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BTS Group

Annual Report Feb 18, 2020

3018_10-k_2020-02-18_5b7c6141-5f13-489e-8ca9-a51ecad7cedf.pdf

Annual Report

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BTS GROUP AB (PUBL)

Year-end report January 1 – December 31, 2019

Profit increased 21 percent in 2019 and 17 percent in the fourth quarter

Full year 2019

  • Net sales amounted to MSEK 1,865 (1,598). Adjusted for changes in foreign exchange rates, growth was 10 percent.
  • Operating profit (EBITA) increased by 21 percent to MSEK 245 (202).1
  • Profit before tax increased by 20 percent to MSEK 216 (180).
  • Profit after tax increased by 20 percent to MSEK 151 (126).
  • Earnings per share increased by 18 percent to SEK 7.84 (6.67).

Fourth quarter 2019

  • Net sales amounted to MSEK 553 (494). Adjusted for changes in foreign exchange rates, growth was 6 percent.
  • Operating profit (EBITA) increased by 17 percent to MSEK 89 (76).2
  • Profit before tax increased by 15 percent to MSEK 80 (70).
  • Profit after tax increased by 13 percent to MSEK 55 (49).
  • Earnings per share increased by 11 percent to SEK 2.86 (2.58).

Dividend

The proposed dividend is SEK 4.20 (3.60) per share to be paid on two occasions in the amount of SEK 2.10 per payment.

  • BTS applies the new reporting standard IFRS 16 regarding leases as of January 1, 2019. Comparative figures for 2018 have not been restated. IFRS 16 had a positive effect of MSEK 4.8 on EBITA. If the new standard had not been applied, EBITA would have amounted to MSEK 241 (202). For other effects, see the separate table on pages 12–13.
  • IFRS 16 had a positive effect of MSEK 1.4 on EBITA for the fourth quarter. If the new standard had not been applied, EBITA would have amounted to MSEK 87 (76).

BTS is a global professional services firm headquartered in Stockholm, Sweden, with over 830 professionals in 35 offices located on six continents. We focus on the people side of strategy, working with leaders at all levels to help them make better decisions, convert those decisions to actions and deliver results. At our core, we believe people learn best by doing. For more than 30 years, we've been designing fun, powerful experiences™ that have a profound and lasting impact on people and their careers. We inspire new ways of thinking, build critical capabilities and unleash business success. It's strategy made personal.

1 | YEAR-END REPORT JANUARY 1 – DECEMBER 31, 2019 YEAR-END REPORT JANUARY 1 – DECEMBER 31, 2019 | 1 We serve a wide range of client needs, including: Strategy execution, Leadership development programs, Assessment, Developing business acumen, Transforming sales organizations, Coaching, and Digital solutions, events and services. We partner with nearly 450 organizations, including over 30 of the world's 100 largest global corporations. Our major clients are e.g.: ABB, Chevron, Coca-Cola, Ericsson, EY, HP, Mercado Libre, Salesforce.com, SAP, and Tencent. BTS is a public company listed on the Nasdaq Stockholm exchange and trades under the symbol BTS B. For more information, please visit www.bts.com.

NET SALES AND PROFIT BEFORE TAX

Q4

Vision The global leader in turning strategy into action.

Fourteenth consecutive record-breaking quarter – our best ever

Another record-breaking quarter!

The operating profit for the fourth quarter increased 17 percent, and we achieved the highest revenue and the largest profit ever.

It is particularly gratifying to have surpassed the robust fourth quarter from last year – which was fantastic, and led to what is known as a positive profit warning.

Overall, 2019 was a good year with an operating profit increase of a full 21 percent. The increase in our earnings has been stable over time: operating profit has risen on average 23 percent per year over the last five years.

We are particularly pleased to have achieved a 21 percent increase in earnings in 2019 despite the weak performance in one of our three regions. While both BTS North America and BTS Europe had a strong year in 2019 with healthy growth and increased margins, earnings decreased in our second biggest region, BTS Other markets.

After four years of strong performance in BTS Other markets, we invested for further growth in 2019 but grew only 4 percent. The effect on our operating margin was material, and earnings in 2019 decreased 9 percent. Our assessment for 2020 is that earnings in BTS Other markets will increase.

Our total operating margin during 2019 increased by 0.6 percentage points to 13.2 percent. The positive trend in the EBITA margin that began in the fourth quarter of 2016 is continuing.

These improvements were due to a higher share of licensing revenue, more efficient resource utilization and economies of scale – revenue growing more rapidly than overall costs. We will continue to work on raising the margin, with a target EBITA margin of 15 percent.

Anyone following BTS may note relatively large fluctuations between quarters and a more stable performance over the years. A more careful analysis shows us that lower growth during one quarter is often the consequence of a strong quarter year-on-year and vice versa. To illustrate: operating profit increased over the four quarters of 2019 by 46 percent, 13 percent, 31 percent and 17 percent. If instead we look at the average during 2018 and 2019, it is much more even between quarters; the variation is only a few percentage points. The same conclusion applies with regards to revenue growth per quarter.

BTS continues to invest approximately 3 percent of revenue in the development of digital services, and the share of BTS's revenues based on digital solutions is growing rapidly. Revenue for purely digital licenses

increased 43 percent from MUSD 10 to 14. One example is the BTS Digital Cascade tool, with which our customers can reach all their employees quickly and efficiently.

