Annual Report 2013
Making the world a better place to sit
CONTENT 01
Important events in 2013
04
Among the leaders in Europe
06
About Scandinavian Business Seating
10
The ceo’s report
14
Corporate Management
16
Corporate Governance
20
Scandinavian Business Seating chases new growth
26
Growth through clear differentiation
28
HÅG
32
RH
36
RBM
40
Directors’ report for 2013
48
Consolidated annual accounts
80
Annual accounts Scandinavian Business Seating Group AS
90
Auditor’s report
92
Corporate responsibility report
119
Contacts
HÅG SoFi
Important events in 2013 Increased market orientation
The office furniture market saw stable development in 2013. Sales performance in the different markets has varied according to the state of the market, and the group recorded a decline of just below 1 % in sales, compared with 2012. This is considered satisfactory, particularly in relation to the challenges in the European markets. The reorganisation in the sales area, with the introduction of a new organisational model in the sales companies, was completed in 2013. This has given a clearer organisational model, with more defined roles and responsibilities, and a distinction between the Key Account Management teams (major projects) and the more dealer-focused teams.
New products
The new HÅG SoFi, RH Mereo and RBM Noor products were first launched at the Stockholm Furniture Fair in February 2013, and have received a very warm welcome on the market. The products have already managed to receive several awards and international recognition.
Still committed to Asia
In 2013, the subsidiary in Singapore showed a positive development, and further potential in the region has been identified. Last year the group began the work of establishing own companies in Shanghai and Hong Kong.
Establishment in Switzerland
In June, the group established a subsidiary in Switzerland, Scandinavian Business Seating AG. On 1 July 2013, the group took over the dealer agreements and employees from our distributor in Switzerland, and brought them to the new company. The running of our operation in Switzerland showed a positive development during the last half of 2013.
Better margins and operating profit
The group has continued the work of increasing the efficiency of the entire value chain. A more structured procurement organisation, greater efficiency in the production processes and effective management of production capacity made a great contribution to margins in 2013. The operating profit was also positively affected by strict privatising and a focused approach to activities and fixed costs.
RH Mereo
Revenues and results (MNOK) 1 400
250
1 200
200
1 000 800
150
600
100
400
50
200 0
2008
2009
2010
2011
2012
2013
0
EBITA Operating revenues
RBM Noor
Some major customers/contracts in 2013 Norway:
DNB Bank ASA Statkraft SF
Sweden:
Ericsson Volvo Cars AB
Denmark:
DSB Koncernen Tåstrup Danske Bank
Netherlands: Isala Klinieken ABN AMRO UK:
Schroders UK
France:
LVMH – Moët Hennessy · Louis Vuitton
Switzerland: CERN USA:
AC Nielsen Chicago Northwestern University, Chicago
Malaysia: Telenor DNV, Singapore
Singapore: DNV
3
RBM Flip and Fold/HÅG Capisco
HÅG Futu
RBM Low Back Bella/ RBM Allround bord
RH Support
HÅG Capisco/HÅG SoFi – Deloitte, Norway
AMONG THE LEADERS IN EUROPE Vision: To make the world a better place to sit Mission: To offer the best seating solutions for working people Scandinavian Business Seating is an international company in the office chairs, canteen- and conference furniture segment. Its head office is in Oslo, and it has production units in Norway and Sweden. The group also has sales companies in Denmark, Germany, the Netherlands, the UK, France, Singapore, Switzerland and China. The group is the largest supplier of office chairs in Western Europe. HÅG, RBM and RH are rooted in the Scandinavia design tradition, based on unique design philosophies and concepts that target different buyer groups. 4
Sales per market 2013 30%
18% 15% 10%
Operating income EBITA margin Income before taxes Net income Net interest bearing-debt Investments Total assets Net working capital 1) Equity share 2) No. of employees per 31.12.
1%
Asia
Switzerland
1%
France
Export
UK
Be-Ne-Lux
Germany
Denmark
3%
Swivel chairs 60%
RH 31%
Conference 35%
RBM 10%
Other 5%
MNOK
2013
2012
2011
2010
2009
2008
1 003
1 010
1 091
1 010
989
1 289
MNOK
235
236
255
204
105
247
MNOK
204
204
219
165
46
207
%
20
20
20
16
5
16
MNOK
80
83
81
72
(8)
26
MNOK
56
73
49
50
(9)
17
MNOK
898
574
657
618
775
900
MNOK
61
58
28
19
31
60
MNOK
1 880
1 829
1 864
1 835
1 859
1 985
%
16
11
14
14
13
15
%
40
55
50
55
49
41
Full time equivalents per 31.12. No. of sold chairs
5%
HÅG 59%
Key figures
EBITDA
6%
Distribution number of units sold 2013
Sales per brand 2013
Operating revenues
Sweden
Norway
7%
Thousand
472
475
479
463
457
633
459
462
462
451
447
617
417
433
455
443
485
1) Inventory + accounts receivables - accounts payable in percent of operating revenues 2) Includes shareholder loan in 2012 and earlier.
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ANNUAL REPORT 2013
Scandinavian Business Seating
The organisation
ABOUT Scandinavian Business Seating Scandinavian Business Seating is the market leader in Scandinavia for the design, development and production of office chairs and seating for private and public office environments. Over the course of the last few years, the group has also cemented its position as the largest manufacturer of office chairs in Western Europe, in terms of value. The group, which comprises Scandinavian Business Seating Group AS and its subsidiaries, owns the Scandinavian brands HÅG, RBM and RH, which all operate in the premium segment of the office chair market. Scandinavian Business Seating, with 470 employees, is dedicated to realising the company’s vision: Making the world a better place to sit! The group has its head office in Oslo and production units at Røros in Norway and Nässjö in Sweden. In addition, the group has its own sales companies in Denmark, Germany, the Netherlands, the UK, France, Switzerland, Singapore and China, as well as a large network of independent dealers and partners in other important markets for the company.
Ownership structure
The group was founded in June 2007 and changed its name to Scandinavian Business Seating in autumn 2008. All three merged companies were strong privately-owned start-ups with long traditions and extensive experience of developing, producing and marketing office chairs in Europe. HÅG has existed since 1943, RBM since 1975 and RH since 1977. The Swedish private equity conglomerate Ratos AB, which is listed on Nasdaq OMX Stockholm, acquired RH, RBM and HÅG in 2007.
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Ratos owns companies in a range of industries and is one of Europe’s largest listed private equity conglomerates. Ratos had 18 companies in its portfolio in 2013, with 21 000 employees, sales of SEK 42 billion and an operating income of SEK 3 billion. Ratos’s business concept is to generate, over time, the highest possible return through the professional, active and responsible exercise of its ownership role in companies. In addition to a solid capital base, Ratos also contributes extensive experience and expertise to strategic, industrial, structural and financial processes at the companies it owns.
Market position
Scandinavian Business Seating’s main market is Scandinavia, which accounts for 63 per cent of its total sales. Sales to other European markets account for around 31 per cent of total sales, with Germany, the Netherlands and the UK constituting the largest markets. Office chairs and seating solutions account for about 40 percent of the total office furniture market in Western Europe, which is estimated to be worth around NOK 22 billion per annum. Today, the group is the market leader in office chairs in Scandinavia, with a market share of 34 per cent. Over the course of the last few years, the group has also bolstered its position as the largest manufacturer of office chairs in Western Europe, in terms of value. Scandinavian Business Seating is well positioned in terms of price, function, design, environment and geographical cover to win new market shares within all its market segments.
RBM Noor/RBM Twisted Little Star table
HÅG SoFi
RH Mereo
The company´s three brands, HÅG, RBM og RH, are based on Scandinavian values and characteristics.
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ANNUAL REPORT 2013
Scandinavian Business Seating
Business strategy
Scandinavian Business Seating has clear ambitions to expand still further, thereby cementing and strengthening its position as the leading office chair specialist in Europe. We abide by our motto of “different and better”, working with innovative new products and pursuing an offensive marketing strategy, inspired by two distinct market trends –health and the environment.
Sales and distribution
The group’s products are distributed via a network of independent dealers. The main markets are served by dedicated companies in Norway, Sweden, Denmark, Germany, the UK, the Netherlands, France, Switzerland and Singapore. The group has established a common export unit, Global Partner Organisation (GPO), for sales to other markets. GPO’s remit includes marketing and selling the company’s three brands to customers in the USA, Europe and the rest of the world via partners and importers. The company also enjoys close cooperation with interior designers, ergonomists and purchasers, who, together with our own organisation, provide good dialogue with and service for our end users.
Research and development
Innovation and design are prerequisites for international success in our industry. Scandinavian Business Seating has a strong research and development culture, backed up by tradition and experience, within the spheres of design, ergonomics and the environment. Research and development work is deemed a top priority, both at brand and group level, with R&D facilities in Oslo and Røros in Norway and at Nässjö in Sweden.
We make the world a better place to sit!
Nature did not design people to sit still in office chairs. We need movement and variation and for the person and workstation to interact well in order to perform at our best and, at the same time, protect our health and the environment. Once we realise how much time we spend seated in office chairs, meeting chairs or other seating solutions, it becomes clear that the world deserves good chairs to sit on. Scandinavian Business Seating therefore wants to facilitate better performance at work by fulfilling the following mission: To offer the best seating solutions for working people. Our vision, which is also our guiding light, is: To make the world a better place to sit.
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The organisation
Corporate social responsibility
An overarching concept at Scandinavian Business Seating is that we have a clear responsibility above and beyond making money that involves protecting our shared environment and demonstrating corporate social responsibility and social accountability in areas where our activities come into contact with communities, locally and globally. We wish to achieve this through products and processes that are as resource efficient and environmentally-sound as possible, while also being safe in terms of health. We also work in a targeted manner to create a good working environment, with employees who are aware of their responsibilities as regards health and the environment. We provide our employees with training in environmental management systems, and we keep up to date with and comply with relevant laws and regulations within the quality and environment field.
Strong brands – HÅG, RBM and RH
The group’s three brands, HÅG, RBM and RH, are based on Scandinavian values and characteristics. At the same time they each occupy a niche in the office chair market, with distinct design philosophies and concepts that meet the varying needs of the market and customers. Our seating solutions therefore focus strongly on ◆ visual design ◆ ergonomics ◆ environment ◆ quality A brand is all about the product’s function and user experiences, visual design and identity, and the story conveyed by the product. All our products project a common Scandinavian identity: ◆ User-oriented, functional design with optimum use of materials. ◆ The right quality at the right price. ◆ Balance between ergonomics, the environment and aesthetics, characterised by elegance and simplicity. ◆ The most environmentally-correct products at this time. It is the case that the above result in products that stand out in a market moving in so many different product directions.
VISUal DESIGN
ERGONOMIcs
Environment
quality
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ANNUAL REPORT 2013
Scandinavian Business Seating
The organisation
Lars I. Røiri
THE CEO's REPORT Well positioned for growth, good profitability and new market shares
largest product launches ever in the history of the company, with three new main product series for all three of our brands, HÅG, RH and RBM. This has helped improve our position in the markets, and secure our leading position as an office chair specialist. Our commitment to the Asian market was further strengthened during the year. We have succeeded at establishing a presence, and have identified key potential for our product solutions in this region. We have also established a new subsidiary in Switzerland.
Scandinavian Business Seating is the market leader in Scandinavia for the development, design and production of chairs for offices, canteens and conference rooms. The office furniture market in Europe showed more stable development in 2013 following negative growth in 2012. As Europe is our main market, this led to good profitability in 2013. The total turnover is in line with 2012, with growth in Denmark, the UK, France, Switzerland, the USA and Asia. We are noting a stable development in Germany, a negative development in the Netherlands, and a weak decline in Norway, Sweden and Finland due to a fewer number of major projects in the market. We have nevertheless taken a larger share of the project market in Norway.
The company has conducted several projects for operational improvement that have yielded results. This has resulted in better margins and a stronger foundation for continued profitable growth and development. Scandinavian Business Seating now appears to be a company with the financial and organisational clout to take market shares and grow in the markets.
Despite stable and somewhat negative growth in the overall market, Scandinavian Business Seating achieved good results in 2013 through our improvement and development projects, and the largest product launches in the company's history. This makes us well positioned for growth, good profitability and new market shares, regardless of how the overall market develops in the time ahead.
Strengthened position
Scandinavian Business Seating has reinforced its market position and also in 2013 has a significant share of the industry's total profitability. The good result is due to stable sales and an effective combination of sourcing and automation of our assembly. We also still note good effects of the past restructuring processes. During 2013 we focused on growth and continuing to increase our market shares in the main markets. Despite a very challenging market in Europe, we have succeeded at achieving growth in individual markets. We have also executed the
10
The successful product launches make us well-equipped to tackle different market scenarios, whether dealing with a market that is still volatile or a market with stronger growth. Sales were slightly lower than the previous year in a market that on the whole saw negative growth in certain European markets. Despite the stable/negative development in the overall market, we achieved good results and reinforced our position for future good profitability through our improvement and development projects. The earnings before interest, tax and amortisation (EBITA) were 20.4 %, which is on the same level as last year. The good operating margin is due to our continued focus on the main markets and defined target markets (Asia and the USA), combined with operational improvement.
With its solid financial position and wellcapitalised owners, Scandinavian Business Seating is well-positioned to take an active role in the coming consolidation process. HÅG SoFi Communication/ RBM Twisted Little Star/RH Lounge
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ANNUAL REPORT 2013
Scandinavian Business Seating
Favourable future prospects
We anticipate the total market development in 2014 to remain uncertain but, as in 2013 with greater variations from market to market. The company's significant exposure in Scandinavia, and particularly Norway, is positive for the group because the macroeconomic prospects for Scandinavia are positive. As for Europe otherwise, we expect a strengthening of our market positions in 2014, partly due to our new products, which were well received on the market in 2013. An increasingly stable and positive overall market in the medium term means that we continue to expect increased consolidation within the industry, following a lengthy period of very little activity. The market is still very fragmented, and consolidation will probably occur at the manufacturer level in particular. With its solid financial position and well-capitalised owners, Scandinavian Business Seating is well-positioned to take an active role in the coming consolidation process. As a major player in the industry, we strengthened our relationships with customers and suppliers in 2013. Our strategy continues to focus on building closer partnerships and promoting long-term collaboration with our most important customers and suppliers. At the same time, we will continue the work of developing and increasing the efficiency of the work processes, when there is still room for improvement and further optimisation. Scandinavian Business Seating will also continue our offensive focus on product development in 2014. This is an important part of our strategy to ensure that we expand our position as one of Europe's leading names within the development, design and production of seating solutions for office environments. In 2013, we reinforced our position towards the goal to become the leading office chair specialist in the European markets. We will provide the best, most competitive seating solutions by "making the world a better place to sit". 2014 will give us substantial scope for strengthening the company and reinforcing our market position, which will involve: ◆◆ growing in the European markets by selectively investing in more resources in individual markets, and further developing our sales and distribution process for increased sales productivity. ◆◆ actively developing our organisation, partner model and markets in Asia. ◆◆ keeping a high commitment and investment level in product development. ◆◆ developing and launching our future e-business model.
12
The organisation
The environment and corporate social responsibility
The group has focused on the environment for over 20 years. This can be seen in product solutions, choice of materials and processes that lead to lower greenhouse gas emissions, less use of chemicals and lower resource consumption. These attitudes are visible in everything from product development to production and sale, both in-house and through the requirements we make on the rest of the value chain. We are pleased to see that also this work yields results and a competitive advantage. In 2013, we received the Norwegian Design Council's Environment Award for our new HÅG SoFi office chair. The group issues an annual corporate responsibility report based on the internationally recognised Global Reporting Initiative format. In addition to discussing environmental performance and goals, the report accounts for how the group works with suppliers in low-cost countries and how we handle our corporate social responsibility for both internal and external interested parties. The group had 470 employees at the end of 2013. They are organised in an efficient matrix structure. We are an organisation with highly-skilled workers, and have further increased our expertise in key fields. In 2013, the organisation yet again proved its strength and competence through three major launches and several development projects. This is why it is not a cliché to state that our workers and our organisation are our main competitive advantage going ahead. Scandinavian Business Seating is well-positioned for further growth and profitability, with a clear focus on creating the best possible growth potential for the group.
Lars I. Røiri CEO
EBITA-margin 20,0%
20,2%
20,4%
2011
2012
2013
16,4%
16,1%
4,6%
2008 HÅG SoFi Communication
2009
2010
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ANNUAL REPORT 2013
Scandinavian Business Seating
The organisation
CORPORATE MANAGEMENT 1. Ketil Årdal (b. 1970) Senior Vice President Commercial Operations Responsible for sales in Europe and marketing. Joined in 2012. Training and experience from the Norwegian Armed Forces. Holds a diploma from BI / Varehandelens Høyskole and has completed business programmes at the London Business School and the IMD in Lausanne. Ketil began his career at Kellogg's, and has worked internationally at Findus and Duni. 2. Christian Eide Lodgaard (b. 1970) Senior Vice President Products & Brand Concepts Responsible for product development. Joined in 2007. MSc in Science and previously worked at Hydro Aluminium Automotive. 3. Patrik Röstlund (b. 1970) Senior Vice President Manufacturing & Purchasing Operations Responsible for production, procurement and logistics. Joined in 2010. Holds a Bachelor in Business Administration. Previously worked at Saab Automobile and General Motors. 4. Lars I. Røiri (b. 1961) CEO Joined Scandinavian Business Seating (HÅG) in 1999 and was appointed Managing Director in 2001. Became CEO of Scandinavian Business Seating when the group was formed in June 2007. MSc in Business. Previously worked at Tomra, Saba-Mølnlycke, Jordan and Coloplast Norge. 5. Lillevi E. Øglænd Ivarson (b. 1964) Senior Vice President HR & Organisation Development Responsible for the HR function. Joined in 2007. MSc in Business. Previously worked at Hydro and Yara. 6. Eirik Kronkvist (b. 1969) Chief Financial Officer / CFO Responsible for the accounts, finances, legal and IT. Joined in 2010. Bachelor in Business Administration and MBA in strategic management. Previous experience from Compaq Computer Norge, Hewlett Packard Norge and Steria. 7. Frederik Fogstad (b. 1965) Senior Vice President Global Partner Organisation (GPO) Responsible for sale to markets outside Europe. Joined in 2013. Education and experience from the Norwegian Armed Forces. MSc in Business. Past experience from Varier Furniture AS, Kunde & Co, INTERSPORT, Kellogg’s, Middelfart and Coca Cola.
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1
2
3
6 5
7
4
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ANNUAL REPORT 2013
Scandinavian Business Seating
The organisation
Corporate governance The company complies with the Norwegian recommendations regarding corporate governance. As the company is not listed on the stock exchange, its corporate governance has been tailored to the company’s situation. 94 % of the company’s shares are owned by the Swedish listed investment company, Ratos AB. The remaining shares are owned by a large number of executives and board members. Scandinavian Business Seating has defined its values. Together with the company's corporate culture, this forms the basis on which the board and management believes that Scandinavian Business Seating should be managed. The company's most important success factor has been its ability to develop, produce and market new seating solutions for office environments. Innovation, a cost-efficient procurement function, flexible production, familiarity with the market, and effective sales work are key success factors for Scandinavian Business Seating. Scandinavian Business Seating strives to maintain high ethical standards in its business practices. All of the companies and employees must comply with the relevant laws and regulations in the country in which they work. The company practises values-driven management based on its values. The company has drawn up guidelines for ethics and corporate social responsibility.
Business
The objects clause in Scandinavian Business Seating’s articles of association stipulates that: “The company’s activities are the production and sale of office furniture, including chairs. This also comprises directly or indirectly owning other companies that perform such activities, the provision of administrative services and other services to such companies, and anything else naturally related to this.”
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Scandinavian Business Seating designs, develops, produces and markets seating solutions for office environments. Growth and good profitability will be created through a high degree of innovation, modern Scandinavian design, good ergonomic solutions and a people and environment-oriented approach to the products. The group's executive management team currently has seven members. They cover the group's main processes in the value chain: CEO, R&D, production and procurement, sales and marketing, HR and finance/IT. The group's executive management team is constantly tailored to suit the company's strategic and operational development. The CEO has day-to-day responsibility for Scandinavian Business Seating's activities and manages the organisation within the framework set by the board.
Equity and dividends
The company's equity share as at 31.12.2013 was 40 %. No dividends will be paid in the short and medium term, as available liquidity will primarily be used to invest and repay debt. The board does not have a mandate to increase capital.
Equal treatment of shareholders and transactions with close associates
Scandinavian Business Seating has two share classes. Each A (ordinary) share is worth one vote, while B-shares do not have a vote. The company has laid down guidelines that require the board to be notified when board members or the CEO have significant interests in a transaction entered into by the company.
organisational structure: Group CEO Lars I. Røiri Commercial Operations Ketil Årdal
Manufacturing & Purchasing Operations Patrik Röstlund
Global Partner Organisation (GPO) Frederik Fogstad
COMMERCIAL RESPONSIBILITY
FUNCTIONAL RESPONSIBILITY
Products & Brand Concepts Christian Eide Lodgaard
Finance, IT, Legal & Risk Eirik Kronkvist
HR & Organisation Development Lillevi Ivarson
General meetings
Scandinavian Business Seating’s supreme body is the general meeting. The ordinary general meeting must be held every year by the end of March.
Nomination committee
A nomination committee has not been established for the election of shareholder-elected board members. As a result of the ownership structure, it has been natural that the work related to the composition of the board’s shareholder-elected members be handled by the largest shareholder, Ratos AB.
Corporate assembly and board: composition and independence
The company's articles of associations state that the board must consist of one to ten people, as determined by the general meeting, with the addition of board members that the employees may be entitled to elect. The current board of Scandinavian Business Seating has five members, all of whom are shareholder-elected. The board’s chair is selected by the general meeting. The board is broadly made up of technical, marketing and financial expertise. There are no limits on the terms of board members, as the board’s composition is reg-
ularly reviewed. The CEO is not a member of the board, but regularly attends the board meetings. Scandinavian Business Seating Group AS has no employees, and is a holding company. The employee's representatives sit on the boards of the operating companies Scandinavian Business Seating AS and Scandinavian Business Seating AB. A dedicated group committee has been established to secure good and open dialogue between the management and the employee-elected representatives across the organisation and geographical location. The committee has permanent members from the sites (two from Røros, two from Nässjö, and one from Oslo), as well as members from the management and the HR department. Three meetings are normally held each year. Scandinavian Business Seating and its underlying subsidiaries do not have their own corporate assemblies. An agreement has been concluded on extra board representation from the employees of Scandinavian Business Seating AS. The board of Scandinavian Business Seating AB also has employee representatives.
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ANNUAL REPORT 2013
Scandinavian Business Seating
The boards of Scandinavian Business Seating's other subsidiaries consist of the CEO of Scandinavian Business Seating, as chairman of the board, and members of the group's executive management team.
The work of the board
The board has overall responsibility for the management and control of the company. The management group updates the company’s three-year strategy plan every year on behalf of the board. This plan also contains the company’s financial target figures. The board approves general strategies and sets strategic and financial goals, which are maintained in the company's three year strategy plan and in the annual budget. Outside board meetings, the board serves as advisers to the management group. Six board meetings are held according to a fixed meeting and work plan. They are linked to the approval of quarterly figures and regular strategy work. The board has rules of procedure, and annually assesses its work. The board appoints the company’s CEO. The CEO performs his or her work pursuant to a job description, the company’s budget and strategy plan, and contact with the board. The board has a dedicated audit committee made up of selected members of the board. This committee prepares business for review before final decisions are made at the board meeting. The committee performs tasks related to financial reporting, the annual accounts, internal control, and has contact with the company’s auditor. The board annually reviews and approves the company’s policies.
