Embed Size (px)
DESCRIPTION
EDB´s annual report for 2009.
Citation preview
Practical innovation 2009
Annual reportEDB Business Partner ASANedre Skøyen vei 26P.O. Box 640 Skøyen NO–0214 Oslo Org. no: 934 382 404 MVAwww.edb.com
Ann
ua
l rep
ort 20
09
EDB B
usin
ess P
artn
er A
SA
w
ww
.ed
b.co
m
Design: Mission/CreunaConcept and text: CreunaPhoto: Bård Ek, Scanpix,
Getty Images and iStockphoto
Contents
Number of employees
EDB Consulting EDB Solutions EDB Outsourcing
Revenue (NOK)
EDB in brief
6,000 7.5 billion
EDB Business Partner ASA (EDB) is a leading in-formation technology (IT) services provider in the Nordic region. We help customers unlock substan-tial value from the entire IT services value chain, spanning solutions, consulting and outsourcing.
We have a history of successfully innovating with, and delivering business-critical solutions to public
and private sector customers. EDB serves as a res-ponsive partner, combining local expertise, deep industry knowledge and substantial international delivery capability. Our operational footprint in-cludes Europe, UK, USA, India and Ukraine.
EDB Business Partner is listed on the Oslo Stock Exchange. Ticker: EDB.
Analysis of employees by locationPercent
Norway 48%
Sweden 22%
Other 5%
Off-/near-shore 25%
02 EDB in brief
03 Practical innovation 04 TowardsdynamicIT
06 Chief Executive Officer’s introduction
08 The year 2009 08 Importantcontracts 10 Keyfiguresandevents12 Management review 12 Businessoverview 16 Strategicagenda 18 Solutions 21 Consulting 23 ITOperations 26 Riskmanagement 28 Corporateresponsibility
31 Report of the Board of Directors
42 Financial accounts 42 AnnualaccountsandnotesGroup 82 AnnualaccountsandnotesEDBBusinessPartnerASA 91 Auditor’sreport
92 Corporate governance
99 Investor information 102 Keyfigures
104 Executive management
106 One improved EDB
EDB
Annual Report 2009 Practical innovation
33
Revenue and EBITA per yearNOK million
Revenue by business areaPercent
Consulting25.0%
IT Operations55.8%
Solutions 19.2%
0
200
400
600
800
0908070605
0
2000
4000
6000
8000
09080706050
300
600
900
1200
0
200
400
600
800
09080706050
200
400
600
800 Revenue EBITA
IT market and EDB’s delivery areas
Bridging innovation and results
Economic realities and long-term trends have changed the face of innovation. In particular, technology and globalisation have reduced the barriers to experimentation and change. Organisations must now constantly renew themselves in order to justify their existence. This is practical innovation.
The drive is relentless: Deliver new products, new services and better outcomes, at lower cost. Then repeat. While maintaining flawless service quality. And staying abreast of a steadily evolving market and competi-tive space.
At EDB, we help our customers to bridge intent and result, leveraging the power of information technology. Everything we do is about deliver-ing More from IT: The insights, services and solutions that help customers generate tangible results faster.
Source: IDC
software20%
hardware30%
customer support services
project services EDB Consulting EDB Solutions
outsourcing EDB Outsourcing
it services50%
Read more at edb.com
Read more at edb.com
Scalable and flexible internet-based IT services
Competitive cycles are faster, as trends move from marginal to mainstream in the blink of an eye. Businesses must adjust to customer demands faster – and deliver at lower cost. Traditional IT solutions and technology are a burden in this new environment: Inflexible, expensive and slow to respond to market needs. Now, IT must be more agile, innovative and cost-effective.
We offer our customers cloud-based IT solutions: Scalable and flexible services that they can consume according to their busi-ness needs. This makes it dramatically easier to begin, execute and adjust operations. In 2009, Norwegian insurance provider KLP entered the banking sector using EDB Financial Suite, our flexible, internet-based set of banking solutions. KLP launched its state-of-the-art internet based banking operation just months after receiving a banking licence.
Standardised, efficient IT services
Both public and private sector organisations are moving ag-gressively to optimise costs and total value across their extend-ed set of processes. Industrialised IT is a response to this need, producing IT services that are simplified, standardised and designed to support a focus on total system value.
At EDB, we are using lean operations, virtualisation technology and usage based service models to provide better outcomes ta lower cost. With our EDB digital public service solution for example, we use standard SAP functionality as a base to develop customised solutions that address the unique needs of our local government clients. This produces solutions that deliver end-user value, while remaining cost-effective to develop and operate.
EDB
Annual Report 2009Practical innovation
4
Towards dynamic IT
Cloud computing
Industrialised IT
Read more at edb.com
Read more at edb.com
Connected, collaborative operations
Mobile and collaboration technologies are evolving into robust mainstream tools with virtually unlimited potential for improving end-user experiences. The challenge is helping clients integrate these tools in a manner that creates genuine competitive advan-tages for them.
EDB’s leadership in this arena dates back to our early introductions of both internet and mobile banking in the Norwegian banking industry. We are taking a broad and active approach to mobility through for example, internet and mobile banking applications and online collaboration solutions. Continuing the tradition, this year we will provide Norwegian banks with a dedicated iPhone banking application for their customers.
IT driven by social value
Green IT has been on the corporate agenda for some time, primarily driven by the bottom line benefits of reducing energy waste. However, both public and private sector organisations now realise that sustainability begins with their strategic agenda. They need IT services that can help them deliver social value in areas such as ethics, information accessibility, compliance and risk management.
EDB remains focused on reducing the environmental impact of our energy use. However, we are going much further, creating IT services that deliver value to society on a broad level. In Trondheim, the St. Olavs hospital has freed up more resources for patient care, thanks to a partnership with EDB. We provide state of the art, centralised IT and communications services that support better quality of care and reliability, while also reducing costs and energy use.
EDB
Annual Report 2009
5
Practical innovation
The world is increasingly complex and unpredictable on several dimensions. This poses a challenge to public and private sector organisations. Their operations must become more innovative, flexible and value-focused, in order to meet end-users’ needs. EDB’s approach to IT is therefore equally dynamic and value-focused. We are proactively integrating the key technology trends that are driving a shift towards dynamic IT.
Mobility
Sustainability
EDB
Annual Report 2009CEO’s introduction
6
Dear EDB investor
2009 was a challenging year for almost every sector of the economy. IT services, where EDB is the fifth largest Nordic player, also suffered from the economic downturn. However, the market will recover and start to grow again over time. Thanks to our focused strategy and clear operational priorities, EDB will strengthen its market position and improve its profitability.
Focus on profitabilityEDB was early to announce that it expected 2009 to be a challenging year, with the second half of the year weaker than the first half. At the start of 2010, we see continuing price pressure and weak demand in certain segments of the market, but some customers are showing signs of increased willingness to invest in IT.
In order to meet the downturn in the IT services market, EDB launched a cost improvement pro-gram at the start of 2009 to reduce overall annual costs by NOK 400 million. We have seen sizeable results from this program. We have reduced OPEX by 6%, and CAPEX is down by 35%. The total cost reduction achieved amounts to NOK 514 million.
In view of the continuing uncertain market situa-tion at the start of 2010, EDB is continuing its close
focus on measures to improve profitability, which include cost savings, simplifying value chains and accelerating the implementation of the group’s glo-bal delivery structure. We are also committed to continuing our strict capital discipline.
Opportunities in a market worth NOK 130 billionThe market offers opportunities despite the current difficult conditions. We are extremely pleased by the confidence in EDB that our customers continue to demonstrate – EDB won contracts worth NOK 8.6 billion last year, quite a number of which were with new customers. This meant that EDB started 2010 with a record order backlog of NOK 12.6 billion, and this helps to create transparency for future earnings in a challenging market.
EDB is the market leader for the Nordic bank and finance market, and with 6% growth in solution sales in this area we further strengthened our position in 2009. We aim to increase our market share again in 2010, so I would like to expand on our priorities in this area:• Further development work on the EDB Financial
Suite is a high priority, including a new credit
The market offers opportunities despite the current difficult conditions.
EDB
Annual Report 2009 CEO’s introduction
7
solution, card blocking and electronic archiving. Cost-effective solutions and rapid time-to-market contribute to strengthening our customers’ competitiveness and are key features of our Bank and Finance value offer.
• The Bank and Finance unit’s international sales also showed good growth in 2009. We are well positioned in the Swedish market, and sales to the other Nordic countries, as well as to the United Kingdom, are growing well.
The Nordic IT services market is worth an esti-mated NOK 130 billion. With our strong local base, global delivery model and broad range of services, EDB is well positioned to strengthen its market position.
Focused strategy and well-defined operational prioritiesThe Board of EDB approved a new focused strat-egy. The new strategy, which aims to secure EDB’s profitable development, is based on clear feedback from our customers. Over the course of autumn 2009, the entire group worked on developing detailed action plans in accordance with overall priorities:• Accelerated organic growth We intend to focus
on market segments that offer growth, prioritise the integration of acquired companies and further develop integrated delivery chains, while ensur-ing greater innovation and renewal.
• Develop and attract talent We will strengthen our resource management, build centre of ex-pertise, emphasise coaching-based management training and ensure greater mobility.
• Increase agility and competitiveness Priority areas are shorter time-to-market for new solutions, standardised operating services, new concepts, systems and methodology for monitoring and enhancing operations solutions and the continu-ing development of our global delivery structure.
• One improved EDB We are integrating the com-panies acquired and moving forward as a single brand. We have started work on streamlining internal processes to ensure that customers experience EDB as a single, well co-ordinated, company.
At the start of 2010, EDB brought together its entire consulting operation as a single organisa-tional unit with unified management. We have strengthened our sales focus on priority areas, and taken steps to simplify our marketing com-munications.
Everyone at EDB is focused on the continuing development of EDB to ensure that the company strengthens its market position and thereby achieves its financial targets and creates lasting value for the benefit of our employees, customers and shareholders.
John-Arne HaugerudActing Chief Executive Officer
John-Arne Haugerud is acting CEO at EDB. He has previously been responsible for IT Opera-tions and Business Development as well as planning and imple-menting major outsourcing assignments. He has worked at EDB for 20 years.
EDB
Annual Report 2009
8
The year 2009
Important contracts
DnB NOR enters into a renewed and expanded agreement with EDB for IT services. The agree-ment runs for five years, and represents total
contract value of approximately NOK 3.8 billion.
Four Norwegian banks, Sparebanken Sør, Sparebanken Sogn og Fjordane, Helgeland Spare-bank and Gjensidige Bank, enter into a renewed and extended agreement with EDB for IT services. The contract runs for five years, and represents total contract value of approximately NOK 800 million.
Sparebanken Vest enters into an agreement with EDB for the purchase of product solutions and operating services for the bank’s activities. The agreement runs for five years and represents total contract value in the order of NOK 500 million.
Storstockholms Lokaltrafik awards EDB an outsourcing contract. The agreement represents total contract value of SEK 200 million, and runs for four years with the possibility to extend for a further four years.
Green Cargo signs a new and expanded agreement with EDB that covers IT operating serv-ices, applications man-agement and consulting
services. The agreement represents total contract value of SEK 300 million over five years.
The solar energy company REC enters into a global delivery agreement with EDB for the supply of IT infra-structure services. The
agreement has an estimated contract value of NOK 225 million and runs for five years.
Sparebanken Pluss extends and expands its agreement with EDB in a new five-year contract for operating services and solutions for its banking activities. The agreement represents estimated total contract value of NOK 150 million.
Posten Sverige chooses EDB as its long-term IT services supplier. The agreement represents total contract value of around SEK 150 million, and runs to the end of 2012.
Statoil selects EDB as a main supplier of consulting services for SAP and Industrial IT. The agreement runs for two years with an option to prolong with two plus two years and has an estimated value of NOK 100 million.
EDB secured all-time record of NOK 8.6 billion in new customer agree-ments during 2009. The year’s highlights included a five-year, NOK 3.8 billion framework agreement with DnB NOR, which widens the scope of our previously existing relationship and holds potential for further expansion. We have a order backlog totalling NOK 12.6 as of 31 Dec-ember 2009.
EDB
Annual Report 2009
9
The year 2009
EDB’s largest contracts in 2009 Million
2009DnB NOR 3 800 nok
Four Norwegian banks (Sparebanken Sør, Sparebanken Helgeland, Sparebanken Sogn og Fjordane, Gjensidige Bank) 800 nok
Sparebanken Vest 500 nok
Green Cargo 300 sek
REC 225 nok
Storstockholms Lokaltrafik (SL) 200 sek
Posten Sverige 150 sek
Sparebanken Pluss 150 nok
Centrala Studiestödsnämnden 100 sek
Storebrand 100 nok
Statoil 100 nok
KLP 70 nok
BIS Production Partner 64 nok
SpareBank 1 alliance 60 nok
Total contract signings in 2009 NOK 8.6 billion
Order backlog at the start of 2010 NOK 12.6 billion
KLP launches a new bank with a solutions portfolio from EDB, and signs a five-year agreement through KLP Banken for IT
solutions and operating services representing total contract value of NOK 70 million.
Storebrand Bank extends and expands its agree-ment with EDB for the delivery of payment services and bank operating solutions to January 2014, repre-senting total contract value of around NOK 100 million.
CSN, Centrala Studiestödsnämnden awards EDB a contract for the administration and operation of IT services representing total contract value of SEK 100 million for four years, with the possibility to extend for three years.
BIS Production Partner enters into an agree-ment with EDB for delivery of IT infrastructure and operations services representing total contract value of NOK 64 million through to 2012.
The SpareBank 1 alliance enters into an agreement to access reg-ister information using EDB’s Infobank solution. The agreement runs for
five years and represents total contract value of around NOK 60 million.
Important contracts in 1Q 2010
Kammarkollegiet the Swedish Legal, Financial and Administrative Services Agency, enters into a framework agreement that gives EDB the right to submit offers of IT services. The agreement applies to deliveries to local and central government over a five-year period. EDB is one of ten companies partici-pating in the agreement that represents estimated total contract value of SEK 4 billion.
Samhall in Sweden re-news its agreement with EDB for the supply of IT operations and support for a further four years. The total value of the contract is approximately SEK 80 million.
Coor Service Management continues its collaboration with EDB by entering into a new and expanded five-year agreement representing total contract value of around SEK 170 million.
Green Cargo enters into an agreement with EDB for the delivery of services for business operations and applications management, representing an expansion of the existing close collaboration be-tween the two companies. The agreement runs to 2014 and represents total contract value of SEK 200 million.
EDB
Annual Report 2009
10
The year 2009
Key figures and events
Key figures 2009NOK million
2009 2008 2007 2006 2005 2004
Operating revenue 7 492 7 871 6 354 5 882 4 870 3 992Profit before amortisation of intangible assets (EBITA) 954 670 644 397 486 364EBITA before non-recurring items 603 724 607 541 503 364EBITA margin 12.7% 8.5% 10.1% 6.8% 10.0% 9.3%EBITA margin before non-recurring items 8.1% 9.2% 9.5% 9.3% 10.3% 9.3%Return on invested capital (ROIC) 10.3% 12.6% 14.2% 14.6% 19.6% 19.1%Number of employees 5 991 6 175 5 201 3 849 2 664 2 480 Earnings per share 1.35 2.18 3.32 2.47 2.66 1.95 Equity ratio 28% 25% 33% 33% 44% 38%Investments in fixed assets 214 329 246 292 381 233
For detailed information on key figures, see page 102.
Operating revenue NOK million
EBITA before non-recurring itemsNOK million
Cash flow from operationsNOK million
0
2000
4000
6000
8000
090807060504 0
200
400
600
800
090807060504 0
200
400
600
800
090807060504
Number of employees
Investments in fixed itemsNOK million
Net interest- bearing liabilitiesNOK million
Return on invested capital (ROIC)Percent
0
2000
4000
6000
8000
090807060504 0
750
1500
2250
3000
090807060504
0
100
200
300
400
090807060504
0
6
12
18
24
090807060504For detailed information on definitions on key figures, see page 103.
EDB
Annual Report 2009
11
The year 2009
January EDB cancels a contract with
the City of Oslo for the supply of applications operations. The cancellation reflects disa-greement between the parties on commercial matters relating to aspects of the delivery.
February Sparebanken Vest becomes
the first bank in Norway to offer electronic signing for new customers by using EDB’s new solution. The bank expects to reduce the processing times for many of its services by us-ing this solution.
The airline SAS selects EDB’s subsidiary Spring Consulting to upgrade its SAP platform in Norway, Sweden and Denmark.
April EDB brings together the
operating services of the IT Operations business area and the operations division of the former IS Partner AS as a single business area under the same management.
EDB’s subsidiary Avenir, the Bergen Municipality, Bergen University College, the University of Bergen and other local IT environments join forces to make Bergen a centre of excellence for using Open Source in developing the IT solutions of the future.
EDB announces cost sav-ing measures of NOK 400 million in response to the fall in revenue caused by the impact of the global financial crisis. The company launches an improvement program to reduce costs and strengthen earnings.
May EDB sells its print and
envelope-filling activities to Strålfors. As part of the agree-ment, Strålfors will operate as EDB’s subcontractor to pro-vide these services to public sector and bank and finance customers. In addition, Strål-fors takes over equipment and certain customer contracts representing around 75 full-time equivalent positions.
June Handelsbanken’s customers
become the first card users in Norway to use a new geographic blocking service. The solution delivered by EDB means that with just a few key strokes on their internet banking con-nection, customers are able to protect their cards against most common forms of fraud.
July EDB sells two small
businesses in Sweden. The companies sold are Astrakan Strategisk Utbildning, which arranges training courses, and Guide Market Solutions, which offers solutions for sales and marketing.
August EDB signs a preliminary
agreement with FOREX Bank to supply banking services and take over the operation of the bank’s IT solutions. The agree-ment runs for five years and represents total contract value of around NOK 200 million.
September EDB implements a defined
contribution pension scheme for its employees in Norway with effect from Septem-ber following a decision by the Board to terminate the current defined benefit pen-sion scheme for Norwegian employees.
EDB’s subsidiary company Avenir enters into an agree-ment with Trafikanten to develop a new publishing solution that will provide 1.5 million Norwegians with up-to-date information on public transport through a range of channels including the inter-net, mobile telephones and a customer centre.
November EDB launches a new solu-
tion that allows Norwegians to change bank and set up new bank accounts over the internet by using BankID. BN Bank attracts a great deal of attention as the first bank in Norway to offer this new solution with its ’Ekstrakonto’ account.
December AstraZeneca of Sweden
enters into a framework agree-ment with EDB that makes EDB one of the company’s selected suppliers in the IT services area.
The Norwegian Govern-ment Administration Serv-ices agency (GAS) and EDB enter into an agreement for the development and opera-tion of Budmod, which is the model used to simplify the preparation of the Norwegian national budget. The agree-ment runs for one year, with an option to extend through to 2014.
January 2010 Endre Rangnes leaves
his position as Chief Execu-tive Officer of EDB Business Partner ASA in order to join the Lindorff Group as its CEO. EDB’s Board appoints Execu-tive Vice President John-Arne Haugerud as Acting CEO.
The Norwegian Parliament selects EDB’s subsidiary Avenir as its sole supplier of project management services for ICT projects. The agreement runs for four years, and represents total contract value of up to NOK 8 million.
EDB’s subsidiary Spring Consulting wins a contract with Falck in Denmark to provide SAP-related services. The contract provides for Spring to take on responsi-bility for operations and the future development of Falck’s SAP platform for the next five years.
EDB
Annual Report 2009
12
Management review
EDB is a leading information technology (IT) services company in the Nordic region. We combine local expertise, deep industry knowledge and a substantial international delivery capability. EDB has developed critical mass within the full range of IT services through a targeted consolidation program. We are now focusing on growing our business organically. A key element of our growth strategy is offering industry-leading ease of access to our highly efficient delivery organisation.
No.1Norway
• Nordic Banking
and finance•
NordicSAP services
• Nordic
Oil and Gas
No. 2 Nordic
outsourcing
No. 3 industry in the
Nordic
No. 4 Nordic project
services
No. 5 Sweden
The IT services market is a value chain with three segments: Outsourcing, project services and customer support services. EDB operates mainly within the first two segments and is the fifth largest provider of IT services in the Nordic region. We hold a dominant position in Norway and within the financial, and oil and gas sectors. In addition, we are one of the leading vendors of outsourcing in the Nordic region.
EDB’s local roots drive our business. We have worked with major private and public sector customers in the Nordic region for almost half a century. As globalisation has expanded our cus-tomers’ horizons, we have created the platforms they need to grow internationally. As a result, we now provide global delivery capabilities for Nordic businesses that compete on the global stage.
As the pace of change increases in all sectors, cus-tomers increasingly demand IT services from pro-viders who understand their industry and business objectives thoroughly and are able to convert that insight into appropriate technological solutions.
At EDB, we have always been focused on helping customers get more out of their IT investments. Now, we have taken further steps to make sure that we can continue to support our customers proactively in the future, by simplifying our delivery model and introducing One improved EDB.
Market developments The IT services market was severely hit in 2009, with lower volumes and price pressure in most areas. Customers focused on cost-oriented projects and more flexible business models, with that offered lower costs in business downturns. We have therefore experienced stronger demand for our outsourcing services in combination with global delivery models. Macroeconomic changes were behind these developments: Most European economies experienced slow growth or con traction during the year, along with increases in credit costs. This resulted in lower spending on IT services by customers in both the public and private sectors.
Business overview
A renewed and more agile EDB
EDB
Annual Report 2009
13
Management review
Expecting modest spending in 2010Percent
Top 10 CIO priorities in 2010
Market outlook by industries CAGR 2010–2012 in percent
Significantdecline10.3%
Modest decline 14.3%
Modest increase 19.2%
Aboutthe same
50.2%
Significantincrease
6%
Going into 2010, our view is that customers con-tinue to be cautious in their IT spending. Among the few bright spots are services related to stan-dardising IT infrastructure, automating work pro-cesses and security. Market research analysts IDC and Gartner project that the IT services market will improve gradually during 2010, with potential for growth in the latter half of the year. We believe that the improvements we have made to our operating model leave us well positioned to gain both volume and market share as the situation improves.
In the Nordic region, the market has been evolving quickly, with customers tending to prefer integrat-ed providers such as EDB, who provide a full range of services. This is reflected in the rapid consolida-tion of the market. According to market researcher IDC, the top 15 Nordic IT services providers now
command 63% of the market, up from 40% in 2003. With the Nordic IT services market now close to NOK 130 billion in annual sales, these developments provide opportunities for EDB.
While scale is important, so is the flexibility to handle rapidly changing business needs. Mobile platforms for example have rushed to the forefront, becoming core elements of information accessibi lity. EDB has responded in this arena, for example cre-ating Norwegian banking applications for iPhone. This is a continuation of our heritage; in previous decades, EDB also introduced internet and mobile banking solutions to the Norwegian market.
An optimal mix of capabilitiesEDB is well equipped to address customer needs in the IT services market. Our strength is the ability to serve as a strong partner with an ideal mix of in-timacy, market insight and scale. For example, we have worked with the banking industry and local municipalities from the early sixties right through to today. With this unique base of experience and our local presence, we develop scalable solutions that provide the benefits of cost sharing for our cus-tomers – and a profitable business model for EDB.
EDB has gained significant capabilities in company restructuring and M&A support following our ac-quisition of IS Partner from StatoilHydro. We now have IT talent with vast experience in this arena and the benefit of IS Partner’s prove, industry- leading methodologies for supporting mergers, acquisition and divestments.
customerfocusandpriorities
Mobile solutions IT SecurityEnvironmental initiativesUnified communicationVirtualisationSoftware as a serviceCloud computingBusiness IntelligenceIT outsourcingWeb 2.0
Source: Gartner
0 1 2 3 4 5
Industry
Telecom
Bankingand finance
Public sector
Source: IDC survey January 2010 (n=600)
Source: IDC
Nordic market shares within IT Services2009
changefromcompany share lastyearIBM 13.3% -3.1% Tieto 7.1% -3.2% Logica 6.8% 1.3% HP 5.4% -7.1% EDB 5.2% -2.4% CSC 3.2% 0.5%
Source: IDC
EDB
Annual Report 2009
14
Management review
Global delivery model In today’s increasingly global economy, EDB believes that focusing on Nordic customers re-quires a strong international delivery capability. We provide a package of IT services globally for our customers, which increases the efficiency of their internal processes. For example, when the Norwegian solar energy giant REC decided to expand their manufacturing operations to Singapore, EDB was able to provide a unified IT platform in support of the company’s entire global operations.
Flexible global sourcing capabilitiesEDB’s flexible global sourcing model gives us a competitive advantage. We integrate resources from our global subsidiaries into our deliveries for Nordic customers. A quarter of EDB’s employees are located in India and Ukraine. Our subsidiaries in these countries have nearly two decades of expe-rience successfully and exclusively serving EDB’s Nordic clients and other international customers seeking the advantages of global sourcing. This al-lows us to provide high quality offerings at competitive cost levels.
The unique element of EDB’s global sourcing is that we lead with local Nordic project manage-ment. This provides a close – and seamless – link to customer needs, while utilising the efficiency of offshore resources. We have integrated global sourcing into the majority of our outsourcing customer deliveries.
One improved EDBAs the pace of change increases in all sectors, customers increasingly demand IT services from providers who understand their industry thoroughly. They also have a greater focus on their internal
EDB’s delivery model
BankingandFinance
Public sector
Telecom Industry
Consultıng
OutsourcingEDB’s delivery model reflects our deliveries to four industry specialist area; Banking and Finance, Public sector, Telecom and Industry. The delivery areas Con-sulting and Outsourcing delivers solutions to both the private and public sector. The delivery area Solutions serves customers within Banking and Finance and Public sector.
EDB’s revenue per countryPercent
EDB’s revenue per industryPercent
Other10%
Industry35%
Sweden 21%
Telecom8%
Norway69%
Public sector
14%
Banking and
Finance43%
Nordic IT services per categoryTotal NOK 130 bilion
Customer support services17%
Projectservices 38% Out-
sourcing45%
Source: IDC
EDB
Annual Report 2009
15
Management review
EDB has become a more international company.
At the same time, the group has strengthened
its Nordic roots.
processes, which in turn means that they seek IT services that deliver value across their entire businesses. Our response has been to develop an operating model that is convenient for customers: One improved EDB. We have four areas focused on managing relationships customers in Banking an finance, the public sector, telecom and industry. However, we maintain technical expertise and critical mass within three service organisations that focus on the main segments of the IT value chain: Solutions, consulting and outsourcing.
This structure allows us to focus on customer needs more intimately, while delivering services efficiently. We can more easily develop IT solutions that support customers strategic needs, yet are also more efficient to operate further on in the IT value chain.
Customers have responded positively to our improved delivery model by extending their com-mitments to EDB. During 2009 we signed NOK 8.6 billion of new and extended agreements with our customers. These agreements provided customers with increased value in the form of reduced costs. This is part of a trend towards customers reducing operational costs and investing the savings in new solutions.
Strategic prioritiesHaving developed a solid platform, we have defined a set of strategic priorities to drive growth and profitability in our business. The most impor-tant of these is organic sales growth, which we are supporting through several changes, including restructuring our sales organisation and imple-menting a new customer relationship management (CRM) system. Furthermore we are working to take advantage of our full range of services by focusing on cross-selling, particular to our key customers.
Sales growth naturally will require us to continue to attract and keep the best IT talent. We are already recruiting heavily to support the growth of our business in the Swedish market.
Finally, we believe that we must continue to improve the agility and competitiveness of our services. Improved processes and a focus on our global sourcing program will help us extend our lead in providing the levels of reliability and cost that our customers expect.
EDB
Annual Report 2009
16
Management review
Develop and attract talent
One improved EDB
Accelerated organic growth
Increase agility and
competitiveness
Strategic agenda
Nordic leadership
EDB is seeking opportunities for revenue growth in industry verticals and horizontals that have growth potential. Our main focus is on Norway and Sweden, and on specific market niches in the other Nordic countries.
Continuing focus on competence development in pace with market requirements. Ensure that EDB is an attractive workplace, and has a good supply of talents.
Make EDB quicker to respond and adapt to changing market needs, combined with measures to improve productivity.
We are integrating the companies acquired and moving forward as a single brand. We have started work on streamlining internal processes and systems to ensure that customers experience EDB as a single, well co-ordinated, company.
Description
• Selective international growth in bank and finance
• Targeted focus on identified market segments that show good growth prospects and where EDB has a competitive advantage
• Greater internal mobility and international experience for our employees
• Develop a specialised global centre of expertise
• Establish a management system for our global resources
• Increase awareness and know-ledge of EDB with technology
• Build greater market awareness and better knowledge of EDB’s products and services
• A unified corporate culture across the entire group
• Establish a program for benchmarking products and services
• Improve customer satisfaction
Long-term objectives
EDB
Annual Report 2009
17
Management review
EDB is determined to become the Nordic leader in IT services, outperforming the market in growth and earnings. We aim to grow organically, but remain open to strategic acquisitions. In support of this vision, we began implementing a new strategic agenda at the end of 2009. The focus is on becoming even better at delivering what customers value; innovative IT services, within a flexible structure and at a competitive cost.
• Continue work on developing a strategic customer team that will look after each customer’s complete range of requirements and ensure rapid decision-making and efficient total deliveries
• Make delivery chains more integrated by making efficient use of global sourcing, as well as through innovation and renewal
• Focus on resource management to ensure greater internal mobility and make optimal use of EDB’s competence
• Personal development and expertise targets for all employees
• Continuing program of process-oriented and coaching-based management training
• Shorter time-to-market for new solutions through improved innovation processes
• Closer interaction with partners on delivery of services to customers
• Continuing development of EDB’s global delivery structure designed to meet the needs of Nordic customers
• A single, unified brand for EDB, including sub-sidiary companies that have been acquired
• Targeted marketing communications that build greater awareness of EDB and develop better knowledge of our products and services
• A program to firmly embed a unified business concept, strategic vision and corporate values
• Market-led training programs for certification and specialist expertise
• Program of targeted activities with universities and colleges
• New and streamlined CRM system• Roll-out of the public sector solutions portfolio
• Launch new solutions as part of EDB Financial Suite
• New products and solutions concepts for outsourcing
• Nordic-wide service concepts for Consulting
• Simplified decision processes • New methodology and systems for
monitoring operation solutions• Continue with the ‘lean’ working program
• Expanded e-training program to ensure employee compliance with EDB’s ethical guidelines
• A unified CSR program with strong local involvement and commitment
• Reduce the overall number of support systems and ensure more unified usage
Priorities for 2010
EDB
Annual Report 2009
18
Management review
Our Solutions business area grew profitably in 2009 by capitalising on structural changes in the banking segment. Income grew 5.6% to NOK 1.5 billion, while EBITA margin remained strong despite some challenges.
Solutions
Capitalising on market opportunities
EDB’s business area Solutions delivers a complete range of IT solutions to the Nordic financial and public sectors. We had 1,000 employees and annual revenue of NOK 1.5 billion as of year-end 2009. Our strength lies in our ability to quickly develop cost-effective solutions, fuelled by our deep indus-try knowledge and local insight.
EDB is the market leader in IT solutions for the Nordic finance sector. This sector provides 88% of our revenues in solutions, primarily from software, maintenance and forecasting services. Our flexible, software as a service (SaaS) based solutions cover the entire range of business proc-esses within financial institutions. For example, our new lending solutions are uniquely tailored to banks’ processes, speeding up credit processes and improving the quality of lending decisions.
We also provide local governments, health ad-ministrators and other public sector organisations with resource allocation and management, case processing, collaboration and document handling solutions. Our EDB Resource Allocation and Management solution, based on SAP, is an effi-cient and unified system. It meets organisations’ needs for efficient transaction processing, inte-
gration, user-friendliness and consistent manage-ment information.
Promising growth in a turbulent marketThe Solutions business area grew reasonably well in 2009, with revenue increasing 5.6% to NOK 1.5 billion. This is due to our timely position as a provider of cost-effective solutions in an economic context where cost control has become a business priority for our customers.
The solutions area reported an EBITA-margin of 13.1% in 2009 as compared to 14.5% in 2008.
2009 2008 2007
Revenue (NOK million) 1 507 1 427 1 373
EBITA (NOK million) 198 207 200
EBITA margin (%) 13.1 14.5 14.6
Timely, cost-effective financial sector solutionsOur approach is to build an offering that ensures that customer can get robust, leading edge solu-tions from us, at competitive cost levels. The EDB Financial Suite is our complete portfolio of solutions for financial institutions. It gives them single source for solutions covering all aspects of their business, from sales to customer service,
Solutions:Share revenuePercent
19.2%
EDB
Annual Report 2009
19
Management review
transaction management, business intelligence and compliance. Customers can chose parts of the suite or all, to fit their needs. We design each component of the solution so that we can custom-ise them to fit customer requirements.
We provide rapid speed to market by standardising solutions: Developing and customising standard components to meet local banking requirements. This allows us to provide customers with robust, feature-rich solutions at low cost. Solutions based on standardisation are now important in all our markets.
Cost sharing is another key element of our ap-proach to solutions for the financial sector. We are able to reduce the cost of new solutions by developing them in partnership with key custom-ers, then selling the standardised solutions across the industry. With risks and development costs spread over a wider customer base, the solution is cheaper for each individual customer.
Supporting public sector renewalThe public sector is in the midst of a renewal. Organisations in this sector are all seeking to use resources more effectively, while delivering faster outcomes, better quality service and increasing public access to information.
We are working with the sector to meet these goals. EDB Digital Public Sector is a portfolio of solutions that we have developed to help the public sector meet its goals. These solutions address collaboration, case management, resource management and allocation processes. One of EDB’s strengths in this area is our experience in developing self-service solutions. These solutions improve process efficiency while increasing public access and user satisfaction.
Beyond technical solutions, collaboration among public sector entities is an important factor in helping to capture the benefits that technology makes possible. We have taken on a lead role in prompting public sector collaboration, for example through the open source software centre that we helped establish in Bergen. The centre is working to develop cost-effective, reliable solutions and to help customers, users and vendors jointly test new solutions. EDB participates in research at the cen-tre, along with the Bergen Municipality and sev-eral higher education institutions in the region.
