Annual Report • Apr 22, 2014
Annual Report
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Bong is a leading provider of specialised packaging and envelope productsin Europe, offering solutionsfor distribution and packaging of information, advertising materials and lightweight goods.
Important growth areas in the Group are the Propac packaging concept and Russia. The Group has annual sales of approximately SEK 2.5 billion and about 2,000 employees in 15 countries.
Bong has strong market positions in the majority of keymarketsin Europe, and theGroup sees interesting possibilities for continued expansion and development.
Bong is a public limited company and its shares are listed on NASDAQ OMX Stockholm (Small Cap).
| KEY FIGURES | 2013 | Q4 | Q3 | Q2 | Q1 | 2012 | 2011 | 2010 | 2009 |
|---|---|---|---|---|---|---|---|---|---|
| Net sales, SEK M |
2,564 | 664 | 595 | 628 | 677 | 2,946 | 3,203 | 2,326 | 1,915 |
| Operating profit/loss, SEK M |
–109 | –14 | -28 | –20 | –47 | 15 | 40 | –91 | 65 |
| Profit/loss after tax, SEK M |
–141 | –18 | –47 | –28 | –47 | –55 | –16 | –97 | 24 |
| Cash flow after investing activities, SEK M |
–91 | 14 | –19 | –70 | –16 | –38 | 137 | –277 | 169 |
| Operating margin, %1 |
–4,3 | –4.3 | –5.0 | –5.2 | –7.0 | 0.5 | 1.3 | –3.9 | 3.4 |
| Number of employees1 |
2,051 | 2,051 | 2,076 | 2,099 | 2,136 | 2,271 | 2,431 | 1,540 | 1,220 |
1 Year to date.
SIGNIFICANT SALES OF SPECIAL PACKAGING
Nordic and Baltic countries, 23% Central Europe, 33% France and Spain, 23% United Kingdom, 16% Russia/Eastern Europe, 3%
Other, 2%
Dear shareholders, customers and other stakeholders,
A company like Bong, which has been in existence for 277 years, experiences long periods of prosperity and expansion, but must also be able to cope with challenging periods and crises. Indeed, 2013 was one of the most challenging years in the company's history in modern times. Growing digitalisation along with the weak economy in Europe put tremendous pressure on the envelope industry. Volumes fell by about 11 per cent compared with 2012, and pressure on prices increased. Already in 2012, demand fell by about 8 per cent, which means that in the last two years alone the market has dropped about 20 per cent.
This has led to an accelerated consolidation on the manufacturing side. Several minor players have gone out of business, while some companies have been taken over by other major players. Capacity is declining at a rapid pace – partly through attrition and partly through adaptation to lower volumes by all major manufacturers. On previous similar occasions, the industry did an inadequate job of keeping up, but the major cutbacks that have been taken in late 2013 and early 2014 should lead to less overcapacity moving forward.
The difficult market conditions in 2013 resulted in lower sales and pressure on margins. To address this situation, in spring of 2013 we implemented several new cost-saving measures that resulted in lower fixed costs towards the end of the year. We reviewed our entire cost structure to become more efficient and we dedicated extra time to analysing profitability at the customer and product level in order to understand where we need to make changes.
But above all, we worked to strengthen our financial position during the year. In the third quarter we completed a new issue that raised about SEK 290 million in new equity. We also issued a new convertible loan of SEK 75 million, replacing bank debt with new, long-term credit at our two main banks. The rights issue restored the equity ratio to a good level, is gradually reducing financing costs and provides a solid platform for for the on-going transformation work.
After the rights issue we formulated an extensive new restructuring plan to return to profitability. In 2014, all energy will be devoted to implementing the three-step plan: higher cost efficiency (fewer production facilities with higher capacity utilisation), higher margins (rapid improvement or phasing out of unprofitable businesses, primarily in the envelope business) and additional cash contributions (higher inventory turnover and sales of buildings and equipment that are no longer needed). The plan is expected to be fully implemented in late 2015, at which time we expect annual cost savings of SEK 150-200 million. Already in 2014, we aim to reverse earnings to a positive operating result (EBIT) before restructuring costs.
As the restructuring programme takes effect, we will return resources to grow within Propac, our strategic growth area in specialty packaging. We have already built up a base of products and solutions for the growing e-commerce market as well as gift bags for retailers. The product range also includes secure mailings with attractive growth potential. Sales of specialty packaging totalled
approximately SEK 420 million in 2013, which is significantly more than the SEK 50 million in sales that we had in 2005 when we began our Propac initiative. The markets for e-commerce packaging, gift packaging and secure mailing is much larger than the market for envelopes, and with the position we have built up in recent years, we have every opportunity to multiply Propac sales over the long term. It will be a challenging but exciting journey for our company.
Bong is a highly international company. Our broad presence in Europe allows us to adopt good ideas in one market and apply them in another. Bong's gift packaging – which we are now further developing – is used by retail trade chains in several countries. In addition, in 2013 we purchased a share of the French company MailInside. Their groundbreaking solution for direct mail has excellent prospects far beyond the French borders. Both products embody the innovation that characterises Bong. You can read more about them in this annual report.
The last few years have been extremely challenging for us, not least in 2013, but we have coped with the crisis and are now aiming for a rapid return to a positive financial performance, after which we will continue to focus on growth. I would like to thank all of the employees within the Bong Group for a job well done during this difficult period. Thanks to your extraordinary efforts, I am convinced that we will handle this transition in an excellent way. I would also like to thank all of our customers and other partners for your continued support and cooperation. Finally, I would like to extend a special thanks to all the old and new shareholders who invested in the rights issue in 2013. It was crucial for the necessary restructuring of the company that has just begun and I promise you that we will do everything in our power to ensure that your investment will be successful.
My vision is that within a few years Bong will have a stronger financial position, a positive net result, a highly efficient and customer-oriented envelope business characterised by high service and quality, as well as a rapidly growing specialty packaging business. The work to turn this vision into reality has already begun.
Kristianstad, March 2014
Anders Davidsson President and Chief Executive Officer
In 2013 Bong launched a three-step plan to reverse the earnings trend. The first step was taken last year and included a rights issue, which resulted in a decisive improvement in financial position. In 2014 and 2015, measures to improve profitability have top priority. From 2015 onwards, Bong will gradually focus on accelerating growth in specialty packaging (Propac) as well as Russia and Eastern Europe.
A good financial position is essential for implementing the changes that lie ahead over the next few years. The Extraordinary General Meeting in July 2013 resolved to increase the Company's capital by issuing new shares at a value of SEK 126 million as well as a convertible loan of about SEK 75 million, which together provided the Company with about SEK 200 million in new capital. The meeting also resolved on set-off issues in which Bong's single largest shareholder, Holdham S.A. and the company's two largest lending banks would settle loans of about SEK 100 million and SEK 50 million, respectively, against new shares.
In connection with these transactions, Bong also entered into a new bank agreement for a longterm solution of a total of SEK 590 million with better terms than previously.
The financing was raised during the third quarter of 2013 and resulted in an increase in equity of a total of SEK 290 million, a reduction in net debt and a significant improvement in the Group's solvency. Along with the long-term banking agreement and the convertible loan, the company now has the financial platform required to improve profitability and create growth in selected areas.
Bong intends to quickly achieve an improvement in earnings and a positive cash flow through a combination of higher production efficiency, increased margins, primarily in the envelope business, and asset rationalisation. A new comprehensive restructuring programme within the framework of the two-year plan is expected to result in annual cost-savings of between SEK 150 and 200 million when fully implemented in 2015. Restructuring is expected to cost SEK 150-200 million, most of which will impact 2014. The goal is to achieve an operating profit before restructuring costs by 2014.
The envelope industry in Western Europe is fiercely competitive. Low production costs are crucial for competitiveness.
Since the acquisition of Hamelin's envelope division in 2010 Bong has implemented a number of structural measures aimed at coordinating the Group's production units and adapting capacity to the lower demand for envelopes. About 500 people have left the Group since the end of 2010 as a result of factory closures and staff layoffs.
As part of the two-year plan, Bong is now once again conducting a review of the facilities structure to further reduce production costs.
Bong's customer base consists of a large number of customers of varying size. The large number of customers entails significant complexity in production, warehousing, distribution and sales. Businesses that do not meet Bong's requirements for profitability will be phased out.
Bong probably has the widest range on the European envelope market. A relatively small number of items accounts for a large share of sales. Bong is exploring ways to limit the standard range, produce in shorter series and keep fewer items in stock.
Disposal of redundant assets such as machinery and real estate, as well as higher inventory turnover, are expected to strengthen cash flow by SEK 50-100 million in 2014 and 2015.
Bong's specialty packaging operation Propac has sales of about SEK 420 million and includes packaging for retail trade, security solutions and e-commerce solutions. During the first half of 2014 Bong is conducting a strategic review of the various elements within Propac to adjust the product offering and determine which areas Bong will focus on in the future.
Bong has a presence in Poland and Russia and intends to use them as a base to grow into new markets in Eastern Europe in 2014-2015. These markets are undergoing higher growth than in Western Europe.
Bong's solutions play a unique role in an increasingly digitised world.
We are all part of a global nervous system. Using new technologies, we can reach each other anywhere, anytime. Methods in the digital world are becoming increasingly sophisticated. But human needs remain unchanged.
Envelopes and packaging serve as an interface that has the unique ability to appeal to our senses. They create expectations and experiences, forming spaces and meeting points that unite and affect.
Bong develops envelopes and packages that add their specific values to a constantly communicating world. The high pace of change characterises Bong's offering, constantly supplying solutions for new applications in varying designs and materials.
Bong recognised early on the need for flexible and elegant packaging solutions in retail trade and developed an expandable gift box. Customers, who include international clothing store chains, demand gift packaging that will be quick and simple to use for store staff at the same time that they are attractive for the end customer.
In order to meet the competition and expand the offering, in 2013 Bong developed a completely new product that combines the quality of the previous gift packaging with a brand new function: The customer can choose whether the packaging will be a gift bag or a gift box. In addition to the traditional gift bag, Bong can now offer a flexible package that adapts to the needs of the moment in just seconds.
With a few simple folds and quick peel-and-seal closure, the new solution carries on the functional and customised tradition that characterises the earlier gift packaging and the rest of Bong's line of products.
Bong has had the design protected and is currently seeking a patent for this unique solution, which will be a valuable addition to the market.
Omni-channel (or seamless shopping) means that customers can freely move between all channels and get the same service and offering in-store and online, regardless of platform. According to a survey conducted by the US consultancy Accenture in the autumn of 2013, consumers increasingly expect a unified shopping experience combining the online and in-store experience.
To meet customer expectations, retail trade must structure electronic and physical channels that interact in a total, cohesive relationship with the customer where the brand experience is the same, regardless of interface. In a world that combines all channels and modes of expression, envelopes and packages play a natural and integral role as a unique, physical intermediary of emotions and thoughts.
E-commerce continues to grow in Europe. Goods and services with a value of EUR 312 billion were purchased online in 2012, up 19 per cent from 2011, according to the European trade association ECommerce Europe. E-commerce between companies and consumers now accounts for about five per cent of total retail sales in Europe.
The rapid growth will continue, not least because commerce between countries is expected to grow substantially. Of the 465,000 retail businesses in the 17 largest EU countries, half are engaged in e-commerce. Just under 20 per cent of their e-commerce involves cross-border sales. E-commerce is expected to rise significantly as this share grows. With its solutions for e-commerce businesses throughout Europe, Bong has excellent prospects to take advantage of the continued growth in the market.
Bong constantly revamps its offering – in both envelopes and specialty packaging. A new type of envelope for direct mail is renewing the industry and Bong has taken a leadership position in this area by becoming a stakeholder in the French MailInside.
Bong manufactures and sells envelopes in all shapes and sizes. From standard envelopes to customised solutions with unique properties, with and without overprint, with different kinds of sealing solutions and in many different materials, colours and sizes.
The number of designs is essentially infinite. Most envelopes are used to send transaction-related mail and direct marketing (DM).
A large amount of information is sent electronically today, but for certain types of mail, such as bills, statements, notices, payslips and contracts, many people prefer physical letters. Studies show that physical mail has a unique ability to inspire confidence in the recipient.
Over 30 per cent of the total letter volume in Northern and Western Europe consists of envelopes for DM. Addressed DM is gaining in popularity for many businesses. One reason is that it is easier to adapt direct mailshots to the target audience than ads on TV, radio, online and in the press. There are many ways to personalise an envelope through its design, size, paper quality, location of the window, sealing and other measures.
In 2013 Bong became a partner in the French company MailInside, which developed the innovative envelope solution EAZIP®, where the message is integrated with the envelope. The solution is attractive, innovative, eliminates enveloping and lowers postage costs through its clever lightweight design.
The standard range sold by all business units in the Group includes padded and expandable bags in various materials and designs, corrugated board and cardboard, folders, pockets and tubes. Bong appeals to the special needs of the retail, e-commerce and security market segments with solutions sold by a dedicated sales team in the Bong Packaging Solutions business unit.
The battle for attention and the consumer's wallet is getting tougher. Service is an important competitive tool and it includes packaging concepts. Bong gift packaging reduces time and storage space in the store and is an elegant addition to the gift table and under the Christmas tree.
The challenge for many large retail chains is to serve customers efficiently, while maintaining a high level of service. Bong's lightweight, expandable and attractive gift packaging comes in smart boxes that fit right under the checkout counter. The sales clerk can either hand the packaging directly to the customer, or in just a matter of seconds unwrap it, place the item in it and hand it to the customer.
E-commerce is growing at double-digit rates throughout Europe. More and more consumers prefer to get their goods delivered to the door, which means that more products must be packed and sent by post or courier. Transports place high demands on packaging. Packages have to tolerate being bumped around and remain convenient to pack. Our packaging materials and packaging help e-commerce companies to keep costs down since they preserve the goods in the same condition as when they were packed. Costly returns are avoided.
The rapidly expanding e-commerce sector has led to growing demand for packaging and distribution services, as well as to the emergence of an entire industry with this specialty, known as fulfilment. For the past few years, Bong has offered these companies not only packaging, but also machines that package objects of varying types using a technique that seals the packaging of various materials without the addition of heat, known as cold seal packaging.
When sending something valuable, people often choose to send it by post or courier service, securely wrapped and packaged. For lawyers, accountants, hospitals, government agencies, banks and financial companies, many letters and parcels are private and confidential. With our range of security packaging, these customers feel secure.
Bong offers security-coded packaging and packaging that indicates whether anyone has made any unauthorised attempts to open them.
The envelope market in Europe is mature and consolidation of the industry continued in 2013. Bong continues to expand in the specialty packaging market, which offers good opportunities for growth.
With envelope sales of about SEK 2 100 million, Bong is one of the two leading envelope manufacturers in Europe. The European envelope market is estimated at about 75 billion units with a value of about SEK 12-13 billion at the producer level.
Consumption in Scandinavia, as well as in Western and Northern Europe, remains high at 200-300 envelopes per person per year. The largest markets are Germany, the UK and France.
Businesses account for more than 95 per cent of envelope use in Western Europe. Bong's clients include companies in telecommunications, banking, insurance, finance, energy and water, with millions of customers. Every day agreements, payslips and pension statements, invoices and confirmations of transactions are sent by letter. Bong delivers envelopes directly to end customers, as well as to wholesalers and office supply stores.
Demand for envelopes has dropped by about 25 per cent over the past five years due to lower economic activity in the wake of the financial crisis. In addition, electronic substitution - e-mail replacing physical mail - contributes to the trend of declining demand.
Weak growth in demand spurred the ongoing consolidation of the envelope market in Western Europe in 2013. In Germany the Mayer Group took over Papyrus envelope manufacturing and Hanse Kuvert went bankrupt, as did a few other small and medium-sized manufacturers in Spain, the UK and Italy. In Spain, Antalis closed its envelope factory. All key players in Europe are working on adjusting costs and capacity.
With a market share of about 20 per cent, Bong, alongside Mayer, is the largest manufacturer in Europe. Spanish Printeos, formerly Tompla, is the third largest manufacturer in Europe with over 10 per cent of the market.
Bong is clearly the leader in the Nordic countries and Russia. In France, England and Germany, Bong is among the two or three top manufacturers. Printeos is the leading manufacturer in Spain.
Consumption in Eastern European markets is between 20 and 70 envelopes per person per year, depending on the country, with an annual growth rate of 5-10 per cent. The Eastern European economies are growing from low levels, but faster than in the West. In these countries where cash payment previously dominated, consumer credit and transaction mail are becoming increasingly common, and many of these countries have chosen to modernise their postal services. Electronic media are not as widespread as in the West, which means that e-mail does not replace physical mail to the same extent.
Since 2005, Bong has purposefully and consistently broadened its offering to include specialty packaging for various purposes. The Propac range includes both standard packaging and customised packaging.
The market for Bong's specialty packaging is much larger than the envelope market. It is significantly more fragmented and statistics for the niches where Bong is active are lacking or difficult to obtain. Bong's assessment is that demand for packaging used in e-commerce, mail order and retail has strong growth potential over an extended time horizon. In 2013, however, the weak European economy also affected demand for Propac.
Bong's assortment of envelopes and packaging made of Tyvek® wasrecertified in May, 2013. Certification provides Bong with the right to label products with the Carbon Trust's Carbon Reduction Label.
Bong made a commitment to reduce carbon emissions attributable to the labelled products for two years after the first certification in 2011. It was the first certification of its kind of such products in Europe and is still the only one.
Recertification means that the products have undergone the independent and rigorous testing by the Carbon Trust to see whether their footprint has been reduced. The footprint is the sum of all greenhouse gases emitted during the product life cycle, not just carbon dioxide.
Certification provides Bong's customers with a reliable basis for decisions when assessing the climate impact of post and packaging solutions made of Tyvek®.
Tyvek® isdurable. It cannotbetornapart,itdoesnot crackanditiswater repellent. The material consists of a network of fibres of 100 per cent high-density flashspun polyethylene. It is soft like fabric and has a shiny, paper-like surface.
The Carbon Trust offers organisations comprehensive solutions for certification andverificationoftheirproducts'footprint. Certification entails an independent verification in accordance with PAS 2050,
and the following regulations: WRI for Product Carbon Footprinting, the Carbon Trust's Footprint Expert™ and the Carbon Trust Code of Good Practice for Product Greenhouse Gas Emissions and Reduction Claims. Carbon Trust Certification is accredited by the United Kingdom Accreditation Service (UKAS).
In April 2013, Bong renewed its agreement with DuPont™ from 2009, which gives Bong the exclusive right to manufacture, sell and market envelopes and packaging made of Tyvek® within Europe. Tyvek® was developed by DuPont™ and is manufactured by DuPont de Nemours in Luxembourg.
Motivated, skilled and healthy employees are a crucial competitive factor on Bong's markets. Bong strives to create a sustainable work environment that attracts, motivates and develops our employees.
Bong is a modern company with short and informal decision-making pathways. Communication is based on transparency and participation. Managers continually inform employees on local and company-wide developments. Everyone is encouraged to take an active part in decisions concerning improvements in the working environment that result in fewer work-related injuries, higher productivity and better quality.
Bong also strives to reward extraordinary efforts. Throughout the Group small bonus programmes are offered related to parameters such as the unit's earnings, production volume, number of claims and delivery reliability.
Bong strives to reduce sickness absence by means of increased information to managers and other employees on the importance of health promotion.
Bong has adopted a code of conduct that lays down the fundamental principles by which the company strives to do business:
Bong expects its employees to handle all business partners in a businesslike manner, correctly and respectfully. Corruption, bribery or anti-competitive practices disrupt markets and jeopardise social and democratic development. Bong denounces such practices.
| Key figures | 2013 | 2012 | 2011 | 2010 | 2009 |
|---|---|---|---|---|---|
| Net sales, SEK M | 2,564 | 2,946 | 3,203 | 2,326 | 1,915 |
| Operating profit/loss, SEK M | –109 | 15 | 40 | –91 | 65 |
| Profit/loss after tax, SEK M | –141 | –55 | –16 | –97 | 24 |
| Cash flow after investing activities, SEK M | –91 | –38 | 137 | –277 | 169 |
| Operating margin, % | –4.3 | 0.5 | 1.3 | –3.9 | 3.4 |
| Profit margin, % | –6.9 | –1.9 | –0.7 | –5.6 | 1.4 |
| Capital turnover rate, times | 1.2 | 1.3 | 1.3 | 1.2 | 1.1 |
| Return on equity, % | neg | neg | neg | neg | 3.6 |
| Return on capital employed, % | neg | 1.0 | 2.6 | neg | 5.5 |
| Equity ratio, % | 26 | 17 | 21 | 21 | 36 |
| Net loan debt, SEK M | 802 | 1,005 | 947 | 1,062 | 589 |
| Net loan debt/equity, times | 1.54 | 2.70 | 1.91 | 2.00 | 0.98 |
| Net loan debt/EBITDA, times | neg | 8.6 | 6.3 | 42.7 | 3.8 |
| EBITDA/net financial items, times | neg | 1.7 | 2.4 | 0.6 | 4.5 |
| Average number of employees | 2,051 | 2,271 | 2,431 | 1,540 | 1,220 |
| Number of shares | |||||
| Number of shares outstanding at end of period | 156,659,604 | 17,480,995 | 17,480,995 | 17,480,995 | 13,128,227 |
| Diluted number of shares outstanding at end of period | 183,932,331 | 18,727,855 | 18,727,855 | 18,727,855 | 13,230,227 |
| Average number of shares | 63,873,865 | 17,480,995 | 17,480,995 | 14,216,419 | 13,128,227 |
| Average number of shares, diluted | 73,796,014 | 18,727,855 | 18,727,855 | 14,528,134 | 13,230,227 |
| Earnings per share | |||||
| Before dilution, SEK | –2.20 | –3.20 | –1.04 | –6.97 | 1.65 |
| After dilution, SEK | –2.20 | –3.20 | –1.04 | –6.97 | 1.63 |
| Equity per share | |||||
| Before dilution, SEK | 3.33 | 21.25 | 28.37 | 30.39 | 45.56 |
| After dilution, SEK | 3.06 | 20.50 | 26.48 | 28.37 | 45.77 |
| Cash flow from operating activities per share | |||||
| Before dilution, SEK | –0.40 | –0.10 | 8.53 | 3.01 | 13.98 |
| After dilution, SEK | –0.34 | –0.09 | 7.96 | 2.81 | 13.87 |
| Other data per share | |||||
| Dividend, SEK | 0.001 | 0.00 | 0.00 | 1.00 | 1.00 |
| Quoted market price on balance day, SEK | 1.5 | 9.7 | 17.9 | 32.0 | 21.0 |
| P/E-ratio, times | neg | neg | neg | neg | 13 |
| Price/Equity before dilution, % | 45 | 45 | 63 | 105 | 46 |
| Price/Equity after dilution, % | 49 | 47 | 68 | 113 | 46 |
1 The Board's proposal.
Bong's shares are listed on the NASDAQ OMX Stockholm Small Cap list. At the end of 2013, the number of shares in Bong AB was 156,659,604. Full conversion of the convertible bond loan with a nominal value of SEK 75 million will add 27,272,727 new shares in the Company.
