AB Fagerhult : Fagerhults Annual Report for 2020 has been published

March 19, 2021 at 10:16 am

We light up your world.

Annual Report 2020

Contents

Business	Financials	Sustainability Report
This is Fagerhult Group	2	The Fagerhult share	30	About our Sustainability Report	94
Events of the year	4	Five-year overview	32	Materiality analysis and
Key performance indicators	5	Administration report	34	stakeholder dialogue	96
Comments from the CEO	6	Corporate governance report	39	Impact across the value chain	98
Business environment and drivers	8	Board of Directors	46	Focus area: People	99
Strategy	10	Senior management	48	Focus area: Environment	106
Sustainability	12	The Group's annual accounts	50	Focus area: Business	111
People	14	The Parent company's	Governance of sustainability eﬀorts	114
Environment	15	annual accounts	55	GRI-index	118
Business	16	Accounting policies	60	Statutory sustainability report	124
Whitecroft Vitality	17	Notes	67	Limited assurance review	125
Value creation	18	Signatures	89
Business Areas	20	Audit report	90
Shareholder information	126
Financial deﬁnitions	127
Industry glossary	128
Addresses	Inside cover

The oﬃcial Annual Report which has been examined by the company's auditors comprises pages 30-89.

Together, Fagerhult's Annual Report and Sustainability Report should be viewed as the company's summary for 2020. The Sustainability Report, pages 94-125, with the accompanying GRI appendix, has been prepared in accordance with the GRI Standards; Core option and has been externally reviewed.

THIS IS FAGERHULT GROUP

This is Fagerhult Group

The Fagerhult Group is one of Europe's leading lighting companies with a total of 4,400 employees in 28 countries.

The Group consists of 13 lighting brands organised into four business areas; Collection, Premium, Professional and Infra- structure. Each brand designs, develops, manufactures and markets innovative and energy eﬃcient lighting solutions for professional applications. Together we oﬀer a wide range of products and solutions for diﬀerent application areas. Since the start in 1945, we have more than 75 years of experience and knowledge about the positive impact of better lighting for people. Fagerhult's share is listed on Nasdaq Stockholm.

A history rooted in Västergötland, Sweden Fagerhult was founded in 1945 by Bertil Svensson and achieved sales of SEK 13,000 in its ﬁrst year. A few years later, the ﬁrst factory was built in Fagerhult, at that time with six employees and sales amounting to SEK 53,000.

This factory, which has now been joined by the Group's other manufacturing units, currently has around 600 employees.

Four business areas

Collection

Global brands with focus on environments with high demands for archiectural design.

Premium

Customized lighting solutions for Euro-pean markets and customers.

Professional

Lighting solutions for indoor environ-ments with focus on local and nearby markets.

Infrastructure

Specialty lighting solu- tions for environments with special require-ments on installation and robustness.

Sales per business area

Collection, 44%

Premium, 35%

Professional, 11%

Infrastructure, 10%

THIS IS FAGERHULT GROUP

International group

Subsidiaries in 28 countries, the international business is divided into four business areas.

Marketing and sales activities are primarily performed locally through subsidiaries and also via agents and distributors, thus giving Fagerhult access to more than 40 markets.

R&D, design and production units: Sweden, Italy, Finland, the UK, Germany, Australia, Turkey, China, Thailand, the Netherlands and Canada.

Trends for sales and operating proﬁt, MSEK

Dividend yield, %

8000

6000

4000

2000

2011

2012 2013 20140,02015 2016 2017 2018 2019 2020

SalesOperating proﬁt

3,023 3,085 3,095 3,736 3,909 4,491 5,170 5,621 7,845 6,816

800

600

400

200

2016 2017 2018 2019 2020

1.9

2.0

2.6

1.1

317

251

277

379

396

524

678

706

795

333

EVENTS OF THE YEAR

Events of the year

During the ﬁrst quarter, the Group successfully launched the new business areas; Collection, Premium, Profes-sional and Infrastructure as an integral part of the strategic alignment process.

New structure

Fagerhult Group - branding To compliment and distinguish from the 13 brands the new Fagerhult Group branding was launched.

Organic growth

The ﬁrst quarter order intake delivered 7.1 per cent organic growth before the pandemic struck - a positive sign we are heading in the right direction.

Business as usual

Early in the second quarter, following the impact of Covid-19, the Group quickly established a new way of working, protecting employees and all operations remained open for the rest of the year.

Emergency medicare delivery

Many of the Group's brands helped support the medical crisis by delivering almost 20,000 luminaires to emer-gency Covid-19 hospitals in various markets.

Strong operating margin The Group's operating margin recovered to 8.9 per cent, ahead of the 8.5 per cent in 2019.

Organic Response in Sweden The Group opened a new Organic Response compe-tence centre in Linköping, Sweden.

Whitecroft Vitality Whitecroft Lighting, launched the sustainability focussed cer- tiﬁed cradle to cradle product platform known as Vitality.

Top employer iGuzzini won the award in Italy for the Top Employer Institution for the handling of Covid-19.

The recovery begins

The third quarter comparable order intake improved 9 per cent compared to the second quarter.

Record high cash ﬂow

During the quarter a record high operating cash ﬂow of 431 MSEK was achieved and net debt reduced by at least

1 BSEK since the ﬁrst quarter.

'Organic' grows 79 per cent The volume of the Group's indoor lighting connectivity solu-tions, Organic Response grows 79 per cent compared to 2019.

Solar panels

Across the Group's factories solar panels generate 2,092

MWh of electricity, suﬃcient to operate all three factories in business area Infrastructure.

South Africa

The Group exits South Africa with the divestment of Lighting Innovations.

Top Employer awarded iGuzzini for the handling of Covid-19.

Whitecroft launched Vitality, a Cradle-to-Cradle certiﬁed product platform.

KEY PERFORMANCE INDICATORS

Key performance indicators

2020	2019	2018	2017	2016
Net sales, MSEK	6,816	7,845	5,621	5,170	4,491
Operating proﬁt, MSEK 1	333	795	706	678	524
Proﬁt after ﬁnancial items, MSEK 1	217	696	667	653	515
Earnings per share, SEK 1	3.21	3.32	4.39	4.32	3.35
Sales growth, %	-13.1	39.6	8.7	15.1	14.9
Operating margin, % 1	4.9	10.1	12.6	13.1	11.7
Net debt/EBITDA ratio 1	3.2	2.9	2.0	2.2	1.9
Equity/ass ets ratio, % 1	47	42	32	31	34
Return on capital employed, % 1	3.5	10.8	14.8	16.8	16.8
Return on equity, % 1	10.1	13.5	25.0	28.1	24.9
Net debt, MSEK 1	2,812	3,737	2,073	1,830	1,222
Net investments in non-current assets, MSEK	184	243	123	177	169

1) The Group has applied IFRS 16 Leases from January 1, 2019. Marked items are aﬀected. For additional information see Accounting principles, page s 60-66 and Note 26, page 83.

Order intake, MSEK	Net sales, MSEK	Operating proﬁt, MSEK	Operating cash ﬂow, MSEK
7,752	795	1,138
5,170 5,621

7,845

7,002

6,816

678

706

1,008

5,238 5,692

524

4,653

4,491

681

333

388

378

2016 2017 2018 2019 2020

COMMENTS FROM THE CEO

"We maintained our calm and continued as planned"

2020 was a unique year, where the Covid-19 pandemic set the agenda for many companies. How would you summarise the year?

It has been a year ﬁlled with both challenges and successes. The pandemic has impacted the entire globe as well as companies, primarily during the spring when major lockdowns were imple- mented in Europe. Nevertheless, we have made important gains with the implementation of our new strategy. When the extent of the pandemic became clear, we quickly decided to continue strategic eﬀorts according to plan. The rapid transition to a digital norm developed smoothly and has led to even closer contact within the management team, which has been positive.

We made every eﬀort to contain the impact of the pandemic during the year, all the while maintaining a fantastic team spirit and organisational vitality. Our goal has always been to do more than what is required locally in order to remain at the cutting edge.

In Italy, iGuzzini was awarded a prize for its management of the Covid-19 situation from an HR perspective, an accolade we are proud of. Our role as a lighting company was also bestowed a new signiﬁcance as we supplied lighting to several temporary hospi- tals that were erected in Sweden and the UK during the spring.

In March, the new structure entered force with the aim of increasing organisational growth and collaboration between companies. How has it progressed?

Our new strategy and structure with the business areas has been well-received. During the year, the business areas have worked with the strategy, achieving various stages of implementation.

Many activities have taken place during the year for which the focus has been on exploring shared business opportunities in various geographical markets. One example is Infrastructure, which includes oﬀering lighting solutions for industrial environ- ments that have speciﬁc requirements. For Infrastructure, I-Valo sold products from Veko to joint projects in Finland, and now the companies are examining a more formal sales collaboration for the Nordic markets.

In 2020, we also deﬁned our priorities at Group level with a new vision and mission statement and the consistent use of the Fagerhult Group as a brand. In conjunction with this, we also launched our new websitewww.fagerhultgroup.com. At Group level, we have focused on four diﬀerent themes forwhich we believe we can collaboratively add most value. These are: sustainability, connected solutions, digital transformation and our work with corporate culture.

What is your view on the year's performance?

The year began positively with a healthy order intake, which was unfortunately reversed when Europe closed down from the middle of March. The order intake then stabilised during the summer, and we have subsequently reduced the gap step by step. We enter 2021 with a somewhat improved order stock com- pared with last year. We also placed considerable focus on costs savings, leading to savings exceeding 16 per cent. A very strong cash ﬂow has also been positive, resulting from such aspects as a focus on increased inventory turnover.

In terms of markets, there have been major diﬀerences in earn- ings depending on location and area of application. The pandemic has been more challenging for our global companies, and we have also noted improved results in Northern Europe. In terms of pro-fessional lighting, we are working on a broad front and have been successful in healthcare and logistics centres for e-commerce, while traditional clothing stores have experienced diﬃculties.

Sustainability has a central position in the new strategy. Where does the Fagerhult Group have the greatest opportunity to inﬂuence?

It is very gratifying that we have set an ambitious mission state- ment with a considerable focus on sustainability. The idea is for sustainability to be a natural part of the entire company and that all functions are important for us in reaching our goals.

More tangibly, our greatest opportunity to inﬂuence is with connected lighting solutions combined with our sustainability know-how. There is still much to be done in the market for professional lighting. We have fully completed the technological shift to LED, but only a third of commercial buildings in Europe have changed to LED lighting. If the EU is to reach its climate goals, major renovation programmes are required such as the EU Renovation Program, which has now been launched.

Our business model provides us with leverage to inﬂuence, and as such we need to construct a sustainable value chain containing an ecosystem of suppliers and partners. It is equally important that we train our customers to correctly use our products and

COMMENTS FROM THE CEO

connected lighting solutions. In this way, they can maximise the beneﬁt from our products and we are able to reduce environ-mental and climate impact.

Our sustainability agenda is driven within the Group globally and locally. We have a central direction in place within which many local initiatives are run and divided within the Group. A very good example of such an initiative is Whitecroft Vitality, which is a concept with circular lighting solutions.

The demand for connected lighting solutions continues to rise. What does this business mean for the Fagerhult Group?

This is an important area for us, and during the year, we have pulled together our expertise in a new function: Connectivity.

This includes our Organic Response technology that supplies our companies with products and expertise for connected lighting solutions. Demand is partly driven based on new user areas, but also by demands for sustainable lighting solutions. Our product life cycle analyses in the Nordic market show that 75 per cent of energy consumption comes from the products in-use phase.

Connected solutions enable optimised use based on requirements, and reduce energy consumption and climate impact as a result.

During the year, we opened a new competence centre for Organic Response in Sweden, where we are now developing operations. The investment in a new competence centre is a long-term initiative that will run for many years and link us more closely with our European companies and customers. In 2020, sales of Organic Response rose 79 per cent, demonstrating the market potential.

A new year is underway, and with it, new opportunities for Fagerhult Group. What will be the focus moving forward?

Our new strategy has created stable ground from which to grow.

Acquisitions have been and remain part of our long-term strategy, but our primary short-term focus is on ﬁnalising the business areas' various strategies and commencing the implementation of said strategies. Opportunities persist for increased organic growth by focusing on mutual business opportunities, and on a Group level, work will continue with our focus areas.

An important aspect of this will be to continue to develop our shared values. This cultural eﬀort is an important cornerstone of our new strategy and will facilitate internal collaboration.

This project began in 2020 and has been received with great enthusiasm by all participants, experiencing these eﬀorts as enjoyable and energising.

2020 has been unlike any other year, and I want to extend my thanks to all of my colleagues for their fantastic work. Despite these sometimes-trying challenges that require quick decision-making, we have managed to maintain our composure and keep pace with operations. This provides us with considerable faith for 2021, a year in which I am also looking forward to being able to visit operations and meet with each other again, something that I think all of us have missed.

Habo, March 2020

Bodil Sonesson President and CEO

BUSINESS ENVIRONMENT AND DRIVERS

Trends, drivers and stakeholders

Today's lighting solutions are about more than just lighting. By focusing on people's needs and adding smart control systems, sustainable value is created.

1 Sustainability drives business

In the past few years, we have witnessed an increase in customer demand for sustainable products and services. Environmental solutions and our carbon footprint remain high on the agenda, but the discussion has broadened. From previously focusing on energy eﬃciency, there is now an interest in the impact over the entire life cycle.

Examples of this are recycling and the potential of upgrading products to increase their lifespan. Today, sustainability is both a social responsibility and a competitive advantage.

Our response

Fagerhult Group takes a holistic approach to creating a sustainable value chain. A signiﬁcant advantage is that we have control over the entire value chain, from design and development, manufacturing in our own factories, to sales and after-market services. This facilitates a holistic way of thinking, in which we focus on energy-eﬃcient solutions from a life-cycle perspec-tive. One example of our work is Whitecroft Lighting's new product platform Whitecroft Vitality. These are our ﬁrst circular lighting products, certiﬁed according to Cradle to Cradle, meaning that we assume respon- sibility for the products' entire lifespan. For more info, see page 17.

BUSINESS ENVIRONMENT AND DRIVERS

2 Lighting with a focus on people

Today's lighting solutions are more than just lighting, it is about well-being. By focusing on people, lighting solutions allow for entirely new experiences for indoor and outdoor environments.

In addition to design, this entails customising solutions in which light quantity and distribution as well as the colour temperature are adapted to our needs and applications. For example, well thought-out and adapted lighting environments contribute to increased well-being in indoor environments.

In the same way, the right outdoor lighting can create attractive urban environments that facilitate safety.

Our response

Our brands are specialised in developing the best lighting solutions for their respective applications. Together with our partners at the speciﬁer level, we create solutions that meet the prerequisites for each unique product.

We also participate in research together with selected universities to actively spread knowledge about the signiﬁcance that light has on people and our well-being. For example, a paper was published in 2020 in which Fagerhult and iGuzzini, together with Aalborg University, studied interaction between natural and artiﬁcially-created light (Double Dynamic Lighting).

3 Smart systems creating opportunities

The demand for smart and connected control systems for lighting continues to rise. These systems allow for the management of light based on the situation, for example, lighting based on activity using sensors in the luminaires. Proximity sensor control leads to a sharp reduction in energy consumption, at the same time the sensors and the data they collect enable for new functionality that can create business beneﬁt for other areas such as property management.

Our response

Fagerhult Group oﬀers complete lighting solutions with smart controls for both indoor and outdoor use. For indoor use, one example is our system Organic Response. Our focus is to develop systems that are easy to use and that are adapted to their respective applications. A fundamental idea is also that our systems are open and that it is possible for other companies to develop supplementary functions that create increased value for our customers and users. Our companies work actively to ﬁnd the right partners in the property ecosystem, for example the construction, ventilation and safety industry.

STRATEGY

Strategy with a focus on growth

2020 signals the start of a new chapter in our history and our new business area structure lays a solid foundation for our future growth. During the year, we also increased our focus on sustainability and connected solutions with a number of joint initiatives.

Fagerhult Group is a leading global lighting group with a long and ancient history. An important part of our development has been the acquisition of successful companies in supplementary niches or in new markets.

Acquisitions still play an important role in our strategy. At the same time, during the year we increased our focus on harnessing our existing opportunities for growth. The new business area structure is pivotal to this work and will help us strengthening our market positions locally and globally.

A new structure for increased growth

The new structure that was introduced at the beginning of 2020, is gathering brands with similar customer groups, partners and markets in four new business areas - Collection, Premium, Professional and Infrastructure.

The new business areas create an improved dynamic and better interaction between the companies. Each business area collaborates in producing their own growth strategies, with propri- etary initiatives and initiatives together with other business areas.

Many projects have been planned and launched, for example, shared product development, supplementary product range, or access to new markets via the market presence of another brand. Read more about our business areas on pages 20-27.

Sustainability is part of our social responsibility

In common for all our brands and companies is our focus on qualitative and sustainable lighting solutions adapted to each project's unique prerequisites. This is well summarised by the Group's mission statement: "Together we innovate to create value and deliver professional lighting solutions that are circular and climate positive and contribute to better lives".

Sustainability is high on the agenda with customer and societal demands and expectations that Fagerhult Group is a responsible and innovative company. In the past few years, the sustainability

agenda has broadened from energy saving to a perspective with a focus on the entire product lifecycle. In the Fagerhult Group, we take a holistic perspective and sustainability eﬀorts are central to all of our operations. This means that sustainability is not a sepa- rate project, but rather an integrated part of our operations.

Our objective is to be the preferred partner for sustainable lighting solutions. An important aspect of this is having trans- parent communication. We should be a knowledge leader in the market, but we also have to report our sustainability eﬀorts in a transparent and easy-to-understand way for all of the company's stakeholders. The research and development of new, more sustainable solutions is being driven in our product companies.

The sustainability agenda also comes with modern and inclusive leadership in order to ensure that we are an attractive workplace that attracts the best talents. For more information about our sustainability eﬀorts, see pages 12-19 and 94-125.

Open systems creating new opportunities

In the past few years, there has been a sharp increase in demand for smart and connected systems for lighting control. The starting point for our systems is luminaires equipped with sensors for proximity sensor control, resulting in signiﬁcant energy savings.

By connecting these sensors to cloud solutions, new applications are created in which information can be used to reduce mainte- nance costs and provide new business opportunities.

A cornerstone for Fagerhult Group is to have open systems that allow other companies to use information and add new solutions that provide an increase in customer beneﬁt. To make this possible, we are establishing an ecosystem with partners that work in neighbouring areas, for example, ventilation, safety and property management.

During the year, we have gathered together our expertise for smart and connected solutions in a new centralized function - Connectivity - as part of our strategy and new structure.

STRATEGY

Organic Response - which develops control systems for indoor environments - is a part of this. Organic Response is based in Melbourne, but in 2020 we have launched a new competence centre in Linköping, Sweden. The idea is to come closer to our European companies and simplify our work with partner programmes in Europe.

Starting point for shared values

Fagerhult Group is characterised by a large amount of people with a great deal of passion for light and lighting. This is still thecase for all of our companies, even if we have completed many acquisitions over the years. As an important step working with the new structure, and to improve collaboration across our companies, we initiated a process of highlighting core values for the Fagerhult Group during the year.

These eﬀorts began early in the spring 2020 and, during the year, a large number of people took part in diﬀerent digital meetings to formulate our new values. The eﬀorts have been well-received, and we will be focused on continuing the work with our values and strengthening our shared culture during 2021.

SUSTAINABILITY

We are part of the transition to a more sustainable society

We include the entire value chain in our continuous work to minimize the negative and maximize the positive eﬀects of our business.

Our ambition is to apply societal, business and environmental responsibility in developing and manufacturing energy-eﬃcient professional lighting solutions that help create sustainable value for people, society and the environment. This shared road ahead for all companies within the Group can be summed up by our mission:

"Together we innovate to create value and deliver professional lighting solutions that are circular, climate positive and contribute to better lives".

Four cornerstones form the foundation to our sustainability approach

During the year, our sustainability approach was presented, to be further developed and implemented. It consists of four main cornerstones that sets the foundation for the continuous work.

We have a clear ambition to hold the position as industry knowledge leader in sustainable lighting solutions and thereby be the customers' ﬁrst choice when it comes to choosing a solution.

As we are a Group of well-known and successful companies and brands with long experience, which we beneﬁt from in ourestablished Group forums. Here, information, experiences and success stories are exchanged to create sustainable solutions. This is covering all valid parts along the value chain from pur-chasing and innovation through manufacturing and operations to the market side. This helps to drive the innovative development of lighting solutions with energy-eﬃcient LED diodes and smart control systems that meet our customers' requirements as well as putting sustainability in the priority seat.

Our social responsibility People responsibility is all about ensuring that all our workplaces are characterized by participa- tion, equality and diversity. It also means that every employee has the right and necessary preconditions to perform and develop in their roles and ﬁnd new opportunities when time is ready.

With increased awareness and focus on sustainability follows the importance of transparent, consistent and regular reporting across all brands and business areas, and relevant numbers and indicators to show the way towards sustainability reporting. It is of vital importance to secure that actions and eﬀorts has the required eﬀects, in accordance with the applicable legal require- ments, international standards and voluntary commitments.

SUSTAINABILITY

With the goal of supporting the 2030 Agenda for Sustainable Development

Currently, four of the UN's 17 Sustainable Development Goals (SDGs) The impact from our operations toward all SDGs will be overseen andhave been identiﬁed as the goals where our operations have the greatest opportunity to impact and contribute positively towards.

eﬀorts going forward will be directed on the connection with the tar- gets and our ambitions and initiatives within the area of sustainability.

No.7

Aﬀordable and clean energy Ensure access to aﬀordable, reliable, sustainable and modern energy for all.

No. 11 Sustainable cities and communities Make cities and human settlements inclusive, safe, resilient and sustainable.

No. 12 Responsible consumption and production

Ensure sustainable consumption and production patterns.

No. 13

Climate action Take urgent action to combat climate change and its impacts.

Modern lighting soultions are incredibly energy eﬃcient. Our latest technology, including LED and control systems, can reduce the energy consumption by up to 70 per cent compared to traditional lighting solutions.

Pages 106-110

Proper lighting in public places can make them more accessible, but also safer during dark hours.

Combined with presence control, the environmental impact can be greatly reduced, as the lighting becomes more energy eﬃcent.

Pages 106-110

As a part of our mission state-ment, we strive to make circular lighting solutions. A good example is Whitecroft Vitality, which is an initiative for circular design, prolonging life utility, and to upgrade products in use.

Page 17

A new role, Chief Sustainability Oﬃcer, was added to the Group Management team during 2020.

The purpose of the role is to coordinate and drive our common sustainability agenda, including our four focus areas.

Page 114

Our most material sustainability topics

We have chosen to gather the most important sustainability topics in three areas: People, Environment and Business. To sum up, the following topics should be seen as the most important for the Group to manage, follow up on and communicate about.

People

Work conditionsEquality and diversityCareer developmentOccupational health and safety

Product responsibility/ safe productsEnvironmentLifecycle perspectiveCircular solutionsEnergy-eﬃcient solutionsConscious material selectionUse of resources

Carbon dioxide emissionsSystematic internal environmental work

Business

Code of Conduct

Ethics and anti-corruption

Human rights

Partner collaboration

Supplier reviews

Due diligence processes

PEOPLE

Value creation for employees

In many ways, 2020 has been characterised by the global spread of the coronavirus pan- demic. Our responsibility as an employer was to, in any way possible, reduce the spread of infection and quickly adapt the company's operations in line with the national rules and recommendations that were introduced to various degrees during the year. Keeping operations running safely was essential and comprehensive eﬀorts therefore took place to make workplaces coronavirus-safe based on local requirements and adapting work procedures by, for example, increasing opportunities to work remotely.

Sustainable workplaces, leadership and employees

Our workplaces are characterised by partic-ipation, commitment and well-being that pro-vide every employee with good preconditions to develop. Group-wide core values unite andguide all employees, and are an integral part of all our processes and in our daily work.

Each company has the goal of oﬀering its employees an inclusive working environment characterised by good development oppor-tunities and attractive career paths, locally as well as globally. It is equally important to develop the kind of leadership in which those that lead feel comfortable in their roles and can apply a coaching style of leadership.

Appreciating people's diﬀerences and various skills is an important way to increase diversity, something that in turn leads to better conditions for creating a more innovative company culture. There is also a clear overall intention to create a better balance between the genders.

For more information about the year's developments, see pages 99-105.

Objectives

Guarantee our employees'

health, safety and human rights.

Sustainable leadership development, ﬁnding new opportunities for valuable people.

Ensure our Group values are an integral part of all processes and daily work.

Facilitate a constructive dialogue and collaboration between Group compa- nies.

66 % 34 %
Members of the Board and	Employees by
senior management by gender	gender at year end
14

85 % 15 %

4,397

employees

During the year, Lighting Innovations in Port Elizabeth, South Africa was divested, and the number of employees in the Fagerhult Group at year end totalled 4,397 (4,465).

ENVIRONMENT

The combination of LED technology's long life and low energy consumption with smart control systems has quickly become the major driving force in lighting professional indoor and outdoor environments. This is a development in technology that generates sustainable values and is applied for proximity sensor-controlled lighting that automatically regulates comfortable and energy-eﬃcient lighting according to the time of day and pres- ence in a space or in an outdoor environment.

Sustainable values generated in the user phase

The continual development of LED technol-ogy combined with connected lighting solu-tions can, depending on application, reduce energy consumption up to 70 per cent.

A circular business model is being cultivated

A shared goal for all companies is to limit the environmental impact of their luminaires throughout their life cycle, from the choiceof materials, product development and manufacturing to use and recyclability.

For example, Whitecroft are already oﬀering a circular product platform for lighting, Whitecroft Vitality, and they launched their ﬁrst Cradle to Cradle certiﬁed product last autumn.

A summary of the Group's direct and indirect emissions 2020

CO2e emissions (tonnes)

Total CO2ee emissions Scope 1

Total CO2 emissions Scope 21

Total CO2e emissions Scope 32

2020 9,888 7,673 345

2019 7,468 5,052 1,200

1) Emissions from sales oﬃces are not included 2019.
2) Information regarding total Scope 3 emissions is unavailable. It covers business trips by ﬂights.

For more information about the year's developments, see pages 106-110.

Objectives

Maximize energy savings, using the latest LED tech-nology and smart lighting control.

Ensure that all products and services fulﬁll appli-cable regulations and standards.

Lifecycle perspective on our solutions to minimize our environmental impact.

Environmental consider-ation throughout our full value chain, internally and externally.

2,092

To continually reduce our indirect CO2 emissions, we have invested in solar panels at several of our production units. In 2020 we produced 2,092 MWh with solar panels installed across the Fagerhult Group which is more than the entire electricity consumed in the three factories in our Infrastructure business area during the year.

BUSINESS

Responsible enterprise is our foundation

Running a responsible enterprise is core for our success. The Code of Conduct - which includes guidelines for labour conditions, business ethics, anti-corruption, respect for human rights and environmental responsi- bility - is a guide for this work. Our common Code of Conduct is supplemented by the companies' local versions alongside their policies and guidelines.

Fagerhult Group is a transparent, sound and open organisation and everyone who works within the Group, from the Board of Directors and management to individual companies' management and employees, is covered by and must act in accordance with laws, regulations and our Code of Conduct.

In the event that a serious irregularity is suspected that is in breach of the Code of Conduct, it is possible to anonymously report the incident using the whistle-blower func-tion, which is accessible via the intranet and on our public website.

A sustainable chain of suppliers

The general assessment is that the Group has a low risk exposure for purchases since a large portion of the procurement is conducted with well-established global companies or from suppliers within our companies' near environments. In line with the decentralised business model, it is each company's responsibility to integrate sustainability with its procurement process in order to ensure a sustainable and ethical supply chain. The companies' procurement functions have the core responsibility for acquiring knowledge of and ensuring that the contracted suppliers adhere to the international guidelines for human rights, freedom of association, right to collective agreements, anti-corruption, and eﬀorts to combat child and forced labour.

Many companies also supplement their agreements with a supplier code of conduct and regularly carry out supplier reviews.

For more information about the year's developments, see pages 111-113.

Objectives

All companies and part-ners conduct business according to current laws and regulations.

Our shared Code of

Conduct forms the basis for everything we do and how we act.

Ensure a sustainable supply chain, making sure all suppliers meet our requirements.

Thorough due diligence is conducted for every company acquisition.

Leading the way to authentic circular lighting solutions

What started as a retroﬁt project for one customer in 2018 has been developed into a circular economy platform and the launch of one of the world's ﬁrst Cradle to Cradle certiﬁed luminaires in 2020.

Manchester based Whitecroft Lighting is one of the United Kingdom's largest manufacturers of professional lighting, providing tailored lighting solutions for commercial, industrial, healthcare and education applications.

The circular journey started in 2018 when the Cheshire Police Authority (CPA) updated a 15 year-old internal lighting system. White- croft Lighting were able to oﬀer an upgraded lighting solution with increased eﬃciency and enhanced control, whilst also reusing (upcycling) a large proportion of the luminar-ies on site.

A sustainable journey towards a circular business model

For Whitecroft Lighting, the CPA project was an eye opener highlighting the opportunities for a more circular approach to both product design and future business models. For cus-tomers, the value creation spans economic, environmental as well as social aspects. Circularity helps prolong the life of existing solutions, reducing carbon dioxide emissions and waste while at the same time creating a more sustainable supply chain.

The Whitecroft Vitality platform was developed around three phases - design and manufacture, through life utility, and regen-eration and recovery. The concept enables products to be kept at their highest utility through life and then refurbish, re-purpose,

The Cradle to Cradle1 certiﬁcation has added transparency and third-party assur-ance to the application of Whitecroft Vitality and marks an important step in Whitecroft Lightings journey towards a more circular business model. Cascade Flex and Flight are two of the world's ﬁrst Cradle to Cradle certiﬁed luminaires (Bronze level) taking a more holistic look at material health/upgrade, local supply chains, social fairness and the responsible use of water and energy by Whitecroft Lighting and its suppliers.

re-sell and in the end recover luminaires.

Depending on their motivations, or speciﬁc project needs, customers can engage with the platform at any phase.

WHITECROFT VITALITY

1) Cradle to Cradle Certiﬁed™ is a globally recognized measure of safer, more sustainable products made for the circular economy.

Flight Vitality, one of the world's ﬁrst luminaires to be Cradle to Cradle Certiﬁed™ Bronze.

In the beginning of 2021, Whitecroft Lighting was presented with the Make UK award for Energy and Sustainability, one of UK's most prestigious national manufacturing awards.

Matt Paskin's tips on circularity

Be true to your values and beliefs

Start by looking at the product

Be curious and don't be afraid to fail

2 3

VALUE CREATION

A Value Creation Business Model

External trends and drivers

Sustainability drives business.

Lighting with a focus on people.Smart systems creating opportunities.

Input resources

Motivated and competent employees.

Strong global and local brands known.

Sales models adapted to local markets.

Modern manufacturing facilities.

Financial means.

VALUE CREATION

Vision

A world enhanced by light.

Mission

Together we innovate to create value and deliver professional lighting solutions that are circular, climate positive and contribute to better lives.

Business model

Group-wide functions, support and resources.

Brands that stand for entrepreneurship, local decision-making and execution.

Value creation

The more than 4,7 millions of units produced yearly create value in several ways;

Energy eﬃciency that reduces both environmental impact and costs.

Health and well-being in indoor environments, in oﬃces, schools and hospitals.

Safer and more secure public places and outdoor environments.

Good work and study environments by contributing to improved performance and concentration.

Build brands amd inﬂuence buying behaviour.

Employment in the local community, as well as salaries and beneﬁts for employees.

Oﬀer skills development and innovation strength among employees and subcontractors.

Financial value in the form of dividends to owners, taxes and reinvestments in the business.

Environmental impact from our value chain

Emissions from purchased materials.

Emissions from energy used in production.

Emissions from the energy consumption during the usage of our products.

Emissions from transportation of goods.

Emissions from business trips.

Collection

Operating proﬁt	Net sales 2020	Operating margin
3,040 SEK	3.2 %
98 SEK

Collection includes our brands with global market presence.

All these brands have an international product portfolio and are well-known among lighting designers and architects globally. They oﬀer a broad product range with a focus on outdoor and indoor environments with stringent requirements in terms of architectural design. Product development and production take place in Sweden, Italy, Canada, China, Germany and Thailand.

Brands:

Head oﬃce: Åhus, Sweden

Our oldest company, founded in 1934.

With a strong Nordic design heritage, ateljé Lyktan oﬀers high quality products for indoor and outdoor environments.

Headoﬃce: Duisburg, Germany The shift to LED technology created new opportunities. LED Linear has taken advantage on this development and oﬀers tailor-made linear luminaires for professionals environments globally.

Focus areas:

Head oﬃce: Recanati, Italy iGuzzini is a world-leading brand with a strong global presence. The company oﬀers innovative lighting solutions for pro- jects with high architectural requirements.