Risk management and internal control
Every month, and as needed, the CEO reports on the company’s position and financial performance to the board in writing. Scandinavian Business Seating systematically revises its strategies based on a three-year rolling plan. Every year an extended group of key managers is involved in this work before the strategies are represented to the board. All employees are involved later and are informed of the content and the consequences for their areas of responsibility. The final, revised strategy provides the basis for the coming year's goals and priorities in the company's business plan. The strategy plan must be plain and simple, and provide clear guidelines for every function in the organisation. The ISO 9001 and ISO 14001 general management/quality system is reviewed and evaluated annually. The group’s interest and currency strategy is set by the board, provides guidelines to
18
The organisation
secure a good financial structure and to reduce risk in relation to fluctuations in the interest levels and exchange rates. Scandinavian Business Seating has a number of internal controllers who are organised under a group controller who reports to the CFO. The group has also drawn up a framework for risk management – a so-called Enterprise Risk Management framework. This framework determines how to work to identify, handle and follow up business risk at the group. The key strategic and operational risk is followed up closely through action plans and regular reporting. The board is regularly briefed on this work.
Remuneration of the board
The board’s remuneration is reported in note 22 of the company’s consolidated annual report. The board’s remuneration is fixed by the general meeting every year. The board’s remuneration is not linked to performance. The board members hold no options in the company. The board members have shares in the controlling company Scandinavian Business Seating AS. The list can be found in note 22.
Remuneration of executives
The remuneration of the CEO and other group management is reported in note 22 of the company’s annual report. The board fixes the terms of the CEO based on a proposal from the chairman of the board. There is no fixed bonus system for executives. However, various forms of bonus schemes are practised, where financial performance and qualitative goals are the most important indicators.
Auditor
The financial positions of almost all of the group’s companies are audited by the auditing firm Ernst & Young. The company’s central finance department cooperates with Ernst & Young in Norway to ensure good and coordinated auditing in all of the group’s units. The auditor’s fees are reported in note 9 of the company s consolidated annual report. Information is provided at the general meeting about the breakdown of the auditor's remuneration into auditing and other services. The auditor regularly attends audit committee meetings, and attends board meetings that review the annual accounts. Audits of health, safety and the environment and the maintenance of ISO certifications are carried out by Veritas auditors.
HÅG Sideways
RH Lounge
RBM Ana
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ANNUAL REPORT 2013
Scandinavian Business Seating
The organisation
SCANDINAVIAN BUSINESS SEATING CHASES NEW GROWTH Encouraged by all of the company's positive achievements during the past few years, and the fact that the company has taken the correct steps in a challenging market situation, the management of Scandinavian Business Seating appears offensive, proactive and with great self-confidence at the beginning of a new year. With a newly-trimmed sales organisation, three new product series that have been well received on the market, good profitability and satisfied customers, the main drivers of continued growth, increased profitability and new market shares are in place. "It has taken us several years to get where we are now. When competitors have had to make cuts during difficult times in recent years, we have had enough profitability to invest and build for the future. Without needing major new investments, we now have significant potential for volume growth as a result of the investments that have already been made in product development, new product launches, a completely new sales organisation, a better foothold in new markets and revitalisation of existing markets," says Scandinavian Business Seating CEO Lars Røiri.
Differentiation
"We have committed to the most profitable segment of the office furniture industry: office, canteen and conference chairs, which is the largest segment in the industry, the segment with the most frequent replacement, and the segment where it is possible to differentiate oneself from the competition, as we have succeeded at our differentiation and our three brands HÅG, RH and RBM. During the past six years in particular, our product development has increased our focus on visual design, quality, health/ergonomics and environmentally-friendly and sustainable production and products,
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so that we can now proudly say that we are industry leaders in documentation of sustainable production and sustainable products. We have incorporated this into our whole design philosophy and our design process. This has turned out to be a profitable venture, which is now paying off. In most tender processes we see an increasing demand for documentation of the environmental impact of the products," says Røiri.
Product development and sales
"Despite our recently having launched three new product series, for which we have great hopes in all of our markets, we are definitely not resting on our laurels. Product development is the main driver of continued growth. We will therefore continue to invest at the same level as earlier in this area, which means that it is still our goal to invest five per cent of our annual turnover in product development. This means that the market can expect new products in office, meeting room and canteen chairs from Scandinavian Business Seating every single year in the near term," says Røiri. He further has great expectations towards the results of the reorganisation that has taken place in the group's sales and marketing work, where the main focus is now on using the same sales method around the world, with a focus on project sales that yield volumes. This means visiting more customers, dealers and partners, and becoming an even better partner to them. This must take place through active participation on major projects, transfer of competence to the end-customer, training and development of the dealership network, selective focus on those who want to become large and professional, early and direct dialogue with the customer to solve and meet the customer's needs and, not least, close contact with both the network of dealers, contractors and architects to identify projects and generate leads at an early stage of the process.
When competitors have had to make cuts during difficult times in recent years, we have had enough profitability to invest and build for the future. From the left: Ketil Årdal, Frederik Fogstad and Lars I. Røiri.
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Europe and the USA
"During the past few years, we have managed to take market shares in a challenging European market. This puts us in a good position when we now see that the European market is gradually improving. We still have a strong position in Scandinavia, which has been the best corner of the world after the financial crisis, with continued strong potential in both Sweden and Denmark. We also have a solid foothold in Germany, the United Kingdom, the Netherlands, France and Switzerland. We judge the opportunities to be good for organic growth in these markets, especially after we have put a better and more efficient sales organisation in place," says Røiri. He receives support for this view from Ketil Årdal, who has a seat on the corporate management, with responsibility for the markets in Europe. "Going ahead, it is motivating that we have managed to take market shares in a challenging European market. We have managed this by professionalizing the sales and marketing work, establishing own subsidiaries with their own showrooms in the main markets (Benelux, the United Kingdom, Germany and Switzerland), establishing KAM functions with a focus on the project market and through a clear strategy and plan for transferring competence to our dealers. This has allowed us to move closer to our end-customers. I also see that we have managed to exploit all of the commercial synergies by fully integrating all sales and marketing work with our other business models. This allows us to avoid fragmentation and suboptimalization of the sales work," says Årdal, who is also pleased that the new product launches have been successful in both Scandinavia and the European market. "It was the dynamic philosophy behind the chairs, the functionality and user-friendliness, that led us to choose HÅG. HÅG chairs prepare us for a flexible future where no person has their own workspace, and where chairs intuitively can be understood and used by employees". (Edwin Swart, Product and Contract Manager, ABN AMRO, Central Facility Services) "What is most important going ahead will be to keep and reinforce our good position and our market shares, both in Scandinavia and in the rest of Europe. With new people and new sales competence in place in key markets, we will now have to focus on working both smarter and better in the market, and delivering results following from the new form of work," says Årdal, who is also pleased that the company has gradually succeeded at revitalising parts of the US market, in which it has had a presence for a long time, but where the competition from US companies is strong.
Asian hub strategy
"We have also consciously committed to new markets in Asia," says Fredrik Fogstad, who sits on the corporate management, with responsibility for Asia and markets in which the company does not have subsidiaries.
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UK Showroom. Clerkenwell, London
We chose HÅG chairs in fierce competition with other alternatives because our employees wanted them. They are the chairs that offer the best combination of comfort and style. We chose HÅG because of its quality.
(Ernst A. Meyer, VP & Regional Manager, DNV GL Oil & Gas, South East Asia)
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HÅG SoFi Communication
"There is significant growth in the large Asian market, where growth during the past few years has been 5–10 per cent in our industry. By way of comparison, the overall market in Europe has not moved during the same period, with some variations from market to market. There is also a large segment in Asia for products in the medium and high end market; segments that are concerned with and demand quality, brands and design from Europe; something we represent," says Fogstad. "Effectively profiting from the growth in the region going ahead requires a clear focus in the operational efforts, which is why we have a conscious hub strategy, where we want to establish ourselves in large population centres like Shanghai, Hong Kong, Singapore, Beijing and other 'highly potent' metropolises and development areas, also in South Korea. We have therefore made conscious choices based on resource use and options for a return." "We chose HÅG chairs due to the good ergonomics of the chairs and how this can contribute to employees' health and productivity. Reliable logistics, deliveries and installation at the right time were also key factors in a challenging region like Myanmar. Telenor has had good experience with HÅG
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chairs since 2001, which made the choice simple also this time. The 10-year guarantee says it all." (Petter Russ, Product Manager, Telenor Real Estate, International) We established ourselves in Singapore already two years ago, and now have a KAM function for the project market, sales staff, a showroom and customer service at this hub. We are setting up operations in Shanghai with Chinese employees, copying the Singapore model. We are very conscious of hiring people with a large network of architects, designers, contractors and others who can quickly help us enter into a dialogue with the project market and the end-customer, who ultimately makes decisions on our products and deliverables. The plan is then to set up operations this year in Hong Kong following the same model. We have had a good start in several of these places in that we have made deliveries to several of our Norwegian customers once they have established operations in these locations, says Fogstad, who believes that the strongest drivers for continued growth in Asia will be that Scandinavian Business Seating has a focus on and faith in what it does, and sells what it has and who it is. This means globalising and being faithful to the company's values and 'cornerstones' (quality, the environment, ergonomics and design), and telling
Reference projects delivered by Scandinavian Business Seating: SCANDINAVIA: NCC's main office in Norway (Oslo) ◆◆ Voted one of the world's 100 best in sustainable solutions by global environmental organisation Sustainia 100: "Cost-efficient building with spectacular architecture and a good indoor climate that inspires and invites cooperation, and shows the way to a sustainable future." ◆◆ Nominated, as the only Nordic building, to the "Best Innovative Green Building" at the MIPIM Awards (European real estate and city development fair), which is one of the most prestigious awards that can be won by architects and developers. EUROPE: ABN Amro (Netherlands) ◆◆ ABN Amro is one of the largest banking companies in the world. ◆◆ A key factor in the company's long-term strategy is its goal to be a leading employer. In an uncertain economic climate and in a world that is constantly changing, the company believes that it cannot afford to lose talents, and believes that what is most important is to create the best place to work. ◆◆ The above also reflects the company's choice of office furniture and office chairs. ABN Amro has replaced 8,000 chairs at its main office in Amsterdam since 2011. LVMH (France) "According to LMVH (Möet Hennessy · Louis Vuitton), Scandinavian Business Seating was chosen as a supplier of chairs for all laboratories and sewing departments due to its exclusive seating solutions, represented by brands HÅG and RH. The opportunities afforded by being able to adapt the chairs to all the different work situations at LVMH led the company to choose HÅG and RH in order to secure the well-being of its highly-qualified employees. The quality and sustainability of our products was also appreciated by LVMH." (Olgica Pezin, Country Manager, Scandinavian Business Seating, France) the same story in every market, because it has now been documented that this meets the different decision-makers, regardless of their geographical location. "This is why we will spend this year training and teaching all of our partners our concepts, values, design philosophy, business models and, not least, the environment and sustainability," says Fogstad.
ASIA: Telenor (Myanmar, Asia) ◆◆ Telenor won the telecommunications contract in Myanmar, and needed to quickly establish a base for 1,000 employees. ◆◆ As a pioneer in innovative workplaces in Asia, represented by its regional headquarters in Bangkok, Telenor wanted to extend this thinking in Myanmar. This is part of the work to attract the best employees in the region. ◆◆ Telenor's interior designer was Hassel, who also designed its regional headquarters in 2005. The project in Myanmar is based on a three-year contract, with planning and building of a new and larger office building to handle expected growth. Det Norske Veritas (DNV) – HQ in Singapore / "Standard Green" ◆◆ DNV Technology Centre received an award from the Singapore Building & Construction Agency; the Green Mark Award. ◆◆ The new offices house a total of 500 employees, who were previously based at four different locations on the island. ◆◆ DNV's office in Singapore combines an intelligent building structure and effective energy consumption. ◆◆ HÅG has delivered over 500 office chairs and 200 meeting room chairs to the new DNV offices.
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ANNUAL REPORT 2013
Scandinavian Business Seating
The organisation
Growth through clear differentiation Scandinavian Business Seating builds all of our work around our four cornerstones: quality, the environment, ergonomics and visual design. This means that we can present HÅG, RH and RBM on a foundation of quality and environmental thinking, while highlighting a solid differentiation between the brands based on a unique history of dynamic ergonomics and clear visual design. The differentiation makes sense to our buyer group's preferences, and significantly contributes to the work to take more market shares in the countries in which we operate.
The same history in every stage
We have spent considerable resources on training our employees to understand why we bring out new and innovative products faster than our competitors, what innovation means in terms of functionality and benefits, and how we will bring the products onto the market in a way that creates demand. Our employees are gathered and united around the story of our cornerstones, and create enthusiasm through a focus on the clear benefits to all people who sit. Every day. Again and again.
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Having a strategic focus on building competence both internally and externally has given us a major competitive edge in our markets. On the whole, this has led to the creation of a pan-European understanding and a momentum that is paving the way for further growth.
Digital venture
The Sales & Training Portal is the first of several digital tools that have come from our comprehensive work to improve our digital sales platform. In the time ahead, we will launch a number of new tools on all types of digital platforms that will make it easier to build added value into our brands – and even easier for our customers to come into direct contact with our concepts and products. An appealing, engaging and clear presentation of our concepts, products and world-class Scandinavian design will help increase our appeal and interest among our target groups. It will be even more important to continue to create interest, an opinion, value and trust in our brands among all of our target groups.
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HÅG SoFi
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ANNUAL REPORT 2013
Scandinavian Business Seating
The organisation
HÅG The HÅG movement
HÅG was founded in 1943 and has been manufactured in Røros, Norway since 1957. In the early 1970s, HÅG went against conventional wisdom and chose a different approach to ergonomic sitting: HÅG established what is still a unique ergonomic philosophy of balanced sitting, which is based on the conviction that people are not made to sit still, but for variation and movement. HÅG is one of the strongest brands in the office chair market in Scandinavia and one of the top 10 in Europe. This position has been achieved thanks to the brand's unique approach to sitting. Every time we develop a new HÅG product, we bring considerable innovation, while remaining true to HÅG's still unique philosophy: HÅG inBalance® keeps you in balanced, continuous movement without needing to think about it. We call it "the HÅG movement". A HÅG chair is designed for the active worker, and ensures that people are alert throughout the working day. Consistent Scandinavian design, accessible functionality and pioneering environmental thinking come together as a greater whole:
Furniture
2013 focused on launching and implementing the new HÅG SoFi office chair, which was first shown at Orgatec in Cologne in 2012. With a formidable presentation and reception at the Stockholm Furniture Fair as a beginning, the good start continued in our other markets. The common denominator here is that the HÅG SoFi attends to the user's need for visual and perceived comfort, and provides a good user experience. Through fully-upholstered organic forms and integrated handles, the HÅG SoFi appears to be a piece of furniture more than other office chairs. It creates calm and a sense of home at work.
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Good design
The HÅG SoFi received the Award for Design Excellence and the Environmental Award for sustainable production from the Norwegian Design Council in 2013. This makes HÅG the brand that has won the most awards from the Norwegian Design Council throughout the years. HÅG's products have received a number of international awards over the years, including the Red Dot Design Award and the iF Design Award.
At its best age
The HÅG Capisco chair has won a number of prizes for its properties and its characteristic design. After almost 30 years on the market, more HÅG Capisco chairs were produced and delivered in 2013 than ever before. The semi-sitting concept represented by this model was designed and developed by Peter Opsvik in the 1980s, and is as unique and is actually more attractive today than ever before. The product has been a pioneer in environmentally-friendly design and still has a very good environmental profile, compared with its competitors. As the first office chair in the world, it was awarded the Nordic Swan label in 2010, and has also met the new stricter requirements for this environmental label.
Environmental pioneer
For many years the HÅG brand has distinguished itself internationally through a conscious commitment to the environment and corporate social responsibility. HÅG's office chairs were among the first in Europe to be certified by the US GREENGUARD Environmental Institute. All HÅG collections are also certified according to ISO 14025-EDP (Environmental Product Declaration). This is a certification that shows that HÅG chairs stand out by having the lowest CO2 emissions in the industry.
Balanced sitting keeps you moving – without having to think about it. HÅG Capisco
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RH Mereo
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ANNUAL REPORT 2013
Scandinavian Business Seating
The organisation
RH Designed for human performance
With roots back to 1977, RH is an integral part of the Swedish design tradition. When the first RH chair was launched, it attracted warranted attention because it took users seriously. Today, the RH chair is recognised by ergotherapists, physiotherapists and other professionals for its unique ergonomic philosophy. It is based on the importance of an upright sitting position, support and movement. These are qualities that increase the users' job satisfaction, and thus also the employees' efficiency and productivity. From the very beginning, RH's philosophy has been to combine ergonomics and functional design. The strong brand concept "Designed for Human Performance" was incorporated later, to underline the fact that good design and correct ergonomics lead to documentable improvement in performance for organisations that use our products. This has helped make RH office and work chairs market leaders in several European countries, especially in RH's main segments – offices, health care and industry – where users make particularly high requirements on function and design.
Innovation and design
All RH chairs have been developed with a focus on functionality. RH products are accordingly comfortable ergonomic chairs that offer many adjustment possibilities and are durable. Despite the advanced construction and maximum performance, they are easy to understand and use, with clear pictograms and intuitive handles and grips. The 2PP™ principle was developed for RH. This is a two-point principle that helps the body maintain an upright sitting position and gives good support, while the chair's unique frictionless movement encourages motion. This technology is the basis for all chair series from RH.
Great success with the new RH Mereo
The RH Mereo chair family was launched at the Stockholm Furniture Fair in February 2013. The chair became a
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fantasticsuccess for the RH brand following production start in August 2013, and has already won a number of major contracts, and become the standard chair for many companies. Our aim in developing the RH Mereo was that the chair would meet the requirements of the dynamic and flexible offices of the future. Our focus was therefore to develop a chair that can be quickly and easily adjusted to the needs of the individual, without compromising ergonomics or performance. The RH Mereo is a product that offers a high level of individual seating comfort, dynamic ergonomics, user friendliness and flexibility that has not been seen on the market before. Extensive use of recycled aluminium instead of steel in many structural parts, together with a high percentage of recycled plastic in large components such as the seat and back, helps give the RH Mereo a world-class carbon footprint.
World-class ergonomics
The aim for RH is that the ergonomics and design of the products contribute to increasing the efficiency of the organisations that use the products. In 2013, RH received the FIRA Ergonomics Excellence Award for its chairs for the 13th year running. RH is the only brand to have received the award since it was established. This is a strong testament to the RH brand's commitment to first-class ergonomics.
Environmental commitment
The RH brand focuses on new solutions to protect the environment. This is achieved through Scandinavian Business Seating's commitment to high-quality products and sustainable production processes. The company is certified according to the ISO 14001 environmental standards. Many other components of the RH chair series are also made using recycled materials. RH was among the first office chair manufacturers whose products were certified in accordance with the international EPD system (Environmental Product Declaration).
RH is the ultimate work tool that always places you in the best seated position to perform. RH Mereo
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RBM Noor
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ANNUAL REPORT 2013
Scandinavian Business Seating
The organisation
RBM Vitalising space and relations
good seating comfort. The collection has a smart modular collection platform with 8 models, and has a large and inspiring composition of polypropylene and 3D plywood shell, textiles and underframe.
The RBM collection consists of a wide range of smart solutions in the form of tables and chairs designed to meet our customers' needs and please our users. RBM's products are functional, easy to use, easy to combine in flexible combinations for use in meeting rooms, canteens and conference environments.
The RBM Noor meets all high environmental standards at Scandinavian Business Seating, and is therefore a very environmentally-friendly and sustainable design.
With its lightweight, playful designs and clean lines, RBM is the ideal choice for open environments where people work, meet, learn and socialise.
RBM provides a good and inviting atmosphere, under the motto "Vitalising space and relations".
Philosophy and focus on people
Scandinavian Business Seating's brand RBM was established in Denmark in 1975, and has roots in Danish and Scandinavian design traditions. Continuous product development has helped create friendly, comfortable and inviting spaces that inspire communication and collaboration in different environments. RBM products are based on sound ergonomic and functional principles, with good comfort and the possibility of individual adaptation, which promotes a flexible working environment for users. The concept is based on the design having the power to change environments and the way people in the environments feel, collaborate and perform. All aspects of RBM's products, from materials, design and production to the sales and support apparatus, are founded on providing high quality and people-centred design.
The RBM Noor
The RBM Noor is our new colourful chair collection for canteens, conference rooms and meeting rooms. The chair was launched at Stockholm's Furniture Fair in February 2013, and received an excellent welcome. In July, also the RMB Noor received the renowned design award "Red Dot; Best of the Best Award" in the product design category. The RMB Noor is the result of an innovative joint-venture between our product development environment and three Scandinavian design agencies: Form Us With Love (FUWL) from Sweden, StokkeAustad from Norway and Grønlund Design from Denmark. The RBM Noor's rounded and friendly form is an expression of our people-centred design, which guarantees the user
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The RBM Low-back Bella
The RBM Low-back Bella was also launched at the Stockholm Furniture Fair in February 2013. This is an expansion of the classic Bella series, designed by renowned industrial designer Tias Eckhoff. The chair has a low back, which gives the design a stylish low profile, so that it easily fits into most environments.
RBM's design team
The RBM Noor and the RBM Low-back Bella have further strengthened RBM's design history. Collaboration with other leading designers also ensures that the brand is always at the forefront of development, while continuing our Scandinavian design traditions. ◆◆ Millions of the 1980 RBM Ana by Tias Eckhoff have been sold. ◆◆ Industrial designers Blum & Balle A/S from Denmark are responsible for the RBM Ultima folding table, the RBM Cameo conference chair and the RBM 600 office chair. ◆◆ Acer Design A/S, Denmark designed the RBM Connect table collection. ◆◆ Harrit & Sørensen A/S, Denmark designed the RBM Sweep sofa and table collection. ◆◆ Bare Møbler AS designed the RBM Twisted Little Star and the Flip and Fold collections.
RBM, Scandinavian Business Seating and the environment
Sustainable production is a natural assumption for Scandinavian Business Seating, and the company constantly strives to reduce its impact on the environment. The company is certified according to the ISO 14001 environmental management system. In the process of designing and manufacturing new RBM products, we always focus on using as few parts as possible and the most eco-friendly materials. The RBM Noor and the new RBM Ana chair series are among several RBM products that leave a very small carbon footprint (EPD), and are also certified in accordance with the GREENGUARD Indoor Air Quality (IAQ) programme for products with low emissions.
RBM is all about positive meetings and joyful moments between people. Space and relations. RBM Noor/RBM Eniment table
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ANNUAL REPORT 2013
Scandinavian Business Seating
Directors’ report
Report from the Board of Directors 2013 Scandinavian Business Seating is the market leader in Scandinavia for the design, development and production of seating solutions for office environments. Scandinavian Business Seating is a brand name supplier and markets HÅG, RH and RBM. The group’s head office is in Oslo and production takes place at its factories in Røros, Norway and Nässjö, Sweden. The group also has sales companies in Sweden, Denmark, Germany, the Netherlands, the UK, France and Singapore. Scandinavian Business Seating Group AS is the parent company of the group. It is a holding company for three companies: Scandinavian Business Seating AS in Norway, Scandinavian Business Seating AB in Sweden and Scandinavian Business Seating A/S in Denmark. The company’s activities include direct or indirect ownership of other companies engaged in the production and sale of office furniture, including chairs, the provision of administrative and other services to such companies, and anything else naturally associated with this.
Sales performance in the different markets has been varied, and the group recorded a decline of -0.8 % in total sales in 2013 compared with 2012, which is considered to be satisfactory in view of the challenges that have existed in the European markets. For the year as a whole, there was a reduction of sales in Scandinavia of one per cent, compared with the previous year. Norway was the only Scandinavian market that did not show an increase compared with 2012. This is due to there being fewer large projects in the Norwegian market in 2013. In the group’s European subsidiaries, there was an increase of two per cent in sales compared with the previous year. The other export markets saw sales grow by one per cent compared with the previous year.
Going concern
In 2013 the number of units sold fell by 3.8 %. The proportion of revenues from each brand remains unchanged from 2012. New orders in Q4 2013 were 19% higher than the same period in 2012 after a relatively slow post-summer start.
Market and general conditions
At the end of Q4 2013, the group concluded the acquisition of the importer in Switzerland. The acquisition was an asset agreement with the purchase of dealer contracts. Scandinavian Business Seating AG was established on 1 July 2013. Sales in Switzerland showed a positive trend in the third and fourth quarters.
