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Annual Report 2015

Shareholder information

Annual General Meeting 25th April 2016The Annual General Meeting of Flexenclosure AB (publ) shareholders will be held at 9am on Monday 25th April 2016 at Eriksbergsgatan 10, 114 30, Stockholm, Sweden.

ParticipationTo be eligible to participate at the Annual General Meeting, shareholders must be registered in the share register maintained by Euroclear Sweden AB no later than 19th April 2016 and notify the Company of their intention to attend the Annual General Meeting by 19th April 2016.

NotificationNotification of intent to participate may be made by post, e-mail or telephone.

By post to:Göran BergströmFlexenclosure AB (publ)Eriksbergsgatan 10SE-114 30 StockholmSweden

By e-mail to [email protected] telephone to +46 (0)8 771 85 00

Notification should include name, personal identification number (corporate identity number), address and daytime telephone number.

Nominee-registered Shareholders whose shares are held in the name of a nominee must temporarily re-register the shares in their own name to be entitled to participate in and exercise their voting rights at the Meeting. Such registration must be completed with Euroclear no later than 19 April 2016. This means that the shareholder must request such registration prior to this date.

Dividend The Board of Directors proposes that no dividend be paid for the 2015 financial year.

Financial information Interim report Q1: 31 MayInterim report Q2: 31 AugustInterim report Q3: 30 November

Investor relations Göran Bergström, CFO+46 510 42 [email protected]

Corporate websitewww.flexenclosure.com

Flexenclosure Annual Report 20151

Contents

Flexenclosure at a glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2015 in brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Message from the CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

This is Flexenclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Market overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Operational review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

2015 financial review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Annual report and consolidated annual report 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Board of directors and management team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Corporate governance and internal control report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Code of business ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Health, occupational safety and environment (HSE) policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Social responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57


Flexenclosure at a glance

2

SummarySwedish high-tech manufacturing company:

• Headquartered in Stockholm, Sweden• Product development and manufacturing facilities in Vara, Sweden• Customer support teams and sales offices in Nigeria and Myanmar• Sales offices in South Africa, Malaysia and Mexico

Two products – eSite and eCentre:

• eSite is a hybrid power system for mobile networks in off-grid or bad-grid geographies, that saves diesel costs by up to 90%

• eCentre is a prefabricated data centre building that is energy efficient, fast to deploy and easy to expand

Vertically integrated from design to installation for eCentres and from design to shipping for eSites.

Bringing green energy technology to high growth economies in Africa, Asia and Latin America.

Flexenclosure at a glance

Revenue split

7 offices worldwide with 128 employees

2,900+ eSites and 36 eCentres sold in

20 countries thus far

2015 revenues of 220 MSEK

Mobile data traffic growth 2015–2021E1)

Flexenclosure OfficesFlexenclosure Deployments

LATIN AMERICA

8x

SUB-SAHARAN

15xASIA/PACIFIC

10x

37%

63%

1) Ericsson Mobility Report, November 2015


2015 in brief

3

Financial highlights Financial Highlights

MSEK 31-Dec-15 31-Dec-14

Revenue1) 220 428

– eSite 118 187

– eCentre 63 221

– Other revenue 39 20

Gross margin %2) 15% 10%

EBITDA (59) (42)

EBIT (77) (57)

Net profit / (loss) (103) (60)

Rights issue 2 101

Working capital 11 109

– Current receivable 268 313

– Current liabilities (270) (220)

– Inventory 13 16

Cash flow (3) (17)

2015 in brief

Events • Order bookings of 300 MSEK in 2015, 12% growth

compared to 2014

• Order backlog 212 MSEK going in to 2016

• eSite successes include: – 1,000 eSite order for IHS Nigeria, together with Nigerian

partner MPI – Completion of deployment of 1,168 sites in Telenor’s

network in Myanmar – Repeat eSite orders from INWI in Morocco and IGT

in Myanmar

• eCentre successes include: – eCentre orders in APAC and LATAM, so eCentres are now

on four continents – Completion of eCentre for ACS Angola, the largest

prefabricated datacenter in Africa – Repeat order from Millicom and the first Uptime Institute

tier certified prefabricated data centre for Millicom – First eCentre wins with pure colocation companies

• Established Flexenclosure Technologies Limited in Nigeria

• Increased sales efforts outside Africa during 2014–15 which has resulted in deals in Asia (Myanmar) and LATAM (Paraguay)

1) Including net revenue and other revenue. Work performed by the company for its own use and capitalized not included.2) Gross margin is calculated as Gross profit 37 MSEK (44 MSEK) divided by Total revenues 244 MSEK (444 MSEK).


Message from the CEO

4


During 2015, Flexenclosure continued its growth trend, winning new orders. Orders booked in 2015 was 300 MSEK, compared with 88 MSEK back in 2011. We have had a compound annual growth rate of 36% over the previous four years and we entered 2016 with an order backlog of 212 MSEK.

Both products made good progress in the market. We won contracts for eCentres in two new continents winning business in Paraguay and in Myanmar. With eSite, our most significant step forward was winning a project with IHS, the largest tower company in Africa. The order is for the supply of 1,000 eSites to Nigeria.

In addition to winning new orders we have been delivering on the projects won in 2014 and 2015. Regarding eCentre, at the end of 2015 we have deployed 12 data centres branded “eCentre”, 8 of which are in Africa. We pride ourselves on the fact that we have been able to deliver into the most challenging geographies, namely Chad, Angola, Sierra Leone, Mozambique, Tanzania and Cote d’Ivoire, and we see that this experience gives us competitive advantage. Our data centre in Angola is the largest pre fabricated data centre in Africa. Regarding eSite, at the end of 2015 we have deployed a total of 1,650 eSites in Africa and Myanmar. We played a major role in the launch

of Telenor’s new network in Myanmar, a venture that has proved highly successful for them.

Revenue for 2015 was 220 MSEK. This is lower than 2014 when we achieved 428 MSEK, but it is accompanied by a healthy improvement in gross margins from 10% up to 15%. This reflects improvements in our products and in our experience to deliver projects. The decline in revenue between 2014 and 2015 was expected. We took a very large data centre order at the end of 2013 which inflated revenues for 2014 and led to a revenue spike. While our order growth shows a very good trend from year to year, the timing of orders and deliveries can make our revenue profile somewhat lumpy. The company was EBITDA positive in Q4 2015.

Both our markets continue to show promise. The continued growth in data communications worldwide inevitably leads to the need for data centres, and the desire to be capital efficient lends itself to modular builds such as

David King, CEO



5

eCentre. We have taken a good step forward in the market now that we are delivering to the broader colocation (hosting) market, in addition to telecom companies. We believe that we are still at the very beginning of the data wave in Africa and we consider that there will be many opportunities in the years to come. Similarly, for eSite, the continued growth of mobile communications in developing countries, coupled with challenges in providing reliable electricity grid power, present strong opportunities for eSite.

In addition to the development of our markets and our products we have continued to build competence in the company. Over the last 18 months appointments have included a CFO, VP Sales, Head of Production, Head of Logistics, Country Manager Myanmar and a number of project managers. We continued adding to our base of engineers in both the eSite and eCentre product units, broadening our fields of expertise and our learning within the organization. I can see that we take steps forward with each new deployment.

We established a subsidiary company in Nigeria, Flexenclosure Technologies Ltd. The initial objective is to be able to provide better support to MPI our partner company in the IHS project. Flexenclosure staff in Nigeria include installation supervisors, technical support engineers, logistics experts and finance staff. As Nigeria is the largest population and largest economy in Africa we are pleased to have a firm footprint there.

Against all of the progress we have had a difficult time collecting our cash, resulting in periods of severe cash shortage that can damage the profitability of our projects in addition to supplier and customer relationships. We are not in dispute with any customers over cash owed to us, but a number of customers have been very slow payers due to of their own liquidity challenges or central bank foreign- exchange restrictions. We do not have concerns about the security of these receivables and expect to collect on all of them gradually. We have gained much experience in this matter and plan for a smoother year in 2016.

Given that Flexenclosure was not profitable for the full year of 2015 we depleted our share capital. This led to us having to create a “Control Balance Sheet” (a balance sheet for liquidation purposes) in Q4 2015.

The cash shortage and the share capital depletion led us to perform a rights issue in February 2016. The issue was

very successful and fully subscribed, enabling us to replenish the share capital already in Q1 2016.

In summary, 2015 proved to be another intense year at Flexenclosure and despite the many challenges there is no doubt that we keep moving forward. Given the continued progress in our products, the increased competence in our organisation and the demand for both mobile communica-tions and data communications in our target markets we consider the outlook to be strongly positive.

I am grateful to our customers for giving us the opportu-nity to serve them and I am proud of the work we have done. I believe that there are few companies capable of delivering so effectively in the environments where we find ourselves. Furthermore I am ever grateful to our employees for their dedication, professionalism, support of one another and a genuine desire to contribute positively within Flexenclosure and out in our markets.

Sincerely,

David KingCEO Flexenclosure AB


This is Flexenclosure

6

IntroductionFlexenclosure designs, manufactures and installs prefabricated data centres and hybrid power systems for the information and communications technology (“ICT”) industry.

Flexenclosure has two core products:

• eSite – hybrid power systems for bad-grid and off-grid base station sites that cut diesel-related costs by up to 90%

• eCentre – custom-designed prefabricated data centre buildings that are fast to deploy, energy efficient and easy to expand

Both offerings are targeted primarily towards emerging and middle-income markets in Sub-Saharan Africa, Central and South East Asia and Latin America. The Company has sold an aggregate of 2,900+ eSites and 36 eCentres across 20 countries on 4 different continents.

The Company’s systems are fully integrated, flexible, modular, factory tested for reliability, adaptable to local conditions and quick to install. eSite enables telecom opera-tors and tower companies to expand their networks cost efficiently irrespective of the condition of the electricity grid. eCentre enables telecom operators, colocation companies,

internet service companies and other enterprises to establish or to modernise their data centre facilities rapidly and in a capital efficient manner. As part of Flexenclosure’s turnkey offering, the Company provides product training, ongoing customer service and maintenance to ensure a high quality and long lifetime product.

Flexenclosure is an expanding company benefiting from a combination of the continued extension of mobile networks, the increase in global demand for data and the attractive GDP growth in its selected geographies.


The Company has won multiple industry awards during recent years



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1989 2001 2007 2008 2009 2010 2011 2012 2013 2014 2015

Telecom sheltersare made part of

Emtunga’s product portfolio

Pre-Flexenclosure buyout

The first datacentre is built

for MTN inNigeria

Flexenclosurebecomes anindependent

company The first eSite is launched

LandmarkeCentre order- MTN orders 2

1.2MWeCentres

New offices inKenya, India

and South East Asia

Total order value (SEKm)

Landmark eSiteorder - Airtelorders 252

solar systems

First large scaleeCentre order

~ SEK 50m

Largest prefab datacentre in Africa- ACS Angola

ordered 880sqmeCentre

Apollo Towersrolls out nationaltower network in

Myanmar, 836 eSites

New offices in Mexico and

Myanmar

New office inSouth Africa

eCentre is now soldon 4 continents

High volume eSiterollout in Nigeria -

1,000 units

New offices inMalaysia

and Nigeria

eCentre islaunched undercurrent brand

12 21

300269

219

73886757

HistoryFlexenclosure was established in 1989 as a separate business division under the company Emtunga Mekaniska Verkstad AB. It became an independent entity in 2007 when it was acquired by Pegroco Invest AB (publ) (“Pegroco”). In the period following the acquisition and leading up to 2011, Flexenclosure focused on developing its core products and making some initial deployments to selected customers. The subsequent years and the coming period consist of three growth stages:

2011–2013 is regarded as the “Establish” phase where the Company reorganised into two dedicated product groups and established the two brands eSite and eCentre. It built a direct sales force and a customer service organisation. The direct sales approach led to early successes and Flexenclosure sold four eSite projects to Airtel and one eCentre project to Vodacom in 2012. At this time the company was deploying one project at a time. In 2013, eSite sales were achieved with INWI in Morocco, plus a number of trials and proof of concepts. At the same time eCentre took a big step forward with two wins in Cote d’Ivoire with MTN and a large project in Angola, worth USD18 million. At the end of the Establish period the Company had deployed 400 eSites and 1 eCentre (the other wins were in backlog for 2014).

2014–2015 is regarded as the “Replicate” phase where Flexenclosure started taking significant market share with both eSite and eCentre and was deploying multiple projects

simultaneously. The big wins for eSite over this expansion period included the break-in to Myanmar with both Apollo Towers and IGT (Irrawady Green Towers), and the break-in to Nigeria selling eSites to IHS Towers through MPI. Over 1,100 eSites were deployed in Myanmar and 1,000 eSites were ordered for Nigeria. The eCentre deployments included the largest prefabricated data centre in Africa in Benfica, Angola for ACS as well as deployments in Mozambique, Tanzania, Cote d’Ivoire, Sierra Leone, Chad, Norway and Sweden. Inevitably Flexenclosure’s experience and capability grew considerably over this period.

Flexenclosure regards the next phase from 2016 onwards as the “Scale” phase, where it will deliver the current back-log; bring new innovations to market for both eSite and eCentre; capitalise on the current pipeline and the existing footprint so as to increase business volume; and use this volume along with the new innovations to expand margins.

The timeline below shows selected historical events for Flexenclosure since 1989.



8

Vision, strategy and objectivesVisionFlexenclosure’s vision is to enable wide-spread adoption of connectivity and broadband services in emerging markets, by establishing commanding market leadership for its two products, through the delivery of innovative, green, energy- efficient technology.

StrategyFlexenclosure is operating a product leadership strategy where it is delivering technically superior products that out-perform, out-live and have a lower total cost of owner-ship than competing offerings.

For both eSite and eCentre, the strategy is to grow foot-print, build market share, climb the learning curve and drive down unit costs. The Company will sell its products to customers capable of multiple repeat purchases over several years resulting in high volume product sales enhanced by recurring revenue streams from software, services and performance based contracts. It will target high growth middle-income and emerging markets.

Over time, Flexenclosure will diversify its customer base both geographically and by industry, enabling the Company to maintain a long-term increasing demand for its products.

Organisation and structure Flexenclosure is structured in two product units, eSite and eCentre and four functional areas – Sales and Marketing, Operations, Finance and Human Resources. The structure is simple and designed to support the strategy of building two successful product businesses, one in hybrid power systems and one in prefabricated data centres.

There are two specialised product units given that there is a difference between the two products and their associated technologies, requiring expertise and focus in each area. The resources in the functional units are shared across both businesses to avoid duplication.