Head oﬃce: Bispingen, Germany Since 1950, WE-EF has designed and manufactured high-end outdoor lumi- naires. The company has an international market presence with focus on urban environments.

With the global market presence there are continuous possibilities for cooperation creating growth within the four brands. During 2020 we have chosen to focus on our four strategical projects where we have now taken the ﬁrst steps.

Net sales	Operating margin
Collection, MSEK	Collection, %
3,376
8.5

3,040

2019 2020

3.2

2019 2020

Premium

Operating proﬁt	Net sales 2020	Operating margin
240 SEK	2,496 SEK	9.6 %

Premium focuses on the European market and global customers who have a base in Europe. Through close collaboration with speciﬁers and local partners, premium projects are delivered, often with customised solutions for the customer. The majority of sales concern indoor applications, but there is also an outdoor range available for speciﬁc markets. Product development and manufacturing facilities operate in Sweden, Germany and China.

Brands:

Head oﬃce: Fagerhult, Sweden Founded in 1945, Fagerhult represents our roots. From the start, the company has developed into a leading European supplier of lighting solutions. Strongest focus is on indoor environments, but with a selected range of outdoor solutions.

Focus areas:

Head oﬃce: Tettnang, Germany LTS primary focus is the German market. The company oﬀers innova-tive solutions for selected indoor environments, such as oﬃces, retail stores, hotels and restaurants.

Premium has substantial opportunities in Europe with growth opportunities in most markets. In 2020, several initiatives were launched to even better meet our customers' demands for sustainability and smart connected lighting solutions.

Net sales	Operating margin
Premium, MSEK	Premium, %
3,023
12.1

2,496

2019 2020

9.6

2019 2020

Professional

Operating proﬁt

30 SEK

Net sales 2020

824 SEK

Operating margin

3.7 %

Professional primarily oﬀers lighting solution for various indoor environments. The focus is on local and neighbouring markets.

Production and product development take place locally for each brand, in Turkey, Australia and the UK. Through close collabora- tion with local partners at the speciﬁer level, the prerequisites are created for developing customer-adapted solutions for custom- ised products that can be delivered with short lead times.

Brands:

Head oﬃce:

Ankara, Turkey Arlight has a strong position in the Turkish market for indoor lighting.

Head oﬃce:

Melbourne, Australia One of the major brands in the Australian and New Zealand markets. Main focus on its own product range, but also selling selected Fagerhult Group brands on the Australian market.

Head oﬃce:

Manchester, UK One of the largest brands in the UK mar- ket. The company has a focus on products for indoor environments and is also the leading brand in the Group in sustainability.

Focus:

The companies in Professional are similar in nature and favourable conditions are in place for collaboration, knowledge sharing and shared ﬁnancial investments. A signiﬁcant focus area concerns various joint initiatives in sustainability and smart connected lighting solutions.

Net sales Professional, MSEK

1,028

824

2019 2020

Operating margin Professional, %

9.4

3.7

2019 2020

Infrastructure

Operating proﬁt	Net sales 2020	Operating margin
139 SEK	740 SEK	18,8 %

Infrastructure oﬀers adapted lighting solutions for environments with speciﬁc requirements for installation, sustainability and robustness. These are often projects within infrastructure and industry. The companies are world-leading in their ﬁelds, and have extensive experience of ﬁnding the best solutions for each project and customer. Most of the sales take place in Europe but there are also some global installations. Product development and production take place in the UK, Finland and the Netherlands.

Brands:

Head oﬃce: Sutton, UK	Head oﬃce: Iittala,	Head oﬃce: Schagen, the
With lighting solutions	Finland	Netherlands
for secure environments	Strong brand in	Veko oﬀers linear lighting
and the transportation	lighting solutions for	solutions for quick and
sector, Designplan is	demanding industrial	easy installation. Strong
focusing on a niche	environments, with a	presence on the Dutch
market. Main presence	leading position in the	market with a focus on light
in the UK market and	Nordic market.	industry, warehouses and
Germany.	data centers.
Focus:

The three brands within Infrastructure all have a strong position in their national markets. There are signiﬁcant growth opportu-nities by expanding into other nearby markets, especially in the Nordic countries, Germany and the United Kingdom.

Net sales Infrastructure, MSEK

699

740

2019 2020

Operating margin Infrastructure, %

18.8

14.4

2019 2020

Financial information

Contents

The Fagerhult share 30

Five-year overview 32

Administration Report 34

Corporate Governance 39

The Board of Directors 46

Group Management 48

The Group's annual accounts 50

The Parent company's annual accounts 55

Accounting policies 60

Notes 67

Signatures 89

Audit report 90

FINANCIAL INFORMATION | THE SHARE

The Fagerhult share

Fagerhult's share was listed in May 1997 and is traded on the Mid Cap list of the Nasdaq, Stockholm. Market capitalisa-tion at year end totalled about SEK 8.0 billion.

Sales and trading

The share symbol is FAG and its ISIN code is SE0010048884. One trading lot corre- sponds to one share. In 2020, total turnover for the share on Nasdaq in Stockholm was 47.1 million shares, at a combined value of MSEK 1,977. Average share turnover per trading day amounted to 186,902, representing a value of SEK 7,845,000. An average of approximately 488 trades were made per trading day.

Share price trend

At 31 December 2020, the closing price for Fagerhult's share was SEK 45.50 per share,corresponding to a market capitalisation of approximately SEK 8.0 billion. The price of the Fagerhult share declined 23 per cent in 2020.

Over the same period, the Nasdaq Stockholm PI rose 11 per cent. The highest closing price of SEK 62.30 was noted on 21 January and the lowest on 19 March at SEK 28.30. The average share price for the year was SEK 42.

Total shareholder return for the Fagerhult share, deﬁned as the price trend including reinvestment of the dividend of SEK 0.00, was negative 25 per cent.

Share capital

At year end, Fagerhult's share capital amounted to MSEK 100.2 (100.2), allocated over 177,192,843 shares with a quotient value of SEK 0.57 per share. All shares have equal voting rights and an equal participation in the company's earnings and capital. At the Annual General Meeting (AGM) on 23 June 2020, it was resolved that the company be permitted to buy back its own shares. This option was not exer- cised in 2020. In connection with the allocationof shares tied to the Group's share-savings plan (see Note 2), treasury shares were used. The number of treasury shares totalled 1,046,064 (1,056,544) after allocation and the number of shares outstanding was 176,146,779. The percentage of shares held as treasury shares was 0.6 per cent. The Board of Directors pro-poses that the AGM resolve to grant the Board the continued right to buy back the company's shares until the next General Meeting.

Ownership structure

At year end, Fagerhult had 8,342 (7,568) shareholders. The largest single shareholder was Investment AB Latour, in which the Douglas family are the main shareholders, with combined holdings of 48.1 per cent (46.6) of the share capital and votes in the company, based on the number of shares outstanding. The ten largest shareholders accounted for 83.2 per cent (80.2) of the share capital and voting rights of the shares outstanding. The proportion held by shareholders outside of Sweden was 12.6 per cent (14.7).

Share price trend

SEK

No. of shares, thousands

141040 140
7 0070,0070000
FagerhultOMX Stockholm PICarnegie Small CSX Sverige
Källa:Source:
Monthly share turnoverO, MthXoSutoscaknhodlms _PI CarnegieCaSrmneaglliCeSXmSawlleCdSeXnSwedeOnmsatt Oanmtaslaattkatinetrail1a0k0ti0e-rtai l1p0e0r0m-taålnpaedr månad
FagerhuFltagerhult OMX Stockholm_PI
Ownership distribution
Foreign shareholders, 13 %
Swedish owners, 87%

Ownership structure (at 31 Dec 2020)

Shareholder

Investment AB Latour Lannebo Fonder

AP Funds

BNP Paribas SEC Services Nordea Funds

The Svensson family, foundation and company The Palmstierna family

Swedbank Funds

Didner and Gerge Småbolag SEB Fonder

Clearstream Banking S.A. (LU)

Johan Hjertonsson

Other owners with more than 20,000 shares (182 owners)

Other owners with 10,001-20,000 shares (132 owners)

Other owners with 1,001-10,000 shares (2,081 owners)

Other owners with up to 1,000 shares (5,935 owners)

AB Fagerhult, treasury shares

Number of shares at year end

Share turnover

Highest price paid during the year, SEK

Year

Volume of shares traded, millions Value of traded shares, MSEK

Average volume of shares traded/trading day Average value per trading day, SEK thousand Turnover rate, %

1) Paid 21 January 2020 2) Paid 19 March 2020

Data per share

Year

Earnings per share before dilution, SEK Dividend per share, SEK

Share price 31 Dec, SEK Dividend yield, %

Equity per share, before dilution, SEK Cash ﬂow per share, before dilution, SEK

1) Proposed dividend 2) Cash ﬂow from operating activities.

2016	2017	2018	2019	2020
2016	2017	2018	2019	2020
31

THE SHARE \|	FINANCIAL INFORMATION
Share capital and
No. of shares	voting rights, %
84,708,480	47.8
13,738,541	7.8
11,555,530	6.5
10,687,107	6.0
7,661,269	4.3
6,775,760	3.8
4,093,599	2.3
3,329,668	1.9
3,166,926	1.8
1,730,734	1.0
1,137,235	0.6
1,138,951	0.6
16,934,165	9.6
1,844,760	1.0
6,119,918	3.5
1,524,136	0.9
1,046,064	0.6
177,192,843	100.00

Volume of shares traded, millions 5.6 9.1 14.2 25.6	47.1
Value of traded shares, MSEK 373 954 1188.2 1,519.9	1,977.1
Average volume of shares traded/trading day 22,269 36,092 56,828 102,712	186,902
Average value per trading day, SEK thousand 1,474 3,803 4,752 6,104	7,845
Turnover rate, % 4.9 7.9 12.3 14.5	26.7
Highest price paid during the year, SEK 92.83 136.67 111.00 73.76	62.301
Lowest price paid during the year, SEK 44.75 76.67 67.70 50.60	28.302

Earnings per share before dilution, SEK 3.35 4.32 4.39 3.32	3.21
Dividend per share, SEK 1.50 2.00 2.00 -	0.501
Share price 31 Dec, SEK 77.83 100.50 76.10 59.50	45.50
Dividend yield, % 1.9 2.0 2.6 -	1.1
Equity per share, before dilution, SEK 14.30 16.51 18.60 31.23	32.94
Cash ﬂow per share, before dilution, SEK2 3.41 5.96 3.30 6.58	6.46

FINANCIAL INFORMATION | FIVE-YEAR OVERVIEW

Five-year overview

Income items (MSEK)

Net sales

Cost of goods sold

Gross proﬁt

Selling expenses Administrative expenses Other operating income Other operating costs

Operating proﬁt

Financial income Financial expenses

Proﬁt after net ﬁnancial itemsBalance-sheet items (MSEK)

Intangible assets

Property, plant and equipment Financial assets

Inventories Trade receivables Other current assets Cash and cash equivalents Total assets

Equity

Pension liabilities Deferred tax liabilities

Other non-current interest-bearing liabilities Other non-interest-

Current interest-bearing liabilities Current non-interest-

Total equity and liabilities

20163

20173

20183

2019 2020

Net sales 4,491 5,170 5,621 7,845	6,816
Cost of goods sold -2,917 -3,246 -3,474 -4,795	-4,417
Gross proﬁt 1,574 1,924 2,147 3,050	2,399
Selling expenses -783 -919 -1,036 -1,698	-1,536
Administrative expenses -316 -385 -467 -631	-614
Other operating income 49 58 201 74	178
Other operating costs -139	-94
Operating proﬁt 524 678 706 795	333
Financial income 17 15 10 38	25
Financial expenses -26 -40 -49 -137	-141
Proﬁt after net ﬁnancial items 515 653 667 696	217

2016

2017

2018

2019 2020

Intangible assets 2,069 2,709 3,160 6,042	5,658
Property, plant and equipment 448 686 703 2,808	2,470
Financial assets 34 54 52 205	219
Inventories 685 761 858 1,247	998
Trade receivables 761 838 925 1,427	1,122
Other current assets 86 99 115 230	171
Cash and cash equivalents 731 950 808 1,133	1,624
Total assets 4,814 6,097 6,621 13,092	12,262
Equity 1,627 1,890 2,129 5,501	5,802
Pension liabilities 68 90 93 190	186
Deferred tax liabilities 131 283 335 1,017	548
Other non-current interest-bearing liabilities 1,752 2,685 2,372 4,458	4,071
Other non-interest-bearing liabilities 239 162 249 150	-
Current interest-bearing liabilities 133 5 416 222	179
Current non-interest-bearing liabilities 864 982 1,027 1,554	1,476
Total equity and liabilities 4,814 6,097 6,621 13,092	12,262

FIVE-YEAR OVERVIEW | FINANCIAL INFORMATION

Key performance indicators and data per share

Sales growth, %

Increase/decrease in operating proﬁt,

Increase/decrease in operating proﬁt after ﬁnancial items, % Operating margin, %

Proﬁt margin, % Liquid ratio, % Net debt/EBITDA Equity/assets ratio, % Capital employed, MSEK Return on capital employed, % Return on equity, %

Net debt, MSEK

Net investments in non-current assets, MSEK Depreciation/amortisation of non-current assets, MSEK Number of employees

Equity per share, SEK Earnings per share, SEK Dividend per share, SEK

Number of shares

Average number of shares outstanding, thousands

1) Proposed dividend
2) Cash ﬂow from operating activities.
2016
3) The Group has applied IFRS 16 Leases from January 1, 2019. The comparative ﬁgures for 2016-2018 have not been adjusted.

For more information about the Key ratios and the deﬁnitions applied, please refer to AB Fagerhult's website under "Investor/Financial data/Financial glossary." The website also includes the deﬁnition of any Alternative Performance Measures used whereas this report details the ﬁnancial aspect to these.

2017

2018

2019 2020

Sales growth, % 14.9 15.1 8.7 39.6	-13.1
Increase/decrease in operating proﬁt, 32.4 29.3 4.1 12.6	-58.2
Increase/decrease in operating proﬁt after ﬁnancial items, % 36.5 26.8 2.2 4.3	-68.9
Operating margin, % 11.7 13.1 12.6 10.1	4.9
Proﬁt margin, % 11.5 12.6 11.9 8.9	3.2
Liquid ratio, % 73 96 56 64	98
Net debt/EBITDA 1.9 2.2 2.0 2.9	3.2
Equity/assets ratio, % 34 31 32 42	47
Capital employed, MSEK 3,581 4,670 5,010 10,372	10,238
Return on capital employed, % 16.8 16.8 14.8 10.8	3.5
Return on equity, % 24.9 28.1 25.0 13.5	10.1
Net debt, MSEK 1,222 1,830 2,073 3,737	2,812
Net investments in non-current assets, MSEK 169 177 123 243	184
Depreciation/amortisation of non-current assets, MSEK 121 158 320 479	558
Number of employees 2,787 3,241 3,384 4,465	4,419
Equity per share, SEK 14.30 16.51 18.60 31.23	32.94
Earnings per share, SEK 3.35 4.32 4.39 3.32	3.21
Dividend per share, SEK 1.50 2.00 2.00 -	0.501
Cash ﬂow per share, SEK 2 3.41 5.96 3.30 6.58	6.46
Number of shares outstanding, thousands 113,818 114,492 114,500 176,136	176,147
Average number of shares outstanding, thousands 113,761 114,318 114,497 153,274	176,142

FAGERHULT GROUP ANNUAL REPORT 2020 33

Administration report

The Board of Directors and CEO of AB Fagerhult (publ.),

Corporate Identity Number 556110-6203, hereby present the Annual Report for the Group and the Parent Company for the year 2020.

Operations

The Fagerhult Group is one of Europe's leading lighting groups. We design, develop, manufac-ture, and market professional lighting solutions for public environments with a focus on aesthetics, function, ﬂexibility and energy-eﬃcient solutions.

The Group has 11 manufacturing facilities in Europe, factories also in China (two), Australia, Turkey, Thailand and Canada and sales compa- nies in more than 29 countries.

Fagerhult's shares are listed on the Nasdaq, Nordic Exchange, Mid Cap list in Stockholm.

Changes in the Group

During 2019 the Fagerhult Group worked on a strategic alignment process. The ambition has been to ﬁnd new opportunities for organic growth and to strengthen the individual brands and collaboration across the Group.

This work has resulted in a new structure and reporting basis for the Group eﬀective from

1 January 2020.

The new structure for Fagerhult Group is based on four business areas; Collection, Premium, Professional and Infrastructure. Each of our 13 brands belongs to one of the business areas and the selection has been done based on product applications, geographic footprint and partner focus. For details on the diﬀerent business areas see below. The new structure is also reﬂected in a new reporting basis. For 2020 we have reported ﬁnancial results according to the four business areas. This replaced the former geographic and product area reporting structure. In the 2020 reporting, 2019 has been re-stated to reﬂect the new business areas and allow comparable numbers.

The strategic alignment process and the newbusiness area structure creates a new Fagerhult Group Management Team. The new management team consists of nine people; CEO, four Head of Business Areas, and four Group functions.

On the 30 October 2020 Fagerhult signed an agreement to divest Lighting Innovations Africa (Pty) Limited to Cape Mountain Concepts (Pty) Limited. The divestment took place on 2nd November 2020. The decision to exit its presence in South Africa was part of an ongoing strategic review. Since the acquisition in 2015, Lighting Innovations has managed the LED transition and maintained a position as a strong local brand for professional lighting solutions. However, the mar-ket continues not to develop as expected and the Fagerhult Group decides to focus its investments on more attractive growth opportunities.

The total losses for the year related to Lighting Innovations were 129.2 MSEK. Of this sum, 109.6 MSEK relates to one-oﬀ costs and write down of assets and 19.6 MSEK is the 2020 trading loss. The main elements of the 109.6

MSEK relate to the impairment of intangible assets (63,1 MSEK), the loss on disposal of the subsidiary (31.3 MSEK) and the balance 15.2

MSEK relates to local tangible asset write downs and redundancy costs.

As a consequence, Fagerhult made changes in the structure of its internal organisation and segment reporting. The reporting entity Lighting Innovations has been separated from the busi-ness area Professional and is reported as a sepa- rate segment Lighting Innovations. The segment reporting now follows the new structure of the Fagerhult Group which is based on four the busi-ness areas; Collection, Premium, Professional and Infrastructure plus Lighting Innovations.

The Group's legal structure is regularly reviewed with the objective of reducing the num- ber of legal entities and reducing administration.

Sometimes this is driven from a customer-market perspective like the 2020 combination of Fagerhult Lighting Limited and LED Linear UK Limited in the UK and sometimes from a simpliﬁcation of the legal, administration and tax perspective similar to the holding company/ sub-company mergers in Germany (WE-EF Trading) and USA/Canada (iGuzzini USA and Sistemalux Canada) in 2020. Finally for 2020,the Group acquired the balance 10 per cent minority interest in iGuzzini Finland.

We also report a post balance sheet event. On the 28 January 2021 Fagerhult completed the transaction to sell 100 per cent of the shares in Commtech Commissioning Services SA to Aire Limpio S.L., a Spanish company based in Madrid.

It had previously been decided that Commtech's core business of site based commissioning ser-vices was strategically not core to the Fagerhult Group. In 2020 Commtech had net sales of 28 MSEK and employed 35 people. A minor capital gain was made from the disposal, refer to the fourth quarter report for further details.

Sales and earnings

The Covid-19 pandemic had a signiﬁcant negative impact on revenues and earnings for 2020. For a full description of the impact of Covid-19 from a qualitative and quantitative aspects as well as the Fagerhult Group's response see below.

During the ﬁrst half of 2020 the Fagerhult Group faced several challenges, not only Covid-19 and as reported many of these challenges were one-oﬀ events which were promptly dealt with. During the second half of the year the Group continued to deal with the Covid-19 pandemic and also completed the exit from South Africa.

From a market perspective we experienced varied levels of activity depending upon geography or application area. Generally the pandemic had a negative impact in all geographical markets and in all application areas, but there were one or two exceptions. The impact of the pandemic was more signiﬁcant the more global the business.

From an application areas perspective, traditional retail was negatively aﬀected whereas in e-retail, horticulture and healthcare (emergency hospitals and vaccination centres) experienced growth.

The Group's businesses have taken the neces- sary actions to help oﬀset the reduced proﬁtability levels arising from a reduction in net sales, due to Covid-19. There have been signiﬁcant cost savings in many areas, including for example discretionary expenses, customer events, travel, exhibitions and also employee levels. The many cost reduction programmes executed during 2020 have also been executed to prepare for the future.

For 2021 and beyond the shape and speed

of the recovery is uncertain and so our short term planning is on this basis. Short term growth aspirations are modest whilst the full annualised impact of the cost savings are expected. The strategic alignment process gathered momen-tum during the year and will ensure we address the market recovery from a stronger position with focussed opportunities for growth. The low level of the installed base of LED luminaires remains a signiﬁcant opportunity, so too the opportunities presented from connected lighting solutions where sales of our Organic Response solution grew 79 per cent by number of units in the year. We report our growing focus on sus-tainability and development of our approach is making good progress, refer to the sustainability sections of this report.

The Fagerhult Group delivered acceptable overall results for the Covid-19 aﬀected 2020 year. The ﬁrst quarter was a disappointment but the net sales and operating proﬁts for each of the second, third and fourth quarters were ahead of expectations as the Group responded quickly to the challenges presented from the pandemic.

The Group's order intake of 7,002 (7,752) MSEK shows an overall -9.7 per cent decrease and on a comparable basis a decrease of -12.3 per cent when adjusting for acquisitions/dispos- als (439 (100) MSEK) and currency eﬀects (-151 MSEK). During the year the comparable level of order intake was +7 per cent for Q1, -24 per cent for Q2 and -15 per cent for Q3 and Q4. It is clear to see the second quarter signiﬁcant impact of Covid-19 from a strongly positive ﬁrst quarter.

The 9 per cent improvement for the third quarter repeated in the fourth despite the second wave of the pandemic.

The Group's net sales of 6,816 (7,845) MSEK show a -13.1 per cent decline, increasing to -14.3 per cent when adjusting for acquisitions/dispos- als (318 (105) MSEK) and currency eﬀects (-134 MSEK). The order backlog at the end of the year is 1,301 (1,218) MSEK.

The Group's operating proﬁt of 332.5 MSEK is adjusted to 442.1 (794.8) MSEK for 109.6 MSEK one-oﬀ costs and write downs in South Africa, refer to the above section for details. During the year there has been a 41.2 MSEK reversal of a provision for earn-out.

During Q2, Q3 & Q4 comparable cost savings of 300.8 MSEK were been delivered and the government subsidy income was 87.5 MSEK, gross and 67.5 MSEK net.

For the full year redundancy costs of 52.0 MSEK have been charged to operating proﬁt. At the start of the year the FTE headcount was 4,608 and by the end of the year there was a reduction of 8,9 per cent, (FTE headcount 408) to 4,200. Of the 408, 144 relate to the exit from South Africa.

Operating cash ﬂows improved to 1,137.9 (1,007.9) MSEK mainly as a result in a work- ing capital reduction of 490.9 (156.9) MSEK. Financial items of 115.8 (99.1) MSEK include 24.9 (22.0) MSEK for IFRS16, a 6.8 MSEK decrease in net interest costs and a 20.6 MSEK increase in FX losses etc.

As a result of new Italian tax legislation the tax charge in the year is a credit of 355.7 (expense 180.8) MSEK. The new legislation aﬀects the accounting for intangible assets and the treat- ment of deferred tax. The 355.7 MSEK credit includes a credit of 436,3 MSEK. The underlying tax charge is 80.6 (180.9) MSEK.

Earnings per share, based on the earnings attributable to the shareholders of the parent company for 2020 was SEK 3.21 (3.32). The 2020 EPS of 3.21 is boosted by SEK 2.48 for the impact of the tax accounting regarding the new Italian tax legislation. For 2019 the average shares outstanding were 153.3m and for 2020 the average shares outstanding were 176.1m. The number of shares at the year-end were 176,1m.

Impact of Covid-19

The Group's Response

During the year, the Group dealt with the Covid-19 pandemic in a good and professional way. Once the diﬃcult initial impacts from the second quarter were overcome, a stable oper-ation returned and continued for the remainder of the year. The ongoing nature of the pandemic encourages the Group to remain diligent and resilient. Particular response actions were;

• The Group followed the regulations of local authorities and national governments.
• The Group took measures for the protection of employees and stakeholders.
• The Group established Crisis Teams at Grouplevel and across subsidiary entities.

• The Group where possible, moved to a split-shift operation and home oﬃce set-up.
• The Group established a regular Group wide communication process.
• The Group entered close dialogue with its suppliers.
• The Group was in regular and transparent dialogue with its lenders.
• The Group implemented new processes to focus on short-medium-long term ﬁnancial planning.
• The Group expanded the use of digitalisation to engage with employees, customers and suppliers.

Qualitative Impacts

• From late March to early May there were up to 4 factories closed at any one point.
• During the third and fourth quarters, all factories remained open.
• All factories continue to function with 100 per cent capability, but with reduced capacity.
• The Group continues with many of its sales oﬃces closed with the employees working from home.
• In some markets we continue to see project volatility.
• In most regions we see a negative impact on the market activity, aﬀecting the level of order intake.
• We see some disruption in the supply chain.
• The uncertainties from the pandemic creates a diﬃcult position to forecast future performance.

Quantitative Financial Impacts

• The decline in market activity resulted in reduced order intake.
• The Group continues to reduce its cost base.
• Strategic cost reviews continue to take place.
• Selling and administration expenses reduced compared to 2019.
• Capital investments reduced compared to 2019.
• Government subsidy income helped support the performance.
• The liquidity position improved during the year.
• Provisions for accounts receivable credit losses and claims increased.
• The original dividend proposal was not proposed to the AGM during the year.
• The new Italian tax legislation was acted upon.

Business areas

Fagerhult has replaced the former geographical business area structure with the new structure for four business areas; Collection, Premium, Professional and Infrastructure. Each of the 13 brands (including ORT) belongs to one of the business areas and the selection was done based on product applications, geographic foot- print, partner focus and go-to-market approach.

Operations remain divided into the four business areas. In accordance with IFRS 8, the external reporting has been adapted so that segment reporting reﬂects the Group's opera- tive leadership structure.

Collection - Exceptional lighting solutions for architectural applications worldwide.

Collection is home to our brands with a global market footprint. All have an international product portfolio and are well-renowned in the lighting designer and architect communities globally. They oﬀer a wide product range with a focus on indoor and outdoor architectural applications.

Brands included are; ateljé Lyktan, iGuzzini, LED Linear and WE-EF with product development and manufacturing facilities in Sweden, Italy, Canada, China, Germany and Thailand. The business area also includes all sales companies for iGuzzini, LED Linear and WE-EF.

The business area is global and has been negatively aﬀected to a higher degree than the other business areas. The strategic opportunity for growth is signiﬁcant within the area. Net sales in 2020 were MSEK 3,040, a decline of -18.5 per cent after adjusting for currencies and acquisi- tions from MSEK 3,376 last year. The operating proﬁt for the period was MSEK 98.2 (286.5) and the operating margin 3.2 (8.5) per cent.

Premium - Lighting solutions for all European markets and for global customers.

Premium focuses on the European market and European-based global customers. Our Premium brands work closely with speciﬁers and partners to deliver premium projects, often with bespoke solutions for the customer. The majority of sales are related to indoor applica- tions, there is also an outdoor oﬀering for speciﬁc markets. Brands included are; Fagerhult and LTSwith product development and manufacturing facilities in Sweden, Germany and China. The business area also includes all Fagerhult sales companies (except New Zealand) and the Organic Response Technologies business.

The business area improved proﬁtability in the second half year from an operating margin of 7.6 per cent at the half year to 9.6 per cent for the full year, the average margin in the third and fourth quarters was 11.7 per cent. Net sales in 2020 were MSEK 2,497, an organic decline of -16.0 per cent from MSEK 3,023 last year. The operat- ing proﬁt for the period was MSEK 240.1 (365.3) and the operating margin 9.6 (12.1) per cent.

Professional - Lighting solutions for selected applications, tailored to local market demands.

Professional focuses mainly on indoor applica- tions for local and neighbouring markets. The brands work closely together with local partners on project speciﬁcations to deliver full and com- plete solutions. Local production and product development allows for tailored solutions with bespoke products delivered within short lead times. Brands included are; Arlight, Eagle Light-ing and Whitecroft, with product development and manufacturing facilities in Turkey, Australia and the UK. The sales company in New Zealand is consolidated in this business area.

The business area recorded a +1.8 per cent organic order intake growth during 2020 and early 2021 starts with a 20 per cent increased order backlog. Net sales in 2020 were MSEK 824, an organic decline of -15.9 per cent from MSEK 1,029 last year. The operating proﬁt for the period was MSEK 30.1 (97.0) and the operat- ing margin 3.7 (9.4) per cent.

Infrastructure - Specialty lighting solutions for critical infrastructure and industry applications.

Infrastructure provides lighting solutions for environments with speciﬁc requirements for installation, durability and robustness. The companies are world-leading in their areas and highly experienced in ﬁnding the best solutions for every project and customer. The majority of sales are within Europe with some globalinstallations. Brands included are; Designplan Lighting, i-Valo and Veko, with product develop-ment and manufacturing facilities in UK, Finland and the Netherlands.

The business area delivered 7.1 per cent organic growth during 2020 as increased activity was seen in e-retail and horticulture.

Net sales in 2020 were MSEK 740. The operating proﬁt for the period was MSEK 139.4 (100.7) and the operating margin 18.8 (14.4) per cent. The MSEK 139.4 operating proﬁt in the business area includes the MSEK 41.2 reversed earn-out provision as it relates to Veko in the Netherlands.

Financial position

The Group's equity/assets ratio at the end of the year was 47.3 (42.0) per cent. Cash and bank balances at year end amounted to MSEK 1,624 (1,134) and consolidated equity totalled MSEK 5,803 (5,501). Net debt amounted to MSEK 2,812 (3,737) where MSEK 785 (928) is due to the adoption of IFRS16 in 2019. Cash ﬂow from operating activities for the year totalled MSEK 1,138 (1,008). The increase of MSEK 130 is due to MSEK 491 (157) working capital decrease, plus MSEK 489 (389) adjustments for non-cash items, plus the eﬀect of reduced taxes and ﬁnancial items paid of MSEK 159 (99). Pledged assets and contingent liabilities were MSEK 17.7 (18.3) and MSEK 6.5 (4.1), respectively.

Employees

In 2020, the average number of employees reduced by 46 to 4,419 (4,465). At the end of 2020 the number of employees was 4,200 (4,608), a reduction of 408, 8,9 per cent. The number of employees in the Group's foreign companies amounted to 3,482 (3,856), which corresponded to 79 (88) per cent of the total number of employ- ees. The proportion of women during the year amounted to 31 (33) per cent of all employees.

To further strengthen the Group's knowledge capital, the established goals for individual and organisational development continue to increase, so too has the investment in developing talented individuals, both new and existing employees.

The Bright Leaders programme and the Graduate Trainee programme are good examples of this.

The company's health care initiatives have focused on preventative measures and healthy living to reduce absence due to illness. For information on salaries and remuneration; refer to Note 2.

Guidelines for remuneration to senior management

The existing policies, for 2020, are that remuner-ation to the CEO and other senior management consists of a ﬁxed basic annual salary plus an annual variable remuneration in the form of a bonus scheme tied to relevant and appropriate performance measures plus a company car beneﬁt and a pension scheme with contributions made by the employer and employee. Annual variable remuneration is based on achieving goals and is maximised at 30-50 per cent of the ﬁxed basic annual salary.

In 2012, a long-term incentive scheme was introduced in the form of a performance-based share-savings plan for senior management. The ﬁrst scheme was in place between 2012 and 2015 and the AGMs in 2013 to 2019 inclusive also resolved to approve share-savings plansthat each extended over three years. Due to Covid-19 there was no such scheme for 2020.

The remuneration to senior management supports the company's strategy and long term development and sustainability in several ways.

Firstly, the total compensation is scheduled during the current year as a basic salary plus the annual bonus aimed at improving the overall result. Most importantly the long-term incentive scheme seeks performance in the longer, two-three year term by focusing on sustained delivery. Secondly, the annual bonus scheme is frequently focussed on speciﬁc longer term aspects, for example sustained growth. Also, the annual schemes and long term schemes tie employees in together working in teams.

