Annual Report • Aug 2, 2017
Annual Report
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Focus where it matters.
| Elekta in brief | 4 |
|---|---|
| CEO statement | 6 |
| External drivers | 9 |
| Strategy | 14 |
| Offering | 23 |
| Oncology informatics | 26 |
| Treatment solutions | 27 |
| Service and support | 32 |
| Geographic regions | 33 |
| Sustainability and employees | 36 |
| The share | 44 |
| Five-year review and key figures | 46 |
| Corporate governance report | 48 |
| Board of Directors´ report | 63 |
|---|---|
| Consolidated income statement and | |
| statement of comprehensive income | 70 |
| Consolidated balance sheet | 72 |
| Changes in consolidated equity | 74 |
| Consolidated cash flow statement | 76 |
| Financial statements – Parent Company | 78 |
| Notes | 80 |
| Board of Directors' signatures | 105 |
| Auditor's report | 106 |
| Glossary | 109 |
| Definitions | 111 |
| Alternative performance measures | 112 |
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.
This report includes forward-looking statements including, but not limited to, statements relating to operational and financial performance, market conditions, and other similar matters. These forward-looking statements are based on current expectations about future events. Although the expectations 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 differ materially from those set out in the statement. Certain of these risks and uncertainties are described further in the section Risks on pages 66–67. Elekta undertakes no obligation to publicly update or revise any forwardlooking statements, whether as a result of new information, future events or otherwise, except as required by law or stock exchange regulation.
Versa HD™ linear accelerator and Leksell® Vantage™ Stereotactic System. Vantage is Elekta's latest system for very precise neurosurgery.
Elekta is proud to be the leading innovator of equipment and software used to improve, prolong and save the lives of people with cancer and brain disorders. Our advanced, effective solutions are created in collaboration with customers, and more than 6,000 hospitals worldwide rely on Elekta technology.
Our treatment solutions and oncology informatics portfolios are designed to enhance the delivery of radiation therapy, radiosurgery and brachytherapy, and to drive cost efficiency in clinical workflows. Elekta employs 3,600 people around the world. Headquartered in Stockholm, Sweden, Elekta is listed on NASDAQ Stockholm. www.elekta.com
| WE WORK AS ONE TEAM |
We work collaboratively and inclusively together. Only then can we truly focus on getting things done for our customers |
|---|---|
| WE DO WHAT WE SAY |
We act with accountability and integrity, taking personal and collective responsibility to make the right things happen |
| WE KEEP THINKING FORWARD |
We believe things can always be more efficient and effective: our innovative spirit and resourcefulness keep us ahead of the game |
As a professional BMX rider, Josh Perry is used to picking himself up after spills and crashes. Why should the diagnosis and treatment of a brain tumor be any different?
When Josh was 21 years old, he had a benign, meningioma brain tumor removed through an open craniotomy, an invasive surgical procedure. Two years later, doctors discovered two new tumors at the original cancer site.
"They were dangerously close to my main artery, so surgery would have been too risky," he explains. "I made it my new goal to find another way and learned
about a form of radiotherapy called stereotactic radiosurgery."
Josh was treated using Leksell Gamma Knife® Perfexion™. He says it was like an MRI, but shorter. "I went in and out of the tunnel (collimator helmet) three times for different lengths of time. It was a bit weird when they fastened a "gnarly frame" (Leksell Stereotactic System®) on my head, but that's all."
Josh was back on his bike a week after treatment and last year he placed 10th in the UCI BMX Freestyle World Cup Series. He adds: "If I had been diagnosed with this condition 20 years ago I probably would not be alive today."
Our company's most important aim and contribution to society is to help cancer clinics improve the lives of as many patients as possible. To achieve this goal, collaboration with strategic partners, employee commitment and corporate responsibility are crucial. During the year, Elekta has identified and is driving activities within four focus areas for sustainable business development.
Read more on pages 36–42
• Almost 1.5 million patients are treated with Elekta's systems each year
NET SALES, BY REGION
| KEY FIGURES | |
|---|---|
| 2016/17 | 2015/16 | Change, % | |
|---|---|---|---|
| Gross order intake, SEK M | 14,064 | 13,821 | 2% |
| Net sales, SEK M | 10,704 | 11,221 | –5% |
| Gross margin | 41% | 41% | – |
| Adjusted EBITA1), SEK M | 1,661 | 1,639 | 1% |
| Adjusted EBITA-margin1), % | 16% | 15% | 7% |
| Operating result, SEK M | 598 | 423 | 41% |
| Operating margin, % | 6% | 4% | 50% |
| Net income, SEK M | 126 | 145 | –13% |
| Equity/assets ratio, % | 32% | 33% | –3% |
| Net debt/equity ratio, times | 0.28 | 0.42 | –33% |
| Capital employed, SEK M | 12,046 | 11,360 | 6% |
| The share: | |||
| Earnings per share before dilution, SEK | 0.33 | 0.36 | –8% |
| Earnings per share after dilution, SEK | 0.33 | 0.36 | –8% |
| Dividend, SEK | 1.002) | 0,50 | 100% |
1) Adjusted for items affecting comparability and bad debt losses. Items affecting comparability amounted to SEK –518 M (–598) Bad debt losses amounted to SEK –46 M (–149)
2) Proposed dividend
Elekta Unity was successfully presented at ESTRO in Vienna in May 2017, and shortly after that the first patients were treated on the new system during a clinical study.
One of Sweden's leading university hospital, New Karolinska Solna, signed a 13-year partnership agreement with Elekta within advanced radiation therapy, with focus on innovation and shared research and education.
Richard Hausmann assumed the role as Elekta's President and CEO. Richard has over 30 years of experience from the medical technology industry.
Gustaf Salford was appointed Executive Vice President and CFO effective July 1, 2017.
The world's most advanced and sophisticated system for radiosurgery treatments of brain tumors, vascular malformations and functional disorders, Elekta's Leksell Gamma Knife® Icon™ received approval for clinical use from Japanese and US regulatory bodies.
A 51-year-old woman in Germany was the first person in the world to be treated with Venezia™, Elekta's new brachytherapy applicator.
Elekta launched Monaco® version 5.11. The new release provides significant performance and speed enhancements over prior versions.
1) Before items affecting comparability and bad debts
2) Gross order intake data 16/17, 15/16 and 14/15. For 11/12, 12/13 and 13/14 net order intake
This year has been characterized by transformation and change. Both are positive and important, and they have resulted in considerably stronger cash flow, lower working capital, significant shorter lead times in our supply chain, and substantial cost savings. At the same time, we have moved forward in product development and we are able to offer our customers a product portfolio that is stronger and more attractive than ever before. Helping our customers to improve patients' lives is and will remain our primary purpose.
I see the year ahead as a turning point at which we will return to growth and achieve the margin target of an adjusted EBITA of at least 20 percent. With our current strong product portfolio and the introduction of Elekta Unity – the new frontier in radiation therapy – our foundation is set for long-term profitable growth.
Constantly pushing boundaries forward in what can be achieved within modern cancer care is only possible through the work that our dedicated teams around the world perform every day. The competence, drive and dedication of our Elekta team are among the factors that have impressed me the most during my first year at Elekta. The progress and the innovation that we generate together is the foundation of future growth, and for that I want to thank all Elekta employees for their considerable efforts during the year.
cash flow improvement during the year
Close to 15 million new cancer cases will occur throughout the world this year. The unrecorded figure is higher since a far too large portion of the world's population unfortunately only has limited or no access to diagnosis
or care today. The number of cancer cases is steadily raising, mainly driven by the fact that the population is growing and since we are living longer. Health care systems around the world have a challenge in how high quality cancer care can be offered to a growing group of cancer patients. We have accepted the challenge and constantly offer new, high quality solutions, aimed at making treatments more precise and better, and at the same time improve workflow and outcomes to enable the treatment of a larger group of patients in various regions of the world.
We delivered the most important news within the industry when Elekta Unity was presented at ESTRO in Vienna in May 2017. Unity is the only solution that integrates the superior diagnosis quality of a high-field MRI system with an advanced system for radiation therapy at the same time in an adaptive way. This is revolutionary and I am convinced that it will fundamentally change how radiation therapy is applied in the future. The first patients have been treated as part of a clinical study and the precision exceeded the expectations. We already have more than 15 customers for Unity and anticipate having 75 orders by the end of 2019.
The interest in Unity is significant and confirms our bet on this idea and our position as the leader in innovation. It generates substantial business opportunities from its sought after characteristics. At the same time is our remaining product portfolio stronger than ever before. For instance, we strengthened our offering during the year through the significantly faster treatment planning system Monaco® 5.11, Leksell Vantage™, the new standard for neurosurgery and Elekta Venezia™, which is a groundbreaking applicator for gynecological brachytherapy.
Our beliefs in future product development are three pronged; we believe image guidance is instrumental to further enhance precision in treatment, that hospital workflow tools like our MOSAIQ® and add-ons to that are necessary to increase clinic efficiency and that intelligent automation is key in strengthening decision support and analytics capabilities. This is where we will see the most significant innovations in the years to come and, now that Elekta Unity is transitioning from the development to the commercialization phase, our focus for development is being redirected towards what we call Elekta Digital. This is a major software undertaking, in which we are creating an integrated platform that also enables applications using big data and artificial intelligence. We are determined to make cancer care not only better but also more cost-effective through more intelligent, faster and more automated workflows never seen before.
It is through innovation that we drive cancer care forward, create value for our customers, strengthen our market position and generate value for our shareholders.
We are ready for future growth. The year's transformation activities have laid the foundation we need. We have shortened our lead times from production to installation considerably through a transformational change in our supply chain and have significantly reduced the backlog of shipped and not installed systems. This has reduced accrued income, freed up working capital, created a more even cash flow and increased the efficiency of our internal processes, which gives us the base for achieving long-term profitable growth. But it had a temporary negative impact on sales and profitability during the year. We have reduced our cost structure by SEK 540 M and will achieve the full savings effect of SEK 700 M during the current fiscal year.
The transformation has led to cash flow increasing to over a billion kronor. This will benefit our shareholders, with a proposal to double the dividend. I am very satisfied with the significant change we have made although some work still needs to be done in the current fiscal year.
During the year we have strengthened our market positions in many geographies, for example, Europe, China, India and Latin America, but at the same time, I see two important geographic areas of Elekta where I am not satisfied with the development. We have thus increased the pace of our activities to achieve the full potential in our operations in the US and in Japan.
The past year was a turning point for Elekta and I look forward to the continuation of the year that has started. We have pushed boundaries forward regarding our internal efficiency and in our product offering, at the same time as we are on track with the commercialization of Elekta Unity, which is an enormous milestone in the company's history and for radiation therapy as a whole.
During 2017/18, we will realize the final effects of the transformation program and achieve an adjusted EBITA margin of at least 20 percent. During the last year, I have reinforced parts of my executive management team and I will continue to ensure the development of the leadership in our organization. I greatly believe in the right leadership by developing internal candidates as well as strengthen the team by external hires to secure a high performance culture within Elekta.
We will continue our work to ensure that more people gain access to cancer care by relentlessly further developing our solutions and contributing to improved care and higher capacity. We do this best in close collaboration with our customers, and I want to say a special thank you to all of the physicians and clinics that help us to improve our solutions, create new ones together with us and drive the fight against cancer and improve and save lives of patients around the world.
Richard Hausmann President and CEO
New technology, advanced software solutions, demographics and economic factors create a rising demand for more advanced, intelligent and costefficient cancer care solutions.
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Technological advances have enabled more efficient forms of treatment, including diagnosis and follow-up. Today, more people survive cancer and the next-generation technology will offer even better and gentler treatments at the same time as more types of cancer will be treatable. The increased survival rate also means that more patients will need to repeat treatments during their lifetime.
Image guidance in radiation therapy is used to visualize the tumor, analyze and adjust for tumor movements and adjust the treatment according to its shape and volume. The most sophisticated imaging system available is high-field MR, which can visualize soft tissue with high-resolution. Using advanced image guidance applications, the accuracy of treatments can improve, and the scope for radiation therapy increases accordingly.
Workflows in radiation therapy are continuously improving, resulting in better integration and optimization with treatment systems. This enables higher efficiency and quality of care. With advanced software systems, other areas of the cancer management ecosystem can be integrated with radiation therapy and enable improved workflow and efficiency.
Greater volumes of data can be registered and collected by software systems. Using advanced software, the data can be used for decision support to increase the automation of treatments, resulting in improved clinical workflows.
Radiation therapy as a form of treatment has doubled during the past decade, and several factors suggest that the use of radiation therapy will continue to rise significantly. According to the Lancet Oncology Commission, the number of cancer cases worldwide is expected to increase by approximately 25 million by 2035, corresponding to an annual increase of three to four percent. This increase is primarily a result of the aging population and a rise in risk factors, such as environmental pollution, obesity and smoking.
25 million is the expected increase in the number of cancer cases by 2035 More people are diagnosed and effectively treated, which results in an increase in the number of patients who survive cancer. This in turn increases the number of re-treatments later in life. More people are today living with cancer as a chronic disease, which steadily increases the need for long-term care.
Precise and efficient treatments, for instance SRS and SBRT technologies are growing. This require upgrades of the current installed base of treatment solutions and has also the potential to increase the throughput in the clinics.
A shortage of capacity is particularly apparent in low and middleincome countries, where only 10 percent of the population has access to radiation therapy. Most of today's installed base of linear accelerators, which is slightly above 13,000 systems, are in high-income countries.
The challenge for national health care authorities is to ensure efficient and high-quality cancer care at a reason-
able cost. Radiation therapy is the most cost-effective treatment option, but it only accounts for seven percent of the total care costs for cancer. Of global cancer patients today, about 25 percent are
of cancer patients would benefit from radiation therapy Source: Lancet Oncology Commission
treated using radiation therapy, although research suggests that the treatment would be beneficial for more than 50 percent of all cancer patients.
Radiation therapy must be planned and performed by specialist nurses, physicians and radiation physicists. There is currently a shortage of trained and qualified personnel in many parts of
the world. This shortage hinders the expansion of this form of treatment, and is also driving demand for automation through advanced software. Lancet Oncology estimates that another 215,000 specialists will be needed by 2035.
Various reimbursement models are being discussed and tested to achieve cost-effective cancer care that can be accommodated within the framework of approved care funding. Regardless of the model, health care authorities need a solution that is efficient, automated and intelligently linked.
With the increase in prosperity and access to information, patients are becoming more knowledgeable and subsequently also demand the best treatments based on the latest technology. Particularly in high-income markets, the modern information society means, for example, that a clinic's equipment, treatments and patient reception is assessed in officially available rankings and evaluations.
The most common forms of cancer treatment are radiation therapy, surgery and drugs. The methods are used separately, but often complement each other and are used in combination. Because of its high level of efficiency in terms of cost and treatment, radiation therapy has a significant potential for more widespread use, both for basic and more complicated treatments.
Access to radiation therapy and the prerequisites for investing in the expansion of cancer care varies considerably between regions, as well as local markets. In low-income countries, less than 10 percent of the population has access to radiation therapy, despite research that confirms that about half of all cancer patients would benefit from this treatment method.
According to The Lancet Oncology Commission, increased access to radiation therapy would save the lives of millions of patients, while substantially reducing the global cost for cancer, which was USD 2 trillion in 2010. Fullscale availability of radiation therapy in the world's low and middle-income countries by 2035 could, according to The Lancet's estimates, be met with a budget of USD 97 billion. The economic benefits of such a venture are estimated at USD 278–365 billion.
Each circle represents an individual country. The diameter of the circle shows the annual number of radiation therapy treatments conducted in the country, in relation to NGI. 8-hour working days were used in all estimates.
A mature market with a focus on new technology and new applications and replacement investments
947 USD NGI –4.7%
362 USD NGI +1.8%
Increased life expectancy
Most of the world's population today lives in low- and middle-income countries, which are also the countries where the average life expectancy, and the number of people that are over 60, is increasing fastest.
As most of the cancer clinics and linear accelerators are currently in high-income countries, there is a significant need to increase the installed base.
According to estimates, only 10 percent of the population in low- and middle-income countries currently has access to radiation therapy.
POPULATION 2013, BILLIONS
Market with a focus on replacement investments and with a growing private sector
Generally, less developed resources for cancer care even if many countries have programs for expansion and modernization
The region is home to 60 percent of the global population, but less than 30 percent of the world's linear accelerators. Increased life expectancy, greater economic prosperity and more effective diagnostic services are driving longterm health care demand in the region
TOTAL NUMBER OF INSTALLED LINEAR ACCELERATORS, 2013
The primary purpose of our business – helping clinicians improve patients' lives – guides us in everything we do. We strive to improve the workflow in clinical environments and the quality of care for patients. The value we generate lies both in business opportunities for Elekta, and societal and economical gains for the world. Ultimately, Elekta creates opportunities for more patients to receive care with the possibility to save and improve their lives.
15
Elekta's strategy drives the business-critical areas of our operations. By focusing on what is truly essential, we combine long-term thinking with agility and a high degree of flexibility. Flexibility allows us to capitalize on opportunities and effectively address challenges in the market.
Act as an innovation leader
We work to improve the treatment of cancer, striving both to improve existing treatments, and to develop systems to treat types of cancer that were not previously treatable. This can be achieved with new technology and advanced software systems. We also develop our systems to make them more effective. Elekta's innovative solutions and services mean that more patients around the world can receive the treatment they need. We develop highly versatile, precise and advanced solutions for cancer care of the future. By continuously developing our portfolio, we help our customers meet an increasing demand for efficiency, both in terms of improved patient outcomes and financial efficiency.
Elekta Unity is the largest and most groundbreaking development project in the history of the company. Unity is a clear example of how we transform innovation leadership into highly efficient treatment solutions. We have created a completely new treatment platform, which combines treatment and
high-quality MR imaging in real time. We see potential for improvement of current treatments, as well as manage types of cancer that were not previously treatable. Elekta estimates that a total of 75 systems will be ordered worldwide before the end of 2019. Read more about Elekta Unity on pages 30–31.
We are focusing on four main areas to further strengthen our customer relationships. We guarantee that our customers receive: a uniform experience, reliable deliveries and reception, consistent behavior, and genuine commitment.
The experience of our customers is a part of Elekta's entire value chain, from our internal product development, supplier inspections and control, commercialization and testing of treatment systems in a clinical environment, to sales and dayto-day service and support.
Sustain a competitive cost-base
Reducing the company's cost structure is not an isolated occurrence. While Elekta has completed a major transformation program, a sustainable cost base for the business as a whole is being ensured for the long term. This is a strategic priority that entails continuous measures to streamline operations and reduce costs in our daily work.
Elekta has been through a period of transformation and one of the objectives was to balance the company's cost levels, based on its strategy. Elekta has substantially strengthened its cash flow and reduced its working capital. Further streamlining and improvements will be prioritized and become a natural part of our daily work. Elekta will, thereby, generate a widened scope for re investments in the business, and make investments in the research and development of future innovations.
Elekta's culture is characterized by continuously improving in order to enhance the efficiency of our internal processes.
Elekta's focus on effective internal processes consists of both plans for prioritized activities and close ties to the corporate culture. Through regular, gradual improvements in individual processes and mechanisms in our business, employees are encouraged to think about how we can work in new ways. This creates the prerequisites for strong and long-term value development with a high degree of cost awareness.
Our goal is that our values should be firmly rooted and permeate everything we do. We work as one team, we do what we say and we keep thinking forward. Through clear leadership, based on common values, we contribute to a reduction in costs, sustainable growth and improved performance.
To live up to our business philosophy, all employees are committed to applying this value-guided work in our operational activities. All of Elekta's 3,600 employees in all 31 countries are included, and the values serve as a cornerstone for them in their objectives. Leadership is highly important to ensure that our values are reflected in everything we do. Read more about Elekta's management philosophy on pages 41–42.
Image guidance – scope of treatment expanded through advanced imaging technologies
Workflow and automation – advanced software improves and automatizes radiation therapy
Cancer incidence and prevalence increasing
Increasing cancer survival rates mean higher frequency of recurrent cancer
Growth within high precision treatments drives efficiency and replacement with new technology
Gap in radiation treatment capacity
Need for qualitative cancer care at affordable cost
Need for trained radiation therapy oncologists and physicists remains high
Trend in public reimbursement structures to focus on quality and efficiency
Patient demand for modern treatments increase
Profitable growth through innovative and efficient solutions Increasing enterprise value Transparency and prudent risk management
Customers (clinics and hospitals)
Innovative technology enabling better treatments and higher efficiency The highest standard and product safety Long-term relationships and support
Improved quality of life Safe and leading treatment methods Improved patient experience
Personal development and career opportunities Responsible business conduct
Long-term partnerships High business ethics
Highest product safety and quality standard Adherence to international
legal requirements
Access to radiation therapy in both developed and developing regions Active contribution to the UN Sustainable Development Goals
Read more on pages 9–13
Continuously improve our processes
Ensuring our internal processes drive innovation and customer experience at appropriate cost levels
Live our values
forward
Shareholders Share price and dividend development Orders, sales and profit growth Cash flow generation Capital employed
Customers (hospitals and clinics) Innovations that improve quality and lower cost of care Customer experience as measured by net promoter score Long term partnerships
Patients
Access to care Clinical innovation for better treatment outcomes Patient experience
Career opportunities and personal development Organizational health Adherence to compliance
Long term partnerships Create innovative eco system based on continuous improvement and innovation
Enable safety and efficacy of care Contribute and adherence to international standards
Cost effectiveness awareness of radiation treatment Access to radiation therapy care in developing countries Member of UN Global Compact
SEK 1 proposed dividend per share doubled
growth in gross order intake, SEK M
+18% customer net promotor score
+7% growth in installed base of treatment solutions
The aim of Elekta's transformation program was to secure improved financial performance as well as operational excellence. This will enable us to continuously improve our ability to innovate and provide the best solutions for our customers and their patients, while we also create shareholder value.
For many years, Elekta has grown rapidly in a fast-growing market. The focus has been on building a leading market position, an installed base and a strong presence in key markets. Organic growth was also supplemented with a series of strategic acquisitions. The transformation program started in 2015 in order to streamline internal processes and to realize synergies from acquisitions, while adapting the company's cost base to lower market growth.
The aim of the transformation program was to create a more efficient business, with improved profitability and cash flow. The program also included measures to strengthen our customer services and innovation capacity. In addition, activities have been implemented to achieve higher efficiency in both the supply chain and the purchasing operations. The program's objectives and status at the end of the year are reported below.
We have reduced administrative spending and increased efficiency in marketing, sales and product development. Our organization has also been adapted in accordance with our three core processes: Product Lifecycle Management, Supply Chain Management and Customer Relationship Management. Together with changes in support and management processes, this enables more efficient processes and workflows.
All of the essential measures have been implemented over the past two years. The financial effects are developing as planned and we have noted gradual improvements compared with the previously communicated targets, which will reach full effect during the fiscal year 2017/18. Continuous improvements and efficiency enhancements will remain a part of the day-to-day operations.
540 Realized cost savings, SEK million
NET WORKING CAPITAL BELOW
| Objective | Current status | |||
|---|---|---|---|---|
| Achieve an EBITA margin of >20 percent in the 2017/18 fiscal year |
Adjusted EBITA margin in fiscal year 2016/17 improved to 16 (15) percent |
|||
| Deliver cost savings of SEK 700 M, with full effect from the 2017/18 fiscal year |
The annual rate of savings increased to SEK 540 M. The reduction in purchasing costs is expected to be visible in 2017/18 |
|||
| Maintain a working capital below 5 percent of net sales |
At the end of the fiscal year working capital was -6 percent to net sales |
|||
| Implement a produce-to-order process | Achieved. Completed in the second quarter 2016/17 |
Our strategic priorities help us to fulfil Elekta's financial ambitions. Our strategy puts how we should act into words and it also shows us the direction we are taking. More specifically, the strategic priorities help us realize our business potential and we have a number of prioritized areas in order to achieve our long-term financial ambitions.
We set the highest standards for ourselves. Our pace in product development is high and we challenge our innovative capacity to continuously improve our offering. Elekta collaborates closely with its customers to ensure the development of products and services that contribute to significantly improving cancer care. Over time, we have produced a broad range of groundbreaking innovations that have transformed cancer care, taking several steps forward. The leading ability to innovate is what lies behind Elekta's success and growth, and we will continue our efforts and investments to drive improvements in cancer care.
Key activities in the transformation program, which was launched in 2015, included strengthening cash flow and capital management. The result include significantly stronger cash flow and lower working capital. Elekta will continue to streamline and reduce lead times in the supply chain, to enhance capital efficiency and continue to generate strong cash flow.
Elekta's ambition to be the leader in emerging markets was a clear aspect of its strategy from an early stage. Today, about onethird of our revenue is derived from these markets and we have a number one position. The need in emerging markets is significant, and over time these markets create a substantial driving force for growth. Demand in these countries has a direct correlation to economic development, which makes these markets more volatile than established markets. Elekta will continue to maintain a strong presence in emerging markets, while we work to secure a balanced risk exposure.
Over the years, Elekta has created a global installed base comprising about 3,900 systems. This means that approximately onequarter of all radiation therapy systems worldwide are from Elekta. In terms of sales of new capacity to the market, Elekta's share is much higher, which is why we continue to expand our installed base. We also hold a leading position in oncology informatics. Continuing to increase our share of the installed base is a prioritized area as this forms the basis for recurring revenues from services, software and support.
The significance of aftermarket services is increasing and our installed base of treatment systems is an asset as we continue to strengthen operations in service and support. The need for clinics and hospitals to operate efficiently is growing along with rising quality and cost awareness. Elekta's broad service offering ensures that customers can receive the greatest possible benefits from their cancer treatment systems. Our services and software solutions help to shorten patient waiting times, improve care routines, simplify workflows and increase efficiency in the clinical environment.
Elekta's internal efficiency efforts will continue as a natural part of our way of working, even after the current transformation program achieves its full effect in 2017/18. By using smart working methods, constantly improving our processes, and utilizing all of our resources as efficiently as possible, we will improve our margins, and at the same time free up resources for continued investment in improving cancer care in the future.
Elekta's aim is to achieve sustainable profitable growth. Elekta conducts its operations based on a long-term plan, which is regularly reviewed and evaluated by the board of directors. These financial objectives form the basis of the long-term planning. The objectives are under review taking into account current macro economic and market conditions.
Organic sales growth exceeding 10 percent in local currency
Operating result improvement rate to exceed sales growth in SEK
Return on capital employed to exceed 20 percent
<0.5 Net debt/equity ratio less than 0.5
Brain metastases – cancer cells that have spread to the brain from primary tumors – are estimated to occur in 10 to 20 percent of patients with cancer. But when Lynn Wyatt from Atlanta, Georgia discovered that the breast cancer she had overcome had resulted in 21 brain lesions, she resolved to not be reduced to a statistic.
"I silently screamed at the cancer that it had chosen the wrong person this time," she recalls. "My eight-year-old son asked: 'Does the doctor know how to fix this?" Fortunately, her doctor was Shannon Kahn at Emory Saint Joseph's Hospital in Atlanta, who specializes in Gamma Knife radiosurgery.
Its high precision and automation makes Leksell Gamma Knife® Perfexion™ particularly suitable for the treatment of brain metastases. After treatment for her 21 metastases, Lynn is once again cancer free and back on the tennis court and doing volunteer work at her children's schools.
"Compared to all the things we go through as cancer patients, the side effects from Gamma Knife radiosurgery are not a big deal," Lynn says. "You're in, you're out and you get on with your life."
As a central partner to hospitals and cancer clinics, we focus on how Elekta's treatment and information systems can create the best possible outcomes. Therefore, we have two key questions that are of vital importance in our operations: how can Elekta help clinics to deliver maximum benefits in a cost-effective manner, and how can we optimize our treatment systems?
"How can Elekta help cancer clinics improve the quality of care, at the same time as the clinics are under increased cost pressure?"
Cancer incidences are growing and at the same time, the number of treatable diagnoses is rising. This results in a higher workload for clinics, often within an unchanged economic framework. To improve efficiency and patient flows, Elekta has developed advanced oncology informatic systems that simplify a clinic's planning, coordination and optimization of treatment sessions.
"How can we further optimize and personalize care so that patients live longer, with an improved quality of life?"
Elekta's treatment systems successfully treat a wide range of cancer types and serious neurological diseases. Continuous innovation helps to constantly increase the effectiveness and precision of treatment, while at the same time becoming better and more gentle for patients as well as improving the quality of life after treatment.
Elekta's innovations are developed in close collaboration with researchers and clinics, and have resulted in leading radiation therapy solutions, as well as informatic systems that optimize and individualize cancer care.
Elekta innovations in oncology informatics have been at the forefront of serving clinician needs for 25 years. Today, MOSAIQ oncology informatics enables clinicians to make informed decisions for better patient care across the cancer spectrum. Customers employing Elekta's advanced informatics solutions improve both patient outcomes and utilization of health care resources.
Use: Manages clinical, operational and financial data throughout the department. Key advantages: Automated decision support. Single data source for improving clinical and operational efficiency. Interoperability advantage allows widest connectivity in the industry.
Elekta's position: MOSAIQ holds a global market leading position with close to 50 percent of the market.
Use: Enables cancer centers to collect, integrate, and analyze clinical, operational, and financial data to monitor efficiencies, understand and visualize patient care. Key advantages: Designed for secure cloud environment. MOSAIQ customers can receive a seamless analytics solution. Meets today's needs and scales to support integration of larger data volumes.
Elekta's position: Elekta's oncology analytics is sought after in the market, with recent key customer installations including renowned MD Anderson Cancer Center.
Extensive experience, innovation at the forefront of development and close collaboration with leading hospitals worldwide enable Elekta to offer world-leading solutions to treat a wide range of different cancer diseases. All of Elekta's linear accelerators and systems for stereotactic radiosurgery and brachytherapy have one thing in common, they provide effective treatments with a high degree of precision and minimal impact on the surrounding healthy tissue.
With the new Elekta Unity, Elekta is taking a transformative step into the future of cancer care through MR image guidance, to direct the radiation therapy with an accuracy that was previously not possible.
Areas of use: Linear accelerators are used in the most predominant form of radiation therapy. The systems can treat a wide range of the most prevalent forms of cancer effectively.
Main advantages: Wide range of usage for the most common cancer types. Stereotactic treatments provide high dose rates that are precisely concentrated to the tumor, and aim to minimize the dose to surrounding tissue.
Elekta's position: Elekta has about 3,600 installed systems around the world and has the highest market share regarding orders for new capacity.
Areas of use: The stereotactic radiosurgery system Leksell Gamma Knife® enables non-invasive treatments of tumors and other serious neurological conditions. Main advantages: Leading efficient and effective method for treating brain conditions that are difficult to treat and to reach with other methods, as well as an efficient treatment for metastatic disease in the brain.
Elekta's position: World-leading in intracranial stereotactic radiosurgery in the brain with a total of over 300 systems in clinical use.
Use: Brings plan management and dose review tools into the EMR, so you can assess and approve plans for any treatment modality from any MOSAIQ workstation. Key advantages: Streamlines image and plan workflows to a high-performance, easyto-use visual workspace. Compare multiple plans and has enhanced 3D imaging capabilities and exceptional visualization. Elekta's position: Strong with a notable market presence in the US and Western European markets.
Use: Simplifies coordination and evaluation of multiple cancer programs and registry submissions.
Key advantages: Provides insights into treatment efficacy by advancing standardization, consistency, and quality of data for research and reporting. Highly detailed and secure database. Enables lifetime patient follow-up. Elekta's position: METRIQ is the largest solution installed in the US market, with approximately 1,300 sites.
Areas of use: Internal radiation therapy placed adjacent to the tumor is particularly effective in the treatment of specific indications including cervical cancer, prostate cancer, breast cancer and skin cancer. Main advantages: Small footprint system with high precision and reduced risk of damage to surrounding, healthy tissue. Elekta's position: Strong position in both established markets and emerging markets. Elekta has about 60 percent of the international market for brachytherapy.
Areas of use: Designed to improve the treatment of the most common types of cancer, and to provide an opportunity to reach tumors that, until now, have been difficult to treat with radiation therapy. Main advantages: The combination of a linear accelerator and MRI creates opportunities to monitor the target in real time and adapt the treatment and to ensure the dose of radiation treats the tumor cells in the most effective way.
Elekta's position: The first patients have been treated under clinical trials using Unity in 2017. Elekta estimates that 75 systems will be ordered before the end of 2019.
Elekta Care™ is a complete and coherent offering in service, support, education, training and consultancy services. The concept includes functions to support Elekta's customers throughout the treatment system's lifecycle.
Elekta Care™ are provided at three different levels, which allow customers to decide on the desired level of service and cost – Elekta Care™ Silver, Elekta Care™ Gold and Elekta Care™ Platinum.
Start-up services help clinics to initiate treatments smoothly and immediately with their new radiation therapy systems delivered from Elekta.
System availability ensures the maximum operating time for the efficient use of the treatment system, thereby offering care to as many patients as possible.
Optimized use covers Elekta's service and support functions as well as education and training. It is about continuously ensuring that the system is optimized and that clinics can utilize all functions in the best possible way.
Upgrade solutions guarantee that new functions and improvements are continuously installed so the treatment systems continually become more efficient and can achieve maximum care results.
Elekta's software solutions play an important role in helping care providers improve efficiency, quality and outcomes. Elekta´s MOSAIQ offers access to complete patient information, optimizing analysis tools and patient data.
The cancer care of the future is largely formed by technological advances. It is becoming increasingly personalized and it must also become more efficient as the number of cancer cases rises. In combination with an increase of treatable types of cancer and a greater technical complexity, higher demands are set on the functionality of the continuum of care. Elekta's software and oncology information systems are developed with a profound understanding of the real needs of care providers, and the systems contribute to significant enhancements in efficiency.
Elekta's vision of cancer care of the future, based on data-driven patient treatment, forms the basis for our focus on innovative and advanced software. Our proprietary information systems are built to work regardless of the hardware used to treat the patient or the design of the clinical environment. The integration of the software with Elekta's hardware is seamless and Elekta's service and support team is always available to ensure optimal performance. There are also excellent integration opportunities to other hardware systems, which offers Elekta a competitive edge in the market.
To simplify and improve day-to-day work in clinical environments, Elekta offers an Oncology-specific software solution powering practice optimization through continuous learning within four main areas: Single platform solution to enable multi-disciplinary treatment management, workflow management to ensure the patient treatment journey is seamless and highly efficient, quality control and decision support through intelligent automation, and actionable oncology analytics.
MOSAIQ supports all activities in a cancer clinic and the system helps patients and the care team throughout the continuum of care with safe practices, communication and workflows.
Analysis, follow-up and database management form a central part of Elekta's software solutions. They enable hospitals and clinics to benefit from the wealth of collective expertise that is available from previous treatments. In this area, Elekta supplies applications that collect, analyze and visualize large amounts of information in a user-friendly manner.
In all software, usability is critical to the ability of hospitals and clinics to leverage their full potential. One key element in all of our software development is a functional user interface. We offer our customers a scalable solution for a secure, high-performance and reliable infrastructure, which is critical for safe healthcare with high patient volumes.
Elekta's family of linear accelerators offers effective treatments of a number of different types of cancer. Versatility and high precision ensure more accurate treatments, faster treatment times and the potential to use technology improvements to increase the number of cancer types that can be treated.
Elekta has developed fully digitally controlled linear accelerators since 1985. Today, we are leaders, and we continue to drive the development forward. Many diagnoses and a wide range of tumor types can be treated using an advanced linear accelerator; including brain and spine, head and neck, breast, lungs, and prostate. Treatment with a linear accelerator system is efficient, both for the patient and for the clinic.
The development of the linear accelerator technology is progressing steadily. Elekta's Versa HD™ is the most advanced digital linear accelerator within our current offering. Together with the Agility™ multileaf collimator – a proprietary advanced beam shaping solution – and high dose rate flattening filter free (FFF) technology, this system
provides unsurpassed versatility, precision and efficiency. In combination with the latest release of the Monaco software Versa HD™ can optimise the dose coverage and harnesses the continuously variable high dose rate to create exquisite plans that literally paint the dose to the target. Combine this with the lowest transmission specification of any equivalent commercial system and you get a truly versatile, fast and highly accurate radiosurgery delivery system – all in one integrated product.
Elekta's software for dose planning is optimized for treatments using Elekta's linear accelerators. The treatment system is efficient from the perspective of
both the clinics as well as the patients. To further improve efficiency, Elekta offers a market-leading oncology information system that seamlessly integrates with various units and treatment systems used within the clinics. Elekta's local service and support team also ensures the continuous upgrade and optimization of a clinics' treatment system based on the prerequisites of each customer.
