Annual Report • Apr 5, 2017
Annual Report
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ANNUAL REPORT 2016
| Doro in brief | 2 |
|---|---|
| The year in brief | 3 |
| CEO's comments | 4 |
| Comment on the year 2016 | 5 |
| Market | 7 |
| Strategy | 9 |
| Operations | 11 |
| Sustainability | 15 |
| Employees | 19 |
| The Doro share | 20 |
| Directors' Report | 22 |
| Corporate Governance Report | 25 |
| Board of Directors | 28 |
| Management | 29 |
| Financial statements | 30 |
| Notes | 38 |
| Board signatures | 56 |
| Audit Report | 57 |
| Quarterly summary | 60 |
| Five-year summary | 61 |
| Definitions | 62 |
| Press releases 2016 | 63 |
This Annual Report is a translation of the Swedish original. If any differences exist, the Swedish version is the official version and should prevail.
Follow the links on the cover, and on pages 10, 13 and 18, to find out what our users think.
Doro provides easy-to-use telecom and care solutions tailored for the world's growing population of seniors.
Doro is the European market leader in senior mobile solutions. The company is dedicated to understanding and responding to the needs and preferences of senior users with the objective of creating satisfied and loyal end-users. Doro's users really appreciate its products, and as many as 82 percent of them would recommend our products to friends and family.
Globally, there are more than 660 million people aged 65 or over and the demographics indicate that this number will be in high growth for many years to come. By 2020, the population of this group is forecast at over 700 million. Most of them will need support in keeping up with technological progress and exploring new convenience services at some point.
Doro's products are sold in more than 40 countries on five continents through an extensive network of leading telecom operators, specialists and retailers with strong distribution channels to endcustomers. This distribution network, and www.doro.se Kalix, Lund and Hong Kong.
Doro's ability to develop new distribution relationships efficiently, are key competitive advantages.
Doro provides value-added consumer solutions for seniors in the form of easyto-use phones with functionality that makes everyday life easier. Doro also offers services that further enable and enhance the quality of independent living for seniors and their families. Doro's offering spans feature phones and smartphones, through software and support services, with a sharp focus on ease of use.
Doro has comprehensive in-depth knowledge of its target group, and has in-house product development teams in More than
continents
the market leader with a 60% market share
Operationally, Doro's focus during the year was on re-engineering processes and operational excellence. For much of the year, Doro Care was negatively affected by its new framework agreement with SKL (The Swedish Association of Local Authorities and Regions) being subject to appeal, with the resulting delay of some 10 months. Production and delivery problems also affected handset models, while product platforms were upgraded and product rationalization executed. Ultimately, the outcome was a stronger product portfolio.
Doro's Chairman Magnus Mandersson resigned, and Johan Andsjö was appointed as Acting Chairman, with Henri Österlund appointed as Acting Vice Chairman.
Robert Puskaric was appointed as new CEO, based in Lund.
| Outcome | ||
|---|---|---|
| Goal | 2016 | |
| Annual growth, % | 20 | 7.1 |
| Long-term operating margin, % | 10 | 2.4 |
| Maximum leverage ratio (interest-bearing debt/equity) |
1.0 | 0.45 |
| Dividend, share of net profit, % | 33 | 75 |
| 2015 | 2016 | |
|---|---|---|
| Net sales, SEK m | 1,829 | 1,959 |
| Gross margin, % | 37.2 | 38.5 |
| Operating profit (EBIT), SEK m | 95.2 | 47.7 |
| Operating margin (EBIT), % | 5.2 | 2.4 |
| Cash flow from operating activities, SEK m | 85.7 | 61.7 |
| Earnings per share after tax, SEK | 2.78 | 1.33 |
| Dividend per share, SEK 1) | – | 1.00 |
| Number of employees at year-end | 358 | 500 |
| 1) See proposed appropriation of profit on page 24. |
CEO'S COMMENT Building on a strong niche position, we have great potential to keep developing our offering, and keep strengthening our positioning in several segments.
I took over as Doro's CEO on 1 February 2017, succeeding Jerome Arnaud, who left the company after nine years in this position. What I've seen of Doro so far has convinced me that the company harbours substantial competence that makes it well prepared to advance its positioning further in its growing niche market—easy to use telecom—and safety solutions specially tailored for the growing population group of seniors. Doro is an entrepreneurially driven company with operations in over 40 countries, whose offering is largely based on mobile platforms from the world's leading vendors, and multinational operators and resellers as major customers like Orange, Consumer Cellular and Amazon.
I have over 20 years' international experience in telecom, mobile platforms, service solutions, and building and developing new strategies and businesses.
I have collaborated with nearly all the world's mobile producers: LG, Samsung, Sharp, Apple, Motorola, HTC and others. As CEO of Ericsson in the Nordics and Eastern Europe, I was envolved in establishing the company as a partner for
non-telecom operators in digital transformation and the Internet of Things. And I'm bringing all this vital experience with me to Doro.
One of my initial priorities has been to meet customers. Apart from the importance of maintaining relationships with them, the impressions and knowledge these meetings generate are crucial to the continued evolution of our offering, and particularly, our ongoing strategy work. It's great how often our customers tell me how important our products are to their ranges, and their great interest and encouragement to keep developing our offering for seniors. One of our most important customers, Orange, also demonstrated its appreciation recently by giving us its Orange Device Partner Award for Outstanding Excellence in Smart Mobile Design for Seniors.
The meetings with our customers, as well as our sales successes and market shares, demonstrate that we have a strong brand and are well-positioned in our segment. Doro delivers digital solutions in the form of products and services that make it easier for seniors to lead independent, active—but also safe—lives. We possess in-depth knowledge of our target groups' needs, competence and resources in hardware, software and services, as well as motivated and committed people who are really enthusiastic about making a difference for senior citizens. This is why I see such great potential for Doro to keep growing in the digital transformation that society is now undergoing.
My first duties in the short term are to get the operations of Doro Care back on track, focus on the group's efficiency, reduce development lead-times, and simultaneously keep developing the company's growth strategy. There is massive potential to keep prioritizing our
successful positioning in simple feature phones, advance our positioning in smart phones and win more market shares internationally. Alongside all the fantastic colleagues I've met so far, I'm convinced that we will succeed in this, and far more, as early as in 2017.
Robert Puskaric, CEO and President 3 April 2017
For Doro, 2016 was a year of transition and consolidation following several years of strong growth. Our sales grew by 7.1 percent and our order book also expanded, to SEK 307.8m (193.7) at yearend. Our top line and order intake performance is clear evidence that our niche strategy—of targeting seniors with easy to use mobile and digital care solutions is successful.
While gross margin increased to 38.5 percent (37.2), EBITDA was lower than last year at SEK 121.4m (139.4) due to increased operating costs of SEK 155m. Of these higher operating costs, SEK 29.8m are restructuring costs.
Excluding restructuring costs, there are two main reasons for higher operating costs: Doro Care was positioned for growth (which due to an appeal against our framework agreement with SKL, did not go to plan), and continued investments in our strategy—addressing seniors and improving their quality of life through technology, products and services.
In 2016, our senior phone business continued to outperform the mobile phone market, with high activity and strong order intake despite challenging market conditions. Doro gained market shares in 2016, while the global feature phone market declined.
We have been phasing out low-end models and replaced the remaining ones with more competitive and profitable products in the same segment. This had a negative effect on sales but a positive effect on gross margin. The acquisition of Trygghetssentralen and an altered customer mix also supported our stronger gross margin.
Smartphones' share of total mobile sales increased, to 19.5 percent in 2016 (14.2). Our brand is continuing to progress in a positive direction, and we are maintaining our focus on improving the sell-through of smartphones. We are investing in various marketing activities, including store staff training, with the aim of continuing to increase the smartphone share of total mobile sales in 2017 and beyond.
Doro Care delivered below management's expectations in 2016. The business was negatively affected by a standstill in the Swedish market due to an appeal against our framework agreement with SKL (The Swedish Association of Local Authorities and Regions' procurement function). A new contract with SKL was finally signed in the fourth quarter but activity is not expected to pick up until early-2017.
In 2016, Doro Care acquired and consolidated Trygghetssentralen, a Norwegian social alarm operator, which performed according to our expectations. We continue to believe the migration of personal social alarms to digital
technology offers business potential in the Nordics and beyond. The acquisition of Trygghetssentralen was an important part of this strategy.
From a strategic perspective, Doro Care is an increasingly important part of Doro. Accordingly, we decided to reorganise Doro Care's management in 2016, in order to better integrate the service offering with our product offerings, and to improve and optimize its cost structure.
Despite the negative impact of delays to the above framework agreement, Doro Care's market leadership in digital social alarms remained stable in the year. By year-end, the number of subscribers had increased to 118,000 (90,000 excluding Trygghetssentralen) from 83,000 at year-end 2015. 12 month forward looking recurring revenue (see definition on page 55) also increased, to SEK 144.7m (101.3 excluding Trygghetssentralen), compared to SEK 60.8m at year-end 2015.
For the full year 2016, group sales increased by 7.1 percent to SEK 1,959.1m. Sales in the Nordics and DACH showed good growth, while the UK contribution did not match expectations.
Sales in the Nordics increased by a high 15.7 percent, supported by the acquisition of Trygghetssentralen and the phone business continuing to perform positively, while the delay with SKL in Sweden affected growth negatively. The DACH region reported good annual sales growth of 6.8 percent, driven by feature phones and the Doro 8030 4G smartphone. In the UK, Brexit—and more importantly depreciation of the GBP had a negative impact on full-year results. In the US, sales performance of 3G feature phones was consistent. However, comparison with the second half-year 2015 is more challenging because of the large-scale campaigns conducted then to promote the migration from 2G to 3G handsets.
Cash flow from operating activities stood at SEK 61.7m (85.7) with a positive trend at year-end. Doro has been making substantial efforts to improve cash management, downscaling its portfolio and renegotiating supplier contracts. The focus on working capital efficiency will continue in 2017.
In 2016, our focus was on improving operational excellence, which included deeper integration of Doro Care. By making our operations more flexible, capacity and fixed costs will improve and more readily match demand. We will continue to enhance our efficiency and flexibility in 2017.
The restructuring program progressed according to plan and restructuring costs amounted to SEK 29.8m for the full year 2016. Non-recurring items included product-related costs, consisting of items including rationalizing our product
portfolio—which also had an impact on depreciation—as well as costs related to the change of CEO and the closure of our R&D center in Paris.
In February 2017, Robert Puskaric became CEO & President, stationed in Lund. This will create additional operational synergies and clearly position Lund as Doro's headquarters. Work will continue on streamlining operations in 2017.
There are currently 660 million people worldwide aged over 65, equivalent to eight percent of the total population.
The number and share is increasing at a pace with generally rising standards of living, and the resulting increased average lifespan in most parts of the world.
Seniors are now healthier, more mobile and more motivated to maintain independent and active lifestyles than ever. They want new digital solutions in the form of products and services that facilitate independent and active lifestyles. The total global market for telecom products for seniors is expected to continue to grow.
Doro has specialized in telecom products and services for this increasingly important consumer segment ever since start-up over 40 years ago, a segment otherwise ignored by telecom vendors despite its substantial buying power and high willingness to pay in the communication segment. Doro's offering spans entry-level feature phones and technically sophisticated but easy-to-use smartphones tailored to seniors' needs,
as well as applications and services for safer, easier everyday lives.
Doro is active in 40 countries worldwide, with its emphasis on Europe and North America, and market leadership (source GfK) in several key European countries (Germany, the UK, France and the Nordics). Its offering is identical in all countries, but demand does differ. For example, northern European seniors are more interested in smartphones, while in Southern Europe simpler feature phones are more sought after.
In the applications and services segment, customers differ between countries, where in the Nordics, public bodies such as municipalities purchase Doro's safety services, which are used in the care services they deliver to senior citizens, while in Germany and the UK, the primary buyers are non-profit organizations and private sector care providers, which use systems based on these services, and in the Netherlands, insurance companies too. In Sweden and Norway, safety services are also combined with Doro Care's call centers directly for private individuals. In time, there is also development potential for safety services directly
targeting private individuals on Doro's other markets.
Doro is one of few providers offering a complete solution in the senior consumer segment. The competition consists of traditional providers in telecom and care.
The services provided by Doro have a small cluster of competitors, some of which compete only in personal care alarms.
A growing number of seniors want more sophisticated, tailored communication solutions that not only cover mobile phones but also user interfaces, applications and other services designed to make their lives easier. Users are becoming progressively more aware and skilled as a growing share of seniors are people who were still at work at the time of the breakthrough of digital communication in the early-1990s. Seniors' families are discovering the possibilities presented by digital care solutions, which mean that they can provide care in new ways,
tailored according to the individual's wish for an independent life without this meaning they are completely alone.
The rigorous and extensive capture of knowledge on user communication patterns and lifestyles that is Doro's core competence has laid the foundation of a segmentation model that sorts the motivation factors of different user types into groups based on user interest in technology and lifestyle. Six different user types have been identified, of which a combination of four constitutes Doro's primary target group. Doro's product and service portfolio satisfies its user needs by delivering products and services for seniors that lead active lives, but want products and services tailored for them, products and services for seniors with specific disabilities such as impaired hearing and vision, compromised mobility, etc., as well as products and services for seniors that are fully dependent on assistance and supervision to enable them to stay in their own homes.
Qualitative research conducted by River Research for Doro in 2015 revealed that before their next mobile phone purchase, more seniors can be expected to want to buy a smartphone instead of staying with feature phones. Doro endeavors to develop smartphones that all seniors can use, and accordingly, conducted research into the barriers seniors face when using smartphones, and that prevent them from upgrading. This research revealed that there were barriers before purchasing, during purchasing and after purchasing, but that these barriers could be overcome with guidance, that seniors would use their smartphones more, be more confident about usage, and be prepared to try completely new functionality that their previous feature phones didn't have. After the survey, most of the research subjects wanted to keep using smartphones.
Source: Infoplease.com
Source: Eurostat
A quiet revolution is happening all over the world. The growing senior population is healthier, more active and outwardlooking than just ten years ago.
Seniors want to stay active, even after long working lives, and to be independent of relatives or social services for dealing with everyday issues. Being able to communicate with their surroundings more easily is a must for a freer, more independent and active lifestyle. For most people, communication basically means having your own mobile phone, and steadily growing share of seniors currently either have a traditional feature phone, or increasingly, a smartphone. In Doro's markets, this group also has high buying power and is very willing to pay for communication solutions that give them an easier life and more freedom.
We want to make age a life stage of independence, empowerment and enjoyment. We want seniors to feel free to pursue their desires and get what they want out of life.
Doro has been working to give senior users the possibility of adopting digital technology according to their own circumstances for a long time. While it might be obvious that individual circumstances
differ, it is equally obvious that not everyone is lucky enough to remain completely healthy in their senior years. Even normal ageing involves compromised vision, hearing and motor skills. Additionally, many older people experience everything from more limited movement to the need to get in touch with relatives or care staff quickly for help in different situations.
2
In-depth understanding and knowledge of seniors' communication patterns, needs and preferences is vital for addressing their changing circumstances. Doro regularly executes extensive market research among seniors, and endeavors to secure a continuous dialogue with its users.
yearly growth in the last 5 years
Based on this information, we have designed a segmentation model that proceeds from user behavior and preferences, as well as user purchasing processes, activity levels, interests and opinions.
With all respect to mobile phones, being certain that contact and assistance is safely within reach is another important dimension to technology. Doro aims to secure market leadership within, and use its knowledge and understanding to develop, digital safety services for use in combination with fixed and mobile telephony, as well as dedicated alarm devices. These services have implications
smartphones Share of Doro's total handset sales in 2016
including continuous contact pathways with call centers, with trained health and social care staff. This applies particularly in the Smarthomes concept, which presents exciting development opportunities, where the combination of sensor technology and sophisticated applications will enable greater safety and freedom for seniors inside and outside their homes.
Doro Care is a strategic key function in Doro's efforts to evolve its offering from primarily hardware, to consist of services for older consumers in the form of relevant hardware-based solutions, for seniors that still live in their own homes. Doro Care currently delivers safety services to private individuals and the municipal sector, private sector care providers and non-profit organizations that provide social alarm services for citizens and customers. Doro is the market leader in Sweden and Norway in operating inhouse call centers. Doro intends to grow these operations through strategic acquisitions, mainly in the Nordics, and eventually, other major European markets, where it now mainly delivers systems for call centers operated by municipalities and other organizations.
This greater services content creates a higher share of recurring revenues and more stable cash flow. An offering inte grating products and services also sharp ens Doro's competitiveness and clarifies distinctions between products, while simultaneously enhancing brand loyalty and countering price pressure.
Our prime strength is our knowledge of the user, which we feed back into the development of our telephones and ser vices. Doro makes substantial research and development investments and has teams developing its proprietary soft ware in-house and with partners in Asia. However, phones and other hardware are produced in collaboration with carefully selected long-term partners in the US, Taiwan and China, who develop and man ufacture products based on Doro's spec ifications. Products are certified in the US, China, Taiwan, India and Sweden.
Doro utilizes selected distributors, who are responsible for deliveries to be tween one and five customers per coun try. These distributors need to be large enough to cope with high volumes, but
also flexible enough to adapt flows to demand fluctuations. Doro products and services are primarily marketed through resellers to operators and consumer electronics retailers, as well as resellers active in ergonomics and rehabilitation. Doro also operates a retail store in Paris and web shops in selected countries. Doro has worked extensively on inform ing and training reseller staff about the unique characteristics of Doro products.
Operational excellence should permeate everything we do. Our objective is to create a culture where we continuously endeavor to find the right way to improve and streamline our work in everything from product development, through sales, delivery and administration. In 2016, we worked actively to create a more efficient structure across the com pany, and to reduce our costs. We also continued our work on building a more flexible supply chain. Over the next year, we will retain our focus on streamlining our operations, reducing working capital and ensuring the right product quality.
" I think my friends were convinced by my phone being so easy to use."
PHILLIPPE'S & JEAN-LUC'S STORY
Doro's offering covers a broad spectrum of products and services, which combined, bring great freedom of choice and adaptability to each user's specific needs and preferences.
Doro offers value-added communication solutions for seniors in the form of easyto-use phones with functionality that makes everyday lives easier, plus associated services that enhance the quality of life of seniors and their families. Doro's comprehensive offering spans feature phones and smartphones with software and support services, to safety services and products.
Doro's offering covers a broad spectrum of products and services, which combined, bring great freedom of choice and adaptability to each user's specific needs and preferences.
The Doro Group consists firstly of a shared Research & Development organization, Supply Chain Management, support functions, and a Sales organization tailored for different product segments, geographical markets and sales channels, and secondly, product segments with customer offerings focusing on technology and services intended to enable
independent and convenient lives for seniors. The offering is bound together by strong internal synergies. Doro's offering consists of the following product segments; Mobile phones with Feature Phones and Smartphones, Applications and Services, as well as Care Products and Services. All products and services are mutual complements.
Doro's consumer products are for all seniors regardless of prior knowledge and interest, to help them stay in contact. We offer phones for every need, from simpler feature phones with large, clear buttons, good sound and more basic functionality such as texting and voice calls, to more sophisticated smartphones with menu systems and clear icons tailored for seniors.
Our research demonstrates that growing numbers of people in our target group of those aged 65 and over want to use a smartphone rather than a regular feature phone. This is why it's important for Doro to ensure that its product portfolio includes several options, based on needs and budgets.
Doro features simple, easy-to-use phones. Our feature phones are easy to use, with a straightforward menu system and clear shortcut buttons so that it's easy for users to access their 10 favorite contacts, for example.
Smartphones offer Internet access over 3G or 4G networks. The different services of a smartphone are organized into apps. Regular smartphones are rarely very logical if you're not used to icons and apps. With our latest smartphones, we've tried to change the perspective, developing a user interface where menus are based on what's logical for the user and especially, the first-time user.
Users can easily download apps and use them on their phones. We have apps for most functions like personal banking, recipes, games etc. You can think of an app as a small computer program. We offer help on getting started with new smartphones, and ongoing support to stay in touch every day.
Doro Care offers a wide selection of safety products and services, including care devices, accessories for seniors and disabled people. We're working continuously to develop new products and services to address market needs, focusing on digital safety systems. We have been developing digital care devices and systems for over ten years, and are currently the Swedish and Norwegian market leader in digital care devices.
MY DORO MANAGER CONNECT AND CARE DORO ALARM APPLICATION CARE DEVICES ALARM RECEIVING CENTER
My Doro Manager is a practical web service that makes owning a Doro mobile even easier. Users can log in simply to change mobile phone settings and content easily, wherever they are.
Connect & Care® is an easy-touse service to help seniors enjoy life, while simultaneously staying connected and in touch. Doro Connect and Care® makes sure everything is working as it should, without restricting lifestyles, by creating support networks of friends, relatives and other trusted people.
Doro Alarm Application (DAA) is a mobile app that is either downloadable or pre-installed on Doro smartphones. DAA makes Doro smartphones compatible with alarm centers, and transmits information using the Doro Secure® IP protocol. The alarm can be activated by pressing the alarm button on the back of the phone, the Doro 3500 alarm button, the In App button, or using a safety timer.
Digital Care Devices create a secure and safe home life. They're easy to install, can be remote-controlled for upgrades and servicing, and are monitored continuously for security and control. We offer a wide selection of accessories, such as portable or permanent alarm devices, IR and smoke detectors, door alarms and bed alarms.
Doro operates call centers in Malmo and Kalix in Sweden, and Oslo in Norway. The total of 200 staff in these centers receive some 20,000 alerts from 120,000 connected users across Sweden and Norway every day. They receive a total of nearly 7 million alarm calls per year. Doro also provides solutions for customers that operate their own call centers in-house.
Each business segment represents a spe cific product or service segment and conducts development of services and products under the management of product owners, who initiate develop ment projects and are also responsible for verification, testing and certifying products. All development proceeds from end-user needs and preferences and is founded on Doro's unique knowl edge of its target groups. Manufacture is in partnership with carefully selected providers in the US, India, Taiwan and Australia. Partnerships in distribution, marketing and sales are managed by Doro's 16 offices worldwide, and are executed through an extensive network of selected collaboration partners, and through various channels; resellers in consumer electronics and ergonomics and rehabilitation, network operators and web retailers, and for Doro Care, munici palities, other organizations and busi nesses active in the care sector.