Flexenclosure’s headquarters is located in Stockholm. The product units and Operations unit are located at the Company’s production facility in Vara, Sweden. The Opera-tions unit comprises production, project management and customer service teams. Flexenclosure’s customer service team is responsible for assisting in the sales of support services to all of our customers, providing maintenance and support as required and managing the warranty and spare parts process.The Sales and Marketing department comprises a direct sales force with a substructure covering each major market.

The company has a total of seven offices worldwide including the two in Sweden. There are customer support organisations including sales offices located in Lagos (Nigeria) and Yangon (Myanmar), and three sales offices in Johannesburg, Kuala Lumpur and Mexico City. At the end of December 2015, Flexenclosure reported 128 employees including five consultants.

The three processes at the heart of the Company’s operations are the Product Development process, the Sales process and the Order to Delivery process.

CEO

David King

CFO

Göran Bergström

eCentre and CTO

Tomas Rahkonen

eSite

Mattias Karlsson

Operations

Marcus Karlsson

Sales and Markering

Jos Baart

HR and IT

Elsie Göransson



9

Business modelProduct offeringThe cornerstone in Flexenclosure’s business model is one of technically superior products and the Company’s vast expertise in project deployment in challenging markets. This allows the Company to command a premium in its pricing and to sell its products to seleced customers capable of repeat purchases over several years.

Target markets and customersFlexenclosure focuses on emerging markets that are characterised by strong underlying marcoreconomic and demographic growth, which creates a strong demand for the Company’s products. These include Sub-Saharan Africa, Central and South East Asia, and Latin America.

Target customers include large blue chip companies active in the ICT industry. Two examples of Flexenclosure’s customers are Millicom for eCentres and IHS Towers1) for eSite. IHS is the largest tower company in Africa.

OperationsProductionProduction of both the eSite and eCentre is currently performed in-house in Flexenclosure’s factory in Vara, allowing the Company to apply stringent quality controls throughout the production process and to have regular interaction between the product development team and the production team. The factory in Vara comprises 15,800m2 of design, production, assembly and storage floor space.

ProjectsProject managementHigh quality project management is essential for the success of Flexenclosure’s projects. Thus, Flexenclosure uses two project managers for each and every project it undertakes, regardless of a project’s scale. One project manager is responsible for the production process in Vara, another project manager is dedicated in-country and is responsible for all on-site related matters such as coordinating third party civil works, managing sub-contractors and overseeing the installation.

TransportationTransportation of both eSite and eCentre products is outsourced to third party logistics companies. The Company typically signs a “dock-to-door” contract governed by the International Chamber of Commerce (ICC), whereby the responsibility for the safe and speedy delivery of the eSite or eCentre rests with the transportation company.

On-site installation and commissioning Flexenclosure is always responsible for the on-site installation and commissioning of an eCentre. The Company sends a team from Sweden and complements it with local sub- contractors in order to deploy according to the standards of time and quality that are required, while at the same time controlling costs within project budgets. Teams from Sweden vary in size from 4 to 12 staff depending on the scale and timeframe for a deployment.

Customer support and maintenanceAs part of the turnkey offering, Flexenclosure provides its customers with product training, ongoing customer service and maintenance to ensure a high quality and long lifetime product. There is a central team supporting both products from Vara. In addition, there is a dedicated local support team for the large eSite deployments in Myanmar and a second dedicated local support team for the large eSite deployments in Nigeria.

Sales and marketingFlexenclosure has had a direct sales team since 2012. Today the team comprises 14 employees and is responsible for all of the Company’s sales efforts across all markets and customer segments. The sales team is structured to cover all aspects of the sales process, from lead generation to account management.

1) Flexenclosure sells to IHS through an installation company in Nigeria called MPI.



10

Product overview

eSite is a fully factory built and tested system providing unparalleled reliability. Production, delivery and installation of the product have been proven in large scale deployments of over 1,000 sites. Given the offered high energy savings of up to 90%, eSite offers a one-to-two year payback time of intital capital expenditures.

eSite addresses a growing problem amongst mobile tele-com operators. The operators are continuously expanding

their networks, often into areas with limited or no access to reliable power infrastructure. Such operators as well as tower companies are struggling with unreliable and expensive power for their existing networks. Using diesel as the main power source for telecom base stations, or as the backup for an unreliable national electricity grid, is becoming increasingly hard to justify, both financially and with respect to diesel’s adverse impact on the environment.

eSite

eSite is a fully integrated hybrid power system for telecom sites that reduces diesel costs and CO2 emissions by up to 90%. It works as a diesel-battery hybrid, with any combination of grid or renewable energy sources and diesel generator backup, to provide reliable, cost efficient power in areas where electricity is either unreliable or unavailable.

How eSite works

Solar energyeSite makes maximum use of sunlight by using advanced charging algorithms and energy source prioritisation with a solar controller with MPPT (Maximum Power Point Tracking) and 99% efficiency.

Unreliable gridAn unreliable power grid at the site can efficiently be used as a power source even if the grid power varies in both voltage and phase. Diriflex Grid Manager controls it all and makes sure uptime is never jeopardised.

GeneratoreSite minimises diesel consumption by using the generator at maximum efficiency to change the batteries quickly. When renewable energy sources are also available, the generator is only used as a backup.

Other sourcesWe have extensive experience with wind turbine technology for telecom applications and can also add modules for other renewable energy sources, such as biogas.

Battery bankeSite’s adaptive charging algorithms minimise generator use regardless of whether the eSite is being run as a diesel-battery hybrid or with other energy sources. The Diriflex controlled charging strategy ensures longest possible battery life.

DiriflexThe brain of eSite, Diriflex optimises the use of batteries and all energy sources to lower diesel consumption, while prolonging the lifespan of the batteries and other components.

eManagereManager drives substantial performance improvements cost savings through actively monitoring, analysing and optimising the performance of an entire network of eSites.



11

CommunityAvailable as an optional feature, eSite can be configured to supply electricity to the local community for mobile phone charging stations, water pumps, lighting, schools or even to power households.

UserDiriflex controls the energy output to provide the required power supply for the telecom equipment, whether it is for a single user site or a multi-tenant shared environment.



12

eCentre is built and tested in a controlled factory environment prior to site delivery. This guarantees the highest possible quality and reliability. Adaptable to local conditions and proven worldwide, an eCentre can be used for several purposes as determined by customer requirements, including a data centre, energy centre, meeting rooms, staging areas and network operatinons centre (NOC). Additional elements of an eCentre can include a telecom tower, gensets or a substation for high-voltage power grid, all of which are delivered as a complete turnkey solution.

eCentre is designed for all data centre tier levels (1–4), where tier levels are the standard methodology to define a data centre’s redundancy-level as defined by the Uptime Institute. And with eCentre being fully customisable, it permits different parts of the building to comply with different tier levels (e.g. a hosting service might have a commercial requirement of a higher Tier level than the rest of the facility).

Flexenclosure has sold 36 data centres to date. It has presence on four continents and has built the largest prefab-ricated data centre in Africa.

Prefabricated modular data centre – energy efficient, reducing costs and environmental impact

eCentre value proposition

Capital efficient expansion Gradual modular scaling to match future needs, limiting day one CAPEX.

Capacity in terms of eCentre modules

Dat

a n

eed

Turnkey solution offers predictablecost and project duration.

Prefabricated and factory builtminimises project management and civil work on site.

Custom design for every customerwith size ranging from 50 –1,000m2.

Energy savings up to 25%compared to traditional solutions.

Predictability withprefabrication, enabling the

following guarantees:

Unparalleled cost control

High quality product

Quick and on time,circa 3x faster than

standard brick and mortar

Highly energy efficient

eCentre guarantees

eCentre

eCentre is a prefabricated, modular and custom designed building (50–1,000m2) that houses and powers data and telecom equipment. It is optimised for energy efficiency and low total cost of ownership (TCO). eCentre enables data centres to be deployed in a capital efficient, scalable manner and into any geography with full predictability regarding time, quality and budget.



13


Market overview

14

Introduction Flexenclosure develops, manufactures, sells and delivers products into two specific markets – hybrid power systems for mobile telecom network base stations in off-grid and bad-grid locations (eSite), and prefabricated modular data centres (eCentre). Both offerings are targeted primarily towards emerging and middle-income markets in Sub-Saharan Africa, Central and South East Asia, and Latin America.

Flexenclosure estimates that growth in its target markets will be driven by four underlying trends:

• Strong economic and demographic trends, supporting high growth in emerging markets

• Increase in mobile and smartphone penetration, data usage and internet penetration in emerging markets

• Continued major investments in telecom coverage across rural areas, while deployment of power grid infrastructure is lagging and many emerging markets still suffer from the lack of an uninterrupted power supply

• Major investments in bandwidth capacity while deployment of colocation data centres is lagging

Market overview


Market overview

15

With strong technology trends across emerging markets as well as significant industry segment drivers, the market opportunity for both of the Company’s products is still largely untapped.

The addressable market potential for eSite in its current application as a power management system for off-grid and bad-grid base stations is in excess of USD 25 billion1) and growing by 16% by 2020.2) Beyond mobile networks, eSite can be used for ATMs for banks, light industry, agriculture and community applications in the future. The total addressable market comprises all applications for hybrid power systems where there is a need for 24/7 power and the power load requirement is relatively low (i.e. less than 12kW).

Research reports estimate that there are >1,000,000 off-grid and bad-grid base stations, with approximately 90% of them using costly diesel generators at great expense to the operators and the environment. This number is growing annually as mobile network operators expand their coverage.2)

Global mobile data traffic will increase eightfold from 2015 to 2020 with the Middle East and Africa, and Asia as the leading regions with a CAGR of 71% and 54% respectively from 2015 to 2020.

The colocation data centre market is expected to reach USD36 billion worldwide by the end of 2017, growing with 26% CAGR from its 2015 market size of USD22.8 billion, according to a report from 451 Research. The market remains fragmented, with the majority of current revenue (about 75%) derived form local providers with less than USD500 million in annualised colocation revenue.3)

Of the entire colocation data centre market, the global market size for prefabricated data centre products for 2014 was estimated at USD1.5 billion, growing to USD4 billion in 2018 with a 30% estimated CAGR (2013–2018).4)

Global # of bad and off-grid towers 2014 Global prefabricated modular data centre revenue forecast 2013–2018E

Off-grid towers

Bad-grid towers701,000

320,100

Total 1m+1,064

1,543

2,175

2,726

3,320

3,958USDm

1,000

2,000

3,000

4,000

201820172016201520142013

CAGR 30%

1) The market size is estimated by the management of the Company and is based on the number of base stations in the area without powerlines or unreliable powerlines (1 000 000) as well as an average price per power station system of 25 000 USD.

2) GSMA: Green Power for Mobile December 20143) http://www.datacenterknowledge.com/archives/2015/04/17/colocation-data-center-market-to-reach-36b-by-2017/4) 451 Research, Prefabricated Modular Datacenters, May 2015


Market overview

16

Emerging marketsEconomic and demographic drivers

Africa, Asia, Latin America and the Caribbean currently represent 85% of the world’s population. Between now and 2050, over 90% of the population growth is expected to take place in Africa and Asia.1)

The young population is expected to drive economic development and lead the emergence of the middle class,

thereby bringing these markets from being export oriented producers to becoming more consumer-driven markets.2) GDP per capita growth in developed markets is clearly outpaced by the development in both African and Asian countries.3)

GDP per capita growth 2010–20193)

2010–2014

2015E–2019E

2%

7%8% 8% 8%

1%

14%

8%

3%

8%

3%

5%

3% 3% 3%2%

3%4%

Ghana Kenya Nigeria India Indonesia Myanmar Germany Sweden UnitedStates

Annual population growth 2010–20143)

2.4%2.7% 2.7%

1.3% 1.3%

0.8%

–0.3%

0.8% 0.8%

GermanyGhana Kenya Nigeria India Indonesia Myanmar Sweden United

States

Median age of population 2015 (years)3)

2119 18

2730

28

47

4138

Ghana Kenya Nigeria India Indonesia Myanmar Germany Sweden UnitedStates

Target market

1) UN World Population Prospects: The 2015 Revision, 20152) McKinsey Global insights, 20123) The World Bank database World Development Indicators, 2015


Market overview

17

Technology trendsProjections show that between 2015 and 2021, mobile data traffic will grow 15 times in Sub-Saharan Africa and 10 times in Asia Pacific, which is significantly faster than the global average. With improvements in international connectivity driven by the upgrade of mobile data networks and expansion of fiber optic networks, the prices of data subscriptions will decrease and in turn encourage even more mobile broadband subscriptions.1) This will continue to drive the Internet penetration rate which has already seen a rapid increase coming from very low levels in emerging markets.

In this part of the world, the evolution of telecommunica-tions infrastructure has skipped a few steps compared to the developed world; people use mobile devices for online activities that others normally perform on laptops or desktop

computers, as the technology overcomes weak or non- existent landline infrastructure. As the need for telecom services continues to drive mobile penetration in emerging markets and thus expedite the growth in size of operators’ networks, so the need for reliable energy becomes more crucial and a key component in operators’ decision-making on whether to build coverage in the more remote areas. Alternative energy solutions based on renewable sources and energy optimisation products such as Flexenclosure’s eSite offer telecom operators and tower companies a powerful way to realise immediate and significant cost reductions. Energy efficient solutions based on renewable energy are now established as the most viable alternative to diesel generators in areas without access to a reliable power grid.

1) Ericsson Mobility Report for Sub-Saharan Africa, Nov 20152) Developed markets penetration 2014: SWE (93%), USA (87%), GER (86%)3) Emerging markets penetration 2014: ZAF (49%), KEN (43%), NIG (43%), GH (19%), IND (18%), IDN (17%), MMR (2%)

Technology usage in Sub-Saharan Africa 2010–2021

Monthly mobiledata traffic(PetaBytes)

Smartphonesubscriptions

Basic phonesubscriptions

2.2

329m

23m

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

693m

318m

Internet penetration 2004–2014

Stagnated penetrationin developed market2)

High penetrationgrowth in

emerging markets3)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

100%

80%

60%

40%

20%

0%


Market overview

18

Hybrid power systemsDefinitionBase stationsBase stations, also referred to as towers or telecom towers due to their construct, use radio signals to connect mobile devices to the network, enabling subscribers to communicate by voice calls, text messages and e-mails, to send pictures, browse the Internet, watch TV and download information. Base stations are a necessary component of an operator’s network and comprise three main elements:

• An antenna (or several antennas) to send and receive radio signals;

• a supporting structure such as a mast or building, on which the antenna is mounted; and

• equipment to power the base station and radio equipment, which is housed in protective cabinets.

