a n n u a l r e p o r t

Transcription

1 annual report 1997

2 Over 560,000 Swedes are members of HSB. Under HSB's roof there is also a complete bank with the help of a complete banking solution from EntraFamily: Bank, Loan, NetBank and NetLoan.

3 CONTENTS AND SUMMONS TO THE ANNUAL GENERAL MEETING general meeting The Annual General Meeting will be held Monday, March 30, 1998 at 4:00 pm Börshuset, Källargränd 2, Stockholm. attendance Shareholders who wish to attend the General Meeting must be registered in their own name (not registered with a nominee) in the share register maintained by Värdepapperscentralen VPC AB (VPC), and must report their desire to attend to: Entra Data AB, P.O.Box 126, SE Stockholm. Telephone , fax Notification must reach the company not later than 4:00 p.m., Thursday, March 26, nominee-registered shares Shareholders who have registered their shares with the trust department of a bank or with a stock broker must, in order to have the right to attend the General meeting, temporarily re-register their shares in their own name with VPC. Such re-registration must be completed by Friday, March 20, dividends The Board of Directors has proposed a dividend of SEK 2.25 per share. Record day for the determination of who is entitled to dividends is Thursday, April 2, If the General Meeting decides in accordance with the recommendation, dividends are expected to be remitted by VPC beginning Thursday, April 9, agenda The Annual General Meeting will consider matters which, according to the Swedish Companies Act and the Articles of Incorporation, should be covered at general meetings. The General Meeting will also deal with any other matters included in the formal notice for the meeting. This notice will be published in the daily press. The agenda can also be obtained from the Company in connection with notification of attendance to the General Meeting, or by visiting our homepage on the Internet: entra in brief 2 the entra share 4 president s statement 6 business concept, visions and economic goals 10 the market 12 entra family 14 financial systems 16 specialist services 20 structure and human capital 22 five-year summary 24 key ratios and definitions 25 board of directors, executive management and auditors 26 board of directors report 29 statement of income 31 balance sheet 32 funds statements 34 notes to the financial statements, accounting principles 36 financial information 1998 Interim Report Jan. - March April 23 Interim Report Jan. - June August 13 Interim Report Jan. - Sept. October 21 auditor s report 42 addresses 44 1

4 ENTRA IN BRIEF Entra s business concept is to offer administrative IT solutions that support the business processes of the financial industry, with focus on the Nordic market. The company shall have a wide and attractive product selection with high technical quality as well as supply the consulting services required for successful installation and cost effective management, thereby increasing clientprofitability. clients Today Entra has about 170 clients within a broad spectrum of players on the financial market. Examples of client companies are banks, stock brokerage firms, finance companies, credit card companies, insurance companies, mortgage institutions, factoring companies and collection agencies. Entra is a leader in this area in Sweden. Approximately one quarter of sales take place via our subsidiaries in Denmark, Norway and Finland, and via international distributors outside the Nordic countries. Our goal is to become the leading software house for the financial sector throughout the Nordic countries. sales by business area ) Financial Systems Specialist Services total Other and eliminations total ) Sales for 1996 excludes a gain from the sale of shares in the amount of MSEK16.5. growth Entra was established in 1982 and three years later began development towards becoming a software house for the financial sector in figures ) Operating revenue msek Profit before taxes msek Equity ratio % Earnings per share sek Average number of employees ) Turnover and income for 1996 excludes revenue from the sale of shares for MSEK In February 1997 Entra s shares were listed on the O-list of the Stockholm Stock Exchange, and a distribution of ownership, combined with a rights issue was carried out. Over the next few years Entra s intent is to grow more rapidly than the rest of the market, or by at least 50 percent per year, while maintaining profit margins. This will be achieved through acquisitions as well as organic growth. the market Due to continuing structural changes in the financial industry, with new players, industrial migration and tougher competition, a well functioning IT system has become an increasingly important prerequisite for success. This is due to companies need to increase competitiveness through better solutions at lower costs. Another important reason is to quickly adapt the services and products of financial institutions to new market conditions. Entra s standardized and turn-key systems make this possible. As the systems are general and suit many companies with similar needs, the costs are considerably lower compared to developing customer-unique systems. General systems are also significantly faster to install, which can be decisive as "time to market" is often an important means of competition today. Operating security is also greater, and thus maintenance is less expensive, as the systems are tried and tested by our 170 clients. In a typical sale for Entra, a general system is sold to a client with the consulting services required to install the system and to adapt it to the client s specific environment. In addition, a long-term relationship with the customer is created as Entra takes care of system administration and regularly updates the system and supplements it as needed with other systems from Entra s product portfolio, EntraFamily. entra family Entra s various systems together cover nearly all the requirements of administrative routines found within the entire financial sector. Today the products are completely integrated in EntraFamily. The first financial application that was developed was EntraCard, a system for handling credit cards, which was released in EntraCard is also the most internationally sold of Entra s different systems. Since then more software products have been developed, and today the product portfolio consists of over 10 different systems, such as EntraBank, 2

5 EntraCard, EntraFund and EntraCredit, to name a few. technology The systems in EntraFamily are so-called client/server solutions a technology that was introduced at the beginning of the 1990s. In 1996 a development project was begun that will transfer EntraFamily to an object-oriented technology. Entra understood early on the advantages of object-oriented technology, which basically can be said to make it possible for computer systems to be quickly adapted and upgraded to new and changed requirements. The technology can be described as a way of constructing software by combining many smaller parts (objects). The same object can be used many times and can be added to or removed from different applications. Knowledge of the Internet and Internet-related technology is another very important competency where Entra has attained a good platform. Entra has developed a complete family of Internet-based solutions that are integrated with the systems in Entra- Family. Internet technology is becoming increasingly important as a tool for supplying financial services and as support for corporate business processes. organization Entra s activities are conducted in two business areas: Financial Systems and Specialist Services. The Financial Systems sector consists of the product areas that sell systems together with consulting services. The Specialist Services sector supplies consulting services, which, together with the Financial Systems sector, make Entra a complete IT partner. Services offered include IT management, Internet solutions for banking and finance and development of object-oriented systems. Entra Data AB Financial Systems Entra Bankdata Entra Capital Solutions Entra Card Systems Entra Finanskonsult Entra Juristdata Entra Softica Subsidiaries in Denmark and Norway Specialist Services Entra Business Objects Entra Phantom Entra Teknik Entra Finansservice Subsidiary in Finland Sales Profit before taxes MSEK MSEK Excludes capital gain on the sale of shares for MSEK