Fixed annual basic salaries for staﬀ and senior management are reviewed simultane-ously, thereby ensuring consistency of levels of increase. Often, there are many members of staﬀ who are oﬀered an annual bonus scheme, which again is tied to similar performance crite- ria to those of senior management. The estab-lishment and development of the executive remuneration policy is made by a combination

Operating proﬁt, MSEK

795

678

706

524

333

2016 2017 2018 2019 2020

Equity/Assets ratio, %

2016 2017 2018 2019 2020

Sales, MSEK

4,491 5,170 5,621

7,845

6,816

2016 2017 2018 2019 2020

Earnings per share, SEK 4.32 4.39

3.35

3.32 3.21

2016 2017 2018 2019 2020

Operating margin, %

13.1

11.7

12.6

10.1

4.9

2016 2017 2018 2019 2020

Cash ﬂow from operating activities per share, SEK

6.58 6.46

5.96

3.41

3.30

2016 2017 2018 2019 2020

of the board and the remuneration committee, sometimes with input from the market outside.

The MTI scheme covers the two year period 2021 to 2022, closing at 31 December 2022. The scheme is a one-oﬀ scheme and will not be repeated in future years. The MTI scheme objec- tives and rewards are over the two year period.

The objective is centred on net sales growth with an operating margin minimum and the reward is a maximum of up to a bonus payment of 30 per cent (in total, not each year) of ﬁxed annual basic salary. For additional information see Note 2.

Investments

The Group's gross investments in property, plant and equipment amounted to MSEK 158.5 (190.3), and primarily pertained to machinery and equipment.

Investments in subsidiaries amounted to SEK 113 million (2,672).

At the year end, construction in progress of tangible assets amounted to MSEK 25.9 (32.8).

Gross investments in intangible assets amounted to MSEK 25.1 (52.4), excluding acqui- sitions of subsidiaries.

Depreciation/amortisation and write downs for the year amounted to MSEK 558 (479), of which property, plant and equipment accounted for MSEK 222.8 (231.2).

Product development

Continuous product development is undertaken within the Fagerhult Group across each of the 13 brands. The aim is to improve existing products, as well as the core focus of developing new products. A basic principle is that development eﬀorts should be carried out close to the markets and in collaboration with customers and end users. From an international perspective,

Fagerhult holds a prominent position within the lighting design and technology ﬁeld. Collabora-tion with the leading manufacturers of controls technologies, light sources and components is essential.

Fagerhult's two main technical laboratories and engineering centres, TeknikCentrum in Sweden and the laboratory in Italy, are two of Europe's best equipped facilities, where we can test the safety and performance of and approve our own products to international standards.

Other developing technical facilities exist also in Sutton and Manchester in the UK.

A vitality index measures the share of net sales from products which are under 3 years old.

Development costs of MSEK 14.8 (19.4) were capitalised in the balance sheet for the year. Other costs are expensed as they arise.

For additional information; see Notes 11 and 29.

Sustainability report in accordance with the Swedish Annual Accounts Act

In accordance with Chapter 6, Section 11 of the Swedish Annual Accounts Act, AB Fagerhult has chosen to combine its sustainability report with its annual report. Refer to pages 94-125 of this document.

Share buybacks, new issues and treasury shares

The AGM on 23 June 2020 authorised the Board to buy back the company's own shares. No shares were bought back during the year. In connection with the allocation of shares tied to the expiring Group's share savings plan, 10,480 treasury shares were used.

The number of treasury shares totalled 1,046,064 (1,056,544) after this allocation and the number of shares outstanding was 177,192,843 (177,192,843). The per centage of shares held as treasury shares was 0.6 (0.6) per cent.

The Board of Directors proposes that the AGM resolve to grant the Board continued authorisation, until the next AGM, to buy back the company's own shares. As treasury shares are not entitled to dividends, they are excluded from the total number of shares in the proposed appropriation of proﬁts stated below.

Risks

A review of risks, including the manner in which these are managed, is found in Note 38.

The Fagerhult share

There are no limitations on the transferability of shares (pre-emption clause). Nor are there any limitations as to the number of votes which each shareholder can exercise at general meetings.

The company is not aware of any agreements between shareholders which could involve limitations on the right to transfer shares.

Appointment and removal of Board members There are no separate provisions in the Articles of Association regarding the appointment or removal of Board members.

Parent Company

AB Fagerhult's operations comprise Group Management, ﬁnancing and the coordination of marketing, production, business and strategy development. The company's net sales amounted to MSEK 11.7 (13.8) for the period. The proﬁt after ﬁnancial items was MSEK 80.9 (144.0). The number of employees during the period was eight (seven).

Outlook for 2021

As the Group learns to work under the new conditions and with new tools, we continue to report a more stable operational situation. Of course there continues to be uncertainty in the market as the pandemic continues to present a medical crisis and a growing economic impact.

Consequently, we maintain our view not to provide further forward looking guidance for 2021 and beyond.

We have commented regarding a lower market activity level. The comparable order intake in the third and fourth quarters was almost 9 per cent improved over the second quarter and we anticipate that order intake levels will be negatively aﬀected for some time to come. Also, we comment regarding a reduced cost base which will provide a full years beneﬁt in 2021. We base our forecasts and plan our business on a slow recovery.

The Group's overall strategy and focusremains intact, to deliver high-quality profes-sional lighting solutions to our customers within our 10 focus application areas. The new business area setup will strengthen collabora-tion and enable us to address focussed organic growth opportunities in the medium-to-longer term and bring beneﬁts to our customers.

In addition, we continue to make good progress with connected solutions, and this remains a key part of the strategy. We experi-enced a 79 per cent increased demand for our Organic Response solutions in 2020 and see no reason why this does not continue to grow during 2021 and beyond.

Proposed appropriation of proﬁts

The following proﬁts are at the disposal of the AGM:

Proﬁt brought forward	3,565.6 MSEK
Net proﬁt for the year	88.5 MSEK
Proﬁt carried forward	3,654.1 MSEK

The total number of dividend-bearing shares on 17 March 2021 amounted to 176,146,779. The Board of Directors proposes that the proﬁt be appropriated as follows:

To be distributed as dividends to shareholders:

SEK 0.50 per share	88.1 MSEK
To be carried forward	3,566.0 MSEK
Total	3,654.1 MSEK
Board of Directors' statement

regarding the proposed dividend

It is the opinion of the Board of Directors that the proposed dividend will not prevent the company or the group from fulﬁlling its short or long-term obligations, nor will it prevent the company or the group from making the necessary invest- ments. Accordingly, the proposed dividend can be justiﬁed pursuant to the provisions of the Swedish Companies Act, Chapter 17, Section 3, paragraphs 2-3.

Considering that the operations of the com- pany and the group continue to be proﬁtable, the equity/assets ratio is at a satisfactory level.

It is the company's and the Group's assessment that liquidity can be maintained at a similarly satisfactory level.

Corporate Governance

Decentralised governance with responsible decision making is one of Fagerhult's strengths, and permeates the entire organisation. The objective of corporate governance is to ensure that this is conducted in a clear, eﬀective, reliable and business oriented manner.

Corporate governance is designed to support the company's long-term strategies, market presence and competitiveness. At the same time, it should help maintain conﬁdence in the Fagerhult Group among stakeholders, such as; shareholders, customers, suppliers, capital markets, society and employees.

Subsidiaries (total 64)

KeySwedish Companies Act externalNasdaq Stockholm's Issuer Rules regulationsSwedish Corporate

Governance Code (the Code)

Accounting rules and regulationsKeyArticles of Association internalFormal work plan for the Board of Directors and terms of reference for the CEO regulationsGuidelines for remuneration to senior management

Various policy documents and instructions (such as the Group's Code of

Conduct, Financial Policy Guidelines and Internal Control Document)

Shareholders and general meetings of shareholders

The shareholders' rights to decide on Fagerhult's aﬀairs are exercised at the Annual General Meeting (AGM), or if appropriate, the Extra-ordinary General Meeting (EGM), which is the company's highest decision making body.

The AGM is to be held no later than six months after the end of the ﬁnancial year and is usually held in late-April to mid-May. At the AGM, the shareholders elect the company's Board of Directors and appoint external audi- tors and decide on their fees. Furthermore, the AGM resolves on whether to adopt the income statements and balance sheets, to approve the appropriation of the company's proﬁt and to discharge the Board and CEO from liability.

The AGM also resolves on the composition of the Nomination Committee and its work, and makes decisions on principles for remuneration and other terms of employment for the CEO and other senior management.

The number of shareholders at year end was 8,342 (7,568). The largest individual share-holder is Investment AB Latour, in which the Douglas family are the main shareholders and hold a total of 47.8 per cent (46.3). For more information on the ownership structure, share capital, share price development, etc., please refer to the section on the Fagerhult share on pages 30-31 and to Note 35.

2020 Annual General Meeting

The 2020 AGM was held under appropriate social distancing conditions on 23 June in Habo, this of course aﬀected the number of attendees. A total of 5 (89) shareholders were physically present at the meeting. Those attending in person held 102,900,871 shares, 58.4 per cent of the votes with a further 18,814,569 shares, 10.7 per cent voting on the resolutions in advance. The total voting population was 69.1 (66.1) per cent. Minutes from the AGM can be found on Fagerhult's website. All resolutions were passed with the required majority. Below is a selection of the resolutions passed at the meeting:

• The shareholders decided that no dividend will be paid.

• It was agreed to appoint 6 directors, as a result Eric Douglas, Cecilia Fasth, Morten Falken-berg, Teresa Enander, Annica Bresky and Jan Svensson were re-elected to the Board of Directors.
• It was decided, in accordance with the Nomination Committee's proposal that the total fees to be paid to the directors would be unchanged at 2,675,000 SEK. This includes 175,000 SEK for the audit sub-committee.
• Jan Svensson was re-elected Chairman and Eric Douglas was re-elected as Vice Chairman.
• Jan Svensson was co-opted ("adjungerad") to the Nomination Committee and he was also granted the authority to appoint four additional members, one each representing the four largest shareholders and for the details of this to be published no later than in connection with the Company's third quarter report.
• It was decided to re-appoint the current audi-tors Öhrlings PricewaterhouseCoopers AB with Peter Nyllinge as chief auditor, up until the conclusion of the annual general meeting 2021.
• It was decided to approve the board of direc-tor's proposal on the principles for remuner- ation to senior management.It was decided, in accordance with the board of director's proposal, to amend the company's articles of association with two amendments of editorial nature and with the amendment that general meetings may be held in Habo, Jönköping or in Stockholm.
• The AGM resolved to grant the Board of Direc-tors authorisation to buy back the company'sown shares, corresponding to a maximum of 10 per cent of total share capital, for the period until the date of the next AGM.

Nomination Committee

The Nomination Committee is to be formed after the Chairman of the Board has identiﬁed the four largest shareholders in the Company in terms of the number of votes that are to make up the Nomination Committee along with the Chairman who is cop-opted ("adjungerad").

The identity of these shareholders is to be based on the shareholders' register and list of nominees maintained by Euroclear Sweden AB and refer to those shareholders registered under their own names or as members of an owner group as per 31 August 2020. It shall not be necessary to change the composition of the Nomination Committee if only marginal changes in the ownership of shares occur after this date. The mandate for the Nomi-nation Committee is until a new Nomination Committee is appointed.

The Nomination Committee consists of the following individuals together with the names of the shareholders that they represent; Jan Svensson as Chairman of the Board of AB Fagerhult (co-opted and not entitled to vote), Johan Hjertonsson (Chairman of the Nomi-nation Committee) representing Investment AB Latour, Johan Ståhl representing Lannebo Fonder, Jan Särlvik representing Nordea Funds and Jannis Kitsakis representing The Fourth Swedish National Pension Fund (AP4).

Largest shareholders as per 31 august 2020
Name	No. of shares	voting rights, %
Investment AB Latour	84,228,480	47.5
Lannebo Fonder	13,846,541	7.8
Swedish National Pension Funds	10,976,990	6.2
BNP Paribas SEC Services	10,344,793	5.8
The Svensson, family, foundation and company	9,608,442	5.4
Nordea Funds	7,307,422	4.1
Palmstierna family	4,077,601	2.3

Share capital and

The nomination committee ahead of 2021 AGM comprises:

Member of the Nomination Committee Jan Svensson (not entitled to vote) Johan Hjertonsson - Chairman Johan Ståhl

Representing

Chairman of the Fagerhult Board Investment AB Latour

Lannebo Fonder

Jannis Kitsakis Jan Särlvik

The Fourth Swedish National Pension Fund (AP4)

Nordea Funds

Participation/votes, %Member of the Nomination

Committee since

n/a 2008

47.5 2019

7.8 2004

4.9 2020

4.1 2020

Board of Directors elected by the AGM Chairman, Jan Svensson Vice Chairman, Eric Douglas Board Member, Cecilia Fasth Board Member, Teresa Enander Board Member, Annica Bresky Board Member, Morten Falkenberg Total

ElectedBorn

2007

1956

750,000

1993

1968

350,000

2014

1973

450,000 2

2019

1979

425,000 2

2019

1975

350,000

2017

1958

350,000 2,675,000

1) Sum total of directly and indirectly held shares and shares representing other owners.
2) These fees include board fees as well as audit sub-committee fees.

FeeNumber of shares/votes

45,000

85,708,4801

9,205

6,200

3,780

15,204 85,787,869

(48.7%)

The Committee's representatives have broad and extensive experience of Board work and work on Nomination Committees.

The Nomination Committee for the 2021 AGM is also described above.

The work of the Nomination Committee takes place during the end of the ﬁnancial year and at the start of the new ﬁnancial year. Prior to an AGM at which auditors are to be appointed, the Nomination Committee collaborates with the Audit Committee, which works with the evalua- tion of the work of the auditors. The Nomination Committee is to observe the guidelines that apply to independent Board members under the Swedish Corporate Governance Code when making nominations to the AGM. Shareholders have the opportunity to submit written pro- posals to the Nomination Committee.

External auditors

The company's auditor, elected at the AGM, examines AB Fagerhult's annual report andconsolidated accounts, the administration of the company by the Board of Directors and the CEO, and the annual accounts of subsidiaries, and submits an audit report. The audit is conducted in accordance with the Swedish Companies Act, International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden.

At the 2020 AGM, Öhrlings Pricewater-houseCoopers were re-appointed as auditors, with Peter Nyllinge as the Auditor-in-Charge.

Among his major auditing assignments, Peter Nyllinge also has Sandvik AB and Saab AB.

The auditor participated at the Board and Audit Committee meeting in February 2020 and there reported on the 2019 audit. The auditor also participated at the Audit Committee meetings in August and December 2020 and February 2021.

Auditing of the Group's companies around the globe is coordinated by Öhrlings Price- waterhouseCoopers. All of the activities of

Independent in relation to the ownersIndependent in relation to the CompanyNumber of meetings - participated in

Yes No Yes Yes Yes Yes 5 (83 %)

Yes 7

Yes 6

Yes 7

6 7 (100 %)

companies with a signiﬁcant scope of opera-tions are audited by PricewaterhouseCoopers in the respective country with the exceptions of the LED Linear, WE-EF and Veko groups who have a full scope audit by other auditors.

For a number of smaller companies, the audit is performed by other accounting ﬁrms.

The Board of Directors

Board members

The Board of Directors determines issues con- cerning the Group's strategic focus, ﬁnances, investments, acquisitions, sales, organisational matters and rules and policies. The Board of Directors is kept abreast of the company's operations through monthly reports provided by Group Management.

The Board of Directors currently consists of six members elected by the general meeting, as well as two Board members and two deputy members elected by the trade unions. The six Board members combined represent ownership

participations equivalent to 49 per cent (47) of the company's share capital and votes. The trade union representatives are the only Board members employed by the Company. The CEO participates in all Board meetings and on occasion, other company employees participate in Board meetings in a reporting capacity. The company's Chief Financial Oﬃcer serves as the Board's secretary. For further information concerning the Board members elected at the company's general meeting, refer to the section concerning the Board of Directors on pages 46-47 of this annual report.

The Board's work is regulated by the Swedish Companies Act, the Articles of Association and the formal work plan adopted by the Board.

Among other things, the Board's work plan contains rules stipulating the number of Board meetings to be held each ﬁnancial year, the issues to be addressed at the meetings, and the division of duties between the Board of Direc- tors and the CEO. The CEO's terms of reference set out the CEO's duties and obligation to report to the Board.

During 2020, seven, which is one more than usual, Board meetings took place. One of these was the statutory Board meeting and the extra Board meeting, during June, was as a result of the Covid-19 pandemic. Four of these meetings address the quarterly reports and the year-end report and one addresses the budget for the following year. At least one of the Board meetings takes place in conjunction with a visit to, and an in-depth review of, one of the Group's companies, but due to Covid-19 this was not possible during 2020. One meeting per year is assigned additional time, and at this meeting a speciﬁc focus is placed on strategic issues.

During 2020 the Board held 6 normal Board meetings and 1 statutory Board meeting. The auditor of the company is present at Board meetings when needed, normally once a year.

Notices and supporting documents are sent to the Board one week in advance of the Board meetings. When issues are to be decided upon, the Board usually receives supporting documents concerning these issues well in advance. The Board appoints two diﬀerentcommittees annually; the Audit Committee and the Remuneration Committee. The aim of these committees is to enhance and facilitate the Board's work, and to address matters related to each area.

Board of Directors' independence Fagerhult's Board meets the stipulation in the Code that a majority of the elected members are independent of the company and its manage-ment, and that at least two of the members are independent in relation to major shareholders (that is, ownership exceeding 10 per cent). See the table on page 41. The Chairman of the Board, Jan Svensson became independent from 1 September 2019. Eric Douglas repre-sents Investment AB Latour and the Douglas family and is not considered to be independent.

With the exception of the union representatives no members of the Board are employed by the Group. The Nomination Committee's assess-ment regarding whether each proposed mem-ber meets the independence requirements is announced in connection with the Committee's proposal.

The work of the Board in 2020

The Board met seven times during the year, with one of these meetings being the statutory Board meeting. Five of the six meetings were fully attended by the Board. Only one meeting had one member absent. The company's auditor was present at one of the Board meetings and three Audit Committee (AC) meetings. These were the Board and AC meetings in February that addressed the annual accounts for 2019 plus AC meetings in August and December.

Important matters dealt with during the year included, amongst other things:

• Long-term operational goals
• The strategic focus of the operations
• Business plans, ﬁnancial plans and forecasts

• Major investments and divestments
• Decisions on long-term ﬁnancing
• Policies and instructions
• Review of the Group's risk management
• Interim reports and annual accounts
• Reports by the Board's committees

• Review of the Group's CSR position and developments
• Follow-up of the external audit
• The impact, eﬀects and response to Covid-19

Evaluation of the work of the Board

The Board will ensure that its work is continuously evaluated through a systematic and structured process. This evaluation is initiated by the Chairman of the Board. Among other things, the process includes an on-line questionnaire in which Board members have the opportunity to express their opinion of the Board's work and to propose ways to improve it. The results of the evaluation are disclosed to the Board, followed by discussions and decisions regarding changes in working methods.

The Board continuously evaluates the work of the CEO and Group Management.

The Audit Committee

The main duty of the Audit Committee (AC) is to audit the Group's accounting and ﬁnancial reporting, as well as to remain in continuous contact with the auditors and review their work plan and fees. Furthermore, the AC is to assist the Nomination Committee in its choice of audi-tors and their fees prior to those AGMs at which the appointment of auditors takes place.

In 2019, the AC was established as Cecilia Fasth as Chair and Teresa Enander as member.

The CFO and auditor attended all three AC meetings during the year. All members of the AC attended the three meetings during 2020. The Chair of the AC gave a brief report to the Board at the February and December Board meetings.

The Remuneration Committee

The work of the Remuneration Committee is, on behalf of the Board, to prepare and negotiate issues concerning the salary and other remu-neration to the CEO, and to approve the CEO's proposals for salaries and remuneration for the other members of senior management.

Its duties also include examining the fees to Board members in the event that they are engaged as consultants by the company's management. The Committee also addresses

any Group-wide bonus system and option pro- grammes. Decisions concerning remuneration for the CEO are determined by the Board.

The Remuneration Committee consists of Jan Svensson (Chairman of the Board) and Eric Douglas (Vice Chairman of the Board). The Committee has had two meetings during the year, at which both members were present.

CEO and Group Management

Fagerhult's President and CEO is responsible for leading and developing operating activities pursuant to the guidelines and instructions issued by the Board. The framework is provided by the terms of reference issued to the CEO, which are determined annually by the Board.

The CEO is assisted by Group Management, consisting of the heads of business areas and staﬀ units. In consultation with the Chairman, the CEO compiles the necessary information and documentation which provides the basis for the Board's work and for the Board to make informed decisions. The CEO is responsible for bringing matters to the attention of the Board and for motivating proposed decisions. The CEO is responsible for and reports on an ongoing basis to the Board on the company's development. In addition, the CEO leads the work of the Group Management and makes decisions in consul- tation with other members of management.

The CEO owns 12,106 shares in the company and this is stated in the presentation of the management on pages 48-49. The holding is not classiﬁed as signiﬁcant and the CEO has no partnership in companies that have signiﬁcant business relationships with companies in the Fagerhult Group.

During the year, the Group Management comprised the CEO, the CFO, the CPO, the head of Strategy & Communications plus three managers with responsibility for the business areas.

Group Management has had regular weekly and monthly meetings during the year where it followed up operations, discussed matters aﬀecting the Group and drafted proposals for strategic alignment plans and budgets, which the CEO presented to the Board for decision. During

2020, a considerable number of meetings and time was devoted to the Covid-19 pandemic and its impact on the Group. Also during the ﬁrst quarter the new strategic alignment, new business area set up and new Fagerhult Group branding were launched.

Management of subsidiaries

Fagerhult's operations are organised into four business areas which include 64 subsidiaries.

The operations of the respective subsidiaries are controlled by their Boards. The Boards of the subsidiaries consist of, among others, the managing director of the subsidiary, at least one business area manager and, in most cases, the Group's CEO and Group's CFO. A formal work plan is established annually for each subsidiary, in which responsibilities and authorities are clearly delegated and where the work of the subsidiary's Board is governed.

Fagerhult has a decentralised structure, with a strong focus on responsibility and perfor-mance, which combines with clear, Group-wide processes to realise synergies. The Company's senior managers and specialists meet continu-ously to reach a broad consensus on important issues.

Fagerhult's Code of Conduct and Fagerhult's global presence demand that our employees and business partners take responsibility for themselves and for each other. The Code clariﬁes Fagerhult's position on issues related to human rights, labour conditions, the environ- ment, business ethics and communication.

The Code applies to all Fagerhult employees regardless of their position. The Board and Group Management have a particular respon-sibility to promote the application of the Code of Conduct. The Code is also communicated to all of Fagerhult's business partners with the expectation that it is complied with. Fagerhult acts as a reliable and honest Group that lives up to its commitments. Fagerhult believes in long-term business relationships in which we, together with our business partners, create a basis for strong ﬁnancial results, concern for the environment and social commitment.

Remuneration to the Management and Board

Guidelines for remuneration to senior management

The existing policies, for 2020, are that remu-neration to the CEO and other senior manage- ment consists of a ﬁxed basic annual salary plus an annual variable remuneration in the form of a bonus scheme tied to relevant and appropriate performance measures plus a company car beneﬁt and a pension scheme with contribu- tions made by the employer and employee.

Annual variable remuneration is based on achieving goals and is maximised at 30-50 per cent of the ﬁxed basic annual salary.

In 2012, a long-term incentive scheme was introduced in the form of a performance-based share-savings plan for senior management. The ﬁrst scheme was in place between 2012 and 2015 and the AGMs in 2013 to 2019 inclu-sive also resolved to approve share-savings plans that each extended over three years.

Due to Covid-19 there was no such scheme for 2020.

The remuneration to senior management supports the company's strategy and long term development and sustainability in several ways. Firstly, the total compensation is sched-uled during the current year as a basic salary plus the annual bonus aimed at improving the overall result. Most importantly the long-term incentive scheme seeks performance in the longer, two-three year term by focusing on sustained delivery. Secondly, the annual bonus scheme is frequently focussed on speciﬁc longer term aspects, for example sustained growth. Also, the annual schemes and long term schemes tie employees in together working in teams.

The establishment and development of the executive remuneration policy is made by a combination of the board and the remuneration

For 2021, at the Annual General Meeting, the above policies plus an additional variable remuneration scheme will be proposed. The additional variable remuneration, referred to as a medium-term incentive (MTI) scheme has two fundamental motivators. Firstly, there was no long-term incentive scheme introduced in 2020 and secondly the MTI scheme is designed to return the Fagerhult Group to pre-Covid-19 levels of net sales by the end of a two year period. The MTI scheme covers the two year period 2021 to 2022, closing at 31 December 2022. The scheme is a one-oﬀ scheme and will not be repeated in future years. The MTI scheme objectives and rewards are over the two year period. The objective is centred on net sales growth with an operating margin minimum and the reward is a maximum of up to a bonus payment of 30 per cent (in total, not each year) of ﬁxed annual basic salary. For additional information see Note 2.

committee, sometimes with input from the market outside.

Long-term incentive scheme

In 2012, a long-term incentive scheme was introduced in the form of a performance-based share-savings plan for senior management. The ﬁrst plan was approved by the 2012 AGM and runs from 2012 to 2015. The AGMs in 2013 to 2019 inclusive also resolved to approve addi-tional share-savings plans that each extended over three years. Due to Covid-19 there was no such plan introduced during 2020.

For further information on guidelines for remuneration, please refer to the material enclosed with the notice of the AGM. For additional information; see Note 2.

Remuneration to the Board

Fees payable to Board members are deter- mined annually by the AGM. Board members who are also employees of the company receive no Board fees. From 2019 fees were also payable to members of the Audit Committees, separate to the standard Board fee. In 2020, remuneration was paid in accordance with the table on page 41.

Code of Conduct

Our global presence demands that our employees and business partners take responsibility for themselves and for each other. Therefore, we have created a regula- tory framework, our Code of Conduct.

Our Code of Conduct should be followed by everyone included in our Group, employees as well as the Board and Management. We also communicate our Code of Conduct to our business partners, with the expecta- tion that it is complied with.

Our Code of Conduct states, amongst other things, that we will act as a reliable and honest Group that lives up to its commit- ments. We believe in long-term business relationships in which we, together with our business partners, create a basis for strong ﬁnancial results, concern for the environ- ment and social commitment.

Remuneration to the auditors

In 2020, remuneration was paid in accordance with Note 27 on page 84.

Internal control of ﬁnancial reporting

Internal control aims to ensure accurate and reliable ﬁnancial reporting and accounting in line with applicable laws and regulations, account-ing standards and other requirements for listed companies.

Control environment

The control environment comprises the values and ethics which the Board of Directors, Audit Committee, the CEO and Group Management communicate and operate under.

The basis of internal control for ﬁnancial reporting consists of the control environment together with the organisation, decision making paths, authorities and responsibilities which are documented and communicated in governing documents. One example is the division of responsibilities between the Board and the CEO and instructions regarding the delegationof authority, as well as instructions applying to the accounting and reporting. Important internal control instruments include Fagerhult's Code of Conduct and values. The Code includes principles governing how business is to be conducted and was reinforced during late 2019 as 1,694 managers across the group underwent an online training and testing process. This process will be repeated during 2021. These values represent a long-term commitment and a shared base connected to the business concept and strategies guiding employees in daily operations.

Fagerhult is characterised by a decentralised organisation based on goal-oriented manage- ment, where good performances are rewarded.

Financial reporting to the Board

The CEO is responsible for ensuring that the Board receives the reports required for its ongoing assessment of the company's and the Group's ﬁnancial positions. Fagerhult's Board receives monthly ﬁnancial reports and the Group's ﬁnancial situation is addressed at each Board meeting.

Risk assessment

Regarding ﬁnancial risk assessment, the risks are assessed as mainly relating to the potential for material misstatement in the reporting of the company's ﬁnancial position and performance.

To minimise these risks, governing documents have been established for accounting, for pro-cedures for annual reporting and for follow-up of reported annual accounts. Fagerhult's Board regularly assesses reporting from a risk per- spective. As a support for these assessments, proﬁt/loss items and balance-sheet items are compared with previous reports as well as budgets and forecasts. The risks identiﬁed in the ﬁnancial reporting are managed through the Group's control structure. In addition to assessing the risks in the ﬁnancial reporting, the Board and management work continuously to identify and manage signiﬁcant risks aﬀecting Fagerhult's business from an operational and ﬁnancial perspective. Read more about risks on pages 85-88.

Control activities and follow-up

Control activities involve all levels of the organ-isation and concern the measures selected to manage the Group's risks.

To ensure completeness and accuracy in the ﬁnancial reporting, instructions and guidelines are in place that have been communicated to the relevant personnel. The activities also limit risk from the identiﬁed risks. The Group's central control function analyses and monitors budget deviations, prepares forecasts, monitors sig- niﬁcant variations between periods, and reports these to others within the organisation, thereby minimising the risk of errors in the reporting.

Control activities also include follow-up and comparisons of earnings trends or signiﬁcant individual items, account reconciliations and balances, and the approval of all proxy and attestation instructions, as well as accounting and valuation principles.

Monitoring of the eﬀectiveness and compli-ance with these control activities takes place through programmed controls and through indi- vidually established procedures. The Group has a shared reporting system in which all reporting is carried out. Financial follow-up is carried out by Group Management in conjunction with regular visits to the subsidiaries, in parallel with development of the control function.

Information and communication Fagerhult continuously provides information about the Group's performance and ﬁnancial position to the market. The quality of exter- nal ﬁnancial reporting is ensured through various activities and procedures. The CEO is responsible for the accuracy and high quality of all information provided, for example, ﬁnancial press releases and presentation materials for various meetings with the media, shareholders and investors

The policy is intended to ensure that Fagerhult's information requirements are met in an accurate and complete manner. The most important governing documents, in the form of policies and instructions, are kept up-to-date and are communicated via the appropriate channels, mainly electronically.

Internal information and communication is about creating awareness among the Group's employees about external and internal gov-erning instruments, including authorities and responsibilities. During 2019 the CFO re-issued to the relevant personnel an update of the Group's Financial Internal Control Guidelines as well as the Group's Financial Policy document. The signiﬁcant update to the internal controls document was the addition of an IT internal controls section.

Fagerhult's whistle-blower policy means that each employee has the right to report suspected breaches of laws or regulations without fear of reprisal.

Evaluation of the need for a separate audit function

The Board and management have determined that a separate internal audit function will not be established in the Fagerhult Group. The Group's Finance department continually monitors com-pliance with the company's governance model, reporting principles and policies. In addition, the Finance department conducts ongoing analyses of the company's reporting and ﬁnancial results to gain assurance regarding the trend.

Together with the controls implemented by the Group's management and the diﬀerent business areas' existing control functions, discussions with the company's external auditors concerning the audit approach, as well as the auditing ﬁrm's extensive organisation are assessed as providing a satisfactory level of assurance. This means that a separate internal audit function is not considered necessary.

Activities in 2020

During the year there were two main focus areas.

Firstly, to deal with the challenges arising as a result of the Covid-19 pandemic and secondly to launch the new strategic alignment process, new business areas and begin to develop the new 5 year strategy. The strategic alignment process was successfully launched during the ﬁrst quarter, it has identiﬁed good opportunities for growth in each business area and the new strategy for business area Infrastructure andPremium have both been communicated to the Board, approved and initiated. During the early part of 2021 the strategy for business areas Collection and Professional will also be communicated. Also during 2020 the Group has disposed of Lighting Innovations in South Africa as this was not considered a key strategic focus area for future investment.

From a technology perspective there has been signiﬁcant progress. We continue the development of a connectivity strategy utilising the OR Technologies business in Australia as the foundation. This has been a key project during the year and the Group's competences in ORT have been expanded in the northern hemisphere with the establishment of a new competence centre in Linköping, Sweden.

The Group continues to look at the declining retail segment and how to address this in the future where the operational set up will be critical in order to remain competitive. Within each new business area, focus and collaboration has been the message and this has determined signiﬁcant growth opportunities in each business area.

Due to Covid-19, activities also increased in the area of ﬁnancial management and managing the business during a reduced period of activity; reducing costs, generating cash, improving working capital and scaling the Group's operat-ing businesses for 2021 and beyond where we see a gradual recovery. Focus and priority has also been given to many senior level recruit-ments, particularly within the local management functions as businesses transition from family owned to becoming members of a listed group.

Following the update of the Minimum Control Requirements in 2019 and the initial issue of the Financial Internal Guidelines, follow up work has been performed locally to improve the internal control in many businesses with the process and results being discussed by the auditor, the Audit Committee and the CFO. This work continues with further internal control improve- ments. The Minimum Control Requirement document and process is based on the COSO framework and the follow-up of internal control pursuant to these guidelines has become an integrated part of Group governance.

FINANCIAL INFORMATION | THE BOARD OF DIRECTORS

The Board of Directors

Jan Svensson

Chairman

Born: 1956

Mechanical Engineer and M.Sc. in Business Administration Chairman Tomra Systems ASA Board Member of Loomis AB, Nobia, BillerudKorsnäs, Assa Abloy AB, Climeon, Herenco and Stena Metall

Board Member of Fagerhult since 2007 Shares in AB Fagerhult: 45,000

Patrik Palm

Born: 1984

Deputy Employee Representative Shares in AB Fagerhult: 0

Eric Douglas

Vice Chairman

Born: 1968

Certiﬁed Economist at high school level and 3 years of studies at Lund University within "Economics for Entrepreneurs."