The group has good levels of profitability and equity. In accordance with section 3-3 of the Accounting Act, it is hereby confirmed that the prerequisites for the going concern assumption exist and accordingly the financial statements have been prepared based on the going concern principle.
The office furniture market has seen a more stable development in 2013 than was the case in 2012. During the first half year, market development was level, due to the unrest in the Eurozone, but from autumn onward the group noticed a positive trend in some markets, such as Denmark, Sweden, Germany and the UK. From a sales point of view, the most
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challenging markets in 2013 were Benelux, Sweden, Germany and Southern Europe.
In November 2013, Scandinavian Business Seating Ltd opened its new showroom in Clerkenwell, London. This is an important part of the efforts in the UK, where the group intends to strengthen its position through Key Account Management focus on the project market in London.
HÅG H09 Inspiration
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ANNUAL REPORT 2013
Scandinavian Business Seating
The group has strengthened its efforts in Asia in 2013. In Q4 the process of establishing a subsidiary in China, Scandinavian Business Seating (Shanghai) Co. Ltd., was begun. The establishment of a Shanghai office will supplement the group’s existing office in Singapore in serving the Asian market.
Income statement
The operating income for the period for Scandinavian Business Seating Group AS was NOK -5.6 million, compared with NOK -3.1 million in 2012. After net financial income of NOK 51.9 million, the income before tax was NOK 46.3 million. Net income for the year was NOK 33.5 million compared with NOK 18.5 million in 2012. The company’s income consists of group contributions and interest income from the subsidiaries. Operating revenues for the group in 2013 were NOK 1,091 million compared with NOK 1,010 million in 2012. Operating income (EBITA) for the period were NOK 204.4 million compared with NOK 203.7 million in 2012. The operating margin in 2013 was 20.4%, an improvement of 0.2 percentage points from the previous year. In 2013 the group had positive contributions from effective production, effective control of direct material, freight costs and the level of fixed costs. The development of prices of raw materials has made a positive contribution to margins in 2013. Net financial expenses were NOK 124.9 million compared with NOK 121.1 million in 2012. The increase is due to higher interest expenses compared with the previous year. Income before tax was NOK 79.6 million compared with NOK 82.6 million the previous year. Net income was NOK 56.4 million, a decrease of NOK 16.7 million from 2012.
Balance sheet and liquidity
Total investments in 2013 amounted to NOK 61.5 million compared with NOK 58.1 million in 2012. Most of the investment was in connection with tools and moulds for new products and production equipment. Investments were made up of investment in fixed assets of NOK 43.0 million, acquisition of subsidiaries of NOK 7.0 million and recognised development costs of NOK 11.5 million. The group has had good liquidity throughout the year. At year-end 2013 net interest-bearing debt amounted to NOK 898 million, an increase of NOK 320 million since year-end 2012. During the course of 2013 the group has repaid NOK 1,075 million of long term liabilities, of which NOK 385 million relates to repayment of a subordinated loan and NOK 690 million was for repayment of a bank loan. The group’s bank agreement was refinanced in December 2013 and a new longterm loan of NOK 950 million was taken up. Total cash flow from operating activities amounted to NOK 134.8 million. Differences in relation to the operating income are mainly due to depreciation, taxes paid and changes in working capital.
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Directors’ report
Total assets at year-end amounted to NOK 1,864 million, an increase of NOK 51 million from year-end 2012. The equity ratio was 40% at the end of 2013 compared with 55% at the end of 2012. The company’s current liabilities at year-end were 21% of total liabilities, an increase of five percentage points on the year before. The total debt-equity ratio was 60% compared to 45% in 2012. The changes are mainly due to repayment of loans shareholders in 2013, which were classified as equity in 2012. The greater part of the interest cost in connection with the subordinated loan from shareholders was not paid out, but was converted to equity in connection with a capital increase adopted by the general meeting of 31 December 2013. Debt financing is subject to requirements concerning the achievement of key figures linked to the result and solvency. The company was within these requirements at year end 2013. At the start of 2014 the group has total credit of NOK 1,053 million. This consists of borrowings of NOK 953 million and an overdraft limit of NOK 100 million. Available funds in the form of unused credit and bank deposits amounted to NOK 144 million at year end.
Increase of capital from conversion of liability into equity
The group’s financing structure was changed in December 2013, as a result of which the shareholder loan was replaced by a bank loan. NOK 385,000,000 of the shareholder loan was repaid and the remainder was converted into equity. This was done in connection with the refinancing of the group, by which the liability of the parent company Scandinavian Business Seating Holding AS to the shareholders was repaid in full or converted into B shares (preferential shares). The board found it appropriate to convert the liability to the parent company Scandinavian Business Seating Holding AS into equity, so as to ensure that Scandinavian Business Seating Group AS was not affected by the new interest cut-off rules. The general meeting of 31.12.13 voted to increase the share capital of Scandinavian Business Seating Group AS through the conversion of loans from shareholders. Liabilities totalling NOK 365.7 million were converted into equity in Scandinavian Business Seating Group AS. This amount consisted of shareholder loans including accrued but unpaid interest as at the date of the general meeting of NOK 78.4 million.
Amendment to the articles of association
As a result of the capital increase, article 4 has been amended to read as follows: “The share capital is NOK 206,200,000, made up of 10,310,000,000 shares each with a face value of NOK 0.02.”
Research and development
In line with the group’s differentiation strategy and product focus, there has been a strong emphasis on innovation and
RH Extend/RBM Noor
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RBM Noor/RBM Eminent table
product development. Four new products were launched in 2013 and are in production. The RH Mereo chair series represents a lift for the RH brand and appeals to the project and multi-use market. HÅG SoFi is a completely new work chair in the main product range of the HÅG brand, with an innovative new armrest function, which sets the standard for user-perceived quality and refined design. RBM Noor is an extensive collection of canteen, conference and meeting room chairs with an individual but friendly design, good comfort and unique combination possibilities and environmental properties. RBM Low-back Bella was also launched. All products were well received by the media, their target group and the market generally. Altogether four patents were registered and four design awards were won by the new products. Improvement work in 2013 has been focused on stronger organisation and processes for future development projects and product maintenance. Development expenses amounting to NOK 11.5 million were capitalised by the group in 2013 in line with IFRS.
Financial risk
Just under 70% of sales revenues are invoiced in currencies other than NOK. A large proportion of the company’s financial
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risk is therefore linked to fluctuations in exchange rates, especially with respect to SEK, DKK and EUR. The majority of raw material purchases are made in NOK, SEK and EUR. To reduce exchange rate risk, currency derivatives are used. The company’s balance sheet is exposed to exchange rate fluctuations in EUR, since loans in SEK exceed receivables in SEK, an exposure which is not hedged. Credit risk associated with counterparts being unable to meet their financial obligations is regarded as acceptable. The majority of the company’s sales are in Northern and Central Europe. Sales are made to our own sales companies and to dealers and importers the group has worked with for some time. Historically, losses from receivables have been limited and accounted for 0.02 % of revenues in 2013. Gross accounts receivable as per 31.12.2013 amounted to NOK 168 million. The company regards its liquidity as good. No decision has been made to implement measures which will change the liquidity risk. Scandinavian Business Seating has centralised its financing function which has responsibility for financing, currency risk, interest rate risk, credit risk and liquidity management.
Working environment, equality and discrimination
The holding company, Scandinavian Business Seating Group AS, has no employees. The company contracts administrative services from the subsidiaries. The Board has adopted guidelines for financial risk management, which have been set out in policies.
Work during the past year on streamlining purchasing has had effects on materials costs, transport costs and warehouse values. Considerable resources were invested in the factories in Røros and Nässjö so as to optimise production for the new products that were launched in 2013.
The group has been working for many years at strengthening and further developing the company’s culture and working environment. Systematic working environment surveys with subsequent specific follow-up plans in the line ensure a good working environment and clear value creation in the group. The company’s core values, focus on leadership, competence development, equality of opportunity, health and safety, the environment and organisational conditions are all important factors in securing and steadily improving a good working environment.
With effect from December 2013, organisational changes were made in that the organisations for purchasing and production/logistics were merged together under common management. Work on optimising the new organisation will proceed in 2014, which is expected to have a positive effect on efficiency, as well as improving service levels to the markets. Work on improving quality, reducing tie-up of capital, balanced logistics costs and optimising materials costs will also have a high priority in 2014.
2013 has been marked by organisational changes in the commercial area. The market organisations have been further strengthened with more resources i both dealer sales and Key Account Management. Good, clear training of new employees has a high priority, so that they can easily find their place in the group, with a good understanding of the processes and strategies at an early stage of their employment. SB Seating Academy has been at the centre of a number of competence building measures in both sales and management. There is a
Production, logistics and purchasing
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ANNUAL REPORT 2013
Scandinavian Business Seating
good, trustful relationship between the company and trade unions. This is an important area for dialogue and information. At Scandinavian Business Seating everyone, regardless of gender, age and background, must have equal opportunities for employment and development. Furthermore, women and men performing the same work will in principle be paid the same salary, prior to assessing work performance. In the case of new appointments and with the composition of teams/ departments, every effort must be made for a working environment with variation in gender, age and background. The group actively works to prevent discrimination due to age, gender, disability, ethnic background, national origin, skin colour, religion or personal beliefs. At year-end 2013, the group had 472 employees, of which 309 were men and 163 women, equivalent to 34% of the workforce. The company’s board has one female member, a proportion of women equivalent to 20%. There is one female member of the group’s executive management, a proportion of women equivalent to 14%. There were fifteen work-related injuries in the company during the course of 2013. These injuries resulted in a total of 71 days absence.
External environment
Scandinavian Business Seating has been focusing on the environment for more than 20 years, in both its processes and its products. It has long been clear to the company that it is important to take the entire life cycle into consideration, since more than 90 per cent of the products’ impact on the environment occurs before the components arrive at the group’s factories. The goal has always been to develop ever better products with a smaller carbon footprint, a higher proportion of recycled materials and totally without chemicals that might be hazardous to health or the environment. The best results are achieved with products with low weight, few parts, good materials and a long lifetime. The products must also be easy to dismantle and recycle. The new HÅG SoFi office chair received the Norwegian Design Council’s Environment Award in 2013. Scandinavian Business Seating makes active use of the EPD (Environmental Product Declaration) to document the products’ environmental performance. The EPDs provide information that includes quantifying the greenhouse gas emissions caused by the product’s entire life cycle: from the extraction of the raw materials, via processing, transport and production, to its use and disposal. This is a key indicator both for customers who wish to minimise the environmental impact of their purchases and for the group’s own development of increasingly better products. The group’s most important chair collections also have the American GREENGUARD certificate, which guarantees that the products contribute to a healthy indoor environment by not emitting hazardous gases. The HÅG Capisco was the first office chair to fulfil the requirements for the Nordic Swan label.
46
Directors’ report
The group’s environmental management system is certified according to ISO 14001. An annual review is performed of which conditions have a significant effect on the environment and the group’s environment goals are concentrated on these. Work in 2013 concentrated on reducing energy consumption, the use of chemicals and waste. The group issues an annual corporate responsibility report based on the internationally recognised Global Reporting Initiative format. The report covers the work the group does to improve its environmental performance and the results that are achieved.
Changes in management and the board
In order to strengthen the company’s presence in all markets, organisational changes on the commercial side were made. Frederik Fogstad, Senior Vice President GPO, became a member of group management with effect from 1 December 2013. Torbjørn Iversen left the company with effect from 1 January 2014. Patrik Röstlund took over as Senior Vice President Manufacturing & Purchasing Operations with effect from 1 December 2013. Board member Olav Kjell Holtan died at the beginning of March 2014.
Future prospects
There is normally considerable uncertainty attached to estimates and assumptions of future conditions. However the market for office furnishings is expected to continue to have a careful progression in demand during 2014. Variations are expected from market to market, but with good opportunities to capture market share. So far in 2014, new orders in the main markets have been at the same level as last year. Order back-log at the end of 2013 will ensure sufficient capacity utilisation at the start of 2014. The company expects a normal cyclical start to 2014, with a stable development of the price of raw materials in the first quarter. In 2014 the group will continue its focus on activities to ensure sales growth in the shorter and longer term in the markets in which the group is established. There is also increased activity, and new opportunities, in the Asian market. These sales promotion activities are expected to have a positive effect on orders over the coming months. The group has good control over its activities and fixed costs. Processes and preparedness for rapid changes in connection with cutting activity levels, investments and general expenses are in place in case there is a drop in demand.
Allocation of profit
The board proposes that the profit for the year of NOK 29 886 000 for Scandinavian Business Seating Group AS is allocated as follows: Transferred to other equity Total Oslo, 18 March 2014
TNOK 29 886 TNOK 29 886
The board of directors of Scandinavian Business Seating Group AS
Ebbe Pelle Jacobsen
Sven-Gunnar Schough
Anne Breiby
Henrik Lundh
Lars I. Røiri
Chairman of the Board
Oscar Hermansson
CEO
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Annual Report 2013
Scandinavian Business Seating
consolidated annual accounts
Consolidated income statement NOK 1 000 Total operating revenues
Notes
01.01.-31.12.2013
01.01.-31.12.2012
4
1 002 554
1 010 515
316 666
323 249
Cost of goods sold Inventory movements, in-house production
14
(5 558)
2 738
9
270 252
259 481
Depreciation
3, 5, 11
30 611
31 948
Write down
3, 5, 11
897
12
185 266
189 392
Total operating costs
798 135
806 808
Operating income
204 420
203 707
Cost of labour
Other operating costs
Financial income
17
77 776
84 670
Financial expense
17
124 293
133 719
Interest expenses to company within the Group Net financial income/(expense) Income before tax Income tax expense
13
Net income
78 350
72 032
(124 867)
(121 080)
79 553
82 627
23 165
9 564
56 388
73 064
56 388
73 064
Consolidated statement of comprehensive income Net income Actuarial changes pensions
371
Exchange differences on translation of foreign operations
(13 453)
1 536
Total comprehensive income for the period
43 306
74 600
Information concerning:
48
Earnings per share (NOK)
21
0,005
0,007
Fully diluted earnings per share (NOK)
21
0,005
0,007
Consolidated statement of financial position NOK 1 000
Notes
31.12.2013
31.12.2012
Assets 3, 13
14 613
8 672
Goodwill
Deferred tax benefit
3, 5
1 388 312
1 388 312
Other intangible assets
3, 5
47 695
32 156
11
152 006
130 592
1 727
2 765
1 604 353
1 562 497
14
54 206
42 167
Depreciable assets and fixed property Financial fixed assets Total fixed assets Inventories Accounts receivables
15
167 661
121 505
Other short-term receivables
15
8 264
5 846
Group receivables
19
555
39
Financial instruments Liquid funds
6
214
3 109
16
44 437
93 641
Total current assets Total assets
275 337
266 308
1 879 690
1 828 805
206 200
103 100
Equity and Liabilities Share capital
20
Other paid-up equity
365 551
103 000
Total paid-up equity
571 751
206 100
174 149
130 843
745 900
336 943
3, 10
1 708
3 691
Deferred tax liabilities
13
4 668
4 209
Guarantees provision
24
3 356
2 829
7
886 156
570 080
Total other equity Total equity Pension obligations
Senior loans Long-term debt group
19
Other long-term debt Total long-term liabilities
672 301 499
597
896 387
1 253 708 97 589
Senior loans
7
54 656
Financial instruments
6
13 005
Accounts payable Taxes payable
64 411 13
Accrued liabilities (taxes, VAT, social security etc.) Guarantees provision
24
Other short-term debt
25
Total current liabilities
52 148
14 507
17 421
28 013
21 486
2 121
1 653
60 691
47 857
237 404
238 154
Total liabilities
1 133 791
1 491 862
Total equity and liabilities
1 879 690
1 828 805
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Annual Report 2013
Scandinavian Business Seating
Notes Group
Consolidated statement of Cash Flows NOK 1 000
Notes
01.01.-31.12.2013
01.01.-31.12.2012
79 553
82 627
30 611
31 948
Operating activities Profit before tax *) Depreciation of assets
5 ,11
Write-downs of assets
5 ,11
897
Unrealised exchange rate difference
4 886
4 673
Other
7 959
(7 459)
(31 254)
(12 876)
92 652
98 913
Paid tax
13
Cash flow from operating activities before change in working capital Cash flow from change in working capital Change in inventories Change in operating receivables Change in payables Change in operating liabilities Cash flow from operating activities
(9 701)
5 483
(33 956)
46 311
2 827
(4 670)
83 019
57 867
134 841
203 904
Investing activities Acquisition of subsidiaries Acquisition of tangible assets Capitalised development expenditures
(6 966) 11 5
Cash flow from investing activities
(42 995)
(42 922)
(11 518)
(15 219)
(61 479)
(58 141)
Financing activities Short or longterm borrowing Repayment of amount borrowed
7
950 000
7, 19
(1 075 283)
(81 140)
(125 283)
(145 640)
Dividends paid Cash flow from financing activities
Cash flow for the year Opening balance - liquid funds Exchange rate difference in liquid funds Closing balance - liquid funds Liquid funds booked as bank deposit
(64 500)
(51 921)
123
93 641
94 393
2 717
(875)
44 437
93 641
44 437
93 641
*) Includes: Interest income Interest expenses
1 937
3 056
35 278
46 262
Unrealised exchange rate difference includes a loss of TNOK 15 900 on unrealised forward exhange contracts (TNOK -853).
50
Consolidated statement of changes in equity NOK 1 000
Equity 01.01.12
Share capital
103 100
Other paid-up equity 103 000
Total paid-up equity 206 100
Foreign currency translation differences
Retained earnings
(3 077)
123 821
120 744
326 844
73 063
73 063
73 063
(64 500)
(64 500)
(64 500)
Net income Dividend Exchange differences Equity 31.12.12
1 536 103 100
103 000
206 100
103 100
262 551
365 651
(1 541)
Net income Issue 1)
Equity 31.12.13
1 536
1 536
132 384
130 843
336 943
56 388
56 388
371 (13 453) 206 200
365 551
571 751
Total equity
56 388 365 651
Actuarial changes pensions Exchange differences
Total other equity
(14 994)
189 143
371
371
(13 453)
(13 453)
174 149
745 900
1) The capital increase was approved at the Annual General Meeting on 31 December 2013 and registered in the Norwegian Register of Business Enterprises on 18 February 2014.
Notes Group Note 1 – General information Scandinavian Business Seating Group AS and its subsidiaries develops, produces and distributes seating solutions for the office market through independent retail chains, importers and dealers. The mother company, Scandinavian Business Seating Group AS, is registered in Norway and has its head office at Majorstuen in Oslo. The group has production facilities in Norway (Røros) and Sweden (Nässjö). The group primarily sells its products in Europe. An overview of the group’s companies is provided in note 18. The group’s ultimate parent company is Ratos AB, which is listed on the NASDAQ OMX, Stockholm Stock Exchange. The consolidated accounts were approved by the board of directors for Scandinavian Business Seating Group AS on 18.03.2014.
Note 2 – Accounting policies
The group presents its annual financial statements in NOK, which is also the parent company’s functional currency. All figures are stated in NOK thousands, unless otherwise is specifically stated. The financial statements have been prepared on an historic costs basis with the exception of pensions and financial instruments, which have been assessed at fair value. The group has in 2013 implemented the changes in IAS 19 Employee Benefits. There are only a few of the group’s Norwegian employees who have benefit-based pension scheme, and the implementation have had minimal impact on the annual accounts.
Consolidation policies The consolidated accounts include Scandinavian Business Seating Group AS and companies in which Scandinavian Business Seating Group AS has a determining influence with respect to the entity’s financial and operational strategy, normally through owning more than half of the capital entitled to vote. Subsidiaries are consolidated from the moment control has been transferred to the group and excluded from consolidation when such control ceases.
Basic policies Scandinavian Business Seating’s consolidated accounts for the 2013 financial year were prepared in accordance with international financial reporting standards (IFRS) and interpretations published by the International Accounting Standards Board (IASB) approved by EU.
Intragroup transactions and outstanding balances within the group, including internal profits and unrealised gains and losses, have been eliminated. The consolidated accounts have been prepared on the basis of an assumption of uniform accounting policies for equal transactions and other events in
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Annual Report 2013
Scandinavian Business Seating
equal circumstances. All companies follow the same financial year. There are no minority interests in the group.
costs are less than the net assets, the difference is recognized through profit and loss at the time of the acquisition.
The financial statements of the individual units in the group are valued in the currency that is primarily utilized in the economic area in which the unit operates (the functional currency). The balance sheet is translated using the exchange rate on the balance sheet date, while the income statement is translated using the average exchange rate for the accounting period. Translation differences that arise due to this are included in the translation differences reserve in equity. Major single transactions are converted separately to spot rate.
Fixed assets
The use of estimates and judgements Preparation of the annual financial statements in conformity with IFRS often requires the management to exercise judgement and make use of estimates. Estimates are based on historical information and judgements are largely made on the basis of management’s knowledge of the market and various indicators. Certain accounting policies are regarded as being particularly important to the company’s financial position, as they are largely determined on the basis of judgements and estimates. These will typically be: • Goodwill impairment tests (see note 5) • Estimates of pension liabilities (see note 10) • Guarantee provisions (see note 2) • Capitalising development costs (see note 5)
Segment information An operating segment is that part of the business which generates operating income and incurs costs, and in which the operating result for the segment is regularly reviewed by the management to decide which resources need to be allocated to it. A segment for which reporting is mandatory is a grouping of segments with similar economic characteristics. The group supplies similar products under three brand names: HÅG, RBM and RH. Risk and returns for the three brands do not differ significantly. The three brands have the same management and financial monitoring structure, and the management does not monitor operating results for each of the brands. The group segment is based on one mandatory reporting segment. Sales distribution per country is included in note 4.
Business amalgamation The acquisition method is used when recognising business amalgamations. When new business and companies are acquired the cost price must be allocated by identifiable assets and liabilities on the basis of estimated fair value. The acquisition costs upon acquisition are valued at fair value of: assets that are paid as remuneration upon the acquisition, issued equity instruments, liabilities assumed by transferring control. Added values upon acquisition in excess of fair value for the net assets in the acquired business valued on the date control is transferred, are classified as goodwill. If the acquisition
52
Notes Group
Fixed assets are valued at their acquisition cost less accumulated depreciation and write-downs. The acquisition cost includes costs directly linked to the acquisition of the asset. Subsequent costs are allocated to the assets’ balance sheet recognised value or recognised in the balance sheet separately when it is likely that future financial benefits will flow to the group and the expense can be valued reliably. Other repair and maintenance costs are recognised through profit and loss in the period the expense is incurred. In cases where increased earnings can be demonstrated due to repair/maintenance, the costs associated with this will be recognised in the balance sheet as asset supply. When assets are sold or disposed of the cost price and the accumulated depreciation is reversed in the accounts and any loss or gain from the transaction is recognised through profit and loss. Depreciation is calculated using linear method over the following periods: • Property and other real estate 10-25 years • Machinery and equipment 6-8 years • Movable property, inventory and vehicles 3-10 years The depreciation period and method, as well as the residual value, will be assessed annually to ensure the method and period used concurs with the financial realities associated with the asset. The group has construction in progress. This is primarily linked to investment in tools and machinery for products which are being developed. Operating equipment is therefore activated and depreciated when the product is launched/completed. This will only be done for tools and machinery for products under development if it is almost certain that future financial benefits related to sales will accrue to the group and this can be measured reliably.
Intangible assets Intangible assets are recognised in the balance sheet when likely future financial benefits that can be ascribed to the asset owned by the group can be demonstrated and the assets’ cost price can be valued reliably. Intangible assets associated with business amalgamations are activated at fair value. The subsequent valuation is based on cost price less amortization and write-downs. The recoverable amount is calculated annually and when there are indications of a fall in value. Intangible assets with fixed lifetimes are amortised over the lifetime of the asset. Amortisation is applied using a linear method over the estimated financial lifetime. The amortisation estimate and amortisation method are assessed each year on the basis of the financial realities that exist.
