Annual Report (ESEF) • Jul 8, 2022
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LOFOTEN, NORWAY JUNE 24, 06:15 AM This is Elekta 1 Business overview CEO’s comment 6 Market and trends 8 Strategic framework 11 Oering 18 Geographical overview 30 Risk management 36 The share 41 In-depth Sustainability Report Introduction 44 Access to Healthcare 46 Environmental Action 50 Business Ethics 54 People in Focus 58 Sustainability governance and reporting principles 64 GRI content index 69 Auditor’s report 72 Corporate governance Chairman’s comment 74 Corporate Governance Report 75 Internal control 83 Board of Directors 86 Executive Management 88 Auditor’s report 91 Remuneration Report 92 Financial reporting Board of Director’s Report 96 Consolidated income statement 104 Consolidated statement of comprehensive income 104 Consolidated balance sheet 106 Changes in consolidated equity 108 Consolidated cash ow statement 110 Financial statements – Parent Company 112 Notes 114 Signatures of the Board 147 Auditor’s report 148 Glossary 152 Denitions 154 Alternative performance measures 155 Five-year review and key gures 158 Annual General Meeting 2022 160 Financial calender cover Content Global leader in precision radiation therapy About the Annual Report Pages 94–147 constitute the statutory annual report, which has been audited. The Annual Report also in- cludes Elekta’s sustainability information, corporate governance and remuneration reports. Elekta presents a sustainability report prepared in accordance with the GRI Standards, Core option, and a sustainability report in accordance with the Swedish Annual Accounts Act. With sales in 120 countries... ... through 40 local oces plus distributors… ... our global team of 4 , 700 employees combine passion, science and imagination to profoundly change cancer care Our strategy ACCESS 2025 and our sustainability agenda is set on improving access to healthcare globally (UNs SDG 3) enabled by environmental action, securing our ethical business standards, and ensuring health, safety and engagement of our people. Delivered in a sustainable way Accelerate innovation Be the customer companion Drive adoption Drive partner integration Our vision: a world where everyone has access to the best cancer care 8,000 10,000 12,000 14,000 16,000 21/2220/2119/20 SEK M 0 5 10 15 20 % 11.3% 14,548 Net sales and EBIT margin Order backlog 0 10,000 20,000 30,000 40,000 21/2220/2119/20 SEK M 39,656 Net debt 1) /EBITDA ratio 0.0 0.5 1.0 1.5 2.0 2.5 3.0 21/2220/2119/20 MULTIPLE 0.57 1) Excluding lease liabilities. Key gures Impacted by Covid-19. Solutions ~60% of net sales Linac Oncology Informatics Neuro Brachy We openly collaborate with customers to advance sustainable, outcome-driven and cost-ecient solutions to meet evolving patient needs, improve lives and bring hope to everyone dealing with cancer. Service ~40% of net sales Delivering high quality after-market services, generating recurring revenues 1 Push the boundaries 50 years of innovation and beyond ELEKTA ANNUAL REPORT 2021/22 2 Experience the dierence 50 years of innovation and beyond 3 ELEKTA ANNUAL REPORT 2021/22 ... and access to the best cancer care. Articial intelligence enhancing productivity... ELEKTA ANNUAL REPORT 2021/22 4 BUSINESS OVERVIEW 5 ELEKTA ANNUAL REPORT 2021/22 “ We have invested signi- cantly in R&D and inno- vation to support future growth and margin expansion. ” Driving growth despite challenges Elekta showed resilience and delivered growth throughout the year, but our margins were pressured by the current challenges in global supply chains. Securing cancer care and driving growth in a year impacted by supply chain challenges Last year, I summarized the year as unprecedented, as our focus was to help our customers maintain cancer care in a world stricken by the pandemic and lockdowns. This year, just as the world was opening, we were faced with new headwinds, supply chain disturbances, component shortages, and increased ina- tion. Throughout the year, our priority has been to continue to secure installations and service our solutions to help our cus- tomers take on the cancer backlog, a result of the past years’ pandemic. Elekta showed resilience and delivered growth throughout the year, but our margins were pressured by the current challenges in the global supply chains. ACCESS 2025 – delivering on our four strategic pillars in a sustainable way We entered the scal year with our Capital Markets Day in June 2021 where we launched our strategy, ACCESS 2025, and our midterm nancial outlook. ACCESS 2025 supports our vision of a world where everyone has access to the best cancer care. It is based on four strategic pillars: accelerate innovation with cus- tomer utilization in mind, drive adoption, be the customers’ life- long companion and drive partnership integration, on which we have executed throughout the year. With innovation with customer utilization in mind we have invested signicantly in R&D and innovation to support future growth and margin expansion. The cancer care backlog requires eective radiation therapy and better workows for cli- nicians. Our latest linear accelerator, Elekta Harmony, delivers on this need. We also see an increased global focus on short- course treatments, accelerated by the pandemic, to reduce hospital visits. Our innovation in image-guided radiotherapy is enabling clinicians to reduce the number of treatment courses from 30toonly a few. Leading this development is Elekta Unity, ourMR-Linac, which over the year has showed impressive clini- cal outcome, pushing the boundaries for what is possible to treat, with some very promising results on, for instance, treat- ment ofpancreatic cancer, a form of cancer that has been veryhard to treat, and prostate cancer, where the results in di - cate fewer sessions, fewer side eects and potentially better outcomes. Wecontinue to drive the paradigm shift in radiation therapy by having more than 120 Unity systems sold and more than 60installed. Another important innovation milestone was the launch of our latest Leksell Gamma Knife platform, Elekta Esprit. It has the capacity to reduce treatment planning from what used to be hours, to under 60 seconds. Through Kaiku Health, we have partnered up with global pharmaceutical companies, and have initiated truly inspiring programs with ourcustomers, enabling more personalized and precise care, thanks to patient reporting and AI monitoring of side eects. Access to the best cancer care is also driven by our strate- gicpillar of partner integration across the cancer care eco system. Elekta is the only company of scale focusing ex - clusively on radiation therapy, and we are also committed to partnership both with healthcare companies and customers. BUSINESS OVERVIEW CEO COMMENT ELEKTA ANNUAL REPORT 2021/22 6 Inthe beginning of this scal year, we announced our strategic partnership with Royal Philips, where we deepened an already successful collaboration to further develop products and solu- tions. We have also launched a commercial partnership with GE Healthcare, andwith IBA. Recently, we signed a ten-year cus- tomer partnership with the leading cancer institute in the Neth- erlands, NKI/AVL, to cocreate personalized workows and drive treatment delivery advancements. Elekta is driving adoption across the globe by expanding the number of people who have access to radiation therapy by300 million by the end of our scal year 2024/25. This will be achieved by adding 825 linacs to underserved market where people today lack access to radiation therapy. So far, we are wellon track to reach this target, by increasing access to an additional 123 million people. To drive growth and customer satis faction, we deployed a strategy of having more direct market presence and over the year we opened oces in the Philippines and Indonesia. We also inaugurated the Elekta Foundation at EXPO in Dubai. The Foundation’s mission is toimprove cancer care access in underserved markets and “ During the year we have worked diligently to validate our CO 2 e baseline as well as identify and drive actions to reduce it. ” regions, and it will focus on increased awareness and preven- tion, strengthen the infrastructure, and expand training. It is crucial that we deliver our strategy in a sustainable way, and during the year we have worked diligently to validate our CO 2 e baseline as well as identify and drive actions to reduce it. I’m proud that we now have submitted our emission targets for validation by the Science Based Targets initiative, to secure the alignment with climate science. We also continue to support the principles of the UN Global Compact. Driving growth and margin expansion in an uncertain environment We are convinced that long-term market trends around the unmet need for cancer care are supporting growth and invest- ment in high-end radiotherapy equipment as well as margin expansion. We expect the uncertain macroeconomic environ- ment and supply chain challenges to continue to impact instal- lations, costs, and margins. To mitigate these eects, we are accelerating our Resilience and Excellence program to improve our cost base and further strengthen our processes. I would like to thank all Elekta employees for their important and tireless work to give patients around the world access to the best cancer care and extend my gratitude to all our customers and partners who, through their dedication and commitment to patients, provide hope for everyone dealing with cancer. Gustaf Salford President and CEO CEO COMMENT BUSINESS OVERVIEW 7 ELEKTA ANNUAL REPORT 2021/22 Expanding access main growth driver The need for cancer care is growing globally. Radiotherapy plays an important role in treating cancer but is currently underused, especially in low- and middle-income countries where access to equipment is lacking. Closing this access gap is vital to improve global cancer care. The market for radiotherapy and related oncology informatics software is estimated to be worth more than USD 7 billion glob- ally. Historically, pre-covid, it has grown by 6–8 percent annu- ally. Elekta has a strong global market position with an overall market share of 42 percent 1) . The market is primarily driven by an increase in the number of patients and the continuous strive to improve patient out- comes. Growing radiotherapy adoption with the expansion of treatment capacity in currently underserved low- and middle- income countries is expected to be the main future growth driver 2) . The overall market for linear accelerators is dominated by Elekta and Siemens Healthineers. The MR-Linac subsegment consists of Elekta and ViewRay. For more information on competition, see page 96. 1) Based on order intake of linacs, MR-Linacs and Leksell Gamma Knife systems in 2021/22. 2) Data bridge market research. Markets and markets. Competitive reporting. Elekta business intelligence. Geographic 5–7% non- software 7–9% software 8–10% emerging markets 2–4% mature markets Solutions North America 2.1M 1.7% 12 Europe 4.3M 1.1% 5 Asia 10.8M 2.7% 1 Expected number of new cancer cases 2025 Number of radiotherapy units per capita 2021Expected yearly growth in cancer cases 2020–2025 Latin America & Caribbean 1.6M 2.8% 2 Africa 1.3M 3.2% 0.3 Oceania 0.2M 2.4% 6 Source: Ferlay J, et al. Global Cancer Observatory: Cancer Tomorrow. Lyon: International Agency for Research on Cancer, 2020; The IAEA Directory of Radiotherapy Centres (DIRAC), 2021. Elekta expects the following growth rates going forward based on market reports and Elekta’s business intelligence. BUSINESS OVERVIEW MARKET AND TRENDS ELEKTA ANNUAL REPORT 2021/22 8 Drivers for radiotherapy adoption More people get cancer… The world’s population is increasing and aging. With the 65+ cohort expected to increase by almost 80 percent by 2040 1) , cancer incidence will increase. The World Health Organization estimates new cancer cases will grow from an estimated 18 million cases in 2020 to 28 million new cases in 2040 2) . …and live with it longer… As survival rates have improved over time, more people are living with cancer as a chronic condition. This increases the risk of oligometastatic disease. As a non-invasive treat- ment option, radiotherapy plays an important part in treating oligometastases, adding both years to life and life to the years 3) . …but many still lack access to radiotherapy There are large structural dierences in cancer care and the availability of radiotherapy between countries and regions. While 50–60 percent of all cancer patients need radiotherapy treatment, 40–60 percent of them lack access. Investments in radiotherapy capacity in low- and middle-income countries would save lives and lead to substantial economic benets 4) . 1) Projections from the UN Population Division, https://www.un.org/development/desa/pd/ 2) GLOBOCAN, data visualization available at CANCER TOMORROW: https://gco.iarc.fr/tomorrow/en/dataviz/isotype?types=0&single_unit=500000&cancers=40 (excluding non-melanoma skin cancer) 3) Palma et al, 2020, Stereotactic Ablative Radiotherapy for the Comprehensive Treatment of Oligometastatic Cancers, available at https://www.medrxiv.org/content/10.1101/2020.03.26.20044305v1 4) Atun et al, Expanding global access to radiotherapy, The Lancet Oncol 2015 Sep; 16(10): 1153-86 https://pubmed.ncbi.nlm.nih.gov/26419354/ MARKET AND TRENDS BUSINESS OVERVIEW 9 ELEKTA ANNUAL REPORT 2021/22 Personalized precision Medical science and technology continue to advance, creating new possibilities for tailored and better targeted treatment for patients. In radiotherapy, advances in imag- ing, for example the launch of MR-Linacs, expands the potential use of radiation treatment to more cancer types and enables lower-margin planning, online adaptive treatment and hypo- fractionation – a treatment plan where the planned radiation dose is delivered in ve treatment ses- sions, so-called fractions, or less. Healthcare trends Higher productivity Aging populations and more treatment options will lead to increasing costs for healthcare systems. As a result, there is a clear trend in all markets, regard- less of reimbursement system or nancing model, to align eco- nomic incentives with quality of care and to focus on cost e- ciency and productivity. This benets cost-ecient treatments such as radiotherapy, and within radiotherapy more productive treatment plans such as hypo- fractionation. Increased digitalization More treatment options and workow complexity across most healthcare disciplines increase the need for digital decision support for clinicians, and workow man- agement tools for clinics. In addi- tion, oncology and radiotherapy are data-intensive disciplines that are well-suited to reap the benets of AI-supported automation tools and big-data analysis. Tying data from dierent workows together into integrated solutions will bene- t both precision and productivity in cancer care. BUSINESS OVERVIEW MARKET AND TRENDS ELEKTA ANNUAL REPORT 2021/22 10 Access to the best cancer care Our updated strategy is guided by our purpose, mission, and vision. It builds on our strengths as a leader in precision radiation therapy and our unique position as an agile innovator and the only independent radiotherapy provider of scale. Strategic framework Our purpose is to inspire hope for anyone dealing with cancer, be those patients, clinicians, or relatives. While radiotherapy has a critical role to play in inspiring hope, it is not the sole answer. Therefore, our mission is to improve patients’ lives by working together with our customers. We use our precision radiation expertise to work hand in hand with clinicians and our part- ners to continuously develop innovative, outcome-driven, and cost-ecient solutions that provide a lasting clinical dier- ence in a sustainable way. We believe in taking an open and proactive approach in our practices, enabling us to build strong partnerships and meet evolving patient needs, no matter where they are in the world. Our vision is a world where everyone has access to the best cancer care. Our approach to working towards our vision is set out in our strategy, ACCESS 2025, of which a core element is our social sustainability ambition of improving Access to Healthcare globally. To be able to deliver on our vision in the longer term, we have identied three additional sustainability focus areas where we put extra eort: Environmental Action, Business Ethics and People in Focus. Through Environmental Action we work to ensure we conduct our business within the boundaries of our planet. In focus area Business Ethics, we work on embodying the ethical business standards we have set for ourselves. And in People in Focus, we work to ensure we always respect human rights throughout our entire value chain. Environ- mental Action People in Focus Business Ethics Access to Healthcare To measure the improvements in access to the best cancer care we have set ambitious strategic targets based on availability, eciency, and clinical outcome. Availability is improved by growing the installed base in currently under- served markets. Patients get better and more ecient care through clinical adoption of new technology or utilization ofavailable technology and improved decision-making support. And through increased patient involvement the care teams can improve clinical outcomes by deeper and richer patient-reported insights. All these actions will improve cancer care. For more information about our strategic mile- stones see page 15. STRATEGIC FRAMEWORK BUSINESS OVERVIEW 11 ELEKTA ANNUAL REPORT 2021/22 Resilience & Process Excellence across the value chain Values We do what we say | We work as one team | We keep thinking forward People Delivered in a sustainable way Accelerate innovation with customer utilization in mind Be the customer lifetime companion Drive adoption across the globe Drive partner integration across the cancer care ecosystem A world where everyone has access to the best cancer care The strategy and its enablers ELEKTA ANNUAL REPORT 2021/22 12 BUSINESS OVERVIEW STRATEGIC FRAMEWORK Elekta’s strategy, ACCESS 2025, is built around four main strategic pillars that shall drive sustainable protable growth and create the next generation treatment, workows and customer engagement models. The strategy – ACCESS 2025 Accelerate innovation with customer utilization in mind We will continue to invest in innovation, both in hardware and software, to keep driving the category of precision radiation medicine forward and to develop new solutions that help customers elevate standards of cancer care. We keep innovating with implementa- tion in mind to drive faster adoption in the market while also advancing functionality. Drive partner integration across the cancer care ecosystem We believe that cancer care is best elevated by bringing together the expertise across the entire network. We also believe that there is no one solution to t all and custom- ers will need tailored solutions to t their needs. And as the only independent radio- therapy provider of scale, we have an important role to play to ensure interopera- bility so that our customers and their patients can enjoy best-of-breed solutions across the cancer care continuum. Be the customer lifetime companion We want to be the preferred and most trusted partner to our customers through- out the lifecycle of our solutions. We will therefore continue developing our service oering as well as new business models so we can build stronger relationships with our customers. Drive adoption across the globe To make sure that patients really do get access to the best cancer care, we will con- tinue to drive market adoption. Initiatives under this focus area include both optimiz- ing our local presence in each market and working with governments on, for example, reimbursement rates. STRATEGIC FRAMEWORK BUSINESS OVERVIEW 13 ELEKTA ANNUAL REPORT 2021/22 Elekta’s business model is to develop, manufacture and market innovative solutions for precision radiation therapy, as well as toprovide services and support for the installed base. After the installation of the solution one year of war- ranty follows. To secure continuous treatments and avoid interruption for the scheduled patients, it is important to have the right service for the solution. Elekta has a good attach rate of service contracts toits installed base. Together, the installation of solutions and the service business drive two dierent revenue streams: upfront and periodical. Today, most devices and software solutions are paid upfront. Services are mainly paid periodically based on contracts but also including occasional service assignments. Customers are increasingly interested in the con- cept “as a Service” to gain from lower upfront costs and always having the latest software. Based on this demand, Elekta is starting to oer “Software as a Service” and “Solutions as a Service”. This implies that there will be a gradual shift towards periodical fees instead of upfront payment over time. As it occurs, it will smoothen out revenue and cash ow more evenly over a longer time period. Upfront Periodical Solutions: • Device • Software • Service TODAY’S REVENUE STREAM Solutions: • Device • Software Upfront Periodical • “as a Service” • Service FUTURE REVENUE STREAM REVENUE STREAM Year 0 Solutions revenue including software, installation, service and training Service revenue for eld and remote service, software license and upgrades Total service revenue +1 Warranty +2 +3 +4 +5 +6 +7 +8 +9 +10 +11 +12 +13 Business model to foster innovations Solutions ~60% of net sales Service ~40% of net sales BUSINESS OVERVIEW STRATEGIC FRAMEWORK ELEKTA ANNUAL REPORT 2021/22 14 Outlook and strategic milestones 2024/25 Elekta’s strategy provides the framework for our pursuit of protable growth in a sustainable way and are quantied in the nancial outlook. For sustainability targets see the In-depth sustainability report on page 41. Mid-term outlook Outlook Outcome Comment • Despite the pandemic and geopolitical-related challenges Elekta had a net sales growth rate in 2021/22 of 4% based on constant exchange rates. InSEK net sales growth was 6% • The outlook is set based on an average expected 6–8% market growth based on constant exchange rates during the mid-term period. In 2021/22 the market 1) grew with <4% Net sales >7% CAGR EBIT margin expansion Dividend ≥ 50% of annual net income Availability of care +300 M people in under- served markets to get access via Elekta’s installed base Elevation of care Among Elekta customers: 2x clinical usage of hypofractionation 4x usage of adaptive treatments Participation of care Among Elekta customers’ patients: +20% increase of engage- ment via an Elekta-powered tool • 2021/22 Elekta’s EBIT margin decreased compared to 2020/21. The main reason is a lower gross margin due to pandemic-driven higher supply chain, logistics and service costs. For more information see page 98 • The dividend proposal is 2.40 SEK/share to be paid out in two installments • At end of 2021/22 +123 million people in underserved markets had gotten access via Elekta’s installed linac base (baseline 2019/20) • Increased usage of hypofractionation in most mature markets as well as increased usage of adoptive treatments • Not quantied on a yearly basis • Ongoing higher engagement among customers patients • Not quantied on a yearly basis Strategic milestones 24/2523/2422/2321/2220/21 4% 7% 24/2523/2422/2321/2220/21 11.3% 13.9% 24/2523/2422/2321/2220/21 79% 50% 24/2523/2422/2321/2220/21 123 59 300 24/2523/2422/2321/2220/21 2x 4x 24/2523/2422/2321/2220/21 +20% 1) Order value of capital goods, in USD. STRATEGIC FRAMEWORK BUSINESS OVERVIEW 15 ELEKTA ANNUAL REPORT 2021/22 Creating responsible value throughout the value chain Elekta’s business provides an important part of cancer care around the globe. Collaborations help to secure both clinician and patient’s need and drive innovations within radiotherapy based on sustainable operations with high-quality suppliers. The foundation of our long-term success is excel- lence and sustainability in all our processes throughout the value chain. We achieve that by developing our people, being mindful of our stake- holders’ needs and continuously rening our pro- cesses to reduce both our costs and environmental footprint. This focus creates resilience and ensures we continue to have the resources to inspire hope for anyone dealing with cancer. The pyramid icons in each section of the value chain illustrates the sustainability focus area most essential for the respective part and refers to the focus areas described in the pyramid below. For more information about the addressed sustainabil- ity issues and goals see page 43. R&D Improving cancer care through innovation Elekta’s market-leading position is based on innovations, both in products and processes, developed in close collabo- ration with leading researchers and clinics in mature and emerging markets. Sustainability requirements are set early in the product design phase. Our R&D hubs: • Informatics solutions in Sunnyvale and St. Louis, U.S., and in Shanghai, China, as well as software in Northern Europe • Leksell Gamma Knife in Stockholm, Sweden • Brachy in Veenendaal, the Netherlands • Linacs and MR-Linacs in Crawley, UK and Beijing, China Main R&D areas supporting: 1. Personalized precision – decision support and increased engagement of patients in care pathway 2. Elevated productivity – resource optimization and mobility of care 3. Integrated informatics – adaptive treatments, workow eciency, automation and cost-eective devices SOURCING & MANUFACTURING Securing stable solutions Both sourcing and manufacturing operations have strong focus on quality and we only use high-quality suppliers to secure stable solutions that provide the necessary precision. The Sustainable Sourcing Program shall identify and mitigate any nonconfor- mities with our Supplier Code of Conduct and drive change. Three main manufacturing sites: • Crawley, UK (Linacs and MR-Linacs) • Beijing, China (Linacs and MR-Linacs) • Veenedaal, the Netherlands (Brachytherapy) 80% of the sourced products and services come from approximately... 450 qualied suppliers around the world. LOGITICS PLATFORM Optimized transport through fully digitalized logistics platform Environ- mental Action People in Focus Business Ethics Access to Healthcare BUSINESS OVERVIEW STRATEGIC FRAMEWORK ELEKTA ANNUAL REPORT 2021/22 16 14% of net sales in R&D investment >1,800 patents MARKETING & SALES Bringing innovations together with clinicians With a strong local presence around the world, we are close to our customers. We have sales in over 120 coun- tries. In many markets we act with our own employees, in others, through selected partners. Training and compliance programs are established to ensure ethical business conduct. To enhance access in underserved markets we also oer nancial solutions. ~13% of net sales through distributors SEK 18 bn in gross order intake 2021/22 AFTERMARKET & SERVICE Providing excellence every day Through high-quality service and support, we enable our customers to maximize the lifetime and value of their investments and provide the best care possible. A global team supports customers throughout the life- cycle of the solution. Assisted by the AI-based Elekta IntelliMax® system, connected to 80 percent of the installed base, an increased share of the support is conducted remotely. 650 eld service engineers 160 support specialists Optimized transport through fully digitalized logistics platform STRATEGIC FRAMEWORK BUSINESS OVERVIEW 17 ELEKTA ANNUAL REPORT 2021/22 Linac Neuro Solutions Elekta oers leading solutions in both radiotherapy treatment and oncology informatics systems for complete oncology clinics. Oncology Informatics Brachy Expanding and elevating innovations Elekta oers leading radiotherapy treatment solutions and complete oncology informatics solutions for comprehensive oncology departments. With innovations that both elevate and expand access to care, we contribute to easing the global cancer burden. Elekta’s oering consists of two distinct segments: solutions and aftermarket services. Solutions is in turn divided in two subseg- ments: Oncology Informatics Solutions and Radiotherapy Treat- ment Solutions. The rst brings together people, workows, and the information clinics need to deliver quality care and run smooth operations across the entire oncology space. The sec- ond subsegment, Radiotherapy Treatment Solutions, consists of the three business lines: Linac Solutions, Neuro Solutions and Brachy Solutions. Each business line oers leading radiotherapy treatment solutions that are optimized for precision, delivering radiation to the target while minimizing the damage to healthy surrounding tissue. The service business provides a large stream of recurring reve- nues based on long-term service contracts with customers. Through AI-supported big data analytics, service operations arebecoming more preventative, reducing unplanned down- time so that more patients can be treated. Accelerated pace of innovation In line with our strategy, ACCESS 2025, investments in research & development have been accelerated. Focus is set on developing the MR-Linac platform, projects within the linac family, and software. As medicine and technology progress, treatment pos- sibilities continue to expand, resulting in increasingly complex workows for clinics. Elekta is developing the next generation of software solutions that will help clinics manage and streamline these workows, tying the two subsegments within solutions closer together. We expect to launch new innovative solutions in2022/23. At the end of 2021/22, the installed base of Elekta solutions was around 6,900, of which some 5,000 units were linacs, MR-Linacs and Leksell Gamma Knife systems. Services Elekta delivers high-quality aftermarket services with a global network, generating recurring revenues. BUSINESS OVERVIEW OFFERING ELEKTA ANNUAL REPORT 2021/22 18 Oncology Informatics Solutions Decision support tools that improve access and elevate care For more than 30 years our leading oncology information system has helped clinicians connect with patients and improve treatment outcomes. The right software tools will raise the standard of care and run clinics operations more eciently. Oncology is a complex and data-driven discipline. Due to the wide range of cancers and tumor types, there is no single stan- dard of care. Treatment plans need to be personalized for each patient, usually from a combination of radiotherapy, surgery, and chemotherapy. To manage this complexity and to ensure continuity in the handovers between all healthcare profession- als involved, clinics use oncology information systems (OIS) tohandle patient data and to manage and analyze their own operations. Elekta oers the best of breed OIS, MOSAIQ, and the support- ing ecosystem of digital tools, MOSAIQ Plaza. It works seam- lessly with all Elekta radiotherapy systems and supports virtually any other oncology medical device or treatment management solution. The OIS is built around a data model specically designed for multidisciplinary oncology care. With repeated observations of the same variables over a long time, it enables clinics to contin- uously evaluate their practices. The role-based software pre- sents each clinician with everything they need for making preci- sion treatment decisions, including high-level support, granular patient data and care pathways based on established treat- ment guidelines. Developing the pathways tool further with better visualization and easier decision making on the optimal treatment strategy is one aspect of the deepened partnership with Royal Philips signed during the year. Supporting innovations The new version of MOSAIQ supports additional radiotherapy systems, like Elekta Harmony, and has an improved user experi- ence and added automation workows. Our OIS and analytics tools have been updated and can provide our customers with good support to comply with the requirements of the previously planned new bundled payment system in the U.S. Kaiku Health is a platform for electronic patient-reported outcomes (ePRO) and an ecient tool for connecting clinicians and patients. It works by patients reporting their wellbeing via an app. The care team can follow each patient and focus their resources on those whose reporting indicate they need care. Kaiku and similar ePROs are continually demonstrating improved survivorship and reduced adverse events resulting inan elevation of care as well as a reduced burden on acute treatments. During the year, Kaiku received an ONC Health ITCertication in the US, which means it can be used to meet the requirements of various regulatory healthcare programs. Cloud-delivered bundles There is growing interest in cloud-delivered software as a service (SaaS) among healthcare providers. The model moves software from a capital investment to an operational expense and makes sure the clinic is always using the latest software version while beneting from smooth updates and exibility. For many new clinics this is an advantage, especially in emerging markets where budgets are smaller and there is greater uncertainty about future software needs. We have put together software bundles that align with dier- ent clinical functionality and deliver them via the Elekta Axis cloud. This makes it easier, especially for new clinics, to match software purchases with their needs while getting enhanced support for cybersecurity. The right software tools will raise the standard of care through strong decision support, and expand access by making clinics’ operations run more eciently. “ Elekta’s pay-per-use model ts very well with our oncology business model, marked by low capex, cost-eective solutions that are rooted in the optimal usage of assets, and not their ownership. ” Dr B S Ajaikumar Executive Chairman, HealthCare Global Enterprises, India OFFERING BUSINESS OVERVIEW 19 ELEKTA ANNUAL REPORT 2021/22 Like many, Florencia Escobar enjoys the small things in life, meeting up with friends or having dinner with her partner. Relaxing and enjoying these moments after receiving cancer treatment – in Florencia’s case external beam radiotherapy and brachytherapy for stage III cervical cancer – can be challenging. Florencia has the support of Elekta’s software application, Kaiku, to help her cope. “The Kaiku app really gives me peace of mind regarding symptoms and my own follow-up,” she says. Using her phone or tablet, Florencia answers questions and reports her symptoms in the app so that her medical team at Leben Salud in Neuquén, Argentina, can follow her condition and schedule follow-up meetings if necessary. Kaiku also helps Florencia by automatically sending her symptom feedback articles. “I nd them very useful, as they help me to learn about the treatment, the symptoms and how to manage them. And it’s reassuring to know the information isreliable – there is a lot of false information on the internet,” she says. Experience the dierence: Kaiku PILAHUE, ARGENTINA JUNE 24, 08:15 AM ILLUSTRATIVE PICTURE ELEKTA ANNUAL REPORT 2021/22 20 BUSINESS OVERVIEW OFFERING Linac Solutions Shifting the paradigm and optimizing workow Elekta oers a complete range of linac solutions that both elevates the standard and expands access to care. Linear accelerators, or linacs, are the cornerstone of radio- therapy departments, treating a wide range of cancer tumors. Patients receiving care with a linac usually only visit the clinic to receive treatment and spend the rest of the day at home. Elekta’s linac solutions are designed to help clinicians raise the quality of care by tailoring treatments to each patient while stillimproving productivity so that more patients can receive treatment. Due to an increasing number of patients as well as budget and personnel constraints, clinics are increasingly focusing on optimizing operational eciency. This means that integra- tion and streamlining of clinical workows have become just as important as choosing the optimal tool for each individual task. Shifting the paradigm Elekta’s linac oering ranges from the very cutting edge of technology to value solutions. At the top of the range is Elekta Unity, our MR-Linac, which isequipped with a diagnostics grade MRI. The introduction of Unity marked a paradigm shift in radiotherapy as the superior image quality of the MRI provides clinicians with clear visibility even in notoriously dicult to see soft tissue such as the abdo- men. The MR-Linac consortium believes that all the nine most common cancers globally would benet from Unity’s improved visualization and treatment adaption: lung, breast, prostate, colon, stomach, liver, rectum, esophagus, and cervix 1) . 25 per- cent of all radiotherapy should benet from a MR-Linac treatment in the future. 1) https://gco.iarc.fr/today/data/factsheets /populations/900-world-fact-sheets.pdf OFFERING BUSINESS OVERVIEW 21 ELEKTA ANNUAL REPORT 2021/22 Wayne Crawley, 73, led a relaxing life, spending his time on his hobbies – shing, golng and cooking – and family when he was diagnosed with prostate cancer. After some searching, he found an oncologist at a cancer center in New Jersey that he connected with. “He was great. It was like talking to family,” he says. With the treatment options explained to him, Wayne opted for radiotherapy on the hospital’s new Elekta Unity MR-Linac. “I understood this was the latest and greatest system, and it’s proven true,” Wayne says. “Everything was fantastic. I thought it might be painful or at least uncomfortable, but the only slight discomfort was lying on the hard couch and the sounds of the machine. But you quickly get used to these; I actually fell asleep during treatment a couple times.” And the side-eects from the treatment have been minimal. “I was visiting the bathroom a little more frequently for the rst one or two weeks, but other than that, nothing,” he says. Experience the dierence: Unity JERSEY CITY, THE UNITED STATES JUNE 24, 10:15 AM ILLUSTRATIVE PICTURE BUSINESS OVERVIEW OFFERING ELEKTA ANNUAL REPORT 2021/22 22 The ability to see clearly and to continuously, in real-time, adapt the treatment plan to changing tumor anatomy, will spare more healthy tissue; enable the managing of hard-to- treat cancers in dicult anatomical sites such as rectum, liver, and pancreas; and facilitate the use of more ecient treatment schedules such as hypofractionation. The MOMENTUM study was initiated in 2019 to provide an infrastructure for data to both develop and assess the best clini- cal practices with Unity. Participating institutions can access clinical and technical data from a large, shared repository, which enables researchers to learn from all patients treated with Unity. Compiling clinical evidence is important to help radi- ation oncologists and physicists optimize their practice and key to obtaining enhanced and stable reimbursement rates in line with the additional clinical value brought by Unity. A major milestone was achieved at ESTRO 2022, when the MOMENTUM study reported on the experience of over 1,800 patients demonstrating utilization in a wide variety of tumor types, all with a promising side eect prole. We continue to see studies where new concepts are explored and are starting to see more studies on clinical safety and eectiveness. Focus going forward is on studies that demonstrate the clinical superi- ority of Unity, which will then be used to establish dierential reimbursement schemes. Common development areas Versa HD is in the high-end segment for traditional linacs. Sub-millimeter precision together with Elekta’s treatment plan- ning system, Monaco, and advanced imaging enable clinics to transition to hypofractionated treatment schedules. These include stereotactic radiosurgery (SRS) and stereotactic body radiation therapy (SBRT), which can t into standard 15-minute treatment slots. Understanding and handling motion, for example when breathing, is a big focus area for both Unity and Versa HD. WithVersa HD comes advanced 4D imaging capability, and forUnity updates during the year included new features in comprehensive motion management. Another area of com- mon interest is online adaptive treatment, which is standard onUnity and under development for traditional linacs. Increasing productivity Harmony is a high-productivity linac as well as Elekta’s newest linac on the market. It brings a completely redesigned in-room experience, especially for the time-consuming patient setup Unprecedented visibility Truly precise and personalized radiotherapy Diagnostic quality MR imaging Unparalleled insight, visibility and control Real-time adaptive treatment in presence of motion Visualization Precision Data & insights Productivity Improved outcomes Unity community Unique approach to innovation with hundreds of clinical partners The benets of Elekta Unity “ When I know my patient is going on the MR-Linac, Ifeel a sense of relief. My patient is getting the best care possible and I will know what’s happening tothe tumor through that journey. That’s an over- whelming feeling, not onlyfor the physician, butalso for the patient. ” Dr Arjun Sahgal Deputy Chief, Sunnybrook Health Sciences Centre, Toronto, Canada OFFERING BUSINESS OVERVIEW ELEKTA ANNUAL REPORT 2021/22 23 process which Harmony’s FastTrack system can reduce by up to50 percent. Overall, treatment times can be reduced by up to 25 percent, and some sites are treating up to 70–80 patients a day, meaning clinics can treat more patients with the same stang, improving access to radiotherapy. It is available in two congurations: Harmony and Harmony Pro. The Pro model is aimed at mature markets and the regular version at emerging greeneld markets. With support for the new in-room workow added to Elekta’s oncology informatics solution, MOSAIQ, there are signicant benets of Harmony in enabling both mature and emerging markets to treat more patients without compromising on precision or clinical versatility. Cloud-based analytics ProKnow is our cloud-based collaboration platform for distribut- ing tasks and for measuring and improving patient outcomes, both important aspects of value-based healthcare. All patient radiotherapy data is centralized in a secure web repository and accessed via a simple and intuitive user interface. Tools like peer-review and plan evaluation can be used to maintain quality and consistency in clinical practice, while tools for big data aggregation and analytics can improve practices over time. Thebuilt-in automated workows, such as auto-contouring, canbe further enhanced by customized automated scripts and third-party analytics. How it works: Linac Image guided radiotherapy Most linacs include an integrated CT imaging system for visualization and positioning of the tumor target while the patient is in the treatment position. Elekta Unity, MR-Linac, replaces this CT imaging with a diagnostic-grade MR imager. MR images are generated immediately before and during treatment which enables real-time adjustments of the radiation beam to the patient’s anatomy at the exact time of the treatment. Cone beam CT MR-Linac The linear accelerator (linac) uses high power microwaves (like radar) to accelerate elec- trons to nearly the speed of light where they hit the target to produce an intense beam of radiation. The shape, direction and intensity of the radiation beam is automatically con- trolled in accordance with a treatment plan, which has been optimized to deliver the required dose of radiation to the individual patient’s tumor, while minimizing the impact to the surrounding healthy tissue. BUSINESS OVERVIEW OFFERING ELEKTA ANNUAL REPORT 2021/22 24 When it was time for a cancer clinic in Clermont-Ferrand, France, to upgrade one of its two linacs in 2021, they opted forElekta Harmony Pro. “We had signicantly improved our volume or cancer cases over the last four years, but we knew that a linac like Harmony would allow us to treat even more patients,” says Dr Vivien Fung, radiation oncologist at the clinic in Clermont-Ferrand. “Plus, it would give us more capacity to meet the increasing demand for hypofractionation.” In October 2021, the clinic began treating patients with a brand-new Harmony Pro, complementing their existing Elekta Versa HD linac. From the beginning, the clinic was able to treat all major tumor types on Harmony. After a month, 70 patients a day were receiving treatments on Harmony alone, ranging from conventional treatments to hypofractionation. Dr Fung adds that they chose the Pro version of Harmony to get High Dose Rate mode, like Versa HD, to enable ecient stereotactic delivery and increase the number of such treat- ments performed. The clinic’s data show that setup time on Harmony is about 20 percent lower than on conventional linacs, but the clinic thinks they can improve further. “We believe that with more experience on this linac we candecrease patient setup time even more, while increasing eciency and productivity,” says Dr Fung. Experience the dierence: Harmony CLERMONTFERRAND, FRANCE JUNE 24, 02:15 PM ILLUSTRATIVE PICTURE OFFERING BUSINESS OVERVIEW 25 ELEKTA ANNUAL REPORT 2021/22 “ I had a unique experience and learned a lot both by observation and through verbal communication. ” Mulape Mutule Kanduza Chief Medical Physicist, Cancer Diseases Hospital, Lusaka, Zambia Brachy Solutions A very precise and economical treatment option Brachytherapy is a cost-ecient treatment modality for many cancer types. As the market leader, Elekta works to improve both access and standard of care. High dose rate brachytherapy is a very precise form of radiother- apy where a radioactive source is temporarily inserted into the body, inside or close to the tumor. Most brachy patients receive it in combination with external beam radiation, for example with a linac, but it can also be used as a standalone treatment. It is standard care for cervical cancer and clinically eective, as well as an economical treatment option, for a range of dierent cancer types such as prostate, breast, skin and rectal. Elekta is the undisputed market leader in the segment of high dose rate brachytherapy, with around two thirds of the market. The oering consists of afterloaders, treatment planning soft- ware and a wide range of applicators. The latest innovation, Elekta Studio, makes it possible to oer a complete image- guided brachytherapy solution, as an in-room mobile wide- boreCT system (ImagingRing) has been added. Clear advantages In-room imaging has very clear advantages. After the applica- tor has been inserted, patients are usually transported to another room for imaging, which takes time and carries dis- placement risk that aects the quality of treatment, and can bestressful for both patients and clinicians. With ImagingRing, images can be obtained in-room without transporting the patient, improving the treatment delivered, patient comfort, and enabling a greater throughput of patients for the clinic. Feedback from the early adopters has been highly positive. Dierent clinics will now be optimizing their workows and com- piling real-world evidence about the benets of Imaging Ring. Clinical evidence will make the advantages clearly visible and increase market demand. A near-term focus has been to get Elekta’s large product portfolio with over 200 applicators approved under the new stricter EU Medical Device Regulation. Future innovation eorts will continue to focus on making brachytherapy faster and eas- ier to perform, and on bringing imaging to the next level with better integration and working towards image-guided adaptive treatments. Access to training A limiting factor for expanding the use of brachytherapy is a shortage of trained sta. To help alleviate this, Elekta runs the BrachyAcademy, the world’s largest educational resource for brachytherapy. Since brachytherapy usually involves a minimally invasive procedure, it may take some time for clinicians to become procient and fast enough at performing it for the reim- bursement to fully cover the clinic’s cost. The BrachyAcademy educates clinicians by peer-to-peer training, improving the eco- nomics for the clinic, while also spreading the use of brachyther- apy. Elekta and its 22 BrachyAcademy partner hospitals world- wide have trained over 2,500 clinicians through workshops and observational visits. The World Health Organization has presented a global strat- egy to eliminate cervical cancer as a public health problem by pursuing vaccination, screening and treatment. The aim is to drastically reduce the incidence of cervical cancer and to expand access to treatment. As the market leader, Elekta is committed to increasing access and to training medical sta globally, espe- cially in underserved markets where it is needed the most. That is why the BrachyAcademy is expanding in low- and middle-income countries, with focus on developing BrachyAcademy partners for gynecological cancer treatments in new regions. How it works: Afterloader with an applicator A radioactive source, the size of a grain of rice, is temporarily placed inside or close to the tumor via an applicator. Treatment planning is done after the applicator has been inserted and an image has been acquired via CT or MRI. Then a carefully planned high dose is delivered very precisely with the afterloader that remotely steers the source in the patient’s body. The entire treatment is typically delivered in one to four fractions during one stay at the hospital, enabling the patient to return home the same day or the day after. BUSINESS OVERVIEW OFFERING ELEKTA ANNUAL REPORT 2021/22 26 The Sidney Kimmel Cancer Center (SKCC) – Jeerson Health, located at the Thomas Jeerson University Hospital in Philadelphia, was the rst clinic in North America to acquire Elekta Studio, which includes ImagingRing, a mobile CT scanner for brachytherapy. “This state-of-the-art, mobile-CT technology brings real-time imaging directly to the patient, thus reducing theamount of time each procedure takes, while improving treatment accuracy and enhancing patient safety,” says DrPramila Rani Anne, Director of Clinical Operations, Department of Radiation Oncology. To make sure the radiation source is positioned correctly inside the body, images are obtained with a CT scan. Until the advent of ImagingRing, this meant moving the patient to another room, risking displacement of the applicator orneedles, and delaying the treatment time. For patients movements during the treatment can be stressful. There- fore, Elekta Studio not only increases eciency but also patient comfort. “ImagingRing underscores our commitment to patient- centered care, ensuring that we are able to provide every individual with the latest treatment options while also providing a more convenient experience,” says Pramila. Experience the dierence: Elekta Studio PHILADELPHIA, THE UNITED STATES JUNE 24, 04:15 PM ILLUSTRATIVE PICTURE 27 ELEKTA ANNUAL REPORT 2021/22 OFFERING BUSINESS OVERVIEW How it works: Leksell Gamma Knife Neuro Solutions Minimally invasive treatment with the highest precision The expertise to protect what matters most with a strong and specialized value proposition for stereotactic radiosurgery. The core of Elekta’s neuro oering is Leksell Gamma Knife (LGK), the most proven and well-documented stereotactic radio sur- gery (SRS) device on the market. SRS is a safe and cost-ecient treatment option for neurological diseases and brain metasta- ses, and a gentler alternative to open surgery and conventional radiotherapy. It is non-invasive, and usually has no side eects and no convalescence or rehabilitation requirements for the patient. Treatment is normally performed in one fraction and patients can return home the same day. The main advantage of LGK is the very sharp dose fall-o that ensures minimal dose to surrounding healthy tissue. The opti- mized workow, which requires minimal quality assurance, is highly ecient and enables some centers to treat more than 1,500 patients per year with one LGK. While SRS can also be performed on modern linacs, LGK oers superior accuracy and shorter treatment times. Clinics that have invested in LGK nd that they can increase the throughput of brain patients while freeing up time on the linac, improving overall access for patients and the economics for the clinic. The installed base of LGKs is around 360 and growing. The latest Neuro solution is the state-of-the-art Elekta Esprit, which was launched at ESTRO in May 2022. Built on decades of development, Esprit takes SRS to the next level. This latest and most advanced system will oer signicantly faster automated treatment planning for clinicians, more personalized and patient-friendly treatments, and a degree of precision able to protect the mind and the person. With submillimeter accuracy, it can target even the smallest, most challenging intracranial tumors and lesions while protecting essential healthy tissue. Its new platform will also serve as a perfect hub for coming innova- tions and future updates. Lightning-fast LGK comes with its own planning tool, Leksell GammaPlan, which is fully integrated with and tailored to LGK. It is also avail- able remotely, a feature which has proven invaluable during thepandemic and has the added advantage of allowing easier collaboration between clinicians and departments. The treatment optimizer Leksell Gamma Knife Lightning is a software designed to reduce planning and treatment delivery times while ensuring that even novice planners can deliver high-quality plans. The automated process reduces planning time by up to 80 percent, increases plan quality, and reduces beam-on-time by up to 50 percent. This solution has been described as game-changing by customers, and the product has seen an enthusiastic uptake with 160 installations in just twoyears. Immobilization options with patient comfort There are currently two immobilization options: a frame and amask. The latest frame, Leksell Vantage, has an open face design, which greatly improves patient comfort while also pro- viding better access for anesthesia. It is easy to assemble and the disposable pins xing the frame eliminate the need for steril- ization. The innovative construction secures improved image quality through dramatically less image distortion, which speeds up the imaging process while allowing clinicians to see more anatomy. In addition to LGK, the headframe is part of astereotactic system that is used for performing stereotactic surgical procedures. Stereotactic radiosurgery is specically developed to treat neurological conditions. With Elekta’s Leksell Gamma Knife, up to 192 low-intensity radiation beams simultaneously con- verge with high accuracy, to deliver a powerful radiation dose to the target. Target volume and shape determine the number of beams used. Advanced stereotactic imaging and a high-denition motion management system enables real-time adaptive treatment. BUSINESS OVERVIEW OFFERING ELEKTA ANNUAL REPORT 2021/22 28 Service Preventive maintenance increases availability for patient treatments We invest in digitalization to be a strong life-time companion to our customers. By connecting and collecting data from our machines we can act before breakdowns happen, enabling customers to plan their downtime and minimize operational disruptions. Service plays an integral part in the value that Elekta and clini- cians provide for patients, directly via maintenance and repairs that keeps the solutions running, and through an expansion in the service portfolio with more value-added services. With preventive maintenance, clinical downtime can be both minimized and planned, making sure that patients receive their treatments as scheduled and that clinics’ operations run eciently. Indirectly, service and support of our installed base is the corner- stone of the close relationship between clinics and Elekta. Together with the stable recurring revenue stream from the service business, it forms a foundation for continued investments in research and development of Elekta’s solutions. Our portfolio of services, Elekta Care, ranges from installation of a new machine to ongoing maintenance, training, and tech- nology updates during the lifetime of the product. We also oer opportunities to participate in knowledge sharing through our global network of service experts. IntelliMax with patented algorithms The bedrock of our preventive maintenance program is Elekta IntelliMax. It collects machine data from more than 22,000 con- nected Elekta products, including 80 percent of our installed baseof linacs, and performs analyses using AI-based patented algorithms to detect issues before they impact the product’s availability. For every issue detected by IntelliMax, an average of eight hoursof clinical downtime can be avoided 1) . Through IntelliMax, more than 20,000 hours of clinical downtime are avoided by our customers each year. Leading remote capabilities Early investments in digitalization have enabled us to develop lead- ing remote support capabilities. We have over 650 eld technicians performing maintenance and repairs, which are supported by more than 160 support specialists providing remote assistance in local languages. Where eld technicians used to rely solely on their own expertise and experience, they can now count on the support from our remote specialists and data from Elekta IntelliMax. In 2021/22, 68 percent of service cases were solved with remote sup- port, avoiding more than 50,000 hours of clinical downtime. Automated spare part logistics Digitalization has also enabled intelligent automation of our spare parts logistics. When the system detects a potential upcoming issue, the required spare part is automatically ordered and sent from the closest warehouse. Spare parts are automati- cally distributed across our warehouses according to analytics of where they are most likely to be needed. The same analytics also provide insights into when spare parts need to be restocked. This automation has, together with strong eorts from the logistics team, enabled us to keep our customers supplied with the necessary parts throughout the pandemic. Developing the service oering Continued investments in digitalization will improve our capabil- ity to deliver and to launch new services. Currently we are looking to expand our service portfolio by oering more value- added services, such as dosimetry, physics, and workow consultancy. We are also increasing our remote support further by standardiz- ing and optimizing the remote process, and creating visual aids to improve communication. We see an increased demand from the market, and together with our partners we are enhancing our service oering. 1) Hypothetical case based on a conservative average of three patients treated per hour per linac, multiplied by the average clinical downtime avoided per IntelliMax detected issue. “ IntelliMax appealed to us, not only because it would alert our support team of any current system errors, but because it would detect issues weeks before they occur. ” Phattanapong Saenchon Chief Physicist, Sakon Nakhon Hospital, Thailand OFFERING BUSINESS OVERVIEW 29 ELEKTA ANNUAL REPORT 2021/22 Geographical overview 1) Share of Elekta’s total order intake 2021/22. Americas 1) 30% EMEA 1) 39% APAC 1) 31% The demand for cancer care is expected to increase as cancer incidence continues to rise all over the world. The challenges from the pandemic diminished as the year proceeded with improved access to hospitals reaching more normalized installation levels but still dierent investment appetite among the geographic markets. Delayed cancer screening and diagnosis due to pandemic- related restrictions and re-prioritizations have led to a pent-up demand in cancer care. Several national cancer care programs have been activated during the year to battle the demand. Later in the year, risk of component shortages arose and new challenges emerged. Both the war in Ukraine and rising ina- tion rates have led to higher costs in addition to already high logistics and supply chain costs as well as delays and market cautiousness. Despite these short-term eects, the underlying growing need for radiotherapy treatment persists. ELEKTA ANNUAL REPORT 2021/22 30 BUSINESS OVERVIEW GEOGRAPHICAL OVERVIEW Americas Focused on the entire cancer care continuum Market development during 2021/22 U.S. customers’ budgets did not return to pre-pandemic levels and construction projects on customer sites were de- layed due to elevated building costs emerging from supply chain issues and ination. However, towards the end of the year we saw a boost in demand. Latin America continued to be impacted by Covid-19. Government funds were diverted to managing new waves of the pandemic, and vaccine rollouts caused delays throughout Latin America. Unfavorable exchange rates and soft economics also delayed both demand and access to customers in emerging markets in the region. Market outlook Cloud services and SaaS structures are accelerating across all industries in the U.S. and at the same time consolidation among healthcare providers is driving demand for inte- grated and standardized software and hardware solutions. Overall, there is a growing importance of software integra- tion in the radiation oncology space as software advance- ments change the workow and roles for care manage- ment, particularly in treatment planning and oncology informatics systems. Customers are looking for solutions to support the entire cancer care continuum and involve the patient in their care journey. There is also an increased interest in the combined treatments of immunotherapy and radiotherapy. The change in the competitive landscape is expected to drive a closer connection between radiation oncology and diagnostic imaging. The reimbursement change to bundled payment, planned for in the U.S., is on hold until further notice. As the inevita- ble migration towards value-based healthcare takes place in the U.S., demand for technologies that enable hypo- fractionation keep growing. This shift leads to a decrease in average treatment sessions per patient, but as cancer incidence rises and more cancer types are treated with radiotherapy, long-term demand is expected to remain intact. This, combined with the expectation that the emerg- ing markets of the region will grow steadily, leads to an overall positive market outlook for the region. Solutions, 43% Service, 57% % of total net sales, 49% employees in region >670 order development 1), 2) –2% net sales development 1) 7% Solutions, 43% Service, 57% % of total net sales, 49% 1) Compared to previous year based on constant exchange rates. 