Self-employed since 1992

Chairman of the Board of Pod Investment AB and Sparbössan Fastigheter AB.

Board Member of, amongst others, Investment AB Latour.

Board Member of Fagerhult since 1993 Holdings in AB Fagerhult: 1,000,000 directly held shares and 84,708,480 shares held through Investment AB Latour

Rasmus Nilsson

Born: 1987

Deputy Employee Representative Shares in AB Fagerhult: 0

THE BOARD OF DIRECTORS | FINANCIAL INFORMATION

Annica Bresky

Born: 1975

M.Sc. Engineering

President and CEO Stora Enso

Board Member of Fagerhult since 2019 Shares in AB Fagerhult: 3,780

Teresa Enander

Born: 1979

M.Sc. Engineering

COO of Formica Capital AB Chairman of 8848 Altitude AB

Board Member of Fagerhult since 2019 Shares in AB Fagerhult: 6,200

Morten Falkenberg

Born: 1958.

Bsc. Marketing, Copenhagen business School

Board member of Velux Group, Duni and CALJAN

Board Member Fagerhult since 2017 Shares in AB Fagerhult: 15,204

Magnus Nell

Born: 1964

Employee Representative Shares in AB Fagerhult: 0

Lars-Åke Johansson

Born: 1961

Employee Representative Shares in AB Fagerhult: 3,000

Cecilia Fasth

Born: 1973

M.Sc. Engineering

CEO of Stena Fastigheter AB

Board Member of Fagerhult since 2014 Shares in AB Fagerhult: 9,205

FINANCIAL INFORMATION | GROUP MANAGEMENT

Group Management

Bodil Sonesson

President and CEO

Born: 1968

M.Sc. in Business Administration, MBA

Employed since: 2018

Shares in Fagerhult: 12,106

GROUP MANAGEMENT | FINANCIAL INFORMATION

Frank Augustsson

Head of Business Area Premium

Born: 1965.

Technical College Graduate Employed since: 1986-2001, 2004

Shares in Fagerhult: 31,372

Michael Wood

Chief Financial Oﬃcer

Born: 1964

Chartered Accountant ACMA Employed since: 2005 Shares in Fagerhult: 19,522

Michael Brüer

Chief Strategy and Communication Oﬃcer

Born: 1983

M.Sc. Engineering, M.Sc. Business Administration

Employed since: 2017

Shares in Fagerhult: 4,375

Geert van der Meer

Head of Business Area Infrastructure

Born: 1965

PhD in Physics Employed since: 2017 Shares in Fagerhult: 1,187

Anders Fransson

Head of Business Area Professional & Chief Sustainability Oﬃcer

Born: 1969

M.Sc. Engineering

Employed since: 2005

Shares in Fagerhult: 25,602

Andrea Gageik

Chief People Oﬃcer

Born: 1972

Master of Arts M. A. Business Coaching and Change Management

Certiﬁed in Systemic Organizational Development and Mediation,

Employed since: 2021 Shares in Fagerhult: 0

Group

Income Statement

MSEK

Note

2020 2019

Net sales

Cost of goods sold

Gross proﬁt

Selling expenses Administrative expenses Other operating income Other operating costs

Operating proﬁt

Financial income Financial expenses

Total ﬁnancial items - net

Proﬁt before tax

Income tax

Net proﬁt for the year

Net proﬁt for the year attributable to shareholders of the Parent Company Net proﬁt for the year attributable to non-controlling interests

Total

Earnings per share, based on earnings attributable to shareholders of the Parent Company during the year: Earnings per share before dilution, SEK

Earnings per share after dilution, SEK

Average number of shares outstanding before dilution, thousand Average number of shares outstanding after dilution, thousand Number of shares outstanding, thousand

Net sales 1	6,816.3	7,844.9
Cost of goods sold	-4,417.1	-4,794.6
Gross proﬁt	2,399.2	3,050.3
Selling expenses	-1,536.2	-1,698.3
Administrative expenses	-614.7	-630.7
Other operating income 33	178.2	73.5
Other operating costs 34	-94.0	-
Operating proﬁt	332.5	794.8
Financial income 3	25.5	38.4
Financial expenses 4	-141.3	-137.5
Total ﬁnancial items - net	-115.8	-99.1

Proﬁt before tax	216.7	695.7
Income tax 9, 10	355.7	-180.9
Net proﬁt for the year	572.4	514.8
Net proﬁt for the year attributable to shareholders of the Parent Company	565.7	508.4
Net proﬁt for the year attributable to non-controlling interests	6.7	6.4
Total	572.4	514.8
Earnings per share, based on earnings attributable to shareholders of the Parent Company during the year:
Earnings per share before dilution, SEK	3.21	3.32
Earnings per share after dilution, SEK	3.21	3.32
Average number of shares outstanding before dilution, thousand	176,142	153,274
Average number of shares outstanding after dilution, thousand	176,142	153,274
Number of shares outstanding, thousand	176,147	176,136

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

MSEK

Note

2020 2019

Net proﬁt for the year

Other comprehensive income

Items that will not be reclassiﬁed to proﬁt or loss:

Remeasurements of pension plans, net after tax

Items that may be reclassiﬁed to proﬁt or loss:

Translation diﬀerences, net after tax

Other comprehensive income for the year, net after tax Total comprehensive income for the year

Total comprehensive income for the year attributable to shareholders of the Parent Company Total comprehensive income for the year attributable to non-controlling interests

Total

Net proﬁt for the year	572.4	514.8
Other comprehensive income
Items that will not be reclassiﬁed to proﬁt or loss:
Remeasurements of pension plans, net after tax 21	3.6	-7.2
Items that may be reclassiﬁed to proﬁt or loss:
Translation diﬀerences, net after tax 38	-270.5	52.3
Other comprehensive income for the year, net after tax	-266.9	45.1
Total comprehensive income for the year	305.5	559.9
Total comprehensive income for the year attributable to shareholders of the Parent Company	299.9	553.5
Total comprehensive income for the year attributable to non-controlling interests	5.6	6.4
Total	305.5	559.9

Group

Balance Sheet

MSEK

Note

2020

2019

Non-current assets

Intangible assets

Goodwill Brands

Other intangible assets

Property, plant and equipment

Land and buildings

Plant and machinery Equipment, ﬁxtures and ﬁttings Right-of-use assets Construction in progress

Financial assets

Other shares and participations Deferred tax assets

Other non-current receivables

Total non-current assets

Current assets

Inventories

Raw materials and consumables Work in progress

Finished products and goods for resale Goods in transit

Current receivables

Trade receivables Current tax assets Other receivables

Prepaid expenses and accrued income

Cash and cash equivalents

Total current assets

ASSETS
Non-current assets
Intangible assets 11
Goodwill	2,843.2	3,002.9
Brands	2,506.0	2,630.8
Other intangible assets	308.6	408.5
5,657.8	6,042.2
Property, plant and equipment 12
Land and buildings	1,064.3	1,142.6
Plant and machinery	417.1	487.9
Equipment, ﬁxtures and ﬁttings	185.9	213.3
Right-of-use assets 26	776.4	931.2
Construction in progress	25.9	32.8
2,469.6	2,807.8
Financial assets
Other shares and participations 13	9.8	14.5
Deferred tax assets 10	196.2	178.8
Other non-current receivables 13	13.4	11.6
219.4	204.9
Total non-current assets	8,346.8	9,054.9
Current assets
Inventories 16
Raw materials and consumables	497.9	596.5
Work in progress	123.2	145.3
Finished products and goods for resale	357.3	474.8
Goods in transit	19.4	30.5
997.7	1,247.1
Current receivables
Trade receivables 6	1,122.2	1,426.8
Current tax assets	71.2	83.3
Other receivables	44.1	60.1
Prepaid expenses and accrued income 15	55.9	86.4
1,293.4	1,656.6

Cash and cash equivalents	1,624.0	1,133.5
Total current assets	3,915.1	4,037.2
TOTAL ASSETS	12,261.9	13,092.1

Group

Balance Sheet

MSEK

Note

2020

2019

EQUITY

Capital and reserves attributable to shareholders of the Parent Company Share capital

Other contributed capital Reserves

Retained earnings incl. net proﬁt for the year

Lease liabilities

Provisions for pensions and similar commitments Other non-current liabilities

Deferred tax liability

Current liabilities Borrowings Lease liabilities

Advance payments from customers Trade payables

Current tax liabilities Other liabilities

Accrued expenses and deferred income

Total liabilities

TOTAL EQUITY AND LIABILITIES

EQUITY
Capital and reserves attributable to shareholders of the Parent Company
Share capital 35	100.2	100.2
Other contributed capital	3,194.6	3,194.6
Reserves	-455.3	-185.9
Retained earnings incl. net proﬁt for the year	2,924.9	2,352.4
5,764.4	5,461.3
Non-controlling interests	38.2	39.9
Total equity	5,802.6	5,501.2
LIABILITIES
Non-current liabilities
Borrowings 17	3,417.8	3,678.2
Lease liabilities 26	651.2	779.7
Provisions for pensions and similar commitments 21	185.5	190.3
Other non-current liabilities 22	-	150.1
Deferred tax liability 10	547.5	1,017.0
4,802.0	5,815.3
Current liabilities
Borrowings 17	47.6	73.8
Lease liabilities 26	133.4	148.3
Advance payments from customers	43.8	31.1
Trade payables	556.0	689.5
Current tax liabilities	81.1	72.5
Other liabilities 22	323.3	299.8
Accrued expenses and deferred income 18	472.1	460.6
1,657.3	1,775.6
Total liabilities	6,459.3	7,590.9
TOTAL EQUITY AND LIABILITIES	12,261.9	13,092.1

Group

Changes in equity

MSEK

Equity at 1 January 2019

Net proﬁt for the year Net investment hedges

Deferred tax on net investment hedges Remeasurements of pension plans

Deferred tax on remeasurements of pension plans Translation diﬀerences

Total comprehensive income for the year

Non-controlling interests acquired Non-cash issue (11,244,805 shares)

Rights issue (50,298,038 shares), net amount Performance-based share-savings plan Dividend, SEK 2.00 per share

Equity at 31 December 2019

Attributable to shareholders of the Parent Company

Other

Share contributedNotecapital 65.5

capital ReservesRetained earnings incl. net proﬁt for the yearNon-controlling interests

Total equity

205.0

-238.2

2,096.9 2,129.2

508.4

6.4 514.8

-19.6 -19.6

5.1 5.1

-9.6 -9.6

2.4 2.4

66.8 66.8

52.3

501.2

6.4 559.9

33.5 33.5

31, 35

6.4 28.3

820.2 826.6

31, 35

2,169.4 2,197.7

5.8 5.8

-251.5 -251.5

100.2

3,194.6

-185.9

2,352.4

39.9 5,501.2

Performance-based share-savings plan Change in non-controlling interests Equity at 31 December 2020

Total comprehensive income for the year

Net proﬁt for the year Net investment hedges

Deferred tax on net investment hedges Remeasurements of pension plans Deferred tax on remeasurements of pension plans

Translation diﬀerences

Net proﬁt for the year	565.7 6.7 572.4
Net investment hedges	30 -9.2 -9.2
Deferred tax on net investment hedges	1.9 1.9
Remeasurements of pension plans	4.8 4.8
Deferred tax on remeasurements of pension plans	-1.2 -1.2
Translation diﬀerences	-262.1 -1.1 -263.2
Total comprehensive income for the year	-269.4 569.3 5.6 305.5
Performance-based share-savings plan	2 2.2 2.2
Change in non-controlling interests	1.0 -7.3 -6.3
Equity at 31 December 2020	100.2 3,194.6 -455.3 2,924.9 38.2 5,802.6

Group

Cash-Flow Statement

MSEK

Note

2020

2019

Operating proﬁt

Cash ﬂow from operating activities before changes in working capital

Changes in working capital

Changes in inventories Changes in current receivables Changes in current liabilities

Cash ﬂow from operating activities

Investing activities

Investments in subsidiaries, net of acquired cash and cash equivalents Investments in intangible assets

Investments in property, plant and equipment Changes in construction in progress Increase in non-current receivables Decrease in non-current receivables

Cash ﬂow from investing activities

Financing activities

Repayment of loans Borrowings

Repayment of lease liabilities

Preferential rights issue, net of issue costs Dividends paid

Cash ﬂow from ﬁnancing activities

Change in cash and cash equivalents

Cash and cash equivalents at beginning of the year Translation diﬀerences in cash and cash equivalents Cash and cash equivalents at end of the year

Operating proﬁt	332.5	794.8
(of which, attributable to leases)	(5.9)	-(1.8)
Adjustments for non-cash items:
Depreciation/amortisation 8	396.5	318.4
Depreciation of right-of-use assets 8	161.9	160.4
Reversal of liabilities for earnout payments 22	-41.2	-21.8
Proﬁt/loss on the sale of shares in subsidiaries 31	31.1	-
Proﬁt/loss on the sale of property, plant and equipment	19.3	1.8
Items in equity	7.0	-3.8
Translation diﬀerences	-86.1	-65.8
821.0	1,184.0
Interest received	3.5	5.1
Interest paid	-55.7	-76.6
Interest paid on lease liabilities	-15.2	-18.1
Income tax paid	-106.6	-243.4
Cash ﬂow from operating activities before changes in working capital	647.0	851.0
Changes in working capital
Changes in inventories	231.0	139.8
Changes in current receivables	349.9	59.6
Changes in current liabilities	-90.0	-42.5
Cash ﬂow from operating activities	1,137.9	1,007.9
Investing activities
Investments in subsidiaries, net of acquired cash and cash equivalents 22, 31	-113.4	-2,672.4
Investments in intangible assets 11	-25.1	-52.4
Investments in property, plant and equipment 12	-158.5	-190.3
Changes in construction in progress 12	6.9	1.7
Increase in non-current receivables 13	-2.7	-
Decrease in non-current receivables 13	-	8.5
Cash ﬂow from investing activities	-292.8	-2,904.9
Financing activities
Repayment of loans 17	-110.3	-1,492.3
Borrowings 17	-	1,893.1
Repayment of lease liabilities 26	-152.3	-153.5
Preferential rights issue, net of issue costs 35	-	2,197.7
Dividends paid	-6.3	-251.5
Cash ﬂow from ﬁnancing activities	-268.9	2,193.5
Change in cash and cash equivalents	576.2	296.5
Cash and cash equivalents at beginning of the year	1,133.5	808.4
Translation diﬀerences in cash and cash equivalents	-85.7	28.6
Cash and cash equivalents at end of the year	1,624.0	1,133.5

Parent Company

Income Statement

MSEK Net sales

Note

2020

2019

Gross proﬁt

Administrative expenses

Operating proﬁt

Financial income and expenses Income from shares in subsidiaries

Interest income and similar proﬁt/loss items Interest expenses and similar proﬁt/loss items

Total ﬁnancial items

Proﬁt before appropriations and tax

Group contributions received

Tax on proﬁt for the year

Net proﬁt for the year

Net sales 1	11.7	13.8
Gross proﬁt	11.7	13.8
Administrative expenses	-59.5	-52.0
Operating proﬁt	-47.8	-38.2
Financial income and expenses
Income from shares in subsidiaries 7	117.3	143.8
Interest income and similar proﬁt/loss items 3	106.1	132.3
Interest expenses and similar proﬁt/loss items 4	-94.7	-93.9
Total ﬁnancial items	128.7	182.2

Proﬁt before appropriations and tax	80.9	144.0
Group contributions received	-	268.0
Tax on proﬁt for the year 9, 10	7.6	-57.8
Net proﬁt for the year	88.5	354.2

Parent Company

Balance Sheet

MSEK	Note	2020	2019
ASSETS
Non-current assets
Financial assets
Shares and participations in subsidiaries	13,14,31	2,963.6	2,963.6
Receivables from subsidiaries	13	4,111.5	4,926.2
Deferred tax assets	10	7.6	-
Other non-current receivables	13	4.3	-
7,087.0	7,889.8
Total non-current assets	7,087.0	7,889.8
Current assets
Current receivables
Other receivables	-	3.4
Receivables from subsidiaries	48.6	179.0
Prepaid expenses and accrued income	15	4.2	13.6
52.8	196.0
Cash and bank balances	952.2	325.7
Total current assets	1,005.0	521.7
TOTAL ASSETS	8,092.0	8,411.5
56

Parent Company

Balance Sheet

MSEK EQUITY Restricted equity Share capital Statutory reserve

Note

2020

2019

Non-restricted equity

Retained earnings

Net proﬁt for the year

LIABILITIES Non-current liabilities

Borrowings

Provisions for pensions and similar commitments Liabilities to subsidiaries

Current liabilities

Trade payables Current tax liabilities Other liabilities Liabilities to subsidiaries

Accrued expenses and deferred income

Total liabilities

EQUITY
Restricted equity
Share capital 35	100.2	100.2
Statutory reserve	159.4	159.4
259.6	259.6
Non-restricted equity
Retained earnings	3,565.6	3,210.3
Net proﬁt for the year	88.5	354.2
3,654.1	3,564.5
3,913.7	3,824.1
LIABILITIES
Non-current liabilities
Borrowings 17	3,210.3	3,423.9
Provisions for pensions and similar commitments 21	4.8	-
Liabilities to subsidiaries	-	0.2
3,215.1	3,424.1
Current liabilities
Trade payables	5.1	3.6
Current tax liabilities	9.7	26.1
Other liabilities	0.7	0.6
Liabilities to subsidiaries	934.6	1,121.2
Accrued expenses and deferred income 18	13.1	11.8
963.2	1,163.3
Total liabilities	4,178.3	4,587.4
TOTAL EQUITY AND LIABILITIES	8,092.0	8,411.5

Parent Company

Changes in equity

MSEK

Equity at 1 January 2019

Net proﬁt for the year

Non-cash issue (11,244,805 shares)

Rights issue (50,298,038 shares), net amount Performance-based share-savings plan Dividend, SEK 2.00 per share

Equity at 31 December 2019

NoteShare capital 65.5

Statutory reserve 159.4

469.1 694.0

31, 35

6.4 28.3

820.2 826.6

2,169.4 2,197.7

100.2

159.4

Retained earnings incl. net proﬁt for the year

Total equity

354.2 354.2

3.1 3.1

-251.5 -251.5

3,564.5 3,824.1

Net proﬁt for the year Performance-based share-savings plan Equity at 31 December 2020

Net proﬁt for the year

88.5

Performance-based share-savings plan

1.1

Equity at 31 December 2020

100.2

159.4

3,654.1

3,913.7

Parent Company

Cash-Flow Statement

MSEK

Note

2020

2019

Operating proﬁt

Adjustments for non-cash items:

Items in equity

Translation diﬀerences

Interest received

Income tax paid

Cash ﬂow from investing activities

Borrowings

Preferential rights issue, net of issue costs Dividends paid

Cash ﬂow from ﬁnancing activities

Change in cash and cash equivalents

Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year

Operating proﬁt	-47.8	-38.2

Adjustments for non-cash items:
Items in equity	1.1	3.1
Translation diﬀerences	-165.8	3.5
-212.5	-31.6
Interest received	106.1	126.3
Interest paid	-55.2	-62.8
Income tax paid	-16.4	-47.4
Cash ﬂow from operating activities before changes in working capital	-178.0	-15.5
Changes in working capital
Changes in current receivables	134.7	-149.1
Changes in current liabilities	-183.7	794.4
Cash ﬂow from operating activities	-227.0	629.8
Investing activities
Investments in subsidiaries 31	-	-1,520.4
Increase in non-current receivables 13	703.1	-1,746.4
Group contributions and dividends received	224.6	411.8
Cash ﬂow from investing activities	927.7	-2,855.0
Financing activities
Repayment of loans 17	-74.2	-1,104.8
Borrowings 17	-	1,380.8
Preferential rights issue, net of issue costs 35	-	2,197.7
Dividends paid	-	-251.5
Cash ﬂow from ﬁnancing activities	-74.2	2,222.2
Change in cash and cash equivalents	626.5	-3.0
Cash and cash equivalents at beginning of the year	325.7	328.7
Cash and cash equivalents at end of the year	952.2	325.7

Accounting policies

The consolidated accounts have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, the Swedish Annual Accounts Act and the Swedish Financial Reporting Board's recom- mendation RFR1.

The Parent Company applies the same accounting policies as the Group, except in the instances stated below in the section Parent Company's Accounting Policies. The deviations arising between the Parent Company's and the Group's accounting policies result from limitations in the possibility of applying IFRS in the Parent Company primarily due to the stip- ulations of the Swedish Annual Accounts Act.

The policies applied for the Parent Company are unchanged compared with the preceding year.

All amounts are reported in millions of Swedish kronor (MSEK), unless stated otherwise. Assets and liabilities are valued at historical cost with the exception of certain ﬁnancial assets and liabilities (conditional earnout payments and derivatives) which are valued at fair value.

Consolidated accounts

Subsidiaries

The consolidated accounts include subsidiaries over which the Group exercises control, that is when the Group is exposed to or has the right to variable returns from its holdings in the company and can aﬀect returns through its control.

Companies acquired during the year are fully consolidated from the date on which control is transferred to the Group. Companies are de-consolidated from the date that control ceases.

The Group applies the acquisition method to recognise the Group's business combinations.

The acquisition price paid for a subsidiary is the fair values of the assets transferred, the liabilities incurred and the shares issued by the Group.

The consideration transferred includes the fair value of any asset or liability resulting from an earnout arrangement. Acquisition-related costs are expensed as incurred and are included under the item Administrative expenses. Identi- ﬁable assets acquired and liabilities assumed in a business combination are measured initially attheir fair values at the acquisition date. For each acquisition, the Group determines whether all non-controlling interests in the acquired company are recognized at fair value or at the proportionate share of the acquired company's net assets. The amount by which the consider-ation, any non-controlling interest and fair value at the acquisition dates of previous sharehold-ings exceeds the fair value of the Group's share of identiﬁable net assets acquired is recorded as goodwill. If the consideration transferred is less than the fair value of the acquired subsidiary's net assets, the diﬀerence is recognised directly in proﬁt or loss.

Intra-Group transactions and balance-sheet items are eliminated in their entirety.

Translation of foreign currencies

Functional currency and presentation currency

Items included in the ﬁnancial statements of each of the Group's entities are measured using the currency of the primary economic environ- ment in which the entity operates (the functional currency). The consolidated accounts are pre-sented in SEK, which is the Parent Company's functional and presentation currency.

Transactions and balance-sheet items Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the transaction dates or the date on which the items are remeasured. Foreign exchange-rate diﬀerences attributable to oper- ating activities are recognised in operating proﬁt, while exchange-rate diﬀerences attributable to the Group's ﬁnancing are recognised under ﬁnancial income and expenses. Exceptions to this include hedging transactions that meet the requirements for the hedge accounting of net investments, for which exchange-rate diﬀer-ences are recognised in other comprehensive income.

Subsidiaries

The results and ﬁnancial position of all subsidiaries (none of which has the currency of a hyper-inﬂationary economy) that have a

functional currency diﬀerent from the presen-tation currency are translated into the Group's presentation currency as follows:

- assets and liabilities for each balance sheet are translated at the closing rate of exchange;
- income and expenses for each income state-ment are translated at the respective average exchange rate (unless the average exchange rate is not a reasonable approximation of the cumulative eﬀect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the transaction-date rates); and
- all resulting exchange-rate diﬀerences are recognised as a separate component of other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing rate.

Income tax

Reported income tax includes tax which is to be paid or received for the current year and adjust-ments pertaining to previous years' current taxes and changes in deferred tax.

The measurement of all income tax liabilities and assets is performed at nominal amounts, applying the tax rates and provisions that have been enacted, or substantially enacted, and which are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

In the case of items recognised in proﬁt or loss, related tax eﬀects are also recognised in proﬁt or loss. The tax eﬀects of items that are recognised in other comprehensive income or directly in equity are also recognised directly against the same.

Deferred tax is calculated using the balance- sheet method on all temporary diﬀerences arising between the tax bases of assets and liabilities and their carrying amounts. These tem- porary diﬀerences have primarily arisen through consolidation adjustments and transfers to tax allocation reserves.

Deferred tax assets pertaining to future tax

deductions are recognised to the extent that it is probable that such deductions can be netted against surpluses in future taxation. Deferred tax liabilities pertaining to temporary diﬀer-ences attributable to investments in subsidiaries are not recognised in the consolidated accounts as the Parent Company can, in all cases, control the date for a reversal of the temporary diﬀer-ences and it is not assessed as probable that a reversal will take place within the foreseeable future.

Inventories

Inventories are reported using the ﬁrst-in, ﬁrst-out method at the lower of cost and net realisable value on the closing date.

The valuation of work in progress and ﬁnished products includes design costs, direct labour costs and other direct costs with a reasonable mark-up for indirect costs (based on normal production capacity). This item excludes borrowing costs.

Net realisable value is the estimated selling price in the on-going course of business, less applicable variable selling expenses.

Revenue recognition

Goods

The Group manufactures and sells lighting solu- tions to the professional lighting market. Sales of goods are recognised when control of the goods is transferred - that is, upon delivery to the customer, when they have full right of deci-sions over the goods and there are no longer any unfulﬁlled obligations that might aﬀect cus- tomers' approval. Delivery is recognised when the goods have been delivered in accordance with the agreed-upon delivery terms and the risk for obsolete or missing goods has transferred to the customer and the customer has accepted the goods in accordance with the agreement, the timeframe for changes to the agreement has expired or the group has objective evidence that all the criteria for acceptance have been fulﬁlled.

Volume rebates are often applied to sold goods based on accumulated sales over a twelve-month period. Income from sales of goods is recognised based on the price in theagreement, less calculated volume rebates.

Historic data is used to estimate the rebate's eventual value and income is recognised only to the extent that it is unlikely that a signiﬁcant reversal will arise. A liability (which is included in accrued expenses) is recognised for estimated volume rebates applied to sales until the closing date. No ﬁnancing component is assessed to be required at the time of sale with a credit period which is in alignment with market practice. The Group's obligation to repair or replace defective products according to normal warranty rules is recognised in accrued costs.

A receivable is recognised when the goods have been delivered, as that is when payment becomes unconditional (that is, payment requires only the passage of time).

Other operating income

Interest income

Interest income is recognised on a time-propor- tion basis using the eﬀective interest method.

Dividend income

Income from dividends is recognised when the right to receive payment has been determined.

Internal transfer pricing

The pricing of transactions such as intra-Group purchases and sales of goods and services, uses market terms.

Leases

The Group's leases pertain primarily to factories, oﬃces and vehicles. The terms are negotiated on an individual basis and contain a wide range of diﬀerent terms and conditions. Leases are recognised as a right-of-use asset and a corre-sponding liability, at the date at which the leasedasset is available for use by the Group. Each lease payment is allocated between repayment of the liability and the ﬁnance cost. The ﬁnance cost is charged to proﬁt or loss over the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

The right-of-use asset is depreciated on a straight-line basis over the shorter of the asset's useful life and the lease term. Leases are typically made for ﬁxed periods of three to ten years but may have extension or termination options as described below.

Assets and liabilities arising from a lease are initially measured on a present value basis.

Lease liabilities include the net present value of the following lease payments:

• ﬁxed fees; and
• variable lease fees that are based on an index.

The lease payments are discounted using the incremental borrowing rate.

Right-of-use assets are measured at cost and comprise the following:

• the initial valuation of the lease liability; and
• payments made on or prior to the date the leased asset was made available to the lessee.

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in proﬁt or loss.

Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of oﬃce furniture.

Lease extension and termination options

Extension and termination options are included in most of the Group's leases for factories/ production plants and oﬃces. These terms are used to maximise ﬂexibility in terms of managing contracts. Options to extend or terminate leases are included in assets and liabilities, when it is reasonably certain that they will be exercised.

Borrowing costs

The Group capitalises borrowing costs which are directly attributable to the purchase, con-struction or production of an asset, and where

a considerable amount of time is required to prepare the asset for use or sale, as a portion of the asset's cost. Other borrowing costs are rec-ognised as expenses in the period in which they arise. No borrowing costs have been capitalised for the reporting periods presented.

Cash-ﬂow statement and cash and cash equivalents

The cash-ﬂow statement has been prepared using the indirect method. The recognised cash ﬂow includes only those transactions that have resulted in receipts or payments. Cash and cash equivalents include cash and bank balances as well as short-term ﬁnancial investments with maturities of less than three months. In both 2020 and 2019, cash and cash equivalents were comprised solely of cash and bank balances.

Property, plant and equipment

Land and buildings comprise, primarily, factories and oﬃces. All property, plant and equipment (PPEs) are measured at cost less depreciation and impairment.

Cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent expenses are included in the asset's carrying amount, or recognised as a separate asset, as appropriate, only when it is likely that future economic beneﬁts associ-ated with the asset will accrue to the Group, and when the asset's cost can be measured reliably. All other repairs and maintenance are recognised as expenses in proﬁt or loss during the period in which they arise.

No depreciation is reported for land. Depre-ciation on other assets is calculated using the straight-line method to allocate their cost down to their residual values over their estimated useful lives, as follows:

Buildings	25-33 years
Permanent equipment,
service facilities, etc. in buildings	10-20 years
Land improvements	20 years
Machinery and equipment	5-10 years
Vehicles and IT systems	5 years
Computers and tools	3 years
62

The assets' residual values and useful lives are reviewed and adjusted, if appropriate, at each closing date. An asset's carrying amount is immediately written down to its recoverable amount if the asset's carrying amount exceeds its estimated recoverable amount.

Intangible assets

Goodwill

Goodwill consists of the amount by which the consideration, any non-controlling interest and fair value at the acquisition dates of previous shareholdings exceeds the fair value of the Group's share of identiﬁable net assets acquired. Goodwill on the acquisition of sub- sidiaries is recognised as an intangible asset.

Goodwill is tested annually to identify any need for impairment and is recognised at cost less accumulated impairment. The gain or loss on the sale of an entity includes the remaining carrying amount for goodwill pertaining to the entity sold.

Goodwill is allocated to cash-generating units (CGUs), when testing for any impairment requirement. This allocation is made to the CGUs which are expected to beneﬁt from the business combination which has given rise to the goodwill item. The Fagerhult Group allocates goodwill to all operating segments.

In 2020, goodwill has been reallocated in conjunction with the changes in the internal organisation and external segment reporting.

The reallocation has occurred based on the relative fair values.

Brands

This item mainly includes assets in the form of brands, which have arisen in conjunction with the acquisition of subsidiaries and which are recognised at fair value on the acquisition date.

Brands acquired as a part of a business combi- nation are assessed as having indeﬁnite useful lives since the Group has made the judgement that these will drive sales for an indeterminate future and are annually tested for impairment as described above for goodwill. Brands that have been acquired separately have a ﬁnite useful life and are initially recognised at cost, less accumulated amortisation and impairmentin subsequent periods. Amortisation is applied on a straight-line basis over the estimated useful life of 20 years.

Other intangible assets

The item Other intangible assets includes Capitalised expenditure for product develop-ment, which is internally generated, Technology identiﬁed in conjunction with a business combi- nation and IT systems.

Capitalised development expenditure The Group incurs no expenses for research.

Expenses arising from development projects (attributable to the development of new lumi-naires) are reported in the Group as intangible assets when it is likely that the project will be successful, in terms of its commercial and technical possibilities, and when the expenses can be reliably measured. Other develop- ment expenses are expensed as they arise.

Development expenses previously recognised as an expense are not capitalised as assets in subsequent periods.

Capitalised development expenditure with a limited useful life is amortised on a straight-line basis from the point in time at which commercial production can be initiated. Amortisation is reported during the asset's expected useful life, which is usually three to ﬁve years. Amortisation is included in proﬁt or loss under the item Cost of goods sold.

Acquired technology

Technology identiﬁed in conjunction with a business combination is recognised at fair value on the acquisition date. Technology has a ﬁnite useful life and is recognised at cost less accumu- lated amortisation and impairment. Amortisation is performed over the asset's expected useful life, which is usually ﬁve to seven years.

IT systems

IT systems mainly pertain to acquired systems and external costs arising on the adaptation of systems in line with the Group's operations and needs. All assets are measured at cost less amortisation and impairment.

Cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent expenses are included in the asset's carrying amount, or recognised as a separate asset, as appropriate, only when it is likely that future economic beneﬁts associated with the asset will accrue to the Group, and when the asset's cost can be measured reliably.

All other forms of maintenance are recognised as expenses in proﬁt or loss during the period in which they arise.

Straight-line amortisation is applied over the estimated useful life of three to ﬁve years.

