CONTENTS
Eniro in brief
Year 2010
Eniro regains its financial stability
Results from operations
Comments from the CEO
Business concept and Strategy
Eniro’s history
From search engine to purchase engine
Business areas
Market
Corporate responsibility
Organization
Corporate Governance 2010
The Board
Group management
The Share
Operative risks and risk management
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Board of Directors’ Report
Consolidated Income Statement
Consolidated Balance Sheet
Changes in Group equity
Consolidated cash flow statement
Parent Company Income Statement
Parent Company Balance sheet
Changes in equity, Parent company
Parent Company cash flow statement
Accounting principles
Notes
Quarterly summary
Multi-year summary
Certification by the Board of Directors and the President
Audit report
Annual General Meeting 2011
Definitions
Addresses
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FURTHER INFORMATION
For more information about Eniro, visit www.eniro.com
Contact: Eniro Investor Relations, tel: +46 8 553 310 00,
e-mail: info@eniro.com
FINANCIAL CALENDER 2011
April 29, 2011
Interim report Jan–Mar 2011
April 29, 2011
Annual General Meeting 2011
July 15, 2011
Interim report Jan–Jun 2011
The combination of high debt and declining revenues in the beginning of 2010 led to Eniro
– despite the company having undergone a rights issue the previous year – having a limited
operational and financial flexibility. During the summer of 2010 Eniro was forced to commence a
discussion with its lenders on conditions of the credit facilities. The Board for Eniro then formulated
an action plan based on three priorities:
1.
Reduced debt
2.
Focus on profitable operations
3.
Commercial focus and continued cost-savings
ENIRO IN BRIEF
YEAR 2010
Eniro is a leading local search company in the Nordic market. Millions of users can easily find points of sale that have the
products and services they are interested in by using Eniro’s services. Advertisers can market themselves to consumers
and companies that are likely to buy and thus gain new customers and increased sales. Better searchability leads to
better business.
The information in Eniro’s databases is available through various distribution channels, Internet and mobile services,
printed directories and other publications, and directory assistance services and SMS services.
Eniro markets its products and services under well-known brands, including eniro.se, Gula Sidorna, Din Del and Eniro 118
118 in Sweden; gulesider.no, kvasir.no, Gule Sider and Gule Sider 1880 in Norway; krak.dk and eniro.dk in Denmark; and
Panorama Firm in Poland.
Eniro markets and sells advertising to more than 500,000 customers. Each year, the company’s around 2,000 sales
representatives contact an estimated 2.5 million existing and potential customers.
Eniro has approximately 3,900 employees and operations were during 2010 divided into the business areas
Directories Scandinavia, Voice Scandinavia and Finland/Poland.
Eniro operates in a search market that is undergoing signifi-cant change as a result of small and medium-sized companies moving away from printed advertising products to digital me-dia. This change has led to reduced revenues for the directory industry, so also for Eniro. It is a challenge for all search com-panies to develop their market and thus maintain advertising revenues with good profitability. Eniro’s strategy has been to adapt to the changed search behavior by developing attractive search services and competitive product offerings online. Eniro’s operations generate positive cash flow. As a result of large and small, often strategically correct acquisitions, in bination with a historically generous dividend policy, the com-pany has had high debts. Eniro has nevertheless always been able to fulfill its amortization plans with good margins. With the financial crisis, the view of financial risks was however chan-ged, which drew attention to companies with high debt, and the situation was made worse by the slowdown in operating revenues during 2009 and 2010.
During 2010, Eniro was not able to fulfill the released forecast regarding development of operating income. This was in part the result of a reduction in demand for printed directories, in combina-tion with a low order intake at the beginning of the year. Coinciding with a potential elevated tax cost in the Norwegian operations, the risk for not meeting the loan conditions increased. The company was therefore forced during the summer of 2010 to commence a discussion on the loan conditions with the lending banks. An ac-tion plan was drafted with three priorities in order to regain initia-tive, create financial stability and continue to develop operations. Johan Lindgren, with extensive experience of leading companies in change, was chosen to be the right person to, in his capacity as President and CEO, lead the work with the three priorities.
Reduced debt
After having evaluated possible options the Board proposed strengthening the balance sheet through a guaranteed rights offering of around 2.5 billion SEK. This was in the sharehol-ders’ interest as it would reduce the financial risk and make it possible for the new leadership to continue to implement the strategy according to the established business plan. An Extraor-dinary General Meeting approved the proposal on 26 November and the subscription period for the rights offering ran from 3 to 17 December 2010.
The rights offering amount that was brought into the company amounted to approximately 2.4 billion SEK after transaction costs and was used in its entirety to reduce the company’s loans. The Group’s debts, expressed as interest-bearing net debt, was reduced by around 2.7 billion SEK and amounted to SEK 3,951 M on December 31, 2010. In January 2011, an agreement was entered into with the company’s lending banks regarding the company’s financing until the end of 2014.
A long-term sustainable capital structure and financing had thereby been secured.
Focus on profitable operations
The second priority entails focus on the continued evaluation of all operations, products and services with consideration of their contribution to the company’s earnings, with the implication that unprofitable operations are terminated.
Eniro’s operations in offline and online in Finland did not reach the desired market position and profitability. During the third quarter, Eniro therefore divested certain assets within its offline and online operations in Finland to Fonecta. Earlier in the year, Eniro’s holding in Finland’s largest online community, Suomi24, had been divested and in the fourth quarter, the Yritystele bu-siness-to-business search service and the local Finish directo-ries, ETD, were closed down. The remaining operations in Eniro Finland are since then completely focused on Voice.
Also small operations, such as individual directories, will be terminated if they do not meet profitability demands. Opera-tions that lie outside the core operaOpera-tions will be sold or closed down. As an example of this, Oreo, which is active within public procurement and offers digital procurement systems, was di-vested during the fourth quarter..
An increased profitability focus also characterizes product de-velopment, which is focused on fewer projects with the poten-tial to generate income in the near future.
Commercial focus and cost-savings
The third priority is related to increasing the product range and increasing sales efficiency in order to slow down the revenue decline in 2011 and turn to growth in 2012.
Through extensive investment on product development, a new search service was launched in the later part of 2010. The work is now directed towards sales and marketing of new customer offers, while product development is maintained at an even level. The sales forces for print and online were merged at the beginning of the year and the organization has been adap-ted to increase the support to sales representatives in their work.
Efficiency initiatives have been undertaken within the entire organization and the total operative cost base was reduced during 2010 by SEK 435 M, excluding currency effects and for comparative operations. Potential for further cost savings has been identified and will entail continued cost reductions of SEK 200 M per year for 2011 and 2012.