Other examples of rapid growth are the new Change & Transformation practice, which offers long-term consulting assignments for more rapid implementation of change, and our Assessment practice. We are seeing increased demand for both larger, customized development programs and shorter, general modules.

One trend in the market place is that major international companies prefer to work with fewer partners and are looking for more strategic and long-term collaborations. BTS is well positioned here, and we are winning several global, long-term agreements with broader services.

The digital acquisitions completed in 2019 – SwissVBS – and early 2020 – Rapid Learning Institute – are of strategic importance for BTS and are expected to make a positive contribution to earnings in 2020.

We see excellent opportunities for continued attractive acquisitions in several areas.

The so-called coronavirus (COVID-19) leads, mainly in China and Asia, to certain cancelled or deferred projects. The total effect during the first quarter is expected to be marginal. We believe that the first quarter will, overall, show good growth and improved earnings.

For 2020, we expect a profit before tax that is better than in the preceding year.

Stockholm, February 18, 2020

Henrik Ekelund

President and CEO of BTS Group AB (publ)

OPERATIONS

Sales

Net sales in BTS for the year amounted to MSEK 1,865 (1,598). Adjusted for changes in foreign exchange rates, growth was 10 percent, of which 9 percent was organic.

Growth varied between the units: BTS Europe 18 percent, BTS North America 13 percent, BTS Other markets 4 percent and APG –5 percent (growth measured in local currency).

Earnings

Operating profit (EBITA) increased by 21 percent during the year to MSEK 245 (202). The operating margin (EBITA margin) was 13.2 (12.6) percent. IFRS 16 had a positive effect of MSEK 4.8 on EBITA. If IFRS 16 had not been applied, EBITA would have amounted to MSEK 241 (202).

Operating profit (EBIT) increased by 23 percent during the year to MSEK 226 (183). The operating margin (EBIT margin) was 12.1 percent (11.5). Operating profit for the year was charged with MSEK 19.7 (18.7) for amortization of intangible assets attributable to acquisitions.

The Group's profit before tax increased by 20 percent to MSEK 216 (180). IFRS 16 resulted in a higher interest expense of MSEK 8.0. If IFRS 16 had not been applied, the Group's profit before tax would have amounted to MSEK 220 (180).

The Group's profitability was positively affected by improved profit in BTS North America, BTS Europe and APG, while weaker earnings in BTS Other markets had a negative effect.

Fourth quarter

Fourth-quarter net sales in BTS amounted to MSEK 553 (494). Adjusted for changes in foreign exchange rates, growth was 6 percent, of which 5 percent was organic.

Operating profit (EBITA) increased by 17 percent in the fourth quarter to MSEK 89 (76). The operating margin (EBITA margin) was 16.1 (15.3) percent. IFRS 16 had a positive effect of MSEK 1.4 on EBITA. If IFRS 16 Leases had not been applied, EBITA would have amounted to MSEK 87 (76).

Operating profit (EBIT) increased by 17 percent to MSEK 83 (71). The operating margin (EBIT margin) was 15.1 percent (14.4). Operating profit (EBIT) for the fourth quarter was charged with MSEK 5.4 (4.6) for amortization of intangible assets attributable to acquisitions.

REVENUE BY QUARTER

PROFIT BEFORE TAX BY QUARTER

PROFIT BEFORE TAX AND OPERATING MARGIN (EBITA) BY QUARTER

Profit before tax for the fourth quarter increased by 15 percent to MSEK 80 (70). IFRS 16 resulted in a higher interest expense of MSEK 2.6. If IFRS 16 had not been applied, the Group's profit before tax would have amounted to MSEK 81 (70).

The Group's profitability was positively affected by improved profit in BTS North America, BTS Europe and APG, while weaker earnings in BTS Other markets had a negative effect.

Market development

The market continued to grow rapidly. The rate of change in the global business sector is high, which is favorable for demand. BTS holds a strong competitive position through our global organization, our digital services and our track record on creating earnings for our customers. We can see an increase in inquiries into major projects and an increased win ratio for BTS.

SEGMENT REPORTING

The effects of IFRS 16 are not included in the BTS Operating units reporting. These effects are recognized as Group adjustments and presented in a separate table.

Operating units

BTS North America consists of BTS's operations in North America, excluding APG but including SwissVBS with its operations in Canada and Switzerland.

BTS Europe consists of operations in France, Germany, the Netherlands, the UK and Sweden.

BTS Other markets consists of operations in Argentina, Australia, Brazil, China, Costa Rica, India, Italy, Japan, Mexico, Singapore, South Africa, South Korea, Spain, Taiwan, Thailand and the United Arab Emirates.

APG consists of operations in Advantage Performance Group in North America.