Customer projectsElectronic signing Sparebanken Vest has become the first bank in Norway to offer customers the
ability to take out insurance electronically. Using our electronic signature solution, the bank expects to reduce processing time for many banking ser-vices that previously were delayed by the need for manual signatures on contracts, documents and forms.
Internet banking mania Norwegians have taken to internet banking rapidly since we developed the first Norwegian internet banking system in 1996. Usage has doubled over the past three years, with customers for example paying 61 bills on average per year via the internet. There are now 4.7 Norwegian internet banking accounts in use, an incredible number for a country of just over 4.8 million people.
Open accounts instantly Customers of BN bank in Norway are the first in the world to be able to open or switch bank accounts instantly. We developed the solution, using the BankID system for electronic authorisation. The new solution was a quick response to new legislation by the Norwegian Ministry of Finance, which allowed customers to authorise new banking and insur-ance accounts electronically.
Open source case management We have taken the initiative to open the archive core of the solution EDB Case and Archive and to make it available as an open source license. We have also launched a project to help the Norwegian public and private sector work together to develop and use free and open source code.
Resource allocation and management EDB pro-vides a resource management system for munici-palities, based on our new solutions suite, EDB Digital Public Sector. The solution is future-proof, user-friendly and robust. It offers capabilities such as digitalisation of case processing and workflows, management tools and integration with personnel and payroll.
Extending our market leadEDB is the leader in the Nordic IT solutions seg-ment, with a targeted presence in the UK deliver-ing channel and card solutions. We strengthened our market position in IT solutions during 2009, despite a demanding year, as most economies struggled with the aftermath of the global finan-cial crisis. Our success was in part due to our securing long-term agreements with a significant percentage of our existing customer base, while adding several new ones.
Solutions: Revenue by industryPercent
Solutions: Revenue and EBITA marginNOK million and percent
Public sector12%
Banking and Finance
88%
0
400
800
1200
1600
0908070
4
8
12
16
Revenue EBITA margin
EDB
Annual Report 2009Management review
20
We believe that we can further increase our mar-ket share in the Nordic region in 2010. We have unmatched scale in the Nordic bank and finance IT solutions sector. Our experience and special-ist experience in the sector give us a significant lead over our international IT competitors. We are therefore building on our momentum with several product launches. They will be focused on quickly helping customers reduced costs with service-based solutions. We also deliver new mobile banking applications, such as the iPhone banking application.
Targeted international growthWe succeeded in growing our business outside of Norway significant faster than the market. This included strong growth in the rest of the Nordics and in the United Kingdom (UK). Our card and customer banking access solutions, such as inter-net and mobile banking, are selling well. We also experienced significant demand for our service-based solutions (SaaS) among second and third tier banks. These cost-effective solutions are developed from our existing Norwegian products and sup-ported within our established organisation.
Our UK business has the greatest potential for growth, even though it only makes up a small segment of our business. We have established a UK-based sales team that is focusing on increas-ing our market share in two key segments; private banks and building societies. Our solutions and flexible SaaS-based delivery model contributed to double-digit growth in 2009.
EDB suite of solutions for banking and finance, EDB Financial Suite
EDB suite of solutions for the public sector, EDB Digital Public Sector
Portal framework Internet banking Mobil bank
Sales and customer services
Multi channel platform
Enterprise platform
Management and reporting
SecurityPayments CardsLending and credit Insurance
Savings and in-vest-ments
Collaborative working
Inte
gra
tion a
nd te
chnolo
gy
Case management and archive
Resource allocation and management
Portals
Case management
Business mgmt.
Resource allocation
Accounting
Publishing
Archiving
Purchasing
Work schedule
Personell
Self-service
Citizen dialogue
Invoicing
Deposits/lending
Payroll
e-Forms
Process plan
Planning/budgeting
Project mgmt.
Fixed assets
EDB
Annual Report 2009
21
Management review
Revenues in EDB`s Consulting business area dropped by 12% to NOK 1.96 billion, as a reduction in private sector sales outweighed an increase in public sector activity.
Consulting
Building a new foundation for growth
The business area Consulting (former Application Services) had a difficult year in 2009, as the macro-economic downturn reduced demand significantly. The macro economic downturn in 2009, affected our customers, particularly exporters and custom-ers based in Sweden. We have partially mitigated the effects of lower demand from our private sector customers, by stronger sales to the public sector, improving our cross-sales results in cooperation with other EDB business units and contract re-newals with some strategic customers. In addition, we have cut costs by reducing our use of sub- contractors and divesting two non-strategic units in Sweden.
Local competencies, global reach and experienceThe Consulting business area delivers a broad range of business critical services to help custom-ers develop self-service and e-commerce solutions on internet, as well as to optimize work proc-esses. Our business and IT consulting teams have expertise in SAP, industrial IT, collaboration, digital business, CRM and business intelligence. The business area has extensive experience in industry-standard solutions, particularly SAP, Microsoft, Oracle and IBM technology, as well
as in project management, systems development, testing and business development. We believe that we distinguish ourselves through our combination of technological expertise and deep industry knowledge.
The Consulting business area employs 2,800 con-sultants. We operate mainly from several locations in Norway, Sweden, Denmark, along with strategic bases in Continental Europe, Singapore, India and the Ukraine.
2009 2008 2007
Revenue (NOK million) 1 963 2 214 1 223
EBITA (NOK million) 145 194 150
EBITA margin (%) 7.4 8.8 12.3
The Consulting business area was hit by reduced demand in 2009, especially among our industrial clients and in the Swedish market. In response, we have established a flexible business model, with a variable salary structure and use of sub-contractors. We reduced the number of our sub-contractors significantly in 2009, a development that we expect to continue in 2010.
Consulting:Share revenuePercent
25%
Consulting: Revenue and EBITA marginNOK million and percent
0
600
1200
1800
2400
0908070
4
8
12
16
Revenue EBITA margin
EDB
Annual Report 2009
22
Management review
We have adjusted our structures, to streamline them and increase the potential for revenue growth. In particular we integrated our sales and delivery teams to EDB’s key customers. We will also merge the subsidiaries within the Consulting business area into a legal entity in Sweden and another in Norway. Finally, we shall increase our market visibility and sharpen our branding by completing a related rebranding effort in the second quarter of 2010.
Customer projects:Smarter commuting 1.5 million Norwegians have seamless, real-time access to commuter transport details, thanks to a publishing solution that EDB is delivering to Trafikanten, the Oslo public transport information service. The solution makes it easy for commuters to access Trafikanten by mobile phones, the internet and in customer centres.
Information is a drug Pharmaceutical giant Astra-Zeneca will now be supported with virtually unlimited IT possibilities, based on an agreement with EDB. We provide AstraZeneca with access to our entire global services portfolio of industry-specific solutions, operating services and consul-tancy services. Within consulting, the agreement covers applications management, business intelli-gence, project management, systems development, systems integration and business development.
SAP for safety Danish security and emergency assistance provider Falck looks to EDB for a wide range of SAP-based services. Falck has expanded a previous agreement in which EDB previously delivered SAP-services related to payroll and personnel area. We will now take on responsibility for applications management operations and the future development of Falck’s SAP platform for the next five years.
There’s no debating IT Stortinget, the Norwegian Parliament, is depending on EDB’s Consulting area to manage its IT projects exclusively over the next four years. We are managing projects
related to Stortinget’s acquisition, implementation and modification of IT systems. In particular, the organisation aims to use internal and external collaboration and social media more extensively, while maintaining its security requirements.
Proactive approach to market conditionsThe consulting market has grown rapidly over the last five years, although the economic downturn reduced demand and increased price pressure in 2009. We were able to offset lower demand in the private sector segments with higher sales in the public sector, which has been investing in internet-based self-service solutions and work flow automation tools.
In 2009, we have expanded our use of globally sourced input for Nordic customer deliveries, to improve our cost position. This is part of a struc-tural change in our business model. We have also partially insulated ourselves from market fluctua-tions recently by increasing the share of long-term projects in our business.
Independent market analysts predict that the demand for consulting should increase in the second half of 2010, but uncertainty remains in the forecasts. Our view is that the market has underlying growth potential. Specifically, there is a clear need in almost every customer to adapt to new business models, that are flexible and tech-nology driven. As a result, we expect that demand will increase as the macroeconomic environment improves.
The Consulting business area is well equipped to meet the challenges in the Nordic market environ-ment. The structure of customer contracts in this segment gives us a clear picture of demand for one or two quarters ahead. We monitor our staff utilization rate weekly. With this and our CRM system, we forecast sales – and in turn, manage our resource usage closely. We continue to moni-tor the situation and are able to quickly adjust to changes in market conditions.
EDB
Annual Report 2009
23
Management review
2009 was a challenging transition year for the IT Operations business area. We integrated the IS Partner business and added NOK 5 billion of contracts to our order backlog. Our revenue dropped by 4,3% in tough macroeconomic conditions. We partially offset this through our cost reduction program.
IT Operations
Strong customer base and improving efficiency
EDB is a leading provider of IT outsourcing serv-ices in the Nordic region, with 2,000 employees and annual sales of 4.38 NOK billion. We have a history of delivering stable and secure services with virtually unlimited uptime. Customers such as Statoil, REC, SJ, DnB NOR and SpareBank 1 rely on us to support their most business-critical activities. In the banking sector alone, we support 15 billion customer transactions, including cash machines (ATMs) and card transactions online and at merchant payment terminals. We also support more than 100,000 workstations, 12,000 servers and 3,500 applications.
A premier outsourcing provider in the Nordic regionThe IT Operations business area offers a complete range of outsourced services to support operations in the public and private sectors. Our services in-clude network services, operational infrastructure and applications, security services, user support and electronic business support services.
Our focus is on developing close relationships with Nordic customers, providing them with support for their domestic and international
ope rations. For example, we deliver comprehen-sive services to the global operations of Statoil and Hydro.
We operate principally in Norway and Sweden, but have local offices in 13 countries and operate onsite at customer locations in 55 countries. Our customer base is extremely broad. It includes majority of the public and private sector in Nor-way and Sweden. We have a particularly strong footprint in the finance, manufacturing, oil and gas, retail, telecom and public sectors.
Challenging year in 2009The IT Operations business area had a promising finish to a challenging year in 2009. The European business climate was dominated by slow or nega-tive growth, which dampened overall economic activity. Our operating revenue for the year dropped by 4.3%, to 4.38 NOK billion, primarily to the comparison our unusually high revenues in 2008. In that year our IS Partner business unit played a central role in completing complex one-off transactions: the demerger of Yara from Hydro and the merger of Hydro with Statoil.
IT Operations:Share revenuePercent
55.8%
EDB
Annual Report 2009
24
Management review
We signed new and expanded contracts with several key customers, securing a significant revenue stream over the next 5 years. Among the customers we have renewed are DnB NOR, Store-brand and Sparebanken Vest. We have also signed several new customer contracts in Sweden, among them Posten, Storstockholms Lokaltrafik (SL) and CSN, the Swedish Board for Study Support.
We continued with the cost reduction programwe had in place, for strategic reasons and in res-ponse to the challenging business environment.This included improving the efficiency of our processes and reducing personnel costs. We achieved the latter by reducing headcount modestly and directing more of our business activity through our lower cost subsidiaries in Ukraine and India. Elsewhere, we reduced costs significantly by renegotiating software and hardware purchasing contracts and out-sourcing our printing operations.
These initiatives helped prevent our margins from dropping, as our revenue fell. Our operating margins were 8.3% for the year compared to 8.9% in 2008.
2009 2008 2007
Revenue (NOK million) 4 380 4 512 3939
EBITA (NOK million) 365 401 330
EBITA margin (%) 8.3 8.9 8.4
Effective service, sourced globallyIT Operations offers customers access to innovative, yet cost-effective IT operating services. We have carried out a NOK 1.6 billion renewal program over the past 5 years, focusing on standardisation, service quality and simplification. This program includes installing a new mainframe platform, infrastructure, security solutions and network. We operate with the Lean production methodology and invest resources in employee training and development.
Our flexible global sourcing program has become an area of strength, allowing us to keep costs competitive while delivering the consistency and quality of service that customers expect from us. We are currently implementing a revised approach to outsourcing, which includes global governance models, resource management systems, centres of excellence, common processes, methods and tools.
We maintain a strong local project management function in close contact with our Nordic custom-ers. This group works to deliver services with the input of our highly qualified and experienced re-sources at our Ukrainian and Indian subsidiaries.
The result is high quality service at cost levels that support our customers’ need to operate more effectively than before.
Diverse customer deliveriesWe secured agreements with customers this year totally more than NOK 5 billion of new contracts. With these new agreements, our order backlog as of year-end 2009 is marginally lower than last year, at NOK 9.24 billion.
Sunny story Leading solar energy company REC chose EDB as its worldwide provider of outsourced IT services, including distributed computing, connectivity services and application services. We will begin by launching services at the company’s corporate headquarters in Norway and in Singa-pore, where REC is set to open the world’s largest integrated solar cell and module plant.
Swedish delivery EDB will provide IT services for the operations of Swedish mail services company Posten, under a new contract. The agreement cov-ers 11 different critical operating services, con-sulting, development and training. It represents the expansion of an existing long-term relation-ship between the companies.
Commuter service EDB has entered into a strategic agreement with Storstockholms Lokaltrafik (SL), the Stockhom public transport system. We will provide SL with network services, application operating services, service desk and workstation operating services, as well as capacity services for servers and storage.
Industrial strength EDB is delivering IT infra-structure services for BIS Production Partner’s Scandinavian operations as part of a two-year NOK 64 million contract. BIS Production Partner supplies industrial projects, maintenance, work-shop production, industrial masonry and consul-tancy services for process industry and energy producers in Northern Europe. The agreement covers site IT services, connectivity and collabo-ration services and hosting of business solutions.
Strong market positionEDB is the second-largest provider of IT outsourc-ing services in the Nordic region, with an 8.6% share of the NOK 62.3 billion market, according to market researcher IDC. Sweden is the largest single geographic market, accounting for 39% of spending, followed by Denmark, Norway and Finland.
IT Operations:Business mix by sectorPercent
IT Operations: Revenue and EBITA marginNOK million and percent
0
1200
2400
3600
4800
0908070
3
6
9
12
Revenue EBITA margin
Bankingand
Finance37%
Publicsector
12%
Ohter6%
Industry and Trade32%
Telecom13%
EDB
Annual Report 2009
25
Management review
The Nordic IT services market has consolidated over the past 5 years, with global players control-ling over 50% of the market and overall, the 10 largest competitors holding 70% total market share. The market has experienced a trend of corporate divestment of former in-house IT serv-ices units, which has influenced contract flow. EDB is strong in this area, having acquired and transformed the in-house IT services units of DnB NOR, Telenor and StatoilHydro.
The Nordic market has a large potential for out-sourcing. Data from IDC shows that only 50% of companies outsourced their IT operations to any extent. A great deal of this potential market will be served by global sourcing, which is now widely accepted by customers as method of controlling costs. However, some sectors such as finance have not yet received the regulatory frameworks they need to in order to commit fully to global sourc-ing. We expect these issues to be cleared up over the next year, as the economic downturn in the Nordic countries has set cost control and flexibili-ty higher on organisational agendas. This develop-ment should drive higher demand for outsourcing, particularly in Sweden.
EDB holds a strong position in the market. We have maintained our margins in a challenging economic environment. Our relationships with customers have resulted in steady volume and
activity, with a solid flow of contract extensions and add-ons. The most important of these was a five-year extension to one of our largest agree-ments, with DnB NOR.
Going forward, our challenges are to maintain organic sales growth and operating margins. The most effective path to that goal is to continue our current success in renewing and extending con-tracts with existing customers. We stand a great chance of success if we can continue improving the quality and effectiveness of our processes, while expanding our global sourcing program to help reduce costs.
We plan to complete a series of cost and quality improvement programs in 2010. These include process efficiencies from integrating IS Partner into our operations and extending our global sourcing program. We will further improve qual-ity and reduce costs by standardising and simpli-fying our service offerings, technical processes, solutions and standards.
Projections from market research companies Gartner and IDC indicate that we can expect a gradual recovery of the IT outsourcing services market by the end of 2010. We believe that our strategic plan will prepare us to take advantage of growth opportunities when they arise.
The IT out- sourcing market by geo graphyPercent
Sweden39%
Norway18%
Denmark26%
Finland17%
Source: IDC
EDB
Annual Report 2009
26
Management review
Risk management
Monitoring and managing exposure
EDB is highly focused on risk management, in line with our responsibility to protect our customers, business and people from potential harm. We operate with a structured process of constantly monitoring the key risks we face and taking actions to mitigate them.
Our business is exposed to a number of risks. The majority of these are linked to EDB’s strategic choices. We position ourselves as a reliable provider of large scale, business-critical IT services for highly visible public and private sector operations.
Risk management is therefore a strategic priority for us. We are systematically working to extend our risk management system into our management and operating procedures. This system connects our management steering and reporting systems to our core delivery and change processes.
Proactive, systematic approachViewing risk from the enterprise level, we create more shareholder and customer value when we understand and manage risks well. The better we are at managing risk, the more we can take on safely. Better risk management allows us to deliver more value at a lower cost. It also helps EDB and its customers avoid unexpected situa-tions that influence value creation and/or cost.
At the delivery/implementation/change level, we manage our processes to make sure that our deliveries to customers meet the agreed levels of quality and timeliness. We also focus on keeping operations stable and functioning as intended, even though planned changes and upgrades.
We believe that a broad, proactive and systematic approach to risk is necessary in today’s increasingly complex operational environment. This means we manage risks to individual deliveries, but also look beyond them to mitigate risk viewed from the busi-ness unit and enterprise levels.
Risk management process in EDB
Types of Risk management: Delivery level Business level Enterprise (company level)
Business area
Business area
Business area
Enterprise
SalesSalesSales Develop-ment
Develop-ment
Develop-ment
ChangesChangesChanges Opera-tions
Opera-tions
Opera-tions
Monitor
Manage
Assess
Identifiy
EDB
Annual Report 2009
27
Management review
Operational riskWe experience operational disruptions that significantly impact our customers’ operations.
Financial riskFalling markets put pressure on revenues and costs, thus exposing EDB’s leveraged financial position.
Transformational riskOur business continuity preparations for key applica-tion areas may not work and results in lengthy disruptions.
Transformational riskWe are unable to transform our operating model to source globally across the board - and renew our products and services accordingly.
Transformational riskWe fail to sustain our business in the process of transforming and consolidating our consult-ing resources under single brand and organisation.
EDB operates many mission-critical solutions for customers, within increasingly complex operational structures. Our technical components are our customers’ business-critical components.
When market demand drops, as we have experienced re-cently, EDB must adjust its cost base accordingly while main-taining investment needed to deliver market-leading products.
We are expanding our use of global solutions, which by their nature, involve more links between a larger number of individuals or groups. This cre-ates more opportunities for breakdowns to occur in the interfaces between them.
There is a broad and growing customer demand for combin-ed local and global delivery solutions. We are structured appropriately – now the challenge is to execute.
Our One improved EDB initiative will deliver new offerings and solutions within a unified world-wide consulting unit. This means we must combine the skills and organisations of several consult-ing companies, and then transi-tion between the old and new business models, while meeting planned profitability targets.
• Continuous focus on executing and improving basic operational processes
• Inventories of solutions• Careful management of internal and customer interfaces
• Strategically adjusting our cost structure in line with our business
• Keeping key customers confident that we can develop and support business solutions with them
• Using our scale and relationship with leading customers to re-new our products, services and delivery processes
• We have set up a separate business continuity programme to support global sourcing, focusing on redundancy of key components, crisis simulation, preparation and training
• Thorough planning, customer interaction and preparation
• Focus on early migrations, which are more demanding than those exe cuted after the process is stabilised
• Detailed and systematic plans for migrating operations and renewing our products and services
• Executing initiatives to keep our staff and customer-facing teams engaged
How are we mitigating it?Risk scenario
EDB’s most urgent scenarios
Why does it matter?
EDB
Annual Report 2009
28
Management review
EDB delivered on its 2009 commitments to reduce emissions, energy use and waste. We implemented a corporate responsibility performance management system and produced our first GRI-compliant annual CR data report. This leaves us ready to take on further challenges in 2010.
EDB believes that corporate responsibility (CR) is a key element of our mission; delivering more from IT. We support essential IT infrastructure across the Nordic countries. Our innovations generate economic and social value, provide security and enable greater access to information. We aim to meet these objectives while also taking the lead on environmental and social issues such as energy usage, data security and privacy.
Doing this requires a solid CR organisation, metrics and accountability. This year we have completed a two-year long project to establish our formal corporate responsibility processes. We now have CR goals tied to team performance and a CR data reporting system in place. We plan to extend the reporting system to our partially owned subsi-diaries in the near future.
Commitments met in 2009 EDB met its commitments for 2009; to improve our environmental performance and build the founda-tions of a CR process that can support the group’s future objectives. In particular, we established a group wide energy reduction process that cut our energy usage significantly. We also created a struc-ture for engaging clients on Green IT efforts.
This progress gives us much needed momentum to take on our additional challenges. For 2010, we will maintain our focus on Green IT operations, while adding a new emphasis on enabling and inspiring our employees to drive social responsi-bility at EDB. Finally, we have committed to begin publishing reports on our CR performance begin-ning in 2010. Cleaner operations EDB consumes a significant amount of electricity in the process operating our scale data centres that support critical operations, such as the systems that keep Norwegian cash machines and internet banking services available 24 hours a day. In 2009, we were able to reduce energy usage by 924 MWh, equivalent to the amount of power used by 90 Swedish households. We did this by thoroughly reviewing and rethinking our operating practices. For example, we increased our use of virtualisation technology and now reuse waste heat from the computer systems in our data centres to warm our buildings.
Our efforts to operate with minimal impact to the environment resulted in us achieving ISO/IEC 14001 environmental certification for our Swed-
EDB Corporate Responsibility priorities
Corporate responsibility
Sustainable IT servicesdelivered
description
Implement 2 Green IT customer projects
Include energy effici-ency programs in all customer contracts
Achieve ISO 14001 environmental manage-ment certification in Norway
Train all employees in environmental awareness
ish operations in 2009. We are working to qualify for the same certification in Norway by the end of 2010. We will also launch a group-wide employee training module on climate change.
Committed employeesEDB is committed to investing in employees. We aim to build a workplace that attracts – and keeps – the best IT talents, by offering exciting challenges and environment that nurtures collective and individual growth. We revised our performance management and staff development processes over the past 12 months and will launch a new common performance appraisal, staff development and performance incentive system in 2010.
None the less, we acknowledge that 2009 was a challenging year on this front for the IT services sector in general – and our company in particular. The realities of lower market demand forced us to take difficult decisions, which in some cases included reducing our workforce or changing elements of our compensation packages.
We are working to increase employee engagement and satisfaction on many levels. A key input to this is a global employee survey we began in 2009, to measure our organisational capabilities and identify areas for improvement. Last year 86% of our em-ployees participated in the survey. We aim to get a 90% response this year.
EDB has a comprehensive workplace health and safety system in place. We comply with the United Nations International Labour Organisation (ILO) guidelines for occupational safety and health man-agement systems.
A culture of sustainabilityIn 2008 we began the process of embedding a cul-ture of sustainability within our organisation. This included “Reputation”, a mandatory ethics and environmental training program for all employees.
We completed the rollout of this program in 2009. It educates employees by exposing them to mock situations where they can examine the types of dilemmas we must manage.
We have also established a program to make employees more effective when working across cultures. In the program, we educate employees on differences in expectations and communications. We also provide tools, tips and systems for commu-nicating better and working effectively in cross-cultural situations. All our business units will complete the training program by the end of 2010.
Clearer supplier standardsWe recognise our responsibility to make sure that our suppliers meet specific ethical and environ-mental standards. In 2009, EDB implemented several company-wide procedures for measuring and documenting supplier conduct. We defined a supplier code of conduct, which is now included in our standard supplier contract agreement. Finally, we created a Lead Buyer Team program, which makes sure that all business units have the competence necessary to define supplier strategy, assess supplier ethics and follow up agreements and purchases. During 2010, we will extend this program to cover all our purchases.
Deeper social impactEDB aims to contribute to the local and global communities on several levels. The most important is the social and economic impact of our work. We also engage social projects. In Ukraine, for example, we sponsor and provide knowledge for a project to improve the quality of life for young people with Down syndrome and their families. We also sponsor employees each year to work in Peru, improving schools in the native Indian community.
We actively seek opportunities to create social value through our work. For example, we are on the green IT steering group for the Norwegian IT
Management review
EDB
Annual Report 2009
29
18%yearly energy consumption of 90 Swedish households
924MWh
reduction=
EDB environmental performance 2009Highlights
objective result
Lower energy consumption 900 MWh reduction
Percentage of total waste recycled/reused 28%
Green IT customer projects implemented None
ISO 14001 certification in Sweden Completed
Reduce employee air travel 31% reduction
EDB
Annual Report 2009
30
Positive contribution to society
Management review
and Telecom industry association (IKT). We are also committed to the Open Source software move-ment. In 2009, we launched an initiative to open up for public access to our records management solution under an open source licensing framework. We followed this up by launching an effort to help Norwegian public sector organisations work together to develop and use Open Source solutions. In addition our subsidiary Avenir started up an Open Source Lab in Bergen, collaborating with the Bergen Municipality, DnB NOR, NextGenTel and the University of Bergen, to develop and test Open
Source solutions for the Norwegian public and private sector.
Strategic foundation for sustainabilityWe believe that strategic intent is the foundation of corporate responsibility. Implementing strategy in turn depends on having processes to measure, manage and support the effort. Following our efforts over the past two years, we now have a robust CR framework in place that complies with the prin-ciples of the UN Global Compact Initiative.
The EDB corporate management team defines our CR strategy, sets our CR goals and makes decisions on our investments in major community involve-ment projects. We have a corporate responsibility manager who is responsible for coordinating our CR activities. The CR manager reports to a steering committee consisting of our internal represen-ta tives responsible for quality and security, the environment, human resources, business develop-ment and union relations. The committee takes decisions on, evaluates and steers our CR activities. We report overall progress on CR goals to executive management every half-year.
In 2010, we will continue our drive for sustainability at EDB, by setting higher targets and increasing awareness of the issue internally. We will also work to cooperate more closely with external groups focused on increasing the sustainability of IT.
Protecting banking customers from fraud
Thanks to EDB, Nordic consum-ers enjoy a unique international fraud protection system on their banking cards.
ChallengeWe identified an important pat-tern of card fraud, through our experience with fraud prevention. Customers’ banking and credit cards – or information about them – was often stolen while customers were abroad in one country, and then used fraudu-lently elsewhere.
ResponseWe partnered with the Norwe-gian bank Handelsbanken to develop a blocking system that would let their customers dictate where and when their banking cards should be valid.
SolutionWe launched the new service early in 2009. Now, a Norwegian bank customer, for example, can block his or her card from being used outside the country. Yet the person can unlock the card for
use in a specific foreign country just before going there on vaca-tion – and block it again after-wards.
ResultThe system has reduced card fraud. Customers now enjoy all the conveniences of using cards, while avoiding a great deal of risk. Several banks have adopted this solution for their customers’ protection.
EDB Corporate Responsibility framework
Good behaviour
Employees rights and well-being
Corporate humanitarian projects
Environmental strategy
Value chain management
Other relevant activities
Codes of conduct
Educational partnership
Plans for actions
Corporate governance
Communityinvolvement
Environmen- tal practice
Report of the Board of Directors/Annual accountsand notes
EDB
Annual Report 2009
32
Board of Directors’
report
Report of the Board of Directors2009
The Nordic IT services market showed a marked decline in 2009 due to the pronounced global economic downturn. The IT services market was affect-ed by weaker demand and downward pressure on prices, but des pite this some areas of the market showed growth. EDB strengthened its position as the market leader for bank and finance solutions. EDB implemented an improvement program to manage the effect of weaker demand and strengthen the company’s competitive position in a market affected by challenging economic conditions.
Global economic conditions deteriorated markedly over the course of 2009, causing a decline in the Nordic IT services market in which EDB has a size-able position. The total market showed a decline in the order of 5% to NOK 126 billion. Among EDB’s primary markets, the sharpest decline was seen in Sweden and in the consulting segment across the Nordic countries, with demand for consulting from industrial companies particularly badly affected.
EDB reports revenue of NOK 7.5 billion in 2009, which represents a decline in line with the overall market of 5%. The Bank & Finance unit in the Solu-tions business area achieved growth of 7%, which demonstrates that the company has strengthened its position as the market leader in this area.
EDB announced the launch of an improvement program in the first quarter of 2009. The program was implemented over the course of the year, and helped to reduce annual costs by NOK 400 million. EDB reports consolidated operating profit before amortisation and write-downs of intangible assets
(EBITA) for 2009 of NOK 603 million, equivalent to a margin of 8.1%.
EDB agreed contract renewals with a significant proportion of its customers over the course of 2009. In addition, the company signed a number of new contracts, particularly in the Swedish market, and by the close of the year EDB’s order backlog amount-ed to NOK 12.6 billion.
The group had 5,991 employees at 31 December 2009, of which 48% were employed in Norway and 52% were employed in international operations.
Key figures for the groupEDB reports revenue of NOK 7,492 million in 2009, which represents a decline of 5% in total. The group generated 31% of its revenue outside Norway in 2009, a slight increase on 2008. EDB’s activities in Sweden accounted for NOK 1,600 million of group revenue.
In order to ensure consistent reporting to the market that corresponds with the way in which the group is
EDB
Annual Report 2009
33
Board of Directors’
report
organised, the Board resolved that EDB should report on the basis of three business areas with effect from 2009. IT Operations accounts for 56% of group reve-nue, Application Services 25% and Solutions 19%. The company has prepared pro forma comparable figures for 2008 for these three business areas.
Consolidated operating profit before depreciation and write-down of intangible assets (EBITA) was NOK 954 million in 2009, compared to NOK 670 million in 2008. EBITA margin was 8.1% in 2009, compared to 9.2% in the previous year.
The group’s operating profit for 2009 after amortisa-tion and write-downs of intangible assets was NOK 454 million, compared to NOK 517 million in 2008. Net financial expense was NOK 162 million in 2009, compared to NOK 225 million in 2008, reflecting the effect of lower interest rates. Consolidated profit before tax was NOK 292 million in 2009, compared to NOK 291 million for 2008. Consolidated profit for the year was NOK 134 million 2009, compared to NOK 209 million in 2008. The group generated cash from operations before non-recurring items of NOK 582 million in 2009, compared to NOK 716 million in 2008. The group’s liquidity reserves totalled NOK 1,376 million at 31 December 2009, including undrawn committed credit facilities of NOK 601 million. The group’s net interest-bearing liabilities totalled NOK 2,695 million at the end of 2009, compared to NOK 2,963 million at the end of 2008.
The group’s equity at 31 December 2009 was NOK 2,221 million, representing an equity ratio of 28%. At the same time in 2008, the group’s equity was NOK 2,153 million, representing an equity ratio of 25%. The distributable reserves of the parent company, EDB Business Partner ASA, amounted to NOK 799 million at 31 December 2009.
EDB seeks to reduce its exposure to currency risk through matching foreign currency borrowings. Information on the group’s procedures for managing other risks can be found in the separate section on Corporate Governance. The Board confirms that the going concern assumption is applicable, cf. Section 3–3 of the Norwegian Accounting Act. The results for 2009, the group’s business strategy and its cur-rent budgets and financing provide the basis for the going concern assumption.
As a subsidiary of Telenor, EDB was previously sub-ject to the Sarbanes Oxley Act (SOX) since Telenor was listed on NASDAQ. The Board of EDB decided, in connection with Telenor’s delisting, that the com-pany would adopt a policy of continuing to comply to all practical intents with the requirements of the Sarbanes Oxley Act. For further information, see the separate section on Corporate Governance.
EDB intensified its work on risk management in 2009,both at the group level and within each business area.The group has procedures for regular reporting and analysis of risk exposure. Great importance is attached to measures that reduce the company’s overall risk exposure. The Board receives regular reports of risk
Bjarne Aamodt (64)ChairmanSenior Vice President, Telenor ASAPrevious employment: Group CEO Alcatel STK ASA, Deputy Managing Director of Det Norske Veritas. Educa-tion: Engineering graduate of the Norwegian University of Science and Technology (1974). Other board appoint-ments: Chairman and board member of a number of Telenor’s companies, Chairman of Statnett SF, Chairman of the Supervisory Board of Nordea Bank Norge ASA. Member of EDB’s board since June 2002. Participation board meetings in 2009: 8 of 8. Shares in EDB: 10 000.
EDB
Annual Report 2009
34
Board of Directors’
report
exposure as part of its work. Reference is made to the more detailed information on risk management elsewhere in the annual report, and on the account provided of the company’s most important areas of risk exposure and the measures implemented to reduce this exposure.
Improvement programEDB launched a cost reduction program in the first quarter of 2009 to reduce costs by NOK 400 million, equivalent to 6% of the cost base in 2008. EDB implemented this program to strengthen the group’s competitive position at a time of challeng-ing economic conditions. The program started to produce results in the second quarter of 2009, and is expected to have its full annual effect from 2010 onwards. If market conditions make it necessary, the Board will implement further cost saving measures in order to ensure that the company maintains satis-factory profitability.
Non-recurring effects associated with the cost im-provement program amounted to NOK 16 million in 2009, made up of the following accounting items:
The defined benefit pension schemes operated for part of the Norwegian activities were terminated with effect from 1 September 2009, resulting in a positive non-recurring effect of NOK 568 million due to the consequent reduction in the group’s capitalised pension liabilities. A number of employees and trade unions have challenged whether EDB had the right to unilaterally decide to make changes to the pension arrangements, and the company has
received formal notice of legal proceedings. See Note 4 to the accounts for further information.
As part of the program of work to build larger and more robust technical environments with a cost effective structure, provisions for restructuring costs totalling NOK 152 million were recognized, including the closure of six locations and head-count reductions of almost 100 employees, as well as provisions in respect of losses on receivables and contract losses in the IT Operations business area.
EDB entered into a strategic outsourcing agreement with Strålfors in respect of the company’s printing ope rations. The agreement was approved by the competition authorities, and came into effect as of 1 September 2009. Outsourcing the group’s printing pro-duction caused an accounting loss of NOK 4 million, but the new arrangement will help to improve profit margins in the IT Operations business area over time.