•
Divesting and restructuring of online and offline operations in Finland•
Rights issue of approximately 2.4 billion SEK after transaction costs was implemented•
Net debt at December 31, 2010 amounted to SEK 3,951 M (6,645)•
The Board of Directors proposes no dividend for 2010RESULTS FROM OPERATIONS
•
Operating revenues amounted to SEK 5,326 M (6,581)•
EBITDA amounted to SEK 605 M (1,807)•
Net income was SEK -4,620 M (608)•
Impairment of SEK 4,264 M, mainly attributed to goodwill in the Norwegian operation•
Operating cash flow amounted to SEK 151 M (1,153)OPERATING REVENUES AND EBITDA MARGIN 2007–2010 OPERATING REVENUES PER SEGMENT 2009–2010
5,000 4,000 3,000 2,000 1,000 0 50 6,000 7,000 60 70 2008 2007 2009 2010* 40 30 20 10 0 OPERATING REVENUES, SEK M
EBITDA MARGIN, %
* Adjusted EBITDA, excluding restructuring costs and other items affecting comparability, amounted to SEK 1,266 M.
DIRECTORIES SCANDINAVIA VOICE SCANDINAVIA FINLAND/ POLAND 0 1000 2000 3000 4000 5000 2010 2009
FINANCIAL TARGETS 2011 AND 2012
OPERATING REVENUESFor 2011, a single-digit organic revenue decline is expected. A turn around to organic revenue growth is expected in 2012. COSTS
The total net cost reduction in 2011 is expected to be SEK 200 M compared to the cost base in 2010, excluding the effects from the divestments and restructuring of the online and offline activities in Finland. In 2012, total costs are estimated to be SEK 200 M lower compared to the total costs in 2011.
CAPITAL STRUCTURE
The target is a net debt in relation to EBITDA not exceeding a multiple of three. DIVIDEND
In September 2010, I took the position as CEO for Eniro, which was then in a very difficult position. Revenues had declined more than expected and the company risked not being able to cope with the imposed lenders conditions on an interest-bearing net debt in relation to EBITDA. Fully aware of the high debt in relation to the company’s size, I took on the task be-cause I saw a company with a strong market position, well-known brands, many customers and loyal employees, present on a growing search market.
Eniro’s business concept – to connect buyers and sellers, re-gardless of the media – is a profitable business, which gene-rates significant customer value and benefit for consumers. Eniro’s position as a leading local search company creates good conditions for developing business in a market that is growing in both the Nordic countries and in Poland. The company’s sig-nificant debt has historical reasons and the financial problems have never been a question of lack of liquidity – on the contrary, Eniro continues to have positive cash flows and has been able to keep up a high amortization rate.
Despite this, work with the company’s long-term financing dominated the last months of 2010. Raising capital was dee-med necessary and in the end of October, the Board propo-sed a rights issue of 2.5 billion SEK in order to reduce debts, strengthen the balance sheet and secure sustainable financing. The rights issue was fully subscribed. Of the shares offered, about 79 percent were subscribed with subscription rights, about 2 percent by people who signed up for subscription without subscription rights and the remaining approximately 19 percent were allotted the so called sub-underwriters, institutional and private investors who guaranteed part of the rights issue.
It is gratifying to see that the rights issue was fully subscribed and that the ownership structure was renewed without the lending banks having to fulfill their guaranteed commitments. It is encouraging that Eniro is currently owned by institutional and private investors who have taken an active investment de-cision. Now it is our responsibility to deliver results that live up to expectations.
The past year
Operating revenues for 2010 reduced organically by 14 percent. The decrease was in line with our guidance to the capital mar-ket but highlights the fact that Eniro has not fully succeeded in adapting activities to the changed search behavior, where
a larger part of the media consumption occurs via digital me-dia. To meet the decrease in revenues, an action plan for re-ducing the operative costs was implemented. Unprofitable entities were terminated and an overall overview was made to adapt activities to the new conditions. The operative cost base was reduced by SEK 435 M, which surpassed our targets. The number of employees and consultants are aligned to the size of the operations, while the pace of activities within product development, after two intensive years, has been reduced to a sustainable level.
EBITDA decreased to SEK 605 M, as a result of weak revenues and negative impact of a one-time effect of SEK -626 M as a result of divestments or restructuring of operations in Finland. Adjusted EBITDA, excluding restructuring costs and other items affecting comparability, decreased by 32 percent compared with the previous year. Eniro showed a substantial loss for the year, net income was SEK -4,620 M, as a result of impairment of intangible assets amounting SEK 4,261 M, primarily relating to the Norwegian operations. However, we generated a positive operating cash flow of SEK 151 M, negatively affected by one-time effects related to the refinancing of SEK 256 M.
Forward-looking activities
The rights issue enabled us to secure long-term financing with new loan agreements that extend to the end of 2014. We can therefore put the discussion of financing behind us and com-pletely focus on developing operations in order to be best in local commercial search services.
Strategy remains intact
Eniro’s strategy is to be a leader within local commercial search. By local search we mean the combination of breath in global digital technology and depth in local knowledge; being either local information or global information with local relevance. Lo-cal search leads to purchases more often compared with global search and places higher demand on information being current and correct.
In order to meet the changed search behavior we are develo-ping opportunities online. Over and above search advertising we will have a broad offering online, with advertising develo-ped in-house as well as advertising via partnerships. The chal-lenge for us is to give users relevant search services and to give customers a range of attractive advertising possibilities, which produce search hits from consumers who are willing
to-COMMENTS FROM THE CEO
2010 was a difficult year for Eniro, with a significant decrease in revenues and earnings. At the end of
the year, a rights issue was successfully concluded. Now that long-term financing has been secured
we can give our full attention to turning the negative revenue development around and be best at
local commercial search services.
buy, which in the end generates business. Our search services are compatible with iPhone, Android and other smartphones, opening the door to entirely new services. A leading position within online and mobile services is a prerequisite to be com-petitive within local search advertising, given that the amount of advertising companies’ advertising investments within mo-bile solutions is predicted to increase substantially.
Just as our industry colleagues in the world’s search and media markets, we find ourselves in a process of change as the result of going from print to digital media, which means a significant transformation of our business to being more relevant, as well as needing to strengthen our customer relationships and introduce a more efficient cost structure. The conversion is necessary for Eniro’s future, while at the same time being a real challenge to implement the transformation with maintained revenues. Printed directories are still an important revenue source for Eniro and we will continue to publish directories as long as there is a customer and user demand and as long as each publication meets our profitability requirements. All operations, products and services are reviewed with regard to their contri-bution to company performance and unprofitable operations will be terminated..
More efficient sales and expanded offering
Our goal is to slow down the decline in sales in 2011 and to return to growth in 2012. The key to turning around Eniro’s development lies in more attractive core services, a broader offer and more effective sales.
For the current year, we have put forward a business plan to capitalize on the investments made in product development in recent years. The new versions of eniro.se and gulesider.no have been well received by our customers. We work continously to increase the attractiveness of our core services and thus pro-mote continued high usage and thereby securing good return on investment for our customers.
