Annual Report • Mar 18, 2011
Annual Report
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THE SPACE NEEDLEIN SEATTLE AND BJORN BORG UNDERWEAR ARE BOTH AWESOME, WELL MADE, AND SUPER ORIGINAL. GOTTA LOVE BJORN BORG!
In thousands of images from Björn Borg wearers in over 40 countries the passion for our brand is very much alive. Our Swedish Exports "mission" is an open invitation to take a photo of how playful, cool, crazy, hot or fantastic you look in your Björn Borgs.
With underwear from Björn Borg – on the ski slopes, beside the Golden Gate Bridge, with diving gear underwater, hanging in a palm tree or with the whole family lined up – our customers show us what they like. They love to be seen and are happy to talk about why they wear Björn Borg.
In our annual report we couldn't help but show some of the many fantastic images we have received. We are so proud to have won the confi dence of these customers and to share their passion for the brand. It spurs us to remain colorful – in every way – and inspires us to bring Björn Borg to more of the world.
Want to see more great photos? Welcome to bjornborg.com/Swedish Exports
5.20 23.5
DISTRIBUTION OF SEK 5.20 PER SHARE.
THE OPERATING MARGIN WAS 23.5 PERCENT.
THE GROSS PROFIT MARGIN WAS 53.6 PERCENT.
Björn Borg is a Swedish group that owns and develops the Björn Borg brand. Fashion underwear is our core business and largest product area. We also offer clothing, footwear, bags, fragrances and eyewear through licensees. Björn Borg is currently represented in around 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 business of underwear. The Group is responsible for distribution of these products in Sweden, England and the U.S., as well as footwear in Sweden and Finland, and manages ten Björn Borg stores in the Swedish market.
Björn Borg's largest product group, underwear, has a strong foothold in established markets, and it is with 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.
47
AT YEAR-END THERE WERE 47 BJÖRN BORG STORES, 10 OF WHICH ARE GROUP-OWNED.
1,733
TOTAL BRAND SALES AMOUNTED TO SEK 1,733 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 five 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 with distinctive and innovative design. Our patterns and colors stand out, and a large variety of models creates an exciting and attractive 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 evident in our marketing communications and product development. Our vision is to be the Champion of Fashion Underwear.
Total brand sales, excluding VAT, decreased compared with the previous year to SEK 1,733 million (1,872). Excluding currency effects, sales decreased by 1 percent.
An outlet was opened during the year in Germany by the German distributor. No other changes were made in the network of stores during the year. At year-end there were a total of 47 (46) Björn Borg stores, 10 (10) of which are Group-owned.
4 BJÖRN BORG ANNUAL REPORT 2010
RICHIE
THE FUTURE OFFERS OPPORTUNITIES. Björn Borg products are purchased and loved by customers in a growing number of countries. Bringing Björn Borg to more places in the world, creating opportunities for profi table growth and building the brand long-term is our mission, and it was where our eff orts were focused in 2010. This resulted in a year of changes and new investments. At the same time we have performed well, with higher revenues and stronger margins.
Underwear is our core and our passion. Two years ago we launched a revised strategy for Björn Borg which emphasizes underwear – our most important product group with the greatest potential. This is where we have the most know-how, extensive experience and a strong network to build on.
2010 was highlighted by the work we did to adapt our operations to this concentration on underwear and to further expand internationally. This has required changes in the organization and investments in key areas to create opportunities for the brand and the Group to grow, which we will continue with in 2011.
Further strengthening our core area, underwear, was one of our most important jobs in 2010. And I think we succeeded well. We have broadened the product assortment and delivered exciting new products. It is a question of testing to fi nd what is right in each area and focusing on the products that gain traction. In 2011 we will launch more products, including new versions of our high-volume women's product, Love All, and an expanded sport line. For men, our classic solid underwear will be redesigned with new models and packaging. And more is on the way.
"We have implemented strategic changes and focused on areas that are critical to the future."
In order to concentrate fully on underwear at Björn Borg in Stockholm, we have decided to license out other product groups to specialists. We feel confi dent that this will create the best opportunities for our main product as well as the other categories.
After the conclusion of the year we announced a new sportswear venture based in the Netherlands together with the Dutch distributor. Called Björn Borg Sport, it will have the license to produce apparel. Together with the licensing of footwear operations in 2010, this means we have completed the restructuring of our operations that we wanted. The Group now has its main focus on underwear, while all of the other product categories are licensed to specialists in each niche.
Another important step during the year was the takeover of the operations in England from the former distributor. The organization is in place, and the fall collections are being shown with the help of a new showroom in London. With our own operations, we can take a more long-term approach in the important British market and receive valuable input for our international expansion. In 2011 we are hoping to grow our newer markets even faster, especially fi ve large new European markets: England, Germany, Italy, France and Spain.
As a whole, 2010 was a good year for Björn Borg, with sales, earnings and margins all rising. At the same time we have implemented strategic changes and focused on areas that are critical to our future. Skilled, passionate employees and a growing network of professional distributors and licensees have made this possible.
As 2011 begins we still see instability in some places, primarily markets in Southern Europe. We are monitoring developments, focusing on what we can infl uence and working on creating as stable a platform for our operations as possible. And we will continue to invest in future growth: in the new clothing company Björn Borg Sport, in England, in e–commerce, in branding, in product development and in other long-term ventures.
We see several signs of exciting opportunities for Björn Borg going forward. The interest we see from established players in various markets around the world is an indication of the strength of our brand. We have to take advantage of this and create business oppor tunities. Our strength is also evident in our products and strong relationship with customers – clearly illustrated by the passion ate images from customers shown in the annual report.
Arthur Engel President
Our vision is to utilize an innovative product offering and successful business model to be the Champion of Fashion Underwear.
The company will develop the Björn Borg brand primarily in fashion underwear.
The Björn Borg brand has its roots in underwear, and underwear remains the core business. The strength of the brand comes from extensive experience and knowledge in this area – and the qualities the brand stands for: its Swedish heritage, colorful products and a passion for underwear. Licensed sales of other product groups contribute to growth and are designed to further develop the brand.
To be the best in underwear and ensure the Group's profitable expansion, Björn Borg has identified a number of key success factors: innovative product development, creative marketing communications and efficient international distribution. Björn Borg's strategy to continue to grow in new and recently established markets and enhance its strong position in established markets is based on these factors.
Since 2009 Björn Borg has chosen to focus on its largest and most profitable product area, underwear. The brand has a strong position in underwear in its established markets and great potential in new markets. The footwear and clothing operations have been licensed out, as have bags, fragrances and eyewear, to optimize opportunities for growth in these areas as well.
Björn Borg's products will be sold mainly through external retailers, including independent stores, department stores, fashion and sporting goods chains. Björn Borg stores are primarily located today in large markets, but the aim is to grow with more Björn Borg stores in newer markets also.
To stay on the forefront in fashion underwear requires innovation and new categories of products and segments – and a fast pace. Björn Borg is continually adjusting its organization to further strengthen competence and increase capacity in product development and design of underwear to meet and exceed the market's expectations.
Implement the current business model, which facilitates geographical and product expansion with limited operating risk and capital investment. Björn Borg's business model is based on the Group's ownership and control of the trademark and that it manages the core business, while specialists are responsible for other product areas and mainly external distributors sell internationally. This provides flexibility and opportunities for profitable expansion. Björn Borg's challenge is to steer the development of the brand through consistent branding in all markets and at the same time serve as an efficient service organization for its customers – the distributors.
Cooperate with strong local distributors with established distribution networks, experience in underwear or fast-moving consumer goods and the resources for long-term marketing investments. Our external distributors' contacts and familiarity with their markets are invaluable to establishing the brand in the country. Underwear, which is a fashion product but has to be replaced quickly like consumer packaged goods, at the same time requires specific know-how. In new markets we evaluate local conditions, the opportunities available to distributors and their ability to reach and penetrate the market during an initial two-year test period, after which decision is made how to proceed.
LAST DAY OF MY VACATION AND THE HOTEL OWNER ASKED ME TO WATER HIS FLOWERS IN RETURN FOR A DISCOUNT.
SIMON
NOTHING BEATS BROTHERLY LOVE...FOR SWEDEN AND BB. MY LITTLE BROTHER LOVED MY SWEDEN BB'S SO MUCH HE ASKED FOR A PAIR FOR CHRISTMAS. PRESTON
The Board of Directors has established financial goals for the period 2010–2014. Björn Borg will generate:
The long-term goals 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 added.
Surplus liquidity that is generated while taking into account the financial goals 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.
.I JUST HAD TO DO IT! YOU SHOULD HAVE SEEN THE OTHER PEOPLES FACES! REMCO
HOT STUFF! GEORGE
The Björn Borg brand is the core of the Group's operations. The Group has developed the brand since 1997 on the basis of an exclusive license 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 for the entire network of licensees and distributors.
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.
The brand has 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 celebrity 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 market ing communications, are based on a distinctive brand platform.
During the year Björn Borg continued to fine-tune its brand platform in line with the company's strategy to focus on underwear.
The brand platform summarizes three con cepts that form the essence of the Björn Borg brand:
Björn Borg is identified as a Swedish underwear brand with a playful, flirty spirit. To create a Swedish Underwear Liberation is Björn Borg's mission.
Our products have historically been distinguished by lively colors and patterns – and they still are.
At the same time Björn Borg is driven by a passion for underwear and fashion and a desire to con stantly challenge and develop its products and the industry.
JUST HOURS AFTER BUYING NEW PAIRS OF BJORN BORGS, WE COULDN'T RESIST TAKING A PHOTO TO SHOW THEM OFF!
FERGUS AND STEFANO
Björn Borg attempts to provide the best possible service to its distributors and licensees, which in turn commit to a specific level of marketing investments in each market. The aim is to create opportunities for them to develop successfully and at the same time ensure coherent development of the brand.
Support for distributors and licensees includes guidelines for uniform, consistent branding and the tools to implement them. In 2009 Björn Borg more clearly structured its branding advice and supporting material for distributors to use in their markets, which were implemented last year. The new guidelines, which include campaigns, PR activities, a media mix and store displays, are packaged to suit each market depending on its stage of development and size. Björn Borg's support for licensees and distributors comprises several areas:
The company showcases the Björn Borg brand through innovative marketing activi ties 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 outdoor advertising, PR, fashion shows, store displays and, to a growing extent, the web site and social media.
Photos of customers wearing Björn Borg underwear have continued to stream in from every corner of the world in response to the Swedish Exports campaign, which was launched in late 2008 and intensified in 2009 and 2010. The images are 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. In spring 2010 the campaign was launched on Facebook, where groups in several countries are "liked" by over 55,000 people so far. The cam paign will continue, and the most fantastic images keep arriving at Björn Borg. Several Swedish Exports images are shown in the annual report.
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 com munications in other channels – in stores, advertising, PR and events – for a greater impact.
In 2010 Björn Borg worked intensely to improve communication through the web site. Among other things, a new platform has been launched for Swedish Exports, a campaign where customers are invited to send in creative and amusing photos of themselves wearing Björn Borg underwear, which has had a fantastic impact. The new platform improves and simplifies communication between the company and consumers as well as between consumers.
The web site also plays an important role in driving sales through special offers in stores, but mainly through underwear sales on the web shop. In 2010 e-commerce took on a more central role on the web site to facilitate a broader expansion and to improve user friendliness. A new global e-commerce platform launched during the spring included a new logistics solution.
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. One successful PR project is Björn Borg's mobile changing rooms, where people can change into a pair of Björn Borg underwear and be photographed for the Swedish Exports campaign. The changing rooms, which are placed in busy public locations mainly in new markets, have gained a lot of attention.
As part of what could be described as a giant recruitment campaign for global ambassadors, Björn Borg lined up successful fashion bloggers in 14 of its most important markets last fall. In cooperation with the bloggers, an international contest was launched to recruit as many Swedish Exports as possible – an expression that the company coined to describe the images that loyal consumers take of themselves in Björn Borg underwear. A steady stream of creative, colorful images was generated through the campaign, which drove so much traffic that Google, in whose network Björn Borg advertised, has done a case study of it.
Björn Borg stores continue to fill an important function as a marketing channel and to display the brand. The new retail con cept was initially launched in a store in Stockholm in March 2010. The concept, which has received a positive response, is designed to showcase underwear in Björn Borg stores. More stores will be redesigned with the new concept in 2011.
Social media continued to grow in importance in 2010 to reach Björn Borg's younger target groups. It is becoming an imperative to closely monitor rapid changes in this area and adapt communications accordingly. Björn Borg has a blog on its web site that is being developed as an independent channel with more active visitors. During the fall it also ran a successful blog project with fashion bloggers in a number of markets. See above.
Björn Borg intensified its work on Facebook in 2010 and had over 55,000 people who liked its various Facebook groups at year-end. Björn Borg has 12,000–13,000 active users a month on Facebook and considers it one of the best places to create and train brand ambassadors. Projects on Twitter and Flickr are also under way.
The brand has an especially strong position in men's underwear. The company is confident that Björn Borg can be considered a market leader in quality and design in its dominant product area, underwear, in established markets.
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, with buying patterns similar to other fashion products. It is displayed and sold not only in separate underwear departments, but also in fashion boutiques along side trendy items, or in sporting goods stores with sports fashion. This requires underwear manu facturers to meet customer demand in terms of fashion, function and new items. Björn Borg's customers should always recognize the brand's products, but should also be able to find something new and unexpected.
Innovative and responsive product development is critical to 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 it has to continuously improve and broaden the product range.
During the year the product development unit for underwear was further 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. The product department has been expanded with additional specialists and the design unit added more designers to meet the demand for a broader product range from more customer groups.
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 trend and design information provided to licens ees in the network prior to each season. A chief designer for every product group ensures uniform brand development through the entire product range.
In its core business, underwear, Björn Borg began in 2009 to create a broader range for new target groups with more products in a variety of 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 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 range to new categories and target groups, as Björn Borg did during the year in the kid's segment and with constructed bras.
Efforts to broaden and improve the product range continued in 2010, when a number of new product categories reached the market. Changes continued on the women's side, where demand for new products is greatest and which is generally more in need of a facelift than the men's side. Among other things, a new line of underwear basics in a variety of colors, Love All, was launched to consumers in mid-February 2010, complemented by marketing activities in stores, online and using outdoor advertising. This volume product has performed well, and additional versions will be launched in 2011. In fall 2010 the product range was initially expanded to include so-called constructed bras, which emphasize fit and quality. The collection of colorful models, which has been sold to key resellers, has received positive reactions in the network and from customers.
In 2010 the men's range was updated with new products in several models. For example, woven boxer shorts were introduced during the fall in both classic and bolder models and patterns. The line of sport underwear launched during the spring has been broadened as interest in this category continues to rise. In 2011 the men's collection will be expanded to include sleeveless undershirts and T-shirts, while a line of athletic underwear for women will be launched as well.
Björn Borg's more classic men's solid underwear will be totally redesigned during the year with new models and packaging. Basics are more important to the men's line than the women's, but a steady flow of new items is critical in every segment to create interest in the brand and maintain its position as a market leader in fashion underwear.
During the holiday 2009 shopping season Björn Borg offered a sneak preview of its new Kids collection with boys' underwear. Sales of the full range of underwear for both boys and girls ages 2–12 began in spring 2010. Kids has generated great interest, and Björn Borg plans to expand the line. A specially designed children's line complements the other categories and creates oppor tunities for growth in new and established markets and in new channels.
With provocative sales campaigns, Björn Borg can generate attention and interest in stores and on the web site and, in the process, drive sales. A successful campaign was run during the year in connection with the World Cup. Called Nations, it included underwear designed with the flags of every participating nation – and one with referee stripes. Locally in Sweden, special underwear with a Royal Wedding theme was sold in connection with Princess Victoria's wedding.
Björn Borg reinvigorated its sock line during the year by adding bright colors and patterns typical for the company, which was positively received. In 2011 more new socks will be introduced.
Björn Borg has been selling shoes, primarily in Scandinavia, for many years, but the aim is to reach even more customers in more markets. To create better opportunities for expansion, Björn Borg has licensed out the footwear product area to an expert in the field – the international Trend Design Group.
Björn Borg wants to be the Champion of Fashion Under wear, but at the same time believes that there are good opportunities for the brand's other product areas to develop and grow – mainly with the help of outside specialists. Since the beginning of 2010 the footwear operations have been licensed out to Trend Design Group, an established pro ducer and wholesaler based in the Netherlands and Italy. In this way Björn Borg can focus on what it does best – underwear – while Trend Design Group designs, develops and sells shoes, which is their specialty. Our new partner's expertise in footwear design and production is complemented by a broadbased distribution network that will benefi t Björn Borg as a footwear brand. This creates new opportunities to reach further and more effi ciently than its own organization could.