A linear accelerator produces radiation beams shaped and aimed at the tumor with high precision in accordance with a calculated and individually adapted treatment plan. Using an alternating current voltage, electrons are accelerated at high speeds and are directed towards the target with the objective to deliver the maximum dose of radiation to the tumor and minimum collateral damage to healthy tissue. The linear accelerator includes integrated imaging visualization and localization of the tumor target.
48% market share
Orders to new clinics and expansion in existing clinics.
Elekta's market position comprises an installed base of about 3,600 linear accelerator systems worldwide. Elekta is a leading player in the field and our market share for new system sockets (meaning sales of systems that do not
replace an existing system) is the highest in the world. Our high market share in new clinical environments is proof of our good reputation and competitive offering.
The stereotactic radiosurgery system Leksell Gamma Knife has for many years been the leading and most precise tool for treating difficult neurological conditions. Leksell Gamma Knife offers a safe, efficient and cost-effective treatment, without prolonged hospitalization for patients.
Within the field of neuroscience, Elekta develops highly precise solutions for both diagnosis and treatment of neurological diseases. Elekta is a pioneer in stereotactic radiosurgery and our solutions in radiosurgery and stereotactic neurosurgery are world-leading. Stereotactic radiosurgery is a non-invasive and very precise method, which makes it particularly suitable for neurological
conditions, where surgery and chemotherapy are more difficult to perform. With Gamma Knife surgery, the patient can usually be treated and go home during the same day, which makes it a very resource-efficient method.
Leksell Gamma Knife® Icon™ has received regulatory approval in a number of key markets, including Europe, USA, Canada and Japan. The new system is equipped with integrated visualization and an option for fixation, with or without a frame, which increases flexibility and improves patient comfort. The possibility of using Elekta's latest Gamma Knife without a stereotactic frame means that it is easier for oncology clinics, in addition to specialized neurology clinics, to include a Gamma Knife in their workflow. Leksell Gamma Knife® Icon™ also makes it possible for physicians to treat tumors in different stages, which enables a more widespread use of radiosurgery in the brain.
Stereotactic radiosurgery is specifically developed to inhibit neurological conditions. Elekta's Leksell Gamma Knife® Icon™ directs and focuses 192 precise beams into a single iso-center in the brain. Advanced imaging technology and tracking systems enable online adaptive treatments. The precise frame-based and frameless fixation options ensure that the dose of radiation hits the target area aimed to be treated.
Elekta has the world's largest installed base of stereotactic radiation treatment systems intended for neurological treatments.
At the end of the 2016/17 fiscal year, the total number of Gamma Knives in clinical use amounts to more than 300.
Elekta is the leader in the treatment of cancer when using a radiation source that is placed in the body, inside or adjacent to a cancer tumor. The method with internal radiation offers high precision and low risk of damage to surrounding, healthy tissue.
Brachytherapy is a radiation treatment method that is effective for the treatment of, for example, cervical cancer, prostate cancer, breast cancer and skin cancer. Brachytherapy can also be used to treat tumors in several other areas of the body. The system for treatment is small in size.
Elekta's brachytherapy system is part of our leading radiation therapy portfolio that has been developed through 40 years of continuous innovation. Elekta has about 60 percent of the world market for HDR brachytherapy and the product portfolio includes
Esteya® for skin cancer, Flexitron® treatment system, Oncentra® treatment planning software and a large number of applicators for precise and simple treatment. Altogether, Elekta's brachytherapy system represents the market's most comprehensive offering in internal radiation.
Brachytherapy is an effective treatment option for several types of cancer. It is also increasingly common that brachytherapy is combined with other treatment methods, such as surgery
and external radiation therapy. The increased use of brachytherapy is positive for the patients since the treatment is associated with low risk for serious side-effects, and with minimal damage to healthy tissue.
Treatment requires specialist expertise, but can be given as an outpatient procedure. This means that treatment is available for many patients and that it is easier to conduct compared to other treatments.
An isotope, in the form of a very small grain of mostly iridium-192, is carefully temporarily placed inside or directly adjacent to the tumor through the afterloader. The radiation from these isotopes has a short range and can therefore precisely limit the radiated area. This ensures that the tumor receives the most effective dose of radiation in order to destroy the cancer cells. Special planning software is used to plan the treatment and radiation of the tumor.
Elekta is world-leading in HDR-brachytherapy, with a total market share of about 60 percent. Our market position is strong in both established clinical environments and in new care facilities. 60% market share
With its intelligent and groundbreaking design, Elekta Unity combines the best of two worlds and will create a completely new standard in image-guided radiation therapy. The first patients were treated under clinical trial using Elekta Unity in 2017.
Elekta Unity is the only system in existence that uses intelligently designed software to integrate the superior diagnostic quality of a 1.5 Tesla highfield magnetic resonance imaging (MRI) system with an advanced radiation therapy treatment delivery device.
Unity is a milestone in Elekta's endeavor to continuously push boundaries and substantially improve cancer care. The system comprises a completely new platform, which is able to provide high-quality images of tumors and surrounding tissue in real time during radiation therapy. This will enable physicians to continuously adjust and adapt radiation therapy during treatment, resulting in a more precise dose of radiation while this is expected to result in sparing surrounding tissue.
When the two technologies are combined, unique opportunities are created to improve the level of treatment for the most common forms of cancer, which account for about half of mortality rates from all cancer diseases worldwide. Unity also has the potential
to treat cancer indications that are currently not treated – or very rarely – treated with radiation therapy. In addition, the ability to acquire high-quality images – and thereby gain insights into the biology of tissues – brings a great potential for better dose painting and assessments of how well tumors respond to treatment.
Elekta's innovation and development work takes place in close collaboration with our customers. The integrated MR-linac system was already conceived 18 years ago by Jan Lagendijk, professor and head of the department for radiation oncology physics at the University Medical Centre Utrecht. In 2012, Elekta established a global consortium comprising seven of the world's leading cancer centers with the aim of demonstrating the clinical value of a system that combines a precise dose of radiation with MRI, from our technology partner Philips. In addition to working closely with our development team, the consortium is also working on creating
clinical workflows and protocols. These will maximize the new system's therapeutic efficacy and ensure seamless integration into existing procedures at radiation oncology departments. The consortium will continue with its research even after commercialization to explore Unity's full potential to improve cancer treatments.
The main reason Elekta Unity has created so much interest is the potential that the new system offers. Ongoing tests at some of the world's most distinguished hospitals and cancer clinics indicate highly promising preliminary results. In 2017, the first patient was treated using Elekta Unity, an important milestone in the commercialization of the system.
Clinics also view Unity as an opportunity to further strengthen their positions as leading cancer treatment clinics, as patients make greater demands and choose care providers based on the standard of technical equipment and patient outcomes.
How does it work? The Elekta Unity system is installed in a bunker environment and is carefully calibrated by radiation physicists from Elekta and the clinic. High-resolution MRI images are generated prior, during, and post radiation and can be used as decision-making data to optimize the treatment. An exact MR/RT treatment offers the potential to deliver a high dose of radiation to the tumor while sparing a larger degree of the surrounding healthy tissue than with conventional linacs because of the tissue visualization during radiation. This enables the possibility to reduce the number of radiation treatment sessions or fractions.
Read more at: unity.elekta.com
"Elekta Unity has the potential to revolutionize the way we treat cancer today"
Jan Lagendijk, PhD, Professor and Head Radiation Oncology Physics in the Department of Radiotherapy at University Medical Centre Utrecht Elekta targets 75 orders 75 until end of 2019
Elekta's service and support function ensures efficiency, maximum availability and a continuous optimization of treatment systems and software. Elekta also offers solutions for education and training of healthcare personnel within radiation oncology.
We provide services that offers our customers the greatest possible benefit of their Elekta cancer treatment solutions. Service and support includes both proactive maintenance activities and reactive response, as well as education and training in various specialty fields.
Elekta Care™ is the backbone of our service activities, which ensures high operational functionality that helps customers shorten patient waiting times, change care routines, simplify workflows and increase efficiency at entire clinics. The demand for our service offering is steadily rising, which means the business area accounts for a large share of revenues within the established markets.
IntelliMax® Remote Services is an integral part of Elekta Care which remotely monitors system performance and enables Elekta service personnel to provide immediate reactive support without being on site, as well as proactive and predictive maintenance. By constantly monitoring hundreds of data points in the linear accelerators we can identify faults, and take corrective action, before it interrupts the clinical schedule, thereby maximizing system availability for the customer. The ability to update software remotely is also an important and time-saving feature of Elekta's service offering.
To further strengthen our customers' operations, Elekta provides several different educational and training services. Personnel training is important, both to ensure that the hospitals and clinics using Elekta's treatment systems can utilize their full capacity and to enhance the supply of skills in the form of radiation oncologists, clinical staff and radiation physicists in local markets. Training is conducted in close collaboration with leading university hospitals. Elekta also operates proprietary training centers – learning and innovation centers – in Beijing, China and Atlanta in the US.
Upgrade solutions guarantees that new functions and improvements are continuously installed. As a result, the treatment systems are constantly becoming more efficient and can achieve the maximum care results. Elekta's open and flexible upgrading services are adaptable based on the specific needs of the customer.
Optimized use means that Elekta's service and support function continuously ensures that the system is optimized through the use of technology, education and consultation so that the clinics can utilize all functions in the best possible way. Software is continuously upgraded. Within optimization services, tailored further training and customized consulting assignments are also available. This do also include professional services to help cancer centers to reach their goals. As part of the Elekta family, customers are also offered communication tools and access to our global network with the associated experience and knowledge bank.
Start-up services help the clinics to smoothly and immediately initiate treatments with their new radiation therapy systems delivered from Elekta. Project management, training support, installation calibration, and warranty review are a few of the elements that together form start-up services within the service offering. Elekta's customer service personnel and technicians are always available for our customers, from day one and throughout the collaboration.
System availability maximizes the operating time and ensures that the treatment system can be used efficiently and offer care to as many patients as possible. As part of Elekta Care™, system availability service includes planned and corrective maintenance measures, remote-based diagnostics through IntelliMax®, analysis of any replacement needs and spare-part management as well as access to the Elekta Care Support Center for further expert support.
Geographic regions
33
Full-year performance for our US operations was not in line with our expectations and additional actions were initiated at the end of the year.
North America is the world's largest market for radiation therapy and it is characterized by a high penetration of treatment solutions, service and after-market business, and known for being an early adopter of new technology. The US has the world's highest health care cost per person, which is driving the need for increased
efficiency. This in turn demands new functionality, and more comprehensive and integrated solutions.
The South American market has a significant need for radiation therapy capacity. The market differs between countries and over time, due to economic development and political initiatives.
Our performance in Latin America has been solid during the year while the US operation has underperformed in relation to its potential and general market development. Order intake in the region decreased by 9 percent for the year, corresponding to 11 percent based on constant exchange rates.
Elekta's organizational changes and focus on improved process management will strengthen our abilities to capitalize on opportunities in the US market. The main priorities for Elekta's US divi-
Solutions, 50% Service, 50% Region's contribution to total net sales, 39%
sion are to regain momentum in sales and continue to increase the customer experience.
Elekta's offering is competitive and comprehensive. Demand for our brachytherapy solutions remained high during the year, and Elekta's ser-
vice and support functions continued to play a key role in helping hospitals and clinics to improve cancer care and drive efficiency. Elekta is well positioned as our new Elekta Unity system undergoes its final stages of development with the aim of being available for sale in the US during 2018.
Elekta closed the year with strong performance in the region as a whole. This was a result of overall good growth and several large contracts wins.
Radiation therapy capacity in Western Europe is insufficient. Most of the larger Western European markets are investing in new radiation therapy as the number of cancer cases increases and earlier diagnosis rates improve. The driving forces are the underlying need to improve clinical efficiency, modernize equipment and treatment solutions.
The Eastern European market has begun to grow after some years of low activity. The resources for cancer treatment are less advanced and many countries plan or are conducting programs to expand and modernize cancer care.
Market activity is mixed in the Middle East with Iran as a good example of 55%
Elekta´s market position
market share of linear accelerator orders
growth. In Africa, only a small percentage of the population has access to radiation therapy or other advanced cancer care, implying a significant long-term growth opportunity.
Both Western Europe and emerging markets across the region performed well. Order intake in the region increased by 5 percent for the year, corresponding to 4 percent based on constant exchange rates.
During the year, Elekta strengthened the partnership in Europe with Genesis Care through a large contract in Spain. A long-term contract with one of Sweden's leading university hospitals, New Karolinska Solna, also contributed to the region's performance. Important contracts have also been signed with customers for
NET SALES
instance in the UK, South Africa, Spain, Greece, Turkey and Iran.
To meet the increasing demand for smart and cost effective cancer care in Western European markets, Elekta has improved its offering in informatics and services. In
other markets, the company is actively positioning itself to capitalize on growth opportunities. In Russia Elekta is establishing a direct sales support and service hub, expected to be operational in 2017/18. To address Turkey's strong development, Elekta is establishing an education and training center.
The long-term need for improved cancer care remains high in the region, and with the economic development continuously strengthened, demand for treatment solutions continues to increase.
The Asia Pacific markets are predominantly characterized by the addition of new treatment capacity. However in addition there is also an increasing percentage of older installed systems that have started reaching the end of their lifecycles and driving a
demand for upgrades in the near future. The long-term need for increased cancer care will continue to be high due to longer life expectancy and greater economic prosperity.
Market growth in the region was favorable during the year. High-growth markets include China, India and South East Asia. The Japanese market continued to be weak during the year.
Elekta´s market position
We continued with strong performance in China during the year together with a robust development in India and South East Asia. Our operations in Japan showed weak development. Order intake in the region increased by 11 percent for the year, corresponding to 5 percent based on constant exchange rates.
Elekta's leading installed base position in growth markets bodes well as demand for service contracts and system upgrades are
becoming more frequent in the region. Strong regional presence is also advantageous as the demand for comprehensive software solutions gradually increases.
In China, Elekta's focus on the delivery of comprehensive treatment solutions continues. Elekta is the clear mar-
ket leader in the country. The market's steadily growing installed base is typically operated during longer hours than in other markets, meaning that an additional need for service and support is expected.
The full-year result shows that we are not performing to our full potential in Japan. The regulatory approval of Elekta's Gamma Knife Icon™ has the potential to strengthen our long-term performance. This will also be true for Elekta Unity once it is released commercially and approved for use in Japan.
Our performance in region Europe, Middle East and Africa as well as Asia Pacific was solid. In Europe, we secured a number of important orders, including some early orders for Elekta Unity. In Asia, we noted strong growth in China and India. Latin America was solid while we needed to implement further activities for improvement in the US. In total order intake for the year grew by 2 percent, representing a decline of 1 percent based on constant currencies.
For macroeconomic statistics and analysis of global drivers' effect on market behavior, see pages 12–13.
Sustainability and employees
Our company's most important aim and contribution to society is to help cancer clinics to improve the lives of as many patients as possible. To achieve this goal, collaboration with strategic partners, employee commitment and corporate responsibility are crucial.
Our focus areas in sustainability
| Fight | Business |
|---|---|
| cancer | ethics |
| with safe and | and preventing |
| efficient products | corruption |
| Sustainable | Human |
| sourcing | rights |
| and environmental | and |
| focus | diversity |
Today, there are efficient forms of treatments to improve, prolong and save the lives of cancer patients. The differences between low-, middle- and high-income countries are, however, enormous in terms of both opportunities to diagnose the disease and the availability of high-quality cancer care. Learn more on pages 9–13.
Elekta's treatment solutions contribute to more effective and gentler treatment options for patients, which in addition to patient benefits may also reduce the need for hospitalization and thereby cut healthcare costs. Our focus on innovation, cost awareness and continuous improvements makes radiation therapy available to more people.
Constructive dialogue, collaboration and strategic partnerships are crucial if we are to develop the best solutions together with our stakeholders. One good example of this strategic collaboration in a research project is the development of Elekta Unity. Learn more on pages 30–31.
Elekta's compliance function is responsible for establishing the framework for Elekta's sustainability efforts, and the external reporting of aspects of sustainability from the perspective of business operations. During the year, a Global Sustainability Manager was recruited, whose assignment is to enroot the strategy and to coordinate Elekta's sustainability efforts within the identified focus areas so the sustainability ambitions can be more clearly integrated. One important task is also to clearly demonstrate how Elekta's
focus areas contribute to the global Sustainable Development Goals. In the spring of 2017, we joined the UN's sustainability initiative Global Compact, which entails that we undertake to act in accordance with the Global Compact's 10 principles for human rights, labor law, the environment and anti-corruption.
Elekta has from the outset been a member of the Swedish Leadership for Sustainable Development network, which includes more than 20 of the leading Swedish companies. The network promotes strong leadership in sustainable development and is coordinated by Sida (Swedish International Development Cooperation Agency). During the year, discussions included how sustainable development work influences business strategies and board decisions.
Elekta's code of conduct contains the basic principles that all of Elekta's employees and business partners are expected to follow. Steering documents link our values with our business concept and strategy based on international principles, such as the Universal Declaration of Human Rights, the UN Global Compact, the OECD Guidelines for Multinational Enterprises and the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy. In order for employees to report any violations of the code of conduct, Elekta has established a global whistleblower tool, where suspected violations can be anonymously reported. The code of conduct was revised during the year to include a letter from our new President and CEO who links Elekta's reworded values with the principles of the code of conduct.
The business community has a key role in working to achieve the 17 global sustainable development goals, which were adopted by the UN's members in September 2015. During the year, Elekta analyzed which of the goals the company is best positioned to contribute towards. Several of the goals are relevant but the analysis revealed that Elekta's solutions have a particular potential to contribute positively to goals 3, 5, 8, 12 and 16. Goal 3, Good Health and Well-being, is the goal judged to have the greatest potential.
Product safety permeates our entire business, and is a prerequisite for being a leading manufacturer of medical equipment. Our goal is to meet the highest-possible safety standards for all products, for both customers and patients, but also for the Company's own installation and service employees. There are strict and comprehensive requirements in both international legislation and product-safety standards that are described in quality system standards, such as ISO 9001, ISO 13485, and in special standards and regulations for medical devices. The systems are reviewed both internally and externally and external inspections are conducted regularly.
The first Gamma Knife in Sub-Saharan Africa was installed at Netcare Milpark Hospital in Johannesburg in April 2017. Previously, there was only a Gamma Knife in Rabat, Morocco, and two in Cairo, Egypt, forcing patients from South Africa to either travel there or to Europe and the US.
Elekta is constantly working to improve the availability of cancer care in countries with lower income levels. This includes adapting systems. Elekta Compact™ is one example of a radiation therapy system with low energy consumption, operational simplicity, and that can be used in smaller spaces, which is often required in markets with limited access to premises, electricity and specialist personnel. Elekta also offers financial solutions and training, and collaborates with various organizations to strengthen cancer care in growth regions. One example of this type of collaboration is Radiating Hope, as described below.
Ashley Cogswell, who was never previously a outdoor type, has in the past year climbed Kilimanjaro and hiked to the Mount Everest Basecamp, as part of the Radiating Hope initiative. Ashley, who in daily life is Director of Software Sales at Elekta, describes the challenge as an event that changed her life.
- I was horrified ahead of the first hike but am very moved by all of the support and by the opportunity to be part of an initiative that improves the availability of radiation therapy in less well developed countries. In comparison with all the people who fight cancer without access to proper care, then my fear is not justified. We are fortunate in our part of the world and this helps in a very real way towards Elekta's overall objective – to help clinics to improve the lives of patients, says Ashley.
For several years, Elekta has collaborated with the nonprofit organization Radiating Hope, which arranges the hikes. The aim of the events is to collect money to help achieve the organization's mission – to improve cancer care in areas of the world with the lowest availability. Collected funds are mainly used for transport and installation of donated equipment or to renovate radiation therapy equipment, often in collaboration with various hospitals and clinics around the world, including Senegal and Nepal.
Learn more at www.radiatinghope.org
To achieve a sound collaboration between healthcare providers and the medtech industry, one fundamental prerequisite is close adherence to existing legislation in areas such as bribery and tendering. This is in order to ensure that tax revenue is correctly utilized, that patients can be assured of the best possible healthcare and medical care and that public confidence in the collaboration is maintained.
For several years, Elekta has worked actively to combat corruption and bribery and to stay out of situations that could violate the guiding principles in our industry agreements around the world. These efforts have been reinforced in recent years through detailed risk analyses and the establishment of specific compliance programs. The code of conduct and our group-wide anti-corruption policy set out the rules of conduct that apply to specific areas of risk.
During the year, the anti-corruption policy was revised to provide additional guidance to employees and business partners, primarily in various interactions with healthcare providers and professionals. Our internal regulations therefore also include situations that, though they are legal, we consider unethical and consequently do not wish to be associated with. An online training course in anti-corruption is also compulsory for all employees. For employee categories that are particularly exposed to situations where corruption or unethical forms of collaboration may occur, such as staff in sales, purchasing and marketing, training courses are customized for each individual session in order to help our employees understand and comply with our internal regulations. The psychology of decision making is an important part in the code of conduct training, when we discuss situations that may be challenging from both a legal and ethical perspective. We train all employees in business ethics based on a concept drawn up by Professor Guido Palazzo. The course weaves together the theory of ethical blindness, which is thought to be a result of a complex interplay between decisions by individuals and various contextual factors, with ethical issues from real life. More than 90 percent of employees in sales have taken part in this training during the year in conjunction with a comprehensive and Group-wide sales training program.
We conduct operations in several geographic markets where corruption is a risk and an obstacle. In markets where we do not have our own sales organization, we work with external distributors and agents. This business model places strict demands on internal strategies and processes to describe and counter the risk of corruption. Last year, an automated process was introduced to ensure effective and risk-based due diligence on these external partners. The evaluation is both commercial and risk-based to maximize the business value for Elekta. During the year, the automated process was implemented throughout most of the Group.
The Global Compliance Officer reports at each board meeting held in connection with the interim reports, and additionally when appropriate. The board is informed of the various activities in the anti-corruption program. An extensive plan covering anti-corruption efforts is presented each year to the board for approval. The board is also regularly informed about the status of internal investigations and where applicable about external investigations that concern Elekta or any of Elekta's business partners.
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• Compliance committee set up as decision-making body for follow-up and decisions on measures as a result of internal investigations
During the year, we began to strengthen our processes in procuring and governing suppliers. By building on the existing foundation for supplier governance, we have now set up a new global sustainable sourcing program and over the next few years we will focus on establishing and implementing the program, to ensure that suppliers manage areas such as business ethics, human rights, the environment and staff in line with Elekta's code of conduct. The control of conflict minerals is also an important component for inclusion in the program. A pilot project was previously completed and work moving forward will ensure that tungsten in particular, which Elekta uses large amounts of, does not come from non-certified smelters.
The program will be risk-based and audits will use a clear process involving both internal and external auditors. There is zero tolerance of: child labor, discrimination, forced labor, life-threatening workplaces, a refusal to be transparent and of bribes and corruption.
Elekta has reinforced its efforts in respect of human rights throughout the entire business and in the supply chain through the "Elekta modern slavery and human trafficking statement". The policy is available at www.elekta.com.
For many years, we have strived to continuously reduce the environmental impact of our operations and from our products. Elekta's environmental policy includes areas such as resource consumption during production, reducing emissions to air and water and, as far as possible, avoiding the use of environmentally hazardous materials. Elekta's greatest environmental impact arises from electricity use in production processes and from the heating of premises, as well as transportation and business travel. Activities related to this include Elekta's changed travel policy, which in Sweden has helped to reduce business trips by air by 22 percent, corresponding to a reduction in CO2 emissions related to air travel by 34 percent. Another example is the active efforts made at our UK plant to optimize the use and recycling of packaging, which besides reducing environmental pressure has the potential to result in cost-savings of more than GBP 50,000 per year and improved efficiency at the plant.
Global Sustainability Manager, Elekta, since February 2017. Broad international background, including the role of Responsible Sourcing Manager Europe, Africa and the Middle East at Electrolux.
The opportunity to strategically develop the excellent work in sustainable business that is taking place in the organization. Elekta has a fantastic foundation considering the aim of its business operations and it feels rewarding to be part of working to provide the best possible cancer care for everyone.
Sustainability is a natural part of all operations, and here it is about ensuring that Elekta's prioritized focus areas in sustainable business have a role in all processes. Sustainability is not a separate issue but must be integrated into daily work by each employee.
I have, together with purchasing, just created the framework for the sustainable sourcing program. The key elements in this are risk-based strategy, training, audits performed by internal and external auditors and collaboration. One important success factor is that the program is naturally integrated into the purchasing process, and is regularly monitored against clear targets.
Which sustainability issues do you see as the most important for your industry in the future? I believe a key issue for R&D is to achieve the highest
possible efficiency with the lowest possible environmental impact, as well as working toward a more circular life cycle for products. Strategic partnerships will become more important to increase the availability of cancer care to all people.
The dedication of our management and employees is key to our customer satisfaction. A high level of competence, true commitment and the ability to adapt are all essential in Elekta's successful change of its operations in response to the change of customer needs and expectations. Each part of our value chain is equally important for customer satisfaction. With 3,600 employees in 31 countries, there are substantial opportunities to utilize both local and group wide expertise.
A flexible organization and a long-term sustainable supply of expertise is needed if the organization is to function as effectively as possible, in line with Elekta's strategic priorities (read more on pages 16–17). To better utilize synergies and to improve the cohesiveness and efficiency of processes, Elekta reorganized from region-based operations to process-based operations during the year. Our managers have an essential role to play in driving operations as part of the ongoing transformation. An ability to lead during change and to spur commitment among employees are important success factors if the company is to move in the right direction. Our annual
succession planning and skills development, as well as better use of internal expertise are examples of important elements to ensure that we leverage the organization's potential.
During the year, Elekta introduced new company values (refer to page 1). Implementing the values throughout the entire organization so that we carry them with us in everything we do, is an important and long-term effort. A first step was taken during the year, which included the global event "Elekta together day", where all employees discussed their role in contributing to the company's strategy and values.
They're motivated, committed and full of energy, but these aren't the characteristics that make the R&D staff in Shanghai a model team. Led by Jack Luo, Director of Engineering in China, the 107 men and women – yes, the engineers are almost equally divided by gender – exemplify Elekta's values.
Jack says: "We do what we say. So when we committed to delivering on the latest version of Elekta's treatment planning software, Monaco, we worked in a systematic and collaborative way to ensure we provided our part of the solution on time and with high quality." By closely working with colleagues in Germany, Japan, Switzerland, US and Sweden, the staff truly works as one team across the organization.
With an average age of just under 30, the Shanghai team is young and energetic. "We have a variety of communities covering technologies, sports, photography, even cooking. Most important is that all of us are interested in engineering innovation," Jack says smiling. "Through continuous engineering, we're continuously innovating and thinking forward; it's in our DNA."
Although it's made up of unique individuals, Jack believes his team is much like any other at Elekta. "We're highly motivated and eager to do our best," he says. "But most of all, we take pride in knowing we're making a difference to thousands of lives."
Parts of Elekta's team at a management conference in Brighton, UK.
Elekta strives to achieve a clear link between the Group's targets and the personal goals of each employee. One important tool is our performance management process, which includes all employees. During the year, the system was carefully evaluated, and as a result, we will further develop our processes for planning and evaluation for the next fiscal year and moving forward. These changes aim to increase flexibility and create the right conditions for management and our employees to clearly link goals and development initiatives to Elekta's strategy and values. Moving forward, the focus will be on individual development, including Elekta's values as an element in performance evaluation and ongoing coaching and dialogue on goals and development.
Measuring appropriately is vital in identifying improvement potential. This year's organizational health index (OHI) – a measurement of the strength of an organization in terms of motivation, leadership and innovation – shows Elekta's organization is moving in the right direction. But there are areas that need improving. All areas note a positive trend compared to the preceding year and the emphasis for future years continues to be a focus on the path ahead, namely on accountability and motivation.
Elekta promotes the health, safety and wellbeing of its employees. Elekta complies with national labor market legislation in all markets and respects the right of all employees to join a trade union and to bargain collectively in accordance with local laws and applicable conventions. The company has zero tolerance of
Executive Vice President Human Resources
all types of discrimination and strives to ensure that all employees with similar experience and qualifications receive equal pay for equal work. We expect both employees and external partners to respect and work on the basis of these principles.
Given Elekta's geographical diversity and spread, ethnical and cultural diversity among our employees is natural. However, there is still potential for better utilization of this diversity. Diversity in terms of gender is relatively positive, though there is a need to improve the gender balance and it is, accordingly, a prioritized issue at Elekta.
A focus on ecodesign from a life-cycle perspective, which includes minimizing energy consumption, material choices and facilitating upgrading and recycling as key components in the products. Assessment of product risks and aspects of safety is an integral part of the development process, which covers all phases in the product life-cycle – from installation to handling and use. The focus moving forward is continued development of innovative and energy-efficient products, which help hospitals and clinics reduce energy consumption and costs.
1
2
3
4
5
Elekta currently procures direct materials from about 600 suppliers, of which some 75 percent of the purchase/delivery value is from the UK, Western Europe and North America. The remainder is primarily from China, Eastern Europe and Japan. Elekta's code of conduct and anti-corruption policy are included in all standard contracts. A risk assessment of all suppliers is conducted each year. This annual review results in a supplier audit plan, for the upcoming 12 months. A review of quality, cost development and delivery performance is conducted each month. A dialogue process is started if the specified requirements are not met. The focus moving forward is to build up and implement a global sustainable sourcing program. The initial focus is on suppliers of direct materials to Elekta's manufacturing. The control of conflict minerals is an important part of the program. Purchasing is responsible for implementing the program together with support from the Global Sustainability Manager.
Elekta has three production units in China and Europe and all facilities are certified in accordance with the environmental management system ISO 14001. The units primarily assemble, test and perform quality assurance, which means that their environmental impact is limited. Sulphur hexafluoride (SF6), which is a necessary component in generating the radiation within linear accelerators, can result in emissions with a strong impact on the environment if the gas is emitted into the atmosphere. Therefore, one important part of Elekta's environmental work is to monitor the use of SF6 in manufacturing. The focus moving forward is to reduce energy consumption and continue to control the use of SF6.
Transport and business travel account for a significant portion of Elekta's environmental impact. A group-wide logistics platform, Logistics control tower, is used to reduce the amount of transportation, control the freight distribution between various transport modes, reduce packaging sizes and streamline the delivery of spare parts. The focus moving forward is to implement the logistics platform for remaining units, further increase the use of remote services, which enable updating software, and diagnosis and remotely rectifying system problems. Additional focus areas are to reduce the number of flights, for example, by using web conferencing and by improving the control and reporting of greenhouse gas emissions.
The highest possible level of safety in each part of the value chain. Elekta offers in-depth training in how the products work and should be used. The user is also supported by automatic security messages and checks built into the software. Energy-efficient products and optimization of energy use and resources help to reduce the environmental footprint and costs for both Elekta and our customers. There will be a continued focus moving forward on innovation and energy-efficient products. Elekta's linear accelerators currently use about 30 percent less energy than comparable devices in the market.
Elekta B-shares have been listed on the NASDAQ Stockholm since 1994. Total number of registered shares on April 30, 2017 was 382,568,409 whereof treasury shares amounted to 1,541,368 series B-shares. Total trading in Elekta shares on NASDAQ Stockholm during the period May 1, 2016 – April 30, 2017 amounted to 327.1 million shares (633.8), corresponding to 85 percent (166) of the total number of shares. The average number of shares traded each day during the period amounted to 1,292,905 (2,525,252). Market capitalization on April 30, 2017 amounted to SEK 34,076 M (22,382), an increase by 52 percent.
| 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 24 for more information on Elekta's share capital.
Elekta's goal is to provide shareholders with a favorable return and value growth. The policy is to distribute at least 30 percent of profit for the year in the form of dividend, repurchase of shares or comparable measures. A dividend decision is based on Elekta's financial position, earnings trend, growth potential and investment needs. For 2016/17, the board proposes, in accordance with the Company's dividend policy, a total dividend of SEK 1.00 (0.50) per share. Total dividend amounts to approximately SEK 382 M and 306 percent of net profit for the year. The board also proposes the dividend to be divided into two payments. See page 67 for more information on dividend.
The board intends to propose to the annual general meeting 2017 to renew the board's authorization to repurchase shares in Elekta AB. The proposal limits the number of shares to be repurchased to a maximum of 10 percent of the number of shares outstanding in Elekta AB.