The Bong share fell 72.4 per cent in 2013. The highest price paid, SEK 5.97, was recorded on 13 February 2013. The lowest price paid, SEK 1.32, was recorded on 16 December 2013.
OMX Stockholm PI (an index for all listed shares on the Stockholm Stock Exchange) increased by 20.5 per cent in 2013. OMX Stockholm Small Cap PI, an index that measures the price performance of companies whose size is comparable with Bong, rose by 39.0 per cent. In 2013 Bong shares traded corresponded with 28.6 per cent of the average value of outstanding share capital as of closing day 2013.
The number of shareholders as at 31 December 2013 was 1,668. Holdham S.A. is Bong's largest shareholder with 33.7 per cent of votes and capital. Melker Schörling via Melker Schörling AB was the second largest shareholder with 12.2 per cent of votes and capital. In February 2014 Paulsson Advisory AB acquired all Melker Schörling AB's shares in Bong. Group management holds 1,467,377 shares, corresponding with barely 1 per cent of the total number of outstanding shares in Bong.
Bong issued convertible debentures with a total nominal value of SEK 75 million to institutional and qualified investors. The convertible debentures mature in 2018 and can be converted into 27,272,727 new shares in Bong.
The Board of Directors and the President of Bong AB (publ.), corporate ID no. 556034-1579, domiciled in Kristianstad, hereby submit their annual report for the financial year 1 January 2013 – 31 December 2013 for the Parent Company and the Group.
Bong is the leading provider of specialised packaging and envelope products in Europe and offers solutions for distribution and packaging of information, advertising materials and lightweight goods. Important growth areas in the Group are the Propac packaging concept and Russia. The Group has annual sales of approximately SEK 2.5 billion and about 2,000 employees in 15 countries. Bong has strong market positions, in most of the important markets in Europe, and the Group sees interesting possibilities for continued expansion and development. Bong is a public limited company and its shares are listed on NASDAQ OMX Stockholm, Small Cap.
The European envelope market rapidly declined in 2013. Electronic substitution and the weak economy in Europe had a negative impact on demand. According to trade association FEPE, volumes dropped by about 11 per cent in 2013 compared to 2012. In Russia, the envelope market weakened especially during the second half year because of a slowdown in the economy and greater savings requirements for public authorities and companies.
At the same time, consolidation and capacity adjustment in the industry continued. Papyrus sold its envelope manufacturing operation in Germany to Mayer during the second quarter. The factory has now closed and production has moved to other manufacturing units in the Mayer Group. Papyrus' share of the German market before the sale to Mayer is estimated at 7-8 per cent. In addition, in late 2013 Hamburg-based Hanse Kuvert, with a market share in Germany of about 5 per cent, announced that it had declared bankruptcy and production would cease. Moreover, a few small and medium-sized manufacturers in Spain, England and Italy have discontinued operations during the year. In early 2014 Spanish Printeos (formerly Tompla) announced that it had sold its British business, with sales of more than GBP 10 million, to Encore, the largest independent envelope company in the UK. In addition to these structural changes, all key players in Europe are working on adjusting costs and capacity.
The specialty packaging market, where Bong is active with its Propac range, is much bigger than the envelope market. The market is also much more fragmented. Market statistics for the niches where Bong is active are lacking or difficult to obtain. In Bong's assessment, demand for packages used in sectors including e-commerce, mail order and retail is still growing and strong growth potential is expected over time. In the short run, however, the weak economy also impacts demand for Propac.
Consolidated sales for the period reached SEK 2,563 million (2,946). The main reason for the drop in sales is the downturn in the envelope market, which resulted in both lower volumes and pricing pressures and had a negative impact on Bong's gross earnings. In addition, exchange rate fluctuations had an impact on sales of SEK -42 million during the period compared with 2012.
Bong's total Propac sales amounted to SEK 417 million (486). Sales are lower compared with 2012 mainly because Bong chose to phase out certain unprofitable dealerships, as well as the decline in the sales of gift bags due to lower activity in the retail sector. Sales of Christmas gift bags were clearly lower than 2012 and other kinds of orders were postponed to the first quarter of 2014. Exchange rate fluctuations also had an impact on Propac sales of SEK -7 million compared with the corresponding period in 2012.
Operating result was SEK -109 million (15), including costs of SEK -69 million (-57) for a restructuring programme launched partly in spring 2013 and partly during the fourth quarter 2013. The structural measures adopted from the spring of 2013 proceeded according to plan and achieved full impact in the fourth quarter of 2013. The extensive new restructuring programme launched during the fourth quarter of 2013 is expected to have an impact mainly during the second half of 2014.
After valuation of goodwill it was decided during the year to write off SEK 15 million, partly as a result of restructuring of the British corporate structure and partly as a result of annual impairment testing of consolidated goodwill in the balance sheet.
During the corresponding period in 2012 a building in France was sold with capital gains of SEK 17 million.
Net financial items during the quarter totalled SEK -67 million (-71), earnings before tax were SEK -176 million (-56) and reported earnings after tax were SEK -141 million (-55). Tax expense for the period was affected by approximately SEK -15 million because Holdham's ownership interest in Bong AB after the issue rose to 33.7 per cent, which according to German tax law reduced Bong's loss carryforwards in Germany accordingly.
In 2013, Bong's main focus has been on strengthening its financial position. The Company has successfully achieved this objective through the rights issue, a new long-term banking agreement and a new five-year convertible loan. With this stronger financial position the Company is now better equipped to implement the changes necessary to improve profitability and create growth in selected areas, such as special packaging. Financial items are also expected to improve by SEK 15 million a year as a result of the lower debt.
In 2014 and 2015 the top priority will be to reverse the Company's performance back to profitability. From 2015 onwards, the focus will gradually shift to accelerating growth within the Group's two strategic growth areas of specialty packaging (Propac), and Russia and Eastern Europe.
To return to profitability as soon as possible Bong has formulated a new action plan to achieve a rapid and significant improvement in performance in 2014 and 2015.
The plan has three main components:
Overall, the savings measures will result in lower fixed costs of SEK 150-200 million on an annual basis. Non-recurring restructuring costs to achieve these savings are expected to reach SEK 150-200 million. Most of the costs are expected to be incurred in 2014, but measures launched in December 2013 were carried as an expense in December.
The goal is to achieve an operating profit (EBIT) before restructuring costs in 2014.
Cash flow after investing activities for the period January-December was SEK -91 million (-37). Payments for the ongoing restructuring programme had a negative impact on cash flow for the year of SEK -66 million (-55). Investments and acquisitions affected cash flow with a net of SEK -28 million (-36).
Cash and cash equivalents at 31 December 2013 amounted to SEK 82 million (SEK 112 million at 31 December 2012). The Group had unutilised credit facilities of SEK 60 million on the same date. Total available cash and cash equivalents amounted to SEK 142 million.
The successfully completed rights issue in the third quarter of 2013 decisively strengthened the Group's financial position. Equity increased, net interest-bearing debt decreased and the equity ratio significantly improved as a result.
Consolidated equity at 31 December 2013 was SEK 522 million (SEK 372 million at 31 December 2012). Translation of the net asset value of foreign subsidiaries to Swedish krona and changes in the fair value of derivative instruments increased consolidated equity by SEK 7 million.
Interest-bearing net loan debt declined by SEK 203 million to SEK 802 million (SEK 1 005 million at 31 December 2012) during the period. Translation of net loans in foreign currency to Swedish krona increased the Group's net loan debt by SEK 3 million.
The Extraordinary General Meeting on 17 July 2013 resolved to increase the Company's capital by issuing new shares at a value of about SEK 126 million as well as the issuance of a five-year convertible loan of SEK 75 million, which together would provide the Company with about SEK 200 million in new capital. The meeting also resolved on set-off issues in which Bong's single largest shareholder, Holdham, would settle shareholder loans of about SEK 100 million against new shares in Bong, and the company's two largest lending banks would settle loans of SEK 50 million against new shares.
The above issues were completed during the third quarter and had a positive impact on equity of SEK 290 million as follows:
Rights issue SEK +126 million
Set-off issues (Holdham and banks) SEK +150 million
Convertible loans SEK +14 million
Issue expenses amounted to a total of SEK 16 million, which has had a negative effect on equity during the third quarter. As a result of the issues, the total number of shares increased to 156,659,604 (183,932,331 after full conversion of the convertible loan).
Consolidated share capital increased by SEK 60 million from SEK 175 million to 235 million. Nominal value per share changed from SEK 10 to SEK 1.50.
Bong reached an agreement in connection with the rights issue on bank financing with its two largest banks. The financing consists of a three-year facility of SEK 350 million, and two five-year facilities totalling SEK 140 and SEK 100 million, respectively.
Investing activities and acquisitions during the period had a net impact on cash flow of SEK -28 million (-36), of which SEK -6 million relates to payment for acquisitions reported in previous years and SEK -22 million relates to other net investments. The net investments include an investment in production equipment and a new business system for the Group. Also included were the sale of machinery and other production equipment, which had a positive impact on cash flow of SEK 19 million.
In February 2014 Melker Schörling AB sold its 12.2 per cent stake in Bong AB to Paulsson Advisory AB. Paulsson Advisory AB is thus the second largest shareholder in Bong AB.
The average number of employees during the period was 2,051 (2,271). The number of employees at 31 December 2013 was 1,961 (2,218). Bong continually works on improving productivity and adjusting staffing to meet current demand and the reduction is the result of the implemented restructuring programme.
Bong's environmental work is aimed at minimising the environmental effects of both end products and processes.
At present, Bong is working actively to improve production methods so that polluting emissions are minimised, to eco-label as large a portion of the range as possible, and to boost knowledge and awareness of environmental issues among its employees. Besides imposing demands on its own operations, Bong is also trying to influence suppliers and customers to design their products so that ecocycle thinking and conservation of natural resources are prioritised.
In order to further rationalise environmental efforts, the company is working according to a plan for environmental certification with the objective that all plants in the Group will be certified to ISO 14001. The plants in Solingen in Germany, Nybro and Kristianstad in Sweden, Tönsberg in Norway, as well as Milton Keynes and Derby in the UK, Sandweiler in Luxembourg, Evreux and Angoulème in France, Kaavi in Finland and Estonia are certified.
In 2009, Bong began efforts to obtain certification of its products according to the pan-European environmental certification standard Paper by Nature. The eco-label is applied to paper products such as envelopes, books and note pads. It takes into account the potential environmental impact of raw materials and manufacturing processes. Paper by Nature guarantees that the raw materials come from sustainably managed forests and that the products have been manufactured in certified facilities. Paper by Nature covers the environmental impact of manufacturing as well as energy aspects, emissions to water and air and environmentally harmful substances. Environmental certification of the products is an important aspect, and labelling with the Nordic Ecolabel (the Swan) is therefore a natural part of Bong's Scandinavian range.
The Group conducts some research and development activities. In addition, active efforts are pursued to meet customer needs for different envelopes and packaging solutions.
The Parent Company's business extends to management of operating subsidiaries and certain Group management functions. During the year the Parent Company's employees, except the CEO, and assets, were transferred to the wholly owned subsidiary Bong International AB. Sales were SEK 21 million (38) and earnings before tax were SEK -28 million (3).
Investments for the period amounted to SEK 6 million (7). The investments are primarily IT-related and pertain to a common platform for administrative systems in the Group. Credits granted but not utilised amounted to SEK 60 million (209).
The Board of Directors of Bong AB (publ) proposes that the 2014 AGM resolve on remuneration to the President and other senior executives as follows: "Senior executives" here refers to executives included in the management group, which currently consists of the company's President and CEO, Chief Financial Officer (CFO), Business Area Manager Nordic Region, Business Area Manager Central Europe, Business Area Manager UK and Managing Area Director Bong France and Bong Spain. Remuneration shall consist of fixed salary, variable remuneration, other benefits and pension. Total compensation must be at market rates and competitive to ensure that the Bong Group can attract and retain competent senior management. In addition to the above variable compensation, from time to time a long-term incentive scheme may be approved.
The variable component of the salary shall have a predetermined ceiling, the basic principle being that the variable salary portion can amount to no more than 60 per cent of the fixed annual salary. The variable component is based on earnings and cash flow as well as individual qualitative goals. The basic principle is that the variable remuneration is paid in accordance with the agreed-upon weighting between the interim goals if the interim goal has been achieved. The variable component is based on a vesting period of one year. The goals for senior executives are established by the Board of Directors.
Pension benefits shall primarily be defined-contribution, but also occur for legal reasons as defined-benefit, although not at the Group Management level. Variable remuneration is not pensionable. Group Management is entitled to pensions under the ITP plan or the equivalent. The retirement age is 65 years. In addition to the ITP plan, some members of Group Management are also entitled to an increased occupational pension premium of up to 30 per cent of their fixed salary.
Group Management's employment contracts include provisions governing remuneration and termination of employment. According to these agreements, employment can ordinarily terminate at the request of the employee with a period of notice of 4–12 months and at the company's request with a period of notice of 6–18 months. In the event of termination by the company, the period of notice and the period during which compensation is payable shall not together exceed 24 months.
Remuneration to the President and other senior executives is prepared by the Board of Directors' remuneration committee and finalised by the Board based on the recommendation of the remuneration committee.
These guidelines apply to those persons who are included in the Group Management during the period the guidelines are in force. The guidelines apply to the employment contracts entered into after the AGM's resolution, and to any changes in existing contracts. The Board of Directors is entitled to disregard the above guidelines if it finds that special reasons exist to justify this in a particular case.
The cost of Group Management's variable remuneration at maximum outcome, which assumes that all bonus-related goals are achieved, can be calculated to be about SEK 9 million (excluding social security contributions). The calculation is based on the current composition of the Group Management.
Bong's principal owners, with stakes of more than ten per cent of the votes and capital, are Holdham S.A., with 34 per cent of the votes and capital, and Paulsson Advisory AB with about 12 per cent of the votes and capital. Nordea AB and FR & R Invest AB each own about 7 per cent of the votes and capital in the company. The total number of ordinary shares was 156,659,604 on 31 December 2013. All shares carry the same rights.
There are no restrictions on the transferability of the shares due to legal regulations or rules in the Articles of Association. Bong is not aware of any agreements between direct shareholders in Bong that entail restrictions in the right to transfer shares.
In the event of a public offer, no agreements are triggered that would have a material effect on Bongs earnings or position.
The company's Board of Directors shall consist of a minimum of four and a maximum of nine members. The members are elected at a General Meeting of Shareholders for the period until the end of the first Annual General Meeting (AGM) held after appointment of the member.The Articles of Association can be amended at the AGM or a General Meeting of Shareholders.
Like all business operations, Bong's operations are associated with risks and opportunities. The specific factors judged to have the greatest impact on Bong's operations are presented below.
Historically, the envelope market has followed the general economic trend. In Russia and Eastern Europe, a generally growing economy still drives envelope consumption. In Western Europe, the connection between general economic growth and envelope consumption is no longer as strong as it has been, given IT developments and associated digitisation.
Demand for envelopes for direct mail varies with the economy. With the aid of more sophisticated databases with personal information, a market is being created for highly sophisticated envelopes intended for personally addressed direct mail. Large promotional mailings in envelopes are declining in frequency and scope over time.
Administrative mailings as a whole has already declined with respect to account statements, order confirmations, etc. as part of digitisation and internet penetration. Other parts of transaction-related mailings, such as invoices, still hold their own in the competition with the newer technology.
The strong demand for packaging in both e-commerce and traditional retail creates great opportunities for Bong to create growth in their specialty packaging line (Propac). Packaging customers also present an opportunity for cross-selling of envelopes. Over time, growth in the packaging area is expected to compensate for the decline in envelopes. Bong is closely monitoring developments and is very active in specialty packaging to ensure sustained growth in Propac.
Changes in postage and charges can lead to changes in letter and mail volumes. Postage increases have a negative impact on volumes, while postage decreases have a positive impact. Postage is usually based on weight or size. Several large markets are using weight-based postage. A transition from weight to size-based postage could lead to changes in Bong's product mix and cause a shift towards small envelope sizes.
The European envelope market has undergone accelerating consolidation since 2009 as a result of the protracted financial crisis. The three largest envelope companies represent about 60 per cent of the total market. However, some of the major markets are still fairly fragmented. Bong believes that overcapacity in the industry has fallen slightly.
Uncoated fine paper is the single most important input material for Bong. The cost of fine paper is about 50 per cent of the total cost. Under normal conditions, Bong can compensate for price increases, with some time lag.
Uncoated fine paper is Bong's most important input material and is mainly purchased from three major suppliers. Delivery disruptions from any of the three suppliers could affect Bong negatively in the short term. In a longer time perspective, Bong does not have any suppliers that are critical to its operations.
The Group's dependence on individual customers is limited. The biggest customer accounts for 4 per cent of annual sales, and the 25 biggest customers account for 33 per cent of total sales.
All companies in the European envelope industry have roughly the same production equipment. The age of the machinery is of limited importance for production efficiency, but newer machines generally have higher capacity. Machine wear is low, and production control and automation are crucial for cost-effective production. In general, the long life of the machines inhibits scrapping and consolidation of the industry.
On the other hand, the low investment need leads to very good cashgenerating capacity. At year-end, the Group's machinery consisted of about 200 envelope machines and 130 overprinting presses. The investment need in existing structure is judged to be limited during the next few years and clearly less than the Group's depreciation costs.
Information regarding goals and applied principles for financial risk management, use of financial instruments and exposure to currency risks, interest rate risks and liquidity risks is provided in Note 1.
In September 2010 the EU commission carried out inspections of several companies in the envelope and paper industry in Europe, including Bong in Sweden. The EC's investigation is currently underway. Against this background, Bong is not able to reasonably assess the outcome of the EC's judicial review.
Bong has no material pending legal disputes.
Bong complies with the environmental laws and rules that apply in each country to this type of industrial production. By means of measurements and regular inspections, Bong has ensured that emission limits are not exceeded, for example. There are no indications that the laws in this area will change in such a way that Bong would be affected to any significant extent or that Bong would be unable to comply with these requirements in the future.
Important factors that affect Bong's earnings and financial position are the volume trend for envelope sales, the price trend for envelopes, paper prices, payroll costs, currency rate changes and interest rate levels. The table below shows how Bong's 2013 earnings would have been affected by a change in a number of business-critical parameters.
Reported effects should be regarded merely as an indication of how profit after financial items would have been affected by an isolated change in the particular parameter.
| Parameter | Change | Impact on earnings after financial items, SEK million |
|---|---|---|
| Price | +/– 1% | 26 +/– |
| Volume | +/– 1% | 13 +/– |
| Paper prices | +/– 1% | 13 +/– |
| Payroll costs | +/– 1% | 7 +/– |
| Interest level | ||
| borrowing | +/– 1%-point | 7 +/– |
Effective and clear corporate governance helps secure the confidence of Bong's stakeholder groups while also increasing focus on business benefits and shareholder value in the company.
Bong's Board of Directors and management strive, by means of great transparency, to make it easier for the individual shareholder to follow the company's decision pathways and to clarify where in the organisation responsibilities and powers lie.
Corporate governance within Bong AB ("Bong") is based on applicable legislation, the regulatory framework for NASDAQ OMX Stockholm and various internal guidelines. The most recent version of the Swedish Code of Corporate Governance ("the Code") was published in February 2010 and covers all listed companies as from 1 February 2010.
Bong applies the Code, and in those cases the company has chosen to disregard the rules of the Code, a reason is given in the appropriate section of the Corporate Governance Report.
Bong is a Swedish public limited liability company whose shares are traded on NASDAQ OMX Stockholm in the Small Cap segment. Bong has around 1,700 shareholders.
Responsibility for management and control of Bong is divided between the shareholders at the General Meeting of Shareholders, the Board of Directors, its elected committees and the President and CEO, according to the Swedish Companies Act, other acts and ordinances, the Code and other applicable rules governing listed companies, the Articles of Association and the Board's internal policy instruments.
The purpose of corporate governance is to define a clear division of responsibilities and roles between owners, Board of Directors, executive management and appointed control bodies.
Governance of Bong is exercised via the General Meeting of Shareholders, the Board of Directors and the President and CEO. The highest decisionmaking body in Bong is the General Meeting of Shareholders.
The Annual General Meeting (AGM) elects the company's Board of Directors. The duties of the AGM also include adopting the company's financial statements, deciding how to distribute the earnings, and deciding whether or not to discharge the members of the Board and the President and CEO from liability. The AGM also elects Bong's auditors.
About 28 shareholders, representing 78 per cent of the total number of shares and votes in the company, participated in Bong's Annual General Meeting on 22 May 2013 in Malmö. All Board members and the company's auditors were present or represented at the AGM.
Bong's principal shareholders can be seen under the heading Shareholders, page 11.
Bong's Board of Directors decides on the Group's overall strategy and on the acquisition and disposal of business entities and real property.
The work of the Board is regulated, e.g. by the Swedish Companies Act, the Articles of Association and the rules of procedure adopted by the Board for its work. According to the Articles of Association, the Board of Directors shall consist of at least four and at most nine members. Since the 2013 AGM, Bong's Board of Directors has consisted of six AGM-elected members without deputies and two employee members with two deputies. The Chairman of the Board is Stéphane Hamelin. The statutory meeting of the Board of Directors was on 22 May 2013. The other members of the Board are Mikael Ekdahl (vice chairman), Christian W. Jansson, Ulrika Eriksson, Eric Joan and Anders Davidsson, President and CEO.
The Board has appointed from among their number two committees: the Audit Committee and Remuneration Committee.
The Board of Directors chairman Mikael Ekdahl received a fee of SEK 100,000 (300,000) for his time as Chairman of the Board of Directors and Stéphane Hamelin received SEK 200,000 for his time as Chairman of the Board of Directors since the 2013 Annual General Meeting. Mikael Ekdahl also received remuneration for serving as chairman of the audit committee SEK 100,000 (100,000). No other fee was paid. There is no agreement on pension, severance pay or other benefits.
Information about remuneration of the Board of Directors, as resolved by 2013 AGM, can be found in Note 4.
Stéphane Hamelin (b. 1961).
Member since 2010 and Chairman of the Board since 22 May 2013. Other appointments/positions: Chairman of the Hamelin board since 1989. Terminated board appointments/partnerships over the past five years: – Previous positions: Active at Borloo law firm from 1984-1989. Shareholding in Bong (private and via company): 52 850 282 shares
Member since 2001 and Chairman of the Board. 2003-22 May 2013. L.L.M., degree in business administration, Lund University. Other appointments/positions: Attorney and partner in Mannheimer Swartling Advokatbyrå. Chairman of the Board of Marco AB and Absolent AB. Deputy Chairman of Melker Schörling AB.
Terminated board appointments/partnerships over the past five years: EM Holding AB and AarhusKarlshamn AB
Shareholding in Bong (private and via related party): 60,000 shares
Ulrika Eriksson (b. 1969)
Board member since 2008.
