Annual Report • Feb 24, 2017
Annual Report
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The forward-looking statements regarding the Group's future financial situation involve factors of uncertainty and risk, which could cause actual developments to deviate from the expectations indicated. Such forward-looking statements are not guarantee of future performance. They involve risk and uncertainty, and the actual performance may deviate materially from that expressed in such forward-looking statements due to a variety of factors. The principal factors of uncertainty and risk are dealt with in further detail under the heading "risk management" on page 19 and in note 6.2, "Financial instruments and risk" in this annual report. Readers are warned not to rely unduly on the forward-looking statements. The Group's revenue will continue to be impacted by relatively few, but large system orders, and such orders are expected to be won at relatively irregular intervals. The terms agreed in the individual license agreements will determine the impact on the order book and on license revenue recognized for any specific financial reporting period. Accordingly, license revenue is likely to vary considerably from one quarter to the next. Unless required by law or corresponding obligations, SimCorp A/S in under no duty and undertakes no obligation to update or revise forward-looking statements after the distribution of this document, whether as a result of new information, future events or otherwise.
Looking back on 2016, I am pleased to say that our results are satisfactory. We have delivered above our initial growth and earnings targets for the year and in line with our revised non-GAAP¹ and GAAP guidance. We are performing in line with our Vision 2020 to grow SimCorp by more than 10% annually over the long term and to continually improve our profit margin.
2016 has been a year of strong growth for SimCorp, achieving non-GAAP revenue of EUR 307.7m – an improvement of 12.4% measured in local currencies – and a non-GAAP operating profit (EBIT) of EUR 80.0m – an improvement of the non-GAAP EBIT margin by 1.4%. We have achieved top-line growth rates above the overall projected market growth2 as a result of securing a number of new, large clients. Particularly in North America, we are building momentum and proudly welcoming world-leading asset manager Franklin Templeton, among others, to the extended SimCorp family.
We have yet again improved our profitability while investing around 20% of our annual revenue back into our platform development to ensure we can continue to deliver on our value proposition of 'One System for a Complex World'. Our continued investment into one fully integrated platform is high compared to that of our competitors' and our results prove the sustainability of this strategy.
As another testimony to our one-system strategy, we have delivered strong results despite
" a market that is characterized by long and complex decision processes. We also continue to see consolidation among the leading players in the industry, which is leaving many asset managers struggling with outdated solutions and legacy systems that are not able to meet the changing demands of a complex world.
Our growth has not only been generated in North America, we have also won new large clients in a mature market like Sweden and in new markets like Italy and Spain. Hence, we continue to see growth potential across all our markets, but with the single biggest growth potential in North America, where, so far, we only have a 5% market share.
In 2017, we will continue to pursue the market opportunities we see in Italy and Spain, establishing new operations in the two countries and forming a new 'Southern Europe' regional entity also encompassing operations in France. To ensure a consolidated, more efficient operational setup, we will also form a new 'Northern Europe' entity by merging the current Nordic and Benelux operations.
We are confident that our value proposition will allow us to further expand our position and win additional market share across all markets in the near term.
The core of our business model is to offer solutions that meet our current and future clients' changing demands. We continue to future-proof the SimCorp Dimension platform by investing in the technology behind the platform and the functionality of the platform itself.
Keeping a close relationship and an open dialogue with our clients about their challenges and ambitions is essential for us to be able to offer the best possible support. Maintaining a high client satisfaction (Net Promotor Score) is part of our company culture and our efforts over the past years have moved us up above the industry benchmark, achieving a position as best-in-class in 2016.
Our results and the ability to realize future potential strongly depend on our talented employees. I'm proud to say that we have seen a dedicated effort from everyone in the organization to achieve our goals in 2016. In the past year, we have grown our organization by more than 100 employees to support our growth ambitions, keeping a strong focus on maintaining operational momentum.
SimCorp has a strong ambition to be an attractive employer and be able to attract and retain the best people in the industry. To achieve this, we offer personal and professional development opportunities, international career challenges, management excellence programs, and competitive benefits; constantly developing our offering within all these areas. Attracting and retaining talent will always be a high priority for SimCorp.
In 2015, we launched our Vision 2020 and, as already mentioned, our growth and profitability in 2016 have met targets. However, the demand for solutions is changing fast
We are building momentum in North America, and we are in line with our Vision 2020 to grow SimCorp by double digits annually over the long term and improve our profitability margin year on year.
307.7m 295.9m Non-GAAP revenue Revenue
and the vendors that can keep up with the pace of change will be the winners. To stay competitive, we continue to evaluate our results and fine-tune our strategic targets.
In 2017, we will keep North America at the center of our growth strategy and we expect solid results. In addition, we will maintain our uniquely integrated front office solution, our ASP delivery offering, and our alternative investments solution as strategic priorities.
In 2017, we will start offering standard platforms. We believe that standard platforms will not only shorten the implementation time and minimize project risk, but also provide an increased confidence in the selection process and shorten the time to value for our clients.
We believe this new strategic initiative will be a competitive differentiator, as it will enable us to 25.8% 22.8% EBIT margin measured in local currencies
increase solution quality and attract clients who prefer to embark on an implementation project with a fixed scope, deadline, and price. New and existing clients who choose a standard platform will always be able to request a reconfiguration of this platform at a later stage.
Non-GAAP EBIT margin measured in local currencies
While adding new initiatives like standard platforms, looking back, our strategy and business model have been validated by satisfactory 2016 results. In 2017, we are determined to stay the course and, given unchanged macroeconomic conditions, we expect to meet our Vision 2020 of long-term double-digit annual growth and improved profitability.
Klaus Holse Chief Executive Officer
2016 was an exciting and satisfactory year for SimCorp and as Chairman of the Board, I am pleased with the company's development. The results proved that despite challenging market trends, SimCorp has been able to increase its order intake and revenue growth.
When we look at the investment management industry, we see an industry that is increasingly challenged by globalization, increasing data volumes, regulation, multi-asset class strategies,
and new and more advanced investment instrument types.
The 1,200 largest global asset managers, who are at the forefront of this complex world, are to an increasing degree recognizing that SimCorp's integrated one-system offering is designed to help meet exactly these challenges. In 2016, we extended the SimCorp family by welcoming new members from the world's top global asset managers and we expanded our cooperation with many of our existing clients.
I am very pleased to see that this increased activity is happening both in North America, which is a key growth market, and in our more mature markets. Our key strategic priorities for front office, alternative investments, and ASP delivery will ensure that we future-proof
" I believe that SimCorp's value proposition 'One System for a Complex World' guides the company in its pursuit of the ambition of becoming the number one provider of investment management solutions globally.
JESPER BRANDGAARD Chairman of the Board of Directors our offering and remain a preferred business partner for the world's top asset managers.
In our annual review of SimCorp's financial targets and strategic priorities, we continue to see a strong match between the industry outlook and SimCorp's offering. This means that, with some minor adjustments of the key strategic priorities, we remain confident in our Vision 2020. In 2017, we will build on our success by constantly focusing on executing the strategy behind this vision. We are confident that the organization has the capabilities required to do so.
According to our dividend policy, we intend to pay dividends of at least 50% of the annual net result. Based on the financial performance in 2016, the Board of Directors intends to propose to the shareholders at the annual general meeting a dividend of EUR 33.3m, equal to DKK 6.25 per share of DKK 1, for the financial year 2016.
Furthermore, based on the current business outlook and the cash position, we expect to initiate a share buyback program again in 2017. We will introduce a new "Safe Harbour" program, acquiring treasury shares for a forecasted amount of EUR 35m during the period from the release of the Annual Report 2016 to the release of the Annual Report 2017 in February 2018.
The Board of Directors is responsible for ensuring that the Board and the Executive SIMCORP INTENDS TO DELIVER CASH RETURNS TO ITS SHAREHOLDERS THROUGH DIVIDEND PAYOUTS AND SHARE BUY-BACK PROGRAMS. THE GUIDING PRINCIPLE IS THAT EXCESS CAPITAL AFTER FUNDING THE COMPANY'S STRATEGIC GROWTH INITIATIVES INCLUDING INVESTMENTS SHOULD BE RETURNED TO THE SHAREHOLDERS.
Management Board possess the right competencies to further develop SimCorp and promote the long-term interest of the company and its shareholders. To ensure the completeness of the competences of the Board of Directors, the Board will at the coming annual general meeting propose the election of Adam Warby, currently CEO at Avanade, and the re-election of the other existing Board members. If elected, the Board of Directors will then consist of nine members, which we believe will enable an appropriate distribution of tasks and ensure an effective and swift decision-making process.
To facilitate long-term succession planning for the Board of Directors and to focus on capacity building for the future, it is proposed to establish a Nomination Committee following the annual general meeting, comprising the Chairman, Vice-chairman, one shareholder-elected member, and one employee-elected member.
At the last general assembly in March 2016, our proposal for ensuring a higher degree of retention on the Executive Management Board was withdrawn. Based on the feedback from a number of shareholders and to align with international corporate governance guidelines, we have revised the proposal, so it allows the Executive Management Board to convert their cash bonus to restricted stock units at a 50% discount compared to the original proposal of a 67% discount.
I would like to thank everyone at SimCorp for contributing to our 2016 performance. I would also like to express my appreciation to our shareholders and business partners for their trust and co-operation. In particular, I extend my gratitude to our loyal SimCorp Dimension and SimCorp Coric clients, new as well as existing ones, who continue to place their trust and business with SimCorp, operating on our SimCorp Dimension and SimCorp Coric platforms.
Jesper Brandgaard Chairman of the Board of Directors
EUR 28.5m Paid dividends
142.9% Total payout ratio
| 2012 | 2013 | 2014 | 2015 | 2016 | ||
|---|---|---|---|---|---|---|
| EUR/DKK rate of exchange at 31 December | 7,4604 | 7,4603 | 7,4436 | 7,4625 | 7,4344 | |
| ORDERS, EUR'000 | ||||||
| Order book value | 14,400 | 13,829 | 16,676 | 24,117 | 44,764 | revenue 320 |
| Order intake | 49,116 | 42,825 | 43,865 | 70,697 | 85,056 | 300 |
| INCOME STATEMENT, EUR'000 | 280 260 |
|||||
| Revenue | 209,190 | 225,129 | 241,069 | 277,927 | 295,930 | 240 220 |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 50,650 | 57,085 | 61,044 | 74,227 | 71,583 | 200 |
| Operating profit (EBIT) | 46,915 | 54,236 | 57,263 | 71,038 | 68,223 | 180 160 |
| Financial items, net | 81 | -230 | 253 | -1,938 | -630 | 140 120 |
| Profit before tax | 46,996 | 54,006 | 57,516 | 69,100 | 67,593 | 100 |
| Profit for the year | 34,474 | 39,336 | 41,583 | 52,584 | 50,992 | 80 60 |
| ADJUSTED NON-GAAP STATEMENT, EUR'000 | 40 20 |
|||||
| Adjusted non-GAAP revenue | 209,190 | 225,129 | 241,069 | 277,927 | 307,691 | 0 |
| Adjusted non-GAAP profit from operations (EBIT) | 46.915 | 54,236 | 57,263 | 71,038 | 79,983 | |
| BALANCE SHEET, EUR'000 | ||||||
| REVENUE Share capital |
6,045 | 5,844 | 5,575 | 5,575 | 5,575 | EARNINGS AND PROFITABILITY |
| Equity | 85,864 | 71,566 | 73,380 | 89,820 | 72,571 | |
| Property, plant and equipment Total revenue EURm |
Revenue, signed at 5,213 |
4,839 | 4,635 | 4,333 | 4,779 | |
| Non-GAAP Cash and cash equivalents revenue |
1 January coming year 58,897 |
47,106 | 37,995 | 43,344 | 31,590 | |
| 320 Total assets |
125,791 | 117,469 | 127,807 | 149,529 | 146,928 | 80 |
| 300 CASH FLOW, EUR'000 280 |
75 70 |
|||||
| 260 Cash flow from operating activities 240 |
46,665 | 47,447 | 44,390 | 54,206 | 65,418 | 65 60 |
| 220 Cash flow from investing activities, net 200 |
-766 | -2,843 | -8,908 | -2,625 | -4,309 | 55 50 |
| - investing in intangible assets 180 |
-242 | -76 | -377 | -277 | -1,644 | 45 |
| 160 - investing in property, plant and equipment 140 |
-558 | -2,331 | -2,054 | -2,029 | -2,973 | 40 35 |
| 120 Cash flow from financing activities |
-35,362 | -55,850 | -46,524 | -46,422 | -72,856 | 30 25 |
| 100 Net change in cash and cash equivalents 80 |
10,537 | -11,246 | -11,042 | 5,159 | -11,747 | 20 |
| 60 EMPLOYEES 40 |
15 10 |
|||||
| 20 Average number of employees 0 |
1,075 | 1,093 | 1,187 | 1,205 | 1,275 | 5 0 |
EURm EBIT Non-GAAP EBIT
| 2012 | 2013 | 2014 | 2015 | 2016 | |
|---|---|---|---|---|---|
| FINANCIAL RATIOS | |||||
| EBIT margin (%) | 22.4 | 24.1 | 23.8 | 25.6 | 23.1 |
| ROIC (return on invested capital) (%) | 124.0 | 158.8 | 146.3 | 136.0 | 121.3 |
| Debtor turnover rate | 7.8 | 8.6 | 7.5 | 8.1 | 7.8 |
| Equity ratio (%) | 68.3 | 60.9 | 57.4 | 60.1 | 49.4 |
| Return on equity (%) | 38.7 | 46.8 | 53.1 | 60.2 | 57.5 |
| Adjusted non-GAAP EBIT margin (%) | 22.4 | 24.1 | 23.8 | 25.6 | 26.0 |
| SHARE PERFORMANCE | |||||
| Basic earnings per share - EPS (EUR) | 0.80 | 0.93 | 1.02 | 1.31 | 1.28 |
| Diluted earnings per share - EPS-D (EUR) | 0.79 | 0.92 | 1.00 | 1.29 | 1.26 |
| Cash flow per share - CFPS (EUR) | 1.08 | 1.13 | 1.08 | 1.35 | 1.64 |
| Book value per share at year end - BVPS (EUR) | 2.02 | 1.73 | 1.81 | 2.24 | 1.84 |
| Dividend per share - DPS (EUR) | 0.40 | 0.47 | 0.54 | 0.60 | 0.71 |
| Dividend per share - DPS (DKK) | 3.00 | 3.50 | 4.00 | 4.50 | 5.25 |
| Dividend payout (%) | 52.5 | 51.9 | 53.6 | 47.6 | 57.5 |
| Total payout (%) | 123.9 | 160.0 | 112.0 | 86.9 | 142.9 |
| MARKET VALUE RATIOS | |||||
| Share price at year end - EUR | 16.94 | 28.62 | 21.83 | 51.99 | 46.3 |
| Share price at year end - DKK | 126.40 | 213.50 | 162.50 | 388.00 | 344.20 |
| Price/book value per share - P/BV (EUR) | 8.4 | 16.5 | 12.0 | 23.2 | 25.2 |
| Diluted price earnings (P/E Diluted) | 20.9 | 30.3 | 21.2 | 39.2 | 36.8 |
| Price cash flow - share price/CFPS - P/CF | 15.6 | 25.4 | 20.1 | 38.6 | 28.3 |
| Share capital (m) | 45.0 | 43.5 | 41.5 | 41.5 | 41.5 |
| Avarage number of shares (m) | 43.1 | 42.1 | 40.9 | 40.2 | 40.0 |
| Avarage number of shares - diluted (m) | 43.6 | 42.7 | 41.5 | 40.9 | 40.5 |
| Market capitalization - EURm | 721 | 1,183 | 884 | 2,087 | 1,827 |
EARNINGS AND PROFITABILITY
RETURN ON EQUITY
Financial highlights and key ratios are defined and calculated in accordance with the Danish Finance Society's 'Recommendations and Financial ratios 2015'. Earnings per share (EPS) and Diluted earnings per share (EPS-D) are measured according to IAS 33. Refer to page 69 for further details.
| FINANCIAL HIGHLIGHTS | OPERATIONAL HIGHLIGHTS | ||
|---|---|---|---|
| 25.8% | Non-GAAP EBIT margin measured in local currencies SimCorp reported non-GAAP EBIT of EUR 80.0m, an increase of EUR 9.0m relative to 2015. The non-GAAP EBIT margin measured in local currencies was 25.8%. The profit for the year was EUR 51.0m. |
182 | SimCorp Dimension clients Twelve new SimCorp Dimension solutions were signed in 2016 bringing the total number of SimCorp Dimension clients up to 182 corresponding to a global market share of 15%. |
| EUR 68.2m | EBIT SimCorp generated EBIT of EUR 68.2m compared with EUR 71.0m in 2015, a decrease of EUR 2.8m. This decrease is mainly caused by the change to subscrip tion-based license sales for new orders. |
EUR 749.0m | License base The license base (accumulated license order value) increased EUR 74.4m to EUR 749m at 31 December 2016. |
| 12.4% | Non-GAAP revenue growth measured in local currencies SimCorp generated non-GAAP revenue of EUR 307.7m in 2016, an increase of EUR 30m compared with last year, or revenue growth of 12.4% measured in local currencies. The currency impact on revenue was a negative EUR 4.7m. |
1,376 | Number of employees Headcount increased by 108 during 2016 bringing the total number of employees to 1,376 at 31 December 2016. |
| EUR 295.9m | Revenue SimCorp generated total revenue of EUR 295.9m in 2016 compared with EUR 277.9m in 2015, equal to an increase of 6.5%. Exchange rate fluctuations for the year had a negative impact of EUR 4.6m on revenue, equal to 1.6%. In local currencies, revenue thus increased by 8.1% compared with 10.1% in 2015. |
EUR 207.3m | Revenue secured on contract SimCorp enters 2017 with EUR 207.3m of the full year's revenue secured on contract – an improvement of EUR 27.4m compared with last year. |
| 20.3% | Order intake growth The total license order intake increased by 20.3% to EUR 85.1m in 2016, including SimCorp Coric orders. The total order book increased by EUR 20.7m from 1 January 2016 to EUR 44.8m at 31 December 2016. |
EUR 72.9m | Payout to shareholders SimCorp purchased treasury shares for EUR 44.4m in 2016 compared to EUR 21.2m in 2015. Combined with the dividend paid in 2016 of EUR 28.5m, SimCorp returned EUR 72.9m to its shareholders in 2016 compared with EUR 45.7m in 2015. |
| EUR 65.4m | Cash inflow The operating activities generated a cash inflow of EUR 65.4m, compared with EUR 54.2m in 2015 and cash holdings amounted to EUR 31.6m at 31 December 2016, which is EUR 11.7m less than in 2015. Cash and cash equivalents equal 21.5% of total assets. |
DKK 6.25 | Dividend per share The Board of Directors intends to recommend to the shareholders at the annual general meeting that dividends be declared at the rate of DKK 6.25 per share of DKK 1 – an increase of 19.0% from 2015. |
Asset managers must align themselves with vendors that are willing to invest back into their products. Investment in R&D is a critical measure in assessing the health and vitality of any future-state operating model.
TOM SECAUR
Global COO, Citisoft, Investment Management Consulting
Global asset managers' software solution requirements still show a strong fit with SimCorp's core value proposition of 'One System for a Complex World'. We met our strategic targets in 2016, and in 2017 we will keep our focus on increasing market share in North America and investing in our solutions for front office, alternative investments, and ASP delivery. Furthermore, we will simplify the selection process for our clients by offering standard platforms.
SimCorp's Vision 2020, launched in 2015, states the financial goals of double-digit annual long-term growth and continuously increasing profit margins. In 2016, the update of Vision 2020 reconfirmed SimCorp's five key strategic priorities to meet the demands of increasing globalization, regulation, and alternative investments:
In light of the market fundamentals, the competitive situation, and our progress on the five 2016 priorities, we have re-assessed and updated our strategic priorities for 2017.
The market fundamentals and our 2020 competitive position both remain robust. The institutional buy-side investment management industry is still regarded as an attractive niche where SimCorp is one of only a handful of global players with the expertise and capabilities to serve global top-tier asset management firms. SimCorp is leading the front-to-back category of investment management systems
and we are confident that our operational efficiency initiatives will enable us to continue to pursue our financial targets.
Industry assets under management are projected to grow at an average 5% per year,1 and asset management industry revenue and profits are back at pre-crisis levels, although margins are under pressure. In addition, 84% of SimCorp's client universe of large asset managers have a positive outlook, expecting annual revenue growth of 6% or more in the next three years.2
Consolidation and the emergence of mega managers constitute an ongoing trend in the market, and we also see another of SimCorp's key target segments, Sovereign Wealth Funds (SWFs), growing in number and size. At the same time, globalization, regulation, and the move towards alternative investments are key mega trends that are all set to continue. This
plays well into SimCorp's value proposition of 'one system for a complex world', as the same large asset managers are looking to scale operations by standardizing and automating processes.3 Reports show that these asset managers are allocating a growing share of investment management system (IMS) spend to a modernization of their operating model.4 A priority which is identified by over half of these institutions as a top-three issue for 2016, compared to just a third in 2015.5
The next three pages hold an assesment of our achievements for the 2016 strategic priorities and the resulting fine-tuning of these priorities is presented as our strategic priorities for 2017, including goals and focus.
1 Boston Consulting Group (BCG): 'Global Asset Management 2016: Doubling Down on Data', July 2016.
2 Lindberg International and Citisoft: 'Unlocking Growth through Innovation', 2016. The survey includes representatives from 83 investment management firms from Europe, North America, and Asia Pacific.
3 PwC: 'The asset management operating model: Keeping pace with industry and technology evolution', in Journal of Applied IT in Investment Management, August 2016.
STRATEGIC PRIORITIES
STATUS ON ACHIEVEMENTS STRATEGIC
CONTINUED FROM 2015
FRONT OFFICE AND IBOR
As we have clearly established SimCorp as the market leader for IBOR, winning the Waters Technology5 Best Buy-side IBOR award for the third time in 2016, we have achieved a status where delivering an IBOR with multi-asset coverage is part of our normal on-going efforts.
Our continued R&D investment in a fully integrated front office solution has resulted in nine new front office clients in 2016. 133 of our existing clients have licensed parts of or our entire front office solution.
This priority has been adjusted to focusing on our front office solution as IBOR has become part of our daily operations.
GOALS AND FOCUS
SimCorp's front office solution has a competitive advantage as opposed to a stand-alone best-of-breed solution as it gives portfolio managers real-time access to relevant data, including risk and performance analytics, before making decisions.
Our front office solution continues to be a strategic priority as there is still a substantial sales potential in our target market and among our existing clients.
Front office IT spend in our target market is projected to grow 4.2% annually (CAGR) from 2015-2020 with a USD 2.2b annual spend in 2017.6
Among the 1,200 asset managers in our target market, we have approximately 1,100 potential new front office clients, and among our existing clients, we still have a sales potential among the clients who have not yet acquired our full Front Office Suite.
ASP OFFERING
A competitive ASP offering has proved the right strategic priority as it is a requirement of some asset managers, especially in North America. Projections say that ASP hosted solutions and softwareon-premise (SOP) deployment will continue to co-exist in the market, with ASP becoming the preferred delivery option.7
In 2016, we have signed contracts with four ASP clients in North America, with one live and two more going live during 2017.
We will continue our ASP offering as a strategic priority.
We will improve, standardize, and make our ASP offering even more cost-efficient, allowing clients to save time, control costs, and reduce operational risk.
We continue to gain valuable knowledge by operating SimCorp Dimension on behalf of our clients and this will strengthen the product offering for all clients.
SimCorp Dimension will predominantly be delivered as an ASP solution over the long term and we expect the majority of all new North American deals in 2017 to be delivered as ASP solutions.
5 Buy-Side Technology, part of Waters Technology, is one of the key industry media covering the buy-side investment management industry. For the past 10 years it has been hosting the Buy-Side Technology Awards, which recognize leading technologies and vendors in their area of expertise.
6 Ovum: 'Financial Markets Technology Spending Through 2020 – Front Office IT spend and growth rate projection', June 2016. 7 CEB: 'Top Technology Initiatives for Capital Markets Firms in 2016', 2015.
2016 2017
CONTINUED FROM 2015
We completed the implementation of an employer branding strategy, an employee value proposition program, and a focused talent pipeline-building framework in 2016.
We have developed a framework for ensuring retention of talent, which includes efforts to strengthen performance management, leadership excellence programs, development opportunities, and a diverse working environment.
Investing in attracting and retaining talent has become an integral part of how we operate in SimCorp, which means we will not continue to have talent as a separate strategic priority. People will continue to be fundamental to everything we deliver. TALENT STANDARD
NEW
To make it easier for new and existing clients to select the solution that best meets their needs, a new strategic priority will be to offer standard platforms. This will mean a fixed scope, delivery time, and price. The benefits for clients include increased quality, faster delivery, and reduced risk and cost for small and large projects alike.
Standard platforms can subsequently be configured to meet special client needs.
STRATEGIC PRIORITIES
KEY GROWTH MARKETS: NORTH AMERICA, FRANCE, AND THE UK
We are pleased that we in 2016 won five SimCorp Dimension and two SimCorp Coric clients in North America, one SimCorp Dimension client in France, and two SimCorp Coric clients in the UK.
CONTINUED FROM 2015
KEY GROWTH MARKETS: NORTH AMERICA, FRANCE AND UK
We believe that the strong results in North America show that we now have not only the right offering in place, but also the right organization in terms of a complete management team with the right competences.
With major SimCorp client wins over the past years in France and the UK, these markets still represent significant growth opportunities, but more in line with our other markets. Therefore, we will not retain France and the UK as strategic growth market priorities.
PRIORITIES
As we enter 2017, North America still holds the single biggest growth potential to SimCorp, with currently a 5% market share.
GOALS AND FOCUS
We will continue our focus on winning market share in this market by ensuring our product meets the special local requirements and by increasing the awareness of SimCorp and our offering.
With more than 50% of our North American client base belonging to the top 50 global asset managers, we have proved that with our local organization in place and our SimCorp Dimension and SimCorp Coric platforms, we can continue to attract new clients.
| Business units | Number of clients |
Total market |
Market share |
|---|---|---|---|
| North America | 24 | 500 | 5% |
| Central Europe | 51 | 200 | 26% |
| Benelux, France & Italy | 28 | 170 | 16% |
| UK & Middle East | 19 | 150 | 13% |
| APAC | 13 | 110 | 12% |
| Nordic | 47 | 70 | 67% |
| Total | 182 | 1,200 | 15% |
* Figures are based on SimCorp estimates
Looking at the key trends and projections impacting how SimCorp should prioritize to win a growing market share in 2017, our current approach still applies with some minor adjustments of our strategic priorities.
IT is taking center stage in asset management operations as an enabler of better integrated, automated, agile, and cost-effective processes. These requirements will favor large global IMS providers like SimCorp offering broad and integrated capabilities, products, and delivery models.
" Investment managers continue to struggle with legacy point-to-point platforms that are manually intensive and difficult to govern. An integrated, data-centric platform fills the need for improved data quality and operational effciencies.
JEREMY HURWITZ CEO and Founder, InvestTech Systems Consulting
Change is the only constant in today's financial industry. To keep pace, SimCorp allocates a high share of its revenue to R&D compared to other vendors. To become even more innovative and adaptive, we have adopted an industry bestpractice model for agile development, which will help our clients stay ahead of the changing demands.
SimCorp's sustained investment into a single platform, SimCorp Dimension, has made it the most comprehensive integrated system on the market. It supports the complete buy-side investment management value chain with best-in-class solutions covering front, middle, and back office operations. SimCorp Dimension enables investment managers to quickly adapt to market changes by making their business and IT architecture simpler and more agile. The integrated system allows investment managers to automate their processes and grow their business into new markets and
asset classes. At its core, SimCorp's awardwinning IBOR enables better and faster investment decisions, giving full transparency about risk exposures and ensuring regulatory compliance. SimCorp Dimension is the optimal solution for top investment managers, as it empowers them to meet the challenges of complexity while, at the same time, solving the bottlenecks caused by inflexible and fragmented systems.
SimCorp Dimension creates value for both investment managers and their customers. The customers will benefit from increased transparency, better and faster service, and a clear overview of their investments.
" Product innovation and superior customer service are key growth drivers for investment managers. SimCorp's best-in-class solutions provide the support and agility required to realize these growth initiatives.
Senior Vice President, Product Management, SimCorp
Our integrated system is made up of 19 different components covering all functions in the front, middle, and back offices. We call these components "Managers" because they refer to the relevant role they support within the company.
To keep our platform constantly updated, we invest a significant share of our annual revenue currently around 20% - back into R&D, to ensure that we always can offer an up-to-date system. To become even better at responding to our clients' changing requirements and the everchanging challenges of the market, we have implemented an agile development approach.
An agile development approach is about responding to change as it appears. This does not only mean monitoring changing market trends closely, it also means closer collaboration and faster feedback from our development-partner clients in the process. This approach ensures a strong fit with both the actual demands of our clients and the challenges in the market. The result is greater value for our clients and a more efficient use of our development resources.
As we scale our agile approach to a full enterprise level with the help of an industry best-practice model, we expect this efficiency to increase significantly over the coming years. The agile development approach has been implemented in SimCorp throughout 2016 and will be how we do development in SimCorp going forward. The approach has been embraced by both our developers and our clients, who all see the immediate benefit of a closer collaboration and a more responsive process.
ADAPTING TO NEW MARKET CHALLENGES AND CLIENT DEMANDS AS THEY APPEAR
Benefits of an agile development approach: SimCorp continually improves its offering in terms of new features for existing and new geographies and segments, product quality, total cost of operations, scalability, new technology, product coverage and quality, and time-to-market.
" Agile development enables you to respond to changes as they appear.
GEORG HETRODT CTO, SimCorp
" As SimCorp operates in a continually changing and highly volatile business environment, its Board of Directors and management regard it essential that risk exposure is thoroughly monitored and controlled. To ensure this, a framework of risk policies and risk mitigating procedures is in place and continuously reviewed and updated.
SimCorp's business entails a number of commercial and financial risks, which could potentially have a negative effect on the company's future activities and results. To manage risk to the extent possible, principal factors, which are subject to uncertainty,
and hence categorized as potential risks, are systematically monitored, analyzed, and managed. Overall, SimCorp's management believes the company is well prepared to manage its potential risk challenges.
Through an Enterprise Risk Management process, a number of gross risks are identified in SimCorp's central and decentralized units. Each risk is described, including current risk mitigation in place or planned mitigating actions. The subsequent analysis of the identified risks includes an inherent risk evaluation based on two main parameters: probability of occurrence and impact on EBIT. The net risk after application of mitigating factors is also reported, and movements from one quarter to another are monitored.
SimCorp management continuously monitors risk development in the SimCorp Group. Each quarter, the main risks and accompanying mitigating actions are presented to the Board of Directors, which discusses whether the risk situation is acceptable and, if not, decides what further mitigating actions are required. During the year, the different risks will vary in importance. For instance, the execution risk associated with the closing of add-on licenses is typically high in Q4 and low in Q1. The Board evaluates risk dynamically to cater for this variation in risk impact.
The Audit Committee carries out an in-depth analysis of the ongoing process of identifying and reporting risks to the Board of Directors in order to ensure that the underlying risk identification method is appropriate and reflects the true risk picture. The policies and guidelines in place stipulate how SimCorp management must work with risk management. SimCorp's compliance with these policies and guidelines is also monitored by the management on an ongoing basis.
them accordingly.
Chairman of the Audit Committee
SIMON JEFFREYS
SimCorp seeks to identify and understand risks and mitigate
Anticipating and responding to important trends in the market for global investment managers are critical to SimCorp's ability to retain clients and win market share. Failing to spot these trends represents a risk.
Also, competitors' expansion of international service-offerings and distribution could endanger SimCorp's leading market position. In addition, new local requirements or legislation may influence the current demand for SimCorp's offerings.
Furthermore, as around 25% of SimCorp's client base are within the top 100 global asset managers, losing one of these clients or their default on payment could potentially have a substantial impact on SimCorp's revenue.
Through extensive market research and industry analysis, SimCorp keeps abreast of trends in the global financial markets.
Also, the company's close and longstanding relationships with clients allow SimCorp to anticipate and respond to market movements and new requirements.
Although around 25% of SimCorp's clients are among the top 100 asset managers, the SimCorp Group has no client with revenue of more than 3.5% (2015: 4.5%) of total revenue.
Product innovation, improved technical infrastructure, and enhanced technical capabilities are fundamental elements in meeting new system requirements in the market. Being unable to deliver those elements in a timely fashion could potentially mean that SimCorp Dimension would end up as a legacy offering.
SimCorp's ability to offer clients the best software products with the highest possible configurability and flexibility is paramount. Inadequate quality control and testing prior to the release of new software versions increase the risk of reduced client satisfaction and loyalty.
SimCorp offers updated product versions of SimCorp Dimension every six months. Updates include enhanced system functionality and improved technical infrastructure based on a systematic prioritization of client and market requirements. The move to a best-practice agile development method, which has been completed in 2016, ensures that SimCorp is able to respond and adapt quickly to changes in market and client demands.
A key element of the product development strategy is extensive quality control and testing prior to the release of new software versions. SimCorp continually raises and follows up on internal quality targets, ensuring alignment with expected market developments. In addition, SimCorp is engaging with relevant external partners to further improve and document the security and quality of our product.
SimCorp's business is based on specialized expertise and innovation. It is imperative that SimCorp continues to attract, develop, and retain the most skilled employees and management talent. Failure to do so constitutes a risk to the Group.
Moreover, it is considered a genuine risk to SimCorp's long-term position, if the company's corporate values do not continue to serve as a core basis for business execution and development.
To ensure SimCorp's ability to attract new, talented employees, a comprehensive 'Employer Value Proposition program' has been implemented to strengthen the company's employer brand. Also, a framework has been set in place to retain talent in SimCorp, including a mentoring program and leadership academy training.
SimCorp allocates substantial resources to internal and external training and development to ensure that professional and personal skills are constantly being maintained and enhanced throughout the organization.
To ensure that SimCorp employees possess the relevant competences, training activities to a large extent draw on the experiences of more senior employees, which optimizes the benefits of the employee development initiatives.
SimCorp senior management regularly travels to the various market units to ensure that the SimCorp corporate culture is maintained.
It is key for SimCorp to provide standardized end-toend serviced solutions, both during implementation and after clients have gone live.
Running on SimCorp Dimension entails having to deal with a variety of technical aspects such as technical infrastructure, WAN lines, third-party integration, databases, data interfaces, and software applications.
Related services are provided by SimCorp and subcontractors engaged by SimCorp. If SimCorp fails to balance the requirements of clients and agreements with these subcontractors, SimCorp risks impairing the clients' businesses as well as its own.
During solution delivery, the largest risk is an inadequate implementation of SimCorp Dimension, leading to lower operational efficiency and increased operational risk and costs for SimCorp's clients, who will not realize the full value of the installation.
