Annual Report • Mar 18, 2010
Annual Report
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"One arm handstand, on a bench, on one of the highest peaks in the city. All, just rockin my Bjorn Borgs…"
Felix Chan, Canada
Some people want to show the whole world what they wear underneath. They want to be seen and challenge – with their jeans hung low. Others just like stylish design, high quality and great fit against their body.
It's an incredible mix of people with one thing in common. They really like our products. And they like to talk about them. Young girls and guys who have yearned for what we offer. Self-assured men and women with attitude. They appreciate the playfulness in our products – and don't want to be boring just because they have turned 30. They are the ones who have been loyal to Björn Borg all these years. And they always, always wear Björn Borg. Every day.
We are so proud of the faith they have shown in us and the passion they share for the brand. It inspires us to stay innovative and take Björn Borg further around the world.
5.00 21.7
Dividend of SEK 5.00 per share.
The operating margin was 21.7%.
Björn Borg is a Swedish company that owns and develops the Björn Borg brand. Fashion underwear is our core business and largest product area. We also offer adjacent products as well as footwear, bags, fragrances and eyewear. Björn Borg is currently represented in nearly 20 markets, the largest of which are the Netherlands and Sweden.
Björn Borg's operations comprise brand development, services for the network of licensees and distributors, and product development in the core businesses of underwear and adjacent products. The Group also manages distribution of these products in Sweden and the U.S.
Björn Borg's largest product group, underwear, has a strong foothold in established markets, and it is through underwear that Björn Borg is launched in new markets. With innovative product development, consistent marketing communications and efficient distribution, the potential is in place for a further expansion of the Björn Borg brand.
46
At year-end there were 46 Björn Borg stores, 10 of which were Group-owned.
Underwear 66% Adjacent products 5% Footwear 10% Licensed products 19%
1,976
Total brand sales increased to SEK 1,976 million.
The Björn Borg brand was established in the Swedish fashion market in the first half of the 1990s. Continuity has helped the brand to carve out a strong position in its established markets, particularly for its largest product group, underwear. In the last four years Björn Borg has expanded to several new markets, where the brand is in a start-up phase.
The brand is recognized for quality products and distinctive and innovative design. Our patterns and colors stand out, and a large variety of models creates an exciting product range. We are seen as a liberated Swedish brand of fashion underwear, which is underscored by our motto: Playful, Vibrant and Daring. A passion for underwear and the courage to challenge the industry is clearly evident in our marketing communications and product development. Our vision is to be The World Champion of Fashion Underwear.
Total brand sales, excluding VAT, increased slightly during the year to SEK 1,976 million (1,971).
In 2009 Björn Borg signed agreements to launch its products in four new markets – Italy, Greece, Portugal and Chile – through outside distributors.
A new distributor took over in the German market. The distribution agreement for England was terminated.
In the U.S. market the aim is to find an outside partner to further develop operations.
A total of three new Björn Borg franchised stores were opened during the year. The first franchised store in Sweden was opened in the fourth quarter. At year-end there were a total of 46 (44) Björn Borg stores, 10 (11) of which are Group-owned.
N ovember 2009 "This is a photo of my Dad and me in the -Sahara desert in -Morocco."
G annual report 2009
Emily and Ray, Cranston Canada
CHANGE AND PASSION. When 2009 began, we decided to adjust Björn Borg's direction going forward. We saw that the biggest potential to successfully develop the brand and company was by focusing on our largest product group, underwear. Making this change possible was our highest priority during the year. We are now prepared for the long-term growth that we have our sights on.
To achieve our goal of being the best in underwear and ensuring profitable growth, we identified three central areas where we need to be even better: innovative product development, creative marketing communications and efficient international distribution, including for the brand's other product groups. To strengthen these functions, we worked intensely during the year on improvements to our routines, skill sets and organization.
We feel that to grow in new and mature markets it is essential that we increase the pace of, and innovation in, our product development. During the year we devoted great energy to this, and the results can now be seen in a broader, stronger range of underwear. During the spring several new products will be launched that we have great confidence in, and more will follow in the fall. We are making an exciting and important investment in a new category, kids' underwear, where we offered a sneak preview during holiday 2009.
At the same time we have clarified our marketing communications with a new brand platform. The campaigns we are now working on are more closely tied to our products and our customers. In the Swedish Exports campaign we rolled out last year, customers were invited to submit photos of themselves wearing Björn Borg products anywhere in the world. Readers of this annual report can see many great examples of the images we received. This direct contact with our consumers is invaluable and typifies the strong connection many people have with the Björn Borg brand.
To ensure that we have the right representation in our markets and licensing agreements, we evaluated all of Björn Borg's distributors and product companies during the year. In addition to experience and an established network of contacts, our partners must have the resources to invest long-term in the brand. Just as importantly, they must share Björn Borg's values and have a passion for the brand. In the same way, we place high demands on ourselves. Björn Borg has to be a service organization that provides the best possible support to its partners in cultivating their markets.
One consequence of our focus on underwear was the decision to license out the footwear product area to an international shoe company, similar to what we have done with bags, fragrances and eyewear. With a strong partner with established product development and international distribution, we believe Björn Borg footwear will have the opportunity to develop better than within the Group, where we have other top priorities. And we are absolutely certain that there is good potential for our footwear to grow internationally.
Björn Borg has obviously been affected by the turbulence that pounded the market during the year and created uncertainty among distributors and retailers. But we still feel that 2009 was a good year for us, with brand sales and consolidated revenues in line with the previous year. There is continued uncertainty where our market is headed in 2010, even though we are also seeing cautious optimism in our own network and the market in general.
Regardless of the economy right now, we remain focused on our long-term development. When the new year began, we had implemented the changes we had hoped for in 2009. Now we are well-prepared for the brand's continued international expansion. We are concentrating the Group's energies on what we are best at. And we are doing it with a passionate, skilled group of employees and a strong network of outside distributors and licensees. We take a long-term approach, are decisive and are very proud of our growing brand.
Arthur Engel President
"We feel that to grow markets it is essential that we increase the pace of, and innovadevelopment."
Our vision is to utilize an innovative product offering and successful business model to become The World Champion of Fashion Underwear.
The Company will develop the Björn Borg brand primarily in fashion underwear.
The Board of Directors has established financial objectives for the period 2010–2014. Björn Borg will generate:
The long-term objective will be achieved by growing slightly below the average target in large markets and generating higher growth in smaller markets. At the beginning of the period sales growth could fall below the target, as several new markets are being added.
Surplus liquidity that is generated while taking into account the new financial objectives will be distributed gradually during the forecast period, starting in 2010.
Operating investments are estimated annually at 2–5 percent of net sales depending on whether any new Björn Borg stores are opened.
Brett Denney, USA
An annual dividend of at least 50 percent of net profit.
• For 2009 the Board of Directors has decided to propose that the Annual General Meeting approve a dividend of SEK 5.00 per share, corresponding to 155 percent of net profit.
Björn Borg will grow in new and recently established markets and further improve its strong position in established markets by:
The Björn Borg brand is the core of the Group's operations. The Group has developed the brand since 1997 on the basis of a license granting exclusive rights to manufacture, market and sell products under the Björn Borg name. In 2006 the Group acquired the Björn Borg trademark and obtained exclusive global rights to its use for all categories of products and services. By owning the trademark, the Björn Borg Group can operate from a position of strength internationally, at the same time that ownership provides long-term security to the entire network.
The Björn Borg trademark in its present form was registered in the late 1980s and established in the Swedish fashion market in the first half of the 1990s. New product areas and geographical markets have been established since then, and the Company has experienced stable growth in recent years.
Continuity has given the brand a distinctive identity and strong position in established markets in its dominant product area, underwear, while newer markets are in a start-up phase.
Today the brand increasingly stands on its own merits, distinct from Björn Borg as a person, and a growing number of consumers associate the name with the brand's products rather than Björn Borg himself. At the same time Björn Borg's legacy as a tennis player and his superstar status in large parts of the world still provide a strong platform for international expansion.
Björn Borg's positioning and all brand development, from design and product development to store layouts and marketing communications, are based on a distinctive brand platform. As part of the work with Björn Borg's new strategy and focus on underwear, this platform was further developed during the year.
The brand platform summarizes three concepts that form the essence of the Björn Borg brand:
Björn Borg's identity is that of a Swedish underwear brand with a playful, flirty approach. A Swedish Underwear Liberation is Björn Borg's mission.
Our products have historically been distinguished by lively colors and patterns – and still are.
At the same time Björn Borg is driven by a passion for underwear and fashion and a desire to constantly challenge and develop its own products and the industry.
Björn Borg tries to provide the best possible service to its distributors and licensees, which in turn commit to a specific level of marketing investment in each market. The aim is to create opportunities for them to develop successfully and at the same time ensure coherent development of the branding.
Support for distributors and licensees includes both guidelines to create uniform, consistent branding and the tools to implement them. In 2009 work with support services was intensified. Clearer, more structured advice and supporting material have been produced for distributors to use in branding work in their markets, which includes campaigns, PR activities, media mix and store displays. They are packaged to suit the various needs of new and well-established markets. Björn Borg's support for licensees and distributors' licensees comprises several areas:
The Company showcases the Björn Borg brand through innovative marketing activities that focus on the product. The strategy is designed to consistently reinforce the brand and drive sales long-term. To achieve cost efficiencies and a broader impact, the Group focuses on integrated campaigns and activities that utilize multiple channels such as the web site, social media, outdoor advertising, PR and fashion shows.
During the year thousands of photos of customers wearing Björn Borg underwear streamed in. The reason was the Swedish Exports campaign that Björn Borg launched in late 2008 and was intensified in 2009, which called for submissions from people wearing our Swedish underwear anywhere in the world. The images were published on the web site and used in stores and other marketing communications.
The response has been fantastic. In a playful way the campaign has created a valuable contact with Björn Borg's consumers – the very best ambassadors for the brand. The campaign continues and fantastic images keep arriving at Björn Borg.
Björn Borg's web site is an important channel for international branding and to communicate with target audiences. Interactive campaigns that get visitors to participate create a sense of belonging and increase traffic to the site. The design and content of the campaigns are integrated with marketing communications in other channels – in stores, advertising, PR and events – to achieve greater impact. The web campaigns in 2009 generated a positive response and attention from the media, at the same time that traffic to the site increased. The web site also plays an important role in driving sales, partly through in-store purchase offers and partly by selling underwear in the web shop, which has been open in every market since 2009.
PR activities and events are an important component in the mix of channels used in Björn Borg's integrated campaigns. Background material and guidelines are produced centrally as part of the marketing packages that distributors have access to, while detailed planning and implementation are handled in each market. Participation in international fashion shows, private showings and related events have also been crucial in positioning and strengthening the brand.
During the year mobile changing rooms were set up to let people change into a pair of Björn Borg underwear and be photographed for our Swedish Exports campaign. The changing rooms were placed in busy public locations and proved very popular. Many people wanted to be immortalized – and take home the underwear as thanks. The images were published on Björn Borg's web site.
Björn Borg stores continue to fill an important function as a marketing channel and to display the brand. A new retail concept created during the year will initially be launched in a store in Stockholm in March 2010. The purpose of the concept is to showcase underwear, although other product groups will continue to be sold to some extent in most Björn Borg stores.
Social media have taken on a greater role in reaching Björn Borg's younger target groups. An important aim is to closely monitor the rapid changes in this area and adapt communications accordingly. Today Björn Borg has a blog on its web site, which it hopes to further develop into an independent channel with more active visitors. The brand is also represented on Facebook groups in various markets, as well as on Twitter and Flickr. The brand's presence in social media will be further intensified, including through investments in Facebook.
The brand has an especially strong position in men's underwear. In its established markets, the Company is confident that Björn Borg can be considered a market leader in its dominant product area, underwear, in terms of quality and design. Nina Ricci Burberry
In underwear, Björn Borg competes with well-known international brands such as Calvin Klein, Hugo Boss and H&M, but also with smaller, local players. Competition in underwear is generally expected to grow as more major fashion brands such as Diesel and Puma introduce their own underwear collections and new companies enter the market.
Underwear is increasingly considered a fashion item, especially among younger target groups, with buying patterns similar to other fashion products. It is displayed and sold not only in separate underwear departments, but also in fashion boutiques alongside trendy items. This means that to meet customer demand, underwear manufacturers have to stay on top of fashion trends and introduce new items.
Innovative and responsive product development is a critical success factor in the focus on underwear that Björn Borg decided on in 2009. Björn Borg is characterized by creative products with the brand's typical playful and colorful identity, but to consolidate its strong position the product range will have to be further improved and broadened at the same time that the pace of product development will have to be accelerated.
During the year the product development unit for underwear was strengthened in terms of its organization and expertise as well as in the way it works in order to raise the tempo and creativity in its design work. Among other things, an experienced product manager was hired for underwear and the design department was expanded through the addition of more designers.
In other categories as well, every detail of the products and every collection must express the values synonymous with the brand. Björn Borg explains the product range's positioning in the trend and design information provided to licensees in the network prior to each season. In 2009 Björn Borg hired a chief designer for all product groups to ensure uniform brand development throughout the entire product range.
In its core business, underwear, Björn Borg's aim is to create a broader range with more products in various categories, from popular basics to trendy, bolder models in playful colors, patterns and materials. This is becoming increasingly important as the brand expands to more markets with somewhat different preferences.
In addition, Björn Borg will increase the number of new items in its men's and women's collections each season to meet the demand from these target groups for exciting new fashions and to create greater interest in the product range and the brand.
Another aim in product development is to expand the product range into new categories, as Björn Borg did during the year in the children's segment and athletic underwear.
During the holiday 2009 shopping season Björn Borg offered a sneak preview in Sweden of a collection of boys' underwear. Björn Borg is confident that a specially designed kid's line for both girls and boys will serve as an excellent complement to its other categories and create opportunities for growth in both new and established markets. The kid's collections will be widely launched during the second quarter of 2010 with a campaign which will donate a share of sales to the Mathare Youth Sports Association, a self-help program to help children and young adults in the slums of Nairobi, Kenya through team sports and environmental cleanups. For every pair of underwear sold from the kid's collection, 1 euro will be donated to the organization.
The focus in product development shifted during the year to the women's line, which was felt to be in greater need of a facelift than the men's. A broader women's collection was offered during the second half of 2009 and was positively received by distributors. Among other things, a new line of underwear basics in a variety of colors, Love All, was launched for consumers in mid-February 2010, with marketing activities in stores, online and using outdoor advertising. In fall 2010 the product range will be further expanded to include constructed bras, with an emphasis on fit and quality.
In 2010 the men's line will be updated as well, with new products in several models. Basics are more important to the men's line than the women's, but a steady flow of new items is crucial in every segment to create interest in the brand and maintain its position as a market leader in fashion underwear.
Björn Borg originally started out with high-quality underwear in bright colors and unique patterns. The women's models that followed were designed in the same style and also proved to be a success. As it now accelerates its product development, Björn Borg remains true to its heritage, but is trying to be a little more feminine in its girl's models and even more striking throughout the collection. More new products and more models in flirty, colorful styles is the goal.
"There's a lot we want to and can do in underwear. It's what we're best at! We see that there is a demand for exciting new products, and we want to meet it," said Malin Wåhlstedt, who was hired as head of underwear at Björn Borg in spring 2009 with the task of accelerating product development.
"The goal is to fine-tune the whole collection, add new styles and categories, and get new products to market faster."
"Björn Borg stands for something a lot of people appreciate: whimsical, eye-catching design, coupled with high quality. The goal is to fine-tune the whole collection, add new styles and categories, and get new products to market faster. We want to be the best in basics as well as that little something special and trendy," she continued.
The product is the key to the business, and an appealing product range is critical to expanding the brand, as the Group hopes to do. Innovative, responsive product development is therefore considered by far to be one of the most important factors to realize the Company's vision to be The World Champion of Fashion Underwear.
"We have a fantastic foundation in the brand's strong identity. Despite growing competition, we still have something of a unique position with our characteristic patterns and bold colors. There is a demand for our somewhat playful style even outside our large, young target group," said Malin Wåhlstedt.
Women's products were the highest priority in product development during the past year, resulting in new models and materials. Girls are also the ones who are the most interested in what's new and fashionable, as well as in quality and fit, according to Malin Wåhlstedt.
"If you want to generalize, most guys stick to the models they like best, but maybe in different colors and patterns, while girls shop between brands and are more likely to try something new. This places tough demands on us to meet their needs and keep them as customers," she said.
Björn Borg will ensure this through a number of new models that reach customers in fall 2010. The trend in girl's underwear is shifting from a unisex-oriented fashion to a more feminine style in its details and material.
"We will now also offer constructed bras and more advanced models. At the same time we are maintaining the bold expressions that are Björn Borg's hallmark. With this combination, we can fill a hole in our segment of the market."
Product development was intensified in the men's segment as well, resulting in a number of new products set for launch in 2010. Among other things, classic boxer shorts are making a comeback in an updated version and a new sports-inspired collection has just landed on the shelves. More new items are promised this fall.
"Björn Borg feels that there is a strong interest in new products in all our markets, which is great. That's why we listen carefully to customers as well as distributors to stay tuned to our markets, which are growing in number. Even the small ones will be big in the future," Malin Wåhlstedt stressed.
One challenge in 2010 is to take further steps to create a greener collection. Björn Borg has identified several areas that can be made more environmentally friendly and is working step by step with them. For example, all packaging in the spring collections has been replaced with greener alternatives.
The fast pace in all aspects of product development is evidence of Björn Borg's determination to stay on top in its specialty, fashion underwear. With Björn Borg's long-term focus and resources, coupled with the passion and skill of its employees and in the network, there is every opportunity to secure a place as a champion.
The Group's substantial growth and high profitability in recent years – and its success in positioning the Björn Borg brand – has been achieved largely thanks to its business model. The model facilitates expansion geographically and in terms of product range with limited operational risk and capital investment, while retaining control over the brand.
Björn Borg's business model utilizes a network of product companies and distributors which are either part of the Group or independent companies and have been granted licenses to one or more product areas or geographical markets. The network also includes Björn Borg stores operated by the Group or as independent franchisees.
By utilizing its own network as well as independent companies, Björn Borg can be involved in every part of the value chain and develop the brand internationally with a compact organization and minimal financial investment and risks. The business model requires little capital investment by the Company, since the distributors in the network are responsible for marketing, including investments and inventory. The model generates substantial consumer sales with limited risk and investment for Björn Borg. The Company owns the strategically important companies in the network.
Another positive effect of the business model and the network's use of a number of independent distributors is that the competence and local expertise of these enterprising entrepreneurs can be put to use. In 2009 the criteria for distributors in each geographical market were revised following the Groups' decision to focus on underwear. Björn Borg's partners in the network must be established players with experience in underwear and fast-moving consumer goods rather than fashion, and they must have an extensive distribution network in their local market and the resources for longterm investments.
Consolidated, wholly owned companies generating revenue and earnings.
Licensees, outside distributors and franchised Björn Borg stores whose sales generate royalties or other types of revenue for Björn Borg.
Companies outside the network.
Björn Borg provides specialized expertise in brand building and management. It is responsible for the development of the Björn Borg brand and for implementing the brand strategy and ensuring compliance within the network. At the same time the aim, as a service organization, is to create the best possible opportunities for distributors to successfully manage operations in their markets. This is done through guidelines and various packages for companies in the network, covering marketing activities, displays and graphic identity material, among other things. This ensures consistency in branding work and is efficient for distributors.
In a network encompassing both the Group's own entities and independent companies, tight control over the brand is essential. With the exception of production, which is handled outside the Group, Björn Borg has its own operations at every level from product development to distribution and consumer sales. This gives it the best chance of ensuring the further development and correct positioning of the Björn Borg brand. Since it owns the Björn Borg trademark as of December 2006, the Group is responsible for ensuring that proper trademark registration and protection are in place.
Underwear from Björn Borg is often prominently displayed in department stores, major retail chains and fashion boutiques. From wellstocked stands, these products attract the attention of customers with their distinctive patterns and bold colors. The design of the packaging ensures that the brand is quickly recognized. Björn Borg offers stores flexible display solutions for small spaces, along with fast service and replenishment. This facilitates sales at the retail level – a strong sales argument for Björn Borg's distributors.
The product companies for the largest product area, underwear, and for adjacent products are wholly owned by the Group. The areas for bags, eyewear and fragrances are licensed to outside product companies, while footwear is scheduled to be licensed out in 2010. In addition, the Dutch distributor is the licensee for the Dutch womenswear collection.