EDB sold two smaller subsidiaries that were part of the Swedish activities of Application Services, but lay outside the group’s core business. This caused an accounting loss of NOK 58 million, principally in respect of goodwill.
In accordance with the current accounting standards, EDB routinely evaluates the book value of intangible assets. As part of this exercise, the Board decided on 28 October 2009 to write down goodwill related to the Application Services business area by NOK 218 million. In addition, the Board decided to write down the capitalised book value of software developed
Adine Grate Axen (48)Shareholder-elected member of the BoardAdviser to the Swedish government as a member of the com-mission for the sale of shares in companies with state ownership Previous employment: Director and former member of the Management Group at Investor AB. Some 20 years’ experi-ence of the finance industry. Education: Masters degree from the Stockholm School of Economics and the Harvard Advanced Management Program. Other board appoint-ments: Extensive experience of appointments on the boards of listed and unlisted companies, including 3 Scandinavia, Carnegie Investment Bank and NASADAQ OMX. Member of the Swedish Industry and Commerce Stock Exchange Com-mittee. Member of EDB’s board since May 2009. Participation board meetings in 2009: 4 of 4. Shares in EDB: 0.
Anne-Lise Aukner (53)Shareholder-elected member of the BoardManaging Director, Nexans Norway AS Previous employment: Corporate attorney at Alcatel STK ASA, Vice President of Gjensidige Forsikring responsible for the company’s total claims settlement activity. Education: Qualified lawyer. Other board appointments: Member of the board in Kongsberg Gruppen ASA, NHO, Intpow, Aukner Holding AS and Norsk Industri in addition to a number of internal appointments with group companies. Member of EDB’s board since May 2006. Participation board meetings in 2009: 8 of 8. Shares in EDB: 0
18%EDB launched an improve-
ment program in the first
quarter of 2009 to reduce cost
by NOK 400 million, equiva-lent to 6% of the cost base
in 2008.
6%
EDB
Annual Report 2009
35
Board of Directors’
report
in-house by NOK 120 million. This write-down relates to EDB’s in-house development of SAP-based solutions for the Norwegian public sector.
IT Operations business areaIT Operations delivers operating services for the entire value chain, and offers broadly based in-depth expertise for global industrial companies, including companies in the oil and gas sector. The business area has extensive experience as an inter-national supplier. IT Operations comprises network services, operation of infrastructure and applica-tions, security services and user support, as well as electronic business support services such as invoice management, payment services and messaging. The IT Operations business area operates from locations in Norway, Sweden, the Ukraine and India, and also has a presence in other countries around the world where its customers have operations.
IT Operations reported total operating revenue of NOK 4,380 million for 2009, compared to proforma NOK 4,577 million for 2008. Operating profit before depreciation of intangible assets (EBITA) was NOK 365 million in 2009, compared to proforma NOK 409 million in 2008. EBITA margin was 8.3%, compared to 8.9% in 2008. Operational investment spending to-talled NOK 192 million in 2009, compared to NOK 281 million in 2008. IT Operations had an order backlog of NOK 9,235 million at the start of 2010. The comparable figures reported for operating revenue are affected by the extraordinary level of revenue generated in 2008 by the former company IS Partner in respect of the demerger of Yara and the StatoilHydro merger.
In February 2009, EDB cancelled a contract with the Oslo Municipality for the supply of applications operating services because of disagreement between the parties on commercial matters. Based on both internal and external evaluation, EDB believes that the company has a valid claim for remuneration in respect of the services supplied that are the subject of disagreement between the parties, and awaits the result of future negotiations in this respect. Over the course of 2009, IT Operations renegoti-ated software and hard ware contracts with its major suppliers. The new contracts have secured lower purchasing costs for EDB in the future, and help to offset the general downward pressure on prices for outsourcing services. In addition, the business area achieved a marked reduction in spending on hired-in temporary consultants in accordance with the group’s cost improvement program.
EDB has carried out a major 18-month exercise to up grade the company’s network infrastructure. This work was completed in the first half of 2009, and has de-livered both greater operational reliability for customers and improvements in network management for EDB.
In response to pressure on prices and increasing international competition, the business area has established a scalable operations centre in Kiev that complements the company’s Norwegian operations centres and has taken over some operations func-tions. In addition, IT Operations has expanded the business area’s operations centre in Bangalore, which provides operating services including SAP hosting.
Ellen Christine Orvin Raaholt (54)Shareholder-elected member of the BoardExecutive Vice President Human Resources Kongsberg Protech SystemsPrevious employment: A number of senior management positions, including EVP–HR at Kongsberg Gruppen, HR Director at ErgoGroup, Project Manager, Senior Consultant and Sales Manager at IBM. Education: Attorney-at-law. Other board appointments: Member of the board of NHO Buskerud and of the Kongsberg Chamber of Commerce. Member of EDB’s board since May 2009. Participation board meetings in 2009: 4 of 4. Shares in EDB: 0.
Anders Brandt (49)Shareholder-elected member of the BoardPartner in IdeKapital ASPrevious employment: Founder of several companies since 1987, having launched and subsequently sold a number of companies in the areas of technology, content and marketing. Education: Copywriter. Other board appointments: Member of the boards of Viken Fibernett, ONE Holding, Best Consulting, Telepress and others. Member of EDB’s board since May 2008. Participation board meetings in 2009: 8 of 8. Shares in EDB: 10 000.
EDB
Annual Report 2009
36
Board of Directors’
report
IT Operations agreed renewals of a number of major contracts in 2009, including a contract with DnB NOR representing total contract value of NOK 3 billion over the next five years. The DnB NOR contract provides for IT Operations to continue its deliveries of core operating services and infrastructure, which include: operating services for internet banking, services for core bank systems, payment service solutions and other key banking systems applications. The new contract also now includes service deliveries such as distribution and printing, as well as a Basel II compli-ant credit processing solution for Nordlandsbanken.
During the course of 2009, IT Operations signed a number of new contracts in Sweden with customers including Posten AB, Storstockholms Lokaltrafik and CSN. Take-on and conversion work for these new customers was carried out throughout 2009, and the business area has started 2010 with a higher level of business volume in the Swedish market. On the basis of contract renewals and new contracts, IT Opera-tions expects to maintain its position as the leading Nordic supplier of outsourcing services. IT Opera-tions reorganised its sales function at the start of 2010 in order to focus more clearly on Nordic customers and market segments that offer potential for growth.
IT Operations will continue its work on integrating the operating services division of IS Partner in 2010 with the aim of realising further synergy benefits as previously communicated. In addition, the intro-duction of new, standardised operating services for customers will provide the basis for cost benefits that will offset the price pressures seen for certain
categories of operating services. The business area will also continue its work on using global sourcing as an integrated part of the services it delivers in order to strengthen its competitive position.
Solutions business areaThe Solutions business area offers a complete range of software and consulting services for the Nordic banking and finance sector. The business area also serves the Norwegian public sector with solutions for Norwegian municipalities, health authorities and national public sector entities. In Sweden, the business area supplies document handling solutions for the public sector.
Solutions reported operating revenue of NOK 1,507 million in 2009, compared to NOK 1,427 million in 2008. Operating profit before depreciation of intan-gible assets (EBITA) was NOK 198 million in 2009, compared to NOK 207 million in 2008. EBITA mar-gin was 13.1%, compared to 14.5% in 2008. Opera-tional investment spending totalled NOK 5 million in 2009, compared to NOK 12 million in 2008. The business area had an order backlog of NOK 2,750 million at the start of 2010, compared to NOK 2,378 million at the start of 2009.
The Bank and Finance unit accounted for 88% of the business area’s operating revenues in 2009. A number of new contracts, as well as contract renewals and additions, were signed with a range of customers, which helped to increase operating revenues by 7%. The unit’s market-leading position is based on innovative solutions with short time-to-
Stig Karlsson (57)Shareholder-elected member of the Board Industrial Advisor, Ratos ABPrevious employment: Managing Director of Atle Tjänste & Handel AB, Investment Director at Ratos AB. Education: Business economics graduate from Örebro University. Other board appointments: Chairman of the board of Diab Group AB, Haglöfs AB, member of the board of Lindab AB, HL Display AB and Lagerstedt & Krantz AB. Member of EDB’s board since May 2009. Participation board meet-ings in 2009: 4 of 4. Shares in EDB: 0.
Wenche Brateng (37)Employee-elected member of the Board Systems architectEducation: Engineering graduate of the Norwegian University of Science and Technology (1995). Member of EDB’s board since September 2007. Participation board meetings in 2009: 8 of 8. Shares in EDB: 2 857.
EDB
Annual Report 2009 Board of Directors’
report
37
market, a competitive portfolio of solutions and a flexible pricing model based on Software as a Service (SaaS). New regulatory requirements in the financial markets have caused increased demand from banks, and to meet this demand EDB has delivered a range of solutions. In 2009, Bank and Finance launched a new process-adapted credit solution known as EDB Kreditt, which delivers low case management costs and greater control for banks. The solution was developed in collaboration with SpareBank 1, and demonstrates the value of the strategic collaboration established with SpareBank 1 in 2007.
The Bank and Finance unit sees continuing oppor-tunities for growth in the Nordic market, both by attracting new customers and by launching new products and services, including solutions to reduce card fraud, a new generation of SMS banking solu-tions, solutions for electronic signatures and iPhone applications. In addition, the business unit is focus-ing on the UK market for sales of delivery channel solutions and card service solutions for building societies and the private banking sector.
The Public Sector unit reported a 3% increase in operating revenues in 2009, which should be seen in the context of the absence of election-related rev-enue in the year and the transition to the new public sector solution suite. The Public Sector unit has now completed the development of a comprehensive and platform-independent solutions suite, EDB Public Sector, for municipalities and health sector authori-ties. EDB has renewed the company’s solutions in this area with new functionality based on standard
international components from SAP. The unit sup-plies more than 300 Norwegian municipalities, of which 40–50 have started work on the transition to the new product suite. In addition, the Public Sec-tor unit offers a range of solutions for other areas of public administration, and as part of this EDB won a new contract in 2009 to develop and operate Budmod, which is the system used to support the preparation of the Norwegian national budget. This contract (including renewal options) runs until 2014.
Application Services business areaWith effect from 2009, all the EDB group’s consult-ing services were brought together in a single busi-ness area – Application Services. This meant that the consulting division of IS Partner became part of Application Services. In order to ensure an optimal balance between Nordic and global resources in customer deliveries, the group’s activities in India and the Ukraine became part of Application Serv-ices with effect from 2009.
This makes Application Services one of the largest Nordic consulting businesses, with as many as 2,800 consultants offering extensive expertise in SAP, Microsoft, Oracle and IBM technology and in project management, systems development and systems inte-gration, as well as in customising and implementing standard systems. The business area operates from a number of locations in Norway, Sweden, Denmark and Belgium, as well as India and the Ukraine.
John Ingvar Brekke (51)Employee-elected member of the BoardBusiness ManagerEducation: Qualified business economist. Member of EDB’s board since November 2002. Participation board meetings in 2009: 7 of 8. Shares in EDB: 1 292.
Eirik Bornø (48)Employee-elected member of the BoardChief ConsultantEducation: Further education college. Other board ap-pointments: Regular meeting deputy board member in Negotias Forbundsstyre. Member of EDB’s board since November 2005. Participation board meetings in 2009: 6 of 8. Shares in EDB: 0.
EBITA margin within the Solutions
business area.
13.1%
EDB
Annual Report 2009
38
Board of Directors’
report
Application Services reported total operating rev-enue of NOK 1,963 million in 2009 compared to pro forma NOK 2,241 million in 2008. Operating profit before depreciation of intangible assets (EBITA) was NOK 145 million in 2009 compared to pro forma NOK 198 million in 2008. EBITA margin was 7.4% in 2009, compared to NOK 8.8% in 2008. Opera tio-nal investment spending totalled NOK 10 million in 2009, compared to NOK 12 million in 2008. The business area had an order backlog of NOK 634 million at the start of 2010.
The consulting market was the segment of the IT services market most affected by the international economic downturn in 2009. This caused both downward pressure on prices and lower billable uti-lisation rates for the business area’s consultants. The Application Services business area was principally affected by weaker demand in the Swedish market and from export-oriented industrial companies.
The business area took steps to reduce its costs in 2009, including making less use of subcontractors. The business area also disposed of two smaller con-sulting units in Sweden that operate on the fringe of the business area’s core activities and generated only weak profitability. EDB has a structure in place to incentivise cross-selling between business areas, and sales by Application Services to existing customers of the group grew strongly in 2009. This included an expanded consulting agreement with Green Cargo, and the business area also signed a contract with DnB NOR to deliver Internet self-service solutions. Application Services also renegotiated a long-term consulting contract with Statoil, which establishes EDB as the customer’s preferred supplier of consult-ants for SAP and industrial IT for the term of the contract. Lower demand from markets exposed to weaker economic conditions was to some extent offset by growth in sales to the public sector.
EDB has defined a policy for resource use whereby a proportion of the services delivered by Application Services will be sourced from hired-in temporary consultants, as well as from the group’s own busi-nesses in the Ukraine and India. The group’s resource management committee keeps the mix of in-house and external consultants under review, and at times when Application Services has spare capacity, the committee takes steps to reduce the use of external consultants for EDB projects. The business area anticipates that its use of external consultants will continue to decrease over the course of 2010.
Application Services monitors its capacity utilisa-tion on a weekly basis, and it uses the company’s
CRM system to update its sales forecasts so that it can quickly adapt its resource situation to changes in the structure of demand. Over the course of the first half of 2010, the subsidiary companies that make up the Application Services business area will be merged in order to ensure a more cost-effective structure and a clearer go-to-market model. This means that by the start of the second quarter of 2010, the Application Services companies will be an inte-grated part of the EDB brand.
Organisation, working conditions and the external environment EDB has subsidiaries in 13 countries, and is repre-sented in a further 55 countries through its interna-tional delivery model that is based on having a local presence wherever its customers have production facilities. The company’s head office is in Oslo, and 2,875 employees work in Norway. In addition, the company has 1,480 employees in Sweden, and a total of 1,502 employees in the Ukraine and India. In addition, the company is represented in Singapore, and in a number of locations in Continental Europe and the USA. This means that EDB offers global delivery capacity for IT operating services, with 24/7 operational capacity provided by the compa-ny’s centres in Porsgrunn, Tampa and Singapore.
With effect from 2009, EDB has simplified the com pany’s organisational structure by reducing the number of business areas from five to three: IT Operations, Solutions and Application Services. In 2009, EDB merged the companies EDB Business Partner Norge AS and IS Partner AS as part of a pro-gram of work to realise synergies, reduce costs and ensure optimal utilisation of investment spending, as well as implementing common work processes and systems for all of EDB’s IT operating services activities. The merger of these companies was carried out with accounting effect from 1 January 2009 and with legal effect from 1 April 2009.
With effect from 2009, all the EDB group’s consulting services were brought together in a single business area – Application Services. This meant that the con-sulting division of IS Partner became part of Applica-tion Services. In order to ensure an optimal balance between Nordic and global resources in customer deliveries, the group’s activities in India and the Ukraine also became part of Application Services.
An important part of the work carried out to create a unified, committed and focused organisation has involved embedding a good understanding of the company’s business concept, strategic vision and corporate values. In view of the organisational
EDB
Annual Report 2009
39
Board of Directors’
report
changes that have been carried out in the Application Services business area, this task received special atten-tion in 2009. This work will continue in 2010.
EDB has a clearly defined set of focus customers, and concentrates on delivering the full range of the group’s services to these customers by co-ordinating its sales effort and customer follow-up across the group’s business areas. Sales and follow-up for other customers remains the responsibility of the approp-riate industry vertical. Business development is now organised as a central group function.
At the close of 2009, the group had 5,991 employ-ees, compared to 6,175 employees at the close of 2008. The sale of two small consulting businesses in Sweden which were on the fringe of the com-pany’s core activities, together with the closure of the in-house printing function, caused a reduction in headcount of approximately 90 employees. As a result of weak demand, the company also reduced the number of employees in Norway by around 100 individuals. The company also significantly reduced the number of hired-in temporary consult-ants over the course of 2009. The extent to which the company uses temporary consultants on customer projects will vary from time to time. EDB aims to continue to restrict the number of hired-in consultants to a low level in 2010.
EDB is committed to making best use of the com-pany’s overall resources and facilitating mobility among its managers as well as among its employ-ees. The company’s resource management commit-tee is responsible for monitoring the use of hired-in temporary consultants and ensuring that wherever possible the company’s own employees will be given priority when assignments are allocated. The resource management committee is chaired by the Executive Vice President – HR, who works with the Executive Vice Presidents responsible for the business areas to deal with specific resource management issues.
The company places great weight on the annual procedure for establishing personal development and objectives plans for every employee in the group. The performance of all employees is evalu-ated at the end of the year, and this provides the foundation for continuing focus on good perform-ance and personal development, as well as playing a role in any individual remuneration appraisal. The group carries out employee surveys twice a year to measure employee satisfaction at the indi-vidual departmental level and for each business area. The results of these surveys form the basis for short-term and long-term measures.
In the same way, the group carries out six-monthly surveys of customer satisfaction and company pro-file that provide feedback on performance relative to defined target parameters. The results of these surveys are analysed both at the group level and at the business area level. Appropriate measures are implemented as required. Bonus payments for man-agers, salespersons and other key individuals are based in part on the results of these surveys.
The Board introduced a share purchase program for all permanent employees in 2008, and almost 1,200 employees bought shares in the company in February 2009. Further 800 employees bought shares in the company in February 2010. All employees eligible to participate are entitled to purchase shares for up to 4% of their fixed salary. Employees can then earn bonus shares after two years, subject to remaining with the company. The number of bonus shares al-located to an individual is based on a combination of the company’s performance and the individual’s performance. The maximum allocation is four bonus shares for every four shares purchased, and everyone entitled to bonus shares will receive at a minimum one bonus share for every four shares purchased.
EDB aims to carry out annual management apprais-als in order to build a complete overview of the com-pany’s management capacity. The appraisal process provides important information for the company’s management development programs. The process is also used to identify management potential, with a particular focus on encouraging more female em-ployees to take on management roles. The manage-ment appraisal process was carried out in selected business areas in 2009. EDB carried out an extensive management development program in coaching-based management in 2008 and 2009, with particular focus on improving performance. This program will continue in 2010 for newly appointed managers, and EDB will continue to pay great attention to manage-ment performance and coaching-based management by adding new modules to the existing program. In addition, the group holds management meetings for all managers twice a year with a particular focus on the group’s business priorities.
Female staff accounted for 36% of total employees in 2009, unchanged from 2008. The proportion of management jobs held by women was 20% in 2009, which was in line with 2008. Increasing the propor-tion of women in management jobs is a priority throughout the group. EDB is committed to more equal gender representation throughout the group, and this includes using the management appraisal
employees bought shares
in EDB in February 2009.
Further 800 employees
bought shares in February
2010.
1200
EDB
Annual Report 2009
40
Board of Directors’
report
process to focus in particular on identifying potential female management talent.
Absence due to sickness for the group in 2009 was 3.4%, as compared to 3.0% in 2008. One (1) work accident was reported during the course of the year. EDB operates a “More inclusive working life” agreement with the Norwegian Labour and Wel-fare Administration’s (NAV) Working Life Centre to strengthen its focus on this important area. EDB is actively committed to preventing and reducing absence due to sickness, through training its manag-ers and monitoring employees with sickness-related absence. The company enjoys good co-operation with the company health service and NAV.
The average salary levels of EDB employees are af-fected by their area of responsibility, age and length of service. A survey will be carried out as part of the 2010 annual salary settlement to identify any salary differentials between male and female employees.
EDB worked throughout 2009 on unifying and co-ordinating the company’s commitment to corporate responsibility (CR), with the aim of ensuring com-pliance in all areas. Particular emphasis was given to initiatives on environmental responsibility, with a focus on the entire value chain including suppli-ers and customers. Further information on CR and environmental issues can be found on page 28 of this annual report and on the company’s website.
EDB operates guidelines on business ethics that ap-ply to all its employees. These guidelines, on which EDB’s corporate values are based, are intended to help the group’s employees make the right decisions on issues they may encounter in their work. EDB is committed to maintaining a high ethical standard in all aspects of the group’s work and responsibil-ity. Through its guidelines on business ethics, EDB focuses on fostering a working environment that is free from discrimination, whether on grounds of religion, colour, gender, sexual orientation, age, na-tional or ethnic origin or disability. In addition, EDB emphasises the role its employees play in ensuring that the working environment is free of bullying, personal abuse, harassment or other unacceptable behaviour. EDB does not tolerate conduct that other employees may experience as degrading or threaten-ing. The company ensures that employees focus on these issues through its work on fostering appropriate conduct, which includes the ‘Reputation’ e-training program that is compulsory for all employees.
CEO Endre Rangnes resigned from the company with effect from 1 January 2010. The Board immedi-
ately started the process of recruiting a new CEO for EDB. In the interim, the Board appointed John-Arne Haugerud as the acting CEO.
Corporate GovernanceThe company is committed to ensuring that its cor-porate governance policies and practices follow the recommendations set out in the ‘Norwegian Code of Practice for Corporate Governance’. The group has updated its internal policies and guidelines, with effect from 2010, in order to comply with the latest edition of the Code published on 21 October 2009. The Board has appointed a Compensation Commit-tee and an Audit Committee to support its work and responsibility in these areas in a proactive and more detailed manner, and these committees report to the Board on their respective areas.
EDB has appointed a compliance officer at group level, who is responsible for supervising compliance with the company’s guidelines on business ethics. As part of a program of work to ensure understand-ing and awareness of the guidelines on business eth-ics, all employees completed an e-training program in 2008, and a new version of the program is to be launched that will similarly be completed by all employees over the course of 2010. The company has also implemented procedures to ensure that all new employees complete the same e-training program. EDB has made arrangements with an independent law firm to make it possible for employees of the group to report to the Board any potential con-cerns they might have about serious misbehaviour or illegal actions in a manner that ensures their anonymity in respect of the company’s manage-ment (‘whistleblowers’). Any matters reported to the law firm are handled in accordance with a policy approved by the Board. Reference is also made to the separate section on Corporate Governance in the annual report.
Future prospectsThe Nordic IT services market showed a marked decline in 2009 due to reduced demand, resulting in pressure on prices. However, some areas of the IT solutions market showed growth, and EDB strength-ened its position in the bank and finance market.
At the start of 2010, there is still reluctance with res-pect to IT investments. EDB is experiencing growth in service areas where standardisation of IT infra-structure and automation of work processes is part of cost-saving programs. This is reflected by lowerdemand for development projects, which is havinga negative effect on EDB’s revenue. The market research companies IDC and Gartner are expecting
EDB
Annual Report 2009
41
Board of Directors’
report
Oslo, 23 March 2010The Board of Directors of EDB Business Partner ASA
Bjarne AamodtChairman of the Board
Adine Grate AxenShareholder-elected member
Anders BrandtShareholder-elected member
Ellen Christine Orvin RaaholtShareholder-elected member
Anne-Lise AuknerShareholder-elected member
Stig KarlssonShareholder-elected member
Wenche BratengEmployee-elected member
John Ingvar Brekke Employee-elected member
Eirik Bornø Employee-elected member
John-Arne Haugerud Acting Chief Executive Officer
an improving trend in the IT services market during 2010, with the prospect of growth in the second half of the year. In view of the continuing uncertain market situation, the Board of EDB is maintaining a strong focus on cost reduction measures to secure the company’s competitiveness, including measures to simplify value chains and acceleration of the implementation of global sourcing.
The company has started 2010 by reinforcing its sales focus on prioritised areas, and has launched a program of work to simplify its marketing message by establishing a revised brand profile for the group. The Board expects that with the measures taken EDB can obtain satisfactory profitability relative to the market position.
Shareholder mattersThe largest single shareholder in EDB Business Part-ner is Telenor Business Partner Invest AS, which owns 51.3% of the company’s share capital. Foreign shareholders held 7.8% of the company at the close of 2009. Otherwise, Norwegian institutional investors dominate the balance of the ownership structure. Further details can be found in note 16 to the consolidated accounts on page 73. The company had 3,160 shareholders at 31 December 2009.
In connection with the group’s share option scheme for employees, options over 1,090,000 shares were outstanding at 31 December 2009. As a result of the Norwegian government’s statement on the state’s role and ownership interest in Norwegian compa-
nies, the Annual General Meeting held on 9 May 2007 resolved that no further share options should be granted, but that existing option agreements can be completed. The accrued portion of the value of the options granted, including calculated employer’s social security contributions on the benefit, repre-sented a charge of NOK 1 million to profit and loss in 2009. This amount was allocated between the parent company and the business areas.
Due to the uncertain conditions in the financial markets and the company’s capital structure at the close of 2009, the Board has resolved to propose to the Annual General Meeting that no dividend should be paid for the 2009 financial year.
Allocation of the result for the yearThe parent company recorded a net profit of NOK 105 million for 2009, which is allocated to other equity.
Statement by the Board of Directors and the Chief Executive OfficerWe hereby confirm that, to the best of our know-ledge, the annual accounts for the period 1 January 2009 to 31 December 2009 have been prepared in accordance with IFRS and that the information in the Directors’ Annual Report gives a true and fair view of the company and the group’s assets, liabili-ties, financial condition and earnings as a whole, and that the report also gives a true and fair view of the information mentioned in Section 5–6, fourth paragraph, of the Securities Trading Act.
EDB
Annual Report 2009
42
Financial Accounts
Group
Profit and loss account Group1 January – 31 December
(nok million) note 2009 2008 2007Operating revenue 7 491.7 7 870.9 6 354.1 Total operating revenue 2 7 491.7 7 870.9 6 354.1
Cost of goods sold 6 2 280.1 2 387.7 1 781.8 Wages and salaries 3,4,5 2 993.0 3 366.4 2 674.3 Depreciation of operating assets 11,20 250.6 296.0 291.1 Write-down of operating assets 11 3.8 – –Loss from sale of business 1 62.0 6.3 –Other operating costs 6 948.7 1 144.3 963.3 Total operating costs 6 538.2 7 200.7 5 710.5
Operating profit before depreciation and write-down of intangible assets 953.5 670.2 643.6
Depreciation of intangible assets 10 161.5 153.4 96,1 Write-down of intangible assets 10 338.2 – –Operating profit 453.8 516.8 547.5
Share of profit/loss in associated companies 12 – -0.2 -2.2 Financial income 7 21.3 25.2 7.6 Financial expense 7 -182.9 -250.4 -128.6 Net financial items -161.6 -225.4 -123.2
Profit before tax 292.2 291.4 424.3
Tax on profit 8 -158.4 -82,4 -121.0 Profit for the year 133.8 209.0 303.3
Comprehensive incomeShare option scheme employee 1.1 3.7 6.7 Cash flow hedges -22.0 -63.5 1.9 Currency translation differences -40.0 26.9 -14.3 Total comprehensive income -60.9 -32.9 -5.7
Total profit for the year 72.9 176.1 297.6
WhereofMajority interests 66.5 168.0 294.4 Minority interests 6.4 8.1 3.2
Earnings per share (NOK) 9 1.35 2.18 3.32 Diluted earnings per share (NOK) 9 1.35 2.18 3.32
EDB
Annual Report 2009
43
Financial Accounts
Group
Statement of financial position GroupPer 31 December
(nok million) note 2009 2008 2007Fixed assets Deferred tax asset 8 4.8 28.7 3.8 Goodwill 10 4 014.0 4 465.3 3 378.7 Other intangible assets 10 481.1 606.4 400.8 Total intangible assets 4 499.9 5 100.4 3 783.3
Land, buildings and other real estate 11 52.0 58.0 67.9 Machinery, equipment and fixtures 11 615,5 662.2 541.0 Financial lease 20 121.8 155.5 – Total tangible assets 789.3 875.7 608.9
Investments in associated companies 12 – – 2.9 Other shareholdings 1.2 1.3 1.3 Non-current receivables 21.2 24.6 5.3 Total non-current financial assets 22.4 25.9 9.5 Total fixed assets 5 311.6 6 002.0 4 401.7
Current assets Inventories 10.0 16.9 16.0 Accounts receivable 13 957.2 1 159.9 932.9 Other current receivables 14,19 825.6 709.9 552.3 Total receivables 1 792.9 1 886.7 1 501.2 Bank deposits 15 773.2 912.1 480.2 Total current assets 2 566.0 2 798.8 1 981.4 Total assets 7 877.7 8 800.8 6 383.1
Equity Share capital 16 160.0 160.0 160.0 Own shares 16 -2.4 -1.9 -1.9 Share premium 34.6 38.9 38.9 Other equity 1 992.2 1 925.7 1 866.1 Total equity 2 184.4 2 122.7 2 063.1
Minority interests 36.9 30.5 22.4 Total equity and minority interests 2 221.3 2 153.2 2 085.5
Liabilities Deferred tax 8 118.4 68.9 11.6 Pension liabilities 4 234.5 790.8 498.4 Other provisions for liabilities 19 46.8 4.9 5.6 Total provision for liabilities 399.7 864.6 515.6
Non-current interest bearing liabilities 17,20 2 681.8 3 693.3 2 292.1 Non-current non-interest bearing liabilities 19 48.6 114.1 39.8 Total non-current liabilities 2 730.4 3 807.4 2 331.9
Accounts payable 525.3 457.0 448.2 Tax payable 8 67.7 67.2 57.4 Deductions and duties payable 605.2 653.2 498.8 Other current liabilities 17,18,19,20 1 328.1 798.2 445.7 Total current liabilities 2 526.3 1 975.6 1 450.1 Total liabilities 5 656.4 6 647.6 4 297.6 Total equity and liabilities 7 877.7 8 800.8 6 383.1
Oslo, 23 March 2010The Board of Directors of Business Partner ASA
Bjarne AamodtChairman of the Board
Adine Grate Axen Anders BrandtAnne-Lise AuknerStig Karlsson
Wenche BratengEmployee-elected member
John Ingvar BrekkeEmployee-elected member
Eirik BornøEmployee-elected member
John-Arne HaugerudActing Chief Executive Officer
Ellen Christine Orvin Raaholt
EDB
Annual Report 2009
44
Financial Accounts
Group
Statement of cash flows Group1 January – 31 December
(nok million) note 2009 2008 2007Cash from/to operationsProfit before tax 292.2 291.4 424.3 Gain/loss on sale of fixed assets 62.1 6.6 1.8 Share of profit/loss in subsidiaries/associated companies – 0.2 2.2 Tax paid in the period -72.6 -94.2 -123.8 Depreciation/write-downs 10,11,20 754.1 449.4 387.2 Interest income/- expenses 161.6 217.3 119.8 Paid interests -182.2 -206.5 -123.7 Difference between pension cost and payments -534.3 72.9 -52.3 Change in inventories, accounts receivable and accounts payable 215.0 72.8 236.7 Change in other accruals -113.5 -93.8 -164.8Net cash flow from operations 582.4 716.1 707.4
Cash from/to investmentsInvestment in fixed operating assets 10 -213.8 -329.2 -245.5 Investment in in-house developed software 11 -160.8 -182.7 -132.3 Sale of fixed operating assets (sales proceeds) 21.9 30.4 80.8 Investment in group companies 1 -77.7 -1 032.9 -459.6 Sale of group companies 1 56.4 2.8 14.7 Purchase/sale of other shares and equity investments – 3.4 1.8 Net cash flow from investments -374.0 -1 508.2 -740.1
Cash from/to financingNew borrowing (current and non-current) 8.8 1 471.3 796.5 Borrowings repaid -306.8 -155.3 -464.7 Dividends paid – -108.4 -100.0 Share issues -4.8 – -18.3 Net cash flow from financing -302.8 1 207.6 213.5
Net change in liquid assets over the year -94.4 415.5 180.8 Currency movement in liquid assets -44.5 16.4 -3.0Bank deposits at 1.1 912.1 480.2 302.4 Bank deposits at 31.12 773.2 912.1 480.2
EDB
Annual Report 2009
45
Financial Accounts
Group
Statement of changes in equity Group
majority interest trans- paid-in fair re- lation share own share other value tained diffe- minority toatal capital shares premium equity reserves earnings rences total interests equity
Equity at 1.1.2007 159.6 -0.9 28.6 792.6 5.7 913.5 -11.6 1 887.5 1.5 1 889.0
Aqusition of shares from minority 17.7 17.7Purchase of own shares -1.0 -28.5 -29.5 -29.5Share issue 0.4 10.3 10.7 10.7Dividend -100.0 -100.0 -100.0Total Profit for the year 2007 1.9 306.8 -14.3 294.4 3.2 297.6Equity at 31.12.2007 160.0 -1.9 38.9 664.1 7.6 1 220.3 -25.9 2 063.1 22.4 2 085.5
Dividend -108.4 -108.4 -108.4Total Profit for the year 2008 -63.5 200.7 30.8 168.0 8.1 176.1Equity at 31.12.2008 160.0 -1.9 38.9 555.7 -55.9 1 421.0 4.9 2 122.7 30.5 2 153.2
Purchase of own shares -0.5 -4.3 -4.8 -4.8Total Profit for the year 2009 -22.0 123.0 -34.5 66.5 6.4 72.9Equity at 31.12.2009 160.0 -2.4 34.6 555.7 -77.9 1 544.0 -29.6 2 184.4 36.9 2 221.3
EDB
Annual Report 2009
46
Accounting principles
Group
1. Business activitiesThe main activities of the parent company EDB Business Partner ASA and its subsidiaries (the ‘group’) are sale of soft-ware, IT solutions and consulting services, as well as the centralised and decentralised operation of computer systems. In addition, the group offers outsourcing services and services related to data communication, data security and electronic publishing.
EDB Business Partner ASA is registered in Norway as a public limited liability company with its registered office in Oslo. The company is listed on the Oslo Stock Exchange (‘Oslo Børs’). The Annual Accounts were approved by the Board of Directors at a meeting held on 23 March 2010.
