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Fagerhult
Earnings Release • Oct 25, 2019
3045_10-q_2019-10-25_6e863a51-0249-4230-9efa-68ef7b5c982b.pdf
Earnings Release
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The third quarter
The Group delivered a third quarter set of results which reports many improvements.
Although still negative, we see improvements in organic order intake and organic net sales both compared to Q1 and Q2. The Q3 deficit for net sales is reduced to -1.6% and the Q3 deficit for order income is reduced to -3.3%.
Further we record a healthy operating margin of 12.3 (13.5)% compared to the 9.1 (11.3)% at the half year. Operating cash flow at 400 (182) MSEK sets a new quarterly record.
Annualising the last two quarters, since the acquisition of iGuzzini, activity on order income establishes the Group at 8.5 BSEK.
The majority of the growth continues to be driven by the acquisition of iGuzzini and also good growth in Northern Europe (NE). We see a more stable situation in the UK & Ireland (UK&I) business area.
The performance improvement programme has delivered positive effects in Q3.
The 2,038 (1,441) MSEK overall order intake in Q3 was 41.4% ahead of last year and on a comparable basis was 3.3% adverse.
On a like for like basis, the business areas of NE and UK&I delivered +3.1% and +3.0% organic order income growth respectively, in the third quarter whereas W&SE and APAC delivered a -6.2% and -15.6% respectively.
Net sales for the quarter at 2,066 (1,441) MSEK showed an overall 43.4% increase and on a comparable basis was 1.6% adverse. The quarterly operating profit at 255.1 (195.0) MSEK shows a 30.8% increase and delivers an operating margin of 12.3 (13.5)%.
Despite lower organic net sales in the quarter, the comparable operating profit and operating margin was ahead of the results for Q3 2018, showing the positive impact of the performance improvement programme.
The operating cash flow in the quarter of 400.4 (181.7) MSEK results from; a 60 MSEK increase in operating profit, a 52 MSEK change in working capital and a 114 MSEK change in Adjustments for non-cash items, all items compared to Q3 2018.
The effects of IFRS 16 have been included in the results for Q3 2019. No historical adjustments have been made to the prior period results, refer to page 19 for details.
Q3
ORDER INTAKE, MSEK 2,038
Order intake was MSEK 2,038 (1,441), which is an overall increase of 41.4% adjusted to -3.3% for acquisitions of MSEK 619.8 and currency effects of MSEK 24.9
NET SALES, MSEK 2,066
Net sales were MSEK 2,066 (1,441), which is an overall increase of 43.4% adjusted to -1.6% for acquisitions of MSEK 614.6 and currency effects of MSEK 34.2
OPERATING PROFIT, MSEK
255
Operating profit was MSEK 255.1 (195.0) representing a 30.8% increase with an operating margin of 12.3 (13.5)%
NET PROFIT, MSEK
181 Earnings after tax were MSEK 181.1 (135.0),
an increase of 34.1%
EARNINGS PER SHARE, SEK
1.02
Earnings per share were SEK 1.02 (1.18)
CASH FLOW FROM OPERATING ACTIVITIES, MSEK
400 Cash flow from operating activities was MSEK 400.4 (181.7)
CEO comments
- › It is pleasing to see that the performance of the Group is improving.
- › I am satisfied to see that the performance improvement programme starts to bring results. However, in some businesses there is still more to do as the results are slow to come.
- › The involvement of our Italian colleagues continues to increase, the networks and relationships continue to build in a positive way.
- › Organic growth remains the key focus for all workstreams, in the short and long term.
- › The strategic review and alignment process continues, with the objective to build an even stronger Fagerhult Group.
January-September
During the year so far, market activity across the business areas has remained at a level consistent with that experienced during the later months of 2018, we do not see a further deterioration. Quarterly organic order intake levels have been -11.9% in Q4 2018, -13.1% in Q1 2019, -7.9% in Q2 and -3.3% in Q3. The year to date result is -8.1%.
The UK market remains Brexit affected. Although, as noted earlier we see an improved order intake position in the third quarter and we report a market which is flat at a lower level. In Europe generally the results from region to region (North, South & West) and country to country remain mixed with the NE region continuing to perform well on all measures. The APAC business area continues to face headwinds but as a result of the performance improvement programme, we report an improved Q3 result.
The Group's year to date order intake at 5,827 (4,401) MSEK shows an overall 32.4% increase with an 8.1% decrease when adjusted for acquisitions (1,691 MSEK) and currency effects (92 MSEK).
The Group's year to date net sales at 5,716 (4,133) MSEK shows an overall 38.3% increase with a 3.2% decrease when adjusted for acquisitions (1,602 MSEK) and currency effects (113 MSEK). The order backlog position remains healthy at 1,520 MSEK.
The operating profit of 588.0 (500.2) MSEK was enhanced in the third quarter by the improvement programme (second quarter absorbed the one-off costs). In the year to date, acquisitions have positively, and organic growth has negatively, affected the operating profit.
In the year to date, operating profit is negatively impacted by a total of 34.0 MSEK, being a combination of one-off M&A transaction costs (11,5), amortisation of iGuzzini intangible assets (14,0) and one-off costs related to the improvement programme (8.5).
Currency conversion on consolidation have positively affected net sales and operating profits by 112.6 (123.5) MSEK and 9.0 (8.5) MSEK respectively.
The operating margin in NE continues to grow, 15.0 (13.5)% year to date and as predicted in the Q2 report, the operating margin shows improvement in the third quarter in all other business areas.
Financial items were -67.8 (-28.7) MSEK with the 39.1 MSEK increase resulting from 17.2 MSEK increased long term debt interest charges and bridge-loan finance combined with 14.6 MSEK in accounting changes for IFRS 16. The balance of the increase is currency movement.
The tax expense for the period was 131.6 (122.6) MSEK, which results in a 25.3% (26.0%) tax rate
"The steady improvement is pleasing to report and we embrace the future."
