Relais Group Plc: IFRS comparative financial information
Relais Group Plc
Company release 27 October 2022 4.15 p.m. EEST
On 25 October, 2022, Relais Group Plc “Relais” announced that it would transition to reporting in accordance with International Financial Reporting Standards (IFRS) and that it would prepare its first financial statements in accordance with IFRS for the financial year ended 31 December 2021.
Relais has prepared the following unaudited IFRS financial information to provide investors with comparative information for the consolidated income statement, balance sheet and for the company’s key figures concerning period 1 January 2021–30 June 2022. Additionally, the opening balance for the IFRS transition date 1.1.2020 and consolidated income statement concerning period 1 January–31 December 2020 have been included in this transition release.
In addition, Relais has prepared the IFRS key figures as at and for the six months ended 30 June 2022 with comparatives for 2021. Adjustments to the key figures between FAS and IFRS have not been presented in the key figure table.
The financial information disclosed in this release is prepared based on IFRS Standards effective on 31 December 2021. IFRS 1 First-time Adaption of International Financial Reporting Standards has been applied in the preparation of comparable key figures and transition calculations presented in this release. The financial information presented in the release is unaudited.
Relais will publish its financial statements prepared in accordance with international financial reporting standards (IFRS) for the period ending 31 December 2021 with comparatives for the period ending 31 December 2020 as well as the opening balance for 1.1.2020, approximately in November 2022.
Description of IFRS transition effects and exemptions applied
The accounting policies that have had the most significant impact on the income statement and the statement of financial position of Relais as a result of the transition to IFRS have been summarized below.
Relais has applied the exemptions of IFRS 1 First-time Adaption of International Financial Reporting Standards relating to business combinations and lease agreements. These are described more in detail below.
The alphabets in topics (A-G) refer to the columns in the calculation tables.
A) Lease arrangements, Relais as a lessee (IFRS 16 Leases)
Relais leases premises (workshops, offices and warehouses), vehicles and other assets. Under FAS Relais recorded rental expenses in the financial year to which they related. Lease payments previously presented under other operating expenses are apportioned between the reduction of the lease liability and the interest charge on the lease liability. Furthermore, depreciation of the right-of-use assets is recorded in profit or loss.
Relais applies the recognition exemption for both short-term leases (a lease that, at the commencement date, has a lease term of 12 months or less), and for leases of low-value assets (each asset with a value of approximately EUR 5,000 or less when new).
(B) Acquisitions (IFRS 3 Business Combinations)
In 2021, Relais acquired Strands Group AB, Raskone Oy, Lumise Oy/Optisell Oy, STS Sydhamnens Trailer Service AB and Trucknik Reservdelar AB, and in 2020 SEC Scandinavia A/S, TD Tunga Delar Sverige AB and Helsingborgs Bildelsbutik AB.
Amortization of goodwill
Under FAS goodwill is amortised according to plan. IFRS requires that goodwill is not amortised but tested for impairment at least annually. Accordingly, the annual goodwill amortization was reversed. The impairment tests carried out as at 1 January 2020, 31 December 2020 and 31 December 2021 showed that the goodwill was not impaired.
Business combinations
In the transition Relais applied the exemption for the accounting treatment of pre-transition date business combinations, which were not restated in accordance with IFRS 3. The related goodwill balance totaled EUR 53,731 thousand on 1 January 2020.
Balance sheet at 31 December 2021 / income statement for financial year 2021
The application of IFRS 3 resulted in recognition of the following:
a) For pre-transition date acquisitions
- Reversal of the accumulated goodwill amortization recognised under FAS since 1 January 2020 totaling EUR 14,154 thousand, comprising the 2021 amortization, EUR 6,572 thousand, and the amortization for the previous year 2020, EUR 6,562 thousand, and the translation difference, EUR 1,021 thousand
b) For the acquisitions effected in 2020
- Net increase in goodwill in total EUR 49 thousand, resulting in from the reversal of the accumulated goodwill amortization recognised under FAS in 2020 from the consolidation dates of the respective acquisitions. The net impact also reflects the decrease in goodwill owing to the adjustments regarding intangible assets
- Recognition of the intangible assets identified (customer relationships and non-competing agreements) separately from goodwill following from purchase price accounting, increasing the intangible assets balance by in total EUR 2,128 thousand and the deferred tax liabilities by EUR 441 thousand.