2. Basis of presentationIn accordance with the Norwegian Accounting Act, the Annual Accounts (consolidated accounts of the group and un-consolidated accounts of the parent company) of EDB Business Partner ASA have been prepared in accordance with the International Financial Reporting Standards (IFRS) as approved by IASB and the EU. The accounts have been prepared on a historical cost basis with the exception of pensions and financial instruments, which are measured at fair value.
The group businesss is for internal reporting requirements divided into three business area based on product/services delivered. The business areas are the primary segment reporting format. Information about segments and geographic distribution is presented in note 2.
In preparing the accounts for the 2009 financial year, the group has implemented all the new and revised standards and interpretations issued by IASB that are relevant to its activities and that were in force for the accounting year commenc-ing on January 1 2008. A review of the standards and interpretations that had not come into force for the 2009 financial year but that may be relevant for EDB can be found at Note 25 to the accounts.
3. Summary of material accounting principlesThe material accounting principles used to prepare the annual accounts of EDB Business Partner ASA are as follows:
a) Presentation and functional currencyThe group presents its accounts in Norwegian kroner (NOK). This is also EDB Business Partner ASA’s functional currency. The figures presented in the annual accounts are in millions of Norwegian kroner unless otherwise stated.
b) Consolidation principlesThe consolidated accounts include the parent company EDB Business Partner ASA and the companies over which EDB Business Partner has a controlling influence. A controlling influence is assumed to exist when the group, directly or indirectly, is able to exercise control over financial and operational decisions.
Subsidiaries are recognized using the purchase method of accounting, whereby the acquisition cost of the shares is offset against the subsidiaries’ equity at the time of purchase. Any excess value resulting from this treatment at the time of purchase is allocated to identifiable assets and is depreciated over their expected life. Goodwill and identifiable assets with indefinite life are not depreciated. Goodwill is not calculated for minority interests. Subsidiaries acquired during the period are consolidated from the date on which the group obtains financial and operational control. Similarly, businesses sold are included in the consolidated accounts until the purchaser takes over financial and operational control.
All intra-group transactions and balances as well as internal gains are netted off in the accounts. Minority interests’ share of post-tax profit or loss is treated as a deduction and shown as a separate line in the profit and loss account. Nega-tive minority interests are not carried in the balance sheet unless there is a guarantee of the shortfall. At the time of acquisition, minority interests are calculated as a portion of the equity of the subsidiary plus/minus excess/under value arising from the acquisition. Minority interests’ share is calculated on the basis of the subsidiary’s post tax-profit, after internal netting, as included in the consolidated accounts.
Companies in which the group has significant influence in financial and operational matters are recognized in accord-ance with the equity method of accounting. The group is normally assumed to have significant influence if its ownership interest is between 20% and 50%. The group’s share of the company’s profit/loss after tax, net of any write-down of excess value, is shown in the profit and loss account as ‘Share of profit/loss in associated companies’.
Accounting principles Group
EDB
Annual Report 2009
47
Accounting principles
Group
c) Classification of assets and liabilities on the balance sheet An asset (liability) is classified as a current asset (short-term liability) if it satisfies the following criteria:a) it is to be sold in, or held for sale or use in, the normal turnover of the group’s business, b) it is primarily held for trading, c) it is expected to be realised within 12 months of the balance sheet date, ord) it is in the form of cash or cash-equivalent assets.
All other assets (liabilities) are classified as fixed assets (non-current liabilities).
d) Recognition of revenue and costsWhere operating services are provided through volume-based contracts, revenue is recognised on the basis of the actual use of services by the customer, or on a linear basis over the period of the contract for term-based contracts. Sales of dialogue services are recognised as revenue on the basis of actual customer usage. Revenue from a transition project that is an integral part of subsequent operating services contract is recognised on a linear basis over the period of the operating services contract. Revenue from transition projects that are not related to an operating services contract is recognised over the transition period.
Service and maintenance agreements are recognised to income on a linear basis over the period of the contract.
Sales of goods are recognised as revenue at the time of delivery. Sales of licences and rights to use software are recognised at the date the contract is signed since this corresponds to the time at which the software is made available to and can be used by the customer. Revenue from sales of software is separated from maintenance revenue on the basis of a separate pricing model and contractual structure. Revenue from software developed specifically for customers is recognised over the development period in line with the degree of completion.
Revenue from consulting services is recognised as the services are provided. Sales of services on a fixed fee basis are recognised to income in line with the number of hours supplied relative to the total number of hours anticipated for the assignment, taking into account any expected additional work and any other expected additional costs.
Cost of goods sold comprises directly allocated costs related to the delivery of goods, including maintenance and opera-tional leasing of hardware and software, as well as the cost of consulting services that are directly related to the turnover of the goods. The costs of employing external consultants that are used for the group’s normal operations and that are re-charged to customers are classified as cost of goods sold.
If a contract is identified as loss-making, provision is made in the balance sheet and recognized to profit and loss in full in the period when the contract is so identified.
Costs incurred in performing service and maintenance contracts are accrued over the life of the contract.
e) InventoriesInventories are valued at the lower of purchase price and net realisable value. Net realisable value is defined as the expected sale price under normal commercial conditions with a deduction for sales costs. Purchase price is determined on the basis of average cost price.
f) Accounts receivableAccounts receivable are recognised in the accounts at nominal value after a deduction for possible losses.
g) Transactions in foreign currencyTransactions in foreign currencies are translated at the exchange rate at the date of the transaction. Currency gains/losses that arise as a result of changes in the exchange rate between the date of the transaction and the payment date are recognised to profit and loss with the exception of translation differences that arise in respect of the group’s net investment in overseas units. Currency gains/losses that relate to receivables/liabilities that form part of net investment in overseas units are included in translation differences as a part of total profit for the year.
Assets and liabilities of foreign subsidiaries that use a functional currency other than Norwegian kroner are translated on the balance sheet date at the exchange rate on the balance sheet date, while profit and loss items are translated at the average exchange rate during the accounting period.
Upon disposal of a foreign subsidiary, the cumulative translation difference in respect of the subsidiary is recognised to profit and loss. If part of a receivable/liability that is treated as part of net investment in a foreign unit is realised, a proportionate share of the cumulative translation difference is recognised to profit and loss.
EDB
Annual Report 2009
48
Accounting principles
Group
h) Tangible assetsTangible operating assets are carried in the balance sheet at historic purchase price less accumulated ordinary deprecia-tion and write-down. When tangible operational assets cease to be used, the historic purchase price and accumulated depreciation are removed from the accounts, and any gain or loss this causes is recognised to profit and loss. Depreciation is applied on a straight-line basis, following specific evaluation, over the following time periods:• Leasehold improvements Lease period• Machinery/equipment/fixtures 3–7 years• Vehicles 5 years• IT equipment 3–5 years
The economic life and depreciation method used are reviewed regularly to ensure that the method and depreciation period reflect the expected useful commercial life of the assets in question. This also applies to disposal value. Deprecia-tion of leasehold improvements are limited to the useful life of the assets.
i) Impairment of non-financial assets with a limited commercial lifeAt each reporting date the group evaluates if there are identified indications that fixed assets or intangible assets may be impaired. If there are such indications, the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss. Recoverable amount is defined as the higher of value in use and net sales value. Value in use is calculated as net present value of future cash flow from continuing use, including cash flow arising from eventual disposal. The discount rate used to calculate the present value is the group’s WACC. Net sales value is calculated as the amount that an entity expects to obtain from the disposal of an asset in an arm’s length transaction between knowledge-able, willing parties, after deducting the estimated costs of disposal.
The smallest unit of a particular asset which can be separately assessed as a valuation unit for the purpose of determining whether there has been a fall in value is determined by the lowest level at which it is possible to identify cash flow inde-pendent of cash flow from other groupings of the same class of asset. In most cases, the group’s business areas represent the smallest valuation unit for this purpose.
An asset is written down to the recoverable amount if the recoverable amount is less than the carrying amount before write-down. Impairment losses are charged to profit and loss in the period the impairment loss is identified, and reduce the carrying amount of the asset by an equivalent amount. Impairment losses may subsequently be reversed to the extent that the reason for the impairment loss no longer applies. However, impairment losses are not reversed if the reversal would cause the carrying amount to exceed the amount that would have applied after applying normal depreciation for the period.
j) LeasingLeasing of assets where the lessor retains the major part of risk and control are classified as operational leases. Other leasing contracts are treated as financial leasing.
Operational leasingThe leasing costs of operational leases are allocated on a linear basis over the period of the lease, and are classified as cost of goods sold or other operating costs in the profit and loss account. See Accounting principle d) for more details on cost of goods sold.
Financial leasingFinancial leasing contracts are recognised as assets and liabilities in the balance sheet in an amount equivalent to the operating asset’s actual value at the time the leasing contract was entered into or, if lower, the net discounted value of the future minimum payments under the terms of the lease contract. A financial leasing contract results in the recognition of both depreciation on the asset financed and financing costs. The depreciation plan for leased assets is equivalent to the depreciation plan for owned assets. If it is not likely that the group will take over the asset upon the expiry of the leasing contract, the asset is depreciated over the shorter of the life of the leasing contract and the depreciation period applied for equivalent assets owned by the group.
k) GoodwillExcess value that cannot be attributed to identifiable assets and liabilities in subsidiaries at the time of acquisition is recognised as goodwill in the balance sheet. Goodwill acquired in a business combination represents a payment made by the acquirer in anticipation of future economic benefits from assets that are not capable of being individually identified and separately recognised. In the case of investment in associated companies, goodwill is included in the cost price of the investment.
Goodwill is not depreciated, but an assessment is made each year as to whether the carrying amount can be justified by future earnings. In addition, goodwill is tested for impairment at any time regardless of the annual test if there are indications that impairment may be needed. If the discounted cash flow is lower than the carrying amount, goodwill is written down to value in use.
l) Intangible assetsIntangible assets with limited commercial life are amortised and any need of impairment losses to be recognised is considered. Depreciation is carried out based on cash flow. Estimated depreciation and the method of depreciation are subject to annual review that takes into account the commercial reality of the intangible asset in question. The group does not have any intangible assets with unlimited commercial life.
EDB
Annual Report 2009
49
Accounting principles
Group
m) Research and developmentExpenses relating to research are recognised in the income statement when they are accrued. Expenses relating to development are capitalised if the following criteria are met in full:• the product or process is clearly defined and its cost elements can be identified and measured reliably • the technical solution for the product has been demonstrated• the product or process will be sold or used in the company’s operations • the asset will generate future economic benefit; and• sufficient technical, financial and other resources for completing the project are present.
When all the above criteria are met, the costs relating to development are capitalised. Costs that have been charged as expenses in previous accounting periods are not recognised in the balance sheet.
The evaluation of future commercial benefit is based on the expected licence revenue and/or reduction in operating costs that will be achieved by carrying out the project. When calculating the profitability of a project, the group’s WACC is applied plus a margin for project risk.
Capitalised development costs are depreciated in accordance with the expected cash flow from the project in question. The depreciation period used is 1–4 years.
n) Pension liabilitiesThe group’s Norwegian subsidiaries operate collective defined benefit or defined contribution pension schemes for all employees. The costs associated with the contractual pension arrangements for employees are included with salary costs in the accounts. The starting point for calculating pension costs is linear application of pension entitlement earned against the likely accumulated pension liability at the time the pension is first drawn.
Liability in respect of contractual pension arrangements is valued as the present value of the future pension benefits for which entitlement has been earned at the date of the balance sheet, and is calculated on the basis of assumptions about discount rates, the investment return on pension assets and expected growth in earnings and pensions. In addition, the calculations make use of Storebrand’s KU disability tariff as the risk table for disability risk among EDB employees, and also use a mortality risk table (K2005) that is based on the best estimates for the Norwegian population. Pension assets are valued at fair value on the balance sheet date.
The cost of pensions is calculated on the basis of the discounted pension entitlement earned at the beginning and end of the year and the pension rights accrued during the year, less the return on the assets provided to fund pensions. Significant changes to the pension schemes, including scheme closures and changes that cause the issue of paid-up policies, are recognised in the accounts in the accounting period when such change takes place, including a proportionate share of the un-amortised difference due to changes in estimates. The effect of any changes in the pension scheme that leads to the issue of fully paid-up policies is recognised in the period the change is made. The effect of other changes in the pension scheme is amortised over the expected average remaining service period. The effect of any changes in estimates, changes in assumptions and calculation differences that exceeds 10% of the higher of pension liabilities or pension assets is amortised over the average remaining service period. In the case of pension schemes where all members are retired, the amortisation factor is set at 1 so that any differences in excess of the ‘corridor’ are amortised in full in the following year.
A compensation scheme has been established for employees that are calculated to have been most disadvantaged by the transition from defined benefit to defined contribution pension arrangements. The compensation is calculated on an individual basis for each affected employee. Compensation is financed from operations, and will be paid over a 15 year period following retirement at age 67. The size of the compensation and the profile for its accrual are calculated on the basis of a standard set of calculation parameters at the time of the changed pension arrangements. Once so calculated, compensation is fixed and is not subject to changes as a result of changes in external or internal pension assumptions. The accrual formula and profile for the compensation scheme is used as the basis to make provisions for the cost of compensation in the accounts so that the total compensation earned to date by employees at any time is provided for as a liability in the consolidated balance sheet.
In addition to the defined benefit pension scheme described above for Norwegian employees, all employees in the group’s Swedish companies are members of the ITP occupational pension scheme. This is an occupational pension insurance based on a collective agreement between Svenskt Näringsliv (the Confederation of Swedish Enterprise) and PTK (the Federation of Salaried Employees in Industry and Services). This scheme is recognized in the consolidated accounts as a contribution schemes because there are no calculation of the cost per employee. Pension premiums paid are recognised to profit and loss as they are incurred.
The company also provides an unfunded operations-based pension plan for members of the group’s executive manage-ment. The operations pension plan is not subject to the Norwegian legislation on defined contribution pensions and enterprise pensions. The annual accrual of pension entitlement is calculated on the basis of 30% of salaries exceeding 12 times the social security base amount (G), applying an annual return equivalent to 12-month NIBOR as at 31 Decem-ber of the previous year.
EDB
Annual Report 2009
50
Accounting principles
Group
Contributions to the AFP pension scheme administered by LO/NHO are accounted for by treating the premiums paid to the scheme’s multi-company pension fund as costs at the time of payment, while the company’s liability to contribute to AFP pensions in payment is calculated by an actuary and recognized as a liability for AFP pensions in payment.
o) TaxationThe tax charge is made up of tax payable and changes in deferred tax/tax assets. The value of deferred tax/tax asset in the statement of financial position is calculated on the basis of all differences, with the exception of associated companies, subsidiaries and jointly controlled businesses, between accounting and taxation values of assets and liabilities (liability method). The amount provided includes all types of difference, and is calculated without being discounted to present value. Deferred tax and deferred tax assets are netted to the extent that temporary timing differences are reversed in the same period and are subject to the same tax system.
Deferred tax asset is capitalised in the statement of financial position to the extent that it is considered likely that the company in question will have sufficient taxable profit in subsequent periods to make use of the tax asset. At each year end, the group carries out a review of deferred tax asset not capitalised to the balance sheet and their accounting value. Deferred tax asset not previously capitalised to the statement of financial position is capitalised to the extent that it ap-pears likely from the review that the company in question will be able to make use of the tax asset. Similarly, companies will reduce the capitalised value of tax asset to the extent that they are no longer able to use the tax asset in question.
Tax payable and deferred tax/tax asset are applied directly to equity to the extent that they relate to items that are themselves applied directly to equity. The tax effects of items booked as comprehensive income are themselves applied as comprehensive income.
p) Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective asset. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
q) Cash flow statementThe cash flow statement is presented using the indirect method. The group’s activities are divided in to operational, financing and investment activities. Investment in new business or sale of business is classified as cash from/to invest-ments, in the cash flow statement, and amounts to the purchase price/sales price less transferred cash and cash deposits at the transaction date.
r) Earnings per shareEarnings per share is calculated by dividing the majority shareholders’ share of the profit/loss for the period by the weighted average number of ordinary shares outstanding over the course of the period. When calculating diluted earn-ings per share, the average number of shares outstanding is adjusted for all share options that have a potential dilutive effect. Options that have a dilutive effect are treated as shares from the date they are issued.
s) ProvisionsA provision is recognised in the accounts only when the company is subject to a liability that is a consequence of an event that has already happened and where it is likely (i.e. more likely than not) that in order to reduce or discharge the liability the company will have to apply financially measurable resources, and the liability can be reasonably estimated. Provisions are evaluated at the end of each accounting period and adjusted to reflect the available information about the provision. In other cases, best estimate. If the time period to the date at which the liability may lead to payment has a material effect on the calculation, the provision will represent the discounted present value of the future liability. Increases in liability caused solely by the lapse of time are reported as an interest expense.
Provisions for restructuring costs only include direct expenses linked to the restructuring which are both necessary for the implementation of the restructuring and which do not relate to the continuing ordinary activities of the company. Such provisions are recognised in the accounts when the company has a detailed plan for the restructuring in question that identifies which business areas will be affected, the locations affected, the functions and estimated number of em-ployees due to receive termination payments, the costs that will be incurred and a time plan for implementation. There must be a real expectation by the parties affected that the company will implement the restructuring. This means either that implementation of the restructuring programme has commenced or that the main elements have been disclosed to the affected parties.
t) EquityThe nominal value of holdings of own shares is reported in the balance sheet as a deduction to share capital. The purchase price in excess of nominal value is charged to other equity. Gains or losses on transactions in own shares are applied directly to equity. If own shares are sold at a price in excess of cost price, the surplus is recognised as other paid-in equity. Realised loss related to sale f own shares are recognised against other paid-in equity, if positive, alternative against other equity.
Transaction costs in relation to equity transactions are charged to equity after deducting tax.
The fair value reserve includes cumulative net changes in fair value of financial instruments until the investment is disposed of or is judged to be of no value.
EDB
Annual Report 2009
51
Accounting principles
Group
u) Share based paymentsThe group has issued equity-settled share-based payments to certain key employees and the group’s executive manage-ment. Such payments include both closed share option programme and a grant of a fixed monetary compensation where the participant is required to invest the net amount into shares in the parent company. Equity-settled share-based payments are measured at fair value when they are granted and is charged to profit and loss on a linear basis over the vesting period. For the share option plans fair value is measured using the Black-Scholes pricing model. Fair value of the share programme is measured to the consideration given on behalf of the employees.
The group also has provided employees with the ability to purchase the group’s ordinary shares at a discount to the current market value and bonus shares. The Board of Directors decides such employee stock ownership grants from time to time. Discounts in the employee stock ownership programme are recorded as salaries and personnel costs when the discount is given to the extent that the discount is vested. Non-vested discounts, including bonus shares, are recorded as an expense based on the estimate of the discount related to shares expected to vest, on a straight-line basis over the vesting period.
Social security tax on options and other share-based payments is recorded as a liability and is recognised over the estimated vestingperiod. The social security tax is calculated with the appropriate taxrate on the difference between marked price and exercise price at the measurement date.
v) HedgingThe group has established a strategy to hedge its net overseas investments. Derivative contracts are recognised as hedging instruments if they satisfy the following criteria:a) hedging is expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the
hedged risk, with hedge effectiveness in the range 80–125%b) the effectiveness of the hedging can be reliably measuredc) there is adequate documentation on entry into the hedging to show that the hedging is highly effective d) hedging is reviewed regularly and has proved effective throughout the reporting periods for which it was intended
The group takes active positions in various currencies to hedge its net investment in (cash flow hedging) overseas units. Changes in the value of currency derivatives classified as hedging instruments are recognised as translation differences in comprehensive income.
The hedging instrument in cash flow hedges is recognised at fair value at the date of financial position statement. If the hedging is evaluated as effective, the change in value is recognised as comprehensive income. If the hedging is evaluated not effective, the change in value is recognised as other financial income/expense in the profit and loss account. Hedging instruments are classified as non-interest bearing liabilities or receivables in the statement of financial position.
w) Financial instrumentsThe groups financial instruments consists mainly of hedging derivatives. These derivatives are valued in accordance with IAS 39. All purchases and sales of financial instruments are recognised on the transaction date. Fair value is used as the cost price. Transaction costs are included in the cost price.
Changes in fair value are recognised as comprehensive income until the investment is disposed of. Derivatives that are not classified as hedging instruments are classified as available for sale and valued at fair value. Changes in the fair value of such derivatives are recognised to profit and loss.
x) Contingent assets and liabilitiesA contingent asset is according to IAS 37 defined as a possible asset, that arises from past events, and whose existence will be confirmed only by the occure or non-occurence of one or more uncertain future events, not wholly within the control of the entity. Contigent assets are not included in the annual accounts, but information is provided if there is a reasonable certainty that the benefit in question will accure to the group.
Contingent liabilities comprise:• a possible obligation arising as a result of past events where the obligation depends on some uncertain future event • a present obligation that is not recognised in the accounts since it is not probable that the obligation will result
in a payment being made• liabilities that cannot be measured reliably
Contingent liabilities are not recognised in the accounts with the exception of contingent liabilities acquired as part of the purchase of a business. Continent liabilities acquired as part of the purchase of a business are recognised in the accounts at fair value even if the liability is not likely to crystallise. Information is provided in the accounts on material contingent liabilities except for contingent liabilities where the likelihood of a payment being made is low.
Contingent assets and liabilities as of 31 December 2009 are shown in note 23 to the consolidated accounts.
EDB
Annual Report 2009
52
Accounting principles
Group
y) Discontinued businessesThe profit/loss related to sale of businesses are shown in a separate line in the profit and loss account. The statement of financial position and cash flow statement include businesses sold until the date of sale. Sale of businesses are shown in note 1 to the consolidated accounts.
z) Loan feesFees incurred in connection with drawing down a loan are capitalised and accrued over the life of the loan.
æ) Use of estimated figuresCertain accounting items in the balance sheet and profit and loss account in the annual accounts are based on estimates and judgements made by the group’s management. This applies particularly to evaluating the depreciation of fixed assets and intangible assets, and determining the fair value of assets and liabilities for businesses acquired, goodwill and pension liabilities. Future events may cause changes to these estimates.
Income recognitionWhere operating services are provided through volume-based contracts, revenue is recognised on the basis of the actual use of services by the customer. If there is no reconciliation/account of actual use at the end of the accounting period, revenue for the period is estimated on the basis of historic figures, adjusted for any known events/information that have influenced usage during the period.
Claims by customers in respect of Service Level Agreements (SLA) for EDB’s deliveries are recognized as a reduction in revenue. SLA claims are estimated on the basis of the individual contract and communications with the customer.
Depreciation of fixed assets and intangible assets Depreciation is based on management’s estimate of useful life. Such estimates may change as a result of technological developments, competition, changes in market conditions and other matters. This may cause changes in the estimated useful life and accordingly in depreciation.
Provision for losses on receivablesProvision for losses on receivables is made only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’). The amount of the impairment loss is meas-ured as the difference between the carrying amount of the receivable and the present value of estimated future cash flows discounted.
Purchase price analysisWhen acquiring new businesses and companies, the cost price is allocated between identifiable assets and liabilities based on estimated fair value. In the case of major acquisitions, EDB hires independent valuation experts to assist with the production of purchase price analyses. The determination of fair value is based on management’s estimates and assumptions.
Customer contracts are identified as intangible assets when businesses are acquired. The fair value of customer contracts is based on the discounted present value of future cash flows. The calculation of present value is based on management’s estimates and assumptions in respect of matters such as margins, time horizon and yield requirement.
GoodwillThe group tests goodwill for impairment annually. The book value of goodwill in the group’s cash-generating units is measured against the value in use of goodwill in these units. The group’s cash generating units correspond with the group’s business segments. The recoverable amount from cash generating units is determined through calculations of value in use. These calculations are based on discounted cash flows that involve uncertainty and require the use of esti-mates. A change in the yield requirement used for discounting future cash flows will affect the book value of goodwill. An increase in the yield requirement will, in isolation, cause a lower value in use which in turn will cause a fall in the future value of goodwill. Note 10 to the consolidated accounts provides sensitivity analysis in respect of the calculation of value in use.
Pension liabilitiesPension costs and pension liabilities are calculated on the basis of a number of estimates and assumptions. Changes in estimates and assumptions and deviations between actual experience and estimates or assumptions (experience adjust-ments) will affect the fair value of net pension liabilities. Experience adjustments are not recognized to profit and loss until the accumulated adjustment exceeds 10% of the higher of pension liability and pension assets at the start of the accounting year.
Capitalisation of development projectsWhen capitalising development costs that relate to the use of internal resources, costs are estimated using an hourly rate based on the direct costs per employee, cf. IAS 19.
Recognition of tax assetIf there are net tax reducing timing differences, or there are tax reducing timing differences which can not be offset, the tax asset is recognised in the balance sheet at the amount that it is likely to be realized. If the tax reducing timing differences are related to losses carried forward, the assessment will be based on the expectation of future taxable profit. The expectations about future taxable profit are based on approved budgets.
EDB
Annual Report 2009
53
Notes Group
Business acquired in 2009:No business were acquired in the 2009 financial year.
Business sold in 2009:With effect from 1 August, Guide Konsult AB sold Astrakan Strategisk Utbildning AB, and with effect from 30 September 2009 sold Guide Marked Solutions AB. These disposals relate to two small subsidiaries that lie outside the group’s core business in the Swedish part of the Application Services business area. The disposals represented an accounting loss for the group of NOK 58 million, which relates principally to goodwill.
(nok million)Sales price 21.9 Value of cash holdings/bank deposits 4.2 Value of other assets 75.9 Accounting gain/loss -58.2
In addition, some parts of the group’s printing activities in Norway and Sweden were sold to Strålfors with effect from 1 September 2009. An accounting loss of NOK 3.8 million was incurred in connection with this sale.
Business acquired in 2008On 9 January 2008, EDB Business Partner ASA entered into an agreement with StatoilHydro ASA to acquire 100% of the share capital of IS Partner AS. The transaction was approved by the Norwegian competition authorities on 31 January, and the company was consolidated with effect from 1 February 2008.
IS Partner is Norway’s largest IT supplier to the oil & gas sector and to manufacturing industry. Goodwill arising from the acquisition relates to the high level of expertise in global industry of the company’s employees, which encompasses both business and work processes in areas including SAP and Oracle. In addition, goodwill arising from the acquisition relates to economies of scale and synergies between EDB’s existing business activities and those of IS Partner, especially in the IT Operations business area. This acquisition reinforces EDB’s position as by far the largest IT services company in Norway. It also strengthens EDB’s competitiveness as one of the leading IT suppliers to the entire Nordic market.
The table below shows information on the allocation of purchase price for the acquisitions. The opening balance has been prepared in accordance with IFRS.
2008 (nok million) is partner
Share 100%
Goodwill 670.8Other intangible assets 32.9Tangible fixed assets 107.6Non-current financial assets 5.0Receivables 369.7Cash/bank deposits 255.1Deferred tax 24.2Non-current liabilities -249.3Current liabilities -319.1
Book equity at time of acquisition 896.9Group contribution 2007 not approved by AGM at time of acqusition 110.2Adjusted book equity at time of acqusition 1 007.1
Identified exess valueCustomer contracts 118.7Software 14.0Provisions -20.0Deferred tax -31.6
Goodwill from acquisition 290.8Net cash outflow 1 379.0
Capitalised transaction costs 5.6
EBITA after acqusition date 234.9 Net Profit of acquired company after acquisition date 85.8
Number of employees at time of acqusition 590
Note 1Changes in group structure
EDB
Annual Report 2009
54
Notes Group
The process of allocating excess value involves reviewing and evaluating the specific excess value items at the acqusition date. The fair value of customer contracts and customer relationships has been calculated using the discounted present value of expected future cash flows over the expected future life. The calculation of expected future cash flows is based on relationships with larger customers where it is expected that the customer relationship will continue. Expected sales are based on historic sales to the customer in question.
effect of edb companies consolidated pro forma figures 2008 (nok million) group acquired proforma
Consolidated operating revenue 7 870.9 139.5 8 010.4Operating profit before amortisation of intangible assets 670.2 7.9 678.1Profit before tax 291.4 -3.8 287.6 Profit after tax 209.0 -2.7 206.3
The proforma figures show the results of the group as it would have been reported if the aquisisted companies have been consolidated from 1 January 2008.
Profit before tax is shown after depriciation of any identified excess value and financing expenses. Revenues and net profits from foreign units are translated at average rate.
Business acquired in 2007:On 30 January, EDB Business Partner AB entered into an agreement to purchase 60.1% of the shares in the Ukrainian IT company Infopulse Ukraina LLC. Infopulse Holding Limited owns the remaining shares in the company. The company is consolidated in the accounts with effect from 1 September 2007, which is the date of transfer of control. Goodwill arising from the acquisition relates to the high level of expertise and education of the company’s employees. The acquisition of Infopulse is important for EDB’s investment in nearshore sourcing, and will help to strengthen EDB’s delivery capacity for both existing and new customers.
With effect from 1 April, EDB Business Partner AB acquired 100% of the shares in the Swedish card processing company Centralen for Elektroniska Korttransaktioner AB (CEKAB). Calculated goodwill arising from the acquisition relates to the company’s position and expected growth in the card services market, as well as economies of scale and synergies be-tween the group’s businesses in Norway and Sweden. The acquisition will strengthen EDB’s growth and market position in the capture and processing of card transactions in the Nordic market.
With effect from 1 April, Guide Konsult AB acquired 100% of the shares in Tre60 AB. Tre60 AB is a Swedish IT consult-ing firm with a strong position in Business Intelligence consulting. Calculated goodwill arising from the acquisition relates to the company’s position in the Swedish market for Business Intelligence, as well as the specialist expertise of its employees in this area. The acquisition will strengthen EDB’s position in IT consulting and application services in the Swedish market.
On 17 July EDB, Business Partner AB entered into an agreement to purchase 60.1% of the shares in Ukrainian company Miratech Corporation Ltd. The remaining shares are owned by Solaya Holdings Limited (under incorporation) and Salasia Holdings Limited (under incorporation). Miratech is one of the leading IT services companies in the Ukraine. The company is consolidated in the accounts with effect from 1 December 2007, which is the date of transfer of control. Identified goodwill arising from the acquisition relates to the technical IT expertise of the company’s employees.
With effect from 1 October EDB, Business Partner ASA acquired 100% of the shares in the Danish IT company TeamR3 A/S. TeamR3 is one of the leading vendors of SAP solutions in Denmark. Identified goodwill arising from the acquisi-tion relates to the SAP expertise of the company’s employees. This acquisition makes EDB one of the leading suppliers of SAP-related IT consulting in the Nordic countries.
With effect from 1 November, EDB Business Partner AB acquired 50.1% of the shares in the Indian IT company Span Infotech, as well as 50.1% of the shares in its American sister company Span Systems Corporation Inc. Goodwill arising from the acquisition relates to the IT expertise of the companies’ employees, and the importance of the companies for EDB’s work on establishing a long-term strategy for Global Sourcing.
Note 1 (cont.)Changes in group structure
EDB
Annual Report 2009
55
Notes Group
The table below shows information on the allocation of purchase price for the acquisitions. The opening balances have been prepared in accordance with IFRS, restated at the exchange rate at the time of the transaction.
2007 (nok million) cekab tre60 infopulse teamr3 span miratech
Share 100% 100% 60.1% 100% 50.1% 60.1%Intangible assets 0.5 0.3 2.4Tangible fixed assets 18.0 0.1 1.9 2.3 8.4 1.6Financial fixed assets 1.4 0,1InventoryReceivables 25.5 9.5 10.1 16.9 31.0 5.5Cash/bank deposits 19.9 4.7 2.7 16.6 1.8 1.1Deferred tax/tax assets -3.4 -0.2 -0.2Non-current liabilities -8.1Current liabilities -16.6 -7.8 -1.1 -9.6 -20.2 -3.6Book equity at time of acquisition 43.4 6.3 14.1 27.7 13.0 7.0
Identified excess valueCustomer contracts 39.6 3.0 7.4 12.4 3.0Other intangible assets 9.0Tangible fixed assets 0.1Provisions -1.7Deferred tax -13.2 -0.7 -1.9 -4.2 -0.8
Adjusted fair value of equity – 100% 77.3 6.3 16.3 33.2 21.2 9.3Adjusted fair value of equity – share 77.3 6.3 9.8 33.2 10.6 5.6
Goodwill from acquisition 157.1 26.3 66.8 72.0 33.8 22.6Net cash outflow 234.3 32.6 76.6 105.2 44.4 28.2Capitalised transaction costs 0.9 0.3 5.2 1.2 1.9 3.7
EBITA after acqusition 25.3 5.0 6.4 3.3 2.4 1.2 Net Profit of acquired companyafter acquisition date 9.4 3.0 2.2 2.0 1.8 0.9
Number of employees at time of acquisition 50.0 45.0 377.0 84.0 545.0 190.0
The process of allocating excess value involves reviewing and evaluating the specific excess value items in the companies acquired. The acquisitions made in 2007 relate principally to consulting businesses (with the exception of CEKAB). When acquiring this type of business, EDB is principally purchasing the expertise of the employees. This expertise cannot be capitalised as an asset in the balance sheet, since it does not satisfy the requirements for capitalised intangible assets. It is therefore normal in the case of acquisitions of this kind of company for a major part of the cost price to be allocated to goodwill. The customer base of each of the businesses acquired has been reviewed and evaluated on a case-by-case basis. The fair value of customer contracts and customer relationships has been calculated using the discounted present value of expected future cash flows over the expected future life. The calculation of expected future cash flows is based on relationships with larger customers where it is expected that the customer relationship will continue. Expected sales are based on historic sales to the customer in question. For those customers where a framework contract has been agreed, this is used as a basis for the fair value calculation and it is assumed that sales will be realised according to the contract over its life.
EDB has contractual call options on the remaining shares in Infopulse, Miratech and the Span companies. The options can be exercised in fixed multiples equivalent to the market price following the end of the 2010 financial year. The minority shareholders in these companies have equivalent put options on equivalent terms. On the basis that the values of the call and put options offset each other, the options are recorded at their net value in the accounts at 31 December 2009.
effect of edb companies 2007 consolidated pro forma figures (nok million) group acquired proforma
Consolidated operating revenue 6 354.1 222.7 6 576.8Operating profit before amortisation of intangible assets 643.6 26.7 670.3Profit before tax 424.3 5.4 429.7Profit after tax 303.3 5.1 308.4
The proforma figures shows the results of the Group as it would have been reported if the aquisisted companies have been consolidated from 1 January 2007. Profit before tax is shown after depreciation of any identified excess value and financing expenses. Revenues and net profits from foreign units are translated at average rate.