The product companies, both Group-owned and independent, are specialists in their respective areas. They are responsible for the design and development of collections for every market, and position different products based on Björn Borg's guidelines. The collections are displayed and sold to distributors in the various geographical markets for further sale to retailers. The product companies also play a supporting role for distributors and retailers in the network. Aside from underwear, the Group-owned product company for underwear and adjacent products comprises socks, swimwear and a men's collection of casual apparel. All design and product development are done by the Group-owned company, while production is handled by outside suppliers, primarily in China and to a lesser extent in Europe. High demands are placed on quality and reliability relative to price, and the performance of suppliers is continuously evaluated.
In both production and logistics, Björn Borg tries to increase flexibility and efficiency, two factors that have grown in importance in recent years in pace with demand for a more responsive supply chain and the ability to adapt production to shifting fashions. The Company also looks for suppliers that can guarantee that Björn Borg's guidelines on working conditions and the environment are met. Read more about Björn Borg's corporate responsibility and environmental work on page 26.
As a consequence of its focus on underwear, the Group has decided to license out product development and portions of sales in the footwear product area. In February 2010 a letter of intent was signed with Trend Design Group, a wellestablished production company and wholesaler of men's and women's footwear with distribution in large parts of Europe as well as North America and Australia. The aim is to utilize a strong international partner to further increase the growth in footwear.
Distribution to retailers is normally handled by distributors with established supply chains and experience in underwear or fast-moving consumer goods, which are granted a license to use the trademark in the marketing and sale of Björn Borg products in various geographical markets. Distributors sell and distribute the products to retailers by building the brand regionally through their sales force. They are responsible for purchasing, sales support, inventory, regional marketing, media planning and training. Björn Borg provides them with support in the form of joint marketing and PR campaigns, among other activities.
The agreements with distributors, which were revised in 2009, run for four years. The distributors commit to specific targets in terms of sales and investments in their markets, and Björn Borg can, if they do not meet predetermined requirements, terminate the agreement.
The challenge for distributors, in the face of tight competition, is to establish and maintain their position as a supplier to chains and department stores as well as independent retailers. Success factors include a high level of service in the form of fast replenishment of popular products, attractive promotional materials and effective marketing activities. The ability to contribute to higher retail sales through such measures is considered a key success factor.
Marketing and sales feedback from distributors to Björn Borg and the product companies is an important element in order to continuously develop and fine-tune the collections and marketing activities. Four times a year the Company brings together all its distributors to showcase its new collections and marketing materials as well as discuss strategies, campaigns and planning, in addition to which an open dialogue is maintained on developments in each market. The close cooperation in the network is important to the successful expansion of the brand.
Distributors pay a royalty to the Group based on a percentage of their sales to retailers. Björn Borg owns the distributors for underwear and adjacent products in Sweden and the U.S. After licensing out the footwear product area, however, Björn Borg will still be responsible for distribution of shoes in Sweden as well as in Finland.
Björn Borg products are sold at the retail level through department stores, chains and independent retailers, as well as through Group-owned and franchised Björn Borg stores and factory outlets. This mix creates the right positioning in the upper mid-price segment while generating high sales volume.
The large network of outside retailers represents an important interface with consumers. In all, around 4,600 retailers sell Björn Borg underwear and adjacent products, including 900 in Sweden, 1,500 in the Netherlands, 800 in Denmark and 400 in Norway. In smaller markets, around 1,000 retailers sell these products. Licensed products are sold through a total of around 6,000 retailers, about half of which are in Sweden.
Chains and department stores – some with shop-in-shops – are gradually increasing in importance to the sale of Björn Borg products, while independent retailers are shrinking in number. For the Company, this offers a more efficient sellingin process and leads to greater exposure in areas with high customer turnover.
Björn Borg stores are important to the brand's exposure, marketing and direct contacts with consumers. At the same time they are a valuable source of sales. Björn Borg stores are either wholly owned or franchised. The network also includes four factory outlets, two of which are run by Björn Borg in Sweden. The ten Group-owned Björn Borg's stores are located in Stockholm, Göteborg, Malmö and Linköping. The 36 franchised stores are in the Netherlands, Norway, Finland, Belgium, Spain and Sweden, where the first franchised Björn Borg store was opened in Helsingborg in late 2009.
| Björn Borg stores | Group-owned | Franchises |
|---|---|---|
| Sweden | 10 | 1 |
| Netherlands | – | 30 |
| Norway | – | 2 |
| Finland | – | 1 |
| Belgium | – | 1 |
| Spain | – | 1 |
| Total | 10 | 36 |
A sales channel of growing importance to Björn Borg is e-commerce through the web site www.bjornborg.com. During the year Björn Borg expanded its web shop to handle sales of underwear, in part by hiring an internationally experienced e-commerce manager. Sales rose after e-commerce was introduced in all of Björn Borg markets in early 2009. With a newly developed platform scheduled for launch in the late spring 2010, there is an opportunity to further grow online sales. In established markets, the web shop offers even greater accessibility and service for customers, while e-commerce in newer markets is an important complement since the number of retailers is still limited. The market that accounts for the largest share of online sales is currently the U.S. 2602 C 206 C 312 C 293 C
BRAND SALES BY RETAILER CATEGORY
March 2009 "I have 25 differe nt b oxers" Norway october 2009 Ellicottville, NY Summer 2009 The Ski Hill Rainer and Patrick . Rainer Noack
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20
Underwear is Björn Borg's largest product area, comprising men's and women's underwear, socks and swimwear. The range consists of trendy and fashionable products with the brand's characteristic patterns and colors, as well as a basics line with classic models. The men's collection accounts for about 70 percent of underwear sales.
Sales are made through independent retailers, retail chains, department stores, online and Björn Borg stores. The product company for underwear is owned and operated by the Björn Borg Group.
Brand sales for underwear rose by slightly over 2 percent in 2009 to SEK 1,310 million. Sales in the largest market, the Netherlands, increased by 6 percent. Sweden, Norway and Denmark reported lower sales than the previous year, while several smaller markets noted strong growth during the year.
Björn Borg offers a men's collection of coordinated sporty basics in casual models, including polos, T-shirts, tank tops, shorts, pajamas and robes. They are sold in Björn Borg stores and through a number of retailers, mainly in Sweden and the Netherlands. The distributor in the Netherlands manufactures a clothing collection for women on a licensing basis; see Licensed products.
Brand sales for adjacent products rose by 3 percent during 2009, and amounted to 99 MSEK.
The footwear product area offers a range of fashion products and timeless classics such as men's and women's casual shoes. In recent years footwear operations have expanded internationally to several of Björn Borg's markets. Sales in Denmark and the Netherlands began in 2007 and rose strongly in 2008–2009. Shoes are sold through independent footwear retailers, footwear chains and department stores.
The product company for footwear was owned and operated by the Björn Borg Group in 2009. As a consequence of the Group's focus on underwear, a letter of intent was signed in February 2010 to license out product development and portions of sales in the product area.
Brand sales in the footwear product area amounted to SEK 204 million during the year, an increase of 23 percent compared to 2008. Growth came primarily from a substantial increase in the Netherlands during the first quarter of the year. In total for 2009 the Netherlands grew by 45 percent to SEK 98 million. Sales in Sweden rose by 22 percent, from SEK 68 million to SEK 84 million. Denmark also reported growth, though from a low level. In Norway and Finland, footwear sales decreased compared to 2008.
The product area for bags falls in the fashion/trend segment and comprises handbags, wallets, gloves and belts. Bags are sold in Björn Borg's established markets in Europe, of which Sweden and the Netherlands are the largest. Bags are sold through luggage and sporting goods shops, retail chains, department stores and Björn Borg stores.
Björn Borg eyeglass frames belong to the trendy segment of the market and are sold to retailers through the licensee's distribution organization. A line of sunglasses is sold to other categories of retailers such as fashion boutiques, department stores and Björn Borg stores. Sweden and the Netherlands are the largest markets for eyewear.
The product area offers a range of fragrances and skincare products for men and women in two lines: Advantage for both sexes, and Björn Borg Off Course, a line of fragrances and skincare products for men. The largest markets are Sweden and Norway. Sales are currently made through major cosmetic chains such as Kicks and department stores such as Åhléns and NK, as well as through independent retailers and Björn Borg stores.
The independent distributor in the Netherlands manufactures and sells a clothing collection for women on a licensing basis in the Dutch market. The clothing is sold through Björn Borg stores, independent fashion boutiques and department stores.
Total brand sales of licensed products amounted to SEK 364 million in 2009, a drop of 15 percent compared to 2008. For bags, the decrease was 3 percent, while eyewear and fragrances reported declines of 9 percent and 13 percent, respectively. Sales of the licensed women's collection in the Netherlands fell by 25 percent during the year.
Björn Borg is currently represented in a total of 18 markets, of which the Netherlands, Sweden, Norway and Denmark are the largest. Smaller markets include Finland, Belgium and Hungary, as well as a number of markets where the brand has been introduced in the last four years: Austria, Canada, Chile, England, France, Germany, Greece, Italy, Portugal, Spain and the U.S.
The Björn Borg trademark was registered in Sweden in 1989 and established in the Swedish apparel market in the first half of the 1990s. In 1994 the first Björn Borg store opened in Stockholm. Today Sweden accounts for 23 percent of total brand sales. Björn Borg products are sold through retailers around the country as well as in Björn Borg stores. Today Björn Borg has broad distribution in the Swedish market. Further expansion will be achieved selectively, although new product categories such as kid's underwear will attract new retailers. Brand sales in Sweden amounted to approximately SEK 460 million in 2009, a decrease of 3 percent compared to the previous year.
The Netherlands was the largest market for the Björn Borg brand in 2009, with 43 percent of total brand sales. Operations in the country date back to 1993, and the brand quickly established a position in the Dutch market through growing volumes and a broad-based presence. Björn Borg products are sold through retailers and in franchised stores. Brand sales in the Netherlands fell by 1 percent compared to 2008 to SEK 846 million.
Björn Borg was launched in Denmark in 1992, and today it accounts for 11 percent of total brand sales. In the Danish market, Björn Borg products are sold exclusively through retailers. There are currently no Björn Borg stores in Denmark. In 2009 brand sales in Denmark totaled approximately SEK 226 million, a decrease of 8 percent compared to 2008.
The brand was launched in the Norwegian market in the early 1990s. Norway today accounts for 11 percent of total brand sales. Products are sold through retailers around the country and two Björn Borg stores in Oslo. In Norway, brand sales totaled approximately SEK 207 million in 2009, a decrease of 15 percent compared to the previous year.
In 2009 brand sales increased in Björn Borg's smaller markets by 52 percent, from SEK 155 million to SEK 237 million. Of the total sales of Björn Borg products during the year, these smaller markets together accounted for 12 percent.
Finland, Belgium and Hungary are markets where the Björn Borg brand was established during the second half of the 1990s. Operations are managed by local distributors. In Finland and Belgium, underwear is the dominant product area, while in Hungary it is bags. There are two Björn Borg stores in these countries, in Antwerp and Helsinki. Belgium continued to grow in 2009, while brand sales in Finland and Hungary dropped slightly.
In 2006 Björn Borg expanded its operations to England. The launch took place at the department store Selfridges in London. Distribution has since been broadened to include several other well-known retailers, including the department stores Harvey Nichols and Harrods, which are important to the continued international expansion. Brand sales in England continued to rise during the year. In August 2009 the agreement with the British distributors was terminated, and the intent is to find a new partner.
In 2009 Björn Borg reached agreement with a new, experienced distributor for the German market after the previous one was terminated. Operations were restarted in fall 2009 and brand sales rose for the year.
Björn Borg signed an agreement with a new distributor in 2007 to introduce the brand in Spain. Consumer sales began in 2008. Björn Borg products are currently sold through a growing number of retailers in the country. In 2009 sales continued to rise in Spain.
Björn Borg decided during the year to seek out a partnership arrangement with less risk to further develop its U.S. operations and has therefore dissolved the large part of its organization in the country. Deliveries continue to retailers in the country, including the department store chain Nordstroms. Discussions are being held with local players on possible cooperations to achieve sustainable, profitable growth in the U.S.
In Canada, Björn Borg launched its sales on a limited scale in late 2008 through an external distributor.
Björn Borg has operated on a limited scale through an external distributor in Austria since 2007. The cooperation and potential for further operations in the country are being evaluated.
Sales of Björn Borg products continue on a small scale in France after the agreement with the previous distributor was terminated in 2009. The aim is to find a new partner for the French market.
In early 2009 agreements were signed with external distributors to launch Björn Borg in Italy and Greece. Both distributors have experience in fashion brands with sales methods similar to Björn Borg's. They each have a broad network of contacts in their markets and the resources to invest in the brand. Sales began in fall 2009.
In fall 2009, agreements were signed with external distributors to launch Björn Borg in Portugal and Chile. The launch is scheduled in spring 2010.
Björn Borg is a Swedish company operating in an international market. Taking responsibility for its impact on people and the environment is one of Björn Borg's core values and is central to cooperations in the Group's broad-based network of product companies and distributors. Active corporate responsibility is obviously important from an overall ethical perspective, but is also vital to make employees and partners, as well as consumers, feel secure in knowing that Björn Borg's operations and products are safe and that the Company takes responsibility for these aspects of its business.
Björn Borg's aim is to gradually increase its work on corporate responsibility and environmental issues, as well as information on its efforts in these areas. By openly and honestly reporting and responding to questions on the corporate responsibility work conducted by the Group, improvement areas and what its aims are going forward, the hope is to address the growing interest in these issues from employees, consumers, the public, partners, organizations and the financial market.
The values that guide us at Björn Borg will lead to an approach that is Open, Innovative, Passionate, Business Smart and Responsible both internally and externally, in interactions with customers as well as in relationships with suppliers and in developing operations.
Openness, innovation, passion and responsibility guide our work with corporate responsibility and environmental concerns. We are committed to incorporating these issues into day-to-day operations and the manufacture of our products.
Since 2007 the Group has had a unit responsible for sustainability issues. To increasingly incorporate sustainability throughout operations, the cooperation between the Group's various functions and with product companies has been expanded. The aim is to increase knowledge and understanding of these issues in the organization and in the network. During the year training was provided on the EU's REACH regulation on chemicals and their safe use for all employees in product development and for licensees.
Björn Borg relies on suppliers overwhelmingly in China and to a lesser extent in Europe. The Group maintains a close cooperation with its suppliers and in many cases has longstanding relationships, especially in its largest product area, underwear, which generally gives it good insight into production conditions. The limited number of principal suppliers facilitates dialogue and oversight. To systematically monitor and ensure compliance with its guidelines, a more organized auditing system is required, which Björn Borg has through the Business Social Compliance Initiative, BSCI, as described below. The Group's supplier agreements, Code of Conduct and chemical restrictions specify the requirements that all suppliers and subcontractors must meet. Björn Borg is convinced that cooperating closely with its suppliers and supporting them in the improvement process are important to achieve lasting results.
Björn Borg wants to ensure that the people who help to manufacture the brand's products do so in a safe working environment and are fairly treated. The most important tool for this is the Group's Code of Conduct, which complies with international conventions as well as the BCSI's guidelines and auditing systems.
BSCI is a European non-profit organization dedicated to helping a large number of members to improve working conditions in their supply chain. Members apply the same requirements in terms of production conditions, etc., which makes it easier for companies and suppliers to make improvements. Björn Borg became a member of BSCI in January 2008 and has since adapted its Code of Conduct to the organization's guidelines. The Code of Conduct is based on the ILO's Core Conventions, the UN Declaration of Human Rights, the UN's Convention on the Rights of the Child and the OECD's Guidelines for Multinational Enterprises.
The Code of Conduct comprises the following areas related to working conditions in manufacturing:
All of Björn Borg's suppliers pledge to comply with the Company's Code of Conduct. Suppliers of underwear, adjacent products and bags are gradually undergoing independent audits and follow-up inspections through BSCI. The product areas for footwear, eyewear and fragrances are conducting follow-ups of their suppliers outside BSCI's framework.
Supplier audits according to the BSCI-adapted Code of Conduct and drafting of action plans began in 2008. By year-end 2009, 95 percent of underwear production had been inspected, far exceeding the target of 75 percent. Audited suppliers are required to alleviate any shortcomings that are discovered according to an agreed-upon plan, which must be fully approved by 2011.
In 2009 Björn Borg had four audits conducted, all of major facilities that produce its underwear. The deficiencies that were discovered – and which are common problems in working environments – involved emergency exits, safety equipment, fire safety training, lighting and storage of chemicals. These deficiencies usually can be fixed relatively quickly and have been given priority since they can pose a direct danger to employees. Follow-up inspections and subsequent audits will ensure that measures are taken.
With regard to working conditions, the amount of overtime is the most common violation of the requirements. This is considered a more difficult problem to address. Björn Borg plans to join together with its suppliers to hire a BSCIapproved consultant to implement the changes necessary to meet current guidelines.
Several of Björn Borg's suppliers participated during the year in workshops arranged by BSCI, which is an important element in the efforts to increase knowledge and understanding of the rules by suppliers.
The products Björn Borg sells must be safe for customers and the environment and free from hazardous substances. At the same time the Group tries to minimize the environmental impact from the production of Björn Borg's products, which is handled exclusively by outside manufacturers. This is done in a number of ways, including by encouraging suppliers to switch to production methods and chemicals that have less impact on the environment and are safer for their employees.
Water, energy and chemical consumption in production are important areas for a manufacturer like Björn Borg to monitor from an environmental standpoint. Other areas that impact the environment and can be influenced are transports and packaging.
Björn Borg has clear guidelines on the use of chemicals that follow the chemical guide of Sweden's Textile Importers' Association and the EU's chemical regulation. They are summarized in the Group's supplier agreements, which provide detailed instructions on the use of various substances.
In some cases Björn Borg's own recommended limits are lower than the Textile Importers' Association's. Björn Borg's contracted suppliers and their textile sources pledge to follow the Company's chemical restrictions. To ensure that the guidelines are followed, underwear samples from every shipment are tested by certified textile laboratories. In addition, at least 30 random samples of articles are taken each year to verify that their chemical levels are below allowable limits. Around 60 random samples were taken from the 2009 collections. Björn Borg's staff regularly visits production facilities as well.
During the year Björn Borg established a product testing cooperation with the research institute Swerea IVF, which has a broad range of operations in the textile field. In a chemical group together with several other Swedish apparel manufacturers under the leadership of Swerea IVF, Björn Borg receives valuable support in its work with production chemicals, including information on regulatory updates, alternative, greener chemicals and methods, and access to expertise.
In September 2009 the Swedish Society for Nature Conservation presented a report on the chemicals found in several brands of plastic sandals, including Björn Borg. One specific model exceeded the limits on phthalates, because of which they were immediately recalled by Björn Borg. This incident led to closer contact with suppliers and sourcing companies regarding chemical use, monitoring and testing. In fall 2009 the supplier requirements were expanded to include an updated Code of Conduct incorporating BSCI's rules and a revised list of chemicals.
Björn Borg's products are shipped primarily by boat from its suppliers in China, and to a limited extent by air. The small share of products manufactured in Europe is transported by truck. Shipments are sent directly from the country of origin to the distributor's warehouse in each market, which generates less emissions and lower costs than if they were sent through a central warehouse.
Björn Borg's underwear products, and to some extent its other product areas, are shipped in plastic and paper packaging. All products contain labels as well. In 2009 work began on the design of greener plastic packaging. In spring 2010 products will have completely new packaging made of PVC-free plastic. EVA plastic and polypropylene are both recyclable.
In its efforts to give back to society, Björn Borg is providing financial support to the Mathare Sports Association (MYSA), a self-help program to help children and young adults in the slums of Nairobi, Kenya through team sports and environmental cleanups. MYSA combines sports with leadership training in part by organizing activities to improve local environments and increase AIDS awareness. The organization currently serves around 20,000 children and young adults. Björn Borg contributes to MYSA's scholarship fund by donating 1 euro from every item of children's clothing. This long-term cooperation will be periodically evaluated.
In 2010 Björn Borg will focus on completing the BSCI audits of the few remaining plants and following up the measures taken at plants that have already been inspected. Resolving the overtime situation in China will be a priority during the year, as will improved routines for contracting new suppliers to guarantee compliance with all guidelines.
Creating greater openness and dialogue about Björn Borg's responsibilities is a long-term goal. To disclose information more systematically according to current standards requires advance planning. Measures were taken during the year to schedule this work.
Björn Borg is expanding its social commitments in 2010 by supporting the organization MYSA.
The competence, creativity and drive of Björn Borg's employees are important factors behind the development of the brand and the Group and are considered decisive to their future success. Retaining employees, offering them opportunities to grow and attracting new professionals are a priority that Management satisfies by continuing to build an open and stimulating corporate culture where employees can grow and further develop. In a growing organization focused on the international expansion of the brand, increasing demands are placed on structure and efficient working methods – while still maintaining creativity.