Business areas
NET SALES AND OPERATING PROFIT BY BUSINESS AREA
| Net sales | Operating profit | Operating margin % | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Q3 | Q1-3 | Q3 | Q1-3 | Q3 | Q1-3 | ||||||||
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||
| Northern Europe | 529.5 | 482.8 | 1,665.3 | 1,542.1 | 84.8 | 67.0 | 249.3 | 207.8 | 16.0 | 13.9 | 15.0 | 13.5 | |
| UK and Ireland | 278.3 | 290.3 | 821.8 | 861.8 | 27.2 | 36.5 | 71.5 | 98.6 | 9.8 | 12.6 | 8.7 | 11.4 | |
| Western and Southern Europe | 1,217.0 | 595.9 | 3,146.1 | 1,539.4 | 141.8 | 85.2 | 290.0 | 179.9 | 11.7 | 14.3 | 9.2 | 11.7 | |
| Africa, Asia and the Pacific | 174.6 | 181.5 | 442.4 | 523.8 | 12.7 | 17.8 | 14.6 | 47.8 | 7.3 | 9.8 | 3.3 | 9.1 | |
| Other | - | - | - | - | -13.0 | -11.5 | -42.3 | -33.9 | - | - | - | - | |
| IFRS 16 | - | - | - | - | 1.6 | - | 4.9 | - | - | - | - | - | |
| Eliminations | -133.5 | -109.9 | -360.0 | -334.2 | - | - | - | - | - | - | - | - | |
| Total | 2,065.9 1,440.6 5,715.6 4,132.9 | 255.1 | 195.0 | 588.0 | 500.2 | 12.3 | 13.5 | 10.3 | 12.1 | ||||
| Financial, unallocated items | - | - | - | - | -16.8 | -8.7 | -67.8 | -28.7 | - | - | - | - | |
| Profit before tax | - | - | - | - | 238.3 | 186.3 | 520.2 | 471.5 | - | - | - | - |
GEOGRAPHICAL BUSINESS AREAS: Northern Europe UK and Ireland Western and Southern Europe Africa, Asia and the Pacific
Northern Europe
The business area comprises the Group's operating units and companies in the Nordics, the Baltics, Poland and Russia. The factory in China, which engages in manufacturing and purchasing, is also included. Development, manufacturing and sales are conducted in Sweden, Finland and China, while operations in other markets engage only in sales.
The challenges in the global retail sector affect our three largest business areas with the largest impact being in NE. Despite this adverse impact this region continues to grow organically, almost +2% in the year to date and +3,1% in the current quarter.
Net sales for the year to date were 1,665.3 (1,542.1) MSEK showing strong growth of 8,0% which adjusts to 6.9% for currency effects. Net sales increased particularly well in Norway, Poland and Russia and grew strongly in Indoor and Outdoor in Sweden which overall is affected by the decline in Retail.
The operating profit for the year to date increased 20.0% to 249.3 (207,8) MSEK with the operating margin increasing from 13.5% to 15.0%.
NET SALES, MSEK 529.5 OPERATING PROFIT, MSEK 84.8 OPERATING MARGIN, % 16.0 "Growth is strong in Indoor & Outdoor but
Q3
the headwinds in Retail affect this success"
3
| Net sales | 529.5 | 482.8 | 1,665.3 | 1,542.1 |
|---|---|---|---|---|
| (of which, intercompany sales) | (75.7) | (57.1) | (200.0) | (198.4) |
| Operating profit | 84.8 | 67.0 | 249.3 | 207.8 |
| Operating margin, % | 16.0 | 13.9 | 15.0 | 13.5 |
| Sales growth, % | 9.7 | 1.1 | 8.0 | 1.6 |
| Sales growth, adjusted for exchange rate differences , % |
8.8 | -1.5 | 6.9 | -0.0 |
| Growth in operating profit, % | 26.6 | -2.3 | 20.0 | 6.7 |
UK and Ireland
| 529.5 (75.7) 84.8 16.0 9.7 8.8 26.6 |
482.8 (57.1) 67.0 13.9 1.1 -1.5 |
1,665.3 (200.0) 249.3 15.0 8.0 |
1,542.1 (198.4) 207.8 |
|---|---|---|---|
| 13.5 | |||
| 1.6 | |||
| 6.9 | -0.0 | ||
| -2.3 | 20.0 | 6.7 | |
| Q3, 2019 | Q3, 2018 | Q1-3, 2019 | Q1-3, 2018 |
| 278.3 | 290.3 | 821.8 | 861.8 |
| (52.2) | |||
| (15.5) | (6.0) | (31.8) | |
| 27.2 | 36.5 | 71.5 | 98.6 |
| 9.8 | 12.6 | 8.7 | 11.4 |
| -4.1 | -2.7 | -4.6 | -6.9 |
| -5.5 | -11.1 | -7.8 | -11.7 |
| decline adjusted to -7.8% for the weaker SEK. | This business area comprises Group companies in the United Kingdom and Ireland. The most significant unit is Whitecroft Lighting and both Whitecroft and Designplan engage in the development, manufacture and sale of lighting systems, while the Fagerhult branded businesses in the UK and Ireland engage in sales. Net sales in the year to date were 821.8 (861.8) MSEK which represents a 4.6% As noted above, the overall situation in the UK remains unchanged, the market is flat but steady. We are pleased to report a 3.0% organic order income growth in the third quarter, but with Brexit being on every agenda, news channel and discussion we are The performance improvement programme actions have been taken and we see a return to almost a double digit operating margin in the third quarter compared to the 8.2% at the half year. The lower activity level will continue to affect profitability levels The operating profit for the year to date was 71.5 (98.6) MSEK and the operating |
Western and Southern Europe
Q3 NET SALES, MSEK 278.3 OPERATING PROFIT, MSEK 27.2 OPERATING MARGIN, %
9.8
"Q3 organic order intake growth of 3% is pleasing to see."
Q3 NET SALES, MSEK 1,217.0 OPERATING PROFIT, MSEK 141.8 OPERATING MARGIN, %
11.7
4
May 2018 and iGuzzini illuminazione S.p.A. which was acquired on 7th March 2019 has been consolidated from March 2019.
Net sales for the year to date of 3,146.1 (1,539.4) MSEK and the business area delivered an operating profit for the period of 290.0 (179.9) MSEK with an operating margin of 9.2 (11.7)%.
The business area is the largest business area for the Group, the order intake annualises above 4.8 BSEK and the opportunity to develop the operating margin is high. The business area contributes the largest operating profit at 290 MSEK for the 9 months.
| Western and Southern Europe | Q3, 2019 | Q3, 2018 | Q1-3, 2019 | Q1-3, 2018 |
|---|---|---|---|---|
| Net sales | 1,217.0 | 595.9 | 3,146.1 | 1,539.4 |
| (of which, intercompany sales) | (27.4) | (23.2) | (72.3) | (52.4) |
| Operating profit | 141.8 | 85.2 | 290.0 | 179.9 |
| Operating margin, % | 11.7 | 14.3 | 9.2 | 11.7 |
| Sales growth, % | 104.2 | 24.5 | 104.4 | 24.0 |
| Sales growth, adjusted for exchange rate differences , % |
97.9 | 15.3 | 96.6 | 17.5 |
| Growth in operating profit, % | 66.4 | 30.1 | 61.2 | 17.9 |
Africa, Asia and the Pacific
The business area comprises our operations in South Africa, Turkey, the United Arab Emirates, Australia and New Zealand. Development, manufacture and sale of lighting systems and controls are conducted in South Africa, Australia and Turkey, while the operations in the United Arab Emirates and New Zealand engage in sales.
