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ANNUAL REPORT 2014

Table of contents

  • Page 1
    ANNUAL REPORT 2014

  • Page 2
    ... Corporate governance report Board of Directors and Auditors Group Management Financial statements and notes Dividend motivation Proposed disposition of earnings Audit report Shareholder information Multi-year overview Glossary 40 42 50 54 60 62 66 130 131 132 134 135 136 The formal annual report...

  • Page 3
    ... AND SOCIETY SAFE Saab is a global defence and security company that develops, manufactures and sells some of the world's most advanced military and civilian solutions. The broad product portfolio is constantly evolving and currently ranges from combat aircraft, radar and weapon systems to civilian...

  • Page 4
    ...'s market organisation is divided into five geographical areas and is based on a strong local presence in a number of key markets. Sweden 45% 19% Asia FOR MORE INFORMATION ON SAAB'S MARKET AREAS, SEE PAGES 13 -15. Rest of Europe 17% 5% Africa 2% Australia Share of Saab's total sales 2014

  • Page 5
    ... Brazilian government for the development, production and support of 36 next generation Gripen aircraft for the Brazilian Air Force. SAAB KOCKUMS the US Army. In addition, the latest generation, Carl-Gustaf M4, was launched. NEW VERSIONS OF THE AT4 WEAPON SYSTEM TO FRANCE Order bookings and sales...

  • Page 6
    ... demands help to shape us as a company. The Gripen coombat aircraft system is an example how internal efficiency, close co-operation with customers and the best suppliers from around the world can produce high quality and commercial success. 2014 - A MILESTONE IN SAAB'S HISTORY At year-end, Saab...

  • Page 7
    ... for many years in training, research and development and production, which have helped to make the company a success in its areas of expertise. While our research and development is primarily based in Sweden, we are constantly expanding internationally. As part of the Gripen contract with Brazil...

  • Page 8
    ... began in 2008. Strained government budgets have reduced investments in defence and security products in recent years. Defence spending is projected to rise going forward, but the turnaround is not expected to be quick or strong and therefore will not impact Saab in the short term. The market is...

  • Page 9
    ... mainly in business area Dynamics that sales fell, due to a challenging market in recent years. At the same time, the business area Security and Defence Solutions increased its sales, partly through the acquisition of Saab Kockums. Our long-term goal is to grow organically, which makes it important...

  • Page 10
    ... security, there are also solutions for ambulance services, field hospitals and underwater vehicles for the offshore oil and gas industry. Saab is organised in six business areas based on technologies and products, but customer offerings usually involves multiple business areas. Different parts...

  • Page 11
    ...). ❻ Aeronautics Dynamics Electronic Defence Systems Security and Defence Solutions Support and Services Industrial Products and Services* * Industrial Products and Services is a new business area as of 2015, see also page 48. ❾ â"« ❿ â"° â"´ â"± â"³ â"² SA AB ANNUAL REPORT 2014 - 7

  • Page 12
    ...the same day an order is placed, while others have a lead time of over a year. These orders involve less customer-financed development than complex systems. Examples include most of Saab's civilian offering, as well as products sold in large volumes, such as ammunition. 8 - SA AB ANNUAL REPORT 2014

  • Page 13
    ... three main parts: sales of products and spare parts, service assignments and long-term customer contracts. In addition, Saab generates a small share of royalties. Long-term customer contracts account for about 60 per cent of sales, but, since Saab's business areas are divided by product and market...

  • Page 14
    ... been high, but is slowing owing in part to falling oil prices. The fastest growth in recent years has been in Russia, but the growth rate there is expected to decline due to economic conditions in the country. 10 - SA AB ANNUAL REPORT 2014 Value of the global defence materiel market, 2008 - 2020...

  • Page 15
    ... moving a large part of the sales organisation that had been consolidated in Sweden to local offices in a number of key markets. "A local presence has significantly raised the profile of Saab's brand and products and at the same time is a sign of our long-term commitment to the countries where we...

  • Page 16
    ...the industry and Saab is that demands will change as the definition of the defence industry is broadened. A greater risk of conflict means a higher demand for protection and security, and companies in the defence industry have to show that they are capable of adapting. 12 - SA AB ANNUAL REPORT 2014

  • Page 17
    ...Average annual growth 2016 - 2020 Average annual growth 2016 - 2020 Nordic & Baltic is Saab's largest market. In addition to the Nordic and Baltic countries, the market area includes Poland. The Swedish Armed Forces are an important reference for many international projects as well. Good relations...

  • Page 18
    MARKET MARKET AREAS 608 1% NORTH AMERICA Number of employees in the market area 12 Number of employees in the market area 36% Share of global defence materiel spending 2016 - 2020 3% 3% LATIN AMERICA Share of global defence materiel spending 2016 - 2020 Average annual growth 2016 - 2020 ...

  • Page 19
    MARKET MARKET AREAS 411 Number of employees in the market area 17% 3% ASIA PACIFIC Share of global defence materiel spending 2016 - 2020 Average annual growth 2016 - 2020 The Thai Air Force has operated Gripen since 2011. Defence spending increased by 3.2 per cent in the region in 2014. ...

