Annual Report • Mar 31, 2017
Annual Report
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| Key data | 2016 | 2015 |
|---|---|---|
| Net sales, SEK m | 12,995 | 11,881 |
| Operating profit, SEK m | 1,272 | 1,235 |
| EBITA, SEK m | 1,484 | 1,427 |
| EBITA margin, % | 11.5 | 12.0 |
| Profit before tax, SEK m | 1,194 | 1,137 |
| Profit for the year after tax, SEK m | 936 | 894 |
| Earnings per share before dilution, SEK | 7.80 | 7.44 |
| Return on operating capital, % | 20 | 22 |
| Cash flow from operating activities, SEK m | 1,207 | 1,076 |
| Net debt/equity ratio, % | 82 | 80 |
| Average number of employees | 5,495 | 4,978 |
Net sales and earnings
In May 2016 a 2:1 bonus issue was carried out, increasing the number of shares from 40 million to 120 million. Relevant comparison figures in this annual report have been recalculated to take this into account.
| Business concept 1 | Sustainable business 13 |
|---|---|
| Indutrade in brief 2 | Quarterly overview 16 |
| CEO's message 4 | Several-year overview17 |
| Goals and strategies 6 | Definitions 19 |
| Business philosophy and | Directors' report 20 |
| acquisition process 8 | Corporate Governance Report 32 |
| Driving forces and business environment 9 |
Proposed distribution of earnings 38 |
| Share data 10 | Group Management 39 |
| Board of Directors and auditors 40 | |
|---|---|
| Group accounts 42 | |
| Parent Company accounts 46 | |
| Notes 50 | |
| Audit report 80 | |
| Annual General Meeting and reporting dates 83 |
|
| Contact information 83 |
This is an unofficial translation of the original Swedish text. In the event of any discrepancy between the English translation and the Swedish original, the Swedish version shall govern.
Indutrade markets and sells components, systems and services with high-tech content in selected industrial niches. By having good knowledge about customers' systems and processes, combined with a high level of technical expertise, Indutrade aspires to be the most effective partner for customers and suppliers alike.
We set high standards for the companies we acquire. They are successful and wellmanaged, with a clearly defined market and distinct customer offering. They are run by entrepreneurs with a passion for their business concept and who want to further develop the business. We acquire companies in which the owner wants to continue leading and developing the business, without being the owner. The rationale for selling can vary. Perhaps the company is facing an expansion or investment phase. Or maybe the owner wants to see his life's work live on. Indutrade has no exit strategy, and by selling to Indutrade, the company's future can be secured.
Being part of the Indutrade Group means that a company can retain its original identity at the same time that it gains access to the combined experience and knowledge of industry colleagues in the Group. Indutrade's companies stimulate each other and benefit from information-sharing. Network seminars and internal benchmarking help to establish best practice that can be spread throughout the Group. All Indutrade companies have clearly decentralised responsibility as well as authority. Indutrade supports them with industrial knowhow, financing, business development and management by objective.
As I now write my final CEO's message for an Indutrade annual report, I can affirm that we have once again reached record levels of sales and earnings. Despite a challenging business environment in many respects, 2016 was the best year ever in Indutrade's history. Sales rose 9% to nearly SEK 13 billion, while profit before tax rose 5%.
The rate of growth was slightly lower than what we have been used to, however. This is explained by the exceptionally good year we had in 2015 for sales of valves for power generation, with a number of major deliveries, for which we did not have any corresponding performance in 2016. The "drop" was thus from a very high level. An additional explanation for the lower rate of growth is the price pressure and weak demand that is currently prevailing in the marine segment.
Global growth has been weak in general, but our broad geographic presence reduces our dependence on individual markets. This breadth also gives us staying power in tough times. It is therefore very gratifying to note the break in trend in Finland; following a long period of weak demand, we noted a clear improvement in the business situation, especially in construction and the shipbuilding industry.
In the UK and Ireland, the markets were negatively affected by the initial shock following the unexpected outcome of the Brexit vote. But we are now seeing a return of optimism and pick-up in demand.
The businesses that are affected by the US market are currently doing very well. A very limited amount of our sales are directly dependent on the USA, however, the underlying performance of many companies is being favourably affected, as they deliver to other companies that directly benefit from growth in the US.
"The type of leadership that I and my colleagues stand for focuses on capitalising on the resources that already exist in the companies we own and acquire. I am firmly convinced that our successes can be credited largely to the fact that we allow individuals to have and take responsibility."
Acquisition activity also stayed high, and during the year we welcomed eleven new companies to the Indutrade Group with combined sales of more than SEK 1.1 billion. Nine of the acquired companies have own brands, which is entirely in line with our strategy to increase the number of companies with proprietary products. Moreover, several of the companies have expertise in advanced testing and measurement technology – a segment that we believe has good growth potential, as we are seeing a heightened focus on efficient use of resources among all our customers.
SEK 15 20 25 As in previous years, most of the acquisitions were made abroad – only two of the companies are Swedish. To be sure, there are many good acquisition candidates in Sweden, but we have seen a clear increase in competition for them, and thus the prices have also risen. A few years ago we were relatively alone with our acquisition model that allowed a continued high degree of self-determination for the companies we acquired, but today there are more actors in the Swedish market that have adopted the same model. Since we do not compete with price, we have instead broadened our acquisition focus to markets outside Sweden, where we can find attractive companies at prices that do not raise the risk level.
Earnings Dividend 0 2008 2009 2010 2011 2012 2013 2014 2015 Looking back on my more than 12 years as CEO of Indutrade, there are many things that I am very proud of. Among other things, we have grown geographically and have become a global group with business in 28 countries. The number of companies has grown from some 60 to more than 200. We have also dramatically increased the share of companies with own brands, which creates stability. Sales have risen every year, except for during the
financial crisis in 2009. Moreover, growth has always been achieved with profitability in focus. Both our earnings and dividends have grown at a steady pace over the years.
What I am most proud of is the power inherent in all of the people in all our companies and how we have allowed this power to take root and flourish. The type of leadership that I and my colleagues stand for focuses on capitalising on the resources that already exist in the companies we own and acquire. I am fully and firmly convinced that our successes can be credited largely to the fact that we allow individuals to have and take responsibility. We recognise talented people, we support them, and we give them room to grow.
The level of freedom we give our people is a strength, but it puts special demands on the central leadership. Above all it requires that one can listen and trust others' abilities. Indutrade consists of a vast number of successful entrepreneurs who know and understand their respective markets. The recipe for success is to allow these entrepreneurs to continue running their businesses in their own ways and to support and inspire them to develop even more. In this way we have built up substantial structural capital in the Group. Every country and every business area has strong organisations.
As my parting words I want to express my heartfelt gratitude to all of the Group's employees, to my colleagues and to business partners who I have had the pleasure to work together with on this journey. You have all helped make Indutrade a strong and stable group that delivers results.
I want to wish my successor the best of luck – you are joining a wonderfully good company. Indutrade's business model has worked very successfully in the same way since 1978, and my strongest advice is to stick with it: "If it ain't broke, don't fix it!"
Johnny Alvarsson President and CEO, Indutrade
The Indutrade Group strives for continuous growth in selected geographic markets, product areas and niches while maintaining limited business risk. Growth is pursued organically as well as through acquisitions. Indutrade's overall goals for profitable growth are:
» to be an international group with proprietary products and brands.
| Financial targets | Target Achievement | Historical achievement % 25 20 15 Target 10 5 0 2012 2013 2014 2015 2016 |
|||
|---|---|---|---|---|---|
| Average sales growth shall amount to a % minimum of 10% per year over a business 25 cycle. Growth is to be achieved organi 20 cally as well as through acquisitions. 15 10 5 0 2012 |
During the last five-year period average annual sales growth was 10%. Net sales rose 9% in 2016. For comparable units, the increase was 2%, while acquired growth was 8% and the currency effect Mål was –1%. 2013 2014 2015 2016 |
||||
| % The target EBITA margin is a minimum 20 of 10% per year over a business cycle. 15 10 5 0 2012 |
The average EBITA margin during the last five years was 11.5%. The EBITA margin in 2016 was 11.5%. Mål 2013 2014 2015 2016 |
% 20 15 10 5 0 2012 2013 2014 2015 2016 |
Target | ||
| % Return on operating capital should be a 30 minimum of 20% per year over a business cycle. 20 10 0 2012 |
During the last five years the average return on operating capital was 21%. In 2016 the return was 20%. Mål 2013 2014 2015 2016 |
% 30 20 10 0 2012 2013 2014 2015 2016 |
Target | ||
| % Net debt/equity ratio should normally not 120 exceed 100%. 100 80 60 40 20 0 2012 |
During the last five years the net debt/ Mål equity ratio at year-end ranged from 79% ej överstiga to 102%. The net debt/equity ratio at 100% year-end 2016 was 82%. 2013 2014 2015 2016 |
% 120 100 80 60 40 20 0 2012 2013 2014 2015 2016 |
Target not to exceed 100% |
||
| % The dividend payout ratio should range 100 from 30% to 60% of net profit. 80 60 40 20 0 2012 |
During the last five years the dividend payout ratio was 44% including the proposed dividend. For 2016 a dividend of SEK 3.20 has been proposed, corre Mål sponding to 41% of net profit. 2013 2014 2015 2016 |
% 100 80 60 40 20 0 2012 2013 2014 2015 2016 |
Target |
To achieve its overarching goals, Indutrade pursues the following strategies:
Growth will be pursued in three dimensions:
Growth is to be achieved organically as well as through acquisitions. As companies in the Indutrade Group grow, the entry barriers for potential competitors are also expected to rise. At the same time, the risk of Indutrade's suppliers to the technical sales companies establishing own sales organisations in the Company's markets decreases.
» Business development and growth are strategic tools for lowering business risk.
Indutrade acquires well managed, long-term successful, often owner-led industrial companies whose management teams are eager to continue running and growing the business. These companies manufacture or sell products in distinct markets.
» Indutrade normally does not sell companies. Nor do we change the companies' names or combine companies, which means that the seller knows that the company will continue as a player in the market.
Indutrade focuses on sales of products in niches in which it can attain a leading position.
» Strong market positions are often a prerequisite for good profitability. They also make it easier to attract the best suppliers, which further strengthens Indutrade's position.
Indutrade gives priority to suppliers who, through own product development, provide market-leading, high-quality products with a high-tech content. A partnership with Indutrade should be the most profitable way for suppliers to sell their products in the geographic markets in which Indutrade operates.
» A range of market-leading products from the best suppliers, coupled with Indutrade's technical and market know-how, makes Indutrade an attractive business partner for existing and potential customers.
Indutrade has a number of companies with proprietary products and brands. The products should have a high-tech content, while the companies should have a strong market position and favourable growth potential.
» Proprietary products and brands balance the Group's technology sales companies. Since 2004 the share of sales of proprietary products has grown by 31 percentage points, and in 2016 they accounted for 40% of consolidated net sales.
The Group gives priority to customers with a recurring need that are active in industries with favourable prospects for maintaining competitive production in Indutrade's home markets. Many of these industries are characterised by a high degree of automation, high distribution costs and/or large start-up investment.
» This contributes to business stability and predictability of revenue flows.
Indutrade's product and service offering, which is aimed at both end users and OEM customers (customers that integrate Indutrade's products in their own products), should have a high-tech content and incorporate a high level of service and qualified technical consulting. Indutrade's sales representatives must have a high level of technical expertise in their respective niches and a depth of knowledge about the customers' production processes.
» This makes Indutrade an attractive business partner that creates value-added for customers and suppliers alike.
Indutrade's governance model is characterised by decentralisation, as the best business decisions are made close to customers by people who have the best understanding of the customers' needs and processes.
» The subsidiaries are responsible for their own profitability, which contributes to greater flexibility and a stronger entrepreneurial spirit.
Our business philosophy builds upon entrepreneurship, self-determination, and customer-adapted leadership. We buy profitable, well managed companies which, after being acquired, are allowed to continue doing business as usual, retaining their name, culture and management.
Giving the subsidiaries a great amount of freedom contributes to customer adaptation and flexibility, and creates favourable conditions to continue fostering entrepreneurship in the organisation. Our governance model is highly decentralised, which puts demands on acquired companies to have a well-working operation and management. Business philosophy
Entrepreneurship
Indutrade supports its subsidiaries with industrial knowhow, financing, business development and management by objective. We are a stable, stock exchange-listed owner that takes responsibility for our subsidiaries' long-term success. The Group's financial strength facilitates the subsidiaries' expansion and promotes stability.
At internal networking seminars, we provide opportunities for our subsidiaries to make comparisons and informally share ideas and experiences. Every quarter a benchmarking process is conducted in the form of a ranking list, which is designed to concretise the companies' goals and give the company presidents knowledge about other companies' development in the Group.
Indutrade strives to establish a dialogue with the owners of potentially interesting companies at an early stage. In doing so, Indutrade is often positioned as a natural discussion partner for business owners prior to a possible sale. At any given time, Indutrade is in discussions with acquisition candidates.
Potential acquisitions are evaluated on the basis of such parameters as market position, the market segment's attractiveness, customers, competitors, the principal supplier's strategic and technical focus, repetitive features in the product offering, financial position, history, key persons' continued involvement, and the value-added that the company can create for customers and suppliers. Thorough evaluation minimises the operational and financial risk associated with an acquisition.
The main purpose of the negotiation phase is to ensure:
In connection with an acquisition, a structured review is conducted that focuses primarily on the acquired company's:
New financial targets – adapted to the company's conditions – are set.
The Group's management and the management of the pertinent business area conduct a continuous dialogue with the company's management. The ongoing governance is goaloriented, with focus on growth, margins and working capital management.
• More energy-efficient and environment-friendly
• Dividend
Society
Customers
operations • Lower costs • Higher productivity • Broader product offering
• Growth in value
• Competence development
Global macro-trends such as climate change, demographic changes and increased globalisation present our customers with a steady progression of new challenges. More efficient production and renewal are in constant focus. Indutrade is an important partner that contributes to its customers' ability to develop.
Conducting active business intelligence in which the salient trends are identified, monitored and analysed is crucial for Indutrade in its ability to make well-grounded decisions regarding its business. While global trends entail challenges, they also represent major business opportunities.
Population growth and a growing middle class are leading to rising demand for capital- as well as consumer goods, at the same time that the need for healthcare is rising as people are living longer. Migration in large parts of the world is creating a need for infrastructure investment. Limited natural resources are leading to greater demands for more efficient use of resources, recycling of material, and conservation of energy in industry. Climate change is leading to demands for greater use of renewable energy sources and a sustainable transport sector, with improved fuel economy and lower carbon emissions. This growing environmental awareness coupled with demands for long-term sustainable development is resulting in greater demand among consumers for locally produced goods.
Indutrade offers components, systems and services that improve our customers' ability to manage change and thereby effectively meet the challenges presented by a changing world.
Our growth strategy is focused on sectors with high demands for efficiency and thus a high degree of automation. Priority is given to products that help industries measure, govern, control, automate and improve the efficiency of their processes, and products that support industries in meeting environmental standards and their energy needs. With Indutrade's help, customers can conduct their business in a more energy-efficient and environment-friendly manner.
In an effort to diversify risk and reduce sensitivity to economic fluctuations, Indutrade works with products and solutions in a wide range of sectors.
In view of the growing demands for generally improved environmental performance and more efficient energy production, together with growing international trade, the segments that are considered to be the most important for Indutrade's continued expansion and development are energy, water and wastewater, the environment, transport, construction and infrastructure, healthcare, engineering and food. Indutrade's largest segments in terms of sales are currently engineering, construction and infrastructure, energy and healthcare.
Indutrade's shares are listed on Nasdaq Stockholm. The shares have been listed on the Large Cap list since 1 January 2015. Indutrade's market capitalisation on 31 December 2016 was SEK 21,960 million (19,220).
Indutrade's share price rose from SEK 160.17 to SEK 183.00 during the year, an increase of 14%. The Stockholm Stock Exchange gained 6% for the year, and the OMX Industrials PI index rose 19%. Including reinvested dividends, the total return for Indutrade shares was 17%. The highest price paid in 2016 was on 8 September, SEK 191.00, and the lowest price paid was on 9 February, SEK 136.23. During the last ten-year period Indutrade's shares have delivered a total return of 448% including reinvested dividends, while the SIX Return Index, which measures the total return of the market as a whole, showed a total return of 107% during the same period.
A total of 48.9 million (42.9) Indutrade shares were traded in 2016 for a combined value of SEK 8.1 billion (5.6). This corresponds to a turnover rate of 41% (36%). Average daily trading volume was 193,398 Indutrade shares (170,743), with 895 transactions (559).
The Annual General Meeting on 27 April 2016 resolved in favour of a 2:1 bonus issue, with 27 May 2016 as the record date. For each existing share held on the record date, two new shares were issued to the shareholder at no charge. Following the bonus issue, the number of shares in Indutrade tripled, and the price per share decreased to roughly a third. As per 31 May 2016 the number of shares in Indutrade was 120,000,000.
Indutrade's share capital amounted to SEK 240 million on 31 December 2016 (40), divided among 120,000,000 shares (40,000,000) with a share quota value of SEK 2 (1). All shares have equal voting power.
Indutrade had 10,518 shareholders on 31 December 2016 (7,965). At year-end the ten largest owners controlled 61% of the capital and votes (65%). Swedish legal entities, including institutions such as insurance companies and mutual funds, owned 69% of the capital and votes at year-end (67%). Foreign ownership of the Company was 24% (26%).
In April 2014 the Annual General Meeting of Indutrade AB resolved to implement an incentive programme, LTI 2014, comprising a combined maximum of 460,000 warrants
in two series, directed at senior executives and other key persons in the Indutrade Group.
Within the framework of Series I, which was offered to 135 persons, the participants acquired a total of 257,500 warrants, and within the framework of Series II, which was offered to 13 persons, the participants acquired a total of 27,500 warrants. After the bonus issue in May 2016, each warrant entitles its owner to subscribe for three shares. The subscription price for Series I has been recalculated to SEK 118.80 per share, and the subscription price for Series II has been recalculated to SEK 116.70 per share.
The shares can be subscribed during specially prescribed subscription periods through Friday, 18 May 2018. Upon full exercise, the number of shares outstanding will increase by 855,000, corresponding to 0.7% of the total number of shares and votes. During the full year 2016, there was a marginal dilutive effect of 0.21% (0.08%).
The Board of Directors has decided to propose to the Annual General Meeting in April 2017 to resolve in favour of an additional long-term share-based incentive programme directed at approximately 180 executives and other key persons within the Group. This programme will also be based on warrants.
The Board's goal is to provide the shareholders an attractive dividend yield and high dividend growth. The goal is that over time, the dividend shall range from 30% to 60% of net profit. During the last five-year period, of Indutrade's aggregate profit after tax, totalling SEK 3,689 million, dividends of SEK 1,618 million have been paid to the shareholders (including the proposed dividend for the year), which corresponds to 44% of net profit.
| 2016 | 2015 | |
|---|---|---|
| Share price per 31 December, SEK | 183.00 | 160.17 |
| Market cap at 31 December, SEK m | 21,960 | 19,220 |
| Dividend, SEK | 3.201) | 3.00 |
| Earnings before dilution, SEK | 7.80 | 7.44 |
| Earnings after dilution, SEK | 7.78 | 7.44 |
| No. of shares outstanding, thousands | 120,000 | 120,000 |
| Average number of shares before dilution, thousands |
120,000 | 120,000 |
| Average number of shares after dilution, thousands |
120,251 | 120,094 |
| No. of shareholders per 31 December | 10,518 | 7,965 |
| Highest price paid during the financial year, SEK |
191.00 | 162.77 |
| Lowest price paid during the financial year, SEK |
136.23 | 103.50 |
| Dividend yield2), % | 1.7 | 1.9 |
| Shareholders' equity, SEK | 36.58 | 30.86 |
| Cash flow from operating activities, SEK | 10.06 | 8.97 |
10 largest shareholders at 31 December 2016
| No. shares | Share of capital and votes, % |
|
|---|---|---|
| L E Lundbergföretagen | 31,575,000 | 26.3 |
| Didner & Gerge funds | 11,743,689 | 9.8 |
| AMF Insurance and funds | 7,829,190 | 6.5 |
| Handelsbanken funds | 6,659,032 | 5.6 |
| SEB Investment Management | 4,459,700 | 3.7 |
| Första AP-fonden | 2,389,000 | 2.0 |
| JPM Chase NA | 2,311,932 | 1.9 |
| SSB Client Omnibus AC OM07 | 2,135,333 | 1.8 |
| Odin Norden | 1,996,951 | 1.7 |
| Länsförsäkringar fund management | 1,962,531 | 1.6 |
| Other | 46,937,642 | 39.1 |
1) Proposed by the Board of Directors.
2) Dividend divided by share price on 31 December.
| 1. | Sustainable growth • Average annual rate of growth of 12% since stock market listing in 2005 • 448% total return, including reinvested dividends, during the last ten-year period • History of successful acquisitions • Opportunities to broaden product offering, enhance value creation and expand geographically |
|---|---|
| 2. | Attractive market position and risk profile • Leading position in selected, niche segments • Focus on high quality and technically advanced products for customers with recurring need • Diversified and stable customer base • Stable long-term relationships with leading suppliers • Not dependent on any single supplier |
| 3. | Stable profitability and strong cash flow • History of stable profitability • Average EBITA margin of 11.5% during last five years • Average return on operating capital of 21% during last five years • Strong operating cash flow generated over the years • High average dividend – 44% of net profit during last five years • Equity ratio 40% at year-end 2016 |
| 4. | Strong culture and extensive expertise • Decentralised organisation • Entrepreneurial spirit • Strict income and cost control • Sales force with extensive technical knowledge |
Analyst firms that monitor Indutrade ABG Sundal Collier, Carnegie Investment Bank, Danske Bank Markets, Handelsbanken, Nordea, SEB and Swedbank.
Acquiring companies is one of the cornerstones of Indutrade's business model. In our acquisition process it is therefore imperative that we ensure shared values and principles with respect to sustainable business. Our ambition is to conduct our business in close dialogue with the stakeholders that affect and are affected by our business decisions to a large extent. Staying abreast of developments in the world around us and advocating for a sustainable value chain gives us conditions to offer our customers innovative solutions to the challenges of today and tomorrow!
Indutrade's most important duty is to create sustainable value through its subsidiaries – both for ourselves and for the communities we work in. We acquire well run and profitable companies that share our values. One of the most important reasons for Indutrade being considered to acquire a company is that the owners want to see their life's work continue to thrive and develop. For our part, being a responsible long-term owner requires that we make careful considerations in the demands we set and the support we lend to our subsidiaries on matters concerning corporate social responsibility. Sustainability issues are included as a recurring topic in discussions surrounding the strategic direction and financial objectives of our subsidiaries. Our ambition is to develop and strengthen our companies in this dimension as well.
We need to continuously adapt our priorities to the ways in which Indutrade is developing and to changes in the surrounding world. Identifying and analysing the expectations that our key stakeholders put on us – including our subsidiaries, owners and employees – helps us to focus our work and our resources on the areas in which we have the greatest influence and where we are subject to high expectations from people in our operating environment. This is a prerequisite for our ability to create our intended level of sustainable value. In 2016 we began work on a general materiality analysis, which resulted in the definition of three focus areas for Indutrade's sustainability work: long-term ownership, competence and qualifications, and business ethics. We intend to validate this analysis with Indutrade's key stakeholders in 2017.
| LONG-TERM OWNERSHIP | COMPETENCE AND QUALIFICATIONS | BUSINESS ETHICS | ||||||
|---|---|---|---|---|---|---|---|---|
| Company culture |
Sustainable acquisition process |
Decentrali sation |
Strong local ties |
Diversity | Competence develop ment |
Succession planning |
Implementation of the Code of Conduct |
Sustainability among suppliers |
We are steadfast in our belief that clearly formulated values form a foundation for good business ethics, which are crucial for upholding the trust of customers and employees as well as of other stakeholders. In our acquisition process, ensuring that we have a shared set of values and principles is therefore a key consideration. We put strong emphasis during the acquisition process on getting to know the company and its management, employees and owners in order to ensure they will be a good fit with Indutrade. Discussions and reasoning surrounding our decentralised governance model and our fundamental values are conducted as early as possible in the acquisition process. In 2017 we will begin work on formalising how we can include corporate culture and decentralisation perspec-
The business conducted by Indutrade's companies is based on long-term, strong relationships with customers and suppliers, but also with the local communities in which the companies are located and operate. Our companies contribute to local development through their long-term presence and profitable business. Each and every one of our employees plays a role in upholding the public's trust in Indutrade's companies as reliable and responsible companies that live up to their obligations in all respects.
Diversity and the rejection of all forms of discrimination are prerequisites for maintaining the competitiveness and dynamism in our organisation as well as for upholding our reputation as an attractive employer. All of our employees are to be given equal opportunities for career development regardless of gender, ethnicity, religion or faith, functional disability, sexual orientation or age. With a decentralised governance model, diversity in the subsidiaries is mainly an issue for the respective companies' presidents. In 2017 Indutrade will look into diversity-promoting measures related to the appointment of our subsidiary presidents.
Indutrade's greatest potential in the area of sustainability lies in helping the subsidiaries' customers meet growing demands and expectations for responsible and sustainable solutions. In addition to being a responsible business partner, this entails that – in developing our customer offerings and positioning our subsidiaries – we demonstrate that we provide value-added, such as from environmental or social
perspectives. Indutrade's companies can point to many good examples of environmentally adapted solutions or solutions that contribute to improved efficiency, safety and productivity for customers. In connection with our internal meetings, such as the Group's annual presidents meeting, the monthly Group Management meetings and internal board meetings, we highlight successful examples of sustainable customer offerings that can serve as inspiration for Indutrade's subsidiaries.
One prerequisite for our success at developing our business is that both we and our subsidiaries can attract, recruit, develop and retain employees with the right competence and values. Indutrade's subsidiaries typically serve as problem solvers for customers, which requires our people to have a high level of business and technical expertise. We therefore put great emphasis on continuous competence development in our companies, which also helps us attract and retain key people. It also helps us secure access to people who are prepared and competent to take on responsibility as a subsidiary president. In 2017 we will develop and follow up our internal development programmes and formalise succession planning within the Group.
Code of Conduct – everyone's responsibility and right The Code of Conduct that we introduced in 2015 lays out a number of overarching principles and guidelines that codify how we want to act and be perceived. The Code of Conduct, which covers environmental concerns, health and safety, business ethics, employee relations, human rights and community impacts, serves as a foundation for our daily work with sustainability issues and applies for all employees. The subsidiary presidents are responsible for ensuring the employees within their respective organisations are familiar with the Code of Conduct. The subsidiary presidents also determine if there are other actors in the company's value chain who are covered by the Code, such as suppliers, contractors or consultants. During 2016 a first follow-up was conducted of the subsidiaries' performance at implementing the Code of Conduct in their operations. This follow-up showed that the vast majority of companies have informed or discussed the content of the Code of Conduct with their employees. The most important issue is considered to be the one dealing with business ethics. Indutrade plans to conduct a review of its anti-corruption work in 2017.