Björn Borg's employees generally have extensive industry experience, including from large international fashion and retail companies, as well as unique competence in underwear. Continuous competence development is important for both new hires and employees who have spent years with the Company. Björn Borg provides internal training and closely follows developments in the industry. An important factor in maintaining a high level of innovation and creativity in product development is to gather inspiration from fashion shows and other international fashion contexts and at the same time create an inspiring climate internally with a close cooperation between departments.
As part of the new strategy implemented in 2009, Björn Borg defined the values that shape the way it works: Open, Innovative, Passionate, Business Smart and Responsible. This also applies to communications both internally and externally. Shared values play an important unifying role for Björn Borg and its growing international business and network of partners, as well as for the development of the brand.
During the year clear targets were introduced for every employee and group to give the staff a better understanding of how they contribute to the Group's goals, as well as to provide greater opportunities for monitoring and development.
The compensation system currently used by the Company utilizes base salaries and an individual bonus system for key employees, which pays out when individual targets are met. In addition, incentive schemes are in place for all employees based on warrants. They are described in more detail in note 7 on page 52.
During the year the organization was strengthened through the addition of new employees to meet the needs of a growing international group, but also to adapt operations to the increased focus on underwear. Among other things, product managers were hired for underwear and adjacent products, in addition to an overall head designer, who is responsible for ensuring that all product groups are developed in accordance with the brand's values. All these individuals are members of Group Management. Reinforcements were also added during the year in other areas of the organization to meet higher ambitions in terms of product development and accommodate the continued international expansion.
The average number of employees in the Group was 92 in 2009. Their average age was 34, and 35 percent were male. Among the Group's employees, 39 percent have a post-secondary education. Average industry experience was slightly over ten years. Employee turnover in 2009 was 28 percent and sick leave 2.3 percent, against 1.9 percent in 2008.
"We all love your underwear collection as they have the best fit , best quality and the greatest colours and prints. short shorts for the guys and mini shorts for the girls :-)"
30 BJÖRN BORG annual report 2009
Mette Ladefoged, Denmark
| SEK thousands | 2009 | 2008 | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|
| Income statement | |||||
| Net sales | 519,915 | 526,556 | 494,886 | 324,555 | 183,639 |
| Operating profit | 112,594 | 128,751 | 142,075 | 81,864 | 31,275 |
| Profit after financial items | 111,658 | 134,822 | 142,227 | 81,400 | 32,856 |
| Profit for the year | 80,902 | 99,202 | 102,091 | 58,485 | 23,499 |
| The Group's financial position | |||||
| Intangible assets | 204,913 | 203,172 | 202,417 | 202,426 | 13,944 |
| Tangible non-current assets | 11,150 | 15,366 | 17,817 | 6,331 | 2,068 |
| Financial non-current assets | – | – | – | 45 | 45 |
| Inventories, etc. | 26,455 | 33,752 | 24,640 | 22,036 | 15,716 |
| Current receivables | 65,719 | 106,197 | 77,093 | 58,194 | 33,772 |
| Cash & cash equivalents | 296,484 | 241,498 | 187,423 | 59,544 | 58,080 |
| Total assets | 604,720 | 599,985 | 509,390 | 348,576 | 123,625 |
| Equity | 460,956 | 413,803 | 342,943 | 138,054 | 82,851 |
| Non-current liabilities (interest-bearing) | 40,889 | 46,816 | 52,515 | 95,465 | – |
| Other non-current liabilities (non-interest-bearing) | 40,011 | 32,884 | 28,607 | 17,141 | 2,794 |
| Current liabilities (interest-bearing) | – | – | – | 10,000 | – |
| Other current liabilities | 62,864 | 106,482 | 85,325 | 87,916 | 37,980 |
| Total equity and liabilities | 604,720 | 599,985 | 509,390 | 348,576 | 123,625 |
| Key figures | |||||
| Gross profit margin, % | 51.3 | 53.8 | 53.6 | 50.7 | 52.2 |
| Operating margin, % | 21.7 | 24.5 | 28.7 | 25.2 | 17.0 |
| Profit margin, % | 21.5 | 25.6 | 28.7 | 25.1 | 17.9 |
| Return on capital employed, % | 20.9 | 28.8 | 40.9 | 48.6 | 42.7 |
| Return on average equity, % | 18.5 | 26.2 | 42.4 | 53.0 | 33.1 |
| Profit attributable to Parent Company's shareholders | 80,867 | 99,210 | 102,062 | 58,485 | 23,449 |
| Equity/assets ratio, % | 76.2 | 69.0 | 67.3 | 39.6 | 67.0 |
| Equity per share, SEK | 18.33 | 16.51 | 13.70 | 5.95 | 3.62 |
| Investments in intangible non-current assets | 3,160 | 2,200 | 225 | 188,532 | – |
| Investments in tangible non-current assets | 1,380 | 2,873 | 15,290 | 5,542 | 728 |
| Depreciation/amortization for the year | –7,024 | –6,976 | –4,121 | –1,329 | –2,609 |
| Average number of employees | 92 | 88 | 76 | 52 | 49 |
| Data per share | |||||
| Earnings per share, SEK | 3.22 | 3.96 | 4.18 | 2.55 | 1.03 |
| Earnings per share (after full dilution), SEK | 3.21 | 3.96 | 4.17 | 2.53 | 1.02 |
| Number of shares | 25,148,384 | 25,059,184 | 25,036,984 | 23,207,376 | 22,896,576 |
| Weighted average number of shares | 25,111,217 | 25,041,134 | 24,406,699 | 22,954,076 | 22,896,576 |
| Effect of dilution | 118,910 | 34,366 | 83,461 | 127,524 | 89,856 |
| Weighted average number of shares (after full dilution) | 25,230,128 | 25,075,500 | 24,490,160 | 23,081,600 | 22,986,432 |
| Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
|---|---|---|---|---|---|---|---|---|
| SEK thousands | 2009 | 2009 | 2009 | 2009 | 2008 | 2008 | 2008 | 2008 |
| Brand sales | 422,121 | 566,423 | 385,637 | 602,183 | 475,806 | 562,835 | 381,246 | 551,062 |
| Net sales | 102,247 | 155,162 | 97,832 | 164,674 | 131,233 | 160,762 | 95,813 | 138,748 |
| Gross profit margin, % | 55.7 | 50.8 | 50.9 | 49.3 | 54.1 | 54.1 | 55.9 | 51.9 |
| Operating profit | 19,427 | 43,454 | 12,131 | 37,582 | 26,049 | 49,688 | 16,493 | 36,521 |
| Operating margin, % | 19.0 | 28.0 | 12.4 | 22.8 | 19.8 | 30.9 | 17.2 | 26.3 |
| Profit after financial items | 19,712 | 40,830 | 11,871 | 39,245 | 28,693 | 52,277 | 16,594 | 37,258 |
| Profit margin, % | 19.3 | 26.3 | 12.1 | 23.8 | 21.9 | 32.5 | 17.3 | 26.9 |
| Earnings per share, SEK | 0.54 | 1.20 | 0.34 | 1.15 | 0.91 | 1.50 | 0.48 | 1.07 |
| Earnings per share after dilution, SEK | 0.53 | 1.19 | 0.33 | 1.15 | 0.91 | 1.50 | 0.48 | 1.07 |
| Number of Björn Borg stores at end of period | 46 | 45 | 43 | 44 | 44 | 41 | 39 | 36 |
| of which Group-owned Björn Borg stores | 10 | 10 | 10 | 11 | 11 | 11 | 10 | 10 |
The Björn Borg Group is active in an industry with seasonal variations. The different quarters vary in terms of sales and earnings. With the current product mix, the second quarter is generally the weakest profit-wise.
Björn Borg reports revenue for four business segments.
Net sales in the Brand and other segment mainly consist of royalty revenue, as well as invoicing of internal Group services. Royalties are generated through wholesale sales of Björn Borg products through distributors (Group-owned and independent) to retailers and are calculated as a share of these sales. Royalties are paid monthly or quarterly in arrears. In 2009 net sales amounted to SEK 138.3 million (142.3) with operating profit of SEK 43.9 million (42.7).
Sales for the Product Development segment are generated by the Group-owned product companies for clothing and footwear through product sales to distributors in all markets. In 2009 net sales amounted to SEK 339.2 million (337.2) with operating profit of SEK 51.0 million (50.0).
Sales for the Distribution segment are generated by the Group-owned distribution companies for clothing and footwear in Sweden and the U.S., where Björn Borg is the exclusive distributor in these segments. In 2009 net sales amounted to SEK 193.8 million (197.0) with operating profit of SEK 9.6 million (27.5).
Sales for the Retail segment are currently generated through Groupowned Björn Borg stores and online. Net sales in Retail amounted to SEK 54.5 million (55.0) in 2009 with operating profit of SEK 8.0 million (8.6).
OPERATIN G PROFIT BY SEGMENT
The Board of Directors and the President of Björn Borg AB (publ), company registration number 556658-0683, herewith present the annual report and consolidated financial statements for the financial year 2009.
Björn Borg AB owns the Björn Borg trademark and focuses on underwear. The Company also offers adjacent products, footwear and, through licensees, bags, eyewear and fragrances. Björn Borg products are sold in 18 markets, the largest of which are Sweden and the Netherlands. Operations are conducted through a network of product and distribution companies which are either part of the Group or independent companies with licenses for product areas and geographical markets. The Björn Borg Group has its own operations at every level from brand development to consumer sales in its own Björn Borg stores. Björn Borg's business model facilitates geographical and product expansion with minimal risk and capital investment, at the same time that control of the brand rests with the Company.
Björn Borg is listed on NASDAQ OMX Nordic's Mid Cap list. The total number of shares in Björn Borg is 25,148,384. There is one class of share. The share capital amounts to SEK 7,858,870 and the quota value per share is SEK 0.3125. Each share carries one vote at the Annual General Meeting (AGM) and there are no limitations on how many votes each shareholder may cast at the AGM. Björn Borg had 6,116 shareholders at year-end. The largest shareholder as of December 31, 2009 was SEB, which directly or indirectly owned more than ten percent of the shares in Björn Borg.
There are no limitations on the right to transfer the Björn Borg share according to current laws or Björn Borg's Articles of Association. Nor is Björn Borg aware of any agreements between shareholders that could infringe upon the right to transfer Björn Borg shares. There are no material agreements in which Björn Borg is a party which take effect, are amended or cease to apply if control over the Company changes as a result of a public takeover offer.
The Board of Directors and any deputies are appointed by the AGM for a period concluding with the following AGM. Björn Borg's Articles of Association contain only the usual provisions on board elections and no rules on special majority requirements to appoint and dismiss Directors.
Björn Borg's Annual General Meeting was held on April 23, 2009. The AGM re-elected Fredrik Lövstedt, Vilhelm Schottenius, Mats H Nilsson, Nils Vinberg and Michael Storåkers as Directors, with Fredrik Lövstedt as Chairman of the Board. Further, the Board resolved to name Monika Elling and Fabian Månsson as new Directors. The Board was also authorized to resolve to issue new shares, warrants and/or convertibles, and to resolve to acquire and transfer the Company's own shares.
In 2009 the Board held seven scheduled meetings, four of which were in connection with the quarterly financial reports, one in connection with the preparations for the AGM, one in connection with the AGM and one in connection with the adoption of the budget. Additional information on the Board's work and members' attendance at the meetings held during the year can be found in the corporate governance report on page 64.
According to the resolution of the AGM, Björn Borg's Nomination Committee shall be composed of the Chairman of the Board and one representative from each of the Company's three largest shareholders measured in terms of votes. For the 2010 AGM Björn Borg's Nomination Committee has the following members:
Martin Bjäringer is Chairman of the Nomination Committee.
In connection with the third quarter report in 2009, the Board of Directors of Björn Borg updated the Company's financial goals for the period 2010–2014.
The long-term objective will be achieved by growing slightly below the average target in large markets and generating higher growth in smaller markets. During the beginning of the period sales growth could fall below the target, as several new markets are being added.
Surplus liquidity that is generated while taking into account the new financial objectives will be distributed gradually during the forecast period, starting in 2010.
Operating investments are estimated annually at 2–5 percent of net sales depending on whether any new Björn Borg stores are opened.
The Board of Directors has decided to propose a dividend of SEK 5.00 (1.50) per share for the financial year 2009, corresponding to 155 (38) percent of net profit. See above under financial objectives and dividend.
During the year Björn Borg signed agreements with external distributors to launch the brand in Greece, Italy, Portugal and Chile. In Greece and Italy, retail sales began on a small scale at the end of the year, while products will reach retailers in Portugal and Chile in spring 2010.
In August 2009 an agreement was signed with a new distributor for the German market. The new distributor has broad experience with well-known underwear brands and an established network of contacts at the retail level.
The distribution agreement in England was terminated as of August 19, 2009, but remains in effect for another two years. The intent is to remain active in the English market.
Björn Borg decided during the year to seek out a partnership arrangement to further develop its U.S. operations and has therefore dissolved the large part of its organization in the country. The feeling is that with an established partner, Björn Borg will have a better opportunity to achieve sustainable growth and profitability in the U.S. market with limited risk. Deliveries to retailers continue at the same time that discussions are being held with U.S. players on a possible cooperation.
A new franchised store opened in Helsingborg, Sweden in the fourth quarter of 2009. For the full-year a total of three new stores were opened and one Group-owned store was closed. At the end of the period there were 46 (44) Björn Borg stores, of which 11 (10) were Group-owned.
Björn Borg's largest product group, underwear, has a strong foothold in established markets, and the Group has extensive know-how and experience in this area. A strategy review in 2009 determined that the Group will focus on underwear as its core business and largest product area. Björn Borg will also offer adjacent products, while other product areas will be managed by licensees.
The key success factors for the further international expansion of the brand are innovative product development, creative, product-focused marketing communications and efficient distribution according to the current business model.
As a consequence of the focus on underwear, the criteria for cooperations with outside distributors have been revised. Björn Borg's partners in its geographical markets must be established players with experience in underwear and fast-moving consumer goods rather than fashion, and they must have an extensive distribution network in their local market and the resources for long-term investments in the brand.
Björn Borg AB is engaged in a dispute with its English distributor regarding shipments that were not delivered. Arbitration proceedings have begun and a settlement is expected in 2010. Because the financial impact of the dispute cannot be reliably determined, the Company has not allocated any provisions for the dispute in these accounts. The financial effect is not expected to materially impact the Group.
The agreements covering the licensed product areas bags, eyewear and fragrances expire on December 31, 2010. The agreements have been terminated by Björn Borg for renegotiation.
In February 2010 Björn Borg signed a letter of intent to license out product development and a portion of sales in the footwear area to Trend Design Group, a well-established production and wholesale company for men's and women's footwear with distribution in large parts of Europe as well as North America and Australia. Distribution of Björn Borg shoes in Sweden and Finland, corresponding to 42 percent of sales in the footwear product area in 2009, remains within the Group and will be managed by the current sales organization, while Trend Design Group will be responsible for sales in other markets.
Licensing of the footwear product area is a consequence of the Group's focus on underwear and adjacent products. At the same time Björn Borg feels that its footwear operations will have a better chance of a broader international expansion by licensing to a partner with experience and an extensive network of contacts in the footwear market.
Licensing is not expected to affect sales in 2010 because of the long lead times, which means it will take time before the change has an impact. In terms of profit, it is expected to have a marginally positive effect in 2010 owing to lower costs for product development and personnel. A slight decrease in revenue is expected in the product development segment as of 2011, at the same time that licensed sales will generate higher royalties for the Group.
Group sales during the year amounted to SEK 519.9 million (526.6), a decrease of 1 percent. Sales were negatively affected during the year by lower volume, at the same time that they were positively affected by the higher dollar exchange rate and increased footwear exports early in the year.
The gross profit margin decreased during the year to 51.3 percent (53.8). Operating profit amounted to SEK 112.6 million (128.8) with an operating margin of 21.7 percent (24.5). Profit before tax declined during the period to SEK 111.7 million (134.8). Operating expenses as a share of net sales remained fairly constant at 29.6 percent (29.4). The main reason for the lower gross profit margin was the stronger dollar during much of the year and its impact on the Distribution segment in particular. Compared to the same period of 2008, operating profit was negatively affected by additional expenses for marketing investments in the U.S.
As of December 31, 2009 the company had 25,148,384 shares outstanding. Earnings per share before and after dilution amounted to SEK 3.22 (3.96) and SEK 3.21 (3.96), respectively.
| Condensed income statement | 2009 | 2008 |
|---|---|---|
| Net sales, SEK million | 519.9 | 526.6 |
| Operating profit, SEK million | 112.6 | 128.8 |
| Operating margin, % | 21.7 | 24.5 |
| Profit before tax, SEK million | 111.7 | 134.8 |
| Profit for the year, SEK million | 80.9 | 99.2 |
| Earnings per share, SEK | 3.22 | 3.96 |
| Earnings per share after full dilution, SEK | 3.21 | 3.96 |
Cash flow from operating activities in the Group amounted to SEK 94.1 million (87.0) for the full-year 2009. The improvement was mainly due to a reduction in working capital resulting from lower accounts receivable. The positive effect on working capital was offset, however, by lower accounts payable owing to earlier shipments to a distributor as well as the payment of a tax liability for 2008.
Total investments in tangible and intangible non-current assets amounted to SEK 4.5 million (5.1) during the year, the large part of which was attributable to a new enterprise system, reconstruction of premises and a new web platform.
For the full-year 2009, cash & cash equivalents increased by SEK 55.0 million (54.1).
The Björn Borg Group's cash & cash equivalents (net cash position) amounted to SEK 296.5 million (241.5) at the end of the period. The equity/assets ratio was 76.2 percent (69.0). The company has no interest-bearing liabilities.
Net financial items were affected negatively during the year by translation differences on receivables in foreign currency for the U.S. operations and lower interest on lending compared to the same period last year.
The competence, creativity and drive of Björn Borg's employees are important factors behind the development of the brand and the Group, and are decisive to their future success. Retaining employees and attracting new professionals to the organization is therefore a priority for Management. The compensation systems currently used by the Company comprise base salaries and an individual bonus system for certain key employees, which pays out when individual targets are met. The maximum bonus corresponds to three months' salary. In addition, Björn Borg has established an incentive scheme based on warrants for all employees.
The AGM on April 23, 2009 resolved that remuneration for the President and six other members of Senior Management shall comprise a base salary, variable compensation, long-term incentive schemes and other benefits, including a pension. Total compensation must be competitive given current market conditions and reasonable relative to each individual's responsibilities and authority. Variable compensation will be based on performance in relation to defined, measurable goals and maximized relative to established targets. The variable compensation will never exceed base salary.
If terminated by the Company, the term of notice will not exceed twelve months. Severance is not paid. Pension benefits are defined contribution and entitle senior executives to receive a pension from age 65.
The Board proposes that the 2010 AGM keep the remuneration guidelines for the President and other senior executives unchanged. The average number of employees for the full year was 92 (88), of whom 35 percent (33) are men and 65 percent (67) women.
Although Björn Borg does not have any research of its own, development and design work is done in the clothing and footwear product areas, which is recognized as development costs through profit or loss.
Taking responsibility for its impact on people and the environment is one of Björn Borg's core values and is crucial to cooperations in the Group's network.
Björn Borg maintains a close cooperation with its suppliers and in many cases has longstanding relationships, which generally gives it good insight into production conditions. The limited number of principal suppliers facilitates dialogue and oversight. Björn Borg works continuously with corporate responsibility and environmental issues, including by specifying requirements that must be met in the Group's supplier agreements, code of conduct and chemical restrictions.
Björn Borg has been a member of the Business Social Compliance Initiative, BSCI, since January 2009 and has since adapted the Group's Code of Conduct to the organization's guidelines. Members apply the same requirements regarding production conditions, etc., which makes it easier for companies and suppliers to make improvements.
All of Björn Borg's suppliers pledge to abide by the Company's Code of Conduct and are successively undergoing independent audits and re-audits; this includes subcontractors. With respect to the use of chemicals in textile production, Björn Borg follows the guidelines of the Textile Importers' Association in Sweden, which are based on Swedish legislation and EU regulations.
During the year Björn Borg continued to work on corporate responsibility issues. For example, 95 percent of suppliers have now been audited according to the Code of Conduct and BCSI's guidelines. This also applies to improved inspections of chemicals contained in products, internal training and industry cooperations to more effectively work with chemical issues in production.
A number of operational and financial risks internally and externally could affect Björn Borg's results and operations.
Through its operations, Björn Borg is exposed to currency, interest rate, credit and counterparty risks, as well as liquidity and refinancing risks. The Board has decided how the Group will manage these risks. See also Note 3, page 50.
