annual report consolidated annual report 2016 - · pdf fileall amounts are in tousand kr...

These financial statements include Page

- administration report 2- income statement 7

- balance sheet 8- statement of changes in equity 10- cash flow statement 12- accounting policies 13- significant judgements and estimates 22- notes 24- signatures 33

All amounts are in tousand kr (kSEK) unless otherwise stated.

Flexenclosure ABOrg. nr 556708-2028

Annual report &

Consolidated annual report

2016The board of directors and the managing director for Flexenclosure AB hereby submits its consolitated financial statements and parent company financial statements for the period 2016

1 (33)

The company's business activities

Aside from new orders and projects deployments the most significant event for Flexenclosure in 2016 was the launch of the new eSite x10. The eSite x10 is the world’s first purpose built hybrid power system for outdoor environments. Unlike previous eSites, the x10 is not an assembly of third party products, but instead it is a fully integrated solution where Flexenclosure has two patents and a design protection. The product is notable in that it has no moving parts and it is convection cooled, meaning it is a maintenance free unit. At the end of 2016, Flexenclosure conducted field trials and the product passed successfully. The next step is proof of concept deployments with several customers, followed by volume orders in the second half of 2017.

During 2016, Flexenclosure received new orders for 200 MSEK and a letter of Intent for 95 MSEK, so the total of new business won was 295 MSEK, close to the 2015 total of 300 MSEK.

The most significant new project wins were for eCentres in Colombia and Bolivia as Flexenclosure continued to build its presence in Latin America. In addition, Flexenclosure won smaller eCentre projects in Ethiopia and on the Pacific island of Palau. The latter marks entry into the market for cable landing stations. This is a new and growing segment of the data centre market that is now emerging as the volume of undersea cables expands in the Pacific region.

Flexenclosure won business for the eSite product from two new customers in Myanmar and expansion orders from Nigeria where the company is supplying eSites to one of Africa’s largest tower companies. 2016 was however a slower year for eSite orders compared to 2015, partly because the largest tower company was in the process of managing a deployment project, and partly because Flexenclosure was transitioning from its previous product the eSite k12, to its new product the eSite x10.

The company is working to get a more even inflow of new orders, which will improve the working capital situation and give a more efficient production process.

Operations

During 2016 Flexenclosure has continued to deploy projects successfully in multiple geographies. The largest deployments during the year were the eSites in Nigeria and the eCentre in Paraguay. Smaller projects have been deployed in Myanmar and Gabon. Flexenclosure has continued to close projects that it has been involved in over a longer period. Closure of projects, that Flexenclosure has been involved in over a longer period of time, will continue during 2017 as final payments are collected. By the end of 2016, Flexenclosure had won orders for a total of 42 data centre projects and just over 3,000 eSites. The company has experience in 27 countries.

Flexenclosure AB

Org. nr 556708-2028

ADMINISTRATION REPORT

The company develops, manufactures, markets, sells and services hybrid power systems (eSite) and prefabricateddata centres (eCentre) for the ICT industry. Flexenclosure's products are built in its own factory in Vara, and installedon-site at customers' premises. The eSite uses renewable energy and shows that a transition to green energy is an effective way of reducing operating costs.

Important circumstances and significant events

Orders

2 (33)

The operational risks associated with the company's customer projects and can be substantial. In recent years, thecompany has worked to control these risks. Flexenclosures operation is primarily performed in the emerging marketswith increased risk for political and financial instability. The company has a collaboration with the Swedish ExportCredit agency (Exportkreditnämnden in Swedish) in order to mitigate these risks. It is important for the company tomaintain a high level of quality and security in projects and the work carried out by the company in existing projectshas increased its knowledge, its awareness and ability to manage the existing risks.

The company initiated an IPO process during the spring of 2016. The company did, however, not go public since the board judged it not likley for the company to raise the minimum capital needed, and should evaluate other financing options in a broader perspective.

Significant event after the end of the year

During the beginning of 2017 the company has continued to successfully carry out field trials for the newly launched product eSite X10. The field trials have been active in Nigeria and Myanmar and shown positive result.

During the first quarter of 2017, the company has continued the work of collecting old payments and succeeded to collect a total amount exceeding 4 MUSD. The most important collection was a receivable from Angola, just short of 2 MUSD.

Significant risks and uncertanties

Operational risks

Financial

Revenue for 2016 was 305,4 MSEK, an improvement of 39% compared to 2015. Of the total revenue, eSite generated 219,8 MSEK and eCentre 76,7 MSEK. The gross margin improved by 4%-points to 22%, compared to last year. The company have maintained a better margin in our projects throughout the year due to improved processes and internal controls. This has resulted in a margin exceeding 20% five quarters in a row.The operating expenditures have decreased compared to last year by 7 %. The EBITDA was -22,7 MSEK, an improvement of 62% compared to last year. EBITDA for the eSite product only, was positive by 2,5 MSEK.

Flexenclosure has had a difficult time collecting cash, resulting in periods of severe cash shortage that has damaged the profitability of the projects and adversely impacted supplier and customer relationships. The company is not in dispute with any customers over cash owed, but several customers have been very slow payers based on a combination of their own liquidity challenges or central bank currency restrictions.

The equity in the balance sheet at the end of the period was 33,3 MSEK inkluding minority shares, giving an equity ratio of 12 %.

3 (33)

The company has customers in several countries and is thereby exposed to potential foreign exchange risks, primarily in USD. A major part of the costs is in SEK, with some purchases of goods and material also made in USD and Euro. The company does not secure or hedge this risk, however it is working to mitigate the risk as much as possible. The company has both receivables and payables exposed in foreign currencies, and is trying to match ingoing and outgoing payments in the same currency. The company also works to mitigate these risks by getting advance payments from customers, working with letter of credits as well as guarantees issued by EKN.

Anticipated future progress

The growth achieved by the company in 2016 has in many ways tested the company's ability in terms of bothproduction and logistics but is has also enhanced the company's expertise and built it market presence to an equalextent. 2016 marked an important step forward for Flexenclosure and the experience gained from that year isextremely valuable for the future in view of the predicted continued growth in both company's product markets.Flexenclosure has during the years established itself as a global player for environmental products. The company willcontinue to develop its products and will launch new innovations during 2017.