Follow-up of adherence to the Code of Conduct will continue to be conducted as part of the annual monitoring of internal control. Employees can choose to report, anonymously if they so desire, deviations from the Code of Conduct or suspicions of improprieties via an established whistleblower function.
All Indutrade employees shall have a safe and healthy workplace. Proactively eliminating obvious physical risks and following up safety work and the employees' work situations are a matter of course for us. In general, the
operations of Indutrade's subsidiaries involve lighter workshop and assembly work. We want to give our subsidiaries the absolute best conditions to grow, among other things by continuously investing in their production environments. Apart from contributing to higher productivity, this also leads to safer workplaces with fewer risk areas and repetitive movements.
Indutrade's direct environmental impacts are relatively limited and arise primarily in the subsidiaries in connection with transports of finished products, business travel, and handling of waste. This notwithstanding, the goal is to reduce our environmental impact through systematic improvement work across the entire value chain. A number of subsidiaries are certified according to ISO 14001, but even companies that are not certified conduct systematic environmental work aimed at achieving continuous improvements that are followed up with targets and action plans within the subsidiaries' respective frameworks. Priority areas of focus include efficient use of energy and natural resources, established systems for reusing and recycling material and energy, and prevention of environmental pollution.
Indutrade is striving to develop and strengthen its subsidiaries with respect to sustainability among its suppliers. A mapping of the subsidiaries' suppliers was conducted in 2016. In 2017 we will analyse the outcome of this mapping and determine how we as owner can best support our subsidiaries in managing potential risks in their respective supply chains.
| 2016 | 2015 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Net sales, SEK million | Total | Oct-Dec | Jul-Sep | Apr-Jun | Jan-Mar | Total | Oct-Dec | Jul-Sep | Apr-Jun | Jan-Mar |
| Engineering & Equipment | 1,537 | 415 | 389 | 397 | 336 | 1,466 | 376 | 373 | 371 | 346 |
| Flow Technology | 2,231 | 580 | 531 | 591 | 529 | 2,234 | 612 | 545 | 593 | 484 |
| Fluids & Mechanical Solutions |
1,558 | 445 | 385 | 404 | 324 | 1,249 | 339 | 316 | 307 | 287 |
| Industrial Components | 2,501 | 690 | 596 | 649 | 566 | 2,263 | 628 | 557 | 589 | 489 |
| Measurement & Sensor Technology |
1,171 | 338 | 295 | 297 | 241 | 938 | 246 | 227 | 246 | 219 |
| Special Products | 3,997 | 1,040 | 990 | 991 | 976 | 3,772 | 1,029 | 1,030 | 928 | 785 |
| Parent Company and Group items |
–40 | –9 | –10 | –12 | –9 | –41 | –11 | –12 | –9 | –9 |
| 12,995 | 3,499 | 3,176 | 3,317 | 2,963 | 11,881 | 3,219 | 3,036 | 3,025 | 2,601 | |
| EBITA, SEK million | Total Oct-Dec | Jul-Sep | Apr-Jun | Jan-Mar | Total | Oct-Dec | Jul-Sep | Apr-Jun | Jan-Mar | |
| Engineering & Equipment | 124 | 29 | 42 | 38 | 15 | 125 | 29 | 41 | 32 | 23 |
| Flow Technology | 168 | 38 | 35 | 55 | 40 | 217 | 59 | 52 | 63 | 43 |
| Fluids & Mechanical Solutions |
199 | 54 | 48 | 56 | 41 | 163 | 41 | 43 | 40 | 39 |
| Industrial Components | 265 | 76 | 67 | 72 | 50 | 249 | 64 | 72 | 68 | 45 |
| Measurement & Sensor Technology |
177 | 51 | 51 | 45 | 30 | 164 | 43 | 42 | 38 | 41 |
| Special Products | 597 | 144 | 142 | 159 | 152 | 564 | 166 | 154 | 140 | 104 |
| Parent Company and Group items |
–46 | –1 | –8 | –20 | –17 | –55 | –4 | –17 | –19 | –15 |
| 1,484 | 391 | 377 | 405 | 311 | 1,427 | 398 | 387 | 362 | 280 | |
| EBITA margin, % | Total | Oct-Dec | Jul-Sep | Apr-Jun | Jan-Mar | Total | Oct-Dec | Jul-Sep | Apr-Jun | Jan-Mar |
| Engineering & Equipment | 8.1 | 7.0 | 10.8 | 9.6 | 4.5 | 8.5 | 7.7 | 11.0 | 8.6 | 6.6 |
| Flow Technology | 7.5 | 6.6 | 6.6 | 9.3 | 7.6 | 9.7 | 9.6 | 9.5 | 10.6 | 8.9 |
| Fluids & | ||||||||||
| Mechanical Solutions | 12.8 | 12.1 | 12.5 | 13.9 | 12.7 | 13.1 | 12.1 | 13.6 | 13.0 | 13.6 |
| Industrial Components | 10.6 | 11.0 | 11.2 | 11.1 | 8.8 | 11.0 | 10.2 | 12.9 | 11.5 | 9.2 |
| Measurement & Sensor Technology |
15.1 | 15.1 | 17.3 | 15.2 | 12.4 | 17.5 | 17.5 | 18.5 | 15.4 | 18.7 |
| Special Products | 14.9 | 13.8 | 14.3 | 16.0 | 15.6 | 15.0 | 16.1 | 15.0 | 15.1 | 13.2 |
| 11.5 | 11.2 | 11.9 | 12.2 | 10.5 | 12.0 | 12.4 | 12.7 | 12.0 | 10.8 |
| Condensed income statements, SEK million |
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|---|---|---|
| Net sales | 12,955 | 11,881 | 9,746 | 8,831 | 8,384 | 7,994 | 6,745 | 6,271 | 6,778 | 5,673 |
| Cost of goods sold | –8,607 | –7,847 | –6,464 | –5,833 | –5,545 | –5,268 | –4,480 | –4,207 | –4,520 | –3,826 |
| Development costs | –156 | –133 | –107 | –110 | –95 | –74 | –48 | –44 | –32 | –20 |
| Selling costs | –2,179 | –2,044 | –1,708 | –1,601 | –1,527 | –1,430 | –1,224 | –1,169 | –1,169 | –972 |
| Administrative expenses | –791 | –635 | –535 | –449 | –426 | –398 | –376 | –323 | –299 | –250 |
| Other operating income/expenses | 50 | 13 | 49 | 18 | 6 | –2 | –3 | –3 | 2 | 4 |
| Operating profit | 1,272 | 1,235 | 981 | 856 | 797 | 822 | 614 | 525 | 760 | 609 |
| Financial income and expenses | –78 | –98 | –86 | –100 | –83 | –93 | –61 | –64 | –68 | –31 |
| Profit after financial items | 1,194 | 1,137 | 895 | 756 | 714 | 729 | 553 | 461 | 692 | 578 |
| Tax | –258 | –243 | –192 | –169 | –145 | –189 | –148 | –120 | –182 | –159 |
| Net profit for the year | 936 | 894 | 703 | 587 | 569 | 540 | 405 | 341 | 510 | 419 |
| EBITA | 1,484 | 1,427 | 1,134 | 990 | 905 | 917 | 703 | 594 | 820 | 650 |
| EBITA margin, % | 11.5 | 12.0 | 11.6 | 11.2 | 10.8 | 11.5 | 10.4 | 9.5 | 12.1 | 11.5 |
| Condensed balance sheets, SEK million |
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
| Assets | ||||||||||
| Goodwill | 2,388 | 1,942 | 1,572 | 1,308 | 1,188 | 822 | 712 | 514 | 574 | 378 |
| Other intangible assets | 1,879 | 1,636 | 1,445 | 1,286 | 1,215 | 888 | 761 | 555 | 599 | 364 |
| Property, plant and equipment | 1,451 | 1,117 | 971 | 849 | 741 | 706 | 657 | 563 | 554 | 388 |
| Financial assets | 117 | 101 | 87 | 61 | 59 | 45 | 50 | 48 | 52 | 43 |
| Inventories | 2,249 | 1,931 | 1,617 | 1,546 | 1,472 | 1,328 | 1,183 | 1,064 | 1,207 | 936 |
| Accounts receivable – trade | 2,292 | 1,995 | 1,702 | 1,435 | 1,411 | 1,263 | 1,047 | 901 | 1,102 | 859 |
| Other receivables | 345 | 300 | 336 | 208 | 204 | 149 | 164 | 125 | 100 | 100 |
| Cash and cash equivalents | 332 | 339 | 357 | 261 | 243 | 264 | 219 | 229 | 223 | 203 |
| Total assets | 11,053 | 9,361 | 8,087 | 6,954 | 6,533 | 5,465 | 4,793 | 3,999 | 4,411 | 3,271 |
| Liabilities and equity | ||||||||||
| Equity | 4,399 | 3,707 | 3,162 | 2,626 | 2,290 | 2,064 | 1,744 | 1,644 | 1,597 | 1,189 |
| Non-current interest-bearing liabilities, and pension liabilities |
2,274 | 1,260 | 1,216 | 2,201 | 1,158 | 837 | 939 | 886 | 930 | 431 |
| Other non-current liabilities and provisions |
563 | 480 | 412 | 353 | 333 | 255 | 231 | 132 | 148 | 237 |
| Current interest-bearing liabilities | 1,686 | 2,028 | 1,635 | 381 | 1,424 | 1,083 | 841 | 462 | 622 | 393 |
| Accounts payable – trade | 968 | 848 | 763 | 602 | 586 | 556 | 493 | 424 | 584 | 470 |
| Other current liabilities | 1,163 | 1,038 | 899 | 791 | 742 | 670 | 545 | 451 | 530 | 551 |
| Total liabilities and equity | 11,053 | 9,361 | 8,087 | 6,954 | 6,533 | 5,465 | 4,793 | 3,999 | 4,411 | 3,271 |
| Condensed cash flow statements, SEK million |
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|---|---|---|
| Cash flow from operating activities before changes in |
||||||||||
| working capital | 1,318 | 1,315 | 970 | 790 | 720 | 764 | 616 | 438 | 619 | 526 |
| Changes in working capital | –111 | –239 | –66 | 69 | –201 | –55 | 40 | 120 | –129 | –127 |
| Cash flow from operating activities |
1,207 | 1,076 | 904 | 859 | 519 | 709 | 656 | 558 | 490 | 399 |
| Net investment in non-current assets |
–320 | –221 | –124 | –206 | –127 | –139 | –111 | –90 | –130 | –67 |
| Company acquisitions and divestments |
–1,164 | –878 | –585 | –444 | –572 | –467 | –684 | –188 | –276 | –307 |
| Change in other financial assets | 8 | –1 | 3 | 1 | –5 | 13 | 0 | 0 | 0 | 1 |
| Cash flow from investing activities |
–1,476 | –1,100 | –706 | –649 | –704 | –593 | –795 | –278 | –406 | –373 |
| Net borrowing | 620 | 303 | 165 | 88 | 442 | 134 | 321 | –12 | 131 | 203 |
| Dividend payout | –360 | –310 | –282 | –282 | –270 | –204 | –172 | –256 | –210 | –150 |
| Cash flow from financing activities |
260 | –7 | –117 | –194 | 172 | –70 | 149 | –268 | –79 | 53 |
| Cash flow for the year | –9 | –31 | 81 | 16 | –13 | 46 | 10 | 12 | 5 | 79 |
| Cash and cash equivalents at start of year |
339 | 357 | 261 | 243 | 264 | 219 | 229 | 223 | 203 | 119 |
| Exchange rate differences | 2 | 13 | 15 | 2 | –8 | –1 | –20 | –6 | 15 | 5 |
| Cash and cash equivalents at end of year |
332 | 339 | 357 | 261 | 243 | 264 | 219 | 229 | 223 | 203 |
| Financial metrics, SEK million | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
| Non-current interest-bearing liabilities |
2,274 | 1,260 | 1,216 | 2,201 | 1,158 | 837 | 939 | 886 | 930 | 431 |
| Current interest-bearing liabilities | 1,686 | 2,028 | 1,635 | 381 | 1,424 | 1,083 | 841 | 462 | 622 | 393 |
| Cash and cash equivalents | –332 | –339 | –357 | –261 | –243 | –264 | –219 | –229 | –223 | –203 |
| Interest-bearing net debt | 3,628 | 2,949 | 2,494 | 2,321 | 2,339 | 1,656 | 1,561 | 1,119 | 1,329 | 621 |
| Net debt/equity ratio, % | 82 | 80 | 79 | 88 | 102 | 80 | 90 | 68 | 83 | 52 |
| Interest coverage ratio, times | 16.5 | 14.6 | 12.2 | 8.9 | 9.0 | 8.9 | 9.4 | 7.6 | 10.4 | 15.8 |
| Equity ratio, % | 40 | 40 | 39 | 38 | 35 | 38 | 36 | 41 | 36 | 36 |
| Net debt/EBITDA, times | 2.2 | 1.8 | 1.9 | 2.1 | 2.3 | 1.6 | 2.0 | 1.6 | 1.5 | 0.9 |
| Return measures | ||||||||||
| Average operating capital, SEK million |
7,491 | 6,537 | 5,324 | 4,894 | 4,078 | 3,680 | 3,605 | 3,211 | 2,484 | 1,711 |
| Return on operating capital, % | 20 | 22 | 21 | 20 | 22 | 25 | 19 | 18 | 33 | 38 |
| Average equity, SEK million | 3,976 | 3,440 | 2,818 | 2,377 | 2,113 | 1,849 | 1,672 | 1,602 | 1,337 | 1,020 |
| Return on equity, % | 24 | 26 | 25 | 25 | 27 | 29 | 24 | 21 | 38 | 41 |
| Number of employees | ||||||||||
| Average | 5,495 | 4,978 | 4,418 | 4,151 | 3,939 | 3,778 | 3,420 | 3,122 | 2,728 | 1,929 |
| Key data per share | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|---|---|---|
| Share price at 31 December, SEK | 183.00 | 160.17 | 104.00 | 89.50 | 65.67 | 61.00 | 77.33 | 45.00 | 22.08 | 41.25 |
| Market cap at 31 December, SEK million | 21,960 | 19,220 | 12,480 | 10,740 | 7,880 | 7,320 | 9,280 | 5,400 | 2,650 | 4,930 |
| Dividend, SEK | 3.201) | 3.00 | 2.58 | 2.35 | 2.35 | 2.25 | 1.70 | 1.43 | 2.13 | 1.75 |
| Earnings before dilution, SEK | 7.80 | 7.44 | 5.87 | 4.89 | 4.74 | 4.50 | 3.39 | 2.84 | 4.25 | 3.49 |
| Earnings after dilution, SEK | 7.78 | 7.44 | 5.87 | 4.89 | 4.74 | 4.50 | 3.39 | 2.84 | 4.25 | 3.49 |
| Number of shares outstanding, 000s | 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 | |||||||||
| Average number of shares before dilution, 000s |
120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 | |||||||||
| Average number of shares after dilution, 000s 120,251 120,094 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 | ||||||||||
| Number of shareholders per 31 December | 10,518 | 7,965 | 5,970 | 6,038 | 5,721 | 5,025 | 5,388 | 5,369 | 4,577 | 4,739 |
| Highest price paid during the financial year, SEK |
191.00 | 162.77 | 106.50 | 90.83 | 76.50 | 79.67 | 78.00 | 51.00 | 49.67 | 57.33 |
| Lowest price paid during the financial year, SEK |
136.23 | 103.50 | 80.33 | 66.00 | 58.33 | 51.17 | 44.83 | 23.17 | 21.25 | 39.00 |
| Dividend yield2), % | 1.7 | 1.9 | 2.5 | 2.6 | 3.6 | 3.7 | 2.2 | 3.2 | 9.7 | 4.3 |
| Shareholders' equity, SEK | 36.58 | 30.86 | 26.33 | 21.86 | 19.07 | 17.18 | 14.52 | 13.70 | 13.31 | 9.91 |
| Cash flow from operating activities, SEK | 10.06 | 8.97 | 7.53 | 7.16 | 4.33 | 5.91 | 5.47 | 4.65 | 4.08 | 3.33 |
1) Proposed for 2016 by the Board of Directors.
2) Dividend divided by the share price on 31 December.
In this annual report Indutrade presents certain key ratios (Alternative Performance Measures – APMs) that complement the financial measures defined in IFRS. Indutrade believes that these key ratios provide valuable information to investors and the Group's management, as they contribute to assessment of the Group's performance, trends, ability to repay debt and invest in new business opportunities, and they reflect the Group's acquisition-intensive business model.
Net profit for the period attributable to owners of the parent divided by the average number of shares outstanding. Definition according to IFRS.
Net profit for the period attributable to owners of the parent divided by the average number of shares outstanding after dilution.
Operating profit before amortisation of intangible non-current assets arising in connection with company acquisitions (Earnings Before Interest, Tax and Amortisation). EBITA is the principal measure of the Group's earnings.
EBITA divided by net sales.
Operating profit before depreciation and amortisation (Earnings Before Interest, Tax, Depreciation and Amortisation).
Shareholders' equity attributable to the parent company divided by the number of shares outstanding.
Equity ratio
Shareholders' equity divided by total assets.
Gross profit divided by net sales.
Interest-bearing liabilities including pension liability and estimated earn-outs from acquisitions, less cash and cash equivalents.
Operating profit plus interest income divided by interest expenses.
Purchases less sales of intangible non-current assets and of property, plant and equipment, excluding those included in acquisitions and divestments of subsidiaries and businesses.
Since not all companies calculate their financial key ratios in the same way, they are not always comparable. They should therefore not be regarded as a substitute for the key ratios defined in IFRS. Following are definitions of Indutrade's key ratios, of which most are APMs.
Interest-bearing net debt divided by shareholders' equity.
Interest-bearing net debt at the end of the period divided by EBITDA on a moving 12-month basis.
Shareholders' equity plus interest-bearing net debt.
Net profit for the period on a moving 12-month basis divided by average shareholders' equity per month.
EBITA calculated on a moving 12-month basis divided by average operating capital per month.
The Board of Directors and President of Indutrade AB (publ), reg. no. 556017-9367, herewith submit the annual report for the 2016 financial year.
Indutrade markets and sells components, systems and services with a high-tech content to industrial companies in selected niches. Through solid knowledge about customers' systems and processes combined with a high level of technical expertise, Indutrade aspires to be the most effective partner for customers and suppliers alike.
The Group was organised in six business areas during the year: Engineering & Equipment, Flow Technology, Fluids & Mechanical Solutions, Industrial Components, Measurement & Sensor Technology, and Special Products. Operations in 2016 were conducted through some 200 subsidiaries in 28 countries on four continents. Indutrade's shares are listed on Nasdaq Stockholm, and have been included on the Large Cap list since January 2015.
During the year we noted greater uncertainty in the market, which also led to greater variation in order intake and net sales for the Group's companies from month to month and between segments and countries. The Nordic countries as a whole performed well, and customer demand strengthened. In Finland order intake has increased in the latter part of the year after a long period of weak growth. The companies in Ireland and Benelux showed continued stable growth, while the UK had challenges.
Order intake for the year totalled SEK 13,004 million (11,939), an increase of 9%. For comparable units the increase was 2%, with acquisitions contributing 8% and currency movements having a negative effect on order intake of 1%. For all of the business areas except Special 3 000 6 000 9 000 12 000 15 000 8 384 8 831 9 746 10,8 11,2 11,6 11,5 11 881 12,0 12 995
3
Products, order intake increased during the year for comparable units. Order intake for Special Products decreased by 3% on a like-for-like basis.
Net sales for the year totalled SEK 12,955 million (11,881), an increase of 9%. For comparable units the increase was 2% and acquired growth contributed 8%, while currency movements had a negative effect on net sales, by 1%.
Operating profit before amortisation of intangible assets attributable to acquisitions (EBITA) was SEK 1,484 million (1,427) for the year, an increase of 4%. For comparable units, EBITA decreased by 4%, while acquisitions contributed 9% and currency movements had a negative effect of 1%. The EBITA margin was 11.5% (12.0%). The gross margin for the Group as a whole was slightly lower compared with the preceding year, at 33.6% (34.0%). The earnings improvement can be credited to favourable like-for-like performance for most companies combined with the contribution made by completed acquisitions. This was countered by lower outgoing shipments of valves for power generation in the energy segment and a challenging business situation for companies in the marine segment, which are also the main reasons why the EBITA margin did not reach the same level as a year ago. For the full year, four of the Group's six business areas exceeded the Group's target of an EBITA margin in excess of 10%.
Net financial items amounted to SEK –78 million (–98), of which net interest expense was SEK –68 million (–78). Net interest expense was favourably affected by a lower average interest rate. Tax on profit for the year was SEK –258 million (–243), corresponding to a tax charge of 22% (21%). Profit for the year rose 5% to SEK 936 million (894). Earnings per share before dilution grew 5% to SEK 7.80 (7.44). % 1 500 MSEK %
The return on operating capital was 20% (22%), and the return on equity was 24% (26%).
Shareholders' equity amounted to SEK 4,399 million (3,707) at year-end, and the equity ratio was 40% (40%).
Cash and cash equivalents amounted to SEK 322 million (339). In addition to this, the Group had unutilised credit promises of SEK 2,854 million (2,580). Interest-bearing net debt amounted to SEK 3,628 million (2,949). The net debt/ equity ratio was 82% at year-end (80%).
Cash flow from operating activities was SEK 1,207 million (1,076). Cash flow after net capital expenditures in intangible non-current assets and property, plant and equipment (excluding company acquisitions) was SEK 887 million (855).
The Group's net capital expenditures, excluding company acquisitions, totalled SEK 320 million (221). Depreciation of property, plant and equipment amounted to SEK 178 million (156). Investments in company acquisitions totalled SEK 996 million (774). In addition, contingent earn-out payments for previous years' acquisitions totalled SEK 168 million (106).
Net sales rose 5% during the year to SEK 1,537 million (1,466). For comparable units the increase was 4%, while currency movements had a positive effect on net sales of 1%.
Most of the business area's sales are in Finland, where the business situation has been challenging in recent years. The start of the year was characterised by continued weak demand, but activity gradually increased during the year, and order intake during the fourth quarter showed signs of a break in this trend. Share of order intake Share of net sales
EBITA decreased marginally to SEK 124 million (125), corresponding to an EBITA margin of 8.1% (8.5%).
Net sales amounted to SEK 2,231 million for the year (2,234). This represents an increase of 1% for comparable units, while currency movements had a negative effect on net sales of 1%.
The demand situation was characterised by large variations between months and quarters, as well as between segments, but most companies performed well during the year as a whole. A lower level of investment in the nuclear
Share of order intake 12% Share of 12% power industry, together with significantly lower level of business for companies in the marine sector, countered the stable demand situation in other segments.
Share of EBITA decreased by 23% to SEK 168 million (217), and the EBITA margin reached 7.5% (9.7%). The decrease in earnings was mainly attributable to lower invoicing for companies in the marine segment, for which restructuring costs also contributed to the earnings decline.
» Fluids & Mechanical Solutions
Net sales rose 25% during the year, to SEK 1,558 million (1,249). The increase for comparable units was 2%, while acquisitions accounted for 22% and currency movements for 1% of the increase.
Demand was stable during the year, and most companies in the business area reported profitable growth.
Share of order intake 19% Share of net sales 19% EBITA increased by 22% to SEK 199 million (163), and the EBITA margin was 12.8% (13.1%). The earnings improvement is mainly attributable to completed acquisitions combined with stable profitability for comparable units.
The companies Klokkerholm Karosseridele A/S (Denmark) and Scanmaskin Group (Sweden) were acquired during the year.
Net sales rose 11% during the year, to SEK 2,501 million (2,263). The increase for comparable units was 4%, and acquisitions contributed 7%. Currency movements had a marginal effect on net sales.
Overall, the business area experienced stronger demand during the year, with a continued large variation between companies and segments. During the year, companies in the construction, infrastructure, healthcare and commercial vehicles segments showed favourable
12% 12% Share of Share of performance. In addition, an improved business situation was noted for companies with customers in the Norwegian offshore industry.
Share of order intake Share of net sales 9% 9% EBITA increased by 6% to SEK 265 million (249), corresponding to an EBITA margin of 10.6% (11.0%). The earnings improvement can mainly be credited to acquisitions.
18% 17% Share of Share of The companies Industri Verktøy AS (Norway) and KA Olsson & Gems AB (Sweden) were acquired during the year.
» Measurement & Sensor Technology
Net sales rose 25% during the year, to SEK 1,171 million (938). The increase for comparable units was 5%, acquisitions contributed 20%, and currency movements had a marginal impact on net sales.
The business area includes companies with own manufacturing and proprietary products along with a relatively high share of project-related business, and as a result order intake and invoicing vary between months and quarters. Demand was generally strong for the business area's companies during the year, and both sales and earnings
Share of order intake 30% Share of net sales developed in a positive direction for most companies on a like-for-like basis. The USA is the market that performed strongest during the year, which countered weak demand in Asia – especially China.
EBITA increased by 8% to SEK 177 million (164), corresponding to an EBITA margin of 15.1% (17.5%). The earnings improvement is mainly attributable to acquisitions.
The companies Senmatic A/S and Crysberg A/S (both in Denmark) were acquired during the year.
Net sales rose 6% during the year, to SEK 3,997 million (3,772). For comparable units, net sales decreased by 1%, while acquired growth was 8% and currency movements had a negative effect on net sales, by 1%.
The business area, whose companies are outside of the Nordic region, noted a large variation in order intake and invoicing in many segments and countries. Special Products is also a business area with a relatively high share of companies with project-related business, resulting in a large variation in order intake and invoicing between months and quarters. For the companies in Benelux and Ireland, the business climate was favourable during the year, which countered weak demand in the UK. The challenging business climate in Switzerland remains, even though the situation has now stabilised following the sharp rise in the Swiss franc in January 2015.
During the year, lower order intake and outgoing shipments of valves for power generation in the energy segment had a significant impact on the comparison with the preceding year. The market remains strong, however, outgoing shipments in 2016 did not meet the same level as for the very large project orders in 2015.
EBITA increased by 6% to SEK 597 million (564), and the EBITA margin was 14.9% (15.0%). The earnings increase is attributable to acquisitions and an overall positive performance for several companies, which countered lower outgoing shipments of valves for power generation.
The companies PECO Select Fasteners BV (Netherlands), and Beldam Crossley Ltd, Fluid Controls Ltd, Vacuum Engineering Services Ltd and Alphr Technology Ltd (all in the UK), were acquired during the year.
| Engineering & Equipment |
Flow Technology |
Fluids & Mechanical Solutions |
Industrial Components |
Measurement & Sensor Technology |
Special Products |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Net sales, SEK million | 1,537 | 1,466 | 2,231 | 2,234 | 1,558 | 1,249 | 2,501 | 2,263 | 1,171 | 938 | 3,997 | 3,772 |
| EBITA, SEK million | 124 | 125 | 168 | 217 | 199 | 163 | 265 | 249 | 177 | 164 | 597 | 564 |
| EBITA margin, % | 8.1 | 8.5 | 7.5 | 9.7 | 12.8 | 13.1 | 10.6 | 11.0 | 15.1 | 17.5 | 14.9 | 15.0 |
| Return on operating capital, % |
24 | 22 | 17 | 23 | 19 | 21 | 20 | 22 | 13 | 14 | 22 | 24 |
| Average number of employees |
526 | 517 | 680 | 670 | 620 | 513 | 695 | 645 | 1,315 | 1,176 | 1,649 | 1,447 |
Acquisitions are a natural part of Indutrade's business and a key component of our growth strategy. We maintain a high pace of acquisitions and normally acquire ten or more companies per year.