Björn Borg is active in the highly competitive fashion industry. The Company's vision is to consolidate Björn Borg as a global fashion brand. Competitors control national and international brands, often focusing on the same markets. They often have substantial financial and human resources. While Björn Borg has so far managed to hold its own in competition with other players, there are no guarantees it will be able to continue to compete with current and future brands.
The Company's future growth is dependent on the network's ability to increase sales through existing channels, though also on finding new geographical markets for the Company's products. The opportunity to find new markets for Björn Borg is partly dependent on factors outside the Company's control, such as economic conditions, trade barriers and access to attractive store locations on commercially viable terms.
The Company's position and future expansion are dependent in part on independent entrepreneurs that serve as product companies, distributors and franchisees in the network. Despite that Björn Borg generally has effective, extensive contractual relationships, directly or indirectly, with outside parties in the network, these agreements can be terminated and there are no guarantees that similar agreements can be signed. The termination of a cooperation with one or more entrepreneurs in the network could adversely impact the Company's growth and results.
The Company's operations are affected by shifts in trends and fashions and consumer preferences with regard to design, quality and price. Positioning relative to various competitors' products is critical. There is generally a positive connection between fashion level and business risk, with higher fashion implying a shorter product life cycle and higher business risk. Sudden changes in fashion trends may reduce sales for some collections.
Like all retail sales, the sale of the Company's products is affected by changes in economic conditions. A growing economy has a positive effect on household finances, which is reflected in spending patterns. A downturn in the economy has the opposite effect.
The Björn Borg trademark is crucial to the Company's position and success. Copyright infringements and distribution of pirated copies damage the Björn Borg brand, the reputational capital of its products and Björn Borg's profitability. As the brand has become stronger and sales of its products have grown, the Company has noted an increase in pirated copies of its products. In addition to the risks associated with pirating, the opportunity to expand to new markets could be affected if, for example, a third party in another country has registered a trademark similar to Björn Borg. The Company works continuously with trademark protection. There are no guarantees, however, that the measures taken to protect the Björn Borg trademark are sufficient.
Furthermore, the Björn Borg trademark is associated with Björn Borg the person. The trademark's position is therefore dependent to some degree on whether Björn Borg himself is associated with the ideals in the brand's platform.
The Company's reputation among customers is based on a consistent experience with Björn Borg products in the markets where they figure. Björn Borg products should be presented in a way that reflects the values Björn Borg represents. If the parties in the network should take any action that presents Björn Borg products in a way that conflicts with the Company's market positioning or the values the brand represents, Björn Borg's reputation would be damaged. In the long term damage to the Company's reputation would impact growth and earnings.
Björn Borg AB (publ) was formed on February 20, 2004 and recorded in the register of companies on March 19, 2004. The Company's form of association is governed by the Swedish Companies Act (2005:551). The domicile of the Board of Directors is the municipality of Stockholm. The Company's registration number is 556658–0683.
It is the Company's policy not to issue earnings forecasts. Uncertainty how the market will develop still lingers. In the Company's view, there is cautious optimism looking ahead to 2010 both in its network and the market as a whole. Regardless of the market's fluctuations, the current year will be distinguished in Björn Borg's case by further investments in product development, marketing communications and distribution – and by cost awareness.
Björn Borg AB (publ) is mainly engaged in intra-Group activities. The Company also owns 100 percent of the shares in Björn Borg Brands AB and Björn Borg Footwear Holding AB. The Parent Company's net sales amounted to SEK 47.6 million (50.6). Profit before tax amounted to SEK 84.4 million (–16.5). Cash & cash equivalents amounted to SEK 287.7 million (220.3). Investments in tangible and intangible non-current assets amounted to SEK 2.3 million (0.8).
The following unappropriated earnings are at disposal of the Annual General Meeting:
| Retained earnings, SEK Profit for the year, SEK |
71,678,749 88,383,374 |
|---|---|
| 160,062,123 | |
| The Board proposes that: Shareholders receive a dividend of |
|
| SEK 5.00 per share, totaling SEK | 125,741,920 |
| Carried forward, SEK | 34,320,203 |
| 160,062,123 |
Based on the information above and what has otherwise come to its attention, the Board of Directors has evaluated the financial position of the Company and the Group and considers the dividend to be justifiable in view of the requirements that the nature, scope and risks of the operations place on the size of the Company's equity, as well as the consolidation needs, liquidity and financial position of the Company and the Group in other respects.
| SEK thousands | Note | 2009 | 2008 |
|---|---|---|---|
| Net sales | 4,5 | 519,915 | 526,556 |
| Cost of goods sold | –253,271 | –243,058 | |
| Gross profit | 266,644 | 283,498 | |
| Distribution expenses | –102,390 | –105,380 | |
| Administrative expenses | –38,463 | –37,133 | |
| Development expenses | –13,197 | –12,234 | |
| Operating profit | 4, 6, 7, 8, 9, 10, 11 | 112,594 | 128,751 |
| Interest income and similar income items | 26 | 4,384 | 13,472 |
| Interest expenses and similar expense items | 26 | –5,320 | –7,401 |
| Profit after financial items | 111,658 | 134,822 | |
| Tax on profit for the year | 13 | –30,756 | –35,620 |
| Profit for the year | 80,902 | 99,202 | |
| Profit for the year attributable to: | |||
| Parent Company's shareholders | 80,867 | 99,210 | |
| Minority interests | 35 | –8 | |
| Other comprehensive income | |||
| Translation adjustments for foreign operations | 844 | –536 | |
| Total comprehensive income for the year | 81,746 | 98,666 | |
| Total comprehensive income for the year attributable to: |
|||
| Shareholders in Parent Company | 81,711 | 98,674 | |
| Minority interests | 35 | –8 | |
| Earnings per share, SEK | 23 | 3.22 | 3.96 |
| Earnings per share after dilution, SEK | 23 | 3.21 | 3.96 |
| SEK thousands | Note | Dec. 31, 2009 | Dec. 31, 2008 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 14 | ||
| Goodwill | 13,944 | 13,944 | |
| Trademarks | 187,532 | 187,532 | |
| Other intangible assets | 3,437 | 1,696 | |
| 204,913 | 203,172 | ||
| Tangible non-current assets Property, plant and equipment |
15 | 11,150 | 15,366 |
| 11,150 | 15,366 | ||
| Total non-current assets | 216,063 | 218,538 | |
| Current assets | |||
| Inventories | |||
| Trading book | 17 | 26,455 | 33,752 |
| Current receivables | 26,455 | 33,752 | |
| Accounts receivable | 18 | 38,032 | 79,900 |
| Tax assets | 7,370 | – | |
| Other current receivables | 3,227 | 5,335 | |
| Prepaid expenses and accrued income | 19 | 17,090 | 20,962 |
| 65,719 | 106,197 | ||
| Cash & cash equivalents | |||
| Cash and bank balances | 296,484 | 241,498 | |
| 296,484 | 241,498 | ||
| Total current assets | 388,657 | 381,447 | |
| TOTAL ASSETS |
604,720 | 599,985 | |
| EQUITY AND LIABILITIE S |
|||
| Equity | |||
| Share capital | 7,859 | 7,831 | |
| Other paid-in capital Reserves |
182,145 308 |
179,177 –536 |
|
| Retained earnings | 270,530 | 227,252 | |
| 460,842 | 413,724 | ||
| Minority interests | 114 | 79 | |
| Total equity | 460,956 | 413,803 | |
| Non-current liabilities | |||
| Deferred tax liabilities | 13 | 40,011 | 32,884 |
| Other non-current liabilities | 20 | 40,889 | 46,816 |
| 80,900 | 79,700 | ||
| Current liabilities | |||
| Accounts payable Current tax liabilities |
13 | 15,480 – |
45,489 19,274 |
| Other current liabilities | 20 | 13,997 | 11,350 |
| Accrued expenses and deferred income | 21 | 33,387 | 30,369 |
| 62,864 | 106,482 | ||
| Total liabilities | 143,764 | 186,182 | |
| TOTAL EQUITY AND LIABILITIE S |
604,720 | 599,985 | |
| Memorandum items | |||
| Pledged assets | 22 | 18,000 | 18,000 |
| Contingent liabilities | 22 | 4,025 | 4,951 |
| SEK thousands | Share O capital |
ther paid-in capital R |
R eserves |
etained M earnings |
inority T interest |
otalt equity |
|---|---|---|---|---|---|---|
| Opening balance, January 1, 2008 | 7,824 | 169,435 | 0 | 165,597 | 87 | 342,943 |
| Total comprehensive income for the year Transactions with owners |
–536 | 99,210 | –8 | 98,666 | ||
| New share issues | 7 | 687 | 694 | |||
| Incentive scheme | 9,055 | 9,055 | ||||
| Dividend for 2007 | –37,555 | –37,555 | ||||
| Total transactions with owners | 7 | 9,742 | –37,555 | – | –27,806 | |
| Closing balance, December 31, 2008 | 7,831 | 179,177 | –536 | 227,252 | 79 | 413,803 |
| Total comprehensive income for the year | 844 | 80,867 | 35 | 81,746 | ||
| Transactions with owners | ||||||
| New share issues | 28 | 2,968 | 2,996 | |||
| Dividend for 2008 | –37,589 | –37,589 | ||||
| Total transactions with owners | 28 | 2,968 | –37,589 | – | –34,593 | |
| Closing balance, December 31, 2009 | 7,859 | 182,145 | 308 | 270,530 | 114 | 460,956 |
| SEK thousands | Note | 2009 | 2008 |
|---|---|---|---|
| OPERATIN G ACTI VITIE S |
|||
| Profit after tax | 80,902 | 99,202 | |
| Income tax expensed through profit or loss | 30,756 | 35,620 | |
| Financial expenses and income recognized through profit or loss | 26 | 936 | –6,071 |
| Amortization/depreciation of intangible/tangible assets | 9 | 7,024 | 6,976 |
| Other financial items | –2,197 | 622 | |
| Interest paid | 26 | 2,850 | –1,996 |
| Interest received | 26 | –745 | 6,702 |
| Taxes paid | –50,280 | –17,841 | |
| Cash flow from operating activities before | |||
| changes in working capital | 69,246 | 123,214 | |
| CHANGES IN WORKING CAPITAL | |||
| Change in inventories | 7,297 | –9,112 | |
| Change in accounts receivable | 41,868 | –18,194 | |
| Change in other receivables | 5,979 | –10,910 | |
| Change in accounts payable | –30,009 | 22,349 | |
| Change in other current liabilities | –263 | –20,393 | |
| Change in working capital | 24,873 | –36,260 | |
| Cash flow from operating activities | 94,119 | 86,954 | |
| INVESTING ACTI VITIE S |
|||
| Acquisition of intangible assets | 14 | –3,160 | –2,200 |
| Acquisition of tangible non-current assets | 15 | –1,380 | –2,873 |
| Cash flow from investing activities | –4,540 | –5,073 | |
| FINANCIN G ACTI VITIE S |
|||
| New share issues | 2,996 | 694 | |
| Paid-in and received warrant premiums from employees | – | 9,055 | |
| Dividend | –37,589 | –37,555 | |
| Cash flow from financing activities | –34,593 | –27,806 | |
| CASH FLOW FOR THE YEAR |
54,986 | 54,075 | |
| Cash & cash equivalents at beginning of year | 241,498 | 187,423 | |
| Cash & cash equivalents at year-end | 296,484 | 241,498 |
| SEK thousands | Note | 2009 | 2008 |
|---|---|---|---|
| Net sales | 4,5 | 47,608 | 50,630 |
| Cost of goods sold | –2,407 | –6,975 | |
| Gross profit | 45,201 | 43,655 | |
| Distribution expenses | –40,826 | –40,235 | |
| Administrative expenses | –15,702 | –15,475 | |
| Development expenses | –6,281 | –6,190 | |
| Operating profit | 4, 6, 7, 8, 9, 10, 11 | –17,608 | –18,245 |
| Dividend from subsidiary | 100,000 | – | |
| Interest income and similar income items | 26 | 2,695 | 6,487 |
| Interest expenses and similar expense items | 26 | –720 | –4,772 |
| Profit after financial items | 84,367 | –16,529 | |
| Appropriations | 12 | – | –104 |
| Profit before tax | 84,367 | –16,633 | |
| Tax on profit for the year | 13 | 4,017 | 4,424 |
| Profit for the year | 88,383 | –12,209 |
| SEK thousands | Note | Dec. 31, 2009 | Dec. 31, 2008 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 14 | ||
| Other intangible assets | 1,694 | – | |
| 1,694 | – | ||
| Tangible non-current assets | 15 | ||
| IProperty, plant and equipment | 4,238 | 5,543 | |
| 4,238 | 5,543 | ||
| Financial non-current assets | 16 | ||
| Shares in Group companies | 54,497 | 54,497 | |
| Total non-current assets | 60,428 | 60,040 | |
| Current assets | |||
| Current receivables | |||
| Accounts receivable | 18 | 810 | 458 |
| Receivables from Group companies | 88,903 | 59,551 | |
| Tax assets | 1,542 | 2,376 | |
| Other current receivables | 27 | 59 | |
| Prepaid expenses and accrued income | 19 | 3,324 | 4,078 |
| 94,606 | 66,522 | ||
| Cash & cash equivalents | |||
| Cash and bank balances | 287,657 | 220,348 | |
| 287,657 | 220,348 | ||
| Total current assets | 382,263 | 286,870 | |
| TOTAL ASSETS |
442,691 | 346,910 | |
| EQUITY AND LIABILITIE S |
|||
| Equity Restricted equity |
|||
| Share capital | 7,859 | 7,831 | |
| Statutory reserve | 46,817 | 46,817 | |
| 54,676 | 54,648 | ||
| Unrestricted equity | |||
| Retained earnings Profit for the year |
71,679 88,383 |
107,343 –12,209 |
|
| 160,062 | 95,134 | ||
| Total equity | 214,738 | 149,782 | |
| Untaxed reserves | 12 | 7,359 | 7,359 |
| Current liabilities | |||
| Accounts payable | 1,840 | 7,713 | |
| Due to Group companies | 207,835 | 173,048 | |
| Other current liabilities | 2,803 | 1,324 | |
| Accrued expenses and deferred income | 21 | 8,116 | 7,684 |
| 220,594 | 189,768 | ||
| Total liabilities | 220,594 | 189,768 | |
| TOTAL EQUITY AND LIABILITIE S |
442,691 | 346,910 | |
| Memorandum items | |||
| Pledged assets | 22 | None | None |
| Contingent liabilities | 22 | None | None |
| SEK thousands | R Share capital |
Statutory reserve | etained earnings |
Total equity |
|---|---|---|---|---|
| Opening balance, January 1, 2008 | 7,824 | 46,817 | 132,836 | 187,477 |
| Dividend paid | –37,555 | –37,555 | ||
| New share issues | 7 | 687 | 694 | |
| Group contributions | 15,799 | 15,799 | ||
| Tax effect of Group contributions | –4,424 | –4,424 | ||
| Profit for the year | –12,209 | –12,209 | ||
| Closing balance, December 31, 2008 | 7,831 | 46,817 | 95,134 | 149,782 |
| Dividend paid | –37,589 | –37,589 | ||
| New share issues | 28 | 2,938 | 2,966 | |
| Group contributions | 15,191 | 15,191 | ||
| Tax effect of Group contributions | –3,995 | –3,995 | ||
| Profit for the year | 88,383 | 88,383 | ||
| Closing balance, December 31, 2009 | 7,859 | 46,817 | 160,062 | 214,738 |
| Number of shares | Number of votes N | umber of shares | Share capital, SEK |
|---|---|---|---|
| Opening balance, January 1, 2008 | 25,036,984 | 25,036,984 | 7,824,058 |
| Exercise of warrants | 22,200 | 22,200 | 6,938 |
| Closing balance, December 31, 2008 | 25,059,184 | 25,059,184 | 7,830,995 |
| Exercise of warrants | 89,200 | 89,200 | 27,875 |
| Closing balance, December 31, 2009 | 25,148,384 | 25,148,384 | 7,858,870 |
All shares are common shares and are fully paid-in. No shares are reserved for transfer according to warrant agreements or other agreements.
| SEK thousands | Note | 2009 | 2008 |
|---|---|---|---|
| OPERATIN G ACTI VITIE S |
|||
| Profit after tax | 88,383 | –12,209 | |
| Income tax expensed through profit or loss | –4,017 | –4,424 | |
| Financial expenses and income recognized through profit or loss | –1,975 | –1,715 | |
| Amortization/depreciation of intangible/tangible assets | 9 | 1,883 | 1,670 |
| Appropriations | – | 104 | |
| Interest paid | –720 | –4,772 | |
| Interest received | 2,695 | 6,487 | |
| Taxes paid | 855 | 2,796 | |
| Cash flow from operating activities before | |||
| changes in working capital | 87,104 | –12,063 | |
| CHANGES IN WORKING CAPITAL | |||
| Change in accounts receivable | –351 | 495 | |
| Change in other receivables | –13,376 | –5,333 | |
| Change in accounts payable | –5,872 | 2,019 | |
| Change in other current liabilities | 36,698 | 92,576 | |
| Change in working capital | 17,099 | 89,757 | |
| Cash flow from operating activities | 104,203 | 77,694 | |
| INVESTING ACTI VITIE S |
|||
| Acquisition of intangible assets | 14 | –1,868 | – |
| Acquisition of tangible non-current assets | 15 | –403 | –754 |
| Cash flow from investing activities | –2,271 | –754 | |
| FINANCIN G ACTI VITIE S |
|||
| New share issues | 2,966 | 694 | |
| Dividend | –37,589 | –37,555 | |
| Cash flow from financing activities | –34,623 | –36,861 | |
| CASH FLOW FOR THE YEAR |
67,309 | 40,079 | |
| Cash & cash equivalents at beginning of year | 220,348 | 180,269 | |
| Cash & cash equivalents at year-end | 287,657 | 220,348 |
Björn Borg owns the Björn Borg trademark and currently has operations in five product areas: clothing, footwear, bags, eyewear and fragrances. Björn Borg products are sold in fifteen markets, the largest of which are Sweden and the Netherlands. Operations are conducted through a network of product and distribution companies which are either part of the Group or independent companies with licenses for product areas and geographical markets. The Björn Borg Group has its own operations at every level from brand development to consumer sales in its own Björn Borg stores.
The Parent Company operates as a limited liability company with its registered address in Stockholm. The address of the head office is Götgatan 78, 28th floor, SE-118 30 Stockholm, Sweden. The Parent Company's share is listed on NASDAQ OMX Nordic. A list of the largest individual shareholders as of December 31, 2009 is provided on page 61 of this annual report.
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) approved by the EU and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) as of December 31, 2009. The Group also applies the Swedish Financial Reporting Board's recommendation RFR 1.2 Supplementary Accounting Regulations for Groups, which specifies the additional disclosures required besides IFRS according to the provisions of the Annual Accounts Act. The Parent Company's functional currency is Swedish krona, which is also the Group's reporting currency. All amounts are in SEK thousands unless indicated otherwise. The Group's critical accounting policies are described below.
The revised accounting principles applied by the Group as of January 1, 2009 are described below. Other changes in IFRS that took effect in 2009 have not had a material impact on the Group's accounts.
IAS 1 Presentation of Financial Statements: Revised IAS 1 Presentation of Financial Statements applies as of January 1, 2009. The revision has impacted the recognition of the currency effect in the translation of foreign operations retroactively from December 31, 2008. This revenue and expenses were previously recognized directly in equity, but are now recognized in a separate statement directly after the income statement. Comparative periods have been revised in the annual report to follow the new layout. Since the revisions only affect the layout, no amounts have been changed with respect to earnings per share or other items in the financial reports.
Björn Borg has chosen to use the new terminology in its financial reports.
IFRS 8 Operating Segments: IFRS 8 requires the Group's segment information to be presented from Management's perspective and business segments to be identified based on internal reporting to the Company's chief operating decision maker. Björn Borg has identified the President as its chief operating decision maker, while internal reporting used by the President to oversee operations and make decisions on allocating resources serves as the basis of the segment information presented. According to the previous standard, IAS 14 Segment Reporting, two types of segments (business segments and geographical areas) were identified using a model based on risks and opportunities. IFRS 8 is purely a disclosure standard, because of which it does not have any impact on the Group's total comprehensive income, financial position, cash flow and changes in equity. The business segments are unchanged based on the most recent annual report.
The International Accounting Standards Board (IASB) has issued number of new and revised standards which apply as of January 1, 2010. The standards that could impact Björn Borg's future financial reporting are described below.