NET SALES PER OPERATING UNIT JANUARY 1–DECEMBER 31, 2019 (2018)

NET SALES PER OPERATING UNIT

MSEK Oct–Dec
2019
Oct–Dec
2018
Jan–Dec
2019
Jan–Dec
2018
BTS North America 243 210 877 714
BTS Europe 129 105 386 316
BTS Other markets 149 155 490 460
APG 31 24 112 109
Total 553 494 1 865 1 598

OPERATING PROFIT (EBITA) PER OPERATING UNIT

MSEK Oct–Dec
2019
Oct–Dec
2018
Jan–Dec
2019
Jan–Dec
2018
BTS North America 32.2 24.5 118.6 93.4
BTS Europe 29.8 26.9 63.3 44.9
BTS Other markets 23.9 24.1 57.2 62.8
APG 1.5 0.4 1.5 0.9
Total 87.5 75.9 240.5 202.1

BTS North America

Net sales for BTS operations in North America amounted to MSEK 877 (714) for the year. Adjusted for changes in foreign exchange rates, revenue grew by 13 percent. Operating profit (EBITA) totaled MSEK 119 (93) for the year. The operating margin (EBITA margin) was 13.5 (13.1) percent.

Net sales for the fourth quarter amounted to MSEK 243 (210). Adjusted for changes in foreign exchange rates, revenue grew by 9 percent. Operating profit (EBITA) amounted to MSEK 32 (25) in the fourth quarter. The operating margin (EBITA margin) was 13.2 (11.7) percent.

BTS North America had a strong 2019, the third consecutive such year. Over the last three years, revenue has increased 14 percent per year on average and earnings by 26 percent per year on average. Innovative solutions, winning messages on the market and continual work to increase internal efficiency created these results.

BTS Europe

Net sales for BTS Europe amounted to MSEK 386 (316) for the year. Adjusted for changes in foreign exchange rates, revenue grew by 18 percent. Operating profit (EBITA) totaled MSEK 63 (45) for the year. The operating margin (EBITA margin) was 16.4 (14.2) percent.

Net sales for the fourth quarter amounted to MSEK 129 (105). Adjusted for changes in foreign exchange rates, revenue grew by 17 percent. Operating profit (EBITA) amounted to MSEK 30 (27) in the fourth quarter. The operating margin (EBITA margin) was 23.0 (25.6) percent.

BTS Europe had an excellent 2019, the second consecutive strong year. BTS Europe strengthened its position in all its geographical markets and won many new customers in parallel with successful efforts to increase internal efficiency.

BTS Other markets

Net sales for BTS Other markets amounted to MSEK 490 (460) for the year. Adjusted for changes in foreign exchange rates, revenue grew by 4 percent. Operating profit (EBITA) totaled MSEK 57 (63) for the year. The operating margin (EBITA margin) was 11.7 (13.7) percent.

Net sales for the fourth quarter amounted to MSEK 149 (155). Adjusted for changes in foreign exchange rates, revenue declined by 6 percent. Operating profit (EBITA) amounted to MSEK 24 (24) in the fourth quarter. The operating margin (EBITA margin) was 16.0 (15.6) percent.

BTS Other markets had four strong years in a row – 2015, 2016, 2017 and 2018 – but 2019 was weaker. We invested for continued rapid growth during the year but achieved only 4 percent growth, and the effect on operating margin was material. Earnings fell 9 percent during the year. Our assessment for 2020 is that earnings in BTS Other markets will increase.

APG

Net sales for APG amounted to MSEK 112 (109) for the year. Adjusted for changes in foreign exchange rates, revenue declined by 5 percent. Operating profit (EBITA) totaled MSEK 1.5 (0.9) for the year. The operating margin (EBITA margin) was 1.4 (0.9) percent.

Net sales amounted to MSEK 31 (24) in the fourth quarter. Adjusted for changes in foreign exchange rates, revenue grew by 18 percent. Operating profit (EBITA) amounted to MSEK 1.5 (0.4) in the fourth quarter. The operating margin (EBITA margin) was 5.0 (1.6) percent.

Due to the strong fourth quarter, APG improved its earnings in 2019. Our review of operations continues.

OTHER INFORMATION

Financial position

Cash flow from operating activities in BTS for the year amounted to MSEK 217.7 (158.2). IFRS 16 had a positive effect of MSEK 47.6 on cash flow from operating activities.

Available cash and cash equivalents amounted to MSEK 316 (262) at the end of the period. The company's interest-bearing loans attributable to completed acquisitions amounted to MSEK 76 (103) at the end of the period.

The equity ratio for BTS was 45 percent (46) at the end of the period. If IFRS 16 had not been applied, the equity ratio would have been 50 percent.

The company had no outstanding conversion loans at the balance sheet date.

Employees

At December 31, the number of employees at BTS was 832 (701).

The average number of employees for the year was 779 (645).

Parent Company

The Parent Company's net sales amounted to MSEK 2.9 (3.0) and profit before tax totaled MSEK 41.9 (68.9). Cash and cash equivalents amounted to MSEK 1.9 (4.5).

Related party transactions

A limited number of transactions with related parties, with the exception of transactions between Group companies, has taken place at prevailing market conditions.

Outlook for 2020

Profit before tax is expected to be better than last year.

Annual General Meeting and proposed dividend

The Annual General Meeting will be held on May 14, 2020 at 2:00 p.m. in the BTS offices at Grevgatan 34, Stockholm, Sweden.

The Board proposes a dividend of SEK 4.20 per share, disbursed in two payments of SEK 2.10 each.