CONTINUES >
SimCorp Professional Services is gradually moving to a global delivery model leveraging a standard delivery methodology based on industry best practices and standard components. This approach will give existing and new clients a lean and efficient solution-delivery service, driving increased quality and value, while reducing risk and cost for small and large projects alike.
SimCorp has established various measures to control both external and internal risk to the provision of full-service packages. Externally, a due diligence process is conducted on each subcontractor to ensure it has sufficient strength – financially, organizationally, and product-wise – to meet SimCorp's requirements. Internally, a clear description and overview of each delivery component allows for a clear segregation of duties. CONTINUES >
the operational services.
using a Group standard.
globally certified providers.
...SOLUTIONS AND SERVICES Moreover, SimCorp's consultants undergo continual training to maintain and develop the required knowledge and experience in relation to
Larger complex multi-year implementation contracts are evaluated, approved, and monitored
SimCorp has in 2016 obtained an ISAE 3402 audit report for our ASP services, which documents that processes and workflows are detailed and structured, provide for appropriate segregation of duties, a sufficient control environment, and environments allowing for test and validation prior to lifting clients' solutions into production. All hosting tasks are carried out by world-leading
After going live with the solution, the most apparent risk is possible breach of service level agreements, security requirements, or other committed standards.
Offering SimCorp Dimension as an ASP service introduces operational risks of running clients' operational IT environments. This in turn exposes SimCorp to potential financial and reputational risks, should operations be negatively impacted by errors or downtime.
Protecting SimCorp's long-term business interests is vital to its continued operations. This includes legal risk that may impact SimCorp's business.
SimCorp believes contractual risk as well as legal risk related to regulatory requirements are critical. Failure to meet or implement regulatory requirements in a timely fashion with respect to, for instance data protection, confidentiality agreements, IPR, and fraud constitutes a risk.
SimCorp is subject to tax and fiscal policies in the countries where the company operates. Changes to such local policies may affect SimCorp's tax and fiscal position.
Due to the nature of SimCorp's operations, the company is exposed to changes in currency exchange rates. A detailed analysis and description of financial risk exposure is provided in note 6.2 to the financial statements.
SimCorp ensures that all contracts entered into are carefully worded. SimCorp monitors and assesses the scope of any new legislation potentially affecting business procedures.
SimCorp's Group Finance department manages the company's currency and financial exposure pursuant to the treasury policy approved by the Board of Directors, and are required to keep the overall currency exposure within defined limits. Furthermore, Group Finance is diligent in securing that, in line with the tax policy, SimCorp is at all times tax compliant in the countries where SimCorp conducts business.
SimCorp has implemented a number of business procedures and controls to enhance transparency of individual activities and provide an improved overview of financial exposure.
Generally, financial reporting involves the risk of non-compliance with applicable legislation and potential business risk.
There is also a risk of inadequate internal controls designed to avoid significant errors and omissions in financial reporting.
SimCorp has implemented various business procedures and controls to ensure compliance in relation to financial reporting. These are based on a range of general principles, policies, and procedures, which are reviewed by SimCorp's Board of Directors and Executive Management Board on a regular basis. The Danish Financial Statements Act requires that an overall description of the Group's internal controls and management of risk with regard to financial reporting is included in the financial statements. The full wording of SimCorp management's statutory responsibilities under section 107 b of the Danish Financial Statements Act is available on SimCorp's website: www.simcorp.com/corpgov2017
The Executive Management Board monitors compliance and provides the Board of Directors with relevant legislation and reports, including updates to the market, deemed to be of significant importance.
With offices and sales in the majority part of the world, SimCorp is from time to time affected by geopolitical uncertainties and unrest.
Further, since 2007, SimCorp has had an additional development unit outside Denmark, based in Ukraine, with a staff of around 200 test analysts, developers, and service delivery consultants, which is part of SimCorp's Product Division and Delivery Services units.
Political and economic unrest in countries and regions where SimCorp operates or plans to operate is monitored continuously and taken into account when making strategic decisions.
Due to the political situation in Ukraine, SimCorp continuously monitors the situation in the country. The Ukrainian office is based outside of Kiev and, so far, SimCorp has not seen any substantial risk associated with operating in the country. In case of critical political destabilization, all employees are able to work from home and will not be requested to go to the office until safety levels have been normalized.
As a software company with a core business based on modern information technology, SimCorp's failure to adequately protect itself against IT risk, represents a particular risk. Cybercrime including unauthorized access to SimCorp's network and data could endanger applications as well as the infrastructure and the technical environment stored on SimCorp's network. The same goes for virus attacks and theft of code and know-how which could also entail prolonged system breakdowns impairing productivity and potentially rendering SimCorp unable to service its clients.
SimCorp continuously monitors its global technical infrastructure, aiming to identify and minimize risk to the company's production and operation. Through well-established procedures and solutions, SimCorp is able to quickly restore critical business services.
SimCorp also operates with a high data security level and maintains strict access control to the physical environment as well as to its data network. The controls are monitored and reviewed on a regular basis in order to optimize information security.
SimCorp management and employees are regularly updated and educated on new potential cybercrime threats and how to act to minimize the risk of exposing SimCorp's network to various phishing and hacking attempts.
Further, SimCorp has developed and implemented a disaster recovery plan for restoring all critical business services and makes use of state-of-the-art tracing software for detecting unintended access, or attempts, to SimCorp's network. The suppliers of this software are diligently screened and assessed prior to purchase and implementation, using both expert assessments of the product as well as in-house proof of concept.
For further details on procedures of SimCorp's risk management, see page 19 in its Corporate Governance Guidelines, www.simcorp.com/corpgov2017
" We continuously aim to add value to the way we service our clients' investment needs. SimCorp Dimension has provided important efficiency gains in the processing of our investment decisions as well as supporting the launch of new investment products and addressing market challenges.
SIMCORP'S CORPORATE GOVERNANCE GUIDELINES PROVIDE THE OVERALL DIRECTION FOR SIMCORP'S BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT TEAM IN THEIR DEFINITION OF WORKING PROCEDURES AND PRINCIPLES.
SimCorp's Board of Directors has reviewed and discussed each of the recommendations for corporate governance issued by Nasdaq Copenhagen and has concluded that, with a few exceptions, SimCorp is in full compliance with the recommendations regarding the way the company is governed as well as the interaction between the company's managerial bodies, its shareholders, and other stakeholders.
SimCorp's Corporate Governance Guidelines are intended to ensure an efficient and adequate management of SimCorp within the framework defined by applicable legislation, rules, and recommendations for listed companies in Denmark and by SimCorp's articles of association, mission, corporate vision, and values.
SimCorp's overall management objective is to promote the long-term interests of the company, and thus of all stakeholders. This objective assumes that SimCorp establishes lasting and constructive relationships with the Group's primary stakeholders: shareholders, clients, business partners, employees, and suppliers.
The Board of Directors is a collective body for promoting the long-term interests of the company. The Board of Directors is responsible for ensuring that the overall strategic management and the financial and managerial control of the Group are conducted adequately. Thus, the Board of Directors acts as a sparring partner to the Executive Management Board in relation to strategic initiatives and monitors the Group's financial condition, risk management, and business activities on an ongoing basis.
The Board of Directors is constituted to ensure its independence, adequate collective competences, and experiences within
executive management disciplines related to global corporations, information technology, and business-to-business sales of software, and to hold sufficient members to enable an appropriate distribution of tasks and an effective decision-making process. As provided in the company's articles of association,
SimCorp's Board of Directors consists of between three and six members elected by the company's shareholders in addition to members elected by and among the company's employees. To further strengthen the collective competences of the Board, SimCorp will at the Annual General Meeting 2017 nominate
In the specific matter of remuneration committees, SimCorp has decided not to comply with the Corporate Governance Recommendations issued by Nasdaq Copenhagen due to the limited complexity of its business.
SimCorp's remuneration guidelines clearly states SimCorp's remuneration principles and procedures. Remuneration matters are considered by the full Board of Directors and a remuneration committee is considered as adding unnecessary cost and complexity.
Targets and performance against these are disclosed in detail as part of the annual
report on a retrospective basis. The mix between fixed salary and short-term incentive and long-term incentive programs for executive directors is in line with levels generally suggested and accepted within both Danish and international corporate governance guidelines.
Under international corporate governance guidelines, any board member serving more than nine years is not regarded as independent. SimCorp's Chairman of the Board of Directors, Mr. Jesper Brandgaard, has served nine years. Being a Danish company following Danish corporate governance guidelines, Mr. Brandgaard is regarded as independent until he has served 12 years.
Adam Warby, currently CEO at Avanade, to replace Franck Cohen, who left the Board in May 2016. At the beginning of 2016, SimCorp's employees elected three employee Board members. Accordingly, following the Annual General Meeting 2017, the Board will consist of six members elected by the shareholders and three members elected by employees.
Independent members of SimCorp's Board of Directors are elected for one year at a time and employee-elected members for threeyear terms.
The Board of Directors carries out an annual self-assessment. In 2016, the process was facilitated by a third party, Odgers Berndtson, and comprised an evaluation of the work and contribution of the Executive Management Board, the Board of Directors, and the Audit Committee within the areas of strategy, finance, risk management, sales, organization, management, and operations.
Based on the self-assessment, it was concluded that the Board's collective work is effective. The Board also concluded that in order to ensure its competences within business-to-business sales of software, it would be looking for a candidate who possesses skills and experiences within this area. With the addition of Adam Warby, as a Board member, the Board of Directors believes it has the appropriate competencies.
The Board of Directors has the overall responsibility for ensuring that SimCorp maintains appropriate procedures to monitor, measure, and manage the company's risks and that
such procedures are firmly embedded in the company's organization. As part of its risk management, the Executive Management Board and the Board have defined and described the most critical risks to SimCorp and the related mitigating actions. A more detailed description of risks and mitigating actions is provided in the section 'Risk Management', pp 19-22.
Further, the company has established a whistleblower body, authorized by the Danish Data Protection Agency, which, in addition to usual control functions, is intended to provide access to reporting on suspected irregularities in the business. An independent member of SimCorp's Board of Directors, Simon Jeffreys, has been appointed as administrator of the whistleblower policy and to act as gatekeeper in respect of the whistleblower account. Contact information: [email protected] or phone: +44 7831 690 999.
In 2017, SimCorp intends to form a Nomination Committee. This committee will assist the Board with oversight of the competence profile and composition of the Board, nomination of members and committees, and other tasks on ad hoc basis as decided by the Board.
The Audit Committee is responsible for assisting the Board of Directors by monitoring SimCorp's financial reporting, its financial internal control and financial risks, as well as the effectiveness and independence of the external audit for the SimCorp Group of companies. The Audit Committee consists of three
members elected by the Board on a one-year term by and among the Board of Directors. The Audit Committee meets as often as it and its Chairman deem necessary, however, at a minimum, the Committee will meet four times a year at appropriate times in the reporting and audit cycle. In 2016, four meetings were held.
Pursuant to the Danish Law and Corporate Governance guidelines, the majority of the members of the Committee should qualify as independent and the committee should possess the necessary financial expertise. The members of the Audit Committee are: Simon Jeffreys (Chairman – independent), Patricia McDonald (Member – independent), and Else Braathen (Member – employee-elected).
For further information, see www.simcorp. com/corpgov2017 for a full description of the Audit Committee's activities.
The Audit Committee reviews and monitors the company's ongoing relations with the external auditors and the independence of the external auditors. Based on recommendations from the Audit Committee and the external auditors, the Board of Directors decides whether there are areas to which the external auditors should pay special attention in given periods.
During the year, the Audit Committee has been informed about the external auditor's policies and procedures for safeguarding its objectivity and independence, and the audit partners and firm rotation requirements have been routinely observed. During the year, the Committee has approved audit-related and non-audit related service fees.
As part of its annual wheel activities, the Audit Committee reviews SimCorp's accounting policies, compliance with reporting requirements, risk policy and assessment, internal controls, whistleblower policy, insurance principles, and interim reports. It has been agreed to do deep-dives into specific topics as appropriate.
During 2016, the SimCorp Audit Committee has not observed any issues of audit independence, or material risk in any of the areas it monitors for the Board of Directors.
Corporate Social Responsibility in SimCorp is firmly based on the Group's core values and 'Corporate Governance Guidelines' as adopted by the Board of Directors. SimCorp's commitment to sustainable development of the company is based on combining financial performance with socially responsible behavior and environmental awareness.
SimCorp does not have an explicit, separate CSR policy, but its 'Guidelines for Good Business Behavior' and 'CSR statement' combined include policies for employees, ethics, suppliers, the environment, stakeholder engagement, governance, anti-bribery and corruption that aim to maintain and enhance its professional and commercial relations with internal and external stakeholders based on mutual respect.
SimCorp works to inform and educate its employees to enable them to carry out their tasks with integrity and in accordance with the guidelines and core values of SimCorp.
SimCorp maintains high standards when it comes to confidentiality and protection of personal data. This is ensured through compliance with technical data security standards and education of the employees in how to handle data in accordance with legislative requirements and confidentiality.
With regard to the environment, SimCorp undertakes initiatives to promote greater responsibility and to increase the use of environmental friendly technologies, when it comes to especially electricity, heat-related energy, and CO2. As examples, the travel activity of SimCorp employees has to some extent been replaced by video conferences.
SimCorp promotes human rights in terms of health and safety in the workplace and the well-being of its employees. Fitness activities, a wide range of social activities, and improved work procedures and practices are promoted and supported by SimCorp.
The company's approach to CSR is described in more detail on the company's website www. simcorp.com/csr2016
SimCorp aims to promote diversity, which includes achieving a reasonable representation of both genders at Board and management level. This goal is based on a wish to strengthen the versatility and total competences of the business and to improve decision-making processes.
SimCorp's approach to diversity is described in SimCorp's Diversity Policy, which is included in SimCorp's Corporate Governance Guidelines and its Diversity Activity Plan,
www.simcorp.com/corpgov2017 and www.simcorp.com/diversity2016
Regarding gender diversity on the Board of Directors, the company has set as a target to have at least two directors (corresponding to one third) of the underrepresented gender elected by the general meeting. This target will be realized through the recruitment of new Board members. In the most recent recruitment process, candidates of both genders were represented, and Mr. Adam Warby was assessed to be the strongest candidate in terms of matching the business challenges SimCorp is currently facing. Consequently, as of the Annual General Meeting 2017, it is still the case that one of the six directors elected by the general meeting is of the underrepresented gender, which means that SimCorp has not yet reached the target figure.
It is SimCorp's objective to increase the proportion of women in SimCorp's total management team, so that it reflects the total proportion of female employees in the SimCorp Group.
Activities conducted in 2016 to increase the proportion of women in managerial positions have focused on maturing a female mentoring program initiated in 2015. The program is targeted at female employees with manager potential. Nine female employees were selected for participation in the program and they were all assigned a mentor from SimCorp's Group Management Committee. One of the participants in the program already stepped into a managerial position in 2015, and two more participants have become managers in 2016.
The aim of the program is to support the building of a pipeline of potential female
leaders, which over time will help increase the number of women at total management team level in SimCorp. The program has received positive feedback, and we will further develop the program in 2017.
At the end of 2016, the total management team comprises 72.1% (2015: 74.2%) men and 27.9% (2015: 25.8%) women.
The overall objective of SimCorp's remuneration policy and incentive programs is to promote Board member, executive management and employee awareness of profitable growth and SimCorp's long-term goals.
At SimCorp, remuneration and incentive levels are set to be competitive and aligned with the interests of both the program participants and the shareholders. The remuneration packages
for SimCorp's Board of Directors (BoD) and Executive Management Board (EMB) are composed of a number of components as illustrated in the table below.
The overall remuneration level proposed to the Annual General Meeting is assessed to be in line with conventional compensation levels for Boards of Directors at comparable, Danish companies and Danish and international corporate governance guidelines. SimCorp's remuneration policy lays out a clear description of SimCorp's remuneration principles and procedures, and the company aims for simplicity and transparency in the creation of all compensation packages.
After the decision of the annual general meeting in April 2016, the remuneration of the individual members of the Board of Directors, including the fee for Audit Committee work, remained unchanged. In 2017, SimCorp intends to form a Nomination Committee.
The remuneration of the Board of Directors is composed of a cash element and a share element per board member. The Board and Audit Committee fees and the proposed Nomination Committee fee for 2017 are outlined in the tables below.
SimCorp Board of Directors (BoD) and Executive Management Board (EMB)
| Remuneration | BoD | EMB | Comments |
|---|---|---|---|
| Fixed fee/base salary | |||
| Fee for committee work | Members of Audit Committee and proposed Nomination Committee |
||
| Short-term cash-based incentive | Up to 45% of base salary | ||
| Conversion of cash bonus for shares (RSUs) |
10% of cash bonus at 67% discount. Proposed 100% of cash bonus at 50% discount |
||
| Long-term share-based incentive | 55% of base salary | ||
| Travel allowance and other expenses | |||
| Benefits | Company cars, phones, etc., comprising up to 10% of base salary |
||
| Severance payments | Up to 24 months' base salary |
| Board fee | Total remuneration (cash and share-based) in DKK |
|---|---|
| Chairman | 937,500 (EUR 125,000) |
| Vice-chairman | 562,500 (EUR 75,000) |
| Member | 375,000 (EUR 50,000) |
| Audit Committee fee | |
| Chairman | 187,500 (EUR 25,000) |
| Member | 93,750 (EUR 12,500) |
| Nomination Committee fee (proposed for 2017) |
|
| Chairman | 93,750 (EUR 12,500) |
| Member | 46,875 (EUR 6,250) |
SimCorp pays a travel allowance of EUR 1,500 (increased to EUR 2,500 for 2017) for meetings for Board members conducted outside their home country and reimburses Board members for relevant expenses such as travel and accommodation in relation to Board meetings.
The value of the shares allotted to the members of the Board of Directors is determined immediately prior to the Annual General Meeting where the shareholders approve the remuneration. The shares are transferred on an annual basis in arreas.
| 2016 | 2015 | |
|---|---|---|
| Total number of restricted stock units (STIP)1 |
842 | 947 |
| Total number of shares allotted2 |
4,873 | 5,858 |
1 Restricted stocks units in capacity as employees of SimCorp A/S. Further details refer note 7.1.
2 Allotted as part of the remuneration of the Board of Directors. 2016: The allotment will take place after publication of this Annual Report 2016 in February 2017.
In line with the Remuneration Guidelines approved by the Annual General Meeting, the Chairmanship proposes the remuneration of the Executive Management Board (EMB) for the coming financial year to the Board of Directors, who collectively approves the remuneration. The total remuneration of the Executive Management Board consists of a fixed base
| EUR'000 | Board fees | committee work | Fees for | Travel allowance | Share-based payment |
Total | ||||
|---|---|---|---|---|---|---|---|---|---|---|
| Remuneration | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 |
| Jesper Brandgaard (Chairman) | 84 | 84 | - | - | - | 3 | 42 | 42 | 126 | 129 |
| Peter Schütze (Vice-chairman) | 50 | 50 | - | - | - | 3 | 25 | 25 | 75 | 78 |
| Hervé Couturier | 34 | 34 | - | - | 6 | 12 | 17 | 17 | 57 | 63 |
| Simon Jeffreys (Chairman Audit Committee) | 34 | 34 | 16 | 16 | 13 | 14 | 25 | 25 | 88 | 89 |
| Patrice McDonald (Audit Committee) | 34 | 34 | 8 | 8 | 9 | 14 | 21 | 21 | 72 | 77 |
| Franck Cohen2 | 8 | - | - | - | 3 | - | - | - | 11 | - |
| Else Braathen (Audit Committee)1 | 34 | - | 8 | - | 2 | - | 21 | - | 65 | - |
| Vera Bergforth1 | 34 | - | - | - | 6 | - | 17 | - | 57 | - |
| Ulrik Elstrup Hansen1 | 34 | - | - | - | - | - | 17 | - | 51 | - |
| Jacob Goltermann (Audit Committe)3 | - | 34 | - | 8 | - | 3 | - | 21 | - | 66 |
| Raymond John3 | - | 34 | - | - | - | 3 | - | 17 | - | 54 |
| Total | 346 | 304 | 32 | 32 | 39 | 52 | 185 | 168 | 602 | 556 |
1 Employee elected effective April 1 2016.
2 Appointed April 1 2016 and resigned May 18 2016.
3 Employee elected retired April 1 2016.
salary, benefits, participation in the short-term cash incentive program (STIP), participation in the long-term incentive program (LTIP), and an option to convert up to 10% of STIP to Restricted Stock Units (RSU).
EMB members can convert part of their 2016 STIP participation into the RSU program with a 67% discount. For 2016, the discount could not exceed 10% of the individual's base salary, and any excess bonus will be paid in cash. These RSUs will vest over a three-year period, with 1/3 of the shares being release after each year, subject to the EMB member's continued service with SimCorp.
Observing international corporate governance guidelines, the discount on RSUs is proposed to be reduced from 67% to 50% for the EMB program from 2017 onwards in the updated Renumeration Guidelines for approval at the Annual General Meeting. To ensure a higher degree of retention of the Executive Management Board, the Board of Directors intends to propose to the Annual General Meeting the members of the Executive Management Board can convert 100% of their STIP participation into the RSU program.
It is a requirement that a member of the EMB has to hold shares with a market value equivalent to the member's fixed annual base salary,
before RSUs, to which the individual has acquired full ownership rights on the vesting date, can be sold. The Board may approve deviations from this principle should individual income tax implications necessitates this.
The total remuneration is benchmarked against total remuneration levels for Danish and international companies similar in size and with comparable business activities. The target salary constitutes the total remuneration if all the predefined short-term and long-term incentive targets are fully met.
The base salary includes all pension contributions. Other benefits such as company car, phone, etc. comprise in terms of annual cost for the company maximum 10% of the base salary.
The Executive Management Board participates in the STIP program with an annual cash bonus scheme of which the target value is up to 45% of the base salary. Typically, the 45% cash bonus will be split as follows:
The Balanced Scorecard consists of 23 KPIs. Point multipliers are used to signify the weight of the individual KPIs. The financial KPIs are assigned a point multiplier of three and one the client-specific KPIs is assigned a point multiplier of two. When a given KPI is fully met, the KPI yields three points. When a KPI is 90% met, the KPI yields one point. A total of 108 points are available in the Scorecard. The threshold for a full 30% cash bonus payout is 86 points.
With not all targets fully met in 2016, the scorecard will yield a total of 24% of the cash bonus against a maximum of 30%.
For 2016, three specific targets related to the following strategic priority areas were defined:
| TARGET PERFORMANCE TOTAL REMUNERATION FOR THE EXECUTIVE MANAGEMENT BOARD | |||
|---|---|---|---|
| Target area | Summary of measures by type |
Target achievement | Weight in scorcard |
Points achieved |
|---|---|---|---|---|
| Financial | - Revenue - Order inflow - EBIT |
On balance, targets have been 56% met |
50% | 30 |
| Product | - Product quality - New releases |
All targets have been met | ||
| Employee | - Employee satisfaction - Attrition |
On balance, targets have been 72% met |
50% | 39 |
| Client | - Pipeline development - Blockbuster sales penetration - Net promoter score (NPS) |
One of the targets was fully achieved |
||
| Total | 100% | 69 |
All three targets were fully met and, hence, the specific targets will yield a total of the maximum 6%.
Based on the achievements, over-performance will yield a total of 0.1% against a maximum of 9%.
In total, the short-term incentive programs for 2016, have yielded 30.1% against a maximum of 45%.
The incentive to focus on long-term value creation is based on participation in the long-term incentive program (LTIP), where members of the EMB will be granted RSUs with an aggregate value at the time of grant of 55% of the base salary. The RSUs vest after three years pending achievement of two metrics: The EMB member must be employed with SimCorp at the vesting date and the SimCorp Group must at the vesting date have met certain defined performance targets. If such targets are only met partially, the number of shares acquired will be reduced or may lapse completely.
1 Vesting in February 2017
2 The NOPAT (net operating profit after tax) margin for
the financial period January 1, 2014 - December 31, 2016. 3 CAGR (based on business growth) for the financial
period January 1, 2014 - December 31, 2016.
| EUR'000 | Salary | Other benefits | Share-based payments2 |
Performance related bonus |
Total | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Klaus Holse | 681 | 616 | 62 | 56 | 463 | 650 | 205 | 265 | 1,411 | 1,587 |
| Georg Hetrodt | 378 | 355 | 34 | 32 | 213 | 205 | 114 | 153 | 739 | 745 |
| Thomas Johansen1 | 335 | 333 | 31 | 30 | -149 | 195 | 101 | 143 | 318 | 701 |
| Total EMB | 1,394 | 1,304 | 127 | 118 | 527 | 1,050 | 420 | 561 | 2,468 | 3,033 |
| Other members of GMC | 1,731 | 1,492 | 158 | 136 | 660 | 572 | 296 | 380 | 2,845 | 2,580 |
| Total GMC | 3,125 | 2,796 | 285 | 254 | 1,187 | 1,622 | 716 | 941 | 5,313 | 5,613 |
1 1/1-13/12-2016
2 The accounting policy for share-based payment is described in note 7.1, accounting policy for other remuneration can be found in note 2.5.
| Awarded | 2016 | 2015 |
|---|---|---|
| Number of restricted stock units (LTIP) |
19,726 | 25,085 |
| Number of restricted stock units (STIP) |
5,151 | 6,659 |
| Cancelled | ||
| Number of restricted stock units |
20,566 | - |
All employees participate in the annual Corporate bonus program with the maximum Corporate bonus set as a percentage of the fixed base salary (STIP):
Executive Management Board (EMB) members: 30% Managers, who are not part of EMB: 5% - 25% Other employees: 3% - 5%
The historic LTIP performance achievements since the initiation in 2010 are shown in the table for the Executive Management Board, along with other senior management members and key employees.
SIMCORP AIMS TO COMMUNICATE OPENLY WITH INVESTORS AND ANALYSTS ABOUT THE GROUP'S FINANCIAL AND BUSINESS DEVELOPMENT. GET AN UPDATE ON THE SIMCORP SHARE, SIMCORP'S SHARE CAPITAL, SHARE-BASED INCENTIVE SCHEMES, DIVIDEND, SHARE BUYBACK AND MORE.
In 2016, liquidity in the SimCorp share measured by average daily trading turnover was up by 41% to EUR 3.1m, and the average daily number of trades increased by 89% to 1,004. SimCorp's share price declined by 12%.
Around 25% of SimCorp shares were managed by investors who are also clients of SimCorp. The company held 4.9% of the shares as treasury shares at year-end 2016. In accordance with section 55 of the Danish Companies Act, the following investors have reported holding more than 5% of SimCorp's share capital:
The share price at 31 December 2016 was DKK 344.20 per share, equal to a market capitalization of EUR 1.8bn (DKK 13.6bn). The share price declined by 12% in 2016. By comparison, the Nasdaq Copenhagen blue chip index (OMXC20 CAP) declined by 2%, while the index for largesized companies (OMXC Large Cap), which includes the SimCorp share, declined by 8%.
Relative to 2015, the average daily turnover of SimCorp shares on Nasdaq Copenhagen rose by 41% to EUR 3.1m, and the average number of trades per day increased by 89% to 1,004, reflecting a lower average volume size per trade.
SimCorp's nominal share capital is DKK 41,500,000 divided into 41,500,000 shares of DKK 1. SimCorp holds 2,037,369 treasury shares of DKK 1 equivalent to 4.9% of the share capital.
At 31 December 2016, SimCorp had approximately 8,000 registered shareholders representing more than 95% of the company's share capital, an increase of approximately 312 registered shareholders during the year. Approximately 44% of the share capital was held or managed by the 25 largest shareholders, and more than 62% of the registered share capital was held by shareholders based outside Denmark. On 31 December 2016, around 6% of the company's share capital was held by the company's management and by approximately 600 employees. Furthermore, SimCorp estimates that Danish and foreign institutional investors held some 70% of the company's shares, in line with the level at year-end 2015.
In accordance with the remuneration policy, approved by the shareholders at the annual general meeting on 1 April 2016, the Board of Directors in 2016 approved a share-based incentive program for management and key employees based on restricted stock units. The fair value of the restricted stock units amounted to EUR 2.8m at the time of allotment, and a total of 69.773 restricted stock units of DKK 1 have been granted, including 19,726 restricted stock units to the Executive Management Board. The restricted stock units will vest after three years, subject to continuing employment and are subject to conditions with respect to average annual minimum revenue growth and annual average net operating profit after tax for the financial years 2016-2018. If the two latter conditions are only partially met, the number of shares transferred after three years will be reduced, potentially to zero.
Furthermore, in connection with the appointment of a new Managing Director for SimCorp Coric Ltd., a total of 481 restricted stock units have been granted as a sign-on bonus. The restricted stock units vest after three years, subject to continuing employment. Additionally, in connection with incentive programs for senior employees, 1,927 restricted stock units were granted. The fair value of the restricted stock units amounted to EUR 0.1m. These will vest after three years subject to continuing employment and subject to performance conditions for the financial years 2016 to 2018. If the conditions are only partially satisfied, the number of shares transferred will be reduced, potentially to zero.
| Stock exchange | Nasdaq Copenhagen A/S |
|---|---|
| Index | OMX LargeCap |
| Sector | Technology |
| ISIN code | DK0060495240 |
| Short code | SIM |
| Share capital | DKK 41,500,000 |
| Nominal size | DKK 1 |
| Number of shares | 41,500,000 |
| Negotiable papers | Yes |
| Restriction in voting rights | No |
| 29 March 2017 | Annual General Meeting |
|---|---|
| 3 Apr 2017 | Expected date for pay-out of dividend |
| 17 May 2017 | Publication of interim financial report 3M 2017 |
| 24 Aug 2017 | Publication of interim financial report H1 2017 |
| 14 Nov 2017 | Publication of interim financial report 9M 2017 |
In addition, 93,396 restricted stock units relating to the corporate bonus program for 2015 were granted in 2016 and distributed among employees in the Group, including 5,151 restricted stock units to the Executive Management Board and 842 restricted stock units to employee-elected members of the Board of Directors. The restricted stock units will vest one third after one year, a further one third after two years, and the last third after three years, subject to vesting conditions.
The share-based incentive program based on restricted stock units will continue in 2017 and comprises restricted stock units with a market value of approximately EUR 3.2m on the date of grant. Further, to strengthen the retention of the North American management team, a separate incentive program with a value of EUR 1.2m will be granted. The program will vest after three years, subject to continuing employment and to certain conditions of revenue and EBIT growth. If the conditions are only partly met, the number of shares transferred after three years will be reduced. Treasury shares will be acquired to cover the program obligations. SimCorp's share-based incentive schemes are further detailed in note
7.1 to the financial statements. In accordance with SimCorp's remuneration policy, members of the Board of Directors will in 2017 continue to receive SimCorp shares with a total value equal to one third of their total remuneration.
It is the assessment of the Board of Directors that these remuneration principles ensure an appropriate alignment of the interests of the Board of Directors with SimCorp's shareholders in general.
As at 31 December 2016, the eight members of the company's Board of Directors held a total of 122,159 SimCorp shares and 1,377 restricted stock units were held by employee-elected members of the Board. The members of the Group's Executive Management Board held a total of 248,471 SimCorp shares and 81,797 restricted stock units.
Additional information on the holdings of SimCorp shares and restricted stock units by members of the Board of Directors, the Executive Management Board, and other related parties is disclosed in note 7.4 to the financial statements.
The annual general meeting of SimCorp A/S will be held on:
Wednesday, 29 March 2017 at 2 pm at
SimCorp's headquarters, Weidekampsgade 16, Copenhagen, Denmark.
To ensure continuity in the composition of the Board of Directors, the five members elected by the shareholders, who are currently serving on the Board of Directors, will stand for re-election at SimCorp's annual general meeting. Brief biographies of the current members of the Board of Directors are found on pages 35-36. Based on the Board of Directors' annual self-assessment and Mr. Franck Cohen having left the Board in May 2016, the Board intends to propose that Mr. Adam Warby be elected as new member of the Board of Directors to meet the ideal competence profile for the Board.
Denmark North America UK Europe Rest of the world 38% 2016 2015 28% 23% 10% 1% 37% 29% 23% 10% 1%
Adam Warby brings 30+ years of international experience in Enterprise Sales, Consulting and Global Services from a career spanning IBM, Microsoft and Avanade. Created as a joint venture by Accenture and Microsoft in 2000, Avanade is the leading provider of innovative cloud and digital services with 29,000 professionals in 22 countries and annual sales of \$2.4bn. As CEO since 2008, Adam has been instrumental in building Avanade's Digital and Cloud Managed Services solutions and offerings portfolio, including closing a number of critical tuck-in acquisitions. His strong operational and financial skills have been the foundation for consistent doubledigit growth for the company over a number of years. Adam lived and worked in the US for seven years and has wide-ranging global experience having managed Avanade's European operations and opened new subsidiaries in the developing markets of China, Brazil and South Africa. Adam earned a B.S. in Mechanical Engineering from Imperial College, London.
The Board of Directors intends to propose an unchanged Board remuneration level in 2017, except for fees for the Nomination Committee. This will entail the following total remuneration to the Board of Directors for the financial year 2017: The remuneration comprises cash of EUR 0.4m (DKK 3.3m), representing two thirds of the total remuneration, and SimCorp shares with a market value of around EUR 0.2m (DKK 1.6m), representing one third of the remuneration, totaling EUR 0.65m (DKK 4.9m). See 'Guidelines for the Remuneration of Board of Directors, Executive Management, and Employees' on the company's website.
The Board of Directors further intends to propose that the shareholders authorize the company to acquire treasury shares of up to 10% of the company's share capital. See section 198 of the Danish Companies Act.
The Board of Directors intends to recommend to the shareholders at the annual general meeting that the share capital be reduced by 1,000,000 shares of DKK 1 by cancellation of
treasury shares. Following this cancellation, the nominal share capital would be DKK 40,500,000 comprising 40,500,000 shares of DKK 1. The change requires an amendment to the articles of association.
The agenda for the annual general meeting including proposed resolutions will be published on Friday, 3 March 2017, on which date the notice convening the meeting will be sent by email to all registered shareholders.
Maintaining a composition of assets that does not raise questions about the company's financial stability is vital to SimCorp's continued international expansion. Management believes this objective will be achieved when the cash holdings and committed credit lines exceed 10% of the projected costs for the coming year. On this basis, the company intends to pay dividends of at least 50% of the profit on ordinary activities after tax. Additionally, cash will be used to buy treasury shares provided
the company does not anticipate specific cash requirements. The purchase of treasury shares is expected to be executed in terms of safe harbor programs.
The Board of Directors has considered SimCorp's cash position and liquidity forecast, and on the basis thereof, the Board of Directors intends to recommend to the shareholders at the annual general meeting that dividends of EUR 33.3m, equal to DKK 6.25 per share of DKK 1, be distributed for the financial year 2016, corresponding to a payout ratio of 67.7%. In order to be eligible for dividends, shares must be registered before 29 March 2017. The ex-dividend date is 30 March 2017.