The annual general meetings in 2009–2016 have resolved to adopt share programs, called performance share plans. Performance share plan 2013/15, resolved by the annual general meeting in 2013, was concluded during the year. Outstanding programs as per April 30, 2017 were performance share plan 2014/17, 2015/18 and 2016/19 respectively. The resolutions entailed that the conditions and the guidelines stated in the respective plans shall form the basis for the receipt of shares by key employees of Elekta upon fulfillment of certain performance requirements during the periods 2014/15–2016/17, 2015/16–2017/18 and 2016/17–2018/19, respectively. The scope of performance share plans 2014/17, 2015/18 and 2016/19 are summarized in the tables below. See Note 5 for more information on the plans.
| 2014/17 | 2015/18 | 2016/19 | |
|---|---|---|---|
| Originally designated number of shares | 976,726 | 289,284 | 280,386 |
| Share price used for calculation of theoretical value, SEK |
75 | 56 | 77 |
| Allotment of share | 2017-09-21 | 2018-09-16 | 2019-09-14 |
| Number of shares as of April 30, 2017 | 691,480 | 265,177 | 280,386 |
Under the performance share plan 2014/17, the performance targets are measured and earned by one-third each financial year from 2014/15 until 2016/17. The results for the 2016/17 financial year, as disclosed in the table below, did not meet the minimum performance level to deliver any performance shares.
| 2016/17 | Allocation of performance shares |
|||||
|---|---|---|---|---|---|---|
| Financial target | Mini mum, % |
Maxi mum, % |
Actual, % |
Out come, % |
Weight, % |
Alloca tion, % |
| Adjusted EBITA growth 2016/17 vs. 2015/16 |
4 | 21 | 1 | 0 | 50 | 0 |
| Business volume growth 2016/17 vs. 2015/16 |
–2 | 1 | –4 | 0 | 50 | 0 |
| Total allocation of performance shares |
0 |
In April 2012 Elekta conducted an issue of convertible bonds, which matured in April 2017. The issue raised approximately SEK 1,894 M for the Company, before transaction costs. The matured loan was repaid with an amount of SEK 1,820 M. The conversion price was SEK 97.50 and bondholders had the right to require conversion into shares at any time until March 28, 2017. As per April 30, 2017, a total of 730,769 A-shares and 30,960 B-shares had been subscribed through conversion of convertible bonds into shares, whereof 730,769 of A-shares and 8,593 of B-shares were converted in fiscal year 2016/17. When the convertible matured the registrated number of shares of series A were 14,980,769 and the number of registrated shares of series B were 368,587,640.
| Shareholding, No. of shares |
No. of share holders |
Percent age of share holders |
No. of shares |
Percent age of share capital |
Average No. per share holder |
|---|---|---|---|---|---|
| 1–500 | 15,433 | 58.7% | 2,585,696 | 0.7% | 168 |
| 501–1,000 | 3,858 | 14.7% | 3,177,146 | 0.8% | 824 |
| 1,001–10,000 | 6,009 | 22.9% | 18,140,729 | 4.7% | 3 ,019 |
| 10,001–100,000 | 731 | 2.8% | 19,765,422 | 5.2% | 27,039 |
| 100,001– | 254 | 0.9% | 339,899,416 | 88.6% | 1,338,187 |
| Total | 26,285 | 100.0% | 383,568,409 | 100.0% | 14,593 |
Source: Euroclear Sweden
| Percentage of | ||||
|---|---|---|---|---|
| Owner | No. of shares | capital | votes | |
| Laurent Leksell and companies | 24,037,393 | 6.3% | 30.6% | |
| Fourth Swedish National | ||||
| Pension Fund | 22,707,041 | 5.9% | 4.4% | |
| AMF Pensionsförsäkring | ||||
| and AMF Fonder | 21,036,410 | 5.5% | 4.1% | |
| Sweden Robur Funds | 20,882,624 | 5.4% | 4.0% | |
| JPM Chase NA | 17,857,522 | 4.7% | 3.4% | |
| Nordea Investment Funds | 17,744,273 | 4.6% | 3.4% | |
| Alecta | 12,939,000 | 3.4% | 2.5% | |
| Second Swedish National | ||||
| Pension Fund | 11,074,560 | 2.8% | 2.1% | |
| Skandia | 8,607,096 | 2.2% | 1.7% | |
| State Street Bank & | ||||
| Trust Com. Boston | 6,392,781 | 1.7% | 1.2% | |
| Other | 220,289,709 | 57.5% | 42.6% | |
| Total | 383,568,409 | 100.0% | 100.0% |
Source: Euroclear Sweden and Finansinspektionen
The table on page 44 lists the 10 largest known shareholders in Elekta AB as of April 30, 2017. Foreign ownership was approximately 44 (40) percent. Foreign holdings which are held by trustees may include other large shareholders with undisclosed holdings, even if no other foreign shareholder has declared holdings above 5 percent.
| Total number | Total share | ||
|---|---|---|---|
| Year | Transaction | of shares | capital |
| 1994 | New issue | 7,397,180 | 36,985,900 |
| 1994 | Exercise of warrants | 7,897,180 | 39,485,900 |
| 1997 | New issue | 10,497,451 | 52,487,255 |
| 2000 | New issue | 27,853,617 | 139,268,085 |
| 2001 | Conversion of debentures | 31,661,867 | 158,309,335 |
| 2001 | Exercise of warrants | 31,678,867 | 158,394,335 |
| 2002 | Exercise of warrants | 32,181,742 | 160,908,710 |
| 2003 | Exercise of warrants | 32,647,067 | 163,235,335 |
| 2003 | Conversion of debentures | 32,781,267 | 163,906,335 |
| 2003 | Exercise of warrants | 32,953,967 | 164,769,835 |
| 2003 | Redemption of shares | 31,066,254 | 155,331,270 |
| 2004 | Exercise of warrants | 31,567,454 | 157,837,270 |
| 2005 | Exercise of warrants | 31,596,236 | 157,981,180 |
| 2005 | Bonus issue | 31,596,236 | 189,577,416 |
| 2005 | Split 3:1 | 94,788,708 | 189,577,416 |
| 2005 | Cancellation of repurchased shares | 94,114,008 | 188,228,016 |
| 2005 | Exercise of warrants | 94,194,372 | 188,388,744 |
| 2006 | Exercise of warrants | 94,451,456 | 189,902,912 |
| 2006 | Redemption of shares | 93,649,756 | 187,299,512 |
| 2006 | Exercise of warrants | 93,741,598 | 187,483,196 |
| 2007 | Exercise of warrants | 93,880,090 | 187,760,180 |
| 2007 | Conversion of debentures | 93,900,016 | 187,800,032 |
| 2007 | Exercise of warrants | 92,272,445 | 187,806,632 |
| 2007 | Cancellation of repurchased shares | 93,903,316 | 184,544,890 |
| 2008 | Exercise of warrants | 93,075,863 | 186,151,726 |
| 2008 | Cancellation of repurchased shares | 92,124,563 | 184,249,126 |
| 2009 | Exercise of warrants | 92,237,944 | 184,475,888 |
| 2010 | Exercise of warrants | 94,188,044 | 188,376,088 |
| 2011 | Exercise of warrants | 94,769,763 | 189,539,526 |
| 2012 | Exercise of warrants | 95,701,670 | 191,403,340 |
| 2012 | Split 4:1 | 382,806,680 | 191,403,340 |
| 2012 | Conversion of convertible loan | 382,807,329 | 191,403,665 |
| 2013 | Conversion of convertible loan | 382,828,114 | 191,414,057 |
| 2014 | Conversion of convertible loan | 382,828,765 | 191,414,383 |
| 2015 | Conversion of convertible loan | 382,829,045 | 191,414,523 |
| 2016 | Conversion of convertible loan | 382,829,047 | 191,414,524 |
| 2017 | Conversion of convertible loan | 383,568,409 | 191,784,205 |
| 2012/131) 2013/14 2014/15 2015/16 2016/17 | |||||
|---|---|---|---|---|---|
| Earnings per share | |||||
| before dilution, SEK | 3.52 | 3.01 | 1.45 | 0.36 | 0.33 |
| after dilution, SEK | 3.52 | 3.00 | 1.45 | 0.36 | 0.33 |
| Cash flow per share | |||||
| before dilution, SEK | 3.17 | 1.31 | 1.78 | 1.00 | 2.69 |
| after dilution, SEK | 3.17 | 1.24 | 1.78 | 1.00 | 2.69 |
| Shareholders' equity per share | |||||
| before dilution, SEK | 14.55 | 16.39 | 17.41 | 16.79 | 17.73 |
| after dilution, SEK | 14.55 | 20.32 | 17.41 | 16.79 | 17.73 |
| Dividend, SEK | 2.002) | 2.002) | 0.50 | 0.50 | 1.003) |
| Share price, Elekta series B, April 30, SEK |
99.65 | 91.00 | 78.00 | 58.70 | 92.45 |
| Market capitalization, April 30, SEK M |
38,127 | 34,697 | 29,740 22,382 | 34,076 | |
| Lowest share price, SEK | 76.88 | 82.10 | 66.10 | 51.60 | 57.50 |
| Highest share price, SEK | 104.50 | 115.60 | 95.05 | 78.70 | 93.15 |
| Average number of shares | |||||
| before dilution, 000's | 380,672 381,277 381,287 381,288 381,306 | ||||
| after dilution4), 000's | 380,672 400,686 381,287 381,288 381,306 | ||||
| Number of shares, April 305) | |||||
| before dilution, 000's | 381,270 381,287 381,287 381,288 382,027 | ||||
| after dilution, 000's | 381,270 400,696 381,287 381,288 382,027 |
1) In September 2012 a 4:1 share split was conducted
2) Ordinary dividend SEK 1.50 and extraordinary dividend SEK 0.50
3) Proposed dividend
4) Number of shares used in the calculation of earnings per share in accordance with IAS 33
5) Number of registered shares at closing excluding treasury shares (1,541,368 per April 30, 2017)
| Three-month interim report May–July 2017/18 | 23 August, 2017 |
|---|---|
| Annual general meeting | 23 August, 2017 |
| Six-month interim report May–October 2017/18 | 1 December, 2017 |
| SEK M | 2012/13 | 2013/14 | 2014/15 | 2015/16 | 2016/17 |
|---|---|---|---|---|---|
| Net sales | 10,339 | 10,694 | 10,839 | 11,221 | 10,704 |
| Operating expenses excl. amortization, depreciation and items affecting comparability |
–7,932 | –8,393 | –9,221 | –9,417 | –8,887 |
| Depreciation | –110 | –118 | –146 | –165 | –156 |
| EBITA before items affecting comparability and bad debt losses | 2,297 | 2,183 | 1,472 | 1,639 | 1,661 |
| Bad debt losses | – 1) | – 1) | -166 | –149 | –46 |
| Amortization | –239 | –295 | –366 | –469 | –499 |
| EBIT before items affecting comparability | 2,058 | 1,888 | 940 | 1,021 | 1,115 |
| Items affecting comparability | –46 | –161 | –3 | –598 | –518 |
| Operating result | 2,012 | 1,727 | 937 | 423 | 598 |
| Financial net | –212 | –225 | –221 | –234 | –258 |
| Profit before tax | 1,800 | 1,502 | 716 | 189 | 340 |
| Taxes | –449 | –350 | –158 | –44 | –214 |
| Profit for the year | 1,351 | 1,152 | 558 | 145 | 126 |
| Attributable to: | |||||
| Parent Company shareholders | 1,340 | 1,148 | 552 | 137 | 125 |
| Non-controlling interests | 11 | 4 | 6 | 8 | 1 |
| 1) Data not available for bad debt losses. | |||||
| CASH FLOW |
| SEK M | 2012/13 | 2013/14 | 2014/15 | 2015/16 | 2016/17 |
|---|---|---|---|---|---|
| Operating flow | 1,894 | 1,692 | 1,299 | 709 | 767 |
| Changes in working capital | –24 | –417 | 524 | 461 | 1,051 |
| Cash flow from operating activities | 1,870 | 1,275 | 1,823 | 1,170 | 1,819 |
| Continuous investments | –578 | –781 | –956 | –774 | –774 |
| Cash flow after continuous investments | 1,292 | 494 | 867 | 396 | 1,045 |
| Acquisition of operations | –84 | 4 | –188 | –12 | –18 |
| Cash flow from investing activities | –662 | –777 | –1,144 | –786 | –792 |
| Cash flow after investments | 1,208 | 498 | 679 | 384 | 1,027 |
| Cash flow from financing activities | –380 | –888 | 186 | –1,303 | –55 |
| Cash flow for the year | 828 | –390 | 865 | –920 | 972 |
| SEK M | 2013-04-30 | 2014-04-30 | 2015-04-30 | 2016-04-30 | 2017-04-30 |
|---|---|---|---|---|---|
| Intangible assets | 6,424 | 6,845 | 8,174 | 8,210 | 8,704 |
| Tangible fixed assets | 487 | 624 | 881 | 803 | 795 |
| Financial assets | 236 | 359 | 371 | 364 | 308 |
| Deferred tax assets | 92 | 143 | 224 | 281 | 375 |
| Inventories | 850 | 1,078 | 1,297 | 1,135 | 936 |
| Receivables | 5,651 | 6,596 | 6,972 | 6,375 | 6,450 |
| Cash and cash equivalents | 2,567 | 2,247 | 3,265 | 2,273 | 3,383 |
| Total assets | 16,307 | 17,892 | 21,184 | 19,441 | 20,950 |
| Shareholders' equity | 5,560 | 6,257 | 6,646 | 6,412 | 6,774 |
| Interest-bearing liabilities | 4,552 | 4,486 | 6,033 | 4,950 | 5,272 |
| Interest-free liabilities | 6,195 | 7,149 | 8,505 | 8,079 | 8,905 |
| Total shareholders' equity and liabilities | 16,307 | 17,892 | 21,184 | 19,441 | 20,950 |
| 2012/13 | 2013/14 | 2014/15 | 2015/16 | 2016/17 | |
|---|---|---|---|---|---|
| Gross order intake, SEK M | n/a | n/a | 12,825 | 13,821 | 14,064 |
| Net order intake, SEK M | 12,117 | 12,253 | 11,907 | 12,880 | n/a |
| Order backlog, SEK M | 11,942 | 13,609 | 17,087 | 18,239 | 22,459 |
| Operating margin, % | 19 | 16 | 9 | 4 | 6 |
| Profit margin, % | 17 | 14 | 7 | 2 | 3 |
| Shareholders' equity, SEK M | 5,560 | 6,257 | 6,646 | 6,412 | 6,774 |
| Capital employed, SEK M | 10,112 | 10,743 | 12,678 | 11,360 | 12,046 |
| Net debt, SEK M | 1,985 | 2,239 | 2,768 | 2,677 | 1,889 |
| Equity/Assets ratio, % | 34 | 35 | 31 | 33 | 32 |
| Net debt/Equity ratio, multiple | 0.36 | 0.36 | 0.42 | 0.42 | 0.28 |
| Interest cover ratio, multiple | 12.6 | 10.6 | 6.7 | 4.4 | 6.0 |
| Return on shareholders' equity, % | 27 | 21 | 9 | 2 | 2 |
| Return on capital employed, % | 21 | 17 | 9 | 4 | 5 |
| Investments in tangible and intangible assets, SEK M | 544 | 726 | 982 | 874 | 681 |
| Depreciation and amortization, SEK M | –349 | –414 | –512 | –634 | –655 |
| Operational cash conversion, % | 79 | 60 | 126 | 111 | 145 |
| Average number of employees | 3,336 | 3,631 | 3,679 | 3,677 | 3,581 |
EQUITY AND EQUITY/ASSETS RATIO
Equity/Assets ratio
CASH FLOW AFTER CONTINUOUS INVESTMENTS
12/13 13/14 14/15 15/16 16/17
Continuous investments Change in working capital Operating flow
1) Data not available for the years 12/13 and 13/14
Elekta AB (publ) 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 a successful business operation since it provides opportunities for maintaining confidence among customers, patients, shareholders, authorities and other stakeholders. Elekta's corporate governance report 2016/17 was prepared by the Company'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 the Company's external auditor.
Elekta AB (publ) is referred to as "Elekta AB", "the Company" or "the Parent Company" and the Elekta Group, which includes Elekta AB and its subsidiaries, is referred to as "Elekta" or "the Group".
Elekta has implemented and complied with the Swedish corporate governance code (the corporate governance code) with one exception during the fiscal year of 2016/17. Elekta's nomination committee resolved to appoint the chairman of the board of directors, 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 effectively lead the work of the nomination committee in order to achieve the best result for the Company's shareholders. According to point 2.4 of the Corporate Governance Code, the chairman of the board of directors is not to be the chairman of the nomination committee.
Elekta is a global medical technology company pioneering significant innovations and clinical solutions for treating cancer and brain disorders. Our primary purpose is to help clinicians improve patients' lives and Elekta's clinical solutions contribute to treatment of close to 1.5 million patients annually, all around the world. Thus, we have a major responsibility towards our customers and their patients.
As a manufacturer of medical devices, Elekta's operations are governed by requirements and standards established by regulatory authorities in various countries, as well as by our own policies and procedures, including our code of conduct. Elekta is furthermore listed on NASDAQ Stockholm and has an international shareholder base, which contributes to the high demands we set on Elekta's governance, including risk management and internal control.
The board emphasizes its work with Elekta's strategy and international development, as well as corporate governance. The purpose of Elekta´s governance framework is to create, preserve, and realize value for our shareholders as well as to provide and secure a sustainable and reliable operation.
During the past few years, Elekta has therefore implemented and strengthened our internal control framework, and reinforced group functions for risk and quality management further. This will enable us to manage and mitigate risks in a more structured manner. We are also very pleased with our updated
and well established compliance program. Elekta has zero tolerance towards all actions that do not comply with or follow regulations, our code of conduct and other business policies. We strive for, and
expect, the highest ethical business standard.
Elekta completed a transformation program during the year, which was launched in June 2015. The aim of the program was to secure improved financial performance as well as operational excellence. All activities included in the program have laid a foundation needed in order to achieve long-term profitable growth.
We on the board continue to support and monitor the company to ensure that we reach our strategic and financial objectives. We are fully confident in that the actions that are being established and implemented by executive management will contribute to a positive future, and the further development of Elekta.
July 10 2017
Laurent Leksell Chairman of the board
At the end of the fiscal year, Elekta AB had 26,285 shareholders, of whom 56 percent were domiciled in Sweden. At April 30, 2017, the largest shareholders were Laurent Leksell with companies, with 30.6 percent of the votes, and the Fourth Swedish National Pension Fund with 4.4 percent of the votes. Read more about the share and shareholders on pages 44–45.
Elekta AB's B share is listed on NASDAQ Stockholm. On April 30, 2017, 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 shareholders, which is the forum in which shareholders may exercise influence, Series A shares entitle the holder to 10 votes, while Series B shares carry one vote each. Read more about the share and shareholders on pages 44–45.
Elekta's goal is to provide shareholders with a favorable return and value growth. The policy is to distribute at least 30 percent of profit for the year in the form of dividends, repurchase of shares or comparable measures. A dividend decision is based on Elekta's financial position, earnings trend, growth potential and investment requirements.
The general meeting of shareholders is Elekta AB:s highest decision-making body. In addition to the annual general meeting of shareholders (ordinary general meeting of shareholders), extraordinary general meetings 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 10 percent of the shares. Decisions are normally made by a simple majority, and in elections, the person receiving the most votes is deemed elected. The Swedish companies act requires certain decisions, such as amendments of the articles of association and the transfer of shares to employees participating in equity-based long-term incentive programs, to be made by a qualified majority. Disclosures on direct or indirect shareholdings in Elekta AB representing 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 of own shares are set out on page 27.
The annual general meeting of shareholders is held in Stockholm, Sweden. The date and venue for the meeting will be announced on Elekta's website www.elekta.com not later than in connection with the third interim report May–January. Notification of the annual general meeting 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.
Shareholders who cannot attend in person may be represented by an authorized proxy. Only shareholders included in the shareholder register are entitled to vote. Shareholders with trustee-registered shares who wish to vote must request that they be entered in the shareholder register by the record date for the annual general meeting. The annual general meeting is held in Swedish, but all relevant documentation is also available in English. At the annual general meeting, shareholders have the opportunity to ask questions. Elekta always strives to ensure that the members of the board of directors, the executive management and the external auditor are present at the annual general meeting.
The 2016 annual general meeting of shareholders was held in Stockholm on September 1, 2016. The meeting was attended by 330 shareholders, either personally or by proxy, corresponding to approximately 65 percent of the votes in the Company. All members of the board of directors were present at the meeting. The 2016 annual general meeting of shareholders resolved on the following:
Further information regarding the annual general meeting 2016, including the minutes, is available at www.elekta.com. No other general meetings of shareholders were held during the 2016/17 fiscal year.
The 2017 annual general meeting of shareholders will be held in Stockholm, Sweden, at Moderna Museet on August 23, 2017 at 2:00 pm. More information regarding the 2017 annual general meeting of shareholders is available at www.elekta.com.
The 2016 annual general meeting of shareholders resolved that the nomination committee for the 2017 annual general meeting of shareholders would be appointed through a procedure whereby the chairman of the board of directors, before the end of the second quarter of the fiscal year, would contact the four largest shareholders in terms of voting rights, besides the shareholder or shareholders the chairman of the board of directors may represent as of the last banking day of September. These shareholders would be given the opportunity to appoint one person each who, together with the chairman of the board of directors, would constitute the nomination committee. The chairman of the nomination committee would, unless the nomination committee unanimously decides otherwise, be the member of the nomination committee appointed by the largest shareholder in terms of voting rights. The nomination committee would be entitled to appoint a person as a co-opted member to the nomination committee. Such a co-opted member would not participate in the nomination committee's resolutions. No remuneration would be paid to the members of the nomination committee.
The composition of the nomination committee for the 2017 annual general meeting of shareholders was announced in a press release on November 9,
| MAY JUNE JULY AUGUST SEPTEMBER OCTOBER |
|---|
• Adoption of budget 16/17
Adoption of the Company code of conduct and relevant policies, directives and instructions
The nomination committee for the 2017 annual general meeting of shareholders comprises:
Laurent Leksell, chairman of the board of directors and representing his own and related parties' holdings
The nomination committee has appointed Laurent Leksell as chairman of the nomination committee. The nomination committee has further resolved to co-opt Caroline Leksell Cooke without voting rights to the nomination committee. 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 role of the nomination committee ahead of the annual general meeting of shareholders includes: Proposing a chairman of the annual general meeting of shareholders, chairman of the board of directors, members of the board of directors, auditor, fees to the board of directors and fees to the auditor and the procedure for appointing the nomination committee.
The nomination committee held four meetings prior to the 2017 annual general meeting of shareholders. For the composition of the board of directors, the nomination committee paid particular attention to the Company's strategy, operations, stage of development and other conditions. The composition also meets the requirements stipulated in item 4.1 of the corporate governance code regarding diversity and a breadth of qualifications, experience and background among board members. The nomination committee does not yet believe that the composition of the board of directors fully meets the requirement of striving for gender balance on the board. Of the nine board members, three are women and six men, meaning that the percentage of women is 33 percent (unchanged). The nomination committee believes that it is important to continue to strive for gender balance on the board. As a diversity policy, the nomination committee has applied rule 4.1 of the code when preparing its proposal.
Annually an evaluation of the board of directors' work, expertise, composition and independence of its members is initiated by the board of directors, partly to assess the preceding year, partly to identify areas for development for the board of directors. The evaluation is performed with support from an evaluation form and by discussions as well as by individual interviews of the board members performed by the chairman of the board. The conclusion is presented to the nomination committee by the chairman of the board.
The nomination committee's complete proposals for the 2017 annual general meeting of shareholders and reasoned statement is published in the notice convening the 2017 annual general meeting of shareholders, which is available at www.elekta.com
The external auditor of Elekta AB is appointed by the annual general meeting of shareholders for a period until the end of the next annual general meeting of shareholders.
The 2016 annual general meeting of shareholders re-elected PwC as external auditor with Johan Engstam as auditor in charge. PwC has been the external auditor of Elekta AB since the 2012 annual general meeting of shareholders.
Johan Engstam was born in 1966 and is an authorized public accountant. During the year, he was also the auditor in charge of MedCap AB, Tobii and Astra Zeneca AB. He has no assignments in any other company that affect his independence as the auditor in charge of Elekta AB.
• Approval of direction in the budget directive
The audit engagement includes the audit of the annual report and consolidated accounts of Elekta AB, the proposed appropriations of the Company's profit or loss and the administration of the board of directors and the President and CEO of Elekta AB. The audit engagement also includes reviewing whether the guidelines for remuneration of senior executives adopted by the annual general meeting of shareholders have been complied with. The audit engagement also includes a review of the interim report for the second quarter, as well as a statutory audit of the corporate governance report.
PwC has performed the audit of Elekta for the 2016/17 fiscal year, based on a risk-based external audit plan, resulting in the unqualified auditor's report and statement, which are available on page 106-108 and at www.elekta.com.
During the year, the audit committee updated guidelines regarding the type of services in addition to audit services, known as permissible nonaudit 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. Permissible non-audit services 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.
Non-audit services procured from the external auditor during the 2016/17 fiscal year adhered to the guidelines established and comprised tax consultancy and other services such as consultancy work related to internal control and accounting principles.
The fees to the external auditor for the 2016/17 fiscal year are reported in Note 8.
The board of directors of Elekta AB ("the board") is appointed by the annual general meeting of shareholders for a period until the end of the next annual general meeting of shareholders. According to the articles of association of Elekta AB, the board is to have between three and 10 members with no more than five deputy members. There are no other rules in the articles of association concerning the appointment or removal of members of the board.
The board of directors comprises nine members. The members of the board are Laurent Leksell, who is also the chairman of the board, Luciano Cattani, Annika Espander Jansson, Siaou-Sze Lien, Johan Malmquist, Tomas Puusepp, Wolfgang Reim, Jan Secher and Birgitta Stymne Göransson. There are neither deputy board members nor employee representatives on the board.
The general counsel serves as secretary for the board.
The composition of the board meets applicable independence requirements as seven of the nine members of the board have been deemed independent in relation to the Company, the executive management and major shareholders. These seven members are: Luciano Cattani, Annika Espander Jansson, Siaou-Sze Lien, Johan Malmquist, Wolfgang Reim, Jan Secher and Birgitta Stymne Göransson.
Attendance at board meetings is shown on pages 58–59.
The board's work is regulated by the Swedish Companies Act, the articles of association, the corporate governance code and the working instructions for the board of directors.
The board is responsible for the organization of Elekta AB and the management of the Company's operations 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 instructions from the board. The responsibilities for the board also include:
• Establishing overall goals and strategy
The working instructions for the board of directors establish that the board is to:
Within the board, there is no special distribution of responsibilities among the members of the board in addition to the duties that the board has delegated to the executive compensation and capability committee and to the audit committee respectively.
Risk management, internal governance and internal control are key components of Elekta's strategy and management processes. Elekta's board of directors assumes the overall responsibility for establishing an efficient risk management, internal governance and internal control system. The responsibility for maintaining the system is delegated to the President and CEO, who is assisted by the executive management and specifically established committees, functions and employees. Functions that are responsible for risk management, internal governance and internal control continuously report on the status directly to the board of directors and/or the audit committee.
Elekta's risk work focuses on assessing and managing strategic risks, operating risks, legal and regulatory risks, market and external risks and financial risks. A risk assessment is performed once a year in order to identify the risks related to the achievement of established objectives, compliance with laws and regulations, and financial reporting. The board of directors also manages subjects for decision that include risk management in, for example, Elekta's strategy and management processes and business decisions. Find out more about risk management in the board's report on risk management and internal control over financial reporting on pages 56–57.
During the 2016/17 fiscal year, the board held 12 minuted meetings. Attendance at board meetings is shown on pages 58–59. These meetings are normally held at the Elekta's head office in Stockholm. 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 work of the board including important agenda items in 2016/17 is on page 50–51.
Appointment of the executive compensation and capability committee The board shall appoint an executive compensation and capability committee ("the executive compensation and capability committee" or "ECCC"), which shall consist of at least two members of the board, of whom at least one shall be independent of the Company and its executive management.
The executive compensation and capability committee consists of four members appointed by the board at the first board meeting following the election of the board by the annual general meeting of shareholders for a term of one year. The members of the committee are Laurent Leksell, who is also the chairman of the committee, Luciano Cattani, Siaou-Sze Lien, and Johan Malmquist. Attendance at committee meetings and independence are shown on pages 58-59. The President and CEO also attends the committee's meetings and the Group VP Human Resources serves as secretary for the committee.
The objective of the executive compensation and capability committee is to ensure a fair and equitable remuneration scope and structure for managers at Elekta. Such remuneration should be designed to contribute to generating maximum value for shareholders and customers, while maintaining the Group's market competitiveness. It should further be designed to ensure the Group's ability to attract, motivate and retain managers who are key to achieving the business objectives of the Group. This applies to remuneration structures for the executive management and for other remuneration structures targeting all Elekta managers. The objective of the committee is also to ensure succession planning and reviews of management succession plans for senior management levels and other Group-critical positions, and to ensure gender and diversity analysis and actions. Furthermore, the objective of the committee is to ensure senior management competencies and capabilities including organization development programs. The committee works in accordance with directives for the executive compensation and capability committee adopted by the board. The committee keeps the board regularly informed and refers matters to the board for decision as necessary.
During the 2016/17 fiscal year, the executive compensation and capability committee held eight minuted meetings. Attendance at committee meetings is shown on pages 58–59. The most important agenda items at the meetings were:
The board shall appoint an audit committee, which shall consist of at least three members of the board with at least one qualifying as a financial expert. The majority of the committee members are to be independent of the Company and its executive management. At least one member of the committee who is independent of the Company and its executive management shall also be independent of the Company's major shareholders.
The audit committee consists of four members, which were appointed by the 2016 annual general meeting of shareholders for the period until the next annual general meeting. The members of the committee are Birgitta Stymne Göransson, who is also the chairman of the committee, Jan Secher, Wolfgang Reim and Annika Espander Jansson. Independence of the members is shown on pages 58–59.
The President and CEO, the CFO and the Chief Audit Executive also attend the committee's meetings as well as the external auditor as applicable. The general counsel serves as secretary for the committee.
The objective of the audit committee is to monitor the Group's financial reporting and the effectiveness of the Group's internal control, internal audit and risk management. The objective is also to keep itself informed about the external audit of the annual report and consolidated report of Elekta AB as well as to review and monitor the impartiality and independence of the external auditor, and pay particular attention if the external auditor provides the Group with services other than audit services. Furthermore, the objective is to assist the nomination committee in preparing the proposal to the annual general meeting of shareholders regarding election of external auditor. The committee works in accordance with working instructions for the audit committee adopted by the board. The committee keeps the board regularly informed and prepares matters to the board for decision.
During the fiscal year 2016/17, the audit committee held four minuted meetings. Attendance at committee meetings is shown on pages 58–59. The most important agenda items at the meetings were:
The board appoints Elekta AB's President and CEO.
Richard Hausmann was appointed President and CEO of Elekta AB on June 10, 2016. More information about Richard Hausmann is provided in the presentation of the executive management on page 60. Richard Hausmann succeeded Tomas Puusepp. More information about Tomas Puusepp is available in the presentation of the board of directors on pages 58–59. Remuneration of the President and CEO is described in Note 5.
The President and CEO is responsible for the day-to-day management of the Company in accordance with applicable laws and regulations as well as internal steering documents including the working instructions for the Chief Executive Officer 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 management and makes decisions in consultation with the members of the executive management.
The President and CEO appoints the members of the executive management following approval by the board of directors.
As of April 30, 2017, Elekta's executive management comprised the President and CEO, the Chief Financial Officer ("CFO"), the Chief Commercial Officer ("CCO"), Chief Marketing Officer ("CMO"), the Chief Operating Officer ("COO"), Chief Strategy Officer ("CSO"), Chief Technology Officer ("CTO"), the Executive Vice President Region North Americas, the Executive Vice President Legal and Compliance, and the Executive Vice President Human Resources. During the 2016/17 fiscal year, the Executive Vice President Global Engineering role was excluded from the executive management as per November 1, 2016, and the marketing and strategy function was divided between Chief Marketing Officer and Chief Strategy Officer as per February 13, 2017. A presentation of the executive management is provided on page 60. Remuneration of the executive management is described in Note 5.
| Management | ||||
|---|---|---|---|---|
| Product | Customer | Supply | Support | |
| lifecycle | relationship | chain | ||
| management | management | management |
The President and CEO is responsible for and leads the work and meetings of the executive management. The executive management makes joint decisions following consultation with various parts of the Group.
The executive management meetings are normally held each week by telephone and with regular intervals in conjunction with visits to the Group's various offices and facilities.
The most important agenda items at the meetings were strategic and operational issues such as product development, acquisitions/divestments, investments, market development, organization, long-term plans and budget, and monthly and quarterly business and financial reviews.
The compliance function is headed by a Global Compliance Officer.
The compliance function's responsibilities are to review and evaluate compliance issues within the organization and ensure that management and employees of the Group are in compliance with the rules and ethical regulations in the most significant risk areas such as anti-corruption and interactions with healthcare professionals, export control and competition law. Since 2017, the function is also responsible for implementing the program
to secure personal data management within the Group. Additionally, sustainability issues have been included within the compliance function since 2017. Elekta's Global Compliance Officer reports functionally to the General Counsel but functions as an independent and objective body ensuring compliance concerns are being appropriately resolved and reported to the board of directors.
Focus areas during the year included the following:
Since the audit committee monitors regulatory compliance in the Group on behalf of the board of directors, it is necessary to have regular information about how the Company manages and prevents compliance risks. It is important that the board is well informed of both the preventive measures and any weaknesses in order to ask the right questions and remain a critical auditor of the operations.
Since 2017, Elekta's Global Compliance Officer presents the progress of the risk-based compliance program at each quarterly committee meeting, and reports on any incidents and the status of ongoing investigations. A written compliance report is submitted at every information meeting. The audit committee constantly monitors, on behalf of the board, any matters that may require greater focus and Elekta's Global Compliance Officer is present at each ordinary meeting with the audit committee.
In addition to continuous reporting, the board has during the year evaluated and approved the long-term plan for preventive anti-corruption efforts with clear goals for the coming fiscal year. The long-term plan is drawn up based on risk analyses and the best international practise.
The quality assurance (QA) and regulatory affairs (RA) functions are headed by Vice President Quality Assurance and Vice President Global Regulatory Affairs respectively, after a division of the quality and regulatory affairs (Q&RA) function during the 2016/17 fiscal year.
The functions' responsibilities include supporting management in its efforts to comply with regulatory requirements for products, quality systems and market entry. The functions provide transparency and interact with management and external regulatory bodies. The functions are responsible for the quality system infrastructure and compliance, product clearances and approvals, and post market vigilance and recall reporting. The functions are also responsible for and conduct internal audits of the quality system and regulatory compliance. Vice President Quality Assurance and Vice President Global Regulatory Affairs, respectively, report to the Chief Operating Officer.
The internal audit function is appointed by and reports to the audit committee and the board of directors.
The internal audit function is under the supervision of the Chief Audit Executive. The internal audit function is an independent and objective assurance and consulting activity. Elekta's Chief Audit Executive reports functionally to the audit committee, and administratively to the Chief Financial Officer (CFO). The scope of the internal audit function encompasses the examination and evaluation of the adequacy and effectiveness of Elekta's governance, risk management and internal control processes as well as the quality of performance in carrying out assigned responsibilities to achieve the Group's objectives as part of the assurance activity. It also encompasses consulting activities and advisory support in relation to Elekta's governance, risk management, and internal control processes.
The internal audit function works in accordance with the guidelines for the internal audit function adopted by the board.
The board and its committees assume the overall responsibility for establishing effective governance of Elekta including risk management and internal control. The responsibility for designing, implementing and conducting effective governance including risk management and internal control is delegated to the President and CEO, who is assisted by the executive management, other operational managers and personnel, the so-called "first line of defense".
In addition, specifically established functions such as compliance, quality assurance, regulatory affairs, internal control, etc. provide guidance and assessments on governance, risk management and internal control related to their areas of expertise, the so-called "second line of defense,". The internal audit function, the so-called "third line of defense", provides independent and objective assurance and advisory support to management on governance, risk management and internal control.
Elekta has defined risk management and internal control as a process, affected by the board and its committees, the President and CEO, the executive management and other managers and personnel, and designed to provide reasonable assurance regarding the achievement of objectives relating to:
• Reliability, timeliness and transparency of internal and external financial and non-financial reporting
• Adherence to applicable laws and regulations, and internal steering documents
Risk management and internal control over financial reporting is a sub-set of the risk management and internal control process. The risk management and internal control process is applicable to all Elekta operations, including business areas, regions, functions, management, people, processes and technology.
All business activities involve risks from external and internal sources. Risk is defined as the possibility that an event will occur and adversely affect the achievement of objectives. Risks that are effectively managed may lead to opportunities and value creation, while risks that are not could result in damage and losses.
Elekta's internal governance and control environment comprise its values, code of conduct, risk strategy, organization, roles and responsibilities, delegation of authority, and policies and procedures. Policies and procedures clarify certain important aspects of the control environment such as board independence from management, a commitment to attract, develop and retain competent individuals as well as performance measures, incentives and rewards to drive accountability for performance.
Elekta has adopted a number of steering documents at group-wide level:
To govern the operations, Elekta has established a business management system with internal steering documents. The most important elements of this system are:
In addition to group-wide steering documents and the business management system, operations are also governed by external laws, regulations, rules and guidelines, such as the Swedish companies act, NASDAQ Stockholm rule book for issuers, Swedish corporate governance code, and requirements and standards from supervisory authorities in the field of medical technology.
The board of directors' report on risk management and internal control over financial reporting has been prepared in accordance with the annual accounts act and the Swedish corporate governance code, and constitutes an integral part of the corporate governance report. The external financial reporting has been prepared in accordance with laws and regulations and applicable accounting standards, namely the International Financial Reporting 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 financial reporting is based on the 2013 updated internal control – integrated framework (the "framework"), and the enterprise risk management integrated framework (the "ERM framework"), both established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The COSO framework is based on 17 fundamental principles linked to the five components: control environment, risk assessment, control activities, monitoring, and information and communication.
The Elekta Group is governed and controlled based on the distribution of rights and responsibilities, including decision-making, among different corporate bodies according to laws and regulations as well as internal steering documents. A structure is provided through which Elekta's objectives and
the means of attaining these objectives and monitoring performance are set. The objectives reflect choices made on how the Group seeks to create, preserve and realize value for its stakeholders. Governance is twofold; it concerns both effectiveness and accountability. Effectiveness 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.
Important elements of the control environment applicable for Elekta's financial reporting are the financial guide, including the accounting policy, reporting instructions, authorization policy and finance policy. In addition, there are other important elements of the control environment for financial reporting such as the communication policy and processes and work instructions to be found in group wide steering documents and in the Elekta business management system.
Risk assessment is carried out continuously throughout the year in order to identify risks that can affect the possibility to reach targets set in relation to the strategy, the business, reporting and compliance.
Risk assessment includes identifying any risk that the qualitative characteristics of useful financial information according to IFRS may not be fulfilled or the financial reporting assertions may not be supported. Risk assessment criteria include occurrence, completeness, accuracy, cut-off, classification, existence, rights and obligations, and valuation for profit and loss and balance sheet items in the financial reporting as applicable, but also information processing relating to input, processing and recording of data. A risk assessment regarding internal control over financial reporting is performed once a year and covers profit and loss and balance sheet items in the financial reporting and related areas and processes. The work is documented in a risk map and included in risk and control matrices (RACM:s) per area and process.
Control activities mitigate the risks identified to achieve set objectives through adherence to risk tolerance levels in terms of globally defined minimum internal control requirements over financial reporting. The control activities are documented in risk and control matrices (RACM:s) 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, verifications, reconciliations, and business performance reviews, or a combination of the two.
Control activities comprise the following areas and processes:
The globally defined minimum internal control requirements over financial reporting comprise entity level controls that are regulated through Elekta's steering documents at Group-wide level, the business management system and internal control frameworks of standard controls that include general
IT controls and uniform process controls for all Elekta companies and locally defined controls where necessary. The controls included in the internal control framework are documented in RACM:s as standard models for all entities and then specifically for each individual entity. All controls in the internal control framework are based on risk assessments of financial flows that impact the financial reporting in general and more specifically for the individual entities.
Monitoring of internal control over financial reporting is carried out through ongoing evaluations, separate evaluations, or some combination of the two, to ascertain whether the five components of risk management and internal control are present and functioning. Control environment, risk assessment, control activities, monitoring and information and communication.
Ongoing evaluations are routine operations, built into processes. Monitoring takes place on a real-time basis by operational managers and personnel and periodically by management at different levels of the Group, and the audit committee and the board, and includes for example monitoring of the following:
Special evaluations may be performed through:
Instructions and budget approvals of internal control for financial reporting are conducted by the audit committee on behalf of the board of directors and require supporting documentation in the form of presentation of status, progress and solutions as well as supporting appendixes such as Internal audit reports and internal control reports. Status, progress and solutions for internal control over financial 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.