The companies we acquire are well managed and successful, with well defined markets. They also have technical niche expertise. They have well-working and motivated management teams that are characterised by entrepreneurship and which are eager to continue with their involvement also after the acquisition. We have a decentralised governance model with a high level of self-determination in the companies.
Indutrade does not have an exit strategy and acts as a long-term owner.
The geographic spread is great, and at year-end 2016 we owned companies in 28 countries. For historical reasons we have the largest share of our business in Sweden and Finland. Outside of these two markets, the primary strategy is to strengthen our position in markets in which we are already established.
In 2016 we acquired eleven companies with combined annual sales of slightly more than SEK 1.1 billion.
| Possession | Acquisition | Country | Business area | Sales, SEK million 1) |
No. employees |
|---|---|---|---|---|---|
| January | PECO Select Fasteners B.V. | Netherlands | Special Products | 30 | 4 |
| March | Industri Verktøy AS | Norway | Industrial Components | 40 | 10 |
| Measurement & Sensor | |||||
| March | Senmatic A/S | Denmark | Technology | 150 | 87 |
| April | Beldam Crossley Ltd | UK | Special Products | 80 | 63 |
| April | Fluid Controls Ltd | UK | Special Products | 40 | 10 |
| May | Klokkerholm Karosseridele A/S | Denmark | Fluids & Mechanical Solutions | 310 | 114 |
| July | KA Olsson & Gems AB | Sweden | Industrial Components | 90 | 21 |
| July | Vacuum Engineering Services Ltd | UK | Special Products | 100 | 45 |
| Measurement & Sensor | |||||
| August | Crysberg A/S | Denmark | Technology | 90 | 46 |
| September | Alphr Technology Ltd | UK | Special Products | 80 | 78 |
| November | Scanmaskin Group | Sweden | Fluids & Mechanical Solutions | 120 | 28 |
| Total | 1,130 | 506 |
1) Estimated annual sales at the time of acquisition.
Indutrade is exposed to numerous risks that could impact the Group to a greater or lesser extent. Risks are defined mainly as factors that affect Indutrade's ability to achieve set goals.
Many of the risks described here could affect the Group both positively and negatively. This means that in the event of a favourable risk development or if the Group is successful in mitigating the risk through its risk management activities, its goal achievement may be better than
anticipated. In such way, risks also entail opportunities for Indutrade. Examples of this are the business climate, customer behaviours and variations in market prices.
At year-end 2016 Indutrade conducted business through 200 companies in 28 countries on four continents. This diversification of risk along with a large number of customers in a wide range of industries and a large number of suppliers in various technology areas limits the business risks.
| Risk | Risk management |
|---|---|
| Changes in the economy | |
| Indutrade's business is dependent on customers' purchases and investments, and is affected by changes in the economy. |
The effect of economic fluctuations in specific sectors and geographic markets is mitigated by the Group's involvement in many different sectors and geographic markets. In addition, the diversification of sales among OEM components, consumables, maintenance products, invest ment goods and service has a balancing effect. |
| Outsourcing of operations | |
| Outsourcing of industrial production to low-cost countries takes place in markets in which Indutrade is active. |
Outsourcing has had a limited impact on Indutrade, since the Group has chosen to focus on customers with a recurring need in industries with a high degree of automation and/or large initial investments, which tend to not outsource. |
| Competition from low-cost countries | |
| An increase in products from low-cost countries can be seen in Indutrade's markets. |
To counter the effects of this competition, Indutrade offers products and services with a high-tech content, a high level of service and qual ified technical advice. In addition, Indutrade strives to establish close partnerships with customers by becoming involved early in the planning and development stages, where Indutrade employees can contribute their expertise about various processes. |
| Operational risk | |
| The Group's operations are conducted with two main focuses: trading compa nies with industrial technology sales, and companies that manufacture their own products. For the companies involved in trading, there is the risk of an agency relationship being terminated. This could occur, for example, in connection with a structural change at the supplier level. |
Termination of an agency relationship is a natural occurrence in an agency company's operations, and the organisation has experience in dealing with this. Indutrade has some 100 trading companies with a few main agencies per company, complemented by a number of smaller agencies. Because of the large number of agencies, no indi vidual agency accounts for a predominant economic risk from the Group's perspective. The risk associated with major customers deciding to bypass the agency level and trade directly with producers is limited, since customers place great value on the technical expertise, availability and delivery reliability provided by an inventory-holding local technolo gy sales company. Indutrade's companies are also active in aftermarket |
sales, such as in servicing.
| Risk | Risk management |
|---|---|
| Changes at the supplier level | |
| There is always a risk of suppliers leaving a partnership with a technology sales com pany to set up their own sales operation. |
Indutrade mitigates this risk by choosing suppliers who view a partner ship with Indutrade as the most profitable sales method. Stable supplier relationships are one of the parameters that are assessed prior to Indutrade's acquisition of a company. To ensure that an acquired com pany does not lose its product agency agreements, its primary suppliers must give their consent to the acquisition. |
| Key person dependence | |
| The risk of losing experienced employees is elevated in connection with company acquisitions. |
Indutrade's acquisition strategy entails ensuring that the target com pany's key employees are motivated to continue running the company after the acquisition. To attract and retain key personnel, Indutrade conducts continuous competence development and special manage ment development programmes. |
| Funding risk | |
| By funding risk is meant the risk that fund ing of the Group's capital requirement will be impeded or become more costly. |
To mitigate funding risk, the group strives to maintain a balanced maturity structure, a good liquidity reserve, and diversified borrowing. This creates a preparedness to take necessary, alternative measures to raise capital should this be necessary. Indutrade takes a centralised approach to the Group's funding. Essentially all external funding is conducted by the Parent Company, which then funds the Group's subsidiaries in local currency. |
| Interest rate risk | |
| By interest rate risk is meant the risk that unfavourable changes in interest rates will have an excessive impact on the Group's net financial expense and earnings. |
Indutrade strives to achieve an even spread of interest maturities to avoid a situation where large loan volumes will be subject to a new level of interest at the same point in time. |
| Currency risk | |
| By currency risk is meant the risk of unfavourable movements in exchange rates affecting consolidated earnings and equity measured in SEK: • Transaction exposure arises as a result of the Group having incoming and outgoing payments in foreign currencies. • Translation exposure arises as a result of the Group, via its foreign subsidiar ies, having net investments in foreign currencies. |
The Indutrade Group's transaction exposure arises, for example, when subsidiaries import products for sale in the domestic market. Exchange rate effects are eliminated as far as possible through currency clauses in customer contracts and by buying and selling in the same currency. In certain cases, forward contracts are used. The Group has a translation risk when translating the accounts of foreign subsidiaries to the Group currency, SEK. This type of currency risk is not hedged at present. |
Nine of Indutrade's Swedish subsidiaries conduct operations that require permits or reporting in accordance with the Swedish Environmental Code. Two foreign subsidiaries conduct operations subject to an equivalent permit or reporting obligation. None of the Group's companies are involved in any environment-related disputes.
Indutrade has adopted a Code of Conduct covering environmental concerns, health and safety, business ethics, employee relations, human rights and community impacts. The Code of Conduct applies for all employees, and the Group's subsidiaries have been instructed to implement the Code of Conduct in a manner that is suitable for their respective operations. Employees can choose to anonymously report deviations from the Code of Conduct or suspicions of improprieties via an established whistleblower function.
At year-end the Group had 5,705 employees (5,107), and the average number of employees during the year was 5,495 (4,978). A total of 506 employees were added through acquisitions.
In April 2014 the Annual General Meeting of Indutrade AB resolved to introduce an incentive programme (LTI 2014), comprising a combined maximum of 460,000 warrants in two series for senior executives and other key persons in the Indutrade Group.
Within the framework of Series I, which was directed at 135 individuals, the participants subscribed for a total of 257,500 warrants for a combined value of SEK 3,914,000. The price per warrant was SEK 15.20, and the subscription price was set at SEK 118.80 per share after the completed bonus issue.
Within the framework of Series II, which was directed at 13 individuals, the participants subscribed for a total of 27,500 warrants for a combined value of SEK 319,000. The price per warrant was SEK 11.60, and the subscription price for this series was set at SEK 116.70 per share after the completed bonus issue.
The shares under the programme can be subscribed during specially prescribed subscription periods starting in the second quarter of 2017 through Friday, 18 May 2018. Upon full exercise, the number of shares outstanding will increase by 855,000, corresponding to 0.7% of the total number of shares and votes.
The Board of Directors has decided to propose to the 2017 Annual General Meeting to resolve in favour of a new long-term share-based incentive programme directed at approximately 180 senior executives and other key persons in the Group. The programme will be based on warrants.
The guidelines for compensation of senior executives that applied in 2016 are outlined in Note 7. The Company's auditors have performed a review to ensure adherence to the guidelines set by the Annual General Meeting. Ahead of the 2017 Annual General Meeting, it is the Board's intention to propose essentially unchanged guidelines for compensation of senior executives, in accordance with the following recommendation:
Non-monetary benefits for members of the executive management shall facilitate the individuals in the execution of their duties and correspond to what can be considered to be reasonable in respect of practice in the market in which the respective executive is active.
Pension terms for members of the executive management shall be in line with the going rate in the market in respect of what applies for peer executives in the market in which the executive works and should be based on a defined contribution pension solution or a general pension plan (in Sweden, the ITP plan).
Development of proprietary products is conducted primarily by manufacturing companies, which are mainly in the Measurement & Sensor Technology and Special Products business areas.
The primary functions of Indutrade AB are to take responsibility for business development, acquisitions, financing, governance and analysis. The Parent Company's net sales, which consist entirely of internal invoicing of services, amounted to SEK 4 million (4) during the year. The Parent Company's financial assets consist mainly of shares in subsidiaries. During the year, the Parent Company acquired shares in seven new companies. The Parent Company did not make any major investments in intangible non-current assets or in property, plant and equipment. The number of employees on 31 December was 11 (10).
During the period January–March 2017, four company acquisitions were carried out. For further information, see under Acquisitions in Note 29.
In other respects, no significant events have taken place for the Group after the end of the reporting period.
Indutrade's view is that the market volatility will continue, which will put high demands on the companies' ability to adapt to prevailing opportunities and challenges. The decentralised business model, in which the managements of Indutrade's 200 companies can make quick decisions in close proximity to their operations, inspires commitment and responsibility. This Indutrade model creates favourable conditions for continued profitable growth
Indutrade applies the Swedish Corporate Governance Code (the Code) since 1 July 2006. The Code is a component of self-regulation in Swedish industry and is based on the "comply or explain" principle. This means that companies that adhere to the Code may depart from individual rules, provided that they give an explanation for each departure. Indutrade has no departures to report for the 2016 financial year. The Corporate Governance Report has been reviewed by the Company's auditors.
Responsibility for management and control of the Group is delegated among the shareholders (via general meetings), the Board, its designated committees and the President in accordance with the Swedish Companies Act, other laws and regulations, applicable rules for listed companies, the Company's Articles of Association and the Board's internal governance documents.
The share capital amounts to SEK 240 million, divided among 120,000,000 shares with a share quota value of SEK 2. All shares have equal voting power. Indutrade, which was previously a wholly owned subsidiary of AB Industrivärden, was introduced on the Stockholm Stock Exchange on 5 October 2005. At year-end 2016 Indutrade had 10,518 shareholders (7,965). The ten largest shareholders controlled 61% of the share capital at year-end. Swedish legal entities, including institutions such as insurance companies and mutual funds, held 69% of the
share capital and votes at year-end. Foreign investors (legal entities) owned 24% of the share capital and votes.
One shareholder, L E Lundbergföretagen AB, with 26.3% of the share capital and votes, controlled 10% or more of the share capital and votes at year-end.
Indutrade's shares are listed on Nasdaq Stockholm and have been included on the Large Cap list since January 2015.
According to Ch. 6 § 2 a of the Swedish Annual Accounts Act, listed companies are to provide disclosures about certain conditions that could affect opportunities to take over the company through a public offer to acquire the shares in the company. No such conditions exist in Indutrade AB.
Indutrade is a public company whose business is to "on its own or through subsidiaries, pursue trade in connection with the import and export of machines, raw materials and finished and semi-manufactured products as well as industrial necessities, including production, preferably within the plastics, mechanical and chemical industries, and activities compatible therewith." The Board shall consist of a minimum of three and a maximum of eight directors, who are elected each year at the Annual General Meeting. Notices of general meetings of shareholders shall be made through advertisement in the Official Swedish Gazette (Post- och Inrikes Tidningar) and on the Company's website within the time frame prescribed by the Swedish Companies Act. An advertisement shall be posted
• The Code of Conduct • Other policies
in the Swedish daily newspaper Dagens Nyheter announcing that notice of the Annual General Meeting has been issued. In votes at general meetings of shareholders, there is no limitation to the number of votes for represented shares.
General meetings of shareholders are Indutrade's highest governing body. At the Annual General Meeting (AGM), which is held within six months after the end of each financial year, the income statement and balance sheet are adopted, the dividend is set, the Board and auditors are elected (where applicable), their fees are determined, other items of legally ordained business are conducted, and decisions are made on proposals submitted by the Board and shareholders.
All shareholders who are registered in the shareholder register on a specified record date and who have notified the Company in due time of their intention to participate at the general meeting are entitled to attend the meeting and vote for the total number of shares they have. Shareholders may be represented by proxy. More information about the 2017 AGM is provided on page 83 of this Annual Report and on the Company's website.
The notice of the AGM scheduled for 26 April 2017 is expected to be published on 22 March 2017 in the Official Swedish Gazette and on Indutrade's website. The notice will include a proposed agenda including proposals for the dividend, the election of directors, directors' fees (broken down by the Chairman and other directors), the election of the auditor, the auditor's fee, proposed guidelines on compensation of the Company's senior executives, and a proposal for a new long-term incentive programme. Röster, % 80 100
At the AGM on 27 April 2016, shareholders representing 61.2% of the shares and votes were in attendance. Fredrik Lundberg was appointed to serve as AGM chairman. The annual report and audit report were presented to the AGM. In connection with this, Chairman of the Board Fredrik Lundberg provided information on the work of the 0 40 2008 2009 2010 2011 2012 2013 2014 2015 2016
Board and reported on the guidelines for compensation of the executive management and on the work of the Audit and Remuneration Committees. In addition, CEO Johnny Alvarsson gave an address reviewing Indutrade's operations in 2015 and the start of 2016.
The auditors reported on their audit of the Group and presented relevant parts of their audit report for 2015.
At the AGM on 6 May 2013, the decision was made in favour of a standing instruction for Indutrade's nomination committee, which shall apply until further notice. According to this instruction, the Nomination Committee ahead of a forthcoming AGM shall consist of representatives of four of the largest shareholders in terms of votes, plus the Chairman of the Board.
Indutrade's board of directors, which is elected by the AGM, consists of eight members including the President. Indutrade has not set any specific age limit for the board members, nor any term limit for how long a director may sit on the Board.
The Chairman of the Board, Fredrik Lundberg, is President and CEO of L E Lundbergföretagen. The Vice Chairman, Bengt Kjell, is a former Executive Vice President of Industrivärden and former CEO of AB Handel och Industri. Ulf Lundahl is a former Executive Vice President of L E Lundbergföretagen. Krister Mellvé has held leading positions in the Robert Bosch Group. Lars Pettersson is a former President and CEO of Sandvik. Katarina Martinson works with asset management for the Lundberg family. Annica Bresky is a former CEO and Business Area Manager of Iggesund Paperboard. Johnny Alvarsson is President and CEO of Indutrade.
A presentation of the current assignments of the members of the Board can be found on pages 40-41 of this Annual Report. The Company's CFO serves as company secretary. Other executives participate at board meetings in a reporting role.
| Member Committee chair |
Audit Committee |
Remuneration Committee |
Year elected |
Attendance at board meetings |
Attendance at Audit Committee meetings |
Attendance at Remuneration Committee meetings |
Independent in relation to the Company |
Independent in relation to major share holders 1) |
|---|---|---|---|---|---|---|---|---|
| Johnny Alvarsson | 2004 | 11/11 | No | Yes | ||||
| Eva Färnstrand | | 1998 | 3/11 | 1/5 | Yes | Yes | ||
| Bengt Kjell (Vice chairman) |
| | 2002 | 11/11 | 5/5 | 3/3 | Yes | Yes |
| Annica Bresky | | 2016 | 7/11 | 4/5 | Yes | Yes | ||
| Ulf Lundahl | | 2006 | 11/11 | 5/5 | Yes | Yes | ||
| Fredrik Lundberg (Chairman) |
| | 2013 | 11/11 | 5/5 | 3/3 | Yes | No |
| Krister Mellvé | | 2012 | 11/11 | 5/5 | Yes | Yes | ||
| Lars Pettersson | | | 2013 | 10/11 | 5/5 | 3/3 | Yes | No |
| Katarina Martinson | | 2015 | 11/11 | 5/5 | Yes | No |
1) Pertains to situation in 2016.
All of the directors, except for Johnny Alvarsson, are independent in relation to Indutrade. Johnny Alvarsson, Bengt Kjell, Krister Mellvé, Ulf Lundahl and Annica Bresky are independent in relation to Indutrade's major shareholders. The Board thereby meets the requirement that at least two of the directors who are independent in relation to the Company shall also be independent in relation to the major shareholders. Only one director, Johnny Alvarsson, has an operational role in the Company.
Each year the Board adopts a written work plan that governs the Board's work and its internal delegation of duties including the committees, decision-making procedures within the Board, meeting procedure and duties of the Chairman. The Board has also issued instructions for the CEO and instructions on financial reporting to the Board.
In addition, the Board has adopted numerous policies, including a finance policy and an investment policy.
The Board is responsible for the Company's organisation and for the administration of its affairs. This entails ensuring that the organisation is suited for its purpose and designed in such a way so as to ensure satisfactory control of its bookkeeping, treasury management and financial conditions in general. In addition, the Board is responsible for ensuring that the Company has satisfactory internal control and continuously evaluates the extent to which the Company's system for internal control works. The Board is also responsible for developing and monitoring the Company's strategies by drawing up plans and setting objectives. The Board oversees and evaluates the President's and operative management's work on a continuous basis. This particular matter is addressed yearly without any members of the executive management present.
In accordance with the adopted work plan, the Board holds at least five regular meetings each year, including the statutory meeting after the AGM, and on any other occasions when warranted by the situation.
In 2016 the Board held a total of eleven meetings including the statutory meeting. The Board conducted its work in accordance with the Board's work plan. Matters requiring special attention by the Board during the year pertained to strategy, finance, acquisitions and sustainability.
As a significant part of the Board's work during the year, a number of subsidiary presidents and business area presidents gave in-depth presentations of their businesses.
All decisions made by the Board during the year were unanimous.
The Chairman organises and leads the work of the Board to ensure that it is carried out in compliance with the Swedish Companies Act, other laws and regulations, applicable rules for listed companies (including the Code), and the Board's internal governance documents. The Chairman monitors business activities through regular contact with the CEO and ensures that the other directors are provided with adequate information and decision-making documentation.
To ensure and improve the quality of the Board's work, every year an evaluation is performed of the board members and of the Board's work, under the direction of the Chairman of the Board. In 2016 this evaluation was conducted by means of a questionnaire that was completed by all of the board members. The results of the evaluation was reported in writing to the board members, who thereafter discussed it jointly at the board meeting in
October. The Chairman of the Board also reported on the results of the evaluation at a meeting of the Nomination Committee.
The Chairman represents the Company on ownership matters.
The Board's remuneration committee draws up a recommendation for decision regarding the terms of employment for the President. The Remuneration Committee also addresses and conducts drafting work for issues related to compensation of the members of the executive management, which culminates with the submission of a recommendation for decision by the AGM.
The President consults with the Remuneration Committee on the terms of employment for the other members of the executive management.
The Audit Committee has an oversight role with respect to the Company's risk management, governance and control, and financial reporting. The committee maintains regular contact with the Company's auditor to ensure that the Company's internal and external reporting satisfies the requirements made on market-listed companies and to discuss the scope and focus of auditing work. The Audit Committee evaluates completed audit activities and informs the Company's nomination committee about the results of its evaluation and assists the Nomination Committee on drawing up recommendations for auditors and fees for their auditing work.
During the year a procurement of audit services was conducted in accordance with Regulation (EU) No. 537/2014 on statutory audit of public-interest entities,
Article 16.1-16.5. The Audit Committee thereafter issued a recommendation to the Nomination Committee for appointment of the Company's auditor.
On three occasions in 2016 the committee conducted reviews with and received reports from the Company's external auditors.
Fees are payable to the Chairman of the Board and directors in accordance with an AGM resolution. The Chairman receives a fee of SEK 530,000, the Vice Chairman receives a fee of SEK 398,000, and the other directors receive a fee of SEK 266,000 each. However, no fee is payable to directors who are employed by a company within the Indutrade Group. The Audit Committee chair is paid a fee of SEK 52,000, and the members of the Remuneration Committee each receive a fee of SEK 26,000. The total yearly fees thus amount to SEK 2,388,000.
At the AGM on 6 May 2013 a decision was made in favour of a standing instruction for Indutrade's nomination committee, which applies until further notice. According to this instruction, the Nomination Committee ahead of a forthcoming AGM shall consist of representatives of four of the largest shareholders in terms of votes, plus the Chairman of the Board, who shall also convene the first meeting of the Nomination Committee. The member representing the largest shareholder shall be appointed as committee chair. The composition of the Nomination Committee ahead of the AGM is to be based on ownership data as per 31 August each year and is to be publicly announced not later than six months prior to the AGM. The composition of the Nomination Committee ahead of the 2017 AGM was announced on 4 October 2016, based on ownership information as per 31 August 2016.
| Representative | Owner | Share of votes as per 31 Aug 2016 |
|---|---|---|
| Claes Boustedt | L E Lundbergföretagen, Committee Chair |
26.3 % |
| Henrik Didner | Didner & Gerge funds | 9.8 % |
| Anders Oscarsson | AMF Insurance and funds | 6.4 % |
| Jonathan Schönbäck |
Handelsbanken funds | 5.8 % |
| Fredrik Lundberg | Chairman of the Board |
The Nomination Committee held two meetings, documented by minutes, at which the evaluation of the Board's work during the past year was presented and the Board's composition was discussed, among other items of business. The Nomination Committee is tasked with drawing up recommendations to be presented to the AGM for resolutions regarding a person to serve as AGM chairman, the Chairman of the Board and other directors, directors' fees, the auditor's fee and election of the auditor, and the principles for the appointment of a new Nomination Committee.
Based on the results of the Board's evaluation and the current directors' availability for re-election – among other things – the Nomination Committee makes an assessment of whether the sitting board meets the requirements that will be made for the Board in view of the Company's situation and future orientation, or if the composition of expertise and experience needs to be changed.
Ahead of the 2017 AGM, the Nomination Committee has proposed the re-election of board members Fredrik Lundberg, Bengt Kjell, Ulf Lundahl, Katarina Martinson, Krister Mellvé and Lars Pettersson. Annica Bresky has notified the committee that she is not available for re-election. Susanna Campbell has been nominated for election as a new director. Susanna Campbell (born 1973), M.Sc. Econ. Stockholm School of Economics, is a former CEO of Ratos and is currently a director for Telia Company AB, among other assignments.
Johnny Alvarsson, President of Indutrade AB, will retire in connection with the 2017 AGM and is not available for re-election. The President-elect, Bo Annvik, M.Sc. Econ., has been nominated for election as a new director. Bo Annvik was President and CEO of Haldex until February 2017. He has previously served in executive positions for Volvo Cars, SKF and Outokumpu.
Fredrik Lundberg has been nominated for re-election as Chairman of the Board. The Nomination Committee's proposal entails that the number of directors on the Board will be unchanged during the coming mandate period and that the Board will thereby have a total of eight members. A more detailed presentation of the members of the Board is provided on pages 40-41 of this Annual Report.
The President is responsible for the administration of Indutrade's day-to-day affairs, which are managed by the Company's executive management team. The President's decision-making authority regarding investments and financing matters is governed by rules set by the Board.
Indutrade's President, Johnny Alvarsson, has been employed by Indutrade since 2004. He was CEO of Elektronikgruppen from 2001 to 2004, CEO of Zeteco AB from 1988 to 2000, and held various management positions at Ericsson from 1975 to 1987. Johnny Alvarsson owns 2,150 shares of Indutrade stock and 15,000 warrants.
At the AGM 2017 Johnny Alvarsson will retire and Bo Annvik will be appointed President and CEO.
At the 2016 Annual General Meeting, the chartered accounting firm PricewaterhouseCoopers AB ("PwC") was re-elected as auditor for a term extending through the 2017 Annual General Meeting.
The auditors maintain regular contact with the Audit Committee and the executive management.
The chief auditor since 2013 is Michael Bengtsson, Authorised Public Accountant. The auditor's fee is reported in Note 10 of this Annual Report.
Indutrade's nine-month interim report for the 2016 financial year was reviewed by the Company's auditors.
As prescribed by the Swedish Companies Act, the Board is responsible for internal control. This report has been prepared in accordance with the Annual Accounts Act and describes how the internal control over financial reporting is organised.
Effective board work is the foundation for good internal control. The Board's work plan and the instructions for the CEO and the Board's committees ensure a clear delegation of roles and responsibilities to the benefit of effective management of risks in the Company's operations.
In addition, the Board has adopted a number of fundamental guidelines and policies designed to create the conditions for a good control environment. These include, among other things, Indutrade's Code of Conduct, a policy for economic and financial reporting, a finance policy and an investment policy. These policies are followed up and
revised as needed. The executive management continuously draws up instructions for the Group's financial reporting which, together with the policies adopted by the Board, are included in the Group's financial manual.
The Group has a joint reporting system that serves as the base for the Group's monthly reporting, consolidation work and monitoring of earnings performance.
The Company has implemented a structured process for assessing risks that could affect financial reporting. This is an annually recurring process and is evaluated by the Audit Committee and the Board.
Through this risk assessment it has been ascertained that the Group's structure, consisting of a large number of standalone companies of varying size that are independent from each other in various sectors and geographical markets, entails a considerable diversification of risk. The risk assessment also covered the Group's income statement and balance sheet items to identify areas in which the aggregate risk for error and the effects of these would be greatest. The areas identified consisted primarily of revenue recognition, trade receivables and inventories.
In addition, continuous risk assessment is conducted in connection with strategic planning, budgeting, forecasts and acquisition activities, aimed at – among other things – identifying events in the market or operations that could give rise to changes in e.g., revenue streams and valuations of assets or liabilities.
The Indutrade Group is organised in six business areas. In addition to a business area president, the respective business area management teams include a controller. The controller plays a central role in analysing and monitoring the business area's financial reporting and in ensuring compliance by the companies in the business area with Group policies. The Parent Company has additional functions for continuous analysis and monitoring of financial reporting by the Group, the business areas and subsidiaries. The Parent Company's finance department also initiates work on the annual self assessment routine regarding internal control over financial reporting.