Hybrid power systemsHybrid power systems harvest and manage the use of energy from different sources in order to provide a steady, balanced and economic power supply in geographies that have limited or no connection to an electricity grid.

A typical hybrid power system combines two or more energy sources using renewable energy technologies, such as solar panels or wind turbines, and conventional technologies, usually diesel generators. Base stations in bad-grid and off-grid locations use diesel generators as the standard supplementary power source. The hybrid power system includes power electronics, electricity storage batteries and a controller that governs the charging strategy for the batteries and the selection of power source. These systems can lower energy costs and CO

2 emissions significantly.


Market overview

19

1) International Energy Agency: Africa Energy Outlook, 2014

Important drivers for increased use of hybrid power systemsEmergence of additional market segmentsInitially, the base stations were solely the domain of the mobile network operators (“MNOs”), but in recent years we have seen the arrival of two new segments, namely Tower Companies (”TowerCos”) and Energy Service Companies (”ESCOs”). The TowerCos purchase and lease back the tower sites to mobile operators and charge operators a monthly rental fee for tower and power. The ESCOs are mini-grid providers and sell MNOs electricity either at a per kW price, or as a fixed monthly fee based on the power load. The nature of their businesses means that both of the new segments are highly focussed on driving down the energy cost component of their site OPEX. It follows that the market for hybrid power systems is increasingly active. TowerCos seek to make progress with their newly acquired tower portfolios, mobile network operators realise they are not going to sell all of their towers and need to cut costs in order to expand into rural areas and Energy Service Companies (”ESCOs”) seek to establish contracts with TowerCos and telecom operators that can create for them long term profitable recurring revenues. In all of these endeavours there is a compelling need to cut diesel costs.

Electricity infrastructure is lagging telecom infrastructure in emerging marketsIn developed markets, tower networks are connected to the national grid using batteries as a backup power source in case of a temporary power outage. In emerging markets however, the national power grid is in many cases unreliable or non-existent, forcing tower networks to rely on alternative power sources (e.g. diesel powered generators, wind turbines, batteries, etc.) as either their main or backup power source.

In Sub-Saharan Africa, the aggregated private participation investments in telecom have increased rapidly since 2000, while the investments in energy infrastructure have been lagging. According to the International Energy Agency, Sub-Saharan Africa has more people living without access to electricity than any other world region – more than 620 million people, and nearly half of the global total.

>75%50% to 75%

25% to 49%<25%

% of people withoutaccess to electricity1)


Market overview

20

Major investments in telecom coverage ...

Aggregated telecom PP investments in Sub-Saharan Africa (2000–2014)1)

… while energy grid investments are lagging

Aggregated energy PP investments in Sub-Saharan Africa (2000–2014)1)

USDbn USDbn

+$85bn

$106bn

$21bn

120

100

80

60

40

20

0

120

100

80

60

40

20

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Need for reliable finacially justifiable green power solutions as 90% of bad-grid and off-grid base stations currently use diesel generators 2) 3)

The need for diesel generators in undeveloped areas around the world stems from the fact that there is no grid available at all, or power outages may last for several hours each day such that battery backup does not suffice. For example, the GSMA reports that due to Nigeria’s poor grid power supply,

over 81% of its on-grid sites suffer power outages for up to 6 hours a day.3) The same report estimates that there are currently over one million towers found in bad grid and off grid locations, increasing by almost 160,000 towers by 2020, in Sub-Saharan Africa, South and East Asia, the Pacific, Latin Amarica, the Caribbean, the Middle East and North Africa.

2014

Off-grid Bad-grid TOTAL

Sub-Saharan Africa 145,100 84,300 229,400

South Asia 81,800 176,500 258,300

East Asia and Pacific 34,800 105,400 140,200

Latin America and Caribbean 58,400 265,600 324,000

Middle East and North Africa 0 69,200 69,200

TOTAL 320,100 701,000 1,021,100

Note: PP = Private Participation

1) Source: The World Bank database2) GSMA: Green Power for Mobile December 20143) Off-grid implies the telecom towers are either completely disconnected from the grid, or receives no electricity from the grid.

Towers that face more than six hours of power outage per day, on average, are classified as bad-grid.

Sub-Saharan Africa

South Asia

East Asia and Pacific

LACA

Middle East and North Africa

44,00022,200

12,90018,300

8,500

4,10022,800

19,600

7,100

+159,500new towers

by 2020

Off-grid towers Bad-grid towers


Market overview

21

1) GSMA: Green Power for Mobile December 2014

The largest OPEX for tower companies is power and fuel The requirement for diesel generators on so many of these sites comes at a significant cost. One estimate shows that for tower companies – a market segment very active in owning base stations – power and fuel costs can constitute

up to as much as 63% of their annual operating costs.1) Given that site profitability is at the core of their business models, TowerCos place significant emphasis on managing the reduction of site operating costs.

TowerCos’ annual operating costs

OPEXsplit 63% 20% 9% 8%

Power and fuel

Other

Rent

Employee benefits

African telecom towers owned by TowerCos

Total # of towers

120k

180k

# of TowerCo owned towers

2015201420132012201120102009

200k

160k

120k

80k

40k

0k0k

85k47% of

telecom towersin 2015 ownedby TowerCos

The GSMA supports that if more towers were to rely on a combination of on-grid and renewable energy sources, not only would the reliability of networks improve, but the costs associated with running them, would be reduced

substantially. Clearly, this is over and above any positive benefits to the global environment from the reduction of CO2 emissions.


Market overview

22

Traditional / bricks and mortar

• Fixed, bricks and mortar building• Requires planning permission• Costly to build• Long lead-time to construct• Not easily scalable due to defined space

Containerised

• Movable, standard shipping container• Planning permission depends on locality• Short lead-time to construct and transport• Scalable with addition of more containers but

inefficient use of space as the number of containers increases

• Standard interiors not customisable

Prefabricated / modular

• Movable custom made modules• Short lead-time to construct and transport• Customised floor plan• Highly scalable, repeatable design, fitted in

Lego-style• Enables capital efficient expansion

Data centresDefinitionData centres are facilities that provide a clean, cool and in every other manner suitable environment to house servers, network and IT equipment. BroadGroup, a leading data centre consulting practice, suggests that a data centre operator’s focus is to ensure minimum downtime on servers and maximum connectivity to networks.1) This includes high levels of fault tolerance and redundancy through the use of back-up generators and uninterruptible power supply systems. Data centres also have state-of-the-art physical security, not only to prevent unauthorised access, but also for fire detection and suppression.

Prefabricated data centresTraditionally, data centres were built within existing buildings, e.g. as a dedicated room or dedicated floor, for the purpose of hosting the servers and IT equipment of the tenant company or companies. More recently, as the quantity of

computing and data storage has grown exponentially, bespoke bricks and mortar data centres have increasingly been constructed as stand-alone structures, often located in suburbs or the outskirts of large cities.

As a result of the cost and time required to build a bricks and mortar data centre, two alternative solutions have emerged in recent years, particularly for use in emerging markets. The first is the containerised data centre, which is, as its name suggests, a fixed-size, standard shipping container that is fitted with data centre equipment and is transported to a desired location. The second is the prefabricated modular data centre, such as Flexenclosure’s eCentre. The primary advantages that prefabricated modular data centres have over a container solution are the quality of the build and the flexibility of the floor plan. The three types of data centre described herein are illustrated in the table below.

1) http://www.broad-group.com/


Market overview

23

Important drivers for increased use of data centresMajor investments in bandwidth capacity while deployment of colocation data centres is lagging

Bandwidth capacity is rapidly increasing as global mobile data traffic continues to grow with strong numbers, 75% estimated for 2015. Growth rates varied widely by region, with Middle East and Africa having the highest growth rate (117%) followed by Asia Pacific (83%), Latin America

(73%), and Central and Eastern Europe (71%). Deployment of colocation data centres is however lagging compared to that growth, especially so in Africa where the number of colocation data centres continues to be very low.

Market size (mTB/month)2015 2020E 2015–2020E CAGR

0.3 4.3 71%

1.6 13.7 54%

0.3 2.1 50%

0.5 4.4 52%

0.6 3.2 42%

0.4 2.8 45%

Middle East and Africa

Asia Pacific

Latin America

Central and Eastern Europe

North America

Western Europe

117%

83%

73%

71%

55%

52%

Mobile data traffic growth by region 2015

Target markets

Graphic by Stephen Song

Muanda, DRC

SwakopmundNamibia

Bata, Equatorial Guinea

Sao Tome

and Principe

KarachiPakistan

ColomboSriLanka

ChennaiIndia

Anna

baAl

geria

Bize

rteTu

nisi

a

PalermoItaly

TripoliLebanon

SuezEgyptCairo

Egypt

AlexandriaEgypt

Trip

oli

Liby

a

Oman

ToliaraMadagascar

Monaco

CasablancaMorocco

MoroniComores

Mayotte

Yzerfontein

Sangano,Angola

Escravos, Nigeria

JeddahSaudi Arabia

Chipiona Spain

MumbaiIndia

Djibouti

Port SudanSudan

FujairahUnited Arab Emirates

CochinIndia

MogadishuSomalia

Altavista

Canary Islands

AsilahMaroc

SesimbraPortugal

Dakar,

Sen

egal

Douala, Cameroun

Lagos, Nigeria

Cotonou, Benin

Accr

a,G

hana

Abija

n,Iv

ory

Coas

t

Dar Es SalaamTanzania

Cacuaco,Angola

Libreville, Gabon

MassiwaEritrea

Kenya

TamataveMadagascar

MaputoMozambique

Mtunzini

Melkbosstrand

MarseilleFrance

St PaulReunion

Baie duJacobet,Mauritius

LondonEngland

Pointe Noir, Congo

Nouak

chott

, Mau

ritania

The G

ambia

Conak

rie, G

uinea

Freetow

n, Sier

ra Le

one

Monro

via, L

iberia

Lom

é, To

go

Chennai

Anna

baAl

gérie

Bize

rteTu

nisi

e

Palermo

AlexandrieEgypt

Muanda, DRC

SwakopmundNamibia


Sao Tome

and Principe

KarachiPakistan

ColomboSriLanka

ChennaiIndia

Anna

baAl

geria

Bize

rteTu

nisi

a

PalermoItaly

TripoliLebanon

SuezEgyptCairo

Egypt

AlexandriaEgypt

Trip

oli

Liby

a

Oman

ToliaraMadagascar

Monaco

CasablancaMorocco

MoroniComores

Mayotte

Seychelles

Yzerfontein

Sangano,Angola

to Fortaleza Brazil

Escravos, Nigeria

Kribi, Cameroun

JeddahSaudi Arabia

Chipiona Spain

MumbaiIndia

Djibouti

Port SudanSudan


CochinIndia

MogadishuSomalia

Altavista

Canary Islands

AsilahMaroc

SesimbraPortugal

Dakar,

Sen

egal

Douala, Cameroun

Lagos, Nigeria

Cotonou, Benin

Accr

a,G

hana

Abija

n,Iv

ory

Coas

t


Cacuaco,Angola

Libreville, Gabon

MassiwaEritrea

Kenya

TamataveMadagascar

MaputoMozambique

Mtunzini

Melkbosstrand

MarseilleFrance

St PaulReunion


LondonEngland

Pointe Noir, Congo

VigoSpain

Nouak

chott

, Mau

ritania

The G

ambia

Conak

rie, G

uinea

Freetow

n, Sier

ra Le

one

Monro

via, L

iberia

Lom

é, To

go

Cape Verde

Chennai

Anna

baAl

gérie

Bize

rteTu

nisi

e

Palermo

AlexandrieEgypt

Kwa Ibo, Nigeria

African Undersea Cables (2009) African Undersea Cables (2018)

Muanda, DRC

SwakopmundNamibia


Sao Tome

and Principe

KarachiPakistan

ColomboSriLanka

ChennaiIndia

Anna

baAl

geria

Bize

rteTu

nisi

a

PalermoItaly

TripoliLebanon

SuezEgyptCairo

Egypt

AlexandriaEgypt

Trip

oli

Liby

a

Oman

ToliaraMadagascar

Monaco

CasablancaMorocco

MoroniComores

Mayotte

Yzerfontein

Sangano,Angola

Escravos, Nigeria

JeddahSaudi Arabia

Chipiona Spain

MumbaiIndia

Djibouti

Port SudanSudan


CochinIndia

MogadishuSomalia

Altavista

Canary Islands

AsilahMaroc

SesimbraPortugal

Dakar,

Sen

egal

Douala, Cameroun

Lagos, Nigeria

Cotonou, Benin

Accr

a,G

hana

Abija

n,Iv

ory

Coas

t


Cacuaco,Angola

Libreville, Gabon

MassiwaEritrea

Kenya

TamataveMadagascar

MaputoMozambique

Mtunzini

Melkbosstrand

MarseilleFrance

St PaulReunion


LondonEngland

Pointe Noir, Congo

Nouak

chott

, Mau

ritania

The G

ambia

Conak

rie, G

uinea

Freetow

n, Sier

ra Le

one

Monro

via, L

iberia

Lom

é, To

go

Chennai

Anna

baAl

gérie

Bize

rteTu

nisi

e

Palermo

AlexandrieEgypt

Muanda, DRC

SwakopmundNamibia


Sao Tome

and Principe

KarachiPakistan

ColomboSriLanka

ChennaiIndia

Anna

baAl

geria

Bize

rteTu

nisi

a

PalermoItaly

TripoliLebanon

SuezEgyptCairo

Egypt

AlexandriaEgypt

Trip

oli

Liby

a

Oman

ToliaraMadagascar

Monaco

CasablancaMorocco

MoroniComores

Mayotte

Seychelles

Yzerfontein

Sangano,Angola

to Fortaleza Brazil

Escravos, Nigeria

Kribi, Cameroun

JeddahSaudi Arabia

Chipiona Spain

MumbaiIndia

Djibouti

Port SudanSudan


CochinIndia

MogadishuSomalia

Altavista

Canary Islands

AsilahMaroc

SesimbraPortugal

Dakar,

Sen

egal

Douala, Cameroun

Lagos, Nigeria

Cotonou, Benin

Accr

a,G

hana

Abija

n,Iv

ory

Coas

t


Cacuaco,Angola

Libreville, Gabon

MassiwaEritrea

Kenya

TamataveMadagascar

MaputoMozambique

Mtunzini

Melkbosstrand

MarseilleFrance

St PaulReunion


LondonEngland

Pointe Noir, Congo

VigoSpain

Nouak

chott

, Mau

ritania

The G

ambia

Conak

rie, G

uinea

Freetow

n, Sier

ra Le

one

Monro

via, L

iberia

Lom

é, To

go

Cape Verde

Chennai

Anna

baAl

gérie

Bize

rteTu

nisi

e

Palermo

AlexandrieEgypt

Kwa Ibo, Nigeria

African Undersea Cables (2009) African Undersea Cables (2018)African undersea cables 2009 African undersea cables 2016


Market overview

24

Major investments in bandwidth capacity ...