6 THE ENTRA SHARE share capital At the end of the year share capital in Entra amounted to SEK 1,612,360, distributed over an equal number of shares with a nominal value of SEK 1. All shares have the same voting rights and carry equal rights to participation in the Company s assets and profits. ownership structure At the end of the year the number of shareholders was 1,899. In conjunction with the distribution of ownership in combination with the listing of the Entra share on the Stockholm Stock Exchange O-list February 14, 1997, the Company s then largest owner, Ledstiernan Utvecklings AB, sold 472,440 shares, equivalent to 29 percent of capital and voting rights, at a price of SEK 195 per share. Ledstiernan declared its intent to remain an active owner of the Company. The largest single owner at the turn of the year was President & CEO Ulf Tangen with 343,926 shares, equivalent to 21.3 percent of share capital and votes. The ownership structure has been stable since the listing. The share for the ten largest owners was 64 percent at year s end. Foreign ownership accounted for approximately 35 percent of share capital. Swedish institutional ownership was 57,000 shares at the end of the year, equivalent to about 3.5 percent of votes and capital. The proportion of Swedish institutional ownership has increased substantially during the beginning of 1998 in connection with the sale by President & CEO Ulf Tangen of approximately half The share price rose from SEK 195 on the first day of the listing to SEK 317 on the last trading day of the year. The price was at SEK 168 at its lowest and SEK 326 at its highest. At the end of the year Entra s stock market capitalization was MSEK 511. of his holdings to Swedish institutions. At the end of February 1998 the proportion of Swedish institutional ownership was about 16 percent. dividend policy The Board of Directors intends to proposes a yearly dividend that on average will amount to about 20 percent share price and turnover During the period from the market listing February 14 to the end of the year, 1,506,472 shares changed hands at a combined value of MSEK 344. of profit after taxes, on the con- dition that this is judged to be consistent with the Group s consolidation needs, liquidity and financial position in general. For the 1997 financial year shareholders number share of capital shareholders of shares and votes % Ulf Tangen 4) Ledstiernan Holland BV 1) Kjell Spångberg 3) Carl Leijonhufvud 3) Den Norske Bank, Oslo Håkan Roos 3) Handelsbankens småbolagsfond Bank of Scotland Domaren i Göteborg ab Lars Ahlman 3) Postbanken, Oslo Sten-Anders Fellman 2) Jan-Erik Hwasser 2) Unibank A/S, Copenhagen Alessandro Cornale 2) Jan-Mikael Mäler 2) Bo Nordlander 2) other shareholders total ) Ledstiernan Holland BV is 50-percent owned by Johan Hernmarck and 50 percent is owned by by Dan Walker. 2) Employees of Entra Data AB. 3) Via holding company. 4) Ulf Tangen sold shares to a small number of Swedish institutions at the beginning of

7 Share price SEK 350 Share price Affärsvärldens Composite Index Share turnover Thousands (after-hours trading) (c) SIX Findata Number of shares traded in thousands the Board has proposed a dividend of SEK 2.25 per share. risks As all businesses, Entra is affected by external factors that can be controlled to a varying extent. The risk factors below are not listed in order of priority and do not claim to be exhaustive. Rapid technological development places high demands on all software-producing companies. The unexpected introduction of a new technology that Entra does not master could have a negative affect on the planned development goals. Entra estimates that the company has a favorable initial position through access to specialist knowledge in Entra Business Objects, advanced product development and close cooperation with clients. One condition for Entra to succeed in growing at the planned rate is that the company will be able to recruit and retain competent employees. In order to stand out as an attractive choice for new employment, Entra continuously works at communicating the company culture, which gives the individual great freedom and the opportunity to realize both the Company s and individual goals. Despite the great demand for competent personnel in the IT industry, Entra has thus far been successful in recruiting employees. International competitors could establish businesses in Entra s home market, which constitutes a potential threat. Another risk is that smaller domestic players could take a strong market position in a certain niche FEB 1997 MAR APR MAY JUNE JUL AUG SEP OCT NOV DEC JAN 1998 However, these risks are judged to be minor since the Nordic market, from an international perspective, is relatively small, while Entra s position with long, stable client relationships is strong. As the majority of Entra s clients are active in the financial sector in Sweden, Entra is highly dependent on the development in this sector. However, this dependency is gradually decreasing as Entra expands into other Nordic markets. per-share data Entra s future growth will be partly organic, partly through acquisition. An acquisition strategy always entails risk. Expected advantages of coordination can be overestimated, integration can be difficult to implement, management resources are exhausted and a certain turbulence can arise in the organization. The acquisitions Entra has carried out thus far have taken place after careful analysis and critical examination, and the results have been very positive. change in share capital nominal change total total amount, in share share number year transaction sek capital, sek capital, sek of shares 1982 Rights issue 1) Split Stock dividend Rights issue 2) Stock dividend Rights issue 3) Rights issue 4) Rights issue 5) Rights issue ) Formation of the Company 2) Private placement with Gösta Auoja 3) Private placement with Svenska AB 4) Conversion of subordinated loan ) Conversion of subordinated loan 87-1 sek ) Shareholders equity per share Profit per share after comprehensive taxes (16.07) Dividend per share 2) o ) Figures in parentheses include a gain on the sale of shares in Intentia International AB. 2) Dividend proposed by the Board of Directors for FEB

