New Wave Group AB Annual report 2017 EN | Page 53

FINANCIAL INFORMATION

Inventories were written down by SEK 106.0( 115.1) million. Write-down related to merchandise on stock amounted to 4.1( 4.4) %.

Accounts receivable amounted to SEK 982.8( 906.2) million. The increase is turnover related.

INVESTMENTS, FINANCING AND LIQUIDITY

Consolidated cash flow from operating activities amounted to SEK 207.8( 448.9) million. The lower cash flow is related to higher purchases than last year and increased accounts receivable( turnover related). Product purchases are related to new basic collections and new warehouse in Canada. The net cash investments amounted to SEK-110.6(-89.6) million. During the year, a number of investments were made in tangible fixed assets, among others in new warehouses as well as new facilities in Kosta. We have also made more investments in intangible assets, which are attributable to IT.

Net debt decreased during the year by SEK 111.6 million to 1,637.3( 1,748.9) million. The decrease is primarily related to changes in currency exchange rates, which reduced the debt by SEK 88.9 million. Our net debt in relation to equity and working capital has decreased and amounted to 54.1( 62.1) % and 57.4( 64.7) % respectively.

The equity ratio improved by 2.5 percentage points and amounted to 50.9( 48.4) % as of 31 December.

The Group’ s total credit facility as of 31 December amounted to SEK 2,539 million of which SEK 2,000 million runs until 10 February 2019, USD 35 million has a term that extends to 10 February 2024 and SEK 250 million has a term of between one and six years. The credit facility amount is limited to and dependent on the value of some underlying assets. The funding agreement means that financial ratios( covenants) must be fulfilled in order to maintain the credit facility.

Based on the present forecast, management estimates that the group will be able to meet these ratios with a satisfactory margin.

Work on a new financial agreement is being finalised and is expected to be completed in the beginning of the second quarter of 2018.

INTANGIBLE ASSETS AND IMPAIRMENT TESTING

The Group’ s intangible fixed assets consist mainly of goodwill and trademarks. The trademarks with the greater value recorded at cost are well known trademarks, such as Orrefors Kosta Boda in Gifts & Home Furnishings and primarily Cutter & Buck in Sports & Leisure. The Groups goodwill and trademarks are tested annual to asses whether any need for impairment exists. The assets value is determined by discounting values of cash flow forecasts for the next five years, including a terminal growth period, using a weighted cost of capital( WACC). The most significant assumptions when determining the value in use consists of growth rate, operating margin and WACC.

Based on the tests and analyses carried out, there is, in the current situation, no write-down requirement. Nor were there any write-down requirements for the comparison year. For more information about the Groups intangible assets and impairment testing, see note 8.

PERSONNEL, ORGANISATION AND COMPENSATION

The number of employees as of 31 December 2017 amounted to 2,495( 2,396) of whom 52 % were female and 48 % were men. Of the total number of employees 631( 631) work in production. The production contained within New Wave group is attributable to Ahead( embroidery), Cutter & Buck( embroidery), Paris Glove, Orrefors Kosta Boda, Seger, Termo, Dahetra and Toppoint.

There is no specifically appointed remuneration committee for the management of salary levels, pension benefits, incentive matters, and other terms of employment for the CEO as these issues are addressed by the Board as a whole. The terms of employment for other members of Group Management are decided on by the CEO and Chairman of the Board.

Shown below are New Wave Group’ s guidelines for compensation to senior executives. The guidelines have been applied during 2017 and up to the annual general meeting 2018, and is even proposed at the annual general meeting May 16, 2018:

Remuneration to the Group CEO and senior management shall comprise a fixed salary at market rate.

No specific Board fees for work within Group companies will be paid to the senior management.

Variable remuneration, such as bonuses, may be permitted when it can be justified for the recruitment or retention of key employees, and to stimulate improvements in sales and profits, as well as for work to achieve the specific key ratios set by the Board. Variable remuneration shall be based on predetermined and measurable criteria such as the earnings trend for the New Wave Group, or the return on equity compared with fixed targets. Variable remuneration shall not exceed 50 % of the fixed remuneration. Total yearly cost cannot exceed SEK 10 million.

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