Construction cost of new submarine cables by region (2012–2016)

… while deployment of colocation data centres is lagging

# of colocation data centres by region (2016)

188 173

107 99

31 11

50045040035030025020015010050

0

Trans-Pacific

Trans-Atlantic

Other

Oceania

Middle East

Mediterranean

LATAM & Caribbean

Europe/Asia

Asia

Africa

$550m

NorthAmerica

Europe Oceania Asia LatinAmerica

MiddleEast

NorthAfrica,

Mauritius &South Africa

Sub-SaharanAfrica

$550m

$640m

$870m

$1,040m

$1,773m

$1,800m

$1,768m

$1,657mNote: Asia excl. China, Hong Kong, Japan: 29;Oceania excl. Austrailia, New Zealand: 65

$190m

1,3701,674

Given the speed of deployment and the ease of capital efficient expansion, the expectation is that prefabricated data centres will take an increasing share of the data centre market. It is even suggested that there will come a time when modular builds are the default option.1) The market

size outlook is positive with an estimated CAGR of 30% (2013–2018), reaching USD4 billion in 2018.1) Currently, the supply side of the market for prefabricated data centres is considered to be immature and quite fragmented with no dominant player.1)

1) 451 Research, Prefabricated Modular Datacenters, May 2015


Operational review

25

eSite Orders to dateFlexenclosure has sold 2,900+ (2,700+ by the end of 2015), and deployed 1,700+ eSites across Africa and Asia. The Company’s historic eSite sales are listed below.

Year CustomerCountry of

deployment Units sold

2011 Airtel Nigeria 252

2012 Airtel Chad 51

2012 Airtel Ghana 7

2012 Airtel Ghana 7

2012 Airtel Tanzania 91

2012 GDS Swaziland 2

2013 Vodacom Tanzania 3

2013 INWI Morocco 30

2013 HTN Nigeria 5

2014 Apollo Towers Myanmar 547

2014 Apollo Towers Myanmar 289

Year CustomerCountry of

deployment Units sold

2014 IHS Nigeria 1

2015 IGT Myanmar 225

2015 INWI Morocco 39

2015 IHS Nigeria 1,000

2015 Seal Towers Nigeria 1

2015 Energy Vision Gabon 32

2015 MTN South Sudan 5

2015 Kambeny Mocambique 28

2015 IGT Myanmar 97

2016 OCK Myanmar 80

2016 IHS Nigeria 200

Operational review


Operational review

26

Case study

Apollo Towers and Telenor

• Leading Myanmar tower-sharing company

• Two year history with Flexenclosure and counting

• Installed eSites: 836

• Full telecommunication rollout in Myanmar. Goal to increase network coverage from 10% of the population to over 80% by 2018

Myanmar, 2014–2015

• Deployment of 836 eSites across Myanmar in extreme conditions – bad-grid to off-grid locations with inadequate road infrastructure

• Producing up to 70 eSites per week with average lead time from construction to installed unit of 16 weeks, total project duration was only 18 months

“We were under enormous pressure to meet an extremely tight launch deadline, and given Myanmar’s limited power and transport infrastructure, the practical challenges of achieving this cannot be overstated. However, Flexenclosure’s rollout capability, along with eSite’s operational performance and efficient realtime monitoring allowed us to meet our own commitment to Telenor.”

Philippe Luxcey, CEO, Apollo Towers


Operational review

27

eCentreOrders to dateTo date, Flexenclosure has sold 36 eCentres and deployed 35 across Africa, Asia, the Caribbean and Europe. The Company’s historic eCentre deployments are listed below.

Year Customer Country City

2001 MTN Nigeria Ikeja

2001 MTN Nigeria Abuja

2001 MTN Nigeria Port Harcourt

2001 MTN Cameroon Yaoundé

2002 MTN Nigeria Lagos

2002 MTN Nigeria Kano

2002 MTN Nigeria Asaba

2003 MTN Nigeria Ibadan

2003 MTN Nigeria Apapa

2004 MTN Nigeria Benin City

2005 Digicel Trinidad Chaguanas

2006 Digicel French Guyana Cayenne

2008 MTN Nigeria Apapa

2008 MTN Nigeria Owerri

2008 MTN Nigeria Enugu

2008 MTN Nigeria Kaduna

2009 MTN Ghana Accra

2009 MTN Ghana Kumasi

Year Customer Country City

2010 MTN Ghana Accra

2010 Zain Sudan Juba

2011 Zain Sudan Jabra

2012 Zain Sudan Um Haraz

2012 Zain Sudan Omdurman

2013 Vodacom Mozambique Maputo

2014 Vodacom Mozambique Matola

2014 MTN Cote d'Ivoire Yopuongon

2014 ACS Angola Luanda

2014 MTN Cote d'Ivoire Bingerville

2014 Vodacom Tanzania Dar es Salaam

2014 Airtel Sierra Leone Freetown

2014 Telenor (TSBc) Norway Hønefoss

2014 Millicom Chad N’Djamena

2014 Enaco Sweden Mobile

2015 Millicom Paraguay Asunción

2015 Tops Sweden Not public

2015 Burst Networks Myanmar Yangon


Operational review

28

Case study

ACS Angola

Angola Comunicações e Sistemas (ACS) is a leading provider of IT solutions and corporate network connectivity in Angola. Its core business is the provision of private networks and hosted data and Internet services with a key focus on the banking sector.

The ChallengeWith its business growing fast, ACS was outgrowing its main data centre facility in the centre of the Angolan capital Luanda.

• ACS identified a large green-field site for a new data centre in Benfica – the rapidly expanding new business and commercial area of Luanda.

• However, the site had absolutely no existing infrastructure – water, power, telecoms connectivity, not even an access road.

The SolutionFlexenclosure’s prefabricated eCentre data centre was selected as the ideal solution.

• Flexenclosure performed a detailed design study then took on full ownership of the project including the data centre, site layout, civil works, telecom tower, VSAT farm, NOC, office space, personnel facilities and site infrastructure.

• The result is an 880sqm floor space 1.25MW data centre designed to sit effortlessly within a beautifully landscaped site – a facility that will secure ACS’s future as a leading player in the Angolan ICT services market.

“We have built the most advanced telecommunications facility in Angola and it positions ACS to take an undisputed leading position in the delivery of mission critical voice and data communications services to the corporate market. I am very proud of what ACS and Flexenclosure have achieved together.”

Carlos Carvalho, Chief Technology Officer, Angola Comunicações e Sistemas


2015 financial review

29

Intro2015 was an important year for Flexenclosure with an increasing order intake. The total orders taken amounts to 300 MSEK (269 MSEK). Flexenclosure manage to be EBITDA- positive during the fourth quarter of the year, although not throughout the whole year.

RevenuesTotal revenues during 2015 amounted to 244 MSEK (445 MSEK) whereof the revenues generated from the operations amounted to 181 MSEK (408 MSEK), other revenues was 39 MSEK (20 MSEK), primarily currency gains, and finally, the revenues from work performed by the company for its own use, amounted to 24 MSEK (17 MSEK) (not included in revenue shown in the multi-year review). The decrease in total revenue was expected by the company, due to the fact that a large order for data centre was taken end of 2013 affecting the revenues in 2014 positively.

Gross marginDuring 2015 the company had an increase in gross margin. The increase was from 10% in 2014 to 15% in 2015. The change in gross margin is an effect of the companies continuously learnings accompanied by the more effective way of executing deliveries.

Cost of goods soldCost of goods sold amounted to 207 MSEK (400 MSEK). The decrease in COGS was expected by the company, due to the fact that the costs in 2014 was affected by a large order taken end of 2013 (in the same way the revenues was affected).

Operating expensesDuring 2015 the operating expenses amounted to 96 MSEK (86 MSEK), divided in 28 MSEK (38 MSEK) in cost of the operation and 68 MSEK (48 MSEK) in cost of the personnel. The increase of personnel cost was driven by a low utilization of personnel working in projects. This cost was reported as personnel costs instead of cost of goods sold.

ResultThe net result for 2015 amounted to –103 MSEK (–60 MSEK). The decrease in net result was mainly an effect of a weaker backlog of orders going in to 2015, and few orders taken in the first quarter 2015. But the total order intake was good at the end of 2015 and the company had a strong backlog which amounted to 212 MSEK going in to 2016.

Balance sheetTotal amount of assets was at the end of 2015 330 MSEK (374 MSEK). The decrease in short term claims is mostly depending on the collection of receivables throughout the year. Regarding the payables there has been an increase in short term debt which is mostly related to the increase of production and purchases made at end of 2015.

Given that Flexenclosure has not been profitable for a number of years and was not profitable for the full year of 2015, the share capital in the company was depleted. This led to Flexenclosure creating a balance sheet for liquidation purposes in November 2015. The cash shortage and the share capital depletion forced the company to perform a rights issue in February 2016, which replenished the share capital. Flexenclosure will present a new balance sheet for liquidation purpose showing restored share capital at the annual general meeting on 25 April 2016.

The accumulated losses (398 MSEK) has been building a deferred tax asset which amounts to almost 88 MSEK at the year end. The company has taken the decision not to recognize this assets presently but will consider to activate the tax losses in line with the company’s improved performance.

Cash flow2015’s cash flow amounted to –3 MSEK (–17 MSEK). The main reason for a better cash flow 2015 in comparison to 2014 is correlating to the more efficient cash collection and decrease in accounts receivable. The cash in bank amount was lower going out of 2015 (0.5 MSEK) compared to 2014 (4 MSEK).

2015 financial review


Annual report and consolidated annual report 2015

30

Annual report and consolidated annual report 2015Flexenclosure AB Org. nr 556708-2028

The board of directors and the managing director for Flexenclosure AB hereby submits its consolitated financial statements and parent company financial statements for the period 2015

These financial statements include Page

Administration report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Change in equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Cash flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Notes to the financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

All amounts are in tousand kr (kSEK) unless otherwise stated.



31

Administration reportThe company’s business activitiesThe company develops, manufactures, markets, sells and services hybrid power systems (eSite) and prefabricated data centres (eCentre) for the ICT industry. Flexenclosure’s products are built in its own factory in Vara, and installed on-site at customers’ premises. The company has delivered systems to customers in more than 50 countries. The eSite uses renewable energy and shows that a transition to green energy is an effective way of reducing operating costs.

Important circumstances and significant eventsOrdersDuring 2015, Flexenclosure continued its growth trend in winning new orders. Orders booked in 2015 was 300 MSEK (269 MSEK last year). The Company has had a compound annual growth rate of 36% over the previous four years.

Both eSite and eCentre made good progress in the market. Flexenclosure won contracts for eCentres in two new continents winning business in Paraguay and Myanmar. In eSite, the most significant step forward was winning a project with one of the largest tower companies in Africa. The order won is for the supply of 1,000 eSites to Nigeria.

OperationsIn addition to winning new orders Flexenclosure has been delivering on the projects won in 2014 and 2015. Regarding eCentre, the company has been able to deliver into the most challenging geographies, namely Chad, Angola, Sierra Leone, Mozambique, Tanzania and Ivory Coast, and it is apparent that this experience gives Flexenclosure competitive advantage going forward. The data centre in Angola is the largest pre-fabricated data centre in Africa. Regarding eSite, at the end of 2015 Flexenclosure has deployed a total of 1,650 eSites in Africa and Myanmar. Flexenclosure played a major role in the launch of Telenor’s new network in Myanmar.

In addition to the development of the company’s markets and products Flexenclosure has continued to build competence in the company. Over the last 12 months appointments have included, a VP Sales, Head of Production, Head of Logistics, Country Manager Myanmar and a number of project managers.

The company established a subsidiary company in Nigeria, Flexenclosure Technologies Ltd. The initial objective is to be able to provide better support to our customer in Nigeria. Flexenclosure staff in Nigeria includes installation supervisors, technical support engineers, logistics experts and finance staff. As Nigeria has the largest population and largest economy in Africa, Flexenclosure see a possibility to strengthen its footprint in the country.

FinancialRevenues for 2015 are 220 MSEK. This is lower than 2014 when the company achieved 428 MSEK, but it is accompa-nied by a healthy improvement in gross margin from 10% up to 15%. This reflects improvements in Flexenclosure’s products and in experience to deliver projects. The decline in revenue between 2014 and 2015 was expected because Flexenclosure took a very large data centre order at the end of 2013 which inflated revenues for 2014 and led to a revenue spike. While the order growth shows a very good trend from year to year, the timing of orders and deliveries can make the revenue profile somewhat lumpy. The company was EBITDA positive in Q4 2015, but not for the whole year.

Flexenclosure has had a difficult time collecting cash, resulting in periods of severe cash shortage that can damage the profitability of the projects and adversely impact supplier and customer relationships. The company is not in dispute with any customers over cash owed, but a number of customers have been very slow payers based on a combination of their own liquidity challenges or central bank currency restrictions.

Given that Flexenclosure has not been profitable for a number of years and was not profitable for the full year of 2015, the share capital in the company was depleted. This led to Flexenclosure creating a balance sheet for liquidation purposes in November 2015. The cash shortage and the share capital depletion forced the company to perform a rights issue in February 2016, which replanished the share capital. Flexenclosure will present a new balance sheet for liquidation purpose showing restored share capital at the annual general meeting on 25 April 2016.

Significant event after the end of the yearFlexenclosure has during the first quarter of 2016 continued to take new orders, from existing customer for both eCentre and eSite.

The rights issue was performed in March, and was very successful. The total amount generated was 60 MSEK, restoring the share capital in the company and improving the cash flow. The rights issue led to a dilution of some existing owners, however, one of the main owners, Pegroco Invest AB, has increased their owner share of the company.

Significant risks and uncertanties Operational risks The operational risks associated with the company’s customer projects can be substansial. In recent years, the company has worked to control these risks. Flexenclosures operation is primarily performed in the emerging markets with increased risk for political and financial instability.



32

The company has a collaboration with the Swedish Export Credit agency (Exportkreditnämnden in Swedish) in order to mitigate these risks. It is important for the company to maintain a high level of quality and security in projects and the work carried out by the company in existing projects has increased its knowledge, its awareness and ability to manage the existing risks.