2) Includes the largest deal ever in the comparing year. GEOGRAPHICAL OVERVIEW BUSINESS OVERVIEW 31 ELEKTA ANNUAL REPORT 2021/22 Market characteristics U.S. • World’s largest radiotherapy market • Customers predominately private • A replacement market • High focus on value-based healthcare and new technology • World’s highest healthcare cost per capita resulting inpublic interest in eciency and reimbursement Canada • Publicly run healthcare with government and provincemaking purchase decisions • Primarily a replacement market • High interest in advanced technology Latin America • A combination of private and public customers • Low access to radiotherapy driving greeneld investments • Weak reimbursement systems • Rapidly growing aging population • Large healthcare groups acquiring smaller clinics EMEA Recovery supported by health care programs Market development during 2021/22 Covid challenges in Europe decreased during the year and most countries within the region had recovered from the pandemic at year-end. As the pressure from the pandemic eased, large cancer care programs were able to shift gear. EU's Beating Cancer Plan and resilience fund (Recovery and Resilience Facility) were activated, which resulted in the start of large public tenders for replacement investments to mod- ernize the installed base in Europe. Longer-term these funds shall harmonize cancer care within the EU. At the same time supply chain challenges accelerated and in the last quarter the war in Ukraine impacted market stability and disrupted cancer treatments. In the Middle East and Africa, glimpses of recovery were seen as actions from public-private partner- ships surfaced. Market outlook Demand in Western Europe is driven by national healthcare programs and their shift towards cancer care (e.g. screening programs for lung cancer), and an increased focus on multi- disciplinary cancer care and combination therapy. In Eastern Europe, the resilience fund will drive national cancer programs and market growth. Demand for high-end solutions is in- creasing as access to resilience funds is enabled and hospitals in Eastern Europe seek clinical expertise from Western Europe and the U.S. In the Middle East and Africa, extended pub- lic-private partnerships will contribute to market recovery and there is a focus on driving eciency to recover from pandem- ic-related delays in treatment and modernizing the installed base. In the Gulf region funds are directed to reverse the outow of medical tourism by creating self-sucient national radiotherapy facilities with help from excess budgets resulting from the oil price surge. The revival of medical tourism is also driving the demand for high-end solutions, like the MR-Linac. The war in Ukraine and the sanctions imposed on Russia and Belarus are disrupting supply chains and cancer treat- ments in Europe and increasing market concerns. At the same time, regional healthcare investment initiatives within EMEA are shifting to cancer care to address the growth in cancer prevalence and incidence. In addition to ghting the pan- demic-driven pent-up demand in cancer care, investments in cancer screening will also enable more early-stage patients to benet from radiotherapy. Especially in highly underserved markets like Africa, where access to cancer care is lacking, increased detection of cancer implies a substantial long-term growth potential. Americas, continued. See page 96 and Note 5 for Elekta’s performance during the year “ U.S. customers shorten courses of treatments and treat more indica- tions in adaptive ways. ” Carlos Castilleja Executive Vice President Region Americas, Elekta BUSINESS OVERVIEW GEOGRAPHICAL OVERVIEW ELEKTA ANNUAL REPORT 2021/22 32 order development 1) 12% net sales development 1) 2% employees in region >640 “ Elekta has a strong market position in Europe with several new long-term cus- tomer partnerships. ” Market characteristics Western Europe • Mainly public customers • Private sector growing steadily • Customers interested in long-term partnership agreements • A replacement market • Focus on new technology and eciency • Increasing demand for service Eastern Europe, Middle East and Africa • An expansion market • Investments often funded by national healthcare programs • Medical health tourism drives adoption of new technology • Around half of market in Middle East and Africa public See page 96 and Note 5 for Elekta’s performance during the year Solutions, 61% Service, 39% % of total net sales, 37% Solutions, 61% Service, 39% % of total net sales, 37% 1) Compared to previous year based on constant exchange rates. Ardie Ermers Executive Vice President Region Europe, Elekta GEOGRAPHICAL OVERVIEW BUSINESS OVERVIEW 33 ELEKTA ANNUAL REPORT 2021/22 order development 1) 1% net sales development 1) 4% APAC High growth potential Market development during 2021/22 Despite negative impact from Covid-19 on the Chinese market, the demand for radiotherapy, and especially hypo- fractionation, increased. The development was driven by the continued improvement of the Chinese healthcare system, which generated growth opportunities for radiotherapy. The Made in China 2025 policy, aiming to upgrade Chinese indus- tries from labor-intensive manufacturing into technology- intensive powerhouses, intensied the importance of local presence in a broader perspective. The Indian market continued to grow, mainly through large private investments, since government funding divert- ed to Covid-related spending and medical tourism decreased. In Southeast Asia, where medical tourism has been an important growth driver, the impact of the pandemic was profound and the recovery lagged due to infrastructural challenges, regulations and repeated lockdowns. The Japanese customers had a cautious attitude due to the pandemic and strict international border control, which challenged access and pace of business, although public spending remained resilient. In Australia, a diversion of gov- ernment spending and a conservative border control slowed down the market in both the public and private sector. Market outlook China’s zero-Covid strategy continues to impact short-term market growth, and in the long term the Made in China 2025 policy will favor domestic players. At the same time, business opportunities arise from public eorts to increase cancer survival rates by expanding the national healthcare system to more rural areas. Overall, the huge growing cancer burden in combination with a growing economy conrms China’s long-term growth potential. In India public investments are estimated to increase short term, even though the driving private sector is expected to recover faster. Fast growing suburbs, privatization, increased private-public partnerships and medical tourism will be the engines of long-term growth, at the same time as custom- ers’ orientation indicates somewhat harder competition from local providers. In Southeast Asian markets, demand will resume progressively as borders open and the latent medical tourism starts to pick up. Both the resilient public segment and the recovering pri- vate segment are likely to drive growth in Japan as replace- ment investments are expected to increase. In Australia, reimbursement changes may delay new technology invest- ments, but in the end, also stimulate technology upgrades, and in rural areas the need for greeneld expansion invest- ments persists. employees in region >770 Solutions, 73% Service, 27% % of total net sales, 34% Solutions, 73% Service, 27% % of total net sales, 34% 1) Compared to previous year based on constant exchange rates. BUSINESS OVERVIEW GEOGRAPHICAL OVERVIEW ELEKTA ANNUAL REPORT 2021/22 34 Market characteristics China • An expansion market, but increasing replacement investments • Customers both public and private • Increasing demand for hypofractionation • Lack of professionals drives demand for comprehensive radiotherapy solutions India • Underserved market with growing need for local high-quality radiotherapy treatments at low cost • Customers mainly private • Low healthcare spending as percentage of GDP • Important destination for medical tourism Japan • A replacement market • Expansion potential as only 25–30 percent of cancer patients receive radiotherapy • High penetration of Leksell Gamma Knife systems Other markets • Underserved markets: o High and growing cancer incidences, increasing life expectancy, more eective cancer diagnostics o Lack of qualied professionals • Mature markets: o High cancer care capacity o Quick to adopt new technology See page 96 and Note 5 for Elekta’s performance during the year “ Cancer care and radio- therapy continue to be an important area in expanding the Chinese health system. ” Anming Gong Executive Vice President Region China, Elekta GEOGRAPHICAL OVERVIEW BUSINESS OVERVIEW ELEKTA ANNUAL REPORT 2021/22 35 Elekta’s two-dimensional ERM process: • “Top-down” – designed to distill insights and provide clarity on the most important risk areas, supporting risk-informed decisions at the executive level and enabling proper risk oversight by the Board of Directors. • “Bottom-up” – ensuring a consistent, comprehensive and group- wide risk identication and prioritization of important risks. Risks are evaluated on the basis of impact and probability and the level of riskpreparedness. Top-down Methodology provides clarity on key risks at group level and enables proper risk oversight by the Board of Directors. Bottom-up Methodology ensures consistent and com- prehensive risk identication and prioritiza- tion across the company. Risks are evaluated on the basis of impact and probability and level of preparedness. Risk management linked with strategic planning Elekta operates in a highly competitive and regulated industry and a strong local presence leave us open to such risks as threats, uncertainties or lost opportunities relating to current or future operations or activities. Sound practices for risk manage- ment are an essential element of our culture, corporate gover- nance, strategy development, and operational and nancial management. We strive to maintain a culture of individual accountability, where everyone factors in risk in daily decision making so that the right level of risk is being assumed. Clear accountabilities at all levels The rst level of control consists of our employees who perform the day-to-day activities within the boundaries set by the Exec- utive Management, and ultimately, the Board of Directors. These boundaries ensure that the actions of a single individual will not result in disproportionate risk or missed opportunities forthe entire company, resulting in not achieving Elekta’s stra- tegic goals. Elekta’s employees and their managers own all risks related to their business operations and are expected to man- age these by maintaining internal controls and risk control pro- cedures. Every employee is expected to comply with internal policies and procedures and applicable laws and regulations. Elekta’s support functions, such as Finance, IT, Human Re- sources, Legal & Compliance and Regulatory Aairs & Quality, form a second control level and carry out various riskmanage- ment and compliance activities to support and monitor the rstlevel of control. Elekta’s independent internal audit function constitutes a third and nal level of control reporting to the Audit Committee on the eectiveness of therisk management processes and internal control system. Risk management governance The Board of Directors is ultimately responsible for the gover- nance of risk management and control systems. The President and CEO, assisted by the Executive Management, is responsible for ensuring there is a common and ecient risk management process in place. Support functions provide guidance on gover- nance, risk management and internal control. Risk management linked with strategic planning Elekta has an established Enterprise Risk Management (ERM) framework aligned with the strategic planning process. A group-wide overview of all Elekta’s risks is undertaken twice ayear, using a common risk identication and rating method- ology, providing a basis for decision-making and prioritization aswell as ensuring appropriate levels of control. Crisis management and response at group level To ensure eciency in Elekta’s ability to successfully respond to disruptive events at group level and continue business operations, a number of risks deemed to have a major im - pactat group level are described in Elekta’s risk universe on page 37 and in Note 2 concerning nancial risk manage- ment. Elekta’s risk universe is divided into four risk categories and 28 aggregated risk areas where impact, probability and riskpreparedness are tracked and trended on a yearly basis. Covid-19 As a response to Covid-19 a global crisis management and resilience response plan was early established. Elekta is running a set of well-coordinated global programs focusing on employee well-being and safety, ensuring sustainable nancing and stable cash reserves, as well as continuously improving our processes with more innovation, automation, and digitalization. Impact of Covid-19 is also seen in global logistics and sourcing today and this is managed through a cross-functional task force that is continuously monitoring and taking measures to counter any negative eects on our customers. Insurance as a risk management tool Where identied risks cannot be avoided, mitigated or accept- ed, risks are being transferred through insurance where possible. Elekta’s insurable risks are covered through global insurance programs tailored to transfer risks associated with property and BUSINESS OVERVIEW RISK MANAGEMENT ELEKTA ANNUAL REPORT 2021/22 36 business interruption, transportation, project execution, business travel, cyber- and liability risks. Elekta’s risk universe Elekta has classied risks in four broad categories to facilitate the discussion around risk appetite and risk response. Operational risks Operational risks are those directly attributable to business oper- ations that Elekta largely can manage and prevent. They have a negative impact on our nancial performance and reputation. Risk factors We manufacture and sell medical equipment that is subject to many laws and regulations and commercialization is dependent on certication and approvals at local levels. Elekta must fulll rigorous demands in accordance with several rules and product safety standards, e.g. EU Directive 93/42/EEG on medical prod- ucts, FDA’s demands on quality systems, as well as a number ofdomestic directives and rules. Our portfolio is characterized by large investments in research and development leading to patent and other intellectual property rights, which need to be safeguarded from third party infringement or improper use. We operate in an industry in which there is an increased demand for using and analyzing personal data or treatment data in order to further develop our product portfolio. This needs to be done in accordance with privacy laws worldwide, and appropriate mea- sures to protect the data against damage, manipulation and undue interference need to be considered. Our business opera- tions depend on many advanced IT systems and solutions that need to be protected against damage and undue interference while also adhering to various data privacy and security laws and regulations worldwide. We depend on successful relation- ships with business parties across the entire value chain, espe- cially suppliers of critical components. In many markets, we rely on an external network of distributors and agents. There is a worldwide trend to strengthen anti-corruption laws, and healthcare equipment manufacturers are particularly exposed in this area selling in many compliance-challenged markets with a growing need for access to equipment. Our ability to attract and retain qualied personnel and management is of great importance and has a signicant impact on the future success of Elekta. Increasingly, companies are being judged by their per- formance on a variety of environmental, social and governance matters and our ability to meet external expectations on these RISK MANAGEMENT BUSINESS OVERVIEW 37 ELEKTA ANNUAL REPORT 2021/22 matters may impact our business and reputation of long-term sustainability performance. Risk approach The focus is on avoiding or mitigating these risks in a cost-e- cient way. This is done through active risk prevention through strong corporate governance controls and business processes to guide the organization’s behavior and decisions towards desired norms. Strategic risks Strategic risks are risks that Elekta voluntarily assumes in order to generate superior returns from the strategy. Risk factors Our industry is characterized by relatively swift technological alterations with advances in industrial know-how and we rely on close collaboration with clinicians to develop new and improved treatment methods according to their needs. We use increased precision to expand the role of radiotherapy, e.g. with innovations such as our MR-Linac, driving paradigm shifts in precision radiation therapy and digital patient-centric solutions for value-based care. Strategic alliances and acquisitions are key to strengthening our portfolio and executing on our strategic priorities and we need to successfully implement the right com- pany operating model that supports our strategy. Risk approach Our approach to managing these risks is to embed fact-based risk information as a natural part of executive decision- making, balancing risk versus reward. Read more about Elekta’s strategy on page 12. External risks External risks arise from events outside the company and are beyond our inuence or control. Risk factors A large geographical presence with multiple manufacturing sites and a large installed base expose us to potential political and economic risks on a global scale and in individual countries or regions. Pandemics cause uncertainty in order growth, lim- ited access to hospitals, and increased risk of delayed installa- tions because of lock down of countries. Elekta’s ability to sell is dependent on availability of nancing for private customers and healthcare spending funds by governments. Elekta’s ability to commercialize its solutions is dependent on the reimburse- ment level that hospitals and clinics can obtain. Elekta’s opera- tion is guided by stringent demands and standards for medical equipment by regulatory authorities and rule changes might bring about increased costs or hinder sales of Elekta’s products. Risk approach The focus is to limit the consequences of these risks on our business. Risk management strategies involve continuously identifying and monitoring external risks and to prepare and train the organization to reduce the impact of occurring risk events through stress testing, and disaster/continuity/recovery plans. Understanding and managing the pandemic has also this year been critical, balancing the well-being and safety of employees with the commitments to customers and their patients. Strong focus has been on resilience activities to control costs and prepare for returning to more normalized growth. Financial risks Financial risks mainly refer to Elekta’s ability to manage its nancial debt and nancial leverage, such as nancing risks andliquidity risks as well as market risks. Risk factors With a large geographical presence and many legal entities worldwide, the company faces currency risks in the form of -transaction and translation exposure. Further, the company holds loans in xed and oating interest rates which could impactthe nancial result negatively. Risk approach Financial risk management is conducted by Elekta’s nance department, which identies, evaluates and hedges nancial risks. Work is pursued in line with the policies established by the Board for overarching risk management and for specic areas such as currency risk, interest-rate risk, and credit risk. Read moreabout Elekta’s nancial risk management in Note 2 andin the internal control over nancial reporting on page 83. BUSINESS OVERVIEW RISK MANAGEMENT ELEKTA ANNUAL REPORT 2021/22 38 Sustainability-related risks embedded into our risk universe Our ERM methodology allows for all material sustainability risks to be part of our risk universe. As part of our strategic planning process, all management teams are asked to ensure that material sustainability risks associated with their operations are appropriately identied, evaluated and managed. For our material sustainability risks see the In-depth Sustainability Report on page 43. Risks with major impact on group level (bottom-up) The Elekta risk universe model is built from a bottom-up ap proach where individual strategic, operational, and external risks are consolidated with the help of cluster risk areas. Each individual risk contained in Elekta’s bottom-up risk register is mapped against a given risk cluster area and measured on its probability and impact, risk management preparedness and contribution to the overall impact on Elekta. Each risk identifying source is also given a unique weight, which will determine the level of inuence on the overall risk score. Below is a picture showing the Elekta risk universe and the severity of each risk cluster area. The closer to the center of the diagram, the more severe impact the risk cluster area has on Elekta during this strategic period. Environ- mental Action People in Focus Business Ethics Access to Healthcare Unfavorable alteration in reimbursement levels Natural disasters and pandemic risk management Political risks including trade restrictions and protectionism Limited access to radiotherapy in low- and middle- income countries Less availability of nancing (customers) Increased market consolidation & strengthened competition landscape Changes in regulatory framework or processes External risks Not fullling transactional, strategic alliances and company reorganizational goals Technology and innovation failures Strategic risks Employees & human rights Talent attraction, succession planning and employee retention Adverse human rights impact in our supply chain, material traceability and conict minerals Legal & regulatory Intellectual property rights & trade secrets protection Substandard agreements and breach of contractual terms Deviation from quality assurance systems and regulatory processes Supply chain & process excellence Loss of key suppliers and access to third-party items Quality issues and disruption in our supply chain processes Business transformation & process excellence Pricing model & sales governance Organization, roles and responsibilities Internal operations/dependencies and suboptimal processes Compliance & business ethics Compliance with laws such as allegations of corruption, improper payments and bid rigging Anti-money laundering & Tax evasion (KYC) Export control & trade compliance Employee fraud Tax risk Data protection Elekta values, accountability and corporate culture IT Cyber and security threats and IT systems disruptions Environment & social Environmental compliance & meet expectations on climate change Operational risks RISK MANAGEMENT BUSINESS OVERVIEW 39 ELEKTA ANNUAL REPORT 2021/22 Elekta key risks (top-down) As part of the ERM process, risks are evaluated with the insight of the Executive Management and the result is a list of the most important risks areas to focus on during the current strategy period. Risk areas Risk description Consequences Mitigation Relevant UN SDG Customer satisfaction & quality excellence (operational risk) Ability to timely and eciently identify and respond to cus- tomer needs, demonstrate the value proposition of new prod- ucts and services and fully com- ply with internal quality assur- ance systems and processes. Customer dissatisfaction, loss of quality advantage, generating costs of non-quality and loss of market share. Continuous development of products in close collaboration with customers and continuous improvements in ecient qual- ity management processes. Cyber & security threats (operational risk) Cyberattack on the Elekta inter- nal network or on external ser- vices providers. Damage to the company net- work and/or leakage of con- dential information resulting in business interruption, loss of business critical data and breach of privacy regulations. Consistent risk analyses and monitoring of threats. Employee training, updated software and internal control. Talent attraction & employee retention (operational risk) Ability to attract, recruit and retain highly skilled employees. Lost technological advantage, knowledge transfer disruption and inability to secure long- term talent growth. Retention and succession planning. Leadership and people development programs and initiatives. Demonstrate sustainable business practices to increase human capital attractiveness. Compliance & business ethics (operational risk) Allegations of corruption and bid rigging and failure to pre- vent improper payments by third parties on Elekta’s behalf. Breach of bribery, public tender and specic industry laws. Loss of reputation, brand value and shareholder value in addition to nes, blacklisting and manage- ment distraction and prosecution. Implementation of eective compliance programs and train- ing with focus on high-risk areas and behavior consistent with Elekta’s values. Technology & innovation (strategic risk) Ability to anticipate and adapt to customer’s needs and cus- tomer’s ability to adopt new technology and software. Loss of competitiveness and ability to reach strategic tar- gets, leading to lower growth and nancial performance. Technology and innovations to be proven through clinical and nancial data. Proactively work with customers to support clini- cal evidence for new technology adoption. Business transformation & process excellence (operational risk) Overcoming change manage- ment challenges, new delivery and support models. Slow adoption of new ways of working and deliveries. Results in lost competitiveness and fail- ure to meet strategic targets. Align processes with strategy and stakeholders. Ensure right employee competences and research. Working together as one Elekta team addressing change management. Macro economic developments (external risk) Ability to adapt and react to pandemics, trade restrictions/ protectionism and war impact on sales, operations, employee well-being, cash ow and down- turns in emerging markets. Pandemics, trade restrictions and war causing limited access to hospitals and delayed start ofinstallations. Inability to plan long-term, leading to less agile business, higher costs and potentially lower nancial performance. Control of costs and close moni- toring of the macroeconomic development in all markets, adjusting ways of working to keep servicing customers and maintain business sustainability. Competition landscape (external risk) Ability to anticipate and re - spond to competition pressure due to vendor and customer consolidation as well as in - creased competition from the evolving medical imaging and informatics industry market Potential loss of competitive- ness and ability to reach strategic targets, leading tolower growth and nancial performance. Continuous development of state-of-the-art solutions and focus on unique value proposition. Environmental compliance (operational risk) Ability to comply with minimum environmental standards & preparedness for investments in climate change Loss of business advantage, brand value and impacting human capital and nancial attractiveness. Continuous monitoring of environ- mental legislation development, compliance with legislation and active participation in environ- mental ratings organizations BUSINESS OVERVIEW RISK MANAGEMENT ELEKTA ANNUAL REPORT 2021/22 40 Elekta B-shares have been listed on Nasdaq Stockholm since 1994. The total number of shares outstanding on April 30, 2022 were 383,568,409, whereof treasury shares amounted to 1,485,289 B-shares. Total trading in Elekta shares on Nasdaq Stockholm during the scal year 2021/22 (May 1, 2021 – April 30, 2022) amounted to 293.4 million shares (364.2), corresponding to 76 percent (95) of the total number of shares. Market capital- ization on April 30, 2022, was SEK 25,500 M (41,761), a decrease of 39 percent. DISTRIBUTION OF SHARES APRIL 30, 2022 Percentage of Class of share No. of shares No. of votes Capital Votes A-shares 14,980,769 149,807,690 3.9% 28.9% B-shares 368,587,640 368,587,640 96.1% 71.1% Total 383,568,409 518,395,330 100.0% 100.0% See Note 26 for more information on Elekta’s share capital. Dividend and authorization to repurchase shares As of May 2021, Elekta’s policy is to distribute at least 50 percent of yearly net income in the form of dividends, share repurchases or comparable measures. All decisions regarding income distri- bution are based on Elekta’s nancial position, earnings trend, growth potential and investment needs. For 2021/22, the Board of Directors proposes a dividend of SEK2.40 (2.20) per share (paid in two installments) to the Annual General Meeting (AGM). The dividend proposal for 2021/22 amounts to approximately SEK 917 M (841), which corresponds to 79 percent (67) of the net income for the year. For more information on the dividend, see page 101. The Board intends to propose to the AGM a renewal of the Board’s authorization to repurchase shares, not exceeding the limit for treasury shares of ten percent of the total amount of shares outstanding. Treasury shares may be used for Elekta’s share-based compensation programs. See Note 7 for more information on Elekta’s share programs. TEN LARGEST SHAREHOLDERS ON APRIL 30, 2022 1 Percentage of Shareholder No. of shares Capital Votes Fourth Swedish National Pension Fund 33,680,795 8.8% 6.5% Laurent Leksell 2) 22,737,393 5.9% 30.4% Nordea Funds 18,332,409 4.8% 3.5% SEB Funds 14,814,517 3.9% 2.9% Schroders 13,392,397 3.5% 2.6% Didner & Gerge Funds 12,766,029 3.3% 2.5% AMF Pension & Funds 12,193,022 3.2% 2.4% T. Rowe Price 11,407,749 3.0% 2.2% Lannebo Funds 11,242,787 2.9% 2.2% Vanguard 11,009,539 2.9% 2.1% Other 221,991,772 57.8% 42.6% Total 383,568,409 100.0% 100.0% 1) Source: Modular Finance. 2) Including company holdings. The table shows the ten largest known shareholders at the endof the scal year. Foreign ownership was approximately 47percent (52) of capital and 35 percent (38) of votes. 79 percent of net income to shareholders THE TOTAL RETURN OF THE ELEKTA SHARE Thousands, shares 0 20,000 40,000 60,000 80,000 100,000 Number of traded shares Elekta B TSR OMX Stockholm GI OMX Stockholm Health Care GI % –30 0 30 60 90 120 150 202220212020201920182017 THE SHARE BUSINESS OVERVIEW 41 ELEKTA ANNUAL REPORT 2021/22 Elekta as an investment Strong underlying demand for cancer treatment driving radiotherapy • Increasing global cancer burden through growing incidence and prevalence aspeople live longer and cancer survival rates are rising globally • Technological innovations improve radiotherapy treatment and more cancer types become relevant for radiotherapy • Large structural dierences in the availability of cancer care around the globe • Increasing healthcare spending putting cost pressure on clinics, thus focusing on value-based healthcare to the benet of cost-ecient treatments like radiotherapy Attractive business model and strong nancial position • Business model with growing recurring revenue providing sustainable growth • Long-term stable growth in order intake, revenue, cash ow and cash generation. Short term more volatile, as the high-value MR-Linac business develops • Strategic focus on service and software to further improve protability long term • Strong balance sheet with good nancial position Elekta acts in a market segment with strong underlying demand as a driver for sustainable growth. Strategic decisions of technological progress and closeness to customers have strengthened our leading positions in the markets. Based on a strong balance sheet and business model, we are increasing our focus on innovation to develop new solutions and elevate the standard of cancer care. Our aim to create further shareholder value and strengthen our sustainability agenda isbuilt upon the following: “ In my view Elekta has opportunities for attractive earnings growth, not least through increasing service operations, higher MR-Linac volumes and cost control. “ Filippa Gerstädt Portfolio Manager, Nordea Asset Management, Sweden ...including innovations • Build on strong product portfolio in close collaboration with partners • Invest in innovation to drive faster adoption, advancing functionality, and to take precision radiation therapy forward Strategic focus to improve patient access to best cancer care... • Build stronger relationships with customers • Deepen our partnerships, e.g. through strategic collaboration with Royal Philips and commercial agreement with GE Healthcare in 2021/22 • Drive market adoption through public aairs and optimizing local presence like e.g. new sales oces inIndonesia and the Philippines in 2021/22 BUSINESS OVERVIEW THE SHARE ELEKTA ANNUAL REPORT 2021/22 42 INDEPTH SUSTAINABILITY REPORT 43 ELEKTA ANNUAL REPORT 2021/22 We are part of building a sustainable future globally Elekta’s vision is a world where everyone has access to the best cancer care. Working to realize this vision while taking our social and environmental responsibility is integral for the long-term success of our company and for building a sustainable future for society. Our approach to sustainability is guided by Agenda 2030 and its Global Goals for Sustainable Development. By addressing our most material sustainability topics, we are making positive contributions to nine of the 17 goals. Particularly, we are making a signicant contribution to target 3.4, which is to reduce pre- mature mortality from cancer and other non-communicable diseases by one third until 2030. We do this through our focused strategy to increase access to radiotherapy in underserved markets. There are large structural dierences in cancer care globally, with low- and middle-income countries generally being under- served in terms of treatment capacity. This is illustrated by the fact that they account for 62 percent of new cancer cases each year and for 70 percent of the deaths. By expanding our reach in underserved low- and middle-in- come markets, we aim to grow our business and contribute to closing the treatment access gap and supporting global sus- tainable development. To support this eort, and to drive inclusion and strive towards a world where no one is left behind in the ght against cancer, we issued our rst- ever sustainability linked bond in December 2021. The bond has a KPI linked to closing the access gap and was the rst bond ever issued in Sweden with a purely social KPI. We aim to serve as a partner to decision-makers globally in building sustainable healthcare systems, which for us means ensuring patients get access to the best care possible. To achieve this, the systems need to be able to regularly adopt new innovations that improve treatment outcomes, for example by ensuring fair and adequate compensation structures for healthcare providers. Other key elements include improving education and training access for healthcare professionals and oering innovative nancing solutions for treatment products and services. While access to healthcare for all is the guiding star for Elekta in our business strategy, and a core element of our sustainability agenda, our three other sustainability focus areas – Business Ethics, Environmental Action and People in Focus – serve as enablers by ensuring that we build a sustainable business that can thrive over the long term. Further information about Elekta’s focus areas, manage- ment approach, progress and performance can be found on the following pages. Environ- mental Action People in Focus Business Ethics Access to Healthcare INDEPTH SUSTAINABILITY REPORT INTRODUCTION ELEKTA ANNUAL REPORT 2021/22 44 Highlights of the year • Issued a sustainability-linked bond • Launched Elekta Foundation • Conducted a fullscale CO 2 e emissions mapping (according to Greenhouse Gas Protocol) Corporate sustainability governance Given its importance to Elekta, corporate sustainability is integrated at every level of Elekta’s governance structure, whichwe describe as bottom-up and top-down. Elekta’s sustainability strategy and targets are set on group level and cascaded throughout the organization and aligned with strategies and targets in relevant functions and business lines. Elekta strives to incorporate the agenda into the line orga- nizations’ planning processes to ensure eective management and alignment with other strategic initiatives and targets. Sus- tainability performance may also impact individual performance assessments and remuneration in parts of our organization. A cross-functional steering committee comprised of selected members of the Executive Management team streamlines the process of implementing relevant actions and targets through- out the organization, and measures results. The sustainability agenda is managed by the Group Sustainability Director report- ing to the VP Strategy & Sustainability, following an organiza- tional change during the year where the sustainability function was expanded and moved from Compliance to the Group Strategy function. The Board of Directors and its committees oversee the sustainability agenda. Social and environmental sustainability topics are managed by the Board’s compensation and sustain- ability committee while business ethics and integrity-related topics are managed by the audit committee. Please refer to page 64 for more information on Elekta’s sustainability and corporate responsibility governance, as wellas descriptions of Elekta’s stakeholder dialogues and materiality assessment. Guided by global standards and principles Our ethical principles are set forth in our Code of Conduct, which is a cornerstone in our eort to build a sustainable com- pany. The Code of Conduct applies to everyone working for and on behalf of Elekta, such as employees, consultants, controlled companies, distributors, and agents. The Code of Conduct is supplemented by specic policies where needed. In addition, we let leading global standards and principles guide our sustainability eorts and policies – including the UN Global Compact and its 10 principles; the OECD Guidelines for Multinational Enterprises and its associated due diligence guid- ance for responsible business conduct; the UN Guiding Princi- ples on Business and Human Rights; the Universal Declaration of Human Rights; the ILO Declaration on Fundamental Princi- ples and Rights at Work; and also the precautionary principle. INTRODUCTION INDEPTH SUSTAINABILITY REPORT 45 ELEKTA ANNUAL REPORT 2021/22 Why is this important to us? Cancer is one of the leading causes of death globally. Around 19 million people are diagnosed with cancer each year and that number is expected to increase 1) . In addition, there are large structural dierences in cancer care globally. Investing in radio- Access to healthcare, in particular radiotherapy, lies at the heart of our business. Improving access globally, especially in low- and middle-income countries, is an important strategic priority for Elekta. therapy capacity in low- and middle-income countries would save lives and lead to substantial economic benets 2) , and would contribute to Goal 3 of the UN Sustainable Development Goals: securing good health and well-being for all. Applicable Sustain able Development Goals Goal 3: Ensure healthy lives and promote well-being for all at all ages 3.4: Reduce mortality from non- communicable diseases and promote mental health 3.C: Increase health nancing and support health workforce in developing countries Goal 4: Ensure inclusive and equitable quality education and promote lifelong learning oppor- tunities for all 4.4: Increase the number of people with relevant skills for nancial success Goal 17: Strengthen the means of implementa- tion and revitalize the global partnership for sustainable development 17.16: Enhance the global partnership for sustainable development 17.17: Encourage eective partnerships Elekta’s contribution • Providing access to high-quality and innovative radiotherapy solutions globally • Oering training and education in radiotherapy to healthcare profes- sionals, particularly in low- and middle-income countries • Collaborating and partnering with clinics, researchers, governments, and the civil society to develop new products and raise awareness about radiotherapy • Established a philanthropic founda- tion (Elekta Foundation) to further improve access to, and quality of, cancer care with special focus on radiotherapy 1) Sung et al, Global Cancer Statistics 2020: GLOBOCAN Estimates of Incidence and Mortality Worldwide for 36 Cancers in 185 Countries, CA: A Cancer Journal for clinicians May/June 2021 https://acsjournals.onlinelibrary.wiley.com/doi/full/10.3322/caac.21660 2) Atun et al, Expanding global access to radiotherapy, The Lancet Oncol 2015 Sep; 16(10): 1153-86 https://pubmed.ncbi.nlm.nih.gov/26419354/ Access to Healthcare INDEPTH SUSTAINABILITY REPORT ACCESS TO HEALTHCARE ELEKTA ANNUAL REPORT 2021/22 46 What hinders access? Improving access to radiotherapy in low- and middle-income countries, often requires working more levers than just adding equipment. The challenges can be categorized into three main types: • Infrastructure: underdeveloped general healthcare and late cancer diagnostics, low public awareness, lack of nancing and compensation systems, and under-dimen- sioned power systems that may not serve radiotherapy equipment appropriately • Human capital: qualied radiotherapy professionals (suchas radiation oncologists, radiation therapists, radiation physicists) are in short supply globally, but especially in low- and middle-income countries • Utilization of equipment: usability knowledge gap which may lead to equipment downtime, unnecessarily lengthy treatment plans and patient queues In addition, healthcare systems are slow to adopt innovations that improve patient outcomes. A reason for that is that both compensation schemes and treatment guidelines are slow to adapt to the possibilities brought on by the new technology. How are we working with this? Helping health systems with adopting innovation In 2021, Elekta formed a new department, Global Policy and Patient Access, to serve as a partner to decision makers, across the world, in building long-term sustainable healthcare systems. To Elekta, a system is only sustainable if it provides fair and ade- quate compensation so that new innovations which provide clear clinical value can emerge and be adopted. Challenges dier between healthcare systems. Developed markets for example may have compensation schemes that economically disadvantage clinics that adopt new treatment schemes, such as hypofractionation, when reimbursing per completed fraction. In developing markets, patients might lackaccess to treatment altogether due to a range of factors. To tackle these varying challenges, the department develops expertise on how healthcare systems are constructed, on how compensation and treatment guidelines are set, and what kind of questions researchers need to answer to help policy makers construct policies that lead to optimal patient outcomes, in aneconomically sustainable way. To make sure this expertise reaches the right people, the department works with decision and policy makers to drive change. The aim is to ensure fair and adequate compensation for radiotherapy treatments, so that hospitals and clinicians working within healthcare systems can adopt new innovations that improve both patient outcomes and access to treatments. The department also manages partnerships with organiza- tions such as IAEA and WHO, societies like ESTRO Cancer Foun- dation and ASTRO, as well as global organizations like City Cancer Challenge, UICC and Global Coalition for Radiotherapy. Elekta engages with these organizations to raise public aware- ness around the need for, and importance of, radiotherapy as acritical cancer treatment and for how innovative technical solutions can contribute to increasing access, as well as supports them with both funds and clinical experts. Innovation focusing on utilization and eciency Elekta invests heavily in R&D to develop cutting edge radiotherapy solutions and oncology information system software. Our linac solutions enable delivery of advanced treatment modalities such as IMRT/VMAT and SBRT that can provide out- comes for several indications that are equal to surgery at a frac- tion of the cost for both provider and patient. Other highly cost-ecient and eective radiotherapy treatment modalities include SRS, for which Elekta has a specialized oering with Leksell Gamma Knife, and brachytherapy, which is the standard of care for cervical cancer and therefore very relevant for low-income markets where prevalence for that indication is higher. A strong focus of our product development is to increase clinical productivity through software that provides decision support, and through user-friendly hardware. These include high-productivity innovations with competitive pricing specically aimed at low- and middle income markets, such as the Elekta Harmony linac. It also includes cloud-delivered software bundles that can easily be scaled up or down with usage. This lowers barriers to adoption for new clinics, especially those in low- and middle income markets where the patient load might be uncertain. Our service portfolio minimizes unnecessary and unplanned clinical downtime through preventive maintenance and remote support. Value-added services such as dosimetry, physics, and workow consultancy services increase access to the competen- cies necessary for clinics to treat patients. Increased access in underserved markets by a sustainability - linked bond of SEK 1.5 bn For outcome 2021/22, see page 15. ACCESS TO HEALTHCARE INDEPTH SUSTAINABILITY REPORT 47 ELEKTA ANNUAL REPORT 2021/22 The Elekta Foundation At the 2021 AGM, Elekta’s shareholders voted to establish the Elekta Foundation. Its mission is to initiate and support projects and programs in partnership with governments, NGOs and healthcare providers to improve access to cancer care in underserved regions and communities. The foundation focuses on three areas: 1) expand education to close knowledge gaps in radiotherapy 2) increase awareness and prevention in cervical cancer, 3) strengthen cancer care infrastructure through new toolsand models. Establishing and supporting the foundation is an important part of Elekta’s sustainability strategy. Since its launch in January 2022, the Elekta Foundation and Turkish Radiation Society have co-organized two hands-on workshops to improve radiation oncologists’ contouring skills in cervical cancer and breast cancer, the two leading causes of cancer deaths among African women. Also, with initial funding from Elekta last year, Rayos Contra Cancer, a US-based non-prot group developed several multicourse programs geared towards clinicians in low- and middle-income countries in Africa, the Middle East, Latin America and Southeast Asia. The programs were taught by volunteer physicians, medical physicists, and therapists. This year, the partner- ship moved over to the Elekta Foundation with increased funding so that more people could enroll, with a target set at 1,700 clinicians from 123 centers. During the year, 1,827 clinicians from 280 centers were trained. The Elekta Foundation is also working with the Rwanda Ministry ofHealth and NGOs such as Clinton Health Access Initiatives (CHAI) and the Society For Health (SFH) to develop a pilot program in cervi- cal cancer prevent and treatment. According to the World Health Organization, cervical cancer is the fourth most frequent cancer in women with an estimated 604,000 new cases in 2020. Of the esti- mated 342,000 deaths from cervical cancer in 2020, about 90% occur in low- and middle-income countries. The Foundation wants tojoin the ght to end this life threatening disease in Africa. Closing the knowledge gap and building human capital locally Trained professionals are in short supply globally, especially in low and middle-income countries, and the need for eective education and training is essential to enable increased patient access. Elekta’s education and training programs address this challenge through three broad categories: • Targeted education and training to optimize adoption ofourproducts and solutions • The use of learning partnerships with our customers fortheprovision of peer-to-peer clinical education, and • Partnering arrangements with local universities and organizations in low and middle-income countries. Elekta employs a exible education and training oering to assist the customer adoption of our products and solutions withinstructor-led sessions conducted at customer sites, instructor-led courses conducted at Elekta’s Global Learning Centers, and through digital virtual sessions as part of our Elekta Digital Learning oering. During 2021/22, over 17,000 peo- ple undertook training using this blended approach. In addition, our customers and employees are able to access self-study materials including videos, eLearning, and software simulations through our Learning Management System and over 21,000 users were registered in the system in 2021/22. Peer-to-peer education is facilitated by our global network oflearning partnerships and initiatives such as Elekta’s Brachy- Academy, which enable accelerated adoption and start-up of our solutions through consulting and clinical education. Experi- enced learning partners share their expertise and best practice INDEPTH SUSTAINABILITY REPORT ACCESS TO HEALTHCARE ELEKTA ANNUAL REPORT 2021/22 48 Performance and outlook 2021/22 Goals Achievements Status New/adjusted goals ACCESS TO HEALTHCARE Increase the installed base by 825 linacs in underserved markets by April 30, 2025, compared to April30, 2020. 2021/22: 175 linacs were installed in underserved markets in (2020/21: 163 linacs). Goal retained. “ Our newly established team acts as a liaison between industry, academia, health- care professionals, patients and governments to enable a joint approach for facing challenges in healthcare systems in an economically sustainable way. ” Susanna Francke Rodau VP Global Policy and Patient Access, Elekta Ongoing, on track Ongoing, not on track Not achievedAchieved by hosting clinical observations sessions, clinical courses, and webinars. Over 6,700 clinicians were assisted through these oerings this year. In addition to this, Elekta also arranges for clinics in low and middle-income markets to twin with – and learn from – clinics in developed markets. Elekta has developed its successful partnering program with NGOs to provide digital learning opportunities in low and middle-income countries this year. Over 450 clinicians have been able to benet from these free course, including con- touring classes for African radiation oncologists to enhance their contouring skills by Turkish Society for Radiation Oncol- ogy and a clinical training program focused on cervical cancer in India via the BrachyAcademy. The creation of the Elekta Foundation has served to rein- force our commitment to growing cancer awareness and prevention to ensure access to cancer care for all. Please see page 48. Strengthening local presence Elekta builds capacity locally by expanding its direct presence, and by increasing the number of local technical experts (ser- vice engineers) that help customers avoid unnecessary clini- cal downtime, directly improving patient access. We are also establishing new entities in low- and middle-income countries to better serve customers. During the year, we have, for example established local entities in the Philippines and Indonesia. Developing customer nancing solutions in joint eorts By partnering with third-party nanciers, such as leasing companies or export credit agencies, we enable nancing solutions and other alternative payment models, that increase the aordability of modern radiotherapy technology for clinics. ACCESS TO HEALTHCARE INDEPTH SUSTAINABILITY REPORT 49 ELEKTA ANNUAL REPORT 2021/22 Why is this important to us? Climate change is an existential issue and everyone must take action to curb global warming and ensure a sustainable future for the planet. As a society, we need to decouple economic growth from environmental impact. At Elekta, we are deter- mined to do our part, and we have stepped up our ambition As Elekta strives for a world where everyone has access to the best cancer care, we need to ensure that we minimize our environmental footprint while maximizing the social value. By setting ambitious targets for reducing greenhouse gas emissions and waste, and increasing circularity, Elekta iscommitted to being part of the solution and decouple growth from environmental impact. during 2021/22. Elekta has set an ambitious roadmap for reduc- ing emissions in line with the Paris Agreement and aligning our operations with climate science. Elekta has submitted environ- mental targets to the Science Based Targets Initiative for vali- dation, following our commitment to the initiative in 2021. Applicable Sustain able Development Goals Goal 9: Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation 9.4: Upgrade all industries and infrastructures for sustainability 9.5: Enhance research and upgrade industrial technologies Goal 12: Ensure sustainable consumption and production patterns 12.4: Responsible management of chemicals and waste 12.5: Substantially reduce waste generation Goal 13: Take urgent action to combat climate change and its impacts 13.1: Strengthen resilience and adaptive capacity to climate related disasters Elekta’s contribution • Decrease the greenhouse gas emis- sions at Elekta and throughout our value chain through e.g. environ- mental eciencies within our own operations, supplier and customer engagement, product develop- ment, proactive servicing to maxi- mise system value, environmentally ecient logistics and and the scal- ing down of waste at our sites • Advancing our circular approach and applying ISO 14000 series design for sustainability standards to all new product development • Ensuring adherence to our environmental policies and standards Environ- mental Action INDEPTH SUSTAINABILITY REPORT ENVIRONMENTAL ACTION ELEKTA ANNUAL REPORT 2021/22 50 How are we working with this? Group-wide collaboration Elekta has established a group-wide team for driving the com- pany’s environmental agenda, with dedicated representatives from the company’s four business lines and selected business functions giving the company a platform for driving change across the value chain. Detailed CO 2 e assessment to enable ambitious reduction targets During 2021/22, Elekta has completed an in-depth analysis of ourGHG emissions prole across scopes 1–3, establishing a new CO 2 e baseline. We have identied three main sources of emis- sions resulting from our work to drive access to cancer care: the use of our products, our supply chain and the production of input materials, and the transportation of our products. In Scope 1, Elekta has expanded its baseline with detailed infor- mation on car eet emissions and we have continually focused on reducing emissions from Scope 1 and 2 during the year. Actions taken include installing more ecient heating and cool- ing systems in the Brachy production facility in the Netherlands and switching parts of our North American car eet to hybrid vehicles. We foresee absolute emission reductions in Scope 1 and 2 over the coming years as part of our commitment to Science Based Targets. In Scope 3, Elekta has improved our emissions data by com- pleting a full emissions according to the Greenhouse Gas (GHG) Protocol. Categories added in the mapping include: employee commuting, processing of products, an expanded view on use ofsold products, and end of life treatment of sold products. To reduce our transportation emissions, Elekta has worked with logistics partners during 2021/22 to establish granular emis- sions data. We have also established digital intelligence tools to analyze activity-based logistics data which will further increase the understanding of our environmental footprint and assist in identifying prioritization areas for emissions reduction. The pandemic developed our ability to leverage digital tools for coordinating global events and activities. We continued to stress more environmentally ecient business travel and during the year, we also estimated emissions from employee commuting through an employee survey across our global organization to follow up going forward. Increasingly driving circularity and scaling down waste The circular economy principles aim to minimize waste and to reuse products and materials. Developing business models based on a more circular approach will enable the decoupling of eco- nomic value creation from the consumption of nite resources. Our ambition is to deliver eco-designed products where we take the full product lifecycle footprint into consideration. The aim is to maximize the positive social impact of our solutions in terms of care provided, while minimizing their environmental footprint. This is managed at the product development stage through the setting of meaningful requirements that drive in - herent design choices. These requirements relate to low energy usage, materials selection, and modular design that increases upgradability, repairability and serviceability to maximize the product value. We also design for reuse, enabling reselling of components at a system’s end of life. A dedicated Global Product sustainability team was set up during the year to analyze the environmental impact of Elekta’s Linac Solutions and to expand the scope of Linac parts included in the circular economy. The team focuses on engineering anal- ysis of high CO 2 e impact materials such as tungsten and on the quantication of reuseable parts used in modular assemblies within our products to identify improvement opportunities and to implement changes. Based on this work and as part of the planned materality analysis, Elekta aims to revisit our circularity strategy during 2022/23. Elekta has several ongoing and planned projects for taking back components of our products at end-of-life for refurbish- ment. We have continued to expand this approach across our product lines. In Linac Solutions, the refurbishment program includes 22 Linac components (21 components in 2020/21), and we continue to identify new components t for refurbishment. When hardware is updated in Neuro, computers are now returned to Elekta to be used as spare parts. Elekta also has an ambition to reduce its packaging waste and during the year, we have worked to improve the baseline for our product packaging. Some initiatives underway include the rede- sign of packaging cases for Linacs and patient support systems. Elekta is also reusing and switching to more environmentally e- cient materials, such as replacing soft wood with plywood, which decreases our packaging footprint and decreases trans- port emissions thanks to the reduced size and weight of packag- ing materials. Other circular initiatives include return and reuse of Gamma Knife shipping containers as well as the refurbishing and reuse of Brachy source containers. Elekta is dedicated to eliminating landll. Our largest manu- facturing site in the UK achieved zero waste to landll in 2021, and waste to landll is already zero at our other two major oce sites in Europe (Sweden and the Netherlands). In addition, used furniture, laptops and mobile phones from Elekta are being repurposed in schools and charities in the UK as part of a local circular economy and recycling community scheme. In this report, Elekta has adopted the Global Reporting Initia- tive’s revised waste reporting standard, increasing the quality of our waste reporting, see page 67. “ We are committed to aligning our operations with climate science and have submitted Elekta’s environmental targets to SBTi for validation. ” Gustaf Salford President and CEO, Elekta ENVIRONMENTAL ACTION INDEPTH SUSTAINABILITY REPORT 51 ELEKTA ANNUAL REPORT 2021/22 Environmental compliance across our business and in our supply chain To ensure compliance in our own operations, all Elekta manu- facturing sites have local environmental management systems that are certied with ISO 14001 or equivalent. A group-wide environmental policy is used to continuously drive environmen- tal performance. On an operational level, environmental com- pliance is managed by the business lines. Elekta intends to expand its group-wide coordination of environmental compli- ance during 2022/23. Elekta’s environmental compliance risks are mainly found in the supply chain and involve suppliers specializing in complex manufacturing processes, which occassionally could have adverse environmental impacts. Suppliers are required to oper- ate in full compliance with applicable environmental legislation and employ suitable management systems. Throughour Supplier Code of Conduct, we ask suppliers to set the same level of responsibility for their environmental impact that we have set for ourselves. The Code is reviewed and updated regularly and covers a wide range of sustainability activities that provide greater transparency about the risks and opportunities faced byboth Elekta and the supplier. Additionally, our current suppliers are assessed and moni- tored from an environmental risk perspective through our Sustainable Sourcing Program, see page 61. Elekta selects suppliers through our Sourcing process that includes quantita- tive and qualitative assessment criteria which are governed byour Sourcing Board, as well as commercial contracting and quality assurance processes. If an environmental risk with a current supplier is identied, an action plan would be initiated to correct any non-conformances. If the risk is still not addressed, the supplier would be deselected as a last resort. The Taxonomy Regulation The purpose of the European Union’s Taxonomy Regulation is to facilitate investors’ assessments of companies’ performance in relation to climate and the environment, with the aim of redi- recting capital ows to sustainable businesses. The Taxonomy Regulation is a classication system dening sustainable perfor- mance for a set of economic activities. Activities covered by the taxonomy are called taxonomy-eligible activities. For these activities, the delegated acts complementing the Taxonomy Regulation dene performance criteria across six environmental objectives, as well as minimum safeguards for the protection of human rights and labor law. Activities that meet all these crite- ria are considered taxonomy aligned. Elekta’s taxonomy assessment and reporting A cross-functional working group at Elekta has analyzed the Group’s activities, based on NACE (Nomenclature of Economic Activities) codes and in-depth know ledge of the Group, to iden- tify activities and nancial transactions which relate to the share of taxonomy eligible net sales, capital expenditure and operational expenditure. Elekta’s main activity, the manufac- turing of medical technology, is not currently taxonomy-eligible under the rst two environmental objectives. To develop the Group’s taxonomy reporting, Elekta is following the developments relating to the Taxonomy Regulation, its dele- gated acts and guidance issued. In 2022/23, initiatives will be undertaken to analyze Elekta’s alignment to the criteria of the taxonomy-eligible activities. In line with the reporting require- ments, Elekta will report its taxonomy alignment in the annual report 2022/23. Total (MSEK) Share of which taxonomy eligible, % Share of which taxonomy non-eligible, % Net sales 14,548 0% 0% Capital expenditure 1,732 0.34% 99.66% Operational expenditure 697 0.03% 99.97% Net sales Elekta’s net sales totaled SEK 14,548 million in 2021 (see Note 6). None of the net sales is attributable to activities covered by the delegated acts. Capital expenditure Elekta’s capital expenditure, as dened in the Taxonomy Regu- lation, corresponds to SEK 1,732 million, of which 0.34 percent is considered taxonomy-eligible. The denominator includes addi- tions to Intangible assets, Right of use assets and Tangible assets (see Note 16, 17, and 18). Taxonomy-eligible capital expenditure relates to the purchase of facility upgrades (tax- onomy category 7.3–7.4), and long-term leasing of hybrid and electric cars (taxonomy category 3.3). Operational expenditure Elekta’s operating expenditure 1) of SEK 697 million, covers direct capitalized costs that relate to research and development, building renovation measures, short-term lease, maintenance and repair and other direct expenditures relating to the day-to- day servicing of property, plant and equipment. 