Björn Borg wants to be the Champion of Fashion Underwear, but at the same time believes that there are good opportunities for the brand's other product areas to develop and grow.
Trend Design Group is a production and wholesale company for men's and women's shoes, headquartered in Amsterdam and with design and product development in Italy. With extensive distribution in parts of Europe, North America and Australia, the company has a valuable inter national network. Sales are generated through its own representatives in a few markets as well as through distri butors and agents. The company has grown since its start in 1983 to where it now has 120 employees and revenues of about SEK 860 million.
The collaboration between Björn Borg and Trend Design Group began in early 2010. During the fi rst year the focus was on promoting the new collections designed by Trend Design Group in markets where Björn Borg shoes were previously sold as well as new markets. Björn Borg has retained the right to sell footwear in Sweden and Finland, while Trend Design Group designs and manufactures all shoes and has the right to sell them in other markets.
The fi rst collection of Björn Borg footwear that Trend Design Group is fully respons ible for will reach stores in number of markets around Europe in March 2011, including in Scandinavia, Germany, Belgium, the Netherlands and France. This will expand sales, although the new markets will initially generate small volumes.
"It's great to work with a strong brand like Björn Borg. We anticipate big opportunities to grow both in and outside Scandinavia," said Ben Poelman, part-owner, sales coordinator and brand manager of Trend Design Group. "At fi rst we will focus on Germany, where we have an established network of contacts."
Björn Borg's footwear collection will consist of men's and women's shoes in both sport and fashion models. We were able to show the fi rst samples of fashion shoes from Trend Design Group in Swedish stores in August 2010. The women's shoes will fall in the mid-price segment, between SEK 500 and 1,500, with men's shoes slightly higher. The fall and winter collection will be somewhat more expensive, however. Ben Poelman sees opportunities to expand the range of Björn Borg shoes and would eventually consider adding children's shoes, for example.
The footwear product area accounted for about 10 percent of Björn Borg's brand sales in 2010. By licensing out foot wear, the hope is that the business will have a better oppor tunity to develop and grow. Trend Design Group's goal is to increase sales in new and existing markets, and it wants to increase awareness of Björn Borg shoes in the Björn Borg network as well as externally. They hope to do so with attractive new shoe collections, broader distribution and increased sales in several markets.
"Our aim is to increase awareness of Björn Borg shoes – internally, among retailers and with consumers. We want to make fantastic shoes and produce good results," said Ben Poelman of Trend Design Group.
The Group's growth and high profitability in recent years – and its success in positioning the Björn Borg brand – has largely been the result of its business model. The model facilitates expansion geographically and in the product range with limited operational risk and capital investment, while retaining control over the brand.
Another positive effect of the business model and the network's use of a number of independent distributors is that the competence and valuable local expertise of these enterprising entrepreneurs can be put to use.
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's business model utilizes the Group's own companies and a network of distributors and licensees, which have been granted licenses to one or more product areas and/or geographical markets. The net work also includes Björn Borg stores operated by the Group or as independent franchisees.
By utilizing its own network as well as independent partners, Björn Borg can be involved in every part of the value chain and develop the brand internationally with a compact organization and limited financial investment and risks. The business model requires little capital investment by the company, since licensees and distributors are responsible for marketing, includ ing investments and inventories for their product areas or markets. The model generates substantial consumer sales with limited risk and investment for Björn Borg. Björn Borg owns the strategically most important operations – the company responsible for the underwear product area.
Björn Borg has 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 organiza tion 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, which include marketing activities, displays and graphic identity material. This ensures consistency in branding work and is efficient for distributors.
In a network encompassing 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 develop ment 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 trade mark since 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 well-stocked displays, 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 recog nized. Björn Borg offers the stores flexible display solutions for small spaces, along with fast service and product replenishment. This facilitates high levels of sales at the retail level – a strong sales argument for Björn Borg's distributors.
The largest product area, underwear, is owned and managed by the Group. The areas for bags, eyewear and fragrances – and footwear from 2010 – are licensed to outside product companies. Until January 2011 the Dutch distributor was the licensee for the womenswear collection in the Dutch market. At that point Björn Borg established a subsidiary to produce fashionable, functional sportswear together with the Dutch distributor; see below.
The basic idea is that specialists should manage each product area to create the best possible prospects for growth and development. Each product company, whether Group-owned or managed by a licensee, is responsible within its respective area for the design and development of collections for every market, and posi tion various 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 the underwear collections for men, women and children, the Groupowned product company for underwear comprises socks, swimwear and loungewear. 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 production and logistics, Björn Borg tries to increase flexibility and efficiency, two factors that have grown in importance in recent years in pace with need 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.
In February 2010 Björn Borg licensed out product development and portions of sales in the footwear product area to Trend Design Group, a well-established 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 first collection that Trend Design Group is responsible for will reach around ten markets in March 2011. The aim is to utilize a strong international partner to further increase the growth in footwear.
In January 2011 Björn Borg established a new subsi diary to produce fashionable athletic and functional wear together with the Dutch distributor. The creation of a separate clothing operation based in the Netherlands is another element in the strategy to focus on the core business, underwear, based in Stockholm. The new company, Björn Borg Sport, builds on the clothing concept in the Netherlands, where Björn Borg has established operations and extensive experience after having successfully managed the licensed womenswear company for about ten years. The collections, both women's and men's, will primarily include functional sports fashion. The products will be sold to distributors in Björn Borg's current markets, with an initial focus on larger markets.
Björn Borg is the majority owner with 51 percent of the new company, while the rest is owned by the current Dutch distributor and a smaller percentage by the cloth ing company's management and board of directors.
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.
The company has revised its criteria for cooperations with distributors in its geographical markets due to the increased focus on underwear. Björn Borg's partners in the network must be entrenched players with experience in underwear and fast-moving consumer goods rather than fashion and have an established distribution network in their local market and the resources for long-term investments.
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.
In the agreements, distributors commit to specific targets in terms of sales and investments in their markets. If they do not meet predetermined require ments, Björn Borg can terminate the agreement. The challenge for distributors, in the face of tight competition, is to establish and maintain their posi tion as a supplier to retail chains and department stores as well as indepen dent retailers. Success factors include a high level of service for retailers 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 licensees is an important element in order to continuously develop and fine-tune the collections and marketing activities. Four times a year Björn Borg brings together all its distributors to showcase its new collections and marketing materials and to discuss strategies, campaigns and planning, in addition to which an open dialogue is maintained on the performance of each market. The close cooperation in the network is important to the successful expansion of the brand.
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 3,800 retailers sell Björn Borg underwear and adjacent products, including 850 in Sweden, 900 in the Netherlands, 800 in Denmark and 400 in Norway. In smaller markets, around 900 retailers sell these products. Licensed products are sold through a total of around 6,000 retailers, about half of which are in Sweden.
Fashion and sporting goods chains as well as depart ment 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. This creates a more efficient selling-in 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. The stores are either wholly owned or franchised. The net work also includes five 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 37 franchised stores are in the Netherlands, Norway, Finland, Belgium, Germany and Sweden, where the first franchised Björn Borg store was opened in Helsingborg in late 2009.
E-commerce through the web site www.bjornborg.com is becoming an increasingly important sales channel for the company. In established markets, the web shop offers even greater accessibility, and in new markets it is an important complement since the number of retailers is still limited.
The global e-commerce platform launched in spring 2010 includes a new logistics solution and accommodates more languages such as Spanish, German and French. During the summer the new e-commerce platform was introduced in the US market as well.
Measures to further improve the web shop are continuing with the aim to make it even easier and more enticing for customers to shop.
Björn Borg has seen accelerating sales since the new web shop was launched last spring and anticipates opportunities for further growth.
| Björn Borg stores | Group owned |
Franchises |
|---|---|---|
| Sweden | 10 | 1 |
| Netherlands | – | 28 |
| Norway | – | 2 |
| Finland | – | 1 |
| Belgium | – | 4 |
| Germany | – | 1 |
| Total | 10 | 37 |
SHARE OF RETAILERS BY RETAILER CATEGORY
MARCH 2009 "I HAVE 25 DIFFERENT ALL I NEED TO KEEP WARM TODAY IS MY BJORN BORG BOXERS. VILDE
NORWAY
20 BJÖRN BORG ANNUAL REPORT 2010
Underwear is Björn Borg's largest product area, comprising men's, women's and children's underwear, socks and swimwear. During the year underwear for children ages 2–12 was added. 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 accounted for about 68 percent of underwear sales, while the women's accounted for 21 percent. The kid's line accounted for about 11 percent after its first year on the market.
Björn Borg underwear is sold by independent retailers, apparel and sporting goods 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 decreased by 8 percent in 2010 to SEK 1,167 million. Among larger markets, Sweden and Belgium reported good growth during the year, while Norway, Denmark and the Netherlands saw sales decrease slightly year-on-year. Among smaller markets, Finland and Germany noted strong sales growth during the year.
In 2010 Björn Borg offered 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. The distri butor in the Netherlands has manufactured a clothing collec tion for women on a licensing basis for the Dutch market; see Licensed products. As of
2011 all clothing is produced and sold under the Björn Borg trademark through a new licensed company, Björn Borg Sport. Brand sales for adjacent products increased by 44 percent in 2010 to SEK 57 million.
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 Björn Borg has expanded the footwear operations internationally to several of the company's markets. Sales in Denmark and the Netherlands began in 2007 and grew strongly in 2008–2009. In 2010 the footwear operations were licensed out to an international footwear company to create opportunities for further expan sion and growth. During the spring the first licensed collection will reach stores in around ten markets.
Shoes are sold through independent retailers, footwear and sporting goods chains, and department stores.
Brand sales in the footwear product area amounted to SEK 178 million during the year, a decrease of 13 percent compared with 2009. Sales in Sweden decreased by 1 percent, from SEK 84 million to SEK 83 million.
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 Nether lands are the largest – through luggage and sporting goods shops, retail chains, department stores and Björn Borg stores.
Björn Borg eyeglass frames fall into the trendy segment of the market and are sold to retailers through the licensee's distribution organization. A line of sunglasses is also 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 Denmark. 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.
Until 2010 the distributor in the Netherlands manufactured and sold 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. As of 2011 all clothing is manufactured and sold under the Björn Borg brand through a new licensed company, Björn Borg Sport.
Total brand sales of licensed products amounted to SEK 331 million in 2010, down 9 percent compared with 2009. For bags the decrease was 7 percent, while eyewear and fragrances reported declines of 19 percent and 27 percent, respectively. Sales of the licensed women's collection in the Netherlands fell by 28 percent during the year.
Sweden 31%
Björn Borg's underwear product area is currently represented in a total of around 20 markets, of which the Netherlands, Sweden, Norway, Denmark and Belgium are the largest, in that order. Smaller markets include Finland and a number of markets where the brand has been introduced in the last fi ve years: Chile, England, Estonia, France, Greece, Italy, Canada, Latvia, Lithuania, Portugal, Switzerland, Spain, Germany, the U.S. and Austria.
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 28 percent of total brand sales. Björn Borg products are sold through around 850 retailers around the country as well as in eleven Björn Borg stores, one of which is franchised. Today Björn Borg has broad distribution in the Swedish market, and all its product groups are represented. Further expansion will be done selectively, although new product categories such as kids' under wear will attract new retailers. Brand sales rose in 2010 compared with the previous year.
The Netherlands was the largest market for the Björn Borg brand in 2010, with 34 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 about 1,000 retailers and 28 franchised stores. In the Dutch market Björn Borg product sells underwear, clothing, footwear, bags and eyewear. Total brand sales in the Netherlands fell during the year, which was largely due to a decline during the first quarter. Sales during the last quarter of the year were largely unchanged.
Björn Borg was launched in Denmark in 1992, and today it accounts for 13 percent of total brand sales. In the Danish market, Björn Borg products are sold exclusively through around 800 retailers, since there are currently no Björn Borg stores in the country. In Denmark the brand is represented in every product area. In 2010 brand sales in Denmark declined slightly compared with 2009.
The brand was launched in the Norwegian market in the early 1990s. Norway today accounts for 12 percent of total brand sales. Products are sold through about 500 retailers around the country and two Björn Borg stores in Oslo. All product groups are represented in Norway. Brand sales in the Norwegian market declined slightly compared with the previous year.
Björn Borg was launched in Belgium during the second half of the 1990s. In recent years the growth rate has increased and Belgium is currently Björn Borg's fifth largest market, with 4 percent of total brand sales. Underwear dominates in the Belgian market and is sold through around 250 retailers and four Björn Borg stores. Brand sales in the Belgian market reported good growth compared with the previous year.
Björn Borg's smaller markets combined for 9 percent of total brand sales, compared with 10 percent in the previous year. The fi rst two years of a distribution cooperation in a new market are considered a test period when market conditions and the distributor's opportunities and ability to cultivate the market are evaluated, after which an assessment is made of the market's future development potential.
The brand was established in Finland during the second half of the 1990s. Underwear is the dominant product area, although footwear and adjacent products are sold as well through retailers and a Björn Borg store in Helsinki. Brand sales grew strongly in Finland during the year.
Björn Borg started operations in England in 2006. The launch took place at the department store Selfridges in London. Distribution has since been broadened to include several other well-known retailers such as Harvey Nichols and Harrods, which are important to the continued international expansion. Underwear is sold in the British market. Since fall 2010 operations are managed by a company in the Björn Borg Group with its own sales organization. As part of the expanded marketing in the country, a showroom was opened centrally at Oxford Circus in London. Brand sales in England decreased in 2010 due to the takeover of the operations. During the second quarter of 2011 Björn Borg will fully manage the operations.
In 2009 Björn Borg reached an agreement with a new, experienced distributor for the German market after the previous agreement had been terminated. Since operations were relaunched in fall 2009, the number of retailers has grown significantly, in particular among sporting goods distributors. An outlet was opened in late 2010. Brand sales continued to rise in 2010.
Björn Borg has operated on a limited scale in Austria since 2007. The cooperation and potential for further operations in the country were evaluated during the year. Thanks to the positive trend in 2010, the prospects of further growth are considered good and the cooperation will be continued.
Björn Borg terminated the agreement with the distributor in Spain at the end of the year. The aim is to remain in Spain, where the brand has begun to gain ground after several years in the market. Negotiations are being held with several interested parties that want to take over distribution in the country.
Björn Borg decided in 2009 to seek out a partnership solution with less risk for the further development of its U.S. operations. The focus now is mainly on further establishing the brand in the country through e-commerce.
In Canada, Björn Borg launched its sales on a limited scale in late 2008 through an external distributor. Brand sales in the Canadian market developed positively during the year from small volumes.
Sales of Björn Borg products in France have remained on a small scale since the agreement with the previous distributor was terminated in 2009. In early 2011 Björn Borg signed a letter of intent with a new distributor for the French market.
In early 2009 an agreement was signed with an independent distributor to launch Björn Borg in Greece, with sales starting in fall 2009. Although difficult market conditions have hampered the brand's development, sales and the number of retailers both increased during the year.
A distribution agreement was signed in Italy in early 2009. During the fourth quarter of 2010 it was announced that the cooperation with the Italian distributor had been terminated. The operations that were launched in fall 2009 have not performed as planned, and it was determined that the distributor is unable to make the investments needed to establish the brand in the country. In early 2011 Björn Borg signed a letter of intent with a new distri butor for the Italian market.
Agreements were signed with independent distributors in fall 2009 to launch Björn Borg in Portugal and Chile in spring 2010. Sales are gradually increasing as the retailer network is expanded.
In August 2010 it was announced that an agreement had been reached with a distributor to launch Björn Borg in Estonia, Latvia and Lithuania during a trial period. The brand was promoted to retailers in these markets during the second half of 2010.
In fall 2010 it was decided that the distributor in Germany would assume responsibility for distribution in Switzerland as well. Sales to retailers are expected to begin during the second quarter of 2011.
Björn Borg is a Swedish company operating in an international market, who wants to be a good corporate citizen with the motivation of ensuring that the Björn Borg brand stands for something positive. One of Björn Borg's fundamental corporate values is taking responsibility. This is why corporate responsibility issues are so important to the company. This means, for example, that products must be of high quality and sustainable, that individuals that directly or indirectly works for Björn Borg must be treated with respect and work under reasonable conditions, and that operations must not impact the environment more than necessary. This should be reflected in business decisions and the way in which operations are conducted. Corporate social responsibility involves not only how the company itself acts but also, ultimately, encouraging partners such as suppliers to also do the right thing.