Note 1 (cont.)Changes in group structure
EDB
Annual Report 2009
56
Notes Group
The group’s business is for internal reporting requirements divided into three strategic business areas, each of which is organised and managed separately. The business areas sell different services and software targeted for different customer groups, and they have different risk and reward profiles.
The EDB Business Partner group is divided into the following business areas in 2009:1) IT Operations2) Solutions3) Application services
The IT Operations segment offers services related to outsourcing of operations in the public and private sectors. Solutions offers applications and services for the bank and finance industry and the public sector. Application services delivers services related to SAP-, Microsoft-, IBM-, and Oracle technology, project management and systems development. Appli-cation services also include global sourcing, which delivers consultant services from Ukraine and India.
Transactions within the segments are based on market conditions.
The business area IT Operations is party to internal agreements based on the same terms and conditions as those for external customers. The rental of software and other IT equipment is based on the cost from an external supplier plus a margin. The business areas Application Services and Global Sourcing charge an agreed price for other business areas equivalent to the price that it would charge its best customer.
All transactions between the segments are eliminated and shown separatly in the table below.
Items included in ‘Not allocated’ relate to support functions and non-recurring items. Not allocated items for 2007 include a non-recurring amount of NOK 36.8 million related to voluntary transfers to the defined contribution pension scheme. For 2008 non-recurring items of net NOK 54.1 million are included in ‘not allocated’. The non-recurring items are related to the following conditions:
non-recurring items (nok million) 2008Sale of business (IT Operations) -6.3Accruals Oslo Municipal (IT Operations) -66.1Closing of pension plan (IS Partner) 53.3Strategic prosesses (Group) -35.0
Non-recurring items in 2009 amounts to net NOK 11.9 million and are related to the following conditions:
non-recurring items (nok million) 2009Termination of defined benefit pension schemes (Group) 567.5Provisons of restructuring (Group) -151.8Sale of business (IT Operations/Application Services) -62.0Write-down of goodwill (Application Services) -218.0Write-down of in house developed software (Solutions) -120.0Provision (Chief Executive Officer) (Group) -3.8
Non-recurring items are in line with internal reporting requirements not allocated to the business areas.
The largest customer of the group amounts to more than 10% of the total revenue. Revenue related to customers within the industry Bank and Finance amounts to 42% of the total revenue, while revenue related to customers within the industry-segment amounts to 35% of the total revenue of the group.
Information about the group’s business areas is presented below. Financial figures reported for previous year are revised to be in line with IFRS 8.
Note 2 Segment information
EDB
Annual Report 2009
57
Notes Group
operating of which operating depreci-2009 (nok million) revenue external ebitda ebita profit assets liabilities capex ation
IT Operations 4 380.3 4 332.5 563.6 364.8 331.4 4 152.0 2 500.7 191.9 198.8Solutions 1 507.3 1 500.9 215.7 197.8 101.8 1 886.3 1 401.4 4.3 17.9Application Services 1 963.4 1 629.7 154.5 144.7 112.7 1 875.0 1 948.4 9.6 9.8Not allocated 101.1 28.6 274.1 246.2 -92.1 50.7 -51.8 8.0 24.0Eliminations -460.4 – – – – -86.3 -142.3 – –Total 7 491.7 7 491.7 1 207.9 953.5 453.8 7 877.7 5 656.4 213.8 250.6
2008 (nok million)IT Operations 4 512.3 4 464.5 644.0 401.2 378.0 4 374.9 3 166.9 281.0 242.8Solutions 1 427.2 1 416.9 226.3 206.8 132.1 2 006.2 1 368.3 12.0 19.5Application Services 2 214.0 1 984.8 202.9 194.2 160.9 2 453.8 2 360.8 16.0 8.8Not allocated 42.7 4.7 -100.5 -125.4 -147.6 87.1 27.9 20.2 24.9Eliminations -325.3 – -6.5 -6.5 -6.6 -121.1 -276.3 – –Total 7 870.9 7 870.9 966.2 670.2 516.8 8 800.8 6 647.6 329.2 296.0
2007 (nok million) IT Operations 3 939.4 3 883.6 576.5 329.7 307.8 3 486.0 1 704.6 206.5 246.8Solutions 1 372.6 1 358.8 216.6 200.0 145.4 1 172.0 1 035.3 12.0 16.6Application Services 1 223.4 1 104.8 154.0 150.4 131.5 1 721.4 1 551.4 3.0 3.6Not allocated 38.3 6.9 -5.1 -29.2 -29.9 3.7 6.3 24.0 24.1Eliminations -219.6 – -7.3 -7.3 -7.3 – – – –Total 6 354.1 6 354.1 934.7 643.6 547.5 6 383.1 4 297.6 245.5 291.1
Geographic segmentsThe group’s activities are divided between Norway, Sweden and other countries. Other countries are mainly related to Denmark, Ukraine and India.
norway sweden other total
(nok million) 2009 2008 2007 2009 2008 2007 2009 2008 2007 2009 2008 2007External opera- ting revenue 5 382.8 5 553.5 4 269.0 1 519.6 1 751.5 1 904.2 589.3 565.9 180.9 7 491.7 7 870.9 6 354.1 Segment assets 5 336.1 6 018.0 4 403.1 2 174.3 2 370.2 1 656.6 367.4 412.6 323.4 7 877.7 8 800.8 6 383.1 Investment 183.2 268.5 185.2 24.2 49.0 59.5 6.4 11.7 0.8 213.8 329.2 245.5
Note 2 (cont.)Segment information
EDB
Annual Report 2009
58
Notes Group
personnel costs (nok million) 2009 2008 2007Wages and salaries 2 643.6 2 539.3 2 009.7Share based compensations 1.1 3.7 6.7Employer’s social security contributions 448.1 454.5 385.8Pension costs -288.4 243.5 182.5Other benefits 188.6 125.4 89.6Total 2 993.0 3 366.4 2 674.3
Average number of employees 6 014 5 902 4 177 Average number of man years 5 886 5 758 5 086
Total personnel cost includes provisons of NOK 3.8 million for payments related to the resignation of CEO Endre Rangnes.
Loans to employeesThere have been granted loans of NOK 17.6 millions for consumer goods for employees in former IS Partner AS. The loans have been taken over from DnB NOR, since IS Partner no longer is a part of the group StatoilHydro ASA. The loans are repaid through withdraw from salaries and possibly severance pay. This arrangement is closed in 2008.
Executive management remuneration
chief executive officer (ceo) – endre rangnes (nok million) 2009 2008 2007Salary 3.056 3.183 2.933Bonus – 1.030 –Cash settlement of options exercised – – –Pension benefits earned through the year 0.914 1.036 0.758Other remuneration 1.367 1.380 1.364
CEO Endre Rangnes has resigned from his position in EDB. John-Arne Haugerud is acting temporarily as CEO.
other other members of executive management 2009 (nok million) salary bonus pensions remuneration
John-Arne Haugerud (acting CEO) 1.702 – 0.430 0.483 Oddgeir Hansen 1.433 0.075 0.343 0.529 Kristian Kuvaas Johansen 1.550 0.160 0.286 0.509 Tone Øvregård 1.124 0.058 0.141 0.485 Geir Remman 1.162 0.036 0.234 0.159 Wiljar Nesse 1.307 0.135 0.261 0.510 Eva Trasti 1.318 0.635 0.289 0.144 Ivar Arne Børset 1.881 0.150 0.425 0.521 Tom Scharning 1.474 0.144 0.325 0.162 Johnny Rindahl 1.310 0.135 0.048 0.159 Previous members of executive managementJarle Haug 1.355 0.365 0.226 0.801
other members of executive management 2008 (nok million) Oddgeir Hansen 1.457 – 0.399 0.551 John-Arne Haugerud 1.768 0.783 0.414 0.486 Kristian Kuvaas Johansen 1.583 0.533 0.293 0.486 Tone Øvregård 1.161 0.100 0.148 0.141 Geir Remman 1.217 – 0.280 0.136 Wiljar Nesse 1.333 – 0.166 0.139 Eva Trasti 1.352 – 0.264 0.126 Ivar Arne Børset 1.632 0.208 0.440 0.137 Jarle Haug 0.700 – 0.134 0.233 Johnny Rindahl 1.270 0.075 0.045 0.137 Previous members of executive managementLars Bjertnæs 2.170 – 0.120 0.268
Note 3Personnel costs etc.
EDB
Annual Report 2009
59
Notes Group
other fair value remune- of options other members of executive management 2007 (nok million) salary bonus pensions ration granted 2007*Oddgeir Hansen 1.328 – 0.323 0.692 –John-Arne Haugerud 1.647 – 0.310 1.083 –Kristian Kuvaas Johansen 0.774 – 0.118 0.052 –Jan Erik Larsen 1.398 0.200 0.338 0.667 1.132 Tone Øvregård 0.953 – 0.119 0.139 0.566 Geir Remman 1.217 – 0.282 0.218 –Thomas Parmbäck 1.285 – 0.082 0.127 1.132 Carl-Johan Lindfors 0.384 – 0.073 0.006 –Jan Ivar Borgersen 1.000 – 0.200 0.152 0.459 Lars Bjertnæs 1.383 – 0.266 0.084 –Eva Trasti 1.148 – 0.268 0.124 –Ole Urdahl 1.520 – 0.311 0.159 –Previous members of executive managementTore Valderhaug 1.716 – 0.176 0.067 –Rikard Wannerholt 1.035 – 0.248 0.064 – * The fair value of granted otions is calculated using the Black and Scholes option pricing model. The value is calculated at the day they are granted
and then multiplied with the number of options granted. The total value is charged to profit and loss over the vesting period of three years.
The following guidelines were set out in a Statement by the Board of Directors pursuant to Section 6–16a of the Public Companies Act, and the Statement was approved by an advisory vote of the Annual General Meeting held on 13 May 2009: The remuneration of the members of EDB’s executive management in the form of salary and other benefits shall be deter-mined in accordance with the following principles:a) Remuneration shall be competitive in relation to senior management salaries in large Nordic IT companies.b) Remuneration shall be made up of both a fixed element and a variable element. The fixed element will be made up of
basic salary and certain standard employment benefits, plus an additional amount in the case of certain key positions for the responsibility involved. The variable element will take the form of a bonus. The additional amount for respon-sibility will be determined individually each year, and the post-tax amount of this payment must be invested in EDB shares that cannot be sold for three years. Total remuneration also includes pension contributions. In addition, CEO and the Group’s Executive Vice Presidents have the benefit of agreements om compensation payments upon leaving employment.
c) The bonus scheme shall reflect both the company’s results and the individual employee’s performance, and shall take the form of a bonus program. For the members of executive management, bonus payments can be up to 50% of basic salary. Bonus will be paid if the determined targets are achieved. In case of exceptional effort, bonus may also be paid even if the key targets of the company are not achieved. The CEO may be remunerated exceeding the guidelines and limits mentioned in this section.
The total remuneration of the members of executive management should reflect the scope and responsibility of their role, the breadth and complexity of the organisation and the company’s values and management standards. In addition, com-pensation should reflect EDB’s attractiveness as an employer and its ability to retain key employees.
The Chief Executive Officer has waived the redundancy rights provided by Chapter XII of the Working Environment Act, but has an individual agreement to receive salary for 12 months following the normal notice period of 6 months. Salary payable for the 12-month period would be reduced by up to 75% in respect of other income. However if the CEO’s em-ployment is terminated as a result of a change in the ownership structure of the company, he is entitled to receive salary for 18 months following the normal notice period of 6 months with no reduction in respect of other income. Some of the group’s Executive Vice Presidents have agreements entitling them to salary for periods of up to 6 months following the normal notice period of 6 months.
The members of executive management are included in the group’s defined contribution group pension scheme and are also members of an operations-based pension plan for the portion of salary that exceeds 12 times the social security base base amount (G), cf. Note 4: Pensions. In the event an individual leaves the company’s service before retirement age, ac-crued operations-based pension benefits will be paid as salary.
No member of the executive management received any remuneration or other benefits from any other company in the group other than those shown above. No additional payments are made for special services over above an individual’s normal management responsibilities.
The remuneration to the CEO and the other members of executive management for 2009 are in line with the principals accounted for above. The executive has, on their own iniative, accepted a reduction in salary of 5% in 2009. Further, the bonus scheme for 2009 was suspended based on the financial position of the company.
The renumeration of the CEO and the members of EDB’s executive management was in extraordinary Annual General Meeting held on 18 August 2008 extended to also include EDB’s share program for employees. The share program that was started in 2008 was continued in 2009.
Note 3 (cont.)Personnel costs etc.
EDB
Annual Report 2009
60
Notes Group
The share option schemes for the CEO and other members of executive management have been approved by the annual general meeting.
Details of the options scheme are provided in Note 5. Options held by members of executive management are as follows:
options options held held average average opening options options options closing exercise exercise average balance granted expired exercised balance price – a price – b maturity
Endre Rangnes 250 000 – 250 000 – – – 51.14 0.4 yrs John-Arne Haugerud (acting CEO) 100 000 – – – 100 000 – 52.10 0.4 yrs Oddgeir Hansen 80 000 – 80 000 – – – 52.10 0.4 yrs Kristian Kuvaas Johansen – – – – – – – –Tone Øvregård 50 000 – – – 50 000 – 58.07 0.8 yrs Geir Remman 25 000 – – – 25 000 – 52.10 0.4 yrs Ivar Arne Børset – – – – – – – –Johnny Rindahl 50 000 – – – 50 000 – 52.10 0.4 yrs Wiljar Nesse 25 000 – – – 25 000 – 52.10 0.4 yrsTom Scharning 25 000 – – – 25 000 – 52.10 0.4 yrsEva Trasti 25 000 – – – 25 000 – 52.10 0.4 yrs
A – Average exercise price for options exercised during the accounting yearB – Average exercise price for options held at the close of the accounting year
Board of DirectorsRemuneration paid to the Board of Directors in 2009 for work performed in 2008, were as follows:
(nok million)Telenor ASA (Bjarne Aamodts participation) 0.407 Anne-Lise Aukner (vice president) 0.277 Anders Brandt 0.133 John Ingvar Brekke 0.222 Eirik Bornø 0.255 Wenche Brateng 0.200 Ingrid Lund 0.011 Anne-Grethe Dalane* 0.222 Staffan Bohman* 0.293 Monica Caneman* 0.329 Hans Kristian Rød* 0.097 Sum 2.708 * Previous members of the Board of Directors
Auditor’s remunerationThe following table shows the proposed remuneration to be paid to the group’s auditor, Ernst & Young AS, in respect of the audit for 2009, including the amounts invoiced in respect of audit-related and tax-related services. The amounts shown include both norwegian and foreign subsidiaries, and are exclusive of value added tax.
(nok million)Audit fee 5.697 Other services –Other audit-related services 3.596 Other taxrelated services –Total 9.293
Other audit-related services include deliveries related to RS402 and SAS70. These expenses are reinvoiced by EDB.
Note 3 (cont.)Personnel costs etc.
EDB
Annual Report 2009
61
Notes Group
The group provides pensions principally through insured collective schemes with life insurance companies. Pension arrangements relate to 4,476 active members and 419 full-service and early retirement (AFP) pensioners.
The presentation of pension costs and pension liabilities set out below aggregates the various pension arrangements provided by the group. The figures therefore include a number of different defined benefit, defined contribution and multi-company pension schemes. The group’s employees in Norway are also members of an AFP early retirement pension arrangement through the LO/NHO scheme. The LO/NHO scheme’s AFP is a multi-company scheme which by its structure should be regarded as a defined benefit scheme, with part of the financing of this scheme carried out by contributions based on the number of employees in the company. The scheme administrator does not provide sufficient information on the company’s share of the overall scheme’s assets and liabilities. As a result of this, this element of pension financing is treated in the accounts as a defined contribution scheme. In addition to contributions based on the number of employees, the company also makes contributions to cover part of the cost of pension paid to members that are in receipt of an AFP pension. This element of contributions is calculated by an actuary and is treated in the accounts as a defined benefit scheme.
The group’s Swedish companies, on the whole, participate in a pension scheme administered by Alecta. This is a multi-company scheme which by its structure should be regarded as a defined benefit scheme. However, since the scheme ad-ministrator does not provide sufficient information on the company’s share of the overall scheme’s assets and liabilities, this scheme is treated in the accounts as a defined contribution scheme.
The group’s defined benefit pension schemes in Norway were closed with effect from 31 December 2006. In replacement, the group made arrangements with Vital for a defined contribution pension scheme. The annual contributions to this scheme are at the rates of 4% for salaries between one and six times the social security base amount (G) and 8% for salaries between 6 G and 12 G. Existing employees were free to choose whether to move to the new scheme. New employees appointed after 31 December 2006 are members of the defined contribution scheme. 360 employees chose to transfer from the defined benefit pension scheme to the defined contribution scheme. This had a positive accounting effect of NOK 37 million recognised to profit in 2007 as a curtailment/settlement in accordance with IAS 19.
The company IS Partner AS was acquired with effect from 1 February 2008. The company’s defined benefit pension scheme was harmonised in 2008 with EDB’s other pension schemes. Provisions for spouse pensions and a general policy of addi-tional pension payments in addition to AFP scheme entitlements have been cancelled. This had a positive accounting effect of NOK 53.4 million. This non-recurring item was recognised to profit as a curtailment/settlement in accordance with IAS 19. The non-recurring item is recognised as personell costs in the profit and loss statement.
The Board of EDB Business Partner ASA resolved with effect from 1 September 2009 to terminate the defined benefit pension schemes operated for EDB Business Partner Norge AS and EDB Business Partner ASA that were already closed to new members, with the transfer of the remaining members to the already existing defined contribution pension scheme arranged through the insurance company Vital. The termination of the defined benefit pension schemes resulted in a positive non-recurring accounting gain of NOK 567.5 million. The non-recurring accounting gain was recognized to profit as a curtailment/settlement in accordance with IAS 19. The accounting gain is classified as ‘wages and salaries’ in the profit and loss statement.
A compensation scheme was established in connection with the termination of the defined benefit pension schemes and the transfer of their members to the defined contribution pension scheme, with the object of limiting the calculated loss in retirement pension capital incurred by employees as a result of the transfer. The terminated schemes were final salary schemes providing pensions of 66% and 70% of final salary respectively subject to deduction of 75% of the security base ammount (G) in basic state pension. The compensation scheme provides compensation relative to the targeted benefit plan with the same percentage cover but with the difference that the deduction for the basic state pension will be 100% of the social security base amount (G). The size of the compensation is accordingly calculated on the basis that the individual employee shall be credited with an amount that causes the aggregate value of the paid-up policy, the defined contribution and the compensation to equal the pension capital at retirement aged 67 to which the individual would have been entitled under the terms of the defined benefit plan target. The calculated loss for which compensation is provided and the earnings profile for such compensation is calculated on the basis of predetermined parameters at the time of calculation. The provision in the accounts uses the actual accrual formula to calculate the compensation costs to be ap-plied in the period. The accrued compensation provision at 31 December 2009 was NOK 1.5 million. The compensation scheme is financed from operations and is not funded. Compensation will be paid upon members achieving a retirement age of 67 in equal annual amounts over a 15 year period. The accrued entitlement to compensation is held on a separate bank account that is pledged in favour of the members entitled to the compensation. The pledged account arrangement is provided by Pensjons Tillitsmann AS, which monitors the agreement.
Note 4Pensions
EDB
Annual Report 2009
62
Notes Group
Other pension plansAs of 1 January 2004, a pension plan financed from operations was established for executive management. The operations pension plan is not subject to the legislation on defined contribution pensions or the legislation on enterprise pensions, and is not funded. The annual pension entitlement is calculated as 30% of salaries exceeding 12 G, and the annual return shall at minimum equal 12 months NIBOR as at 31 December of the previous year. The pension cost charged to the accounts in 2009 was NOK 3.8 million. The accumulated accrued entitlement, including investment return and employer’s social security contributions, totalled NOK 14.2 million at 31 December 2009.
pension costs (nok million) 2009 2008 2007 2006 2005Current value of pension entitlement accrued over the year 108.1 164.6 117.4 110.7 112.9Interest on pension liabilities 92.5 122.0 89.2 64.0 66.3Gross pension expense 200.6 286.6 206.5 174.8 179.2Return on plan assets -66.1 -113.3 -81.4 -52.0 -51.3Booked differences due to changes in estimates and in the pension plan -586.0 -51.3 -45.0 4.2 0.9Net pension expense -451.5 122.0 80.2 126.9 128.9Additional schemes and early retirement 163.1 121.5 102.3 52.0 19.1Pension costs charged to profit and loss -288.4 243.5 182.5 178.9 148.0
pension liabilities (nok million)Gross liability to provide pensions 789.3 2 624.8 1 889.7 1 816.2 1 524.1Pension assets 610.5 1 489.5 1 213.2 1 169.0 1 000.6Changes not amortised 55.7 -344.6 -178.1 -96.6 -16.2Net pension liability 234.5 790.8 498.4 550.5 507.3
Pension liabilities in the statement of financial position 234.5 790.8 498.4 550.5 507.3
change in pension liabilities (nok million)Pension liabilities in the statement of financial position 1.1 790.8 498.4 550.5 507.3 537.0Pension costs -451.5 122.0 80.2 126.9 136.9Premium payments -81.0 -82.0 -127.1 -86.7 -107.8Acquisition/sale of business – 251.7 – 2.9 -30.4Benefits paid and Paid-up policies -19.5 – – – –Other changes -4.3 0.6 -5.2 0.1 -28.4Pension liabilities in the statement of financial position 31.12 234.5 790.8 498.4 550.5 507.3
fair value of plan assets
Plan assets in the statement of financial position 1.1 1 489.5 1 213.2 1 169.0 1 000.6 918.2Return on plan assets 98.9 -103.5 33.8 113.0 37.3Additions and disposals -1 021.4 388.9 – 3.0 -13.8Premium payments 81.0 63.4 110.1 71.3 94.5Pension payments -37.5 -72.5 -99.7 -18.9 -35.6Pension liabilities in the statement of financial position 31.12 610.5 1 489.5 1 213.2 1 169.0 1 000.6
The account of pension arrangements given above is based on calculations carried out by an independent actuary which are reviewed annually. The following assumptions are used in the actuarial calculations for determining pension liability as of 31 December:
2009 2008 2007 2006 2005Discount rate 5.0% 4.4% 4.9% 4.5% 3.9%Future salary inflation 4.5% 4.0% 4.3% 4.0% 3.0%Growth in the basic state pension (G) 4.5% 4.0% 4.3% 4.0% 3.0%Annual increase in pensions 4.0% 3.5% 3.8% 3.1% 2.5%Staff turnover 10.0% 10.0% 10.0% 10.0% 10.0%Mortality assumptions K2005 K2005 K2005 K2005 K63Expected return on pension assets for determining pension cost 5.8% 6..5% 5.9% 4.7% 5.4%
The mortality risk table, K2005, is based on best estimates for the population of Norway. The risk table for disability, produced by Storebrand, corresponds with estimated disability risk in EDB.
Note 4 (cont.)Pensions
EDB
Annual Report 2009
63
Notes Group
The following table shows extracts from these risk tables. The table shows the probability that an employee of the age shown will become disabled or die within a year. The table also shows life expectancy.
expected disable % mortality % duration of life
age man woman man woman man woman
20 0.12 0.15 79.00 83.3440 0.21 0.35 0.09 0.05 79.35 83.6060 1.48 1.94 0.75 0.41 80.94 84.5780 – – 6.69 4.31 87.04 88.97
The plan assets as of 31 December were invested as follows:
investment category 2009 2008 2007 2006 2005Bonds 63% 60% 53% 53% 53%Equity securities 24% 23% 29% 28% 32%Properties 10% 13% 14% 11% 12%Other 3% 4% 4% 8% 3%Total 100% 100% 100% 100% 100%
Pension assets are invested in bonds issued by the Norwegian government, Norwegian municipalities, financial institutions and corporations. Bonds held in foreign currencies are to a large extent currency hedged. Pension assets are invested both in Norwegian and foreign equity securities. The currency hedging policy for foreign equity securities is evaluated on an individual investment basis. Pension assets are invested in accordance with the guidelines applying to life insurance companies.
EDB expects to pay approximately NOK 4 million in pension premiums to the group’s defined benefit plans in 2010.
Pension assumptionsThe assumptions used for pension calculations are determined using a model developed in-house, and are evaluated against the guidelines issued by the Norwegian Accounting Standards Board (NRS). The discount rate applied for defined benefit pension schemes in Norway is estimated on the basis of the yield on Norwegian government bonds. The discount rate used to calculate pension liabilities as of 31 December 2009 was set at 5.0%, as compared to 4.5% in the NRS guide-lines. EDB estimates a 24-year discount rate based on Norwegian 10-year bonds, adjusted for duration on the basis of long-dated German bonds. NRS uses swap rates from the interbank market to calculate zero coupon yields. NRS has not calculated a recommended rate based on a duration calculation using German bonds, but this method is described in the NRS guidelines. The expected return on pension assets is set at 6.3%, based on the asset allocation in the Telenor Pension Fund, as shown in the table above. The rate of future salary increase is set at 4.5%, in line with the NRS guidelines. Future in-crease in the social security base amount (G) is set at 4.5%, as compared to 4.25% in the NRS guidelines. Future pension increases are set 0.5% below the rate of increase in the social security base amount (G), based on historical observations.
Uncertainty over estimatesCalculations of pension cost for the year and the book value of pension liability are based on the assumptions above. Considerable uncertainty attaches to the amounts calculated, which prinsipally vary in pace with the level of interest rates in Norway.
The pension liabilities are specially sensitive to changes in the discount rate. An isolated decrease in the discount rate will lead to an increase in the pension liabilities. An increase in annual earnings growth and annual increase in pensions will lead to an increase in pension liabilities. An increase in the social security base amount (G) wil lead to a decrease in the pension liability. 1% change in the discount rate will give a expected change in in the pension liabilities of 12–14%. A change of 1% in annual increase in pensions will have a estimated effect of the value of pension liabilities of 9–11%. 1% change in annual earnings growth will have a effect of 5–6%.
Note 4 (cont.)Pensions
EDB
Annual Report 2009
64
Notes Group
Employee share based schemesIn 2008 the group started a share program for all employees in EDB. Approximately 1 200 emplyees signed up at the start of the program. An employee can invest up to 4% of gross salary including a discount of 20%, maximum NOK 1 500. The employee will receive bonus shares if certain criteria are met, but is granted 1/4 of a bonus share for every purchased share, given that the employee holds the shares for two years and that he/she is still employed. Bonus shares that are expected to be granted after two years are recognised as an expense over the vesting period.
The group started in 2006 a share option scheme for members of executive management and key employees in specific senior positions. 38 employees were members of the share option scheme at 31 December 2009. The option scheme has a three-year vesting period and rights to one third of the options granted are accrued each year. Options can be exercised quarterly in a period 3 to 10 days following the publication of the company’s quarterly report. The earliest exercise period for the first one-third of the options followed the publication of the second quarter report for 2007. The maximum gain on exercising share options is subject to a limit of 250 percent. 1.5 million options were granted on 1 June 2006 at an average price of NOK 51.94. A further 310 000 options were granted in 2007: 210 000 options on 30 January at an average price of NOK 58.07 and 100 000 options on 1 March at NOK 53.03. As a result of the Norwegian government’s statement on the State’s role and ownership interest in Norwegian companies, the Annual General Meeting held on 9 May 2007 resolved that no further share options should be granted, but that existing option agreements can be com-pleted.
The Board decides whether the exercise of options issued under the 2006 share option scheme will take place either from the company’s holdings of its own shares or by cash settlement. The company accordingly purchased 517 000 of its own shares on 9 June 2006 at NOK 53.15 per share and 550 000 of its own shares on 20 June 2007 at NOK 53.37 per share. There has not been any purchase of own shares in 2008 or 2009 related to the option program. Own shares purchased in 2009 are related to the share program for employees.
Options outstanding:
2009 2008 2007Options outstanding at 1.1 1 480 000 1 582 500 1 741 752Options granted – – 310 000Options exercised – – -229 252Options terminated -390 000 -90 000 -240 000Options expired – -12 500 –Options outstanding at 31.12 1 090 000 1 480 000 1 582 500 Of which fully vested 1 003 316 899 896 432 450
The average share price for options terminated in 2009 was NOK 52.10.
Terminated options in 2009 are mainly related to the resignation of Endre Rangnes and Oddgeir Hansen. The terms and conditions of options outstanding are as follows:
average e no. of year of expiry exercise pric shares
2010 51.91 830 000 2011 58.07 260 000 Total 1 090 000
Provision is made for employer’s social security contributions on the difference between the exercise price of options fully vested and the market value at 31 December 2009. Provision for employer’s social security contributions in the balance sheet was NOK 0 millions in 2009, 2008 and 2007.
The fair value of options is calculated when they are granted, and charged to profit and loss over the vesting period. The cost recognised for the option program was NOK 1.0 million in 2009, NOK 3.7 million in 2008 and NOK 6.7 millions in 2007.
Fair value of options is estimated using the Black and Scholes option pricing model. The average fair value of options as per 31 December 2009 was NOK 0.03.
Note 5Employee share based schemes
EDB
Annual Report 2009
65
Notes Group
The following assumptions are used for the calculation:
Share price when options are grantedThe share price for options granted is the market share price on the day they are granted.
Option exercise priceThe exercise price is the average share price five days before and after the date the options are granted. Options can only be exercised if the share price at the date of exercise exceeds the exercise price plus annual interest of 5.38% since the date the options were granted.
VolatilityHistoric volatility is assumed to be a reasonable indicator of future volatility. Future volatility is therefore defined as historic volatility for the same period as the vesting period. This represents volatility of 27 percent.
Life of the optionsStaff turnover for key personnel is assumed to be 10%. The expected life of options granted is defined as the vesting period for the individual elements of the option program.
DividendThe calculations assume an annual dividend increasing over the life of the options from NOK 1.00 to NOK 1.45.
Risk-free interest rateThe risk-free interest rate used for option calculations is equivalent to the yield on government bonds over the same period as the life of the options.
Cost of goods sold comprise:
(nok million) 2009 2008 2007Purchase and lease of software 571.4 620.5 576.0Purchase and lease of hardware 312.7 288.6 222.7Consulting staff 520.2 551.4 189.9Network capacity 182.3 199.9 212.2Use of goods for resale 283.5 260.8 332.1Other material costs 410.0 466.5 248.9Total cost of goods sold 2 280.1 2 387.7 1 781.8
Other operating costs comprise:
(nok million) Premises rental and other premises costs 414.0 392.2 299.2Temporary consulting staff 323.2 251.7 265.1Travel cost 128.3 143.3 75.6Accrual Oslo Municipality – 58.5 –Other operating costs 83.2 298.6 323.4Total other operating costs 948.7 1 144.3 963.3
(nok million) 2009 2008 2007Interest income 17.3 22.4 4.6Currency gains 2.4 – 1.3Other 1.6 2.8 1.7Total other financial income 21.3 25.2 7.6
Interest expenses 175.6 235.2 122.8Currency losses – 4.5 –Other 7.3 10.7 5.9Total other financial expense 182.9 250.4 128.7
Note 5 (cont.)Employee share based schemes
Note 6Cost of goods sold and other operating costs
Note 7Financial items
EDB
Annual Report 2009
66
Notes Group
Deferred tax/tax asset is calculated on the basis of the differences which exist at year-end between accounting and taxa-tion values.
Deferred tax/tax asset arises in respect of the following timing differences:
timing differences (nok million) 2009 2008 2007Intangible assets 970.3 1 030.2 320.2 Tangible fixed assets -315.2 -340.2 -233.4 Pension liabilities -208.5 -746.8 -477.6 Profit and loss account 313.5 391.8 506.1 Items recognised as comprehensive income -30.6 -79.5 13.9 Other timing differences -202.5 -8.9 -6.3 Gross timing differences 527.0 246.6 122.9 Losses carried forward -127.7 -102.7 -94.9 Basis for deferred tax/ (deferred tax asset) 399.3 143.9 28.0
Deferred tax asset 4.8 28.7 3.8 Deferred tax 118.4 68.9 11.6
The tax effect from other comprehensive income is related to fair value of financial derivatives at 31 December 2009.
The group had tax losses carried forward at 31 December 2009 totalling NOK 127.7 million. Of this, NOK 17.1 million relates to the Swedish activities. The balance of losses carried forward, NOK 110.6 million, relates to the Norwegian activities. There are no time limits to carrying forward losses incurred in Norway and Sweden. The deferred tax asset related to the losses carried forward is capitalised in the balance sheet based on approved budgets and previous taxable profits related to both the Norwegian and Swedish activities.
The deferred tax asset reported for the group relates entirely to tax losses carried forward in Sweden, since these losses carried forward cannot be applied against other positive timing differences. The deferred tax asset related to losses car-ried forward in Norway is netted in full against deferred tax in the accounts.
changes in deferred tax (nok million) 2009 2008 2007Change in deferred tax to profit and loss 84.9 -5.0 49.0 Deferred tax related to sold/purchased business – 48.9 22.1 Other changes in deferred tax not taken to profit and loss -11.5 -11.5 -1.5 Change in deferred tax in the statement of financial position 73.4 32.4 69.6
Tax cost for the year comprisesTax payable 74.2 86.8 74.0 Change in deferred tax 84.9 -5.0 49.0 Under/over accrual of tax prior year -0.7 0.6 -2.0 Total 158.4 82.4 121.0
Effect of permanent differences28% of pre-tax profit 81.8 81.6 118.8 Expenses not deductible 19.5 6.8 5.1 Non-deductible impairment of goodwill 60.8 – –Non-taxable income -2.2 -4.0 -3.5 Losses/tax rate differences abroad -0.4 -1.9 -0.5 Under/over accrual of tax prior year -0.7 0.6 -2.0 Other permanent differences -0.4 -0.7 3.1 Tax of the year 158.4 82.4 121.0
There is not proposed any dividend for 2009.