Goodwill Goodwill is recognised as the difference of the group’s procurement costs in relation to the overtaking enterprise’s net actual value of the recognisable assets, liabilities and subordinated liabilities at the time of acquisition. Goodwill is tested for impairment once a year (31 December) and when there are indications of a fall in value. The impairment is assessed by comparing the recoverable amount per cash flow generating unit with the value recognised in the balance sheet. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. If the recoverable amount per cash flow generating unit is lower than the value recognised in the balance sheet the asset is written down through profit and loss. Historic write-down amounts are not reversed. The group’s goodwill is linked to the acquisition of the subsidiaries Scandinavian Business Seating AS in Norway and Scandinavian Business Seating Holding AB in Sweden. Calculations of future cash flows take account of expected market developments and expected general price developments for the group’s products in the relevant markets. Research and development (internally accumulated) Costs associated with research are recognised through profit and loss when they are incurred. Costs associated with development are recognised through profit and loss when they are incurred unless the following criteria are fully met: • the products or process is clearly defined and the cost elements can be identified and valued reliably, • the technical solution for the products has been demonstrated, • the product or process will be sold or used in the business, • the asset will generate future financial benefits, and • sufficient technical, financial and other resources exist to complete the project. When all the criteria are fulfilled, the costs associated with development start to be recognised in the balance sheet. Costs recognised as costs in earlier accounting periods are not recognised in the balance sheet. Development costs recognised in the balance sheet are amortised linearly over the estimated lifetime of the finished products. The amortisation period will normally not exceed six years. Recoverable amount of development costs recognised in the balance sheet will be estimated when there are indications of a fall in value or the need for previous periods’ writedowns no longer exists. Other intangible assets The group has recognised customer contracts in the balance sheet. The customer contracts are acquired in connection
with the group’s establishment of a subsidiary in Switzerland. The contracts are recorded at cost and amortisation is applied using a linear method over the estimated lifetime.
Financial instruments and loans Currency exposure associated with the group’s operations is continuously hedged by the expected net cash flows in currency associated with operational factors being hedged through forward contracts, though only for a limited time horizon and only to the extent it is estimated that it is certain that these expected cash flows will be realised. The manner which the company utilises currency derivatives does not qualify as hedge accounting and is financial hedging in which unrealised losses and gains by changes in value are recognised through profit and loss as losses and gains on currency and recognised in the balance sheet at fair value. The group therefore does not use hedge accounting. Realised gains or losses on forward contracts are classified as sale in the consolidated income statement. Accounts receivable are valued at estimated fair value, which is the original invoice amount less a provision for a decrease in value. The provision is made when there is objective evidence that the group cannot collect the total outstanding amount pursuant to the original invoice amount. Liquid funds are valued at fair value as per 31 December. For balances in foreign currency, the currency rate as per 31 December is used for the valuation. The Scandinavian Business Seating group has established a group account system (cash pool system) of which Scandinavian Business Seating Group AS is according to the agreement the group account holder. The bank can settle each withdrawal and the available balance against each other such that the net balance represents the outstanding balance between the bank and Scandinavian Business Seating Group AS. The group recognises the net balance of the accounts included in the group account system. Loans are recognised at the original loan amount. Loan costs are activated and distributed through profit and loss in line with the loan’s repayment period. Loans are recognised at amortised cost when effective interest rates are used in which the difference between net proceeds and the redemption value is recognised through profit and loss over the term of the loan. Loan costs are recognised in the balance sheet and charged to the result in line with the repayment plan.
Stock Stock, including semi-fabricated products, is recognised at the lowest of cost price and net sales price. Net sales price is valued as the market price in normal operations less the cost of completion, marketing and distribution. Costs are established using the FIFO method. The processed stock includes variable costs and fixed costs that can be allocated to goods based on normal capacity. Redundant stock is written-down in its entirety.
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Annual Report 2013
Scandinavian Business Seating
Obsoleteness The stock is assessed for obsolescence. Obsolescence arises when the stock contains faulty components or components for products which are no longer for sale, and thus do not represent any value to the group. Provisions for obsolescence are reversed in those instances when the components are nonetheless able to be used in production. In the opposite case, the components are destroyed (used provision ref. note 14).
Cash flow statement The cash flow statement is prepared using the indirect method.
Equity Share capital Ordinary shares are classified as equity. Expenses directly associated with the issuing of new shares or options, less deductions for tax, are recognised as a reduction in the received remuneration in equity. Translation differences reserve Translation differences arise in connection with currency differences in the consolidation of foreign units. Currency differences in cash items (liabilities or receivables) that in reality are part of a company’s net investment in a foreign unit are treated as translation differences. When foreign units are sold the accumulated translation differences associated with the unit from the same period as the gain or loss from the sale is recognised are reversed and recognised through profit and loss.
Income tax The tax costs consist of payable tax and changes in deferred tax. Deferred tax/tax assets are calculated for all differences between the accounting and tax-related values of assets and liabilities with the exception of goodwill from the integration of undertakings. Deferred tax assets are recognised when it is likely the company will have sufficient taxable profit to utilise the tax assets. On every balance sheet date the group conducts a review of the deferred tax assets and the value recognised. The companies recognise earlier unrecognised deferred tax assets to the extent it has become likely that the company can utilise the deferred tax assets. Similarly the company will reduce the deferred tax assets to the extent the company no longer believes it can utilise the deferred tax assets. The deferred tax and deferred tax assets are valued on the basis of the expected future tax rate for the companies in the group in which temporary differences have arisen. The deferred tax and deferred tax assets are recognized independent of when the differences will be reversed. The deferred tax and deferred tax assets are recognized at nominal value and classified as financial non-current assets in the balance sheet.
54
Notes Group
Payable tax and deferred tax are recognised directly against equity to the extent that these relate to matters that are recognised directly against equity.
Provisions for obligations Provisions are recognised when the group has a present obligation (legal or constructive) as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.
Guarantee provisions Provisions associated with guarantee work for concluded sales are valued at the estimated cost for such work. The estimate is calculated on the basis of historic figures for service work and guarantee repairs. Recognised guarantee provisions correspond to an estimate of the future costs the group expects to incur from such repairs to already concluded sales. The liabilities based on historic data expected to be incurred within one year are classified as current liabilities, while those expected to be incurred in more than one year are classified as non-current liabilities in the balance sheet. Continuous guarantee costs associated with repairs are recognised through profit and loss as goods costs, while service work is recognised through profit and loss as other operating costs in the income statement.
Pensions The group’s companies have pension schemes that cover all employees. The costs associated with the pension agreements appear as personnel costs in the accounts. The group’s employees are members of collective defined contribution pension schemes. Payments linked to the contribution plans are recognised as a cost in the period to which the contributions relate. Some employees in Norway with partial disability still have a defined-benefit scheme. The costs associated with these schemes on based on a linear carrying forward of pension earnings against probable accumulated liabilities at the time of accrual. A linear accrual model distributes the future accumulated liabilities linearly over the accrual period, and regards the employees’ accrued pensions’ rights in the period as a pensions cost. Any introduction of a new, or changes to an existing, benefits-based pension scheme results in changes to the pension liabilities. The introduction of new schemes or changes to existing schemes that appear with retrospective effect and which result in the employees having immediately earned a paid up policy (or a changed paid up policy) are recognised through profit and loss immediately. The effect of accrued pension benefits is divided over the remaining average accrual period. In the case of contribution plans, payments have been made to the insurance company. Once the contribution has been paid there are not further payment liabilities. Payments linked to the contribution plans are recognized as a cost in the period to which the contributions relate. AFP is a benefit-based multi-employer plan in which the financing share attached to the premium is
included as a defined contribution scheme. The own share linked to the scheme is booked as a cost on a current basis. The pension earning period coincides with the period of employment. An annual deviation (known as the estimate deviations) arises between estimated and actual accruals on pension funds and between estimated and actual pension liabilities. This is due to deviations and changes in the preconditions. Estimate deviations are recognised as other income and costs in the total comprehensive income for the period it occurs. Level changes are recognised in the income statement as a single event unless the change is conditional on the employees remaining in the company. In the event of the latter, the change is amortised over the remaining pension earning period.
Operational leases The leasing of assets in which the lessor retains the material proportion of risk and control are classified as operational leasing. Other lease agreements are treated as financial leases. The group only has operational leases. Lease payments are classified as an operating cost and recognized through profit and loss over the term of the contract.
Recognition of income Income is valued at the fair value of the remuneration, net after deductions for value added tax and discounts. Intragroup sales are eliminated. Income is recognized when the income can be reliably valued, it is likely the financial benefits associated with the transaction will flow to the group, and the particular criteria mentioned below are met. Sales are not regarded as being able to be valued reliably before all conditions associated with the sale have been met. Sales of goods The group sells seating furniture through independent retail chains, dealers and importers. Income from sales of goods are recognised through profit and loss once the risk and ownership associated with the sold goods have been transferred to the buyer and the group no longer has the right of disposal or control associated with these goods. In the vast majority of cases this happens upon delivery from production. The products are often sold with discounts and return rights in the event to defects. Sales are recognized on the basis of the agreed price less any discounts. Freight earnings The group has income from freight linked to the transportation of goods, which is recognised as income on an ongoing basis in line with the earnings from the sale of goods. Government grants Government grants are recognised at fair value when it is reasonably certain that the grant will be received and that the group will fulfil the criteria associated with the grant. Government grants associated with future costs are recognised in the balance sheet and recognized through profit and loss as a
cost reduction in the period that results in the best composition of the costs they are meant to compensate for.
Management reporting See annual report chapter regarding corporate governance.
Approved IFRSs and IFRICs with future effective dates Standards and interpretations that are issued up to the date of issuance of the consolidated financial statements, but not yet effective, are disclosed below. The Group’s intention is to adopt the relevant new and amended standards and interpretations when they become effective, subject to EU approval before the consolidated financial statements are issued.
IAS 19 Employee Benefits The amendment introduces the option to recognise contributions from employees or third parties as a reduction in the service cost in the same period in which they are payable if, and only if, they are linked solely to the employee’s service rendered in that period. The amendment will not have any impact on the Group’s financial position or performance.
IAS 27 Separate Financial Statements As a consequence of the issuance of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities, the IASB has amended IAS 27. IAS 27 now only deals with accounting in the separate financial statements. The title of the standard is amended accordingly. Within the EU/EEA area, the amendments are effective for annual periods beginning on or after 1 January 2014. The amendment will not have any impact on the Group’s financial position or performance.
IAS 36 Impairment of Assets IAS 36 is amended to address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. These amendments are issued to align the disclosure requirements in IAS 36 with the IASB’s original intention when consequential amendments to IAS 36 were made as a result of the issuance of IFRS 13 Fair Value Measurement. The amendments are effective for annual periods beginning on or after 1 January 2014. The amendment will not have any impact on the Group’s financial position or performance.
IFRS 9 Financial Instruments: Classification and Measurement IFRS 9, as issued, reflects the two first phases of IASB’s work on the replacement of IAS 39, which are classification and measurement of financial assets and financial liabilities and hedge accounting. Third and last phase of this project will address amortised cost measurement and impairment of
55
Annual Report 2013
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financial assets. The mandatory effective date of IFRS 9 has been removed to allow sufficient time for entities to prepare to apply the new Standard. The IASB have decided that a new date should be decided upon when the entire IFRS 9 project is closer to completion. The Group will evaluate potential effects of IFRS 9 as soon as the final standard, including all phases, is issued. The effect of the implementation is uncertain.
IFRS 10 Consolidated Financial Statements IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements and SIC-12 Consolidation – Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27. In accordance with IFRS 10, an investor controls another entity when it is exposed, or has rights, to variable returns from its involvement with the other entity, and has the ability to affect those returns through its power over the entity. Within the EU/EEA area, IFRS 10 is effective for annual periods starting on or after 1 January 2014. The amendment will not have any impact on the Group’s financial position or performance.
IFRIC Interpretation 21 Levies IFRIC 21 is an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The Interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. The Interpretation includes guidance illustrating how the Interpretation should be applied. The amendment will not have any impact on the Group’s financial position or performance.
Annual Improvements 2010 – 2012 IFRS 2 Share-based Payment Performance condition and service condition are defined in order to clarify various issues, including the following: • A performance condition must contain a service condition • A performance target must be met while the counterparty is rendering service • A performance target may relate to the operations or activities of an entity, or to those of another entity in the same group • A performance condition may be a market or non-market condition
56
Notes Group
• If the counterparty, regardless of the reason, ceases to provide service during the vesting period, the service condition is not satisfied
IFRS 3 Business Combinations Contingent consideration in a business acquisition that is not classified as equity is subsequently measured at fair value through profit or loss whether or not it falls within the scope of IFRS 9 Financial Instruments.
IFRS 8 Operating Segments Operating segments may be combined/aggregated if aggregation is consistent with the core principle of the standard, if the segments have similar economic characteristics and if they are similar in other qualitative respects. If they are combined, the entity must disclose the economic characteristics (e.g., sales and gross margins) used to assess whether the segments are ‘similar’. The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker, similar to the required disclosure for segment liabilities.
IFRS 13 Fair Value Measurement The IASB clarified that short-term receivables and payables with no stated interest rates can be held at invoice amounts when the effect of discounting is immaterial.
IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets The amendment to IAS 16.35(a) and IAS 38.80(a) clarifies that revaluation can be performed, as follows: • Adjust the gross carrying amount of the asset to market value Or • Determine the market value of the carrying amount and adjust the gross carrying amount proportionately so that the resulting carrying amount equals the market value The IASB also clarified that accumulated depreciation/amortisation is the difference between the gross carrying amount and the carrying amount of the asset (i.e., gross carrying amount – accumulated depreciation/amortisation = carrying amount). The amendment to IAS 16.35(b) and IAS 38.80(b) clarifies that the accumulated depreciation/amortisation is eliminated so that the gross carrying amount and carrying amount equal the market value.
IAS 24 Related Party Disclosures The amendment clarifies that a management entity – an entity that provides key management personnel services – is a related party subject to the related party disclosures. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. The effect of implementation is uncertain.
Annual Improvements 2011 – 2013 IFRS 13 Fair Value Measurement The portfolio exception in IFRS 13 can be applied to financial assets, financial liabilities and other contracts.
Note 3 – Estimate uncertainty In preparing the annual financial statements, estimates and assessments have been made which affect the reported values of assets, liabilities, revenues, expenses and the disclosures of potential obligations. These estimates have been made largely on the basis of management’s subjective judgements and assumption about the future. Future events can result in changes to these estimates. Changes are recognised in the financial statements when new estimates can be reliably determined. The company’s critical accounting estimates relate to the following items:
Tangible fixed assets
Net pension obligations Net pension obligations are determined using calculations by actuaries based on assumptions which include the discount rate, future salary growth, pension regulations, forecast returns on pension plan assets and demographic indicators of disability and mortality. The assumptions are made using observable market prices and historical trends for the company and society in general. Significant variability in the assumptions, particularly in the level of interest rates, can have a material effect on the calculated amounts of pension liabilities and expenses. The carrying value of net pension obligations is MNOK 1.7 (MNOK 3.7).
Deferred taxes There is uncertainty in relation to interpretations of complex tax regulations, amendments to tax legislation, and the size and timing of future taxable income. Given the extensive scope of international business conditions and the longterm nature and complexity of existing contracts, differences between actual performance and the assumptions that have been made, or future changes in these assumptions, it may be necessary to adjust tax revenues and expenses which have already been recorded. See note 13 for further information about taxes.
By acquisition, tangible fixed assets are estimated at fair value, which corresponds to the market value. The expected useful life of the company’s production equipment is largely affected by the volume of production. With an expected reduction in demand for the company’s products, the lifetime of the production equipment will be somewhat longer than we have seen over the last several years. The current depreciation period is from 6 to 8 years, while sales forecasts indicate a useful economic life of 5 to 10 years. The carrying value of tangible fixed assets are MNOK 152 (MNOK 131).
Intangible assets The carrying value of goodwill in the company is tested annually for impairment. Management bases its cash flow forecasts on estimated rates of growth. Estimated rates of growth are derived from judgements made by management of how macroeconomic conditions, the company’s market position and its growth ambitions will affect future growth. The assumptions used to test goodwill for impairment are based on estimates that are uncertain. The company has been cautious in its projections of future cash flows in order to reduce the uncertainty in these estimates. Sensitivity analyses have been performed on projected earnings and the discount rate which show that there is a substantial margin compared with book values. Management’s judgements are based on historical data and its market knowledge. The business is substantially affected by the economic cycle in its main markets. This is particularly relevant in Scandinavia and Central Europe. The carrying value of goodwill is MNOK 1 388 (MNOK 1 388).
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Notes Group
Note 4 – Segment information Business segments Scandinavian Business Seating’s business segmentation is based on the company’s internal organisation structure and focus from the company’s management. The group is run as a single company with different products with the same target group. No assignment of costs to the various product areas is made. Scandinavian Business Seating is a niche supplier which develops, produces and sells seating for working environments. The company’s customer structure consists of a very large number of dealers in all the main markets. Outside the main markets, importers buy direct from Scandinavian Business Seating and sell on to dealers and end-customers. The size of our customers varies significantly. However, there are no customers big enough to make the company vulnerable
should they decide to terminate the business relationship. There are no individual customers or groups of customers which account for more than ten percent of total sales within the group. Consequently, the group has a reporting segment, which is business seating for public and private sector working environments. The management closely monitors sales trends on the various markets, which is reflected in the reports generated based on follow-up. Geographic sales distribution as shown below reflects the distribution used in following up the various market areas. There are insignificant differences between the various geographic main areas with regard to growth potential, risk profile and future potential. In addition, sales are monitored to the main product groups within seating for working environments.
Sales Figures in MNOK
Fixed assets
2013
2012
2012
Norway
304
329
95
85
Sweden
185
180
52
43
Denmark
152
139
1
1
Germany, UK, France, NL
268
276
4
2
93
86
1 003
1 011
152
131
Others Total
Sales (MNOK)
Number (1 000)
2013
2012
2013
2012
Office chairs
802
804
252
258
Conference chairs
140
175
165
175
60
32
1 003
1 011
417
433
Others Total
58
2013
Note 5 – Intangible assets NOK 1 000
Goodwill
Development
Other intangible
Total
Fiscal year 2012 Booked value 01.01.12
1 388 312
21 474
Investment
15 148
Conversion differences
(112)
Write down (4 409) 1 388 312
1 409 844 15 148
(1) (2)
This year's depreciation Booked value 31.12.12
58
(113) (2) (4 409)
32 101
55
1 420 468
57 715
55
1 446 082
Per 31.12.12 Cost price
1 388 312
Accumulated depreciation /write-downs Booked value 31.12.12
(25 614)
(25 614)
1 388 312
32 101
55
1 420 468
1 388 312
32 101
55
1 420 468
Fiscal year 2013 Booked value 01.01.13 Investment
11 842
7 725
19 567
Conversion differences
1 570
(204)
1 366
Write down
(842)
(55)
(897)
(3 800)
(696)
(4 496)
40 871
6 825
1 436 008
1 464 699
This year's depreciation Booked value 31.12.13
1 388 312
Per 31.12.13 Cost price
1 388 312
68 804
7 583
(27 933)
(758)
(28 691)
1 388 312
40 871
6 825
1 436 008
Indefinite
6-10 years
5 years
1-9 years
4 years
Accumulated depreciation /write-downs Booked value 31.12.13 Economic life Remaining economic life
The Group has no other intangible assets except goodwill that have indefinite lifetime. Depreciations on intangible assets are booked purely as depreciations. Amortization of acquired customer contracts are recognized as impairment.
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Annual Report 2013
Scandinavian Business Seating
Research and development The group performs its own research and development within the field of seating solutions. External parties within a number of fields are used as part of this work. The group has several external designers who work on product development. In most cases the designers are compensated for their work in the form of royalties on sales of the individual product. A not inconsiderable proportion of the total R&D costs are royalties from sales that are recognised as costs in the individual year. Costs incurred in the period and which satisfy the criteria for the product development of future seating solutions are recognised in the balance sheet.
Notes Group
An impairment test is performed every year. The test uses the same preconditions for growth and return on investment (WACC) as for goodwill. Costs for ongoing R&D activities as per 31 December are expected to have future earnings that exceed the value recognised in the balance sheet and expected future costs. The group had at the end of the year two major R&D projects ongoing. These expected completion of launch in the second half of 2016. The group receives government grants for research and development. The support recognised during the period amounted to:
2013 Research Counsil of Norway
2012 1 171
Training grant
112
46
Total
112
1 217
38 075
34 402
R&D costs in the period
Funds from the Research Council of Norway are disbursed in relation to the degree of completion of the project they are meant to support. All conditions for such support have been fulfilled.
Other intangible assets Other intangible assets constitute customer files and rights associated with lease agreements. Amortisation takes place
over the individual asset’s expected lifetime. In the case of leases this will be the same as the duration of the lease.
Goodwill Goodwill distributed per enterprise purchase: Purchase in 2007 Scandinavian Business Seating AS (former HÅG AS)
1 079 676
Scandinavian Business Seating Holding AB (former RHRBM Holding AB) Total goodwill
Scandinavian Business Seating has accumulated goodwill of TNOK 1 388 312. Goodwill is allocated in connection with purchase transactions in 2007. Goodwill is recognised as the excess of the amount paid and the acquiring company’s net fair value of the identifiable assets, liabilities and contingent liabilities at the time of acquisition. The group has identified one cash flow generating unit for 2013. The group operates as a single company with different products with the same target group. No allocation of costs to the different product areas was made.
60
308 636 1 388 312
Goodwill is tested for impairment. The book value of goodwill is the residual value from business combinations. Goodwill is tested by comparing the present value of the discounted stream of future cash flows and the book value. Cash flow projections are based on extrapolating figures for 2015 and 2016 from estimates in the company’s and the group’s senior management strategy plan for 2014. A constant growth rate has been applied throughout the time period of the cash flow projections.
Impairment tests of goodwill
Sensitivity
The conducted impairment tests of goodwill show that there is no need to write-down recognised goodwill. The company is of the opinion that the assumptions used in the tests are best estimate and, besides taking account of a normal level of long-term uncertainty in relation to the company’s development, also take account the uncertainty in the current financial market.
Sensitivity calculations were conducted for the three companies with different parameters (WACC and long-term growth). The cash flows are also extrapolated using EBITA at 2013 level. These show that the conclusions, with reasonable changes to the assumptions, do not change in relation to the fact that the group can justify its recognised goodwill.
WACC before tax + 2% Impairment margin Marginal value WACC before tax
2013
2012
12,62%
11,61%
806
882
16,70%
15,51%
Long term growth
0%
0%
Impairment margin
718
776
466
913
Extrapolation of this year’s EBITA Impairment margin
Assumptions When determining the fair value of goodwill, the following assumptions are considered to be the most sensitive to fair value measurements: Sales Sales estimates, which have a material effect on figures in the income statement and cash flows, have taken into account that the company is recovering from a recession with expectations of a higher growth rate over the next three years than the long-term average. The long-term growth has been fixed at three per cent, reflecting the long-term rate of inflation plus a very conservative growth rate. Gross margins The group expects sound gross margins in the years ahead. There are continuous improvement projects in procurement and logistics, as well as production optimization. The group has, over the past years, shown that these projects had an effect and it is expected that this will also apply to future.
The simplification does not result in any material effects. The WACC rate used is 7.75 % after tax, corresponding to 10.62% before tax. The group has applied the following assumptions for estimating WACC: • The long term risk-free interest rate is equivalent to the interest rate on 10 year government bonds as this corresponds with the time horizon on the relevant cash flows. • The risk premium is 5 per cent based on market research undertaken by the Norwegian Society of Financial Analysts and the recommendation from its members. • Beta is 1.5% due to the cyclical nature of the industry • Corporate Spread is 4%, where 1.25% reflects the current uncertainty in the borrowing market plus the NIBOR/STIBOR spread against a long-term risk-free interest rate.
WACC A lower risk-free interest rate used reduces the WACC compared with 2012. The cash flow is discounted with interest (WACC) before tax. A tax rate of 27 per cent is used when calculating the WACC before tax. This is a simplification of the theoretically correct method. The group’s goodwill is linked to cash flows from countries with differing tax percentages.