Impairment of non-ﬁnancial assets

Assets which have an indeﬁnite useful life (good-will and brand) or intangible assets that are not yet ready for use (capitalised development expenditure) are not subject to amortisation and, instead, are tested for annually or when necessary for any need for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In those cases, in which the carrying amount exceeds the esti-mated recoverable amount, the carrying amount is immediately impaired down to the recoverable amount. The recoverable amount is the greater of an asset's fair value, less selling expenses and the asset's value in use. For the purposes of assessing any need for impairment, assets are grouped at the lowest levels for which there are separate, identiﬁable cash ﬂows (CGUs).

Financial Instruments

Financial instruments reported in the balance sheet include other shares and participations, other non-current receivables, operating receiv-ables, cash and cash equivalents, borrowings, other non-current liabilities (pertaining to condi- tional earnout payments) and operating liabilities.

Derivative instruments included in the items operating receivables and operating liabilities.

Financial assets

The Group classiﬁes its ﬁnancial assets in the following categories: Financial assetsrecognised at FVTPL (encompasses the items other shares and participations, and derivative instruments with positive fair value recognised in the item other current receivables) and Financial assets recognised at amortised cost (encom-passes the items other non-current receivables, trade receivables, and parts of current receiv- ables and cash and cash equivalents).

The classiﬁcation of investments in liability instruments is based on the Group's business model for managing ﬁnancial assets and the contractual conditions for the assets' cash ﬂows. All of the Group's ﬁnancial assets that comprise debt instruments are classiﬁed in the category Financial assets at amortised cost.

These include assets held in order to collect contractual cash ﬂows and where these cash ﬂows consist solely of principal and interest which is recognised at amortised cost. Interest income from these ﬁnancial assets is recognised as ﬁnancial income on the basis of the eﬀective interest method. Proﬁts and losses that arise upon derecognition from the balance sheet are recognised directly in proﬁt or loss.

Purchases and sales of ﬁnancial assets are recognised on the trade date, the date on which the Group commits itself to purchase or sell the asset. Financial assets are derecognised from the balance sheet when the rights to receive cash ﬂows from the instruments have expired or been transferred, and the Group has substan-tially transferred all of the risks and rewards associated with ownership.

Financial assets initially valued at fair value, plus transaction costs directly pertaining to the purchase when the asset is not recognised at fair value in proﬁt or loss. Transaction costs pertaining to ﬁnancial assets recognised at FVTPL are expensed directly in proﬁt or loss.

The Group measures all equity instruments at fair value in proﬁt or loss. Changes in the fair value of ﬁnancial assets recognised at FVTPL are recognised in proﬁt or loss.

In accordance with IFRS 9, the Group applies a modiﬁed approach for impairment testing of trade receivables. The modiﬁcation results in the loss allowance for ECLs being calculated based on the risk of loss for the entire term ofthe receivable and is recognised when the receivable is ﬁrst recognised. To measure the ECLs, trade receivables have been collectively based on past-due days. The Group uses prospective variables to calculate ECLs. ECLs are recognised in the Group's income statement under the item selling expenses.

Financial liabilities

The Group classiﬁes its ﬁnancial liabilities in the categories Financial liabilities measured at fair value through proﬁt or loss (consists of conditional earnout payments recognised under the items Non-current and Current liabilities and derivative instruments with negative fair values recognised under the item Other current liabilities) and Other ﬁnancial liabilities (encompassing the items current and non-current borrowings, trade payables and parts of the item Other current liabilities).

Financial liabilities measured at FVTPL are initially measured at fair value, while applica- ble transaction costs are recognised in proﬁt or loss. Other ﬁnancial liabilities are initially measured at fair value, net after transaction costs, and thereafter, at amortised cost using the eﬀective interest method. Derivative instru-ments are recognised on the trade date and are not used for hedge accounting. Changes in fair value are, therefore, recognised immediately in proﬁt or loss under Operating proﬁt. The change in fair value for conditional earnout payments are recognised under the item Other operating income in proﬁt or loss.

Financial liabilities are removed from the balance sheet when obligations have been reg- ulated or annulled, or have otherwise expired. The diﬀerence between the carrying amount for a ﬁnancial liability (or part of a ﬁnancial liability) that has been extinguished or transferred to another party and the payment made, including transferred assets that are not cash or assumed liabilities, is recognised in proﬁt or loss.

Net investment hedges

The Group applies net investment hedges in foreign operations, which are recognised according to the following: Any gain or loss on

the hedging instrument relating to the eﬀective portion of the hedge is recognised in other comprehensive income and is accumulated in reserves in equity. The gain or loss relating to the ineﬀective portion is recognised directly in proﬁt or loss. Gains and losses accumulated in the item reserves in equity are reclassiﬁed to the income statement when the foreign operation is partially disposed of or sold. As a hedging instrument for net investments, the Group designates borrowings in the same currency as the net investment.

Equity

Transaction costs which are directly applicable to the issue of new shares or share options are reported, net after tax, in equity, with a deduction for the proceeds of the issue. In the case of a repurchase of shares, retained earnings are reduced by the amount paid for the shares.

When treasury shares are sold, retained earn- ings increase by the amount received.

Borrowings

Borrowings (encompassing the items non- current and current borrowings in the balance sheet) are initially recognised at fair value, net after transaction costs. Borrowings are recognised thereafter at amortised cost and any diﬀerence between the amount received (net after transaction costs) and the repayment amount is recognised in proﬁt or loss over the duration of the term, using the eﬀective interest method.

Borrowings are classiﬁed as current liabilities if the Group does not have an unconditional right to defer payment of the liability for at least twelve months after the end of the reporting period.

Employee beneﬁts

Pension commitments

Within the Group, there are both deﬁned-contribution plans and deﬁned-beneﬁt plans. A deﬁned-beneﬁt plan is a pension plan stipulating a determined amount of pension beneﬁt which the employee receives after retirement, usually based on several factors, such as age, length ofservice or salary. A deﬁned-contribution plan is a pension plan according to which the Group pays a ﬁxed amount to a separate legal entity and, therewith, has no obligation to pay addi- tional premiums. Costs for employees' service during current or previous periods impact the Group's earnings.

In deﬁned-beneﬁt plans, beneﬁts to employ-ees and former employees are based on the employee's salary at the retirement date and on the number of years of service. The Group is liable for payment of the beneﬁts.

The liability recognised in the balance sheet pertaining to deﬁned-beneﬁt plans is the present value of the deﬁned-beneﬁt commit-ments at the closing date and is adjusted for unrecognised actuarial gains/losses for service during previous periods. The deﬁned-beneﬁt commitments are calculated yearly by an inde-pendent actuary, applying the projected unit credit method. This method allocates pension costs in pace with the employees' execution of services for the company, which increases their right to future remuneration. The company's commitments are valued at the present value of the expected future payments, utilising a discount rate corresponding to interest on ﬁrst-class corporate bonds. The most important actuarial assumptions are stated in Note 21.

Actuarial gains and losses may arise in conjunction with determination of the present value of the commitments. These can arise from actual outcomes deviating from earlier assumptions or from changed assumptions.

These items are then reported in Other compre- hensive income in the period in which they arise.

Costs of employment for previous periods are recognised directly in proﬁt or loss.

For deﬁned-contribution plans, the Group pays premiums into a public or privately admin-istered pension insurance plan on an obligatory, contractual or voluntary basis. The Group has no additional payment obligations when these premiums are paid. The premiums are reported as pension costs when they fall due. Prepaid premiums are recognised as assets to the extent that cash repayment or a decrease in future payments may beneﬁt the Group.

Share-based payments

The Group has a share-savings plan, which is recognised as a plan settled through equity. The cost of the plan is calculated on the basis of the allocated shares' fair value at the time of alloca- tion and is allocated over the term of the plan. In those cases, in which the plan may lead to costs in the form of social security contributions, the Group reserves the social security contributions on an ongoing basis at fair value, allocated over the term of the plan.

Termination beneﬁts

Termination beneﬁts are payable when an employee's employment is terminated prior to the normal pensionable age or when an employee voluntarily accepts termination of employment in exchange for such beneﬁts.

The Group reports severance pay when there is a demonstrable obligation to terminate the employment according to a detailed, formal plan with no the possibility of reinstatement, or when it is required to provide termination beneﬁts as a result of an oﬀer to encourage employees to leave service voluntarily. Beneﬁts falling due more than 12 months after the closing date are discounted to present value.

Provisions

Provisions for restructuring costs and statutory requirements are recognised when the Group has a legal or informal obligation to do so as a result of previous events, when it is more likely that an outﬂow of resources will be required to settle the obligation rather than not be required, and when the amount can be reliably calculated.

If there are a number of similar obligations, an assessment is made of the probability that an outﬂow of resources will be required to settle the entire Group's obligations. A provision is recognised even if the probability of an outﬂow for a separate item in this group of obligations is minimal.

Earnings per share

Earnings per share are calculated as net proﬁt for the year in accordance with the income statement attributable to shareholders of the

Parent Company in relation to the average number of shares outstanding before and after dilution.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker is responsible for allocating resources and assessing the performance of the operating segments. The Group has identiﬁed this function as the CEO who makes the strategic decisions.

Expenses attributable to a particular segment are comprised of both direct expenses and a portion of Group-wide expenses. Unspeciﬁed expenses represent Group-wide expenses.

The operating segments' assets consist mainly of intangible assets, property, plant and equipment, inventories and trade receivables.

Segment liabilities consist mainly of trade pay- ables, and accrual and deferral items. Fagerhult only applies IFRS 16 at Group level, and not at operating segment level.

As previously communicated in 2020, the Group has been working with strategy since 2019. The ambition has been to identify new opportunities for growth and to strengthen the Group's individual brands as well as intra-Group collaboration. These eﬀorts resulted in a new structure for the operations and for segment reporting from 1 January 2020.

The Group's new structure is based on four business areas: Collection, Premium, Profes- sional and Infrastructure. Each of the Group's 13 brands belong to one of the business areas and has therefore not had to be reallocated.

The allocation has been made based on the segment's product range, geographical pres- ence and partner focus. This structure replaces the previous segment reporting, which was based on geographic areas and product areas. The comparative ﬁgures for 2019 have been restated and goodwill has been reallocated to the new business areas, refer to the section on goodwill above. As a further step in the strategic review, Fagerhult evaluated various options in 2020 for exiting its South African operations,Lighting Innovations. As a result, Fagerhult has implemented further structural changes in its internal organisation and, consequentially, in the external segment reporting. Lighting Innovations has been removed from the business area Professional and is now reported as a separate business area and operating segment, Lighting Innovations.

Lighting Innovations does not meet the quantitative thresholds for being reported separately under IFRS 8 Segment reporting.

However, it is Fagerhult's considered opinion that the disclosures about Lighting Innovations comprise useful and relevant information. The comparative ﬁgures for 2020 and 2019 have been restated and goodwill has been reallocated to the new business area and operating segment, Lighting Innovations.

Dividend

Dividends to AB Fagerhult's shareholders are recognised as liabilities in the consolidated balance sheet in the period in which the divi-dends were adopted by the Parent Company's shareholders.

Parent Company's accounting policies

The Parent Company's annual accounts have been prepared in accordance with the Swedish Annual Accounts Act and the Swedish Finan-cial Reporting Board's recommendation RFR 2

Accounting for Legal Entities. RFR 2 stipulates that, in its annual accounts, the Parent Company is to apply International Financial Reporting Standards (IFRS) as endorsed by the EU, where this is possible within the framework of the Swedish Annual Accounts Act, and with regard to the connection between accounting and taxation. RFR 2 speciﬁes the exceptions and supplements to be applied in relation to IFRS. Identiﬁed diﬀerences between accounting policies of the Group and the Parent Company mainly pertain to IAS 12 Income taxes. The amounts transferred to untaxed reserves constitute taxable temporary diﬀerences. Due to the connection between accounting and taxation, deferred tax liabilities applicable tountaxed reserves are not disclosed separately in the Parent Company. Accordingly, these are reported in their gross amounts in the balance sheet. Appropriations are recognised at gross value in proﬁt or loss.

Group contributions are recognised as appropriations. Furthermore, the Parent Company does not measure in accordance with IFRS 9, and instead applies the points stated in RFR 2 (IFRS 9 Financial Instruments, pp. 3-10).

Nor does the Parent Company apply IFRS 16 Leases and has, from 1 January 2019, instead chosen to apply points 2-12 pertaining to IFRS 16 contained in RFR 2.

Signiﬁcant estimates and assumptions

The preparation of the annual accounts requires that qualiﬁed estimates and assess- ments be made for accounting purposes.

Furthermore, company management exercises its judgement in the application of the Group's accounting policies. Estimates and assess- ments can aﬀect the income statement and the balance sheet, as well as any additional infor-mation which has been reported in the annual accounts. Consequently, changes in valuations and assessments can lead to changes in the annual accounts.

Impairment testing of goodwill and brands with indeﬁnite useful lives

For the Group, it has been determined that the estimates and assessments made in connec-tion with impairment testing of goodwill and brands are of signiﬁcance for the consolidated accounts. Each year, the Group conducts tests to determine whether any impairment requirement exists for carrying amounts. The recoverable amounts of cash-generating units are determined based on value-in-use calcula- tions. These calculations are based on certain assumptions regarding the future which, for the Group, are associated with a risk of material adjustments of carrying amounts during the forthcoming ﬁnancial year. Signiﬁcant assump- tions and the eﬀects of reasonable changes of such are stated in Note 11. Intangible assets

Assessment of the length of the leasing agreements

Extension and termination options are included in most of the Group's leases for factories/ production plants and oﬃces.

When the term of the lease was determined, the management considered all available information that provided a ﬁnancial incentive to exercise an extension option, or to not utilise an option to terminate a contract. The possibility of extending a contract is only included in the term of the lease if it is reasonably certain that the contract will be extended (or not terminated).

The following factors are normally most relevant for leases for factories/production facilities and oﬃces:

• Historic lease terms and the costs and dis-ruptions to operations entailed by the need to replace an existing factory/production facility or oﬃce premises;
• If the lease contains any material fees for terminating the lease (or not extending it), the Group normally considers it reasonably certain that the lease will be extended (or not terminated).
• If the Group has any expenses for leasehold improvements and expects these to have a substantial residual value, it normally reason-ably certain that the lease will be extended (or not terminated).

The majority of the lease extension options for factories/production facilities have been included in the lease liability, since the Group cannot replace assets without material costs for disruption to operations. The majority of the oﬃce leases comprise shorter lease terms and notice periods of one to three years. The Group's assessment is that these shorter lease terms do not reﬂect the actual terms, and therefore a minimum term of three years has been applied.

An individual assessment is conducted in conjunction with the lease expiring or as soon as a decision to change the operations is known and where the change would aﬀect the term of the lease.

Measurement of trade receivables

Trade receivables are recognised net of any provisions for expected credit losses. The loss allowance for trade receivables is based on the assumptions for risk of default and expected loss levels. The Group makes its own assump-tions and choices of input data for calculating impairment. These are based on historic data, known market conditions and forward-looking calculations at the end of each reporting period.

Refer also to Note 6 Trade receivables and the section on Credit risk in Note 38 Risks.

Measurement of inventories Inventories are reported using the ﬁrst-in, ﬁrst-out method at the lower of cost and net realisable value on the closing date. Estimates are required of projected sales volumes, which are primarily based on historic data and projec- tions. Refer also to Note 16 Inventories

Application of new or amended standards

New and amended standards applied by the Group.

None of the amendments of standards that apply from 1 January 2020 have had any material impact on the consolidated ﬁnancial statements.

New standards and interpretations that have not yet been adopted by the Group.

A number of new standards and interpretations come into eﬀect for ﬁnancial years starting after 1 January 2021, and have not been applied in the preparation of these ﬁnancial statements.

None of these standards or interpretations are expected to have any material impact on the consolidated ﬁnancial statements.

Notes

Note 1 | Segment reporting

Net sales and income
Net sales	3,040.2	3,375.9	2,495.6	3,022.8	824.3	1,028.5	740.3	699.5	29.0	105.4	-313.1	-387.2	6,816.3	7,844.9
(of which internal sales)	(85.5)	(100.0)	(127.0)	(152.3)	(70.8)	(88.0)	(29.8)	(46.9)	(0.0)	-(313.1)	-(387.2)	(0.0)	(0.0)
Operating proﬁt by line of business	98.2	286.5	240.1	365.3	30.1	97.0	139.4	100.7	-129.2	-7.0	12.7	6.3	391.3	848.8
Unspeciﬁed expenses	-58.8	-54.0
Operating proﬁt	332.5	794.8
Financial income	25.5	38.4
Financial expenses	-141.3	-137.5
Income tax	355.7	-180.9
Net proﬁt for the year	572.4	514.8
Other disclosures
Non-current assets	3,784.2	4,058.8	2,248.6	2,315.3	516.4	598.3	801.8	843.1	103.3	776.4	931.2	8,127.4	8,850.0
Other assets	1,144.6	1,501.1	687.0	852.0	255.6	321.5	209.3	193.8	36.2	-15.7	-18.7	-67.4	-247.7	2,213.4	2,638.2
Unclassiﬁed assets	1,921.1	1,603.9
Total assets	12,261.9	13,092.1
Liabilities	561.8	787.8	418.5	507.1	128.4	139.9	201.8	172.0	38.3	784.6	928.0	-55.4	-235.7	2,039.7	2,337.4
Unclassiﬁed liabilities	4,419.6	5,253.5
Total liabilities	6,459.3	7,590.9
Investments	104.2	112.1	47.6	64.5	11.1	27.2	20.7	34.3	4.6	183.6	242.7
Depreciation/ amortisation	198.2	178.6	73.9	81.8	34.2	33.2	21.9	18.7	5.6	6.1	161.9	160.4	495.7	478.8
Impairment	62.7	62.7	0.0
Reversal of liabilities for earnout payments	21.8	41.2	41.2	21.8

Collection 2020 2019

Premium 2020 2019

Professional 2020 2019

Infrastructure 2020 2019

Lighting Innovations 2020 2019

IFRS 16 2020 2019

Eliminations 2020 2019

Total

2020 2019

FAGERHULT GROUP ANNUAL REPORT 2020 67

Cont. Note 1

Total

France Italy Australia Norway Spain Denmark Finland

United Arab Emirates Switzerland

Russia Canada Belgium Poland Turkey China Ireland Hong Kong Austria Saudi Arabia Estonia

The Czech Republic South Africa

Other

Non-current assets per market

Italy Sweden Germany Netherlands UK

France Spain Australia Thailand Finland China Turkey Belgium

South Africa Other

Canada USA

External sales per market
Sweden	252.8	257.6	811.5	893.5	18.0	12.2	1,082.3	1,163.3
UK	181.4	190.7	229.8	318.1	480.7	585.4	160.8	122.1	1,052.7	1,216.3
Germany	255.1	268.4	258.7	275.4	0.1	100.0	103.2	613.8	647.1
The Netherlands	21.1	29.3	98.8	117.3	307.6	276.8	427.5	423.4
USA	392.5	420.8	1.9	2.7	394.4	423.5
France	318.2	452.5	63.5	87.3	9.2	8.4	390.9	548.2
Italy	367.7	374.2	11.4	13.6	0.1	379.2	387.8
Australia	132.4	124.6	2.5	4.4	223.7	270.2	358.6	399.2
Norway	32.5	37.7	201.5	253.9	234.0	291.6
Spain	93.3	114.4	112.1	181.3	12.6	2.6	218.0	298.3
Denmark	62.4	52.6	127.3	146.9	0.3	189.7	199.8
Finland	28.5	31.3	103.2	125.6	36.2	29.4	167.9	186.3
United Arab Emirates	72.8	72.0	86.9	81.6	0.7	160.4	153.6
Switzerland	121.2	141.2	27.2	16.6	1.7	4.1	150.1	161.9
Russia	53.9	42.8	45.1	45.6	0.1	0.2	99.1	88.6
Canada	95.0	110.6	95.0	110.6
Belgium	46.8	41.3	5.5	5.8	0.6	0.2	36.7	53.4	89.6	100.7
Poland	5.9	8.2	47.9	84.2	6.6	8.5	60.4	100.9
Turkey	5.8	6.3	0.2	0.1	44.9	57.9	50.9	64.3
China	38.7	79.6	9.9	11.0	0.3	48.9	90.6
Ireland	7.2	5.9	28.8	28.9	3.4	8.4	39.4	43.2
Hong Kong	37.2	0.2	37.4	0.0
Austria	14.4	16.7	10.2	11.1	5.6	9.0	30.2	36.8
Saudi Arabia	28.8	25.0	1.1	0.0	29.9	25.0
Estonia	3.8	6.0	20.6	21.2	0.2	24.6	27.2
The Czech Republic	11.7	10.5	22.2	0.0
South Africa	29.0	105.4	29.0	105.4
Other	273.6	366.2	52.5	144.4	2.8	26.7	11.3	13.9	340.2	551.3
Total Non-current assets per market	2,954.7	3,275.9	2,368.6	2,870.5	753.5	940.5	710.5	652.5	29.0	105.4	-	-	-	-	6,816.3	7,844.9
Italy	2,621.8	2,794.4	26.3	34.9	2,648.1	2,829.3
Sweden	15.2	12.1	1,330.8	1,343.5	65.1	64.0	1,411.1	1,419.6
Germany	420.6	457.2	571.0	599.7	3.6	3.8	165.9	188.2	1,161.1	1,248.9
Netherlands	154.1	161.3	602.7	624.3	72.5	81.1	829.3	866.7
UK	0.4	0.7	72.3	80.3	340.8	396.0	117.2	133.4	219.7	218.7	750.4	829.1
France	248.1	262.9	45.5	47.9	51.5	59.2	345.1	370.0
Spain	215.6	230.4	14.0	15.4	4.2	9.7	233.8	255.5
Australia	73.9	79.6	25.1	25.5	129.9	137.4	44.6	53.9	273.5	296.4
Thailand	106.2	131.3	0.0	0.0	0.1	0.2	106.3	131.5
Finland	0.1	0.3	1.0	1.4	78.3	81.5	23.5	28.5	102.9	111.7
China	62.5	63.5	6.1	8.6	9.2	14.7	77.8	86.8
Turkey	45.6	64.9	22.1	34.2	67.7	99.1
Belgium	0.2	0.3	15.8	16.9	3.7	4.5	19.7	21.7
Ireland	11.0	11.5	4.3	5.1	15.3	16.6
Canada	9.3	13.3	16.1	27.0	25.4	40.3
USA	8.9	11.9	14.9	20.4	23.8	32.3
South Africa	103.3	35.8	0.0	139.1
Other	1.4	0.9	1.9	3.3	0.1	0.0	0.0	0.1	0.0	0.0	32.7	51.1	36.1	55.4
Total	3,784.2	4,058.8	2,248.6	2,315.3	516.4	598.3	801.8	843.1	0.0	103.3	776.4	931.2	-	-	8,127.4	8,850.0

Lighting
Collection	Premium	Professional	Infrastructure	Innovations	IFRS 16	Eliminations	Total
2020 2019	2020 2019	2020 2019	2020 2019	2020 2019	2020 2019	2020 2019	2020	2019

The majority of the Group's income is recognised within a limited timeframe and the Group has no single customer where sales comprise more than 10 per cent of the Group's revenue.

COLLECTION

Exceptional lighting solutions for architectural applications across the globe.

Collection comprises our global brands. All these brands have an international product portfolio and are well-known amongst lighting designers and architects globally. They oﬀer a broad product range with a focus on outdoor and indoor environments with stringent requirements in terms of architectural design.

The brands included comprise: Ateljé Lyktan, iGuzzini, LED Linear and WE-EF, with product development and production taking place in Sweden, Italy, Canada, China, Germany and Thailand. The business area also includes sales companies for iGuzzini, LED Linear and WE-EF

PREMIUM

Lighting solutions for all European markets and for global customers.

Premium focuses on the European market and global customers who have a base in Europe. Our companies work closely with partners to deliver premium projects, often with customised solutions. Most of the sales are generated by products for indoor environments, but outdoor products are also available for speciﬁc markets.

The brands included are: Fagerhult and LTS, with their product development and manufacturing located in Sweden, Germany and China. The business area also includes all of Fagerhult's sales companies (except New Zealand) and Organic Response Technologies.

PROFESSIONAL

Lighting solutions for selected applications, adapted to local needs.

Professional primarily focuses on products for indoor environments for local and neighbouring markets. The company works together with local partners on projectspeciﬁcations to deliver complete solutions. Local produktion and product development enable quick delivery of tailored solutions and customised products.

The brands included are: Arlight, Eagle Lighting and Whitecroft, with product development and manufacturing located in Turkey, Australia and the UK. The business area also includes the sales company in New Zealand.

INFRASTRUCTURE

Specially-adapted lighting solutions for critical infrastructure and industry.

Infrastructure oﬀers lighting solutions for environments with speciﬁc requirements for installation, sustainability and robustness. The companies are world-leading in their ﬁelds, and have extensive experience of ﬁnding the best solution for each project and customer. Most of the sales take place in Europe but installations are performed globally.

The brands included are: Designplan Lighting, i-Valo and Veko, with product development and production in the UK, Finland and the Netherlands.

LIGHTING INNOVATIONS

As part of the strategic review conducted in 2020, the Group decided to exit its South African operation Lighting Innovations, which was announced in a press release on 7 August. As a result, the Group has implemented further structural changes in its internal organisation and segment reporting. Lighting Innovations Africa has been removed from the business area Professional and is now reported as a separate business area and operating segment, Lighting Innovations. On 30 October 2020, an agreement was signed to divest Lighting Innovations Africa (Pty) Ltd to Cape Mountain Concepts (Pty) Ltd. The transfer took place on 2 November 2020, refer to Note 31 Changes in the Group's composition.

Note 2 | Salaries, other remuneration and social security contributions

Parent Company	22.8	18.7	14.8	14.6	(5.8)	(7.4)
Subsidiaries	1,818.9	1,887.9	464.8	477.5	(116.7)	(109.8)
Group	1,841.7	1,906.6	479.6	492.1	(122.5)	(117.2)

Salaries and other remuneration 2020 2019

Salaries and other remuneration to Board members, the CEO and senior management Parent Company, 11 (10) employees Subsidiaries, 37 (36) employees Group

Parent Company, 11 (10) employees

17.6

(0.9)

2.8

16.3

(0.3)

3.1

Subsidiaries, 37 (36) employees

60.8

(3.6)

5.7

73.6

(10.1)

6.6

Group

78.4

(4.5)

8.5

89.9

(10.4)

9.7

Remuneration to senior management during the year:

Parent Company

Chairman of the Board, Jan Svensson Board Member, Eric Douglas

Board Member, Cecilia Fasth

Parent Company
Chairman of the Board, Jan Svensson	0.7	0.7	0.7	0.7
Board Member, Eric Douglas	0.4	0.4	0.4	0.4
Board Member, Cecilia Fasth	0.4	0.4	0.4	0.4
Board Member, Morten Falkenberg	0.4	0.4	0.4	0.4
Board Member, Annica Bresky	0.4	0.4	0.4	0.4
Board Member, Teresa Enander	0.4	0.4	0.4	0.4
CEO, Bodil Sonesson	4.9	5.2	0.4	0.2	1.6	2.2	6.9	7.6
Other senior management, 4 (3) individuals	9.0	7.0	0.5	0.1	0.3	0.2	1.2	0.9	0.1	1.1	11.1	9.3
16.6	14.9	0.9	0.3	0.3	0.2	2.8	3.1	0.1	1.1	20.7	19.6
Subsidiaries
Other senior management, 2 (4) individuals	3.6	12.6	0.1	4.6	0.2	0.5	1.6	2.3	0.7	5.5	20.7
Group	20.2	27.5	1.0	4.9	0.5	0.7	4.4	5.4	0.1	1.8	26.2	40.3

Social security contributions 2020 2019

(of which pension expenses)

2020 2019

2020

Salaries and other (of which variable remuneration remuneration)

2019

Board fees 2020 2019

Basic salary/Variable remuneration 2020 2019

2020

Other beneﬁtsPension expenses

2019

Pension
expenses
Pension	Share-based
expenses	payments	Total
2020 2019	2020 2019

Salaries and other (of which variable

remunerationremuneration)

2020 2019

FAGERHULT GROUP ANNUAL REPORT 2020 69

Cont. Note 2

Remuneration to the Board of Directors was determined at the 2020 AGM. No additional remuneration other than Board fees has been paid to the Board of Directors, with the exception of remuneration for travel expenses. Other senior management refers to the Group management and those individuals responsible for the various business areas. Other beneﬁts refer to company cars.

Remuneration policy

The Chairman of the Board and Board members receive Board fees in accordance with the resolutions of the AGM. Remuneration is not paid to members of the Board employed within the Group.

Remuneration to the CEO is determined by the Board on the basis of proposals made by the Remuneration Committee. Remuneration to other senior management has been approved by the Remuneration Committee following proposals from the CEO.

Remuneration to the CEO and other senior management consists of basic salary, variable remuneration, company car beneﬁts and pensions. The balance between basic salary and variable remuneration is to be in proportion to the employee's responsibilities and authority.

For the CEO, annual variable remuneration is maximised at the equivalent of 50 per cent of ﬁxed salary. The variable salary is based on the Group's earnings per share. In addition to the annual bonus, the CEO is covered by the performance-based share-savings plan described below.

For other senior management, annual variable remuneration is capped at 30-40 per cent of basic salary. Variable remuneration is typically based on improvement, compared to the previous year, in terms of each individual's respective responsibil- ity for operating proﬁt, the Group's earnings per share and the outcome of individual activity plans.

Pensions

The retirement age of the CEO and other senior management is 65. Deﬁned-contribution pension insurance corresponding to 35 per cent of the ﬁxed annual salary is paid for the CEO. Pension expenses for the CEO in 2019 also includes expenses for 2018. Pension beneﬁts for other senior management are paid within the framework of the applicable ITP supplementary pension plan.

Severance Pay

For the CEO, the notice period for termination of employment is 12 months if termination is initiated by the company and six months if initiated by the CEO.

If termination is initiated by the company without reason for termination, the CEO is entitled to severance pay corresponding to 12 months' salary. Severance pay is deducted against other earned income.

For other senior management, the notice period is 12 months if initiated by the Company, and six months if initiated by the employee. No separate agreements exist regarding retirement age, future pension or severance pay to Board members and other senior management.

Performance-based share-savings plan

The company's 2012 AGM resolved to implement a performance-based share-savings plan for the CEO, senior management and a number of key employees within the Group. Additional performance-based share-savings plans were then approved by the AGMs in 2013, 2014, 2015, 2016, 2017, 2018 and 2019. In the ﬁrst plan, a total of 27 people were oﬀered the opportunity to participate, of which 25 accepted. In the second plan, 29 people were oﬀered the opportunity to participate, of which 20 accepted. In the third plan, 34 people were oﬀered the opportunity to participate, of which 31 accepted. In the fourth plan, 33 people were oﬀered the opportunity to participate, of which 9 accepted. In the ﬁfth plan, 29 people were oﬀered the opportunity to participate, of which 22 accepted. In the sixth plan, 37 people were oﬀered the opportunity to participate, of which 20 accepted.In the seventh plan, 48 people were oﬀered the opportunity to participate, of which 26 accepted.In the eighth plan, 50 people were oﬀered the opportunity to participate, of which 22 accepted.

Participation in the plan requires a personal investment in Fagerhult shares.

Following, under normal circumstances, a three-year vesting period, a cost-free allocation of shares in Fagerhult can be made to the participants, provided that certain conditions are met.

In order for the share awards to be eligible for the allotment of shares, participants are required to remain in employment within the Group and to retain their entire investment in Fagerhult shares acquired within the framework of the plan during the vesting period. Some of the allocated share awards (known as performance share awards) also require meeting a ﬁnancial performance target related to Fagerhult's average earnings per share. For the plans approved by the 2015, 2016, 2017, 2018 and 2019 AGMs, all share awards are so-called performance share awards, meaning that they are conditional on a ﬁnancial performance target.

The 2017 plan was concluded in 2020. The conditions for the performance share awards pertaining to average earnings per share for 2017-2018 were partially fulﬁlled and 10,480 shares were allocated to the participants.

For the remaining two plans, in accordance with the conditions for the plans, the remaining participants have acquired a total of around 63,000 shares in Fagerhult.

A total of approximately 205,449 share awards have been allocated to plan partici- pants, of which 32,160 to the CEO and 173,619 to other senior management.

For the 2018 plan, the ﬁnancial performance target pertains to average earnings per share for the 2018-2019 ﬁnancial years. For the 2018 plan, achievement of the ﬁnancial performance target was 0 per cent, which implied an allocation of 0 shares. Based on the proﬁt for the year, this results in an impact of approximately SEK 0.00. For the 2019 plan, the ﬁnancial performance target pertains to average earnings per share for the 2019-2020 ﬁnancial years. A maximum of about 118,000 shares can be allocated as part of the 2019 plan. The valuation of the allocated share awards is based on the market price of the share at the time of allotment, with a deduction for the lack of dividend.

The total cost in 2020 for all share-savings plans was MSEK 2.0 (6.3) or

SEK 0.01 (0.04) per share. Earnings per share at maximum allocation is estimated to be SEK 0.00 based on the proﬁt for the year.

