6) (1.3) (0.1) (4.6) Total Management services relate to the Chairman of the Board. Services purchased from Platanen AB and its subsidiary Fastighetsbolaget Henriksborg HB are charged at standard market terms. 52

53 NOTES Board fees/ 2015 basic salary Bonus Pension costs Car allowance Total Board Chairman, Carl Rosenblad Board Member, Fredrik Nygren Board Member, Peter Carlberg Board Member, Ann-Marie Åström Board Member, Erik Lindborg Board Member, Thomasine Rosenblad Nomination committee Chairman, Lennart Norling Rasmus Palmqvist Management (of which CEO) (2.6) (0.6) (0.9) (0.1) (4.2) Total Note 29 Adjustments for non-cash items Group Parent Company Provisions Other Total The option price for the remaining approx. 20 percent of the shares is also based on Micropack s earnings during the years The minority does not have entitlement to dividends on Micropack s profits during the option period. The value of recognised goodwill and other intangible assets arising from the acquisition, including the provision for the performance-based call option and purchase consideration, amounts to SEK million. Goodwill is attributable to the employees and the high profitability of the acquired business. No part of the recognised goodwill is expected to be tax deductible. In June 2016, Consilium increased its shareholding in the company Consilium Säkerhet Syd AB from 30 percent to percent. Consilium Säkerhet Syd AB has net sales of approx. SEK 45 million, and sells, designs, installs and provides servicing for fire alarms for clients with high safety and reliability requirements. The company has 18 employees. The acquisition strengthens Consilium s position for future expansion in the land market. The cost of acquisition for the acquired percent of the shares was SEK 6.0 million. The value of goodwill arising from the acquisition amounts to SEK 13.1 million, after fair value recognition of the previously owned 30-percent share. Goodwill is attributable to the employees and the high profitability of the acquired business. No part of the recognised goodwill is expected to be tax deductible. After the date of acquisition, the company is consolidated and is therefore no longer an associated company. The acquired companies have had an effect of SEK 62.0 million on the Consilium Group s revenue from the date of acquisition, and a positive effect of SEK 10.2 million on profit after tax for the same period. The corresponding full-year effects, i.e. if the acquisitions had been conducted on 1 January 2016, are estimated at SEK million on the Group s revenue and SEK 14.5 million on profit after tax. The Group s profit before tax for 2016 was charged with SEK 8.8 million relating to acquisition-related transaction costs. Assets and liabilities related to the acquired operations at the acquisition date were as follows (SEK millions) Note 30 Earnings per share Group Calculation is based on Profit/loss for the year attributable to owners of the Parent Average number of shares 11,702,203 11,702,203 Note 31 Non-current receivables Consilium has no past-due non-current receivables at 31/12/2016. Parent Company Opening balance, 1 Jan Receivables from subsidiaries Exchange differences Repayments Closing balance, 31 Dec Note 32 Business acquisitions In April 2016, Consilium acquired percent of the shares in the Scottish fire safety company Micropack (Engineering) Ltd, with the subsidiary Micropack Detection (Americas) Inc. Micropack has net sales of approx. SEK 95 million, and develops and sells flame detection systems and advanced fire and gas safety services to the oil and gas industry. Micropack has 30 employees. The acquisition complements and strengthens Consilium s offering of advanced fire safety systems in several market segments and Consilium is expected to contribute to a significant volume increase for Micropack. Micropack also brings Consilium advanced safety expertise for fire and gas detection in demanding environments. The cost of acquisition of percent of the shares was SEK million. The purchase agreement includes a put and call option, giving entitlement to acquire the remaining percent of the company for a profit-related purchase consideration. The assessment is that the terms of the option are such that it is likely that it will be exercised, which means that a provision for the estimated purchase consideration will be recognised and the acquired company will be fully consolidated in the consolidated financial statements. In addition to a cash payment, the purchase is financed with seller-financing of SEK 54 million, with the repayment linked to Micropack s earnings during the years Micropack (Engineering) Ltd with subsidiaries Consilium Säkerhet Syd AB Property, plant & equipment Intangible assets Financial assets Inventories Current receivables Cash & cash equivalents Non-current liabilities Current liabilities Fair value of net assets acquired, excluding goodwill and other intangible assets, and option liabilities and contingent consideration The fair value of acquired trade receivables amounted to SEK 18.1 million. The gross contractual amount for trade receivables is SEK 18.1 million and these receivables are expected to be collected in their entirety. The acquisition of Micropack was financed in cash and through seller-financing. At the end of the reporting period, the liability was valued on the basis of Micropack s expected earnings in the coming years. The option liability for the remaining shares in Micropack is valued according to the put/call option, also based on the company s expected earnings in the coming years. The option liability that arose in connection with the acquisition of JKK in 2014 has a similar structure and is treated similarly. No deferred tax has arisen in connection with the calculation of acquisition balance sheets. Consilium also acquired 30 percent of the shares in the Swedish electronics company Foab Production AB in April As the company is an associate, it is not consolidated. 53