Information and communication regarding risk management and internal control over financial reporting relates to both internal and external information and communication.
Internal information about important internal steering documents for risk management and internal control over financial reporting, including and RACM:s, 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 effective design and operating effectiveness of risk management and internal control over financial reporting are channeled up the organization based on the result of the monitoring in order for management at different 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 fulfill their oversight responsibility. This communication normally takes place at the ordinary audit committee meetings and board meetings, respectively.
Elekta provides the financial markets and other stakeholders with continuous external information and communication regarding the Group's and the Company's financial performance and position in accordance with the communication policy. External information and communication regarding financial reporting is provided in the form of:
Elekta observes a silent period prior to each interim and year-end report.
During the fiscal year 2016/17, the implementation of the global internal control project, comprising the internal control framework for financial reporting, proceeded and was completed according to plan. The implementation has been validated by the internal control function. Internal audits of implementation and operational compliance were performed at a selection of implemented entities. The project is administered by a program management office with representatives from the internal audit function and the internal control function. The review of the company's internal steering documents as a basis for the company's control environment proceeded as planned during the fiscal year. Continuous information on the status and progress of the project and the results of the internal audits were addressed at the meetings of the audit committee and subsequently followed up by the board.
During the 2017/18 fiscal year, the plan is to expand the global internal control framework through the implementation of a number of additional processes and implementation at a few smaller entities currently not in scope for the internal control framework. Administration and support of the control framework as well as the identification and management of improvement measures will be carried out throughout the year. The review of the company's internal steering documents as a basis for the company's control environment will continue as planned during the fiscal years. The internal audit plan will, based on a risk perspective, have its main focus on financial reporting, operating processes, and on specific risk areas.
Laurent Leksell Luciano Cattani Annika Espander
Siaou-Sze Lien Johan Malmquist Tomas Puusepp1) Wolfgang Reim Jan Secher Birgitta Stymne
| Jansson | ||||
|---|---|---|---|---|
| First elected: | 1972 | 2008 | 2015 | 2011 |
| Board chairman Chairman of the executive compensation and capability committee |
Member of the board Member of the executive compensation and capability committee |
Member of the board Member of the audit committee |
Member of the board Member of the executive compensation and capability committee |
|
| Attendance: | 12/12 8/8 |
11/12 8/8 |
12/12 4/4 |
12/12 8/8 |
| Total fees: | 1,075,000 90,000 |
460,000 50,000 |
460,000 110,000 |
460,000 50,000 |
| Year of birth: | 1952 | 1945 | 1964 | 1950 |
| Education: | MBA and PhD from Stock holm School of Economics, Sweden |
Master of Science in Eco nomics from the University of Rome, Italy |
Bachelor of Science in Chemistry from Uppsala University/University of Michigan, and MBA in Inter national Business Manage ment from Uppsala Univer sity, Sweden |
Bachelor of Science in Physics from Nanyang University and a Master of Science in Computer Science from Imperial College in London |
| Independence: | Not independent in relation to the Company and the execu tive management and, being the Company's largest share holder, not independent in relation to major shareholders |
Independent of the Com pany and the executive management and indepen dent of major shareholders |
Independent of the Com pany and the executive management and indepen dent of major shareholders |
Independent of the Com pany and the executive management and indepen dent of major shareholders |
| Other board assignments: | Board chairman: Leksell Social Ventures Board member: Interna tional Chamber of Com merce (ICC) and Stockholm School of Economics |
– | Board member: Lifco AB, Esperio AB and Asperia AB |
Board member: Nanyang Technological University (NTU), NTU's Confucius Institute, Japfa Ltd and Singapore Corporation of Rehabilitative Enterprises (SCORE) |
| Holdings in Elekta AB: (own and closely related parties) |
14,980,769 A-shares 9,056,624 B-shares |
20,000 B-shares | 8,000 B-shares | 10,000 B-shares |
| Principal work experience and other information: |
Founder of Elekta and Exec utive Director from 2005 to 2013. Former President and CEO of Elekta during the years from 1972 to 2005. Among others, Assis tant Professor and Fac ulty member of Stockholm School of Economics, IFL and Insead Fontainebleau, and Visiting Scholar at Harvard Business School |
President for EMEA at Stryker Corporation from 2001 to 2004, Group Presi dent International at Stryker Corporation from 2005 to 2008, and Executive Vice President International Pub lic Affairs at Stryker Corpo ration from 2008 to 2010. CEO of Eucomed (European MedTech Industry Trade Association) in 2012 |
25 years' experience as an advisor and investor, as well as from executive positions within the financial markets, among others from Han delsbanken, Enskilda Securi ties, and Catella. Operational experience from the pharma ceutical industry (Pharma cia). Currently CEO at Asperia AB |
Senior Executive Coach at Mobley Group Pacific Ltd after a 28-year career at Hewlett-Packard. Until 2006, Senior Vice President, Hewlett-Packard Services for the Asia Pacific & Japan region |
| Siaou-Sze Lien | Johan Malmquist | Tomas Puusepp1) | Wolfgang Reim | Jan Secher | Birgitta Stymne Göransson |
|---|---|---|---|---|---|
| 2015 | 2013 | 2011 | 2010 | 2005 | |
| Member of the board Member of the executive compensation and capability committee |
Member of the board Member of the executive compensation and capability committee |
Member of the board | Member of the board Member of the audit committee |
Member of the board Member of the audit committee |
Member of the board Chairman of the audit committee |
| 12/12 8/8 |
11/12 | 12/12 4/4 |
12/12 4/4 |
12/12 4/4 |
|
| 460,000 50,000 |
– | 460,000 110,000 |
460,000 110,000 |
460,000 200,000 |
|
| 1961 | 1955 | 1956 | 1957 | 1957 | |
| Bachelor Degree Stock holm School of Economics, Sweden |
Electrical Engineer, studies in Physics at the Royal Insti tute of Technology in Stock holm and at the University of Stockholm and Management (IEP) at IMD in Lausanne |
Master in Natural Sciences and PhD in Physics from the Federal Institute of Technol ogy ETH in Zürich |
Master of Science in Industrial Engineer ing and Management from Linköping University, Sweden |
MBA from Harvard Business School and Master of Science in Chemical Engi neering and Biotechnology from the Royal Institute of Technology in Stockholm, Sweden |
|
| Independent of the Com pany and the executive management and indepen dent of major shareholders |
Not independent in rela tion to the Company and the executive management but independent in relation to major shareholders |
Independent of the Com pany and the executive management and inde pendent of the major shareholders |
Independent of the Com pany and the executive management and inde pendent of the major shareholders |
Independent of the Com pany and the executive management and inde pendent of the major shareholders |
|
| Board chairman: Tingstad AB and Arjo AB Board member: Mölnlycke Health Care AB, Dunkerstif telserna, Chalmers Univer sity of Technology Founda tion, SCA AB, Trelleborg AB, and Getinge AB |
Board chairman: Global Medical Investments GMI AB Board member: The Swedish American Chamber of Com merce in New York and Per mobil AB |
Board chairman: Ondal Medical Systems GmbH Board member: GN Store Nord A/S, Klingel GmbH and Medlumics S.L. |
Board chairman: Peak Man agement AG Board Member: The Euro pean Chemical Industry Council and IKEM (Innova tion and Chemical Industries in Sweden) |
Board chairman: HL Display and Fryshuset Foundation Board member: Pandora AS, Capio AB, Rhenman & Part ners Asset Management AB, Midsona AB, and Sporta more AB |
|
| 20,000 B-shares | 600,000 B-shares | 17,500 B-shares | 18,800 B-shares | 6,100 B-shares | |
| Extensive experience from the medical technology industry, among others as president and CEO for Get inge AB between 1997 and 2015. Before that, various positions within the Getinge group and Electrolux group |
Various positions at the Research Institute for Nuclear Physics, Scanditro nix and Ericsson before being employed by Elekta in 1988. Since then, he has held vari ous management positions within the Company, includ ing head of Elekta's neurosur gery operations, President of Elekta's subsidiary in North America, global head of Elek ta's sales, marketing and ser vice operations, and President and CEO of Elekta during fis cal years 2005/06 to 2013/14, |
CEO at DORC B.V. since March 2017. Previously, inde pendent consultant focus ing on the medical technol ogy industry. Until the end of 2006, CEO of Drager Med ical AG. At Siemens from 1986 until 2000, as President of the Special X Ray Prod ucts Division and CEO of the Ultrasound Division among other positions |
President and CEO of Perstorp AB from September 2013. Pre viously President and CEO of Ferrostaal AG from 2010 to 2012, operating partner of the US private equity fund Apollo in London from 2009 to 2010, CEO of Clariant AG in Basel from 2006 to 2008 and CEO of SICPA in Lausanne from 2003 to 2005. Before he held var ious leading positions in the ABB Group during the years from 1982 to 2002 |
President and CEO of Memira Group 2010 to 2013. CEO of Semantix Group 2005 to 2009, and COO/ CFO of Telefos 2001 to 2005. Before that, various man agement positions, includ ing Åhléns AB, Gambro and McKinsey & Co |
1) Tomas Puusepp served as Elekta´s President and CEO from May 13, 2015 until June 9, 2016. For information about Tomas Puusepp´s remuneration, see Note 5
and during 2015/16
Richard Hausmann1) Year of birth: 1960 Role: President and CEO Employed since: 2016 Holdings4): 29,000 B-shares Education: Doctorate in Physics from Regensburg University, Germany
Ian Alexander Year of birth: 1958 Role: Chief Commercial Officer (CCO) Employed since: 2008–2011 and since 2012 Holdings4): 1,332 B-shares
Jonas Bolander Year of birth: 1966 Role: EVP Legal and Compliance Employed since: 2001 Holdings4): 200 B-shares Education: Master of Laws from Stockholm University
Peter Gaccione2) Year of birth: 1959 Role: EVP Region North America Employed since: 1997 Holdings4): - Education: BS Electronic Engineering
John Lapré Year of birth: 1964 Role: Chief Technology Officer (CTO) Employed since: 2011 (Nucletron 2009) Holdings4): 5,250 B-shares Education: MSc in Human Nutrition and Physiology, and PhD in Toxicology from Wageningen University
Ioannis Panagiotelis Year of birth: 1972 Role: Chief Marketing Officer (CMO) Employed since: 2017 Holdings4): -
Education: MSc in Medical Physics and a PhD in Biomedical Physics and Bioengineering from the University of Aberdeen, and MBA from IESE Business School in Barcelona
Gustaf Salford3) Year of birth: 1977 Role: Chief Financial Officer (CFO) Employed since: 2009 Holdings4): 2,100 B-shares Education: MSc in Business Administration, Stockholm School of Economics
Johan Sedihn Year of birth: 1965 Role: Chief Operating Officer (COO) Employed since: 1993 Holdings4): 79,462 B-shares Education: MSc in Industrial Engineering and Management from Linköping University
Karin Svenske Nyberg Year of birth: 1966 Role: EVP HR Employed since: 2017 Holdings4): - Education: MSc Chemical Engineering, Royal Institute of Technology, Stockholm, and Behavioural
Science, Stockholm University
Maurits Wolleswinkel Year of birth: 1971 Role: Chief Strategy Officer (CSO) Employed since: 2011 Holdings4): 5,000 B-shares Education: MSc in Mechanical Engineering from Delft University of Technology, and MSc in General Management from Nyenrode University
1) Richard Hausmann assumed the role as President and CEO effective on June 10, 2016. Richard Hausmann succeeded
To the general meeting of the shareholders in Elekta AB (publ) corporate identity number 556170-4015.
It is the board of directors who is responsible for the corporate governance statement for the year the financial year May 1, 2016 – April 30, 2017 on pages 48–60 and that it has been prepared in accordance with the Annual Accounts Act.
Our examination has been conducted in accordance with FAR's auditing standard RevU 16 The auditor's examination of the corporate governance statement. This means that our examination of the corporate governance statement is different and substantially 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 sufficient basis for our 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 with the annual accounts and the consolidated accounts and are in accordance with the Annual Accounts Act.
Stockholm, July 10, 2017
PricewaterhouseCoopers AB Signature on original auditors' report in Swedish1)
Johan Engstam Camilla Samuelsson Auditor-in-charge
Authorized public accountant Authorized public accountant
1) This is a translation of the original auditors' report in Swedish. In the event of any differences between the translation and the original statement in Swedish, the Swedish version shall prevail
| Board of Directors' Report | 63 |
|---|---|
| Consolidated income statement | 70 |
| Consolidated statement of comprehensive income | 70 |
| Consolidated balance sheet | 72 |
| Changes in consolidated equity | 74 |
| Consolidated cash flow statement | 76 |
| Financial statements – Parent Company | 78 |
| Notes | 80 |
| Note 1 Accounting principles |
80 |
| Note 2 Financial risk management |
85 |
| Note 3 Estimates and assessments |
90 |
| Note 4 Segment reporting |
90 |
| Note 5 Salaries, other remuneration and social security costs |
91 |
| Note 6 Depreciation/amortization |
93 |
| Note 7 Operating leases |
94 |
| Note 8 Remunerations to auditors |
94 |
| Note 9 Expenses by nature |
94 |
| Note 10 Income from participations in Group companies | 94 |
| Note 11 Net financial items | 94 |
| Note 12 Interest income, interest expense and similar items | 94 |
| Note 13 Appropriations and untaxed reserves | 94 |
| Note 14 Taxes | 95 |
| Note 15 Intangible assets | 96 |
| Note 17 Shares in subsidiaries | 97 | |
|---|---|---|
| Note 18 Shares in associates | 98 | |
| Note 19 Other financial assets | 99 | |
| Note 20 Inventories | 99 | |
| Note 21 Accounts receivable | 99 | |
| Note 22 Other current assets | 99 | |
| Note 23 Cash and cash equivalents | 99 | |
| Note 24 Equity | 100 | |
| Note 25 Interest-bearing liabilities | 100 | |
| Note 26 Provisions | 101 | |
| Note 27 Prepaid income | 102 | |
| Note 28 Accrued expenses | 102 | |
| Note 29 Other current liabilities | 102 | |
| Note 30 Assets pledged | 102 | |
| Note 31 Contingent liabilities | 103 | |
| Note 32 Cash flow statement | 103 | |
| Note 33 Related party transactions | 103 | |
| Note 34 Business combinations | 103 | |
| Note 35 Average number of employees | 104 | |
| Board of Director´s signature | 105 | |
| Auditor's report | 106 | |
| Glossary | 109 | |
| Definitions | 111 | |
| Alternative performance measures | 112 | |
The Board of Directors and the CEO of Elekta AB (publ.), corporate identity number 556170-4015 and registered office in Stockholm, hereby submit the consolidated financial statements and annual report for the fiscal year 2016/17, covering the period May 1, 2016 – April 30, 2017. Amounts in parentheses indicate values for the previous fiscal year. Elekta AB (publ.) is referred to as "Elekta AB" or "the Parent Company" and the Elekta Group, which includes Elekta AB and its subsidiaries, is referred to as "Elekta" or "the Group".
Elekta is a medical technology company which aims to improve, prolong and save lives through clinical solutions for treating cancer and brain disorders. The Group develops clinical treatment solutions for radiation therapy and radiosurgery, as well as workflow-enhancing 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.
Elekta's products comprise hardware as well as software and service with a focus on clinical solutions. Elekta's treatment solutions and oncology informatics portfolios are designed to enhance the delivery of radiation therapy, radiosurgery and brachytherapy, and to drive cost efficiency in clinical workflows. Elekta's operations are divided into three geographical regions:
The global market development for Elekta's solutions is driven by the need for qualitative cancer care at an affordable 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 efficiency in health systems and among care providers is an important part of the market dynamics. This benefits solutions within radiation therapy which is one of the most cost-effective treatment solutions. The evolving consolidation and integration in care delivery will further support comprehensive and complete solution suppliers, such as Elekta.
A complete radiation therapy program includes various technologies in Elekta's product portfolio. Each solution is addressing various cancer types as well as cancer patients and our all important complementary solutions. New advancements in precision, accuracy and effectiveness will increase the need for radiation therapy. Information management solutions constitute an important element in care delivery where hospital information systems and cancer informatics are other important elements of Elekta's solutions. There is a significant shortage of radiation therapy capacity, which is an important fact in understanding the potential and market outlook in many developing economies.
The main competitor in the global market, with a comprehensive product range and overlap with Elekta, is Varian Medical Systems. Elekta is overall one of the largest supplier of radiation therapy solutions. For the emerging markets, Elekta is the largest supplier. Elekta is the market leader in many segments, such as intracranial radiosurgery, HDR brachytherapy and information management solutions.
From a competitive perspective there are also various companies addressing specific segments within radiation therapy. Companies, such as Accuracy with its radiosurgery solutions, Bebig with its brachytherapy products, and Philips and Raysearch with its treatment planning solutions, are part of our competitive landscape. Hospital Information System (HIS) companies are addressing the HIS market with hospital wide solutions where cancer care is one of many different specialties. In addition there are a number of companies with products and applications supporting different aspects of cancer care processes.
Elekta's aim is to achieve sustainable profitable growth. Elekta conducts its operations based on a long-term plan which is regularly reviewed and evaluated by the Board of Directors. The following financial objectives form the basis of long-term planning and are currently under review:
As from the fiscal year 2016/17, Elekta reports gross order intake instead of net order intake. This is in line with industry peers. The difference between gross and net order intake are backlog adjustments and currency effects.
Gross order intake increased by 2 percent and decreased by 1 percent based on constant exchange rates. The order backlog was SEK 22,459 M on April 30, 2017, compared with SEK 18,239 M on April 30, 2016. Orders that are cancelled or not expected to materialize as planned are removed from the order backlog. The order backlog was affected by adjustments of SEK –441 M (–941) and translation differences of SEK 1,295 M (–511) relating to the revaluation of the order backlog at closing rates. The order backlog as per 30 April 2017 is expected to be revenue recognized as follows: 35 percent in fiscal year 2017/18, 26 percent in 2018/19, and 39 percent thereafter.
| SEK M | 2016/17 | 2015/16 | Change, % |
|---|---|---|---|
| North and South America | 4,516 | 4,954 | –9% |
| Europe, Middle East and Africa | 5,078 | 4,824 | 5% |
| Asia Pacific | 4,470 | 4,043 | 11% |
| Group | 14,064 | 13,821 | 2% |
Gross order intake in the region decreased by 9 percent to SEK 4,516 M (4,954), corresponding to a 11 percent decrease based on constant exchange rates. Latin America was solid while North America underperformed. In particular there were challenges within the solutions area while service was showing solid growth. Net sales increased by 4 percent to SEK 4,147 M (4,005), corresponding to an increase of 1 percent based on constant exchange rates. The contribution margin in the region was positively affected by cost savings and amounted to 37 percent (32). Measures to strengthen operations in the US were taken and on June 1, Peter Gaccione was appointed Executive Vice President for North America.
The market in the US remained stable and investments in renewing the installed base of radiation therapy equipment continued. Market growth is primarily related to services. Hospital consolidation continues and is driving the market towards more comprehensive solutions and larger projects, as well as longer lead times for purchasing decisions. In South America, demand for cancer care is growing mainly driven by a rapidly aging population and a substantial shortage of radiation therapy capacity. However, weak economic conditions throughout the region have slowed investments in new equipment. See page 34 for more information on region North and South America.
Gross order intake in the region increased by 5 percent to SEK 5,078 M (4,824) and increased by 4 percent based on constant exchange rates. Net sales decreased by 6 percent to SEK 3,444 M (3,651), corresponding to a decrease of 5 percent based on constant exchange rates. The decrease was mainly related to third party products. The contribution margin in the region amounted to 31 percent (24). The increase compared to the previous year mainly relates to a lower level of bad debt losses and cost savings.
During the year, Elekta signed a number of significant orders, including New Karolinska Solna in Sweden, Andalusian Health Service in Spain, Stavros Niarchos Foundation in Greece and a few Elekta Unity orders.
Radiation therapy capacity in Western Europe is insufficient, evidenced by the long waiting times for treatment in many countries. This is being addressed through increased investments by public health care systems as well as an expansion of private care providers. Emerging markets across the region performed favorably. Eastern Europe showed growth while the Middle East was mixed, with growth in the recently opened market in Iran. Growth in Africa has been significant and represents an interesting longterm growth potential.
During the year Elekta established a direct sales support and service hub in Russia, which is expected to be operational in 2017/18.
See page 34 for more information on region Europe, Middle East and Africa.
Gross order intake in the region increased by 11 percent to SEK 4,470 M (4,043), corresponding to a 5 percent increase based on constant exchange rates with good growth in China and India. Affected by the one-off effect of the new produce-to-order process, net sales decreased by 13 percent to SEK 3,114 M (3,565), corresponding to a decrease of 17 percent based on constant exchange rates. The decrease mainly related to China and Japan. The contribution margin in the region amounted to 30 percent (27).
The region is home to almost 60 percent of the global population, but has less than 30 percent of the world's total capacity for radiation therapy. Accordingly, there is a large unmet need for cancer care. The main market
drivers are longer life expectancy and greater economic prosperity, which are leading to a growing need for investments in health care. Market growth in the region was favorable during the year. High-growth markets include China, India and South East Asia. The Japanese market is currently weak.
See page 35 for more information on region Asia Pacific.
Net sales decreased by 5 percent to SEK 10,704 M (11,221), equivalent to a decrease of 7 percent based on constant exchange rates. The decrease was mainly related to the one-off effect from the new produce-to-order process.
| SEK M | 2016/17 | 2015/16 | Change, % |
|---|---|---|---|
| North and South America | 4,147 | 4,005 | 4% |
| Europe, Middle East and Africa | 3,444 | 3,651 | –6% |
| Asia Pacific | 3,114 | 3,565 | –13% |
| Group | 10,704 | 11,221 | –5% |
Gross margin was 41 percent (41). Operating expenses, decreased by 6 percent as a result of cost reduction activities and currency effects. Selling and administrative expenses amounted to SEK 2,093 M (2,362), corresponding to 20 percent (21) of net sales.
EBITA before items affecting comparability and bad debt losses amounted to SEK 1,661 M (1,639). Items affecting comparability amounted to SEK –518 M (–598) and mainly refer to costs related to legal disputes and costs for severance, efficiency initiatives and external support within the transformation program. The effect from changes in exchange rates was approximately SEK 315 M (60), including hedges.
Operating result was SEK 598 M (423), corresponding to an operating margin of 6 percent (4).
Net financial items amounted to SEK –258 M (–234). The increase was related to an impairment of participations in associates (Global Medical Investments GMI AB) while interest expenses decreased due to lower interest rates. Profit before tax amounted to SEK 340 M (189). Tax amounted to SEK –214 M (–44). The tax rate was high because of low or negative results in entities in low tax jurisdictions. Profit for the year amounted to SEK 126 M (145).
Earnings per share amounted to SEK 0.33 (0.36) before/after dilution. Return on shareholders' equity amounted to 2 percent (2) and return on capital employed amounted to 5 percent (4).
Continuous investments were SEK 682 M (865) including investments in intangible assets of SEK 541 M (687). Investments in intangible assets are mainly related to ongoing R&D programs. The reduction was related to the Elekta Unity project coming to its final development phase and to an investment in licenses made in 2015/16. The reduced investment in other assets was also R&D related. Amortization of intangible assets and depreciation of tangible fixed assets amounted to a total of SEK 655 M (634).
Elekta conducts research and development (R&D) aimed at strengthening and enhancing its position as technology leader. R&D expenditure, before capitalization of development costs, decreased by 12 percent (5) and amounted to SEK 1,196 M (1,355), equal to 11 percent (12) of net sales. Costs related to the R&D function amounted to SEK 1,018 M (1,065). Capitalization and amortization of development costs in the R&D function amounted to a net of SEK 178 M (290). Capitalization amounted to SEK 534 M (591) and amortization to SEK 356 M (301).
Cash flow from operating activities increased by SEK 649 M to SEK 1,819 M (1,170). Cash flow after continuous investments increased to SEK 1,045 M (396). Operational cash conversion was 145 percent (111). The cash flow improvement was mainly due to the positive effects from the transformaSee pages 76–77 for more information on the consolidated cash flow.
Cash and cash equivalents amounted to SEK 3,383 M (2,273) and interestbearing liabilities amounted to SEK 5,272 M (4,950). Thus, net debt amounted to SEK 1,889 M (2,677). Equity amounted to SEK 6,774 M (6,412). Net debt/ equity ratio was 0.28 (0.42).
In April the convertible loan corresponding to a value of SEK 1,820 M matured. The convertible bond was refinanced through a SEK 1,000 M bond issued under the MTN program. Elekta also entered into a five-year loan agreement of GBP 90 M (approximately SEK 1,000 M) with the Nordic Investment Bank with the purpose of financing R&D investments.
The balance sheet has been affected by changes in exchange rates. The exchange rate effect of the translation of cash and cash equivalents amounted to SEK 138 M (–72). The translation difference in long-term interest-bearing liabilities amounted to SEK 207 M (–43). Shareholder's equity was affected by exchange rate differences amounting to SEK 364 M (–281). See pages 72–73 for more information on the consolidated balance sheet.
The average number of employees during the year was 3,581 (3,677). The number of employees on April 30, 2017 totaled 3,681 (3,617). Value added per average employee amounted to SEK 1,140 T (1,060).
Richard Hausmann was appointed as the new President and CEO effective June 10, 2016. He succeeded Tomas Puusepp.
Richard Hausmann joined Elekta with nearly three decades of experience in the medical device industry. He led GE's Magnetic Resonance (MR) division as President and CEO, served as President and CEO of Siemens computed tomography (CT) and worked at Siemens in leading positions in its MR business. He also acted as President and CEO of Siemens Ltd China, responsible for the company's entire portfolio in its core emerging market. Richard has a solid track record of bringing clinical innovations to the global health care market and is known for his deep insights into customer and patient needs, with a strong workflow and outcome orientation. Richard Hausmann has a doctorate in physics from the University of Regensburg.
Todd Powell, Executive Vice President Global Engineering, left the company with effect from October 31, 2016.
Karin Svenske Nyberg joined Elekta as Executive Vice President Human Resources on January 16, 2017. Valerie Binner, former Executive Vice President Human Resources, left the company with effect from June 10, 2016.
On February 13, 2017, Ioannis Panagiotelis joined Elekta and the Executive Management Team as Chief Marketing Officer. With effect from the same date Maurits Wolleswinkel, former EVP Marketing and Strategy assumed the position as Chief Strategy Officer in the Elekta Executive Management Team.
The implementation of the transformation program is completed and all the objectives announced in June 2015 are on track to be fully realized during fiscal year 2017/18. The overall ambition is to create more efficient operations, with improved profitability and cash flow. The program has included measures to strengthen our customer services and support, our innovation capacity and activities for increased efficiency in supply chain and procurement processes. The objectives of the transformation and status as of the fourth quarter:
On May 23, 2016, an arbitration tribunal in London issued an award in the dispute between two Elekta group companies and humediQ GmbH. The award concluded an arbitration with humediQ arising out of an agreement for the exclusive supply of Identify™ under the Elekta label, which was entered into in 2011. The tribunal determined that the Elekta companies did not validly terminate the 2011 agreement and that, as a result, they must pay humediQ EUR 8.9 M for Identify systems the Elekta companies did not order according to minimum volume commitments in the contract. This amount is less than half of the EUR 19 M that humediQ claimed in the arbitration. The tribunal also held that the respective success of each party was comparable and that each party should bear its own legal costs. The Elekta companies do not have any further obligation to purchase any systems from humediQ. In addition to the damages ordered in the arbitration award, Elekta has written off approximately EUR 5 M in receivables related to the agreement with humediQ. An amount of SEK 29 M relating to humediQ has been reported as items affecting comparability. This amount is in addition to SEK 128 M, which was reported as items affecting comparability in 2015/16.
On April 3, 2017, it was announced that Elekta and Varian Medical Systems reached a confidential settlement agreement to end ongoing patent litigation involving technology used for radiation oncology and the treatment of cancer. Varian and Elekta resolved the multi-year disputes in the United States, Germany, and the United Kingdom, including the suit brought by Elekta AB and William Beaumont Hospital, with no payments exchanged by the plaintiffs and defendants and no future financial obligations. The two companies have been in litigation since 2015.
As communicated in November 2015, Elekta's subsidiary in Italy and some former employees are suspected of interfering with public procurement processes. Elekta provided all requested information to the Italian authorities during the investigation which closed in August 2016. Elekta has zero tolerance for any deviation from the code of conduct and clear corporate policies and procedures in place. The Public Prosecutor of Milan, Italy, has in 2017 initiated preliminary hearings involving individuals and Elekta's Italian subsidiary in connection with alleged bid-rigging allegations.
A group of employees have sued Nucletron B.V. and claims that they have suffered a pension loss as a result of the transition from an old to a new pension scheme in 2004. The claims have not been specified and Elekta's assessment is that the claims lacks merit. A decision in first instance is expected during fiscal year 2017/18.
On May 10, 2017 Elekta announced that Gustaf Salford had been appointed Executive Vice President and Chief Financial Officer effective July 1, 2017. He succeeded Håkan Bergström.
On June 1, 2017, Elekta appointed Peter Gaccione as Executive Vice President for North America, succeeding Bill Yaeger.
The Executive Management team is presented on page 60.
On June 29 Elekta AB entered into a new five year revolving credit facility for EUR 200 M with five banks. The existing EUR 175 M revolving credit facility with maturity in May 2018 has been cancelled in connection with the signing of the new facility. The new facility is primarily intended to be used as a back-up financing.
Responsible and sustainable business is critical to Elekta's ability to fulfill its business objectives. Elekta's sustainability activities embrace four focus areas; fight cancer with safe and efficient products, business ethics and prevent corruption, sustainable sourcing and environmental focus, human rights and diversity. All employees, as well as all business partners, must adhere to the standards of conduct and the ethical behavior described in our code of conduct and our anti-corruption policy.
The Elekta principles for employment practices, employee rights and human rights, as described in the code of conduct, are deployed on a local level throughout the Group and the supply chain in accordance with our new sustainable sourcing program.
Product safety and quality in products and services are key for Elekta and permeate all activities from product development and manufacturing to service activities. Elekta is striving to reduce the environmental impact of the Group's products and activities and to comply with all relevant environmental laws and regulations. The environmental responsibility is described in the Group's environmental policy. See pages 36–43 for more information about our responsibilities.
Elekta continue to focus on improving processes as one of their key strategic priorities. Elekta conducts regular audits to ensure compliance to established requirements from medical regulatory authorities. Where appropriate Elekta's development, production or sales units are certified in accordance to relevant ISO 9001 and ISO 13485 standards.
The establishment of the shared service center, Elekta Business Services, in Poland has created the opportunity to improve and further standardize the business support processes. With single global instances of IT Solutions available, Elekta has been able to quickly migrate many business support activities into Poland and more easily establish new business operations around the world. At the same time, Elekta IT has been able to consolidate its own activities in Poland to create a cost efficient and effective support organization for the IT Solutions deployed within Elekta.
During the year, the IT teams have also executed infrastructure modernization and consolidation programs to further decommission over 400 hardware devices, replacing them with modern virtual systems to reduce space, power and cooling requirements. With every physical server consuming the same amount of electricity as the average domestic home, this work has made a good contribution to the corporate sustainability objectives and the "Green IT" agenda.
Cybersecurity is of growing concern globally. Elekta IT is committed to continuous strengthening of our security position, and during the year, additional preventive measures to protect our business from malware and cyber threats have been implemented. The ISO 27001 certificates have also been renewed as an ongoing commitment to quality and security compliance.
Elekta's adoption and deployment of secure cloud-based solutions for collaboration have been strengthened by the addition of new virtual meeting solutions in our major business locations. Not only will this help Elekta
connect and collaborate in new ways, but it will reduce the cost and unproductive time associated with business travel.
Elekta's presence in a large number of geographical markets leave it open to potential exposure to political and economic risk on a global scale and in individual countries or regions. United Kingdom's decision to leave the European Union, as an example, might lead to economic uncertainty that may impact Elekta since an important part of the business is located in the United Kingdom. In some markets weak economic development and strained finances may mean less availability of financing for private customers and reduced future health care spending by governments.
Elekta operates in a competitive landscape. The medical equipment industry is characterized by relatively swift technological alterations with advances in industrial knowhow. Elekta's products are developed in close collaboration with research institutes. For Elekta it is of great significance that these prospective and intimate relationships are maintained, in order to understand customer needs.
New products and improved methods for treatment are continuously released and future developments on the medical equipment market might have an impact on Elekta's ability to compete. Thus, it is crucial that new products and technical solutions developed by Elekta are protected from the risk of improper use by competitors. When possible and deemed appropriate, Elekta protects its intellectual property rights by way of patents, copyrights and trademark registrations.
Elekta sells its products through its direct sales force and through an external network of agents and distributors. The Group's continued success is dependent on its ability to establish and maintain successful relationships with customers and collaborations with external sales channels.
Corruption is a risk and an obstacle for development and growth in some countries of which Elekta has operations. Elekta has implemented an anti-corruption policy to discourage corruption as well as third party risk management processes.
Elekta's operations comprise several geographical markets. This does expose the Group to a vast number of laws, regulations, policies and guidelines regarding topics such as health, security, environment, trade restrictions, competition, exchange control and delivery of products. As a manufacturer of medical equipment, Elekta's operation is guided by demands and standards set by regulatory authorities. Rule changes might bring about increased costs or hinder sales of Elekta's products. Regulatory processes may interfere with the possibility to introduce products.
Much like other companies within the same field of business, Elekta is dependent on assessments and decisions made by authorities such as Läkemedelsverket in Sweden or the FDA (Food and Drug Administration) in the US. Assessments of that sort are inclusive of product safety as well as permission to market and sell medical equipment. Applications to these authorities demand comprehensive documentation, and unforeseen circumstances might interfere with the ability to introduce, market, sell and deliver products, as well as hindering or limiting the commercial appeal and/or causing a severe financial cost.
Elekta has to fulfill rigorous demands in accordance with international rules and product safety standards from the International Electrotechnical Commission (IEC) and International Organization for Standardization (ISO), Rådets direktiv 93/42/EEG on medical products, FDA's demands on quality systems, as well as a number of other domestic directives and rules. These are explained in Elekta's quality system in accordance with ISO 9001 and ISO 13485. Quality systems are reviewed and certified by external regulatory authorities and are regularly inspected by FDA. To deviate from safety regulations is an example of a circumstance which might result in delays and prohibit deliveries of Elekta products.
Elekta is continuously evaluating conditions to enter new markets. The process takes into consideration both the opportunities and risks involved. There are regulatory registration requirements with each market that could potentially delay product introductions and certifications.
Political stability in certain countries and the security situation for employees traveling to exposed areas are constantly evaluated.
Elekta depends on the capability of producing advanced medical equipment, which requires highly qualified personnel. The Group's ability to attract and retain qualified personnel and management is of great importance and will have a significant impact on the future success of the Group.
Elekta's ability to commercialize its solutions is dependent on the reimbursement level that hospitals and clinics can obtain. Reimbursement systems vary depending on the country. Alterations in the existing reimbursement systems related to medical products or implementation of new regulations might have a direct impact on demand for Elekta's products. Elekta's delivery of treatment equipment relies on customers' capability to receive the delivery on site. Depending on contractual the terms a delay can result in postponed invoicing and also affect the timing of revenue recognition. The Group's credit risks are normally limited, since customer operations are, to a large extent, financed either directly or indirectly by public funds. See also Note 2 and Note 21 for more information on credit risk and credit exposure.
Elekta is dependent on a limited number of suppliers for delivery of critical components. There is a risk of delivery difficulties occurring due to circumstances beyond Elekta's control. Critical suppliers are regularly followed up regarding delivery precision and quality of components.
Integrating third party components with Elekta products might bring about product responsibility for the components. Unforeseen problems can cause delays, hinder or limit the products' commercial use and/or translate to a cost for the Group.
From time to time Elekta is involved in disputes associated with the business operations. Situations in question might revolve around disputes over product liability, contractual questions, immaterial rights and alleged flaws in the delivery of goods or services. Disputes can be costly, time consuming and can hamper the process of ongoing operations. Intellectual property disputes are costly and might have a material impact on Elekta's operations and financial position. In addition, it can be difficult to predict the outcome of intricate disputes. Disputes related to Elekta's product liability might concern alleged negligence, warranty issues or mistreatment and might bring about major costs unrelated to the final verdict. Elekta has product liability insurances. However, there is still a risk that future demands will exceed or fall outside of the insurance coverage.