Note 3 | Financial income

Interest income Dividends Exchange-rate gains Total

Of which Group companies

Interest income	2.4	4.5	106.1	126.3
Dividends	1.1	0.6	-	-
Exchange-rate gains	22.0	33.3	-	6.0
Total	25.5	38.4	106.1	132.3
Of which Group companies	-	-	(105.7)	(124.5)

Note 4 | Financial expenses

Interest expenses

Interest expenses on lease liabilities Exchange-rate losses

Impairment of shares and participations Other ﬁnancial expenses

Total

Of which Group companies

Group 2020 2019

Parent Company 2020 2019

Group 2020 2019

Parent Company 2020 2019

Interest expenses	55.7	64.6	46.7	54.7
Interest expenses on lease liabilities	15.2	18.1	-	-
Exchange-rate losses	56.3	46.8	39.5	31.2
Impairment of shares and participations	5.6	-	-	-
Other ﬁnancial expenses	8.5	8.0	8.5	8.0
Total	141.3	137.5	94.7	93.9
Of which Group companies	-	-	(0.6)	(1.4)

Note 5 | Financial assets and ﬁnancial liabilities

GROUP Financial assets

Derivative instruments - held for trading (included in the item, other receivables)

Trade payables Other liabilities

Short-term borrowings - no hedge accounting applied Current lease liabilities

Other non-current liabilities

Long-term borrowings - hedge accounting Non-current borrowings - no hedge accounting applied Non-current lease liabilities

Financial liabilities

Cash and cash equivalents

Derivative instruments - held for trading (included in the item, other receivables)

Other shares and participations Other non-current receivables Trade receivables

Financial assets

Other shares and participations

9.8

14.5

Other non-current receivables

13.4

11.6

Trade receivables

1,122.2

1,426.8

Derivative instruments - held for trading (included in the item, other receivables)

1.5

Cash and cash equivalents

1,624.0

1,133.5

Financial liabilities

Long-term borrowings - hedge accounting

319.1

339.6

Non-current borrowings - no hedge accounting applied

3,098.7

3,338.6

Non-current lease liabilities

n/a

651.2

n/a

779.7

Other non-current liabilities

150.1

Short-term borrowings - no hedge accounting applied

47.6

73.8

Current lease liabilities

n/a

133.4

n/a

148.3

Trade payables

556.0

689.5

Other liabilities

106.1

99.1

Derivative instruments - held for trading (included in the item, other receivables)

18.2

20.8

IFRS 9 Category

1 = Financial assets at amortised cost.
2 = Financial assets recognised at FVTPL.
3 = Financial liabilities recognised at FVTPL.
IFRS 9 Category
4 = Financial liabilities at amortised cost. Lease liabilities are measured pursuant to IFRS 16.

2020

Carrying amount

Fair valueIFRS 9 Category

Derivative instruments outstanding per 31 December 2020 pertained to currency forward contracts with a nominal value of MSEK 50 (122). Fair value based on observable data. Refer also to Note 30, Hedging.

Note 6 | Trade receivables and credit risks/provision for credit losses

Of which covered by credit insurance

Carrying amount

Trade receivables outstanding ECL allowances

Trade receivables outstanding	1,221.9	1,525.2	-	-
ECL allowances	-99.7	-98.4	-	-
Carrying amount	1,122.2	1,426.8	-	-
Of which covered by credit insurance	(443.2)	(526.8)	-	-

Note 7 | Income from shares in subsidiaries

Group 2020 2019

Parent Company 2020 2019

2019

Carrying amount

Fair value

Parent Company 2020 2019

Impairment of loan receivable on Lighting Innovations Africa (Pty) Ltd

Dividends received

Total

Dividends received	224.6	143.8
Impairment of loan receivable on Lighting Innovations Africa (Pty) Ltd	-107.3	-
Total	117.3	143.8

Reversed, unutilised provisions Provision for the year Translation diﬀerences Closing provision

Acquisitions of subsidiaries Divestments of subsidiaries Conﬁrmed losses

Change in provision for credit losses Opening provision

Change in provision for credit losses
Opening provision	-98.4	-28.4	-	-
Acquisitions of subsidiaries	-	-69.7	-	-
Divestments of subsidiaries	1.1	-	-	-
Conﬁrmed losses	4.5	2.5	-	-
Reversed, unutilised provisions	10.9	10.2	-	-
Provision for the year	-25.7	-14.8	-	-
Translation diﬀerences	7.9	1.8	-	-
Closing provision	-99.7	-98.4	-	-

Group 2020 2019

Parent Company 2020 2019

Note 8 | Depreciation/amortisation and impairment

Amortisation of intangible assets in the Group was MSEK 111.0 (87.2), depreciation of property, plant and equipment totalled MSEK 222.8 (231.2) and depreciation of right-of-use assets amounted to MSEK 161.9 (160.4). Impairment of goodwill amounted to MSEK 48.6 (0.0) and of brands to MSEK 14.1 (0.0). Depreciation/ amortisation and impairment are speciﬁed per function in the income statements as follows:

Total depreciation/amortisation and impairment

Right-of-use assets Cost of goods sold Selling expenses Administrative expenses Total

Selling expenses Administrative expenses Total

Equipment, ﬁxtures and ﬁttingsGoodwill

Other operating costs Total

Brands

Cost of goods sold Other operating costs Total

Other intangible assets Cost of goods sold Selling expenses Administrative expenses Total

Land and buildings Cost of goods sold Selling expenses Administrative expenses Total

Plant and machinery Cost of goods sold Total

Cost of goods sold

Goodwill
Other operating costs	48.6	-	-	-
Total	48.6	-	-	-
Brands
Cost of goods sold	3.3	3.3	-	-
Other operating costs	14.1	-	-	-
Total	17.4	3.3	-	-
Other intangible assets
Cost of goods sold	96.5	78.7	-	-
Selling expenses	7.3	3.4	-	-
Administrative expenses	3.9	1.8	-	-
Total	107.7	83.9	-	-
Land and buildings
Cost of goods sold	24.6	21.8	-	-
Selling expenses	19.6	14.0	-	-
Administrative expenses	8.0	10.4	-	-
Total	52.2	46.2	-	-
Plant and machinery
Cost of goods sold	105.7	114.5	-	-
Total	105.7	114.5	-	-
Equipment, ﬁxtures and ﬁttings
Cost of goods sold	29.8	18.8	-	-
Selling expenses	16.0	24.3	-	-
Administrative expenses	19.1	27.4	-	-
Total	64.9	70.5	-	-
Right-of-use assets
Cost of goods sold	48.9	50.4	-	-
Selling expenses	78.0	76.3	-	-
Administrative expenses	35.0	33.7	-	-
Total	161.9	160.4	-	-

Total depreciation/amortisation and impairment	558.4	478.8	-	-

Note 9 | Income tax/tax on proﬁt for the year

Group 2020 2019

Company 2020 2019

ParentGroup 2020 2019

Current tax	129.7	193.3	-	57.8
Change due to altered tax rate in Sweden	-	-0.1	-	-
Deferred tax	-485.4	-12.3	-7.6	-
Total	-355.7	180.9	-7.6	57.8
Diﬀerence between the Group's tax expense and the tax expense based on current rates
Reported proﬁt before tax	216.7	695.7	80.9	412.0
Tax according to current tax rates, 21.4% (21.4)	46.4	148.9	17.3	88.2
Change due to altered tax rate in Sweden	-	1.7	-	-
Tax eﬀect of non-deductible expenses	39.1	18.8	23.5	0.5
Tax eﬀect of non-taxable income	-9.6	-10.6	-48.4	-30.9
Eﬀect of changed tax legislation in Italy	-436.3	-	-	-
Eﬀect of foreign tax rates	4.7	22.1	-	-
Income tax/tax on proﬁt for the year recognised in proﬁt or loss	-355.7	180.9	-7.6	57.8

Parent

Company 2020 2019

Note 10 | Deferred tax

Deferred tax expense/ income for the year Deferred tax income referring to temporary diﬀerences Deferred tax expense referring to temporary diﬀerences Change due to altered tax rate in Sweden Total

Deferred tax expense/ income for the year
Deferred tax income referring to temporary diﬀerences	-498.2	-22.1	-7.6	-
Deferred tax expense referring to temporary diﬀerences	12.8	9.9	-	-
Change due to altered tax rate in Sweden	-	-0.1	-	-
Total	-485.4	-12.3	-7.6	-

Temporary diﬀerences

Group 2020 2019

Parent Company 2020 2019

Temporary diﬀerences referring to the following items have resulted in deferred tax liabilities and deferred tax assets. These items have indeﬁnite useful lives.

Temporary diﬀerences relating to investments in subsidiaries for which deferred tax liabilities have not been recognised, as a sale would not result in taxation.

Total deferred tax assets

Current receivables Pension provisions Non-current liabilities Current liabilities Tax losses

Machinery and equipment Right-of-use assets Other ﬁnancial assets Inventories

Deferred tax assets Intangible assets Buildings

Total deferred tax liabilities

Machinery and equipment Current receivables Untaxed reserves Non-current liabilities Current liabilitiesDeferred tax liabilities Intangible assets Buildings

Deferred tax liabilities
Intangible assets	449.8	919.8	-	-
Buildings	77.9	80.1	-	-
Machinery and equipment	6.7	3.6	-	-
Current receivables	-	0.1	-	-
Untaxed reserves	7.6	8.4	-	-
Non-current liabilities	3.8	4.4	-	-
Current liabilities	1.7	0.6	-	-
Total deferred tax liabilities	547.5	1,017.0	-	-
Deferred tax assets
Intangible assets	0.2	-	-
Buildings	67.1	69.2	-	-
Machinery and equipment	3.3	1.0	-	-
Right-of-use assets	5.5	3.7	-	-
Other ﬁnancial assets	-	2.5	-	-
Inventories	29.1	33.7	-	-
Current receivables	19.5	13.7	-	-
Pension provisions	24.8	21.1	0.6	-
Non-current liabilities	2.9	2.6	-	-
Current liabilities	21.7	31.3	-	-
Tax losses	22.1	-	7.0	-
Total deferred tax assets	196.2	178.8	7.6	-

Temporary diﬀerences relating to investments in subsidiaries for which deferred tax liabilities have not been recognised, as a sale would not result in taxation.	1,888.9	1,677.1	-	-

Change in deferred tax assets

Opening balance

Acquisitions of subsidiaries Divestment of subsidiaries Right-of-use assets

Change in temporary diﬀerences recognised in proﬁt or loss Change in temporary diﬀerences recognised in equity

Translation diﬀerences Closing balance

Group 2020 2019

Parent Company 2020 2019

Change in deferred tax liabilities Opening balance Acquisitions of subsidiaries Change in temporary diﬀerences recognised in proﬁt or loss Translation diﬀerences Closing balance

Italian tax decree

Group 2020 2019

Parent Company 2020 2019

Change in deferred tax assets
Opening balance	178.8	29.2	-	-
Acquisitions of subsidiaries	-	150.2	-	-
Divestment of subsidiaries	-5.3	-	-	-
Right-of-use assets	2.7	2.9	-	-
Change in temporary diﬀerences recognised in proﬁt or loss	21.5	-10.7	7.6	-
Change in temporary diﬀerences recognised in equity	0.7	7.5	-	-
Translation diﬀerences	-2.2	-0.3	-	-
Closing balance	196.2	178.8	7.6	-
Change in deferred tax liabilities
Opening balance	1,017.0	334.7	-	-
Acquisitions of subsidiaries	-	703.1	-	-
Change in temporary diﬀerences recognised in proﬁt or loss	-463.9	-23.0	-	-
Translation diﬀerences	-5.6	2.2	-	-
Closing balance	547.5	1,017.0	-	-

During 2020, the Italian government introduced several programs/decrees to support the Italian economy and Italian companies from the negative impacts of Covid-19. In the decree resolved on 14 August 2020, the 'August Decree', reliefs and support are granted for several separate areas including corporate and tax measures.

Within the August Decree's area of tax measures, a revaluation of tangible or intangible assets or the realignment of accounts values and tax values of a certain assets is available. For Italian companies which accounts in accordance with IFRS, such aforementioned realignment is applicable. To qualify for the new measures, the accounting for 2019, 2020 should be complete and consistent plus a substitute tax of 3 per cent of the realigned value amount is payable. The Italian general corporate tax rate is 27,7 per cent. The substitute tax can be paid in three equal instalments during 2021-2023.

As a result of the new tax legislation, iGuzzini illuminazione S.p.A. ('iGuzzini') has decided to realign the book value with the tax value of its trademark 'iGuzzini' and for this to take place in the annual accounts for 2020. Prior to the realignment, the iGuzzini trademark had a book value in iGuzzini (and the Group) 1,661 MSEK with a deferred tax amounting to 488 MSEK which has been reversed in the income statement on the line income tax for 2020.

As a consequence of the realignment the corresponding amount coming out of the realignment is converted into the restricted equity reserve in iGuzzini's annual accounts for 2020. The ﬁscal depreciation time period for the amount converted into the restricted reserve is 18 years, with the ﬁrst depreciation in 2021. This means that 27 MSEK per year will be made available and converted back into unrestricted reserve during each of the 18 years following 2020.

For iGuzzini (and the Group), the above decision entails an extraordinary tax charge of the substitute tax in the amount of 52 MSEK in the annual accounts for 2020 together with the deferred tax credit of 488 MSEK netting to 436 MSEK as reported above. Also, 1,661 MSEK is converted into the restricted reserve. The aforementioned tax allocation amount will aﬀect iGuzzini's (and the Group's) results for 2020 with the corresponding amount.

Note 11 | Intangible assets

Group

2020

2019

Parent Company 2020 2019

Acquisitions of subsidiaries Sales and disposals Translation diﬀerences Closing accumulated cost Opening impairment Impairment for the year Sales and disposals Translation diﬀerences

Closing accumulated impairment Carrying amount

Brands Opening cost

Acquisitions of subsidiaries Sales and disposals Translation diﬀerences Closing accumulated cost Opening amortisation Acquisitions of subsidiaries Amortisation and impairment for the year Sales and disposals

Translation diﬀerences

Closing accumulated amortisation Carrying amount

Other intangible assets Opening cost

Acquisitions of subsidiaries Purchases

Sales and disposals Reclassiﬁcations Translation diﬀerences Closing accumulated cost Opening amortisation Acquisitions of subsidiaries Amortisation for the year Sales and disposals Reclassiﬁcations Translation diﬀerences

Closing accumulated amortisation Carrying amount

Goodwill
Opening cost	3,141.8	2,238.8	-	-
Acquisitions of subsidiaries	-	868.7	-	-
Sales and disposals	-51.6	-	-	-
Translation diﬀerences	-108.1	34.3	-	-
Closing accumulated cost	2,982.1	3,141.8	-	-
Opening impairment	-138.9	-138.9	-	-
Impairment for the year	-48.6	-	-	-
Sales and disposals	51.6	-	-	-
Translation diﬀerences	-3.0	-	-	-
Closing accumulated impairment	-138.9	-138.9	-	-
Carrying amount	2,843.2	3,002.9	-	-
Brands
Opening cost	2,688.6	933.7	-	-
Acquisitions of subsidiaries	-	1,750.1	-	-
Sales and disposals	-14.1	-	-	-
Translation diﬀerences	-112.3	4.8	-	-
Closing accumulated cost	2,562.2	2,688.6	-	-
Opening amortisation	-57.8	-44.4	-	-
Acquisitions of subsidiaries	-	-7.1	-	-
Amortisation and impairment for the year	-17.4	-3.3	-	-
Sales and disposals	14.1	-	-	-
Translation diﬀerences	4.9	-3.0	-	-
Closing accumulated amortisation	-56.2	-57.8	-	-
Carrying amount	2,506.0	2,630.8	-	-
Other intangible assets
Opening cost	882.1	425.2	-	-
Acquisitions of subsidiaries	-	400.4	-	-
Purchases	25.1	52.4	-	-
Sales and disposals	-7.3	-	-	-
Reclassiﬁcations	-10.6	-	-	-
Translation diﬀerences	-34.6	4.1	-	-
Closing accumulated cost	854.7	882.1	-	-
Opening amortisation	-473.6	-254.5	-	-
Acquisitions of subsidiaries	-	-135.5	-	-
Amortisation for the year	-107.7	-83.9	-	-
Sales and disposals	5.9	-	-	-
Reclassiﬁcations	10.6	-	-	-
Translation diﬀerences	18.7	0.3	-	-
Closing accumulated amortisation	-546.1	-473.6	-	-
Carrying amount	308.6	408.5	-	-

The item Brands includes brands with carrying amounts of MSEK 2,492.1 (2,612.3) and indeﬁnite useful lives. These assets are subject to annual impairment testing.

The item Other intangible assets includes capitalised expenditure for product development which is internally generated, at a carrying amount of MSEK 20.0 (26.4) and an IT system with a carrying amount of MSEK 67.9 (104.8) and Technol- ogy valued at MSEK 220.3 (273.7) upon acquisition.

Impairment testing of goodwill and brands is recognised in proﬁt or loss under the item, Other operating costs.

Cont. Note 11

Impairment testing of Goodwill and Brands with indeﬁnite useful lives

On 1 January 2020, the carrying amount for goodwill was reallocated based on relative fair values in conjunction with the changes in the internal organisation and external segment reporting. Each of the Group's 13 brands belong to one of the business areas and therefore did not require reallocation. As of this date, the carry- ing amounts for goodwill of MSEK 48.6 and brands of MSEK 14.1 were allocated to the new segment Lighting Innovations. Both of these items were fully written down in 2020, refer also to Note 31 Changes in the Group's composition and Note 34

Other operating costs.

As of 31 December 2019, goodwill and brands for the Group's cash-generating units (CGUs), as identiﬁed according to the previous segment reporting, were distributed as follows; Northern Europe (goodwill MSEK 131.1 and brands MSEK 10.4), the UK and Ireland (goodwill MSEK 262.0 and brands MSEK 19.8), Western and Southern Europe (goodwill MSEK 2,341.5 and brands MSEK 2,543.4) and Africa, Asia and the Paciﬁc (goodwill MSEK 267.3 and brands MSEK 38.7).

As of 31 December 2020, Goodwill and brands are distributed among the Group's cash-generating units (CGUs) and identiﬁed per segment as follows.

Collection Premium Professional Infrastructure Total

Collection	2,220.6	-	-	-
Premium	61.1	-	1,945.9	-
Professional	10.8	-	389.6	-
Infrastructure	199.6	-	507.7	-
Total	2,492.1	-	2,843.2	-

Brands 2020 2019

Goodwill 2020 2019

Each year, the Group performs a test for each CGU to assess whether any need for impairment exists for goodwill and brands in line with the applied accounting policies.

The recoverable amount for each CGU is determined by value-in-use calculations, which comprise the present value of estimated future payments expected to arise from an asset during its useful life, including the calculated residual value at the end of the asset's useful life. These calculations assume estimated future cash ﬂows based on ﬁnancial forecasts for the coming eight-year period (ﬁve-year period), as approved by management. The projection period has been changed as part of adapting the strategic plan to the eﬀects of Covid-19. To extrapolate cash ﬂows beyond this period, a growth rate of 2.5 per cent (0.75-3.0) has been applied. The cash-ﬂow method has been applied.

Management has designated a budgeted operating margin based on the previous results and on expectations of future market development. The discount rate before tax which has been applied is 10 per cent for all CGUs (10 per cent for all CGUs except Africa, Asia and the Paciﬁc where a rate of 12 per cent is applied). At present, the risk-free interest rate is historically low. After taking into account the risk-free interest rate and stock market risk premiums, the discount rate has been lowered compared with the year earlier.

SIGNIFICANT ASSUMPTIONS

Market share and growth

The current market share has been applied to future periods. Forecasts are based on previous experience and on external sources of information. The estimated growth rate used to extrapolate cash ﬂows beyond the budget period was as follows (Northern Europe 0.75 per cent, UK and Ireland 1 per cent, Western and Southern Europe 3 per cent and Africa, Asia and the Paciﬁc 2.5 per cent):

Collection 2.5%

Premium 2.5%

Professional 2.5%

Infrastructure 2.5%

Expenses

The forecast of personnel costs is based on the expected inﬂation rate, increases in real salary (historical average) and the planned streamlining of the company's production. The forecast is in line with previous experience and external sources of information.

Exchange rates

Exchange-rate forecasts are based on the current listed exchange rates and on listed forward rates. The forecast is in accordance with external sources of information.

Variables applied

The discount rate before tax which has been applied is 10 per cent for all CGUs (10 per cent for all CGUs except Africa, Asia and the Paciﬁc where a rate of 12 per cent is applied).

Exchange rates:

EUR 10.54 (10.59)

GBP 11.90 (12.01)

Sensitivity analysis as per 31 December 2020 - the discount rate before taxes was 1 per cent higher.

- the estimated growth rate used to extrapolate cash ﬂows for the entire projection period was 1 per cent lower.

If the discount rate before tax used to calculate value in use for the CGU had been 1 per cent higher than the management's assessment (11 per cent instead of 10 per cent), this would not have indicated any impairment in any CGU. If the projected growth rate were to decrease by a full 1 per cent for the entire projection period, no impairment would be required in any of the CGUs.

Sensitivity analysis as per 31 December 2019

If the discount rate before tax used to calculate value in use for the CGU Western and Southern Europe had been 1 per cent higher than the management's assess- ment (11 per cent instead of 10 per cent), the Group would have reported an impair- ment of the carrying amount of MSEK 385. If the estimated growth rate used to extrapolate cash ﬂows beyond the budget period was 2 per cent instead of the management's assessment of 3 per cent, the Group would have recognised an impairment of the carrying amount of MSEK 93. The recoverable amount for other CGUs exceeds the carrying amounts for goodwill and brands with indeﬁnite useful lives by a signiﬁcant margin.

Note 12 | Property, plant and equipment

Group

2020

2019

Parent Company 2020 2019

Land and buildings Opening cost

Acquisitions of subsidiaries Purchases

Sales and disposals Translation diﬀerences Closing accumulated cost Opening depreciation Acquisitions of subsidiaries Depreciation for the year Sales and disposals Translation diﬀerences

Closing accumulated depreciation Carrying amount

Plant and machinery Opening cost

Acquisitions of subsidiaries Purchases

Sales and disposals Translation diﬀerences Closing accumulated cost Opening depreciation Acquisitions of subsidiaries Depreciation for the year Sales and disposals Translation diﬀerences

Closing accumulated depreciation Carrying amount

Equipment, ﬁxtures and ﬁttings

Opening cost

Acquisitions of subsidiaries Purchases

Sales and disposals Translation diﬀerences Closing accumulated cost Opening depreciation Acquisitions of subsidiaries Depreciation for the year Sales and disposals Translation diﬀerences

Closing accumulated depreciation Carrying amount

Construction in progress Opening cost

Acquisitions of subsidiaries

Land improvements during the year Reclassiﬁcations

Translation diﬀerences Carrying amount

Land and buildings
Opening cost	1,803.3	491.1	-	-
Acquisitions of subsidiaries	-	1,283.1	-	-
Purchases	23.4	24.4	-	-
Sales and disposals	-0.3	-4.3	-	-
Translation diﬀerences	-78.6	9.0	-	-
Closing accumulated cost	1,747.8	1,803.3	-	-
Opening depreciation	-660.7	-225.9	-	-
Acquisitions of subsidiaries	-	-390.9	-	-
Depreciation for the year	-52.2	-46.2	-	-
Sales and disposals	0.1	4.2	-	-
Translation diﬀerences	29.3	-1.9	-	-
Closing accumulated depreciation	-683.5	-660.7	-	-
Carrying amount	1,064.3	1,142.6	-	-
Plant and machinery
Opening cost	2,521.2	1,170.3	-	-
Acquisitions of subsidiaries	-	1,240.9	-	-
Purchases	86.4	97.5	-	-
Sales and disposals	-55.9	-40.5	-	-
Translation diﬀerences	-110.6	53.0	-	-
Closing accumulated cost	2,441.1	2,521.2	-	-
Opening depreciation	-2,033.3	-912.0	-	-
Acquisitions of subsidiaries	-	-1,034.7	-	-
Depreciation for the year	-105.7	-114.5	-	-
Sales and disposals	26.5	41.1	-	-
Translation diﬀerences	88.5	-13.2	-	-
Closing accumulated depreciation	-2,024.0	-2,033.3	-	-
Carrying amount	417.1	487.9	-	-
Equipment, ﬁxtures and ﬁttings
Opening cost	949.1	582.1	-	-
Acquisitions of subsidiaries	-	312.1	-	-
Purchases	48.7	68.4	-	-
Sales and disposals	-21.1	-25.2	-	-
Translation diﬀerences	-44.7	11.7	-	-
Closing accumulated cost	932.0	949.1	-	-
Opening depreciation	-735.8	-437.0	-	-
Acquisitions of subsidiaries	-	-245.9	-	-
Depreciation for the year	-64.9	-70.5	-	-
Sales and disposals	19.9	23.1	-	-
Translation diﬀerences	34.7	-5.5	-	-
Closing accumulated depreciation	-746.1	-735.8	-	-
Carrying amount	185.9	213.3	-	-
Construction in progress
Opening cost	32.8	34.5	-	-
Acquisitions of subsidiaries	-	14.2	-	-
Land improvements during the year	22.8	21.8	-	-
Reclassiﬁcations	-29.3	-37.9	-	-
Translation diﬀerences	-0.4	0.2	-	-
Carrying amount	25.9	32.8	-	-

Note 13 | Financial assets

Carrying amount

Acquisitions during the year, see Note 31

Shares and participations in subsidiaries Opening cost

Shares and participations in subsidiaries
Opening cost	2,963.6	616.6
Acquisitions during the year, see Note 31	-	2,347.0
Carrying amount	2,963.6	2,963.6

New receivables Amortised receivables Closing receivables

Receivables from subsidiaries Opening receivables

Receivables from subsidiaries
Opening receivables	4,926.2	3,179.8
New receivables	-	1,797.2
Amortised receivables	-814.7	-50.8
Closing receivables	4,111.5	4,926.2

Parent Company 2020 2019

Note 14 | Shares and participations in subsidiaries

Other shares and participations Opening cost

Acquisitions of subsidiaries Divestments during the year Acquisitions during the year Impairment during the year Closing receivables

Other non-current receivables Opening receivables Acquisitions of subsidiaries New receivables

Closing receivables

The fair values of the Group's ﬁnancial assets correspond with their carrying amounts.

Details of wholly owned subsidiaries, their corporate identity numbers and registered oﬃces:Subsidiaries:

Fagerhult Retail AB

Whitecroft Lighting Holdings Ltd, UK Elenco Lighting AB

WE-EF Leuchten GmbH, Germany iGuzzini illuminazione S.p.A, Italy Carrying amount

Sub-subsidiaries:

Ateljé Lyktan AB

Fagerhult Belysning AS, Norway Fagerhult AS, Denmark Fagerhult OY, Finland I-Valo OY, Finland Fagerhult Oü, Estonia Fagerhult BV, Netherlands Fagerhult NV, Belgium Fagerhult GmbH, Germany

LTS Licht & Leuchten GmbH, Germany LED Linear GmbH, Germany

LED Linear USA Inc, USA LED Linear UK Ltd, UK

Arlight Aydinlatma A.S., Turkey

Lighting Innovations Africa (pty) Ltd, South Africa Whitecroft Lighting Ltd, UK

Corporate Identity Number Registered oﬃcesCorporate Identity Number Registered oﬃcesGroup 2020

2019

Parent Company 2020 2019

Other shares and participations
Opening cost	14.5	18.7	-	-
Acquisitions of subsidiaries	-	4.7	-	-
Divestments during the year	-	-8.9	-	-
Acquisitions during the year	0.9	-	-	-
Impairment during the year	-5.6	-	-	-
Closing receivables	9.8	14.5	-	-

Group 2020

2019

Parent Company 2020 2019

Other non-current receivables
Opening receivables	11.6	4.2	-	-
Acquisitions of subsidiaries	-	7.2	-	-
New receivables	1.8	0.2	-	-
Closing receivables	13.4	11.6	-	-

Carrying amountNo. of shares

2020

2019

Fagerhults Belysning AB 556321-8659 Habo 2,500	337.2	337.2
Fagerhult Retail AB 556337-4924 Bollebygd 5,000	0.6	0.6
Whitecroft Lighting Holdings Ltd, UK 03848868 Ashton-under-Lyne 11,915	275.6	275.6
Elenco Lighting AB 556035-5090 Borås 1,800	2.9	2.9
WE-EF Leuchten GmbH, Germany HRB 208064 Bispingen 1	0.2	0.2
iGuzzini illuminazione S.p.A, Italy IT 00082630435 Macerata 21,050,000	2,347.1	2,347.1
Carrying amount	2,963.6	2,963.6

Share of equity, %No. of shares

2020 2019

Fagerhults Belysning Sverige AB 556122-2000 Habo 1,000	100	100
Ateljé Lyktan AB 556063-9634 Åhus 2,000	100	100
Fagerhult Belysning AS, Norway 937418906 Oslo 100	100	100
Fagerhult AS, Denmark 63.128 Ishöj 65	100	100
Fagerhult OY, Finland 0980280-0 Helsinki 6,000	100	100
I-Valo OY, Finland 1571418-8 Iittala 2,020	100	100
Fagerhult Oü, Estonia 10703636 Tallinn 5,400	100	100
Fagerhult BV, Netherlands 96121 IJsselstein 2,250	100	100
Fagerhult NV, Belgium BE 0492.822.044 Baaigem 9,400	100	100
Fagerhult GmbH, Germany 13135 B Hamburg 1	100	100
LTS Licht & Leuchten GmbH, Germany HRB 630906 Tettnang 1	100	100
LED Linear GmbH, Germany HRB8188 Neukirchen-Vluyn 1	100	100
LED Linear USA Inc, USA SRV 131038296 Niagara Falls 3,000	100	100
LED Linear UK Ltd, UK 8280741 London 150	100	100
Arlight Aydinlatma A.S., Turkey 790,361,767 Kazan/Ankara 50,000	100	100
Lighting Innovations Africa (pty) Ltd, South Africa 2015/099974/07 Port Elizabeth 1	-	100
Whitecroft Lighting Ltd, UK 03848973 Ashton-under-Lyne 2	100	100

FAGERHULT GROUP ANNUAL REPORT 2020 77

Cont. Note 14

Share of equity, %Sub-subsidiaries:

Corporate Identity Number Registered oﬃces

No. of shares

2020

2019

Fagerhult Lighting Ltd, Ireland Fagerhult Sp.z.o.o, Poland Fagerhult France, France Fagerhult S.L., Spain

Commtech Commissioning Services S.A., Spain Fagerhult Lighting System (Suzhou) Co. Ltd, China Fagerhult Trading (Hongkong) Co., Ltd

Eagle Lighting (Australia) Pty Ltd, Australia Organic Response Pty Ltd, Australia Fagerhult (NZ) Ltd, New Zealand Fagerhult SPb, Russia

WE-EF Trading & Design GmbH, Germany WE-EF Lighting Co. Ltd, Thailand

WE-EF Helvetica SA, Switzerland WE-EF Lighting Ltd, UK

WE-EF Lighting Pty. Ltd, Australia WE-EF Lighting USA LLC, USA WE-EF Lumiere S.A.S., France Flux Eclairage S.A.S, France

Veko Lightsystems International B.V.Netherlands Veko Lightsystems GmbH, Germany

Orlandi S.R.L., Italy iGuzzini illuminazione France SA, France iGuzzini illuminazione Iberica SA, Spain iGuzzini illuminazione Deutschland GmbH, Germany iGuzzini Illuminazione Österreich GmbH, Austria iGuzzini illuminazione UK Ltd, UK iGuzzini illuminazione Norge AS, Norway iGuzzini illuminazione Schweiz AG, Switzerland iGuzzini illuminazione Ooo, Russia iGuzzini Finland & Baltic Ltd., Finland iGuzzini Lighting (China) Co., Ltd., China Shanghai iGuzzini Trading Co., Ltd., China iGuzzini Hong Kong Ltd, Hong Kong iGuzzini S.E.A. Pte LTD, Singapore iGuzzini Middle East FZE, United Arab Emirates iGuzzini Lighting WLL, Qatar iGuzzini Lighting North America Inc., Canada iGuzzini Lighting USA, Ltd, USA iGuzzini Canada (9372-1801 Quèbec Inc), Canada 9850-333 Canada Inc., Canada

Sistemalux Inc., Canada

Designplan Lighting Ltd, UK 00784246 Sutton 360,300	100	100
Fagerhult Lighting Ltd, UK 3488638 London 40,000	100	100
Fagerhult Lighting Ltd, Ireland 98.834 Dublin 100	100	100
Fagerhult Sp.z.o.o, Poland 260213 Warsaw 1000	100	100
Fagerhult France, France 391138385 Lyon 4,200	100	100
Fagerhult S.L., Spain B84215722 Madrid 3,010	100	100
Commtech Commissioning Services S.A., SpainA83770263 Madrid 60,120	100	100
Fagerhult Lighting System (Suzhou) Co. Ltd, China 3200044439 Suzhou 1	100	100
Fagerhult Trading (Hongkong) Co., Ltd 39362546-000-05-08-5 Hong Kong 1	100	100
Eagle Lighting (Australia) Pty Ltd, Australia 124400933 Melbourne 500,001	100	100
Organic Response Pty Ltd, Australia ACN 618 122 277 Melbourne 100	100	100
Fagerhult (NZ) Ltd, New Zealand 3233074 Christchurch 1	100	100
Fagerhult SPb, Russia 1097847074544 Saint Petersburg 1	100	100
WE-EF Trading & Design GmbH, Germany HRB 101286 Bispingen 1	-	100
WE-EF Lighting Co. Ltd, Thailand 105524015230 Bangplee 16,800	100	100
WE-EF Helvetica SA, Switzerland CHE-115970534/CH-6 Geneva 1,000	100	100
WE-EF Lighting Ltd, UK 5925012148 Nottingham 30,000	100	100
WE-EF Lighting Pty. Ltd, Australia 64570065 Braeside 50,000	100	100
WE-EF Lighting USA LLC, USA 2922528 Warrendale 1	100	100
WE-EF Lumiere S.A.S., France 398371088 Satolas-et-Bonce 5,000	100	100
Flux Eclairage S.A.S, France 504356346 Satolas-et-Bonce 4,000	100	100
Veko Lightsystems International B.V.Netherlands 37041869 Shagen 40,000	100	100
Veko Lightsystems GmbH, Germany HRB 25170 Duisburg 1	100	100
Orlandi S.R.L., Italy IT 08091600158 Macerata 1	100	100
iGuzzini illuminazione France SA, France FR 61300816287 Paris 31,000	100	100
iGuzzini illuminazione Iberica SA, Spain A58675208 Barcelona 100,000	100	100
iGuzzini illuminazione Deutschland GmbH, GermanyDE 129381264 Munich 1	100	100
iGuzzini Illuminazione Österreich GmbH, AustriaATU72916623 Vienna 1	100	100
iGuzzini illuminazione UK Ltd, UK 2391370 London 121,578	100	100
iGuzzini illuminazione Norge AS, Norway NO 979 575 785 Oslo 500	100	100
iGuzzini illuminazione Schweiz AG, Switzerland 105493484 Zürich 3,000	100	100
iGuzzini illuminazione Ooo, Russia 7719275374 Moscow 1	99	99
iGuzzini Finland & Baltic Ltd., Finland FI06691842 Helsinki 105	100	89
iGuzzini Lighting (China) Co., Ltd., China 310000400453617 Shanghai 1	100	100
Shanghai iGuzzini Trading Co., Ltd., China 9131010669878976XQShanghai 1	100	100
iGuzzini Hong Kong Ltd, Hong Kong 788598 Hong Kong 2,000,000	100	100
iGuzzini S.E.A. Pte LTD, Singapore 200604874N Singapore 400,000	100	100
iGuzzini Middle East FZE, United Arab Emirates 1034 Dubai 1	100	100
iGuzzini Lighting WLL, Qatar 64564 Doha 200	95	95
iGuzzini Lighting North America Inc., Canada 1214227611 IC0001 Québec 2,000,100	-	70
iGuzzini Lighting USA, Ltd, USA 27-1923628 Delaware 100	70	70
iGuzzini Canada (9372-1801 Quèbec Inc), Canada 1173367138 Québec 32,001,000	100	100
9850-333 Canada Inc., Canada 1224250025 IC0001 Québec 10,516,742	70	70
Sistemalux Inc., Canada 1012637761 IC0001 Québec 12,248,100	70	70

Note 15 | Prepaid expenses and accrued income

Prepaid rent	3.9	0.4	-	-
Insurance	9.2	9.3	-	-
Licences	10.7	10.2	-	-
Consultancy fees	2.6	8.2
Supplier bonus	3.7	2.6	-	-
Advertising and marketing	2.0	15.7	-	-
Taxes and social security contributions	2.8	5.4	-	-
Non-invoiced income	4.0	4.8	-	-
Financial fees	2.7	13.0	2.5	12.7
Other items	14.3	16.8	1.7	0.9
Total	55.9	86.4	4.2	13.6

Note 16 | Inventories

Raw materials and consumables	497.9	596.5	-	-
Work in progress	123.2	145.3	-	-
Finished products and goods for resale	357.2	474.8	-	-
Goods in transit	19.4	30.5	-	-
Total	997.7	1,247.1	-	-

Group	Parent Company
2020	2019	2020 2019
0.9
13.6
Group	Parent Company
2020	2019	2020 2019

Expenses arising for inventories that have been expensed are included in the item Cost of goods sold and amounted to MSEK 2,409.7 (2,698.8).