" I haven't needed to ask anyone for help with my new Doro phone—it's so easy to use! "
MADELEIN'S STORY
Doro endeavors to create value-added for users, their families and wider society by enabling easier, free and safer everyday lives for seniors. Doro achieves this by
developing high-quality, easy-to-use communication solutions and safety services especially tailored for seniors. Through deep understanding, innovative product
development and well-structured distribution and sales, Doro creates value in the form or enhanced quality of life, the conservation of resources and economic value.
Using technology, Doro makes seniors' everyday lives easier, and creates security for them and their families. Through our business, we participate in, and contribute to, a society were seniors can live more active, richer lives.
Doro helps bridge the technology gap between seniors and the rest of the population by offering safe and easy-to-use products. We are continuing to advance our positioning as the market leader in telecom solutions for seniors, and provide services that improve seniors' ability to maintain flexible and independent lives with safety solutions at home. This means that more seniors can live at home longer, which is often what they want themselves, and creates socioeconomic benefits.
Extensive market research and analysis has provided us with rigorous and nuanced knowledge of seniors—a social group making up a growing share of the global population. The specific preferences and interests of seniors will become critical to social needs in the future.
Doro operates in a sector in rapid transformation. We have to be flexible and be able to adapt quickly to our users' new behavior patterns and needs when developing technology solutions. When things are evolving rapidly, it is also vital that Doro stands up for its core values, and complies with its Code of Conduct. This means responsibility in every part of our business.
Doro's core values permeate our business structure and serve as guiding principles when developing products and collaborating with our employees, customers and end-users. Our ethical Code of Conduct is the foundation for transforming these principles into conduct and actions.
Within the auspices of our sustainability work, we focused on making the management of our information security more systematic in 2016. The risk analysis we executed in the year identified data security as the greatest risk from a businesscritical perspective. This is an issue of
TRUST EASE CARE
The confidence that we always keep our promises.
Simplicity and doing what we can to make everyday life easier.
Care and sympathy for other people's needs.
an inner conviction that gives us the energy to embrace life and live it to the full.
resonance with the people we encounter; a special understanding of their needs by being on their side.
great importance to our customers and our business, not least with the acquisition of Doro Care in 2015. Doro has also continued work on environmental certification of a growing share of our operations, and by creating the right potential for a long-term sustainable supply chain with high standards and monitoring. In the fall, Doro started efforts to define our operations and business model in terms of sustainability opportunities and risks. This serves as the foundation for the strategic sustainability work which we will continue develop in 2017. In the coming year, we plan to execute a materiality analysis so we can highlight our critical sustainability issues systematically, in terms of risks and opportunities. The next stage is to produce strategic priorities and define clear targets and follow-ups.
In a variety of ways, Doro is attempting to contribute to more sustainable development in every part of its business—from raw materials to production and usage by consumers (see the illustration of our value creation on page 14). Doro does not operate any production in-house, and its manufacturing partners are in countries including China. It is important for Doro to stand up for its values in every part of its business, including partners' production units in Asia, which entails a systematic approach to setting standards and following up.
Doro endeavors to select materials with the minimum possible environmental impact. We consider whether the more environmental materials appearing on the market can replace existing materials.
Affiliation to the Electronic Industry Citizenship Coalition (EICC) has enabled Doro to start work on improving the traceability of raw materials at the supplier level, and thus ensure the usage of conflict minerals is avoided wherever possible.
More stringent restrictions on the use of hazardous substances under RoHS (EU Directive on the restriction of the use of certain hazardous substances in electrical and electronic equipment) have been in place since 2013, which over and above environmental labelling, also set the requirement of CE labelling. The POPs Regulation also sets new restrictions on materials.
Doro has agreements and collaborations with a dozen manufacturing partners in China. Most are specialists in consumer electronics and telecom, but we also have agreements with a number of accessory manufacturers. It is important for us to be clear about what we stand for, and conduct ourselves accordingly, in every part of our business. Doro endeavors to secure long-term relationships and close collaborations with partners and suppliers. We want to be a force for positive change, and to create the incentive for our partners and suppliers to evolve and improve. We believe we can contribute to progress by standing up for our values and requiring our suppliers to
comply with our Code of Conduct and satisfy our environmental standards.
All our suppliers undertake to comply with our Code of Conduct, of which there are two versions—one for the European market, and a more specific and extensive one for the Asian market. Doro has been conducting third-party audits of existing suppliers at least once every three years since 2008, depending on whether a supplier is considered high or low risk. We visit China four times each year to ensure that plants are complying with our Code and guidelines on site. Our Chinese inspectors also play an important role in our efforts to uphold the Code, by monitoring and recording potentially non-compliant working conditions regularly and on site. They also inspect all shipments before transport from the relevant plant.
If a supplier breaches the Code or any other standard, we require the supplier to explain why. In order for our collaboration to continue, we require the supplier to produce an action-plan for improvements. If the supplier still does not satisfy the standard, Doro is entitled to discontinue the collaboration. We report back directly to our current suppliers using the Supplier Score Card appraisal
tool, where CSR is one of several parameters for evaluating and monitoring. We are always clear with suppliers about the standards we are applying, and when we deselect a supplier, we explain how they did not satisfy our standards.
Doro also applies ambitious environmental standards to suppliers. We work actively to improve the environmental performance of our products through efficient design. When developing a product, we always try to make it slightly better than the preceding version—in terms of performance, energy consumption, ergonomics and user-friendliness, and for recycling and servicing.
Doro's largest suppliers are ISO 14001 certified, and a growing number of plants are working on various environmental programs to achieve ISO 14001 certification. Doro does not conduct any operations that are subject to permits or reporting.
Doro's own operations are working on optimizing product and packaging logistics. As far as possible, Doro uses environmentally accredited suppliers and haulage contractors. We utilize maritime freight
and also use video and teleconferencing extensively.
In its own operations, Doro endeavors to minimize its external environmental impact by utilizing resources efficiently in every context. Doro Care has been environmentally certified since 2011, and more parts of the Group secured environmental certification in 2017.
To remain at the leading edge in our sector, we need to hire, retain and develop the right people with the right competence. This means our employees are our most important resources and ambassadors. Find out more about how we promote a positive working atmosphere on page 19.
Doro's offering is to provide technology that helps seniors to live more active and richer lives. Our customers are a range of institutions such as municipalities and county councils, as well as end-consumers.
In relationships with customers, one important issue of trust is protecting our customers' integrity. Our customers
should feel safe and secure when using our products and services. This is espe cially important because we manage highly confidential personal data in our collaborations with municipalities. In autumn/fall 2016, we started implement ing a new information security policy, stating rules on which parties can access what information, for example, and how this information should be used optimally.
The objective is to secure ISO 27001 certification for Doro Care's operation in 2017, raise internal awareness of data security risks, and reduce the number of risks with high risk ratings.
Doro's competitors on the market provide similar services to Doro in safety solutions, for example, albeit with simpler functionality and lower pricing. One of Doro's strengths is the high integrity and security of our technology, which is a long-term value creator for our customers.
Doro complies with the GSM Association's Universal Charging Solutions (UCS) initiative to standardize USB chargers on the market—and even tually, to reduce the unnecessary pro duction of new chargers.
Doro takes an overall perspective on product life cycles. We do everything we can to avoid product waste entering the natural environment, and for the batter ies and packaging of used products to be disposed of efficiently. Quality and respect for the environment and humans are fundamentals of our operations, and we build our Group's success and longterm profitability on these values.
Our products are subject to a range of environmental directives, regulations and laws, which apply stringent standards to the usage and recycling of our devices. Doro's Quality and Environmental Manager is responsible for compliance with relevant laws and ordinances. To ensure compliance with local environ mental legislations, Doro has a dedicated Environmental Manager in each country where we are active.
The combination of our diversity and strong core values gives us the overall competence to really understand and address our users.
Doro's products and services promise improved quality of life for the user, offering more safety, freedom and flexibility.
Users, their families and the social services that appoint us have high expectations of us. Our employees are our primary resource for being able to satisfy these expectations. Accordingly, hiring, retaining and developing the right employees is a critical factor for Doro's continued success. Doro is an attractive employer, and we have a good flow of qualified candidates into our recruitment processes. Our development projects often involve intensive work over limited periods, which is why we partly staff them with consultants, which evens out resources and brings flexibility between more and less intensive work phases.
We work continuously on developing our recruitment processes. For example, we have implemented an all-new webbased recruitment system to enhance and streamline this process for our call centers. We appoint carefully selected external recruitment agencies for all other activities.
We place great emphasis on our employees' job satisfaction. We endeavor to provide attractive and equal developmental opportunities for employees, both in their current roles and by progressing through our organization. Responsibility and authority is delegated through Doro's flat organizational structure. We endeavor to achieve short decision-paths, and our objective is for every employee to feel that they are participating, and responsible for, the company's progress.
Doro's employees represent many different job categories including nursing assistants, graduate engineers, engineers, technicians, accountants, marketers and sales professionals. Operations in over 40 countries mean that our employees have different origins, speak a variety of languages and understand different cultures. The collaboration between our units in different countries involves crossfertilization of values, ideas and understandings, and contributes to our knowledge of end-users in different markets, as well as their needs and preferences.
Modern technology such as videoconferencing is used to create and maintain effective communication group wide.
The combination of our diversity with shared collective values provides us with integrated competence to really understand and address our users' needs and preferences. Doro's core values are Trust, Care and Ease, plus In Tune and Zest. They permeate our corporate culture and serve as guiding principles when Doro develops products and interacts with its employees, customers and end-users.
Good leadership is about responsibility, visibility and availability. Doro works actively on discovering talented leaders among its own employees, and provides developmental opportunities in its organization through formal and informal leadership.
Each year we conduct an Employment Engagement Survey (EES) for all staff as a complement to appraisal interviews and daily dialog.
A Group-wide HR system is being implemented for 2017.
The Doro share is listed on Nasdaq Stockholm in the small-cap segment, which is made up of companies with market capitalizations of up to EUR 150m. The share made poor progress in 2016, falling 14.5 percent. However, OMX Technology, the Stockholm Stock Exchange sector index that Doro is a constituent of, fell further, by a total of 20.0 percent. However, the Stockholm Stock Exchange overall did gain 5.8 percent.
Doro attracted many new shareholders, and has now a total of 11,066 (7,405) shareholders. Swedish share ownership also increased in the year, to 62 percent (53).
In 2016, more than 94 percent (97) of the turnover in the Doro share was on Nasdaq OMX Stockholm. A total of some 21.1 million (20.9) shares were traded in the year with average daily turnover of 83,495 (83,300) shares.
As of January 1, 2016, Doro's share capital amounted to SEK 23,238,255 (21,204,483) with a total number of outstanding shares of 23,238,255 (21,204,483), each with a quotient value of SEK 1.00. All shares carry equal votes. The company's share capital was unchanged in 2016. At year-end 2016, the share capital was SEK 23,238,255 (23,238,255) and the number of outstanding shares was 23,238,255, each with a quotient value of SEK 1.00.
An Extraordinary General Meeting on August 21, 2014 adopted a resolution to implement a directed issue of warrants to senior executives and key employees of the Doro Group. Each warrant entitles the holder to subscribe for one share at a pre-determined price of SEK 42.00 in the period May 22, 2017 to June 21, 2017 inclusive. Doro issued a total of 841,000 warrants. Detailed information about the warrants program is at www.doro.com. For information on senior executives' holdings, see pages 28–29.
Doro's long-term target is a dividend payout ratio of approximately one-third of net profit. The Board of Directors is proposing the payment of a dividend of SEK 1.00 per share for 2016.
The Doro share is regularly monitored by financial analysts who work for Introduce and Redeye, who publish updated research at www.introduce.se/foretag/doro and http://www.redeye.se/bolag/doro.
Coincident with a company's publication of its quarterly interim reports, the CEO and CFO host a webcast presentation associated with each report. This webcast, normally held at 9 a.m. on the reporting date, is available at the company's website, corporate.doro.com. The CEO and CFO take questions at these presentations. In addition to the quarterly report webcasts, the CEO and CFO are also available for meetings and telephone conferences with investors, financial analysts and shareholders regularly through the year.
Source: Euroclear
| Holding, no. of shares |
No. of shareholders |
% of all shareholders |
|---|---|---|
| 1–500 | 8,746 (5,358) | 79 (72.4) |
| 501–1,000 | 1,161 (976) | 10.5 (13.2) |
| 1,001–5,000 | 897 (823) | 8.1 (11.1) |
| 5,001–10,000 | 107 (105) | 1.0 (1.4) |
| 10,001–15,000 | 44 (27) | 0.4 (0.4) |
| 15,001–20,000 | 17 (19) | 0.2 (0.3) |
| > 20,001 | 94 (97) | 0.8 (1.3) |
| Total | 11,066 (7,405) | 100.0 |
Source: Euroclear
| Transaction | 2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|
| Number of shares at year-end, 000 | 23,238 | 23,238 | 21,204 | 20,806 | 19,349 |
| Share price at year-end, SEK | 53.00 | 62.00 | 38.80 | 44.00 | 24.50 |
| Share price high | 78.00 | 62.00 | 55.00 | 57.30 | 33.90 |
| Share price low | 45.10 | 37.50 | 25.10 | 24.60 | 21.10 |
| Market capitalization at year-end, SEK m | 1,232 | 1,440 | 823 | 915 | 474 |
| Quotient value, SEK | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
| Earnings per share, SEK | 1.33 | 2.78 | 2.76 | 3.07 | 2.73 |
| Cash flow per share, SEK 1) | 2.66 | 3.69 | 1.06 | 5.60 | 2.08 |
| Reported equity, SEK | 22.38 | 20.74 | 15.79 | 13.79 | 10.80 |
| Dividend per share, SEK | 1.00 | – | – | 1.50 | 1.25 |
| Dividend share of net profit, % | 75 | – | – | 51 | 46 |
| P/E ratio 2) | 39.73 | 22.30 | 14.05 | 14.33 | 8.98 |
| Dividend yield, % 3) | 1.9 | – | – | 3.4 | 5.1 |
1) Cash flow from operating activities divided by number of shares before dilution at year-end
2) Share price at year-end divided by earnings per share for the year
3) Dividend per share divided by share price at year-end
SHARE CAPITAL HISTORY
| Year | Transaction | Change in number of shares |
Issue price, SEK |
Increase in share capital, SEK m |
Amount deposited, SEK m |
Total number of shares |
|---|---|---|---|---|---|---|
| 2001 | Directed issue | 11,764,705 | 8.50 | 11.8 | 100 | |
| 2005 | New share issue | 7,141 | 1.00 | 0.0 | 0 | |
| 2005 | Reverse split, 5:1 | –17,180,000 | 0.00 | 0.0 | 0 | |
| 2006 | New share issue, 3:1 | 12,885,000 | 6.00 | 64.4 | 71.2 | |
| 2006 | Offset issue | 227,631 | 7.66 | 1.1 | 1.5 | |
| 2009 | Directed issue | 1,700,000 | 9.50 | 1.7 | 16.2 | |
| 2011 | Directed issue | 241,543 | 25.56 | 0.2 | 6.3 | |
| 2013 | Directed issue | 1,457,000 | 27.89 | 1.5 | 40.6 | 20,806,174 |
| 2014 | Warrant program | 398,309 | 35.30 | 0.4 | 14.1 | 21,204,483 |
| 2015 | Directed issue | 2,033,772 | 41.50 | 2.0 | 84.4 | 23,238,255 |
| As of December 31, 2016 Ten largest shareholders |
No. of shares |
Proportion of capital and votes, % |
|---|---|---|
| Accendo Capital | 2,700,571 | 11.6 |
| Swedbank Robur Fonder | 1,166,929 | 5.0 |
| Nordea Investment Funds | 1,024,563 | 4.4 |
| Försäkringsbolaget, Avanza Pension | 984,255 | 4.2 |
| FCP Objectif Investissement, Microcaps | 920,000 | 4.0 |
| Clearstream Banking S.A., W8IMY | 872,070 | 3.8 |
| Catella Fondförvaltning | 709,219 | 3.1 |
| Handelsbanken Fonder | 684,832 | 3.0 |
| Originat AB | 650,000 | 2.8 |
| Nordnet Pensionsförsäkring AB | 582,468 | 2.5 |
| Subtotal | 10,294,907 | 44.3 |
| Total number of shares | 23,238,255 | 100 |
Source: Euroclear
Doro AB (also referred to below as Doro) is a public limited company. The Company has its registered office in Lund, Sweden. It is registered in Sweden under corporate identity number 556161-9429. The head office address is Magistratsvägen 10, 226 43 Lund, Sweden. Doro has subsidiaries in France, Hong Kong, Norway, the UK, Germany, Italy and the US. The legal structure of the Group is shown in Note 9.
Doro is a Swedish company that develops, markets and sells mobile communication and safety solutions that are specially adapted for the growing number of seniors worldwide. With more than 40 years' experience and operations in more than 40 countries, Doro is the world-leading brand for easy-to-use mobile phones and complementary safety services for seniors. Doro created the category of Care Electronics and has won a number of international design awards, most recently Best Mobile Device for Accessibility & Inclusion at the 20th Global Mobile Awards.
Doro operates in the rapidly changing market for mobile communication and safety solutions for older consumers in Europe, North and South America and the Asia-Pacific region. Doro's products are manufactured by contractors, mainly in China. Doro protects its products by owning moulding tools and design rights, and also by actively participating in the design, development and quality assurance processes. Doro coordinates its sourcing to achieve economies of scale and attractive pricing.
Information about the Doro share is on pages 20–21.
Total revenue amounted to SEK 1,959.1m (1,828.9), an increase of 7.1 percent. Adjusted for acquisitions the increase was 4.4 percent.
Doro launched a range of products and services in the year, including: Smartphones:
Doro's total revenue in the year amounted to SEK 1,959.1m (1,828.9), an increase of 7.1 percent compared with 2015. Adjusted for acquisitions the increase was 4.4 percent. Almost all markets grew. The highest growth was in the Nordics, where Care and Trygghetssentralen enjoy strong positioning, as well as the US and Canada. Doro is experiencing growth in Germany, while sales in EMEA and the UK declined slightly after events including the EU referendum (Brexit).
EBIT amounted to SEK 47.7m (95.2), yielding an EBIT margin of 2.4 percent (5.2). The lower margin is an effect of several non-recurring expense items, and Care's sales being affected by delays to a new framework agreement with SKL (The Swedish Association of Local Authorities and Regions), due to an appeal by a competitor. Operating margin in the fourth quarter 2016 was 3.4 percent (9.4).
Net profit for the year amounted to SEK 31.0m (63.8). Net financial items were SEK –8.3m (–10.8).
Cash flow from operating activities amounted to SEK 61.7m (85.7). The Group's net cash flow and change in cash and cash equivalents, which amounted to SEK 17.1m (–34.3) in the year, was charged with corporate acquisitions of SEK –29.0m (–162.0) and investments of SEK –67.4m (–58.7). The investments that were capitalised are primarily attributable to product development. No dividend was paid in 2016 (0). At year-end, Doro had interest-bearing liabilities of SEK 234.5m (194.6), while cash and cash equivalents amounted to SEK 61.0m (43.9). The equity ratio increased to 40.4 percent (40.2) at the end of the period.
The aim of the Policy is to clarify responsibilities and to define general rules and guidelines for specific areas within Doro, with a view to supporting operations, reducing financial risk and allowing efficient use of capital and cash flow.
The estimated net flows based on normal volumes and current price lists (which usually apply for around three months) are 60–80 percent hedged. Doro applies hedge accounting in accordance with IFRS.
The members of the Board of Directors are Acting Chairman of the Board Johan Andsjö, Karin Moberg, Jonas Mårtensson, Lena Hofsberger and Henri Österlund. The Chief Executive Officer Robert Puskaric also participates at Board meetings. Magnus Mandersson left the Board of Directors in October 2016, and Jerome Arnaud left the Board of Directors in February 2017. The Company's CFO Magnus Eriksson is co-opted to the Board of Directors as Secretary.
The Board's proposed guidelines for remuneration of senior executives for 2017 are principally that salaries and other terms of employment for the management will be at market levels. In addition to fixed basic salary, the management can also receive variable remuneration and bonuses with a predetermined ceiling and based on results achieved relative to established targets (and in certain cases, other key performance indicators).
The maximum cost, including social security contributions, for variable remuneration may not exceed the fixed base salary of the company's management.
An amount is to be set annually for the total cost for fixed and variable remuneration. This amount must include all the Company'� remuneration costs. The Company's senior executives are able to allocate part of their fixed and variable remuneration to other benefits, such as pension benefits. The management's pension plans shall mainly be defined contribution plans.
If employment is terminated by the Company, senior executives may be entitled to severance pay; in which case, this shall have a predetermined ceiling. No severance pay is due if employment is terminated by the employee. The Board is entitled to depart from these guidelines if there are particular reasons for this in individual cases.
This proposal is in line with the guidelines adopted by the 2016 Annual General Meeting.
Doro carries out product development and design projects jointly with various external partners. In addition to the Company's own development costs, manufacturing partners also bear significant development costs. Doro engages design companies from different countries and the costs may be either fixed or variable. Doro also sometimes buys technology from various external companies.
In addition, Doro invests in various moulding tools and design rights in order to protect product designs. These costs are capitalised until products are ready for shipment, when depreciation begins.
For 2016, the Group's costs of development work amounted to SEK 42.1m (60.5).
Doro has registered the trademarks Doro, Doro Care, Care Electronics, Doro PhoneEasy, Doro Secure, Doro Experience, Doro Connect & Care, Doro Liberto, Ergonomic Sound, Audioline, along with a large number of other product names and figurative trademarks. Doro has also protected its designs through a large number of registered design rights.
Investments are made in design, moulding tools, certification processes, control equipment, other equipment, computers and software systems. Investments amounted to SEK 67.4m (58.7). See also accounting principles.
During the year Doro was not involved in any disputes that have affected or will affect the Company's position in a material manner.
Regular follow-up of suppliers' quality is carried out quarterly using the "Doro scorecard". Follow-up focuses on the suppliers' manufacturing processes and specifies points of escalation for reported quality failures and associated remedial action. Potential suppliers are assessed on site in respect of all quality-related processes. At the same time, an initial evaluation is carried out in connection with Doro's Code of Supplier Conduct. The product quality of individual consignments is also checked on an ongoing basis.