  • Page 20
    ... on the global market. In 2013 Sweden ordered 60 Gripen E and in 2014 a contract to supply the next generation Gripen to Brazil was signed. Gripen now has an established position as a technologically advanced, flexible and cost efficient combat aircraft system. CONTINUOUS DEVELOPMENT Gripen is...

  • Page 21
    ... offers training systems and simulators to train fighter pilots and service personnel. GRIPEN IS FLOWN HERE Gripen is currently operated by the air forces in Sweden, South Africa, Thailand, Czech Republic and Hungary, as well as the Empire Test Pilots' School (ETPS) in the UK. In 2014, a contract...

  • Page 22
    ... of weather conditions. Sales by market segment and business area Market segment Business areas Aeronautics** Dynamics Electronic Defence Systems** Security and Defence Solutions Support and Services Combitech** Sales, MSEK 10,481 5,240 3,192 2,330 1,838 446 Air Land Naval Civil security Commercial...

  • Page 23
    ...avionics, weapon systems, sensors, training, service and support. A contract was signed with the Brazilian government during the year on the development and production of 36 of the next generation Gripen. 45% SHARE OF GROUP SALES 2014 Gripen regularly trains with other countries' air forces. Aerial...

  • Page 24
    ... used by the Swedish Navy. CIVIL SECURITY Saab's civil security offering includes air and maritime traffic management, security solutions for airports, prisons and emergency services and underwater vehicles for the offshore industry. 10% SHARE OF GROUP SALES 2014 Paratus is a mobile information...

  • Page 25
    ... a number of other product areas with market potential. Airborne Early Warning & Control Systems for ground combat Maintenance, Repair & Overhaul - Maintenance and repair of components, spare parts and electronics as well as vehicle, aircraft and platform overhauls Saab Kockums - Develops, builds...

  • Page 26
    ... on the development and production of the next generation Gripen for the Brazilian Air Force. The Brazilian Air Force's negotiating team visiting Gripen production in Sweden. The contract further strengthens Gripen's position in the global market as a cost efficient combat aircraft system. Its...

  • Page 27
    ... RESULT: The long-term dividend goal is to distribute 20-40 per cent of net income to the shareholders over a business cycle. For 2014, the Board of Directors proposes a dividend of SEK 4.75 per share (4.50), corresponding to 43 per cent (65) of net income. 4.75 SA AB ANNUAL REPORT 2014 - 23

  • Page 28
    ...repurchased to secure the Group's Share Matching Plan and Performance Share Plan. The repurchased shares are held as treasury shares. TRADING VOLUME AND STATISTICS Source: SIS Ägarservice OWNERSHIP STRUCTURE Saab had 33,732 shareholders (30,352) at year-end 2014. Swedish investors accounted for...

  • Page 29
    ... in Saab's long-term Share Matching Plan and Performance Share Plan and for subsequent transfers to cover certain expenses associated with LTI 2014, mainly social security costs. Repurchases may be effected on Nasdaq Stockholm. On 5 June 2014, Saab announced that the Board of Directors had...

  • Page 30
    ...and employees. SAAB'S STRATEGY IS BASED ON FOUR PRIORITY AREAS: Profitable growth - Focus on product areas with good potential and a market area organisation with a strong local presence in key markets. PROFITABLE GROWTH PORTFOLIO Performance - Continuously improve efficiencies in every part of...

  • Page 31
    ... the year. The decrease is mainly because Saab received development orders in 2013 related to Gripen E for Sweden. In 2014, Saab signed a contract with the Brazilian government on the development and production of 36 next generation Gripen. Deliveries are planned for 2019-2024 and the order value is...

  • Page 32
    ...ced for short-term gains. Saab's business area Security and Defence Solutions (SDS) offers good examples of successful measures. The product portfolio, staffing and processes have all been evaluated and the results have been sales growth, cost savings and increased efficiency. Work processes have...

  • Page 33
    ... same time. Saab's new radar systems have been developed over several years as part of the Group's largest development project after Gripen. The systems are modularly designed, which means that additional models can be developed at relatively low costs. One example is Giraffe 8A for long-range air...

  • Page 34
    ... The company is part of business area Security and Defence Solutions. The acquisition is consistent with the strategy to expand the offering and strengthen Saab's position in naval systems. It gives Saab another business with a strong local presence in Sweden and with good export potential. RESEARCH...

  • Page 35
    ... offers a number of other products such as the Stirling external-combustion engine and systems for submarine rescues and mine clearance. The business unit has around 850 employees, with broad-based competence in production, development and service. During the second half of the year, Saab Kockums...

  • Page 36
    ... among Swedish engineering students. 76% * Saab's employee survey By working actively on occupational health issues, Saab reduces the risk of accidents, illnesses and workplace injuries in both the short and long term. In 2014, Saab introduced a new Group-wide global work environment policy. Saab...