In the company, there is a loss carried forward of 442 MSEK, which could be used against future profits. The deferredtax recoverable amounts to 22% of the losses. As the company, has not accounted any profit, the board has decidednot to activate the asset in the balance sheet, but will do so when the company shows a stable profit.

The company’s board and owners are currently involved in an ongoing process to raise new equity and secure a longterm financial solution for the company. The process is expected to close in Q2 2017.

Shareholders with an ownership in the company exceeding 10%:

Pegroco Invest AB 32%

AB Flexen Intressenter 13.60%

Financial risks

The company has a policy to decrease the financial costs and control and mitigate all the financial risks in the company,like levels of interests, foreign exchange risks, refinancing and counterparty risks.

The company is working to get sufficient working capital. This will be done by increasing the equity via a rights issue or other external financing of the company. The main shareholder, Pegroco Invest AB, has issued a “letter of comfort” committing to, alone and/ or with other shareholders, provide the company with needed capital until such time that the company is profitable and has a positive cash flow.

The liquidity of the company improved during the first and the last quarter due to the two rights issue during the year.

One risk is the lack of hard currencies, primarily dollars, in certain countries where the company is operating. The currency restrictions and macroeconomic environments in some of the geographical areas where the company operates, have had an impact on the company’s abilities to collect payments.

4 (33)

2016 2015 2014 2013 2012

Order intake MSEK 295 300 269 219 73 Revenue 1) kSEK 305,394 220,450 427,544 52,465 65,998 EBITDA kSEK -22,772 -59,479 -39,164 -65,743 -58,936 Result before tax kSEK -44,110 -103,823 -57,765 -80,108 -68,515 Total assets kSEK 276,450 330,301 375,592 99,237 98,609 Solidity % 12% -8% 20% 33% 19%

2016 2015 2014 2013 2012

Order intake MSEK 295 300 269 219 73 Revenue 1) kSEK 301,344 220,450 427,544 52,465 65,998 EBITDA kSEK -23,479 -58,917 -41,465 -63,275 -53,676 Result before tax kSEK -44,781 -103,260 -60,066 -78,704 -72,506 Total assets kSEK 274,798 330,168 374,436 100,650 98,871 Solidity % 12% -8% 20% 34% 18%

1) Revenue comprises of Net revenue and Other operating income

Multi-year review, Group

Multi-year review, Parent company

Change in Equity

5 (33)

Profit/losses brought forward 41,148,448Profit for the year -44,780,925

-3,632,477

The board of directors propose the total profit/loss brought forward is appropriated as follows:

to be brought forward -3,632,477-3,632,477

Appropriation of earnings

The following profits/losses brought forward are to be decided upon by the annual general meeteing (SEK):

6 (33)

kSEK Not

01/01/201631/12/2016

01/01/201531/12/2015

01/01/201631/12/2016

01/01/201531/12/2015

Operating income etc.

Revenue 3 296,485 180,895 292,709 180,895Work performed by the company for its own use and capitalized 14,540 23,578 14,540 23,578Other operating income 3 8,909 39,555 8,635 39,555Total operating income etc. 319,934 244,028 315,884 244,028

Operating expenses

Raw materials and consumables -235,879 -206,886 -235,464 -206,886Other external costs 4, 5 -41,104 -28,181 -40,135 -27,655Personnel costs 6 -65,723 -68,440 -63,764 -68,404Depreciation of tangible and intangible fixed assets -6,408 -17,684 -6,372 -17,684Total operating expenses -349,114 -321,191 -345,735 -320,628Operating profit -29,180 -77,163 -29,851 -76,600

Gain from financial items:

Other interest income and similar items 700 – 700 –Interest expense and similar items 7 -15,630 -26,660 -15,630 -26,660Profit after financial items -44,110 -103,823 -44,781 -103,260

Income tax on profit for the year 8 -241 – – –Profit for the year -44,351 -103,823 -44,781 -103,260

Attributable to:Parent company shareholders -44,351 -103,823Minority shareholders – –


INCOME STATEMENT

Group Parent company

7 (33)

kSEK Notes 31/12/2016 31/12/2015 31/12/2016 31/12/2015

ASSETS

Fixed assets

Intangible fixed assets

Capitalised expenditure for product development and similar 9 55,383 46,603 55,383 46,603Goodwill 10 – 510 – 510Advance payments for intangible fixed assets

– – – –Total intangible fixed assets 55,383 47,113 55,383 47,113

Tangible fixed assets

Equipment, tools, fixtures and fittings 11 218 427 146 247Total tangible fixed assets 218 427 146 247

Financial fixed assets

Participations in group companies 12 – – 706 832Receivables from group companies 13 – – 639 604Total financial fixed assets 0 0 1,345 1,436

Total fixed assets 55,601 47,540 56,874 48,796

Current assets

Inventories etc.

Raw materials and consumables 14,442 12,694 14,011 12,694Total inventories 14,442 12,694 14,011 12,694

Current receivables

Trade receivables 144,809 162,075 143,693 162,075Other receivables 12,945 49,928 11,765 48,802Prepaid expenses and accrued income 14 47,868 57,563 47,859 57,563Total current recievables 205,622 269,567 203,317 268,441

Cash and bank 785 500 597 237

Total current assets 220,849 282,761 217,925 281,372

Total assets 276,450 330,301 274,798 330,168


BALANCE SHEET


8 (33)

kSEK Notes 31/12/2016 31/12/2015 31/12/2016 31/12/2015

Equity and liabilities

Equity 15Restricted equity

Share capital 21,217 3,793 21,217 3,793Development fund 14,540 14,540Total restricted equity 35,757 3,793 35,757 3,793

Non-restricted equity

Share premium reserve 41,427 74,365Profit for the year -44,351 -103,823Profit brought forward 41,148 73,827Profit for the year -44,781 -103,260Total non-restricted equity -2,924 -29,458 -3,633 -29,434

Equty attributable to parent company shareholders 32,833 -25,665

Minority shareholding 498 498Total equity 33,331 -25,167 32,125 -25,640

Other provisions 16 4,748 4,133 4,748 4,133Total provisions 4,748 4,133 4,748 4,133