The revised versions of IAS 27 Consolidated and Separate Financial Statements and IFRS 3 Business Combinations mean, among other things, that transactions with minority owners, where control is retained, are recognized as transactions between owners (in equity). Further, the rules for recognition of contingent consideration have been revised, so that the cost of an acquisition is recognized all at once. Subsequent adjustments to cost affect profit and loss, as do acquisition-related expenses, which may no longer be included in the cost of an acquisition. The new standard is applied prospectively, i.e., primarily to new acquisitions and transactions as of January 1, 2010.
In addition to IFRS 3 and IAS 27, revisions have been made to IFRS 2 Share-based Payment with respect to cash-settled intra-group payments, IAS 32 Financial Instruments: Presentation with respect to the classification of new issues, IAS 39 Financial Instruments: Recognition and Measurement with respect to items eligible for hedge accounting, IFRS 12 Service Concessions, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 16 Hedges of a Net investment in a Foreign Operation and IFRIC 17 Distribution of Non-cash Assets to Owners.
Management is currently evaluating whether these other new and revised standards and interpretations will affect the Group's financial reports in the period when they are applied for the first time.
The consolidated financial statements include the Parent Company and all entities over which the Parent Company exercises control. These are companies in which Björn Borg has the right to formulate financial and operational strategies, generally through a shareholding of more than 50 percent of the capital and votes. The existence and effect of potential voting rights which are currently exercisable or convertible are taken into account when determining whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is obtained and are no longer consolidated from the date on which control ceases.
The acquisition method is used to report the Group's acquisitions of subsidiaries. The cost of an acquisition consists of the fair value of the assets paid as consideration, equity instruments in issue and liabilities that have arisen or been assumed as of the closing date. Identifiable acquired assets and assumed and contingent liabilities are initially valued at fair value on the acquisition date, regardless of the scope of any minority interests. The surplus comprised of the difference between the acquisition value and fair value of the Group's share of identifiable acquired net assets is recognized as goodwill. If the cost of the acquired subsidiary's net assets is less than their fair value, the difference is recognized directly through profit or loss. The accounting principles used by subsidiaries are adjusted where necessary to ensure consistency with the principles applied by other Group entities. All inter-company transactions and balances are eliminated in the preparation of the consolidated financial statements. Unrealized losses are also eliminated unless the transaction provides evidence of impairment.
Associates are companies in which the Group holds at least 20 and not more than 50 percent of the votes or where the Group otherwise can exercise a significant influence. A significant influence means that the owner can participate in decisions concerning a company's financial and operational strategies, but does not allow it to decide on these strategies.
Associates are reported according to the equity method. Holdings in associates are initially recognized at cost. The carrying amount includes any goodwill. The equity method means that the Group's share of any profit generated by the associate after acquisition is recognized through profit or loss. Cumulative changes subsequent to acquisition are recognized as a change in the holding's carrying amount.
Unrealized gains and losses on transactions between an associate and the Parent Company are eliminated in proportion to the Group's holding in the associate.
The minority share in a subsidiary's net assets is reported as a separate item in the Group's equity. In the consolidated income statement, the minority share is included in reported income. Transactions with the minority are treated in the same way as transactions with external parties. The sale of shares to the minority results in a gain or loss that is recognized in the consolidated income statement. The acquisition of minority shares can result in goodwill if the cost exceeds the carrying amount of the acquired net assets.
Note 1, Continued
Transactions in foreign currency are translated to Swedish krona at the exchange rate on the transaction date. Monetary items (assets and liabilities) in foreign currency are translated to Swedish krona at the balance date exchange rate. Exchange gains and losses that arise on such translations are recognized through profit or loss as other operating income and/or other operating expenses.
Revenue comprises the fair value of goods and services sold, net of value-added tax, rebates and discounts and after eliminating intra-Group sales. Revenue is recognized as follows:
1. Royalty revenue
Royalty revenue is generated through wholesale sales of Björn Borg products by distributors (Group-owned and independent) to retailers, and is calculated as a percentage of these sales. Royalties are recognized through profit or loss at the same time as the distributor's wholesale sale.
2. Product company revenue
The product companies for clothing and footwear generate revenue for Björn Borg from product sales to distributors.
3. Distribution company revenue
The Group-owned distribution companies for the clothing and footwear product areas generate revenue for Björn Borg from product sales to retailers.
4. Björn Borg store revenue
Björn Borg stores generate revenue for Björn Borg from sales to consumers.
In a finance lease, the economic risks and benefits associated with ownership of an asset are transferred in all essential respects from lessor to lessee. Other leases are classified as operating.
Assets held according to finance leases are recognized as non-current assets in the consolidated balance sheet at fair value at the start of the lease term or at the present value of the minimum lease fees, whichever is lower. The corresponding liability is carried in the balance sheet as a liability to the lessor. Lease payments are distributed between interest and principal. Interest is distributed over the lease term so that every reporting period is charged with an amount corresponding to a fixed interest rate on the recognized liability for each period. Depreciation of financially leased assets is carried for owned assets, with the exception of lease assets where it is unlikely Björn Borg will redeem the asset in question. In such cases, the asset is depreciated over its period of use or the lease term, whichever is shorter, taking into account residual values at the conclusion of each period.
Lease fees paid for operating leases are expensed on a straight-line basis over the lease term unless another systematic approach better reflects Björn Borg's use of the leased asset.
The Group has only defined contribution pension plans. A defined contribution plan is a pension plan where the Group pays fixed premiums to a separate legal entity. After it has paid the premium, Björn Borg has no further obligation to the Group's employees. The fees are recognized as staff costs in the period to which the fees relate.
Premiums received from employees for stock options in issue have been recognized as an increase in equity. If the Group receives market-rate consideration from employees for equity instruments in issue, no expense is recognized through profit or loss.
Termination benefits are payable when employment is terminated before the normal retirement date or when an employee accepts voluntary redundancy. The Group recognizes a liability and an expense in connection with a termination when Björn Borg is demonstrably committed to terminating employment before the normal retirement date or providing termination benefits as the result of an offer made to encourage voluntary redundancy.
Björn Borg recognizes a liability and an expense for bonuses when there is a legal or constructive obligation to pay such bonuses to employees as a result of past practice.
The Group's total tax expense consists of current tax and deferred tax. Current tax is the tax paid or received for the current year and any adjustments to current tax in prior years. Deferred tax is calculated on differences arising between the tax bases of assets and liabilities and their carrying amounts. Deferred tax is reported using the liability method. Deferred tax liabilities are normally recognized for all taxable temporary differences, while deferred tax assets are recognized to the extent it is probable that taxable profit will be available against which the amounts can be utilized.
The carrying amount of a deferred tax asset is tested at each balance sheet date and reduced to the extent it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.
Deferred tax is determined using the tax rates expected to apply to the period when the asset is recovered or the liability settled. Deferred tax is recognized as income or expense through profit or loss, unless it is attributable to transactions or events recognized directly in equity, in which case it is recognized in equity.
Deferred tax assets are set off against deferred tax liabilities when they relate to income taxes levied by the same tax authority and the Group intends to make or receive a single net payment.
Goodwill consists of the amount by which cost exceeds the fair value of the Group's share of an acquired subsidiary's identifiable net assets upon acquisition. If it is proven at the time of acquisition that the fair value of acquired assets, liabilities and contingent liabilities exceeds cost, the surplus is immediately recognized as revenue through profit or loss.
Goodwill has an indeterminate period of use and is recognized at cost less accumulated impairment losses. Goodwill is allocated to the smallest cash-generating units.
Tenancy rights are recognized at cost less depreciation. Depreciation is booked on a straight-line basis over the estimated period of use, i.e., the lease term, usually five years.
Trademarks are tested annually to identify any impairment loss and are recognized at cost less accumulated amortization. The Björn Borg trademark was established in the Swedish fashion market during the first half of the 1990s. Continuity has given the brand a distinctive identity and strong position in its markets. It is characterized by quality products and creative, innovative design influenced by the sporting heritage associated with the Björn Borg name. Through consistent, long-term branding, Björn Borg has strengthened its role in the international fashion market. The trademark is considered to have a very strong market position and therefore has an indeterminate period of use.
Tangible non-current assets are recognized as assets in the balance sheet if it is probable that future economic benefits will accrue to the Company and their cost can be reliably measured. Tangible non-current assets, consisting mainly of equipment and computers, are carried at cost less accumulated depreciation and impairment losses. Depreciation of tangible non-current assets is expensed in a way that the asset's value is depreciated on a straight-line basis over its estimated useful life. Equipment and computers are depreciated by 20–33 percent annually.
At the end of each reporting period, the Group's assets are tested for impairment. If there is an indication of impairment, the asset's recoverable amount is calculated. Goodwill has been allocated to cash-generating units and, together with other intangible assets with an indeterminate period of use and intangible assets not in use, is subject to annual impairment testing even if there is no indication of diminished value. However, impairment testing is done more frequently if there are indications of diminished value. The recoverable amount is the higher of the asset's value in use and the value that would be obtained if the assets were sold to an independent party, i.e., its net selling price. Value in use is the present value of all receipts and disbursements expected to arise from continuing use of the asset plus the present value of the net selling price at the end of the asset's useful life. If the estimated recoverable amount is less than the carrying amount, the asset is written down to its recoverable amount.
Inventory is valued at the lower of cost according to the first in, first-out method and fair value (net selling price).
Net selling price corresponds to the estimated selling price less estimated expenses required to complete the sale.
The necessary provisions are made for obsolescence based on an individual determination. The change between the year's opening and closing balances in the obsolescence reserve affects operating profit in its entirety.
Financial instruments are valued and recognized by the Group in accordance with the rules in IAS 39. Financial assets and liabilities are categorized according to IAS 39. Financial instruments are initially recognized at cost, corresponding to the instrument's fair value plus transaction costs for all financial instruments other than those in the category financial assets (liabilities, which are recognized at fair value through profit or loss). Subsequent recognition and valuation depend on how the financial instruments have been classified.
Financial assets and liabilities are recognized in the balance sheet when the Company becomes a party to the instrument's contractual terms. Accounts receivable are recognized when an invoice has been issued. Liabilities are recognized when the counterparty has performed as agreed and there is a contractual obligation to pay, even if the invoice has not yet been received. Accounts payable are recognized when an invoice has been received.
A financial asset is derecognized when the rights in the agreement are realized, expire or the Company loses control of them. The same applies to part of a financial asset. A financial liability is derecognized when the obligation in the agreement is fulfilled or otherwise discharged. The same applies to part of a financial liability.
Financial assets and liabilities are set off and recognized net in the balance sheet when there is a legal right of set-off and when the intention is to report the items net or realize the asset while at the same time settling the liability.
Loans receivable and accounts receivable are financial receivables that arise when the Company provides money without the intent to trade its claim and are categorized as loans receivable and accounts receivable. Within loans receivable and accounts receivable, accounts receivable are included in other current receivables and cash & cash equivalents. Assets in this category are recognized after acquisition at amortized cost. Amortized cost is calculated with the help of the effective interest rate method, which means that any premiums and discounts as well as directly related costs or revenue are accrued over the life of the agreement with the help of the estimated effective interest rate. The effective interest rate is the interest rate that produces the instrument's cost through a present value calculation of future cash flows. The anticipated maturity of accounts receivable is short, due to which they are carried at nominal amount without discounting. Accounts receivable are recognized at the amounts that are expected to be received after deducting impaired receivables, which are evaluated individually. Provisions for impaired receivables are recognized when there is objective proof that the Group will not be able to receive all the amounts that are due as per the original terms of the receivables. If it is determined in the quarterly review of exposures that a customer, due to insolvency, has not been able to pay its liabilities or for good reason is not expected to pay its liabilities within three months, a provision is allocated for the entire established or anticipated loss. Provisions for anticipated impaired receivables are based on an individual assessment of each customer given their solvency, future risk and the value of the collateral received.
Write-downs of accounts receivable are recognized in operating expenses.
Cash & cash equivalents consist of cash, demand deposits and other short-term investments with maturities of three months or less. Cash and bank deposits are reported at nominal amounts and short-term investments at fair value, with any changes in value recognized through profit or loss.
Accounts payable and loan liabilities are categorized as "Financial liabilities," which means they are recognized at amortized cost. The anticipated maturity of accounts payable is short, due to which the liability is carried at nominal amount without discounting.
Liabilities to credit institutions, bank overdraft facilities and other liabilities (loans) are initially recognized at fair value, net after transaction costs. Loans are subsequently carried at amortized cost. Any transaction costs are distributed over the term of the loan applying the effective rate method. Long-term liabilities have an anticipated maturity of more than one year, while short-term liabilities have a maturity of less than one year.
Common shares are classified as share capital. Transaction costs in connection with new share issues are reported as a deduction (net of tax) from the issue proceeds.
Provisions for legal claims or other claims from external counterparties are reported when the Group has a legal or constructive obligation as a result of a past event and it is likely that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made.
The cash flow statement has been prepared according to the indirect method. Reported cash flow comprises only transactions that entail receipts and disbursements.
The annual report of the Parent Company has been prepared according to the Annual Accounts Act, the Swedish Financial Reporting Board's recommendation RFR 2:2 Accounting in Legal Entities and statements from the Swedish Financial Reporting Board. RFR 2:2 means that the Parent Company, in the annual report for the legal entity, must apply all EU-approved IFRS and pronouncements as far as possible within the framework of the Annual Accounts Act and the Pension Obligations Vesting Act, taking into account the connection between reporting and taxation. The recommendation specifies the exemptions from and additions to IFRS. Differences between the accounting principles of the Group and the Parent Company are indicated below.
The amounts allocated to untaxed reserves constitute taxable temporary differences. Because of the relationship between recognition and taxation, the deferred tax liability attributable to untaxed reserves is not reported separately by the legal entity. Swedish practice requires changes in untaxed reserves to be recognized through profit or loss in individual companies under the heading "Appropriations." The accumulated value of provisions is reported in the balance sheet under the heading "Untaxed reserves," of which 26.3 percent is considered a deferred tax liability and 73.7 percent restricted equity.
Björn Borg recognizes shareholder contributions and Group contributions in accordance with statement UFR 2 from the Swedish Financial Reporting Board. Shareholder contributions are recognized directly in the unrestricted equity of the recipient and as an increase in the contributor's "Shares in Group companies."
Group contributions paid and received for the purpose of minimizing the Group's tax are reported as a reduction or increase in unrestricted equity, and their tax effects are recognized directly in equity and therefore do not affect profit or loss.
Estimates and assumptions are periodically evaluated based on historical experience and other factors, including assumptions regarding future events that under current circumstances seem reasonable. Estimates and assumptions about the future are part of the work in preparing the annual report. By definition, the estimates for accounting purposes that this necessitates will not always correspond to actual outcomes.
Deferred tax is calculated on temporary differences between the carrying amounts of assets and liabilities and their value for tax purposes. There are primarily two types of assumptions and estimates that affect reported deferred tax, i.e., those used to determine the carrying amount of various assets and liabilities and those used to determine future taxable gains in cases where future utilization of deferred tax assets is dependent on this. For more information, see Note 13.
Impairment testing of the Group's goodwill and the carrying amount for trademarks requires estimates and assumptions regarding margins, growth, discount rates, etc. For a more detailed description of impairment testing, see Note 14.
Through its operations, Björn Borg is exposed to currency, interest rate, credit and counterparty risks, as well as liquidity and refinancing risks. The Board has decided how the Group will manage these risks.
Fluctuations in exchange rates affect Björn Borg's results mainly because sales and purchases are made in different currencies (transaction exposure).
The Group's largest currency exposure is against the dollar; approximately 50 percent of the Group's sales and cost of goods sold is in USD or USD-pegged currencies. The Group's transaction risk arises because Björn Borg's largest business segment, Product Development, has sales in USD and purchases in USD, at the same time that the Distribution business segment has sales in SEK and purchases in USD. The Group manages transaction risk partly by using the surplus it generates on sales in product development to outside distributors for purchases of goods for sale in the Distribution business segment.
The Björn Borg Group was affected positively by the significant increase in the value of the U.S. dollar against the Swedish krona in 2009 compared to 2008. For the full-year 2009 the USD/SEK exchange rate was an average of about 18 percent higher than in 2008.
The higher dollar exchange rate against the Swedish krona has affected the Product Development business segment positively in the form of higher gross profit in SEK due to increased revenue and increased purchases, at the same time that it has affected the Distribution business segment negatively in the form of more expensive purchases, and thus lower gross profit in SEK and percentage-wise.
The table below describes the effect of the dollar exchange rate on the Björn Borg Group's revenue and operating profit based on the current business model and the various business segments' share of revenue and operating profit.
Several components are affected by movements in the dollar exchange rate as well as each business segment's share of total revenue and profit, the timing of deliveries and changes in inventory.
Björn Borg does not use currency derivatives.
| Percent | Estimated E effect on revenue |
stimated effect on operating profit |
|
|---|---|---|---|
| Stronger USD vs. SEK | 10% | 4% | 3% |
| Weaker USD vs. SEK | –10% | –4% | –3% |
| Stronger EUR vs. SEK | 10% | 1% | 1% |
| Weaker EUR vs. SEK | –10% | –1% | –1% |
Interest rate risk refers to the risk that changes in market interest rates will negatively impact the Group's net interest income and expenses. Björn Borg's interest rate risk as of December 31, 2009 was limited, since interest-bearing assets amounted to SEK 296,484 thousand and interest-bearing loan liabilities amounted to SEK 0 thousand.
The Group's credit and counterparty risks consist of exposures to commercial and financial counterparties. Credit or counterparty risk refers to the risk of a loss if the counterparty does not meet its obligations. According to the decision of the Board of Directors, this risk will be limited by accepting only counterparties with high credit ratings and establishing limits. Björn Borg's commercial credit risk mainly consists of accounts receivable, which are distributed among a large number of counterparties. Credit risk vis-à-vis financial counterparties is limited to financial institutions with high credit ratings. As of December 31, 2009 there were no significant concentrations of credit risk. The maximum credit risk corresponds to the carrying amount of the financial assets.
| Group | 2009 | 2008 |
|---|---|---|
| Accounts receivable | 38,032 | 79,900 |
| Other current receivables | 3,227 | 5,335 |
| Cash and bank balances | 296,484 | 241,498 |
| 337,743 | 326,733 |
Liquidity and refinancing risk refers to the risk that the cost will be higher and financing opportunities limited when loans are renewed and that payment obligations cannot be met due to insufficient liquidity or difficulty obtaining financing. The Group's cash & cash equivalents are invested short-term.
| Dec. 31, 2009 | Up to 3 mos. | 3-12 mos. | 1–5 yrs. O | ver 5 yrs. |
|---|---|---|---|---|
| Accounts receivable | 38,032 | – | – | – |
| Other current receivables | 3,227 | – | – | – |
| Cash and bank balances | 296,484 | – | – | – |
| Accounts payable | 15,480 | – | – | – |
| Other liabilities | – | –13,998 | –8,785 | –32,104 |
| Totalt | 353,223 | –13,998 | –8,785 | –32,104 |
| Dec. 31, 2008 | Up to 3 mos. | 3-12 mos. | 1–5 yrs. O | ver 5 yrs. |
| Accounts receivable | 79,900 | – | – | – |
| Other current receivables | 5,335 | – | – | – |
| Cash and bank balances | 241,498 | – | – | – |
| Accounts payable | 45,489 | – | – | – |
| Other liabilities | – | –11,350 | –15,946 | –30,870 |
| Totalt | 372,222 | –11,350 | –15,946 | –30,870 |
A business segment is a group of assets and operations which provides products or services that are exposed to risks and opportunities that differ from those of other business segments. The Björn Borg Group is divided into four primary business segments: Brand, Product Development, Distribution and Retail.
Segment reporting is prepared according to the same accounting principles as the consolidated accounts, as indicated in Note 1.
In its capacity as owner and manager of the Björn Borg trademark, the Björn Borg Group receives royalty revenue based on wholesale sales by distributors and product companies.
The product companies for clothing and footwear are responsible for design and development of collections for all markets in the network. They generate revenue from product sales to distributors.
The distribution companies for the clothing and footwear product areas generate revenue for the Björn Borg Group from product sales to retailers.