In this evaluation the Group's companies have been grouped into three categories, based on the nature and scope of the respective companies' businesses. For each category of companies, a questionnaire for evaluation of internal control has been prepared based on the performed risk analysis.
All companies owned by Indutrade at the start of 2016 were required to respond to the evaluation questionnaire. The responses were compiled and evaluated per category of companies and for the Group as a whole. As a complement to this work, the auditors validated parts of the respective companies' completed questionnaires. In addition to this, the controllers of the business areas and Parent Company monitor internal control through visits to a number of companies each year. Both the evaluation performed by the Company and the result of the auditors' validation were reported and discussed with the Audit Committee. Feedback is provided to the companies in the Group where a need for improved routines has been identified. The overall evaluation of internal control over the Group's financial reporting will serve as documentation for the subsequent years' self assessment and work on further strengthening internal control.
The Company's governing documents, consisting of policies, guidelines and manuals – to the extent that these pertain to financial reporting – are updated on a regular basis and communicated to the companies within the Group. Systems and routines have been established to provide management with reports on the results of operations and financial position in relation to set targets, among other things.
The Board conducts a monthly evaluation of business development, earnings, position and cash flow using a report pack containing comments on outcomes and certain key ratios.
The Audit Committee has an oversight role regarding the Company's financial reporting, risk management, and governance and control. In addition, the Audit Committee maintains regular contact with the Company's auditors to ensure that the Company's internal and external reporting satisfies requirements made on market-listed companies and to monitor any observations that emerge from the audit.
The Group has a simple operative structure consisting primarily of small and medium-sized standalone businesses that are independent of each other, with varying conditions for internal control. Compliance with governance and internal control systems that have been drawn up by the Group is checked by the controllers on a regular basis at the business area and Parent Company levels. In addition, the controllers perform continuing analyses of the companies' reporting and financial outcomes to verify their performance. Added to this is the routine for annual self assessment of internal control over financial reporting. In view of the above, the Board has opted to not have a dedicated internal audit function.
| Proposed distribution of earnings | SEK million |
|---|---|
| Dividend of SEK 3.20 per share | 384 |
| To be carried forward | 2,888 |
| Total | 3,272 |
The Board of Directors proposes a dividend of SEK 3.20 per share corresponding to SEK 384 million. The Board's proposal is fully disclosed in note 33.
JOHNNY ALVARSSON President and CEO. President of Special Products business area
Born 1950 Employed since 2004
Education M. Sc. Eng., Management studies
Professional experience President and CEO Elektronikgruppen and Zeteco, various positions at Ericsson
No. of shares 2,150 No. of warrants 15,000
PETER ERIKSSON President of Flow Technology business area Born 1953 Employed since 1995 Education Technical college engineer, B. Sc. Market
economics, IFL Professional experience President and Partner Alnab, Sales Manager Alnab
No. of shares 44,150
No. of warrants 10,000
CLAES HJALMARSON Head of Business Development
Born 1954 Employed since 1984
Education B. Sc. Economics
Professional experience CFO Colly Group, CFO G A Lindberg Group, Auditor Ernst & Young
12,600 No. of warrants 10,000
No. of shares
JUHA KUJALA
President of Engineering & Equipment business area Born
1967 Employed since 2006
Education eMBA, Technical college engineer
Professional experience President Kontram Oy and Maansähkö Oy, Sales Manager Kontram Oy, Export Manager Kalmar Industries Oy
No. of shares 3,000
No. of warrants 10,000
President of Fluids & Mechanical Solutions business area
Born 1955 Employed since
1999
Education B. Sc. Economics, Management studies
Professional experience President and Partner Industri Belos, President J Sörling, Group Controller Transventor, Vice President Parator
No. of shares 16,200
No. of warrants 10,000
SUSANN NYBERG Head of Group Finance
Born 1963 Employed since
2012 Education M. Sc. Business
Administration and Economics
Professional experience Group Controller Addtech, Management Consultant KPMG, Financial Manager positions at Telia, Financial Manager and Controller positions at SKF
No. of shares 1,438 No. of warrants 3,500
JOAKIM SKANTZE
President of Industrial Components business area Born
1967 Employed since 2016
Education M. Sc. Electronics, economics and
management studies Professional experience Venture Manager Traction,
President Gnosjö Plast, Business Area Manager and Partner Schneidler Grafiska, Senior consultant Accenture
No. of shares No. of warrants
0
0
PATRIK STOLPE President of Measurement & Sensor Technology business area Born
1965 Employed since
2015
Education B. Sc. Electronics, Industrial marketing
Professional experience Global Segment Manager Xylem, President and CEO Lorentzen & Wettre
No. of shares 1,521
No. of warrants 10,000
JAN ÖHMAN
CFO Born 1960 Employed since
2014 Education
Senior High School, Business economics Professional experience CFO Sandvik Venture,
CFO and Vice President Sandvik Materials Technology, General Manager Boliden Aitik Mining Operation
No. of shares 10,000
No. of warrants 20,000
Chairman since 2013 President and CEO of L E Lundbergföretagen Born
1951 Education B. Sc., MBA, Hon. PhD in Economics and Hon. PhD in Technology
Professional experience President and CEO of L E Lundbergföretagen
Other directorships Chairman of Holmen, Hufvudstaden and Industrivärden. Vice chairman of Svenska Handelsbanken. Director of Skanska and L E Lundbergföretagen
No. of shares 31,575,000 (via L E Lundbergföretagen)
Vice chairman since 2013 Director since 2002 Own investment business
Born 1954
Education
MBA, Stockholm School of Economics
Acting President and CEO of Industrivärden, President and CEO of Handel och Industri, Executive Vice President and Head of Investment of Industrivärden, Head of Corporate Finance Securum, Senior Partner and founder Navet, Authorised public accountant
Chairman of Hemfosa Fastigheter and SSAB. Director of Industrivärden, ICA Gruppen and Pandox among others
No. of shares 60,000
Director since 2016
Born 1975
Education M. Sc. and Executive MBA
President of Iggesund Paperboard, President of BillerudKorsnäs Karlsborg and Production Manager StoraEnso Kvarnsveden
Director of Åforsk foundation and negotiating delegation of Industriarbetsgivarna Pulp & Paper. Deputy member of Skogsindustrierna's board
No. of shares 1,660
Director since 2006
Born 1952 Education
LL. B. and B. Sc. Economics
Executive Vice President and Deputy CEO of L E Lundbergföretagen, President of Östgöta Enskilda Bank, Head of Swedish operations of Danske Bank, CEO of Danske Securities
Chairman of Fidelio Capital, Ramirent, Eltel and SHB Regionbank Stockholm. Director of Holmen and Attendo
No. of shares 12,000
Katarina Martinson Krister Mellvé Lars Pettersson Johnny Alvarsson
Director since 2015 Works with asset management for the Lundberg family
Born 1981
Education
M. Sc. Economics
Analyst at Handelsbanken Capital Markets, Vice President Strategas Research Partners LLC, New York, Analysis of investment strategies investment research, International Strategy & Investment Group, New York
Director of L E Lundbergföretagen, Fastighets AB L E Lundberg, Fidelio Capital, Husqvarna, Karlsson & Wingesjö, Lundbergs Kapitalförvaltning, AniCura and Lyko
No. of shares 31,575,000 (via L E Lundbergföretagen)
Director since 2012
Born 1949
Education B. Sc. Economics
Professional experience Leading positions within Robert Bosch Group
Chairman of DeltaNordic and Giganse. Director of Modular Management and Mannerheim Invest Holding AB
No. of shares 45,000
Director since 2013 Born 1954 Education M. Sc. PhD h.c. Uppsala University
Professional experience
President and CEO of Sandvik AB, Sandvik Materials Technology, Sandvik Tooling and Sandvik Coromant
Other directorships Chairman of KP Komponenter A/S. Director of Husqvarna, Industrivärden, L E Lundbergföretagen and Festo AG
No. of shares 2,100
President and CEO. Director since 2004
Born 1950
Education M. Sc. Engineering, Management studies
Professional experience President and CEO of Elektronikgruppen and Zeteco, various positions at Ericsson
Chairman of FM Mattsson Mora Group. Director of VBG Group, Instalco and Sdiptech
No. of shares 2,150 No. of warrants 15,000
Michael Bengtsson, Authorised public accountant. Born 1959. Chief Auditor of Indutrade since 2013.
Other auditing assignments in public companies: Bure, Sweco, Nobina, Invisio Communication and Eniro. Other auditing assignments in major unlisted companies: Perstorp and Carnegie.
| Note SEK million |
2016 | 2015 |
|---|---|---|
| Net sales 3 |
12,955 | 11,881 |
| Cost of goods sold | –8,607 | –7,847 |
| Gross profit | 4,348 | 4,034 |
| Development costs | –156 | –133 |
| Selling costs | –2,179 | –2,044 |
| Administrative expenses | –791 | –635 |
| Other operating income 5 |
154 | 117 |
| Other operating expenses 5 |
–104 | –104 |
| Operating profit 4, 7, 8, 9, 10 |
1,272 | 1,235 |
| Financial income 11 |
59 | 46 |
| Financial expenses 12 |
–137 | –144 |
| Profit after financial items | 1,194 | 1,137 |
| Tax 14 |
–258 | –243 |
| Net profit for the year | 936 | 894 |
| Profit attributable to: | ||
| Equity holders of the parent | 936 | 893 |
| Non-controlling interests | 0 | 1 |
| Earnings per share attributable to equity holders of the parent, SEK | 7.80 | 7.44 |
| Earnings per share after dilution, attributable to equity holders of the parent, SEK | 7.78 | 7.44 |
| Average number of shares before dilution, 000s | 120,000 | 120,000 |
| Average number of shares after dilution, 000s | 120,251 | 120,094 |
| Proposed dividend per share, SEK | 3.20 | 3.00 |
| SEK million | Note | 2016 | 2015 |
|---|---|---|---|
| Net profit for the year | 936 | 894 | |
| Other comprehensive income | |||
| Items that subsequently can be reversed into income statement | |||
| Fair value adjustment of hedge instruments | 2 | 25 | 16 |
| Tax attributable to fair value adjustment | –5 | –3 | |
| Exchange rate differences | 103 | –50 | |
| Items that cannot be reversed into income statement | |||
| Actuarial gains/losses | 23 | –15 | –5 |
| Tax attributable to actuarial gains/losses | 3 | 2 | |
| Other comprehensive income, net after tax | 111 | –40 | |
| Total comprehensive income for the year | 1,047 | 854 | |
| Comprehensive income attributable to | |||
| Equity holders of the parent | 1,047 | 853 | |
| Non-controlling interests | 0 | 1 |
| SEK million | Note | 31 Dec 2016 |
31 Dec 2015 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | |||
| Goodwill | 2,388 | 1,942 | |
| Agencies, customer relationships, etc. | 1,446 | 1,254 | |
| Trademarks | 279 | 259 | |
| Software, licences, etc. | 53 | 52 | |
| Other intangible assets | 101 | 71 | |
| Total intangible assets | 15 | 4,267 | 3,578 |
| Property, plant and equipment | |||
| Land and buildings | 803 | 559 | |
| Machinery | 357 | 280 | |
| Equipment | 285 | 258 | |
| Construction in progress and advances | 6 | 20 | |
| for property, plant and equipment Total property, plant |
|||
| and equipment | 16 | 1,451 | 1,117 |
| Financial assets | |||
| Financial assets available for sale | 17 | 15 | 5 |
| Non-current receivables | 18 | 19 | 19 |
| Deferred tax assets | 14 | 83 | 77 |
| Total financial assets | 117 | 101 | |
| Total non-current assets | 5,835 | 4,796 | |
| Current assets | |||
| Inventories | 19 | 2,249 | 1,931 |
| Accounts receivable – trade | 20 | 2,292 | 1,995 |
| Current tax assets | 18 | 17 | |
| Other current receivables | 189 | 172 | |
| Prepaid expenses and accrued income | 21 | 138 | 111 |
| Cash and cash equivalents | 28 | 332 | 339 |
| Total current assets | 5,218 | 4,565 | |
| TOTAL ASSETS | 11,053 | 9,361 |
| 31 Dec | 31 Dec | ||
|---|---|---|---|
| SEK million | Note | 2016 | 2015 |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 240 | 40 | |
| Reserves | 143 | 20 | |
| Profit brought forward incl. net profit for the year |
4,006 | 3,643 | |
| Total equity attributable to owners of the parent |
4,389 | 3,703 | |
| Non-controlling interests | 10 | 4 | |
| Total equity | 4,399 | 3,707 | |
| Non-current liabilities | |||
| Non-current interest-bearing liabilities | 22 | 1,993 | 1,005 |
| Other non-current liabilities | 4 | – | |
| Pension obligations | 23 | 281 | 255 |
| Deferred tax liabilities | 14 | 549 | 472 |
| Other provisions | 24 | 10 | 8 |
| Total non-current liabilities | 2,837 | 1,740 | |
| Current liabilities | |||
| Current interest-bearing liabilities | 22 | 1,686 | 2,028 |
| Accounts payable – trade | 968 | 848 | |
| Current tax liabilities | 127 | 106 | |
| Other current liabilities | 465 | 437 | |
| Accrued expenses and deferred income | 25 | 571 | 495 |
| Total current liabilities | 3,817 | 3,914 | |
| TOTAL EQUITY AND LIABILITIES | 11,053 | 9,361 |
Information on pledged assets and contingent liabilities is provided in Notes 26 and 27.
| Attributable to owners of the parent | ||||||
|---|---|---|---|---|---|---|
| SEK million | Share capital |
Reserves | Profit brought forward |
Total | Non controlling interests |
Total equity |
| OPENING BALANCE, 1 JANUARY 2015 | 40 | 57 | 3,063 | 3,160 | 2 | 3,162 |
| Comprehensive income | ||||||
| Net profit for the year | – | – | 893 | 893 | 1 | 894 |
| Other comprehensive income | ||||||
| Fair value adjustment of hedge instruments | – | 16 | – | 16 | – | 16 |
| Tax attributable to fair value adjustment | – | –3 | – | –3 | – | –3 |
| Actuarial gains/losses | – | – | –5 | –5 | – | –5 |
| Tax attributable to actuarial gains/losses | – | – | 2 | 2 | – | 2 |
| Exchange rate differences | – | –50 | – | –50 | – | –50 |
| Total comprehensive income | – | –37 | 890 | 853 | 1 | 854 |
| Transactions with shareholders | ||||||
| Acquisitions of non-controlling interests | – | – | – | – | 1 | 1 |
| Dividend paid for 2014 | – | – | –3101) | –310 | – | –310 |
| Total transactions with shareholders | – | – | –310 | –310 | 1 | –310 |
| OPENING BALANCE, 1 JANUARY 2016 | 40 | 20 | 3,643 | 3,703 | 4 | 3,707 |
| Comprehensive income | ||||||
| Net profit for the year | – | – | 936 | 936 | 0 | 936 |
| Other comprehensive income | ||||||
| Fair value adjustment of hedge instruments | – | 25 | – | 25 | – | 25 |
| Tax attributable to fair value adjustment | – | –5 | – | –5 | – | –5 |
| Actuarial gains/losses | – | – | –15 | –15 | – | –15 |
| Tax attributable to actuarial gains/losses | – | – | 3 | 3 | – | 3 |
| Exchange rate differences | – | 103 | – | 103 | 0 | 103 |
| Total comprehensive income | – | 123 | 924 | 1,047 | 0 | 1,047 |
| Transactions with shareholders | ||||||
| Acquisitions of companies with non-controlling interests |
– | – | – | – | 6 | 6 |
| Acquisitions of non-controlling interests | – | – | –1 | –1 | 0 | –1 |
| Bonus issue | 200 | – | –200 | – | – | – |
| Dividend paid for 2015 | – | – | –3602) | –360 | 0 | –360 |
| Total transactions with shareholders CLOSING BALANCE, 31 DECEMBER 2016 |
200 240 |
– 143 |
–561 4,006 |
–361 4,389 |
6 10 |
–355 4,399 |
1) The dividend per share for 2014 was SEK 2.58.
2) The dividend per share for 2015 was SEK 3.00. The proposed dividend per share for 2016 is SEK 3.20.
| SEK million | Note | 2016 | 2015 |
|---|---|---|---|
| Operating activities | |||
| Operating profit | 1,272 | 1,235 | |
| Adjustment for | |||
| Depreciation, amortisation and impairment losses | 8, 15, 16 | 411 | 365 |
| Adjustment of contingent consideration | 29 | –32 | –7 |
| Net profit from sale of operations, property, plant and equipment, and shares | 0 | 1 | |
| Other non-cash items | 28 | 24 | |
| Paid tax | –299 | –215 | |
| Change in working capital | |||
| Inventories | –45 | –149 | |
| Accounts receivable – trade | –71 | –160 | |
| Accounts payable – trade | 10 | 20 | |
| Other operating assets and liabilities, net | –5 | 50 | |
| Interest received | 8 | 6 | |
| Interest paid | –65 | –66 | |
| Other financial items | –5 | –28 | |
| Cash flow from operating activities | 1,207 | 1,076 | |
| Investing activities | |||
| Acquisitions of subsidiaries and operations | 29 | –1,164 | –880 |
| Sales of subsidiaries and operations | 29 | 0 | 2 |
| Acquisitions of property, plant and equipment | 16 | –306 | –199 |
| Sales of property, plant and equipment | 16 | 14 | 11 |
| Acquisitions of intangible non-current assets | 15 | –28 | –33 |
| Decrease/increase in financial assets | 8 | –1 | |
| Cash flow from investing activities | –1,476 | –1,100 | |
| Financing activities | |||
| Borrowings | 4,724 | 4,221 | |
| Repayment of debt | –4,104 | –3,918 | |
| Dividends paid | –360 | –310 | |
| Cash flow from financing activities | 260 | –7 | |
| Cash flow for the year | –9 | –31 | |
| Cash and cash equivalents at start of year | 339 | 357 | |
| Exchange rate differences in cash and cash equivalents | 2 | 13 | |
| Cash and cash equivalents at end of year | 28 | 332 | 339 |
| SEK million | Note | 2016 | 2015 |
|---|---|---|---|
| Net sales | 4 | 4 | |
| Gross profit | 4 | 4 | |
| Administrative expenses | 4 | –64 | –55 |
| Operating loss | 7, 8, 9, 10 | –60 | –51 |
| Financial income | 11 | 97 | 55 |
| Financial expenses | 12 | –107 | –99 |
| Profit from participations in Group companies | 13 | 664 | 573 |
| Profit after financial items | 594 | 478 | |
| Group contributions received | 605 | 599 | |
| Group contributions rendered | –66 | –70 | |
| Change in tax allocation reserve | –55 | –110 | |
| Excess depreciation of equipment | 0 | 0 | |
| Profit before tax | 1,078 | 897 | |
| Tax | 14 | –92 | –73 |
| Net profit for the year | 986 | 824 |
| SEK million | Note | 2016 | 2015 |
|---|---|---|---|
| Net profit for the year | 986 | 824 | |
| Other comprehensive income | |||
| Items that subsequently can be reversed to the income statement | |||
| Fair value adjustment of hedge instruments | 2 | 12 | 15 |
| Tax attributable to fair value adjustment | –3 | –3 | |
| Other comprehensive income, net of tax | 9 | 12 | |
| Total comprehensive income for the year | 995 | 836 |
| SEK million | Note | 31 Dec 2016 |
31 Dec 2015 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible non-current assets | |||
| Software and licences | 15 | 0 | 0 |
| Property, plant and equipment | |||
| Equipment | 16 | 1 | 1 |
| Financial assets | |||
| Participations in Group companies | 17 | 4,564 | 4,112 |
| Non-current receivables | 18 | 14 | 12 |
| Deferred tax assets | 14 | 6 | 9 |
| Total financial assets | 4,584 | 4,133 | |
| Total non-current assets | 4,585 | 4,134 | |
| Current assets | |||
| Current receivables | |||
| Receivables from Group companies | 3,838 | 2,908 | |
| Other receivables | 50 | 15 | |
| Prepaid expenses and accrued income | 21 | 6 | 5 |
| Total current receivables | 3,894 | 2,928 | |
| Cash and cash equivalents | 28 | 0 | 29 |
| Total current assets | 3,894 | 2,957 | |
| TOTAL ASSETS | 8,479 | 7,091 |
| SEK million | Note | 31 Dec 2016 |
31 Dec 2015 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Restricted equity | |||
| Share capital | 32 | 240 | 40 |
| Statutory reserve | 5 | 5 | |
| Unrestricted equity | 245 | 45 | |
| Share premium reserve | |||
| Reserve for fair value | 4 | 4 | |
| –11 | –20 | ||
| Profit brought forward | 2,293 | 2,029 | |
| Net profit for the year | 986 3,272 |
824 2,837 |
|
| Total equity | 3,517 | 2,882 | |
| Untaxed reserves | |||
| Tax allocation reserve | 553 | 498 | |
| Excess depreciation of equipment | 0 | 0 | |
| Total untaxed reserves | 553 | 498 | |
| Non-current liabilities | |||
| Non-current interest-bearing liabilities | 22 | 1,807 | 832 |
| Other non-current liabilities | 2 | – | |
| Pension obligations | 23 | 15 | 14 |
| Deferred tax liabilities | 14 | 11 | 3 |
| Total non-current liabilities | 1,835 | 849 | |
| Current liabilities | |||
| Current interest-bearing liabilities | 22 | 1,538 | 1,852 |
| Accounts payable – trade | 1 | 1 | |
| Liabilities to Group companies | 961 | 927 | |
| Other current liabilities | 20 | 37 | |
| Current tax liabilities | 37 | 25 | |
| Accrued expenses and deferred income | 25 | 17 | 20 |
| Total current liabilities | 2,574 | 2,862 | |
| TOTAL EQUITY AND LIABILITIES | 8,479 | 7,091 |
Information on pledged assets and contingent liabilities is provided in Notes 26 and 27.
| Share | Share premium |
Reserve for fair |
Retained | |||
|---|---|---|---|---|---|---|
| SEK million | capital | Reserves | reserve | value | profit | Total |
| OPENING BALANCE, 1 JANUARY 2015 | ||||||
| Comprehensive income | 40 | 5 | 4 | –32 | 2,339 | 2,356 |
| Net profit for the year | – | – | – | – | 824 | 824 |
| Other comprehensive income | ||||||
| Fair value adjustment of hedge instrument | – | – | – | 15 | – | 15 |
| Tax attributable to fair value adjustment | – | – | – | –3 | – | –3 |
| Total comprehensive income | – | – | – | 12 | 824 | 836 |
| Transactions with shareholders | ||||||
| Dividend paid for 2014 | – | – | – | – | –3101) | –310 |
| Total transactions with shareholders | – | – | – | – | –310 | –310 |
| OPENING BALANCE, 1 JANUARY 2016 | 40 | 5 | 4 | –20 | 2,853 | 2,882 |
| Comprehensive income | ||||||
| Net profit for the year | – | – | – | – | 986 | 986 |
| Other comprehensive income | ||||||
| Fair value adjustment of hedge instrument | – | – | – | 12 | – | 12 |
| Tax attributable to fair value adjustment | – | – | – | –3 | – | –3 |
| Total comprehensive income | – | – | – | 9 | 986 | 995 |
| Transactions with shareholders | ||||||
| Dividend paid for 2015 | – | – | – | – | –3602) | –360 |
| Bonus issue | 200 | – | – | – | –200 | – |
| Total transactions with shareholders | 200 | – | – | – | –560 | –360 |
| CLOSING BALANCE, 31 DECEMBER 2016 | 240 | 5 | 4 | –11 | 3,279 | 3,517 |
1) The dividend per share for 2014 was SEK 2.58.
2) The dividend per share for 2015 was SEK 3.00. The proposed dividend per share for 2016 is SEK 3.20.
| SEK million | 2016 | 2015 | |
|---|---|---|---|
| Operating activities | |||
| Operating loss | –60 | –51 | |
| Adjustment for | |||
| Depreciation, amortisation and impairment losses | 8, 15, 16 | 0 | 0 |
| Other non-cash items | 0 | 4 | |
| Tax paid | –72 | –11 | |
| Change in working capital | |||
| Accounts receivable – trade | 0 | 0 | |
| Accounts payable – trade | 1 | –1 | |
| Other operating assets and liabilities, net | –563 | –266 | |
| Interest received | 53 | 40 | |
| Interest paid | –53 | –56 | |
| Group contributions received and dividend income | 1,247 | 969 | |
| Other financial items | –8 | –21 | |
| Cash flow from operating activities | 545 | 607 | |
| Investing activities | |||
| Acquisitions of subsidiaries | 17 | –960 | –625 |
| Acquisitions of intangible non-current assets | 15 | – | 0 |
| Acquisitions of financial assets | –1 | 0 | |
| Cash flow from investing activities | –961 | –625 | |
| Financing activities | |||
| Borrowings | 4,718 | 4,179 | |
| Repayment of debt | –3,971 | –3,822 | |
| Dividends paid | –360 | –310 | |
| Cash flow from financing activities | 387 | 47 | |
| Cash flow for the year | –29 | 29 | |
| Cash and cash equivalents at start of year | 29 | 0 | |
| Cash and cash equivalents at end of year | 28 | 0 | 29 |
Amounts stated in the notes are in SEK million unless indicated otherwise. takes effect in 2018. IFRS 15 replaces IAS 18 Revenue and IAS The symbols IS and BS indicate amounts in the notes that can be found in the income statement or balance sheet, respectively.
The Indutrade Group markets and sells components, systems and services with a high-tech content to industrial companies in selected niches. Business is conducted via approximately 200 subsidiaries in 28 countries. Indutrade's shares have been listed on Nasdaq Stockholm since 2005 and quoted on the Large Cap list since 2015. The Group is organised in six business areas.
The Parent Company is a limited liability company with registered office in Stockholm.
This annual report was approved by the Board of Directors for publication on 21 March 2017. The consolidated and parent company income statements and balance sheets will be presented for adoption by the Annual General Meeting on 26 April 2017.
Overarching accounting principles and new standards are reported below. Other important accounting principles are reported in connection with the respective notes.
The consolidated accounts of the Indutrade Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union as well as with RFR 1 and the Swedish Annual Accounts Act. Assets and liabilities have been accounted for at historical cost, except for with respect to revaluations of financial assets and liabilities (including derivative instruments) and available-for-sale financial assets, which are measured at fair value.
Preparation of financial statements in accordance with IFRS requires the use of a number of important accounting estimations. Further, application of the Company's accounting principles requires that management makes certain assessments. Areas that involve a high degree of assessment, or areas in which assumptions and estimations are of material significance for the consolidated financial statements, are described below in the section "Important estimations and assumptions for accounting purposes".
There are no new IFRSs or IFRIC pronouncements endorsed by the EU that are applicable for Indutrade or that had a significant impact on the Group's result of operations and position in 2016.
There are no new IFRSs or IFRIC pronouncements that will have a significant impact on the Group's result of operations and position in 2017.
No newly issued IFRSs or interpretations have been applied prospectively.