Financial risksThe company is working to decrease the financial costs and control and mitigate all the financial risks in the company, like levels of interests, foreign exchange risks, refinancing and counterparty risks.

The company is working to get sufficient working capital for the coming twelve months. This could be done through a listing of the company during 2016, or by increasing the share capital via a rights issue or other external financing of the company. The main shareholder, Pegroco Invest AB, has issued a “letter of comfort” committing to secure the liquidity needs of the company until such time that the company is profitable and has a positive cash flow.

The liquidity of the company improved during the first quarter due to the rights issue, however the work to receive customer receivables still continues. One problem is the lack of hard currencys, primarily dollars, in certain countries where the company is operating. Three of the main outstanding receivables are;

Apollo Towers Singapore Ltd with current receivables of approximately 46 MSEK. Flexenclosure has successfully deployed nearly 1,000 esites in Myanmar for Apollo. Apollo has however been delayed in raising their debt financing with the result of delayed payment to Flexenclosure. All indications are however that this will be paid in the coming quarter.

Two other customers, one in Angola with receivables of 25 MSEK and one in Sierra Leone with receivables of 10 MSEK, both have problems to pay due to dollar payment restrictions in their countries. However, the Company is expecting to collect these receivables during in Q2 2016. The company is also working to get a more even inflow of new orders, which will improve the working capital situation.

In order to improve the liquidity of the company, the current situation with the financial lenders is under discussion. The company has an existing financial revolving credit facility with Nordea that expires 2016-06-30 and a loan to Collector that expires 2016-06-30. The company is currently in discussions with its lenders with an aim to prolong the loans.

The company has its operations in several countries and is thereby exposed to potential foreign exchange risks, primarily in USD. Tthe major part of the costs is in SEK, with some purchases of goods and material also made in USD and Euro. The company does not secure or hedge this risk, however it is working to mitigate the risk as much as possible. The company has both receivables and payables exposed in foreign currencies, and is trying to match ingoing and outgoing payments in the same currency.

Flexenclosure has during 2015 worked hard to improve the gross margins in the projects, and this is reflected in an improved gross margin for the last quarter of 2015, and also during the first quarter 2016. The company has improved the quality in its internal processes regarding the control of costs and management of change orders in the existing projects.

Anticipated future progressThe growth achieved by the company in 2015 has in many ways tested the company’s ability in terms of both production and logistics but it has also enhanced the company’s expertise and built its market presence to an equal extent. 2015 marked an important step forward for Flexenclosure and the experience gained from that year is extremely valuable for the future in view of the predicted continued growth in both of the company’s product markets. Flexenclosure has during the years established itself as a global player for environmental products. The company will continue to develop its products and will launch new innovations during 2016.

In the company there is a loss carried forward of 398 MSEK, which could be used against future profits. The deferred tax recoverable amounts to 22% of the losses. As the company has not accounted any profit, the board has decided not to activate the asset in the balance sheet, but will do so when the company is profitable.

The board of the company has made the judgment that the financial situation in the company is satisfying for 2016.

Shareholders with an ownership in the company exceeding 10% by 31 March 2016:Pegroco Invest AB 36.30%AB Flexen Intressenter 19.40%Applied Vencap LCC 11.50%International Financial Corporation 10.60%



33

Multi-year review, Group

2015 2014 2013 2012 2011

Order intake MSEK 300 269 219 73 88

Revenue 1) kSEK 220,450 427,544 52,465 65,998 102,690

EBITDA kSEK –59,479 –39,164 –65,743 –58,936 –21,956

Result before tax kSEK –103,823 –57,765 –80,108 –68,515 –28,086

Total assets kSEK 330,301 375,592 99,237 98,609 111,911

Solidity % –8% 20% 33% 19% 45%

Multi-year review, Parent company

2015 2014 2013 2012 2011

Order intake MSEK 300 269 219 73 88

Revenue 1) kSEK 220,450 427,544 52,465 65,998 102,690

EBITDA kSEK –58,917 –41,465 –63,275 –53,676 –19,544

Result before tax kSEK –103,260 –60,066 –78,704 –72,506 –25,631

Total assets kSEK 330,168 374,436 100,650 98,871 115,412

Solidity % –8% 20% 34% 18% 47%

1) Net revenue and other revenue, work performed by the company for its own use and capitalized not included.

Appropriation of earningsThe following profits/losses brought forward are to be devided upon by the annual general meeteing (SEK):

Share premium reserve Profit/losses brought forward 71,975,200Profit(loss) for the year –103,260,176

–31,284,976

The board of directors propose the total profit/loss brought forward is approprated as follows:

to be brought forward –31,284,976

–31,284,976



34

Income statement

Group Parent company

kSEK Notes01/01/201531/12/2015

01/01/201431/12/2014

01/01/201531/12/2015

01/01/201431/12/2014

Operating income etc.Revenue 3 180,895 407,801 180,895 407,801

Work performed by the company for its own use and capitalized 23,578 17,072 23,578 17,072

Other operating income 3 39,555 19,743 39,555 19,743

Total operating income etc. 244,028 444,616 244,028 444,616

Operating expensesRaw materials and consumables –206,886 –400,192 –206,886 –400,193

Other external costs 4, 5 –28,181 –35,507 –27,655 –37,808

Personnel costs 6 –68,440 –48,080 –68,404 –48,080

Depreciation/amortisation and impairment of tangible and intangible fixed assets –17,684 –15,899 –17,684 –15,899

Total operating expenses –321,191 –499,679 –320,628 –501,980

Operating profit (loss) –77,163 –55,063 –76,600 –57,364

Other interest income and similar items – 4,678 – 4,678

Interest expense and similar items 7 –26,660 –7,380 –26,660 –7,380

Profit (loss) after financial items 8 –103,823 –57,765 –103,260 –60,066

Profit (loss) for the year –103,823 –57,765 –103,260 –60,066

Attributable to:

Parent company shareholders –103,823 –57,767

Minority shareholders – 2



35

Balance sheet


kSEK Notes 31/12/2015 31/12/2014 31/12/2015 31/12/2014

ASSETSFixed assetsIntangible fixed assetsCapitalised expenditure for research and development and similar 9 46,603 39,989 46,603 39,989

Goodwill 10 510 1,020 510 1,020

Total intangible fixed assets 47,113 41,009 47,113 41,009

Tangible fixed assetsEquipment, tools, fixtures and fittings 11 427 416 247 244

Total tangible fixed assets 427 416 247 244

Financial fixed assetsParticipations in group companies 12 – – 832 432

Receivables from group companies 13 – – 604 –

Total financial fixed assets 0 0 1,436 432

Total fixed assets 47,540 41,425 48,796 41,685

Current assetsInventories etc.Raw materials and consumables 12,694 15,705 12,694 15,705

Total inventories 12,694 15,705 12,694 15,705

Current receivablesTrade receivables 162,075 178,911 162,075 178,911

Other receivables 49,928 86,051 48,802 84,818

Prepaid expenses and accrued income 14 57,563 49,678 57,563 49,678

Total current recievables 269,567 314,640 268,441 313,407

Cash and bank 500 3,822 237 3,639

Total current assets 282,761 334,167 281,372 332,751

Total assets 330,301 375,592 330,168 374,436



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Balance sheet cont.


kSEK Notes 31/12/2015 31/12/2014 31/12/2015 31/12/2014

Equity and liabilities

Equity 15

Restricted equityShare capital 3,793 2,117 3,793 2,117

Unregistered share capital – 1,123 – 1,123

Total restricted equity 3,793 3,240 3,793 3,240

Non-restricted equityShare premium reserve 74,365 130,280 73,827 132,041

Profit (loss) for the year –103,823 –57,767 –103,260 –60,066

Total non-restricted equity –29,458 72,513 –29,434 71,975

Equity attributable to parent company shareholders –25,665 75,753

Minority shareholding 498 498

Total equity –25,167 76,251 –25,640 75,215

ProvisionsOther provisions 16 4,133 4,195 4,133 4,195

Total provisions 4,133 4,195 4,133 4,195

Long-term liabilitiesBank overdraft facilities 17 9,217 11,676 9,217 11,676

Other liabilities 16 – – –

Total long-term liabilities 9,233 11,676 9,217 11,676

Current liabilitiesBank overdraft facilities 18 29,426 29,997 29,426 29,997

Other liabilities to credit institutions 17 42,838 33,324 42,838 33,324

Advance payments from customers 63,735 29,849 63,735 29,849

Accounts payable 138,732 86,852 138,732 86,847

Other liabilities 19,393 12,870 19,793 12,755

Accrued expenses and deferred income 19 47,977 90,578 47,933 90,578

Total current liabilities 342,102 283,470 342,457 283,350

Total equity and liabilities 330,301 375,592 330,168 374,436

Contingent liabilitiesGuarantee 76,000 61,000 76,000 61,000

Other contingent liabilities 23,337 66,000 23,337 66,000

99,337 127,000 99,337 127,000



37

Change in equityGroup

Share capital

Share premium

Other equity incl. profit (loss)

for the year

Parent company shareholders’

equityMinority

shareTotal

equity

Balance brought forward

15-01-01 3,240 366,671 -294,158 75,753 498 76,251

Reclassifications – – – – – –

New share issue, share-based payment 553 1,852 2,405 2,405

Net profit (loss) for the year –103,823 –103,823 –103,823

Balance carried forward

15-12-31 3,793 368,523 –397,981 –25,665 498 –25,167

Parent company Share

capitalShare premium

reservProfit or loss

brought forwardNet profit (loss)

for the yearTotal

equity


15-01-01 3,240 364,251 –232,210 -60,066 75,215

Reclassification of profit (loss) from previous year –60,066 60,066 –

Reclassifiations – – – – –

New shares issue 553 1,852 2,405

Net profit (loss) for the year –103,260 –103,260


15-12-31 3,793 366,103 –292,276 –103,260 –25,640



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Cash flow statement


kSEK Notes01/01/201531/12/2015

01/01/201431/12/2014

01/01/201531/12/2015

01/01/201431/12/2014

Operating activitiesOperating profit (loss) –77,163 –55,063 –76,600 –57,364

Adjustment for non-cash items, etc. 24 17,621 23,035 17,623 23,089

Interest received – 8 – 8

Interest paid –26,660 –7,380 –26,660 –7,380

Income tax paid – – – –

Cash flow from operating activities before changes in working capital –86,202 –39,400 –85,638 –41,647

Cash flow from changes in working capitalChange in inventories 3,011 –9,846 3,011 –9,846

Change in trade receivables and other receivables 45,074 –282,333 44,967 –279,763

Change in trade payables and other liabilities 49,688 155,323 50,163 155,001

Net cash flow from operating activities 11,571 –176,256 12,504 –176,255

Investing activitiesAcquisition of subsidary – – –400 –

Acquisition of intangible fixed assets –23,578 –17,072 –23,578 –17,072

Acquisition of tangible fixed assets –222 – –214 –

Acquisition of financial fixed assets – – –604 –

Cash flow from investing activities –23,800 –17,072 –24,796 –17,072

Financing activitiesNew shares issue 2,405 101,334 2,405 101,334

New borrowings 9,530 45,000 9,514 45,000

Repayment of borrowings –2,459 – –2,459 1

Change in bank overdraft facilities –571 29,997 –571 29,997

Cash flow from financing activities 8,906 176,331 8,890 176,332

Cash flow for the year –3,323 –16,997 –3,402 –16,996Cash and cash equivalents at the beginning of the year 3,822 20,819 3,639 20,635

Cash and cash equivalents at year-end 500 3,822 237 3,639



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Notes to the financial statementsNOTE 1 Accounting and valuation principles

The financial reports of the Group and the Parent company have been prepared in accordance with the Annual Accounts Act and BRNAR 2012:1 (K3). The principles applied are unchanged compared to last year.

The most important accounting and valuation principles used in the preparation of the financial reports are summarised below.

Correction of errorDuring the year, Flexenclosure discovered an error in the gross reporting of work performed by the Company for its own use and capitalised.

The correction of the error has not affected opening profit/loss carried forward, as the operating profit/loss for 2014 was unchanged. The following items in the income statement for 2014 were changed, with the following amounts; Net sales increased by kSEK 17,072. Operating expenses have increased by the same amount.

Valuation principles for consolidated accountsConsolidated accountsIn the consolidated account, the operations of Flexenclosure AB and all subsidiaries are consolidated up until and including 31 December 2015. Subsidiaries are all companies in which Flexenclosure has the right to draw up the Company’s financial and operational strategies for the purpose of receiving financial benefits. Flexenclosure achieves and exercises a deciding influence by holding more than half of the votes. Companies set up for particular purposes are also consolidated if Flexenclosure AB has a deciding influence, irrespective of whether there is an ownership share or not. The balance sheet date of all subsidiaries is 31 December and they apply Flexenclosure’s valuation principles.

The consolidated accounts are presented in SEK, which is also Flexenclosure AB’s reporting currency. Profit/loss for subsidiaries purchased or sold during the year are reported as from the date the purchase or sale came into force, according to what is applicable.

Minority interests, which are reported as part of equity, represent the proportion of a subsidiary’s profit/loss and net assets that is now owned by Flexenclosure. Flexenclosure allocates the net profit/loss from the subsidiaries between Flexenclosure AB’s owner and the minority based on their respective ownership shares.

Amounts reported in the financial reports for subsidiaries have been adjusted where required in order to safeguard correspondence with Flexenclosure’s accounting principles.

Acquisition methodFlexenclosure applies the acquisition method when reporting company acquisitions entailing that the reported value of Flexenclosure AB’s participations in Group companies are eliminated by being offset against the subsidiary’s equity at the time of acquisition.

Flexenclosure AB draws up an acquisition analysis as at the time of acquisition in order to identify Flexenclosure’s acquisition value, both for the participations and also for the subsidiary’s assets, provisions and liabilities. The company acquisition is reported in the Group as from the time of acquisition.

All subsidiaries in the Group are subsidiaries started by the Company.

Translation of foreign operationsForeign operationsOn consolidation, assets and liabilities, including goodwill and other Group-wide surplus or shortfall values are translated to SEK at the exchange rate on the balance sheet date. Income and expenses are translated to SEK according to an average exchange rate for the reporting period, which constitutes an approximation of the transaction rate. Exchange rate differences that arise on translation of foreign operations are reported in equity.

Valuation principles for income statementIncomeIncome arises from the sale of goods and the performance of services and is reported in the item Net sales. Income is valued at the fair value of what has been received or will be received for goods delivered and services performed, i.e. at sales price excluding trade discounts, quantity discounts and similar price deductions and value added tax. Amounts received on behalf of another are not included in Flexenclosure’s income.