Dividends for the financial year 2016 are expected to be paid on 3 April 2017. Based on the current business outlook and the cash position, SimCorp expects to continue having a share buyback program, in 2017 for a forecasted EUR 35m. The program will carried out in two half yearly buy-back programs of EUR 17.5m each during the period from the release of the Annual Report 2016 to the release of the Annual Report 2017 in February 2018. The program will be carried out in compliance with the provisions of Regulation No. 596/2014 of the European Parliament and of the Council on market abuse (the Market Abuse Regulation - MAR) and delegated legislation under MAR.
SimCorp pursues an open dialogue with investors and analysts about the company's business and financial performance. In order to ensure that all SimCorp's stakeholders have equal access to corporate information, news is released to Nasdaq Copenhagen, the media, and on SimCorp's website, where users can also subscribe to SimCorp's news service. SimCorp's Investor Relations team handles all contact with investors and the press on issues relating to the company's shares.
Please contact: Anders Hjort, Head of Investor Relations, Telephone: +45 35 44 88 00, [email protected], www.simcorp.com
Announcements to Nasdaq Copenhagen in 2016 can be found at www.simcorp.com/en/ news-and-announcements
Business address: Novo Nordisk A/S, Novo Allé, 2880 Bagsværd, Denmark
PERSONAL AND EDUCATIONAL BACKGROUND Born 1963, Danish citizen, MSc (Econ. and Audit.) and MBA from Copenhagen Business School.
Chairman of SimCorp A/S' Board of Directors since 2008 and Vice-chairman from 2007 to 2008. Also Chairman of the Board of Directors of NNIT A/S.
Executive Vice President and CFO of Novo Nordisk A/S. Is regarded as independent.
Group executive experience in a multinational corporation, including responsibility for strategy development and implementation, information technology and finance. Furthermore, involved in the development and governance of companies with IT and consultancy activities.
Business address: Stork's Nest, Kinsale, Ireland
PERSONAL AND EDUCATIONAL BACKGROUND Born 1969, Irish citizen, B. Comm. (Hons) from University College, Cork, MBA from Harvard Business School.
Member of SimCorp A/S' Board of Directors and SimCorp A/S' Audit Committee since 2014. Non-Executive. Chair of TD Bank (Europe) and TD Securities Ltd and Chair Audit Committee. Board Director and Chair of the Risk Committee of The Davy Group. Director of Board Agenda.
INDEPENDENCE Is regarded as independent.
RELEVANT COMPETENCES AND EXPERIENCE Significant board level experience within the financial services industry covering risk, strategy, corporate governance, major program management and consulting services.
Business address: AMADEUS S.A.S, 485 Route du Pin Montard, 06902 Sophia Antipolis Cedex, France
PERSONAL AND EDUCATIONAL BACKGROUND Born 1958, French citizen, MSc (Industrial Engineering) from École Centrale de Paris.
DIRECTORSHIPS Member of SimCorp A/S' Board of Directors since 2008.
INDEPENDENCE Executive Vice President in Amadeus S.A.S. Is regarded as independent
RELEVANT COMPETENCES AND EXPERIENCES International experience in software development for the financial sector as well as general management skills.
Business address: SimCorp A/S, Weidekampsgade 16, 2300 Copenhagen S, Denmark.
PERSONAL AND EDUCATIONAL BACKGROUND Born 1974, Danish citizen, MSc. (Economics) from University of Copenhagen.
DIRECTORSHIPS Employee-elected member of SimCorp A/S' Board of Directors since 2016.
RELEVANT COMPETENCES AND EXPERIENCES 16 years of experience from the financial industry. Expertise within fixed income, data management, and proactive management of SimCorp Dimension on behalf of the clients.
Business address: Aon UK Ltd., The Aon Centre, 122 Leadenhall Street, London EC3V 4AN, United Kingdom
PERSONAL AND EDUCATIONAL BACKGROUND Born 1952, British citizen, B.Com (Hons) from University of Cape Town, CA(SA), FCA, CPA.
Member of SimCorp A/S' Board of Directors since 2011. Chairman of the Audit Committee of SimCorp A/S since 2013. Chairman of Aon UK Ltd, director and Chairman of the Audit Committee of the Board of Directors of St James's Place plc and Henderson International Income Trust. Member of the Board of Directors of Templeton Emerging Markets Investment Trust plc.
INDEPENDENCE Is regarded as independent.
Group executive experience in a multinational corporation, including responsibility for strategy development and implementation, information technology and finance. Furthermore, involved in the development and governance of companies with IT and consultancy activities.
Business address: SimCorp GmbH, Justus-von-Liebig-Straße 1, 61352 Bad Homburg, Germany.
PERSONAL AND EDUCATIONAL BACKGROUND Born 1966, German citizen, Graduate Business Economist from Bankakademie Frankfurt.
DIRECTORSHIPS Employee-elected member of SimCorp A/S' Board of Directors since 2016.
28 years' experience from the financial industry within private asset management, custodian, investment management, and fund administration. Expertise within settlement, back office operations, fund administration, and business analysis.
Business address: SimCorp A/S, Weidekampsgade 16, 2300 Copenhagen S, Denmark.
PERSONAL AND EDUCATIONAL BACKGROUND Born 1967, Danish citizen, MSc. (Math and Economics) from Aarhus University.
DIRECTORSHIPS Employee-elected member of SimCorp A/S' Board of Directors since 2016.
13 years in risk management in leading financial institutions. 9 years in SimCorp's Product Management shap-ing the risk solutions of SimCorp Dimension.
Business address: SimCorp A/S, Weidekampsgade 16, 2300 Copenhagen S, Denmark.
PERSONAL AND EDUCATIONAL BACKGROUND Born 1948, Danish citizen, MSc (Econ.).
Vice-chairman of SimCorp A/S' Board of Directors since 2012. Chairman of the Board of Directors of DSB SOV and Falck A/S. Vice-chairman of the Board of Directors of Nordea-fonden and Nordea Bank-fonden. Member of the Board of Directors of Lundbeckfonden, Lundbeckfond Invest A/S, Bestyrelsesforeningen, Gösta Enboms Fond and Dronning Margrethe den II's Arkæologiske Fond. Member of the Industrial Board of Axcel and Axcel Future, and member of The Systemic Risk Council. Chairman of the investment committee of the Danish Climate Investment Fund and the Danish Agribusiness Fund.
INDEPENDENCE Is regarded as independent.
More than 30 years of management experience from an international financial company as well as several board positions both as chairman and member. Involvement in IT development and trading operations in financial institutions.
Born 1976 Managing Director, SimCorp North America Present position held since 2014
Born 1963 Chief Financial Officer (Interim) Present position held since 2016
Born 1966 Executive Vice President, SimCorp EMEA Present position held since 2012
Born 1961 Chief Executive Officer Present position held since 2012 Member of SimCorp A/S' Executive Management Board Chairman of the Board of Directors of EG A/S Member of the supervisory Board of Industriens Arbejdsgivere i København and The Scandinavian Golf Club Chairman of the Board of Directors of Delegate A/S and Lessor Group
Born 1967 Chief Human Resources Officer, Group Human Resources Present position held since 2014
Born 1966 Chief Technology Officer Present position held since 2009 Member of SimCorp A/S' Executive Management Board Chairman of the Board of Directors of Dyalog Ltd.
Born 1958 Executive Vice President, SimCorp Global Services Present position held since 2013
Born 1969 Chief Marketing Officer, Group Marketing & Communications Present position held since 2014
In the Annual Report 2015, SimCorp announced that, to support growth, all future new sales of SimCorp Dimension licenses would be on subscription-based licensing terms. From 2017, the revenue-recognition method for subscription-based licensing agreements will change. Revenue from subscription-based licenses and perpetual licenses will have the same recognition.
and has the ability to the use and get the benefits from the service.
SimCorp has assessed that the client obtains control of the SimCorp Dimension license or SimCorp Coric license, when a contract is agreed and the license is delivered. The license revenue will therefore be recognized in the year of sale, provided that the contract does not have functionality gaps or acceptance criteria. The IFRS 15 recognition is similar to the current revenue recognition for perpetual licenses,
SUBSCRIPTION BUSINESS MODEL
except that the subscription-based license fees will be discounted to net present value.
SimCorp must adopt the new revenue standard IFRS 15 no later than 1 January 2018, but has decided to early adopt IFRS 15 from 1 January 2017 to avoid confusion with the non-GAAP measures, which were introduced in the 2016 reporting. The purpose at that time was to provide comparison between the perpetual license model and the new subscription-based license model during the transition period.
IASB has issued accounting standard IFRS 15 "Revenue from Contracts with Customers" to take effect from 1 January 2018. The standard will establish a single, comprehensive framework for revenue recognition.
During 2016, SimCorp assessed and evaluated the new standard and concluded that with the new revenue recognition standard, there should not be distinguished between the revenue recognition for a subscription-based license and the revenue recognition for a perpetual license, since the nature of the license is independent of the delivery model.
Revenue is recognized when the client obtains control over the software license and SimCorp has an enforceable right to receive payment for the performance completed, or when the client has obtained control over the service
quarterly in advance.
0
1
2
3
4
5
Revenue
License fee recognized at agreement and when renewed. The bar chart illustrates a five-year agreement.
The use of non-GAAP measures is discontinued in 2017.
The subscription fee includes both license fee and maintenance fee. The revenue recognition for the maintenance part of the fee will continue to be over the term of the contract when the service is delivered.
The ASP offering, the hosted solution, consists of two parts; firstly, the subscription for SimCorp Dimension and, secondly, the provisions for the hardware and infrastructure required to operate the system. The revenue recognition for the ASP services will continue to be over the term of the contract when the service is delivered.
The non-GAAP measures, adjusted non-GAAP revenue and adjusted non-GAAP EBIT, applied in 2016 to new SimCorp Dimensions orders on subscription-based license terms as if they were on perpetual terms. With the adoption of the IFRS 15 revenue recognition standard, the recognition for the subscription-based licenses will be identical to the recognition for perpetual licenses. The only difference from the SimCorp non-GAAP measures is that this will also apply to the recognition of SimCorp Coric licenses and to add-on sales of SimCorp Dimension licenses.
To transition into the new revenue recognition standard, SimCorp will recognize the cumulative effect of initially applying the guidance as an opening balance sheet adjustment to equity in the period of the initial application, i.e. January 2017.
At 31 December 2016, SimCorp's order book totaled EUR 44.8m, of which SimCorp Dimension accounted for EUR 32.4m and SimCorp Coric for EUR 12.4m. Approximately 50% of the SimCorp Dimension order book relates to subscription-based license agreements, and 100% of the SimCorp Coric order book are subscription-based license agreements, i.e. the cumulative effect will reduce the order book by around EUR 28.5m. The remaining approximately EUR 16.3m of the order book relates to functionality yet to be developed or to contracts subject to acceptance criteria, or similar conditions where the recognition of revenue is deferred until delivery of the functionality or until the performance obligation has been satisfied.
January 2017, approximately EUR 22m after provisions for taxes will be booked as retained earnings in the Group consolidated equity.
SimCorp will in 2017, the first year of adoption, report both in accordance with the current
and the new reporting standard, as required in the standard. By adopting IFRS 15, the negative impact on revenue and EBIT of introducing subscription-based licensing will be eliminated.
As a consequence of adopting IFRS 15, SimCorp will change its revenue reporting to be divided into the following items:
License income made on new perpetual license terms or subscription-based license terms.
Additional license income from existing clients made on perpetual license terms or subscription-based license terms.
PROFESSIONAL SERVICES FEES Implementation fees related to the implementation of new and existing contracts irrespective of the terms of the contract. Furthermore, professional services fees include revenue from professional services based on multi-year recurring contracts as well as professional services fees related to operating ASP services for clients.
Maintenance fees related to contracts made on perpetual and subscription-based license terms. Maintenance fees include both initial license- and additional license-based maintenance fees.
Fees related to the pass-through invoicing of infrastructure costs associated with ASPbased contracts.
Other types of revenue, for instance training.
| 2016 | 2015 | |||||
|---|---|---|---|---|---|---|
| Q1 | Q2 | Q3 | Q4 | Total | Total | |
| Profit, EURm | ||||||
| Licenses - new sales | 4.2 | 1.4 | 14.6 | 19.4 | 39.6 | 32.4 |
| Licenses - additional sales | 3.1 | 10.5 | 5.6 | 20.2 | 39.4 | 38.3 |
| Professional services | 21.3 | 24.7 | 20.8 | 27.5 | 94.3 | 85.0 |
| Maintenance | 31.3 | 32.0 | 33.5 | 32.5 | 129.3 | 122.3 |
| ASP hosting | 0.1 | 0.3 | 0.3 | 0.3 | 1.0 | 0.1 |
| Other | 1.3 | 1.1 | 1.5 | 1.7 | 5.6 | 5.6 |
| Revenue | 61.3 | 70.0 | 76.3 | 101.6 | 309.2 | 283.7 |
| Profit from operations (EBIT) | 7.4 | 15.1 | 20.5 | 38.2 | 81.2 | 76.4 |
| EBIT margin | 12.1% | 21.6% | 26.9% | 37.6% | 26.3% | 26.9% |
Preliminary restatement of financial statement 2016 according to IFRS 15.
FINANCIAL TARGETS 2017
| Guidance given in | ||
|---|---|---|
| local currencies and | Guidance | Restated |
| in accordance with IFRS 15 | 2017 | 2016 |
| Revenue | 7%-12% | 10.7% |
| EBIT margin | 25%-28% | 26.1% |
SimCorp expects revenue growth in local currencies, and in accordance with IFRS 15, between 7% and 12% in 2017, with an EBIT margin measured in local currencies between 25% and 28%. SimCorp's long-term target is to generate double-digit annual revenue growth, and to expand margins year on year.
Despite the current turmoil on the global equity markets, oil price uncertainty, and political uncertainty, SimCorp regards the underlying macroeconomic trends for 2017 as positive.
It is difficult to predict the total number of deals available in 2017. However, based on the company's strong market performance over the last three years, and considering the momentum gained with the front office offering, SimCorp expects to continue to gain market share in 2017.
Reports show that a growing share of investment managers' IT budgets in 2017, compared to 2016, will be allocated to modernization of the operating model and legacy system replacement1. Further, SimCorp expects to be able to gain an even stronger position with current as well as new clients in the front office area as a result of its continued investment into its Front Office Suite. This assumption is backed by reports predicting that projected front office IT spend in our target market is to grow 4.2% CAGR from 2015-2020 with a USD 2.2b annual spend in 20172. SimCorp also expects to benefit further from the full ownership of SimCorp Coric by cross-selling between SimCorp Dimension and SimCorp Coric.
The expected most important focus areas in the investment management industry are met by SimCorp's offering, including:
Based on the current business environment and SimCorp's current position, the expectations for 2017 in accordance with IFRS 15 are to grow revenue in local currencies by
Main currencies EUR per 100 Exchange rate 31 January 2017 Average rates 2016 Average rates 2015 USD 92.98 90.51 90.07 CAD 71.14 68.70 71.14 AUD 70.43 67.51 67.80 SGD 65.78 65.48 65.65 GBP 116.14 123.18 138.24 CHF 93.74 91.77 93.63 NOK 11.25 10.79 11.22 SEK 10.58 10.56 10.71
between 7% and 12% and to generate an EBIT margin measured in local currencies between 25% and 28%.
Based on the exchange rates prevailing per end of January 2017, SimCorp estimates reported revenue to be positively impacted from currency fluctuations by around 0.4%. The impact from currency fluctuations on reported EBIT margin is expected to be positive by around 0.3%-points.
For 2017, SimCorp expects a group effective tax rate between 23% and 25%.
In 2016, SimCorp changed its licensing model from a perpetual license model to a subscription-based model to support further growth, particularly in North America. This change applied to new SimCorp Dimension licenses only, as existing clients already have acquired
2 Ovum: 'Financial Markets Technology Spending Through 2020 – Front Office IT spend and growth rate projection', June 2016.
the right to use SimCorp Dimension under the perpetual license model. Some existing clients, however, might choose to move from a perpetual model to a subscription-based model, just as some new clients may want to enter a perpetual license model agreement.
We expect to sign both perpetual license agreement and subscription-based license agreements in 2017.
The ability to offer clients to operate SimCorp Dimension is increasingly becoming a prerequisite for signing new deals, particularly in North America. Consequently, SimCorp has since 2016 made it a strategic priority to offer to operate SimCorp Dimension on clients' behalf. The ASP offering entails costs to third-party global IT-infrastructure providers, which SimCorp will be passing through to clients at very marginal profits.
The ASP offering will have a dilutive impact on EBIT margins as a result of the pass through of ASP hosting costs and revenues. The ASP offering is expected to impact revenue growth positively by around 0.5%-point in 2017 and have minor negative impact on the EBIT margin in 2017 included in the guidance.
Accordingly, income will vary considerably from one reporting period to the next. Clients who already had business relations with SimCorp on 1 January 2017 are expected to account for around 90% of total revenue in 2017 – unchanged from 2016.
SimCorp's long-term target is to generate double-digit annual revenue growth and to expand margins year on year. SimCorp's long-term expectations are based on the assumption that the level of new deals in the market will be between 40 and 50 per year.
" SimCorp's integrated solution has provided multi-asset support, decreased the number of applications, and dramatically reduced manual processes, reports, and interfaces.
CHRYSSA HALLEY SVP, Deputy Controller, Fannie Mae
SimCorp achieved a non-GAAP1 EBIT margin of 25.8% measured in local currencies in 2016 and reported a non-GAAP EBIT of EUR 80.0m, or an increase of 12.6% compared with 2015. SimCorp achieved a revenue growth for 2016 of 8.1% measured in local currencies and an EBIT margin of 22.8% measured in local currencies. Strong performance in new sales in North America contributed to the positive non-GAAP revenue growth of 12.4% measured in local currencies. Total order intake increased by 20.3% and, on balance, SimCorp views the performance in 2016 as satisfactory.
| Realized 2016 |
24 Sep 2016 | Q1 2016 10 May 2016 |
Annual report 2015 22 Feb 2016 |
|
|---|---|---|---|---|
| Revenue | 8.1% | 5%-10% | 3%-8% | 3%-8% |
| Adjusted non-GAAP revenue1 |
12.4% | 10%-15% | 8%-15% | 8%-13% |
| EBIT margin | 22.8% | 22%-24% | 21%-24% | 21%-24% |
| Adjusted non-GAAP EBIT margin |
25.8% | 24%-28% | 24%-28% | 24%-27% |
1 SimCorp Dimension order intake made on subscription-based terms to be income recognized in the year the order is signed, as if the orders had been signed on perpetual license terms. Refer to note 2.1.
In 2016, the subscription-based licensing model was introduced to support further growth, particularly in North America. In order to still enable comparison with past performance, an additional guidance on adjusted non-GAAP revenue and non-GAAP EBIT margin measures was introduced.
The 2015 Annual Report announced 2016 revenue growth expectations measured in local currencies between 3% and 8%, based on an expected split between new SimCorp Dimension license deals of 75/25 in the favor of subscription-based licenses and a non-GAAP revenue growth measured in local currencies between 8% and 13%. The EBIT margin in local currencies was expected to be between 21% and 24% and the non-GAAP EBIT margin between 24% and 27%.
In the interim report for Q1 2016 published 10 May 2016, the expectations for the 2016 non-GAAP revenue margin were revised to a revenue growth in local currencies between 8% and 15%, and the expectations for the non-GAAP EBIT margin in local currencies were increased to between 24% and 28%.
On 24 September 2016, SimCorp announced that a perpetual order had been signed with Franklin Templeton Companies and that the expected split between subscription-based deals and perpetual deals was now 50/50. Consequently, the revenue growth measured in local currencies was updated to be between 5% and 10% and the non-GAAP revenue growth in local currencies to be between 10% and 15%. Expectations for the reported EBIT margin were raised to between 22% and 24%, while expectations for the non-GAAP EBIT margin in local currencies were maintained at between 24% and 28%.
SimCorp achieved a revenue growth for 2016 of 8.1% measured in local currencies and an EBIT margin of 22.8% measured in local currencies. The currency rate fluctuations impacted revenue growth negatively by 1.6% and the EBIT margin positively by 0.3%, leading to a reported revenue growth of 6.5% and a reported EBIT margin of 23.1%. The non-GAAP revenue growth for 2016 was 12.4% measured in local currencies and the non-GAAP EBIT margin was 25.8% measured in local currencies. The currency rate fluctuations impacted non-GAAP revenue growth negatively by 1.7% and the non-GAAP EBIT margin positively by 0.2%, leading to a reported non-GAAP revenue growth of 10.7% and a reported non-GAAP EBIT margin of 26.0%.
The total license order intake increased by 20.3% to EUR 85.1m in 2016, including SimCorp Coric orders. The order intake for SimCorp Dimension increased by 27.1% to EUR 77.7m. Twelve new SimCorp Dimension solutions were sold, totaling EUR 39.1m. The order intake for SimCorp Coric was EUR 7.4m. SimCorp Coric sold four new standalone solutions and two solutions were sold with SimCorp Dimension. The total order book increased by EUR 20.7m from 1 January 2016 to EUR 44.8m at 31 December 2016, including the order book value of SimCorp Coric contracts of EUR 12.4m. The order book value of SimCorp Dimension orders increased from EUR 13.6m to EUR 32.4m as a result of a number of the new license orders being on
subscription-based terms rather than perpetual license-based terms. The split between subscription-based and perpetual SimCorp Dimension license orders were 60/40 in favor of perpetual orders.
Compared with 2015, the average size of new SimCorp Dimension licenses decreased from EUR 4.7m to EUR 3.3m per deal in 2016. The main reason for this decrease is that while two very large new license deals were signed in 2015, both large and smaller license deals were signed in 2016.
In 2016, SimCorp signed five new SimCorp Dimension license orders in the designated growth market North America. Three of the new contracts were signed on subscription-based terms and two on perpetual terms. Four of the contracts are to be delivered as ASP contracts.
In France, another of SimCorp's designated growth markets, one new perpetual deal was signed with EXANE SA. Additionally, a joint effort between the sales team in France and Central Europe enabled SimCorp to sign a significant perpetual SimCorp Dimension license order with Generali Investments in Italy. Finally, France signed a subscription-based SimCorp Dimension license order with an undisclosed client in Spain.
In addition, two new subscription-based SimCorp Dimension orders were signed in the Nordic business unit. The remaining two new license deals on the SimCorp Dimension platform were perpetual license orders signed with Belfius Bank & Insurance in Belgium and an undisclosed asset manager in Australia.
SimCorp Coric sold six new solutions in 2016; two in the UK, two in Europe, and two in the US.
Order intake of additional licenses for SimCorp Dimension increased by 19.1% in 2016. A number of large add-on sales deals were
signed with clients in the Middle East. In Benelux, a large add-on license deal was signed with Nomura, Luxemburg, and another large add-on license deal was signed with a client in France. Further, the Nordic business unit achieved strong add-on sales in 2016.
Measured as a percentage of the total value of the installed SimCorp Dimension license base, the conversion rate for additional licenses was 5.7% in 2016 compared with 5.3% in 2015. In 2016, SimCorp again saw an increase in existing clients adopting its Front Office Suite. This was both the case for clients previously using the former SimCorp Dimension front office solution, and clients who had before used a non-SimCorp solution for front office operations.
SimCorp also saw existing clients expanding their use of the SimCorp Coric platform, both in terms of functionality and in number of users. In 2016, a number of clients renewed their subscription licenses with SimCorp Coric subsequent to the initial subscription period. The renewal rate was 100%.
Three clients cancelled SimCorp Dimension contracts in 2016 with an immaterial impact of 0.3%-points of total revenue.
License base (left axis)
License base (left axis)
Add-on license sales in % of license base (right axis)
Add-on license sales in % of license base (right axis)
Conversion rate: Add-on licenses as a percentage of the installed license base beginning of year. License base: Accumulated license order value. Conversion rate: Add-on licenses as a percentage of the installed license base beginning of year. License base: Accumulated license order value.
| EURm | Revenue 12M 2016 |
Share of revenue 12M 2016 |
Revenue 12M 2015 |
Share of revenue 12M 2015 |
Growth relative to 12M 2015 |
Growth local currency relative to 12M 2015 |
|---|---|---|---|---|---|---|
| - Subscription fees | 11.9 | 4.0% | 7.9 | 2.9% | 49.3% | 55.7% |
| - Professional services | 23.1 | 7.8% | 24.3 | 8.7% | -4.6% | -2.5% |
| - Maintenance | 125.6 | 42.4% | 120.1 | 43.2% | 4.6% | 6.3% |
| - ASP hosting | 0.9 | 0.3% | 0.1 | 0.0% | n.m | n.m |
| - Other | 0.7 | 0.3% | 0.4 | 0.1% | 111.7% | 114.2% |
| Recurring revenue | 162.2 | 54.8% | 152.8 | 54.9% | 6.2% | 8.3% |
| - License fees | 58.2 | 19.7% | 59.7 | 21.5% | -2.4% | -1.9% |
| - Professional services | 70.2 | 23.7% | 60.2 | 21.7% | 16.5% | 18.2% |
| - Other | 5.3 | 1.8% | 5.2 | 1.9% | 0.6% | 2.4% |
| Non-recurring revenue | 133.7 | 45.2% | 125.1 | 45.1% | 6.8% | 7.9% |
| Total revenue | 295.9 | 100.0% | 277.9 | 100.0% | 6.5% | 8.1% |
SimCorp derives revenue from three primary sources: license fees, fees from professional services, and maintenance income. SimCorp generated total revenue of EUR 295.9m in 2016 compared with EUR 277.9m in 2015, equal to an increase of 6.5%. Exchange rate fluctuations for the year had a negative impact of EUR 4.6m on revenue, equal to 1.6%. In local currencies, revenue thus increased by 8.1% compared with 10.1% in 2015.
The total non-GAAP revenue, which includes the value of the subscription-based licenses as if they had been perpetual licenses, was EUR 307.7m in 2016 compared with EUR 277.9m in
2015, equal to an increase of 10.7%. Exchange rate fluctuations for the year had a negative impact of 1.7%. This gives an increase in non-GAAP revenue measured in local currencies of 12.4% compared with 10.1% in 2015.
As a consequence of moving to the subscription-based licensing model, SimCorp also changed its revenue reporting to be divided into recurring revenue and non-recurring revenue.
Recurring revenue was EUR 162.2m compared with EUR 152.8m in 2015. Currency fluctuations impacted recurring revenue negatively by EUR 3.2m. The increase in recurring revenue is related to revenue from new subscriptionbased licenses, add-on subscription-based
licenses, and a higher maintenance revenue, which continues to increase with the completion of client installations.
Non-recurring revenue was EUR 133.7m compared with EUR 125.1m in 2015. Currency fluctuations impacted non-recurring revenue negatively by EUR 1.4m. The increase in nonrecurring revenue relates to both an increase in add-on perpetual license revenue and a higher professional services revenue from the implementation of new client installations and new functionality to existing clients.
SimCorp's total license fee recognized from subscription-based licenses, new perpetual licenses, and add-on licenses totaled EUR 65.7m, an increase of EUR 0.8m, or 1.2%
compared to 2015. Currency fluctuations impacted total license fee negatively by EUR 0.6m. The non-GAAP license income totaled EUR 77.5m, after an adjustment of EUR 11.8m for the impact of selling SimCorp Dimension licenses as subscription-based contracts instead of as perpetual licenses, an increase of 19.4% relative to reported revenue in 2015. Currency fluctuations impacted this negatively by EUR 0.8m. In total, the reported license fee revenue accounted for 22.2% of the Group's total revenue compared with 23.3% last year, while the non-GAAP license fee revenue accounted for 25.2%.
Existing clients made additional investments in SimCorp Dimension and SimCorp Coric in 2016, and the number of SimCorp Dimension clients with a license base of more than EUR 2m has increased by 4%-points to 72% of all clients at 31 December 2016. Around 100 clients have expanded their use of SimCorp Dimension during 2016, which is similar to the number in 2015.
The accumulated value of the installed license base for SimCorp Dimension clients who have an installed license base above EUR 2m accounted for 92% of the value of the total installed license base. The license base is the contract value of all software licenses sold.
The ten largest clients generated around 25% of SimCorp's total revenue, which is an increase of 1% from last year's level. No single client accounted for more than 3.3% of the revenue in 2016.
Maintenance income increased by 4.6% from EUR 120.1m last year to EUR 125.6m with the completion and implementation of new client installations and new functionality to existing clients. The increase in local currency was 6.3%. Maintenance income accounted for 42.4% of total revenue compared with 43.2% in 2015. License agreements won in 2016 will increase annual maintenance income by around EUR 11m once implemented.
Fees from professional services were EUR 93.3m compared with EUR 84.5m in 2015, equal to a 10.4% increase. Currency rate fluctuations impacted revenue growth from professional services negatively by EUR 1.5m. Fees from professional services accounted for 31.5% of total revenue in 2016 compared with 30.4% in 2015.
SimCorp entered 2017 with signed revenue for the full year of EUR 207.3m – an increase of EUR 27.4m compared with the beginning of 2016, and higher than ever before.
In 2016, SimCorp achieved a strong top-line growth of 40% in the designated growth market North America, SimCorp Coric reported a 34% growth, and Western Europe recognized 25% growth, all measured in local currencies. Some of the more mature markets also delivered a relatively high growth, taking SimCorp's already strong position in these markets into consideration, while only Central Europe's top-line declined (for more details, see the Business Unit Review 2016, pp 55-56).
| EURm | 2016 | 2015 | Change |
|---|---|---|---|
| Central Europe | 68.8 | 74.2 | -7.2% |
| Benelux, France & Italy |
65.0 | 52.0 | 24.9% |
| Nordic | 54.6 | 54.7 | -0.2% |
| North America | 47.5 | 37.6 | 26.4% |
| UK & Middle East | 31.9 | 34.4 | -7.4% |
| APAC | 18.6 | 16.9 | 10.2% |
| SimCorp Coric | 9.5 | 8.1 | 17.3% |
| Total | 295.9 | 277.9 | 6.5% |
SimCorp's total operating expenses (including amortization and depreciation) increased by 10.0% to EUR 228.0m compared with EUR 207.4m in 2015. The total costs were positively impacted by currency rate fluctuations, which reduced costs by EUR 4.2m. 72% of SimCorp's total costs were directly related to employees compared with 75% in 2015.
The cost increase was partly related to building capacity for the future business growth, which has led to an increase of 5.8% in the average number of full-time employees from 1,205 to 1,275. The number of employees were 1,376 at the end of 2016, representing an increase of 108 compared with 2015. Additionally, the cost increase can be attributed to a general annual salary increase of around 2%. The ratio of operating expenses to revenue was 77.1% and measured on non-GAAP revenue 74.1% compared with 74.6% in 2015.
Cost of sales increased by 11.7% to EUR 111.8m. Salary costs for implementation consultants are included in this category and account for a significant part of the cost of sales. The increase was mainly related to a higher number of professional service implementation consultants in France and the UK, and increased costs to external implementation consultants due to a significantly higher business activity level in 2016. Cost of sales represents 37.8% of revenue compared with 36.0% in 2015.
Research and development costs increased by 9.9% from EUR 53.9m to EUR 59.3m. The increase was driven by a 7% increase in the average number of employees and by a general salary increase of around 2%. Research and development costs represent 20.0% of revenue compared with 19.4% in 2015. Management maintains focus on the ongoing improvement of efficiency and effectiveness within the Product division.
48% 26% 17% 9%
Sales and marketing costs increased by 6.3% to EUR 37.5m in 2016, the increase mainly being related to a 5.2% increase in the average number of employees. Furthermore, sales commission has increased as a result of the strong order intake. The increase also relates to higher sales commission reflecting a different geographical distribution of the order intake in 2016. Sales and marketing costs represent 12.7% of revenue, which is the same level as in 2015.
Administrative expenses increased by 7.8% to EUR 19.4m. Administrative expenses represent 6.6% of revenue.
SimCorp generated an EBIT of EUR 68.2m compared with EUR 71.0m in 2015, a decrease of EUR 2.8m. This decrease is mainly caused by the change to subscription-based license sales for new orders. Exchange rate fluctuations for the year had a positive net impact
of 0.3%-points on the EBIT margin. The adjusted non-GAAP EBIT totaled EUR 80.0m compared with EUR 71.0m in 2015, an increase of EUR 9.0m. The currency rate fluctuations for the year had a positive net impact of 0.2%-points on the non-GAAP EBIT margin.
Foreign exchange adjustments generated financial income of EUR 2.7m. Financial expenses, primarily relating to cash holdings and foreign exchange adjustments, amounted to EUR 3.4m.
Operations generated a profit before tax of EUR 67.6m against EUR 69.1m in 2015. The tax charges for 2016 amounted to EUR 16.6m against EUR 16.5m in 2015. The effective tax rate was 24.6% compared with 23.9% in 2015. Income tax rate has increased due to higher earnings in jurisdictions with higher tax rates.
The Group profit after tax was EUR 51.0m against EUR 52.6m in 2015. After foreign currency translation differences and other items of EUR 1.7m, the total comprehensive income amounted to EUR 49.3m against EUR 54.4m in 2015.
| EURm | Costs 2016 | Share of consolidated costs 2016 |
Share of revenue 2016 |
Change relative to 2015 |
|---|---|---|---|---|
| Cost of sales | 111.8 | 49.0% | 37.8% | 11.7% |
| Research and development |
59.3 | 26.0% | 20.0% | 9.9% |
| Sales and marketing |
37.5 | 16.5% | 12.7% | 6.3% |
| Administration | 19.4 | 8.5% | 6.6% | 7.8% |
| Total | 228.0 | 100.0% | 77.1% | 10.0% |
SimCorp had total assets of EUR 146.9m at 31 December 2015 compared with EUR 149.5m at 31 December 2015. Cash holdings amounted to EUR 31.6m, or EUR 11.7m less than 31 December last year. Total receivables amounted to EUR 80.0m at 31 December 2016 against EUR 68.1m at 31 December 2015. The increase is related to strong sales at the end of 2016. SimCorp has not made any provisions for bad debts since 2008.
The Group's total non-current assets were EUR 1.2m lower compared with 2015 and amounted to EUR 26.7m at 31 December 2016. Goodwill was EUR 4.0m at 31 December 2016, which was a decrease of EUR 0.6m from last year due to exchange differences. The carrying amount of acquired software increased by EUR 0.5m to EUR 4.2m, and the value of client contracts was EUR 2.8m at the end of 2016, which was a decrease of EUR 0.6m from last year due to exchange differences. Deferred tax assets decreased by EUR 0.5m to EUR 8.5m. Property, plant, and equipment amounted to EUR 4.8m against EUR 4.3m in 2015.