Björn Borg is trying to work in a more conscious, structured way with corporate social responsibility issues and to be more transparent about the work it is doing in this area. By reporting openly on the company's corporate social responsibility work, including which areas need improvement and the goals that the company is working towards, Björn Borg hopes to meet the expectations of its employees, consumers, the public, partners, organizations and the financial market. Björn Borg also tries to learn from successful examples of measures and approaches in the corporate social responsibility area.
The President has the overall responsibility for corporate social responsibility issues. The Group also has a person responsible for managing these issues at an operat ing level. This includes enforcing and revising the company's code of conduct, monitoring that manufacturers, licensees and others follow the requirements, and providing information and training internally and for outside partners. To increase the impact of corpo rate social responsibility issues in a broader sense, Björn Borg plans to deepen its cooperations with licensees and, where applicable, with outside partners. The aim is to increase knowledge and understanding of cor po rate social responsibility issues in the wider network of partners, including through various types of training and follow-ups.
Ensuring the quality of the products and production processes is an important part of Björn Borg's corporate social responsibility work. When a con sumer buys a product of high quality, it will last. If the product is something the buyer values highly and enjoys, they will typically use it more often and for longer. A longer product life cycle can help to reduce environmental impacts. Björn Borg strives to maintain consistently high quality in its products. Specialists within each product area work continuously to improve every step of the manufacturing process, from design and choice of materials to production, in order to reach the right level of quality. The aim is that the customer will be able, and want, to use Björn Borg's products for a long time. The company's surveys show that this is the case.
Björn Borg has evaluated products over their life cycle in order to get a better understanding of their environmental impact and as a basis for further environmental work. The results show that it is the washing of the underwear by the customer that has the greatest impact. Because of this, Björn Borg will add a text on its packaging to encourage customers to think about the environment when using, and especially washing, the product. Other factors that affect the environment during the lifecycle of an undergarment are the manufacturing and processing of the material and, of course, the manufacturing and the subsequent transport of the product itself.
The production of cotton for underwear uses a considerable amount of water and chemicals. In early 2011 Björn Borg therefore started working with a new collection of underwear for men and women made from organic cotton for launch in spring 2012. A growing share of Björn Borg's products are also made with other, generally less environmentally harmful materials such as polyester and polyamide, a trend which is expected to continue.
Björn Borg, like its licensees, relies on outside manufacturers to produce its products, primarily in Asia, but also to some extent in Europe. The company normally maintains close, longstanding relationships with its suppliers, which provides good insight into production conditions and creates opportunities for a constructive dialogue on corporate social responsibility issues. The number of principal suppliers is purposely kept low to facilitate control and follow-up. Björn Borg wants to take responsibility for ensuring that the people who produce Björn Borg products do so in a safe environment and under reason able conditions, even if they are employed by third party manufacturers, not the Björn Borg Group. The requirements that Björn Borg places on its manu facturers in this respect are spelled out in manufacturing agreements, codes of conduct and chemical restrictions. A key success factor in implementing these types of requirements, is a close cooperation with the manufacturers in question and to allocate time and resources to support them as far as possible in making their own, internal improvements.
To better be able to systematically monitor and ensure compliance with the requirements placed on manufacturers, the company has joined the Business Social Compliance Initiative, BSCI, and applies its methodologies.
BSCI is a European non-profit organization dedicated to helping a large number of members, mostly retail, brand and import companies, to improve working con ditions in their supply chain. BSCI helps mem bers to work more efficiently by applying the same standardized requirements in terms of produc tion con ditions, etc., which makes it easier for these companies and their suppliers to make improvements. This includes a system to control and document the results of inspections and corrective actions. Björn Borg became a member of BSCI in January 2008 and has since adapted its Code of Conduct to the organization's guidelines. BSCI's 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.
BSCI's Code of Conduct includes the following key elements:
All of Björn Borg's manufacturers have committed to comply with the company's Code of Conduct, which is based on the BSCI's Code of Conduct, as noted above. When new manufacturers are contracted, a systematic review is done of working conditions, work environments, chemical handling, etc. in order to verify that the company in question is equipped to meet Björn Borg's requirements. The largest manufacturers contracted by Björn Borg are audited at least every three years. Any non-compliances that are identified result in a request to manu facturers to implement corrective action plans, after which they are re-audited to confirm that the appropriate measures have been taken. BSCI's requirement is that production units that supply 70 percent of more of total production volume must comply with the requirements of its code of conduct.
The BSCI audits that Björn Borg previously conducted, including of its largest manufacturer, have resulted in demands that the manufacturers implement improvements. The most common areas of non-compliance relate to emergency exits, safety equipment, fire safety training, lighting and storage of chemicals.
These non-compliances can usually be remidied fairly easily. In April 2010 Björn Borg had an extensive re-audit conducted of the Group's largest underwear manufacturer, with good results. The facility was classified at the second highest level. The problems that remained primarily involved the amount of overtime. It is not unusual that overtime among manufacturers exceeds the levels allowed in the code of conduct. This issue is generally much more difficult to address. In Björn Borg's experience, it requires fundamentally changing attitudes, which takes time. In 2010 the company's largest manufacturer hired an outside consultant to support in implementing the changes in working hours required. The audits and re-audits that have been conducted to date concludes that BSCI's requirement (of 70 percent or more) is being met, but continuous follow-ups are needed to verify that the manufacturers at least maintain this level and continue to comply with the guidelines. Re-audits of overtime at Björn Borg's largest manufacturers will be made in 2011.
Björn Borg also tries to monitor its licensees' corporate social responsibility work, e.g., by controlling which controls they conduct of their manufacturers. Some licensees are active themselves within the BSCI. In 2010, two licensees conducted BSCI audits of their manufacturers, as a result of which these licensees now comply with BSCI's requirements as indicated above. These licensees also require their manufacturers to abide by BSCI's Code of Conduct. One of the licensees has terminated its agreement with a manufacturer that failed to meet the requirements. Björn Borg's goal is to further extend its cooperations with licensees in the area of corporate social responsibility in the future.
As noted above, the company's largest manufacturer has hired an outside consultant as support in its improvement efforts. Björn Borg is also planning additional measures to increase awareness and understanding of its code of conduct, BSCI and current rules among its licensees, and eventually among others in its network of partners as well.
The products sold by Björn Borg shall comply with applicable legal requirements and other mandatory rules and be safe for customers and the environment. Björn Borg tries to minimize the environmental impact from the manufacturing of its products. Since manufacturing is handled exclusively by outside parties, this work usually involves trying to induce manufacturers in various ways to switch to production methods and chemicals that are safer for the environment and their personnel. An important focus area going forward is water, energy and chemical consumption in production. Another is whether the impact of trans ports and packaging can be further reduced.
Björn Borg has implemented guidelines on the use of chemicals in the manufacture of its products based on the chemical guide of Sweden's Textile Importers' Association and EU chemical regulations. The company's manufacturers have pledged to follow the instructions on the use of various substances, as detailed in a specific list of chemicals produced for this purpose. In some cases Björn Borg's own recommended limits on what is allowed in products are lower than the Textile Importers' Association's. Samples of the materials used in the company's underwear are now regularly tested before production begins in order to ensure that the guidelines are followed as early in the process as possible. Björn Borg's employees also regularly visit production facilities, giving them the opportunity to inspect and monitor them. A formal chemical handling process has now been implemented within the Group, based on the REACH regulation. The purpose of this work is to be able to inform outside stakeholders such as customers of the extent to which specific substances are used in individual products.
Björn Borg cooperates with the research institute Swerea IVF, which has a broad range of operations in the textile field, including product testing. A chemicals group made up of a number of Swedish apparel companies under the leadership of Swerea IVF offers Björn Borg valuable support in its work with production chemicals, including access to expertise and up-to-date information on new and revised rules and more environmentally adapted chemicals and methods.
Björn Borg's products are shipped primarily by sea from its suppliers in China, and only to a limited extent by air. The small share of products manufactured in Europe is transported by truck. Ship ments are sent directly from the country of origin to the distributor's warehouse in each market, which produces less emissions and lower costs than if they were sent through a central warehouse.
Björn Borg's underwear, and to some extent its other product areas, are shipped in plastic and paper packaging. All products contain labels. In 2010 greener plastic packaging was introduced in the form of EVA and polypropylene plastics, both of which are recyclable.
In its efforts to give back to society, Björn Borg is providing finan cial support to the Mathare Sports Association (MYSA), a self-help pro gram for children and young adults in the slums of Nairobi, Kenya that uses team sports and environmental cleanups. MYSA com bines sports with leadership training by organizing activities to improve local environments and increase AIDS awareness. The organization currently serves around 25,000 children and young adults. Björn Borg donates a specific percentage of the sales price of each underwear item in its kid's collection to support MYSA's organization and scholarship fund. As a result, Björn Borg in 2010 allocated approximately SEK 5.4 million. In 2010 it donated SEK 1 million to MYSA for specific projects, including financing for grants and an office for operations. All the money will go to the organization as it expands and starts more projects. This long-term co operation is periodically evaluated. In 2010 Björn Borg's partner, Social Initiative, followed up to see if the money was being used as agreed, how the support was being perceived by the children and how well the organization was performing, with positive results.
In 2010 Björn Borg will focus on completing the BSCI re-audits mentioned above, including of the manufacturers that produced the high-volume product, Love All. Addressing the overtime situa tion will remain a priority in 2011. New manufacturers may also be included within the framework of the BCSI re-audits and in some cases may require audit measures. Further re-audit of licensees are planned as well. Björn Borg's goal is otherwise to gradually increase openness about its corporate social responsibility work and more clearly communicate its goals and results in this area.
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, off ering them opportunities to grow and attracting new professionals are priorities that management satisfi es by building 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 effi cient 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 the main area, underwear. Continuous skills 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 events and at the same time create an inspiring climate internally with 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 internally and externally. Shared values play an important unifying function for Björn Borg and its growing international business and network of partners, as well as for the development of the brand.
Clear targets should be set for every employee and group to give the staff a better understanding of how they contribute to the Group's goals and to provide more opportunities for monitoring and development.
The compensation system currently used by the company utilizes base salaries and variable compensation for key employees, which pays out when individual targets are met. In addition, incentive schemes are offered to all employees based on warrants. They are described in more detail in note 7 on page 53.
During the year employees were added in certain functions to meet the needs of a growing international group, but also to adapt the company's increased focus on underwear. This included specialists and designers in underwear. The organization was also strengthened in other areas during the year to meet higher aims and continue the international expansion.
The average number of employees in the Group was 100 in 2010. Their average age was 34, and 37 percent were men. Among the Group's employees, 32 percent have a post-secondary education. Average industry experience was slightly over ten years. Employee turn over in 2010 was 41 percent and sick leave 3.2 percent, against 2.3 percent in 2009.
30 BJÖRN BORG ANNUAL REPORT 2010
MADDIE AND ALLI
BJÖRN BORG ANNUAL REPORT 2010 31
| SEK thousands | 2010 | 2009 | 2008 | 2007 | 2006 |
|---|---|---|---|---|---|
| Income statement | |||||
| Net sales | 536,040 | 519,915 | 526,556 | 494,886 | 324,555 |
| Operating profit | 126,005 | 112,594 | 128,751 | 142,075 | 81,864 |
| Profit after financial items | 123,995 | 111,658 | 134,822 | 142,227 | 81,400 |
| Profit for the year | 90,763 | 80,902 | 99,202 | 102,091 | 58,485 |
| Balance sheet | |||||
| Intangible assets | 208,334 | 204,913 | 203,172 | 202,417 | 202,426 |
| Tangible non-current assets | 7,808 | 11,150 | 15,366 | 17,817 | 6,331 |
| Financial non-current assets | – | – | – | – | 45 |
| Deferred tax assets | 6,438 | – | – | – | – |
| Inventories, etc. | 26,239 | 26,455 | 33,752 | 24,640 | 22,036 |
| Current receivables | 85,344 | 65,719 | 106,197 | 77,093 | 58,194 |
| Short-term investments | 35,567 | – | – | – | – |
| Cash & cash equivalents | 194,275 | 296,484 | 241,498 | 187,423 | 59,544 |
| Total assets | 564,005 | 604,720 | 599,985 | 509,390 | 348,576 |
| Equity | 427,276 | 460,956 | 413,803 | 342,943 | 138,054 |
| Non-current liabilities | 34,724 | 40,889 | 46,816 | 52,515 | 95,465 |
| Deferred tax liabilities | 48,189 | 40,011 | 32,884 | 28,607 | 17,141 |
| Current liabilities (interest-bearing) | – | – | – | – | 10,000 |
| Other current liabilities | 53,816 | 62,864 | 106,482 | 85,325 | 87,916 |
| Total equity and liabilities | 564,005 | 604,720 | 599,985 | 509,390 | 348,576 |
| Key figures | |||||
| Gross profit margin, % | 53.6 | 51.3 | 53.8 | 53.6 | 50.7 |
| Operating margin, % | 23.5 | 21.7 | 24.5 | 28.7 | 25.2 |
| Profit margin, % | 23.1 | 21.5 | 25.6 | 28.7 | 25.1 |
| Return on capital employed, % | 25.7 | 20.9 | 28.8 | 40.9 | 48.6 |
| Return on average equity, % | 20.5 | 18.5 | 26.2 | 42.4 | 53.0 |
| Profit attributable to Parent Company's shareholders | 90,897 | 80,867 | 99,210 | 102,062 | 58,485 |
| Equity/assets ratio, % | 75.8 | 76.2 | 69.0 | 67.3 | 39.6 |
| Equity per share, SEK | 16.99 | 18.33 | 16.51 | 13.70 | 5.95 |
| Investments in intangible non-current assets | 4,878 | 3,160 | 2,200 | 225 | 188,532 |
| Investments in tangible non-current assets | 2,498 | 1,380 | 2,873 | 15,290 | 5,542 |
| Investments in financial assets | 9,046 | – | – | – | – |
| Depreciation/amortization for the year | –7,136 | –7,024 | –6,976 | –4,121 | –1,329 |
| Average number of employees | 100 | 92 | 88 | 76 | 52 |
| Data per share | |||||
| Earnings per share, SEK | 3.61 | 3.22 | 3.96 | 4.18 | 2.55 |
| Earnings per share (after dilution), SEK | 3.57 | 3.21 | 3.96 | 4.17 | 2.53 |
| Number of shares | 25,148,384 | 25,148,384 | 25,059,184 | 25,036,984 | 23,207,376 |
| Weighted average number of shares | 25,148,384 | 25,111,217 | 25,041,134 | 24,406,699 | 22,954,076 |
| Effect of dilution | 321,818 | 118,910 | 34,366 | 83,461 | 127,524 |
| Weighted average number of shares (after dilution) | 25,470,202 | 25,230,128 | 25,075,500 | 24,490,160 | 23,081,600 |
| Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
|---|---|---|---|---|---|---|---|---|
| SEK thousands | 2010 | 2010 | 2010 | 2010 | 2009 | 2009 | 2009 | 2009 |
| Brand sales | 428,234 | 506,572 | 338,253 | 460,156 | 410,053 * | 501,629 * | 358,037 * | 602,183 |
| Net sales | 115,893 | 170,998 | 100,770 | 148,379 | 102,247 | 155,162 | 97,832 | 164,674 |
| Gross profit margin, % | 56.3 | 52.6 | 55.1 | 51.6 | 55.7 | 50.8 | 50.9 | 49.3 |
| Operating profit | 24,513 | 51,516 | 13,939 | 36,037 | 19,427 | 43,454 | 12,131 | 37,582 |
| Operating margin, % | 21.2 | 30.1 | 13.8 | 24.3 | 19.0 | 28.0 | 12.4 | 22.8 |
| Profit after financial items | 24,150 | 49,772 | 14,644 | 35,429 | 19,712 | 40,830 | 11,871 | 39,245 |
| Profit margin, % | 20.8 | 29.1 | 14.5 | 23.9 | 19.3 | 26.3 | 12.1 | 23.8 |
| Earnings per share, SEK | 0.70 | 1.46 | 0.43 | 1.03 | 0.54 | 1.20 | 0.34 | 1.15 |
| Earnings per share after dilution, SEK | 0.70 | 1.44 | 0.42 | 1.01 | 0.53 | 1.19 | 0.33 | 1.15 |
| Number of Björn Borg stores at end of period | 47 | 46 | 46 | 46 | 46 | 45 | 43 | 44 |
| of which Group-owned Björn Borg stores | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 11 |
* Because brand sales for the full-year 2009 have been changed to correct the previously reported figures, quarterly brand sales for 2009 have been updated. Previously reported figures: Q2 2009 = SEK 385,637,000, Q3 2009 = SEK 566,423,000, Q4 2009 = SEK 422,121,000.