My ambition is that Eniro will be able to offer a good media mix in all the channels where advertisers wish to reach their custo-mers. With our brands as starting point, we will present a broader product offering, for example new advertisement formats, videos and development of homepages. In order to broaden our offe-ring, we may enter partnerships, which long-term could mean a stronger revenue base but also lower margins.
A number of activities and actions have been initiated to increase efficiency in Eniro’s sales. Over and above the sales channels we currently use, we will better utilize under-used channels such as customer service, letters and SMS. Eniro’s already strong sales culture will be strengthened to meet customer demands. Our professional sales force will be given the best opportunities to carry out their work, with support from the rest of the organization. The organizational structure has been aligned with a focus on land-based sales organizations in order to clarify the responsi-bility for revenue generation and cost control. Measures include further centralization of product development and business support, greater focus on customer-oriented delivery management and complement the finance function with specific responsibility for monitoring and controlling of the transition of the business..
Positive start in 2011
In January 2011, we saw the sales start of the new search services that have been launched on the Swedish and Norwegian markets. The preparations have been thorough, the sales representatives were able to start its activities as planned and we have received positive feedback from our customers. It should however be re-membered that a large part of the revenues for 2011, about 40 percent was sold during 2010 at lower values compared to the previous year. The sales cycle from sales opportunity to revenue recognition is about six months, which gives us good visibility, but also a corresponding retardation of the measures we are imple-menting. All in all, the measures we are implementing are estima-ted to result in a single-digit organic revenue decline during the second half of the year.
In conclusion, I see good opportunities for Eniro in the coming years. Market conditions are better than they have been in recent years, with strong economic conditions and growing advertising markets in the Nordic region and Poland. Eniro has important strengths in the form of a strong market position, a unique da-tabase, well-known brands, new search services at the forefront of development, and a large customer base. In addition, we are working hard to broaden our product range and to streamline sales by new sales channels and an organization with more com-mercial focus.
Finally, I would like to thank all shareholders who participated in the rights offering, all customers, and all employees who, despite a turbulent year, have continued to make great efforts. We can only gain competitive trust by continuously delivering according to expectations. It will require much contribution over the co-ming year, and I look forward to jointly implementing our plan to become the best in local commercial search services
Johan Lindgren
Eniro has a unique database linking buyers and sellers and making it easy to search regardless of distribution channel. The development of new and improved products and services is at the core of its strategy to achieve its vision to be the first choice for local search.
Eniro offers local search and directory services. Revenues are derived from customers who pay for adverts that are publis-hed and distributed in distribution channels online, printed products, directory assistance and mobile services.
Main strengths
Eniro’s position as a leading local search company in the Nordic market is based on a number of strengths that to-gether create good conditions for Eniro’s ability to meet its objectives and meet future challenges.
Unique databases. Over the years, Eniro has invested signifi-cant resources in developing its databases with commercially relevant information about companies in markets in which Eniro is active. The information gives Eniro a key competi-tive advantage while raising entry barriers for other search companies. Databases are updated daily, allowing users to get relevant hits with up-to-date information.
Large sales force. Eniro has a sales force of approximately 2,000 sales representatives, who have developed long-term relationships with their customers. Eniro devotes significant resources in training its sales force. To increase efficiency and provide customers with high skills, parts of the sales or-ganization are focused on a particular brand and/or search service. A number of efficiency measures were introduced in early 2011, among which are focused sales teams dedicated to potential customers, to regaining lost customers, or for media devices and mobile services.
Diversified customer base. Eniro brings together more than 500,000 customers with users. The client base consists of companies of different sizes, operating in different industries and geographic areas, and this diversification makes Eniro less vulnerable to changes in specific industries or regions. Product innovation. A major strength is the ability to develop innovative products and services and to quickly adapt to user preferences. A successful product development has been key to successfully maintaining Eniro’s strong market position. Well-known brands. Eniro’s brands is an important asset. According to a survey conducted by Mind Research in June 2010, Eniro’s brands have the following brand recognition: Eniro (Sweden) 97 percent, Gule Sider (Norway) 94 percent, Krak (Denmark) 95 percent.
Leading marketing tool for local companies. Eniro enables local companies to reach a wide, local audience, willing to buy; while global competitors have focused on general searches instead of locally tailored services. The local sales force also enables Eniro to maintain a close relationship with local com-panies in their respective markets.
Strategy
Eniro’s vision is to be the first choice for local searches. The ambition is to maintain Eniro’s strong market position while managing the transition from print products to online search. To meet the changing search behavior Eniro has developed its databases and services to enhance relevance for users and improved searchability for customers. The goal is to increase profitability by continually developing its value-adding offe-rings and revenue model from providing valuable information to generating transactions.
A number of initiatives and actions have been carried out to achieve this vision.
Eniro is focusing on increasing the attractiveness of its core services. The new versions of search engines eniro.se in Swe-den and gulesider.no in Norway represent a significant im-provement of the customer offer. The new platform enables improved products and services and adds up to an expanded offering. Sales of new advertising formats started in Sweden and Norway in January 2011 and will start in Denmark in the third quarter of 2011.
The effectiveness of sales has increased by sales represen-tatives starting to use hitherto under-utilized distribution channels such as email, SMS and letters. To achieve the most effective mix of communication links, elaborate customer segmentation has been initiated. The number of sales leads per customer will also increase.
Additional potential to increase efficiency in order to imple-ment cost savings has been identified. Profitability of indivi-dual products is continuously evaluated to maximize the con-tribution to the company’s earnings, cash flow and customer satisfaction.
Eniro was formed through a spin-off of Telia’s
(now Telia Sonera’s) operations for directories
and was listed on the Stockholm Stock Exchange
in 2000. But Eniro’s history dates back to the
1880s when the first Norwegian Telephone
Directory was published by the Norwegian
Tele-communications Administration (now Telenor).
The Royal Telegraph Agency published the first
Swedish telephone directory in 1889, issuing a
couple of hundred copies.
The first version of the Swedish yellow pages, Gula Sidorna, was published in 1978 by the Telecommunications Authority (Televerket) and the U.S. conglomerate ITT. The first online version, gulasidorna.se, was launched in 1996 and Eniro was first of the European directory companies to offer mobile location servces. In the early 1990s, Televerket formed a separate directory unit and entered the markets in several European contries, through acquisitions and the introduction of directories. At the time of the initial public offering, Eniro had presence not only in Sweden but also in Denmark, Finland, Estonia, Latvia, Lithuania, Russia, Belarus, Ukraine and Germany. As an independent company, Eniro had a clear strategy to grow in new markets.