  • Page 37
    ... central part of the growth strategy is to maintain a presence in local markets around the world. The percentage female managers, 2006 - 2014 % 30 25 20 15 10 07-Q4 08-Q4 09-Q4 10-Q4 11-Q4 12-Q4 13-Q4 14-Q4 Percentage of female managers Percentage of female employees SA AB ANNUAL REPORT 2014...

  • Page 38
    ... of research and development work is done, which is one reason why it is important for Saab to be a popular and attractive employer. Ã-stersund Number of employees No. of employees by country Dec 31, 2014 No. of employees by location Dec 31, 2014 Sweden South Africa USA Australia UK Netherlands...

  • Page 39
    ... control systems) or strategic products that can be used for both civil and military purposes. Saab sells products in all these areas. The product portfolio also includes civil products, where exports are not governed by ISP. Business ethics and risks are a recurring theme at Board meetings, Group...

  • Page 40
    ... risk awareness, internal processes and the company's tools for managing corruption risks. Employees who become aware of or suspect non-compliance with laws or Saab's Code of Conduct are expected to file a report through Saab's whistleblower system. In 2014, Saab created a new whistleblower system...

  • Page 41
    ... world leader in corporate security and risk management. See also the risk section on pages 50-53. TRAINING CONTRIBUTES TO SOCIETY Saab is a highly research-intensive company, which is essential in order to remain competitive in the long term. This means both customer- and product specific research...

  • Page 42
    ... that the products meet environmental requirements. SUSTAINABLE INNOVATIONS An important part of Saab's efforts to reduce its environmental impacts is research and development collaborations within the industry to create sustainable solutions for the future. Saab is one of the main suppliers to...

  • Page 43
    ... of environmental problems and improve environment-related skills. Priority issues in the environmental area are identified and analysed on a continual basis. Saab is researching whether technical solutions used in the aerospace and defence industry can be used to reduce environmental risks and...

  • Page 44
    ... REPORT CONTENTS Group - Financial review 2014 Business areas Other significant events Risks and risk management Corporate governance report Board of Directors and Auditors Group Management Other information Financial statements Dividend motivation Proposed disposition of earnings Audit report...

  • Page 45
    ... leading high technology companies, Saab offers products, solutions and services for military defence and civil security. In 2014, the Group had customers in over 100 countries, while research and development was concentrated in Sweden. Most of the Group's employees work in Europe, South Africa, the...

  • Page 46
    ... to commercial aircraft manufacturers, a business that is included in business area Industrial Products and Services as of 2015. Aeronautics includes the following business units: Gripen E, Gripen C/D, Gripen Brazil and Air Piloted Training Systems. As of 2015, Aerostructures is part of the business...

  • Page 47
    ... management systems for armed forces as well as niche products for the civil and defence market such as underwater vehicles for the offshore industry. Share of sales 2014 12% Order bookings 2014 SEK billion 5 4 3 SERVICES AND SOLUTIONS SALES, INCOME AND MARGIN • Ground combat weapons...

  • Page 48
    ADMINISTRATION REPORT BUSINESS AREA ELECTRONIC DEFENCE SYSTEMS The business is built on Saab's close interaction with customers that require efficient solutions for surveillance and for threat detection, localisation and protection. The business area has a product portfolio covering airborne, land-...

  • Page 49
    ...police and ambulance services. Security and Defence Solutions includes the following: Combat System and C4I Solutions, Critical System and Communication Solutions, Traffic Management, Training and Simulation and Saab Kockums. ORDERS RECEIVED Share of sales 2014 24% Order bookings 2014 SEK billion...

  • Page 50
    ... Share of sales 2014 14% Order bookings 2014 SEK billion 5 4 3 SERVICES AND SOLUTIONS SALES, INCOME AND MARGIN • Integrated service solutions for businesses in air, land, marine and civil security. • Package solutions for equipment maintenance and service, technical training, spare parts...

  • Page 51
    ..., systems security, communications, mechanics, technical product information and logistics. As of 2015 Combitehc is included in the business area Industrial Products and Services. Operational cash flow was at a lower level in 2014 compared to 2013, mainly due to lower operating income. EMPLOYEES...

  • Page 52
    ... business units: Aerostructures, Avionics, Combitech and Saab Ventures. EMPLOYEES On 1 January 2015, Industrial Products and Services had 2,411 employees. • The technology consulting company Combitech; see page 47. • Aerostructures is a subcontractor to the aviation industry and manufactures...

  • Page 53
    ... the electronic security system for the Southern Queensland Correctional Centre in Australia. • Saab's Board of Directors resolved to repurchase Series B shares to secure delivery of shares to participants in Saab's long-term Share Matching Plan and Performance Share Plan. • In June, Saab issued...

  • Page 54
    ... long periods of time, and high-tech product development or refinement. Operations involve customer and supplier relationships, joint ventures and other corporate alliances as well as Saab's own business activities in many countries. All businesses entail risk. A risk can be specific to the company...

  • Page 55
    ...16. Long-term customer contracts Management of long-term customer contracts entails risks. Saab's operations involve complex development projects on the leading edge of technology where the competitive situation is complex. Our success depends on the ability to offer cost- SA AB ANNUAL REPORT 2014...