0.03 percent of this operating expenditure is considered taxonomy-eligible and primarily includes facility maintenance upgrades (taxonomy ca te g o r y 7. 3 –7.4). EU Taxonomy 1) The Taxonomy Regulation’s denition of operating expenditure does not correspond to that of IFRS and Elekta’s nancial statements. INDEPTH SUSTAINABILITY REPORT ENVIRONMENTAL ACTION ELEKTA ANNUAL REPORT 2021/22 52 Performance and outlook 2021/22 Goals Achievements Status New/adjusted goals CLIMATE AND EMISSIONS Elekta will develop and submit new emission reduction targets to SBTi for approval by 2021/22. Emission reduction targets covering Scopes 1–3 have been submitted to SBTi and are awaiting validation. (In 2021/22, Elekta has further devel- oped its climate calculations meth- odology with an extended scope, improved data quality and updated emission factors. 2021/22 is Elekta’s new baseline year.) CO 2 e (tons) 2021/22 Direct emissions (Scope 1) 4,405 Indirect emissions (Scope 2), market based 1) 2,859 Other indirect emissions (Scope 3) 826,756 Total emissions, all scopes 834,020 Emission intensity (total emissions tons CO 2 e/ MSEK net sales) 57. 3 1) Location based indirect emissions in 2021/22: 6,206 tonnes CO 2 e. Please refer to page 66 for detailed reporting. The emission reduction targets will be communicated once validated by SBTi. Progress will be reported in the Annual Report 2022/23. MATERIALS EFFICIENCY Establish and implement a take- back program for selected parts of relevant products by 2021/22, and a refurbishment program to use reclaimed parts and compo- nents by 2025/26. Ongoing, with 22 components included in program (21 components in 2020/21). Elekta is actively working to expand the scope of this program through the deployment of circular economy requirements in two major new product development projects, as well as in the existing installed base. Increase number of components in the take-back program. Circularity strategy and initiatives to be expanded in 2022/23. WASTE Send zero waste to landll by 2024/25. On track. In 2021/22, Elekta achieved zero waste to landll in the UK. In Sweden and the Netherlands, zero waste to landll has earlier been achieved. During 2021/22, Elekta has adopted the Global Reporting Initia- tive’s revised reporting standard, increasing the quality of our waste reporting, see page 67. Send zero waste to landll by 2024/25 from our main sites (UK, Netherlands, Sweden, China; 3 out of 4 completed) and improve data quality at remaining sites. New! Minimize waste from use of sold products by increasing re-use or recycling of materials; rst step is to rene customer disposal guidelines by 2022/23. Ongoing, on track Ongoing, not on track Not achievedAchieved ENVIRONMENTAL ACTION INDEPTH SUSTAINABILITY REPORT 53 ELEKTA ANNUAL REPORT 2021/22 As Elekta strives for our life-saving products to be available to as many as possible worldwide, we must make it a top priority to combat corruption and other unethical business behavior, which can be detrimental to sustainable development. We implement eective compliance and integrity programs with emphasis on values and behavior. Why is this important to us? Unethical business practices, such as corrupt or anticompetitive behavior, hinders sustainable economic and social develop- ment. Such practices can also have a substantial negative impact on innovation, customers and ultimately the well-being of patients. Agenda 2030 and its SDG 16.5 sets out to substan- tially reduce corruption and bribery by 2030. It is a prerequisite to reach the other global goals for sustainable development. The healthcare sector is particularly vulnerable to corruption 1) , including improper benets provided in good faith in close inter- action with those in charge of government funds. Close interac- tions with healthcare professionals calls for detailed guidelines on business practices that need to be free from even the suggestion of improper inuence. Most of our sales will go through a public tender process, and it is crucial that we implement and promote lawful and sustainable practices, which is part of SDG12.7. Applicable Sustain able Development Goals Goal 12: Ensure sustainable consump- tion and production patterns 12.7: Promote sustainable public procurement practices Goal 16: Promote just, peaceful and inclusive societies 16.5: Substantially reduce corruption and bribery Elekta’s contribution Enforcing a robust compliance program to detect, prevent and mitigate unlawful and unethical behavior in all our business activities, raising awareness about sound business practices, and providing compliance training both internally andexternally. Business Ethics 1) According to a report from the U4 Anti-Corruption Resource Centre, this is due to “large amounts of resources, information asymmetry, the large number of actors, system complexity and fragmentation, and the globalised nature of the supply chain for drugs and medical devices”. Read more at: https://www.u4.no/publications/health-sector-corruption INDEPTH SUSTAINABILITY REPORT BUSINESS ETHICS ELEKTA ANNUAL REPORT 2021/22 54 Performance and outlook 2021/22 Goals Achievements Status New/adjusted goals RISK ASSESSMENTS Complete anti-bribery and corruption risk assessment for Region Europe. Completed for Russia. Other eastern European countries to be concluded within 2022/23. Develop a compliance-focused risk assessment strategy by 2022/23, to beused to prioritize activities and allocate resources. COMMUNICATION AND TRAINING Complete compliance training for allregions. Goal revised during the year to target allregional management teams with responsibility to cascade down. Com- pleted for the majority of regions. Train- ing continuously on -going in all regions. Continue to execute and mature a structured business ethics training andcommunication plan, with 100% employee training in compliance & business ethics, including in-depth role-based training plan as well as training of customer facing Elekta business parties. Annual all-employee Code of Con- duct to be completed for 100% employees according to enhanced training model, further adapting training to the employee´s individual prole. Annual employee Code of Conduct training provided to all regions, detailed and instructor lead training provided to customer facing employees. Complete Code of Conduct and enhanced Compliance training for allthird parties according to new delivery model. Goal revised, new strategy and modality for compliance training to be imple- mented in 2022/23. Extend trainings on lawful interac- tions during public tenders to all employees and third parties involved in sales working for and on Elekta’s behalf during 2021/22. Goal revised during the year to target allregional management teams with responsibility to cascade down. Com- pleted for the majority of the regions. Training continuously ongoing in all regions. DETECT AND RESPOND Implement Third-Party Monitoring program and complete monitoring process for 40% of total third-party population during an 18-month period. Goal achieved. Complete monitoring activities for the second target group of the Third-Party monitoring program by 2022/23. Continue to increase response rate for participation in annual all-em- ployee Integrity Survey with a target of at least 50% participation. Increased response rate (from 38% to45%) with an absolute increase of more than 500 employees. The survey revealed that Elekta employ- ees are committed to compliance gen- erally, with a very good understanding of importance of ethical business, and how to behave in accordance with the Code of Conduct and other company policies and that standards expressed therein align with their personal values (>95 %). Year-over-year trends were positive in 4 of 6 questions for which such a comparison can be made. The only two questions slightly tending down, which are topics for global improvement, regards clear under- standing on compliance expectations including management communication of compliance expectations. Continue to deploy and mature an improved culture of business ethics and compliance, emphasizing role of leadership, ownership and account- ability, measured through yearly integ- rity surveys and re-launch in 2022/23 of Elekta Integrity Line campaign in all oces. Ongoing, on track Ongoing, not on track Not achievedAchieved BUSINESS ETHICS INDEPTH SUSTAINABILITY REPORT 55 ELEKTA ANNUAL REPORT 2021/22 Elekta’s compliance program 1 Top-level commitment The responsibility for implementing an eective compliance ultimately rests with the Board of Directors. At least four times a year, the Presi- dent and CEO reports to the Board and the EVP & General Counsel, in the capacity of head of the company’s Compliance function, reports to the Board’s audit committee on risks, programs, and ongoing issues and investigations. For more information on the compliance function and its interaction with the Board, see the Corporate Governance Report on page 75. Since the building of a compliance culture starts at the top, the CEO and the senior management team are expected to lead by example, to demonstrate through behavior and communication that all employees are expected to act according to the highest ethical standards. 2 Risk assessments Elekta’s biggest compliance risks are identied through systematic risk assessments where high-risk geographies with strategic importance to Elekta are prioritized. The aim of the assessments is to identify any gaps our compliance program might have in a specic region and to imple- ment mitigation measures where needed. The assessments are con- ducted as workshops together with the relevant regional management and external support, and include a comprehensive risk identication pro- cess that covers the typical risk categories of country-, sector-, transac- tion-, business opportunity- and business partner risks. They are sup- ported with specic compliance audits conducted by the internal audit function. 3 Compliance organization The Board of Directors has given the EVP & General Counsel, as the head of the Compliance function, autonomy and resources for the day-to- day management of the compliance program that oversees the high- risk legal and reputational areas: anti-bribery and corruption; competi- tion and antitrust law; and trade compliance. These resources include regional compliance ocers, and a global trade compliance ocer. The compliance function was reorganized during the year with a greater focus on regional remits. Tax matters are managed by Elekta’s tax committee and Elekta’s nance function. 2 1 3 4 5 6 7 8 9 Top-level commitment Interactions with healthcare profes- sion als Detect and respond Monitoring and continuous improvement Third-party risk manage- ment program Risk assessments Communi- cation and training Practical and accessible policies Compliance organiz - ation 4 Practical and accessible policies Our Code of Conduct and the Group-wide anti-corruption policy are thecornerstone documents for building and maintaining a compliance culture. The Code of Conduct is available in twelve languages and is further supported by several policies from the Board of Directors and the Presi- dent and CEO. The global policy framework was reviewed and updated during 2020/21. In 2021/22, the focus has been on further updating the Code of Conduct, updating the policies as well as creating processes that align with the updated policies. These cover the following areas: • Anti-corruption & dealing with business partners • Conicts of interest • Fair competition • Condential information & trade secrets • Insider trading • Trade compliance • People & Human rights • Procurement • Data privacy • Risk management • Tax strategy • Anti-money laundering & anti-tax evasion • IT security • Travel & expenses The anti-corruption policy provides guidance to employees and business partners, primarily in various interactions with healthcare providers and professionals. Where needed due to a higher identied risk, the policy is supplemented by stricter local guidelines. Several ways-of-working documents supplement each area with more detailed guidance. INDEPTH SUSTAINABILITY REPORT BUSINESS ETHICS ELEKTA ANNUAL REPORT 2021/22 56 5 Communication and training Compliance and integrity training is essential in ensuring that our Code of Conduct and other policies are used and adhered to, and we strive to provide continuous training for both employees and business partners. The training is designed to be engaging and uses real-life scenarios and ethical dilemmas with a focus on the psychology of decision-making. To provide easily available hands-on guidance on the main corporate policies, training videos on dierent topics are regularly published inter- nally. The material is also included in the mandatory Code of Conduct training. New employees are introduced to the Code of Conduct during their orientation program. The Code of Conduct is supplemented with spe- cic compliance training tailored to the risk prole and needs of the employee’s role. 6 Third-party risk management program Third-party representative risk is managed by strict requirements on completion of an automated risk-based due diligence on all third-party intermediaries, as well as inclusion of compliance-with-laws language in all representative agreements which sets forth clear expectations on business conduct and provides audit rights. The third-party risk management program covers commercial inter- mediaries and other non-sales intermediaries that work with govern- ment ocials, such as registration agents and customs brokers. The program was revamped during the year to include systematic monitor- ing of the high risk third parties. This provides reasonable assurance that our third parties follow the applicable laws and business ethics stan- dards set out in our Code of Conduct, when acting on Elekta’s behalf. 7 Interactions with healthcare professionals Elekta has clear guidelines in our anti-corruption policy on interactions with healthcare professionals that, in addition to areas such as travel, gifts and entertainment, covers risk areas such as research funding, scholarships and other collaborations. In higher risk markets, the guide- lines are supplemented with more detailed local policies. The guidelines are aligned with codes that have been developed with peers in industry associations such as COCIR and AdvaMed. Coopera- tion and alignment are vital for the creation of a framework for ethical business conduct between the medical device industry and healthcare professionals. 8 Detect and respond Elekta aims to create a culture where everyone feels free and safe to raise compliance-related issues. When such issues are promptly addressed, it reduces the risk of escalation to violations against the law or our Code of Conduct. To facilitate anonymous reporting for all stake- holders, internal and external, if such violations were to occur, or were suspected to occur, we have an established global whistleblower pro- cess and a reporting tool, the Elekta Integrity Line, which is available inall applicable languages. All reported cases are checked internally by the head of the Compli- ance function, the EVP & General Counsel, and regularly reported to the Board of Directors. Each case is followed up to the extent feasible, and appropriate remediation measures are taken. In 2021/22, 17 cases were reported, either through the Integrity Line, aspecial e-mail address directly to Compliance, or through other channels. Most cases relate to people and leadership issues. 9 Monitoring and continuous improvement The eectiveness of the compliance program is ensured through contin- uous monitoring and audits that make sure our policies and procedures are adhered to. Internal adherence is ensured through, inter alia, the inclusion of rele- vant compliance-specic questions in the Internal Controls Framework and audits performed by the Internal Audit Function. Findings are used to improve both local and global programs. The third-party monitoring program referred to in step 6 above, measures adherence by our third parties, and can trigger performing audits where necessary. How are we working with this? We are building a culture of ethical business conduct by estab- lishing expectations for individual behavior across the organiza- tion and by embedding compliance into our processes. The work is guided by our nine-point compliance program, focusing on our high-risk legal areas: anti-bribery and corruption, competi- tion law, and trade compliance. The program is based on best practices dened by leading enforcement agencies that have been tailored to suit Elekta’s needs, risks and challenges. It con- sists of nine activities designed to strengthen business ethics and prevent corruption and improper payments. The manage- ment approach of trade compliance and fair competition are also described below. How do we know the program is working? Elekta measures the Compliance program eectiveness through risk assessments with the aim to identify and remedy any gaps we may have in our program due to for example spe- cic country risks or local challenges. The risk assessment serves as a good indicator of local knowledge about policies and pro- cedures and whether local management genuinely engages in promoting compliance and integrity. Elekta includes root cause assessments as part of our case management process for reported incidents. The aim is to detect and prevent future similar misconduct and to test whether the existing controls were adequately designed to miti- gate the risk. Additionally, we are including compliance controls in our Internal Controls Framework. Elekta’s annual internal employee survey tracks employees’ perception of our performance on compliance and integrity. Survey questions include whether Elekta’s senior management genuinely promotes a culture of compliance and integrity, and whether employees believe concrete actions would be taken should they report a violation of the Elekta Code of Conduct. Results are presented on page 55. Elekta’s programs are continuously benchmarked with our peer companies, and we participate in external surveys to mea- sure our performance against best practice. BUSINESS ETHICS INDEPTH SUSTAINABILITY REPORT 57 ELEKTA ANNUAL REPORT 2021/22 People are at the core of Elekta’s business. From the patients receiving treatment with our solutions, to our more than 4,700 employees across the globe and the people that we, in dierent ways, engage with in our supply chain. Why is this important to us? We are dependent on the creativity and competence of both our own employees and the people employed in our supply chain to keep bringing innovations that benet cancer patients to the market. Ensuring that we can attract and develop qualied employ- ees is a prerequisite for keeping our position as innovator of Applicable Sustain able Development Goals and targets Goal 5: Achieve gender equality and empower all women and girls 5.5: Ensure full participation in leadership and decision-making 5.C: Adopt and strengthen policies and enforce- able legislation for gender equality Goal 8: Promote sustained, inclusive and sus- tainable economic growth, full and productive employment and decent work for all 8.5: Full employment and decent work with equal pay 8.7: End modern slavery, tracking, and child labor 8.8: Protect labor rights and promote safe working environments Elekta’s contribution Safeguarding human rights and labor rights for everyone working at Elekta and in our supply chain globally. Ensur- ing that we oer an inclusive and safe workplace. People in Focus cancer treatments. We oer a range of opportunities for employees and aim to create an inclusive and diverse culture where everyone can grow professionally as well as personally. In addition, we set high standards on our supply chain to ensure human and labor rights are safeguarded. INDEPTH SUSTAINABILITY REPORT PEOPLE IN FOCUS ELEKTA ANNUAL REPORT 2021/22 58 How are we working with this? Our approach as employer Elekta’s approach as employer is summarized in our People & Human Rights Policy. It is based on international standards for human and labor rights and aims to facilitate a culture that promotes diversity, inclusion, and equal opportunity as well as high health and safety standards. The Human Resources func- tion is responsible for maintaining the policy, training our employees and investigating any reported violations. Managers are responsible for implementing the policy in their line organi- zations and for making sure that all employees and contract workers are familiar with it and follows its guidelines. Elekta’s global People Agenda aims to leverage the full poten- tial of our employees in executing on our company strategy. Theagenda is updated on an annual basis in line with Elekta’s annual strategic focus areas, and is based on the following cor- nerstones: • Driving capability development to ensure delivery of ACCESS 2025, with systematic talent management ensuring a future talent pool and a culture of development • Strengthening our culture to secure a sustainable delivery ofour strategy • Continuing to improve the Diversity, Equity, Inclusion and Belonging agenda • Proactively driving organizational eectiveness and e- ciency • Continually enhancing the support delivered by HR throughour HR Excellence program Performance evaluation and employee engagement Employee performance is reviewed throughout the year with aformal annual review against company targets and values (aswell as Leadership Cornerstones for managers), and against individual annual development plans. The plans, which man- ager and employee co-develop, and the reviews are tools foremployees to become accountable for their owncareer development. Comprehensive employee engagement surveys are con- ducted yearly and complemented throughout the year with shorter pulse surveys across the organization. They enable Elekta to track a range of indices, including engagement, team eciency and leadership, and to improve as an employer. The last comprehensive survey was conducted in March 2022. See page 62 for comments on results. Tailored training and development programs Continuous competence development is essential to keep up with a rapidly evolving business environment and is at the top ofElekta’s strategic agenda. Personal development plans are based on the best practice model 10:20:70, which means 10 per- cent formal training; 20 percent developmental relationships such as peer coaching, support from a line manager, a mentor, or similar; and 70 percent applying the acquired skills in the daily work or in a stretch project. Developing leaders is an important priority for Elekta. We have various global leadership development programs, aimed at managers at dierent levels in the organization, as well as diverse development oerings for all employees. We constantly review both the content and delivery methods of our oerings to ensure employee development aligns with our strategy or as a response to the changing demands of employees and leaders alike, such as in relation to well-being, or diversity, equity or inclusion. In addition to the global programs, dierent local oerings, both within geographies and functions, are oered. A diverse and inclusive workplace Everyone at Elekta should have equal opportunity, no matter ofgender, age, sexual orientation, ethnicity, nationality, religion or any other potential basis for discrimination. An inclusive and respectful work environment is essential for maintaining a diverse workforce, where everyone’s talents and contributions are appreciated. Our approach is outlined in Elekta’s People & Human Rights policy and is evaluated against targets and reported annually. Gender diversity is an area of special focus where we have targets to increase the underrepresented gender, which today isfemale, in both senior leadership and in business-critical posi- tions to 30 percent by 2022/23. To achieve this, we ensure that there is female representation in recruiting processes, that we evaluate candidates for new roles fairly, that we identify new hires with high potential for managerial roles and that the gen- der distribution in our leadership programs is balanced. We also assess and review gender pay gaps for comparable roles within the company. These are conducted locally and are based on local regulations and legal requirements. Elekta promotes a geographically and culturally diverse work- force. One example of our work is the Diversity, Equity, Inclusion and Belonging Committee with a Women’s Initiative and Next “ I’m proud that we have continued to strengthen our culture during the pan- demic. When each and every one takes full respon- sibility, we create a force that will strengthen our position as an employ er, and secure our long-term competitiveness as a business. ” Karin Svenske Nyberg EVP Human Resources, Elekta PEOPLE IN FOCUS INDEPTH SUSTAINABILITY REPORT 59 ELEKTA ANNUAL REPORT 2021/22 Generation anity group in the region Americas. The groups work to make Elekta an increasingly inclusive and rewarding place to work, for example by supporting women and early career employees in the workplace. Another example is the recently started Diversity, Inclusion and Belonging group in the UK, that works with awareness training, for example about unconscious bias. Health, well-being and safety of employees Elekta is committed to ensuring a safe work environment throughout our operations, preventing workplace accidents, injuries, and illness. The health, well-being, and safety of all our employees and customers is paramount, and we will continue to develop this agenda in relation to both physical and psychologi- cal aspects. Discrimination, harassment or bullying in the work- place jeopardizes the health and well-being of our employees and contractor partners and conicts with the company’s suc- cess and are not tolerated in any form. There have been nine incidents of discrimination in the year, of which all have been investigated and resolved without any further actions. No inci- dents are still on-going. Reported incidents of discrimination are primarily reviewed by the local HR function as well as by an inde- pendent party. Our manufacturing sites operate local occupational health and safety (OHS) management systems which have been designed in line with national legal requirements. All proce- dures cover both our own employees and subcontractors working on behalf of Elekta. Local OHS committees or onsite working groups identify hazards, assess risks, and investigate workplace incidents. They meet quarterly and are comprised ofrepresentatives from local management teams, health- and safety- specialists, and employee representatives. Risk assessments are in place for all activities that are carried out by Elekta’s workers and contractors. Specially trained health- and safety-managers also carry out walk-around audits and inspections to identify hazards and investigate reported inci- dents. External advisors are consulted in these activities. When hazards are identied or incidents occur, the internal processes are reviewed and risk assessments updated. Employees and contractors are required to report work-related hazards and hazardous situations to their managers or directly to the health- and safety-manager. Specic instructions and routines have been established for workers engaged in o-site installations, for example with installations or service at hospi- tals. These employees are always required to evaluate their work- ing conditions and may discontinue their work until any identi- ed health and safety issues have been resolved. OHS risks directly linked to our business include radiation and o-site installations. Safety measures related to radiation include purpose-built shelters for testing, personal dosimetry for workers exposed to radiation and regular occupational health physical exams. Training in health and safety is provided to workers according to the specic needs of their role and responsibilities. As stipulated in both our Code of Conduct and in our People & Human Rights Pol- icy, roles that require specic safety instructions and protection receive all necessary training and are equipped with personal pro- tective equipment (PPE) and tools before starting work. Health- and safety-training covers general work practices as well as specic work-related hazards including the use pf chemi- cals and radiation. Health- and safety-information is communi- cated through the line organization and in many sites through work-safety ‘Tool Box Talk’ meetings where workers are invited to participate. Employees are also consulted in the development, implementation and evaluation of the safety management systems. The promotion of worker health, including mental health, is of the highest importance to Elekta. We partner with non-occupa- tional healthcare providers as part of the compensation and benets system in many sites. Other sites oer medical exams annually. Elekta encourages employee well-being and health through webinars and the sponsoring of company sports associations, team well-being events and health awareness campaigns. Safeguarding human and labor rights Elekta has a global supplier base and most of our suppliers of direct materials do not operate in countries with known human rights issues. Such exposure is located further upstream in our supply chain, where there may be a risk that workers work exces- sive overtime, lack freedom of association, experience forced labor or are not paid living wages. Our commitment to human rights and labor rights is set out inour Code of Conduct, which prohibits any form of forced, compulsory or child labor and proclaims the right to fair wages including time to rest, overtime compensation and holidays. TheCode of Conduct is complemented by a Supplier Code of Conduct, which puts more detailed human and labor rights “ Becoming a more diverse and inclusive company is a smart business decision as it drives performance and customer loyalty. We have started a Women’s Initia- tive in our region to create a space for women to grow, to connect, and to further a sense of belong- ing within Elekta. ” Emily Jenkins VP Marketing, Elekta INDEPTH SUSTAINABILITY REPORT PEOPLE IN FOCUS ELEKTA ANNUAL REPORT 2021/22 60 requirements on Elekta suppliers. It also covers sourcing of conict minerals, business ethics, and environmental protection and requires all suppliers to cascade the same requirements on their suppliers. Some of our products contain, to a small extent, minerals such as cobalt and tungsten, which are often mined in high-risk or conict-aected areas and where there might be modern slavery-like working conditions connected to their extraction. Weare members of the Responsible Minerals Initiative and are working with them to trace the source of minerals in our prod- ucts, ensuring the minerals have been extracted under decent working conditions. For results, see page 63. Supplier engagement for sustainability We select suppliers through our Sourcing process that includes quantitative and qualitative assessment criteria that are gov- erned by our Sourcing Board, commercial contracting and qual- ity assurance processes. A key part of our sustainability ambi- tion is our Sustainable Sourcing Program, which is a due dili- gence and continuous improvement program aimed at building a win-win relationship with our suppliers to manage risk and drive value creation, while identifying opportunities for improve- ments in our supply chain. The program covers a range of sus- tainability requirements, and aims to identify and mitigate any non-conformances with Elekta’s Supplier Code of Conduct. During the year, we have revised the program to address devia- tions identied in 2020/21 regarding its execution and started its implementation. Elekta’s revised Sustainable Sourcing Program is managed by the Sustainable Sourcing Forum which is chaired by Business Line Linac Solutions Sustainability Lead and includes procurement directors and representation from Compliance. Elekta’s Compliance function is responsible for the Supplier Code of Conduct while Elekta’s Procurement Function is respon- sible for ensuring supply chain implementation and compliance to the Code. During the year, Elekta conducted supplier assessments including supplier audits and business reviews in which suppliers shared their ESG programs. Eleven supplier audits included specic ESG assessments. The audits identied no signicant non-conformances. Some suppliers were instructed to review their employee working hours policy. In 2021/22, four suppliers were categorized as high-risk suppliers. Elekta commissioned GEOGRAPHIC LOCATION OF SUPPLIERS, BY SPEND; 2021/22 Europe, 69% Americas, 15% APAC, 16% Europe, 69% Americas, 15% APAC, 16% independent third-party on-site audits of all these suppliers. Findings included risks relating to working hours and overtime. Elekta has reported its ndings to all the suppliers and requested corrective action. No supplier commercial contracts have needed to be terminated, and we continue to engage with the suppliers to build collaboration across the supply chain. We aim to build collaborative partnerships with suppliers that foster a mutual understanding of each organization’s sustain- ability programs, commitments and targets. In March 2022, Elekta hosted a global supplier engagement day in Sweden, UK, the Netherlands, and China. More than 100 supplier representa- tives attended physical and virtual events focusing on the impor- tance of sustainable sourcing and the building of resilient supply chains for the future. “ Supplier collaboration is key to Elekta and we welcomed more than 100 suppliers during our global Supplier Day in March 2022 for dis- cussions on future strategic collaborations, specically on sustainability and resilience programs. ” Steve Wort SVP and Head of Supply Chain, Linac Solutions, Elekta Striving for the highest quality and product safety Quality and safety in all products and oerings are top priorities for Elekta. The goal is to meet the highest possible safety stan- dards for all products, for customers and patients, as well as for the company’s own installation and service employees. Elekta’s products are developed, manufactured, marketed, sold, and serviced in accordance with quality-controlled processes. As a medical device manufacturer, Elekta must comply with strict and comprehensive international legal requirements and prod- uct safety standards. The function Product Quality & Service is specialized to improve and monitor product quality. Elekta is certied with ISO 13485 (quality management sys- tems, design and manufacture of medical devices). Require- ments in national regulations are implemented as applicable in the procedures concerned, such as the requirement of reporting of incidents and recalls. Quality management systems are reviewed by both internal and third-party auditors and certied by external regulatory bodies and authorities that conduct regular inspections. PEOPLE IN FOCUS INDEPTH SUSTAINABILITY REPORT 61 ELEKTA ANNUAL REPORT 2021/22 Performance and outlook 2021/22 Goals Achievements Status New/adjusted goals EMPLOYEE ENGAGEMENT Increase eNPS (employer net pro- moter score) to 26 by 2023/24. eNPS at 28 in 2021/22. Increased level of ambition: eNPS at 34 in 2024/25. Reduce voluntary attrition rate to 7% by 2023/24. Voluntary attrition rate at 8.2% in 2021/22. Elekta has seen a slight increase in attrition this year, which follows global trends in this area. Goal retained. Improve overall employee experi- ence based on results from individ- ual employee and team discussions, comprehensive or pulse surveys and other dialogue forums. In 2021/22, the annual employee survey saw an increase of all indices. Elekta continues to develop pulse survey oerings to ensure timely employee feedback is obtained and acted upon. All employees received performance and career develop- ment reviews during the year. Goal retained. DIVERSITY AND INCLUSION Increase the female/underrepre- sented gender representations in critical business positions to 30% by2022/23. 26% in 2021/22, increased during the year. Elekta continues to focus on initia- tives to develop gender diversity for example through leadership develop- ment. Goal retained. Implement, assess and review gender pay gap reviews in our larger sites globally in a meaning- ful way. Location Gender Pay Gap United States 16 % The Netherlands 12 % United Kingdom 6 % Sweden 0 % China 0 % Gender pay gap is measured at Elekta’s larger sites. For reporting principles, see page 68. We continue to focus on this important area. Elekta will always strive to achieve 100%, meaning 0% pay gap. Continue to promote a geographi- cally and culturally diverse work- force. We continue to develop the use of employee resource groups across Elekta. Revise diversity ambition and develop our goals during 2022/23. Ongoing, on track Ongoing, not on track Not achievedAchieved INDEPTH SUSTAINABILITY REPORT PEOPLE IN FOCUS ELEKTA ANNUAL REPORT 2021/22 62 Goals Achievements Status New/adjusted goals OCCUPATIONAL HEALTH AND SAFETY Zero vision of ‘lost time’ workplace accidents by 2022/23. In 2021/22, Elekta recorded a total of four incidents of lost-time cases (15 cases in 2020/21). During 2021/22, Elekta’s UK site has initiated report- ing of all “near misses” which expe- dites corrective actions to avoid future accidents. Implement a health surveillance pro- gram during 2022/23 for manufac- turing sites in the UK and China. Expand and align accident reporting at manufacturing sites in the UK and China by 2022/23. Develop a global work environment policy (incl. psychological work environment). Continued work to ensure a safe psychological work environment has been conducted during 2021/22 in local units that will serve as input into the global policy framework. Expand the People & Human Rights Policy to include psychological work environment by 2022/23. SUPPLIER ASSESSMENTS INCL. HUMAN RIGHTS New goals will be set upon the completion of the review of the Sustainable Sourcing Program which was initiated in 2020/21. During the year, Elekta has estab- lished a new Sustainable Sourcing Program. See page 61. Goals and targets within the new Sustainable Sourcing Program are in formulation and will be aligned with new and upcoming interna- tional standards. Training on sustainability risk awareness in the supply chain to beoered to relevant employee groups. In 2021/22, selected procurement employees (appr 12 employees) have attended ESG awareness sessions including human rights (more than 20 hours per individual). The sessions will be followed up with further train- ing in 2022/23. Oer sustainability risk awareness training with focus on upcoming legislation relating to the supply chain to relevant employee groups. Revision of previous target: 100% of Elekta suppliers of prod- ucts with 3TGs (tin, tantalum, tungsten)/ cobalt to require their smelters validated by 2021/22. In 2021/22, all suppliers of prod- uctswith tungsten used smelters validated by the Responsible MiningInitiative. All suppliers of cobalt have signed Elekta’s Suppliers Code of Conduct or equivalent. Elekta is using minor quantities of tantalum, tin and gold. Maintain level of conformance and improve data quality on supplier processes. Performance and outlook 2021/22 Ongoing, on track Ongoing, not on track Not achievedAchieved PEOPLE IN FOCUS INDEPTH SUSTAINABILITY REPORT 63 ELEKTA ANNUAL REPORT 2021/22 Sustainability governance and reporting principles Structured sustainability governance, stakeholder dialogues and materiality assessments ensure that we focus on our most material topics and enable us to track our progress. Governance structure for corporate responsibility and sustainability By incorporating the program for corporate responsibility into our line operations, we ensure eective management and alignment with other strategic initiatives and targets. The Board of Directors governs Elekta’s sustainability program and our CEO reports to the Board on major issues. The Group’s compensation and sustainability committee over- sees quarterly Elekta’s environmental and social work. Matters pertinent to business ethics and compliance are overseen by the audit committee. For more information, see page 79. A cross-functional steering committee, comprising of selected members of the Executive Management, regularly discusses mat- ters pertinent to corporate responsibility and sustainability. The committee includes functions such as nance, communications, HR, legal, and strategy. The work of this group streamlines the process of implementing relevant actions and targets throughout the dierent functions and business lines in our organization, as well as measuring results. The corporate responsibility program is developed and coordinated by the Group Sustainability Director reporting to the VP Strategy and Sustainability following an organizational change during this year, when the sustainability function was moved from Compliance to the Group Strategy function and expanded. Dening material topics and reporting content: stakeholder engagement and materiality assessment Our approach to sustainability is all about focusing where it mat- ters the most. By engaging with stakeholders and continuously developing our sustainability agenda, we have the best opportu- nity to conduct our business sustainably and thrive in an ever-changing environment. In 2021/22, Elekta has re-organized its sustainability function and transferred it to the Group Strategy team. Following this re-organization, Elekta is planning to update its materiality assessment during 2022/23. Elekta continuously engages in dialogues with stakeholders such as investors, clients and employees. Insights and conclusions from these continuous dialogues guide our agenda and activities. Elekta also conducts more comprehensive stakeholder dialogues intermittently, the last one being in 2018/19. In 2019/20, Elekta car- ried out a gap and bechmark analysis, comparing the sustainabil- ity program and reporting with industry standards, peers and various sustainability rating indices. The stakeholder dialogue engaged a number of investors, all our employees as well as our Executive Management team and their directly reporting man- agers. Stakeholders were asked to rank various sustainability issues and individual topics based on their importance to our busi- ness and their impact on sustainable development. Input from relevant networks as well as general external stakeholder priori- ties of the medical supplies sector were also accounted for. Results were analyzed and discussed in the steering group for corporate sustainability. Thetopics considered material are presented in the table on page 65. Forums for sustainable development Elekta is an active member in networks and industry associations working on sustainability and human rights toensure that we contribute to, and are up to date with, the global sustainability agenda. We are actively partici- pating and collaborating in networks and organizations such as the following: • UN Global Compact and its Swedish network • Responsible Minerals Initiative • ICC Sweden’s Sustainability Committee • COCIR (e.g. the EHS steering committee) INDEPTH SUSTAINABILITY REPORT SUSTAINABILITY GOVERNANCE AND REPORTING PRINCIPLES ELEKTA ANNUAL REPORT 2021/22 64 Material topics Research and development Sourcing and manu- facturing Logistics Marketing and sales After market and service ACCESS TO HEALTHCARE Access to healthcare • • • Innovation and R&D • • • ENVIRONMENTAL ACTION Materials eciency • • • Emissions • • • • • Waste • Environmental compliance • • Supplier environmental assessments • BUSINESS ETHICS Anti-corruption • • • Fair competition and public tenders • • Export control and safe trading • • • • • Customer privacy • • • PEOPLE IN FOCUS Employee engagement • • • • • Occupational health and safety • • • • • Diversity and inclusion • • • • • Supplier social assessments • Human rights assessment • Customer health and safety • • See page 69 for the GRI Content Index with page references for each material topic. Our material topics and their boundaries Drawing on the conclusions from the stakeholder dialogue, legal requirements, risks and opportunities, we have identied a set of important topics, based on the double materiality principle. The topics cover a wide range of dierent issues along the value chain. The table below describes the specic boundaries – where the impact occurs. The size of the bullet reects the scope of our impact. SUSTAINABILITY GOVERNANCE AND REPORTING PRINCIPLES INDEPTH SUSTAINABILITY REPORT 65 ELEKTA ANNUAL REPORT 2021/22 Environmental Action Materials (weight in tonnes) 2021/22 2021/22 1) 2020/21 1) Non-renewable materials 4,141 3,180 3,049 Renewable materials 1,142 869 859 Total 5,283 4,049 3,908 1) Excluding Brachytherapy and 2020/21 reporting format. Non-renewable materials include metals, composites and ceram- ics, electronics and other materials used in the manufacturing of Elekta’s products. Renewable materials include materials used in transport and packaging such as wood and cardboard. The data compiled is based on material types and composition of standard products and may exclude certain parts. It covers Neurotherapy (Leksell Gamma Knifes), Radiotherapy (Linacs), MR-Radiotherapy (MR-Linacs) products and Brachytherapy, that were ordered during 2021/22. Previous years, Elekta has reported by number of shipped units, but starting 2021/22, Elekta reports ordered units for materials used as per the CO 2 e emissions base- line set during the year. The increased use of materials is a result of increased sales during 2021/22 and also impacted by the fact that reporting is changed to number of ordered units. Greenhouse gas emissions CO 2 e (tons) 2021/22 Direct emissions (Scope 1) 4,405 Indirect emissions (Scope 2), market based 1) 2,859 Other indirect emissions (Scope 3) 826,756 Purchased goods and services 290,697 Fuel and energy related 2,212 Upstream transportation 16,863 Waste generated in operations 888 Employee commuting 3,733 Business travel 9,651 Processing of sold products 96,712 Use of sold products 405,801 EoL treatment of sold products 199 Total CO 2 e emissions, scope 1–3 834,020 Elekta has set a new CO 2 e baseline in 2021/22, which is based on number of ordered units in the period. Elekta follows the Green- house Gas (GHG) Protocol Corporate Accounting and Reporting Standard and reports greenhouse gas as carbon dioxide equiva- lents (CO2e) and has selected the operational control approach when dening its organizational boundary. Elekta does not oset emissions and the calculations were carried out by a third-party provider. Scope 1 and 2 Elekta’s scope 1 emissions arise from fuel use within owned and leased vehicles (mobile combustion) as well as gaseous fuel used for heating in oce premises (stationary combustion). Elekta’s scope 2 emissions arise from electricity and heating consumption within Elekta’s oce and manufacturing premises. Actual consumption gures of electricity and gas usage were col - lected for all Elekta sites with 50+ FTE (covering around 90% of the total employee count) and the remaining energy consumption was extrapolated from this to cover all FTEs globally. Scope 3 • Purchased goods and services including capital goods: Emissions from those categories are derived by applying spend-based method where emissions are calculated by mapping each supplier based on its sector to an environ- mentally extended input-output analysis, EEIO (specically, Exiobase). • Fuel- and energy-related activities (not included in scope 1 or 2): Well-to-tank emissions have been calculated based onthe used volumes per fuel type and the kWh for energy per country. • Upstream transportation: The majority of emissions data within this category (91% of the total transport emissions) were provided directly by Elekta’s logistic suppliers (well-to- wheel assessment). For the remaining logistic activities, the emissions were appropriately extrapolated based on the available activity data. • Waste generated in operations: The calculations were madeby applying a spend-based method. Emissions were calculated by mapping each supplier falling into this scope 3 category to an environmentally extended input-output analysis, EEIO (specically, Exiobase). • Employee commuting: Emissions were estimated based on an employee survey considering the distance traveled as well as the mode of commuting. The survey was conducted in 2022 with 572 respondents. The results were then extrap- olated to cover the whole workforce. • Business travel: The majority of business travel emissions calculations are based on activity data provided by Elekta’s travel suppliers and the remaining data has been calculated using the spend-based method. • Use of sold products: Emissions arising from this category were assessed by matching the energy use (per max rating, and using an average user prole with conservative assumptions) over the full lifetime of Elekta’s products (Linac, MR-Linac, Brachy and Gammaknife) and software to respective countries’ emissions factors of the countries towhich products were sold. This category also contains emissions from SF6 used in some of our products. • End-of-life treatment of sold products: Emissions from this category include an assessment of key materials and pack- aging by weight which were matched with conservative (highest emitting scenario) end-of-life scenario assump- tions since not full transparency is available on how our products or their materials are handled at the end of life atcustomer site. Reporting data and principles INDEPTH SUSTAINABILITY REPORT SUSTAINABILITY GOVERNANCE AND REPORTING PRINCIPLES ELEKTA ANNUAL REPORT 2021/22 66 Waste Waste generated (weight in tons) Total, generated waste Diverted from disposal Directed to disposal Hazardous 5.49 0.82 4.67 Non-hazardous 403.09 329.37 73.72 Total 408.58 330.19 78.39 Waste diverted from disposal (weight in tons) Onsite Osite Total Hazardous waste Preparation for reuse 0 0 0 Recycling 0 0.82 0.82 Other recovery operations 0 0 0 Total, hazardous waste 0 0.82 0.82 Non-hazardous waste Preparation for reuse 0 5.6 5.6 Recycling 0 323.77 323.77 Other recovery operations 0 0 0 Total, non-hazardous waste 0 329.37 329.37 Total waste diverted from disposal 330.19 330.19 Waste directed to disposal (weight in tons) Onsite Osite Total Hazardous waste Incineration (with energy recovery) 0 0.07 0.07 Incineration (without energy recovery) 0 4.51 4.51 Landlling 0 0 0 Other disposal operations 0 0.09 0.09 Total, hazardous waste 0 4.67 4.67 Non-hazardous waste Incineration (with energy recovery) 0 26.92 26.92 Incineration (without energy recovery) 0 0 0 Landlling 0 46.8 46.8 Other disposal operations 0 0 0 Total, non-hazardous waste 0 73.72 73.72 Waste data includes data from Elekta’s sites in the Netherlands, Sweden, the United Kingdom and China. Data is mainly actual and based on information provided by the waste disposal con- tractor at each site. In previous years, we have reported waste data for North America. However, nearly all the oces remain closed or attendance on a voluntary basis following the pan- demic. In 2021/22, Elekta has not been billed for any waste removal on the following sites: Atlanta, St Charles, Sunnyvale andMontreal. Environmental compliance Elekta has not been subject to any signicant nes or non mone- tary sanctions for non-compliance with environmental laws. Business Ethics During 2021/22, Elekta made a signicant upgrade to its Global Data Privacy organization in order to meet the challenges posed by the constantly increasing data privacy regulatory require- ments. The organization is transitioning to a GDPR+ methodology whereby the default approach is GDPR compliance and adjust- ments are made to this approach based on specic country-by- country requirements. During the FY, the organization investi- gated several potential privacy-related issues, none of which arose as a result of complaints. Elekta has not been subject to any signicant nes or nonmonetary sanctions for non-compliance with data privacy laws and no privacy related cases reported through the Elekta Integrity line during 2021/22. In 2021/22 there were no conrmed incidents of corruption, and no legal actions for anti-competitive behavior, anti-trust, and/or monopoly practices. Elekta has no on-going legal disputes. People in Focus Elekta’s employees Elekta has 4,826 (4,342) employees. Occassionally, Elekta uses contractors for specic projects. Elekta’s number of employees is not impacted by seasonal variations. The human resources data has been collected from Elekta’s HR system. Total number of employees by employment contract (permanent and temporary), by gender 2021/22 Permanent contract Temporary contract Total Women 1,378 23 1,401 Men 3,257 21 3,278 Non-categorized 146 1 147 Total 4,781 45 4,826 2020/21 Permanent contract Temporary contract Total Women 1,201 27 1,228 Men 2,942 34 2,976 Non-categorized 138 138 Total 4,281 61 4,342 SUSTAINABILITY GOVERNANCE AND REPORTING PRINCIPLES INDEPTH SUSTAINABILITY REPORT 67 ELEKTA ANNUAL REPORT 2021/22 Total number of employees by employment contract (permanent and temporary), by region 2021/22 Permanent contract Temporary contract Total North America 1,035 1 1,036 South America 118 0 118 Europe 2,253 28 2,281 Middle East, Africa and India 306 0 306 China 741 0 741 Japan 135 12 147 Asia Pacic 193 4 197 Total number of employees 4,781 45 4,826 2020/21 Permanent contract Temporary contract Total North America 1,038 3 1,041 South America 71 0 71 Europe 1,914 44 1,958 Middle East, Africa and India 216 0 216 China 716 0 716 Japan 125 11 136 Asia Pacic 201 3 204 Total number of employees 4,281 61 4,342 Total number of employees by employment type (full-time and part-time), by gender 2021/22 Full-time Part-time Total Women 1,342 59 1,401 Men 3,208 70 3,278 Non-categorized 146 1 147 Total number of employees 4,696 130 4,826 2020/21 Full-time Part-time Total Women 1,171 57 1,228 Men 2,902 74 2,976 Non-categorized 137 1 138 Total number of employees 4,210 132 4,342 Collective bargaining agreements All employees have the right to join a trade union and to bargain collectively in accordance with local laws and applicable conven- tions. Everyone who works for Elekta should have the right to fair terms and conditions according to local rules and regulations, including contractual working time, time to rest, overtime and holidays. Employees, whether they are covered by collective bar- gaining agreements or not, are competitively and fairly compen- sated for their work. At year end 2021/22, 12.6% (11) percent of Elekta’s employees were covered by collective bargaining agree- ments (Brazil, Germany, Austria, France, Greece, Italy, Finland, the Netherlands). Occupational health and safety Workplace accidents are followed up by collecting data from production sites involving manual manufacturing work. See page 63. Diversity of governance bodies and employees 2021/22 2020/21 Gender, % Men Women Men Women Board of Directors 57. 2 42.8 62.5 37.5 Group management 85.7 14.3 86.0 14.0 All employees 2) 61.0 29.0 61.0 29.0 2) 10.0% of employees are not categorized. 2021/22 Age, % –30 years 30–50 years 50– years No age recorded Board of Directors 0 14.2 85.8 0 Group management 0 50.0 50.0 0 All employees 11.0 61.6 24.4 3.0 2020/21 Age, % –30 years 30–50 years 50– years No age recorded Board of Directors 0 12.5 87.5 – Group management 0 46.6 46.6 – All employees 11.0 61.7 24.1 3.2 Gender pay gap Gender pay gap is calculated by dividing the average salary of men by the average salary of women and subtracting one. The gender pay gap reects the pay gap across the organization and is not adjusted for dierences such as managerial levels and years of work experience. See page 62. 1) All employee data is based on headcount and includes contractors. INDEPTH SUSTAINABILITY REPORT SUSTAINABILITY GOVERNANCE AND REPORTING PRINCIPLES ELEKTA ANNUAL REPORT 2021/22 68 GRI Standard Disclosure number Disclosure name Page reference Omissions/ Comment GRI 101: FOUNDATION 2016 GRI 102: GENERAL DISCLOSURES 2016 ORGANISATIONAL PROFILE 102-1 Name of the organisation. 