EuroMaint Annual Report
Contents Page 1 A maintenance partner that gets the trains on track Operational activities Group overview 1 in brief 2 The CEO s comments 4 Strategic focus 6 Business areas 10 Offering 11 Five-year overview 21 Page 4 Page 6 Increasingly strict requirements for being a sensitive and cost-effective maintenance and business partner Quality focus enhances EuroMaint s position in the market Financial reporting Directors report 22 24 28 Notes 32 Auditor s report 54 The Board of Directors 55 Company management 56 10 Page 11 Page Four business areas with the best interests of the railway as a common denominator Customised maintenance offering for rail passenger traffic and freight traffic
GROUP OVERVIEW A maintenance partner that gets the trains on track Euromaint is Europe s largest independent supplier of maintenance services for one of the future s most important industries the rail transport industry. The climate challenges facing society advocate more transport by train. At the same time, the industry is facing challenges in the form of insufficient track capacity, lack of confidence from passengers and profitability problems. With integrated and customised maintenance solutions, industrialised processes and complete component and spare parts offerings, Euromaint is part of the solution to strengthening confidence in the train as a means of transport. The train operators which choose the company to be a business partner can focus on the overall experience of their passengers. The rolling stock owners who choose Euromaint to be their maintenance partner gain full insight into and control over the status of their rolling stock fleets. The public transport authorities which choose the company s maintenance solutions can expect the region s train services to be both more stable and more punctual, while the freight transporters which choose Euromaint can count upon the freight being on track at the right time. Euromaint is a stable business and collaboration partner. The customer value created through close cooperation, efficient maintenance processes, employees with specialist skills and purposeful quality and safety work will benefit the owner and provide the opportunity to invest in continued development of the offering. EuroMaint Annual Report 1
GROUP OVERVIEW EuroMaint in two minutes Euromaint offers maintenance of rolling stock to train operators, rolling stock owners, infrastructure contractors and rolling stock manufacturers. The company has more than 25 workshops and mobile service units in five countries. The main geographic markets are Sweden and Germany. Besides the maintenance of rolling stock for rail passenger and freight traffic, the customers are also offered logistics services and reprocessing of components. In addition, Euromaint has an offering for players with rolling stock used to maintain railway infrastructure. Customers here include SJ, A-Train, Green Cargo, AAE, VTG, DB (Deutsche Bahn) and Infranord. Operational activities are run through the subsidiary Euromaint Rail s four business areas Passenger, Freight/Germany, Components and Work Machines. Each business area should create customer value and profitability. Since 2007 Euromaint has been owned by Ratos AB, a Swedish listed private equity company. Net revenue 2009 SEK millions 3,000 2,814 2,860 2,510 2,000 1,000 0 2009 2010 2011 2,484 2,416 The average annual growth for 2009 was 0.7 per cent. Weak market development, stiff competition and pressure on prices have affected Euromaint s revenue trend. Earnings have been documented on an as if basis for 2010. For the basic data for the graphs, information on the as if basis and additional key ratios, please refer to the five-year overview on page 21. in brief The first of a total of 55 second class passenger carriages refurbished for SJ were delivered in February. The refurbishment is taking place at Euromaint s workshop in Notviken and is expected to continue until the first quarter of 2014. The project is a continuation of the refurbishment of 160 carriages completed by Euromaint in 2009 2011. In March, RDC Deutschland GmbH signed a contract with Euromaint for the modernisation of two driving trailers and four passenger carriages. Once this work is complete all the carriages will form a modern six-carriage train unit for long-distance passenger traffic in Germany. The contract also gives RDC Deutschland the option of ordering the modernisation of two more six-carriage train units. In June, the Jernbaneverket Bane Energi division showed its confidence in Euromaint once more by engaging the company to refurbish and modernise three train operation converters. Euromaint has taken on the overall responsibility, which means everything from refurbishment at the workshop to commissioning the converters at the power converter station and arranging the logistics for the assignment. 2 EuroMaint Annual Report
GROUP OVERVIEW Infrastructure providers Responsible for track and overhead lines Passengers Freight Infrastructure contractors Maintain track and lines for infrastructure providers Train operators and rolling stock owners for passenger traffic Train operators for freight traffic and freight wagon owners Euromaint supplies maintenance for the work machines used by the infrastructure contractors. Euromaint supplies maintenance, reprocessing of components and the supply of materials for passenger trains as well as freight wagons and locomotives. In June, Euromaint s workshop in Landskrona became the first in Sweden to be ECM certified for maintenance of freight wagons designated for hazardous goods. The certificate, which applies to the maintenance of freight wagons, also includes the maintenance of tank wagons and other freight wagons designated for hazardous goods. In June, after four years with Euromaint as its partner, SL decided to extend its contract with the company for maintenance of work machines. The contract runs until November 2015. In July, Euromaint was commissioned by SJ to maintain the rolling stock that operates the route between Sala and Linköping. The assignment covers both preventive and corrective light maintenance, including the provision of materials for 11 vehicles four Regina trains and seven X12 trains. Since 15 December this maintenance has been carried out at Euromaint s workshop in Linköping. At the start of 2014, Euromaint was commissioned by Tågkompaniet (TKAB) to carry out maintenance on the Regina trains TKAB operates on behalf of X-trafik from 15 June 2014 up until 2024. This maintenance will be carried out at Euromaint s workshop in Gävle. Euromaint has already worked with TKAB on Tåg i Bergslagen, and in the last few years has been awarded several maintenance contracts for Regina trains. EuroMaint Annual Report 3
THE CEO S COMMENTS Increasingly strict requirements for being a sensitive and cost-effective maintenance and business partner Our improvement work and focus on quality have given results. This is pleasing, especially when it is considered that what we do is important. Together with other players in the industry, we work to make companies and private individuals choose to use the train. Euromaint is part of the solution. By carrying out high-quality maintenance on time, Euromaint is part of the solution. The train a clear place, even in the future The train is important. In an increasingly global and urban world, the train should have a more clear place. The position as the most environmentally friendly means of transport is a fantastic opportunity and the solution to many transport and environmental problems. At the same time, the train faces major challenges and confidence in the train as a means of transport is low. For us to overcome this, industry players have to work together to increase the reliability and attractiveness of the train. By carrying out high-quality maintenance on time, Euromaint is part of the solution. EuroMaint s independence a market advantage To a certain extent the market is still influenced by its history. Yet more and more people are discovering our strengths and realising that Euromaint wins business on its own merits despite stiff competition. In Germany we are viewed as a modern, trailblazing alternative. We inhabit a relatively unique position. Thanks to our independence in relation to rolling stock manufacturers and operators, the customer can feel reassured that we are acting in their interest. Market situation remains tough After a difficult start to the year with the loss of a contract for Norrlandståg, produced many important orders for Euromaint. During the year we signed contracts with, among others, SJ for maintenance of the rolling stock operating Sala Linköping, we received an extended commission from A-Train for maintenance of Arlanda Express, and SL chose to continue to place its maintenance of work machines with us, to mention just a few agreements. Despite this, the pressured market situation had a tangible effect on Euromaint in the autumn. Some of our existing customers decided to change their maintenance strategy and cut back on maintenance or chose to carry it out themselves. This situation resulted in us having to review our staffing levels. Redundancies were announced in Luleå, Åmål and Örebro, as well as at the head office in Solna, with these mainly affecting administrative staff. This cutback in staff began at the end of the autumn and will continue throughout 2014, assuming that market conditions remain the same. In Germany we have experienced difficulties on the freight side as this is sensitive to the state of the market. This has led to staff cutbacks. Alongside this, the passenger side in Germany has developed positively. I see major potential in this area. has been characterised by continued weak conditions, primarily on the freight side of the German market, which had an adverse effect on our profit. Revenue fell by 2.7 per cent and amounted to SEK 2,416 million (2,484). This fall is explained by the economic trend in Germany. Our operations in Sweden grew by 2.3 per cent. The operating profit (EBITA), adjusted for expenses affecting comparability, was SEK 67 million (90). This is not in line with our targets. Many important procurement procedures in the next few years Although the industry is currently going through a difficult time, the rail market is 4 EuroMaint Annual Report
THE CEO S COMMENTS full of opportunities, especially for Euromaint. When investments are made in new trains, this creates a business opportunity for us. What s more, there are many trains that need to be overhauled or refurbished so they can remain in service for a few decades more. 2014 is the start of some very exciting years with new players in the market and many comprehensive contracts being put out for tender. I believe that we are well prepared for this. Available trains our most important task Our most important task is to ensure that the trains are available and delivered clean, safe and well maintained to the customers as scheduled. We have continued to work methodically and with a long-term perspective to continuously improve the quality. Developing our industrial maintenance process and improving our planning have played a central role in this work and have taken place as part of an excellent and close collaboration with our customers. Together we have achieved success. Increasing numbers of trains are being delivered on time because more and more trains come into the correct workshop on time where the correct components and spare parts are already in place. We have a good planning process, but we are not satisfied; we are continuing to develop it so that we can further increase the quality of our customers rolling stock. Investments to meet customer needs We have also made investments to enhance our attractiveness. Many customers are influenced by the market situation and are examining their costs. The requirements for the utilisation ratio of the rolling stock are getting even stricter. A new business system being implemented in the first half of 2014 will further raise the quality of the maintenance. We have also invested in our bogie workshop in Örebro, and from the halfway point of 2014 the lead time for reprocessing of a bogie will be more than halved, from 15 to just seven days. As a result, Euromaint is establishing the most attractive reprocessing offering in Sweden. We have put ourselves in an excellent position to win new business. Quality to remain the top priority We entered with the ambition of developing our existing contracts in order to create added value for our customers, winning new contracts and continuing to develop positively. Thanks to the enthusiastic commitment of our employees, we have made good progress but our focus on quality improvements will continue to have the highest priority for the foreseeable future. We must always be the best at everything we do in order to be part of the solution. Solna, February 2014 Ove Bergkvist President and CEO EuroMaint Annual Report 5
STRATEGIC FOCUS Quality focus enhances Euro- Maint s position in the market The clear direction established by Euromaint means that the company is fully focused on delivering high-quality maintenance solutions so that all trains maintained by the company are on track and in service when they are supposed to be. The objective is to secure the company s position as the leading maintenance player in Sweden and to grow in Germany. In there were approx. 200 million railway journeys in Sweden, or an average of over half a million train journeys per day. Alongside this, approx. 65,000 tonnes of freight were transported on Swedish railways. The passengers expect the train to be a comfortable and safe method of transport, while the freight transporters set strict requirements for delivery reliability. Punctuality and safety are essential when it comes to both passenger and freight transport. A lack of punctuality means high costs to society as well as the risk that the next journey or transport will take place by another method of transport than rail. Euromaint is part of the solution. But efficiently run train services need all players to do their job. Euromaint s role is to ensure that the trains are well-maintained and that they are on track and in service when they are supposed to be. Euromaint is a Swedish company with an international offering and operational activities in five European countries. These operational activities are represented by more than 25 workshops and mobile service units in Belgium, Latvia, the Netherlands, Sweden and Germany. The offering is pan-european but the main markets are Sweden and Germany. The economy affects the need for maintenance The maintenance market for rolling stock is affected by the development in traffic. In Sweden, rail passenger traffic has grown on average by 1.1 per cent per year for the past few years. This is a level of growth that Trafikverket expects to continue, as outlined in its forecasts for the work on the national transport plan 2014 2025. According to Eurostat, rail passenger traffic in Germany grew on average by 2.8 per cent in the period 2009. The assessment here is also that the rate of growth seen in recent years will continue in the years ahead. In, freight traffic, which varies to a greater extent according to the state of the economy, was at the same level as in 2009 in both Sweden and Germany. The weak market development means that Euromaint s customers must balance strict requirements Sundsvall Vännäs Luleå for safety and punctuality against profitability issues and pressured budgets. One example of this is that in recent years DB has reduced its number of freight wagons as well as changing its maintenance strategies. Long contracts In Sweden and Germany alike, the majority of the rail passenger traffic is put out to tender by a public transport authority or equivalent in a certain region. In a procurement process the operators must be able to demonstrate that they can achieve the traffic targets. An important aspect here is having well-maintained trains. The contract periods for traffic services put out to tender are often long. In Sweden the contracts for procured traffic normally run for between five and 10 years. In Germany, the contract periods are even longer and may run for up to 20 years. Because the contract periods are long, several years can go by without any major maintenance assignments being put out to tender. This means that winning or losing a procurement process has a far-reaching effect on Euromaint s operational activities. Before 2017, around 10 major maintenance contracts in Sweden worth the equivalent of SEK 1.4 billion in annual revenue will be put out to tender. Borlänge Gävle Västerås Örebro Stockholm Hallsberg Falköping Linköping Göteborg Åmål Jelgava Vision Landskrona Malmö Antwerpen Rotterdam Wolfsburg Duisburg Wustermark Delitsch Leipzig Mission Euromaint s presence Workshop Service station Mobile maintenance only Kaiserslautern Oberhausen Ingolstadt 6 EuroMaint Annual Report
STRATEGIC FOCUS Strong competition means high efficiency is essential Depending on geographic market and segment, Euromaint faces different types of competition. Some competitors are small, local niche companies, while others are major international players with a complete offering or operators with their own workshops. The latter are mainly present in Germany, where many operators choose to handle parts of the maintenance themselves. Euromaint s internal change work is primarily about continuously improving the quality of customer deliveries. This allows for further efficiency measures and greater competitiveness in a market characterised by stiff competition and pressure on prices. To meet the expectations of the customers, owners and other stakeholders, Euromaint has defined four focus areas: stability, image, profitability and growth. Clear quality improvements To both maintain existing business and win new contracts, Euromaint must be a reliable partner and run a stable business with high quality and delivery reliability. Regardless of size, every single assignment is important. We aim to have contracts extended after the original one expires and to win new contracts with existing and new customers thanks to our proven quality. Planning is a basic prerequisite for a successful maintenance process. Euromaint works closely with its customers to develop solutions that reduce the time that the trains are out of service. These days there is not always spare capacity in the form of locomotives, wagons or carriages and high-value components such as wheels, bogies and traction motors. As a consequence, the rolling stock must be maintained as efficiently as possible without compromising on quality or safety. In light of these factors, Euromaint ensures that the correct resources are in place to deliver reliable maintenance solutions in an effective manner throughout the assignment period. The improvement work that has been carried out has produced clear results. In recent years the delivery quality and availability for e.g. the SJ2000 has stabilised at an increasingly higher level. In practice this means that the trains have been available for use in line with the set maintenance plans. This has been achieved thanks to the close partnership between Euromaint and SJ and due to the systematic internal cooperation and ongoing dialogue. A decision on an important investment in a new business system was taken during the course of the year. This will mean advantages and efficiency gains within both production and administration, such as more streamlined and more secure Essential for everyone to take responsibility We ve discussed our core values in our group. As far as I m concerned, it s important that these are not just a few words that we learn; we actually need to link them to our day-to-day work. Both how we interact colleague to colleague and when it comes to the working environment as a whole. We work in an exposed environment and I want to feel safe even though I spend most of my working hours out on the tracks. But perhaps the most important thing of all is that everyone has to take responsibility for us delivering safe trains on time to the customer. I usually compare it to if I were to take my own car in for a service I d want to be sure that I d get it back at the promised time. Emma Thörnqvist, maintenance engineer at Euromaint s workshop in Hagalund EuroMaint Annual Report 7
STRATEGIC FOCUS Cooperation for greater availability Euromaint has established a close working relationship with SJ where the common goal is for the SJ2000 trains to have high availability so that as many people as possible will choose to travel by high-speed train. There should also be room for flexibility in the form of expanded capacity when demand is even higher, e.g. at Christmas and Easter and during major events. So that Euromaint and SJ have the same view of the current rolling stock situation and are able to discuss e.g. the expansion of train services, the two parties perform a reconciliation each week. Thanks to open dialogue and close cooperation, key ratios and availability are at an increasingly stable level. Euromaint s target is to ensure that the maximum number of rolling stock units is available for use every day. Stefan Bengtsson, business manager at Business Area Passenger, Euromaint Rail ordering and purchasing procedures within the provision of components and spare parts, as well as easier access to information for maintenance staff and for the financial follow-up of assignments from order to invoice. Presenting a strong image of EuroMaint The view of Euromaint varies. In Sweden in some cases the memory remains of the company s time as part of a state-run monopoly, while in Germany the company appears to a greater extent to be a welcome and modern alternative. Changing the image of a company is a long journey that always starts from inside the company itself. Being sensitive to customer expectations and delivering to meet these are crucial to being viewed as an attractive business partner. Euromaint s journey from being perceived as part of the state system to being a competitive, privately owned business in a fully competitive market is driven in part by a long-term internal assessment and culture change project. The customer promise has also been defined as quality, delivery and innovation. Maintenance of trains requires the employees to have high-level and specific specialist skills. All work tasks involved in the maintenance process are necessary to ensure the quality and safety of the delivery and thus customer satisfaction too. This means the employees constantly have to challenge themselves and regularly complete the internal rolling stock and safety training programmes that qualify them and also make them available for new assignments. A broader internal training programme has been introduced in order to keep raising quality and knowledge levels throughout the company. The objective here is to increase the insight into and understanding of how everything fits together. The training, which is held in groups and led by internal experts in fields such as economics, quality and change work, will continue during 2014. The past year has also seen the intensification of work within CR and sustainability. The priority areas for Euromaint are environment, quality and safety. A code of conduct governing how Euromaint acts and expects others to act both internally and externally has been introduced at the company. The objective for not only the ongoing change work but also the CR work is to reduce the risks at the company and also boost confidence in Euromaint in the market. Tough market situation To be a stable business partner, a forwardlooking employer and to generate a good return for the owner, the objective is to create profitable growth, maintain good control of costs and deliver strong cash flows. Euromaint aims for growth with profitability, where profitability is given priority. Euromaint s overall profitability target is to achieve an annual EBITA margin of 10 per cent in the long term. The economic situation signifies profitability problems for the entire industry, which means that Euromaint s profitability is not satisfactory. The EBITA margin was 1.0 (2.4) per cent. The market situation is characterised by greater competition and pressure on prices. This has been particularly noticeable when it comes to Euromaint s maintenance of freight rolling stock in Germany. The saving measures initiated in and which were continued in are producing gradual results. These measures concern efficiency improvements, primarily within administrative functions. During the year Euromaint has also shut down operations at a workshop in Germany. 8 EuroMaint Annual Report