Degree in business administration.
Other appointments/positions: Senior Executive Vice President, Apoteket AB. Board member of Bong Packaging Solutions AB.
Terminated board appointments/partnerships over the past five years: – Previous positions: Various executive positions at Apoteket AB
and Reitan Servicehandel i Sverige AB.
Shareholding in Bong (private and via company): 100,000 shares
Anders Davidsson (b. 1970) Board member since 2004. Degree in business administration. Other appointments/positions: President and CEO of Bong AB. Chairman of the Board of Bong Packaging Solutions AB, board member of Bong Sverige AB, Bong Suomi Oy, Bong UK Ltd and Bong Belgium S.A. Terminated board appointments/partnerships over the past five years: Aarhus Karlshamn AB Shareholding in Bong: 468,377 shares
Board member since 2007.
Dr. h.c. (Econ.); degree in business administration.
Other appointments/positions: Chairman of the Board of Apoteket AB, Svensk Handel AB, Enzymatica AB and Vivoline Medical AB, as well as board member of KappAhl AB, Europris AS, BRIS, Confederation of Swedish Enterprise, Kontanten AB and Fata Morgana AB. Terminated board appointments/partnerships over the past five years: Carmel Pharma AB.
Shareholding in Bong (private and via company): 745,246 shares
Eric Joan (b. 1964).
Board member since 2010.
Graduate of École Polytechnique Universitaire de Lille and Harvard Business School.
Other appointments/positions: CEO of Hamelin.
Terminated board appointments/partnerships over the past five years: – Shareholding in Bong (private and via company): 0.
Peter Harrysson (b. 1958).
Board member since 1997.
Other appointments/positions: Repairman at Bong Sverige AB. Terminated board appointments/partnerships over the past five years: – Shareholding in Bong (private and via company): 0.
Christer Muth (b. 1954).
Board member since February 2009. Other appointments/positions: Internal sales, customer service, Bong Sverige AB.
Terminated board appointments/partnerships over the past five years: – Shareholding in Bong (private and via company): 0.
The Board of Directors has adopted written rules of procedure and issued written instructions concerning the division of responsibilities between the Board and the President and CEO. There are instructions regarding information to be furnished regularly to the Board of Directors. During financial year 2013, the Board of Directors held eleven meetings in addition to the statutory meeting. The President and CEO provided board members with information at all regular meetings about the financial position of the Group and significant events in the company's operations. The Board meets at least four times a year in addition to the statutory meeting. One of the meetings can be held at one of the Group's units and be combined with an in-depth review of this unit.
Key issues that the Board of Directors addressed in 2013 include: 13 February Year-end report and progress report from auditors 8 May Financing 22 May Q1 2013 interim report and statutory board meeting after the 2013 AGM 16 June Financing 12 July Q2 2013 interim report 15 July Financing 20 August Financing 4 September Financing 12 September Visit to subsidiary
20 November Q3 2013 interim report
14 December Budget 2014
Bong complies with the Stockholm Stock Exchange's listing agreement and the Code with regard to requirements on independent Board members.
| Independent of company1 |
Independent of major shareholders1 |
Attendance at Board meetings |
|
|---|---|---|---|
| Stéphane Hamelin | Yes | No | 10 |
| Mikael Ekdahl | Yes | No | 11 |
| Ulrika Eriksson | Yes | Yes | 11 |
| Anders Davidsson | No | No | 11 |
| Christian W Jansson | Yes | Yes | 11 |
| Eric Joan | Yes | No | 9 |
1 The assessment of the independence of the Board members has been made in accordance with NASDAQ OMX Stockholm's Rules for Issuers and criteria of independence.
The company's articles of association do not contain any limitations in respect of how many votes each shareholder may cast at a General Meeting of Shareholders.
The Annual General Meeting appoints a special Nomination Committee whose task is to submit proposals to the AGM in consultation with the principal owners on the composition of the Board of Directors.
The Nomination Committe elected by the 2013 AGM consisted of four members: Mikael Ekdahl (Melker Schörling AB), Chairman, Stéphane Hamelin (Holdham S.A.), Peter Edwall (Ponderus Securities AB) and Erik Sjöström (Skandia). Since Bong's principal shareholders at the time (Melker Schörling AB and Holdham S.A.), represented about 45 per cent of votes, it was only natural that they were represented on the Nomination Committee. Furthermore, said shareholders considered it to be natural that a representative from one of the largest shareholders in terms of votes should serve as Chairman of the Nomination Committee. The Nomination Committee has dealt with the issues that follow from the Code. The Nomination Committee has had two formal meetings with regular contact in between.
Ulf Hedlundh (Svolder AB) and Christian Paulsson (Paulsson Advisory AB) were appointed to the Nomination Committee in conjunction with Melker Schörling ABs divestment of its shares in Bong AB to Paulsson Advisory AB. The Nomination Committee thus consists of Christian Paulsson (Paulsson Advisory AB), Ulf Hedlundh (Svolder AB) and Stéphane Hamelin Holdham S.A.). Stéphane Hamelin has been appointed Chairman of the Nomination Committee.
The Board of Directors has appointed a remuneration committee consisting of Mikael Ekdahl, chairman, and Stéphane Hamelin.
The Committee's task is to review and give the Board recommendations regarding the principles for remuneration, including performance-based remuneration to the company's senior executives. Questions concerning the President's terms of employment, remuneration and benefits are prepared by the remuneration committee and decided by the Board of Directors.
The President's salary consists of a fixed portion and a variable portion. The variable component, which is re-examined annually, is dependent on the achievement of goals for the company and the President.
The Remuneration Committee met on three occasions in 2013 at which both members participated.
The Board of Directors has appointed an audit committee consisting of Mikael Ekdahl, chairman, and Christian W. Jansson. Since Bong's principal shareholders represent about 45 per cent of votes it is only natural that one of them is represented on the committee along with an additional independent board member.
Since other members of the Board cover other activities within the Group, this has been deemed sufficient. The Audit Committee shall oversee that the company's accounts are prepared with full integrity for the protection of the interests of shareholders and other parties. The Audit Committee met three times in 2013 at which both members participated at two meetings.
Bong's auditors are elected by the AGM for a term of one year. The 2013 AGM elected accounting firm PricewaterhouseCoopers AB, with authorised auditor Eric Salander as principal auditor, and authorised auditor Christer Olausson as co-auditor, for a one-year mandate period.
The auditors review the Board's and the President's administration of the company and the quality of the company's audit documents. The auditors report the results of their review to the shareholders via the Audit Report, which is presented at the AGM. In addition, the auditors submit detailed accounts to the Board of Directors at least once a year and report to the Audit Committee at each of its meetings.
The President leads the day-to-day management of the company in accordance with the Board's guidelines and directions. The President is responsible for keeping the Board of Directors informed and ensuring that the Board has all the factual material needed to make informed decisions. The President is a member of the Board of Directors. The President also keeps the Chairman of the Board informed, by continuous dialog, of the development of the Group.
The President and others in the Group Management hold formal meetings once a month as well as a number of informal meetings to go through the results of the previous month and discuss strategy questions.
In 2013, Bong's Group Management consisted of 6 people, including
one woman. The Group consists of the Parent Company Bong AB and a number of subsidiaries, as reported in Note 14.
Reporting by subsidiaries takes place on a monthly basis.
The boards of the subsidiaries mainly consist of members of Bong's corporate management and the Parent Company's board of Directors.
The 2013 AGM decided that the Group Management's salaries should consist of a fixed basic salary plus variable performance-based remuneration. The variable remuneration can be paid for performance that exceeds what is normally expected of a member of the Group Management after an evaluation has been made of individual performances and the company's reported profit.
The extent to which pre-established goals for the company and the senior executive have been achieved is taken into account when establishing the variable remuneration. The total remuneration for members of the Group Management should be at a competitive level.
The Board of Directors is responsible for ensuring that there is a good system for internal control and risk management.
Responsibility for creating good conditions for working with these matters is delegated to the President. Both Group Management and managers at different levels in the company bear this responsibility in their respective areas. Powers and responsibilities are defined in policies, guidelines and instructions for authorisation rights.
According to the Code, the Board of Directors shall annually submit a description of the company's system for internal control and risk management regarding financial reporting. This report is prepared in accordance with the Code.
Internal control regarding financial reporting is a process designed to provide reasonable assurance regarding the reliability of the external and financial reporting and whether the financial statements are prepared in accordance with generally accepted accounting principles, applicable acts and ordinances and other requirements on listed companies. The internal control activities are included in Bong's administrative procedures. Internal control regarding financial reporting in Bong can be described in accordance with the following framework.
Internal control in Bong is based on a control environment that includes values and management culture, follow-up, a clear and transparent organisational structure, division of duties, the duality principle, quality and efficiency of internal communications.
The basis of the internal control regarding financial reporting consists of a control environment with organisation, decision-making channels, powers and responsibilities that have been documented and communicated in governing documents such as internal policies, guidelines and instructions, as well as job descriptions for controlling functions. Examples are rules of procedure for the Board and President, instructions for financial reporting, information policy and authorisation instructions.
The control activities include both general and more detailed controls intended to prevent, detect and correct errors and non-conformances.
The control activities are devised and documented at the corporate and departmental level. The internal regulatory framework with policies, guidelines and instructions comprises the most important tool for furnishing information and instructions for the purpose of securing the financial reporting. In addition, a standardised reporting package is used by all subsidiaries in order to ensure consistent application of Bong's principles and coordinated financial reporting.
Bong also has a self-assessment process relating to internal controls.
Bong continuously evaluates the risks surrounding reporting that may arise. Furthermore, the Board of Directors is responsible for ensuring compliance with insider laws and standards for furnishing information. The overall financial risks are defined and taken into consideration in establishing the Group's financial goals.
The Group has an established, but changeable, system for management of business risks that is integrated in the Group's control process for business planning and performance. In addition, seminars are routinely held on business risks and risk assessment within the Group. There are procedures for ensuring that significant risks and control deficiencies are, when necessary, detected by the Group Management and the Board of Directors on a periodic basis.
In order to ensure effective and correct information, both internally and externally, good communications are required. Within the Group there are guidelines for ensuring that relevant and essential information is communicated within the Group, within each unit and between the management and the Board of Directors. Policies, manuals and work descriptions are available on the company's intranet and/or in printed form. In order to ensure that external information is correct and complete, Bong applies an information policy adopted by the Board of Directors.
The President is responsible for ensuring that internal control is organised and followed up in accordance with the guidelines established by the Board of Directors. Financial governance and control are exercised by the Group accounting function. The financial reporting is analysed monthly at the detailed level. The Board of Directors has regular access to financial reports, and the company's financial situation is dealt with at every Board meeting. Every quarterly report is gone through by the Board of Directors. The President is responsible for ensuring that independent objective reviews are performed for the purpose of systematically evaluating and proposing improvements in the Group's processes for governance, internal control and risk management. In view of this and how the financial reporting has otherwise been organised, the Board of Directors finds no need for a special internal auditing function.
The Board of Directors proposes that the earnings available for distribution, SEK 739,522,181, be carried forward.
Bong's current priority is to reduce debt and improve profitability. Therefore, the Board proposes that no dividend be paid for 2013. No dividend was paid for 2012.
| SEK THOUSAND | Note | 2013 | 2012 |
|---|---|---|---|
| Revenue | 2 | 2,563,516 | 2,945,931 |
| Cost of goods sold | 3–4, 6, 8 | –2,118,712 | –2,399,585 |
| Gross profit | 444,804 | 546,346 | |
| Selling expenses | 3–4, 6, 8 | –262,147 | –264,756 |
| Administrative expenses | 3–6, 8 | –224,902 | –238,661 |
| Other operating income | 7, 12 | 30,577 | 30,529 |
| Other operating expenses | 7, 12 | –97,461 | –58,218 |
| Share in profit in associated companies | 19 | –358 | –399 |
| Operating profit/loss | –109,487 | 14,841 | |
| Financial income | 9, 12 | 4,312 | 4,843 |
| Financial expenses | 10, 12 | –71,007 | –76,100 |
| Total financial income and expenses | –66,695 | –71,257 | |
| Result before tax | –176,182 | –56,416 | |
| Income tax | 11 | 35,539 | 1,119 |
| NET RESULT FOR THE YEAR | –140,643 | –55,297 | |
| Attributable to: | |||
| Parent Company's shareholders | –140,643 | –55,995 | |
| Non-controlling interests | – | 698 | |
| Earnings per share attributable to Parent Company's shareholders |
|||
| – basic, SEK | 13 | –2,20 | –3.20 |
| – diluted, SEK | 13 | –2,20 | –3.20 |
| SEK THOUSAND | 2013 | 2012 |
|---|---|---|
| Net result for the year | –140,643 | –55,297 |
| Other comprehensive income | ||
| Items not to be recognised in the income statement | ||
| Actuarial profit on post-employment benefit obligations | 15,182 | 5,379 |
| 15,182 | 5,379 | |
| Items that may subsequently be recognised in the income statement | ||
| Cash flow hedges | 2,555 | 2,058 |
| Hedging of net investments | –24,248 | 36,482 |
| Exchange rate differences | 21,867 | –50,587 |
| Income tax relating to components of other comprehensive income | 4,039 | –9,837 |
| Other comprehensive income after tax | 19,395 | –16,505 |
| TOTAL COMPREHENSIVE INCOME | –121,248 | –71,802 |
| Attributable to: | ||
| Parent Company's shareholders | –121,248 | 72,500 |
| Non-controlling interests | – | 698 |
| SEK THOUSAND | Note 31 Dec. 2013 | 31 Dec. 2012 | |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | |||
| Goodwill | 14 | 533,215 | 539,750 |
| Other intangible assets | 15 | 43,204 | 36,355 |
| Total | 576,419 | 576,105 | |
| Tangible assets | |||
| Property, plant and equipment | 16 | 189,901 | 198,556 |
| Plant and machinery | 16–17 | 194,480 | 248,896 |
| Equipment, tools, fixtures, and fittings | 16 | 39,596 | 35,453 |
| Construction in progress | 18 | 21,454 | 28,493 |
| Total | 445,431 | 511,398 | |
| Financial assets | |||
| Interests in associated companies | 19 | 354 | 713 |
| Interests in other companies | 20 | 3,215 | 1,000 |
| Deferred tax assets | 21 | 185,711 | 140,314 |
| Other non-current receivables | 4,249 | 5,489 | |
| Total | 193,529 | 147,516 | |
| Total non-current assets | 1,215,379 | 1,235,019 | |
| Current assets | |||
| Inventories etc. | |||
| Raw materials and consumables | 93,548 | 109,834 | |
| Products in progress | 6,798 | 11,181 | |
| Finished products and merchandise | 163,564 | 190,947 | |
| Total | 22 | 263,910 | 311,962 |
| Current receivables | |||
| Trade receivables | 23 | 398,147 | 417,126 |
| Current tax asset | 18,295 | 15,379 | |
| Other current receivables | 24 | 11,637 | 16,913 |
| Deferred expenses and accrued income | 40,455 | 41,959 | |
| Total | 468,534 | 491,377 | |
| Cash and cash equivalents | 81,648 | 112,250 | |
| Total current assets | 814,092 | 915,589 | |
| TOTAL ASSETS | 2,029,471 | 2,150,608 |
| SEK THOUSAND | Note 31 Dec. 2013 31 Dec. 2012 | ||
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 32 | 234,989 | 174,810 |
| Other contributed capital | 705,039 | 475,953 | |
| Reserves | 31 | –55,030 | –62,260 |
| Retained earnings including net result for the year | –349,428 | –204,961 | |
| Equity attributable to equity holders of the Parent | 535,570 | 383,542 | |
| Non-controlling interests | 13,770 | –12,042 | |
| Total equity | 521,800 | 371,500 | |
| Non-current liabilities | |||
| Borrowings | 25 | 510,505 | 738,029 |
| Deferred tax liabilities | 21 | 30,118 | 23,455 |
| Pension obligations | 27 | 185,902 | 209,632 |
| Other provisions | 26 | 6,179 | – |
| Other non-current liabilities | 4,916 | 3,396 | |
| Total non-current liabilities | 736,900 | 974,512 | |
| Current liabilities | |||
| Borrowings | 25 | 184,873 | 169,958 |
| Trade payables | 303,466 | 341,802 | |
| Current tax liability | 3,267 | 6,193 | |
| Other current liabilities | 24 | 56,701 | 65,645 |
| Other provisions | 26 | 28,282 | 31,887 |
| Accrued expenses and deferred income | 28 | 194,182 | 189,111 |
| Total current liabilities | 770,771 | 804,596 | |
| TOTAL EQUITY AND LIABILITIES | 2,029,471 | 2,150,608 |
| Attributable to Parent Company shareholders | |||||||
|---|---|---|---|---|---|---|---|
| SEK THOUSAND | Note | Share capital | Share premium | Reserves | Retained earnings incl. net result for the year | Non-controlling interests | Total equity |
| Opening balance at 1 January 2012 | 174,810 | 475,953 | –41,882 | –114,239 | 1,279 | 495,921 | |
| Effects of change over IAS 19 | –38,600 | –38,600 | |||||
| Comprehensive income | |||||||
| Net result for the year | –55,995 | 698 | –55,297 | ||||
| Other comprehensive income | |||||||
| Items not to be recognised in the income statement | |||||||
| Revaluation of post-employment benefit obligations, after tax | 3,873 | 3,873 | |||||
| 3,873 | 3,873 | ||||||
| Items that may subsequently be recognised in the income statement | |||||||
| Cash flow hedges, after tax | 1,084 | 1,084 | |||||
| Hedging of net investments, after tax | 29,125 | 29,125 | |||||
| Exchange rate differences, after tax | –50,587 | –50,587 | |||||
| Total other comprehensive income | 31 | –20,378 | 3,873 | 0 | –16,505 | ||
| Total comprehensive income | –20,378 | –52,122 | 698 | –71,802 | |||
| Transactions with shareholders | |||||||
| Dividend to non-controlling interests | –441 | –441 | |||||
| Acquisition from non-controlling interests | –13,578 | –13,578 | |||||
| Total transactions with shareholders | – | –14,019 | –14,019 | ||||
| CLOSING BALANCE AT 31 DECEMBER 2012 | 31, 32 | 174,810 | 475,953 | –62,260 | –204,961 | –12,042 | 371,500 |
| Opening balance at 1 January 2013 | 174,810 | 475,953 | –62,260 | –204,961 | –12,042 | 371,500 | |
| Comprehensive income | |||||||
| Net result for the year | –140,643 | – | –140,643 | ||||
| Other comprehensive income | |||||||
| Items not to be recognised in the income statement | |||||||
| Actuarial profit on post-employment benefit obligations, after tax | 12,165 | 12,165 | |||||
| 12,165 | 12,165 | ||||||
| Items that may subsequently be recognised in the income statement | |||||||
| Cash flow hedges, after tax | 1,993 | 1,993 | |||||
| Hedging of net investments, after tax | –16,630 | –16,630 | |||||
| Exchange rate differences, after tax | 21,867 | 21,867 | |||||
| Total other comprehensive income | 31 | 7,230 | 12,165 | – | 19,395 | ||
| Total comprehensive income | 7,230 | –128,478 | – | –121,248 | |||
| Transactions with shareholders | |||||||
| New issue | 60,179 | 215,274 | 275,453 | ||||
| Convertible debenture | 13,812 | 13,812 | |||||
| Issuance cost | –15,989 | –15,989 | |||||
| Acquisition from non-controlling interests | –1,728 | –1,728 | |||||
| Total transactions with shareholders | 60,179 | 229,086 | – | –15,989 | –1,728 | 271,548 | |
| CLOSING BALANCE AT 31 DECEMBER 2013 | 31, 32 | 234,989 | 705,039 | –55,030 | –349,428 | –13,770 | 521,800 |
| SEK THOUSAND | Note | 2013 | 2012 |
|---|---|---|---|
| OPERATING ACTIVITIES | |||
| Operating profit/loss | –109,487 | 14,841 | |
| Depreciation, amortisation, and impairment losses | 106,739 | 102,140 | |
| Financial income received | 4,312 | 4,842 | |
| Financial expenses paid | –71,007 | –76,100 | |
| Tax paid | –7,075 | –22,440 | |
| Other items not affecting liquidity | 33 | –1,489 | –23,863 |
| Cash flow from operating activities before change in working capital | –78,007 | –580 | |
| Change in working capital | |||
| Inventories | 50,342 | 13,167 | |
| Current receivables | 31,355 | 94,024 | |
| Current operating liabilities | –66,738 | –108,323 | |
| Cash flow from operating activities | –63,048 | –1,712 | |
| INVESTING ACTIVITIES | |||
| Acquisition of intangible and tangible assets incl.advance payments to suppliers |
–53,278 | –58,405 | |
| Disposal of intangible and tangible assets | 19,091 | 35,538 | |
| Acquisition of subsidiaries, net of cash required | 6,336 | –12,911 | |
| Cash flow from investing activities | –27,851 | –35,778 | |
| Cash flow after investing activities | –90,899 | –37,490 | |
| FINANCING ACTIVITIES | |||
| New issue | 200,757 | – | |
| Proceeds from borrowings | 84,370 | 43,053 | |
| Amortisation of loans | –225,250 | –42,669 | |
| Dividend | – | –432 | |
| Cash flow from financing activities | 59,877 | –48 | |
| Cash flow for the year | –31,022 | –37,538 | |
| Cash and cash equivalents at start of year | 112,250 | 151,459 | |
| Exchange rate difference in cash and cash equivalent | 420 | –1,671 | |
| CASH AND CASH EQUIVALENTS AT YEAR-END | 81,648 | 112,250 |
Bong is a leading European provider of specialised packaging and envelopes offering solutions for distribution and packaging of information, advertising material and lightweight goods. The Group has operations in Sweden, Norway, Denmark, Finland, Estonia, Latvia, the UK, the Netherlands, Belgium, Germany, France, Poland, Spain and Russia. Bong has strong market positions, especially in northern Europe, Germany, France and the UK. This annual report was approved by the Board on 7 April 2014 for publication.
The most important accounting policies applied in the preparation of the consolidated financial statements are described below. These policies were applied consistently for all years presented, unless otherwise stated. The consolidated accounts have been prepared in accordance with International Financial Accounting Standards (IFRSs) and IFRIC interpretations as adopted by the EU, RFR 1 Supplementary Accounting Rules for Groups and the Swedish Annual Accounts Act. The consolidated accounts have been prepared in accordance with the cost method, except with regard to financial assets and liabilities (including derivative instruments) measured at fair value through profit or loss.
Preparing financial statements in accordance with IFRS requires the use of some important accounting estimates. It also requires that management make certain judgements in the application of the company's accounting policies. Those areas that include a high degree of assessment, which are complex, or in which assumptions and estimations are of material significance for the consolidated financial statements are stated in Note 36.