54 NOTES Note 33 Proposed distribution of profits Amounts in SEK thousands The following amounts are at the disposal of the annual general meeting: Share premium reserve 130,435 Retained earnings -59,232 Profit/loss for the year -11,600 Total 59,603 The Board proposes that the profit be distributed as follows: Cash dividend of SEK 2.00 per share to shareholders -23,412 Carried forward 36,191 After the proposed dividend, the equity/assets ratio for the Parent Company will be 13 percent and for the Group 22 percent. The equity/assets ratio is satisfactory considering that the Company and the Group continue to operate profitably. The liquidity of the Company and the Group is expected to be maintained at a satisfactory level. It is the Board s assessment that the proposed dividend will not prevent the Parent Company or other Group companies from discharging their obligations or making necessary investments. The proposed dividend can therefore be justified pursuant to the provisions of the Swedish Companies Act, Chapter 17, section 3, para. 2-3 (the precautionary principle). Note 34 Events after the reporting period In January 2017, Consilium acquired 60 percent of the shares in the US fire safety company ACAF Systems Inc. ACAF Systems has developed Automatic Compressed Air Foam Systems, which enable more effective fire extinguishing, use less water and foam, and are quicker than conventional foam extinguishing systems. The systems generate compressed air foam which is biodegradable. The products have undergone extensive functional tests in different countries and obtained United States FM approval and patents. ACAF Systems has net sales of approx. SEK 10 million and 5 employees. The acquisition complements Consilium s product range and gives access to new technology and related patents, and international product approvals. The cost of acquisition of 60 percent of the shares was SEK 8.9 million. The value of recognised goodwill and other intangible assets arising from the acquisition is SEK 6.7 million. Goodwill is attributable to the employees and the expected high profitability of the acquired business. No part of the recognised goodwill is expected to be tax deductible. Assets and liabilities related to the acquired operation at the acquisition date were as follows (SEK millions) ACAF Systems Inc. Property, plant & equipment 0.0 Intangible assets 1.6 Financial assets 0.0 Inventories 0.0 Current receivables 0.2 Cash & cash equivalents 0.3 Non-current liabilities -6.5 Current liabilities -0.3 Fair value of net assets acquired, excluding goodwill and other intangible assets -4.7 No deferred tax has arisen in connection with the calculation of the acquisition balance sheet. The prepared acquisition balance sheet is preliminary. Note 35 The income statements and balance sheets for the Parent Company and Group will be presented for adoption at the annual meeting on 19 May The Board and CEO confirm that the consolidated annual financial statements have been prepared in accordance with international financial reporting standards (IFRS), as adopted by the EU, and provide a true and fair view of the Group s financial performance and position. The Parent Company s annual financial statements have been prepared in accordance with generally accepted accounting principles in Sweden and provide a true and fair view of the Company s financial performance and position. The Board of Directors report presents the operations, financial position and performance of the Group and Parent Company, and describes material risks and uncertainties to which the Parent Company and Group companies are exposed. Stockholm, 17 april 2017 Carl Rosenblad Chairman of the Board Peter Carlberg Erik Lindborg Fredrik Nygren Board Member Board Member Board Member Carl Adam Rosenblad Ann-Marie Åström Thomasine Rosenblad Board Member Board Member Board Member Ove Hansson Chief Executive Officer Our audit report was submitted in Stockholm on 20 April 2016 Sten Håkansson Chief Auditor Öhrlings PricewaterhouseCoopers AB 54

55 AUDITOR S REPORT AUDITOR S REPORT To the general meeting of the shareholders of Consilium AB (publ), corporate ID Report on the annual accounts and consolidated accounts Opinions We have audited the annual accounts and consolidated accounts for Consilium AB (publ) for the year The Company s annual accounts and consolidated accounts are included in this document on pages In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the Parent Company s financial position at 31 December 2016 and its financial performance and cash flows for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the Group s financial position at 31 December 2016 and its financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU and the Annual Accounts Act. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts. We therefore recommend that the general meeting of shareholders adopt the income statement and balance sheet for the Parent Company and the Group. Basis for opinions We conducted the audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under these standards are further described in the Auditor s Responsibilities section. We are independent of the Parent Company and the Group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions. Our audit approach Focus and scope of the audit We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we considered areas where the Managing Director and Board made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and forecasts regarding future events that are inherently uncertain. As in all of our audits, we also addressed the risk of the Managing Director and Board overriding internal controls, including, among other things, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. We tailored our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates The Consilium Group consists of about 45 operating entities, many of which are relatively small. In addition to Sweden, PwC is also the appointed auditor for the companies in Norway and Dubai. For other significant subsidiaries, we have instructed the entities auditors and determined the necessary level of our involvement in their audit work in order to be able to conclude that sufficient appropriate audit evidence has been obtained for us to express our opinion on the consolidated financial statements as a whole. As part of our work, we have obtained written reports from the subsidiaries auditors. During the year, the Group team also visited the subsidiaries in Norway and Scotland and discussed significant audit issues with management and local auditors. Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance that the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users made on the basis of these annual accounts and consolidated accounts. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including overall Group materiality for the financial statements. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of individual and aggregate misstatements on the financial statements as a whole. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of the annual accounts and consolidated accounts as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. Key audit matter Valuation of goodwill Goodwill is described in the Annual Report in note 10 and in the accounting policies. In recent years, Consilium has acquired two subsidiaries engaged in services and sales to the offshore oil industry. During the last two-year period, oil prices have been halved, which also affects these companies customers. The acquisition of Micropack (Scotland) in 2016 gave rise to goodwill of SEK million and the acquisition of the JKK Group (Norway) brought further goodwill of SEK 88 million. The acquisition of Micropack was conducted when oil prices had already fallen and the price reflects this situation. Valuation of option liabilities and additional purchase consideration Option liabilities and additional purchase consideration are described in the Annual Report in note 22 and in the accounting policies. The acquisitions of both Micropack and the JKK Group provided Consilium with options to purchase the outstanding shares. For the JKK Group, the liability was SEK 42 million in December 2016, while for Micropack, the corresponding liability, including the residual purchase consideration, was SEK 117 million. In both cases, the liabilities are lower than in the previous year (JKK) as well as on acquisition date (Micropack), due to a downward revision of the earnings forecasts for the companies. The assessment of future earnings is directly linked to the size of the liability. How our audit addressed the key audit matter Although oil prices have remained at a low level, activity among the acquired customers has recently increased. This is also reflected in the upward forecasts the companies are reporting from 2017 onwards, and is also the basis for the valuations. As part of the audit, we have challenged the companies forecasts based on history, the outcome in early 2017, including new orders, and on the reasonableness of estimated sales in coming years. We have also examined the rate of return (WACC) used in the valuation, based on industry comparisons, capital structure, etc. The audit of option liabilities and additional purchase consideration liabilities has been conducted by examining the companies earnings forecasts for the relevant periods. The audit was similar to the process described above for the valuation of goodwill, and included examination of forecasts based on assumptions of sales growth and margin development, compared with historical figures and development during the most recent period in

56 AUDITOR S REPORT Information other than the annual accounts and consolidated accounts This document also contains information other than the annual accounts and consolidated accounts, which is presented on pages 1-26 and The Board of Directors and the Managing Director are responsible for this other information. Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance or conclusion regarding this other information. In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure, we also take into account our knowledge otherwise obtained in the audit and assess whether the information appears to be materially misstated. If, based on the work performed concerning this information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibility of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and for ensuring that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error. In preparing the annual accounts and consolidated accounts, the Board of Directors and the Managing Director are responsible for the assessment of the Company s and the Group s ability to continue as a going concern. They disclose, as applicable, matters related to the going concern and use of the going concern basis of accounting. The going concern basis of accounting is, however, not applied if the Board of Directors and the Managing Director intend to liquidate the Company, cease operations, or have no realistic alternative but to do so. Auditor s responsibility Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users made on the basis of these annual accounts and consolidated accounts. A further description of our responsibility for the audit of the annual accounts and consolidated accounts is available on Swedish Inspectorate of Auditors website: pdf. This description is part of the auditor s report. Basis for opinions We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities in this regard are further described in the Auditor s Responsibilities section. We are independent of the Parent Company and the Group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions. Responsibility of the Board of Directors and the Managing Director The Board is responsible for the proposal concerning appropriations of the Company s profit or loss. Proposing a dividend includes an assessment of whether the dividend is justifiable considering the requirements that the nature, scope and risks of the Company s and the Group s operations place on the size of the Parent Company s and the Group s equity, consolidation requirements, liquidity and position in general. The Board of Directors is responsible for the Company s organisation and the administration of its affairs. This includes, among other things, continuous assessment of the Company s and the Group s financial situation and ensuring that the Company s organisation is designed so that accounting, management of assets and the Company s financial affairs are otherwise controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors guidelines and instructions, and, among other matters, shall take measures that are necessary to handle the Company s accounting in accordance with law and to conduct the management of assets in a reassuring manner. Auditor s responsibility Our objective for the audit of the administration, and therefore our opinion regarding discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect has: undertaken any action or been guilty of any omission which could give rise to liability to the Company; or in any other way acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. Our objective for the audit of the proposed appropriations of the Company s profit or loss, and therefore our opinion regarding same, is to assess with a reasonable degree of assurance whether the proposal is in accordance with the Companies Act. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the Company, or that the proposed appropriations of the Company s profit or loss are not in accordance with the Companies Act. A further description of our responsibility for the audit of the administration is available on Swedish Inspectorate of Auditors website: se/rn/showdocument/documents/rev_dok/revisors_ansvar.pdf. This description is part of the auditor s report. Report on other legal and regulatory requirements Opinions In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Consilium AB (publ) for the year 2016 and the proposed appropriations of the Company s profit or loss. We recommend to the general meeting that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year. Stockholm, 20 April 2017 Öhrlings PricewaterhouseCoopers AB Sten Håkansson Authorised Public Accountant 56