The Group's equity decreased during the year from EUR 89.8m to EUR 72.6m. Comprehensive income amounted to EUR 49.3m against EUR 54.4m last year. The net effect from share-based payments related to restricted stock units was EUR 6.3m, compared with EUR 7.7m in 2015. Dividend payments of EUR 28.5m against EUR 24.5m last year and purchases of treasury shares of EUR 44.4m against EUR 21.2m in 2015 reduced equity by EUR 72.9m in 2016 compared with EUR 45.7m in 2015.
Operating activities generated a net cash inflow of EUR 65.4m against EUR 54.2m last year and there was a net cash outflow of EUR 4.3m from investing activities compared with EUR 2.6m in 2015.
SimCorp purchased 948,047 treasury shares with a nominal value of DKK 1 in 2016 at an average price of DKK 348.23 per share. SimCorp delivered 228,017 treasury shares with a nominal value of DKK 1 on the vesting of restricted stock units. Furthermore, 4,873 treasury shares will be delivered after publication of this annual report as remuneration to the Board of Directors in accordance with a resolution adopted by shareholders at the annual general meeting 2016.
At 31 December 2016, SimCorp held 2,037,369 treasury shares with a nominal value of DKK 1 each (4.9% of the total share capital) at a cost of EUR 77.7m and a market value of EUR 94.3m. At 31 December 2015, SimCorp held 1,317,339 treasury shares with a nominal value of DKK 1 each (3.2% of the total share capital) at a cost of EUR 39.5m and a market value of EUR 68.5m.
In 2016, the parent company generated revenue of EUR 151.1m, an increase of EUR 8.5m compared with 2015.
The parent company received dividends totaling EUR 8.3m from subsidiaries in 2015 compared with EUR 23.0m in 2015.
Profit before tax for the year was EUR 61.5m against EUR 81.5m in 2015. Income tax amounted to EUR 12.3m compared with EUR 13.2m in 2015.
Profit after tax for the year was EUR 49.2m against EUR 68.3m in 2015. Equity decreased by EUR 16.9m to EUR 76.0, including share capital of EUR 5.6m, retained earnings of EUR 37.1m, after a proposed dividend of EUR 33.3m.
The Board of Directors intends to recommend to shareholders at the annual general meeting that, of the total recognized comprehensive income of EUR 49.6m, dividends of EUR 33.3m be declared, representing DKK 6.25 per share of DKK 1, and that EUR 16.3m be transferred to retained earnings.
Q4 of 2016 was a strong quarter with five new SimCorp Dimension orders signed. One perpetual license order with Generali Investments in Italy and four subscription-based orders; two in the Nordic market unit, one in North America, and one in Spain. Finally, one new SimCorp Coric order was signed in Europe.
In Q4 2016, the total order intake was EUR 40.7m, an increase of EUR 18.8m compared with Q4 2015. This gives a total order book of EUR 44.8m at 31 December 2016. The order book increased as a result of four new license orders signed on subscription-based terms rather than perpetual license terms.
Q4 2016 revenue was EUR 93.7m, a quarterly increase of 11.7% measured in EUR and 12.7% measured in local currencies. Non-GAAP revenue, after adjustment of EUR 7.3m for the impact of selling SimCorp Dimension licenses as subscription-based contracts rather than perpetual licenses, totaled EUR 101.0m compared with a reported revenue of EUR 83.8m in Q4 2015, an increase of 20.4% relative to Q4 2015.
Recurring revenue was EUR 42.0m compared with EUR 38.7m in the same period last year. Currency fluctuations have impacted this negatively by EUR 0.7m. The increase in recurring revenue is related to both new subscription-based licenses and to higher maintenance revenue.
Non-recurring revenue increased by 14.5% to EUR 51.7m. The increase is related to an increase in add-on perpetual license revenue and higher professional services revenue from implementation of new client installations and new functionality to existing clients.
Total costs (including depreciation and amortization) were EUR 63.4m, an increase of EUR 7.3m or 13.1% compared with the same period last year. Total costs were reduced by approximately EUR 1.5m from the effect of currency fluctuations. The average number of full-time employees increased by 98 compared with same period last year and accounted for around 8%-points of the increase in costs.
Cost of sales increased EUR 3.1m or 11.4%. The increase was driven by the recruitment of a higher number of professional service implementation consultants in North America, France, and the UK. Finally, the increase in costs was also related to the hiring of external implementation consultants due to a significantly higher business activity than in Q4 2015.
Research and development costs increased 14.1% compared with Q4 2015 driven by a higher number of employees.
Sales and marketing costs increased by 12.8%. Higher sales commissions and more people employed in the sales organization were the main drivers for this.
EBIT and EBIT MARGIN
SimCorp made EBIT of EUR 30.3m compared with EUR 28.0m in Q4 2015, an increase of
EUR 2.3m. The EBIT margin decreased to 32.4% compared with 33.4% in the same period last year.
Adjusted non-GAAP EBIT measured in local currencies was EUR 37.7m, which is an increase of EUR 9.6m compared with Q4 2015. The adjusted non-GAAP EBIT margin increased to 37.3% from 33.4% in 2015.
RESULT FOR THE PERIOD BEFORE TAX The result before tax was EUR 29.8m against EUR 27.5m in Q4 2015.
The Group profit after tax for Q4 2016 was EUR 22.4m against EUR 21.0m in same period last year.
| EURm | 2016 Q4 |
2015 Q4 |
|---|---|---|
| Revenue | 93,659 | 83,826 |
| Cost of sales | 30,448 | 27,338 |
| Gross profit | 63,211 | 56,488 |
| Other operating income | 51 | 237 |
| Research and development costs | 16,113 | 14,122 |
| Sales and marketing costs | 10,917 | 9,678 |
| Administrative expenses | 5,885 | 4,883 |
| Operating profit (EBIT) | 30,347 | 28,042 |
| Adjusted non-GAAP statement | ||
| Subscription - new sales - adj. of order | 7,303 | 0 |
Adjusted non-GAAP revenue 100,962 83,826 Adjusted non-GAAP profit from operations (EBIT) 37,657 28,042
| EURm | Revenue Q4 2016 |
Share of revenue Q4 2016 |
Revenue Q4 2015 |
Share of revenue Q4 2015 |
Growth relative to Q4 2015 |
Growth local currency relative to Q4 2015 |
|---|---|---|---|---|---|---|
| - Subscription fees | 3.6 | 3.8% | 2.1 | 2.5% | 68.9% | 77.2% |
| - Professional services | 6.8 | 7.3% | 6.0 | 7.2% | 13.4% | 16.3% |
| - Maintenance | 31.2 | 33.3% | 30.5 | 36.4% | 2.3% | 3.5% |
| - ASP hosting | 0.2 | 0.2% | 0.0 | 0.0% | n.m | n.m |
| - Other | 0.2 | 0.2% | 0.1 | 0.1% | 100.0% | 104.0% |
| Recurring revenue | 42.0 | 44.8% | 38.7 | 46.2% | 8.5% | 10.4% |
| - License fees | 29.6 | 31.6% | 26.1 | 31.1% | 13.4% | 13.1% |
| - Professional services | 20.4 | 21.8% | 17.3 | 20.6% | 17.6% | 18.1% |
| - Other | 1.7 | 1.8% | 1.7 | 2.0% | 0.0% | 2.6% |
| Non-recurring revenue | 51.7 | 55.2% | 45.1 | 53.8% | 14.5% | 14.6% |
| Total revenue | 93.7 | 100.0% | 83.8 | 100.0% | 11.7% | 12.7% |
| 2015 | 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | ||
| EUR/DKK rate of exchange at end of quarter | 7,4697 | 7,4604 | 7,4598 | 7,4625 | 7,4512 | 7,4393 | 7,4513 | 7,4344 | |
| PROFIT, EUR'000 | |||||||||
| Subscription - new sales | 1,397 | 1,581 | 1,484 | 1,431 | 1,677 | 1,753 | 1,926 | 2,358 | |
| Subscription - additional sales | 340 | 452 | 584 | 681 | 972 | 1,033 | 1,037 | 1,114 | |
| Professional services | 5,295 | 7,396 | 5,622 | 5,972 | 4,187 | 6,538 | 5,662 | 6,773 | |
| Maintenance | 29,400 | 30,074 | 30,087 | 30,544 | 30,574 | 31,101 | 32,572 | 31,323 | |
| Hosting and other | 122 | 79 | 108 | 138 | 241 | 496 | 449 | 467 | |
| Total recurring revenue | 36,554 | 39,582 | 37,885 | 38,766 | 37,651 | 40,921 | 41,646 | 42,035 | |
| Perpetual licenses - new sales | 2,345 | 4,166 | 12,644 | 10,324 | 901 | 646 | 12,743 | 9,807 | |
| Perpetual licenses - additional sales | 1,808 | 9,153 | 3,424 | 15,821 | 2,948 | 7,958 | 3,400 | 19,838 | |
| Professional services | 14,644 | 14,029 | 14,291 | 17,243 | 16,955 | 18,053 | 14,870 | 20,280 | |
| Other | 1,137 | 1,091 | 1,348 | 1,672 | 1,153 | 960 | 1,466 | 1,699 | |
| Total non-recurring revenue | 19,934 | 28,439 | 31,707 | 45,060 | 21,957 | 27,617 | 32,479 | 51,624 | |
| Total revenue | 56,488 | 68,021 | 69,592 | 83,826 | 59,608 | 68,538 | 74,125 | 93,659 | |
| Adjusted non-GAAP revenue | 56,488 | 68,021 | 69,592 | 83,826 | 64,366 | 68,390 | 73,973 | 100,962 | |
| Cost of sales | 24,429 | 24,291 | 24,028 | 27,338 | 26,676 | 27,084 | 27,565 | 30,448 | |
| Gross profit | 32,059 | 43,730 | 45,564 | 56,488 | 32,932 | 41,454 | 46,560 | 63,211 | |
| Other operating income | 9 | 6 | 240 | 237 | 84 | 52 | 137 | 51 | |
| Research and development costs | 13,427 | 13,793 | 12,575 | 14,122 | 14,296 | 14,771 | 14,090 | 16,113 | |
| Sales and marketing costs | 7,573 | 8,933 | 9,153 | 9,678 | 8,274 | 8,654 | 9,701 | 10,917 | |
| Administrative expenses | 4,471 | 4,305 | 4,382 | 4,883 | 4,580 | 4,429 | 4,548 | 5,885 | |
| Operating profit (EBIT) | 6,597 | 16,705 | 19,694 | 28,042 | 5,866 | 13,652 | 18,358 | 30,347 | |
| Adjusted non-GAAP operating profit (EBIT) | 6,597 | 16,705 | 19,694 | 28,042 | 10,624 | 13,496 | 18,206 | 37,657 | |
| Financial items, net | -717 | -397 | -260 | -564 | 51 | -4 | -157 | -520 | |
| Profit before tax | 5,880 | 16,308 | 19,434 | 27,478 | 5,917 | 13,648 | 18,201 | 29,827 | |
| Tax | 1,581 | 3,758 | 4,670 | 6,507 | 1,404 | 3,560 | 4,205 | 7,432 | |
| Profit for the period | 4,299 | 12,550 | 14,764 | 20,971 | 4,513 | 10,088 | 13,996 | 22,395 | |
| Earnings before interest, tax, depreciation and amortization (EBITDA) | 7,347 | 17,437 | 20,518 | 28,925 | 6,679 | 14,481 | 19,261 | 31,162 |
| 2015 | 2016 | |||||||
|---|---|---|---|---|---|---|---|---|
| Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |
| BALANCE SHEET, EUR'000 | ||||||||
| Share capital | 5,575 | 5,575 | 5,575 | 5,575 | 5,575 | 5,575 | 5,575 | 5,575 |
| Equity | 54,223 | 64,689 | 73,969 | 89,820 | 91,098 | 62,185 | 62,174 | 72,571 |
| Property, plant and equipment | 4,316 | 4,757 | 4,520 | 4,333 | 4,597 | 4,486 | 4,558 | 4,779 |
| Cash and cash equivalents | 26,923 | 24,672 | 37,270 | 43,344 | 60,125 | 29,912 | 35,779 | 31,590 |
| Total assets | 122,577 | 122,333 | 126,991 | 149,529 | 160,409 | 126,085 | 135,585 | 146,928 |
| CASH FLOWS, EUR'000 | ||||||||
| Cash flow from operating activities | 14,003 | 7,480 | 19,374 | 13,349 | 21,542 | 10,765 | 23,141 | 9,970 |
| Cash flow from investing activities, net | -183 | -1,156 | -535 | -751 | -265 | -864 | -2,199 | -981 |
| Cash flow from financing activities | -25,323 | -8,542 | -5,946 | -6,611 | -4,347 | -40,140 | -15,079 | -13,290 |
| Net change in cash and cash equivalents | -11,503 | -2,218 | 12,893 | 5,987 | 16,930 | -30,239 | 5,863 | -4,301 |
| EMPLOYEES | ||||||||
| Average number of employees | 1,182 | 1,208 | 1,209 | 1,221 | 1,242 | 1,260 | 1,283 | 1,318 |
| FINANCIAL RATIOS | ||||||||
| EBIT margin (%) | 11.7 | 24.6 | 28.3 | 33.5 | 9.8 | 19.9 | 24.8 | 32.4 |
| Adjusted non-GAAP EBIT margin (%) | 16.5 | 19.7 | 24.6 | 37.3 | ||||
| ROIC (return on invested capital) (%) | 65.5 | 155.2 | 173.2 | 228.1 | 37.3 | 97.2 | 139.0 | 224.4 |
| Debtor turnover rate | 7.0 | 7.6 | 11.4 | 9.8 | 7.2 | 8.0 | 10.3 | 9.9 |
| Equity ratio (%) | 44.2 | 52.9 | 58.2 | 60.1 | 56.8 | 49.3 | 45.9 | 49.4 |
| Return on equity (%) | 22.8 | 84.4 | 85.2 | 102.4 | 20.0 | 52.7 | 90.0 | 133.0 |
| SHARE PERFORMANCE | ||||||||
| Basic earnings per share - EPS (EUR) | 0.11 | 0.31 | 0,37 | 0.52 | 0.11 | 0.25 | 0.35 | 0.57 |
| Diluted earnings per share - EPS-D (EUR) | 0.10 | 0.31 | 0,36 | 0.52 | 0.11 | 0.25 | 0.35 | 0.56 |
| Operating cash flow per share - CFPS (EUR) | 0.35 | 0.19 | 0,48 | 0.33 | 0.54 | 0.27 | 0.58 | 0.25 |
| Average number of shares (m) | 40.5 | 40.3 | 40,2 | 40.1 | 40.2 | 40.2 | 39.9 | 39.5 |
| Average number of shares - diluted (m) | 41.0 | 40.9 | 40,8 | 40.6 | 40.7 | 40.8 | 40.4 | 40.1 |
| 2015 | 2016 | |||||||
|---|---|---|---|---|---|---|---|---|
| SEGMENT DATA | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 |
| SEGMENT REVENUE | ||||||||
| Nordic | 14,080 | 19,235 | 13,240 | 18,124 | 14,502 | 15,771 | 12,624 | 20,382 |
| Central Europe | 16,364 | 18,446 | 18,848 | 25,643 | 17,164 | 17,719 | 16,780 | 22,868 |
| UK & Middle East | 4,915 | 8,775 | 12,788 | 6,991 | 5,714 | 9,533 | 9,528 | 10,574 |
| Benelux, France & Italy | 10,351 | 11,046 | 12,278 | 22,270 | 11,685 | 13,864 | 14,337 | 28,222 |
| APAC | 4,292 | 4,948 | 4,536 | 4,857 | 4,187 | 4,347 | 6,735 | 5,147 |
| North America | 9,299 | 9,923 | 10,236 | 11,777 | 9,869 | 10,880 | 18,130 | 13,658 |
| Dimension | 23,873 | 30,530 | 30,701 | 43,535 | 24,003 | 25,105 | 35,676 | 48,000 |
| Coric | 1,803 | 2,175 | 2,114 | 3,166 | 2,647 | 2,701 | 2,908 | 2,720 |
| Corporate functions | 158 | 342 | 167 | 686 | 341 | 444 | 580 | 689 |
| Total | 85,135 | 105,420 | 104,908 | 137,049 | 90,112 | 100,364 | 117,298 | 152,260 |
| Elimination/not allocated | -28,647 | -37,399 | -35,316 | -53,223 | -30,504 | -31,826 | -43,173 | -58,601 |
| Group total revenue | 56,488 | 68,021 | 69,592 | 83,826 | 59,608 | 68,538 | 74,125 | 93,659 |
| SEGMENT OPERATING PROFIT (EBIT) | ||||||||
| Nordic | 581 | 2,912 | 82 | 691 | 1,705 | 1,929 | 1,052 | 668 |
| Central Europe | 1,314 | 1,687 | 646 | 1,626 | 404 | 1,572 | 1,407 | 1,506 |
| UK & Middle East | -247 | 563 | 2,455 | -591 | -379 | 2,434 | 39 | -803 |
| Benelux, France & Italy | 247 | 1,095 | 2,076 | -1,073 | 731 | 1,369 | 231 | 2,009 |
| APAC | -383 | 849 | 228 | 557 | 121 | 666 | 401 | 119 |
| North America | -505 | -3,458 | 214 | 97 | -1,930 | 873 | -667 | 342 |
| Dimension | 8,197 | 15,060 | 16,241 | 27,367 | 7,310 | 8,022 | 20,566 | 29,886 |
| Coric | -455 | 5 | 156 | 625 | 36 | 42 | 91 | 460 |
| Corporate functions | -2,152 | -2,008 | -2,404 | -1,257 | -2,132 | -3,255 | -4,762 | -3,840 |
| Total segment operating profit (EBIT) | 6,597 | 16,705 | 19,694 | 28,042 | 5,866 | 13,652 | 18,358 | 30,347 |
* Group quarterly data is unaudited.
After an extensive review of the leading products in the market, we chose SimCorp Dimension as the platform best suited to meet our needs. By teaming up with SimCorp, which focuses its resources on one platform that keeps pace with global industry and market changes, we can concentrate on servicing our clients' current and emerging needs. "
ALOK SETHI Chairman of Franklin Templeton Services
North America delivered a strong performance in 2016 with total revenue growing 40%. Five new deals were signed - three on subscription-based license terms and two on perpetual license terms. Further, four of the new license deals signed in North America are based on SimCorp's ASP delivery offering. The strong performance brings the total number of clients up to 24, corresponding to an estimated market share of 5% in North America. The strong order intake increased the value of the total installed license base by USD 23m, reaching USD 103m at the end of 2016.
| USDm | 2016 | 2015 Change | |
|---|---|---|---|
| Total revenue | 58.2 | 41.6 | 40% |
| - Recurring revenue | 21.5 | 17.6 | 22% |
| - Non-recurring revenue - Non-GAAP net income |
31.0 | 24.0 | 29% |
| adj. | 5.7 | - | - |
| New wins | 5 | 0 | |
| Market share | 5% | 4% | 1% |
| SimCorp clients | 24 | 19 | 26% |
| Number of employees | 108 | 99 | 9% |
UK performed below expectations with total revenue growing 4% in 2016. Against expectations, no new clients were signed in the UK in 2016, however, add-on sales showed a positive development due to large deals signed with Middle East clients. Currently, SimCorp has 19 SimCorp Dimension clients in the UK and Middle East, equaling an estimated market share of 13%. The total installed license base grew by GBP 6m to GBP 62m at the end of 2016.
Nordic – SimCorp's most mature market – delivered a strong performance with total revenue growing 12% in 2016. Two new clients were signed – both on subscription-based license terms – bringing the total number of Nordic clients up to 47. The installed license base grew by DKK 106m to DKK 1.214m at the end of 2016.
Most business units experienced high activity levels, which resulted in twelve new SimCorp Dimension clients and four new SimCorp Coric clients in 2016, and a satisfactory pipeline for 2017.
| GBPm | 2016 | 2015 Change | |
|---|---|---|---|
| Total revenue | 25.1 | 24.1 | 4% |
| - Recurring revenue | 11.5 | 9.1 | 26% |
| - Non-recurring revenue - Non-GAAP net income adj. |
13.6 - |
15.0 - |
-9% - |
| New wins | 0 | 2 | |
| Market share | 13% | 14% | -1% |
| SimCorp clients | 19 | 21 | -10% |
| Number of employees | 76 | 69 | 10% |
| DKKm | 2016 | 2015 Change | |
|---|---|---|---|
| Total revenue | 448.2 | 401.8 | 12% |
| - Recurring revenue | 253.7 | 257.1 | -1% |
| - Non-recurring revenue - Non-GAAP net income |
146.7 | 144.7 | 1% |
| adj. | 47.8 | - | - |
| New wins | 2 | 0 | |
| Market share | 67% | 66% | 1% |
| SimCorp clients | 47 | 46 | 2% |
| Number of employees | 72 | 80 | -10% |
CENTRAL EUROPE Staff 167 BENELUX, FRANCE & ITALY Staff 119 CORIC Staff 68
The strong performance in the business unit in 2015 continued in 2016 with total revenue growing 25%. Four new SimCorp Dimension clients were signed – one in each of the markets France, Belgium, Italy and Spain. Three of the new deals were based on perpetual license terms. The total installed license base grew by EUR 25m to EUR 134m at the end of 2016.
Central Europe performed below expectations and below 2015 results. Total revenue declined by 7% in 2016 as a result of not signing any new clients. Central Europe currently holds 51 clients, equaling an estimated market share of 26%. The total value of the installed license base increased by EUR 3m to EUR 236m.
In APAC, total revenue increased by 11% in 2016 compared to 2015, with one new client signed in Australia. Currently, SimCorp holds 13 clients in the APAC region, corresponding to an estimated market share of 12%. The total value of the installed license base increased by AUD 2m to AUD 81m at the end of 2016.
Performance in SimCorp Coric was again strong in 2016 with total revenue growing 34%, driven by a strong order intake in 2016 and 2015. Four new SimCorp Coric clients were signed in 2016 bringing the total number of SimCorp Coric clients up to 57. The 57 clients are comprised by 26 SimCorp clients who are also SimCorp Dimension clients and 31 SimCorp clients who are only SimCorp Coric clients.
APAC Staff 24
| EURm | 2016 | 2015 Change | |
|---|---|---|---|
| Total revenue | 65.0 | 52.0 | 25% |
| - Recurring revenue | 21.6 | 18.2 | 19% |
| - Non-recurring revenue - Non-GAAP net income adj. |
43.4 - |
33.8 - |
28% - |
| New wins | 4 | 3 | |
| Market share | 16% | 14% | 2% |
| SimCorp clients | 28 | 24 | 17% |
| Number of employees | 119 | 102 | 17% |
| EURm | 2016 | 2015 Change | |
|---|---|---|---|
| Total revenue | 68.9 | 74.2 | -7% |
| - Recurring revenue | 49.0 | 48.9 | 0% |
| - Non-recurring revenue - Non-GAAP net income adj. |
19.9 - |
25.3 - |
-21% - |
| New wins | 0 | 1 | |
| Market share | 26% | 26% | 0% |
| SimCorp clients | 51 | 51 | 0% |
| Number of employees | 167 | 161 | 4% |
| AUDm | 2016 | 2015 Change | |
|---|---|---|---|
| Total revenue | 27.6 | 24.9 | 11% |
| - Recurring revenue | 21.8 | 22.7 | -4% |
| - Non-recurring revenue - Non-GAAP net income adj. |
5.8 - |
2.2 - |
164% - |
| New wins | 1 | 0 | |
| Market share | 12% | 11% | 1% |
| SimCorp clients | 13 | 12 | 8% |
| Number of employees | 24 | 25 | -4% |
| GBPm | 2016 | 2015 Change | |
|---|---|---|---|
| Total revenue | 7.8 | 5.8 | 34% |
| - Recurring revenue | 6.5 | 4.3 | 51% |
| - Non-recurring revenue - Non-GAAP net income |
1.3 | 1.5 | -13% |
| adj. New wins |
- 4 |
- 2 |
- |
| Coric clients who are also SimCorp Dimension clients |
26 | 26 | 0% |
| Coric clients who are only SimCorp Coric clients |
31 | 27 | 15% |
| Number of employees | 68 | 47 | 45% |
The Board of Directors and the Executive Management Board have today considered and approved the annual report for 2016 of SimCorp A/S.
The annual report has been prepared in accordance with the International Financial Reporting Standards as adopted by the EU and further requirements according to the Danish Financial Statements Acts. In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the Group's and the parent company's assets, liabilities and
financial position as of 31 December 2016 and of the results of the parent company's and the Group's operations and cash flows for the financial year 1 January to 31 December 2016.
In our opinion the Management report gives a true and fair view of developments in the activities and financial position of the Group and the parent company, the results for the year and the financial position of the Group and the parent company, as well as a description of the significant risk and uncertainty factors that may affect the Group and the parent company.
We recommend that the annual report be adopted by the shareholders at the annual general meeting.
Copenhagen, 24 February 2017
Klaus Holse Chief Executive Officer
Georg Hetrodt Chief Technology Officer
Chairman
Jesper Brandgaard
Peter Schütze Vice-chairman
Hervé Couturier
Simon Jeffreys
Patricia McDonald
Vera Bergforth
Else Braathen Ulrik Elstrup Hansen
In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the Group's and the parent company's financial position at 31 December 2016 and of the results of the Group's and parent company's operations and cash flows for the financial year 1 January to 31 December 2016 in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act.
SimCorp's consolidated financial statements and the parent company financial statements for the financial year 1 January to 31 December 2016, comprise income statement, statement of comprehensive income, balance sheet, statement of changes in equity, cashflow statement and notes to the financial statements, including summary of significant accounting policies for the Group as well as for the Parent Company Collectively referred to as the "financial statements".
We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) and the ethical requirements that are relevant to our audit of the financial statements in Denmark. We have also fulfilled our other ethical responsibilities in accordance with the IESBA Code.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for 2016. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Management is responsible for the Management Review.
Our opinion on the financial statements does not cover the Management Review, and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the Management Review and, in doing so, consider whether the Management Review is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
Moreover, we considered whether the Management Review includes the disclosures required by the Danish Financial Statements Act.
Based on the work we have performed, in our view, the Management Review is in accordance with the consolidated financial statements and the parent company financial statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in the Management Review.
The Group and the parent company provide its products and services to clients in bundled packages as multi-element contracts, and recognition of revenue is subject to the inherent complexities in the software industry.
We focused on this area due to the judgmental and complex nature of revenue recognition for multiple element arrangements that include allocation of consideration with rebates, discounts and allowances to separate components of the contract. Further, we focused on inappropriate cut-off, deferral of revenue and revenue recognition for fixed fee projects due to the inherent estimation uncertainty of the percentage of completion.
Refer to note. 2.1 "Revenue", 2.2 "Segment and other revenue information" and 2.3 "Future Revenue".
We assessed the design and implementation of the controls over the Group's revenue cycle.
We tested relevant controls including applicable information systems and Management's review controls.
For multi-element contracts, we obtained Management's allocation of revenue to the specific contract elements and assessed the fair value attributed to each element of the contracts including rebates, discounts and allowances.
We assessed the percentage of completion on specific fixed fee projects based on Management reports, project estimates and interview of project managers. We also assessed the outcome of prior period estimates.
For the new contract type where SimCorp acts as Application Service Provider (ASP), we discussed the revenue recognition of the contract elements with Management. We also evaluated whether SimCorp acts as principal or agent towards end-clients in the ASP contract set-up and recognizes revenue accordingly.
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
The Group operates in a complex multinational tax environment and there are open tax and transfer pricing cases with domestic and foreign tax authorities.
We focused on this area as the amounts involved are potentially material and the valuation of tax assets and liabilities are associated with uncertainty and judgement.
Refer to note 3.1 "Income tax", 3.2 "Deferred tax" and 3.3 "Income tax payable".
In understanding and evaluating Management's judgements, we considered the status of recent and current tax authority audits and enquiries, the outcome of previous claims, judgemental positions taken in tax returns and current year estimates and developments in the tax environment.
In addition, we used our own local and international tax specialists, evaluated the adequacy of Management's key assumptions and read correspondence with tax authorities to assess the valuation of tax assets and liabilities.
Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, Management is responsible for assessing the Group's and parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Group or parent company, or to cease operations, or has no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark 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 based on these financial statements.
As part of an audit in accordance with ISAs and additional applicable in Denmark, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, 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 opinion. 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.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance 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.
Mikkel Sthyr Leif Ulbæk Jensen State Authorised Public Accountant State Authorised Public Accountant
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Copenhagen, 24 February 2017 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab CVR no 3377 1231
" A number of asset managers are looking for innovative technology solutions to help transform their investment processes 'front-to-back'. Integrated solutions that can do this have the potential to enhance business capabilities, increase flexibility and simplify complex processes.
SIMCORP ANNUAL REPORT 2016 Emne 60
Partner, EY Wealth & Asset Management Technology Advisory
| 62 | Income statement | SECTION 1 | BASIS OF PREPARATION | SECTION 5 | INVESTED CAPITAL | |
|---|---|---|---|---|---|---|
| 62 | Statement of comprehensive income |
66 | 1.0 Accounting policies, estimates and judgments |
84 | 5.1 | Intangible assets and property, plant and equipment |
| 63 | Cash flow statement | 88 | 5.2 | Investments in associates | ||
| 64 | Balance sheet | 89 | 5.3 | Deposits | ||
| 65 | Statement of changes in equity | SECTION 2 | REVENUE AND EARNINGS | 90 | 5.4 | Provisions |
| 66 | Notes | 70 | 2.1 Revenue | |||
| 110 | SimCorp A/S | 73 | 2.2 Segment and other revenue information |
SECTION 6 | CAPITAL STRUCTURE AND | |
| 74 | 2.3 Future revenue | FINANCING ITEMS | ||||
| 75 | 2.4 Operating costs | 91 | 6.1 | Equity, treasury shares and dividend | ||
| 76 | 2.5 Employee costs | 92 | 6.2 | Financial instruments and risk | ||
| 77 | 2.6 Earnings per share | 97 | 6.3 | Financial income and expenses | ||
| SECTION 3 | TAX | SECTION 7 | OTHER DISCLOSURES | |||
| 78 | 3.1 Income tax | 98 | 7.1 | Share-based remuneration | ||
| 79 | 3.2 Deferred tax | 104 | 7.2 | Pensions and similar liabilities | ||
| 80 | 3.3 Income tax payable | 106 | 7.3 | Operating leases | ||
| 106 | 7.4 | Related party transactions | ||||
| 108 | 7.5 | Auditors' remuneration | ||||
| SECTION 4 | WORKING CAPITAL | 108 | 7.6 | Events after the balance sheet date | ||
| 81 | 4.1 Receivables | 108 | 7.7 | Adjustments, cash flow | ||
| 82 | 4.2 Contracts in progress relating to professional services |
108 | 7.8 | Segment information reconciliation of the profit before tax |
||
| 82 | 4.3 Trade payables and other payables | 109 | 7.9 | Subsidiaries | ||
| 83 | 4.4 Contingent liabilities and other financial liabilities |
|||||
| INCOME STATEMENT | 2016 | 2015 | |
|---|---|---|---|
| Note | EUR '000 | EUR '000 | |
| Revenue | 2.1, 2.2, 2.3 | 295,930 | 277,927 |
| Cost of sales | 2.4, 2.5, 5.1, 7.1 | 111,773 | 100,086 |
| Gross profit | 184,157 | 177,841 | |
| Other operating income | 324 | 492 | |
| Research and development costs | 2.4, 2.5, 5.1, 7.1 | 59,270 | 53,917 |
| Sales and marketing costs | 2.4, 2.5, 5.1, 7.1 | 37,546 | 35,337 |
| Administrative expenses | 2.4, 2.5, 5.1, 7.1, 7.5 | 19,442 | 18,041 |
| Operating profit (EBIT) | 68,223 | 71,038 | |
| Share of profit after tax in associates | 5.2 | 94 | 126 |
| Financial income | 6.3 | 2,694 | 1,796 |
| Financial expenses | 6.3 | 3,418 | 3,860 |
| Profit before tax | 67,593 | 69,100 | |
| Tax on the profit for the year | 3.1 | 16,601 | 16,516 |
| Profit for the year | 50,992 | 52,584 | |
| Earnings per share | |||
| Basic earnings per share - EPS (EUR) | 2.6 | 1.28 | 1.31 |
| Diluted earnings per share - EPS-D (EUR) | 2.6 | 1.26 | 1.29 |
| STATEMENT OF COMPREHENSIVE INCOME | 2016 | 2015 |
|---|---|---|
| Note | EUR '000 | EUR '000 |
| Profit for the year | 50,992 | 52,584 |
| Other comprehensive income Items that will not be reclassified subsequently to the income statement: |
||
| Actuarial loss on defined benefit pension plans | -259 | -279 |
| Tax | 57 | 49 |
| Items that will be reclassified subsequently to the income statement, when specific conditions are met: |
||
| Foreign currency translation differences for foreign operations |
-1,529 | 2,066 |
| Other comprehensive income after tax | -1,731 | 1,836 |
| Total comprehensive income | 49,261 | 54,420 |
| ADJUSTED NON-GAAP STATEMENT | 2016 | 2015 |
|---|---|---|
| Subscription - new sales - adjustment of order intake |
11,761 | 0 |
| Adjusted non-GAAP revenue | 307,691 | 277,927 |
| Adjusted non-GAAP operating profit (EBIT) | 79,983 | 71,038 |
| CASH FLOW STATEMENT | 2016 | 2015 | |
|---|---|---|---|
| Note | EUR '000 | EUR '000 | |
| Profit for the year | 50,992 | 52,584 | |
| Adjustments | 7.7 | 25,672 | 26,990 |
| Changes in working capital | 1,997 | -3,870 | |
| Cash from operating activities before financial items | 78,661 | 75,704 | |
| Financial income received | 218 | 63 | |
| Financial expenses paid | -368 | -387 | |
| Income tax paid | 3.1 | -13,093 | -21,174 |
| Net cash from operating activities | 65,418 | 54,206 | |
| Purchase of associates | 5.2 | 0 | -138 |
| Purchase of intangible fixed assets | 5.1 | -1,644 | -277 |
| Purchase of property, plant and equipment | 5.1 | -2,973 | -2,029 |
| Proceeds from sale of property, plant and equipment | 5.1 | 0 | 32 |
| Purchase of financial assets | 5.3 | -132 | -311 |
| Proceeds from sale of financial assets | 5.3 | 349 | 88 |
| Dividends from associates | 6.3 | 91 | 10 |
| Net cash used in investment activities | -4,309 | -2,625 | |
| Net cash from operating and investment activities | 61,109 | 51,581 | |
| Employee bonds | 0 | -744 | |
| Dividends paid | -28,450 | -24,457 | |
| Purchase of treasury shares | 6.1 | -44,406 | -21,221 |
| Net cash used in financing activities | -72,856 | -46,422 | |
| Change in cash and cash equivalents | -11,747 | 5,159 | |
| Cash and cash equivalents at 1 January | 43,344 | 37,995 | |
| Foreign exchange adjustment of cash and cash equivalents |
-7 | 190 | |
| Cash and cash equivalents at 31 December | 31,590 | 43,344 |
| BALANCE SHEET 31 DECEMBER | 2016 | 2015 |
|---|---|---|
| Note | EUR '000 | EUR '000 |
| ASSETS | ||
| Non-current assets | ||
| Intangible assets 5.1 |
||
| Goodwill | 3,976 | 4,579 |
| Software | 4,215 | 3,749 |
| Client contracts | 2,804 | 3,442 |
| Total intangible assets | 10,995 | 11,770 |
| 5.1 Property, plant and equipment |
||
| Leasehold improvements | 2,446 | 1,700 |
| Technical equipment | 1,179 | 2,383 |
| Other equipment, fixtures, fittings and prepayments | 1,154 | 250 |
| Total property, plant and equipment | 4,779 | 4,333 |
| Other non-current assets | ||
| Investments in associates 5.2 |
551 | 628 |
| Deposits 5.3 |
1,890 | 2,102 |
| Deferred tax 3.2 |
8,534 | 9,078 |
| Total other non-current assets | 10,975 | 11,808 |
| Total non-current assets | 26,749 | 27,911 |
| Current assets | ||
| Receivables 4.1 |
80,041 | 68,144 |
| Income tax receivable 3.3 |
1,966 | 4,276 |
| Prepayments | 6,582 | 5,854 |
| Cash and cash equivalents | 31,590 | 43,344 |
| Total current assets | 120,179 | 121,618 |
| Total assets | 146,928 | 149,529 |
| 2016 | 2015 | |
|---|---|---|
| Note | EUR '000 | EUR '000 |
| LIABILITIES AND EQUITY | ||
| Equity | ||
| Share capital | 5,575 | 5,575 |
| Exchange adjustment reserve | -518 | 1,011 |
| Retained earnings | 34,173 | 54,825 |
| Proposed dividend | 33,341 | 28,409 |
| Total equity | 72,571 | 89,820 |
| Non-current liabilities | ||
| Deferred tax 3.2 |
1,149 | 973 |
| Provisions 5.4, 7.2 |
5,573 | 4,687 |
| Other debt | 0 | 2,343 |
| Total non-current liabilities | 6,722 | 8,003 |
| Current liabilities | ||
| Prepayments from clients | 14,647 | 7,678 |
| Trade payables and other payables 4.3 |
50,922 | 42,215 |
| Income tax 3.3 |
1,946 | 1,810 |
| Provisions 5.4 |
120 | 3 |
| Total current liabilities | 67,635 | 51,706 |
| Total liabilities | 74,357 | 59,709 |
| Total liabilities and equity | 146,928 | 149,529 |
| EUR '000 | Exchange | Proposed | ||||
|---|---|---|---|---|---|---|
| 2016 | Note | Share capital |
adjustment reserve |
Retained earnings |
dividends for the year |
Total |
| Equity at 1 January | 6.1 | 5,575 | 1,011 | 54,825 | 28,409 | 89,820 |
| Comprehensive income for the year* | ||||||
| Total comprehensive income for the year | 0 | -1,529 | 50,790 | 0 | 49,261 | |
| Transactions with owners | ||||||
| Dividends paid to shareholders | 0 | 0 | -41 | -28,409 | -28,450 | |
| Share-based payment | 0 | 0 | 6,293 | 0 | 6,293 | |
| Tax, share-based payment | 0 | 0 | 53 | 0 | 53 | |
| Purchase of treasury shares | 0 | 0 | -44,406 | 0 | -44,406 | |
| Proposed dividends to shareholders | 0 | 0 | -33,341 | 33,341 | 0 | |
| Equity at 31 December | 5,575 | -518 | 34,173 | 33,341 | 72,571 | |
| 2015 | ||||||
| Equity at 1 January | 5,575 | -1,055 | 44,208 | 24,652 | 73,380 | |
| Comprehensive income for the year* | ||||||
| Total comprehensive income for the year | 0 | 2,066 | 52,354 | 0 | 54,420 | |
| Transactions with owners | ||||||
| Dividends paid to shareholders | 0 | 0 | 195 | -24,652 | -24,457 | |
| Share-based payment | 0 | 0 | 6,483 | 0 | 6,483 | |
| Tax, share-based payment | 0 | 0 | 1,215 | 0 | 1,215 | |
| Purchase of treasury shares | 0 | 0 | -21,221 | 0 | -21,221 | |
| Proposed dividends to shareholders | 0 | 0 | -28,409 | 28,409 | 0 | |
| Equity at 31 December | 5,575 | 1,011 | 54,825 | 28,409 | 89,820 |
MOVEMENTS IN EQUITY 2016
* Refer to Statement of comprehensive income on page 62.