International expansion
Shortly after the IPO , a major expansion in northern Europe was initiated through the acquisition of related directory, Internet, and directory assistance companies. Among the first acquisi-tions was the search company Windhager and the business-to-business company Wer Liefert Was? in Germany. Other early acquisitions were the purchase of the Yellow Pages of Moscow and of Poland’s leading directory company, Panorama Polska. Eniro also acquired the directory operations of the Finnish com-pany Elisa Oy, Finland’s second largest directory comcom-pany and market leader in directory assistance.
Through the acquisition of Scandinavia Online, which owned the web portal Passagen and the search engine Evreka, Eniro got access to IT infrastructure and skills within IT applications and search functionality. An integrated search service in all the Nordic countries (eniro.se, eniro.no, eniro.fi and eniro.dk) was launched in 2003. In the same year, Eniro acquired the company Respons, which ran the leading Swedish directory assistance 118 118, and a number of directory assistance ser-vices in Finland.
Search companies with focus on Nordic countries
In 2004, a strategic decision was made to focus operations on the Nordic countries and Poland. Economies of scale were
made possible by seeking a leadership position and being the largest directory on these markets. The acquisition of the Swedish company Gula Tidningen allowed Eniro to strengthen its position in classifieds. In 2005, the company acquired the leading Norwegian search company Findexa, which similarly to Eniro had its origin in the national telephone company (Telenor). Eniro also acquired a number of directory services in Finland and sold its operations in Estonia, Latvia, Lithuania, Russia and Belarus.
In late 2006, Eniro launched an updated version of the search engines eniro.se, eniro.no, eniro.fi and eniro.dk. In 2007 and 2008, Eniro reached a leading position in online services on the Danish market through the acquisition of the leading Da-nish search engine Krak. At the same time Eniro expanded its distribution channels by partnering with other media compa-nies. The remaining German business Wer Liefert Was? was sold in 2007 and Eniro had by then achieved a clear position as the leading Nordic search company.
Online development and efficiency
A phase of intensive product development and restructuring of operations then followed as a result of the transition by users from print to digital media. With the focus on local commercial search, the aim was to go from the bulk of revenues deriving from print products to developing online opportunities. At the same time, the company was reorganized from a holding company structure to a corporate structure, which included streamlining the Group-wide functions. New business areas were Directories Scandinavia, Voice Scandinavia and Finland/ Poland. Eniro introduced package sales, which means that all advertisers are visible both in the directories and online, and the previously separate sales forces for offline and online were merged into a joint sales organization designed to strengthen customer relationships and increase efficiency in sales. The Finnish offline and online businesses were divested or closed down in 2010 because they had not achieved the de-sired market position and not shown consistent profitability. Following these measures Eniro is focused on Voice in Finland and the remaining operations are included in the segment Voice Scandinavia as of 2011.
During 2010 a big step was taken to Eniro’s vision to be the best in local search. A new version of eniro.se with product search functionality was launched in Sweden and shortly the-reafter a new version of gulesider.no in Norway was launched with the same functionality. In conjunction with the launch of the new service, Eniro changed its corporate image to signal the focus on online and the dynamics that Eniro creates when buyers meet sellers.
In 2010, a new version of eniro.se was launched in
Sweden and in 2011 gulesider.no in Norway was
launched with the same functionality. Eniro’s new
online service are neither a search engine nor a
price comparison site, but can best be described as
a purchase engine.
In addition to improved functionality and new design, the big-gest change with the new versions of eniro.se and gulesider. no is that users can now easily find the companies that sell a specific product or service. For the customers, the change means better and more specific searchability, which in turn leads to more contacts and business.
Local information about the wide range
The biggest news are the new method to collect information from customers and the underlying search algorithm that pro-vides relevant results when searching for products and services. No other online service allows users to find points of purchase as easily for an equally wide range of products and services. The starting point in the development of new versions was to strengthen services in the area in which Eniro already has a strong position – to generate business for customers and de-liver relevant results to users searching for where a product or service can be purchased. The existing database was expanded with more information about products and services. Thus, local information in Eniro’s own database was combined with addi-tional data on companies and their products and services.
Developed to meet customer needs
One of the aims of the new service was to create more busi-ness for customers through increased searchability. The idea is that customers should be more active in their marketing, which also offers greater benefit to the users. The service in-cludes much more companies and points of purchase than ever before, which means the number of relevant hits in-creases. At the same time, the quality, scope, and depth of the database is continuously being enhanced by users submitting suggestions for improvement.
The development work included user testing to test the con-cept and ease of use. The new online services are still good sites to search for names or phone numbers, but in addition you can now easily find where to buy a specific product or service and you can also book a hotel or restaurant table directly using the service.
Broader customer offering
The new platform enables enhanced advertising opportunities and adds up to an expanded offering. In October, the service was introduced as a mobile application for both iPhone and Android as well as a customized service for mobile Internet. The new advertising format went on sale in Sweden and Norway in January 2011 and will go on sale in Denmark from the third quarter of 2011 after launching the product search functionality on krak.dk.
Search for products and services is increasing
After the launch of the new version of eniro.se in September 2010, search results for businesses and points of purchase increased by about 40 percent, measured as number of side impressions. At the same time, a change in search behavior was noticed whereby more and more people make searches by entering the products and services they want to buy ins-tead of entering the company name or industry. On eniro.se, an increasing proportion of users search for products, compa-nies and categories.
FROM SEARCH ENGINE TO PURCHASE ENGINE
WHAT IS LOCAL SEARCH?
It is often easier to find something on the other side of the world than on the other side of the street. As a user, you want relevant results. Advertisers want to attract local customers. Most of us spend most of our money close to where we live and work.
Local search more often provides leads to purchases as compared to global search. Greater demands are placed on the information being relevant, accurate and current.
SEARCH FOR YOGA PRIVATE LESSONS IN STOCKHOLM
Product search functionality allows users to search for the specific product or service they are looking for directly in the search field. Most relevant companies are ranked highest and placed first in the hit list.
ENIRO’S MODEL FOR RELEVANT HITS
1 Basic information
2 Crawling of commercially relevant company websites
3 Information from product files 4 Keywords per industry
5 Customer interface where customers add information
The new search services gather all the information in one place. Eniro’s database contains basic information such as company names, phone numbers, addresses, websites and industries. In addition, Eniro collects information from commercially relevant com-pany websites in Sweden and Norway as well as information from product files, which are the same sources as price comparison sites use. For each industry, relevant keywords are also added, and customers can add their own search words from a particular user interface, thus affecting searchability and rankings.
1 2 3 4 5
CRA WLING KEY WORDS INFORMA TION BASIC INFORMA TION CUST OMER INTERF ACEEniro’s search services include channels online,
printed products, mobile services and
direc-tory assistance services and are marketed in
Sweden, Norway, Denmark and Poland. Group
revenues were during 2010 divided into three
business areas: Directories Scandinavia, Voice
Scandinavia and Finland/Poland. From 2011,
Eniro’s remaining operations in Finland will be
reported in the segment Voice Scandinavia.