STRATEGIC FOCUS New business opportunities in sight Euromaint s objective is to grow in the Nordic countries as well as in the rest of Europe, organically and through acquisitions. Through continual change work and a constant focus on quality, Euromaint is creating a stable platform for winning important contracts that will be put out for tender in the next few years. The weak development in rail passenger traffic and rail freight transports in both Sweden and Germany has continued to have an effect on the company s growth prospects. The year also saw a few large procurement processes in the market. Net revenue fell by 2.7 per cent during the year. The opportunities for growth in the next three-year period are in Sweden and the other Nordic countries for the business areas Passenger, Components and Work Machines. The procurement situation for the Passenger business area in the next few years appears to be relatively positive with around 10 major procurement processes due in Sweden. An important investment is being made in the Components business area s bogie workshop in Örebro. CORE VALUES This refurbishment means the time to complete a bogie overhaul will be more than halved from 15 to an average of seven days. A clear sign that this investment is timely is that the market is showing an interest in the benefits produced by shorter lead times for bogie maintenance even before the workshop has been put into service. Euromaint also has great potential for winning new business within maintenance of passenger rolling stock in Germany. A large number of multiple units, EMU/ DMU trains (Electric Multiple Unit and Diesel Multiple Unit), will be overhauled in the coming years, and this is an area where Euromaint has a strong offering. Fleets of brand new passenger rolling stock will also be put into service in the next few years. Warranty assignments, i.e. correcting major faults on this rolling stock within the warranty period, will also involve further business opportunities for the company in the German maintenance market. Euromaint s ambition is to capitalise on the benefits that will be brought about by its position as the leading private and independent player in Europe. CUSTOMER PROMISES Net revenue 2009 SEK millions 3,000 2,000 1,000 0 2009 2010 Net revenue from Euromaint s Swedish operations increased by 2.3 per cent in compared to last year. At the same time, net revenue from the rest of Europe in fell by 17.5 per cent. The average annual growth for 2009 was 0.7 per cent. EBITA margin 2009 Per cent 6 5 4 3 2 1 0 1 2009 2010 2011 2011 The EBITA margin fell from 2.4 per cent to 1.0 per cent. The continued weak market in Germany has had an adverse effect on earnings despite the efficiency improvements implemented at the German operations. During the year Euromaint has also cut back on staff within administrative functions as well as announcing redundancies at the Swedish operations. Cooperation Equity/assets ratio 2009 Per cent 40 Quality 30 Taking responsibility Contributing Reliable Delivery Innovation 20 10 0 2009 2010 2011 The equity/assets ratio increased from 33 per cent to 39 per cent during the year. Earnings have been documented on an as if basis for 2010. For the basic data for the graphs, information on the as if basis and additional key ratios, please refer to the five-year overview on page 21. EuroMaint Annual Report 9
BUSINESS AREAS Four business areas with the best interests of the train as a common denominator Euromaint conducts operations in four business areas whose task is to create maximum profitability in each part of the total offering. The common denominator is that those with the same core values and customer promises work towards achieving long and valuecreating partnerships with customers active within the rail transport industry. Business Area Passenger The business area offers a complete maintenance concept to train operators, rolling stock owners and public transport authorities. The customers can purchase either all or parts of the maintenance offering, everything from light maintenance to full service commitments, including reprocessing and overhauls. The business area normally operates with full service commitments, with a payment model based on the customers rolling stock being available for traffic. In practice, this sees the customers paying according to the number of kilometres travelled by the trains, which means that the common goal of Euromaint and the customers is for the rolling stock to be used in traffic. The business area is also responsible for the Swedish offering within maintenance of rolling stock for freight traffic. Business Area Freight/Germany The business area has a comprehensive range of maintenance services for freight rolling stock and an offering under development for rail passenger rolling stock in the German market. The offering covers planned and remedial maintenance (both in the workshop and by mobile units) as well as overhauls, refurbishments and reprocessing of components. The planned maintenance is based on framework agreements that define the actions to be carried out in accordance with an established maintenance plan. Remedial damage maintenance is carried out either against tender or on a running account basis. Major and more far-reaching actions, such as overhauls and refurbishments, always follow established maintenance plans. Business Area Components The business area offers reprocessing of components and complete material supply to all types of customers in the rail transport industry, everything from sourcing and stockkeeping to intelligent logistics solutions and the sale of spare parts. As a logistics supplier, the business area generates income from contracts that can cover parts of the supply chain or complete responsibility for the supply of spare parts and reprocessed components. The business area not only maintains a large number of customer relationships with train operators and other maintenance companies, it also fulfils the role as supplier to Euromaint s other business areas with regard to reprocessing of components and provision of spare parts. The business area has its own warehouse stocking approx. 55,000 items for maintenance of rolling stock. Business Area Work Machines The business area offers a complete maintenance programme for machines and tools used for maintenance and construction of the railway infrastructure, such as track and overhead lines. The business model usually consists of framework agreements that contain fixed actions, which are usually sub-ordered by the customer, as well as service packages based on the machines running hours. Corrective maintenance and mobile maintenance are carried out either against tender or on a running account basis. Number of employees on 31 Dec: 934 (1,036) Business Area Manager: Henrik Dagberg Examples of customers: A-Train, AAE, Green Cargo, MTR, SJ, Tågkompaniet, Västtrafik, Öresundståg Workshops/facilities: Borlänge, Falköping, Gävle, Göteborg, Hallsberg, Landskrona, Linköping, Luleå, Malmö, Stockholm, Sundsvall, Vännäs, Västerås Number of employees on 31 Dec: 849 (968) Business Area Manager: Robert Lehmann Examples of customers: AAE, Aretz, BASF, DB, Ermewa, GATX, Nacco, TWA, VTG, Wascosa Workshops/facilities: Delitzsch, Duisburg, Ingolstadt, Kaiserslautern, Leipzig, Oberhausen, Wolfsburg, Wustermark, Antwerp, Rotterdam Number of employees on 31 Dec: 288 (300) Business Area Manager: Ingela Erlinghult Examples of customers: Alstom, Arriva, Bombardier, Inlandsbanan, JBV, Metro, Transitio, TRV, Tågab, other business areas within Euromaint Workshops/facilities: Jelgava, Åmål, Örebro Number of employees on 31 Dec: 36 (37) Business Area Manager: Gustav Jansson Examples of customers: Jernbaneverket, SL, Strukton Workshops/facilities: Stockholm, Åmål 10 EuroMaint Annual Report
OFFERING Customised maintenance offering for rail passenger traffic and freight traffic Quality and safety are always focal points at Euromaint. Providing high-quality maintenance is about the customers rolling stock always complying with all statutory requirements for traffic safety. In addition to this, Euromaint wants to create the conditions for more passenger and freight transports by rail by ensuring availability and reliability. Specialist skills and industrialised processes guarantee the customers maintenance solutions with a high level of quality and safety. As far as the customer is concerned, this means that they have control over which rolling stock units are available for traffic and thus can plan their operations and ensure punctual departures and arrivals. This also means the customers can be certain their rolling stock is railworthy. The maintenance offering covers everything from light maintenance, according to the customer s traffic flows, to heavy maintenance such as overhauls, as well as the reprocessing of components and material provision. This makes Euromaint the obvious business partner regardless of whether the customer is active within passenger or freight traffic or maintains infrastructure for the railway. The company also offers reprocessing of components, spare parts and logistics services to all players in the rail transport industry. Besides maintenance of rolling stock for passenger traffic and freight traffic, the company has a targeted offering for rolling stock maintenance aimed at companies which maintain railway infrastructure such as track and overhead lines and which also carry out towing and clearing. Euromaint is Europe s largest maintenance partner independent of rolling stock manufacturers and train operators. As a result of this, the company has no loyalties other than giving every customer the most qualitative and cost-effective maintenance solution. EuroMaint Annual Report 11
OFFERING PASSENGER TRAFFIC A complete maintenance concept increases availability Euromaint offers a complete maintenance concept for rail passenger traffic. Maintenance solutions adapted to the needs of the rolling stock and the customers are developed in close collaboration with the customers. This often involves a full service commitment where Euromaint takes responsibility for the maintenance and receives payment based on the number of kilometres the trains travel. This payment model means that both Euromaint and the customers are successful when the customers rolling stock units are available for traffic. Optimised maintenance solutions for greater rolling stock availability All rolling stock has a maintenance plan. This indicates what maintenance is to be carried out and when. The starting point for Euromaint s optimised maintenance concept is to customise a maintenance solution based on the customer s traffic and the current maintenance plan for their rolling stock. In the first instance the maintenance is governed by the times of the day when there are few journeys and the need for available rolling stock is lower. The interventions are adapted to the quality and safety requirements defined for the assignment. Factors that play a role include where the rolling stock s operating pauses are scheduled and where the workshops are located, when and how long the trains can be available for maintenance, and other specific requirements set by the customer. The customer may, for example, request mobile maintenance patrols at strategic end stations which carry out comfortrelated actions to ensure a comfortable and positive travelling experience for the passengers. Euromaint develops and regularly optimises the maintenance plans for the fleets of rolling stock which the company is contracted to maintain. The objective is to increase the availability and improve the efficiency for both parties. The company s long experience of train maintenance, combined with regular analyses of the pattern of faults that arise, the real operating environment of the rolling stock and the maintenance carried out, means the customers can be reassured that their rolling stock maintenance develops throughout the contract period. Long-term planning Rolling stock must be delivered according to schedule Euromaint constantly develops its industrialised maintenance process. The foundations for this are always a clear and common planning of maintenance work. When the trains come into the workshops as scheduled, the correct spare parts, components, tools and staff are already on site to carry out the planned maintenance action. This produces greater efficiency and quality. The objective is for the customers rolling stock to be back in service as planned. Ultimately it is a question of ensuring punctuality and safety for passengers and improving profitability for the customers and Euromaint alike. When more extensive preventive maintenance actions are necessary, the work may be divided into smaller tasks that are carried out over several planned workshop visits. In this way, the actions can be carried Spare parts Rolling stock in traffic Locations/depots Maintenance windows Availability requirements Quality requirements Workshop Maintenance documentation Design actions Expertise Physical conditions Components Euromaint takes full responsibility for the maintenance of rolling stock for passenger traffic. Customised maintenance solutions, adapted to the customer s traffic, are combined with an efficient spare parts and component supply system to increase the availability of the customer s rolling stock fleet. 12 EuroMaint Annual Report
OFFERING PASSENGER TRAFFIC Nothing can go wrong en route to the airport From the centre of Stockholm to Arlanda Airport in 20 minutes. And a new ticket if the train is more than two minutes late. That is the Arlanda Express promise to its customers. Speed, punctuality and comfortable travel are vital competitive advantages for Arlanda Express, which every year has 55,000 departures between the centre of Stockholm and Arlanda Airport. I always take the Arlanda Express. It s quick and I ve never had a train be cancelled or not arrive on time, says Ulrika Morgenstern, a passenger who often flies from Arlanda. Arlanda Express is owned and run by A-Train AB, whose greatest challenge is described as in all situations giving the customers what they ve been promised a punctual, fast and environmentally friendly journey that always takes place. This makes heavy demands on Euromaint, which has been taking care of the rolling stock maintenance since 2005. The contract was renewed recently and Martin Byström, Technical Director at A-Train, explains what he is especially pleased with: For us to be able to keep our customer promises, there must be service-mindedness in all links of the chain, even at our suppliers, and we think that is the case at Euromaint Rail. We ve had extremely high availability for our trains and a good relationship with both the people actually carrying out the maintenance and those at management level. A-Train s challenge: Punctual, fast and environmentally friendly journeys that always take place. EuroMaint s solution: Preventive and remedial maintenance, plus overhauls and supply of materials. Customer value: Complete and punctual trains in service. EuroMaint Annual Report 13
OFFERING PASSENGER TRAFFIC Remote Vehicle Monitoring Remote Vehicle Monitoring RVM means the maintenance can be more efficient thanks to real-time monitoring of the condition of the rolling stock. When a fault arises in the electrical systems, Euromaint receives information immediately and can act straight away. RVM also means that planned maintenance can be prepared and systematic faults can be detected earlier. As a result, more trips can be run with the existing train fleet. 1 Kundportal The train computer receives signals from the electronic systems on the train and generates fault codes. 5 Customer portal The information on the train s condition is displayed in a customer portal, where you can: see the utilisation ratio see improvement proposals engage in dialogue on rolling stock obtain positional information to facilitate traffic planning see key ratios. GSM 2 The data is forwarded via RVM. out during the ordinary operational pauses, which increases the time the train can be used in traffic. Corrective maintenance to remedy faults and deficiencies is, where possible, carried out during planned visits to the workshop or in connection with preventive maintenance. Remote monitoring creates added value for customers Remote monitoring of different train systems is one of the tools utilised by Euromaint to create added value for its customers. The Remote Vehicle Monitoring (RVM) system means that Euromaint, via a real time connection to the train computer, can obtain information about fault indications and the train s geographical position. This information is analysed by experienced fault tracers and rolling stock engineers who determine what should be done, either immediately or 3 4 EuroMaint Euromaint makes a diagnosis, books the train in for maintenance in dialogue with the customer, and prepares actions. The data is transformed into information and sent to Euromaint for analysis and processing. 6 EuroMaint workshop When the train comes in, the work has been prepared and the action time can be reduced. in conjunction with the next planned visit to the workshop. Remote monitoring makes it possible to plan the action and order material in advance, even though the rolling stock has not been checked for faults before it arrives at the workshop. This reduces the time the train spends at the workshop and makes the maintenance more efficient. With the customers quickly receiving relevant status information about the prioritised maintenance needs of their rolling stock, the train services can be planned in a better way and provide useful support for the driver and other staff onboard. Efficient component and material supply Euromaint offers a complete component and material supply service to its customers. The offering includes sourcing, stockkeeping, comprehensive logistics solutions and a unique range of spare parts. Euromaint s purchasing organisation already has established relationships with important manufacturers and subcontractors. This means that the company creates cost benefits when purchasing spare parts. The company also offers reprocessing of high-value components such as wheels, bogies and traction motors. Aided by a well-established logistics system, the correct components and spare parts are delivered to each workshop for planned maintenance work. Safety in focus Safety awareness is high at Euromaint. Certain elements of the maintenance work are carried out in demarcated areas, where entry is restricted to authorised maintenance staff. In the zone, mobile phones are banned and talking with the engineers while they are inside is not permitted. Traceable, registered torque wrenches are used to tighten the bolts connected to the axletrees. This gives certified proof that every bolt has been tightened to exactly the correct torque. Passenger traffic offering in Germany In Germany, Euromaint s offering has concentrated on overhauls and refurbishment of passenger carriages. In the coming years, the need for overhauls of multiple units (EMU and DMU trains) will increase. Euromaint also offers what are termed roll-out services, which involves the company completing and fine-tuning passenger trains for delivery, on assignment from the train manufacturers. A German maintenance offering for passenger traffic in line with the Swedish maintenance concept is currently under development. The fact that Euromaint also carries out warranty actions on assignment from the train manufacturers is a strength since new trains are now about to be brought into service. EUROMAINT S CUSTOMERS WITHIN MAINTENANCE OF PASSENGER TRAFFIC ROLLING STOCK 14 EuroMaint Annual Report
OFFERING PASSENGER TRAFFIC Punctuality demands reliable rolling stock Since December, Euromaint has been in charge of the maintenance of SJ rolling stock operating the Sala Linköping route. We re very pleased so far; the availability has been good, says Johan Rydén, a rolling stock engineer at SJ. Safe, comfortable, sustainable journeys that represent value for money and arrive at the final destination in all situations. That is SJ s promise to its customers. One of the major challenges at the moment, which SJ shares with the Swedish Transport Administration and other train operators, is improving punctuality. This is something we re working really hard on together, and having railworthy and reliable rolling stock is a vital element of that work. We chose Euromaint because they have extensive expertise within the railway industry and an established network of subcontractors. We also have good experience with them elsewhere in Sweden where they maintain both our SJ2000 train units and InterCity trains, says Johan Rydén. Ahead of this assignment Euromaint used its NPI process, New Product Introduction, which step by step describes what needs to be done before new pieces of rolling stock are taken to a workshop and also how the maintenance should be handled once it is up and running. By keeping an eye on all elements before a contract starts, we can guarantee troublefree production that maintains high quality right from day one, says Ketil Torp, contract manager at Euromaint. SJ s challenge: Safe, comfortable, sustainable journeys that represent value for money and take the passengers to their destination. EuroMaint s solution: Preventive and corrective maintenance, including material supply, with well-defined processes as back-up. Customer value: Railworthy and reliable trains every day. EuroMaint Annual Report 15