Lighting Innovations, South Africa, has re-focused on the domestic market as well as servicing only neighbouring export partners. The cost base has been reduced in September and during Q4 we expect to see the improvement in the operating result.
Our business in Turkey faces domestic headwinds stemming from local geo-political conditions. The planned improvement in the UAE based business sees early signs of delivery with improved order income in recent months and a lower operating cost base.
The economy in Australia continues to show signs of weakening, but positively, from ORT in Melbourne, the new SN3 connectivity solution is making good progress in many markets with an anticipated doubling of unit sales in 2019 compared to last year.
Net sales for the year to date were 442.4 (523.8) MSEK, and shows a decline of 15.5% overall, reducing to 14.7% after adjusting for currency effects. The operating profit was 14.6 (47.8) MSEK and the operating margin was 3.3 (9.1)%.
| Africa, Asia and the Pacific | Q3, 2019 | Q3, 2018 | Q1-3, 2019 | Q1-3, 2018 |
|---|---|---|---|---|
| Net sales | 174.6 | 181.5 | 442.4 | 523.8 |
| (of which, intercompany sales) | (15.0) | (23.6) | (35.6) | (51.6) |
| Operating profit | 12.7 | 17.8 | 14.6 | 47.8 |
| Operating margin, % | 7.3 | 9.8 | 3.3 | 9.1 |
| Sales growth, % | -3.8 | 2.0 | -15.5 | 3.5 |
| Sales growth, adjusted for exchange rate differences , % |
-6.2 | 8.5 | -14.7 | 9.8 |
| Growth in operating profit, % | -28.7 | -9.6 | -69.5 | 12.7 |
Other
The business area mainly comprises central Group wide functions and the Parent Company, AB Fagerhult.
Q3 NET SALES, MSEK 174.6 OPERATING PROFIT, MSEK 12.7 OPERATING MARGIN, % 7.3
"OR Technologies doubles the number of units sold in 2019."
Business per product area
For the year to date, adjusting for currency and acquisition effects, net sales in the Group's largest product area, Indoor Lighting increased by 0.5%. We report a 2.1% like for like reduction in Outdoor Lighting and a significant decline in Retail Lighting of 15.0%. The global retail industry is in a period of change and this affects all stakeholders. The impacts of this decline for the Group are experienced mostly in NE but also in the UK&I and W&SE.
In the medium term the approach to the Retail Lighting segment and how to benefit from the Group's strong position and operational footprint is the subject of a significant review within Group Management.
Indoor Lighting sales are well balanced across the business areas and demonstrates the Indoor Lighting solutions strength of all businesses, whereas in Retail and Outdoor Lighting there only exists any significant market penetration in W&SE and NE & W&SE respectively.
For the third quarter, the net sales mix was 55.5(60.0)% Indoor, 19.1 (18.4)% Retail and 25.4 (21.6)% Outdoor.
NET SALES PER PRODUCT AREA
| Q3, 2019 | Q3, 2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| Northern Europe | 336.9 | 47.9 | 69.1 | 299.8 | 52.7 | 73.2 | ||
| UK and Ireland | 208.9 | 44.5 | 9.4 | 252.5 | 17.5 | 14.3 | ||
| Western and Southern Europe | 456.4 | 296.1 | 437.1 | 172.7 | 188.1 | 211.9 | ||
| Africa, Asia and the Pacific | 145.2 | 5.5 | 8.9 | 138.2 | 7.4 | 12.3 | ||
| Total | 1,147.4 | 394.0 | 524.5 | 863.2 | 265.7 | 311.7 |
| Indoor | Retail Outdoor | Indoor | Retail Outdoor | |||
|---|---|---|---|---|---|---|
| Northern Europe | 336.9 | 47.9 | 69.1 | 299.8 | 52.7 | 73.2 |
| UK and Ireland | 208.9 | 44.5 | 9.4 | 252.5 | 17.5 | 14.3 |
| Western and Southern Europe | 456.4 | 296.1 | 437.1 | 172.7 | 188.1 | 211.9 |
| Africa, Asia and the Pacific | 145.2 | 5.5 | 8.9 | 138.2 | 7.4 | 12.3 |
| Total | 1,147.4 | 394.0 | 524.5 | 863.2 | 265.7 | 311.7 |
| Q1-3, 2019 | Q1-3, 2018 | |||||
| Indoor | Retail Outdoor | Indoor | Retail Outdoor | |||
| Northern Europe | 1,105.8 | 139.4 | 220.2 | 955.4 | 174.6 | 213.7 |
| UK and Ireland | 657.2 | 80.6 | 31.8 | 676.4 | 120.1 | 33.5 |
| Western and Southern Europe | 1,181.7 | 760.1 | 1,132.0 | 369.0 | 531.7 | 586.3 |
| Africa, Asia and the Pacific | 362.7 | 16.1 | 28.0 | 419.4 | 20.5 | 32.3 |
| Total | 3,307.4 | 996.2 | 1,412.0 | 2,420.2 | 846.9 | 865.8 |
| and bank balances at the end of the period were 1,135 (527) MSEK and consolidated equity was 5,523 (1,960) MSEK. The cash flow for the year to date was +280 (-447) MSEK and includes the acquisition of iGuzzini 2,574, earn-out payments for earlier acquisitions of 99 MSEK, and payment of the dividend 252 (229) MSEK. During Q2 the rights issue raised 2,213 MSEK and the bridge loan was repaid. At the end of the period the net debt increased to 4,097 (2,366) MSEK as a result of the above, but also due to the accounting changes under IFRS 16 by 966 (0) MSEK. Cash flow from operating activities was +629 (+91) MSEK with the 538 MSEK increase mainly due to a 374 MSEK change in working capital improvement compared to a year ago and an 88 MSEK increase in profitability. Pledged assets and contingent liabilities amounted to 47.2 (47.2) MSEK and 1.5 (1.5) MSEK respectively . |
||||||
| Rights issue The company's rights issue was fully subscribed. The subscription period ended on 22nd May 2019 and the final count showed that 49,861,704 shares, corresponding to approximately 99.1 percent of the offered shares, were subscribed for with subscription |
Financial position
Rights issue
NET SALES INDOOR, Q1-3 2019
NET SALES OUTDOOR, Q1-3 2019
The remaining 436,334 shares that were not subscribed for with subscription rights have been allocated to those who have applied for subscription of shares without subscription rights in accordance with the principles described in the prospectus.