Subsidiaries are all companies where the Group has the right to dictate financial and operational strategies in a way that normally accompanies a shareholding amounting to more than half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The consolidated accounts include companies acquired during the year from the date when control passes to the Group. Companies disposed of are included in the consolidated accounts until the date when control no longer exists.
The acquisition method is used for accounting of the Group's business combinations. The consideration for the acquisition of a subsidiary is the fair value of the transferred assets, liabilities and the shares issued by the Group. The consideration includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. For each acquisition, the Group determines whether all non-controlling holdings in the acquired company should be recognised at fair value or at the holding's proportionate share of the acquired subsidiary's net assets. Surplus amount from purchase price, possible minority and fair value of previous possessions at the acquisition date compared to the Group's share of acquired net assets are reported as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income.
If the business combination is completed in several steps, the previous equity interests in the acquired company are measured at fair value at the date of acquisition. Any gain or loss arising is recognised in profit or loss.
Each contingent consideration to be transferred by the Group is recognised at fair value at the date of acquisition. Subsequent changes to the fair value of a contingent consideration classed as an asset or liability are recognised in line with IAS 39, either in profit and loss or in other comprehensive income. Contingent considerations classed as equity are not remeasured and the subsequent settlement is recognised in equity.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.
Associated companies are all those companies where the Group has a significant, but not controlling, influence, which as a rule is true for shareholdings that give them between 20 per cent and 50 per cent of the votes. Holdings in associated companies are recognised in accordance with the equity method and are initially measured at cost. The Group's carrying amounts for holdings in associated companies include goodwill identified on acquisition, net after any impairment losses. The Group's share of its associated companies' post-acquisition profits or losses is recognised in the Income Statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. Accumulated changes after the acquisition are recognised as a change in the holding's recognised carrying amount. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associated company.
Unrealised gains on transactions between the Group and its associated companies are eliminated in relation to the Group's holding in the associated company. Unrealised losses are also eliminated, unless the transaction constitutes evidence of the existence of an impairment loss for the transferred asset. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses in associated companies are recognised in the Income Statement.
External financial information shall reflect the information and the measures that are used internally within the company to manage the operation and make decisions about resource allocation. The company shall identify the level where the company's chief operating decision maker regularly reviews of sales and earnings. These levels are defined as segments. Bong's chief operating decision maker is the company's CEO. The regular internal reporting of results that is made to the CEO and that meets the criteria for constituting a segment is done for the Group as a whole, which means that Bong reports the whole Group as the company's only segment.
Items included in the financial statements for the different entities in the Group are stated in the currency that is used in the economic environment where the enterprise in question is mainly active (functional currency). The Swedish Krona (SEK), which is the Parent Company's functional and reporting currency, is used in the consolidated accounts.
Transactions in foreign currencies are translated to the functional currency at the exchange rate prevailing on the transaction date. Exchange gains and losses arising in connection with the payment of such transactions and the translation of monetary assets and liabilities in foreign currencies at the closing rate are recognised in profit or loss. An exception is when the transactions constitute hedges that meet the conditions for hedge accounting of cash flows or of the net investment, when gains/ losses are recognised in other comprehensive income.
The earnings and financial position of all Group companies with another functional currency than the reporting currency are translated as follows: Assets and liabilities are translated at the closing rate and all items in the Income Statement at the average rate. Exchange rate differences are recognised in other comprehensive income. Goodwill and adjustments of fair value that arise in connection with the acquisition of a foreign operation are treated as assets and liabilities in this operation and translated at the closing rate.
Property, plant and equipment are measured at cost less depreciation. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent expenditures are added to the asset's carrying amount or are recognised as a separate asset, whichever is suitable, only when it is likely that the future economic benefits associated with the asset will flow to the company and the cost of the asset can be measured reliably. All other types of repairs and maintenance are recognised as costs in the Income Statement during the period they arise. Land is not subject to depreciation. Depreciation of other assets, in order to allocate their cost down to the calculated residual value, is based on the asset's calculated useful life and is calculated on a straight-line basis from the time the plant is taken into service.
The residual values and useful lives of the assets are tested every balance sheet date and adjusted if necessary. An impairment loss is recognised equal to the amount by which the carrying amount of the asset exceeds its recoverable amount.
Gains and losses on disposal are determined by comparing sales revenue with carrying amount and are recognised in profit or loss.
Goodwill consists of the amount by which the cost of the acquisition exceeds the fair value of the Group's share of the acquired subsidiary's or associated company's identifiable net assets on the acquisition date. Goodwill on acquisition of subsidiaries is recognised as an intangible asset. Goodwill is subjected to impairment testing annually and is recognised at cost less accumulated impairment losses. Gain or loss on disposal of an entity includes the remaining carrying amount for the goodwill attributable to the entity. In connection with impairment testing, the Group is treated as a cash-generating unit.
Software of a standard character is recognised as an expense. Expenditure for software that has been developed or otherwise extensively adapted for the Group is capitalised as an intangible asset if the software is likely to have economic benefits that exceed the cost after one year. Capitalised expenditure acquired software is amortised on a straight-line basis over its useful life, but no longer than over eight years. The amortisation is included in the Income Statement item "Administrative expenses".
Customer relationships acquired in a business combination are recognised at fair value at the acquisition date. Customer relationships have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of the customer relationship.
Assets that have an indefinite useful life – for example, goodwill or intangible assets not ready to use – are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use.
The Group classifies its financial assets and liabilities in the following categories: Financial assets measured at fair value through profit or loss, loan receivables and trade receivables, and loans and other financial liabilities. The classification is dependent on the purpose for which the financial asset was acquired. Management establishes the classification of the financial assets on initial recognition.
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.
Loan receivables and trade receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These assets are measured at amortised cost. Amortised cost is determined on the basis of the effective interest rate calculated at the acquisition date. Trade receivables are recognised at the amount that is expected to be recovered, i.e. less doubtful debts.
Loans and other financial liabilities, for example trade payables, belong to this category. The liabilities are measured at amortised cost.
A financial asset or financial liability is recognised in the Balance Sheet when the company becomes a party to the contractual terms of the instrument. Trade receivables are recognised in the Balance Sheet when an invoice has been sent. A liability is recognised when the counterparty has performed its contractual obligations and there is a contractual obligation to pay, even if no invoice has been received. Trade liabilities are recognised when an invoice has been received. A financial asset is derecognised when the entitlements in the contract are realised, mature, or fall outside the control of the company. The same applies to part of a financial asset. A financial liability is derecognised when the obligation in the contract is discharged or otherwise extinguished. The same applies to part of a financial liability.
A financial asset and a financial liability are offset and the net amount recognised in the Balance Sheet when, and only when, an entity has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. The purchase or sale of financial assets is recognised on the trade date, which is the day when the company committed itself to purchase or sell the asset.
Financial instruments that are not derivatives are recognised initially at cost, equivalent to the fair value of the instrument plus transaction costs for all financial instruments except for those classified as financial assets that are recognised at fair value through profit or loss, which are recognised at fair value exclusive of transaction costs. A financial instrument is classified on initial recognition based on the purpose for which the instrument was acquired. The classification determines how the financial instrument is measured after initial recognition.
The Group's derivative instruments have been acquired to financially hedge the interest rate and currency risks to which the Group is exposed. An embedded derivative is accounted for separately if it is not closely related to the host contract. Derivatives are initially recognised at fair value, which means that transaction costs are charged to the profit for the period. After initial recognition, derivative instruments are measured at fair value and changes in value are recognised in the manner described below.
To meet the requirements on hedge accounting according to IAS 39, there must be a clear relationship with the hedged item. Furthermore, hedging must effectively protect the hedged item, documentation must be provided on the hedge, and it must be possible to measure this effectiveness. Gains and losses with regard to hedges are recognised in profit or loss at the same time as gains and losses for the hedged items are recognised. In hedge accounting, changes in value are recognised in the hedging reserve in equity.
Forward exchange contracts are used to hedge receivables or liabilities against currency risk. When a hedging instrument is used to hedge a fair value, the derivative is recognised at fair value in the Balance Sheet and the hedged asset or liability is also recognised at fair value in respect of the hedged risk. The change in value of the derivative is recognised in profit or loss together with the change in value of the hedged item. Changes in value pertaining to operating receivables and liabilities are recognised in operating profit or loss, while changes in value pertaining to financial receivables and liabilities are recognised in net financial items.
The forward exchange contracts used to hedge future cash flows and forecast sales in foreign currencies are recognised in the Balance Sheet at fair value. The changes in value are recognised directly in other comprehensive income until the hedged flow hits the Income Statement, whereby the accumulated change in value of the hedging instrument is transferred to the Income Statement, where it meets and matches the profit or loss effects of the hedged transactions.
Interest rate swaps are used to hedge the uncertainty in future interest flows from loans at variable interest rates. The interest rate swaps are measured at fair value in the balance sheet. In the Income Statement the interest coupon portion is recognised continuously as interest income or expense. Any other change in value of the interest rate swap is recognised directly in other comprehensive income until the hedged item affects the Income Statement and as long as the criteria for hedge accounting and effectiveness are met. The gain or loss attributable to the ineffective portion is recognised in profit or loss.
Investments in foreign subsidiaries (net assets including goodwill) have to some extent been hedged by means of foreign currency loans or forward exchange contracts, which are translated on the balance sheet date at the closing rate. Translation differences on financial instruments used as hedging instruments to hedge a net investment in a Group company are recognised, the extent the hedge is effective, in equity. This is intended to offset the translation differences that affect equity when the Group companies are consolidated.
Inventories are measured, with application of the first-in first-out principle, at the lower of cost and net realisable value on the balance sheet date. The cost of finished goods and work in process includes raw materials, direct labour costs, other direct costs and attributable indirect production costs (based on normal production capacity). Borrowing costs are not included. The net realisable value is the expected selling price in the ordinary course of business less applicable variable selling expenses.
Trade receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are distinguished by the fact that they arise when the Group furnishes goods directly to a customer without the intention to trade the resulting receivable. They are included in current assets with the exception of items with a due date more than 12 months after the balance sheet date, which are classified as non-current assets. Trade receivables are initially recognised at fair value and thereafter at amortised cost by applying the effective interest method, less provision for impairment. Provision is made for impairment of trade receivables when objective evidence exists that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted by the effective interest rate. The amount of the provision is recognised in the Income Statement.
Cash and cash equivalents include, besides cash on hand and demand deposits, other short-term financial investments with maturity dates within three months of the acquisition date.
Ordinary shares are classified as equity. Transaction costs directly attributable to the issue of new shares or options are recognised, net after tax, in equity as a deduction from the proceeds of the issue.
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are initially recognised at fair value and thereafter at amortised cost by applying the effective interest method.
Liabilities to credit institutions and, in the Parent Company, liabilities to subsidiaries are initially recognised at fair value, net after transaction costs. Borrowings are thereafter recognised at amortised cost, and any difference between the amount received (net after transaction costs) and the repayment amount is recognised in the Income Statement allocated over the term of the loan by applying the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer payment of the liability at least 12 months after the balance sheet date.
Bank credit lines are recognised as borrowings in current liabilities on the Balance Sheet.
The tax expense for the period includes current tax and deferred tax. The current tax expense is calculated based on the tax rules that have been enacted or substantively enacted by the balance sheet date in those countries where the Group companies are active and generate taxable revenue.
Deferred tax is calculated in its entirety, in accordance with the balance sheet method, on all temporary differences arising between the tax base of assets and liabilities and their carrying amounts. The main temporary differences arise from untaxed reserves, provisions for pensions and other pension benefits, property, plant and equipment and tax-loss carryforwards. Deferred tax is calculated by applying tax rates and laws that have been enacted or announced as of the balance sheet date and that are expected to apply when the concerned deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets relating to tax-loss carryforwards or other future tax deductions are recognised to the extent it is likely that the deduction can be offset against a surplus in future taxation. Deferred tax liabilities relating to temporary differences attributable to investments in subsidiaries are not recognised in Bong's consolidated accounts since the Parent Company can in all cases control the time for reversal of the temporary differences and it is not considered likely that reversal will take place in the foreseeable future.
Deferred tax assets and liabilities are offset when a legal right to do so exists for the tax assets and liabilities in question and when the deferred tax assets and liabilities are attributable to taxes charged by the same tax authority and pertain to either the same tax subject or different tax subjects where there is an intention to settle the balances by net payments.
For items recognised in the Income Statement, the associated tax effects are also recognised in the Income Statement. The tax effects of items recognised in other comprehensive income or directly in equity are recognised in other comprehensive income or equity, respectively.
There are both defined-contribution and defined-benefit pension plans in the Group. The most extensive defined-benefit pension plans are in Sweden, Germany, France and Norway. In defined-contribution plans, the company pays fixed contributions to a separate legal entity and has no obligation to pay further contributions. The Group's profit is charged with costs as the benefits are vested. In defined-benefit plans, benefits are paid to employees and former employees based on salary at retirement and number of years of service. The Group bears the risk for payment of the pledged benefits. In the event the plans are funded, assets have been set aside in pension funds or the like. The net of the calculated present value of the obligations and the fair value of the plan assets is recognised as a provision in the Balance Sheet
Regarding defined-benefit plans, the pension cost and the pension obligation are calculated using the "Projected Unit Credit Method" in a way that allocates the cost over the working life of the employee. The calculation is performed regularly by independent actuaries. The company's obligations are calculated as the present value of expected future payments using a discount rate equivalent to the interest rate on first-class corporate bonds or treasury bonds with a maturity equivalent to the obligations in question. The most important actuarial assumptions are shown in Note 27, page 32.
Actuarial gains and losses may arise when the present value of the obligation and the fair value of plan assets are determined.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in other comprehensive income during the period in which they arise. Costs for service during previous periods are recognised directly in the income statement.
If the pension cost and pension provision established for Swedish plans according to IAS 19 deviates from the equivalent amount according to FAR 4, a cost for special payroll tax on the difference is also recognised. The above-described accounting policy for defined-benefit pension plans is only applied to the consolidated accounts. The Parent Company accounts for defined-benefit pension plans in accordance with FAR's recommendation no. 4, Accounting of Pension Liabilities and Pension Costs.
Termination benefits are payable when an employee's employment has been terminated by the Group before the normal retirement date or when an employee accepts voluntary redundancy in exchange for such benefits. The Group recognises severance pay when it is demonstrably obligated by a detailed formal plan to either terminate an employee without a possibility of withdrawal, or to provide termination benefits as a result of an offer made in order to encourage voluntary redundancy
The Group recognises a liability and a cost for bonuses when there is a legal obligation or an informal obligation due to previous practice.
Other employee benefits are recognised as costs as they become vested.
Provisions are recognised when the Group has a legal or informal obligation as a result of previous events and it is probable that an outflow of resources will be required to settle the obligation, and where the amount can be measured reliably.
In cases where the Group can expect that a provision will be repaid, for example under an insurance contract, the repayment shall be recognised as a separate asset, but only when repayment is as good as certain. Provisions are measured at the best estimate of the amount that is expected to be settled. Provisions for restructuring include costs for cancellation of lease agreements and severance benefits. No provisions are made for future operating losses.
Revenue recognition of goods takes place on delivery to the customer and after the customer's acceptance. The sales revenue includes the fair value of goods sold and is recognised less value added tax and discounts and after elimination of intra-Group sales.
Financial income consists of interest income on invested funds, dividend revenue, gains on changes in value of financial assets measured at fair value through profit or loss, and gains on hedging instruments that are recognised in the Income Statement. Interest income on financial instruments is recognised according to the effective interest method (see below). Dividend income is recognised when the right to receive a dividend has been established. The gain or loss from sale of a financial instrument is recognised when the economic risks and rewards incidental to ownership have been transferred to the purchaser and the Group no longer has control over the instrument.
Financial expenses consist of interest expenses on loans, the effect of dissolution of present value calculation of provisions, loss on change in value of financial assets measured at fair value through profit or loss, impairment of financial assets and losses on hedging instruments that are recognised in the Income Statement. All borrowing costs are recognised in the Income Statement by applying the effective interest method, regardless of how the borrowed funds have been used. Exchange gains and losses are offset. The effective interest rate is the rate that discounts the estimated future receipts and payments through the expected life of a financial instrument to the net carrying amount of the financial asset or liability. The calculation includes all fees paid or received by the contracting parties that are a part of the effective interest rate, transaction costs and all other premiums or discounts.
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
The Group leases certain non-current assets. A lease under which the risks and rewards incidental to ownership of a non-current asset are substantially transferred to the Group is classified as a finance lease. At the commencement of the lease period, finance leases are recognised in the Balance Sheet at the lower of the fair value of the asset and the present value of the minimum lease payments. Each lease payment is allocated between amortisation of liabilities and financial expenses in order to achieve a fixed interest rate for the recognised liability. Equivalent payment obligations, less financial expenses, are included in the Balance Sheet items "Other current liabilities" and "Other non-current liabilities".
The interest element of the financial expenses is recognised in the Income Statement allocated over the lease period so that each lease period is charged with an amount that corresponds to a fixed interest rate for the liability recognised during the period in question. Non-current assets held under finance leases are depreciated over the useful life of the asset or the lease period, whichever is shorter.
Expenditures for research work are recognised as expenses when they occur. Expenditures for development work are normally recognised as expenses when they occur. The development work that is done is of great importance for the Group, but has the character of maintenance development, which means that all criteria according to IAS 38 are not met, and particularly the requirement of future cash flow as a result of the investment.
The cash flow statement is prepared in accordance with the indirect method. The recognised cash flow only includes transactions that entail cash receipts and cash payments.
Dividend to the Parent Company's shareholders is recognised as a liability in the consolidated financial statements in the period when the dividend is determined by the Parent Company's shareholders.
All values are in SEK thousand unless stated otherwise.
Business operations are conducted on the basis of a finance policy adopted by the Board of Directors that provides rules and guidelines for how the different financial risks are to be managed. This policy governs both overall risk management and specific areas, such as foreign exchange risk, interest rate risk, the use of hedging instruments and investment of excess liquidity. The finance policy identifies the three significant risks, market risk and credit risk and liquidity risk, to which the Group is exposed in its day-to-day operations. The Group's financial policy focuses on minimising possible unfavourable effects on the Group's financial results due to the unpredictability of the financial markets.
Financial risk management is the responsibility of a central finance function, which identifies, evaluates and manages financial risks in close collaboration with the subsidiaries. The hedging instruments used are loans, as well as currency and interest rate derivatives, according to the guidelines established in the finance policy.
Market risk refers to the currency risk that arises when future purchase and sales agreements or commercial invoices in a currency that is not the unit's functional currency affect a future operating profit (transaction exposure), and when the value of foreign investments is affected by currency rate fluctuations (translation exposure), as well as the interest rate risk that can adversely affect the Group's net interest income when market rates change.
In 2013, Bong's sales to countries outside of Sweden accounted for 91 (91) per cent of total sales. Of the Group's total sales, approximately 60 (60) per cent are denominated in EUR, 17 (18) per cent in GBP, 9 (9) per cent in SEK, 5 (5) per cent in NOK and 9 (9) per cent in other currencies. There is also local management of foreign currencies in the subsidiaries (please refer to the section on Transaction exposure).
Transaction exposure arises in the Group's operational flows (sale and purchasing) as well as in the financial flows (interest payments and amortisation) in currencies other than the companies' functional currency. This currency risk consists of the risk of fluctuations in the value of accounts receivable, accounts payable and other current receivables and liabilities, as well as the risk of changes in expected and contracted future invoiced currency flows.
Bong has manufacturing on virtually all its main markets, which limits its transaction exposure. Currency risk is primarily due to purchases or sales in EUR in the Group's subsidiaries with other functional currencies and from the parent company's borrowing in EUR.
The Group's financial policy requires the subsidiaries to report their currency risk to the central finance function. This risk is then aggregated centrally and hedged with forward exchange contracts. Bong's risk management policy is to hedge between 50 per cent and 100 per cent of expected net cash flows in foreign currency for the next twelve months, depending on maturity date.
If the EUR had appreciated (depreciated) by 10 per cent against the krona the Group's result on an annual basis, given the same flows as in 2013, would have deteriorated (improved) by SEK 0.3 million (2.0) as a consequence of transaction exposure. This worsening is due to increased purchase costs for the subsidiaries as well as higher interest costs on the part of the parent company's debt, which is denominated in EUR and is stated net after hedging.
If the EUR had appreciated (depreciated) by 10 per cent against the SEK on the balance sheet date, with all other variables constant, transaction exposure would result in a worsening (improvement) of earnings by SEK 0.4 million (1.0) due to losses (gains) in the translation of trade payables denominated in EUR. An equivalent strengthening (weakening) would have changed consolidated equity by SEK -0.8 million (+2.4) and SEK +0.8 million (-2.4) respectively due to changes in assessment of currency forwards and interest swaps, the result of which are reported in equity.
Currency risks also exist in the translation of the assets, liabilities and profits of foreign subsidiaries to the Parent Company's functional currency, known as translation exposure.
Bong's policy is for the subsidiaries to primarily take out loans in their local currency to limit translation exposure. Bong's policy is that the loan portfolio is handled by the central finance function and that lending and equity in foreign convertible currencies should be hedged to a certain extent. The hedging level prescribed by the policy has been observed during the year. Hedges can be effected via forward exchange contracts or external borrowings of equivalent amounts.
Translation exposure in the Group mainly comprises EUR and GBP. If the EUR had appreciated (depreciated) by 10 per cent compared with the closing day rate at 31 December 2013, with all other variables constant, earnings would improve (worsen) by SEK 7.5 million (10.6), mainly due to gains from translation of currency swaps that are not included in hedge accounting. An equivalent change would have increased (decreased) consolidated equity by SEK 82.6 million (44.4) as a result of gains (losses) from translation of net investments in the subsidiaries. The analysis also include items in DKK, since this currency is linked to the EUR. For GBP the effect on earnings would be an improvement (worsening) of SEK 4.3 million (5.4) and equity would decrease (increase) by SEK 43.4 million (24.8). The effect on equity includes the external loans denominated in EUR and GBP raised to hedge foreign net investments.
Interest rate risk is the risk that the Group's net interest income will be adversely affected when market rates change. The Group's goal in managing interest rate risk is to achieve a balance between short and long maturities to reduce the volatility in interest costs. Bong's borrowings via credit facilities provided by the banks normally have maturities of between one and three months.
Interest rate risk is continuously analysed using simulations of the impact that an interest rate increase would have on the Group's results. The fixed interest rate is then controlled by means of interest rate swaps, where variable interest rates are converted into fixed rates. Given the same loan debt, short-term investments, cash and cash equivalents and fixed interest rate periods as at the end of the year, an increase in the market rate of 100 base points (1 percentage point) would worsen the Group's net interest income on an annual basis by about SEK 7.4 million (8.4).
