Annual report 2007
Board of Directors annual report
HISTORY AND BUSINESS CONCEPT
InfoCare is represented in 75 locations throughout the Nordic and Baltic countries. The corporation’s head office is in Kristiansand. InfoCare offers a supplier-independent service concept within service, maintenance, repair, logistics and support of IT systems and consumer electronics. The corporation’s largest shareholders are the private equity companies CapMan (51,9 %) and Segulah (30,7 %), along with individuals in the corporation’s Board of Directors and management (14,3 %).
CORPORATION ENTERPRISES
InfoCare is an authorised service partner for leading manufacturers of equipment and basic software. The company’s independent position and partnership philosophy has been - and will remain - of major importance for the development of the corporation. The great majority of the corporation’s turnover is related to partnership cooperation with the largest suppliers of IT equipment and consumer electronics. InfoCare’s operations are organised into two business divisions: Professional Services, that supplies IT-based service solutions to the corporate and organisations market and Consumer Services, that supplies services within IT and consumer electronics to the consumer market. The corporation has operations in Norway, Sweden, Denmark, Finland and Estonia.
STRATEGIC AND COMPETITION-RELATED POSITIONING
In 2007, InfoCare continued to re-affirm the corporation’s position as a leading Nordic supplier of service within IKT and consumer electronics. The two most important events in 2007, in this respect, were the merger with Powermill and the acquisition of the bankrupt estate of the IT company Strax.
Powermill, a Nordic service supplier within IT and consumer electronics, had approximately 500 employees, operations in Sweden, Denmark, Finland and Estonia. Strax were a supplier of repair and service operations in Norway and Denmark with a staff of approx. 200.
Powermill's and Strax' strong positions in the consumer market and InfoCare’s established concept for the professional market form the strategic foundation of the new, merged corporation. Powermill, Strax and InfoCare had a certain degree of overlap in regard to internal skills profiles, product range and geographical localisation. This represents a sound starting point for the development of economies of scale and further industrialisation of the enterprise.
The acquisition of Strax was completed in June and the merger of Powermill and InfoCare was finalised in September. The corporation then entered a phase of integration of the two companies. Strax and Powermill’s enterprises were wholly integrated into the corporation’s division for Consumer Services. This means that after the merger the two enterprise areas of Professional Services and Consumer Services are of equal size, whether measured in order to the number of employees or turnover.
The merger of the three companies makes industrialisation of the collective enterprise possible - and important to handle the increasing international competition and demands of our customers. The merger with Powermill and the acquisition of Strax has further consolidated the corporation’s market position.
MARKET DEVELOPMENT, TRENDS AND PRIORITY AREAS
2007 has shown signs of a moderate market growth. The falling price levels of IT equipment and consumer electronics contributes to continued pressure on prices and profit margins.
At the same time, an increasing trend is the use of IT technology within new areas of application. The rapidly accelerating digitalisation that is taking place within the consumer electronics sector means that the consumer market will become an increasingly more important business area for InfoCare in the coming years. In addition, the consumer market is demanding a steadily new service concept that, combined with effective logistics solutions, creates new market opportunities that the company can utilise and use to its advantage. This particular trend appears to be continuing.
There is therefore reason to assume that the growth seen in the consumer market will continue to be of major importance in the next few years. InfoCare, along with its partners, has created a strategic platform that puts us in a sound position to meet these developments.
For several years, the professional market has shown a limited rate of growth within the market niches in which InfoCare operates. This tendency has continued in 2007. The growth drive in this segment has, to a considerable degree, been the steadily increasing trend of consolidation and outsourcing. This trend appears set to continue. There is therefore reason to assume that InfoCare’s growth potential within the professional market will be good also in the future.
In 2007, the corporation has maintained focus on increasing efficiency and optimising supplier systems to the professional market. Through concerted efforts in this respect, the company’s supply organisation for Professional Services has created a sound starting point for future growth and increased profitability.
Company growth throughout the last few years has, to a large degree, taken place outside of Norway. Customers and partners in all Nordic countries have shown steadily greater faith in the company’s concepts and 75% of the corporation’s turnover now comes from markets outside of Norway. The Board views the Baltic and Eastern European markets as interesting arenas in regard to further geographical expansion. In this respect, the corporation, with its presence in Estonia, has established a bridgehead for further enterprise, both in the Baltic area and further eastwards.
ACCOUNTS AND FINANCIAL KEY FIGURES (FIGURES IN MNOK FROM 2006 IN BRACKETS)
In 2007, the corporation had a consolidated operating income of 1 346.5 MNOK (1 088.9). The growth in turnover is partly due to organic growth (34%) and also the acquisition of enterprises (66%) - related to the merger with Powermill from September 2007 and the acquisition of the bankrupt estate of Strax in June 2007.
The operating result before amortization of intangible assets (EBITA) was 4.0 MNOK (51.0). The result before tax was -35.9 MNOK (10.7). The result after tax was -32.8 MNOK (7.9). The corporation’s amortization of intangible assets was 6.9 MNOK (8.8). The Board of Directors is satisfied with the turnover development in 2007.