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Annual Report 2013
Scandinavian Business Seating
Notes Group
Note 6 – Financial instruments and risks Market risk Scandinavian Business Seating has centralised its financing function which has responsibility for financing, currency risk, interest rate risk, credit risk and liquidity management. The group has established guidelines for interest rates, currency and credit set out in policies. Effects of increase/reduction in selling prices and rebates: If the group’s selling prices were 1% higher or lower in 2013 and other variables remained constant, it would have resulted in a higher or lower operating result of TNOK 10 025. If rebates on sales were 1% lower or higher in 2013, and other variables remained constant, it would have resulted in an increase or reduction in the operating income of TNOK 19 074. Foreign currency risk MNOK 643 of the Group’s revenues are denominated in foreign currency. The company has an even flow of revenues, and its sales are not generally based on a few large individual orders generating a large share of the sales. The Group invoices the customer in the customer’s own currency. This means that a large share of the company’s financial risk is attached to changes in exchange rates, especially in SEK,
DKK, GBP and EUR. The Group has foreign currency risk connected to future cash flow in foreign currency and net investments in subsidiaries abroad. In order to limit the effect of fluctuating exchange rates, the company uses foreign currency derivatives. Normally, between 50-70 % of expected net foreign currency exposure is secured through use of derivates. The forward contracts are agreed with a large, recognised finance institution in Norway and any credit risk is therefore considered minimal. These contracts are treated as ordinary derivatives where the unrealised gains and losses are recognised in the income statement as currency gains/losses and are recorded at fair value. The Group has investments in subsidiaries in foreign currency where the net investments are disposed for currency risks by conversion. The currency risk from the Group’s net investments in foreign subsidiaries is not secured by drawing long-term loans with corresponding amounts. Effects of increase/reduction in foreign currency: If NOK compared to other currencies was 10% weaker/ stronger as per 31 December 2013 and all other variables were consistent, this would have caused the following change in income before taxes:
Sensitivity financial instruments included in hedging as per 31.12.13 Foreign currency risk: 10% change in currency rate EUR/NOK
+/- TNOK
20 287
Foreign currency risk: 10% change in currency rate DKK/NOK
+/- TNOK
10 649
Foreign currency risk: 10% change in currency rate GBP/NOK
+/- TNOK
609
EUR
DKK
GBP
Due in 2014
118 341
43 050
6 087
Due in 2015
84 529
63 442
Foreign currency derivates made to secure future cash flow as per 31.12.13 Figures in NOK 1000
62
Interest risk The Group’s interest risk is primarily connected to long-term debt. As the net interest bearing debt per 31.12.13 was 48% of the total balance sheet, the net profit is considerably exposed by the interest level. The debt primarily consists of variable-rate loans and the Group’s guidelines states a maximum of a fixed rate period up to 12 months. In 2013, the Group’s variable-rate loans have been in NOK, SEK and EUR. With net interest-bearing debt of TNOK 898 083, the level of interest rates does significantly affect the financial expenses.
majority of the company’s sales are to Northern/Central Europe, with the company selling to dealers and importers with whom it has a long-standing business relationship. The Group has guidelines to ensure that outstanding accounts conform to fixed credit limits. The Group has no major credit risk linked to one particular contracting party or several contracting parties who can be regarded as a group by virtue of similarities in the credit risk. The Group has guidelines to ensure that sales are only made to customers who have not previously had significant problems with payment and outstanding accounts do
Credit risk The credit risk represented by contracting parties not being able to meet their obligations is regarded as low. The
Maximal exposure for credit risk as per 31.12. of financial instrument: Gross accounts receivables (note 15) Other receivables Financial instruments Liquid funds Total
Liquidity risk Scandinavian Business Seating’s activities are not capital intensive and normal annual investment represents 3-6 % of the company’s sales. The company regards its liquidity as good. Active attention is given to the company’s liquidity throughout the year, in terms of both working capital elements and operational activities. Work on the working capital elements has been in focus for several years and the company has strategies, key figures and action plans that are continuously followed up on during the year. The company carefully considers the effects on liquidity of operational activities, projects and investments before these are initiated, in order to retain predictability in liquidity development. The company’s focus on operational effectiveness in all parts of the value chain and close follow-up on working capital ensure that there is satisfactory liquidity for further investment in product development and market development and for servicing debt. No decision has been made to implement any measures that will change the liquidity risk.
2013
2012
167 785
121 514
8 264
5 846
214
3 109
44 437
93 641
220 700
224 111
instruments is based on market value and calculated by external finance institutions. The value of cash and overdraft facility recognised in the balance sheet is approximated to actual value based on such instruments having a short repayment period. Similarly, the book value of accounts receivable and accounts payable is approximated to the actual value as they are included on ’normal’ conditions. Establishment costs for borrowing are recognised in the balance sheet at historical cost and recognised as expenses over the lifetime of the loan. Royalties paid in advance are recognised in the balance sheet at historical value and balanced against ongoing royalty payments to designers. The company does not practice hedge accounting. Financial instruments are recognised at fair value and changes in fair value are recognised in the income statement. Fair value is based on statements from credit institutions. As at 31.12.13, the fair value of forward currency exchange contracts amounted to TNOK 12 791. Value change recognised for 2013 was a loss of TNOK 15 900.
Use of actual value Currency derivatives are recognised in the income statement at their actual value. The book value of other financial instruments is concurrent with actual value. The value of hedging
63
Annual Report 2013
Scandinavian Business Seating
Notes Group
Fair value hierarchy NOK 1 000
Fair value Held for trading
Loans and receivables
Book value
Fair value
Fair value level*)
Non-current assets Shares in other companies
122
122
122
106
106
106
106
228
228
167 661
167 661
167 661
214
214
44 437
44 437
44 437
212 098
212 312
212 312
Senior loans
886 156
886 156
886 156
Total
886 156
886 156
886 156
54 656
54 656
54 656
Other financial assets Total
122
3
Current assets Accounts receivables Financial instruments
214
Liquid funds Total
214
1
Long-term liabilites
Current liabilities Senior loans Accounts payable Financial instruments Total
64 411 13 005 13 005
119 067
*) The following hierarchy is used for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. Level 3: Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
64
64 411
64 411
13 005
13 005
132 072
132 072
1
Note 7 – Mortgages and guarantees NOK 1 000
2013
2012
Bank loans
952 558
678 933
Capitalised loan costs
(11 746)
(11 264)
1 783 235
1 211 459
34 682
41 171
97 777
144 339
From 2 to 5 years
451 252
639 393
5 years or later
570 099
Long-term debt
Booked value of assets mortgaged: Shares in subsidiaries Property in Sundveien AS and Fastighets AB Stolhuset Maturity dates amortisation and interests Within 1 year
Interest rate and currency rates as per 31.12. is used for calculating future amortisation and interests. Booked value of loans per currency: NOK
558 545
522 402
SEK
297 738
145 267
EUR
84 529
Total
The group’s bank agreement was refinanced in December 2013. The old loan was repaid and during 2013 the group has paid off TNOK 690 283 of the bank loan. The remaining cost relating to the repaid bank loan were expensed. A new long term bank loan agreement for TNOK 952 558 was signed as part of the refinancing. The bank loan is in NOK, SEK and EUR. The repayment period is six years and the loan becomes due in its entirety in 2019. The costs of the loan will be capitalised and expensed over the lifetime of the loan. The assets pledged as security are shares which Scandinavian Business Seating Group AS has in its subsidiaries, properties in Sundveien AS and Fastighets AB Stolhuset, as well as Scandinavian Business Seating Group AS’ shares recorded in the parent company Scandinavian Business Seating Holding AS. The interest is variable and normally tied for three months at a time. The average interest rates in 2013 was for the NOK-loan 1.68% and the SEK-loan 1.15% plus margin. There are terms linked to the loan in the form of certain key figures based on the result and solvency ratio which must be fulfilled. The company fulfilled the terms in the loan agreement as at 31.12.2013. Interest rates correspond to the total of relevant IBOR and an interest margin based on the key performance
940 812
667 669
indicator NIBD/EBITDA. The margin is set according to an incremental scale in relation to key performance indicators achieved. At the end of 2013, the Group had a total credit facility of TNOK 1 052 558 consisting of long-term debt of TNOK 952 558 and a bank overdraft limit of TNOK 100 000. Liquid resources in the form of unused credit facilities and cash at bank per 31.12.13 amounted to TNOK 144 437, which constitutes about 14% of the turnover for the year. The company is currently experiencing good profitability. The external borrowing carried out in the company is based on the company continuing to be profitable and appear a solid company. One goal is therefore to maintain the group’s profitability and measures are continuously implemented to adapt cost levels to the changing income picture. Besides the company’s strategy for future growth and profitability, the management specifically follows up the specific requirements stipulated in the agreement with our main banker. Those parts of the business that particularly influence the development of these requirements (covenants) are subject to special follow up. Bank covenants are valued at the end of every quarter.
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Annual Report 2013
Scandinavian Business Seating
Notes Group
Note 8 – Capital management Objectives and strategy The overall objective of the Group’s capital management is to be an attractive borrower through sound liquidity planning so that the Group at all times will be offered cost-effective funding to top-market conditions for comparable borrowers and securities. The Group shall keep good relations with at least two sources of financing. The capital management shall meet the Group’s collected need of funding. Every funding decision shall be made with consideration to the Group’s current need of financing, and the targets described below for debt management: • Low funding risk • High flexibility with reference to interest rate management and securities • Limited administration
Increase of capital from conversion of liability into equity
by a bank loan. NOK 385 000 000 of the shareholder loan was repaid and the remainder was converted into equity. This was done in connection with the refinancing of the group, by which the liability of the parent company Scandinavian Business Seating Holding AS to the shareholders was repaid in full or converted into B shares (preferential shares). In order to ensure that Scandinavian Business Seating Group AS is not affected by the new interest cut-off rules, the liability to the parent company, Scandinavian Business Seating Holding AS, was converted into equity. The general meeting of Scandinavian Business Seating Group AS on 31.12.13 voted to increase the share capital by converting the loan from shareholders. Liabilities totalling NOK 365 651 000 were converted into equity in Scandinavian Business Seating Group AS. This amount consisted of shareholder loans including accrued but unpaid interest as at the date of the general meeting of NOK 78 350 000.
The group’s financing structure was changed in December 2013, as a result of which the shareholder loan was replaced
Note 9 – Cost of labour, no. of employees, compensations etc. Salary expenses (NOK 1000) Salaries
2013
2012
211 152
204 698
Social security contributions
31 347
30 706
Pension costs, see note 10
12 168
12 496
Other benefits Total Average number of man-labour year
15 585
11 581
270 252
259 481
472
468
1 836
1 777
813
582
527
205
Loan to employees No loans are made to any of the employees. Auditor NOK 1000 excl. VAT Audit fee Audit related consultancy services Tax consultancy fee Other services
66
224
Note 10 – Pension costs, -assets and -obligations insurance company. The fund invests in shares, bonds, the capital market, real estate and hedge funds. Future return is estimated based on historical return on these investments. The future return is uncertain and is dependent of interest level, development on the stock exchange and administration of the risks. The pension liability has been calculated using a straight-line pension-earning basis. Unrealised gains and losses resulting from changes in actuarial assumptions are distributed over the estimated remaining average pension-earning period. The company’s unsecured scheme comprises an agreement-based early retirement scheme (AFP) and a former President & CEO’s pension agreement, which is financed via the company’s operations. For the group’s companies in other countries, defined contribution pension plans for all employees are established. Provisions have been made for the group’s share of under-coverage of the old occupational pension scheme.
The group has pension agreements covering all employees. The group’s Norwegian companies are required to have an occupational pension scheme in accordance with legislation on compulsory occupational pensions. The company’s pension scheme fulfils the requirements of this legislation. On 01.12.2012, the pension agreements of all Norwegian employees were changed from a defined-benefit to a contributory scheme. This change meant that there was a non-recurring effect on the group’s pension costs in 2012 of MNOK 7.5. As of 01.12.2012, employees with partial disability still have a defined-benefit scheme, the main elements of which are 60% of final pay and a 30-year earning period. The scheme also covers survivors and full disability pension. As of 31.12.2013, this scheme had 16 members. No guarantees have been given to the employees that the pension benefits will automatically be changed as a result of a reduction in National Insurance benefits. The collective pension agreement has been funded by the accumulation of funds with an
NOK 1 000 Components of pension costs
2013
2012
2011
2010
2009
Not Not Not Not Not Covered Covered Covered Covered Covered covered covered covered covered covered
Benefits earned during the year
75
Interests costs
41
9 384 30
Return on pension plan assets
2 432
7 850 38
(2 482)
Effect of changes in actuarial assumption Employer's contribution
17
Administration costs
100
Net pension costs defined benefit plan
233
Pension costs defined-contribution plan
3
233 11 935
7 719
303
7 930
345
3 101
149
3 036
150
(2 836)
(3 414)
(7 226)
(200)
731
(151)
1 154
(714)
1 017
100
1 316
5
1 093
12
1 126
62
1 065
68
3 971
11 902
Net pension costs
91
(3 235)
547 33
3 134
554 (157) 10 126
505 (48) 10 768
434 (200) 10 068
663
8 682
8 543
9 364
11 604
3 971
8 525 10 126
8 495 10 768
9 164 10 068 12 267
(5 178)
(1 303) (94 053) (1 865) (78 814)
Pension assets and obligations Estimated obligations Assets of the plan at fair value
(6 420)
(661)
5 555
3 629
Effect of changes in actuarial assumption Employer's contribution Net pension plan assets/ (-obligations)
(122) (987)
(707) (60)
(218)
56 718 214
33 321
(128) (5 264)
(3 933) (70 881)
57 590 217
(3 456)
48 254
17 663
206
23 025
369
(230) (2 992)
(354)
(3 191)
(488)
(721) (2 474) (1 217) (9 278) (1 878) (6 552) (4 080) (2 793) (3 575)
67
Annual Report 2013
Scandinavian Business Seating
Actuary calculation is made annually using the following assumption (p.a.)
2013
2012
2011
2010
2009 4,40%
Discount rate
4,10%
3,50%
2,60%
4,00%
Expected increase in salaries
3,75%
3,25%
3,50%
4,00%
4,25%
Expected G-increase
3,50%
3,00%
3,25%
3,75%
4,00%
Expected growth in running pensions
0,00%
0,00%
0,10%
1,30%
1,30%
Expected return on pension plan assets
4,40%
3,60%
4,10%
5,00%
5,60%
Transfer to AFP at 62 years of age
0,00%
0,00%
0,00%
0,00%
25,00%
Return on pension funds are expected to stay unchanged in 2013. Future returns are uncertain and dependent on interest rates, stock market fluctuations and risk management. Contributions to the pension scheme for 2013 are calculated to TNOK 250. Total recognised obligation includes an old AFP scheme with TNOK 500. The obligation is booked inclusive the Group’s portion of the schemes’ under financing.
Commonly used insurance assumptions have been used as the basis for the actuarial assumptions made for demographic factors and retirements. The standardised assumptions with regard to mortality and disability trends were prepared by the Association of Norwegian Insurance Companies. The estimates are based on K2013 with enhanced disability tariff IR73 and enhanced life expectancy. The discount rate tracks the interest rate for government bonds. The financial rate of return on the funds was 5.8% (4.53%) in 2012.
2013 Change in pension obligations Net obligation 01.01. Pension cost in the income statement The periods premium payments Premium payments and other changes Net obligation 31.12.
2012
(1 217)
(11 472)
24
(7 346)
(3 286)
(2 793)
(3 575)
(233)
(33)
(3 971)
157
(10 126)
48
(10 769)
200
931
8 964
789
529
4 005
(987)
(721)
(2 474)
11%
Capital bonds
35%
Property
15%
Money market Other Total
2010
(2 474)
Shares
Bonds
2011
Not Not Not Not Covered Covered Covered Covered covered covered covered covered
Pension fund investment profile:
68
Notes Group
9% 5% 25% 100%
6 000 (1 398) (1 217) (11 472)
5 700 3 262
516
89
24
(7 346)
(3 286)
Note 11 – Depreciable assets and fixed property
NOK 1 000
Buildings and other fixed property
Machinery and equipment
Furniture and fittings
Construction in progress
Total
Fiscal year 2012 Booked value 01.01.12 Conversion differences Reclassification Additions Transfer from construction in progress Sales
43 526
21 833
(273)
(36)
539
40 948
11 029
117 336
(245)
(24)
(578)
(539)
1 201
2 713
4 378
34 555
42 847
289
13 519
3 345
(17 152)
1
(1 222)
(67)
(120)
(65)
(4 463)
(9 351)
(13 725)
40 752
28 558
34 097
27 186
130 593
Cost
111 247
111 000
271 614
27 186
521 047
Accumulated depreciations
(70 495)
(82 442)
(237 517)
Booked value 31.12.12
40 752
28 558
34 097
27 186
130 593
40 752
28 558
34 097
27 186
130 593
1 827
609
566
1 342
4 344
(599)
(599) 43 783
This year's ordinary depreciation Booked value 31.12.12
(1 474) (27 539)
Per 31.12.12 (390 454)
Fiscal year 2013 Booked value 01.01.13 Conversion differences Reclassification Additions
2 402
1 646
4 097
35 638
3 806
35 815
(39 621)
(4 644)
(8 794)
(12 677)
40 337
25 825
61 898
23 946
23 946
Transfer from construction in progress This year's ordinary depreciation Booked value 31.12.13
(26 115) 152 006
Per 31.12.13 Cost
117 998
118 130
318 462
Accumulated depreciations
(77 661)
(92 305)
(256 564)
Booked value 31.12.13
40 337
25 825
61 898
10-25 years
6-8 years
3-10 years
Economic life
578 536 (426 530)
23 946
152 006
The Group has tangible fixed assets in use that are fully depreciated.
69
Annual Report 2013
Scandinavian Business Seating
Notes Group
Note 12 – Other operating costs NOK 1 000
2012
Premises costs
27 306
28 097
Marketing costs
27 149
25 363
Travelling costs
12 519
10 710
Fees
19 546
26 112
Freight
40 556
44 730
Royalty
15 085
14 998
Car expenses
16 182
15 234
Other operating costs
26 925
24 149
185 266
189 392
Total other operating costs
70
2013
Note 13 – Taxes The major components of income tax expense are: NOK 1 000
2013
2012
Taxes payable on this years result
26 055
20 242
Changes in deferred taxes and deferred tax benefit (Norway)
(4 220)
1 623
Changes in deferred taxes and deferred tax benefit (other countries)
(1 263)
451
Taxes previous years
2 593
(12 752)
23 165
9 564
Income before taxes
79 553
82 627
Taxes 28%
22 275
23 136
2 593
(12 752)
Permanent differences
571
(2 050)
Changed tax rate Norway
421
Income tax expense reported in the income statement By using the Norwegian tax rate, the taxes differ from booked figures as a result of the following:
Taxes due to: Change in assessment previous years
Other: differences in tax rates, currency etc. Income tax expense reported in the income statement
(2 695)
1 230
23 165
9 564
Specification of the basis of deferred taxes: Temporary differences included in the provision for deferred taxes: Fixed assets Intangible assets Current assets Obligations and other differences
26 531
23 767
(20 162)
(14 300)
14
(733)
17 997
1 827
Carry forward losses
8 473
Pension obligations not covered
2 044
5 377
34 897
15 938
9 945
4 463
Deferred tax benefit
14 613
8 672
Deferred tax
(4 668)
(4 209)
Total
9 945
4 463
Total Net deferred tax Deferred tax and deferred tax benefit are booked as gross value in the balance sheet statement.
71
Annual Report 2013
Scandinavian Business Seating
Deferred tax assets are mainly linked to temporary differences in non-current assets and pension obligations. There is a high degree of probability that the group will generate taxable profits in subsequent periods against which these
Notes Group
deferred tax assets can be utilised. The benefits of the deferred tax assets will flow to the company and have therefore been recorded at their full value.
2013
2012
Reconciliation of deferred tax Opening net balance as of 01.01.
4 463
8 796
Tax expense during the period recognised in profit or loss
5 486
(2 720)
(4)
(1 613)
9 945
4 463
26 055
20 242
Other: differences in tax rates, currency etc. Closing net balance 31.12. Reconciliation of current income tax for the year ended 31.12. Current income tax charge Tax payment, not settled
1 085
5 886
Prepaid income tax
(12 633)
(8 707)
Closing balance 31.12.
14 507
17 421
2013
2012
28 991
22 510
9 121
7 822
Note 14 – Inventories Inventories consist of the following items: NOK 1 000 Raw materials Work in progress Finished goods
16 094
11 835
54 206
42 167
12 039
(6 170)
Balance 01.01.
1 084
693
Total inventories Change in inventories Dead stock allocation Provisions
1 093
587
Provision used
(589)
(196)
Balance 31.12
1 588
1 084
Write-down of inventory booked as cost amounts to TNOK 3 412 (TNOK 196). The amount is classified as cost of goods sold.
72
Note 15 – Accounts receivables and other receivables NOK 1 000
2013
2012
167 785
121 514
Accounts receivables Gross outstanding Allowance for doubtful accounts as at 31.12 Total accounts receivables Realized losses
124
9
167 661
121 505
211
6 783
Reversed allowance doubtful accounts Used allowance
231 9
4 998
142 301
108 858
24 769
12 725
Age distribution accounts receivables per 31.12. Not due Due 0-60 days Due 61-180 days
591
Due 181-365 days
7 (96)
Due more than 365 days
11
Other short-term receivables Prepaid expenses
6 239
Deposit
1 216
942
809
1 549
8 264
5 846
NOK 1 000
2013
2012
Liquid funds
44 437
93 641
6 781
7 435
44 437
93 641
44 437
93 641
Other receivables Total
3 356
Note 16 – Liquid funds
Of this: Bank deposit payroll tax In the cash flow statement, liquid funds includes the following: Cash and bank deposit Bank overdraft (limit TNOK 100 000) Total
73
Annual Report 2013
Scandinavian Business Seating
Notes Group
Note 17 – Aggregated financial income/expense NOK 1 000
2013
2012
Financial income Interest income
1 937
3 056
75 819
81 459
20
155
77 776
84 670
Interest expense bank loan etc.
35 278
46 262
Net foreign exchange loss
75 098
82 477
Other financial expenses
13 917
4 980
124 293
133 719
Net foreign exchange gain Other financial income Total Financial expense
Total
The Group has foreign currency translation reserve booked against other comprehensive income. A reconciliation of this is shown in the consolidated statement of changes in equity.
Note 18 – Companies in the Group Company
74
Business location
Ownership
Company’s share
Scandinavian Business Seating Holding AB
Nässjö
100%
100%
Scandinavian Business Seating AS
Oslo
100%
100%
Scandinavian Business Seating GmbH
Neuss
100%
100%
Scandinavian Business Seating BV
Dordrecht
100%
100%
HÅG Inc
Greensboro, NC
100%
100%
Scandinavian Business Seating AB
Nässjö
100%
100%
Scandinavian Business Seating Sarl
Paris
100%
100%
Ergonomiprodukter i Bodafors AB
Nässjö
100%
100%
Scandinavian Business Seating A/S
København
100%
100%
Sundveien AS
Oslo
100%
100%
Fastighets AB Stolhuset
Nässjö
100%
100%
Scandinavian Business Seating Ltd.
London
100%
100%
Scandinavian Business Seating Asia PTE Ltd.
Singapore
100%
100%
Scandinavian Business Seating AG
Othmarsingen
100%
100%
Note 19 – Group receivables and debts NOK 1 000
2013
2012
Receivables Scandinavian Business Seating Holding AS
555
39
Total
555
39
Debt Shareholder loan: Scandinavian Business Seating Holding AS
600 269
Accrued interest shareholder loan: Scandinavian Business Seating Holding AS
72 032
Total
672 301
Capitalised interest expenses Repayment Interest rate
72 032 385 000 12%
12%
75
Annual Report 2013
Scandinavian Business Seating
Notes Group
Note 20 – Share capital Scandinavian Business Seating Group AS has a total of 10 310 000 000 shares at a nominal value of NOK 0.02 per share. The share capital is NOK 206 200 000. An increase in capital through conversion of a shareholder loan including accrued interest was adopted at the company’s general meeting on 31 December 2013 and registered in the Register of Business Enterprises on 18 February 2014. The capital increase was performed by increasing the nominal value of the company’s 10 310 000 000 shares from NOK 0.01
by NOK 0.01 to NOK 0.02, so that the total increase in share capital was NOK 103 100 000. The difference between nominal share capital increase and total subscription amount was assigned to share premium. The total subscription amount was NOK 365 651 000. Scandinavian Business Seating Group AS has one share class in which each share has one vote. There are no restrictions on trading shares in Scandinavian Business Seating Group AS.