Interest in the rights issue has been high and as a result the rights issue was oversubscribed by 23.2 percent.
From the rights issue Fagerhult received proceeds amounting to approximately MSEK 2,213 before deduction of issue costs. As a result of the issue, Fagerhult's share capital has increased by MSEK 28.3 to MSEK 100.2. The total number of shares has increased by 50,298,038 to 177,192,843.
The new shares subscribed for with subscription rights were registered with the Swedish Companies Registration Office in late May 2019 and trading in these new shares began in the first week of June 2019. The new shares subscribed for without subscription rights started trading in mid-June 2019. For further information refer to the press releases on 28th May and 28th June 2019.
Investments
The Group's net investments in non-current assets was 189 (129) MSEK. The figure does not include investments in subsidiaries, which were 2,672 (307) MSEK.
Acquisition of iGuzzini
PROCESS AND INTEGRATON
On 15th October 2018, Fagerhult signed a Letter of Intent with the shareholders of iGuzzini illuminazione S.p.A ("iGuzzini") to acquire 100% of the shares of iGuzzini.
On 21st December 2018 Fagerhult signed a Share Purchase Agreement with the shareholders of iGuzzini to acquire 100% of the shares of iGuzzini.
On 7th January 2019, the board of Fagerhult called for an Extraordinary General Meeting of Shareholders (EGM) to be held on 7th February 2019.
At the EGM on the 7th February all resolutions were passed by the shareholders attending the meeting.
On 7th March 2019, the transaction was completed and Fagerhult acquired 100% of the shares in iGuzzini. The board of directors of Fagerhult, also on 7th March 2019, decided on the Issue in Kind which forms part of the purchase price for the acquisition.
The purchase price for iGuzzini amounts to 365.2 MEUR, of which 284.5 MEUR is paid in cash and 80.7 MEUR in new Fagerhult shares.
On 26th April 2019, the board of directors of Fagerhult decided on the terms for the Rights Issue. The proceeds from the Rights Issue has been used to pay down the bridging loan finance drawn down at completion on 7th March. The Rights Issue carried a record date of 6th May and the subscription period closed on 22nd May.
With iGuzzini joining the Fagerhult Group, one of Europe's largest and leading professional lighting groups has been created and the combined companies will have an even stronger position in Europe and a strong platform from which to grow sales globally.
iGuzzini is a leading high-end international architectural lighting company with a strong brand and have created a successful international business with a global customer base. iGuzzini is very complementary to the Fagerhult Group both in terms of geography and product portfolio. Based in Recanati, Italy, iGuzzini is a respected lighting company with high brand awareness particularly amongst specifiers and lighting designers. Founded in 1959, the company designs, manufactures and markets professional lighting solutions for indoor and outdoor lighting areas.
For the financial year ending 31st December 2018, iGuzzini had net sales of approximately MEUR 240, an EBITDA margin of circa 14-15% and employed 1,470 employees. Fagerhult estimates significant procurement synergies as well as mediumto-longer term sales synergies and targets MEUR 8 annual EBITDA synergies by 2022.
7
For more information refer to the press releases on 15th October 2018, 21st December 2018, 7th January 2019, 7th February 2019, 7th & 29th March 2019, 26th April 2019 and 2nd , 13th & 28th May 2019 as well as on 28th June 2019.
PURCHASE PRICE ALLOCATION (PPA)
The tables below detail the financial effect of the acquisition for the total consideration as well as the assets and liabilities arising and the net change in consolidated cash and cash equivalents.
This is an updated draft PPA analysis and may be subject to change with any such changes being finalised and reported in the Q4 report.
On 7 th March 2019, Fagerhult signed an agreement to acquire 100% of the shares of iGuzzini and the purchase price for iGuzzini amounts to 365.2 MEUR, of which 284.5 MEUR is paid in cash and 80.7 MEUR in new Fagerhult shares.
iGuzzini has been consolidated in the Western and Southern Europe business area from the 1st March 2019.
THE CONSIDERATION CONSISTS OF THE FOLLOWING COMPONENTS
| Cash paid | 2,993.6 |
|---|---|
| Fagerhult shares, issued through an issue in kind (11,244,805 shares) | 826.5 |
| Total consideration | 3,820.1 |
| Net assets acquired | 3,104.9 |
| Goodwill | 715.2 |
THE ASSETS AND THE LIABILITES ARISING FROM THE ACQUISITION
| Fair value | |
|---|---|
| Cash and cash equivalents | 419.9 |
| Property, plant and equipment | 1,338.8 |
| Financial assets | 98.9 |
| Intangible assets | 2,182.6 |
| Inventories | 516.9 |
| Receivables | 621.1 |
| Liabilities | -1,378.9 |
| Deferred tax liabilities | -660.9 |
| Net assets | 3,138.4 |
| Non-controlling interests | -33.5 |
| Net assets acquired | 3,104.9 |
| Cash purchase consideration | 2,993.6 |
| Cash and cash equivalents in the acquired company | -419.9 |
| Change in consolidated cash and cash equivalents on acquisition | 2,573.7 |
Employees
The average number of employees during the period was 5,010 (3,368).
Parent company
AB Fagerhult's operations comprise Group Management, financing and business development activities. The profit before appropriations and tax was 49.0 (1.8) MSEK. The number of employees during the period was 7 (7).
Accounting principles
The interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual accounts Act. The information for the interim period on pages 1-19 is an integral part of this financial report.
The Parent Company's interim report has been prepared in accordance with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board's recommendation RFR.
Applied accounting principles are unchanged in comparison with those described in Fagerhult's annual report for the financial year 2018 except that AB Fagerhult from
January 1, 2019 applies IFRS 16 Leases. The implementation of the new standard has some effect on the financial reports.
The parent company, AB Fagerhult, has chosen not to apply IFRS 16 Leases but have instead from January 1, 2019 applied RFR 2 IFRS 16 Leases.
On Business area level, Fagerhult will not apply IFRS 16. It will only be applied on the Group level. The segment reporting for 2019 will thus be unchanged compared to 2018.