Elekta's business operations involve development, manufacturing and delivery of products and services in a large number of jurisdictions. Operations are taxed under the laws in the jurisdictions in which they operate. Changes in tax regimes could impact the Group's cash tax liabilities and tax charge, resulting in either an increase or a reduction in financial results depending on the nature of the change.
International regulations governing the global tax environment are also subject to regular changes. Due to the uncertainty related to which of the final tax regulations under consideration will be enacted Elekta cannot predict the impact, if any, that these changes could have on the business.
Elekta's operations within research and development, production, distribution, marketing and administration depend on a large number of advanced IT systems and IT solutions. Routines and procedures are applied in order to protect the hardware, software and information against damages, manipulations, loss or incorrect use. If these systems and solutions should be affected by any interference resulting in loss of information it might have a negative impact on Elekta's operations, result and financial position.
In its operation, Elekta is subject to a number of financial risks such as currency risk, interest rate risk, credit risk and liquidity risk. Currency risks arise primarily as a product of future business transactions, recognized assets and liabilities along with net investments in foreign operations. Interest rate risk concerns the risk of fluctuating rate levels affecting Elekta's result negatively, particularly rising long-term loan costs. Credit risk ascends from financial credit risk related to liquid cash and cash equivalents, derivative financial instruments and receivables from banks and financial institutes along with credit exposure towards customers and
distributors. Liquidity risk relates to the risk of being unable to fulfill payment obligations as a result of inadequate liquidity or difficulty taking on external loans. Some of Elekta's financing agreements are subject to financial covenants, such as net debt/ebitda and interest cover. A development of financial metrics impacting net debt and/or ebitda negatively, could end up in a break of covenants resulting in a need to renegotiate the agreements or to repay existing financing. Note 2 provides further details and information regarding financial risks and financial risk management.
Elekta's operation is bound to projects the basis of consists of relatively big deliveries to customers. The lead time from delivery to installation can therefore 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. During the year, Elekta had a gross margin of 41 percent (41).
As a result of its international operations and structure, Elekta has a significant exposure to exchange rate fluctuations. This pertains primarily to expenses in SEK and GBP against revenue in USD and EUR. Based on the year's income, expense and currency structure a general change of 1 percentage point in the SEK exchange rate against other currencies would affect the Group's operating profit by approximately +/– SEK 13 M (18). In the short term, the effect 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 affect the Group's profit before tax by approximately +/– SEK 4 M (10).
The Parent Company of the Group, Elekta AB, conducts no operating activities but provides group management, joint group functions and financial management. Profit for the year amounted to SEK 91 M (503) inclusive of dividends from subsidiaries of SEK 271 M (615). Total assets amounted to SEK 11,445 M (10,655) of which shares in subsidiaries amounted to SEK 2,222 M (2,129) and receivables from subsidiaries amounted to SEK 6,549 M (6,807). Cash and cash equivalents at year-end amounted to SEK 2,479 M (1,499). Shareholders' equity amounted to SEK 2,606 M (2,631). Interest-bearing liabilities amounted to SEK 8,649 M (7,726), of which SEK 3,381 M (2,791) constituted liabilities to subsidiaries. The average number of employees during the year was 30 (32). The number of employees on April 30, 2017 was 31 (32). For further information refer to the Parent Company's financial reports and the accompanying notes.
During the year 730,769 new Series A-shares and 8,593 new Series B-shares were subscribed through conversion of convertible loan. The total number of registered shares on April 30, 2017 was 383,568,409 divided between 14,980,769 A-shares and 368,587,640 B-shares. One series A-share entitles the holder to 10 votes and series B-shares entitle the holder to one vote for each share. All shares carry equal rights to participate in the Company's assets and profits. In accordance with Section 12 of the Articles of Association, series A-shares are subject to right of first refusal. All A-shares are owned by Laurent Leksell via companies, also the only shareholder representing more than 10 percent of total votes. On 30 April, 2017, treasury shares amounted to 1,541,368 (1,541,368) equivalent to 0.4 percent (0.4) of the total number of outstanding shares as well as of share capital. Regarding treasury shares, par value is 0,50 SEK per share and average cost is 49,70 SEK per share.
See pages 44–45 for more information on Elekta's share.
For 2016/17, the Board proposes a dividend of SEK 1.00 (0.50) per share to be divided into two payments. Total proposed dividend amounts to approximately SEK 382 M (191) and 306 percent (139) of net profit for the year. The Board intends to propose to the 2017 Annual General Meeting the renewal of the Board's authorization to repurchase shares in Elekta AB. The proposal limits the number of shares to be repurchased to a maximum of 10 percent of the number of shares outstanding in Elekta AB.
| Amounts in SEK | April 30, 2017 |
|---|---|
| Distributable shareholders' equity of the Parent Company | |
| Premium reserve | 656,609,561 |
| Retained earnings | 1,510,671,830 |
| Profit for the year | 90,566,042 |
| Total | 2,257,847,432 |
| The Board of Directors and the President and CEO propose: | |
| to be distributed to the shareholders, | |
| a total dividend of SEK 1.00 per share1) | 382,027,041 |
| and that the remaining amount be carried forward | 1,875,820,391 |
| Total | 2,257,847,432 |
1) The total amount distributed may change up until the record date depending on changes in the number of shares
In making this proposal for dividend, the Board has taken into account the The Parent company's dividend policy, solidity as well as its general financial position, whereby the Parent company's ability to fulfill existing and foreseeable payment obligations in a timely manner, as well as potential acquisitions and other investments. The equity ratio is reassuring, under the assumption that the Parent company and the Group continue to be profitable. The impact of the proposed dividend on the Group's reported equity/ assets ratio of 32 percent (33), will be marginal. Concerning the Parent company's and the Group's result and position in general, refer to the statements of income, statements of comprehensive income, balance sheets and statements of cash flow and notes.
It is the assessment of the Board of Directors that the proposed dividend neither prevents the Parent company, and other companies within the Group, from fulfilling their obligations, nor from making the necessary investments. The proposed dividend can therefore be justified in respect of Chapter 17, section 3, paragraphs 2 and 3 of the Swedish Companies Act (the prudence rule).
The Articles of Association state that board members are appointed and dismissed by the Annual General Meeting. The Articles of Association contain no specific regulations regarding changes to the Articles of Association.
The Board of Directors proposes that the Annual General Meeting on August 23, 2017 approve the following guidelines for remuneration and other terms of employment for the executive management of the Group. The guidelines will be valid for employment agreements entered into after the Annual General Meeting and for any changes made to existing employment agreements thereafter. It is proposed that the Board be given the ability to deviate from the guidelines below in individual cases where specific reasons or requirements exist. The guidelines in the following proposal are, in principle, unchanged compared to the guidelines which were proposed by the Board of Directors and approved by the Annual General Meeting in 2016, except for the section "Annual incentive" and "Notice periods and severance agreements" below.
It is of fundamental importance to Elekta and its shareholders that the guidelines for remuneration and other terms of employment for the executives of the Group attract, motivate and retain competent employees and managers, both in the short and long term. To achieve this goal, it is important to ensure fairness and internal equity, while maintaining market competitiveness in terms of the structure, scope and level of executive compensation within Elekta. Employment conditions for executive management should comprise a balanced mix of fixed salary, a variable salary component, annual incentive, long-term incentives, pension and other benefits, as well as notice and severance payments, where applicable.
Total target cash compensation (fixed plus variable salary components), should be competitive in the geographic market where the executive is resident. The level of total target compensation should be reviewed annually to ensure that the company is competitive for similar positions in the market to be able to recruit and retain business critical competencies where needed. Market medians are established with the assistance of external compensation benchmarking. Since compensation should be performance-driven, the target annual variable salary component should account for a relatively high portion of the total target compensation.
The Group compensation system comprises various forms of compensation. This ensures well-balanced remuneration, thereby strengthening and underpinning short and long-term objective setting and achievement.
Executive Management's fixed salary shall be individual and based on the content and responsibility of the position, the individual's competence and experience in relation to the role held, as well as the geography in which the position is based.
In addition to a fixed salary, Executive Management also has a variable salary component. The variable component is structured as a portion of the total cash remuneration package and is primarily related to the achievement of common Group financial performance goals. The Key Performance Indicators (KPIs) for variable salary components shall primarily be related to the outcome of specific financial and functional objectives within the Group compensation and benefit system.
The size of the variable salary component depends on the position held and may amount to between 30 percent and 70 percent of the fixed salary for on-target performance. Performance against fixed targets and payment for results achieved are measured quarterly. Quarterly payments, if these exist, against variable salary components are capped at 100 percent.
The goals for the variable salary component are established annually by the Board so as to sustain the business strategy and objectives. Other KPIs may be used to drive focus on non-financial objectives of particular interest.
For performance related to financial goals within the variable salary plan exceeding 100 percent of the target, there is the opportunity for additional compensation called an annual incentive. The annual incentive entails a potential to earn a maximum of 100 percent of the target variable salary component. Accordingly, the maximum payout level for the sum of the variable salary component and the annual incentive is capped at 200 percent of the original target for variable compensation. The plan also contains a minimum performance level or threshold under which no variable salary or annual incentive will be paid out at all.
The Board also uses long-term incentives to ensure alignment between shareholder interests and executive management, senior managers and other key colleagues. On an annual basis, the Board of Directors evaluates whether an equity-based long-term incentive program should be proposed to the Annual General Meeting.
In order to strengthen long-term thinking in decision-making and ensure achievement of long-term objectives, while also covering situations where equity-based solutions may be inappropriate or precluded by law, the Board may also selectively decide on other types of non-equity-based long-term incentive programs. Monetary long-term incentives should only be used as remuneration in special circumstances and be in line with practice in each market. They must also require continued employment in the Group.
In order to ensure long-term engagement and retention of key staff in connection with the acquisition of new business, the divestment of operations or other transitional activities, an additional annual incentive with a deferred payment of 12–24 months may or may not be applied. This deferred incentive requires continued employment until an agreed future date for any payment to be made and is applied only in special and rare circumstances, which means that it is not part of any ordinary executive remuneration scheme. The deferred incentive should never exceed 50 percent of the contractual annual variable salary component and shall in other aspect comply with the Group bonus plan.
When establishing new pension agreements, senior executives who are entitled to pension benefits should only be enrolled in defined-contribution schemes. The standard retirement age for Swedish citizens is 65 years while other executives follow the rules of their respective countries of residence. The main guideline is that the size of pension contributions shall be based only on the fixed salary. Certain individual adjustments may occur based on local market practice.
Benefits such as company cars and health, medical and sickness-related insurance schemes, should be of a more limited value compared with other items of the compensation package and in line with the market practice for the respective geographic market.
Periods of notice at Elekta follow local labor legislative requirements in the geographies in which they are based. Senior executives generally have notice periods of between 6 and 12 months and, in specific circumstances, are entitled to severance payment equal to 6–12 months employment. In the event of a material change of control, the President and CEO shall be entitled to an extra severance payment equal to 18 months employment.
Severance agreements entitling executives to lump sum payments will in principle not be signed.
During the year, Elekta's Executive Compensation & Capability Committee (ECCC) provided the Board with recommendations regarding principles for formulating the Group's remuneration system and remuneration of senior executives and senior managers. The recommendations covered formulation of the bonus system, distribution between fixed and variable remuneration and the size of any salary increases. The ECCC also proposed criteria for assessing the performance of senior executives and senior managers. Any decisions on remuneration for the CEO are taken by the Board in its entirety.
The Board has discussed the proposals from the ECCC and its motion to the Annual General Meeting is based on the recommendation submitted. Elekta's ECCC comprises the Chairman of the Board and three independent Board members. The President and CEO attend the committee's meetings. The Group Vice President Human Resources acts as the ECCC secretary.
| SEK M | Note | 2016/17 | 2015/16 |
|---|---|---|---|
| Net sales | 4 | 10,704 | 11,221 |
| Cost of products sold | –6,277 | –6,608 | |
| Gross profit | 4,427 | 4,613 | |
| Selling expenses | –1,165 | –1,336 | |
| Administrative expenses | –928 | –1,026 | |
| R&D expenses | –1,018 | –1,065 | |
| Exchange rate differences | –201 | –165 | |
| Operating result before items affecting comparability | 1,115 | 1,021 | |
| Items affecting comparability | –518 | –598 | |
| Operating result | 4–9 | 598 | 423 |
| Income from participations in associates | 11 | –17 | 11 |
| Financial income | 11 | 31 | 37 |
| Financial expenses | 11 | –271 | –285 |
| Exchange rate differences | 11 | –1 | 3 |
| Profit before tax | 340 | 189 | |
| Income taxes | 14 | –214 | –44 |
| Profit for the year | 126 | 145 | |
| Profit attributable to: | |||
| Parent Company shareholders | 125 | 137 | |
| Non-controlling interests | 1 | 8 | |
| Earnings per share: | |||
| Earnings per share before dilution, SEK | 0.33 | 0.36 | |
| Earnings per share after dilution, SEK | 0.33 | 0.36 | |
| Average number of shares before dilution, thousands | 381,306 | 381,288 | |
| Average number of shares after dilution, thousands | 381,306 | 381,288 |
| SEK M | Note | 2016/17 | 2015/16 |
|---|---|---|---|
| Profit for the year | 126 | 145 | |
| Other comprehensive income | |||
| Items that will not be reclassified to the statement of income: | |||
| Remeasurements of defined benefit pension plans | 26 | 1 | 8 |
| Tax | 14 | 0 | –2 |
| Total items that will not be reclassified to the statement of income | 1 | 6 | |
| Items that subsequently may be reclassified to the statement of income: | |||
| Revaluation of cash flow hedges | 2 | 34 | 117 |
| Translation differences from foreign operations | 364 | –281 | |
| Tax | 14 | –7 | –25 |
| Total items that subsequently may be reclassified to the statement of income | 391 | –189 | |
| Other comprehensive income, net | 392 | –183 | |
| Total comprehensive income | 518 | –38 | |
| Comprehensive income attributable to: | |||
| Parent Company shareholders | 517 | –45 | |
| Non-controlling interests | 1 | 7 |
In the income statement presented on the previous page items affecting comparability have been separately recognized. Items affecting comparability amounted to SEK –518 M (–598) and mainly refer to costs related to legal disputes and costs for severance, efficiency initiatives and external support within the transformation program. In the table below presents the income statement down to operating result before and after items affecting comparability with items affecting comparability allocated by function.
| 2016/17 | 2015/16 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SEK M | Note | Excluding items affecting comparability |
Restruct uring costs |
Costs related to legal disputes |
Including items affecting comparability |
Excluding items affecting comparability |
Restruct uring costs |
Costs related to legal disputes |
Including items affecting comparability |
|||
| Net sales | 4 | 10,704 | – | – | 10,704 | 11,221 | – | – | 11,221 | |||
| Cost of products sold | –6,277 | –23 | – | –6,300 | –6,608 | –25 | – | –6,633 | ||||
| Gross profit | 4,427 | –23 | – | 4,404 | 4,613 | –25 | – | 4,588 | ||||
| Selling expenses | –1,165 | –5 | – | –1,170 | –1,336 | –49 | – | –1,385 | ||||
| Administrative expenses | –928 | –231 | –235 | –1,394 | –1,026 | –243 | –231 | –1,500 | ||||
| R&D expenses | –1,018 | –24 | – | –1,042 | –1,065 | –50 | – | –1,115 | ||||
| Exchange rate differences | –201 | – | – | –201 | –165 | – | – | –165 | ||||
| Operating result | 4–9 | 1,115 | –283 | –235 | 598 | 1,021 | –367 | –231 | 423 |
Net sales decreased 5 percent to SEK 10,704 M (11,221), corresponding to 7 percent decrease based on constant exchange rates. The decrease was mainly related to a one-off effect from the new produce-to order process.
| Net sales, SEK M |
Change, %1) |
Operating result, SEK M |
|
|---|---|---|---|
| Q1 | 1,882 | –15% | –34 |
| Q2 | 2,434 | –16% | 140 |
| Q3 | 2,673 | 1% | 144 |
| Q4 | 3,715 | 0% | 347 |
| Full year 2016/17 | 10,704 | –7% | 598 |
1) Compared to last fiscal year based on constant exchange rate
Gross margin was 41 percent (41). EBITA before items affecting comparability and bad debt losses amounted to SEK 1,661 M (1,639). The effect from changes in exchange rates was approximately SEK 315 M (60) including hedges.
Operating result increased by 41 percent and amounted to SEK 598 M (423). Operating margin was 6 percent (4).
Research and development expenditures before capitalization of development costs decreased 12 percent to SEK 1,196 M (1,355) equal to 11 percent (12) of net sales. Capitalization of development costs and amortization of capitalized development costs amounted to net SEK 155 M (266), of which SEK 178 M (290) relates to the R&D function. Capitalization within the R&D function amounted to SEK 534 M (591) and amortization to SEK 356 M (301).
The change in unrealized exchange rate effects from effective cash flow hedges amounted to SEK 34 M (117) and is reported in other comprehensive income. Closing balance of unrealized exchange rate effects from effective cash flow hedges in shareholders' equity was SEK 36 M (–9) exclusive of tax. According to Elekta's currency hedging policy, anticipated sales in foreign currency may be hedged up to 24 months.
Net financial items amounted to SEK –258 M (–234). The increase was related to an impairment of participations in associates while interest expense decreased due to lower interest rates.
Income before tax amounted to SEK 340 M (189). Tax expense amounted to SEK –214 M (–44) or 63 percent (23). The tax rate is high because of low or negative results in entities in low tax jurisdictions. Profit after tax amounted to SEK 126 M (145).
| SEK M | 2016/17 | 2015/16 |
|---|---|---|
| Operating result/EBIT before items | ||
| affecting comparability | 1,115 | 1,021 |
| Bad debt losses | 46 | 149 |
| Amortization: | ||
| Capitalized development costs | 380 | 326 |
| Assets relating business combinations | 119 | 143 |
| EBITA before items affecting | ||
| comparability and bad debt losses | 1,661 | 1,639 |
| SEK M | Note | April 30, 2017 | April 30, 2016 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 15 | 8,704 | 8,210 |
| Tangible fixed assets | 16 | 795 | 803 |
| Shares in associated companies | 18 | 22 | 12 |
| Other financial assets | 2, 19 | 285 | 352 |
| Deferred tax assets | 14 | 375 | 281 |
| Total non-current assets | 10,181 | 9,658 | |
| Current assets | |||
| Inventories | 20 | 936 | 1,135 |
| Accounts receivable | 21 | 3,726 | 3,301 |
| Accrued income | 1,640 | 2,126 | |
| Current tax assets | 14 | 191 | 160 |
| Derivative financial instruments | 2 | 92 | 47 |
| Other current receivables | 22 | 802 | 741 |
| Cash and cash equivalents | 23 | 3,383 | 2,273 |
| Total current assets | 10,769 | 9,783 | |
| Total assets | 20,950 | 19,441 | |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Parent Company shareholders: | |||
| Share capital | 24 | 192 | 192 |
| Contributed funds | 812 | 740 | |
| Reserves | 600 | 208 | |
| Retained earnings | 5,171 | 5,262 | |
| Parent Company shareholders, total | 6,774 | 6,402 | |
| Non-controlling interests | 0 | 10 | |
| Total equity | 6,774 | 6,412 | |
| Non-current liabilities | |||
| Long-term interest-bearing liabilities | 25 | 5,272 | 3,065 |
| Deferred tax liabilities | 14 | 778 | 690 |
| Long-term provisions | 26 | 142 | 140 |
| Other long-term liabilities | 2 | 33 | 73 |
| Total long-term liabilities | 6,224 | 3,967 | |
| Current liabilities | |||
| Short-term interest-bearing liabilities | 25 | 0 | 1,885 |
| Accounts payable | 1,000 | 1,122 | |
| Advances from customers | 2,531 | 1,943 | |
| Prepaid income | 27 | 1,874 | 1,648 |
| Accrued expenses | 28 | 1,875 | 1,817 |
| Current tax liabilities | 14 | 111 | 93 |
| Short-term provisions | 26 | 231 | 347 |
| Derivative financial instruments | 2 | 48 | 50 |
| Other current liabilities | 281 | 157 | |
| Total current liabilities | 7,952 | 9,062 | |
| Total equity and liabilities | 20,950 | 19,441 |
For information about assets pledged and contingent liabilities see Note 30 and 31 respectively.
The Group's consolidated balance sheet has been affected by changes in exchange rates. The balance sheets of the foreign subsidiaries are translated at the closing rate as per the closing date. The exchange rates used for translation as per 30 April 2017 and 30 April 2016 respectively are presented in the table on page 85.
The Group's total assets increased by SEK 1,509 M to SEK 20,950 M (19,441). Fixed assets totaled SEK 10,181 M (9,658) of which goodwill amounted to SEK 5,388 M (5,069).
Current assets, excluding cash and cash equivalents, decreased by SEK 124 M to SEK 7,386 M (7,510). Accounts receivable, accrued income and inventories decreased by 4 percent (decreased by 11). Inventory value in relation to net sales was 9 percent (10).
Cash and cash equivalents increased by SEK 1,110 M to SEK 3,383 M (2,273) at year-end, totaling 16 percent (12) of total assets. Of total bank balances SEK 12 M (10) were pledged primarily for commercial guarantees.
The Group's capital employed increased to SEK 12,046 M (11,360).
Interest-free liabilities and provisions increased by SEK 825 M to SEK 8,904 M (8,079). Interest-bearing liabilities totaled SEK 5,272 M (4,950). Net debt amounted to SEK 1,889 M (2,677). Total equity was SEK 6,774 M (6,412). Return on shareholders' equity amounted to 2 percent (2) and return on capital employed amounted to 5 percent (4). Net debt/equity ratio was 0.28 (0.42) and equity/assets ratio was 32 percent (33).
Elekta's operations is to a large extent project based. Payment flows from projects generally occur in connection with order receipt, delivery and acceptance, which generates fluctuations in working capital. Thus, movements in working capital depend on the progress of projects and the timing of certain events in relation 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 flow from projects does not always coincide with the recognition of revenue and may result in either an asset (accrued income) or a liability (advances from customers).
Elekta's payment terms varies significantly between regions and specific customers. For example, in China, the majority 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 met certain 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 a private hospital market with replacement investments. The operating cycle in the projects are typically shorter
than Elekta's average. In a typical customer relationship, Elekta receives partial payments at order receipt, delivery, installation and acceptance. North America is the region where Elekta has the lowest DSO. Lastly, customers in Europe are typically public hospitals and contracts are awarded through public procurement processes. In such cases, terms and conditions are often pre-defined 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 projects where customers pay after acceptance of installation.
Accounts receivable amounted to SEK 3,726 M (3,301) as per 30 April, showing a increase of 13 percent in SEK. The majority of non-due accounts receivable are normally due within 90 days.
In a limited number of customer projects, Elekta is providing financing through extended payment terms. Such receivables amounted to SEK 185 M (181) as per 30 April and are included in "Other financial assets" in the balance sheet and specified as "Contractual receivables" in note 19.
Customer advances represent projects for which invoiced amounts exceed revenue recognized. Advances from customers amounted to SEK 2,531 M (1,943) as per 30 April, an increase of SEK 588 M. The increase; early in the year due to the produce-to-order process and later in the year due to large project advances.
| SEK M | April 30, 2017 | April 30, 2016 |
|---|---|---|
| Working capital assets | ||
| Inventories | 936 | 1,135 |
| Accounts receivable | 3,726 | 3,301 |
| Accrued income | 1,640 | 2,126 |
| Other operating receivables | 802 | 741 |
| Sum working capital assets | 7,104 | 7,303 |
| Working capital liabilities | ||
| Accounts payable | 1,000 | 1,122 |
| Advances from customers | 2,531 | 1,943 |
| Prepaid income | 1,874 | 1,648 |
| Accrued expenses | 1,875 | 1,817 |
| Short-term provisions | 231 | 347 |
| Other current liabilities | 281 | 157 |
| Sum working capital liabilities | 7,792 | 7,035 |
| Net working capital | –688 | 268 |
| Percent of net sales | –6% | 2% |
Net working capital amounted to SEK –688 M (268) at year-end, corresponding to –6 percent (2) of net sales.
| SEK M | Note | Share capital |
Other contributed capital |
Translation reserve |
Hedge reserve |
Retained earnings |
Elekta AB:s owners, total |
Non controlling interests |
Total equity |
|---|---|---|---|---|---|---|---|---|---|
| Opening balance May 1, 2015 | 192 | 740 | 490 | –95 | 5,310 | 6,638 | 8 | 6,646 | |
| Profit for the year | – | – | – | – | 137 | 137 | 8 | 145 | |
| Remeasurements of defined benefit | |||||||||
| pensions plans | – | – | – | – | 8 | 8 | – | 8 | |
| Cash flow hedges | – | – | – | 1171) | – | 117 | – | 117 | |
| Translation differences from foreign operations | – | – | –280 | – | – | –280 | –1 | –281 | |
| Tax relating to components of other comprehensive income |
14 | – | – | – | –25 | –2 | –27 | – | –27 |
| Other comprehensive income | 0 | 0 | –280 | 92 | 6 | –182 | –1 | –183 | |
| Total comprehensive income | 0 | 0 | –280 | 92 | 143 | –45 | 7 | –38 | |
| Dividend | – | – | – | – | –191 | –191 | –5 | –196 | |
| Conversion of convertible loan | 0 | 0 | – | – | – | 0 | – | 0 | |
| Transactions with the shareholders, total | 0 | 0 | 0 | 0 | –191 | –191 | –5 | –196 | |
| Closing balance April 30, 2016 | 192 | 740 | 210 | –2 | 5,262 | 6,402 | 10 | 6,412 | |
| Opening balance May 1, 2016 | 192 | 740 | 210 | –2 | 5,262 | 6,402 | 10 | 6,412 | |
| Profit for the year | – | – | – | – | 125 | 125 | 1 | 126 | |
| Remeasurements of defined benefit pensions plans |
– | – | – | – | 1 | 1 | – | 1 | |
| Cash flow hedges | – | – | – | 341) | – | 34 | – | 34 | |
| Translation differences from foreign operations | – | – | 364 | – | – | 364 | – | 364 | |
| Tax relating to components of other comprehensive income |
14 | – | – | – | –7 | 0 | –7 | – | –7 |
| Other comprehensive income | 0 | 0 | 364 | 27 | 1 | 392 | 0 | 392 | |
| Total comprehensive income | 0 | 0 | 364 | 27 | 126 | 517 | 1 | 518 | |
| Acquisition of non-controlling interest | – | – | – | – | –31 | –31 | –1 | –32 | |
| Dividend | – | – | – | – | –191 | –191 | –10 | –201 | |
| Incentive programs | – | – | – | – | 5 | 5 | – | 5 | |
| Tax effect incentive programs | – | – | – | – | 0 | 0 | – | 0 | |
| Conversion of convertible loan | 0 | 72 | – | – | – | 72 | – | 72 | |
| Transactions with the shareholders, total | 0 | 72 | 0 | 0 | –217 | –145 | –11 | –156 | |
| Closing balance April 30, 2017 | 192 | 812 | 574 | 26 | 5,171 | 6,774 | 0 | 6,774 |
1) Of which transferred to the income statement in 2016/17: SEK –185 M (–132)
In 2016/17 Elekta paid a total dividend of SEK 191 M. The dividend payment has affected equity through a reduction of retained earnings.
During 2016/17, a number of 730,769 new A-shares and 8,593 new B-shares were subscribed through conversion of convertibles, which have affected equity by increases in share capital and contributed funds, by SEK 72 M in total.
The total number of shares in Elekta as of April 30, 2017, amounted to 383,568,409 of which 14,980,769 A-shares and 368,587,640 B-shares. See Note 24 for more information on share capital.
Total equity includes equity of foreign subsidiaries. Translation is performed at closing rate and the translation difference is reported in the translation reserve via other comprehensive income. The translation difference amounted to SEK 364 M (–281) in 2016/17. Shareholders' equity in foreign currency is hedged when it is deemed appropriate in individual cases. The translation reserve includes all exchange rate differences arising in conjunction with the translation of foreign operations that have prepared their financial reports in a currency other than that used in the group's financial reports. In addition, the translation reserve consists of exchange rate differences arising from the translation of liabilities raised as a hedging instrument for a net investment in foreign operations. The translation reserve amounted to SEK 574 M (210) at year end.
Cash flow 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 hedging is determined by the Company's currency risk assessment. Currency hedging is defined on the basis of the expected sales in foreign currency over up to 24 months. Hedging is done to reduce the effects of short-term fluctuations on the currency markets. The hedge reserve includes the effective portion of the accumulated net change in the fair value of cash flow hedging instruments attributable to hedging transactions that have not yet occurred. During 2016/17 the change in the hedge reserve was SEK 27 M (92) after tax and the closing balance of the hedge reserve was SEK 26 M (–2).
CONSOLIDATED EQUITY AND RETURN
| SEK M | Note | 2016/17 | 2015/16 |
|---|---|---|---|
| Operating activities | |||
| Profit before tax | 340 | 189 | |
| Non-cash items: | |||
| Depreciation | 6, 15, 16 | 655 | 634 |
| Interest net | 32 | 178 | 203 |
| Other non-cash items etc. | 32 | 50 | 147 |
| Operating cash flow before interest and tax | 1,222 | 1,173 | |
| Interest received | 31 | 37 | |
| Interest paid | –219 | –233 | |
| Income taxes paid | 14 | –268 | –268 |
| Operating cash flow | 767 | 709 | |
| Increase (–)/decrease (+) in inventories | 231 | 80 | |
| Increase (–)/decrease (+) in operating receivables | 158 | 350 | |
| Increase (+)/decrease (–) in operating liabilities | 662 | 31 | |
| Change in working capital | 1,051 | 461 | |
| Cash flow from operating activities | 1,819 | 1,170 | |
| Investing activities | |||
| Investments in intangible assets | 15 | –633 | –596 |
| Investments in machinery and equipment | 16 | –141 | –187 |
| Sale of fixed assets | 0 | 14 | |
| Increase in long-term receivables | 0 | –12 | |
| Decrease in long-term receivables | 0 | 7 | |
| Continuous investments | –774 | –774 | |
| Cash flow after continuous investments | 1,045 | 396 | |
| Business combinations | 32, 34 | –24 | –24 |
| Divestment of other shares | – | 5 | |
| Repayments from partnerships | 18 | 6 | 7 |
| Cash flow from investing activities | –792 | –786 | |
| Cash flow after investments | 1,027 | 384 | |
| Financing activities | |||
| Borrowings | 1,996 | 1 | |
| Repayment of debt | –1,829 | –1,108 | |
| Acquisition of non-controlling interest | –21 | – | |
| Dividend | –201 | –196 | |
| Cash flow from financing activities | –55 | –1,303 | |
| Cash flow for the year | 972 | –920 | |
| Change in cash and cash equivalents during the year | |||
| Cash and cash equivalents at the beginning of the year | 2,273 | 3,265 | |
| Cash flow for the year | 972 | –920 | |
| Exchange rate differences | 138 | –72 | |
| Cash and cash equivalents at the end of the year | 23 | 3,383 | 2,273 |
The cash flow statement describes the ability of the operations to generate cash and cash equivalents. Elekta's cash flow is used primarily to finance 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 flows during the year.
Elekta's project-based operations affect cash flow through movements in working capital. Payment flows from projects generally occur in connection with order receipt, delivery and acceptance – mostly not coinciding with revenue recognition – thus generating fluctuations in working capital levels. See also comments on working capital on page 73.
The operating cash flow (cash flow from operating activities exclusive of change in working capital) amounted to SEK 767 M (709), a increase of SEK 58 M compared with the preceding year.
Cash flow from operating activities increased to SEK 1,819 M (1,170). The cashflow improvement was mainly due to positive effects from the transformation program with a reduction of working capital.
Cash flow from investing activities amounted to SEK –792 M (–786) including investments in intangible assets of SEK –633 M (–596).
Cash flow after continuous investments increased by SEK 649 M to SEK 1,045 M (396) including a negative effect of SEK 575 M from payments related to the transformation program and costs related to legal disputes. Cash flow after investments amounted to SEK 1,027 M (384), including payments relating to business combinations of SEK –24 M (–24).
Cash flow from financing activities amounted to SEK –55 M (–1,303).
| SEK M | Note | 2016/17 | 2015/16 |
|---|---|---|---|
| Administrative expenses | –108 | –98 | |
| Operating result before other | |||
| items affecting comparability | 5, 7, 8 | –108 | –98 |
| Other items affecting comparability | –11 | –22 | |
| Operating result | –119 | –120 | |
| Income from participations | |||
| in Group companies | 10 | 268 | 615 |
| Income from participations in associated | 18 | –30 | –27 |
| Interest income and similar items | 12 | 153 | 194 |
| Interest expenses and similar items | 12 | –222 | –227 |
| Exchange rate differences | 7 | 4 | |
| Appropriations | 13 | 0 | 43 |
| Profit before tax | 58 | 482 | |
| Income taxes | 14 | 33 | 21 |
| Profit for the year | 91 | 503 |
| SEK M | 2016/17 | 2015/16 |
|---|---|---|
| Profit for the year | 91 | 503 |
| Other comprehensive income | ||
| Items that subsequently may be reclassified to the statement of income: |
||
| Hedge of net investment | – | – |
| Tax | – | – |
| Other comprehensive income, net | – | – |
| Total comprehensive income | 91 | 503 |
| SEK M | Note April 30, 2017 | April 30, 2016 | |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 15 | 75 | 83 |
| Shares in subsidiaries | 17 | 2,222 | 2,129 |
| Shares in associated companies | 18 | 0 | 0 |
| Receivables from subsidiaries | 2,679 | 2,662 | |
| Other financial assets | 19 | 26 | 73 |
| Deferred tax assets | 14 | 63 | 29 |
| Total non-current assets | 5,065 | 4,976 | |
| Current assets | |||
| Receivables from subsidiaries | 3,870 | 4,145 | |
| Other current receivables | 22 | 31 | 35 |
| Cash and cash equivalents | 23 | 2,479 | 1,499 |
| Total current assets | 6,380 | 5,679 | |
| Total assets | 11,445 | 10,655 | |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 24 | 192 | 192 |
| Statutory reserve | 156 | 156 | |
| Restricted equity | 348 | 348 | |
| Premium reserve | 657 | 585 | |
| Retained earnings | 1,601 | 1,698 | |
| Unrestricted equity | 2,258 | 2,283 | |
| Total equity | 2,606 | 2,631 | |
| Untaxed reserves | 13 | – | – |
| Long-term provisions | 26 | 36 | 53 |
| Long-term interest-bearing liabilities | 25 | 5,268 | 3,063 |
| Long-term liabilities to subsidiaries | 25 | 39 | 39 |
| Total long-term liabilities | 5,307 | 3,102 | |
| Current liabilities | |||
| Short-term interest-bearing liabilities | 25 | – | 1,872 |
| Short-term liabilities to subsidiaries | 25 | 3,342 | 2,752 |
| Short-term provisions | 26 | 30 | 29 |
| Other current liabilities | 29 | 123 | 216 |
| Total current liabilities | 3,495 | 4,869 | |
| Total equity and liabilities | 11,445 | 10,655 |
| SEK M Note |
2016/17 | 2015/16 |
|---|---|---|
| Operating activities | ||
| Profit before tax | 57 | 482 |
| Interest net 32 |
47 | 24 |
| Other non-cash items etc. 32 |
168 | 78 |
| Interest received | 153 | 195 |
| Interest paid | –229 | –228 |
| Income taxes paid 14 |
–20 | –5 |
| Operating cash flow | 176 | 546 |
| Increase (–)/decrease (+) in operating receivables | 459 | –412 |
| Increase (+)/decrease (–) in operating liabilities | –83 | –13 |
| Change in working capital | 376 | –425 |
| Cash flow from operating activities | 552 | 121 |
| Investing activities | ||
| Investments in subsidiaries 32 |
–84 | –24 |
| Increase (–)/decrease (+) in long-term receivables | –4 | 1 |
| Cash flow from investing activities | –88 | –23 |
| Cash flow after investments | 464 | 98 |
| Financing activities | ||
| Borrowings | 2,587 | 52 |
| Repayment of debt | –1,887 | –1,079 |
| Conversion of convertible loans | 72 | – |
| Dividend | –191 | –191 |
| Cash flow from financing activities | 582 | –1,218 |
| Cash flow for the year | 1,046 | –1,120 |
| Change in cash and cash equivalents during the year | ||
| Cash and cash equivalents at the beginning of the year | 1,499 | 2,630 |
| Cash flow for the year | 1,046 | –1,120 |
| Exchange rate differences | –66 | –11 |
| Cash and cash equivalents at the | ||
| end of the year 23 |
2,479 | 1,499 |
| Restricted equity | Unrestricted equity | |||||
|---|---|---|---|---|---|---|
| SEK M | Share capital | Statutory reserve |
Premium reserve |
Retained earnings |
Total equity |
|
| Opening balance May 1, 2015 | 192 | 156 | 585 | 1,386 | 2,319 | |
| Profit for the year | – | – | – | 503 | 503 | |
| Other comprehensive income | – | – | – | – | – | |
| Total comprehensive income | – | – | – | 503 | 503 | |
| Dividend | – | – | – | –191 | –191 | |
| Conversion of convertible loan | 0 | – | 0 | – | 0 | |
| Transactions with the shareholders, total | 0 | 0 | 0 | –191 | –191 | |
| Closing balance April 30, 2016 | 192 | 156 | 585 | 1,698 | 2,631 | |
| Opening balance May 1, 2016 | 192 | 156 | 585 | 1,698 | 2,631 | |
| Profit for the year | – | – | – | 91 | 91 | |
| Other comprehensive income | – | – | – | – | – | |
| Total comprehensive income | – | – | – | 91 | 91 | |
| Dividend | – | – | – | –191 | –191 | |
| Incentive programs | 0 | – | 0 | 2 | 2 | |
| Conversion of convertible loan | 0 | – | 72 | – | 72 | |
| Transactions with the shareholders, total | 0 | – | 72 | –189 | –117 | |
| Closing balance April 30, 2017 | 192 | 156 | 657 | 1,601 | 2,606 |
Elekta AB, with corporate registration number 556170-4015, is a Swedish public company with its registered office in Stockholm. The address to the head office is Elekta AB, Box 7593, SE-103 93 Stockholm.
