NWG // FINANCIAL INFORMATION
Strong growth
The continued expansion planned by New Wave Group will put strong pressure on management and employees. Wrong recruitments, organizational problems, the departure of key individuals etc. could delay and affect the progress of the expansion. The crucial factor determining the pace of expansion is that results expand at the same pace. New Wave Group is allocating resources to mentorship schemes and annual meetings of management to guarantee strong future leadership and spread New Wave Group’ s values.
Fashion trends- changes in economic conditions
New Wave Group devotes significant resources to ensure good design and quality. Still, due to the rapid pace of change in the fashion industry, the Group cannot exclude the possibility of temporary declines in sales for certain collections. However, New Wave Group has a limited risk, as the fashion content is low in the Corporate operating segment and the promo sales channel. The Sports & Leisure operating segment also focuses on areas that are less sensitive to changes in fashions, even if fashion trends have a somewhat higher impact.
New Wave Group’ s goal is that the promo sales channel shall account for 60 – 80 % of total sales.
Foreign expansion
The Group establishes presence in additional foreign countries only when previous foreign operations are generating satisfactory profits. The Board deems that this strategy represents a good compromise between optimal growth and reduced risk. New Wave Group believes it is very hard to determine the exact timetables and budgets for new foreign ventures, which could entail a risk of initial losses. However, the Board deems that the company is well equipped for the new ventures that are being planned.
Environment
The Group’ s operations may involve environmental commitments, but the Board’ s and the management’ s assessment is that these, to the extent that they may have an impact on the Group’ s financial position, have been considered in the present financial statements.
Financial risks
New Wave Group’ s international operations means that it is continuously exposed to various financial risks. The financial risks are interest rate risks, currency and liquidity and credit risks. In order to minimize the effect these risks may have on earnings, the Group has a risk policy.
The Group’ s policy is to have short fixed-rate interest periods, which means that fluctuating short-term interest rates have a rapid impact on the Group’ s net interest income.
A significant portion of New Wave Group’ s sales are made in foreign currency( 79 %). The Group is exposed to changes in exchange rates in the future flows of payments related to firm commitments and to loans and bank deposits in foreign currencies, i. e. transaction exposure. The Group’ s financial statements are also affected by translating the results and net assets of foreign subsidiaries into SEK, i. e. translation exposure.
Due to the relatively capital-intensive nature of its activities and its expansive growth strategy, New Wave Group has a need to secure its funding. For a growth group like New Wave Group it is essential to ensure that sufficient liquidity is available to fund future expansion and that there is a high degree of flexibility when acquisition opportunities occur. It is also important that a sound balance between equity and financing through debt is kept, as New Wave Group’ s goal is that the equity ratio should not fall below 40 % over one business cycle( see also Financial targets on page 88).
The Group is exposed to credit risk from its operating activities, primarily accounts receivable, and from its financing activities which include deposits at banks and financial institutions, currency futures and other financial instruments. The Group’ s total exposure to credit risk amounted, at year-end, to SEK 2,295.7( 1,983.1) million.
For a more extensive description of the Group’ s risk exposures and risk management see note 16.
The Parent company
Net sales amounted to SEK 180.4( 121.9) million, which refers to intra-group sales. Result before appropriations and tax decreased and amounted to SEK 395.8( 509.1) million, which is mainly related to write down of financial assets where capital contributions to cover losses in subsidiaries have been written down. Cash flow from investing activities amounted to SEK-36.8( 43.6) million. Last year ' s cash flow includes an intragroup company sale of SEK 95 million.
Total assets amounted to SEK 5,319.2( 5,520.9) million and equity, including the equity portion of untaxed reserves, amounted to SEK 2,648.5( 2,741.4) million. Net debt amounted to SEK 1,469.5( 1,674.7) million. The parent company ' s net financing to subsidiaries amounted to SEK 1,781.3( 2,156.6) million.
ANNUAL REPORT // 087