This section provides an overview of the financial accounting policies and key accounting estimates. The Group's accounting policies that relate to the financial statements as a whole are set out in Note 1. Accounting policies which relate to a specific note or section have been included at the beginning of each section or note following definitions and policies relevant to each note.
Consolidated financial statements are presented on the basis of the latest developments in international financial reporting. All entities in the Group apply the same accounting policies.
The notes to the financial statements have been grouped into seven sections with the aim of reducing complexity and improving the readers' experience. The notes have been organized into the following seven sections:
| Section 1 | Basis of preparation |
|---|---|
| Section 2 | Revenue and |
| earnings | |
| Section 3 | Tax |
| Section 4 | Working capital |
| Section 5 | Invested capital |
| Section 6 | Capital structure |
| and financing items | |
| Section 7 | Other disclosures |
The annual report for the period 1 January - 31 December 2016 includes the consolidated financial statements of SimCorp A/S and its subsidiary undertakings (the Group) as well as separate financial statements for the parent company SimCorp A/S. Reference is made to page 115 for parent company specific accounting policies.
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional Danish requirements for the presentation of financial statements.
On 24 February 2017 the Board of Directors and the Executive Management Board considered and approved the annual report for 2016 of SimCorp A/S and Group. The annual report will be presented to the shareholders for approval at the Annual General Meeting to be held on 29 March 2017.
The financial statements are presented in EUR which is the reporting currency of the activities of the Group rounded to the nearest EUR 1,000. The EUR is the reporting currency as most of the Group's transactions are in this currency.
The annual report has been prepared on a going concern basis and in accordance with the historical cost convention, except where IFRS explicitly requires use of other values.
The accounting policies, except as described below, have been applied consistently during the financial year and for the comparative figures. For standards implemented prospectively, the comparative figures are not restated. The accounting policies are unchanged from last year.
The Annual Report for 2016 is presented in conformity with the new and revised IFRS/ IAS standards and new IFRIC interpretations approved by the EU, which apply to financial years beginning on 1 January 2016.
IASB has issued accounting standard IFRS 15 "Revenue from contracts with customers" to take effect as of 1 January 2018. The standard will establish a single comprehensive frame work for revenue recognition. Based on an assessment, the new standard will affect the revenue recognition. SimCorp will adopt IFRS 15 from 1 January 2017. Refer pages 39-40 for further details for SimCorp.
In January 2016, the IASB issued IFRS 16 "Leasing". It currently awaits EU endorsement. The standard becomes effective from 1 January 2019 with earlier application permitted. All leases must be recognized in the balance sheet with a corresponding lease liability, except for short-term assets and minor assets. Leased assets are amortized over the lease term, and payments are allocated between installments on the lease obligation and interest expense, classified as financial items. SimCorp has assessed that the impact of the balance sheet recognition of leases will affect a number of financial ratios such as EBITDA margin and return on equity. Refer to note 7,3 for details about operating lease commitments.
IASB has issued IFRS 9 "Financial Insruments" to take effect from 1 January 2018.
IFRS 9 - Financial Instruments: Classification and Measurement of Financial Assets and Financial Liabilities. The standard contains requirements for the classification and measurement of financial assets and financial liabilities, impairment methodology and general hedge accounting. However, the implementation of IFRS 9 is not expected to have a significant effect on the consolidated financial statements.
In addition, a number of other new standards and interpretations not applicable/mandatory for the preparation of the 2016 Annual Report have been published. SimCorp Group expects to implement the new applicable and approved, not yet effective accounting standards and interpretations, as they take effect.
None of the other changed standards or interpretations are expected to have any significant monetary effect on the statements of SimCorp Group's results, assets and liabilities or the equity.
The consolidated financial statements comprise the parent company SimCorp A/S and subsidiaries. Subsidiaries are entities controlled by the parent. Control is established when SimCorp A/S is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
Companies in which the Group holds between 20% and 50% of the voting rights and/or otherwise exercises a significant, but not a controlling influence are considered associates.
The consolidated financial statements have been prepared by including the financial statements of the parent company and the subsidiaries, which have all been prepared in accordance with the Group's accounting policies.
On consolidation, intra-group income and expenses, shareholdings, balances, dividends and realized and unrealized gains and losses on intra-group transactions are eliminated.
Unrealized gains and losses on transactions with associates are eliminated in proportion to the Group's shares in the associates.
For each of the reporting entities in the Group, a functional currency is determined. The functional currency is the currency in the primary economic environment in which the individual reporting entity operates. Transactions in currencies other than the functional currency are denominated in foreign currencies.
Foreign currency transactions are translated into the functional currency at the exchange rates effective at the transaction dates.
The average rate of exchange for the month is used to approximate the transaction dates' exchange rates. Exchange differences arising from the settlement of such transactions, as well as from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currency, are recognized in the income statement under financial income or financial expenses.
Foreign exchange adjustments of intra-group accounts are recognized in other comprehensive income in the consolidated financial statements.
On consolidation, the income statements of foreign subsidiaries and associates are translated at the exchange rates effective at the transaction dates. Effects of exchange rate adjustments arising from the translation of the income statements to the exchange rates effective at the balance sheet date are taken directly to other comprehensive income.
Foreign subsidiaries' and associates' balance sheets are translated at the exchange rates effective at the balance sheet date.
Effects of exchange rate adjustments arising from the translation of foreign subsidiaries' opening equity from the exchange rates effective at the prior balance sheet date are taken directly to other comprehensive income.
The exchange adjustment reserve in the consolidated financial statements comprises foreign exchange differences arising on the translation of the financial statements of enterprises from their functional currencies to the SimCorp Group's presentation currency (EUR).
On full or partial realization of a net investment, foreign exchange adjustments are recognized in the income statement.
Other comprehensive income consists of income and costs not included in the income statement, including exchange rate adjustments arising from the translation of foreign subsidiaries´ financial statements into reporting currency, and actuarial gains or losses on defined benefit pension plans.
The cash flow statement is presented according to the indirect method commencing with the result for the year.
The cash flow statement shows the Group's cash flows divided into operating, investing and financing activities as well as cash and cash equivalents at the beginning and end of the year.
Cash flow from operating activities is calculated using the indirect method as the profit for the year adjusted for non-cash items, changes in working capital, financial income received, financial expenses paid and income tax paid.
Cash flows from investing activities comprise receipts and payments in connection with acquisitions and disposals of companies and operations, intangible assets and property, plant and equipment as well as other non-current assets and liabilities.
Cash flows from financing activities comprise changes in share capital and related costs, purchase of treasury shares and distributions of dividends to shareholders.
Cash and cash equivalents comprise cash and bank deposits.
The financial statements separately present items which are considered individually material. Individually immaterial items are aggregated with other items of similar nature in the statements or in the notes. Specific disclosures required by IFRS are presented, unless the information is considered immaterial to the economic decision making of the users of these financial statements.
In applying the Group's accounting policies, in addition to estimations, management makes other judgments that may impact the application of accounting policies and reported amounts of assets, liabilities, costs, cash flows and related disclosures at the date of the financial statements.
The estimates and judgments applied are based on assumptions which management believes to be reasonable, but which are inherently uncertain and unpredictable. Such assumptions may be incomplete or inaccurate, and unexpected events or circumstances may arise.
In addition, the company is subject to risks
and uncertainties encountered in the ordinary course of business that may cause actual results to deviate from the estimates.
The notes to the financial statements contain information about the assumptions and the uncertainty of estimates at the balance sheet date involving the risk of changes that could lead to adjustments to the carrying amounts of assets or liabilities within the upcoming financial year.
Management considers the following to be key accounting estimates and assumptions used in the preparation of the financial statements:
Revenue (note 2.1) Deferred tax (note 3.2)
Risk factors specific to the SimCorp Group are described in the management report on page 19 and in the financial instruments and risks (note 6.2).
Certain financial measures, such as adjusted non-GAAP revenue, adjusted non-GAAP-operating profit (EBIT) and adjusted non-GAAP EBIT margin are not prepared in accordance with IFRS and are therefore considered non-IFRS financial measures. Our non-GAAP financial measures might not correspond to non-GAAP measures that other companies report. The non-IFRS measures should only be considered in addition to, and not as substitutes for or superior to, IFRS measures.
It is our belief that the disclosed supplemental non-IFRS financial information provide useful information to investors as management uses this information, in addition to financial data prepared in accordance with IFRS, to obtain a more transparent understanding of past performance and anticipated future results.
Reported revenue and EBIT are adjusted to reflect new subscription based SimCorp Dimension contracts as if the orders had been signed on perpetual license terms. This is achieved by deducting from revenue income recognized under subscription agreements and adding the value of the order inflow for new SimCorp Dimension contracts in the year when they are signed.
Financial highlights and key ratios are defined and calculated in accordance with The Danish Finance Society's "Recommendations and Financial Ratios 2015". Earnings per share (EPS) and diluted earnings per share (EPS-D) are measured according to IAS 33.
Other operating income comprises income of a secondary nature relative to the activities of the Group, including gains on the sale of intangible assets and property, plant and equipment and government grants. Government grants relate to research and development funding.
| EBIT margin (%) | Operating profit (EBIT) / Revenue x 100 | Price / Book value per share (P/BV) | Price / Book Value (BVPS) |
|---|---|---|---|
| Non-GAAP EBIT margin (%) | Non-GAAP (EBIT) / Non-GAAP Revenue x 100 |
Price / Diluted price earnings (P/E Diluted) |
Price / EPS Diluted shares |
| ROIC (return on invested capital) (%) | Operating profit EBIT / Average operating assets x 100 |
Price / Cash flow (P/CF) | Price / Cash flow (CFPS) |
| Debtor turnover ratio | Revenue / Receivables at year-end | ||
| Equity ratio (%) | Equity at year-end / Total assets at year-end x 100 |
||
| Return on equity (ROE) (%) | Profit for the year / Average equity x 100 | ||
| Basic earnings per share (EPS) | Profit for the year / Average number of shares |
|---|---|
| Diluted earnings per share (EPS-D) | Profit for the year / Average number of diluted shares |
| Cash flow per share (CFPS) | Cash flow from operating activities / Average number of diluted shares |
| of shares | |
| Dividend per share (DPS) | Dividends paid / Number of shares at year-end |
| Dividend payout ratio (%) | Dividends paid / Profit for the year x 100 |
| Total payout ratio (%) | Dividends paid plus value of share |
| Non-GAAP EBIT margin (%) | Non-GAAP (EBIT) / Non-GAAP Revenue x 100 |
(P/E Diluted) |
|---|---|---|
| ROIC (return on invested capital) (%) | Operating profit EBIT / Average operating assets x 100 |
|
| Debtor turnover ratio | Revenue / Receivables at year-end | |
| Equity ratio (%) | Equity at year-end / Total assets at year-end x 100 |
|
| Return on equity (ROE) (%) | Profit for the year / Average equity x 100 | |
| Share Performance definitions | Other definitions | |
| Basic earnings per share (EPS) | Profit for the year / Average number of shares |
|
buybacks / Profit for the year x 100
| Price / Diluted price earnings (P/E Diluted) |
Price / EPS Diluted shares |
|---|---|
| Price / Cash flow (P/CF) | Price / Cash flow (CFPS) |
| Basic earnings per share (EPS) | Profit for the year / Average number of shares |
Order intake | Representing the license value of new licenses and of add-on licenses. |
|---|---|---|---|
| Diluted earnings per share (EPS-D) | Profit for the year / Average number of diluted shares |
Order book | Accumulated value of software licenses which are yet to be income recognized. |
| Cash flow per share (CFPS) | Cash flow from operating activities / Average number of diluted shares |
Secured revenue | Representing the total revenue commit ted for license, maintenance and profes |
| Book value per share (BVPS) | Equity at year-end / Average number | sional services etc. |
This section provides information related to the composition of revenue, operating costs and earnings per share. The notes present details of the Group's profit and earnings per share for the year. Details include disclosures on revenue, segment information, operating costs and employee costs and other operating profit (EBIT) items.
Group operating profit (EBIT) was EUR 68.2m compared with EUR 71.0m in 2015.
In 2016 operating costs increased to EUR 228.0m compared with EUR 207.3m. The main contributor to the increased operating costs was an increase in the business activity level.
Accounting policies that do not relate exclusively to a specific income statement note are set out below. Accounting policies which relate to a particular note to the income statement have been included with each individual note.
In this section, the following notes are presented:
2.1 Revenue 2.2 Segment and other revenue information 2.3 Future revenue 2.4 Operating costs 2.5 Employee costs 2.6 Earnings per share
Revenue is derived from fees charged to clients for software licenses for SimCorp Dimension and SimCorp Coric, maintenance fees, professional services and application service provider (ASP) on-boarding fees, hosting fees and operational services. The total contract sum is allocated to the separate components of those standard software contracts which comprise several components for the purpose of revenue recognition.
Revenue is subsequently reported into recurring revenue and non-recurring revenue. Recurring revenue consists of subscription based license fees, professional services from multi-year recurring contracts, maintenance fees, ASP hosting fees and operational services. Non-recurring revenue consists of perpetual-based licenses fees, professional services fees and ASP on-boarding revenue.
License revenue for on premise fixed term license agreements and subscription agreements are recognized on a straight-line basis over the terms of the agreements. If there is a requirement for client acceptance of functionality, the revenue recognition for the period before acceptance is obtained will be deferred until the time of acceptance.
Maintenance fees relate to perpetual license contracts. Revenue from maintenance agreements is recognized on a straight-line basis over the contract period.
Professional service fees from multi-year contracts are recognised as and when the work has been performed.
ASP revenue is derived from fees charged to the clients for ASP hosting fees and ASP operational services providing the client with the infrastructure solution required to use SimCorp Dimension in a cloud-based environment. Revenue from ASP hosting fees and ASP operational service is recognized on a straight-line basis over the contract period. The ASP agreement give the clients the right to use SimCorp Dimension in a cloud-based infrastructure but not the right to terminate the ASP contract and take possession of the software to run it on its own infrastructure or using another hosting provider.
Standard perpetual software licenses provide clients a right to use SimCorp Dimension and SimCorp Coric software allowing the client to take possession of the software for installation on its premises. Revenue from sales of standard perpetual software licenses is recognized at the time of delivery provided the delivery of standard software does not depend on client acceptance of its functionality. If there is a
requirement for client acceptance of functionality, the revenue recognition for the period before the acceptance will be deferred until the time of acceptance.
Professional service fees related to implementation services and ASP on-boarding services is reported as non-recurring revenue irrespective of the term of the contract as implementations, by nature, only occur once. Professional service fees sold on a Time and Materials basis are recognized as and when the work is performed. Revenue from fixed fee professional services projects and revenue from ASP on-boarding services projects is determined by applying the percentage-of-completion method.
Other non-recurring revenue consists of, for instance, training and education and is recognized when the services have been delivered.
The percentage-of-completion method requires estimation of total revenue and the stage of completion. The assumptions, estimates, and uncertainties inherent in determining the stage of completion affect the timing and amounts of revenue recognized. If there is no sufficient basis to measure the progress of completion, or to estimate the total contract revenue, revenue recognition is limited to the amount of contract costs incurred provided the contract is expected to be profitable. The determination of whether a sufficient basis to measure the progress of completion exists is judgmental. Changes in estimates of progress towards completion and of contract revenue and costs are accounted for as cumulative catch-up adjustments to the reported revenue for the applicable contract.
The adjusted non-GAAP revenue is measured as the Total Revenue plus an adjustment for net new order inflow on subscription-based license terms as if they were on perpetual terms.
| REVENUE RECURRING/NON-RECURRING | 2016 | 2015 |
|---|---|---|
| Note | EUR '000 | EUR '000 |
| REVENUE | ||
| Recurring Revenue | ||
| Subscription-new sales | 7,714 | 5,893 |
| Subscription-additional sales | 4,156 | 2,056 |
| Professional services * | 23,160 | 24,286 |
| Maintenance | 125,570 | 120,105 |
| ASP hosting and other | 1,653 | 447 |
| Total non-recurring revenue | 162,253 | 152,787 |
| Non-Recurring Revenue | ||
| Perpetual licenses-new sales | 24,097 | 29,478 |
| Perpetual licenses-additional sales | 34,144 | 30,206 |
| Professional services ** | 70,158 | 60,208 |
| Other | 5,278 | 5,248 |
| Total non-recurring revenue | 133,677 | 125,140 |
| Total revenue | 295,930 | 277,927 |
| Adjusted non-GAAP Revenue *** | ||
| Subscription - new sales - adjustment of order | 11,761 | - |
| Adjusted non-GAAP Revenue | 307,691 | 277,927 |
Subscription – new sales Subscription – additional sales Professional Services* Maintenance ASP hosting and other Perpetual – new sales
REVENUE RECURRING/NON-RECURRING
Perpetual – additional sales
Professional Services**
Other
* Ongoing support and services
** Implementation services related to initial and add-on license sales
*** SimCorp Dimension order intake made on subscription-based terms to be income recognized in the year the order is signed, as if the orders had been signed on perpetual license terms
The Group develops and sells standard software and related services. The operation is managed and organized respectively into product division, responsible for the development of the software, and a sales organization. The sales organization is based on a geographical structure, in which the countries are grouped into six business units. The business units have been identified based on countries that share the same market conditions and
cultures. A number of clients has a global setup and the related revenue is therefore included in multiple business units.
The accounting policies of the reported segments are the same as the Group's described throughout the notes. Segment reporting shows revenue and operating profit together with total assets that can be directly related to the individual segments. Unallocated assets are headquarter assets, cash and investments in associates.
Segment reporting is prepared in accordance with the Group's internal management reporting structure for performance management and resource allocation.
The segments reflect the geographical business unit structure for the sale of the SimCorp Dimension software and related services as well as the product division being responsible for the development and technical support of the SimCorp Dimension software. The SimCorp Coric segment relates to the development and sale of the SimCorp Coric software.
Additionally the Group reports on corporate functions which include shared services regarding administration, marketing and internal systems, which are allocated based on an allocation key for the segments.
Segment income and costs consist of transactions between the segments. Such transactions are made on market terms.
Refer note 7.8 for a reconciliation to income statement.
| EUR '000 | Nordic | Central Europe |
UK and Middle East |
Benelux, France, and Italy |
APAC | North America |
Dimen sion* |
Coric | Corporate Functions |
Total | Elimina tion/Un allocated |
Group |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2016 | ||||||||||||
| Revenue | 53,786 | 68,839 | 30,733 | 65,011 | 18,577 | 47,476 | 1,579 | 9,521 | 408 | 295,930 | 0 | 295,930 |
| Revenue between segments | 9,493 | 5,692 | 4,616 | 3,097 | 1,839 | 5,061 | 131,205 | 1,455 | 1,646 | 164,104 | -164,104 | 0 |
| Total segment revenue | 63,279 | 74,531 | 35,349 | 68,108 | 20,416 | 52,537 | 132,784 | 10,976 | 2,054 | 460,034 | -164,104 | 295,930 |
| Segment operating profit (EBIT) | 5,354 | 4,889 | 1,291 | 4,340 | 1,307 | -1,382 | 65,784 | 629 | -13,989 | 68,223 | 0 | 68,223 |
| Total assets | 15,058 | 14,768 | 9,031 | 36,238 | 5,595 | 28,168 | 1,551 | 12,656 | 5,222 | 128,287 | 18,641 | 146,928 |
| 2015 | ||||||||||||
| Revenue | 53,866 | 74,175 | 33,214 | 52,036 | 16,859 | 37,561 | 1,499 | 8,117 | 600 | 277,927 | 0 | 277,927 |
| Revenue between segments | 10,813 | 5,126 | 255 | 3,909 | 1,774 | 3,674 | 127,140 | 1,141 | 753 | 154,585 | -154,585 | 0 |
| Total segment revenue | 64,679 | 79,301 | 33,469 | 55,945 | 18,633 | 41,235 | 128,639 | 9,258 | 1,353 | 432,512 | -154,585 | 277,927 |
| Segment operating profit (EBIT) | 4,266 | 5,273 | 2,180 | 2,345 | 1,251 | -3,652 | 66,865 | 331 | -7,821 | 71,038 | 0 | 71,038 |
| Total assets | 15,061 | 16,569 | 7,656 | 30,802 | 5,714 | 19,780 | 1,347 | 12,463 | 4,961 | 114,353 | 35,176 | 149,529 |
* Dimension includes all development costs for SimCorp Dimension.
Geographical segmentation is presented for revenue and non-current assets for the most significant countries for the Group.
| 2016 | 2015 | |||
|---|---|---|---|---|
| EUR '000 | % | EUR '000 | % | |
| Revenue allocation by country (significant) |
||||
| USA | 46,448 | 16% | 37,747 | 14% |
| Germany | 39,838 | 13% | 41,475 | 15% |
| France | 23,039 | 8% | 22,107 | 8% |
| Switzerland | 22,447 | 8% | 23,625 | 9% |
| Netherlands | 20,247 | 7% | 21,399 | 8% |
| Denmark | 17,355 | 6% | 17,219 | 6% |
| England | 16,889 | 6% | 20,746 | 7% |
| Sweden | 15,155 | 5% | 11,482 | 4% |
| Norway | 14,485 | 5% | 20,386 | 7% |
| England | 7,223 | 44% | 7,585 | 45% |
|---|---|---|---|---|
| Denmark | 3,200 | 20% | 3,245 | 19% |
Significant countries are defined as countries representing 5% or more of the Group's revenue.
The geographical distribution of revenue is based on the country in which the client is invoiced.
The SimCorp Group has no clients contributing revenue of more than 3.5% (2015: 4.5%) of total revenue.
Rental of software, subscription and ASP agreements are agreements that give clients the right to use the SimCorp Dimension standard software and/or the SimCorp Coric standard software over a defined period of time. The term of these agreements is typically between three and eight years. Clients subsequently have an option to extend the rental or subscription period.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Future revenue within 1 year | 9,064 | 5,798 |
| Future revenue within 2-5 years | 21,979 | 10,368 |
| Future revenue after 5 years | 1,814 | 760 |
| Total | 32,857 | 16,926 |
Figures presented above are undiscounted and translated at average exchange rates for December 2016.
The increase in future revenue from 2015 to 2016 is due to the new business model of selling SimCorp Dimension on subscription-based terms.
Operating costs are allocated into Cost of sales, Research and development, Sales and marketing costs and Administrative expenses.
Cost of sales comprises costs incurred to achieve the year's revenue, including costs of delivering and implementing systems, ASP hosting and infrastructure cost, training courses and support. Cost of sales primarily comprises salaries, share-based payments, other employee related costs, hosting fees, depreciation and amortization, and indirect costs, such as rent and technological infrastructure.
Research and development costs comprise salaries, share-based payments, other employee related costs, depreciation and amortization, and other costs directly or indirectly attributable to the Group's research and development activities.
Research and development costs are expensed in the year in which they are incurred when they do not qualify for capitalization, for capitalization criteria see note 5.1.
Sales and marketing costs primarily comprise salaries, commissions, bonuses, share-based payments and other sales employee related costs, travel and meeting expenses, marketing expenses, depreciation and amortization, and indirect costs such as rent and technological infrastructure.
Administrative expenses comprise salaries, bonuses, share-based payments and other employee costs and expenses related to management, administrative staff, office costs, depreciation, amortization and indirect costs such as rent and technological infrastructure.
| EURm | Costs 2016 |
Share of costs 2016 |
Costs 2015 |
Share of costs 2015 |
Growth relative to 2015 |
Growth local cur rency relative to 2015 |
|---|---|---|---|---|---|---|
| Cost of sales | 111.8 | 49.0 % | 100.1 | 48.3 % | 11.7% | 14.1% |
| Research and development costs | 59.3 | 26.0 % | 53.9 | 26.0 % | 9.9% | 11.6% |
| Sales and marketing costs | 37.5 | 16.5 % | 35.3 | 17.0 % | 6.3% | 8.9% |
| Administrative expenses | 19.4 | 8.5 % | 18.0 | 8.7 % | 7.8% | 7.5% |
| Total | 228.0 | 100.0 % | 207.3 | 100.0 % | 10.0% | 12.0% |
EMPLOYEE COST
Employee costs consist of salaries, sales commission, bonuses, pensions and social costs,
share-based payments, vacation pay and other benefits.
Salaries, sales commission, bonuses, pensions and social costs, share-based payments, vacation pay and other benefits are recognized in the year in which the associated services are rendered by the employees.
Remuneration to executive management and board of directors is given below:
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Salaries | 132,386 | 125,973 |
| Defined contribution pension plans | 3,006 | 3,069 |
| Defined benefit pension plans | 552 | 158 |
| Share-based payments | 5,073 | 5,485 |
| Social security and other costs | 11,426 | 10,479 |
| Total employee cost | 152,443 | 145,164 |
| Average number of employees | 1,275 | 1,205 |
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Salaries | 1,394 | 1,304 |
| Other benefits | 127 | 118 |
| Share-based payment | 527 | 1,050 |
| Performance-related bonus | 420 | 561 |
| Executive management total | 2,468 | 3,033 |
| Board fees | 346 | 304 |
| Fees for committee work | 32 | 32 |
| Travel allowance | 39 | 52 |
| Share-based payment | 185 | 168 |
| Board of directors total | 602 | 556 |
| Total | 3,070 | 3,589 |
For additional disclosures on executive management and board remuneration please refer to Remuneration, pages 27-30.
Professional Services Research & Development Internal support and service Sales and sales support
Benelux, France and Italy 107 (90)
UK 67 (56)
Nordic 72 (82)
Central Europe 147 (150)
APAC 24 (27)
North America 103 (98)
Coric 58 (47)
Product Division 465 (445)
Corporate functions 232 (210)
Where SimCorp provides long-term incentives and benefits, the costs are accrued to match the rendering of services by the employees. The accounting policy for share-based remuneration is described in note 7.1.
Obligations related to contributions-based pension schemes are recognized in the income statement under employee costs in the period for which the related service is provided. The accounting treatment for defined benefit plans is described in note 7.2.
Earnings per share (EPS) and diluted earnings per share (EPS-D) are measured according to IAS 33.
| 2016 | 2015 | |
|---|---|---|
| Profit for the year (EUR´000) | 50,992 | 52,584 |
| Average number of shares | 41,500,000 | 41,500,000 |
| Average number of treasury shares | -1,530,961 | -1,261,324 |
| Average number of shares in circulation | 39,969,039 | 40,238,676 |
| Average dilutive impact of outstanding restricted stock units | 527,186 | 637,602 |
| Average number of diluted shares in circulation | 40,496,225 | 40,876,278 |
| Basic earnings per share - EPS (EUR) | 1.28 | 1.31 |
| Diluted earnings per share - EPS-D (EUR) | 1.26 | 1.29 |
All allotted restricted stock units were included in 2015 and 2016 as the conditions stipulated in note 7.1 are expected to be met. See also the Management report concerning share-based remuneration on pages 31-32.
This section contains all relevant disclosures and details regarding tax recognized in the financial statements.
The total tax on Group profit for the year has slightly increased by EUR 0.1m to EUR 16.6m compared with EUR 16.5m in 2015. Income tax has increased due to lower prior years adjustments compared with 2015, partly offset by lower tax rates in several jurisdictions and lower profit before tax. The Group's effective tax rate has increased from 23.9% to 24.6%.
In this section, the following notes are presented:
Accounting Policy
in equity.
income or directly on equity.
The income tax for the year comprises current and deferred tax, including adjustments to prior years. Tax is recognized in the Income statement, except to the extent it relates to items recognized on other comprehensive
The tax deduction on share-based remuneration for the year is recognized in taxable income in the income statement. If the total tax deduction exceeds the total expenses then tax for the excess is deducted directly
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Tax for the year: | ||
| Tax on profit | 16,601 | 16,516 |
| Tax on other comprehensive income | -57 | -49 |
| Total tax | 16,544 | 16,467 |
| Tax on profit for the year breaks down as follows: | ||
| Current tax | 16,170 | 17,827 |
| Deferred tax | 100 | -607 |
| Prior-year adjustments | 77 | -637 |
| Change in tax rates | 254 | -67 |
| Total tax on profit for the year | 16,601 | 16,516 |
| Tax paid during the year | 13,093 | 21,174 |
| Tax on profit for the year breaks down as follows: | ||
| Tax calculated on the year's pre-tax profit, 22% (2015:23.5%) | 14,870 | 16,204 |
| Difference in tax in subsidiaries relative to 22% (2015:23.5%) | 523 | 50 |
| Change in tax rates | 254 | -67 |
| Tax effect: | ||
| Non-taxable income | -1,366 | -1,538 |
| Non-deductible expenses | 1,432 | 1,513 |
| Other, including prior-year adjustments | 888 | 354 |
| Total tax on profit for the year | 16,601 | 16,516 |
| Effective tax rate | 24.6% | 23.9% |
Deferred tax is calculated using the liability method on all temporary differences between the accounting and taxable values of assets and liabilities, excluding temporary differences relating to goodwill which is not amortizable for tax purposes.
Deferred tax assets are assessed yearly and only recognized to the extent that it is more likely than not that they can be utilized.
Deferred tax assets, including the tax value of tax losses carried forward, are recognized as other non-current assets and measured at the amount at which they are expected to be realized, either by setting off deferred tax liabilities or by setting off tax on future earnings within the same legal entity or a jointly taxed entity.
Deferred tax is measured based on the tax legislation and statutory tax rates in the respective countries that will apply under the legislation in force on the balance sheet date when the deferred tax asset is expected to
crystallize as current tax. Changes in deferred tax resulting from changes in tax rates are recognized in the income statement.