OFFERING FREIGHT TRAFFIC A strong position providing customer benefits With a network of workshops covering large areas of Germany and a presence in important ports in the Benelux region, combined with the Swedish workshops, Euromaint can follow freight wagon owners from Luleå in the north to Oberhausen in the south. This gives the company advantages in the European market for maintenance of rolling stock for freight traffic. Euromaint has a comprehensive range of maintenance services for rail freight traffic. Maintenance of freight wagons involves a relatively small proportion of preventive actions. Generally speaking the overall maintenance plan sees the freight wagons undergo a major overhaul every three to seven years. However, some wagon owners and operators like their wagons to be inspected regularly, for example on an annual basis, to reduce corrective maintenance. Yet most maintenance on freight wagons consists of corrective actions such as replacing brake blocks or damaged wheels. Mobile maintenance an increasingly important factor Mobile maintenance has become an increasingly important part of the total maintenance solution for freight rolling stock. This involves remedying faults and damage directly on site whenever possible. This increases availability. The operator which owns or leases the wagon can thus be confident that the wagon is in service as much as possible. If the maintenance partner can offer service on site, the stoppage will be significantly shorter than if the wagon has to be transported to a workshop. Mobile maintenance is important, particularly in northern Sweden where it can be a long way to the nearest workshop. Euromaint has developed several different mobile maintenance solutions for supplying help alongside the track, or on site with the customer in ports and at terminals. This includes light, equipped vans for simpler actions as well as heavy trucks with equipment for handling more complex damage. Buffers, springs and wheels can be replaced today directly at the scene of the damage. With a portable lathe, even wheels can be turned in the field. Moreover, Euromaint has a mobile concept for testing brakes, which means the rolling stock no longer needs to be transported to the workshop to undergo these tests. This complete offering means the customers can reduce the number of maintenance partners, resulting in more efficient administrative processes and follow-up. Sweden Euromaint has a complete range of maintenance services for corrective maintenance and overhauls as well as the reprocessing of components. Maintenance and refurbishment of freight locomotives are also offered in Sweden. This means that the company s offering for rail freight traffic is unique in comparison with its rivals which maintain either locomotives or freight wagons. In Sweden, overhauls of freight wagons are carried out at the workshops in Landskrona and Luleå. The company has expertise and experience, regardless of whether the overhaul concerns wagons for bulk transports, tank wagons or container carriers. This is combined with an attractive offering for the refurbishment of freight wagons. This could, for example, involve a freight wagon for transporting steel being adapted to transport timber instead. What s more, during the year the company was the first in Sweden to gain ECM certification for maintenance of rolling stock designated to transport hazardous goods. One example of the company s expertise in refurbishing freight locomotives is the four model T46 terminal locomotives that are being refurbished on behalf of LKAB. Refurbishments are extensive assignments that set stringent requirements for expertise and experience, since they often involve rebuilding a locomotive from the ground up. Germany and the rest of Europe Euromaint s operational activities in Europe are based at the company s workshops in Germany, which focus on overhauls and reprocessing of components. At the Kaiserslautern workshop, reprocessing of high-value components such as couplers, bumpers and draft gear is also offered. EUROMAINT S CUSTOMERS WITHIN MAINTENANCE OF FREIGHT TRAFFIC ROLLING STOCK 16 EuroMaint Annual Report
OFFERING FREIGHT TRAFFIC Efficient maintenance for wagons in good condition The French company Nacco S.A. leases freight wagons and tanker carriers. For Nacco to build long-term relationships with its customers, efficient wagon maintenance is required. Nacco is a major lessor of wagons in the European market. Euromaint s workshop in Landskrona carries out overhauls on virtually all of Nacco s wagons in Sweden. Our customers want to have good, quick service if anything happens to the wagons they rent from us. Not only are Euromaint quick, they live up to their promises, says Bo Engdahl, salesman at Nacco. Euromaint s objective is to always keep promises and carry out efficient train maintenance. Good planning and dialogue with the customer provide the right conditions for delivering good maintenance, says Ulf Norberg, contract manager at Euromaint. Nacco s tank wagons transport substances such as ammonia, propane and other chemicals. It is important that the workshop doing the maintenance on these wagons is correctly certified. Our maintenance partners have to keep accurate documentation and be certified. They also have to possess a bit more expertise and experience when working with tank wagons, and Euromaint s certified workshop in Landskrona meets all our requirements, says Bo Engdahl. Nacco s challenge: Leasing wagons which are always in good condition. EuroMaint s solution: Overhauls plus corrective maintenance as and when necessary. Customer value: Efficient maintenance of the right quality providing available and reliable wagons. EuroMaint Annual Report 17
OFFERING COMPONENTS AND SPARE PARTS Advanced component and material supply Euromaint reprocesses components and offers material supply for all types of rolling stock. The company is the largest in Sweden in terms of reprocessing of components such as bogies, wheels, traction motors and power converters. Maintenance that keeps rolling stock on track Availability is essential for rolling stock in service. Through an integrated approach to component replacement in connection with light maintenance and overhauls, the throughput time for rolling stock at the workshop is reduced. Components are removed and replaced with new reprocessed components and the rolling stock unit can leave the workshop. Reprocessing work includes wheels, bogies and traction motors, transformers and generators as well as electronic components and smaller motors. The removed components are cleaned, maintained and repaired. After completed reprocessing, the components are placed in a component warehouse ready to be installed in the next piece of rolling stock. We have a well-developed system of replacement components for the vast majority of rolling stock in operation. This means that the lead time never need be longer than the time it takes to replace the component. In addition to component maintenance for rolling stock, maintenance of train power converters is also offered. Identical quality at a lower cost The technique of taking a finished product and preparing detailed drawings and specifications of how the product is constructed and works is called reverse engineering. Euromaint takes this approach in order to reduce lead times, ensure access to materials that might not be manufactured any more, cut costs and increase supplier independence. Euromaint therefore recreates design documentation for priority spare parts and replacement components. This documentation is used to produce parts of identical quality but with shorter lead times and at a lower cost than the original. This approach requires a high level of traceability and Euromaint has created a process which assures the quality of every single element and material used throughout the work flow. The replacement of original materials does not take place until this has first been approved by the customer. Customised material supply Euromaint offers around 55,000 stocked spare parts and around 45,000 items made to order for rolling stock. Customers are supplied with spare parts in the right place at the right time and at the right price from the central warehouse in Örebro and other strategically located service warehouses. Euromaint s purchasing and logistics system is adapted to the rail transport industry. The company has built relationships with the most important manufacturers and subcontractors and has both the knowledge and the volumes required for effective purchasing and logistics processes. EUROMAINT S CUSTOMERS WITHIN COMPONENT MAIN TENANCE AND PROVISION OF SPARE PARTS 18 EuroMaint Annual Report
OFFERING COMPONENTS AND SPARE PARTS High-quality reprocessing of components Competitive pricing, short lead times and the high quality of the finished work were three strong reasons for Transitio choosing Euromaint to be its maintenance partner for reprocessing of automatic couplers. Competitive pricing, short lead times and the high quality of the finished work were three strong reasons for Transitio choosing Euromaint to be its maintenance partner for reprocessing of automatic couplers. Transitio finances, procures and manages rolling stock which it then provides to public transport authorities, among other parties. Our challenge lies in preserving the correct status and condition of the rolling stock we own and lease, says Jan Eriksson, a rolling stock manager at Transitio. Euromaint plays an important role in the maintenance chain by reprocessing the automatic couplers of the rolling stock. The work is carried out at Euromaint s workshop in Örebro. The lead times are critical. We know the challenges faced by our customers if the lead times are not maintained during the reprocessing of components. Our priority is ensuring that Transitio get their couplers on time so that the punctuality of their customers train services is not adversely affected, says Christina Stomberg, contract manager at Euromaint Rail. Jan Eriksson finds Euromaint to be cooperative, flexible and adaptable and says that they are very happy with the partnership. We very rarely have any complaints about or deficiencies in the work carried out by Euromaint. Everything goes smoothly and I m very pleased with our collaboration, concludes Jan Eriksson. Transitio s challenge: An effective maintenance plan for punctual regional transport. EuroMaint s solution: As part of the maintenance chain, Euromaint carries out reprocessing of components on the rolling stock s automatic couplers. Customer value: Efficient and optimised reprocessing of components means high availability for the rolling stock. EuroMaint Annual Report 19
OFFERING WORK MACHINES Comprehensive maintenance services for work machines Euromaint offers maintenance of machines for track maintenance and, with its long-standing experience, can be part of the solution to ensure railway availability. Within Euromaint we have solid expertise in and experience of all types of machines for track and overhead line work. The objective is to improve our customers competitiveness by increasing availability and ensuring infrastructure reliability. This is achieved through comprehensive maintenance services, vast function and product know-how, high technical expertise and a flexible organisation. The offering includes maintenance of machines for track maintenance, e.g. track switching trains, ballast ploughs, track aligners, inspection trolleys and engine trolleys, as well as equipment for overhead line maintenance, e.g. catenary wagons and cable replacement machines. EUROMAINT S CUSTOMERS WITHIN WORK MACHINES High level of service with full service commitment Stockholms Lokaltrafik (SL) is meant to enable passengers in the Stockholm area to get to work, their place of study or leisure activities. This means the trains need to run on time. SL has a large fleet of machinery which takes care of track maintenance, and since November 2009 Euromaint has been responsible for maintaining these work machines. Euromaint has long-standing experience and a high level of technical expertise within maintenance of work machines. The objective is to increase the availability and reliability of the machines. Gustav Jansson is Business Area Manager for Work Machines at Euromaint: Our assignment is to take on a full service commitment for the work machines. This involves everything from managing to developing the maintenance. We have to keep the quality of the work high enough that the work machines are both available and reliable when they are doing their jobs, he says. SL s fleet of machinery comprises around 120 different machines. Euromaint s professional know-how and specialist knowledge of our machines is unique. At the same time, they are willing to make changes and there is a strong desire to develop and improve. This is a level of service that leads to reliability and confidence, says Viveca Swing, SL s business manager for work machines. SL s challenge: The Stockholm region is growing and the population is rising by around 20,000 each year. New residential areas are being built all over the county and the inner city of Stockholm is becoming denser. So public transport has to work. EuroMaint s solution: Full service commitment with preventive and corrective maintenance. Customer value: Dependable, available and reliable work machines. 20 EuroMaint Annual Report
Five-year overview Five-year overview SEK millions INCOME STATEMENT Note Q4 2 Q4 2 2 2 2011 1 2010 1 2009 Net revenue 622 614 2,416 2,484 2,489 2,860 2,814 2,510 Operating expenses 592 595 2,366 2,407 2,420 2,727 2,835 2,352 Other income/expenses 2 15 18 33 33 28 63 17 Income from sales/disposals 2 EBITDA 32 34 68 111 102 159 41 175 Depreciation, amortisation and impairment losses 11 13 42 51 51 57 56 42 EBITA 21 22 25 60 51 102 15 133 Depreciation, amortisation and impairment losses of intangible assets 2 4 4 EBIT 21 22 25 60 51 100 19 128 Financial income 0 1 9 2 2 3 2 1 Financial expenses 3 15 14 44 48 48 51 63 59 EBT 6 9 10 14 5 52 79 70 Tax 18 3 26 18 18 43 33 13 Profit/loss from discontinued operations 2 5 9 118 30 Profit/loss for the year/period 24 4 11 12 12 23 77 57 Profit or loss attributable to parent company s owners 24 4 11 12 12 23 77 57 Items affecting comparability 1 11 42 30 30 35 184 Operating EBITA 23 33 67 90 81 137 169 133 STATEMENT OF FINANCIAL POSITION Goodwill 712 710 712 719 Other intangible fixed assets 3 8 9 23 Property, plant and equipment 176 164 185 202 Financial assets, non-interest-bearing 16 0 24 10 Total non-current assets 907 882 930 954 Inventories 421 432 454 375 Receivables, non-interest-bearing 481 459 690 776 Cash, bank and other current investments 22 Total current assets 924 892 1,144 1,151 TOTAL ASSETS 1,831 1,774 2,075 2,105 Equity attributable to parent company s owners 719 594 737 516 Provisions, interest-bearing 12 11 19 15 Provisions, non-interest-bearing 24 32 47 22 Liabilities, interest-bearing 552 577 628 756 Liabilities, non-interest-bearing 523 548 632 786 Financial liabilities, other 1 11 11 10 TOTAL EQUITY AND LIABILITIES 1,831 1,774 2,075 2,105 KEY RATIOS EBITA margin (%) 3.5 3.6 1.0 2.4 2.1 3.6 0.5 5.3 EBT margin (%) 1.0 1.5 0.4 0.6 0.2 1.8 2.8 2.8 Return on equity (%) 1.8 11.9 Return on capital employed (%) 4.1 10.4 Equity/assets ratio (%) 39 33 36 24 Interest-bearing net debt 564 588 647 772 Debt/equity ratio 0.8 1.0 0.9 1.5 Average no. of employees 2,282 2,419 2,437 2,442 2,373 1,909 1) The profits and average number of employees for 2010 and 2011 are pro forma taking into account the discontinued operation (Business Area Refurbishment) and sale of business (Euromaint Industry). 2) The profits for and are pro forma taking into account the discontinued operations in Germany and Belgium. 3) Excluding interest on shareholder borrowings. EuroMaint Annual Report 21
Directors report Directors report The Board of Directors and the CEO of Euromaint Gruppen AB, Corp. ID number 556731-5402, with registered office in Stockholm, hereby submit the Annual Report for operational activities during the financial year. Shareholders Euromaint Gruppen AB is a wholly-owned subsidiary of EMaint AB, company registration number 556731-5378, with registered office in Stockholm, which is owned by Ratos AB. Euromaint Gruppen AB acquired 100 per cent of Euromaint AB on 1 September 2007 from the previous owner AB Swedcarrier. Operations and organisation Euromaint strengthens its customers competitiveness through services and products that increase the availability, reliability and service life of production equipment in the rail transport industry. Through operational activities in Euromaint Rail AB, Euromaint can be found throughout Sweden, from Luleå in the north to Malmö in the south, in Jelgava in Latvia, and since 2010 in Germany and the Netherlands. The head office is in Solna. The business environment Rail is a central part of the European infrastructure for the transport of passengers and freight. It is a common interest for the EU as a solution to many of the challenges facing Europe as it tries to provide for sustainable development. National rail systems are being opened up in accordance with the EU s principles on free movement and free competition. This is a process that has reached different stages in different countries. Passenger traffic is still largely a national question, while the EU has long worked to create the conditions for a well-functioning pan-european rail freight market. A deregulated market benefits Euromaint in its role as an independent player for maintenance, without links to train operators or manufacturers. In the recession continued to affect Euromaint adversely, not least in Germany where the goods operators continue to review their maintenance strategy and carry out more maintenance in-house. However, the perception is that Euromaint has not lost shares of the total markets. Various means of potential growth World-class operational activities in the domestic markets are a necessary foundation for expansion. For the company to be the leading independent player in train maintenance, stability, profitability, a good image and growth are required. Euromaint s independent position is an important factor for creating an attractive image as a partner. The business model makes it clear that, as an independent partner, the company shares the same goals as the customer when it comes to optimising the activities for increased profitability, and that the high level of quality in the domestic market can be transferred to new markets. The work to internationalise operational activities is continuing. Employees The average number of employees in the Group was 2,282 (2,419). Environmental impact Common to all of Euromaint Rail AB s production areas is that their main environmental impact is on air and water and, to a certain extent, soil. Its activities are classified as environmentally hazardous, and require reporting to the environmental authorities. The environmental authorities decide whether the degree of environmental hazard requires licensing or reporting. If Euromaint Rail AB does not receive the environmental licences required for production, this can limit the company s ability to fulfil its commitments to its customers. If there is a short delay in licences being issued, it is possible to switch workshop activities in order to limit economic damage. Euromaint Rail AB s units are obliged to submit reports in accordance with the Ordinance concerning Environmentally-Hazardous Activities and the Protection of Public Health (1998:899). Notifiable activities carried out by Euromaint Rail AB include rolling stock cleaning, painting, de-icing, the handling of diesel fuel, etc. Risks and uncertainty factors s companies have a customer structure in which a few customers account for a large proportion of the Group s revenue. The loss of one major customer, or a significant customer contract, would result in considerable demands for an adjustment of the companies operational activities to match the reduced revenue. During a transitional period, the profitability of companies would be reduced in any such scenario. However, as customer relationships often include several different contract territories with varying contract lengths, this risk is distributed over time. and the industry in general are affected by the weather conditions, where severe winters with restricted passability for rail traffic could affect costs. Otherwise, the company is affected by the general trends in demand and market conditions in each industry. Multi-year review and key ratios For key ratios see Five-year overview on page 21. Financial instruments and risk management Through its operations, Euromaint is exposed to financial risks, including the effect of changes in prices on the loan and capital markets, exchange rates and interest rates. s overall risk management focuses on the unpredictability of the financial markets and aims at minimising potentially unfavourable effects on the Group s financial results. Financial operations in the Group are centralised in Euromaint Rail AB s finance function, which is responsible for the sourcing of capital, cash management and financial risk management. The operational activities are regulated through the Group s financial policy. The following important financial risks are dealt with: Market risks The risk that the value of, or future cash flows from, a financial instrument will vary due to changes in market prices. Currency risk and interest rate risk constitute market risks. Currency risks Currency risk refers to the risk of exchange rate fluctuations negatively affecting the Group s income statement, balance sheet and/or cash flows. Currency risks exist, both in the form of transaction risks and translation risks. 22 EuroMaint Annual Report