57 CORPORATE GOVERNANCE CORPORATE GOVERNANCE Consilium s shares are listed on Nasdaq Stockholm. Consilium adopted the Swedish Corporate Governance Code (the Code) on 1 July 2008 in accordance with the stock exchange rules. This corporate governance report constitutes part of the formal annual report and has been reviewed by the Company s auditor. The Board s internal control report can be found at the end of this corporate governance report. The main purpose of the corporate governance report is to describe the bodies, control & management resources and principles Consilium applies in order to achieve the Group s overall goal of creating value for shareholders. Consilium did not derogate from the Code during General Meeting of Shareholders Shareholders influence in the Company is exercised at the shareholders meeting, which is Consilium s highest decision-making body. Shareholders wishing to participate in a shareholders meeting and vote their shares must be listed in the register of shareholders no later than 5 working days before the meeting, and must notify the Company of their intention to participate in the meeting, indicating any advisors attending, as instructed in the notice of the meeting. Shareholders unable to attend may exercise their rights through a proxy, in accordance with the Swedish Companies Act. Annual General Meeting The annual general meeting of shareholders is held within six months of the end of the financial year. The annual general meeting deals with the election and remuneration of Board members and auditors, establishment of guidelines for remuneration of key management personnel, adoption of the income statement and balance sheet, allocation of profit and the discharging of Board members and the CEO from liability for the financial year. If there is reason to convene a shareholders meeting before the next annual general meeting, the shareholders are called to an extraordinary general meeting. Consilium did not hold any extraordinary general meetings in AGM The annual general meeting of the shareholders of Consilium for the 2015 financial year was held in Nacka on 23 May In addition to the business described above, the meeting adopted resolutions as follows: payment of a dividend of SEK 2.00 per share to shareholders and a Board mandate to issue new shares or convertible bonds (with a derogation from preferential rights for shareholders) for financing of possible acquisitions. All sitting Board members were re-elected. Carl Rosenblad was re-elected as Chairman. Shareholders present at the meeting represented 87 percent of the votes and 78 percent of the capital. Nomination Committee The task of the nomination committee is to propose candidates for election to the Board prior to the annual general meeting. In 2016, the nomination committee consisted of Lennart Norling (Chairman, independent of the Company and major shareholders), Chairman of the Board Carl Rosenblad and Rasmus Palmqvist CORPORATE GOVERNANCE MODEL Nomination Committee Marine & Safety business area General Meeting of Shareholders Board President & CEO Management Group Auditor Safety Engineering business area Elected/appointed by Informs/reports to External regulations Swedish Companies Act Swedish Accounting Act Swedish Annual Accounts Act Rules for Issuers Swedish Corporate Governance Code Internal Controls Articles of Association Board s Work Plan CEO s Instructions Group policies and instructions Business plan, goals and strategies 57

58 CORPORATE GOVERNANCE Board members attendance, relationship and fees: Elected Attendance 2016 Relationship Consilium Relationship major shareholder Carl Rosenblad, Chairman (6) Non-independent Non-independent 175,000 Carl Adam Rosenblad (6) Non-independent Non-independent Fredrik Nygren (6) Independent Independent 125,000 Peter Carlberg (6) Independent Independent 125,000 Ann-Marie Åström (6) Independent Independent 125,000 Erik Lindborg (6) Independent Non-independent 125,000 Thomasine Rosenblad (6) Independent Non-independent 125,000 Ove Hansson, CEO 6(6) Anna Holmgren, Secretary 6(6) Fees Information about Board members can be found on page 62. (independent of the Company and major shareholders). The nomination committee held one (1) meeting in The nomination committee is also responsible for the composition and working procedures of the Board. A presentation of the nomination committee s work was given at the 2016 AGM. The committee s independent members have received compensation of SEK 12,000 per person, and reimbursement for expenses, in accordance with the decision of the annual general meeting. Board Consilium s Board has ultimate responsibility for managing the Company s affairs between the annual general meetings. The Board appoints the President and CEO, and makes decisions on issues concerning the strategic direction of the business and the Company s overall organisation. Since the annual general meeting in May 2016, Consilium s Board has consisted of seven members. The Board is composed of persons representing the Company s major shareholders and persons who are independent of the major shareholders. The CEO does not serve on the Board, but is always present at Board meetings. The Finance Manager and Treasurer also normally attends the meetings and acts as the Board s Secretary. Other employees in the Group may also attend Board meetings in a reporting capacity. In 2016, the Board held six meetings at which minutes were taken. Matters dealt with at the meetings included the year-end report, interim financial reports, the market situation and outlook, business plans, goals and strategies, risk management, budgets, long-term financing, strategic cooperation and acquisitions, and other investments. Other discussions included new laws and regulations that could affect Consilium s work and reporting. The attendance and independence of the Board and co-opted members is shown in the table above. Chairman of the Board The Chairman is responsible for ensuring the work of the Board is conducted efficiently and that the Board performs its tasks. The Chairman organises and leads the work with the aim of creating the best possible conditions for the Board s members. The Chairman also remains in regular contact with the Company s CEO in order to ensure the Board has access to sufficient information to allow it to follow the Company s performance and financial position, and to plan accordingly. Carl Rosenblad is Chairman of the Board. Work of the Board The Board of Directors has adopted a formal work plan which defines the division of work between the Board and CEO. The formal work plan also regulates the Board s areas of responsibility, duties and decision-making powers. The main duties involve making decisions on strategic issues, assuming responsibility for the Company s capitalisation and capital structure, ensuring the Company is efficiently managed and making decisions on other matters of importance such as large investments and acquisitions. The Board s formal work plan also contains rules on information management and on evaluation of the work of the Board and the CEO. A written set of instructions for the