Björn Borg's concept stores generate revenue for the Group from sales to consumers.
| Brand P | roduct Development | Distribution | Retail | Total | Eliminations | Group | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SEK thousands | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
| Revenue | ||||||||||||||
| External sales | 54,936 | 57,272 | 257,391 | 250,608 | 153,102 | 163,655 | 54,485 | 55,021 | 519,915 | 526,556 | – | – | 519,915 526,556 | |
| Internal sales | 83,341 | 85,020 | 81,788 | 86,579 | 40,713 | 33,312 | 6 | 6 | 205,847 | 204,916 –205,847 –204,916 | – | – | ||
| Total sales | 138,277 | 142,292 339,179 337,187 | 193,815 | 196,967 | 54,491 | 55,027 725,762 | 731,472 –205,847 –204,916 | 519,915 526,556 | ||||||
| Operating profit | 43,942 | 42,656 | 50,984 | 50,009 | 9,635 | 27,475 | 8,032 | 8,611 112,594 | 128,751 | – | – | 112,594 128,751 | ||
| Non-current assets | 197,427 | 215,792 | 8,648 | 8,512 | 506 | 632 | 7,875 | 10,749 | 214,457 | 235,686 | 1,606 | –17,148 | 216,063 218,538 | |
| Inventory | – | – | 1,373 | 854 | 28,742 | 34,752 | 8,234 | 12,065 | 38,349 | 47,671 | –11,894 | –13,919 | 26,455 | 33,752 |
| Other current assets | 717,981 | 535,511 | 93,989 | 166,868 | 74,414 | 96,196 | 28,569 | 37,289 | 914,953 | 835,865 –552,751 –454,419 | 362,203 381,446 | |||
| Total assets | 915,409 | 751,304 104,011 176,234 | 103,661 | 131,581 | 44,678 | 60,104 1,167,759 1,119,222 –563,039 –485,486 | 604,720 633,736 | |||||||
| Other liabilities | 317,670 | 290,517 | 99,325 | 170,199 | 96,852 | 87,109 | 42,634 | 45,966 | 556,481 | 593,791 –412,717 –407,609 | 143,764 186,181 | |||
| Total liabilities | 317,670 | 290,517 | 99,325 170,199 | 96,852 | 87,109 | 42,634 | 45,966 556,481 | 593,791 –412,717 –407,609 | 143,764 186,181 | |||||
| Investments in tangible | ||||||||||||||
| and intangible assets | 2,317 | 754 | 446 | 164 | 474 | 510 | 1,303 | 3,645 | 4 540 | 5 073 | – | – | 4,540 | 5,073 |
| Depreciation/amortization | –1,883 | –1,670 | –156 | –57 | –947 | –151 | –4,038 | –5,097 | –7 024 | –6 976 | – | – | –7,024 | –6,976 |
The difference between operating profit for segments for which information is disclosed, SEK 112,594 thousand (128,751), and profit before tax and discontinued operations, SEK 111,658 thousand (134,822), is net financial items, SEK –936 thousand (6,071).
Sales between segments are executed on market terms. Revenue from outside parties that is reported to Management is valued in the same way as in profit and loss.
The column for eliminations refers strictly to internal transactions.
| Sweden N | etherlands N | orway | Denmark | Other | Group | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |
| Net sales | 203,059 | 218,067 | 156,187 | 123,981 | 38,524 | 46,518 | 37,220 | 40,283 | 84,925 | 97,706 | 519,915 | 526,556 |
| Assets | 604,720 | 633,736 | – | – | – | – | – | – | – | – | 604,720 | 633,736 |
| Investments | 4,540 | 5,073 | – | – | – | – | – | – | – | – | 4,540 | 5,073 |
| Depreciation/amortization | –7,024 | –6,976 | – | – | – | – | – | – | – | – | –7,024 | –6,976 |
Revenue of approximately SEK 156,187 thousand (123,981) refers to a single outside customer. This revenue is attributable to the brand and product development segment in the Netherlands.
| Net sales | Group P | arent Company | |||
|---|---|---|---|---|---|
| SEK thousands | 2009 | 2008 | 2009 | 2008 | |
| Royalty and service revenue | 54,936 | 57,272 | 47,608 | 50,630 | |
| Product company revenue | 257,391 250,608 | – | – | ||
| Distribution company revenue | 153,102 163,655 | – | – | ||
| Concept store revenue | 54,485 | 55,021 | – | – | |
| 519,915 526,556 | 47,608 | 50,630 |
Royalty revenue amounted to SEK 52,468 thousand (55,435). There is no royalty revenue in the Parent Company.
The Parent Company's revenue from subsidiaries amounted to SEK 45,098 thousand (47,218). The Parent Company's expenses for subsidiaries amounted to SEK 5,912 thousand (5,567). The Parent Company's sales to subsidiaries mainly consist of compensation to cover shared costs for rents, central administration, shared systems and marketing services.
| Wages, salaries, other | ||||||
|---|---|---|---|---|---|---|
| compensation and social | Group P | arent Company | ||||
| security contributions | 2009 | 2008 | 2009 | 2008 | ||
| Wages, salaries and | ||||||
| other compensation | 40,122 | 38,052 | 12,990 | 10,268 | ||
| Social security contributions | 11,450 | 12,933 | 3,927 | 4,183 | ||
| Pension costs | 4,455 | 4,687 | 2,210 | 2,336 | ||
| Total | 56,027 | 55,672 | 19,128 | 16,787 | ||
| Wages, salaries and other compensation divided between Board, Senior Executives and other employees |
||||||
| Board, President and other | ||||||
| Senior Executives | 8,770 | 11,260 | 5,973 | 7,732 | ||
| Other employees | 31,352 | 26,792 | 7,017 | 2,536 | ||
| Total | 40,122 | 38,052 | 12,990 | 10,268 | ||
| Average number of employees1 | ||||||
| Women | 60 | 59 | 10 | 7 | ||
| Men | 32 | 29 | 10 | 7 | ||
| Total | 92 | 88 | 20 | 14 | ||
| Group | 2009 | 2008 | ||||
| Gender distribution among | ||||||
| Directors and Senior Executives M | en | Women M | en | Women | ||
| Board | 6 | 1 | 6 | 1 | ||
| Other Senior Executives | 4 | 3 | 5 | 2 | ||
| Total | 10 | 4 | 11 | 3 |
1 The average number of employees is calculated based on 1,800 annual working hours.
| 2009 | 2008 | |||||
|---|---|---|---|---|---|---|
| Compensation and other benefits to Directors |
Board O fees |
ther compensation |
Bord O fees |
ther compensation |
||
| Chairman of the Board | ||||||
| Fredrik Lövstedt | 300 | – | 300 | – | ||
| Other Directors; | ||||||
| Mats H Nilsson | 100 | 10 | 100 | 16 | ||
| Fabian Månsson | 100 | – | – | – | ||
| Vilhelm Schottenius | 100 | 29 | 100 | 24 | ||
| Monika Elling | 100 | – | – | – | ||
| Michael Storåkers | 100 | – | 100 | – | ||
| Nils Vinberg | 50 | – | – | – | ||
| Lottie Svedenstedt | – | – | 100 | 9 | ||
| Håkan Roos | – | – | 100 | – | ||
| Total | 850 | 39 | 800 | 49 |
| 2009 | Base | Variable P salary compensation |
ensions O | ther costs compensation |
|---|---|---|---|---|
| President | 1,800 | 240 | 447 | – |
| EVP | 1,080 | 240 | 395 | – |
| Other Senior Executives | 5,235 | 175 | 998 | – |
| Total | 8,115 | 655 | 1,840 | – |
| 2008 | Base | Variable P salary compensation |
ensions O | ther costs compensation |
| President EVP |
1,800 1,065 |
240 120 |
960 373 |
1,800 – |
| Other Senior Executivese | 3,948 | 175 | 779 | – |
The Chairman and other Directors received total fees of SEK 850 thousand (800) in 2009, in accordance with the Board compensation approved by the Annual General Meeting. The Chairman received SEK 300 thousand (300), while other Directors excluding the President received SEK 100 thousand (100) each. One Director received compensation for only six months because he received a salary from the Company during the period. In addition to their fees, the Chairman and other Directors are reimbursed for travel and accommodations in connection with Board meetings.
The President's base salary amounted to SEK 1,800 thousand (1,800). In addition, he received variable compensation of SEK 240 thousand (240). The variable compensation is paid if the Group's sales and results exceed the Board's established budget. Moreover, the President receives a company car and health insurance. He is entitled to a monthly pension provision corresponding to 25 percent of base salary.
The President has a term of notice of 6 months if terminated by the Company. If he resigns, there is a 6 month term of notice. The President is entitled to severance corresponding to 6 months' base salary. A proposal on the terms of the compensation package for the President is made by a compensation committee consisting of Fredrik Lövstedt and Monika Elling and approved by the Board. The President's holding of shares and warrants is described below.
Senior Executives refer to ten persons who, together with the President, made up the Group Management in 2009.
Base salaries paid to other Senior Executives amounted to SEK 6,315 thousand (5,013) in 2009. Moreover, they receive variable compensation if the Group's sales and results exceed the Board's established budget. The variable compensation for 2009 amounted to SEK 415 thousand (295). Certain Senior Executives also have access to a company car. Björn Borg pays pension premiums to a defined contribution pension plan. Retirement benefit costs for 2009 amounted to SEK 1,393 thousand (1,152). The Senior Executives have a mutual term of notice of 6 months. The shareholdings and warrant holdings of Senior Executives of Björn Borg are described below.
| Senior Executives as of Dec. 31, 2009 N | o. of warrants N | o. of shares |
|---|---|---|
| Fredrik Lövstedt | 1,400,040 | |
| Mats H Nilsson | 1,478,440 | |
| Vilhelm Schottenius | 1,023,520 | |
| Monika Elling | 29,000 | |
| Michael Storåkers | 40,000 | |
| Nils Vinberg | 711,080 | |
| Fabian Månsson | 0 | |
| President | 750,000 | 35,000 |
| Other Senior Executives | 546,000 | 155,160 |
| Total | 1,296,000 | 4,872,240 |
The Group has only defined contribution pension plans. A defined contribution plan is a plan where the Group pays fixed premiums to a separate legal entity. After it has paid the premium, Björn Borg has no further obligation to the Group's employees. The fees are recognized as staff costs in the period to which the fees relate and in 2009 amounted to SEK 4.5 million (4.7).
Björn Borg offers the following two incentive schemes based on warrants in Björn Borg (i.e., the Parent Company).
Warrant scheme 2008:1, approved by the Annual General Meeting 2008 at the suggestion of Björn Borg's Board of Directors, issued 500,000 warrants to Björn Borg Brands AB for further transfer to employees of the Group. After deducting warrants that have been deregistered by the Swedish Companies Registration Office, there are currently 155,300 outstanding warrants in this scheme. The outstanding warrants carry the right to subscribe for 155,300 shares for SEK 74.60 per share.
Warrant scheme 2008:2, approved by the Annual General Meeting 2008 at the suggestion of Björn Borg's Board of Directors, issued 1,250,000 warrants to Björn Borg Brands AB for further transfer to the President and Vice President of the Group. There are currently 1,250,000 outstanding warrants in this scheme. The outstanding warrants carry the right to subscribe for 1,250,000 shares for SEK 48.84 per share.
The warrants have been acquired at market rates based on an independent valuation according to the Black & Scholes model. None of the outstanding schemes contain terms that could entail costs for the Company, e.g., in form of social security contributions. Warrant scheme 2006:1 provided Björn Borg Brands AB with total proceeds of SEK 2,996 thousand in 2009; no outstanding warrants remain in this scheme. If all outstanding warrants were exercised, the number of shares in the Company would increase from 25,148,384 to 26,533,684 and the share capital would increase by SEK 439,156, which would mean that the new shares correspond to 5.6 percent of the total number of shares on a fully diluted basis.
| Warrant scheme | Scheme 2006:1 |
Scheme 2008:1 |
Scheme 2008:2 |
Total |
|---|---|---|---|---|
| Outstanding at beginning of year | 22,300 | 155,300 | 1,250,000 | 1,427,600 |
| Converted to shares | –22,300 | –22,300 | ||
| Outstanding and exercisable at year-end | 0 | 155,300 | 1,250,000 | 1,405,300 |
| Share entitlement | 0 | 155,300 | 1,250,000 | 1,405,300 |
| Group P | arent Company | ||||
|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | ||
| Deloitte AB | |||||
| Compensation for audits | |||||
| and related services | 932 | 946 | 619 | 690 | |
| Compensation for other assignments | 56 | 122 | 56 | 122 | |
| 988 | 1,068 | 675 | 812 | ||
| Other accounting firms | |||||
| Compensation for audits | |||||
| and related services | – | 74 | – | – | |
| Compensation for other assignments | 31 | 25 | – | – | |
| 31 | 99 | – | – | ||
| Total | 1,019 | 1,167 | 675 | 812 |
Audit assignments refer to the examination of the annual report and accounting records as well as the administration by the Board and the President, other tasks related to the duties of the Company's auditors and consultation or other services that may result from observations noted during such examinations or implementation of such other tasks. All other tasks are defined as other assignments.
Depreciation/amortization of intangible and tangible non-current assets by function
| Group P | arent Company | |||||
|---|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |||
| Distribution expenses | 4,566 | 4,768 | 1,224 | 1,085 | ||
| Administrative expenses | 1,756 | 1,988 | 471 | 417 | ||
| Development expenses | 702 | 220 | 188 | 167 | ||
| Total | 7,024 | 6,976 | 1,883 | 1,670 |
| Group P | arent Company | ||||
|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | ||
| Leases during the year amount to Future lease fees amount to |
14,671 | 12,017 | 5,523 | 3,952 | |
| – within 1 year – later than 1 year but within |
14,950 | 12,275 | 5,631 | 4,027 | |
| 5 years | 62,708 | 51,454 | 23,646 | 16,895 | |
| Total | 77,658 | 63,729 | 29,277 | 20,922 |
The Björn Borg Group leases offices and retail space. The leases are signed on market terms with regard to price and duration. Certain leases are variable and include both a minimum rent and a portion contingent on sales.
As of the closing day, December 31, 2009, the Björn Borg Group had no finance leases.
Until July 1, 2009 Björn Borg Footwear AB had a property lease with Klockaren Fastighetsförvaltning i Varberg AB, which was owned by Jan Lanai. On July 1, 2009 the property was sold to an outside party, at which point the related-party relationship ceased. Jan Lanai is a member of the management of the Björn Borg Group and is President and Director of Björn Borg Footwear AB. In 2009 SEK 232 thousand (399) was expensed for rent for premises. Transactions with related parties were made on market terms.
| Parent Company | Dec. 31 2009 |
Dec. 31 2008 |
|---|---|---|
| Untaxed reserves | ||
| Accumulated accelerated depreciation | 1,404 | 1,404 |
| Tax allocation reserve 2006 | 5,955 | 5,955 |
| Total | 7,359 | 7,359 |
| Group P | arent Company | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Current tax on profit for the year | –23,239 –30,923 | – | – | |
| Deferred tax | –7,517 | –4,697 | – | – |
| Notional tax on Group contributions | 4,017 | 4,424 | ||
| Total recognized tax expense | –30,756 –35,620 | 4,017 | 4,424 |
| Reconciliation between current tax | Group P | arent Company | ||
|---|---|---|---|---|
| rate and effective tax rate | 2009 | 2008 | 2009 | 2008 |
| Recognized profit before tax | 111,658 134,822 | 84,367 –16,633 | ||
| Tax according to current tax rate | –29,366 –37,750 | –22,188 | 4,657 | |
| Tax effect of: | ||||
| Tax related to tax allocation reserve | – | – | –33 | – |
| Other non-deductible costs | –319 | –60 | –67 | –233 |
| Other tax-exempt income | 71 | 84 | 26,305 | – |
| Tax owing to amended tax rate | – | 1,894 | – | – |
| Tax related to revenue/expenses not | ||||
| recognized through profit or loss | –97 | 210 | – | – |
| Adjustment of tax from previous years | –349 | – | – | – |
| Unutilized tax loss in U.S. | –696 | – | – | – |
| Recognized tax expense | –30,756 –35,620 | 4,017 | 4,424 |
| Group P | arent Company | |||
|---|---|---|---|---|
| Dec. 31 | Dec. 31 | Dec. 31 | Dec. 31 | |
| Deferred taxes | 2009 | 2008 | 2009 | 2008 |
| Recognized deferred tax assets and tax liabilities |
||||
| Inventories | 3,128 | 3,661 | – | – |
| Untaxed reserves | –43,139 –36,545 | – | – | |
| Total deferred tax assets (+) deferred tax liabilities (–) |
–40,011 –32,884 | – | – |
| Group | Dec. 31 2009 |
Dec. 31 2008 |
|---|---|---|
| Goodwill | ||
| Accumulated cost | ||
| Opening balance | 13,944 | 13,944 |
| Carrying amount at year-end | 13,944 | 13,944 |
| Trademarks | ||
| Accumulated cost | ||
| Opening balance | 187,532 187,532 | |
| Carrying amount at year-end | 187,532 187,532 | |
| Tenancy rights | ||
| Accumulated cost | ||
| Opening balance | 3,425 | 1,225 |
| Investments | – | 2,200 |
| Closing balance | 3,425 | 3,425 |
| Accumulated amortization | ||
| Opening balance | –1,729 | –284 |
| Amortization for the year | –1,245 | –1,445 |
| Closing balance | –2,974 | –1,729 |
| Carrying amount at year-end | 451 | 1,696 |
| Capitalized expenditure for software | ||
| Accumulated cost Investments |
3,160 | – |
| Closing balance | 3,160 | – |
| Accumulated amortization | ||
| Amortization for the year | –174 | – |
| Closing balance | –174 | – |
| Carrying amount at year-end | 2,986 | – |
| 31 dec | 31dec | |
| Parent Company | 2009 | 2008 |
| Capitalized expenditure for software Accumulated cost |
||
| Investments | 1,868 | – |
| Closing balance | 1,868 | – |
| Accumulated impairment losses | ||
| Amortization for the year | –174 | – |
| Closing balance | –174 | – |
| Carrying amount at year-end | 1,694 | – |
The purchase price consists of an initial price of SEK 124,000 thousand and a supplemental payment in the next ten years comprising a fixed portion and a contingent portion. The reported cost of the trademark is the initial purchase price of SEK 124,000 thousand, together with the portion of the supplemental payment that can be reliably determined (total SEK 187,532 thousand), whereby only the fixed portion of the supplemental payment is included. An expense will be recognized through profit or loss during the period 2007–2016 for the amount by which the actual supplemental payment exceeds the payment recognized in the cost of the trademark. In accordance with IAS 38, future payments of the supplemental payment have been discounted to present value and a corresponding amount is carried among other liabilities. The difference between the present value of the future supplemental payment and the nominal amount is carried as an interest expense over the credit period applying the effective interest method.
Goodwill has been allocated to three cash-generating units: Björn Borg Brands AB, Björn Borg Clothing AB and Björn Borg Footwear Holding AB. There are also intangible assets in the form of trademarks where the cash-generating unit is Björn Borg Brands AB. A list is provided below.
| Goodwill | 2009 | 2008 |
|---|---|---|
| Björn Borg Brands AB | 9,330 | 9,330 |
| Björn Borg Clothing AB | 658 | 658 |
| Björn Borg Footwear Holding AB | 3,956 | 3,956 |
| 13,944 | 13,944 | |
| Trademarks | ||
| Björn Borg Brands AB | 187,532 187,532 | |
| 187,532 187,532 |
Every year the Group tests goodwill and trademarks for impairment in accordance with the accounting principle described in Note 1. The future cash flows used to calculate each unit's value in use are based in the first year on the budget adopted by the Board for 2010 for each unit, after which cash flows are based on the assumption that annual growth will be lower than historical growth in the last five-year period. Management bases its assumptions of future growth on previous experience and thorough discussions with distributors and licensees.
Impairment tests were conducted as of December 31, 2009 applying a 14 percent discount rate before tax as well as an assumption of annual, sustainable growth of 3 percent for the period beyond the forecast horizon. This annual growth is assumed to be in line with growth for the market in which Björn Borg is active. The forecast period stretches from 2010 to 2014.
There are no impairment losses in the Group, since the discounted present value of future cash flows exceeds the carrying amount of the net assets in every case.