96 102-2 Activities, brands, products and services 16–17, 18–29, 96 102-3 Location of headquarters 96 102-4 Location of operations 16–17 102-5 Ownership and legal form 41, 96 102-6 Markets served 17, 30–35, 126 102-7 Scale of the organisation 18, 67–68, 96, 104, 106, 137 102-8 Information on employees and other workers 67–68 102-9 Supply chain 18, 60–61 102-10 Signicant changes to the organisation and its supply chain 98–99 102-11 Precautionary principle or approach 45 102-12 External initiatives 45, 50 102-13 Membership of associations 47, 64 STRATEGY 102-14 Statement from President/CEO (senior decision-maker) 6–7 ETHICS AND INTEGRITY 102-16 Values, principles, standards and norms of behaviour 11–12, 44–45, 56, 59–60 GOVERNANCE 102-18 Governance structure 45, 64, 78–80 STAKEHOLDER ENGAGEMENT 102-40 List of stakeholder groups 64 102-41 Collective bargaining agreements 68 102-42 Basis for identication and selection of stakeholders 64 102-43 Approach to stakeholder engagement 64 102-44 Key topics and concerns raised 64–65 REPORTING PRACTICE 102-45 Entities included in the consolidated nancial statements 137 102-46 Process for dening the report content and the topic boundaries 64–65 102-47 List of material topics 65 102-48 Restatements of information 60 102-49 Changes in reporting 72 102-50 Reporting period 72 102-51 Date of most recent report 72 102-52 Reporting cycle 72 102-53 Contact point for questions regarding the report 72 102-54 Reporting in accordance with the GRI Standards 72 102-55 GRI content index 69–71 102-56 External assurance 72 GRI content index GRI CONTENT INDEX INDEPTH SUSTAINABILITY REPORT 69 ELEKTA ANNUAL REPORT 2021/22 Material topics GRI Standard Disclosure number Disclosure name Page reference Omissions/ Comment ACCESS TO HEALTHCARE GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 46–49, 65 INNOVATION AND R&D GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 13–14, 16, 18–29, 45, 46–47, 57, 65 Company specic disclosure N/A Investments in R&D 99 ANTICORRUPTION GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 54–57, 65, 82 GRI 205: Anti- corruption 2016 205-3 Conrmed incidents of corruption and actions taken 67 FAIR COMPETITION AND PUBLIC TENDERS GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 54–57, 65 GRI 206: Anti- competitive Behavior 2016 206-1 Legal actions for anti-competitive behavior, anti-trust and monopoly practices 67, 100 EXPORT CONTROL AND SAFE TRADING GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 54–57, 65 MATERIALS EFFICIENCY GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 51, 53, 57, 65 GRI 301: Materials 2016 301-1 Materials used by weight or volume 66 EMISSIONS GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 50-53, 57, 65 GRI 305: Emissions 2016 305-1 Direct (Scope 1) GHG emissions 53, 66 305-2 Energy indirect (Scope 2) GHG emissions 53, 66 305-3 Other indirect (Scope 3) GHG emissions 53, 66 305-4 GHG emissions intensity 53 WASTE GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 48–50, 57, 65 GRI 306: Waste 2020 306-1 Waste generation and signicant waste-related impacts 50–53, 67 306-2 Management of signicant waste-related impacts 50–53, 67 306-3 Waste generated 67 306-4 Waste diverted from disposal 67 306-5 Waste directed to disposal 67 ENVIRONMENTAL COMPLIANCE GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 52, 53, 57, 60–61, 65 GRI 307: Environ mental Compliance 2016 307-1 Non-compliance with environmental laws and regulations 67 SUPPLIER ENVIRONMENTAL ASSESSMENT GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 50–52, 57, 60–61, 63, 65 GRI 308: Supplier Environmental Assessment 2016 308-2 Negative environmental impacts in the supply chain and actions taken 51–52, 61 EMPLOYEE ENGAGEMENT GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 57, 58–59, 62, 65 Company specic disclosure N/A Employee engagement and eNPS 62 INDEPTH SUSTAINABILITY REPORT GRI CONTENT INDEX ELEKTA ANNUAL REPORT 2021/22 70 GRI Standard Disclosure number Disclosure name Page reference Omissions/ Comment OCCUPATIONAL HEALTH & SAFETY GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 57, 58, 60, 65 GRI 403: Occupational Health and Safety 2018 403-1 Occupational health and safety management system 60 403-2 Hazard identication, risk assessment and incident investigation 60 403-3 Occupational health services 60 403-4 Worker participation, consultation, and communication on occupational health and safety 60 403-5 Worker training on occupational health and safety 60 403-6 Promotion of worker health 60 403-7 Prevention and mitigation of occupational health and safety impacts directly linked by business relationships 60 Company specic disclosure N/A Number of recorded incidents 63 N/A Number of lost time cases 63 GRI 406: Non- discrimination 2016 406-1 Incidents of discrimination and corrective actions taken 60 TRAINING AND EDUCATION GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 57, 58–59, 65 GRI 404: Training and Education 2016 404-2 Programs for upgrading employee skills and transition assistance programs 59 404-3 Percentage of employees receiving regular performance andcareer development reviews 62 DIVERSITY AND INCLUSION GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 57, 58–59, 62, 65 GRI 405: Diversity and Equal Opportunity 2016 405-1 Diversity of governance bodies and employees 65 405-2 Ratio of basic salary and remuneration of women to men 62, 68 Not reported by employee category. HUMAN RIGHTS ASSESSMENT GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 57, 58, 60–61, 62, 65 GRI 412: Human Rights Assessment 2016 412-2 Employee training on human rights policies or procedures 63 SUPPLIER SOCIAL ASSESSMENT GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 57, 58, 60–61, 62, 65 GRI 414: Supplier Social Assessment 2016 414-2 Negative social impacts in the supply chain and actions taken 60–61 Company specic disclosure N/A Number of audits of high-risk suppliers – results and follow-up actions/sanctions 61 CUSTOMER PRIVACY GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 55–57, 65 GRI 418: Customer Privacy 2016 418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data 67 CUSTOMER HEALTH AND SAFETY GRI 103: Management Approach 2016 103-1–3 Explanation of the material topic, its boundary and management approach 45, 57, 61, 65 GRI CONTENT INDEX INDEPTH SUSTAINABILITY REPORT 71 ELEKTA ANNUAL REPORT 2021/22 Engagement and responsibility It is the Board of Directors who is responsible for the statutory sustainability statement for the year 2021-05-01 – 2022-04-30 on pages 43–72 and that it has been prepared in accordance with the Annual Accounts Act. The scope of the audit Our examination has been conducted in accordance with FAR’s auditing standard RevR 12 The auditor’s opinion regarding the statutory sustainability statement . This means that our examina- tion of the corporate governance statement is dierent and sub- stantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sucient basis for our opinions. Auditor’s report on the statutory sustainability statement To the general meeting of the shareholders of Elekta AB (publ), corporate identity number 556170-4015 Opinion A statutory sustainability statement has been prepared. Stockholm, 8 July 2022 Ernst & Young AB Signature on original auditors’ report in Swedish 1) Rickard Andersson Authorized Public Accountant 1) This is a translation of the original auditors’ report in Swedish. In the event of any dierences between the translation and the original statement in Swedish, the Swedish version shall prevail. Statutory Sustainability Report This report has been prepared in accordance with theSwedish Annual Accounts Act. Please refer to thetable below for page references. Pages Business model 14, 16–17 Environmental matters 51–53, 66–67 Social matters and employees 46–49, 58–63, 67–68 Human rights 58, 60–61, 63 Anti-corruption 54–57, 67 Sustainability risks 36–40, 50, 52, 54, 56–57, 58–61 EU taxonomy reporting 52 Auditor’s report 72 About the sustainability report This sustainability report covers the scal year 2021/22 (May 1, 2021 – April 30, 2022). Elekta publishes a sustain- ability report annually. Last year’s report was published on July 9, 2021. Compared to last year’s report Elekta has adopted the revised standard GRI 306: Waste 2020. The report covers all Elekta’s fully-owned subsidiaries. See Note 19 for details about Elekta’s subsidiaries. The report constitutes Elekta’s Communication of Progress in line with the UN Global Compact’s guide- lines. This report has been prepared in accordance withthe GRI Standards: Core option. Questions or comments? We would like to hear from you. Please contact Hilma Nordquist, Global Sustain- ability Director, [email protected] INDEPTH SUSTAINABILITY REPORT AUDITOR’S REPORT ELEKTA ANNUAL REPORT 2021/22 72 CORPORATE GOVERNANCE 73 ELEKTA ANNUAL REPORT 2021/22 This year, it has been 50 years since Elekta was founded. While our expansion did not begin in earnest until the early 1980s, our focus has remained unchanged: to make a meaningful impact on health- care providers and their patients around the world by delivering the best and safest clinical solutions. Staying close to our customers and really understanding their needs has enabled us to push the boundaries of cancer care. We have pioneered technologies in neurosurgery with Leksell Gamma Knife, and in radiation therapy with onboard imaging and advanced treat- ment modalities such as IMRT and VMAT, among others. Our latest breakthrough, the Elekta Unity MR-Linac, continues to gain ground thanks to to its superior MR image quality, providing exquisite images of targets and surrounding healthy tissue. Building on our Swedish heritage, our systematic approach to internationalization began early. We had a simultaneous strategy of reaching out to both the largest healthcare markets and emerging markets. Today, we are diversied with product development and clinical research activities in all major global markets. Since we work with advanced technology in a very complex clinical area, this foot- print helps us gain an insight into the diering needs of cancer care around the world. We have come a long way in 50 years, having grown from a smallSwedish company specializing in stereotactic radiosurgery, toa broad global radiation therapy leader with sales in more than 120 countries, around 40 of which we have direct representation. Elekta has grown to become essential to cancer care globally, asthe only major company fully focused on radiotherapy and neurosurgery. I know that my father, Professor Lars Leksell, would have been proud to see us carry out his legacy, and excited to see us continue todevelop clinical solutions, software systems, and services to ensure that our customers and their patients get access to best treatment possible. But we could not have done it alone. Close cooperation with ourcustomers has been, and will continue to be, essential for our ability to develop technology that makes a dierence for patients. Iwould therefore like to extend my sincere gratitude to our custom- ers, employees, and many others and thank them for their support and contribution throughout the years. We saw geopolitical tensions rising and the outbreak of a large war in Europe in February 2022, when Russia invaded Ukraine. This will exacerbate the trend of regionalization of supply chains that arguably started with Covid. To ensure we comply with sanctions, and to secure our supply chains, we have strengthened our focus onrisk management and compliance. While the situation in the world might aect the short-term sup- ply chains, it will not aect the elevated post-covid need for cancer care, nor the long-term growing cancer burden. In addition, the shortage and uneven distribution of treatment capacity in the world remains a persistent challenge. Elekta has both a responsibility and a great opportunity to respond to these challenges and strengthen access to cancer care. This is also our key strategic priority in the coming years – ACCESS 2025. This means continuing to bring imaging into the radiotherapy pro- cess and to help clinicians manage the ever-increasing complexity – due to growth in both treatment options and available data – by integrating and systemizing treatment workows with more e- cient software systems. Our knowledge of the disease continues to develop. As we better understand the tumors’ genetics, and with support of other pathological information sources, the personaliza- tion of treatment will improve. Going forward, more interplay can be expected with immunotherapy. In addition, we have launched new solutions and programs to strengthen access, particularly in low- income countries, which is the key priority of our social sustainability strategy. The establishment of the Elekta Foundation in 2021 is an important element of this strategy. Creating value for patients and cancer care demands persever- ance and focus. We will continue to think and plan for the long term. This starts by securing eciency and good governance in our own operations, while addressing our sustainability, environmental and social responsibilities. Using our nancial resources wisely ensures that we can provide a return to our nancial stakeholders, without whom we would not have been able to get to where we are, and where we need to go. We will keep pushing the boundaries for many years to come. We are here to continue to provide hope and help for everyone dealing with cancer. Laurent Leksell Chairman of the Board “ Elekta has grown to become essen- tial to cancer care globally, as the only major company fully focused on radiotherapy and neurosurgery. ” CORPORATE GOVERNANCE CHAIRMAN’S COMMENT ELEKTA ANNUAL REPORT 2021/22 74 Elekta AB (publ) 1) is a Swedish public limited liability company listed on Nasdaq Stockholm. Elekta considers good corporate governance, including risk management and internal control, to be an important element of successful business operations as it provides oppor- tunities for maintaining condence among customers, patients, shareholders, authorities and other stakeholders. Elekta’s Corporate Governance Report 2021/22 has been prepared by Elekta AB’s Board of Directors, in accordance with the Annual Accounts Act and the Swedish Corporate Governance Code, as a separate report from the Board of Directors’ report, and it has been reviewed by Elekta AB’s external auditor. Elekta’s structure for corporate governance An overview of Elekta’s corporate governance structure is set out inthe illustration below. The dierent corporate bodies that are included in the structure are described in more detail in this report inthe order specied below. Elekta has implemented and complied with the Swedish corpo- rate governance code (the Code) 2) with one exception during the -scal year of 2021/22. According to point 2.4 of the Code, the chairman of the Board of Directors is not to be the chairman of the nomination committee. Elekta’s nomination committee resolved toappoint the Chairman of the Board, Laurent Leksell, as chairman of the nomination committee. This was motivated by the fact that Laurent Leksell, in his capacity as the major shareholder, is well suited to eectively lead the work of the nomination committee inorder to achieve the best result for Elekta AB’s shareholders. ELEKTA’S GOVERNANCE STRUCTURE As per April 30, 2022 Internal control Risk management Shareholders Nomination committee 2 Elects/Appoints Informs (e.g. directions, objectives, steering documents)/ Reports (e.g. results, compliance, deviations) Informs/Reports direct Informs/Reports indirect 1 External auditor 3 Internal audit 9 Executive Management 6 President and CEO 5 Board of Directors 4 4.1 Compensation and sustainability committee 4.2 Audit committee RA&Q 8 Compliance 7 1) ”Elekta” or the “Group” refers to the Elekta Group which includes Elekta AB (publ) and its subsidiaries, and “Elekta AB” and the “Company” or the “Parent Company” refers to Elekta AB (publ). 2) The Code can be found at www.corporategovernanceboard.se Corporate Governance Report 2021/22 CORPORATE GOVERNANCE REPORT 75 ELEKTA ANNUAL REPORT 2021/22 1 Shareholders Shares and votes Elekta AB’s B share is, since 1994, listed on Nasdaq Stockholm. On April 30, 2022, the total number of registered shares in Elekta AB was 383,568,409 divided between 14,980,769 Series A shares and 368,587,640 Series B shares. At the general meetings of sharehold- ers, which are the forum in which shareholders may exercise inu- ence, Series A shares entitle the holder to ten votes each, while Series B shares carry one vote each. Laurent Leksell has been the largest shareholder of Elekta AB in terms of voting rights since the listing on Nasdaq Stockholm and controlled through own and related parties as per 30 April, 2022, holdings representing 30.4 percent of the votes. Read more about the share, the shareholders and Elekta’s divi- dend policy on page 41. General meeting of shareholders The general meeting of shareholders is Elekta AB’s highest deci- sion-making body at which the shareholders can exercise their right to make decisions in certain company matters. In addition to the annual general meeting (AGM) of shareholders, extraordinary gen- eral meetings (EGM) of shareholders may be held at the discretion of the Board of Directors or if requested by the external auditor or by shareholders holding at least ten percent of the shares. The AGM is held in Stockholm, Sweden. The date and venuefor the meeting will be announced on Elekta’s website www.elekta.com, not later than in connection with the third interim report for the period May–January. Notication ofthe AGM is published, according to the rules of the Swedish Companies Act, not earlier than six weeks and not later than four weeks in advance of the meeting. Disclosures on direct or indirect shareholdings in Elekta AB repre- senting at least one-tenth of the voting rights, and information about authorizations by the general meeting of shareholders for the Board of Directors to decide upon acquisition ofown shares, areset out on page 41. AGM 2021 The AGM 2021 was held on August 25, 2021. As a result of the Covid- 19 pandemic, the AGM was held through advance voting. 417 share- holders voted in advance, either personally or by proxy, correspond- ing to approximately 70 percent of the votes in the Company. The main resolution items of the AGM 2021 are set out in the column to the right. Further information regarding the AGM 2021, including the minutes, is available at www.elekta.com. No other general meetings of shareholders were held during the scal year 2021/22. AGM 2022 The AGM 2022 will be held on August 25, 2022. More information regarding this AGM is found on page 160. The main resolution items of the AGM 2021: • A dividend payment of SEK 2.20 per share to shareholders • Discharge from liability of the members of the Board as well as the President and CEOfor management of Elekta AB in the 2020/21 scal year • Adoption of fees to the Board totaling SEK 5,040,000 (4,580,000), of which SEK 1,410,000 (1,280,000) to the Chairman of the Board and SEK 605,000 (550,000) to eachof the other external members of the Board, as wellasremuneration for board committee work ofSEK135,000 (115,000) to the chairman of the compensa- tion and sustainability committee and SEK 90,000 (80,000) toeach oftheother members of the committee, and SEK250,000 (240,000) to the chairman of the audit committee and SEK 160,000 (150,000) to each of the other members ofthe committee • Re-election of Laurent Leksell, Caroline Leksell Cooke, Johan Malmquist, Wolfgang Reim, Jan Secher, Birgitta Stymne Göransson and Cecilia Wikström as members ofthe Board. Laurent Leksell was re-elected as Chairman or the Board • Election of Ernst & Young AB as external auditor, with authorized public accountant Rickard Andersson as the auditor in charge • Approval of the Board’s remuneration report • Adoption of the share-based long-term incentive program, Performance Share Plan 2021, to be oered to Executive Management and certain keyemployees • Authority for the Board for acquisition and transfer of own shares • Contribution for establishing a philanthrophic foundation 0 200 400 600 20212020201920182017 Shareholders Number of shareholders present (personally or by proxy) Percentage of voting rights present (personally or by proxy) 30 50 70 90 Votes (%) SHAREHOLDERS’ PRESENCE AT AGM:S CORPORATE GOVERNANCE REPORT ELEKTA ANNUAL REPORT 2021/22 76 2 Nomination committee Responsibilities of the nomination committee The main responsibility of the nomination committee is to prepare proposals for adoption at the AGM with respect to election and remuneration matters, as for instance election of chairman of the general meeting, directors and external auditor as well as remuner- ation to the directors and the external auditor. Appointment of nomination committee The instruction for the nomination committee, adopted by the AGM 2020, sets out a procedure for how the nomination commit- tee for an AGM shall be appointed. According to such procedure, the Chairman of the Board shall contact the four largest sharehold- ers in terms of voting rights, besides the shareholder or shareholders the Chairman of the Board may represent. The assessment of which shareholders that are the largest shall be based on Euroclear Sweden’s shareholder statistics as of the last banking day in Sep- tember. These shareholders will be given the opportunity to appoint one person each who, together with the Chairman of the Board, will constitute the nomination committee. The chairman of the nomination committee will, unless the nomination committee unanimously decides otherwise, be the member of the nomination committee appointed by the largest shareholder in terms of voting rights. No remuneration will be paid to the members of the nomi- nation committee. The composition of the nomination committee for the AGM 2022 is set out below. The assignment for the nomination com- mittee is valid until the end of the next AGM or, where applicable, until a new nomination committee has been appointed. The nomination committee for the 2020 annual general meeting of shareholders The composition of the nomination committee for the 2020 annual general meeting of shareholders is set out below. The assignment for the nomination committee is valid until the end of the next annual general meeting of shareholders, or, where applicable, until a new nomination committee has been appointed. The nomination committee for the AGM 2022 • Laurent Leksell (chairman) – represents his own and related parties’ holdings and is also theChairman of the Board • Jesper Bergström – Handelsbanken Funds • Per Colleen – The Fourth Swedish National Pension Fund • Filippa Gerstädt – Nordea Funds • Javiera Ragnartz – SEB Funds Preparation for the AGM 2022 The nomination committee held ve meetings prior to the AGM 2022. An evaluation of the Board’s work, competences, composi- tion and independence of its members is performed annually and initiated by the Chairman of the Board, partly to assess the pre- ceding year, partly to identify areas for development for the Board. During the scal year 2021/22 a digital evaluation was per- formed with support from an external company. The conclusion is presented to the nomination committee by the Chairman of the Board. In addition, individual interviews have been held by the committee with each director. The nomination committee has, through the audit committee’s chairman, obtained the audit committee’s recommendation as regards election of auditor. When preparing its proposal for board composition, the nomi- nation committee has applied the Code, section 4.1, as diversity policy. The aim with the policy is to have a composition appropri- ate to Elekta AB’s operations, phase of development and other relevant circumstances. The members of the Board are collectively to exhibit diversity and breadth of qualications, experience and background. Gender balance on the Board is to be strived for. The view of the nomination committee is that the current board com- position meets the requirements of the policy. One of the focus areas for the committee has been to increase gender balance on the Board. The nomination committee’s proposals for the AGM 2022 are presented in the notice convening the AGM 2022. A rea- soned statement explaining the nomination committee’s pro- posal for the Board’s composition is posted on Elekta’s website www.elekta.com in connection with the issuance of the notice of the AGM 2022. 2 External auditor 3 External auditor and auditor in charge The external auditor of Elekta AB is appointed by the AGM for a period lasting until the end of the next AGM. The AGM 2021 elected Ernst & Young AB (EY) as external auditor with Rickard Andersson as auditor in charge. Rickard Andersson was born in 1973 and is an authorized public accountant as well as member of FAR. During the year, he was also the elected auditor in charge of Munters, Securitas, SSAB and Volati. He has no assignments in any other company that aects his independence as the auditor in charge of Elekta AB. EY has performed the audit of Elekta for the 2021/22 scal year, inaccordance with a risk-based external audit plan, resulting in the unqualied auditor’s report and statement, which are available on page 148. Services and fees According to the audit committee’s guidelines, services in addition to audit services, known as permissible non-audit services, that Elekta may procure from the external auditor in order to assure that the impartiality and independence of the external auditor is not put at risk, may not exceed 70 percent of the cost for audit services measured over a three-year period. The audit committee may decide to make exceptions under certain circumstances. CORPORATE GOVERNANCE REPORT 77 ELEKTA ANNUAL REPORT 2021/22 • Ensuring that external information and communications are characterized by openness, and that they are accurate, reliable and relevant Appointment of the Board of Directors The Board of Elekta AB is elected by the AGM for a period lasting until the end of the next AGM. According to the articles of association of Elekta AB, the Board isto have between three and ten members with no more than ve deputy members. There are no specic rules in the articles of association concern- ing the appointment or removal of members of the Board, nor concerning amendment of the articles of association. Composition and independence of the Board of Directors The Board comprises seven members, which are presented on page 86. There are neither deputy board members nor employee representatives on the Board. The General Counsel, EVPand Chief Compliance Ocer (the General Counsel) serves assecretary for the Board. According to the Code, the majority of the directors appointed by the general meeting of shareholders shall be independent of Elekta AB and the Executive Management. In addition, at least two of the directors, who are independent of Elekta AB and the Executive Management, shall also be independent of major shareholders. The composition of the Board meets the independence requirements asve of the seven members of the board have been deemed inde- pendent in relation to Elekta AB, the Executive Management and major shareholders. These ve members are Johan Malmquist, Non-audit services procured from EY during the 2021/22 scal year adhered to the guidelines established and comprised mainly oftax consultancy and other audit-related services. The fees to the external auditor for the 2021/22 scal year are reported in Note 9. Board of Directors 4 Responsibilities of the Board of Directors The work of the Board of Directors is regulated by the Swedish Companies Act, Elekta AB’s articles of association, the Code and the working instructions for the Board. The Board is responsible for the organization of Elekta AB and the management of its opera- tions in the interest of the Company and all shareholders. This includes appointing a President and CEO who is responsible for managing the day-to-day operations in accordance with instruc- tions from the Board. The responsibilities for the Board also include: • Establishing overall goals and strategy • Dening guidelines to govern ethical conduct with the purpose ofensuring the long-term ability to create value • Ensuring an eective system for follow-up and control on Elekta AB’s operations and risks that Elekta AB and its operations are exposed to • Ensuring a satisfactory process for monitoring compliance withlaws and regulations and other regulatory compliance requirements applicable for Elekta AB as well as compliance withinternal company regulations Board meeting • Review of strategic initiatives Innovation The accelerated investments in innovation during the year highlights the importance of R&D for Elekta and these activities are moni- tored closely by the Board of Directors. The R&D pipeline focuses on personal precision, elevated productivity and integrated informatics within oncology care. The Board’s aim is to ensure Elekta’s competitive edge and providing good return on the investments through innovations that will drive Elekta’s future growth and improve protability. 2 2021 MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER 2022 JANUARY FEBRUARY MARCH APRIL Two board meetings • Inaugural board meeting • Adoption of interim report Q1 2021/22 • Report from the audit committee and the compen- sation and sustainability committee Board meeting • Adoption of year-end and Q4 report 2020/21 • Meeting with auditor and review of external audit report for the full year • Review and approval of budget for scal year 2021/22 incl. nancial targets • Report from the audit committee and the compensation and sustainability committee • Adoption of updated prospectus for MTN-program Board meeting • Adoption of annual report 2020/21 (including all reports therein) • Adoption of notice and nal proposals to the AGM THE WORK OF THE BOARD OF DIRECTORS INCLUDING SOME IMPORTANT AGENDA ITEMS IN 2021/22 Board meeting • Presentations by an investor, an analyst and customers on the external view of Elekta • Review of strategic initiatives Examples of the Board’s focus areas: New external environment Supervision of pandemic related headwinds remained on the Board of Directors’ agenda throughout the year. Elekta’s Resilience and Excellence program was accelerated as geo- political uncertainties emerged from the war inUkraine next to persistent pandemic chal- lenges. The Board has focused on foreseeing and mitigating the impact from the new macroeconomic environment with continued higher costs in the supply chain and rising ination. 1 CORPORATE GOVERNANCE REPORT ELEKTA ANNUAL REPORT 2021/22 78 Wolfgang Reim, Jan Secher, Birgitta Stymne Göransson and CeciliaWikström. The independence of each board member is shown on page 86. Remuneration to the Board is set out in Note 7 and on page 86. The work of the Board of Directors The working instructions for the Board establish that the Board isto: • Hold at least seven ordinary meetings per year • Adopt nance and foreign exchange policies • Adopt a code of conduct • Approve a long-term plan and budget, including an investment budget • Approve investments and similar decisions where the amount of the transaction exceeds SEK 10 million if such a transaction falls outside the approved investment budget • Decide on acquisition or sale of real estates or shares, or acquisi- tion or sale of the assets of, or a major part of the assets of, another company • Decide on the establishment and liquidation of subsidiaries • Adopt guidelines for remuneration of senior executives to be approved by the AGM • Decide on terms of employment for the President and CEO according to guidelines for remuneration of senior executives approved by the AGM • Adopt the annual report, year-end report and interim reports Within the Board, there is no special distribution of responsibilities among the members of the Board in addition to the duties that the Board meeting • Adoption of interim report Q2 2021/22 • Adoption of working instructions for board, committees and CEO • Meeting with auditor and review of mid-term audit report • Report from the audit committee and thecompensation and sustainability committee Board meeting • Review of draft budget for scal year 2022/23 Board meeting • Investment review M&A and partnerships Complementing Elekta’s own R&D pipeline through mergers and acquisitions is permanently on the Board of Director’s agenda. Since the competitive landscape of the radiotherapy market shifted, build- ing partnerships has been on top of the agenda. During the year Elekta has entered new partnerships with both industry peers as well as customers. The Board has been closely involved in building these collaborations that will broaden Elekta’s oering while ensuring the Company’s vendor agnostic position is kept intact. 3 2021 MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER 2022 JANUARY FEBRUARY MARCH APRIL THE WORK OF THE BOARD OF DIRECTORS INCLUDING SOME IMPORTANT AGENDA ITEMS IN 2021/22 Board meeting • Adoption of interim report Q3 2021/22 • Report from the audit committee and the compensation and sus- tainability committee • Review of long-term nancial plan Board has delegated to the compensation and sustainability committee and to the audit committee, respectively. During the scal year 2021/22, the Board held ten minuted meetings. Board meetings are normally held at Elekta’s head oce in Stockholm, or at other locations where Elekta has oces or other facilities, but have during this scal year to some extent been held through telephone and video conferences as a result of the pandemic. Representatives from the Executive Management and other senior managers regularly attend board meetings to report on matters within their respective area of responsibility. For ordinary board meetings, an agenda with decision supporting material is available ahead of the meetings. The board members’ attendance at board meetings is shown on page 86. BOARD COMMITTEES To improve the eciency of the board work, the Board has appointed a compensation and sustainability committee and anaudit committee. The committees work in accordance with directives adopted by the Board and prepare recommendations and proposals for the Board. 4.1 Compensation and sustainability committee The committee and its responsibilities The compensation and sustainability committee shall prepare theBoard’s motions on issues relating to remuneration principles, remuneration and other terms and conditions of employment forthe Executive Management. In relation to sustainability, CORPORATE GOVERNANCE REPORT 79 ELEKTA ANNUAL REPORT 2021/22 thecommittee shall, inter alia, monitor the measures to strengthen corporate culture with respect to corporate social responsibility in the light of Elekta’s code of conduct as well as advise the President and CEO on proposals for targets and vision for sustainability. Composition The compensation and sustainability committee consists of four members appointed by the Board, at the rst board meeting fol- lowing the election of the Board by the AGM, for a term of one year. In addition to the committee members, the President and CEO, the Executive Vice President Human Resources, the Vice President of Compensation & Benets, the Group Sustainability Director as well as Vice President Group Strategy & Sustainability attend the committee’s meetings. The General Counsel serves as secretary for the committee. The compensation and sustainability committee • Laurent Leksell (chairman) • Caroline Leksell Cooke • Wolfgang Reim • Cecilia Wikström Work during the year During the scal year 2021/22, the compensation and sustainability committee held four minuted meetings. At these meetings, the committee has, inter alia, reviewed the remuneration of the Execu- tive Management, prepared a proposal for a new long-term incen- tive program for 2022/23 for Executive Management and other key individuals as well as prepared the Board’s recommendations regarding guidelines for remuneration of senior executives for the next AGM. In addition, the work has included conducting a succes- sion planning and reviewing management succession plans for senior management levels and other Group-critical positions. The committee has further, in line with instructions from the Board of Directors, worked with the Elekta’s sustainability matters, with a special focus on human rights, corporate philanthropy and environ- ment. The members’ attendance at committee meetings and independence are shown on page 86. 4.2 Audit committee The audit committee and its responsibilities The Board shall appoint an audit committee with the respons ibility to monitor Elekta AB’s nancial reporting and provide recommen- dations and proposals to ensure the reliability of the reporting. The committee shall, with regard to the nancial reporting, monitor the eectiveness of Elekta’s internal control, internal audit and risk management. The committee’s responsibilities also include being continually informed about the audit of the annual report and con- solidated nancial statements. In addition, the committee shall inform the Board about the result of the audit and how the audit contributed to the reliability of the reporting as well as the role of the committee during the audit. The audit committee also exam- ines and monitors the impartiality and independence of the audi- tor. Furthermore, the committee provides proposal to Elekta AB’s nomination committee concerning the appointment of auditor for the following mandate period. Composition The members of the audit committee cannot be employed by the Company and at least one member shall have accounting or audit competency. Elekta’s audit committee has three members who were appointed by the Board at the rst board meeting following the election of the Board by the AGM, for a term of one year. In addition to the committee members, the CFO, the Head of Group Accounting and the Chief Audit Executive also attend the committee’s meetings as well as the external auditor, if needed. TheDeputy General Counsel serves as secretary for the committee. The audit committee • Birgitta Stymne Göransson (chairman) • Johan Malmquist • Jan Secher Work during the year During the scal year 2021/22, the audit committee held six min- uted meetings. During such meetings, the committee has reviewed the year-end report and annual report for the scal year 2020/21 aswell as interim reports for 2021/22. Further, part of the work has been to monitor the performance of the global internal control framework, approve the internal audit plan as well as review and follow up of internal audit reports. Another task, among others, that has been dealt with is to review the external audit plan and external audit reports. At every meeting, in-depth reviews are car- ried out on the nancial management of selected business areas. The members’ participation at committee meetings is shown on page 86. President and CEO 5 Responsibility The President and CEO is responsible for the day-to-day manage- ment of Elekta AB in accordance with applicable laws and regula- tions as well as internal steering documents. These include the working instructions for the CEO adopted by the Board and other instructions from the Board. The President and CEO also represents the Group in various contexts, leads the work of the Executive Man- agement and makes decisions in consultation with the members ofthe Executive Management. “ Good corporate governance includes an audit committee that monitors both the inter- nal and external reporting. ” Johan Malmquist Member, Elekta’s audit committee CORPORATE GOVERNANCE REPORT ELEKTA ANNUAL REPORT 2021/22 80 Appointment of the President and CEO The Board appoints Elekta AB’s President and CEO. Gustaf Salford is the President and CEO of Elekta AB. More infor- mation about Gustaf Salford isprovided inthe presentation of the current Executive Management on page 88. Remuneration to the President and CEO is described in Note 7. The guidelines, proposed by the Board for approval by the AGM 2022, for remuneration to the Executive Management are described on page 102 and in the Remuneration report 2021/22 on page 92. Executive Management 6 Appointment and responsibility The President and CEO appoints the members of the Executive Management. The President and CEO is responsible for and leads the work and meetings of the Executive Management. The Execu- tive Management supports the President and CEO in his work and makes joint decisions following consultation with various parts of the Group. Composition A presentation of Elekta’s current Executive Management is pro- vided on page 88. As of April 30, 2022, Elekta’s Executive Man- agement comprised the President and CEO, the CFO, the four Solu- tions presidents, four region EVPs as well as the heads of Product, Global Services, HR and Legal & Compliance. Remuneration to the Executive Management is described in Note 7. The guidelines, proposed by the Board for approval by the AGM 2022, for remuneration to Executive Management are described on page 102. Work during the year The Executive Management meets on a regular basis. During the scal year, the meetings have partly been carried out through telephone and video conferences due to the pandemic. The most important agenda items at the meetings during the scal year were strategic and operational matters such as product development, acquisitions/divestments, investments, market development, organization, long-term plans and budget, and monthly and quarterly business and nancial reviews. 7 Compliance Responsibility The compliance function’s responsibilities are to review and evalu- ate compliance issues within the organization to ensure that management and employees of the Group are in compliance with rules and ethical regulations relating to, inter alia, anti-bribery and corruption, trade compliance as well as competition and antitrust laws. The General Counsel presents on a quarterly basis for the audit committee the progress of the risk-based compliance program and reports on any incidents and on-going investigations. A written compliance report is submitted at every meeting. The function is headed by the General Counsel. Work during the year The compliance function was partly reorganized during the scal year, inter alia, to increase regional focus. Two regional compliance heads, who report directly to the General Counsel, were appointed. During the year, focus has remained on the third-party manage- ment program, which involves activities such as risk assessment, monitoring and training of business partners such as distributors and sales agents. Elekta’s compliance program has been further strengthened through an update of the training and awareness program. This includes a review of the automated Code of Conduct training which is given to all employees as well as the in-depth individual training adapted to specic risks deemed relevant for the employ- ees respective role and duties. More information about the compliance function, the compli- ance and business ethics program as well as the activities during the year is provided on page 54. 8 Regulatory aairs and quality Responsibility The regulatory aairs and quality function’s responsibilities include supporting management to comply with regulatory requirements for products, quality systems and market entry. Interaction with, and to provide transparency to, external regulatory bodies is CORPORATE GOVERNANCE REPORT 81 ELEKTA ANNUAL REPORT 2021/22 another key responsibility. The function is furthermore responsible for the quality system’s infrastructure and compliance, product clearances and approvals as well as post market vigilance and recall reporting. The heads of the function, Senior Vice President Regulatory Aairs & Quality and Vice President Regulatory Aairs & Quality, both report to the General Counsel. Work during the year The most important tasks during the scal year have encompassed ensuring product approval forregulatory market entry as well as to manage inspections from dierent authorities and organizations to ensure continued certication. In addition, the work of the function has included completing the implementation of the Medical Device Regulation (MDR) in Europe. The quality management system and the main part of the product portfolio are MDR certied. 9 Internal audit Responsibility Internal audit is an independent function that conducts indepen- dent and objective assurance, review, investigation and consulting activities. The scope of the internal audit function encompasses the examination and evaluation of the adequacy and eective- ness of Elekta’s governance, process steering, risk management and internal control processes, as well as the quality of perfor- mance in carrying out assigned responsibilities to achieve the Group’s objectives as part of the assurance activity. The work also encompasses consulting activities and advisory support in the same areas. The internal audit function works in accordance with the guidelines for the internal audit function adopted by the Board. The internal audit function is appointed by, and reports to, the audit committee and the Board. The Chief Audit Executive, who functionally reports to the audit committee and administratively to the CFO, supervises the internal audit function. Work during the year The work of the internal audit function, based on an internal audit plan established and approved by the audit committee, has ncluded internal audits and investigations of subsidiaries. Inaddition, their work included quality reviews of processes encompassed by the global internal control program. Further- more, statistical follow-up reporting of the internal control pro- gram to Executive Management, the audit committee and the Board has been carried out as well as consulting in connection with the update of the internal control program. The internal audit function has during the year coordinated the external auditas well as managed the audit committee meetings. ELEKTA´S PROCESS FOR INTERNAL CONTROL Risk management, governance and internal control are key com- ponents of Elekta’s strategy and management processes. Elekta’s Board of Directors assumes the overall responsibility for establish- ing an ecient control of risk management, governance and internal control. The responsibility for maintaining the control systems is delegated to the President and CEO, who is assisted bythe Executive Management, other operational managers andcoworkers. Functions responsible for risk management, governance and internal control continuously report the current status directly to the Board and/or the audit committee. Elekta’s personnel will represent the rst level of control environ- ment in their day-to-day work and in their management teams. To facilitate the work, there are policies, guidelines and boundaries set by the Executive Management on behalf of the Board. The boundar- ies should ensure that no individual employee accepts a dispropor- tionate portion of riskor to little risk which may result in missed opportunities and ultimately Elekta not achieving the strategic goals. All employees have the obligation to obtain an appropriate level of understanding within their roles and responsibilities and carry out their responsibilities correctly and completely. Employees are the owners of all risks related to their business operations and are expected to manage these by maintaining good internal control and follow risk and control procedures. Every employee is expected to comply with internal policies, procedures and applicable laws and regulations. The next stage of control environment lays within the support functions such as nance, IT, HR, compliance, regulatory aairs and quality as well as legal that support and monitor the rst level of controls. The nal stage of control environment is the internal audit func- tion that provides independent and objective audits, assurance and advisory support to the management on governance, preparation of decisions, risk management and internal control. The process for risk management and internal control applies for the entire Group, including business lines, regions, functions, management, coworkers, processes and technology. The Elekta risk work is focused on identifying and managing strategic risks, operational risks, legal and regulatory risks, external risks and market- and nancial risks. Risk assessments are being completed and updated continuously in order to identify risks that can impact the achievement of strategy goals, legal compliance and regulations and nancial reporting. The Board also continuously manages decisions that include risk management, for example, within the Elekta strategy and manage- ment processes and business management. Find out more about risk management in the Board’s report on risk management and internal control over nancial reporting on page 83. A description of how other risks are being managed can be found in the risks and risk management section on page 36. RISK MANAGEMENT AND INTERNAL CONTROL OBJECTIVES INTERNAL GOVERNANCE AND CONTROL ENVIRONMENT INFORMATION AND COMMUNICATION RISK MONITORING CONTROL CORPORATE GOVERNANCE REPORT ELEKTA ANNUAL REPORT 2021/22 82 Report on risk management and internal control over nancial reporting The Board of Directors’ report on risk management and internal control over nancial reporting has been prepared in accordance with the Annual Accounts Act and the Swedish corporate gover- nance code, and constitutes an integral part of the corporate governance report. The external nancial reporting has been pre- pared in accordance with laws and regulations and applicable accounting standards, namely the International Financial Report- ing Standards (IFRS), and other requirements on listed companies, such as the Nasdaq Stockholm Rule Book for Issuers. Elekta’s work on risk management and internal control over nancial reporting is based on the 2013 updated internal control – integrated frame- work (the “framework”), established by the Committee of Spon- soring Organizations of the Treadway Commission (COSO). The COSO framework is based on 17 fundamental principles linked to ve components: control environment, risk assessment, control activities, information and communication, as well as monitoring. Objective The Elekta Group is governed and controlled based on the distri - bution of rights and responsibilities, including decision- making, among dierent corporate bodies according to laws and regula- tions as well as internal steering documents. A structure is pro- vided through which Elekta’s objectives and the means of attain- ing these objectives and monitoring performance are set. The objectives reect choices made onhow the Group seeks to cre- ate, preserve and realize value for its stakeholders. Governance istwofold; it concerns both eectiveness and accountability. Eectiveness is measured by performance, and accountability includes all issues surrounding disclosure and transparency. Objective setting is a prerequisite necessary to internal control and a key part of the Elekta strategy and management processes. Therefore, Elekta’s corporate governance encompasses both the strategy and management processes, outlining the establishment of both long-term objectives and strategies with at least a three- year perspective and short-term objectives and plans with a one- year perspective, and the risk management and internal control process. Control environment Important elements of the control environment applicable for Elekta’s nancial reporting are the nancial guide, including the accounting policy, reporting instructions, authorization policy and nance policy. In addition, there are other important elements of the control environment for nancial reporting such as the commu- nication policy and processes and work instructions to be found in group-wide steering documents and in the Elekta business man- agement system. Risk assessment is carried out continuously throughout the yearin order to identify risks that can aect the possibility to reach targets set in relation to the strategy, the business, reporting and compliance. Risk assessment Risk assessment includes identifying any risk that the qualitative characteristics of useful nancial information, according to IFRS, may not be fullled or the nancial reporting assertions may not be supported. Risk assessment criteria include occurrence, complete- ness, accuracy, cut-o, classication, existence, rights and obliga- tions, and valuation for prot and loss and balance sheet items in the nancial reporting as applicable, but also information process- ing relating to input, processing and recording of data. A risk assessment regarding internal control over nancial reporting is performed once a year and covers prot and loss and balance sheet items in the nancial reporting and related areas and processes. The work is documented in a risk map and included in risk and control matrices (RACMs) per area and process. Control activities Control activities mitigate the risks identied to achieve set objec- tives through adherence to risk tolerance levels in terms of globally dened minimum internal control requirements over nancial reporting. The control activities are documented in RACMs per area, process and risk. Control activities are aimed at preventing errors and irregularities from occurring and/or detecting errors and irregularities that may have occurred. Control activities can be manual or automated, such as authorizations and approvals, verications, reconciliations, and business performance reviews, or a combination of two. Control activities comprise the following areas and processes: • Entity-level controls – over the control environment • General IT controls – over IT system components, processes and data for a given IT environment including logical access, program change management, back-up and recovery • Process controls – over processes such as order recognition, order to cash, revenue recognition, purchase to pay, inventory, payroll and nancial statement close strategic perspective ≥ 3 years CORPORATE GOVERNANCE REPORT 83 ELEKTA ANNUAL REPORT 2021/22 The globally dened minimum internal control requirements over nancial reporting comprise entity level controls that are regulated through Elekta’s steering documents at Group-wide level, the busi- ness management system and internal control frameworks of stan- dard controls that include general IT controls and uniform process controls for all Elekta companies and locally dened controls where necessary. The controls included in the internal control framework are documented in RACMs as standard models for all entities and then specically for each individual entity. All controls in the internal control framework are based on risk assessments of nancial ows that impact the nancial reporting in general and more specically for the individual entities. Information and communication Information and communication regarding risk management and internal control over nancial reporting relates to both internal and external information and communication. Internal information about important internal steering docu- ments for risk management and internal control over nancial reporting, including RACMs, as well as the communication policy and processes, work instructions and other relevant information in the Elekta business management system, are channeled down the organization and communicated to relevant personnel on the Group’s intranet. Internal information regarding the status of the eective design and operating eectiveness of risk management and internal control over nancial reporting are channeled up the organization, based on the result of the monitoring, in order for management at dierent levels to be able to take corrective actions as necessary. The President and CEO and the Chief Audit Executive in turn inform the audit committee and the Board, respectively, of the results of the monitoring in order for them to be able to fulll their oversight responsibility. This communication normally takes place at the ordinary audit committee meetings and board meet- ings, respectively. Elekta provides the nancial markets and other stakeholders withcontinuous external information and communication regard- ing the Group’s and Elekta AB’s nancial performance and position in accordance with the communication policy. External information and communication regarding nancial reporting is provided in the form of: • Interim reports, year-end reports and annual reports • Press releases on news and events that may signi- cantly aect the Group’s valuation and future prospects • Presentations and telephone conferences for nancial analysts, investors and media representatives on aregular basis See information, including reports, press releases and presentations, on the Elekta website www.elekta.com. Elekta observes a silent period prior to each interim and year-end report. Monitoring Monitoring of internal control over nancial reporting is carried out through ongoing evaluations, separate evaluations, or some combi- nation of the two, to ascertain whether the ve components of risk management and internal control are present and functioning: control environment, risk assessment, control activities, information and communication, as well as monitoring. Ongoing evaluations are routine operations, built into processes. Monitoring takes place on a real-time basis by operational manag- ers and personnel and periodically by management at dierent levels of the Group, and the audit committee and the Board, and includes, for example, monitoring of the following: • Business and nancial performance • Order bookings and revenue recognition • Compliance reports from the compliance function • Internal audit reports from the RA&Q functions related to, forexample, the quality system and regulatory compliance • Internal audit planning • Internal audit reports from the internal audit function • External audit reports from the external auditor Special evaluations may be performed through: • Periodic reviews of whether risk management and internal control are operating as intended by nancial managers and general management at local, regional, business area and Group level as applicable • Internal control compliance conrmation questionnaire, atool for local management to report on the status of eective design and operating eectiveness of the globally dened minimum internal control requirements over nancial reporting documented in RACMs • Internal audit according to the internal audit plan Instructions and budget approvals of internal control for nancial reporting are conducted by the audit committee on behalf of the Board and require supporting documentation in the form of pre- sentation of status, progress and solutions, as well as supporting appendices such as internal audit reports and internal control reports. Status, progress and solutions for internal control over nancial reporting are discussed at the audit committee meeting and instructions are documented and, where approvals are required, approvals are performed and documented accordingly. The audit committee subsequently briefs the Board of Directors at the next board meeting and provides supporting documentation for discussion and approval. “ Elekta’s Internal Control Framework brings a system- atic, disciplined ap proach to evaluate and improve the eectiveness of risk management, control, and governance processes. “ Jonny Lövgren Chief Audit Executive, Elekta CORPORATE GOVERNANCE REPORT ELEKTA ANNUAL REPORT 2021/22 84 Activities performed in the scal year 2021/22 During the scal year 2021/22, the performed activities have primarily focused on review of timeliness and qual- ity of internal control performance, improvement of management reporting regarding adherence to the internal control framework as well as ongoing internal control improvements. In addition, the implementation of the internal control framework in some small-sized new group companies has continued as planned. Risk- based reviews on the quality of nancial reporting, underlying processes and control points in smaller and/ or new entities have been carried out. Annual update of the internal control framework has been performed according to plan as well as annual sign-o by manage- ment. Information relating to the results of the inde- pendent reviews were addressed at the meetings of the audit committee and subsequently followed up by the Board. Planned activities for the scal year 2022/23 During the scal year 2022/23, focus will be on reviews of timeliness and quality of internal control perfor- mance and also increase eciency and centralization of control performance. Furthermore, on-going imple- mentation of internal control framework in new entities will be continued and any new entities will be included continuously. Also, additional risk-based reviews on thequality of nancial reporting, underlying processes and control points in smaller and/or new entities will continue. CORPORATE GOVERNANCE REPORT 85 ELEKTA ANNUAL REPORT 2021/22 1 4 7 2 3 5 6 Board of Directors CORPORATE GOVERNANCE BOARD OF DIRECTORS ELEKTA ANNUAL REPORT 2021/22 86 First elected: 2011 Member of the board Member of the compensation and sustainability committee Attendance: 10/10 4/4 Total fees (SEK): 605,000 90,000 Year of birth: 1956 Education: MSc and Doctor of Physics, Federal Institute of Technology ETH in Zurich Independence: Other board assignments: Board chairman: Ondal Medical Systems GmbH. Board member: Nord A/S, LAP GmbH and Audeering GmbH Holdings 1) : 17,50 0 B -share s Principal work experience: CEO of Amann Girrbach AG. Independent consultant focusing on the medical technology industry and interim CEO at DORC BV (2016) and Ondal Medical Systems (2013). Before that, CEO of Dräger Medical AG (2000–2006). At Siemens from 1986 until 2000, as CEO of the Ultrasound Division (1998–2000) and President of the Special Products Division (1995–1998). 4 Wolfgang Reim First elected: 2010 Member of the board Member of the audit committee Attendance: 9/10 6/6 Total fees (SEK): 605,000 160,000 Year of birth: 1957 Education: MSc in Industrial Engineering andManagement, Linköping University Independence: Other board assignments: Board chairman: Peak Management AG. Board Member: IKEM (Innovation and Chemical Industries in Sweden) and CEFIC (the European Chemical Industry Council) Holdings 1) in Elekta AB: 38,800 B-shares Principal work experience: President and CEO of Perstorp Holding AB. Previously President and CEO of Ferrostal AG (2010–2012). Operating partner of the US private equity fund Apollo in London (2009– 2010). CEO of Clariant AG in Basel (2006–2008). CEO of SICPA in Lausanne (2003–2005). Various leading positions in the ABB Group (1982–2002). 5 Jan Secher First elected: 2005 Member of the board Chairman of the audit committee Attendance: 10/10 6/6 Total fees (SEK): 605,000 250,000 Year of birth: 1957 Education: MBA, Harvard Business School; MSc in Chemical Engineering and Bio technology, Royal Institute of Technology (KTH) in Stockholm Independence: Other board assignments: Board chairman: Industrifonden and Min Doktor. Board member: Bure Equity AB, Pandora AS, Asker Healthcare AB, BCB Medical Oy and Rhenman & Partners Asset Management Holdings 1) : 8,100 B-shares Principal work experience: President and CEO of Memira Group (2010–2013). CEO of Semantix Group (2005–2009). COO/CFO of Telefos (2001–2005). Before that various management positions, including McKinsey, Gambro and Åhléns. 6 Birgitta Stymne Göransson First elected: 1972 Board chairman Chairman of the compen sation and sustainability committee Attendance: 10/10 4/4 Total fees (SEK): 1,410,000 135,000 Year of birth: 1952 Education: MBA and PhD in Economics, Stockholm School of Economics Independence: Other board assignments: Board chairman: Leksell Social Ventures andStockholm School ofEconomics. Board member: International Chamber of Commerce (ICC) and Elekta Foundation Holdings 1) : 14,980,769 A-shares and 7,756,624 B-shares Principal work experience: Founder ofElekta and Executive Director (2005–2013), President and CEO (1972–2005). Founder and partner of Nordic Management AB (1980–1986). Among others, Assistant Professor and Faculty member of Stockholm School of Economics, IFL and INSEAD Fontainbleau, and Visiting Scholar atHarvard Business School. 1 Laurent Leksell First elected: 2017 Member of the board Member of the compensation and sustainability committee Attendance: 10/10 4/4 Total fees (SEK): 605,000 90,000 Year of birth: 1981 Education: BSc in Business Administration, Stockholm University; Marketing studies at Wharton School at the University of Pennsylvania and at Columbia Business School Independence: Other board assignments: Board chairman: Bonit Invest S.A./N.V. Board member: Leksell Social Ventures’ investment committee Holdings 1) : 182,308 B-shares Principal work experience: Extensive experience in the areas of digital strategy, communication and technology. Currently responsible for major international business in the role as industry manager at Google. 2 Caroline Leksell Cooke First elected: 2015 Member of the board Member of the audit committee Attendance: 10/10 6/6 Total fees (SEK): 605,000 160,000 Year of birth: 1961 Education: BSc in Business Administration, Stockholm School of Economics Independence: Other board assignments: Board chairman: Getinge AB and Arjo AB. Board member: Mölnlycke Health Care AB, The Dunker Founda- tions, Chalmers University of Technology Founda- tion, Trelleborg AB and Stena Adactum AB Holdings 1) : 30,000 B-shares Principal work experience: Extensive experience from the medical technology industry, among others as president and CEO of Getinge AB (1997– 2015). Before that various positions within the Getinge Group and Electrolux Group. 3 Johan Malmquist First elected: 2018 Member of the board Member of the compensation and sustainability committee Attendance: 10/10 4/4 Total fees (SEK): 605,000 90,000 Year of birth: 1965 Education: Master of Divinity, Uppsala University Independence: Other board assignments: Board chairman: Elekta Foundation, European Institute of Public Administration (EIPA), NL, and Uppsala University Alva Myrdal Center for Nuclear Disarmament. Board member: Integrum AB, The Royal Swedish Library (KB) Holdings 1) : 4,000 B-shares Principal work experience: CEO of the Beijer Foundation and Anders Wall Foundation. Member of the European Parliament (2009–2019). M.P. in the Swedish Parliament (2002–2009). Priest within the Swedish Church (since 1994). 7 Cecilia Wikström 1) Own and closely related parties’ holdings in Elekta AB as per April 30, 2022. For current holdings see www.elekta.com Independence: Independent of the Company and the executive management and independent of the major shareholders. Independent of the Company and the executive management, notindependent of the major shareholders. BOARD OF DIRECTORS CORPORATE GOVERNANCE 87 ELEKTA ANNUAL REPORT 2021/22 Executive Management President and CEO Employed since: 2009 Holdings 1) : 39,000 B-shares Year of birth: 1977 Education: MSc in Business Administration, Stockholm School of Economics Principal work experience: CFO at Elekta during 2017–2020 and several dierent leadership roles at Elekta since 2009. Prior to Elekta experience from management consulting rms BCG and Booz Allen Hamilton. 1 Gustaf Salford President Linac Solutions Employed since: 2019 Holdings 1) : 8,787 B-shares Year of birth: 1958 Education: Medical Doctor in Internal Medicine and Haemato-Oncology, Nancy-Université in Lorraine; MBA, Business School HEC Paris. 