Doro's quality and environmental manager continually monitors the Company's products to check that, as a minimum, they meet requirements set by authorities in relevant markets, technical specifications and environmental requirements.
The Company has a long-term operating margin target of 10 percent and an annual growth target of 20 percent for the coming years. The Company's long-term target is a dividend of around a third of net profit after tax. Finally, the Board of Directors has specified a maximum debt/equity ratio of 1.0 (interest-bearing liabilities/shareholders' equity).
The Board of Directors has proposed that the AGM 2017 approves a dividend of SEK 1.00 per share.
In addition to Group management and financial functions, the Parent Company Doro AB also provides a number of support functions for the rest of the Group. Marketing and product development are coordinated by the Parent Company, while the product and quality department oversees design and tool modifications, as well as quality assurance of deliveries. Purchasing and logistics are also coordinated by the Parent Company, which is responsible for flows of material within the Group.
Doro AB had Net sales of SEK 1,439.5m (1,393.4). Profit after financial items amounted to SEK –1.3m (26.4). Doro AB is responsible for the subsidiaries' financing. The Parent Company's net debt was SEK 221.0m (168.7) at year-end 2016. Shareholders' equity amounted to SEK 373.2m (370.9).
Doro's risks and uncertainties primarily relate to its ability to continually develop competitive products, to disruptions in supply, customer relations and exchange rate fluctuations.
Further information on Doro's management of financial risks is in Note 23. Other risks are described below.
Doro operates largely within telecommunications and is affected by general price decreases and the progress of costs in the consumer electronics industry. This means that selling prices may fall faster than production prices.
Doro works actively with various forecasting tools and follow-up programmes for production planning and stock management.
The Company works in partnership with suppliers, which allows good flexibility based on forecasts that are converted into purchase orders.
Changes in authorities' requirements and technological progress could result in products in stock having a significantly lower sales value than estimated. For Care, pricing is normally determined by competitive public tender for new hardware sales, or new contracts for services for safety solutions.
In March 2016, Doro signed a new loan agreement with Svenska Handelsbanken for a total credit facility of SEK 310m, of which SEK 30.5m had been utilised at the time of the acquisition of Tryghetssentralen AS. SEK 40m of this acquisition facility was repaid in the year. Doro also has a overdraft facility with Handelsbanken of SEK 50m.
Doro's cash flow from operating activities is usually slightly negative in the first quarter, with positive cash flow during the rest of the year. The Company's cash funds and credit agreements have been adapted to deal with these fluctuations.
Doro operates within competitive markets. Market segmentation is one way of facing this competition.
In addition, Doro continually conducts market research to find out end customers' needs and preferences, so it can develop unique products. Activities to increase productivity are conducted in parallel. Brand development within the seniors market is another distinguishing feature that is an asset of the Company.
In recent years Doro has had a low level of bad debts since its main customer group is large business groups with regular trade. In 2016, Doro had bad debt of SEK 2.5m (5.0). Doubtful debt in 2016 amounted to SEK 6.7m (1.7).
In 2016, no individual customer accounted for more than 10 percent ofrevenue
The risk of complaints refers to the costs of correcting faults arising in products supplied by Doro.
Warranty periods are usually 12–24 months. Various provisions are made for outstanding warranties. The Group's extensive quality work has improved quality in recent years.
Doro has a coordinated programme for insurance. Drawing on external expertise, Doro has drawn up a policy stating the type of insurance to be taken out, the amounts of cover required and the division of risk between the Parent Company and subsidiaries.
Political risk refers to the risk that authorities in various countries take political decisions that make continued operations more difficult, more expensive or impossible. All production is in Asia (this is also largely true of all our competitors).
Environmental risk refers to the costs that may be incurred by the Group in reducing its environmental impact. Doro does not manufacture products itself.
Doro works actively to comply with various new directives relating to the environment and has had no problems with managing charges for returns of electronic waste, packaging and used batteries.
This type of risk refers to the costs that may be incurred by Doro for pursuing various legal proceedings, as well as costs of third parties. Doro was not party to any material legal dispute in 2016. Doro draws on external expertise with a view to prevention and actively safeguards its rights.
The Annual General Meeting will be held at 2 p.m. on 27 April 2017 at Hotel Scandic Anglais, Humlegårdsgatan 23, 102 44 Stockholm, Sweden.
The Board of Directors has decided to propose a dividend of SEK 1 per share for 2016. The Company's liquidity and cash flow improved progressively through the year, and accordingly, it enjoys a strong financial base and ability to finance growth through investment, either organic or via acquisitions.
The following unrestricted funds in the Parent Company are available to the Annual General Meeting:
| Share premium reserve | 158,614,455.70 |
|---|---|
| Fair value reserve | 1,580,754.00 |
| Retained earnings | 106,902,006.98 |
| Profit for the year | –1,536,883.00 |
| 265,560,333.68 |
The Board of Directors proposes that the funds at the disposal of the AnnualGeneral Meeting of SEK 265,560,333.68 are appropriated so that a dividend of SEK 23,238,255.00 is paid, and the remaining amount of SEK 242,322,078.68 is carried forward.
Our expectation for 2017 is that both sales and EBIT will increase compared to 2016.
Robert Puskaric became CEO of Doro on 1 February, stationed in Lund, Sweden.
Having the confidence of the market, shareholders and the public is essential to Doro's continued success. To maintain it, the Board of Directors and management must conduct themselves in a responsible, transparent and committed manner. Accordingly, it is reassuring that in the year, the Board of Directors worked effectively and constructively with the Company's management and other employees. The role of the Board is becoming increasingly important in a global business environment where change is occurring evermore rapidly—not only in terms of the macroeconomic climate and specific business conditions thatDoro operates in, but also through the increased competition now present on some of our markets. We are well prepared to face changing market conditions and the Company can adapt quickly to newcircumstances.
We are also in a period of significant investment in new products and services that make life easier for the world's seniors. This places great demands on the Board's ability to take well-founded decisions and to balance the risks and opportunities always associated with a commercial enterprise.
Doro's openness to the market and the fact that we continually provide information about ongoing actions and business results are just as important to Doro's credibility. This is the basis of a value-creating relationship with all our stakeholders, whereby existing and new shareholders can be sure they are receiving accurate information at the right time.
Doro AB is a Swedish public limited company listed on OMX Nasdaq Stockholm ("the Stockholm Stock Exchange"). Doro's corporate governance is based on Swedish legislation, primarily the Swedish Companies Act, but also on the Stockholm Stock Exchange's Rule Book for Issuers, the Swedish Corporate Governance Code ("the Code") and other applicable rules. The
Company is also governed by its Articles of Association, internal instructions and policies, and recommendations issued by relevant bodies. This Corporate Governance Report has been prepared by the Board of Directors of Doro AB in compliance with the Swedish Annual Accounts Act and the Code. This Report is part of the formal Annual Accounts
According to the share register maintained by Euroclear Sweden AB as of 31 December 2016, Doro AB had 11,066 shareholders. Foreign shareholders represented 38.0 percent of the total number of shares. The number of shares of Doro AB as of 31 December 2016 was 23,238,255, and at the same date, Doro's market capitalization was SEK 1,232m.
Doro's largest shareholder is Accendo Capital, which holds 11.6 percent of the Company's shares.
All companies listed on the Stockholm Stock Exchange must comply with the Swedish Corporate Governance Code. Its aim is to improve the corporate governance of listed companies and to create confidence in them, from the public and participants on the capital markets. The Code is based on the principle of "comply or explain", which means that companies may depart from the rules provided they give a satisfactory explanation for their departure and review the selected alternative. The Code is available on the website www.corporategovernanceboard.se.
The Annual General Meeting is the Company's highest decision-making body. The Board of Directors and Chairman of the Board of Doro AB are elected at the Annual General Meeting. The Company's auditors are
also appointed. The Annual General Meeting approves the Income Statement and Balance Sheet, and the appropriation of profit or loss for the year. Other matters to be dealt with are laid down in the Swedish Companies Act. The Annual General Meeting is to be held within six months of the end of the financial year. Shareholders who are registered in Euroclear Sweden's register of shareholders on the record day and have notified their intention to attend are entitled to participate at the Annual General Meeting.
The Annual General Meeting appoints the members of the Company's Nomination Committee. The duties of the Nomination Committee are to nominate Board members and, where appropriate, auditors for election at the next Annual General Meeting, and to propose remuneration for work on the Board and its Committees to the Annual General Meeting. The Nomination Committee also proposes a Chairman for the Annual General Meeting.
The members of the Nomination Committee are Chairman Mark Shay, nominated by Accendo Capital, Bengt Belfrage, nominated by Nordea Fonder and Helen Fasth Gillstedt, nominated by Handelsbanken Fonder. Johan Andsjö, Acting Chairman of Doro AB, co-opted member of the nomination committee.
Doro AB's Board of Directors consisted of seven members elected by the AGM on 3 May 2016. In October 2016, Chairman of the Board Magnus Mandersson resigned. Johan Andsjö took over as Acting Chairman. In February 2017, Jerome Arnaud resigned as Board member, and since then, the Board of Directors consists of five members. There is a more detailed presentation of each member on page 28. The Company's
CFO Magnus Eriksson is co-opted to the Board of Directors as Secretary. Other senior executives participate at Board meetings to make presentations.
The Board of Directors met on 13 occasions in 2016, five meetings were held in Stockholm, three meetings were held at the Company's premises in Lund, and one meeting was held at the Company's premises in Paris. Four meetings were also held as conference calls. All Board members attended all meetings apart from the CEO on 7 December. The Company's CFO and Board Secretary attended ten of the meetings.
The Board deals with matters arising such as market conditions, budgets, results for the period and cost efficiency. All Board meetings follow an agenda, which is approved in advance. This is sent out to each Board member a week in advance of each meeting, along with relevant documentation and a list of matters outstanding from the previous meeting. The meetings of the Remuneration Committee are reported back to the Board and minutes of these meetings are distributed to the Board.
Each month, the previous month's results are also sent out with comments.
The Board of Directors' rules of procedure stipulate the working methods for Doro AB's Board of Directors. The rules of procedure are based on the Articles of Association, the Swedish Companies Act and the Code. The Board bears overall responsibility for the Doro Group.
The Board of Directors' responsibilities also encompass Doro's relationships with its shareholders, the general public, public authorities and other organizations and interest groups. The Board of Directors is responsible for executing resolutions made by the AGM and for achieving the business targets stated in the Articles of Association. The Board of Directors' authorizations are stated in the Articles of Association and the Swedish Companies Act.
An appraisal of the overall work of the Board of Directors should be conducted each year through a collective internal review of the Board's work. The outcome of this appraisal should be reported to the Nomination Committee. The change of Chairman of the Board and Chief Executive Officer in the past year means that this appraisal has been deferred until afterthe AGM.
The Company's Board of Directors appoints its Chief Executive Officer. The division of responsibility between the Board of Directors and the Chief Executive officer is stated in the Board of Directors' rules of procedure and instructions for the Chief Executive Officer. These state that the Board of Directors is responsible for the Company's governance, monitoring, organization, strategies, internal controls and policies. The Board of Directors also decides on major investments, matters of principle regarding governance of subsidiaries and electing Board members and Chief Executive Officers of subsidiaries.
The Board of Directors assures the quality of financial reporting. In turn, the Chief Executive Officer is responsible for the Company being managed in accordance with the Board of Directors' guidelines and instructions. Additionally, the Chief Executive Officer is responsible for budgeting and planning the Company's operations to achieve specific targets. The Chief Executive Officer should make arrangements for a good control environment and that the Group's risk-taking always complies with the Board of Directors' instructions. Any non-compliance must be reported to the Board of Directors. The Board of Directors also receives regular updates from the Chief Executive Officer through monthly reports.
The whole Board is responsible for remuneration matters and other terms of employment for Group management and five other key employees. The Chairman of the Board approves the employment terms of managers who report to the CEO. In total, this applies to the terms of employment for 12 people. Directors' fees are decided annually by the Annual General Meeting.
The Company's Nomination Committee consults on proposals for fees.
The Board then sets the remuneration for the CEO. The Board has appointed Jonas Mårtensson and Henri Österlund to the Remuneration Committee from among its members. The Committee held its first meeting on 3 May 2016 to decide on remuneration principles for 2016 and establishing a bonus program for 2016. A new share warrant program was not initiated in 2016. Both members attended the meeting. A second meeting was held on 15 December 2016 with the aim of discussing the current bonus program and remuneration for the new CEO for 2017. Both members also attended this meeting. The minutes from these meetings were presented at the following Board meeting.
Total Directors' fees amounted to SEK 1,450,000, in accordance with an Annual General Meeting resolution. Of this amount, the fees to the Chairman of the Board were SEK 450,000, with each other Board member receiving SEK 200,000. The Company's CEO received noDirector's fee.
The Company's Chief Executive Officer received a salary of SEK 4,346,000 for his work in 2016. The Company also expensed severance pay for the Chief Executive Officer of SEK 9,022,000 and variable remuneration of SEK 477,000. Salaries to the Group management's other six members amounted to SEK 8,508,000 including severance pay of SEK 2,257,000. No variable compensation was paid for 2016. All employed members of Group management including the CEO receive employment benefits in the form of a company car. The Annual General Meeting held on 3 May 2016 adopted guidelines for remuneration ofsenior executives for the financial year 2016.
According to his current employment contract, the CEO and the Company have a reciprocal notice period of 12 months. The CEO is entitled to full salary and other employment benefits during the notice period. Other senior executives have notice periods of three to nine months.
The 16 subsidiaries are managed and monitored by the Board of Directors in each country, mainly consisting of representatives of Doro AB in Sweden. Doro AB's Chief Executive Officer and President is Chairman of every subsidiary apart from Doro SAS in France, where Johan Andjsö is Chairman. The subsidiaries report to Doro AB's Board of Directors at each meeting. Their reports contain information on each company's progress and financial position.
The Finance Committee became an integrated part of the Board of Directors in the year, with the Company's financial position and other issues within the remit of the Finance Committee discussed regularly during Board meetings. The Committee's primary duty is to consult on quarterly financial statements, and provide decision support for acquisitions and the Group's financing.
The Board of Directors bears ultimate responsibility for ensuring that the Company has a satisfactory structure for internal control and the preparation of reliable financial reports. It is the responsibility of the Board andGroup management to monitor and identify commercial risks and govern the Company in such away that it is able to manage its main risks.
The auditors monitor and review how the Company is being managed by its Board of Directors and CEO, and the quality of the Company's financial reporting.
The AGM 2016 appointed audit firm Ernst & Young AB as Doro's auditors for a period of one year, with Stefan Engdahl as Auditor in Charge. In the past three years, the Doro Group's audit fees have amounted to SEK 2.0m (2016), SEK 2.1m (2015), and SEK 1.2m (2014).
The responsibilities of the Audit Committee are an integrated part of Board meetings and minutes of these meetings. The auditor is scheduled to participate at meetings twice a year.
The focus and scope of the audit is presented by the Company's auditor. An audit is conducted based on the quarterly accounts as of 30 September, with its
outcome presented at a meeting with the Audit Committee.
All members attended all meetings, along with the auditor, Stefan Engdahl. The Audit Committee satisfies the requirement of independence stated in the Swedish Corporate Governance Code.
The main duty of the Committee is to support the Board of Directors in its work on auditing and internal control, accounting and financial reporting. The main focus of work in 2016 was on following up on the year-2015 audit, and a more detailed review of the January-September 2016 period, known as the hard close.
The clear definition and communication of organisational resources, decision-making structures, responsibilities and authority levels in the Company's policy documents is an important component of the control environment. More information on the Company's internal controls is in the Directors' Report on page 27.
The Group Controller is responsible for raising specific issues with the CFO. In view of the limited size of the Finance department, Doro does not consider that any need exists for a separate internal audit function.
The company's Board of Directors shall have a minimum of three and a maximum of seven members. Members are elected at the Annual General Meeting (AGM) for the period until the end of the first Annual General Meeting held after the Board member was appointed. The Articles of Association can be amended at Annual General Meetings or shareholders' meetings.
The AGM on 3 May 2016 resolved to authorize the Board of Directors to decide on new issues of shares of a total maximum not exceeding 10 percent of the total number of outstanding shares. The AGM also decided to authorize the Board of Directors to take decisions on the purchase of treasury shares, of a maximum number of shares that treasury holdings do not exceed 10 percent of all the shares of the company at any time.
According to Swedish Corporate Governance Code, the Board shall ensure that the Company has sound internal control and shall constantly be kept informed concerning, and evaluate the functioning of, the Company's system for internal control. In addition, the Board shall submit a report showing how internal control over financial reporting is organised and, if there is no internal audit function, evaluate the need for such a function and justify its position.
With a view to creating and maintaining a functioning control environment, the Board has established a number of fundamental documents of significance for financial reporting, including in particular the Board's rules of procedure and instructions for the CEO and the committees. The CEO has the primary responsibility for maintaining the control environment established by the Board in the day-to-day work of the Company. He reports regularly to the Board as part of established procedures. In addition, reports are received from the Company's auditors.
The internal control system also rests on a management system based on the Company's organisation and method of conducting operations, with clearly defined roles, areas of responsibility and delegation of powers. Steering documents such as policies and guidelines also play an important role in the control structure.
The Group conducts ongoing risk assessment to identify material risks in respect of the financial statements.
The main risk relating to the financial statements is considered to be that of material misstatement, e.g. in bookkeeping and the measurement of assets, liabilities, income and expenses, or other discrepancies.
Fraud and losses through embezzlement are a further risk. Risk management is an integral part of each process and various methods are used to evaluate and limit risks, and to ensure that the risks to which Doro is exposed are managed according to established rules, instructions and follow-up procedures. The purpose of this is to minimise any risks and promote accurate accounting, reporting and disclosure.
Control activities are in place to manage the risks that the Board and Company management consider to be material to the business, internal control and financial reporting.
The control structure sets out clear roles within the organisation that enable the efficient distribution of responsibility for specific control activities aimed at the timely detection and prevention of the risk of reporting errors. Such control activities include a clear decisionmaking hierarchy and procedures for major decisions such as acquisitions, other types of major investments, divestments, agreements and analyses.
An important duty of Doro's staff units is to implement, develop further and maintain the Group's control procedures and conduct internal control geared to business-critical matters. Those responsible for processes at different levels are responsible for implementing the necessary controls in respect of financial reporting. The period close and reporting processes include controls relating to measurement, accounting principles and estimates.
Continual analysis of financial reporting is carried out and this, along with the analysis performed at Group level, is of great importance in ensuring that the financial statements are free from material misstatement.
The Group controller plays an important role in the internal control process, bearing responsibility for the financial reporting from each unit being accurate, complete and timely.
Doro works with the communications consultancy Hallvarsson & Halvarsson AB, which aims to promote completeness and accuracy in financial statements released to the stock market. Regular updates and bulletins inform the employees concerned of changes to accounting principles and reporting requirements and also provide them with other information. The organisation has access to policies and guidelines.
The Board receives monthly financial reports. External information and communication is governed by the Company's Communications Policy, among other things, which describes Doro's general disclosure principles.
Doro's compliance with adopted policies and guidelines is monitored by the Board and management team. The Company's financial position is discussed at each Board meeting. The Board's Remuneration Committee and Steering Group Finance play an important role in matters such as remuneration, financial reporting and internal control.
Before publication of interim reports and the Annual Report the Board and management review the financial statements.
Doro's management conducts monthly follow-up of earnings, analysing deviations from budget, forecasts and the previous year. The duties of the external auditor include performing an annual review of the internal controls implemented by Group subsidiaries.
The Board meets with the auditors twice a year to discuss internal control and, in specific cases, to instruct the auditors to perform separate reviews focusing on specific areas.
In light of this, the Board has not found it necessary to establish a separate internal audit function.