CEO defines the division of work between the Board and CEO, and regulates the powers of the CEO. The Board conducts an annual evaluation of its work and the results are reported to the nomination committee. An important task is to ensure correct and timely reporting in the Company, and to the Board and share market. Accordingly, the Board receives regular reports detailing significant events, order intake trends, invoicing, results, cash flow, financial position and the number of employees in the Group and its companies. During the year, the Board has at least one meeting with the chief auditor who also maintains regular contact with the Chairman of the Board. Committees The Board of Consilium has decided that the size of the Company does not warrant the appointment of an audit committee. Audit matters are dealt with by the full Board. On at least one occasion during the year, Consilium s auditors report in person to the Board on their observations from the audit and their evaluation of the Group s internal control. Matters concerning exchange rate movements, investments, acquisitions and strategic direction are also dealt with. For the reason mentioned above, Consilium has decided the full Board will also deal with remuneration matters rather than establishing a special remuneration committee. The main work involves defining the CEO s employee benefits, and preparing share-based payment programmes, such as option schemes, for adoption by the annual general meeting. Specific provisions in the articles of association Consilium s articles of association do not contain any specific provisions on the appointment and dismissal of Board members, or on amendments to the articles of association. President and Group management The President and Chief Executive Officer of Consilium is Ove Hansson. The division of work between the CEO and Board and the CEO s powers are regulated in the instructions to the CEO, which are defined and revised on an annual basis. In addition to the President and CEO, Group management consisted of the Company s Finance Manager and Treasurer and Group Controller and the managers of Consilium s business areas at the end of the year. More information about Group management can be found on page

59 CORPORATE GOVERNANCE Share capital and shareholders Share capital at the end of 2016 amounted to SEK 58.5 million, divided into 11,702,203 shares (par value SEK 5.0). Each class A share corresponds to 10 votes and each B share to one vote. All shares carry equal entitlement to the Company s assets and earnings. The total number of shareholders at the end of the year corresponded to about 25 percent of the share capital. More information about the share and shareholders can be found on pages Operational control Consilium s operations are organised into a number of divisions in the two business areas Marine & Safety and Safety Engineering, which are responsible for Consilium s offering and global market organisation. The operations are organised into a clear functional structure, allowing leveraging of synergies and economies of scale in development, production, purchasing, marketing and sales, and are led by the two business area managers. The Group s business organisation is structured according to the principle of decentralised responsibility and authority. Each business area has its own subsidiary board of which the Group President is chairman. Like the Parent Company, the subsidiaries have a formal work plan for their board and written instructions for their managing director. The subsidiaries also have a number of policies and instructions governing operations, including the business areas divisions. These areas include IT, environment, quality, equality, INTEREST MODEL Global supplier base Suppliers Best customer value on the market Customers authorisation procedures, financing and currency hedging. The Group President has overall responsibility for day-to-day operations and their control, and the managers of the subsidiaries report on weekly order intake, invoicing and order backlog for each profit centre. Monthly financial statements are also prepared for each profit centre. These are analysed at different levels and consolidated at Group level. Reporting Internal reporting takes place within the same system used for preparation of the consolidated financial statements and their quarterly presentation to the market. In addition to the income statements and balance sheets, the closing financial reports contain key financial ratios and other relevant information. Analyses are made of inventory levels and movements, trade receivables and customer credit periods. The fundamental principle of the Group s reporting and follow-up systems is that they are characterised by transparency and decentralisation. The management of each subsidiary is strongly committed to developing and rationalising these processes. A key to success is having access to relevant and correct information, which is measured and followed up. Much effort has been devoted to the implementation and development of business systems for measuring the profitability of individual transactions, customers, sectors and geographical markets. Individual costs are monitored and measured at critical stages in production, administration and sales. Partners Strengthening our organisation These are then compared with previous results and targets. Remuneration of the Board and key management personnel The 2016 annual general meeting adopted Board fees of SEK 800,000, distributed as follows: Chairman of the Board SEK 175,000, external Board members SEK 125,000 each. The meeting also adopted guidelines relating to the compensation of key management personnel, which are essentially in line with market salaries and other terms of employment. Key management personnel s remuneration consists of the basic salary, annual variable compensation, any long-term share-based incentive schemes, retirement benefits, other benefits and conditions for termination and severance pay. The annual variable compensation is always capped at a maximum of 3 monthly salaries. None of the key management personnel has a period of notice exceeding 12 months. Annual variable compensation and long-term share-based incentive schemes must primarily be linked to the earnings and value development of the Company/ Group. Retirement benefits are always contribution-based. Auditor The auditor s task is to examine Consilium s financial statements and accounting records and the administration of the Board and CEO. The chief auditor also submits an audit report to the annual general meeting. Shareholders have the opportunity to put questions to the auditor at the meeting. Consilium s auditor is elected by the annual general meeting. The 2014 annual general meeting elected Öhrlings PricewaterhouseCoopers AB as auditor for a period of four years, with Sten Håkansson as chief auditor. At the 2016 annual general meeting, it was decided that auditors would be paid against invoice in accordance with approved purchasing principles. Fees paid to Öhrlings Pricewaterhouse- Coopers AB in 2016 amounted to SEK 3.7 million (auditing services SEK 3.2 million, other services SEK 0.5 million). Responsibility, consideration and respect Community Consilium AB Shareholders Creating and delivering value Employees Attracting and motivating staff Consilium s stakeholders Consilium is dependent on a large number of external parties. Cooperation and contacts with these parties may take the form of contractual and informal relationships or partnerships. The Company s stakeholders are parties who affect or can be affected by Consilium s actions. The simplified stakeholder model below does not show fragmented stakeholders such as competitors with whom the Company does not have any clear relationship. Added 59