The Group recognizes deferred tax assets relating to losses carried forward when management finds that these can be offset against taxable income in the foreseeable future. An assessment is made taking into consideration the effect of restrictions in utilization in local tax legislation. Future taxable income is assessed based on budgets as well as management's expectations regarding growth and operating margin in the coming 5 years.
| DEFERRED TAX | ||||||
|---|---|---|---|---|---|---|
| Balance | Profit | Balance | ||||
| EUR '000 | 1 January FX. adj. | and loss | OCI | Equity | 31 December | |
| 2016 | ||||||
| Intangible assets | -1,439 | 181 | -110 | 0 | 0 | -1,368 |
| Property, plant and equipment | 802 | -7 | -4 | 0 | 0 | 791 |
| Current assets | -178 | 0 | 133 | 0 | 0 | -45 |
| Provisions | 894 | 23 | 351 | 57 | 0 | 1,325 |
| Current liabilities | 284 | 0 | -24 | 0 | 0 | 260 |
| Share-based payment | 2,723 | 10 | -138 | 0 | -717 | 1,878 |
| Tax losses carry-forward | 5,019 | 119 | -594 | 0 | 0 | 4,544 |
| Total | 8,105 | 326 | -386 | 57 | -717 | 7,385 |
| 2015 | ||||||
| Intangible assets | -1,468 | -85 | 114 | 0 | 0 | -1,439 |
| Property, plant and equipment | 738 | -7 | 71 | 0 | 0 | 802 |
| Current assets | -270 | 0 | 92 | 0 | 0 | -178 |
| Provisions | 707 | 5 | 133 | 49 | 0 | 894 |
| Current liabilities | 380 | -9 | -87 | 0 | 0 | 284 |
| Share-based payment | 1,269 | -3 | 138 | 0 | 1,319 | 2,723 |
| Tax losses carry-forward | 5,115 | -7 | -89 | 0 | 0 | 5,019 |
| Total | 6,471 | -106 | 372 | 49 | 1,319 | 8,105 |
Tax value of the capitalized tax losses are expected to be realized within 5 years, as the affected subsidiaries expect a sufficient future taxable income. In 2017 EUR 3.5m (2015: 2016 EUR 1.5m) of the deferred tax assets are expected to be utilized.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Deferred tax at 1 January | 8,105 | 6,471 |
| Foreign exchange adjustment | 326 | -106 |
| Adjustment of deferred tax, profit and loss | -100 | 607 |
| Prior-year adjustment, profit and loss | -32 | -302 |
| Change in tax rates | -254 | 67 |
| Adjustment of deferred tax, other comprehensive income | 57 | 49 |
| Adjustment of deferred tax, equity | -717 | 1,319 |
| Net deferred tax at 31 December | 7,385 | 8,105 |
| Recognized in the balance sheet as follows: | ||
| Deferred tax assets | 8,534 | 9,078 |
| Deferred tax liabilities | -1,149 | -973 |
| Net deferred tax at 31 December | 7,385 | 8,105 |
Tax payable or receivable on taxable income for the year is recognized in the balance sheet as current tax liabilities and receivables adjusted for tax on prior years taxable income and payments in the year.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Payable at 1 January | -2,466 | 1,757 |
| Foreign exchange adjustment | 94 | -41 |
| Prior-year adjustments | 45 | 49 |
| Current tax on profit for the year | 16,170 | 17,827 |
| Current tax on equity | -770 | -884 |
| Income tax paid | -13,093 | -21,174 |
| Net receivable income tax at 31 December | -20 | -2,466 |
| Recognized in the balance sheet as follows: | ||
| Income tax receivable | -1,966 | -4,276 |
| Income tax payable | 1,946 | 1,810 |
| Net receivable income tax at 31 December | -20 | -2,466 |
Net working capital consists of current assets less current liabilities used in, or necessary for, the company's operations. The main components are work in progress related to professional services, accounts receivable and accounts payable. Working capital management prioritizes ensuring a strong cash flow performance.
Net working capital improved by EUR 5.6m in 2016 to EUR 20.9m. This can be explained mainly by an increase in payables and prepayments from clients. Net working capital represents 7.1% of revenue compared with 9.6% in 2015. It is expected that receivables will grow at a slower pace in the future with the adoption of the subscription based license terms.
In this section, the following notes are presented:
Accounting Policy
administrative expenses.
Receivables are measured at amortized cost. If there is objective evidence of impairment of a receivable, it is written down. Write-downs are made individually. The write-down is recognized in the income statement under
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Receivables from clients | 37,837 | 34,218 |
| Accrued revenue | 40,564 | 31,881 |
| Other receivables | 1,640 | 2,045 |
| Total receivables at 31 December | 80,041 | 68,144 |
| Aging of trade receivables from clients at 31 December: | ||
| Not due | 32,063 | 23,373 |
| Not more than 30 days | 3,456 | 7,597 |
| More than 30 days but not more than 90 days | 1,772 | 2,006 |
| More than 90 days | 546 | 1,242 |
| Total | 37,837 | 34,218 |
Accrued revenue consists mainly of revenue from the sale of software licenses and receivables from professional services contracts in progress, see note 4.2.
No security has been received with respect to trade receivables.
No write-down has been made in 2016 and 2015 for trade receivables.
The Group's exposure to currency and credit risk for trade receivables is disclosed in note 6.2.
Contracts in progress relating to fixed fee professional services are measured at the estimated sales value of the proportion of the contract completed at the balance sheet date. Amounts invoiced on account in excess of work completed are included in prepayments under current liabilities.
Other payables include bonus and commission accruals, vacation pay obligations, derivative financial instruments, payroll taxes and VAT. Payables are measured at cost. Derivative financial instruments are initially recognized at their fair values on their trade dates.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Income recognized sales value | 11,482 | 21,733 |
| Payments received on account | -13,490 | -18,907 |
| Contracts in progress | -2,008 | 2,826 |
| Which are recognized as follows: | ||
| Contracts in progress (assets) | 804 | 4,385 |
| Contracts in progress (liabilities) | -2,812 | -1,559 |
| Contracts in progress | -2,008 | 2,826 |
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Trade payables | 12,690 | 8,737 |
| Accrued vacation payable | 10,926 | 10,127 |
| Bonus and commissions payable | 15,316 | 15,692 |
| Payroll taxes, VAT etc., payable | 8,942 | 7,563 |
| Derivative financial instruments | 59 | 96 |
| Other debt | 2,989 | 0 |
| Total trade payables and other payables | 50,922 | 42,215 |
Exposure to currency and liquidity risk for trade and other payables is disclosed in note 6.2.
The Group is a party to inquiries from authorities when investigating various issues. The outcome of such is not expected to have a significant effect on profit for the year and the assessment of the Group's financial position.
The most significant contingent liability relates to SimCorp A/S and is the so called "ATP-ruling" related to possible VAT exemption for certain pension services.
On 13 March 2014, the Court of Justice of the European Union ("ECJ") published its judgment in the case C-464/12 ATP PensionService A/S determining that services provided to certain pension funds may be covered by the VAT exemption in section 13, subsection 1, no. 11, litra c and f of the Danish VAT Act.
As a consequence of the ECJ ruling, a number of SimCorp's Danish clients have filed a claim against SimCorp for recovery of the VAT levied on SimCorp's products and services. Pursuant to the Danish Tax Administration Act, SimCorp has claimed a refund from the Danish Tax Authorities ("SKAT") of the VAT collected on services provided to its Danish clients. SKAT has not yet replied to this claim for a refund. However, in August 2016 SimCorp received a so-called "binding ruling" from the Danish Tax Council and in this binding the Danish Tax Council concluded that SimCorp's products and services going forward are subject to VAT.
SimCorp does not expect the above ruling from the ECJ to significantly have an effect on profit for the year and the assessment of the Group's financial position and accordingly, SimCorp has not made a provision for this in its annual accounts 2016.
Return on invested capital is a key measure to assist decision making as the Group places focus on maximizing return on investment to shareholders. This sections comprises notes which offer a through understanding of invested capital.
In this section, the following notes are presented:
Initially, goodwill is recognized at cost. Subsequently, goodwill is measured at cost less accumulated impairment. Goodwill is not amortized. The carrying amount of goodwill is tested for impairment at least annually. Impairment losses are recognized directly in profit for the year and are not subsequently reversed.
Intangible assets with limited economic lives are measured at cost less accumulated amortization and impairment losses. Intangible assets include proprietary and acquired software. Amortization is provided on a straightline basis over the estimated useful lives of the assets, which are as follows:
Costs of development projects for software for resale are recognized as intangible assets where they are clearly defined and identifiable, where there are sufficient resources to implement the projects, and where it is certain that identifiable future income or cost reductions will cover the development and future operating costs.
Capitalized development costs comprise salaries.
Development costs comprise costs attributable to the Group's development functions, including salaries, and other employee costs and amortization. To the extent that the development costs are not capitalized, they are recognized as research and development costs in the income statement.
Software acquired is measured at cost less accumulated amortization and accumulated impairment losses.
Acquisition related client contracts are initially recognized at fair value at the acquisition date and subsequently carried at cost less accumulated amortization and any accumulated impairment losses. The churn rate is calculated on a contract by contract basis and has averaged around 5% on renewal. The value of client contracts is amortized on a straight line basis, based on the estimated duration of the acquired contract or other relevant period if deemed appropriate.
The carrying values of other intangible assets are reviewed annually for impairment to assess if there is an indication of impairment beyond what is expressed through normal amortization. If the carrying amount exceeds its recoverable amount, the carrying amount of the asset is written down to the recoverable amount.
All intangible assets apart from goodwill are considered to have limited useful economic lives.
Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment. Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets, which are as follows:
The basis of depreciation is calculated with due consideration to scrap value and any prior impairment write down. The estimated useful life and scrap value of each asset is determined at the date of acquisition and reassessed annually. When the scrap value equals the carrying amount of the asset, the asset ceases to be depreciated. Any change in depreciation period or scrap value is recognized as a change in accounting estimate.
Impairment, depreciation and amortization are recognized in production costs, research and development costs, sales and marketing costs or administrative expenses.
For the SimCorp Group, the measurement of intangible assets, including goodwill, could be affected by significant changes in judgment and assumptions underlying their calculation. The estimated useful life reflects the period over which the Group expects to derive economic benefit from intangible assets.
As active markets for the majority of acquired assets and liabilities do not exist, management has made estimates of their fair values. Fair values were estimated as the present value of future cash flows calculated based on churn rates or other expected cash flows related to
each asset. Estimates of fair value are associated with uncertainty and may be subsequently adjusted.
Determination of the useful life of client contracts at up to 20 years and software at up to 10 years is based on estimates regarding the period over which such assets are expected to produce economic benefits to the Group.
| 2016 | 2015 | ||||||
|---|---|---|---|---|---|---|---|
| EUR '000 | Intangible | Property, plant and equipment |
Total | Intangible | Property, plant and equipment |
Total | |
| Cost of sales | 253 | 701 | 954 | 81 | 612 | 693 | |
| Research and development costs | 418 | 1,013 | 1,431 | 506 | 1,033 | 1,539 | |
| Sales and marketing costs | 184 | 272 | 456 | 210 | 247 | 457 | |
| Administrative expenses | 53 | 466 | 519 | 69 | 431 | 500 | |
| Total amortization and depreciation | 908 | 2,452 | 3,360 | 866 | 2,323 | 3,189 |
Estimates for intangible assets and for property, plant and equipment are unchanged from previous reports.
| INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT EUR '000 |
Goodwill | Software | Client Contracts |
Intangible total |
Leasehold improvement |
Technical equipment |
Other equipment, fixtures, fittings and prepayments |
Property, plant and equipment total |
|---|---|---|---|---|---|---|---|---|
| 2016 | ||||||||
| Cost at 1 January | 4,579 | 10,976 | 3,790 | 19,345 | 6,410 | 8,468 | 4,396 | 19,274 |
| Foreign exchange adjustment Additions |
-603 0 |
-543 1,644 |
-523 0 |
-1,669 1,644 |
-37 1,479 |
-49 424 |
-10 1,070 |
-96 2,973 |
| Disposals | 0 | 0 | 0 | 0 | -253 | -925 | -85 | -1,263 |
| Cost at 31 December 2016 | 3,976 | 12,077 | 3,267 | 19,320 | 7,599 | 7,918 | 5,371 | 20,888 |
| Amortization/depreciation at 1 January | 0 | 7,227 | 348 | 7,575 | 4,710 | 6,085 | 4,146 | 14,941 |
| Foreign exchange adjustment | 0 | -110 | -48 | -158 | -35 | -11 | -6 | -52 |
| Amortization/depreciation | 0 | 745 | 163 | 908 | 700 | 1,590 | 162 | 2,452 |
| Disposals | 0 | 0 | 0 | 0 | -222 | -925 | -85 | -1,232 |
| Amortization and depreciation at 31 December | 0 | 7,862 | 463 | 8,325 | 5,153 | 6,739 | 4,217 | 16,109 |
| Carrying amount at 31 December 2016 | 3,976 | 4,215 | 2,804 | 10,995 | 2,446 | 1,179 | 1,154 | 4,779 |
| 2015 | ||||||||
| Cost at 1 January | 4,993 | 10,483 | 3,575 | 19,051 | 6,628 | 7,534 | 4,451 | 18,613 |
| Foreign exchange adjustment | 248 | 216 | 215 | 679 | 77 | -17 | -3 | 57 |
| Additions | 0 | 277 | 0 | 277 | 614 | 1,291 | 124 | 2,029 |
| Disposals | -662 | 0 | 0 | -662 | -909 | -340 | -176 | -1,425 |
| Cost at 31 December 2015 | 4,579 | 10,976 | 3,790 | 19,345 | 6,410 | 8,468 | 4,396 | 19,274 |
| Amortization/depreciation at 1 January | 662 | 6,563 | 149 | 7,374 | 4,907 | 4,812 | 4,259 | 13,978 |
| Foreign exchange adjustment | 0 | -7 | 4 | -3 | 65 | -9 | -6 | 50 |
| Amortization/depreciation | 0 | 671 | 195 | 866 | 644 | 1,615 | 64 | 2,323 |
| Disposals | -662 | 0 | 0 | -662 | -906 | -333 | -171 | -1,410 |
| Amortization and depreciation at 31 December | 0 | 7,227 | 348 | 7,575 | 4,710 | 6,085 | 4,146 | 14,941 |
| Carrying amount at 31 December 2015 | 4,579 | 3,749 | 3,442 | 11,770 | 1,700 | 2,383 | 250 | 4,333 |
Amortization/depreciation period (years) Up to 10 Up to 20 Up to 10 3 5
Goodwill is tested for impairment once a year, other intangible assets are tested when there is indication of impairment.
No indication of impairment beyond what is expressed through normal amortization has been perceived in relation to Software and Client Contracts.
When performing the impairment test, an assessment is made as to the ability of individual cash generating units (CGUs) to generate sufficient positive net cash flow in the future to support the value of the unit in question.
Cash generating units are defined as the smallest group of identifiable assets which together generate incoming cash flow from continued operations.
An estimate was made of the future free net cash flow based on budgets and strategy for 2017 and projections for the next 4 years. Significant parameters in this estimate are discount rate, revenue growth rate and profit margin. The recoverable amount is based on the value in use calculated by discounting expected future cash flows.
At 31 December 2016, the carrying amount of goodwill was tested for impairment.
The expected performance of SimCorp Dimension for SimCorp Asia Pty. Ltd. and SimCorp Coric for SimCorp Coric Ltd. were assessed in order to verify if sufficient to offset the carrying amount of the cash generating units as at 31 December 2016.
The impairment test as of December 31 2016 showed no indication of impairment for 2016 (2015: Nil). Management's assessment is that currently no changes in key assumptions are reasonably likely to reduce the value in use below the carry value for any of the cash generating units.
For Coric, the estimated growth rate in revenue during the forecast period is based on historical performance and the expectation that many more SimCorp Dimension clients as well as new clients will adopt the Coric reporting functionality under SimCorp's full ownership. The operating margin in the forecast period and the terminal period are estimated based on expectations that the entity will be able to increase it's client base without significant increase in costs. No growth has been assumed in the terminal value.
The discount rate used in determining the value in use is based on the weighted average cost of capital (WACC). For SimCorp Coric Ltd., the WACC is determined based on a risk free rate of 0.4% (2015: 0.9%) and a risk premium of 6.3% (2015: 5.8%) assuming a Beta of 1.1 (2015: 1.1). The risk free rate is based on 10 years British government bonds. Estimated leveraged European industry Beta was used for SimCorp Coric Ltd.
The carrying value of assets allocated to SimCorp Asia Pty. Ltd. is significantly lower than cash generated during one year of operations.
In performing the impairment test management made an assessment of whether the CGU to which the intangibles relate will be able to generate positive net cash flows sufficient to support the value of intangibles and other net assets of the entity. The assessment is based on estimates of expected future cash flows based on budgets, estimated discount rates, growth and profit margin development.
| Total Intangibles | Discount rate before tax | Annual average growth | |||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR '000 | Goodwill | Software | Client Contracts |
2016 | 2015 | 2016 | 2015 | 2016 | 2015 |
| SimCorp Coric Ltd | 3,797 | 2,491 | 2,804 | 9,092 | 11,141 | 7% | 7% | 14% | 9% |
| SimCorp Asia Pty Ltd | 179 | 0 | 0 | 179 | 174 | 8% | 8% | 2% | 2% |
| Total carrying amount | 3,976 | 2,491 | 2,804 | 9,271 | 11,315 |
Associates are entities over which SimCorp has significant influence, but which it does not control. It is generally presumed that SimCorp has significant influence when it has between 20% and 50% of voting rights or representation on the board of directors.
Investments in associates are recognized according to the equity method and measured in the balance sheet at the proportionate share of the associates' net asset values calculated in accordance with the Group's accounting policies less or plus the proportionate share of any unrealized intra-group gains and losses and plus the carrying amount of goodwill.
Associates with a negative equity value are measured at nil. A provision is made if SimCorp A/S has a legal or constructive obligation to cover the negative balance of any associate.
The Group's proportionate shares of the profit or loss of associates after tax and elimination of the proportionate shares of intra-group gains or losses are recognized in the consolidated income statement.
The Group's share of any impairment losses related to the net assets of the investee are also recognized. The Group considers whether objective evidence of impairment exists through the application of IAS 39 Financial instruments: Recognition and Measurement. Where evidence of impairment exists the investee is tested for impairment in accordance with IAS 36. Any impairment charge is capable of being reversed in full.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Cost at 1 January | 173 | 24 |
| Foreign exchange adjustment | 0 | 0 |
| Additions | 0 | 149 |
| Cost at 31 December | 173 | 173 |
| Adjustments at 1 January | 455 | 314 |
| Foreign exchange adjustment | -112 | 19 |
| Share of profit for the year | 94 | 126 |
| Disposals and other adjustments | -59 | -4 |
| Adjustments at 31 December | 378 | 455 |
| Carrying amount at 31 December | 551 | 628 |
| ASSOCIATES | Share attributable to the SimCorp Group |
|||||||
|---|---|---|---|---|---|---|---|---|
| EUR '000 | Country of incorporation |
Ownership interest |
Revenue | Profit for the year |
Assets | Liabilities | Equity | Profit for the year |
| 2016 | ||||||||
| Dyalog Ltd. | England | 19.9% | 2,891 | 412 | 3,583 | 901 | 402 | 82 |
| Opus Nebula Ltd. | England | 30.0% | 394 | 42 | 118 | 28 | 149 | 12 |
| 2015 | ||||||||
| Dyalog Ltd. | England | 19.9% | 3,037 | 746 | 3,863 | 602 | 461 | 149 |
| Opus Nebula Ltd. | England | 30.0% | 21 | -77 | 73 | 15 | 167 | -23 |
SimCorp's investment in Dyalog Ltd. is a strategic investment as the company is an important supplier. SimCorp purchases APL licenses from Dyalog Ltd. Please refer note 7.4.
In 2015 SimCorp has acquired 30% of Opus Nebula Ltd. This partnership enables a cloud-based Software as a Service (SaaS) Client and Fund Reporting offering. It will give SimCorp the opportunity to gain valuable experience in developing SaaS offerings while Opus Nebula Ltd. services smaller clients.
Deposits are primarily related to leasing of offices.
Security deposits which will not be returned within one year of the balance sheet date are recognized as non-current assets. Commitments which require a deposit will initially be recorded to the deposit asset account, if the deposit is not recovered it is charged to the income statement.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Cost at 1 January | 2,102 | 1,873 |
| Foreign exchange adjustment | 5 | 6 |
| Additions | 132 | 311 |
| Disposals* | -349 | -88 |
| Carrying amount at 31 December | 1,890 | 2,102 |
* Disposals include reclassifications to current receivables.
| EUR '000 | Re-establishment costs for rented premises |
Anni versary bonuses |
Pension | Other | Total |
|---|---|---|---|---|---|
| 2016 | |||||
| Liability at 1 January | 1,068 | 1,297 | 2,325 | 0 | 4,690 |
| Foreign exchange adjustment | -32 | 10 | 42 | 0 | 20 |
| Used during the year | 4 | -101 | 0 | 0 | -97 |
| Reversal of unused liabilities | -38 | -34 | 0 | 0 | -72 |
| Provisions for the year | 502 | 259 | 357 | 34 | 1,152 |
| Total provisions | 1,504 | 1,431 | 2,724 | 34 | 5,693 |
| Expected due dates for provisions: |
|||||
| Falling due within 1 year | 0 | 120 | 0 | 0 | 120 |
| Falling due within 2 to 5 years | 1,403 | 527 | 0 | 0 | 1,930 |
| Falling due after 5 years | 101 | 784 | 2,724 | 34 | 3,643 |
| Total provisions | 1,504 | 1,431 | 2,724 | 34 | 5,693 |
| 2015 | |||||
| Liability at 1 January | 1,176 | 1,190 | 1,952 | 69 | 4,387 |
| Foreign exchange adjustment | 15 | 1 | 74 | 8 | 98 |
| Used during the year | -186 | -92 | 0 | -33 | -311 |
| Reversal of unused liabilities | -74 | -31 | -266 | -44 | -415 |
| Provisions for the year | 137 | 229 | 565 | 0 | 931 |
| Total provisions | 1,068 | 1,297 | 2,325 | 0 | 4,690 |
| Expected due dates for pro visions: |
|||||
| Falling due within 1 year | 0 | 3 | 0 | 0 | 3 |
| Falling due within 2 to 5 years | 972 | 557 | 0 | 0 | 1,529 |
| Falling due after 5 years | 96 | 737 | 2,325 | 0 | 3,158 |
| Total provisions | 1,068 | 1,297 | 2,325 | 0 | 4,690 |
Provisions cover the costs of restoring leasehold premises and provisions for anniversary bonuses, the latter resulting from the Group's commitment of one month's pay in connection with employees' 25th and 40th anniversary.
A provision is recognized when the Group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of the Group's resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The Group has an obligation to re-establish and refurbish leased offices when the premises are vacated, a provision is recognized corresponding to the present value of expected future costs. The present value of the obligation is included in the cost of the tangible asset and depreciated accordingly.
In valuing provisions, the costs estimated to settle the liability are discounted if such discounting would have a material effect on the measurement of the liability. A pre-tax discount rate is used that reflects the level of interest rates with the liability. Changes in the discount element during the year are recognized as financial expenses.
It is SimCorp's policy to pay dividends of at least 50% of group profit on ordinary activities after tax. Additionally, cash is used to buy treasury shares provided the company does not anticipate specific cash requirements.
In this section, the following notes are presented:
Dividend
Dividends are recognized as a liability when declared by the shareholders in general meeting. Dividends recommended to be paid for the year are stated as a separate line item under equity until approved at the General Meeting.
Treasury shares acquired by the parent company are recognized in the balance sheet at zero value. Proceeds on the purchase of treasury shares and dividends from such shares are recognized in equity.
At 31 December 2016, the share capital amounted to DKK 41,500,000 divided into 41,500,000 shares unchanged from 2015. The company's shares are traded on NASDAQ Copenhagen in denominations of DKK 1. No shares confer any special rights upon any shareholder. No shares are subject to restrictions on transferability or voting rights.
The share capital may be increased in one or more issues by a total nominal amount of up to DKK 5,000,000 (5,000,000 shares of DKK 1 nominal value) as directed by the Board of Directors with respect to time and terms. This authority is valid for a period of five years, expiring on 1 March 2018, and may be extended by the shareholders for one or more periods of up to five years at a time.
| Number of | Nominal value | |
|---|---|---|
| shares | EUR '000 | |
| SHARE | ||
| CAPITAL | 41,500,000 | 5,575 |
The capital increase may be effected by cash payment or otherwise. The capital increase may be effected without pre-emption rights to the company's existing shareholders, if the shares are issued at market price or as consideration for the company's acquisition of an existing operation or specific assets of a value that equals the value of the shares issued. Except for the cases specified in the preceding period, the company's existing shareholders shall have a right to subscribe new shares proportionately to their existing holdings. The new shares shall be negotiable instruments, and no restrictions shall apply to the transferability of the shares. No shareholders shall be under an obligation to have their shares redeemed in full or in part by the company or any other party.
Unless Danish legislation provides for a greater majority or unanimity, the adoption of resolutions regarding amendments to the company's articles of association and the company's dissolution or merger with another company requires a majority of not less than two thirds of all the votes cast as well as of the voting share capital represented at the relevant general meeting, and that not less than 50% of the share capital is represented at the general meeting. Should less than 50%
of the share capital be represented at the general meeting, and the resolution is adopted by not less than two thirds of the votes cast as well as of the voting share capital represented at the general meeting, another general meeting may be called within 14 days after the preceding general meeting. At the new general meeting, the resolution can be adopted by not less than two thirds of the votes cast as well as of the voting share capital represented at the general meeting.
Refer to pages 31 to 34 for additional information.
| Number of shares | EUR'000 | Acquisition value | Percent of share capital |
||||
|---|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||
| At 1 January | 1,317,339 | 1,002,252 | 39,470 | 25,335 | 3.2 | 2.4 | |
| Foreign exchange adjustment |
149 | -64 | - | - | |||
| Purchases | 948,047 | 565,847 | 44,406 | 21,221 | 2.3 | 1.4 | |
| Used RSU program | -228,017 | -250,760 | -6,370 | -7,022 | -0.6 | -0.6 | |
| At 31 December | 2,037,369 | 1,317,339 | 77,655 | 39,470 | 4.9 | 3.2 |
The market value of treasury shares at 31 December 2016 was EUR 94,3m (2015: EUR 68.5m). The shares are carried at EUR 0.0m in the financial statements. The Board of Directors has been authorized to let the company acquire treasury shares of up to a total nominal value of 10% of the company's share capital including the company's current holding of treasury shares.
In 2016, SimCorp A/S acquired 948,047 treasury shares at an average price of DKK 348.23 per share equal to a purchase price of EUR 44.4m (2015: 565,847 treasury shares at an average price of DKK 279.87 per share equal to a purchase price of EUR 21.2m).
In 2016, SimCorp A/S delivered 228,017 treasury shares as part of the share based remuneration program for a nominal value of DKK 228,017 (2015: DKK 250,760) calculated at an average market price of DKK 288.69 per share (2015: DKK 237.20 per share), equal to a calculated price of EUR 8.9m (2015: EUR 8.0m).
The company acquires treasury shares for the purpose of reducing the share capital and for covering the Group's obligations arising from the restricted stock unit incentive programs.
Capital management and dividend policy The Board of Directors regularly assesses the need for adjusting the capital structure, including the requirement for cash, credit facilities and equity.
SimCorp pursues a dividend policy to the effect that, when cash resources exceed 10% of an upcoming year's projected costs, the company will pay minimum 50% of the Group profit for the year by way of dividend. In addition, the company will buy treasury shares provided that it does not anticipate specific cash requirements.
Distribution of dividends to shareholders has no tax consequences for the company.
The Board of Directors intends to recommend to the shareholders at the annual general meeting that dividends of approximately EUR 33.3m (2015: EUR 28.5m), equal to DKK 6.25 (2015: DKK 5.25) per 1 share, be distributed and that the company be authorized to acquire treasury shares for up to 10% of the company's share capital.
Further, the Board of Directors proposes to reduce the share capital of the Company by nominally DKK 1,000,000 from nominally DKK 41,500,000 to nominally DKK 40,500,000, equivalent to a reduction of the share capital by 1,000,000 shares of DKK 1 by cancellation of treasury shares.
Due to the nature of its operations, investments and financing, the Group is exposed to changes in exchange rates and interest rates. The Group's policy is to direct financial management towards the management of financial risks related to operations and finance. The Group's financial risks are managed centrally by the Group Finance department according to policies committed in writing and approved by the Board of Directors.
The purpose is to ensure efficient liquidity management. Excess liquidity is transferred to SimCorp A/S which operates as the internal bank for the Group.
The scope and nature of the Group's financial instruments appear from the income statement and the balance sheet in accordance with the accounting policies applied. Provided below is information about factors that may influence amounts, time of payment or reliability of future payments, where such information is not provided directly in the financial statements.
This note addresses only financial risks directly related to the Group's financial instruments. The Group's most important operational and commercial risk factors are described in more detail on pages 19-22 of the report.
EUR 37% USD 18% GBP 10% DKK 10% CHF 7% NOK 5% AUD 3% Other 10%
(CONTINUED)
| CURRENCY EXPOSURE | 2016 | 2015 | REVENUE BY CURRENCY | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| EUR '000 | Cash/ equivalents |
Receivables | Debt | Net position |
Cash/ equivalents |
Receivables | Debt | Net position |
||
| EUR/DKK | 1,125 | 9,628 | 645 | 10,108 | 1,336 | 1,044 | 294 | 2,086 | ||
| EUR/CHF | 185 | 74 | 0 | 259 | 761 | 0 | 0 | 761 | ||
| EUR/GBP | 19 | 1 | 173 | -153 | 6 | 395 | 152 | 249 | ||
| GBP/DKK | 663 | 8 | 1,507 | -836 | 24 | 0 | 215 | -191 | ||
| USD/DKK | 1,039 | 9 | 17 | 1,031 | 472 | 66 | 112 | 426 | ||
| USD/SGD | 0 | 296 | 0 | 296 | 0 | 1,078 | 0 | 1,078 | ||
| USD/GBP | 30 | 1,346 | 730 | 646 | 14 | 1,273 | 517 | 770 | ||
| CAD/USD | 247 | 560 | 143 | 664 | 208 | 1,914 | 204 | 1,918 | ||
| CHF/DKK | 3 | 0 | 21,138 | -21,135 | 0 | 0 | 22,378 | -22,378 | ||
| CHF/USD | 0 | 2,704 | 0 | 2,704 | 0 | 3,058 | 0 | 3,058 | ||
| CHF/GBP | 0 | 0 | 195 | -195 | 0 | 0 | 0 | 0 | ||
| DKK/SEK | 0 | 0 | 681 | -681 | 0 | 0 | 0 | 0 |
Currency risk is the risk that arises from changes in exchange rates and affects the Group's result. The Group's foreign subsidiaries are not severely impacted by foreign exchange fluctuations, as both income and costs are generally settled in the functional (local) currency of the individual entity and material cash balances are transferred to SimCorp A/S.
The consolidated income statement is impacted by changes in exchange rates. The results of foreign subsidiaries are translated from their functional currency to EUR at the exchange rates ruling on the dates of underlying transactions. The average exchange rate for the month is used to reflect the transaction dates' exchange rates.
The Group's foreign exchange management policy is to balance incoming and outgoing payments in local currency as much as possible and generally seek to ensure that an increasing number of contracts entered into are EUR-denominated. When placing surplus funds, the Group generally seeks to minimize its net exposure in individual currencies.
At the balance sheet date, SimCorp A/S had financially hedged CHF 22,7m (2015: CHF 24.2m) relating to future cash flows from a subsidiary for 2017 and 2018 at CHF rates against DKK of between 6.90 and 6.96.
In order to mitigate currency risk in relation to the Ukraine, SimCorp is using USD for salaries in that country.
Currency exposures from investments in subsidiaries have not been hedged. The related exchange rate adjustments are recognized in other comprehensive income.
The table shows currency exposure to each currency as at the balance sheet date based on the functional currencies of the individual Group companies. Additionally, the revenue allocation by currency is illustrated above.
(CONTINUED)
| SENSITIVITY ANALYSIS | 2016 | 2015 | |||
|---|---|---|---|---|---|
| Change in cross rate |
EUR '000 | Change in cross rate |
EUR '000 | ||
| EUR/CHF | 5% | 13 | 5% | 38 | |
| EUR/GBP | 10% | -15 | 10% | 25 | |
| GBP/DKK | 10% | -84 | 10% | -19 | |
| USD/DKK | 10% | 103 | 10% | 43 | |
| USD/SGD | 10% | 30 | 10% | 108 | |
| USD/GBP | 10% | 65 | 10% | 77 | |
| CAD/USD | 10% | 66 | 5% | 96 | |
| CHF/DKK | 10% | -2,114 | 5% | -1,119 | |
| CHF/USD | 10% | 270 | 10% | 306 | |
| CHF/GBP | 10% | -20 | - | - | |
| DKK/SEK | 10% | -68 | - | - |
Based on the net exposure of the Group, the hypothetical impact on the profit before tax for the year and equity, of exchange rate fluctuations.
The impact of change in interest levels on the equity of the Group does not deviate significantly from the impact on the profit and loss for the year.
A corresponding fall in the cross rate would have an equivalent opposite effect on profit before tax and equity.
The sensitivity analysis has been prepared at the balance sheet date based on the exposure to the listed currencies at the balance sheet date, without taking into account potential effects on interest rate levels, effect on other currencies etc.
The Group's interest rate risks are generally related to its bank deposits.
The Group had cash deposits of EUR 31.6m at 31 December 2016 (2015: EUR 43.3m) carrying a variable rate of interest based on the money market rate. The effective rate of interest varies with the currency and, made up at the
balance sheet date, fluctuated between -1.01%- 0,0% in 2016 (2015: -0.75-0.0%) for significant cash deposits.
The Group had no long-term loans.
If interest rates increased by one percentage point, the interest rate sensitivity as calculated based on quarterly cash deposits at the end of the quarters in 2016 and 2015, respectively, would have a positive impact of EUR 0.32m (2015: EUR 0.43m) in the Group. A corresponding fall in interest rates would have the opposite impact.
It is SimCorp's policy that cash reserves must exceed 10% of the coming year's expected costs.
The Group's cash reserve comprises cash and cash equivalents and unutilized credit facilities. The Group aims to have sufficient cash resources to allow it to continue to operate adequately in case of unforeseen fluctuations in cash. The Group has unused credit facilities in banks of EUR 4.2m (2015: EUR 5.0m). The current cash position and expected cash flow for 2017 are considered to be adequate to meet the obligations of the Group as they fall due.
Financial liabilities are classified as 'Financial liabilities measured at amortized cost' in the balance sheet.
| Current | Non-current | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 1 to 6 months |
1 to 6 months |
7 to 12 months |
7 to 12 months |
1 to 5 years |
1 to 5 years |
later than 5 years |
later than 5 years |
||
| EUR '000 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Prepayments from clients | 10,295 | 4,605 | 2,815 | 2,216 | 1,537 | 857 | 0 | 0 | |
| Trade payables | 12,104 | 8,055 | 185 | 446 | 460 | 236 | 0 | 0 | |
| Provisions | 67 | 3 | 53 | 0 | 1,931 | 1,529 | 3,642 | 3,158 | |
| Other payables | 29,783 | 28,693 | 3,548 | 3,038 | 1,853 | 1,747 | 0 | 0 | |
| Income tax and deferred tax | 636 | 1,836 | 1,425 | 9 | 552 | 938 | 482 | 0 | |
| Other debts | 2,989 | 0 | 0 | 0 | 0 | 2,347 | 0 | 0 | |
| Total | 55,874 | 43,192 | 8,026 | 5,709 | 6,333 | 7,654 | 4,124 | 3,158 |
The table indicates when the current and non-current liabilities including interest per 31.12.2016 and 31.12.2015, respectively, are expected to fall due. Interest payments are estimated based on current market conditions. The maturity profile of the Group's operational leasing obligations appears in note 7.3.