The effective interest rate for the loan portfolio based on average borrowings for the year amounted to 4.8 per cent (5.3). Interest-bearing net debt on 1 January amounted to SEK 802 million (955) and average time to maturity on these liabilities was about 0.8 years (0.4) including interest swaps and about 0.7 years (0.3) excluding interest swaps. Short-term investments and cash and cash equivalents amounted to SEK 82 million (112), and the fixed interest rate period on these assets is about 0 months (0). In 2012 the Group's borrowing consisted almost exclusively of SEK, EUR and GBP.
As of the balance sheet date, the company had interest rate swaps with a nominal value of SEK -1.9 million (-4.7), and they have been measured against equity. Fair value of derivative instruments is recognised as other current liabilities.
If interest rates on the Group's loans as at 31 December had been 100 basis points higher/lower with all other variables constant, the Group's earnings would have been SEK 0 million (0.4) lower or 0 million (0.3) higher, respectively, mainly as an effect of higher accrued interest expense for loans with floating rates. Other components in equity would have been SEK 1.0 million (2.0) higher and SEK 0.6 million (1.2) lower, respectively, as an effect of an increase/decrease in fair value for interest rate derivatives with fixed interest rates.
Credit risk consists of operational and financial credit risk.
The operational risk can be found in the Group's trade receivables. The goal of Bong's credit process is to achieve competitive credit sales, minimise credit losses and improve the Group's cash flow and profit.
Depending on national practice, the credit periods vary from country to country, but can in some countries be long, about 90 days, so that outstanding credits to individual companies can in some cases reach considerable amounts. If such companies should become insolvent or encounter other payment difficulties, Bong could incur severe financial loss.
This risk is limited because trade receivables are distributed among a large number of customers and geographic markets. The Group's ten largest customers and the top three account for 21% (24) and 10% (12) of total sales, respectively. Credit risk is also reduced because to a large extent Bong has long-term stable relationships with its large suppliers and customers.
To further improve the credit process, a credit report is obtained for credit sales. This procedure varies locally, but is based on data from external credit agencies combined with intragroup information about historical payment behaviour.
In several countries subsidiaries have ongoing credit insurance policies to cover outstanding trade receivables, especially in the Group's German, Danish, French and British companies.
In 2013 credit losses as a percentage of net sales amounted to about 0.1%.
More information about outstanding claims can be found in Note 23.
Financial credit risk refers to the risk that the Group's financial counterparties cannot meet their obligations with respect to cash and cash equivalents, short-term bank deposits or financial instruments with positive market value. Since the Group is a net borrower, excess liquidity is primarily used to repay external debts, which reduces the financial credit risk. On January 1 financial credit exposure was SEK 82.1 million (112.7), attributable to cash and cash equivalents of SEK 81.6 million (111.5) and derivative instruments with positive market value of SEK 0.5 million (1.2).
Financial counterparties must have a high credit rating, short rating P-1/A-1, and the counterparties with which the Group holds derivatives and makes short-term bank deposits also participate in the Group's longterm financing.
Liquidity risk refers to the risk that the Group cannot meet its short-term payment obligations due to insufficient or illiquid cash reserves. Bong minimises this risk by having sufficient cash on hand and committed credit facilities to cover its payment obligations. The finance function obtains rolling forecasts of the Group's liquidity reserve from the subsidiaries.
Surplus cash in the subsidiaries, in excess of the portion required to manage working capital requirements, is transferred to the finance function and used almost exclusively to reduce the Group's current liabilities.
The Group's financing consists mainly of a credit facility at Nordea and Swedbank, which was raised in 2013 following a renewed procurement. The credit facilities have a term of between three and five years.
Bong is obligated to comply with financial terms in the loan agreement, known as covenants. These covenants indicate how large the net debt may be in relation to EBITDA and the interest coverage ratios that the Group must achieve.
Other credit facilities consist of the subsidiaries' local overdraft facilities in foreign banks. At year-end, total credit facilities amounted to SEK 727 million (1,013) and approved unused credit to SEK 60 million (208).
The Parent Company's external borrowing largely covers the borrowing needs of the subsidiaries.
The table below analyses the Group's non-derivative financial liabilities and net settled derivative financial instruments that comprise financial liabilities, broken down by the time remaining on the balance sheet date until the contractual maturity date and assuming an unchanged financing structure and amortisation rate over time for the Group's non-derivative liabilities. Derivatives that are financial liabilities are included in the analysis if their contractual maturities are essential for understanding the timing of future cash flows. The amounts shown in the table are the contractual undiscounted cash flows estimated at the closing market rate and the period's expected interest margin.
Net regulated derivatives are exclusively interest rate swaps, which the Group uses to manage interest rate risk.
Consolidated gross settled derivatives consist of forward exchange contracts to hedge the subsidiaries' inflows and outflows and the Parent Company's flows in foreign currencies, as well as currency swaps to hedge the Parent Company's borrowing and lending to the subsidiaries in currencies other than SEK. Maturity is a maximum of 12 months and all forward exchange contracts are included in a hedging relationship. Forward exchange contracts require contractual undiscounted inflows equivalent to SEK 29.0 million (88.3) and contractual undiscounted outflows equivalent to SEK 28.8 million (88.0). Currency swaps hedge lending in the Parent Company for a nominal amount of SEK 130.2 million (138.0).
Bong's goal regarding capital structure is to safeguard the Group's ability to continue its operations, so that it can continue to generate returns to shareholders and benefit for other stakeholders and maintain a capital structure that minimises the cost of capital.
In order to maintain or adjust the capital structure, the Group can change the dividends paid to shareholders, repay capital to shareholders, issue new shares or sell assets to reduce debt.
| The Group assesses its capital based on the following ratios: | |||||
|---|---|---|---|---|---|
| Key figures | 2013 | 2012 |
|---|---|---|
| Equity ratio, % | 25.7 | 17.3 |
| Net loan debt, SEKm | 802 | 1,005 |
| Net debt/equity ratio, times | 1.54 | 2.70 |
| Net debt/EBITDA, times | neg | 8.59 |
The table below shows the financial derivatives at fair value, based on how the classification in the fair value hierarchy has been made. The different levels are defined as follows:
• Listed prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
• Input data other than listed prices included in Level 1, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2).
• Input data for the asset or liability not based on observable market data (i.e. unobservable data) (Level 3).
All hedge instruments in the table below are measured according to Level 2.
| At 31 December 2013 | Assets Liabilities | |
|---|---|---|
| Interest rate swaps - cash flow hedging | – | 1,885 |
| Currency forwards - cash flow hedging | 493 | 324 |
| Currency forwards - held for trading | 5 | 1,667 |
| Total | 499 | 3,877 |
| At 31 December 2012 | Assets Liabilities |
| Total | 1,093 | 5,992 |
|---|---|---|
| Currency forwards - held for trading | 165 | 812 |
| Currency forwards - cash flow hedging | 928 | 467 |
| Interest rate swaps - cash flow hedging | – | 4,713 |
Of the above contract, the following amounts remain in the hedging reserve: interest swaps - cash flow hedges SEK -1.9 million (-4.7), currency forwards - cash flow hedging SEK 0.2 million (0.5). The interest component of the currency forwards is recognised in the income statement and is not included in the hedging reserve.
Exchange gains and losses on forward exchange contracts as cash flow hedges as of 31 December, reported in Other comprehensive income, are recognised in the Income Statement in the period during which the hedged transaction affects the Income Statement. Gains and losses on interest rate swaps have also been recognised in Other comprehensive income and will be continuously transferred to financial expenses until the interest rate swaps expire. All cash flow hedging were assessed to be fully effective on 1 January.
Gains and losses on the hedging instruments held for trading are recognised in the Income Statement as financial income and expenses. The Group does not offset financial assets and liabilities.
| At 31 December 2013 | Less than 1 year | Between 1 and 2 years | Between 2 and 5 years | More than 5 years |
|---|---|---|---|---|
| Borrowings (excluding finance lease liabilities) | 93,515 | 77,381 | 215,379 | 378,745 |
| Bank credit lines | 119,600 | |||
| Finance lease liabilities | 1,370 | 1,436 | 778 | |
| Derivative instruments | 1,210 | 697 | 255 | |
| Trade payables and other payables | 509,618 | |||
| As at December 31 2012 | Less than 1 year | Between 1 and 2 years | Between 2 and 5 years | More than 5 years |
| Borrowings (excluding finance lease liabilities) | 110,849 | 172,424 | 325,402 | 376,290 |
| Bank credit lines | 95,000 | |||
| Finance lease liabilities | 508 | 434 | 590 | |
| Derivative instruments | 3,123 | 1,172 | 972 |
| Total | 2,563,516 | 2,945,931 |
|---|---|---|
| Other | 49,186 | 60,446 |
| Russia/Eastern Europe | 68,623 | 78,437 |
| United Kingdom | 409,193 | 506,432 |
| France and Spain | 598,860 | 723,283 |
| Central Europe | 853,729 | 936,288 |
| Nordic and Baltic | 356,862 | 406,964 |
| Sweden | 227,063 | 234,081 |
| 2013 | 2012 |
| 2013 | 2012 | |
|---|---|---|
| Depreciation, amortisation and impairment | ||
| (Note 6) | 106,739 | 102,140 |
| Costs for remuneration to employees (Note 4) Changes in inventories of finished |
733,774 | 830,170 |
| goods and work in progress | 67,102 | 12,614 |
| Raw materials | 1,150,549 | 1,334,388 |
| Transport costs | 130,278 | 146,173 |
| Other expenses | 417,319 | 477,517 |
| Total cost of goods sold, selling | ||
| and administrative expenses | 2,605,761 | 2,903,002 |
| 2013 | 2012 | |||
|---|---|---|---|---|
| Number of | Number of | |||
| employees | men | employees | men | |
| Sweden | 232 | 141 | 261 | 165 |
| Norway | 69 | 42 | 79 | 43 |
| Denmark | 42 | 25 | 44 | 32 |
| Finland | 85 | 40 | 89 | 43 |
| Germany | 524 | 353 | 552 | 362 |
| UK | 247 | 186 | 308 | 191 |
| Netherlands | 28 | 20 | 39 | 27 |
| Belgium | 18 | 4 | 27 | 10 |
| Russia | 100 | 54 | 102 | 61 |
| Estonia | 61 | 24 | 50 | 27 |
| Luxembourg | 34 | 20 | 33 | 13 |
| France | 435 | 293 | 514 | 338 |
| Poland | 163 | 91 | 160 | 90 |
| Spain | 11 | 7 | 11 | 8 |
| Latvia | 2 | 1 | 2 | 1 |
| Total | 2,051 | 1,301 | 2,271 | 1,411 |
| 2013 | 2012 | |||
|---|---|---|---|---|
| Total | men | Total | men | |
| Board members | 55 | 51 | 67 | 61 |
| President and other | ||||
| senior executives | 51 | 49 | 53 | 49 |
| 2013 | 2012 | |||
|---|---|---|---|---|
| Salaries and | Social Salaries and | Social | ||
| remun. | contrib. | remun. | contrib. | |
| Parent Company | 12,234 | 6,405 | 17,473 | 9,866 |
| pension costs | – | 2,299 | – | 3,719 |
| Subsidiaries | 572,797 | 142,338 | 632,167 | 170,664 |
| pension costs | – | 27,946 | – | 31,176 |
| Group | 585 031 | 148,743 | 649,640 | 180,530 |
| pension costs | – | 30,245 | – | 34,895 |
The 2013 AGM resolved on remuneration guidelines for the CEO and other senior executives as follows. "Senior executives" here refers to executives included in the management group, which at the time consisted of the company's President/CEO and Business Area Manager Nordic Region, Chief Financial Officer (CFO), Business Area Manager Packaging Solutions, Business Area Manager Central Europe, Business Area Manager United Kingdom and Business Area Manager France and Spain. Remuneration shall consist of fixed salary, variable remuneration, other benefits and pension. Total compensation must be at market rates and competitive to ensure that the Bong Group can attract and retain competent senior management. In addition to the above variable compensation, from time to time a long-term incentive scheme may be approved.
The variable component of the salary shall have a predetermined ceiling, according to the basic principle that the variable salary portion can amount to no more than 60 per cent of the fixed annual salary. The variable component is based on earnings and cash flow as well as individual qualitative goals. The basic principle is that the variable remuneration is paid in accordance with the agreed-upon weighting between the interim goals if the interim goal has been achieved. The variable component is based on a vesting period of one year. The goals for senior executives are established by the Board of Directors.
Pension benefits shall primarily be defined-contribution, but also occur for legal reasons as defined-benefit, although not at the Group Management level. Variable remuneration is not pensionable. Group Management is entitled to pensions under the ITP plan or the equivalent. The retirement age is 65 years. In addition to the ITP plan, some members of Group Management are also entitled to an increased occupational pension premium of up to 30 per cent of their fixed salary.
Group Management's employment contracts include provisions governing remuneration and termination of employment. According to these agreements, employment can ordinarily terminate at the request of the employee with a period of notice of 4–12 months and at the company's request with a period of notice of 6–18 months. In the event of termination by the company, the period of notice and the period during which severance pay is payable shall not together exceed 24 months.
Remuneration to the President and other senior executives is prepared by the Board of Directors' remuneration committee and finalised by the Board based on the recommendation of the remuneration committee.
These guidelines apply to those persons who are included in the Group Management during the period the guidelines are in force. The guidelines apply to the employment contracts entered into after the AGM's resolution, and to any changes in existing contracts. The Board of Directors is entitled to disregard the above guidelines if it finds that special reasons exist to justify this in a particular case.
Salaries and other remuneration broken down between board members etc. and other employees
| 2013 | 2012 | ||
|---|---|---|---|
| Board | Other | Board | Other |
| and CEO | employees | and CEO | employees |
| Total remuneration 51,966 |
533,065 | 49,014 | 600,626 |
| including incentive, etc 1,326 | 1,265 | 44 | 1,009 |
The Board of Directors' chairman Mikael Ekdahl received a fee of SEK 100 thousand (300) and Stéphane Hamelin received SEK 200 thousand since the 2013 Annual General Meeting (0). Mikael Ekdahl also received SEK 100 thousand in compensation for serving as chairman of the audit committee. The amount comprises part of the director's fee determined by the AGM. No other fee was paid. There is no agreement on pension, severance pay or other benefits.
The total fee paid to other Board members for 2013 was SEK 600 thousand (700). Board member Stéphane Hamelin received SEK 50 thousand up until he was elected chairman. Board member Mikael Ekdahl received SEK 100 thousand for the time after the 2013 Annual General Meeting. Board members Eric Joan and Ulrika Eriksson received SEK 150 thousand (150) each. Board member Christian W. Jansson received SEK 200 thousand. This amount consists of the directors' fee of SEK 150 thousand (150) and remuneration for members of the Audit Committee of SEK 50 thousand (50).
No other fee was paid. There is no agreement on pension, severance pay or other benefits. No director's fee was paid to the President, nor to the employee representatives.
A fixed salary including remuneration for paid leave of SEK 4,965 thousand (4,328) was paid for 2013, plus benefits mainly comprising car benefit valued at SEK 112 thousand (117). In addition to a fixed salary, a variable remuneration of no more than 60 per cent of the fixed salary may be paid, based on the Group's fulfilment of certain financial goals. Variable remuneration of SEK 1,076 thousand (0) was paid for 2013. The retirement age is 65 years. A pension premium of 30 per cent of the base salary was paid. In 2013 a pension premium of SEK 365 thousand (403) was paid based on an agreement exchanging pension for pay. In the event of termination by the company, the President is entitled to salary and benefits for 24 months. In the event of termination by the President, the period of notice is 6 months.
Total fixed salaries of SEK 10,611 thousand (11,606), plus benefits mainly comprising car benefits valued at SEK 440 thousand (538), were paid to other senior executives in the management group, consisting of 5 people, in 2013. In addition to a fixed salary, a variable remuneration of no more than 40-60 per cent of the fixed salary may be paid, based on the Group's fulfilment of certain financial goals. Variable remuneration of SEK 1,237 thousand (1,425) was paid for 2013. Variable remuneration of SEK 883 thousand was paid during the year for 2012. Pension benefits are payable for the Swedish executives under terms equivalent to those of the general pension plan. Pension benefits are payable for the foreign executives in accordance with individual agreements that give the company a cost not exceeding 10 per cent of the annual salary. A pension premium of SEK 1,419 thousand (1,541) was paid for 2013. In the event of termination by the company, unchanged salary is payable for 6–18 months. In the event of termination by the employee, the period of notice is 4–12 months.
The Board of Directors has a Compensation Committee made up of the Chairman of the Board plus one other Board member. The committee deals with matters relating to terms of employment and remuneration to the President/CEO and other senior executives in the Group.
| 2013 | 2012 | |
|---|---|---|
| PwC | ||
| Auditing assignments | 3,808 | 3,967 |
| Audit-related activities | 634 | 530 |
| Tax services | 69 | 40 |
| Other services | 336 | 95 |
| Total | 4,847 | 4,632 |
| 2013 | 2012 | |
| KPMG | ||
| Auditing assignments | 82 | 193 |
| Audit-related activities | 52 | 78 |
| Tax services | 0 | 0 |
| Total | 134 | 271 |
| 2013 | 2012 | |
| Other | ||
| Auditing assignments | 226 | 164 |
| Audit-related activities | 20 | 21 |
| Other services | 111 | 166 |
| Total | 357 | 351 |
| 2013 | 2012 | |
|---|---|---|
| Broken down by non-current asset | ||
| Goodwill impairment write-down | 15,076 | – |
| Other intangible assets | 9,267 | 9,001 |
| Land and buildings | 11,656 | 13,415 |
| Plant and machinery | 61,745 | 69,171 |
| Equipment, tools fixtures and fittings | 8,995 | 10,553 |
| Total | 106,739 | 102,140 |
| Broken down by function | ||
| Cost of goods sold | 75,859 | 86,221 |
| Selling expenses | 3,224 | 3,180 |
| Administrative expenses | 12,580 | 12,739 |
| Other expenses | 15,076 | – |
| Total | 106,739 | 102,140 |
| Total | 30,577 | 30,529 |
|---|---|---|
| Capital gain on sale of non-current assets | 25,243 | 25,720 |
| and liabilities | 5,334 | 4,809 |
| Exchange gains on operating receivables | ||
| Operating income | 2013 | 2012 |
| Total | –97,461 | –58,218 |
|---|---|---|
| Loss on sale of non-current assets | –7,386 | –2,542 |
| Exchange losses on operating receivables and liabilities |
–5,981 | –4,569 |
| Goodwill impairment write-down | –15,076 | – |
| Restructuring and transaction costs | –69,018 | –51,107 |
| Operating expenses | 2013 | 2012 |
The Group's most important operating leases relate to rental of premises. The Group has operating leases for machinery, cars and office equipment on a smaller scale. There are no restrictions in the lease agreements.
The nominal value of future lease payments is broken down as follows on the balance sheet date:
| 2013 | 2012 | |
|---|---|---|
| Fall due for payment within one year | 56,826 | 57,355 |
| Fall due for payment later | ||
| than one year but within five years | 146,506 | 146,468 |
| Fall due for payment after five years | 57,362 | 81,118 |
| Total | 260,694 | 284,941 |
| Lease payments for operating leases | ||
| were paid in the following amounts: | 56,443 | 56,632 |
| 2013 | 2012 | |
|---|---|---|
| Interest income | 1,294 | 3,033 |
| Exchange gains on financial items | 3,018 | 1,810 |
| Total | 4,312 | 4,843 |
| 2013 | 2012 | |
|---|---|---|
| Interest portion in this year's pension costs | –3,506 | –4,431 |
| Interest expenses, other | –54,046 | –59,504 |
| Exchange losses on financial items | –1,111 | –1,361 |
| Other financial expenses | –12,344 | –10,804 |
| Total | –71,007 | –76,100 |
| 2013 | 2012 | |
|---|---|---|
| Current tax | –1,568 | –12,462 |
| Deferred tax | 37,107 | 13,581 |
| Total | 35,539 | 1,119 |
The tax on the Group's profit before tax differs from the theoretical amount that would result from application of the tax rates for the profits in the consolidated companies as follows.
| 2013 | 2012 | |
|---|---|---|
| Profit before tax | –176,182 | –56,416 |
| Income tax calculated according to | ||
| national tax rates for each country | 49,331 | 15,796 |
| Tax on: | ||
| – adjustment of previous years' tax | –211 | –2,170 |
| – non-taxable revenue/ other | ||
| non-deductible expenses | 2,095 | –6,772 |
| Recognition of previously unrecognised tax loss | 173 | 8,374 |
| Revaluation of deferred tax: | ||
| - change in the Swedish tax rate | 391 | –8,999 |
| – write-down | –16,240 | –5,110 |
| Tax according to Income Statement | 35,539 | 1,119 |
| 2013 | 2012 | |
|---|---|---|
| Exchange gains/losses are recognised in | ||
| the income statement as follows | ||
| Other operating income | 5,334 | 4,809 |
| Other operating expenses | –5,981 | –4,536 |
| Financial income | 3,018 | 1,810 |
| Financial expenses | –1,111 | –1,361 |
| Total | 1,260 | 722 |
In calculating basic earnings per share, profit attributable to the Parent Company's shareholders is divided by the weighted average number of ordinary shares outstanding during the period.
| Basic earnings per share, SEK | –2,20 | –3,20 |
|---|---|---|
| outstanding (thousands) | 63,874 | 17,481 |
| Ordinary shares | ||
| Company's shareholders | –140,643 | –55,995 |
| Profit attributable to the Parent | ||
| 2013 | 2012 | |
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Parent Company has potential ordinary shares in the form of convertible debentures. The convertible debt is assumed to have been converted into ordinary shares, and the net profit is adjusted to eliminate the interest expense less the tax effect.
| 2013 | 2012 | |
|---|---|---|
| Profit attributable to the | ||
| Parent Company's shareholders | –140,643 | –55,995 |
| Weighted average number of | ||
| ordinary shares outstanding (thousand) | 63,874 | 17,481 |
| – convertible bonds (thousand) | 9,922 | 1,247 |
| Weighted average number of ordinary shares for | ||
| calculation of diluted earnings per share (thousand) 1 73,796 | 18,728 | |
| Diluted earnings per share, SEK | –2,20 | –3,20 |
The dilution effect is not taken into account when it leads to a better result
| 31 Dec. 2013 | 31 Dec. 2012 | |
|---|---|---|
| Opening costs | 539,749 | 550,626 |
| Purchases/acquisitions, note 34 | – | 5,208 |
| Write-down | –15,076 | – |
| Exchange rate differences | 8,542 | –16,084 |
| Closing cost | 533,215 | 539,750 |
For impairment testing purposes, the Group is regarded as a cash-generating unit (CGU), since the whole Group's operation is regarded as a single segment.
The recoverable amount for a CGU is determined based on a calculation of value in use. That calculation uses cash flows projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated based on the assumption that the envelope market in Europe as a whole will not grow from today's level. The cash flows are based on previous years' outcomes and management's projections of the market trend. Management has established the budgeted cash flows based on previous years' results, planned and completed efficiency-improving measures and projections of the market trend.