IFRS 15 Revenue from Contracts with Customers, the new IFRS for revenue recognition, has been endorsed by the EU and
11 Construction Contracts. This new standard uses a five-step control-based model and is built upon the principle that revenue is recognised when the customer gains control over the sold product or service; this replaces the previous principle that revenue is recognised when the risks and rewards have been transferred to the buyer. During the year Indutrade mapped out conceivable effects of the new standard. This evaluation is not yet complete, but thus far no material effects have been discovered. The effects of the expanded disclosure requirement will be determined in 2017. We have not yet taken a position on which transitional method will be used.
IRFS 9 Financial Instruments, which has been endorsed by the EU and takes effect in 2018, replaces most of IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 addresses classification, valuation and recognition of financial assets and liabilities, and introduces new rules for hedge accounting. The standard introduces a new model for impairment of financial assets that is based on anticipated losses, and not as previously under the former IAS 39, in connection with a loss event having occurred. The new standard also facilitates more hedging strategies to qualify for hedge accounting. With respect to recognition of impairment, for Indutrade's part it is mainly trade receivables that are affected. The quantitative effects will be determined in 2017.
The new leasing standard, IFRS 16, replaces the current IAS 17. The standard entails changes primarily for lessees in that the breakdown of leases into operating and finance leases has been removed. Assets and liabilities attributable to all leases, with a few exceptions, are to be recognised on the balance sheet. IFRS 16 takes effect in 2019 and has not yet been endorsed by the EU. The disclosures provided in Note 9, Operating leases, provide an indication of the scope of the contracts that exist at present.
The consolidated accounts include subsidiaries in which the Group directly or indirectly has control. Subsidiaries are included in the consolidated accounts from the date control is transferred to the Group. They are excluded from the consolidated accounts from the date control ceases.
The purchase method is used for reporting of the Group's business acquisitions. The purchase price for the acquisition of a subsidiary consists of the fair value of the acquired assets and liabilities. The purchase price also includes the fair value of all assets and liabilities that are the result of an agreement on contingent consideration. Transaction costs in connection with acquisitions are recognised directly in profit for the year as other operating expenses. In cases where contingent consideration is remeasured at fair value, this is recognised in operating profit. Identifiable, acquired assets and liabilities taken over in a business acquisition are initially measured at fair value as per the acquisition date.
For each acquisition, the Group determines if non-controlling interests in the acquired company are to be stated at the holding's proportional share of the fair value of identifiable net assets, excluding goodwill (partial goodwill), or at fair value, which entails that goodwill is also reported for non-controlling interests (full goodwill). Subsequent acquisitions up to 100% are reported as equity transactions.
Goodwill is initially carried at the amount in which the total purchase price and non-controlling interests exceed the fair value of identifiable, acquired assets and liabilities taken over.
Intra-Group transactions and balance sheet items as well as unrealised gains and losses on transactions between Group companies are eliminated.
The Group treats transactions with non-controlling interests as transactions with the Group's shareholders. Transactions with non-controlling interests are reported in equity.
Non-current assets and non-current liabilities consist essentially of amounts that are expected to be recovered or paid after later than 12 months from the balance sheet date. Current assets and current liabilities consist essentially of amounts that are expected to be recovered or paid within 12 months from the balance sheet date.
Items that are included in the financial statements for the Group's various units have been valued in the currency that is used in the economic environment in which the respective company mainly operates (the functional currency). In the consolidated accounts, Swedish kronor (SEK) is used, which is the Parent Company's functional and reporting currency. The earnings and financial position of all Group companies that have a different functional currency than their reporting currency are translated to the Group's reporting currency in accordance with the following:
Goodwill and fair value adjustments that arise in connection with the acquisition of a foreign business are treated as assets and liabilities in the acquired business and are translated at the exchange rate in effect on the balance sheet date.
Transactions in foreign currencies are translated to the functional currency at the exchange rate in effect on the transaction date. Exchange rate gains and losses that arise upon payment in such transactions and when translating monetary assets and liabilities in foreign currencies at the exchange rate on the balance sheet date are recognised in profit or loss. An exception to this rule is applied for transactions that constitute hedges that meet the conditions for hedge accounting of cash flows or of net investments, for which gains/losses are recognised in other comprehensive income.
Exchange rate differences that arise upon translation or recognition of operating assets/liabilities are reported as other income/expenses, while exchange rate differences that arise upon payment of financial assets/liabilities are reported as financial income/expenses.
The Group makes estimations and assumptions about the future. By definition, the estimations for accounting purposes that are a consequence of these rarely match the actual outcome. This applies primarily for the need to recognise impairment of goodwill and defined benefit pension obligations. Assumptions and estimations are evaluated continuously and are based on historical experience and anticipations of future events that are considered to be reasonable under prevailing conditions.
The Parent Company accounts have been prepared in accordance with the Swedish Annual Accounts Act and RFR 2, Reporting for Legal Entities. According to RFR 2, in the annual report for a legal entity, the Parent Company shall apply all IFRSs and statements endorsed by the EU as far as possible within the confines of the Annual Accounts Act and taking into account the connection between reporting and taxation. The recommendation indicates which exceptions and amendments are to be applied with respect to IFRS.
Participations in Group companies are reported in the Parent Company using the cost method. In the Parent Company, a change in the liability for contingent consideration affects the value of participations in subsidiaries. Contingent consideration is reported in the Parent Company when it is certain or probable that the obligation will arise.
Untaxed reserves are reported in the Parent Company including deferred tax liabilities and not as in the Group (broken down into deferred tax liabilities and equity).
Group contributions are reported gross as appropriations in accordance with the alternative rule in RFR 2.
The Group mainly has the following financial instruments: trade receivables, cash and cash equivalents, trade payables, borrowings, contingent consideration and derivative instruments.
Since Indutrade's trade payables normally have a remaining term of less than six months, the carrying amount is considered to reflect fair value.
Derivative instruments are stated at fair value on the balance sheet as per the contract date, both initially and for subsequent revaluations. The method for reporting the gain or loss that arises in connection with revaluation depends on whether the derivative instrument has been identified as a hedge instrument and, if such is the case, the nature of the item that has been hedged. The Group identifies certain derivatives as a hedge of a particular risk that is coupled to a reported asset or liability, or a very probable, prognosticated transaction (cash flow hedge). See further under Cash flow hedging below.
The Group's other derivatives consist of forward contracts. Realised and unrealised gains and losses arising from changes in fair value are included in the income statement during the period in which they arise. Gains and losses arising from forward cover of payments in foreign currencies are posted as other operating income/expense, and the earnings effect of forward contracts used to hedge loans is reported among financial income and expenses.
The effective portion of changes in the fair value of a derivative instrument that is identified as a cash flow hedge and that
meets the conditions for hedge accounting is reported in other comprehensive income. Changes in the value of the derivative are recognised in the income statement on the same line and at the same point in time as the hedged item.
Indutrade uses interest rate swaps to some extent to hedge borrowings at variable interest rates. The gain or loss that is attributable to the effective portion is recognised in other comprehensive income, while the ineffective portion is recognised immediately in the income statement in the item "Interest expense". Accumulated amounts in equity are restated in the income statement in the periods in which the hedged item affects earnings (e.g., when the prognosticated, hedged interest payment is made). The gain or loss that is attributable to the effective portion of interest rate swaps is then reported as interest expense in the income statement.
When a prognosticated transaction is no longer expected to take place, the accumulated gain or loss that was previously reported in the hedging reserve through other comprehensive income is immediately transferred to the income statement.
This category includes financial assets that are not derivatives and that have been designated to this category at the time of acquisition or have not been classified in any other category. These are included in non-current assets unless the Group has the intention of selling the asset within 12 months after the balance sheet date. The Group has only negligible holdings of such assets. The difference between the carrying amount and fair value is considered to be immaterial.
At year-end 2016 the Indutrade Group conducted business in 28 countries. This geographic spread along with a large number of customers and products provides relatively limited risk exposure and sensitivity to economic fluctuations. The Group's operations are conducted with two main focuses: trading companies with industrial technology sales, and companies that manufacture their own products.
For the companies involved in trading, there is the risk of an agency relationship being terminated. This could occur, for example, in connection with a structural change at the supplier level. This is a natural occurrence in an agency's operations, and the organisation has experience in dealing with this. Indutrade has more than 100 trading companies with a few main agencies per company, complemented with a number of smaller agencies. Because of the large number of agencies, no individual agency accounts for a predominant economic risk from the Group's perspective.
The risk associated with major customers deciding to bypass the agency level and trade directly with producers is limited, since customers place great value on the technical expertise, availability and delivery reliability provided by an inventory-holding local technology sales company. Indutrade's companies also provide aftermarket services, such as servicing.
In the course of its business, the Indutrade Group is exposed to various types of financial risk:
Interest rate risk
Currency risk
Indutrade's board of directors sets the Company's finance policy on a yearly basis. This policy establishes the Company's financial strategy and internal delegation of responsibilities. The policy also governs such matters as how financing, liquidity management and currency risk management are to be handled within the Group as well as any restrictions that should be considered with respect to counterparties.
By funding risk is meant the risk that funding of the Group's capital requirement will be impeded or become more costly. To mitigate funding risk the Group strives to maintain a balanced maturity structure, a good liquidity reserve, and diversified borrowing. This creates a preparedness to take necessary alternative actions to raise capital should this be necessary.
Indutrade takes a central approach to the Group's funding. In principle, all external funding is conducted by the Parent Company, which then funds the Group's subsidiaries, both in and outside Sweden, in local currency. Cash pools are established in Sweden, Finland, Norway, Denmark, Germany, the Netherlands and the UK.
Indutrade has had a commercial paper programme in place since 2014. The framework of the programme was expanded in 2016 from SEK 1,500 million to SEK 2,000 million.
At year-end 2016 the Parent Company had external interestbearing liabilities of SEK 3,345 million (2,684). The corresponding amount for the Group was SEK 3,679 million (3,033). The Group's interest-bearing net debt was SEK 3,628 million at year-end (2,949).
At year-end 2016 the Group had SEK 332 million (339) in cash and cash equivalents and SEK 2,854 million (2,580) in unutilised overdraft facilities. Of the Group's interest-bearing loans, 54% of the total principal falls due for payment after 31 December 2017. For a more detailed maturity analysis, see the description of the Group's borrowings in Note 22.
The Group strives to maintain a reasonable balance between equity, debt financing and liquidity, to enable the Group to secure funding at a reasonable capital cost. The Group's goal is that the net debt/equity ratio, defined as interest-bearing liabilities less cash and cash equivalents in relation to equity, normally should not exceed 100%. At year-end the debt/equity ratio was 82% (80%).
By interest rate risk is meant the risk that unfavourable changes in interest rates will have an excessive impact on the Group's net financial items and earnings. At year-end 2016, as in the preceding year, most of the Group's loans carried variable rates of interest.
The Parent Company has entered into contracts to hedge SEK 400 million of its borrowing at variable interest against fixed interest for five years. Both contracts expire in 2018. The difference between the fixed and variable interest is expensed in the income statement. During the year, valuation of interest rate swaps resulted in a gain for the Group of SEK 13 million (15) before tax, which is recognised in other comprehensive income. The Parent Company had a corresponding gain of SEK 12 million (15).
Based on the loan structure at year-end, a 1% rise in the interest rate on an annualised basis would result in a higher interest expense of approximately SEK 35 million (27), without taking into account the loans' fixed interest periods. Taking into account the existing interest swaps, the effect would be approximately SEK –31 million (–20). Profit after tax would be affected by SEK –24 million (–16).
The table below shows the remaining contractual terms of loans until maturity including interest, on loans, leasing commitments and contingent consideration. Trade payables normally have a term of less than six months.
For information on the utilisation of bank overdraft facilities and granted credit limits, see Note 22.
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| Maturity dates for loans, leasing commitments and contingent earn-out pay ments, incl. interest: |
2016 | 2015 | 2016 | 2015 | |
| Maturity 2016 | 2,051 | 1,868 | |||
| Maturity 2017 | 1,716 | 137 | 1,558 | 42 | |
| Maturity 2018 | 929 | 864 | 820 | 805 | |
| Maturity 2019 | 545 | 13 | 507 | – | |
| Maturity 2020 | 20 | 9 | 5 | – | |
| Maturity 2021 or later | 523 | 7 | 501 | – | |
| Total borrowings incl. interest, SEK million |
3,733 | 3,081 | 3,391 | 2,715 |
By currency risk is meant the risk of unfavourable changes in exchange rates affecting consolidated earnings and equity measured in SEK:
The Indutrade Group's transaction exposure arises when subsidiaries import products for sale in the domestic market and/or sell products in foreign currency. Exchange rate effects are eliminated as far as possible by using currency clauses in customer contracts and by buying and selling in the same currency. In certain cases, forward contracts are used. Indutrade therefore considers its transaction exposure to be limited.
The consolidated income statement includes SEK 12 million (11), net, in exchange rate differences in operating profit and SEK 2 million (–7), net, in financial items.
With respect to transaction exposure, at 31 December 2016 Indutrade had net exposure of SEK 150 million (105) in foreign currency. See the breakdown of currencies in the following table.
| Group | 2016 | 2015 | ||
|---|---|---|---|---|
| SEK million | Local currency |
SEK | Local currency |
SEK |
| USD | 9.6 | 87 | 15.7 | 131 |
| EUR | 4.7 | 45 | –2.4 | –22 |
| GBP | 1.9 | 21 | –0.6 | –8 |
| DKK | 4.3 | 6 | 10.7 | 13 |
| CHF | –0.7 | –6 | –1.0 | –8 |
| Other currencies | –3 | –1 | ||
| Total | 150 | 105 |
At year-end the Group had outstanding forward contracts to reduce the currency risk associated with future flows. All of the contracts expire within 16 months. Market valuation of outstanding forward contracts as per 31 December 2016 resulted in an unrealised gain of SEK 10 million (16) before tax, which is recognised in other comprehensive income.
Group
| SEK million | 2016 | 2015 |
|---|---|---|
| USD | 121 | 207 |
| EUR | 80 | 98 |
| SEK | 27 | – |
| GBP | 26 | – |
| SGD | 6 | 15 |
| AUD | 3 | – |
| Total | 263 | 320 |
In addition, the Parent Company has hedged outstanding receivables from and liabilities to subsidiaries, contingent earn-out payments and anticipated dividends, as shown in the table below. Receivables from subsidiaries increased during the year.
Parent Company
| SEK million | 2016 | 2015 |
|---|---|---|
| EUR | 1,131 | 391 |
| GBP | 822 | 161 |
| CHF | 160 | 103 |
| NOK | 38 | 29 |
| PLN | 22 | 21 |
| DKK | 77 | 20 |
| RUB | 7 | 12 |
| SGD | 3 | 2 |
| Total | 2,260 | 739 |
All contracts expire within 14 months.
The Group is exposed to a translation risk associated with translation of the accounts of foreign subsidiaries to the Group currency, SEK. This type of currency risk is not hedged. Net investments in foreign subsidiaries at year-end are shown in the following table. Indutrade also had net investments in other currencies in both 2016 and 2015, but the amounts were insignificant.
| Group | 2016 | 2015 | ||
|---|---|---|---|---|
| Net exposure in millions |
Local currency |
in SEK | Local currency |
in SEK |
| EUR | 153 | 1,462 | 142 | 1,296 |
| GBP | 69 | 776 | 52 | 641 |
| DKK | 459 | 591 | 120 | 146 |
| NOK | 378 | 399 | 320 | 305 |
| CHF | 20 | 180 | 22 | 182 |
| Total | 3,408 | 2,570 |
Indutrade estimates that the Company's translation exposure entails that a 1% change in the value of SEK vs. other currencies would result in a yearly positive/negative effect (in the event of a weakening/strengthening of SEK) corresponding to approximately SEK 90 million (81) on net sales and approximately SEK 7 million (6) on net profit. The effect on equity of a 1% change would be SEK 35 million (27).
In the treasury management activities, credit risks arise in connection with investments of cash and cash equivalents, and counterparty risks arise in connection with the use of forward contracts. These risks are limited by working with counterparties that have been approved in accordance with the guidelines stipulated in the finance policy.
The risk of the Group's customers failing to meet their obligations, i.e., of payment not being received from customers, constitutes a customer credit risk. Assessment of Indutrade's credit risk in commercial transactions is handled by the respective subsidiaries. Indutrade's exposure to individual customers is small, and the risk spread is considered to be favourable. No single customer accounts for more than 3% (3%) of consolidated sales. The Indutrade Group does business in many countries, which entails a spread of credit risk exposure over several geographic areas. For information on sales and profit per geographic area, see Note 3.
For information on age analysis, provisions for impaired trade accounts receivable and customer losses, see Note 20.
The table below shows financial instruments at fair value, based on the classification of the fair value hierarchy. The various levels are defined as follows:
| Level 1 | Level 2 | Level 3 | Total | |
|---|---|---|---|---|
| Assets | ||||
| Available-for-sale financial assets |
– | – | 15 | 15 |
| Derivative instruments held for hedging purposes |
– | 0 | – | 0 |
| Liabilities | ||||
| Derivative instruments held for hedging purposes |
– | 18 | – | 18 |
| Contingent earn-out payments | – | – | 129 | 129 |
| Level 1 | Level 2 | Level 3 | Total | |
|---|---|---|---|---|
| Assets | ||||
| Available-for-sale financial assets |
– | – | 5 | 5 |
| Derivative instruments held for hedging purposes |
– | 3 | – | 3 |
| Liabilities | ||||
| Derivative instruments held for hedging purposes |
– | 38 | – | 38 |
| Contingent earn-out payments |
– | – | 259 | 259 |
Derivative instruments consist of currency forward contracts and interest rate swaps. No transfers were made between level 2 and level 3 during the year. Assets in level 3 consist essentially of holdings of shares and participations in unlisted companies. Fair value is considered to be equal to cost. For further information, see Note 17. Contingent earn-out payments have been discounted to present value using an interest rate that is judged to be in line with the market rate at the time of acquisition. Adjustments for changes in market interest rates are not made on a regular basis, as this effect is considered to be immaterial. Essentially all longand short-term loans carry variable interest rates, which is why fair value is equal to the carrying amount. For further information about contingent earn-out payments and loans, see Note 22. For the Group's other financial assets and liabilities, such as trade accounts receivable, cash and cash equivalents, and trade accounts payable, fair value is estimated to be equal to the carrying amount.
continued
| 2016 | 2015 | |
|---|---|---|
| Opening book value | 259 | 241 |
| Acquisitions during the year | 72 | 120 |
| Earn-out payments | –174 | –106 |
| Reversed via income statement | –32 | –7 |
| Interest expense | 3 | 10 |
| Exchange rate differences | 1 | 1 |
| Closing book value | 129 | 259 |
Segment reporting is based on internal reporting to the chief operating decision maker. For Indutrade, this means the Group CEO and the key ratios that are presented for the business areas.
The Group recognises revenue when its amount can be measured in a reliable manner and it is probable that future economic benefit will accrue to the Company. Revenue is recognised excluding value added tax and discounts. The Group's sales consist in all essential respects of sales of products. Revenue from sales of products is recognised when ownership, i.e., the benefits and risks, has been transferred to the buyer. The date on which ownership is transferred is regulated in most sales made by the Group in written agreements with the buyer. For the small portion of sales that pertain to sales of services, revenue is recognised when the services are rendered.
The Group is organised in the six business areas Engineering & Equipment, Flow Technology, Fluids & Mechanical Solutions, Industrial Components, Measurement & Sensor Technology, and Special Products, which constitute the Group's operating segments. The Group's business areas conduct business primarily in the Nordic countries and in central and northern Europe.
The Engineering & Equipment business area's operations involve sales of components as well as customisation, combinations and installations of products from various suppliers. Business is conducted mainly in Finland.
The Flow Technology business area offers components and systems for controlling, measuring, monitoring and regulating flows. The business area includes companies that specialise in various areas of industrial flow technology.
The Fluids & Mechanical Solutions business area offers hydraulic and mechanical components to industries in the Nordic and Baltic countries. Important product areas are filters, hydraulics, tools & transmission, industrial springs, valves, water and wastewater fittings, steel profiles, compressors, product labelling and construction plastics.
The Industrial Components business area offers a wide range of technically advanced components and systems for production and maintenance, and medical technology equipment. The products consist mainly of consumables.
The Measurement & Sensor Technology business area offers design solutions, measurement instruments, measurement
systems and sensors for various industries. All of the business area's companies have proprietary products based on advanced technological solutions and own development, design and manufacturing.
The Special Products business area offers specially manufactured niche products, design solutions, aftermarket service and assembly, and special processing. The business area includes companies with a considerable amount of own manufacturing and proprietary products.
According to IFRS, the part of operations that does not constitute its own operating segment is to be called "Other". At Indutrade, only the Parent Company is included in the segment called "Other". Indutrade AB lacks a major revenue source, which is why the Parent Company does not constitute its own operating segment. Kemiteknik Fästelement/Elektronik/Ind.fjädrar Mätteknik Hydraulik & Industriell utrustning Ventiler 22 15 12 7 6
The operating segments are monitored through "Net sales", which include both external and internal sales. However, the scope of internal sales between the subsidiaries is very limited, which is shown in the eliminations column in the table below. Pumpar Rör & rörsystem Medicinteknik Filter & Processteknik 5 5 5 4
The earnings metric that is monitored in Indutrade is EBITA. The table below also shows Profit before tax. Service Automation 4 2
The business areas are followed up using the same accounting principles as the Group. Övrigt Glas/Plast/Keramik 2
continued
The Indutrade Group does not receive revenue from any single customer that amounts to 10% of total, which is why no data is reported on this.
Investments in non-current assets include purchases of intangi-
The principle for breaking down external revenue and noncurrent assets per geographic area in the tables below is that such reporting is based on the location of the subsidiary's registered office.
ble assets (Note 15), and property, plant and equipment (Note 16).
| 2016 | EE | FT | FM | IC | MST | SP | PC | Elim. 1) | Total |
|---|---|---|---|---|---|---|---|---|---|
| Net sales | 1,537 | 2,231 | 1,558 | 2,501 | 1,171 | 3,997 | 4 | –44 | 12,955 |
| Operating profit | 112 | 147 | 168 | 222 | 139 | 532 | –60 | 12 | 1,272 |
| Net financial items | –5 | –14 | –3 | –6 | 0 | –35 | 654 | –669 | –78 |
| Profit before tax | 108 | 133 | 165 | 215 | 139 | 498 | 1,078 | –1,142 | 1,194 |
| EBITA | 124 | 168 | 199 | 265 | 177 | 597 | –60 | 14 | 1,484 |
| EBITA margin, % | 8.1 | 7.5 | 12.8 | 10.6 | 15.1 | 14.9 | – | – | 11.5 |
| Amortisation of intangible assets | –19 | –24 | –34 | –45 | –44 | –67 | 0 | – | –233 |
| Depreciation of property, plant and equipment | –12 | –23 | –25 | –27 | –30 | –61 | 0 | – | –178 |
| Sales growth, % | 5 | 0 | 25 | 11 | 25 | 6 | – | – | 9 |
| Operating capital at year-end | 557 | 927 | 1,213 | 1,362 | 1,479 | 2,989 | 3,723 | –4,223 | 8,027 |
| Return on operating capital, % | 24 | 17 | 19 | 20 | 13 | 22 | – | – | 20 |
| Investments in non-current assets | 27 | 32 | 24 | 51 | 26 | 223 | 1 | – | 384 |
| Total assets | 805 | 1,484 | 1,744 | 2,122 | 1,903 | 3,935 | 8,479 | –9,419 | 11,053 |
| Total liabilities | 666 | 1,339 | 625 | 1,191 | 638 | 2,524 | 4,409 | –4,738 | 6,654 |
| 2015 | EE | FT | FM | IC | MST | SP | PC | Elim.1) | Total |
|---|---|---|---|---|---|---|---|---|---|
| Net sales | 1,466 | 2,234 | 1,249 | 2,263 | 938 | 3,772 | 4 | –45 | 11,881 |
| Operating profit | 113 | 194 | 136 | 209 | 133 | 505 | –51 | –4 | 1,235 |
| Net financial items | –6 | –14 | –1 | –6 | –10 | –22 | 529 | –568 | –98 |
| Profit before tax | 107 | 180 | 135 | 203 | 123 | 483 | 897 | –991 | 1,137 |
| EBITA | 125 | 217 | 163 | 249 | 164 | 564 | –51 | –4 | 1,427 |
| EBITA margin, % | 8.5 | 9.7 | 13.1 | 11.0 | 17.5 | 15.0 | – | – | 12.0 |
| Amortisation of intangible assets | –17 | –25 | –28 | –42 | –34 | –63 | 0 | – | –209 |
| Depreciation of property, plant and equipment | –13 | –20 | –21 | –24 | –27 | –51 | 0 | – | –156 |
| Sales growth, % | 1 | 8 | 18 | 29 | 25 | 39 | – | – | 22 |
| Operating capital at year-end | 532 | 935 | 798 | 1,234 | 1,145 | 2,484 | 2,764 | –3,236 | 6,656 |
| Return on operating capital, % | 22 | 23 | 21 | 22 | 14 | 24 | – | – | 22 |
| Investments in non-current assets | 27 | 38 | 25 | 61 | 31 | 91 | 1 | – | 274 |
| Total assets | 749 | 1,557 | 1,213 | 1,915 | 1,472 | 3,367 | 7,091 | –8,003 | 9,361 |
| Total liabilities | 592 | 1,399 | 481 | 1,102 | 485 | 1,669 | 3,711 | –3,785 | 5,654 |
1) Pertains mainly to elimination of the Parent Company's dividends from subsidiaries, impairment of subsidiary shares, shares in subsidiaries, and loans to and from subsidiaries.
EE – Engineering & Equipment IC – Industrial Components FT – Flow Technology
SP – Special Products FM – Fluids & Mechanical Solutions MST – Measurement & Sensor Technology
PC – Parent Company
continued
Consolidated revenue from external customers per geographic area, SEK million
Based on where the Group's legal companies have their registered offices. The information on page 2 is based on where the customers are located.
Based on where the Group's legal companies have their registered offices, excluding financial assets.
| Danmark och Norge | 452 | |||
|---|---|---|---|---|
| Storbritannien och Irland | 987 Group |
Parent Company | ||
| 822 2016 541 |
2015 | 2016 | 2015 | |
| Benelux Goods for resale, raw ma 236 terials and consumables Finland 233 |
365 –6,929 |
–6,423 | – | – |
| 213 Costs for employee Schweiz 213 benefits |
–2,980 | –2,674 | –41 | –39 |
| Övriga världen Depreciation/amortisation |
455 –411 434 |
–365 | 0 | 0 |
| 0 Transport costs |
500 –269 |
1000 1500 –236 |
2000 0 |
2500 – |
| 2016 Marketing costs |
2015 –100 |
–88 | –1 | –4 |
| Property-related costs | –502 | –429 | –7 | 0 |
| Other costs | –542 | –444 | –15 | –12 |
| IS Total | –11,733 | –10,659 | –64 | –55 |
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Other operating income Exchange rate gains |
108 | 109 | – | – |
| Revaluation of liabilities pertaining to contingent consideration |
31 | 7 | – | – |
| Gain on sale of subsidiaries/ operations |
0 | 1 | – | – |
| Other | 15 | 0 | – | – |
| IS Total | 154 | 117 | – | – |
| Other operating expenses Exchange rate losses |
–96 | –98 | – | – |
| Transaction costs for acquisi tions |
–8 | –6 | – | – |
| Other | – | 0 | – | – |
| IS Total | –104 | –104 | – | – |
| Other operating income/ expenses, net |
50 | 13 | – | – |
| 2016 | 2015 | |||
|---|---|---|---|---|
| Number of em ployees |
Of whom, women |
Number of em ployees |
Of whom, women |
|
| Parent Company | 11 | 5 | 10 | 5 |
| Subsidiaries in Sweden | 1,449 | 308 | 1,387 | 291 |
| Total Sweden | 1,460 | 313 | 1,397 | 296 |
| Subsidiaries outside Sweden |
4,035 | 1,008 | 3,581 | 916 |
| Total | 5,495 | 1,321 | 4,978 | 1,212 |
The Parent Company's board is composed of two women and six men (same as in preceding year). The subsidiaries' boards and management include six women (2015: five women). The Group's management consisted of one woman and eight men through 31 December 2016 (same as in preceding year).