If the assumed growth beyond the forecast period used in the calculation of value in use for goodwill and trademarks had been 0 percent instead of the assumed 3 percent, there would have still been no impairment losses.
| Group P | arent Company | |||
|---|---|---|---|---|
| Dec. 31 2009 |
Dec. 31 2008 |
Dec. 31 2009 |
Dec. 31 2008 |
|
| Accumulated cost | ||||
| Opening balance | 25,885 | 23,012 | 8,366 | 7,612 |
| Investments | 1,380 | 2,873 | 403 | 754 |
| Sales and disposals | – | – | – | – |
| Closing balance | 27,265 | 25,885 | 8,769 | 8,366 |
| Accumulated depreciation | ||||
| Opening balance | –10,519 | –5,195 | –2,822 | –1,152 |
| Sales and disposals | 9 | 166 | – | – |
| Depreciation for the year | –5,605 | –5,490 | –1,709 | –1,670 |
| Closing balance | –16,115 –10,519 | –4,531 | –2,822 | |
| Carrying amount at year-end | 11,150 | 15,366 | 4,238 | 5,544 |
| Parent Company | Dec. 31 2009 |
Dec. 31 2008 |
|---|---|---|
| Shares in subsidiaries | ||
| Opening cost | 54,497 | 54,497 |
| Closing cost | 54,497 | 54,497 |
| Shares in subsidiaries | Reg. N Reg.no. address |
o. of Share of shares equity % |
Book value |
||
|---|---|---|---|---|---|
| Björn Borg Brands AB | 556537-3551 Stockholm 84,806 | 100 40,216 | |||
| Björn Borg Clothing AB | 556414-0373 Stockholm | 1,000 | 100 | ||
| Björn Borg Sweden AB | 556374-5776 Stockholm | 3,000 | 100 | ||
| Anteros Lagerhantering AB 556539-2221 Stocckholm | 901 | 90,1 | |||
| Björn Borg Retail AB | 556577-4410 Stockholm | 1,000 | 100 | ||
| Björn Borg Inc | Delaware | 3,000 | 100 | ||
| Björn Borg Footwear | |||||
| Holding AB | 556544-8924 Varberg | 1,999 | 100 14,281 | ||
| Björn Borg Footwear AB | 556280-5746 Varberg | 5,000 | 100 | ||
| 54,497 |
| Group P | arent Company | |||
|---|---|---|---|---|
| Dec. 31 | Dec. 31 | Dec. 31 | Dec. 31 | |
| 2009 | 2008 | 2009 | 2008 | |
| Trading book, gross | 27,273 | 34,796 | – | – |
| Reserve for obsolescence in inventory | –818 | –1,044 | – | – |
| Total | 26,455 | 33,752 | – | – |
| Group P | arent Company | ||||
|---|---|---|---|---|---|
| Dec. 31 | Dec. 31 | Dec. 31 | Dec. 31 | ||
| Accounts receivable | 2009 | 2008 | 2009 | 2008 | |
| Accounts receivable, gross | 40,176 | 81,769 | 970 | 561 | |
| Reserve for impaired receivables | –2,144 | –1,869 | –160 | –102 | |
| Total accounts receivable, net, | |||||
| after reserve for impaired | |||||
| receivables | 38,032 | 79,900 | 810 | 458 | |
| Overdue receivables | |||||
| Not overdue | 11,506 | 62,774 | – | 168 | |
| 1–30 days | 22,202 | 10,023 | 670 | 25 | |
| 31–90 days | 278 | 4,563 | – | 19 | |
| 91–180 days | 3,180 | 2,790 | 140 | 43 | |
| >180 days | 3,010 | 1,619 | 160 | 306 | |
| Total | 40,176 | 81,769 | 970 | 561 | |
| Overdue receivables not considered impaired | |||||
| Not overdue | 11,506 | 62,768 | – | 168 | |
| 1–30 days | 22,202 | 9,866 | 670 | 25 | |
| 31–90 days | 278 | 4,102 | – | 19 | |
| 91–180 days | 3,180 | 2,094 | 140 | 10 | |
| >180 days | 866 | 1,070 | – | 237 | |
| Total | 38,032 | 79,900 | 810 | 458 | |
| Group P | arent Company | ||||
| Control account for customer | Dec. 31 | Dec. 31 | Dec. 31 | Dec. 31 | |
| losses – reconciliation | 2009 | 2008 | 2009 | 2008 | |
| Provisions at beginning of year | –1,869 | –507 | – | – | |
| Reversed provisions | – | 87 | – | – | |
| Provisions | –63 | –1,363 | –160 | – |
| Group P | arent Company | |||
|---|---|---|---|---|
| Dec. 31 | Dec. 31 | Dec. 31 | Dec. 31 | |
| 2009 | 2008 | 2009 | 2008 | |
| Accrued royalty revenue | 4,280 | 4,664 | – | – |
| Prepaid rents | 4,043 | 5,336 | 1,418 | 2,107 |
| Prepaid leases | 97 | 69 | – | – |
| Other | 8,670 | 10,893 | 1,906 | 1,971 |
| Total | 17,090 | 20,962 | 3,324 | 4,078 |
Established losses –212 –86 – – Total –2,144 –1,869 –160 –
| Group P | arent Company | |||
|---|---|---|---|---|
| Non-current and current interest-bearing loans |
Dec. 31 2009 |
Dec. 31 2008 |
Dec. 31 2009 |
Dec. 31 2008 |
| Bank overdraft facilities | 20,000 120,000 | 20,000 120,000 | ||
| Total available credit lines | 20,000 120,000 | 20,000 120,000 | ||
| Unutilized available credit lines | 20,000 120,000 | 20,000 120,000 |
Other liabilities include a reported liability to the seller of the Björn Borg trademark totaling SEK 46,816 thousand (of which SEK 5,927 thousand will be paid within 12 months and SEK 32,104 thousand after 5 years).
| Group P | arent Company | |||
|---|---|---|---|---|
| Dec. 31 2009 |
Dec. 31 2008 |
Dec. 31 2009 |
Dec. 31 2008 |
|
| Royalty expenses | 6,332 | 7,303 | – | – |
| Personnel-related items | 6,541 | 6,884 | 1,595 | 4,085 |
| Customs and shipping expenses | 63 | 1,498 | – | – |
| Management expenses | 1,127 | 1,115 | 1,127 | 1,115 |
| Marketing expenses | 1,209 | – | – | – |
| Other | 18,115 | 13,569 | 5,394 | 2,483 |
| Total | 33,387 | 30,369 | 8,116 | 7,683 |
| Group P | arent Company | ||||
|---|---|---|---|---|---|
| Pledged assets | Dec. 31 2009 |
Dec. 31 2008 |
Dec. 31 2009 |
Dec. 31 2008 |
|
| Chattel mortgages | 18,000 | 18,000 | – | – | |
| Total | 18,000 | 18,000 | – | – | |
| Contingent liabilities | |||||
| Other guarantees | 4,025 | 4,951 | – | – | |
| Total | 4,025 | 4,951 | – | – |
| 2009 | 2008 | |
|---|---|---|
| Earnings per share, SEK | 3.22 | 3.96 |
| Earnings per share, SEK (after full dilution) | 3.21 | 3.96 |
| Number of shares | 25,148,384 | 25,059,184 |
| Number of shares, weighted average | 25,111,217 | 25,041,134 |
| Effect of dilution | 118,910 | 34,366 |
| Number of shares, weighted | ||
| average (after full dilution) | 25,230,128 | 25,075,500 |
Earnings per share are calculated by dividing profit attributable to the Parent Company's shareholders by the average number of shares outstanding during the period. All warrant schemes are taken into account in calculating the dilution effect.
| Group | 2009 | 2008 | |
|---|---|---|---|
| Accounts and loans receivable Financial liabilities measured at amortized cost |
–2 837 | 2,536 –7,719 |
14,393 |
| Total | –301 | 6,674 |
The Annual General Meeting on April 23, 2009 approved a dividend of SEK 37,589 thousand for the financial year 2008, corresponding to SEK 1.50 per share. The Board proposes that the Annual General Meeting adopt a dividend of SEK 5.00 per share for the financial year 2009, corresponding to SEK 125,742 thousand.
| Group | Dec. 31 2009 |
Dec. 31 2008 |
|---|---|---|
| Change in exchange rates | 1,360 | 1,457 |
| Interest income* | 2,850 | 6,702 |
| Other financial income | 174 | 5,313 |
| Total financial income | 4,384 | 13,472 |
| Change in exchange rates | –2,366 | –560 |
| Other financial expenses | –108 | –2,525 |
| Interest expense Trademarks** | –2,101 | –2,320 |
| Interest expenses** | –745 | –1,996 |
| Total financial expenses | –5,320 | –7,401 |
| Net financial items | –936 | 6,071 |
* Of which SEK 2,850 thousand (6,702) in interest income for financial assets not measured at fair value through profit or loss.
** Of which SEK –2,846 thousand (–4,316) in interest expenses for financial assets not measured at fair value through profit or loss.
| Accounts | Other | Total | N | on-financial | ||
|---|---|---|---|---|---|---|
| receivable and | financial | carrying | Fair | assets and | Total | |
| Group 2009 | loans receivable | liabilities | amount | value | liabilities | assets |
| Accounts receivable | 38,032 | – | 38,032 | 38,032 | – | 38,032 |
| Cash and bank balances | 296,484 | – | 296,484 | 296,484 | – | 296,484 |
| Total financial assets | 334,516 | – | 334,516 | 334,516 | – | 334,516 |
| Other non-current liabilities | – | 40,889 | 40,889 | 40,889 | – | 40,889 |
| Other current liabilities | – | 5,927 | 5,927 | 5,927 | 8,071 | 13,998 |
| Accounts payable | – | 15,480 | 15,480 | 15,480 | – | 15,480 |
| Total financial liabilities | – | 62,296 | 62,296 | 62,296 | 8,071 | 70,367 |
| Accounts | Other | Total | N | on-financial | ||
| Group 2008 | receivable and loans receivable |
financial liabilities |
carrying amount |
Fair value |
assets and liabilities |
Total assets |
| Accounts receivable | 79,900 | – | 79,900 | 79,900 | – | 79,900 |
| Cash and bank balances | 241,498 | – | 241,498 | 241,498 | – | 241,498 |
| Total financial assets | 321,398 | – | 321,398 | 321,398 | – | 321,398 |
| Other non-current liabilities | – | 46,816 | 46,816 | 46,816 | – | 46,816 |
| Other current liabilities | – | 5,699 | 5,699 | 5,699 | 5,651 | 11,350 |
| Accounts payable | – | 45,489 | 45,489 | 45,489 | – | 45,489 |
| Total financial liabilities | – | 98,004 | 98,004 | 98,004 | 5,651 | 103,655 |
The undersigned certify that the consolidated accounts and the annual report have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU as well as generally accepted auditing standards and provide a true and fair view of the financial position and results of the Group and the Parent Company and that the Board of Directors' report provides a true and fair overview of the operations, financial position and results of the Group and the Parent Company and describes the substantial risks and uncertainties faced by the Parent Company and companies in the Group.
Stockholm, March 16, 2010
Fredrik Lövstedt Nils Vinberg Monika Elling Fabian Månsson Chairman Vice Chairman
Mats H Nilsson Vilhelm Schottenius Michael Storåkers
Arthur Engel President
My audit report was submitted on March 16, 2010 Deloitte AB
Authorized Public Accountant Authorized Public Accountant
Håkan Pettersson Tommy Mårtensson
To the Annual General Meeting of Björn Borg AB (publ), company reg. no. 556658-0683
We have examined the annual accounts, the consolidated financial statements, the accounting records and the administration of the Board of Directors and the President of Björn Borg AB (publ) for the financial year 2009. The Company's annual report is included in the printed version of this document on pages 35–58. The Board of Directors and the President are responsible for the financial statements and the administration of the Company as well as for the application of the Annual Accounts Act in the preparation of the annual accounts and the application of the International Financial Reporting Standards (IFRS) as adopted by the EU and the Annual Accounts Act in the preparation of the consolidated financial statements. Our responsibility is to express an opinion on the annual accounts, the consolidated financial statements and the administration of the Company based on our audit.
We conducted our audit in accordance with generally accepted auditing standards in Sweden. These standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the Board of Directors and the President and critical estimates made by the Board of Directors and the President when preparing the annual accounts and consolidated financial statements as well as
evaluating the overall presentation of information in the annual accounts and the consolidated financial statements. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the Company in order to be able to determine the liability, if any, to the Company of any Board member or the President. We have also examined whether any Board member or the President has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below.
The annual accounts have been prepared in accordance with the Annual Accounts Act and provide a true and fair view of the Company's results of operations and financial position in accordance with generally accepted accounting principles in Sweden. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and the Annual Accounts Act and provide a true and fair view of the Group's results of operations and financial position. The Board of Directors' report is consistent with the other parts of the annual accounts and the consolidated financial statements.
We recommend that the Annual General Meeting adopt the Parent Company's income statement and balance sheet and the Group's income statement and statement of financial position, that the profit in the Parent Company be dealt with in accordance with the proposal in the Board of Directors' report, and that the members of the Board and the President be discharged from liability for the financial year.
Stockholm, March 16, 2010 Deloitte AB
Håkan Pettersson Tommy Mårtensson Authorized Public Accountant Authorized Public Accountant
The Björn Borg share has been listed on NASDAQ OMX Nordic's Mid Cap list since May 7, 2008 under the ticker symbol BORG. The share had been listed on the First North alternative marketplace since December 2004.
The share capital in Björn Borg AB amounts to SEK 7,858,870, divided into 25,148,384 shares with a quota value of SEK 0.3125 per share. All shares carry equal rights to participate in the Company's profits and assets.
The last price paid on December 30, 2009 was SEK 67, giving Björn Borg a market capitalization of SEK 1,685 million. A total of 9.96 million shares were traded in 2009 at a value of approximately SEK 562 million. The average daily turnover was 39,665 shares. The share price rose during the year by SEK 26, or 63.4 percent. The share reached a high of SEK 72.00 and dipped to a low of SEK 35.20.
Björn Borg has two outstanding incentive schemes based on warrants. The exercise of all the outstanding warrants would fully dilute the share capital by about 6.0 percent. For more information on the incentive schemes, see Note 7 on page 52.
According to Björn Borg's financial objectives for the period 2010– 2014, 50 percent of net profit will be distributed to the Company's shareholders. As part of the financial objectives, the Company will try to maintain long-term cash reserves equivalent to 10–20 percent of annual sales. The surplus liquidity that is generated while taking into account the new financial objectives will be distributed in stages during the forecast period, starting in 2010.
For 2009 the Board of Directors proposes that the Annual General Meeting approve a dividend of SEK 5.00 (1.50) per share, corresponding to 155 percent (38) of net profit.
As of December 31, 2009 Björn Borg had 6,116 shareholders (6,166), according to Euroclear. Björn Borg's ten largest shareholders owned shares corresponding to 57.6 percent of the votes and capital. Institutional investors owned 27 percent.
| Year T | ransaction | Change in no. of shares |
Total C no. of shares |
hange in T share capital |
otal share capital, SEK |
Quota value, SEK |
Issue price, SEK |
|---|---|---|---|---|---|---|---|
| 2004 | Company formation | 1,000 | 1,000 | 100,000 | 100,000 | 100.00 | – |
| 2004 | New share issue | 7,500 | 8,500 | 750,000 | 850,000 | 100.00 | 6 |
| 2004 | Non-cash issue | 37,243 | 45,743 | 3,724,000 | 4,574,300 | 100.00 | 6 |
| 2004 | 20-for-1 split | 869,117 | 914,860 | – | 4,574,300 | 5.00 | – |
| 2004 | New share issue | 450,000 | 1,364,860 | 225,000 | 6,824,300 | 5.00 | 17 |
| 2004 | Bonus issue | 66,176 | 1,431,036 | 330,880 | 7,155,180 | 5.00 | 16 |
| 2006 | 4-for-1 split | 4,293,108 | 5,724,144 | – | 7,155,180 | 1.25 | – |
| 2006 | Redemption of warrants | 15,800 | 5,739,944 | 19,750 | 7,174,930 | 1.25 | 27 |
| 2006 | Redemption of warrants | 61,900 | 5,801,844 | 77,375 | 7,252,305 | 1.25 | 27 |
| 2007 | New share issue | 278,552 | 6,080,396 | 348,190 | 7,600,495 | 1.25 | 90 |
| 2007 | 4-for-1 split | 18,241,188 | 24,321,584 | – | 7,600,495 | 0.31 | – |
| 2007 | Redemption of warrants | 422,400 | 24,743,984 | 132,000 | 7,732,495 | 0.31 | 33 |
| 2007 | Redemption of warrants | 293,000 | 25,036,984 | 91,563 | 7,824,058 | 0.31 | 33 |
| 2008 | Redemption of warrants | 4,600 | 25,041,584 | 1,438 | 7,825,495 | 0.31 | 33 |
| 2008 | Redemption of warrants | 17,600 | 25,059,184 | 5,500 | 7,830,995 | 0.31 | 33 |
| 2009 | Redemption of warrants | 89,200 | 25,148,384 | 27,875 | 7,858,870 | 0.31 | 33 |
| No. of shares | Votes/capital, % | |
|---|---|---|
| SEB | 2,602,480 | 10.3 |
| Swedbank Robur Funds | 2,037,060 | 8.1 |
| Martin Bjäringer through companies | 1,800,000 | 7.2 |
| Mats Nilsson through companies | 1,478,440 | 5.9 |
| Fredrik Lövstedt through companies | 1,400,040 | 5.6 |
| Fourth Swedish National Pension Fund | 1,274,717 | 5.0 |
| Lannebo Funds | 1,206,724 | 4.8 |
| Vilhelm Schottenius through companies and family | 1,023,520 | 4.1 |
| Livförsäkrings AB Skandia | 892,831 | 3.6 |
| JP Morgan Bank | 760,555 | 3.0 |
| Total, 10 largest shareholders | 14,476,367 | 57.6 |
| Total, other | 10,672,017 | 42.4 |
| Total number of shares | 25,148,384 | 100 |
According to share register on December 31, 2009.
With respect to major shareholders in Björn Borg, the holdings of related parties are equated with the shareholders' own shares to the extent allowed by the Act on Reporting Obligations for Certain Holdings of Financial Instruments.
| N | o. of shareholders | No. of shares C | apital and votes, % |
|---|---|---|---|
| 1 – 500 | 4,417 | 753,288 | 3.0 |
| 501 – 1,000 | 494 | 683,598 | 2.7 |
| 1,001 – 5,000 | 665 | 1,581,792 | 6.3 |
| 5,001 – 10,000 | 93 | 728,012 | 2.9 |
| 10,001 – 15,000 | 40 | 522,280 | 2.1 |
| 15,001 – 20,000 | 21 | 373,528 | 1.5 |
| 20,001 – | 86 | 20,505,886 | 81.5 |
| Total | 6,116 | 25,148,384 | 100.0 |
According to share register on December 31, 2009.
| 2009 | 2008 | 2007 | 2006 | 2005 | |
|---|---|---|---|---|---|
| Earnings per share before dilution, SEK | 3.22 | 3.96 | 4.18 | 2.55 | 1.03 |
| Earnings per share after full dilution, SEK | 3.21 | 3.96 | 4.17 | 2.53 | 1.02 |
| Number of shares outstanding on closing day | 25,148,384 | 25,059,184 | 25,036,984 | 23,207,376 | 22,896,576 |
| Average number of shares outstanding | 25,111,217 | 25,041,134 | 24,406,699 | 22,954,076 | 22,896,576 |
| Average number of shares outstanding after full dilution | 25,230,128 | 25,075,500 | 24,490,160 | 23,081,600 | 22,986,432 |
Chairman since 2005, Director since 2004. b. 1956. M.Sc. Eng., MBA. Other directorships: Chairman of Alertsec AB. President of AB Durator Background: Former Executive Vice President of Protect Data AB (1996– 2001). Has run his own company since 1984. Considered independent in relation to the Company and the Management, but not in relation to the Company's major
shareholders. Shares in Björn Borg: 2,600,040.
Vice Chairman since 2008. Director since 2004. b. 1957. B.Sc. Econ. Other directorships: Chairman of Charge Holding AB, Vice Chairman of Odd
Molly International AB, Director of RNB Retail and Brands AB, Source 11 AB and Vinberg Management AB. Background: Former President of Björn
Borg AB (2004–2008), former CFO of Björn Borg AB (1999–2004), President of Industriell Partner AB, CFO of Industrihandelsgruppen.
Not considered independent in relation to the Company and the Management, but independent in relation to the Company's major shareholders.
Shares in Björn Borg: 711,080.
b. 1962. B.Sc. Econ., B.Sc. ME, MBA. Background: Most recently Regional Managing Director and CFO of Intrum Justitia. Earlier an analyst at Enskilda Securities in Stockholm, COO of Arrow Lock, New York, USA (today part of Assa Abloy), Business Development Manager in Cash Handling Services at Securitas. Through the end of 2007 Monika Elling was a Director of AB Lindex.
Considered independent in relation to the Company and the Management, as well as the Company's major shareholders. Shares in Björn Borg: 59,000.
Director since 2009. b. 1964. B.Sc. Econ. Other directorships: Active as industrial advisor since 2008. Background: In recent years Fabian Månsson has served as an industrial advisor for the managements of Hugo Boss and Mavi Jeans, among other companies. Former CEO, President and Director of Eddie Bauer Inc, USA. EVP of Spray Ventures AB. President, Purchasing Manager and Divisional Manager for H&M Hennes and Mauritz AB. Considered independent in relation to the Company and the Management, as well as the Company's major shareholders. Shares in Björn Borg: 2,000.
Mats H Nilsson Director since 1998.
b. 1955.