Directors report Interest rate risks Interest rate risks refer to the risk of a negative effect on the Group s financial results resulting from changes in market interest rates. Other risks Credit risk Credit risk is the risk generated by the fact that the credit rating of the investor s counterparty can change in an unpredictable manner, thereby resulting in a loss for the Group. Liquidity and refinancing risk Refinancing risks refer to the risk that the refinancing of mature loans will become difficult or costly and that Euromaint will thereby have difficulty fulfilling its payment obligations. Liquidity risk refers to the risk of difficulty in fulfilling the obligations associated with financial liabilities. For more information about financial risks, see Note 18. Events of material significance in the financial year In the weak freight market continued to affect Euromaint adversely, especially in Germany where several customers are choosing to carry out a greater proportion of their maintenance in-house. In contrast to the freight business, the passenger business in Germany has seen a positive trend in with a number of successful projects carried out in Delitzsch. In order to manage the loss in volume from the freight business, the German company carried out an extensive austerity programme in and among other things shut down loss-making operations in Angermünde. saw the Swedish operations, which have a greater emphasis on the passenger business that is less sensitive to recession, continue the work on developing the maintenance concept and strengthening quality, as well as helping to make existing customers more competitive by actively proposing improvements to their rolling stock. In the Swedish company lost the maintenance contract for SJ Norrland, although it did sign an agreement with and started performing maintenance for regional transport company SJ Uven in Linköping. Future development Euromaint has a strong position in the Swedish train maintenance market. Through the acquisition of RSM in Germany in 2010, the subsidiary Euromaint Rail considerably strengthened its operational activities directed at freight traffic and established itself in the increasingly deregulated European rail market. Changes in maintenance strategies among the German freight transporters mean that Euromaint needs to adjust its German operational activities and take a closer look at the possibility of increasing its share of the maintenance of passenger coaches. Euromaint is already the leading independent player for train maintenance in Europe and, thanks to its position, Euromaint has good opportunities to take advantage of the ongoing deregulation of the train operator market in Europe. Euromaint has identified a number of areas that must be fulfilled in order to attract current and potential customers; these areas constitute the Group s customer promises. The focus areas are: Stability be a stable partner and operate a stable business Profitability create profitable growth, good control of costs and strong cash flow Image strengthen the market s confidence by standing for quality, delivery and innovation Growth grow in the Nordic countries as well as in the rest of Europe, organically and through acquisitions Based on these areas, Euromaint wants to further strengthen its position on the market. Euromaint Gruppen AB carries out internal management services for other companies in the Group, as well as managing Group-wide finance agreements with banks. Apart from that, there are no external activities. Revenue was SEK 0 thousand (248) and operating profit SEK 734 thousand ( 23). The profit/loss for the year amounted to SEK 62,166 thousand ( 62,145). Consolidated revenue and results Revenue Total earnings amounted to SEK 2,439 million (2,518). Operating profit Operating profit amounted to SEK 26 million (60), giving an operating margin of 1.0 per cent (2.4). Financial items Net financial income amounted to SEK 96 million ( 100). Cash flow Cash flow for the period after investments amounted to SEK 50 million (5). Equity/assets ratio The equity/assets ratio amounted to 39 per cent (33). The equity/ assets ratio is measured as equity and shareholder borrowings in relation to the balance sheet total. Appropriation of profits in the parent company Proposed appropriation of profits The parent company s profit/loss for the year was SEK. 62,165,429 Available to the Annual General Meeting, SEK: Retained earnings 898,040,731 Profit/loss for the year 62,165,429 Total 835,875,302 The Board of Directors proposes that the accumulated profit be appropriated as follows: Distribution to shareholders 25,434,000 Carry forward 810,441,302 Total 835,875,302 The income statement and balance sheet will be presented for adoption at the Annual General Meeting on 25 March 2014. EuroMaint Annual Report 23
Consolidated statement of income and other comprehensive income Note Operating income Net revenue 2, 3, 4 2,415,519 2,484,093 Other operating income 5 23,629 34,231 Total operating income 2,439,148 2,518,324 Operating expenses Cost of goods and services sold 4 843,800 817,674 Other external expenses 6, 7 495,721 536,501 Personnel costs 8 1,025,431 1,052,510 Amortisation 9 4,468 6,967 Depreciation 10 37,803 44,220 Other operating expenses 5 5,427 879 Total operating expenses 2,412,650 2,458,751 Operating profit 26,498 59,573 Financial income 11 9,276 2,058 Financial expenses 4, 11 105,276 102,243 Net financial items 96,001 100,185 Profit/loss before tax 69,503 40,612 Tax 12 25,561 17,578 Profit/loss for the year from continuing operations 43,942 58,190 Profit/loss from discontinued operations 5,001 8,538 Profit/loss for the year 48,943 66,728 Other comprehensive income Items that have been transferred or can be transferred to the profit/ loss for the year Change to translation reserve for the year 6,335 6,053 Change to hedging reserve for the year 877 1,038 Currency adjustment 45 Items that cannot be transferred to the profit/loss for the year Revaluations of defined benefit pension obligations 1,171 Other comprehensive income for the year 6,041 7,046 Comprehensive income for the year Profit/loss for the year attributable to Parent company shareholders share of the profit/loss for the year 48,943 66,728 Comprehensive income for the year attributable to Parent company shareholders 6,041 7,046 Total comprehensive income for the year attributable to parent company shareholders 42,902 73,774 Earnings per share Earnings per share, undiluted 489 667 Earnings per share from continuing operations Earnings per share, undiluted 489 667 24 EuroMaint Annual Report
Consolidated statement of financial position Note Assets Non-current assets Intangible fixed assets 9 715,081 717,493 Property, plant and equipment 10, 13 175,814 164,458 Participations in associates 15 224 215 Deferred tax assets 12 15,815 Total non-current assets 906,934 882,166 Current assets Inventories 16 421,307 432,319 Trade receivables 17, 18, 19 316,678 350,793 Receivables from Group companies 17 32,608 16,000 Tax assets 17 6,092 6,270 Other receivables 17, 19 22,323 28,734 Completed, not invoiced 17, 20 10,007 3,200 Prepaid expenses/accrued income 17 92,609 54,488 Cash and cash equivalents 21 22,350 Total current assets 923,974 891,804 Total assets 1,830,908 1,773,970 Liabilities and equity Equity Share capital 100 100 Other capital contribution 1,096,543 432,316 Reserves 20,324 31,607 Retained earnings including profit/loss for the year 357,548 309,763 Equity attributable to parent company shareholders 718,771 91,046 Non-current liabilities Non-current interest-bearing liabilities 13, 18, 19, 22 509,000 401,800 Shareholder borrowings 4, 18, 19, 22 503,198 Provisions for pensions and similar obligations 23 11,947 11,112 Other provisions 24 21,934 27,239 Deferred tax liabilities 12 2,183 5,113 Other non-current liabilities, interest-bearing 22 10,519 11,611 Other non-current liabilities, non-interest-bearing 19 3,876 15,438 Total non-current liabilities 559,459 975,511 Current liabilities 25 Advance payment from customers 12,887 8,252 Trade payables 4, 19 253,612 239,347 Liabilities to credit institutions, interest-bearing 19, 22 32,861 163,215 Other current liabilities 19 28,369 31,101 Invoiced, not completed 26 47,973 62,039 Accrued expenses/deferred income 176,976 203,459 Total current liabilities 552,678 707,413 Total liabilities 1,112,137 1,682,924 Total equity and liabilities 1,830,908 1,773,970 Pledged assets and contingent liabilities 27 Pledged assets, floating charges 209,772 251,466 Contingent liabilities 68,510 117,397 EuroMaint Annual Report 25
Consolidated statement of changes in equity Note Share capital Equity attributable to parent company shareholders Other capital contribution Reserves Retained earnings including profit/loss for the year Total equity Opening equity 1 January 100 432,286 24,516 119,651 288,219 Adjusted item 30 30 Group contributions received/given 16,000 16,000 Current tax attributable to Group contributions 4,208 4,208 Dividend 1 135,191 135,191 Profit/loss for the year 66,728 66,728 Other comprehensive income for the year 7,091 45 7,046 Comprehensive income for the year 7,091 66,683 73,774 Closing equity 31 December 100 432,316 31,607 309,763 91,046 Opening equity 1 January 100 432,316 31,607 309,763 91,046 Adjusted opening balance effect IAS 19 4,071 11,313 7,242 Adjusted opening equity 1 January 100 432,316 27,536 321,076 83,804 Shareholder contributions received 664,227 664,227 Group contributions received/given 32,608 32,608 Current tax attributable to Group contributions 7,174 7,174 Dividend 1 11,792 11,792 Profit/loss for the year 48,943 48,943 Other comprehensive income for the year 7,212 1,171 6,041 Comprehensive income for the year 7,212 50,114 42,902 Closing equity 31 December 100 1,096,543 20,324 357,548 718,771 Change in translation reserve 1 Opening translation reserve 1 January 24,516 Change for the year from the translation of companies 6,053 Closing translation reserve 31 December 30,569 Opening translation reserve 1 January 30,569 Adjusted opening balance effect IAS19 4,071 Change for the year from the translation of companies 6,335 Closing translation reserve 31 December 20,163 Change to hedging reserve Opening hedging reserve 1 January Change for the year 1,038 Closing hedging reserve 31 December 1,038 Opening hedging reserve 1 January 1,038 Change for the year 877 Closing hedging reserve 31 December 161 1) Exchange rate differences when translating financial statements of foreign operations. The company applies hedge accounting for currency and interest derivatives. See Note 1 for more information. 26 EuroMaint Annual Report
Consolidated statement of cash flows Note Operating activities Profit/loss after financial items in continuing operations 69,503 40,612 Profit/loss after financial items in discontinued operations 5,001 8,538 Depreciation/amortisation 42,311 51,225 Other items not affecting liquidity 21 58,618 41,572 Income tax paid 10,818 3,051 Cash flow from operating activities before changes in working capital 37,243 46,698 Changes in working capital Increase ( )/Decrease (+) in inventories 11,012 22,017 Increase ( )/Decrease (+) in trade receivables 34,115 18,207 Increase ( )/Decrease (+) in other current receivables 71,125 35,270 Increase (+)/Decrease ( ) in trade payables 14,265 15,167 Increase (+)/Decrease ( ) in other current liabilities 38,646 73,011 Cash flow from operating activities 13,136 34,014 Investing activities Acquisition of intangible assets and property, plant and equipment 9, 10 36,696 28,711 Cash flow from investing activities 36,696 28,711 Cash flow from operating activities 49,832 5,303 Financing activities Synthetic options 967 Borrowings 120,950 Amortisation loans 152,009 53,546 Repayment of shareholder borrowings 564,226 Dividend paid 11,792 135,191 Shareholder contributions received 664,227 Group contribution received 16,000 183,434 Cash flow from financing activities 72,183 5,303 Change in cash and cash equivalents for the period 22,351 Cash and cash equivalents at beginning of the period Cash and cash equivalents at year end 21 22,351 EuroMaint Annual Report 27
Parent company Parent company income statement Note Operating income Net revenue 2 248 Total operating income 248 Operating expenses Other external expenses 6 734 1 Personnel costs 8 270 Total operating expenses 734 271 Operating profit 734 23 Financial income 11 9,007 122 Financial expenses 11 87,994 84,398 Net financial items 78,987 84,276 Profit/loss before tax 79,721 84,299 Tax 12 17,555 22,154 Profit/loss for the year 62,166 62,145 Parent company statement of comprehensive income Note Profit/loss for the year 62,166 62,145 Other comprehensive income Change to hedging reserve for the year 877 1,038 Other comprehensive income for the year 877 1,038 Comprehensive income for the year 61,289 63,183 28 EuroMaint Annual Report
Parent company Parent company balance sheet Note Assets Non-current assets Participations in Group companies 14 935,200 935,200 Deferred tax assets 12 45 293 Non-current receivable Group companies 19 187,780 146,530 Total non-current assets 1,123,025 1,082,023 Current assets Receivables from Group companies 17, 19 456,185 302,288 Prepaid expenses/accrued income 17 14,397 Miscellaneous 101 5 Total current assets 470,683 302,293 Total assets 1,593,708 1,384,316 Liabilities and equity Equity Restricted equity Share capital 100 100 Reserves 161 1,038 Non-restricted equity Retained earnings 898,041 245,570 Profit/loss for the year 62,166 62,145 Total equity 835,814 182,487 Non-current liabilities 22 Non-current interest-bearing liabilities 13, 18, 19 509,000 401,800 Shareholder borrowings 4, 18, 19 503,198 Other non-current liabilities, non-interest-bearing 19 1,667 12,577 Total non-current liabilities 510,667 917,575 Current liabilities 25 Trade payables 4, 19 708 19 Liabilities to Group companies 19 221,514 239,130 Liabilities to credit institutions, interest-bearing 22 25,000 45,000 Other current liabilities 5 21 Accrued expenses/deferred income 84 Total current liabilities 247,227 284,254 Total liabilities 757,894 1,201,829 Total equity and liabilities 1,593,708 1,384,316 Pledged assets and contingent liabilities 27 Pledged assets 204,582 246,276 Contingent liabilities EuroMaint Annual Report 29
Parent company Parent company s changes in equity Equity Restricted equity Share capital Fair value reserve Hedging reserve Non-restricted equity Retained earnings Profit/loss for the year Total equity Opening equity 1 January 100 458,364 139,783 318,681 Appropriation of profits 139,783 139,783 Dividend 135,191 135,191 Group contributions received 84,368 84,368 Current tax attributable to Group contributions 22,188 22,188 Profit/loss for the year 62,145 62,145 Other comprehensive income for the year 1,038 1,038 Comprehensive income for the year 1,038 62,145 63,183 Closing equity 31 December 100 1,038 245,570 62,145 182,487 Opening equity 1 January 100 1,038 245,570 62,145 182,487 Appropriation of profits 62,145 62,145 Shareholder contributions 664,226 664,226 Dividend 11,792 11,792 Group contributions received 79,720 79,720 Current tax attributable to Group contributions 17,538 17,538 Profit/loss for the year 62,166 62,166 Other comprehensive income for the year 877 877 Comprehensive income for the year 877 62,166 61,289 Closing equity 31 December 100 161 898,041 62,166 835,814 The number of shares in the parent company amounts to 100,000 (100,000). The par value in the parent company is 1. Change to hedging reserve Opening hedging reserve 1 January Change for the year 1,038 Closing hedging reserve 31 December 1,038 Opening hedging reserve 1 January 1,038 Change for the year 877 Closing hedging reserve 31 December 161 30 EuroMaint Annual Report
Parent company Parent company cash flow statement Note Operating activities Profit/loss after financial items 79,721 84,299 Other items not affecting liquidity 21 47,585 54,517 Cash flow from operating activities before changes in working capital 32,136 29,782 Changes in working capital Increase ( )/Decrease (+) in other current receivables 168,390 1,260 Increase (+)/Decrease ( ) in trade payables 689 7 Increase (+)/Decrease ( ) in other current liabilities 37,722 19,825 Cash flow from operating activities 237,559 11,224 Investing activities Acquisition of intangible assets and property, plant and equipment Cash flow from investing activities Cash flow from operating activities 237,559 11,224 Financing activities Synthetic options 968 Borrowings 120,950 Amortisation loans 55,000 37,084 Repayment of shareholder borrowings 564,226 Dividend paid 11,792 135,191 Shareholder contributions received 664,227 Group contribution received 84,368 183,434 Cash flow from financing activities 237,559 11,159 Change in cash and cash equivalents for the period 65.0 Cash and cash equivalents at beginning of the period 65.0 Cash and cash equivalents at year end EuroMaint Annual Report 31
notes Noter Note 1 Accounting and valuation policies This annual report and the consolidated financial statements were adopted by the Board and the CEO on 14 February 2014 and are proposed for final adoption by the Annual General Meeting on 25 March 2014. Ratos formed the Euromaint Gruppen AB on 25 April 2007. Euromaint Gruppen AB acquired Euromaint AB on 1 September 2007. The parent company is a registered limited liability company domiciled in Stockholm. The address for the head office is Svetsarvägen 10, SE-171 41 Solna, Sweden. The parent company in the largest group to which Euromaint Gruppen AB, 556731-5402 is a subsidiary, and in which the Consolidated Financial Statements are drawn up, is Ratos AB, 556008-3585, Stockholm. The most important accounting policies applied in the preparation of these consolidated financial statements are listed below and have been applied consistently to all periods unless otherwise stated. s accounting policies have also been consistently applied by Group companies. Statement of compliance with applicable regulations Euromaint Gruppen s Consolidated Financial Statements have been prepared in accordance with the Swedish Annual Accounts Act and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and interpretations from the International Financial Reporting Interpretations Committee (IFRIC), as they both have been adopted by the EU. The Consolidated Financial Statements are also prepared according to the Swedish Financial Reporting Board s Recommendation RFR 1. (Supplementary Accounting Rules for Groups). The accounting policies relating to the parent company correspond to the policies for the Group except as shown below under the heading. The parent company s Annual Report is prepared in accordance with the Swedish Financial Reporting Board Recommendation RFR 2 (Accounting for legal entities) and the Swedish Annual Accounts Act. Basis of preparation of the statements The accounts are based on historical acquisition costs, apart from certain financial instruments. For further information on this point, please consult the section Financial Instruments, below. Important estimates and assumptions for accounting purposes The preparation of statements in accordance with IFRS requires the use of a number of estimates and assumptions about the future; these are made by the company management. The estimates for accounting purposes that result will, by definition, rarely correspond to the actual results. Estimates and assumptions are reviewed regularly. Changes to estimates are reported in the period in which the change is made if the change only affects this period, or in the period in which the change is made and future periods if the change affects both the current period and future periods. Uncertainty in estimates Some assumptions about the future and certain estimates and assumptions at the balance sheet date have special significance for the valuation of assets and liabilities in the balance sheet. Discussed below are the areas where the risk of changes in value during the following year is greatest due to the need to change assumptions or estimates. Goodwill impairment testing Goodwill arising from business combinations represents the difference between the acquisition cost and the fair value of the acquired identifiable net assets. Impairment testing for goodwill is performed once a year. The recoverable amount (i.e. the higher of value in use and fair value less selling expenses) is normally established based on the value in use, derived using discounted cash flow calculations. This in turn requires the expected future cash flow from the cash-generating unit to be estimated and an appropriate discount rate is established for calculating the cash flow s present value. Pension obligations The value of pension obligations for defined benefit pension plans is based on actuarial calculations using assumptions regarding discount rates, expected returns on plan assets, future salary increases, inflation and demographic conditions. Obsolescence of inventories In value terms, inventories consist mainly of items acquired according to an estimated maintenance plan for different train models. Since these cycles are long-term (5 12 years), there is an uncertainty in the assessment. The company has an obligation to stock items (spare parts) over a long period for individual train models, which have a very long economic and technical life. Percentage of completion accounting method With the percentage of completion accounting method there is uncertainty, as the work runs for several years, in predicting the final financial outcome of a major refurbishment project. Reconciliation is therefore made during the period from the beginning of the project until completion, but because this consumes both time and money, this is only performed a certain number of times during the year. Provision for warranties for work carried out For so-called availability work, faults in a provided service or a non-functioning product are corrected during a short period after the service has been provided. The cost of the work or replacement of a non-functioning product is included in the agreed business deal. For refurbishment work, there is a need for warranties to the customer. These warranties run for two to five years. Since each refurbishment job is a unique part of the company s operations and cannot be compared with any other refurbishment job, the cost for warranties is difficult to assess. The company tries to estimate the warranty costs that may arise, and make provisions for these, but some uncertainty remains over the final outcome. Changed accounting policies The change in IFRS with application from which is deemed to have had the greatest effect on the Group s accounting is the change to IAS 19. The change means that the so called corridor method is no longer permitted and the actuarial gains and losses must be recognised in other comprehensive income. The amount that was previously recognised in the so-called corridor, SEK 7,242 thousand, was returned as at 1 January. Returns that are calculated on plan assets are based on the discount rate which was used when calculating the pension obligation. This means that the net interest on the net pension liability is now constituted by the interest expense on the pension liability and interest income on the plan assets. The difference between the actual return and the total included in the net interest income concerning plan assets is recognised in other comprehensive income. New IFRS that have not yet been applied A number of new and changed IFRS only come into force in the next financial year and have not been applied in advance when preparing these financial statements. IFRS 10. New standard for Consolidated Financial Statements. The new standard does not contain any changes compared to the currently valid IAS 27 regarding the consolidation of acquisitions and disposals. IFRS 10 contains a model that is to be used when determining whether or not there is a controlling interest for all investments that a company holds. IFRS 12 Disclosure of Interests in Other Entities. The disclosure requirements concerning subsidiaries etc. have been changed. IAS 28 Investments in Associates and Joint Ventures. The change concerns how recognition is to be done when changes in investments change and significant or joint controlling interest ceases or does not cease. Consolidated financial statements Euromaint Gruppen s income statement and balance sheet comprise all the companies over which the parent company directly or indirectly exercises a controlling interest. A controlling interest means the right to directly or indirectly shape a company s financial and operating strategies in order to obtain economic benefits. A controlling interest arises when a shareholding totals more than half of the voting rights. When assessing if there is significant influence, potential voting shares that can be used or converted without delay are taken into consideration. Intra-group transactions and balance sheet items, as well as profit on transactions between Group companies are eliminated. Unrealised losses are also eliminated, unless the transaction provides evidence that there is an impairment requirement for the transferred asset. 32 EuroMaint Annual Report