Termination benefits are payable when employment is terminated before the normal retirement date or when an employee accepts voluntary departure in exchange for such benefits. The Group reports severance pay when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without the possibility of withdrawal, or to providing termination benefits as a result of an offer made to encourage voluntary departures.
The Parent Company and most of the subsidiaries have bonus or profit-sharing systems based on the earnings performance of each unit. The Group reports a liability and an expense for these programmes when it has a formal or constructive obligation to make such payments in exchange for services performed by employees and the amount of such obligations can be calculated in a reliable manner. Reporting is done in the period the cost pertains to.
| 2016 | 2015 | |||||
|---|---|---|---|---|---|---|
| Wages, salaries remuneration and other |
Social security costs |
pension costs Of which, |
Wages, salaries remuneration and other |
Social security costs |
pension costs Of which, |
|
| Parent Company | 30 | 12 | 3 | 25 | 14 | 5 |
| Subsidiaries in Sweden |
761 | 331 | 76 | 667 | 301 | 72 |
| Total Sweden | 791 | 343 | 79 | 692 | 315 | 77 |
| Subsidiaries outside Sweden |
1,588 | 277 | 145 | 1,348 | 262 | 128 |
| Total | 2,379 | 620 | 224 | 2,040 | 577 | 205 |
Of the Parent Company's pension costs, SEK – million (2) pertains to the Board of Directors and the CEO. The corresponding amount for the Group is SEK 35 million (34).
| 2016 | 2015 | ||||||
|---|---|---|---|---|---|---|---|
| management 1) Companies' |
Of which, bonuses and similar |
employees Other |
management 1) Companies' |
Of which, bonuses and similar |
employees Other |
||
| Parent Company | 15 | 2 | 15 | 13 | 3 | 12 | |
| Subsidiaries in Sweden |
94 | 10 | 667 | 85 | 13 | 582 | |
| Total Sweden | 109 | 12 | 682 | 98 | 16 | 594 | |
| Subsidiaries outside Sweden |
152 | 21 | 1,436 | 155 | 21 | 1,193 | |
| Total | 261 | 33 | 2,118 | 253 | 37 | 1,787 |
1) Pertains to the Board of Directors and Presidents.
The Chairman and members of the Board of Directors are paid a fee in accordance with a resolution by the Annual General Meeting. A fee of SEK 530,000 is payable to the Chairman, and a fee of SEK 398,000 is payable to the Vice Chairman. A fee of SEK 266,000 is payable to each of the other non-executive directors, and a fee of SEK 52,000 is payable to the Audit Committee chair. A fee of SEK 26,000 is paid to members of the Remuneration Committee.
Compensation for the CEO and other senior executives consists of a base salary, variable compensation, other benefits and pension. By other senior executives is meant eight persons: the Chief Financial Officer (CFO), five business area presidents, the Head of Group Finance and the Head of Business Development. Senior executives employed by the subsidiaries receive their compensation from the respective subsidiaries.
For the CEO of the Parent Company, the variable compensation is capped at six months' salary, i.e., 50% of base salary. For other senior executives, the variable compensation is capped at four to seven months' salaries, or 33% to 58% of base salary. Variable compensation is related to the earnings performance of the Group or of the respective business areas.
The retirement age for the CEO is normally 65. In addition to statutory retirement benefits, Indutrade is to pay pension premiums – excluding premiums for disability insurance and waiver of premium protection – corresponding to 35% of his base salary. The CEO is entitled to choose his pension solution, within the cost framework described above and subject to the approval of the Chairman. Johnny Alvarsson has been given an extended mandate as President and CEO until the 2017 Annual General Meeting, with unchanged terms. Other senior executives are entitled to retirement benefits corresponding to an average of 30% of their respective base salaries. The retirement age is 65. Earned retirement benefits are not conditional upon future employment by Indutrade.
continued
In the event of the Company serves notice, the CEO is entitled to a 24-month notice period with retained employment benefits. For notice given by the CEO, a six-month notice period applies. For other senior executives, a notice period of six to 24 months applies for notice served by the respective companies, depending on the employee's current age. Salary paid out during the notice period is not deducted from other income.
In April 2014 the Annual General Meeting resolved in accordance with the Board's proposal to implement an incentive programme, LTI 2014, comprising a combined maximum of 460,000 warrants in two series, directed at senior executives and other key persons in the Indutrade Group. Within the framework of Series I, which was offered to 135 persons, the participants acquired a total of 257,500 warrants for a combined total of SEK 3,914,000. The price per warrant was SEK 15.20, which corresponded to the market price. The subscription price was set at SEK 118.80 per share, recalculated for the bonus issue carried out in May 2016. Within the framework of Series II, which was offered to 13 persons, the participants acquired a total of 27,500 warrants for a combined value of SEK 319,000. The price per warrant was SEK 11.60, which corresponded to the market price. The subscription price for this series was set at SEK 116.70 per share, recalculated for the bonus issue carried out in May 2016. The CEO acquired 15,000 warrants, and other senior executives acquired 73,500 warrants. Each warrant carries entitlement to subscribe for three shares in Indutrade during specially prescribed subscription periods through 18 May 2018. A cash subsidy corresponding to 120% of the price paid by the participants for the warrants will be paid out on two occasions and in equal parts after half of the term of the programme and after three years, respectively, normally under the condition that the participant has not sold any warrants and continues to be employed by the Group at the time of payment. Half of the subsidy was paid out in 2016.
The Board of Directors has decided to propose to the Annual General Meeting in April 2017 to resolve in favour of a new longterm share-based incentive programme directed at approximately 180 senior executives and other key persons in the Group. The programme will be based on warrants.
By executive management is meant in this context the President and CEO, the Chief Financial Officer, the business area presidents, the Head of Group Finance and the Head of Business Development.
Indutrade shall apply the compensation levels and terms of employment necessary to be able to recruit and retain management with high competence and the capacity to achieve set objectives. The forms of compensation shall motivate members of the executive management to perform their utmost in order to safeguard the interests of the shareholders.
The forms of compensation shall therefore be in line with the going rate in the market and shall be straightforward, longterm and quantifiable. Compensation of members of executive management shall normally consist of a fixed and a variable portion. Fixed salary for members of the executive management shall be in line with the going rate in the market and shall be commensurate with the individual's expertise, responsibilities
and performance. The variable portion shall reward achievement of clearly set goals regarding the Company's and the respective business areas' earnings performance as well as the Group's growth in simple, transparent structures. The variable compensation component for members of the executive management shall normally not exceed seven months' salary and can amount to a maximum of SEK 14 million.
Incentive programmes in the Company shall mainly be share price–related and cover persons in senior positions in the Company who have a significant influence over the Company's earnings and growth, and shall be based on the achievement of set targets. An incentive programme shall contribute to the long-term commitment to the Company's development and shall be implemented on market terms. The Company shall be able to pay cash compensation coupled to senior executives' purchases of shares and share-related instruments. Such cash compensation shall normally not exceed 15% of the executive's fixed salary.
Non-monetary benefits for members of the executive management shall facilitate the individuals in the execution of their duties and correspond to what can be considered to be reasonable in respect of practice in the market in which the respective executive is active.
Pension terms for members of the executive management shall be in line with the going rate in the market in respect of what applies for peer executives in the market in which the executive works and should be based on a defined contribution pension solution or a general pension plan (in Sweden, the ITP plan).
Severance pay for members of executive management shall not exceed a total of 24 months' salary in the event the Company serves notice, and 6 months in the event the member of the executive management gives notice.
The Board's Remuneration Committee prepares and conducts drafting work for decisions on the terms of employment for the CEO, and the Board evaluates the CEO's performance once a year. The Remuneration Committee also prepares and conducts drafting work concerning guidelines for remuneration of members of the executive management, for decision by the Board. The President consults with the Remuneration Committee regarding the terms of employment for other members of the executive management.
The Board shall have the right to depart from the aforementioned guidelines for compensation of the executive management if there are special reasons in a particular case.
continued
| SEK 000s | directors' fees Base salary/ |
compensation 1) Variable |
Other benefits | Pension cost | Total |
|---|---|---|---|---|---|
| Fredrik Lundberg, Chairman of the Board, member of the Remu neration Committee |
556 | – | – | – | 556 |
| Bengt Kjell, Vice Chairman of the Board, member of the Remu neration Committee |
424 | – | – | – | 424 |
| Annica Bresky, Director | 266 | – | – | – | 266 |
| Katarina Martinson, Director |
266 | – | – | – | 266 |
| Ulf Lundahl, Director, Audit Committee chair |
318 | – | – | – | 318 |
| Krister Mellvé, Director | 266 | – | – | – | 266 |
| Lars Pettersson, Director, member of the Remu neration Committee |
292 | – | – | – | 292 |
| Johnny Alvarsson, President and CEO |
10,897 | 2,126 | 114 | – 2) 13,137 | |
| Other senior executives (8 persons) |
16,828 | 4,057 | 844 | 5,697 | 27,426 |
| Total | 30,113 | 6,183 | 958 | 5,697 | 42,951 |
1) Including compensation (the year's subsidy cost) for the senior executives who participate in the above-mentioned incentive programme, which amounted to SEK 74,000 for the CEO and SEK 413,000 for senior executives.
2) After reaching an agreement with the Remuneration Committee, the CEO has opted to take out an amount corresponding to pension premiums as salary.
| SEK 000s | directors' fees Base salary/ |
compensation 1) Variable |
Other benefits | Pension cost | Total |
|---|---|---|---|---|---|
| Fredrik Lundberg, Chair man of the Board, mem ber of the Remuneration Committee |
546 | – | – | – | 546 |
| Bengt Kjell, Vice Chair man of the Board, mem ber of the Remuneration Committee |
416 | – | – | – | 416 |
| Eva Färnstrand, Director | 260 | – | – | – | 260 |
| Martin Lindqvist, Direc tor, member of the Re muneration Committee |
260 | – | – | – | 260 |
| Ulf Lundahl, Director, Audit Committee chair |
312 | – | – | – | 312 |
| Krister Mellvé, Director | 260 | – | – | – | 260 |
| Lars Pettersson, Director | 286 | – | – | – | 286 |
| Johnny Alvarsson, Presi dent and CEO |
6,720 | 3,474 | 120 | 2,364 | 12,678 |
| Other senior executives (6 persons) |
16,899 | 7,717 | 926 | 4,609 | 30,151 |
| Total | 25,959 | 11,191 | 1,046 | 6,973 | 45,169 |
1) Including compensation (the year's subsidy cost) for the senior executives who participate in the above mentioned incentive programme, which amounted to SEK 114,000 for the CEO and SEK 465,000 for senior executives.
Depreciation of property, plant and equipment and amortisation of intangible non-current assets are included in the following functions in the following amounts:
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Cost of goods sold | 301 | 267 | – | – |
| Development costs | 8 | 5 | – | – |
| Selling costs | 66 | 61 | – | – |
| Administrative expenses | 36 | 32 | 0 | 0 |
| Total | 411 | 365 | 0 | 0 |
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Lease payments ex pensed during the year: Future contracted lease payments |
223 | 189 | 2 | 2 |
| Maturity year 1 | 212 | 182 | 2 | 2 |
| Maturity year 2 | 172 | 140 | 2 | 2 |
| Maturity year 3 | 127 | 104 | 2 | 2 |
| Maturity year 4 | 87 | 62 | 2 | 2 |
| Maturity year 5 | 51 | 45 | 2 | 2 |
| Maturity year 6– | 100 | 75 | 10 | 12 |
| Total future lease payments |
749 | 608 | 20 | 22 |
Operating leases in the Parent Company and Group pertain primarily to premises.
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| PricewaterhouseCoopers | ||||
| Audit assignment | 13 | 12 | 1 | 1 |
| Auditing activities in addi tion to audit assignment |
1 | 1 | – | – |
| Tax consulting | 1 | 1 | – | – |
| Other services | 1 | 1 | 0 | 0 |
| Total fees, PricewaterhouseCooper |
16 | 15 | 1 | 1 |
| Other auditing firms | ||||
| Auditing fees | 5 | 4 | – | – |
Other auditing firms refers to several auditing firms where none account for a significant amount in 2016 or the preceding year. Audit assignment pertains to fees for the statutory audit, i.e.,
such work that was necessary to issue the audit report as well as audit consulting in connection with the audit assignment.
Financial income consists of interest income on invested funds, dividends, and gains on hedge instruments recognised in profit for the year.
Interest income is reported in accordance with the effective interest method and includes accrued interest as per the balance sheet date. Dividend income is recognised when the right to payment has been determined.
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Interest | 8 | 7 | 53 | 40 |
| Exchange rate differences | 51 | 39 | 44 | 15 |
| Other | – | 0 | – | – |
| IS Total financial income |
59 | 46 | 97 | 55 |
| Interest | – | – | 52 | 38 |
|---|---|---|---|---|
Financial expenses consist of interest expenses on loans and pension liabilities, effects of the dissolution of discounted contingent consideration, losses on hedge instruments recognised in profit for the year, and bank charges. Interest expenses are reported in accordance with the effective interest method.
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Interest expenses, bank loans | –67 | –68 | –57 | –59 |
| Interest expenses, pension obligations |
–4 | –5 | – | – |
| Interest expenses, finance leases | –2 | –2 | 0 | 0 |
| Interest expenses, contingent consideration |
–3 | –10 | –1 | –6 |
| Total interest expenses | –76 | –85 | –58 | –65 |
| Exchange rate differences | –49 | –46 | –38 | –23 |
| Other | –12 | –13 | –11 | –11 |
| IS Total financial expenses | –137 | –144 | –107 | –99 |
| Interest | – | – | –3 | –3 |
|---|---|---|---|---|
| Parent Company | 2016 | 2015 |
|---|---|---|
| Dividends from subsidiaries | 664 | 573 |
| IS Total | 664 | 573 |
Taxes
Income tax consists of current tax and deferred tax. Income taxes are reported in the income statement, except in cases where the tax is attributable to items that are reported in other comprehensive income.
Current tax is tax that is to be paid or received in the current year using the tax rates that apply at the balance sheet date; this also includes adjustments of current tax attributable to earlier periods. Tax is calculated according to the current tax rate in the respective countries.
Deferred taxes attributable to temporary differences between the book value and the taxable value of assets and liabilities are reported in full in the consolidated accounts, while the Parent Company still reports the difference pertaining to machinery and equipment as an untaxed reserve. However, deferred tax liability is not reported if it arises as a result of initial recognition of goodwill. Valuation of deferred tax is based on how the underlying asset or liability is expected to be realised or settled. Deferred tax is calculated using the tax rates that apply on at the balance sheet date or announced as per the balance sheet date and which are expected to apply when the deferred tax asset in question is realised or the tax liability is settled. Deferred tax assets attributable to deductible, temporary differences and unutilised tax-loss carryforwards are reported to the extent that it is probable that they will be utilised in the foreseeable future.
| Group | Parent Company | |||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |||
| Tax expense | ||||||
| Current tax | –299 | –283 | –84 | –73 | ||
| Deferred tax | 41 | 41 | –8 | 0 | ||
| Other tax | 0 | –1 | – | – | ||
| Total | –258 | –243 | –92 | –73 |
The Group's tax expense amounted to 21.6% (21.4%) of consolidated profit before tax. The difference between the reported tax expense and anticipated tax expense (weighted average tax based on national tax rates) is explained below.
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Profit before tax | 1,194 | 1,137 | 1,078 | 897 |
| Weighted average tax based on national tax rates (Group 21.7% and 22.0%, respective ly, and Parent Company 22.0% and 22.0%, respectively) |
–259 | –250 | –237 | –197 |
| Tax effect of: | ||||
| Non-deductible interest expenses on discounted contingent consideration |
–1 | –2 | 0 | –1 |
| Non-deductible transaction costs for acquisitions |
–2 | –1 | – | – |
| Non-deductible impairment of goodwill |
7 | 2 | – | – |
| Other non-deductible expenses/tax-exempt income |
–9 | 1 | 145 | 125 |
| Utilisation of loss-carryforward where tax was not previously reported |
0 | 2 | – | – |
| Adjustment pertaining to previous years' current tax |
2 | 0 | – | – |
| Change in tax rate | 4 | 6 | – | – |
| Other items | 0 | –1 | – | – |
| IS Total | –258 | –243 | –92 | –73 |
| 21.6% | 21.4% | 8.5% | 8.1% |
continued
| non-current Intangible assets |
equipment plant and Property, |
Untaxed reserves |
obligations Pension |
Other items | Total tax | |
|---|---|---|---|---|---|---|
| 1 Jan. - 31 Dec. 2015 | ||||||
| Deferred tax, net Opening book value |
–264 | –35 | –93 | 33 | 23 | –336 |
| Deferred tax as per income statement |
41 | –3 | –19 | 2 | 14 | 35 |
| Change in tax rate affecting income statement |
6 | 0 | – | 0 | 0 | 6 |
| Deferred tax recognised in other comprehensive income |
– | – | – | 2 | –3 | –1 |
| Deferred tax attributable to acquisitions |
–88 | –4 | –6 | – | 0 | –98 |
| Exchange rate differences | 1 | 0 | – | –1 | –1 | –1 |
| Deferred tax, net Closing book value |
–304 | –42 | –118 | 36 | 33 | –395 |
| As per 31 Dec. 2015 | ||||||
| Deferred tax asset | 1 | 1 | – | 36 | 39 | 77 |
| Deferred tax liability Deferred tax, net |
–305 –304 |
–43 –42 |
–118 –118 |
0 36 |
–6 33 |
–472 –395 |
| Group | ||||||
|---|---|---|---|---|---|---|
| non-current Intangible assets |
equipment plant and Property, |
reservesa Untaxed |
obligations Pension |
Other items | Total tax | |
| 1 Jan. - 31 Dec. 2016 | ||||||
| Deferred tax, net Opening book value |
–304 | –42 | –118 | 36 | 33 | –395 |
| Deferred tax as per income statement |
44 | –6 | –4 | 3 | 0 | 37 |
| Change in tax rate affecting income statement |
4 | 0 | – | – | 0 | 4 |
| Deferred tax recognised in other comprehensive income |
– | – | – | 3 | –5 | –2 |
| Deferred tax attributable to acquisitions |
–88 | –14 | –5 | – | 0 | –107 |
| Exchange rate differences | –5 | 0 | – | 1 | 1 | –3 |
| Deferred tax, net Closing book value |
–349 | –62 | –127 | 43 | 29 | –466 |
| As per 31 Dec. 2016 | ||||||
| BS Deferred tax asset | 0 | 1 | – | 43 | 39 | 83 |
| BS Deferred tax liability –349 | –63 | –127 | 0 | –10 | –549 | |
| Deferred tax, net | –349 | –62 | –127 | 43 | 29 | –466 |
The loss-carryforward, in which deferred tax has been capitalized, amounts to SEK 98 million (74), corresponding to a tax asset of SEK 29 million (22). Uncapitalised loss-carryforwards amount to SEK 32 million (10), corresponding to a tax asset of SEK 9 million (3).
Substantial dividends may be recognised without withholding tax.
Of the deferred tax liabilities, SEK 48 million will be dissolved in 2017. The calculation is based on estimated depreciation of acquisition calculations in the coming year.
| obligations Pension |
Other items | Total tax | |
|---|---|---|---|
| 1 Jan. - 31 Dec. 2015 | |||
| Deferred tax, net Opening book value |
2 | 7 | 9 |
| Deferred tax as per income statement |
1 | –1 | 0 |
| Deferred tax recognised in other comprehensive income |
– | –3 | –3 |
| Deferred tax, net Closing book value |
3 | 3 | 6 |
| As per 31 Dec. 2015 | |||
| Deferred tax asset | 3 | 6 | 9 |
| Deferred tax liability | – | –3 | –3 |
| Deferred tax, net | 3 | 3 | 6 |
| Deferred tax, net | |||
|---|---|---|---|
| Opening book value | 3 | 3 | 6 |
| Deferred tax as per income statement |
0 | –8 | –8 |
| Deferred tax recognised in other comprehensive income |
– | –3 | –3 |
| Deferred tax, net Closing book value |
3 | –8 | –5 |
| As per 31 Dec. 2016 | |||
| BS Deferred tax asset | 3 | 3 | 6 |
| BS Deferred tax liability | – | –11 | –11 |
| Deferred tax, net | 3 | –8 | –5 |
Goodwill consists of the amount by which the total purchase price and non-controlling interests exceed the fair value of identifiable, acquired assets and liabilities taken over. Goodwill is tested at least annually for impairment and is carried at cost less accumulated impairment losses. Gains or losses on the disposal of an entity include the remaining carrying amount of goodwill relating to the entity sold. Goodwill is normally allocated at the segment level for impairment testing. For impairment testing during the year, see "Impairment testing of non-financial assets" below.
The Group's starting point with respect to acquisitions is that agencies, customer relations, etc., and the item software, licences, etc. have a limited useful life and are carried at cost less accumulated amortisation. Trademarks are possible to identify in connection with major company acquisitions. Trademarks that have been capitalised to date have been judged to have an indefinite useful life, and no amortisation is calculated. Instead, an impairment test is conducted at least annually, as for goodwill.
In connection with nearly all company acquisitions completed by Indutrade, a value is identified for purchased agencies and the customer relations that are included as part of the acquisition. Since most of Indutrade's acquisitions are small, it is not possible to itemise the intangible assets. For small acquisitions, the cost of customer relations and agencies is normally valued at between a half year's and one year's gross profit. According to IFRS, supplementary disclosures are to be made for each significant intangible asset. Since the Indutrade Group's intangible assets consist for the most part of many small sub-items, where none constitutes an item with material impact on the Group's result or position, no supplementary disclosures are made for these smaller intangible non-current assets.
Amortisation is calculated on a straight-line basis to allocate the cost of these assets over their estimated useful lives. The following amortisation schedules are used:
| Agencies, customer relations, etc. | 5–20 years |
|---|---|
| Trademarks | – |
| Software, licences, etc. | 5–10 years |
| Other intangible assets | 5–20 years |
The Group conducts certain product-specific development activities. Outlays for development are reported as development costs in the income statement as they arise. If the requirements in IAS 38 for internally prepared intangible assets are fulfilled, then the development that has been conducted is capitalised and is included in the item "Other intangible assets". The requirements of this standard are that the development costs pertain to identifiable, unique assets that are controlled by the Group. Capitalisation is done if it is technically possible to complete preparation of the asset and the intention is to use or sell the asset, that it can be shown that future economic benefit is probable, and that the costs can be calculated in a reliable manner.
continued
Goodwill and trademarks are judged to have an indefinite useful life and are not amortised, but are instead tested at least annually for impairment. For assets, which are amortised, impairment is judged on the basis of a decline in value whenever events or changes in conditions indicate that the carrying amount may not be recoverable. Impairment is recognised in the amount in which the asset's carrying amount exceeds its recoverable value. The recoverable value is the higher of the asset's fair value less selling costs and its value in use. In calculations of value in use, future cash flows are discounted using a discount factor that takes into account risk-free interest and the risk associated with the specific asset. When determining any need to recognise impairment, assets are grouped at the lowest levels in which there are separate, identifiable cash flows (cash-generating units). For Indutrade this entails that such determination is normally done at the segment level, which corresponds to Indutrade's business areas. For assets other than financial assets and goodwill for which an impairment loss has previously been recognised, a test is performed as per each balance sheet date to determine if any reversals should be made.
| Goodwill | Agencies, customer relationships, etc. |
Trademarks | licences, etc. Software, |
Other intangible assets |
Total intangible assets |
|
|---|---|---|---|---|---|---|
| 1 Jan.–31 Dec. 2015 | ||||||
| Opening book value |
1,572 | 1,089 | 252 | 46 | 58 | 3,017 |
| Exchange rate differences |
–35 | –15 | 2 | –2 | 0 | –50 |
| Investments during the year |
– | – | – | 19 | 14 | 33 |
| Company acquisitions |
404 | 372 | 5 | 1 | 4 | 786 |
| Reclassification | – | – | – | 0 | – | 0 |
| Adjustment of preliminary purchase price allocation |
1 | 0 | – | – | – | 1 |
| Amortisation | – | –192 | 0 | –12 | –5 | –209 |
| Closing book value | 1,942 | 1,254 | 259 | 52 | 71 | 3,578 |
| As per 31 Dec. 2015 Cost |
2,066 | 2,211 | 259 | 133 | 101 | 4,770 |
| Accumulated amortisation and impairment charges |
–124 | –957 | 0 | –81 | –30 –1,192 | |
| Book value | 1,942 | 1,254 | 259 | 52 | 71 | 3,578 |
Goodwill is not amortised continuously; instead, the value is tested yearly for impairment in accordance with IAS 36. Testing was conducted most recently in December 2016.
Goodwill is apportioned over cash-generating units, which for Indutrade are equated with operating segments. Operating segments correspond to Indutrade's business areas.
The recoverable value has been calculated according to value in use and is based on the current estimation of cash flows for the next five years. Assumptions have been made on the gross margin, level of overheads, need for working capital and investment need. The parameters have been set to correspond to budgeted earnings for the 2017 financial year. During the rest of the five-year period, an annual growth rate of 2% (2%) has been assumed. Where greater changes are expected, the assumptions have been adapted to better correspond to these expectations. For cash flows beyond the five-year period, the rate of growth has been assumed to correspond to the growth rate during the fifth year, ordinarily 2%. The cash flows have been discounted with a weighted cost of capital that corresponds to approximately 9% (10%) before tax. The weighted cost of capital has been adapted to the prevailing level of interest rates. The same discount rate has been used for all segments, since they conduct similar operations. The calculation shows that value in
continued
use exceeds the carrying amount at the segmental level. A sensitivity analysis shows that the remaining goodwill value would continue to be upheld if the discount rate were to be raised by 1 percentage point or long-term growth were to be decreased by 1 percentage point.
Every year impairment testing is conducted for trademarks at the segmental level in accordance with the same principles and at the same point in time as for goodwill.