8 PRESIDENT S STATEMENT 1997 was yet another successful year for Entra. Profit after financial items increased by 68 percent, to MSEK 28. This can be seen as a confirmation of successful strategic choices and that Entra s market position in IT solutions for the financial sector has been further strengthened. Through continual development and single-minded efforts, Entra has developed into the Nordic region s largest independent supplier of IT solutions for the financial sector. The primary explanation is that Entra has gradually expanded its product range and can offer competitive software products that meet nearly all administrative needs of banking and finance. The focused concentration strictly on the needs of the financial market provides great opportunities for growth as the use of information technology is increasing considerably in this sector. Sales during 1997 increased by 49 percent, to MSEK 209. There are a number of distinct trends that are driving demand for Entra s products. distinct growth trends Demands for increased efficiency and rationalization in industry have forced companies to focus on core competence. This has caused the purchase pattern in industry to more and more shift from developing one s own applications to buying standard programs. Now we see that this development is also coming to the financial industry. IT solutions are purchased from specialist companies that develop general systems, and the development costs can be split among several customers. Moreover, the systems can be installed quickly and have high operating security as they have been thoroughly tested by Entra s circa 170 clients. Technological development is increasingly more rapid, which means that more and more companies in the financial sector choose to invest in modern IT solutions from external suppliers rather than developing or upgrading their own systems. Awareness that standardized systems from external suppliers completely support the business processes of the financial industry is gradually increasing. The majority of Entra s clients see IT support as a means of competition, and therefore demand systems that use the latest technology. The explosive development of the Internet, and the closely related intranet and extranet, is an exciting area which provides our clients with new business opportunities. Entra is at the cutting edge of Internet solutions for the financial sector. Through the development of Entra- NetFamily, all basic applications within EntraFamily are accessible over the Internet. This gives added value to our products and extends the lifecycle of our clients investments. Anxiety over adaptation to a common European currency and, above all, the changeover for the turn of the millenium, affect the market for consulting services, but also, indirectly, the market s demand for software. Many companies choose to invest in new, secure administrative IT solutions rather than upgrade the current ones. Pent-up need for investment in the financial sector after the deep crisis at the beginning of the 1990s means that many companies need new systems. The considerable resources now utilized for upgrading, adjusting and adapting existing systems mean that necessary investments are put off until the future. This, in combination with the strong outsourcing trend in banking and finance, means that demand is not expected to decrease after year Growth will continue over an extended period. new flexible product generation Entra strives to create products that, by using new technological possibilities, support our clients needs for rapid change and adaptation to the demands of the world around us. The development of the new generation of EntraFamily is based on object-oriented technology and will take place gradually over the next three to four years. During 1998 we will release EntraCredit 2.0. The system is directed at finance companies and will be the first objectoriented product from EntraFamily to reach the market. The advantage of the new technology is increased quality and performance, increased flexibility and platform independence. The system can be used in all the different computer environments that the market demands. Entra will be one of the first companies in the world with concentration on the 6

9 financial industry to go through such a comprehensive technological shift. Through the reuse of general objects we strengthen our competitiveness further, while our internal development processes can be made considerably more efficient. Entra s relationship with its clients is a long-term commitment, which among other things means that the clients have a big influence on product development going forward. The costly and ambitious transition to the next product generation is taking place in close cooperation with our clients. This means that we also share the development costs. Entra s share of self-financed product development relative to sales is therefore not expected to increase. Expansion of EntraFamily is a never-ending process. During 1997 the corporate treasury system Final was acquired from Alta System AB. The acquisition meant a widening of Entra s customer base, since Final is mainly directed at the corporate treasury departments of large industrial companies. Through the acquisition of Juristdata i Sverige AB during 1997, Entra received an important product supplement with functionality for collection agencies. Juristdata s main product, Nova, is the leading collection system on the market, and since its integration in Entra, sales have been very successful. home market in the nordic countries Our goal is to develop into a leading software house for the financial sector throughout the entire Nordic market. On the Finnish market the conditions look good, and the number of employees increased during the year from two to ten. Demand for Entra s services was strong. Profitability improved further on the Danish market and the year s profit was very good. Norway is the Nordic country outside Sweden in which Entra has been established for the longest period of time and has a wide customer base. During the year the business went through a consolidation phase 7

10 and the foundation is now laid for good development. During autumn 1997 negotiations about a merger with the Norwegian software company Provida A/S were held. The deal had great coordination possibilities, above all through the companies complementary product portfolios, and was also in line with Entra s ambition to quickly achieve a high penetration of the entire Nordic market. Due to disagreement about the final terms, the deal was not carried out despite the good preconditions. Entra has continued very good relations with Provida, and the companies are investigating possibilities for various forms of cooperation. Entra has some software sales outside the Nordic countries. EntraPhantom and EntraCard are installed in 10 and 15 countries, respectively. In the countries outside the Nordic region sales have thus far taken place through distribution partners, Sema Group and Silverlake System among others. stock market introduction increased the rate of growth 1997 was Entra s first year as a listed company. The listing in February has been very positive for our business, not least through the attention we get in the media and from the capital market. The equity offering in combination with the stock market introduction gave us new capital and thus the possibility to increase our rate of growth through acquisition. During 1997 four acquisitions were consummated, all of which have been very successful. In March 1997 Entra acquired Softica AB who sells consulting services to the capital market. To better meet our clients increasing demand for technical support of PC networks, security and the Internet, Entra acquired the assets and liabilities of the company Industri-Teknik Tord Persson AB. Entra has created a strong platform for continued expansion. The goal to develop into the leading software house for the financial sector throughout the Nordic countries remains. We have a unique range of products for the financial sector, with a wide selection of well-proven and competitive software products, longterm and stable client relations, competent and well-motivated employees as well as a strong financial position. In light of this, the more expansive development that was initiated during 1997 will continue. Our goal is, through a combination of acquisition and organic growth, to grow by at least 50 percent per year over the next several years with a maintained high profit margin. ulf tangen President and CEO 8

11 ABB Credit specializes in large and complex multinational financing projects. To assist, ABB Credit has a system solution from EntraFamily that, very appropriately, is called EntraCredit. 9

12 BUSINESS CONCEPT, VISIONS AND ECONOMIC GOALS business concept Entra s business concept is to supply administrative IT solutions that support the business processes of the financial industry with primary focus on the Nordic market. The Company shall have a wide and attractive product selection with high technical quality as well as supply the consulting services required for successful installation and cost effective management, thereby increasing our clients profitability. goals Entra will become the leading software house for the financial sector throughout the Nordic countries. This will occur through development of the great business potential of existing and new customers, through new establishments and acquisitions in the Nordic markets, and through distributors in the non-nordic markets. Entra has a clearly expressed growth goal: The business volume shall increase at an annual rate of 50 percent over the next few years, of which about half will be organic growth and half through acquisition. This means a rate of growth that is considerably higher than growth in the total market for IT solutions for the banking and finance sector. This sector is calculated to grow by about 15 percent per year. Entra s growth will take place with a maintained profit margin of between 10 and 15 percent. The fulfillment of this goal is to a great extent dependent on the continuation of the outsourcing trend in the financial industry, but also on the maintained or improved competitiveness of Entra s product range. product development On average, 30 percent of Entra s total hourly production will continue to be invested in product development. Approximately half will be financed by Entra and the remaining half will be financed by clients. Over the next few years Entra will transfer the existing software products to the new generation of EntraFamily that is built upon object-oriented technology. This will result in significantly less maintenance and a more cost-effective development and upgrade process. Through its high technological competence, financial strength and close cooperation with its clients, Entra has the right set of prerequisites to succeed with this technology shift. By developing general software products that suit companies with similar needs, Entra will supply systems that are cost effective and flexible. Entra calculates the development cost of a general system to be twice as high as that of a customer-unique system. Future development work will primarily be aimed at: Transformation to object-oriented systems to attain flexibility and platform independence. Continued adaptation of software products to the needs of foreign markets. Continued integration of the products in EntraFamily. Continued development of Entra s Internet solutions to better support the clients new forms of distribution. long-term agreements an important strategy The costs of developing new systems are in general lower than what is put into maintenance and management of the system during its lifetime. Supplying product development and management services through long-term agreements is an important business strategy for Entra. After the initial system installation, Entra continually develops the product portfolio. This is done in view of the increasingly rapid technological development, recurring changes in the government authorities requirements, new regulations, etc. This development is brought to the client base through management agreements, and is also a prerequisite for always being able to offer new customers modern and competitive solutions. This continued development extends the life of Entra s software products. entra s vision Entra s vision is to become the obvious first choice for investment in IT solutions for companies in the financial sector. Entra will advance its position through a continued, focused build up of competence in the financial sector, and will tie its clients closer to the Company and develop systems that better support the end client s workflow and decision processes. The client will choose Entra because the Company s thorough knowledge of the banking and finance industry offers increased client benefits, because Entra is the most cost-effective alternative in terms of service and quality, and because the Company takes every opportunity to use the latest technology. 10