notes Consolidation principles and business combinations Subsidiaries are companies under the control of Euromaint Gruppen AB. Controlling interest means the right to directly or indirectly shape a company s financial and operating strategies in order to obtain economic benefits. When assessing if there is a controlling interest, potential voting shares that can be used or converted without delay are taken into consideration. Acquisitions on 1 January 2010 or later Subsidiaries are reported according to the acquisition method. This method means that the acquisition of a subsidiary is considered a transaction by means of which the Group indirectly acquires the subsidiary s assets and takes over its liabilities. The acquisition analysis establishes the fair value on the acquisition date of the acquired identifiable assets and assumed liabilities, as well as any holding without a controlling interest. Transaction fees, with the exception of transaction fees related to the issue of equity instruments or debt instruments, arising are recognised directly in the profit/loss for the year. When combining businesses where the transferred compensation, possibly a holding without a controlling interest and the fair value of a previously owned share (in the event of phased acquisition) exceeds the fair value of acquired assets and assumed liabilities which are recognised separately, the difference is recognised as goodwill. When the difference is negative, a low price acquisition, this is recognised directly in the profit/loss for the year. Transferred compensation in conjunction with the acquisition does not include payments related to the regulation of previous business relationships. This type of regulation is recognised in earnings. The company s acquisitions have not included any conditional purchase sums. Acquisitions made between 1 January 2004 and 31 December 2009 For acquisitions made between 1 January 2004 and 31 December 2009, where the acquisition cost exceeds the fair value of acquired assets and assumed liabilities, as well as contingent liabilities reported separately, the difference is recognised as goodwill. When the difference is negative, this is recognised directly in the profit/loss for the year. Transaction fees, with the exception of transaction fees related to the issue of equity instruments or debt instruments, arising have been included in the acquisition cost. Foreign currency translation Foreign operations financial statements Receivables and liabilities in foreign operations, including goodwill and other consolidated surplus and deficit values, are translated from the foreign operations functional currency to the Group s reporting currency, the Swedish krona, at the rate on the balance sheet date. When preparing the consolidated financial statements, all items in the income statement for foreign subsidiaries are recalculated to Swedish krona using the average exchange rates, which constitute an approximation of the exchange rates in force at the time of each transaction during the year. The changes in the Group s equity arising from different exchange rates on the balance sheet date, compared with the rate on the previous balance sheet date, are recognised in other comprehensive income and accumulate as a separate component under equity, designated translation reserve. When disposing of foreign activities, the accumulated translation differences attributable to the sold foreign activities are reclassified from equity to profit/loss for the year as a reclassification adjustment at the time when the profit or loss from the sale is recognised. Transactions in foreign currency All subsidiaries use the local currency as their functional currency. Transactions are reported at the rate on the transaction date, which is then translated. Monetary assets and liabilities in foreign currency are recalculated to the functional currency at the exchange rate in force on the balance sheet date. Exchange rate differences that arise from these translations are reported in the profit/loss for the year. Non-monetary assets and liabilities reported at historical acquisition cost are translated at the exchange rate at the time of the transaction. Non-monetary assets and liabilities reported at fair value are translated into the functional currency at the rate in force at the time of the valuation of fair value. The functional currency of the parent company is Swedish krona which also constitutes the statement currency for the parent company and Group. Net investment in a foreign operation Monetary non-current receivables to a foreign operation for which no regulation is planned, or which will in all probability not take place within the foreseeable future, are in practice part of Euromaint s net investment in the foreign operation. An exchange rate difference arising in the monetary non-current receivable is recognised in other comprehensive income and accumulated in a separate component in equity, designated translation reserve. When disposing of a foreign operation the accumulated exchange rate differences related to monetary non-current receivables are included in the accumulated translation differences reclassified from the translation reserve in equity to the net profit/loss for the year. Property, plant and equipment Owned assets Property, plant and equipment is included at acquisition cost, less accumulated depreciation and accumulated impairment loss. The acquisition cost includes the purchase price and costs directly attributable to the asset, such as the cost for getting it in place and in such a condition that it can be used in accordance with the aim of the acquisition. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is likely that future economic benefits associated with the asset will flow to the Group and the acquisition cost of the item can be measured reliably. All other types of repairs and maintenance are reported as expenses in the income statement during the period in which they arise. Leased assets Assets leased under finance lease contracts are recognised as non-current assets in the statement of financial position and are initially measured at the lower of the leased item s fair value and the present value of the minimum lease payments at the start of the contract. The obligation to pay future lease payments is recognised as non-current and current liabilities. The leased assets are depreciated over the useful life of the asset, or if shorter over the agreed leasing period, while lease payments are reported as interest and the amortisation of debt. The assets that are leased according to operational leasing are not recognised as assets in the statement of financial position. Operating lease contracts do not give rise to a liability either. Depreciation/amortisation principles To allocate their acquisition cost down to the estimated residual value, there is straight-line depreciation according to plan of property, plant and equipment over the estimated useful life, according to the following percentages per year: Category Depreciation year Machinery and equipment 5 10 Computers and terminals 3 Improvements to leasehold 5 10 The assets residual values and useful lives are reviewed on each balance sheet date and are adjusted if necessary. An asset s carrying amount is written down immediately to its recovery value (the higher of net realisable value and value in use) if the asset s carrying amount exceeds its estimated recovery value. Profits and losses following disposals are determined by comparing the revenue from sales and the carrying amount, and the result is reported in the income statement. Intangible assets Goodwill Goodwill represents the amount by which the acquisition cost exceeds the fair value of the Group s share of the acquired subsidiary s identifiable net assets on the date of acquisition minus any write-downs. Goodwill is recognised as an intangible asset. Profit or loss on the divestment of a unit includes the remaining carrying amount of the goodwill relating to the divested unit. Goodwill is allocated to cash-generating units when carrying out testing for impairment, which is done annually. Impairment testing for goodwill is carried out using the following procedure. The goodwill value as determined on the date of acquisition is allocated to cash-generating units, or groups of cash-generating units, which are expected to bring benefits to the company through synergies. Assets and liabilities that already exist in the Group at the time of acquisition can also be attributed to these cash-generating units. Any cash flow of this type to which goodwill is allocated corresponds to the lowest level within the Group at which goodwill is monitored by the company s management and is not a part of the Group greater than one segment. Impairment is necessary when the recoverable amount for a cash-generating unit (or groups of cash-generating units) is less than the carrying amount. A write-down is then recorded in the income statement. EuroMaint Annual Report 33
notes Technology Research projects or patent rights acquired in a business combination are capitalised and reported at the acquisition cost less amortisation and writedowns. Subsequent expenses for capitalised intangible assets are reported as an asset in the statement of financial position. Only then do they increase the future economic benefits for the specific asset to which they relate. All other expenses are recorded as a cost when they occur. Depreciation/amortisation principles Amortisation is reported in the profit/loss for the year over the estimated useful life of the intangible asset, unless such useful lives cannot be determined. The useful lives are re-examined at least once a year. Goodwill and other intangible assets with an uncertain useful life or which are not yet ready for use are tested for impairment annually, and also as soon as indications arise that suggest that the asset in question has reduced in value. Intangible assets with definable useful lives are amortised from the date they are available for use. The calculated useful lives are: Category Depreciation year Technology 3 Impairment of non-financial assets Property, plant and equipment and intangible assets Assets that have an indefinite useful life are not depreciated, but are tested annually for impairment. The assets which are depreciated are assessed in terms of any need for impairment whenever events or changes in circumstances indicate that the carrying amount is not recoverable. If it is not possible to significantly determine independent cash flows for an individual asset, and its fair value minus selling expenses cannot be used, the assets are grouped to the lowest level when testing for impairment where it is possible to identify significantly independent cash flows a so-called cash-generating unit. A write-down is made according to the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less selling expenses or value in use. When calculating the value in use, future cash flows are discounted by a discount factor that takes into account the risk-free interest rate associated with the specific asset. An impairment is recognised as a cost in the profit/loss for the year. Once impairment losses have been identified for a cash-generating unit, the write-down sum is primarily assigned to goodwill. The other assets included in the unit are then proportionally written down. Assets, except goodwill, that have previously been written down are examined on each balance sheet date to determine whether a reversal is required. Financial instruments Financial instruments recognised in the statement of financial position include, on the asset side, cash and cash equivalents, trade receivables, derivatives and other receivables. On the liability side are trade payables, loans, derivatives and other liabilities. A financial asset or financial liability is recognised in the statement of financial position once the company has become a party to the instrument s contractual terms. Trade receivables are recognised in the statement of financial position when the invoice has been sent. Liabilities are entered when the counterparty has delivered and a contractual obligation to pay exists, even if an invoice has not yet been received. Trade payables are entered when an invoice has been received. A financial asset is derecognised from the statement of financial position when the rights in the contract have been realised, cancelled or the company loses control over it. The same applies to part of a financial asset. A financial liability is derecognised from the statement of financial position when the obligation in the contract has been fulfilled or is otherwise satisfied. The same applies to part of a financial liability. Acquisitions and divestments of financial assets are reported on the trade date, which is the date on which the company commits to acquire or sell the asset. Financial instruments and hedge accounting Forward agreements used to hedge currency changes for receivables and liabilities in a foreign currency are valued at the spot price on the day when the currency future is taken up for assessment of the underlying receivable or liability. The difference between the forward rate and the day rate when the agreement is entered into (the arbitrage premium) is amortised over the term of the forward agreement. Amortised arbitrage premiums are reported as interest rate income or an interest rate expense when the future is longer than three months. Classification of financial instruments classifies its financial instruments into the following categories: financial assets or financial liabilities held for trading and measured at fair value via the income statement, trade receivables, liabilities measured at amortised acquisition cost and derivatives used for hedging purposes. The classification depends on the purpose for which the instrument was acquired. The classification is determined at initial recognition and is reassessed at each reporting date. Calculation of fair value When the market is not active for a particular financial asset, fair values are calculated through valuation techniques, whereby the Group makes assumptions based on the market conditions prevailing at the balance sheet date. Market rates of interest form the basis for calculating the fair value of longterm loans. For other financial instruments where the market value is not specified, fair value is considered to correspond with the carrying amount. Financial assets measured at fair value via the income statement. This category includes financial assets held for trading and those which, from the time of investment, are attributable to the category measured at fair value via the income statement. s assets in this category consist of derivative instruments that are not identified as hedges. Assets in this category are classified as current assets if they are held for trading or are expected to be realised within 12 months of the balance sheet date. Financial assets measured at fair value via the income statement are valued at their fair value initially, which means that transaction costs burden the income for the period, and following the acquisition date. Realised and unrealised gains and losses arising from changes in fair value are included in the income statement as financial items in the period in which they occur. Trade receivables Trade receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade receivables are recognised at the acquisition cost less any provision for impairment. Trade receivables are deemed uncertain when payment is not seen as likely. The impairment losses for receivables are determined based on historic experience of bad debts on similar accounts. Trade receivables with impairment losses are recognised at the present value of expected future cash flows. However, receivables with a short term are not discounted. Impairments of trade receivables recognised at amortised acquisition cost are reversed if the previous reasons for impairment are no longer valid and full payment from the customer is expected to be received. Financial liabilities valued at fair value via the income statement This category includes derivatives with negative fair value that are not used for hedge accounting, and financial liabilities that are held for trading. The liabilities are valued continuously at fair value, which means that transaction costs burden the income for the period, and changes in value are reported in the income statement as a financial item. Synthetic options Synthetic option programmes with market premiums are recognised and measured in accordance with IAS 39. Received premiums are recognised as financial liabilities. When a valuation of the options at fair value through an option pricing model corresponds to the premium the company has received, this means that there is no initial cost to the company. The liability is revalued continuously at fair value by applying an option pricing model, taking the existing conditions into account. Changes in value over the option s term are reported as a financial item, as well as other income and expenses in respect of financial assets and liabilities. If a synthetic option is exercised by the holder, the financial liability, as previously revalued at fair value, is settled. Any realised profit is recognised in the income statement as a financial item. If the synthetic options mature without value, the reported liability is recognised as income. Borrowing Loans are initially recognised at the loan sum including transaction costs, and are then reported at amortised acquisition cost applying the effective interest rate method. Borrowings are classified as current liabilities if payment of the liability is to be made within 12 months following the balance sheet date. Trade payables Trade payables are initially reported at the acquisition cost equivalent to fair value with additions for transaction costs and are subsequently measured at amortised cost using the effective interest rate method. 34 EuroMaint Annual Report