The Group is not exposed to significant risks concerning individual clients or business partners. Clients are generally major investment managers in the financial sector. Under the Group's policy for assuming credit risk all major clients and other business partners are assessed prior to any contract being signed.
The maximum exposure to credit risk equals the carrying amounts:
Financial assets are classified as 'Receivables'.
Credit risk relating to cash funds comprising current account deposits is deemed to be immaterial as the accounts are held with selected recognized international banks with high credit ratings. No security has been received.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Cash and cash equivalents | 31,590 | 43,344 |
| Receivables | 80,041 | 68,144 |
| Maximum credit exposure | 111,631 | 111,488 |
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Europe | 23,090 | 19,559 |
| North America | 7,155 | 3,366 |
| Asia | 248 | 178 |
| Australia | 690 | 233 |
| Other | 880 | 37 |
| Total | 32,063 | 23,373 |
The Group's trade receivables at 31 December 2016 include no impairments (2015: no impairments), see note 4.1. Impairments are based on individual assessments and result from objective indication of impairment. The
TRADE RECEIVABLES QUALITY BY GEOGRAPHICAL REGION
impairments will be charged to administrative expenses. Maturity dates for receivables are specified in note 4.1. No single client represents more than 7.5% (2015: 10.1%) of total trade receivables.
The Group have the following financial instruments:
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Receivables | 71,067 | 79,607 |
| Derivate financial instruments | 59 | 96 |
| Financial obligations measured at amortized cost | -15,679 | -11,080 |
SimCorp measures derivative financial instruments comprising, in 2016, of forward exchange transactions for the sale of CHF 22.7m (2015:CHF24.2m) against DKK in the period from February 2017 to November 2018 at fair value.
The fair value is determined using generally accepted valuation techniques based on observable exchange rates and yield curves. The forward exchange contracts are included in level 2 (observable input), negative EUR 0,1m (2015: EUR 0.1m).
Financial income and expenses include interest income and interest expense, realized and unrealized exchange gains and losses, refunds under the Danish tax prepayment scheme, changes related to the fair value of derivative financial instruments, withholding tax, amortization of financial assets and liabilities as well as surcharges under the Danish tax prepayment scheme.
Dividends on investments in associates are recognized in the Goup's income statement in the financial year in which the dividend is declared.
Differences arising when derivatives are re-measured at fair value are taken through profit or loss in financial income or financial expenses. Attributable transaction costs are recognized in the income statement.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Financial income | ||
| Dividend from associates | 91 | 10 |
| Interest income, cash etc. | 94 | 63 |
| Fair value adjustments, derivatives | 37 | 0 |
| Foreign exchange gains | 140 | 0 |
| Foreign exchange adjustments | 2,332 | 1,723 |
| Total financial income | 2,694 | 1,796 |
| Financial expenses | ||
| Interest expenses, financial assets carried at amortized cost | 52 | 43 |
| Interest expenses, deferred payment acquisition | 31 | 2 |
| Interest expenses, pension | 28 | 43 |
| Other financial expenses | 1,471 | 1,272 |
| Fair value adjustments, derivatives | 0 | 96 |
| Foreign exchange adjustments | 1,836 | 2,404 |
| Total financial expenses | 3,418 | 3,860 |
This section contains other required disclosures relevant for the understanding of the Groups' financial statements, but which are not essential for the understanding of the individual themes in the previous sections.
In this section, the following notes are presented:
SimCorp's Board of Directors has adopted an overall policy for remuneration and incentive programs and the policy has been approved by shareholders at the Annual General Meeting. The overall objective being to promote awareness of profitable growth and the Group's long-term goals. The Board of Directors wishes the company to offer share-based remuneration. The Board of Directors also believes that it is a natural decision for a company like SimCorp to offer shares to its Board members as a minor part of their overall remuneration. Shares are granted to members of the Board of Directors subject to approval at the Annual General Meeting.
In the 2016 financial year EUR 5.1m (2015: EUR 5.5m) was charged to the income statement in respect of share-based remuneration.
For restricted stock units, the fair value is measured at the grant date, adjusted for dividends and recognized in the income statement as employee cost over the vesting period. The counter entry is recognized directly in equity.
On initial recognition of restricted stock units, the number of restricted stock units expected to vest is estimated. Subsequently, adjustment is made for changes in the number of employees estimated to become entitled to restricted stock units and the numbers of the restricted units are
adjusted when performance conditions are only partly met and the adjustment is recognized in the income statement as employee cost.
In the financial year 1 January to 31 December 2016 a provision of EUR 168 thousand (2015: EUR 168 thousand) was charged to the income statement in respect of this program. The company will allot 4.873 treasury shares after publication of the annual report 2016 to members of SimCorp's Board of Directors (2015: 5.858 treasury shares).
Restricted stock units are granted annually in April to members of the Executive Management Board and key employees as part of the long-term incentive program. These restricted stock units vest three years after being granted subject to continuing employment. Furthermore, the restricted stock units are subject to conditions with respect to average annual minimum revenue growth and annual average net operating profit after tax for the three consecutive financial years including the year of grant. If the two last conditions are only partially satisfied, the undertaking with respect to the number of shares transferred after three years is reduced, and may possibly lapse completely.
In addition, restricted stock units with particular vesting conditions are occasionally granted to key personnel upon hiring as a part of a sign-on agreement, special performance incentives or similar incentives. When such particular vesting conditions apply they are specifically described below.
In April 2012 a total of 154,710 restricted stock units were granted to members of the Executive Management Board and key employees. In September 2012 an additional 1,250 restricted stock units were granted in connection with the appointment of an Executive Vice President and a further 5,000 restricted stock units were granted to the CEO in January 2013. In 2015: 105,045 shares were transferred to the Executive Management Board and key employees, who participated in the long-term incentive program in 2012 and have fulfilled the program's criteria. The number of shares was reduced by 17.4% compared to the maximum under the program. This program was fully completed in 2015.
In connection with Klaus Holse's appointment as CEO 107,220 restricted stock units were granted to him on 1 September 2012, as Klaus Holse has completed his personal investment of DKK 5m in SimCorp shares. Sixty percent of these restricted stock units vested in 2015, further twenty percent vested in 2016, and the remaining twenty percent after five years subject to continuing employment. EUR 96 thousand (2015: EUR 297 thousand) was charged to the income statement in respect of this program in the 2016 financial year. Shares transferred during the 2016 financial year in connection with this program totaled 21,444 (2015: 64,332).
In April 2013 a total of 117,950 restricted stock units were granted to members of the Executive Management Board and key employees, and an additional 1,230 restricted stock units were granted in connection with the appointment of a Senior Vice President in July 2013. Furthermore 610 restricted stock units were granted to a Senior Vice President appointed in October 2013. EUR 142 thousand (2015: EUR 863 thousand) was charged to the income statement in respect of this program in the 2016 financial year. In 2016: 100,188 shares were transferred to Executive Management Board and employees, who participated in the long-term incentive program in 2013 and have fulfilled the program's criteria.
The number of shares was reduced by 9.9% compared with maximum under the program (2015: 0%).
In April 2014 a total of 83,325 restricted stock units were granted to members of the Executive Management Board and key employees. EUR 569 thousand (2015: EUR 839 thousand) was charged to the income statement in respect of this program in the 2016 financial year. The number of shares has not been reduced compared to the maximum under the program (2015: 0%).
In April 2015 a total of 84,641 restricted stock units were granted to members of the Executive Management Board and key employees, additional 2,475 restricted stock units were granted to senior management employees during the remainder of the year. EUR 734 thousand was charged to the income statement in respect of this program in the 2016 financial year (2015: EUR 636 thousand). The number of shares has not been reduced compared to the maximum under the program.
In April 2016 a total of 69,773 restricted stock units were granted to members of the Executive Management Board and key employees, additional 1,927 restricted stock units were granted to senior management employees during the remainder of the year. EUR 677 thousand was charged to the income statement in respect of this program in the 2016 financial year. The number of shares has not been reduced compared with the maximum under the program.
In 2014 9,170 restricted stock units were granted in connection with the appointment of a senior management employee in the UK. These vest after three years, subject to continuing employment and are subject to conditions with respect to average annual revenue growth for the financial years 2014 to 2016. If the conditions are only partially satisfied, the number of shares transferred after three years will be reduced, and may possibly lapse completely. EUR 53 thousand was charged to the income statement in respect of this program in the 2016 financial year (2015: EUR 81 thousand). The program has been completed and 7,175 shares will be transferred in February 2017.
In connection with the acquisition of Equipos Ltd. (SimCorp Coric Ltd.) 8,431 restricted stock units were granted to management and key employees of SimCorp Coric Ltd. in 2014. These restricted stock units will vest after three years subject to continuing employment. EUR 25 thousand was charged to the income statement in respect of this program in the 2016 financial year (2015: EUR 45 thousand).
In 2014, in connection with the appointment of a new head of North America the Company has granted 9,493 restricted stock units equivalent to EUR 200 thousand. One third of these restricted stock units vest after one year, a further one third after two years, and the remaining third after three years, subject to continuing employment as part of the sign-on agreement. Shares transferred during the 2016
financial year in connection with this program totaled 3,164 (2015: 3,164). Additionally the Company has granted 15,000 restricted stock units, which will vest at the end of February 2018, subject to continuing employment. Furthermore, these restricted stock units are subject to conditions with respect to annual revenue growth in North America for the financial years 2015 to 2017. If the conditions are only partially satisfied, the number of shares transferred after three years will be reduced, and may possibly lapse completely. EUR 125 thousand was charged to the income statement in respect of these programs in the 2016 financial year (2015: EUR 198 thousand).
In 2015, in connection with the appointment of senior management employees in North America, a total of 7,971 restricted stock units have been granted as sign on bonuses. One third of these restricted stock units vest after one year, a further one third after two years, and the remaining third after three years, subject to continuing employment as part of the sign-on agreement. EUR 41 thousand was charged to the income statement in respect of this program in the 2016 financial year (2015: EUR 100 thousand).
In addition, in connection with an incentive program for a senior management employee in France 7,834 restricted stock units have been granted. These will vest after three years subject to continuing employment and performance conditions with respect to order intake for the financial years 2015 to 2017. If the conditions are partially satisfied the
number of shares transferred will be reduced and may possibly lapse completely. EUR 63 thousand was charged to the income statement in respect of this program in the 2016 financial year (2015: EUR 63 thousand).
In January 2016 in connection with the appointment of senior management employees in SimCorp Coric Ltd. 481 restricted stock units have been granted as sign on bonuses. The restricted stock units vest after three years, subject to continuing employment. EUR 8 thousand was charged to the income statement in respect of this program in the 2016 financial year.
As part of the annual corporate bonus program the employees have had the option to receive or instead waive their corporate bonus and elect to receive restricted stock units at a discount of 67%. Based on the waived bonus amount the company grants restricted stock units to employees of the parent company and its foreign subsidiaries. One third of these restricted stock units vest after one year, a further one third after two years, and the remaining third after three years, subject to continuing employment.
Restricted stock units granted related to corporate bonus programs 2011 to 2015.
On 20 March 2012 the company granted 35,700 restricted stock units in connection with the 2011 corporate bonus program. In 2015 EUR 15 thousand was charged to the income statement in respect of this program. The program was completed in 2015
On 6 March 2013 the company granted 14,350 restricted stock units as part of its 2012 corporate bonus program. EUR 10 thousand (2015: EUR 36 thousand) was charged to the income statement in respect of this program in the 2016 financial year.
In March 2014 the company granted 144,718 restricted stock units in connection with the 2013 corporate bonus program. EUR 316 thousand (2015: EUR 416 thousand) was charged to the income statement in respect of this program in the 2016 financial year.
In March 2015 the company granted 120,031 restricted stock units in connection with the 2014 corporate bonus program. EUR 438 thousand (2015: EUR 758 thousand) was charged to the income statement in respect of this program in the 2016 financial year.
In March 2016 the company granted 87,412 restricted stock units in connection with the 2015 corporate bonus program. EUR 694 thousand (2015: EUR 866 thousand) was charged to the income statement in respect of this program in the 2016 financial year.
In March 2017 the company will grant restricted stock units as part of its corporate bonus program for 2016. EUR 914 thousand was charged to the income statement in respect of this program in the 2016 financial year.
(CONTINUED)
| 2016 | Fair Value | Cancelled or | Avg. | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Grant | Vesting | EUR | Outstanding | transferred | Performance | Outstanding | remaining | |||
| Type | Year | period | million | 1 January | Granted | Vested | to other | Adjustment | 31 December | term |
| Board of Directors | ||||||||||
| Long-term incentive program | 2014 | Feb-17 | 0 | 0 | 0 | 313 | 0 | 313 | 0,17 | |
| Corporate bonus 2013 | 2014 | Mar-15/16/17 | 724 | 0 | -360 | -133 | - | 231 | 0.25 | |
| Corporate bonus 2014 | 2015 | Mar-16/17/18 | 947 | 0 | -315 | -632 | - | 0 | - | |
| Corporate bonus 2015 | 2016 | Mar-17/18/19 | 0 | 842 | 0 | -9 | - | 833 | 1.25 | |
| Executive Management Board | ||||||||||
| Long-term incentive program | 2013 | Feb-16 | 30,003 | 0 | -30,003 | 0 | 0 | 0 | - | |
| Long-term incentive program | 2014 | Feb-17 | 24,456 | 0 | 0 | -6,226 | 0 | 18,230 | 0.17 | |
| Long-term incentive program | 2015 | Feb-18 | 25,085 | 0 | 0 | -6,403 | 0 | 18,682 | 1.17 | |
| Long-term incentive program | 2016 | Feb-19 | 0 | 19,726 | 0 | -4,944 | 0 | 14,782 | 2.17 | |
| Corporate bonus 2013 | 2014 | Mar-15/16/17 | 4,120 | 0 | -2,059 | -548 | - | 1,513 | 0.25 | |
| Corporate bonus 2014 | 2015 | Mar-16/17/18 | 6,659 | 0 | -2,219 | -1,130 | - | 3,310 | 0.75 | |
| Corporate bonus 2015 | 2016 | Mar-17/18/19 | 0 | 5,151 | 0 | -1,315 | - | 3,836 | 1.25 | |
| CEO - Klaus Holse | 2012 | Sep-15/16/17 | 42,888 | 0 | -21,444 | 0 | - | 21,444 | 0.75 | |
| Other employees | ||||||||||
| Long-term incentive program | 2013 | Feb-16 | 72,296 | 0 | -70,185 | -2,111 | 0 | 0 | - | |
| Long-term incentive program | 2014 | Feb-17 | 55,580 | 0 | 0 | -1,252 | 0 | 54,328 | 0.17 | |
| Long-term incentive program | 2015 | Feb-18 | 59,767 | 0 | 0 | -2,088 | 0 | 57,679 | 1.17 | |
| Long-term incentive program | 2016 | Feb-19 | 0 | 51,974 | 0 | 0 | 0 | 51,974 | 2.17 | |
| Corporate bonus 2012 | 2013 | Mar-16 | 13,830 | 0 | -13,830 | 0 | - | 0 | - | |
| Corporate bonus 2013 | 2014 | Mar-15/16/17 | 84,263 | 0 | -42,106 | -1,341 | - | 40,816 | 0.25 | |
| Corporate bonus 2014 | 2015 | Mar-16/17/18 | 107,250 | 0 | -35,045 | -3,305 | - | 68,900 | 0.75 | |
| Corporate bonus 2015 | 2016 | Mar-17/18/19 | 0 | 87,403 | 0 | -2,911 | - | 84,492 | 1.25 | |
| Senior Employee United Kingdom | 2014 | Mar-17 | 9,170 | 0 | 0 | 0 | -1,995 | 7,175 | 0.25 | |
| Key Employees SimCorp Coric | 2014 | Mar-17 | 6,028 | 0 | 0 | -1.159 | - | 4,869 | 0.25 | |
| Senior Empl. North America, sign on | 2014 | Sep-17 | 6,329 | 0 | -3,164 | 0 | - | 3,165 | 0.75 | |
| Senior Empl. North America | 2014 | Feb-18 | 15,000 | 0 | 0 | 0 | 0 | 15,000 | 1.17 | |
| Senior Empl. North America | 2015 | Feb-16/17/18 | 7,971 | 0 | -2,495 | 0 | - | 5,476 | 0.67 | |
| Senior Empl. France | 2015 | Feb-18 | 7,834 | 0 | 0 | 0 | 0 | 7,834 | 1.17 | |
| Senior Empl. United Kingdom | 2016 | Feb-19 | 0 | 481 | 0 | 0 | - | 481 | 2.17 |
(CONTINUED)
| 2016 | Fair Value | Cancelled or | Avg. | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Grant | Vesting | EUR | Outstanding | transferred | Performance | Outstanding | remaining | |||
| Type | Year | period | million | 1 January | Granted | Vested | to other | Adjustment | 31 December | term |
| Total | ||||||||||
| Long-term incentive program | 2013 | Feb-16 | 2.5 | 102,300 | 0 | -100,188 | -2,111 | 0 | 0 | - |
| Long-term incentive program | 2014 | Feb-17 | 2.4 | 80,036 | 0 | 0 | -7,165 | 0 | 72,871 | 0.17 |
| Long-term incentive program | 2015 | Feb-18 | 2.7 | 84,852 | 0 | 0 | -8,491 | 0 | 76,361 | 1.17 |
| Long-term incentive program | 2016 | Feb-19 | 2.9 | 0 | 71,700 | 0 | -4,944 | 0 | 66,756 | 2.17 |
| Corporate bonus 2012 | 2013 | Mar-16 | 0.3 | 13,830 | 0 | -13,830 | 0 | - | 0 | - |
| Corporate bonus 2013 | 2014 | Mar-15/16/17 | 4.2 | 89,107 | 0 | -44,525 | -2,022 | - | 42,560 | 0.25 |
| Corporate bonus 2014 | 2015 | Mar-16/17/18 | 3.4 | 114,856 | 0 | -37,579 | -5,067 | - | 72,210 | 0.75 |
| Corporate bonus 2015 | 2016 | Mar-17/18/19 | 3,5 | 0 | 93,396 | 0 | -4,235 | - | 89,161 | 1.25 |
| CEO - Klaus Holse | 2012 | Sep-15/16/17 | 1.4 | 42,888 | 0 | -21,444 | 0 | - | 21,444 | 0.75 |
| Senior Employee United Kingdom | 2014 | Mar-17 | 0.3 | 9,170 | 0 | 0 | 0 | -1,995 | 7,175 | 0.25 |
| Key Employees SimCorp Coric | 2014 | Mar-17 | 0.2 | 6,028 | 0 | 0 | -1,159 | - | 4,869 | 0.25 |
| Senior Empl. North America, sign on | 2014 | Sep-17 | 0.2 | 6,329 | 0 | -3,164 | 0 | - | 3,165 | 0.75 |
| Senior Empl. North America | 2014 | Feb-18 | 0.3 | 15,000 | 0 | 0 | 0 | 0 | 15,000 | 1.17 |
| Senior Empl. North America | 2015 | Feb-16/17/18 | 0.2 | 7,971 | 0 | -2,495 | 0 | - | 5,476 | 0.67 |
| Senior Empl. France | 2015 | Feb-18 | 0.2 | 7,834 | 0 | 0 | 0 | 0 | 7,834 | 1.17 |
| Senior Empl. United Kingdom | 2016 | Feb-19 | 0.0 | 0 | 481 | 0 | 0 | - | 481 | 2.17 |
| Total Restricted Stock Units | 580,201 | 165,577 | -223,225 | -35,194 | -1,995 | 485,363 | 0.98 | |||
| 2015 | ||||||||||
| Board of Directors | ||||||||||
| Corporate bonus 2013 | 2014 | Mar-15/16/17 | 1,084 | 0 | -360 | 0 | - | 724 | 0.75 | |
| Corporate bonus 2014 | 2015 | Mar-16/17/18 | 0 | 947 | 0 | 0 | - | 947 | 1.25 | |
| Executive Management Board | ||||||||||
| Long-term incentive program | 2012 | Apr-15 | 28,580 | 0 | -28,578 | 0 | -2 | 0 | - | |
| Long-term incentive program | 2013 | Feb-16 | 24,109 | 0 | 0 | 0 | 5,894 | 30,003 | 0.17 | |
| Long-term incentive program | 2014 | Feb-17 | 20,225 | 0 | 0 | 0 | 4,231 | 24,456 | 1.17 | |
| Long-term incentive program | 2015 | Feb-18 | 0 | 25,085 | 0 | 0 | 0 | 25,085 | 2.17 | |
| Corporate bonus 2011 | 2012 | Mar-15 | 2,810 | 0 | -2,810 | 0 | - | 0 | - | |
| Corporate bonus 2013 | 2014 | Mar-15/16/17 | 6,179 | 0 | -2,059 | 0 | - | 4,120 | 0.75 | |
| Corporate bonus 2014 | 2015 | Mar-16/17/18 | 0 | 6,659 | 0 | 0 | - | 6,659 | 1.25 | |
| CEO - Klaus Holse | 2012 | Sep-15/16/17 | 107,220 | 0 | -64,332 | 0 | 0 | 42,888 | 1.25 |
(CONTINUED)
| 2015 | Fair Value | Cancelled or | Avg. | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Type | Grant Year |
Vesting period |
EUR million |
Outstanding 1 January |
Granted | Vested | transferred to other |
Performance Adjustment |
Outstanding 31 December |
remaining term |
| Other employees | ||||||||||
| Long-term incentive program | 2012 | Apr-15 | 77,784 | 0 | -76,467 | -1,279 | -38 | 0 | - | |
| Long-term incentive program | 2013 | Feb-16 | 60,193 | 0 | 0 | -2,900 | 15,003 | 72,296 | 0.17 | |
| Long-term incentive program | 2014 | Feb-17 | 47,390 | 0 | 0 | -1,724 | 9,913 | 55,580 | 1.17 | |
| Long-term incentive program | 2015 | Feb-18 | 0 | 62,031 | 0 | -2,264 | 0 | 59,767 | 2.17 | |
| Corporate bonus 2011 | 2012 | Mar-15 | 28,010 | 0 | -27,690 | -320 | - | 0 | - | |
| Corporate bonus 2012 | 2013 | Mar-16 | 14,350 | 0 | 0 | -520 | - | 13,830 | 0.25 | |
| Corporate bonus 2013 | 2014 | Mar-15/16/17 | 132,295 | 0 | -43,991 | -4,041 | - | 84,263 | 0.75 | |
| Corporate bonus 2014 | 2015 | Mar-16/17/18 | 0 | 112,425 | 0 | -5,175 | 0 | 107,250 | 1.25 | |
| Senior Employee United Kingdom | 2014 | Mar-17 | 9,170 | 0 | 0 | 0 | - | 9,170 | 1.25 | |
| Key Employees SimCorp Coric | 2014 | Mar-17 | 7,166 | 0 | 0 | -1,138 | - | 6,028 | 1.25 | |
| Senior Empl. North America, sign on | 2014 | Sep-17 | 9,493 | 0 | -3,164 | 0 | - | 6,329 | 1.75 | |
| Senior Empl. North America | 2014 | Feb-18 | 15,000 | 0 | 0 | 0 | 0 | 15,000 | 2.17 | |
| Senior Empl. North America | 2015 | Feb-16/17/18 | 0 | 7,971 | 0 | 0 | - | 7,971 | 1.17 | |
| Senior Empl. France | 2015 | Feb-18 | 0 | 7,834 | 0 | 0 | 0 | 7,834 | 2.17 | |
| Total | ||||||||||
| Long-term incentive program | 2012 | Apr-15 | 2.1 | 106,364 | 0 | -105,045 | -1,279 | -40 | 0 | - |
| Long-term incentive program | 2013 | Feb-16 | 2.5 | 84,303 | 0 | 0 | -2,900 | 20,897 | 102,300 | 0.17 |
| Long-term incentive program | 2014 | Feb-17 | 2.4 | 67,616 | 0 | 0 | -1,724 | 14,144 | 80,036 | 1.17 |
| Long-term incentive program | 2015 | Feb-18 | 2.7 | 0 | 87,116 | 0 | -2,264 | 0 | 84,852 | 2.17 |
| Corporate bonus 2011 | 2012 | Mar-15 | 0.3 | 30,820 | 0 | -30,500 | -320 | - | 0 | - |
| Corporate bonus 2012 | 2013 | Mar-16 | 0.3 | 14,350 | 0 | 0 | -520 | - | 13,830 | 0.25 |
| Corporate bonus 2013 | 2014 | Mar-15/16/17 | 4.2 | 139,558 | 0 | -46,410 | -4,041 | - | 89,107 | 0.75 |
| Corporate bonus 2014 | 2015 | Mar-16/17/18 | 3.4 | 0 | 120,031 | 0 | -5,175 | - | 114,856 | 1.25 |
| CEO - Klaus Holse | 2012 | Sep-15/16/17 | 1.4 | 107,220 | 0 | -64,332 | 0 | - | 42,888 | 1.25 |
| Senior Employee United Kingdom | 2014 | Mar-17 | 0.3 | 9,170 | 0 | 0 | 0 | 0 | 9,170 | 1.25 |
| Key Employees SimCorp Coric | 2014 | Mar-17 | 0.2 | 7,166 | 0 | 0 | -1,138 | - | 6,028 | 1.25 |
| Senior Empl. North America, sign on | 2014 | Sep-17 | 0.2 | 9,493 | 0 | -3,164 | 0 | - | 6,329 | 1.75 |
| Senior Empl. North America | 2014 | Feb-18 | 0.3 | 15,000 | 0 | 0 | 0 | 0 | 15,000 | 2.17 |
| Senior Empl. North America | 2015 | Feb-16/17/18 | 0.2 | 0 | 7,971 | 0 | 0 | - | 7,971 | 1.17 |
| Senior Empl. France | 2015 | Feb-18 | 0.2 | 0 | 7,834 | 0 | 0 | 0 | 7,834 | 2.17 |
| Total Restricted Stock Units | 591,059 | 222,952 | -249,451 | -19,361 | 35,001 | 580,201 | 1.12 |
Board of director's restricted units are acquired in a capacity as employees of SimCorp A/S. Fair value is shown at time of grant.
The Group has entered into pension and similar agreements with most employees. Obligations relating to defined contribution plans are recognized in the income statement in the period in which they are earned, and payments due are recognized in the balance sheet under other payables.
For defined benefit plans, the net present value is only calculated for those benefits earned to date by employees. The present value of future pension payments is estimated actuarially and shown net of the fair value of any plan assets in the balance sheet as pension obligations.
Differences between calculated pension assets and liabilities and their realized values are termed actuarial gains and losses. Actuarial gains and losses are recognized in the statement of comprehensive income.
Any changes in benefits earned to date are actuarially calculated and expensed immediately when the employees have already earned the right to the changed benefits. Otherwise, they are recognized in the income statement over the period during which the employees earn the right to the benefits.
For defined benefit plans, annual actuarial calculations are made of the net present value of future benefits to be paid under the plan.
The net present value is calculated based on assumptions of the future developments of salary, interest, inflation and mortality rates. Assumptions are assessed at reporting date and changes in these assumptions may significantly affect the liabilities and pension cost under defined benefit plans.
The pension obligations of the Parent company and the majority of foreign subsidiaries are covered by insurance (defined contribution plans). For a few foreign subsidiaries the pension obligations are not covered or only partly covered by insurance (defined benefit plans).
Under defined benefit plans, the employer is obliged to pay a defined benefit (for example a fixed percentage of an employee's final salary) to the employee after retirement. Under a defined benefit plan, the Group carries the risk in respect of future developments in interest rates, inflation, mortality or disability.
The Group's Norwegian and Swiss subsidiaries have defined benefits pension plans comprising a total of 33 employees (2015: 34). The plans entitle the employees to defined future benefits. These primarily depend on number of years of service, salary level at retirement age and the size of the national pension.
The actuarial assessments of assets and liabilities in the Norwegian defined benefit plan have been done by Storebrand Pensjonstjenester AS (Norway) on basis of standardized assumptions, prepared by Forsikringsnæringens Hovedorganisasjon (Norway), regarding life expectancy
and other demographic factors. Specifically the tariff K2013BE has been applied.
For the Swiss defined benefit plan the actuarial assessments of assets and liabilities have been
done by Allea Ltd (Switzerland) on basis of standardized assumptions, prepared by Swiss Association of Actuaries, regarding life expectancy and other demographic factors.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Pension liabilities | ||
| At 1 January | 7,991 | 6,824 |
| Foreign exchange adjustment and other adjustments | 163 | 332 |
| Employee contributions | 197 | 194 |
| Expensed in the income statement | 505 | 367 |
| Calculated interest | 111 | 148 |
| Actuarial loss/(gain) change in demographic assumptions | -248 | 0 |
| Actuarial loss/(gain) change in financial assumptions | 217 | 357 |
| Actuarial loss/(gain) change in experience | -476 | -190 |
| Payroll taxes | -35 | -31 |
| Settlements | -151 | 0 |
| Benefits paid through pension assets | 258 | -10 |
| Present value of pension liabilities at 31 December | 8,532 | 7,991 |
| Fair value of plan assets | ||
| At 1 January | 5,671 | 4,872 |
| Foreign exchange adjustment | 126 | 259 |
| Calculated interest | 82 | 97 |
| Return on plan assets in addition to calculated interest | -800 | -139 |
| Employee contributions | 197 | 194 |
| Employer contributions | 444 | 411 |
| Settlements | -151 | 0 |
| Benefits paid through pension assets | 258 | -10 |
| Other | -19 | -13 |
| Fair value of plan assets at 31 December | 5,808 | 5,671 |
| Net liability included in the balance sheet | 2,724 | 2,320 |
| Switzerland | Norway | ||||
|---|---|---|---|---|---|
| (Latest information as of September 30) | 2016 | 2015 | 2016 | 2015 | |
| Shares | 9% | 5% | |||
| Bonds/mortgage bonds | 72% | 76% | |||
| Property | 14% | 12% | |||
| Other financial assets | 5% | 7% | |||
| Assets held at Allianz Suisse collective foundation |
100% | 100% | |||
| Total | 100% | 100% | 100% | 100% |
| Switzerland | Norway | ||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||
| Discount rate | 0.5% | 0.8% | 2.1% | 2.7% | |
| Future salary increases | 1.5% | 1.5% | 2.3% | 2.5% |
Significant actuarial assumptions for the determination of the pension benefit liability are discount rate and expected future remuneration increases.
The sensitivity analysis below have been determined based on reasonable likely changes in assumptions occurring at the end of the period.
| Switzerland | Norway | ||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||
| Discount rate +1% | -957 | -788 | -28 | -34 | |
| Discount rate -1% | 1,362 | 1,106 | 38 | 45 | |
| Future remuneration +1% | 299 | 165 | 20 | 23 | |
| Future remuneration -1% | -263 | -145 | -17 | -19 |
The sensitivities consider the single change shown with the other assumptions assumed to be unchanged. In practice, changes in one assumption may be accompanied by offsetting changes in another assumption (although this is not always the case).
The Group expects to pay EUR 453 thousand to the defined benefit pension plans in 2017 (2015: EUR 431 thousand for the year 2016). For defined contribution plans, the employer is obliged to pay a defined contribution (for example a fixed percentage of an employee's salary) to independent insurance companies. For a defined contribution plan, the Group runs no risk in respect of future developments in interest rates, inflation, mortality or disability.
For operating leases, the lease payments are recognized in the income statement on a straight line basis over the lease periods.
All the Group's leases are with an option to extend and are made on market terms with normal rent adjustment clauses and no right of first refusal.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Rent commitments | ||
| Payable within 1 year | 9,889 | 9,553 |
| Payable within 2 to 5 years | 19,387 | 21,604 |
| Payable after 5 years | 5,993 | 1,536 |
| Rent commitments until expiry of minimum term of tenancy | 35,269 | 32,693 |
| Other commitments | ||
| Payable within 1 year | 711 | 682 |
| Payable within 2 to 5 years | 1,055 | 808 |
| Total other commitments | 1,766 | 1,490 |
| Total commitments | ||
| Payable within 1 year | 10,600 | 10,235 |
| Payable within 2 to 5 years | 20,442 | 22,412 |
| Payable after 5 years | 5,993 | 1,536 |
| Total commitments | 37,035 | 34,183 |
Amounts of EUR 10.3m (2015: EUR 11.5m) relating to operating leases have been recognized in the income statement for 2016 in the Group. The Group's other liabilities comprise operating leases for operating equipment, generally with a lease period of between two and five years.
In November 2008 SimCorp moved into the headquarters at Weidekampsgade 16, Copenhagen. The lease has been entered into on market terms and with normal rent adjustment clauses. SimCorp served notice on around 2000 m2 which were vacated mid October 2015. The initial lease is for a period of ten years, with an option to extend for up to 20 years from the commencement of the lease.
SimCorp's related parties exercising a significant influence comprise the company's Board of Directors and Executive Management Board as well as relatives of these persons. Related parties also comprise companies in which the individuals mentioned above have material interests.
The Group did not enter into any agreements, deals or other transactions in 2016 in which the parent company's Board of Directors or Executive Management Board had a financial interest, except for transactions following from the employment relationship. See notes 7.1 and Remuneration in pages 27-30.
Purchases of services from associates amounted in 2016 to EUR 1.2m compared with EUR 1.2m in 2015.
Transactions with subsidiaries have been eliminated in the consolidated financial statement in accordance with the accounting policies applied.
Trading with subsidiaries and associates of the SimCorp Group is conducted on arm's length terms. Ownership interests are shown in note 7.9.
In 2016 the Group has received dividends of EUR 0.09m from associates (2015: 0.01m).
Key Management Personnel (cf. IAS 24) consists of the Board of Directors and the Executive Management Board.
Remuneration to members of the Board of Directors and the Executive Management Board is disclosed in page 28 and in page 30.
Members of the Board of Directors are elected by the shareholders at the annual general meeting for terms of one year. Members of the Board of Directors elected by the employees are elected among all SimCorp Group employees every third year. Election was held in March 2016, the next election will be held in March 2019. Refer to pages 35-36 for additional information on Board of Directors members.