60 CORPORATE GOVERNANCE to the model are phrases expressing values which are inherent in the relationships or which Consilium seeks to establish. Responsibility It is Consilium s ambition to conduct responsible operations based on sustainable development. Consilium sees sustainable development as development that meets the needs of the present without compromising the ability of future generations to meet their own needs (UN 1987). The Group s sustainable development work will also focus on The Natural Step s four sustainability principles and the environmental quality objectives adopted by the Swedish parliament. It is Consilium s goal that all product companies and production units will have an environmental management system according to ISO It is important that the Company s operations are planned, implemented, monitored and improved according to this standard in order to reduce adverse environmental impacts. Consilium sees this work as a natural part of its commitment to the Company s stakeholders. In addition, it is Consilium s firm belief that a successful environmental programme also generates economic benefits, both in the short and long term. Environmental policy Based on the Company s own requirements and the expectations of the outside world, Consilium works for a better environment and endeavours to offer environmentally-friendly products and solutions that promote sustainable development. Consilium regards legislation and regulations as a minimum requirement and, as in all its operations, aims for constant improvement and reduction of the Group s environmental impacts. In order to achieve this, Consilium will: allocate sufficient resources for environmental work integrate environmental issues into its quality management system in an overall perspective, treat environmental measures as a long-term investment encourage and develop environmental awareness among employees cooperate with environmentally-aware suppliers and partners. Stockholm and the local regulations in the Company s countries of operation. Consilium s financial reporting will: be correct and complete, and prepared in accordance with current laws, standards and recommendations; provide a true and fair description of the Company s operations support a rational and well-informed valuation of the Company s operations. In addition to these goals, internal financial reporting must support correct business decisions at all levels in the Group. The Board s description of internal control is based on the structure of COSO s (Committee of Sponsoring Organisations of the Treadway Commission) framework for internal control. Control environment In order to create and maintain a functioning control environment, the Board has adopted a number of fundamental documents of key importance to financial reporting. These include the Board s formal work plan and the instructions for the CEO. The CEO is primarily responsible for ensuring the control environment adopted by the Board is upheld in the day-to-day operations and reports regularly to the Board in accordance with defined procedures. Reports are also submitted by the Company s auditor. The internal control structure is also based on a management system which reflects the company s organisation and method of operating, with clearly defined roles, areas of responsibility and delegation of authority. INTERNAL CONTROL IN CONSILIUM Risk assessment Control environment The Group s control documents, such as policies, guidelines and code of business ethics, also play an important role in the control structure. Control documents dealing with financial reporting are the most important components of the financial reporting control environment. These documents are regularly updated to reflect amendments to reporting standards, legislation and listing regulations. Risk assessment The Group carries out regular risk assessment in order to identify significant risks associated with financial reporting. The main risk associated with financial reporting relates to material misstatements and insufficient disclosure in the financial statements, which can occur during recognition and measurement of assets, liabilities, income and expense. Other risks include fraud, loss or embezzlement of assets. Risk management is incorporated into each process, and different methods are used to assess and limit risks and to ensure the risks to which Consilium is exposed are managed in accordance with adopted policies, instructions and established monitoring procedures, and that these mini mise potential risks and support correct accounting, reporting and disclosure. Control activities Control activities are designed to manage what the Board and management consider to be significant risks, and in doing so to prevent, identify and correct any errors in financial reporting. These control activities Control structure The Board s internal control report for the 2016 financial year Consilium s Board is responsible for ensuring internal control is conducted in accordance with the Swedish Companies Act and the Swedish Corporate Governance Code. Consilium s financial reporting follows the legislation and regulations for companies listed on Nasdaq Monitoring Information 60