Sale of goods Sale of goods is reported when Flexenclosure has transferred the significant risks and benefits associated with ownership of the goods to the customer, the goods have been delivered to the customer and the expenses that arise as a result of the transaction can be calculated in a reliable way. Income from sale of goods that do not have any significant service obligations is reported on delivery.

The eSite production area: Income derived from shipping of products for the eSite production area is recognised when the risk passes to the purchaser.Income derived from installing the product is recognised when the product is installed and commissioned by the customer.

Contract assignments and service assignments at fixed priceOngoing projects on behalf of clients are recognised in accordance with the principle of revenue recognition of work in progress whereby revenue recognition takes place in accordance with the respective degree of completion of the assignment. When the outcome can be estimated reliably, income from assignments and expenses related to assignments are recognised in the income statement on the basis of the degree of completion of the tasks under the agreement at the balance sheet date.

The eCentre production area: The degree of completion is established by comparing assignment expenses incurred with the total assignment expenses.

When Flexenclosure cannot estimate the outcome of an assignment in a reliable way, assignment income is reported in an amount corresponding to assignment expenses incurred which which probably be reimbursed by the customer.

On all occasions when it is probable that the total assignment expenses will exceed the total assignment income, the anticipated loss is reported immediately in the income statement.

When it is no longer probable that payment will be received for amounts that have already been reported as income, the amount that will probably not be received is reported as a cost.

Income from service assignment with an uncertain number of activities over a fixed period of time are reported in a linear manner over this time period.



40

The gross amounts to be paid by customers for assignments are reported in the item Prepaid expenses and accrued income for all assignments in progress where assignment expenses and reported profits (after deduction of reported losses) exceed the invoiced amount. The gross amounts to be paid by customers for assignments are reported in the item Advance payments from customers for all assignments in progress where the invoiced amount exceeds the assignment expenses and reported profits (after deduction of reported losses).

Contract assignments/service assignments at cost plus are recognised in revenue at the rate the work is done and material is delivered or consumed.

Valuation principles for balance sheetIntangible fixed assetsIntangible fixed assets are valued at acquisition value minus accumulated depreciation and impairment. The acquisition value does not include borrowing expenses.

Development expenses brought forwardFlexenclosure carried out development products in order to develop the Group’s commercial productseSite and eCenter and support systems for administration and production.

Expenses for the research phase in a development project are written off during the period in which they arise.

Expenses that are directly attributable to the development phase of a development project are reported as an intangible fixed asset, provided they fulfil the following requirements:

• It is technically possible to complete the asset so that it can be used or sold.

• Flexenclosure intends to complete the asset and use or sell it. • Flexenclosure has the prerequisites to use or sell the asset. • It is probable that the asset will generate future financial benefits. • There are sufficient resources to complete the asset and to use or sell it.

• The development expense can be measured in a reliable way.

Development expenses that do not fulfil these criteria for capitalisation are written off as they arise. The acquisition value of expenses brought forward include the expenses for the production of the asset. Directly attributable expenses include personnel expenses arising from the work on development and direct expenses for external consultants.

The Company calculates attributable personnel expenses by following up the number of man hours expended on each development project. Expenses per man hour is valued at actual monthly salary and the estimated payroll overhead including pension recalculated on an hourly basis.

The reported value of all development projects capitalised is revalued by the Company management whenever it is established that the reported value of a development project is higher than the estimated fair value. When it can be established that the reported value is higher than the estimated fair value, an impairment is carried out in the income statement.

GoodwillGoodwill represents the difference between the acquisition value of a company acquisition and the fair value of the acquired assets, liabilities and contingent liabilities.

SoftwareCapitalised expenses for software purchased consist of the expenses for purchase and installation of the specific software.

DepreciationDepreciation of the depreciable amount is done in a linear way over the expected useful life. Depreciation starts when the asset can be used. Licences are written off over the contract period. The useful life is reviewed at each balance sheet date. For capitalised expenses for development, the depreciation period is based on the product’s forecast life cycle. The assets are subject to linear depreciation over the assets’ useful life. The useful life is reviewed at each balance sheet date.

The following useful lives are used:

• Development expenses brought forward: 3–5 years • Licences: 5 years • Goodwill: 10 years

Goodwill is currently depreciated over a period in excess of five years when it relates to a net asset acquisition, where Flexenclosure AB’s business and company name was acquired.

Removal from the balance sheetIntangible fixed assets are removed from the balance sheet on scrapping or disposal, or when no future financial benefits are expected from the use, scrapping or disposal of the asset.

When intangible fixed assets are sold, the capital gain is calculated as the difference between the sale price and the reported value of the asset, and is reported in the income statement in one or the other of the items Other operating income or Other operating expenses.

Tangible fixed assetsTangible fixed assets are initially reported at the acquisition value or manufacturing cost including expenses for getting the asset into place and in condition to use as was the intention of the investment. The acquisition value includes the purchase price and all other directly attributable expenses, such as expenses for delivery, handling, installation, assembly,and consultancy services.

The acquisition value of the Group’s buildings/machines has been allocated according to component. Tangible fixed assets are there-after valued at acquisition value minus accumulated depreciation and impairment.

DepreciationDepreciation of tangible fixed assets is made of the asset’s depreciable amount over its useful life, and starts when the asset is taken into use. Depreciation is done in a linear way. The following useful lives are applied:

• Equipment, tools, fixtures and fittings: 3–5 years

Removal from the balance sheetTangible fixed assets are removed from the balance sheet on scrapping or disposal, or when no future financial benefits are expected from the use, scrapping or disposal of the asset or component.

When tangible fixed assets are sold, the capital gain is calculated as the difference between the sale price and the reported value of the asset, and is reported in the income statement in one or the other of the items Other operating income or Other operating expenses.

LeasingLeasing agreements are classified as either financial or operational leasing at the time they are entered into.

All leasing agreements within Flexenclosure are classified as operational leasing.



41

Operational leasingLeasing agreements that are not financial leasing agreements are operational leasing agreements. When Flexenclosure is the leaseholder, leasing fees relating to operational leasing agreements are written off in a linear way over the leasing period. Additional costs, such as maintenance and insurance, are written off as they arise.

Assessment of impairment requirement for intangible and tangible fixed assetsAt each balance sheet date, an assessment is made of whether there is any indication that the value of an asset is lower than its reported value. If there is such an indication, the recovery value of the asset is calculated. If the recovery value is less than the reported value, an impairment is made which is written off.

An intangible fixed asset produced in-house which is not yet completed for use or sale on the balance sheet date is always assessed for impairment.

The recovery value of an asset or a cash-generating unit is the highest of fair value minus sales costs and the value in use. Fair value minus sales costs constitutes the price that Flexenclosure would expect to get from a sale between knowledgeable parties who are independent of each other and who are interested in the transaction being completed. Deduction is made of such costs as are directly attributable to the sale. The value in use consists of future cash flows to which an asset or a cash-generating unit is expected to give rise.

On impairment assessment, assets are grouped into cash- generating units. A cash-generating unit is the smallest identifiable group receiving payments that are independent in all significant respects. The result is that the impairment need of certain assets is assessed on an individual basis, and some are assessed at cash- generating unit level.

With the exception of goodwill, a new assessment is made of all assets for any sign that a previous impairment no longer is justified. An impairment is reversed if the recoverable value of the asset or the cash-generating unit exceeds the reported value and is allocated proportionally over all assets, apart from goodwill.

Receivables and liabilities in foreign currencyMonetary items in foreign currency are translated at the exchange rate on the balance sheet date and the exchange rate differences that arise are reported in the income statement. Exchange rate gains and losses relating to operational receivables and liabilities in foreign currency are reported in the items Other operating income and Other operating expenses. Realized exchange rate gain may occur at time of payment of receivables. Other exchange rate gains and losses are reported under the heading Profit/loss from financial items.

Non-monetary items are not recalculated on the balance sheet date and are valued at acquisition value.

A monetary item that is considered to be part of the Group’s net investment in a foreign operation is reported in the Company where the difference arose and in the consolidated accounts as a separate component direct in equity.

Financial instrumentsReporting and valuationFinancial instrumentsFinancial assets and liabilities are reported when Flexenclosure becomes part of the contractual terms and conditions of the financial instrument.

Accounts receivable – trade are valued at acquisition value minus any anticipated losses. Accounts payable – trade and other non- interest bearing liabilities are valued at nominal amounts.

Financial fixed assets and long-term receivables are valued both at the first time of reporting and in subsequent valuations at accrued acquisition value, which is normally the same as fair value (transaction value) at the time of acquisition, with the addition of directly attributable transaction expenses, such as brokerage. Financial assets classified as current assets and current liabilities are valued both at the first time of reporting and in subsequent valuations at acquisition value. An addition is made of directly attributable transaction expenses, such as brokerage.

InventoryInventory is valued according to the lowest value principle, i.e. the lowest of the acquisition value and the net sales value. The acquisition value includes all the expenses attributable to the manufacturing process and a suitable proportion of associated manufacturing expenses, based on normal capacity.

The acquisition value is calculated according to the weighted average value principle, where deliveries from inventory are valued at the average value of the articles delivered to inventory during the inventory closure period, plus all inventory receipts from the previous period.

The net sales value is the estimated price for which the good can be sold according to terms that are normal for the operation, minus any applicable sales expenses that are directly attributable to the sales transaction.

Income taxes Income tax consists of current tax and deferred tax. Income tax is reported in the income statement except when an underlying transaction is reported in equity, when the associated tax effect is also reported in equity.

Current tax receivables and tax liabilities and deferred tax receivables and tax liabilities are offset against each other if there is a legal right to offset.

Current tax Current tax is the tax cost for the current financial year relating to the taxable profit for the year and that part of the income tax for previous financial years that has not yet been reported. Current tax is valued at the probable amount according to the tax rates and tax rules that apply on the balance sheet date, and are not translated into current value.

Deferred taxDeferred tax is the income tax on the taxable profit relating to future financial years as a result of previous transactions or events.

Deferred tax is calculated using the balance sheet method for all temporary differences, i.e. differences between the reported value of assets and liabilities and their tax values and tax shortfalls.

No provision is made for deferred tax on temporary difference attributable to holdings in subsidiaries or joint ventures, as Flexenclosure can control the timing of reversal of the temporary differences, and such a reversal will not take place within the foreseeable future. No provision is made for deferred tax at the first reporting of goodwill, however.



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Changes to deferred tax are reported in the income statement.Deferred tax receivables are reported for all deductible temporary

difference and for the option of utilising unused loss carry forward in the future.

Deferred tax receivables and tax liabilities are valued based on how Flexenclosure expects to be regain/settle the reported value of the corresponding asset/liability. The valuation is done without discounting and according to the tax rates and tax rules that are decided on on the balance sheet date. A deferred tax receivable is valued at most at the amount that will probably be regained, based on current or future taxable profits, which is reassessed on every balance sheet date.

Liquid assetsLiquid assets consist of cash and cash equivalents and unappropriated holdings with banks and other credit institutions and other current liquid investments that can easily be converted into a known amount and that are exposed to an insignificant risk of value fluctuations. Such investments have a term of a maximum of three months.

EquityEquity in the Group consists of the following items:

Share capital representing the nominal value of issued and registered shares.

Other capital contributed including any premium received on new issues of share capital. Any transaction costs associated with new share issues are deducted from the premium, with consideration for any income tax effects.

Other equity including profit/loss for the year, which includes the following:

• Profit/loss brought forward, i.e. all profit/loss brought forward and share-related remuneration for the current and previous periods

All transactions with Flexenclosure AB’s owners are reported separately in equity.

Dividend to be paid is included in the item Other liabilities when the dividend has been approved at a general meeting before the balance sheet date.

Payments to employeesCurrent paymentsCurrent payments to employees, such as salaries, holiday pay and bonus, are payments to employees that become due within 12 months from the balance sheet date during the year the employee has earned the pay. Current payments are valued at the undiscounted amount the Group is expected to pay as a result of the unutilised right.

Payments after termination of employmentFlexenclosure provides payments after termination of employment in the form of pensions through various defined contribution schemes. There are no defined benefit schemes.

Defined contribution pension schemesFlexenclosure pays fixed fees to other legal entities relating to several government schemes and insurance schemes for individual employees. Flexenclosure has no legal or informal obligations to pay further fees over and above payment of the fixed fee, which is reported as a cost during the period in which the service in question is performed.

Other long-term paymentsPayments that become due for payment after more than 12 months are valued at the current value of the obligation on the balance sheet date.

Payment on terminationProvision for severance pay is reported when Flexenclosure has a legal or informal obligation to terminate employment before its due time or to pay compensation on termination by means of an offer in order to encourage voluntary redundancy. Provision is made for that part of the termination pay that the employee receives without any duty to work, plus social security contributions, which represents the best estimation of the pay that is expected to be required in order to settle the obligation.

Provisions, contingent liabilities and contingent assetsProvisionsProvisions for product guarantees, legal processes, loss contracts or other claims are reported when Flexenclosure has a legal or informal obligation as a result of an event that has occurred, it is probable that an outflow of resources will be required in order to settle the obligation and the amount can be estimated in a reliable way. The timing or the amount of the outflow may still be uncertain.

Provisions for restructuring is only reported if a fixed and detailed restructuring plan has been prepared and introduced, or if the main features of the plan have at least been published to those on whom it impacts.

Provisions are not reported for expenses connected to the future operation.

Provisions are initially valued at the best estimation of the amount required to settle the existing obligation, based on the most reliable information that is available on the balance sheet date. Provisions are discounted at their current value where the time value of money is significant.

Any compensation that Flexenclosure is almost certain to receive from an external party in relation to the obligation is reported as a separate asset. However, this asset cannot exceed the amount of the attributable provision.

The provision is only utilised for the expenses for which the provision was originally intended. The provision is reassessed every balance sheet date. Adjustments are reported in the income statement.

Contingent liabilitiesThe following are reported as contingent liabilities

• a possible obligation as a result of events that have occurred and whose existence will only be confirmed by one or several uncertain events, which are not entirely within the control of Flexenclosure, occurring or failing to occur, or

• an existing obligation as a result of events that have occurred but which have not been reported as a liability or a provision

as it is not probable that an outflow of resources will be required in order to settle the obligation, or the size of the obligation cannot be calculated with sufficient reliability.



