Annual and Sustainability Report 2011 - Teracom

Operating profit for the year amounted to SEK 376 (293)
million, an increase of 28 percent compared to 2010. There
was a negative impact on profit from costs affecting comparability
totaling SEK 36 (47) million. This amount consisted of
restructuring costs of SEK 17 million as well as impairment
losses on property, plant and equipment of SEK 19 million,
which were an adjustment resulting from technological
development. Comparative costs from last year consisted of
restructuring costs of SEK 23 million and impairment losses
on property, plant and equipment and inventories of SEK 24
million. Boxer Sweden's profit was affected negatively by the
above-mentioned SEK 50 million. Translation of the subsidiaries'
losses in Finland and Denmark resulted in a positive
impact on profits of slightly more than SEK 19 million
compared to last year.
Profit after financial items was SEK 325 (281) million.
Net financial expense for the year was SEK -51 (-12) million.
Interest expenses increased by approximately SEK 35 million
compared to full year 2010 due to higher loan levels during
the year as a result of the acquisition of Teracom Denmark
(BSD). This year the Group began to apply hedge accounting
to unrealized gains related to electricity derivatives, which
were reported directly in comprehensive income. Unrealized
gains (losses) related to electricity derivatives positively
impacted last year's net financial income/expense by SEK 14
million since hedge accounting was not applied.
Net profit for the period was SEK 168 (201) million.
Based on the company management team's current assessment
of future profits, a deferred tax asset of SEK 9 million
was reported for the year's deficit in Finland. A deferred tax
asset of SEK 25 million was reported for the year's deficit in
the Swedish Parent Company, Teracom Group AB. Last year a
deferred tax asset of SEK 105 million was capitalized based
on a valuation of the deficits in the Danish operations.
Parent Company earnings
Parent Company income for 2011 amounted to SEK 33 (-)
million. Operating profit for the year was SEK -37 (-) million.
The Parent Company received dividends from subsidiaries
totaling SEK 297 (-) million and profit after financial items
was SEK 201 (-) million. Net profit for the period was SEK
226 (-) million. Based on the management's assessment, a
deferred tax asset of SEK 25 (-) million was capitalized during
the year.
Financial position
Group interest-bearing liabilities amounted at year-end to
SEK 2,016 (2,381) million. During 2011, the amortization of
credit facilities amounted to SEK 375 million. The net debt/
equity ratio was 0.98 (1.12). Total assets decreased by SEK
145 million to SEK 5,553 (5,698) million. The Group's equity
ratio was 32 (31) percent, which represents an increase of
one percentage point compared to the same time last year.
Significant events January – December 2011
• Teracom Sweden offered program companies the option
of purchasing broadcasting of commercials or programs in
up to 30 different regions. During the period, new agreements
were signed with several major program companies.
• On June 1 Teracom Group AB was formed as the Parent
Company for the Group, which created a transparent legal
structure corresponding to the business structure.
• Andrea Gisle Joosen began working on August 8 as the
new President of Boxer TV Access AB (Boxer Sweden). Most
recently, she held the position of President of Panasonic
Nordic.
• Steffen Weber was named in November Acting President
of Teracom A/S (Teracom Denmark). He is replacing Finn
Søndergaard, who is moving to the Group Strategy &
Business Development Department as a step toward retirement.
Significant events after the end of the period
• Sales of Boxer On Demand, which was launched on
Novembe r 7, 2011, were temporarily halted on January 2.
• On January 11, Danish TV 2 went from MPEG2 to MPEG4
and in conjunction with this joined Boxer's pay TV
channe l selection, which has greatly contributed to Boxer
Denmark' s strong growth.
• Boxer Denmark reached 300,000 pay TV customers on
Februar y 5, 2012.
• When the Parent Company acquired Digi TV Plus Oy in
2009, it issued two put options for the remaining 49 percent
of shares in the Finnish subsidiary. The put options
were reported as a liability. At the beginning of 2012, the
owner of one of the put options utilized the right to sell
shares worth the equivalent of approximately 18 percent
to the Parent Company. The purchase was completed at a
price corresponding to the amount reported as a liability
at the end of the financial year. One put option, and therefore
a liability, for approximately 31 percent of the shares
in Digi TV Plus Oy remain.
Risks and risk management
Executive management has primary responsibility for
managing the Group's risk. In general, there are three types
of risks. Business risks are normally managed by the operational
units in the Group, financial risks by the Group's central
finance department and regulatory risks by the central function,
Regulatory and Public Affairs. Group management
manages the risks in a structured, proactive manner with the
aid of a clearly documented control model, decision-making
processes and Group policies.
Business and operational risks
The most important business risk is the tough competition
on all markets, which means that the terrestrial network
could have a lower market share if more and more customers
switch to other digital TV platforms such as satellite, cable
TV and TV via broadband. The pay TV companies are therefore
focusing on providing an attractive offer to the large
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