  • Page 56
    ... REPORT RISKS AND RISK MANAGEMENT effective high technology solutions and in some cases on participation in the customer-country's economy through various forms of industrial co-operation. The risk in managing long-term customer contracts is that Saab will be unsuccessful in meeting customer...

  • Page 57
    ...Interest risks Refinancing risks Credit and counterparty risks Commodity risks Pension obligation Operating risks Develop and introduce new systems and products Long-term customer projects Environmental risk and liabilities Compliance risks Information handling risks SA AB ANNUAL REPORT 2014 - 53

  • Page 58
    ... Meeting 2015 will also be planned and carried out pursuant to the provisions of the Code. Saab's website, www.saabgroup.com, has a special area for corporate governance issues, which is updated in accordance with the Code. The Board annually issues a report on how the internal control of financial...

  • Page 59
    .... Group Management Business areas Aeronautics Dynamics Electronic Defence Systems Security and Defence Solutions Support and Services Combitech* Group Functions Finance HR Communications ICT Quality and Environment Legal affairs Procurement Strategy Reports Appoints All operating units report...

  • Page 60
    ... Board set aside time for the contract with Brazil on Gripen NG and issues related to Gripen E to Sweden. During the year, the Board also worked with other key export and marketing strategies as well as the company's ethical standards. Committee work represents an important part of the Board's work...

  • Page 61
    ... Audit Committee shall monitor the company's financial reporting, monitor the efficiency of the company's internal control, internal audit and risk management in respect of the financial reporting, keep informed about the audit of the annual report and group accounts, review and monitor the auditors...

  • Page 62
    ... discuss their review of the company for the financial year 2014. The Board of Directors has also met on one occasion with the auditor without the presence of the President or any other members of the Group Management. Internal control over financial reporting Saab's system of internal control is...

  • Page 63
    ... entail considerable sums of money, stretch over long periods of time and involve technological development or refinement of products. Based on Saab's operations, the material risk areas in financial reporting are project accounting, acquisitions and goodwill, development costs, hedging and other...

  • Page 64
    ... in Saab: 58 CONNY HOLM Member of the Board since 2008 and Deputy Board member 1995-2008 President of the local trade union IF Metall at business area Industrial Products and Services, Jönköping Born 1947 Upper secondary engineering education Shares in Saab: 1,378 60 - SA AB ANNUAL REPORT 2014

  • Page 65
    ... member since 2007 Member of the local Swedish Association of Graduate Engineers at Saab AB, Gothenburg Born 1955 M.S.E.E. from Chalmers University of Technology Shares in Saab: 698 JAN KOVACS Deputy Board member since 2008 President of the local salaried employees' union Unionen at Saab, Linköping...

  • Page 66
    ... and Head of business area Industrial Products and Services Born 1958 M.Sc. in Engineering Employed 2000 Shares in Saab: 24,133 GUNILLA FRANSSON Senior Vice President and Head of business area Security and Defence Solutions Born 1960 M.Sc. and Ph.D. (Tec. Lic.) Employed 2008 Shares in Saab: 7,292...

  • Page 67
    ... Saab AB Board members, as described below. Saab shall offer market terms in order to recruit and retain senior executives. To the greatest extent possible, remuneration structures shall be characterised by predictability with respect to both the cost for the company and the benefit for the employee...

  • Page 68
    ... time. Compensation for these services shall be paid at market terms. INFORMATION IN THE ANNUAL REPORT NOTE 37 The Board of Directors propose that the Annual General Meeting resolve to adopt a long-term incentive programme 2015 consisting of two parts: Share Matching Plan 2015 and Performance Share...

  • Page 69
    ... in Saab's long-term Share Matching Plan and Performance Share Plan and for subsequent transfers to cover certain expenses associated with LTI 2014, mainly social security costs. Repurchases may be effected on Nasdaq Stockholm. On 5 June 2014, Saab announced that the Board of Directors had...

  • Page 70
    ..., supplemental information Information on Parent Company Environmental report Restated accounting 2013 regarding new structure Restated accounting 2014 regarding new structure Exchange rates used in financial statements Definitions of key ratios 106 112 112 Shares in associated companies and joint...

  • Page 71
    FINANCIAL INFORMATION - FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT MSEK Note 2014 2013 Sales Cost of goods sold Gross income Other operating income Marketing expenses Administrative expenses Research and development costs Other operating expenses Share in income of associated companies and...

  • Page 72
    ... item of MSEK 83, relating to a lost legal dispute, was reported in financial net. In 2013, Saab invested in the Indian company Pipavav Defence and Offshore Engineering Company Limited. A combination of negative currency effects and share price development resulted in a value decline of MSEK 133 in...

  • Page 73
    ... a maximum period of ten years. Capitalised development costs have been reduced from MSEK 3,628 at the end of 2008 to MSEK 952 at the end of 2014. Inventories increased during 2014 due to larger projects. Inventories are recognised after deducting utilised advances. SA AB ANNUAL REPORT 2014 - 69

  • Page 74
    ... Total long-term liabilities Short-term interest-bearing liabilities Advance payments from customers Accounts payable Derivatives Tax liabilities Other liabilities Accrued expenses and deferred income Provisions Total current liabilities Liabilities attributable to assets held for sale Total...