notes Derivative instruments has used derivative instruments in the form of futures to hedge parts of its exposure to currency risks in the payment flows, as well as interest rate swaps to hedge parts of borrowings with variable interest rates. Hedge accounting was applied with effect from 1 January 2008. Since, there are only interest rate swaps. With effect from 2011, the Group successively discontinued the use of derivatives and there are now no unrealised derivatives remaining. Derivative contracts and interest rate swaps are recognised as follows. The effective portion of the hedging instrument s change in value is recognised in other comprehensive income and the accumulated changes in value in a specific component of equity, while the ineffective part is recognised in profit/loss for the year. (The last derivative contract was realised in December 2011.) In order to meet the requirements for hedge accounting under IAS 39, there needs to be a clear link to the hedged item. It also demands that the hedge effectively protects the hedged item, that the hedge documentation is prepared, and that efficiency can be shown to be high through efficiency measurement. Accumulated changes in value in equity are reversed in the profit/loss for the year in the periods when the hedged item affects the result, for example, when the forecast external sale has taken place. When a hedging instrument expires, is sold or when the hedge no longer meets the conditions for hedge accounting, the accumulated changes in value in equity remain and are reversed to the profit/loss for the year. If a forecast transaction is no longer expected to take place, the accumulated change in value that has been recognised in equity is immediately transferred to profit/loss for the year. Derivatives with positive values are reported as assets and derivatives with negative values as liabilities. Cash and cash equivalents Cash and cash equivalents include cash and bank deposits. Associates Associates are companies in which the Group has a significant, but not controlling, interest in operational and financial management, ordinarily through a shareholding of between 20 and 50 per cent of the voting rights. From the date that the controlling interest is obtained, the shares in the associate are recognised in the consolidated financial statements using the equity method. The equity method means that the value reported in the Group of shares in the associates corresponds to the Group s share in the associates equity as well as Group goodwill and other residual values of Group surplus and deficit values. In the consolidated profit/loss for the year, the Group s share in associated companies profit/loss attributable to the owners of the parent company, adjusted for any depreciation, impairment and reversals of acquired surpluses and deficit values, is recognised in Income from participations in associates. These equity participations, reduced by dividends received from associates, constitute the main change of the reported value of equity in associates. Any difference on the acquisition date between the acquisition cost for the holding and the owner company s share of the net fair value of the associate s identifiable assets and liabilities is recognised according to the same principles as for the acquisition of subsidiaries. Transaction fees, with the exception of transaction fees related to the issue of equity instruments or debt instruments, arising have been included in the acquisition cost. When the Group s share of reported losses in the associate exceeds the reported value of the shares in the Group, the value of the shares is reduced to zero. Deduction for losses also takes place against long-term financial intermediaries without collateral, which financially constitute part of the owner company s net investment in the associate. Continuing losses are not recognised unless the Group provided guarantees to cover losses arising in the associate. Inventories Inventories are valued at the acquisition cost or the net realisable value, whichever is lowest. The acquisition cost for inventories is calculated using the first-in, first-out (FIFO) method and includes expenses that have been incurred from acquiring stock assets and transporting them to their current location and getting them into the appropriate condition. For manufactured goods and work in progress, the acquisition cost includes a reasonable proportion of indirect costs based on normal capacity. The net realisable value is the estimated sale price in operating activities, once the costs of completion and sale have been deducted. Contingent liabilities A contingent liability is recognised when there is a possible commitment deriving from events that have occurred and whose occurrence is only confirmed by one or more uncertain future events or when there is a commitment that has not been recognised as a liability or provision due to it not being credible that an outflow of resources will be required. Classification The non-current assets, non-current liabilities and provisions consist essentially of amounts that are expected to be recovered or paid after more than 12 months following the balance sheet date. Current assets and current liabilities consist essentially of amounts that are expected to be recovered or paid within 12 months following the balance sheet date. Income taxes Income taxes are included in the consolidated financial statements with both current and deferred tax. Group companies are subject to taxation in accordance with the existing legislation in each country. A current tax liability or asset is reported as the tax estimated to be paid or received for the current or previous years. Deferred tax is reported on all temporary differences arising from the difference between the tax value of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is calculated by applying the tax rates and tax laws that have been enacted or announced at the balance sheet date and are expected to apply when the deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are reported for deductible temporary differences and unused tax loss carry-forwards to the extent it is likely that future taxable profits will be available against which the temporary differences or unused loss carry-forwards may be utilised. Remuneration to employees Pension obligations Group companies have various pension plans. The pension plans are financed through the payment of insurance premiums or through provisions in the balance sheet. has both defined benefit and defined contribution pension plans. A defined contribution pension plan is a pension plan for which the Group does not have any further payment obligations once the contributions are fully paid. Defined contribution pension plans in the Group are PA-03, Option ITP-S, and ITP in Alecta which is reported as a defined contribution plan due to lack of the information required to report the plan as a defined benefit plan. The contributions are reported as personnel costs. Prepaid contributions are reported as an asset to the extent that a cash refund or reduction of future payments can be credited by the Group. A defined benefit pension plan means that the employee is guaranteed a pension equivalent to a certain percentage of their final salary. The liability reported in the balance sheet for defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The present value of the defined benefit obligation is determined by discounting the estimated future cash flows using the interest rate on government bonds with maturities comparable to the current pension liability. The calculation is performed by an qualified actuary using the Projected Unit Credit Method. s net obligation comprises the present value of the obligation minus the fair value of plan assets adjusted for any asset limits. The net interest cost of the defined benefit obligation is recognised in the profit/ loss for the year under net financial income. The net interest is based on the interest that arises when discounting the net obligation minus the fair value of plan assets adjusted for any asset limits. Other components are recognised in operating profit. Revaluation differences comprise of actuarial profits and losses, the difference between the actual return on plan assets and the sum that is included in the net interest and any changes in asset limit differences. Revaluation differences are recognised in other comprehensive income. The special income tax comprises part of the actuarial assumptions and is therefore recognised as part of the net obligation. The part of the special income tax that is calculated based on the Swedish Act on Safeguarding Pension Obligations for legal entities is recognised for the sake of simplicity as an accrued expense instead of part of the net obligation. Yield tax is recognised in profit or loss for the period to which the tax pertains and is therefore not included in the liability calculation. In funded plans the tax is charged to the return of the plan assets and is recognised in other comprehensive income. In unfunded plans the tax is charged to the profit/ loss for the year. Short-term benefits Short-term employee benefits are calculated without discounting, and are reported as a cost once the related services have been received. A provision is reported for the expected cost of profit-sharing and bonus payments when the Group has a valid legal or informal obligation to make such payments as a result of services received from employees and if the obligation can be estimated reliably. EuroMaint Annual Report 35
notes Termination benefits Termination benefits are payable for an employee s employment terminated before the normal retirement date or when an employee accepts voluntary redundancy in exchange for such compensation. reports the liability or cost when it is demonstrably committed either to terminating the employee according to a detailed formal plan without the possibility of revocation, or to providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits that are due after 12 months from the balance sheet date or longer are discounted to the present value. Provisions Provisions are reported when the Group has an existing legal or informal obligation as a result of past events; it is more likely that an outflow of resources is required to settle the obligation than to not do so and the amount can be estimated reliably. No provisions are made for future operating losses. If there are a number of similar obligations, the likelihood of there needing to be an outflow of resources to settle this entire group of obligations is assessed. Where the effect of when payment is made is important, the provisions are calculated by discounting the expected future cash flow at an interest rate before tax that reflects the current market estimates of the time value of money and, where applicable, the risks associated with the liability. The provisions for warranties, restructuring and pensions are reported under provisions. Provision for warranties starts to be calculated when a service is completed or the goods have been released to the customer. In order to estimate the amounts, historical data related to repairs and exchanges are generally used. Revenue recognition Revenue is reported less VAT, any discounts and similar revenue reductions. Net revenue includes sales of services within maintenance, the refurbishment of rolling stock, and the maintenance and implementation of production facilities for the manufacturing industry. For refurbishment work, contract revenue is recognised in proportion to the assignment s completion rate, which comprises accrued contract costs compared to forecast contract costs. This accounting is based on the view that the performance is fulfilled as the work is carried out and means that profits are gradually reported based on each assignment s completion rate when the assignment s final outcome can be reliably estimated. For availability deals, known as kilometre contracts, revenue recognition is based on the number of kilometres that the rolling stock has travelled. An anticipated loss for an assignment is charged in full immediately to the profit/loss for the period. Financial income and expenses Financial income relates to the positive exchange rate differences, interest income on financial assets, pension assets and bank deposits, profit from the change in value of financial assets valued at fair value via the income statement and any such profit from hedging instruments reported in income. Financial expenses are costs related to loans, pension liabilities, current bank charges, negative exchange rate differences, loss from the change in value of financial assets valued at fair value via the income statement, impairment of financial assets, and any such losses from hedging instruments reported in the profit/loss for the year. Leases Operating leases Leases in which a substantial part of the risks and benefits of ownership are retained by the lessor are classified as operating leases. Payments that are made during the lease period are written-off in the income statement on a straight-line basis over the lease period. Finance leases Finance leases involve the financial risks and benefits associated with ownership largely being transferred to the lessee. Where this is not the case, it is a question of operating leases. Minimum lease payments are allocated between interest expense and amortisation of outstanding liabilities. The interest charges may be allocated over the lease period so that each accounting period is charged with an amount equal to a fixed interest rate for the liability reported in each accounting period. Variable charges are written-off in the periods they are incurred. Cash flow statement The indirect method is applied when reporting cash flow from operating activities. Related party disclosures Related parties refers to the companies where Euromaint or parties related to Euromaint can exercise a controlling interest or a significant influence in terms of operational and financial decisions. The circle of related parties also includes the companies and individuals who have an opportunity to exercise a controlling interest or a significant influence over Euromaint Gruppen s financial and operational decisions. Related party transactions are reported in Note 4. Related individuals are defined as the Chairman and Members of the Board, the Chief Executive Officer and other senior executives as well as close relatives of these people. Remuneration to the Board of Directors and the Chief Executive Officer is presented in Note 8. Discontinued operations When the Group intends to discontinue an operation that represents either a separate major line of business or a geographical area of operations, this is recognised as a discontinued operation in accordance with IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations. Profit or loss after tax in the discontinued operation is recognised as a single amount in the income statement, separate from the statement of other comprehensive income and the statement for the comparative period, in order to present the discontinued operation separately from the remaining operations. The layout of the statement of financial position for the current and previous year has not been amended, in accordance with applicable regulations, in the same way. Earnings per share Earnings per share is calculated using the profit/loss for the year for the Group attributable to the parent company s owners and on the weighted average number of shares outstanding during the year. When calculating the diluted earnings per share, the profit/loss and the average number of shares are adjusted to take account of the effects of diluting potential ordinary shares. During the year there has been no dilution of potential ordinary shares. The parent company s Annual Report is prepared in accordance with the Swedish Financial Reporting Board Recommendation RFR 2 (Accounting for legal entities) and the Swedish Annual Accounts Act. Differences between the parent company and the Group s accounting policies Due to the link between accounting and taxation, the rules on financial instruments and hedge accounting in IAS 39 are not applied to the parent company as a legal entity. In the parent company, financial fixed assets are valued at acquisition cost minus any write-down and financial current assets according to the principle of lowest value. Interest rate swaps that effectively hedge cash flow risk in interest rate payments for liabilities are valued at the net of accrued claim for variable interest and accrued liability for fixed interest and the difference is reported as an interest rate expense or interest rate income. The hedging is effective if the financial significance of the hedge and the liability is the same as if the liability had instead been taken up at a fixed market rate when the hedging relationship commenced. Any premiums paid for the swap agreement are amortised as interest over the term of the agreement. Group contributions Group contributions are reported according to their financial significance. This means that Group contributions that are issued and received in order to minimise the Group s total tax are reported directly in retained earnings after deductions for the current tax effect. 36 EuroMaint Annual Report
notes Note 2 Distribution of net revenue Sale of services 2,188,033 2,352,502 248 Sale of goods 227,486 131,591 Total 2,415,519 2,484,093 248 Note 3 Distribution of net revenue by segment operates in two segments taking into account how the Group organises the sales of goods and services. The two segments are Sweden and Central Europe. All sales in the parent company are internal whereupon they are omitted. Distribution of net revenue in the Group is as given below in :, Sweden 1,885,944 1,843,276 Central Europe 529,575 640,817 Total 2,415,519 2,484,093 Note 4 Transactions with related parties Purchase of goods and services Bisnode Kredit AB 7 Financial expenses EMaint (Ratos) 61,028 54,529 61,028 54,529 Receivables from related parties Ratos Inwido 32,608 32,608 Spin International 16,000 16,000 Liabilities to related parties EMaint (Ratos) 503,198 503,198 The following table provides details of the transactions with related parties. Expenses Receivable Group Inwido contributions Bisnode Kredit AB Service purchase Emaint (Ratos) Interest expenses Companies in Note 4 are companies within the Ratos Group. Information on remuneration paid to senior executives can be found in Note 8. EuroMaint Annual Report 37
notes Note 5 Other operating income and expenses Other operating income Profit on the sale of non-current assets 117 302 Exchange gains on receivables/liabilities of an operating nature 3,382 Miscellaneous 23,512 30,547 Total 23,629 34,231 Other operating expenses Loss on the sale of non-current assets 71 879 Exchange losses of an operating nature 5,356 Total 5,427 879 The parent company has no figures to report for and. Note 6 Auditors fees KPMG Auditing assignments 1,694 1,626 Tax assignments 194 256 Other assignments 33 264 Total 1,921 2,146 Auditing assignments refer to the review of the annual report and accounting as well as the administration by the Board of Directors and the CEO, other duties which are incumbent on the company s auditors to perform as well as advice and other assistance as a result of observations made during the review or the implementation of such other duties. Everything else falls under other assignments. The parent company s audit fees for and were paid by the subsidiary EuroMaint AB. Note 7 Operating leases Future minimum lease payments, Within 1 year 131,965 86,303 Between 1 and 5 years 131,516 92,257 More than 5 years 14,564 3,412 Total 278,045 181,972 Written-off lease rentals 125,646 110,522 Total 125,646 110,522 The rental of track, premises and IT equipment is recognised under the Group s operating leases. 38 EuroMaint Annual Report
notes Note 8 Average number of employees and employee costs The average number of employees broken down by gender is Sweden Female 115 134 Male 1,209 1,301 Total 1,324 1,435 Germany Female 89 94 Male 839 864 Total 928 958 Rest of Europe Female 2 2 Male 28 24 Total 30 26 Group total Female 206 230 Male 2,076 2,189 Total 2,282 2,419 Board members Female 6 3 1 Male 10 12 3 3 Total 16 15 4 3 The Chief Executive Officer and other senior executives Female 3 4 Male 6 6 Total 9 10 Personnel costs Sweden Salaries and other remuneration The Board of Directors and CEOs 3,081 4,253 Of which bonuses and comparable remuneration (750) Other employees 516,549 511,192 154 Total salaries and other remuneration 519,630 515,445 154 Payroll overheads 211,788 214,755 111 Of which pension expenses 43,596 47,767 59 Other countries Salaries and other remuneration The Board of Directors and CEOs 1,946 2,904 Of which bonuses and comparable remuneration Other employees 248,850 263,358 Total salaries and other remuneration 250,796 266,262 Payroll overheads 51,815 54,274 Of which pension expenses Remuneration and other benefits during the period The Chairman of Euromaint Gruppen AB received a fee of SEK 100 thousand (433) in, with other Board Members receiving SEK 36 thousand (42). If employed by Ratos, no fee applies. The Chief Executive Officer of Euromaint Gruppen AB receives a salary from Euromaint Rail AB. The CEO s retirement age is 65. The CEO has a defined contribution pension promise of 30 per cent of monthly pensionable remuneration. The notice period is twelve months for notice from the company s side and six months for notice from the CEO s side and during this time, salary is paid with full adjustment against other income. Some employees in the Euromaint Group have taken up synthetic shares and options. However, these are not linked to each employee s employment. Benefits to management groups and employees in similar positions, in accordance with ÅRL, are recognised as benefits to other employees. EuroMaint Annual Report 39
notes Note 9 Intangible fixed assets Recovery value The calculated recovery value is made up of the value in use. The value in use is calculated as the present value of future calculated cash flows generated by the asset during the estimated useful life. The assessment of future cash flows is based on realistic and verifiable assumptions that constitute the best estimates of the financial circumstances that are expected for the useful life. For example, personnel cost increases and other operating costs are based on anticipated inflation, which can be compensated through price increases in current contracts or indexing in fixed price contracts. Exchange rate forecasts are based on the current noted exchange rate taking account of existing currency hedges. The assessment of future cash flows is based on the latest budgets/forecasts and normally covers a three-year period. For calculations after this period the estimates of future cash flows are based on the assumption of a steady rate of growth deemed realistic for the cash-generating unit. For the calculation, a growth rate of 3 per cent has been used based on market positions, plans for the future and growth in the market for each unit. Estimates of future cash flows do not include future payments attributable to a future restructuring that the ownership is not obliged to implement. As soon as the ownership is obliged to implement the restructuring, future cash flows then include savings and other benefits, as well as payments out that the restructuring is expected to give rise to. Nor do assessed future cash flows include receipts and payments from financing activities. On the other hand, tax receipts and payments are included. When valuing a company, it is normal to include taxes. The calculated value in use should be compared with the carrying amount of ownership, which includes both tax assets and liabilities. In order to make the valuation comparable with the carrying amount, the Group therefore includes receipts and payments in the estimated future cash flows instead of reducing the group value by tax liabilities and receivables. The company has chosen a discount rate after tax, as estimated future cash flows also include tax. The discount factor reflects market assessments of the time value of money and the specific risks associated with the asset. The discount factor does not reflect any such risks taken into account when future cash flows are estimated. As a starting point when calculating the discount rate, the company s weighted average capital cost, its marginal borrowing rate and other market borrowing rates independent of the company s capital structure are used. For the calculations, the discount rate after tax has been calculated at 8.14 per cent. Impairment testing of cash-generating units containing goodwill The following cash-generating units have substantial reported goodwill values in relation to the total reported amount of goodwill in the Group: SEK millions Railway Sweden 662 662 Railway Germany 50 48 Total 712 710 The impairment testing carried out by the company management, which has also been presented to the Board of Directors, has not resulted in impairment of the carrying amounts in the remaining segments in. Goodwill Technology Total Goodwill Technology Totalt Opening accumulated acquisition costs 709,961 25,926 735,887 711,794 21,593 733,387 Investments during the year 107 107 5,541 5,541 Correction 991 991 1 Currency adjustment 1,820 380 2,200 1,833 217 2,050 Closing accumulated acquisition costs 711,781 26,413 738,194 709,961 25,926 735,887 Opening accumulated amortisation 18,394 18,394 12,537 12,537 Correction 991 991 1 Amortisation for the year 4,468 4,468 6,967 6,967 Exchange rate difference 251 251 119 119 Closing accumulated amortisation 23,113 23,113 18,394 18,394 Net book value 711,781 3,300 715,081 709,961 7,532 717,493 The goodwill that is recognised is attributable to Euromaint AB and subsidiary. All intangible assets are acquired. For information with respect to amortisation, see Note 1. Goodwill with an indefinite useful life is attributed to separate subsidiaries during impairment testing, as these constitute cash-generating units. The parent company has no intangible fixed assets; for this reason this division is not reported. 1) Correction refers to incorrect opening balances from previous years. 40 EuroMaint Annual Report