In tax terms, a dividend payment is not tax deductible for the company making the payment. For shareholders that are EEA resident taxation subjects (cf. Tax Act Section 2–38 (1)), the dividend received after 7. October 2008 is taxable by 0,84% in accordance with the exemption method. Companies outside the EEA receiving the dividend will be subject to withholding tax in accordance with the double taxation agreement between Norway and their country of residence. If there is no double taxation agreement, withholding tax of 25% is deducted from the dividend.
For personal shareholders, dividend receipts are in principle liable to tax. Personal shareholders resident in Norway are taxed on dividends in accordance with the standard deduction method.
Foreign personal shareholders will be subject to withholding tax in the same way as companies resident outside the EEA.
The company is responsible for deducting the withholding tax due on payments to foreign shareholders.
Note 8Tax
EDB
Annual Report 2009
67
Notes Group
Ordinary earnings per share is calculated as profit for the year attributable to shareholders divided by the average weighted number of shares outstanding over the year.
Diluted earnings per share is calculated as profit for the year attributable to shareholders adjusted for interest on convert-ible loan. The average weighted number of shares outstanding over the year is adjusted for all dilutive effects in respect of options and convertible loans.
The denominator for the calculation of diluted earnings per share includes all shares that may be received by holders of convertible loans and all share options that are in the money and can be exercised. For the purposes of the calculation, it is assumed that such share options were exercised at the date the option was granted.
(nok) 2009 2008 2007Profit for the year attributable to shareholders (majority) 66 500 000 168 000 000 294 400 000Share of comprehensive income attributable to shareholders (majority) 55 500 000 29 000 000 5 700 000Total Profit for the year attributable to shareholders (majority) 122 000 000 197 000 000 300 100 000
Average number of shares in the period 90 202 210 90 345 684 90 507 653Effect of employee options – – –Effect of convertible loan – – –Diluted average number of shares 90 202 210 90 345 684 90 507 653
Earnings per share (NOK) 1.35 2.18 3.32
Diluted earnings per share (NOK) 1.35 2.18 3.32
Dividend proposed for approval by the Annual General Meeting(not recognised as a liability at 31.12)Proposed total dividend payment (NOK 000) – – 108 414.8 Proposed dividend per share – – 1.20
Note 9Earnings per share
EDB
Annual Report 2009
68
Notes Group
in-house customer developed contracts (nok million) goodwill software and software total
Acquisition cost at 1.1.2009 6 440.6 416.1 631.8 7 488.4 Additions in the year – 160.8 1.3 162.1 Disposal/reclassification in the year -84.2 -1.5 -0.4 -86.1 Translation differences -29.3 8.7 -27.3 -47.8 Acquisition cost at 31.12.2009 6 327.1 584.1 605.4 7 516.6
Accumulated depreciation/write-down at 1.1.2009 -1 975.3 -75.0 -366.4 -2 416.7 Ordinary depreciation in the year – -79.3 -82.2 -161.5 Write-downs in the year -218.0 -120.2 – -338.2 Disposals in the year-ordinary depreciation 15.5 1.3 0.5 17.3 Translation differences -135.3 -2.6 15.5 -122.4 Accumulated depreciation/write-down at 31.12.2009 -2 313.1 -275.8 -432.6 -3 021.5
Book value at 31.12.2009 4 014.0 308.3 172.8 4 495.1
Economic life yearly assesment 1–4 years 2–10 yearsMethod of depreciation based on based on cash flow cash flow
Costs of NOK 160.8 million in respect of software developed in-house were capitalised in 2009. Of the costs capitalised in 2009, NOK 89.8 million relates to the project to establish EDB’s new public sector solutions for municipalities and health authorities using SAP-based solutions. The capitalised value of some part of this project was based on impairment test in 2009 written down by NOK 118 million. The development of this solution has taken somewhat longer than expected, and customers are now demanding more extensive functionality than was originally expected. The additional costs involved can to some extent be recovered through customer invoicing, but on an overall evaluation the project was written-down. The impairment test performed at 31 December 2009 showed no need for any further write-down at 31 December 2009.
NOK 61.5 million was invested in 2009 in the Bank and Finance solutions area. This investment is mainly related to the development of new credit solutions and sales support systems for a number of Nordic banks.
Other development work carried out in the group is almost entirely related to customer-specific projects. The income derived from these projects exceeds the development costs. Accordingly no material amount of costs for research and development was recognised in 2009.
Recognised goodwill and other intangible assets arise from the following acquisitions: customer contracts year (nok million) goodwill and software of purchase
Fellesdata 861.4 – 2000Guide Konsult AB 391.5 28.6 2006IBM lokalforvaltning 240.6 – 2004Outsourcingsoppdrag 274.0 – 2001Telenor Driftstjenester 198.1 – 2004Tag Systems AS 194.5 2.2 2006Spring Consulting 189.0 – 2006Datarutin 125.2 – 2006Capgemini IT drift Norge og Sverige 121.8 – 2004Unigrid 93.2 – 2001Avenir 96.6 – 2006Drop IT AB 47.1 – 2006EDB ASA 38.8 – 1999BanqIT AB 14.9 13.2 2005PDS 18.6 – 2001STI AS 11.0 – 2006Tre60 AB 24.5 – 2007CEKAB 146.4 28.3 2007Infopulse 37.2 0.0 2007TeamR3 A/S 78.2 1.2 2007Span Infotech 35.8 8.1 2007Miratech 14.9 0.9 2007IS Partner 961.7 90.3 2008Other smaller acquisitions 17.1 –Impairment Application Services -218.0 –Total 4 014.0 172.8
Note 10Intangible assets
EDB
Annual Report 2009
69
Notes Group
Allocation of goodwill to cash-generating units
(nok million)IT Operations 2 060.5 Solutions 856.2 Application services 1 009.5 Global Sourcing 87.8 Total 4 014.0
In accordance with IFRS, goodwill is tested for impairment annually by measuring the recoverable amount against book value. The test is made at the lowest level of cash generating unit in the group. The group’s segment reporting determines the lowest level of cash generating unit. One exception is made for Global Sourcing, which is retained as a separate cash generating unit since separate budgets are produced for this unit. The calculation of recoverable amount is based on future value in use, which is the net present value of future cash flows from the cash generating unit.
The number of cash generating units decreased from five in 2008 to four in 2009. IS Partner, which was a separate unit in 2008, is now split between IT Operations and Application Services in accordance with the structure of management reporting.
The estimates used to determine future cash flows and the discount rate used when calculating future value in use are subject to uncertainty.
The calculation of value in use discounts future cash flows over a five-year period. The impairment test for 2009 was carried out at 30 September 2009. The cash flows used were based on the forecast for the fourth quarter of 2009 and the budget for 2010. Future cash flows are based on assumptions about parameters including revenue and EBITA margin. Revenue and EBITA margin assumptions are based on historic revenue/margin adjusted for future developments in the market.
The Nordic IT services market showed a marked decline in 2009 due to reduced demand, resulting in pressure on prices. However, some areas of the IT solutions market showed growth, and EDB strengthened its position within bank and finance. At the start of 2010, there is still reluctance with respect to investments. EDB is experiencing growth in service areas where standardisation of IT infrastructure and automation of work processes is part of cost saving programs. This is reflected by lower demand for development projects, having a negative effect on EDB’s revenue.
The market research companies IDC and Gartner are expecting an improving trend in the IT services market during 2010, with the prospect of growth in the second half of the year. Against the background of the continuing uncertain market situation, the Board of EDB continues to focus on measures to strengthen profitability, including simplifying value chains and accelerated implementation of the group’s global delivery structure.
A terminal value is calculated for the end of the five-year period using a fixed growth rate. The calculations assume growth of 2% in the terminal value of cash flow. Future cash flows are discounted to present value using a discount rate (weighted average cost of capital – WACC) of 10%. WACC is based on a 15-year risk-free interest rate of 4.0%, gearing ratio of 55%, equity market premium of 5.0% and equity beta of 1.00. WACC is in line with market expectations for EDB and is unchanged from the WACC used in previous years. The same WACC is used for all cash generating units since differences in future uncertainty are reflected in the expected cash flows that form the basis for the calculation of future value in use.
The 2009 impairment test identified need to write down goodwill related to the cash generating unit Application Services. The performance of this area showed a positive trend for services related to the public sector, banking and finance, whereas deliveries to industrial customers reflected a sharp decline in demand over the last year due to the depressed economic situation. Market research indicates that it will take some time for this market to improve. Against this back-ground, goodwill related to Application Services was written down by NOK 218.0 million.
SensitivityThe calculations are based on assumptions about both macroeconomic and company-specific factors. Stress tests have been carried out to evaluate the sensitivity of each cash generating unit to changes in these factors.
IT OperationsA change of 1 percentage point in WACC to 11% and a reduction in growth rate to 1% would not cause any impairment for the IT Operations business area. WACC at 12% and a growth rate of 0% would result in impairment of NOK 170 million for this business area.
A reduction in EBITA margin of 1 percentage point, assuming WACC of 10% and a growth rate of 2%, would not result in impairment for this business area. Impairment would only arise for this business area in the event of a reduction in EBITA margin of 2 percentage points.
Note 10 (cont.)Intangible assets
EDB
Annual Report 2009
70
Notes Group
Solutions A change of 1 percentage point in WACC to 11% and a reduction in growth rate to 1% would not cause any impairment for the Solutions business area. Even WACC at 12% and a growth rate of 0% would not cause any impairment for this business area
A reduction in EBITA margin of 1 percentage point, assuming WACC of 10% and a growth rate of 2%, would not result in impairment for this business area. Impairment would only arise for this business area in the event of a reduction in EBITA margin of 6 percentage points.
Application ServicesWACC of 10% and a growth rate of 2% caused impairment of NOK 218 million for the Application Services business area, which was recognized in the 2009 accounts. A change of 1 percentage point in WACC to 11% and a reduction in growth rate to 1% would have caused impairment in the order of NOK 450 million. In order for there to be no impairment for this business area, EBITA margin would have needed to be 2 percentage points higher, assuming unchanged WACC and growth rate.
Global SourcingA change of 1 percentage point in WACC to 11% and a reduction in growth rate to 1% would not cause any impairment for the Global Sourcing business area. Even WACC at 12% and a growth rate of 0% would not cause any impairment for this business area.
A reduction in EBITA margin of 1 percentage point, assuming WACC of 10% and a growth rate of 2%, would not result in impairment for this business area. Impairment would only arise for this business area in the event of a reduction in EBITA margin of almost 7 percentage points.
improvements to machinery/ it asset of(nok million) leased premises 1) fixtures 1) vehicles equipment execution total
Acquisition cost at 1.1.2009 138.4 585.4 6.0 1 906.4 17.5 2 653.7Additions in the year 0.8 56.8 0.2 168.3 -13.6 212.5Disposals in the year -0.1 -36.4 -0.2 -93.1 – -129.8Translation differences -0.1 -11.3 – -24.9 – -36.3Acquisition cost at 31.12.2009 139.0 594.5 6.0 1 956.7 3.9 2 700.1Accumulated depreciation/write-downs at 1.1.2009 -80.4 -321.6 -5.8 -1 525.7 – -1 933.5Ordinary depreciation for the year -6.7 -58.0 -0.1 -155.3 – -220.1Write-downs for the year – – – -3.8 – -3.8Accumulated depreciation/write-down on sale 0.1 32.2 0.1 67.9 – 100.3Translation differences 0.0 5.6 – 18.9 – 24.5Accumulated depreciation/write-down at 31.12.2009 -87.0 -341.8 -5.8 -1 598.0 – -2 032.6
Book value at 31.12.2009 52.0 252.7 0.2 358.7 3.9 667.5
Depreciation rates 10–20% 15–30% 20% 20–33%Depreciation method Linear Linear Linear Linear1) Fixtures and fittings in leased premises are depreciated over the residual period of the lease if this is shorter than the normal depreciation period.
Book value of IT-equipment financed with financial lease is NOK 121.8 million per 31 December 2009.
Note 10 (cont.)Intangible assets
Note 11Tangible fixed assets
EDB
Annual Report 2009
71
Notes Group
registeredshares in subsidiaries owned by parent company (nok million) office share % voting % book value
EDB Business Partner Norge AS Oslo *28.4% 100% 2 200.7Fellesdata AS Oslo 100% 100% 555.4EDB Telekom AS Oslo 100% 100% 43.8EDB Business Partner AB Stockholm 100% 100% 111.5EDB Card Services AS (Tag Systems AS) Mo i Rana 100% 100% 245.3Avenir AS Oslo 100% 100% 19.6EDB Consulting Group AS (Spring Consulting AS) Oslo 100% 100% 168.2Annorledes Opplevelser AB Stockholm *49.1% 100% 36.2Spring Consulting Partner ApS (under liquidation) Holte **37.5% 100% 2.5Spring Consulting Danmark A/S Viborg **89.6% 100% 113.9Total 3 497.2* The parent company also controls 71.6% through the wholly-owned subsidiary Fellesdata AS.** The parent company controls 50.9% of Annorledes Opplevelser AB through the wholly-owned subsidiary EDB Consulting Group. EDB
Consulting Group also controls the remaining 62,5% of Spring Consulting Partner ApS. In addition the company owns 7.4% of the shares in Spring Consulting Danmark A/S, where as Spring Consulting Partner Aps controls the remaining 3.0% of Spring Consulting Danmark A/S.
In addition to subsidiaries owned by the parent company, the following companies are consolidated in the group accounts in accordance with the past equity method:
company registered office share % voting %Fellesdata Eiendom AS Oslo 100.0% 100.0%EDB Business Partner Sverige AB Stockholm 100.0% 100.0%Infovention AB Stockholm 100.0% 100.0%EDB Business Application AB Stockholm 100.0% 100.0%Kjonerud Eiendom AS Stange 100.0% 100.0%Kjonerud Teknologisenter ANS Stange 100.0% 100.0%Kommunedata AL Oslo 71.4% 71.4%Card Tagnology AB Stockholm 100.0% 100.0%Guide Konsult AB Stockholm/Guthenburg 100.0% 100.0%Drop IT AB Stockholm 100.0% 100.0%Guide Konsult Göteborg AB Guthenburg 100.0% 100.0%Guide Konsult Stockholm AB Stockholm 100.0% 100.0%EDB Card Services AB (CEK AB) Stockholm 100.0% 100.0%Tre60 AB Stockholm/Guthenburg 100.0% 100.0%NUK Holding AB Stockholm 60.1% 60.1%Infopulse Ukraine LLC Kiev 60.1% 60.1%EXMT Nordic AB Stockholm 60.1% 60.1%Miratech Corporation Ltd. Kiev 60.1% 60.1%Spring Consulting Ltd. Bulgaria 95.0% 95.0%Span Infotech (India) Private Limited Bangalore 50.7% 50.7%Span Systems Corporation Inc New Jersey, USA 50.7% 50.7%Virtu AS Oslo 100.0% 100.0%EDB BP Belgium SA/NV Brussel 100.0% 100.0%EDB BP France SAS Tolouse 100.0% 100.0%EDB BP Deutschland GmbH Köln 100.0% 100.0%EDB BP Spain S.L. Barcelona 100.0% 100.0%EDB BP Netherlands B.V. Sluiskil 100.0% 100.0%EDB BP Americas Inc. Tampa 100.0% 100.0%EDB BP UK Ltd. Twikenham 100.0% 100.0%EDB BP Italy S.R.L. Milan 100.0% 100.0%EDB BP Singapore Pte Ltd Singapore 100.0% 100.0%EDB BP Portugal Unepessoal CDA Portugal 100.0% 100.0%EDB GmbH (Austria) Austria 100.0% 100.0%
In 2009 EDB Business Partner ASA has sold the comanies Astrakan Strategisk Utbildning AS, Guide Marked Solutions AB, Miratech Ltd. and Miratech UK Ltd.
EDB BP Singapore Pte Ltd was established in 2009.
Viewcard AS has been liquidated in 2009.
Note 12Interests in sub sidi aries and associated companies
EDB
Annual Report 2009
72
Notes Group
Accounts receivable are recognised at their nominal value less a provision for losses.
(nok million) 2009 2008 2007Gross outstanding 998.0 1 168.0 932.9Provision for losses on receivables -40.8 -8.1 0.0Net accounts receivable 957.2 1 159.9 932.9
Loss on receivables to profit and loss 1.9 0.9 0.1
Age distribution accounts receivable
less 30–60 61–90 91–180 more than not than days days days 180 days overdue 30 days overdue overdue overdue overdue
Per 31.12.2009 65% 19% 4% 2% 4% 7%Per 31.12.2008 71% 18% 4% 2% 6% 0%Per 31.12.2007 68% 20% 4% 2% 5% 1%
Provision for loss on accounts receivable relates mainly to Oslo Municipality. For further information, see note 23.
(nok million) 2009 2008 2007Deferred income 192.5 157.4 145.8Implementation projects 137.9 151.0 113.1Prepaid costs 408.9 321.8 253.7Other current receivables 86.3 79.7 39.7Total 825.6 709.9 552.3
EDB has established a group bank account system whereby EDB Business Partner ASA operates the group account, while other group companies are sub-account holders. The bank nets all balances and withdrawals to create a net position that represents the credit or debit balance between DnB NOR and EDB Business Partner ASA.
The group has issued a guarantee in respect of tax deductions from salaries due to the tax authorities. The guarantee amount was NOK 140.0 million at 31 December 2009.
EDB held NOK 1.3 million of blocked deposits at 31 December 2009. This represents the balance on a separate bank account pledged in favour of Norsk Tillitsmann Pensjon AS as collateral for employees’ accrued compensation rights arising from the transition from defined benefit to defined contribution pension arrangements.
Note 13Accounts receivable
Note 14Other current receivables
Note 15Cash and cash equivalents
EDB
Annual Report 2009
73
Notes Group
The share capital of EDB Business Partner ASA at 31 December 2009 consisted of:
number par value (nok) book value (nok)Ordinary shares 91 412 684 1.75 159 972 197Whereof own shares 1 january 2009 1 067 000 1.75 1 867 250Purchase of own shares 2009 286 949 1.75 502 927Total shares outstanding 90 058 735 1.75 157 602 786There is only one class of shares.
There has been no issuing of new shares in 2009. The company had 3 160 shareholders at year-end, and Norwegian shareholders held 92,2% of the total share capital.
The largest shareholders at 31 December 2009 were:
shareholder interest
Telenor Business Partner Invest AS 51.3%Folketrygdfondet 7.8%Oslo Pensjonsforsikring 4.1%Orkla ASA 3.4%Odin Norden 2.7%Arendals Fossekompani 2.3%DnB NOR Norge 1.5%EDB Business Partner ASA 1.5%Morgan Stanley 1.2%Trafalger AS 1.0%Skagen Vekst 0.8%Pactum AS 0.8%Skandinaviska Enskilda Banken 0.8%AS Skarv 0.8%KLP Liv Norge 0.6%The Northern Trust 0.5%Handelsbanken 0.5%Other 18.4%Total 100.0%
The following members of the Board of Directors hold shares/options:
number number number number of shares of options of shares of options name 31.12.2009 31.12.2009 12.3.2010 12.3.2010Bjarne Aamodt 10 000 – 10 000 –Anders Brandt 10 000 – 10 000 –John I. Brekke 1 292 – 1 292 –Wenche Brateng 1 792 – 2 857 –
Note 16Share capital, shareholders etc.
EDB
Annual Report 2009
74
Notes Group
The following members of executive management hold shares/options:
number number number number of shares of options of shares of options name 31.12.2009 31.12.2009 1.3.2010 1.3.2010Endre Rangnes 102 800 – 74 800 –John-Arne Haugerud (acting CEO) 48 816 100 000 56 584 100 000Oddgeir Hansen 49 600 – 22 400 –Kristian Kuvaas Johansen 20 800 – 20 800 –Ivar Arne Børset 18 200 – 25 968 –Tone Øvregård 17 749 50 000 25 517 50 000Wiljar Nesse 15 000 25 000 24 987 25 000Eva Trasti 5 800 25 000 5 800 25 000Tom Scharning 5 039 25 000 14 094 25 000Johnny Rindahl 2 000 50 000 2 000 50 000Geir Remman 1 600 25 000 1 600 25 000
Mandates for the issue of sharesGeneral mandate Pursuant to Section 10–14 of the Public Limited Liability Companies Act, the Board is authorised to increase the company’s share capital by up to NOK 15,997,219 by issuing up to 9,141,268 shares each of nominal value NOK 1.75. The authorisation may be utilised in one or more share issues. The authorisation may be used to issue shares as consideration for a full or partial acquisition of other businesses. The authorisation includes increase of share capital in return for non-cash contributions or a right to assume special obligations on behalf of the company or a resolution on a merger pursuant to Section 13–5 of the Public Limited Liability Companies Act, cf Section 10–14 (2) no. 4 and no. 6 of the Public Limited Liability Companies Act. The Board may decide to set aside the preferential rights of existing shareholders to subscribe for the shares to be issued pursuant to Section 10–4 of the Public Limited Liability Companies Act. This mandate is valid until June 1 2010.
Mandate in respect of share based shemes for employees in the EDB GroupThe Board is authorised pursuant to section 9–4 in Public Limited Companies Act to purchase company’s own shares limited to nominal value of NOK 15,997,220. The company may not at any time purchase shares in such a way that the total nominal value owned by the company after the purchase exeeds 10% of the companys’s share capital. The price at which shares are purchased must be at least NOK 1.75 per share and no more than 100 NOK per share. The company’s holding of its own shares will only be used in connection with meeting its liabilities in respect of the share option scheme for key employees and/or to distribute “bonus shares” according to the share purchase scheme for all employees. The company’s purcahses and sales of its own shares shall take place through the stock exchange. This mandate is valid until June 1 2010.
Note 16 (cont.)Share capital, shareholders etc.
EDB
Annual Report 2009
75
Notes Group
(nok million) 2009 2008 2007Liabilities from financial leases 93.6 132.5 12.5Liabilities to other credit institutions 2 588.2 3 560.8 2 279.6Total 2 681.8 3 693.3 2 292.1
Interest bearing liability:
draw per 31.12.2009 maturity interest bearing debt (nok million) credit final total after (nok million) maturity nok sek 31.12.2009 2010 2011 2012 2013 2013
Syndicated facility 800.0 2012 530.0 530.0 530.0Syndicated facility (term loan) 2 010.0 2013 1 340.0 494.0 1 740.1 140.0 140.0 140.0 1 320.1Multi currency facility 500.0 2011 554.0 448.7 448.7Bond 600.0 2010 600.0 600.0 600.0Financial lease 127.6 34.0 34.0 34.0 25.6Other interest bearing liabilities 21.3 11.9 2.9 2.3 0.6 3.7Total 3 910.0 2 470.0 1 048.0 3 467.7 785.9 625.6 706.3 1 346.3 3.7
Average interest on the credit per 31 December 2009 were 3 months NIBOR/ STIBOR + 0.73%. In addition to this, the group has entered into five interest swaps exchanges (see note 21).
Commitment fee and arrangement fee is capitalized by NOK 17.6 million. From this NOK 1.5 million is charged as finance cost per 31 December 2009. The company has as part of the agreement obliged that net interest bearing debt over EBITDA (earnings before interest, tax, depreciation and amortisation) shall not exceed 3.25 more than 2 quarters during the loan period or above 3.50. The company is in compliance with financial covenants, as of 31 December 2009.
The part of the non-current interest bearing liability that is due within one year after the balance sheet date is classified as current liabilities in the balance sheet. As of 31 December 2009 NOK 785.9 million is classified as current liabilities.
(nok million) 2009 2008 2007Accrued expenses 250.6 267.1 178.5 Pre-paid to customers 168.1 150.6 113.5 Provisions 63.2 22.1 15.3 Current liabilities financial lease 34.0 39.4 12.6 Interest bearing current liabilities 751.9 142.5 11.4 Other current liabilities 60.3 176.6 114.4 Total 1 328.1 798.3 445.7
Note 17Non-current interest bearing liabilities
Note 18Other current liabilities
EDB
Annual Report 2009
76
Notes Group
onerous- restruc- (nok million) contracts turing premises total
Opening balance at 1.1.2009 58.5 6.9 2.9 68.3Provisions made in 2009 20.0 40.3 60.1 120.4Provisions applied in 2009 -16.8 -12.3 -1.5 -30.6Unused provions – – – –Translation differences – -0.4 – -0.4Closing balance at 31.12.2009 61.7 34.5 61.5 157.7
Current 61.7 34.5 17.4 113.5Non-current 44.2 44.2
Onerous contractsOf the total provision at 31 December 2009 NOK 44.5 million is related to Oslo Municipality. The provision is related to an implementation project and the balance sheet item ‘Other current receivables’ is reduced by this amount. NOK 14 mil-lion of the provision at 31 December 2008 is applied in 2009 for costs accrued in relation to the contract with Oslo Municipality.
This year’s provision of NOK 20 million is related to an onerous contract within the business area IT Operations. Of this amount, NOK 5.8 million reduces the balance sheet item ‘Other current receivables’.
RestructuringAs part of the group’s cost improvement program in 2009 to make the group’s cost base more competitive, a restructuring that involved a shut down of six locations and nearly a hundred employees was carried out autumn 2009. Provisions related to personnel is classified as restructuring in the above table, while provsions related to shut down of locations are classified as premises.
PremisesProvision is made for premises leases where the premises are not used or are sub-let with a loss.
Note 19Provisions
EDB
Annual Report 2009
77
Notes Group
Group as lessee – financial leasingEDB has entered into two financial leasing contracts for software. Software which is an integrated part of the IT equip-ment is classified as fixed assets in the statement of financial position.
Assets leased under financial leasing contracts are as follows:
(nok million) 2009 2008 2007IT equipment 155.5 155.5 21.4Disposals in the year -3.2 – –Accumulated depreciation -30.5 – -21.4Prepaid software lease 13.6 16.4 25.1Net book value 135.4 171.9 25.1
Future minimum lease payments:
Up to 1 year 39.91–5 years 101.5After 5 years –Total future minimum lease payments 141.4
Interest -13.8Present value of future minimum lease payments 127.6
Of which– current liabilities 34.0– non current liabilities 93.6
These agreements do not impose any restrictions on the company’s dividend policy or financing arrangements.
Group as lessee – operational leasingThe group has entered into a number of operational leasing contracts for IT equipment, office premises and other facilities. The majority of these leasing contracts include options to extend.
Leasing costs are made up as follows:
(nok million) 2009 2008 2007Office premises 268.8 258.9 224.8IT equipment, vehicles and other 289.7 249.7 200.7Total leasing costs 558.5 508.6 425.5
The minimum future lease payments in respect of contracts with no cancellation option fall due as follows:
Up to 1 year 389.9 1–5 years 980.8 After 5 years 766.0 Total future minimum lease payments 2 136.7
Significant lease agreementsPlatformsIn 2006 there was established a consolidated platform to utilize internal economy of scale. The hardware in this platform is leased from IBM. The technical useful life is expected to be at least 60 months. The leasing contract will expire in June 2012. There is no regulation of the leasing amount during the leasing period. The company has an option to by the hardware at markert value in the future.
Rental agreement SkøyenThe rental agreement expire in 2019. The rent is regulated annualy with the changes in CPI. The rent i based on total m2.The renter is responsible to keep original standard. The agreement may be extended further with three periodes of 5 years.
Rental agreement HortenThe rental agreement is a 80 year ground rent agreement. The rent is regulated every ten year in accordance with CPI.
Note 20Leasing contracts
EDB
Annual Report 2009
78
Notes Group
Financial riskThe group has established a strategy to manage the interest risk and currency risk associated with international invest-ments. Interest risk and currency risk are managed to ensure a high degree of predictability and lower fluctuations in interest and currency costs from year to year. The group does not intend to trade actively in the market, but evaluates the risks and enters into appropriate hedging transactions for major projects and investments.
Information on exposure to financial risk is reported on a half-yearly basis to the Board of Directors and the executive management.
Currency riskEDB’s activities internationally involve investments denominated in foreign currencies that represent financial risk in the form of currency exposure. The group is principally exposed to two types of currency risk:
– foreign investments leading to future loan repayments and/or dividend payments– contractual purchases or sales denominated in foreign currency
Foreign investments are in principle financed in the same currency as the investment, and the maturity profile of borrow-ings is arranged so that repayment coincides with dividend receipts/loan repayments from the foreign unit. For each indi-vidual exposure in excess of the equivalent of NOK 50 million, at least 80% of expected cash flow is hedged in this way.
At the end of 2009 the group had taken up a loan of SEK 1,048 million to hedge its investments in Sweden.
Translation differences in respect of this loan and receivables due from the Swedish activities are applied as compre-hensive income in the profit and loss statement.
Sensitivity analysis in respect of currency riskIf the NOK had been 10–20% stronger/weaker relative to all currencies at 31 December 2009, and all other variables had remained constant, EDB’s total profit for the year would have been NOK 66–113 million higher/lower.
Interest-rate risk and liquidity riskThe group’s policy is to maintain a base of long-term bank borrowing and to draw on long-term banking facilities to finance long-term investments. Short-term interest-bearing financing is principally used as a temporary measure in anticipation of arranging long-term financing. The group’s current short-term borrowing should not normally exceed more than 30–40% of total borrowing in order to limit refinancing risk. The interest rate risk target for the company’s borrowing portfolio is for the average interest rate fixing period to be between 0.5 and 2.5 years. Floating rate borrowing (interest rate fixing periods less than one year) shall not exceed 75% of borrowing. Similarly, fixed rate borrowing shall not exceed 75% of long-term borrowing.
In order to manage the risk associated with the borrowing portfolio and fluctuations in underlying interest rates, and to ensure a stable and predictable cash flow, the company uses financial hedging instruments. In 2008, the company entered into 3 new interest swap agreements whereby the company pays a fixed interest rate in return for receiving float-ing interest rate payments. The principal amount hedged is NOK 500 million (5 years), SEK 494 million (4 years) and NOK 230 million (3 years. The group entered into a 5-year interest swap agreement in 2007 where the principal amount is NOK 300 million, and in 2006 a 4-year interest swap with the pricipal amount of SEK 350 million. The market value is calculated on the basis of the mid-price of prices quoted in the market on the balance sheet date. However, this does not represent a trading price that could be used for purchases or sales. The different interest rate hedges are matched with different loans so the roll over for both hedges and loans are due and rolled at the same time (quarterly).
Sensitivity analysis regarding interest riskThe EDB Group calculates the valuation effects on their financial instruments by simulating a parallel shift in the interest rate curve. Based on simulations a 10 to 30% change in the curve (22 to 66 basis points) will represent an increase in the valuation of approximately NOK 6.3 to 19.0 million or a decrease in the valuation of approximately NOK 6.3 to 19.0 million. Additionally the floating part of the portfolio will at a corresponding shift lead to an improvement/aggravation of profit after tax from NOK 2.5 to 7.6 million. The effect on comprehensive income will be from NOK 8.5 to 26.6 million.
Energy contractsThe company has agreed a strategy for energy purchasing. The objective of the strategy is to reduce the risk of fluctuation in the cost of future energy purchases, and thereby stabilise the company’s cash flow and provide greater certainty for budgeting.
Credit riskCredit risk relates to the loss that the group would suffer if a counterparty proved unable to fulfil its obligations. Since the group has a large number of customers, the credit risk of large clams associated with the group’s accounts receivable is limited. The group’s maximum credit risk at 31 December 2009 was NOK 1.198 million. This include accounts receivable and other receivables, except from prepaid expenses and receivables on goverment.
Note 21Financial instruments
EDB
Annual Report 2009
79
Notes Group
Book value 31 December 2009 of financial instruments:
interest rate swap – agreements market value 31.12.2009 ineffective part of hedging
Principal amount NOK 500 million NOK -19.7 million – Principal amount SEK 494 million SEK -19.5 million – Principal amount NOK 230 million NOK -3.5 million – Principal amount NOK 300 million NOK -11.4 million – Principal amount SEK 350 million SEK -2.8 million –
Energy Contracts NOK 2.4 million NOK 2.1 million
Changes in market value of the hedging instrument since 31 December 2008 are booked as comprehensive income in the profit and loss statement. The ineffective part of hedging is booked as ‘financial/expenses income’.
Fair value hierarchy The group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilitiesLevel 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectlyLevel 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
As at 31 December 2009, the group held the following financial instruments measured at fair value (NOK million): assets measured at fair value level 1 level 2 level 3Energy contracts – hedged 2,4
liabilities measured at fair value
Interest rate swap 47,8
During the reporting period ending 31 December 2009, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.
Telenor Business Partner Invest AS owns 51.3% of the shares and rights of EDB Business Partner ASA. The consolidated financial statements of EDB are a part of the consolidated financial statement of Telenor.
The EDB Business Partner group is party to agreements for the sale of services to a number of companies in the Telenor Group. Total revenue from sales to companies in the Telenor group in 2009 amounted to NOK 594.8 million. The EDB Business Partner Group purchased goods and services from the Telenor Group in 2009 totalling NOK 193.6 million.
Services that different Telenor-companies are demanding from the EDB Group are operation of IT-systems such as UNIX, networks and office platforms. Services that EDB Group is acquiring Telenor are mainly communication services such as network services and mobile telephone services.
All transactions with the Telenor Group are carried out on normal arm’s length commercial terms. There has not been given any gurantees related to sales with any of the companies in the Telenor Group.
Outstanding accounts with Telenor-companies:
31.12.2009 31.12.2008 31.12.2007Accounts reicevable 104.4 132.4 121.0 Accounts payable 54.2 42.3 58.3
There has been no provison of losses related to outstanding accounts with Telenor-companies. Telenor Pensjonskasse has the administration of the plan assets. For information about remuneration to executive management and board of directors, see note 3.
Note 22Related parties
Note 21 (cont.)Financial instruments
EDB
Annual Report 2009
80
Notes Group
EDB repudiated its contract with Oslo Municipality in February 2009 on the basis of a material default of payment obligations resulting from commercial disagreement over payments due for deliveries of application operating services. The parties subsequently held some discussions on this matter, but did not reach agreement. In December 2009 the dispute was referred to the courts for legal proceedings. As at 31 December 2009, the group has recognised an expense of NOK 39.4 million relating to outstanding customer receivables due from Oslo Municipality. In view of this, the outstanding balance of customer receivables due from Oslo Municipality was judged to be a contingent asset at 31 December 2009 and was therefore charged as an expense in full in the consolidated accounts for 2009. Oslo Municipality has issued proceedings against EDB claiming NOK 90 million (of which NOK 45 million relates to the invoiced amount) as at 31 December 2009 and this is accordingly a contingent liability at 31 December 2009. This liability is not reflected in the accounts since it is not considered likely that Oslo Municipality will succeed in its claim. EDB has issued proceedings against the Oslo Municipality claiming NOK 130 million (of which 45 million relates to the invoiced amount).