- The contingent consideration liability payable in 2022 (current), EUR 345 thousand.
- Reversal of the non-controlling interests (NCI), EUR -66 thousand: One acquisition of the Group made in 2020 involve put or put/call option arrangement over the shares held by NCI in those subsidiaries. Relais has accounted for the option as a financial liability and therefore that acquiree is fully (100%) consolidated from the acquisition date.
- In respect of the consolidated income statement, the net impact comprising the goodwill amortization reversal and recognition of the amortization on the identified intangible assets in aggregate positive EUR 665 thousand, decreasing the amortization charge for the financial year 2021.
c) For the acquisitions effected in 2021
- Net decrease in goodwill in total EUR 9,624 thousand, mainly resulting in from the intangible assets identified. The net impact also reflects the reversal of the goodwill amortization recognised under FAS in 2021 from the consolidation dates of the respective acquisitions.
- Recognition of the intangible assets identified (customer and marketing-related intangibles, non-competing agreements and technology-based intangible assets) separately from goodwill following from purchase price accounting, increasing the intangible assets balance by in total EUR 11,811 thousand and the deferred tax liabilities by EUR 2,394 thousand.
- The contingent consideration liability (current), EUR 91 thousand.
- In respect of the consolidated income statement:
- Line item Materials and services: the increase in the said expenses, EUR 1,010 thousand, reflects the fair value adjustment made to the inventories of certain acquirees at the acquisition date and expensed as the related goods were subsequently sold.
- Line item Employee benefit expenses: the adjustment, EUR 910 thousand, arises from an earn-out arrangement accounted for as remuneration, since it is conditional to certain specific work performance, among others.
- Line item Depreciation, amortization and impairment losses: the net impact comprising recognition of the amortization on the identified intangible assets and the goodwill amortization reversal was in aggregate positive EUR 3,166 thousand, decreasing the amortization charge for the financial year 2021.
- Line item Other operating expenses: IFRS requires acquisition-related costs, such as professional fees, be expensed whereas under FAS they are generally capitalised. The adjustment was EUR 1,574 thousand.
Balance sheet at 31 December 2020 / income statement for financial year 2020
a) For pre-transition date acquisitions
- Reversal of the goodwill amortization recognised under FAS since 1 January 2020, totaling EUR 6,562 thousand. The respective adjustment for the balance sheet totaled EUR 8,751 thousand, including the related translation difference EUR 2,189 thousand not recorded previously in accordance with FAS.
b) For the acquisitions effected in 2020
- Net increase in goodwill in total EUR 968 thousand, mainly resulting in from the reversal of the accumulated goodwill amortization recognised under FAS in 2020 from the consolidation dates of the respective acquisitions. The net impact also reflects the decrease in goodwill owing to the adjustments regarding intangible assets.
- Recognition of the intangible assets identified (customer relationships and non-competing agreements) separately from goodwill following from purchase price accounting, increasing the intangible assets balance by in total EUR 2,724 thousand and the deferred tax liabilities by EUR 564 thousand.
- The contingent consideration liability (non-current), EUR 345 thousand.
- In respect of the consolidated income statement:
- Line item Materials and services: the increase in the said expenses, EUR 360 thousand, reflects the fair value adjustment made to the inventories of certain acquirees at the acquisition date and expensed as the related goods were subsequently sold.
- Line item Depreciation, amortization and impairment losses: the net impact comprising recognition of the amortization on the identified intangible assets and the goodwill amortization reversal was in aggregate positive EUR 597 thousand, decreasing the amortization charge for the financial year 2020.
- Line item Other operating expenses: IFRS requires acquisition-related costs, such as professional fees, be expensed whereas under FAS they are generally capitalised. The adjustment was EUR 153 thousand.