Long-term liabilities

Liabilities to credit institutions 18 16,231 9,217 16,231 9,217Other liabilities – 16 – –Total long-term liabilities 16,231 9,233 16,231 9,217

Current liabilities

Liabilities to credit institutions 18 47,524 42,838 47,524 42,838Bank overdraft facilities 19 – 29,426 – 29,426Advance payments from customers 22,734 63,735 22,734 63,735Accounts payable 41,547 138,732 41,285 138,732Liabilities to group companies – – 264 –Current tax liabilities 210 – – –Other liabilities 52,995 19,393 52,994 19,793Accrued expenses and deferred income 20 57,130 47,977 56,894 47,933Total current liabilities 222,140 342,102 221,695 342,457

Total equity and liabilities 276,450 330,301 274,798 330,168


BALANCE SHEET


9 (33)

Group Share capital Other contributed

capital

Other equity incl. profit for

the year

Parent company

shareholders equity

Minority share Total equity

Balance brought forward01/01/2016 3,793 368,523 -397,981 -25,665 498 -25,167New shares issue 17,424 85,122 102,545 102,545Development fund 14,540 -14,540 –Net profit for the year -44,351 -44,351 -44,351Translation difference 304 304 304Balance carried forward31/12/2016 21,217 468,185 -456,568 32,833 498 33,331


CHANGE IN EQUITY

10 (33)

Parent company Share capital Restricted reserves

Profit or loss brought forward

Net profit for the year

Total equity

Balance brought forward01/01/2016 3,793 73,828 -103,260 -25,639Reclassification of profit from previous year -103,260 103,260 –New shares issue 17,424 85,122 102,546

Development fund 14,540 -14,540Net profit for the year -44,781 -44,781Balance brought forward31/12/2016 21,217 14,540 41,150 -44,781 32,125

Flexenclosure AB

Org. nr 556708-2028

CHANGE IN EQUITY

11 (33)

kSEK Note

01/01/201631/12/2016

01/01/201531/12/2015

01/01/201631/12/2016

01/01/201531/12/2015

Operating activities

Operating profit -29,180 -77,163 -29,851 -76,600Adjustment for non-cash items, etc. 27 7,224 17,621 7,113 17,623Interest received 700 – 700 –Interest paid -15,630 -26,660 -15,630 -26,660Cash flow from operating activities before changes in working capital -36,886 -86,202 -37,668 -85,638Cash flow from changes in working capital

Change in inventories -1,748 3,011 -1,317 3,011Change in trade receivables and other receivables 63,945 45,074 65,124 44,967Change in trade payables and other liabilities

-95,221 49,688 -96,023 50,163Net cash flow from operating activities -69,911 11,571 -69,885 12,504

Investing activities

Acquisition of subsidary – – – -400Acquisition of intangible fixed assets -14,540 -23,578 -14,540 -23,578Acquisition of tangible fixed assets -83 -222 – -214Acquisition of financial fixed assets – – – -604Disposal of financial fixed assets – – -35 –Cash flow from investing activities -14,623 -23,800 -14,575 -24,796

Financing activities

New share issue 102,546 2,405 102,546 2,405New borrowings 7,014 9,530 7,014 9,514Repayment of borrowings 4,686 -2,459 4,686 -2,459Change in bank overdraft facilities -29,426 -571 -29,426 -571Cash flow from financing activities 84,820 8,906 84,820 8,890

Cash flow for the year 286 -3,323 360 -3,403

Cash and cash equivalents at the beginning of the year 500 3,822 236 3,639Cash and cash equivalents at year-end 786 500 596 236


CASH FLOW STATEMENT


12 (33)

Note1 Accounting and valuation principles

The financial reports of the Group and the Parent company have been prepared in accordance with the Annual Accounts Act and BRNAR 2012:1 (K3). The principles applied are unchanged compared to last year.

The most important accounting and valuation principles used in the preparation of the financial reports are summarised below.

Valuation principles for consolidated accounts

Consolidated accounts

In the consolidated account, the operations of Flexenclosure AB and all subsidiaries are consolidated up until and including 31 December 2016. Subsidiaries are all companies in which Flexenclosure has the right to draw up the Company’s financial and operational strategies for the purpose of receiving financial benefits. Flexenclosure achieves and exercises a deciding influence by holding more than half of the votes. Companies set up for particular purposes are also consolidated if Flexenclosure AB has a deciding influence, irrespective of whether there is an ownership share or not. The balance sheet date of all subsidiaries is 31 December and they apply Flexenclosure’s valuation principles.

The consolidated accounts are presented in SEK, which is also Flexenclosures AB's reporting currency.

Profit/loss for subsidiaries purchased or sold during the year are reported as from the date the purchase or sale came into force, according to what is applicable.

Minority interests, which are reported as part of equity, represent the proportion of a subsidiary’s profit/loss and net assets that is now owned by Flexenclosure. Flexenclosure allocates the net profit/loss from the subsidiaries between Flexenclosure AB’s owner and the minority based on their respective ownership shares.

Amounts reported in the financial reports for subsidiaries have been adjusted where required in order to safeguard correspondence with Flexenclosure’s accounting principles.

All subsidiaries in the Group are subsidiaries started by the Company.

Acquisition method

Flexenclosure applies the acquisition method when reporting company acquisitions entailing that the reported value of Flexenclosure AB’s participations in Group companies are eliminated by being offset against the subsidiary’s equity at the time of acquisition.

Flexenclosure AB draws up an acquisition analysis as at the time of acquisition in order to identify Flexenclosure’s acquisition value, both for the participations and also for the subsidiary’s assets, provisions and liabilities. The company acquisition is reported in the Group as from the time of acquisition.

All subsidiaries in the Group are subsidiaries started by the Company.

Flexenclosure AB

Org. nr 556708-2028

Notes to the financial statements

13 (33)

Flexenclosure AB

Org. nr 556708-2028

Translation of foreign operations

Foreign operations

On consolidation, assets and liabilities, including goodwill and other Group-wide surplus or shortfall values are translated to SEK at the exchange rate on the balance sheet date. Income and expenses are translated to SEK according to an average exchange rate for the reporting period, which constitutes an approximation of the transaction rate. Exchange rate differences that arise on translation of foreign operations are reported in equity.