In calculating value in use, a discount rate of 10.3 per cent after tax (13.2 per cent before tax) has been assumed, along with a growth rate of -6.9 +/-1.0 per cent in addition to the projected inflation rate. A discount rate of 10.3 per cent and a growth rate of 0.8-1.0 per cent were used the previous year.
The discount rate used is given after tax and reflects the market interest rates, risks and tax rates that apply to the different units. The average growth rate used is based on industry forecasts. Positive growth is expected above all in the packaging sector and in Eastern Europe.
A growth rate of 1 per cent has been used to extrapolate cash flows beyond the budget period.
The impairment test indicated that impairment of goodwill was required in the amount of SEK 12 million due to the downward market trend in the forecast period. In connection with the merger of two smaller legal entities in the UK (Image Ltd and Nova Ltd) an impairment charge of SEK 3 million was taken for related goodwill. For a sensitivity analysis relating to the need for impairment of goodwill, please see note 36.
| 31 Dec. 2013 31 Dec. 2012 | ||
|---|---|---|
| Opening costs | 56,726 | 50,637 |
| Purchase | 2,109 | 3,792 |
| Sale/retirement | 0 | –1,936 |
| Reclassifications | 13,681 | 6,236 |
| Exchange rate differences | 1,686 | –2,003 |
| Closing cost | 74,202 | 56,726 |
| Opening accumulated depreciation | –20,371 | –14,965 |
| Sales/retirements | 0 | 1,936 |
| Exchange rate differences | –1,360 | 1,659 |
| Depreciation for the year | –9,267 | –9,001 |
| Closing accumulated depreciation | –30,998 | –20,371 |
| Closing residual value according to plan | 43,204 | 36,355 |
| Property, plant and equipment | 31 Dec. 2013 31 Dec. 2012 | |
|---|---|---|
| Opening costs | 213,075 | 248,383 |
| Purchase | 2,111 | 1,176 |
| Sale/retirement | –3,036 | –26,304 |
| Reclassifications | 0 | 1,690 |
| Exchange rate differences | 5,767 | –11,870 |
| Closing cost | 217,917 | 213,075 |
| Opening accumulated depreciation | ||
|---|---|---|
| and impairment losses | –14,519 | –25,352 |
| Sales/retirements | 1,817 | 18,886 |
| Exchange rate differences | –3,658 | 5,362 |
| Depreciation and impairment losses for the year | –11,656 | –13,415 |
| Closing accumulated depreciation | –28,016 | –14,519 |
| Closing residual value according to plan | 189,901 | 198,556 |
| Of which land | 20,032 | 22,985 |
| Plant and machinery | 31 Dec. 2013 31 Dec. 2012 | |
|---|---|---|
| Opening costs | 1,143,024 | 1,223,757 |
| Increase through business combination | – | – |
| Purchase | 10,381 | 17,086 |
| Sale/retirement | –53,463 | –53,232 |
| Reclassifications | 2,119 | 2,079 |
| Exchange rate differences | 26,730 | –46,666 |
| Closing cost | 1,128,791 | 1,143,024 |
| Opening accumulated depreciation | –894,128 | –921,463 |
| Sales/retirements | 45,459 | 46,490 |
| Exchange rate differences | –24,520 | 47,232 |
| Reclassifications | 623 | 3,323 |
| Amortisation for the year | –61,745 | –69,710 |
| Closing accumulated depreciation | –934,311 | –894,128 |
| Closing residual value according to plan | 194,480 | 248,896 |
| Equipments, tools, fixtures and fittings | 31 Dec. 2013 31 Dec. 2012 | |
| Opening costs | 218,110 | 226,139 |
| Purchase | 13,419 | 7,744 |
| Sale/retirement | –9,239 | –6,696 |
| Reclassifications | 832 | 1,427 |
| Exchange rate differences | 2,257 | –10,504 |
| Closing cost | 225,379 | 218,110 |
| Opening accumulated depreciation | –182,657 | –187,699 |
| Sales/retirements | 7,902 | 5,919 |
| Exchange rate differences | –2,033 | 9,676 |
| Amortisation for the year | –8,995 | –10,553 |
| Closing accumulated depreciation | –185,783 | –182,657 |
| Closing residual value according to plan | 39,596 | 35,453 |
| 31 Dec. 2013 31 Dec. 2012 | ||
|---|---|---|
| Opening costs | 6,865 | 6,985 |
| Exchange rate differences | 38 | –120 |
| Closing cost | 6,903 | 6,865 |
| Opening accumulated depreciation | –4,626 | –4,152 |
| Exchange rate differences | –349 | 65 |
| Amortisation for the year | –501 | –539 |
| Closing accumulated depreciation | –5,476 | –4,626 |
| Closing residual value according to plan | 1,427 | 2,239 |
| NOTE 17 CONT. | Nominal values |
Present values |
|---|---|---|
| 31 Dec. 2013 31 Dec. 2013 | ||
| FUTURE MINIMUM LE A SE | ||
| PAYMENTS FALL DUE A S FOLLOWS: | ||
| Within one year | 1,370 | 1,315 |
| After one year but within five years | 2,214 | 2,009 |
| After five years | 0 | 0 |
| Total | 3,584 | 3,324 |
| Nominal | Present | |
| values | values | |
| 31 Dec. 2012 31 Dec. 2012 | ||
| FUTURE MINIMUM LE A SE | ||
| PAYMENTS FALL DUE AS FOLLOWS: | ||
| Within one year | 508 | 488 |
| After one year but within five years | 1,024 | 914 |
| After five years | – | – |
| Total |
| 31 Dec. 2013 31 Dec. 2012 | ||
|---|---|---|
| Opening costs | 28,493 | 15,438 |
| Accrued expenses | 10,248 | 28,607 |
| Reclassifications | –17,255 | –14,755 |
| Exchange rate differences | –32 | –797 |
| Closing balance | 21,454 | 28,493 |
| 2013 | 2012 | |
|---|---|---|
| Opening balance | 713 | 6,265 |
| Acquisitions | – | 713 |
| Reclassification to subsidiary | – | –6,095 |
| Share in profits | –358 | –399 |
| Exchange rate differences | –1 | 229 |
| Closing balance | 354 | 713 |
| Company | Corporate identity number | Domicile | Invested capital | Book value |
|---|---|---|---|---|
| Bong Schweiz AG | CH 020 3 038 355-0 | Seuzach, Schweiz | TCHF 100 | 354 |
| Total | 354 |
| Assets | Liabilities | Revenues | Profit | Tax | Stake,% | |
|---|---|---|---|---|---|---|
| Bong Schweiz AG | 260 | 260 | 371 | –97 | 0 | 50 |
| Company | Corporate identity number | Domicile | Invested capital | Book value |
|---|---|---|---|---|
| Bong Fastigheter KB | 969655-5763 | Stockholm, Sweden | SEK 1,000 thousand | 1,000 |
| Mail Inside | 492 969 787 RCS | Paris, France | SEK 2,215 thousand | 2,215 |
| Total | 3,215 |
Deferred tax assets and liabilities are offset when a legal right to do so exists for the tax assets and liabilities in question and when the deferred taxes are payable to the same tax authority. The offset amounts are as follows:
| Deferred tax per temporary | ||
|---|---|---|
| -- | -- | ---------------------------- |
| Total | 185,711 | 140,314 |
|---|---|---|
| Other temporary differences | 11,183 | 29,699 |
| Pensions | –1,896 | 11,740 |
| Property, plant and equipment | 24,134 | –9,141 |
| Intangible assets | –106 | 1,550 |
| Loss carryforward | 152,396 | 106,466 |
| Deferred tax asset | ||
| difference amounts to: | 31 Dec. 2013 31 Dec. 2012 | |
| Total | 30,118 | 23,455 |
|---|---|---|
| Other temporary differences | 30,497 | 8,174 |
| Pensions | 3,247 | –7,832 |
| Property, plant and equipment | 14,336 | 14,371 |
| Intangible assets | –13,807 | 16,431 |
| Loss carryforward | –4,155 | –7,689 |
| Deferred tax liability |
Deferred tax assets are recognised for tax-loss carryforwards to the extent it is likely they can be utilised to offset future taxable profits.
The Group's loss carryforwards mainly relate to operations in Germany and Sweden. In recent years a number of steps have been taken to reduce costs and streamline the operation. The chances of being able to utilise remaining loss carryforwards are deemed good.
| At year-end | 155,593 | 116,859 |
|---|---|---|
| Tax relating to components of other comprehensive 4,039 | –9,837 | |
| terminated emp. | – | 15,610 |
| Actuarial loss on remuneration following | ||
| Recognised in the Income Statement | 37,107 | 13,219 |
| Exchange rate differences | –2,412 | 882 |
| At start of year | 116,859 | 96,985 |
| deferred taxes is as follows | 2013 | 2012 |
| The gross change with regard to |
The expenditure for the inventory that was recognised is included in the item "Cost of goods sold" and amounted to SEK 1,217,651 thousand (1,347,002). Of the inventory value, SEK 2,021 thousand (1,621) has been measured at net realisable value. The inventory was depreciated during the year by SEK 61 thousand (443).
31 Dec. 2013 31 Dec. 2012
| Trade receivables | 411,253 | 427,416 |
|---|---|---|
| Minus: provision for impairment of receivables | –13,106 | –10,290 |
| Trade receivables – net | 398,147 | 417,126 |
| Stated amounts, per currency for the | ||
| Group's trade receivables are as follows: | 31 Dec. 2013 31 Dec. 2012 | |
| SEK | 29,078 | 35,105 |
| GBP | 99,777 | 95,626 |
| EUR | 236,286 | 243,894 |
| Other currencies | 46,112 | 52,791 |
| Total | 411,253 | 427,416 |
| Geographic distribution of receivables: | 31 Dec. 2013 31 Dec. 2012 | |
| Sweden | 30,665 | 35,724 |
| Nordic and Baltic | 41,614 | 53,118 |
| Central Europe | 97,394 | 102,851 |
| France and Spain | 121,375 | 119,436 |
| United Kingdom | 102,572 | 95,626 |
| Russia / Eastern Europe | 17,633 | 20,661 |
| Total | 411,253 | 427,416 |
| Changes in the reserve for doubtful | ||
| trade receivables are as follows: | 2013 | 2012 |
| At 1 January | 10,290 | 11,747 |
| Provision for doubtful debts Receivables that have been |
6,745 | 4,342 |
| written off during the year as uncollectable (–) | –3,381 | –3,519 |
| Reversal of unutilised amounts | –614 | –1,369 |
| Exchange rate difference | 66 | –911 |
| At 31 December | 13,106 | 10,290 |
|---|---|---|
The credit quality of trade receivables that neither fallen due for payment nor are impaired can be assessed by reference to an external credit rating (if available) or to the counterparty's payment history:
| Collection pattern counterparties | 31 Dec. 2013 31 Dec. 2012 | |
|---|---|---|
| Group 1 new customers | 22,533 | 63,218 |
| Group 2 existing customers | ||
| without previous defaults | 377,452 | 292,103 |
| Group 3 existing customers with some | ||
| previous non-payments where all | ||
| non-payments have been fully recovered | 11,268 | 13,709 |
| Total trade receivables | 411,253 | 369,030 |
At 31 December 2013 trade receivables totalling SEK 62,139 thousand (48,096) were overdue but were not considered to be impaired. The overdue receivables relate to a number of customers who have not previously had any difficulties paying.
| these trade receivables: | 31 Dec. 2013 31 Dec. 2012 | |
|---|---|---|
| Less than 3 months | 48,923 | 37,806 |
| 3 to 6 months | 4,038 | 2,768 |
| More than 6 months | 9,178 | 7,522 |
| Total | 62,139 | 48,096 |
For trade receivables and other receivables, fair value is in line with book value
| Other current receivables | 31 Dec. 2013 31 Dec. 2012 | |
|---|---|---|
| Currency and interest rate derivatives | 573 | 1,093 |
| Other current receivables | 11,064 | 15,820 |
| Total | 11,637 | 16,913 |
| Other current liabilities | 31 Dec. 2013 31 Dec. 2012 | |
| Currency and interest rate derivatives | 3,895 | 5,997 |
| Other current liabilities | 52,806 | 59,648 |
| Total | 56,701 | 65,645 |
| Long-term | 31 Dec. 2013 31 Dec. 2012 | |
|---|---|---|
| Bank loans | 449,317 | 638,901 |
| Convertible loan | 61,188 | 34,479 |
| Shareholder loan | – | 64,649 |
| Total | 510,505 | 738,029 |
| Short-term | 31 Dec. 2013 31 Dec. 2012 | |
| Bank credit lines | 119,630 | 94,958 |
| Bank loans | 65,243 | 75,000 |
| Total | 184,873 | 169,958 |
| Maturity dates of long-term | ||
|---|---|---|
| borrowings are as follows: | 31 Dec. 2013 31 Dec. 2012 | |
| Between 1 and 2 years | 52,019 | 139,649 |
| Between 2 and 5 years | 154,953 | 259,479 |
| More than 5 years | 303,533 | 338,901 |
| 510,505 | 738,029 |
| balance sheet date was as follows: | 31 Dec. 2013 31 Dec. 2012 | |
|---|---|---|
| Bank credit lines | 2,19% | 1,20% |
| Other borrowings | 5,07% | 5,32% |
The interest rate level is dependent on the current market rate, loan currency fixed interest rate period and financial key ratios agreed with the Group's main bank. The key ratios relate to the Group's net debt/EBITDA ratio.
| are as follows: | 31 Dec. 2013 31 Dec. 2012 | |
|---|---|---|
| SEK | 172,844 | 123,701 |
| EUR | 438,164 | 709,583 |
| GBP | 81,996 | 71,756 |
| Other currencies | 2,374 | 2,947 |
| 695,378 | 907,987 | |
| The Group has the following | ||
| unutilised credit facilities: | 2013-12-31 | 2012-12-31 |
| Variable interest rate: | ||
| – expires within one year | – | – |
| – expires after more than one year | 59,800 | 208,455 |
| Fixed interest rate: | ||
| – expires within one year | – | – |
| Restructuring | 2013 | 2012 |
|---|---|---|
| At 1 January | 31,887 | 23,359 |
| Recognised in the income statement: | ||
| Restructuring | ||
| – additional provisions | 69,018 | 57,000 |
| Utilised during the year | –75,125 | –49,635 |
| Other | ||
| – additional provisions | 6,179 | – |
| Exchange rate difference | 2,502 | 1,163 |
| At 31 December | 34,461 | 31,887 |
| 2013 | 2012 | |
| Non-current portion | 6,179 | – |
| Current component | 28,282 | 31,887 |
| 34,461 | 31,887 |
In order to maintain long-term competitiveness and restore profitability to a satisfactory level, SEK 69 million was allocated in restructuring costs during the year. The restructuring programme relates primarily to measures to adjust to lower demand and covers essentially the entire group.
The Group has defined-benefit pension plans in a number of countries. The most extensive defined-benefit pension plans are in Sweden, Germany, and Norway, where they cover virtually all salaried employees and certain other personnel. The pension plans provide benefits based on the average remuneration and length of employment of the employees at or near retirement.
The Group is exposed to a number of risks through their defined-benefit pension plans and healthcare plans following termination of employment. Almost half of Bong's pension liabilities are in pension plans that were closed to new commitments long ago, so they will gradually be completely phased out. A reduction in the interest rate for corporate bonds will mean an increase in plan liabilities. Some of the plan's pension liabilities are linked to inflation; higher inflation leads to higher debt. Under the majority of the pension obligations, the employees covered by the plan will receive benefits for life, which means that increased life expectancy will result in higher pension liabilities.
| Pension liabilities in the balance sheet | 2013-12-31 | 2012-12-31 |
|---|---|---|
| Present value of funded obligations | 73 219 | 81 475 |
| Fair value of plan assets | –46 512 | –53 112 |
| Deficit in funded plans | 26 708 | 28 363 |
| Present value of unfunded obligations | 159 194 | 181 270 |
| Closing balance pension liability | 185 902 | 209 632 |
The change in the defined-benefit obligation over the year is as follows:
| Present value of obligation | Fair value of plan assets | Total | |
|---|---|---|---|
| At 1 January 2012 (Restated) | 264,525 | 49,344 | 215,181 |
| Service costs during current year | 1,984 | – | 1,984 |
| Interest expense/(revenue) | 9,112 | 1,831 | 7,281 |
| Revaluations: | |||
| - Return on plan assets excl. amounts included in interest exp/(revenue) | 3,706 | –3,706 | |
| - (Profit)/loss as a result of changed financial assumptions | –4,763 | – | –4,763 |
| - Experience-based (profits)/losses | 3,314 | – | 3,314 |
| Exchange rate differences | 1,330 | –107 | 1,437 |
| Fees: | |||
| - Employer | 13,508 | –13,508 | |
| - Employees covered by the plan | 29 | 29 | 0 |
| Payments from the plan: | |||
| - Benefits paid | –15,200 | –15,200 | 0 |
| Assumed through business combination | 2,412 | 2,412 | |
| At 31 December 2012 (Restated) | 262,744 | 53,112 | 209,632 |
| At 1 January 2013 | 262,744 | 53,114 | 209,630 |
| Service costs during current year | 4,390 | 4,390 | |
| Interest expense/(revenue) | 8,685 | 1,909 | 6,775 |
| Service costs during previous year | 457 | 457 | |
| Revaluations: | |||
| - Return on plan assets excl. amounts included in interest exp/(revenue) | – | 2,457 | 2,457 |
| - (Profit)/loss as a result of changed demographic assumptions | 7 | – | 7 |
| - (Profit)/loss as a result of changed financial assumptions | -10,907 | -10,907 | |
| - Experience-based (profits)/losses | -6,724 | -6,724 | |
| – | |||
| Exchange rate differences | -12,025 | –4,015 | –8,009 |
Fees: – - Employer – 11,460 –11,460 - Employees covered by the plan 25 25 0 Payments from the plan - Benefits paid –13,119 –13,525 406 - Settlements –1,119 – –1,119 At 31 December 2013 232,413 46,512 185,902
The defined-benefit obligation and the composition of plan assets by country are listed below:
| 2013 | Sweden Germany Norway Other | Total | ||
|---|---|---|---|---|
| Present value of obligation | 73,954 | 82,194 57,997 18,815 232,960 | ||
| Fair value of plan assets | 0 | 0 –39,334 | –7,177 –46,512 | |
| Total | 73,954 | 82,194 18,663 11,638 186,449 |
| 2012 | Sweden Germany Norway Other | Total | ||
|---|---|---|---|---|
| Present value of obligation | 84,783 | 85,024 62,131 22,130 254,067 | ||
| Fair value of plan assets | 0 | 0 –45,860 –7,252 | –53,112 | |
| Total | 200,955 |
Significant actuarial assumptions
| 2013 | Sweden Germany Norway | Other | ||
|---|---|---|---|---|
| Discount rate (%) | 4.10 | 3.40 | 4.10 | 3.40 |
| Salary increases (%) | 2.00 | 2.00 | 1.75 | 2.00 |
| Life expectancy at 65, men | 20 | 19 | 21 | 21 |
| Life expectancy at 65, women | 23 | 23 | 24 | 25 |
| 2012 | Sweden Germany Norway | Other | ||
|---|---|---|---|---|
| Discount rate (%) | 3.55 | 3.40 | 3.80 | 3.40 |
| Salary increases (%) | 3.55 | 3.40 | 3.80 | 3.40 |
| Life expectancy at 65, men | 20 | 19 | 21 | 21 |
| Life expectancy at 65, women | 23 | 23 | 24 | 25 |
Sensitivity of the defined-benefit obligation for changes in the essential weighted assumptions
Sensitivity analysis of the defined-benefit obligation is set out in Note 36. The sensitivity analysis is based on a change in one assumption while all other assumptions remain constant. In practice it is unlikely that this will occur and some of the changes in the assumptions may be correlated. When calculating the sensitivity of the defined-benefit obligation for significant actuarial assumptions, the same method is used (present value of the defined-benefit obligation using the projected unit credit method at the end of the reporting period) as in calculation of the pension liability recognised in the statement of financial position.
| Compilation of managed assets: | 2013 | 2012 |
|---|---|---|
| Insurance policy (unlisted) | 44 715 | 51 421 |
| Other | 1 797 | 1 691 |
| Total | 46 512 | 53 112 |
Fees to plans for benefits after terminated employment are expected to be SEK 11.2 million for financial year 2014.
Weighted average term of the pension obligation is 12 years.
Obligations for old-age pension and family pension for salaried employees in Sweden are secured by insurance in Alecta. According to a statement by the Swedish Financial Reporting Board, UFR 3, this is a multi-employer defined-benefit plan. For financial year 2013, the Group has not had access to information to be able to account for its proportionate share of the plan's obligations, plan assets and costs, for which reason it has not been possible to account for the plan as a defined-benefit plan. The ITP pension plan that is secured via insurance in Alecta is therefore accounted for as a defined contribution plan. The premium for the defined-benefit portion of the old-age pension is individual and is dependent on the age, salary and previously earned pension of the insured. Expected pension contributions during the year for pension insurance in Alecta amount to SEK 1.3 million. The Group accounts for an insignificant portion of the plan.
The collective funding ratio is the market value of Alecta's assets as a percentage of their insurance obligations calculated according to Alecta's actuarial assumptions, which do not agree with IAS 19. Collective consolidation, in the form of collective consolidation level, is usually allowed to vary between 125 and 155 per cent. If Alecta's collective consolidation level is less than 125 per cent or greater than 155 per cent, measures shall be taken in order to create conditions for the consolidation level to return to the normal range. Alecta's surplus can be distributed to the policyholders and/or to the insured if the collective consolidation level is greater than 155 per cent. However, Alecta applies premium reductions to avoid any surplus. At year-end 2013, Alecta's surplus in the form of the collective funding ratio amounted to 148 per cent (129).
| Total | 194,182 | 189,111 |
|---|---|---|
| Other accrued expenses | 103,720 | 79,207 |
| Pay-related accrued expenses | 90,462 | 109,904 |
| 31 Dec. 2013 31 Dec. 2012 |
| 31 Dec. 2013 31 Dec. 2012 | ||
|---|---|---|
| Relating to pension obligations | ||
| Floating charges | 20,000 | 20,000 |
| Restricted bank deposits | 20,000 | |
| Relating to liabilities to credit institutions | ||
| Shares in subsidiaries | 1,050,675 | 386,600 |
| Property mortgages | 126,895 | 12,326 |
| Current assets | 186,869 | 14,303 |
| Total | 1,404,439 | 433,229 |
| 31 Dec. 2013 31 Dec. 2012 | ||
|---|---|---|
| Liability FPG | 1,155 | 1,149 |
| Other contingent liabilities | 430 | 682 |
| Total | 1,585 | 1,831 |
| 2013 | 2012 | |
|---|---|---|
| Gains on disposal of intangible assets and | ||
| property, plant and equipment | –8,442 | –23,205 |
| Change in provisions | 20,783 | 4,939 |
| Exchange rate differences and other | –13,830 | –5,637 |
| Total | –1,489 | –23,903 |
During the year no acquisitions occurred apart from acquisition of subsidiaries as set out in Note 35.