  • Page 75
    ... with shareholders: Share matching plan Dividend Acquisition and sale of non-controlling interest Closing balance, 31 December 2013 Opening balance, 1 January 2014 Net comprehensive income for the year Transactions with shareholders: Repurchase of shares Share matching plan Dividend Acquisition and...

  • Page 76
    ... to MSEK 239 (68), of which MSEK 171 (24) was related to capitalised development costs, mainly within radar and sensor technology, and MSEK 68 (44) to other intangible assets. CASH FLOW As of 2014, operational cash flow is reported by business area as opposed to previously when free cash flow was...

  • Page 77
    ... The Parent Company includes units within the business areas Aeronautics, Electronic Defence Systems, Security and Defence Solutions, and Support and Services. Group staff and Group support are included as well. The business areas Dynamics and Combitech are subsidiaries to Saab AB and are not a part...

  • Page 78
    ... PARENT COMPANY BALANCE SHEET MSEK Note 31-12-2014 31-12-2013 ASSETS Fixed assets Intangible fixed assets Tangible fixed assets Financial fixed assets: Shares in Group companies Receivables from Group companies Shares in associated companies and joint ventures Other long-term securities...

  • Page 79
    FINANCIAL INFORMATION - FINANCIAL STATEMENTS PARENT COMPANY BALANCE SHEET MSEK Note 31-12-2014 31-12-2013 EQUITY AND LIABILITIES Equity Restricted equity: Capital stock Revaluation reserve Statutory reserve Unrestricted equity: Retained earnings Net income for the year Total equity Untaxed ...

  • Page 80
    ... directly in equity: Change in revaluation reserve Net comprehensive income for the year Transactions with shareholders: Dividend to shareholders Repurchase of shares Share matching plan Closing balance, 31 December 2014 1,746 707 543 4,531 - 7,527 1,746 1,746 -7 700 700 543 543 7 -477...

  • Page 81
    FINANCIAL INFORMATION - FINANCIAL STATEMENTS PARENT COMPANY STATEMENT OF CASH FLOWS MSEK Note 2014 2013 Operating activities Income after financial items Adjustments for items not affecting cash ï¬,ow Income tax paid Cash ï¬,ow from operating activities before changes in working capital Cash ï¬,...

  • Page 82
    ... in Sweden and the large part of its sales are generated in Europe, in addition to which Saab has a local presence in South Africa, Australia, the US and other selected countries. On 16 February 2015, the Board of Directors and the President approved this annual report and consolidated accounts for...

  • Page 83
    FINANCIAL INFORMATION - NOTES As of 1 January 2015, Saab's operations are divided into the following six business areas: Aeronautics, Dynamics, Electronic Defence Systems, Security and Defence Solutions, Support and Services, and Industrial Products and Services, which will also be reported as ...

  • Page 84
    ...). Customer-financed research and development is recognised in cost of goods sold. • Administrative expenses relate to expenses for the Board of Directors, Group Management and staff functions as well as expenses attributable to business area and business unit managements. • Marketing expenses...

  • Page 85
    ... category financial assets at fair value through profit or loss. The instruments are subsequently recognised at fair value or amortised cost, depending on how they have been classified as follows. The fair value of listed financial assets and liabilities is determined using market prices. Saab also...

  • Page 86
    ...commitment at present value has been determined based on the interest rate on the closing day for a first-class mortgage bond with a maturity corresponding to the pension obligation. The calculation is made by a qualified actuary using the projected unit credit method. 82 - SA AB ANNUAL REPORT 2014

  • Page 87
    ... three-year period. In April 2014 at the Annual General Meeting the decision was made to modify the Performance Share Plan in order to increase interest in the plan. See also note 37. PROVISIONS A provision is recognised in the statement of financial position when the Group has a legal or informal...

  • Page 88
    FINANCIAL INFORMATION - NOTES SIGNIFICANT DIFFERENCES BETWEEN THE GROUP'S AND THE PARENT COMPANY'S ACCOUNTING PRINCIPLES The Parent Company follows the same accounting principles as the Group with the following exceptions. Business combinations Transaction costs are included in the cost of business...

  • Page 89
    ... includes sales of goods manufactured by Saab and goods purchased for resale, e.g., spare parts and other equipment that are sold separately. Long-term customer contracts Long-term customer contracts relate to the development and manufacture of complex systems that stretch across several accounting...

  • Page 90
    ...in South Africa, Australia, the US and other selected countries globally. Saab's operating and management structure is divided into six business areas which also represent operating segments; Aeronautics, Dynamics, Electronic Defence Systems, Security and Defence Solutions, Support and Services, and...

  • Page 91
    .... Electronic Defence Systems Security and Support and Defence Services Solutions Group Aeronautics Dynamics Combitech Corporate Eliminations Group MSEK 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 External sales Internal sales...