Valuation principles for income statement

Income

Income arises from the sale of goods and the performance of services and is reported in the item Revenue. Income is valued at the fair value of what has been received or will be received for goods delivered and services performed, i.e. at sales price excluding trade discounts, quantity discounts and similar price deductions and value added tax. Amounts received on behalf of another are not included in Flexenclosure’s income.

Sale of goods

Sale of goods is reported when Flexenclosure has transferred the significant risks and benefits associated with ownership of the goods to the customer, the goods have been delivered to the customer and the expenses that arise as a result of the transaction can be calculated in a reliable way. Income from sale of goods that do not have any significant service obligations is reported on delivery.

The eSite production area: Income derived from shipping of products for the eSite production area is recognised when the risk passes to the purchaser. Income derived from installing the product is recognised when the product is installed and commissioned by the customer.

Contract assignments and service assignments at fixed price

Ongoing projects on behalf of clients are recognised in accordance with the principle of revenue recognition of work in progress whereby revenue recognition takes place in accordance with the respective degree of completion of the assignment. When the outcome can be estimated reliably, income from assignments and expenses related to assignments are recognised in the income statement on the basis of the degree of completion of the tasks under the agreement at the balance sheet date.

The eCentre production area: The degree of completion is established by comparing assignment expenses incurred with the total assignment expenses.

When Flexenclosure cannot estimate the outcome of an assignment in a reliable way, assignment income is reported in an amount corresponding to assignment expenses incurred which probably will be reimbursed by the customer. On all occasions when it is probable that the total assignment expenses will exceed the total assignment income, the anticipated loss is reported immediately in the income statement.

14 (33)

Flexenclosure AB

Org. nr 556708-2028

When it is no longer probable that payment will be received for amounts that have already been reported as income, the amount that will probably not be received is reported as a cost.Income from service assignment with an uncertain number of activities over a fixed period of time are reported in a linear manner over this time period.

The gross amounts to be paid by customers for assignments are reported in the item Prepaid expenses and accrued income for all assignments in progress where assignment expenses and reported profits (after deduction of reported losses) exceed the invoiced amount. The gross amounts to be paid by customers for assignments are reported in the item Advance payments from customers for all assignments in progress where the invoiced amount exceeds the assignment expenses and reported profits (after deduction of reported losses).

Contract assignments and service assignments at cost plus

Contract assignments/service assignments at cost plus are recognised in revenue at the rate the work is done and material is delivered or consumed.

Valuation principles for balance sheet

Intangible fixed assets

Intangible fixed assets are valued at acquisition value minus accumulated depreciation and impairment. The acquisition value does not include borrowing expenses.

Development expenses brought forward

Flexenclosure carried out development products in order to develop the Group’s commercial productseSite and eCenter and support systems for administration and production.

Expenses for the research phase in a development project are written off during the period in which they arise.

Expenses that are directly attributable to the development phase of a development project are reported as an intangible fixed asset, provided they fulfil the following requirements:

* It is technically possible to complete the asset so that it can be used or sold.* Flexenclosure intends to complete the asset and use or sell it.* Flexenclosure has the prerequisites to use or sell the asset.* It is probable that the asset will generate future financial benefits. * There are sufficient resources to complete the asset and to use or sell it.* The development expense can be measured in a reliable way.

Development expenses that do not fulfil these criteria for capitalisation are written off as they arise. The acquisition value of expenses brought forward include the expenses for the production of the asset. Directly attributable expenses include personnel expenses arising from the work on development and direct expenses for external consultants.

The Company calculates attributable personnel expenses by following up the number of man hours expended on each development project. Expenses per man hour is valued at actual monthly salary and the estimated payroll overhead including pension recalculated on an hourly basis.

15 (33)

Flexenclosure AB

Org. nr 556708-2028

The reported value of all development projects capitalised is revalued by the Company management whenever it is established that the reported value of a development project is higher than the estimated fair value. When it can be established that the reported value is higher than the estimated fair value, an impairment is carried out in the income statement.

Goodwill

Goodwill represents the difference between the acquisition value of a company acquisition and the fair value of the acquired assets, liabilities and contingent liabilities.

Software

Capitalised expenses for software purchased consist of the expenses for purchase and installation of the specific software.

Depreciation

Depreciation of the depreciable amount is done in a linear way over the expected useful life. Depreciation starts when the asset can be used. Licences are written off over the contract period. The useful life is reviewed at each balance sheet date. For capitalised expenses for development, the depreciation period is based on the product's forecast life cycle. The assets are subject to linear depreciation over the assets' useful life. The useful life is reviewed at each balance sheet date.

The following useful lives are used:

* Development expenses brought forward: 5 years* Licences: 5 years* Goodwill: 10 years

Goodwill is currently depreciated over a period in excess of five years when it relates to a net asset acquisition, where Flexenclosure AB’s business and company name was acquired.

Removal from the balance sheet

Intangible fixed assets are removed from the balance sheet on scrapping or disposal, or when no future financial benefits are expected from the use, scrapping or disposal of the asset.When intangible fixed assets are sold, the capital gain is calculated as the difference between the sale price and the reported value of the asset, and is reported in the income statement in one or the other of the items Other operating income or Other operating expenses.

Tangible fixed assets

Tangible fixed assets are initially reported at the acquisition value or manufacturing cost including expenses for getting the asset into place and in condition to use as was the intention of the investment. The acquisition value includes the purchase price and all other directly attributable expenses, such as expenses for delivery, handling, installation, assembly and consultancy services.

The acquisition value of the Group’s buildings/machines has been allocated according to component. Tangible fixed assets are thereafter valued at acquisition value minus accumulated depreciation and impairment.

16 (33)

Flexenclosure AB

Org. nr 556708-2028

Depreciation

Depreciation of tangible fixed assets is made of the asset’s depreciable amount over its useful life, and starts when the asset is taken into use. Depreciation is done in a linear way. The following useful lives are applied:

* Equipment, tools, fixtures and fittings: 3-5 years

Removal from the balance sheet

Tangible fixed assets are removed from the balance sheet on scrapping or disposal, or when no future financial benefits are expected from the use, scrapping or disposal of the asset or component.

When tangible fixed assets are sold, the capital gain is calculated as the difference between the sale price and the reported value of the asset, and is reported in the income statement in one or the other of the items Other operating income or Other operating expenses.