For information on the effects of the transition to IFRS 16, see page 19. Accounting principles according to IFRS 16 follows below.
LEASING
The group leases consist mainly of factories, offices and vehicles. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Since the opening balances for 2019 has been reported in accordance with IFRS 16, all right-of use assets have been valued at the value of the lease liability, with adjustment for prepaid lease payments attributable to the agreements as of January 1, 2019.
Lease liabilities include the net present value of the following lease payments:
- fixed payments
- variable lease payment that are based on an index
The lease payments are discounted using the group's incremental borrowing rate. Right-of-use assets are measured at cost comprising the following:
- the amount of the initial measurement of lease liability
- any lease payments made at or before the commencement date less any lease incentives received
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
Extension and termination options:
Options to extend or terminate contracts are included in the asset and liability as it is reasonably certain that they will be exercised. These terms are used to maximise operational flexibility in terms of managing contracts.
Risks and uncertainties
The Group's significant risks and uncertainties consist primarily of business risks, and financial risks associated with currencies and interest rates. Through the company's international operations, the Fagerhult Group is subject to financial exposure arising from currency fluctuations as well as the regionalised uncertainty of political situations.
The most prominent risks, however, are currency risks arising from export sales and imports of raw materials and components. This exposure is reduced by hedging the flow of sensitive currencies, based on individual assessment. Currency risk also arises in
the translation of foreign net assets and earnings. For more information about the company's risks, refer to the 2018 Annual Report. In addition to the risks described in the company's Annual Report, no other significant risks are considered to have arisen.
Nomination committee
AB Fagerhult has a Nomination Committee comprising a representative of each of the four largest shareholders or owner groups in terms of the number of votes, and also the Chairman of the Board, although the Chairman of the Board of Directors shall be coopted ("adjungerad") without the right to vote.
The Nomination Committee is to be formed after the Chairman of the Board has identified the four largest shareholders in the Company in terms of the number of votes that are to make up the Nomination Committee along with the Chairman.
The identity of these shareholders is to be based on the shareholders' register and list of nominees maintained by Euroclear Sweden AB and refer to shareholders registered under their own names or as members of an owner group as per 31 August 2019.
It shall not be necessary to change the composition of the Nomination Committee if only marginal changes in the ownership of shares occur after this control date. If one of the four largest shareholders waives their right to appoint a representative, this right is then transferred to the next shareholder that has the largest shareholding of the shareholders not identified as one of the four largest shareholders on the same date.
The mandate period of the Nomination Committee is until a new Nomination Committee is appointed.
THE LARGEST SHAREHOLDERS AS AT 31TH AUGUST 2019
| Share capital and | ||
|---|---|---|
| Name | No. of shares | voting rights,% |
| Investment AB Latour | 78,410,480 | 44.3% |
| Lannebo funds | 13,511,460 | 7.6% |
| FMR, Fidelity (US) | 10,568,173 | 6.0% |
| The Svensson, family, foundation and company | 9,618,442 | 5.4% |
| Swedbank funds | 8,510,529 | 4.8% |
| Fimag S.p.A. | 8,442,313 | 4.8% |
| Nordea funds | 4,949,059 | 2.8% |
| JP Morgan | 4,247,463 | 2.4% |
The Nomination Committee consists of the following individuals together with the names of the shareholders that they represent; Jan Svensson as Chairman of the Board of AB Fagerhult (not entitled to vote), Johan Hjertonsson representing Investment AB Latour, Johan Ståhl representing Lannebo Funds, Evert Carlsson representing Swedbank Robur Small Business Funds and Adolfo Guzzini representing Fimag S.p.A.
Questions regarding the nomination committee shall be addressed to the Group's CFO Michael Wood, [email protected]
Outlook for 2019-2020
During the last two years, acquisitive growth has led to a strong positive sales and earnings trend for the Group and for the last 9-18 months order intake development has shown organic decline. During this period the Group's main markets have displayed mixed activity levels, some being in decline, some flat and some with slight growth. The retail segment has and continues to provide headwinds as the industry undergoes a change.
The tail-wind of growth provided by the LED technology shift impacts no longer. Conventional technology luminaires have been replaced by LED ones where the share of net sales approaches 100% for the Group. The global installed base of LED luminaires remains low which is a significant opportunity for Fagerhult, especially with connected solutions.
As a result of the LED technology shift, the Group has benefitted from growth and margin development and has taken advantage of these positive trends to continue to invest for the future, particularly in product design and development and controls and connected solutions.
The Group's medium-to-long term strategy continues to include further acquisitions, both geographically and technology led acquisitions.
The Group has established and remains in a strong position in all of its main markets. The Group has a more balanced regional and product area operational
footprint and the acquisition of iGuzzini, Veko, WE-EF and LED Linear in recent years creates significant opportunity to re-organise and to strengthen our position in many geographical and product areas.
For the future, management focus on a process of strategic alignment across the Group and brands to address the market and to continue to provide great services to customers.
The Group is in a strong position with good profitability and momentum and management believe in the ability to grow market shares and increase profitability by taking advantage of this position whilst executing the alignment process. The performance improvement programme initiated at the start of Q2 is expected to deliver further benefits in the fourth quarter and into 2020.
Habo, 25th October 2019 AB Fagerhult (publ)
Bodil Sonesson President and CEO
The year-end report will be submitted on 18 th February 2020.
In 2020, interim reports will be submitted on 5th May, 18th August and 23rd October. The Annual General Meeting will be held on 5th May 2020 in Habo.
Information can be obtained from;
Bodil Sonesson, CEO, +46 72223 7602
Michael Wood, CFO, +46 73087 4647
AB Fagerhult (publ.) Corporate ID no. 556110-6203 SE-566 80 Habo Tel +46 (0)36-10 85 00 [email protected]
Report of Review of Interim Financial Information
AB Fagerhult (publ). Corporate ID no. 556110-6203
INTRODUCTION
We have reviewed the condensed interim financial information (interim report) of AB Fagerhult as of 30 September 2019 and the nine-month period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
SCOPE OF REVIEW
We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.