A 50 per cent stake in Angus & Wright Ltd was acquired on 1 November 2011. On January 1, 2013 the remaining 50 per cent of shares in the company were acquired.
| non-controlling interests. | –1,728 |
|---|---|
| The carrying amount of the acquired share of | |
| Consideration paid to non-controlling interests | –1,969 |
| non-controlling interests | 241 |
| The carrying amount of the acquired share of |
Accounting estimates and judgements are evaluated continuously and are based on historical experience and other factors, including expectations of future events that are considered reasonable under prevailing circumstances.
The present value of the pension obligations is dependent on a number of factors that are established on an actuarial basis based on a number of assumptions. The assumptions used in establishing the net cost (income) for pensions includes the long-term rate of return on the plan assets in question and the discount rate. Every change in these assumptions, as in other actuarial assumptions, will affect the carrying amount of the pension obligations. The assumption of expected return on plan assets is in line with the discount rate in accordance with revised IAS rules. The Group determines a suitable discount rate at the end of each year. This is the interest rate that is used to determine the present value of estimated future payments expected to be required to settle the pension obligations.
In determining a suitable discount rate, the Group takes into account the interest rates on first-class corporate bonds or treasury bonds denominated in the currency in which the payments will be made and with maturities equivalent to the estimates for the pension obligations in question. In Sweden, the Group also takes into account interest rates on mortgage bonds when determining the discount rate.
| Hedging | Translation | Revaluation of | Total | |
|---|---|---|---|---|
| reserve | reserve | assets | reserves | |
| Opening balance 1 January 2012 | –8,934 | –38,309 | 5,361 | –41,882 |
| Cash flow hedges | 2,058 | 2,058 | ||
| Hedging of net investments | 36,482 | 36,482 | ||
| Exchange rate difference | –50,587 | –50,587 | ||
| Tax effect | –974 | –7,357 | –8,331 | |
| Closing balance 31 December 2012 | –7,850 | –59,771 | 5,361 | –62,260 |
| Opening balance 1 January 2013 | –7,850 | -59,771 | 5,361 | –62,260 |
| Cash flow hedges | 2,555 | 2,555 | ||
| Hedging of net investments | –24,248 | –24,248 | ||
| Exchange rate difference | 21,867 | 21,867 | ||
| Tax effect | –564 | 7,620 | 7,056 | |
| Closing balance 31 December 2013 | –5,859 | –54,532 | 5,361 | –55,030 |
The number of shares at year-end 2013 was 156,659,604 (2012: 17,480,995) with a quotient value of SEK 1.50 per share (2012: SEK 10 per share). All issued shares are fully paid. The Extraordinary General Meeting, held 17 July 2013, resolved on the issuance of convertible bond subordinated loans. On conversion to shares the number of shares will increase by 27,272,727 and share capital by SEK 40,909,090.
| Number of shares | ||||
|---|---|---|---|---|
| (thousand) | Share capital | Share premium | Total | |
| At 1 January 2012 | 17,481 | 174,810 | 475,953 | 650,763 |
| At 31 December 2012 | 17,481 | 174,810 | 475,953 | 650,763 |
| At 1 January 2013 | 17,481 | 174,810 | 475,953 | 650,763 |
| Extraordinary General Meeting 17 July 2013 | ||||
| Impairment of share capital | –148,589 | 148,589 | 0 | |
| Cash issue | 69,924 | 104,887 | 20,977 | 125,864 |
| Set-off issue | 69,255 | 103,881 | 45,708 | 149,589 |
| Convertible loan | 13 812 | 13 812 | ||
| At 31 December 2013 | 156,660 | 234,989 | 705,039 | 940,028 |
The set-off issue was aimed at Holdham SA and lending banks.
Other significant assumptions regarding pension obligations are based on prevailing market terms. Further information is furnished in Note 27. If the actual return on the plan assets were to deviate by 1 per cent from management's estimates, the carrying amount of the pension obligations would be SEK 0.3 million higher or SEK 0.3 million lower. If the discount rate deviated by +/–1 per cent from management's estimates, the carrying amount of the pension obligations would be estimated at about +/– SEK 25 million lower/higher than the actual carrying amount.
The recoverable amount has been determined by calculation of the value in use. Certain estimates must be made for these calculations. Management has determined the budgeted operating margin based on previous earnings and their expectations of the future market trend as well as external information about market trends. A sustainable growth rate of 1,0 per cent has been used to extrapolate cash flows beyond the budget period. This growth rate is judged to be a conservative estimate. Furthermore, an average discount rate after tax of 10.3 per cent has been used (13.2 per cent before tax), as evident from Note 14, which is the same as the previous year. A sensitivity analysis has been performed for the Group as a cash-generating unit. The results of the analysis are summarised below.
The sensitivity analysis should therefore be interpreted with caution. As a result of the write-down for the year of SEK 15 million, the book value is equal to the estimated recoverable amount.
The Parent Company's and its subsidiary Bong International AB's borrowings in EUR and GBP are identified as hedging of net investments in subsidiaries in Germany, Estonia, Belgium, France and the UK. The fair value of the borrowings at 31 December 2013 was SEK 439,871 thousand (586,281). The exchange difference amounting to SEK -5,046 thousand (15,911) on translation of the borrowings to SEK on the balance sheet date, is recognised in 'Reserves' in equity.
A dividend for 2012 of SEK 0 per share was approved at the AGM on 22 May 2013. A dividend for 2013 of SEK 0 per share will be proposed at the AGM on 21 May 2014.
Bong AB is a public limited liability company domiciled in Kristianstad, Sweden, Uddevägen 3, Box 516, 291 25 Kristianstad, Sweden. Bong AB is listed on NASDAQ OMX Stockholm (Small Cap).
| Transactions with associated companies | 2013 | 2012 |
|---|---|---|
| Sales during the year | 692 | 507 |
| Purchases during the year | – | – |
| Current receivables balance sheet date | 412 | 51 |
Transactions with subsidiary to Holdham S.A. are counted
as related-party transactions since Holdham S.A.
| is the largest shareholder in Bong AB | 2013 | 2012 |
|---|---|---|
| Sales during the year | 70,722 | 78,949 |
| Purchases during the year | 8,375 | – |
| Current receivables balance sheet date | 31,107 | 18,257 |
Below are the standards applied by the Group for the first time for annual periods beginning 1 January 2013 and that have a material impact on the consolidated financial statements:
IAS 19 "Employee benefits" was amended in June 2011. The amendment requires the Group to cease application of the "corridor approach" and instead to recognise all actuarial gains and losses in other comprehensive income as they arise. Past service costs will be recognised immediately. Interest costs and expected return on plan assets will be replaced by a net interest rate calculated using a discount rate, based on the net surplus or net deficit in the defined-benefit plan.
The amended standard came into force on January 1, 2013 with retroactive application. The transition effects on the balance sheet, shareholders' equity, income statement and Other comprehensive income for the 2012 comparative year are as follows: Shareholders' equity at 1 January 2012 was negatively impacted by SEK 35 million net after tax as a result of the recognition of unrealised actuarial losses and taking into account special employer's contributions and an increase in deferred tax assets. Accordingly, this entailed an increase of SEK 48 million in pension provisions and an increase in deferred tax assets of about SEK 13 million. Net income for financial year 2012 was also restated in accordance with the new principles, which entailed a negative impact of a total of about SEK 1 million after tax. The amended standard also had a negative impact on operating result for financial year 2012 of SEK 1 million, which entails a marginally positive impact on tax expense. The effect is spread evenly over the year. The amended standard had a negative impact on earnings per share of 5 öre for financial year 2012 and 1 öre per share for the January-March 2012 reporting period. The impact on Other comprehensive income for 2012 was positive with a total of about SEK 4 million net after tax attributable to actuarial gains that arose during the period. The revaluation result is also distributed evenly throughout the year. The total negative effect on shareholders' equity at 31 December 2012 was about SEK 35 million. Accordingly, at the end of 2012 the new policy resulted in an increase of SEK 48 million in pension provisions and of SEK 14 million in deferred tax assets, compared with earlier policies.
In IAS 1, "Presentation of financial statements" amendments have been adopted relating to other comprehensive income. The most significant change in the revised IAS 1 is the requirement that items reported in "other comprehensive income" will be presented in two groups. The division is based on whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI.
IFRS 13 "Fair value measurement" aims to improve consistency and reduce complexity in the application of fair value measurement by providing a precise definition and a shared source in IFRS for fair value measurements and the associated disclosures. The standard provides guidance on fair value measurement of all types of assets and liabilities, both financial and non-financial. The requirements do not expand the area of application for when fair value shall apply but provide guidance on how it is to be applied where other IFRS already require or allow fair value measurement.
At the time of preparation of the consolidated financial statements as at 31 December 2013, a number of standards and interpretations have been published that have not yet come into force. Below is a preliminary assessment of the impact that adoption of these standards and interpretations may have on Bong AB's financial statements.
IFRS 9 "Financial instruments" addresses the classification, valuation and accounting for financial liabilities and assets. IFRS 9 was issued in November 2009 for financial assets and in October 2010 for financial liabilities and replaces those sections of IAS 39 related to classification and measurement of financial instruments. IFRS 9 states that financial assets have to be classified in two measurement categories: measurement at fair value or measurement at amortized cost. The classification is determined at initial recognition based on the company's business model and the characteristic conditions in the contractual cash flows. For financial liabilities, no major changes will take place compared with IAS 39. The most significant change relates to liabilities identified at fair value. For these, the portion of the fair value change arising from own credit risk has to be recognised in other comprehensive income instead of profit and loss provided that this does not give rise to accounting mismatch. The Group has not yet assessed the effects of the new standard. The Group will assess the impact of the remaining phases of IFRS 9 as they are completed by the IASB.
IFRS 10 "Consolidated financial statements" is based on already existing principles defining control as the decisive factor in determining whether a company is to be included in the consolidated accounts. The standard provides further guidance that can be of assistance when it is difficult to determine control. The Group intends to implement IFRS 10 for the financial year commencing 1 January 2014 and has not yet evaluated the full effect on the financial statements.
IFRS 12 "Disclosures of interests in other entities" includes the disclosure requirements for subsidiaries, joint arrangements, associated companies and unconsolidated structured entities. The Group has yet to assess the full impact of IFRS 12 on the financial statements. The Group intends to implement the IFRS 12 for the financial year commencing 1 January 2014.
| SEK thousand | Note | 2013 | 2012 |
|---|---|---|---|
| Net sales | 20,981 | 38,085 | |
| Administrative expenses | 2–5 | –46,751 | –70,571 |
| Other operating income | 6 | 4,635 | 9,450 |
| Operating profit/loss | 7 | –21,135 | –23,036 |
| Profit from interests in subsidiaries | 8 | 4,102 | 23,241 |
| Other interest income and similar line items | 9 | 61,985 | 76,410 |
| Interest expenses and similar line items | 10 | –73,320 | –73,436 |
| Total financial income and expenses | –7,232 | 26,216 | |
| Result before tax | –28,367 | 3,180 | |
| Tax on profit/loss for the year | 11 | 6,992 | –1,014 |
| NET RESULT FOR THE YEAR | –21,375 | 2,166 |
| TOTAL COMPREHENSIVE INCOME | –16,664 | 3,764 |
|---|---|---|
| Other comprehensive income after tax | 4,711 | 1,598 |
| Income tax relating to components of other comprehensive income |
–1,329 | –451 |
| Cash flow hedges | 6,040 | 2,049 |
| Other comprehensive income | ||
| Net profit for the year | –21,375 | 2,166 |
| SEK thousand | 2013 | 2012 |
| SEK thousand | Note 31 Dec. 2013 31 Dec. 2012 | ||
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | |||
| Capitalised development expenditure | 0 | 23,668 | |
| Investments in progress | 0 | 932 | |
| Total | 12 | 0 | 24,600 |
| Property, plant and equipment | |||
| Equipment, tools, fixtures, and fittings | 0 | 2,526 | |
| Total | 13 | 0 | 2,526 |
| Financial assets | |||
| Interests in subsidiaries | 14 | 727,999 | 1,131,210 |
| Interests in other companies | 15 | 1,000 | 1,000 |
| Deferred tax assets | 16 | 47,263 | 40,272 |
| Receivables from subsidiaries | 652,193 | 799,060 | |
| Other non-current receivables | 50 | 101 | |
| Total | 1,428,505 | 1,971,642 | |
| Total non-current assets | 1,428,505 | 1,998,768 | |
| Current assets | |||
| Current receivables | |||
| Receivables from subsidiaries | 0 | 158,491 | |
| Current tax asset | 892 | 680 | |
| Other current receivables | 18 | 1,596 | 2,546 |
| Deferred expenses and accrued income | 19 | 13,318 | 13,341 |
| Total | 15,806 | 175,058 | |
| Cash and cash equivalents | 20,859 | 42,450 | |
| Total current assets | 36,665 | 217,508 | |
| TOTAL ASSETS | 1,465,170 | 2,216,276 |
| SEK thousand | Note 31 Dec. 2013 31 Dec. 2012 | ||
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Equity | 22,24 | ||
| Restricted equity | |||
| Share capital | 234,989 | 174,810 | |
| Non-restricted equity | |||
| Fair value reserve | 0 | –4,713 | |
| Share premium reserve | 303,429 | 90,380 | |
| Retained earnings | 457,469 | 455,303 | |
| Net profit for the year | –21,375 | 2,166 | |
| Total non-restricted equity | 739,522 | 543,136 | |
| Total equity | 974,512 | 717,946 | |
| Provisions | |||
| Pension obligations | 25 | 0 | 11,526 |
| Total provisions | 0 | 11,526 | |
| Non-current liabilities | |||
| Borrowings | 17 | 365,270 | 640,245 |
| Liabilities to subsidiaries | 17 | 0 | 344,397 |
| Other liabilities | 17 | 61,188 | 99,128 |
| Total non-current liabilities | 426,458 | 1,083,770 | |
| Current liabilities | |||
| Borrowings | 17 | 47,000 | 75,000 |
| Trade payable | 1,373 | 10,710 | |
| Liabilities to subsidiary | 12,494 | 292,007 | |
| Other current liabilities | 18 | 756 | 10,269 |
| Accrued expenses and deferred income | 19 | 2,577 | 15,048 |
| Total current liabilities | 64,200 | 403,034 | |
| TOTAL EQUITY AND LIABILITIES | 1,465,170 | 2,216,276 | |
| Pledged assets | 20 | 556,060 | 521,972 |
| Contingent liabilities | 21 | 0 | 236 |
| Restricted equity | Non-restricted equity | ||||
|---|---|---|---|---|---|
| SEK thousand Note |
Share capital | Fair value reserve |
Share premium reserve |
Retained earnings incl. net profit for the year |
Total |
| Opening balance at 1 January 2012 | 174,810 | –6,309 | 90,380 | 455,303 | 714,184 |
| Comprehensive income | |||||
| Net profit for the year | 2,166 | 2,166 | |||
| Other comprehensive income Cash flow hedges, after tax |
1,596 | 1,596 | |||
| Total other comprehensive income | 1,596 | 1,596 | |||
| Total comprehensive income | 1,596 | 2,166 | 3,762 | ||
| CLOSING BALANCE AT 31 DECEMBER 2012 | 174,810 | –4,713 | 90,380 | 457,469 | 717,946 |
| Opening balance at 1 January 2013 | 174,810 | –4,713 | 90,380 | 457,469 | 717,946 |
| Comprehensive income | |||||
| Net profit for the year | –21,375 | –21,375 | |||
| Other comprehensive income | |||||
| Cash flow hedges, after tax | 4,713 | 4,713 | |||
| Total other comprehensive income | 4,713 | 4,713 | |||
| Total comprehensive income | 4,713 | –21,375 | –16,662 | ||
| Transactions with shareholders | 22 | ||||
| Write-down of share capital | –148,589 | 148,589 | 0 | ||
| New issue | 208,768 | 66,685 | 275,453 | ||
| Convertible loan | 13,812 | 13,812 | |||
| Issue costs | –16,037 | –16,037 | |||
| Total transactions with shareholders | 60,179 | 0 | 213,049 | 0 | 273,228 |
| CLOSING BALANCE AT 31 DECEMBER 2013 | 234,989 | 0 | 303,429 | 436,094 | 974,512 |
| SEK thousand | Note | 2013 | 2012 |
|---|---|---|---|
| OPERATING ACTIVITIES | |||
| Operating profit/loss | –21,135 | –23,036 | |
| Depreciation, amortisation, and impairment losses | 2,741 | 4,065 | |
| Financial income received | 47,514 | 36,307 | |
| Finance expenses paid | –61,539 | –59,613 | |
| Tax paid | –212 | – | |
| Other items not affecting liquidity | 26 | –11,470 | –1,039 |
| Cash flow from operating activities before change in working capital | –44,101 | –43,316 | |
| Change in working capital | |||
| Current receivables | 709,518 | –16,477 | |
| Current operating liabilities | –295,186 | 32,780 | |
| Cash flow from operating activities | 370,231 | –27,013 | |
| INVESTING ACTIVITIES | |||
| Acquisition of property, plant and equipment incl. advance payments to suppliers |
–1,134,386 | –6,893 | |
| Cash flow from investing activities | –1,134,386 | –6,893 | |
| Cash flow after investing activities | –764,155 | –33,906 | |
| FINANCING ACTIVITIES | |||
| New issue | 200,757 | – | |
| Loans raised | 541,584 | 17,314 | |
| Amortisation of loans | –365 | –732 | |
| Cash flow from investing activities | 741,976 | 16,582 | |
| Cash flow for the year | –22,179 | –17,324 | |
| Cash and cash equivalents at start of year | 42,450 | 58,617 | |
| Exchange rate difference in cash and cash equivalent | 588 | 1,157 | |
| CASH AND CASH EQUIVALENTS AT YEAR-END | 20,859 | 42,450 |
| NOTE | PAGE | |
|---|---|---|
| 1 Accounting policies | 39 | |
| 2 Employees and wages, salaries | ||
| and other remuneration | 39 | |
| 3 | Remuneration to auditors | 40 |
| 4 Depreciation according to plan | 40 | |
| 5 | Operating leases/rental agreements | 40 |
| 6 | Other operating income | 40 |
| 7 Purchases and sales between group companies | 40 | |
| 8 Profit from interests in subsidiaries | 40 | |
| 9 Other interest income and similar line items | 40 | |
| 10 Interest expenses and similar profit/loss items | 40 | |
| 11 Tax | 40 | |
| 12 Intangible assets | 40 | |
| 13 Property, plant and equipment | 40 | |
| 14 Interests in subsidiaries | 41 | |
| 15 Interests in other companies | 41 | |
| 16 Deferred tax | 41 | |
| 17 Borrowings | 41 | |
| 18 Other current receivables and liabilities | 42 | |
| 19 Deferred/accrued income/expense | 42 | |
| 20 Pledged assets | 42 | |
| 21 Contingent liabilities | 42 | |
| 22 Dividend | 42 | |
| 23 Information about Bong AB | 42 | |
| 24 Share capital | 42 | |
| 25 Provisions for pensions and similar commitments | 42 | |
| 26 Other items not affecting liquidity in the | ||
| parent company's cash flow statements | 42 |
All values are in SEK thousand unless stated otherwise.
The Parent Company has prepared its annual report in accordance with the Swedish Annual Reports Act and RFR 2 Accounting for Legal Entities. The rules in RFR 2 state that the Parent Company shall, in preparing the annual report for the legal entity, apply all IFRSs and statements approved by the EU as far as possible while complying with the Swedish Annual Reports Act and the Act on Safeguarding of Pension Obligations and taking into account the relationship between accounting and taxation. This recommendation defines the exceptions and additional disclosures compared with IFRS.
Consequently, the Parent Company applies the principles presented in the consolidated accounts, with the exceptions indicated below. These principles have been applied consistently for all years presented, unless otherwise stated.
The Income Statement and Balance Sheet follow the format in the Swedish Annual Reports Act. This entails differences compared with the consolidated accounts, mainly with regard to untaxed reserves and provisions.
Shares and interests in subsidiaries are recognised at cost less impairment losses. Dividends received are recognised as financial income.
The Parent Company applies measurement at fair value according to Chapter 4 Section 14 a-d of Annual Reports Act, which means that the description of the Group's accounting policies applies to the Parent Company as well, except with regard to recognition of the profit or loss effects of hedging. The Parent Company accounts differ from the consolidated accounts in the following cases:
Changes in value of hedging instruments for hedging of highly probable cash flows are recognised in the Income Statement.
Changes in value of hedging instruments held for hedging of current and non-current receivables and liabilities are recognised in the Income Statement.
Shareholders' contributions paid are recognised as an increase in the value of shares and interests. A judgement is thereby made of whether the value of shares and interests is impaired.
Group contributions paid to subsidiaries are reported, depending on the relationship between accounting and taxation, in the income statement on the line Profit from interests in subsidiaries. Group contributions received from subsidiaries are reported according to the same principles as customary dividends from subsidiaries and thus reported as financial income on the line Profit from interests in subsidiaries.
The Parent Company's pension obligations are recognised in accordance with FAR SRS RedR 4, Accounting for Pension Liability and Pension Cost. The capital value of pension obligations not covered by insurance is recognised as a provision in the Balance Sheet. The interest element of the change in the pension liability is recognised as a financial expense. Other pension costs are charged to operating profit.
Average number of employees
| 2013 | 2012 | |||
|---|---|---|---|---|
| Total | Of whom | Total | Of whom | |
| employees | men | employees | men | |
| Sweden | 7 | 5 | 15 | 11 |
Distribution of senior executives on the balance sheet date
| 2013 | 2012 | |||
|---|---|---|---|---|
| Total Of whom |
Total | Of whom | ||
| employees | men | employees | men | |
| Board members | 8 | 7 | 8 | 7 |
| President and other senior executive officers |
1 | 1 | 2 | 2 |
| 2013 | 2012 | |||
|---|---|---|---|---|
| Salaries | Social | Salaries | Social | |
| and remun. | contrib. and remun. | contrib. | ||
| Total | 12,234 | 6,405 | 17,473 | 9,866 |
| Of which pension costs |
2,299 | 3,719 |
Salaries and other remuneration broken down between board members etc. and other employees
| 2013 | ||||
|---|---|---|---|---|
| Board | Other | Board | 2012 Other |
|
| and CEO | employees | and CEO employees | ||
| Total | 8,324 | 3,910 | 6,354 | 11,119 |
| Including incentive, etc. | 0 | 106 | 0 | 689 |
More information about remuneration to the Board and CEO is provided in Group note 4.
| PwC | 2013 | 2012 |
|---|---|---|
| Auditing assignments | 400 | 785 |
| Audit-related activities | 38 | 130 |
| Other services | 110 | 225 |
| Total | 548 | 1,140 |
| Broken down by non-current asset | 2013 | 2012 |
|---|---|---|
| Capitalised development costs | 2,273 | 3,036 |
| Equipment, tools, fixtures, and fittings | 468 | 1,029 |
| Total | 2,741 | 4,065 |
| Depreciation is recognised |
The Parent Company's most important operating leases relate to offices and IT-related assets.