4 Lionel Hadjadjeba CFO Employed since: 2022 Holdings 1) : – Year of birth: 1978 Education: MSc in Industrial Engineering and Business Management, Royal Institute of Technology (KTH) in Stockholm; MSc in Business Administration and Economics, Stockholm University Principal work experience: CFO at Recipharm during 2018–2021. Before that experience from senior man- agement positions at LEAX, Electrolux, SAS and Accenture. 2 Tobias Hägglöv President Oncology Informatics Solutions Employed since: 2006 Holdings 1) : – Year of birth: 1970 Education: BSc in Health Science, University of Sydney. 3 Andrew Wilson President Brachy Solutions Employed since: 2011 Holdings 1) : 17,300 B-shares Year of birth: 1964 Education: MSc in Human Nutrition and Physiology, and PhD in Toxicology, Wageningen University & Research. 5 John Lapré 1 4 2 3 5 CORPORATE GOVERNANCE EXECUTIVE MANAGEMENT ELEKTA ANNUAL REPORT 2021/22 88 EVP Global Services Employed since: 2017 Holdings 1) : 5,800 B-shares Year of birth: 1974 Education: MSc in Electrical Engineering, Royal Institute of Technology (KTH) in Stockholm. 7 Paul Bergström Chief Product Ocer Employed since: 2011 Holdings 1) : 22,716 B-shares Year of birth: 1971 Education: MSc in Mechanical Engineering, Delft University of Technology; MSc in General Management, Nyenrode Business Universiteit inBreukelen. 8 Maurits Wolleswinkel EVP Region Europe Employed since: 2021 Holdings 1) : 8,700 B-shares Year of birth: 1975 Education: MSc in Industrial Engineering and Management Science, Eindhoven University ofTechnology. 9 Ardie Ermers President Neuro Solutions Employed since: 2008–2010 and since 2012 Holdings 1) : 8,581 B-shares Year of birth: 1980 Education: Radiation Therapist, Munich. 6 Verena Schiller 76 8 9 1) Own and closely related parties’ holdings in Elekta AB as per April 30, 2022. For current holdings see www.elekta.com EXECUTIVE MANAGEMENT CORPORATE GOVERNANCE 89 ELEKTA ANNUAL REPORT 2021/22 General Counsel and EVP Employed since: 2001 Holdings 1) : 17,000 B-shares Year of birth: 1966 Education: Master of Laws, Stockholm University. 14 Jonas Bolander EVP Human Resources Employed since: 2017 Holdings 1) : 7,120 B -share s Year of birth: 1966 Education: MSc in Chemical Engineering, Royal Institute of Technology (KTH) in Stockholm; Behavioural Science, Stockholm University. 13 Karin Svenske Nyberg Acting EVP Region Americas Employed since: 2007 Holdings 1) : – Year of birth: 1974 Education: BSc in Business Administration, Baylor University, Texas. 10 Carlos Castilleja 2) EVP Region Turkey, India, Middle East, Africa, APAC & Japan Employed since: 2018 Holdings 1) : 2,000 B-shares Year of birth: 1964 Education: MSc in Biomedical Engineering, University of Technology of Compiègne; Electrical Engineering degree, Jesuits Saint Joseph Univer- sity of Beirut; Marketing degree, Business School HEC Paris. 11 Habib Nehme EVP Region China Employed since: 2009 Holdings 1) : – Year of birth: 1964 Education: MSc in Biomedical Engineering, Huazhong University of Science and Technology in Wuhan. 12 Anming Gong 10 11 12 1413 1) Own and closely related parties’ holdings in Elekta AB as per April 30, 2022. For current holdings see www.elekta.com 2) Larry Biscotti was EVP Region Americas until May 2022. Koncernledning, forts. CORPORATE GOVERNANCE EXECUTIVE MANAGEMENT ELEKTA ANNUAL REPORT 2021/22 90 1) This is a translation of the original auditors’ report in Swedish. In the event of any dierences between the translation and the original statement in Swedish, the Swedish version shall prevail. Auditor’s report on the corporate governance statement To the general meeting of the shareholders of Elekta AB (publ), corporate identity number 556170-4015 Engagement and responsibility It is the Board of Directors who is responsible for the corporate gov- ernance statement for the year 2021-05-01 – 2022-04-30 on pages 73–90 and that it has been prepared in accordance with the Annual Accounts Act. The scope of the audit Our examination has been conducted in accordance with FAR’s auditing standard RevU 16 The auditor’s examination of the corpo- rate governance statement . This means that our examination of the corporate governance statement is dierent and substantially less in scope than an audit conducted in accordance with Interna- tional Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sucient basis for our opinions. Opinions A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second paragraph points 2–6 the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent withthe annual accounts and the consolidated accounts and arein accordance with the Annual Accounts Act. Stockholm, 8 July 2022 Ernst & Young AB Signature on original auditors’ report in Swedish 1) Rickard Andersson Authorized Public Accountant AUDITOR’S REPORT CORPORATE GOVERNANCE 91 ELEKTA ANNUAL REPORT 2021/22 Remuneration Report 2021/22 Introduction This report describes how Elekta AB (publ) has applied the guide- lines for remuneration to executive management, adopted by the Annual General Meeting (AGM) 2020, in the scal year 2021/22. One senior executive at Elekta is covered by this report, Elekta’s Presi- dent and CEO. The report has been prepared in accordance with the Swedish Companies Act and the Rules on Remuneration of the Board and Executive Management and on Incentive Programmes issued by the Swedish Corporate Governance Board, and will be approved by the AGM. The remuneration report will be available on Elekta´s website www.elekta.com atthe time of the AGM 2022. Further information on executive remuneration is available in Note 7. Information on the work ofthe compensation and sustain- ability committee during the scal year is set out in Elekta’s corpo- rate governance report available on page 73. Remuneration of the Board of Directors is not covered by this report, such remunera- tion is resolved annually by the AGM and disclosed in Note 7 and on page 87. Key events and key gures in 2021/22 On page 6, the President and CEO summarizes the scal year 2021/22 and Elekta´s result. In the summary, information around key events which have impacted the remuneration will be available in more detail. Elekta’s remuneration guidelines: purpose, scope and deviations A prerequisite for the successful implementation of Elekta’s strat- egy and safeguarding of its long-term interests, including its sus- tainability, is that the company can recruit and retain qualied per- sonnel. To this end, it is necessary that Elekta oers competitive remuneration. The remuneration structures shall encourage employees to do their utmost to safeguard shareholders’ interests and thereby Elekta’s sustainability and long-term value creation. According to the remuneration guidelines for executive manage- ment, they shall include a well-balanced combination of xed sal- ary, variable remuneration, long-term incentive programs, pension benets and other benets, as well as terms governing termination, where applicable. This combination of remuneration strengthens and supports short- and long-term targeting and target fullment. The total compensation shall be on market terms on the geo- graphic market where the individual resides or works. Applied remu- neration levels shall be reviewed annually in comparison with equiv- alent positions on the market, to ensure that Elekta is able to attract and retain skills critical for the business where so required. The auditor shall review if the company has complied with the remuneration guidelines to executive management. Theauditor’s report will be available on Elekta’s website www.elekta.com atthe time for the AGM 2022 togetherwith other AGM material. No remuneration has been reclaimed during the scal year. In addition to remuneration covered by the remuneration guide- lines, the AGM of the company may resolve to implement long- term share-related incentive plans. Elekta has three outstanding share programs called performance share plans and they are described in Note 7. “ Our remuneration guidelines safeguard shareholders’ interests by strengthening and supporting long-term sustainable value creation. ” Wolfgang Reim Member, Elekta’s compensation and sustainability committee CORPORATE GOVERNANCE REMUNERATION REPORT ELEKTA ANNUAL REPORT 2021/22 92 Total remuneration of the President and CEO in 2021/22 (TSEK) Fixed remuneration Variable remuneration Proportion of xed and variable Name (position) Annual base salary Pension Other benets One-year incentives 1) Multi-year incentives 2) Total remuneration Fixed Variable Gustaf Salford (President and CEO) 7,896 1,969 114 4,810 594 15,384 59% 41% 1) One-year incentives (STI 2021/22 and other bonus) earned in 2021/22. 2) Multi-year incentive cost allocated in 2021/22. For actual vested reward, see table multi-year variable remuneration (LTI 2019/22) below. Performance of the President and CEO in 2021/22 One-year variable remuneration (STI 2021/22) Name (position) Performance criteria 1) Relative weighting of performance criteria Measured performance and Remuneration outcome (MSEK) Gustaf Salford (President and CEO) Group net sales from Solutions 25% Threshold for payout: 6,595 Cap for maximum payout: 13,048 Performance outcome 2) : 8,385 Group net sales from Service 25% Threshold for payout: 4,590 Cap for maximum payout: 8,606 Performance outcome 2) : 5,720 Group operating income (EBIT) 25% Threshold for payout: 1,676 Cap for maximum payout: 3,144 Performance outcome 3) : 1,678 Group cash ow 4) 25% Threshold for payout: 720 Cap for maximum payout: 1,350 Performance outcome: 450 1) The performance criteria are reviewed and decided every year by the Board of Directors and the criteria shall support the short-term strategy but also have a long-term view. Therefore, the performance criteria can be changed year by year. 2) Group net sales outcome adjusted to budgeted rates. 3) Excluding the contribution to Elekta Foundation of SEK 35 M reported in Q3 2021/22. 4) After continuous investments. Multi-year variable remuneration (LTI 2019/22) Name (position) Performance criteria Relative weighting of performance criteria Measured performance and Remuneration outcome Gustaf Salford (President and CEO) Total shareholder return (TSR) development compared to OMXS30 share index 1) 100% Threshold for payout: +0.1% Cap for maximum payout: ≥15% 1) Performance share plan LTI 2019/22 described in detail under share programs in Note 7 in the Annual Report 2021/22. Comparative information on the change of remuneration 1) and company performance over the last three scal years (TSEK) 2021/22 Change 2020/21 Change 2019/2020 Total remuneration for President and CEO position 15,384 12% 13,680 –9% 15,027 Group operating income (EBIT) 2) 1,678,296 –12% 1,906,000 15% 1,657,000 Average remuneration on full time equivalent basis employees 3) in Sweden 773 –9% 852 4% 821 1) Fixed and variable remuneration earned during each scal year. 2) Excluding the contribution to Elekta Foundation of SEK 35 M reported in Q3 2021/22. 3) Excluding members of the executive management. REMUNERATION REPORT CORPORATE GOVERNANCE 93 ELEKTA ANNUAL REPORT 2021/22 FINANCIAL REPORTING ELEKTA ANNUAL REPORT 2021/22 94 Content Board of Directors’ Report 96 Consolidated income statement 104 Consolidated statement of comprehensive income 104 Consolidated balance sheet 106 Changes in consolidated equity 108 Consolidated cash ow statement 110 Financial statements – Parent Company 112 NOTES 114 Note 1 Signicant accounting principles 114 Note 2 Financial risk management 116 Note 3 Financial instruments 119 Note 4 Estimates and assessments 123 Note 5 Segment reporting 124 Note 6 Net sales 125 Note 7 Salaries, other remuneration and social security costs 126 Note 8 Depreciation/amortization/write-down 129 Note 9 Remunerations to auditors 129 Note 10 Expenses by nature 129 Note 11 Income from participations in Group companies 129 Note 12 Net nancial items 129 Note 13 Interest income, interest expense and similar items 130 Note 14 Taxes 130 Note 15 Earnings per share 132 Note 16 Intangible assets 132 Note 17 Leases 134 Note 18 Tangible assets 136 Note 19 Shares in subsidiaries 137 Note 20 Shares in associated companies 137 Note 21 Other nancial assets 138 Note 22 Inventories 138 Note 23 Accounts receivable and contract assets 138 Note 24 Other current receivables 139 Note 25 Cash and cash equivalents and short-term investments 139 Note 26 Equity 140 Note 27 Interest-bearing liabilities 140 Note 28 Provisions 141 Note 29 Customer contract related balances and order backlog 143 Note 30 Accrued expenses 143 Note 31 Other current liabilities 143 Note 32 Assets pledged 144 Note 33 Contingent liabilities 144 Note 34 Cash ow statement 144 Note 35 Related party transactions 145 Note 36 Business combinations 145 Note 37 Average number of employees 146 Note 38 Signicant events after the reporting period 146 Board of Director´s signatures 147 Auditor’s report 148 “ In 2021/22 Elekta’s protability has been adversely impacted by higher pandemic- related costs within supply chain, logistics and service as well asination. This was partly oset by underlying sales growth, although still at a lower rate than pre- pandemic growth levels. ” Tobias Hägglöv CFO, Elekta BOARD OF DIRECTORS’ REPORT FINANCIAL REPORTING 95 ELEKTA ANNUAL REPORT 2021/22 The Board of Directors and the CEO of Elekta AB (publ), corporate identity number 556170-4015 and registered oce in Stockholm, hereby submit the consolidated nancial statements and annual report for the scal year 2021/22, covering the period May 1, 2021 – April 30, 2022. Amounts in parentheses indicate values for the pre- vious scal year. Elekta AB (publ) isreferred to as “Elekta AB” or “the Parent Company” and theElekta Group, which includes Elekta AB and its subsidiaries, is referred to as “Elekta” or “the Group”. Elekta’s operations Elekta is a medical technology company which aims to improve, prolong and save lives through clinical solutions for for treating cancer and brain disorders. The Group develops clinical treatment solutions for radiation therapy and radio surgery, as well as workow-enflow-enhanc- ing software systems, across the spectrum of cancer care. Elekta is a leader in clinical solutions for image guided radiation therapy and stereotactic radiosurgery, giving oncologists and neurosurgeons an unmatched capability to treat tumors and functional targets with ultra-high precision while sparing healthy tissue. Since 2018 Elekta also oers MR-guidealso offers MR-guided radiation therapy solutions, combining a linear accelerator with magnetic resonance imaging. Elekta’s treatment solutions and oncology informatics port- folios are designed to enhance the delivery of radiation therapy, radiosurgery and brachytherapy, and to drive cost eciency in clinical workows. At the end of 2021/22 Elekta had an installed base of approxi- mately 6,900 devices. The Group has a good attach rate of service contracts to the installed base. Around 60 percent of net sales comes from Solutions and around 40 percent from Service. Elekta’s operations are divided into three geographical regions: • Americas • EMEA • APAC Market The global market development for Elekta’s solutions is driven by the need for qualitative cancer care at an aordable cost. Cancer incidence and prevalence are increasing. More patients are surviving their cancer, which increasingly makes cancer a chronic disease with growing number of patients all over the world in need of long-term care. The cost of cancer care is increasing and the demands for cost eciency in health systems and among care providers is an important part of the market dynamics. This bene- ts solutions within radiation therapy which is one of the most cost-eective treatment solutions. In the wake of Covid most markets are also focused on reducing the number of treatments per patients, so-called hypofraction- ation, enabled by the state-of-the-art devices with high precision. A complete radiation therapy program includes various technolo- gies in Elekta’s product portfolio. New advancements in precision, accuracy and eectiveness will increase the need for radiotherapy. Information management solutions constitute an important ele- ment in care delivery where hospital information systems and can- cer informatics are other important elements of Elekta’s solutions. There is a signicant shortage of radiotherapy capacity, which is Board of Directors’ Report important in understanding the potential and market in many low-income economies. Increasingly precise diagnosis of each tumor, and a continuously expanding range of therapy options is transforming oncology care to more integration between diagnosis and radiotherapy treat- ment. Competition The main competitor in the global market, with a comprehensive product range and overlap with Elekta, is Siemens Healthineers after their acquisition of Varian Medical Systems. Elekta is one of the largest suppliers of radiation therapy solutions. For the emerg- ing markets, Elekta is the largest supplier. To support customer’s need accross the cancer care ecosystem Elekta has deepened its partnership with the imaging player Royal Philips and set up a com- mercial partnership with another imaging player, GE Healthcare. From a competitive perspective there are also various companies addressing specic segments within radiation therapy. Companies, such as Accuray with radiosurgery solutions, Bebig with brachy- therapy products, ViewRay with MR- Linac as well as RaySearch with software solutions, are part of Elekta’s competitive landscape. Hospital Information System (HIS) companies are addressing the HIS market with hospital wide solutions where cancer care is one of many dierent specialties. In addition, there are a number of com- panies with products and applications supporting dierent aspects of cancer care processes. Financial guidance Elekta’s strategy is built around four main strategic pillars: • Accelerate innovation with customer utilization in mind • Drive partner integration across the cancer care ecosystem • Be the customers’ lifetime companion • Drive adoption accross the globe These pillars shall drive sustainable protable growth and create the next generation trement, workows and customer engagement models. The strategy is regularly reviewed and evalu- ated by the Board of Directors and the strategic plan is the base for the execution of Elekta’s operations. Due to uncertainties related to the development of the pandemic Elekta did not publish an outlook for the scal year 2021/22. In May, 2021, Elekta published a mid-term outlook. Until scal year 2024/25 Elekta will target: • Net sales CAGR of above 7 percent • EBIT margin percent expansion • Dividend policy of at least 50 percent of net income For the scal year 2022/23 no outlook has been published due to the continued impact from the pandemic and recent geo- political and macro economic challenges. Fiscal year 2021/22 Order intake and order backlog The pandemic and locked down countries continued to have a neg- ative impact on order intake, but towards the end of the scal year most parts of the world had gradually lifted the restrictions. At year-end there were additional challenges due to the changing FINANCIAL REPORTING BOARD OF DIRECTORS’ REPORT ELEKTA ANNUAL REPORT 2021/22 96 geopolitical situation. For the full year gross order intake increased based on constant exchange rates by 4 percent and 5 percent in SEK. The order backlog was SEK 39,656 M on April 30, 2022, com- pared with SEK 33,293 M on April 30, 2021. Orders that are canceled or not expected to materialize as planned are removed from the order backlog. The positive translation eect due to the conversion to closing exchange rates amounted to SEK 3,763 M (negative 3,524). Geographic region: Americas In Americas gross order intake was atwith SEK 5,570 M (5,579), corresponding to a 2 percent decrease based on constant exchange rates. The decrease was mainly due to strong comparable gures asElekta’s largest order ever was booked last year. Order intake in Latin America increased compared to the previous year. Net sales increased by 9 percent to SEK 4,254 M (3,888), corre- sponding to an increase of 7 percent based on constant exchange rates. Both North and Latin America had a positive development. Revenue from Solutions represented 43 percent (40) of the region’s total net sales. The contribution margin in the region amounted to 39percent (39). For information on the market characteristics of the region Americas see page 31. Geographic region: EMEA Gross order intake in EMEA increased by 13 percent to SEK 7,165 M (6,353) and by 12 percent based on constant exchange rates. Order intake grew double-digits in both Europe and the Middle East and Africa. Net sales increased by 4 percent to SEK 5,321 M (5,140), corre- sponding to an increase of 2 percent based on constant exchange rates. The development in Europe as well as in the Middle East and Africa was positive. Revenue from Solutions represented 61 percent (61) of the region’s total net sales. The contribution margin in the region amounted to 34 percent (37). For information on the market characteristics of the region EMEA see page 32. GROSS ORDER INTAKE NET SALES Americas, SEK 5,570 M EMEA, SEK 7,165 M APAC, SEK 5,628 M Americas, SEK 5,570 M EMEA, SEK 7,165 M APAC, SEK 5,628 M Americas, SEK 4,254 M EMEA, SEK 5,321 M APAC, SEK 4,972 M Americas, SEK 4,254 M EMEA, SEK 5,321 M APAC, SEK 4,972 M The scal year 2021/22 • Gross order intake amounted to SEK 18,364 M (17,411), an increase of 4percent in constant exchange rates • Net sales amounted to SEK 14,548 M (13,763), an increase of 4 percent in constant exchange rates • Operating income (EBIT) was SEK 1,643 M (1,906), corresponding to an EBIT margin of 11.3 percent (13.9) • Net income for the year amounted to SEK 1,157 M (1,253) • Earnings per share amounted to SEK 3.02 (3.28) before/after dilution • Cash ow from operating activities amounted to SEK 1,858 M (2,551), representing an opera- tional cash conversion of 69 percent (82) • Cash ow after continuous investments amounted to SEK 450 M (1,706) • The Board of Directors proposes to the AGM adividend of SEK 2.40 (2.20) per share for 2021/22 4% order growth based on constant exchange rates BOARD OF DIRECTORS’ REPORT FINANCIAL REPORTING 97 ELEKTA ANNUAL REPORT 2021/22 Geographic region: APAC Gross order intake in APAC increased by 3 percent to SEK 5,628 M (5,479), corresponding to a 1 percent increase based on constant exchange rates. India was, together with Australia, a strong growth driver in the region, whereas China was at based on a contracting market at the end of the year. Net sales increased by 5 percent to SEK 4,972 M (4,735), corre- sponding to an increase of 4 percent based on constant exchange rates. The positive development was related to both the mature and emerging markets in the region. Revenue from Solutions repre- sented 73 percent (74) of the region’s total net sales. The contribu- tion margin in the region amounted to 31 percent (32). For information on the market characteristics of the region APAC see page 34. Net sales The pandemic continued to have a negative impact on net sales throughout the scal year as travel restrictions and limited access to hospitals led to delayed installations. Net sales for the full year increased by 6 percent to SEK 14,548 M (13,763), equivalent to an increase of 4 percent based on constant exchange rates. Solutions and Service had equally growth rates of 6 percent in SEK, although revenue for Solutions had a larger positive currency impact. Based on constant exchange rates Solutions grew 4 percent and Service 5percent. Geographically net sales increased in all three regions. For net sales in the regions see each section above. Earnings Gross margin was 37.4 percent (40.8). The decrease compared to last year was explained by higher logistics and supply chain costs and higher costs to serve the installed base. EBITDA amounted to SEK 2,682 M (3,110). Operating income decreased by 14 percent and amounted to SEK1,643 M (1,906). The operating income decreased due to lower gross margin and increased operating expenses. Selling expenses increased 17 percent driven by more travelling and marketing activi- ties with additional physical exhibitions compared to previous year as well as provision related to the war in Ukraine. Administration costs increased 5 percent driven by more investments in digitaliza- tion and one-o project related costs. The eect from changes in exchange rates was SEK 155 M (97), including hedges. Operating income was positively impacted by a reversed additional purchase price of SEK 48 M, while the contribution to Elekta Foundation, as decided by AGM 2021, impacted the operating income negatively by SEK 35 M. Operating margin was 11.3 percent (13.9). Net nancial items amounted to SEK –142 M (–277), of which SEK–41 M (–41) consisted of interest on lease liabilities under IFRS 16. Income after nancial items amounted to SEK 1,501 M (1,630) andtax amounted to SEK –345 M (–377) representing atax rate of 23 percent (23). Net income for the year amounted to SEK 1,157 M (1,253). Earnings per share amounted to SEK 3.02 (3.28) before and after dilution. Return on shareholders’ equity amounted to 14 percent (16) and return on capital employed amounted to 12 percent (12). Partnership with Royal Philips In June, 2021, Elekta and Royal Philips signed a non-exclusive agreement todeepen their existing strategic part- nership. Through deeper cross-port- folio collaboration, Elekta and Royal Philips will utilize their complementary capabilities to further improve patient care. The partnership also intends to further deliver a superior experience in diagnosis and adaptive, personalized treatments for clinicians, shorter treatment times and more precise therapy for patients, and lowered care costs for healthcare providers. Signicant events during the year Elekta Harmony received clearance by FDA In June, 2021, Elekta announced that its newest linear accelerator, Harmony, has received 510(k) clearance from the U.S. Food and Drug Administration (FDA). Elekta Foundation At the Annual General Meeting in August Elekta’s shareholders approved the Board of Directors’ proposal of a contribution of SEK 35 M to establish the philanthropic Elekta Foundation. The Foundation was inaugurated in January, 2022. MAY 2021 – APRIL 2022 FINANCIAL REPORTING BOARD OF DIRECTORS’ REPORT ELEKTA ANNUAL REPORT 2021/22 98 Investments and depreciation Continuous investments amounted to SEK 1,408 M (845). Invest- ments in intangible assets increased and amounted to SEK 1,220 M (678), mainly related to R&D investments in the Linac family, Unityand software. Investments in tangible assets amounted to SEK 188 M (167). Amortization of intangible assets and depreciation of tangible xed assets amounted to a total of SEK 1,039 M (1,204). Research and development Elekta conducts research and development (R&D) aimed at strengthening and enhancing its position as technology leader. Costs related to the R&D function amounted to SEK 1,372 M (1,486). Capitalization of development costs and amortization of capital- ized development costs amounted to net SEK 673 M (–9), of which SEK 675 M (–2) relates to the R&D function. Capitalization within the R&D function amounted to SEK 1,157 M (676) and amortization to SEK –482 M (–678). Projects in capitalization phases increased in line with accelerated investments in innovations and amortizations decreased due to lower amortization from Unity. Cash ow Cash ow from operating activities decreased by SEK 693 M to SEK 1,858 M (2,551). Cash ow after continuous investments decreased to SEK 450 M (1,706) mainly due to higher investments in intangible assets in accordance with the accelerated focus on innovation. Operational cash conversion was 69 percent (82). The lower cash ow was mainly related to lower result and higher investments in intangible assets related toR&D investments in the Linac family, Unity and software. For more information on the consolidated cashow see page 110. Financial position Cash and cash equivalents and short-term investments amounted to SEK 3,077 M (4,411) and interest-bearing liabilities excluding lease liabilities amounted to SEK 4,609 M (5,184). Thus, net debt amount- ed to SEK 1,532 M (774). Net debt in relation to EBITDA was 0.57 (0.25). In December 2021 a sustainability-linked bond of SEK 1,500 M was issued with a social KPIto renance maturities of SEK 1,000M in Swedish bond market and loans of 36M GBP and 50M USD. The exchange rate eect from the translation of cash and cash equiva- lents amounted to SEK 183 M (–329). The translation dierence in interest- bearing liabilities amounted to SEK 78 M (–216). Other com- prehensive income was aected by exchange rate dierences from translation of foreign operations amounting to SEK 758 M (–838). For more information on the consolidated balance sheet see page 106. Employees The average number of employees during the year was 4,631 (4,194). The number of employees on April 30, 2022 totaled 4,751 (4,314). Value added per average employee amounted to SEK 1,388 K (1,432). Increased market presence To improve market access and strengthen the relationship with customers Elekta has established presence in markets in which Elekta previously have been repre- sented by distributors. A sales oce was established in Indonesia in August 2021 and in the Philippines in February 2022. In Turkey the long-time partner, Özyürek Mümessillik ve Dış Ticaret A.Ş., was acquired in September 2021. Investment grade rating from S&P In October Elekta received an investment grade rating from S&P Global Ratings (S&P). S&P has assigned a BBB- rating to Elekta and to the Group’s senior unse- cured notes, with stable outlook. S&P notes that Elekta’s rating reects the global leading position, ability to intro- duce new innovative treatment solutions and the key credit strengths being low leverage and stable cash generation. Sustainability-linked bond In December, 2021, Elekta issued Sweden’s rst sustainability-linked bond with a pure social key performance indicator. The funds, SEK 1.5 billion, will contribute to closing the global access gap within radi- ation therapy through increasing the number of linear accelerators in under- served markets. Tobias Hägglöv appointed CFO In January, Elekta appointed Tobias Hägglöv as Chief Financial Ocer (CFO). Tobias Hägglöv has previously held the role of CFO at Recipharm as well as senior management positions at LEAX, Electrolux, SAS and Accenture. Elekta and IBA in collaboration In March, Elekta entered into a collabora- tive agreement with IBA to optimize quality assurance (QA) solutions. Partnership with GE Healthcare In April Elekta and GE Healthcare signed aglobal commercial collaboration agree- ment in radiation oncology to be able to provide hospitals a comprehensive oering across imaging and treatment for cancer patients requiring radiation therapy. BOARD OF DIRECTORS’ REPORT FINANCIAL REPORTING 99 ELEKTA ANNUAL REPORT 2021/22 Legal disputes Elekta has no ongoing material legal disputes. Signicant events after year-end No events have occurred subsequent to the balance sheet date that would have a material impact on the Elekta’s nancial statements. Impact from war in Ukraine On February 24, 2022, Russia initiated an invasion of Ukraine. In scal year 2020/21 and the rst nine-months of scal year 2021/22 group revenue in Russia, Belarus and Ukraine represented about 2percent. The war has had a negative impact on Elekta’s European business in terms of orders, revenue and protability, including a provision of receivables amounting to SEK 18 M. On a global scale the war has impacted supply chain costs and prolonged lead times further. Elekta has neither production nor Tier 1 suppliers in these three countries. Sustainability Elekta presents sustainability information in the section Business overview and In-depth Sustainability Report. Elekta AB has pre- pared a statutory sustainability report in accordance with Chapter6 Section 11 of the Swedish Annual Accounts Act. The references to the statutory sustainability report are presented on page 72. Quality Elekta continues to focus on improving processes as one of the company’s key strategic priorities. Elekta conducts regular audits toensure compliance to established requirements from medical regulatory authorities. Where appropriate Elekta’s development, production or sales units are certied in accordance with relevant ISO standards. IT During the scal year Elekta has been committed to the ongoing expansion of cloud-based IT services and has renewed the Compa- ny’s long-term partnerships with a number of leading cloud appli- cation providers. Microsoft has become an increasingly important strategic partner for productivity, security, and collaboration ser- vices for Elekta as well as for the Company’s customer and partner ecosystem. These new agreements include substantial cloud capacity expansion for both internal business requirements and the customer facing cloud computing services for Elekta’s clinical solu- tions. This will allow for further migration of business applications and product development activities into the cloud, enabling further IT consolidation with higher contracted service levels to reduce Data-Centre consumption, supporting Elekta’s sustainability strategy through reduced carbon footprint. The journey to digitalization and automation of Elekta’s pro- cesses continues and the IT project portfolio has been focused on arange of initiatives that support Elekta’s business plan for process eciency and automation. Work has been particularly focused on governance and cost controls in the supply chain and in the digitali- zation of the customer support processes. In these innovative projects, new ways of working have been established to ensure global standardization and control of all procurement needs. Elekta’s initiative to drive remote support eectiveness, through a recent implementation of a leading IT inte- gration platform, has been eective in ensuring that machine data from the installed clinical systems can be more rapidly made avail- able across the Company’s business ecosystem. The platform ensures timely monitoring of system performance which enhances predictive and proactive maintenance and a more automatic cus- tomer support process. Elekta continues to develop the Company’s digital capabilities and has initiatives underway to build new secure workows that will connect Elekta to the growing ecosystem of partners and custom- ers across the globe. Risks During the year, the impact of Covid-19 has caused uncertainty inorder growth, limited access to hospitals and increased risk of delayed installations because of lock down of countries. A weak economic development, strained nances, especially in light of aprolonged impact of the pandemic, may mean less availability ofnancing for private customers and reduced future healthcare spending by governments. Geopolitical tensions, including restric- tions and protectionism with a growth of sanctions may impact Elekta’s local partnering, manufacturing and sales in certain mar- kets as well as further expose Elekta to potentially conicting trade compliance sanctions. The radiotherapy industry is characterized by an increased demand for using and analyzing personal data or treatment data in order to further develop the products. Elekta’s solutions need to be protected against damage and undue interfer- ence whilst also adhering to various data privacy laws and regula- tions worldwide and an increasing threat of material cyber and information security attacks targeting healthcare data has been noted. Elekta witnesses an increased competition due to vendor and customer consolidation as well as changing competition land- scape within the medical imaging and informatics market. Elekta continues to respond with development of state-of-the-art solu- tions and focus on a unique value proposition. Corruption and risk of improper payments continues to be a threat in many markets having a growing need for access to radiotherapy and Elekta con- tinuously work to strengthen its compliance programs and business ethics preventive controls. Elekta’s operational, strategic, external, and nancial risks are described on page 37 together with the risk management process. Elekta’s nancial risks are described in more detail in Note 2. Sensitivity analysis Elekta’s operation is project based with relatively big deliveries tocustomers. The lead time from delivery to installation can there- fore vary from period to period. Quarterly variations of delivery volumes occur, which has a high impact on net sales and net income each quarter. Elekta’s gross margin can also vary from period to period depending on product and geographic mix and currency movements. As a result of its international operations and structure, Elekta has a signicant exposure to exchange rate uctuations. This per- tains primarily to expenses in GBP and CNY against revenue in USD and EUR. Based on the year’s income, expense and currency struc- ture a general change of 1percentage point in the SEK exchange rate against other currencies would aect the Group’s net prot FINANCIAL REPORTING BOARD OF DIRECTORS’ REPORT ELEKTA ANNUAL REPORT 2021/22 100 and shareholders’ equity by approximately +/– SEK 25 M (23). In the short term, the eect is reduced through hedging. Based on the balance sheet structure at year-end a general change of 1 percentage point in the interest on borrowings and investments would aect the Group’s prot before tax by approxi- mately +/– SEK 3 M (0). Parent Company The Parent Company of the Group, Elekta AB, conducts no operat- ing activities but provides group management, joint group func- tions and nancial management. Net income for the year amounted to SEK 1,118 M (427) inclusive of dividends from subsidiar- ies of SEK 1,101 M (354). Total assets amounted to SEK 9,543 M (11,306) of which shares in subsidiaries amounted to SEK2,752 M (2,590) and receivables from subsidiaries amounted to SEK 4,759 M (5,089). Cash and cash equivalents and short-term investments at year-end amounted to SEK 1,863 M (3,421). Shareholders’ equity amounted to SEK 2,368 M (2,087). Interest-bearing liabilities amounted to SEK 7,081 M (9,042), of which SEK 2,482 M (3,858) con- stituted liabilities to subsidiaries. The average number of employees during the year was 57 (45). The number of employees on April 30, 2022 was 60 (49). For further information refer to the Parent Company’s nancial reports and the accompanying notes. Shares The total number of registered shares on April 30, 2022 was 383,568,409 divided between 14,980,769 A-shares and 368,587,640 B-shares. One series A-share entitles the holder to10 votes and series B-shares entitle the holder to one vote foreach share. All shares carry equal rights to participate in the Company’s assets and prots. In accordance with Section 12 of Elekta’s Articles of Association, series A-shares are subject to right of rst refusal. All A-shares are owned indirectly by Laurent Leksell who is also the only shareholder representing more than 10 percent of total votes. On April 30, 2022, treasury shares amounted to 1,485,289 (1,485,289) equivalent to 0.4 percent (0.4) of the total number of outstanding shares as wellas of share capital. Regarding treasury shares, par value is0.50 SEK per share and average cost is 49.70 SEK per share. For more information on Elekta’s share see page 41. Dividend and proposal to repurchase shares For 2021/22, the Board of Directors proposes to the AGM a dividend of SEK 2.40 (2.20) per share. Totalproposed dividend amounts to approximately SEK 917 M (841) and 79 percent (67) of the group net prot for the year. It is also proposed that the dividend will be paid in two installments, with one payment of SEK 1.20 per share in Sep- tember 2022 and the remaining SEK 1.20 per share in March 2023. The proposed record dates are August 29, 2022, for the rst pay- ment and February 27, 2023, for the second payment. The Board of Directors intends to propose to the 2022 AGM a renewal of the board’s authorization to decide on the acquisition ofa maximum number of own shares so that, after the acquisition, the company holds no more than 10 percent of the total number ofoutstanding shares in Elekta AB. Appropriation of prot Amounts in SEK April 30, 2022 Distributable shareholders’ equity of the Parent Company Premium reserve 656,608,114 Retained earnings 245,591,714 Prot for the year 1,117,970,581 Total 2,020,170,409 The Board of Directors propose: to be distributed to the shareholders, a total dividend of SEK 2.40 per share 1) 916,999,488 and that the remaining amount be carried forward 1,103,170,921 Total 2,020,170,409 1) The total amount distributed may change up until the record date depending on changes in the number of shares. The board’s statement on the proposed dividend In making this proposal for dividend, the board has taken into account the Parent Company’s dividend policy, equity/assets ratio as well as its general nancial position, whereby the ParentCom- pany’s ability to fulll existing and foreseeable payment obliga- tions in a timely manner, as well as potential acquisitions and other investments has been considered. The Parent Company’s equity includes SEK–20 M pertaining to assets and liabilities measured at fair value in accordance with Chapter 4 Section 14a of the Swedish Annual Accounts Act. The equity ratio and liquidity is reassuring, under the assumption that the Parent Company and the Group continue to be protable. The impact of the proposed dividend on the Group’s reported equity/assets ratio of 34 percent (33), will be marginal. Concerning the ParentCompany’s and the Group’s result and position in general, refer to the income statements, statements of com prehensive income, balance sheets and cash ow statements and notes. It is the assessment of the Board of Directors that the proposed dividend neither prevents the Parent Company, and other compa- nies within the Group, from fullling their obligations, nor from mak- ing the necessary investments. The proposed dividend can therefore be justied in respect of Chapter 17, section 3, paragraphs 2 and 3 of the Swedish Companies Act (the prudence rule). Articles of Association The Articles of Association state that board members are appointed and dismissed by the AGM. The Articles of Association contain no specic regulations regarding changes to the Articles of Association. 2.40 SEK/share, dividend proposal BOARD OF DIRECTORS’ REPORT FINANCIAL REPORTING 101 ELEKTA ANNUAL REPORT 2021/22 Guidelines for remuneration to executive management The guidelines for remuneration to the executive management were adopted by the AGM 2020 and will apply until the AGM 2024 at the latest. The guidelines cover the President and CEO and members of the executive management of Elekta. The guidelines shall apply to employment agreements and any modications to employment agreements executed after the AGM 2020. The guidelines do not apply to remuneration decided on or approved by the general meeting or such issues and transfers covered by Chapter 16 of the Companies Act. The guidelines’ promotion of Elekta’s business strategy, long-term interests and sustainability In order to successfully implement Elekta’s business strategy and to foster Elekta’s long-term interests, including its sustainability, it is of fundamental importance for Elekta and its shareholders that, from a short-term and long-term perspective, the remuneration guidelines attract, incentivise and create favourable conditions forretaining skilled employees and managers. The guidelines are aimed at creating increased transparency as regards remuneration issues and, through a carefully considered remuneration structure, creating incentives for executive management to execute strategic plans and achieve Elekta’s nancial targets. To achieve this, it is important to maintain fair and internally balanced terms which, at the same time, are competitive on the market in terms of remuneration structure, scope and level. For information regarding Elekta’s business strategy, please see Elekta’s website. Remuneration and forms of remuneration Employment terms for executive management shall include a well-balanced combination of xed salary, variable remuneration, long-term incentive programs, pension benets and other benets, as well as terms governing termination, where applicable. This combination of remuneration strengthens and supports short-term and long-term targeting and target ful-lment. The total compen- sation shall be on market terms on the geographic market where the individual resides or works. Applied remuneration levels shall be reviewed annually in comparison with equivalent positions on the market, to ensure that Elekta is able to attract and retain skills criti- cal for the business where so required. Median salaries on the mar- ket are determined through external benchmarking where such is available. As far as possible, remuneration shall be based on perfor- mance and thus the annual variable remuneration shall constitute a relatively large portion of the total remuneration. The various types of remuneration that may be paid out are described below. Fixed salary Fixed salary for executive management shall be individual and based on each individual’s responsibilities and role in terms of individual skills and experience in the relevant position as well as regional conditions. In case of a maximum variable remuneration result, the xed salary may amount to between 40 and 50 per cent of the total annual xed salary and variable remuneration. Variable remuneration In addition to xed salary, executive management are entitled to variable remuneration, referred to as an annual bonus. The variable remuneration is structured as part of the total remuneration package and shall primarily be related to results in terms of the Group’s nan- cial targets (50–100 per cent of the variable remuneration). Other non-nancial targets of particular interest, such as clearly dened individual targets with respect to specic work duties within the respective business area, shall also be used (0–50 per cent of the vari- able remuneration). Variable remuneration targets shall be estab- lished annually by the Board of Directors with the aim of ensuring that they are in line with the Group’s business strategy and results targets. Targets shall be structured so as to promote the Group’s business strategy and long-term interests, including its sustainability, by being clearly connected to the business strategy and promoting the long- term development of the executive management. The size of the variable remuneration varies depending on position and may constitute between 30 and 70 per cent of xed annual salary at full achievement of targets. Target fullment is measured, and any payments made in respect thereof take place annually or quarterly. If the nancial targets for variable remuneration are exceeded, there is a possibility to pay additional remuneration in consideration of over- performance. The annual bonus entails that there is potential to receive, at most, 200 per cent of the variable remuneration in case of over achievement of targets. Thus, payment of variable remuneration is capped at 200 per cent of the original target for the variable remu- neration and may entail, at most, that 140 per cent of the xed salary can be paid out as variable remuneration. Target formulation is struc- tured so that no variable remuneration or bonus is received in the event a minimum performance level or threshold is not achieved. Upon conclusion of the annual measurement period, an assess- ment shall take place as to the extent to which targets have been fullled, through an overall performance assessment. The Compen- sation & Sustainability Committee is responsible for the assessment with respect to variable salary for the President and CEO and other executive management. Insofar as relates to nancial targets, the assessment shall be based on audited nancial information pub- lished by the Group. Elekta may, at any given time, alter, discontinue or cancel parts of the remuneration plan, or the entire plan. However, only in respect of future performance at the time in question. Elekta may also, after payment of remuneration, subsequently correct the remuneration ifan error can be identied in a nal audit. Share-related long-term incentive programs The Board of Directors uses long-term incentive programs to ensure alignment between the interests of the shareholders and the interests of executive management and other key individuals in Elekta. The Board of Directors shall each year assess whether a share-related long-term incentive program should be proposed to the annual gen- eral meeting. More information about current share programs is available in Note 7 of the annual report and on Elekta’s website. These long-term incentive programs promote the Group’s business strategy and long-term interests including its sustainability by strengthening the Group’s ability to recruit and retain employees, diversifying and increasing share ownership among key individuals and ensuring a shared focus on long-term growth in value for the shareholders. Special remuneration Additional cash variable remuneration can be paid, with a delay in payment up to 36 months, to ensure long-term commitment and that key employees remain in connection with acquisitions of new companies, divestments of businesses, other transitional activity or other extraordinary work endeavours. Such delayed remuneration is conditional on continued employment until a predetermined date in order for any payment to take place, and is applied only in very special cases, and thus is not included in any ordinary remuneration system. The delayed remuneration may not exceed 50 per cent of the con- tracted annual xed remuneration per year and thus may amount to150 per cent of annual salary in the event of delayed payment for 36 months. The delayed remuneration shall otherwise comply with FINANCIAL REPORTING BOARD OF DIRECTORS’ REPORT ELEKTA ANNUAL REPORT 2021/22 102 the same principles as applicable to variable remuneration in the Group. Decisions regarding special remuneration for extraordinary endeavours shall be taken by the Board of Directors. Pensions When new pension agreements are entered into, executive manage- ment who are entitled to pension shall only have dened contribution pension agreements. With respect to executive management who are Swedish citizens, retirement normally takes place at the age of 65and, with respect to others, in accordance with each country’s pension regulations. The general rule is that pension provisions are based only on xed salary and take place at market levels in each country; however, pension provisions shall not exceed 40 per cent of xed salary. Certain individual adjustments may occur in line with local market practice or mandatory collective agreement provisions. Other benets Benets such as company car, compensation for preventive care insurance, healthcare insurance and medical insurance, etc. shall con- stitute a smaller element of the total compensation package and be in accordance with what is customary on each geographic market. Premiums and other costs for such benets may not, in total, exceed 20 per cent of xed salary. For executive management stationed in acountry other than their country of domicile, additional compensa- tion and other benets may be paid to a reasonable extent in light of the particular circumstances associated with being stationed in a for- eign country. This comprises, for example, ight costs, housing, term fees, journeys home, assistance with tax returns and tax equalisation. With respect to employment conditions governed by regulations other than Swedish ones, insofar as relates to other benets, appro- priate adjustments shall take place to comply with such mandatory regulations or established local practice, whereupon the overarching purpose of these guidelines shall be satised as far as possible. Remuneration payable to Directors Directors elected by the general meeting shall, in specic cases, be entitled to receive fees and other remuneration for work performed on behalf of Elekta, alongside board work. Fees on market terms, which must be approved by other Directors, shall be payable in respect of such services. Termination terms and severance compensation Termination periods within Elekta shall comply with the statutes and agreements applicable on each geographic market. Termination peri- ods with respect to executive management shall be between 6 and 12 months and, in specic cases, executive management are entitled to severance compensation corresponding to 6–12 months’ xed salary. In case of certain radical changes in the ownership structure, the Pres- ident and CEO is entitled to receive additional severance compensa- tion corresponding to 18 months’ xed salary. Preparation and decision-making procedure The Compensation & Sustainability Committee shall, each year, pre- pare remuneration issues and submit to the Board of Directors recom- mendations for principles for structuring the Group’s compensation system and executive management remuneration. Therecommenda- tions shall include proposals for structuring bonus systems, the break- down between xed and variable remuneration as well as the size of any salary increases. The Compensation & Sustainability Committee shall also propose criteria for assessment of performance by executive management. Decisions regarding remuneration are adopted by the Board of Directors as a whole. The Board of Directors shall prepare proposals for new guidelines at least every fourth year and shall pres- ent the proposals for a decision by the annual general meeting. The Compensation & Sustainability Committee shall comprise ofatleast three independent directors, one of whom shall serve as chairman. The President and CEO shall attend the meetings of the committee. The elected chairman of the Compensation & Sustain- ability Committee shall convene its meetings. The members of the Compensation & Sustainability Committee are independent in rela- tion to Elekta AB and the executive management. The President and CEO, and other members of executive management, may not be present at meetings at which remuneration issues are addressed and decided upon, insofar as they are aected by the issues. In conjunc- tion with all decisions, it is ensured that conicts of interest are avoided and that any potential conicts of interest are addressed inaccordance with Elekta’s corporate governance framework, comprising of a code of conduct, policies and guidelines. Derogation from the guidelines The Board of Directors may decide to derogate temporarily from the guidelines, wholly or in part, where there are particular reasons for doing so in an individual case and provided such derogation is neces- sary to satisfy Elekta’s long-term interests, including its sustainability, or to ensure Elekta’s nancial viability. As stated above, the duties of the Compensation & Sustainability Committee include preparing decisions by the Board of Directors on remuneration issues, which includes decisions regarding derogations from the guidelines. Description of signicant changes to the guidelines The content of the guidelines has been reviewed and adapted to thelegal requirements imposed by Directive (EU) 2017/828 of the European Parliament and of the Council amending Directive 2007/36/ EC as regards encouragement of the long-term share- holderengagement. Previously decided remuneration that is not yet due for payment Elekta has ongoing share-related programs that have not yet fallen due for payment. More information about current share programs isavailable in Note 7 of the annual report and on Elekta’s website. BOARD OF DIRECTORS’ REPORT FINANCIAL REPORTING 103 ELEKTA ANNUAL REPORT 2021/22 SEK M Note 2021/22 2020/21 Net sales 6 14,548 1 3, 76 3 Cost of products sold –9 , 111 –8,153 Gross income 5,436 5,610 Selling expenses –1,355 –1,143 Administrative expenses –1,17 3 –1,086 R&D expenses –1,372 –1,486 Other operating income and expenses –48 –85 Exchange rate dierences 155 97 Operating income 5–10 1,643 1,906 Income from participations in associated companies 12 5 –7 Financial income 12 42 30 Financial expenses 12 –159 –253 Interest expenses lease liabilities 12 –41 –41 Exchange rate dierences 12 12 –5 Income after nancial items 1,501 1,630 Income tax 14 –345 –37 7 Net income 1, 157 1, 253 Net income attributable to: Parent Company shareholders 1,154 1,254 Non-controlling interests 3 –1 Earnings per share: Before dilution, SEK 15 3.0 2 3. 28 After dilution, SEK 15 3.0 2 3. 