The Björn Borg Group is active in an industry with seasonal variations. The four quarters vary in terms of sales and earnings. With the current product mix, the second quarter is generally the weakest with regard to sales and earnings.
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 2010 net sales amounted to SEK 135.5 million (138.3) with operating profit of SEK 40.8 million (43.9).
Sales in the Product Development segment are generated by the Group-owned product companies for clothing and adja cent products through sales to distributors in all markets. In 2010 net sales amounted to SEK 360.6 million (339.2) with operating profit of SEK 64.4 million (51.0).
Sales in the Wholesale segment are generated by the Groupowned distributors for clothing and footwear in Sweden, England and the U.S., where Björn Borg is the exclu sive distri butor in these segments. In 2010 net sales amounted to SEK 208.2 million (193.8) with operating profit of SEK 21.3 million (9.6).
Sales in the Retail segment are currently generated through Group-owned Björn Borg stores and e-commerce. Net sales in Retail amounted to SEK 49.1 million (54.5) in 2010 with an operating loss of SEK 0.5 million, against year-earlier profit of SEK 8.0 million.
OPERATING 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 accounts for the financial year 2010.
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 around 20 markets, the largest of which are Sweden and the Netherlands. Operations are conducted through a network of product and wholesale 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 limited risk and capital investment, at the same time that control of the brand rests with the company.
Björn Borg is listed on NASDAQ OMX Stockholm 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 6,908 shareholders at year-end. The largest shareholder as of December 31, 2010 was Fredrik Lövstedt, who 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 term concluding with the following AGM. Björn Borg's Arti cles 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 15, 2010. The AGM re-elected Mats H Nilsson, Vilhelm Schottenius, Michael Storåkers, Monika Elling, Fabian Månsson and Nils Vinberg as Directors, with Fredrik Lövstedt as Chairman of the Board. Kerstin Hessius was elected as a new Director. The AGM also passed resolutions on the profit distribution, authorization for the Board to resolve on acquisitions, transfers of the company's own shares and new share issues.
In 2010 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, one strategy meeting and one meeting in connection with the adoption of the budget. In addition, two special meetings were held. Further 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 by votes. For the 2011 AGM Björn Borg's Nomination Committee has the following members:
Mats H Nilsson is Chairman of the Nomination Committee.
Björn Borg's financial goals for the period 2010–2014 are as follows:
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 goals 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 concept stores are opened.
The Board of Directors has decided to recommend to the 2011 AGM a distribution of SEK 5.20 per share for the financial year 2010, corresponding to 144 percent of net income; see above regarding the financial goals and dividend. As proposed, the distribution would be paid through an automatic redemption, whereby every share is divided into a common share and two redemption shares. The redemption shares will then automatically be redeemed for SEK 2.60 per share. Payment for the redemption shares, contingent on the approval of the AGM, is expected to be made around May 25, 2011. The Board of Directors' proposal corresponds to a transfer to shareholders of SEK 130.8 million (125.7). For 2009 a dividend of SEK 5.00 was paid per share, corresponding to 155 percent of net income.
During the year Björn Borg gradually took over the British operations from the former distributor and fully manages them as of the second quarter of 2011. The takeover of the operations slightly increased operating expenses during the second half of 2010. The Spanish distributor filed for bankruptcy at the end of 2010. Because of the business model Björn Borg uses with its distributors, the bankruptcy has not caused any significant costs for the Group. There is a strong interest in the brand in the country, and negotiations are currently being held with potential partners in the Spanish market.
The previously announced letter of intent on wholesale in Poland has been canceled.
During the first quarter of 2011 Björn Borg signed the letters of intent with new distributors in Italy and France. In the company's estimation, the new distributors have the capacity for the necessary investments to establish the brand in these countries.
In recent years Björn Borg has expanded to a number of new markets in cooperation with external distributors. The Group has tightened its criteria for new distributors in terms of resources, contact networks and experience. In 2011 Björn Borg will introduce a two-year trial period on cooperations with new distributors in order to evaluate market conditions and the distributor's opportunity and ability to cultivate the market. During this introductory stage, we will assess the market's future development potential.
Due to its focus on underwear, Björn Borg during the year licensed out its 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 remains within the Group and is managed by the current sales organization, while Trend Design Group is responsible for sales in other markets.
The first collection of Björn Borg footwear that Trend Design Group is fully responsible for will reach stores in a number of markets around Europe in March 2011.
An outlet in Germany was opened by the German distributor during the fourth quarter of 2010. No other changes were made regarding the number of stores during the year. At year-end there were 47 (46) Björn Borg stores, of which 10 (10) are Group-owned.
An agreement has been reached on the previously reported dispute with the English distributor regarding undelivered shipments, which affected profit negatively in the second quarter of 2010.
The company has agreements for four licensed product groups: footwear, bags, eyewear and fragrances.
In January 2011 Björn Borg established a new subsidiary to produce fashionable athletic and functional wear together with the Dutch distributor. The creation of a separate clothing operation based in the Netherlands is another element in the strategy to focus on the core business, underwear, based in Stockholm. The new company, Björn Borg Sport, builds on the clothing concept in the Netherlands, where Björn Borg has established operations and extensive experience after having successfully managing the licensed womenswear company for about ten years. The collections, both women's and men's, will primarily include sports fashion and functional sportswear. The products will be sold to distributors in Björn Borg's current markets, with an initial focus on larger markets. In 2011 Björn Borg Sport will handle some billing for shipments from the former Dutch apparel operations. This is expected to raise the Group's operating expenses by about SEK 10 million in 2011. The new clothing operation is considered to have good financial potential.
Group sales during the year amounted to SEK 536.0 million (519.9), an increase of 3 percent. The increase came from product development (export sales to distributors) and wholesale operations (sales to retailers), while lower footwear exports to the Netherlands negatively affected sales in the first quarter of 2010.
The gross profit margin increased during the year to 53.6 percent (51.3). Operating profit amounted to SEK 126.0 million (112.6) and the operating margin was 23.5 percent (21.7). Profit before tax increased to SEK 124.0 million (111.7). Operating expenses as a share of net sales amounted to 30.1 percent (29.6). The higher gross margin was partly due to a larger share of higher-margin sales within product development, and to some extent to a weaker USD compared with 2009, which has had a positive effect on the wholesale operations.
At the end of the period the company had 25,148,384 (25,148,384) shares outstanding. Earnings per share before and after dilution amounted to SEK 3.61 (3.22) and SEK 3.57 (3.21), respectively.
| Condensed income statement | 2010 | 2009 |
|---|---|---|
| Net sales, SEK million | 536.0 | 519.9 |
| Operating profit, SEK million | 126.0 | 112.6 |
| Operating margin, % | 23.5 | 21.7 |
| Profit before tax, SEK million | 124.0 | 111.7 |
| Profit for the year, SEK million | 90.8 | 80.9 |
| Earnings per share, SEK | 3.61 | 3.22 |
| Earnings per share after full dilution, SEK | 3.57 | 3.21 |
Cash flow from operating activities in the Group amounted to SEK 72.8 million (94.1) for the full-year 2010. The decline was mainly due to increased tied-up working capital compared with December 31, 2009, partly caused by larger deliveries to wholesale customers at the end of the year, which increased accounts receivable. Together with other current receivables, they were SEK 19.6 million higher than on December 31, 2009. At the same time accounts payable were SEK 5.5 million lower than a year earlier.
Total investments in tangible and intangible non-current assets amounted to SEK 7.4 million (4.5), the large part of which was attri butable to a new web platform, but also a store renovation and a new enterprise system. During the first quarter Björn Borg Services AB was acquired for SEK 9.1 million, excluding Björn Borg Services' cash and transaction expenses.
For the full-year 2010 cash & cash equivalents decreased by SEK 66.6 million, compared with an increase of SEK 55.0 million in the previous year, mainly due to an increased dividend to shareholders and the temporary increase in tied-up working capital. In 2010, SEK 125.7 million was distributed to shareholders, compared with SEK 37.6 million in 2009.
The Björn Borg Group's cash & cash equivalents and short-term investments amounted to SEK 229.8 million (296.5) at the end of the period. The equity/assets ratio was 75.8 percent (76.2). The company has no interest-bearing liabilities.
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 a variable compensation system for certain key employees, which pays out when individual targets are met. The maximum variable compensation corresponds to three months' salary. In addition, Björn Borg has established an incentive scheme based on warrants for all employees.
The Annual General Meeting on April 15, 2010 resolved that remuneration for the President and other members of senior management shall comprise a base salary, variable compensation, longterm 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. Variable compensation will never exceed the 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 (or a combination) and entitle senior executives to receive a pension from age 65.
The Board proposes that the 2011 AGM keep the remuneration guidelines for the President and other senior executives unchanged. The average number of employees for the full year was 100 (92), of whom 37 percent (35) are men and 63 percent (65) women.
Although Björn Borg does not conduct any research, 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 major suppliers are gradually undergoing independent audits and re-audits. 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, including through audits and re-audits of suppliers, an increase in 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 beyond 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 company's profitability is also affected by changes in global commodity prices and by increased production, payroll and transport costs in the countries where the company buys its products.
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 of late, 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.
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, Björn Borg Footwear, Björn Borg Inc. (US) and Björn Borg Services AB (dormant).
Moreover, the company owns 80 percent of the shares in Björn Borg Ltd (UK). The Parent Company's net sales for the full-year 2010 amounted to SEK 45.8 million (47.6). Profit before tax and allocations amounted to SEK 68.8 million (84.4) for the full-year. Cash & cash equivalents and short-term investments amounted to SEK 217.3 million (287.7) on December 31, 2010. Full-year investments in tangible and intangible non-current assets amounted to SEK 0.8 million (2.3).
The following unappropriated earnings are at disposal of the Annual General Meeting:
| Retained earnings, SEK | 56,880,795 |
|---|---|
| Profit for the year, SEK | 77,616,900 |
| 134,497,695 | |
| The Board proposes that: | |
| Shareholders receive a distribution of | |
| SEK 5.20 per share, totaling SEK | 130,771,597 |
| Carried forward, SEK | 3,726,098 |
| 134,497,695 |
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 | 2010 | 2009 |
|---|---|---|---|
| Net sales | 4,5 | 536,040 | 519,915 |
| Cost of goods sold | –248,844 | –253,271 | |
| Gross profit | 287,196 | 266,644 | |
| Distribution expenses | –106,643 | –102,390 | |
| Administrative expenses | –41,037 | –38,463 | |
| Development expenses | –13,511 | –13,197 | |
| Operating profit | 4, 6, 7, 8, 9, 10, 11 | 126,005 | 112,594 |
| Interest income and similar income items | 26 | 2,754 | 4,384 |
| Interest expenses and similar expense items | 26 | –4,764 | –5,320 |
| Profit after financial items | 123,995 | 111,658 | |
| Profit before tax | 123,995 | 111,658 | |
| Tax on profit for the year | 13 | –33,232 | –30,756 |
| Profit for the year | 90,763 | 80,902 | |
| Profit for the year attributable to: | |||
| Parent Company's shareholders | 90,897 | 80,867 | |
| Non-controlling interests | –134 | 35 | |
| Total comprehensive income | |||
| Profit for the year | 90,763 | 80,902 | |
| Other comprehensive income | |||
| Exchange rate differences | 253 | 844 | |
| Total comprehensive income for the year | 91,017 | 81,746 | |
| Total comprehensive income for the year attributable to | |||
| Parent Company's shareholders | 91,151 | 81,711 | |
| Non-controlling interests | –134 | 35 | |
| Earnings per share, SEK | 23 | 3.61 | 3.22 |
| Earnings per share after dilution, SEK | 23 | 3.57 | 3.21 |
| SEK thousands | Note | Dec. 31, 2010 | Dec. 31, 2009 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 14 | ||
| Goodwill | 13,944 | 13,944 | |
| Trademarks | 187,532 | 187,532 | |
| Other intangible assets | 6,858 | 3,437 | |
| 208,334 | 204,913 | ||
| Tangible non-current assets | 15 | ||
| Property, plant and equipment | 7,808 | 11,150 | |
| 7,808 | 11,150 | ||
| Financial non-current assets | |||
| Deferred tax assets | 6,438 | – | |
| 6,438 | – | ||
| Total non-current assets | 222,580 | 216,063 | |
| Current assets Inventories |
|||
| Trading book | 17 | 26,239 | 26,455 |
| 26,239 | 26,455 | ||
| Current receivables | |||
| Accounts receivable | 18 | 50,993 | 38,032 |
| Tax assets | 15,260 | 7,370 | |
| Other current receivables | 4,486 | 3,227 | |
| Prepaid expenses and accrued income | 19 | 14,605 | 17,090 |
| 85,344 | 65,719 | ||
| Short-term investments | |||
| Short-term investments | 35,567 | – | |
| Cash & cash equivalents | 35,567 | – | |
| Cash and bank balances | 194,275 | 296,484 | |
| 194,275 | 296,484 | ||
| Total current assets | 341,425 | 388,657 | |
| TOTAL ASSETS | 564,005 | 604,720 | |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 7,859 | 7,859 | |
| Other paid-in capital | 182,145 | 182,145 | |
| Reserves | 561 | 308 | |
| Retained earnings | 235,685 | 270,530 | |
| 426,250 | 460,842 | ||
| Non-controlling interests | 1,026 | 114 | |
| Total equity | 427,276 | 460,956 | |
| Non-current liabilities | |||
| Deferred tax liabilities | 13 | 48,189 | 40,011 |
| Other non-current liabilities | 20 | 34,724 | 40,889 |
| 82,913 | 80,900 | ||
| Current liabilities | |||
| Accounts payable | 9,987 | 15,480 | |
| Current tax liabilities | 13 | – | – |
| Other current liabilities Accrued expenses and deferred income |
20 21 |
11,192 32,637 |
13,997 33,387 |
| 53,816 | 62,864 | ||
| Total liabilities | 136,729 | 143,764 | |
| TOTAL EQUITY AND LIABILITIES | 564,005 | 604,720 | |
| Memorandum items | |||
| Pledged assets | 22 | 18,000 | 18,000 |
| Contingent liabilities | 22 | 1,586 | 4,025 |
| Closing balance, December 31, 2010 | 7,859 | 182,145 | 561 | 235,685 | 1,026 | 427,276 |
|---|---|---|---|---|---|---|
| Total transactions with owners | – | – | – | –125,742 | 1,046 | 1,046 |
| Non-controlling interests arising through acquisitions | 1,046 | 1,046 | ||||
| Dividend for 2009 | –125,742 | –125,742 | ||||
| Total comprehensive income for the year Transactions with owners |
253 | 90,897 | –134 | 91,017 | ||
| Closing balance, December 31, 2009 | 7,859 | 182,145 | 308 | 270,530 | 114 | 460,956 |
| Total transactions with owners | 28 | 2,968 | – | –37,589 | – | –34,593 |
| Dividend for 2008 | –37,589 | –37,589 | ||||
| New share issues | 28 | 2,968 | 2,996 | |||
| Total comprehensive income for the year Transactions with owners |
844 | 80,867 | 35 | 81,746 | ||
| Opening balance, January 1, 2009 | 7,831 | 179,177 | –536 | 227,252 | 79 | 413,803 |
| SEK thousands | Share capital |
Other paid-in capital |
Reserves | Retained earnings |
Non- controlling interests |
Total equity |
| SEK thousands | Note | 2010 | 2009 |
|---|---|---|---|
| OPERATING ACTIVITIES | |||
| Profit after tax | 90,763 | 80,902 | |
| Income tax expensed through profit or loss | 33,232 | 30,756 | |
| Financial expenses and income recognized through profit or loss | 26 | 2,010 | 936 |
| Amortization/depreciation of intangible/tangible assets | 9 | 7,136 | 7,024 |
| Other financial items | –2,645 | –2,197 | |
| Interest paid | 26 | 2,049 | 2,850 |
| Interest received | 26 | –114 | –745 |
| Taxes paid | –32,945 | –50,280 | |
| Cash flow from operating activities before | |||