Directories Scandinavia
Directories Scandinavia covers all search engines in chan-nels online, printed products and mobile services in Sweden, Norway and Denmark. Directories Scandinavia contributed to about 70 percent of total operating revenues for 2010. Of operating revenues around 52 percent was reported in accordance with the deferral method*) (online), around 37 percent was reported in accordance with the publication method*) (offline) and around 11 percent was other products. Through local search services Eniro sells various types of in-formation pages to their customers. The ads are usually sold as subscriptions based on an annual subscription fee. Infor-mation pages are sold per insertion and for a given period of time. The price consists of a basic price, and increases depen-ding on the amount and type of information included on the page, such as searchable headings, search words, amount of text and images. A majority of Eniro’s online revenues comes from these types of ads. Online distribution is accomplished by eniro.se, emfas.se, dindel.se, bilweb.se, leta.se in Sweden; gulesider.no, telefonkatalogen.no, kvasir.no, sol.no and proff. no in Norway; krak.dk, eniro.dk and sol.dk in Denmark. Eniro’s printed products consist of directories and other prin-ted media, including books of maps and specific guides. The company annually publishes and distributes about 700 edi-tions of regional and local directories accumulating to around 20 million copies. The regional and local directories include Gula Sidorna, Gula Sidorna–På väg and Din Del in Sweden; Gule Sider, Telefonkatalogen, Ditt Distrikt, Din Bydel and Proff i Norge, and Mostrum Vejviser and Eniro local directories in Denmark.
In Norway, the use of Gule Sider annually amounts to about 38 percent, according to TNS Gallup, Consumers & Media. A survey by TNS SIFO indicates that 58 percent of Swedes use the yellow pages at least once a year and 36 percent do it every month.
Eniro offers additional ways to reach their target audiences. Display advertising means customers buy an ad space for a certain period. The ads are usually linked to a number of search words and displayed to users searching for those words, but there are also ads that appear for all users. Spon-sored links are displayed next to search results and contribute more traffic to corporate websites. The sponsored link is dis-played when someone searches for the words chosen by the customer. Eniro charges per “click” on the link.
The new versions of eniro.se and gulesider.no, which were launched in Sweden and Norway, permit Eniro to provide a new range of improved products and services. The new online ser-vice offers ad format that is intended both for small and medi-um-sized businesses and larger companies and media buyers. By continued launches equivalent mobile services will also be offered in all three countries.
User-written reviews have become an increasingly important part of consumer purchase decision making when purcha-sing goods or services. Eniro has launched rejta.se in Sweden, dehitter.dk in Denmark and anbefallt.no in Norway, where users contribute information themselves and also partake of ratings and reviews from other users.
*) Principles for revenue distribution are described on page 52.
BUSINESS AREAS
REVENUE DISTRIBUTION 2010
17% 13% 70% Directories Scandinavia Voice Scandinavia Finland/PolandVoice Scandinavia
Voice Scandinavia includes directory assistance services via phone and SMS in Sweden, Norway and Finland. In 2010, Eniro managed around 50 million calls and text messages. Voice Scandinavia contributed about 13 percent of operating revenues for 2010.
Voice Scandinavia offers personalized search services via pho-ne and SMS. Users pay for the services and Eniro gets revenue per call or text message. Eniro offers directory assistance and personal search services by Eniro 118 118, Eniro 118 119 and Eniro 118 118 SMS in Sweden and Gule Sider 1880 in Norway. In Sweden, Eniro 118 118 is a market leading player in directory assistance. The Swedish operation has gradually been focused in fewer places, and now operates from four locations in Sweden. In Norway, Eniro offers voice services from a chal-lenger position.
In recent years the number of calls received has decreased, mainly due to increased competition and fewer requests for standard directory assistance such as information on names and numbers, which is easily accessible via the Internet. The trend toward more advanced personal search is positive. Eniro has further refined its voice services to offer a personalized search service that encourages greater use.
In 2008, Eniro’s product portfolio in Sweden and launched Answer Service, through which Eniro handling switchboard calls to major companies in Sweden.
Finland/Poland
Finland/Poland covers all operations in Finland and Poland. Finland/Poland contributed about 17 percent of operating revenues for 2010.
Eniro’s Finnish activities within offline and online were di-vested or closed down in 2010 because they have not achie-ved the desired market position and did not show consistent profitability.
During the second quarter Eniro divested its holdings in Finland’s largest online community, Suomi24 (S24). During the third quarter Eniro divested certain assets in the offline and online operations at Eniro Finland Oy Fonecta Ltd.; databa-ses for Helsinki and Pirkanmaa and online services (Business to Consumer) including the domain name eniro.fi. During the fourth quarter, the business-to-business search engine Yritys-tele was sold to Bisnode and local Yritys-telephone directories, ETD, were shut down.
As a result of these measures Eniro is now solely focused on Voice in Finland. This operation comprises directory assistan-ce and call assistan-center. The call assistan-center handles both serviassistan-ces for incoming and outgoing calls, which includes both customer service and telemarketing. As of the first quarter of 2011, the Finnish operations, which in 2010 had revenues of SEK 291 M, will be included in the segment Voice Scandinavia.
Eniro holds a strong position in the printed products in Poland and with its regional directory Panorama Firm has about half of the directory market. Eniro is also currently present in the online search service pf.pl, which also is available as a mobile service. The market for online services is however, not as well developed in Poland as it is in the Scandinavian countries. Internet use by the population is generally lower, while the usage of those who have access to mobile Internet is the hig-hest in Europe. Eniro does not offer package sales in Poland, but sells exposure in directories and online separately.
FIGURES ABOUT ENIRO
Eniro’s internet services have in total about 1 billion user •
sessions per year
For its customers in Sweden and Norway Eniro generates a •
transaction value of about 250 billion SEK per year (TNS SIFO) Each day Eniro deals with about 11,000 customer contacts •
The search market is based on the needs of
individuals and companies to find companies
from which they can buy the goods and services
they are looking for. Companies pay for various
forms of advertising to make them searchable
and to attract new business. Search companies
provide different kinds of advertising channels.
Growing market in rapid change
The total search market in Scandinavia and Poland is growing while the use of printed products is declining. As a result of changed user behavior an increasing share of the advertising expenditure is transferred from print products to equivalent online services. Search companies have addressed the change in the market by developing online and mobile services and also by continuing to develop directory assistance services. The search markets in Sweden, Norway and Denmark are expected to show average annual growth rates of 5 percent, 7 percent and 3 percent in the period 2009–2014 according to BIA/Kelsey.
From print to online
The printed products are still attractive marketing tools for advertisers, with its high reach, long life and users who are willing to buy, as compared to other print media. Directories often provide advertisers with a good return on their adverti-sing investment. This means that they are expected to play an important role for the foreseeable future. Nevertheless, growth in online is partly at the expense of printed products. BIA/Kelsey estimates that ad revenue from printed products in Scandinavia will be reduced by an average 11 percent per year from 2009 to 2014, while revenues from online adverti-sing in search media is estimated to increase by an average of 14 percent over the same period.