Candidates for Board membership may not have turned 70 years of age on the date of the general meeting at which the election takes place.
| NUMBER OF SHARES | 2016 | 2015 |
|---|---|---|
| Shareholdings: | ||
| Shareholdings, Board of Directors: | ||
| Jesper Brandgaard | 86,743 | 85,279 |
| Peter Schütze | 9,793 | 8,915 |
| Herve Couturier | 7,830 | 7,244 |
| Simon Jeffreys | 9,933 | 9,055 |
| Patricia McDonald | 1,461 | 729 |
| Else Braathen 2) | 4,611 | - |
| Vera Bergforth 2) | 560 | - |
| Ulrik Elstrup Hansen 2) | 1,228 | - |
| Jacob Goltermann 3) | - | 10,844 |
| Raymond John 3) | - | 3,044 |
| Board of Directors, total | 122,159 | 125,110 |
| Shareholdings, Executive Management Board: | ||
| Klaus Holse | 91,392 | 79,414 |
| Georg Hetrodt | 147,472 | 138,153 |
| Thomas Johansen 1) | 9,607 | 10,512 |
| Executive Management Board, total | 248,471 | 228,079 |
| Total shareholdings by members of the Board of Directors | ||
|---|---|---|
| and the Executive Management Board | 370,630 | 353,189 |
| 2016 | 2015 | |
|---|---|---|
| Restricted stock units, Board of Directors: | ||
| Else Braathen 2) | 1,081 | - |
| Ulrik Elstrup Hansen 2) | 296 | - |
| Raymond John 3) | - | 656 |
| Jacob Goltermann 3) | - | 1,015 |
| Board of Directors, total | 1,377 | 1,671 |
| Restricted stock units, Executive Management Board: | ||
| Klaus Holse | 59,846 | 85,212 |
| Georg Hetrodt | 21,951 | 24,596 |
| Thomas Johansen 1) | 0 | 23,403 |
| Executive Management Board, total | 81,797 | 133,211 |
| Total restricted stock units granted to members of the Board of Directors and the Executive Management Board |
83,174 | 134,882 |
| 1) Resigned 13.12.2016 |
2) Employee elected effective April 1 2016
3) Retired April 1 2016
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Audit Fees | 258 | 222 |
| Other service with assurance fees | 7 | 8 |
| Tax and VAT advice fees | 120 | 193 |
| Other service fees | 48 | 62 |
| Total | 433 | 485 |
Audit fees include the audit of the consolidated and local financial statements.
Tax fees primarily relate to assistance with transfer pricing audits in Canada and fees related to preparation of Advanced Pricing Agreements with USA and Germany.
No material events have occurred after 31 December 2016, that have consequences for annual report 2016.
This note provides details to cash flow statement reported on page 63.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Depreciation | 3,360 | 3,189 |
| Share of profit after tax in associates | -94 | -126 |
| Financial income | -2,694 | -1,796 |
| Financial expenses | 3,418 | 3,860 |
| Tax on profit for the year | 16,601 | 16,516 |
| Adjustment share-based remuneration | 5,081 | 5,347 |
| Total adjustments | 25,672 | 26,990 |
This note provides a reconciliation to reported segment profit from operations in note 2.2 Segment and other revenue information.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Total segment profit reported (EBIT) | 68,223 | 71,038 |
| Share of profit after tax in associates | 94 | 126 |
| Financial income | 2,694 | 1,796 |
| Financial expenses | -3,418 | -3,860 |
| Profit before tax | 67,593 | 69,100 |
There are no ownership changes during 2016 in the Group's subsidiaries. The Group's subsidiaries are at 31 December 2016:
| NAME | Registered office | Ownership interest in 2016 |
Share capital |
|
|---|---|---|---|---|
| SimCorp Ltd. | London, United Kingdom | 100% | 100,000 | GBP |
| SimCorp GmbH | Bad Homburg, Germany | 100% | 102,000 | EUR |
| SimCorp Österreich GmbH | Vienna, Austria | 100% | 17,500 | EUR |
| SimCorp Norge AS | Oslo, Norway | 100% | 1,000,000 | NOK |
| SimCorp Sverige AB | Stockholm, Sweden | 100% | 100,000 | SEK |
| SimCorp Benelux SA/NV | Brussels, Belgium | 100% | 62,000 | EUR |
| SimCorp USA Inc. | New York, USA | 100% | 7,010,000 | USD |
| SimCorp Schweiz AG | Zurich, Switzerland | 100% | 100,000 | CHF |
| SimCorp Asia Pty. Ltd. | Sydney, Australia | 100% | 1,000,000 | AUD |
| SimCorp Singapore Pte. Ltd. | Singapore, Singapore | 100% | 1 | SGD |
| SimCorp Ukraine LLC | Kiev, Ukraine | 100% | 2,968,000 | UAH |
| SimCorp Canada Inc. | Vancouver, Canada | 100% | 9,000,000 | CAD |
| SimCorp France S.A.S | Paris, France | 100% | 500,000 | EUR |
| SimCorp Hong Kong Ltd. | Hong Kong, China | 100% | 14,000,000 | HKD |
| SimCorp Luxembourg S.A. | Luxembourg, Luxembourg | 100% | 31,000 | EUR |
| SimCorp Coric Ltd.* | Wolverhampton, United Kingdom |
100% | 722,342 | GBP |
SimCorp Benelux SA/NV has branches in the Netherlands, Luxembourg and France. SimCorp Ltd. has a branch in the United Arab Emirates and in Azerbaijan.
SimCorp Sverige AB has a branch in Finland.
SimCorp USA Inc. has a branch in Canada.
*SimCorp Coric Ltd. has a 100% owned subsidiary in the USA, SimCorp Coric Inc.
| 111 | Income statement | SECTION 1 | BASIS OF PREPARATION | SECTION 5 | INVESTED CAPITAL | |
|---|---|---|---|---|---|---|
| 111 | Statement of comprehensive income |
115 | 1.0 Accounting policies | 121 | 5.1 | Intangible assets and property, plant and equipment |
| 112 | Cash flow statement | 122 | 5.2 | Investments in associates and subsidiaries |
||
| 113 114 |
Balance sheet Statement of changes in equity |
SECTION 2 116 |
REVENUE AND EARNINGS 2.1 Revenue |
122 | 5.3 | Deposits |
| 115 | Notes | 117 | 2.2 Employee costs | 123 | 5.4 | Provisions |
SECTION 3 TAX 118 3.1 Income tax 118 3.2 Deferred tax
| SECTION 6 | CAPITAL STRUCTURE AND FINANCING ITEMS |
|
|---|---|---|
| 124 | 6.1 | Financial income and expenses |
| SECTION 4 | WORKING CAPITAL | |
|---|---|---|
| 119 | 4.1 Receivables | |
| 119 | 4.2 Trade payables and other payables | |
| 120 | 4.3 Contingent liabilities and other financial liabilities |
|
| SECTION 7 | OTHER DISCLOSURES |
|---|---|
| 125 | 7.1 | Operating leases |
|---|---|---|
| 126 | 7.2 | Related party transactions |
| 126 | 7.3 | Auditors' remuneration |
| 127 | 7.4 | Adjustments, cash flow |
| 127 | 7.5 | Events after the balance sheet date |
| 2016 | 2015 | |
|---|---|---|
| Note | EUR '000 | EUR '000 |
| Revenue 2.1 |
151,087 | 142,519 |
| Cost of sales 2.2 |
43,261 | 34,277 |
| Gross profit | 107,826 | 108,242 |
| Other operating income | 22,550 | 22,309 |
| Research and development costs 2.2 |
41,835 | 43,837 |
| Sales and marketing costs 2.2 |
12,532 | 8,756 |
| Administrative expenses 2.2, 7.3 |
22,181 | 18,058 |
| Operating profit (EBIT) | 53,828 | 59,900 |
| Financial income 6.1 |
10,305 | 24,620 |
| Financial expenses 6.1 |
2,635 | 3,022 |
| Profit before tax | 61,498 | 81,498 |
| Tax on the profit for the year 3.1 |
12,282 | 13,153 |
| Profit for the year | 49,216 | 68,345 |
| 2016 | 2015 | |
|---|---|---|
| Note | EUR '000 | EUR '000 |
| Profit for the year | 49,216 | 68,345 |
| Items that will be reclassified subsequently to the income statement, when specific conditions are met: |
||
| Foreign currency translation differences for foreign operations |
400 | -168 |
| Other comprehensive income after tax | 400 | -168 |
| Total comprehensive income | 49,616 | 68,177 |
| Proposed distribution | ||
| Dividend | 33,341 | 28,409 |
| Transferred to retained earnings | 16,275 | 39,768 |
| 49,616 | 68,177 |
| 2016 | 2015 | ||
|---|---|---|---|
| Note | EUR '000 | EUR '000 | |
| Profit for the year | 49,216 | 68,345 | |
| Adjustments | 7.4 | 11,736 | -1,087 |
| Changes in working capital | 8,049 | -27,545 | |
| Cash from operating activities before financial items | 69,001 | 39,713 | |
| Financial income received | 395 | 146 | |
| Financial expenses paid | -291 | -293 | |
| Income tax paid | 3.1 | -11,141 | -13,316 |
| Net cash from operating activities | 57,964 | 26,250 | |
| Purchase of associates | 5.2 | 0 | -138 |
| Purchase of intangible fixed assets | 5.1 | -1,644 | -277 |
| Purchase of property, plant and equipment | 5.1 | -346 | -958 |
| Proceeds, sale of property, plant and equipment | 5.1 | 0 | 24 |
| Purchase of financial assets | 5.3 | -27 | -24 |
| Proceeds, sale of financial assets | 5.3 | 20 | 38 |
| Dividends from associates | 6.1 | 91 | 10 |
| Dividends from subsidiaries | 6.1 | 8,309 | 23,040 |
| Net cash from/used in investment activities | 6,403 | 21,715 | |
| Net cash from operating and investment activities | 64,367 | 47,965 | |
| Employee bonds | 0 | -744 | |
| Dividends paid | -28,450 | -24,457 | |
| Purchase of treasury shares | -44,406 | -21,221 | |
| Net cash used in financing activities | -72,856 | -46,422 | |
| Change in cash and cash equivalents | -8,489 | 1,543 | |
| Cash and cash equivalents at 1 January | 28,299 | 26,748 | |
| Foreign exchange adjustment of cash and cash equivalents |
-107 | 8 | |
| Cash and cash equivalents at 31 December | 19,703 | 28,299 |
| 2016 | 2015 | ||
|---|---|---|---|
| Note | EUR '000 | EUR '000 | |
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 5.1 | ||
| Software | 1,708 | 415 | |
| Total intangible assets | 1,708 | 415 | |
| Property, plant and equipment | 5.1 | ||
| Leasehold improvements | 563 | 879 | |
| Technical equipment | 914 | 1,950 | |
| Other equipment, fixtures, fittings and prepay ments |
15 | 1 | |
| Total property, plant and equipment | 1,492 | 2,830 | |
| Other non-current assets | |||
| Investments in subsidiaries | 5.2 | 36,996 | 36,857 |
| Investments in associates | 5.2 | 162 | 161 |
| Deposits | 5.3 | 1,555 | 1,542 |
| Deferred tax | 3.2 | 2,455 | 3,475 |
| Total other non-current assets | 41,168 | 42,035 | |
| Total non-current assets | 44,368 | 45,280 | |
| Current assets | |||
| Receivables | 4.1 | 42,587 | 42,528 |
| Prepayments | 2,812 | 2,607 | |
| Cash and cash equivalents | 19,703 | 28,299 | |
| Total current assets | 65,102 | 73,434 | |
| Total assets | 109,470 | 118,714 |
| 2016 | 2015 | |
|---|---|---|
| Note | EUR '000 | EUR '000 |
| LIABILITIES AND EQUITY | ||
| Equity | ||
| Share capital | 5,575 | 5,575 |
| Retained earnings | 37,070 | 58,896 |
| Proposed dividend | 33,341 | 28,409 |
| Total equity | 75,986 | 92,880 |
| Non-current liabilities | ||
| Provisions 5.4 |
1,523 | 1,384 |
| Other debt | 0 | 832 |
| Total non-current liabilities | 1,523 | 2,216 |
| Current liabilities | ||
| Prepayments from clients | 85 | 212 |
| Trade payables and other payables 4.2 |
30,686 | 22,292 |
| Income tax | 1,182 | 1,111 |
| Provisions 5.4 |
8 | 3 |
| Total current liabilities | 31,961 | 23,618 |
| Total liabilities | 33,484 | 25,834 |
| Total liabilities and equity | 109,470 | 118,714 |
| Proposed | |||||
|---|---|---|---|---|---|
| 2016 | Note | Share capital |
Retained earnings |
dividends for the year |
Total |
| Equity at 1 January | 6.1 | 5,575 | 58,896 | 28,409 | 92,880 |
| Comprehensive income for the year* | |||||
| Total comprehensive income for the year | 0 | 49,616 | 0 | 49,616 | |
| Transactions with owners | |||||
| Dividends paid to shareholders | 0 | -41 | -28,409 | -28,450 | |
| Share-based payment | 0 | 6,293 | 0 | 6,293 | |
| Tax, share-based payment | 0 | 53 | 0 | 53 | |
| Purchase of treasury shares | 0 | -44,406 | 0 | -44,406 | |
| Proposed dividends to shareholders | 0 | -33,341 | 33,341 | 0 | |
| Equity at 31 December | 5,575 | 37,070 | 33,341 | 75.986 | |
| 2015 | |||||
| Equity at 1 January | 6.1 | 5,575 | 32,456 | 24,652 | 62,683 |
| Comprehensive income for the year* | |||||
| Total comprehensive income for the year | 0 | 68,177 | 0 | 68,177 | |
| Transactions with owners | |||||
| Dividends paid to shareholders | 0 | 195 | -24,652 | -24,457 | |
| Share-based payment | 0 | 6,483 | 0 | 6,483 | |
| Tax, share-based payment | 0 | 1,215 | 0 | 1,215 | |
| Purchase of treasury shares | 0 | -21,221 | 0 | -21,221 | |
| Proposed dividends to shareholders | 0 | -28,409 | 28,409 | 0 | |
| Equity at 31 December | 5,575 | 58,896 | 28,409 | 92,880 |
* Refer to Statement of comprehensive income on page 111.
SECTION 1 BASIS OF PREPARATION
SimCorp A/S is a public limited company based in Denmark. The annual report for the period 1 January – 31 December 2016 includes the financial statements of SimCorp A/S the parent company.
The annual report of the parent company SimCorp A/S is presented in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and Danish disclosure requirements for the annual reports of listed companies.
The financial statements are presented in EUR which is the reporting currency of the activities of the Parent, rounded to the nearest EUR 1,000. The functional currency of the parent company SimCorp A/S is DKK.
The accounting policies for the financial statements of the parent company are unchanged from last year. The accounting policies are the same as for the Consolidated financial statements, with exceptions described below. For a description of the accounting policies of the Group, please refer to the Consolidated financial statements.
For each of the reporting entities in the Group, a functional currency is determined. The functional currency is the currency in the primary economic environment in which the individual reporting entity operates. Transactions in currencies other than the functional currency are denominated in foreign currencies.
Foreign exchange adjustments of intra-group accounts are recognized in the income statement in SimCorp A/S' financial statements. Foreign exchange adjustments of intra-group accounts between SimCorp A/S and subsidiaries are considered part of the net investment in the subsidiaries concerned. Settlement of intra-group balances considered part of the net investment are not, per se, considered a partial divestment of a subsidiary.
Investments in subsidiaries and associates are measured at cost in the parent company's financial statements. Where the recoverable amount is lower than cost, the investment is written down to the lower value.
Associates with a negative equity value are measured at nil. A provision is made if Sim-Corp A/S has a legal or constructive obligation to cover the negative balance of any associate.
Dividends on investments in subsidiaries and associates are recognized in the parent company's income statement in the financial year in which the dividend is declared.
Other operating income comprises income of a secondary nature relative to the activities of the Group, including gains on the sale of intangible assets and property, plant and equipment, government grants and invoicing to subsidiaries of delivered services.
| REVENUE AND EARNINGS | 2016 | 2015 | |
|---|---|---|---|
| Note | EUR '000 | EUR '000 | |
| REVENUE | |||
| Recurring Revenue | |||
| Subscription - additional sales | 10 | 247 | |
| Professional services | 1,049 | 1,516 | |
| Maintenance | 92,710 | 90,807 | |
| Hosting and other | 595 | 251 | |
| Total recurring revenue | 94,364 | 92,821 | |
| Non-Recurring Revenue | |||
| Perpetual licenses - new sales | 17,744 | 16,666 | |
| Perpetual licenses - additional sales | 24,917 | 19,861 | |
| Professional services | 13,651 | 12,573 | |
| Other | 411 | 598 | |
| Total non-recurring revenue | 56,723 | 49,698 | |
| Total revenue | 151,087 | 142,519 |
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Salaries | 52,478 | 50,917 |
| Defined contribution pension plans | 1,283 | 1,199 |
| Share-based payments | 5,073 | 5,485 |
| Social security costs | 144 | 131 |
| Total employee cost | 58,978 | 57,732 |
| Average number of employees | 462 | 449 |
Additional information on share-based payments can be found in Note 7.1 of the consolidated financial statements. Additional information on remuneration to executive management and board of directors can be found in pages 27-30.
SECTION 3 TAX
SimCorp A/S' Income taxes amounts to EUR 12.3m relative to EUR 13.2m in 2015. The Income tax has decreased due to a lower profit before tax and is further impacted by a lower tax rate compared with 2015.
The Danish corporate tax rate was 22% in 2016 compared with 23.5% in 2015.
SimCorp A/S's effective tax rate has increased from 16.1% to 20.0% primarily due to lower dividends received.
Income tax paid in SimCorp A/S amounts to EUR 11.1m in 2016 compared with EUR 13.3m in 2015.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Intangible assets | -376 | -91 |
| Property, plant and equipment | 565 | 500 |
| Provisions | 335 | 304 |
| Current liabilities | 53 | 39 |
| Share-based payment | 1,878 | 2,723 |
| Net Deferred tax at 31 December | 2,455 | 3,475 |
Deferred tax assets has decreased EUR 1.0m to EUR 2.5m in 2016 (EUR 3.5m in 2015), which mainly relates to changes in share prices on Sharebased payments and additions to intangible assets.
SECTION 4 WORKING CAPITAL
.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Receivables from clients | 2,888 | 2,031 |
| Receivables from subsidiaries | 29,451 | 37,745 |
| Accrued revenue | 9,539 | 1,687 |
| Other receivables | 709 | 1,065 |
| Total receivables at 31 December | 42,587 | 42,528 |
| Aging of trade receivables from clients at 31 December: | ||
| Not due | 2,761 | 1,387 |
| Not more than 30 days | 28 | 247 |
| More than 30 days but not more than 90 days | 48 | 352 |
| More than 90 days | 51 | 45 |
| Total | 2,888 | 2,031 |
Accrued revenue consists mainly of revenue from the sale of software licenses and receivables from professional services contracts in progress, see note 4.2.
No security has been received with respect to trade receivables.
No write-down has been made in 2016 and 2015 for trade receivables.
The Group's exposure to currency and credit risk for trade receivables is disclosed in note 6.2.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Trade payables | 6,249 | 4,182 |
| Debt to subsidiaries | 10,708 | 4,890 |
| Accrued vacation payable | 8,030 | 7,459 |
| Bonus and commissions payable | 4,651 | 5,598 |
| Payroll taxes, VAT etc., payable | 123 | 67 |
| Derivative financial instruments | 59 | 96 |
| Other debt | 866 | 0 |
| Total trade payables and other payables | 30,686 | 22,292 |
As part of building long-term client relationships, the company has made a commitment to, in some contracts, provide SimCorp Dimension product support for up to eight years from the date of the contract.
SimCorp A/S has issued guarantees for its subsidiaries' delivery commitments to clients for a total of EUR 36.2m (2015: EUR 27.4m).
The parent company expects to issue letters of support to certain subsidiaries.
Bank guarantees have been provided for rent commitments in Austria, Australia, Belgium, France, Germany, Luxembourg, Sweden and USA.
The parent company is a party to inquiries from authorities when investigating various issues. The outcome of such is not expected to have a significant effect on profit for the year and the assessment of the company's financial position.
The most significant contingent liability relates to SimCorp A/S and is the so called "ATP-ruling" related to possible VAT exemption for certain pension services.
On 13 March 2014, the Court of Justice of the European Union ("ECJ") published its judgment in the case C-464/12 ATP PensionService A/S determining that services provided to certain pension funds may be covered by the VAT exemption in section 13, subsection 1, no. 11, litra c and f of the Danish VAT Act.
As a consequence of the ECJ ruling, a number of SimCorp's Danish clients have filed a claim against SimCorp for recovery of the VAT levied on SimCorp's products and services. Pursuant to the Danish Tax Administration Act, SimCorp has claimed a refund from the Danish Tax Authorities ("SKAT") of the VAT collected on services provided to its Danish clients. SKAT has not yet replied to this claim for a refund. However, in August 2016 Sim-Corp received a so-called "binding ruling" from the Danish Tax Council and in this binding the Danish Tax Council concluded that SimCorp's products and services are subject to VAT.
On this basis, SimCorp does not expect the above ruling from the ECJ to significantly have an effect on profit for the year and the assessment of the Group's financial position and accordingly, SimCorp has not made a provision for this in its annual accounts 2016.
| 2016 | 2015 | |||||
|---|---|---|---|---|---|---|
| EUR '000 | Intangible | Property, plant and equip ment |
Total | Intangible | Property, plant and equip ment |
Total |
| Cost of sales | 206 | 337 | 543 | 81 | 325 | 406 |
| Research and development costs |
92 | 856 | 948 | 98 | 917 | 1,015 |
| Sales and marketing costs |
11 | 107 | 118 | 13 | 117 | 130 |
| Administrative expenses |
42 | 392 | 434 | 44 | 416 | 460 |
| Total amortization and depreciation |
351 | 1,692 | 2,043 | 236 | 1,775 | 2,011 |
| 5.1 INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT (CONTINUED) |
Intangible | Leasehold improve |
Technical | Other equipment, fixtures, fittings and prepay |
Property, plant and equipment |
|
|---|---|---|---|---|---|---|
| EUR '000 | Software | total | ment | equipment | ments | total |
| 2016 | ||||||
| Cost at 1 January | 7,448 | 7,448 | 3,604 | 7,080 | 3,272 | 13,956 |
| Foreign exchange adjustment | 29 | 29 | 13 | 26 | 12 | 51 |
| Additions | 1,644 | 1,644 | 0 | 329 | 17 | 346 |
| Disposals | 0 | 0 | 0 | -799 | 0 | -799 |
| Cost at 31 December | 9,121 | 9,121 | 3,617 | 6,636 | 3,301 | 13,554 |
| Depreciation at 1 January | 7,033 | 7,033 | 2,725 | 5,130 | 3,271 | 11,126 |
| Foreign exchange adjustment | 29 | 29 | 10 | 21 | 12 | 43 |
| Depreciation | 351 | 351 | 319 | 1,370 | 3 | 1,692 |
| Disposals | 0 | 0 | 0 | -799 | 0 | -799 |
| Depreciation at 31 December | 7,413 | 7,413 | 3,054 | 5,722 | 3,286 | 12,062 |
| Carrying amount at 31 December | 1,708 | 1,708 | 563 | 914 | 15 | 1,492 |
| 2015 | ||||||
| Cost at 1 January | 7,189 | 7,189 | 3,699 | 6,470 | 3,319 | 13,488 |
| Foreign exchange adjustment | -18 | -18 | -9 | -16 | -8 | -33 |
| Additions | 277 | 277 | 0 | 958 | 0 | 958 |
| Disposals | 0 | 0 | -86 | -332 | -39 | -457 |
| Cost at 31 December | 7,448 | 7,448 | 3,604 | 7,080 | 3,272 | 13,956 |
| Depreciation at 1 January | 6,815 | 6,815 | 2,486 | 4,026 | 3,313 | 9,825 |
| Foreign exchange adjustment | -18 | -18 | -6 | -10 | -8 | -24 |
| Depreciation | 236 | 236 | 331 | 1,439 | 5 | 1,775 |
| Disposals | 0 | 0 | -86 | -325 | -39 | -450 |
| Depreciation at 31 December | 7,033 | 7,033 | 2,725 | 5,130 | 3,271 | 11,126 |
| Carrying amount at 31 December | 415 | 415 | 879 | 1,950 | 1 | 2,830 |
| Depreciation period | Up to 10 years |
Up to 10 years |
3 years | 5 years | ||
Estimates for intangible assets and for property, plant and equipment are unchanged from previous reports.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Cost at 1 January | 161 | 24 |
| Foreign exchange adjustment | 1 | 0 |
| Additions | 0 | 137 |
| Cost at 31 December | 162 | 161 |
| Carrying amount at 31 December | 162 | 161 |
Additions to investments, associates in 2015 relate to Opus Nebula Ltd.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Cost at 1 January | 36,857 | 36,950 |
| Foreign exchange adjustment | 139 | -93 |
| Cost at 31 December | 36,996 | 36,857 |
| Carrying amount at 31 December | 36,996 | 36,857 |
| Dividends received | 8,309 | 23,040 |
Deposits are primarily related to leasing of offices.
Security deposits which will not be returned within one year of the balance sheet date are recognized as non-current assets. Commitments which require a deposit will initially be recorded to the deposit asset account, if the deposit is not recovered it is charged to the income statement.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Cost at 1 January | 1,542 | 1,560 |
| Foreign exchange adjustment | 6 | -4 |
| Additions | 27 | 24 |
| Disposals* | -20 | -38 |
| Carrying amount at 31 December | 1,555 | 1,542 |
* Disposals include reclassifications to current receivables.
Please refer note 7.9 in the consolidated financial statements for a list of subsidiaries and Note 5.2 in the consolidated financial statements for a list of associates.
| EUR '000 | Re-establish ment costs for rented premises |
Anniversary bonuses |
Total |
|---|---|---|---|
| 2016 | |||
| Liability at 1 January | 621 | 766 | 1,387 |
| Foreign exchange adjustment | 2 | 2 | 4 |
| Reversal of unused liabilities | 0 | -34 | -34 |
| Provisions for the year | 25 | 149 | 174 |
| Total provisions | 648 | 883 | 1,531 |
| Expected due dates for provisions: | |||
| Falling due within 1 year | 0 | 8 | 8 |
| Falling due within 2 to 5 years | 648 | 174 | 822 |
| Falling due after 5 years | 0 | 701 | 701 |
| Total provisions | 648 | 883 | 1,531 |
Provisions cover the costs of restoring leasehold premises and provisions for anniversary bonuses. The latter resulting from the Company's commitment of one month's pay in connection with employees' 25th and 40th anniversaries.
Used re-establishment costs during the year 2015 refer to the discontinuation of approximately 15% of SimCorp Headquarters' lease.
| EUR '000 | Re-establish ment costs for rented premises |
Anniversary bonuses |
Total |
|---|---|---|---|
| 2015 | |||
| Liability at 1 January | 708 | 644 | 1,352 |
| Foreign exchange adjustment | -1 | -1 | -2 |
| Used during the year | -111 | -24 | -135 |
| Reversal of unused liabilities | 0 | -30 | -30 |
| Provisions for the year | 25 | 177 | 202 |
| Total provisions | 621 | 766 | 1,387 |
| Expected due dates for provisions: | |||
| Falling due within 1 year | 0 | 3 | 3 |
| Falling due within 2 to 5 years | 621 | 98 | 719 |
| Falling due after 5 years | 0 | 665 | 665 |
| Total provisions | 621 | 766 | 1,387 |
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Financial income | ||
| Dividend from subsidiaries | 8,309 | 23,040 |
| Dividend from associates | 91 | 10 |
| Interest income, subsidiaries | 195 | 116 |
| Interest income, cash etc. | 60 | 30 |
| Fair value adjustments, derivatives | 37 | 0 |
| Foreign exchange gains | 140 | 0 |
| Foreign exchange adjustments | 1,473 | 1,424 |
| Total financial income | 10,305 | 24,620 |
| Financial expenses | ||
| Interest expenses, subsidiaries | 88 | 74 |
| Interest expenses, financial assets carried at amortized cost | 25 | 25 |
| Interest expenses, deferred payment acquisition | 31 | 2 |
| Other financial expenses | 1,248 | 1,104 |
| Fair value adjustments, derivatives | 7 | 96 |
| Foreign exchange adjustments | 1,236 | 1,721 |
| Total financial expenses | 2,635 | 3,022 |
Amounts of EUR 4.8m (2015: EUR 5.7m) relating to operating leases have been recognized in the income statement for 2016 in the company.
In November 2008 SimCorp moved into the headquarters at Weidekampsgade 16, Copenhagen.
The lease has been entered into on market terms and with normal rent adjustment clauses. SimCorp served notice on around 2000 m2 which were vacated mid October 2015. The initial lease is for a period of ten years, with an option to extend for up to 20 years from the commencement of the lease.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Rent commitments | ||
| Payable within 1 year | 5,331 | 4,967 |
| Payable within 2 to 5 years | 5,088 | 8,372 |
| Rent commitments until expiry of minimum term of tenancy | 10,419 | 13,339 |
| Other commitments | ||
| Payable within 1 year | 172 | 196 |
| Payable within 2 to 5 years | 140 | 182 |
| Total other commitments | 312 | 378 |
| Total commitments | ||
| Payable within 1 year | 5,503 | 5,163 |
| Payable within 2 to 5 years | 5,228 | 8,554 |
| Total commitments | 10,731 | 13,717 |
For the parent company, in addition to transactions with other related parties depicted in note 7.4 of the consolidated financial statements, related parties also comprise subsidiaries and associates in which SimCorp A/S has a controlling or significant influence.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Purchases of services from subsidiaries | 28,523 | 20,770 |
| Purchases of services from associates | 1,033 | 1,195 |
| Sale of services to subsidiaries | 142,664 | 142,946 |
The parent company's outstanding balance with subsidiaries is specified in note 4.1 and 4.2
Balances with subsidiaries and associates comprise ordinary trade balances relating to the purchase and sale of services. Outstanding balances carry interest and are subject to terms and conditions identical to those made with the parent company's and the Group's clients and suppliers.
Trading with subsidiaries and associates is conducted on arm's length terms. Ownership interests are shown in note 7.9 of the consolidated financial statements.
Interest on outstanding balances with subsidiaries and associates is specified in note 6.1 in the Financial statements of the parent company.
In 2016 the parent company has received dividends of EUR 8.3m (2015: EUR 23.0m) from subsidiaries and EUR 0.09m dividends were received from associates (2015: 0.01m).
The parent company has provided delivery bonds to certain clients of its subsidiaries, and the parent company has issued letters of support to certain subsidiaries, see note 4.3.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Audit Fees | 100 | 78 |
| Tax and VAT advice fees | 24 | 47 |
| Other service fees | 27 | 25 |
| Total | 151 | 150 |
Audit fees include the audit of the consolidated and parent company financial statements.
Tax fees primarily relate to assistance with transfer pricing audits in Canada and fees related to preparation of Advanced Pricing Agreements with USA and Germany.
This note provides details to cash flow statement reported on page 112.
| 2016 | 2015 | |
|---|---|---|
| EUR '000 | EUR '000 | |
| Depreciation | 2,043 | 2,011 |
| Financial income | -10,305 | -24,620 |
| Financial expenses | 2,635 | 3,022 |
| Tax on profit for the year | 12,282 | 13,153 |
| Adjustment share based remuneration | 5,081 | 5,347 |
| Total adjustments | 11,736 | -1,087 |
No material events have occurred after 31 December 2016, that have consequences for
SIMCORP A/S Weidekampsgade 16 2300 Copenhagen S Denmark Phone +45 35 44 88 00
SIMCORP UKRAINE LLC V. Stusa 35–37, 2nd floor 03142 Kiev Ukraine Phone +380 44 495 86 00
SIMCORP SVERIGE AB Jakobsbergsgatan 22 111 44 Stockholm Sweden Phone +46 8 528 015 00
SIMCORP NORGE AS Biskop Gunnerusgate 14A 0051 Oslo Norway Phone +47 23 10 41 00
SIMCORP FINLAND (Finnish branch of SimCorp Sverige AB) Salomonkatu 17 00100 Helsinki Finland Phone +358 9685 2010 SIMCORP GMBH Justus-von-Liebig-Straße 1 61352 Bad Homburg Germany Phone +49 6172 9240-0
SIMCORP ÖSTERREICH GMBH Wollzeile 16 1010 Vienna Austria Phone +43 1 5120099
SIMCORP SCHWEIZ AG Sihlquai 253 8005 Zurich Switzerland Phone +41 44 360 59 00
SIMCORP BENELUX SA/NV Building Stéphanie 1 Avenue Louise 143 1050 Brussels Belgium Phone +32 2 213 30 00
SIMCORP NETHERLANDS (Dutch branch of SimCorp Benelux SA/NV) Gustav Mahlerplein 109-111 1082 MS Amsterdam The Netherlands Phone : +31 (0)20 708 57 64
SIMCORP FRANCE S.A.S. 23 rue de Vienne 75008 Paris France Phone +33 1 5535 5454
SIMCORP LUXEMBOURG S.A. rue Eugène Ruppert 20 2453 Luxembourg Luxembourg Phone +352 26 49 35 65
SIMCORP LTD. 2nd floor 100 Wood Street London EC2V 7AN United Kingdom Phone +44 20 7260 1900
SIMCORP CORIC 2nd floor 100 Wood Street London EC2V 7AN United Kingdom Phone +44 20 7260 1900
SIMCORP CORIC PB Building The Development Centre University of Wolverhampton Science Park, Glaisher Drive Wolverhampton WV10 9RT West Midlands United Kingdom
SIMCORP LTD. ABU DHABI Mezzanine (M-4) of Blue Tower (A) Plot, E—18/02 Muroor Road Abu Dhabi United Arab Emirates Phone: +44 20 7260 1900
SIMCORP USA INC. One State Street Plaza 1 State Street, 29th Floor New York, NY 10004 USA Phone: +1 212 994 9400
SIMCORP USA INC. 1999 Avenue of the Stars Suite 1100 Los Angeles, CA 90067 USA Phone +1 424 354 5151
SIMCORP CANADA INC. 100 Wellington Street West TD West Tower, Suite 2204 (PO Box 123) Toronto, Ontario M5K 1H1 Canada Phone +1 647 591 9200
SIMCORP ASIA PTY. LTD. Level 15, 68 Pitt Street Sydney NSW 2000 Australia Phone +61 2 9240 3500
SIMCORP HONG KONG LTD. Suite 2122, 21st Floor, The Center 99 Queen's Road Central Hong Kong
SIMCORP SINGAPORE PTE. LTD. #58-11/12/14, Republic Plaza9 Raffles Place Singapore 048619 Singapore Phone +65 6823 1517
www.simcorp.com [email protected] SIMCORP A/S
Weidekampsgade 16 2300 Copenhagen S Denmark
Phone +45 35 44 88 00 [email protected] www.simcorp.com
Company reg. no: 15505281
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