Acquisitions

As previously communicated in a press release on the same day, BTS acquired Polaris Assessment Systems on February 28, 2019. The acquisition encompasses a small cash remuneration and newly issued BTS shares equivalent to MUSD 0.1 in exchange for the rights to all of Polaris's operations including employees, technology, intellectual property, customer relations, brands and equipment.

Through the acquisition of Polaris, BTS gains two business advantages: new industry-leading services that give access to a new market segment worth approximately USD 2 billion globally, and secondly, bringing on board three influential thought leaders in this market segment.

As previously communicated in a press release on the same day, BTS acquired shares in Swiss Virtual Business School VBS AG on July 15, 2019, at which point 100 percent of the voting rights had been acquired. The acquisition encompasses all operations including talent, technology, intellectual property, customer relations, brands and equipment.

Of the initial purchase price, approximately 10 percent was paid in new BTS shares. An additional payment will be paid out in 2021 provided the business meets specific targets 2019-2021 based on the entire measurement period.

SwissVBS provides high impact digital learning solutions for the modern corporate learner. It operates primarily in the European and North American markets, bringing thought leadership and creative solutions to clients through digital journeys as well as learning reinforcement methods. The SwissVBS team will bring world class expertise in digital learning and performance support. This means that BTS can offer clients a wider range of solutions and become even more competitive as an end-to-end talent partner. SwissVBS will also bring clients with whom the company has developed strong relationships and won awards, making BTS stronger in the Canadian and German-speaking markets.

SwissVBS was established in St. Gallen in 2001 as an offspring of the University of St. Gallen. Since then it has successfully grown into a respected provider of customized digital learning to some of the world's largest corporations.

As previously communicated in a press release on the same day, BTS acquired shares in Samsari AB on September 2, 2019, at which point 100 percent of the voting rights were acquired. The acquisition encompasses all operations including talent, technology, intellectual property, customer relations, brands and equipment.

The acquisition of Samsari brings years of experience to BTS through a strong and dynamic team with skills in change management, transformation projects and communication – skills that will become increasingly important and will thus strengthen the BTS service offering as a whole. The acquisition will also contribute to broadening the BTS customer base in the Nordic market.

Ratification of acquisition analyses

The preliminary acquisition analyses regarding the year's acquisitions of Polaris Assessment Systems, Swiss Virtual Business School VBS AG and Samsari AB have been ratified. The effect of the ratification is an increase in goodwill and a provision for deferred tax liability of MSEK 3.4.

The acquisition calculations ratified at the date of acquisition translated at the exchange rate on the balance sheet date at December 31, 2019:

MSEK SwissVBS Other Total
Tangible assets 0.1 0.0 0.1
Intangible assets 16.0 0.9 16.9
Financial assets 0.1 0.0 0.1
Receivables 5.5 0.3 5.7
Cash and cash
equivalents
0.1 1.1 1.2
Current liabilities –5.7 –1.1 –6.8
Non-current liabilities –9.7 0.8 –8.9
Identifiable assets 6.4 2.0 8.4
Goodwill 54.2 7.5 61.7
Total purchase prices 60.6 9.5 70.1
Fair value of issued
shares
–0.7 –0.9 –1.6
Estimated additional
cash purchase price
–0.8 –0.8
Provision for conditional
purchase prices
–53.0 –2.0 –55.0
Purchase prices paid in
cash for 2019
acquisitions
6.9 5.8 12.7

Goodwill consists of expected future synergy effects in the form of an expanded product range and services. Alongside synergy effects, the addition of qualified employees and future profitability components are included in the goodwill item.

The provisions for conditional earnouts is included in the balance sheet under Provisions in the amount of MSEK 55.0. These earnouts can amount to anywhere between MSEK 0 and a maximum of MSEK 58.5.

No acquisition costs were capitalized, but were instead expensed in their entirety. Expenses for completing the acquisitions including issue costs are included in the Group's operating expenses for 2019 in the amount of MSEK 2.8.

Acquisitions in 2019 contributed MSEK 19.5 to the Group's net sales and MSEK 2.3 to the Group's profit after tax. If the acquisitions had been completed on January 1, 2019, they would have contributed approximately MSEK 38.6 to net sales and approximately MSEK 4.3 to profit after tax.

Events after the end of the period

To further strengthen its digital customer offerings, BTS signed an agreement in January 2020 regarding the acquisition of the Rapid Learning Institute in the US. Details regarding the acquisition were communicated in a press release on January 6, 2020.

Risks and uncertainties

The Group's material risks and uncertainties include market and business risks, operational risks and financial risks. Business and market risks may relate to greater customer exposure for specific sectors and companies as well as sensitivity to market conditions. Operational risks include dependence on individuals, skills supply and intellectual property as well as BTS meeting the high quality demands of its clients. Financial risks mainly relate to foreign exchange and credit risks.

The management of risks and uncertainties is described in the 2018 Annual Report. BTS is considered to have a good spread of risks across companies and sectors, and operational risks are handled in a structured manner through well-established processes. Day-to-day exposure to currency fluctuations is limited since revenue and costs are mainly in the same currency in each market, and credit risk is limited since BTS only accepts creditworthy counterparties. No new material risks or uncertainties are deemed to have arisen during 2019.