| changes in working capital | 99,486 | 69,246 | |
| CHANGES IN WORKING CAPITAL | |||
| Change in inventories | 216 | 7,297 | |
| Change in accounts receivable | –12,961 | 41,868 | |
| Change in other receivables | 1,226 | 5,979 | |
| Change in accounts payable | –5,492 | –30,009 | |
| Change in other current liabilities | –9,722 | –263 | |
| Change in working capital | –26,733 | 24,873 | |
| Cash flow from operating activities | 72,753 | 94,119 | |
| INVESTING ACTIVITIES | |||
| Investments in intangible non-current assets | 14 | –4,878 | –3,160 |
| Investments in tangible non-current assets | 15 | –2,498 | –1,380 |
| Investments in financial non-current assets | –9,046 | – | |
| Sale of tangible non-current assets | 161 | – | |
| Short-term investments | –35,567 | – | |
| Reversal of deferred tax assets | 2,608 | – | |
| Cash flow from investing activities | –49,220 | -4,540 | |
| FINANCING ACTIVITIES | |||
| New share issues | – | 2,996 | |
| Dividend | –125,742 | –37,589 | |
| Cash flow from financing activities | –125,742 | –34,593 | |
| CASH FLOW FOR THE YEAR | –102,209 | 54,986 | |
| Cash & cash equivalents at beginning of year Cash & cash equivalents at year-end |
296,484 194,275 |
241,498 296,484 |
| SEK thousands | Note | 2010 | 2009 |
|---|---|---|---|
| Net sales | 4,5 | 45,818 | 47,608 |
| Cost of goods sold | –368 | –2,407 | |
| Gross profit | 45,450 | 45,201 | |
| Distribution expenses | –44,742 | –40,826 | |
| Administrative expenses | –17,208 | –15,702 | |
| Development expenses | –6,883 | –6,281 | |
| Operating profit | 4, 6, 7, 8, 9, 10, 11 | –23,383 | –17,608 |
| Dividend from subsidiary | 100,000 | 100,000 | |
| Interest income and similar income items | 26 | 2,313 | 2,695 |
| Interest expenses and similar expense items | 26 | –10,142 | –720 |
| Profit after financial items | 68,788 | 84,367 | |
| Appropriations | 12 | 818 | – |
| Profit before tax | 69,606 | 84,367 | |
| Tax on profit for the year | 13 | 8,011 | 4,017 |
| Profit for the year | 77,617 | 88,383 | |
| Other comprehensive income | – | – | |
| Total comprehensive income for the year | 77,617 | 88,383 |
| SEK thousands | Note | Dec. 31, 2010 | Dec. 31, 2009 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 14 | ||
| Other intangible assets | 1,686 | 1,694 | |
| 1,686 | 1,694 | ||
| Tangible non-current assets | 15 | ||
| Property, plant and equipment | 2,830 | 4,238 | |
| 2,830 | 4,238 | ||
| Financial non-current assets | 16 | ||
| Shares in Group companies | 320,771 | 54,497 | |
| Total non-current assets | 325,287 | 60,428 | |
| Current assets | |||
| Current receivables | |||
| Accounts receivable | 18 | 543 | 810 |
| Receivables from Group companies | 47,801 | 88,903 | |
| Tax assets | 1,666 | 1,542 | |
| Short-term investments | 35,567 | – | |
| Other current receivables | 5 | 27 | |
| Prepaid expenses and accrued income | 19 | 2,383 | 3,324 |
| 87,965 | 94,606 | ||
| Cash & cash equivalents | |||
| Cash and bank balances | 181,742 | 287,657 | |
| 181,742 | 287,657 | ||
| Total current assets | 269,707 | 382,263 | |
| TOTAL ASSETS | 594,994 | 442,691 | |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Restricted equity | |||
| Share capital | 7,859 | 7,859 | |
| Statutory reserve | 46,817 | 46,817 | |
| 54,676 | 54,676 | ||
| Unrestricted equity | |||
| Retained earnings | 56,881 | 71,679 | |
| Profit for the year | 77,617 | 88,383 | |
| 134,498 | 160,062 | ||
| Total equity | 189,174 | 214,738 | |
| Untaxed reserves | 12 | 6,540 | 7,359 |
| Current liabilities | |||
| Accounts payable | 2,913 | 1,840 | |
| Due to Group companies | 383,256 | 207,835 | |
| Other current liabilities | 2,733 | 2,803 | |
| Accrued expenses and deferred income | 21 | 10,378 | 8,116 |
| Total liabilities | 399,280 | 220,594 | |
| TOTAL EQUITY AND LIABILITIES | 594,994 | 442,691 | |
| Memorandum items | |||
| Pledged assets | 22 | None | None |
| Contingent liabilities | 22 | None | None |
| Closing balance, December 31, 2010 | 7,859 | 46,817 | 134,498 | 189 174 |
|---|---|---|---|---|
| Total comprehensive income for the year | – | – | 77,617 | 77 617 |
| Tax effect of Group contributions | – | – | –8,050 | –8 050 |
| Group contributions | – | – | 30,611 | 30 611 |
| Dividend paid | – | – | –125,742 | –125 742 |
| Closing balance, December 31, 2009 | 7,859 | 46,817 | 160,062 | 214 738 |
| Total comprehensive income for the year | – | – | 88,383 | 88 383 |
| Tax effect of Group contributions | – | – | –3,995 | –3 995 |
| Group contributions | – | – | 15,191 | 15 191 |
| New share issues | 28 | – | 2,938 | 2 966 |
| Dividend paid | – | – | –37,589 | –37 589 |
| Opening balance, January 1, 2009 | 7,831 | 46,817 | 95,134 | 149 782 |
| SEK thousands | capital | reserve | earnings | equity |
| Share | Statutory | Retained | Total |
| Number of shares | Number of votes | Number of shares | Quota value |
|---|---|---|---|
| Opening balance, January 1, 2009 | 25,059,184 | 25,059,184 | 7,830,995 |
| Exercise of warrants Closing balance, December 31, 2009 |
89,200 25,148,384 |
89,200 25,148,384 |
27,875 7,858,870 |
| Exercise of warrants | – | – | – |
| Closing balance, December 31, 2010 | 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 | 2010 | 2009 |
|---|---|---|---|
| OPERATING ACTIVITIES | |||
| Profit after tax | 77,617 | 88,383 | |
| Income tax expensed through profit or loss | –8,011 | –4,017 | |
| Financial expenses and income recognized through profit or loss | 7,828 | –1,975 | |
| Amortization/depreciation of intangible/tangible assets | 9 | 2,209 | 1,883 |
| Appropriations | –818 | – | |
| Interest paid | –10,142 | –720 | |
| Interest received | 2,313 | 2,695 | |
| Taxes paid | –164 | 855 | |
| Cash flow from operating activities before | |||
| changes in working capital | 70,832 | 87,104 | |
| CHANGES IN WORKING CAPITAL | |||
| Change in accounts receivable | 267 | –351 | |
| Change in other receivables | 120,478 | –13,376 | |
| Change in accounts payable | 1,072 | –5,872 | |
| Change in other current liabilities | 129,813 | 36,698 | |
| Change in working capital | 251,630 | 17,099 | |
| Cash flow from operating activities | 322,462 | 104,203 | |
| INVESTING ACTIVITIES | |||
| Short-term investments | 28 | –35,567 | – |
| Investments in subsidiaries | –266,275 | – | |
| Investments in intangible assets | 14 | –420 | –1,868 |
| Investments in tangible non-current assets | 15 | –372 | –403 |
| Cash flow from investing activities | –302,634 | –2,271 | |
| FINANCING ACTIVITIES | |||
| New share issues | – | 2,966 | |
| Dividend | –125,742 | –37,589 | |
| Cash flow from financing activities | –125,742 | –34,623 | |
| CASH FLOW FOR THE YEAR | –105,914 | 67,309 | |
| Cash & cash equivalents at beginning of year Cash & cash equivalents at year-end |
287,657 181,742 |
220,348 287,657 |
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 around twenty markets, the largest of which are Sweden and the Netherlands. Operations are conducted through a network of product and wholesale 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 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 Stockholm. A list of the largest individual shareholders as of December 31, 2010 is provided on page 61 of this annual report.
The consolidated accounts 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, 2010. The Group also applies the Swedish Financial Reporting Board's recommendation RFR 1 (December 2010) Supplementary Accounting Regulations for Groups, which specifies the disclosures that are required in addition to IFRS according to the provisions of the Annual Accounts Act. Items in the consolidated accounts are valued at cost, with the exception of certain financial instruments, which are measured at fair value. The significant accounting principles applied are described below. The Parent Company's functional currency is the 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, 2010 are described below. Other changes in IFRS that took effect in 2010 have not had a material impact on the Group's accounts.
IAS 27 Consolidated and Separate Financial Statements and IFRS 3 Business Combinations apply to acquisitions and transactions on or after 1 January 2010. The changes to these standards 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 assumption in the recognition of multiple-step acquisitions has been changed, whereby the fair value of the previously owned shares is calculated on the date of acquisition (when control is obtained). Cost therefore consists of the fair value of previously owned shares plus the price of the newly acquired shares. Any change in the value of the previously owned shares is recognized through profit or loss.
The new rules in IFRS 3 required the Group to recognize transition costs of SEK 1.3 million related to the acquisition of FSSIT Services AB. Compared with the previously applied IFRS principles, this transaction cost would have affected the cost of the acquisition and not directly affected results. The above changes will otherwise affect future acquisitions.
Other new and revised standards and interpretations did not have a material effect on the Group's financial reports in 2010.
The International Accounting Standards Board (IASB) has issued number of new and revised standards which apply as of January 1, 2011. The standards that could impact Björn Borg's future financial reporting are described below.
The revisions to IAS 24 Related Party Disclosures change the definition of related parties, due to which several special relationships have been added to the category of related parties, while several others have disappeared. IAS 24 is applied retroactively to financial years beginning on or after January 1, 2011. In addition to IAS 24 Related Party Disclosures, changes were made to IAS 32 Financial Instruments.
The consolidated accounts 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 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 day, plus expenses directly attributable to the acquisition. Identifiable acquired assets and assumed and contingent liabilities are initially valued at fair value on the acquisition date, regardless of the scope of any non-controlling interests. The surplus is comprised of the difference between the cost 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 accounts. 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.
Non-controlling interests in a subsidiary's net assets are reported as a separate item in the Group's equity. In the consolidated income statement, noncontrolling interests are included in reported income. Transactions with noncontrolling interests are treated in the same way as transactions with external parties. The sale of shares to non-controlling interests results in a gain or loss that is recognized in the consolidated income statement. The acquisition of non-controlling interests can result in goodwill if the cost exceeds the carrying amount of the acquired net assets.
Transactions in foreign currency are translated to Swedish kronor at the exchange rate on the transaction date. Monetary items (assets and liabilities) in foreign currency are translated to Swedish kronor 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.
Note 1, continued
Revenue comprises the fair value of goods and services sold, net of value-added tax and discounts and after eliminating intra-Group sales. Revenue is recognized as follows:
Royalty revenue is generated through wholesale sales of Björn Borg products by distributors (Group-owned and independent) and the product companies 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. Internal royalties are eliminated in the preparation of the consolidated accounts.
The product companies for clothing and footwear generate revenue for Björn Borg from product sales to distributors.
The Group-owned wholesale companies for the clothing and footwear product areas generate revenue for Björn Borg from product sales to retailers.
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. 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 balance sheet approach. Deferred tax liabilities are normally recognized for all taxable temporary differences, while deferred tax assets are recognized to the extent it is probable that future taxable profits will be available against which the amounts can be utilized.
The carrying amount of deferred tax assets is tested at each balance sheet date and reduced to the extent it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilized.
Deferred tax is determined using the tax rates that are 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 directly 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.
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 at fair value through profit or loss are financial assets initially recognized at fair value through profit or loss according to the so-called fair value option. The fair value option was chosen because management periodically evaluates and manages assets based on their fair values.
The fair value of short-term investments and derivatives is estimated using official market listings on the closing day. When such listings are unavailable, valuations are made using generally accepted methods such as the discounting of future cash flows to listed interest rates for each maturity. Translations to SEK are based on listed exchange rates on the closing day.
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. Translations to SEK are based on closing-date exchange rates.
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 recognized 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 that 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. Non-current liabilities have an anticipated maturity of more than one year, while current 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 statement of cash flows 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 (December 2010) Accounting in Legal Entities and statements from the Swedish Financial Reporting Board. RFR 2 (December 2010) 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.
Shareholder contributions are recognized directly in the unrestricted equity of the recipient and as an increase in shares in subsidiaries at the time the contributions are made to the subsidiaries. Group contributions are recognized according to their economic substance. This means that Group contributions paid as distributions are recognized by the recipient in the result from shares in subsidiaries and by the contributor as a reduction in unrestricted equity. Group contributions paid or received by the Parent Company to minimize the Group's total tax are recognized directly against retained earnings after deducting any tax effect.
Shares in subsidiaries are recognized according to the acquisition cost method. Appraisals are made of the value of the shares when there is an indication of diminished value. Acquisition-related costs for subsidiaries, which are expensed in the consolidated accounts, are included as part of the acquisition cost of the shares in the subsidiary.
Note 1, continued
The Parent Company's financial guarantee agreements mainly consist of guarantees on behalf of subsidiaries. Financial guarantees commit the company to compensate the holder of a debt instrument for losses they incur because a given debtor does not make payment upon maturity according to the terms of the agreement. The Parent Company applies a voluntary rule in RFR 2 to recognize financial guarantees compared with the rules on financial instruments in IFRS (IAS 39). According to this rule, the Parent Company recognizes outstanding financial guarantees as a provision in the balance sheet when the company has a commitment and payment will likely be required to settle it, i.e., according to the rules on provisions in IAS 37.
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 mainly because sales and purchases are made in different currencies (transaction exposure).
The Group's largest currency exposure is against the U.S. 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 Wholesale business segment has sales in SEK and purchases in USD.
The Björn Borg Group was affected negatively by the significant decrease in the value of the U.S. dollar against the Swedish krona in 2010 compared with 2009. For the full-year 2010 the dollar was an average of about 6 percent lower than in 2009.
The lower dollar versus the Swedish krona has affected the Product Development business segment negatively in the form of lower gross profit, at the same time that it has affected the Wholesale business segment positively in the form of less expensive purchases, and thus higher gross profit.
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 aspects influence the dollar's total impact on the Group, e.g., each business segment's geographical share of total revenue and profit, the timing of deliveries and changes in inventory.
Björn Borg does not use currency derivatives.
| Estimated currency effect 2010 | Percent | Estimated effect on revenue |
Estimated effect on operating profit |
|---|---|---|---|
| Stronger USD vs. SEK | 10% | 5% | 3% |
| Weaker USD vs. SEK | –10% | –5% | –3% |
| Stronger EUR vs. SEK | 10% | 1% | 1% |
| Weaker EUR vs. SEK | –10% | –1% | –1% |
The reason for the table is that the Group's sales and purchases through the Product Development business segment to external distributors are affected positively or negatively depending on the dollar's fluctuations relative to the Swedish krona – sales in USD/purchases in USD. In the Wholesale business segment, goods purchases are affected negatively by a strong dollar and positively by a weak dollar at the same time that pricing to retailers is not adjustable due to currency sales in SEK/purchases in USD.
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, 2010 was limited, since interest-bearing assets amounted to SEK 229,842 thousand (296,484) and interest-bearing loan liabilities amounted to SEK 0 thousand (0).