Leasing

Leasing agreements are classified as either financial or operational leasing at the time they are entered into.All leasing agreements within Flexenclosure are classified as operational leasing.

Operational leasing

Leasing agreements that are not financial leasing agreements are operational leasing agreements. When Flexenclosure is the leaseholder, leasing fees relating to operational leasing agreements are written off in a linear way over the leasing period. Additional costs, such as maintenance and insurance, are written off as they arise.

Assessment of impairment requirement for intangible and tangible fixed assets

At each balance sheet date, an assessment is made of whether there is any indication that the value of an asset is lower than its reported value. If there is such an indication, the recovery value of the asset is calculated. If the recovery value is less than the reported value, an impairment is made which is written off.

An intangible fixed asset produced in-house which is not yet completed for use or sale on the balance sheet date is always assessed for impairment.

The recovery value of an asset or a cash-generating unit is the highest of fair value minus sales costs and the value in use. Fair value minus sales costs constitutes the price that Flexenclosure would expect to get from a sale between knowledgeable parties who are independent of each other and who are interested in the transaction being completed. Deduction is made of such costs as are directly attributable to the sale. The value in use consists of future cash flows to which an asset or a cash-generating unit is expected to give rise.

On impairment assessment, assets are grouped into cash-generating units. A cash-generating unit is the smallest identifiable group receiving payments that are independent in all significant respects. The result is that the impairment need of certain assets is assessed on an individual basis, and some are assessed at cash-generating unit level.

17 (33)

Flexenclosure AB

Org. nr 556708-2028

With the exception of goodwill, a new assessment is made of all assets for any sign that a previous impairment no longer is justified. An impairment is reversed if the recoverable value of the asset or the cash-generating unit exceeds the reported value and is allocated proportionally over all assets, apart from goodwill.

Receivables and liabilities in foreign currency

Monetary items in foreign currency are translated at the exchange rate on the balance sheet date and the exchange rate differences that arise are reported in the income statement. Exchange rate gains and losses relating to operational receivables and liabilities in foreign currency are reported in the items Other operating income and Other operating expenses. Realized exchange rate gain may occur at time of payment of receivables. Other exchange rate gains and losses are reported under the heading Profit/loss from financial items.

Non-monetary items are not recalculated on the balance sheet date and are valued at acquisition A monetary item that is considered to be part of the Group’s net investment in a foreign operation is reported in the Company where the difference arose and in the consolidated accounts as a separate component direct in equity.

Financial instrumentsReporting and valuation

Financial instruments

Financial assets and liabilities are reported when Flexenclosure becomes part of the contractual terms and conditions of the financial instrument.

Accounts receivable – trade are valued at acquisition value minus any anticipated losses. Accounts payable - trade and other non-interest bearing liabilities are valued at nominal amounts.

Financial fixed assets and long-term receivables are valued both at the first time of reporting and in subsequent valuations at accrued acquisition value, which is normally the same as fair value (transaction value) at the time of acquisition, with the addition of directly attributable transaction expenses, such as brokerage. Financial assets classified as current assets and current liabilities are valued both at the first time of reporting and in subsequent valuations at acquisition value. An addition is made of directly attributable transaction expenses, such as brokerage.

Inventory

Inventory is valued according to the lowest value principle, i.e. the lowest of the acquisition value and the net sales value. The acquisition value includes all the expenses attributable to the manufacturing process and a suitable proportion of associated manufacturing expenses, based on normal capacity.

The acquisition value is calculated according to the weighted average value principle, where deliveries from inventory are valued at the average value of the articles delivered to inventory during the inventory closure period, plus all inventory receipts from the previous period.

The net sales value is the estimated price for which the good can be sold according to terms that are normal for the operation, minus any applicable sales expenses that are directly attributable to the sales transaction.

18 (33)

Flexenclosure AB

Org. nr 556708-2028

Income taxes

Income tax consists of current tax and deferred tax. Income tax is reported in the income statement except when an underlying transaction is reported in equity, when the associated tax effect is also reported in equity.

Current tax receivables and tax liabilities and deferred tax receivables and tax liabilities are offset against each other if there is a legal right to offset.

Current tax

Current tax is the tax cost for the current financial year relating to the taxable profit for the year and that part of the income tax for previous financial years that has not yet been reported. Current tax is valued at the probable amount according to the tax rates and tax rules that apply on the balance sheet date, and are not translated into current value.

Deferred tax

Deferred tax is the income tax on the taxable profit relating to future financial years as a result of previous transactions or events.

Deferred tax is calculated using the balance sheet method for all temporary differences, i.e. differences between the reported value of assets and liabilities and their tax values and tax shortfalls.

No provision is made for deferred tax on temporary difference attributable to holdings in subsidiaries or joint ventures, as Flexenclosure can control the timing of reversal of the temporary differences, and such a reversal will not take place within the foreseeable future. No provision is made for deferred tax at the first reporting of goodwill, however.

Changes to deferred tax are reported in the income statement.

Deferred tax receivables are reported for all deductible temporary difference and for the option of utilising unused loss carry forward in the future.

Deferred tax receivables and tax liabilities are valued based on how Flexenclosure expects to be regain/settle the reported value of the corresponding asset/liability. The valuation is done without discounting and according to the tax rates and tax rules that are decided on on the balance sheet date. A deferred tax receivable is valued at most at the amount that will probably be regained, based on current or future taxable profits, which is reassessed on every balance sheet date.

Liquid assets

Liquid assets consist of cash and cash equivalents and unappropriated holdings with banks and other credit institutions and other current liquid investments that can easily be converted into a known amount and that are exposed to an insignificant risk of value fluctuations. Such investments have a term of a maximum of three months.

19 (33)

Flexenclosure AB

Org. nr 556708-2028

Equity

Equity in the Group consists of the following items:

Share capital representing the nominal value of issued and registered shares.

Other capital contributed including any premium received on new issues of share capital. Any transaction costs associated with new share issues are deducted from the premium, with consideration for any income tax effects.

Other equity including profit/loss for the year, which includes the following:

* Profit/loss brought forward, i.e. all profit/loss brought forward and share-related remuneration for the current and previous periods All transactions with Flexenclosure AB’s owners are reported separately in equity.Dividend to be paid is included in the item Other liabilities when the dividend has been approved at a general meeting before the balance sheet date.