The reduced result in 2007 is partly due to the considerable one-off costs associated with the restructuring process that was initiated in the wake of the two acquisitions and party due to the loss in production that inevitably occurs during such major readjustments periods. When the decision to carry out the two acquisitions was taken, it was in accordance with the company’s plan to immediately initiate a radical restructuring and integration process to create economies of scale. The Board was thus aware of the fact that the planned restructuring would lead to weaker results for the corporation in the short term. The result reduction, in this respect, is of a temporary character and it is the assessment of the Board that the implemented acquisitions and following integration and restructuring processes will result in a great improvement in the corporations’ earning potential in the future.
The corporation’s financial position is regarded as good. At the end of 2007, equity capital stood at 13.7% (15.1 %). Apart from equity the corporation is financed by shareholder loans from the equity funds administered by CapMan and Segulah, and mezzanine loans from the mezzanine funds administered by CapMan, such that the share of self-financing at the end of 2007 represents 30.3% (32.3%). Specifications of shareholder loans and mezzanine loan are contained in Note 16 in the supplied notes to the annual accounts.
The cash flow from operations was -37,2 MNOK (40.5). The reduction in cash flow of 77.7 MNOK is mainly due to the reduced earnings in 2007. Net interest-bearing liabilities at the end of the year were 651.6 MNOK (371.3), of which 412.5 MNOK is external net financing via Nordea Bank.
The liquidity reserve for the corporation, including the unused drawing rights, at the end of 2007 represented MNOK 91.3 (91). The company has delivered accounts on the premise of continued operations. The basis for this premise lies in the corporation’s financial position, and the expected result development for 2008.
The parent company’s result before tax was -28.1 MNOK (-17.8). The balance in the parent company is comprised of investments in the subsidiary company and financing. Equity as of 31.12.2007 was 141.1 MNOK (65.8). In 2007 the corporation has continued the process that began in 2006 concerning the upgrading of internal IT systems. The project, that is anticipated to continue over a 3 year period, is developing in keeping with approved plans. The company’s development work has been entered into accounts with a value of 4.0 MNOK.
FINANCIAL RISK
The corporation’s regular operations involve normal credit risk and exposure to currency fluctuations. The corporation’s credit policies and financial strategies ensure that exposure within each of these areas is kept within a defined framework. It is the assessment of the Board that the corporation operates within an acceptable risk level. In order to adjust the company’s capital structure to the new framework terms that are a consequence of the merger with Powermill and the acquisition of Strax, in 2008 the corporation is provided with MNOK 64,6 in the form of loans from shareholders.
PERSONNEL, WORKING ENVIRONMENT AND THE EXTERNAL ENVIRONMENT
At the end of 2007, the corporation had 2 578 employees, compared to 1 553 employees at the end of the previous year. In general the working environment within the corporation can be characterised as good, in that the company has a normal turnover and minimal absence due to sickness (3.9%). No industrial accidents have occurred in the company. The enterprise does not lead to pollution of the external environment.
The percentage of female employees at the company is 13.7%. The company’s personnel politics are based on ‘same wages for the same work’ principle, which means that men and women have the same rates of pay in the same positions, given otherwise identical premises.
The company strives to accommodate employees of both sexes, to provide the opportunity to combine work with family life. The company has 108 part-time employees at the end of 2007. 39.8% of these were female workers, 60.2 % were men. In positions that are suitable in practical terms, InfoCare has made accommodations for part-time work. At the end of 2007, 93 employees were on leave of absence, of which 32.3% were female workers. Most female workers are employed within administrative functions.
OWNERSHIP AND COMPANY MANAGEMENT
The company’s principles for ownership and management have been accepted by the Board of Directors. These principles shall secure share values, a sound corporate culture and solid reputation. In connection with the merger with Powermill, at the Extraordinary General Meeting in August 2007, a new Board of Directors was appointed. The Board is comprised of external shareholder-elected members that are not connected with the company’s operations. The company’s employees have three representatives on the Board. The employee representatives contribute to Board duties in a constructive manner, in the best interests of the company’s employees and its shareholders.
ANNUAL RESULT AND AMOUNTS BROUGHT FORWARD
The Board of Directors has decided to recommend to the Annual General Meeting that the parent company’s result for 2007, TNOK -25 215, is disposed as follows:
Transferred to share premium account TNOK - 25 215
Sum disposed TNOK - 25 215
The parent company does not have distributable equity as of 31.12.07.
The Board of Directors is not aware of any issues that are of importance for the evaluation of the company’s position and the result of enterprise operations. The accounts, with notes – along with the Board of Director’s report – provide the full account of the year’s operations and the financial position at the end of the fiscal year. Beyond the addition of the shareholder loan as stated above, there have been no circumstances after the end of the fiscal year that affect or alter the basis for the assessment of the company’s position and result.
FUTURE PROSPECTS
At the start of 2008, there is somewhat more uncertainty regarding the macro-economic situation than has been the case in recent years. However, the market prospects within the corporation’s areas of enterprise are regarded as good.
During 2007, InfoCare has experienced considerable growth and reaffirmed its market position in Norway, Sweden, Denmark and Finland and now also in Estonia. With a broad range of services, competitive prices, local presence and a close partnership with leading innovators and technology suppliers, the company has excellent prospects of consolidating its position as the Nordic countries’ leading supplier of services within ICT and consumer electronics.
The Board of Directors assesses the company as being well positioned to meet the market-related challenges and to have good prospects for continued growth and value generation.