13 The merger with Trygg-Hansa makes S-E-Banken the largest asset manager in the Nordic Region with a total of SEK 380 billion in assets under management. Six products from EntraFamily contribute in different ways to this task involving great responsibility: Fund, Loan, Credit, Match, Nova and Orca.

14 THE MARKET IT-services in banking/finance in Sweden Total market (about SEK 7 billion) Internal ITdepartments. About SEK 5.5 billion. Available market for consultants and software houses. About SEK 1.5 billion. The market for administrative solutions for the financial sector displayed continued strong growth during In Entra s most important geographic market, Sweden, revenues in the entire IT industry, including internal computer departments, consulting services, outsourcing, computer administration, hardware and software, etc., amounted to about SEK 100 billion. Of this, IT solutions for the financial sector, excluding hardware, accounted for on the order of SEK 7 billion, with expected future growth of around 15 percent per year. The market for IT solutions for the banking and finance sector is still only open to competition to a certain extent. The greatest part, equivalent to a value of about SEK 5.5 billion, is still handled by the internal computer departments of the major financial companies. If these internally produced services are subtracted, Entra s available market in Sweden is estimated to be approximately SEK 1.5 billion. This market is growing considerably more quickly than the IT market in general. This is partly because the total market for IT solutions for the financial sector is growing vigorously, but also because the share of externally produced software products and services is growing. It is a clear and growing international trend to purchase externally supplied IT solutions and to hire specialists. Growing competition in the financial industry, with structural change, establishment of niche players and industry migration, where for example mortgage institutions and insurance companies expand their activities in the area of finance, strong demand for software products is created. This is partially due to the difficulties for small and medium-sized players to achieve critical mass, which gives advantages of scale in their own development projects, but is also due to the need to quickly and effectively reach and adapt to the market. Often "time to market" is decisive for a successful investment, which means that companies more and more often choose to buy turn-key systems that can quickly be put into operation, rather than develop and maintain customer-unique systems themselves. Demand for Entra s products is also driven as many companies choose to invest in EntraFamily rather than adapt existing systems in preparation for year Entra s modern products have been developed for a problem-free tran- Available market (about SEK 1.5 billion) Entra Niche players Consultants - WM-data - Enator - Cap etc. sition to year One of Entra s oldest systems, EntraCredit, is an exception in this regard, but the new generation of EntraCredit is prepared for the turn of the millenium. The transition to year 2000 still requires comprehensive testing, especially in regard to EntraFamily s large number of interfaces to the adjoining infrastructure, which must also be adapted to handle the millenium change. This work is already in progress, and Entra will have done the requisite tests of integration with the surrounding systems in plenty of time, so that a safe transition to year 2000 can be ensured for Entra s clients. strategic means of competition Cost reduction was long the primary reason for investing in computer systems, but as technology develops and becomes an increasingly important part of society, IT systems are also becoming an important strategic means of competition for companies and organizations. This means that the systems are integrated and are used throughout the entire business. For example, systems that have only been active during the duration of a credit, now function as sales support and information support in pre-sales and drawing up of contracts, and are even used for analyzing further business opportunities with existing customers. Internet and the use of Internetrelated technology is becoming an increasingly important tool for supplying financial services and as support for the company s business processes. In addition, totally new concepts are 12

15 being created with virtual organizations and new relationships between client and supplier. For instance, a number of Swedish banks offer their services over the Internet, many finance companies use Internet-related technology, the socalled extranet, to provide information support to distributors, brokerage firms offer share trading over the Internet, etc. The application area appears to be infinite and demand is great. The rapid technological development constantly offers new business concepts at lower and lower costs. outsourcing The market for standardized business systems directed at commerce and industry has reached a totally different degree of maturity than the market for the equivalent systems for the financial sector. The reason is that industry for a long time has been forced to adapt its activities to new conditions and continually improve efficiency and effectiveness to reduce costs. A more complex corporate and organizational environment has led to an increased focus on core competence. One result of this change in strategy is that industry has, to a large extent, changed over from developing its own systems to buying standardized systems externally. The same trend has also gained a stronger foothold during recent years in the financial industry as a result of more severe competition and demand for cost effectiveness for the banking and finance sector. According to the international pattern, more and more companies are choosing to hire specialist companies to handle, among other things, system development, computer administration and system maintenance. Internal system development is decreasing in favor of turn-key software products, which make possible an organization that can more quickly adapt to new market conditions and new technological possibilities. For the most part the markets in the other Nordic countries followed the same growth pattern during the year as the Swedish market. The variations that are found can be explained mostly in that the countries have reached different levels of maturity in terms of outsourcing and have different historical behavior among their financial companies. Market acceptance of externally developed IT solutions is greatest in the Finnish market, where the banking and finance sector has long hired external suppliers. In the Danish and Norwegian markets, so-called service agencies for development and operation of computer systems are hired to a significantly greater extent than in Sweden. In the Swedish market Entra has no competitors of comparable size and with an equivalent product range. The largest competitors are the internal computer departments of the largest commercial banks. Within certain specific product and service segments Entra has some smaller competitors. In the other Nordic markets there is above all Provida in Norway, Tieto in Finland and the industry-owned service agencies in Denmark. clients Entra s clients represent a broad spectrum of players in the financial market. Among the clients are banks, finance companies, insurance companies, credit card companies, corporate treasury departments, fund managers, mortgage institutions, collection agencies and other financial institutions. Entra s largest customer category consists of the large banks financial activities outside the banks core operations, as for instance, finance company activities, credit cards, fund management, collections, etc. Other important customer groups for Entra are the large insurance companies growing financial activities, independent small and medium-sized banks, finance companies and other types of medium-sized financial institutions such as mortgage institutions, fund companies, etc. One of Entra s goals is to establish itself over time as a leading supplier of banking systems to the large banks, which will require continued growth and product development. A typical business deal for Entra is to sell a contract for software products and the consulting services needed for successful installation and for maintenance and development. This means that Entra has very long lasting and stable customer relationships. At the end of 1997 Entra s systems were installed with about 170 customers in Sweden, Norway and Denmark. In addition there were about 30 installations of EntraCard in 12 countries. Examples of large deals that were realized in 1997 are HSB Bank and Finans- Skandic, which is one of Sweden s largest finance companies. 13