28 Average number of shares: Before dilution, thousands 15 382,083 382,08 3 After dilution, thousands 15 382,083 382,08 3 Consolidated income statement Consolidated statement of comprehensive income SEK M Note 2021/22 2020/21 Net income 1, 157 1, 253 Other comprehensive income Items that will not be reclassied to the income statement: Remeasurements of dened benet pension plans 28 27 –3 Change in fair value of equity instruments 21 –45 206 Tax 14 2 –43 Total items that will not be reclassied to the income statement, net of tax –16 160 Items that subsequently may be reclassied to the income statement: Revaluation of cash ow hedges 3 –448 231 Translation dierences from foreign operations 758 –838 Tax 14 92 –48 Total items that subsequently may be reclassied to the income statement, net of tax 402 –654 Other comprehensive income, net of tax 386 –494 Total comprehensive income 1,543 759 Comprehensive income attributable to: Parent Company shareholders 1,540 760 Non-controlling interests 3 –1 FINANCIAL REPORTING GROUP ELEKTA ANNUAL REPORT 2021/22 104 Comments on the consolidated income statement Net sales Net sales increased 6 percent to SEK 14,548 M (13,763), corresponding to 4 percent increase based on constant exchange rates. Net sales, SEK M Change, % 1) Operating income, SEKM Q1 3,009 8% 201 Q2 3,697 7% 533 Q3 3,602 –3% 340 Q4 4,239 5% 570 Full-year 2021/22 14,548 4% 1,643 1) Compared to last scal year based on constant exchange rates. Earnings Gross margin was 37.4 percent (40.8). The decrease in gross mar- gin compared to previous year was explained by higher logistics and supply chain costs and higher costs to serve the installed base. EBITDA amounted to SEK 2,682 M (3,110). Operating income decreased by 14 percent and amounted toSEK 1,643 M (1,906). The operating income decreased due to lower gross margin and increased operating expenses. Selling expenses increased 17% driven by more travelling and marketing activities with more the physical exhibitions compared toprevious year as well as provision related to war in Ukraine. Administration costs increased 5% driven by more investments in digitalization and one-o project related costs. Research and development costs decreased by 8 percent toSEK –1,372 M (–1,486) equal to 9 percent (11) of net sales. Capitalization of development costs and amortization of capi- talized development costs amounted to net SEK 673 M (–9), ofwhich SEK 675 M (–2) relates to the R&D function. Projects incapitalization phases increased in line with accelerated investments in innovations and amortizations decreased due tolower amortization from Unity. Capitalization within the R&Dfunction amounted to 1,157 M (676) and amortization to SEK –482 M (–678). Operating income included a positive eect from changes inexchange rates compared to last year and was positively impacted by a reversed additional purchase price of SEK 48 M. The contribution to Elekta Foundation, as decided by AGM 2021, amounted to SEK 35 M. Operating margin was 11.3 percent (13.9). The change in unrealized exchange rate eects from eective cash ow hedges amounted to SEK –448 M (231) and is reported in other comprehensive income. According to Elekta’s currency hedging policy, anticipated sales in foreign currency may be hedged up to 24 months. Net nancial items amounted to SEK–142 M (–277). Interest expenses was lower due to lower level of gross debt and as theaverage interest rate expenses on the debt was lower. Income after nancial items amounted to SEK 1,501 M (1,630). Tax expense amounted to SEK –345 M (–377) or 23 percent (23). Net income amounted to SEK 1,157 M (1,253). Result overview SEK M 2021/22 2020/21 Operating income (EBIT) 1,643 1,906 Amortization of intangible assets: Capitalized development costs 493 685 Assets relating business combinations 123 118 EBITA 2,259 2,709 Depreciation 422 401 EBITDA 2,682 3,110 GROUP FINANCIAL REPORTING 105 ELEKTA ANNUAL REPORT 2021/22 SEK M Note April 30, 2022 April 30, 2021 ASSETS Non-current assets Intangible assets 16 10, 262 8, 779 Right-of-use assets 17 975 953 Tangible assets 18 954 897 Shares in associated companies 20 25 27 Other nancial assets 3, 21 590 506 Deferred tax assets 14 616 436 Total non-current assets 13,423 11,597 Current assets Inventories 22 2,533 2 , 283 Accounts receivable 23 3,647 3, 28 1 Accrued income 29 1,796 1, 772 Current tax receivables 14 219 165 Derivative nancial instruments 3 127 220 Other current receivables 24 1,481 1,116 Cash and cash equivalents 25 3, 077 4,411 Total current assets 12,880 13,247 Total assets 26, 303 2 4,844 EQUITY AND LIABILITIES Equity Parent Company shareholders: Share capital 26 192 192 Contributed funds 812 812 Reserves 1,025 623 Retained earnings 6,883 6,568 Parent Company shareholders, total 8,913 8,197 Non-controlling interests 3 0 Total equity 8,916 8,197 Non-current liabilities Interest-bearing liabilities 27 4,099 3, 04 3 Deferred tax liabilities 14 5 49 515 Lease liabilities 27 841 854 Provisions 28 215 2 24 Other liabilities 3 120 71 Total non-current liabilities 5,824 4,707 Current liabilities Interest-bearing liabilities 27 510 2,141 Lease liabilities 27 245 200 Accounts payable 2, 3 1,35 2 1,016 Advances from customers 29 4,161 3, 7 59 Prepaid income 29 2,342 2,082 Accrued expenses 30 1,901 1,83 7 Current tax liabilities 14 114 1 37 Provisions 28 149 1 74 Derivative nancial instruments 3 361 35 Other current liabilities 31 429 559 Total current liabilities 11,564 1 1 ,941 Total equity and liabilities 26, 303 2 4,844 For information about assets pledged and contingent liabilities see Note 32 and 33 respectively. Consolidated balance sheet FINANCIAL REPORTING GROUP ELEKTA ANNUAL REPORT 2021/22 106 Comments on the consolidated balance sheet The Group’s consolidated balance sheet has been aected by changes in exchange rates. The balance sheets of the foreign sub- sidiaries are translated at the closing rate as per the closing date. The exchange rates used for translation as per April 30, 2022 and April 30, 2021 respectively are presented in the table on page 115. Assets and capital employed The Group’s total assets increased by SEK 1,459 M to SEK 26,303M (24,844). Fixed assets totaled SEK 11,216 M (9,676) of which good- will amounted to SEK 6,499 M (5,973). Right-of-use assets amounted to SEK 975 M (953). Current assets, excluding cash and cash equivalents and short- term investments, increased by SEK 966 M to SEK 9,803M (8,837). Accounts receivable, accrued income and inventories increased by 9 percent (–4). Inventory value in relation to net sales was 17 percent (17). Cash and cash equivalents and short-term investments decreased by SEK 1,334 M to SEK 3,077 M (4,411) at year-end, totaling 12 percent (18) of total assets. Of total bank balances SEK 8 M (8) were pledged primarily for commercial guarantees. The Group’s capital employed increased to SEK 14,610 M (14,435). Liabilities and shareholders’ equity Interest-free liabilities and provisions increased by SEK 1,283 M to SEK 11,693 M (10,409). Interest-bearing liabilities amounted to SEK 5,695 M (6,239), of which SEK 1,086 M (1,054) pertained to lease liabilities. Net debt amounted to SEK 1,532 M (774). Total equity was SEK 8,916 M (8,197). Return on shareholders’ equity amounted to 14 percent (16) and return on capital employed amounted to 12 percent (12). Net debt/EBITDA ratio was 0.57 (0.25) and equity/ assets ratio was 34 percent (33). Working capital Elekta’s operations is to a large extent project based. Payment ows from projects generally occur in connection with order receipt, delivery and acceptance, which generates uctuations in working capital. Thus, movements in working capital depend on the progress of projects and the timing of certain events in rela- tion to terms in the contract. Invoicing and payments from the customer occur in accordance with the terms of the contract while revenue is recognized based on accounting principles. Therefore cash ow from projects does not always coincide with the recognition of revenue and may result in either anasset (accrued income) or a liability (advances from customers). Elekta’s payment terms varies signicantly between regionsand specic customers. For example, in China, themajor- ity of Elekta’s customers are in the public sector. Financing and payments are normally structured by a bank through a letter of credit arrangement. When Elekta has metcertain performance conditions, payments are obtained from the issuing bank. The majority of the proceeds are normally due at shipment. As another example, the US is largely aprivate hospital market with replacement investments. Theoperating cycle in the projects are typically shorter than Elekta’s average. In a typical customer rela- tionship, Elekta receives partial payments at order receipt, deliv- ery, installation and acceptance. Lastly, customers in Europe are typically public hospitals and contracts are awarded through public procurement processes. In such cases, terms and condi- tions are often pre-dened by the customer. This means that Elekta get paid late in the operating cycle and payment times are generally longer than normal. There are many examples of proj- ects where customers pay after acceptance of installation. Accounts receivable amounted to SEK 3,647 M (3,281) as per April 30, showing an increase of 11 percent in SEK. The majority of non-due accounts receivable are normally due within 90days. In a limited number of customer projects, Elekta is providing nancing through extended payment terms. Such receivables amounted to SEK 397 M (372) as per April 30 and are included in “Other nancial assets” in the balance sheet and specied as “Contractual receivables” in Note 21. Customer advances represent projects for which invoiced amounts exceed revenue recognized. Advances from customers amounted to SEK 4,161 M (3,759) as per April 30, an increase of SEK 402 M. Working capital SEK M April 30, 2022 April 30, 2021 Working capital assets Inventories 2,533 2,283 Accounts receivable 3,647 3,281 Accrued income 1,796 1,772 Other operating receivables 1,459 1,116 Sum working capital assets 9,435 8,451 Working capital liabilities Accounts payable 1,352 1,016 Advances from customers 4,161 3,759 Prepaid income 2,342 2,082 Accrued expenses 1,901 1,837 Short-term provisions 149 174 Other current liabilities 429 559 Sum working capital liabilities 10,333 9,428 Net working capital –898 –977 Percent of net sales –6% –7% Net working capital amounted to SEK –898 M (–977) at year-end, corresponding to –6 percent (–7) of net sales. GROUP FINANCIAL REPORTING 107 ELEKTA ANNUAL REPORT 2021/22 SEK M Note Share capital Other contributed capital Tran slation reserve Hedge reserve Retained earnings Elekta AB:s owners, total Non- controlling interests Total equity Opening balance May 1, 2020 192 812 1,307 –29 5,830 8, 113 1 8,113 Net income – – – – 1,254 1,254 –1 1,253 Remeasurements of dened benet pensions plans – – – – –3 –3 – –3 Change in fair value of equity instruments – – – – 206 206 – 206 Revaluation of cash ow hedges 1) – – – 231 – 231 – 231 Translation dierences from foreign operations – – –838 – – –838 0 –8 38 Tax relating to components of other comprehensive income 14 – – – –48 –43 –90 – –90 Other comprehensive income – – –838 184 160 –494 0 –494 Total comprehensive income – – –8 38 184 1,414 76 0 –1 7 59 Dividend – – – – –688 –688 – –688 Incentive programs – – – – 12 12 – 12 Transactions with the shareholders, total – – – – –676 –6 76 – –6 76 Closing balance April 30, 2021 192 812 469 154 6,568 8, 197 0 8, 197 Opening balance May 1, 2021 192 812 469 154 6,568 8, 197 0 8, 197 Net income – – – – 1, 154 1,154 3 1,157 Remeasurements of dened benet pensions plans – – – – 27 27 – 27 Change in fair value of equity instruments – – – – –45 –45 – –45 Revaluation of cash ow hedges 1) – – – –448 – –448 – –448 Translation dierences from foreign operations – – 758 – – 758 0 758 Tax relating to components of other comprehensive income 14 – – – 92 2 94 – 94 Other comprehensive income – – 758 –355 –16 386 0 386 Total comprehensive income – – 75 8 –355 1,13 7 1,540 3 1,543 Dividend – – – – –841 –841 – –841 Incentive programs – – – – 17 17 – 17 Transactions with the shareholders, total – – – – –823 –823 – –82 3 Closing balance April 30, 2022 192 812 1,227 –201 6,883 8,913 3 8,916 1) Of which transferred to the income statement in 2021/22: SEK 9 4 M (164). Changes in consolidated equity FINANCIAL REPORTING GROUP ELEKTA ANNUAL REPORT 2021/22 108 In 2021/22 Elekta paid a total dividend of SEK 841 M. The dividend payment has aected equity through a reduction of retained earnings. The total number of shares in Elekta as of April 30, 2022, amounted to 383,568,409 of which 14,980,769 A-shares and 368,587,640 B-shares. See Note 26 for more information onshare capital. Total equity includes equity of foreign subsidiaries. Translation is performed at closing rate and the translation dierence is reported in the translation reserve via other comprehensive income. The translation dierence amounted to SEK 758 M (–838) in 2021/22. Shareholders’ equity in foreign currency is hedged when it is deemed appropriate in individual cases. The translation reserve includes all exchange rate dierences arising in conjunc- tion with the translation of foreign operations that have prepared their nancial reports in a currency other than that used in the group’s nancial reports. In addition, thetranslation reserve con- sists of exchange rate dierences arising from the translation of liabilities raised as a hedging instrument for a net investment in foreign operations. The translation reserve amounted to SEK 1,227 M (469) at year end. Cash ow hedges are reported in the hedge reserve via other comprehensive income. Elekta hedges its currency risk in line with the policy established by the board. The scope of this hedg- ing is determined by the Company’s currency risk assessment. Currency hedging is dened on the basis of the expected sales in foreign currency over up to 24 months. Hedging is done to reduce the eects of short-term uctuations on the currency markets. The hedge reserve includes the eective portion of the accumulated net change in the fair value of cash ow hedging instruments attributable to hedging transactions that have not yet occurred. During 2021/22 the change in the hedge reserve was SEK –355 M (184) after tax and the closing balance of the hedge reserve was SEK –201 M (154). Comments on changes in consolidated equity Changes in consolidated equity –2,000 –1,000 0 1,000 2,000 2021/222020/212019/202018/192017/18 SEK M Prot for the year Cash ow hedges Incentive programs Remeasurements of dened benet pension plans Net gain/(loss) on equity instruments designated at fair value Translation dierences Dividends Consolidated equity and return Average shareholder’s equity, SEK M Return on shareholder’s equity, percent SEK M 0 2,000 4,000 6,000 8,000 10,000 2022- 04-30 2021- 04-30 2020- 04-30 2019- 04-30 2018- 04-30 % 0 10 20 30 40 50 GROUP FINANCIAL REPORTING 109 ELEKTA ANNUAL REPORT 2021/22 SEK M Note 2021/22 2020/21 Operating activities Income after nancial items 1,501 1,630 Non-cash items: Depreciation and amortization 8, 16, 17, 18 1,03 9 1,204 Interest net 34 106 204 Other non-cash items 34 –211 3 07 Operating cash ow before interest and tax 2,435 3,345 Interest received 42 30 Interest paid –156 –2 49 Income taxes paid 14 –452 –465 Operating cash ow 1,869 2,660 Change in inventories –97 270 Change in operating receivables –291 –7 72 Change in operating liabilities 376 393 Change in working capital –12 –109 Cash ow from operating activities 1,858 2,55 1 Investing activities Investments in intangible assets 16 –1, 220 –678 Investments in tangible assets 18 –188 –167 Sale of xed assets 0 0 Continuous investments –1,408 –845 Cash ow after continuous investments 450 1, 706 Business combinations 34,36 –175 –272 Short-term investments 34 –69 60 Divestment in other shares 34 – 443 Dividends associated companies 20 4 1 Cash ow from investing activities –1,649 –613 Cash ow after investments 209 1 ,938 Financing activities Borrowings 34 1,505 0 Repayment of lease liabilities 34 –228 –215 Repayment of debt 34 –2,16 3 –2,703 Dividend –841 –688 Cash ow from nancing activities –1, 726 –3,605 Cash ow for the year –1,517 –1,667 Change in cash and cash equivalents during the year Cash and cash equivalents at the beginning of the year 4, 41 1 6,407 Cash ow for the year –1,517 –1,667 Exchange rate dierences 183 –329 Cash and cash equivalents at the end of the year 25 3,077 4,41 1 Consolidated cash ow statement FINANCIAL REPORTING GROUP ELEKTA ANNUAL REPORT 2021/22 110 Comments on the consolidated cash ow statement The cash ow statement describes the ability of the operations to generate cash and cash equivalents. Elekta’s cash ow is used pri- marily to nance market growth, strategic research projects and investments. Based on the income statement and balance sheet translated at the average exchange rate, the statement shows the Group’s net ows during the year. Elekta’s project-based operations aect cash ow through movements in working capital. Payment ows from projects generally occur in connection with order receipt, delivery, and acceptance – mostly not coinciding with revenue recognition – thus generating uctuations in working capital levels. See also comments on working capital on page 107. The operating cash ow (cash ow from operating activities exclusive of change in working capital) amounted to SEK 1,869 M (2,660), a decrease of SEK 791 M compared with the previous year. Cash ow from operating activities decreased to SEK 1,858 M (2,551). Cash ow from investing activities amounted to SEK –1,649 M (–613) including investments in intangible assets of SEK –1,220 M (– 678). Cash ow after continuous investments decreased by SEK 1,256 M to SEK 450 M (1,706). The decrease in cash ow wasdue to decreased cash ow from operating activities. Cash ow after investments amounted to SEK 209 M (1,938), including payments relating to business combinations of SEK –175 M (–272). Cash ow from nancing activities amounted to SEK –1,726 M (–3,605). Specication of cash ow after continuous investments –2,000 0 1,000 2,000 Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1 SEK M Investments/Divestments Change in working capital Operating cashow 2019/20 2020/21 2021/22 Cash ow from operating activities –1,000 0 1,000 2,000 3,000 Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1 SEK M Per quarter Rolling 12 months 2019/20 2020/21 2021/22 GROUP FINANCIAL REPORTING 111 ELEKTA ANNUAL REPORT 2021/22 Income statement – Parent Company SEK M Note 2021/22 2020/21 Administrative expenses –38 –27 Other operating income and expenses 48 – Operating income 10 –27 Income from participations in Group companies 11 1,121 327 Interest income and similar items 13 138 154 Interest expenses and similar items 13 –125 –217 Result from participation in other companies –43 208 Exchange rate dierences 11 –4 Income after nancial items 1,112 441 Income tax 14 6 –14 Net income 1,118 427 Statement of comprehensive income – Parent Company SEK M 2021/22 2020/21 Net income 1 ,118 427 Other comprehensive income Other comprehensive income, net of tax – – Total comprehensive income 1 ,118 427 Financial statements – Parent Company Balance sheet – Parent Company SEK M Note April 30, 2022 April 30, 2021 ASSETS Non-current assets Intangible assets 16 39 46 Shares in subsidiaries 19 2,752 2,590 Shares in associated companies 20 6 13 Receivables from subsidiaries 2,160 2,194 Other nancial assets 21 38 81 Deferred tax assets 14 44 27 Total non-current assets 5,039 4,951 Current assets Receivables from subsidiaries 2,599 2,895 Other current receivables 24 42 39 Cash and cash equivalents 25 1,863 3,421 Total current assets 4,504 6,355 Total assets 9,543 11,306 EQUITY AND LIABILITIES Equity Share capital 26 192 192 Statutory reserve 156 156 Restricted equity 348 348 Premium reserve 657 657 Retained earnings 1,363 1,082 Unrestricted equity 2,020 1,739 Total equity 2,368 2,087 Provisions 28 13 36 Interest-bearing liabilities 27 4,099 3,043 Total non-current liabilities 4,112 3,079 Current liabilities Interest-bearing liabilities 27 500 2,141 Liabilities to subsidiaries 27 2,482 3,858 Provisions 28 – 4 Other current liabilities 31 81 137 Total current liabilities 3,063 6,140 Total equity and liabilities 9,543 11,306 FINANCIAL REPORTING PARENT COMPANY ELEKTA ANNUAL REPORT 2021/22 112 Cash ow statement – Parent Company SEK M Note 2021/22 2020/21 Operating activities Income after nancial items 1,112 441 Interest net 34 –24 37 Other non-cash items 34 –2 –135 Interest received 138 154 Interest paid –114 –191 Income taxes paid 14 –11 – Operating cash ow 1,099 306 Change in operating receivables –655 1,119 Change in operating liabilities –1,433 –391 Change in working capital –2,088 728 Cash ow from operating activities –989 1,034 Investing activities Business combinations 34 – –235 Shareholders’ contributions paid 34 –155 –55 Divestments of other shares 34 – 443 Change in long-term receivables 1,154 197 Cash ow from investing activities 999 350 Cash ow after investments 10 1,384 Financing activities Borrowings 1,401 – Repayment of debt –2,067 –2,701 Dividend –841 –688 Cash ow from nancing activities –1,507 –3,389 Cash ow for the year –1,497 –2,005 Change in cash and cash equivalents during the year Cash and cash equivalents at the beginning of the year 3,421 5,387 Cash ow for the year –1,497 –2,005 Exchange rate dierences –61 39 Cash and cash equivalents at the end of the year 25 1,863 3,421 Changes in equity – Parent Company Restricted equity Unrestricted equity SEK M Share capital Statutory reserve Premium reserve Retained earnings Total equity Opening balance May 1, 2020 192 156 657 1,341 2,346 Net income – – – 427 427 Other comprehensive income – – – – – Total comprehensive income – – – 427 427 Dividend – – – –688 –688 Incentive programs – – – 2 2 Transactions with the shareholders, total – – – –686 –686 Closing balance April 30, 2021 192 156 657 1,082 2,087 Opening balance May 1, 2021 192 156 657 1,082 2,087 Net income – – – 1,118 1,118 Other comprehensive income – – – – – Total comprehensive income – – – 1,118 1,118 Dividend – – – –841 –841 Incentive programs – – – 4 4 Transactions with the shareholders, total – – – –837 –837 Closing balance April 30, 2022 192 156 657 1,363 2,368 PARENT COMPANY FINANCIAL REPORTING 113 ELEKTA ANNUAL REPORT 2021/22 Note 1 Signicant accounting principles Elekta AB, with corporate registration number 556170-4015, is a public limited company and its shares are listed on Nasdaq Stockholm, Sweden. Elekta AB is the parent company of the Group and is headquarted in Stockholm, Sweden. The address to the head oce is Elekta AB, Kungstensgatan 18, Box 7593, SE-103 93 Stockholm. This annual report, including the consolidated nancial state- ments, was signed and approved for publication by the Board of Directors of Elekta AB on July 7, 2022. The statements of income and the balance sheets, for the Parent Company and the Group, included in the annual report and the consolidated nancial statements, are subject to adoption by the annual general meet- ing on August 25, 2022. The most important accounting principles applied in the prepa- ration of the nancial reports are set out below and, where appli- cable, in the following notes. Mainly, the same principles are applied for the Parent Company and the Group. The Parent Com- pany’s accounting principles deviating from those applied by the Group, or con sidered important to describe, are stated under a separate heading at the end of this note. Basis for preparation Elekta’s consolidated nancial statements have been prepared in accordance with International Financial Reporting Stan- dards (IFRS) as endorsed by the European Union (EU) on April 30, 2022, the Swedish Annual Accounts Act and standard RFR 1 of the Swedish Financial Reporting Board. The Parent Company’s nancial reports have been prepared in accordance with the Swedish Annual Accounts Act and standard RFR 2 of the Swedish Financial Reporting Board. Measurement basis Assets and liabilities are recognized at historical cost apart from nancial assets and liabilities that are short-term invest- ments, derivatives and contingent considerations, which are recognized at fair value. New and revised IFRS applied from May 1, 2021 There are no new or revised standards and interpretations adopted as of May 1, 2021 that have had a material impact onthe Elekta Group’s nancial statements. Consolidated accounts The consolidated accounts include Elekta AB (the Parent Company) and its subsidiaries. Subsidiaries are all companies in which the Group has a controlling interest. The Group has a controlling interest in a company when it has exposure, or right, to variable returns from its holding in the company and has the ability to use its power over the company to aect the returns. A subsidiary is included in the con solidated accounts from the point in time when the controlling interest is obtained until the point in time when the controlling interest ceases. Intra-group transactions, balance sheet items and unrealized intra-group prots are eliminated in the consolidated accounts. The acquisition method The consolidated accounts have been prepared in accordance with the acquisition method, which means that the cost of shares in subsidiaries is eliminated against their equity at the time of acquisition. Acquisition related transaction costs are not included in the cost of the shares but expensed as incurred. The equity in a subsidiary is determined on the basis of the fair value of assets, liabilities and contingent liabilities at the acquisition date. Thus, only the part of the subsidiary’s equity which has arisen after the acquisition date is included in the consolidated accounts. In business combinations, where the sum of (i) the cost of shares in subsidiaries, (ii) the value of non-controlling interest and (iii) the fair value of previously held equity interest, exceeds the fair value of the Group’s share of acquired identiable net assets at acquisition, the dierence is reported as goodwill. If the initial accounting for a business combination is incom- plete by the end of the reporting period in which the combination occurs, provisional amounts are reported for the items for which the accounting is incomplete. Such amounts may be adjusted during the measurement period, or new assets or liabilities may be recognized, to reect new information obtained about facts and circumstances that existed as of the acquisition date and, ifknown, would have aected the measurement of the amounts recognized as of that date. Non-controlling interests In connection with acquisitions of less than 100 percent, when acontrolling inuence is achieved, non-controlling interests aredetermined either as a proportional share of the fair value ofidentiable net assets excluding goodwill or at fair value. Non-controlling interests are recognized as a separate item in the Group’s equity. The Group’s income statement and every component ofother comprehensive income are attributable tothe shareholders of the Parent Company and to non- controlling interests. Losses attributable to non- controlling interests are recognized even if this results in a negative balance. Subsequent acquisitions up to 100 percent and divestments of participations in a subsidiary that do not lead to a loss of con- trolling inuence are recognized as equity transactions. Translation of foreign subsidiaries The Group companies prepare their nancial statements in their functional currency, i.e. the currency used in the primary economic environment in which they mainly operate. These reports provide the basis for the con solidated accounts which are prepared in Swedish kronor (SEK), which is the functional currency of the Parent Company and the presentation cur- rency. Unless otherwise stated, the amounts presented are Notes FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 114 inmillions Swedish krona and, accordingly, rounding dier- ences can occur. The income statements and balance sheets of foreign subsidiaries have been translated, from their respec- tive functional currency, to the presentation currency of the Group. All items in the income statements have been trans- lated at the average rate for the reporting period, while assets and liabilities in the balance sheets have been translated at theclosing rate. Translation dierences are reported in other comprehensive income. Certain long-term nancing related to subsidiaries, where a settlement is not considered to take place in the foreseeable future, is considered as an increase in the Parent Company’s net investment in the subsidiaries. Taking the tax eect into consider- ation, exchange gains and losses are reported in other compre- hensive income. Income statement Elekta presents its income statement classied by function where the operating expenses are allocated to cost of products sold, selling expenses, administrative expenses and R&D ex - penses. Exchange rate dierences are reported on separate lines within the operating income. These have been identied as important to distinguish from operating income and expenses directly related to functions in order to ease comparability overtime. Government grants Government grants relate to nancial grants from governments, public authorities and similar local, national, or international bodies. These are recognized when there is a reasonable assur- ance that the grants will be received and that Elekta will comply with the conditions attached to them. Government grants relat- ing to expenses are recognized in the income statement as a deduction of such related expenses. Government grants relating to assets are included in the balance sheet as prepaid income and recognized as income over the useful life of the assets. Transactions and balances in foreign currency Transactions in foreign currency are translated to the respec- tive Group Company’s functional currency by use of the cur- rency rate prevailing on the transaction date. Monetary receiv- ables and liabilities in foreign currency are similarly translated by use of the closing day rate. Exchange rate dierences aris- ing upon translation, and upon payment of the transaction, are reported in the income statement with the exception of those related to qualied hedge transactions, related to cash ows or net investments, which are recognized in equity under other comprehensive income. Exchange rate gains and losses on operating balance sheet items are recognized in the operat- ing income. Exchange rate gains and losses on loans and investments are recognized as nancial items. Non-monetary assets and liabilities carried at historical cost are translated at the exchange rate prevailing on the transaction date. Cash ow statement The cash ow statement is prepared according to the indirect method. Exchange rates Average rate Closing rate Country Currency 2021/22 2020/21 April 30, 2022 April 30, 2021 Australia AUD 6.554 6.388 7.031 6.517 Canada CAD 7.093 6.692 7.712 6.825 China CNY 1.389 1.302 1.483 1.295 Euroland EUR 10.250 10.293 10.349 10.151 United Kingdom GBP 12.089 11.549 12.294 11.682 Hong Kong HKD 1.143 1.130 1.254 1.079 Japan JPY 0.078 0.083 0.075 0.077 USA USD 8.902 8.764 9.839 8.377 The Parent Company The Group’s Parent Company, Elekta AB, carries out group management andprovides joint group functions and nancial management. The Parent Company’s revenues consist mainly of dividends from subsidiaries. The most material balance sheet items are shares in subsidiaries, intra-group balances and external loans. The Parent Company’s annual accounts have been prepared in accordance with the Swedish Annual Accounts Act (1995:1554) and standard RFR2 of the Swedish Financial Reporting Board. RFR 2 requires the Parent Company, in its annual accounts, to apply all the International Financial Reporting Standards (IFRS) as endorsed by the EU in so far as this is possible within the framework of the Annual Accounts Act and with regard to the relationship between accounting and taxation. RFR 2 states what exceptions from, and additions to, IFRS should be made. Revenues The Parent Company’s revenues consist mainly of dividends from sub sidiaries. Dividends are recognized when the right to receive payment is judged to be rm. Shares in subsidiaries and shares in associates Shares in subsidiaries and shares in associates are accounted for at cost less any accumulated impairment losses. Acquisition- related transaction costs are included in the cost of the shares. The recoverable amount of shares in subsidiaries or shares in associates is calculated whenever there is an indication of a reduction in value. Impairment is performed if the recoverable amount is lower than the carrying value. Impairment losses are recognized in the nancial net in the income statement. NOTE 1 Essential accounting principles, cont. NOTES FINANCIAL REPORTING 115 ELEKTA ANNUAL REPORT 2021/22 Financial instruments Derivative nancial instruments and short-term investments are accounted for at fair value. Changes in the fair values of derivative nancial instruments are reported in the income statement with the exception of exchange dierences related to a monetary item that forms part of a net investment in a foreign subsidiary. Such value changes are recognized in equity under other comprehensive income. Contingent consider- ations are reported as provisions in the Parent Company. Group contributions Group contributions are reported in accordance with RFR 2. Group contributions received and given are recognized as income from participations in Group companies and increase of shares in subsidiaries respectively. The tax eect of group contributions is recognized in the income statement in accor- dance with IAS 12. Note 2 Financial risk management Accounting principles See Note 3 for accounting principles relating to nancial instruments. Financial risk factors As a result of its operations, the Elekta Group is exposed to a number of nancial risks: market risk, credit risk and liquidity risk. The Group’s over riding risk management policy focuses on the unpredictability of nancial markets and seeks to reduce any potentially unfavorable eects on the Group’s nancial results. Risk management is conducted by the Group’s nance department, which identies, evaluates and hedges nancial risks. Work is pursued in line with the policies established by theboard for over arching risk management and for specic areas such as currency risk, interest-rate risk, credit risk, utiliza- tion of derivative instruments and nancial instruments that are not derivatives, and the investment of surplus liquidity. Market risk Market risk encompasses currency risk, interest-rate risk andprice risk. The Group’s exposure to and management of currency risk and interest-rate risk are described below. The Group’s exposure to price risk is limited and is not described in particular. Currency risk Because of its international operations, the Group is exposed to currency risks in the form of transaction exposure and trans- lation exposure. Trans action exposure arises as a result of future business transactions and translation exposure emerges as a result of recognized assets and liabilities in foreign cur- rency as well as net investments in foreign operations. The Group’s currency risk mainly arises from currency exposures in US dollars (USD), Euro (EUR), British Pounds (GBP), Japanese Yen (JPY) and Chinese Yuan (CNY). The Group’s net revenue arises primarily in USD, EUR and JPY, while the Group’s net expenses largely arise in GBP, EUR and USD. Sales companies primarily have income and expenses in their functional currency while production companies are to a greater extent exposed to currency risk as sales are largely in a currency other than the functional currency. The currency risk that arises from future business transactions and recognized assets and lia- bilities are managed using derivative contracts based on fore- casted net ows and recognized net balances. Elekta’s policy is to hedge the exchange-rate risk using forwards, the extent of which is determined by the Group’s estimation of the exchange-rate risk and in accordance with the Group’s established policy. Highly forecasted transaction exposure hedging is on the basis of expected net sales and hedging is conducted over a period up to 24 months. Each Group company is responsible for quantifying its transaction exposure in particular ow forecasts that then pro- vide the basis for determination of the exposure and decisions on hedging measures. Currency hedging of recognized assets and liabilities in foreign currency is hedged, in accordance with policy, from 50 percent to 100percent. Hedging is carried out in order to reduce the eects of short- term uctuations in currency markets. The Parent Company’s direct and indirect holdings in foreign operations entail that net assets in the foreign operations are exposed to currency risk. Such net investments in foreign currency are hedged when viewed as appropriate on an individual basis, currently there are no out- standing net investment hedges. Based on the year’s income, expense and currency structure (transaction exposure) a general change of one percentage point in the SEK exchange rate against other currencies would aect Group net prot and shareholders’ equity by approximately +/– SEK 25 M (23), exclusive of hedging eects. The table below shows the impact on net income from a 1 percent weakening of the Swedish krona (SEK) in relation to the major currencies. Impact on operating income of a 1 percent weakening of SEK, SEK M Currency April 30, 2022 April 30, 2021 USD 36 32 EUR 6 8 JPY 5 5 GBP –27 –27 CNY –3 –2 Other currencies 8 7 The Group’s net sales and operating expenses by currency for 2021/22 are shown in the following diagram. NOTE 1 Essential accounting principles, cont. FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 116 Net sales and operating expenses per currency –4,000 0 4,000 8,000 OtherSEKCNYGBPJPYEURUSD SEK M Net sales 2021/22 Operating expenses 2021/22 Net sales 2020/21 Operating expenses 2020/21 Interest-rate risk Interest-rate risk refers to the risk that changes in the interest rate level negatively aect Elekta’s earnings. Elekta’s policy is to reduce the interest-rate risk through the use of loans, investments and derivatives. Hedging is carried out in order to reduce impact on result from interest rate movements and is never to exceed the amount and maturity of the underlying exposure. The Group’s nance department analyzes exposure to interest-rate risk, whereby renancing, turnover of existing posi- tions, alternative nancing and hedging are taken into account. Based on this, the eect on earnings that a certain change in the interest rate would have is calculated, in which the total change in the interest rate is usedfor all currencies. Elekta usually obtains long-term loans at a variable or xed interest rate based on current market conditions. Conversion to xed or variable interest rates is done using interest rate deriva- tives when this is deemed appropriate from a risk management and market perspective. An interest rate swap entails that the Group reaches agreement with another party with the indicated intervals (such as per quarter) to swap the dierence between xed and variable interest amount, estimated on the basis of the contracted nominal amount. Based on the balance sheet structure at year-end and under the assumption that all other variables were constant, a gen- eral change in the interest rate on loans and investments by one percentage point would aect the Group’s net result and shareholders’ equity by SEK –4 M (0), excluding hedging eects. The impact on the result is mainly attributable to lower/higher interest expense for loans at variable interest rate. On April 30, 2022, interest-bearing liabilities amounted to SEK 5,695 M (6,239), of which SEK 1,086 M (1,054) pertained to lease liabilities. The average xed interest term was 1.6 years (1.1) and the weighted average interest rate, taking interest rate deriva- tives into account, was 1.5 percent (1.8). See Note 27 for more information on interest-bearing loans. Credit risk Credit risk arises via nancial credit risk related to cash and cash equivalents, short-term investments, derivative instruments and balances at banks and nancial institutions as well as through credit exposure vis-à-vis customers and distributors. Credit risk is managed primarily at Group level, but, as regards credit risk in accounts receivable and accrued income, the pri- mary responsibility lies with the individual Group companies. Maximum credit risk is deemed to correspond to the carrying values of the nancial assets recognized in the balance sheet. Financial credit risk Elekta’s nance policy includes special counterparty regula- tions in which the maximum credit exposure and the lowest credit rating for various counterparts are specied. Elekta’s liquidity is invested in accordance with the determined policy, with the goal of maintaining high liquidity combined witha low credit risk. The majority of the subsidiary nancing goes through internal loans from the Parent Company, therefore there is a credit risk originating from these. The opening balance of expected credit losses in the Parent Company amounted to SEK 27 M andthe clos- ing balance of expected credit loss reservation at the end of nancial year 2021/22 was SEK 21 M. Credit risk in accounts receivable Credit risk in accounts receivable, including accrued income, are managed primarily by the individual group companies. The credit risk for each new customer is analyzed before the condi- tions for payment and delivery are oered. A continuous follow up of the credit risk in receivables outstanding and agreed transactions are performed. A risk assessment is conducted continuously of credit worthiness through the observance of the customer’s nancial position and other inuencing factors as well as previous experience. No single customer accounts for 10 percent or more of Elekta’s net sales. A continuous assessment is made of the credit risk in receiv- ables outstanding and at the end of the nancial year 2021/22 the provision for bad debts amounted to SEK 98 M. See Note 23 for an analysis of credit exposure in accounts receiv- able and provision for bad debts. Liquidity risk Liquidity risk pertains to the risk of not being able to cover pay- ment obligations due to insucient cash and cash equivalents or diculties in obtaining external nancing. The operating Group companies draw up cash ow forecasts, which are con- solidated centrally. At the Group level, rolling forecasts for the Group’s liquidity reserve are observed in order to ensure that the Group has sucient cash resources to meet the require- ments of current operations, while also retaining sucient scope of unutilized credit facilities. Excess liquidity in operating Group companies is usually trans- ferred centrally and is managed by the Group’s nancial function. Investments are made primarily in interest-bearing accounts, term-limited borrowing, money market instruments, money mar- ket funds and tradable securities, depending on which instrument is viewed as having an appropriate term or sucient liquidity to meet the particular situation. In order to reduce the liquidity risk, Elekta endeavors to maintain readily available funds equal to at least 10 percent of net sales. On April 30, 2022, available cash and cash equivalents and short-term investments amounted to SEK 3,069 M (4,403), or 21 percent (32) of net sales. In addition, Elekta had SEK 2,070M (2,030) in unutilized credit facilities. NOTE 2 Financial risk management, cont. NOTES FINANCIAL REPORTING 117 ELEKTA ANNUAL REPORT 2021/22 Maturity analysis: nancial liabilities April 30, 2022 April 30, 2021 SEK M < 1 yr > 1 yrs < 3 yrs > 3 yrs < 5 yrs > 5 yrs Total < 1 yr > 1 yrs < 3 yrs > 3 yrs < 5 yrs > 5 yrs Total Loans (Note 27) 615 1,274 2,921 363 5,172 2,232 597 1,093 1,580 5,502 Lease liabilities (Note 27) 260 331 154 464 1,209 231 346 164 512 1,252 Accounts payable 1,352 – – – 1,352 1,016 – – – 1,016 Derivative nancial instruments – outow, gross 7,727 2,185 – – 9,912 6,886 1,675 – – 8,561 Derivative nancial instruments – inow, gross –8,076 –2,131 – – –10,207 –6,721 –1,692 – – –8,413 Other liabilities 429 42 – – 471 559 64 – – 623 Total 2,307 1,701 3,075 827 7,909 4,204 990 1,257 2,092 8,542 NOTE 2 Financial risk management, cont. Net debt/EBITDA ratio SEK M Note April 30, 2022 April 30, 2021 Interest-bearing liabilities 27 4,609 5,184 Cash and cash equivalents and short-term investments 25 –3,077 –4,411 Net debt 1,532 774 EBITDA 2,682 3,110 Net debt/EBITDA ratio 0.57 0.25 The net debt/EBITDA ratio was 0.57 compared to 0.25 for prior scal year. See Note 27 for more information on interest- bearing liabilities and section Alternative Performance Measures on page 155 for more information on EBITDA and Net debt. The table below shows the Group’s liquidity risk through a maturity analysis regarding nancial liabilities (including interest payments as applicable) and derivatives recognized asnancial liabilities. The amounts noted in the table are contractual, undiscounted cash ows classied on the basis ofthe term on the balance sheet date that remains to the agreed maturity date. Capital management The primary objective of the Group’s capital management is tosecure a going concern through maintaining a high credit- worthiness and a well- balanced capital structure with the aim of generating return to shareholders and benets for other stakeholders, and to keep down the costs of capital. In order to maintain or adjust the capital structure, the Group can change the dividend paid to shareholders, repay capital to shareholders, issue new shares or sell assets to reduce debt. Maturity analysis: loans & lease liabilities Loans Lease liabilities SEK M 0 1,000 2,000 3,000 4,000 >5 yrs>3 yr >5 yrs >1 yrs <3 yrs <1 yr FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 118 Note 3 Financial instruments Accounting principles A nancial asset or a nancial liability is reported in the bal- ance sheet when the Company becomes party to the contrac- tual terms and conditions of the instrument. A nancial asset is removed from the balance sheet when the contractual rights are realized, fall due, or if the Company transfer substantially all the risks and rewards of ownership. Spot acquisitions or sales of nancial assets are reported on the settlement date, which is the date on which the asset is delivered. Accounts receivable are reported in the balance sheet when the invoice is dispatched. Financial assets are initially recognized at fair value plus trans- action costs, except for those nancial assets carried at fair value through the net income. Related transaction costs are expensed in the income statement. The fair value of quoted nancial assets corresponds to the asset’s listed bid price on the closing date. In the absence of such information, a valuation is carried out using generally accepted methods such as the discounting of future cash ows at the quoted market interest rate for the particular maturity. For short-term loans, the fair value is deemed to comply with the carrying amount in view of the fact that a change inmarket rate of interest does not have a material eect on the market value. Financial assets and liabilities are o-set and reported at anet amount in the balance sheet when there is a legal right to net and when the intention is to settle the items using a net amount or simultaneously realize the assets and settle the liability. Subsequent measurement of the nancial asset, after the ini- tial recognition at fair value, is based on what business model the Company have for managing the asset and the cash ow char- acteristics of the asset. For debt instruments there are three mea- surement categories with the following characteristics. • Amortized cost; assets held with the intention for collection of contractual cashows and the cashow represent solely payments of principal and interest. • Fair value through other comprehensive income; assets held with the intention for collection of contractual cashow and for selling it, and the cashow represent solely pay- ments of principal and interest. • Fair value through the net income; all nancial assets that do not meet the criteria for amortized cost or fair value through other comprehensive income. Equity instruments, instrument that evidences a residual inter- est in the asset of an entity after deduction of all its liabilities, are measured at fair value through the net income. The nancial liabilities are classied into following measure- ment categories: • fair value through the net income; liabilities held for trading • amortized costs; liabilities not held for trading Financial assets measured at amortized cost Assets are classied in this category when the intention is to hold the asset for collection of contractual cashows and the cashow represent solely payments of principal and interest. In this category assets are measured at amortized cost using the eective interest method, less any provision for impairment. Interest income and gains and losses is recognized in the income statement. The category includes for example accounts receivables as well as cash and bank. Accounts receivable Since the anticipated life of accounts receivable is short, reporting is based on the amounts expected to be received, without discounting in accordance with the method for amor- tized cost. Impairment loss on accounts receivable is recog- nized in operating income. See Note 2 and 23 for further information about credit risk and impairment policies. Cash and cash equivalent Cash and cash equivalent comprise cash and bank balances with nancial institutions and short-term investments with an original maturity of less than three months. Cash and bank are reported at amortized cost, while the short-term investments in money market funds is measured at fair value through the net income. Financial assets measured at fair value through other comprehensive income (FVOCI) When the intention of the nancial asset is to hold the asset for collection of contractual cashow and for selling it, and the cashow represent solely payments of principal and interest, the asset is classied into this category. The assets are mea- sured at fair value with changes in fair value recognized in other comprehensive income (OCI), except for eective inter- est, impairment gains and losses and foreign exchange gains and losses which are recognized in the income statement. When the nancial asset is derecognized, the cumulative gain or loss in OCI is reclassied to the income statement. In this category Elekta has classied account receivables that may be sold. For Elekta it is only in a few countries where account receivables are subject for factoring. As the sold account receivables are derecognized close to them being issued, there are no material dierences between fair value and amortized cost. Elekta treat interest in other shares as equity investment desig- nated as measured at fair value through other comprehensive income with gains and losses remaining in other comprehensive income, without recycling to the net income upon derecognition. NOTES FINANCIAL REPORTING 119 ELEKTA ANNUAL REPORT 2021/22 Financial assets measured at fair value through prot and loss (FVPL) All nancial assets that do not meet the criteria for amortized cost or FVOCI are measured as FVPL. Assets are classied to this category when the intention is to sell in short term. Deriva- tives with a positive market value are classied in this category unless they are used for hedge accounting. Financial deriva- tives and short-term investments in tradeable securities as well as money market funds is classied in this category. Assets in this category are recognized at fair value and changes in value are recognized in the income statement. Impairment Financial assets carried at amortized cost and FVOCI are assessed for impairment based on expected credit losses. The expected credit loss allowance is based on historical credit loss experience, current conditions and forward-looking economic conditions. The impairment methodology applied depends on whether there has been a signicant increase in credit risk. The Company applies the simplied approach to measuring expected credit losses on accounts receivables, meaning a use of a lifetime expected loss allowance. See Note 23 for more information about impairment on accounts receivables. Financial liabilities at fair value through prot or loss This category includes derivatives with negative fair values that are not used for hedge accounting, nancial liabilities held for trading and contingent considerations. Liabilities in this category are measured at fair value with changes in that value recognized in the income statement. Financial liabilities measured at amortized cost This category includes nancial liabilities that are not held for trading, for example loans and accounts payable. These are recognized initially at fair value, net after transaction costs, and subsequently at amortized cost according to the eective interest method. Loan liabilities Loan liabilities are initially reported at fair value, net of trans- action costs, and subsequently at amortized cost according to the eective interest method. Loan liabilities carrying a xed rate of interest that are reported under hedge accounting in line with the method for fair value hedging are valued at market in respect of the interest component. Changes in market value are o-set with changes in value of the hedge instrument in net nancial items. Hedging of net investments Loans in foreign currency are reported at closing rate. Exchange rate dierences for loans in connection with hedg- ing of net investments in foreign operations are reported in other comprehensive income, with tax eects taken into account, and are thus o-set against the translation dier- ences that arise when translating the subsidiaries’ balance sheets into SEK. Accounts payable The valuation principle for accounts payable is the amortized cost principle. The expected lifetime for accounts payable is short and thus the payables are reported at nominal value without discounting. Accounting for derivatives used for hedging purposes The group applies the hedge accounting requirements of IFRS 9. All derivatives are initially and continuously recognized at fair value in the Balance sheet. Gains and losses on remeasure- ment of derivatives used for hedging purposes are recognized as follows. Changes in value relating to cash ow hedges are reported in other comprehensive income and are taken to theincome statement as the hedged cash ow aects the income statement. Any ineective portion of the change in value is reported directly in the income statement. The result of a revaluation of derivatives used to hedge fair value is reported in the income statement along with changes in the fair value of the receivable or liability exposed to the hedged risk. For derivatives designated and qualied as hedging instru- ments, the method of recognizing the fair value gains or losses depends on the nature of the item being hedged. The Group documents, at the inception of the hedge, the rela- tionship between hedged item and nancial derivative instru- ment, as well as its risk management objective and strategy. The Group also documents its assessment, both at the hedge incep- tion and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly eective in osetting the changes in fair values or cash ows of hedged items based on the following hedging criteria’s. • There is an economic relationship between the hedged itemand the hedging instrument • The eect of credit risk does not dominate the value changes that result from that economic relationship and • The hedge ratio of the hedging relationship is consistent with risk management strategy. The table below presents the Group’s nancial assets and nancial liabilities by measurement category with the carrying amount and fair value per item. Fairvalue for long-term inter- est-bearing liabilities has been established by discounting future payment ows at current market interest rate and thenconverting to SEK at the current exchange rate. For other nancial instruments the fair value is estimated to agree with the carrying amount. NOTE 3 Financial instruments, cont. FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 120 NOTE 3 Financial instruments, cont. Financial instruments per category April 30, 2022 April 30, 2021 SEK M Note Carrying amount Fair value Carrying amount Fair value FINANCIAL ASSETS Financial assets measured at fair value through the net income: Derivative nancial instruments – non-hedging 16 16 32 32 Current investments classied as cash equivalents 25 3 3 792 792 Financial assets measured at amortized cost: Other nancial assets 21 552 552 423 423 Accounts receivable 23 3,647 3,647 3,281 3,281 Other receivables 24 688 688 582 582 Cash and bank 25 3,074 3,074 3,619 3,619 Financial assets measured at fair value through other comprehensive income: Equity instruments 21 15 15 60 60 Derivatives used for hedging purposes: Derivative nancial instruments – hedging 135 135 212 212 April 30, 2022 April 30, 2021 SEK M Note Carrying amount Fair value Carrying amount Fair value FINANCIAL LIABILITIES Financial liabilities measured at fair value through the net income: Derivative nancial instruments – non-hedging 55 55 29 29 Other liabilities (contingent considerations) 32 32 120 120 Financial liabilities measured at amortized cost: Long-term interest- bearing liabilities 27 4,099 4,251 3,043 3,250 Short-term interest- bearing liabilities 27 510 504 2,141 2,174 Accounts payable 1,352 1,352 1,016 1,016 Other liabilities 884 884 803 803 Derivatives used for hedging purposes: Derivative nancial instruments – hedging 384 384 13 13 Distribution by level when measured at fair value April 30, 2022 April 30, 2021 SEK M Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total FINANCIAL ASSETS Financial assets measured at fair value through the net income: Derivative nancial instruments – non-hedge accounting – 16 – 16 – 32 – 32 Current investments classied as cash equivalents 3 – – 3 792 – – 792 Derivatives used for hedging purposes: Derivative nancial instruments – hedge accounting – 135 – 135 – 212 – 212 Financial assets measured at fair value through other comprehensive income: Equity instruments 1) – – 15 15 60 – – 60 Total nancial assets 3 151 15 168 852 244 – 1,096 FINANCIAL LIABILITIES Financial liabilities at fair value through the net income: Derivative nancial instruments – non-hedge accounting – 55 – 55 – 29 – 29 Contingent considerations – – 32 32 – – 120 120 Derivatives used for hedging purposes: Derivative nancial instruments – hedge accounting – 384 – 384 – 13 – 13 Total nancial liabilities – 439 32 471 – 42 120 162 1) The reduction of SEK 45 M in 2021/22 in fair value of equity instruments was related to uncertainty in an investment in other companies and measured at fair value through other comprehensive income. The reclassication has taken place due to the asset is no longer listed on the market. NOTES FINANCIAL REPORTING 121 ELEKTA ANNUAL REPORT 2021/22 NOTE 3 Financial instruments, cont. Derivatives outstanding April 30, 2022 April 30, 2021 SEK M Nominal Asset Liability Hedge reserve after tax Nominal Asset Liability Hedge reserve after tax Currency derivatives: Cash ow hedges 2,756 135 384 –201 5,772 212 13 154 Non-hedge accounting 1,323 16 55 – –22 32 29 – Currency derivatives, total 4,080 151 439 –201 5,750 244 42 154 Cash ow hedges outstanding Q1 22/23 Q2 22/23 Q3 22/23 Q4 22/23 23/24 Currencies Currency Amount Exchange rate Amount Exchange rate Amount Exchange rate Amount Exchange rate Amount Exchange rate GBP/SEK GBP 27 M 11.497 31 M 10.824 13 M 11.758 37 M 11.720 59 M 11.879 EUR/SEK EUR 12 M 10.171 32 M 10.216 7 M 10.292 16 M 10.292 34 M 10.307 USD/SEK USD 51 M 8.503 69 M 8.494 34 M 8.462 85 M 8.707 103 M 8.984 JPY/SEK JPY 1,000 M 0.079 800 M 0.079 550 M 0.080 1,350 M 0.078 1,725 M 0.079 The table below presents detailed information regarding theGroup’s outstanding cash ow hedges. Realized results from cash ow hedges have been recognized on the line “Currency rate dierences” in the operating income and amounted to SEK 94 M (164) during the year, of which SEK17M (0) was related to the ineective portion. The table above shows how the Group’s nancial assets and nancial liabilities, which are carried at fair value, have been categorized in the fair value hierarchy. The dierent levels are dened as follows. Level 1: Quoted prices on an active market for identical assets or liabilities. Level 2: Other observable data than quoted prices included in Level 1, either directly (that is, price quotations) or indirectly (that is, obtained from price quo- tations). Level 3: Data not based on observable market data. Financial instruments, level 1 The fair value of tradeable securities are reported based on quoted prices on an active market. Financial instruments, level 2 The fair value of nancial instruments that are not traded on an active market are determined by means of available valua- tion techniques. Market information is used when available. The use of corporate-specic information is avoided whenever possible. If all important in-data required for a fair value valua- tion of an instrument is observable, the instrument is in level2. Specic valuation techniques used in the valuation ofnancial instruments include, for example, listed market prices, fair value for interest-rate swaps, calculated as the present value of estimated future cash ows based on observ able yield, fair value of currency forward contracts determined through the use of rates for currency foreign exchange contracts on the balance sheet date. Financial instruments, level 3 The change during the year for instruments at level 3 mainly refers to contingent considerations. Contingent considerations are valued at the fair value based on data available such as conditions set forth in the purchase agreement and current assessments of the estimated fulllment of the conditions. Movements nancial instruments level 3 Financial instruments, net 2021/22 2020/21 Opening balance May 1 –120 –105 Business combinations –18 –79 Payments 43 47 Reversals 65 – Reclassications 15 – Translation dierences –2 16 Closing balance April 30 –18 –120 The reclassication has taken place due to the asset no longer listed on the market. Outstanding derivative nancial instruments The Group’s derivative nancial instruments outstanding at April 30 are presented with nominal amounts and fair values in the table below. The total amount of fair values of assets and liabilities respectively are equivalent to the carrying values recognized in the balance sheet. FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 122 NOTE 3 Financial instruments, cont. The hedged transactions in foreign currency are estimated to take place in the coming 24 months. Results from the forward exchange agreements recognized in the hedge reserve in other comprehensive income on 30 April 2022, will be accounted for in the income statement in the periods when the hedged transactions will aect the income statement. The estimated future eect from outstanding cash ow hedges are presented in the table below. Outstanding cash ow hedges’ estimated eect on the income statement 2022/23 2023/24 SEK M Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Expected result from cash ow hedges –44 –47 –37 –67 –21 –17 –12 –4 Osetting of nancial assets and nancial liabilities Financial assets and nancial liabilities set o only consist of derivative nancial instruments. In the case of nancial assets and liabilities that are subject to legally binding osetting agreements, each agreement between the company and the counterparties permits net deduction of the relevant nancial assets and liabilities if both 2021/2022 2020/2021 SEK M Gross amount Amounts set o in the balance sheet Net amounts in the balance sheet Amounts covered by netting agreements but not set o Net amount Gross amount Amounts set o in the balance sheet Net amounts in the balance sheet Amounts covered by netting agreements but not set o Net amount Financial assets 151 – 151 –4 146 244 – 244 –203 41 Financial liabilities 439 – 439 –293 146 42 – 42 0 41 parties elect to apply net deduction. If both parties are not in agreement regarding net deduction, gross deduction is applied. In the event that one party defaults, the other party is entitled to deduct on a net basis. Note 4 Estimates and assessments The preparation of nancial statements and application of accounting standards require that management use estimates and assessments. Therefore, they make certain assumptions which are considered reasonable under the prevailing circum- stances. Thus, estimates and assessments aect the nancial reports and they are frequently based on experience as well as other factors, including expectations of future events. Using other assumptions than those actually applied in the prepara- tion of the nancial statements, the result can be dierent and the actual outcome seldom complies with the anticipated result. For Elekta, estimates and assessments are particularly important in: • revenue recognition, see Note 6 • valuation of accounts receivable, see Note 23 • calculation of deferred taxes, see Note 14 • impairment testing of goodwill, see Note 16 • capitalization and amortization of intangible assets, see Note 16 • calculation of provisions, see Note 28 • valuation of leases, see Note 17 Estimates and assessments are continually reassessed. NOTES FINANCIAL REPORTING 123 ELEKTA ANNUAL REPORT 2021/22 Segment reporting Americas EMEA APAC Other/ Group-wide 1) Group total SEK M 2021/22 2020/21 2021/22 2020/21 2021/22 2020/21 2021/22 2020/21 2021/22 2020/21 Net sales 3) 4,254 3,888 5,321 5,140 4,972 4,735 – – 14,548 13,763 Operating expenses –2,606 –2,386 –3,486 –3,260 –3,409 –3,227 – – –9,501 –8,874 Contribution margin 1,648 1,502 1,835 1,880 1,563 1,507 – – 5,047 4,889 Contribution margin, % 39% 39% 34% 37% 31% 32% Global costs – – – – – – –3,403 –2,983 –3,403 –2,983 Operating income 1,648 1,502 1,835 1,880 1,563 1,507 –3,403 –2,983 1,643 1,906 Income from participations in associated companies – – – – 5 –7 5 –7 Financial income – – – – 42 30 42 30 Financial expenses – – – – –200 –295 –200 –295 Exchange rate dierences – – – – 12 –5 12 –5 Income after nancial items 1,648 1,502 1,835 1,880 1,563 1,507 –3,545 –3,259 1,501 1,630 Income tax – – – – – – –345 –377 –345 –377 Net income 1,648 1,502 1,835 1,880 1,563 1,507 –3,890 –3,636 1,157 1,253 Net sales per product type Solutions 2) 1,819 1,563 3,221 3,126 3,612 3,485 – – 8,652 8,175 Service 2,435 2,325 2,100 2,014 1,360 1,249 – – 5,896 5,588 Total 4,254 3,888 5,321 5,140 4,972 4,735 – – 14,548 13,763 Depreciation/Amortization –352 –519 –597 –608 –89 –77 – – –1,039 –1,204 Investments 416 407 909 352 83 86 – – 1,408 845 1) Within other/group-wide are costs that can not be allocated by segment such as global costs and items aecting comparability. Allocations by segment are not done for nancial items and tax. 2) The product type Solutions includes hardware and software combined as it better reects the business follow-up. 3) Net sales from internal transactions amounts to SEK 13,348 M (11,489) and has been eliminated in the table above. Note 5 Segment reporting Accounting principles Operating segments are reported in accordance with manage- ment reporting as reported to the chief operating decision maker. The chief operating decision maker is the function that is responsible for allocation of resources and assessment of the operating segments’ performance. In Elekta, this function has been identied as the President and CEO who is responsible for and deals with the continuous administration of the Group based on the board’s guidelines and instructions. To his aid, he has the executive management. Elekta’s President and CEO evaluates business performance from both geographic and product based perspectives. The geographic follow-up is how- ever the main perspective and the product based perspective constitutes a complement to the geographic monitoring and control. It is from the geographic perspective that the business activity is conducted and managed. Evaluation of nancial performance is executed for three geographic regions which are Elekta’s operating segments: • Americas • EMEA • APAC The same accounting principles are applied in the segment reporting as for the Group. See Note 16 for information on goodwill per region. For information regarding tangible assets per country see Note 18. FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 124 Note 6 Net sales Accounting principles