Reversal of goodwill amortizations
Excluding the acquisitions of Aktiebolaget Reservdelar and Huzells i Karlstad Aktiebolag. the businesses acquired prior to the IFRS transition 1.1.2020 are recognised in Relais Group Plc's IFRS financial statements by using the carrying amount of goodwill as of 1.1.2020 as presented in the FAS Financial Statements and as defined in the transition exemption of IFRS 1. Relais Group Plc has reversed the FAS amortization in the conversion period by adjusting the goodwill amortizations in the Profit and Loss Statement against the goodwill recognised in the Statement of Financial Position. In accordance with IFRS, goodwill shall no longer be amortized over its useful life but it will be tested for impairment in accordance with IAS 36 annually or whenever there are indications of impairment in the assets. The goodwill has been tested for impairment as of 1 January 2020, 31 December 2020 and 31 December 2021 and has not resulted any impairment recognition.
For the acquisitions effected in 2022, please see the consolidated 2022 income statements and balance sheets for further details.
(C) Revenue from Contracts with Customers
Under FAS Relais generally recognised revenue as the goods had been sold or service rendered, without considering return rights, for example. In the transition Relais adjusted revenues for return rights and timing differences (deferring revenue recognition). Generally, the related impacts were not significant for the Group as a whole, except for the liabilities recorded to account for return rights as well as for core parts that are returnable and reusable. This increased the line item Trade and other payables by EUR 1,813 thousand at 31 December 2021, EUR 1,724 thousand at 31 December 2020, and EUR 1,765 thousand at 1 January 2020.
(D) Financial instruments (IFRS 9 Financial Instruments)
Transactions costs
Under FAS Relais expensed transaction costs for financial instruments as incurred. Under IFRS loans and borrowings measured at amortised cost are recognised net of transaction costs. Consequently, the transaction costs of EUR 814 thousand attributable to the borrowings from financial institutions were set off against the borrowings, EUR 814 thousand at 1 January 2020, EUR 324 thousand at 31 December 2020, and EUR 183 thousand at 31 December 2021. The transaction costs are recognised using the effective interest rate over the term of the borrowings. The impact on the 2021 income statement, increasing financial expenses, was EUR 141 (489) thousand.
Allowance for expected credit losses (ECL)
Prior to the IFRS transition, Relais recorded credit losses when they realised. The Group has adopted the expected credit loss model, measuring credit losses at an amount equal to the lifetime expected credit losses for a trade receivable. The resulting allowance, recorded as a deduction to trade receivables, totaled EUR 179 thousand at 1 January 2020, EUR 198 thousand at 31 December 2020, and EUR 198 thousand at 31 December 2021. In 2021, Relais has begun to record credit loss provisions also in local bookkeeping, as applicable.
(E) Leasehold improvements (IAS 16 Property, Plant and Equipment)
Relais has capitalized leasehold improvement costs for leased premises. Such capitalized costs are typically treated as intangible assets under FAS, but as tangible assets under IFRS, based on their nature. The adjustment amounted to EUR 217 thousand at 1 January 2020, EUR 201 thousand at 31 December 2020 and EUR 688 thousand at 31 December 2021. The related reclassification within the depreciation and amortization charge totaled EUR 205 (20) thousand.
(F) Reclassifications (IFRS 9 Financial Instruments and IAS 12 Income Taxes)
The following accounting items presented in FAS Financial statements have been reclassified in IFRS adjustment calculations:
- the reclassification of the interest rate swaps with negative fair values from provisions to other non-current financial liabilities, based on their nature and maturity (EUR 73 thousand at 1 January 2020, EUR 157 thousand at 31 December 2020, and EUR 48 thousand at 31 December 2021)
- the reclassification of deferred tax assets from current assets to non-current assets, based on their maturity (EUR 285 thousand at 1 January 2020, EUR 284 thousand at 31 December 2020, and EUR 1 thousand at 31 December 2021).