Provision for obsolescence is included in the value of the inventories. Impairment amounted to MSEK 85.1 (30.9) and the amount recovered from previous years amounted to MSEK 97.1 (64.9). The previous year's provisions are reversed when goods are divested or scrapped.

Note 17 | Bank overdraft facilities and other borrowings

Agreed bank overdraft facilities at year end amounted to MSEK 284.8 (279.3) for the Group and MSEK 200.0 (250.0) for the Parent Company.

2020

Group 2019

Maturities for long-term loans:
Within one year	47.6	73.8	-	-
Between one and ﬁve years	2,224.2	3,608.7	2,096.7	3,423.9
After ﬁve years	1,193.6	69.5	1,113.6
Total	3,465.4	3,752.0	3,210.3	3,423.9

Parent Company 2020 2019

Contracted interest rates on the closing date had contractual periods of three months.

Short-term borrowings, EUR Short-term borrowings, THB Short-term borrowings, CAD Short-term borrowings, USD Total

Average contracted interest rate on borrowings: Long-term borrowings, EUR Long-term borrowings, GBP Long-term borrowings, ZAR Long-term borrowings, THB Long-term borrowings, CAD Total

2020	2019
Interest,	Liability,	Interest,	Liability,
%	SEK	%	SEK

Average contracted interest rate on borrowings:
Long-term borrowings, EUR	1.1	3,290.7	1.2	3,446.3
Long-term borrowings, GBP	1.1	126.4	1.1	139.4
Long-term borrowings, ZAR	-	-	9.1	90.7
Long-term borrowings, THB	-	-	-	-
Long-term borrowings, CAD	3.7	0.7	3.7	1.8
Total	3,417.8	3,678.2
Short-term borrowings, EUR	1.1	46.5	1.7	72.0
Short-term borrowings, THB	5.3	0.1	5.3	0.5
Short-term borrowings, CAD	3.7	0.7	3.7	0.9
Short-term borrowings, USD	2.0	0.3	2.0	0.4
Total	47.6	73.8

The carrying amount of the Group's borrowings corresponds with fair value, as the loans carry ﬂoating interest rates that are market-based.

Note 18 | Accrued expenses and deferred income

2020

Group 2019

Accrued salaries and remuneration	208.0	203.7	7.8	5.2
Customer bonuses	60.2	76.7	-	-
Accrued social security contributions	72.6	46.1	2.0	1.2
Claims	45.4	42.0	-	-
Financial items	3.8	14.7	1.6	3.4
Consultancy fees	7.6	14.6	-	1.0
Rent	12.0	11.7	-	0.1
Royalties	10.2	4.8	-	-
Audit fees	5.1	5.1	-	-
Shipping	1.9	3.8	-	-
Repair and maintenance	6.8	2.9	-	-
Temporary employees	0.3	2.1	-	-
Other items	38.2	32.4	1.7	0.9
Total	472.1	460.6	13.1	11.8

Parent Company 2020 2019

1.0

- - - - - 0.9 11.8

Note 19 | Pledged assets

For own liabilities Real estate mortgages Total pledged assets

For own liabilities
Real estate mortgages	17.7	18.3	-	-
Total pledged assets	17.7	18.3	-	-

Group 2020 2019

Note 20 | Contingent liabilities

Guarantees, customs authorities Guarantee, direct pensions Guarantees for subsidiaries Total contingent liabilitiesGuarantee FPG

Guarantee FPG	1.2	0.9	-	-
Guarantees, customs authorities	1.0	1.0	-	-
Guarantee, direct pensions	4.3	2.2	4.3	2.2
Guarantees for subsidiaries	-	-	44.3	45.1
Total contingent liabilities	6.5	4.1	48.6	47.3

Group 2020 2019

Note 21 | Provisions for pensions and similar commitments

Provisions for other pensions Total

Provisions for pensions PRI (interest-bearing)

Provisions for pensions PRI (interest-bearing)	68.9	71.2	-	-
Provisions for other pensions	116.6	119.1	4.8	-
Total	185.5	190.3	4.8	-

Deﬁned-beneﬁt plans

Parent Company 2020 2019

Group 2020 2019

Parent Company 2020 2019

Within the Group there are deﬁned-beneﬁt plans in Sweden, Turkey, Germany, France, Italy and Switzerland, in which employees retain the right to remuneration, after termination of employment, based on the ﬁnal salary and length of service. The Group does not have any plan assets.

Pension insurance with Alecta

ITP2 Plan commitments for retirement pensions and family pensions for salaried employees in Sweden are guaranteed through insurance with Alecta. According to a statement from the Swedish Financial Reporting Board, UFR 10, Classiﬁcation of ITP plans ﬁnanced by insurance in Alecta, this is a deﬁned-beneﬁt multi-employer plan. For the 2020 ﬁnancial year, the company did not have access to information that would enable it to report its proportional share of the plan's obligations, plan assets and costs, which means the plan could not be reported as a deﬁned-beneﬁt plan. The ITP 2 pension plan which is secured through insurance with Alecta is, therefore, reported as a deﬁned-contribution plan. Premiums for deﬁned-beneﬁt retirement and family pensions are calculated individually and depend, inter alia, on the insured party's salary, previously earned pension rights and remaining length of service. Expected fees for the next reporting period for ITP 2 insurance with Alecta amount to MSEK 38.0 (2019: MSEK 34.3). The Group's share of the total contribu- tions to the plan is negligible. The collective funding ratio is the market value of Alecta's assets as a percentage of insurance commitments calculated according to Alecta's actuarial methods and assumptions, which do not comply with IAS 19. The collective consolidation level is normally allowed to vary between 125 and 155 per cent. If Alecta's collective consolidation level falls below 125 per cent or exceeds 155 per cent, actions must be taken to create the conditions enabling the consoli- dation level to revert to the normal interval. For low consolidation levels, one measure could be raising the contractual premiums for taking up new insurance and expanding existing beneﬁts. With a high level consolidation, one measure could be to implement premium reductions. At the end of 2020, Alecta's surplus in the form of the collective consolidation level was 148 per cent (2019: 144 per cent).

Cont. Note 21

Acquisitions of subsidiaries

Current service cost Interest expenses Total

Speciﬁcation of changes in net debt recognised in the consolidated balance sheet: Net debt at beginning of year recognised in the approved balance sheet

Net cost recognised in proﬁt or loss Beneﬁt payments

Deﬁned-beneﬁt plans

The amounts recognised in the consolidated income statement are:

Settlement of pension plan Actuarial gains (-)/losses (+) Translation diﬀerences

Net debt at year end

The amounts recognised in the balance sheet are determined as follows:

Present value of commitments Net debt at year end

Total pension costs

Total pension costs recognised in the consolidated income statement: Total costs for deﬁned-beneﬁt plans Total costs for deﬁned-contribution plans Total pension costs

Discount rate, %

Pension costs are allocated in the consolidated income statement among the following items: Cost of goods sold

Selling expenses Administrative expenses Financial expenses Total

Actuarial assumptions

Signiﬁcant actuarial assumptions as of the closing date pertaining to pension liabilities in Sweden (expressed as weighted averages)

Net liability in Sweden

Future annual pension growth rate, %

Deﬁned-beneﬁt plans
The amounts recognised in the consolidated income statement are:
Current service cost	18.4	21.1
Interest expenses	1.9	1.5
Total	20.3	22.6
Speciﬁcation of changes in net debt recognised in the consolidated balance sheet:
Net debt at beginning of year recognised in the approved balance sheet	190.3	93.5
Acquisitions of subsidiaries	-	86.5
Net cost recognised in proﬁt or loss	20.3	22.6
Beneﬁt payments	-5.9	-9.2
Settlement of pension plan	-15.9	-9.0
Actuarial gains (-)/losses (+)	1.9	7.4
Translation diﬀerences	-5.2	-1.5
Net debt at year end	185.5	190.3
The amounts recognised in the balance sheet are determined as follows:
Present value of commitments	185.5	190.3
Net debt at year end	185.5	190.3
Total pension costs
Total pension costs recognised in the consolidated income statement:
Total costs for deﬁned-beneﬁt plans	20.3	22.6
Total costs for deﬁned-contribution plans	102.2	94.6
Total pension costs	122.5	117.2
Pension costs are allocated in the consolidated income statement among the following items:
Cost of goods sold	48.5	43.5
Selling expenses	45.7	44.0
Administrative expenses	26.4	28.2
Financial expenses	1.9	1.5
Total	122.5	117.2
Actuarial assumptions
Signiﬁcant actuarial assumptions as of the closing date pertaining to pension liabilities in Sweden (expressed as weighted averages)
Net liability in Sweden	68.8	71.2
Discount rate, %	0.80	1.05
Future annual pension growth rate, %	1.50	1.70

Group 2020 2019

Assumptions regarding future life expectancy are based on the insurance study DUS14.

Sensitivity analysis

If the discount rate decreases 0.5 per cent, the present value of obligations will rise 6.7 per cent (6.9). If the interest rate increases 0.5 per cent, the present value of obligations will decline 6.0 per cent (6.2). If inﬂation decreases 0.5 per cent, the present value of obligations will decline 6.3 per cent (6.1). If inﬂation increases 0.5 per cent, the present value of obligations will rise 6.9 per cent (6.7). A change of one year in useful life aﬀects the present value of obligations by 4.5 per cent (4.6).

Note 22 | Other non-current liabilities

Other non-current liabilities pertain exclusively to liabilities for estimated earnout payments attributable to acquisitions.

Of which recognised as current liability Closing liabilities

Veko Lightsystems International B.V.

Veko Lightsystems International B.V.	106.1	249.2	-	-
106.1	249.2	-	-
Of which recognised as current liability	-106.1	-99.1	-	-
Closing liabilities	0.0	150.1	-	-

Of which recognised as current liability

Translation diﬀerences Closing liabilities

Reversal of liabilities in proﬁt or loss:Change in liabilities for estimated earnout payments.

Opening liabilities

Liabilities paid:

Veko Lightsystems International B.V.

LED Linear UK Ltd, UK

Change in liabilities for estimated earnout payments.
Opening liabilities	249.2	368.0	-	-
Liabilities paid:
Veko Lightsystems International B.V.	-105.3	-98.7	-	-
Reversal of liabilities in proﬁt or loss:
Veko Lightsystems International B.V.	-41.2	-	-
LED Linear UK Ltd, UK	-	-21.8	-	-
Translation diﬀerences	3.4	1.7	-	-
Closing liabilities	106.1	249.2	-	-

Of which recognised as current liability	106.1	99.1	-	-

Cont. Note 22

Group 2020 2019

Parent Company 2020 2019

The conditional earnout payment recognised regarding the acquisition of Veko Lightsystems International B.V., the Netherlands, was based on certain predeter- mined proﬁt levels being met during 2018 to 2020. If contractual goals had been met, an earnout payment would be disbursed in cash during the 2020 ﬁnancial year. On 31 December 2020, part of the conditional earnout payment was reversed because the actual proﬁt for the company did not meet the given levels in the period in question. A proﬁt of MSEK 41.2 was recognised in the item Other revenue in proﬁt or loss for the 2020 ﬁnancial year. The conditional earnout payment recognised regarding the acquisition of LED Linear UK Ltd, UK, was based on certain predetermined proﬁt levels being met during 2017 to 2019. If contractual goals had been met, an earnout payment would have been disbursed in cash during the 2020 ﬁnancial year. On 31 December 2019, the entire conditional earn- out payment was reversed because the actual proﬁt for the company did not meet the given levels in the period in question. A proﬁt of MSEK 21.8 was recognised in the item Other revenue in proﬁt or loss for the 2019 ﬁnancial year.

Note 23 | Reconciliation of net debt

Net debt and changes in net debt are analysed below

Borrowings - due in <12 months (incl. overdraft facility) Borrowings - due in >12 months

Lease liabilities - due within one year Lease liabilities - due in >12 months Net debt

Cash and cash equivalents Borrowings - ﬂoating interest Lease liabilities

Net debt

Cash and cash equivalents

Cash and cash equivalents	1,624.0	1,133.5	952.2	325.7
Borrowings - due in <12 months (incl. overdraft facility)	-47.6	-73.8	-	-
Borrowings - due in >12 months	-3,417.8	-3,678.2	-3,210.3	-3,423.9
Lease liabilities - due within one year	-133.4	-148.3	-	-
Lease liabilities - due in >12 months	-651.2	-779.7	-	-
Net debt	-2,626.0	-3,546.5	-2,258.1	-3,098.2

Cash and cash equivalents	1,624.0	1,133.5	952.2	325.7
Borrowings - ﬂoating interest	-3,465.4	-3,752.0	-3,210.3	-3,423.9
Lease liabilities	-784.6	-928.0	-	-
Net debt	-2,626.0	-3,546.5	-2,258.1	-3,098.2

2020

Group

2019

Parent Company 2020 2019

Group

Net debt at 1 January 2019

Eﬀect of transition to IFRS 16

Cash and cash equivalents/ overdraft facility 808.4

Acquisitions of subsidiaries New leasing agreements Cash ﬂow from borrowings Cash ﬂow from lease liabilities Cash ﬂow from other activities Exchange-rate diﬀerences Net debt at 31 December 2019

296.5 296.5

28.6 1,133.5

Borrowings due <12 months -416.1

-125.0

467.2

0.1 -73.8

Borrowings due >12 months -2,371.6

-419.5

Lease liabilitiesTotal

0.0 -1,979.3

-784.0 -784.0

-145.8 -690.3

-128.1 -128.1

-868.0 -400.8

-19.1 -3,678.2

153.5 153.5

-23.6 -14.0

-928.0

-3,546.5

Acquisitions of subsidiaries 0.0

New leasing agreements Cash ﬂow from borrowings Cash ﬂow from lease liabilities Cash ﬂow from other activities Exchange-rate diﬀerences Net debt at 31 December 2020

576.2 576.2

-85.7 1,624.0

18.3

7.9 -47.6

-62.0 -62.0

92.0 110.3

168.4 -3,417.8

152.3 152.3

53.1 143.7

-784.6

-2,626.0

Parent Company

Net debt at 1 January 2019

Cash and cash equivalents/ overdraft facility 328.7

Cash ﬂow from borrowings Cash ﬂow from other activities Exchange-rate diﬀerences Net debt at 31 December 2019

-3.0 -3.0

325.7

Borrowings due <12 months -411.0 411.0

Borrowings due >12 months

Total

-2,706.8 -2,789.1

-687.0 -276.0

-30.1 -30.1

-3,423.9

-3,098.2

Cash ﬂow from borrowings Cash ﬂow from other activities Exchange-rate diﬀerences Net debt at 31 December 2020

626.5 626.5

952.2

74.2 74.2

139.4 139.4

-3,210.3

-2,258.1

Note 24 | Purchases and sales between Group companies and other related parties

Of the Parent Company's total income from operations of MSEK 11.7 (13.8), MSEK 10.9 (13.8) pertained to remuneration from subsidiaries for services performed.

There have been no other purchases between the Parent Company and the subsidiaries or other related parties. Remuneration to members of the Board, the CEO and other senior management is reported in Note 2.

Note 25 | Average number of employees

Board members and senior management Group

Parent Company

Subsidiaries

Sweden

738

753

Italy

780

660

563

639

Germany

596

615

China

249

250

Australia

187

194

The Netherlands

190

178

Canada

185

169

Thailand

145

152

Turkey

134

145

South Africa

144

France

148

141

Spain

Finland

Norway

USA

Denmark

United Arab Emirates

Switzerland

Poland

Hong Kong

Russia

Belgium

Estonia

Ireland

New Zealand

Singapore

Qatar

Austria

100

Total in subsidiaries

4,412

4,458

Group total

4,419

4,465

2020

Board members

Parent Company Board members

Group

Board members

CEO and other senior management

Parent Company

Board members

CEO and other senior management

Note 26 | Leases

Operational leases

Leasing fees for the year

The nominal value of future minimum leasing fees for non-cancellable leases

Within one year

2020

2019

Number of employeesNumber of Men % employees

Between one and ﬁve years After ﬁve years

Total

Men %

Amounts recognised in the balance sheet The balance sheet shows the following amounts relating to leases: Right-of-use assets:

- Factories
- Oﬃces
- Vehicles

Deferred tax assets Prepaid expenses Total assets

Lease liabilities: Non-current Current

Total liabilities

Parent Company 2020 2019

Leasing fees for the year	0.1	0.1
The nominal value of future minimum leasing fees for non-cancellable leases
Within one year	0.1	0.1
Between one and ﬁve years	-	-
After ﬁve years	-	-
Total	0.1	0.1

Group

2020

2019

Right-of-use assets:
- Factories	469.2	535.7
- Oﬃces	248.5	319.9
- Vehicles	58.7	75.6
Deferred tax assets	5.5	3.7
Prepaid expenses	-15.7	-18.7
Total assets	766.2	916.2
Lease liabilities:
Non-current	651.2	779.7
Current	133.4	148.3
Total liabilities	784.6	928.0

Right-of-use assets added in the 2020 ﬁnancial year amounted to MSEK 31 (262), of which MSEK 0 (159) pertained to subsidiaries.

Amounts recognised in proﬁt or loss

The statement of proﬁt or loss shows the following amounts relating to leases: Depreciation of right-of-use assets:

- Factories
- Oﬃces
- Vehicles

Expenses relating to short-term leases or leases of low-value assets.

Exchange-rate diﬀerence

Interest expenses on lease liabilities (see Note 4 Financial expenses). Deferred tax (see Note 10 Deferred tax).

Net eﬀect on proﬁt or loss

Group

2020

2019

Depreciation of right-of-use assets:
- Factories	-44.4	-47.0
- Oﬃces	-77.2	-71.2
- Vehicles	-40.3	-42.2
Expenses relating to short-term leases or leases of low-value assets.	-6.8	-8.1
Exchange-rate diﬀerence	-9.7	-3.9
Interest expenses on lease liabilities (see Note 4 Financial expenses).	-15.2	-18.1
Deferred tax (see Note 10 Deferred tax).	2.7	3.7
Net eﬀect on proﬁt or loss	-190.9	-186.8

2019

No material variable lease payments were identiﬁed that were not included in lease liabilities.

NumberMen %NumberMen %

The total cash outﬂow for leases in 2020 was MSEK 167.5 (171.6). The maturity analysis of lease liabilities is presented in Note 38 Risks under Liquidity Risk.

Note 27 | Remuneration to auditors

PricewaterhouseCoopers Audit

Tax consulting Other services Total

Audit activities other than audit assignment

Audit	11.2	9.6	0.5	0.3
Audit activities other than audit assignment	0.1	0.1	-	-
Tax consulting	2.5	4.3	0.5	0.5
Other services	0.1	1.1	0.1	-
Total	13.9	15.1	1.1	0.8

Group 2020 2019

Parent Company 2020 2019

Out of the remuneration to the auditors for 2020 the following relates to the audit ﬁrm Öhrlings PricewaterhouseCoopers AB: Audit MSEK 4.0 (2.6), audit activities other than audit assignment MSEK 0.0 (1.1), tax consulting MSEK 1.3 (3.5) and other services MSEK 0.1 (0.9).

Other accounting ﬁrms

Tax consulting Other services Total

Audit

Audit	4.7	4.1	-	-
Tax consulting	2.5	2.9	-	-
Other services	1.3	2.4	-	-
Total	8.5	9.4	-	-

Group 2020 2019

Note 28 | Expenses by nature

Total

Other costs

Own vehicle expenses Contract manufacturing Depreciation/amortisation and impairment (notes 8, 11 and 12)

Temporary employees Travel expenses Consumables

Transportation expenses Expenditure for own properties and rented premises Advertising and selling expenses External services

Expenses for employee beneﬁts (notes 2 and 21)

Raw materials and consumables Changes in inventories of ﬁnished products and goods for resale, and work in progress

Raw materials and consumables	2,270.0	2,873.1	-	-
Changes in inventories of ﬁnished products and goods for resale, and work in progress	139.7	-174.3	-	-
Expenses for employee beneﬁts (notes 2 and 21)	2,321.3	2,398.7	37.6	33.3
Transportation expenses	161.0	175.8	-	-
Expenditure for own properties and rented premises	195.7	203.6	1.3	1.3
Advertising and selling expenses	278.5	342.3	0.4	1.6
External services	91.5	133.4	10.4	7.4
Temporary employees	32.7	67.2
Travel expenses	33.7	82.2	0.6	1.8
Consumables	41.5	46.9	0.7	1.1
Own vehicle expenses	64.1	70.9	0.6	0.6
Contract manufacturing	169.0	164.9	-	-
Depreciation/amortisation and impairment (notes 8, 11 and 12)	558.4	478.8	-	-
Other costs	304.9	260.1	7.9	4.9
Total	6,662.0	7,123.6	59.5	52.0

Parent Company 2020 2019

Group 2020 2019

Parent Company 2020 2019

The total amount for raw materials and consumables refers to capitalised inventory values.

Note 29 | Expenses for product development

Expensed overheads for product development

Group 2020 2019

Parent Company 2020 2019

Note 30 | Hedging

A certain portion of the expected inﬂow of foreign currencies is hedged. Currency hedges are primarily made using currency forward contracts. This refers primarily to payments from foreign subsidiaries. The total hedging of future payments involving the most sensitive net ﬂows in foreign currencies, as compared with the expected ﬂows during the coming six months was, as per the closing date, NOK 68 per cent, EUR -31 per cent, GBP 56 per cent, CNY 51 per cent and PLN 61 per cent. The nominal value of these hedging contracts was MNOK 40.5 (70.0), MEUR 1.1 (2.0), MGBP 1.7 (3.6), MAUD 0.0 (0.8), MCNY 19.5 (31.0) and MPLN 3.3 (7.9). The Group does not apply hedge accounting for these contracts. Had the Group redeemed its outstanding contracts on the closing date at the current forward rate, the earnings impact would have been a positive MSEK 0.9 (positive: 0.2). The Group applies hedge accounting where the purchase consideration for acquired companies has to some extent been ﬁnanced through borrowing in the acquired company's local currency. Net assets abroad that are subject to hedge accounting amounted to MSEK 591 (715) and accumulated borrowings of MSEK 319 (340), which reﬂects a hedging quotient of 54 per cent (47). Annual translation diﬀerences recognised in other comprehensive income concerning borrowings as hedged net assets amounted to an expense of MSEK 9.2 (expense: 12.9) before deferred tax of MSEK 1.9 (2.7). Accumulated translation diﬀerences recognised in other com-prehensive income concerning borrowings as hedged net assets amounted to MSEK 8.4 before deferred tax of MSEK 2.8.

Refer also to Note 38.

Note 31 | Changes in the Group's composition

Companies divested in 2020

As announced in the press release published on 7 August 2020, the Group decided to exit its operations in the South African market. Moreover, it was announced in the press release on 30 October 2020, that the Group had signed an agreement to divest Lighting Innovations Africa (Pty) Ltd to Cape Mountain Concepts (Pty) Ltd. The transfer took place on 2 November 2020 and generated a loss of MSEK 31.1.

The loss was recognised under the item Other operating costs and was charged as an expense to operating proﬁt for the business area and operating segment Lighting Innovations for 2020. Refer also to Note 34. Other operating costs.

The new owners of the operations already own other lighting operations in South Africa. Under this new ownership Lighting Innovations Africa (Pty) Ltd remains open for business and continues to manufacture lighting ﬁxtures and smart solutions primarily for the indoor commercial sector.

Note 32 | Contractual assets and liabilities

The Group's contractual assets and liabilities pertain primarily to non-invoiced income, see Note 15 and liabilities to customers in the form of customer bonuses, see Note 18 and received orders, undelivered (order book). Per 31 December 2020, received orders, undelivered amounted to MSEK 1,301.1 (1,217.5), of which the majority pertains to deliveries for 2021.

Note 33 | Other operating income

324.3

332.2

Income from activities outside the Group's primary operations is recognised as Other operating income. Income in the form of state aid for Covid-19 is included in other operating income and is recognised when there is reasonable assurance that the grants will be received and the Group will meet the conditions associated with the aid. Of other income recognised, MSEK 67.5 pertained to state aid related to Covid-19.Per 31 December 2020, part of the conditional earnout payment for the acquisition of Veko Lightsystems International B.V, the Netherlands, amounting to MSEK 41.2 was reversed and was recognised in Other income. Per 31 December 2019, the entire conditional earnout payment for the acquisition of LED Linear UK Ltd, UK, was reversed. A proﬁt of MSEK 21.8 was recognised in the item Other revenue in proﬁt or loss for the 2019 ﬁnancial year, refer to Note 22 Other non-current liabilities.

Note 34 | Other operating costs

Impairment of goodwill, Lighting Innovations Africa (pty) Ltd Impairment of brand, Lighting Innovations Africa (pty) Ltd Proﬁt/loss on the sale of Lighting Innovations Africa (pty) Ltd Total

Group 2020 2019

Impairment of goodwill, Lighting Innovations Africa (pty) Ltd	48.6	-	-	-
Impairment of brand, Lighting Innovations Africa (pty) Ltd	14.1	-	-	-
Proﬁt/loss on the sale of Lighting Innovations Africa (pty) Ltd	31.3	-	-	-
Total	94.0	-	-	-

Parent Company 2020 2019

Refer also to Note 11 Intangible assets and Note 31 Changes in the Group's composition.

Note 35 | Share capital

The share capital in AB Fagerhult totals SEK 100,409,278 (100,409,278) distrib- uted amongst 177,192,843 ( 177,192,843 ) shares, with a quotient value of SEK 0.57 (0.57) per share. The number of treasury shares was 1,046,064, with a quotient value of SEK 591,310. All shares outstanding entitle the holder to equal participation in the Parent Company's assets and proﬁt and are fully paid-up. Each share entitles the holder to one vote.

Number of shares outstanding at year end

Preferential rights issue

Allocation of treasury shares; refer to Note 2.

Change in the number of shares outstanding Number of shares outstanding at beginning of year Non-cash issue

Change in the number of shares outstanding
Number of shares outstanding at beginning of year	176,136,299	114,500,292
Non-cash issue	-	11,244,805
Preferential rights issue	-	50,298,038
Allocation of treasury shares; refer to Note 2.	10,480	93,164
Number of shares outstanding at year end	176,146,779	176,136,299

Note 36 | Parent Company

2020

2019

The Parent Company's business name is Aktiebolaget Fagerhult. The company is a limited liability company, registered with the Swedish Companies Registration Oﬃce, with its registered oﬃce in the County of Jönköping, the Municipality of Habo, and with the Corporate Identity Number 556110-6203. The company's visit- ing address is Fagerhult, Habo, Sweden. AB Fagerhult is the Parent Company in the Fagerhult Group, one of Europe's leading lighting groups. The Group develops, manufactures and markets lighting systems for public environments. At year end, AB Fagerhult had approximately 8,342 (7,568) shareholders. The ten largest shareholders together hold 83.7 per cent (81.5) of the shares outstanding.

Ownership structure (at 31 Dec 2020) Shareholder

Didner and Gerge Småbolag SEB Fonder

Johan Hjertonsson

Other

Number of shares outstanding at the end of the period

The Svensson family, foundation and company Nordea Funds

The Palmstierna family Swedbank Funds

Clearstream Banking S.A. (LU)

Investment AB Latour Lannebo Fonder

AP Funds

BNP Paribas SEC Services

Investment AB Latour	84,708,480	48.1
Lannebo Fonder	13,738,541	7.8
AP Funds	11,555,530	6.6
BNP Paribas SEC Services	10,687,107	6.1
The Svensson family, foundation and company	6,775,760	3.8
Nordea Funds	7,661,269	4.3
The Palmstierna family	4,093,599	2.3
Swedbank Funds	3,329,668	1.9
Didner and Gerge Småbolag	3,166,926	1.8
SEB Fonder	1,730,734	1.0
Clearstream Banking S.A. (LU)	1,137,235	0.6
Johan Hjertonsson	1,138,951	0.6
Other	26,422,979	15.0
Number of shares outstanding at the end of the period	176,146,779	100.0

Note 37 | Proposed appropriation of proﬁts

The Group's retained earnings according to the consolidated balance sheet amount to MSEK 2,924.9 (2,352.4).