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, 2010 there were no significant concentrations of credit risk. The maximum credit risk corresponds to the carrying amount of the financial assets.
| 285,321 | 337,743 | |
|---|---|---|
| Cash and bank balances | 194,275 | 296,484 |
| Short-term investments | 35,567 | – |
| Other current receivables | 4,486 | 3,227 |
| Accounts receivable | 50,993 | 38,032 |
| Group | 2010 | 2009 |
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.
| Total | 353,223 | 13,997 | 26,177 | 14,712 |
|---|---|---|---|---|
| Accounts payable | 15,480 | – | – | – |
| Other liabilities | – | 13,997 | 26,177 | 14,712 |
| Cash and bank balances | 296,484 | |||
| Other current receivables | 3,227 | |||
| Accounts receivable | 38,032 | |||
| Dec. 31, 2009 | Up to 3 mos. | 3-12 mos. | <5 yrs. | Over 5 yrs. |
| Total | 259,741 | 11,192 | 27,224 | 7,500 |
| Accounts payable | 9,987 | – | – | – |
| Other liabilities | – | 11,192 | 27,224 | 7,500 |
| Cash and bank balances | 194,275 | |||
| Other current receivables | 4,486 | |||
| Accounts receivable | 50,993 | |||
| Dec. 31, 2010 | Up to 3 mos. | 3-12 mos. | <5 yrs. | Over 5 yrs. |
A business segment is a group of assets and operations which provides products or services that are exposed to risks and opportunities different from those of other business segments. The Björn Borg Group is divided into four primary business segments: Brands, Product Development, Wholesale 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 | Product Development | Wholesale | Retail | Total | Eliminations | Group | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SEK thousands | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 |
| Revenue | ||||||||||||||
| External sales | 51,057 | 54,936 | 270,029 | 257,391 | 165,859 | 153,102 | 49,095 | 54,485 | 536,040 | 519,915 | – | – | 536,040 | 519,915 |
| Internal sales | 84,417 | 83,341 | 90,604 | 81,788 | 42,378 | 40,713 | 2 | 6 | 217,401 | 205,847 | –217,401 | –205,847 | – | – |
| Total sales | 135,474 | 138,277 | 360,633 | 339,179 | 208,237 | 193,815 | 49,097 | 54,491 | 753,441 | 725,762 | –217,401 | –205,847 | 536,040 | 519,915 |
| Operating profit | 40,778 | 43,942 | 64,371 | 50,984 | 21,342 | 9,635 | –486 | 8,032 | 126,005 | 112,594 | – | – | 126,005 | 112,594 |
| Non-current assets 1 | 440,533 | 197,427 | 8,412 | 8,648 | 884 | 506 | 9,229 | 7,875 | 459,058 | 214,457 | –236,478 | 1,606 | 222,580 | 216,063 |
| Inventory | – | – | 1,079 | 1,373 | 27,388 | 28,742 | 9,742 | 8,234 | 38,209 | 38,349 | –11,970 | –11,894 | 26,239 | 26,455 |
| Other current assets | 824,682 | 717,981 | 116,370 | 93,989 | 91,809 | 74,414 | 28,783 | 28,569 1,061,644 | 914,953 | –746,458 | –552,751 | 315,186 362,203 | ||
| Total assets | 1,265,215 | 915,409 | 125,861 | 104,011 | 120,081 | 103,661 | 47,754 | 44,678 1,558,911 | 1,167,759 | –994,906 | –563,039 | 564,004 604,720 | ||
| Other liabilities | 561,042 | 317,670 | 120,288 | 99,325 | 79,033 | 96,852 | 36,403 | 42,634 | 796,766 | 556,481 | –660,037 | –412,717 | 136,729 | 143,764 |
| Total liabilities | 561,042 | 317,670 | 120,288 | 99,325 | 79,033 | 96,852 | 36,403 | 42,634 | 796,766 | 556,481 | –660,037 | –412,717 | 136,729 | 143,764 |
| Investments in tangible | ||||||||||||||
| and intangible assets | 839 | 2,317 | 30 | 446 | 515 | 474 | 5,899 | 1,303 | 7,376 | 4,540 | – | – | 7,283 | 4,540 |
| Depreciation/amortization –2,209 | –1,883 | –103 | –156 | –263 | –947 | –4,557 | –4,038 | –7,136 | –7,024 | – | – | –7,132 | –7,024 |
1 The increase relates to the acquisition of Björn Borg Services AB; see Note 16.
The difference between operating profit for segments for which information is disclosed, SEK 126,005 thousand (112,594), and profit before tax and discontinued operations, SEK 123,995 thousand (111,658), is net financial items, SEK –2,010 thousand (–936).
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 Netherlands |
Norway | Denmark | Other Group |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |
| Net sales | 193,333 203,059 | 143,325 | 156,187 | 60,257 | 38,524 | 49,882 | 37,220 | 89,243 | 84,925 | 536,040 | 519,915 | |
| Assets | 564,005 604,720 | – | – | – | – | – | – | – | – | 564,005 604,720 | ||
| Investments | 7,283 | 4,540 | – | – | – | – | – | – | – | – | 7,283 | 4,540 |
| Depreciation/amortization | –7,132 | –7,024 | – | – | – | – | – | – | – | – | –7,132 | –7,024 |
Revenue of approximately SEK 143,325 thousand (156,187) refers to a single outside customer. This revenue is attributable to the brand and product development segment in the Netherlands.
| Net sales | Group | Parent Company | ||
|---|---|---|---|---|
| SEK thousands | 2010 | 2009 | 2010 | 2009 |
| Royalty and service revenue | 51,057 | 54,936 | 45,818 | 47,608 |
| Product company revenue | 270,029 | 257,391 | – | – |
| Wholesale company revenue | 165,859 | 153,102 | – | – |
| Retail revenue | 49,095 | 54,485 | – | – |
| 536,040 | 519,915 | 45,818 | 47,608 |
Royalty revenue amounted to SEK 49,582 thousand (52,468). There is no royalty revenue in the Parent Company.
The Parent Company's revenue from subsidiaries amounted to SEK 44,343 thousand (45,098). The Parent Company's expenses for subsidiaries amounted to SEK 1,129 thousand (5,912). 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 | Parent Company | |||
| security contributions | 2010 | 2009 | 2010 | 2009 | |
| Wages, salaries and | |||||
| other compensation | 43,470 | 40,122 | 14,736 | 12,990 | |
| Social security contributions | 11,829 | 11,450 | 4,155 | 3,927 | |
| Pension costs | 4,536 | 4,455 | 2,336 | 2,210 | |
| Total | 59,835 | 56,027 | 21,227 | 19,128 | |
| Wages, salaries and other | |||||
| compensation divided | |||||
| between Senior Executives | |||||
| and other employees | |||||
| Board, President and other | |||||
| Senior Executives | 10,849 | 8,770 | 7,965 | 5,973 | |
| Other employees | 32,621 | 31,352 | 6,771 | 7,017 | |
| Total | 43,470 | 40,122 | 14,736 | 12,990 | |
| Average number of employees1 | |||||
| Women | 63 | 60 | 14 | 10 | |
| Men | 37 | 32 | 9 | 10 | |
| Total | 100 | 92 | 23 | 20 | |
| Group 2010 2009 | |||||
| Gender distribution among | |||||
| Directors and Senior Executives | Men | Women | Men | Women | |
| Board | 6 | 2 | 6 | 1 | |
| Other Senior Executives | 4 | 2 | 4 | 3 | |
| Total | 10 | 4 | 10 | 4 |
1 The average number of employees is calculated based on 1,800 annual working hours.
| Total | 1,000 | 130 | 850 | 39 |
|---|---|---|---|---|
| Kerstin Hessius | 100 | – | – | – |
| Nils Vinberg | 100 | – | 50 | – |
| Michael Storåkers | 100 | – | 100 | – |
| Monika Elling | 100 | 40 | 100 | – |
| Vilhelm Schottenius | 100 | – | 100 | 29 |
| Fabian Månsson | 100 | – | 100 | – |
| Other Directors: Mats H Nilsson |
100 | 25 | 100 | 10 |
| Chairman of the Board Fredrik Lövstedt |
300 | 65 | 300 | – |
| fees | sation | fees | sation | |
| benefits to Directors | Board | compen- | Board | compen- |
| Compensation and other | Other | Other | ||
| 2010 | 2009 |
Compensation and other benefits to Senior Executives
| Total | 8,115 | 655 | 1,840 | – |
|---|---|---|---|---|
| Other Senior Executives | 5,235 | 175 | 998 | – |
| EVP | 1,080 | 240 | 395 | – |
| President | 1,800 | 240 | 447 | – |
| 2009 | Base salary |
Variable compen- sation |
Pension costs |
Other compen sation |
| Total | 8,533 | 2,316 | 2,281 | – |
| Other Senior Executives | 5,595 | 1,050 | 1,276 | – |
| EVP | 1,102 | 633 | 431 | – |
| President | 1,836 | 633 | 574 | – |
| 2010 | Base salary |
compen- sation |
Pension costs |
compen sation |
| Variable | Other |
Total fees of SEK 1,000 thousand (850) to the Chairman and other Directors were expensed in 2010, in accordance with the Board compensation approved by the Annual General Meeting. The Chairman received SEK 300 thousand (300), while other Directors received SEK 100 thousand (100) each. In addition to their fees, the Chairman and other Directors are reimbursed for travel and accommodations in connection with Board meetings. The members of the Compensation Committee received total fees of SEK 40 thousand (0) and the members of the Audit Committee received a total of SEK 90 thousand (0). All compensation complies with the Board compensation resolved by the AGM.
The President's base salary and other compensation amounted to SEK 1,836 thousand (1,800) during the year. In addition, he received variable compensation of SEK 633 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 the equivalent of his maximum monthly benefits in severance beyond the term of notice. 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 six persons who, together with the President, made up the Group Management in 2010.
Note 7, continued
Base salaries paid to other Senior Executives amounted to SEK 6,697 thousand (6,315) in 2010. Moreover, they receive variable compensation if the Group's sales and results exceed the Board's established budget. The variable compensation for 2010 amounted to SEK 1,683 thousand (415). 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 2010 amounted to SEK 1,707 thousand (1,393). If terminated by the company, Senior Executives are entitled to a term of notice of 3-6 months. If they resign, the term of notice is 4-6 months. The shareholdings and warrant holdings of Senior Executives of Björn Borg are described below.
of Board, President and other Senior
| Mats H Nilsson Vilhelm Schottenius |
1,478,440 1,023,520 |
|
|---|---|---|
| Nils Vinberg Monika Elling |
711,080 69,000 |
|
| Michael Storåkers | 40,000 | |
| Kerstin Hessius | 6,000 | |
| Fabian Månsson | 2,000 | |
| President | 750,000 | 35,000 |
| Other Senior Executives | 546,000 | 10,500 |
| Total | 1,296,000 | 5,975,580 |
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 2010 amounted to SEK 4.5 million (4.5).
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, 46,000 of which relate to Senior Executives. The outstanding warrants carry the right to subscribe for 155,300 shares for SEK 74.60 per share. The warrant scheme expires on June 1, 2011. Subscriptions are permitted in May 2011, though not before the interim report has been published.
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 warrant scheme expires on November 30, 2012. Subscriptions are permitted in May and November 2011 and in May and November 2012, though not before the interim report has been published.
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. 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 2008:1 |
Scheme 2008:2 |
Total |
|---|---|---|---|
| Outstanding at beginning of year Converted to shares |
155,300 – |
1,250,000 – |
1,405,300 – |
| Outstanding and exercisable at year-end |
155,300 | 1,250,000 | 1,405,300 |
| Share entitlement | 155,300 | 1,250,000 | 1,405,300 |
New layout for 2010 according to Annual Accounts Act, chap. 5, section 21.
| Group | Parent Company | |||
|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | |
| Deloitte AB | ||||
| Statutory audit | 1,022 | 873 | 773 | 619 |
| Other audits | – | – | – | – |
| Tax advice | 58 | 59 | 58 | – |
| Other services | 12 | 56 | 13 | 56 |
| 1,092 | 988 | 844 | 675 | |
| Other accounting firms | ||||
| Statutory audit | 25 | 31 | – | – |
| Other audits | – | – | – | – |
| Tax advice | – | – | – | – |
| Other services | – | – | – | – |
| 25 | 31 | – | – | |
| Total | 1,117 | 1,019 | 844 | 675 |
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
| Total | 7,136 | 7,024 | 2,209 | 1,883 | |
|---|---|---|---|---|---|
| Development expenses | 714 | 702 | 221 | 188 | |
| Administrative expenses | 1,784 | 1,756 | 552 | 471 | |
| Distribution expenses | 4,638 | 4,566 | 1,436 | 1,224 | |
| 2010 | 2009 | 2010 | 2009 | ||
| Group | Parent Company |
| Group | Parent Company | |||
|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | |
| Leases during the year amount to | 13,844 | 14,671 | 5,816 | 5,523 |
| Future lease fees amount to | ||||
| – within 1 year | 14,104 | 14,950 | 5,866 | 5,631 |
| – later than 1 year | ||||
| but within 5 years | 59,126 | 62,708 | 24,599 | 23,646 |
| Total | 73,230 | 77,658 | 30,465 | 29,277 |
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, 2010, the Björn Borg Group had no finance leases.
No transactions with related parties took place in 2010.
| 5,955 | 5,955 |
|---|---|
| 585 | 1,404 |
| 2010 | Dec. 31 2009 |
| Dec. 31 |
| Group | Parent Company | |||
|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | |
| Current tax on profit for the year | –23,385 –23,239 | –40 | – | |
| Deferred tax | –9,847 | –7,517 | – | – |
| Notional tax on Group contributions | – | – | 8,051 | 4,017 |
| Total recognized tax expense | –33,232 –30,756 | 8,011 | 4,017 | |
| Reconciliation between current tax | Group | Parent Company | ||
| rate and effective tax rate | 2010 | 2009 | 2010 | 2009 |
| Recognized profit before tax | 123,995 | 111,658 | 69,606 | 84,367 |
| Tax according to current tax rate | –32,611 –29,366 | –18,306 | –22,188 | |
| Tax effect of: | ||||
| Tax related to tax allocation reserve | – | – | –36 | –33 |
| Other non-deductible costs | –98 | –319 | –56 | –67 |
| Taxable income | 69 | 71 | – | – |
| Other tax-exempt income | 195 | – | 26,449 | 26,305 |
| Tax related to revenue/expenses not | ||||
| recognized through profit or loss | –312 | –97 | – | – |
| Adjustment of tax from previous years | –40 | –349 | –40 | – |
| Unutilized tax loss in the U.S. | –58 | –696 | – | – |
| Unutilized tax loss in UK | –239 | – | – | – |
Recognized tax expense –33,232 –30,756 8,011 4,017
| Group | Parent Company | |||
|---|---|---|---|---|
| Dec. 31 | Dec. 31 | Dec. 31 | Dec. 31 | |
| Deferred taxes | 2010 | 2009 | 2010 | 2009 |
| Recognized deferred | ||||
| tax assets and tax liabilities | ||||
| Inventories | 3,148 | 3,128 | – | – |
| Untaxed reserves | –51,337 | –43,139 | – | – |
| Total deferred tax assets (+) | ||||
| deferred tax liabilities (–) | –48,189 | –40,011 | – | – |
| Dec. 31 | Dec. 31 | |
|---|---|---|
| Group | 2010 | 2009 |
| 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 | 3,425 |
| Closing balance | 3,425 | 3,425 |
| Accumulated amortization | ||
| Opening balance | –2,974 | –1,729 |
| Amortization for the year | –252 | –1,245 |
| Closing balance | –3,226 | –2,974 |
| Carrying amount at year-end | 199 | 451 |
| Capitalized expenditure for software | ||
| Accumulated cost | ||
| Opening balance | 4,385 | – |
| Investments | 4,832 | 4,385 |
| Closing balance | 9,217 | 4,385 |
| Accumulated amortization | ||
| Opening balance | –947 | – |
| Amortization for the year | –1,411 | –947 |
| Closing balance | –2,358 | –947 |
| Carrying amount at year-end | 6,858 | 3,438 |
| Dec. 31 | Dec. 31 | |
|---|---|---|
| Parent Company | 2010 | 2009 |
| Capitalized expenditure for software | ||
| Accumulated cost | – | |
| Opening balance | 1,868 | – |
| Investments | 420 | 1,868 |
| Closing balance | 2,288 | 1,868 |
| Accumulated impairment losses | ||
| Opening balance | –174 | – |
| Amortization for the year | –428 | –174 |
| Closing balance | –602 | –174 |
| Carrying amount at year-end | 1,686 | 1,694 |
Goodwill has been allocated to three cash-generating units: Björn Borg Brands AB, Björn Borg Clothing AB and Björn Borg Footwear AB.
There are also intangible non-current assets in the form of trademarks where the cash-generating unit is Björn Borg Brands AB. A list is provided below.
| Dec. 31 | Dec. 31 | |
|---|---|---|
| Goodwill | 2010 | 2009 |
| Björn Borg Brands AB | 9,330 | 9,330 |
| Björn Borg Clothing AB | 658 | 658 |
| Björn Borg Footwear AB | 3,956 | 3,956 |
| 13,944 | 13,944 | |
| Dec. 31 | Dec. 31 | |
| Trademarks | 2010 | 2009 |
| 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 2011 for each unit.
Cash flows are subsequently 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 detailed discussions with distributors and licensees.
Impairment tests were conducted as of December 31, 2010 applying a 14 percent (14) discount rate before tax as well as an assumption of annual, sustainable growth of 3 percent (3) 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 2011 to 2020.