Critical accounting estimates and assumptions

In order to prepare the financial statements in conformity with IFRS, Corporate Management is required to make estimates and assumptions that affect the application of accounting principles and the recognized amounts of assets, liabilities, revenue and costs. Estimates and assumptions are based on historical experience and a number of other factors that are regarded as reasonable under prevailing conditions. Actual outcomes can deviate from these estimates and assumptions. Estimates and assumptions are reviewed regularly.

Accounting principles

This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting. The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as endorsed by the EU, RFR 1 Supplementary Accounting Rules for Groups, and the Swedish Annual Accounts Act. The Parent Company's statements have been prepared in accordance with RFR 2 Accounting for Legal Entities and the Annual Accounts Act.

New accounting policies for 2019 IFRS 16 Leases

BTS applies IFRS 16 Leases as of January 1, 2019. IFRS 16 is applied retrospectively without restating comparative figures. Accordingly, the opening balance for 2019 has been restated in accordance with the new standard. The standard has impacted BTS's accounting of the Group's operating leases, which mostly comprise premises.

The Group recognizes a right-of-use asset in the balance sheet and a lease liability at the present value of future lease payments, adjusted for any prepaid or accrued payments attributable to the lease. The leased asset is depreciated straight-line over the lease term or over the useful life of the underlying asset if it is deemed to be probable that the Group will take over ownership at the end of the lease term. The lease expense is recognized as depreciation in EBITA and interest expenses in net financial items.

The implementation of the new lease standard results in increased assets and interest-bearing liabilities in the balance sheet, which thus impact the net financial position. The implementation also had a positive impact on EBITA in profit or loss based on a portion of the lease expenses being recognized as interest expenses in net financial items. In the cash flow statement, lease payments are distributed between interest paid in the operating cash flow and repayment of lease liabilities in the financing activities. Since the main payment is recognized in financing activities, cash flow from financing activities is reduced by the corresponding increase in cash flow from operating activities.

The average interest rate for the transition calculation was 4 percent. The Group applies the modified retrospective approach, meaning that the asset is recognized at the same amount as the lease liability, and for this reason no transition effect is presented in equity. Accordingly, comparative information continues to be recognized in accordance with IAS 17 Leases.

The opening effect on the consolidated balance sheet on January 1, 2019 was a reported lease asset (right-of-use asset) of MSEK 170 and a lease liability of MSEK 167 were added, of which MSEK 3 was reclassified from prepaid rent. The implementation effects are summarized in the table "Comparison between IAS 17 and IFRS 16." More details about the implementation, restated financial information and a description of new accounting principles are presented in BTS's 2018 Annual Report.

IFRIC 23 Uncertainty over Income Tax Treatments

IFRIC 23 is a new interpretation that clarifies the accounting for uncertainty in income taxes under the framework of IAS 12 Income Taxes. For BTS, this entails a change to

the classification of identified income-tax related risks that were previously recognized as a provision for tax expenses that are probable for setting the commitment. The uncertainty in the treatment of income taxes is recognized as a tax liability going forward.

IFRIC 23 is applied retrospectively without restating comparative figures. Accordingly, the opening balance for 2019 has been restated in accordance with the new interpretation. Income-tax related risks that were previously recognized as short and long-term provisions are reclassified to tax liabilities at an amount totaling MSEK 48 on January 1, 2019. Accordingly, no transition effect is presented in equity.

Financial calendar

Annual report 2019 April 2020
Interim report Jan–March 2020 May 14, 2020
Interim report Jan–June 2020 August 18, 2020
Interim report Jan–Sept 2020 November 11, 2020

Stockholm, February 18, 2020

Henrik Ekelund President and CEO

Contact information

Henrik Ekelund CEO Tel: +46 8 587 070 00
Stefan Brown CFO Tel: +46 8 587 070 62
Michael Wallin Head of Investor Tel: +46 8 587 070 02
Relations Mobile: +46 70 878 80 19

For further information, visit our website www.bts.com

BTS Group AB (publ) Grevgatan 34 SE-114 53 Stockholm SWEDEN

Tel. +46 8 587 070 00 Company registration number: 556566-7119

Auditor's Review Report

Introduction

We have reviewed the condensed interim financial information (interim report) of BTS Group AB (publ) as of December 31, 2019, and the twelve-month period then ended. The Board of Directors and the CEO are responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

The scope and extent of review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Company. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope and extent than an audit conducted in accordance with International Standards on Auditing, ISA and the generally accepted auditing standards. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Therefore, the opinion we express does not have the assurance as an opinion based on an audit would have.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Stockholm, February 18, 2020