Payments to employees

Current payments

Current payments to employees, such as salaries, holiday pay and bonus, are payments to employees that become due within 12 months from the balance sheet date during the year the employee has earned the pay. Current payments are valued at the undiscounted amount the Group is expected to pay as a result of the unutilised right.

Payments after termination of employment

Flexenclosure provides payments after termination of employment in the form of pensions through various defined contribution schemes. There are no defined benefit schemes.

Defined contribution pension schemes

Flexenclosure pays fixed fees to other legal entities relating to several government schemes and insurance schemes for individual employees. Flexenclosure has no legal or informal obligations to pay further fees over and above payment of the fixed fee, which is reported as a cost during the period in which the service in question is performed.

20 (33)

Flexenclosure AB

Org. nr 556708-2028

Other long-term payments

Payments that become due for payment after more than 12 months are valued at the current value of the obligation on the balance sheet date.

Payment on termination

Provision for severance pay is reported when Flexenclosure has a legal or informal obligation to terminate employment before its due time or to pay compensation on termination by means of an offer in order to encourage voluntary redundancy. Provision is made for that part of the termination pay that the employee receives without any duty to work, plus social security contributions, which represents the best estimation of the pay that is expected to be required in order to settle the obligation.

Provisions, contingent liabilities and contingent assets

Provisions

Provisions for product guarantees, legal processes, loss contracts or other claims are reported when Flexenclosure has a legal or informal obligation as a result of an event that has occurred, it is probable that an outflow of resources will be required in order to settle the obligation and the amount can be estimated in a reliable way. The timing or the amount of the outflow may still be uncertain.

Provisions for restructuring is only reported if a fixed and detailed restructuring plan has been prepared and introduced, or if the main features of the plan have at least been published to those on whom it impacts.

Provisions are not reported for expenses connected to the future operation.

Provisions are initially valued at the best estimation of the amount required to settle the existing obligation, based on the most reliable information that is available on the balance sheet date. Provisions are discounted at their current value where the time value of money is significant.

Any compensation that Flexenclosure is almost certain to receive from an external party in relation to the obligation is reported as a separate asset. However, this asset cannot exceed the amount of the attributable provision.

The provision is only utilised for the expenses for which the provision was originally intended.The provision is reassessed every balance sheet date. Adjustments are reported in the income statement.

Contingent liabilities

The following are reported as contingent liabilities* a possible obligation as a result of events that have occurred and whose existence will only be confirmed by one or several uncertain events, which are not entirely within the control of Flexenclosure, occurring or failing to occur, or

* an existing obligation as a result of events that have occurred but which have not been reported as a liability or a provision as it is not probable that an outflow of resources will be required in order to settle the obligation, or the size of the obligation cannot be calculated with sufficient reliability.

21 (33)

Note 2Important assessments and uncertainty of estimatesWhen financial reports are drawn up, the Board of Directors and the Managing Director must make certain estimates, assessments and assumptions, according to the accounting and valuation principles applied, which impact on the reporting and valuation of assets, provisions, liabilities, income and expenses. The areas where such estimates and assessments may be of great importance to the Group, and which can thus affect the income statements and balance sheets in the future, are described below.

The following are important assessments that have been made during implementation of the Group’s accounting principles, and which have the most significant effect on the financial reports.

Reporting on contract assignments in progress

Reported profit or loss of a contract assignment in progress is based on the percentage of completion of the project. Flexenclosure has made the assessment that assignment expenses incurred in proportion to total estimated assignment expenses best describes the percentage of completion of the project. The percentage of completion method requires that project income and project expenses can be estimated in a reliable manner.This requires a well established system for estimation, forecasting, reconciliation and financial tracking of the project, including the analysis of deviations in the estimate compared to the previous estimate. This critical assessment is performed at least once a month. If the final financial outcome of the project is assessed to be negative total estimated project expenses are recognised as cost regardless of the current state of completion of the project.

Forecasting the final outcome of a project is a critical assessment which is important for the reporting of profit and loss during the life of the project. There is a risk that the final profit or loss of the project may deviate from the forecasted one. When Flexenclosure cannot estimate the outcome of an assignment in a reliable way, assignment income is reported in an amount corresponding to assignment expenses incurred.

Capitalising intangible fixed assets

Development phase

The allocation between the research and development phases of new development projects concerning eSite and eCenter and determining whether the requirements for capitalisation of development expenses have been fulfilled requires assessment. Following capitalisation, the issue of whether the completion of the reporting requirements for development expenses is continuing to be fulfilled is monitored, and also whether there are indications that the capitalised expenses may be exposed to a reduction in value.

Flexenclosure has development expenses brought forward which have not yet been completed. These are assessed for any impairment requirement on an annual basis. In order to do this, an assessment must be made of future cash flows attributable to the asset or the cash-generating unit to which the asset shall be attributed once it is completed. A suitable discount interest rate should also be set in order to discount these estimated cash flows. Determining the discount interest rate is always subject to important assessments.

Impairment

In order to assess the impairment requirement, the recovery value of each asset or cash-generating unit is calculated, based on expected future cash flow and using a suitable interest rate in order to discount the cash flow. There are uncertainties in the assumptions about future cash flow and the setting of a suitable discount interest rate.

Flexenclosure AB

Org. nr 556708-2028

22 (33)

Flexenclosure AB

Org. nr 556708-2028

Useful life of depreciable assets

On each balance sheet date, a review is made of the current assessments of the useful lives of depreciable assets. The uncertainty of these assessments is due to technical obsolescence, which can change the use of the asset in question.

Reporting of deferred tax receivables

The assessment of the extent to which deferred tax receivables may be reported is based on an assessment of the probability of the Group’s future taxable income against which deferred tax receivables can be utilised. Significant consideration is also required in the assessment of the effect of certain legal and financial limitations or uncertainties in different jurisdictions.

Since Flexenclosure historically has reported losses the board has decided that a deferred tax receivable shall be reported only when convincing evidence are at hand which support the notion that accumulated taxable loss can be regained against future taxable profits.

Accounts receivable - trade

Accounts receivable – trade are valued at the cash flow that is expected to be received by the Company. A detailed and objective review of all outstanding amounts on the balance sheet date is therefore carried out.