This annual report, including the consolidated financial statements, was signed and approved for publication by the board of directors of Elekta AB on July 10, 2017. The statements of income and the balance sheets, for the Parent Company and the Group, included in the annual report and the consolidated financial statements, are subject to adoption by the annual general meeting on August 23, 2017.
The most important accounting principles applied in the preparation of the financial reports are set out below. Mainly, the same principles are applied for the Parent Company and the Group. The Parent Company's accounting principles deviating from those applied by the Group, or considered important to describe, are stated under a separate heading at the end of this note.
Elekta's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU) on April 30, 2017, the Swedish Annual Accounts Act and standard RFR 1 of the Swedish Financial Reporting Board. The Parent Company's financial reports have been prepared in accordance with the Swedish Annual Accounts Act and standard RFR 2 of the Swedish Financial Reporting Board.
Assets and liabilities are recognized at historical cost apart from financial assets and liabilities that are derivatives and contingent considerations, which are recognized at fair value.
No new or revised standards with material impact on the financial reports have been applied from 1 May 2016.
The following new standards have been published by the IASB but are either not yet effective or not yet adopted by the EU.
• IFRS 9 Financial Instruments
IFRS 9 is a new standard on accounting for financial instruments and will replace IAS 39. The standard comprise classification, valuation and impairment of financial instruments as well as hedge accounting. The evaluation of the impact from implementing the standard on the financial statements of the Group is ongoing. Areas that will be further evaluated relate to classification of receivables and the effect on the bad debt provision from replacing the incurred loss model currently applied for impairment with an expected loss model. The current assessment is that the implementation of the standard will not have any material impact on the Group's financial position or result. The standard is effective for annual reporting periods beginning on or after 1 January 2018 and Elekta will implement the new standard as of 1 May 2018.
• IFRS 15 Revenue from Contracts with Customers IFRS 15 Revenue from Contracts with Customers is a new revenue recognition standard replacing IAS 18 Revenue and IAS 11 Construction contracts. Elekta has evaluated expected effects from implementing the new standard and directional accounting principle decisions have been taken. Based on the analysis performed, a one-time effect is expected to be reported in equity
mainly relating to the timing for revenue recognition of treatment solutions. With the present policy, treatment solutions are revenue recognized when risks and rewards are transferred to the customer, which is normally at the time of shipment. According to IFRS 15 revenue recognition should occur at the time of transfer of control to the customer, which according to Elektas assessment is when the treatment solution is ready for installation at the customer's site. As under the present policy, some agreements with customers stipulates terms that will mean that transfer of control occurs at the time of acceptance. The financial impact that will be reported in equity on transition will primarily depend on the number of treatment solutions that are shipped but are not yet ready for installation at the customer site at this point in time. Other less significant financial effects are also expected from the transition, mainly relating to changes in the allocation of the transaction price to various performance obligations. The standard provides a choice of two transition methods and Elekta has tentatively taken a decision to apply the full retrospective method with restatement of comparative periods. The Group is currently performing a more detailed assessment of the impact from the implementation of IFRS 15, both from an operational and financial perspective. This exercise is still ongoing and therefore it is not practicably possible to disclose reliable estimates of the expected financial effects. The standard is effective for annual reporting periods beginning on or after 1 January 2018 and Elekta will implement the new standard as of 1 May 2018.
• IFRS 16 Leases
IFRS 16 Leases will replace IAS 17 Leases and the related interpretations IFRIC 4, SIC15 and SIC 27. The new standard will affect the accounting for leases in the books of a lessee, whereas the accounting will in all material aspects remain unchanged for lessors. With the new standard there will no longer be a distinction between operating and finance lease. All leases, with the exception of short-term leases and those of minor value, will be recognized in the balance sheet. Depreciation of lease assets must be separately recognised from interest on lease liabilities in the income statement. The evaluation of the effect on the financial statements of the Elekta Group is ongoing. The initial assessment is that the major effect from implementing the new standard will relate to operating lease agreements for offices, factories and warehouses. The standard is effective for annual reporting periods beginning on or after 1 January 2019. Not yet endorsed by the EU.
Other new or revised standards and interpretations, not yet applied, are not considered to have a material impact on the Elekta Group's financial statements.
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 affect the returns. A subsidiary is included in the consolidated 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 profits are eliminated in the consolidated accounts.
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 identifiable net assets at acquisition, the difference is reported as goodwill. A negative difference, negative goodwill, is recognized immediately as an income in the income statement.
If the initial accounting for a business combination is incomplete 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 reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date.
In connection with acquisitions of less than 100 percent, when a controlling influence is achieved, non-controlling interests are determined either as a proportional share of the fair value of identifiable 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 profit or loss and every component of other comprehensive income are attributable to the shareholders of the Parent 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 controlling influence are recognized as equity transactions.
The Group companies prepare their financial 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 consolidated accounts which are prepared in Swedish kronor (SEK), which is the functional currency of the Parent Company and the presentation currency. The income statements and balance sheets of foreign subsidiaries have been translated, from their respective functional currency, to the presentation currency of the Group. All items in the income statements have been translated at the average rate for the reporting period, while assets and liabilities in the balance sheets have been translated at the closing rate. Translation differences are reported in other comprehensive income.
Certain long-term financing 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 effect into consideration, exchange gains and losses are reported in other comprehensive income.
Associates are companies which are not subsidiaries but in which the Group has a significant, but not controlling, interest. This normally means companies in which the holding represents more than 20 percent but less than 50 percent of the voting rights. Associates are reported by use of the equity method. Holdings in associates are initially recognized at cost in the consolidated balance sheet. The carrying amount is adjusted for the share of associates' earnings after the acquisition date. Dividends from associates are reported as a reduction of the carrying amount. Income from participations in associates is a separate line in the income statement.
Operating segments are reported in accordance with management 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 identified 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 however 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 financial performance is executed for three geographic regions which are Elekta's operating segments:
The same accounting principles are applied in the segment reporting as for the Group.
Elekta presents its income statement classified by function where the operating expenses are allocated to cost of products sold, selling expenses, administrative expenses and R&D expenses. Exchange rate differences and items affecting comparability are reported on separate lines within the operating result. These items have been identified as important to distinguish from operating revenue and costs directly related to functions in order to ease comparability over time. Items affecting comparability are events or transactions with significant financial effects, which are relevant for understanding the financial performance when comparing income for the current period with previous periods, including restructuring programs, expenses relating to major legal disputes, impairments and gains and losses from acquisitions or disposals of subsidiaries.
Elekta's revenue is derived primarily from the sales of hardware and software products, as well as service contracts and services to these products. The revenue is valued at the fair value of the consideration received or receivable, and represents the amounts received for sold products and services, net of sales discounts, returns and value added tax.
Revenue from the sale of products is recognized when all of the following conditions are satisfied:
The above implies that each contract requires an examination of any circumstances, terms and conditions affecting the transaction.
Revenue from the rendering of service is recognized when the outcome can be estimated reliably and it is probable that the economic benefits associated with the transaction will flow to the entity. When the service is performed by an undetermined number of acts over the specified service period, revenue is recognized on a straight-line basis over the service period.
Bundled deals, where hardware, software products and service may be included in the same deal, are very common. A bundled deal is treated as a project and is supported by a project team that coordinates the delivery and implementation of the products, which can occur at different stages. For bundled deals the total revenue is allocated to its different parts based on their relative fair values. As explained below, methods for revenue recognition are different between hardware products, software products and services.
The timing of revenue recognition often does not coincide with invoicing and payments from customers. Payment terms or conditions for projects differ 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.
The risk and rewards related to hardware products are usually transferred to the customer upon shipment or delivery depending on the contracted shipment terms. The hardware products are delivered to comply with the delivery date contracted with the customer. At this point the customer has invested heavily in preparing an appropriate environment in which to accommodate the equipment and will be firmly committed to embarking upon the final stages of the project such as installation and training and this is normally the point in time where the main part of revenue is recognized. Once technical acceptance has been received from the customer the last part of revenue (related to installation and training) is recognized. Hardware products include integrated software components required for the product's essential functionality.
After completing the implementation of software, or a part thereof, the customer will be presented with a certificate detailing the products delivered which is then signed by the customer. When the customer has signed the certificate, fully or partly, it serves as proof of acceptance. By signing it the customer confirms that the products, services and training have been provided in accordance with the agreement and that the software has been handed over to the customer for clinical use. When Elekta receives the signed certificate, revenue will be recognized given that all conditions for revenue recognition have been met. Many times, the acceptance procedure is performed in steps which also leads to a gradual recognition of revenue.
Service revenue is recognized on a straight-line basis over the contractual term of the arrangement or the expected period during which those specified services will be performed. Maintenance and support agreements on software products are generally renewed on an annual basis. The revenue for maintenance and support will be deferred and amortized over the length of the contract.
Remuneration paid to employees in the form of wages/salary, paid vacation, etcetera is accounted for as it is earned. Pensions are reported either as defined contribution plans or as defined benefit 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 defined contribution pension plans, a pension cost is reported on a continuous basis as the benefits are earned, which normally coincides with the date on which the fees are paid.
Elekta has defined benefit 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.
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 is only applied to a very limited extent and neither cost nor obligation are 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 profit and loss over the vesting period. At each closing in the vesting period the expected number of vested shares is revised and the impact of any changes over the original estimates are recognized in the income statement, with a corresponding adjustment to equity.
In addition, provisions are made for estimated employer contributions related to the share programs. Calculations are based on a theoretical market valuation where the market value is calculated using Black & Scholes based on the share price on the closing date. For allotted shares, social security expenses are paid on the basis of the market value on the allotment date.
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. Deferred tax is calculated and reported in accordance with the balance sheet method. In accordance with this method, deferred tax is calculated on the basis of the temporary differences between the tax bases and the carrying amounts of assets and liabilities. Deferred tax assets relating to loss carry-forwards and other future tax credits are recognized to the extent it is probable that deductions can be made against future profits. Valuation is based on nominal amounts based on the tax rules prevailing in each country and the anticipated tax rate for the following year in each country. Deferred taxes relating to temporary differences attributable to investments in subsidiaries are not recognized in the consolidated financial statements since Elekta AB, in all cases, can control the time of reversal of the temporary differences and it is not considered probable that such a reversal will occur in the foreseeable future. Deferred tax assets and deferred tax liabilities are offset when there is a legal right to do so and when the deferred tax amounts concern the same tax authority. For items recognized in profit or loss, the related tax effects are also recognized in profit or loss. For items recognized in other comprehensive income, related tax effects are also recognized in other comprehensive income.
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 manufacturing processes or the like, therefore no amortization is allocated to cost of goods sold.
Goodwill comprises the positive amount by which 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 identifiable 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 indicated. See also section Impairment.
Research costs are expensed as they are incurred. In those instances in which it is difficult 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. Identifiable costs for the development of new products are capitalized to the extent that these are considered to provide future economic benefits. In other instances, development 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 produced commercially, and during the estimated useful life of the asset. The amortization period is 3–5 years.
Intangible assets also include technology, brands, customer relations, etcetera. 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 10–20 years Order backlog 0.5–1 year
Tangible assets acquired by Group companies are reported at cost, less accumulated depreciation and any write-downs. Assets in acquired companies are reported at fair value on the acquisition date after deduction of subsequent accumulated depreciation. Machinery and equipment is depreciated on a straight-line basis during its economic life of between 3 and 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 lives are reviewed annually and adjusted as required.
The carrying amount of a depreciated asset is tested for impairment 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 consists 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 goodwill is allocated to cash generating units. When testing for impairment of goodwill, the assets are grouped in cash-generating units and assessments are made on the basis of these units' future cash flows. Impairment losses on goodwill are not reversed.
All impairment losses, and any reversals of the same, are recognized in the income statement.
The lease of tangible assets, for which the Group is essentially responsible for the same risks and benefits as it would be in the case of direct ownership, is classified as finance lease. The leased asset is reported as a fixed asset and the corresponding obligation to pay a lease fee is reported as an interest-bearing liability. The lease payments are distributed between amortization of the liability and financial expense, so that each reporting period is charged with an interest amount corresponding to a fixed interest rate on the reported liability during each period. The leased asset is depreciated in accordance with the same principles that apply to owned assets of the same type. If any uncertainty exists about whether the asset will be
taken over at the end of the lease period, the asset is depreciated over the lease period, if this is shorter.
Lease of assets, for which the lessor, for all practical purposes, is considered the owner, is classified as operating lease. The lease fee is expensed on a straight-line basis over the lease period.
Inventories are valued in accordance with the 'first in, first out' principle and at the lower of cost and net realizable value. Internal profits arising from deliveries between Group companies are eliminated upon consolidation.
Transactions in foreign currency are translated to the respective Group Company's functional currency by use of the currency rate prevailing on the transaction date. Monetary receivables and liabilities in foreign currency are similarly translated by use of the closing day rate. Exchange rate differences arising upon translation, and upon payment of the transaction, are reported in the income statement with the exception of those related to qualified hedge transactions, related to cash flows 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 operating result. Exchange rate gains and losses on loans and investments are recognized as financial items. Non-monetary assets and liabilities carried at historical cost are translated at the exchange rate prevailing on the transaction date.
A financial asset or a financial liability is reported in the balance sheet when the Company becomes party to the contractual terms and conditions of the instrument. A financial asset is removed from the balance sheet when the contractual rights are realized, fall due, or the Company loses control of them. Spot acquisitions or sales of financial 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.
The fair value of quoted financial 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 flows at the quoted market interest rate for the particular maturity.
For short-term loans and investments, the fair value is deemed to comply with the carrying amount in view of the fact that a change in market rate of interest does not have a material effect on the market value.
Financial assets and liabilities are off-set and reported at a net 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.
Financial assets and liabilities are divided into the following categories in accordance with IAS 39.
Assets are classified in this category when the intention is to sell in the short term. Derivatives with a positive market value are classified in this category unless they are used for hedge accounting. Assets in this category are recognized at fair value and changes in value are recognized in the income statement. Only financial derivatives assigned to this category during the year.
Loan receivables and accounts receivable are financial assets, which are not derivatives, with fixed or determinable payments, which are not quoted in an active market. The receivables arise when money, goods or services are provided directly to another party without any intention of trading in the receivables. Assets in this category are measured at amortized cost less any provision for impairment. The category include for example accounts receivable as well as cash and cash equivalents.
Since the anticipated life of accounts receivable is short, reporting is based on the amounts expected to be received, based on individual assessment of any bad debts, without discounting in accordance with the method for amortized cost. Impairment loss on accounts receivable is recognized in operating profit.
Cash and cash equivalents comprise cash and bank balances with financial institutions and short-term investments with an original maturity of less than three months. Cash and cash equivalents are reported at nominal value.
This category includes derivatives with negative fair values that are not used for hedge accounting, financial 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.
This category includes financial 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 effective interest method.
Loan liabilities are initially reported at fair value, net of transaction costs, and subsequently at amortized cost according to the effective interest method. Loan liabilities carrying a fixed 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 off-set with changes in value of the hedge instrument in net financial items.
A convertible loan is recognized as a compound financial instrument divided into a liability component and an equity component. Upon initial recognition of the convertible bond, the fair value of the liability component is determined based on the present value of the contractually determined stream of cash flows based on a discount rate determined from the market rate of comparable instruments without the conversion option. Subsequent to initial recognition, the liability component is measured based on its amortized cost, using the effective interest method. The carrying value of the liability component gradually approaches the nominal value of the convertible loan. The gradual increase in the liability component is recognized in the income statement as interest expense and the total interest expense of the convertible loan therefore includes the gradual increase in the liability component as well as the cash coupon. The equity component is calculated as the difference between the nominal value of the convertible loan and the initially recognized liability component. The equity component is carried at a fixed value in shareholders' equity. Transaction costs related to the issue of the convertible loan are distributed between the liability and equity component in proportion to the distribution of the issue proceeds. The transaction costs are included in the calculation of amortized cost, using the effective interest method, and are expensed over the term of the convertible loan.
Loans in foreign currency are reported at closing rate. Exchange rate differences for loans in connection with hedging of net investments in foreign operations are reported in other comprehensive income, with tax effects taken into account, and are thus off-set against the translation differences that arise when translating the subsidiaries' balance sheets into SEK.
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.
All derivatives are initially and continuously recognized at fair value in the balance sheet. Gains and losses on remeasurement of derivatives used for hedging purposes are recognized as follows. Changes in value relating to cash flow hedges are reported in other comprehensive income and are taken to the income statement as the hedged cash flow affects the income statement. Any ineffective 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.
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 estimate of the amount to be paid.
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.
The cash flow statement is prepared according to the indirect method.
The Group's Parent Company, Elekta AB, carries out group management and provides joint group functions and financial management. The Parent Company's revenues consist mainly of dividends from subsidiaries. The most material balance sheet items are shares in subsidiaries, intragroup 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 RFR 2 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.
The Parent Company's revenues consist mainly of dividends from subsidiaries. Dividends are recognized when the right to receive payment is judged to be firm.
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 financial net in the income statement.
Derivative financial instruments are accounted for at fair value. Changes in the fair values of derivative financial instruments are reported in the income statement with the exception of exchange differences 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 considerations are reported as provisions in the Parent Company.
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 effect of group contributions is recognized in the income statement in accordance with IAS 12.
| Average rate | Closing rate | |||||
|---|---|---|---|---|---|---|
| Country | Currency | 2016/17 | 2015/16 | April 30, 2017 | April 30, 2016 | |
| Australia | AUD | 6.546 | 6.229 | 6.606 | 6.149 | |
| Canada | CAD | 6.610 | 6.451 | 6.473 | 6.436 | |
| China | CNY | 1.289 | 1.320 | 1.282 | 1.242 | |
| Euroland | EUR | 9.518 | 9.328 | 9.630 | 9.176 | |
| United Kingdom | GBP | 11,314 | 12.670 | 11,439 | 11.782 | |
| Hong Kong | HKD | 1.120 | 1.087 | 1.136 | 1.039 | |
| Japan | JPY | 0.080 | 0.071 | 0.079 | 0.075 | |
| USA | USD | 8.694 | 8.434 | 8.840 | 8.059 |
As a result of its operations, the Elekta Group is exposed to a number of financial risks: market risk, credit risk and liquidity risk. The Group's overriding risk management policy focuses on the unpredictability of financial markets and seeks to reduce any potentially unfavorable effects on the Group's financial results.
Risk management is conducted by the Group's finance department, which identifies, evaluates and hedges financial risks. Work is pursued in line with the policies established by the board for overarching risk management and for specific areas such as currency risk, interest-rate risk, credit risk, utilization of derivative instruments and financial instruments that are not derivatives, and the investment of surplus liquidity.
Market risk encompasses currency risk, interest-rate risk and price 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.
Because of its international operations, the Group is exposed to currency risks in the form of transaction exposure and translation exposure. Transaction exposure arises as a result of future business transactions and translation exposure emerges as a result of recognized assets and liabilities in foreign currency 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 Swedish kronor (SEK), GBP and CNY. 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 liabilities are managed using derivative contracts based on forecasted net flows and recognized net balances. Elekta's policy is to hedge the exchange-rate risk using forwards or options, 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. Hedging is conducted on the basis of expected net sales over a period up to 24 months. Each Group company is responsible for quantifying its transaction exposure in particular flow forecasts that then provide the basis for determination of the exposure -3,000 USD EURJPY GBPCNYSEK OtherElekta Annual Report 2016/17 85
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 100 percent.
Hedging is carried out in order to reduce the effects of short-term fluctuations 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.
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 affect Group net profit and shareholders' equity by approximately +/– SEK 10 M (14), exclusive of hedging effects. 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.
| Currency | April 30, 2017 | April 30, 2016 |
|---|---|---|
| USD | 28 | 30 |
| EUR | –4 | 3 |
| JPY | 6 | 5 |
| GBP | –17 | –20 |
| CNY | –4 | –5 |
| Other currencies | 3 | 6 |
The Group's net sales and operating expenses by currency for 2016/17 are shown in the following diagram.
Interest-rate risk refers to the risk that changes in the interest rate level negatively affect Elekta's earnings, primarily as a result of higher expenses for long-term borrowing, since the Group's interest-rate risk primarily arises through long-term borrowing at variable interest rate.
Elekta's policy is to reduce the interest-rate risk through the use of loans, investments and derivatives. The Group's finance department analyzes exposure to interest-rate risk, whereby refinancing, turnover of existing positions, alternative financing and hedging are taken into account. Based on this, the effect on earnings that a certain change in the interest rate would have is calculated, in which the total change in the interest rate is used for all currencies.
Elekta usually obtains long-term loans at a variable or fixed interest rate based on current market conditions. Conversion to fixed or variable interest rates is done using interest rate derivatives 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 difference between fixed 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 general change in the interest rate on loans and investments by one percentage point would affect the Group's net result and shareholders' equity by +/– SEK 3 M (7), excluding hedging effects. The impact on the result is mainly attributable to lower/higher interest expense for loans at variable interest rate.
On April 30, 2017, interest-bearing liabilities totaled SEK 5,272 M (4,950), of which SEK 4 M (1) pertained to financial leasing. The average fixed interest term was 1.6 years (2.2) and the weighted average interest rate, taking interest rate derivatives into account, was 2.5 percent (3.0). See Note 25 for more information on interest-bearing loans.
Credit risk arises via financial credit risk related to cash and cash equivalents, derivative instruments and balances at banks and financial institutions as well as through credit exposure vis-á-vis customers and distributors. Credit risk is managed primarily at Group level, but, as regards credit risk in accounts receivable and accrued income, the primary responsibility lies with the individual Group companies. Maximum credit risk is deemed to correspond to the carrying values of the financial assets recognized in the balance sheet.
Elekta's finance policy includes special counterparty regulations in which the maximum credit exposure and the lowest credit rating for various counterparties are specified. Only banks and financial institutions that have received the credit rating from Standard & Poor's of – A (long) and A1+ (short) or higher– are accepted. Elekta's liquidity is invested in accordance with the determined policy, with the goal of maintaining high liquidity combined with a low credit risk.
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 conditions for payment and delivery are offered. 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 financial position and other influencing 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 receivables outstanding and at the end of the financial year 2016/17 the provision for bad debts amounted to SEK 121 M. See Note 21 for an analysis of credit exposure in accounts receivable and provision for bad debts.
Liquidity risk pertains to the risk of not being able to cover payment obligations due to insufficient cash and cash equivalents or difficulties in obtaining external financing. The operating Group companies draw up cash flow forecasts, which are consolidated centrally. At the Group level, rolling forecasts for the Group's liquidity reserve are observed in order to ensure that the Group has sufficient cash resources to meet the requirements of current operations, while also retaining sufficient scope of unutilized credit facilities.
Excess liquidity in operating Group companies is transferred centrally and is managed by the Group's financial function. Investments are made primarily in interest-bearing accounts, term-limited borrowing, money market instruments, money market funds and tradable securities, depending on which instrument is viewed as having an appropriate term or sufficient 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, 2017, available cash and cash equivalents amounted to SEK 3,371 M (2,263), or 31 percent (20) of net sales. In addition, Elekta had SEK 1,685 M (1,606) in unutilized credit facilities.
The table below shows the Group's liquidity risk through a maturity analysis regarding financial liabilities (including interest payments as applicable) and derivatives recognized as financial liabilities. The amounts noted in the table are contractual, undiscounted cash flows classified on the basis of the term on the balance sheet date that remains to the agreed maturity date.
| 2017-04-30 | 2016-04-30 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 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 25) | – | 1,924 | 2,902 | 442 | 5,268 | 1,991 | 902 | 1,026 | 1,216 | 5,135 |
| Finance leases (note 25) | 4 | – | – | – | 4 | 1 | – | – | – | 1 |
| Accounts payable | 1,000 | – | – | – | 1,000 | 1,122 | – | – | – | 1,122 |
| Derivative financial instruments – outflow, gross | 4,587 | 71 | – | – | 4,658 | 3,975 | 7 | – | – | 3,982 |
| Derivative financial instruments – inflow, gross | –3,140 | –70 | – | – | –3,210 | –3,607 | –8 | – | – | –3,615 |
| Other liabilities | 281 | 33 | – | – | 314 | 157 | 71 | – | – | 228 |
| Total | 2,732 | 1,958 | 2,902 | 442 | 8,034 | 3,639 | 972 | 1,026 | 1,216 | 6,853 |
The primary objective of the Group's capital management is to secure a going concern through maintaining a high creditworthiness and a wellbalanced capital structure with the aim of generating return to shareholders and benefits 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.
Elekta's objective is that the net debt/equity ratio is not to exceed 0.5. This key figure is calculated as net debt in relation to total equity. Net debt is calculated as interest-bearing liabilities (short and long term according to the consolidated balance sheet) less cash and cash equivalents.
| Note | 30 April, 2017 | 30 April, 2016 | |
|---|---|---|---|
| Interest-bearing liabilities | 25 | 5,272 | 4,950 |
| Cash and cash equivalents | 23 | –3,383 | –2,273 |
| Net debt | 1,889 | 2,677 | |
| Total equity | 6,774 | 6,412 | |
| Total capital | 8,663 | 9,089 | |
| Net debt/Equity ratio | 0.28 | 0.42 |
The net debt/equity ratio was 0.28 compared to 0.42 2015/16. See also Note 25 for more information on interest-bearing liabilities.
lished by discounting future payment flows at current market interest rate and then converting to SEK at the current exchange rate. For other financial instruments the fair value is estimated to agree with the carrying amount.
The table below presents the Group's financial assets and financial liabilities by measurement category with the carrying amount and fair value per item. Fair value for long-term interest-bearing liabilities has been estab-
April 30, 2017 April 30, 2016 SEK M Note Carrying amount Fair value Carrying amount Fair value FINANCIAL ASSETS Financial assets measured at fair value through profit or loss: Derivative financial instruments – non-hedge accounting 44 44 21 21 Loan receivables and accounts receivable: Other financial assets 19 285 285 352 352 Accounts receivable 21 3,726 3,726 3,301 3,301 Other receivables 22 355 355 376 376 Cash and cash equivalents 23 3,383 3,383 2,273 2,273 Derivatives used for hedging purposes: Derivative financial instruments – hedge accounting 63 63 27 27 FINANCIAL LIABILITIES Financial liabilities at fair value through profit or loss: Derivative financial instruments – non-hedge accounting 20 20 17 17 Other liabilities (contingent considerations) 77 77 104 104 Financial liabilities measured at amortized cost: Long-term interest-bearing liabilities 25 5,272 5,322 3,065 3,213 Short-term interest-bearing liabilities 25 0 0 1,885 1,984 Accounts payable 1,000 1,000 1,122 1,122 Other liabilities 237 237 90 90 Derivatives used for hedging purposes: Derivative financial instruments – hedge accounting 28 28 36 36
The table below shows how the Group's financial assets and financial liabilities, which are carried at fair value, have been categorized in the fair value hierarchy. The different levels are defined as follows:
| April 30, 2017 | April 30, 2016 | |||||||
|---|---|---|---|---|---|---|---|---|
| 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 profit or loss: |
||||||||
| Derivative financial instruments – non-hedge accounting | – | 44 | – | 44 | – | 21 | – | 21 |
| Derivatives used for hedging purposes: | ||||||||
| Derivative financial instruments – hedge accounting | – | 63 | – | 63 | – | 27 | – | 27 |
| Total financial assets | – | 107 | – | 107 | – | 48 | – | 48 |
| FINANCIAL LIABILITIES | ||||||||
| Financial liabilities at fair value through profit or loss: | ||||||||
| Derivative financial instruments – non-hedge accounting | – | 20 | – | 20 | – | 17 | – | 17 |
| Contingent considerations | – | – | 77 | 77 | – | – | 104 | 104 |
| Derivatives used for hedging purposes: | ||||||||
| Derivative financial instruments – hedge accounting | – | 28 | – | 28 | – | 36 | – | 36 |
| Total financial liabilities | – | 48 | 77 | 125 | – | 53 | 104 | 157 |
The fair value of financial instruments that are not traded on an active market are determined by means of available valuation techniques. Market information is used when available. The use of corporate-specific information is avoided whenever possible. If all important in-data required for a fair value valuation of an instrument is observable, the instrument is in level 2. Specific valuation techniques used in the valuation of financial instruments include, for example, listed market prices, fair value for interest-rate swaps, calculated as the present value of estimated future cash flows based on observable yield, fair value of currency forward contracts determined through the use of rates for currency foreign exchange contracts on the balance sheet date.
The change during the year for instruments at level 3 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 fulfillment of the conditions.
| Contingent considerations | 2016/17 | 2015/16 |
|---|---|---|
| Opening balance May 1 | 104 | 152 |
| Business combinations | 13 | –14 |
| Payments | –24 | –24 |
| Reversals | –6 | – |
| Revaluations | –10 | –5 |
| Translation differences | 0 | –5 |
| Closing balance April 30 | 77 | 104 |
The Group's derivative financial 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.
| SEK M | April 30, 2017 | April 30, 2016 | ||||||
|---|---|---|---|---|---|---|---|---|
| Nominal | Asset | Liability | Hedge reserve after tax |
Nominal | Asset | Liability | Hedge reserve after tax |
|
| Currency derivatives: | ||||||||
| Cash flow hedges | 1,898 | 63 | 28 | 26 | 954 | 27 | 36 | –2 |
| Non-hedge accounting | 3,737 | 44 | 20 | – | 3,231 | 21 | 17 | – |
| Currency derivatives, total | 5,635 | 107 | 48 | 26 | 4,185 | 48 | 53 | –2 |
The table below presents detailed information regarding the Group's outstanding cash flow hedges. Realized results from cash flow hedges have been recognized on the line "Currency rate differences" in the operating result and amounted to SEK –185 M (–132) during the year, of which SEK 1 M (–23) was related to the ineffective portion.
| April 30, 2017 | April 30, 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Currencies | Currency | Amount | Term | Exchange rate | Currency | Amount | Term | Exchange rate | |
| EUR/GBP | EUR | – | – | – | EUR | 6 M | 6–12 mon | 0.748 EUR/GBP | |
| EUR/SEK | EUR | 2 M | 6–6 mon | 9.588 EUR/SEK | EUR | 5 M | 6–12 mon | 9.488 EUR/SEK | |
| JPY/GBP | JPY | 1,100 M | 3–18 mon | 0.007 JPY/GBP | JPY | 1,300 M | 6–15 mon | 0.006 JPY/GBP | |
| JPY/SEK | JPY | 300 M | 6–12 mon | 0.082 JPY/SEK | JPY | 400 M | 6–15 mon | 0.071 JPY/SEK | |
| USD/GBP | USD | 172 M | 2–18 mon | 0.785 USD/GBP | USD | 72 M | 3–18 mon | 0.676 USD/GBP | |
| USD/SEK | USD | 28 M | 3–21 mon | 8.770 USD/SEK | USD | 18 M | 3–12 mon | 8.164 USD/SEK |
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 2017, will be accounted for in the income statement in the periods when the hedged transactions will affect the income statement. The estimated future effect from outstanding cash flow hedges are presented in the table below.
OUTSTANDING CASH FLOW HEDGES' ESTIMATED EFFECT ON THE INCOME STATEMENT
| 2017/18 | 2018/19 | |||||||
|---|---|---|---|---|---|---|---|---|
| SEK M | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 |
| Expected result from cash flow hedges | –3 | 2 | 14 | 9 | 8 | 7 | 0 | – |
Offsetting of financial assets and liabilities consists solely of derivative instruments that are encompassed by legally binding agreements on offsetting.
OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES
| 2016/2017 | 2015/2016 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| SEK M | Gross amount |
Amounts set off in the balance sheet |
Net amounts in the balance sheet |
Amounts covered by netting agreements but not set off |
Net amount |
Gross amount |
Amounts set off in the balance sheet |
Net amounts in the balance sheet |
Amounts covered by netting agreements but not set off |
Net amount |
|
| Financial assets | 107 | – | 107 | –42 | 64 | 48 | – | 48 | –32 | 16 | |
| Financial liabilities | 48 | – | 48 | –42 | 6 | 53 | – | 53 | –32 | 21 |
In the case of financial assets and liabilities that are subject to legally binding offsetting agreements, each agreement between the company and the counterparties permit net deduction of the relevant financial assets and liabilities if both 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.
The preparation of financial 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 circumstances. Thus, estimates and assessments affect the financial 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 preparation of the financial reports the result can be different and the actual outcome seldom complies with the anticipated result. For Elekta, estimates and assessments are particularly important in revenue recognition, valuation of accounts receivable, calculation of deferred taxes and provisions, and also for impairment testing of goodwill. Estimates and assessments are continually reassessed. Amounts below refer to 30 April 2017 (2016) unless otherwise stated.
One of the conditions for revenue recognition is that revenue from the sale of products is recognized when the risks and rewards of ownership of the goods has been transferred to the buyer. The assessment of when these risks and rewards are transferred requires that each contract is examined of the circumstances affecting the transaction. The risk and rewards related to hardware products are usually taken as transferred to the customer upon shipment or delivery depending on the contracted shipment terms. Thus, the main part of revenue is normally recognized upon either shipment or delivery. The timing of revenue recognition often does not coincide with invoicing and payments from customers. Therefore, the assessment of the conditions for revenue recognition being satisfied often forms the basis for amounts recognized as either accounts receivable or accrued income. Amounts invoiced are reported as accounts receivable while revenue recognized amounts not yet invoiced are reported as accrued income. Net sales for the year amounted to SEK 10,704 M (11,221). Accrued income amounted to SEK 1,640 M (2,126). Accounts receivable amounted to SEK 3,726 M (3,301). For more information on accounts receivable see below.
Accounts receivable is one of the most significant items in the balance sheet and is carried at nominal value net after provisions for bad debts. Thus, the provision for bad debts is subject to estimates and assessments. Accounts receivable amounted to SEK 3,726 M (3,301) including bad debt provisions of SEK 121 M (92). See Note 2 for further information regarding the credit risk in accounts receivable and Note 21 for more information on accounts receivable and the provision for bad debts.
Deferred tax assets and deferred tax liabilities are balance sheet items which are subject to estimates and assessments. Deferred tax is calculated on temporary differences between the carrying amounts and the tax values of assets and liabilities. Estimates and assessments affect the recognized deferred tax amounts in the determination of the carrying amounts of the different assets and liabilities, and also through forecasts regarding future taxable profits in those cases where a future utilization of deferred tax assets depends on future taxable profits. Deferred taxes amounted to a net liability of SEK 403 M (409), whereof assets SEK 375 M (281) and liabilities SEK 778 M (690). See Note 14 for more information on deferred taxes.
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 373 M (487).
For the Group, the most significant estimates and assumptions are those relating to impairment testing of goodwill. This means that the effect on the financial reports may be considerable if the estimates and assessments made would prove to deviate significantly 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 determine the net realizable value. Therefore, the value in use is normally 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 performed through discounting future estimated cash flows. 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 adjustments of the assumptions made could have an effect on the carrying amount of the goodwill. Assuming a lower growth rate would lead to a lower recoverable amount. A higher discount rate would also lead to a lower recoverable amount. Goodwill amounted to SEK 5,388 M (5,069). Refer to Note 15 for more information on goodwill and for a description of the impairment test performed, major assumptions made as well as the effects of likely changes to them.