Shareholders of Scandinavian Business Seating Group AS at year end:
Shareholder
Share capital
Scandinavian Business Seating Holding AS
TNOK 206 200
No. of shares 10 310 000 000
No. of outstanding shares per 31.12.12
10 310 000 000
No. of outstanding shares per 31.12.13
10 310 000 000
94% of the shares in Scandinavian Business Seating Holding AS (the parent company) are owned by Ratos AB and the remaining 6% are owned by management and board members. There are no restrictions on trading shares in Scandinavian Business Seating Holding AS. In order to achieve a more manageable number of shares in Scandinavian Business Seating Holding AS, the general meeting of the company on 27 December 2013 implemented a share consolidation at a ratio of 1 030:1, so that 1 030 existing
shares in the company became 1 new share. The face value of the share was changed from NOK 0.01 to NOK 10.30. Scandinavian Business Seating Holding AS has a total of 10 000 000 A shares (ordinary shares) and 34 299 100 B shares (preferential shares), each with a face value of NOK 10.30 per share. Shares within each share class are equal. A shares and B shares are equal, with the exception of article 5-7 in the company’s articles of association.
The major shareholders in Scandinavian Business Seating Group AS at year end:
Shareholder Spin International AB (Ratos AB) Other shareholders < 1%
No. of A-shares
No. of B-shares
Portion
8 499 961
33 225 947
94,2%
1 500 039
1 073 153
5,8%
10 000 000
34 299 100
100,0%
2013
2012
Earnings per share (NOK)
0,005
0,007
Fully diluted earnings per share (NOK)
0,005
0,007
Total
Note 21 – Earnings per share
Net income (NOK 1 000)
76
56 388
73 064
Median number of outstanding shares
10 310 000 000
10 310 000 000
Median number of outstanding shares (fully diluted)
10 310 000 000
10 310 000 000
Note 22 – Related parties The Group’s related parties consist of members of the board and the management.
Payments to executives (NOK 1000)
Rest of Group Management
CEO
Board of Directors fee Salaries
Board
873 2 987
10 154
Bonuses
536
922
Other benefits
201
1 068
Pension costs
68
877
Shares owned by management and board members in the mother company Scandinavian Business Seating Holding AS per 31.12.13:
No. of A-shares
No. of B-shares
219 901
159 662
Group Management Lars Ivar Røiri (Røiri Invest AS) Lillevi Ivarson (Tunset AS)
54 976
39 916
Eirik Kronkvist
32 069
23 284
Patrik Röstlund
32 069
23 284
Christian Lodgaard
10 996
7 984
Board Ebbe Pelle Jacobsen, Chairman of the Board
73 301
53 221
Sven-Gunnar Schough
58 086
230 924
Anne Breiby (Kjerby AS)
14 661
58 283
Olav Kjell Holtan (Holtan Management AS)
14 661
10 645
The parent company, Scandinavian Business Seating Holding AS, owns shares in Scandinavian Business Seating Group AS which have been pledged as security for financing relating to Scandinavian Business Seating Group AS.
In accordance with the current bonus scheme for management and senior employees, the group has allocated TNOK 1 313 as of 31.12.13. The bonus will be due for payment in 2014. There are no option programmes or agreements of share-based payment in the company.
The CEO has an agreement for full pay for up to 24 months in the event of termination of employment by the company. There is no agreement for any remuneration in the event of the chair of the board leaving the position. No loans have been given to any employees of the company or closely related parties as of year end. Neither does the company have any other transactions with closely related parties.
77
Annual Report 2013
Scandinavian Business Seating
Notes Group
Note 23 – Operational leasing agreements The Group has entered into leasing agreements for cars, offices and IT-equipment, where office rental are the major part. Most of the leasing agreements have an option to renew. There exist no condition to take up these options. The rental
NOK 1 000
agreements do not contain restrictions of the company’s dividend policy or financing opportunity. The rental costs of 2013 comprise TNOK 24 855. Future minimum rental for non-terminable lasing agreements falls due as follows:
2013
2012
Within 1 year
19 184
18 394
1 to 5 years
33 756
46 933
After 5 years
9 772
20 341
62 712
85 668
NOK 1 000
2013
2012
Balance 01.01.
4 483
6 200
Provisions
3 242
330
Provision used
(2 248)
(2 047)
Balance 31.12.
5 477
4 483
Total
Note 24 – Guarantees provision
The company has made a provision of TNOK 5 477 for warranty claims for chairs sold in the past five years. The provision has not been discounted, as the effect of such discounting is insignificant. The warranty costs are estimated to be paid out over the next five years with the main emphasis being early on in the five-year period. Approximately 40% of the amount is expected to be used within one year. The provision has been calculated on the basis of historical figures and the age distribution of complaints costs. The level of the
provision has been adjusted to the turnover for the past five years. In addition, an evaluation has been made of whether there are other specific events that are of importance to the size of the provision. On parts there are a 10 years guarantee on HÅG-products, a five years guarantee on RH -products and RBM products give six years guarantee. RBM-products also gives a half year guarantee on service work.
Note 25 – Other short-term debt NOK 1 000
2013
2012
Accrued salary expenses
25 859
27 563
Other accrued expenses
34 832
20 294
60 691
47 857
Total other short-term debt
78
Note 26 – Events after the balance sheet date No events have occurred after the balance sheet date, with or without accounting consequences, which are of such significance they could affect the presented accounts.
31 December 2013 Oslo, 18 March 2014
Ebbe Pelle Jacobsen Chairman of the Board
Sven-Gunnar Schough
Anne Breiby
Oscar Hermansson
Henrik Lundh
Lars I. Røiri CEO
79
Annual Report 2013
Scandinavian Business Seating
Annual accounts SB Seating Group AS
Income statement Scandinavian Business Seating Group AS
NOK 1 000
Notes
01.01.-31.12.2013
01.01.-31.12.2012
2
895
1 069
2, 3
4 724
2 852
5 619
3 921
(5 619)
(3 921)
Total operating revenues Cost of labour Other operating costs Total operating costs Operating income Financial income
4
210 924
210 901
Financial expense
4
(164 024)
(181 032)
Net financial income/(expense)
46 900
29 869
Income before taxes
41 281
25 949
11 394
7 427
29 886
18 521
Income tax expense Net income
80
5
Balance sheet Scandinavian Business Seating Group AS NOK 1 000
Notes
31.12.2013
31.12.2012
1 211 459
1 211 459
Assets Shares in subsidiaries
6
Capitalised loan costs Shareholder loan
7, 8
Total fixed assets Group receivables
7
Capitalised loan costs Other receivables
9 402
9 011
328 355
293 078
1 549 217
1 513 549
137 719
132 055
2 344
2 253
87
19
140 150
134 327
1 689 367
1 647 876
Cash and liquid funds Total current assets Total assets Equity and liabilities Share capital
9
206 200
103 100
Other paid-up equity
9
365 551
103 000
571 751
206 100
54 781
24 895
626 532
230 995
895 558
579 091
895 558
1 251 392
80 671
57 804
5
11 556
7 266
7
2 450
Total paid-up equity Retained earnings
9
Total equity Senior loans
8
Shareholder loan
7, 8
Total long-term liabilities Senior loans
8
Bank overdraft Taxes payable Accounts payable Group payable Other short-term debt Total current liabilities
672 301
99 842
226 15 373
577
167 276
165 489
Total liabilities
1 062 835
1 416 881
Total equity and liabilities
1 689 367
1 647 876
81
Annual Report 2013
Scandinavian Business Seating
Notes SBSeating Group AS
Cash Flow Statement Scandinavian Business Seating Group AS
NOK 1 000 Income before taxes Paid tax Group contribution Change in accounts receivables Change in payables Unrealised currency differences Change in other provisions Cash flow from operating activities Cash flow from investing activities Payments received, increase long-term debt Down payment of long term debt
01.01.-31.12.2013
01.01.-31.12.2012
46 281
25 949
(7 104)
(7 384)
(142 700)
(132 000)
(5 002)
11 094
2 656
12
(14 329)
5 094
90 614
69 494
(29 584)
(27 741)
0
0
950 000 (1 075 283)
Received share premium fund from Sundveien AS Net change in bank overdraft
15 000 22 867
(20 560)
132 000
136 600
Dividende received Group contribution received
42 340
Dividende paid Cash flow from financing activities Cash flow for the year
82
(81 140)
(64 500) 29 584
27 741
0
0
Opening balance - Cash and liquid funds
0
0
Closing balance - Cash and liquid funds
0
0
Notes Scandinavian Business Seating Group AS Note 1 – Accounting policies The financial statements have been prepared in accordance with the provisions of the Accounting Act and good accounting practice in Norway.
Use of estimates The management has used estimates and assumptions that have affected the income statement and the valuation of assets and liabilities, as well as assets and liabilities that are uncertain on the balance sheet date, in the preparation of the annual accounts pursuant to good accounting practice.
Currency Transactions in foreign currencies are translated at the exchange rate at the time of the transaction. Monetary items in foreign currencies are translated to NOK at the exchange rate on the balance sheet date. Non-monetary items measured at the historic exchange rate expressed in foreign currency are translated to NOK using the exchange rate at the time of the transaction. Non-monetary items that are measured at fair value expressed in foreign currency are translated at the exchange rate set on the balance sheet date. Foreign currency changes are recognised through profit and loss during the accounting period.
Tax Tax consists of payable tax and changes in deferred tax. Deferred tax/tax assets are calculated for all differences between the accounting and tax related values of assets and liabilities. Deferred tax is calculated using 27% of the basis of the temporary differences that exist between accounting and tax related values, as well as the tax related deficit that can be carried forward at the end of the accounting year. Net deferred tax assets are recognised to the extent it is probable they can be used in the future. Payable tax and deferred tax are recognised directly against equity to the extent that the tax items relate to equity transactions. Classification and stating of balance sheet items Current assets and current liabilities encompass items that fall due for payment within one year of the acquisition date, and items linked to the product cycle. Other items are classified as non-current assets/non-current liabilities.
Non-current assets are stated at acquisition cost less depreciation and write-downs. Non-current liabilities are recognised in the balance sheet at their nominal amount on the date they were established.
Subsidiaries/associated companies Subsidiaries and associated companies are valued in accordance with the cost method in the financial statements. Investments are stated at the cost of the shares unless they have had to be written down. They are written down to fair value when the fall in value is due to causes that it cannot be assumed will be transient and this is regarded as necessary pursuant to good accounting practice. Impairment charges are reversed when the basis for impairment not longer exists. Dividends, group contributions and other contributions are recognised in the same year they are allocated in the subsidiary. If dividends/group contributions exceed the post-acquisition detained share of earnings, the excess amount represents repaid invested capital and distributions are deducted from the value of the investment recognised in the balance sheet of the parent company.
Receivables Trade and other receivables are stated in the balance sheet at their nominal value less provisions for expected bad debts. Bad debt provisions are made on the basis of individual assessments of the individual receivables. In addition to this an unspecified provision is made to cover expected bad debts from other trade receivables.
Cash flow statement The cash flow statement was prepared using the indirect method. Cash and cash equivalents include cash, bank deposits and other short-term, liquid placements.
Consolidation Scandinavian Business Seating Group AS is 100% owned by Scandinavian Business Seating Holding AS. The group’s supreme parent company is Ratos AB. Ratos AB is a privately owned, Swedish investment company listed on the NASDAQ OMX, Stockholm Stock Exchange. Scandinavian Business Seating Group presents the consolidated financial statements for the group.
Current assets are stated at the lower of cost and fair value. Current liabilities are recognised at their nominal amount on the date they were established.
83
Annual Report 2013
Scandinavian Business Seating
Notes SBSeating Group AS
Note 2 – Cost of labour, no. of employees, compensations etc. NOK 1 000
2013
2012
Other benefits
895
1 069
Total
895
1 069
Audit fee
130
122
Audit related consultancy services
187
430
Salaries Social security contributions Pension costs
Average number of man-labour year Auditor (NOK 1000 excl. VAT)
Tax consultancy fee Other services
76
79
6
45
490
490
Payments to executives (NOK 1000) Board of Directors fee, Chairman of the Board There are no employees in Scandinavian Business Seating Group AS.
CEO received the following payments from Scandinavian Business Seating AS (NOK 1000) Salaries
2 987
2 223
Bonus
536
900
Other benefits
201
215
Pension costs
68
353
The CEO has, if the company gives notice of cessation of employment, an agreement of up till 24 months salary paid. At yearend, no loans are made to any of the employees or related parties in the company. The company is not obliged to have compulsory collective pension plans according to the Norwegian law of compulsory collective pension.
Note 3 – Other operating costs
84
NOK 1 000
2013
2012
Fees
4 488
2 709
Other operating costs
237
143
Total operating costs
4 724
2 852
Note 4 – Aggregated financial income/expense NOK 1 000
2013
2012
Financial income Interest income
214
704
Interest income group
19 791
21 717
Foreign exchange gain
53 218
56 480
Group contribution
137 700
132 000
210 924
210 901
Interest expense
33 677
44 793
Interest expense group
78 350
72 032
Foreign exchange loss
38 389
59 681
Total Financial expense
Other financial expenses Total
13 608
4 526
164 024
181 032
2013
2012
11 556
7 266
Note 5 – Taxes NOK 1 000 Income tax expense Taxes payable this years result Taxes previos year Income tax expense
(162)
162
11 394
7 427
41 281
25 949
Taxes payable Income before taxes Permanent differences Basis taxes payable
(10) 41 271
25 949
11 556
7 266
Income before taxes
41 281
25 949
28% taxes
11 559
7 266
28% taxes
Taxes due to: Received dividende, group contribution Taxes previos year Taxes
(3) (162)
162
11 394
7 427
85
Annual Report 2013
Scandinavian Business Seating
Notes SBSeating Group AS
Note 6 – Shares in subsidiaries Business location
Selskap
Scandinavian Business Seating AS Scandinavian Business Seating Holding AB
Time of acquisition
Ownership
Company's share
Equity
Net income
Oslo
2007
100%
100%
135 137
28 968
Nässjö
2007
100%
100%
194 464
18 393
Oslo
2009
100%
100%
18 325
345
Sundveien AS
Figures for equity and the result for the year are from the latest authorised annual financial statements, for the year 2012. The book value of shares in subsidiary companies is TNOK 1 211 459. Management has assessed whether impairment indicators exist for long-lived assets. The subsidiaries, with the exception of Sundveien AS, are parent companies in the group which show good profitability and are well positioned to distribute dividends. The underlying values in the subsidiaries are substantially higher than the recorded book values. The decline in value is deemed to be temporary and management does not consider it necessary to write down the value of the assets.
Note 7 – Receivables and debts with companies within the same group and with related companies Scandinavian Business Scandinavian Business Scandinavian Business Seating Holding AB Seating AS Seating Holding AS
NOK 1 000
2013
2012
328 355
293 078
2013
2012
2013
2012
Sundveien AS
2013
2012
Total
2013
2012
328 355
293 078
137 700
132 000
19
55
466 074
425 134
Receivables Shareholder loan Group contribution Group receivables Total
328 355
293 078
135 000
130 000
19
55
2 700
135 019 130 055
2 700
2 000
2 000
Debts Shareholder loan
600 269
600 269
Accured interest shareholder loan
72 032
72 032
Group payable Total
86
2 450 2 450
2 450 672 301
2 450
672 301
Note 8 – Receivables and debts 2013
2012
Receivables due in more than one year Shareholder loan Total
328 355
293 078
328 355
293 078
Long-term debt due later than 5 years Shareholder loan
672 301
Total Gjeld sikret ved pant
672 301 1 052 558
828 933
Assets mortgaged: Shares Total
1 211 459
1 211 459
1 211 459
1 211 459
The senior loan is in NOK, SEK and EUR and was refinanced in December 2013. The down payment period is six years and is due in 2019. The cost of the loan will be capitalised and expensed over the lifetime of the loan. The interest is variable and normally tied for three months at a time. The average interest rates in 2013 was for the NOK-loan 1.68% and the SEK-loan 1.15% plus margin. There are terms linked to the loan in the form of certain key figures based on the result and solvency ratio which must be fulfilled. The company fulfilled the covenants in the loan agreement as at 31.12.2013. Interest rates correspond to the total of relevant IBOR and an interest margin based on the key performance indicator NIBD/EBITDA. The margin is set according to an incremental scale in relation to dey performance indicatros achieved. At the end of 2013, the company had a total credit line of TNOK 1 052 558, consisting of long-term debt of TNOK 952 558 and a bank overdraft limit of TNOK 100 000.
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Notes SBSeating Group AS
Note 9 – Equity NOK 1 000
Share capital
Equity per 31.12.12
Other Total paid-up equity paid-up equity
103 100
103 000
206 100
103 100
262 551
365 651
206 200
365 551
571 751
Net income Issue 1) Equity per 31.12.13
Retained earnings 24 895 29 886
Total equity 230 995 29 886 365 651
54 781
626 532
1) An increase in capital through conversion of a shareholder loan including accrued interest was adopted at the company’s general meeting on 31 December 2013 and registered in the Register of Business Enterprises on 18 February 2014. The capital increase was performed by increasing the nominal value of the company’s 10 310 000 000 shares from NOK 0.01 by NOK 0.01 to NOK 0.02, so that the total increase in share capital was NOK 103 100 000. The difference between nominal share capital increase and total subscription amount was assigned to share premium. Scandinavian Business Seating Group AS has totally 10 310 000 000 shares of nominell value of NOK 0.02 per share. Scandinavian Business Seating Group AS has one class of shares and each share gives one vote.
Shareholders in Scandinavian Business Seating Group AS at year-end
No. of shares
Scandinavian Business Seating Holding AS
10 310 000 000
Scandinavian Business Seating Holding AS is a subsidiary of Ratos AB. Ratos publishes a consolidated financial statement. The annual report is available by request at the company’s office in Stockholm.
Note 10 – Events after the balance sheet date No events have occurred after the balance sheet date, with or without accounting consequences, which are of such significance they could affect the presented accounts.
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31 December 2013 Oslo, 18 March 2014
Ebbe Pelle Jacobsen Chairman of the Board
Sven-Gunnar Schough
Anne Breiby
Oscar Hermansson
Henrik Lundh
Lars I. Røiri CEO
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Scandinavian Business Seating
Auditor’s report
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Scandinavian Business Seating
CORPORATE SOCIAL RESPONSIBILITY
We were not made to sit still People are not designed to sit still. We need movement and variation in order to perform at our best. In 2013, the topic "Sitting is the new smoking" received much attention in the media. The assertion is based on scientific findings from several countries that show that sitting for long periods of time is more harmful than previously thought. This is an interesting finding, and we are pleased by the increased interest in solutions that reduce sedentary lifestyles. At the same time, this confirms that Scandinavian Business Seating's long-term focus on variation and movement, and "making the world a better place to sit", is probably the greatest contribution we can make towards a better society with greater productivity and fewer strain injuries. At Scandinavian Business Seating we have the overall idea that we have a responsibility beyond making money, namely to take care of nature and the people involved. We aspire
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to be an environmentally conscious player whose products, services and processes generate minimal greenhouse gas emissions, do not present a risk to health, and result in minimal waste. The group must also be a responsible player in society with employees who act as good ambassadors. These attitudes must be visible in everything we do, throughout the value chain.
The GRI report In addition to the formal annual report, Scandinavian Business Seating has reported separately since 2010 on important areas of finance, the environment and social responsibility in accordance with the guidelines of the Global Reporting Initiative (GRI). The report you are now reading is an expression of our desire for openness about how we practice our corporate social responsibility. The delivery chain for our products is our primary focus; in other words everything related to development, manufacturing and distribution of all of our brands.
HÅG Capisco
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Significant indicators ASPECTS
High importance
1 Economy A Result B Market proximity C Indirect economic influence
3 Society A The workplace B Human rights (incl. child labour) C Corporate social responsibility (incl. local communities) D Product responsibility
1B
2B
2E
2H
1C 3D 3B 3A 3C
2I
2D
2C
Interested/external parties Low importance
We have also placed emphasis on the report addressing areas where we have access to data and can affect the result. One important element of a GRI report is determining which indicators should be reported. We have systematically identified the viewpoints of both internal and external interested parties. On this basis, we have chosen a set of indicators that we believe are important for both our business and society. As is apparent from the table above, most environmental aspects are important to us and our surroundings. In addition, our target groups consider our relationship with society to
94
2G 2A
1A
Own judgement
2 Environment A Materials B Energy C Water D Biodiversity E Discharges, emissions, waste F Environmental effect of products and services G Compliance with statutes and regulations H Transport I General / expences / investments
2F
High importance
be particularly important. We naturally agree with this, not least as an important company in several local communities in Scandinavia and in connection with our use of subcontractors in low-cost countries. External parties have also mentioned product liability as an important area. We see this as positive, and it has been incorporated as an important element of all of our brands. This year's report addressed 35 indicators, and thus meets the requirements of level B. See also the cross-reference table on page 116.
RH Mereo
Scandinavian Business Seating's longterm focus on variation and movement, and "making the world a better place to sit", is probably the greatest contribution we can make to a better society. 95
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Interested parties matrix
Other matters
Local communities
Suppliers
Customers
Employees
Owners
Interested Mutual influence parties
96
Forum for dialogue
Topic 2013 – frequency of dialogue
Investment company Ratos AB owns 85 per cent of Scandinavian Business Seating. Ratos' purpose is to achieve the greatest possible profitability, and influence Scandinavian Business Seating through governing, shareholder-elected bodies. For its part, Scandinavian Business Seating influences Ratos' total profitability through its operations.
Ratos AB sits on Scandinavian Business Seating's board and the companies' mutual influence follows from Scandinavian Business Seating's “Corporate Governance Policy”, which is published in the company's quality and environmental management system (TQM).
The topic has been the company's profitability and general operations.
79 per cent of our employees are in Norway and Sweden, while the rest are employed by the other sales companies. Scandinavian Business Seating exercises significant influence over the employees via their wage and working conditions. In addition to this comes the employees' surroundings, family, etc. The employees exercise significant influence over Scandinavian Business Seating through their productivity, creativity and general efforts.
The employees are heard via various formal bodies linked to the trade unions, board work, working environment committees, etc. In Sweden the employees have two representatives on the board, in Norway they have three. 52 per cent of our employees are members of a trade union. In addition to this comes the dialogue on the company's HR policy and the organisation's structure, with associated reporting systems.
In 2013, we followed up the action plans that were drawn up after last year's working environment survey. We have also formalised and expanded the introduction programme for new employees. Among other things, this means that more people than ever are going to Røros, Norway and Nässjö, Sweden as part of their training.
Customers can be divided into two groups: dealers and end-customers. Scandinavian Business Seating focuses here on the individual dealer’s efforts to achieve its targets.
As the face of Scandinavian Business Seating towards the customer, dealers exercise significant influence over Scandinavian Business Seating's general reputation. Scandinavian Business Seating also depends on the individual dealer's efforts to achieve their goals. On the other hand, the dealers are dependent on good processes and products to achieve their own targets.
Different customer satisfaction surveys are conducted regularly, as well as indepth interviews with selected dealers.
Scandinavian Business Seating's supplier portfolio can be divided into two main categories: direct materials (DM) and indirect materials and services (IM&S). Transport is included in IM&S.
Upstream and downstream suppliers exercise significant influence over Scandinavian Business Seating on a general basis. In 2013 we chiefly focused on DM suppliers.
After our ethical guidelines for suppliers (Code of Conduct) were updated to include human rights, working conditions, the environment and corruption, in 2013 we had a special focus on, and follow-up of, suppliers in low-cost countries (China and Eastern Europe).