Lund, 3 April 2017 The Board of Doro AB
Primary occupation: Acting Chairman of the Board
Education: B.Sc., Royal institute of Technology, Stockholm
Year of election: 2016
Year of birth: 1972
Nationality: Swedish
Other assignments: Board member: Crystal Almond holding (Wind Hellas), Adamo Telecom Iberia SA, Advisory Board T-mobile NL
Dependence: Company: No Owners: No
Previous assignments: CEO of Salt (former Orange Switzerland), Consejero Delegado
Own and related parties shareholdings, 2016: 54,000 shares
Own and related parties shareholdings, 2015: –
Board attendance: 12/13
Attendance: – Remuneration Committee: 1/2
Primary occupation: Founder and CEO of Friends of Adam Education: MBA, Stockholm Universityt
Year of election: 2009 Year of birth: 1963
Nationality: Swedish
Other assignments:
Chairman of the Board: Friends-OfAdam AB, Board member: Doro Care AB, SBAB
Dependence: Company: No
Owners: No Previous assignments: 14 years experience from leading positions at Telia Company
Board member: AP 7, IAR Systems Group AB, Caretech AB Own and related parties share-
holdings, 2016: 5,000 shares Own and related parties shareholdings, 2015: 5,000 shares Board attendance: 13/13
Primary occupation: Partner and Board member in Alted AB
Education: MBA, Stockholm School of Economics Year of election: 2007
Year of birth: 1963 Nationality: Swedish
Other assignments: Chairman of
the Board: Alcadon Group AB, Ownpower Projects Europe AB, Board member: DistIT AB, IAR Systems Group AB, JNM Invest AB
Owners: No Previous assignments: 17 years in corporate finance at SEB Enskilda, Maizels Westberg & Co
and Nordea Own and related parties shareholdings, 2016: 100,000 shares
(through companies) Own and related parties shareholdings, 2015: 100,000 shares
Board attendance: 13/13 Attendance:
– Remuneration Committee: 2/2
Primary occupation: Professional Board member
Education: Master of Business Administration, Bachelor of Arts, Bothe degrees Gothenburg University
Year of election: 2015
Year of birth: 1954 Nationality: Swedish
Other assignments: Chairman of the Board: Ambea, Pharma-Relations AB, Leos Lekland, RestaurangAssistans AB, Board member: Max Hamburgerrestauranger, AB Anders Löfberg, SABIS AB
Dependence: Company: No Owners: No Previous assignments: CEO of Aleris, CEO of SSP Group Ltd,
and a number of positions at Compass Group Plc and SAS Service Partner
Own and related parties shareholdings, 2016: –
Own and related parties shareholdings, 2015: –
Board attendance: 13/13
Primary occupation: Managing Partner, Accendo Capital
Education: M.Sc. (econ.), Helsinki School of Economics
Year of election: 2015
Year of birth: 1971 Nationality: Finnish
Other assignments: Founder and partner Accendo Capital
Dependence: Company: No Owners: Yes
Previous assignments: Board member: Okmetic Oyj, Talentum Oyj, Comptel Oyj, Partner: Conventum Corporate Finance, Triton, Associate: Doughty Hanson i Stockholm
Own and related parties shareholdings, 2016: 6,830 shares
Own and related parties shareholdings, 2015: 50 shares
Board attendance: 13/13
Attendance: – Remuneration Committee: 2/2
Position: CEO Employed since: 2017 Education: MBA Year of birth: 1969
Nationality: Swedish
Previous experience: Ericsson AB
Own and related parties shareholdings, 2016: –
Own and related parties shareholdings, 2015: –
Position: Vice President Product Development
Employed since: 2002 Education: MSc, Industrial Engineering and Management, Institute of Technology Linköping
Year of birth: 1964 Nationality: Swedish
Previous experience: Director of Manufacturing, Anoto
Own and related parties shareholdings, 2016: 15,000 shares, 65,000 warrants
Own and related parties shareholdings, 2015: 20,000 shares, 65,000 warrants
ULRIK NILSSON
Position: Vice President Operations Employed since: 1991 Education: Technician, telecoms Year of birth: 1971
Nationality: Swedish Previous experience: Supply
manager Own and related parties shareholdings, 2016: 397 shares, 65,000 warrants
Own and related parties share-
Position: Vice President Sales & Marketing Employed since: 2016
Education: MBA, University of Lund
Year of birth: 1968 Nationality: Swedish
Previous experience: Sales Director at DS Smith, VP Global Customer Unit Vodaphone at Sony, Sales Director Carphone Warehouse at Sony Ericsson
Own and related parties shareholdings, 2016: 42,000 warrants
Own and related parties shareholdings, 2015: –
Position: Chief Financial Officer Employed since: 2015
Education: Master of Science in Business Administration,
Lunds University Year of birth: 1969
Nationality: Swedish
Previous experience: CFO at Lekolar, CEO BRIO Holding AB, Head of Corporate Business Control at Sony Ericsson
Own and related parties shareholdings, 2016: 65,000 warrants
Own and related parties shareholdings, 2015: –
Position: Vice President Doro Care
Education: MSc Eng., Royal Institute of Technology and MSc Program, Stockholm School of Economics, Stockholm University
Year of birth: 1978
Nationality: Swedish Previous experience: CFO at
Lekolar, Vice President Business Development Beijer Electronics
Own and related parties shareholdings, 2016: –
Own and related parties shareholdings, 2015: –
Position: Human Resources Director
Employed since: 2015
Education: Master of Science in Business Administration, Gothenburg University
Year of birth: 1971
Nationality: Danish
Previous experience: HR manager Itella, HR manager DT Group
Own and related parties shareholdings, 2016: –
Own and related parties shareholdings, 2015: –
holdings, 2015: 3,897 shares, 65,000 warrants
| SEK m | Note | 2016 | 2015 |
|---|---|---|---|
| REVENUE | |||
| Net sales | 2, 3 | 1,959.1 | 1,828.9 |
| Other revenue | 2 | 16.0 | 9.1 |
| OPERATING COSTS | |||
| Goods for resale | 19 | –1,205.7 | –1,149.1 |
| Other external costs | 4, 16 | –361.8 | –341.1 |
| Personnel costs | 5 | –274.2 | –179.0 |
| Depreciation and impairment of property, plant and equipment | 8 | –2.9 | –2.6 |
| Amortization and impairment of intangible assets | 7 | –70.8 | –41.4 |
| Other expenses | 2 | –12.0 | –29.6 |
| Operating profit/loss | 2 | 47.7 | 95.2 |
| PROFIT/LOSS FROM FINANCIAL ITEMS | |||
| Interest income and similar profit/loss items | 6 | 2.6 | 4.1 |
| Interest costs and similar profit/loss items | 6 | –10.9 | –14.9 |
| Profit/loss after financial items | 39.4 | 84.4 | |
| Tax on profit/loss for the year | 17 | –8.4 | –20.6 |
| Profit/loss for the year | 31.0 | 63.8 | |
| Attributable to: Parent Company's shareholders | 31.0 | 63.8 | |
| KEY FIGURES | |||
| Average number of shares, thousands | 11 | 23,238 | 22,937 |
| Average number of shares after dilution, thousands | 23,411 | 22,995 | |
| Earnings per share after tax, SEK | 1.33 | 2.78 | |
| Earnings per share after tax,after dilution, SEK | 1.32 | 2.77 |
| SEK m | 2016 | 2015 |
|---|---|---|
| Profit/loss for the year | 31.0 | 63.8 |
| Other comprehensive income to be reclassified to profit or loss in subsequent periods: | ||
| Translation differences | 4.9 | –2.3 |
| Effects from cash flow hedges | 4.9 | 1.7 |
| Deferred tax | –1.1 | –0.4 |
| Other comprehensive income | 8.7 | –1.0 |
| Comprehensive income | 39.7 | 62.8 |
| Attributable to: Parent Company's shareholders | 39.7 | 62.8 |
THE GROUP
| Assets, SEK m | Note | 2016 | 2015 |
|---|---|---|---|
| NON-CURRENT ASSETS | |||
| Goodwill | 7 | 372.1 | 348.6 |
| Customer register and distribution agreements | 7 | 17.0 | 16.3 |
| Trademarks | 7 | 0.0 | 0.2 |
| Capitalized expenditure for development work | 7 | 73.3 | 76.3 |
| Right to lease | 7 | 1.7 | 1.8 |
| Equipment and tools | 8 | 12.9 | 7.7 |
| Long-term receivables | 4 | 6.5 | 14.5 |
| Other financial non-current assets | 0.8 | 0.6 | |
| Deferred tax asset | 17 | 11.9 | 15.6 |
| 496.2 | 481.6 | ||
| CURRENT ASSETS | |||
| Inventories | 19 | 217.9 | 188.5 |
| Prepayments to supplier | 6.3 | 0.4 | |
| Accounts receivable – trade | 23 | 371.2 | 375.2 |
| Other current receivables | 4, 10 | 66.8 | 77.2 |
| Current tax receivables | 39.1 | 1.9 | |
| Prepaid expenses and accrued income | 10 | 29.4 | 30.2 |
| Cash and bank balances | 12, 23 | 61.0 | 43.9 |
| 791.7 | 717.3 | ||
| TOTAL ASSETS | 1,287.9 | 1,198.9 |
| Shareholders' equity and liabilities, SEK m | Note | 2016 | 2015 |
|---|---|---|---|
| SHAREHOLDERS' EQUITY | |||
| Share capital | 11 | 23.2 | 23.2 |
| Other paid-up capital | 242.9 | 244.7 | |
| Reserves | 13.3 | 4.5 | |
| Accumulated profit or loss | 209.6 | 145.8 | |
| Profit/loss for the year | 31.0 | 63.8 | |
| Total shareholders' equity | 520.0 | 482.0 | |
| LONG TERM LIABILITIES | |||
| Interest-bearing liabilities | |||
| Liabilities to credit institutions | 4, 24 | 162.2 | 136.3 |
| Total interest-bearing liabilities | 162.2 | 136.3 | |
| Non interest-bearing liabilities | |||
| Provisions for pension | 21 | 2.2 | 2.9 |
| Other provisions | 22 | 32.6 | 31.1 |
| Total non interest-bearing liabilities | 34.8 | 34.0 | |
| CURRENT LIABILITIES | |||
| Interest-bearing liabilities | |||
| Liabilities to credit institutions | 4, 12, 24 | 72.3 | 58.3 |
| Total interest-bearing liabilities | 72.3 | 58.3 | |
| Non interest-bearing liabilities | |||
| Provisions for guarantees | 20 | 58.1 | 54.3 |
| Accounts payable – trade | 254.9 | 286.5 | |
| Other liabilities | 18 | 16.9 | 26.8 |
| Current tax liability | 2.6 | 3.8 | |
| Accrued expenses and prepaid income | 13 | 166.1 | 116.9 |
| Total non interest-bearing liabilities | 498.6 | 488.3 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 1,287.9 | 1,198.9 |
THE GROUP
| Change in shareholders' equity 2016, SEK m | Share capital | Other paid-up capital | Reserves 1) | Profit brought forward |
Total Shareholders' equity |
|---|---|---|---|---|---|
| Shareholders' equity December 31, 2014 | 21.2 | 162.3 | 5.5 | 145.8 | 334.8 |
| Profit/loss for the year | 63.8 | 63.8 | |||
| Other comprehensive income | –1.0 | –1.0 | |||
| Comprehensive income | 0.0 | 0.0 | –1.0 | 63.8 | 62.8 |
| New share issue for acquisition of subsidiary, note 18 | 2.0 | 82.4 | 84.4 | ||
| Total transactions with shareholders | 2.0 | 82.4 | 0.0 | 0.0 | 84.4 |
| Shareholders' equity December 31, 2015 | 23.2 | 244.7 | 4.5 | 209.6 | 482.0 |
| Profit/loss for the year | 31.0 | 31.0 | |||
| Other comprehensive income | 8.8 | 8.8 | |||
| Comprehensive income | 0.0 | 0.0 | 8.8 | 31.0 | 39.8 |
| Warrants | –1.8 | –1.8 | |||
| Total transactions with shareholders | 0.0 | –1.8 | 0.0 | 0.0 | –1.8 |
| Shareholders' equity December 31, 2016 | 23.2 | 242.9 | 13.3 | 240.6 | 520.0 |
| 1) Specification of reserves | 2016 | 2015 | |
|---|---|---|---|
| Accumulated translation differences, January 1 | 6.7 | 9.0 | |
| Translation differences for the year | 4.9 | –2.3 | |
| Accumulated translation differences, December 31 | 11.7 | 6.7 | |
| Accumulated effects of cash flow hedges, January.1 | –2.2 | –3.5 | |
| Effects of cash flow hedges for the year | 4.9 | 1.7 | |
| Deferred tax in effects of cash flow hedges | –1.1 | –0.4 | |
| Accumulated effects of cash flow hedges, December 31 | 1.6 | –2.2 | |
| Total reserves, December 31 | 13.3 | 4.5 |
THE GROUP
| SEK m | Note | 2016 | 2015 |
|---|---|---|---|
| OPERATING ACTIVITIES | |||
| Profit/loss after financial items 1) | 39.4 | 84.4 | |
| Adjusted for items not in cash flow | |||
| Change in provisions | 20, 21, 22 | 4.7 | –11.5 |
| Depreciation and write-downs | 7, 8 | 73.7 | 44.0 |
| Adjustment for other non-cash items: | |||
| Unrealized exchange differences in cash flow hedges | –0.6 | 6.3 | |
| Reverse of additional purchase price in acquisitions | 18 | 0.0 | –0.5 |
| Total adjustment for other non-cash items | 77.8 | 38.3 | |
| Taxes paid | 17 | –26.3 | –17.4 |
| Cash flow from operating activities before changes in working capital | 90.9 | 105.3 | |
| Change in working capital | |||
| Change in inventories | 19 | –25.3 | 26.0 |
| Change in receivables | –3.7 | –95.8 | |
| Change in non-interest-bearing liabilities | –0.2 | 50.2 | |
| Cash flow from operating activities | 61.7 | 85.7 | |
| INVESTING ACTIVITIES | |||
| Acquisitions of subsidiaries | 18 | –29.0 | –162.0 |
| Acquisition of intangible assets | 7 | –59.7 | –56.9 |
| Acquisition of property, plant and equipment | 8 | –7.7 | –1.8 |
| Cash flow from investing activities | –96.4 | –220.7 |
| SEK m | Note | 2016 | 2015 |
|---|---|---|---|
| FINANCING ACTIVITIES Warrant program, new issue |
0.0 | 0.6 | |
| Warrant program, buy back | –0.6 | –0.6 | |
| Amortization of loans | –79.8 | –52.9 | |
| Loan raised and change in bank overdraft facility | 129.8 | 154.7 | |
| Cash flow from financing activities | 49.4 | 101.8 | |
| Cash flow for the year | 14.7 | –33.2 | |
| Cash and cash equivalents at beginning of year | 43.9 | 78.2 | |
| Exchange rate difference in cash and cash equivalents | 2.4 | –1.1 | |
| Cash and cash equivalents at end of year | 23 | 61.0 | 43.9 |
1) Interest paid and received is stated in note 6.
PARENT COMPANY
SEK m Note 2016 2015 OPERATING INCOME Net sales 2, 3 1,439.5 1,393.4 Other revenue 2 5.7 1.3 OPERATING COSTS Goods for resale 19 –936.9 –912.0 Other external costs 4, 16 –373.6 –340.0 Personnel costs 5 –64.0 –51.6 Depreciation and impairment of property, plant and equipment 8 –0.5 –0.7 Amortisation and impairment of intagible assets 7 –57.7 –30.3 Other expenses 2 –10.1 –28.6 Operating profit/loss 2.4 31.5 PROFIT/LOSS FROM FINANCIAL ITEMS Interest income and similar profit/loss items 6 7.2 8.3 Interest costs and similar profit/loss items 6 –10.9 –13.4 Profit/loss after financial items –1.3 26.4 Tax on profit/loss for the year 17 –0.2 –6.1 PROFIT/LOSS FOR THE YEAR –1.5 20.3
| SEK m | 2016 | 2015 |
|---|---|---|
| Profit/loss for the year | –1.5 | 20.3 |
| Other comprehensive income to be reclassified to profit or loss in subsequent periods: | ||
| Effects from cash flow hedges | 4.9 | 1.7 |
| Deferred tax | –1.1 | –0.4 |
| Other comprehensive income | 3.8 | 1.3 |
| Comprehensive income | 2.3 | 21.6 |
| Assets, SEK m | Note | 2016 | 2015 |
|---|---|---|---|
| FIXED ASSETS | |||
| Intangible assets | |||
| Capitalized expenditure for development work | 7 | 52.0 | 58.1 |
| Goodwill | 7 | 0.0 | 0.0 |
| Customer register | 7 | 0.0 | 0.8 |
| Brands | 7 | 0.0 | 0.1 |
| Property, plant and equipment | |||
| Equipment and tools | 8 | 0.8 | 1.4 |
| Financial assets | |||
| Participations in Group companies | 9, 25 | 309.9 | 309.9 |
| Receivables from Group companies | 29.5 | 0.0 | |
| Deferred tax asset | 17 | 8.1 | 9.4 |
| Total fixed assets | 400.3 | 379.7 | |
| CURRENT ASSETS | |||
| Inventories | |||
| Goods for resale | 19 | 130.5 | 120.8 |
| Advanced payment to suppliers | 0.1 | 0.4 | |
| Current receivables | |||
| Accounts receivable – trade | 23 | 266.7 | 271.3 |
| Receivables from Group companies | 253.6 | 198.5 | |
| Other current receivables | 10 | 42.4 | 47.9 |
| Current tax receivables | 3.9 | 0.0 | |
| Prepaid expenses and accrued income | 10 | 7.4 | 7.1 |
| Cash and bank balances | 12, 23 | 43.4 | 7.1 |
| Total current assets | 748.0 | 653.1 | |
| TOTAL ASSETS | 1,148.3 | 1,032.8 | |
| Shareholders' equity and liabilities, SEK m | Note | 2016 | 2015 |
| SHAREHOLDERS' EQUITY | |||
| Restricted equity | |||
| Share capital 23 238 255 (23 238 255) shares, quota value SEK 1 | 11 | 23.2 | 23.2 |
| Revaluation reserve | 0.5 | 0.5 | |
| Other allocated capital | 55.5 | 55.5 | |
| Reserve for development expenses | 28.5 | 0.0 | |
| Total restricted equity | 107.7 | 79.2 |
| Shareholders' equity and liabilities, SEK m | Note | 2016 | 2015 |
|---|---|---|---|
| Non-restricted equity | |||
| Share premium reserve | 158.6 | 158.6 | |
| Fair value reserve | 1.6 | –2.2 | |
| Accumulated profit or loss | 106.9 | 115 | |
| Profit/loss for the year | –1.5 | 20.3 | |
| Total non-restricted equity | 265.6 | 291.7 | |
| Total shareholders' equity | 373.2 | 370.9 | |
| PROVISIONS | |||
| Provisions for guarantees | 20 | 49.9 | 48.0 |
| Other provisions | 22 | 25.0 | 25.0 |
| Total provisions | 74.9 | 73.0 | |
| LONG-TERM LIABILITIES | |||
| Interest-bearing liabilities | |||
| Liabilities to credit institutes | 24 | 160.0 | 120.0 |
| Total interest-bearing liabilities | 160.0 | 120.0 | |
| CURRENT LIABILITIES | |||
| Interest-bearing liabilities | |||
| Overdraft facility | 12 | 0.0 | 4.1 |
| Liabilities to credit institutes | 24 | 50.0 | 30.0 |
| Liabilities to Group companies | 54.4 | 21.7 | |
| Total interest-bearing liabilities | 104.4 | 55.8 | |
| Non interest-bearing liabilities | |||
| Accounts payable – trade | 178.1 | 250.0 | |
| Liabilities to Group companies | 160.2 | 73.2 | |
| Other liabilities | 5.6 | 9.9 | |
| Current tax liability | 0.0 | 0.4 | |
| Accrued expenses and prepaid income | 13 | 91.9 | 79.6 |
| Total non interest-bearing liabilities | 435.8 | 413.1 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 1,148.3 | 1,032.8 |
| Reserve for develop | Total shareholders' | |||||||
|---|---|---|---|---|---|---|---|---|
| Changes in shareholders' equity 2016, SEK m | Share capital | Revaluation reserve | Statutory reserve | ment expenses Share premium reserve | Fair value reserve | Retained earnings | equity | |
| Shareholders' equity December 31, 2014 | 21.2 | 0.5 | 55.5 | 0.0 | 76.2 | –3.5 | 115.0 | 264.9 |
| Profit for the year | 20.3 | 20.3 | ||||||
| Other comprehensive income | 1.3 | 1.3 | ||||||
| Comprehensive income | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 1.3 | 20.3 | 21.6 |
| New Share issue for acquisition of subsidiary | 2.0 | 82.4 | 84.4 | |||||
| Total transactions with shareholders | 2.0 | 0.0 | 0.0 | 0.0 | 82.4 | 0.0 | 0.0 | 84.4 |
| Shareholders' equity December 31, 2015 | 23.2 | 0.5 | 55.5 | 0.0 | 158.6 | –2.2 | 135.3 | 370.9 |
| Profit for the year | –1.5 | –1.5 | ||||||
| Other comprehensive income | 3.8 | 3.8 | ||||||
| Comprehensive income | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 3.8 | –1.5 | 2.3 |
| Allocation to reserve for development expenses | 28.5 | –28.5 | 0.0 | |||||
| Total transactions with shareholders | 0.0 | 0.0 | 0.0 | 28.5 | 0.0 | 0.0 | –28.5 | 0.0 |
| Shareholders' equity December 31, 2016 | 23.2 | 0.5 | 55.5 | 28.5 | 158.6 | 1.6 | 105.3 | 373.2 |
| SEK m | Note | 2016 | 2015 |
|---|---|---|---|
| OPERATING ACTIVITIES | |||
| Profit/loss after financial items 1) | –1.3 | 26.4 | |
| Adjusted for items not in cash flow | |||
| Change in provisions | 20, 21, 22 | 2.0 | –0.6 |
| Depreciation and write-downs | 7, 8 | 58.1 | 31.0 |
| Unrealized exchange differences in cash flow hedges | –0.6 | 6.3 | |
| Total adjustment for non-cash items | 59.5 | 36.7 | |
| Taxes paid | –4.4 | –9.9 | |
| Cash flow from operating activities before changes in working capital | 53.8 | 53.2 | |
| Change in working capital | |||
| Change in stocks | 19 | –9.6 | 36.1 |
| Change in receivables | –44.9 | –87.7 | |
| Change in non-interest-bearing liabilities | 28.6 | 73.1 | |
| Cash flow from operating activities | 27.9 | 74.7 | |
| INVESTING ACTIVITIES | |||
| Acquisition of subsidiaries | 18 | 0.0 | –149.3 |
| Acquisition of intangible assets | 7 | –50.6 | –50.3 |
| Loan to subsidiary | –29.5 | 0.0 | |
| Cash flow from operating activities | –80.1 | –199.6 |
| SEK m Note |
2016 | 2015 |
|---|---|---|
| FINANCING ACTIVITIES | ||
| Change in non interest-bearing liabilities subsidiares | 32.7 | 9.5 |
| Loans raised and changes in bank overdraft facility | 130.8 | 155.1 |
| Amortization of loan | –75.0 | –42.5 |
| Cash flow from financing activities | 88.5 | 122.1 |
| Cash flow for the year | 36.3 | –2.8 |
| Cash and cash equivalents at beginning of year | 7.1 | 9.9 |
| Cash and cash equivalents at end of year 23 |
43.4 | 7.1 |
1) Interest paid and received is stated in note 6.
The Annual Accounts and Consolidated Accounts were approved for publication by the Board of Directors and Chief Executive Officer on April 3, 2017 and will be presented to the AGM on April 27, 2017 for approval.
The Consolidated Accounts were prepared in accordance with International Financial Reporting Standards (IFRS/IAS) as issued by the International Accounting Standards Board (IASB) as endorsed by the EU.
The Consolidated Accounts were also prepared in accordance with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board's recommendation RFR 1 (Supplementary Accounting Rules for Groups).
The Annual Accounts of the Parent Company were prepared in accordance with the Swedish Annual Accounts Act and applying the Swedish Financial Reporting Board's recommendation RFR 2 (Accounting for Legal Entities). Statements applicable to listed companies issued by the Swedish Financial Reporting Board have also been applied.
There are no new accounting principles or interpretation statements that came into effect as of January 1, 2016 that materially affect these financial statements.
A number of accounting standards and interpretation statements have been published, but have not yet come into effect.
IFRS 9 is divided in three parts: Classification and Measurement, Impairment and Hedge Accounting, and will replace the current IAS 39 Financial Instruments: Recognition and Measurement. Doro is currently evaluating the effect of IFRS 9. The mandatory effective date is January 1, 2018, but prospective application is permitted.