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 | Parent Company | |||
|---|---|---|---|---|
| Dec. 31 | Dec. 31 | Dec. 31 | Dec. 31 | |
| 2010 | 2009 | 2010 | 2009 | |
| Accumulated cost | ||||
| Opening balance | 27,265 | 25,885 | 8,769 | 8,366 |
| Investments | 2,498 | 1,380 | 372 | 403 |
| Sales and disposals | –417 | – | – | – |
| Closing balance | 29,346 | 27,265 | 9,141 | 8,769 |
| Accumulated depreciation | ||||
| Opening balance | –16,115 | –10,519 | –4,531 | –2,822 |
| Sales and disposals | 302 | 9 | – | – |
| Depreciation for the year | –5,725 | –5,605 | –1,780 | –1,709 |
| Closing balance | –21,538 | –16,115 | –6,311 | –4,531 |
| Carrying amount at year-end | 7,808 | 11,150 | 2,830 | 4,238 |
| Dec. 31 | Dec. 31 | ||||
|---|---|---|---|---|---|
| Parent Company | 2010 | 2009 | |||
| Shares in subsidiaries Opening cost Acquired companies |
54,497 266,274 |
54,497 – |
|||
| Closing accumulated cost | 320,771 | 54,497 | |||
| Shares in subsidiaries | Registered Reg.no. address |
No. 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 Stockholm | 901 | 90,1 | – | ||
| Björn Borg Retail AB | 556577-4410 Stockholm 1,000 | 100 | – | ||
| Björn Borg Inc | Delaware | 3,000 | 100 | – | |
| Björn Borg UK Limited | 7392965 Wales | 400,000 | 80 | 4,185 | |
| Björn Borg Services AB | 556537-3551 Stockholm 5,000 | 100 262,089 | |||
| Björn Borg Footwear AB | 556280-5746 Varberg | 6,999 | 100 | 14,281 | |
| 320,771 |
On March 25, 2010 Björn Borg acquired 100 percent of the capital and votes in FSSIT Services AB (the name of which has since been changed to Björn Borg Services AB). Björn Borg UK Limited was formed on September 30, 2010. Björn Borg owns 80 percent of the capital and votes in the company.
| 26,239 – |
27,273 –818 |
– | – – |
|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 |
| Dec. 31 | Dec. 31 | Dec. 31 | Dec. 31 |
| Group | Parent Company | ||
| Group | Parent Company | |||
|---|---|---|---|---|
| Dec. 31 | Dec. 31 | Dec. 31 | Dec. 31 | |
| Accounts receivable | 2010 | 2009 | 2010 | 2009 |
| Accounts receivable, gross | 53,860 | 40,176 | 812 | 970 |
| Reserve for impaired receivables | –2,867 | –2,144 | –269 | –160 |
| Total accounts receivable, | ||||
| net, after reserve for | ||||
| impaired receivables | 50,993 | 38,032 | 543 | 810 |
| Overdue receivables | ||||
| Not overdue | 33,602 | 11,506 | 18 | – |
| 1–30 days | 13,821 | 22,202 | 15 | 670 |
| 31–90 days | 2,932 | 278 | 4 | – |
| 91–180 days | 1,680 | 3,180 | 15 | 140 |
| >180 days | 1,825 | 3,010 | 760 | 160 |
| Total | 53,860 | 40,176 | 812 | 970 |
| Overdue receivables not | ||||
| considered impaired | ||||
| Not overdue | 33,602 | 11,506 | 18 | – |
| 1–30 days | 13,821 | 22,202 | 15 | 670 |
| 31–90 days | 2,927 | 278 | 4 | – |
| 91–180 days | 519 | 3,180 | 15 | 140 |
| >180 days | 124 | 866 | 492 | – |
| Total | 50,993 | 38,032 | 543 | 810 |
| Group | Parent Company | |||
| Control account for customer | Dec. 31 | Dec. 31 | Dec. 31 | Dec. 31 |
| losses – reconciliation | 2010 | 2009 | 2010 | 2009 |
| Provisions at beginning of year | –2,144 | –1,869 | –160 | – |
| Total | –2,867 | –2,144 | –269 | –160 |
|---|---|---|---|---|
| Established losses | 2,086 | –212 | 160 | – |
| Provisions | –2,867 | –63 | –269 | –160 |
| Reversed provisions | 58 | – | – | – |
| Provisions at beginning of year | –2,144 | –1,869 | –160 | – |
| Total | 14,605 | 17,090 | 2,383 | 3,324 |
|---|---|---|---|---|
| Other | 5,914 | 8,670 | 984 | 1,906 |
| Prepaid leases | 88 | 97 | 0 | – |
| Prepaid rents | 3,889 | 4,043 | 1,399 | 1,418 |
| Accrued royalty revenue | 4,714 | 4,280 | 0 | – |
| 2010 | 2009 | 2010 | 2009 | |
| Dec. 31 | Dec. 31 | Dec. 31 | Dec. 31 | |
| Group | Parent Company | |||
| Unutilized available credit lines | 20,000 | 20,000 | 20,000 | 20,000 |
|---|---|---|---|---|
| Total available credit lines | 20,000 | 20,000 | 20,000 | 20,000 |
| Available credit lines Bank overdraft facilities |
– 20,000 |
– 20,000 |
– 20,000 |
– 20,000 |
| Non-current and current interest-bearing loans |
Dec. 31 2010 |
Dec. 31 2009 |
Dec. 31 2010 |
Dec. 31 2009 |
| Group | Parent Company |
Bank overdraft facilities were not utilized at any point in 2010. The company pays annual contractual interest amounting to 0.4 percent of the facility. Other liabilities include a reported liability to the seller of the Björn Borg trademark totaling SEK 40,889 thousand (of which SEK 6,164 thousand will be paid within 12 months and SEK 34,724 thousand after five years). Since no interest is paid on the liability, future amortization of the liability has been discounted to present value. The difference between the present value of the liability and the nominal amount is carried as an interest expense over the credit period applying the effective interest method.
| Group | Parent Company | |||
|---|---|---|---|---|
| Dec. 31 | Dec. 31 | Dec. 31 | Dec. 31 | |
| 2010 | 2009 | 2010 | 2009 | |
| Contingent consideration | ||||
| for trademarks | 5,901 | 6,332 | – | – |
| Personnel-related items | 8,030 | 6,541 | 4,295 | 1,595 |
| Customs and shipping | – | – | – | – |
| Management expenses | 1,902 | 1,127 | 1,902 | 1,127 |
| Marketing expenses | 1,993 | 1,209 | – | – |
| Other | 14,811 | 18,178 | 4,181 | 5,394 |
| Total | 32,637 | 33,387 | 10,378 | 8,116 |
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| Dec. 31 | Dec. 31 | Dec. 31 | Dec. 31 | ||
| Pledged assets | 2010 | 2009 | 2010 | 2009 | |
| Chattel mortgages | 18,000 | 18,000 | – | – | |
| Shares in subsidiaries and associates | 0 | 0 | 0 | 0 | |
| Total | 18,000 | 18,000 | 0 | 0 | |
| Contingent liabilities | |||||
| Other guarantees | 1,586 | 4,025 | – | – | |
| Total | 1,586 | 4,025 | – | – |
| 2010 | 2009 | |
|---|---|---|
| Earnings per share, SEK | 3.61 | 3.22 |
| Earnings per share, SEK (after dilution) | 3.57 | 3.21 |
| Number of shares | 25,148,384 | 25,148,384 |
| Number of shares, weighted average | 25,148,384 | 25,111,217 |
| Effect of dilution | 321,818 | 118,910 |
| Number of shares, weighted average | ||
| (after dilution) | 25,470,202 | 25,230,128 |
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.
| Total | 3,664 | –301 |
|---|---|---|
| Financial assets at fair value through profit or loss | 567 | – |
| Financial liabilities at amortized cost | 640 | –2,837 |
| Accounts and loans receivable | 2,457 | 2,536 |
| Group | 2010 | 2009 |
The Annual General Meeting on April 15, 2010 approved a dividend of SEK 125,742 thousand for the financial year 2009, corresponding to SEK 5.00 per share.
The Board of Directors has decided to recommend to the AGM a distribution of SEK 5.20 per share for the financial year 2010. As proposed, the distribution would be paid through an automatic redemption, whereby every share is divided into a common share and two redemption shares. The redemption shares will then automatically be redeemed for SEK 2.60 per share. Payment for the redemption shares, contingent on the approval of the AGM, is expected to be made around May 25, 2011. The Board of Directors' proposal corresponds to a transfer to shareholders of SEK 130,771,597 (125,741,920).
| Group | Parent Company | |||||
|---|---|---|---|---|---|---|
| Group | 2010 | 2009 | 2010 | 2009 | ||
| Change in exchange rates | 33 | 1,360 | 33 | – | ||
| Interest income* | 2,049 | 2,850 | 1,646 | 2,694 | ||
| Other financial income** | 672 | 174 | 634 | 1 | ||
| Total financial income | 2,754 | 4,384 | 2,313 | 2,695 | ||
| Change in exchange rates | –2,352 | –2,366 | – | –446 | ||
| Other financial expenses | –425 | –108 | –10,074 | –213 | ||
| Interest expense Trademarks* | –1,873 | –2,101 | – | – | ||
| Interest expenses* | –114 | –745 | –68 | –61 | ||
| Total financial expenses | –4,764 | –5,320 | –10,142 | –720 | ||
| Net financial items | –2,010 | –936 | –7,829 | 1,975 |
* The item in its entirety refers to financial assets not measured at fair value through profit or loss.
** Of which SEK 567 thousand (0) refers to unrealized changes in short-term investments at fair value through profit or loss.
| Accounts | Other | Total | Non-financial | |||
|---|---|---|---|---|---|---|
| receivable and | financial | carrying | Fair | assets and | Total | |
| Group Dec. 31, 2010 | loans receivable | liabilities | amount | value | liabilities | assets |
| Accounts receivable | 50,993 | – | 50,993 | 50,993 | – | 50,993 |
| Short-term investments | 35,567 | 35,567 | 35,567 | 35,567 | ||
| Cash and bank balances | 194,275 | – | 194,275 | 194,275 | – | 194,275 |
| Total financial assets | 280,835 | – | 280,835 | 280,835 | – | 280,835 |
| Other non-current liabilities | – | 34,724 | 34,724 | 34,724 | – | 34,724 |
| Other current liabilities | – | 6,164 | 6,164 | 6,164 | 5,028 | 11,192 |
| Accounts payable | – | 9,987 | 9,987 | 9,987 | – | 9,987 |
| Total financial liabilities | – | 50,875 | 50,875 | 50,875 | 5,028 | 55,903 |
| Accounts | Other | Total | Non-financial | |||
| receivable and | financial | carrying | Fair | assets and | Total | |
| Group Dec. 31, 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 |
Fair values are determined according to a valuation hierarchy comprised of three levels. The levels reflect the extent to which the fair values are based on observable market inputs or internal assumptions. Following is a description of the various levels for determining the fair value of financial instruments recognized at fair value.
Level 1 – fair value is determined using observable (unadjusted) quoted prices on an active market for identical assets and liabilities.
Level 2 – fair value is determined using valuation models based on observable inputs for the asset or liability other than quoted prices included in level 1.
Level 3 – fair value is determined using valuation models where significant inputs are based on non-observable data.
All holdings of financial assets by the Group and Parent Company are recognized at fair value, which consist exclusively of accounts receivable, short-term investments, and cash and bank balances, can be found in level 1. The quoted market prices used for the Group's financial assets consist of the bid rates on the closing day. The carrying amount and fair value as indicated in the table above totals SEK 280.8 million (334.5).
On March 25, 2010 Björn Borg acquired 100 percent of the capital and votes in FSSIT Services AB (the name of which has since been changed to Björn Borg Services AB). The purchase price amounted to SEK 9.1 million, excluding FSSIT Services AB's cash reserves, and transaction costs to SEK 1.3 million. The transaction costs have been recognized as an administrative cost and thus affected operating profit negatively.
During the two years prior to the acquisition FSSIT Services AB did not carry on any operations, and other than cash reserves the company essentially lacked assets and liabilities. Operating previously as an IT service company, FSSIT Services AB generated losses that gave it tax loss carryforwards of approximately SEK 182 million, for which deferred tax assets of SEK 9 million have been recognized in the acquisition balance sheet. The acquisition affects the Group's cash flow by SEK –9 million, which corresponds to the difference between the purchase price paid and FSSIT Services AB's cash reserves on the acquisition date. The effect on the Group's results and financial position is immaterial before or after the acquisition date.
Carrying amounts of identifiable acquired assets and assumed liabilities
| Cash & cash equivalents | 251.8 |
|---|---|
| Deferred tax assets | 9.1 |
| Total identifiable net assets | 260.9 |
| Total purchase price (cash paid) | 260.9 |
| Goodwill | 0.0 |
As previously announced, Björn Borg established a new subsidiary in January 2011 to produce fashionable athletic and functional wear together with the Dutch distributor. The creation of a separate clothing operation based in the Netherlands is another element in the strategy to focus on Björn Borg's core business, underwear, based in Stockholm. The new company, Björn Borg Sport, builds on the clothing concept in the Netherlands, where Björn Borg has established operations and extensive experience after having successfully managing the licensed womenswear company for about ten years. The collections, both women's and men's, will primarily include sports fashion and functional sportswear. The products will be sold to distributors in Björn Borg's current markets, with an initial focus on larger markets. In 2011 Björn Borg Sport will handle some billing for shipments from the former Dutch apparel operations. The venture is expected to raise the Group's operating expenses by about SEK 10 million in 2011. The new clothing operation is considered to have good financial potential.
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 operations 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 17, 2011
Fredrik Lövstedt Nils Vinberg Monika Elling Kerstin Hessius Chairman Vice Chairman
Fabian Månsson Mats H Nilsson Vilhelm Schottenius Michael Storåkers
Arthur Engel President
Our audit report was submitted on March 17, 2011 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 accounts, the accounting records and the administration of the Board of Directors and the President of Björn Borg AB (publ) for the financial year 2010. 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 accounts. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts 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 accounts 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 accounts as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. 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 accounts 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 accounts.
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 17, 2011 Deloitte AB
Håkan Pettersson Tommy Mårtensson
Authorized Public Accountant Authorized Public Accountant
The Björn Borg share has been listed on NASDAQ OMX Stockholm's Mid Cap list since May 7, 2008 and is traded under the ticker symbol BORG. The share had previously 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 31, 2010 was SEK 64, giving Björn Borg a market capitalization of SEK 1,609 million. A total of 18.8 million shares were traded in 2010 at a value of approximately SEK 1,263 million. The average daily turnover was 74,256 shares. The share price fell during the year by SEK 3, or 4.7 percent. The share reached a high of SEK 80.50 and dipped to a low of SEK 55.
Björn Borg has two outstanding incentive schemes based on warrants in the company. The exercise of all the outstanding warrants would fully dilute the share capital by about 6 percent. For more information on the incentive schemes, see Note 7 on page 52.
According to Björn Borg's financial goals for the period 2010–2014, 50 percent of net profit will be distributed to the company's shareholders. As part of the financial goals, the company will strive 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 goals will be transferred to the shareholders in stages during the forecast period, starting in 2010.
The Board of Directors has recommended to the AGM a distribution of SEK 5.20 per share for 2010, corresponding to 144 percent of net income. As proposed, the distribution would be paid through an automatic redemption, whereby every share is divided into a common share and two redemption shares. The redemption shares will then automatically be redeemed for SEK 2.60 per share. Payment for the redemption shares, contingent on the approval of the AGM, is expected to be made around May 25, 2011.
The Board of Directors' proposal corresponds to a transfer to shareholders of SEK 130.8 million (125.7). For 2009 a dividend of SEK 5.00 was paid per share, corresponding to 155 percent of net income.
As of December 31, 2010 Björn Borg had 6,908 shareholders (6,116), according to Euroclear. Björn Borg's ten largest shareholders owned shares corresponding to 53.5 percent of the votes and capital. Institutional investors owned 27 percent.
| Change in no. | Total no. | Change in | Total share | Quota value, | Issue price, | ||
|---|---|---|---|---|---|---|---|
| Year | Transaction | of shares | of shares | share capital | capital, SEK | SEK | 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 |
| Total number of shares | 25,148,384 | 100.0 |
|---|---|---|
| Total, other | 12,155,166 | 48.3 |
| Total, 10 largest shareholders | 12,993,218 | 51.7 |
| Avanza | 528,032 | 2.1 |
| MSIL IPB Client Account | 532,227 | 2.1 |
| Nils Vinberg | 711,080 | 2.8 |
| JP Morgan Bank | 741,800 | 2.9 |
| Fourth Swedish National Pension Fund | 943,999 | 3.8 |
| Vilhelm Schottenius | 1,023,520 | 4.1 |
| Mats H Nilsson directly or through related parties | 1,478,440 | 5.9 |
| Robur | 1,855,600 | 7.4 |
| SEB | 2,578,480 | 10.3 |
| Fredrik Lövstedt through companies | 2,600,040 | 10.3 |
| No. of shares | Votes/capital, % |
According to share register on December 31, 2010.