Elekta’s revenue is primarily derived from the sales of treatment solutions and oncology informatics including equipment used for radiation therapy, radiosurgery and brachytherapy as well as software products and related services. Many of Elekta’s products and services are sold on a stand- alone basis but are often included in bundled deals, which are arrangements where equipment, software and services may be included in the same contract. A bundled deal is treated as a project which is supported by a project team that coordi- nates the production, delivery and installation, which can occur at dierent stages. The equipment, installation, soft- ware and services are distinct performance obligations exclud- ing the software that is integrated in the hardware. In most contracts the transaction price consists of a xed consideration which is clearly stated in the contract and the products are usually sold without a right of return. In rare cases contracts can include variable consideration for which the value is estimated for revenue recognition purposes. The allocation of the transaction price, including any dis- count, to the various goods and services (performance obliga- tions) in a contract is performed based on the relative stand- alone selling prices for the goods and services identied as per- formance obligations. As many items included in a bundled deal are also sold on a stand-alone basis, the stand-alone sell- ing prices are based on observable prices in most cases. For items not sold on a stand-alone basis the stand-alone selling prices have been estimated using the best available market and internal data relating to those items. Costs incurred to obtain a contract consist mainly of com- missions, which is recognized as contract asset and areamor- tized over the time when the related revenue is recognized. The timing for revenue recognition of products and services included in a bundled deal depend on its nature and when con- trol for each product or service has been transferred to the customer. Payment terms or conditions for projects dier between regions. In some markets, partial payments will be due upon certain events such as order receipt, delivery and acceptance. In other markets, the entire payment is due upon completion of implementation or acceptance. Amounts invoiced are reported as accounts receivable while revenue recognized amounts not yet invoiced are reported as accrued income. Treatment solutions Elekta sells treatment solutions including hardware, software and service. Main hardware products are Leksell Gamma Knife ® , Linear accelerators, MR-Linacs and Afterloaders. Soft- ware licenses consist mainly of Oncology informatics systems (OIS) and Treatment planning systems (TPS). Services include maintenance and support relating to equipment, software, training, installation services and warranties. Most bundled deals include at least one device, software licenses, installa- tion, service, training and one-year standard warranty that isincluded in the price. There is a possibility for an extended warranty in some contracts that is considered as a service contract. Revenue recognition for these deals is linked to whencontrol for each identied performance obligation is transferred to the customer, which for a standard contract happens at dierent stages over a longer period, usually up tosix months depending on the geographical market. Hardware products In a standard contract, control is considered to be transferred when the device is delivered to the customer’s site and installa- tion is started. At this time, the customer has physical posse- sion of the unit and Elekta has the right to payment for the equipment delivered. Software products For software licenses control is considered to be transferred and revenue is recognized when the licenses are made avail- able to the customer, which is usually at the time of accep- tance of the software. Service contracts For service agreements, control is considered to be transferred over time and revenue is recognized on a straight-line basis over the contractual term of the arrangement or the expected period during which the specied services will be performed. Maintenance and support agreements relating to software products are generally renewed on an annual basis. Installation services and training with low values and which span over a limited time are considered non-material and revenue is recog- nized when the related device reaches the stage of technical acceptance. Estimates and assessment Changes to the goods and services included in an arrangement and the amounts allocated to each item could aect the tim- ing and amount of revenue recognition. Revenue recognition also depends on the timing of shipment, readiness of the cus- tomer’s site, availability of products and for some contracts, customer acceptance terms. If shipments or installations are not made on scheduled timelines or if the products are not accepted by the customer in a timely manner, revenues may dier from expectations. Revenue recognition does often not coincide with invoicing to, and payments from, customers. Payment terms or condi- tions for projects may dier between contracts and regions, but in a standard Elekta contract partial payments will be due upon certain events, such as order receipt, shipment and acceptance. In a standard project, amounts invoiced in accor- dance with an invoicing plan are reported as accounts receiv- able and as a contract liability included in advances from cus- tomers if performance obligations are not yet satised and revenue cannot be recognized. Amounts that have been rec- ognized as revenue, but for which Elekta has not yet the right to invoice according to the invoicing plan agreed, are reported as contract assets and included in accrued income. For service contracts the agreed consideration is invoiced and paid in advance in most markets. When there is a contract agreed and invoiced to the customer, Elekta usually has the right to pay- ment even if the performance obligations are still to be satised. Therefore, a receivable is accounted for with a corresponding contract liability reported as deferred income. NOTES FINANCIAL REPORTING 125 ELEKTA ANNUAL REPORT 2021/22 NOTE 6 Net sales, cont. Net sales for the year amounted to SEK 14,548 M (13,763). Accrued income amounted to SEK 1,796 M (1,772). Accounts receivable amounted to SEK 3,647 M (3,281). For more informa- tion on accounts receivable see Note 23. Net sales per country is based on sales to customers in the respective country. There is no individual customers represent- ing more than 10 percent of net sales. Net sales by country SEK M 2021/22 % 2020/21 % Sweden 38 0.3 46 0.3 USA 3,228 22.2 3,147 22.9 China 2,314 15.9 2,221 16.1 Japan 953 6.5 926 6.7 Germany 741 5.1 650 4.7 Italy 594 4.1 697 5.1 France 487 3.3 445 3.2 India 482 3.3 397 2.9 Canada 452 3.1 249 1.8 United Kingdom 449 3.1 389 2.8 Australia 344 2.4 312 2.3 Netherlands 339 2.3 304 2.2 Spain 260 1.8 382 2.8 Other countries 3,865 26.6 3,599 26.1 Total 14,548 100.0 13,763 100.0 Net sales per product type and timing of revenue recognition SEK M 2021/22 2020/21 Hardware Point in time 7,100 6,595 Software Point in time 1,552 1,581 Service (incl. software) Over time 5,896 5,588 Total 14,548 13,763 Hardware SEK 7,100 M Software SEK 1,552 M Service SEK 5,896 M Note 7 Salaries, other remuneration and social security costs Accounting principles Remuneration paid to employees in the form of wages/salary, paid vacation, etcetera is accounted for as it is earned. Share-based compensation Ongoing share programs are reported according to IFRS 2 Share-based payments and are mainly equity-settled. The conditions of the share programs state that they may be settled in other ways than through shares. This possibility isonly applied to a very limited extent and neither cost nor obligationare material amounts. Accounting for equity-settled share-based compensation programs entails that the instrument’s fair value at grant date is recognized in the income statement over the vesting period, with a corresponding adjustment to equity. This leads to an estimated cost, corresponding to the earned portion of the estimated share value at allotment, being charged to prot and loss over the vesting period. For performance-based share programs, the expected number of vested shares is revised at each reporting date and the impact of any changes over the original estimates are recognized in the income statement, with a corresponding adjustment to equity. Market-based share programs (LTI 2019/22, LTI 2020/23 and LTI 2021/24) are not revalued during the remainder of the vesting period after the fair value is established, except if the condition of contin- ued employment during the vesting period is no longer fullled. In addition, provisions are made for estimated employer con- tributions related to the share programs. Calculations are based on a theoretical market valuation where the market value is cal- culated using Monte Carlo based on the share price on the clos- ing date. For allotted shares, social security expenses are paid onthe basis of the market value on the allotment date. Salaries, other remuneration and social security costs Group Parent Company SEK M 2021/22 2020/21 2021/22 2020/21 Salaries and remunerations: Board and Managing directors 125 115 27 24 Other employees 3,858 3,308 67 43 Total salaries and other remunerations 3,983 3,423 94 67 Social security costs: Pension costs 294 215 15 12 Other social security costs 488 451 30 28 Total social security costs 782 667 45 41 Total salaries, other remunera- tion and social security costs 4,766 4,089 139 108 Bonuses included in the above salaries and other remunera- tions paid to the Boards and the Managing directors of subsid- iaries amounted to SEK 30 M (34), and SEK 12 M (8) in the Par- ent Company. Total pension costs amounted to SEK 294 M (215) of which SEK 23 M (19) concern dened benet pension plans. Pension costs in the Parent Company amounted to a total of SEK 15 M (12) and the full amount related to dened contribution pension plans. For further information regarding the dened benet pension plans see Note 28. FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 126 NOTE 7 Salaries, other remuneration and social security costs, cont. Remuneration to the Board of Directors The AGM resolved the adoption of fees to the Board of Directors totaling SEK 6,015 K (5,475), of which SEK 6,015 K (5,475) were paid. Thefees were distributed in accordance with the table below. Fees for the Board of Directors April 30, 2022 April 30, 2021 SEK Thousands Regular remuneration Remuneration compensation committee Remuneration audit committee Regular remuneration Remuneration compensation committee Remuneration audit committee Chairman: Laurent Leksell 1 410 135 – 1,280 115 – Members: Cecilia Wikström 605 90 – 550 80 – Wolfgang Reim 605 90 – 550 80 – Jan Secher 605 – 160 550 – 150 Birgitta Stymne Göransson 605 – 250 550 – 240 Johan Malmqvist 605 – 160 550 – 150 Caroline Leksell Cooke 605 90 – 550 80 – Total 5,040 405 570 4,580 355 540 Remuneration and other benets to Executive Management during the year 2021/22 SEK Thousands Fixed remuneration Variable remuneration Share-based compensation 2) Other benets Pension costs Total President and CEO 7,896 4,811 2,142 114 1,970 16,932 Other senior executives resident in Sweden (5) 11,663 7,480 5,017 271 2,744 27,176 Other senior executives resident abroad (11) 37,073 17,307 10,483 1,967 3,071 69,901 Total senior executives 56,632 29,598 17,642 2,352 7,785 114,009 Remuneration and other benets to Executive Management during the year 2020/21 SEK Thousands Fixed remuneration Variable remuneration Share-based compensation 2) Other benets Pension costs Total President and CEO 1) 12,656 6,993 1,133 124 5,331 26,238 Other senior executives resident in Sweden (8) 9,177 6,167 3,266 273 2,691 21,574 Other senior executives resident abroad (11) 37,880 20,499 7,507 1,369 1,488 68,743 Total senior executives 59,713 33,660 11,906 1,765 9,511 116,554 1) Richard Hausmann resigned as President and CEO June 2, 2020 and Gustaf Salford took over as Acting President and CEO from June 2, 2020. In november, 2020, Gustaf Salford was appointed President and CEO. Of the remuneration and other benets listed above to the President and CEO SEK 13,562 T are remunerations and other benets to Richard Hausmann. Variable remuneration pertains to the bonus for the 2021/22 and 2020/21 scal years respectively, partly paid quarterly during each scal year and partly paid in the year after. Remuneration to executive management The guidelines for remuneration to the executive manage- ment, adopted by the AGM in 2020, are presented on page 102. The Executive Management for 2021/22 was comprised of a total of 17 people, of whom 6 are located in Sweden and the other 11 in the Netherlands, the UK, the US, Turkey, Germany and China. The tables below display remunerations and other benets to the Executive Management in 2021/22 and 2020/21 respectively. NOTES FINANCIAL REPORTING 127 ELEKTA ANNUAL REPORT 2021/22 NOTE 7 Salaries, other remuneration and social security costs, cont. Share based payment As per April 30, 2022, Elekta has three outstanding share pro- grams. The share program performance share plan LTI 2018/21, which was outstanding as per April 30, 2021, has expired during the year. The total number of shares that may be allotted under the share programs is 1,146,332 (1,187,790) B-shares. The share pro- grams are secured by delivery of shares already held or repur- chased by Elekta and, consequently, no new shares will be issued under the share programs. Share programs awarded to employees have a potential dilution eect. However, certain performance targets must be met for dilution to occur and this was not the case at the closing date. The share-related incentive programs are reported in accor- dance with IFRS 2 Share-based payments. The recognized costs related to the share programs amounted to SEK 19 M (12) and social security amounted to SEK2 M (4). For more informa- tion see page 102. Share programs The AGM has for a number of years resolved to adopt share pro- grams called performance share plans. Performance share plan LTI 2018/21, resolved by the AGM in 2018, expired during the year. For information on the program see the Annual Report 2020/21. Outstanding share programs as per April 30 2022 were performance share plan LTI 2019/22, LTI 2020/23 and LTI 2021/24. The performance share plans cover approximately 28 (LTI 2019/22), 25 (LTI 2020/23) and 29 (LTI 2021/24) key employees of the Group respectively. The performance share plans entitle the participants to obtain, free of charge, B-shares in Elekta upon fulllment of certain performance requirements. The main terms of the performance share programs are: • A performance share award shall entitle a participant to receive, subject to the terms and conditions set forth in the performance share plans and applicable award agreements, a number of B-shares based upon the attainment of per- formance targets over a three-year performance period • Each performance share award shall be subject to forfeiture in the event of termination of employment due to a reason other than death, disability or retirement or failure to attain performance targets over the applicable performance period • Performance share awards shall be settled through the delivery of shares unless otherwise decided by the board • The number of shares to be allotted will depend on the degree of fulllment of nancial targets The nancial targets for performance share plans are dened as Total Shareholder Return (TSR) relative to the OMXS30 index over a three-year period. The minimum performance require- ment is that Elekta TSR outperform the OMXS30 index with at least +0,1 percent. The maximum performance level requires that Elekta TSR outperform the OMXS30 Index at or above +15 percent. If the minimum performance level is reached, the allo- cation will amount up to (and will not exceed) 30 percent of annual base salary at the beginning of the scal year 2019/20 for performance share plan LTI 2019/22, at the beginning of s- cal year 2020/21 for performance plan LTI 2020/23 and at the beginning of scal year 2021/22 for performance plan LTI 2021/24. The actual minimum value for each participant will be subject to an individual performance evaluation for the past scal year. If the maximum performance level is reached or exceeded, the allocation will amount to (and will not exceed) the maximum number of performance shares. If performance is below the maximum level but above the minimum level, a proportionate allocation of shares will be made. No allocation will be made if performance is below the minimum level. The terms of the performance share plan further state that: • The performance targets may be adjusted should an event occur that aects the operations of the Company or the number of outstanding Elekta shares or otherwise aecting the performance targets and deemed relevant by the board. • The performance targets will be nally evaluated at the end of the applicable performance period and each participant will receive the number of shares he/she is entitled to according to the participant’s award agreement depending on the attainment of the applicable performance targets over the performance period • The value that a participant can receive in settlement of the performance share award is maximized at 400 percent of the value of the shares at the date of grant of the per- formance share award • Potential allotments of shares will take place September 16, 2022 (LTI 2019/22), September 16, 2023 (LTI 2020/23) and September 16, 2024 (LTI 2021/24) respectively Participants shall at allotment of shares receive compensation for any cash dividends paid during the respective three-year performance period. Before the number of shares to be allotted is nally deter- mined, the board shall examine whether the allotment is rea- sonable, taking into consideration the Company’s nancial results and position, conditions on the stock market and other circumstances, and if not, as determined by the board, reduce the number of shares to be allotted to the lower number of shares deemed appropriate by the board. Delivery of shares and dividend compensation in settlement of the performance share award shall be made as soon as practicable following the lapse of the performance period. The conditions of the share programs state that the right to performance share awards may be settled in other ways than through the delivery of shares. As per April 30, 2022, there were no material obligations to settle in any other way than through shares. FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 128 Share program LTI 2018/21 1) LTI 2019/22 2) LTI 2020/23 2) LTI 2021/24 2) Originally designated number of shares 530,799 410,307 510,622 483,189 Share price used forcalculation of theoretical value SEK 120 64 65 53 Theoretical value at time of issue, SEK 63,695,880 26,259,648 33,190,430 25,652,504 Allotment of shares 2021–09–14 2022–09–16 2023–09–16 2024-09-16 Number of shares as of April 30, 2021 397,828 315,115 474,847 – Granted during the year – – – 483,189 Cancelled/Expired during the year –397,828 –51,500 –50,847 –24,472 Released during the year – – – – Number of shares as of April 30, 2022 – 263,615 424,000 458,717 1) Average closing share price of the Elekta class B share on the exchange NASDAQ Stockholm during a period of ten trading days before the day the participants are oered to participate in the program. 2) For the market-based perfomance conditions, a Monte Carlo approach has been used to determine the fair value of granted performance shares. NOTE 7 Salaries, other remuneration and social security costs, cont. Note 8 Depreciation/amortization/write-down Group SEK M 2021/22 2020/21 Cost of products sold 101 95 Selling expenses 161 153 Administrative expenses 245 234 R&D expenses 532 721 Total 1,039 1,204 There has been no write-downs of tangible assets or intangible assets during 2021/22 or 2020/21. Note 9 Remunerations to auditors Group Parent Company SEK M 2021/22 2020/21 2021/22 2020/21 Group auditor (EY) Audit engagements 11 10 5 3 Audit-related services 0 1 – 0 Tax consultancy 0 1 – 0 Other services 1 0 0 – Total Group auditor 13 11 5 4 Other auditors Audit engagements 0 1 – – Audit-related services 1 0 – – Tax consultancy 9 10 1 4 Other services 0 0 – – Total other auditors 11 12 1 4 Total 23 24 6 8 Audit engagements refers to remuneration to auditors for work related to the statutory audit, including audit of the annual report and the accounting records, the administration of the board of directors and the managing director as well as audit consultancy work directly linked to the audit assignment. Audit-related services comprises quality assurance services, including consultancy work driven by observations made in theaudit engagement. Other services refers to other services/consultancy work which are not covered by any of the other categories above, e g consultancy work related to internal control and acquisitions. Note 10 Expenses by nature In the income statement costs are broken down by function. Operating expenses amounts to SEK 12,904 M (11,857). Below, operating expenses are broken down by nature: Group SEK M 2021/22 2020/21 Products, materials and consumables 6,119 5,454 Personnel costs 5,018 4,268 Depreciation and amortization (Notes 8, 16, 17 and 18) 1,039 1,204 Other expenses 728 932 Total 12,904 11,857 Note 11 Income from participations in Group companies Parent Company SEK M 2021/22 2020/21 Dividends from subsidiaries 1,101 354 Group Contribution 20 – Other – –27 Total 1,121 327 Note 12 Net nancial items Group SEK M 2021/22 2020/21 Income from participations in associated companies 5 –7 Interest income, external 42 29 Other nancial income 0 0 Financial income 42 30 Interest expenses, other external loans –107 –192 Interest expenses, lease liabilities –41 –41 Other nancial expenses 1) –53 –61 Financial expenses –200 –295 Exchange rate dierences on nancial instruments 12 –5 Net nancial items –142 –277 1) Other nancial expenses mainly consist of bank charges. NOTES FINANCIAL REPORTING 129 ELEKTA ANNUAL REPORT 2021/22 Note 13 Interest income, interest expense and similar items Parent Company SEK M 2021/22 2020/21 Interest income from subsidiaries 125 135 Interest income, external 13 18 Interest income and similar items 138 154 Interest expenses to subsidiaries –11 –6 Interest expenses, other external loans –103 –185 Other nancial expenses –11 –26 Interest expenses and similar items –125 –217 Note 14 Taxes Accounting principles The tax expense in the income statement includes all tax that is to be paid or received for the current year, adjustments relating to previous years’ current tax, and changes in deferred tax. De- ferred tax is calculated and reported in accordance with the bal- ance sheet method. In accordance with this method, de ferred tax is calculated on the basis of the temporary dierences be - tween the tax bases and the carrying amounts of assets and lia- bilities. Deferred tax assets relating to loss carry-forwards and other future tax credits are recognized to the extent it is proba- ble that deductions can be made against future prots. Valua- tion is based on nominal amounts based on the tax rules prevail- ing in each country and the anticipated tax rate for the follow- ing year in each country. Deferred taxes relating to temporary dierences attributable to investments in subsidiaries are not recognized in the consolidated nancial statements since Elekta AB, in all cases, can control the time of reversal of the temporary dierences and it is not considered probable that such a reversal will occur in the foreseeable future. Deferred tax assets and deferred tax liabilities are oset when there is a legally enforca- ble right to oset tax assets against tax liabilities and when the deferred tax amounts refer to the same tax authority. For items recognized in the net income, the related tax eects are also recognized in the net income. For items recognized in other comprehensive income, related tax eects are also recognized in other comprehensive income. Estimates and assessments Deferred tax assets and deferred tax liabilities are balance sheet items which are subject to estimates and assessments. Deferred tax is calculated on temporary dierences between the carrying amounts and the tax values of assets and liabilities. Estimates and assessments aect the recognized deferred tax amounts inthe determination of the carrying amounts of the dierent assets and liabilities, and also through forecasts regarding future taxable prots in those cases where a future utilization of deferred tax assetsdepends on future taxable prots. Deferred taxes amounted to a net asset of SEK 67 M ( –79), whereof assets SEK 616 M (436) and liabilities SEK 549M (515). Income taxes Group Parent Company SEK M 2021/22 2020/21 2021/22 2020/21 Current taxes –402 –401 –11 – Deferred taxes 57 24 17 –14 Total –345 –377 6 –14 Group 2021/22 2020/21 SEK M SEK M % SEK M % Income after nancial items 1,501 – 1,630 – Swedish corporate income tax rate –309 –20.6 –349 –21.4 Dierence between corporate tax rate in Swe- den and other countries –71 –4.7 –46 – 2.8 Taxes related to prior years –10 –0.7 3 0.2 Non-taxable income 62 4.1 38 2.3 Non-deductible expenses –12 –0.8 –31 – 1.9 Eect of tax rate changes 30 2.0 3 0.2 Tax losses carried forward without corresponding increase in deferred taxes –48 –3.2 –8 –0.5 Utilization of previously unrecognized tax losses 15 1.0 15 0.9 Other –2 –0.1 – 2 – 0.1 Eective tax rate –345 –23.0 –377 –23.1 Current tax, net (liability –/receivable +) Group Parent Company SEK M 2021/22 2020/21 2021/22 2020/21 Opening balance, May 1 29 –108 17 17 Business combination 1 – – – Reclassications 32 27 – – Adjustment for prior years –31 –11 –11 – Current tax for the year –370 –389 – – Paid taxes 452 465 11 – Divestments – 33 – – Translation dierences –7 11 – – Closing balance, April 30 104 29 17 17 FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 130 Deferred tax assets and deferred tax liabilities Deferred tax assets/liabilities in the balance sheet are attributable to the following: Group Assets (+) Liabilities (–) Net SEK M April 30, 2022 April 30, 2021 April 30, 2022 April 30, 2021 April 30, 2022 April 30, 2021 Loss carry-forwards 310 146 – – 310 146 Untaxed reserves – – 0 –27 0 –27 Intangible assets 0 24 –821 –596 –821 –572 Tangible xed assets 35 31 –68 –48 –33 –17 Right of use assets 22 17 – – 22 17 Financial assets/liabilities 83 1 0 –44 83 –43 Provisions 69 96 –35 –12 34 84 Accrued expenses 61 60 – – 61 60 Other assets 397 297 –36 –90 361 207 Other liabilities 54 73 –4 –6 51 67 Deferred tax assets/tax liabilities 1,031 744 –964 –823 67 –79 Osetting –415 –308 415 308 – – Net deferred tax assets/tax liabilities 616 436 –549 –515 67 –79 Tax relating to components of other comprehensive income Group Parent Company SEK M 2021/22 2020/21 2021/22 2020/21 Revaluation of dened benet pension plans –7 0 – – Revaluation of cash-ow hedges 92 –48 – – Net gain/loss on equity instruments designated at fair value 9 –43 – – Total 94 –90 – – Deferred tax assets (+)/liabilities (–), net SEK M Group, net Parent Company, net Opening balance May 1, 2020 –41 41 Business combinations 0 – Divestments 3 – Reclassications –3 – Adjustment for prior years 14 12 Change in tax legislations 3 1 Deferred taxes for the year 7 –26 Deferred taxes charged in other comprehensive income –90 – Translation dierences 30 – Closing balance April 30, 2021 –79 27 Reclassications 2 – Adjustment for prior years 22 11 Change in tax legislations 30 – Deferred taxes for the year 5 6 Deferred taxes charged in other comprehensive income 94 – Translation dierences –7 – Closing balance April 30, 2022 67 44 The Group has tax loss carry forwards of approximately SEK 508 M (308) for which deferred tax assets have not been recognized. These tax loss carry forwards have long or indenite periods of utilization and are subject to regular assessment of whether it is probable that deductions can be made against future prots. NOTE 14 Taxes, cont. NOTES FINANCIAL REPORTING 131 ELEKTA ANNUAL REPORT 2021/22 Research and development Research costs are expensed as they are incurred. In those instances in which it is dicult to distinguish between the research phase and the development phase in a project, the entire project is considered as research and is expensed as incurred. Identiable costs for the development of new prod- ucts are capitalized to the extent that these are considered to provide future economic benets. In other instances, develop- ment expenditures are expensed as they are incurred. Costs for development once reported in the income statement are never capitalized in future periods. Capitalized expenditures are amortized on a straight-line basis from the time when the asset is available for use, which normally occurs when it is pro- duced commercially, and during the estimated useful life of the asset. The amortization period is 3–5 years. Customer relations and other intangible assets Intangible assets also include technology, brands and cus- tomer relations. In conjunction with the acquisition of such assets, the acquisition values are reported as assets, which are amortized on a straight line basis over the estimated useful life. Surplus value in acquired order backlog is also reported as other intangible assets. Amortization periods: Technology 5–11 years Brands 6–10 years Customer relations 5–20 years Order backlog 0.5–1 year Impairment The carrying amount of a depreciated asset is tested for impair- ment whenever there are indications that the carrying amount might not be recoverable. If there are indications of impairment, the asset’s recoverable amount is calculated. The recoverable amount consists of the higher of the value in use of the asset in operations and the value that would be received if the asset was sold to a third party, the net realizable value. Value in use con- sists of all incoming and outgoing payments attributable to the asset during the period it is expected to be used in operations, plus the net realizable value at the end of the useful life. If the calculated recoverable amount is less than the carrying amount, impairment is made to the asset’s recoverable amount. An impairment loss recognized in previous periods is reversed if the reasons for the impairment no longer exist. However, a reversal will not be higher than the carrying amount would have been if an impairment loss had not been recognized in previous periods. Goodwill is subject to annual impairment testing even if there are no indications of impairment. The carrying amount of good- will is allocated to cash generating units. When testing for impair- ment of goodwill, the assets are grouped in cash-generating units and assessments are made on the basis of these units’ future cash ows. Impairment losses on goodwill are not reversed. All impairment losses, and any reversals of the same, are recognized in theincome statement. Note 15 Earnings per share Before dilution The calculation of earnings per share before dilution is based on the net income attributable to Parent Company sharehold- ers divided by the weighted average numbers of shares out- standing during the year excluding treasury shares. 2021/22 2020/21 Net income attributable to Parent Company shareholders (SEK M) 1,154 1,254 Weighted average number of shares (thousands) Total number of ordinary shares 383,568 383,568 Eect of holding of treasury shares –1,485 –1,485 Weighted average number before dilution (thousands) 382,083 382,083 Earnings per share before dilution (SEK) 3.02 3.28 After dilution Diluted earnings per share is calculated by adjusting the weighted average numbers of shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group’s long term incentive programs have a dilutive potential. 2021/22 2020/21 Net income attributable to Parent Company shareholders (SEK M) 1,154 1,254 Weighted average number of shares (thousands) Total number of ordinary shares 383,568 383,568 Eect of holding of treasury shares –1,485 –1,485 Adjusted for long-term incentive programs – – Weighted average number before dilution (thousands) 382,083 382,083 Earnings per share before dilution (SEK) 3.02 3.28 Note 16 Intangible assets Accounting principles Intangible assets contain goodwill, capitalized development costs, customer contracts, customer relationships and other intangible assets. Other intangible assets mainly consist of acquired technology. Amortization of intangible assets is reported in the income statement and allocated to functions as applicable. There are no intangible assets related to manu- facturing processes or the like, therefore no amortization is allocated to cost of goods sold. Goodwill Goodwill comprises the positive amount by which the sum of (i) the cost of shares in subsidiaries, (ii) the value of non-con- trolling interest and (iii) the fair value of previously held equity interest exceeds the fair value of the Group’s share of acquired identiable net assets at acquisition. Goodwill is carried at cost less accumulated impairment losses. Goodwill is tested for impairment on an annual basis, or more frequently if indi- cated. See also section Impairment. FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 132 Estimates and assessment For the Group, the most signicant estimates and assumptions are those relating to impairment testing of goodwill. This means that the eect on the nancial reports may be consid- erable if the estimates and assessments made would prove to deviate signicantly from the actual outcome. In connection with impairment testing of goodwill the carrying amount is compared with the recoverable amount. The recoverable amount is determined by the higher of an asset’s net realizable value and its value in use. Normally, it is not possible to deter- mine the net realizable value. Therefore, the value in use is nor- mally the value being compared with the carrying amount. Thus, each cash generating unit’s value in use is calculated in assessing any impairment of goodwill. Calculations are per- formed through discounting future estimated cash ows. In order to perform the calculations a number of assumptions concerning future circumstances and estimates of parameters are made, for example growth and discount rate. Any adjust- ments of the assumptions made could have an eect on the carrying amount of the goodwill. Assuming a lower growth rate would lead to a lower recoverable amount. A higher dis- count rate would also lead to a lower recoverable amount. Goodwill amounted to SEK 6,499 M (5,973). Other intangible assets mainly relates to technology acquired through business combinations. Capitalized develop- ment costs comprise capitalized expenditure for research and development as well as other capitalized development costs such as software. Total capitalized development costs amounted to SEK 1,166 M (677) for the year whereof capitaliza- tion of development costs within R&D represented SEK 1,157 M (676). NOTE 16 Intangible assets, cont. Intangible assets Group Parent Company SEK M Goodwill Capitalized development costs Customer relationships Tecnology Patents, Licenses Total Group Other intangible assets Total Parent Company Accumulated acquisition value May 1, 2021 5,973 5,843 1,575 636 338 14,363 91 91 Business combinations 57 47 45 – – 148 – – Purchases/capitalization – 1,166 36 – 18 1,220 – – Sold/scrapped – –1 – – 10 6 – – Translation dierences 470 662 66 70 27 1,292 – – Accumulated acquisition value April 30, 2022 6,499 7,716 1,721 706 393 17,035 91 91 Accumulated amortization & impairment May 1, 2021 – –3,987 –857 –461 –280 –5,585 –45 –45 Amortization for the year – –493 –97 –18 –9 –617 –7 –7 Sold/scrapped – 1 – – –10 –6 – – Translation dierences – –420 –54 –63 –25 –562 – – Accumulated amortization & impairment April 30, 2022 – –4,899 –1,008 –542 –324 –6,773 –52 –52 Carrying amount April 30, 2022 6,499 2,817 713 164 69 10,262 39 39 Accumulated acquisition value May 1, 2020 6,311 5,762 1,672 751 367 14,863 91 91 Reclassications – 4 – – –4 – – – Business combinations 228 – 20 30 – 278 – – Divested companies – –46 – – – –46 – – Purchases/capitalization – 677 – – 2 678 – – Sold/scrapped – – – –57 –4 –61 – – Translation dierences –566 –553 –118 –88 –24 –1,348 – – Accumulated acquisition value April 30, 2021 5,973 5,843 1,575 636 338 14,363 91 91 Accumulated amortization & impairment May 1, 2020 – –3,687 –836 –575 –297 –5,394 –38 –38 Divested companies – 46 – – – 46 – – Amortization for the year – –685 –90 –18 –10 –803 –7 –7 Sold/scrapped – – – 57 4 61 – – Translation dierences – 340 69 74 22 505 – – Accumulated amortization & impairment April 30, 2021 – –3,987 –857 –461 –280 –5,585 –45 –45 Carrying amount April 30, 2021 5,973 1,856 718 175 57 8,779 46 46 Impairment testing Goodwill is tested for impairment every year in order to assure that the carrying amount of each of the Group’s cash-gener- ating units is not higher than its recoverable amount. The Group’s cash-generating units equal the geographic regions, which also constitute the Group’s operating segments. Thecarrying amount equals capital employed and the recover- able amount for each cash- generating unit is determined based on a calculation of value in use for each unit. The alloca- tion of goodwill to cash-generating units (operating segments) is shown in thefollowing table. NOTES FINANCIAL REPORTING 133 ELEKTA ANNUAL REPORT 2021/22 Goodwill by segment SEK M April 30, 2022 April 30, 2021 Americas 1,836 1,687 EMEA 2,427 2,231 APAC 2,236 2,055 Total 6,499 5,973 The value in use for each unit is derived from discounted cash ows, based on estimated future cash ows. The estimates are based on the nancial budget for the next scal year as deter- mined by the Executive Management, and expected future development up to ve years. Assumptions regarding sales volume, sales prices, operating expenses and product mix formthe basis for estimated future growth and margin devel- opment. Volume assumptions are based on historical out- come, the Executive Management’s expectations on market development, and expected global market growth. Price assumptions are based on current market trends and ination forecasts. Margin development is based on current margin lev- els and product mix adjusted for expected price changes and possible changes in the product mix. For periods after ve years, the extrapolation of expected cash ows has been assumed to be a prudent 2 percent (2), which is considerably lower than the anticipated industry growth. The cash ows have been discounted using a pre-tax interest rate of 8 percent (8). The interest rate corresponds to the Group’s current weighted cost of capital (WACC) and is based on current mar- ket assessments. Impairment testing is performed in April/May every year, after the budget and business plans have been determined by the Executive Management. The 2022 (2021) test showed that there is no impairment. Sensitivity analysis have been carried out with regard to the discount rate (risk) and long-term growth with a general reduction in the growth rate after ve years of 2 percentage points (2) (implying an assumption of zero growth) and a gen- eral increase in the weighted capital cost of 2 percentage points (2). The sensitivity analyses did not demonstrate any impairment. In addition to the annual impairment test, goodwill is tested whenever there are indications of impairment. Purchases/capitalization per country Sweden, SEK 64 M United Kingdom, SEK 630 M USA, SEK 390 M Netherlands, SEK 79 M Other countries, SEK 48 M Canada, SEK 9 M Note 17 Leases Accounting principles Elekta’s lease contracts mainly consist of contracts for prem- ises, vehicles and equipment. For premises and equipment, theGroup accounts for the lease and non-lease components of a contract separately. Leases are recognized as a liability and acorresponding right-of-use asset at the date at which the leased asset is available for use by the Group. Lease liabilities include the net present value of the following lease payments: • xed payments, less any lease incentives receivable • variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date • amounts expected to be payable by the Group under resid- ual value guarantees • the exercise price of a purchase option if the Group is rea- sonably certain to exercise that option, and • payments of penalties for terminating the lease, if the lease term reects the exercise of that option The lease payments are discounted using the Group’s incremen- tal borrowing rate, since the interest rate implicit in the lease cannot be readily determined in most cases. The incremental borrowing rate is the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of simi- lar value to the right-of-use asset in a similar economic environ- ment with similar terms, security and conditions. To determine the incremental borrowing rate the Group uses a risk-free inter- est rate and adjusts for credit risk as well as specic adjustments for dierent durations and currencies. Lease payments are allocated between amortization of the lease liability and interest expenses. The interest expense is charged to the income statement over the lease term to pro- duce a constant periodic rate of interest on the remaining bal- ance of the lease liability for each period. Right-of-use assets are measured at cost comprising the following: • the amount of the initial measurement of the lease liability • lease payments made at or before the commencement date less any lease incentives received • any initial direct costs, and • an estimate of expected restoration costs NOTE 16 Intangible assets, cont. FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 134 Right-of-use assets are depreciated on a straight-line basis over the shorter of the asset’s useful life and the lease term. If the group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. The Group’s lease contracts for premises typically range between xed periods of 1 to 20 years and the vehicle leases usually have a lease term of 3 to 5 years. Elekta has a number of contracts where the contractual terms include extension and termination options that are included when it is deter- mined as reasonably certain that they will be exercised. The assessment of reasonable certainty is only revised if a signi- cant event or a signicant change in circumstances occurs. When adjustments to lease payments or reassessments of the lease term are conducted, the lease liability is remeasured and adjusted against the right-of-use asset. The Group remeasures the lease liability using a revised discount rate if the lease term is reassessed. The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take eect. Payments associated with short-term leases and low-value assets are recognized on a straight-line basis as an expense in the income statement. Short-term leases are leases with a lease term of less than 12 months. The Group does not apply IFRS 16 to intangible assets. Provided that Elekta’s operations continue to the current extent, future lease commitments are deemed to be in par with current commitments. As of April 30, 2022 the balance sheet shows the following amounts related to leases: Right-of-use assets SEK M Premises Vehicles Total Opening accumulated acquisition value May 1, 2021 1,201 148 1,349 Additions 1) 125 50 175 Terminations –60 –31 –91 Translation dierences 118 9 127 Accumulated acquisition value April 30, 2022 1,384 176 1,560 Opening balance accumulated depreciation May 1, 2021 –337 –59 –396 Depreciation for the year –184 –46 –229 Terminations 57 27 84 Translation dierences –39 –4 –44 Accumulated depreciation April 30, 2022 –503 –82 –585 Carrying amount April 30, 2021 881 94 975 SEK M Premises Vehicles Total Opening accumulated acquisition value May 1, 2020 1,260 134 1,394 Additions 1) 69 65 134 Terminations –11 –39 –49 Translation dierences –117 –13 –130 Accumulated acquisition value April 30, 2021 1,201 148 1,349 Opening balance accumulated depreciation May 1, 2020 –190 –49 –239 Depreciation for the year –175 –48 –223 Terminations 6 32 39 Translation dierences 22 5 27 Accumulated depreciation April 30, 2021 –337 –59 –396 Carrying amount April 30, 2021 864 89 953 1) Additions includes new lease contracts, index-adjustments and remeasurements. For maturity analysis of lease liabilities see Note 2. Amounts recognized in the income statement SEK M 2021/22 2020/21 Depreciation for the year 229 223 Interest expense (included in nance cost) 41 41 Expense relating to short-term leases (included in cost of goods sold and administrative expenses) 1 3 Expense relating to leases of low-value assets that are not shown above as short-term leases (included in administrative expenses) 5 5 Total 276 272 No material variable lease payments not included in the lease liability has been identied. Low-value assets comprise small items such as printers and coee machines. Total cash outow for leases during scal year 2021/22 was SEK 267 M (256). Leasing fees paid by the Parent Company during the year amounted to SEK 221 K. Future leasing fees due for payment within one year amount to SEK 153 K, after 1 year but within 5years to SEK 85 K. The operating lease contracts are mainly contracts for premises where the business is conducted. NOTE 17 Leases, cont. NOTES FINANCIAL REPORTING 135 ELEKTA ANNUAL REPORT 2021/22 Tangible assets SEK M Machinery etc for production Equipment, tools and installations Operational leasing Buildings Total Accumulated acquisition value May 1, 2021 396 1,727 25 228 2,376 Business combinations – 1 – – 1 Purchases 21 143 21 3 188 Sold/scrapped –16 –63 – 0 –80 Translation dierences 20 127 7 18 175 Accumulated acquisition value April 30, 2022 423 1,934 53 250 2,660 Accumulated depreciation and impairment May 1, 2021 –259 –1,122 – –98 –1,480 Reclassications –1 1 – – – Sale/disposals 16 61 – 0 78 Depreciation for the year –36 –141 –3 –13 –192 Translation dierences –13 –88 0 –8 –110 Accumulated depreciation and impairment April 30, 2022 –294 –1,289 –3 –119 –1,706 Carrying amount April 30, 2022 129 645 49 130 954 Accumulated acquisition value May 1, 2020 370 1,818 – 235 2,423 Business combinations – 0 – – 0 Divested companies –10 –18 – – –28 Reclassications 29 –29 – – – Purchases 19 113 27 8 167 Sold/scrapped –2 –24 – – –26 Translation dierences –10 –133 –2 –15 –161 Accumulated acquisition value April 30, 2021 396 1,727 25 228 2,376 Accumulated depreciation and impairment May 1, 2020 –246 –1,118 – –91 –1,455 Divested companies 8 16 – – 24 Reclassications –1 1 – – – Depreciation for the year –32 –132 – –14 –178 Sold/scrapped 1 24 – – 25 Translation dierences 11 87 – 6 104 Accumulated depreciation and impairment April 30, 2021 –259 –1,122 – –98 –1,480 Carrying amount April 30, 2021 137 605 25 130 897 Tangible assets by country SEK M 2021/22 2020/21 Sweden 65 65 United Kingdom 413 392 China 150 139 Netherlands 131 127 USA 76 81 Other countries 119 93 Total 954 897 Sweden, SEK 65 M United Kingdom, SEK 413 M China, SEK 150 M Netherlands, SEK 131 M USA, SEK 76 M Other countries, SEK 119 M Note 18 Tangible assets Accounting principles Tangible assets acquired by Group companies are reported at cost, less accumulated depreciation and any write-downs. Assets in acquired com panies are reported at fair value on the acquisition date after deduction of subsequent accumulated depreciation. Buildings are depreciated on a straight-line basis over 50 years. Machinery and equipment are depreciated on a straight-line basis during its economic life of between 3and 5 years. Installations and improvements on third party property are depreciated over the period of the lease agreement. The residual value of assets and their useful economic livesare reviewed annually and adjusted as required, see Note 16 for impairment principles. See Note 17 for rightof use assets. FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 136 Note 19 Shares in subsidiaries Parent Company SEK M 2021/22 2020/21 Opening balance May 1 2,590 2,251 Investments 7 284 Shareholder contributions 155 55 Closing balance April 30 2,752 2,590 Company Corp. id. no. Domicile No. of shares Interest, % Carrying amount, SEK M Elekta Instrument AB 556492-0949 Stockholm, Sweden 1,000,000 100.0 50 Leksell Institute AB 556942-6314 Stockholm, Sweden 50,000 100.0 0 Elekta Solutions AB 559157-5286 Stockholm, Sweden 50,000 100.0 200 Global Medical Investments GMI AB 556786-4375 Stockholm, Sweden 32,100,000 100.0 7 Elekta KK 65 820 Tokyo, Japan 2,000 100.0 36 Elekta Holding Limited 2699176 Crawley, England 22,810,695 100.0 494 Elekta Holdings US Inc. 58-1876545 Norcross, USA 6,020 100.0 432 Elekta Ltd. R889657862 Montreal, Canada 1 100.0 229 Elekta Asia Ltd 502 493 Hong Kong, S.A.R. 81,022,160 100.0 13 Elekta Instrument (Shanghai) Ltd 310115764250077 Shanghai, China 1 100.0 50 Elekta BMEI (Beijing) Medical Equipment Co., Ltd. 91110114400615135X Beijing, China 1 80.0 230 Elekta China Investment Co., Ltd 91310115MA1K47TB2R Shanghai, China 1 100.0 135 Elekta Pty Limited ACN 109 006 966 Sydney, Australia 1 100.0 1 Elekta Medical System India Private Limited U33112DL2005PTC139794 New Delhi, India 10,000 99.0 31 Elekta SA B 414 404 913 Paris, France 2,493 100.0 4 Elekta Medical SA A-818 867 31 Madrid, Spain 10,000 100.0 3 Elekta GmbH HRB 63500 Hamburg, Germany 1 100.0 0 Elekta GmbH FN 166018w Innsbruck, Austria 1 100.0 3 Elekta Hellas EPE 998 569 196 Atens, Greece 600 100.0 0 Elekta S.A./N.V. HRB 613 484 Zaventem, Belgium 250 100.0 1 Elekta BV 17 097 384 Best, The Netherlands 40 100.0 0 Elekta S.p.A. 02723670960 Agrate Brianza (MI), Italy 500,000 100.0 66 Elekta Medical Systems Comercio e Servicos para Radioterapia Ltda CNPJ 09.528.196/0001-66 Sao Paolo, Brazil 1 100.0 73 Elekta (Pty) Ltd 2000/018814/07 Pretoria, South Africa 1 100.0 0 Elekta Pte Ltd 20090927AZ Singapore, Singapore 10,000 100.0 0 Elekta Limited, South Korea 1311111-0259 Seongnam-si, South Korea 473,879 100.0 16 Elekta Services S.R.O 292 80 095 Brno, Chech Republic 1 100.0 0 Elekta Medikal Sistemler Ticaret A.S. 196757 Istanbul, Turkey 87,900,000 100.0 87 Elekta Medical SA de CV EME140919G49 Mexiko City, Mexico 50 100.0 57 Elekta sp.Z.O.O KRS 0000538192 Warszaw, Poland 2,000 100.0 104 Elekta Company Limited 106810452 Hanoi, Vietnam 1 100.0 2 Elekta Business Services sp.Z.O.O KRS 000567549 Warszaw, Poland 1 100.0 1 Elekta SARL Algeria 16236978051 Dely Ibrahim, Algeria 1 100.0 0 Elekta LLC 1167746799637 Moscow, Russian federation 1 100.0 11 RRTS Unipessoal LDA 514185155 Lisbon, Portugal 1 100.0 13 Elekta General Trading LLC 158410 Cairo, Egypt 310,000 50.0 14 Kaiku Health Oy 2505458-2 Helsinki, Finland 716,944 100.0 381 Elekta Medical Systems SRL J40/9054/2021 Bucharest, Romania 20 100.0 1 Elekta Philippines Inc 2021110032534-01 Makati City, Philippines 250,000 100.0 5 PT Elekta Medical Solutions 1281002451394 Jakarta, Indonesia 2,500 49.0 2 Total 2 752 Note 20 Shares in associated companies Accounting principles Associates are companies which are not subsidiaries but in which the Group has a signicant, but not controlling, interest. This normally means companies in which the holding rep- resents more than 20 percent but less than 50 percent of the voting rights. Associated companies are reported by use of the equity method. Holdings in associated companies are initially recognized at cost in the consolidated balance sheet. The car- rying amount is adjusted for the share of associated compa- nies earnings after the acquisition date. Dividends from associ- ated companies are reported as a reduction of the carrying amount. Income from participations in associated companies is a separate line in the income statement. NOTES FINANCIAL REPORTING 137 ELEKTA ANNUAL REPORT 2021/22 Shares in associated companies Group Parent Company SEK M April 30, 2022 April 30, 2021 April 30, 2022 April 30, 2021 Opening balance May 1 27 34 13 6 Investments 1) – 7 – 7 Participations in income of associated companies (Note 12) 5 –7 – – Dividends –4 –1 – – Reclassication –7 – –7 – Translation dierences 4 –6 – – Closing balance April 30 25 27 6 13 1) Previous year, of which SEK 7 M relates to loan conversion to associated company. Inventories Group SEK M April 30, 2022 April 30, 2021 Components 290 231 Work in progress 95 97 Finished goods 2,147 1,955 Total 2,533 2,283 Write-down of inventories during the year amounted to SEK 59M (64). In the income statement this is reported as costof product sold. Note 23 Accounts receivable and contract assets Estimates and assessment Accounts receivable is one of the most signicant items in the balance sheet and is carried at nominal value net after provi- sions for bad debts. Accounts receivable amounted to SEK 3,647 M (3,281) including expected credit losses of SEK 98 M (146). See Note 2 for further information regarding the credit risk in accounts receivable. See Note 3 for accounting principles. From 1 May 2018 Elekta applies the sim- plied approach for measuring expected credit losses for accounts receivables and contract assets, in accordance with IFRS 9. For all account receivables overdue more than 90 days and with a value of more than SEK 1 M an individual evaluation is made and when necessary a specic provision is applied. For all non-due and overdue receivables not covered by a specic provision a general provision is calculated based on region and aging. The general provision is calculated as a percentage of the receivable and the percentage used is based on historical loss experience, current conditions and forward-looking eco- nomic conditions for each region. As of April 30, 2022, the gen- eral provision is SEK 58 M and the specic provision amounted to SEK 40 M. Final write o of a receivable is done when no fur- ther actions are taken to collect on the receivable and proba- bility of collection is deemed to be unlikely, e.g. bankruptcy. The contract asset relates to unbilled work in progress and are considered to have the same risk characteristics as nondue accounts receivables. An individual evaluation is made for contract assets over 180 days and with a value of more than SEK 5M. Contract assets amounted to SEK 1,796 M (1,772) including expected credit losses of SEK 16 M (1). Note 21 Other nancial assets Group Parent Company SEK M April 30, 2022 April 30, 2021 April 30, 2022 April 30, 2021 Participations in other companies 15 60 14 58 Derivative nancial instruments 24 24 – – Loan receivables 12 12 – – Contractual receivables 500 373 – – Other non-current receivables 40 38 23 23 Total 590 506 38 81 The table below presents detailed information regarding the Group’s participations in other companies. Participations in other companies Group Parent Company SEK M April 30, 2022 April 30, 2021 April 30, 2022 April 30, 2021 Opening balance May 1 60 297 58 293 Revaluation through other comprehensive income –2 206 – – Revaluation – – – 107 Divestments & write-downs –43 –443 –43 –343 Closing balance April 30 15 60 14 58 Note 22 Inventories Accounting principles Inventories are valued in accordance with the ’rst in, rst out’ principle at the lower of cost and net realizable value. Internal prots arising from deliveries between Group companies are eliminated upon consolidation. NOTE 20 Shares in associated companies, cont. FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 138 Credit risk analysis of accounts receivable Group April 30, 2022 April 30, 2021 SEK M Gross Provi- sion Total Gross Provi- sion Total Not due 2,173 –5 2,168 2,133 –4 2,128 Overdue 1–30 days 547 –1 546 337 0 337 Overdue 31–60 days 205 –1 203 161 –1 160 Overdue 61–90 days 139 –3 136 75 –2 73 Overdue > 90 days 682 –88 594 720 –138 582 Total accounts receivables, net 3,745 –98 3,647 3,426 –146 3,281 2021/22 2020/21 SEK M 0 500 1,000 1,500 2,000 2,500 Over- due > 90 days Over- due 61–90 days Over- due 31–50 days Over- due 1–30 days Not due Provision for bad debt accounts receivable Group SEK M 2021/22 2020/21 Opening balance May 1 –146 –198 Acquired companies 1 – Provisions –91 –78 Reversals 84 83 Realized loss 67 39 Translation dierences –13 9 Closing balance April 30 –98 –146 Provision for bad debt contract assets Group SEK M 2021/22 2020/21 Opening balance May 1 –1 –1 Provisions –16 –1 Reversals 1 1 Closing balance April 30 –16 –1 Note 24 Other current receivables Group SEK M April 30, 2022 April 30, 2021 Prepayments to suppliers 84 87 Other receivables 1) 688 582 Prepaid expenses 709 447 Total 1,481 1,116 1) Mainly value added tax. Parent Company SEK M April 30, 2022 April 30, 2021 Derivative nancial instruments (Note 2) 14 7 Current tax assets 17 17 Other receivables 3 4 Prepaid expenses 8 11 Total 42 39 Note 25 Cash and cash equivalents and short-term investments Cash and cash equivalents and short term investments only contains investments that redily can be converted to a known amount of cash and are subject to an insignicant risk of changes in value. All the investments presented as cash equiv- alents are only held for a short maturity of maximum three months. Group Parent Company SEK M April 30, 2022 April 30, 2021 April 30, 2022 April 30, 2021 Current investments classied as cash equivalents 1) 3 792 3 792 Cash and bank 3,074 3,619 1,860 2,629 Total 3,077 4,411 1,863 3,421 1) Refers to short-term interest-bearing funds with a high credit rating Available cash and cash equivalents and short-term invest- ments amounted to SEK 3,077 M (4,411) which is cash and cashequivalents and short-term investments reduced by bankbalances included in assets pledged. See Note 32. NOTE 23 Accounts receivable and contract assets, cont. NOTES FINANCIAL REPORTING 139 ELEKTA ANNUAL REPORT 2021/22 Note 26 Equity Number of shares in Elekta AB (publ) A-shares B-shares Total Share capital Number of shares May 1, 2020 14,980,769 368,587,640 383,568,409 191,784,205 Number of shares April 30, 2021 14,980,769 368,587,640 383,568,409 191,784,205 of which treasury shares – 1,485,289 1,485,289 Number of shares May 1, 2021 14,980,769 368,587,640 383,568,409 191,784,205 Number of shares April 30, 2022 14,980,769 368,587,640 383,568,409 191,784,205 of which treasury shares – 1,485,289 1,485,289 Appropriation of prot Amount to be paid to the shareholders SEK 916,999,488 Amount to be carried forward by the Parent Company SEK 1,103,170,921 Total non-restricted equity of the Parent Company SEK 2,020,170,409 All shares have a par value of SEK 0.50 and provide the holders with equal rights to the Company’s assets and earnings. All shares are entitled to dividends subsequently issued. One series A-share entitles the holder to 10 votes and one series B-share to one vote. In accordance with section 12 of the articles of asso- ciation, series A-shares are subject to right of rst refusal. All series A-shares are currently owned by Laurent Leksell via Note 27 Interest-bearing liabilities Group Parent Company SEK M April 30, 2022 April 30, 2021 April 30, 2022 April 30, 2021 Bond loan 2,995 2,497 2,995 2,497 Liabilities to credit institutions 1,614 2,687 1,604 2,687 Liabilities to subsidiaries – – 2,482 3,858 Lease liabilities 1,086 1,054 – – Total 5,695 6,239 7,081 9,042 Maturity term structure, external loans <1 year 510 2,141 500 2,141 >1 year–<3 years 999 499 999 499 >3 years–<5 years 2,751 997 2,751 997 >5 years 349 1,547 349 1,547 Total 4,609 5,184 4,599 5,184 company. The dividend paid out during the nancial year amounted to a total sum of SEK 841 M, corresponding to SEK 2.20 per share. At the AGM on August 25, 2022, a dividend of SEK 2.40 per share for the year 2021/22 – a total sum of approximately SEK 917 M will be proposed. The average number of shares before and after dilution during the year, rounded to the nearest thousand, was 382,083 thousand (382,083). The number of repurchased shares on April 30, 2022, totaled 1,485,289 B-shares (1,485,289). The share program awarded toemployees have a potential dilution eect. Certain perfor- mance targets must be met for dilution to occur and this was not the case at the closing date. For more information on the Elekta share, see page 41. Specication by currency Liability amount SEK M Currency April 30, 2022 April 30, 2021 April 30, 2022 April 30, 2021 Swedish kronor, SEK M 3,505 5,296 3,494 3,297 US dollar, USD M 1 100 10 419 British Pound, GBP M 90 143 1,104 1,469 Chinese Yuan, CNY M – 42 – – Total 4,609 5,184 Fixed interest term including eects of derivatives April 30, 2022 April 30, 2021 < 1 year 505 4,346 > 1 year < 3 years 1,000 – > 3 year < 5 years 2,754 – > 5 years 349 838 Total 4,609 5,184 FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 140 Note 28 Provisions Accounting principles Provisions Provisions are reported when the Group has, or is considered to have, an obligation resulting from an event that has occurred and for which payments are likely to meet the obligation. A further condition is that it is possible to make a reliable esti- mate of the amount to be paid. Pensions Pensions are reported either as dened contribution plans or as dened benet plans. Most of Elekta’s pension commitments are met through ongoing payments to authorities or other independent organizations that administer the pension plans. For these dened contribution pension plans, a pension cost is reported on a continuous basis as the benets are earned, which normally coincides with the date on which the fees are paid. Elekta has dened benet pension plans for certain employees in a few countries. Independent actuaries calculate the magnitude of the obligations in each plan and revalue the obligations of the pension plans each year. The pension costs are estimated using the so-called projected unit credit method in a way that distributes the costs over the employee’s working life. These obligations are valued at the present value of the expected future payments. Actuarial gains and losses are reported in other comprehensive income in the period during which they arise. Warranty provisions Estimated costs for product guarantees are charged against operating costs in conjunction with the income recognition of the products. The estimated costs are established using historic statistics, with known changes taken into account regarding product quality, repair costs etcetera. Estimates and assessment Provisions include uncertainties and entails various judgments. Provisions for guarantees are based on historic statistics, while others, such as provisions for legal disputes and restructuring are based on management’s best estimate of the expected outcome. A provision is only reported when an event has occurred for which economic responsibility is probable and when it is possible to make a reliable estimate of the amount to be paid. Total provisions amounted to SEK 364 M (398). Provisions Group Parent Company