There has been no significant events after balance sheet date, that effects the financial statement for 2009.
This note provides information on approved changes to IFRS/IAS that came into force after the end of the company’s financial year that are of relevance to the group’s activities.
The following paragraphs provide an overview of changes to IFRS/IAS standards that are relevant to the group’s activities but have not yet come into effect. The group anticipates that the implementation of the changes listed below is not expected to have any material effect on the consolidated accounts when the changes are made. However, one effect of the implementation of IFRS 3 will be changes to the accounting treatment of acquisition costs and negative minority interests following the implementation date.
Amendments to IFRS 2 Share-based Payments – Group Cash-settled Share-based payment TransactionsThe amendment to IFRS 2 provides more guidance on the accounting for group cash-settled share-based payment transactions. In addition, the definition of share based payment is somewhat modified. This amendment supersedes IFRIC 8 and IFRIC 11. This amendment is effective for annual periods beginning on or after 1 January 2010, but the amendment is not yet approved by the EU. The group expects to apply the amendment as of 1 January 2010. IFRS 3 (revised) Business CombinationsCompared to the existing IFRS 3, the revised IFRS 3 incorporates certain amendments and clarifications related to the use of the purchase method. This includes issues such as goodwill in business combinations achieved in stages, minority interests and contingent considerations. Transactions costs other than share and debt issuance costs will be expensed as incurred. IFRS 3 (R) is effective for annual periods beginning on or after 1 July 2009. The group expects to implement IFRS 3 (R) as of 1 January 2010. IFRS 9 Financial InstrumentsIFRS 9 replaces the classification and measurement rules in IAS 39 Financial Instruments- Recognition and measurement for financial instruments. According to IFRS 9 financial assets with basic loan features shall be measured at amortised cost, unless one opts to measure these assets at fair value. All other financial assets shall be measured at fair value. IFRS 9 is effective for annual periods beginning on or after 1 January 2013, but the standard is not yet approved by the EU. The group expects to apply IFRS 9 as of 1 January 2013. IAS 24 (revised) Related Party DisclosuresThe revised IAS 24 clarifies and simplifies the definition of a related party, compared to the current IAS 24. The revised standard also provides some relief for government-related entities to disclose details of all transactions with other government-related entities (as well as with the government itself). IAS 24 (R) is effective for annual periods beginning on or after 1 January 2011, but the revised standard is not yet approved by the EU. The group expects to implement IAS 24 (R) as of 1 January 2011. IAS 27 (revised) Consolidated and Separate Financial Statements The revised IAS 27 provides more guidance on accounting for changes in ownership interest in a subsidiary and the disposal of a subsidiary, compared to the current IAS 27. According to the revised standard the entity measures the interest retained in a former subsidiary at fair value upon loss of control of the subsidiary, and the corresponding gain or loss is recognised through profit and loss. The revised standard also includes a change in the requirements relating to the allocation of losses in a loss-making subsidiary. IAS 27 (R) requires total comprehensive income to be allocated between the controlling and the non-controlling party, even if this results in the non-controlling interest having a deficit balance. IAS 27 (R) is effective for annual periods beginning on or after 1 July 2009. The group plans to implement IAS 27 (R) as of 1 January 2010.
Note 23Contingent assets and liabilities
Note 24Events after balance sheet date
Note 25Approved changes to IFRS that came into force after the date of the accounts
EDB
Annual Report 2009
81
Notes Group
Amendments to IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction – Prepayments of a Minimum funding RequirementThe amendment to IFRIC 14 intends to correct an unintended consequence of IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. This amendment will allow entities to recognise a prepayment of pension contributions as an asset rather than an expense. The amendment is effective for annual periods beginning on or after 1 January 2011, but the amendment is not yet approved by the EU. The group expects to implement the amendment as of 1 January 2011. IFRIC 16 Hedges of a net investment in a foreign operationThe interpretation addresses issues relating to the accounting of a hedge of the foreign currency exposure arising from a net investment in a foreign entity. The interpretation clarifies what types of hedges that might qualify for hedge account-ing and what types of foreign currency risks that might be hedged. The interpretation is effective for annual periods beginning on or after 1 July 2009. The group plans to implement IFRIC 16 as of 1 January 2010.
EDB
Annual Report 2009
82
Financial Accounts
EDB Business
Partner ASA
Profit and loss account EDB Business Partner ASA1. January – 31. December
(nok million) note 2009 2008 2007Other operating revenue – – –Total operating revenue – – –
Wages and salaries 1,2 32.3 26.2 13.3 Other operating costs 4 2.7 37.9 5.0 Total operating costs 35.0 64.1 18.3
Operating profit -35.0 -64.1 -18.3
Income from investment in subsidiaries 3 369.4 245.5 342.1 Other financial income 5 67.4 181.8 63.1 Financial expense 5 -255.8 -293.9 -124.2 Net financial items 181.0 133.4 281.0
Profit before tax 146.0 69.3 262.7
Tax on profit 6 -41.1 -19.0 -71.1 Profit for the year 104.9 50.3 191.6
Comprehensive incomeShare option scheme employee 0.6 1.6 2.4 Cash flow hedges 15.3 -55.4 3.6 Total comprehensive income 15.9 -53.8 6.0
Total profit for the year 120.8 -3.5 197.6
EDB
Annual Report 2009
83
Financial Accounts
EDB Business
Partner ASA
Statement of financial position EDB Business Partner ASAPer 31 December
(nok million) note 2009 2008 2007Fixed assets Deferred tax asset 6 52.8 100.1 69.4 Total intangible assets 52.8 100.1 69.4
Investments in subsidiaries 8 3 497.2 3 457.8 2 105.8 Other non-current shareholdings 0.4 0.4 0.4 Non-current receivables 9 1 023.3 1 068.2 1 159.9 Total non-current financial assets 4 520.9 4 526.4 3 266.1 Total fixed assets 4 573.7 4 626.5 3 335.5
Current assets Other current deposits 9 116.4 67.7 58.8 Bank deposits 7 419.5 701.7 751.3 Total current assets 535.9 769.4 810.1 Total assets 5 109.6 5 395.9 4 145.6
Equity Share capital 10 160.0 160.0 160.0 Own shares 10 -2.4 -1.9 -1.9 Share premium 34.6 38.9 38.9 Paid-in other equity 560.4 559.8 666.6 Total paid-in equity 752.6 756.8 863.6 Retained earnings 557.3 437.1 442.2 Total equity 1 309.9 1 193.9 1 305.8
Liabilities Pension liabilities 2 12.9 13.0 10.9 Total provision for liabilities 12.9 13.0 10.9
Non-current interest bearing liabilities 9,11 2 956.7 3 890.2 2 704.6 Non-current non-interest bearing liailities 9,11 47.8 69.6 0.6 Total non-current liabilities 3 004.5 3 959.8 2 705.2
Accounts payable 7.3 8.5 4.4 Tax payable 6 – 28.7 44.8 Deductions and duties payable 9.1 3.5 4.1 Current interest bearing liabilities 9 740.0 140.0 –Other current liabilities 9 25.9 48.5 70.4 Total current liabilities 782.3 229.2 123.7 Total liabilities 3 799.7 4 202.0 2 839.8 Total liabilities and equity 5 109.6 5 395.9 4 145.6
Oslo, 23 March 2010The Board of Directors of Business Partner ASA
Bjarne AamodtChairman of the Board
Anders BrandtAnne-Lise AuknerStig Karlsson
Wenche BratengEmployee-elected member
John Ingvar BrekkeEmployee-elected member
Eirik BornøEmployee-elected member
John-Arne HaugerudActing Chief Executive Officer
Adine Grate Axen Ellen Christine Orvin Raaholt
EDB
Annual Report 2009
84
Financial Accounts
EDB Business
Partner ASA
Cash flow statement EDB Business Partner ASA1 January – 31 December
(nok million) 2009 2008 2007Cash from/to operationsProfit before tax 146.0 69.3 262.7Gain/loss on sale of fixed assets – – –Share of profit/loss in subsidiaries/associated companies -369.5 -245.5 -342.1Tax paid in the period -28.6 -44.8 -82.5Interest income/- expenses 188.4 139.8 61.1Paid interests -151.7 -184.0 -72.9Difference between pension cost and payments 5.4 2.0 -6.5Change in accounts payable 0.2 2.6 –Change in other accruals 6.8 -15.0 -10.8Net cash flow from operations -203.0 -275.6 -191.0
Cash from/to investmentsInvestment in group companies -39.4 -1 352.1 -129.2Sale of group companies – –Net cash flow from investments -39.4 -1 352.1 -129.2
Cash from/to financing New borrowing (current og non-current) 250.0 1 470.0 792.1Borrowings repaid -500.4 -140.0 -484.9Dividends paid – -108.4 -100.0Sale of own shares -4.8 – -18.8Group contribution received/paid 274.1 317.2 362.9Net cash flow from financing 18.9 1 538.8 551.3
Net change in liquid assets over the year -223.5 -88.9 231.1Bank deposits at 1.1. 701.7 751.3 527.6Currency movements in liquid assets -58.7 39.3 -7.4Bank deposits at 31.12. 419.5 701.7 751.3
EDB
Annual Report 2009
85
Financial Accounts
EDB Business
Partner ASA
Statement of changes in equityEDB Business Partner ASA
paid-in fair other share own share other value retained total capital shares premium equity reserves earnings equity
Equity at 1.1.2007 159.6 -0.9 28.6 792.6 – 247.0 1 226.9
Purchase of own shares -1.0 -28.4 -29.4Share issue 0.4 10.3 10.7Dividend -100.0 -100.0Total Profit for the year 2007 2.4 195.2 197.6Equity at 31.12.2007 160.0 -1.9 38.9 666.6 – 442.2 1 305.8
Dividend -108.4 -108.4Total profit for the year 2008 1.6 -5.1 -3.5Equity at 31.12.2008 160.0 -1.9 38.9 559.8 – 437.1 1 193.9
Purchase of own shares -0.5 -4.3 -4.8Total profit for the year 2009 0.6 120.2 120.8Equity at 31.12.2009 160.0 -2.4 34.6 560.4 – 557.3 1 309.9
EDB
Annual Report 2009
86
Accounting principles
EDB Business
Partner ASA
The accounts of EDB Business Partner ASA are prepared in accordance with the regulation in the Norwegian Accounting Act that allow simplified application of International Financial Reporting Standards, cf. Regulation no 0057 of 21 January 2008. This means that the accounting principles are the same as in the group accounts, while the disclosures are in accord-ance with the Norwegian Accounting Act.
Shares in subsidiaries are recognised in the company’s unconsolidated accounts in accordance with the cost method. Dividends and other profit distributions acrrued for in these companies are recognised as financial income in the periode to the extent that they result from profits earned during the period of ownership.
For further information about accounting principles, see group accounts.
personnel costs (nok million) 2009 2008 2007Wages and salaries 23.4 22.4 22.9Employer’s social security contributions 3.7 4.1 3.3Pension costs 2.7 4.3 -6.5Other benefits 4.0 1.5 3.6Charged other units -1.5 -6.1 -10.0Total 32.3 26.2 13.3
Average number of employees 8 10 10Average number of man-labour year 8 10 10
See note 3 – Group regarding remuneration to executive management.
Auditor’s remunerationThe following table shows the proposed remuneration to be paid to the group’s auditor, Ernst & Young AS, in respect of the audit for 2009, including the amounts invoiced in respect of audit-related and tax-related services. The amounts shown are exclusive of value added tax.
(nok million) 2009Audit fee 1.032Other services – Other assurance services 0.278Tax advice –Total 1.310
Accounting principles
Note 1Personnel costs etc.
EDB
Annual Report 2009
87
Notes EDB Business
Partner ASA
The company provides pensions principally through a collective scheme with a life insurance company. The company operates an occupational pension scheme that meets the requirements of Norwegian legislation on mandatory occupa-tional pensions. The company’s defined benefit pension scheme was terminated for all current employees with effect from 1 September 2009. Following this, the scheme applies only to 14 retired members. In connection with the termina-tion of the defined benefit scheme, the employee members were transferred to a defined contribution pension scheme administered by Vital Pensjonskasse. This scheme has 7 members.
A compensation scheme was established in connection with the termination of the defined benefit pension schemes and the transfer of their members to the defined contribution pension scheme, with the object of limiting the calculated loss in retirement pension capital incurred by employees s a result of the transfer.
An additional operating pension plan is established for executive managment. The operating pension plan is not comprised by legislation on pension and contribution pension or legislation on enterprise pension and is not fund based. The annual pension entitlement is calculated as 30% of salaries exceeding 12 G, and the annual return shall at minimum equal 12 months NIBOR 31 December previous year.
pension costs (nok million) 2009 2008 2007Current value of pension entitlement accrued over the year 2.6 4.2 4.6Interest on pension liabilities 1.2 1.3 1.0Gross pension expense 3.8 5.5 5.6Return on plan assets -1.0 -1.3 -1.1Booked difference due to changes in estimates and in the pension plan -0.3 0.1 -11.0Net pension expense 2.5 4.3 -6.5Additional schemes and early retirement 0.2 – –Pension costs charged to profit and loss 2.7 4.3 -6.5
pension liabilities (nok million) Gross liability to provide pensions 34.7 36.1 31.9Plan assets -21.1 -17.7 -17.6Changes not amortised -0.7 -5.4 -3.4Net pension liability 12.9 13.0 10.9
Pension assets in the statement of financial position – – – Pension liabilities in the statement of financial position 12.9 13.0 10.9
For assumptions used in the actuarial calculations, see note 4 – Group.
Note 2Pensions
EDB
Annual Report 2009
88
Notes EDB Business
Partner ASA
Income from investment in subsidiaries in 2009, 2008 and 2007 relates to received group contribution from equity accumulated during the period of ownership by the parent company.
Income from investment in 2009 relates to 2008 and 2009.
Other operating costs comprise:
(nok million) 2009 2008 2007Consultant costs 1.4 2.0 3.5Strategic prosesses – 35.0 –Other operating costs 1.3 0.9 1.5Total other operating costs 2.7 37.9 5.0
(nok million) 2009 2008 2007Intra-group interest income 54.5 148.8 57.2External interest income 12.9 5.2 4.9Currency gains – 27.8 1.0Total other financial income 67.4 181.8 63.1
Intra-group interest expense -35.6 66.8 –External interest expenses -160.2 224.0 121.2Currency losses -58.4 – –Other -1.6 3.1 3.0Total other financial expenses -255.8 293.9 124.2
Note 3Income from investment in subsidiaries
Note 4Other operating costs
Note 5Financial items
EDB
Annual Report 2009
89
Notes EDB Business
Partner ASA
Deferred tax/tax asset is calculated on the basis of the differences which exists at year-end between accounting and taxa-tion values.
Deferred tax/tax asset arises in respect of the following timing differences:
timing differeces (nok million) 2009 2008 2007Pension liabilities -13.5 -13.5 -12.3Group contribution – -274.8 -243.5Financial derivatives -47.9 -69.1 7.8Non-current receivables/payables -12.4 – –Losses carried forward -109.1 – –Others -5.8 0.1 0.1Gross timing differences -188.7 -357.3 -247.9
Basis for deferred tax/(deferred tax asset) -188.7 -357.3 -247.9
Deferred tax/(deferred tax asset) -52.8 -100.1 -69.4
Calculation of tax base for the yearProfit before tax 146.0 69.3 262.7Permanent differences 0.7 2.7 -8.8Change in timing differences to profit and loss -255.8 30.4 -93.9Losses carried forward 109.1 – –Basis for tax payable – 102.4 160.0
Tax cost for the year comprisesTax payable – 28.7 44.8Change in deferred tax 41.1 -8.5 26.3Under/over accrual of tax prior year – -1.2 –Total 41.1 19.0 71.1
Movement in deferred taxChange in deferred tax to profit and loss 41.1 -8.5 26.6Tax on equity transactions 6.2 -22.1 7.4Change in deferred tax in the statement of financial position 47.3 -30.6 34.0
Effect of permanent differences28% of profit before tax 40.9 19.4 73.6Expenses not deductible 0.2 0.9 0.6Non-taxable income – -0.1 -3.1Under/over accrual of tax prior year – -1.2 –Tax for the year 41.1 19.0 71.1
As a consequence of the Government’s financial help package, NOK 5.6 million can be utilized against previous years’ paid in tax. This is classified as part of the deferred tax asset in the statement of financial position.
The parent company has issued a guarantee of NOK 150 million for borrowings by subsidiaries as part of the group cash management account arrangements. In 2009 EDB Business Parter ASA has issued a new tax deduction guarantee on behalf of the subsidiaries of NOK 140 million.
Note 6Tax
Note 7Guarantees issued and contractual commitments
EDB
Annual Report 2009
90
Notes EDB Business
Partner ASA
Shares in subsidiaries are recognised in accordance with the cost method. See also note 12 – Group
(nok million) 2009 2008 2007ReceivablesNon-current interest bearing receivables 121.7 1 068.2 1 159.9Current non-interest bearing receivables 901.6 0.9 4.0Group contribution 95.3Accrued interest income 21.8 64.9 54.4Total 1 140.4 1 134.0 1 218.3
LiabilitiesNon-current interest bearing liabilities 378.0 351.3 442.0Current liabilities 2.6 6.6 29.4Accrued interest expenses 13.3 26.7 23.8Total 393.9 384.6 495.2
Non-current interest bearing receivables are due in total in 2012.
See note 16 – Group for information about share capital, shareholders etc.
(nok million) 2009 2008 2007Liabilities to subsidiaries 377.9 351.3 442.0Liabilities to credit institutions 2 578.8 3 538.9 2 262.6 Total 2 956.7 3 890.2 2 704.6
See note 17 – Group for futher information on specifications regarding liabilites to credit institutions.
See note 21 – Group regarding information on financial instruments and risk.
Telenor Business Partner Invest AS owns 51,3% of the shares and rights of EDB Business Partner ASA. The consolidated financial statements of EDB are a part of the consolidated financial statement of Telenor. Telenor Pensjonskasse has the administration of the plan assets. For information about remuneration to executive management and board of directors, see note 3 – group.
See note 22 – Group regarding related parties.
Note 8Interests in subsidiaries
Note 9Intra-group accounts receivable and payable
Note 10Share capital, shareholders etc.
Note 11Other non-current interest bearing liabilities
Note 12Related parties
EDB
Annual Report 2009
91
Auditor’s report
Auditor’s report
EDB
Annual Report 2009
92
Corporate governance
Corporate governance at EDB
EDB is committed to healthy corporate governance practices that will strengthen confidence in the company and contribute to optimal value creation over time. The objective of corporate governance is to regulate the division of roles between shareholders, the Board of Directors and ex-ecutive management more comprehensively than is required by legislation.
The Norwegian Corporate Governance Board (NCGB) has issued the Norwegian Code of Practice for Corporate Governance. The NCGB has members from a range of organisations representing share-holders, the auditing profession, finance and the stock exchange. Adherence to the Code of Practice is based on the “comply or explain” principle, which means that a company must comply with all the recommendations of the Code of Practice or explain why it has chosen an alternative approach to specific recommendations. The Oslo Stock Exchange (Oslo Børs) requires listed companies to publish an annual statement of their policy on corporate governance in accordance with the Code of Practice in force at the time.
EDB’s commitment to corporate governance is based on the following elements:• EDB will provide open, reliable and relevant
communication to the outside world about the company’s activities and its corporate gover-nance.
• EDB’s Board of Directors will be autonomous, and independent of the company’s executive management.
• EDB will pay particular attention to ensuring that there are no conflicts of interest between
the interests of its shareholders, the members of its Board of Directors and its executive manage-ment. Where conflicts of interest do arise, the company will ensure that it has rules and proce-dures to deal with the situation in a professional manner.
• EDB will ensure a clear division of responsibility between the Board of Directors and the executive management.
• EDB will treat all shareholders equally.
1. Implementation and reporting on corporate governance
Implementation EDB’s Board of Directors (the “Board”) and executive management carry out a thorough annual review of corporate governance. The company has updated its internal policies and guidelines with effect from 2010 in order to comply with the revised Norwegian Code of Practice for Corporate Governance issued on 21 October 2009 (the “Code”). The revised Code can be found at www.nues.no. EDB provides information on cor-porate governance in its annual report, and on its website at www.edb.com. The group follows all the recommendations of the Code. Accordingly, there are no deviations from the recommendations that require further comment.
EDB
Annual Report 2009
93
Corporate governance
Corporate values and ethical guidelines Confi-dence in EDB as a company and in its business activities as a whole is essential for the group’s con-tinuing competitiveness. EDB sees good corporate governance as more than following the relevant laws and regulations. Openness about the systems and procedures for the management of the group strengthens value creation, builds internal and external confidence and promotes an ethical and sustainable approach to business. EDB reviewed its business concept, strategic vision and corporate values, as well as its guidelines for business ethics, in 2008, and implemented an e-training program to ensure that all employees were fully aware of and committed to its policies and guidelines. The group implements annual measures in all business areas to ensure employee awareness of, and committ-ment to, the policies and guidelines. As a part of this, an updated version of the e-training program is being rolled out for all employees in spring 2010. The company has also established procedures to ensure that all new employees participate in the same e-training program.
2. BusinessThe business objective of EDB Business Partner ASA is defined in the company’s Articles of Asso-ciation, which state that EDB is to develop, manage and operate its own and other parties’ IT solutions, to sell services and consultancy and any activities related to those previously mentioned. The com-pany’s Articles of Association are included on page 96 of the annual report, and are published on the EDB website at www.edb.com.
3. Equity and dividendsEquity The group’s equity at 31 December 2009 was NOK 2,221 million, representing an equity ratio of 28%. The Board considers this to be satisfactory. The group’s capital adequacy is kept under constant review in relation to its objectives, strategy and risk profile.
Dividend policy The company’s objective is to generate a return for its shareholders through dividends and increases in the share price that is at least in line with the return available on similar investment opportunities of comparable risk. EDB aims to pay an annual dividend to shareholders equivalent to 20–50% of normalised post-tax profit.
The Board proposes a dividend if it is satisfied that this will not have an adverse effect on the compa-ny’s future growth ambitions and capital structure. The Board has decided to propose that the Annual General Meeting should resolve not to pay a divi-dend for 2009.
Increases in share capital The Board held one mandate in respect of increases in share capital at 31 December 2009. The mandate expires on 1 June 2010. Any new mandates will be valid for only one year to the date of the next AGM, and will be issued for specifically stated purposes. The Board will only propose increases in share capital when this is in the long-term interest of shareholders. It will normally be the case that existing sharehold-ers will be given priority subscription and allot-ment rights in any major new issue of shares.
Purchases of the company’s own shares The Board held a mandate at 31 December 2009 to buy back shares as part of the company’s share option scheme for executive personnel and to underwrite the company’s commitment to distribute bonus shares as part of the share purchase scheme for all employees. Employees can earn the right to bonus shares two years after they first purchase shares through the employee share purchase scheme.
4. Equal treatment of shareholders and transactions with close associates
Equal treatment The Articles of Association do not impose any restrictions on voting rights. All shares have equal rights.
Transactions with close associates EDB’s Board and executive management are committed to treat-ing all the company’s shareholders equally. Telenor owns 51.3% of EDB’s shares. EDB provides services to Telenor in accordance with an extensive operat-ing services agreement. EDB’s Board and manage-ment are satisfied that these and other business transactions and contracts between EDB and Tele-nor are on an ‘arm’s length’ basis. The Board will pay particular attention to obtaining independent valuations for any material transactions between the company and its close associates.
5. Freely negotiable sharesShares in EDB are freely negotiable. The Articles of Association do not impose any restrictions on transfers of shares. EDB Business Partner ASA is listed on the Oslo Stock Exchange. EDB works actively to attract the interest of potential new shareholders. Strong liquidity in the company’s shares is essential if the company is to be viewed as an attractive investment and thus achieve a low cost of capital. Members of the executive manage-ment team meet regularly with current and poten-tial shareholders in Norway, Europe and the USA. The company strives to ensure that the information provided in stock exchange announcements, meetings, reports and presentations gives a com-
EDB
Annual Report 2009
94
Corporate governance
plete picture of the company’s strategy, business areas, operations and financial results.
6. General meetingsThe Annual General Meeting of EDB The Annual General Meeting (“AGM”) is the company’s ultimate corporate body. The Board strives to ensure that AGMs are an effective forum for communication between shareholders and the Board.
Preparation for the AGM The AGM is usually held before 1 June each year, and at least by 30 June, which is the latest date permitted by company law. The 2010 AGM will be held on 6 May. The notice call-ing the AGM and any Extraordinary General Meet-ing and all supporting documentation, are made available on the company’s website (www.edb.com) and sent to shareholders by post no later than three weeks in advance of the meeting. The notice and supporting documen tation include all the neces-sary information for shareholders to form a view on the matters to be considered. In accordance with the company’s established practice, the deadline for shareholders to notify their intention to attend a general meeting can be no earlier than the day before the date of the meeting. The company’s financial calendar is notified to the market by is-suing a stock exchange announcement, and is also published on its website and in the annual report.
Participation in the AGM Shareholders must give written notice of their intention to attend the AGM, either by post, telefax or e-mail. Shareholders who are unable to attend the meeting are encouraged to appoint a proxy. The arrangements for appointing a proxy allow shareholders to specify how their proxy should vote on each matter to be considered. The Board attends the AGM, together with at least one representative from the Election Committee, and the auditor. The executive management is rep-resented at the AGM with, at a minimum, the CEO and the CFO attending.
Agenda and conduct of the AGM The Board decides the agenda for the AGM. The main agenda items are determined by the requirements of the Public Limited Liability Companies Act and Article 7 of the Articles of Association. Each AGM appoints a chairperson for the meeting, thereby ensuring that the AGM has an independent chairperson in accor-dance with the recommendations of the Code. The CEO gives a presentation of the group at each AGM. The Audit Committee and the Compensation Com-mittee present an account of their work over the
past 12 months. The AGM minutes are published on the EDB website at www.edb.com.
7. Election committeeEDB has an Election Committee comprising three members. The members of the Election Committee are elected by the AGM after considering pro-posals made by the current Election Committee. The members of the Election Committee serve for a two-year term of office. The company has arranged for shareholders to communicate their views on the composition of the Election Commit-tee through the company’s website at www.edb.com. The AGM also issues the mandate for the work of the Election Committee. These arrange-ments are formalised in the company’s Articles of Association. In addition, the AGM decides each year on the remuneration of the Election Committee.
The Election Committee’s duties are to nominate candidates for consideration by the AGM for the Chairman of the Board, the other members of the Board and the deputy members of the Board, and to nominate candidates for the members of the Election Committee. The mandate for the Election Committee includes guidance on selecting suitable candidates to ensure an appropriate composition of expertise on the Board. The Election Committee is also responsible for carrying out an annual review of the remunera-tion paid to the members and deputy members of the Board and submitting specific proposals in this respect to the AGM.
The members of the Election Committee with effect from the 2009 AGM are:• Erik Amlie, Chair• Sindre Sørbye• Bjørn Magnus Kopperud, Telenor ASA
Erik Amlie and Bjørn Magnus Kopperud come to the end of their term of office at the 2010 AGM.
Information on the membership of the Election Committee and the timetable for submitting proposals for new members can be found on the EDB website at www.edb.com.
8. Board of directors: composition and independence
The Board of EDB Business Partner has nine members, of which the shareholders elect six while the remaining three are elected by and from among the employees. Of the six shareholder-elected members, three are female, and one of the three employee representatives is female. Three
EDB
Annual Report 2009
95
Corporate governance
shareholder-elected members of the Board come to the end of their term of office at the 2010 AGM. Elections for the employee-elected members of the Board took place in Autumn 2009, and all three members were re-elected for a new term of office.
Elections to the Board Pursuant to a ruling by the Industrial Democracy Commission in 2007, EDB does not have a corporate assembly. The Board is therefore elected by the AGM. The Chairman of the Board is elected by the AGM. The Deputy Chair-man of the Board is elected by the Board.
The composition of the Board The shareholder-elected members represent wide-ranging experi-ence, with industry specific expertise from bank-ing and finance, telecommunications, industry and ICT, as well as professional expertise in HR/management, finance, accounting, technology, law and marketing. The members bring experience from Norwegian, Swedish and other European companies. EDB believes that the Board as a whole represents the best interests of all the company’s shareholders. This is achieved in part by ensuring that the Board’s expertise, capacity and diversity are well suited to the activities in which EDB is involved. The annual report includes CVs for mem-bers of the Board and information on their share-holdings in EDB. This information is also available and updated on www.edb.com.
Independence of the Board The Chairman of the Board, Bjarne Aamodt, is an employee of Telenor. Aamodt is not responsible for purchasing services or negotiating contracts in respect of products and services purchased and sold between EDB and Tele-nor, nor does he have any operational responsibility in this area. None of the other shareholder-elected members has employment or business links to Tele-nor or EDB. The Board has rules on conflicts of inter-est to ensure that any potential conflicts are identified and handled in a professional manner. The Deputy Chairman leads the Board’s consideration of any matter where the Chairman has a conflict of interest. The Board’s guidelines require that members must notify the Chairman in advance if the Board is to consider any matter in which they may have a finan-cial interest or are otherwise involved.
Holdings of shares in EDB by members of the Board Information on shares in EDB held by members of the Board can be found in Note 16 – Group, page 73.
Attendance by members of the Board at Board meetings Reference is made to the Board member’s CVs in the Board of Directors Report, on page 33–
37, which provides information on the number of Board meetings attended by each Board member.
9. The work of the BoardThe work of the Board The Board has the ultimate responsibility for the management of the group and for supervising its day-to-day management and ac-tivities in general. The main duties of the Board are to develop the company’s strategy and monitor its implementation. In addition, the Board exercises supervision responsibilities to ensure that the com-pany manages its business and assets and carries out risk management in a prudent and satisfactory manner. The Board is responsible for the appoint-ment of the CEO.
Mandate for the Board In accordance with the provi-sions of Norwegian company law, the terms of refer-ence for the Board are set out in a formal mandate that includes specific rules and guidelines on the work of the Board and decision-making. The Chair-man of the Board is responsible for ensuring that the work of the Board is carried out in an effective and proper manner in accordance with legislation.
Mandate for the CEO The Board issues a mandate for the work of the CEO. There is a clear division of responsibilities between the Board and the CEO. The CEO is responsible for the operational manage-ment of the group.
Financial reporting The Board receives periodic reports on the company’s commercial and financial status. The company follows the timetable laid down by the Oslo Stock Exchange for the publication of interim and annual reports.
Board meetings The Board holds regular meetings and a strategy meeting each year. Extraordinary Board meetings are held as and when required, to consider matters that cannot wait until the next regular meeting. In addition, the Board has appointed an Audit Committee and a Compensation Committee to work on matters in these areas.
Audit Committee The Audit Committee is appointed by the Board, and its main responsibilities are to supervise the group’s internal control systems, and to ensure that the auditor is independent and that the annual accounts give a fair picture of the group’s financial results and financial condition in accordance with generally accepted account-ing practice. The Audit Committee has reviewed the procedures for risk management and financial controls in the major areas of the group’s business activities. The Audit Committee receives reports on
Contact information:
Law firmHestenes and Dramer & Co
Attn. Frode Sulland,attorney
Tel: +47 24 14 53 50Fax: +47 24 14 53 51
E-mail:sekr3@hestenes
dramer.no
Whistle blowers
EDB
Annual Report 2009
96
Corporate governance
the work of the external auditor and the results of the audit. In addition, the Committee has reviewed the group’s work on corporate governance in EDB. The head of Internal Audit was appointed by the company.
The members of the Audit Committee with effect from the 2009 AGM are:• Adine Grate Axen, Chair• Anders Brandt• Wenche Brateng
Compensation Committee The Compensation Com-mittee makes proposals to the Board on the em-ployment terms and conditions and total remunera-tion of the CEO and other executive personnel. These proposals are also relevant for other employees.The members of the Compensation Committee with effect from the 2009 AGM are:• Ellen Christine Orvin Raaholt, Chair• Stig Karlsson• John Ingvar Brekke
Arrangements for anonymous employee contact with the Board: EDB places great importance on en-suring that employees can freely express their views and provide feedback to the Board. In order to ensure anonymity, the Board has set up a contact point for ‘whistleblowers’ through the law firm Hestenes og Dramer & Co in Oslo to ensure that information can be submitted directly to the Chairman of the Board without the company knowing the identity of the sender. The Board has instigated specific policy guidelines for handling such referrals, including arrangements to monitor the progress of each case.
The Board’s evaluation of its own work The Board carries out an annual evaluation of its own perfor-mance, working arrangements and competence. The Chairman of the Board prepares a report on this evaluation, which is made available to the Election Committee. The Board also carries out a similar evaluation of the CEO. The evaluations carried out in the previous year involved external professional assistance in order to quality-assure the evaluation methodology and the manner in which the evalua-tions were carried out.
10. Risk management and internal controlMain features EDB’s risk management and internal control is based on elements of the COSO framework, and helps ensure that EDB has unified control in place that covers the company’s operational activities, financial reporting and compliance with legislation and regulation.
Group internal audit EDB has a separate internal audit department, which reports directly to the Board and the Audit Committee. The Board has approved a mandate that defines the objectives, authority and responsibility of the internal audit function. The internal audit department is managed by the head of Internal Audit, and has five full-time equivalent employees. The department’s work is based on an annual program that is evaluated and approved by both the Board and the Audit Committee.
Finanstilsynet (the Financial Supervisory Authority of Norway) is not directly responsible for supervising EDB, but can exercise control over the group through the banks in accordance with the ICT regulations. EDB has chosen to follow an open approach in its relationship with Finanstilsynet.