The provision for doubtful receivables is based on an assessment of the customers’ solvency and is intrinsically difficult to estimate. When drawing up the financial reports a special assessment of the Group’s Accounts receivables is made on an item-by-item basis.

23 (33)

Flexenclosure AB

Org. nr 556708-2028

Notes to income statement

Note 3 Revenue

2016 2015 2016 2015

eSite 219,790 117,775 216,014 117,775eCentre 76,695 63,120 76,695 63,120Total 296,485 180,895 292,709 180,895

Other operational revenue amounts to the following:

2016 2015 2016 2015

Realized exchange rate profit 8,700 36,853 8,461 36,853Received grants 173 302 173 302Other – 2,400 – 2,400Total 8,873 39,555 8,635 39,555

Note 4 Remuneration to auditors

The following amounts are expensed: 2016 2015 2016 2015

Grant Thornton AB

-audit engagement 937 626 937 626-audit work in addition to audit engagement 332 48 332 48

Grant Thornton, Kenya

-tax consultancy – 18 – 18Total 1,269 692 1,269 692

Note 5 Operating leases

Group

Future minimum lease payments are following:

Within 1 year 1-5 years After 5 years Total

31 December 2016 1,457 213 – 1,67031 December 2015 3,077 1,676 – 4,753

Leasing expenses during the reporting period amount to 3 216 kSEK (2015: 3 372 kSEK).


Flexenclosure leases their office and production facilities in Vara according to an operational leasing agreement. The rental contract is binding for 36 months and shall be renewed in 2017. Furthermore there is a lease for the head quarter in Stockholm. These two lease agreements amount close to 80 % of the total leasing costs.

All lease agreements are non-cancellable for a duration of 36 months from the inception of the lease.

Minimum lease payments

Revenue is split between the following lines of business

24 (33)

Flexenclosure AB

Org. nr 556708-2028

Parent company

Within 1 year 1-5 years After 5 years Total

31 December 2016 1,457 213 – 1,67031 December 2015 3,077 1,676 – 4,753

Note 6 Salary, wages and other remunerations to employees

Remunerations to employees are following:

2016 2015 2016 2015

Remunerations - Board 1,105 478 1,105 478Salaries - CEO 2,190 2,191 2,190 2,191Salaries - Management 6,146 5,983 6,146 5,983Salaries and wages - Other employees 37,698 37,655 35,992 37,619Total salary and wages 47,139 46,307 45,433 46,271

Pensions - CEO 443 556 443 556Pensions - Management 1,450 1,462 1,450 1,462Pensions - Other employees 4,862 4,543 4,598 4,543Other statutory social security contributions 13,639 14,171 13,639 14,171Total statutory social security contributions 20,394 20,732 20,130 20,732

Board fees are paid annually as follows:To Chairman of the board 250 kSEK.To Other members of the board 150 kSEK.To members of the audit committee 50 kSEK.

Members of the board have the right to invoice their fees from a private owned company and are therefore allowed, in addition to that decided on the annual general meeting, add an amount equal to the employers contribution that should have been charged to the company if the fee was paid directly to the member.

The CEO of the have, according to contract, a salary for 2016 that amounts to 2 190 kSEK.

Since year end of 2015, Anne-Lie Lind (independent board member) has chosen to leave the board.

At year end of 2016 consisted the boards independent members of Viktor Kovacs, Anil Raj and Jan Roxendal (chairman). Other board members were, at the same time, Per Grunewald, Par Ostberg, Johan Burenius and Andrew Bartley.

Be termination of CEO from the company the period of notice is set to 12 months wheras the period of notice is set to 6 months by resignation.

Minimum lease payments

Leasing expenses during the reporting period amount to 3 216 kSEK (2015: 3 372 kSEK).


25 (33)

Flexenclosure AB

Org. nr 556708-2028

Note 7 Financial costs

2016 2015 2016 2015

Financial costs 14,768 16,600 14,768 16,600Financial costs in projects 862 10,060 862 10,060Total 15,630 26,660 15,630 26,660

Note 8 Income tax on profit for the year

2016 2015 2016 2015

Net profit for the year before tax -44,110 -103,823 -44,781 -103,260

Tax according to current tax rate, 22 % 9,704 22,841 9,852 22,717Adjustment of prior years' tax – 3,944 – 3,944Adjustment for differences in tax rates abroad – 61 – –Tax-exempt income 17 – 17 –Non tax-deductible expenses -35 – -35 -237

-9,833 -26,846 -9,833 -26,423Others -93 – – –Income tax according to the income statement -241 0 0 0

Income tax on profit for the year consists of:Current tax On profit for the year 10,074 22,902 9,833 22,480 Adjustment prior years' tax – 3,944 – 3,944 Used losses carried-forward -9,833 -26,846 -9,833 -26,423Income tax according to the income statement 241 0 0 0

Average tax rate 22% 26% 22% 26%

In the Group exists taxable deficit in Flexenclosure AB that amounts to 442 MSEK that only can be used against future surplus. The company's deferred tax asset amounts to 22% of the losses carried forward. Since the company has not been profitable, has the deferred asset been reported to the value of zero.

The main components of the tax expense for the financial year and the relationship between the expected tax expense based on the Swedish effective tax rate of 22 % (2015: 22 %) and the reported tax expense in the profit/loss is as follows:


Deferred tax asset on losses carry-forward not previsously recognised


26 (33)


Notes to balance sheet

Note 9 Development work and similar work brought forward

2016 2015 2016 2015

Opening accumulated acquisition values 92,293 68,715 92,293 68,715Work performed by the company for its own use and capitalized 14,540 23,578 14,540 23,578Closing accumulated acquisition values 106,833 92,293 106,833 92,293

Opening accumulated depriciation -45,690 -28,726 -45,690 -28,726Depreciation for the year -5,760 -16,964 -5,760 -16,964Accumulated amortisation carried forward -51,450 -45,690 -51,450 -45,690

Carrying amount 55,383 46,603 55,383 46,603

Note 10 Goodwill

2016 2015 2016 2015

Opening accumulated acquisition values 5,100 5,300 5,100 5,300Sales/disposals – -200 – -200Accumulated cost carried forward 5,100 5,100 5,100 5,100

