New Wave Group AB Q3_Nov_06_EN_HQ | Page 9

PERSONNEL AND ORGANISATION The number of employees as of 30 September was 2,592 (2,565), of which 52 % were women and 48 % were men. Of the number of employees, 592 (609) work in production. The production available within the New Wave Group is attributable to AHEAD (embroidery), Cutter & Buck (embroidery), Dahetra, Kosta Boda, Orrefors, Paris Glove, Seger, Termo and Toppoint. INTANGIBLE ASSETS INVESTMENTS, FINANCING AND LIQUIDITY The Group’s intangible assets with indefinite useful life consist of goodwill and trademarks. The useful lives are assessed to be inde- finite because they are well established strategic brands in respective markets which the Group intends to maintain and develop further. The brands with greater value, listed at their acquisition values, are well-known brands such as Orrefors and Kosta Boda within Gifts & Home Furnishings as well as mainly Cutter & Buck within Sports & Leisure. The value of the Group’s goodwill and trademarks, which are based on local currency and can give rise to currency tran- slation effects in the consolidated financial statements, have been allocated between the cash-generating units they are considered to belong to. These units are also the Group’s segments. The value of these intangible assets is reviewed annually to ensure that the value does not deviate negatively from book value, but can be tested more frequently if there are indications that the value has decreased. In order to assess whether there are indications of impairment, the recoverable amount needs to be determined by a calculation of the respective cash-generating unit’s value in use. The value in use is based on established cash flow projections for the next five years, and a long-term growth rate, so-called terminal growth. The most important assumptions in determining the value in use include growth rate, operating margin and discount rate (WACC). When determining the discount rate, an assessment of financial factors such as interest rates, borrowing costs, market risk, beta values and tax rates will be carried out. As the cash generating units have different characteristics, each unit is assessed after its commercial factors. The estimated cost of capital (WACC) is considered to be representative of all cash generating units. Cash flow from operating activities for the quarter amounted to SEK -131.1 (-83.0) million. The lower cash flow is mainly attribu- table to the timing of payments for goods purchased. Cash flow from investing activities amounted to SEK -32.6 (-42.1) million. For the first nine months of the year, cash flow from operating activities was SEK -187.3 (48.2) million. The lower cash flow is mainly related to the timing of payments of the Group's merch- andise purchases. Cash flow from investing activities was slightly lower than last year and amounted to SEK -106.5 (-123.5) million. Net debt increased by SEK 1,183.0 million, of which SEK 692.0 million is related to IFRS 16, and amounted to SEK 3,093.5 (1,910.5) million. The remainder of the increase is mainly due to financing of our expanded product range and therefore higher inventory values. The net debt to equity ratio and net debt in relation to working capital amounted to 82.8 (58.4)% and 78.8 (59.4)% respectively, see also Note 8 regarding IFRS 16 on page 27. The equity ratio decreased by 3.7 percentage points compared to the previous year and amounted to 44.0 (47.7) %. The decrease is attributable to IFRS 16, which reduced the equity ratio by 4.0 percentage points. In September, the Group signed a supplement to the existing financing agreement and increased its total credit limit by an addi- tional SEK 500 million. As of September 30, the Group's total credit limit thus amounted to SEK 3,248 million, of which SEK 2,150 million runs until March 2022, USD 25 million through January 2024 and SEK 350 million has a maturity extending until August 2027. The other SEK 500 million has a maturity between three months and six years. The credit limit is limited in amount to and dependent on the value of certain underlying assets. The financing agreement means that key ratios (covenants) must be met for maintenance of the credit limit. The cash-flow forecasts that are basis for the impairment test are based on the five year forecast adopted by the Board (2020-2024) and thereafter a terminal growth of 3.0 (3.0 %). In calculating the present value of expected future cash flows, a weighted average cost of capital (WACC) of 10.2 (10.3) % before tax is used. Based on the tests and analyses carried out, there is, in the current situation, no need for impairment. Nor was there any need for impairment for the comparison year. Based on the current forecast, the management estimates that the Group will be able to meet these key figures with a satisfactory margin. 9