The accounting principles applied in the segment reporting are the same as in the group accounts.
Net sales per country is based on sales to customers in the respective country. There is no individual customers representing more than 10 percent of net sales.
Information on other non-current assets (intangible assets) per country cannot be disclosed as the necessary information is not available. See Note 15 for information on goodwill per region.
| SEK M | 2016/17 | 2015/16 |
|---|---|---|
| Sweden | 80 | 26 |
| USA | 3,436 | 3,275 |
| China | 953 | 1,552 |
| Japan | 888 | 811 |
| United Kingdom | 557 | 372 |
| Germany | 412 | 519 |
| Italy | 348 | 524 |
| India | 347 | 272 |
| France | 341 | 323 |
| Australia | 258 | 312 |
| Other countries | 3,084 | 3,235 |
| Total | 10,704 | 11,221 |
| SEK M | 2016/17 | 2015/16 |
|---|---|---|
| Sweden | 81 | 85 |
| United Kingdom | 327 | 320 |
| China | 121 | 122 |
| USA | 110 | 117 |
| Netherlands | 87 | 87 |
| Other countries | 69 | 72 |
| Total | 795 | 803 |
| North and South America |
Europe, Middle East and Africa |
Asia Pacific |
Other/ Group-wide2) |
Group total |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| SEK M | 2016/17 | 2015/16 | 2016/17 | 2015/16 | 2016/17 | 2015/16 | 2016/17 | 2015/16 | 2016/17 | 2015/16 | |
| Net sales1) | 4,147 | 4,005 | 3,444 | 3,651 | 3,114 | 3,565 | – | – | 10,704 | 11,221 | |
| Operating expenses | –2,600 | –2,713 | –2,365 | –2,763 | –2,174 | –2,590 | – | – | –7,139 | –8,066 | |
| Contribution margin | 1,547 | 1,292 | 1,079 | 888 | 940 | 975 | – | – | 3,565 | 3,155 | |
| Contribution margin, % | 37% | 32% | 31% | 24% | 30% | 27% | |||||
| Global costs | –2,450 | –2,134 | –2,450 | –2,134 | |||||||
| Items affecting comparability |
–518 | –598 | –518 | –598 | |||||||
| Operating result | 1,547 | 1,292 | 1,079 | 888 | 940 | 975 | –2,968 | –2,732 | 598 | 423 | |
| Income participations in associated companies |
–17 | 11 | –17 | 11 | |||||||
| Financial income | 31 | 37 | 31 | 37 | |||||||
| Financial expenses | –271 | –285 | –271 | –285 | |||||||
| Exchange rate differences |
–1 | 3 | –1 | 3 | |||||||
| Income before tax | 1,547 | 1,292 | 1,079 | 888 | 940 | 975 | –3,226 | –2,966 | 340 | 189 | |
| Income tax | –214 | –44 | –214 | –44 | |||||||
| Profit for the year | 1,547 | 1,292 | 1,079 | 888 | 940 | 975 | –3,440 | –3,010 | 126 | 145 | |
| Net sales per product type |
|||||||||||
| Solutions3) | 2,075 | 2,046 | 2,006 | 2,284 | 2,130 | 2,722 | – | – | 6,211 | 7,052 | |
| Service | 2,072 | 1,959 | 1,438 | 1,367 | 984 | 843 | – | – | 4,494 | 4,169 | |
| Total | 4,147 | 4,005 | 3,444 | 3,651 | 3,114 | 3,565 | – | – | 10,704 | 11,221 | |
| Depreciation/ | |||||||||||
| Amortization | –245 | –258 | –377 | –342 | –33 | –34 | – | – | –655 | –634 | |
| Investments | 328 | 330 | 323 | 522 | 30 | 22 | – | – | 681 | 874 |
1) Which of net sales, internal SEK 5,476 M (5,183)
2) Within other/group-wide are costs that can not be allocated by segment such as global costs and items affecting comparability. Allocations by segment are not done for financial items and tax
3) The product type solutions includes hardware and software combined as it better reflects the business follow-up. The comparatives have been restated
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| SEK M | 2016/17 | 2015/16 | 2016/17 | 2015/16 | |
| Salaries and remunerations: | |||||
| Board and Managing directors | 131 | 123 | 17 | 15 | |
| Other employees | 2,797 | 2,788 | 37 | 28 | |
| Total salaries and other remunerations | 2,928 | 2,911 | 54 | 43 | |
| Social security costs: | |||||
| Pension costs | 225 | 230 | 13 | 16 | |
| Other social security costs | 330 | 334 | 18 | 14 | |
| Total social security costs | 555 | 564 | 31 | 30 | |
| Total salaries, other remuneration and social security costs | 3,483 | 3,475 | 85 | 73 |
Bonuses included in the above salaries and other remunerations paid to the Boards and the Managing directors of subsidiaries amounted to SEK 34 M (30), and SEK 1 M (4) in the Parent Company. Total pension costs amounted to SEK 225 M (230) of which SEK 15 M (5) concern defined benefit pension
plans. Pension costs in the Parent Company amounted to SEK 13 M (16) of which the total amount related to defined contribution pensions plans. For further information regarding defined benefit pension plans see Note 26.
According to the resolution by the AGM, fees totaling SEK 5,065,000 (4,955,000) were paid to the Board of Directors. The fees were distributed in accordance with the table below.
| April 30, 2017 | ||||||
|---|---|---|---|---|---|---|
| Thousands | Regular remuneration |
Remuneration compensation committee |
Remuneration audit committee |
Regular remuneration |
Remuneration compensation committee |
Remuneration audit committee |
| Chairman: | ||||||
| Laurent Leksell | 1,075 | 90 | – | 1,075 | 90 | – |
| Members: | ||||||
| Luciano Cattani | 460 | 50 | – | 460 | 50 | – |
| Siaou-Sze Lien | 460 | 50 | – | 460 | 50 | – |
| Tomas Puusepp | – | – | – | – | – | – |
| Wolfgang Reim | 460 | – | 110 | 460 | – | 110 |
| Jan Secher | 460 | – | 110 | 460 | – | 110 |
| Birgitta Stymne Göransson | 460 | – | 200 | 460 | – | 200 |
| Annika Espander Jansson | 460 | – | 110 | 460 | – | – |
| Johan Malmqvist | 460 | 50 | – | 460 | 50 | – |
| Total | 4,295 | 240 | 530 | 4,295 | 240 | 420 |
The guidelines for remuneration to the executive management, which are proposed by the board of directors for the AGM on August 23, 2017 are presented on pages 68–69. The proposed guidelines are unchanged compared to those proposed by the board of directors and approved by the AGM on September 1, 2016. The executive management for 2016/2017 was comprised of a total of ten people, of whom four are located in Sweden and the other six in the Netherlands, the UK, and the US. The tables below display remunerations and other benefits to the executive management in 2016/17 and 2015/16 respectively.
Two members of Elekta's executive management team has been offered, and has accepted, to participate in an individual performance based incentive scheme extending to 2016/17 and 2017/18. Reported expenses for the scheme was SEK 3.1 M (2.6) excluding social security costs during 2016/17. The requirements for fulfilling the objectives for the scheme, and the related progressive payouts, are regulated in an agreement that has been approved by Elekta's executive compensation and capability committee, ECCC.
| Thousands | Fixed remuneration |
Variable remuneration |
Severance pay |
Share-based compensation |
Other benefits |
Pension costs |
Total |
|---|---|---|---|---|---|---|---|
| President and CEO – Richard Hausmann1) | 6,072 | 2,779 | – | 1,003 | 136 | 1,750 | 11,740 |
| President and CEO – Tomas Puusepp1) | 425 | 21 | – | – | 7 | 99 | 552 |
| Other senior executives resident in Sweden (4) | 10,459 | 6,776 | 3,252 | 1,531 | 699 | 2,083 | 24,800 |
| Other senior executives resident abroad (6) | 25,109 | 11,098 | 4,460 | 2,059 | 1,037 | 1,261 | 45,025 |
| Total senior executives | 42,065 | 20,674 | 7,713 | 4,593 | 1,879 | 5,194 | 82,119 |
| Member of the board/Previous President and CEO – Tomas Puusepp | 4,674 | 234 | 6,191 | – | 79 | 1,093 | 12,272 |
1) Richard Hausmann was appointed as President and CEO effective June 10th 2016. He succeeded Tomas Puusepp
| Thousands | Fixed remuneration |
Variable remuneration |
Severance pay |
Share-based compensation |
Other benefits |
Pension costs |
Total |
|---|---|---|---|---|---|---|---|
| President and CEO – Tomas Puusepp1) | 5,077 | 2,403 | – | – | 178 | 1,594 | 9,252 |
| President and CEO – Niklas Savander1) | – | – | 7,032 | – | 156 | 1,593 | 8,781 |
| Other senior executives resident in Sweden (5) | 9,219 | 6,116 | 1,960 | – | 950 | 2,352 | 20,597 |
| Other senior executives resident abroad (5) | 21,180 | 9,877 | – | – | 844 | 5,393 | 37,294 |
| Total senior executives | 35,476 | 18,396 | 8,992 | – | 2,128 | 10,932 | 75,924 |
1) Niklas Savander ended his employment May 19th 2015. Tomas Puusepp started his employment May 13th 2015
Variable remuneration pertains to the bonus for the 2016/17 and 2015/16 fiscal years respectively, partly paid quarterly during each fiscal year and partly paid in the year after.
As per April 30, 2017, Elekta has three outstanding share programs. The share program performance share plan 2013/16, which was outstanding as per April 30, 2016, has been concluded during the year.
The total number of shares that may be allotted under the share programs is 1,237,043 (1,794,061) B-shares. The share programs are secured by delivery of shares already held or repurchased by Elekta and, consequently, no new shares will be issued under the share programs. Share programs awarded to employees have a potential dilution effect. However, certain performance targets must be met for the programs to be diluted and this was not the case at the closing date.
The share-related incentive programs are reported in accordance with IFRS 2 Share-based payments. The recognized costs related to the share programs amounted to SEK 6 M (–), whereof social security amounted to SEK 1 M (–). See page 44 for more information.
The AGM has for a number of years resolved to adopt share programs called performance share plans. Performance share plan 2013/16, resolved by the AGM in 2013, was concluded during the year. For information on the program see the annual report 2015/16 pages 79–80. Outstanding programs as per April 30 2017 were performance share plan 2014/17, 2015/18 and 2016/19 respectively. The performance share plans cover approximately 147 (2014/17), 10 (2015/18) and 8 (2016/19) key employees of the Group respectively. The performance share plans entitle the participants to obtain, free of charge, B-shares in Elekta upon fulfillment of certain performance requirements.
The main terms of the performance share programs are that:
The financial targets for performance share plan 2014 are defined as the Group's earnings before interest, taxes, amortizations, bad debt losses and items affecting comparability (adjusted EBITA) with 50 percent weight, and the Group's business volume in local currency (sales and orders) with 50 percent weight. The performance targets are measured and shares are earned by one-third each financial year from 2014/2015 until 2016/2017. The financial targets include a minimum level that must be exceeded in order for any allotment to occur, and a maximum level in excess of which no additional allotment will occur. Allotment between the minimum level and maximum level is linear. The board establishes the minimum and maximum level for the respective performance target. The levels that are established and to what extent they have been achieved will be presented at latest when the program ends.
The financial targets for performance share plans 2015 are defined as average annual percentage growth rate in earnings per share (EPS) during the fiscal year 2015/16 until the fiscal year 2017/18, versus EPS for the fiscal years 2014/15. Under performance share plan 2015/18 the maximum number of shares will be allotted if the annual average EPS growth is at or exceeds 41 percent, no allotment of shares will occur if the annual average EPS growth is below 32 percent and allotment of shares between annual average EPS growth 32 and 41 percent is linear.
The financial targets for performance share plans 2016 are defined as average annual percentage growth rate in earnings per share (EPS) during the fiscal year 2016/17 until the fiscal year 2018/19, versus EPS for the fiscal years 2015/16. Under performance share plan 2016/19 the maximum number of shares will be allotted if the annual average EPS growth is at or exceeds 132 percent, no allotment of shares will occur if the annual average EPS growth is below 103 percent and allotment of shares between annual average EPS growth 103 and 132 percent is linear.
The terms of the performance share programs 2014, 2015 and 2016 further state that:
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 finally determined, the board shall examine whether the allotment is reasonable, taking into consideration the Company's financial 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, 2017, there were no material obligations to settle in any other way than through shares.
| 2013/16 | 2014/17 | 2015/18 | 2016/19 | |
|---|---|---|---|---|
| Originally designated number of shares |
798,000 | 976,726 | 289,284 | 280,386 |
| Share price used for calculation of theoretical |
||||
| value SEK1) | 104 | 75 | 56 | 77 |
| Allotment of shares | 2016-09-13 2017-09-21 2018-09-16 2019-09-14 | |||
| Number of shares as of April 30, 2016 |
646,328 | 858,449 | 289,284 | – |
| Granted during the year | – | – | – | 280,386 |
| Cancelled/Expired during the year |
–646,328 | –166,969 | –24,107 | – |
| Released during the year | – | – | – | – |
| Number of share as of April 30, 2017 |
– | 691,480 | 265,177 | 280,386 |
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 offered to participate in the program
| SEK M | Group | ||||
|---|---|---|---|---|---|
| 2016/17 | 2015/16 | ||||
| Cost of products sold | 40 | 68 | |||
| Selling expenses | 128 | 125 | |||
| Administrative expenses | 69 | 83 | |||
| R&D expenses | 418 | 358 | |||
| Total | 655 | 634 |
| Group | ||||
|---|---|---|---|---|
| SEK M | 2016/17 | 2015/16 | ||
| Leasing fees paid during the year | 212 | 198 | ||
| Nominal value of agreed future leasing fees: | ||||
| Due for payment within 1 year | 221 | 190 | ||
| Due for payment after 1 year but within 5 years | 581 | 593 | ||
| Due for payment after more than 5 years | 658 | 837 | ||
| Total | 1,460 | 1,620 |
Leasing fees paid by the Parent Company during the year amounted to SEK 455 K (349). Future leasing fees due for payment within one year amount to SEK 260 K (426), after 1 year but within 5 years SEK 176 K (200).
The operating lease contracts are mainly contracts for premises where the business is conducted.
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| SEK M | 2016/17 | 2015/16 | 2016/17 | 2015/16 | |
| Group auditor (PwC) | |||||
| Audit engagements | 12 | 11 | 4 | 5 | |
| Audit-related services | 0 | 1 | 0 | 0 | |
| Tax consultancy | 4 | 4 | 0 | 0 | |
| Other services | 2 | 1 | 1 | 1 | |
| Total Group auditor | 18 | 17 | 5 | 6 | |
| Other auditors | |||||
| Audit engagements | 0 | 0 | – | – | |
| Audit-related services | 0 | – | – | – | |
| Tax consultancy | 1 | 0 | – | – | |
| Other services | 0 | 0 | – | – | |
| Total other auditors | 1 | 0 | – | – | |
| Total | 19 | 17 | 5 | 6 |
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 CEO 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 the audit 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.
In the income statement costs are broken down by function. Operating expenses amount to SEK 10,107 M (10,798). Below, operating expenses are broken down by nature:
| Group | |||||
|---|---|---|---|---|---|
| SEK M | 2016/17 | 2015/16 | |||
| Products, materials and consumables | 3,958 | 4,283 | |||
| Personnel costs | 3,482 | 3,540 | |||
| Depreciation and amortization (Notes 6, 15 and 16) | 655 | 634 | |||
| Operating leasing fees (Note 7) | 212 | 198 | |||
| Other expenses | 1,800 | 2,143 | |||
| Total | 10,107 | 10,798 |
| Parent Company | |||||
|---|---|---|---|---|---|
| SEK M | 2016/17 | 2015/16 | |||
| Dividends from subsidiaries | 271 | 615 | |||
| Divestment of shares in subsidiaries | –3 | – | |||
| Total | 268 | 615 |
| Group | ||||
|---|---|---|---|---|
| SEK M | 2016/17 | 2015/16 | ||
| Income from participations in associates | –17 | 11 | ||
| Interest income, external | 31 | 37 | ||
| Other financial income | – | 0 | ||
| Financial income | 31 | 37 | ||
| Interest expenses, convertible loan | –67 | –69 | ||
| Interest expenses, other external loans | –142 | –171 | ||
| Other financial expenses | –62 | –45 | ||
| Financial expenses | –271 | –285 | ||
| Exchange rate differences on financial instruments | –1 | 3 | ||
| Net financial items | –258 | –234 |
| Parent Company | |||||
|---|---|---|---|---|---|
| SEK M | 2016/17 | 2015/16 | |||
| Interest income from subsidiaries | 140 | 177 | |||
| Interest income, external | 13 | 17 | |||
| Interest income and similar items | 153 | 194 | |||
| Interest expenses to subsidiaries | –5 | –12 | |||
| Interest expenses, convertible loan | –67 | –69 | |||
| Interest expenses, other external loans | –128 | –138 | |||
| Other financial expenses | –22 | –8 | |||
| Interest expenses and similar items | –222 | –227 |
| Parent Company | ||||||
|---|---|---|---|---|---|---|
| Appropriations | Untaxed reserves | |||||
| SEK M | 2016/17 | 2015/16 | 2016/17 | 2015/16 | ||
| Tax allocation reserve | – | 43 | – | – | ||
| Total | – | 43 | – | – |
INCOME TAXES
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| SEK M | 2016/17 | 2015/16 | 2016/17 | 2015/16 | |
| Current taxes | –253 | –180 | – | – | |
| Current tax adjustments for prior years | –1 | 13 | – | 3 | |
| Deferred taxes | 40 | 123 | 33 | 18 | |
| Total | –214 | –44 | 33 | 21 | |
| Swedish tax | 22% | 22% | |||
| Effect of other tax rates for foreign companies | 21% | 11% | |||
| Tax, current and deferred, related to prior years | 10% | –12% | |||
| Other | 10% | 2% | |||
| Tax rate | 63% | 23% |
The tax rate is high due to impact from low or negative results in entities in jurisdictions having low tax rate.
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| SEK M | 2016/17 | 2015/16 | 2016/17 | 2015/16 | |
| Opening balance, May 1 | –67 | 27 | –1 | 8 | |
| Reclassifications | 5 | 3 | – | – | |
| Adjustment for prior years | 1 | –13 | – | –4 | |
| Current tax for the year | 253 | 180 | – | – | |
| Paid taxes | –268 | –268 | –20 | –5 | |
| Translation differences | –4 | 4 | – | – | |
| Closing balance, April 30 | –80 | –67 | –21 | –1 |
Deferred tax assets/liabilities in the balance sheet are attributable to the following:
| Group | Assets (+) | Liabilities (–) | Net | |||
|---|---|---|---|---|---|---|
| SEK M | April 30, 2017 | April 30, 2016 | April 30, 2017 | April 30, 2016 | April 30, 2017 | April 30, 2016 |
| Loss carry-forwards | 132 | 51 | – | – | 132 | 51 |
| Untaxed reserves | – | – | –31 | –36 | –31 | –36 |
| Intangible assets | 0 | – | –766 | –710 | –766 | –710 |
| Tangible fixed assets | 14 | 14 | –43 | –56 | –29 | –42 |
| Financial assets/liabilities | 3 | 4 | –7 | –4 | –4 | 0 |
| Other assets | 164 | 164 | –36 | –2 | 128 | 162 |
| Other liabilities | 187 | 182 | –20 | –16 | 167 | 166 |
| Deferred tax assets/tax liabilities | 500 | 415 | –903 | –824 | –403 | –409 |
| Offsetting | –125 | –134 | 125 | 134 | – | – |
| Net deferred tax assets/tax liabilities | 375 | 281 | –778 | –690 | –403 | –409 |
| SEK M | Group, net | Parent Company, net |
|---|---|---|
| Opening balance May 1, 2015 | –508 | 11 |
| Adjustment for prior years | 40 | – |
| Business combinations | –16 | – |
| Deferred taxes for the year | 87 | 18 |
| Deferred taxes charged in other comprehensive income | –27 | – |
| Translation differences | 15 | – |
| Closing balance April 30, 2016 | –409 | 29 |
| Adjustment for prior years | –32 | – |
| Deferred taxes for the year | 72 | 33 |
| Deferred taxes charged in other comprehensive income | –7 | – |
| Translation differences | –27 | – |
| Closing balance April 30, 2017 | –403 | 63 |
The Group has tax loss carry forwards of approximately SEK 490 M (240) for which deferred tax assets have not been recognized. These tax loss carry forwards have long or indefinite periods of utilization and are subject to regular assessment of whether it is probable that deductions can be made against future profits.
TAX RELATING TO COMPONENTS OF OTHER COMPREHENSIVE INCOME
| Group | Parent Company | |||
|---|---|---|---|---|
| SEK M | 2016/17 | 2015/16 | 2016/17 | 2015/16 |
| Revaluation of defined benefit pension plans | 0 | –2 | – | – |
| Revaluation of cash-flow hedges | –7 | –25 | – | – |
| Total | –7 | –27 | – | – |
| Group | Parent Company | ||||||
|---|---|---|---|---|---|---|---|
| SEK M | Goodwill | Capitalized development costs |
Customer relationships |
Other intangible assets |
Total Group |
Other intangible assets |
Total Parent Company |
| Accumulated acquisition value May 1, 2016 | 5,069 | 3,083 | 1,432 | 946 | 10,530 | 91 | 91 |
| Business combinations | 13 | – | 19 | – | 32 | – | – |
| Purchases/Capitalization | – | 535 | – | 6 | 541 | – | – |
| Divestments/Disposals | –2 | – | – | –5 | –7 | – | – |
| Translation differences | 309 | 108 | 79 | 59 | 555 | – | – |
| Accumulated acquisition value April 30, 2017 | 5,389 | 3,726 | 1,530 | 1,006 | 11,651 | 91 | 91 |
| Accumulated amortization May 1, 2016 | – | –1,262 | –388 | –670 | –2,320 | –8 | –8 |
| Divestments/Disposals | – | – | – | 5 | 5 | – | – |
| Amortization for the year | – | –380 | –86 | –33 | –499 | –8 | –8 |
| Translation differences | –1 | –54 | –28 | –50 | –133 | – | – |
| Accumulated amortization April 30, 2017 | –1 | –1,696 | –502 | –748 | –2,947 | –16 | –16 |
| Carrying amount April 30, 2017 | 5,388 | 2 030 | 1,028 | 258 | 8,704 | 75 | 75 |
| Accumulated acquisition value May 1, 2015 | 5,338 | 2,612 | 1,271 | 870 | 10,091 | – | – |
| Business combinations | –151 | – | 201 | – | 50 | – | – |
| Purchases/Capitalization | – | 592 | – | 95 | 687 | 91 | 91 |
| Divestments/Disposals | – | – | – | – | – | – | – |
| Translation differences | –118 | –121 | –40 | –19 | –298 | – | – |
| Accumulated acquisition value April 30, 2016 | 5,069 | 3,083 | 1,432 | 946 | 10,530 | 91 | 91 |
| Accumulated amortization May 1, 2015 | – | –977 | –314 | –626 | –1,917 | – | – |
| Divestments/disposals | – | – | – | – | – | – | – |
| Amortization for the year | – | –326 | –82 | –61 | –469 | –8 | –8 |
| Translation differences | – | 41 | 8 | 17 | 66 | – | – |
| Accumulated amortization April 30, 2016 | – | –1,262 | –388 | –670 | –2,320 | –8 | –8 |
| Carrying amount April 30, 2016 | 5,069 | 1,821 | 1,044 | 276 | 8,210 | 83 | 83 |
Other intangible assets mainly relates to technology acquired through business combinations. Capitalized development 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 535 M (592) for the year whereof capitalization of development costs within R&D amounted to SEK 534 M (591).
Goodwill is tested for impairment every year in order to assure that the carrying amount of each of the Group's cash-generating 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. The carrying amount equals capital employed and the recoverable amount for each cash-generating unit is determined based on a calculation of value in use for each unit. The allocation of goodwill to cash-generating units (operating segments) is shown in the following table.
| SEK M | April 30, 2017 | April 30, 2016 |
|---|---|---|
| North and South America | 1,841 | 1,748 |
| Europe, Middle East and Africa | 1,908 | 1,761 |
| Asia Pacific | 1,639 | 1,560 |
| Total | 5,388 | 5,069 |
The value in use for each unit is derived from discounted cash flows, based on estimated future cash flows. The estimates are based on the financial budget for the next fiscal year as determined by the executive management, and expected future development up to five years. Assumptions regarding sales volume, sales prices, operating expenses and product mix form the basis for estimated future growth and margin development. Volume assumptions are based on historical outcome, the executive management's expectations on market development, and expected global market growth. Price assumptions are based on current market trends and inflation forecasts. Margin development is based on current margin levels and product mix adjusted for expected price changes and possible changes in the product mix. For periods after five years, the extrapolation of expected cash flows has been assumed to be a prudent 2 percent (2), which is considerably lower than the anticipated industry growth. The cash flows 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 market assessments. Impairment testing is performed in April/May every year, after the bud-
get and business plans have been determined by the executive management. The 2017 (2016) test showed that there is no impairment.
Sensitivity analyses have been carried out with regard to the discount rate (risk) and long-term growth with a general reduction in the growth rate after five years of 2 percentage points (2) (implying an assumption of zero growth) and a general 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.
| SEK M | Machinery etc for production |
Equipment, tools and installations |
Finance lease equipment |
Buildings | Total |
|---|---|---|---|---|---|
| Accumulated acquisition value May 1, 2016 | 119 | 1,402 | 5 | 191 | 1,717 |
| Reclassifications | 133 | –133 | – | – | 0 |
| Purchases | 18 | 116 | – | 6 | 140 |
| Divestments/Disposals | –2 | –48 | –1 | – | –51 |
| Translation differences | 2 | 35 | 1 | 8 | 46 |
| Accumulated acquisition value April 30, 2017 | 270 | 1,372 | 5 | 205 | 1,852 |
| Accumulated depreciation May 1, 2016 | –76 | –795 | –4 | –40 | –914 |
| Reclassifications | –80 | 80 | – | – | 0 |
| Divestments/Disposals | 2 | 41 | 1 | – | 44 |
| Depreciation for the year | –19 | –125 | –1 | –11 | –156 |
| Translation differences | –1 | –27 | –1 | –2 | –31 |
| Accumulated depreciation April 30, 2017 | –174 | –826 | –5 | –53 | –1,057 |
| Carrying amount April 30, 2017 | 96 | 546 | 0 | 152 | 795 |
| Accumulated acquisition value May 1, 2015 | 117 | 1,336 | 7 | 253 | 1,713 |
| Reclassifications | 4 | –4 | – | – | 0 |
| Purchases | 9 | 175 | – | 3 | 187 |
| Divestments/Disposals | –3 | –47 | –1 | –56 | –107 |
| Translation differences | –8 | –59 | –1 | –9 | –77 |
| Accumulated acquisition value April 30, 2016 | 119 | 1,402 | 5 | 191 | 1,717 |
| Accumulated depreciation May 1, 2015 | –47 | –748 | –6 | –32 | –832 |
| Reclassifications | –25 | 24 | – | – | –1 |
| Divestments/Disposals | 3 | 46 | 1 | – | 50 |
| Depreciation for the year | –11 | –144 | 0 | –10 | –165 |
| Translation differences | 4 | 27 | 1 | 2 | 34 |
| Accumulated depreciation April 30, 2016 | –76 | –795 | –4 | –40 | –914 |
| Carrying amount April 30, 2016 | 43 | 606 | 1 | 151 | 803 |
| Parent Company | ||
|---|---|---|
| SEK M | 2016/17 | 2015/16 |
| Opening balance May 1 | 2,129 | 2,142 |
| Investments | 13 | 2 |
| Adjusted purchase price | – | –15 |
| Liquidation | –3 | – |
| Shareholder contributions | 83 | – |
| Write-down | – | – |
| Closing balance April 30 | 2,222 | 2,129 |
| 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 Neuromag Oy | 0756256-7 | Helsinki, Finland | 1,832 | 100.0 | 44 |
| 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 | 2 |
| Elekta BMEI (Beijing) Medical Equipment Co., Ltd. 91110114400615135X | Beijing, China | 0 | 100.0 | 230 | |
| 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 | 100.0 | 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 | 0 | 100.0 | 0 |
| Medical Intelligence Medizintechnik GmbH | HRB 14835 | Schwabmünchen, Germany | 0 | 100.0 | 226 |
| Elekta GmbH | FN 166018w | Innsbruck, Austria | 1 | 100.0 | 3 |
| Elekta Hellas EPE | 998 569 196 | Aten, Greece | 0 | 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 Radiologia, Radiocirurgia e Radioterapia LTDA. |
CNPJ 09.528.196/0001-66 | Sao Paolo, Brazil | 0 | 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, Korea | 1311111-0259 | Seongnam-si, South Korea | 473,879 | 100.0 | 16 |
| Elekta Services S.R.O | 292 80 095 | Brno, Czech Republic | 0 | 100.0 | 0 |
| Elekta Medikal Sistemler Ticaret A.S. | 196757 | Istanbul, Turkey | 87,900,000 | 100.0 | 92 |
| Elekta Medical SA de CV | EME140919G49 | Mexico City, Mexico | 50 | 100.0 | 26 |
| Elekta sp.Z.O.O | KRS 0000538192 | Warszaw, Poland | 2,000 | 100.0 | 134 |
| Elekta Company Limited | 106810452 | Hanoi, Vietnam | 1 | 100.0 | 2 |
| Elekta Business Services sp.Z.O.O | KRS 000567549 | Warzaw, Poland | 1 | 100.0 | 1 |
| Elekta SARL Algeria | 16236978051 | Dely Ibrahim, Algeria | 0 | 49.0 | 0 |
| Elekta LLC | 7704369566 | Moscow, Russian federation | 0 | 100.0 | 0 |
| RRTS Unipessoal Lda | 514185155 | Lisbon, Portugal | 0 | 100.0 | 12 |
| Total | 2,222 |
| SEK M | Group | Parent Company | |||
|---|---|---|---|---|---|
| 2016/17 | 2015/16 | 2016/17 | 2015/16 | ||
| Opening balance May 1 | 12 | 9 | – | 27 | |
| Investments | 30 | – | 30 | – | |
| Participations in income of associates (Note 11) | 13 | 11 | – | – | |
| Dividends etcetera | –6 | –7 | – | – | |
| Write-down (Note 11) | –30 | – | –30 | –27 | |
| Translation differences | 3 | –1 | – | – | |
| Closing balance April 30 | 22 | 12 | – | – |
| Group | Parent Company | |||
|---|---|---|---|---|
| SEK M | April 30, 2017 | April 30, 2016 | April 30, 2017 | April 30, 2016 |
| Participations in other companies | 3 | 3 | – | – |
| Derivative financial instruments | 15 | 1 | – | – |
| Loan receivables | 38 | 61 | – | 25 |
| Contractual receivables | 185 | 181 | – | – |
| Other non-current receivables | 44 | 106 | 26 | 48 |
| Total | 285 | 352 | 26 | 73 |
| Group | ||
|---|---|---|
| SEK M | April 30, 2017 | April 30, 2016 |
| Components | 189 | 165 |
| Work in progress | 45 | 41 |
| Finished goods | 702 | 929 |
| Total | 936 | 1,135 |
Impairment of inventories during the year amounted to SEK 83 M (70). In the income statement this is reported as cost of products sold.
| Group | |||||
|---|---|---|---|---|---|
| SEK M | April 30, 2017 | April 30, 2016 | |||
| Accounts receivable, gross | 3,847 | 3,393 | |||
| Provision for bad debts | –121 | –92 | |||
| Carrying amount | 3,726 | 3,301 | |||
| Credit risk analysis of accounts receivable |
|||||
| Not due | 2,384 | 2,245 | |||
| Overdue 1–60 days | 831 | 515 | |||
| Overdue 61–90 days | 88 | 134 | |||
| Overdue >90 days | 423 | 407 | |||
| Total accounts receivables, net | 3,726 | 3,301 | |||
| Provision for bad debts | |||||
| Opening balance May 1 | –92 | –156 | |||
| Provisions | –46 | –149 | |||
| Reversals | 9 | 1 | |||
| Realized loss | 12 | 237 | |||
| Reclassification | –1 | –29 | |||
| Translation differences | –3 | 4 | |||
| Closing balance April 30 | –121 | –92 |
Refer to Note 2 for more information on the Group's credit risks.
| Group | ||||
|---|---|---|---|---|
| SEK M | April 30, 2017 | April 30, 2016 | ||
| Prepayments to suppliers | 103 | 63 | ||
| Other receivables | 355 | 376 | ||
| Prepaid expenses | 344 | 302 | ||
| Total | 802 | 741 |
| Parent Company | ||||
|---|---|---|---|---|
| SEK M | April 30, 2017 | April 30, 2016 | ||
| Derivative financial instruments | 7 | 3 | ||
| Current tax assets | 21 | 1 | ||
| Other receivables | 1 | 20 | ||
| Prepaid expenses | 2 | 11 | ||
| Total | 31 | 35 |
| Group | Parent Company | |||
|---|---|---|---|---|
| SEK M | April 30, 2017 | April 30, 2016 | April 30, 2017 | April 30, 2016 |
| Current investments | 1,828 | 1,049 | 1,828 | 1,049 |
| Cash and bank | 1,555 | 1,224 | 651 | 450 |
| Total | 3,383 | 2,273 | 2,479 | 1,499 |
Available cash and cash equivalents amounted to SEK 3,371 M (2,263) which is cash and cash equivalents reduced by bank balances included in assets pledged (Note 30).
| Number of shares in Elekta AB (publ) | A-shares | B-shares | Total | Share capital |
|---|---|---|---|---|
| Number of shares May 1, 2015 | 14,250,000 | 368,578,775 | 382,828,775 | 191,414,388 |
| Conversion of convertible loan | – | 272 | 272 | 136 |
| Number of shares April 30, 2016 | 14,250,000 | 368,579,047 | 382,829,047 | 191,414,524 |
| of which treasury shares | – | 1,541,368 | 1,541,368 | |
| Number of shares May 1, 2016 | 14,250,000 | 368,579,047 | 382,829,047 | 191,414,524 |
| Conversion of convertible loan | 730,769 | 8,593 | 739,362 | 369,681 |
| Number of shares April 30, 2017 | 14,980,769 | 368,587,640 | 383,568,409 | 191,784,205 |
| of which treasury shares | 1,541,368 | 1,541,368 |
| Total non-restricted equity of the Parent Company | SEK 2,257,847,432 |
|---|---|
| Amount to be carried forward by the Parent Company | SEK 1,875,820,391 |
| Amount to be paid to the shareholders | SEK 382,027,041 |
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 association, series A-shares are subject to right of first refusal. All series A-shares are currently owned by Laurent Leksell via company. The dividend paid out during the financial year amounted to a total sum of SEK 191 M, corresponding to SEK 0.50 per share. At the AGM on 23 August, 2017, a dividend of SEK 1.00 per share for the year 2016/17 – a total sum of approximately SEK 382 M will be proposed. The average number of shares before and after dilution during the year, rounded to the nearest thousand, was 381,306 thousand (381,288). The number of repurchased shares on April 30, 2017, totaled 1,541,368 B-shares (1,541,368). The share program awarded to employees have a potential dilution effect. Certain performance targets must be met for the program to get diluted and this was not the case at the closing date.