  • Page 92
    FINANCIAL INFORMATION - NOTES Note 4, cont. Sales by operating segment Parent Company NOTE 6 MSEK OTHER OPERATING EXPENSES Group Parent Company MSEK 2014 2013 Aeronautics Electronic Defence Systems Security and Defence Solutions Support and Services Total Sales by geographical market 6,532 ...

  • Page 93
    ... systems. Saab Kockums has a unique offering and strong presence in Sweden concerning submarines and warships. Saab also sees potential to expand Saab Kockums' current market position through opportunities in the export market. Purchase Analysis MSEK Purchase price Purchase price paid 22 July 2014...

  • Page 94
    FINANCIAL INFORMATION - NOTES NOTE 9 EMPLOYEES AND STAFF COSTS of whom men of whom men Average number of employees1) 2014 2014 of whom men 2013 of whom men 2013 Group companies Sweden South Africa USA Australia UK Czech Republic The Netherlands Norway Germany Denmark Switzerland Finland Canada ...

  • Page 95
    ...a fairly high degree with audits and which are normally performed by the external auditor, including consultations on advisory and reporting requirements, internal control and the review of interim reports. Other services relate to expenses that are not classified as audit assignments, audit work in...

  • Page 96
    ... surpluses. Group Parent Company MSEK Result from shares in Group companies Result from shares in associated companies/joint ventures MSEK 2014 2013 2014 2013 2014 2013 Current tax expense (-)/tax income (+) Taxes for the year Adjustment for taxes related to previous years Total Deferred...

  • Page 97
    .../losses from sale of Group companies, associated companies and other shares and reduction of liability for conditional consideration have affected tax-exempt income by MSEK 182 (146). Parent Company MSEK 2014 (%) 2014 2013 (%) 2013 Income before taxes Tax according to current tax rate for the...

  • Page 98
    ...-2014 The change in deferred tax assets and liabilities in the Parent Company, Saab AB, has been recognised in profit or loss. Estimated utilisation dates of recognised deferred tax assets Parent Company MSEK Net MSEK Group Parent Company Tangible fixed assets Inventories Accounts receivable...

  • Page 99
    ... capitalised tax value in tax loss carry forwards, MSEK -4. Other numbers in the "Recognised in profit or loss" column in the table above total MSEK -21, which is the amount of deferred tax related to temporary differences and deferred tax attributable to previous years. Group MSEK Opening...

  • Page 100
    ... development costs Group Parent Company MSEK 2014 2013 2014 2013 Cost of goods sold Marketing expenses Research and development costs 144 2 320 168 2 454 136 202 139 200 MSEK 2014 2013 2014 2013 Acquisition value Opening balance, 1 January Business combinations Internally developed...

  • Page 101
    ... placed on Saab and similar companies in the market. All units have sales of defence materiel, unique systems, products and support solutions in the international market as their primary activity, and their business risk in this respect is considered equivalent. During the year a review was made...

  • Page 102
    FINANCIAL INFORMATION - NOTES Note 17, cont. Plant and machinery Group Parent Company Equipment, tools and installations Group Parent Company MSEK 2014 2013 2014 2013 MSEK 2014 2013 2014 2013 Acquisition value Opening balance, 1 January Business combinations Investments Reclassifi...

  • Page 103
    ... 31 December Carrying amount, 31 December Leasing fees for aircraft obtained/leased via operating leases MSEK Payments to lessors 2014 2013 Contracted 2015 321 249 206 176 162 154 1,268 Parent Company 128 85 44 8 4 4 273 618 -653 35 - 942 -323 -1 618 2016 2017 2018 2019 2020 and forward Total...

  • Page 104
    ... costs for investment properties that generated rental income during the year Effect on net income/net rental income 4 -2 2 4 -2 2 Share in associated companies and joint ventures' net income and non-controlling interests. Information on fair value of investment properties in the Parent Company...

  • Page 105
    ...Germany Switzerland Sweden South Africa India Thailand 510 22 28 24 35 22 20 16 102 11 790 -2 4 1 1 7 23 -9 25 Kontorsbolaget i Karlskoga AB Sweden 42 869 1 531 41 338 Gripen International KB Total joint ventures Total 256 256 1,125 227 227 758 29 29 367 50.0 SA AB ANNUAL REPORT 2014 - 101

  • Page 106
    ... Gripen International KB, 969679-8231, Linköping Industrigruppen JAS AB, 556147-5921, Stockholm Total 2013 MSEK % of votes and capital 23.0 33.0 36.6 50.0/26.0 23 2 78 3 50.0 80.0 29 135 Carrying amount Fixed assets Shares in joint ventures Current assets Total assets Total equity Long term...

  • Page 107
    ... to the work performed. Unutilised advance payments amount to MSEK 856 (818). Costs attributable to assignment revenue amounted to MSEK 5,438 (3,507). Reported gross income amounted to MSEK 996 (751). Parent Company NOTE 26 OTHER LONG-TERM SECURITIES HOLDINGS Parent Company MSEK 31-12-2014 31-12...

  • Page 108
    ... value less selling expenses amounts to MSEK 161 (128). Of inventories, MSEK 193 is expected to be realised more than twelve months after the closing day. The change in work in progress is mainly related to higher activity levels in larger projects. Parent Company Bank deposits relate to short-term...