The Scandinavian countries are expected to have a rapid growth in online up to 2014. BIA/Kelsey estimates that the segment for online services in Sweden will grow by an average of 16 percent per year while in Norway it is expected to grow by about 14 per-cent per year and in Denmark with about 12 perper-cent per year. The market in Poland is expected to increase by 20 percent. Of the aggregate market for local search in Scandinavia, 78 per-cent is estimated to be revenues from online services in 2014, compared to 51 percent in 2009.
Internet fastest growing advertising media
Internet’s share of the search market continues to grow. The transformation from print to online has come the furthest in the Nordic countries, which lead the world in terms of Internet usage, the proportion of households with broadband connec-tions and the number of cell phone subscripconnec-tions per capita. The largest part of the market for Internet advertising consists of display advertising and search marketing. According to IRM, display advertising and search marketing account for about 70 percent of the total Internet advertising market in Sweden. With the development of search engines and their use, search marketing has come to play a central role in Internet adverti-sing. Search engines have traditionally dominated search advertising. Today, the sale of search advertising brings in almost as much revenue in Sweden as display advertising.
Mobile advertising is expected to increase
Cell phone penetration in the markets in which Eniro is present is high overall and virtually everyone has access to cell pho-nes. The use of smartphones and the amount of data now be-ing moved to mobile networks is increasbe-ing rapidly. Accordbe-ing to Mediavision, around 2 million Swedes have a smartphone today.
As cell phones become more advanced, user behavior changes. Cell phones are increasingly being used to search the Internet from places where previously there was no Internet access. As a result, the search for goods and services via cell phone is expected to increase. The share of advertising companies’ ad investments in mobile solutions is expected to increase sharply in the coming years. A leading position in online and mobile services is therefore essential to be competitive in local search advertising. Eniro provides mobile search services in Scandina-via, which allows search directly in cell phone, through app-lications for smartphones, mobile Internet solutions, and also through SMS services.
Reduced volume in voice services
The activities of directory assistance are influenced by the fact that more and more people are seeking information online and via their cell phones, which means that the number of calls about telephone numbers and names is decreasing. Product development is a success factor also in voice services. The de-velopment of the voice industry is expected to move toward more personalized services, for example, providing information on good restaurants and booking tables.
Competition and industry colleagues
Both the markets for online and printed products are characte-rized by high competition. For the printed products it is mainly in the form of substitute competition, that is, when one search channel gains users and advertising from another search chan-nel. Eniro’s printed products compete with other directories and other printed forms of advertising activities including traditio-nal media such as newspapers, radio, television and outdoor advertising and direct marketing.
Eniro has a high market share in the Scandinavian and Polish markets. Competitors range from major global players to smal-ler, local companies, niche players, media groups and traditional directory companies.
Industry colleagues are European search companies originating in directory operations. All of these companies are undergoing a shift from offline to online and currently have a relatively high debt due to a combination of growth through acquisitions and aggressive strategies for the company’s capital structure.
Unlisted companies Main Markets Owners Revenues 2010 Net debt 2010
Listed companies
Netherlands, Finland, Denmark, Austria, Sweden, Czech Republic, Slovakia, Poland and Gibraltar Belgium, Ireland, Romania and Portugal
Sweden, Norway, Denmark, Finland and Poland France, Spain, Luxemburg and Morocco
Italy, Germany and Great Britain
Great Britain, USA, Spain, Argentina, Peru and Chile World wide
-Apax Partners Worldwide LLP and Cinven Ltd
Listed in Stockholm Listed in Paris Listed in Milan Listed in London
Listed in New York
-SEK 3,951 M EUR 1,858 M EUR 2,731 M GBP 2,830 M n/a -SEK 5,326 M EUR 1,125 M EUR 1,111 M GBP 1,951 M USD 29,321 M EDSA1) Truvo2) Eniro Pages Jaunes SEAT Yell3) Google
1) EDSA was reconstructed during 2010 and does not publicly report owners, revenues and net debt.
2) Truvo does not publicly report revenues and net debt. The company is under reconstruction at the release of Eniro’s annual report.
3) Yell has not published its year-end result for 2010 at the release of Eniro’s annual report. Instead revenues for the last twelve months are stated.
Sources:
BIA/Kelsey is an independent adviser and analyst company, specialized in local media. IRM is an independent organization that analyze the advertisement and media market in Sweden. Mediavision is an independent adviser and analyst company, specialized in consumer behavior in digital media.
Eniro’s ambition is to take social responsibility and
be proactive in relation to all stakeholders –
custo-mers, users, employees, shareholders and suppliers.
This means taking responsibility not only ethically
and socially, but also environmentally.
Eniro’s services provide important community information, which is useful for customers and users. All Eniro’s search services and directories contain information on various social services in the municipality and county council. Search servi-ces make it easy to find, for example, information about pro-ducts, events, addresses and opening hours, which simplifies life for users. Through its local distribution, Eniro’s products and services are also important marketing channels for small and medium-sized businesses.
Customers are at the core of Eniro’s business. To be perceived as both respected and serious is paramount, while at the same time, it is crucial to demonstrate the value of Eniro’s services. In order to demonstrate the transaction value generated by Eniro’s services, studies are regularly carried out to show the value of investing in Eniro products. To improve customer rela-tions, the previously separate sales forces for print and online were combined into a single sales force that sells packages for all distribution channels in the beginning of 2010.
Users are one of Eniro’s main target groups. The requirement to develop relevant new products and be at the forefront of innovation and functionality is constantly increasing. As part of responsible behavior, Eniro does not allow advertisements that are discriminatory or offensive in terms of ethnicity, gen-der, religion or political beliefs, sexual orientation, nationality or similar. There are also restrictions on the advertising of al-cohol, in accordance with the law, and advertising of tobacco or drugs is not allowed. For Internet services, Eniro also provi-des a “family filter” which can be activated by the user. It is important for the company to be an attractive employer. Eniro must be a workplace that employees can feel proud of, not only in its capacity as a driven sales and development organization, but also in its capacity as a responsible company that cares about environmental and social issues.
In 2010, Eniro took part in “The Carbon Disclosure Project,” an annual survey that charts listed companies’ greenhouse gas emissions and strategies relating to climate change. Eniro also forms part of Robur Ethica funds, which includes com-panies that credibly show that they can manage their social, ethical and environmental risks.
Eniro works with carefully selected suppliers to ensure high quality. A purchasing policy requires suppliers to have an en-vironmentally friendly approach.