Öhrlings PricewaterhouseCoopers AB

Magnus Thorling Authorized Public Accountant

GROUP INCOME STATEMENT, SUMMARY

KSEK Oct–Dec
2019
Oct–Dec
2018
Jan–Dec
2019
Jan–Dec
2018
Net sales 552,505 494,426 1,865,499 1,598,399
Operating expenses –444,627 –414,405 –1,554,314 –1,384,450
Depreciation of property, plant,
and equipment
–18,993 –4,131 –65,8551 –11,835
Amortization of intangible assets –5,416 –4,644 –19,670 –18,713
Operating profit 83,469 71,246 225,660 183,401
Net financial items –3,080 –783 –9,7711 –3,130
Associated company, profit after tax –123 –733 585 –477
Profit before tax 80,267 69,729 216,475 179,794
Estimated tax –25,080 –20,808 –65,7261 –53,660
Profit for the period 55,187 48,921 150,748 126,134
attributable to the shareholders
of the parent company
55,187 48,921 150,748 126,134
Earnings per share, before dilution
of shares, SEK
2.86 2.58 7.84 6.67
Number of shares at end of the period 19,318,292 19,013,916 19,318,292 19,013,916
Average number of shares before dilution 19,318,292 18,989,343 19,221,242 18,905,124
Earnings per share, after dilution
of shares, SEK
2.86 2.53 7.84 6.56
Average number of shares after dilution 19,318,292 19,316,565 19,221,242 19,232,346
Dividend per share, SEK 4.202 3.60

1 The IFRS effect appears in a separate table on page 12.

Proposed dividend

GROUP STATEMENT OF COMPREHENSIVE INCOME

KSEK Oct–Dec
2019
Oct–Dec
2018
Jan–Dec
2019
Jan–Dec
2018
Profit for the period 55,187 48,921 150,748 126,134
Items that will not be reclassified
to profit or loss
Items that may be reclassified
to profit or loss
Translation differences in equity –34,849 5,323 26,111 39,747
Other comprehensive income for the period,
net of tax
–34,849 5,323 26,111 39,747
Total comprehensive income for the period 20,337 54,244 176,859 165,881
attributable to the shareholders
of the parent company
20,337 54,244 176,859 165,881

GROUP BALANCE SHEET, SUMMARY

KSEK Dec 31,
2019
Dec 31,
2018
Assets
Goodwill 535,916 455,268
Other intangible assets 82,467 72,026
Tangible assets 219,7781 38,803
Financial assets 13,147 15,082
Total non-current assets 851,308 581,179
Trade receivables 514,132 512,468
Other current assets 186,983 172,006
Cash and cash equivalents 316,388 262,357
Total current assets 1,017,503 946,831
TOTAL ASSETS 1,868,812 1,528,010
Equity and liabilities
Equity 839,678 704,203
Provisions 134,052 220,608
Non-current liabilities 230,2451 62,893
Current liabilities 664,8381 540,307
Total liabilities 1,029,134 823,807
TOTAL EQUITY AND LIABILITIES 1,868,812 1,528,010

The IFRS effect for the period January to December 2019 appears in a separate table on page 13

GROUP CASH FLOW STATEMENT, SUMMARY

KSEK Jan–Dec
2019
Jan–Dec
2018
Cash flow before changes in working capital 235,8091 160,097
Cash flow from changes in working capital –18,096 –1,934
Cash flow from operating activities 217,712 158,163
Acquisition related –14,260 –15,055
Other –23,4052 –22,266
Cash flow from investing activities –37,665 –37,321
Dividend –69,231 –53,010
New issue 22,899 5,800
Other –85,7431 –23,366
Cash flow from financing activities –132,074 –70,576
Cash flow for the period 47,973 50,266
Cash and cash equivalents, opening balance 262,357 199,876
Translation differences in cash and cash equivalents 6,058 12,215
Cash and cash equivalents, closing balance 316,388 262,357

The IFRS effect for the period January to December 2019 appears in a separate table on page 13

Acquisition of assets

GROUP CHANGES IN CONSOLIDATED EQUITY

KSEK Total equity
Dec 31, 2018
Total equity
Dec 31, 2018
Opening balance 704,203 580,555
Dividend to shareholders –69,231 –53,010
New issue 26,657 10,943
Other 1,190 –166
Total comprehensive income for the period 176,859 165,881
Closing balance 839,678 704,203

PARENT COMPANY'S INCOME STATEMENT, SUMMARY

KSEK Oct–Dec
2019
Oct–Dec
2018
Jan–Dec
2019
Jan–Dec
2018
Net sales 615 630 2,930 2,955
Operating expenses –1,474 –1,256 –1,146 –1,756
Operating profit –859 –626 1,784 1,199
Net financial items 16,191 48,728 40,077 67,739
Profit before tax 15,332 48,102 41,861 68,939
Estimated tax –878 –827 –878 –827
Profit for the period 14,454 47,275 40,983 68,112

PARENT COMPANY'S BALANCE SHEET, SUMMARY

KSEK Dec 31, 2019 Dec 31, 2018
Assets
Financial assets 302,332 301,983
Other current assets 21,905 41,517
Cash and cash equivalents 1,883 4,509
Total assets 326,120 348,010
Equity and liabilities
Equity 155,290 156,881
Non-current liabilities 40,000 147,802
Current liabilities 130,830 43,327
Total equity and liabilities 326,120 348,010

GROUP CONSOLIDATED KEY RATIOS

KSEK Oct–Dec
2019
Oct–Dec
2018
Jan–Dec
2019
Jan–Dec
2018
Net sales 552,505 494,426 1,865,499 1,598,399
Operating profit (EBITA) 88,885 75,890 245,330 202,114
Operating margin (EBITA margin), % 16.1 15.3 13.2 12.6
Operating profit (EBIT) 83,469 71,246 225,660 183,401
Operating margin (EBIT margin), % 15.1 14.4 12.1 11.5
Profit margin, % 10.0 9.9 8.1 7.9
Operating capital1 599,687 544,686
Return on operating capital, % 39 35
Return on equity, % 20 20
Equity ratio, at end of the period, % 45 46 45 46
Cash flow 54,872 32,020 47,973 50,266
Cash and cash equivalents, at end of the
period
316,388 262,357 316,388 262,357
Average number of employees 826 691 779 645
Number of employees at end of the period 832 701 832 701
Revenues for the year per employee 2,393 2,478