The nominal value of future lease payments is broken down as follows on the balance sheet date:
| 2013 | 2012 | |
|---|---|---|
| Fall due for payment within one year | 54 | 3,265 |
| Fall due for payment after one | ||
| year but within five years | 0 | 3,488 |
| Fall due for payment after five years | 0 | 512 |
Lease payments for operating leases were paid during the year in the amount of SEK 2,384 thousand (4,403). No assets are sub-leased, nor are there any restrictions in the lease agreements.
| 2013 | 2012 | |
|---|---|---|
| Supplier bonus | 4,095 | 9,045 |
| Exchange gains | 313 | 265 |
| Rental and payroll costs | 227 | 140 |
| Total | 4,635 | 9,450 |
The Parent Company's business consists of management of operating subsidiaries and Group management functions. In 2013 the Parent Company charged the subsidiary management fees amounting to SEK 20,981 thousand (38,085) and received SEK 227 thousand (140) in rental revenue. The Parent Company's purchases from subsidiaries amounted to SEK 6,055 thousand (15,359). Pricing between Parent and subsidiary is on a commercial basis and at market prices.
| 2013 | 2012 | |
|---|---|---|
| Dividend | 4,102 | 31,441 |
| Group contributions paid | 0 | –8,200 |
| Total | 4,102 | 23,241 |
| 2013 | 2012 | |
|---|---|---|
| Financial income, Group companies | 44,914 | 37,029 |
| Exchange rate differences on financial items | 17,071 | 39,381 |
| Total | 61,985 | 76,410 |
| 2013 | 2012 | |
|---|---|---|
| Financial expenses, Group companies | –1,258 | –7,742 |
| Interest portion in this year's pension costs | 2 | –760 |
| Interest expenses, other | –42,477 | –49,205 |
| Exchange rate differences on financial items | –21,193 | –8,822 |
| Other financial expenses | –8,394 | –6,907 |
| Total | –73,320 | –73,436 |
| 2013 | 2012 | |
|---|---|---|
| Deferred tax | 6,992 | –1,014 |
| Total | 6,992 | –1,014 |
Difference between Parent Company's tax expense and tax expense based on applicable tax rate:
| 2013 | 2012 | |
|---|---|---|
| Profit before tax | –28,367 | 3,180 |
| Tax calculated according to applicable | ||
| tax rate: | 6,241 | –836 |
| Tax on: | ||
| – dividend from subsidiary | 902 | 8,269 |
| – previously unrecognised tax loss | – | – |
| – other non-taxable revenue | – | – |
| – other non-deductible expenses | –151 | –575 |
| – effect of the reduced tax rate to 22% | 0 | –7,871 |
| Tax according to Income Statement | 6,992 | –1,014 |
| 2013 | 2012 | |
|---|---|---|
| Opening cost | 30,272 | 23,348 |
| Purchases/acquisitions | 6,742 | 5,103 |
| Divestments/disposals | –37,014 | – |
| Reclassification | 0 | 1,821 |
| Closing cost | 0 | 30,272 |
| Opening accumulated depreciation | –5,672 | –2,636 |
| Divestments/disposals | 7,945 | 0 |
| Depreciation for the year | –2,273 | –3,036 |
| Closing accumulated depreciation | 0 | –5,672 |
| Closing residual value according to plan | 0 | 24,600 |
| 2013 | 2012 | |
|---|---|---|
| Opening cost | 22,703 | 22,734 |
| Purchases/acquisitions | 108 | 1,790 |
| Divestments/disposals | –22,811 | 0 |
| Reclassification | 0 | –1,821 |
| Closing cost | 0 | 22,703 |
| Opening accumulated depreciation | –20,177 | –19,148 |
| Divestments/disposals | 20,645 | 0 |
| Depreciation for the year | –468 | –1,029 |
| Closing accumulated depreciation | 0 | –20,177 |
| Closing residual value according to plan | 0 | 2,526 |
| Company | Corporate identity number | Domicile | Share of equity, % | Number of shares | Book value |
|---|---|---|---|---|---|
| Bong International AB | 556044-3573 | Kristianstad, Sweden | 100 | 1,501,200 | 171,939 |
| Bong GmbH | HRB 1646 | Wuppertal, Germany | 100 | 1 | 556,060 |
| Total | 727,999 | ||||
| Opening book value of shares in subsidiaries | 1,131,210 | ||||
| Sale of Venlop BV shares to Bong Retail Solutions NV | –2,432 | ||||
| Transferred shares in subsidiaries to Bong International AB | –572,597 | ||||
| Set-off issue Bong International AB | 150,000 | ||||
| Shareholders' contributions Bong International AB | 21,818 | ||||
| Company | Corporate identity number | Domicile | Invested capital | Book value |
|---|---|---|---|---|
| Bong Fastigheter KB | 969655-5763 | Stockholm, Sweden | SEK 1,000 thousand | 1,000 |
| Total | 1,000 |
Deferred tax assets refer to the value of loss carryforwards.
| 31 Dec. 2013 31 Dec. 2012 | ||
|---|---|---|
| Bank loans | 365,270 | 640,245 |
| Convertible loan | 61,188 | 34,479 |
| Shareholder loan | – | 64,649 |
| Liabilities to subsidiaries | – | 344,397 |
| 426,458 | 1,083,770 | |
| Current | ||
| Bank loans | 47,000 | 75,000 |
| 47,000 | 75,000 | |
| Total borrowings | 473,458 | 1,158,770 |
The loan consists of 75 convertible bonds with a nominal value of SEK 1,000,000, ISIN SE0005281821, and is listed on NASDAQ OMX Stockholm.
The convertible loan carries an annual interest rate of 10 per cent from 27 June 2013 through the final maturity date 27 June 2018.
The convertible bonds shall become due for redemption on 27 December 2018 to the extent that conversion has not occurred before then. The convertible bonds may be converted into new shares in Bong AB at the latest 30 days prior to the final date when the convertible bonds are due for redemption. The rate at which conversion may be made shall be SEK 2.75 per share.
Shares issued due to the conversion shall entitle to dividends for the first time on the record day for the dividend that occurs next after the actual conversion day. Upon conversion share capital may be increased with an amount equivalent to a maximum of SEK 40,909,091.
Of the Parent Company's borrowings, SEK 0 million (0) are loans for subsidiaries.
| 426,458 | 1,083,770 | |
|---|---|---|
| More than 5 years | 256,458 | 684,642 |
| Between 2 and 5 years | 127,500 | 259,479 |
| Between 1 and 2 years | 42,500 | 139,679 |
The granted amount of the bank credit line in the Parent Company is SEK 0 thousand (68,391), of which SEK 0 thousand (0) is utilised.
| Other current receivables | 31 Dec. 2013 31 Dec. 2012 | |
|---|---|---|
| Currency and interest rate derivatives | – | 1,499 |
| Other current receivables | 1,596 | 1,047 |
| Total | 1,596 | 2,546 |
| Other current liabilities | 31 Dec. 2013 31 Dec. 2012 | |
| Currency and interest rate derivatives | – | 7,000 |
| Other current liabilities | 756 | 3,269 |
| Total | 756 | 10,269 |
| 31 Dec. 2013 31 Dec. 2012 | ||
|---|---|---|
| Shares in subsidiaries | 556,060 | 521,972 |
| Total | 556,060 | 521,972 |
| 31 Dec. 2013 31 Dec. 2012 | ||
|---|---|---|
| Other contingent liabilities | 0 | 236 |
| Total | 0 | 236 |
A dividend for 2013 of SEK 0 per share will be proposed at the AGM on 21 May 2014. A dividend for 2012 of SEK 0 per share was approved at the AGM on 22 May 2013.
Bong AB is a public limited liability company domiciled in Kristianstad, Sweden, Uddevägen 3, Box 516, 291 25 Kristianstad, Sweden. Bong AB is listed on NASDAQ OMX Stockholm (Small Cap).
The number of shares at year-end 2013 was 156,659,604 (17,480,995) with a quotient value of SEK 1.50 per share (SEK 10 per share). Detailed information about the Parent Company's shares, share capital and convertible bonds can be found in the Group's note 32.
| 31 Dec. 2013 31 Dec. 2012 | ||
|---|---|---|
| PRI pensions | 0 | 11,526 |
| Total provisions | 0 | 11,526 |
| 2013 | 2012 | |
|---|---|---|
| Exchange rate differences and other | –11,470 | –1,039 |
| Total | –11,470 | –1,039 |
| Deferred expenses and accrued incomer | 31 Dec. 2013 31 Dec. 2012 | |
|---|---|---|
| Internal and external interest income | 1,775 | 4,375 |
| Other accrued expenses | 11,543 | 8,966 |
| Total | 13,318 | 13 341 |
| Accrued expenses and deferred income | 31 Dec. 2013 31 Dec. 2012 | |
| Pay-related accrued expenses | 1,697 | 5,593 |
| Internal and external interest expenses | 274 | 7,108 |
| Other items | 606 | 2,347 |
The consolidated financial statements will be submitted to the Annual General Meeting on 21 Maj 2014 for adoption. The Board of Directors and the President ensure that the consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRSs) as adopted by the EU and give a true and fair view of the Group's results of operations and financial position.
The financial statements of the Parent Company have been prepared in accordance with generally accepted accounting policies in Sweden and give a true and fair view of the Parent Company's financial position and results of operations. The statutory Administration Report of the Group and the Parent Company provides a fair review of the development of the Group's and the Parent Company's operations, financial position and results of operations and describes material risks and uncertainties facing the Parent Company and the companies included in the Group.
Kristianstad 9 April 2014
Stéphane Hamelin Chairman of the Board
Mikael Ekdahl Member of the Board
Christian W Jansson Member of the Board
Peter Harrysson Member of the Board
Eric Joan Member of the Board
Ulrika Eriksson Member of the Board
Christer Muth Member of the Board
Anders Davidsson President and member of the Board
Our Audit Report was submitted 9 April 2014
PricewaterhouseCoopers AB
Eric Salander Authorised Public Accountant Auditor in charge
Christer Olausson Authorised Public Accountant
To the annual meeting of the shareholders of Bong AB (publ), corporate identity number 556034-1579
WeWe have audited the annual accounts and consolidated accounts of Bong AB (publ), for the year 2013 except for the corporate governance statement on pages 14-16.The annual accounts and consolidated accounts of the company are included in the printed version of this document on pages 12-43.
The Board of Directors and the Managing Director are responsible for the preparation and fair presentation of these annual accounts and consolidated accounts in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act, and for such internal control as the Board of Directors and the Managing Director determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these annual accounts and consolidated accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual accounts and consolidated accounts are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts and consolidated accounts. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company's preparation and fair presentation of the annual accounts and consolidated accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors and the Managing Director, as well as evaluating the overall presentation of the annual accounts and consolidated accounts.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the parent company as of 31 December 2013 and of its financial performance and its cash flows for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2013 and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act. Our opinions do not cover the corporate governance statement on pages 14-16. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the annual meeting of shareholders adopt the income statement and balance sheet for the parent company and the group.
In addition to our audit of the annual accounts and consolidated accounts, we have also audited the proposed appropriations of the company's profit or loss and the administration of the Board of Directors and the Managing Director of Bong AB (publ) for the year 2013. We have also conducted a statutory examination of the corporate governance statement.
The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss, and the Board of Directors and the Managing Director are responsible for administration under the Companies Act and that the corporate governance statement on pages 14-16 has been prepared in accordance with the Annual Accounts Act.
Kristianstad 9 April 2014
PricewaterhouseCoopers AB
Our responsibility is to express an opinion with reasonable assurance on the proposed appropriations of the company's profit or loss and on the administration based on our audit. We conducted the audit in accordance with generally accepted auditing standards in Sweden.
As a basis for our opinion on the Board of Directors' proposed appropriations of the company's profit or loss, we examined the Board of Directors' reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal is in accordance with the Companies Act.
As a basis for our opinion concerning discharge from liability, in addition to our audit of the annual accounts and consolidated accounts, we examined significant decisions, actions taken and circumstances of the company in order to determine whether any member of the Board of Directors or the Managing Director is liable to the company. We also examined whether any member of the Board of Directors or the Managing Director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
Furthermore, we have read the corporate governance statement and based on that reading and our knowledge of the company and the group we believe that we have a sufficient basis for our opinions. This means that our statutory examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden.
We recommend to the annual meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year. A corporate governance statement has been prepared, and its statutory content is consistent with the other parts of the annual accounts and consolidated accounts.
Eric Salander Authorised Public Accountant Auditor in charge
Christer Olausson Authorised Public Accountant
President and Chief Executive Officer. Employed since 2002.
Education: MSc Business and Economics.
Previous positions: Vice President Sales and Marketing, Bong Ljungdahl 2002–2003. Management Consultant and Project Manager, McKinsey & Company 1998–2002.
Holding in Bong (privately and through companies): 466 877.
HÅKAN GUNNARSSON Year of birth: 1969. Chief Financial Officer. Employed since 1999.
PETER
Business Manager Nordic. Employed since 2005.
Education: MSc Business and Economics. Previous positions: Managing Director, Icopal 2002-2004. Sales and Marketing Director, Saint Gobain Isover 1997–2002.
Holding in Bong (privately and through companies): 500 000 shares.
Business Manager France and Spain.
Education: MSc Chemical Engineering. Previous positions: Business Manager Europe, Ferro Corporation. Holding in Bong: 83,500 shares.
Employed since 2008.
PASCAL GRAVOUILLE Year of birth: 1962.
Business Manager UK. Employed since 1998. Education: Graduated from the
ELMAR SCHÄTZLEIN Year of birth: 1962.
University of Rennes. Previous assignments: CEO of Hamelin Paperbrands Limited and CEO of Industrie Papeterie Charentaise. Holding in Bong: 7 000 shares.
Business Manager Central Europe. Employed since 2004. Education: MSc Engineering. Previous positions: Schneidersöhne Munich/Italy 1995–2003. Holding in Bong (privately and through companies): 310 000 shares.
STÉPHANE HAMELIN Chairman of the Board
ANDERS DAVIDSSON Member of the Board
ULRIKA ERIKSSON Member of the Board
CHRISTIAN W. JANSSON Member of the Board
ERIC JOAN Member of the Board
PETER HARRYSSON Member of the Board (Employee representative)
CHRISTER MUTH Member of the Board (Employee representative)
OTHER KEY EXECUTIVES
Education: MSc Business and Economics. Holding in Bong: 100,000 shares.
Year of birth: 1964. Director Purchasing and Logistics. Employed since 2006.
Year of birth: 1965. Sales and Marketing Director, pan-European Sales. Employed since 2007.
Year of birth: 1960. Chief Information Officer. Employed since 2008.
PEDER ROSQVIST Alternate Director (Employee representative)
MATS PERSSON Alternate Director (Employee representative)
Net sales divided by total assets
DILUTED EARNINGS PER SHARE Profit after tax divided by the average number of shares before dilution
EARNINGS PER SHARE
Profit after tax divided by the average number of shares before dilution
EBITDA Earnings before interest, taxes, depreciation and amortisation
EQUITY/ASSETS RATIO Equity divided by balance sheet total (total assets)
Interest-bearing liabilities and provisions less cash on hand, bank deposits and interest-bearing receivables
Net debt in relation to equity
OPERATING MARGIN Operating profit divided by net sales
P/E RATIO Share price at balance sheet date divided by earnings per share
PROFIT MARGIN Profit after tax divided by net sales
RETURN ON CAPITAL EMPLOYED Earnings after financial revenues, divided by assets less current liabilities
RETURN ON EQUITY Earnings after interest and tax, divided by average equity
Price per share divided by equity per share
The Annual General Meeting will be held at 4:00 PM on Wednesday, 21 May 2014, in the Company's premises in Kristianstad.
Shareholders registered in the share register kep t b y Euroclear Sweden AB on Thursda y 15 May 2014 ar e entitled t o par ticipate in the meeting. T o be eligible t o participate in the Annual General Meeting, shareholders with nominee-reg istered holdings mus t therefore temporarily re-register their shares in their own name s through the agency o f their nominee s so tha t they ar e recorded in the shar e reg ister in due time before Thursda y 15 May 2014.
Shareholders who wish t o par ticipate in the meeting mus t notify the company no later than 12 noon
| Interim Report January – March 2014 |
21 May 2014 |
|---|---|
| Annual General Meeting |
21 May 2014 |
| Interim Report January – June 2014 |
July 2014 |
| Interim Report January – September 2014 |
November 2014 |
| Year-end report 2014 |
February 2015 |
on Thursday, 15 May 2014 , b y one of the following methods:
Address by post: Bong AB (publ), Attn: Katarina Sjöström, Hans Michelsensgatan 9 , S-211 20 Malmö, Sweden.
By telephone: +46 (0)40-17 60 41. Per facsimile: +46 (0)40-17 60 39. By e-mail: anmalan.arsstamma@ bong.se
The Boar d o f Directors and the CE O and President propose that no dividend be distributed in respect of the fiscal year 2013.
The AGM will consider items of business which are required by law and the Articles of Association to be dealt with at the meeting, as well as other items of business mentioned in the notice convening the meeting.
Bong AB Uddevägen 3 Box 516 SE-291 25 Kristianstad +46 44 20 70 00 www.bong.com
Hans Michelsensgatan 9 SE-211 20 Malmö +46 40 17 60 00
Bong Belgium NV Zenneveld Business Park Bergensesteenweg 793 bus 6 B-1600 St.-Pieters-Leeuw +32 24 31 90 00 www.bong.be
Bong Retail Solutions NV Stasegemsestraat 133b BE-8500 Kortrijk +32 56 74 55 10 www.bongretail.com
Bong Danmark A/S Baldersbuen 2 P.O. Box 179 DK-2640 Hedehusene +45 46 56 55 55 www.bong.dk
Bong Eesti Ou Joe tn 17 EE-79801 Kohilla +372 48 90 140 www.bongeesti.ee
Bong Suomi Oy Tuottotie 3 FI-33960 Pirkkala +358 3 241 8111 www.bong.fi
Bong Suomi Oy Kirjekuorentie 1 FI-73600 Kaavi +358 17 265 6600
Bong Suomi Oy Niittyvillankuja 3 FI-01510 Vantaa +358 9 565 7910
Manuparis SAS 1 rue Eugène Hermann FR-27180 Saint Sébastien de Morsent +33 2 32 39 98 01 www.bong.fr
IPC SAS 11, Impasse du Mas Prolongée FR-16710 Saint Yrieix sur Charente +33 5 45 95 63 50 www.bong.fr
MME SAS 43, rue Ettore Bugatti BP 91548 FR-87021 Limoges Cedex 9 +33 5 55 45 25 25
Sepieter SAS + Bong SAS 100 Rue de Lannoy 59650 Villeneuve d'Ascq +33 3 20 66 69 99 www.sepieter.com
Bong SAS + Manuparis SAS 20, rue d'Athènes FR-75009 Paris +33 1 56 92 39 42
Bong GmbH Piepersberg 30 DE-42653 Solingen +49 2 12/23 39 10 www.bong.de
Bong GmbH Hermann-Krum-Straße 9-11 DE-88319 Aitrach +49 75 65/98 09-0 www.bong.de
Bong GmbH Posthornweg 1 DE-04860 Torgau +49 2 12/23 39 13 00 www.bong.de
Pflüger Kuvert GmbH Am Pestalozziring 14 DE-91058 Erlangen +49 9131 4002-0 www.pflueger-kuvert.de
Lober Druck und Kuvert GmbH Beethovenstraße 24-26 DE-86368 Gersthofen +49 821-2 97 88 0 www.lober.eu
Lober Druck und Kuvert GmbH Piepersberg 30 DE-42653 Solingen +49 2 12/23 39 10
Bong Latvija SIA Dzelzavas iela 120 G LV-1021 Riga +371 6 7 241 339
Bong Security Solutions S.A Zone Industrielle Rolach LU-5280 Sandweiler +352 35 75 04-30 www.bong.lu
Bong B.V. Robijnstraat 86 NL-1812 RB Alkmaar +31 72 576 322
Bong Norge AS Bekkevejen 161, 3173 Vear Postboks 2074 NO-3103 Tonsberg +47 33 30 54 00 www.bong.no
Bong Norge AS Postboks 74 NO-2026 Skjetten +47 64 83 12 50
Pflüger Koperty Sp zo.o. Ul. Zawila 56 PL-30-390 Krakow +48 12 252 02 00 www.pfluger-koperty.pl Bong Cay Swiat Kopert Sp zo.o. ul. Ustronna 14 PL-60-012 Poznan +48 61 89 93 910 www.bong.pl
Postac LLC RU-248000, Kaluga Domostroiteley pr, 17. +7 4842 76 44 68
Envel Europa S.A Placa Gal La Placidia 7 esc D. 8° ES-08006 Barcelona +34 932 41 88 50
Envel Europa S.A Poligono Industrial Campllong Torreblanca 9 ES-25600 Balaguer (Lleida) +34 973 44 38 86
Bong Sverige AB Box 516 SE-291 25 Kristianstad Uddevägen 3 SE-291 54 Kristianstad +46 44 20 70 00 www.bong.se
Bong Sverige AB Box 823 SE-382 28 Nybro Emmabodavägen 9 SE-382 45 Nybro +46 481 440 00 www.bong.se
Bong Retail Solutions Box 823 SE-382 28 Nybro Emmabodavägen 9 SE-382 45 Nybro +46 481 440 00 www.bongretail.com
Bong Packaging Solutions Hans Michelsensgatan 9 SE-211 20 Malmö +46 40 17 60 00 www.bong.com www.propacpackaging.com
Bong Schweiz AG Aspstrasse 12 CH-8472 Seuzach +41 52 320 09 80 www.bong-ag.ch
Bong U.K. Ltd. Michigan Drive, Tongwell GB-Milton Keynes MK15 8HQ +44 1908 216 216
Surrey Envelopes Ltd. Unit 7 Nelson Trading Estate The Path, Morden Road GB-London SW19 3BL +44 2085 450 099 www.surrey-envelopes.com
Surrey Envelopes Ltd. Anglers Business Centre Nottingham Road, Spondon GB-Derby DE21 7NJ +44 1332 667 790 www.surrey-envelopes.com
Packaging First Ltd. Unit 12, Nash Hall The Street, High Ongar GB-Essex CM5 9NL +44 1277 363 656 www.packagingfirst.co.uk
Bong Packaging Systems 3 Winchester Street Andover GB- Hampshire SP10 2EA +44 1264 335 334 www.bongsystems.com
Bong has the widest range of envelopes in the European market and is the leader in specialty packaging for e-commerce and retail trade. Head office
Bong AB Uddevägen 3 P.O. Box 516 SE-291 25 Kristianstad SWEDEN +46 44 20 70 00 www.bong.com
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