Sustainability
Eniro promotes a systematic and targeted environmental ini-tiative and Eniro in Sweden and Norway are certified according to the ISO 14001 standard. In 2010, work focused primarily on environmental production and distribution of directories, trans-portation and waste reduction. The environmental impact of di-rectories in Sweden, Denmark and Norway have been mapped along the entire value chain in order to place the directory’s en-vironment impact in a broader context. In order to identify the environmental impact of Internet services, a life cycle analysis of Eniro’s online services has been performed.
All company cars Eniro buys are environmentally friendly. This has resulted in reduced fuel consumption and reduced costs for the company. As far as travel is concerned, the target is to redu-ce the environmental impact of travel. Traveling is increasingly being replaced with videoconferencing and teleconferencing, which will save employees both time and travel expenses. Eniro strives to adapt the directory circulation according to demand. Therefore, White Pages have been distributed in Stockholm, Gothenburg and Malmö only upon request. Citi-zens of Sweden and Norway can choose not to receive Eniro’s directory. A further measure to customize directory circulation is the elimination of customers’ advance copy of the Yellow Pa-ges in Sweden. Taken together, these measures have led to re-duced carbon emissions, environmental benefits and savings. Please see Eniro’s website for more information on Eniro’s environmental work.
Following a major reorganization in the fall of 2009, the first step was taken in altering the company structure from a hol-ding company structure to an integrated group, a change that in everyday speech would be termed “One Eniro”. In 2010, this process of change continued with greater intensity.
In early September 2010 the company announced the ap-pointment of the new CEO, Johan Lindgren. Under his direc-tion further steps were taken to streamline the company and reduce its cost base by aligning the organizational structure and increasing synergies primarily in product development, sales concept development and Service Delivery, a Nordic co-ordination of the former divisions IT and Operations.
Meanwhile, customer and market focus was reinforced by the creation of country-based sales organizations with revenue responsibility clearly defined for each geographical market. Work relating to improving efficiency resulted in employees leaving the Group during the year while a number of external specialists, primarily in product development were recruited to strengthen the company’s competitiveness. Even staff functions have been streamlined by reducing the number of employees and clarifying roles and responsibilities. Efficiency work and the divestment of operations in Finland resulted in the reduction of 1,065 employees during the year (of which 392 are related to the divestment of the Finnish operations). The total number of employees reached 3,929 at the end of the year.
Increased sales focus
The sales force organization is the backbone of any sales-oriented company and a key success factor for Eniro. The sales force of over 2,000 people primarily forming Eniro’s staff and the sales organization is tailored to the conditions in each market, although there is a common structure that applies to all market units.
The company increased its focus on sales during the year by implementing a number of strategic initiatives. In the be-ginning of the year, the previously separate sales forces for offline and online were combined to meet customers’ desi-res for only one contact at Eniro. A new support unit, Sales Development, was created to focus exclusively on sales con-cept development and sales training as part of the Eniro Business School. All sales managers conducted an evaluation to ensure that every leader possessed the right skills and the right values for the company. As a basis for the assessments, the company produced a management profile, which outlines the company’s requirements and expectations of its leaders. As part of its plan to reverse the negative development of re-venues, specific sales teams were created for media products
and mobile services and sales teams created to focus on win-ning back customers who had left Eniro. By make better use of under-used channels such as customer service, letters and SMS, Eniro will make sales more efficient.
Equality
During the year, Eniro Sweden was named as “Best innova-tor” by the business magazine Veckans Affärer for its revised Equality Plan. The company has a very even distribution of the number of employed men and women with 56 percent wo-men. Of the more than 250 managers in the company, 43 per-cent are women. During the year, Eniro has conducted train-ing and seminars for managers ustrain-ing the theme of “parental smart business” and the company has also invested in activi-ties for employees on parental leave in order to strengthen its position as an equal opportunities company.
ORGANIZATION
2010 2009 Dec 31 Dec 31 Sweden 1,334 1,625 Norway 799 914 Denmark 377 433 Finland 381 783 Poland 1,038 1,239 Total 3,929 4,994 NUMBER OF EMPLOYEESThis report has been reviewed by Eniro’s
exter-nal auditors. The corporate governance report is
not part of Eniro’s formal annual report. Eniro has
applied the Swedish Code of Corporate
Governan-ce sinGovernan-ce 2005. The code is available on the
Swe-dish Corporate Governance Board’s website www.
corporategovernance.se. Eniro has no instances
of non-compliance to report for the financial year
2010.
ENIRO’S CORPORATE
GOVERNANCE STRUCTURE
General meetings
The shareholders’ influence over the company is exercised at the shareholders’ meeting, which is the company’s supreme decision-making body. To accommodate foreign shareholders attending general meetings, Eniro provides simultaneous Eng-lish interpretation of the general meetings to shareholders re-questing this service when giving notice of intention to partici-pate at the Annual General Meeting (AGM). Eniro also provides English translations of all documents on Eniro’s website. These documents will also be sent to any shareholders requesting them.
On the basis of the resolution passed at the AGM in 2007, the Board may, at the company’s expense, collect proxies from the shareholders in accordance with the procedure described in Chapter 7 Section 4 Paragraph 2 of the Swedish Companies Act.
Nomination Commitee
The task of the Nomination Committee is to present proposals for election of the Chairman of the AGM, election of the Chairman and Members of the Board, remuneration of the Board Members, the process for election of the Nomination Committee, and if applicable, a proposal for the appointment of and remuneration to the auditors.
The AGM resolves on the method for appointing the members of the Nomination Committee for the subsequent year and the method for appointing the current Nomination Committee is de-scribed in the minutes of the latest AGM which may be downloa-ded from www.eniro.com.
Since 2005 the AGM has determined that the four largest share-holders and the Chairman of the Board shall form the Nomination Committee. The name of the members of the Nomination Com-mittee are announced in a press release as soon as they have been appointed. Such announcement takes place no later than six months prior to the AGM.
If a member of the Nomination Committee resigns from the po-sition prior to the conclusion of the Committee’s work, the same shareholder who appointed the resigning member shall, if consi-dered to be necessary, appoint a successor, or if that shareholder no longer, in terms of voting rights, is one of the four largest reholders, then such appointment can be made by the new sha-reholder in that group. The Nomination Committee’s proposals are presented in the notice of the AGM and on Eniro’s website. When the notice of the AGM is published, the Nomination
Com-CORPORATE GOVERNANCE 2010
INTERNAL GOVERNANCE INSTRUMENTS
Business concept and goal, articles of association, rules of procedure of the Board, work instructions for the President and CEO, strategies and policies, such as Eniro Internal Corporate Governance, and processes for internal control and management.
EXTERNAL GOVERNANCE INSTRUMENTS
Swedish Companies Act, Swedish Annual Reports Act, other relevant laws, Nasdaq OMX Stockholm’s Rule Book for Issuers, and the Swedish Code of Corporate Governance.