61 CORPORATE GOVERNANCE may be clear decision-making procedures and processes for important decisions such as acquisitions, other major investments, disposals, agreements and analytical monitoring. An important task for Consilium s staff functions is to implement, develop and maintain the Group s control routines and carry out internal controls focusing on business-critical areas. Process managers at different levels are responsible for carrying out the necessary controls relating to financial reporting. Accounting and reporting processes have controls relating to measurement, accounting policies and accounting estimates. All entities in the Group have their own controllers/financial managers who participate in the evaluation of their own reporting. Continuous analysis of financial reporting at both entity and Group level represents an important way of ensuring financial reports do not contain material misstatements. The Group s control organisation plays a key part in the internal control process and is responsible for ensuring each entity submits correct, complete and timely financial reports. Information and communication Consilium has internal information and communication paths which support complete and correct financial reporting. These include control documents such as internal directives, guidelines and policies on financial reporting. Regular updates and briefings about changes in accounting policies and reporting and disclosure requirements are communicated and made available to all employees concerned. The Group s intranet gives the organisation access to policies and guidelines. The Board receives regular financial reports. External information and communication is governed by the Company s information policy which describes Consilium s general principles for information-sharing. Monitoring The Group s compliance with adopted policies and guidelines is monitored by the Board and Company management. The Company s financial situation is dealt with at each Board meeting. Consilium s management monitors the financial results on a monthly basis by analysing deviations from the budget, forecast and previous year. All monthly accounts are discussed with the management of each business area. Financial reporting is reviewed by the Board prior to publication of quarterly and annual reports. Internal control Consilium has an internal risk assessment function which reports directly to the President & CEO. Where control measures include visits to subsidiaries or their divisions, the activity is carried out in accordance with a specially created control process. This process has been developed in order to optimise working methods and delivery of value-creating reports. Internal control has also developed a uniform risk management process for areas such as customer credit policy and insurance solutions, which will further strengthen corporate governance in the Group. Consilium does not have a special internal audit function as it is the Board s opinion that there are no special circumstances in the Company or its operations which warrant the establishment of such a function. Stockholm, 17 April 2017 Carl Rosenblad Chairman of the Board Peter Carlberg Erik Lindborg Fredrik Nygren Board Member Board Member Board Member Carl Adam Rosenblad Ann-Marie Åström Thomasine Rosenblad Board Member Board Member Board Member Ove Hansson Chief Executive Officer AUDITOR S REPORT ON THE CORPORATE GOVERNANCE STATEMENT To the general meeting of the shareholders in Consilium AB (publ), corporate identity number Engagement and responsibility It is the board of directors who is responsible for the corporate governance statement for the year 2016 on pages and that it has been prepared in accordance with the Annual Accounts Act. The scope of the audit Our examination has been conducted in accordance with FAR s auditing standard RevU 16 The auditor s examination of the corporate governance statement. This means that our examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinions. Opinions A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second paragraph points 2-6 the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the annual accounts and the consolidated accounts and are in accordance with the Annual Accounts Act. Stockholm, 20 April 2017 Öhrlings PricewaterhouseCoopers AB Sten Håkansson Authorized Public Accountant 61

62 CONSILIUM S BOARD CONSILIUM S BOARD Carl Rosenblad b LL.B. M.Sc Business and Economics. Elected to the Board in Chairman since Other directorships: Chairman of the Board of Platanen Holding AB with subsidiaries, Tessin Fastighets AB, Svenska Bostadsfonden Management AB 1-2, Svenska Bostadsfonden Instutition AB 1-2. Shareholding in Consilium, see page 23. Carl Adam Rosenblad b M.Sc Business and Economics. Elected to the Board in Manager Marine & Safety business area. Other directorships: Consilium Group companies and Platanen AB. Shareholding in Consilium: 24,000. Fredrik Nygren b B.Sc. (Econ). Elected to the Board in Chairman of the Board of ExeoTech Invest AB (publ) with subsidiaries. Other directorships: Chairman of the Board of Twinblade Technologies Holding Sweden AB (publ) and Swedish Lloyd Ltd, Director of La Petite Epicerie International Pte Ltd. Shareholding in Consilium: 0. Peter Carlberg b Graduate engineer. Elected to the Board in CEO Framo AS. Other directorships: Chairman of the Board of Framo Nippon, Director of Framo AS. Shareholding in Consilium: 2,500. Ann-Marie Åström b LL.B. Elected to the Board in Chairman of the Board of Gotland Tankers AB. Other directorships: Vice-chairman of the Board of Rederi AB Gotland, Member of SKULD s Committee and member of Intertanko s Swedish Council. Shareholding in Consilium: 1,000. Erik Lindborg b M.Eng. Elected to the Board in CEO MTC Brattberg AB. Other directorships: Director of MCT Brattberg AB, Fururitas AB and MCT Capital AB. Shareholding in Consilium: 0. Thomasine Rosenblad b B.Sc. HR. Elected to the Board in CEO Career Planet AB. Other directorships: Director of Career Planet AB. Shareholding in Consilium: 9,723. All directorships are correct at 31 December

63 CONSILIUM S MANAGEMENT CONSILIUM S MANAGEMENT Ove Hansson b LL.B. M.Sc Business and Economics. Present position: President & CEO of Consilium AB. Manager Fire safety & Automation. Chairman of the Board in Consilium s subsidiaries. Previous positions and directorships: Director of Consilium AB during Shareholding in Consilium: 100,086. Carl Adam Rosenblad b M.Sc Business and Economics. Present position: Manager Marine & Safety business area. Director of Consilium AB, Consilium Group companies and Platanen AB. Previous positions and directorships: Manager Marine & Safety Navigation division. Shareholding in Consilium: 24,000. Anna Holmgren b Diploma in Economics. Present position: Finance Manager and Treasurer of Consilium AB. Previous positions and directorships: CFO of Consilium s subsidiaries. Shareholding in Consilium: 0. Roger Orreteg b M.Sc Business and Economics. Present position: Group controller of Consilium AB. Previous positions and directorships: CFO of Consilium s subsidiaries. Shareholding in Consilium: 2,000. Sten Håkansson Auditor Chief Auditor, appointed in Öhrlings PricewaterhouseCoopers AB SE Stockholm 63