SEK M April 30, 2022 April 30, 2021 April 30, 2022 April 30, 2021 Restructuring reserve 4 7 – 4 Warranty provisions 105 108 – – Other provisions 39 60 – 0 Short-term provisions 149 174 – 4 Provision for pensions 123 146 – – Other provisions 92 78 13 36 Long-term provisions 215 224 13 36 Pension plans Elekta has dened benet pension plans for certain employees in a few countries; mainly Japan, Netherlands, Italy and Germany. Most common is however dened contribution plans. Total pension costs for the Group amounted to SEK294 M (215) of which SEK 23 M (19) relate to dened benet pension plans, see Note 7. Pension costs, dened benet pension plans Group SEK M April 30, 2022 April 30, 2021 Current service cost –23 –19 Interest on obligation –3 –3 Interest income 2 2 Past service costs and gains/losses on settlements 1 –1 Actuarial loss/gain 27 –3 Total cost of dened benet pension plans before tax 3 –25 whereof reported in: the income statement –23 –22 other comprehensive income 27 –3 Dened benet pension plans Group SEK M April 30, 2022 April 30, 2021 Dened benet obligation, funded plans 157 186 Fair value of plan assets –138 –155 Provision for pensions, funded plans 19 31 Dened benet obligation, unfunded plans 103 115 Provision for pensions, unfunded plans 103 115 Pension provision for dened benet plans, net 123 146 NOTES FINANCIAL REPORTING 141 ELEKTA ANNUAL REPORT 2021/22 Plan assets in % Group SEK M April 30, 2022 April 30, 2021 Assets held by insurance company 93% 96% Other 7% 4% 100% 100% Discount rate The discount rate reects the estimated timing of benet pay- ments and is used for measuring the present value of the obli- gation. A uctuation in the discount rate will have material eect on the pension obligation but will also impact the inter- est income and expense reported in the nance net. To deter- mine the discount rate, AA-rated corporate bonds indexes matching the duration of the pension obligations are applied in most countries. Key assumptions used in the valuation of the pension liability (weighted average) Group April 30, 2022 April 30, 2021 Discount rate used, % 2.0 1.0 Future salary increase, % 1.8 1.9 Ination, % 2.1 0.9 Sensitivity analysis of the most important assump- tions aecting the recognized pension liability Group April 30, 2022 April 30, 2021 Discount rate +0.5% –7,9% –8,8% Discount rate –0.5% 9,2% 10,1% Salary increase rate +0.5% 1,8% 1,5% Salary increase rate –0.5% –1,7% –1,5% Ination, +0,5% 1,9% 2,1% Ination, –0,5% –2,1% –2,0% NOTE 28 Provisions, cont. Movement in provision for pensions April 30, 2022 April 30, 2021 SEK M Present value of obligation Fair value of plan assets Net Present value of obligation Fair value of plan assets Net Opening balance 301 –155 146 317 –142 175 Current service cost 21 2 23 18 2 19 Past service costs and gains/losses on settlements –1 – –1 1 – 1 Interest expenses /income 3 –2 1 3 –2 1 324 –155 169 338 –142 197 Actuarial gains/losses attributable to: Return on plan assets – 36 36 – –4 –4 Changes in nancial assumptions –57 – –57 7 – 7 Changes in demographic assumptions – – – –4 – –4 Experience assumptions –6 – –6 5 – 5 Transfers – – – –13 – –13 Contributions by employers – –17 –17 – –18 –18 Contributions by employees 1 –1 – 1 –1 – Benet payments –7 2 –5 –10 2 –9 Exchange rate dierences 4 –3 1 –22 7 –15 Closing balance 261 –138 123 301 –155 146 FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 142 NOTE 28 Provisions, cont. Note 29 Customer contract related balances and order backlog Group SEK M April 30, 2022 April 30, 2021 Contract assets Income not invoiced 1,812 1,773 Doubtful income not invoiced –16 –1 Total 1,796 1,772 Contract liabilities Advances from customer 4,161 3,759 Prepaid service income 2,114 1,995 Other prepaid income 228 88 Total 6,503 5,842 Revenue recognized in the period Group SEK M 2021/22 2020/21 Revenue recognized in the year relating to the opening balance of the contract liability balance 4,417 4,277 Order backlog was SEK 39,656 M, compared to SEK 33,293 M on April 30, 2022. Order backlog is converted at closing exchange rates which resulted in a negative translation dier- ence of SEK 3,524 M. According to current delivery plans, cur- rent order backlog is expected to be recognized as follows: approximately 35 percent in 2021/22, 30 percent in 2022/23 and 35 percent thereafter. Note 30 Accrued expenses Group SEK M April 30, 2022 April 30, 2021 Reserve for additional project costs 644 548 Accrued commission costs 50 121 Accrued vacation pay 256 194 Accrued social costs 94 86 Accrued interest expenses 10 18 Accrued bonus costs 360 298 Accrued expenses GRNI 1) 90 104 Other items 397 468 Total 1,901 1,837 1) Includes liabilities for goods received where the related invoice has not yet been received. Note 31 Other current liabilities Group SEK M April 30, 2022 April 30, 2021 Value added tax 318 439 Personnel taxes 28 25 Other personnel related liabilities 8 7 Contingent consideration 24 55 Other items 51 32 Total 429 559 Parent Company SEK M April 30, 2022 April 30, 2021 Accounts payable 4 8 Accrued expenses (see below) 41 49 Derivative nancial instruments 34 15 Other liabilities 2 64 Total 81 137 Accrued expenses Accrued vacation pay liability 7 8 Accrued social costs 3 3 Accrued interest expenses 9 18 Other items 22 20 Total 41 49 Movement in provisions Group Parent Company SEK M Restructuring reserve Warranty provisions Other provisions Restructuring reserve Other provisions Opening balance May 1, 2020 2 101 135 0 10 Provisions 31 157 37 26 26 Reversals 0 –77 –30 – –1 Provisions utilized during the year –26 –67 0 –23 – Other – 4 – – – Translation dierences 0 –10 –4 – – Closing balance April 30, 2021 7 108 138 4 36 Opening balance May 1, 2021 7 108 138 4 36 Provisions 7 135 49 – – Reversals –1 –88 –6 – –23 Provisions utilized during the year –8 –59 –52 –4 – Other – 2 – – – Translation dierences 0 7 3 – – Closing balance April 30, 2022 4 105 132 – 13 NOTES FINANCIAL REPORTING 143 ELEKTA ANNUAL REPORT 2021/22 Note 34 Cash ow statement Group Parent Company SEK M 2021/22 2020/21 2021/22 2020/21 Interest net Interest income –42 –30 –138 –154 Interest expenses 148 233 114 191 Total 106 204 –24 37 Other non-cash items Participations in net income of associated companies, after tax –5 7 – – Revaluation of participations in other companies – 2 43 –206 Cost of incentive programs 17 12 5 3 Anticipated group contributions – – –20 – Unrealized exchange rate eects –183 291 1 29 Other items –41 –5 –31 39 Total –211 307 –2 –135 Business combinations Purchase price –152 –274 – –235 Contingent considerations –42 –47 – – Unpaid part of purchase price 18 49 – – Total –175 –272 – –235 Other investing activities Shareholders’ contributions paid – – –155 –55 Dividends from associated companies 4 1 – – Divestments of other shares – 443 – 443 Investments in short term investments –69 – – – Divestments of short term investments – 60 – – Total –65 504 –155 388 More information on business combinations is presented in Note 36. Changes in net liabilities related to nancing activities 2021/22 Non-cash changes SEK M Opening balance Cash ow Other Foreign exchange movements Closing balance Bond loans 2,497 496 – – 2,993 Leases liabilities 1,054 –228 169 91 1,086 Liabilities to credit institutes 2,687 –1,163 – 78 1,603 Other – 9 – – 9 Total 6,239 –886 169 169 5,692 Note 32 Assets pledged Group SEK M April 30, 2022 April 30, 2021 Bank balances 8 8 Total 8 8 Collateral pledged for contingent liabilities. Note 33 Contingent liabilities Group Parent Company SEK M April 30, 2022 April 30, 2021 April 30, 2022 April 30, 2021 Guarantees 1,562 1,535 767 633 Total 1,562 1,535 767 633 For the group the guarantees consist of mainly bid bonds. For the Parent Company the guarantees consist of mainly performance guarantees and advance payments guarantees. FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 144 NOTE 34 Cash ow statement, cont. Note 35 Related party transactions Transactions between Elekta AB and its subsidiaries are shown in Notes 11, 12, 13 and 27. These transactions are eliminated upon consolidation. Sales to associated companies amounted to SEK 22 M (34), receivables from associated companies amounted to SEK 31 M (27) and costs related to associated companies amounted to SEK 9 M (12). None of the board members or any of the senior executives has, or has had, any direct or indirect involvement in any busi- ness transactions between themselves and Elekta. In addition to this, no other transactions with related parties have occurred. Remunerations and benets to key personnel in management positions are presented in Note 7. Note 36 Business combinations 2021/22 During 2021/22 Elekta has made some minor acquisitions to atotal preliminary xed acquisition price of approximately SEK 150 M with a maximum variable amount of approximately SEK 3 M. The acquisitions made during the year consists of one share acquisition and several small asset acquisitions. The achievement goals for the variable acquisition price related to Kaiku Health Oy that was acquired in May 2020, hasnot been fullled, and has been reversed during the year. 2020/21 On May 19, 2020 Elekta acquired 100% of shares in Kaiku Health Oy to further develop its focus on cancer care providers and their patients through its acquisition of Kaiku Health. The pre- liminary acquisition price consisted of a xed amount of approximately SEK 230 M and a maximum variable amount of approximately SEK 50 M, which is depending on the achieve- ment of goals set-up for the transferred business. Since the acquisition date, the acquisition of Kaiku Health Oy has had animpact of SEK 19 M on consolidated net sales and SEK –40 M on net income. The dierence in impact on the Group’s consol- idated net sales and net income, compared to if the acquisi- tion had been consolidated from May 1, 2020, is insignicant. The goodwill recorded of SEK 228 M from the acquisition is attributable to the value of the skills within the company in terms of its capability to develop new digital health interven- tions for cancer patient The Finnish company is best known for its app that monitors patient-reported outcomes, providing intelligent symptom tracking and management for healthcare providers in routine oncology care and studies. The Kaiku Health app screens for patients’ symptoms, noties the care team on their development and provides value-based person- alized support for patients. It is easily implemented into exist- ing hospital information systems and can be integrated with Elekta’s MOSAIQ ® Oncology Information System (OIS). This makes Kaiku Health a valuable tool for healthcare teams to collate patient-recorded feedback and act immediately if anything unusual is reported. Changes in net liabilities related to nancing activities 2020/21 Non-cash changes SEK M Opening balance Cash ow Other Foreign exchange movements Closing balance Bond loans 2,496 – 1 – 2,497 Leases liabilities 1,256 –215 121 –109 1,054 Liabilities to credit institutes 5,606 –2,703 –5 –211 2,687 Total 9,358 –2,918 117 –320 6,239 NOTES FINANCIAL REPORTING 145 ELEKTA ANNUAL REPORT 2021/22 Note 38 Signicant events after the reporting period No signicant events have occured subsequent to the balance sheet date that would have a material impact on the Elekta Group’s nancial statements. Note 37 Average number of employees Men Women Total 2021/22 2020/21 2021/22 2020/21 2021/22 2020/21 Parent Company 23 26 34 19 57 45 Subsidiaries: Sweden 177 152 105 89 282 241 USA 626 597 297 278 924 875 United Kingdom 619 553 202 184 822 736 China 520 484 210 220 730 704 The Netherlands 177 164 57 51 234 214 Poland 92 130 129 58 222 188 Germany 92 86 17 17 109 102 Japan 106 105 22 23 128 127 India 118 120 10 0 128 120 Canada 75 74 27 25 102 99 Italy 63 60 19 17 82 77 France 62 57 15 15 77 72 Australia 61 54 21 19 82 73 Brazil 47 47 16 14 63 62 Spain 44 41 11 7 55 48 Hong Kong 38 35 13 16 51 51 Turkey 54 42 21 17 75 59 Finland 75 48 27 16 102 64 Mexico 34 30 8 8 42 38 South Korea 26 23 2 3 28 26 Singapore 20 18 13 9 33 28 Austria 15 15 3 3 18 18 Russia 15 16 8 6 23 22 Philipines 3 – 2 – 5 – South Africa 12 14 5 4 17 18 Romania 2 – 0 – 2 – Indonesia 13 – 2 – 15 – Belgium 13 10 2 2 15 12 Greece 12 10 3 2 15 12 Czech Republic 6 6 5 4 11 10 Portugal 11 10 3 2 14 12 New Zealand (branch) 8 7 3 2 11 9 Algeria 8 8 1 1 9 9 Vietnam 15 12 3 1 18 12 Switzerland (branch) 5 5 2 2 7 7 Egypt 22 2 0 0 22 2 Serbia 3 3 0 0 3 3 Total average number of employees 3,312 3,062 1,319 1,132 4,631 4,194 Specication men/women among Board of Directors and executive management During the nancial year, the Board of Directors of Elekta AB consisted of 57 percent (57) men. The Executive Committee consisted of 86 percent (86) men. FINANCIAL REPORTING NOTES ELEKTA ANNUAL REPORT 2021/22 146 The Board of Directors and the President and CEO certify that the annual nancial report has been prepared in accordance with generally accepted accounting principles and that the consolidated accounts have been prepared in accordance with the international set of accounting standards referred to in Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards, and give a true and fair view of the posi- tion and prot or loss of the Parent Company and the Group, and that the management report gives a fair review of the development and performance of the business, position and Stockholm July 7, 2022 Laurent Leksell Chairman of the board Caroline Leksell Cooke Member of the board Johan Malmquist Member of the board Wolfgang Reim Member of the board Jan Secher Member of the board Birgitta Stymne Göransson Member of the board Cecilia Wikström Member of the board Gustaf Salford President and CEO Our audit report was submitted on July 8, 2022 Ernst & Young AB Rickard Andersson Authorized Public Accountant prot or loss of the Parent Company and the Group, and describes the principal risks and uncertainties that the Parent Company and the companies in the Group face. The annual report also contains the sustainability report in accordance with the Swedish Annual Accounts Act, Chapter 6, Section 11, see page 72, reporting on EU taxonomy for sus- tainable activities in accordance with the EU Taxonomy Regu- lation (EU 2020/852), see page 52, and the Sustainability Report in accordance with the Global reporting Initiative, GRI, see the GRI Index on page 69. SIGNATURES OF THE BOARD FINANCIAL REPORTING 147 ELEKTA ANNUAL REPORT 2021/22 REVENUE RECOGNITION Description How this area was taken into account in the audit Elekta’s revenue comes from the sale of machinery, software and services. Many of Elekta’s products and services are sold independently, while others are part of so-called compound contracts, where equipment, software and ser- vices are covered by a single customer agreement. Revenue for each compo- nent in the contract (performance obligation) is recognized when the control istransferred to the customer. Revenue recognition depends on management’s assessments of the con- tract terms that govern when the control for each component passes to the buyer. Machines are installed in accordance with the installation date agreed with the customer and it is usually at this time that the revenue for the machine is reported. After technical approval has been received from the cus- tomer, theremaining part of the revenue is reported attributable to software and installation. The transaction price, taking discounts into account, is allocated among the various performance commitments in the contract based on estimated stand- alone sales prices for the goods and services in the contract identied as per- formance commitments. Due to the inherent complexity of revenue recognition and the nature of estimates and assessments from management, we have assessed revenue recognition as a particularly important area of the audit. For accounting policies and disclosures, please refer to Note 6. In our audit, we have mapped and evaluated Elekta’s processes and controls on revenue recognition to gain an understanding of how they work and where any errors could occur. Our mapping has focused on the approval of new customer agreements, the model for allocating revenue to various components of the agreements and the company’s controls to ensure that the revenue is accounted for in the right period. After our mapping, we have tested thecontrols and carried out, among other things, the following review measures: • Performed trend and correlation tests using computerized analytical meth- ods in order to identify uctuations and to check that payment has been received for reported revenue. • Randomly tested that revenue is accounted for in the correct period and at the right amount • Reviewed a selection of new and old contracts and sales against the terms of the contract and Elekta’s guidelines for assessing revenue recognition. We have also examined the accounting policies and notes provided in the annual report. Report on the annual accounts and consolidated accounts Opinions We have audited the annual accounts and consolidated accounts of Elekta AB (publ) for the nancial year 2021-05-01 – 2022-04-30. The annual accounts and consolidated accounts of the company are included on pages 94–147 in this document. In our opinion, the annual accounts have been prepared in accor- dance with the Annual Accounts Act and present fairly, in all mate- rial respects, the nancial position of the parent company as of 30 April 2022 and its nancial performance and cash ow for the year then ended in accordance with the Annual Accounts Act. The con- solidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the nancial position of the group as of 30 April 2022 and their nancial performance and cash ow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. We therefore recommend that the general meeting of sharehold- ers adopts the income statement and balance sheet for the parent company and the group. Our opinions in this report on the annual accounts and consoli- dated accounts are consistent with the content of the additional report that has been submitted to the parent company’s audit com- mittee in accordance with the Audit Regulation (537/2014) Article 11. Basis for Opinions We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Swe- den. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional Auditor’s report To the general meeting of the shareholders of Elekta AB (publ) corporate identity number 556170-4015 This is a translation from the Swedish original. ethics for accountants in Sweden and have otherwise fullled our ethical responsibili- ties in accordance with these requirements. This includes that, based onthe best of our knowledge and belief, no prohibited ser- vices referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled com- panies within the EU. We believe that the audit evidence we have obtained is sucient and appropriate to provide a basis for our opinions. Key Audit Matters Key audit matters of the audit are those matters that, in our profes- sional judgment, were of most signicance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these mat- ters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fullled the responsibilities described in the Auditor’s responsibilities for the audit of the nancial statements section ofour report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the nancial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide thebasis for our audit opinion on the accompanying nancial statements. Materiality Scope Key Audit Matters FINANCIAL REPORTING AUDITOR’S REPORT ELEKTA ANNUAL REPORT 2021/22 148 GOODWILL Description How our audit addresses this key audit matter Goodwill amounts to SEK 6,499 million as of April 30, 2022 and represents a sig- nicant proportion of Elekta’s total assets. Goodwill amounts are allocated to the Group’s cash-generating units (CGUs). Impairment testing of goodwill with an indenite useful life iscarried out annually, or more frequently if there are indications of a decline in value. When the book value exceeds the estimated recoverable amount, the asset is impaired to the recoverable amount. The recoverable amount is the highest of aCGU’s net realizable value and value in use,which corresponds to the dis- counted present value of future cashows. Future cash ows are based on the forecast approved bymanagement. The estimates are based on the nancial budget forthe next scal year as determined by the Executive Management, and expected future development up to ve years. As described in Note 16, the calculations of utilization values assume that important assumptions are made regarding, among other things, growth rates, gross margin and discount rates. Note 16 describes signicant assumptions used in the calculation of the value in use. As the value in use is dependent upon these assumptions, we have assessed valuation of goodwill as a key audit matter. Our review has included, among other things, the following review measures; • Evaluation of the company’s process for establishing and conducting impair- ment tests. • Review of the Company’s identication of cash-generating units (CGU) • Evaluation using own valuation experts regarding used valuation methods and calculation models. • Assessment of the plausibility of assumptions made. • Conducted a sensitivity analysis of the company’s impairment test • Analysis of the reliability of the current year’s forecast by comparing itagainst historical performance • Examination of additional information provided in the Annual Report. Other Information than the annual accounts and consolidated accounts This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1–91. The remuneration report for nancial year 2021–2022 on pages 92–93 also constitutes other information. The Board of Directors and the Managing Director are responsible for this other informa- tion. Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information. In connection with our audit of the annual accounts and consoli- dated accounts, our responsibility is to read the information identi- ed above and consider whether the information is materially incon- sistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated. If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other infor- mation, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accor- dance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error. In preparing the annual accounts and consolidated accounts, TheBoard of Directors and the Managing Director are responsible for the assessment of the company’s and the group’s ability to con- tinue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intends to liquidate the company, to cease operations, or has no realistic alternative but to do so. The Audit Committee shall, without prejudice to the Board of Director’s responsibilities and tasks in general, among other things oversee the company’s nancial reporting process. Auditor’s responsibility Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as awhole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with ISAs and generally accept- edauditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud orerror and are considered material if, individually or in the aggre- gate, they could reasonably be expected to inuence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts. As part of an audit in accordance with ISAs, we exercise profes- sional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sucient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, orthe override of internal control. • Obtain an understanding of the company’s internal control rele- vant to our audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the eectiveness of the company’s internal control. AUDITOR’S REPORT FINANCIAL REPORTING 149 ELEKTA ANNUAL REPORT 2021/22 • Evaluate the appropriateness of accounting policies used andthe reasonableness of accounting estimates and related disclosures made by the Board of Directors and the Managing Director. • Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting in preparing the annual accounts and consolidated accounts. We also draw a conclusion, based on the audit evi- dence obtained, as to whether any material uncertainty exists related to events or conditions that may cast signicant doubt on the company’s and the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the annual accounts and consoli- dated accounts or, if such disclosures are inadequate, to mod- ify our opinion about the annual accounts and consolidated accounts. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company and a group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the annual accounts and consolidated accounts, including the dis- closures, and whether the annual accounts and consolidated accounts represent the underlying transactions and events in amanner that achieves fair presentation. • Obtain sucient and appropriate audit evidence regarding the nancial information of the entities or business activities within the group to express an opinion on the consolidated accounts. We are responsible for the direction, supervision and perfor- mance of the group audit. We remain solely responsible for ouropinions. We must inform the Board of Directors of, among other matters, the planned scope and timing of the audit. We must also inform ofsignicant audit ndings during our audit, including any signi- cant deciencies in internal control that we identied. We must also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regard- ing independence, and to communicate with them all relation- ships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or related safeguards applied. From the matters communicated with the Board of Directors, we determine those matters that were of most signicance in the audit of the annual accounts and consolidated accounts, includ- ing the most important assessed risks for material misstatement, and are therefore the key audit matters. We describe these mat- ters in the auditor’s report unless law or regulation precludes disclosure about the matter. Report on other legal and regulatory requirements Report on the audit of the administration and the proposed appropriations of the company’s prot or loss Opinions In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of ABC AB (publ) for the year 2021-05-01 – 2022-04-30 and the proposed appropriations of the company’s prot or loss. We recommend to the general meeting of shareholders that theprot be appropriated (loss be dealt with) in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director bedischarged from liability for the nancial year. Basis for Opinions We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fullled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is su- cient and appropriate to provide a basis for our opinions. Responsibilities of the Board of Directors and the Managing Director The Board of Directors is responsible for the proposal for appropri- ations of the company’s prot or loss. At the proposal of a divi- dend, this includes an assessment of whether the dividend is justi- able considering the requirements which the company’s and the group’s type of operations, size and risks place on the size of the parent company’s and the group’s equity, consolidation require- ments, liquidity and position in general. The Board of Directors is responsible for the company’s organi- zation and the administration of the company’s aairs. This includes among other things continuous assessment of the com- pany’s and the group’s nancial situation and ensuring that the company’s organization is designed so that the accounting, man- agement of assets and the company’s nancial aairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors’ guidelines and instructions and among other matters take measures that are necessary to fulll the company’s account- ing in accordance with law and handle the management of assets in a reassuring manner. Auditor’s responsibility Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect: • has undertaken any action or been guilty of any omission which can give rise to liability to the company, or • in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles ofAssociation. Our objective concerning the audit of the proposed appropriations of the company’s prot or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the pro- posal is in accordance with the Companies Act. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company’s prot or loss are not in accordance with the Companies Act. As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgment and maintain professional scepticism throughout the audit. The FINANCIAL REPORTING AUDITOR’S REPORT ELEKTA ANNUAL REPORT 2021/22 150 1) This is a translation of the original auditors’ report in Swedish. In the event ofany dierences between the translation and the original statement in Swedish, the Swedish version shall prevail. examination of the administration and the proposed appropria- tions of the company’s prot or loss is based primarily on the audit of the accounts. Additional audit procedures performed are based on our professional judgment with starting point in risk and mate- riality. This means that we focus the examination on such actions, areas and relationships that are material for the operations and where deviations and violations would have particular importance for the company’s situation. We examine and test decisions under- taken, support for decisions, actions taken and other circum- stances that are relevant to our opinion concerning discharge from liability. As a basis for our statement on the Board’s proposal for appropriation of the company’s prot or loss, we have reviewed the Board’s reasoned opinion and a selection of the supporting documents for this in order to assess whether the proposal is compatible with the Swedish Companies Act. The auditor’s examination of the ESEF report Opinion In addition to our audit of the annual accounts and consoli- dated accounts, we have also examined that the Board of Directors and the Managing Director have prepared the annual accounts and consolidated accounts in a format that enables uniform electronic reporting (the Esef report) pursuant to Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528) for Elekta AB for the nancial year 2021-05-01 – 2022-04-30. Our examination and our opinion relate only to the statutory requirements. In our opinion, the ESEF report #[checksum] has been prepared in a format that, in all material respects, enables uniform elec- tronic reporting. Basis for opinion We have performed the examination in accordance with FAR’s recommendation RevR 18 Examination of the ESEF report . Our responsibility under this recommendation is described in more detail in the Auditors’ responsibility section. We are indepen- dent of Elekta AB in accordance with professional ethics for accountants in Sweden and have otherwise fullled our ethical responsibilities in accordance with these requirements. We believe that the evidence we have obtained is sucient and appropriate to provide a basis for our opinion. Responsibilities of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are responsi- ble for the preparation of the Esef report in accordance with Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528), and for such internal control that the Board of Directors and the Managing Director determine is necessary toprepare the Esef report without material misstatements, whether due to fraud or error. Auditor’s responsibility Our responsibility is to obtain reasonable assurance whether the Esef report is in all material respects prepared in a format that meets the requirements of Chapter 16, Section 4(a) of the Swedish Securities Market Act (2007:528), based on the proce- dures performed. RevR 18 requires us to plan and execute procedures to achieve reasonable assurance that the Esef report is prepared in a format that meets these requirements. Reasonable assurance is a high level of assurance, but it is not a guarantee that an engagement carried out according to RevR 18 and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to inuence the economic decisions of users taken on the basis of the Esef report. The audit rm applies ISQC 1 Quality Control for Firms that Per- form Audits and Reviews of Financial Statements, and other Assurance and Related Services Engagements and accordingly maintains a comprehensive system of quality control, including documented policies and procedures regarding compliance with professional ethical requirements, professional standards and legal and regulatory requirements. The examination involves obtaining evidence, through various procedures, that the Esef report has been prepared in a format that enables uniform electronic reporting of the annual and con- solidated accounts. The procedures selected depend on the audi- tor’s judgment, including the assessment of the risks of material misstatement in the report, whether due to fraud or error. In carry- ing out this risk assessment, and in order to design audit proce- dures that are appropriate in the circumstances, the auditor con- siders those elements of internal control that are relevant to the preparation of the Esef report by the Board of Directors and the Managing Director, but not for the purpose of expressing an opin- ion on the eectiveness of those internal controls. The examina- tion also includes an evaluation of the appropriateness and rea- sonableness of assumptions made by the Board of Directors and the Managing Director. The procedures mainly include a technical validation of the Esef report, i.e. if the le containing the Esef report meets the technical specication set out in the Commission’s Delegated Regulation (EU) 2019/815 and a reconciliation of the Esef report with the audited annual accounts and consolidated accounts. Furthermore, the procedures also include an assessment of whether the Esef report has been marked with iXBRL which enables a fair and complete machine-readable version of the con- solidated statement of nancial performance, nancial position, changes in equity and cash ow. Ernst & Young AB was appointed auditor of Elekta AB by the general meeting of the shareholders on 25 August 2021 and has been the company’s auditor since the 22 August 2019. Stockholm July 8, 2022 Ernst & Young AB Signature on original auditors’ report in Swedish 1) Rickard Andersson Authorized Public Accountant AUDITOR’S REPORT FINANCIAL REPORTING 151 ELEKTA ANNUAL REPORT 2021/22 Glossary Adaptive radiation therapy A treatment technique that aims to customize each patient’s treatment plan to patient specic variation by evaluating and characterizing the systematic and random variations through image feedback and including them in adaptive planning. Benign The term benign is used when describing tumors or growths that do not threaten the health of an individual. Benign is theopposite of malignant. Brachytherapy Is also known as internal radiation therapy, involves placing a radiation source in or near the treatment area. This allows very high tumor doses to be achieved, while limiting the impact on surrounding organs. The method is typically used to treat gynecological cancer and prostate cancer, but also breast cancer and certain types of skin cancer. Cancer Uncontrolled, abnormal growth of cells. Chemotherapy Treatment of cancer diseases with the aid of chemicals that eliminate diseased cells. Cone beam CT (CBCT) A CBCT system mounted to a linac or Gamma Knife creates images used for verifying or determining the location of the patient in relation to the treatment beam(s). Computed tomography (CT) A radiological method of imaging anatomical structures by means of layering, using computer technology. Deep brain stimulation (DBS) A brain ‘pacemaker’ is implanted to stimulate brain activity and block signals that cause unwanted symptoms present in functional neurological disorders, for example tremor. Diusion weighted imaging (DWI) A method to evaluate the molecular function and micro- architecture of the human body. Electronic brachytherapy Type of brachytherapy that uses an X-ray tube to induce radia- tion. It can deliver radiation to the tumor with a high degree of precision whilst minimizing damage to healthy surrounding tissue. Due to the source of radiation used, electronic brachy- therapy can be performed in a room with minimal shielding. External-beam radiation therapy The most common type of radiation therapy, in which the radi- ation source is produced by a linear accelerator and delivered by the radiation beam from the linear accelerator head rotated around the patient. By delivering the radiation from various angles, the radiation dose is distributed more evenly inthe tumor without excess damage to surrounding healthy tissue. Fraction Part of the total radiation dose, delivered at a daily treatment. Food and Drug Administration (FDA) Is an agency of the US Department of Health and Human Services. The FDA is responsible for protecting and promoting public health through the regulation and supervision of for example medical devices. Gamma Knife ® radiosurgery Stereotactic radiosurgery with Leksell Gamma Knife ® . Glioblastoma The most common and most aggressive malignant primary brain tumor. They are usually highly malignant as a large number of tumor cells are reproducing at any given time and are supported by a large network of blood vessels. Glioblastoma often inltrate with normal healthy brain tissue. High dose radiation (HDR) An amount of radiation that is greater than that given in typical radiation therapy. High-dose radiation is precisely directed at the tumor to avoid damaging healthy tissue, and may kill more cancer cells in fewer treatments. Hypofractionation A treatment schedule in which the total dose of radiation is divided into large doses and treatments are given once a day or less often. Image guided radiation therapy (IGRT) IGRT enables high precision targeting and accuracy using high-resolution multi-dimensional X-ray images of the patient’s tissue. Image guided radiation therapy (IGRT) with magnetic resonance imaging (MRI) This provides high-quality images of tissue and tumors while treatment is in progress, and also enables adaptation of the radiation dose in real-time. The method is under development in the MR-Linac consortium. Intensity-modulated radiation therapy (IMRT) IMRT is an advanced type of treatment that uses multiple very small beams of varying intensity rather than a single, large, uniform beam. The radiation can therefore be tailored to the size and shape of the tumor, allowing higher tumor doses while minimizing the impact on healthy tissue. Incidence Incidence is the number of new cancer cases arising in a given period in a specied population. Invasive A treatment technique that penetrates the skin, skull, etcetera. The opposite of non-invasive (bloodless). Linear accelerator (Linac) Equipment for generating and directing ionizing radiation for treatment of cancer. Magnetoencephalograph (MEG) Equipment for real time mapping of the function in dierent parts of the brain, by measuring the magnetic eld generated by brain cells activity. GLOSSARY 152 ELEKTA ANNUAL REPORT 2021/22 GLOSSARY Magnetic resonance imaging (MRI) Technology used to visualize and dierentiate organs and anatomical structures inside the body. It uses non-ionizing radiation and is thus harmless to the patient. Malignant Refers to cancerous cells that usually have the ability to aggressively spread, invade and destroy tissue. Opposite tobenign. Meningioma A type of tumor that develops from the meninges, the mem- brane that surrounds the brain and spinal cord. Meningiomas are the most common type of primary brain tumors and are often benign. Metastases Secondary malignant tumors originating from primary cancer tumors in other parts of the body. Multileaf collimator An accessory to the linear accelerator, working like an aper- ture. With a large number of individually adjustable metal leaves, the treatment beam can be shaped to the size and shape of the target volume. MR-Linac See image guided radiation therapy (IGRT) with magnetic resonance imaging (MRI). Neurology The study of the nervous system and its disorders. Neurosurgery Surgery of the brain or other parts of the central nervous system. Oligometastases A limited number of metastases. Oncology The study of tumor diseases. Oncology information system (OIS) All patient information is collected and accessible in an oncol- ogy information system, from diagnosis through treatment and follow-up, so that clinics can deliver the best possible care for every patient. MOSAIQ ® is Elekta´s world leading oncology information system. Parkinson’s disease Paralysis, with trembling and shaking as well as muscular – rigidity, with a change in movements and posture by the patient. Prevalence The prevalence of a particular cancer can be dened as the number of persons in a dened population who have been diagnosed with that type of cancer, and who are still alive at the end of a given year, the survivors. Prevalence of cancers based on cases diagnosed within one, three and ve are pre- sented as they are likely to be of relevance to the dierent stages of cancer therapy, namely, initial treatment (one year), clinical follow-up (three years) and cure (ve years). Patients who are still alive ve years after diagnosis are usually consid- ered cured since the death rates of such patients are similar to those in the general population. Radiation therapy Fractionated ionizing radiation treatment of cancer. Radiosurgery Non-invasive surgery in which a high, single dose of precise ionizing radiation replaces surgical instruments. Stereotactic body radiation therapy (SBRT) SBRT enables accurate delivery of radiation to a tumor and mini- mizes the radiation dose to surrounding tissue. This enables that small and medium-sized tumors can be treated with higher doses and fewer sessions, known as hypofractionation. Stereotactic radiosurgery (SRS) This is typically used to treat tumors and other disorders in the brain. The method involves the delivery of a single high dose, to small and critically located targets in the brain. The method oers very high precision, with a minimum impact on sur- rounding brain tissue. Stereotactic radiation therapy (SRT) Radiation therapy of cancer, where high precision and accuracy is achieved by delivering the radiation based on an external xed-coordinate system. Stereotaxy A technique in which a xed-coordinate system can determine the location of a point by specifying the coordinates in terms of height, depth and laterally. Tesla (T) MRI requires a magnetic eld that is both strong and uniform. The eld strength of the magnet is measured in teslas (T). The majority of systems operate at 1.5T, even though there are commercial systems available between 0.2–7T. Treatment planning system Treatment planning systems provide tools for multimodality image registration, organ and tumor contouring, treatment simulation and plan optimization. Monaco® is Elekta´s com- prehensive treatment planning system that supports all major treatment techniques. Tumor An abnormal mass of tissue that results when cells divide more than they should or do not die when they should. Tumors may be benign (not cancer), or malignant (cancer). Also called neoplasm. Volumetric modulated arc therapy (VMAT) VMAT is a more advanced variant of intensity modulated radi- ation therapy (IMRT). VMAT enables the physician to control the radiation beam, dosage amount and speed of rotation around the patient, which enables faster and more accurate treatment. 153 ELEKTA ANNUAL REPORT 2021/22 Denitions Average number of employees Total annual number of paid working hours in relation to number of standard working hours per year. Compound annual growth rate (CAGR) The mean annual growth rate over a specied period of time longer than a year. Capital employed Total assets less interest-free liabilities. Capital turnover ratio Net sales in relation to average total assets. 1) Cash ow per share Cash ow after investments in relation to the weighted average number of shares. Contribution margin per region Net sales less cost of products sold and expenses directly attributable to the respective region. Days sales outstanding (DSO) The total of accounts receivables and accrued income less advances from customers and prepaid income in relation to twelve months rolling net sales divided by 365. Earnings per share (EPS) Net income attributable to Parent Company shareholders in relation to the weighted average number of shares (excluding treasury shares). EBIT Earnings before interest and taxes. Also called operating income. EBITDA Operating income plus depreciation and amortization. Equity/assets ratio Total equity in relation to total assets. Gross order intake Order intake during a period. Interest cover ratio EBITDA in relation to interest expenses (excl. interest expenses lease liabilities). Items aecting comparability Events or transactions with signicant nancial eect, which are relevant for understanding the nancial performance when comparing income for the current period with previous period, including restructuring programs, expenses relating to major legal disputes, impairments and gains and losses for acquisitions or disposals of subsidiaries. Net debt Interest-bearing liabilities (excl. lease liabilities) less cash and cash equivalents. Net Debt/EBITDA ratio Net debt in relation to EBITDA. Net order intake Order intake during a period adjusted for cancellations, removals of orders and currency eects. Operational cash conversion Cash ow from operating activities in relation to EBITDA. Operating margin Operating income (EBIT) in relation to net sales. Prot margin Income after nancial items in relation to net sales. Return on capital employed Income after nancial items plus nancial expenses in relation to average capital employed. 1) Return on shareholders’ equity Net income attributable to Parent Company shareholders in relation to average shareholders’ equity excluding non-con- trolling interests. 1) Shareholders’ equity per share Shareholders’ equity excluding non-controlling interests in relation to the number of shares at year-end (excluding treasury shares). Value added per employee Operating income plus salaries, other remuneration and socialsecurity costs and cost of incentive programs in relation to average number of employees. Working capital Short-term interest-free assets less short-term interest-free liabilities, excluding current tax and derivatives. 1) Average based on the last ve quarters. DEFINITIONS 154 ELEKTA ANNUAL REPORT 2021/22 ALTERNATIVE PERFORMANCE MEASURES Gross order intake based on constant exchange rates Americas EMEA APAC Total % SEK M % SEK M % SEK M % SEK M 2021/22 vs 2020/21 Change based on constant exchange rates –2 –127 12 740 1 68 4 681 Currency eects 2 117 1 73 1 81 2 271 Reported change 0 –9 13 812 3 150 5 953 2020/21 vs 2019/20 Change based on constant exchange rates 23 1,136 –4 – 31 6 5 259 6 1,079 Currency eects –12 –581 –5 – 360 – 8 –462 –8 –1,403 Reported change 11 555 –10 –676 –4 –203 –2 – 324 Net sales based on constant exchange rates Americas EMEA APAC Total % SEK M % SEK M % SEK M % SEK M 2021/22 vs 2020/21 Change based on constant exchange rates 7 279 2 98 4 205 4 582 Currency eects 2 87 2 84 1 32 1 203 Reported change 9 366 4 181 5 237 6 784 2020/21 vs 2019/20 Change based on constant exchange rates –4 –187 –2 –118 11 516 1 211 Currency eects –9 –407 –5 –289 –8 –354 –7 –1,049 Reported change – 13 –594 – 7 –406 4 162 –6 – 83 8 Reconciliation of non-IFRS measures Alternative Performance Measures (APMs) are measures and key gures that Elekta’s management and other stakeholders use when managing and analyzing Elekta’s business perfor- mance. These measures are not substitutes, but rather supple- ments to nancial reporting measures prepared in accordance with IFRS. APMs used by Elekta are dened on page 154. Seebelow for comments on why these APMs are used by Elekta and, when applicable, reconciliations to the IFRS nancial statements. Order backlog Order backlog represents all orders that have been booked but not yet revenue recognized. Elekta follows the maturity prole of the order backlog when forecasting revenue. Alternative performance measures Gross order intake Gross order intake represents the new orders that have been booked during the period and this is in line with industry peers. Order and sales growth based on constant exchange rates Elekta’s order intake and sales are, to a large extent, reported in subsidiaries with other functional currencies than SEK, which is the group reporting currency. In order to present order and sales growth on a more comparable basis and to show the impact of currency uctuations, order and sales growth based on constant exchange rates are presented. The schedules below present growth based on constant exchange rates reconciled to the total growth reported in accordance with IFRS. 155 ELEKTA ANNUAL REPORT 2021/22 Gross income and gross margin Gross income is the dierence between net sales and cost of products sold and is presented on a separate line in the income statement. Gross income as a percentage of net sales rep- resents gross margin. The Gross margin is used by manage- ment to review eects on the income statement from factors such as product mix and price development. EBITDA EBITDA is used for the calculation of the interest cover ratio and operational cash conversion. SEK M 2017/18 2018/19 2019/20 2020/21 2021/22 Operating income/EBIT 1,845 1,696 1,657 1,906 1,643 Amortization intangible assets: Capitalized development costs 408 664 746 685 493 Assets relating busi- ness combinations 116 117 119 118 123 Depreciation xed assets 151 162 410 401 422 EBITDA 2,520 2,639 2,931 3,110 2,682 Items aecting comparability The classication of revenue or expenses as items aecting comparability is based on management’s assessment of the characteristics and also the materiality of the item. Operating income (EBIT) and operating margin EBIT is part of Elekta’s long term nancial ambitions. The mea- sure is presented in the income statement as Elekta consider it to provide users of the nancial statements with a better understanding of the Group’s operating performance from a nancial perspective. The operating margin shows the operat- ing income as a percentage of net sales. Capital employed Capital employed represents the value of the balance sheet net assets that is the key driver of cash ow and capital required to run the business. It is also used in the calculation of return on capital employed. SEK M April 30, 2018 April 30, 2019 April 30, 2020 April 30, 2021 April 30, 2022 Total assets 23,760 24,064 28,411 24,844 26,303 Deferred tax liabilities –511 –587 –545 –515 –549 Long term provisions –158 –188 –235 –224 –215 Other long-term liabilities –63 –55 –73 –71 –120 Accounts payable –1,132 –1,427 –1,025 –1,016 –1,352 Advances from customers –5,316 –4,883 –4,103 –3,759 –4,161 Prepaid income –1,990 –2,170 –2,226 –2,082 –2,342 Accrued expenses –1,662 –1,661 –1,703 –1,837 –1,901 Current tax liabilities –107 –166 –246 –137 –114 Short-term provisions –186 –188 –179 –174 –149 Derivative nancial instruments –46 –94 –105 –35 –361 Other current liabilities –257 –308 –501 –559 –429 Capital employed 12,331 12,337 17,472 14,435 14,610 Return on capital employed Return on capital employed is a measure of the protability after taking into account the amount of total capital used unrelated to type of nancing. A higher return on capital employed indicates a more ecient use of capital. SEK M 2017/18 2018/19 2019/20 2020/21 2021/22 Income after nan- cial items 1,681 1,580 1,454 1,630 1,501 Financial expenses 225 186 266 295 200 Income after nan- cial items plus nancial expenses 1,905 1,766 1,720 1,924 1,702 Average capital employed (last ve quarters) 11,194 12,010 14,247 15,735 14,638 Return on capital employed, % 17 15 12 12 12 ALTERNATIVE PERFORMANCE MEASURES 156 ELEKTA ANNUAL REPORT 2021/22 ALTERNATIVE PERFORMANCE MEASURES Return on shareholders’ equity Return on shareholders’ equity measures the return generated on shareholders’ capital invested in the company. SEK M 2017/18 2018/19 2019/20 2020/21 2021/22 Net income 1,348 1,198 1,084 1,253 1,154 Average shareholders’ equity excluding non- controlling interests (last ve quarters) 6,015 7,167 7,967 8,069 8,515 Return on shareholders’ equity, % 22 17 14 16 14 Interest cover ratio The interest coverage ratio shows how much result that is available to pay interest on outstanding debt. SEK M 2017/18 2018/19 2019/20 2020/21 2021/22 EBITDA 2,520 2,639 2,931 3,110 2,682 Interest expenses 163 156 163 192 107 Interest cover ratio, multiple 15.5 16.9 18.0 16.2 25.1 Operational cash conversion Cash ow is a focus area for management. The operational cash conversion shows the relation between cash ow from operating activities and EBITDA. SEK M 2017/18 2018/19 2019/20 2020/21 2021/22 Cash ow from operating activities 2,404 1,621 1,014 2,551 1,858 EBITDA 2,520 2,639 2,931 3,110 2,682 Operational cash conversion, % 95 61 35 82 69 Working capital In order to optimize cash generation, management focuses on working capital and reducing lead times between orders booked and cash received. A reconciliation of working capital to items in the balance sheet is presented on page 107. Days sales outstanding (DSO) DSO is used by management to follow the development of overall payment terms to customers, which have signicant impact on working capital and cash ow. SEK M 2017/18 2018/19 2019/20 2020/21 2021/22 Accounts receivable 3,402 3,455 3,379 3,281 3,647 Accrued income 1,160 1,401 1,526 1,772 1,796 Advances from customers –5,316 –4,883 –4,103 –3,759 –4,161 Prepaid income –1,990 –2,170 –2,226 –2,082 –2,342 Net receivable from customers –2,744 –2,198 –1,424 –789 –1,060 Net sales 11,573 13,555 14,601 13,763 14,548 Number of days 365 365 365 365 365 Net sales per day 32 37 40 38 40 Days sales out- standing (DSO) –87 –59 –36 –21 –27 Net debt and net debt/EBITDA ratio Net debt is important to understand the nancial stability of the company. Net debt and net debt/EBITDA ratio is used by management to track the debt evolvement and to analyze the leverage and renancing need of the Group. SEK M 2017/18 2018/19 2019/20 2020/21 2021/22 Long-term interest- bearing liabilities 4,369 3,558 7,101 3,043 4,099 Short-term interest- bearing liabilities 975 1,000 1,001 2,141 510 Cash and cash equiv- alents and short-term investments –4,541 –4,119 –6,470 –4,411 –3,077 Net debt 803 439 1,632 774 1,532 EBITDA 2,520 2,639 2,931 3,110 2,682 Net debt/EBITDA ratio, multiple 0.32 0.17 0.56 0.25 0.57 Equity/assets ratio The equity/assets ratio gives an indication of the nancial exi- bility and independence to operate and manage variations in working capital needs as well as to capitalize on business opportunities. SEK M 2017/18 2018/19 2019/20 2020/21 2021/22 Shareholders’ equity 6,987 7, 779 8,113 8,197 8,916 Total assets 23,760 24,064 28,411 24,844 26,303 Equity/assets ratio, % 29 32 29 33 34 157 ELEKTA ANNUAL REPORT 2021/22 Income statement SEK M 2017/18 2018/19 2019/20 2020/21 2021/22 Net sales 11,573 13,555 14,601 13,763 14,548 Operating expenses excl. amortization and depreciation –9,053 –10,916 –11,670 –10,653 –11,866 Depreciation –151 –162 –410 –401 –422 Amortization –524 –781 –865 –803 –616 Operating income (EBIT) 1,845 1,696 1,657 1,906 1,643 Financial net –164 –116 –203 –277 –142 Income after nancial items 1,681 1,580 1,454 1,630 1,501 Taxes –333 –382 –370 –377 –345 Net income 1,348 1,198 1,084 1,253 1,157 Attributable to: Parent Company shareholders 1,348 1,198 1,084 1,254 1,154 Non-controlling interests 0 0 0 –1 3 Cash ow SEK M 2017/18 2018/19 2019/20 2020/21 2021/22 Operating cash ow 2,357 2,256 2,526 2,660 1,869 Changes in working capital 47 –636 –1,512 –109 –12 Cash ow from operating activities 2,404 1,621 1,014 2,551 1,858 Continuous investments –816 –658 –761 –845 –1,408 Cash ow after continuous investments 1,589 962 252 1,706 450 Short-term investments –83 38 –26 60 –69 Acquisition of operations –58 –54 –511 172 –171 Cash ow from investing activities –957 –674 –1,298 –613 –1,649 Cash ow after investments 1,447 946 –284 1,938 209 Cash ow from nancing activities –367 –1,473 2,624 –3,605 –1,726 Cash ow for the year 1,080 –527 2,339 –1,667 –1,517 Balance sheet SEK M April 30, 2018 April 30, 2019 April 30, 2020 April 30, 2021 April 30, 2022 Intangible assets 9,175 9,301 9,469 8,779 10,262 Right-of-use assets – – 1,156 953 975 Tangible assets 895 957 968 897 954 Financial assets 261 508 748 533 615 Deferred tax assets 350 402 504 436 616 Inventories 2,560 2,634 2,748 2,283 2,533 Receivables 5,978 6,144 6,348 6,554 7,271 Short-term investments 83 45 62 – – Cash and cash equivalents 4,458 4,073 6,407 4,411 3,077 Total assets 23,760 24,064 28,411 24,844 26,303 Shareholders’ equity 6,987 7,779 8,113 8,197 8,916 Interest-bearing liabilities 5,344 4,558 8,102 5,185 4,609 Lease liabilities – – 1,256 1,054 1,086 Non interest-bearing liabilities 11,429 11,727 10,940 10,408 11,692 Total shareholders’ equity and liabilities 23,760 24,064 28,411 24,844 26,303 Five year review and key gures FIVE YEAR REVIEW AND KEY FIGURES 158 ELEKTA ANNUAL REPORT 2021/22 FIVE YEAR REVIEW AND KEY FIGURES Key gures 2017/18 2018/19 2019/20 2020/21 2021/22 Gross order intake, SEK M 14,493 16,796 17,735 17,411 18,364 Order backlog, SEK M 27, 974 32,003 34,689 33,293 39,656 Operating margin, % 16 13 11 14 11 Prot margin, % 15 12 10 12 10 Shareholders’ equity, SEK M 6,987 7,779 8,113 8,197 8,916 Capital employed, SEK M 12,331 12,337 17,472 14,435 14,610 Net debt, SEK M 803 439 1,632 774 1,532 Equity/Assets ratio, % 29 32 29 33 34 Net debt/EBITDA ratio, multiple 0.32 0.17 0.56 0.25 0.57 Interest cover ratio, multiple 15.5 16.9 18.0 16.2 25.1 Return on shareholders’ equity, % 22 17 14 16 14 Return on capital employed, % 17 15 12 12 12 Investments in tangible and intangible assets, SEK M 861 660 761 845 1,408 Depreciation and amortization, SEK M –675 –943 –1,275 –1,204 –1,039 Operational cash conversion, % 95 61 35 82 69 Average number of employees 3,702 3,798 4,117 4,194 4,631 Equity and equity/assets ratio 0 2,000 4,000 6,000 8,000 10,000 21/2220/2119/2018/1917/18 SEK M Equity Equity/assets ratio 0 10 20 30 40 50 % Operating income (EBIT) 0 500 1,000 1,500 2,000 21/2220/2119/2018/1917/18 SEK M Cash ow after continuous investments –3,000 –1,500 0 1,500 3,000 4,500 21/2220/2119/2018/1917/18 SEK M Operating ow Change in working capital Continuous investments Net sales and income after nancial items 0 3,000 6,000 9,000 12,000 15,000 21/2220/2119/2018/1917/18 SEK M Income after nancial items Net sales 159 ELEKTA ANNUAL REPORT 2021/22 The AGM of Elekta AB (publ) will be held on Thursday 25August 2022. Pursuant to temporary legislation, the Board of Directors has decided that the AGM should be conducted without the physical presence of shareholders, representatives or third parties and that the shareholders before the meeting shall be able to exercise their voting rights only by voting in advance, so-called postal voting. Shareholders who wish to exercise their voting rights at the AGM shall be registered in the register of shareholders on Wednesday 17 August 2022, and notify by casting its postal vote no later than Wednesday 24 August. This through a special form or electronically through BankID verication, both approaches handled via www.elekta.com. For other instructions see under the heading Postal voting in the Notice of the Annual General Meeting that will be published no later than four weeks prior to the AGM. Since it will not be possible to attend the AGM in person or by proxy, there will be no opportunity to ask questions at the AGM. Questions can instead be sent in advance by post to: Elekta AB (publ) Attn Head of Investor Relations P.O.Box 7593 103 93 Stockholm, Sweden AGM 2022 Last day for sending in potential questions to the Board or the President and CEO Aug 14, 2022 Record date to participate Aug 17, 2022 Last day for voting Aug 24, 2022 Final day of trading in Elekta shares including the right to the dividend Aug 25, 2022 AGM Aug 25, 2022 Record date for rst payment of dividends Aug 29, 2022 First payment date for dividends Sep 1, 2022 Record date for second payment of dividends Feb 27, 2023 Second payment date for dividends Mar 2, 2023 Annual General Meeting (AGM) 2022 or via e-mail to [email protected] or by telephone +4676 611 76 25, no later than on 14 August, 2022. Share- holders who want the President and CEO to be able to address the questions in his presentation, which will be available on www.elekta.com in advance of the AGM, need to send the questions to Elekta on 8 August 2022, at the latest. ELEKTA ANNUAL REPORT 2021/22 160 ANNUAL GENERAL MEETING 2022 Financial calendar Interim report, Q1, May–Jul 2022/23 Aug 25, 2022 Annual General Meeting Aug 25, 2022 Interim report, Q2, May–Oct 2022/23 Nov 24, 2022 Interim report, Q3, May–Jan 2022/23 Feb 24, 2023 Year-end report, Q4, 2022/23 May 25, 2023 Regulatory status of products This document presents Elekta’s product portfolio. Certain products or functionality described may be works in progress and/or pending regulatory approval for certain markets. Forward looking statements This report may include forward-looking statements including, but not limited to, statements relating to operational and nancial performance, market conditions, and other similar matters. These forward-looking statements are based on current expectations about future events. Although the expecta- tions described in these statements are assumed to be reasonable, there is no guarantee that such forward-looking statements will materialize or are accurate. Because these statements involve assumptions and estimates that are subject to risks and uncertainties, results could dier materially from those set out in the statement. Certain of these risks and uncertainties are described further in the section Risks on page 36. Elekta undertakes no obli- gation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law or stock exchange regulation. © 2022 Elekta AB (publ). Elekta, Gamma Knife, Leksell, Leksell Gamma Knife, Monaco, MosaiQ, and all marks identied as a trademark (™) or a registered trademark (®) are the property of the Elekta Group. All rights reserved. No part of this document may be reproduced in any form without written permission from the copyright holder. Production: Elekta’s Investor Relations and Finance Team, in cooperation with Solberg and Henricsson Design. Photos: Getty Images, Adobe Stock, Shutterstock, Magnus Fond, Eva Dalin, Jesper Koefoed, Maarten ter Mors and Xiaoqiang Wang. Elekta AB Box 7593 SE – 103 93 Stockholm, Sweden T +46 8 587 254 00 F +46 8 587 255 00 elekta.com /company/elekta @elekta_@elekta/elek ta
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