- the reclassification of listing expenses from financial expenses to other operating expenses in the financial year 2021 based on their nature, in total EUR 119 thousand.
(G) Share-based long-term incentive plan (IFRS 2 Share-based Payment)
Relais established a new share-based long-term incentive plan for its key employees in February 2021, comprising synthetic options (share appreciation rights, SARs). The options have been issued for no consideration and they entitle their holders to a cash payment at the settlement date, based on the value of a specific number of incentive units included in the plan. Under FAS, the plan has not been accounted for through profit or loss. Under IFRS, the options are measured at the grant-date fair value and recognized as employee benefit expenses over the vesting period, and as a liability. The expense for the financial year 2021 and the related non-current liability at the financial year-end 2021 totaled EUR 650 thousand.
Changes in key figures and alternative performance measures to be reported
New ESMA (European Securities and Markets Authority) guidelines on alternative performance measures have been effective from 2016 fiscal year.
Relais Group Oyj will introduce and publish the following new alternative performance measures in its IFRS reporting in order to better illustrate the operative development of the business:
- Comparable EBITDA
- Comparable EBITA
- Comparable operating profit
- Comparable profit
- Comparable profit excluding amortizations of acquisitions
- Comparable earnings per share excluding amortizations of acquisitions, basic
- Comparable earnings per share excluding amortizations of acquisitions, diluted
- Net debt excluding leasing liabilities
- Net gearing excluding leasing liabilities
Amortizations of acquisitions arise from assets recognised in fair value in acquired business combinations.
The financial data described above and the release in its entirety are presented in the pdf file attached to the release.
KEY FIGURES, IFRS
| EUR thousand unless stated otherwise | Jan-Mar 2022 | Jan-Mar 2021 | Jan-Jun 2022 | Jan-Jun 2021 | Jan-Sep 2021 |
Jan-Dec 2021 |
| Net Sales | 62,119 | 53,477 | 120,718 | 105,542 | 164,283 | 237,830 |
| Net sales growth, % | 16.2% | - | 14.4% | - | - | 84.4% |
| Gross profit | 28,134 | 20,456 | 54,767 | 42,953 | 67,785 | 99,588 |
| Gross margin, % | 45.3% | 38.3% | 45.4% | 40.7% | 41.3% | 41.9% |
| EBITDA | 8,865 | 7,501 | 15,434 | 14,468 | 24,963 | 36,005 |
| EBITDA margin, % | 14.3% | 14.0% | 12.8% | 13.7% | 15.2% | 15.1% |
| Comparable EBITDA | 9,315 | 8,510 | 16,294 | 16,093 | 26,891 | 38,607 |
| Comparable EBITDA, % | 15.0% | 15.9% | 13.5% | 15.2% | 16.4% | 16.2% |
| EBITA | 5,734 | 5,657 | 9,113 | 9,720 | 17,710 | 25,727 |
| EBITA margin, % | 9.2% | 10.6% | 7.5% | 9.2% | 10.8% | 10.8% |
| Comparable EBITA | 6,184 | 6,665 | 9,973 | 11,345 | 19,638 | 28,330 |
| Comparable EBITA, % | 10.0% | 12.5% | 8.3% | 10.7% | 12.0% | 11.9% |
| Operating profit | 4,969 | 5,117 | 7,522 | 8,480 | 15,772 | 23,042 |
| Operating profit margin, % | 8.0% | 9.6% | 6.2% | 8.0% | 9.6% | 9.7% |
| Comparable operating profit | 5,419 | 6,125 | 8,381 | 10,105 | 17,700 | 25,645 |
| Comparable operating profit, % | 8.7% | 11.5% | 6.9% | 9.6% | 10.8% | 10.8% |