64 ADDRESSES ADDRESSES SWEDEN HEAD OFFICE Consilium AB Västra Finnbodavägen 2-4 P.O. Box 5028 SE Nacka Tel: Fax: info@consilium.se Consilium Marine & Safety AB Salsmästaregatan 21 P.O. Box 8763 SE Gothenburg Tel: Fax: Västra Finnbodavägen 2-4 P.O. Box 5021 SE Nacka Tel: Fax: Consilium Building Safety AB Södra Långebergsgatan 36 SE Västra Frölunda Tel: sales.cbs@consilium.se service.cbs@consilium.se Consilium Säkerhet Syd AB Topplocksgatan 3 SE Malmö Tel: Fax: Florettgatan 39 SE Helsingborg Tel: Fax: Consilium Säkerhet Väst AB Marieholmsgatan 64 SE Gothenburg Tel: Fax: Consilium Säkerhet Öst AB Hammarby Fabriksväg 25 SE Stockholm Tel: Fax: Consilium Incendium AB Rattgatan 21 SE Kungälv Tel: info@incendiumfire.com OTHER EUROPE BELGIUM Consilium BV Graaf Jansdijk Zeebrugge Tel: Fax: CYPRUS Consilium Marine Cyprus Ltd 61, Anexartisias Street 3040 Limassol Cyprus Tel: info@consiliumcyprus.com FINLAND Consilium Marine Oy Vapaalantie 2A Vantaa Tel: Fax: Nauti Electronics Oy Moottorikatu Vaasa Finland Tel: Fax: service@nautiele.fi GERMANY Consilium GmbH Grootsruhe 4 D Hamburg Tel: Fax: consilium@consilium-hamburg.de GREECE Consilium Marine Hellas Ltd 19, Zoodohou Pigis Str Pireaus Tel: /8 Fax: ITALY Consilium Italy S.r.I Via dell Artiginato Montelupo F. no Firenze Tel: Fax: cmi@consilium.it Via XII Ottobre Genua Tel: Fax: cmi@consilium.it Microdata Due srl Via Greti del Vara, Follo (SP) - Italy Tel: Fax: info@microdata.it NETHERLANDS Consilium BV Achterwetering RK Schoonhoven Tel: Fax: Buveco Gasdetection BV P.O. Box 74, 2665 ZH Bleiswijk Jan van der Heydenstraat JA Bleiswijk Netherlands Tel: +31 (0) Fax: +31 (0) sales@buveco.com NORWAY Consilium Norway AS Karihaugveien 89 NO-1086 Oslo Tel: Fax: support@consilium.no FireNor AS Holskogsveien Kristiansand 5 Norway Tel: sales@firenor.no FireProducts AS Holskogsveien Kristiansand 5 Norway Tel: sales@fireproducts.no Consilium Control Systems AS Holskogsveien Kristiansand 5 Norway Tel: sales@firenor.no Consilium Norway AS Stavanger Kanalarmen 12 NO-4052 Royneberg Norway Tel: Fax: info@consilium.no Consilium Building Safety AS Verkseier Furulunds vei 16B, PO Box 252, NO-0614 Alnabru 0668 Oslo Norway Tel: sales.cbs@consilium.no service.cbs@consilium.no SPAIN Consilium Spain Gran Vía 81, 5 o Dpto Bilbao, Vizcaya Tel: Fax: services@consiliumspain.com Consilium Ferrol Rio Miño 5-7, 4 o A Ferrol La Coruña Tel: cbarreiro@consiliumspain.com Consilium Algeciras Urbanización Jardines de Algeteres Bloque 25, 2 o A Algeciras Cadiz Tel: dclavero@consiliumspain.com Consilium Barcelona PSO. Frederica Montseny, 1 1 a - 2 a Bloque 25, 2 o A Montgat Barcelona Tel: julian@consiliumspain.com 64

65 ADDRESSES Consilium s market organisation encompasses 63 offices in 26 countries around the world. UNITED KINGDOM Micropack (Engineering) Ltd Fire Training Centre, Schoolhill, Portlethen, Aberdeen AB12 4RR Tel: +44 (0) info@micropack.co.uk Consilium Marine UK Unit 34, Space Business Centre Knight Road ME2 2BF Rochester Kent, England Tel: Fax: info@consilium.co.uk Consilium Marine UK Unit 16 Jacobean House, Glebe Street Business Centre, Town Centre G74 4LY East Kilbridge, Scotland Tel: info@consilium.co.uk NORTH AMERICA USA Consilium Marine US Inc 4370 Oaks Road, Suite 721 Fort Lauderdale FL Tel: Fax: E 4TH ST Apt. 36 Long Beach, CA Tel: sales@consiliummarineus.com Houston Tel: sales@consiliummarineus.com New York Tel: sales@consiliummarineus.com Norfolk Tel: sales@consiliummarineus.com Micropack Detection (Americas) Inc 1227 Lakecrest Court; Fort Collins, Colorado, Tel: info@micropackamericas.com 800 Town and Country Blvd Suite 300 Houston, TX ACAF Systems Inc. 4 Grafton Street, Coventry. RI USA AFRICA MAROCCO Consilium Fire Automation and Fire Protection Bureau 414 Casa Massira Business center 12, Avenue Ali Abderrazak Casablanca, Marocco ASIA CHINA Consilium Trading Co. Ltd Room 108, Block 2 HangXing Business Building No. 27, Lane 258 CaoXi Road Shanghai Tel: /60/70/80 Fax: Consilium Shanghai Co. Ltd Room E, Level 4, No. 129, North Fu Te Road Wai Gao Qiao Free Trade Zone Shanghai Tel: /17/18 Fax: Consilium DaLian Rm 1001, Unit 1 No. 3, Honqiao Street, Ganjingzi District Liaoning Province, DaLian City P.R. China Tel: Fax: service@consilium.cn Market offices 65

66 Consilium QingDao Room 301, Unit 2, No. 14 Sakura District HuaCheng Road, ChengYang District, QingDao City ShanDong Province China Tel: Fax: Firenor Fire Fighting Engineering (Dahlian) Co., Ltd 3-1F-D, Aolan Industrial Park, No. 60-1, Dongbei 7 Street, Free Trade Zone, Dalian China Tel: kl@firenor.cn Consilium Shanghai Ltd Room 108, Block 2 HangXing Business Building No 27, Lane Caoxi Road Shanghai Tel: Fax: sales@consilium.cn Consilium Hong Kong 22/F, Hang Seng Bank NP Branch Bldg, 339 King s Road, Hong Kong China Tel: Fax: INDIA Consilium Marine India Pvt. Ltd., Visakhapatnam Br 210, Raheja Arcade Sector - 11, CBD Belapur Navi Mumbai Tel: /52/53 Fax: service.cmi@consilium.ae 501, Sai Krishna Complex Rly, New Colony Visakhapatnam Tel: Fax: service.cmi@consilium.ae 1st Floor, Velyn Villa, Kurisupalli Road, Perumanoor (PO) Kochi Tel: Fax: service.cmi@consilium.ae Consilium Fire Safety Pvt Ltd 293 K Estate, Westend Marg Said-uL-Ajab New Delhi Tel: Fax: service@consilium.vn Ahmedabad Tel: info@consilium-firesafety.com Mumbai Tel: info@consilium-firesafety.com Kochi Tel: info@consilium-firesafety.com SFS Sureland Fire & Security Pvt. Ltd. 293, Kehar Singh Estate Westend Marg, Said-ul-Ajab New Delhi , India Tel: +91 (11) Fax: +91 (11) Consilium Automation & Fire Protection Pvt. Ltd. 401, Mint India Bulls Behind Hiranadani Meadows Next to Hyde Park Off Ghodbunder Road Than West, Mumbai - India Tel: JAPAN Consilium Nittan Marine Ltd 3 Fl, KDC Sasazuka Bldg. 54-5, Sasazuka 1-chome, Shibuya-ku, Tokyo Tel: Fax: MALAYSIA Consilium Engineering Sdn Bhd 25-2, The Boulevard, Mid Valley City Lingkaran Syed Putra Kuala Lumpur Malaysia Tel: Fax: OMAN Consilium Engineering & Trading LLC Muscat Tel: service.oman@consilium.ae SAUDI ARABIA Consilium Saudi Arabia Dammam Tel: marine.sales@consilium.ae SINGAPORE Consilium Marine Singapore Pte Ltd 7030 Ang Mo Kio Avenue Northstar Singapore Tel: Fax: mail@consilium.se SOUT KOREA Consilium Marine Korea Ltd Room 1407, 2, Marine city 2-ro, Haeundae-gu Busan, Republic of Korea Tel: Fax: service@consilium.co.kr UNITED ARAB EMIRATES Consilium Middle East (FZC) Warehouse No B3/22 P.O. Box 8018 SAIF Zone, Sharjah Tel: Fax: info@consilium.ae Abu Dhabi Tel: info@consilium.ae Dubai Tel: info@consilium.ae Fujairah Tel: info@consilium.ae QATAR Consilium Qatar LLC Al Matar Street, (Airport Road) Near Old Al Rameez Building Doha, Qatar Tel: Fax: Consilium Firenor Korea Ltd Room 1407, 2, Marine city 2-ro, Haeundae-gu Busan, Republic of Korea Tel: Fax: service@consilium.co.kr VIETNAM Consilium Vietnam J.S.C. R4-52, Hung Phuoc 4, Phu My Hung, Tan Phong Ward, Dist 7 Ho Chi Minh City Tel: Fax: services@consilium.vn Consilium Vietnam J.S.C. Room A104, N3 Building, 91 Nguyen chi Thanh Dong Da Hanoi Tel: /52 services@consilium.vn OCEANIA AUSTRALIA Consilium Novamarine Pty. Ltd. 30 Downie Street Wickham (Newcastle) NSW 2293 Australien Tel: Fax: service@novamarine.com.au 66