  • Page 109
    ... of the closing day and MSEK 69 (59) later than five years of the closing day. Liabilities to credit institutions mainly consist of Medium Term Notes (MTN). For more information on financial risk management, see note 41. The fair value of MTNs exceeds book value by MSEK 37 (5). Saab otherwise does...

  • Page 110
    ... 1,011 Group Sweden USA Switzerland Total Costs for employment during the current year Net interest expense Cost of defined-benefit plans in the income statement Cost of defined-contribution plans Payroll tax Total cost of post-employment compensation 106 - SA AB ANNUAL REPORT 2014 147 74...

  • Page 111
    ... income statement Group MSEK 2014 2013 Cost of goods sold Marketing expenses Administrative expenses Research and development costs Financial expenses Total cost of post-employment compensation 755 82 66 51 57 1,011 757 85 62 52 74 1,030 Estimated payments during 2015 amount to approximately...

  • Page 112
    ...Long-term incentive programme In April 2007, Saab's Annual General Meeting resolved to offer permanent employees the opportunity to participate in a Share Matching Plan. The Board considers it important that Saab's employees share a long-term interest in the value development of the company's shares...

  • Page 113
    ... 2014, Saab's Annual General Meeting resolved in the same way as in previous years to offer employees a Share Matching Plan and a modified Performance Share Plan. The Performance Share Plan, which covers senior executives and key employees, entitles participants to 2-7 matching shares, depending...

  • Page 114
    ... during 2014. Since November 2008, all eligible executives have participated in the Performance Share Plans approved by the Annual General Meetings in 2009, 2010, 2011, 2012, and 2013 and in the Share Matching Plans 2011, 2012, and 2013. The Performance Share Plan 2010 was concluded in January 2015...

  • Page 115
    ...see information for 2013 below. Share related plans relate to both Share Matching Plans and Performance Share Plans. Including compensation for the additional costs the benefits lead to. Social security costs must be added since parts of the fees are invoiced through a limited company. Board members...

  • Page 116
    ... costs in projects as well as for environmental commitments. No provision has been made for liability risks associated with the production of civil aircraft or the production of sub-components for civil aircraft. Business combinations 2014 relate to ThyssenKrupp Marine Systems AB. Parent Company...

  • Page 117
    ... a specific number of days, with a certain probability. Saab uses three days and a 99-per cent probability. The Treasury Risk Analysis unit reports each portfolio's risk defined according to established risk measures to Saab's CFO on a daily basis. Financial instruments Financial assets in the Group...

  • Page 118
    ... Measured at fair value 31-12-2014 Financial assets Financial investments Long-term receivables Derivatives1) Forward exchange contracts Currency options Interest rate swaps Electricity derivatives Total derivatives Accounts receivable and other receivables Short-term investments Liquid assets...

  • Page 119
    ... Measured at fair value 31-12-2013 Financial assets Financial investments Long-term receivables Derivatives1) Forward exchange contracts Currency options Interest rate swaps Electricity derivatives Total derivatives Accounts receivable and other receivables Short-term investments Liquid assets...

  • Page 120
    FINANCIAL INFORMATION - NOTES Note 41, cont. The Group's outstanding derivatives Currency derivatives Fair value 2014 Fair value 2013 Million Currency Local currency Asset SEK Liability SEK Net Local currency Asset SEK Liability SEK Net Maturity up to 1 year EUR USD Other -298 -161 -112...

  • Page 121
    ... in fixed price tenders. Definitions Foreign currency risk refers to the risk that fluctuations in exchange rates will negatively affect income. Exchange rate fluctuations affect Saab's income and equity in various ways: • Income is affected when sales and the cost of goods and services sold are...

  • Page 122
    ... affected by changes in market rates. Interest rate effects on advance financing affect gross income. Interest rate risks in the Group's financial investments are managed based on high liquidity and a duration of 12 months, with the option of deviating by +/- 12 months. As of year-end, the duration...

  • Page 123
    .... Commodity risks Price risks are divided into two parts: • Commodity price risk refers to the risk that purchasing costs for material will rise. • Electricity price risk refers to the risk that Saab could be negatively affected by changes in electricity prices. SA AB ANNUAL REPORT 2014 - 119

  • Page 124
    ... to accept risks in relation to benchmarks (hedging strategy) at the equivalent of MSEK 1 (1) expressed in VaR. The market value of electricity derivatives as of year-end was MSEK -5 (-12). Since 1 January 2010, electricity derivatives are used as cash flow hedges for the Stockholm price area (SE3...

  • Page 125
    FINANCIAL INFORMATION - NOTES Note 41, cont. Trading The Board has given Saab Treasury a risk mandate for trading in interest rate and currency instruments. During 2014, MSEK 15 was allocated to trading expressed as VaR. If the cumulative result for the year is negative, the mandate is reduced ...