16 ENTRA FAMILY During 1985 Entra s development towards becoming a software house with a concentration on the financial sector was begun. In 1986 the first software product was released, EntraCard. During the years that followed additional software products were developed, and in 1996 Entra had also released EntraBank, EntraCard, EntraFund, EntraOptima, EntraLoan, EntraCredit, Phantom, EntraMarket, EntraFact and EntraOrca among others. Today Entra is a full range software house for the finance sector. The software products are integrated in EntraFamily which includes approximately 10 standardized systems aimed at different segments of the financial sector. The programs are based on client/server technology, which was launched at the beginning of the 1990s. Through client/server technology the applications can be divided up between the client, often a PC, and the server, today often an NT server or an IBM AS/400. In the server the greater part of a system s functions are carried out, while the clients are used to communicate with users. EntraFamily can be supplemented with various additional products such as EntraNetFamily, which makes all the applications in EntraFamily accessible over the Internet, or EntraCallcenter which is a module for a complete telephone banking system. With the various parts of EntraFamily, Entra has realized its goal of building up a complete and integrated product selection for a full range financial institution. object technology Entra realized early on that object technology is a technology of the future, but system development based on object technology was then still in the development stage. To build up the requisite competence for developing new versions of EntraFamily, Entra Business Objects was formed in Since 1996 there has been an on-going development project that will transfer EntraFamily to an object-oriented technology. The advantage of object-oriented systems is primarily that computer systems can quickly be adapted to new and changed demands. The technology can be described as a way of constructing programs by putting together many smaller parts (objects). The same object can be used many times for different applications, and individual objects can be easily removed or added to adapt the application to special needs. The open architecture of object-oriented technology also means that new technological possibilities can effectively be utilized and introduced in the systems. Entra s software products are currently adapted to specific technological environments, so-called platforms. The most common technological platforms are IBM s AS/400 and Windows NT. The new object-oriented generation of EntraFamily, which is being developed in the programming language JAVA, will be platform independent. entra bank EntraBank is a modern banking system primarily for medium-sized and small banks. The system constitutes a complete banking system for Swedish banks (customer information, borrowing and lending including security handling, reporting to government authorities, etc.) and also contains functions for market research, profitability follow-up and analyses. The system contains a module for a complete telephone banking solution which makes information and transaction handling possible over the telephone. Together with the application EntraNetBank, banking services can be offered over the Internet. entra card EntraCard is a complete credit card system that handles both the relations with the cardholders and with the sales locations that accept the cards. EntraCard is adapted to and authorized for clearing with the major international card organizations, such as VISA and MasterCard. The system provides good business support for safe and effective handling of the entire process, from granting credit to claims handling. entra fund EntraFund is a powerful and robust fund management system for major fund administrators and is a complete solution that takes care of everything from calculations of the value of fund shares to printouts of transaction reports. The system can be supplemented with EntraOrca for further refinement of information. entra optima EntraOptima is a PC-based system for small fund and asset managers. The system is complete for administration and performs everything from registration and analysis to reporting and accounting. entra orca EntraOrca is the next generation s fund 14

17 and asset management system which makes possible coordination of financial information as well as performance analysis, risk and limit handling, manager support and reporting for large fund and asset managers. entra loan EntraLoan is a system for administration of mortgage lending. The system was developed for housing and mortgage institutions, but can also be used by credit institutions in trade and industry. The system is routine-oriented. entra credit EntraCredit is a system for administration of finance company activities. The system provides comprehensive user and business support which increases security, control and efficiency. It also provides possibilities for extracting statistics. phantom Phantom is a tool developed by Entra for adapting computer systems to the modern client/server environment. The tool can be used to replace text-based user interfaces with a modern graphical and window-based user interface. entra market EntraMarket supplies purchasers and analysts in the securities market with real-time information. The system has built-in analysis and observation possibilities. The personal workplace can be adapted to individual needs, while the server part is a common resource. The system is easy to integrate with other applications and has carefully tested connections to Reuters, PMI and SIX among others. entra fact EntraFact is a factoring system that, together with other products in Entra- Family, covers the total needs of the information systems of finance companies. Factoring stands out for the large amounts of data that are dealt with. EntraFact is therefore developed with a focus on effective and flexible data handling. entra net family EntraNetFamily is a family of Internet solutions that integrates all of the EntraFamily products with the Internet. EntraNet makes it possible to offer customers and partners access to the company s services over the Internet in a secure and controlled manner. product function example of customers entra nova EntraNova is a user-friendly collection system that enables completely automated handling of collections. The system is based on object-oriented technology, which entails great flexibility combined with high security. EntraNova can handle an unlimited number of languages, value added taxes and interest tables. The system can be integrated with the Internet. entra final EntraFinal is a completely integrated and flexible corporate treasury system for effective finance and portfolio management. The system is cash-flow-oriented and supports business handling (Front office), risk handling (Middle office) and administration (Back office). EntraBank Banking system Ikano Banken, Wasa Banken, Länsförsäkringar Bank, HSB Bank EntraCard Credit card system Sparbanken Finans, First Card, Handelsbanken, KF-kort, Telia Card, Royal Bank of Canada, Standard Charter Bank EntraFund Fund management Nordbanken Kapitalförvaltning, Skandiasystem (IBM AS/400) banken, S-E-Banken Fonder EntraOptima Fund management FöreningsSparbanken Fonder, Folksam, system (PC network) Förenade Liv, Trevise Gruppen EntraLoan Mortgage system S-E-Banken Bolån, SBAB, Trygg-Hansa, HSB EntraCredit Leasing system Wasa Kredit, TryggFinans, Finans Skandic Nordbanken Finans, K-Finans Phantom Client/server technology ABB, Stora, Allianz, Mercedes-Benz EntraMarket Marketing information Erik Penser Fonder, Spintab system EntraFact Factoring system BG Finans, AL Finans, Nor Finans, Bedriftsfinans EntraOrca Platform system for Swedbank, Folksam, Förenade Liv datawarehousing EntraFinal Corporate treasury system Scania, BTL (Bilspedition), Investor, KPA EntraNova Collection system Allmäna Inkassobyrån, Ikano Banken, S-E-Banken, GE Capital 15