IFRS 15 constitutes a new framework for recognising revenue with additional disclosure requirements. The framework establishes principles about the nature, amount, timing and uncertainty of revenue and cash flow arising from an entity's contracts with customers. IFRS 15 will replace the current IAS 11 Construction Contracts and IAS 18 Revenue. Doro is evaluating the impact of the IFRS 15 and monitoring any statements from the IASB and FASB Joint Transition Resource Group for revenue recognition as well as amendments to the standard. The mandatory effective date is January 1, 2018, but prospective application is permitted.
IFRS 16 Leases was published in January 2016 and replaces the former IAS 17 Leases and the related IFRIC 4, SIC-15 and SIC-27 interpretation statements. Although accounting for lessors will be unchanged in all material respects, the accounting for lessees will change. There will no longer be a distinction between operating and finance leases, all leases will be recognized in the Balance Sheet apart from short-term leases and those of minor value. The model reflects the fact that at the start of a lease, the lessee obtains the right to use an asset for a period of time and has an obligation to pay for that right. The standard is effective for financial years beginning on or after 1 January 2019. Prospective application is permitted. Doro will evaluate the impact of IFRS 16.
IFRS 16 had not yet been endorsed as of the publication date of these Annual Accounts.
Other new or revised accounting standards are not considered to have a material impact on Doro's financial statements.
Assets, provisions and liabilities are based on historical cost unless otherwise stated below.
All amounts, unless otherwise stated, are in millions of Swedish kronor (SEK m).
The Group includes Parent Company Doro AB, and the companies in which the Parent Company, directly or indirectly owns shares controlling more than half of the voting rights. This means that Doro AB exerts a controlling influence over Group companies.
At the end of the financial year there were 15 (14) trading companies in the Group.
Acquired companies are included in the Consolidated Accounts from the acquisition date or when control of the company is obtained. Sold companies are included up to and including the date they are sold.
The Consolidated Accounts are prepared in accordance with the purchase method, which means that the historical cost of participations in Group companies is divided between identifiable assets and liabilities at their fair value on the acquisition date. Unutilized loss carry-forwards for tax purposes in the acquired company are converted into deferred tax assets in the Consolidated Accounts if the assessed earnings capacity is such that utilising them is deemed possible. Furthermore, deferred tax is calculated on the difference between the fair values of assets and liabilities and their tax base.
In cases where the historical cost of participations in Group companies exceeds the net of acquired assets and liabilities, as above, the difference is recognized as goodwill, which is tested at least once a year for impairment.
For company acquisitions, the purchase price can be earnings dependent. The calculation is then based on future profit and hence the total purchase price. On a quarterly basis, an assessment is made as well as an adjustment of the expected purchase price. Changes in the item in question are recognized in profit or loss.
Intra-Group balances and unrealized internal gains are eliminated in the Consolidated Accounts. When eliminating internal transactions, accounts is also taken of the tax effect on the basis of nominal tax rates in each country.
All of the assets and liabilities of foreign Group companies are translated at the closing day rate, while all items in the income statements are translated at the average rate for the financial year. The exchange rate differences arising in this context are partly an effect of the differences between the income statements' average rates and closing day rates, and partly of the fact that net assets are translated at a different rate at the end of the year than at the beginning of the year. Translation differences are recognized in the Statement of Comprehensive Income.
The following exchange rates have been used in the translation of foreign operations:
| Average rate | Closing day rate | ||||
|---|---|---|---|---|---|
| Currency | 2016 | 2015 | 2016 | 2015 | |
| EUR | 9.44 | 9.33 | 9.54 | 9.18 | |
| HKD | 1.10 | 1.08 | 1.17 | 1.09 | |
| NOK | 1.02 | 1.04 | 1.05 | 0.95 | |
| GBP | 11.59 | 12.83 | 11.19 | 12.46 | |
| USD | 8.57 | 8.40 | 9.07 | 8.42 |
Receivables and liabilities in foreign currencies are translated at the closing day rates and unrealized exchange gains and losses related to operations are included in other income and other expenses. Exchange rate differences related to non-operational items, such as cash and cash equivalents and bank loans, are recognised in net financial income/expense.
Doro's revenues consist of product sales, mainly new telephone handsets and alarm units, revenues from alarm services and revenues from leasing alarm units. Revenue from product sales is recognized when essentially all risks and rights associated with ownership have been transferred to the buyer, which usually occurs on delivery. Revenues relating to services are recognised in the period when services are rendered. Rental revenues are recognised in the period the lease covers. Doro has discount agreements with most customers. Contracted discounts reduce sales revenue in the period the sale is recognised.
Employee remuneration is reported as salaries earned and paid plus vested bonus. Accrued holiday pay and social security contributions are recognized as accrued expenses.
The predominant share of Doro's obligations towards employees consists of various defined-contribution pension plans.
A defined-contribution pension plan is a pension plan according to which the Group pays fixed fees to a separate legal entity. The Group has no legal or informal obligations to pay further fees if this legal entity lacks sufficient funds to pay all remuneration to employees associated with the employees' service during current or previous periods.
For defined-contribution pension plans, the Group pays fees to publicly or privately managed pension insurance plans on a compulsory, contractual or voluntary basis. The Group has no further payment obligations once these fees have been paid. The fees are recognized as personnel costs when they become due for payment. Prepaid fees are recognized as an asset to the extent that cash repayment or reductions in future payments may accrue to the Group.
In addition, a limited number of employees at the Group's French subsidiary have defined-benefit pension plans. A defined-benefit pension plan is one that is not a defined-contribution plan. Characteristic of definedbenefit plans is that they specify an amount for the pension benefit to be received by an employee following retirement. This is normally based one or more factors such as age, period of service and salary.
All obligations for which provisions are made are assessed by an actuary to determine the amount of the provision. The liability recognized in the Balance Sheet for defined-benefit pension plans is the present value of the defined-benefit obligation at the end of the reporting period.
Since the recognized liability regarding defined-benefit pension plans is an insignificant amount, the assumptions on which the actuarial calculations are based are not presented in the Annual Accounts.
Product development is conducted in collaboration with various manufacturing partners and most expenditure is borne by them. Doro works in an environment of rapid technological progress. Product development refers to expenditure for product adaptations, design, model approval, etc.
Expenses relating to the development phase are capitalized as an intangible asset if it is likely, with a high degree of reliability, that they will result in future financial benefits for the Group.
This means that strict criteria must be met before a development project results in intangible assets being capitalized. Such criteria include the option of ending a project, proof that a project is technically feasible and that a market exists, and that there is an intention and opportunity to use or sell the intangible asset. There must also be an opportunity to reliably measure expenses during the development phase.
External partners' moulds for manufacturing products are, however, owned by Doro and expenditure for them is capitalized and depreciated according to plan if the lifespan of the product is expected to exceed one year.
Doro has no research expenses.
Property, plant and equipment and intangible fixed assets are recognized at historical cost less accumulated depreciation/amortization according to plan, except goodwill and right to lease, which is not amortized in the Group.
Financial instruments recognized as assets in the Balance Sheet include, on the asset side, accounts receivable, other receivables, forward currency contracts, non-current investments and bank balances. Overdraft facilities, liabilities to credit institutions, accounts payable and other current liabilities are included in shareholders' equity and liabilities. With the exception of forward currency contracts and a liability for additional purchase price, financial instruments are initially recognized at historical cost, equal to the fair value of the instrument plus transaction expenses. Instruments are then recognized subject to how they have been classified in accordance with the following. Forward currency contracts are recognized in the Balance Sheet as of the contract date and are measured at fair value, both initially and in subsequent reassessments.
For more information see the section on hedge accounting below. Additional purchase price is recognised that fair value on the acquisition date. Subsequent revaluations of fair value are recognised as other operating income/other operating expenses.
A financial asset or financial liability is recognized in the Balance Sheet when the company becomes party to the instrument's contractual terms. Accounts receivable are recognized in the Balance Sheet when invoiced. Liabilities are recognized once the counterparty has delivered and there is a contractual obligation to pay, even though an invoice may not yet have been received. Accounts payable are recognized when invoices are received.
A financial asset or part of a financial asset is de-recognized from the Balance Sheet when the contractual rights are realized, mature or are no longer under the company's control. This also applies for part of a financial asset. A financial liability or part of a financial liability is de-recognized from the Balance Sheet when contractual obligations are met or otherwise extinguished. The same applies to part of a financial liability.
The purchase or sale of financial assets is recognized at the transaction date, which is the date on which the Company undertakes to purchase or sell the asset.
A financial asset and financial liability are offset against each other and the net amount recognized in the Balance Sheet only when there is a legal right to offset the amounts and there is an intention to settle the items to a net amount or realize the asset and settle the liability simultaneously.
Financial instruments are measured at fair value and classified in the following categories:
Fair value is determined based on the following three levels:
All financial instruments measured at fair value have been measured according to Level 2.
Derivatives – currency hedges Derivatives are classified as held for trading or accounted for as hedges.
• Measurement at fair value in profit or loss.
• Measurement at fair value through other comprehensive income.
Available-for-sale assets • Measurement at fair value through profit or loss.
Accounts receivable and loans receivable are non-derivative financial assets with determined or determinable payments that are not quoted on an active market. They are included among currents assets, with the exception of items maturing more than 12 month after the close of the reporting period, which are classified as non-current assets. The Group's accounts receivable and loans receivable consist of accounts receivable and other receivables in the Balance Sheet. Accounts receivable are recognized net less doubtful debt. Deductions for doubtful debt are based on a model in which extended maturities give increased deductions. In addition, an individual assessment is made of accounts receivable, with account taken of anticipated bad debt losses. Other receivables are recognized net less doubtful debt based on individual assessments with account taken of the expected losses they are expected to incur.
Other financial liabilities consist of accounts payable, liabilities to banks and accrued expenses, apart from social security contributions and taxes. Other financial liabilities are measured at amortized cost.
Effective from January 1, 2013, Doro applies hedge accounting for forward currency contracts. The hedging strategy conforms to an adopted finance policy in terms of purpose, amounts, maturities and currencies.
Changes in the value of forward exchange contracts classified as cash flow hedges are recognized in other comprehensive income. Hedge accounting ceases when the underlying exposure enters the Balance Sheet (i.e. when purchases and sales occur). Accumulated results in the hedging reserve (which is in other comprehensive income) are then dissolved against cost of goods sold of forward exchange contracts relating to purchases, or against sales for forward exchange contracts relating to sales.
Value changes relating to forward exchange contracts from the date on which hedge accounting ceased will be recognized directly in cost of goods sold, or sales.
Forward exchange contracts linked to commercial flows not subject to hedge accounting are classified as "held for trading". Value changes relating to such foreign exchange transactions have been recognized directly in sales for contracts relating to sales, and in the cost of goods sold for contracts relating to purchases. Hedge accounting is only used for forward contracts in EUR, USD, NOK and GBP and that relate to exposures that have not yet
entered the Balance Sheet. Currency derivatives linked to liquidity management and loans are not subject to hedge accounting. They are classified as "held for trading". Value changes relating to such foreign exchange transactions are recognized in net financial income/expense.
At least at every year-end at the close of accounts, an assessment is made as to whether there is any indication of impairment of the carrying amounts of the Group's assets. When there is such an indication, the recoverable amount of the asset is measured. The recoverable amount is the greater of an asset's net realizable value and its value in use. When establishing value in use, present value measurement is performed for estimated future payments that the asset is expected to generate during its useful life.
In present value measurement, an interest rate before tax is used for the purpose of the measurement that reflects the current market interest rate and the risk attributable to the asset. If the recoverable amount is less than the carrying amount, the asset is impaired to its recoverable amount.
Reversals of impairment are recognized if there are no grounds for such impairment, except for goodwill. Impairment and reversals of impairment are recognized in profit or loss.
At least once a year, an assessment of forecast future earnings and cash flow trends is made with regard to goodwill, capitalised expenditure for ongoing development projects and leasehold rights on premises. When the carrying amount exceeds the recoverable amount, it is impaired.
Depreciation according to plan is on a straight-line basis on the historical cost of the asset category and the estimated useful life:
Tools for the manufacture of products are included in intangible assets, capitalized expenditure for development work.
| Equipment and tools | 2–5 years |
|---|---|
| --------------------- | ----------- |
Intangible assets are amortized over their estimated useful life. For capitalized product development, amortization commences as of market launch of the product in question. Amortization according to plan is on a straight-line basis on the historical cost of the asset category: Capitalized expenditure for development work 1–3 years Trademarks and brands 1–5 years Customer register and distribution agreements 3–5 years
Leases are classified in the Consolidated Accounts as either finance or operating leases. Finance leases exist when the financial risk and benefits associated with the ownership are essentially transferred to the lessee.
Finance leases mainly refer to the lease of alarm devices to public sector customers. Leases for company cars, photocopiers, computer equipment and similar are recognized as operating leases. Rent for premises is included in operating leases.
Inventories are measured at the lower of cost (in accordance with the first-in, first out principle—FIFO) and net realizable value (in accordance with the lowest value principle). Cost is calculated for each delivery.
Technological development is rapid and prices fall regularly. Impairment of inventory is recognized according to a model whereby older inventory gives greater impairment. Different product groups have varying rates of impairment. The net sales value is defined as the selling price less selling expenses. Impairment to the net realizable value includes impairment due to technological and commercial obsolescence made in the Group company in question.
Impairment increases according to a scale, with products impaired to 50 percent after 6–12 months as inventory, depending on the product group, and fully impaired after 18 months. In addition, individual impairment tests may be conducted. The measurement technique using different obsolescence steps provides an accurate measurement of fair value.
Provisions are defined as liabilities that are uncertain in term of amounts or time of settlement. A provision is recognized when there is an undertaking ensuring from a transpired event, it is probable that an outflow of resources will be required in order to settle the undertaking and that the amount can be reliably estimated. Pensions, guarantee commitments, disputes and additional expenses are recognized as provisions in the Balance Sheet.
Provisions are made for estimated repair expenditure and losses of margins regarding goods that may be returned within the warranty period (between one and two years from the sale to the end user).
A statistical program has been developed that captures outcomes regarding the time at which products are sold until they are returned, the proportion that is repaired, scrapped, compensated for through product exchange of crediting as well as cost for checking, repairs (including parts) and transport. In the event of variances (mainly in the share of returned
products), warranty provision requirements are changed. The total warranty reserve is classified as current liabilities as majority of guarantees falls within one year.
All tax expected to be payable on reported profit is recognized in the Income Statement. Such taxes have been computed according to each country's tax regulations and are recognized under the item tax on profit for the year.
The Group's total tax in the Income Statement consists of current tax on taxable profits for the period, and deferred tax. Deferred tax mainly consists of changes in deferred tax assets with respect to loss carry-forwards and for tax purposes and other temporary differences.
The Group uses the balance sheet method for calculating deferred tax assets and liabilities. According to the balance sheet method, computation is based on tax rates on the closing date applied to temporary differences between an asset or liability's value in terms of accounting and taxation, and loss carry-forwards for tax purposes. Deferred tax assets are recognized in the Balance Sheet only to the extent of value that can probably be utilized within the foreseeable future. An individual assessment is performed of the situation for companies in each country.
Cash flow statements are prepared using the indirect method, which means that profit/loss after financial income/expense is adjusted for transactions that did not entail incoming and outgoing payments during the period, and for income and expenses relating to the cash flow of investment activities.
Cash and equivalents comprise cash, bank balances and current investments. In 2016 and 2015, Doro had no current investments.
On the sale of share warrants, the purchase consideration received is recognised as an increase in Other paid-up capital. On the repurchase of share warrants, the purchase consideration is recognised as a reduction in other paid-up capital.
Operating segments are reported in a manner consistent with the internal reporting presented to the chief operating decision maker of the Group. The chief operating decision maker is the function responsible for the allocation of resources and the assessment of the segments' earnings. For Doro, this function has been identified as the CEO. For more information about Doro's segment reporting, see Note 2.
The balance sheet items entitled current assets and current liabilities are expected to be recovered or paid within a twelve-month period. All other balance sheet items are recovered or repaid later.
In their preparation of Doro's Consolidated Accounts, the Board of Directors and the CEO, besides estimates made, have made a series of judgments regarding critical accounting matters that can significantly affect the amounts recognized. These relate to the following:
When testing carrying amounts of goodwill for impairment, assumptions are made about the future expected profit and cash flow trend for the lowest possible cash-generating unit. This is described in more detail in Note 7.
When measuring deferred tax assets, an assessment of future surpluses for tax purposes of each company is made, and thereby of the ability to utilize the loss carry-forwards. The size of the loss carry-forwards is detailed in Note 17.
Individual assessments are made when evaluating credit risks in accounts receivable. The assessment is based on past payment capacity and other information. Doro has in the past had very low realized bad debt losses, but is active in follow-up. Refer to Note 23 for more information.
Measurement of inventory is based on an inventory turnover model. In addition, individual assessments are performed based on past sale statistics and sales forecasts compared with product volumes in inventory and in production with suppliers.
Participations in Group companies are measured at historical cost. If the recoverable amount (see section above entitled "impairment") should prove to be lower, there is an impairment. Impairment of the value of participations in subsidiaries is reversed when there are no longer grounds for such impairment.
The parent company applies fair value accounting for financial instruments in accordance with Annual Accounts Act Chap 4:14.
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| Net sales | 2016 | 2015 | 2016 | 2015 | |
| Net sales of products | 1,831.7 | 1,771.3 | 1,439.5 | 1,393.4 | |
| Sales of services | 75.2 | 55.5 | 0.0 | 0.0 | |
| Rental income | 52.2 | 2.1 | 0.0 | 0.0 | |
| Total | 1,959.1 | 1,828.9 | 1,439.5 | 1,393.4 |
| Group | Parent Company | |||
|---|---|---|---|---|
| Other Revenue | 2016 | 2015 | 2016 | 2015 |
| Capitalized development costs | 11.7 | 6.1 | 5.7 | 1.3 |
| Recovered receivables | 1.3 | 0.0 | 0.0 | 0.0 |
| Gain on sale of fixed assets | 0.1 | 0.0 | 0.0 | 0.0 |
| Others | 2.9 | 3.0 | 0.0 | 0.0 |
| Total | 16.0 | 9.1 | 5.7 | 1.3 |
| Other expenses | 2016 | 2015 | 2016 | 2015 |
| Exchange rate differences | –12.0 | –29.6 | –10.1 | –28.6 |
| Total | –12.0 | –29.6 | –10.1 | –28.6 |
Doro is reported as a functional organization. The functional matrix structure provides focused support for the organization and these services are shared between the various products, geographical regions and distribution channels. The regions are responsible for sales in each region, and report to the Vice President of Sales & Marketing. The integration of Doro's operations means that Doro has become a single operating segment with a collective strategy and earnings monitoring, as well as cost and investment budgets.
Doro's operation are reported as a single segment, and financial information and results of operations are analyzed and reviewed by the chief operating decision maker as one segment. The most important earnings measure for managing operations is EBIT.
The location of customers forms the basis of division of sales by geographical region. No single customer represents more than 10 percent of net sales. All significant tangible and intangible assets are controlled by the Swedish parent company.
| Total revenue per region | 2016 | 2015 |
|---|---|---|
| Nordic | 536.9 | 463.9 |
| of which Sweden | 401.2 | 389.0 |
| EMEA (Europa, Mid East and Africa) | 467.0 | 468.5 |
| DACH (Germany, Austria, Switzerland) | 475.1 | 444.7 |
| UK (Great Britain, Ireland) | 274.0 | 278.8 |
| USA and Canada | 189.8 | 149.5 |
| Rest of the world | 19.9 | 13.0 |
| Central overhead | –3.6 | 10.5 |
| Total | 1,959.1 | 1,828.9 |
Of the Parent Company's invoicing, SEK 132.8m (134.5) relates to subsidiaries. Invoicing from subsidiaries to the Parent Company amounted to SEK 146.0m (96.2). Invoicing between subsidiaries amounted to SEK 58.9m (50.9).
Costs for operating rental and lease charges during the year amount to SEK 18.3m (14.5) for the Group and SEK 3.0m (2.9) for the Parent Company. Agreed future rental and lease charges are due for payment as shown below.
| Group | Parent Company | |||
|---|---|---|---|---|
| Rental and leasing | 2016 | 2015 | 2016 | 2015 |
| Within 1 year | 17.1 | 11.3 | 2.8 | 2.8 |
| Within 2 to 5 years | 23.6 | 17.5 | 3.5 | 5.0 |
| Later than 5 years | 0.0 | 0.0 | 0.0 | 0.0 |
| Total | 40.7 | 28.8 | 6.3 | 7.8 |
In addition to the normal rental and lease contracts reported above, Doro finance leases alarm devices to customers in the public sector.
