Significant events after the end of the period
Peter Andersson has been appointed President and CEO and will assume the position on October 11 at the latest. Peter is 44 years old and has been active as Business Unit Manager for Production Sweden & Poland since 2016.
A new three-year credit agreement was signed with Skandinaviska Enskilda Banken AB. The facility amounts to SEK 825 M and matures in July 2022 with an option for extension by another two years.
Decision has been taken to make significant investments of approximately SEK 60 M at the site in Norrköping. The investments are anticipated to give competitive advantages after being taken into operation in 2020. In connection with the investment decision the existing rental agreement for the Norrköping site has been extended to 2029.
No other significant events have taken place after the end of the period.
Transactions with related parties
No transactions took place between BE Group and related parties that had a material impact on the company’s financial position and results apart from dividend paid to the mother company´s shareholders according to decision taken at the Annual General Meeting 2019.
Significant risks and uncertainties
The financial risk exposure is explained in the 2018 Annual Report, which was published in March 2019. No new significant risks or uncertainties have arisen since that date.
The interim report was prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The Parent Company’s interim report is prepared in compliance with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board’s recommendation RFR 2 Accounting for Legal Entities.
Refer to the 2018 Annual Report for details of the Group’s accounting principles and definitions of certain terms. The principles applied are unchanged in relation to the Annual Report with addition of the new accounting principle regarding IFRS 16 that entered into effect on January 1, 2019, and are described in the Annual Report 2018, under Accounting principles.
IFRS 16 Leases replaces existing IFRS related to recognition of leases, such as IAS 17 Leases and IFRIC 4 Determining Whether an Arrangement Contains a Lease. The Group applies the standard from January 1, 2019.
IFRS 16 mainly affects lessees and the central effect is that all leases that previously were recognized as operating leases are recognized in a way that is similar to the previous recognition of finance leases. This means that even for operating leases, assets and liabilities are recognized, with associated recognition of costs for depreciation and interest – in contrast to previous principles when no recognition was made of lease assets and related liabilities, and when the leasing fees were allocated to periods straight-line as a leasing cost. Except for recognition of the right of use asset and leasing liability for leases of minor value and contracts of a duration of no more than 12 months. The Group has chosen not to apply the exemption rules. The Group also applies the relief rule to inherit the earlier definition of leasing at the transition. This means that it is applied to all contracts entered into before January 1, 2019 identified as leases under IAS 17 and IFRIC 4.
At January 1, 2019, the Group reports rights of use, related to outstanding leasing commitments, of SEK 565 M and leasing liabilities of SEK 565 M. The effect of the introduction of IFRS 16 on the financial statements depends on future financial circumstances, including the Group’s loan interest, the composition of the Group’s leasing portfolio and the Group’s assessment regarding whether or not they want to use any options to extend leases. The Group´s EBITDA has improved at the same time that interest expenses have increased. The change is due to the costs for the operating leases previously being included in EBITDA, while amortization on rights of use and interest on the leading liability do not.
The Group applies the modified retroactive transition method, which means that the accumulated effect of the transition to IFRS 16 is recognized in the retained earnings in the opening balance at January 1, 2019. The effect in the retained earnings of the transition to IFRS 16 has no material impact to BE Group. No comparative figures will be restated.
The reconciliation between commitments regarding operating leases according to IAS 17 as of December 31, 2018 and the lease liability as of January 1, 2019 according to IFRS 16 is presented below. The weighted average marginal loan interest rate as of January 1, 2019 was 2%.
|Commitments for operating leases at December 31, 2018||617|
|Discounting with application of the Group’s marginal interest on loans||-50|
|Lease liability at January 1, 2019||565|
|Liabilities for finance leases at January 1, 2018||18|
The lease liability at June 30, 2019, amounts to SEK 543 M, of which SEK 16 M corresponds to what was previously recognized as finance leases.
IFRIC 23 clarifies how companies are to assess the manner in which a transaction is to be measured and recognized when there are uncertainties in income tax. The Group applies the new guidance as of 1 January 2019. In connection with application, the Group’s tax positions were reassessed based on the new guidance, which generated an increased provision for income tax of SEK 2 M.