18 business area FINANCIAL SYSTEMS Financial Systems is Entra s largest business area and includes the business units Entra Bankdata, Entra Finanskonsult, Entra Card System, Entra Capital Solutions, Entra Softica, Entra Juristdata as well as the subsidiaries in Norway and Denmark. The activities of Financial Systems include development and marketing of the general software products that are part of EntraFamily. Financial Systems also supplies the consulting services that are associated with program sales. Consulting services include such things as project management, installation, adaptation of client-specific functions, conversion, system management and development of the systems. Sales are primarily directed at the banking and finance sector. The business area is divided into six product groups, all of which are market leaders in their respective market segments. Entra s Norwegian and Danish business activities are also included in Financial Systems. market and sales Demand for standard software for the banking and finance sector continued to experience very positive development during the year. The total available market for Entra is judged at the moment to have a considerably faster rate of growth than the total market for IT solutions for the financial sector. The market for IT solutions for the financial sector, excluding hardware, is estimated to grow by about 15 percent per year, which can be compared to Entra s rate of expansion of 49 percent during Moreover, it is becoming increasingly common to hire external suppliers such as Entra, so-called outsourcing. The financial sector, which is distinguished by a high use of information technology, is currently going through a structural change with new players, new services and new distribution systems. This means increased demand for advanced information technology. Increased competition and demands for cost effectiveness among Swedish banks are also expected to favor suppliers of fully developed standard systems. The changeover and adaptation to a common European currency and the turn of the millenium are also prompting short-term demand for new systems. The business area was expanded by three acquisitions during the year. In March 1997 Softica AB was acquired, in October Juristdata AB and in December an assets and liabilities acquisition of the corporate treasury system Final from Alta System AB was carried out. The purpose is to broaden the product portfolio in order to be able to provide a complete solution for a full range financial The business area s share of Entra s total revenues 68% institution. The acquisitions furnished the business area with about MSEK 28 in turnover at year end and about 30 employees on a full year basis. Total revenues for business area Financial Systems increased during 1997 by 33 percent to MSEK The predominant part, 77 percent, consisted of consulting services in connection with installation as well sales and operating profit msek Sales Operating profit as system management and continued development. License revenue for systems sold accounted for the remaining 23 percent. The business area accounted for about 68 percent of the Group s total sales. Operating profit increased by 45 percent to MSEK The average number of employees during the year was 142, which was an increase of 38 compared to the previous year. banking systems Entra Bankdata is the leading supplier of banking systems in Sweden. Entra Bankdata markets EntraBank which is a complete system for traditional banking activities. During 1997 the program EntraNetBank was also released, which, in combination with EntraBank, constitutes an integrated solution for offering banking services over the Internet. The system can also be supplemented with a modern telephone banking system, EntraCallcenter. 16

19 EntraBank is directed mainly at small and medium-sized banks. The large commercial banks use normal mainframe systems which are run by internal computer departments. At the end of the year Entra Bankdata had sold and installed EntraBank at five so-called niche banks. Sales during 1997 amounted to MSEK 27, which was an increase compared to the previous year of eight percent. About 75 percent of sales were made up of consulting services, while the remaining 25 percent were license revenues. systems for mortgage institutions and finance companies Entra Finanskonsult is Sweden s only external supplier of standard software for housing loan institutions. EntraLoan, which is Entra s program for mortgage institutions, accounted for 76 percent of total revenues during The remaining 24 percent were attributable to EntraCredit, a complete system for finance companies. In total there are about ten mortgage institutions in Sweden. Of these, six use EntraLoan. The remaining market potential consists of a number of major players that have large internal computer departments and systems they have developed themselves. During the year work advanced to develop the new, object-oriented version of EntraCredit. The first customers will receive EntraCredit 2.0 during the autumn of Through EntraCredit 2.0 Entra will further increase its competitiveness. Interest from potential customers is great and two delivery agreements have already been signed. EntraCredit 2.0 is from the outset adapted for the Internet and to the conditions in the entire Nordic market. The existing customer base for today s version of EntraCredit 1.0 is made up of twelve major finance companies in Sweden, Norway and Denmark. Revenues for Entra Finanskonsult decreased during 1997 by nine percent to MSEK 18.8, of which 85 percent was made up of revenue from consulting services and 15 percent from license revenue. The reason for the decline in sales is the extensive investment program for EntraCredit 2.0. With the new version of EntraCredit, which from the beginning aims at the needs of the entire Nordic market, the customer base is expected to at least double in a few years time. systems for credit cards Entra Card Systems develops and markets the system EntraCard. Entra has a leading market position in Sweden and business activities outside of Sweden are growing rapidly. The customers mainly consist of banks and finance companies that issue cards and honor payments. The Bo Nordlander Business Area Director potential customer base is expanding further as cards grow as a means of payment. Different card-based loyalty and bonus systems, which are supported by the system, are becoming increasingly common in, for example, retailing and oil companies. EntraCard is sold and distributed by Silverlake Systems in Southeast Asia and by Sema Group in the other markets outside of the Nordic countries. Demand for card systems is experiencing very strong growth in all markets. Sales in the product area increased by 49 percent during 1997 to MSEK License revenue accounted for 22 percent and consulting services for 78 percent. systems for capital management Entra Capital Solutions is Sweden s leading supplier of software for fund and asset managers. In line with international trends, the Nordic mar- 17