These alarm devices are financed either on Doro's Balance Sheet, or leased from a finance company. The finance lease receivable is divided between short term, i.e. within one year, of SEK 23.6m (19.7) and long term, within 2 to 5 years, of SEK 6.5m (14.4). The short-term lease liability amounts to SEK 21.6m (19.7) and the long-term finance lease liability amounts to SEK 2.4m (14.4).
| Number | 2016 | of which men |
2015 | of which men |
|---|---|---|---|---|
| Parent Company | 57 | 36 | 48 | 29 |
| Other companies Sweden | 137 | 60 | 122 | 54 |
| Norway | 68 | 38 | 3 | 3 |
| United Kingdom | 13 | 8 | 13 | 8 |
| France | 36 | 20 | 39 | 24 |
| Hong Kong | 9 | 7 | 9 | 7 |
| Germany | 52 | 38 | 48 | 35 |
| Italy | 1 | 1 | 1 | 1 |
| Total | 373 | 208 | 283 | 161 |
Salaries, remuneration, social security contributions and pension costs are as follows:
| Group | Parent Company | |||
|---|---|---|---|---|
| SEK m | 2016 | 2015 | 2016 | 2015 |
| Salaries and other remuneration | 194,9 | 140.1 | 39.4 | 32.6 |
| 194,9 | 140.1 | 39.4 | 32.6 | |
| Payroll overheads excluding | ||||
| pension costs | 55.5 | 37.9 | 12.8 | 10.5 |
| 55.5 | 37.9 | 12.8 | 10.5 | |
| Pension costs | 16.0 | 12.2 | 7.1 | 5.3 |
| of which defined contribution | 10.3 | 10.5 | 7.1 | 5.3 |
| 16.0 | 12.2 | 7.1 | 5.3 |
| Women | Women | |||
|---|---|---|---|---|
| Number | 2016 | % | 2015 | % |
| Board | 6 | 33 | 7 | 43 |
| Group Management | 6 | 17 | 7 | 29 |
| 2016 | 2015 | |||
|---|---|---|---|---|
| SEK m | Board and CEO |
Other employees |
Board and CEO |
Other employees |
| Sweden | 6.0 | 88.8 | 4.0 | 76.4 |
| Norway | 0.0 | 27.5 | 0.0 | 2.2 |
| United Kingdom | 0.0 | 7.5 | 0.0 | 7.3 |
| France | 9.1 | 21.1 | 2.0 | 21.6 |
| Germany | 0.0 | 28.6 | 0.0 | 20.8 |
| Hong Kong | 0.0 | 5.3 | 0.0 | 5.0 |
| Italy | 0.0 | 2.3 | 0.0 | 1.9 |
| Total | 15.1 | 181.0 | 6.0 | 135.2 |
| The Board 2016 | Fees | Pension | remu neration |
Total |
|---|---|---|---|---|
| Chairman of the Board | 400 | 0 | 0 | 400 |
| Other Board members | 871 | 0 | 0 | 874 |
| Total | 1,271 | 0 | 0 | 1,271 |
Bo Kastensson, who served as Chairman until the end of the AGM on 3 May 2016, received SEK 175,000. Magnus Mandersson, who was elected as Chairman by the AGM on 3 May 2016, and resigned on 17 October 2016, received SEK 216,000. Johan Andsjö, who was elected to the Board of Directors by the AGM on 3 May 2016, and was then elected as Chairman on 17 October 2016, received SEK 105,000. Charlotta Falvin, who resigned from the Board at the AGM on 3 May 2016, received SEK 75,000. Henri Österlund, Lena Hofsberger, Karin Moberg and Jonas Mårtensson each received SEK 175,000.
| Bonus and variable remuner |
Other | ||||
|---|---|---|---|---|---|
| Senior Executives 2016 | Salary | ation Pension | benefits | Total | |
| Jérôme Arnaud (CEO) | 13,367 | 477 | 391 | 101 | 14,336 |
| Other senior executives | 8,508 | 2,695 | 681 | 11,884 | |
| Total | 21,875 | 477 | 3,086 | 782 | 26,220 |
The above amounts include salaries, remuneration and severance pay to employed senior executives. In 2016, the management team had seven members. The Chief Executive Officer's salary of SEK 13.4m includes severance pay of SEK 9.0m.
| Other remuner |
||||
|---|---|---|---|---|
| The Board 2015 | Fees | Pension | ation | Total |
| Chairman of the Board | 350 | 0 | 0 | 350 |
| Other Board members1) | 675 | 0 | 0 | 675 |
| Total | 1,025 | 0 | 0 | 1,025 |
1) Charlotta Falvin, Jonas Mårtensson and Karin Moberg each received SEK 150,000. Lena Hofsberger and Henri Österlund, who were elected to the Board by the AGM on 27 April, received fees of SEK 75,000. Fredrik Hedlund, who left the Board at the AGM on 27 April 2015, receied a fee of SEK 75,000.
| Bonus and variable remuner |
Other | |||||
|---|---|---|---|---|---|---|
| Senior Executives 2015 | Salary | ation Pension | benefits | Total | ||
| Jérôme Arnaud (CEO) | 4,164 | 820 | 358 | 93 | 5,435 | |
| Other senior executives | 8,004 | 582 | 1,877 | 460 | 10,923 | |
| Total | 12,168 | 1,402 | 2,235 | 553 | 16,358 |
The amounts include salaries and remunerations to employed senior excecutives. In 2015, the management team has had seven members.
Fees are paid to the Chairman and other Board members in accordance with AGM resolution. Remuneration to the CEO and other senior executives comprises basic salary, variable remuneration, other benefits (mainly company cars) and pension premiums. The balance between basic salary and variable remuneration should be in proportion to the executive's responsibilities and authorities. The average number of senior executives in the management team in 2016 was 7 (7).
The retirement age of the CEO and other senior executives of the Group is 65 and pensions are usually paid in accordance with occupational pensions plan plus full provisioning for the full amount of salaries according to the ITP/ITPK plans (supplementary pensions for salaried employees). All pension benefits are irrevocable,i.e. not dependent on continued employment.The retirement age of the CEO is 65 years. No agreements have been signed concerning pension commitments or equivalent, apart from as stated regarding the periods of notice mentioned above, whether for Board members or senior executives. Pension schemes for senior executives are substantially defined contribution with premiums of SEK 3.1m (2.2) paid.
If notice is served by the company or by the CEO himself, the period of notice is one year. The CEO is entitled to salary for 12 months during the period of notice. No severance pay will be paid if notice is served by CEO. Other senior executives are entitled to salary for notice periods of between 3 and 9 months.
These procedures are explained in the Directors' Report.
An Extraordinary General Meeting on 21 August 2014 resolved on a directed issue of new warrants to senior executives and key employees of the DoroGroup. Each warrant gives the holder the right to buy one share to a predetermined price of SEK 42.00 in the period 22 May 2017 to 21 June 2017.
The warrant price is calculated according to the Black & Scholes model, taking into consideration estimated dividend and the applied share price of SEK 31.10, volatility 30 percent, risk-free interest of 0.31 percent and duration of 2.78 years (12 September 2014–21 June 2017).
The CEO subscribed for 200,000 warrants and the rest of the Group management subcribed for 325,000 warrants. Doro Incentive subcribed for 141,000 warrants for potential future employees. A total of 841,000 warrants were issued.
In 2015, an additional 135,000 warrants were subscribed and 65,000 warrants were re-purchased. Another 65,000 options were subscribed in 2016, and 265,000 were repurchased.
| Group | Parent Company | |||
|---|---|---|---|---|
| Income | 2016 | 2015 | 2016 | 2015 |
| Interest income, external | 0.2 | 0.0 | 0.1 | 0.0 |
| Interest income, internal | 0.0 | 0.0 | 5.1 | 4.6 |
| Exchange rate gain | 2.4 | 3.7 | 2.0 | 3.7 |
| Other | 0.0 | 0.4 | 0.0 | 0.0 |
| Total | 2.6 | 4.1 | 7.2 | 8.3 |
| Expenses | ||||
| Interest expenses, external | –5.8 | –9.1 | –5.2 | –6.8 |
| Interest expenses, internal | 0.0 | 0.0 | –0.6 | –0.7 |
| Exchange rate losses | –4.8 | –5.8 | –4.8 | –5.8 |
| Other | –0.3 | 0.0 | –0.3 | –0.1 |
| Total | –10.9 | –14.9 | –10.9 | –13.4 |
| Net financial income/expense | –8.3 | –10.8 | –3.7 | –5.1 |
| INTANGIBLE FIXED ASSETS | ||
|---|---|---|
| Group/goodwill, SEK m | 2016 | 2015 |
| Opening cost | 348.6 | 151.9 |
| Acquisitions during the year | 16.8 | 200.0 |
| Translation difference | 6.7 | –3.3 |
| Closing accumulated cost | 372.1 | 348.6 |
| Group/customer register and distribution agreements |
2016 | 2015 |
| Acquisition value brought forward | 37.3 | 22.6 |
| Acquisitions during the year | 7.3 | 15.2 |
| Translation difference | 1.4 | –0.5 |
| Closing accumulated acquisition value | 46.0 | 37.3 |
| Write-downs brought forward | –21.0 | –12.3 |
| Write-downs for the year | –7.2 | –9.0 |
| Translation difference | –0.8 | 0.3 |
| Closing/write-downs | –29.0 | –21.0 |
| Closing residual value according to plan | 17.0 | 16.3 |
| Parent Company/goodwill | 2016 | 2015 |
|---|---|---|
| Acquisition value brought forward | 19.1 | 19.1 |
| Acquisitions during the year | 0.0 | 0.0 |
| Closing accumulated acquisition value | 19.1 | 19.1 |
| Write-downs brought forward | –19.1 | –19.1 |
| Write-downs for the year | 0.0 | 0.0 |
| Closing/write-downs | –19.1 | –19.1 |
| Closing residual value according to plan | 0.0 | 0.0 |
| Parent Company/customer register | 2016 | 2015 |
|---|---|---|
| Acquisition value brought forward | 14.8 | 14.8 |
| Acquisitions during the year | 0.0 | 0.0 |
| Closing accumulated acquisition value | 14.8 | 14.8 |
| Write-downs brought forward | –14.0 | –12.9 |
| Write-downs for the year | –0.8 | –1.1 |
| Closing/write-downs | –14.8 | –14.0 |
| Closing residual value according to plan | 0.0 | 0.8 |
The Group assesses the need for goodwill to be written down on an annual basis or when indications of impairment arise. Impairment testing is applied at the lowest level where separable cash flows can be identified. Since all the Group companies' activities and their contributions are highly dependent on each other there is no breakdown of goodwill.
The recoverable value of the unit is measured based on the current value in use of future cash flows. Future cash flows are estimated on the basis of expected growth rate in accordance with established forecasts for the next five years. These forecasts are based on historical experience, but also takes expected future development into account. Assumptions regarding future growth and profitability are based on external and internal estimates of market growth, past performance and management's assessment of market shares.The WACC discount factor, has been set using the Capital Asset Pricing Model (CAPM). A risk-three interest rate equal to the yield on 10-year government bonds has been applied in addition to the stock market risk premium on small enterprises, as part of the WACC. The required return has been ascertained based on the optimum capital structure as derived from the capital market. Since the recoverable amount exceeds the carrying amount, no need for impairment is deemed to exist.
Growth rate after 5 years: Doro has assumed a perpetual growth rate of 2 percent (2) in the impairment test. A change in the growth rate from 2 to 1 percent implies no impairment. The discount rate before tax increases by 1 percentage point: Doro has applied a discount rate of 13.6 percent (13.6) before tax in the impairment test. A change in the discount rate before tax to 14.6 percent implies no impairment.
Profitability: the analysis takes an assumption about profitability into consideration. A 10 percent decrease in profitability does not cause any impairment.
| The Group/brands | 2016 | 2015 |
|---|---|---|
| Acquisition value brought forward | 1.8 | 1.1 |
| Acquisitions during the year | 0.0 | 0.7 |
| Translation difference | 0.0 | 0.0 |
| Closing accumulated acquisition value | 1.8 | 1.8 |
| Depreciation according to plan brought forward |
–1.6 | –0.7 |
| Depreciation according to plan for the year | –0.2 | –0.9 |
| Closing depreciation according to plan | –1.8 | –1.6 |
| Closing residual value according to plan | 0.0 | 0.2 |
| Parent Company/brands | 2016 | 2015 |
|---|---|---|
| Acquisition value brought forward | 36.8 | 36.8 |
| Acquisitions during the year | 0.0 | 0.0 |
| Closing accumulated acquisition value | 36.8 | 36.8 |
| Depreciation according to plan brought forward |
–36.7 | –36.5 |
| Depreciation according to plan for the year | –0.1 | –0.2 |
| Closing depreciation according to plan | –36.8 | –36.7 |
| Closing residual value according to plan | 0.0 | 0.1 |
| Group/right to lease | 2016 | 2015 |
| Acquisition value brought forward | 1.8 | 1.8 |
| Translation differences | –0.1 | 0.0 |
| Closing accumulated cost | 1.7 | 1.8 |
| The Group's capitalized expenditure | ||
|---|---|---|
| for development work / IT | 2016 | 2015 |
| Acquisition value brought forward | 159.3 | 108.8 |
| Acquisitions during the year | 47.2 | 37.8 |
| Acquisitions | 0.0 | 13.6 |
| Sales/disposals/Write downs | –30.1 | –9.3 |
| Reclassifications | 28.7 | 8.4 |
| Closing accumulated acquisition value | 205.1 | 159.3 |
| Depreciation according to plan brought | ||
| forward | –103.8 | –81.7 |
| Depreciation according to plan for the year | –46.3 | –31.4 |
| Sales/Disposals/Write downs | 13.7 | 9.3 |
| Closing depreciation according to plan | –136.4 | –103.8 |
| Closing residual value according to plan | 68.7 | 55.5 |
| Ongoing capitalized expenditure for development work /IT |
2016 | 2015 |
|---|---|---|
| Opening balance | 20.8 | 9.7 |
| Reclassifications | –28.7 | –8.4 |
| New expenditure | 14.3 | 20.3 |
| Cost accounted | –1.8 | –0.8 |
| Closing balance | 4.6 | 20.8 |
| Total closing residual value | 73.3 | 76.3 |
Write-down of capitalized expenditures for development work amounts to SEK 16.4m (0) for the Group and SEK 14.3m (0) for the Parent company. The write-downs are partly driven by a general review of the product portfolio and partly by the fact that the sales of certain products are lower than expected.
| Parent Company/capitalized expenditure | ||
|---|---|---|
| for development work / IT | 2016 | 2015 |
| Acquisition value brought forward | 148.4 | 108.8 |
| Acquisitions during the year | 42.1 | 31.2 |
| Sales/disposals | –26.0 | 0.0 |
| Reclassifications | 20.4 | 8.4 |
| Closing accumulated acquisition value | 184.9 | 148.4 |
| Depreciation according to plan brought | ||
| forward | –110.7 | –81.7 |
| Depreciation according to plan for the year | –42.3 | –29.0 |
| Sales/disposals/Write downs | 11.7 | 0.0 |
| Closing depreciation according to plan | –141.3 | –110.7 |
| Closing residual value according to plan | 43.6 | 37.7 |
| Ongoing capitalized expenditure for development work /IT |
2016 | 2015 |
|---|---|---|
| Opening balance | 20.4 | 9.7 |
| Reclassifications | –20.4 | –8.4 |
| New expenditure | 10.2 | 20.3 |
| Cost accounted | –1.8 | –1.2 |
| Closing balance | 8.4 | 20.4 |
| Total closing residual value | 52.0 | 58.1 |
| Group | Parent Company | |||
|---|---|---|---|---|
| Equipment and tools, SEK m | 2016 | 2015 | 2016 | 2015 |
| Acquisition value brought forward | 25.8 | 31.4 | 14.5 | 23.5 |
| Acquisitions during the year | 7.8 | 1.8 | 0.0 | 0.0 |
| Acquisitions | 2.2 | 4.1 | 0.0 | 0.0 |
| Sales/disposals | –2.3 | –11.3 | –0.1 | –9.0 |
| Reclassifications | 0.0 | 0.0 | 0.0 | 0.0 |
| Translation difference | 0.3 | –0.2 | 0.0 | – |
| Closing acquisition value | 33.9 | 25.8 | 14.4 | 14.5 |
| Depreciation according to plan brought forward |
–18.1 | –26.6 | –13.1 | –21.4 |
| Depreciation according to plan for the year |
–3.4 | –2.6 | –0.6 | –0.7 |
| Sales/disposals | 0.6 | 11.0 | 0.1 | 9.0 |
| Reclassifications | 0.0 | 0.0 | 0.0 | 0.0 |
| Translation difference | 0.0 | 0.1 | 0.0 | – |
| Closing depreciation according to plan |
–20.9 | –18.1 | –13.6 | –13.1 |
| Closing residual value according to plan |
13.0 | 7.7 | 0.8 | 1.4 |
| Subsidiary | No. of shares |
% | Book value, SEK m, 2016 |
Book value, SEK m, 2015 |
|---|---|---|---|---|
| Doro A/S, Norway | 200 | 100 | 0.60 | 0.60 |
| Doro UK Ltd | 3,013,400 | 100 | 4.20 | 4.20 |
| Doro SAS | 66,667 | 100 | 11.60 | 11.60 |
| Doro Hong Kong Ltd | 4,500 | 100 | 5.10 | 5.10 |
| Doro Inc | 3,000 | 100 | 0.04 | 0.04 |
| Doro Incentive AB | 50,000 | 100 | 0.06 | 0.06 |
| Doro Deutschland GmbH | 1 | 100 | 0.20 | 0.20 |
| IVS Industrievertretung Sch weiger GmbH1) |
9,239 33.33 | 46.50 | 46.50 | |
| Doro S.R.L | 1 | 100 | 0.10 | 0.10 |
| Aldebaran SAS | 275,000 | 100 | 5.20 | 5.20 |
| Doro Care AB2) | 78,376 | 100 | 236.30 | 236.30 |
| – Doro Trygghetsjour AB | ||||
| – Doro Care Nordic AB | ||||
| – Doro Care Sales UK Limited | ||||
| – Doro Care GmbH | ||||
| – Doro Care AS | ||||
| Total | 309.9 | 309.9 |
1) IVS industrievertretung Schweiger GmbH is 100 percent consolidated. Doro AB owns
33.33 percent and Doro Deutschland GmbH owns 66.67 percent.
2) Doro Care AB's subsidiaries are wholly-owned.
| 2016 | 2015 | |
|---|---|---|
| Opening balance | 309.9 | 73.4 |
| Acquisition | 0.0 | 236.5 |
| Closing balance | 309.9 | 309.9 |
| Subsidiary – Company reg. no | Registered office |
|---|---|
| Doro A/S – 934210719 | Fredrikstad, Norway |
| Doro UK Ltd – 1180330 | Chalfont St Peter, United Kingdom |
| Doro SAS – 309,662,195 | Versailles, France |
| Doro Hong Kong Ltd – 08194263-000-12-98-6 | Kowloon, Hong Kong |
| Doro Inc. – 4706937,810 0,090679976 | New York, USA |
| Doro Incentive AB – 556843-4962 | Lund, Sweden |
| Doro Deutschland GmbH – HRB75859 | Köln, Germany |
| IVS Industrievertretung Schweiger GmbH | |
| – HRB 2040 | Amberg, Germany |
| Doro S.R.L – 08721340969 | Milano, Italy |
| Aldebaran SAS – 504,770,116 | Paris, France |
| Doro Care AB – 556388-9335 | Kalix, Sweden |
| – Doro Trygghetsjour AB – 556569-9740 | Malmö, Sweden |
| – Doro Care Nordic AB – 556773-1301 | Kalmar, Sweden |
| – Doro Care Sales UK Limited – 7776454 | London, United Kingdom |
| – Doro Care GmbH – HRB 6783 | Taunus, Germany |
| – Doro Care AS – 986616500 | Oslo, Norway |
| Group | Parent Company | |||
|---|---|---|---|---|
| Other current receivables | 2016 | 2015 | 2016 | 2015 |
| VAT receivable | 27.1 | 38.2 | 29.2 | 36.9 |
| Cash Flow hedges | 12.4 | 10.8 | 12.4 | 10.8 |
| Financial lease receivables | 23.7 | 19.7 | 0.0 | 0.0 |
| Other current receivables | 3.6 | 8.5 | 0.8 | 0.2 |
| Total | 66.8 | 77.2 | 42.4 | 47.9 |
| Prepaid expenses | Group | Parent Company | ||
|---|---|---|---|---|
| and accrued income | 2016 | 2015 | 2016 | 2015 |
| Prepaid rent | 4.8 | 3.8 | 0.5 | 0.4 |
| Prepaid insurance premiums | 1.0 | 0.6 | 0.0 | 0.0 |
| Prepaid exhibition costs | 1.6 | 1.4 | 1.6 | 1.3 |
| Prepaid IT costs | 0.9 | 0.5 | 0.7 | 0.4 |
| Prepaid licenses | 3.5 | 3.1 | 3.3 | 2.9 |
| Prepaid installation expenses | 12.9 | 17.3 | 0.0 | 0.0 |
| Other prepaid expenses | 4.7 | 3.5 | 1.3 | 2.1 |
| Total | 29.4 | 30.2 | 7.4 | 7.1 |
| No. of shares | Voting rights | Class | |
|---|---|---|---|
| A shares | 23,238,255 | 1 vote per share | Normal |
23 238 255 shares at a quota value of SEK 1.00 per share = SEK 23 238 255.
Doro executed a non-cash issue of 2,033,772 shares as payment to the sellers of 36.3 percent of the shares in Caretech AB. The total value of the non-cash issue was SEK 84.4m. The share issue increased the number of shares in Doro from 21,204,483 to 23,238,255, resulting in dilution of approximately 8.7 percent for existing shareholders.
The Board of Directors proposes a dividend of SEK 1 per share for the 2016 financial year.
An Extraordinary General Meeting on 21 August 2014 resolved on a directed issue of new warrants to senior executives and key employees of the Doro Group. Each warrant gives the holder the right to buy one share to a predetermined price of SEK 42.00 in the period 22 May 2017 to 21 June 2017. The warrant price is calculated according to the Black & Scholes model, taking into consideration estimated dividend and applied share price of SEK 31.10, volatility 30 percent, risk-free interest of 0.31 percent and duration of 2.78 years (12 September 2014 –21 June 2017).
The CEO subscribed for 200,000 warrants and the rest of the Group management subcribed for 325,000 warrants. Doro Incentive subcribed for 141,000 warrants for potential future employees. A total of 841,000 warrants were issued.
In 2015, an additional 135,000 warrants were subscribed and 65,000 warrants were re-purchased.
In 2016, 65,000 warrants were subscribed and 265,000 warrants were re-purchased.
Repurchase of warrants is made when warrant holders leave Doro.
| Group | Parent Company | |||
|---|---|---|---|---|
| SEK m | 2016 | 2015 | 2016 | 2015 |
| Approved credit | 50.0 | 50.0 | 50.0 | 50.0 |
| Utilized credit | 0.0 | 4.1 | 0.0 | 4.1 |
| Group | Parent Company | |||
|---|---|---|---|---|
| SEK m | 2016 | 2015 | 2016 | 2015 |
| Holiday pay liability | 22.6 | 12.0 | 5.6 | 4.4 |
| Payroll overheads | 10.6 | 7.7 | 2.6 | 2.4 |
| Other staff liabilities | 11.7 | 5.4 | 0.0 | 0.0 |
| Accrued royalty | 29.3 | 32.6 | 29.3 | 31.9 |
| Accrued customer bonus | 37.8 | 27.3 | 24.2 | 19.8 |
| Other accrued expenses | 54.1 | 31.9 | 30.2 | 21.1 |
| Total | 166.1 | 116.9 | 91.9 | 79.6 |
| Group | Parent Company | |||
|---|---|---|---|---|
| SEK m | 2016 | 2015 | 2016 | 2015 |
| Chattel mortgages | 186.6 | 186.6 | 170.0 | 170.0 |
| Shares in subsidiaries | 243.2 | 0.0 | 236.3 | 0.0 |
| Total | 429.8 | 186.6 | 406.3 | 170.0 |
| CONTINGENT LIABILITIES | |||
|---|---|---|---|
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Guarantees for subsidiary | 0.0 | 0.0 | 0.0 | 3.0 |
| Total | 0.0 | 0.0 | 0.0 | 3.0 |
Doro AB has the ultimate responsibility for the obligations of its subsidiary, Doro UK Ltd. Doro UK Ltd acts as an agent for Doro AB in the UK and Ireland and has no external customer relations of its own.