Jönköping, 25th October 2019
Öhrlings PricewaterhouseCoopers AB
Peter Nyllinge Martin Odqvist Authorized Public Accountant Authorized Public Accountant Auditor-in-Charge
Group INCOME STATEMENT
| 2019 | 2018 | 2019 | 2018 | 2018/2019 | 2018 | |
|---|---|---|---|---|---|---|
| Q3 | Q3 | Q1-3 | Q1-3 | Oct-Sep | Jan-Dec | |
| 3 months | 3 months | 9 months | 9 months | 12 months | 12 months | |
| Net sales | 2,065.9 | 1,440.6 | 5,715.6 | 4,132.9 | 7,203.7 | 5,621.0 |
| Cost of goods sold * | -1,238.0 | -887.2 | -3,498.5 | -2,559.4 | -4,413.3 | -3,474.2 |
| Gross profit * | 827.9 | 553.4 | 2,217.1 | 1,573.5 | 2,790.4 | 2,146.8 |
| Selling expenses * | -426.2 | -247.8 | -1,218.4 | -754.9 | -1,499.4 | -1,035.9 |
| Administrative expenses * | -173.3 | -120.3 | -465.6 | -344.2 | -588.4 | -467.0 |
| Other operating income | 26.7 | 9.7 | 54.9 | 25.8 | 229.9 | 200.8 |
| Other operating expenses | - | - | - | - | -138.9 | -138.9 |
| Operating profit * | 255.1 | 195.0 | 588.0 | 500.2 | 793.6 | 705.8 |
| Financial items * | -16.8 | -8.7 | -67.8 | -28.7 | -78.2 | -39.1 |
| Profit before tax * | 238.3 | 186.3 | 520.2 | 471.5 | 715.4 | 666.7 |
| Tax * | -57.2 | -51.3 | -131.6 | -122.6 | -172.6 | -163.6 |
| Net profit for the period * | 181.1 | 135.0 | 388.6 | 348.9 | 542.8 | 503.1 |
| Net profit for the period attributable to shareholders of the Parent Company * | 179.8 | 135.0 | 383.5 | 348.9 | 537.7 | 503.1 |
| Earnings per share, based on earnings attributable to shareholders of the parent during the year: |
||||||
| Earnings per share before dilution, SEK * | 1.02 | 1.18 | 2.63 | 3.05 | 3.63 | 4.39 |
| Earnings per share after dilution, SEK * | 1.02 | 1.18 | 2.63 | 3.05 | 3.63 | 4.39 |
| Average number of outstanding shares before dilution | 176,136 | 114,500 | 145,653 | 114,496 | 148,130 | 114,497 |
| Average number of outstanding shares after dilution | 176,136 | 114,500 | 145,653 | 114,496 | 148,130 | 114,497 |
| Number of outstanding shares, thousands | 176,136 | 114,500 | 176,136 | 114,500 | 176,136 | 114,500 |
| STATEMENT OF COMPREHENSIVE INCOME | ||||||
| Net profit for the period * | 181.1 | 135.0 | 388.6 | 348.9 | 542.8 | 503.1 |
| Other comprehensive income | ||||||
| Items which may not be reversed in the income statement: | ||||||
| Revaluation of pension plans | -4.2 | - | -4.2 | - | -4.9 | -0.7 |
| Items which may be reversed in the income statement: | ||||||
| Translation differences | 137.6 | -96.3 | 199.2 | -53.6 | 213.3 | -39.5 |
| Other comprehensive income for the period, net after tax * | 133.4 | -96.3 | 195.0 | -53.6 | 208.4 | -40.2 |
| Total comprehensive income for the period * | 314.5 | 38.7 | 583.6 | 295.3 | 751.2 | 462.9 |
| Comprehensive income attributable to shareholders of the Parent Company * | 313.2 | 38.7 | 578.5 | 295.3 | 746.1 | 462.9 |
* Impacted by IFRS 16 from 2019-01-01
BALANCE SHEET
| 30 Sep | 30 Sep | 31 Dec | |
|---|---|---|---|
| 2019 | 2018 | 2018 | |
| Intangible assets | 6,253.0 | 3,297.2 | 3,159.9 |
| Tangible fixed assets * | 2,876.7 | 715.5 | 703.1 |
| Financial assets * | 231.0 | 52.0 | 52.1 |
| Inventories | 1,321.3 | 873.0 | 857.4 |
| Accounts receivable - trade | 1,583.2 | 1,112.6 | 925.0 |
| Other non-interest-bearing current assets * | 220.4 | 151.8 | 115.3 |
| Cash and cash equivalents | 1,134.8 | 526.6 | 808.4 |
| Total assets | 13,620.4 | 6,728.7 | 6,621.2 |
| Equity * | 5,523.1 | 1,960.0 | 2,129.2 |
| Long-term interest-bearing liabilities * | 4,941.4 | 2,888.3 | 2,465.1 |
| Long-term non-interest-bearing liabilities | 1,227.3 | 846.5 | 584.0 |
| Short-term interest-bearing liabilities * | 290.6 | 4.6 | 416.1 |
| Short-term non-interest-bearing liabilities | 1,638.0 | 1,029.3 | 1,026.8 |
| Total equity and liabilities | 13,620.4 | 6,728.7 | 6,621.2 |
* Impacted by IFRS 16 from 2019-01-01
CASH FLOW STATEMENT
| 2019 | 2018 | 2019 | 2018 | 2018/2019 | 2018 | |
|---|---|---|---|---|---|---|
| Q3 | Q3 | Q1-3 | Q1-3 | Oct-Sep | Jan-Dec | |
| 3 months | 3 months | 9 months | 9 months | 12 months | 12 months | |
| Operating profit * | 255.1 | 195.0 | 588.0 | 500.2 | 793.6 | 705.8 |
| Adjustments for non-cash items * | 153.3 | 39.1 | 193.6 | 59.0 | 200.2 | 65.6 |
| Financial items * | -19.1 | -10.2 | -58.1 | -28.6 | -68.6 | -39.1 |
| Tax paid | -38.1 | -39.3 | -176.7 | -147.8 | -223.8 | -194.9 |
| Funds contributed from operating activities * | 351.2 | 184.6 | 546.8 | 382.8 | 701.4 | 537.4 |
| Change in working capital | 49.2 | -2.9 | 81.8 | -292.1 | 214.6 | -159.3 |
| Cash flow from operating activities * | 400.4 | 181.7 | 628.6 | 90.7 | 916.0 | 378.1 |
| Cash flow from investing activities | -49.6 | -31.1 | -2,858.7 | -407.6 | -2,865.7 | -414.6 |
| Cash flow from financing activities * | -225.5 | -238.0 | 2,510.1 | -129.9 | 2,515.9 | -124.1 |