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NOTE 2 Important assessments and uncertainty of estimates

When financial reports are drawn up, the Board of Directors and the Managing Director must make certain estimates, assessments and assumptions, according to the accounting and valuation principles applied, which impact on the reporting and valuation of assets, provisions, liabilities, income and expenses. The areas where such estimates and assessments may be of great importance to the Group, and which can thus affect the income statements and balance sheets in the future, are described below.

The following are important assessments that have been made during implementation of the Group’s accounting principles, and which have the most significant effect on the financial reports.

Reporting on contract assignments in progressReported profit or loss of a contract assignment in progress is based on the percentage of completion of the project. Flexenclosure has made the assessment that assignment expenses incurred in proportion to total estimated assignment expenses best describes the percentage of completion of the project. The percentage of completion method requires that project income and project expenses can be estimated in a reliable manner.This requires a well established system for estimation, forecasting, reconciliation and financial tracking of the project, including the analysis of deviations in the estimate compared to the previous estimate. This critical assessment is performed at least once a month. If the final financial outcome of the project is assessed to be negative total estimated project expenses are recognised as cost regardless of the current state of completion of the project.

Forecasting the final outcome of a project is a critical assessment which is important for the reporting of profit and loss during the life of the project. There is a risk that the final profit or loss of the project may deviate from the forecasted one. When Flexenclosure cannot estimate the outcome of an assignment in a reliable way, assignment income is reported in an amount corresponding to assignment expenses incurred.

Capitalising intangible fixed assetsDevelopment phaseThe allocation between the research and development phases of new development projects concerning eSite and eCenter and determining whether the requirements for capitalisation of development expenses have been fulfilled requires assessment. Following capitalisation, the issue of whether the completion of the reporting requirements for development expenses is continuing to be fulfilled is monitored, and also whether there are indications that the capitalised expenses may be exposed to a reduction in value.

Flexenclosure has development expenses brought forward which have not yet been completed. These are assessed for any impairment requirement on an annual basis. In order to do this, an assessment must be made of future cash flows attributable to the asset or the cash-generating unit to which the asset shall be attributed once it is completed. A suitable discount interest rate should also be set in order to discount these estimated cash flows. Determining the discount interest rate is always subject to important assessments.

ImpairmentIn order to assess the impairment requirement, the recovery value of each asset or cash-generating unit is calculated, based on expected future cash flow and using a suitable interest rate in order to discount the cash flow. There are uncertainties in the assumptions about future cash flow and the setting of a suitable discount interest rate.

Useful life of depreciable assetsOn each balance sheet date, a review is made of the current assessments of the useful lives of depreciable assets. The uncertainty of these assessments is due to technical obsolescence, which can change the use of the asset in question.

Reporting of deferred tax receivablesThe assessment of the extent to which deferred tax receivables may be reported is based on an assessment of the probability of the Group’s future taxable income against which deferred tax receivables can be utilised. Significant consideration is also required in the assessment of the effect of certain legal and financial limitations or uncertainties in different jurisdictions.

Since Flexenclosure historically has reported losses the board has decided that a deferred tax receivable shall be reported only when convincing evidence are at hand which support the notion that accumulated taxable loss can be regained against future taxable profits.

Accounts receivable – tradeAccounts receivable – trade are valued at the cash flow that is expected to be received by the Company. A detailed and objective review of all outstanding amounts on the balance sheet date is therefore carried out.

The provision for doubtful receivables is based on an assessment of the customers’ solvency and is intrinsically difficult to estimate. When drawing up the financial reports a special assessment of the Group’s Accounts receivables is made on an item-by-item basis.

NOTE 3 Revenue

Revenue is split between the following lines of business


2015 2014 2015 2014

eSite 117,775 186,843 117,775 186,843

eCentre 63,120 220,958 63,120 220,958

Total 180,895 407,801 180,895 407,801

Other operational revenue amounts to the following:


2015 2014 2015 2014

Realized exchange rate profit 36,853 17,770 36,853 17,770

Received grants 302 365 302 365

Other 2,400 1,608 2,400 1,608

Total 39,555 19,743 39,555 19,743



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NOTE 4 Remuneration to auditors

The following amounts are expensed:


2015 2014 2015 2014

Grant Thornton AB

– audit engagement 626 317 626 317

– audit work in addition to audit engagement 48 132 48 132

Grant Thronton, Kenya

– tax consultancy 18 – 18 –

Total 692 449 692 449

NOTE 5 Operating leases

GroupFlexenclosure leases their office and production facilities in Vara according to an operational leasing agreement. The rental contract is binding for 36 months and shall be renewed in 2017. Furthermore there is a lease for the head quarter in Stockholm. Both of these lease agreements amounts to 80% of the total leasing costs.

All lease agreemant are non-cancellable for a duration of 36 months from the inception of the lease.

Future minimum lease payments are following:

Minimum lease payments

Within 1 year 1–5 years

After 5 years Total

31 December 2015 3,077 1,676 – 4,753

31 December 2014 3,220 1,353 – 4,573

Leasing expenses during the reporting period amount to 3,372 kSEK (2014: 3,614 kSEK).

Parent company

Minimum lease payments

Within 1 year 1–5 years

After 5 years Total

31 December 2015 3,077 1,676 – 4,753

31 December 2014 3,220 1,353 – 4,573

Leasing expenses during the reporting period amount to 3,372 kSEK (2014: 3,614 kSEK).

NOTE 6 Salary, wages and other remunerations to employees

Remunerations to employees are following:


2015 2014 2015 2014

Remunerations – Board 478 434 478 434

Salaries – CEO 2,191 2,301 2,191 2,301

Salaries – Management 5,983 4,515 5,983 4,515

Salaries and wages – Other employees 37,655 35,981 37,619 35,474

Total salary and wages 46,307 43,231 46,271 42,724

All independent board members receives a yearly fee of 75 kSEK. The board members representing an owner does not receive a fee. In accordance to an extra annual general meeting on October 23 2015, the independent boardmembers will receive 150 kSEK going forward. For the chairman of the company a yearly fee of 250 kSEK is paid. The CEO of the company have, according to contract, a salary for 2015 that amounts to 2,191 kSEK.

Since year end of 2014, Sofia Ericsson Holm (representing an owner), Torbjörn Nilsson (independent board member) and Tore Tolke (substitute) have chosen to leave the board.

At year end of 2015 the boards independent members consisted of Viktor Kovacs, Anil Raj, Anne-Lie Lind and Jan Roxendal (chairman). The representors for owners were, at the same time, Per Grunewald and Andrew Bartley.


2015 2014 2015 2014

Pensions – CEO 556 400 556 400

Pensions – Management 1,462 820 1,462 820

Pensions – Other employees 4,543 3,702 4,543 3,702

Other statutory social security contributions 14,171 13,370 14,171 13,370

Total statutory social security contributions 20,732 18,292 20,732 18,292

Be termination of CEO from the company the period of notice is set to 12 months wheras the period of notice is set to 6 months by resignation.

NOTE 7 Financial costs


2015 2014 2015 2014

Interest expense 16,226 7,380 16,226 7,380

Return of impairment 374 – 374 –

Financial costs in projects 10,060 – 10,060 –

Total 26,660 7,380 26,660 7,380



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NOTE 8 Income tax on profit for the year

In the Group exists taxable deficit in Flexenclosure AB that amounts to 398 MSEK that only can be used against future surplus. The company’s deffered tax asset amounts to 22% of the losses carried forward. Since the company has not been profitable, has the deffered asset been reported to the value of zero.

The main components of the tax expense for the financial year and the relationship between the expected tax expense based on the Swedish effective tax rate of 22% (2014: 22%) and the reported tax expense in the profit/loss is as follows:


2015 2014 2015 2014

Net profit for the year before tax –103,823 –57,765 –103,260 –60,066

Tax according to current tax rate, 22% 22,841 12,708 22,717 13,215

Adjustment of prior years' tax 3,944 – 3,944 –

Adjustment for differences in tax rates abroad 61 506 – –

Tax-exempt income – – – –

Non tax-deductible expenses – – –237 –1,780

Deferred tax asset on losses carry-forward not previsously recognised –26,846 –13,214 –26,423 –11,434

Valuation of prior years' losses carried-forward – – – –

Used loss carried-forward not previously recorded as assets – – – –

Others – – – –

Income tax according to the income statement 0 0 0 0

Income tax on profit for the year consists of:

Current tax

On profit for the year 22,902 13,214 22,480 11,434

Adjustment prior years’ tax 3,944 – 3,944 –

Deferred tax

Change in temporary differences – – – –

Used losses carried-forward –26,846 –13,214 –26,423 –11,434

Income tax according to the income statement 0 0 0 0

Average tax rate 26% 23% 26% 19%

NOTE 9 Development work and similar work brought forward


2015 2014 2015 2014

Opening accumulated acquisition values 68,715 51,643 68,715 51,643

Work performed by the company for its own use and capitalized 23,578 17,072 23,578 17,072

Closing accumulated acquisition values 92,293 68,715 92,293 68,715

Opening accumulated depriciation –28,726 –13,647 –28,726 –13,647

Depreciation for the year –16,964 –15,079 –16,964 –15,079

Accumulated amortisation carried forward –45,690 –28,726 –45,690 –28,726

Carrying amount 46,604 39,989 46,604 39,989



46

NOTE 10 Goodwill


2015 2014 2015 2014

Opening accumulated acquisition values 5,300 5,300 5,300 5,300

Sales/disposals –200 – –200 –

Accumulated cost carried forward 5,100 5,300 5,100 5,300

Opening accumulated depriciation –4,280 –3,770 –4,280 –3,770

Sales/disposals 200 – 200 –

Depreciation for the year –510 –510 –510 –510

Accumulated amortisation carried forward –4,590 –4,280 –4,590 –4,280

Carrying amount 510 1,020 510 1,020

NOTE 11 Equipment, tools, fixtures and fittings


2015 2014 2015 2014

Opening accumulated acquisition value 5,129 5,129 4,921 4,921

Acquisitons 222 – 214 –

Sales/disposals –1,799 – –1,799 –

Accumulated cost carried forward 3,551 5,129 3,335 4,921

Opening accumulated depreciation –4,713 –4,403 –4,677 –4,367

Sales/disposals 1,799 – 1,799 –

Depreciation for the year –210 –310 –210 –310

Accumulated depreciation carried forward –3,124 –4,713 –3,088 –4,677

Carrying amount 427 416 247 244

NOTE 12 Participations in group companies

The following subsidiaries are included in the group:

Name/domicile Corporate ID Number of shares Share % Residual value

Flexenclosure International AB, Sweden 556896-6617 50,000 100 50

Flexenclosure Kenya Ltd, Kenya 999 99.9 8

Flexenclosure Telecom India Private Ltd, India 255 51 374

Flexenclosure Technical Solutions Ltd, Nigeria 4,000 100 400

2015 2014

Carrying amount 832 432

NOTE 13 Receivables from group companies


2015 2014 2015 2014

Opening accumulated receivables – – – –

New receivables – – 604 –

Payment/amortization – – – –

Accumulated receivables carried forward 0 0 604 0

Carrying amount 0 0 604 0



47

NOTE 14 Prepaid expenses and accrued income


2015 2014 2015 2014

Accrued subscription income in ongoing projects 26,866 45,405 26,866 45,405

Prepaid expenses in ongoing projects 28,955 – 28,955 –

Other 1,743 4,273 1,743 4,273

Carrying amount 57,563 49,678 57,563 49,678

NOTE 15 Equity

Share capital

Class of shares A B C D Total

Number/value at the beginning of the year 389,452 60,810 231,321 681,583

New share issue registered 2015 31,150* 323,542 185,287 539,979

Number/value at the end of the year 389,452 91,960 554,863 185,287 1,221,562

New share issue resolved in 2015 3,542,524 3,542,524

Number/value per 31 March 2016 389,452 91,960 4,097,387 185,287 4,764,086

* Shares of Series C converted into shares of Series B.

ShareShares of Series A, C and D carry the right to ten (10) votes while shares of Series B carries the right to one (1) vote.

In accordance with the company’s articles of association, holders of shares of Series B may request to have their shares converted into shares of Series A and holders of shares of Series C may request to have their shares of Series C converted into shares of series B. Furthermore, the Board of Directors shall, following a request from a holder of shares of Series C, resolve to redeem such shares of Series C.

Shares of Series D shall be redeemable through resolutions which are supported by a majority of the votes from shares of Series D represented at the general meeting in the company, held at the latest 24 months after issuing shares of Series D. Shares of Series D which have not been redeemed within this period shall automatically be converted into shares of Series C.

WarrantsIncentive scheme: The company has 50,000 outstanding warrants to some employees which carry the right to subscribe for new shares of Series A in the company from 1 May 2019 until 1 July 2019. Upon full exercise of the warrants in the incentive scheme, the number of shares in the company will increase with 50,000 new shares of Series A.

Conversion warrants: During 2015, the company issued and allotted 185,287 warrants which gives the right to subscribe for new shares of Series C in the company from 9 January 2015 until 9 February 2017, in accordance the conditions set out in the Board of Directors’ proposal to resolution at the extraordinary general meeting on 29 December 2014. Upon full exercise of the conversion warrants, the number of shares in the company will increase with up to 58,620 new shares of Series C.



48

NOTE 16 Other provisions

Recorded provisions and changes in these are as follows:

Group Guarantees Total

Carrying amount 1 January 2014 1,675 1,675

Additional provisions 2,520 2,520

Carrying amount 31 December 2014 4,195 4,195

Additional provisions

Reversed used –62 –62


Parent company Guarantees Total

Carrying amount 1 January 2014 1,675 1,675

Additional provisions 2,520 2,520


Additional provisions

Reversed amount –62 –62


NOTE 17 Long-term liabilities


2015 2014 2015 2014

Amortisation within 1 year 42,838 33,324 42,838 33,324

Amortisation within 2 to 5 years 9,217 11,676 9,217 11,676

52,055 45,000 52,055 45,000

NOTE 18 Bank overdraft facilities


05-07-07 05-07-06 05-07-07 05-07-06

Bank overdraft facilities granted 30,000 30,000 30,000 30,000

Granted limit has after day of closing been reduced to 15,000 kSEK.

NOTE 19 Accrued expenses and deferred income


05-07-07 05-07-06 05-07-07 05-07-06

Employee related costs 12,580 11,431 12,535 11,431

Accrued interest 717 900 717 900

Costs related to ongoing projects 34,681 76,745 34,681 76,745

Deferred income – 1,502 – 1,502

Carrying amount 47,977 90,578 47,933 90,578

NOTE 20 Information about the group

Flexenclosure AB is a public limited company that does not consolidate into a parent concern.