The 2016 AGM elected Stefan Engdahl (Ernst & Young AB) as auditor of the Parent Company, Doro AB. Ernst & Young will audit all major entities large units for the period of one year.
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| Fees and costs, SEK m | 2016 | 2015 | 2016 | 2015 | |
| Auditing | 2.0 | 2.1 | 0.8 | 0.9 | |
| Auditing outside the assignment | 0.2 | 1.2 | 0.2 | 0.3 | |
| Tax consultancy | 0.4 | 0.6 | 0.4 | 0.5 | |
| Other | 0.8 | 0.4 | 0.8 | 0.4 | |
| Total | 3.4 | 4.3 | 2.2 | 2.1 |
| Taxes on profit/loss | Group | Parent Company | ||
|---|---|---|---|---|
| for the year, SEK m | 2016 | 2015 | 2016 | 2015 |
| Current tax | –7.8 | –19.1 | 0.0 | –3.9 |
| Deferred tax | –0.6 | –1.5 | –0.2 | –2.2 |
| Total tax on profit/loss for the year | –8.4 | –20.6 | –0.2 | –6.1 |
Relationship between the tax expense for the year and the reported earnings before tax:
| Group | Parent Company | |||
|---|---|---|---|---|
| Taxes, SEK m | 2016 | 2015 | 2016 | 2015 |
| Reported profit/loss before tax | 39.4 | 84.4 | –1.3 | 26.4 |
| Tax at current rate 22.0 % | –8.7 | –18.6 | 0.3 | –5.8 |
| Non-deductible expenses | –1.2 | –4.1 | –0.5 | –0.3 |
| Non-taxable income | 3.1 | 1.5 | 0.0 | 0.0 |
| Utilisation of previously unrecog nized tax loss carryforwards |
0.0 | 1.1 | 0.0 | 0.0 |
| Change in valuation in losses carryforwards |
0.2 | 6.1 | 0.0 | 0.0 |
| Change in valuation of temporary differences |
0.0 | 0.0 | 0.0 | 0.0 |
| Tax cost concerning previous year | 3.1 | –2.4 | 0.0 | 0.0 |
| Adjustment for tax rates in foreign Group company |
–4.9 | –4.2 | 0.0 | 0.0 |
| Reported tax | –8.4 | –20.6 | –0.2 | –6.1 |
Temporary differences arise in those cases where accounted values of assets or liabilities and their tax value are different. Temporary differences, unutilized losses carry forward and other future tax deductions have led to deferred tax liabilities and tax assets for the following:
| Group | Parent Company | |||
|---|---|---|---|---|
| Deferred tax asset, SEK m | 2016 | 2015 | 2016 | 2015 |
| Unutilized losses carry forward | 7.2 | 8.6 | 0.2 | 0.0 |
| Temporary differences, provisions | 9.0 | 8.8 | 8.4 | 8.8 |
| Temporary differences, other | –4.3 | –1.8 | –0.5 | 0.6 |
| Total reported deferred tax asset | 11.9 | 15.6 | 8.1 | 9.4 |
Deferred tax assets are shown for unutilized losses carried forward and temporary differences in the Balance Sheet, when they are calculated to be used in the near future. A single calculation is made for each company with respect to past earnings trends, future plans and the option of using losses carried forward.
Of the consolidated losses carried forward, SEK XX m (95) can be used without a time limit being imposed. The remaining losses are in the United Kingdom, France and Sweden.
Loss carry-forwards are as follows:
| 2016 | 2015 | |
|---|---|---|
| Without limit | 95 | 95 |
| Total | 95 | 95 |
Non-accounted deferred tax assets in the Balance Sheet concerning unutilized taxable loss carry-forwards amount to:
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| SEK m | 2016 | 2015 | 2016 | 2015 | |
| 15 | 15 | 0 | 0 |
| Group | Parent Company | |||
|---|---|---|---|---|
| Gross changes of deferred taxes | 2016 | 2015 | 2016 | 2015 |
| Opening balance | 15.6 | 15.6 | 9.4 | 12.0 |
| Tax in Income Statement | –0.6 | –1.5 | –0.2 | –2.2 |
| Tax attributable to other comprehensive income |
–1.8 | –0.4 | –1.1 | –0.4 |
| Acquisitions | –1.3 | 1.9 | 0.0 | 0.0 |
| Closing balance | 11.9 | 15.6 | 8.1 | 9.4 |
On April 15, 2016, DORO AB acquired all shares of Trygghetssentralen AS in Norway. The cost of the acquisition of SEK 1.2m was charged to operating profit (other external expenses) for the first half year. The purchase price was paid in cash at SEK 29.4m, of which 8.8m related to the settlement of Trygghetssentralen's loans from its previous owner. In Q4, a final cash settlement of SEK 1.1m was paid. Goodwill is linked to the enhanced position in the Care segment in Norway that Trygghetssentralen's sales channel provide, as well as increased expertise in the Care area. On the acquisition date, the headcount was 68 permanent employees and approximately 60 temporary employees. In 2016 the Trygghetssentralen business was integrated with Doro and consequently it is not possible to measure Net Sales and EBIT for the acquired operations isolated.
| Fair value | SEK m |
|---|---|
| Intangible assets | 7.4 |
| Property, plant and equipment | 2.2 |
| Deferred tax asset | 0.5 |
| Inventories | 2.2 |
| Accounts receivable | 6.1 |
| Other receivables, prepaid expenses and accrued income | 2.0 |
| Cash and bank | 1.5 |
| Accounts payable | –1.2 |
| Deferred tax liability | –1.9 |
| Other liabilites, accrued expenses and prepaid income | –5.1 |
| Acquired net assets | 13.7 |
| Goodwill | 16.8 |
| Total purchase consideration | 30.5 |
| Cash in company acquired | –1.5 |
| The acquisition's impact on the Group's cash flow | 29.0 |
On January 30, 2015 acquired Doro AB 63.7 percent of the stock in Caretech AB in Kalix. The remaining 36.3 percent was acquired on 18 February 2015 through an issule of new shares. SEK 3m of the cost of the acquisition was charged two year-2014 earnings, and SEK 0.8m was charged to to year-2015 earnings. The purchase price was paid in cash with SEK 148.1m and SEK 84.4m as a non-cash issue. Goodwill is linked to the enhanced position in the Care segment that CareTech's new sales channels provide, as well as increased expertise in the Care segment for seniors. On the acquisition date, the headcount was 154 Net sales for 2014 amounted to SEK 130.1m with an EBIT of SEK 7.5m.
In 2016 the Caretech business was integrated with Doro and consequently it is not possible to measure Net Sales and EBIT for the acquired operations isolated.
| Fair value | SEK m |
|---|---|
| Intangible assets | 29.7 |
| Tangible fixed assets | 4.1 |
| Deferred tax asset | 5.1 |
| Other financial assets | 0.3 |
| Inventories | 9.9 |
| Accounts receivable | 20.2 |
| Other receivables, prepaid expenses and accrued income | 10.7 |
| Cash and bank | 2.0 |
| Interest bearing debt | –16.0 |
| Accounts payable | –11.9 |
| Deferred tax liability | –3.1 |
| Other liabilites, accrued expenses and prepaid income | –18.5 |
| Acquired net assets | 32.5 |
| Goodwill | 200.0 |
| Total purchase consideration | 232.5 |
| Of which paid bynew share issue | –84.4 |
| Cash in company acquired | –2.0 |
| The acquisition's impact on the Group's cash flow | 146.1 |
| Company acquisition impact on | Group | |
|---|---|---|
| Group cash flow | 2016 | 2015 |
| Caretech AB | 0.0 | –146.1 |
| IVS GmbH | 0.0 | –14.9 |
| Isidor SAS | 0.0 | –0.9 |
| Trygghetscentralen A/S | –29.0 | 0.0 |
| –29.0 | –162.0 |
| The Group, SEK m | 2016 | 2015 |
|---|---|---|
| Opening gross stock | 201.8 | 214.8 |
| Acquisition | 2.2 | 10.1 |
| Change in gross stock | 23.2 | –21.8 |
| Internal profit in stock | 4.0 | –0.1 |
| Translation difference | 2.4 | –1.2 |
| Closing gross stock | 233.6 | 201.8 |
| Opening write-downs of stock | –13.3 | –10.2 |
| Acquisition | 0.0 | –0.2 |
| Change in write-downs of stock | –2.2 | –3.1 |
| Translation difference | –0.2 | 0.2 |
| Closing write-downs of stock 1) | –15.7 | –13.3 |
| Net stock in balance sheet | 217.9 | 188.5 |
1) Acquisition value for the inventory that write-downs of stock of SEK 15.7m (13.3) relates to is based on inventory book value of SEK 46.1m (42.7).
| Parent Company, SEK m | 2016 | 2015 |
|---|---|---|
| Opening gross stock | 129.8 | 163.1 |
| Change in gross stock | 11.5 | –33.3 |
| Closing gross stock | 141.3 | 129.8 |
| Opening write-downs of stock | –9.0 | –6.2 |
| Change in write-downs of stock | –1.8 | –2.8 |
| Closing write-downs of stock 1) | –10.8 | –9.0 |
| Net stock in balance sheet | 130.5 | 120.8 |
1) Acquisition value for the inventory reserve of SEK 10.8m (9.0) is based on inventory book value of SEK 42.7m (42.4).
| Group | Parent Company | |||
|---|---|---|---|---|
| SEK m | 2016 | 2015 | 2016 | 2015 |
| Opening balance | 54.3 | 42.9 | 48.0 | 36.9 |
| Amount released | –75.1 | –61.2 | –65.8 | –53.1 |
| New provisions | 78.7 | 72.7 | 67.7 | 64.2 |
| Translation difference | 0.2 | –0.1 | – | – |
| Closing balance | 58.1 | 54.3 | 49.9 | 48.0 |
| The Group, SEK m | 2016 | 2015 |
|---|---|---|
| Opening balance | 2.9 | 2.8 |
| Amount released | –0.8 | 0.0 |
| New provisions | 0.0 | 0.2 |
| Translation difference | 0.1 | –0.1 |
| Closing balance | 2.2 | 2.9 |
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| SEK m | 2016 | 2015 | 2016 | 2015 | |
| Opening balance | 31.1 | 54.1 | 25.0 | 36.6 | |
| Amount released | –2.4 | –4.7 | 0.0 | –1.2 | |
| New provisions | 3.7 | 8.1 | 2.9 | 0.3 | |
| Unutilized amount cancelled | 0.0 | –27.2 | 0.0 | –11.8 | |
| Reclassification | 0.0 | 0.9 | 0.0 | 1.1 | |
| Translation difference | 0.2 | –0.1 | 0.0 | – | |
| Closing balance | 32.6 | 31.1 | 27.9 | 25.0 |
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Additional royalty expenses | 29.1 | 25.7 | 25.0 | 25.0 |
| Other provisions | 3.5 | 5.4 | 0.0 | 0.0 |
| Closing balance | 32.6 | 31.1 | 25.0 | 25.0 |
Additional royalty expenses consist of expenses that are known but had not been debited at the time of invoicing, and those that are unknown but expected at the time of invoicing. The reserve for additional expenses is charged to cost of goods sold to obtain accurate allocation by period of the gross margin.
The Board of Directors of Doro has adopted a treasury policy that regulates how financial risks are to be identified and managed. Risk Management aims to reduce or eliminate risks. The main objective is to achieve a low risk profile.
Doro AB (Parent Company) has the overall responsibility for the Group´s financial risk management including currency risk management, liquidity management and cash management. Centralisation and coordination enable substantial economies of scale with respect to the terms obtained for financial transactions and financing. The risk to which Doro is exposed are described below..
The Group is primarily exposed to credit risk associated with financial investments and in accounts receivable, as well as counterparty risk associated with foreign exchange hedging. Credit and counterparty risks are managed centrally by the Parent Company Doro AB. Financial derivatives may only purchased from counterparties/issuers within the categories government, municipalities and banks. At 31 December 2016 and 31December 2015 there were no short-term investments.
Accounts receivable amounted to SEK 371.2m (375,2). In recent years Doro has experienced low credit losses (less than 0.5 percent of sales) due to the fact that the main customer group is large business with regular trade. The single largest customer accounts for less than 10 percent of Group sales. In most countries, Doro operates without credit insurance.
| Group | |||
|---|---|---|---|
| 2016 | 2015 | ||
| 275.5 | 356.4 | ||
| 96.5 | 16.1 | ||
| 8.4 | 7.3 | ||
| 380.4 | 379.8 | ||
| –9.2 | –4.6 | ||
| 375.2 | |||
| 371.2 |
| Group | |||||
|---|---|---|---|---|---|
| Impaired accounts receivable | 2016 | 2015 | |||
| Opening balance | –4.6 | –8.0 | |||
| Acquisitions | –0.4 | – | |||
| Expected bad debt losses | –6.7 | –1.7 | |||
| Confirmed bad debt losses | 2.5 | 5.0 | |||
| Translation differences | –0.1 | 0.0 | |||
| Amount reversed | 0.1 | 0.1 | |||
| Closing balance | –9.2 | –4.6 |
Other receivables
Other receivables are not yet due.
At 31 December 2016, the Group had SEK 234.5m (194.6) in interestbearing liabilities, including financial lease agreements for alarm devices within Doro Care, amounting to SEK 24.0m (34.2). In April 2016 a new Revolving Facility Agreement was signed, amounting to SEK 310m. At 31 December 2016, the RCF was amortized to SEK 270m, whereof 210m was utilized.
At 31 December 2016, Group liquidity amounted to SEK 61.1m (43.9). In addtion, the Group also had an untilized bank overdraft facility of SEK 50.0m (45.9).
The overall objective is to meet the short-term financing need of Group operations, while minimizing surplus liquidity. Doro has a minimum liquidity reserve of SEK 20m.
Doro is exposed to foreign exchange risks caused by unfavourable exchange rate fluctuations that may affect sales, earnings and equity. Foreign exchange risk is described below, divided between transaction exposure and translation exposure.
Transaction exposure arises when sales and purchases take place in foreign currencies. Doro has income and expenses in different currencies. Goods are primarily purchased in USD, while sales are commonly in EUR, GBP and the Nordic currencies. In accordance with the treasury policy, forecast net flows are hedged on a quarterly basis for periods for which the price list is set at between 60 to 80 percent. The hedge horizon can thus vary between three to six months. Foreign exchange management is centralised in Doro AB's Finance department, which buys and sells currencies in accordance with the treasury policy. Since 2013, Doro has been applying hedge accounting in accordance with IFRS (see accounting principles for further information).
| Before hedging 31/12/16 |
After hedging 31/12/16 |
Sensitivity given 5% SEK depreciation |
Before hedging 31/12/15 |
After hedging 31/12/15 |
Sensitivity given 5% SEK depreciation |
|
|---|---|---|---|---|---|---|
| NOK | 23.3 | 7.5 | 0.4 | 17.0 | 5.0 | 0.3 |
| EUR | 237.0 | 65.8 | 3.3 | 303.0 | 72.0 | 3.6 |
| GBP | 92.4 | 19.7 | 1.0 | 86.0 | 22.0 | 1.1 |
| USD | –303.2 | –87.6 | –4.4 | –372.0 | –53.0 | –2.7 |
The table shows outstanding transaction exposure at year-end for the hedged period. The hedged period as per the end of December refers to flows through the end of May. The net market value of all outstanding currency forwards as of 31 December 2016 was SEK 9.2m. Of this value, SEK 8.7m related to forwards for transaction exposure, and that were hedge accounted.
Translation exposure arises when foreign assets and liabilities, as well as the income statements of foreign subsidiaries, are translated into SEK upon consolidation. Doro does not hedge the translation exposure.
At year-end, the value of foreign net assets was SEK 184m (152). The division by currency is in the following table.
| Value of foreign assets | 2016 | 2015 |
|---|---|---|
| USD | 9 | 7 |
| NOK | 3 | 3 |
| EUR | 139 | 113 |
| GBP | 26 | 23 |
| HKD | 7 | 6 |
| Total | 184 | 152 |
Interest rate risk is the risk that the Group's net financial income/expense decreases due to rising market interest rates. Doro's existing loan portfolio exclusively comprises loans with variable interest. In 2016, the average interest on borrowings was 2.3 percent. If SEK interest rates increased by one percentage point, Doro's net financial income/expense would deteriorate by approximately SEK 1.5m, based on indebtedness as of 31December 2016.
| Cur | 3 mth.– | 3 yr. | ||||
|---|---|---|---|---|---|---|
| Group, SEK m | rency 0–3 mth. | 1 yr. | 1–3 yr. | or more | Total | |
| Bank loans | SEK | 50.0 | 160.0 | 210.0 | ||
| Currency forwards | EUR | 0.0 | 1.2 | 1.2 | ||
| Currency forwards | USD | 7.3 | –0.9 | 6.4 | ||
| Currency forwards | GBP | 0.3 | 0.9 | 1.2 | ||
| Currency forwards | NOK | 0.1 | 0.3 | 0.4 | ||
| Lease liabilities | SEK | 21.6 | 2.4 | 24.0 | ||
| Total | 7.7 | 75.3 | 162.4 | – | 245.4 |
| Group 2016 | Derivatives held for trading |
Derivatives subject to hedge accounting |
Available for sale assets |
Accounts receivable and loans receivable |
Other financial liabilities |
Carrying amount |
Fair value |
|---|---|---|---|---|---|---|---|
| Accounts receivable | 371.2 | 371.2 | 371.2 | ||||
| Other receivables | 3.6 | 3.6 | 3.6 | ||||
| Foreign exchange derivatives subject to hedge accounting | 12.1 | 12.1 | 12.1 | ||||
| Foreign exchange derivatives held for trading | 0.3 | 0.3 | 0.3 | ||||
| Bank balances | 61.0 | 61.0 | 61.0 | ||||
| Assets | 0.3 | 12.1 | 61.0 | 374.8 | 0.0 | 448.2 | 448.2 |
| Foreign exchange derivatives subject to hedge accounting | 3.2 | 3.2 | 3.2 | ||||
| Liabilities to credit institutions | 234.5 | 234.5 | 234.5 | ||||
| Accounts payable | 254.9 | 254.9 | 254.9 | ||||
| Other liabilities | 169.7 | 169.7 | 169.7 | ||||
| Liabilities | 0.0 | 3.2 | 0.0 | 0.0 | 659.1 | 662.3 | 662.3 |
| Group 2015 | |||||||
| Accounts receivable | 375.2 | 375.2 | 375.2 | ||||
| Other receivables | 9.3 | 9.3 | 9.3 | ||||
| Foreign exchange derivatives subject to hedge accounting | 4.5 | 4.5 | 4.5 | ||||
| Foreign exchange derivatives held for trading | 6.3 | 6.3 | 6.3 | ||||
| Current investments | 0.0 | 0.0 | |||||
| Bank balances | 43.9 | 43.9 | 43.9 | ||||
| Assets | 6.3 | 4.5 | 43.9 | 384.5 | 0.0 | 439.2 | 439.2 |
| Foreign exchange derivatives subject to hedge accounting | 7.3 | 7.3 | 7.3 | ||||
| Liabilities to credit institutions | 194.6 | 194.6 | 194.6 | ||||
| Accounts payable | 286.5 | 286.5 | 286.5 | ||||
| Additional purchase consideration | 2.1 | 2.1 | 2.1 | ||||
| Other liabilities | 128.5 | 128.5 | 128.5 | ||||
| Liabilities | 2.1 | 7.3 | 0.0 | 0.0 | 609.6 | 619.0 | 619.0 |
| Parent Company 2016 | Derivatives held for trading |
Derivatives subject to hedge accounting |
Available for sale assets |
Accounts receivable and loans receivable |
Other financial liabilities |
Carrying amount |
Fair value |
|---|---|---|---|---|---|---|---|
| Accounts receivable | 266.7 | 266.7 | 266.7 | ||||
| Receivables from Group companies | 253.6 | 253.6 | 253.6 | ||||
| Other receivables | 0.7 | 0.7 | 0.7 | ||||
| Foreign exchange derivatives subject to hedge accounting | 12.1 | 12.1 | 12.1 | ||||
| Foreign exchange derivatives held for trading | 0.3 | 0.3 | 0.3 | ||||
| Current investments | 0.0 | 0.0 | |||||
| Bank balances | 43.4 | 43.4 | 43.4 | ||||
| Assets | 0.3 | 12.1 | 43.4 | 521.0 | 0.0 | 576.8 | 576.8 |
| Foreign exchange derivatives subject to hedge accounting | 3.2 | 3.2 | 3.2 | ||||
| Liabilities to credit institutions | 210.0 | 210.0 | 210.0 | ||||
| Accounts payable | 178.1 | 178.1 | 178.1 | ||||
| Receivables from Group companies | 214.6 | 214.6 | 214.6 | ||||
| Other liabilities | 91.9 | 91.9 | 91.9 | ||||
| Liabilities | 0.0 | 3.2 | 0.0 | 0.0 | 694.6 | 697.8 | 697.8 |
| Parent Company 2015 | |||||||
| Accounts receivable | 271.3 | 271.3 | 271.3 | ||||
| Receivables from Group companies | 198.5 | 198.5 | 198.5 | ||||
| Other receivables | 0.2 | 0.2 | 0.2 | ||||
| Foreign exchange derivatives subject to hedge accounting | 4.5 | 4.5 | 4.5 | ||||
| Foreign exchange derivatives held for trading | 6.3 | 6.3 | 6.3 | ||||
| Current investments | 0.0 | 0.0 | |||||
| Bank balances | 7.1 | 7.1 | 7.1 | ||||
| Assets | 6.3 | 4.5 | 7.1 | 470.0 | 0.0 | 487.9 | 487.9 |
| Foreign exchange derivatives subject to hedge accounting | 7.3 | 7.3 | 7.3 | ||||
| Liabilities to credit institutions | 154.1 | 154.1 | 154.1 | ||||
| Accounts payable | 250.0 | 250.0 | 250.0 | ||||
| Receivables from Group companies | 94.9 | 94.9 | 94.9 | ||||
| Other liabilities | 79.1 | 79.1 | 79.1 | ||||
| Liabilities | 0.0 | 7.3 | 0.0 | 0.0 | 578.1 | 585.4 | 585.4 |
Fair value measurement is at the following three levels:
Level 1: According to quoted prices on an active market for the same instrument.