| Cash flow for the period | 125.3 | -87.4 | 280.0 | -446.8 | 566.2 | -160.6 |
| Cash and cash equivalents at beginning of period | 989.1 | 636.4 | 808.4 | 949.9 | 526.6 | 949.9 |
| Translation differences in cash and cash equivalents | 20.4 | -22.4 | 46.4 | 23.5 | 42.0 | 19.1 |
| Cash and cash equivalents at end of period | 1,134.8 | 526.6 | 1,134.8 | 526.6 | 1,134.8 | 808.4 |
* Impacted by IFRS 16 from 2019-01-01
KEY RATIOS AND DATA PER SHARE
| 2019 | 2018 | 2019 | 2018 | 2018/2019 | 2018 | |
|---|---|---|---|---|---|---|
| Q3 | Q3 | Q1-3 | Q1-3 | Oct-Sep | Jan-Dec | |
| 3 Months | 3 Months | 9 months | 9 months | 12 months | 12 months | |
| Sales growth, % | 43.4 | 10.3 | 38.3 | 7.3 | 32.1 | 8.7 |
| Growth in operating profit, % * | 30.8 | 1.5 | 17.6 | -1.0 | 18.0 | 4.1 |
| Growth in profit before tax, % * | 27.9 | 1.2 | 10.3 | -1.1 | 10.5 | 2.2 |
| Operating margin, % * | 12.3 | 13.5 | 10.3 | 12.1 | 11.0 | 12.6 |
| Profit margin, % * | 11.5 | 12.9 | 9.1 | 11.4 | 9.9 | 11.9 |
| Cash liquidity, % * | 58.8 | 50.9 | 58.8 | 50.9 | 58.8 | 56.0 |
| Net debt/EBITDA ratio * | 2.6 | 2.4 | 3.3 | 2.8 | 3.1 | 2.0 |
| Equity/assets ratio, % * | 40.6 | 29.1 | 40.6 | 29.1 | 40.6 | 32.2 |
| Capital employed, MSEK * | 10,755 | 4,853 | 10,755 | 4,853 | 10,755 | 5,010 |
| Return on capital employed, % * | 9.5 | 16.2 | 10.1 | 14.2 | 10.3 | 14.8 |
| Return on equity, % * | 13.1 | 27.6 | 13.5 | 24.2 | 14.5 | 25.0 |
| Net debt, MSEK * | 4,097 | 2,366 | 4,097 | 2,366 | 4,097 | 2,073 |
| Gross investment in non-current assets, MSEK * | 47.1 | 34.0 | 189.0 | 128.7 | 219.3 | 159.0 |
| Net investment in non-current assets, MSEK * | 47.1 | 34.0 | 189.0 | 128.7 | 183.6 | 123.3 |
| Depreciation/amortisation/impairment of non-current assets, MSEK * | 135.2 | 47.1 | 348.7 | 137.3 | 531.7 | 320.3 |
| Number of employees | 4,685 | 3,350 | 5,010 | 3,368 | 4,027 | 3,384 |
| Equity per share, SEK * | 31.36 | 17.12 | 31.36 | 17.12 | 31.36 | 18.60 |
| Number of outstanding shares, thousands | 176,136 | 114,500 | 176,136 | 114,500 | 176,136 | 114,500 |
* Impacted by IFRS 16 from 2019-01-01
For more information about the Key ratios and the definitions applied, please refer to AB Fagerhult's website under "Investor/Financial data/Financial glossary." The website also includes the definition of any Alternative Performance Measures used whereas this report details the financial aspect to these.
CHANGES IN EQUITY
| Attributable to shareholders of the Parent Company | Total equity | |||||
|---|---|---|---|---|---|---|
| Share capital | Other contributed capital |
Reserves | Retined earnings |
Non controlling interest |
||
| Equity at 1 January 2018 | 65.5 | 205.0 | -198.7 | 1,818.7 | 1,890.5 | |
| Net profit for the period | 348.9 | 348.9 | ||||
| Other comprehensive income | -53.6 | - | -53.6 | |||
| Total comprehensive income for the period | -53.6 | 348.9 | 295.3 | |||
| Performance share plan | 3.2 | 3.2 | ||||
| Dividend paid, SEK 2.00 per share | -229.0 | -229.0 | ||||
| Equity at 30 September 2018 | 65.5 | 205.0 | -252.3 | 1,941.8 | 1,960.0 | |
| Equity at 1 January 2019 | 65.5 | 205.0 | -238.2 | 2,096.9 | 2,129.2 | |
| Net profit for the period | 383.5 | 5.1 | 388.6 | |||
| Other comprehensive income | 199.2 | -4.2 | 195.0 | |||
| Total comprehensive income for the period | 199.2 | 379.3 | 5.1 | 583.6 | ||
| Acquired Non-controlling interest | 33.5 | 33.5 | ||||
| Issue in kind (11,244,805 shares) | 6.4 | 820.1 | 826.5 | |||
| Rights issue (50,298,038 shares), net amount after issue costs | 28.3 | 2,169.4 | 2,197.7 | |||
| Performance share plan | 4.1 | 4.1 | ||||
| Dividend paid, SEK 2.00 per share | -251.5 | -251.5 | ||||
| Equity at 30 September 2019 | 100.2 | 3,194.5 | -39.0 | 2,228.8 | 38.6 | 5,523.1 |
Parent company
INCOME STATEMENT
| 2019 | 2018 | 2019 | 2018 | 2018/2019 | 2018 | |
|---|---|---|---|---|---|---|
| Q3 | Q3 | Q1-3 | Q1-3 | Oct-Sep | Jan-Dec | |
| 3 Months | 3 Months | 9 months | 9 months | 12 months | 12 months | |
| Net sales | 3.7 | 3.6 | 11.2 | 10.8 | 15.5 | 15.1 |
| Administrative expenses | -12.6 | -11.1 | -41.4 | -40.8 | -51.1 | -50.5 |
| Other operating income | 0.2 | - | 0.2 | - | 0.2 | - |
| Operating profit | -8.7 | -7.5 | -30.0 | -30.0 | -35.4 | -35.4 |
| Income from shares in subsidiaries | 32.7 | - | 81.8 | 58.8 | 81.8 | 58.8 |
| Financial items | 7.9 | 5.0 | -2.8 | -27.0 | -3.0 | -27.2 |
| Profit before appropriations and tax | 31.9 | -2.5 | 49.0 | 1.8 | 43.4 | -3.8 |
| Group contributions received | - | - | - | - | 260.0 | 260.0 |
| Changes in tax allocation reserve | - | - | - | - | 8.6 | 8.6 |
| Tax | - | - | - | - | -45.8 | -45.8 |
| Net profit | 31.9 | -2.5 | 49.0 | 1.8 | 266.2 | 219.0 |
BALANCE SHEET
| 30 Sep | 30 Sep | 31 Dec | |
|---|---|---|---|