No events or changed conditions have been identified that warrant impairment testing for other intangible non-current assets that are amortised.
| 2016 | 2015 | |
|---|---|---|
| Engineering & Equipment | 134 | 128 |
| Flow Technology | 179 | 180 |
| Fluids & Mechanical Solutions | 436 | 295 |
| Industrial Components | 461 | 403 |
| Measurement & Sensor Technology | 436 | 316 |
| Special Products | 742 | 620 |
| Total | 2,388 | 1,942 |
| 2016 | 2015 | |
|---|---|---|
| Engineering & Equipment | 0 | 0 |
| Flow Technology | 59 | 59 |
| Fluids & Mechanical Solutions | 17 | – |
| Industrial Components | 5 | 4 |
| Measurement & Sensor Technology | 146 | 146 |
| Special Products | 52 | 50 |
| Total | 279 | 259 |
| Parent Company | 2016 | 2015 |
|---|---|---|
| Opening cost | 2 | 2 |
| Investments during the year | – | 0 |
| Closing accumulated cost | 2 | 2 |
| Opening amortisation | –2 | –2 |
| Amortisation for the year | 0 | 0 |
| Closing accumulated amortisation | –2 | –2 |
| BS Planned residual value | 0 | 0 |
Property, plant and equipment are stated at cost less accumulated depreciation according to plan. Cost includes charges that are directly attributable to acquisition of the asset. Additional charges are added to the asset's carrying amount or are reported as a separate asset, depending on which is suitable, only when it is probable that the future economic benefit associated with the asset will accrue to the Group and the asset's cost can be measured in a reliable manner. All other forms of repairs and maintenance are reported as costs in the income statement in the period in which they were incurred.
Property, plant and equipment are depreciated over their estimated useful lives. The following depreciation schedules are used:
| Buildings | 25–40 years |
|---|---|
| Machinery | 5–10 years |
| Equipment | 3–10 years |
No depreciation is calculated for land.
The assets' residual value and useful lives are tested for impairment at the end of every reporting period and are adjusted as necessary. Gains and losses on disposals of non-current assets are reported in the function in which depreciation was reported prior to their disposal or, alternatively, in other operating income and expenses.
Land is judged to have an indefinite useful life and is not amortised, but is instead tested at least annually for impairment. For assets, which are depreciated, impairment is judged on the basis of a decline in value whenever events or changes in conditions indicate that the carrying amount may not be recoverable. Impairment is recognised in the amount in which the asset's carrying amount exceeds its recoverable value. The recoverable value is the higher of the asset's fair value less selling costs and its value in use. In calculations of value in use, future cash flows are discounted using a discount factor that takes into account risk-free interest and the risk associated with the specific asset. When determining any need to recognise impairment, assets are grouped at the lowest levels in which there are separate, identifiable cash flows (cash-generating units). For Indutrade this normally entails that such determination is normally done at the segment level, which corresponds to Indutrade's business areas. For assets other than financial assets and goodwill for which an impairment loss has previously been recognised, a test is performed as per each balance sheet date to determine if any reversals should be made.
continued
| Group | |||||
|---|---|---|---|---|---|
| Land and buildings | Machinery | Equipment | Construction in progress |
Total property, plant and equipment |
|
| 1 Jan.–31 Dec. 2015 | |||||
| Opening book value | 524 | 214 | 226 | 7 | 971 |
| Exchange rate differences | –2 | 10 | –2 | 0 | 6 |
| Investments during the year 1) | 34 | 70 | 111 | 24 | 239 |
| Company acquisitions | 25 | 33 | 28 | – | 86 |
| Transferred from construction in progress |
0 | 10 | 1 | –11 | 0 |
| Sales and disposals 1) | – | –1 | –28 | – | –29 |
| Reclassification | 0 | 1 | –1 | – | 0 |
| Depreciation | –22 | –57 | –77 | – | –156 |
| Closing book value | 559 | 280 | 258 | 20 | 1,117 |
| As per 31 Dec. 2015 Cost |
825 | 843 | 806 | 20 | 2,494 |
| Accumulated depreciation and impairment charges |
–266 | –563 | –548 | – | –1,377 |
| Book value | 559 | 280 | 258 | 20 | 1,117 |
The item "equipment" includes leased assets held by the Group under finance leases in the following amounts:
| 2016 | 2015 | |
|---|---|---|
| Cost – capitalised finance leases |
158 | 132 |
| Accumulated depreciation | –56 | –41 |
| Book value | 102 | 91 |
Leased assets consist primarily of cars.
| Parent Company | 2016 | 2015 |
|---|---|---|
| Opening cost | 4 | 4 |
| Investments during the year | 1 | 1 |
| Sales and disposals | –1 | –1 |
| Closing accumulated cost | 4 | 4 |
| Opening depreciation | –3 | –3 |
| Depreciation for the year | 0 | 0 |
| Sales and disposals | 0 | 0 |
| Closing accumulated depreciation | –3 | –3 |
| BS Planned residual value | 1 | 1 |
| Opening book value | 559 | 280 | 258 | 20 | 1,117 |
|---|---|---|---|---|---|
| Exchange rate differences | 12 | 0 | 5 | 1 | 18 |
| Investments during the year 1) | 8 | 69 | 117 | 162 | 356 |
| Company acquisitions | 122 | 26 | 18 | 2 | 168 |
| Transferred from construction in progress |
127 | 51 | 1 | –179 | 0 |
| Sales and disposals 1) | – | –2 | –28 | – | –30 |
| Reclassification | – | –1 | 1 | – | 0 |
| Depreciation | –25 | –66 | –87 | – | –178 |
| BS Closing book value | 803 | 357 | 285 | 6 | 1,451 |
| As per 31 Dec. 2016 | |||||
| Cost | 1,158 | 1,162 | 929 | 6 | 3,255 |
| Accumulated depreciation and impairment charges |
–355 | –805 | –644 | – –1,804 | |
| BS Book value | 803 | 357 | 285 | 6 | 1,451 |
1) Of net investments in property, plant and equipment, SEK 292 million (188) had an effect on cash flow, while SEK 46 million (46) pertain to investments financed via finance leases.
| Domicile | Share of capital % |
Share of votes % |
No. shares |
Book value |
|
|---|---|---|---|---|---|
| Kiinteistö Oy Honkakoli |
Finland | – | – | 18 | 1 |
| Kytäjän Golf Oy | Finland | – | – | 6 | 1 |
| Ega Matic | Denmark | 27 | 27 | 125 | 1 |
| Veng Norge | Norway | 30 | 30 | 300 | 9 |
| Other | – | – | – | 3 | |
| Available-for-sale financial assets | 15 |
For the Group's holdings of shares and participations in other companies, fair value is considered to be equal to cost. See also Note 2.
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Opening cost | 5 | 4 | 4,748 | 4,137 |
| External acquisitions | – | – | 781 | 586 |
| Shareholder contribution | – | – | 92 | 30 |
| Internal restructuring | – | – | –394 | – |
| Adjustment of estimated contingent consideration |
– | – | –27 | –5 |
| Increase through company acquisitions |
10 | 0 | – | – |
| Exchange rate differences | 0 | 1 | – | – |
| Closing accumulated cost | 15 | 5 | 5,200 | 4,748 |
| Opening revaluations | – | – | 8 | 8 |
| Closing accumulated revaluations |
– | – | 8 | 8 |
| Opening impairment charges | – | – | –644 | –644 |
| Impairment charges during the year |
– | – | – | – |
| Closing accumulated impairment charges |
– | – | –644 | –644 |
| BS Book value | 15 | 5 | 4,564 | 4,112 |
| Purchase price, external acquisitions |
–781 | –586 |
|---|---|---|
| Purchase price not paid | 8 | 61 |
| Reversal of contingent consideration |
– | 5 |
| Purchase price paid for previous years' acquisitions |
–103 | –98 |
| Shareholder contribution paid out |
–84 | –7 |
| Total | –960 | –625 |
A complete, statutory specification has been appended to the annual report sent in to the Swedish Companies Registration Office. This specification is available upon request from Indutrade AB.
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Opening balance | 19 | 15 | 12 | 9 |
| Additional receivables | 2 | 1 | 2 | – |
| Repaid deposits/amortisation | –10 | – | – | – |
| Company acquisitions | 8 | 1 | – | – |
| Change in value of pensions | 0 | 1 | 0 | 1 |
| Reported net against pension obligations |
– | 2 | – | 2 |
| Exchange rate differences | 0 | –1 | – | – |
| BS Total | 19 | 19 | 14 | 12 |
The Group's non-current receivables pertain mainly to endowment insurance policies. The book value is judged to correspond to fair value. The maturity dates for the endowment insurance policies is dependent on the date of retirement for the persons insured.
The Parent Company's non-current receivables pertain mainly to an endowment insurance policy.
Inventories are stated at the lower of their cost and net realisable value. Cost is calculated using the first-in first-out (FIFO) method. The cost of finished goods and work in progress consists of raw materials, direct wages, other direct costs and related indirect manufacturing costs (based on normal manufacturing capacity). Net realisable value is the estimated selling price in the normal course of business, less relevant variable selling costs.
| Inventories are broken down into the following items: |
2016 | 2015 |
|---|---|---|
| Raw materials and consumables | 373 | 289 |
| Products in process | 305 | 281 |
| Finished products and goods for resale | 1,571 | 1,361 |
| BS Total | 2,249 | 1,931 |
The cost of goods sold for the Group includes impairment of inventory, totalling SEK 24 million (21). No significant reversals of previous impairment charges were made in 2016 or 2015.
Trade receivables
Trade receivables are stated initially at fair value and thereafter in the amount that is expected to be received after individual assessment. A provision for decreases in the value of trade receivables is made when there is objective evidence that the Group will not be able to receive all amounts due according to the original terms of the receivable. Testing is conducted locally in the respective subsidiaries. The asset's carrying amount is reduced by use of a value impairment account, and the loss is recognised in the income statement under the item "Selling costs". Recoveries of previous impairment losses are credited to selling costs in the income statement. Since the Group consists of approximately 200 operating companies, the item trade receivables consists of many smaller amounts. The subsidiaries have close contact with their customers, and thus valuation of trade receivables rarely poses any difficulty. The risk is lower, and the subsidiaries can act quickly, if a customer does not pay in accordance with the terms and conditions. See also Note 2. Since Indutrade's trade receivables normally have a remaining term of less than six months, the carrying amount is considered to reflect the fair value.
| Trade receivables | 2016 | 2015 |
|---|---|---|
| Trade receivables not due | 1,704 | 1,494 |
| Trade receivables 0–3 months past due | 473 | 454 |
| Trade receivables 3–6 months past due | 43 | 39 |
| Trade receivables more than 6 months past due | 124 | 53 |
| Provision for impaired trade receivables | –52 | –45 |
| BS Total | 2,292 | 1,995 |
| Provision for impaired trade receivables | ||
| Provision for trade receivables, 0–3 months past due |
–4 | –5 |
| Provision for trade receivables, 3–6 months past due |
–2 | –6 |
| Provision for trade receivables, older than 6 months |
–46 | –34 |
| Total | –52 | –45 |
| Change in provision for impaired trade receivables during the year |
||
| Opening provision | –45 | –36 |
| Receivables written off as customer losses | 7 | 5 |
|---|---|---|
| Reversed, unutilised provisions | 6 | 6 |
| Provision for the year for impaired trade receivables |
–16 | –21 |
| Company acquisitions | –2 | 0 |
| Exchange rate differences | –2 | 1 |
| Closing provision | –52 | –45 |
For a description of risks associated with the Company's trade receivables, see Note 2.
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Prepaid rents | 19 | 20 | – | – |
| Prepaid insurance premiums | 11 | 11 | 0 | 0 |
| Other prepaid expenses | 93 | 68 | 6 | 5 |
| Accrued income | 15 | 12 | – | – |
| BS Total | 138 | 111 | 6 | 5 |
Loans are stated initially at fair value, net after deducting transaction costs. They are thereafter stated at amortised cost, and any difference between the amount received (net after transaction costs) and the repayment amount is stated in the income statement allocated over the duration of the loans using the effective interest method. Borrowings are classified as non-current liabilities unless the Group has an unconditional right to defer repayment by at least 12 months after the balance sheet date.
Indutrade normally uses an acquisition structure consisting of a base level of consideration and contingent consideration (earn-out payment). Contingent consideration is normally based on the projected earnings of the acquired company in the years immediately ahead. As per the date of the transaction, the contingent consideration is measured at fair value by estimating the present value of the likely outcome. The interest expense is thereafter allocated over the period up until the date of payment. Contingent consideration is remeasured at every reporting date. Excess or deficit amounts are booked as an expense or revenue in the income statement under other operating income/expense. Contingent consideration is reported as current if it is payable within 12 months from the balance sheet date.
IAS 17 defines a lease as an agreement whereby a lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time.
The Group leases certain non-current assets, mainly premises and cars.
Leases in which the Group in all essential respects accepts the financial risks and benefits associated with ownership are classified as finance leases. Otherwise, the lease is classified as an operating lease.
At the start of the lease period, finance leases are carried on the balance sheet at the lower of the leased asset's fair value and the present value of the minimum lease payments. Every lease payment is allocated between amortisation of the liability and financial expenses to achieve a fixed rate of interest for the reported liability. Corresponding payment obligations, after deducting financial expenses, are reported on the balance sheet under long-term and short-term borrowings. Non-current assets held under finance leases are depreciated during the shorter of the asset's useful life or lease period.
Assets leased under operating leases are not carried as assets on the consolidated balance sheet, and operating leases do not give rise to any liability. Lease payments are expensed on a linear basis over the lease period as operating expenses. See Note 9.
| Externally granted bank overdraft facilities amount to SEK 789 |
|---|
| million (798) for the Group and SEK 680 million (680) for the |
| Parent Company. |
Group Parent Company
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||
| Non-current Future leasing obligations for finance leases |
56 | 54 | 1 | 1 | |
| SEK-denominated loans with terms longer than 1 year |
1,808 | 800 | 1,800 | 800 | |
| EUR-denominated loans with terms longer than 1 year |
3 | 4 | – | – | |
| Loans in other currencies with terms longer than 1 year |
45 | 55 | – | – | |
| Contingent earn-out payments in SEK with payment due later than 1 year |
1 | 22 | – | 22 | |
| Contingent earn-out payments in EUR with payment due later than 1 year |
36 | 44 | – | – | |
| Contingent earn-out payments in other currencies with payment due later than 1 year |
44 | 26 | 6 | 9 | |
| BS | 1,993 | 1,005 | 1,807 | 832 | |
| Current | |||||
| Utilised bank overdraft facilities | 48 | 40 | 25 | – | |
| Future leasing obligations for finance leases |
43 | 35 | 1 | – | |
| SEK-denominated loans with terms shorter than 1 year |
1,5001) 1,5381) | 1,4991) | 1,5381) | ||
| EUR-denominated loans with terms shorter than 1 year |
0 | 201 | – | 201 | |
| Loans in other currencies with terms shorter than 1 year |
47 | 47 | – | – | |
| Contingent earn-out payments in SEK with payment due less than 1 year |
13 | 47 | 13 | 45 | |
| Contingent earn-out payments in EUR with payment due less than 1 year |
17 | 6 | – | – | |
| Contingent earn-out payments in other currencies with payment due less than 1 year |
182) | 1142) | – | 68 | |
| BS | 1,686 | 2,028 | 1,538 | 1,852 | |
| Total | 3,679 | 3,033 | 3,345 | 2,684 |
1) Of which, commercial paper SEK 1,499 million (1,038). 2) Of which, GBP corresponding to SEK 18 million.
Car leases are reported as finance leases in accordance with IFRS, entailing an increase in liabilities by SEK 99 million (89). Of the Group's long-term leasing obligations, SEK 33 million falls due for payment in 2018, SEK 21 million in 2019, and SEK 2 million in 2020 or later.
| SEK million | 2016 | 2015 | 2016 | 2015 |
|---|---|---|---|---|
| Maturity dates for long-term loans in SEK |
||||
| Maturity 2017 | – | – | ||
| Maturity 2018 | 801 | 800 | 800 | 800 |
| Maturity 2019 | 501 | – | 500 | – |
| Maturity 2020 | 1 | – | – | – |
| Maturity 2021 or later | 505 | – | 500 | – |
| Total long-term borrowings in SEK million |
1,808 | 800 | 1,800 | 800 |
Long-term loans in SEK carry variable rates of interest. The carrying amount corresponds to fair value. The Parent Company has entered into contracts to hedge part of its borrowing that is at variable interest rates to fixed interest rates. See Note 2.
| Group | Parent Company | |||
|---|---|---|---|---|
| EUR million | 2016 | 2015 | 2016 | 2015 |
| Maturity dates for long-term loans in EUR |
||||
| Maturity 2017 | 0 | – | ||
| Maturity 2018 | 0 | 0 | – | – |
| Maturity 2019 | 0 | 0 | – | – |
| Maturity 2020 | 0 | 0 | – | – |
| Maturity 2021 or later | 0.3 | 0.4 | – | – |
| Total long-term borrowings in EUR million |
0.3 | 0.4 | – | – |
| Corresponding amounts in SEK million |
3 | 4 | – | – |
Long-term loans in EUR carry variable rates of interest. The carrying amount corresponds to fair value.
| Group | Parent Company | |||
|---|---|---|---|---|
| SEK million | 2016 | 2015 | 2016 | 2015 |
| Maturity dates for long-term loans in other currencies |
||||
| Maturity 2017 | 26 | – | ||
| Maturity 2018 | 11 | 8 | – | – |
| Maturity 2019 | 10 | 8 | – | – |
| Maturity 2020 | 10 | 8 | – | – |
| Maturity 2021 or later | 14 | 5 | – | – |
| Total long-term borrowings in other currencies |
45 | 55 | – | – |
By other currencies is meant KRW, DKK, GBP and USD. The loans have both variable and fixed rates of interest. The difference between fair value and the carrying amount is negligible.
| Group | Parent Company | |||
|---|---|---|---|---|
| SEK million | 2016 | 2015 | 2016 | 2015 |
| Payment due for long-term contingent earn-out payments in SEK |
||||
| Payable in 2017 | 22 | 22 | ||
| Payable in 2018 | 1 | – | – | – |
| Total long-term contingent earn-out payments in SEK million |
1 | 22 | – | 22 |
The present value is calculated using an interest rate of 2%.
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| EUR million | 2016 | 2015 | 2016 | 2015 | |
| Payment due for long-term contingent earn-out payments in EUR |
|||||
| Payable in 2017 | 2.0 | – | |||
| Payable in 2018 | 2.9 | 2.6 | – | – | |
| Payable in 2019 | 0.3 | 0.2 | – | – | |
| Payable in 2020 | 0.6 | – | – | – | |
| Total long-term contingent earn-out payments in EUR million |
3.8 | 4.8 | – | – | |
| Corresponding amount in SEK million |
36 | 44 | – | – |
The present value is calculated using an interest rate of 2% for payments of SEK 7 million, an interest rate of 3% for payments of SEK 23 million, and an interest rate of 4% for payments of SEK 6 million.
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| SEK million | 2016 | 2015 | 2016 | 2015 | |
| Payment due for long-term contingent earn-out payments in other currencies: |
|||||
| Payable in 2017 | 26 | 9 | |||
| Payable in 2018 | 44 | – | 6 | – | |
| Total long-term contingent earn-out payments in other currencies |
44 | 26 | 6 | 9 |
By other currencies is meant NOK, GBP, KRW and MYR, of which NOK accounts for approximately SEK 6 million and GBP for SEK 36 million. The present value is calculated using an interest rate of 2%.
The Group has both defined benefit and defined contribution pension plans. A defined benefit pension plan is a pension plan that specifies a level of post-retirement benefits. The Group's defined benefit plans are both funded and unfunded. For funded plans, the assets have been detached (plan assets). A defined contribution pension plan is a pension plan to which the Group makes set contributions to a separate legal entity.
The liability carried on the balance sheet pertaining to defined benefit pension plans consists of the present value of the defined benefit obligations on the balance sheet date, less the fair value of the plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligations is calculated by discounting the anticipated future cash flows using the rate of interest for high quality corporate bonds in countries in which such a market exists (the Netherlands, the UK and Switzerland).
For calculations of defined benefit pension obligations in Sweden, the discount rate has been set in reference to the interest rate for mortgage bonds with a duration that corresponds to the average duration of the obligations. Indutrade has determined that a deep market for high quality corporate bonds exists in Sweden and is of the opinion that Swedish mortgage bonds issued by Swedish corporations in the financial sector are covered by the concept of corporate bonds. Based on the outstanding volume, turnover and number of issues in the mortgage bond market, it has been determined that a deep market exists for these bonds. Consequently, mortgage bonds have been used as a basis for the interest rate.
Actuarial gains and losses arising from experience-based adjustments and changes in actuarial assumptions are recognised directly in other comprehensive income after taking into account payroll tax and deferred tax.
Pension costs relating to service in current and past periods are recognised directly in profit or loss.
For defined contribution pension plans, the Group pays contributions to publicly or privately administered pension plans on a statutory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. Earnings are charged in pace with employees' earnings of the benefits.
Some of the Group's defined benefit pension obligations have been financed through payment of premiums to the insurance company Alecta. Since relevant information about these cannot be obtained from Alecta, these obligations are reported as a defined contribution plan.
In calculations of the liability on the balance sheet pertaining to defined benefit pension plans, various assumptions have been made, as shown in the table.
The Parent Company's pension obligation consists of an endowment insurance policy.
In accordance with IAS 19 Employee Benefits, actuaries commissioned by Indutrade have computed the Group's pension liability and the provisions to be made on a regular basis for pensions for the Group's employees.
The pension plans include retirement pensions, disability pensions and family pensions. Calculations are done individually and are based on the employee's salary, previously earned pension benefits and the anticipated remaining service period. Apart from the PRI plan in Sweden, the Group has defined benefit plans primarily in the Netherlands, Switzerland and the UK. Switzerland has a risk-sharing system for defined benefit plans in which the risk is split between the company and the employees. The plan in the UK was closed for new contributions in 2014.
| 2016 | 2015 | |
|---|---|---|
| PRI plan | 117 | 104 |
| Defined benefit plans, Netherlands, Switzerland and the UK |
137 | 126 |
| Total defined benefit plans | 254 | 230 |
| Other pension obligations | 27 | 25 |
| BS Total | 281 | 255 |
The Group's plan assets, totalling SEK 748 million (680), consist for Switzerland and the Netherlands of investments with insurance companies, mainly in government bonds, corporate bonds and interest rate derivatives. Plan assets in the UK consist of equities and equity funds, government and corporate bonds, and liquid assets. The pension liability is irrevocable.
The pension plans include retirement pensions, disability pensions and family pensions. Premiums are paid on a regular basis during the year to independent legal entities. The size of the pension premiums is based on the individual employee's salary, and the cost of the premium is recognised on a continuing basis through profit or loss.
According to a pronouncement from the Swedish Financial Reporting Board, retirement pension and family pension obligations secured through insurance with Alecta for salaried employees in Sweden are classified as multi-employer defined benefit plans. For 2016 Indutrade does not have access to such information that would make it possible to report this plan as a defined benefit plan, which is why the plan is reported as a defined contribution plan. Premiums paid during the year for pension plans with Alecta amounted to approximately SEK 20 million (18). Premiums for 2017 are expected to be in line with 2016. Alecta's collective funding ratio was 149% (153%) in December 2016.
| Group | 2016 | |||
|---|---|---|---|---|
| Assumptions in calculating pension obligations |
Sweden | Nether lands |
Switzer land |
UK |
| Discount rate, % | 2.55 | 1.90 | 0.80 | 2.90 |
| Future salary increases, % | 3.00 | 1.80 | 1.00 | – |
| Anticipated inflation, % | 1.50 | 1.80 | 0.50 | 3.50 |
| Future pension increases, % | 1.50 | 1.80 | 0.00 | 2.50 |
| Employee turnover, % | 2.00 | 1) | 1) | – |
1) Age-related
| 2015 | ||||
|---|---|---|---|---|
| Assumptions in calculating pension obligations |
Sweden | Nether lands |
Switzer land |
UK |
| Discount rate, % | 3.20 | 2.20 | 1.10 | 3.60 |
| Future salary increases, % | 3.05 | 2.50 | 1.00 | – |
| Anticipated inflation, % | 1.55 | 1.90 | 0.50 | 3.10 |
| Future pension increases, % | 1.55 | 1.80 | 0.00 | 2.40 |
| Employee turnover, % | 2.00 | 1) | 1) | – |
1) Age-related
| Duration, years | 2016 | 2015 |
|---|---|---|
| Sweden | 18 | 18 |
| Netherlands | 20 | 15 |
| Switzerland | 17 | 17 |
| UK | 16 | 14 |
| Impact on defined benefit obligation, SEK million |
Sweden | Nether lands |
Switzer land |
UK |
|---|---|---|---|---|
| Discount rate, increase by 1.00% | –16 | –72 | –53 | –11 |
| Discount rate, decrease by 1.00% | 21 | 97 | 71 | 11 |
| Salary increase of 1.00% | 14 | 9 | 9 | 0 |
continued
| Amounts reported on the balance sheet | 2016 | 2015 |
|---|---|---|
| Present value of funded obligations | 885 | 806 |
| Fair value of plan assets | –748 | –680 |
| 137 | 126 | |
| Present value of unfunded obligations | 117 | 104 |
| 117 | 104 | |
| Net liability, defined benefit plans, on balance sheet |
254 | 230 |
| Revaluation in other comprehensive income | ||
| Experience-based adjustments of defined benefit obligations |
–3 | –2 |
| Return on plan assets, excl. interest income | –25 | –11 |
| Demographic adjustments of defined benefit obligations |
–5 | –1 |
| Financial adjustments of defined benefit obligations |
48 | 19 |
| Total | 15 | 5 |
Actuarial gains and losses, including payroll taxes in Sweden, are recognised in other comprehensive income. At the end of the financial year, accumulated actuarial losses recognised in comprehensive income amounted to SEK 127 million (110).
| 2016 | 2015 | |
|---|---|---|
| Present value of pension obligations at start of year |
910 | 887 |
| Pension costs | 24 | 27 |
| Interest expenses | 17 | 19 |
| Employee contributions | 9 | 8 |
| Pension payments | –30 | –50 |
| Dissolution of pension liability | – | –5 |
| Actuarial gains (–)/losses (+) | 40 | 16 |
| Exchange rate differences | 32 | 8 |
| Present value of pension obligations at year-end |
1,002 | 910 |
| Plan assets at start of year | 680 | 669 |
| Interest income | 13 | 14 |
| Employee contributions | 10 | 10 |
| Company contributions | 20 | 18 |
| Pension payments | –26 | –45 |
| Dissolution of pension liability | – | –3 |
| Return on plan assets, excl. interest income | 25 | 11 |
| Exchange rate differences | 26 | 6 |
| Plan assets at year-end | 748 | 680 |
| Net liability at start of year | 230 | 218 |
| Net cost reported in the income statement | 28 | 32 |
| Pension payments | –5 | –7 |
| Company contributions | –20 | –18 |
| Dissolution of pension obligation | – | –2 |
| Actuarial gains (–)/losses (+) | 15 | 5 |
| Exchange rate differences in foreign plans | 6 | 2 |
| Net liability at year-end | 254 | 230 |
| Group | 2016 | 2015 | ||||
|---|---|---|---|---|---|---|
| Amounts reported in income statement | Defined benefit plans |
Defined contribu tion plans |
Total | Defined benefit plans |
Defined contribu tion plans |
Total |
| Current service cost | 24 | 196 | 220 | 27 | 173 | 200 |
| Interest on obligation | 17 | – | 17 | 19 | – | 19 |
| Return on plan assets | –13 | – | –13 | –14 | – | –14 |
| Net cost in income statement | 28 | 196 | 224 | 32 | 173 | 205 |
| Of which, included in selling costs | 24 | 144 | 168 | 27 | 132 | 159 |
| Of which, included in administrative expenses | 0 | 52 | 52 | 0 | 41 | 41 |
| Of which, included in financial items | 4 | – | 4 | 5 | – | 5 |
Anticipated company contributions to defined benefit pension plans in 2017 amount to SEK 20 million.