The local communities are defined as Nässjö and Røros. However, this report particularly focuses on Røros due to Scandinavian Business Seating’s special position in a small community.
Scandinavian Business Seating has long been an important actor in the local community in Røros. As one of the region's largest employers, the company holds an important position in the local community. The connection with Røros is also important for the HÅG brand.
Scandinavian Business Seating has contributed financially to culture and sports projects in the local community, in addition to the statutory taxes and duties. There is no formal forum for dialogue between the local community and the company, but there is close cooperation on matters that affect both parties, for example the scheduled flight between Røros and Oslo.
Scandinavian Business Seating is a member of the Norwegian organisation Ethical Trading Initiative Norway (ETIN) and collaborates with other environmental organisations as needed.
In 2013, we benefited greatly from collaboration with environmental organisation Zero to chart possible manufacturers of bio-based polypropylene.
HÅG Conventio Wing
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CORPORATE SOCIAL RESPONSIBILITY
Finance Scandinavian Business Seating creates long-term value for owners and society as a whole through efficient commercial activities based on the principle of sustainable development. The company wants to be a positive contributor to society for the employees, the company's partners and the subcontractors. The group's strong focus on research and development makes an important contribution to this value creation. Profitable operations give the company a basis on which to create jobs directly in the company and indirectly at the company's partners and subcontractors, who deliver goods and services to the company's value chain. In Røros, Norway in particular, the company is a cornerstone company and an important contributor to the local community.
Distribution of the group's tax costs by country:
Amounts in NOK
2010
2011
2012
2013
Norway
11,3
19,9
1,6
14,3
Sweden
5,6
8,9
8,6
6,6
Denmark
2,4
3,3
(1,2)
3,2
Netherlands
0,7
(0,9)
Germany
0,9
0,7
England
1,1
(0,3)
0,5
France
0,3
1,0
0,3
The group's operating income amounted to MNOK 1,003 in 2013. Operating costs amounted to MNOK 798; wage costs and social benefits for employees accounted for MNOK 270 of this. This represents 34 per cent of operating costs.
Amounts in NOK
2010
2011
2012
2013
Wages
190,1
200,1
204,7
211,2
Interest to lenders
37,8
33,4
46,3
35,3
Interest to owners
77,7
63,1
70,5
76,2
Income tax expense
22,3
32,9
9,6
23,2
Social security contr.
27,2
29,7
30,7
31,3
Return for owners and lenders Scandinavian Business Seating Holding AS, which is the group's parent company, paid MNOK 383 to the owners in 2013. This was repayment of subordinated loans. In 2013 the outstanding subordinated loan was converted to equity (B-shares). The interest paid to lenders amounted to MNOK 35.3 in 2013.
(0,2) (0,3)
Switzerland Total
(0,9) 1,2 (0,3)
Singapore
Income and costs
98
Payments to public authorities
22,3
32,6
(0,2)
(0,4)
9,6
23,2
Voluntary, non-profit investments Scandinavian Business Seating's most important contribution is to be a good employer for its employees. The group believes it is important to actively contribute to the local communities in Røros and in Nässjö. Every year an amount is therefore set aside to sponsor activities in the local communities like sports teams and the Winter Chamber Music festival in Røros.
Retained earnings Following the group's establishment in 2007, dividends have been paid to the owners on one occasion. In the short and long term, free liquidity will be used to invest and repay debt rather than pay dividends. This will result in flexibility to invest further in research and development, as well as in growth-promoting measures in the markets in which the company operates.
HÅG SoFi – Deloitte, Norway
RBM Noor
RH Logic
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CORPORATE SOCIAL RESPONSIBILITY
THE ENVIRONMENT Scandinavian Business Seating has had the environment on the agenda for over 20 years. During the first few years, we focused most on energy efficiency and reduced use of non-renewable materials. In recent years there has also been much focus on chemicals that are hazardous to health and the environment. We have gradually acquired substantial knowledge about environmentally-friendly solutions, materials and processes. The result is seen in the present resource-efficient products (with a low carbon footprint), containing as few chemicals as possible, and which are also prepared for simple disassembly and recycling. As part of the work with ISO 14001, we have defined our most important environmental issues, and have accordingly established a set of strategic environmental goals: ◆◆ The average energy consumption per product throughout the entire life cycle will be reduced by 40 per cent (based on 2005 figures) before 2020. ◆◆ The share of recycled materials in products must be increased from the present level of 30 per cent, to an average 60 per cent until 2020. ◆◆ Neither environmental nor health hazardous chemicals will be used in the manufacture of our products. ◆◆ Scandinavian Business Seating will contribute to ensuring that our products end their life cycles being disassembled, and that over 90 per cent of the components undergo recycling or energy recovery. The annual environmental targets will contribute to the achievement of the long-term goals, and are addressed in the relevant following chapters. In 2013, we focused on reduced energy consumption, increased use of recycled materials, reduced consumption of hazardous chemicals, and sorting and reducing waste. The environmental and social responsibility work is performed by a separate unit of the company's product development department. The Senior Vice President R&D represents the area in the executive management.
Climate, chemicals and resources At Scandinavian Business Seating we have found it appropriate to divide our environmental focus into three focus areas: climate, chemicals and resources. The best solutions lie in the intersection between all three. We call this “full breadth”. We also take consideration of the environmental consequences throughout the life cycle, not just from factory gate in to factory gate out. We call this “full depth”. By taking both full
100
breadth and full depth into consideration, we are certain that we constantly improve the overall environmental performance of our products and that we avoid less than optimum solutions. Climate The products' climate effects, represented by greenhouse gas emissions, are closely connected with energy consumption. We have therefore decided to measure and communicate the products' carbon footprints using an Environmental Product Declaration (EPD). This quantifies the greenhouse gas emissions caused by a product throughout its life cycle: from extraction of the raw materials, via processing, transport and production, to use and disposal. Greenhouse gas emissions are a key indicator both for customers who wish to minimise the environmental impact of their purchases and for our own search for increasingly better products. The table on page 109 shows that all of our collections perform well in comparison with our competitors. At the same time, climate-efficient products are just part of the general picture. How we run our factories and offices is also of significance. Starting with this year's report, we will therefore show the group's greenhouse gas emissions in the form of environmental accounts based on the Greenhouse Gas Protocol (GHG Protocol). Use of chemicals As a manufacturer of “body-hugging” products, it is important to know the effect of the chemical use in products and processes on users and the people involved in the processes. The area has received increasing attention during the past few years, and many customers make detailed demands regarding use of chemicals in products. The furniture industry uses chemicals as fire retardants, in paints and glue, and for production of textiles, foam and other plastics. At Scandinavian Business Seating, we work constantly to detect and replace unwanted chemicals, without reducing the qualities of the products. To ensure that our chairs do not contain chemicals that could harm users or the indoor climate, we have decided to test our most important collections against the requirements of the American Greenguard Environmental Institute. In practice, Greenguard has a zero tolerance policy regarding emissions of formaldehyde and volatile organic compounds.
The present resource-efficient products contain as few chemicals as possible, have a low carbon footprint, and are also prepared for simple disassembly and recycling.
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minimise greenhouse gas emissions
Environmental impact
minimise use of chemicals
Resources Our current use of non-renewable resources is far from sustainable; in a way we are stealing from future generations. At Scandinavian Business Seating, we are continuously working to reduce the use of non-renewable resources, and we measure our own development by looking at how much of a product is made from recycled materials. This percentage by weight is also listed in the EPD, and varies in current collections from 19–61 per cent. For the same reason, it is important to reduce the volume of waste, and ensure that what we generate can be recycled as far as possible, or incinerated for heat recovery.
sales offices in Switzerland and Asia. As far as the transport of products to customers is concerned, we focus on a high degree of flat packing. We only transport fully assembled chairs when we can drive a full vehicle directly to the customer. In every other case, a flat packed product, which can be transported together with other products on parts of the route where we cannot fill vehicles with a single order will be the most environmentally efficient method. We are working continuously to reduce the pack volume of our products, and to ensure that vehicles to and from the factory are as full as possible.
Energy consumption and greenhouse gas accounts
Our factories and sales offices mainly use power in the form of electricity and district heating. When performing renovation, the environmental impact influences the decision-making. In 2013, windows with better insulation were installed at the factory in Røros, and more energy-efficient lighting was installed in the factory in Nässjö. The table lists our annual emission of greenhouse gases in connection with operation and heating of the group's own units. In 2013, our target was to reduce direct energy consumption by 3 per cent, but it is difficult to unambiguously document the change. Annual consumption is affected by winter in Røros, the number of employees and the number of chairs we produce. We are nevertheless convinced that we will eventually be able to see the results of our work.
We drew up the first greenhouse gas accounts for HÅG in 2008. They showed that the decidedly greatest emissions come from business travel and the transport of goods from the factory to the customer. We have substantially increased our video conferencing capacity in order to reduce business travel. Together with other measures, over a period of several years this has resulted in reduced business travel, measured in lower travel expenses. This indicator is easy to follow, and we assume that greenhouse gas emissions have been reduced more or less accordingly. The increase in 2013 is due to the launch of three new collections, and establishment of new
The volume of greenhouse gases emitted in connection with the manufacture and use of a product is, as mentioned earlier, referred to as a product's carbon footprint. In practice, this is also a measure of energy consumption, as a smaller footprint is the result of lower energy consumption. From a life cycle perspective, over 95 per cent of the environmental impact of our products occurs before the components arrive at our factories for final assembly. This means that the design and construction phase, as well as the choice of supplier, are critical to
To achieve good environmental results, we need to keep the environment in mind all the way from the concept stage. The best results are achieved with products with low weight, few parts, good materials and a long lifetime. The products must also be easy to dismantle and recycle. These principles are described in detail on page 106. When the new HÅG SoFi office chair received the Norwegian Design Council's Environment Award in 2013, we took this as confirmation that we are on the right path.
102
minimise waste and pollutants
"Eco Design Tool"
ENERGY CONSUMPTIONS HEADQUARTER AND SalES OFFICES
tCO2e 250
200
150
100 Gas 50
Remote heating
600
a product's environmental performance. Detailed data on how the choice of material and construction affects the environmental performance has now been collated in a tool that we call our “Eco-design tool”. This has become an important aid in the development of new eco-friendly products. The environmental performance of established products can also be improved. This can be done, for example, by changing materials, suppliers or by increasing the percentage of recycled materials. Several years ago, the environmental performance of several of our products was improved by about 30 per cent simply by moving production of aluminium star bases from China to Scandinavia.
500
Use of chemicals
0
Electricity 2010
2011
2012
2013
ENERGY CONSUMPTIONS PRODUCTION Røros AND NÄssjÖ
tCO2e 800 700
400 300
Oil
200 Remote heating 100 0
Electricity 2010
2011
2012
At Scandinavian Business Seating, we have a dedicated list of chemicals that are hazardous to health and the environment that we do not want to use in our products or processes. This “negative list” is updated every year, and all of our suppliers of direct materials must undertake in writing to meet our requirements. The negative list is stricter than both current industry requirements and national requirements.
2013
TRAVEL COSTS (MNOK) 20 18 16 14
In addition to making requirements, we actively check their compliance. Accordingly, in 2013 there were two cases where renowned subsuppliers, who make deliveries to a large section of the European furniture industry, used hazardous chemicals in connection with surface treatment of the components. The processes have now been changed so that these chemicals can be avoided, to the satisfaction of both ourselves and the industry. In order to be certain that our chairs do not emit hazardous gases, they are tested and certified in accordance with the Greenguard indoor climate requirements, as mentioned earlier. A list of the collections that have been tested can be found on page 114.
12 10 8 6
Recycled materials
4 2 0 2008
2009
2010
2011
2012
2013
The only materials that cannot be recycled, and thus in theory are impossible to replace with recycled qualities in today's products are foam and wool textiles. It should be possible to recycle all other materials, but at present
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CORPORATE SOCIAL RESPONSIBILITY
Waste management Waste (tonn)
2010
2011
2012
2013
Material recycling
320,4
260,4
353,2
293,1
Incineration with energy recovery
138,6
112,9
90,8
95,6
0,5
0,4
0,1
0,4
Total waste
459,5
373,7
444,1
389,1
Hazardous waste (kg)
2010
2011
2012
2013
Disposal
Waste oil Oil contaminated soil Oil filters Organic solvents Paint, glue, lacquer Spray paint Fluorescent tubes
0
0
214
3 242
2 248
1 322
200
135
0
648
200
0
0
0
9 567
1 665
3 251
10 775
0
0
35
0
99
100
0
0
Lead batteries
125
0
0
17
Slag, dust
351
182
155
34
Oil emulsions, waste water
13 929
0
0
1 000
Process water
48 200
68 000
69 500
47 300
Halogenated organic waste
0
0
1 183
0
EE-waste
148
598
699
1 151
Ribbons
69
60
77
52
0
0
0
217
77 408
73 982
77 148
62 730
Not specified waste Total hazardous waste
only steel, aluminium and polypropylene plastic are commercially available as recycled. The use of recycled material is also limited by availability and quality. Recycled materials are good because they both reduce our use of non-renewable materials and because this results in lower energy consumption / greenhouse gas emissions. By replacing virgin aluminium with recycled aluminium, we for example save over 90 per cent of the energy required to cast a chair's star base. The use of recycled plastic also brings great gains. The saving for polypropylene (PP) is approximately 60 per cent from using 100 per cent recycled material. As regards steel, we will never be able to use 100 per cent recycled material. The proportion will depend on the manufacturing process. Parts that undergo advanced deep drawing may for example only contain about 20–30 per cent recycled materials before the steel loses its flow properties. Even so, the savings compared to the use of virgin materials are considerable. Scandinavian Business Seating is actively working to increase the percentage of recycled materials in all of its products. The average share shown in the table on page 105 is the total of recycled steel and aluminium, and is based on figures from the EPDs.
Water consumption and discharges to water Water consumption is not defined as a significant environmental aspect in either Røros or Nässjö, and no activities have therefore been prioritised to reduce consumption.
104
800 3 720
There is a surface treatment facility in Røros where the metal components are washed before powder coating. The washing process uses different types of cleaning agents. The process water is purified before release into the public sewage system. The separated waste is treated as hazardous waste, and is delivered to an authorised reception facility.
Waste and emissions to air For many years, the waste from our production units has been sorted and either recycled or incinerated for heat recovery. In 2012, we also began sorting waste from the main office in Oslo. In 2013, we achieved our goal of a 10 per cent reduction, compared with the previous year. Production environments, especially mechanical production in Røros, generate a certain amount of hazardous waste. This normally occurs for short periods of time in connection with various maintenance procedures and will therefore show an increase during given periods. All hazardous waste is declared pursuant to the requirements of the Waste Regulations, and delivered to an approved reception facility. Here the waste is sorted, and most of it is delivered for incineration for heat recycling. The table shows the hazardous waste delivered from the production units during the past few years. At some point in time, our chairs will also become waste. However, due to their high quality and timeless design, most of our products lead such a long and itinerant life that it is not
HÅG Capisco chair in parts
possible to organise their collection and disassembly. We nevertheless put much care into ensuring that our products are easy to take apart and sort for recycling. An average of over 95 per cent of the materials in our chairs is recyclable. Given the return systems in use today, however, only just over 60 per cent of the material is recycled. Scandinavian Business Seating is a member of the Norwegian take-back scheme Grønt Punkt and equivalent schemes in other markets. According to its website, Grønt Punkt collects and recovers around 88 per cent of all packaging.
Proportion of recycled materials (%) 35
Our factories do not pollute the soil, water or air, and cause no noise or odour problems for their surroundings.
30
Biodiversity
25
Scandinavian Business Seating's factory in Røros is located next to the Kvitsanden protected landscape area, about 2 km west of the centre of Røros. The Kvitsanden protected landscape area consists of a special shifting sands area containing both stable and mobile sand dunes. The area is an important element of the landscape, and has a very high conservation value. At Scandinavian Business Seating's factory in Røros, we are particularly aware of our environmental obligations, and have drawn up procedures to prevent all pollution of the local environment.
2013 20 2012 15 2011 10 2010
5
2009
0 Work Chairs
Visit- and Conference Chairs
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ANNUAL REPORT 2013
Scandinavian Business Seating
CORPORATE SOCIAL RESPONSIBILITY
I Lowest possible carbon footprint
1. LOW WEIGHT
MINIMISED ENVIRONMENTAL IMPACT
2. FEW COMPONENTS
II
III REDUCE USE OF NON-RENEWABLE MATERIALS
NO TOXIC CHEMICALS
5. CRADLE-TO-CRADLE CLOSED LIFE CYCLE
3. HIGH-QUALITY MATERIALS
4. LONG LIFE
ENVIRONMENTALLY EFFICIENT PRODUCTS At Scandinavian Business Seating, we want all of our products to document good environmental performance in all three of our focus areas: climate, health and resources. After working on this for many years, we know what is needed. Our experience is summarised in five focus areas with the keywords: low weight, few components, high-quality materials, long service life, and products designed for disassembly and recycling.
106
and simpler assembly. This in turn means our solutions are often more resource-efficient than traditional products.
1. Low weight Low weight means fewer materials and less use of resources. The correct materials for the job and weight-optimisation are major factors in this context.
3. High quality materials In today's society, we use much more than our share of the Earth's non-renewable resources. Our lifestyles are far from sustainable. Our goal at Scandinavian Business Seating is therefore to increase the use of recycled materials. Over 95 per cent of the materials are recycled in today's products. The only components that are not normally recycled are wool textiles and foam. In this area, as well, we are continuously looking for better solutions. For example, we have replaced foam with more environmentally-friendly solutions in several of our newest models.
2. Few components The best solutions are almost always the simplest. We invest major resources in refining new ideas before they go into production. Fewer components mean fewer tools, less transport
Good materials should also mean healthy products. For this reason we try to avoid all chemicals that are hazardous to health and the environment, both in-house and earlier in the value chain.
We want all of our products to be able to document good environmental performance in all three of our focus areas: Climate, health and resources. RBM Noor/RBM Allround table
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CORPORATE SOCIAL RESPONSIBILITY
Environmental Declaration ISO 14025/ISO 21930 NEPD nr:
HÅG Capisco Puls 8010
212
Approved according to ISO14025, §8.1.4: Valid until:
17.06.2011 17.06.2016
Verification of data: Independent verification of data and other environmental information has been carried out by Senior Research Scientist Hanne Møller in accordance with ISO14025, §8.1.3. Declaration compiled by: MSc. Camilla Skjerve-Nielssen and Siv.ing. Kari-Anne Lyng PCR: Product Category Rules for Seating solution (The Norwegian EPD Foundation, 2008). PCR approved by the Norwegian EPD Foundation's verification committee. See also "Methodological Decisions ". About EPD: EPDs from other program operators than the Norwegian EPD Foundation may not be comparable. Figure 1
Cradle Use to phase gate Global warming: 31 1 kg CO2-eq. Energy consumption: 607 37 MJ Amount of recycled materials: 48 % Guarantee period: 10 yr Environmental Indicators.
Information about the product: Functional unit: Scope of assessment:
Year of study: Data: Expected market area: Company contact:
Office Chair Seating solution, produced and maintained for 15 years. This environmental declaration covers the product's life cycle from raw material extraction until the finished seating solution, incl. use & maintenance. The user phase is represented by a use scenario in Southern Germany. A scenario for disposal is presented. 2011 Specific data: 2006 to 2008, Specific database data: Late 1990s to 2006. (See Figure 5) Europe & U.S.A. Carl P. Aaser, Tel: + 47 22 59 59 10, e-mail:
[email protected]
Product Specification Mass kg/seating solution
Information about the producer: HÅG asa Fridtjof Nansens vei 12 Postboks 5055, Majorstuen N-0301 OSLO, Norway Org.nr.: NO-928902749 ISO 14001 certified by Dovre Sertifisering (NO-S-0000016). HÅG's Environmental Management System includes procedures for collection of LCA data and EPD development.
0,2 Share %
Table 1
% from suppliers with a % included in certified Environmental the analysis Management System*
Steel 3,9 27 % Aluminium 2,9 21 % Other metals 0 0% PUR 0,2 1% Plastics 3,9 27 % PVC 0 0% Textiles: wool, polyester 0,08 1% Cardboard (packaging) 1,8 13 % Various 1,5 11 % Total 14,2 100 % 98,3 % * In % of analysed mass, input to the assembly department at HÅG
% of components with EPD*
System boundaries (see the last page for more information) A-G A-G A-G A-G A-G A-G A-G
54 %
0%
Hazardous content
The sitting solution meets the following minimum emissions requirements in the Greenguards certification: Formaldehyde: < 0.025 ppm (< 0.03 mg/m³) (Greenguard certificate). It has not been possible to obtain data on the content of brominated flame retardents & heavy metals. These chemicals have not been detected in HÅGs production.
EPD/environmental declaration
Long lifetime The longer a product lasts, the longer it will take before it has to be replaced by a new one. Long service life therefore helps reduce global resource and energy consumption. We are aware that all of our products must have a long service life, multiple settings, a timeless design, are of high quality, and contain parts that can be replaced when worn. We are one of few manufacturers that provide products with a 10-year guarantee. "From cradle to cradle" Instead of thinking traditionally about a product, from “cradle to grave”, we think from “cradle to cradle”. This means that
108
at the end of their life cycle, all materials can easily begin a new life in new products. That is why we make all of our products so that they can easily be dismantled without the need for special tools. All plastic parts are marked for sorting and recycling. We know that by choosing the best solutions in all these five areas, the result is a sustainable product with a low carbon footprint, low content of hazardous chemicals and limited use of non-renewable resources. This is our strength: The big picture!
29
31
36
37
HÅG Capisco Puls 8010
HÅG Capisco 8106
HÅG H05 5370
53
54
57
57
59
60
61
HÅG H04 4400
HÅG H04 4470
EFG Team Spirit 2
Orange Box X10
SAVO EOS HL
HÅG H09 9230
HÅG H05 5300
Orangebox Ara
100
73
86
SAVO S3
300
Connection Eco
250
Orangebox G64
Orangebox G68
SAVO XO ML
SAVO Ikon 3 LN
Steelcase Think
91
Steelcase Please
82
Orangebox
79
90
Orangebox Spina
EFG Splice
RH Logic
67
RH Extend
51
66
New RH Activ
50
HÅG Futu
44
64
Orange Box Joy
HÅG H03 320
29
HÅG Sideways
50
SAVO Studio 32
26
HÅG Conventio 9511
0
24
HÅGConventio Wing
Carbon footprint By model
Scandinavian Business Seating
Competitors
kgCO2
285
247
200
168
150
106 108 109
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ANNUAL REPORT 2013
Scandinavian Business Seating
CORPORATE SOCIAL RESPONSIBILITY
CORPORATE SOCIAL RESPONSIBILITY Scandinavian Business Seating wants to create a secure and good working environment, both in-house and with our suppliers and partners. We also want to behave as a responsible actor towards our customers and society. We support and follow the principles of the United Nations Global Compact. At Scandinavian Business Seating, we have chosen to focus particularly on three points: 1. The workplaces in Norway and Sweden and with our Western European suppliers. Everyone who is connected with our product delivery chain must have safe and good working conditions and we will actively counter all forms of corruption and unhealthy competition. 2. Suppliers in low-cost countries. Scandinavian Business Seating has a number of suppliers in low-cost countries (Eastern Europe and China), and has special focus on these suppliers meeting the requirements in international regulations concerning human rights and working conditions. We have also established environmental requirements, and have a zero tolerance policy on corruption. 3. The local community – Røros Scandinavian Business Seating is one of the largest workplaces in Røros. This creates both opportunities and obligations. Scandinavian Business Seating's ethical guidelines for both its own employees and suppliers (Code of Conduct) state that we want employees to conduct themselves as good ambassadors, and treat their colleagues and fellow human beings with respect and courtesy. We clearly distance ourselves from corruption and bribes, and we support the work for free competition and fair trade. Our ethical guidelines for suppliers were updated in 2012 and are now in line with the guidelines in the United Nations Global Compact. Follow-up of employees, the workplace, human rights, social responsibility and product responsibility is shared between the group's Human Relations (HR) department and the department for the environment and corporate social responsibility. The HR department is represented in corporate management by the HR Director, while the department for the environment and corporate social responsibility is repre-
110
sented by the Senior Vice President R&D. The year's activities and achieved targets in the individual focus areas will be apparent from the subsequent review.