20 ket for fund management is increasing tremendously. New players who are looking for new systems drive the market for Entra Capital Solutions. The distribution forms for trade of financial instruments has changed. More and more customers are demanding systems that can be combined with Internet or intranet solutions. Entra has a complete selection of software for fund and asset managers. The product portfolio contains, among other things, turn-key systems for fund administration, systems for working with and analyzing finance market information and systems for Internet-based fund trading. The solutions are adapted to several different types of platforms. The major fund companies are typically based on IBM AS/400, while the smaller players often use Windows NT. Entra has a strong position in the market for systems for fund and asset managers. The number of installations is about 60, and Entra s share of the Swedish market is between 60 and 70 percent. Sales during 1997 amounted to MSEK 24.3, which was an increase of 14 percent compared to the previous year. Of the sales about 74 percent was made up of consulting services and the remaining 26 percent of license revenue. acquisitions Entra Juristdata is Sweden s leading supplier of software products for collection agencies. The product area arose through Entra s acquisition of Juristdata AB in October The strong demand for software for collections is above all driven by companies efforts to optimize their resources. The collections industry is today facing harder competition from internal collection departments. Juristdata s collection system, Nova, is directed at both traditional collection agencies and to the growing number of companies that handle collection activities on their own. The market consists of a broad spectrum of companies, but with a primary focus on banking and finance. Entra Softica supplies consulting services in the area of IT aimed at the capital market and specializes in electronic securities trading and risk management. The product area was formed in 1997 when Entra acquired Softica AB. Entra Softica runs a pure consulting service and is in many regards active in the same segment as Entra Capital Solutions. The market for risk management is growing at a rapid rate. In December 1997 the corporate treasury system Final was acquired from Alta System AB. The new system means an expansion of the product range in Financial Systems. The market consists primarily of the corporate treasury departments of large companies. Through the on-going development of the next generation, Final 3.0, its competitiveness will increase substantially, which is expected to lead to rapid growth. the other nordic countries Sales by Entra s subsidiaries in the Nordic countries outside Sweden increased moderately during This was partly because the acquisitions carried out during the year only included the Swedish market. In the future acquisitions will also be made in the other Nordic countries. In the Norwegian market Entra markets a comprehensive selection of software products, such as systems for fund management, credit card handling, and administration of different forms of financing such as leasing and factoring. The systems are completely adapted to Norwegian conditions in terms of language, governmental reporting, infrastructure, etc. Sales during the year decreased by 13 percent to MSEK 9.6. In the Danish market activities are run through Entra Financial Software. The business is directed at solutions for finance companies, where Entra is the market leader in programs for factoring. Sales amounted to MSEK 6.6 compared to MSEK 4.9 during the previous year. The profit margin improved somewhat compared to the previous year s high level. 18

21 Sparbanken Sverige and Föreningsbanken were merged during the year into FöreningsSparbanken. Three solutions form EntraFamily were included in the merger, of which one is used to issue customer-specific cards.

22 business area SPECIALIST SERVICES The business area Specialist Services supplies consulting services, which, together with the services and products of business area Financial Systems, makes Entra a complete IT partner. Activities are pursued in four business units. Entra Business Objects with Entra Internet Solutions is active in development of object-oriented systems and Internet solutions for banking and finance. Entra Teknik offers a number of consulting services in systems maintenance, computer communication and networks, computer security and Internet solutions. Entra Phantom is responsible for sales and management of the Entra-developed client/server and integration tool Phantom. Entra Finansservice offers system administration and services on a service agency basis, so-called outsourcing, and meets the Group s internal computer needs. The technical competence that is continually built up in the business area is of strategic importance to Entra s activities. The business area s activities support and supplement Entra s primary business. This is done by offering clients competitive consulting services in combination with the application competence within the business area Financial Systems. In addition, the business area meets the Group s internal need for qualified technical services. market and sales Demand for consulting services and advanced IT solutions saw continued positive development during the year. The increasing complexity of the IT systems and their increasing importance for the business development of companies are causing demand for consulting services to skyrocket. To an ever greater extent companies are looking for partnerships in IT development, which means an increasingly strategic role for Entra in the company s IT process. The explosive development of the Internet and Internetrelated technology is also taking on an important role in companies. Many players see the new and changed business opportunities opened by the sales and operating income msek Sales 71,9 41,9 Operating profit 12,2-0,9 Internet as a way of meeting the tougher competition within the financial industry. Sales during 1997 increased by 71 percent to MSEK The predominant part, 90 percent, consisted of consulting services. License revenues from the sale of products within EntraNetFamily and the client/server tool Phantom accounted for the The business area s share of Entra s total sales 32% remaining 10 percent. The business area accounted for about 32 percent of the Group s total sales. Operating profit increased from 0.9 to MSEK the average number of employees during the year was 64, which was an increase of 20 compared to the previous year. internet solutions Over the past few years Specialist Services has quickly developed into a complete supplier of Internet-related services for the financial sector. Today Entra is on the leading edge in regard to the use of modern technology with emphasis on the Internet. To position Entra s unique competence, Entra Internet Solutions, which develops and markets EntraNetFamily, was established in With EntraNetFamily all of Entra s administrative systems can be fully integrated with the Internet. Entra Internet Solutions also acts as an advisor to companies in questions concerning IT strategies. object-oriented technology Entra Business Objects was founded in 1994 for the purpose of building up the competence required to develop the new object-oriented generation of EntraFamily. Today Entra Business Objects has a leading position in the development and use of object-oriented technology. Consulting services are also sold to service companies outside the finance sector. The customers are both system developers and end users. Entra Business Objects primarily sells pro- 20

23 gram development tools and consulting services to system developers. Sales to end users most often take the form of a contract for development of a new application. Entra Business Objects Finnish branch, Oy Entra Business Objects AB, showed strong growth during the year. Sales increased by 185 percent to MSEK 5.6, and the number of employees rose from two to ten people. Sales, including the Finnish sales, were MSEK 26.4, an increase of 41 percent compared to technical services Entra Teknik markets consulting services within operation and maintenance of clients computer environments and networks, as well as solutions for computer security and Internet/Intranet. As a step in Entra s investment in meeting the rapidly growing need for installation and service of PC-based networks and communication and security solutions, the assets and liabilities in Industri Teknik Tord Persson AB were acquired during June The acquisition brought Entra Teknik 19 people. For assignments in outsourcing, Entra Teknik usually hires out consultants for the long or short term who carry out operation and maintenance services on the clients systems. Another important area within Entra Teknik is security solutions. In step with increased use of the Internet, companies must have adequate security for their internal networks. Entra Teknik is specialized in creating firewalls between internal and external networks as well as other security measures, such as encryption solutions and digital signatures. The high level of competence in computer security is also used for offensive security valuation. This means that Entra Teknik, at the request of a client, tests and evaluates the existing security system by actively trying to get into the company s internal network. Entra Teknik also works with system integration, IT solutions and communication between systems that work in different environments. Within this area as well, use of the Internet has driven demand. During 1997 sales were MSEK 25, which was an increase of 185 percent compared to the previous year. client/server systems The client/server and integration tool developed by Entra Phantom, makes it possible for old-fashioned computer systems in mainframe and AS/400 environments to be modernized and made more efficient. Older systems, which often have a text-based user interface, can be replaced by a modern window-based interface in the PC environment. With the window-based interface it is easy to integrate different applications and thus increase the areas of use for the systems. Sales in the product area Phantom were MSEK 7.9 in Thomas Jonsson Business Area Director This was an increase of 15 percent over the previous year. services Entra Finansservice markets EntraFacility, Entra s outsourcing service. Entra Finansservice offers system operation, of primarily EntraFamily systems, 24 hours a day on a service agency basis. As the systems of the financial industry are integrated with the Internet, system operation becomes increasingly complicated, since system operation is required 24 hours a day year round. For this reason the market for Entra Finansservice is calculated to increase greatly over the next few years, the natural target group being Entra s approximately 170 clients with EntraFamily systems. During 1997 sales amounted to MSEK 12.6, which was an increase of 64 percent compared to the previous year. 21