B.Sc. Econ. Other directorships: Director of Credelity Capital AB and SevenDay Finans AB. Background: Former Executive Director of Swiss Bank Corporation, London, and Director of SG Warburg & Co Ltd,
London. Considered independent in relation to the Company and the Management, as well as the Company's major shareholders. Shares in Björn Borg: 1,478,440.
b. 1956.
B.Sc. Econ. Other directorships: Chairman of Procurator AB, Ernströms Handel & Industry AB, Collector AB, Nilörngruppen AB, Stam-
pen Media Partner AB, Sportmanship Invest AB, Identity Works AB, Saddler Scandinavia AB, the regional bank board of Handelsbanken.
Background: One of the founders of the Björn Borg brand and Lunarworks AB (Lunarstorm).
Considered independent in relation to the Company and the Management, as well as the Company's major shareholders. Shares in Björn Borg: 1,023,520.
Director since 2006. b. 1972.
B.Sc. Econ.
Other directorships: Chairman of McCann Nordic AB, Storåkers McCann AB and Vulkan AB. Director of the Stockholm School of Economics, Bukowskis AB, Moderna Museet's Advisory Board. Background: Former Director of Stockholm Business Region AB, Koncept AB, Fortum Värme, Pysslingen Förskolor och Skolor
Considered independent in relation to the Company and the Management, as well as the Company's major shareholders. Shares in Björn Borg: 40,000.
Deloitte AB Håkan Pettersson. Authorized Public Accountant.
Tommy Mårtensson. Authorized Public Accountant.
Shareholdings and warrant holdings as of February 28, 2010.
Arthur Engel President. b. 1967. Recruited 2008. B.Sc. Econ. Background: President of Gant, -President of Leo Burnett. Shares in Björn Borg: 35,000. Warrants in Björn Borg: 750,000.
Malin Wåhlstedt Product Manager Underwear. b. 1966. Recruited 2009. Business School Economics. Background: Former Section Manager H&M, Underwear. Shares in Björn Borg: 0.
Henrik Fischer Vice President and International Sales Director. b. 1967. Recruited 2008. Business School Economics. Background: President of Polarn o. Pyret, COO of Gant, President of Gant Sweden. Shares in Björn Borg: 6,000. Warrants in Björn Borg: 500,000.
Johan Mark Financial Manager. b. 1974. Recruited 2005. B.Sc. Econ. Background: Axfood AB, Öhrlings PWC. Shares in Björn Borg: 3,000. Warrants in Björn Borg: 10,000.
Rocky af Ekenstam Brennicke Marketing Director. b. 1971. Recruited 2007. Diploma in Communication Strategy. Background: Former PR/Event Manager at Björn Borg, PR Coordinator at PR/Designbyrå, CEO of Brennicke Produktion. Shares in Björn Borg: 0.
Magnus Ehrland Creative Director. b. 1965. Recruited 2009. Background: Design Director of J Lindeberg, Menswear Designer Diesel, Italy.
Shares in Björn Borg: 1,500.
Ulrika Andersson Product Manager Adjacent Products. b. 1965. Recruited 2009. Fashion Design & Creation, ESMOD, Paris.
Background: Head of Design & Product Development Gant, Purchasing H&M L.O.G.G. Shares in Björn Borg: 5,000.
Shareholdings and warrant holdings as of February 28, 2010.
The Björn Borg share is listed on NASDAQ OMX Nordic.
Corporate governance refers to the rules and structure established to effectively control and manage the operations of a corporation. Ultimately the purpose of corporate governance is to satisfy the demands of shareholders for a return on their investment and the demands of all stakeholders for information on the Company and its development.
Björn Borg applies the Swedish Code of Corporate Governance. The Board of Directors is responsible for ensuring compliance with the code by the Board itself as well as Management and the Company in general, and continuously monitors that the code is followed. If a company subject to the Swedish Code of Corporate Governance does not follow it in any respect, the company must report the deviation, describe the solution it has selected instead and state the reasons why. In 2009 Björn Borg applied the Swedish Code of Corporate Governance without deviating from any of its provisions.
This corporate governance report does not constitute part of the formal annual report and has not been reviewed by the Company's auditors.
Björn Borg's highest decision-making body is the Annual General Meeting (AGM), at which every shareholder who is recorded in the share register on the record day for the AGM is entitled to participate personally or by proxy. The AGM may decide on all issues that by law or in accordance with the Articles of Association expressly fall under another decision-making body's exclusive competence. Every shareholder is entitled to have an issue brought before at the AGM.
The AGM elects the Company's Board of Directors and its Chairman. Among the other duties of the AGM are to adopt the balance sheet and income statement, decide on the disposition of the profit from the Company's operations and discharge the Directors and the President from liability. The AGM also decides on the fees paid to the Board and approves the compensation guidelines for Management. The AGM also elects the auditors and decides on their fees. Further, the AGM may resolve to increase or reduce the share capital and can amend the Articles of Association. With respect to new issues of shares, convertibles and warrants, the AGM has the option of authorizing the Board to take decisions.
The next AGM will be held in Stockholm on April 15, 2010. A notice will be released in accordance with the Articles of Association and the rules that apply according to the Swedish Companies Act and the Swedish Code of Corporate Governance.
The 2009 AGM was held in Stockholm on April 23, 2009. The AGM passed resolutions to reelect Directors Mats H Nilsson, Vilhelm Schottenius, Michael Storåkers and Nils Vinberg, and reelected Fredrik Lövstedt as Chairman. Monika Elling and Fabian Månsson were elected as new Directors. The AGM also resolved to approve the profit distribution, authorize the Board to decide to acquire and transfer the Company's own shares and issue new shares. The AGM also approved the Board's proposal to amend the Articles of Association with respect to the way in which notice of the meeting is served and the timing of the notice as well as amend the purpose of the business in the Articles of Association. The amendments with respect to the timing and method of serving notice of the meeting are contingent on the current provisions of the Companies Act entering into force. Since the provisions of the Companies Act have not yet entered into force, the amendments to the Articles of Association in this respect have not yet been implemented. The minutes of the AGM can be found on Björn Borg's web site.
According to the resolution of the 2009 AGM, Björn Borg shall have a Nomination Committee. The Nomination Committee, whose composition was published on the web site in October 2009, consists of the following members leading up to the 2010 AGM:
Martin Bjäringer has been named Chairman of the Nomination Committee. According to the resolution of Björn Borg's 2009 AGM, the Nomination Committee's mandate is to propose to the 2010 AGM the number of Directors to be elected by the meeting, their fees, any compensation for committee work, the composition of the Board, the Chairman, whether to form a Nomination Committee, the Chairman of the AGM and, when applicable, the election of the auditors and their fees. The Nomination Committee held three meetings at which minutes were taken through January 31, 2010, in addition to contacts at other times. No compensation was paid to the members of the committee.
In accordance with the Articles of Association, Björn Borg's Board of Directors consists of a minimum of four and a maximum of eight members, with a maximum of two deputies. Directors are elected annually at the AGM for a one-year term until the next AGM. The AGM on April 23, 2009 reelected Directors Mats H Nilsson, Vilhelm Schottenius, Michael Storåkers and Nils Vinberg. Monika Elling and Fabian Månsson were elected as new Directors. Fredrik Lövstedt was elected Chairman of the Board.
The Board fulfills the requirements of the Swedish Code of Corporate Governance and the Swedish Corporate Governance Board's instruction 1-2009 that no more than one Director elected by the AGM may play or have recently played an operational role in the Company, that a majority of the Directors are independent in relation to the Company and that at least two Directors are independent of the Company's major shareholders. The Board is assisted by an outside secretary. Further information on the Directors can be found on page 62 of the annual report.
Pursuant to the Swedish Companies Act, Björn Borg's Board is responsible for the Company's organization and management of its affairs and appoints its President. The Board lays down the Company's goals and strategy, adopts critical policy documents and continuously monitors their compliance. The Board also has ultimate responsibility for its various committees. The Board's rules of procedure, which were drawn up at the Board meeting on February 17, 2009, define the principles for Board work, the delegation between the Board and the President, and financial reporting.
The Board held seven scheduled meetings in 2009, four of which in connection with quarterly interim reports, one in connection with the preparations for the AGM, one in connection with the AGM and one in connection with the budget formulation. Directors' attendance at the year's Board meetings is shown in the table below.
The Board has established a Compensation Committee consisting of Chairman Fredrik Lövstedt and Monika Elling to prepare proposals on remuneration and other terms of employment for Senior Executives. In 2009 the committee did not hold any meetings at which minutes were kept, since Management compensation was unchanged compared with the previous year.
Björn Borg's Board has established an Audit Committee consisting of Chairman Fredrik Lövstedt, Mats H Nilsson and Monika Elling. The committee supports the Board in its efforts to quality assure Björn Borg's financial reports and ensures the preparation and promulgation of correct, high-quality financial reporting. The committee convened a total of four times in 2009, all in connection with the quarterly reports. Fredrik Lövstedt, Mats H Nilsson and Monika Elling attended all of these meetings.
The Board has established an instruction for the President's work and role. The President is responsible for day-to-day management of the Group's operations according to the Board's guidelines as well as other established policies and guidelines, and reports to the Board.
The President of Björn Borg since November 3, 2008 is Arthur Engel. He does not own any shares in companies with which Björn Borg has significant business ties. Further information on the President can be found on page 63 in the annual report.
The outside auditors review Björn Borg's annual accounts, accounting records and the administration of the Board of Directors and the President. After every financial year the auditors submit an audit report to the AGM. The auditors are appointed by the AGM for a term normally of four years. The 2007 AGM elected the registered public accounting firm Deloitte AB as auditor for a four-year term, with authorized public accountant Håkan Pettersson as chief auditor, assisted by authorized public accountant Tommie Mårtensson. Håkan Pettersson has been the auditor for Björn Borg since the Company was established in 2004 and for the Group since 1997.
Further information on the auditors can be found on page 62 in the annual report. Information on the auditors' fee can be found in Note 8.
Compensation to the Chairman and other Directors is determined by the AGM. According to the resolution of the 2009 AGM, the Chairman received compensation of SEK 300,000 in 2009 and other Directors received SEK 100,000. No separate fees are paid for committee work.
According to the compensation guidelines for Senior Executives approved by the 2009 AGM, the remuneration for the President and seven other members of Management includes a base salary, variable compensation, long-term incentive schemes and other benefits, including a pension. The variable compensation is based on the results relative to defined, measurable targets and maximized relative to current salary targets.
The fixed and variable salary components as well as benefits for the President and Management of Björn Borg are indicated in Note 7 of the annual report.
Björn Borg has two outstanding incentive schemes that offer warrants in the Company. They were approved by the 2008 AGM and the Extraordinary General Meeting in 2008. The scope of Björn Borg's incentive schemes is indicated in Note 7 of the annual report.
| Feb 18 M | ar 23 A | pr 23 M | ay 14 A | ug 19 N | ov 11 | Dec 16 | |
|---|---|---|---|---|---|---|---|
| Fredrik Lövstedt | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| Vilhelm Schottenius | 0 | 1 | 1 | 1 | 1 | 1 | 1 |
| Mats H Nilsson | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| Håkan Roos* | 0 | 1 | – | – | – | – | – |
| Lottie Svedenstedt* | 1 | 1 | – | – | – | – | – |
| Michael Storåkers | 1 | 1 | 0 | 1 | 1 | 1 | 0 |
| Nils Vinberg | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| Fabian Månsson** | – | – | 1 | 1 | 1 | 1 | 1 |
| Monika Elling** | – | – | 1 | 1 | 1 | 1 | 1 |
| No. of attendees | 5 | 7 | 6 | 7 | 7 | 7 | 6 |
* Declined reelection ** Newly elected Directors
The quality of the financial reporting is ensured by the Board of Directors' policies and instructions on the delegation of responsibility and control as well as the instruction for the President on financial reporting, among other things. Prior to each of its meetings, the Board receives the latest financial reports and at each meeting it discusses the financial situation of the Parent Company and the Group. The Board also discusses the interim and annual reports. At least once a year the auditors report on whether the Company has ensured that its accounts, their management and financial control are being handled satisfactorily. After the formal report the President, Executive Vice President and Chief Financial Officer leave the meeting so that the Directors can have a discussion with the auditors without the participation of the Senior Executives.
According to the Swedish Companies Act and the Swedish Code of Corporate Governance, the Board is responsible for internal control. This report on internal control of financial reporting for 2009 has been prepared in accordance with the Swedish Code of Corporate Governance and is part of the corporate governance report. Björn Borg's Board has evaluated the need for a separate audit function (internal audit) and has found that such a function is not necessary at present.
The control environment serves as the basis for internal control of financial reporting. The Board of Directors' rules of procedure and instructions for the President and the Board's committees clearly define the delegation of roles and responsibilities in order to effectively manage the Company's risks. The Board has established a number of fundamental guidelines and frameworks that are important to internal control. Examples include the Board's rules of procedure, financial policy, investment policy, code of conduct and communication policy. The Board's Audit Committee has as its specific responsibility to monitor and quality assure the financial reporting.
Management regularly reports to the Board based on established routines, as does the Audit Committee. Management is responsible for ensuring that the routines and systems established for internal control are followed to ensure proper management of significant operating risks. This includes routines and guidelines for various Senior Executives, so that they will understand the importance of their roles in maintaining good internal control.
Each year Management performs a risk assessment of financial reporting. The risk analysis has identified a number of critical processes. The greatest focus is on purchasing and revenue processes. Assessed risks in various major balance sheet and income statement items are graded and monitored. The Audit Committee plays an important role in risk assessment, since it reports on its observations and priority areas to Björn Borg's Board.
Prior to each of its meetings, the Board receives financial reports. The financial situation of the Parent Company and the Group is treated as a separate point at each Board meeting. The Audit Committee plays an important role in the monitoring process, since it reports on its observations and priority areas to the Board.
Manuals, guidelines and policy documents important to financial reporting are updated and provided to all parties concerned at internal meetings or by e-mail. To ensure that external information is distributed correctly, Björn Borg has a communication policy laid down by the Board.
Financial reporting for all subsidiaries is managed by Björn Borg's accounting department. The Company's auditors conduct the audit of the Group's financial reporting and therefore review the processes, systems, routines and accounting work done by Björn Borg's accounting department.
The Board of Directors of Björn Borg is ultimately responsible for internal control. The Audit Committee appointed by the Board is responsible for, among other things, quality assuring the Company's financial reporting, informing itself about the focus of the audit and reviewing the efficiency of the internal control systems for financial reporting.
The Audit Committee has the internal control structure as a recurring point at its meetings.
Björn Borg is listed on NASDAQ OMX Nordic's Mid Cap list. The total number of shares in Björn Borg is 25,148,384. There is one class of share. The share capital amounts to SEK 7,858,870 and the quota value per share is SEK 0.3125. Each share carries one vote at the Company's AGM, and there are no limitations on how many votes each shareholder may cast at the AGM. Björn Borg had 6,116 shareholders at year-end. The largest shareholder as of December 31, 2009 was SEB. SEB directly or indirectly owns more than ten percent of the shares in Björn Borg. In addition to the above, it can be noted that Chairman Fredrik Lövstedt increased his holding in Björn Borg by 1,200,000 shares on January 4, 2010. After the increase, Fredrik Lövstedt, through AB Durator and other related parties, owns 2,600,040 shares in Björn Borg, corresponding to approximately 10.3 percent of the share capital and votes in the Company.
There are no limitations on the right to transfer the Björn Borg share due to legal provisions or Björn Borg's Articles of Association. Nor is Björn Borg aware of any agreements between shareholders that could infringe upon the right to transfer Björn Borg shares.
| Seb | 2,602,480 | 10.3% |
|---|---|---|
| Swedbank Robur Funds | 2,037,060 | 8.1% |
| Martin Bjäringer through companies | 1,800,000 | 7.2% |
| Mats Nilsson through companies | 1,478,440 | 5.9% |
| Fredrik Lövstedt through companies | 1,400,040 | 5.6% |
| Fourth Swedish National Pension Fund | 1,274,717 | 5.0% |
| Lannebo Funds | 1,206,724 | 4.8% |
| Vilhelm Schottenius through companies and family | 1,023,520 | 4.1% |
| Livförsäkrings AB Skandia (Publ) | 892,831 | 3.6% |
| JP Morgan Bank | 760,555 | 3.0% |
| Total, 10 largest shareholders | 14,476,367 | 57.6% |
| Total, other | 10,672,017 | 42.4% |
| Total number of shares | 25,148,384 | 100% |
Net sales less cost of goods sold in relation to net sales.
Operating profit as a percentage of net sales.
Profit before tax as a percentage of net sales.
Equity as a percentage of total assets.
Profit after financial items plus finance expense as a percentage of average capital employed.
Net income according to the income statement as a percentage of average equity. Average equity is calculated by adding equity at January 1 to equity at December 31 and dividing the result by two.
Earnings per share in relation to the weighted average number of shares during the period.
Earnings per share adjusted for any dilution effect.
Estimated total sales of Björn Borg products at the consumer level, including VAT, based on reported wholesale sales.
Björn Borg refers to Björn Borg AB or, depending on the context, the group in which Björn Borg AB is the Parent Company (also referred to as "the Group"). "Björn Borg" also refers to the Björn Borg brand or, in rare cases, Björn Borg himself. In cases where "Björn Borg" refers to Björn Borg the person, this is noted.
Retailers of Björn Borg products, including department stores, retail chains and independent merchants, as well as Groupowned or franchised Björn Borg stores and factory outlets.
Distributors refer to the approximately 30 distributors with agreements with Björn Borg or with one of the external product companies on the use of the Björn Borg trademark and/or sale of Björn Borg products.
Product companies are the Group companies Björn Borg Clothing AB and Björn Borg Footwear AB as well as the external companies EGOptiska International AB (eyewear), Libro Gruppen AB (bags) and Romella International AB (fragrances), which have agreements with Björn Borg on the use of the Björn Borg trademark in the development, design and manufacture of Björn Borg products.
Björn Borg stores are stores managed by either Björn Borg Retail AB or a franchisee and sell only Björn Borg products.
Franchisees are companies with franchise agreements with Björn Borg that give them the right to manage Björn Borg stores.
The network comprises Group companies included in Björn Borg and product companies, distributors and franchisees that directly or indirectly have contractual relationships with Björn Borg on the use of the Björn Borg trademark and/or sale of Björn Borg products. Independent retailers that are not franchisees are not part of the network.
SEK Swedish krona USD US dollar HKD Hong Kong dollar
EUR Euro
The Annual General Meeting of shareholders will be held on Thursday, April 15, 2010 at 5:00 pm (CET) at the Company's office, Götgatan 78, Stockholm.
To be entitled to participate in the Annual General Meeting, shareholders must be entered in the shareholders' register maintained by the Swedish Central Securities Depository (VPC) on Friday, April 9, 2010 and must notify the Company of their intention to participate by 4:00 p.m. on the same date, April 9, 2010. Notification must be sent in writing to Björn Borg AB, Götgatan 78, SE-118 30 Stockholm, Sweden, by telephone to +46 8 506 33 700 or by e-mail to [email protected]. When notifying the Company, please include your name, personal identification or company registration number, address, telephone number and the names of those accompanying you.
Proxies and representatives of legal entities are advised to submit authorization documents well in advance of the meeting. A proxy template is available on Björn Borg's web site, www.bjornborg.com.
Shareholders whose shares are registered in the name of a nominee must temporarily re-register the shares in their own names with VPC in order to be entitled to participate in the meeting. Re-registration must be completed by Friday, April 9, 2010, which means that shareholders must inform nominees well in advance of this date.
Annual General Meeting 2010 April 15, 2010 Interim report January – March 2010 May 6, 2010 Interim report, January – June 2010 August 19, 2010 Interim report, January – September 2010 November 11, 2010 Year-end report 2010 February 10, 2011
Financial reports can be downloaded from the Company's web site www.bjornborg.com or ordered by telephone +46 8 506 33 700 or by e-mail [email protected].
Arthur Engel, President E-mail: [email protected] Tel: +46 8 506 33 700 Mobile: +46 701 81 34 01
Johan Mark, CFO E-mail: [email protected] Tel: +46 8 506 33 700 Mobile: +46 733 93 12 26
Production Vero Kommunikation, Superlativ and Wildeco. Photography Björn Borg's image archive, Joakim Folke and Karl Johan Larsson. Printing Jernström Offset, 2010.
oct ober 2009 "On top of the highest mountian Norway, the Gald h øpiggen , enjoying the perfect view and the sun in my BB."
Tom van Haaren
Björn Borg AB Götgatan 78, 28th floor, SE-118 30 Stockholm, Sweden Tel +46 8 506 33 700 Fax +46 8 506 33 701 www.bjornborg.com
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