  • Page 126
    ... Security USA LLC Saab Dynamics AB Saab Danmark A/S Saab Grintek Defence (Pty) Ltd Saab Kockums AB Saab Seaeye Ltd Saab Sensis Corporation Växjö, Sweden Finland The Netherlands Germany Australia Västervik, Sweden USA Czech Republic USA Karlskoga, Sweden Denmark South Africa Malmö, Sweden UK USA...

  • Page 127
    ... Saab Naval Systems AB, 556757-5104, Malmö, Sweden Saab North America, Inc., USA Saab Precision Components AB, 556627-5003, Jönköping, Sweden Saab Seaeye Holdings Ltd, UK Saab South Africa (Pty) Ltd, South Africa Saab Surveillance Systems AB, 556577-4600, Järfälla, Sweden Saab Technologies...

  • Page 128
    ... 864 322 1,186 Raising of loans Repurchase of shares Dividend paid to the Parent Company's shareholders Dividend paid to non-controlling interest Cash ï¬,ow for the year SUPPLEMENTAL INFORMATION ON STATEMENT OF CASH FLOWS Liquid assets Group MSEK 31-12-2014 31-12-2013 NOTE 46 STATEMENT OF CASH...

  • Page 129
    ... The Group also includes the holdings in associated companies and joint ventures. Saab AB also operates a small business in a South Korean branch. Acquisitions in 2014 relate to ThyssenKrupp Marine Systems AB. Purchase price paid includes payment to minority stakeholders in Bayes Risk Management AS...

  • Page 130
    ...-Dec restated Aeronautics Saab has implemented a new structure where the operations within Security and Defence Solutions which were related to Airborne Surveillance have been moved to corresponding operations within either Electronic Defence Systems or Support and Services. The reorganisation was...

  • Page 131
    ... in business area Aeronautics), Avionics Systems (previously in business area Electronic Defence Systems), the independent technology consulting firm Combitech, Saab ventures' product portfolio (previously in Saab Corporate) and a development project, which up until year-end 2014 was a part of Saab...

  • Page 132
    FINANCIAL INFORMATION - NOTES Sales 2014 MSEK Q1 actual Adjustment structural change Q1 restated EBITDA 2014 MSEK Q1actual Adjustment structural change Q1 restated Aeronautics Dynamics EDS SDS S&S Combitech IPS Corporate/Internal...- 439 226 625 468 394 143 228 2,523 128 - SA AB ANNUAL REPORT 2014

  • Page 133
    ...11 -25 12 13 Adjustment structural change NOTE 51 Q1 restated EXCHANGE RATES USED IN FINANCIAL STATEMENTS Year-end rate Average rate 107 28 -25 -12 87 12 73 270 Land 2014 2013 2014 2013 Australia Denmark Euro India Canada Norway Switzerland UK South Africa Czech Republic USA AUD DKK EUR INR CAD...

  • Page 134
    ...on the cutting edge of technology. Over the years, Saab has conducted significant development projects and managed the associated risks with great success. See also risks and uncertainties in the annual report. The Board of Directors' proposed dividend amounts to SEK 4.75 per share, corresponding to...

  • Page 135
    ... adopted for use in the European Union, and generally accepted accounting principles, and give a true and fair view of the financial positions and results of the Group and the Parent Company, and that the management report gives a fair review of the development of the operations, financial positions...

  • Page 136
    ... accounts of Saab AB (publ) for the year 2014, except for the corporate governance statement on pages 54-62. The annual accounts and consolidated accounts of the company are included in the printed version of this document on pages 40-131. Responsibilities of the Board of Directors and the Managing...

  • Page 137
    ... Board of Directors and the Managing Director be discharged from liability for the financial year. Stockholm 20 February 2015 PricewaterhouseCooopers AB Håkan Malmström Authorised Public Accountant Auditor in charge Anna-Clara af Ekenstam Authorised Public Accountant SA AB ANNUAL REPORT 2014...

  • Page 138
    ... 18 20 55 • by mail with reply card in separate invitation or to: Saab Annual General Meeting, Box 7839, 103 98 Stockholm, Sweden • online: www.saabgroup.com/arsstamma Please indicate your name, personal ID number (Swedish citizens), address and telephone number. If you are attending by power of...

  • Page 139
    MULTI-YEAR OVERVIEW MSEK. unless otherwise indicated 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 Order bookings Order backlog 31 December Sales Foreign market sales, % Defence sales, % Operating income (EBIT) Operating margin, % Operating income before depreciation/ amortisation ...

  • Page 140
    ... Global Reporting Initiative Fighter system Information and Communications Technology ISP Inspektionen för Strategiska Produkter (Swedish Agency for Non-Proliferation and Export Controls) Intelligence, surveillance and reconnaissance Luftfartsverket (The Air Navigation Service Provider for Sweden...

  • Page 141
    ... INFORMATION Headquarters Saab AB P.O. Box 12062 SE-102 22 Stockholm, Sweden Visiting address: Gustavslundsvägen 42 Telephone: +46 8 463 00 00 Linköping Saab AB P.O. Box 14085 SE-581 88 Linköping Visiting address: Bröderna Ugglas gata Telephone: +46 13 18 00 00 Concept, text and production...

  • Page 142