Opening accumulated depriciation -4,590 -4,280 -4,590 -4,280Sales/disposals – 200 – 200Depreciation for the year -510 -510 -510 -510Accumulated amortisation carried forward -5,100 -4,590 -5,100 -4,590

Carrying amount 0 510 0 510

Acquisitons – – – –



27 (33)


Note 11 Equipment, tools, fixtures and fittings

2016 2015 2016 2015

Opening accumulated acquisition value 3,551 5,129 3,335 4,921Acquisitons 83 222 – 214Sales/disposals – -1,799 – -1,799Exchange rate differences -227 – – –Accumulated cost carried forward 3,407 3,551 3,335 3,335

Opening accumulated depreciation -3,088 -4,713 -3,088 -4,677Sales/disposals – 1,799 – 1,799Exchange rate differences -83 – – –Depreciation for the year -18 -210 -102 -210Accumulated depreciation carried forward -3,189 -3,124 -3,190 -3,088


Note 12 Participations in group companies

The following subsidiaries are included in the group:

Name/domicile Corporate ID

Number of

shares Share %

Residual

value

Flexenclosure International AB, Sweden 556896-6617 50,000 100 50Flexenclosure Kenya Ltd, Kenya 999 99.9 8Flexenclosure Telecom India Private Ltd, India 255 51 374Flexenclosure Technical Solutions Ltd, Nigeria 4,000 100 274

2016 2015

Carrying amount 706 832

Note 13 Receivables from group companies

2016 2015 2016 2015

Opening accumulated receivables – – 604 –New receivables – – 35 604Accumulated receivables carried forward 0 0 639 604


Note 14 Prepaid expenses and accrued income

2016 2015 2016 2015

Accrued subscription income in ongoing projects 42,705 26,866 42,705 26,866Prepaid expenses in ongoing projects 2,639 28,955 2,639 28,955Other 2,524 1,743 2,515 1,743Carrying amount 47,868 57,563 47,859 57,563




28 (33)


Note 15 Equity

Note 16 Appropriation of earnings

Profit/losses brought forward 41,148,448Profit for the year -44,780,925

-3,632,477

The board of directors propose the total profit/loss brought forward is appropriated as follows:

to be brought forward -3,632,477-3,632,477

The following profits/losses brought forward are to be decided upon by the annual general meeteing (SEK):

29 (33)


Note 17 Other provisions

Recorded provisions and changes in these are as follows:

Group Guarantees Total

Carrying amount 1 January 2015 4,195 4,195Amounts used -62 -62Carrying amount 31 December 2015 4,133 4,133Additional provisions 1,701 1,701Amounts used -95 -95Reversed amount -991 -991Carrying amount 31 December 2016 4,748 4,748

Parent company Guarantees Total

Carrying amount 1 January 2015 4,195 4,195Amounts used -62 -62Carrying amount 31 December 2015 4,133 4,133Additional provisions 1,701 1,701Amounts used -95 -95Reversed amount -991 -991Carrying amount 31 December 2016 4,748 4,748

Note 18 Long-term liabilities

2016 2015 2016 2015

Amortisation within 1 year 47,524 42,838 47,524 42,838Amortisation within 2 to 5 years 16,231 9,217 16,231 9,217

63,755 52,055 63,755 52,055

Note 19 Bank overdraft facilities

2016 2015 2016 2015

Bank overdraft facilities granted – 30,000 – 30,000

Granted limit has during the year been reduced from 30 000 kSEK to 15 000 kSEK and subsequently to zero.

Note 20 Accrued expenses and deferred income

2016 2015 2016 2015

Employee related costs 11,763 12,580 11,596 12,535Accrued interest 774 717 774 717Costs related to ongoing projects 36,474 34,681 36,474 34,681Other costs 8,120 – 8,051 –Carrying amount 57,130 47,977 56,894 47,933

Note 21 Pledged assets

2016 2015 2016 2015

Contingent liabilities

Company mortgages 76,000 76,000 76,000 76,000Pledged receivables 21,020 23,337 21,020 23,337

97,020 99,337 97,020 99,337





30 (33)


Other notes

Note 22 Information about the group

Note 23 Inter-group purchases and sales

Note 24 Average number of employees

Average number of employees

Including men


Including men

Sweden 69 93 77

Countries outside EU 9 8 1 –Total 9 77 94 77


Including men


Including men

Sweden 85 69 93 77Total 85 69 93 77

Parent company

2016 2015

Flexenclosure AB is a public limited company that does not consolidate into a parent concern.The group companies in Kenya and India are dormant.

Inter-group sales amounted to 0.1 % (2015: 0 %) of total revenue. Purchases amounted to 0.1 % (2015: 0 %) of total operating costs.

Group

2016 2015

31 (33)


Note 25 Split by gender

The board includes no (2015: 1) woman and 7 men (2015: 5).The management, including CEO, includes 1 (2015: 1) woman and 7 men (2015: 6).

Note 26

Note 27 Adjustment for non-cash items, etc

2016 2015 2016 2015

Depreciation 6,408 17,684 6,372 17,684Provision 615 -61 615 -61Other adjustments 201 -2 126 –Total adjustments 7,224 17,621 7,113 17,623

Note 28 Definition of KPI

Net revenue (multi-year review): Amount of net revenue and other revenue

EBITDA: Result before depreciation, interest and tax

Solidity: Adjusted equity as a ratio of total assets

Subsequent events

No events which leads to adjustments or significant matters have occured between the closing day and the issue date of these financial statements.


32 (33)


Note 29 Transaction with related part

Type of transaction/type of connection:

2016 2015 2016 2015

Short term loan from Pegroco Invest AB 31,800 15,000 31,800 15,000Interest and other financial costs Pegroco Invest AB 4,771 1,124 4,771 1,124

Date

Signatures

Jan Roxendal Per Grunewald Andrew Bartley

Chairman Board member Board member

Viktor Kovacs Anil Raj Johan Burenius

Board member Board member Board member

Pär Östberg David King

Board member Managing Director

Our audit report has been issued 3rd of April 2017.

Grant Thornton AB

Anders Meyer

Authorised accountant


33 (33)

annual report consolidated annual report 2016 - · pdf fileall amounts are in tousand kr...

Documents