| Profit (loss) for the period | 2,657 | 2,562 | 2,650 | 4,657 | 9,219 | 14,377 |
| Profit (loss) for the period margin, % | 4.3% | 4.8% | 2.2% | 4.4% | 5.6% | 6.0% |
| Comparable profit (loss) | 3,103 | 3,553 | 3,507 | 6,260 | 11,149 | 16,949 |
| Comparable profit (loss) margin, % | 5.0% | 6.6% | 2.9% | 5.9% | 6.8% | 7.1% |
| Comparable profit (loss) excluding amortisation of acquisitions |
3,872 | 4,111 | 5,101 | 7,522 | 13,085 | 19,665 |
| Comparable profit (loss) excluding amortisation of acquisitions margin, % |
6.2% | 7.7% | 4.2% | 7.1% | 8.0% | 8.3% |
| Items affecting comparability included in profit (loss) for the period |
450 | 1,008 | 859 | 1,625 | 1,928 | 2,603 |
| Net working capital | 67,148 | 45,038 | 67,843 | 54,311 | 63,640 | 61,009 |
| Inventories | 74,025 | 56,970 | 75,489 | 60,556 | 65,547 | 73,352 |
| Net Debt excl. leasing Liabilities | 87,135 | 67,672 | 101,036 | 76,413 | 81,115 | 84,775 |
| Net Debt (excl. Leasing Liabilities) to EBITDA, rolling | 2.33 | 2.90 | 2.73 | 2.95 | 2.63 | 2.35 |
| Net gearing excl. leasing Liabilities | 83.2% | 74.5% | 104.6% | 80.7% | 83.2% | 82.9% |
| Equity ratio | 33.5% | 31.1% | 31.5% | 32.6% | 33.3% | 33.2% |
| Return on investment (ROI) | 8.5% | 12.1% | 7.9% | 8.7% | 10.7% | 11.7% |
| Return on equity (ROE) | 10.3% | 12.0% | 5.3% | 10.6% | 13.8% | 15.7% |
| Return on assets (ROA) | 7.1% | 10.2% | 6.6% | 7.5% | 9.2% | 9.9% |
| Earnings per share, basic (EUR) | 0.15 | 0.15 | 0.15 | 0.27 | 0.52 | 0.81 |
| Earnings per share, diluted (EUR) | 0.14 | 0.14 | 0.15 | 0.25 | 0.50 | 0.78 |
| Comparable earnings per share, basic (EUR) | 0.17 | 0.21 | 0.20 | 0.36 | 0.63 | 0.96 |
| Comparable earnings per share, diluted (EUR) | 0.17 | 0.20 | 0.20 | 0.34 | 0.61 | 0.92 |
| Comparable earnings per share excluding amortisation of acquisitions, basic (EUR) |
0.22 | 0.24 | 0.28 | 0.43 | 0.75 | 1.11 |
| Comparable earnings per share excluding amortisation of acquisitions, diluted (EUR) |
0.21 | 0.23 | 0.27 | 0.41 | 0.71 | 1.06 |
| Average number of employees | 968 | 634 | 987 | 737 | 777 | 812 |
| Personnel at the end of the period, FTE | 973 | 792 | 1,023 | 854 | 848 | 950 |
Relais Group Plc
Board of Directors
Further information:
Relais Group, CEO Arni Ekholm
Tel. +358 40 760 3323
Email: arni.ekholm@relais.fi
Certified advisor:
Evli Plc
Tel. +358 40 579 6210
Distribution:
Nasdaq Helsinki
Financial Supervisory Authority
Key media
www.relais.fi
Relais Group
Relais Group is a leading consolidator and acquisition platform on the vehicle aftermarket in the Nordic and Baltic countries. We have a sector focus in vehicle life cycle enhancement and related services. We also serve as a growth platform for the companies we own.
We are a profitable company seeking strong growth. We carry out targeted acquisitions in line with our growth strategy and want to be an active player in the consolidation of the aftermarket in our area of operation. Our acquisitions are targeted at companies having a good strategic fit with our group companies.
Our net sales in 2021 was EUR 237.8 (2020: 128.9) million. During 2021, we completed a total of six acquisitions. We employ approximately 1,000 professionals in six different countries. The Relais Group share is listed on Nasdaq Helsinki Ltd's Nasdaq First North Growth Market Finland with the stock symbol RELAIS.