Workforce At year-end 2013, the group had 472 employees; of which 309 were men and 163 women. This means that 34 per cent of the workforce are women. 20 per cent of the board of Scandinavian Business Seating are women, and 14 per cent of the group's executive management team are women. Scandinavian Business Seating AS – Norway Three employee representatives sit on the board. Board elections are held every second year. The company does not have a corporate assembly, but an agreement was reached on extra board representation for the employees. Four board meetings are normally held each calendar year. The CEO, CFO and HR Director have been elected as shareholder representatives of the company. Scandinavian Business Seating AB – Sweden Two employee representatives sit on the board. Other board members are the CEO, CFO, HR Director and the general manager of Scandinavian Business Seating AB, who also acts as the board's secretary. Four meetings are normally held each year. The boards of Scandinavian Business Seating's other subsidiaries consist of the CEO of Scandinavian Business Seating, as chairman of the board, and members of the group's executive management team.
Employee turnover We had a turnover of 9 per cent in 2013; a slight increase compared with 2012. This is equivalent to 43 people; 18 of whom were women.
Employee benefits Scandinavian Business Seating wants to be a company that offers its employees good employee benefits. The schemes vary from country to country. In Norway and Sweden (which represent about 80 per cent of the workforce), all employees are covered by tariff agreements.
Sick leave
Røros
Oslo
Nässjö
2009
7,93
1,78
2,68
2010
6,24
1,80
2,20
2011
5,22
2,26
3,13
2012
6,00
2,60
3,92
2013
6,00
2,80
2,52
RBM Noor
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ANNUAL REPORT 2013
Scandinavian Business Seating
Trade union work 52 per cent of workers in Norway and Sweden are organised in trade unions, which is an increase compared with 2012. The factory in Røros has one part-time employee representative in 70 per cent of a full-time position. Both factories have regular monthly meetings between the employee representative and the company. Freedom of association and collective bargaining rights are a matter of course, and apply to all of the group's units regardless of country. No instances have been recorded of attempts to set aside freedom of association and collective bargaining rights. A total of 198 employees are trade union members. Scandinavian Business Seating's success depends on the performance of its employees. The best way of creating motivation is through active involvement. In areas that have a collective pay agreement, the involvement of employee representatives is stipulated by the agreements, which state that employees must be involved and information provided at as early a stage as possible in the decision-making processes, giving employee representatives a genuine opportunity to influence decisions.
Procedures for local hiring Scandinavian Business Seating has found that in many connections it is appropriate to recruit from the local community. This gives greater stability to the workforce and is especially relevant in Røros, where we have found that it can be difficult to retain highly-skilled employees. Around 60 per cent of the managers in Røros and Nässjö had local ties in 2013. Scandinavian Business Seating is a member of the “Fjelltrainee” training scheme in the Røros region.
Knowledge and skills Analysis of competence is an important instrument in order to develop our employees and the company, and Scandinavian Business Seating works systematically to review our employees' knowledge and skills, as part of the annual development interview. Based on the company's strategic goals, we also look at the general competence that is required at any given time to further develop the company. All workers must possess this knowledge, but with varying skills levels, depending on the position. Together, the general and special departmental qualification requirements will provide the foundation for each department's training plans. Scandinavian Business Seating has its own ”Academy”, which is responsible for internal development programmes in management development, sale and project development. Competence development and training is also an integrated part of change processes and strategic initiatives, such as the launch of new products. In cases where internal programmes do not meet the needs, external provision is used, and is paid for by Scandinavian Business Seating.
HSE and sick leave Preventive HSE work is an important part of the work to achieve the general goal that "all employees should also return home in the same state of health as when they arrived at work". Scandinavia Business Seating does systematic and preventive HSE work, and the work is organised through formal bodies, and in accordance with statutory legislation. An annual HSE plan is drawn up, and activities were carried
112
CORPORATE SOCIAL RESPONSIBILITY
out according to plan in 2013. We have working environment committees in Oslo and in Røros, in which both the company and employees are represented. In Nässjö, several people participate in the formal HSE committee, which meets according to a fixed schedule. We also have safety deputies in the organisation that attend to the employees' interests in cases regarding the working environment. The safety deputies are regularly involved in the planning and implementation of measures that are relevant to the working environment. All safety deputies receive training, so that they are secure in their role. Two safety rounds are conducted every year, and the findings are reported to an incident system and followed up there. There is a statutory industrial safety organisation in Røros. There were no major incidents in 2013 that required its participation. Everyone at Scandinavia Business Seating has been trained on systematic work with the working environment. The training includes the structure of our HSE system, evaluation procedures when an alarm is triggered, typical risks for different groups of employees, use of safety equipment, and each employee's responsibility for its use. Chemicals used in production are under constant risk assessment and assessment for substitution. The goal is to avoid all chemicals that may be hazardous to health. This work has yielded good results, and in 2013 no hazardous chemicals were used in the manufacturing. Preventive risk assessments are conducted in connection with new processes, new equipment and changes to tasks. Risk assessments are also carried out after near-accidents and accidents. Internal courses on risk analysis were held for employees in 2013. All personal injuries are recorded and followed up. There has been an increase in the number of cases recorded during the past year. This is related to a focus in 2013 on preventive HSE work and on recording HSE matters. However, in Røros there was a decline from 2012 to 2013 in the number of accidents recorded. In Røros in 2013, we achieved an H-value of 7.9 and an F1-value of 158. Nässjö did not record any accidents in 2013. Today we only record sick leave in Norway and Sweden. Work-related illnesses are not recorded, as the individual's clinical picture is usually complex. Specific work has been conducted for many years to reduce sick leave. We closely follow up employees who are at risk of needing sick leave and those who are on sick leave. Procedures have also been devised for adapting tasks and ensuring that employees can return to work quickly. Sick leave in Røros and Oslo is at the same level as in 2012, while there was a reduction in sick leave in Nässjö. See the table on page 111. Both the company and its sports teams encourage employees to participate in physical activity and in 2013 several successful activities were conducted in Røros and Oslo.
Discrimination Scandinavian Business Seating's goal is to be a workplace with full equality between women and men. Everyone, regardless of gender, age and background, has the same opportunities for employment and development. The basic principle is that men and women who perform the same tasks should
be able to earn the same. When new positions are created and teams and departments are put together, the gender ratio of the team/department must be taken into account. The company strives to achieve a working environment characterised by variation in gender, age and background. The company actively works to prevent discrimination due to age, gender, disability, ethnicity, national origin, skin colour or personal beliefs.
Management
HSE ORGANISATION
CREATE ACTION
Corruption
HMS WORK model
Scandinavian Business Seating expects its employees to avoid situations which may cause a conflict between the company and their personal interests. All forms of corruption and bribes are unacceptable. These attitudes are set out in the group's ethical guidelines, and the work against corruption specifically focuses on the units that are most vulnerable (sale and procurement). Scandinavian Business Seating did not record any breach of the corruption rules in 2013, nor were any recorded in previous years. For this reason, the group has never been involved in any forms of sanctions associated with corruption.
IDENTIFY RISKS
INVOLVEMENT
Register HSE cases
Suppliers Our core suppliers (who represent 84 per cent of the Annual Purchasing Value (APV)) are mainly located in Scandinavia (58 %) and the Baltic area (37 %). Asian suppliers, represented by two suppliers, only make up 4 % of this group.
Geographic distribution of our most important suppliers in 2012
Purposeful work has been done since 2011 to concentrate procurements on fewer suppliers. All of the components of the new products have therefore been placed with the core suppliers. Delivery of these collections was scheduled for late 2013, so the effect can only be partly seen in the figures.
Scandinavia 58% East-Europe 37%
Asia is still a minority supplier to Scandinavian Business Seating, with 9 suppliers. As mentioned, the volume is concentrated among two core suppliers. Our practice in recent years of closer follow-up of suppliers in China has been maintained and to some extent reinforced, with the support of our employees in China. Regular interviews and inspections are performed, and status and action plans have been established for all Chinese suppliers. This work has been fruitful.
West-Europe 1%
Share of suppliers that have accepted our purchasing recuirements 2012 MNOK 80
The local community – Røros
60
Røros is the place of our birth and we have a long history in this community. Today we are one of the biggest workplaces in the area. Our relationship with our employees in Røros has a knock-on effect on their families and friends, and the surroundings. Ultimately this is of importance to our productivity and our results. We are conscious of this responsibility and maintain a good formal and informal dialogue with the authorities and other important people who form opinion in Røros.
50 40 30 20 10
Fabrics
Commodities
Wood
Packaging
Foam
Aluminium
0 Assembly
Our factory in Røros is located in an area with Sámi settlements. The group has not been involved in infringements of indigenous rights.
Contracted Including new products and new contracts
Plastics
Indigenous rights
Non contracted
70
Steel
All new suppliers are selected on the basis of well-established processes for evaluation and selection. This includes an assessment of the extent to which they meet our ethical guidelines for suppliers (Code of Conduct), and meet our environmental requirements.
Asia 4%
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ANNUAL REPORT 2013
Scandinavian Business Seating
CORPORATE SOCIAL RESPONSIBILITY
GREENGUARD
Nordic Swan Label
EPD, ISO 14025
Möbelfakta
EN 12521
EN 15372
Ansi Bifma
NPR 1813
BS 5459
GS, LGA
IEC 61340 (ESD)
EN 16139
EN 1729
EN 13761
EN 1335
Certificates and declarations
HÅG Chair model HÅG Capisco HÅG Capisco Puls HÅG H03 HÅG H04 HÅG H04 Communication HÅG H04 Communication w/star base HÅG H05 HÅG H05 Communication HÅG Futu HÅG Futu Communication HÅG SoFi HÅG SoFi Communication HÅG H09 HÅG H09 meeting HÅG Conventio HÅG Conventio w/star base HÅG Conventio Wing HÅG Conventio Wing w/star base HÅG Sideways
t t t t
t t
t
t t t
t t t
t t
t
t t t t
t t t t t
t t t t t
t t t
t
t
t t
t
t
t
t
t
t t
t t t t t
t
t t t
t t
t
t t
t t t t t t t t t
t
t t t t t t t t t
t t t
t
t
t
t
t
t
t t
t
t
t
t
t
RH Chair model RH Activ RH Mereo RH Extend RH Logic RH Support
t
t
t
t
t
t t
t t
t t t
t t t
t t
t t t t t
RBM Chair model RBM 300 RBM 500 RBM 600 RBM 700 RBM 800 RBM Noor RBM Ana RBM Ballet RBM Bella RBM Low-back Bella RBM Cameo RBM Sweep
t t t t t
t t
t
t
t t t
t t
t t t
RBM Table model RBM Allround RBM Ultima RBM Standard folding table RBM Twisted Little Star RBM u-Connect RBM e-Connect RBM Eminent RBM Sweep table
114
t t t t t t
t t t t
t
t t
PRODUCT LIABILITY All of Scandinavian Business Seating's products are developed, tested and approved in accordance with relevant furniture standards that cover safety, strength and stability considerations. All products are approved in accordance with the relevant European EN standards. Several of the products are also tested and approved pursuant to the German GS mark (Geprüfte Sicherheit), the British BS 5459-2 standard, which is used to test chairs intended for intensive use (24 hours/7 days a week) and the American ANSI/BIfma standard. In order to ensure that our products do not harm the indoor climate by emitting hazardous gases, they are tested pursuant to the requirements of the American Greenguard Environmental Institute. The most important collections from HÅG, RH and RBM have been approved. In 2010, the HÅG Capisco was the first office chair to be awarded the Nordic Swan label. All products have labels that provide information on the existing certification. The chairs are also delivered with detailed user manuals and instructions for safe use, maintenance and cleaning.
HÅG Capisco
115
ANNUAL REPORT 2013
Scandinavian Business Seating
CORPORATE SOCIAL RESPONSIBILITY
Global Reporting Initative indeks The Global Reporting Initiative (GRI) is a network-based organisation that pioneered the world’s most widely used sustainability reporting framework. Below a list of the GRI indicatiors, with reference to where the topics are discussed in the report.
Indicator
Description
Page
Profile
116
1
Strategy and Analysis
1.1
Statement from the most senior decision-maker of the organisation.
12
1.2
Description of key impacts, risks, and opportunities.
12
2
Organisational Profile
2.1
Name of the organisation.
2.2
Primary brands, products, and/or services.
28-39
2.3
Operational structure of the organisation, including main divisions, operating companies, subsidiaries, and joint ventures.
17,119
2.4
Location of organisation’s headquarters.
2.5
Number of countries where the organisation operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report.
2.6
Nature of ownership and legal form.
2.7
Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries).
2.8
Scale of the reporting organisation.
2.9
Significant changes during the reporting period regarding size, structure, or ownership.
2.10
Awards received in the reporting period.
3
Report Parameters
3.1
Reporting period: 2013
3.2
Date of most recent previous report: May 2012
3.3
Annual Reporting Cycle
3.4
Contact point for questions regarding the report or its contents
3.5
Process for defining report content.
In our report 35 indicators are addressed. This fulfils the requirements for level B in accordance with GRI’s classification. NR - not relevant NA - not addressed PA - partly addressed
Indicator
Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers). See GRI Boundary Protocol for further guidance.
94-96
3.7
State any specific limitations on the scope or boundary of the report (see completeness principle for explanation of scope).
94-96
3.8
Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organisations.
NR
3.9
Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the Indicators and other information in the report. Explain any decisions not to apply, or to substantially diverge from, the GRI Indicator Protocols.
94
3.10
Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement (e.g.,mergers/acquisitions, change of base years/periods, nature of business, measurement methods).
NR
3.11
Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report.
NR
3.12
Table identifying the location of the Standard Disclosures in the report.
116-118
3.13
Policy and current practice with regard to seeking external assurance for the report.
NR
119
119
6-8 6 NR 1
118 92-94
Page
3.6
1
6
Description
4
Governance, Commitments and Engagement
4.1
Governance structure of the organisation, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organisational oversight.
4.2
Indicate whether the Chair of the highest governance body is also an executive officer.
17
4.3
For organisations that have a unitary board structure, state the number of members of the highest governance body that are independent and/or non-executive members.
17
4.4
Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body.
17
16-19
Indicator
Description
Page
4.5
Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organisation’s performance (including social and environmental performance).
18
4.6
Processes in place for the highest governance body to ensure conflicts of interest are avoided.
18
EC9
Process for determining the qualifications and expertise of the members of the highest governance body for guiding the organisation’s strategy on economic, environmental, and social topics.
17
4.8
Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation.
92, 98
4.9
Procedures of the highest governance body for overseeing the organisation’s identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles.
16-18
Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance.
18
4.11
Explanation of whether and how the precautionary approach or principle is addressed by the organisation.
92
4.12
Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organisation subscribes or endorses.
110
4.13
Memberships in associations (such as industry associations) and/or national/international advocacy organisations in which the organisation: * Has positions in governance bodies; * Participates in projects or committees; * Provides substantive funding beyond routine membership dues; or * Views membership as strategic.
96
4.14
List of stakeholder groups engaged by the organisation.
96
4.15
Basis for identification and selection of stakeholders with whom to engage.
94
4.16
Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group.
96
4.17
Key topics and concerns that have been raised through stakeholder engagement, and how the organisation has responded to those key topics and concerns, including through its reporting.
96
4.7
4.10
Indicator
Management approach
16
Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments.
98
EC2
Financial implications and other risks and opportunities for the organisation’s activities due to climate change.
NA
EC3
Coverage of the organisation’s defined benefit plan obligations.
67
EC4
Significant financial assistance received from government.
EC5
EC1
Page
Understanding and describing significant indirect economic impacts, including the extent of impacts.
NA
Environmental Management approach
100
EN1
Materials used by weight or volume.
NA
EN2
Percentage of materials used that are recycled input materials.
105
EN3
Direct energy consumption by primary energy source.
103
EN4
Indirect energy consumption by primary source.
NA
EN5
Energy saved due to conservation and efficiency improvements.
NA
EN6
Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives.
PA 106
EN7
Initiatives to reduce indirect energy consumption and reductions achieved.
NA
EN8
Total water withdrawal by source.
EN9
Water sources significantly affected by withdrawal of water.
NA
EN10
Percentage and total volume of water recycled and reused.
NA
EN11
Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas.
PA 105
EN12
Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas.
NA
EN13
Habitats protected or restored.
NA
EN14
Strategies, current actions, and future plans for managing impacts on biodiversity.
NA
EN15
Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk.
NA
EN16
Total direct and indirect greenhouse gas emissions by weight.
103
EN17
Other relevant indirect greenhouse gas emissions by weight.
NA
EN18
Initiatives to reduce greenhouse gas emissions and reductions achieved.
NA
EN19
Emissions of ozone-depleting substances by weight.
NA
EN20
NOx, SOx, and other significant air emissions by type and weight.
NA
EN21
Total water discharge by quality and destination.
EN22
Total weight of waste by type and disposal method.
Performance Indicator Finance
Description
PA104
PA 104 104 None registered
EN23
Total number and volume of significant spills.
EN24
Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally.
104
60
EN25
Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organisation’s discharges of water and runoff.
PA 105
Range of ratios of standard entry level wage compared to local minimum wage at significant locations of operation.
NA
EN26
Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation.
105
EC6
Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation.
NA
EN27
Percentage of products sold and their packaging materials that are reclaimed by category.
PA 105
EC7
Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation.
112
EN28
Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations.
EC8
Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement.
NA
EN29
Significant environmental impacts of transporting products and other goods and materials used for the organisation’s operations, and transporting members of the workforce.
None registered
PA 102
117
ANNUAL REPORT 2013
Indicator EN30
Scandinavian Business Seating
Description Total environmental protection expenditures and investments by type.
Page NA
Indicator
110
LA1
Total workforce by employment type, employment contract, and region.
PA 110
LA2
Total number and rate of employee turnover by age group, gender, and region.
110
LA3
Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations.
LA4
Percentage of employees covered by collective bargaining agreements.
LA5
Minimum notice period(s) regarding significant operational changes, including whether it is specified in collective agreements.
LA6
LA7
LA8
Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programs. Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programs.
Percentage of security personnel trained in the organisation’s policies or procedures concerning aspects of human rights that are relevant to operations.
NA
HR9
Total number of incidents of violations involving rights of indigenous people and actions taken.
113
Percentage and total number of business units analysed for risks related to corruption.
113
NA
SO3
Percentage of employees trained in organisation’s anti-corruption policies and procedures.
113
SO4
Actions taken in response to incidents of corruption.
113
SO5
Public policy positions and participation in public policy development and lobbying.
NA
SO6
Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country.
None registered
SO7
Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly practices and their outcomes.
None registered
SO8
Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations.
None registered
110
112
112
LA10
Average hours of training per year per employee by employee category.
NA
LA11
Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings.
112
Percentage of employees receiving regular performance and career development reviews.
NA
Ratio of basic salary of men to women by employee category.
Management approach
110
HR1
Percentage and total number of significant investment agreements that include human rights clauses or that have undergone human rights screening.
NA
HR2
Percentage of significant suppliers and contractors that have undergone screening on human rights and actions taken.
HR3
Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained.
NA
HR4
Total number of incidents of discrimination and actions taken.
112
HR5
Operations identified in which the right to exercise freedom of association and collective bargaining may be at significant risk, and actions taken to support these rights.
NA
HR6
Operations identified as having significant risk for incidents of child labor, and measures taken to contribute to the elimination of child labor.
NA
HR7
Operations identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of forced or compulsory labor.
NA
110
PR1
Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures.
PR2
Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes.
NA
PR3
Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements.
115
PR4
Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes.
None registered
PR5
Practices related to customer satisfaction, including results of surveys measuring customer satisfaction.
NA
PR6
Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship.
NA
PR7
Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship by type of outcomes.
None registered
PR8
Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data.
None registered
PR9
Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services.
None registered
NA
Management approach
PA 110
Product responsibility
110
Human rights
118
110
SO2
Health and safety topics covered in formal agreements with trade unions.
LA14
Management approach
110-112
110
LA9
Composition of governance bodies and breakdown of employees per category according to gender, age group, minority group membership, and other indicators of diversity.
Society
Nature, scope, and effectiveness of any programs and practices that assess and manage the impacts of operations on communities, including entering, operating, and exiting.
NA
LA13
Page
SO1
Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programs.
LA12
Description
HR8
Labor practices and decent work Management approach
CORPORATE SOCIAL RESPONSIBILITY
113
For comments and questions relating to Scandinavian Business Seating’s report on corporate responsibility, please contact Vice President Environment, Carl Peter Aaser:
[email protected]
PA 115
Head quarter Scandinavian Business Seating Group AS Fridtjof Nansens vei 12 | P.B. 5055 Majorstuen | NO-0301 Oslo | Norway Tel: +47 22 59 59 00 | sbseating.com Sales offices Scandinavian Business Seating AS Fridtjof Nansens vei 12 | P.B. 5055 Majorstuen | NO-0301 Oslo | Norway Tel: +47 22 59 59 00 Scandinavian Business Seating AB Rosenlundsgatan 29 C | Box 17198 | SE-104 62 Stockholm | Sweden Tel: +46 (0)752 45 50 50 Scandinavian Business Seating A/S Nordhuset, Kajakvej 2 | DK-2770 Kastrup | Denmark Tel: +45 99 50 55 00 Scandinavian Business Seating GmbH Sperberweg 8 | DE-41468 Neuss | Germany Tel: +49 (0)2131 1510-0 Scandinavian Business Seating BV Guldenweg 17 | Postbus 42 | NL-4870 AA Etten-Leur | Netherlands Tel: +31 (0)76 504 25 35 Scandinavian Business Seating Ltd. Upper Tulse Hill Trading Estate | 5 Somers Place | London SW2 2AL | UK Tel: +44 (0)208 683 9930 Scandinavian Business Seating Sarl Central Parc | 1 Allée du Sanglier | FR-93421 Villepinte | France Tel: +33 (0)148 61 99 12 Scandinavian Business Seating AG Panoramaweg 33 | CH-5504 Othmarsingen | Switzerland Tel: +41 (0)62 885 06 60 Scandinavian Business Seating Asia PTE Ltd. 36-38B Pagoda Street | Level 3 | Singapore 059197 Tel: +65 6225 6632 |
[email protected] Scandinavian Business Seating (Shanghai) Co., Ltd. Room 318 | No 58, Taicang Road | Shanghai 200021 | China Tel: +86 21 6103 6890 Production Scandinavian Business Seating AS Sundveien | NO-7366 Røros | Norway Tel: +47 72 40 72 00 Scandinavian Business Seating AB Vallgatan 1 | Box 294 | SE-571 23 Nässjö | Sweden Tel: +46 (0)380 55 53 00 For other markets, contact Global Partner Organisation (GPO) at the head quarter.
Photo: Birgit Fauske – birgitfauske.no Per Gunnarsson – pgfotograf.com Rolf Ørjan Høgset – rolfie.no Pål Laukli – tinagent.com Moment Studio – moment.no Rift (3D) – rift.no Jonas Lindström – jlindstroem.com Pelle Wahlgren – studiowahlgren.com Egon Gade – egongade.com L. Hargreaves – leonhargreaves.com
Interior styling: Annette Ekjord Christine Hærra J. Kråkvik/A. D’Orazio Susanne Swegen Design: Marketing & Brand Communication, Scandinavian Business Seating Print: KLS Grafisk Hus A/S
Thank you: 657.no DKNO Skandinavisk Design Eske interiør og design Granit Hay Illums Bolighus Kalmar Konstmuseum Kvadrat Norway Designs Pukebergs Glasbruk Pur Norsk Verket interiør
Scandinavian Business Seating owns the brands HÅG, RH and RBM and is a Scandinavian market leader in the design and manufacturing of seating for private and public office environments. Together all employees work to realise the company’s vision – To make the world a better place to sit. Scandinavian Business Seating has its head office in Oslo and production units in Røros, Norway and Nässjö, Sweden. Additionally the company has sales companies in Denmark, Sweden, Germany, the Netherlands, UK, France, Singapore, Switzerland and China.