Level 2: Based on directly or indirectly observable market data not included in Level 1.
Level 3: Based on input date not observable on the market.
Derivates and additional purchase considerations at fair value in the table above have been measured according to Level 2.
For other financial instruments, the carrying amount is a reasonable estimate of fair value.
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Bank loans | 159.8 | 121.9 | 160.0 | 120.0 |
| Finance lease liability | 2.4 | 14.4 | 0.0 | 0.0 |
| Total | 162.2 | 136.3 | 160.0 | 120.0 |
| Short-term | ||||
| Bank loans | 50.7 | 33.4 | 50.0 | 30.0 |
| Finance lease liability | 21.6 | 19.7 | 0.0 | 0.0 |
| Overdraft facilities | 0.0 | 4.1 | 0.0 | 4.1 |
| Factoring facilities | 0.0 | 1.1 | 0.0 | 0.0 |
| Total | 72.3 | 58.3 | 50.0 | 34.1 |
| Total liabilities to credit institutes | 234.5 | 194.6 | 210.0 | 154.1 |
The bank loans accrue interest of 1.85 percent + STIBOR. Plan amortisation is on a semi-annual basis. All liabilities to credit institutions are denominated in Swedish kronor.
| Group | Parent Company | |||||
|---|---|---|---|---|---|---|
| Maturity dates of long-term liabilities | 2016 | 2015 | 2016 | 2015 | ||
| 1 –2 years | 62.4 | 48.9 | 60.0 | 35.0 | ||
| 2–5 years | 99.8 | 87.4 | 100.0 | 85.0 | ||
| More than 5 years | 0.0 | 0.0 | 0.0 | 0.0 | ||
| Total | 162.2 | 136.3 | 160.0 | 120.0 |
Helmut Schweiger, owner of 4.4 percent of Doro, had a liability to Doro amounting to SEK 1.9m (6.0) relating to tax expenses for the period before Doro acquired IVS GmbH from him. The parties have agreed that Helmut Schweiger pays the liability when the Group settles the corresponding liability with the German tax authority. The receivable from Helmut Schweiger and the corresponding liability to the German tax authority, is denominated in EUR. The receivable is recognized as other receivables, and the liability as other provisions. Helmut Schweiger is liable for compensating the company for all expenses including potential interest that is charged by the tax authority.
No other related party transactions occured in the year, apart from salaries and remunerations in Note 5.
On 1 February 2017, Robert Puskaric became Doro's CEO, stationed in Lund, Sweden.
The Board of Directors has decided to propose a dividend of SEK 1 per share for 2016. The company's liquidity and cash flow improved progressively through the year, and accordingly, the company has a secure financial base and is well prepared to finance growth through investment, either organically or through acquisitions.
The following funds in the parent company are at the disposal of the AGM:
| Share premium reserve | 158,614,455.70 |
|---|---|
| Fair value reserve | 1,580,754.00 |
| Profit brought forward | 106,902,006.98 |
| Loss for the year | –1,536,883.00 |
| 265,560,333.68 |
The Board of Directors proposes that the funds available to the AGM of SEK 265,560,333.68 are appropriated so that a dividend of SEK 23,238,255.00 is paid, and the remaining amount of 242,322,078.68 is carried forward.
Guidelines for alternative key performance indicators for companies with securities listed on a regulated market place within the EU have been issued by ESMA (the European Securities and Markets Authority). These guidelines should be applied to alternative key performance indicators used effective 3 July 2016.
The Annual Accounts refer to a number of non-IFRS earnings measures used to help investors and managers analyse the company. We review the various non-IFRS earnings measures used as a complement to the Financial information reported in accordance with IFRS.
Review of financial earnings measures not stated in the IFRS regulations.
| Non-IFRS earnings measure |
Description | Reason for use of measure |
|---|---|---|
| Restructuring expenses | Expenses for restructuring and personnel expenses related to restructuring. |
This measure illustrates the specific expenses arising in tandem with restructuring a specific operation, which contributes to better understanding of the underlying cost level in operating activities. |
| Gross margin, % | Net sales less the expense for goods for resale as a percentage of net sales. |
Gross margin is an important measure to illustrate margin before personnel expenses and other external expenses. |
| Sales growth comparable units, % |
Net sales for the period less net sales for companies acquired in the year less net sales for the corresponding period of the previous year as a percentage of net sales for the corresponding period of the previous year. |
Sales growth in comparable units indicates the group's organic growth excluding business combinations. |
| Equity/assets ratio | Equity expressed as a percentage of total assets. | Traditional measured to illustrate financial risk, expressed as the portion of total capital that is financed by shareholders. |
| Return on average equity | Rolling 12-month earnings after financial items and tax divided by average equity. |
Illustrates which return is generated on shareholders' invested capital, from a shareholder perspective. |
| Capital employed | Total assets less non-interest-bearing liabilities and cash and bank balances. |
This measure illustrates how much total capital is used in operations, and accordingly, is one component for measuring returns from operations. |
| Return on average capital employed |
Rolling 12-month operating profit, divided by quarterly average capital employed. |
The central measure for measuring the return on all the capital tied up in operations. |
| Recurring revenue | Net sales in the coming 12 months on subscription contracts currently in place. |
This measure illustrates contracted revenues for the coming 12-month period. |
| Number of subscribers | Number of subscription customers linked to alarm call centres. | This measure illustrates the volume of customers in the alarm call centre operation. |
| Debt/equity ratio | Interest-bearing liabilities divided by equity. | This measures the company's financial risk (interest-rate sensitivity). |
| Dividend yield | Dividend per share divided by year-end share price. | Return measure on investing in the company's share. |
| P/E ratio | Share price at year-end divided by earnings per share after tax. | Measure to evaluate the price of the company's share. |
| Capital turnover rate | Sales for the year divided by average total assets. | This measure illustrates how much capital operations require, i.e. how capital intensive they are. |
| Cash conversion rate, % | Cash flow from operating activities as a percentage of operating profit. |
This measure illustrates the share of earnings that affect cash flow. |
Computation of financial earnings measures not in IFRS regulations
| 2016 | 2015 | |
|---|---|---|
| Capital employed | ||
| Total assets | 1,287.9 | 1,198.9 |
| Non-interest-bearing liabilities | 533.5 | 522.3 |
| Cash and cash equivalents | 61.0 | 43.9 |
| Reported capital employed | 693.4 | 632.7 |
| Debt/equity ratio | ||
| Interest-bearing liabilities | 234.5 | 194.6 |
| Equity | 520.0 | 482.0 |
| Reported debt/equity ratio | 0.45 | 0.40 |
| Rate of capital turnover | ||
| Net sales | 1,959.1 | 1,828.9 |
| Average total assets | 1,243.4 | 1,025.8 |
| Reported rate of capital turnover | 1.6 | 1.8 |
The undersigned hereby certify that the consolidated accounts and the annual accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the EU and according to generally accepted accounting practice, and give a true generally accepted accounting practice, of the Group's and Parent Company's financial position and results of operations, and the statutory administration report of the Group and the Parent Company give a true and fair view of the progress of the Group's and Parent Company's operations, financial position and results of operations, and reviews the significant risks and uncertainty factors faced by Group companies.
Lund, Sweden, April 3, 2017
Acting Chairman of the Board
Henri Österlund Lena Hofsberger Karin Moberg Acting Vice Chairman of the Board Board member Board member
Jonas Mårtensson Robert Puskaric
Board member CEO
Our auditor´s report was submitted on April 3, 2017
Ernst & Young AB
Stefan Engdahl
Authorized Public Accountant
To the general meeting of the shareholders of Doro AB (publ), corporate identity number 556161-9429
We have audited the annual accounts and consolidated accounts of Doro AB (publ) except for the corporate governance statement on pages 25–29 for the year 2016. The annual accounts and consolidated accounts of the company are included on pages 22–56 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 31 December 2016 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 31 December 2016 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. Our opinions do not cover the corporate governance statement on pages 25–29.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.
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.
Goodwill and participations in group companies
The carrying value of goodwill as of 31 December 2016 amounts to 372.1 MSEK in the consolidated balance sheet, which represents 29% of total assets. Participations in group companies amounts to 309.9 MSEK in the parent company's balance sheet, which represents 27% of total assets. The company performs an impairment test annually, and when there is an indication of impairment, to ensure the carrying value does not exceed the estimated recoverable value. The recoverable amount is determined by calculating the present value of future cash flows for the lowest cashgenerating unit. Future cash flows are based on management's business plans and forecasts, and includes a number of assumptions, including earnings performance, growth, investment requirements and the discount rate. For participations in group companies the recoverable amount is the higher of fair value and value in use.
Changes in assumptions have a major impact on the calculation of the recoverable amount and the assumptions that the company applied will be of significant importance for the assessment whether an impairment requirement exists. We have therefore assessed the accounting for goodwill and participations in group companies as a key audit matter of the audit.
The impairment test for 2016 did not result in any impairment. A description of the impairment test is shown in Note 7 "Intangible fixed assets" and in Note 1 "Accounting principles" section "Impairment" and section "Critical accounting matters and uncertainty in estimates".
In our audit, we evaluated and tested management's process for preparing the impairment test, including evaluating past accuracy of forecasts and assumptions. We also made comparisons with other companies in order to
evaluate the reasonableness of future cash flows and growth assumptions and with the help of our valuation specialists examined the selected discount rate and assumptions about long-term growth. We have also reviewed the company's model and method for preparing the impairment test and assessed the company's sensitivity analysis. We also assessed whether the disclosures in the financial statements are appropriate.
This document also contains other information than the annual accounts and consolidated accounts and is found on pages 2–21 and 60–63. 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.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
We must inform the Board of Directors of, among other matters, the planned scope and timing of the audit. We must also inform of significant audit findings during our audit, including any significant deficiencies in internal control that we identified.
We must also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the annual accounts and consolidated accounts, including the most important assessed risks for material misstatement, and are therefore the key audit matters. We describe these matters in the auditor's report unless law or regulation precludes disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in the auditor's report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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 Doro AB (publ) for the year 2016 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 fulfill 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.
As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgment and maintain professional skepticism throughout the audit. The examination of the administration and the proposed appropriations of the company's profit or loss is based primarily on the audit of the accounts. Additional audit procedures performed are based on our professional judgment with starting point in risk and materiality. This means that we focus the examination on such actions, areas and relationships that are material for the operations and where deviations and violations would have particular importance for the company's situation. We examine and test decisions undertaken, support for decisions, actions taken and other circumstances that are relevant to our opinion concerning discharge from liability. As a basis for our opinion on the Board of Directors' proposed appropriations of the company's profit or loss we examined the Board of Directors' reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal is in accordance with the Companies Act.
The Board of Directors is responsible for that the corporate governance statement on pages 25–29 has been prepared in accordance with the Annual Accounts Act.
Our examination of the corporate governance statement is 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 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts of the annual accounts and consolidated accounts and are in accordance with the Annual Accounts Act.
Malmö, April 3, 2017 Ernst & Young AB
Stefan Engdahl Authorized Public Accountant
| 2016 | 2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| SEK m | Q 1 | Q 2 | Q 3 | Q 4 | Q 1 | Q 2 | Q 3 | Q 4 |
| QUARTERLY PROFIT TREND | ||||||||
| Income/net sales | 413 | 474 | 473 | 599 | 338 | 424 | 445 | 623 |
| Capitalised product development/ other income |
3 | 8 | 1 | 5 | 2 | 2 | 2 | 3 |
| Operating costs | –394 | –461 | –441 | –560 | –352 | –386 | –407 | –554 |
| Operating profit/loss before depreciation |
22 | 21 | 33 | 45 | –12 | 40 | 40 | 72 |
| Planned depreciation and write-downs |
–13 | –17 | –19 | –25 | –11 | –11 | –10 | –13 |
| Operating profit/loss after depreciation |
9 | 4 | 14 | 20 | –23 | 29 | 30 | 59 |
| Net financial items | –1 | –3 | 0 | –4 | –5 | –2 | –1 | –2 |
| Profit/loss after financial items | 8 | 1 | 14 | 16 | –28 | 27 | 29 | 57 |
| Taxes | –2 | 0 | –1 | –5 | 6 | –6 | –7 | –14 |
| Net profit/loss | 6 | 1 | 13 | 11 | –22 | 21 | 22 | 43 |
| QUARTERLY BALANCE SHEET FOR THE GROUP |
||||||||
| Intangible assets | 445 | 469 | 473 | 464 | 428 | 433 | 440 | 443 |
| Property, plant and equipment | 8 | 10 | 10 | 13 | 10 | 7 | 7 | 8 |
| Financial assets | 13 | 12 | 8 | 7 | 1 | 1 | 14 | 15 |
| Deferred Tax Asset | 18 | 18 | 21 | 12 | 19 | 19 | 15 | 16 |
| Inventories | 231 | 212 | 240 | 218 | 237 | 185 | 225 | 188 |
| Current receivables | 378 | 426 | 429 | 513 | 322 | 325 | 387 | 485 |
| Cash and bank balances | 51 | 34 | 23 | 61 | 52 | 54 | 43 | 44 |
| Total assets | 1,143 | 1,180 | 1,204 | 1,288 | 1,069 | 1,024 | 1,131 | 1,199 |
| Shareholders' equity | 486 | 496 | 511 | 520 | 409 | 421 | 449 | 482 |
| Long -term liabilities | 218 | 239 | 192 | 201 | 225 | 188 | 187 | 170 |
| Current liabilities | 439 | 445 | 501 | 567 | 435 | 415 | 495 | 546 |
| Total shareholders' equity and liabilities |
1,143 | 1,180 | 1,204 | 1,288 | 1,069 | 1,024 | 1,131 | 1,198 |
| 2016 | 2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| SEK m | Q 1 | Q 2 | Q 3 | Q 4 | Q 1 | Q 2 | Q 3 | Q 4 |
| QUARTERLY CASH FLOW | ||||||||
| Operating profit/loss after financial items |
7 | 3 | 13 | 16 | –23 | 27 | 28 | 56 |
| Depreciation accrding to plan | 13 | 17 | 19 | 25 | 11 | 10 | 10 | 13 |
| Other non cash flow items | 11 | –5 | –2 | –5 | 11 | –4 | 2 | –7 |
| Taxes | –9 | –10 | –8 | 0 | –10 | –6 | –3 | 1 |
| Change in working capital | –55 | 2 | 15 | 13 | –34 | 38 | –4 | –31 |
| Cash flow from operating activities | –32 | 7 | 37 | 50 | –45 | 65 | 33 | 32 |
| Investments | –14 | –45 | –18 | –20 | –167 | –16 | –15 | –23 |
| Cash flow from investing activities | –14 | –45 | –18 | –20 | –167 | –16 | –15 | –23 |
| Change in interest-bearing liabilities | 53 | 20 | –31 | 8 | 186 | –47 | –31 | –6 |
| Cash flow from financing activities | 53 | 20 | –31 | 8 | 186 | –47 | –31 | –6 |
| Translation differences and other | 0 | 1 | 1 | 0 | 0 | 0 | 1 | –2 |
| Cash and cash equivalents (change in cash and cash equivalents) |
7 | –17 | –11 | 38 | –26 | 2 | –12 | 1 |
| SEK m | 2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|
| INCOME STATEMENT | |||||
| Net sales | 1,959.1 | 1,828.9 | 1,276.2 | 1,142.5 | 837.5 |
| Operating profit/loss before depreciation and write-downs, EBITDA |
121.4 | 139.2 | 122.6 | 113.7 | 83.1 |
| Operating profit/loss after depreciation and write-downs, EBIT |
47.7 | 95.2 | 79.7 | 78.9 | 61.4 |
| Net financial items | -8.3 | –10.8 | –0.4 | –0.7 | –11.9 |
| Profit/loss after financial items | 39.4 | 84.4 | 79.3 | 78.2 | 49.5 |
| BALANCE SHEET | |||||
| Fixed assets | 496.2 | 481.6 | 222.3 | 227.8 | 93.2 |
| Current assets | 730.7 | 673.4 | 552.2 | 397.2 | 282.1 |
| Cash and bank balances | 61.0 | 43.9 | 78.2 | 123.9 | 141.1 |
| Shareholders' equity | 520.0 | 482.0 | 334.8 | 287.0 | 209.0 |
| Long-term liabilities | 200.7 | 170.3 | 59.6 | 138.3 | 73.1 |
| Current liabilities | 567.2 | 546.6 | 458.3 | 323.6 | 234.3 |
| Balance sheet total | 1,287.9 | 1,198.9 | 852.7 | 748.9 | 516.4 |
| KEY FIGURES (Definitions on page 60) |
|||||
| RETURN RATIOS | |||||
| Average return on capital employed, % |
6.8 | 17.1 | 32.8 | 52.2 | 94.5 |
| Average return on shareholders' equity, % |
6.2 | 15.6 | 18.7 | 24.4 | 27.4 |
| Earnings per share, after taxes paid, SEK |
0.56 | 2.92 | 2.90 | 3.68 | 2.34 |
| Cash conversion rate | 129 | 90 | 26 | 140 | 65 |
| SEK m | 2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|
| MARGINS | |||||
| Operating margin, EBITDA, % | 6.2 | 7.6 | 9.6 | 10.0 | 9.9 |
| Operating margin, EBIT, % | 2.4 | 5.2 | 6.2 | 6.9 | 7.3 |
| Net margin, % | 2.0 | 4.6 | 6.2 | 6.8 | 5.9 |
| CAPITAL TURNOVER | |||||
| Capital turnover rate (multiple) | 1.6 | 1.8 | 1.6 | 1.8 | 1.7 |
| FINANCIAL DATA | |||||
| Equity/assets ratio, % | 40.4 | 40.4 | 39.3 | 38.3 | 40.5 |
| Cash flow from operating activities | 61.7 | 85.7 | 22.5 | 110.5 | 40.2 |
| Number of employees | 500 | 358.0 | 172.0 | 149.0 | 81.0 |
| Cash and cash equivalents (incl. unused credit) |
111.0 | 89.8 | 86.7 | 123.9 | 172.6 |
| Investments (incl. acquisitions) |
96.4 | 220.7 | 51.2 | 146.7 | 27.3 |
Number of shares at the end of the month divided by the number of months.
Average number of shares adjusted for the dilution effect from warrants is calculated as the difference between the assumed number of shares issued at the redemption price and the assumed number of shares issued at the average share price for the period.
Total assets less non-interest-bearing liabilities and cash and cash equivalents.
Net sales for the year divided by the average balance sheet total.
Cash flow from operating activities divided by EBIT.
CASH FLOW Cash flow from operating activities.
CASH FLOW PER SHARE Cash flow from operating activities divided by the average number of shares.
EARNINGS PER SHARE AFTER TAX Profit/loss after tax divided by the average number of shares for the period.
Profit/loss after financial items divided by the average number of shares for the period, after dilution.
Profit/loss after taxes paid divided by the average number of shares for the period.
Profit/loss after taxes paid divided by the average number of shares for the period, after dilution.
Profit/loss before tax divided by the average number of shares for the period.
Profit/loss before tax divided by the average number of shares for the period, after dilution.
Operating profit/loss (after depreciation/amortisation) as a percentage of sales for the year.
Profit/loss before depreciation/amortisation as a percentage of sales for the year.
Shareholders' equity at the end of the period divided by the number of shares at the end of the period.
Shareholders' equity at the end of the period divided by the number of shares at the end of the period, after dilution.
Shareholders' equity as a percentage of the balance sheet total.
Profit/loss after net financial items plus interest expenses divided by financial expenses.
Share price at the end of the period multiplied by the number of shares at the end of the period.
Interest-bearing liabilities minus cash position as a percentage of shareholders' equity.
Profit/loss after financial items as a percentage of sales for the year.
Number of shares at the close of the period.
The number of shares at the end of the period adjusted for the dilution effect from warrants is calculated as the difference between the assumed number of shares issued at the redemption price and the assumed number of shares issued at the average share price at the end of the period.
Shareholders' equity divided by the number of shares at year-end.
Operating profit/loss divided by the quarterly average capital employed excluding cash and bank balances.
Profit/loss after financial items and tax divided by average shareholders' equity.
Closing price at the end of the period.
| 16 Dec | Doro appoints Robert Puskaric as new CEO and President |
|---|---|
| 8 Dec | Doro centers top management team to Lund, prepares CEO change and changes guidance |
| 25 Oct | Doro AB's Nomination Committee for the 2017 Annual General Meeting |
| 18 Oct | Doro's Chairman resigns |
| 17 Oct | Doro Care has today signed a new framework agreement with SKI |
| 14 Oct | Doro to present its interim report for July – September 2016 via audiocast and telephone conference |
| 30 Sep | The administrative court has issued its judgement on the appeal regarding a new framework agreement with SKL. This judgment can still be appealed. |
| 8 Sep | New organization and CEO in Doro Care |
| 5 Sep | Doro 8031 launched in a joint offer with Telekom Deutschland in the German market |
| 28 Jul | Doro to present its interim report for April – June 2016 via webcast and telephone conference |
| 6 Jul | Revised outlook for 2016 |
| 3 May | Press release from Doro AB's Annual General Meeting 2016 |
| 19 Apr | Doro to present its interim report for January – March 2016 via webcast and telephone conference |
| 15 Apr | Doro's acquisition of Trygghetssentralen |
| 31 Mar | Notice of annual general meeting 2016 |
| 2 Mar | Consumer Cellular launches a new Doro smartphone |
| 29 Feb | Bell Canada launches Doro smartphones |
| 18 Feb | Doro acquires Trygghetssentralen in Norway in order to strengthen its international presence in telecare service |
| 17 Feb | Year-end report 2015 |
| 3 Feb | Doro to present its Year-end report 2015 via webcast and telephone conference |
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