Other provisions
A provision is reported on the balance sheet when the Group has a formal or constructive obligation as a result of an event that has occurred and it is probable that an outflow of resources will be required to settle the obligation, and the amount has been calculated in a reliable manner.
Future obligations for guarantee commitments are based on outlays for similar costs during the financial year or calculated costs for the respective obligations.
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Guarantee commitments | 10 | 8 | – | – |
| Total long-term provisions |
10 | 8 | – | – |
| Guarantee commitments | |
|---|---|
| Opening balance, 1 January 2016 | 8 |
| Guarantee commitments in acquired companies |
1 |
| Change in guarantee commitments for the year |
1 |
| BS Closing balance, 31 December 2016 | 10 |
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Accrued vacation pay | 189 | 164 | 4 | 3 |
| Other payroll costs | 169 | 148 | 5 | 8 |
| Accrued social security costs |
72 | 68 | 3 | 4 |
| Customer bonuses and discounts |
26 | 22 | – | – |
| Accrued financial expenses | 3 | 4 | 3 | 3 |
| Other | 112 | 89 | 2 | 2 |
| BS Total | 571 | 495 | 17 | 20 |
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| For own liabilities: | ||||
| Real estate mortgages | 158 | 112 | – | – |
| Chattel mortgages | 18 | 113 | – | 1 |
| Assets subject to liens1) | 102 | 91 | – | – |
| Endowment insurance policies |
– | 1 | – | – |
| BS Total | 278 | 317 | 0 | 1 |
1) Car leases are reported as finance leases in accordance with IFRS, entailing an increase in assets, liabilities and pledged assets.
A contingent liability is recognised when a possible obligation arises from past events and whose existence will be confirmed only by the occurrence of one or more uncertain future events, or when an obligation currently exists that is not reported as a liability or provision because it is not probable that an outflow or resources will be required to settle the obligation.
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Contingent liabilities for subsidiaries' PRI liabilities |
– | – | 78 | 78 |
| Guarantees pledged for the benefit of subsidiaries |
– | – | 52 | 34 |
| Contingent liabilities for own PRI liabilities |
2 | 2 | – | – |
| Other contingent liabilities | 2 | 1 | – | – |
| BS Total | 4 | 3 | 130 | 112 |
Cash and cash equivalents include short-term investments with maturities of less than three months, and cash and bank balances. Drawn bank overdraft facilities are stated on the balance sheet under the item "Current interest-bearing liabilities".
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Cash and bank balances | 324 | 335 | 0 | 29 |
| Short-term investments | 8 | 4 | – | – |
| BS Total | 332 | 339 | 0 | 29 |
All of the shares were acquired in PECO Select Fasteners BV (Netherlands), Industri Verktøy AS (Norway), Senmatic A/S (Denmark), Beldam Crossley Ltd (UK), Fluid Controls Ltd (UK), Klokkerholm Karosseridele A/S (Denmark), KA Olsson & Gems AB (Sweden), Vacuum Engineering Services Ltd (UK), Crysberg A/S (Denmark), Alphr Technology Ltd (UK), and Scanmaskin Group (Sweden).
On 16 March Industri Verktøy AS (Norway) was acquired, with annual sales of SEK 40 million. The company supplies equipment for building in stone and concrete.
On 1 July KA Olsson & Gems AB (Sweden) was acquired, with annual sales of SEK 90 million. The company is a niche technology sales company with business in three segments: Tape & Glue, Films & Digital, and Display & Décor.
On 3 May Klokkerholm Karosseridele A/S (Denmark) was acquired, with annual sales of SEK 310 million. The company offers a wide range of spare parts to the automotive repair industry.
On 8 November Scanmaskin Group (Sweden) was acquired, with annual sales of SEK 120 million. The company manufactures floor grinding, surface finishing and polishing equipment.
On 18 March Senmatic A/S (Denmark) was acquired, with annual sales of SEK 150 million. The company manufactures a wide range of standard and customised sensors for measurement of temperature and relative humidity.
On 12 August Crysberg A/S (Denmark) was acquired, with annual sales of SEK 90 million. The company develops and manufactures electronic control solutions primarily for irrigation systems used in such areas as parks, sports facilities and golf courses.
On 8 January PECO Select Fasteners BV (Netherlands) was acquired, with annual sales of SEK 30 million. The company supplies special and customised fasteners to manufacturers of steel constructions within wind power, cranes, vessels and buildings.
On 1 April Beldam Crossley Ltd (UK) was acquired, with annual sales of SEK 80 million. The company manufactures packings, advanced plastic components and bearings.
On 6 April Fluid Controls Ltd (UK) was acquired, with annual sales of SEK 40 million. The company provides control and instrumentation solutions comprising valves, fittings and pressure regulators.
On 5 July Vacuum Engineering Services Ltd (UK) was acquired, with annual sales of SEK 100 million. The company manufactures leak detection equipment.
On 21 September Alphr Technology Ltd (UK) was acquired, with annual sales of SEK 80 million. The company designs and manufactures customised equipment for manual and automated production lines.
continued
Pertains to the impact on the 2016 income statement
| SEK million | Net sales | EBITA |
|---|---|---|
| Engineering & Equipment | – | – |
| Flow Technology | – | – |
| Fluids & Mechanical Solutions | 280 | 33 |
| Industrial Components | 164 | 16 |
| Measurement & Sensor Technology | 185 | 24 |
| Special Products | 314 | 51 |
| Effect on Group | 943 | 124 |
| Acquisitions completed in 2015 | 262 | 31 |
| Acquisitions completed in 2016 | 681 | 93 |
| Effect on Group | 943 | 124 |
If all of the acquired units had been consolidated as from 1 January 2016, net sales would have amounted to SEK 13,440 million, and EBITA would have totalled SEK 1,554 million.
| Preliminary purchase price allocation | SEK million |
|---|---|
| Purchase price, incl. contingent earn-out payments | |
| totalling SEK 72 million | 1,142 |
| Book value |
Fair value adjust ment |
Fair value |
|
|---|---|---|---|
| Acquired assets | |||
| Goodwill | – | 420 | 420 |
| Agencies, trademarks, customer relationships, licences, etc. |
24 | 405 | 429 |
| Property, plant and equipment | 168 | – | 168 |
| Financial assets | 17 | – | 17 |
| Inventories | 238 | – | 238 |
| Other current assets1) | 194 | – | 194 |
| Cash and cash equivalents | 82 | – | 82 |
| Deferred tax liability | –21 | –86 | –107 |
| Provisions incl. pension obligations | –1 | – | –1 |
| Other operating liabilities | –292 | – | –292 |
| Non-controlling interests | –6 | – | –6 |
| 403 | 739 | 1,142 |
1) Mainly trade receivables.
Since disclosures about the individual acquisitions are insignificant, they are provided here in aggregate form. The cost of customer relations and agencies has been valued at one-half to one year's gross profit and is reported on the balance sheet as
agencies, trademarks, customer relations, licences, etc. Agencies, customer relations, licences, etc. will be amortised over a period of 10 to 20 years, while trademarks are assumed to have indefinite useful life. Trademarks are included in the amount of SEK 16 million. Goodwill is justified by the good profitability and personnel included in the acquired companies. Indutrade normally uses an acquisition structure entailing a base level of consideration plus a contingent earn-out payment.
Initially, the contingent earn-out payments are valued at the present value of the likely outcome, which for the acquisitions made during the year amount to SEK 72 million. The contingent earn-out payments fall due for payment within four years and can amount to a maximum of SEK 74 million. If the conditions are not met, the outcome can be in the range of SEK 0–74 million.
Transaction costs for the acquisitions carried out during the year totalled SEK 8 million (6) and are included in Other operating expenses in the income statement. Contingent earn-out payments have been restated in the amount of SEK 32 million (7). The resulting income is reported in Other operating income in the income statement in the amount of SEK 31 million (7) and in net financial items in the amount of SEK 1 million (0).
The purchase price allocation calculation for EPE-Goldman BV, which was acquired in October 2015, has now been finalised. No significant adjustments have been made in the calculation. For other acquisitions, the purchase price allocation calculations are preliminary. Indutrade regards the calculations as preliminary during the time that uncertainty exists with respect to, for example, the outcome of guarantees in the acquisition agreements concerning inventories and trade receivables.
| Purchase price, incl. contingent earn-out payments | 1,142 |
|---|---|
| Purchase price not paid out | –64 |
| Cash and cash equivalents in acquired companies | –82 |
| Payments pertaining to previous years' acquisitions | 168 |
| Total effect on cash flow | 1,164 |
On 10 January Indutrade acquired RS Technics BV (Netherlands), with annual sales of SEK 20 million. The company develops and manufactures customer-specific sensors for measuring temperature, pressure and humidity.
On 19 January Indutrade acquired Sunflower Medical Ltd (UK), with annual sales of SEK 50 million. The company is a manufacturer of healthcare equipment.
On 13 February Indutrade acquired Ellard Ltd (UK), with annual sales of SEK 100 million. The company manufactures drives, motors and controls for doors and shutters, complemented with accessories.
On 13 March Indutrade acquired Türenfabrik Safenwil AG (Switzerland), with annual sales of SEK 70 million. The company manufactures various kinds of doors, such as interior and exterior doors, fire protection and security doors.
Preliminary purchase price allocation calculations will be presented in the first quarter interim report for 2017.
continued
All of the shares were acquired in Flowtec Industrietechnik GmbH (Austria), Adaero Precision Components Ltd (UK), Cepro International BV (Netherlands), Sepab Fordonsprodukter AB (Sweden), Filtration Ltd (UK), Combilent A/S (Denmark), Milltech Precision Engineering Ltd (UK), Geomek Stockholms Geomekaniska AB (Sweden), Relekta-gruppen (Norway), Professional Parts Sweden AB (Sweden), Trelawny SPT Ltd (UK), Fergin Sverige AB (Sweden) and EPE-Goldman BV (Netherlands).
On 14 April Geomek Stockholms Geomekaniska AB (Sweden) was acquired, with annual sales of SEK 140 million. Geomek markets and sells solutions, products and services in geotechnical surveying and the foundation drilling industry.
On 24 April Relekta-gruppen (Norway – Relekta AS, Norsk Industriolje AS and Relekta Service AS) was acquired, with annual sales of SEK 270 million. Relekta is a Norwegian technology sales company that supplies products for construction, repair and maintenance primarily for the construction industry, automotive workshops and general industry.
On 16 June Professional Parts Sweden AB (Sweden) was acquired, with annual sales of SEK 130 million. Proparts is a technology sales company that supplies replacement parts to the automobile aftermarket.
On 9 September Fergin Sverige AB (Sweden) was acquired, with annual sales of SEK 50 million. Fergin sells a wide range of encapsulated lighting fixtures for use in demanding environments.
On 22 January Sepab Fordonsprodukter AB (Sweden) was acquired, with annual sales of SEK 50 million. With focus on commercial vehicles, Sepab develops unique products for safety, national adaptation, efficiency and comfort.
On 12 March Combilent A/S (Denmark) was acquired, with annual sales of SEK 100 million. Combilent is a leading manufacturer of combiner systems and RF conditioning products for communication systems.
In early January 2015 the acquisition of Flowtec Industrietechnik GmbH (Austria) was completed, with annual sales of SEK 80 million. Flowtec is a technology sales company that sells industrial components to companies in Austria and Eastern Europe.
On 9 January Adaero Precision Components Ltd (UK) was acquired, with annual sales of SEK 50 million. Adaero manufactures customised, high precision industrial components.
Also on 9 January, Cepro International BV (Netherlands) was acquired, with annual sales of SEK 70 million. Cepro manufactures work station products for welding and grinding workshops.
On 6 March Filtration Ltd (UK) was acquired, with annual sales of SEK 30 million. Filtration sells high quality filters from leading manufacturers.
On 18 March Milltech Precision Engineering Ltd (UK) was acquired, with annual sales of SEK 45 million. Milltech conducts manufacturing and assembly of high precision components.
On 1 July Trelawny SPT Ltd (UK) was acquired, with annual sales of SEK 60 million. Trelawny manufactures and installs pneumatic tools and equipment for various types of surface treatment. On 2 October EPE-Goldman BV (Netherlands) was acquired, with annual sales of SEK 80 million. EPG supplies hydraulic products from leading manufacturers to industrial customers.
Pertains to the impact on the 2015 income statement
| SEK million | Net sales | EBITA |
|---|---|---|
| Engineering & Equipment | – | – |
| Flow Technology | – | – |
| Fluids & Mechanical Solutions | 152 | 30 |
| Industrial Components | 402 | 51 |
| Measurement & Sensor Technology | 100 | 3 |
| Special Products | 545 | 91 |
| Effect on Group | 1,199 | 175 |
| Acquisitions completed in 2014 | 401 | 67 |
| Acquisitions completed in 2015 | 798 | 108 |
| Effect on Group | 1,199 | 175 |
If all of the acquired units had been consolidated as from 1 January 2015, net sales for the year would have would have increased by SEK 311 million to SEK 12,192 million, and EBITA would have increased by SEK 40 million to SEK 1,467 million.
| Preliminary purchase price allocation | SEK million |
||
|---|---|---|---|
| totalling SEK 120 million | Purchase price, incl. contingent earn-out payments | ||
| Book value |
Fair value adjust ment |
Fair value |
|
| Acquired assets | |||
| Goodwill | 2 | 402 | 404 |
| Agencies, trademarks, customer relationships, licences, etc. |
5 | 377 | 382 |
| Property, plant and equipment | 83 | 3 | 86 |
| Financial assets | 1 | – | 1 |
| Inventories | 199 | – | 199 |
| Other current assets1) | 228 | – | 228 |
| Cash and cash equivalents | 79 | – | 79 |
| Deferred tax liability | –8 | –90 | –98 |
| Other operating liabilities | –305 | – | –305 |
| Non-controlling interests | –2 | – | –2 |
| 282 | 692 | 974 |
1) Mainly trade receivables.
Since disclosures about the individual acquisitions are insignificant, they are provided here in aggregate form. The cost of customer relations and agencies has been valued at one-half to one year's gross profit and is reported on the balance sheet as agencies, trademarks, customer relations, licences, etc. They will be amortised over a period of 10 to 20 years, with the exception of trademarks, which are assumed to have indefinite useful life. Trademarks are included in the amount of SEK 5 million. Goodwill is justified by the good profitability and personnel included in the acquired companies.
Indutrade normally uses an acquisition structure entailing a base level of consideration plus a contingent earn-out payment. The contingent earn-out payments are based on the earnings of the acquired companies during the years immediately ahead. Initially, the contingent earn-out payments are valued at the present value of the likely outcome, which for the acquisitions made during the year amount to SEK 120 million. The contingent earn-out payments fall due for payment within four years and can amount to a maximum of SEK 127 million. If the conditions are not met, the outcome can be in the range of SEK 0-127 million.
Transaction costs for the acquisitions carried out during the year totalled SEK 6 million (5) and are included in Other operating expenses in the income statement. Contingent earn-out payments have been restated in the amount of SEK 7 million (101). The resulting income is reported in Other operating income in the income statement in the amount of SEK 7 million (94) and in net financial items in the amount of SEK 0 million (7).
| Total effect on cash flow | 880 |
|---|---|
| Payments pertaining to previous years' acquisitions | 106 |
| Cash and cash equivalents in acquired companies | –79 |
| Purchase price not paid out | –121 |
| Purchase price, incl. contingent earn-out payments | 974 |
In January the operations of Tuupakan Sähkökeksus Oy, which was part of the Engineering & Equipment business area and had net sales of SEK 14 million, were divested. The sale generated a capital gain of SEK 1 million.
Intra-Group purchases and sales were only limited in extent. Investments with and borrowings from Group companies have been made on an arm's length basis.
The Indutrade Group's related parties consist mainly of senior executives. Disclosures of transactions with these related parties are provided in Note 7, Wages, salaries and other remuneration, and social security costs.
During the period January–March 2017 four company acquisitions were carried out. For further information, see Note 29.
In other respects, no significant events for the Group have occurred after the end of the reporting period.
Indutrade AB, reg. no. 556017-9367, is the Parent Company of the Group. The Company is a Swedish limited liability company with registered office in Stockholm, Sweden. Address:
Box 6044 SE-164 06 Kista Tel: +46 (0)8 703 03 00 Website: www.indutrade.com
The share capital of Indutrade AB as per 31 December 2015 consisted of 40,000,000 shares with a share quota value of SEK 1. A 2-for-1 bonus issue was carried out in May 2016, in which each existing share carried entitlement to two new shares. The share quota value increased from SEK 1 to SEK 2, the number of shares increased by 80,000,000, and the share capital increased by SEK 200 million. As per 31 December 2016 the share capital thus consisted of 120,000,000 shares with a share quota value of SEK 2, for a total of SEK 240 million.
At the Annual General Meeting on 26 April 2017, a dividend of SEK 3.20 per share will be proposed for the 2016 financial year, for a total of SEK 384 million. The proposed dividend has not been reported as a liability in these financial statements.
| Share premium reserve | 4 |
|---|---|
| Reserve for fair value | –11 |
| Retained earnings | 2,293 |
| Net profit for the year | 986 |
| Total | 3,272 |
The Board of Directors proposes the following distribution of earnings (SEK million)
| 3,272 |
|---|
| 2,888 |
| 384 |
The dividend proposed by the Board of Directors corresponds to 11% of the Parent Company's equity and 9% of the Group's equity. Indutrade's dividend policy is that the dividend shall, over time, amount to between 30% and 60% of net profit.
Against the backdrop of the anticipated trend in the economy, the Board is of the opinion that the proposed dividend is well balanced with respect to the goals, scope and risks of the operations and with respect to the ability to meet the Company's future obligations.
If the dividend had been paid out at year-end, the Group's equity ratio would have been 36%. After payment of the proposed dividend, it is judged that Indutrade will continue to have a favourable financial position.
The Board of Directors and President certify that the consolidated financial statements and annual report have been prepared in accordance with International Financial Reporting Standards (IFRS) and generally accepted accounting principles and give a true and fair presentation of the Group's and Parent Company's position and result of operations. The Directors' Report for the
Group and Parent Company gives a true and fair overview of the Group's and Parent Company's operations, position and result of operations and describes material risks and uncertainties facing the Parent Company and companies included in the Group.
The Group's and Parent Company's result of operations and position in general are shown in the preceding income statements, balance sheets, cash flow statements and notes.
Stockholm, 21 March 2017
Fredrik Lundberg Chairman of the Board
Bengt Kjell Vice Chairman of the Board Annica Bresky Director
Katarina Martinson Director
Ulf Lundahl Director
Krister Mellvé Director
Lars Pettersson Director
Johnny Alvarsson President and CEO, Director
Our audit report was submitted on 22 March 2017 PricewaterhouseCoopers AB
Michael Bengtsson Authorised Public Accountant
To the general meeting of the shareholders of Indutrade AB (publ), corporate identity number 556017-9367
We have audited the annual accounts and consolidated accounts of Indutrade AB (publ) for the year 2016, with the exception of the Corporate Governance Report on pages 32-41 of the printed version of this document. The annual accounts and consolidated accounts of the company are included on pages 20-79 in this document and appendix to note 17 Shares and participations.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the parent company as of 31 December 2016 and its financial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2016 and their financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. Our opinion does not cover the corporate governance report on pages 32–41. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the parent company and the group.
We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we considered areas where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.
Indutrade markets and sells components, systems and services with high-tech content in selected niches to the industry. The Group consists of 200 companies in 28 countries and has a clearly defined acquisition strategy. Since the stock market introduction
in 2005, the Group has grown, mainly through acquisitions, by 12 percent in average per year. The single largest company in the Group is HP Valves in the Netherlands. With the exception of this company the Group consists of individually small entities with respect to the Group as a total. The most significant balance sheet items are inventories and accounts receivables.
In order to ensure that we in our audit of the consolidated accounts have a common focus on important areas, and to ensure that we obtain a sufficient coverage of the Group's net sales, the Group audit team have assigned each subsidiary one out of five audit scopes. These scopes vary from no audit (nonsignificant subsidiary or no statutory audit obligation) to so called full audit which means interim audit procedures during fall with a focus on internal controls, review procedures as of September 30 and year-end audit procedures. Through this scope of our work we as Group auditors obtain enough coverage from subsidiaries in Group reporting scope when we issue this Auditor's report. In addition, local statutory audit procedures are performed for all legal entities within the Group subject to such requirements according to local law.
The strongly decentralized governance model adopted by Indutrade, means local management in the individual subsidiaries have important responsibilities in terms of establishing and maintaining proper internal controls. Within the Indutrade Group there is an annual process for self-assessment whereby the companies respond to an internal controls questionnaire. Answers are summarized and evaluated by the parent company's finance department and business area controllers. In addition, we perform as part of our audit a validation of selected questions in the self-assessment.
On Group level we audit areas such as impairment of goodwill, actuarial reports for significant pension plans and acquisition balances.
Our audit is carried out continuously during the year. In 2016, with respect to the interim reports for the third quarter and yearend, we reported our main observations to Group management and the Board of Directors. For the third quarter, we issued a public review report.
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters.
Inventories in the Group amount to SEK 2.2 billion as of December 31, 2016, which constitutes a significant item in the consolidated balance sheet where existence and valuation are important factors to consider. The obsolescence provisions are to some extent affected by management's judgments.
Refer to the Annual Report Note 19 – Inventories.
In our audit we have mapped and assessed the companies' inventory processes including routines for valuation and assessment of obsolescence in order to gain an understanding of risks and controls. We have also participated in stocktaking and performed audit procedures of pricing of articles in stock.
We have tested the obsolescence models in the subsidiaries against Indutrade's general accounting principles considering the company's operations, system support, inventory turnover and other relevant factors.
Based on our work, we had no material observations for the overall audit on Indutrade's valuation of inventory.
Accounts receivable amount to SEK 2.3 billion as of December 31, 2016 which constitutes a significant balance sheet item, where existence and valuation are important factors. Also in this case, there are elements of management's judgments in terms of impaired accounts receivable and assessment of credit risk. Based on this valuation of accounts receivable is considered a key audit matter in our audit.
Refer to the Annual Report Not 2 – Risk and risk management and note 20 – Trade receivables.
The sales process, covering controls related to credit assessment, follow-up and monitoring of receivables past due and valuation of impaired accounts receivable, is an important process to focus on in our audit. In connection with the year-end audit we have had a specific focus in our audit on provisions for impaired trade accounts receivable, where we need to assess the chosen model for provisioning and management's judgment with respect to significant credit risks or customers with payment difficulties. We have also performed tests over subsequent payments in order to confirm existence of accounts receivable.
Based on our work, we had no material observations for the overall audit on Indutrade's valuation of accounts receivable.
This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1-19 and page 83. The Board of Directors and the Managing Director are responsible for this other information.
Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.
If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company's and the group's ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intends to liquidate the company, to cease operations, or has no realistic alternative but to do so.
The Audit Committee shall, without prejudice to the Board of Director's responsibilities and tasks in general, among other things oversee the company's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.
A further description of our responsibility for the audit of the annual accounts and consolidated accounts is available on Revisorsnämndens website: www.revisorsinspektionen.se/rn/ showdocument/documents/rev_dok/revisors_ansvar.pdf. This description is part of the auditor's report.
In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Indutrade AB (publ) for the year 2016 and the proposed appropriations of the company's profit or loss.
We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.
We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and the group's type of operations, size and risks place on the size of the parent company's and the group's equity, consolidation requirements, liquidity and position in general.
The Board of Directors is responsible for the company's organization and the administration of the company's affairs. This includes among other things continuous assessment of the company's and the group's financial situation and ensuring that the company's organization is designed so that the accounting, management of assets and the company's financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors' guidelines and instructions and among other matters take measures that are necessary to fulfil the company's accounting in accordance with law and handle the management of assets in a reassuring manner.
Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:
Our objective concerning the audit of the proposed appropriations of the company's profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company's profit or loss are not in accordance with the Companies Act.
A further description of our responsibility for the audit of the administration is available on Revisorsnämndens website: www.revisorsinspektionen.se/rn/showdocument/documents/ rev_dok/revisors_ansvar.pdf. This description is part of the auditor's report.
The Board of Directors is responsible for the Corporate Governance Report on pages 32-41 of this document having been prepared in accordance with the Annual Accounts Act.
Our examination of the corporate governance report is conducted in accordance with FAR's auditing standard RevU 16 The auditor's examination of the corporate governance report. This means that our examination of the corporate governance report is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinions.
A corporate governance report has been prepared. Disclosures in accordance with Chapter 6, Section 6, the second paragraph, points 2-6 of the Annual Accounts Act and Chapter 7, Section 31, the second paragraph of the same law are consistent with the other parts of the annual accounts and consolidated accounts and are in accordance with the Annual Accounts Act.
Stockholm March 22, 2017 PricewaterhouseCoopers AB
Michael Bengtsson Authorized public accountant Partner in charge
The Annual General Meeting (AGM) will be held at 4 p.m. on Wednesday, 26 April 2017, at IVA Konferenscenter, Wallenberg room, Grev Turegatan 16, Stockholm.
To be entitled to participate in the AGM, shareholders must be listed in the shareholder register maintained by Euroclear Sweden AB on Thursday, 20 April 2017, and have notified the Company of their intention to participate by Thursday, 20 April 2017 at the latest.
Shareholders who have registered their shares in their own name with Euroclear are automatically entered in the shareholder register. Shareholders whose shares are registered in the names of a trustee must have their shares re-registered temporarily in their own names well in advance of 20 April to be eligible to participate in the AGM.
Notification of intention to attend the AGM can be made:
Notification must be received by the Company no later than Friday, 21 April 2017.
Shareholders may exercise their right to participate in the AGM through appointment of a proxy with power of attorney. Such power of attorney must be in writing and should be sent to the Company well in advance of the AGM at the above address. Proxies for legal entities must also submit a certified copy of a certificate of incorporation or corresponding authorisation document.
The dividend will be paid to shareholders who on the record date, 28 April 2017, are registered in the shareholder register. Provided that the AGM resolves in accordance with the Board's proposal, payment of the dividend is expected to be made via Euroclear Sweden on 4 May 2017.
1 January–31 March 2017 26 April 2017
1 January–30 June 2017 25 July 2017 1 January–30 September 2017 25 October 2017
CONTACT INFORMATION Indutrade AB, Box 6044, SE-164 06 Kista, Sweden Visitors address: Raseborgsgatan 9 Reg. no. 556017-9367 Tel: +46 (0)8 703 03 00, E-mail: [email protected], www.indutrade.se
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