Outcome of impairment test for Lindex, Stockmann Group's updated guidance for 2020 and a change of the reporting method for the real estate properties
STOCKMANN plc, Inside Information 28.1.2021 at 18:30 EET
The book value of Lindex’s intangible assets adjusted to EUR 368 million due to the COVID-19 pandemic
The ongoing and re-escalated COVID-19 pandemic increases uncertainty in Lindex’s main markets and especially the short-term business environment is challenging.
Stockmann Group has concluded an impairment test for Lindex's goodwill. As a result, Stockmann will recognise approximately EUR 250 million in impairment related to Lindex’s goodwill in its fourth-quarter consolidated income statement. The write-down will be reported as an adjustment, and it has no cash flow impact. After the impairment, the book value of Lindex´s intangible assets will be EUR 368 million.
According to IFRS, the Stockmann Group tests the goodwill of its assets regularly to confirm that the recoverable amounts of the assets and related cash-generating units are greater than their carrying values. The impairment tests are done annually and whenever there is an indication that the asset may be impaired.
Stockmann Group's updated guidance for 2020
Stockmann Group’s revenue for the year 2020 will be on a lower level than in the previous year. Despite a profitable fourth quarter and the robust performance of Lindex, the full-year operating result will be slightly loss-making. The impairment related to Lindex’s goodwill will increase the reported operating loss.
Earlier guidance for 2020 (published on 30 October 2020):
The COVID-19 pandemic has a significant negative impact on the entire Stockmann Group’s business operations. The fourth quarter is associated with greater uncertainty than normal due to the coronavirus situation. The revenue for the year 2020 will be on a lower level than in the previous year and the operating result will be loss-making.
Change of reporting method for Stockmann’s real estate properties
The Stockmann Group’s divisions, Stockmann Retail and Real Estate, were combined into a new Stockmann division in 2019. Real estate business is not anymore managed or operated as a separate business nor reported separately. There are certain material changes in the business model that support a change back to applying the cost model for the real estate properties. Therefore, Stockmann has changed from its previous revaluation model to a cost model for its property, plant and equipment for the financial year 2020.
The change in accounting method is applied retrospectively in the opening balance for the comparative period as of 1 January 2019 according to the IAS 8 standard. The revaluation surplus included in equity is derecognized and the opening balance of land and water, buildings and constructions, retained earnings and deferred tax liabilities are adjusted in the previously reported 2019 financials and in the interim reports in 2020.
As a result of the reporting method change, the accounting value of Stockmann Group’s real estate properties decreased from EUR 667.6 million to EUR 254.9 million and the amount of equity from EUR 800.9 million to 469,6 million as at 31 December 2019.
The main impact in consolidated income statement relate to decrease of previously reported depreciations and deferred income taxes. Thus the change decreases previously reported 2019 depreciations by approximately EUR 10 million. The adjusted comparison data is presented in the attached tables.
On 8 April 2020, the District Court of Helsinki ruled to initiate corporate restructuring proceedings for Stockmann plc. As part of the restructuring process, Stockmann is obliged to sell its real estate properties and negotiate leaseback arrangements. Real estate properties are classified as assets held for sale in the consolidated financial statements 2020.
Jari Latvanen, CEO, tel. +358 9 121 5606
Pekka Vähähyyppä, CFO, puh. +358 9 121 3351