1 The calculation included the item of non-interest-bearing liabilities amounting to 952,737 (720,967) KSEK.

COMPARISON BETWEEN IFRS 16 AND IAS 17

Excerpt from Group income statement

IFRS 16 IAS 17
KSEK Jan–Dec
2019
Change Jan–Dec
2019
Jan–Dec
2018
EBITDA 311,185 56,018 255,167 213,949
Depreciation of property, plant, and equipment –65,855 –51,218 –14,637 –11,835
EBITA 245,330 4,800 240,530 202,114
Amortization of intangible assets –19,670 –19,670 –18,713
EBIT 225,660 4,800 220,860 183,401
Net financial items –9,771 –7,995 –1,776 –3,130
Associated company, profit after tax 585 585 –477
EBT 216,475 –3,195 219,669 179,794
Estimated tax –65,726 946 –66,672 –53,660
Profit for the period 150,748 –2,249 152,997 126,134

Group balance sheet

IFRS 16 IAS 17
KSEK Dec31, 2019 Change Dec31, 2019 Dec31, 2018
ASSETS
Goodwill 535,916 535,916 455,268
Other intangible assets 82,467 82,467 72,026
Tangible assets 219,778 177,308 42,471 38,803
Financial assets 13,147 13,147 15,082
Total non-current assets 851,308 177,308 674,000 581,179
Trade receivables 514,132 514,132 512,468
Other current assets 186,983 –2,138 189,120 172,006
Cash and cash equivalents 316,388 316,388 262,357
Total current assets 1,017,503 –2,138 1,019,641 946,831
TOTAL ASSETS 1,868,812 175,170 1,693,642 1,528,010
EQUITY AND LIABILITIES
Equity 839,678 –2,216 841,894 704,203
Provisions 134,052 134,052 220,608
Non-current liabilities 230,245 130,224 100,021 62,893
Current liabilities 664,838 47,163 617,675 540,307
Total liabilities 1,029,134 177,387 851,747 823,807
TOTAL EQUITY AND LIABILITIES 1,868,812 175,170 1,693,642 1,528,010

Group cash flow statement

IFRS 16 IAS 17
KSEK Jan–Dec
2019
Change Jan–Dec
2019
Jan–Dec
2018
Cash flow before changes in working capital 235,809 48,023 187,786 160,097
Cash flow from changes in working capital –18,096 –462 –17,635 –1,934
Cash flow from operating activities 217,712 47,561 170,151 158,163
Cash flow from investing activities –37,665 –37,665 –37,321
Cash flow from financing activities –132,074 –47,561 –84,513 –70,576
Cash flow for the period 47,973 47,973 50,266
Cash and cash equivalents, opening balance 262,357 262,357 199,876
Translation differences in cash and cash equivalents 6,058 6,058 12,215
Cash and cash equivalents, closing balance 316,388 316,388 262,357

NET SALES ACCORDING TO BUSINESS MODEL

Jan–Dec 2019 Jan–Dec 2018
MSEK BTS
North
America
BTS
Europe
BTS Other
markets
APG Total BTS
North
America
BTS
Europe
BTS Other
markets
APG Total
Programs 453 230 357 89 1,129 398 190 333 87 1,008
Development 279 106 79 0 464 190 79 75 0 344
Licenses 88 27 32 23 170 78 24 27 22 150
Other revenue 57 24 22 0 103 48 23 25 0 96
TOTAL 877 386 490 112 1,865 714 316 460 109 1,598

BTS applies IFRS 15 Revenue from contracts with customers from 2018. For more information, see Note 2 Significant accounting policies and Note 9 Segment reporting in the Annual Report 2018.

DEFINITIONS

Earnings per share

Earnings attributable to the parent company's shareholders divided by number of shares before dilution.

Operating margin (EBITA margin)

Operating profit before interest, tax and amortization as a percentage of net sales.

Operating margin (EBIT margin)

Operating profit after depreciation as a percentage of net sales.

Profit margin

Profit for the period as a percentage of net sales.

Operating capital

Total balance sheet reduced by liquid funds and other interest-bearing assets and reduced by non-interest bearing liabilities.

Return on operating capital

Operating profit (EBIT) as a percentage of average operating capital.

Return on equity

Profit after tax as a percentage of average equity.

Equity ratio

Equity as a percentage of total balance sheet.

THE GLOBAL LEADER IN TURNING STRATEGY INTO ACTION

BTS focuses on the people side of strategy, working with leaders at all levels to help them make better decisions, convert those decisions to actions and deliver results. At our core, we believe people learn best by doing. For more than 30 years, we've been designing fun, powerful experiences™ that have a profound and lasting impact on people and their careers. We inspire new ways of thinking, build critical capabilities and unleash business success. It's strategy made personal.

Vision

The global leader in turning strategy into action.