notes Note 10 Property, plant and equipment Buildings and land Improvements to leasehold Plant and machinery Equipment, tools, fixtures and fittings Construction in progress Total Opening acquisition costs 6,557 49,492 165,219 305,636 23,236 550,140 Correction 1,433 2 4,893 2 6,326 Purchasing 4,006 2,790 1,900 17,544 16,500 42,740 Sales/disposals 10,892 8,714 19,606 Currency adjustment 249 99 1,492 6,186 592 8,618 Closing accumulated acquisition costs 10,812 52,381 159,152 325,545 40,328 588,218 Opening depreciation 1,603 31,475 116,987 235,617 385,682 Correction 1,433 2 4,893 2 6,326 Depreciation for the period 908 3,972 10,179 22,744 37,803 Depreciation for the period in discontinued operations 40 40 Sales/disposals 10,865 8,309 19,174 Currency adjustment 91 82 748 806 1,727 Closing accumulated depreciation 2,602 35,529 118,482 255,791 412,404 Closing planned residual value 8,210 16,852 40,670 69,754 40,328 175,814 Buildings and land Improvements to leasehold Plant and machinery Equipment, tools, fixtures and fittings Construction in progress Total Opening acquisition costs 5,900 50,210 169,726 284,467 26,609 536,912 Correction 5,906 1 5,906 1 Purchasing 1,301 753 5,320 22,669 2,122 27,921 Sales/disposals 431 1,356 2,530 6,158 1,085 11,560 Currency adjustment 213 115 1,391 1,248 166 3,133 Closing accumulated acquisition costs 6,557 49,492 165,219 305,636 23,236 550,140 Opening depreciation 1,027 27,742 113,816 208,957 351,542 Correction 4,304 1 4,304 1 Depreciation for the period 618 4,582 10,329 28,691 44,220 Depreciation for the period in discontinued operations 38 38 Sales/disposals 42 789 2,375 5,901 9,107 Currency adjustment 60 479 472 1,011 Closing accumulated depreciation 1,603 31,475 116,987 235,617 385,682 Closing planned residual value 4,954 18,017 48,232 70,019 23,236 164,458 1) Correction refers to reclassification of non-current assets. 2) Correction refers to incorrect opening balances from previous years. The parent company has no property, plant or equipment; for this reason this division is not reported. EuroMaint Annual Report 41
notes Note 11 Financial income and expenses Interest income Loans and receivables 458 714 189 122 Pensions 1,344 Change in value synthetic options 8,818 8,818 Financial income 9,276 2,058 9,007 122 Interest expenses Financial liabilities valued at amortised acquisition cost 100,234 93,902 85,910 81,298 Pensions 1,757 Loans and payables Other financial expenses 5,043 6,584 2,084 3,100 Financial expenses 105,277 102,243 87,994 84,398 Income and expenses by financial category Financial assets/liabilities are measured at fair value in the income statement Held for trading Financial assets measured according to the Fair Value Option Loans and receivables Liabilities valued at amortised acquisition cost Derivatives used for hedging purposes Total Income by category Interest income 458 458 Valuation of synthetic options 8,818 8,818 Total 8,818 458 9,276 Expenses by category Interest expenses 100,233 100,233 Other financial expenses 5,043 5,043 Total 105,276 105,276 Income by category Interest income 714 714 Pension plan 1,344 1,344 Total 1,344 714 2,058 Expenses by category Interest expenses 93,902 93,902 Pension plan interest expenses 1,757 1,757 Other financial expenses 6,584 6,584 Total 1,757 100,486 102,243 42 EuroMaint Annual Report
notes Income and expenses by financial category Financial assets/liabilities are measured at fair value in the income statement Held for trading Financial assets measured according to the Fair Value Option Loans and receivables Liabilities valued at amortised acquisition cost Derivatives used for hedging purposes Total Parent Company Income by category Interest income 189 189 Valuation of synthetic options 8,818 8,818 Total 8,818 189 9,007 Expenses by category Interest expenses 85,910 85,910 Other financial expenses 2,084 2,084 Total 87,994 87,994 Parent Company Income by category Interest income 122 122 Total 122 122 Expenses by category Interest expenses 81,298 81,298 Other financial expenses 3,100 3,100 Total 3,100 81,298 84,398 Note 12 Tax The tax rate was changed on 1 January from 26.3 per cent to 22 per cent. Total reported tax Current tax 6,929 3,330 17,538 22,188 Tax attributable to previous years 60 1,083 34 Deferred tax 18,572 19,825 17 Total 25,561 17,578 17,555 22,154 Differences between reported tax and estimated tax are based on the current tax rate consisting of the following components: Difference in estimated tax at current tax rate Reported profit before tax from continuing operations 69,503 40,612 79,721 84,299 Reported profit before tax from discontinued operations 5,001 8,538 Tax according to current tax rate, 22% (26.3%) 16,391 12,926 17,539 22,171 Effects of non-taxable income and non-deductible expenses Effect of other tax rates in other countries/foreign subsidiaries 2,761 1,032 Non-deductible expenses 12,480 6,692 1 Non-taxable income 4 12 Activation of previously unrecognised tax loss carryforwards 13,355 8,566 Tax attributable to previous years 60 1,083 Miscellaneous 10,992 28,591 16 17 Total 25,561 17,578 17,555 22,155 s effective tax for amounts to 33.8 per cent ( 35.8) of taxable profit. The parent company s effective tax for amounts to 27.3 per cent ( 26.3) of taxable profit. Deferred tax assets and liabilities are attributable to the following: Changes in deferred tax assets and deferred tax liabilities related to the hedging instruments have been reported in other comprehensive income, other changes have been reported in the income statement. EuroMaint Annual Report 43
notes Deferred tax assets Deferred tax attributable to deficits 14,327 517 Hedging instruments (under Other comprehensive income) 45 293 Non-current assets 23 2,824 Other provisions 1,511 1,439 Other receivables 782 Transferred to Deferred tax liabilities 86 Provisions at year end 15,815 45 293 Deferred tax liabilities Provisions for pension obligations 2,183 3,822 Provisions 1,205 Transferred from Deferred tax assets 86 Provisions at year end 2,183 5,113 Changes to deferred tax assets and liabilities are attributable to the following: Change in deferred tax assets Opening value 86 23,585 293 Deferred tax attributable to deficits 13,810 583 Non-current assets 2,801 25,309 Valuation of hedging instruments 248 293 Other provisions 72 1,439 Other receivables 782 782 Closing value 15,815 86 45 293 Change in deferred tax liability Opening value 5,027 13,850 Provisions for pension obligations 1,639 344 Non-current assets 3,762 Provisions 1,205 5,405 Closing value 2,183 5,027 Tax items reported directly against equity Current tax attributable to Group contributions 7,174 4,208 17,538 22,188 Total 7,174 4,208 17,538 22,188 44 EuroMaint Annual Report
notes Note 13 Finance leases Future minimum lease payments, Within 1 year 7,861 6,242 Between 1 and 5 years 10,519 11,282 More than 5 years 1,387 Total 18,380 18,911 Future minimum lease payments exclude guaranteed residual values, as these do not constitute a future payment. Guaranteed residual values are included in the closing lease liabilities however. The guaranteed residual values amount to SEK 5,363 thousand (4,335). No variable fees are included in net income. The hire of rolling stock, machines and workshop equipment is reported under the Group s finance leases. For the majority of the finance lease contracts, at the end of the contract Euromaint can either purchase the equipment for an equivalent residual value of 10 per cent, recommend another buyer, or extend the contract (the new rental then becomes a quarterly rent per year as previously). There are no amounts to report for the parent company. Written-off lease rentals 6,664 7,361 Total 6,664 7,361 Note 14 Participations in Group companies (refers to the parent company) Company s name Corp. ID no. Registered office No. of participations Equity and voting rights % Book value Book value Euromaint AB 556084-8458 Stockholm 1,000 100 935,200 935,200 Closing value 935,200 935,200 Euromaint Rail AB 556032-2918 Stockholm 190,000 100 Euromaint Rail Bemanning AB 556670-3095 Stockholm 1,000 100 Euromaint GmbH Amtsgericht Leipzig Stadt HRB 25939 Leipzig / Germany 1 100 Euromaint SIA 40003885784 Riga / Latvia 15,000 100 On 2 December the Board of Directors of Euromaint AB decided that the company would be merged with its parent company, Euromaint Gruppen AB (556731-5402). Note 15 Participations in associates Note 16 Inventories Carrying amount at year start 215 482 Investments 218 Sales 470 Exchange rate differences 9 15 Carrying amount at year end 224 215 Holdings The following specifications show the Group s associates. Company s name Equity and voting rights % Book value Book value Euromaint Mobile Service BV 50 224 215 Associates owned by Group companies 224 215 Gross stock 436,271 422,048 Obsolescence reserve 75,670 63,158 Work in progress 60,706 73,429 Net stock 421,307 432,319 Distributed as below Replacement parts 90,588 89,019 Spare parts 266,808 268,920 Work in progress 60,706 73,429 Miscellaneous 3,205 951 Total 421,307 432,319 EuroMaint Annual Report 45
notes Note 17 Trade receivables and other receivables Trade receivables 316,678 350,793 Receivables from Group companies 32,608 16,000 456,185 302,288 Tax assets 6,092 6,270 Other receivables 22,323 28,734 101 5 Completed, not invoiced 10,007 3,200 Prepayments and accrued income 92,609 54,488 14,397 Total 480,317 459,485 470,683 302,293 Specification of prepayments and accrued income Prepaid rent 33,784 25,784 Accrued income, maintenance measures 42,885 20,234 Miscellaneous 15,940 8,470 14,397 Total 92,609 54,488 14,397 Note 18 Financial risks and risk management Through its operations, Euromaint is exposed to financial risks, including the effect of changes to prices in the loan and capital markets, exchange rates and interest rates. s overall risk management focuses on the unpredictability of the financial markets and aims at minimising potentially unfavourable effects on the Group s financial results. Financial operations in the Group are centralised in Euromaint Rail AB s finance function. The finance function acts as an internal bank and is responsible for the sourcing of capital, cash management and financial risk management. The operations are regulated through the Group s financial regulations. The following important financial risks are dealt with: Market risks The risk that the value of, or future cash flows from, a financial instrument varies due to changes in market prices. Currency risk and interest rate risk constitute market risks. Currency risks Currency risk refers to the risk of exchange rate fluctuations negatively affecting the Group s income statement, balance sheet and/or cash flows. Currency risks exist, both in the form of transaction risks and translation risks. Euromaint is to some extent exposed to currency and transaction risks because of relatively large volumes purchased in foreign currency and small customer invoicing in the corresponding currencies. Purchases made in foreign currencies for major projects are hedged at 100 per cent or are agreed with variable currency clauses during the tender/contract process. The financial regulations do not require currency hedges for the current net flows. Euromaint is exposed to the following currencies: EUR, NOK, USD, GBP, DKK, LVL and CHF. Euromaint s largest currency exposure is to goods purchased in EUR. The net flow in EUR is approximately EUR 21,450 thousand (17,000) per year, which means that a 5 per cent change in the exchange rate will affect purchase costs before hedging by approximately SEK 8.9 million (7.4) before tax. Currency hedging is no longer practised against this net flow. Exposure relating to the transaction risk attributable to the other currencies is not significant. Currency risk in the form of translation risk is attributable to the currencies EUR and LVL. Translation differences for internal investment loans in EUR are reported due to its character to equity. Interest rate risks Interest rate risks refer to the risk of a negative effect on the Group s financial results resulting from changes in market interest rates. Euromaint is affected by the general rate adjustments through its external loan portfolio. To counter these, SEK 150 million of the loans has been hedged with a 2-year interest rate swap The underlying loans run for 3 months. The interest rate swap gives a base rate of 1.95 per cent up to the due date, 14 February 2014. Therefore, with the current size of the loan portfolio, an increase in interest rates of 1 percentage unit increases the annual interest expense for Euromaint by SEK 5.0 million before taxes. The shareholder borrowings carry a fixed rate of 12 per cent until the loans are repaid. There were no shareholder borrowings at the end of the financial year. Other risks Credit risk Credit risk is the risk generated by the fact that the credit rating of the investor s counterparty can change in an unpredictable manner, thereby resulting in a loss for the Group. Euromaint has procedures in place to minimise the ongoing customer credit risk in its operations. These procedures relate, for example, to credit testing, advances and warranty management, and ongoing credit monitoring. Identified customer losses during amounted to SEK 6,319 thousand (2,356). At the balance sheet date, Euromaint had indirect collateral of approximately SEK 61 million (91) in the form of advances from customers. considers that there are no significant concentrations of credit risk in respect of the financial assets. Age analysis, due non-impaired trade receivables Not due 237,148 Due 0 60 days 49,613 Due 61 180 days 25,103 Due 181 365 days 1,235 More than 1 year 3,579 Total trade receivables 316,678 Financial assets that are neither due for payment nor can be written down are deemed to have a good credit quality. 46 EuroMaint Annual Report
notes Liquidity and refinancing risk Refinancing risks refer to the risk that the refinancing of mature loans will become difficult or costly and that Euromaint will thereby have difficulty fulfilling its payment obligations. Liquidity risk refers to the risk of difficulty in fulfilling the obligations associated with financial liabilities. Euromaint s policy is to always have available cash and cash equivalents and secured refinancing to the extent required for the activity. As of 31 December, there was a loan facility with Swedbank totalling SEK 734 million (1,090), including a bank overdraft facility of SEK 80 million (197) as well as a separate framework of SEK 120 million (50) solely dedicated to bank guarantees. As of the measurement day, 31 December, Euromaint fulfilled all the requirements related to financial key ratios associated with the financing agreement. Book value Due dates on bank loans and shareholder borrowings: Within 1 year 25,000 1 5 years 234,000 5 years or later 275,000 Total 534,000 For lease liability due dates, see Note 7. Fair value of derivative instruments on the balance sheet date Contracts with negative fair values: Interest rate swap (due date 1 5 years) 206 1,331 Loan terms and due date structure/interest rate renegotiation Loans from credit institutions and shareholder borrowings Nominal sum Due date 1 year or less Within 1 5 years Bank loans 339,000 30/06/2019 25,000 234,000 Bank loans 195,000 30/06/2019 Total 534,000 25,000 234,000 Transaction exposure converted to SEK EUR NOK Other Total Currency Net revenue in 48,679 28,059 76,738 Net currency exposure 48,679 28,059 76,738 No currency hedging takes place against the net flows. EuroMaint Annual Report 47
notes Note 19 Information on fair value of financial instruments The carrying amount of trade receivables, cash and cash equivalents, trade payables and other liabilities constitutes a reasonable approximation of fair value. As of 31 December Financial liabilities valued at fair value via the income statement Liabilities valued at amortised acquisition cost Derivatives used for hedging purposes Liabilities by category Held for trading Book value Book value Non-current interest-bearing liabilities 509,000 3 Synthetic options and shares 1,461 Current interest-bearing liabilities 32,861 Total 1,461 541,861 As of 31 December Financial liabilities valued at fair value via the income statement Liabilities valued at amortised acquisition cost Derivatives used for hedging purposes Liabilities by category Held for trading Book value Book value Non-current interest-bearing liabilities 401,800 3 Shareholder borrowings 503,198 4 Synthetic options and shares 11,246 Current interest-bearing liabilities 163,215 Total 11,246 1,068,213 As of 31 December Financial assets measured at fair value via the income statement Loans and receivables Derivatives used for hedging purposes Assets by category Held for trading Book value Book value Receivables from Group companies 643,965 Total 643,965 As of 31 December Financial liabilities valued at fair value via the income statement Liabilities valued at amortised acquisition cost Derivatives used for hedging purposes Liabilities by category Held for trading Book value Book value Non-current interest-bearing liabilities 509,000 3 Synthetic options and shares 1,461 Liabilities to Group companies, non-interest-bearing 221,514 Total 1,461 730,514 As of 31 December Financial assets measured at fair value via the income statement Loans and receivables Derivatives used for hedging purposes Assets by category Held for trading Book value Book value Receivables from Group companies 448,818 Total 448,818 As of 31 December Financial liabilities valued at fair value via the income statement Liabilities valued at amortised acquisition cost Derivatives used for hedging purposes Liabilities by category Held for trading Book value Book value Non-current interest-bearing liabilities 401,800 3 Shareholder borrowings 503,198 Synthetic options and shares 11,246 Liabilities to Group companies, non-interest-bearing 239,130 Total 11,246 1,144,128 48 EuroMaint Annual Report
notes Fair value of comprehensive income Assets Level 3 Level 3 Non-current investment, pension obligations, non-interest-bearing1 Total Liabilities Synthetic shares and options 2 1,461 11,246 Derivative financial instruments Total 1,461 11,246 The same values apply to the parent company as for the Group in and. Only level 3 instruments are valued at fair value above other comprehensive income/income statement. Level 3. Fair value based on input data that is not observable on the market. The value of the liability for the synthetic shares is based on an external measurement, where a Fair Market Value has been assessed using a DCF model (discounted cash flow). The cash flows have been calculated based on the company s business plans, market prospects, investment plans and growth forecasts and then discounted by a weighted average capital cost (WACC). For the measurement, a WACC of 8.14 per cent was used. When determining the discount rate, consideration has been given to specific risks in the market and to the company, risk-free rate, market loan margins and the company s capital structure. The model calculates an Equity Value (EQV) based on the value of the entire company less the loan. The value of the liability for the synthetic options has been calculated using the Black-Scholes valuation method and is based on the company s extent and terms for the incentive programme, share valuation and statistics on volatility and yield rates for government bonds. 1) Reported as net under provisions, pensions. 2) Synthetic shares and options were valued by an external independent valuer in. 3) Non-current interest-bearing liabilities run with variable interest rates, which is why these are considered to be valued at fair value. 4) Shareholder borrowings run with a fixed interest rate of 12 per cent. At the end of there were no shareholder borrowings in the Group. Financial assets and liabilities valued at fair value in the income statement Synthetic shares and options Opening balance 11,246 11,246 11,246 11,246 Profit/loss, income statement 8,818 8,818 Concluded 967 967 Closing balance 1,461 11,246 1,461 11,246 Note 20 Completed, not invoiced Assets in the balance sheet Accrued income 151,873 3,200 Invoiced amounts 141,866 Total 10,007 3,200 For contracts reported according to the percentage of completion accounting method the degree of completion is determined in relation to the abandoned assignment charges compared to forecast assignment charges incurred. In the same year the total contract revenue amounted to SEK 227,486 thousand and the total contract losses amounted to SEK 208,373 thousand. EuroMaint Annual Report 49