24 STRUCTURE AND HUMAN CAPITAL Entra s organization and governing philosophy is characterized by the expression "Freedom with responsibility". The various companies and the individual consultants are given great freedom to individually adapt projects to client-specific conditions, as long as the basis is Entra s experience-based methodology and the project meets the Company s most important goal, satisfied clients. The market is growing, partly through further sales of EntraFamily systems to existing clients, partly through sales to new clients. During 1997 Entra gained about 50 new clients. Consulting services of various types, and service and maintenance account for about 75 percent of the Company s revenues. Good customer relationships are therefore crucial to Entra s long-term profitability. An example of our leadership philosophy is that consultants are not judged by the number of billable hours which is otherwise common for consulting companies as this can lead to longterm sub-optimization. Consultants are instead judged by how well they have solved the task that the customer formulated together with Entra. During 1997 a project was in progress to strengthen the Group staff in the areas in which increased coordination can provide synergy, without impairing flexibility and client adaptations. Marketing and sales to large customers is one of these areas. A common marketing department for the Group was established in February quality assurance Quality assurance in Entra is based on customer benefit. Quality is achieved by meeting the clients demands and expectations from both a technical and functional perspective. In order to ensure that a high level of quality is always maintained, Entra has a quality policy and a quality system with defined quality goals. recruitment policy and salary levels Entra s consultants and system developers shall have the highest competence in system development as well as the finance and banking business. In order to attract personnel with this competence, and keep existing personnel, Entra offers very good opportunities to influence career development and work content. In addition, Entra s salary levels hold their own in relation to the industry average. Competence is completely decisive for employment. Entra s recruitment policy is neutral to gender, age, etc. During 1997, 119 people were recruited and 32 left the Company, equivalent to personnel turnover of 15 percent. (Personnel turnover is defined as the number of people who leave in relation to the average number of employees during the year.) The total number of employees was 260 at the end of the year. The new employees were primarily consultants and system developers, which meant that the low proportion of administrative personnel in Entra declined further. competence development The competence within Entra is continuously being developed. New employees go through Entra University, a two-year trainee program which begins with a four week introductory education which includes courses about the Company and its products and services, finance and banking activities as well as technology and system development. Leadership training is carried out within Entra Academy, a newly established program for education parallel with regular work. Competence development will be increasingly coordinated to provide a maximum yield from the Group perspective. Competence transmission is an important method of ensuring that the company rather than the individual has the competence. One way to achieve this is job rotation, something which Entra is continually increasing the use of. Improved communication infrastructure within the Group also constitutes a means for transmitting competence. Regular 22

25 Group-wide seminars and an intranet under development will increase the exchange between the companies. The Company s intranet will initially contain things such as internal newsletters, manuals and forms. In time, a knowledge and experience database will be built up. To further improve the exchange of experiences and competence, a review of the company structure to eventually combine companies with similar competence is underway. A function for managing and refining human capital has been established on the Group staff. This function will also be responsible for client capital, in part by establishing a program for formal client studies among other things. product development Entra annually invests 30 percent of the consultants and system developers time in product development. This is done in project form, partly because it is more cost effective than having a fixed staff and partly to increase the exchange between product development and consulting. During 1998 product development will be coordinated in connection with the production of the new version of EntraFamily. This further increases the possibilities for re-use of common functions/components and thus efficiency, as well as the opportunity for transmission of competence within the Group. Added value per employee SEK 800thousand Employees by personnel and educational/training categories (1997 averages) Software engineers Managers/ Sales people Specialists in system technology Project leaders/ project process specialists Employees: years of professional experience number of employees >10 year University/ College Administrators System analysts/ programmers 1 year of computer education 23

26 FIVE-YEAR SUMMARY tsek ) ) income statement excerpts Net revenues Other operating revenue total Operating profit Financial items profit before taxes Taxes Minority interest profit for the year balance sheet excerpts Intangible fixed assets Tangible fixed assets Financial fixed assets Other current assets Cash and bank balances total assets Shareholders' equity and minority interest Deferred tax liability Interest-bearing liabilities 542 Other non-interest-bearing liabilities total liabilities and equity ) 1996 operating revenue and profit before taxes includes a capital gain of MSEK 16.5 from the sale of shares in Intentia International AB, as well as MSEK 3.6 which refers to the sale of the back office system Finess which took place in ) 1995 operating revenue includes MSEK 14.4 from the divestiture of the back office system Finess and its related operations. The sale resulted in a capital gain of MSEK 8.9, which, together with a capital gain of MSEK 1.8 from the sale of Informatikk A/S, is included in profit before taxes. 24

27 KEY RATIOS AND DEFINITIONS key ratios ) Operating margin % 13.1 (21.1) Net margin % 13.4 (21.1) Capital employed msek ROCE % ROE % Equity ratio % Times interest earned Value added per employee tsek 700 (746) Number of employees average ) Figure in parentheses include a capital gain from the sale of shares in Intentia International AB. definitions operating margin Operating income divided by total revenue. profit margin Profit after financial items divided by total revenue. capital employed Total assets reduced by non-interest-bearing liabilities including deferred tax liabilities. Average capital employed is equal to the sum of opening and closing capital employed divided by two. roce return on capital employed Income after financial items, plus financial costs, divided by average capital employed. roe return on shareholders' equity Profit after financial items, less comprehensive taxes and minority interest, divided by average shareholders' equity. Average shareholders' equity is equal to beginning and ending shareholders' equity divided by two. Comprehensive taxes consist of current taxes plus 28 percent standard taxes on the year's appropriations. equity ratio Shareholders' equity, plus minority interests, divided by balance sheet total. times interest earned Profit after financial items, plus financial expenses, divided by financial expenses. value added per employee Operating income plus payroll expense and social benefits and other wage and salary incidence cost of 50%, divided by the average number of employees. average number of employees Average number of full-time employees during the year. shareholders' equity per share Shareholders' equity divided by the number of shares outstanding at year end. earnings per share after comprehensive taxes Income after financial items, minus comprehensive taxes and minority interest, divided by the number of shares outstanding at year end. 25

28 Board of Directors Jan-Erik Hwasser Sture Hallström Ulf Tangen Johan Hernmarck Lars Ahlman Kjell Spångberg Executive Management Mats Gustafsson Jonas Sjöholm Sten-Anders Fellman Bo Nordlander Thomas Jonsson