| 2019 | 2018 | 2018 | |
| Financial assets | 7,684.5 | 3,551.1 | 3,796.4 |
| Other receivables | 109.3 | 37.0 | 46.9 |
| Cash & Bank | 265.7 | 142.2 | 328.7 |
| Total assets | 8,059.5 | 3,730.3 | 4,172.0 |
| Equity | 3,518.1 | 475.3 | 694.0 |
| Untaxed reserves | - | 8.6 | - |
| Long-term interest bearing liabilities | 4,245.7 | 2,763.2 | 2,706.8 |
| Long-term non interest bearing liabilities | 0.2 | 1.7 | 1.7 |
| Short-term interest bearing liabilities | 269.7 | 464.3 | 740.6 |
| Short-term non interest bearing liabilities | 25.8 | 17.2 | 28.9 |
| Total Equity and Liabilities | 8,059.5 | 3,730.3 | 4,172.0 |
CHANGES IN EQUITY
| Share capital |
Statutory reserve |
Retained | earnings Total equity | |
|---|---|---|---|---|
| Equity at 1 January 2018 | 65.5 | 159.4 | 475.4 | 700.3 |
| Performance share program | 3.7 | 3.7 | ||
| Net profit for the period | 219.0 | 219.0 | ||
| Dividend paid, SEK 2.00 per share | -229.0 | -229.0 | ||
| Equity at 31 December 2018 | 65.5 | 159.4 | 469.1 | 694.0 |
| Issue in kind (11,244,805 shares) | 6.4 | 820.1 | 826.5 | |
| Rights issue (50,298,038 shares), net amount, after issue cost | 28.3 | 2,169.4 | 2,197.7 | |
| Performance share plan | 2.4 | 2.4 | ||
| Net profit for the period | 49.0 | 49.0 | ||
| Dividend paid, SEK 2.00 per share | -251.5 | -251.5 | ||
| Equity at 30 September 2019 | 100.2 | 159.4 | 3,258.5 | 3,518.1 |
NET SALES, MSEK OPERATING PROFIT, MSEK
OPERATING MARGIN, % EARNINGS PER SHARE, SEK
OPERATING CASHFLOW NET DEBT AND NET DEBT EBITDA RATIO
KEY RATIOS AND DATA PER SHARE
| 2018/2019 | |||||
|---|---|---|---|---|---|
| 2015 | 2016 | 2017 | 2018 | Oct-Sep 12 months |
|
| Net sales, MSEK | 3,909.4 | 4,490.7 | 5,170.3 | 5,621.0 | 7,203.7 |
| Operating profit, MSEK * | 396.0 | 524.2 | 677.9 | 705.8 | 793.6 |
| Profit before tax, MSEK * | 377.2 | 514.7 | 652.5 | 666.7 | 715.4 |
| Earnings per share, SEK * | 2.54 | 3.35 | 4.32 | 4.39 | 3.63 |
| Sales growth, % * | 4.6 | 14.9 | 15.1 | 8.7 | 32.1 |
| Growth in operating profit, % * | 4.6 | 32.4 | 29.3 | 4.1 | 18.0 |
| Growth in profit before tax, % * | 8.4 | 36.5 | 26.8 | 2.2 | 10.5 |
| Operating margin, % * | 10.1 | 11.7 | 13.1 | 12.6 | 11.0 |
| Net debt/EBITDA ratio * | 1.9 | 1.9 | 2.2 | 2.0 | 3.1 |
| Equity/assets ratio, % * | 38.4 | 33.8 | 31.0 | 32.2 | 40.6 |
| Capital employed, MSEK * | 2,846 | 3,581 | 4,670 | 5,010 | 10,755 |
| Return on capital employed, % * | 14.4 | 16.8 | 16.8 | 14.8 | 10.3 |
| Return on equity, % * | 20.9 | 24.9 | 28.1 | 25.0 | 14.5 |
| Net debt, MSEK * | 937 | 1,222 | 1,830 | 2,073 | 4,097 |
| Net investment in non-current assets, MSEK * | 117.9 | 169.0 | 177.1 | 123.3 | 183.6 |
| Depreciation/amortisation/impairment of non-current assets, MSEK * | 107.3 | 121.2 | 158.2 | 320.3 | 531.7 |
| Number of employees | 2,451 | 2,787 | 3,241 | 3,384 | 4,027 |
* Impacted by IFRS 16 from 2019-01-01
NET SALES AND OPERATING PROFIT, MSEK
New accounting principles IFRS 16 Leases
This note explains the effects in the Group's financial report when applying IFRS 16 Leases. In the balance sheet, the following adjustments were made regarding IFRS 16 Leases:
IFRS 16 BALANCE SHEET ADJUSTMENTS
| Closing balance | Impact of transition to IFRS 16 |
Opening balance | IFRS 16 impact | |
|---|---|---|---|---|
| 31 Dec 2018 |
1 jan 2019 |
30 Sep 2019 |
||
| Tangible fixed assets | 703.1 | 797.0 | 1,500.1 | 975.3 |
| Financial assets | - | - | - | 2.3 |
| Other non-interest-bearing current assets | 115.3 | -13.0 | 102.3 | -18.9 |
| Equity | - | - | - | -7.5 |
| Long-term interest-bearing liabilities | 2,465.1 | 668.7 | 3,133.8 | 805.7 |
| Short-term interest-bearing liabilities | 416.1 | 115.3 | 531.4 | 160.5 |
In the income statement, the following adjustment were made regarding IFRS 16 Leases:
IFRS 16 INCOME STATEMENT ADJUSTMENTS
| IFRS 16 impact | |
|---|---|
| 2019 | |
| Q1-3 | |
| 9 months | |
| Reversal of leasing costs under IAS 17 | 122.4 |
| Depreciation | -117.5 |
| Operating profit | 4.9 |
| Profit before tax | -9.7 |
| Net profit for the period | -7.3 |
The Group has applied IFRS 16 Leases from January 1, 2019, which resulted in changed accounting policies and adjustments in the amounts reported in the financial report. In accordance with the transition provisions in IFRS 16 has the group applied the simplified transition method and therefore has not restated comparatives. All right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 31 December 2018. In applying IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:
the use of a single discount rate to a portfolio of leases with reasonably similar characteristics,
the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2018 as short-term leases, the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application.