notes Note 21 Cash flow analysis, other items not affecting liquidity Changes in provisions 4,470 13,722 Unpaid interest on shareholder borrowings 61,028 54,529 61,028 54,529 Currency translation effects 2,072 453 Other items 4,132 312 70,925 12 Total 58,618 41,572 131,953 54,517 Cash and cash equivalents comprise cash and deposits held with banks and similar institutions with maturities within three months from the date of acquisition and short-term cash investments with a maturity from the date of acquisition of less than three months, which are only exposed to an insignificant risk of changes in value. Disposal of subsidiaries No disposals have been made during or. Acquisitions of subsidiaries No acquisitions have been made during or. Note 22 Interest-bearing liabilities Fair value for interest-bearing liabilities approximates the book value, which is why the calculation of fair value has not been made. Recognised amounts for Group borrowing are as follows: Book value/fair value Book value/fair value Long-term component Bank loans 509,000 405,000 509,000 401,800 Shareholder borrowings 503,198 503,198 Finance lease liability 10,519 11,611 Other 1 3,200 Total 519,519 916,609 509,000 904,998 1) Other relates to bank charges for taking out the loan. These are amortised over the term and are reversed during the term of the loan. Short-term component Bank loans 25,000 45,000 25,000 45,000 Finance lease liability 7,861 6,376 Bank overdraft facility 0 111,839 Total 32,861 163,215 25,000 45,000 Overdraft limit 80,000 196,934 The total loan facility with Swedbank includes SEK 784,000 thousand (1,090,000), and other institutions SEK 0 thousand (0). A new bank agreement was determined on October. According to the new agreement, the agreement covers an overdraft of SEK 80,000 thousand, leasing credit limit of SEK 50,000 thousand, guarantee limit of SEK 120,000 thousand and a bank loan of SEK 534,000 thousand. Interest on the shareholder borrowings amounts to 12 per cent and is fixed until the loan is repaid. s exposure, with respect to external borrowing, to changes in interest rates and the contractual timing of interest rate renegotiation is as follows: All loans with Swedbank run for 3 months. SEK 150 million of the loan sum has been hedged at a fixed interest rate of 1.95 per cent with term until 14 February 2014, by signing an interest rate swap contract. The average term in months for outstanding external bank loans is therefore: 66.0 6.5 Weighted average interest rates including interest margins were on the balance sheet date: 4.87 % 4.79 % Interest rate duration 1 year or less 534,000 301,800 534,000 301,800 1 5 years 145,000 145,000 Total 534,000 446,800 534,000 446,800 For maturity of bank loans and shareholder borrowings, see Note 18. For finance leases, see Note 13. 50 EuroMaint Annual Report
notes Note 23 Pensions and similar obligations Defined benefit pension plans, Present value of partially or fully funded obligations (+) 44,263 55,071 Present value of unfunded obligations (+) 11,772 18,683 Total present value of defined benefit pension obligations (+) 56,035 73,754 Fair value of plan assets ( ) 50,959 57,130 Net of present value of the obligations and fair value of plan assets 5,076 16,624 Effect of limitation rule on net assets (+) 6,696 2,059 Net amount for defined benefit plans is recognised in the statement of financial position 11,772 18,683 The net amount for defined benefit plans is recognised in the following items in the statement of financial position: Other financial fixed assets Provisions for pensions 11,772 18,683 Net amount in the statement of financial position 11,772 18,683 Overview of defined benefit plans The defined benefit pension obligations that are included in the Group s recognition of defined benefit pension liabilities are as follows: I. Defined benefit pension within the state occupational pension agreement PA91/PA03, which was earned in the period when the state owned the company. These benefits are secured through insurance with KPA. II. Professional and occupational disability annuities for former employees. Secured through depositing on account in the company s balance sheet. III. A number of employees that are covered by the ITP-S plan are entitled to early retirement pension according to the transitional provisions, a socalled transitional provision pension. The employees this concerns are a fixed group, i.e. no new individuals will be added. A transitional provision pension means that the employee is entitled to draw their pension from the age of 60 with a level of benefit of 65 per cent of their salary until the normal retirement age of 65. Payments to employees who have exercised the right to early retirement pension in accordance with the transitional provisions are untouchable pension obligations for the company and are secured through depositing on account in the company s balance sheet. IV. A few other retirement benefits derived from old state pension agreements. Changes in the present value of the obligation for defined benefit plans, Obligation for defined benefit plans as of 1 January 73,754 87,844 Remuneration paid 11,277 13,640 Current service costs 2 26 Service costs for previous periods 148 704 Interest expense 873 1,752 Revaluations: Actuarial gains and losses on changed demographic assumptions Actuarial gains and losses on changed financial assumptions 1,987 3,028 Experience adjustments 5,182 4,552 Effects of acquisition/disposal of businesses Exchange rate differences Obligation for defined benefit plans as of 31 December 56,035 73,754 Changes in the present value of the obligation for defined benefit plans, Fair value of plan assets as of 1 January 57,130 64,141 Contributions by the employer 1,002 Contributions by participants covered by the plan Interest income recognised in profit or loss 707 1,354 Remuneration paid 5,490 6,225 Effects of acquisition/disposal of businesses Exchange rate differences Administrative expenses (not related to the management of the plan assets) The difference between actual return and return according to the discount rate of the plan assets 1,388 3,142 Fair value of plan assets as of 31 December 50,959 57,130 The recognised plan assets consist of 100 per cent of the value of the Group s insurance contracts in KPA concerning earned pension rights in old state pension agreements. The calculated value of the insurance is partly based on the actuarial calculation methods and it is therefore not possible to report how the plan assets are distributed between shares, bonds and other types of securities. Cost reported in the profit/loss for the year, Current service costs 2 26 Service costs for previous periods 148 704 Net interest income/interest expense 193 490 Net cost in the profit/loss for the year 47 188 Actual return on plan assets 1,788 8,774 Cost reported in other comprehensive income, Revaluations: Actuarial gains ( ) and losses (+) 7,169 1,524 The difference between actual return and return according to the discount rate of the plan assets 1,388 3,142 Effects of change in asset limit, excluding amounts recognised in the net interest 4,610 2,197 Net amount reported in other comprehensive income 1,171 579 Assumptions for defined benefit pension obligations The most important actuarial assumptions as of the balance sheet date (expressed as weighted averages):, per cent Discount rate as of 31 December 1.90 1.30 Future pension increase 1.20 1.10 The present value of the obligation is divided among the members of the plan(s) as follows: Active members 0.4 (0.9) per cent Paid-up policyholders 11.0 (10.8) per cent Pensioners 88.6 (88.3) per cent EuroMaint Annual Report 51
notes An example of the mortality assumption of expected remaining lifespan on which the obligation is calculated appears in the table below:, number Mortality assumptions at 65 retired members: Male 19.7 19.7 Female 22.8 22.8 Mortality assumptions at 65 for members who are 45: Male 21.7 21.7 Female 24.1 24.1 Sensitivity analysis The effect on the present value of the obligation in the event of various changes in the actuarial assumptions on the balance sheet date is presented below; other assumptions are unchanged. The Effect on obligation the present, as of 31 December value of the obligation Official assumption (see table above) 56,035 Reduction of the discount rate by 0.5 percentage unit 57,942 3.40% Increase in the assumption on future pension increases by 0.5 percentage unit 57,358 2.40% Increase in the expected remaining lifespan by 1 year for a man currently aged 65, with corresponding changes for other ages and for women 59,094 5.50% As at 31 December the weighted average term of the obligation amounted to 7 (7) years. The defined benefit pension obligations that are included in the Group s recognition of defined benefit pension liabilities belong to all old pension agreements for which no new pension rights have been earned. In the future the Group may be forced to pay the indexing cost for the pension benefits which are insured with KPA; however, no such indexing cost is expected to arise in 2014. estimates that no payments will take place in 2014 for funded and unfunded defined benefit plans which are recognised as defined benefit plans; however, SEK 27,790 thousand will be paid in 2014 to the defined benefit plans that are recognised as defined contribution plans. The obligations for retirement pensions and family pensions for salaried employees in Sweden are secured through insurance with Alecta. According to a statement from the Swedish Financial Reporting Board, UFR 3, this is a defined benefit plan that includes several employers. For the financial year, the company has not had access to such information that makes it possible to report this plan as a defined benefit plan. The pension plan according to ITP, which is secured by insurance with Alecta, is therefore reported as a defined contribution plan. The fees for the year for pension insurance policies taken out with Alecta amount to approximately SEK 38,453 million (39,507). Alecta s surplus can be distributed to policyholders and/or those insured. At the end of, Alecta s surplus in the form of the collective consolidation level amounted to 127 per cent. The collective consolidation level comprises the market value of Alecta s assets as a percentage of the insurance obligations calculated in accordance with Alecta s technical insurance calculation assumptions, which does not comply with IAS 19. Note 24 Other provisions Warranties Other provisions Total Warranties Other provisions Total Provisions at start of year 23,465 3,774 27,239 26,221 7,118 33,339 Provision for the year 10,695 10,695 4,865 577 5,442 Utilisation during the year 13,819 2,555 16,374 6,663 3,662 10,325 Exchange rate difference 144 230 374 958 259 1,217 Provisions at year end 20,485 1,449 21,934 23,465 3,774 27,239 The parent company does not report any provisions. Provision for warranties starts to be calculated when a service is completed or the goods have been released to the customer. In order to estimate the amounts, historical data related to repairs and exchanges are generally used. Provision for restructuring is reported when a detailed and formal restructuring plan has been established by the Group and when this has either started or has been made publicly known. Note 25 Trade payables and other liabilities Advance payment from customers 12,887 8,252 Trade payables 253,612 239,347 708 19 Liabilities to Group companies 221,514 239,130 Liabilities to credit institutions, interest-bearing 32,861 163,215 25,000 45,000 Other current liabilities 28,369 31,101 5 21 Invoiced, not completed 47,973 62,039 Accrued expenses / deferred income 176,976 203,459 84 Total 552,678 707,413 247,227 284,254 Specification of accruals and deferred income Personnel costs 101,160 95,329 Product liabilities 20,998 36,763 Accrued costs, maintenance measures 23,685 53,821 Miscellaneous 31,133 17,546 84 Total 176,976 203,459 84 52 EuroMaint Annual Report
notes Note 26 Invoiced, not completed Invoiced amounts 308,279 139,909 Accrued income 260,306 77,870 Total 47,973 62,039 For contracts reported according to the percentage of completion accounting method the degree of completion is determined in relation to the abandoned assignment charges compared to forecast assignment charges incurred. In the same year the total contract revenue amounted to SEK 227,486 thousand and the total contract losses amounted to SEK 208,373 thousand. Note 27 Pledged assets and contingent liabilities Pledged assets Pledged shares in subsidiaries (net assets) 1 204,582 246,276 204,582 246,276 Pledged floating charges 5,190 5,190 Total 209,772 251,466 204,582 246,276 Contingent liabilities Pension obligations, FPG/PRI 13 16 Other guarantees 68,497 117,381 Total 68,510 117,397 Total 278,282 368,863 204,582 246,276 1) Floating charges and shares in subsidiaries (Euromaint AB and Euromaint Rail AB) are pledged in Swedbank as security for their total credit commitment. Pledged shares have been recorded at the value of net assets in the Group for the current subsidiaries. gives warranties on refurbishment and maintenance work of up to 5 years after the completion date. Note 28 Discontinued operations In September, the Group decided to wind up the company WLS Belgium and the Angermünde unit. Since the decision was taken, the units have been recognised as discontinued operations in the income statement for. Profit or loss for the year in discontinued operations Income 3,666 5,293 Expenses 8,667 13,831 Tax for the year 1 Profit/loss for the year 5,001 8,538 Net cash flow from discontinued operations Cash flow from operating activities 4,823 8,873 Cash flow from investing activities 2 190 53 Cash flow from financing activities 2 Net cash flow 4,633 8,926 1) The tax revenues in the Group are essentially attributable to Group contributions and are not deemed to be business area specific. 2) The business area is essentially considered not to have been the owner of the Group s loans or assets, whereupon only the cash flow from the business area s operating activities is recognised. Stockholm, 14 February 2014 Leif Johansson Chairman of the Board Ove Bergkvist Jonathan Wallis Kjell Carlsson Elisabet Wenzlaff CEO EuroMaint Annual Report 53
Auditor s report Auditor s report To the Annual General Meeting of Euromaint Gruppen AB, corp. ID no. 556731-5402 Report on the Annual Report and the Consolidated Financial Statements We have audited the Annual Report and Consolidated Financial Statements for Euromaint Gruppen AB for. The company s Annual Report and Consolidated Financial Statements are included in the printed version of this document on pages 22 53. The Annual Report and the Consolidated Financial Statements are the responsibility of the Board of Directors and the Chief Executive Officer The Board of Directors and Chief Executive Officer are responsible for preparing an Annual Report giving a true and fair view according to the Swedish Annual Accounts Act and Consolidated Financial Statements giving a true and fair view according to International Financial Reporting Standards as adopted by the EU, and the Swedish Annual Accounts Act, and for the internal controls the Board of Directors and the Chief Executive Officer deem necessary in order to prepare an Annual Report and Consolidated Financial Statements that do not contain material misstatements, whether these are due to fraud or error. The auditor s responsibility Our responsibility is to express an opinion about the Annual Report and the Consolidated Financial Statements based on our audit. We have performed the audit according to International Standards on Auditing and generally accepted auditing practice in Sweden. These standards require us to comply with professional ethical requirements and to plan and perform the audit to obtain reasonable assurance that the Annual Report and the Consolidated Financial Statements are free of material misstatement. An audit involves taking various actions to obtain audit evidence about amounts and other information in the Annual Report and the Consolidated Financial Statements. The auditors decide the actions that are to be taken, including by assessing the risks of material misstatement in the Annual Report and the Consolidated Financial Statements, whether these are due to fraud or error. During this risk assessment, the auditor takes into account the parts of the internal controls that are relevant for the way the company prepares the Annual Report and the Consolidated Financial Statements to give a true and fair view, in order to design audit procedures that are appropriate taking into account the circumstances, but not for the purpose of making a statement about the effectiveness of the company s internal controls. An audit also includes assessing the appropriateness of the accounting policies that have been used and the reasonableness of the Board of Directors and Chief Executive Officer s estimates in the statements, as well as assessing the overall presentation in the Annual Report and the Consolidated Financial Statements. We consider that the audit evidence we have collected is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the Annual Report has been prepared in accordance with the Swedish Annual Accounts Act and gives in all material respects a true and fair view of the parent company s financial position as of 31 December and of its financial performance and cash flow for the year according to the Swedish Annual Accounts Act. The Consolidated Financial Statements have been prepared in accordance with the Swedish Annual Accounts Act and give in all material respects a true and fair view of the Group s financial position as of 31 December and of its financial performance and cash flow for the year according to International Financial Reporting Standards, as adopted by the EU, and the Swedish Annual Accounts Act. The Directors Report is consistent with other parts of the Annual Report and the Consolidated Financial Statements. We therefore recommend that the Annual General Meeting adopt the income statement and balance sheet for the parent company as well as the statement of comprehensive income and consolidated statement of financial position. Report on other requirements according to laws and other statutes In addition to our audit of the Annual Report and Consolidated Financial Statements, we have also performed an audit of the proposed appropriation of the Company s profit or loss as well as the Board of Directors and Chief Financial Officer s administration of Euromaint Gruppen AB for the year. The Board of Directors and the Chief Executive Officer s responsibility The Board of Directors is responsible for the proposal for the appropriation of the company s profit or loss, and the Board of Directors and the Chief Executive Officer are responsible for the administration according to the Swedish Companies Act. The auditor s responsibility Our responsibility is to express an opinion with reasonable assurance on the proposal for the appropriation of the company s profit or loss and on the administration based on our audit. We have performed the audit according to generally accepted auditing practice in Sweden. As a basis for our opinion on the Board of Directors proposal for the appropriation of the company s profit or loss, we have reviewed the Board s reasoned opinion, as well as a selection of evidence for this, in order to assess whether the proposal complies with the Swedish Companies Act. As the basis for our pronouncement on discharge from liability, we have, in addition to our audit of the Annual Report and the Consolidated Financial Statements, examined significant decisions, actions taken and circumstances in the Company in order to be able to determine the liability to the Company, if any, of any Board Member or the Chief Executive Officer. We have also examined whether any Board Member or the CEO has otherwise acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We consider that the audit evidence we have collected is sufficient and appropriate to provide a basis for our opinion. Opinion We recommend that the Annual General Meeting appropriate the profit of the parent company according to the proposals contained in the Directors Report and discharge the Board Members and the Chief Executive Officer from liability for the financial year. Stockholm, 14 March 2014 KPMG AB Fredrik Sjölander Authorised Public Accountant 54 EuroMaint Annual Report
The Board of Directors The Board of Directors Leif Johansson Chairman of the Board Date of Birth: 1949 Board Member since: Other appointments: Chairman of the Board, Ålborg Fastighets A/S. Board Member, Arcus- Gruppen AS, Inwido AB, Profura AB, Latour Industries Education: Bachelor of Science in Engineering and Business Current employment: Industrial advisor, Ratos Jonathan Wallis Board Member Date of Birth: 1974 Board Member since: 2007 Other appointments: Board Member, KVD Kvarndammen AB Education: Graduate Business Administrator, Stockholm School of Economics, BA, Stockholm University Current employment: Senior Investment Manager at Ratos Kjell Carlsson Board Member Date of Birth: 1951 Board Member since: Other appointments: Chairman of the Board, Kopy Goldfields AB Education: Master of Science in Engineering, Chalmers University of Technology Current employment: Senior Advisor Elisabet Wenzlaff Board Member Date of Birth: 1955 Board Member since: Other appointments: Board Member, Apoteket AB, Grönklittsgruppen AB, Visualeyes AB. Deputy Board Member, Nacka Energi AB Education: Bachelor of Law, Stockholm University, Master of Law, University of Pennsylvania Current employment: Selfemployed Oscar Hermansson Deputy Member Date of Birth: 1979 Deputy Board Member since: Other appointments: Board Member, Scandinavian Business Seating AS Education: Graduate Business Administrator, Stockholm School of Economics Current employment: Investment Manager, Ratos Bertil Hallén Employee Representative Date of Birth: 1954 Board Member since: 2001 Other appointments: Board Member, Göteborgs Hamn AB, ABF Göteborg Vuxenutbildning AB, Odinskolan Fastighets AB Karin Nyberg Employee Representative Date of Birth: 1952 Board Member since: 2008 Other board appointments: Education: Upper secondary humanities EuroMaint Annual Report 55
Company management Company management Ove Bergkvist Position: President and CEO Date of Birth: 1968 Employed by Euromaint: 2011 Henrik Dagberg Position: Business Area Manager Passenger Date of Birth: 1972 Employed by Euromaint: 2009 Ingela Erlinghult Position: Business Area Manager Components Date of Birth: 1965 Employed by Euromaint: 2009 Lena Gellerhed Position: HR Manager Date of Birth: 1968 Employed by Euromaint: 2007 Gustav Jansson Position: Business Area Manager Work Machines Date of Birth: 1952 Employed by Euromaint: 1978 Mattias Wessman Position: CIO Date of Birth: 1974 Employed by Euromaint: 2009 Jens Wikman Position: CFO Date of Birth: 1977 Employed by Euromaint: Anne-Catherine Worth Position: Communications Manager Date of Birth: 1969 Employed by Euromaint: 56 EuroMaint Annual Report
Produced by Euromaint, Huvudsta Kommunikation and Elli Production. Photography: Cover Kasper Dudzik, page 13 Niklas Alm, page 14 SJ/Jonas Bilberg, Board and Management Bengt Alm. Printed by: Sib-Tryck Holding AB.
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