For more information on the Elekta share, see pages 44–45.
| Group | Parent Company | |||
|---|---|---|---|---|
| SEK M | April 30, 2017 |
April 30, 2016 |
April 30, 2017 |
April 30, 2016 |
| Bond loan | 1,996 | 2,605 | 1,996 | 2,605 |
| Convertible loan | – | 1,872 | – | 1,872 |
| Liabilities to credit institutions |
3,272 | 472 | 3,272 | 458 |
| Liabilities to subsidiaries | – | – | 3,381 | 2,791 |
| Finance lease liabilities | 4 | 1 | – | – |
| Total | 5,272 | 4,950 | 8,649 | 7,726 |
| Maturity term structure, external loans |
||||
| < 1 year | – | 1,885 | – | 1,872 |
| > 1 year < 3 years | 2,505 | 858 | 2,505 | 857 |
| > 3 year < 5 years | 1,000 | 998 | 1,000 | 998 |
| > 5 years | 1,767 | 1,209 | 1,763 | 1,208 |
| Total | 5,272 | 4,950 | 5,268 | 4,935 |
| Liability amount | SEK M | |||
|---|---|---|---|---|
| Currency | April 30, 2017 |
April 30, 2016 |
April 30, 2017 |
April 30, 2016 |
| Swedish kronor, SEK M | 2,000 | 2,894 | 1,995 | 2,872 |
| US dollar, USD M | 200 | 200 | 1,764 | 1,607 |
| Euro, EUR M | 50 | 50 | 482 | 459 |
| British Pound, GBP M | 90 | – | 1,026 | – |
| Polish Zloty, PLN M | 3 | – | – | – |
| Brazilian real, BRL M | 0 | 0 | – | 0 |
| Chinese yuan, CNY M | – | 10 | – | 12 |
| Total | 5,268 | 4,950 |
| April 30, 2017 | April 30, 2016 | |
|---|---|---|
| < 1 year | 3,212 | 3,043 |
| > 1 year < 3 years | 737 | 398 |
| > 3 year < 5 years | 882 | 300 |
| > 5 years | 442 | 1,209 |
| Total | 5,272 | 4,950 |
| Group | Parent Company | |||
|---|---|---|---|---|
| SEK M | April 30, 2017 | April 30, 2016 | April 30, 2017 | April 30, 2016 |
| Restructuring reserve | 117 | 155 | 2 | 5 |
| Warranty provisions | 95 | 101 | – | – |
| Other provisions | 19 | 91 | 28 | 24 |
| Short-term provisions | 231 | 347 | 30 | 29 |
| Provision for pensions | 93 | 82 | – | – |
| Other provisions | 49 | 58 | 36 | 53 |
| Long-term provisions | 142 | 140 | 36 | 53 |
Elekta has defined benefit pension plans for certain employees in a few countries. Most common is however defined contribution plans. Total pension costs for the Group amounted to SEK 225 M (230) of which SEK 210 M (225) relate to defined contribution pension plans (see Note 5).
| Group | ||
|---|---|---|
| SEK M | 2016/17 | 2015/16 |
| Current service cost | –13 | –12 |
| Interest expense | –3 | –2 |
| Interest income | 1 | 1 |
| Actuarial gains (+) and losses (–) | 1 | 8 |
| Total pension costs defined | ||
| benefit plans | –14 | –5 |
| whereof reported in: the income | ||
| statement | –15 | –13 |
| other comprehen | ||
| sive income | 1 | 8 |
| Group | ||
|---|---|---|
| SEK M | April 30, 2017 | April 30, 2016 |
| Defined benefit obligation, funded plans | 97 | 83 |
| Fair value of plan assets | –88 | –78 |
| Provision for pensions, funded plans | 9 | 5 |
| Defined benefit obligation, unfunded plans |
83 | 77 |
| Provision for pensions, unfunded plans | 83 | 77 |
| Pension provision for defined benefit plans, net |
93 | 82 |
| Group | ||
|---|---|---|
| SEK M | 2016/17 | 2015/16 |
| Opening balance: | ||
| Defined benefit obligation | 160 | 154 |
| Fair value of plan assets | –78 | –72 |
| Provision for pensions May 1 | 82 | 82 |
| Pension costs | 14 | 5 |
| Contributions/Repayments | –4 | –3 |
| Benefit payments | –5 | –3 |
| Change in provision plan | 1 | – |
| Translation differences | 5 | 1 |
| Closing balance: | ||
| Defined benefit obligation | 181 | 160 |
| Fair value of plan assets | –88 | –78 |
| Provision for pensions April 30 | 93 | 82 |
| Group | ||||
|---|---|---|---|---|
| April 30, 2017 | April 30, 2016 | |||
| Discount rate | 1.6% | 1.6% | ||
| Future salary increases | 1.5% | 1.5% |
| Group | ||||
|---|---|---|---|---|
| SEK M | Restructuring reserve |
Warranty provisions |
Other provisions |
Other provisions |
| Opening balance May 1, 2015 | 0 | 99 | 155 | 75 |
| Provisions | 156 | 66 | 127 | – |
| Reversals | 0 | –36 | –1 | –13 |
| Provisions utilized during the year | – | –22 | –24 | –24 |
| Reclassifications | – | – | –108 | 45 |
| Translation differences | –1 | –6 | 0 | –5 |
| Closing balance April 30, 2016 | 155 | 101 | 149 | 77 |
| Provisions | 227 | 73 | 38 | 1 |
| Reversals | –9 | –58 | –15 | –6 |
| Provisions utilized during the year | –257 | –23 | –102 | –13 |
| Reclassifications | – | – | –4 | – |
| Translation differences | 1 | 3 | 2 | 5 |
| Closing balance April 30, 2017 | 117 | 95 | 68 | 64 |
In the consolidated accounts, other provisions mainly refer to provisions related to legal disputes. In the Parent company, contingent considerations are reported as provisions and amount to SEK 55 M (68).
| Group | ||
|---|---|---|
| SEK M | April 30, 2017 | April 30, 2016 |
| Prepaid service income | 1,529 | 1,234 |
| Other prepaid income | 345 | 414 |
| Total | 1,874 | 1,648 |
| Group | ||
|---|---|---|
| SEK M | April 30, 2017 | April 30, 2016 |
| Reserve for additional project costs | 831 | 884 |
| Accrued commission costs | 95 | 113 |
| Accrued vacation pay liability | 154 | 147 |
| Accrued social costs | 45 | 46 |
| Accrued interest expenses | 49 | 76 |
| Other items | 701 | 551 |
| Total | 1,875 | 1,817 |
| Parent Company | ||
|---|---|---|
| SEK M | April 30, 2017 | April 30, 2016 |
| Accounts payable | 27 | 105 |
| Accrued expenses (see below) | 74 | 96 |
| Current tax liabilities | – | – |
| Derivative financial instruments | 18 | 14 |
| Other liabilities | 4 | 1 |
| Total | 123 | 216 |
| Accrued expenses | ||
| Accrued vacation pay liability | 6 | 7 |
| Accrued social costs | 3 | 3 |
| Accrued interest expenses | 46 | 76 |
| Other items | 19 | 10 |
| Total | 74 | 96 |
COLLATERAL PLEDGED FOR CONTINGENT LIABILITIES
| Group | ||
|---|---|---|
| SEK M | April 30, 2017 | April 30, 2016 |
| Bank balances | 12 | 10 |
| Total | 12 | 10 |
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| SEK M | April 30, 2017 | April 30, 2016 | April 30, 2017 | April 30, 2016 | |
| Guarantees | 46 | 40 | 1,075 | 1,014 | |
| Total | 46 | 40 | 1,075 | 1,014 |
Guarantees consist of mainly advance payment guarantees and performance guarantees. Also parental guarantees and bid bonds are common.
| Group | Parent Company | |||
|---|---|---|---|---|
| SEK M | 2016/17 | 2015/16 | 2016/17 | 2015/16 |
| Interest net | ||||
| Interest income | –31 | –37 | –153 | –194 |
| Interest expenses | 209 | 240 | 200 | 218 |
| Total | 178 | 203 | 47 | 24 |
| Other non-cash items | ||||
| Participations in profit/loss of associated companies, after tax | 17 | –11 | 30 | – |
| Write-down of shares in associated companies | – | – | 3 | 27 |
| Write-down of shares in subsidiaries | – | – | – | – |
| Result from divestments/disposals of fixed assets | 3 | 2 | – | – |
| Cost of incentive programs | –5 | – | – | – |
| Appropriations | – | – | 0 | –43 |
| Unrealized exchange rate effects etc | 32 | 184 | 105 | 59 |
| Other items | 3 | –28 | 30 | 35 |
| Total | 50 | 147 | 168 | 78 |
| Business combinations | ||||
| Purchase price | –31 | – | –1 | – |
| Contingent considerations | –24 | –24 | – | –24 |
| Unpaid part of purchase price | 31 | – | – | – |
| Shareholder contributions | – | – | –83 | – |
| Total | –24 | –24 | –84 | –24 |
More information on business combinations is presented in Note 34.
Transactions between Elekta AB and its subsidiaries are shown in notes 10, 12, 19 and 25. These transactions are eliminated upon consolidation. Sales to associated companies amounted to SEK 35 M (25) and receivables from associated companies amounted to SEK 32 M (53).
None of the board members or any of the senior executives has, or has had, any direct or indirect involvement in any business transactions between themselves and Elekta. In addition to this, no other transactions with related parties have occurred. Remunerations and benefits to key personnel in management positions are presented in Note 5.
On January 31, 2017, Elekta acquired the service business as well as personnel of Portuguese distributor Sociedade Avanco, S. A. (Avanco). The acquisition will bring Elekta closer to its Portuguese customers. Through the transaction Elekta assumed all service contract revenue from Avanco starting on February 15, 2017. The acquisition price consisted of a fixed amount of approximately SEK 25 M and a maximum variable amount of approximately SEK 6 M, which is depending on the achievement of goals set-up for the transferred business. According to a preliminary purchase price allocation goodwill and intangible assets amount to approximately SEK 31 M based on the full variable amount of the acquisition price. The identification and valuation of intangible assets related to customer relationships is ongoing. Elekta consolidates the Avanco business from January 31, 2017. The acquisition is expected to add 0 percent to Elekta's net sales on an annual basis and is expected to be accretive to Elekta earnings per share (EPS). Transaction costs amount to approximately SEK 1 M and is reported as other operating expenses in the consolidated income statement.
During the year an amount of SEK 24 M (24) regarding contingent considerations related to acquisitions in previous years has been paid out.
In 2015/16 no acquisitions were carried out. For the acquisitions performed in 2014/15 all purchase price allocations were finalized during 2015/16. The adjustments made in comparison with the preliminary purchase price allocations were mainly relating to finalized valuation of acquired service contracts. Recognised liabilities regarding contingent considerations amounted to SEK 138 M in the final purchase price allocations. During the year an amount of SEK 24 M regarding contingent considerations related to acquisitions in previous years were paid out.
| Men | Women | Total | ||||||
|---|---|---|---|---|---|---|---|---|
| 2016/17 | 2015/16 | 2016/17 | 2015/16 | 2016/17 | 2015/16 | |||
| Parent Company | 16 | 18 | 14 | 14 | 30 | 32 | ||
| Subsidiaries: | ||||||||
| Sweden | 143 | 149 | 77 | 84 | 220 | 233 | ||
| USA | 654 | 605 | 246 | 344 | 900 | 949 | ||
| Great Britain | 512 | 549 | 142 | 160 | 654 | 709 | ||
| China | 362 | 365 | 168 | 159 | 530 | 524 | ||
| The Netherlands | 174 | 182 | 41 | 48 | 215 | 230 | ||
| Germany | 120 | 140 | 32 | 30 | 152 | 170 | ||
| Japan | 73 | 72 | 21 | 27 | 94 | 99 | ||
| India | 88 | 88 | 6 | 4 | 94 | 92 | ||
| Poland | 30 | 13 | 45 | 9 | 75 | 22 | ||
| Italy | 56 | 58 | 18 | 20 | 74 | 78 | ||
| Canada | 55 | 54 | 14 | 19 | 69 | 73 | ||
| France | 50 | 53 | 13 | 14 | 63 | 67 | ||
| Brazil | 41 | 38 | 14 | 16 | 55 | 54 | ||
| Hong Kong | 32 | 26 | 17 | 18 | 49 | 44 | ||
| Spain | 38 | 38 | 9 | 10 | 47 | 48 | ||
| Australia | 37 | 33 | 9 | 10 | 46 | 43 | ||
| Turkey | 24 | 24 | 10 | 11 | 34 | 35 | ||
| Mexico | 26 | 27 | 5 | 5 | 31 | 32 | ||
| Finland | 24 | 22 | 6 | 6 | 30 | 28 | ||
| Austria | 15 | 17 | 6 | 6 | 21 | 23 | ||
| South Korea | 18 | 18 | 3 | 3 | 21 | 21 | ||
| Singapore | 12 | 12 | 3 | 4 | 15 | 16 | ||
| Greece | 10 | 9 | 3 | 3 | 13 | 12 | ||
| Czeck Republic | 9 | 12 | 3 | 2 | 12 | 14 | ||
| Belgium | 9 | 6 | 2 | 1 | 11 | 7 | ||
| South Africa | 5 | 7 | 2 | 2 | 7 | 9 | ||
| New Zealand (branch) | 5 | 4 | 1 | 1 | 6 | 5 | ||
| Vietnam | 5 | 3 | – | – | 5 | 3 | ||
| Switzerland (branch) | 3 | 3 | 1 | 2 | 4 | 5 | ||
| Portugal | 2 | – | 1 | – | 3 | – | ||
| Russia | 1 | – | – | – | 1 | – | ||
| Total average number of employees | 2,649 | 2,645 | 932 | 1,032 | 3,581 | 3,677 |
During the financial year, the board of directors of Elekta AB consisted of 67 percent (67) men. The executive management consisted of 95 percent (93) men.
The board of directors and the President and CEO certify that the annual financial 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 position and profit 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 profit 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.
Stockholm July 10, 2017
Laurent Leksell Chairman of the board Annika Espander Jansson Member of the board
Luciano Cattani Member of the board
Siaou-Sze Lien Member of the board
Wolfgang Reim Member of the board
Johan Malmquist Member of the board
Birgitta Stymne Göransson Member of the board
Jan Secher Member of the board
Tomas Puusepp Member of the board
Richard Hausmann CEO and President
Our audit report was submitted on July 10, 2017 PricewaterhouseCoopers AB
Johan Engstam Authorized public accountant Auditor in charge
Camilla Samuelsson Authorized public accountant
To the general meeting of the shareholders of Elekta AB (publ), corporate identity number 556170-4015
We have audited the annual accounts and consolidated accounts of Elekta AB (publ) for the financial year 2016-05-01 – 2017-04-30. The annual accounts and consolidated accounts of the company are included on pages 62–105 in this document.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the parent company as of 30 April 2017 and its financial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 30 April 2017 and their financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the parent company and the group.
We conducted our audit in accordance with International Standards on Auditing (ISA) and 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 fulfilled our ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
Materiality
Key Audit Matters
Scope
Overview Materiality
• We have applied an overall materiality level of SEK 55 million
Audit scope
• The audit included Elekta AB and larger subsidiaries
Key audit matters
Elekta is a global company selling solutions including machines and software as well as services around the world. The accounting of those is dependent on the contract terms and conditions stipulating when the risk and
rewards are transferred to the customers, their ability to pay, and often the terms and conditions result in the timing of invoicing and receipt of payment differing from revenue recognition. Sales to new markets could imply new customers or contractual terms affecting the point in time at which revenues can be recognized. The customer contracts might include multiple elements, such as machines, services and software which can involve complex accounting treatment. Sales are impacted by the customers' demand for product delivery and a significant portion of sales are recognized late in Elekta's fourth quarter, and a deferral into the next fiscal year could have a significant impact on the financial statements. In summary, this means that the accounting for revenue and receivables is depending on management's judgement, the customers' ability to pay and the terms and conditions of the customer contracts.
We designed our audit by determining materiality and assessing the risks of material misstatement in the consolidated financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the group operates.
The current year group audit included the parent company and subsidiaries in Sweden, UK, USA, the Netherlands, Germany, Austria, Brazil, and China including Hong Kong, Spain, Italy, Japan, South Korea, Poland, Turkey, Czech Republic, and South Africa. These entities perform procedures during interim periods, many of them in conjunction with the second quarter, and audit procedures of the year-end closing performed as at 30 April 2017. These entities represent more than 80% of Elekta's total turnover. In addition, the majority of Elekta's subsidiaries have statutory audit requirements.
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
| Group materiality | SEK 55 million |
|---|---|
| How we determined it | 5% of three year average adjusted pre-tax income. |
| Rationale for the materiality benchmark applied |
We selected pre-tax income as the benchmark as we consider this to comprise a common benchmark used by Elekta stakeholders. 5% is, in auditing standards, an acceptable level. |
We agreed with the audit committee that we would report to them misstatements identified during our audit which are in excess of SEK 10 million,
Revenue from sale of machines and customer contracts including both machines, software and services is accounted for in the correct value and in the proper period.
Elekta's revenues and profit are a result of the sale of machines, software and services. A significant portion of total revenues, is attributable to the sale of machines. The accounting of these sales is dependent on management's judgements regarding contract terms and conditions in terms of when the risks and rewards are seen to be transferred to the customer.
Sales of multiple element contracts, contracts including both hardware, software and services, is a common business practice within Elekta.
Risk and rewards associated with the machines are usually transferred to the customer on delivery or, in accordance with the agreed upon contract terms. Machines are delivered on the date agreed with the customer. Usually, it is at that point in time that the revenue from machines is accounted for. When a customer acceptance test has been received, the remaining revenues from software and installation are recognized. Consequently, the timing of revenue recognition regularly differs from invoicing and payment from customers which can take place before or after the delivery was made.
Refer to accounting principles and disclosures on pages 81–82 and footnote 4 in the 2016/17 Annual Accounts.
Account receivables and accrued revenues represent significant portions of the balance sheet and the valuation of these items is dependent on management's judgements and customer's ability to pay.
Payment terms differ between countries and customers. Credit terms vary between markets and customers. In some markets, partial payments are made based on activities such as order receipt, delivery, and customer acceptance of the installation. In other markets, full payment is made after finalizing the installation, or at acceptance. Invoiced amounts are recognized as account receivables while revenue which has been recognized but not invoiced, is accounted for as accrued revenue.
Sales in new markets implies new customers and conditions which can result in a higher level of risk of customers with weaker ability or willingness to pay.
Refer to accounting principles and disclosures on pages 83–84 and 86 as well as footnote 21 in the 2016/17 Annual Accounts.
No material observations were made in the audit as a result of our procedures.
In our audit, we have evaluated Elekta's process and controls regarding account receivables and accrued revenues to obtain an understanding of their function and to determine where a possible error could occur. Our evaluation focused on the monitoring of old receivables and on management's assessment of customers' ability to pay and the valuation of the reported account receivables and accrued revenue. This evaluation was performed to be able to focus our substantive testing on the correct areas. After our evaluation, we performed substantive testing such as:
No material observations were made in the audit as a result of our procedures.
as well as misstatements below that amount which, in our view, warrant reporting for qualitative reasons.
Key audit matters of the audit are those matters that, in our professional judgment, were of most significance 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 matters.
This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1–61 and 109–114. The board of directors and the managing director are responsible for this other information.
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 consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent 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 information, we are required to report that fact. We have nothing to report in this regard.
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 accordance 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, the board of directors and the managing director are responsible for the assessment of the company's and the group's ability to continue 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 financial reporting process.
Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole 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 an audit conducted in accordance with ISAs 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.
A further description of our responsibility for the audit of the annual accounts and consolidated accounts is available on Revisorsinspektionens website: www.revisorsinspektionen.se/rn/showdocument/documents/ rev_dok/revisors_ansvar.pdf. This description is part of the auditor´s report.
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 Elekta AB (publ) for the financial year 2016-05-01– 2017-04-30 and the proposed appropriations of the company's profit or loss.
We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the board of directors and the managing director be discharged from liability for the financial year.
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 fulfilled our ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
The board of directors is responsible for the proposal for appropriations of the company's profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable 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 requirements, liquidity and position in general.
The board of directors is responsible for the company's organization and the administration of the company's affairs. This includes among other things continuous assessment of the company's and the group's financial situation and ensuring that the company's organization is designed so that the accounting, management of assets and the company's financial affairs 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 fulfil the company's accounting in accordance with law and handle the management of assets in a reassuring manner.
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:
Our objective concerning the audit of the proposed appropriations of the company's profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal 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 profit or loss are not in accordance with the Companies Act.
A further description of our responsibility for the audit of the administration is available on Revisorsnämnden's website: www.revisorsinspektionen.se/rn/showdocument/documents/rev_dok/revisors_ansvar.pdf. This description is part of the auditor´s report.
Stockholm the 10 July 2017
PricewaterhouseCoopers AB Signature on original auditors' report in Swedish1)
Johan Engstam Camilla Samuelsson Auditor-in-charge
Authorized public accountant Authorized public accountant
1) This is a translation of the original auditors' report in Swedish. In the event of any differences between the translation and the original statement in Swedish, the Swedish version shall prevail
A treatment technique that aims to customize each patient's treatment plan to patient specific variation by evaluating and characterizing the systematic and random variations through image feedback and including them in adaptive planning.
The term benign is used when describing tumors or growths that do not threaten the health of an individual. Benign is the opposite of malignant.
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.
Uncontrolled, abnormal growth of cells.
Treatment of cancer diseases with the aid of chemicals that eliminate diseased cells.
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).
A radiological method of imaging anatomical structures by means of layering, using computer technology.
A brain 'pacemaker' is implanted to stimulate brain activity and block signals that cause unwanted symptoms present in functional neurological disorders, for example tremor.
Type of brachytherapy that uses an X-ray tube to induce radiation. 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 brachytherapy can be performed in a room with minimal shielding.
Disorder characterized by repeated, sudden disturbances of brain function.
The most common type of radiation therapy, in which the radiation 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 in the tumor without excess damage to surrounding healthy tissue.
Part of the total radiation dose, delivered at a daily treatment.
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.
Diseases in the central nervous system.
Stereotactic radiosurgery with Leksell Gamma Knife®.
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 infiltrate with normal healthy brain tissue.
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.
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.
IGRT enables high precision targeting and accuracy using high-resolution multi-dimensional X-ray images of the patient's tissue.
This provides high-quality images of tissue and tumors while treatment is in progress, and also enables adaptation of the radiation dose in realtime. The method is under development in the MR-linac consortium.
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 is the number of new cancer cases arising in a given period in a specified population.
A treatment technique that penetrates the skin, skull, etcetera. The opposite of non-invasive (bloodless).
Elekta's two learning and innovation centers in Atlanta, USA and in Beijing, China. The LINC:s are state-of-the-art facilities that provide Elekta users and employees with an ideal environment for learning.
Equipment for generating and directing ionizing radiation for treatment of cancer.
Equipment for real time mapping of the function in different parts of the brain, by measuring the magnetic field generated by brain cells activity.
Technology used to visualize and differentiate organs and anatomical structures inside the body. It uses non-ionizing radiation and is thus harmless to the patient.
Refers to cancerous cells that usually have the ability to aggressively spread, invade and destroy tissue. Opposite to benign.
A type of tumor that develops from the meninges, the membrane that surrounds the brain and spinal cord. Meningiomas are the most common type of primary brain tumors and are often benign.
Secondary malignant tumors originating from primary cancer tumors in other parts of the body.
An accessory to the linear accelerator, working like an aperture. With a large number of individually adjustable metal leaves, the treatment beam can be shaped to the size and shape of the target volume.
See image guided radiation therapy (IGRT) with magnetic resonance imaging (MRI).
The study of the nervous system and its disorders.
Surgery of the brain or other parts of the central nervous system.
The study of tumor diseases.
All patient information is collected and accessible in an oncology 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.
Paralysis, with trembling and shaking as well as muscular rigidity, with a change in movements and posture by the patient.
The prevalence of a particular cancer can be defined as the number of persons in a defined 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 five are presented as they are likely to be of relevance to the different stages of cancer therapy, namely, initial treatment (one year), clinical follow-up (three years) and cure (five years). Patients who are still alive five years after diagnosis are usually considered cured since the death rates of such patients are similar to those in the general population.
A type of external radiation therapy where a particle accelerator is used to direct proton beams at the tumor during treatment. Proton therapy is used for research purposes and to a limited extent for patient care, partly due to its high investment and maintenance costs.
Fractionated ionizing radiation treatment of cancer.
Non-invasive surgery in which a high, single dose of precise ionizing radiation replaces surgical instruments.
SBRT enables accurate delivery of radiation to a tumor and minimizes 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.
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 offers very high precision, with a minimum impact on surrounding brain tissue.
Radiation therapy of cancer, where high precision and accuracy is achieved by delivering the radiation based on an external fixed-coordinate system.
A technique in which a fixed-coordinate system can determine the location of a point by specifying the coordinates in terms of height, depth and laterally.
MRI requires a magnetic field that is both strong and uniform. The field 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 systems provide tools for multimodality image registration, organ and tumor contouring, treatment simulation and plan optimization. Monaco® is Elekta´s comprehensive treatment planning system that supports all major treatment techniques.
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.
VMAT is a more advanced variant of intensity modulated radiation 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.
Total annual number of paid working hours divided by number of standard working hours per year.
EBITA and EBITDA adjusted for items affecting comparability and bad debt losses.
The mean annual growth rate over a specified period of time longer than a year.
Total assets less interest-free liabilities.
Net sales divided by average total assets.1)
Cash flow after investments in relation to the weighted average number of shares.
Net sales less cost of products sold and expenses directly attributable to the respective region.
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.
Net profit for the year attributable to Parent Company shareholders in relation to the weighted average number of shares (excluding treasury shares).
Operating result items plus amortization.
EBITDA Operating result items plus depreciation and amortization.
Equity/Assets ratio Total equity in relation to total assets.
Gross orders Order intake during a period.
Interest cover ratio2) EBITDA in relation to interest expenses.
Events or transactions with significant financial effect, which are relevant for understanding the financial 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.
Interest-bearing liabilities less cash and cash equivalents.
Net debt in relation to total equity.
Order intake during a period adjusted for cancellations, removals of orders and currency effects.
Cash flow from operating activities divided by EBITDA.
Profit margin Profit before tax in relation to net sales.
Profit before tax plus financial expenses in relation to average capital employed.1)
Net profit for the year attributable to Parent Company shareholders in relation to average shareholders' equity excluding non-controlling interests.1)
Shareholders' equity excluding non-controlling interests in relation to the number of shares at year-end (excluding treasury shares).
Operating profit plus salaries, other remuneration and social security costs and cost of incentive programs divided by average number of employees.
financial expenses
Short-term interest-free assets less short-term interest-free liabilities, excluding current tax and derivatives.
1) Average based on the last five quarters 2) New definition. The previous definition was profit before tax plus financial expenses in relation to
With effect July 3, 2016 Elekta has introduced the new European reporting guidelines for Alternative Performance Measures (APMs). APM:s are measures and key figures that Elekta's management and other stakeholders use when managing and analyzing Elekta's business performance. These measures are not substitutes, but rather supplements to financial reporting measures prepared in accordance with IFRS. Key figures and other APM:s used by Elekta are defined on page 111. See below for comments on how APM:s are used by Elekta and, when applicable, reconciliations to the IFRS financial statements.
From 2016/17 Elekta reports gross order intake. Gross order intake represents the new orders that has been booked during the period and this is in line with industry peers.
Up until 2015/16 Elekta reported net order intake. The difference between gross and net order intake are backlog adjustments and currency effects.
Order backlog represents all orders that have been booked but not yet revenue recognized. Elekta follows the maturity profile of the order backlog when forecasting revenue.
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 fluctuations, 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.
| North and South America |
Europe, Middle East and Africa |
Asia Pacific |
Total | |||||
|---|---|---|---|---|---|---|---|---|
| % | SEK M | % | SEK M | % | SEK M | % | SEK M | |
| 2016/17 vs 2015/16 | ||||||||
| Change based on constant exchange rates | –11 | –545 | 4 | 193 | 5 | 202 | –1 | –150 |
| Currency effects | 2 | 107 | 1 | 61 | 6 | 225 | 3 | 393 |
| Reported change | –9 | –438 | 5 | 254 | 11 | 427 | 2 | 243 |
| 2015/16 vs 2014/15 | ||||||||
| Change constant currency effect | 2 | 67 | 0 | 5 | 1 | 33 | 1 | 105 |
| Currency effects | 10 | 451 | 3 | 119 | 9 | 321 | 7 | 891 |
| Reported change | 12 | 518 | 3 | 124 | 10 | 354 | 8 | 996 |
| North and South America |
Europe, Middle East and Africa |
Asia Pacific |
Total | |||||
|---|---|---|---|---|---|---|---|---|
| % | SEK M | % | SEK M | % | SEK M | % | SEK M | |
| 2016/17 vs 2015/16 | ||||||||
| Change based on constant exchange rates | 1 | 40 | –5 | –183 | –17 | –606 | –7 | –749 |
| Currency effects | 3 | 102 | –1 | –24 | 4 | 155 | 2 | 233 |
| Reported change | 4 | 142 | –6 | –207 | –13 | –451 | –5 | –516 |
| 2015/16 vs 2014/15 | ||||||||
| Change constant currency effect | –1 | –29 | –6 | –230 | –2 | –77 | –3 | –336 |
| Currency effects | 11 | 382 | 1 | 54 | 8 | 283 | 7 | 719 |
| Reported change | 10 | 353 | –5 | –176 | 6 | 206 | 4 | 383 |
Gross profit is the difference between net sales and cost of products sold and is presented on a separate line in the income statement. Gross profit as a percentage of net sales represents gross margin. The Gross margin is used by management to review effects on the income statement from factors such as product mix and price development
EBITDA is used for the calculation of the interest cover ratio and operational cash conversion.
| SEK M | 2012/13 2013/14 2014/15 2015/16 | 2016/17 | |||
|---|---|---|---|---|---|
| Operating result/EBIT | 2,012 | 1,727 | 937 | 423 | 598 |
| Amortization: | |||||
| Capitalized development costs |
109 | 172 | 236 | 326 | 380 |
| Assets relating business combinations |
130 | 123 | 130 | 143 | 119 |
| Depreciation | 110 | 118 | 146 | 165 | 156 |
| EBITDA | 2,361 | 2,140 | 1,449 | 1,057 | 1,253 |
As a result of the implementation of the new guidelines for APMS the previously used term "non-recurring items" has been reviewed and replaced, from the first quarter 2016/17, by the term "items affecting comparability". The classification of revenue or expenses as items affecting comparability is based on management's assessment of the characteristics and also the materiality of the item. Expenses classified as items affecting comparability in this annual report are presented in a schedule on page 71.
EBITA adjusted for items affecting comparability and bad debt losses is used by management to evaluate the business and is considered to assist management and investors in comparing the performance across reporting periods on a consistent basis. Bad debt losses have been excluded as these relate to turbulence in the market that is not expected to occur on a regular basis. For a reconciliation of EBITA adjusted for items affecting comparability and bad debt losses to operating result (EBIT) as presented in the IFRS income statement, see page 71.
Operating income or EBIT (earnings before interest and taxes) is part of Elektas' long term financial ambitions. The measure is presented in the income statement as Elekta consider it to provide users of the financial statements with a better understanding of the Group's operating performance from a financial perspective. The operating margin shows the operating income as a percentage of net sales.
Capital employed represents the value of the balance sheet net assets that is the key driver of cash flow and capital required to run the business. It is also used in the calculation of return on capital employed.
| SEK M | April 30, 2013 |
April 30, 2014 |
April 30, 2015 |
April 30, 2016 |
April 30, 2017 |
|---|---|---|---|---|---|
| Total assets | 16,307 | 17,892 | 21,184 | 19,441 | 20,950 |
| Deferred tax liabilities | –582 | –687 | –732 | –690 | –778 |
| Long term provisions | –121 | –131 | –259 | –140 | –142 |
| Other long-term liabilities | –27 | –8 | –20 | –73 | –33 |
| Accounts payable | –1,217 | –1,295 | –1,262 | –1,122 | –1,000 |
| Advances from customers | –1,292 | –1,686 | –2,165 | –1,943 | –2,531 |
| Prepaid income | –1,034 | –1,200 | –1,673 | –1,648 | –1,874 |
| Accrued expenses | –1,404 | –1,526 | –1,789 | –1,817 | –1,875 |
| Current tax liabilities | –240 | –219 | –119 | –93 | –111 |
| Short-term provisions | –68 | –169 | –99 | –347 | –231 |
| Derivative financial instruments | –28 | –13 | –162 | –50 | –48 |
| Other current liabilities | –182 | –215 | –225 | –157 | –281 |
| Capital employed | 10,112 | 10,743 | 12,678 | 11,360 | 12,046 |
Return on capital employed is a measure of the profitability after taking into account the amount of total capital used unrelated to type of financing. A higher return on capital employed indicates a more efficient use of capital.
| SEK M | 2012/13 2013/14 2014/15 2015/16 | 2016/17 | |||
|---|---|---|---|---|---|
| Profit before tax | 1,800 | 1,502 | 716 | 189 | 340 |
| Financial expenses | 223 | 231 | 259 | 285 | 271 |
| Profit before tax plus financial expenses |
2,023 | 1,733 | 975 | 474 | 611 |
| Average capital employed (last five quarters) |
9,467 | 10,025 | 11,230 | 12,039 | 11,668 |
| Return on capital employed, % |
21% | 17% | 9% | 4% | 5% |
Return on shareholders' equity measures the return generated on shareholders' capital invested in the company.
| SEK M | 2012/13 2013/14 2014/15 2015/16 | 2016/17 | |||
|---|---|---|---|---|---|
| Profit for the year | 1,340 | 1,148 | 552 | 137 | 125 |
| Average shareholders' equity excluding non-controlling interests (last five quarters) |
4,960 | 5,553 | 6,260 | 6,587 | 6,541 |
| Return on shareholders' equity, % |
27% | 21% | 9% | 2% | 2% |
The interest coverage ratio shows how much result that is available to pay interest on outstanding debt.
| SEK M | 2012/13 2013/14 2014/15 2015/16 | 2016/17 | |||
|---|---|---|---|---|---|
| EBITDA | 2,361 | 2,140 | 1,449 | 1,057 | 1,253 |
| Interest expenses | 188 | 202 | 217 | 240 | 209 |
| Interest cover ratio, multiple | 12.6 | 10.6 | 6.7 | 4.4 | 6.0 |
Cash flow is a focus area for management. The operational cash conversion shows the relation between cash flow from operating activities and EBITDA.
| SEK M | 2012/13 2013/14 2014/15 2015/16 | 2016/17 | |||
|---|---|---|---|---|---|
| Cash flow from operating | |||||
| activities | 1,870 | 1,275 | 1,823 | 1,170 | 1,819 |
| EBITDA | 2,361 | 2,140 | 1,449 | 1,057 | 1,253 |
| Operational cash conversion, % |
79% | 60% | 126% | 111% | 145% |
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 73.
DSO is used by management to follow the development of overall payment terms to customers, which have significant impact on working capital and cash flow.
| SEK M | 2012/13 2013/14 2014/15 2015/16 | 2016/17 | |||
|---|---|---|---|---|---|
| Accounts receivable | 3,192 | 4,197 | 4,207 | 3,301 | 3,726 |
| Accrued income | 1,861 | 1,699 | 1,895 | 2,126 | 1,640 |
| Advances from customers | –1,292 | –1,686 | –2,165 | –1,943 | –2,531 |
| Prepaid income | –1,034 | –1,200 | –1,673 | –1,648 | –1,874 |
| Net receivable from customers | 2,727 | 3,010 | 2,264 | 1,836 | 961 |
| Net sales | 10,339 | 10,694 | 10,839 | 11,221 | 10,704 |
| Number of days | 365 | 365 | 365 | 365 | 365 |
| Net sales per day | 28 | 29 | 30 | 31 | 29 |
| Days sales outstanding (DSO) | 96 | 103 | 76 | 60 | 33 |
Net debt is important to understand the financial stability of the company. Net debt is used by management to track the debt evolvement and to analyze the leverage and refinancing need of the Group.
| SEK M | 2012/13 2013/12 2014/15 2015/16 | 2016/17 | |||
|---|---|---|---|---|---|
| Long-term interest-bearing liabilities |
4,340 | 4,361 | 4,958 | 3,065 | 5,272 |
| Short-term interest-bearing liabilities |
212 | 125 | 1,075 | 1,885 | 0 |
| Cash and cash equivalents | –2,567 | –2,247 | –3,265 | –2,273 | –3,383 |
| Net debt | 1,985 | 2,239 | 2,768 | 2,677 | 1,889 |
Net debt/equity ratio is one of Elekta's financial targets. The level of debt is important to understand the financial stability of the company.
| SEK M | 2012/13 2013/14 2014/15 2015/16 | 2016/17 | |||
|---|---|---|---|---|---|
| Net debt | 1,985 | 2,239 | 2,768 | 2,677 | 1,889 |
| Shareholders' equity | 5,560 | 6,257 | 6,646 | 6,412 | 6,774 |
| Net debt/equity ratio, multiple |
0.36 | 0.36 | 0.42 | 0.42 | 0.28 |
The equity/assets ratio gives an indication of the financial flexibility and independence to operate and manage variations in working capital needs as well as to capitalize on business opportunities.
| SEK M | 2012/13 2013/14 2014/15 2015/16 | 2016/17 | |||
|---|---|---|---|---|---|
| Shareholders' equity | 5,560 | 6,257 | 6,646 | 6,412 | 6,774 |
| Total assets | 16,307 | 17,892 | 21,184 | 19,441 | 20,950 |
| Equity/assets ratio, % | 34% | 35% | 31% | 33% | 32% |
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© 2017 Elekta AB (publ) All mentioned trademarks and registered trademarks 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 Intellecta Corporate. Photo: iStock, Folio, Shutterstock, Mats Lundqvist and Derrick Brady.
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