Operational control EDB has implemented a regime with an Approval Authority matrix and guidelines to specify the level of authority granted to individuals and the next level of authority required to decide or approve matters beyond the individual’s author-ity. The Board approves the matrix, and the CEO has operational responsibility for ensuring that it is enforced. The group’s organisational structure defines three levels of decision-making committees, which have clearly defined authority limits for all the relevant types of decisions.
EDB has a separate legal department, managed by an in-house attorney who reports directly to the CEO. The attorney is also secretary to the Board and therefore has direct access to members of the Board. Procedures and guidelines are in place to ensure that the legal department is involved in all activity over a certain size that might represent legal risks for the group, including bidding for contracts and entering into agreements. The group has standard policies for contract terms and conditions.
EDB’s CEO and CFO hold monthly status meetings with each business area, both at the financial con-troller and senior management level. These meetings review commercial performance and decide on ap-propriate follow-up measures. Other members of the executive management team attend these meetings as required.
EDB has established a risk management process that is included as part of its delivery and development processes. The CEO and Board receive periodic reports. EDB’s framework for risk management uses a predefined process and methodology that is imple-mented at the group level, at the business area level and by the individual units. This process is adapted
Articles of associa-tion for EDB Busi-ness Partner ASAAs revised 9 May 2007
§1 Name of the companyThe name of the company is EDB Business Partner ASA. The company is a public limited company.
§2 Registered office The company’s registered office is in Oslo.
§3 Business objective The company’s business is to develop, manage and operate its own and other parties’ IT solu-tions, to sell services and consultancy and any activities related to the foregoing. These activities may be carried out by the company itself, by its subsidiaries or through collabo ration with other parties.
§4 Share capitalThe share capital is NOK 159 972 197 consisting of 91,412,684 shares each of nominal value NOK 1.75
§5 Board of directorsThe company’s Board of Directors shall have a minimum of five and a maximum of eleven mem-bers in accordance with the decision of the Gener-al Meeting. The Chairman of the Board is elected by the General Meeting. The Board of Directors shall have a Deputy Chairman, who shall be elected by the Board.
§6 Signing powers The Board of Directors acts on behalf of the com-pany and has power of signing for the company. Power of signing for the company is also vested in the Chairman and one member of the Board of Directors signing jointly.
EDB
Annual Report 2009
97
Corporate governance
to local operations. It ensures a pro-active approach to risk management, so that the risks involved in normal operations are systematically identified, analysed and managed. It also ensures that risk exposure is continually monitored at several levels. Corrective measures are identified and defined, as is responsibility for following up specific risk areas.
EDB also continually monitors market conditions and key economic figures that provide the basis for evaluating financial risk.
Risk related to financial reporting As a subsidiary of Telenor, EDB has been subject to the Sarbanes Oxley Act (SOX) because Telenor was listed on NASDAQ. Telenor decided in 2007 to discontinue its NASDAQ listing. The Board of EDB has nonetheless decided that the company will continue to comply to all prac-tical intents with the requirements of the Sarbanes Oxley Act. This requires extensive documentation of internal control for significant and key processes in the company. This reporting represents significant additional work for EDB, but also serves to improve the quality of the company’s control systems and financial reporting procedures. Extensive testing is carried out to ensure compliance with the established controls. Neither EDB’s executive management nor its auditor reported any substantive weaknesses in the related internal control systems at 31 December 2009.
Compliance with laws and regulations: EDB’s legal department, working in collaboration with the management of the business units, is responsible for ensuring that the company complies at all times with the relevant legislation and regulations, both in Norway and in the other countries where the company operates.
The company has produced written guidelines for business ethics, and all employees are required to confirm that they understand and comply with these guidelines.
Annual review of internal control by the Board: The Board receives regular reports on risk manage-ment at its meetings, through routine financial reporting and the executive management’s reports on each business area.
In addition to its regular reviews of risk manage-ment, the Board carries out an annual review of the group’s internal control systems and the major risk factors to which the group is exposed. The Board evaluates whether the systems are sufficient, appropriate and properly exercised. EDB has fol-lowed a growth strategy over recent years. In light
of this, the Board has paid particular attention to ensuring that the internal control systems apply to all aspects of the group’s activities. The Board also considers the need for any further measures in relation to the risk factors identified.
11. Remuneration of the Board of Directors and the election committee
The remuneration paid to the members of the Board is decided by the AGM having considered proposals by the Election Committee. The remu-neration paid to the members of the Election Com-mittee is decided by the AGM having considered proposals by the Board.
12. Remuneration of executive personnel The Board has approved a policy for the remunera-tion of the CEO and other executive personnel. In accordance with the requirements set out in the Public Limited Liability Companies Act, the main features of this remuneration will be subject to an advisory vote by the AGM.
EDB offers performance-based remuneration for its executive personnel, which is linked to the crea-tion of shareholder value and long-term earnings performance. The group’s system for management by objectives provides the main basis for determin-ing the remuneration of managers and employees. The group’s financial objectives represent the main parameter for evaluating executive management performance. They also determine whether bonuses are paid. The financial objectives that provide the basis for executive management bonuses include EBITA and EBITA-margin, as well as budgeted reve-nue targets. The performance of other employees is appraised relative to parameters set by the manage-ment by objectives system, as well as revenue and earnings targets for each business area. In addition to financial targets, performance appraisal includes customer satisfaction and employee satisfaction. Information on payments of performance-based remuneration to executive personnel can be found in Note 3 – Group, on page 58.
13. Information and communicationsFinancial reports and announcements: EDB nor-mally publishes its provisional annual accounts at the end of January/beginning of February. The complete annual report and accounts are distribut-ed to shareholders no later than three weeks prior to the AGM. Quarterly interim reports are normally published in the third week following the end of the quarter. EDB publishes an annual financial calendar, which can be found on the Oslo Stock Exchange website, through news agencies and on
§7 General Meeting The business of the Annual General Meeting shall be to consider and vote upon the following matters:• To elect the Chairman
of the Board of Directors and the other members of the Board of Direc-tors, together with any deputy members of the Board of Directors
• To elect the Chairman and other members of the Election Committee
• To adopt the Board of Directors’ Report and the Annual Accounts, including the payment of any dividend
• Such other matters as by the law or by opera-tion of the Articles of Association are to be dealt with at a General Meeting
The Chairman of the Board of Directors opens the General Meeting and puts forward a proposal for a person to chair the General Meeting.
Shareholders who intend to attend the General Meeting shall give the company written notice of their intention within a time limit given in the Notice of the General Meeting, which cannot expire earlier than five days before the General Meeting. Shareholders who have failed to give such notice within the time limit, can be denied admission. §8 Election committee The company shall have an Election Committee. The Annual General Meeting shall determine the Mandate of the Elec-tion Committee and shall decide the remuneration of the members of the Election Committee.
EDB
Annual Report 2009
98
Corporate governance
the EDB website. All stock exchange announcements are also distributed through Hugin, a commercial publisher of financial information.
Other market information EDB holds public pres entations for investors in connection with the publication of its interim reports. These pres-entations review the published results, market conditions and the company’s future prospects. The presentations are delivered by the CEO and the CFO at a minimum, and are distributed by webcast so that anyone unable to attend can follow the presentation in real time or view it later. Following each quarterly presentation, the CEO and the CFO hold further presentations for investors at various locations in Europe and the USA.
Quarterly interim reports, presentation material and webcasts are all available on the EDB website at www.edb.com.
In addition to these arrangements, EDB maintains regular dialogue with investment analysts and investors. The group considers it very important to inform shareholders and investors about the company’s commercial and financial performance. EDB is committed to ensuring that the participants in the stock market receive the same information at the same time. The group therefore takes a cautious approach in its contacts with individual sharehold-ers and investment analysts. The company does not participate in any meetings with investors or ana-lysts for the four weeks prior to each quarter-end. EDB satisfies the requirements for the Oslo Stock Exchange Information symbol and English symbol.
14. TakeoversFundamental considerations and responsibilities The Board of EDB is committed to equal treatment of shareholders and will ensure openness with respect to any potential takeover of the company. As a result, the Board has drawn up guidelines for its conduct in the event that any bid is made for the company. The guidelines apply where a process is initiated with a view to making a bid to acquire all or part of EDB, subject to the process having made sufficient progress to be regarded as a realistic possibility. The guidelines also cover the situation if a formal bid is made.
Equal treatment and openness EDB’s Articles of Association do not contain any restrictions or limitations on acquiring the company’s shares. Telenor held 51.3% of the company’s share capital at 31 December 2009, but has no special rights as a shareholder. The Board is committed to treating all shareholders equally.
Evaluation of a bid If a formal bid is made for EDB, the Board will normally seek to attract com-peting bids. This will not apply if the Board is able to recommend a bid received unequivocally, or if the process of seeking to attract a competing bid would cause a bid already made to be withdrawn or expire.
If a bid is received for the company’s shares, the Board will issue a statement evaluating the bid together with a recommendation on whether share-holders should or should not accept the bid. If the Board finds that it is unable to recommend whether or not shareholders should accept the bid, it will ex-plain its reasons for not making a recommendation. If the Board’s statement is not the unanimous view of the Board, this will be explained.
15. AuditorElection of the auditor: Although EDB and Telenor are both audited by Ernst & Young, different audit teams are responsible for each company.
Auditor’s relationship with the Board and the Audit Committee The auditor attends at least one meeting each year with the Board at which the com-pany’s management is not represented. The auditor participates at meetings of the Board that consider the annual accounts and participates at all meetings of the Audit Committee.
Auditor’s relationship with executive management The Board has issued guidelines for the conduct of the relationship between the auditor and the group. The Board regularly reviews this relationship, to ensure that the auditor is fulfilling a sufficiently independent and satisfactory control function. The Board has ruled that EDB can only use the auditor for consultancy work in cases where such agree-ments are specifically approved by the Board.
The Election Committee shall submit proposals to the Annual General Meet-ing in respect of the following matters:• Election of persons to
fill vacancies for the Chairman of the Board of Directors and mem-bers of the Board of Directors
• Any election of persons as deputy members of the Board of Directors
• Election of persons to fill vacancies for the Chairman and other members of the Election Committee
• The remuneration to be paid to the Chairman, the Deputy Chairman, the members of the Board of Directors and any deputy members of the Board of Directors.
The Board of Directors shall submit proposals for the remuneration to be paid to the members of the Election Committee.
§9 Share options and arrangements for distrib-uting shares to employees The limits to be applied toshare option schemes and arrangements for distrib-uting shares to employees shall be approved in advance by the Annual General Meeting.
EDB
Annual Report 2009
99
Investor information
Investor information
Share tradingEDB Business Partner ASA (“EDB” or “the Company”) is listed on the Oslo Stock Exchange (Oslo Børs), in the OB Match liquidity category. 18,675,320 EDB shares changed hands in stock exchange trading in 2009, equivalent to 20% of the total number of shares and 43% of shares in free float. Average daily turnover was 74,404 shares per day.
Return on investment and dividendThe company’s objective is to generate the best pos-sible long-term return for its shareholders, through dividends paid and share price increases that com-bined, match or exceed the return available on simi-lar investment opportunities of comparable risk. EDB aims to pay an annual dividend equivalent to 20–50% of normalised post-tax profit, defined as post-tax profit adjusted for non-recurring items such as gains on disposals, provisions for restructuring and non-recurring tax charges, subject to the Board’s assessment that this will not have an adverse effect on the company’s future growth ambitions and capi-tal structure. In view of this, the Board has decided to propose to the AGM that no dividend should be paid for the 2009 accounting year. (nok) 2009 2008 2007 2006Highest price 26.40 41.00 60.00 63.50Lowest price 10.60 10.35 38.80 45.20Closing price 23.70 13.40 40.70 55.25Dividend 0.00 0.00 1.20 1.10
Increases in share capitalThe Board will only propose increases in share capital when this is in the long-term interest of
shareholders. Existing shareholders will normally be given priority subscription and allotment rights in any major new issue of shares, even though the AGM has authorised the Board to waive these rights in certain circumstances. The Board holds a general mandate to increase the company’s share capital by up to NOK 15,997,219 by issuing up to 9,141,268 shares, each of nominal value NOK 1.75. The Board is authorised to waive the priority rights of existing shareholders in respect of any shares issued under this mandate.
Purchases of own sharesIn connection with a share purchase program for employees and an option scheme for key employees, the Board has been granted a mandate to acquire shares in the company. The mandate restricts the company’s purchases of its own shares to shares with a maximum nominal value of NOK 15,997,220. This notwithstanding, the company is not permit-ted at any time to acquire shares if the acquisition would cause the total nominal value of the com-pany’s holding of its own shares to exceed 10% of the total nominal value of the shares issued. As at 31 December 2009, EDB held 1,353,949 of its own shares.
Investor relationsEDB Business Partner ASA provides regular infor-mation to shareholders, investment analysts and other interested parties on the company’s perform-ance, activities and specific developments. The company strives to ensure that the information it provides represents the most complete and correct
Q1 Interim report April 20 2010
Annual general meeting
May 6 2010
Q2 Interim report July 15 2010
Q3 Interim report October 19 2010
Q4 Interim report and provisional annual account
for 2010 February 9 2011
Financial calendar
EDB
Annual Report 2009Investor information
100
picture possible of its activities and current business status. This helps to ensure that the pricing of the company’s shares reflects its underlying value and expectations of its future performance.
The company is required to promptly issue an-nouncements, through the Oslo Stock Exchange, regarding any events that might affect the company’s share price and are of significance for the market. These announcements are subject to relevant rules and guidelines. EDB has an established Investor Relations (IR) policy to clearly define which infor-mation must be treated as inside information and at what point it must be communicated to the Oslo Stock Exchange.
EDB maintains open and structured lines of commu-nication with the investor market and other players. The objective is to ensure that all shareholder groups have access to the same information at the same time. The company achieves this through annual reports, quarterly interim reports, presentations, webcasts of all open presentations, a capital markets day, meet-ings with investors and press releases.
The financial calendar for EDB for the coming year is published on the company’s web site. It provides the dates for events including the publication of quarterly interim reports and the Annual General Meeting. Investor road shows are an important part of our commitment to information and corporate communications. Members of the Executive Management team hold presentations in Europe and in the USA to give both potential and current investors information on EDB’s business, strategy and financial results. Contact information relating to investor relations at EDB can be found on our web site.
Analysts covering EDB AS at the end of february 2010
company analyst
ABG Sundal Collier Hallgeir HollupCarnegie Espen TorgersenCheuvreux Niklas Kristoffersson Danske Bank, Danske Equities Martin StenshallDnB NOR Markets Fredrik ThoresenFirst Securities Ole Jørgen RødFondsfinans Arild NysætherHandelsbanken Anita HuunNordea Markets Andre AdolfsenOrion Securities Jonas Jarutis Platou Markets Daniel MalmbergSEB Enskilda Securities Ole Petter KjerkreitS&P James Crawford
Shareholder structure 2009 2008Number of shareholders as of 31 December 3 160 2 256Proportion held by Norwegian shareholders 92.2% 94.4%– of which Telenor Business Partner ASA 51.3% 51.3%Proportion held by foreign shareholders 7.8% 5.6%Total number of shares as of 31 December 91 412 684 91 412 684– of which holdings of own shares 1 353 949 1 067 000
Outstanding options and additional payments for responsibilityAs a result of the Norwegian government’s state-ment on the State’s role and ownership interest in Norwegian companies, the Annual General Meeting held on 9 May 2007 resolved that no further share option schemes would be established, but that existing option arrangements would be honoured.
The Annual General Meeting held on 10 May 2006 approved an option scheme for executive manage-ment and other key employees of EDB. The scheme comprises options over 2.7 million shares. When options are exercised, the Board decides whether settlement will take the form either of delivering shares from the company’s holding of its own shares or by cash payment, but not by issuing new shares. Pursuant to the mandate granted by the AGM, the Board of EDB allocated 1.5 million options to members of the executive management and other key employees on 1 June 2006. A further 210,000 options were allocated on 30 January 2007 and 100,000 options were allocated on 1 March 2007. The exercise price for the options granted is the average volume weighted closing price on the Oslo Stock Exchange for the five days before and five days after the date of allocation. For options allo-cated to the CEO, the exercise price for the
Q40
9
Q30
9
Q20
9
Q10
9
Q40
8
Q30
8
Q20
8
Q10
8
Q40
7
Q30
7
Q20
7
Q10
7
Q40
6
Q30
6
Q20
6
Q10
6
Q40
5
Q30
5
Q20
5
Q10
5
Q40
9
Q30
9
Q20
9
Q10
9
Q40
8
Q30
8
Q20
8
Q10
8
Q40
7
Q30
7
Q20
7
Q10
7
Q40
6
Q30
6
Q20
6
Q10
6
Q40
5
Q30
5
Q20
5
Q10
5
0
20
40
60
80
0
20
40
60
80
Development EDB share priceNOK
EDB
Annual Report 2009
101
Investor information
options granted is the average volume weighted closing price on the Oslo Stock Exchange for the five days before the date of allocation. The maxi-mum gain on share options is subject to a limit of 250%. The overall vesting period for the options granted is three years. The first third of the option grant can be exercised after the first year of the vesting period, during a period of 3–10 days follow-ing each of the company’s quarterly presentations of its financial results. Similarly, the second third can be exercised after two years of the vesting period and the final third after the third year of the vesting period.
The Board of EDB Business Partner granted ap-proximately 1.9 million options in 2004 and 2005, to members of the executive management and some 50 key employees. These options have a vesting period of two years. The exercise price and exer-cise arrangements follow the same rules as the 2006 scheme.
The exercise price for these share options is based on the average market price at the time they were granted, and options can only be exercised if the current share price is equivalent to at least the price at the time of allocation, plus annual interest of 5.38%. The options outstanding at 31 December 2009 were as follows:• 830,000 options granted in May 2006 at
a market price of NOK 52.10• 260,000 options granted in January 2007
at a market price of NOK 58.07
No options were exercised in 2009.
The Annual General Meeting held on 9 May 2007 approved the payment of additional variable salary amounts for the responsibility involved in the duties performed by members of the executive management and key personnel of EDB. The addi-tional payments for responsibility are determined on an individual basis each year, and the post-tax amount of such payments must be invested in EDB shares that cannot be sold for three years. Pursuant to the mandate granted by the Annual General Meeting, the company purchased 177,000 shares on 5 February 2009 at the market price of NOK 12.00.
Analysis of shares by shareholder group at 31 December 2009 percent percentno.ofshares no.of oftotal oftotalpershareholder shareh. shareh. sharecap.1–1 000: 1 627 51% 0.8%1 001–10 000: 1 334 42% 3.6%10 001–100 000: 143 5% 4.9%100 001–1 000 000: 48 2% 16.2%1 000 001–10 000 000: 7 0% 23.2%Over 10 000 000: 1 0% 51.3%Total 3 160 100% 100.0%
Largest shareholders at 31 December 2009
Telenor Business Partner Invest AS 51.3%Folketrygdfondet 7.8%Oslo Pensjonsforsikring 4.1%Orkla ASA 3.4%Odin Norden 2.7%Arendals Fossekompani 2.3%DnB NOR Norge 1.5% EDB Business Partner 1.5%Morgan Stanley 1.2%Trafalgar AS 1.0%Skagen Vekst 0.8%Pactum AS 0.8% Skandinaviska Enskilda Banken 0.8%AS Skarv 0.8%KLP Liv Norge 0.6%The Northern Trust 0.5% Handelsbanken 0.5%Other 18.4%Total 100.0%
0
100
200
300
400
0
100
200
300
400
Q40
9
Q30
9
Q20
9
Q10
9
Q40
8
Q30
8
Q20
8
Q10
8
Q40
7
Q30
7
Q20
7
Q10
7
Q40
6
Q30
6
Q20
6
Q10
6
Q40
5
Q30
5
Q20
5
Q10
5
Q40
9
Q30
9
Q20
9
Q10
9
Q40
8
Q30
8
Q20
8
Q10
8
Q40
7
Q30
7
Q20
7
Q10
7
Q40
6
Q30
6
Q20
6
Q10
6
Q40
5
Q30
5
Q20
5
Q10
5
EDB share priceIndex
EDB Oslo Stock Exchange IT-index Oslo Stock Exchange benchmark index
EDB
Annual Report 2009
102
Investor information
Key fiures for the Group
keyfigures(nokmillion) 2009 2008 2007 2006 2005 2004Operating revenue 7 492 7 871 6 354 5 822 4 870 3 922 Profit before depreciation (EBITDA) 1 208 966 935 708 793 599 Profit before amortisation of intangible assets (EBITA) 954 670 644 397 486 364 EBITA before non-recurring items 603 724 607 541 503 364 EBITA margin 12.7% 8.5% 10.1% 6.8% 10.0% 9.3%EBITA margin before non-recurring items 8.1% 9.2% 9.5% 9.3% 10.3% 9.3%Return on invested capital (ROIC) 10.3% 12.6% 14.2% 14.6% 19.6% 19.1%Number of employees 5 991 6 175 5 201 3 849 2 664 2 480 Market capitalisation 2 166 1 225 3 720 5 038 4 439 4 484
geographicalanalysisofoperatingrevenue(nokmillion)Norway 5 169 5 548 4 269 4 400 4 168 3 568 Sweden 1 573 1 845 1 904 1 369 613 352 Other 750 478 181 53 77 3 Total 7 492 7 871 6 354 5 822 4 858 3 922 Share of revenue outside Norway 31% 30% 33% 24% 14% 9%
keyfigurespershare(nok)Earnings per share 1.35 2.18 3.32 2.47 2.66 1.95 Earnings per share before non-recurring items 2.13 2.60 12.99 3.11 2.77 2.44 EBITDA per share 13.41 10.69 10.33 7.82 8.77 6.63 Cash flow per share 6.45 7.93 7.81 7.13 6.42 6.75 Book equity per share 24.62 23.59 23.04 20.85 19.38 16.90 Average number of shares 90 202 210 90 345 684 90 507 653 90 615 314 90 380 733 90 364 424
solidity
Equity ratio 28% 25% 33% 33% 44% 38%Gearing 1.21 1.38 0.88 0.93 0.26 0.41 Net interest-bearing liabilities 2 695 2 963 1 837 1 756 454 628 Net interest-bearing liabilities/EBITDA 2.23 3.1 1.9 2.5 0.6 1.0
liquidity(nokmillion)Cash and bank deposits 773 912 480 302 245 193 Liquidity reserve 1 376 983 1 010 707 1 044 893 Cash flow from operations 582 716 707 646 580 610 Investments in fixed assets 214 329 246 292 381 233 Investments in software developed in-house 161 183 132 76 9 – Free cash flow 368 387 461 278 190 379 Free cash flow return 17.0% 31.6% 12.4% 5.5% 4.3% 8.5%Net working capital 68 94 45 119 54 -261 Working capital as percent of revenues 0.9% 1.2% 0.7% 2.0% 1.1% -6.6%
EDB
Annual Report 2009
103
Investor information
Key figures by business area
itoperations(nokmillion) 2009 2008 2007 2006 2005 2004Operating revenue 4 380 4 512 3 939 3 859 3 799 3 208 EBITA 365 401 330 336 345 302 EBITA margin 8.3% 8.9% 8.4% 8.7% 9.1% 9.4%Operational investments (CAPEX) 192 281 207 239 344 213 Number of employees 2 004 2 030 1 792 1 847 1 662 1 587
solutions(nokmillion)Operating revenue 1 507 1 427 1 373 1 215 1 141 817 EBITA 198 207 200 180 216 118 EBITA margin 13.1% 14.5% 14.6% 14.8% 18.9% 14.5%Operational investments (CAPEX) 5 12 12 11 14 7 Number of employees 1 006 985 951 831 754 639
applicationservices(nokmillion)Operating revenue 1 963 2 214 1 223 862 733EBITA 145 194 150 90 46EBITA margin 7.4% 8.8% 12.3% 10.4% 6.2%Operational investments (CAPEX) 10 6 3 2 Number of employees 2 811 2 997 2 293 976
Order backlog orderbacklog orderbacklogdistributed
(nokmillion) 31.12.2009 2010 2011 2012 2013 later
IT Operations 9 235 3 582 2 352 1 515 1 317 470 Solutions 2 750 925 715 597 340 173 Application Services 634 470 164Total order backlog 12 619 4 978 3 230 2 112 1 657 643In percent of total 39% 26% 17% 13% 5%
Cash flow per share Net cash flow from operations divided by average number of shares outstanding.
Average number of shares after dilution Average number of shares outstand-ing less the company’s holding of its own shares plus the average number of new shares equivalent to the dilution effect of employee share options and convert-ible loans.
Equity ratio Total equity capital as a percentage of total equity and liabilities.
Gearing Net interest-bearing liabilities divided by total equity.
Net interest-bearing lia bi-lities Total of current and long-term interest-bearing liabilities less cash and bank deposits.
Liquidity reserves Cashand bank deposits plus un-drawn committed credit facilities.
Return on invested capital (ROIC) EBITA adjusted for non-recurring items divided by invested capital.
Invested capital Goodwill before amortisation but after any impairments, plus net working capital plus net long-term operational assets
and commitments (deferred tax and provisions for re-structuring are not included as operational items).
Liquid assets Cash and bank deposits.
Free cash flow Cash from operations less operational investment spending.
Free cash flow return Free cash flow divided by market capitalisation.
Net working capital Inven-tories, accounts receivables and other current receiva-bles less accounts payable, tax payable, deductions and duties payable and other current liabilities.
EBITA Earnings before interests, tax and amorti-zation and write-down of intangible assets.
Key figures – definitions
EDB
Annual Report 2009
104
Executive management
Executive managementPer March 2010
John-Arne Haugerud (53)Acting President and CEOFor the last four years Haugerud has been responsible for business develop ment and planning and implementing major out sourcing assignments. Before that he was Managing Director of the IT Opera-tions business area from 2001. He has held various senior management positions at Teamco, Novit and Fellesdata since 1991. Haugerud has extensive broad experience of the bank and finance sector. Shares: 56 584. Share options: 100 000.
Tom Scharning (50)Executive Vice President ConsultingEDB Consulting includes EDB’s consulting services in the Nordic, Continental Europe, Ukraine and India. His previous work expe-rience was with the consulting firm daVinci Consulting, where he was the Sales and Marketing Director and a partner in the firm. Prior he worked as Managing Director for SPCS-Gruppen and Digital Equipment. He was also a member of the main board of the Research Council of Norway and a member of the board of ICT Norway. Tom Scharning
is an engineering graduate of the Norwegian University of Science and Technology. Tom has further qualifications in finance and management from IMD in Lausanne. Shares: 14 094. Share options: 25 000.
Wiljar I. Nesse (45)Executive Vice President Banking and FinanceWiljar Nesse’s previous work experience includes Elkem and AP Dow Jones. He joined EDB from Manamind AS, where he was the chief executive and part owner. In addition, Nesse has extensive experience of senior management positions in IT compa-nies, with particular focus on IT solutions for the finance industry. He is a business economics graduate of the Norwegian School of Economics and Business Administration. Shares: 24 987. Share options: 25 000.
Kristian Kuvaas Johansen (38)Executive Vice President Chief Financial OfficerKristian Johansen joined EDB from AF Gruppen, where he was Executive Vice President and Chief Financial Officer. Johansen also worked for a number of years in Danske Bank’s Corporate Finance departments in Oslo and London. He is a Master of Business Administration graduate of the University of New Mexico, USA. Shares: 20 800. Share options: 0.
Thorolf Thorstensen (59)Acting Executive Vice President IT OperationsThorolf Thorstensen is a mathematics and informatics graduate of the University of Oslo. Thorstensen has many years’ experi-ence in major negotiations and strategic acquisitions. Thorstensen has extensive management experience in the IT industry at all levels. He was previously a member of the executive management team at Teamco and Fellesdata, and Managing Director of IF Assistor and EDB Sweden. Shares: 0. Share options: 25 000.
EDB
Annual Report 2009
105
Executive management
Ole Urdahl (50)Executive Vice President, TelecomOle Urdahl previous experience includes running the IT Operations business area and Bank and Finance unit at EDB, and he was formerly Deputy Managing Director of EDB Teamco. He joined EDB through the acquisition of Fellesdata AS, where he was responsible for the IT operations area. Prior to this, Urdahl held senior management positions in marketing and business devel-opment at Fellesdata. Urdahl is a business economics graduate of the Norwegian School of Management. Shares: 36 149. Share options: 100 000.
Geir Inge Skålevik (41)Executive Vice President, Legal DepartmentSkålevik has held the same position since he joined EDB in 2001. Prior to this he worked in practice as an Attorney-at-Law for seven years with the Oslo law firm Grette. Skålevik graduated with a law degree from the Uni-versity of Oslo in 1994. He has particular specialised legal experience in the areas of IT and contract law, as well as in company law and stock exchange and securities legislation and transactions. His responsi-bilities at EDB include overall responsibility
for contractual processes, processes for internal authority and decision-making, and processes for Control & Compliance and Intellectual Property Management. Shares: 31 227. Share options: 50 000.
Tone Øvregård (49)Executive Vice President Human ResourcesTone Øvregård joined EDB from ErgoGroup, where she was HR Director. She has ex-tensive and varied experience of working in HR, and has held a number of senior management positions at Norway Post, including responsibility for training and management development. Øvregård holds qualifications in business organisation and management from institutions including the Norwegian School of Management.Shares: 25 517. Share options: 50 000.
Lars-Erik Johannessen (43)Executive Vice PresidentPublic Sector and IndustryLars-Erik Johannessen has previously held senior management positions in a number of companies, including Merkantildata where he was a member of the executive management team with responsibility for Ementor. Ementor, together with Eterra, represented the major business activities of Merkantildata. Johannessen joined EDB from his position as Managing Director of Avenir, which is one of Norway’s leading
IT consulting firms. He is a qualified engineer in the field of engineering cybernetics. Shares: 7 768. Share options: 50 000.
Rolf Corneliussen (53)Executive Vice President Quality and SecurityQuality assurance and security includes work on process and quality improvements using EDB’s lean manufacturing methodol-ogy and responsibility for internal IT. His previous work experience includes working for Storebrand as Executive Vice President responsible for IT, and as an Associate Partner at Accenture. Rolf Corneliussen is a business economics graduate of the Norwegian School of Economics and Busi-ness Administration, 1981. Shares: 3 825. Share options: 0.
Geir Remman (47)Executive Vice President Communications and MarketingGeir Remman joined EDB in autumn 2005. Before joining EDB, he worked for the newspaper Finansavisen for ten years – in the last five years as editor. Remman is an MBA graduate of the Norwegian School of Management. Shares: 1 600. Share options: 25 000.
Thomas Parmbäck (55)Managing Director of EDB Business Partner Sweden ABThomas Parmbäck has extensive ex-perience of both the Swedish and inter-national markets. He joined EDB from Digidoc, where he was Managing Director. Prior to this he was Managing Director of the air and ocean freight operation of ASG (later called Danzas and now DHL), Man-aging Director of an Enator subsidiary and Sales Manager at IBM. Parmbäck is a busi-ness economics graduate of the University
of Linköping, specialising in international business. Shares: 6 231. Share options: 100 000.
Eva Trasti (55)Executive Vice President DnB NOR customer relationshipEva Trasti has held a number of senior management positions in EDB, most re-cently as head of the Banking and Finance business unit. Eva Trasti has long-standing and extensive experience of the banking and finance sector. Shares: 5 800. Share options: 25 000.
EDB
Annual Report 2009
106
One improved EDB
More from our improved EDB
During 2009, EDB has focused in embedding our shared values and vision into the fabric of our culture. With our one improved EDB program, we aim to ensure that the entire company acts as one working together to help our customers generate lasting value from IT. We will always be the best provider when it comes to delivering More from IT.
We unlock substantial value through in depth technology expertise and industry knowledge. Our wide range of IT services is dedicated to matching business needs with technology opportunities.
Mission
The best partner forcreating lasting valuefrom information tech- nology for Nordic customers around the world.
Vision
Values and guiding principles
Resourceful: We build the best of our group-wide exper-tise and experience into our solutions and deliveries.
Responsive: We are close to our customers, respond effectively to their changing needs and strive for continuous improvement.
Inspiring: We translate new know- ledge into opportuni-ties and solutions to advance our customers and build our expertise.
Team spirit:We respect and truly support each other in our pursuit of common goals.
Enthusiasm:We fuel our work with inspiration and energy.
Design: Mission/CreunaConcept and text: CreunaPhoto: Bård Ek, Scanpix,
Getty Images and iStockphoto
Contents
Number of employees
EDB Consulting EDB Solutions EDB Outsourcing
Revenue (NOK)
EDB in brief
6,000 7.5 billion
EDB Business Partner ASA (EDB) is a leading in-formation technology (IT) services provider in the Nordic region. We help customers unlock substan-tial value from the entire IT services value chain, spanning solutions, consulting and outsourcing.
We have a history of successfully innovating with, and delivering business-critical solutions to public
and private sector customers. EDB serves as a res-ponsive partner, combining local expertise, deep industry knowledge and substantial international delivery capability. Our operational footprint in-cludes Europe, UK, USA, India and Ukraine.
EDB Business Partner is listed on the Oslo Stock Exchange. Ticker: EDB.
Analysis of employees by locationPercent
Norway 48%
Sweden 22%
Other 5%
Off-/near-shore 25%
02 EDB in brief
03 Practical innovation 04 TowardsdynamicIT
06 Chief Executive Officer’s introduction
08 The year 2009 08 Importantcontracts 10 Keyfiguresandevents12 Management review 12 Businessoverview 16 Strategicagenda 18 Solutions 21 Consulting 23 ITOperations 26 Riskmanagement 28 Corporateresponsibility
31 Report of the Board of Directors
42 Financial accounts 42 AnnualaccountsandnotesGroup 82 AnnualaccountsandnotesEDBBusinessPartnerASA 91 Auditor’sreport
92 Corporate governance
99 Investor information 102 Keyfigures
104 Executive management
106 One improved EDB
Practical innovation 2009
Annual reportEDB Business Partner ASANedre Skøyen vei 26P.O. Box 640 Skøyen NO–0214 Oslo Org. no: 934 382 404 MVAwww.edb.com
Ann
ua
l rep
ort 20
09
EDB B
usin
ess P
artn
er A
SA
w
ww
.ed
b.co
m