NOTE 21 Inter-group purchases and sales

Inter-group sales amounted to 0% (2014: 0%) of total revenue.Purchases amounted to 0% (2014: 0%) of total operating costs.

NOTE 22 Average number of employees

Group

2015 2014

Average number of employees

Including men


Including men

Sweden 93 77 86 68

Countries outside EU 1 – 2 –

Total 94 77 88 68

Parent company

2015 2014


Including men


Including men

Sweden 93 77 86 68

Total 93 77 86 68

NOTE 23 Split by gender

The board includes 1 (2014: 1) woman.The management, including CEO, includes 1 (2014: 1) woman.

NOTE 24 Adjustment for non-cash items, etc.


2015 2014 2015 2014

Depreciation 17,684 15,899 17,684 15,899

Unrealised exchange gain – 4,670 – 4,670

Provision –61 2,520 –61 2,520

Other adjustments –2 –54 – –

Total adjustments 17,621 23,035 17,623 23,089

NOTE 25 Definitiopn of KPI

Net revenue (multi-year review): Amount of net revenue and other revenueEBITDA: Result before depreciation, interest and taxSolidity: Adjusted equity as a ratio of total assets



49

NOTE 26 Transaction with related part

Type of transaction/type of connection:


2015 2014 2015 2014

Short term loan from Pegroco AB 15,000 3,500 15,000 3,500

Interest Pegroco AB 1,124 311 1,124 311

Date

Signatures

Jan Roxendal Per Grunewald Andrew Bartley Chairman Board member Board member

Viktor Kovacs Anne-Lie Lind Anil Raj Board member Board member Board member

David KingManaging Director

Our audit report has been issued 4th of April 2016 with adverse opinion from a standard format

Grant Thornton AB

Anders MeyerAuthorised accountant


Board of directors and management team

50


Board of Directors

JAN ROXENDAL

Jan Roxendal is an international business leader with over 25 years experience from executive positions in the Financial Services and Industrial sectors.

He spent 18 years with ABB, including four years as member of the Group Executive Committee and 11 years as Group CEO for ABB Financial

Services. More recently he was CEO of Gambro AB and CEO of Intrum Justitia AB.

Jan is Chairman of the Board of both the Swedish Export Guarantee Board (EKN) and MySafety Group AB. He is also a board member of Catella AB and Swedish Export Credit (SEK).

Jan began his career at Skandinaviska Enskilda Banken in Stockholm. He holds a Higher General Banking Degree.

ANDREW BARTLEY

Andrew Bartley is Chief Investment Officer in the Global Telecoms Media and Technology (TMT) investment group at the International Finance Corporation (IFC) based in Washington, DC. He also sits on the board of a number of IFC investee companies.

Prior to joining the IFC, Andrew worked with Monenco Agra in the UK in project management and systems engineering, for Larox OY in Australia as a design engineer and with BAE Marine Systems in the UK.

Andrew received his B.Eng. (Mech.) from the University of Bristol, UK, and his M.B.A. from The Kellogg School of Management, Northwestern University, USA.

PER GRUNEWALD

Mr Per Grunewald has over 20 years of industrial experience.

His previous positions include Senior Investment Manager at Bure Equity, CEO of E2 Home (JV Ericsson/Electrolux) and Senior Vice President at Electrolux.

He is the co-founder of Pegroco invest, a privately owned investment

company focusing on the Technology and Service areas. Pegroco Invest was the founding investor in Flexenclosure AB and Mr Grunewald guided Flexenclosure’s transformation into an independent company as it’s first Chairman of the Board.

Mr Grunewald is a member of the Royal Swedish Academy of Engineering Sciences and holds an M.Sc. in Engineering from Chalmers University of Technology, Sweden.

VICTOR KOVACS

Viktor Kovacs has over 25 years of experience in the global ICT sector, with a particular focus on Emerging and Developing Markets.

He has held key market development and operational management roles at EDS Corporation (acquired by HP), Octel Communications (acquired by Lucent),

Portal Software (acquired by Oracle) and Cisco. His most recent venture, cloud services company Neostratus where Viktor was Founder and Board Chairman, was sold to a private equity consortium in 2014.

Viktor is currently a Senior Partner and Executive Board member of EMFC Loan Syndications, where he manages corporate strategy and market development across emerging and frontier markets, primarily in Africa and Central Asia.

Mr. Kovacs holds a BS in Electrical Engineering from the Milwaukee School of Engineering.



51

ANNE-LIE LIND

Mrs Anne-Lie Lind is an international business leader with over 20 years of experience in the logistics and manu facturing industries.

Mrs Lind was the Director of SKF Logistics Services from 2011 to 2015 and held other senior positions at SKF within Manufacturing, Sales and

Engineering consultancy services.From 2013 to 2015 she was a board member of Cargo-

Space24 and she is currently Chairman of the Board at AkkaFRAKT and a board member at Olofsfors AB.

Mrs Lind holds a M.Sc. in Mechanical Engineering from Chalmers University, Sweden and a MBA from Gothenburg University, Sweden.

ANIL RAJ

Anil Raj is a veteran of the industry with roots tracing back to the early days of mobile telecom.

Mr Raj was the start-up CEO of Hutchison in India and launched the country’s very first mobile network. As head of Ericsson’s Smartphone Division, he was responsible for launching the

world’s first smartphone and first Bluetooth product. He also headed Ericsson’s businesses in India and Indonesia establishing the company as the market leader.

Mr Raj studied Business Administration at Stockholm University, Sweden.

Management team

DAVID KING

David King is an international business leader with over 20 years experience in telecom and high-technology markets. He has held senior executive roles in companies in both the US and Europe.

His previous roles include COO of Acision, CEO of Visual Wireless and General Manager of Ericsson’s wireline

business. He is an experienced board member and chairman.

Prior to his general management career he spent seven years strategy consulting.

David holds a MBA from London Business School.

GÖRAN BERGSTRÖM

Göran Bergström is a highly experienced financial business leader.

His previous roles include 11 years as CFO at Tele2 Sweden, a leading European telecoms company, and he was also CFO at 4T (WyWallet), a mobile payment joint venture between the four Swedish mobile operators.

Earlier positions include credit and operations management roles for IT and industrial companies, and he has significant experience in optimising the efficiency of financial and operational processes.

Göran has a law degree from Stockholm University.

TOMAS RAHKONEN

Tomas Rahkonen has more than 15 years of experience from global positions in the ICT industry.

His previous experience includes positions at Ericsson (Group level, CTO office), and as manager for a cross- functional team at Sony Ericsson.

He has filed several patents and been a member of the Sony Ericsson patent board.

Tomas holds a Ph.D. in Industrial Control Systems from the KTH Royal Institute of Technology in Stockholm, Sweden.

JOS BAART

Jos Baart is a highly skilled sales leader with over 20 years experience in the global ICT industry.

His previous roles include senior strategic business development, product marketing, sales and sales support positions at Ericsson (both country and group level) and at Lavastorm Analytics

where he led the EMEA Sales function.Jos studied Electronics and Marketing Management in

Eindhoven and Utrecht, The Netherlands.



52

ELSIE GÖRANSSON

Elsie Göransson has been a member of Flexenclosure’s management team since its establishment as an independent company.

She began her career as an auditor and has more than 20 years experience in CFO and senior human resources and IT positions across a variety of

companies, both startup and multinational. She is a change management expert, with a history of running successful transition projects at both team and organisation levels.

Elsie holds an MBA from Stockholm University, Sweden.

MARCUS KARLSSON

Marcus Karlsson has more than 20 years of experience from the manufacturing industry in leading product management positions.

Prior to Flexenclosure he was the Deputy Division Manager at Pharmadule Emtunga and managed global manu-facturing and product launch projects.

MATTIAS KARLSSON

Mattias Karlsson has for the past five years been in charge of the development of Flexenclosure’s award winning green power management solution eSite.

Mr. Karlsson has over 20 years of experience from electrical and automatization projects, mainly in the process and renewable areas. As both

a designer and a project manager, he has a wide experience of evaluating and designing options for both on- and off-grid power systems.

AuditorsAnders Meyer (member of FAR), Authorized Accountant at Grant Thornton Sweden AB. Auditor in charge since 2012. Address: Sveavägen 2, 103 94 Stockholm, Sweden.


Corporate governance and internal control report

53

Flexenclosure AB (publ) is a Swedish public limited company.The shareholders’ meeting is the highest decision-making body and the forum

where the shareholders can directly exercise their power. Shareholders meet at least once a year to approve the company’s annual report, discharge the directors and the CEO from liability and decide on the appropriation of profits for the previous financial year. The Annual General Meeting also elects board members and, when required, auditors for the coming term.

The board of directors is appointed by the shareholders’ meeting to manage the company’s affairs on behalf of the shareholders. The board has broad powers to manage the company without the involvement of the shareholders. However, the shareholders always have the right to call an extra ordinary general meeting, (EGM), at any time and replace the board members.

The CEO is appointed by the board and is responsible for the day-to-day management of the company according to instructions issued by the board of directors. The division of responsibilities between the board and the managing director is stipulated in a set of written instructions that is approved by the board of directors.

The auditor is appointed by the shareholders at the annual general meeting, (AGM), to audit the company’s annual report and accounts, as well as the running of the company by the board of directors and the managing director. Formally, the auditor’s report to the shareholders, but in practice they also have an important role in supporting the board in its task of overseeing the CEO’s running of the company.

The corporate governance model is defined by legislation, self-regulation and tradition. The main pieces of legislation are the Swedish Companies Act, the Accounting Act and the Annual Accounts Act. In addition to these, there are a number of self-regulating frameworks of rules, such as the Swedish Code of Corporate Governance.

The Swedish system is based on a strict division of power and responsibilities between the share holders (through the annual general meeting), the board of directors, the executive management and the auditors.

Corporate governance and internal control report


Code of business ethics

54

To maintain a high ethical standard, Flexenclosure has issued a document called “Code of Business Ethics” that applies across the entire company and is applicable to all activities within the company. It’s based on the UN Global Compact 10 principles, categorised in four areas;

Labor StandardWe will not compromise health or safety in the workplace for production or profit. It is the goal at every Flexenclosure location to have and maintain a safe workplace. Health and Safety policies and procedures are published for all our offices and work sites.

All employees must perform their duties while following the published health and safety rules, and must promptly report any concerns, safety violations or incidents.

Flexenclosure does not use child labour or forced labour.Flexenclosure respects the freedom of individual

employees to join or refrain from joining legally authorized associations or organizations.

We consider diversity as a strength and honour and respect all who choose to work for us. Every employee must respect the people and cultures with whom or in which they work. We seek diversity at all levels and expect a work environment in which all employees can develop and contribute to their full potential. We give equal opportunity for employment to all individuals, regardless of their race, colour, gender, religion, sexual orientation, origin, disability, age or other status of individuals unrelated to the individual’s right to perform work.

EnvironmentFlexenclosure works in a manner that protects and promotes the well-being of the environment. We minimise any harmful effects of our operations on the natural environment and finite resources. We will comply fully with all relevant environmental legislation.

Anti-corruptionFlexenclosure does not accept any form of unethical business including all corrupt, fraudulent, coercive, collusive or obstructive practices.

Human RightsWe support human rights consistent with the UN Declaration of Human Rights and will consider carefully before trading with or investing in countries which are governed by regimes that do not adhere to the UN Declaration.

Code of business ethics


Health, occupational safety and environment (HSE) policy

55

Occupational safety is of great importance for Flexenclosure. The Health, Occupational Safety and Environment (HSE) Policy is the set of basic principles and guidelines that will guide the company management regarding the health and safety of the staff, working environment and the impact on the external environment.

Procedures regarding Health, Occupational Safety and Environment are described in the Flexenclosure HSE manual: e.g. operations, travel safety, emergencies, information and education, follow-up and records.

Flexenclosure provides and sustains a safe and healthy working environment for all employees. This is achieved by integrating health and safety into all our processes and procedures and by creating a company culture within which we believe that all accidents are preventable.

The goal for the company’s work environment is to create a physically, mentally and socially healthy and stimulating workplace for all employees. Every employee shall understand the importance of their own work and be given the opportunity to influence their own work situation and their own health.

Flexenclosure always aims to minimise any negative impact on the environment. Flexenclosure should protect the environment, use resources in a sustainable manner, recycle and handle residual waste in an acceptable manner. Our design process should design for sustainability. In our projects we shall consider hazards and risks regarding environmental impacts.

Flexenclosure’s key HSE activities are as follows:

• Leadership shall promote safety at all levels

• Management team shall define and revise the HSE goals every year

• Managers are responsible for healthy and safe working conditions and shall work together with their employees to gain their participation and encourage co-responsibility for HSE matters

• Perform risk analyses when introducing new technologies or working methods

• Using environmentally sound technologies

• Using waste management procedures

• Education of the HSE policy and procedures for all employees

• Evaluate performance and continually improve the HSE procedures

Health, safety and environmental legislation and client requirements creates minimum requirements for HSE compliance but Flexenclosure seeks to maintain a higher standard. Ideas for improvements in our HSE performance can come from laws, client demands, staff ideas, technical and economic advances.

For each customer project that involves on-site construction work, an HSE Project Plan will be issued to assess the potential HSE risks involved with the project mission.

Health, occupational safety and environment (HSE) policy


Risk management

56

By having predetermined procedures for risk identification, assessment and mitigation, Flexenclosure will be able to protect the organisation’s resources and income opportunities by:

• avoiding threat

• reducing the negative effect or probability of threat

• or even accepting some potential or actual consequences of particular threat

Flexenclosure has defined the following risk categories:

1. Country/Politics

2. Customer

3. Business Partners

4. Product

5. Operations

6. Legal

7. Financial

8. Sales

Each of these risk categories is explained in the Risk Management framework – the identified risks and the mitigation actions as well as reference documents to existing procedures in the Quality Management System.

Risk management is not a separate process or action. It shall be used throughout the processes within the company’s business operations to make sure Flexenclosure has the resources to minimise, monitor and control the probability and/or impact of unfortunate events or to maximise the realisation of opportunities.

Risk management


Social responsibility

57

It’s important for Flexenclosure to make a social contribution, for example by:

• Developing products that use renewable energy to make electricity – and thereby social development – available to rural areas of Africa and Asia.

• Fuelling economic development by enabling better data communications via eCentre deployments.

• Seeking to work collaboratively and to create a great working environment simply by being good colleagues, with a strong work ethic, positive attitude and belief in team work.

• Aiming to do good fair business in accordance with “Flexenclosure Code of Business Ethics”.

• Always seek to deliver what we promised in a good and fair way.

We believe that technology should improve people’s lives.

Social responsibility

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