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.
| Total | 6,908 | 25,148,384 | 100.0 | |
|---|---|---|---|---|
| 20,001 – | 82 | 19,811,630 | 78.8 | |
| 15,001 – 20,000 | 20 | 348,885 | 1.4 | |
| 10,001 – 15,000 | 38 | 493,051 | 2.0 | |
| 5,001 – 10,000 | 130 | 994,738 | 4.0 | |
| 1,001 – 5,000 | 790 | 1,858,926 | 7.3 | |
| 501 – 1,000 | 908 | 795,255 | 3.2 | |
| 1 – 500 | 4,940 | 845,899 | 3.3 | |
| No. of shareholders | No. of shares | Capital and votes, % |
According to share register on December 31, 2010.
| DATA PER SHARE | |||||
|---|---|---|---|---|---|
| 2010 | 2009 | 2008 | 2007 | 2006 | |
| Earnings per share before dilution, SEK | 3.61 | 3.22 | 3.96 | 4.18 | 2.55 |
| Earnings per share after full dilution, SEK | 3.57 | 3.21 | 3.96 | 4.17 | 2.53 |
| Number of shares outstanding on closing day | 25,148,384 | 25,148,384 | 25,059,184 | 25,036,984 | 23,207,376 |
| Average number of shares outstanding | 25,148,384 | 25,111,217 | 25,041,134 | 24,406,699 | 22,954,076 |
| Average number of shares outstanding after dilution | 25,470,202 | 25,230,128 | 25,075,500 | 24,490,160 | 23,081,600 |
Fredrik Lövstedt Chairman since 2005, Director since 2004. b. 1956. M.Sc. Eng., MBA. Other assignments: 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. Shares in Björn Borg: 2,600,040
Nils Vinberg Vice Chairman since 2008. Director since 2004. b. 1957. B.Sc. Econ. Other assignments: Chairman of Charge Holding AB. Director of RNB Retail and Brands AB, Odd Molly International AB, Elevenate AB, Svensk Handel Stil 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. Shares in Björn Borg: 711,080.
Monika Elling Director since 2009. b. 1962. B.Sc. Econ., B.Sc. ME. Background: CEO of Poolia. Previously Regional Managing Director and CFO of Intrum Justitia, analyst at Enskilda Securities in Stockholm, COO of Arrow Lock, New York, the U.S. (today part of Assa Abloy), Business Development Manager in Cash Handling Services at Securitas. Formerly a Director of AB Lindex.
Shares in Björn Borg: 69,000.
Kerstin Hessius Director since 2010. b. 1958. B.Sc. Econ. Other assignments: CEO of Tredje AP-fonden, Director of Vasakronan AB, Hemsö AB and member of the HHS Advisory Board and Stiftelsen Danvikshem. Background: Former CEO of Stock holms börsen, Deputy Governor at Sveriges Riks bank, Managing Director of Asset Management at Östgöta Enskilda Bank/ Danske Bank and various management positions at Alfred Berg/ABN Amro. Shares in Björn Borg: 6,000.
Fabian Månsson Director since 2009. b. 1964. B.Sc. Econ. Other assignments: Active as industrial advisor since 2008, Director of Aurora Fashions.
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, the U.S.. EVP of Spray Ventures AB. President, Purchasing Manager and Divisional Manager for H&M Hennes och Mauritz AB.
Shares in Björn Borg: 2,000.
Mats H Nilsson Director since 1998. b. 1955. B.Sc. Econ. Other assignments: 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. Shares in Björn Borg: 1,478,440.
Vilhelm Schottenius Director since 1997. b. 1956. B.Sc. Econ. Other assignments: Director of Procurator AB, Collector AB, Nilörngruppen AB, Stampen 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). Shares in Björn Borg: 1,023,520.
Auditors: Deloitte AB. Håkan Pettersson, Authorized Public Accountant. Tommy Mårtensson, Authorized Public Accountant.
Michael Storåkers Director since 2006. b. 1972. B.Sc. Econ. Other assignments: CEO of Bukowskis AB. Chairman of McCann Nordic AB and Storåkers McCann AB. Director of the Stockholm School of Economics, Bukowskis AB, Stockholmsmässan AB and Rodebjer AB. Background: Former Director of Stockholm Business Region AB, Koncept AB, Fortum Värme, Pysslingen Förskolor och Skolor AB.
Shareholdings and warrant holdings as of December 31, 2010.
Shares in Björn Borg: 40,000.
Arthur Engel President. b. 1967. Recruited 2008. B.Sc. Econ. Background: President of Gant. Shares in Björn Borg: 35,000. Warrants in Björn Borg: 750,000.
Malin Wåhlstedt Business Area 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.
Magnus Teeling Financial Manager. b. 1973. Recruited 2011. B.Sc. Econ. Background: Tilgin AB, Aroma AB, KPMG. Shares in Björn Borg: 500.
Erik Jarnsjö Marketing Director. b. 1974. Recruited 2011. B.Sc. Econ. Background: Brand Manager at Coop, Senior Brand Manager at Unilever, Nordic Marketing Manager at Unilever, Marketing Manager at Spendrups Bryggeri. 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.
Shareholdings and warrant holdings as of December 31, 2010.
The Björn Borg share is listed on NASDAQ OMX Stockholm.
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 regarding the company and its development.
The corporate governance principles applied by Björn Borg, in addition to the rules stipulated in laws and regulations are stated in the Swedish Code of Corporate Governance. The Board of Directors is responsible for ensuring that the code is applied by the Board itself as well as by the management and the company in general, and continuously monitors that the code is applied. If a company that applies the Swedish Code of Corporate Governance does not follow it in any respect, the company must explain the non-compliance, describe the solution it has selected instead and state the reasons why. In 2010 Björn Borg applied the Swedish Code of Corporate Governance without non-compliance with any of its provisions, with the exception that Director Mats H Nilsson served as Chairman of the Nomination Committee. The reason for this non-compliance was that the Nomination Committee felt that Mats H Nilsson's background as a major longterm shareholder and Director of Björn Borg qualified him to effectively lead the 2010 Nomination Committee as Chairman.
This corporate governance report does not constitute part of the formal annual report.
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 and notifies the company as required is entitled to participate personally or by proxy. The AGM may decide on all issues that affect the company and do not expressly fall under another decision-making body's exclusive competence according to the Swedish Companies Act or the Articles of Association. Every shareholder is entitled to have an issue brought before the AGM.
The AGM elects the company's Board of Directors and the Chairman. Among the other duties of the AGM are to adopt the balance sheet and income statement, and decide on the disposition of the profit from the company's operations and the discharge from liability for the Directors and the President. The AGM also decides on remunera tion to the Board and approves the compensation guidelines for management. The AGM in addition elects the company's 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 may authorize the Board to take decisions.
The next AGM will be held in Stockholm on April 14, 2011. 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 2010 AGM was held in Stockholm on April 15, 2010. The AGM passed resolution to reelect Directors Mats H Nilsson, Vilhelm Schottenius, Michael Storåkers, Monika Elling, Fabian Månsson and Nils Vinberg, and reelected Fredrik Lövstedt as Chairman. Kerstin Hessius was elected as a new Director. The AGM also resolved to approve the profit distribution, authorize the Board to decide on the acquisition and transfer of the company's own shares and to issue new shares. The minutes of the AGM can be found on Björn Borg's web site.
According to the resolution of the 2010 AGM, Björn Borg's Nomination Committee will be appointed in a specific way. The Nomination Committee, whose composition was published on the Group's web site in October 2010, consists of the following members for the 2011 AGM:
Mats H Nilsson has been named Chairman of the Nomination Committee. According to the resolution of Björn Borg's 2010 AGM, the Nomination Committee's mandate is to propose to the 2011 AGM the number of Directors to be elected by the meeting, their remuneration, any compensation for committee work, the composition of the Board, the Chairman, the Nomination Committee, the Chairman of the AGM and, when applicable, the election of the auditors and their remuneration. Up until January 31, 2011, the Nomination Committee has held two meetings at which minutes were taken. In addition contacts were made 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. Directors are elected annually at the AGM for a one-year term up until the following AGM. The AGM on April 15, 2010 reelected Directors Fredrik Lövstedt, Mats H Nilsson, Vilhelm Schottenius, Michael Storåkers, Nils Vinberg, Monika Elling and Fabian Månsson. Kerstin Hessius was elected as a new Director. Fredrik Lövstedt was elected Chairman of the Board.
The Board fulfills the requirements of the Swedish Code of Corporate Governance that no more than one Director elected by the AGM is employed in the company's management or the management of the company's subsidiary, that a majority of the Directors are independent in relation to the company and the management, and that at least two Directors are independent in relation to the company's major shareholders. Prior to the 2010 AGM the Nomination Committee concluded that all of the nominated Directors were independent from the company and the management as well as from major shareholders, with the exception that the Chairman of the Board, Fredrik Lövstedt, was not considered independent in relation to the company's major shareholders due to his shareholding, and that Nils Vinberg was not considered independent in relation to the company and the management due to his previous role as President of Björn Borg.
The Board is assisted by an external secretary. For more information on the Directors, see page 62 of the annual report.
Pursuant to the Swedish Companies Act, Björn Borg's Board is respons ible for the company's organization and the 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 compliance thereto. The Board also has ultimate responsibility for its various committees. The Board's rules of procedure, which were adopted at the Board meeting on August 18, 2010 and subsequently reevaluated, define the principles for Board work, the delegation between the Board and the President, and financial reporting.
In 2010 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, one strategy meeting and one meeting in connection with the adoption of the budget. In addition, two extraordinary meetings were held. 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 2010 the committee held two meetings. The Compensation Committee is a drafting committee.
The Board of Directors 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 is tasked with ensuring that accurate, qualitative financial reports are prepared and communicated. The committee convened a total of four times in 2010, all in connection with the quarterly reports. All of the Committee's members attended all of these meetings. The Audit Committee is a drafting committee.
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 is Arthur Engel, born 1967, since November 3, 2008. He does not own any shares in companies with which Björn Borg has significant business interests. For more information on the President, see page 63 of 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 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. The issue of the election of auditors will be addressed at the 2011 AGM. According to a change in the Swedish Companies Act, the auditors' term has been shortened to one year, instead of the previous four-year term.
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.
Remuneration to the Chairman and other Directors is determined by the AGM. According to the resolution of the 2010 AGM, the Chairman received remuneration of SEK 300,000 and other Directors received SEK 100,000. For committee work in 2010, the member of the Compensation Committee was paid SEK 15,000 and the Chairman was paid SEK 25,000, while the members of the Audit Committee were each paid SEK 25,000 and the Chairman was paid SEK 40,000.
According to the remuneration guidelines for Senior Executives approved by the 2010 AGM, the remuneration for the President and other members of management includes a base salary, variable compensation, previously established long-term incentive schemes and other benefits, including a pension. The variable compensation is based on the results relative to defined, measurable targets and is maximized relative to the salary target.
The fixed and variable salary components and benefits for the President and the management of Björn Borg are indicated in Note 7 of the annual report.
Björn Borg has two current warrant-based incentive schemes. 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.
| No. of attendees | 6 | 7 | 5 | 7 | 7 | 7 | 8 | 8 | 7 |
|---|---|---|---|---|---|---|---|---|---|
| Kerstin Hessius* | – | – | – | 1 | – | – | 1 | 1 | 1 |
| Monika Elling | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | – |
| Fabian Månsson | 1 | 1 | 1 | – | 1 | 1 | 1 | 1 | 1 |
| Nils Vinberg | 1 | 1 | – | 1 | 1 | 1 | 1 | 1 | 1 |
| Michael Storåkers | – | 1 | – | 1 | 1 | 1 | 1 | 1 | 1 |
| Mats H Nilsson | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| Vilhelm Schottenius | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| Fredrik Lövstedt | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| Feb 10 | Mar 10 | Mar 24 | May 5 | Jun 17 | Aug 18 | Sep 19 | Nov 10 | Dec 14 | |
| Directors' attendance in 2010 |
* Newly elected Director
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 controls are working. 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 over financial reporting for 2010 has been prepared in accordance with the Swedish Companies Act and 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 in view of the staffing in the company's finance department in relation to the operations' nature, scope and complexity.
The control environment serves as the basis for internal control over 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 understand the importance of their roles in maintaining good internal control.
Management works continuously and actively with risk analysis, risk assessment and risk management to ensure that the risks that the company faces are managed appropriately within the framework that has been established. The risk assessment takes into consideration, among other things, the company's administrative routines with respect to operating, financial and legal risks. Balance sheet and income statement items where there is a risk that material errors could arise are continuously reviewed as well. Assessed risks in various major balance sheet and income statement items are graded and monitored. The risk analysis has identified a number of critical processes. The biggest focus is on purchasing and revenue processes. The Audit Committee plays an important role in risk assessment, since it reports its observations and priorities 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 its observations and priorities 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 finance department. The company's auditors conduct the audit of the Group's financial reporting and review the processes, systems, routines and accounting work done by the finance 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.
Shares in Björn Borg are listed on NASDAQ OMX Stockholm'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 6,908 shareholders at year-end. The largest shareholder as of December 31, 2010 was Chairman Fredrik Lövstedt, who held 10.3 percent of the shares and votes. 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.
| Total number of shares | 25,148,384 | 100.0% |
|---|---|---|
| Total | 12,993,218 | 51.7% |
| Avanza | 528,032 | 2.1% |
| MSIL IPB Client Account | 532,227 | 2.1% |
| Nils Vinberg | 711,080 | 2.8% |
| JP Morgan Bank | 741,800 | 2.9% |
| Fourth Swedish National Pension Fund | 943,999 | 3.8% |
| Vilhelm Schottenius | 1,023,520 | 4.1% |
| Mats H Nilsson directly or through related parties | 1,478,440 | 5.9% |
| Robur | 1,855,600 | 7.4% |
| SEB | 2,578,480 | 10.3% |
| Fredrik Lövstedt | 2,600,040 | 10.3% |
To the Annual General Meeting of Björn Borg AB (publ). Company reg. no. 556658-0683
The Board of Directors is responsible for the corporate governance report and that it has been prepared in accordance with the Annual Accounts Act.
As a basis for our opinion that the corporate governance statement has been prepared and is consistent with the annual accounts and the consolidated accounts, we have read the corporate governance report and assessed its statutory content based on our knowledge of the company.
In our opinion, the corporate governance report has been prepared and its statutory content is consistent with the annual accounts and the consolidated accounts.
Stockholm, March 17, 2011 Deloitte AB
Håkan Pettersson Tommy Mårtensson Authorized Public Accountant Authorized Public Accountant
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, excluding 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), Romella International AB (fragrances) and Trend Design Group (footwear), 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 franchisees 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
Production Vero Kommunikation, Superlativ and Wildeco. Photography Björn Borg's image archive and Karl Johan Larsson. Printing åtta.45, 2011.
The Annual General Meeting of shareholders will be held on Thursday, April 14, 2011 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 AB) on Friday, April 8, 2011 and must notify the company of their intention to participate by 4:00 pm on the same date, April 8, 2011. Notification must be sent in writing to Björn Borg AB, Götgatan 78, SE-118 30 Stockholm, Sweden, by tel 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 8, 2011, which means that shareholders must inform nominees well in advance of this date.
Annual General Meeting 2011 April 14, 2011 Interim report January – March 2011 May 4, 2011 Interim report, January – June 2011 August 23, 2011 Interim report, January – September 2011 November 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].
SHAREHOLDER CONTACTArthur Engel, President E-mail: [email protected] Tel: +46 8 506 33 700Mobile: +46 701 81 34 01
Magnus Teeling, CFO E-mail: [email protected] Tel: +46 8 506 33 700Mobile: +46 708 50 55 37
Björn Borg AB Götgatan 78, 28th floor, SE-118 30 Stockholm, Sweden Tel +46 8 506 33 700Fax +46 8 506 33 701www.bjornborg.com
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