Purpose

We inspire and equip people to do the best work of their lives, creating better businesses and a better world.

Value proposition

We make strategy personal and drive great execution. Our unforgettable experiences create levels of alignment, mindset, and capability that deliver better results, faster.

Financial goals

BTS's financial goals over time are to reach:

  • A revenue growth, adjusted for changes in exchange rates, of 20 percent, primarily organic.
  • An EBITA margin of 15 percent.
  • An equity ratio that does not fall below 50 percent over extended periods.

SWEDEN

Head Office Grevgatan 34 114 53 Stockholm SWEDEN Tel. 08 58 70 70 00

ARGENTINA

Reconquista 657 PB 3 CP1003 CABA. Buenos Aires Tel. +54 1157955721

AUSTRALIA

198 Harbour Esplanade, Suite 404 Docklands VIC 3008 Tel. +61 3 9670 9850

Level 6 10 Barrack St Sydney NSW 2000 Tel. +61 02 8243 0900

BRAZIL

Rua Geraldo Flausino Gomes, 85, cj 42 04575-060 São Paulo – SP Tel. +55 (11) 5505 2070

CANADA

SwissVBS 460 Richmond Street West Suite 700 Toronto, ON M5V 1Y1 Tel. +1 416 848 3744

CHINA

1376 West Nanjing Road Suite 531, East Office Tower Shanghai Centre Shanghai 200040 Tel. +86 21 6289 8688

COSTA RICA

Office 203 Prisma Business Center San Jose Tel: +506 22 88 48 19

FRANCE

57 Rue de Seine 75006 Paris Tel. +33 1 40 15 07 43

GERMANY

Ritterstraße 12 D-50668 Cologne Tel +49 221 270 70 763

INDIA

Vatika Business Center Divyashree Chambers, 2nd Floor, Wing A O'Shaugnessy Road, Langford Town Bangalore 560025 Tel. +91 80 4291 1111 Ext 116

801, 8th Floor, DHL Park Opposite MTNL, Staff quarters, S.V. Road, Goregaon (West). Mumbai - 400062 Maharashtra, Tel. +91 22 6196 6800

ITALY

Viale Fulvio Testi 223 20162 Milan Tel. +39 02 6611 6364

BTS Design Innovation Viale Abruzzi, 13 20131 Milan Tel. +39 02 69015719

JAPAN

TS Kojimachi Bldg. 3F 6-4-6 Kojimachi Chiyoda-ku Tokyo 102-0083 Tel. +81 (3) 6272 9973

MEXICO

Edificio Torre Moliere Calle Moliere 13 – PH Col Chapultepec Polanco C.P. 11560 México, D.F. Tel. +52 (55) 52 81 69 72

THE NETHERLANDS

Barbara Strozzilaan 201 1083 HN Amsterdam Tel: + 31 (0)20 615 15 14

SINGAPORE

1 Finlayson Green Suite 16-01 Singapore 049246 Tel. +65 6304 3032

SPAIN

Simon Bolivar 27-1, Office No. 4 Bilbao 48013 Tel. +34 94 423 5594

Calle José Abascal 55, piso 3ºDcha 28003 Madrid Tel. +34 91 417 5327

SOUTH AFRICA

267 West Avenue, 1st Floor Centurion 0046, Gauteng Tel. +27 12 663 6909

SOUTH KOREA

Room 103, 1st Floor Wonseo Building 13, Changdeokgung 1-gil Jongnogu Seoul 03058 Tel. +82 2 539 7676

SWITZERLAND

SwissVBS Winkelriedstrasse 35 9000 St. Gallen Tel: +41 71 845 5936

TAIWAN

7 F, No. 307, Dun-Hua, North Road Taipei 105 Tel. +886 2 8712 3665

THAILAND

128/27 Phyathai Plaza Building (4th Floor) Phyathai Rd. Kwaeng Thung Phyathai Khet Ratchathewi Bangkok 10400 Tel. +66 2 216 5974

UK

1 Queen Caroline Street London W6 9YN Tel: +44 20 7368 4180

Holbrook Court, Cumberland Business Centre, Hampshire, PO5 1DS Portsmouth Tel: +44 2393 162686

UNITED ARAB EMIRATES

10th Floor, Swiss Tower Jumeirah Lakes Towers Dubai Tel. +971 4 279 8341

USA

Frost Bank Building 401 Congress Avenue Suite 2740 Austin, Texas 78701 Tel. +1 512 474 1416

200 South Wacker Drive Suite 925 Chicago, IL 60606 Tel. +1 312 509 4750

101 West Elm Street Suite 310 Conshohocken, PA 19428 Tel. (toll free) +1 800 445 7089 Tel. +1 484 391 2900

350 Fifth Avenue Suite 5020 New York, NY 10118 Tel. +1 646 378 3730

4742 North 24th Street Suite 120 Phoenix, AZ 85016 Tel. +1 480 948 2777

222 Kearny Street Suite 1000 San Francisco, CA 94108 Tel. +1 415 362 4200

ADVANTAGE PERFORMANCE GROUP

100 Smith Ranch Road, Suite 306 San Rafael, CA 94903 USA Tel. +1 800 494 6646

We create powerful experiences that help leaders build the future of their business

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