1. The Nomination Committee prepares proposals for resolutions which are presented at the AGM. The AGM appoints the members of the Nomination Committee or determines the manner in which they are to be appointed.
2. The Board determines the committees to be established and appoints current Board members to serve as the members of each of the committees.
NOMINATION COMMITEE ANNUAL GENERAL MEETING PROPOSAL1 ELECTIONS1 ELECTIO N INFORMA TION BOARD 2 AUDIT COMMITEE, COMMITTEE FOR ONLINE STRATEGY COMPENSATION COMMITEE, PRESIDENT AND CEO & GROUP MANAGEMENT GO ALS, STRA TEGIES & CONTROL REPORTS & CONTROL ELECTIO N INFORMATION INFORMATION AUDITOR Responsible for the control of the entire business. Reports to the Board and to the shareholders. INTERNAL AUDIT
Reports to the Audit Commitee.
INTERNAL GOVERNING INSTRUMENTS
Business concept and goal, articles of associa-tion, rules of procedure of the Board, instruc-tion for the President and CEO, strategies and policies such as Eniro Code of Corporate Governance, and processes for internal control and management.
EXTERNAL GOVERNING INSTRUMENTS
Swedish Companies Act, Swedish Annual Reports Act, Rule Book for Issuers Nasdaq OMX Stockholm, other relevant laws and Swedish Code of Corporate Governance.
1. The Nomination Committee prepares proposals for resolutions, which are presented at the AGM. The AGM specifies how the members of the Nomination Committee are to be appointed for the following year.
2. The Board decides which committees to establish and elects current Board members to the membership of each committee.
Eniro is a Swedish public limited liability company. The shareholders of Eniro are those who ultimately decides about the group’s governance through their election at the General Meeting of the Company’s Board, which in its turn is then the body that has the day-to-day responsibility for ensuring that the governance complies with laws and other external and internal governing instruments.
All shares have the same voting rights. The model describes the structure of corporate governance within Eniro.
Eniro is a Swedish public limited liability company. The shareholders of Eniro ultimately decide upon the Group’s corporate governance through the election of the Board of Directors at the General Meeing. The Board, in turn, is the body having the day-to-day responsibility for ensuring that the corporate governance functions comply with laws and other external and internal governance instruments. All shareholders may vote for the full number of shares held and represented at the General Meeting, without any restriction on voting rights. All shares entitle equal voting rights. The model illustrates the structure of corporate governance within Eniro.
mittee also publishes a reasoned statement regarding the moti-vation behind its proposed Board composition on Eniro’s website, www.eniro.com.
Board of Directors
The Board of Directors is to manage the company’s affairs in the interests of the company and all shareholders. According to the Swedish Companies Act, the Board has overall liability for the or-ganization of the company and the management of the affairs of the company. According to Eniro’s articles of association the Board shall be comprised of four to ten members, who are nomi-nated by the Nomination Committee and elected annually by the AGM for a term until the end of the next AGM.
The rules of procedure of the Board are adopted at the Board’s annual constituent meeting held directly after the AGM and pro-vide an important part of the framework for the Board’s duties. The rules of procedure of the Board provide, inter alia, that the Board shall hold six meetings every year, including the constitu-ent meeting.
The Board has presently appointed three Board committees, the Compensation Committee, which was appointed for the first time in 2001, the Audit Committee, which was appointed for the first time in 2004 and a Committee for Online Strategy which was appointed for the first time at the Board meeting held on July 14th 2010.
Auditors
The AGM elects the company’s auditors. As from June 1st 2011, auditors serve a statutory term of one year. However, the ar-ticles of association may provide for a four-years term, as is provided for in Eniro’s articles of association. Eniro’s current auditors were elected by the AGM in 2004 and were re-elected by the AGM in 2008. The Nomination Committee nominates the auditors to an AGM which formally elects the auditors. The auditors regularly meet with the Audit Committee to pro-vide information about the day-to-day audit activities. The Audit Committee establishes guidelines regarding the kind of services other than audit services, which may be provided by Eniro’s auditors. The auditors are present at the AGM and report their audit of the annual report and the administration. In addition to the annual report, the auditors review Eniro’s interim report for January–September.
CORPORATE GOVERNANCE 2010
Shareholders
As of December 31st 2010, Eniro had 17,472 shareholders. Eniro is not aware of any shareholder with a direct or indirect sharehol-ding in the company representing one tenth or more of the total number of shares in the company. Please see page 28 of the an-nual report for further information on Eniro’s shareholders.
Annual general meeting
Eniro’s AGM 2010 was held on May 4th at Berns Salonger in Stockholm. All Board members elected at the AGM 2010, except for Thomas Axén, were present at the AGM. Some of the most important matters addressed at the AGM included the following:
Election of the Board
In accordance with the Nomination Committee’s proposal, it was resolved to continue with the Board’s composition of seven Board members with no deputy Board members. Luca Majocchi had an-nounced that he was not available for re-election and Thomas Axén was elected as a new Board member. The remaining pre-sent Board members were re-elected as members of the Board. Lars Berg was re-elected as Chairman of the Board.
Remuneration principles
The AGM 2010 approved the Board’s proposed remuneration principles for senior management and resolved in favour of the Board proposal on further development of the existing scheme for synthetic shares. The full version of the principles can be found in an attachment to the notice of the AGM 2010, “The Board’s complete proposals”. Visit www.eniro.com to download a copy of this attachment.
EXTRA ORDINARY GENERAL MEETING
HELD ON NOVEMBER 26th 2010
Rights issue and reduction of share capital
The Extra Ordinary General Meeting (EGM) of Eniro held on November 26th 2010, approved the Board’s resolution of October 27th 2010 regarding a rights issue of approxima-tely SEK 2.5 billion and thereto connected resolutions on amendments to the articles of association and reduction of the company’s share capital by SEK 242,372,758.50 without redemption of shares, resulting in a reduction of the shares’ quotient value from SEK 2 to SEK 0.50. The terms and con-ditions of the rights issue entitle that each share entitles to one subscription right and each subscription right entitles its holder to subscription of 30 new shares at a subscription price of SEK 0.52 per new share.
According to the final calculations, a total of 3,830,564,310 res, representing approximately 79 percent of the offered sha-res, were subscribed to via the subscription rights. Furthermore, 82,496,095 shares, representing approximately 1.7 percent of the offered shares, were subscribed to by individuals who had applied for subscription of shares without holding subscription rights. A total of 934,394,765 shares, representing approxima-tely 19 percent of the offered shares, were allocated to the sub-underwriters through re-allocation from the consortium of banks that had agreed to underwrite the rights issue. In total, this meant that the rights issue of approximately SEK 2.5 billion (before issue-related costs) was fully subscribed. Through the rights issue the number of outstanding shares was increased by 4,847,455,170 to 5,009,037,009 and Eniro’s share capital was increased by SEK 2,423,727,585 to SEK 2,504,518,504.50.