The following proﬁts (MSEK) are at the disposal of the AGM:

Proﬁt brought forward 3,565.6

Net proﬁt for the year 88.5

Total 3,654.1

The total number of dividend-bearing shares on 17 March amounted to 176,146,779. The Board of Directors proposes that the proﬁt be appropriated as follows:

To be distributed as dividends to shareholders, SEK 0.50 per share 88.1

To be carried forward 3,566.0

Total 3,654.1

Note 38 | Risks

FINANCIAL RISKS Currency risk

Transaction exposure

The Group's transaction exposure arises primarily in the Swedish companies where a large proportion of revenue is generated by the global sales organisation and is not in SEK. Other companies mainly conduct operations in their national markets where revenue and costs are in the same currency as each company's functional currency.

Aside from currency risks on sales by the Swedish companies, risks also arise from the import of raw materials and components. Altogether, the Swedish companies have a surplus inﬂow of foreign currency. The direct commercial foreign exchange ﬂow, after net calculations of ﬂows in the same currencies, shows a surplus of MSEK 79 (287). In addition to this, there is also an indirect impact in conjunction with the purchase of raw materials and components. This results, over time, in a lower net exposure for the Group.

The Group's policy is to hedge all signiﬁcant net cash ﬂows. Incoming ﬂows of for- eign currency should be used for payment in the same currency. In addition, a certain portion of the anticipated net inﬂow from sales and purchases is hedged by means of forward contracts after individual assessment at 50 per cent for the coming nine-month period. On statistical assessment of the foreign-exchange position, a change in the Swedish krona against other currencies of 1 per cent, with all other variables being constant, would impact the Group's earnings by about MSEK 1 (3). The ﬁnancial instruments are managed by the Parent Company's senior manage- ment. The Group does not apply hedge accounting for these contracts.

Translation exposure

No. of shares

Currency risk also arises in conjunction with the translation of foreign net assets and earnings, so-called translation exposure. This currency risk is not hedged and refers, primarily, to the translation of foreign subsidiaries' income statements and balance sheets. Earnings from foreign subsidiaries are translated into Swedish krona based on the average exchange rate for the year. The exposure of the Group's net assets outside of Sweden has increased as operations there have changed from previously pertaining to sales companies, to now also including production units. At the closing date, net assets in foreign companies corresponded to MSEK 5,467 (5,550) including goodwill. The Group applies hedge accounting where the purchase consideration for acquired companies has to some extent been ﬁnanced through borrowing in the acquired company's local currency. Net assets abroad that are subject to hedge accounting amounted to MSEK 599 (715) and accumulated borrowings of MSEK 319 (340), which reﬂects a hedging quotient of 53 per cent (47). Annual translation diﬀerences recognised in other comprehensive income concerning borrowings as hedged net assets amounted to an expense of MSEK 9.2 (expense: 12.9) before deferred tax of MSEK 1.9 (2.7). Accumulated translation diﬀerences recognised in other comprehensive income concerning borrowings as hedged net assets amounted to MSEK 8.4 before deferred tax of MSEK 2.8.

A weakening of the Swedish krona by 1 per cent with all other variables remaining constant would result in an increase in equity of MSEK 55 (55) largely due to gains/ losses on the translation of EUR and GBP. A change in the Swedish krona of 1 per cent against other currencies would result in a direct impact on net sales in the

Cont. Note 38

subsidiaries of approximately MSEK 57 (65) whilst the impact on results in the foreign subsidiaries would be MSEK 2 (3).

The sensitivity analysis for currency risk regarding translation exposure pertained to receivables and liabilities at the end of the reporting period given in a currency other than the respective Group company's functional currency. The table below shows exposure per signiﬁcant currency and the eﬀect of a 1 per cent change in the exchange rate on companies in the Group.

Currency	Receivables	Liabilities	Net exposure	Eﬀect, 1%
AUD	7.2	20.3	-13.1	-0.1
CAD	38.0	44.6	-6.6	-0.1
CNY	14.8	28.9	-14.1	-0.1
DKK	17.5	6.1	11.4	0.1
EUR	472.1	450.4	21.7	0.2
GBP	100.3	48.0	52.3	0.5
NOK	16.8	3.2	13.6	0.1
SEK	89.2	41.6	47.6	0.5
USD	64.5	-64.5	-0.6
Other currencies	80.5	0.4	80.1	0.8
Total	836.4	708.0	128.4	1.3
Interest-rate risk

Fagerhult holds no signiﬁcant interest-bearing assets, which is the reason the Group's income and cash ﬂow from operating activities are, in all material aspects, independent of changes in market interest rates.

The Group's interest-rate risk arises in conjunction with long-term borrowing. In addition to pension liabilities of MSEK 185.5 (190.3), interest-bearing liabilities totalled MSEK 3,464.4 (3,752.0) and cash and cash equivalents were MSEK 1,624.0 (1,133.5). Borrowing on the basis of ﬂoating interest rates exposes the Group to interest-rate risk as regards cash ﬂow. Borrowing on the basis of ﬁxed interest rates implies an interest-rate risk for the Group in terms of fair value. Group policy is to use a ﬁxed-interest period of three months. During 2020 and 2019, the Group's borrowings largely comprised loans with three-month ﬁxed interest rates.

The Group analyses its exposure to interest-rate risk on a dynamic basis. Various scenarios are simulated, whereby reﬁnancing, re-negotiation of existing trading positions, alternative ﬁnancing and hedging are taken into consideration. Based on these scenarios, the Group calculates the earnings impact from a given change in interest rates. In each simulation, the same change in the interest rate is applied for all currencies. The scenarios are simulated only for those liabilities comprising the largest interest-bearing positions. Simulations performed show that the earnings impact of a 1 percentage point change would be a maximum of MSEK 34 (37), with the current capital structure. The simulation is conducted quarterly to verify that the maximum possible loss is within the limits established by the executive management.

If interest rates on borrowing in Swedish krona as of 31 December 2020 had been 10 (10) points higher/lower, but all other variables had been constant, then gains after tax for the ﬁnancial year would have been MSEK 3.5 (3.7) higher/lower, primarily as an eﬀect of higher/lower interest expenses for borrowings with ﬂoating interest rates.

Credit risks

Credit risks are managed at Group level. Credit risks arise if the counterparty does not fulﬁl its commitments in conjunction with lending within the framework of cash management policies and through credit exposure to clients and banks, including receivables and agreed transactions. If the Group's customers have received a credit rating from an independent rating institution, these ratings are used. Where no independent credit assessment exists, a risk assessment is made of the custom- er's credit status in which the entity's ﬁnancial position is considered, as well as previous experience and other factors. Individual risk limits are set based on internal or external credit ratings, in accordance with the limits set by the Group manage- ment. The application of credit limits is frequently reviewed. No signiﬁcant losses occurred in either 2020 or 2019. Of the trade receivables carrying amount, MSEK 443 (527) is covered by credit insurance. A total provision of MSEK 100 (98) was made for expected credit losses. The average conﬁrmed credit losses amounted to 0.04 per cent (0.05) of net sales calculated for the next ﬁve years.

Liquidity risk

Liquidity risk is managed by ensuring that the Group has suﬃcient cash and cash equivalents and short-term investments in a liquid market, available ﬁnancing through agreed credit facilities and the possibility to close market positions. The Group has a strong ﬁnancial position. At present, no new borrowing requirements exist, but should such requirements arise, there is currently no diﬃculty in obtaining external credit, as long as such credit meets certain covenants, on the borrower, such as debt-to equity and interest coverage ratio, which are at present satisﬁed.

Management also meticulously follows rolling forecasts for the Group's liquidity reserve on the basis of anticipated cash ﬂows.

The table below presents an analysis of the Group's ﬁnancial liabilities to be settled net, speciﬁed according to the contractual time to maturity, as of the closing date. The amounts stated in the table are the contractual, undiscounted cash ﬂows. For deriva-tives, the fair value is presented because the contractual dates of maturity are not signiﬁcant for an understanding of cash ﬂows. Amounts falling due within 12 months correspond with the carrying amounts, as the eﬀect of discounting is negligible.

Repayment of bank loans Payment of lease liabilities Interest payments Trade payables and other liabilities

As of

31 December 2020

As of

31 December 2020

Repayment of bank loans

47.6

359.1

50.2

1,805.0

10.0

1,193.5

Payment of lease liabilities

150.5

114.7

92.2

78.3

73.1

362.7

Interest payments

38.5

37.0

33.9

25.3

14.1

17.1

Trade payables and other liabilities1

1,609.7

1,846.3

510.8

176.3

1,908.6

97.2 1,573.3

As of

31 December 2019

Repayment of bank loans Payment of lease liabilities Interest payments Trade payables and other liabilities1

Less Between Between Between Between than 1 1 and 2 2 and 3 3 and 4 4 and 5 year years years years yearsMore than 5 years

73.8

737.0

1,331.5

29.8

1,510.4 69.5

165.9

150.3

105.6

86.4

75.7 443.2

45.9

45.4

24.5

17.0

13.3 0.3

1,701.8 1,987.4

150.1 1,082.8

- 1,461.6

- 133.2

- 1,599.4

- 513.0

1) Of this amount, MSEK 556.0 (689.5) pertained to Trade payables the majority of which fall due within 30 days of the closing date.

Capital risk

The Group's objective with regard to the capital structure is to secure the Group's ability to continue operating, so that it can continue to generate returns for share- holders and beneﬁts for other stakeholders, and to maintain an optimal capital structure to keep the cost of capital down. To maintain or adjust the capital struc-ture, the Group may change the dividend paid to shareholders, repay capital to shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis of debt/equity ratio. This ratio is calculated as interest-bearing liabilities in relation to equity. The debt/equity ratio at 31 December 2020 was 3.2 per cent (2.9) after including the eﬀects of IFRS 16.

OPERATIONAL RISKS

Structural changes and changes in economic conditions

Market demand for the Fagerhult Group's products, and thereby the Group's sales, are impacted by factors outside of the Group's control. An economic downturn in the markets where the Fagerhult Group operates could result in lower demand for the Group's products. The most material sensitivity to the economic cycle is assessed at present to be the parts of the Fagerhult Group's operations that deliver to customers in the construction and property sectors, and customers in the retail sector. In the same manner, structural changes in the markets where the Group

Cont. Note 38

operates could give rise to lower demand for the Group's products. For example, changed consumption patterns and an accelerated transition from physical stores to online stores could negatively impact the segment of the Group's operations that delivers to stores and warehouses. In both case, the changes will negatively aﬀect the Fagerhult Group's operations, earnings and ﬁnancial position.

Moreover, there is a risk that the Fagerhult Group's customers in sectors that are currently less sensitive to the economy would be negatively aﬀected by extended periods of weak economic growth, high unemployment or other negative economic trends, primarily in Europe, or general concerns in the euro-zone, with a resulting decline in the capacity to pay. Accordingly, an economic downturn could negatively impact the Fagerhult Group's operations, earnings and ﬁnancial position.

Competition

The Fagerhult Group meets direct competition in all product segments and in all geographic markets. The Fagerhult Group's long-term growth and earnings are therefore dependent on adapting to customers' needs, changes in industry require-ments and on introducing attractive new products and services, in parallel with maintaining competitive pricing. To maintain its competitiveness, the Fagerhult Group must predict customers' needs and ensure it develops the products and services in demand with and accepted by these customers. Should the Fagerhult Group fail to maintain a competitive position in terms of quality, product prices, security of supply, brand recognition and a broad product oﬀering, and/or fail to adapt to changes in market conditions or otherwise successfully compete with its competitors, this could have a negative eﬀect on the operations, earnings and ﬁnancial position of the Fagerhult Group.

All segments and all markets entail the risk of new competitors capturing market shares with the support of a product oﬀering with which the Fagerhult Group cannot compete. Such competing products and services could reduce demand for the products provided by the Fagerhult Group. This could negatively impact the Fagerhult Group's operations, earnings and ﬁnancial position.

Geopolitical and macroeconomic risks

The Fagerhult Group has operations in about 30 countries. The operations are exposed to risks related to geopolitical concerns and instability as a result of, for example, political or diplomatic crises. war, terrorism, regional or cross-border con- ﬂicts, natural catastrophes, strikes and other geopolitical circumstances in the jurisdictions where the Fagerhult Group conducts its international operations. Over the last two years, the operations have faced geopolitical challenges in, for exam- ple, Turkey and Russia. The Fagerhult Group also imports products to the UK and is thereby exposed to risk related to Brexit. Factors and events similar to the above in the operating environment could negatively impact the Fagerhult Group's opera- tions, earnings and ﬁnancial position.

Inventory risk

Products held in inventories entail a risk of becoming obsolete as a result of outdated technology or over production, if the Group is unable to adapt production to techno- logical developments or to customer preferences. In both case, the changes could negatively aﬀect the Fagerhult Group's operations, earnings and ﬁnancial position.

Operational risk

The Fagerhult Group's operations depend on reliable and eﬃcient production units to ensure that the products are delivered on time and meet quality expectations. The Group's operations could be aﬀected by operational disruptions due to, inter alia, late or incorrect deliveries, technical faults, labour law measures, accidents or erroneous administrative routines. There is also a risk that those measures taken by the company to avoid disruptions prove inadequate should a larger disruption occur. This could negatively impact the Fagerhult Group's operations, earnings and ﬁnancial position.

Supplier risk

To be able to manufacture, sell and deliver products, the Fagerhult Group depends on external suppliers' availability, production, quality assurance and deliveries.

Moreover, the Fagerhult Group is dependent on a few main suppliers for LED com- ponents, which would take a long time to replace. Faulty, late or missed deliveries from suppliers of diﬀerent kinds could entail that the Fagerhult Group's deliveries are in turn delayed or cancelled, or are faulty or incorrect, which could have negative consequences for the Group's customer relations and lead to lower sales.

This could negatively impact the Fagerhult Group's operations, earnings and ﬁnancial position.

Risks pertaining to operating costs

The Group's costs for manufacturing products is impacted by costs for, inter alia, purchasing manufacturing input materials. Those individual components that most impact costs comprise electronic components and sheet metal. Large price changes for input material purchased by the Group could entail a negative impact on the Fagerhult Group's operations, earnings and ﬁnancial position.

In terms of the cost of adding value in the form of manufactured products, wage trends for employees track the general wage trends in the labour markets of the respective countries, which in turn is largely dependent on the economy as a whole.

Unexpected large wage increases and/or increased average sick leave among the Fagerhult Group's staﬀ could entail a negative impact on the Fagerhult Group's operations, ﬁnancial position and earnings. The cost of adding value to manufac-tured products also includes energy costs, which are dependent on developments in the environmental and energy sectors. Rising energy costs could entail a nega- tive impact on Fagerhult's operations, earnings and ﬁnancial position.

Product liability

The Fagerhult Group's products expose the Group to potential claims if the prod-ucts do not function as expected or prove to be defect, or if use of the products causes, results in, or is claimed to have caused or resulted in personal injuries, damage to property or other negative eﬀects. The Fagerhult Group's products make various safety risks relevant, including electrical risks, mechanical risks, thermal risks and exposure to electromagnetic ﬁelds. Requirements covering product liability, irrespective of whether they pertain to project delays or other injuries, could prove costly and time-consuming to defend and could potentially damage the Fagerhult Group's reputation and result in material negative eﬀects for the Fagerhult Group's operations, earnings and ﬁnancial position.

Insurance

The Fagerhult Group purchases and manages Group-wide insurance policies for property and liability risks, thereby creating co-ordination gains and cost advan- tages. The Fagerhult Group's insurance programme encompasses, inter alia, a global liability insurance, which covers general liability and product liability. Limits apply to the scope and amounts of the insurance cover. For example, the cover does not encompass liability for delays and faults that do not lead to product liability.

There is a risk that the Fagerhult Group does not receive full compensation for any damage that arises or claims that can be directed at the company, which could have negative consequences for the Fagerhult Group's operations, earnings and ﬁnancial position.

Dependence on key individuals

The Fagerhult Group is dependent on being able to retain and recruit employees and senior management with key competence. There is a risk that one or more members of senior management or key individuals leave the Group at short notice.

Where the Fagerhult Group fails to retain such key personnel, and/or fails in the future to recruit key personnel, this could have negative consequences for the Fagerhult Group's operations, earnings and ﬁnancial position.

Permits

Several of the manufacturing companies in the Group have operations that in some form require permits. The Fagerhult Group currently possesses all necessary per- mits, mainly environment-related, for conducting operations. However, there is a risk that these permits may not be renewed or may be withdrawn or limited. More-over, there is a risk that the Fagerhult Group's interpretation of applicable laws and provisions concerning the Fagerhult Group's operations, or the relevant authorities' interpretation of these or their own established practices, are not entirely correct, or that such rules, interpretations or practices are changed. Such changes could entail more permits being required for operations, which could be both time-consuming and costly as well as negatively impact on the Fagerhult Group's operations, earnings and ﬁnancial position.

The environment

The operations of the Fagerhult Group have an environmental impact. As a result of the nature of the operations, a risk exists that pollution or environmental damage is

Cont. Note 38

caused or has been caused in the operations run by the Group. There is also a risk that the operations previously conducted by other businesses at a plant or prop-erty, and which are now owned by the Group, may have given rise to pollution or environmental damage. Under current Swedish environmental legislation, the entity conducting operations that have contributed to environmental damage bears responsibility for rectifying the damage. If the business is unable to or lacks suﬃ-cient funds to rectify the damage, the acquirer of the property, who at the time of the acquisition was aware of or should have discovered the pollution, is responsi- ble. This means that, under certain conditions, claims could be directed at the Fagerhult Group for investigation, treatment or other remedial measures in the event of the presence or suspicion of pollution contaminating soil, bodies of water or groundwater. Such claims could negatively impact on the Fagerhult Group's operations, earnings and ﬁnancial position.

A risk exists that future changes in environmental regulations could entail increased expenses and costs to enable continued production. Developments in Sweden and internationally are heading towards stricter environmental rules, whereby new permits are normally subject to lower limits for maximum environmental impact. Regulatory changes could require signiﬁcant new investments to enable continued production. If the Fagerhult Group is unable to meet these changes in a cost-eﬃcient manner or to successfully maintain the necessary permits, this could negatively impact on the Fagerhult Group's operations, earnings and ﬁnancial position.

Corruption

Following the acquisition of iGuzzini, Fagerhult has operations in some 30 countries on four continents. The Group has a decentralised business model that, inter alia, entails that each subsidiary is responsible for compliance with the Group's Code of Conduct. The large geographic spread and decentralised control leaves the Group exposed to the risk of corruption. If any member of management at any subsidiary should set aside the Code of Conduct's rules concerning zero tolerance for corrup-tion, this could damage the Fagerhult Group's reputation, lead to lost business and leave the company liable to pay ﬁnes. This could result in signiﬁcant negative impacts on the Fagerhult Group's operations, earnings and ﬁnancial position.

Activity

Risk

Product development

Product qualityThe environment

Energy eﬃciency and emissionsPersonnel and societal conditionsWorkplace accidentsHuman rights

Description/management

• Quality defects in the product can result in injuries to customers or impact the company's reputation. Fagerhult has a quality policy and guidelines in place for product development and training, which aim to maintain high quality and to reduce risks of the above.

• Increased cost of energy due to legislation can lead to increased production costs. Fagerhult works continuously in all areas of operations to review energy needs and to work as eﬃciently as possible.

• Fagerhult has noted a risk that a workplace accident could occur that could lead to injury or loss of personnel.
Fagerhult works daily with work environment issues and routines, and works proactively in activities that are assessed as having signiﬁcant risk for injury.
• The risk of Fagerhult not respecting human rights is managed by ensuring that the all of the Group's employees are familiar with the company's Code of Conduct, which is always signed upon employment, and through continuous training in the code.

Anti-corruption

Anti-corruptionSustainable supply chainEthics and human rights

• Corruption, or any employees breaking the law, can lead to ﬁnes and lost business as well as aﬀect Fagerhult's reputation. Fagerhult works continuously with the issue and has a Code of Conduct that forms the basis for everything we do and how we act. We conduct company inspections upon acquisition, and all of the Group's companies are to comply with the applicable laws and regulations.

• Fagerhult requires suppliers to fulﬁl the ethical standards we set for suppliers and sub-suppliers and demands human rights be respected. During the year, a supplier code of conduct has been implemented at Fagerhults Belysning, and Fagerhult applies the prudence concept for all relationships.

Note 39 | Events after the closing date

On the 28 January 2021 Fagerhult completed the transaction to sell 100 per cent of the shares in Commtech to Aire Limpio S.L., a Spanish company based in Madrid.

It had previously been decided that Commtech's core business of site based commissioning services was strategically not core to the Fagerhult Group. In 2020 Commtech had net sales of 28 MSEK and employed 35 people.

The sales price was 12,0 MSEK and a proﬁt on disposal of 1.2 MSEK was generated. The transaction had an 8,3 MSEK positive eﬀect on cash balances.

IT risk

The Fagerhult Group needs to use IT systems to manage, inter alia, deliveries of products and input materials as well as to receive and manage customer orders.

A major part of the Fagerhult Group's operations are aimed at customers who set stringent requirements for reliable and exact deliveries, which in turn sets high requirements for functioning and secure IT systems that are well-integrated with the company's various business segments. Maintaining, developing and investing in such systems requires signiﬁcant capital investment and other resources. There is a risk that future investments required in IT systems will be greater than the com- pany's expectations. Moreover, there is a risk that the company's IT systems are disrupted by software and hardware issues, computer viruses, hacker attacks and physical damage. Such problems and disruptions could, depending on the extent, negatively impact on the Fagerhult Group's operations, earnings and ﬁnancial posi- tion.As computer-aided technology has assumed an increasingly greater scope within the companies, security requirements have also increased. The functional security of the databases and e-mail servers is checked via daily backups. Battery backup and diesel generators provide protection against operational disruption in the main manufacturing facility in Habo, from where the majority of the Group's computer operations are controlled. To date, no costs have arisen as a result of damage. The internet connection is ﬁxed and completely isolated from other networks via hardware ﬁrewalls. User access to the system is regulated via Group authorisations and entitlements based on actual assignments and roles within the company.

SUSTAINABILITY RISKS

In various ways, Fagerhult's operations are associated with sustainability risks. In conjunction with the preparation of the Sustainability Report, the most signiﬁcant sustainability risks in our own operations and in our value chain have been identi- ﬁed. We have focused on the speciﬁc areas stated in the Swedish Annual Accounts Act where we are of the opinion that operations signiﬁcantly impact people and the environment: the environment; personnel; societal conditions; respect for human rights; and anti-corruption.

In addition to the purchased price it has been agreed that the 2021 operating proﬁts will be shared equally between Commtech and Fagerhult.

Between the closing date and the date on which this annual report was signed, no signiﬁcant events or information has arisen concerning the circumstances per the closing date or thereafter, which may have a positive or negative eﬀect on the Group, or any of the companies contained therein, and which require any further disclosures, other than those provided above.

SIGNATURES | FINANCIAL INFORMATION

Signatures

The Board of Directors and the CEO certify that the consolidated accounts have been prepared in accordance with international ﬁnancial reporting standards, IFRS, as adopted by the EU, and that they provide a true and fair view of the Group's ﬁnancial position and the results of its operations. The annual report has been prepared in accordance with generally accepted accounting principles in Sweden and provides a true and fair view of the Parent Company's ﬁnancial position and results.

The administration report for the Group and Parent Company provides a true and fair overview of the development of the Group's and the Parent Company's operations, ﬁnancial position and results, and describes signiﬁcant risks and uncertainty factors facing the Parent Company and other companies within the Group.

The income statements and balance sheets will be submitted for adoption at the AGM on 29 April 2021.

Habo, 17 March 2021

Jan Svensson	Eric Douglas	Cecilia Fasth
Chairman	Vice Chairman	Board member
Morten Falkenberg	Annica Bresky	Teresa Enander
Board member	Board member	Board member
Bodil Sonesson	Magnus Nell	Lars-Åke Johansson
President and CEO	Employee Representative	Employee Representative
Our audit report was submitted on 18 March 2021
Öhrlings PricewaterhouseCoopers AB
Martin Odqvist

Peter Nyllinge Authorised Public Accountant

Auditor-in-ChargeAuthorised Public Accountant

Audit Report

Unoﬃcial translation

To the general meeting of the shareholders of AB Fagerhult, corporate identity number 556110-6203

Report on the annual accounts and consolidated accounts

Opinions

We have audited the annual accounts and con-solidated accounts of AB Fagerhult for the year 2020. The annual accounts and consolidated accounts of the company are included on pages 30-89 in this document.

In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all mate- rial respects, the ﬁnancial position of parent company and the group as of 31 December 2020 and its ﬁnancial performance and cash ﬂow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the ﬁnancial position of the group as of 31 December 2020 and their ﬁnancial performance and cash ﬂow for the year then ended in accordance with Inter- national Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act.

A Corporate Governance Report has been prepared. The information provided in this Corporate Governance Report and in the statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts, the information in the Corporate Governance Report is in accordance with the stipulations of the Annual Accounts Act.

We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the parent company and the group.

Our opinions in this report on the annual accounts and consolidated accounts are consistent with the content of the additionalreport that has been submitted to the parent company's audit committee in accordance with the Audit Regulation (537/2014) Article 11.

Basis for Opinions

We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accor-dance with professional ethics for accountants in Sweden and have otherwise fulﬁlled our ethical responsibilities in accordance with these requirements. This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU.

We believe that the audit evidence we have obtained is suﬃcient and appropriate to provide a basis for our opinions.

Our audit approach

The focus and scope of the audit

We designed our audit by determining materiality and assessing the risks of material misstatement in the consolidated ﬁnancial statements. In par-ticular, we considered where management made subjective judgements; for example, in respect of signiﬁcant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of man-agement override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

We tailored the scope of our audit in order to perform suﬃcient work to enable us to provide an opinion on the consolidated ﬁnancial statements as a whole, taking into account the structure of the Group, the accounting pro-cesses and controls, and the industry in which the group operates.

Fagerhult's operations are undertaken in some 30 countries around the world. Each of the local operations has their own ﬁnance function reporting to the head oﬃce in Sweden.

Even if the operations are quite distributed, the four entities, Fagerhults Belysning AB, Fager-hults Belysning Sverige AB, Whitecroft Lighting Ltd. in the UK and iGuzzini in Italy, together, com- prise a decisive portion of the entire group. It was both natural and necessary to execute a full audit on these four entities. In Sweden, the audit was executed by the group team, while in the UK and Italy the local PwC teams executed the audits.

The group team has studied the work under-taken by these local unit auditors to ensure that suﬃcient audit work has been performed, but has also communicated on an ongoing basis with the local teams to maintain a clear understand-ing of the manner in which the audits have been executed. In addition to these four units, after consultation with Fagerhult's Board of Directors and group management, it was determined that the group audit was to include a further 39 units where full audits have been executed. A total of 24 of these units in the various countries have been audited by the PwC network.

As regards just a few companies, whose combined operations represent only a limited portion of the total operations of the group, the group audit team has undertaken analytical procedures. Local statutory audits have been executed on all of the entities in the group with such requirements even if the entity in question has not been included in the reporting on the audit of the consolidated accounts, or has not been included in the audit time schedule.

In addition, the group team has audited the group consolidation, the group's annual ﬁnancial statements and a number of complex transactions and issues. These have included the reallocation of goodwill and impairment testing of intangible assets with indeﬁnite useful lifetimes, brands and goodwill.

Our overall conclusion is that we have evi- denced that suﬃcient audit activities have been executed, and that such activities have taken place primarily through the utilisation of PwC's own network.

Materiality

The scope of our audit was inﬂuenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the ﬁnan-cial statements are free from material misstate- ment. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to inﬂuence the economic decisions of users taken on the basis of the consolidated ﬁnancial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materi- ality for the consolidated ﬁnancial statements as a whole. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the eﬀect of misstatements, both individually and in aggregate on the ﬁnancial statements as a whole.

Key audit matters

Key audit matters of the audit are those matters that, in our professional judgment, were of most signiﬁcance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters.

Key audit matter

Valuation of intangible assets with indeﬁnite useful lifetimes, brands and goodwill

On page 65 in the section, Signiﬁcant Estimates and Assump-tions, amongst the Accounting Principles and in Note 11, Fagerhult describes its valuation of intangible assets with indeﬁnite useful lifetimes which are comprised of brands and goodwill.

Of the group's balance sheet total, MSEK 5,335 or 44 per cent is comprised of intangible assets with indeﬁnite useful lifetimes. As these assets are not amortised on an ongoing basis, an impairment test is to be executed at least once a year. Fagerhult undertook such a test during the fourth quarter 2020.

Such a test includes the assumptions undertaken regarding, amongst other things, future growth, proﬁtability and the discount factor. In other words, the assessments and estimations which are required to be made by the management and Board of Directors are complex.

As these tangible assets comprise a signiﬁcant amount and the required assumptions include assessments and estimations which, taken individually, can have a decisive inﬂuence on the valuation, this is a particularly signiﬁcant area for the audit.

During the year a new segment reporting was implemented which required the goodwill to be reallocated between the cash generated units Fagerhult have identiﬁed when performing the impairment test relating to intangible assets with indeﬁnite useful lifetimes. Fagerhult describes the process in Note 11. The reallocation requires that a relevant distribution key is applied to achieve a true and fair view.

How our audit addressed the Key audit matter

We started with ensuring our understanding of the structure of the new segments. We audited the reallocation of the goodwill between the cash-generated units Fagerhult presented and found it to be according to a true and fair view.

We determined, together with PwC's valuation specialists, that the applied impairment tests, one per segment, were implemented according to established principles and methods.

The assumptions of greatest importance to the impairment tests which were made by the management and Board of Directors, referred to growth, proﬁtability and the discount rates. We have assessed these assumptions by comparing these factors against Fagerhult's budget and strategic plan, and also against historical outcome. We have also undertaken an independent assessment with the starting point on the premises of the markets in which the cash generating units operate. We have checked the discount rates against observable market data.

We have also examined signiﬁcant assumptions to determine if they are consistent with previous years.

With the starting point being the impairment tests, we implemented simulations and undertook sensitivity analyses in order to understand the manner in which a given change could impact the values and which could indicate a possible impairment requirement. These tests have also provided the basis of our control of the information provided in Note 11 of the annual report.

As a ﬁnal, overall control, we have compared the company's stock market value in relation to its calculated net realisable value.

In conclusion, in our audit of the valuation of intangible assets with indeﬁnite useful lifetimes, that is, the brands and goodwill, we have made no observations which are signiﬁcant to the audit as a whole.

Key audit matter

Changes in market demand and impact on revenue recognition Fagerhult describes how it recognises revenue on page 61 and under the heading "Revenue recognition."

The internet of things (IoT) and sustainability are two areas that impact demand from Fagerhult's end customers and thereby create new revenue opportunities for the Group. Oﬀering connected products enables end customers to lower energy consumption, implement new lighting solutions and increase security among other improvements. It also makes it possible for other interested parties to integrate their products and services into Fagerhult's products, which may be of great interest to end customers.

As a natural result of these opportunities, Fagerhult can, over time, be inﬂuenced by what these parties wish to and can oﬀer end cus- tomers. While currently, the Group's main revenue stream is through the sale of products, the future could also see systems, connectivity, maintenance, etc. being oﬀered. Marketing could be conducted on a stand-alone or integrated basis.

Such a development could aﬀect both when and how revenue is recognised.

Other Information than the annual accounts and consolidated accounts

This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1-29 and 94-130. The other information also consists of the remuneration report, which we have had access to prior to the date of this audit report.

The Board of Directors and the Managing Direc- tor are responsible for this other information.

Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.

In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identiﬁed above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess

How our audit addressed the Key audit matter

We instructed each of the local audit teams to be alert to changes in customers' demand and whether these changes aﬀected Fagerhults' customer oﬀering.

The review included obtaining insight into how new products and services have developed in recent years. We instructed the auditors to discuss with the local sales departments to gain an understanding of market trends. The auditor should also make inquiries to the R&D departments, since they create the new products.

As part of our standard audit procedures regarding revenue, such as the review of customer agreements, invoices and payments, we have also tried to identify changes that indicate an impact on the revenue streams.

The Group audit team conducted discussions with Fagerhult's company management to gain an understanding of how the market is changing and whether these changes aﬀect revenue recognition.

Based on our audit, we have no observations that were material for the audit as a whole

whether the information otherwise appears to be materially misstated.

If we, based on the work performed concern-ing this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Director's and the Managing Director

The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU.

The Board of Directors and the Managing Direc-tor are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consol-idated accounts that are free from material misstatement, whether due to fraud or error.

In preparing the annual accounts and consol-idated accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company's and the group's ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intend to liquidate the company, to cease operations, or has no realistic alternative but to do so.

The Audit Committee shall, without prejudice to the Board of Director's responsibilities and tasks in general, among other things oversee the company's ﬁnancial reporting process.

Auditor's responsibility

Our objectives are to obtain reasonable assur-ance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that

includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstate- ment when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could rea- sonably be expected to inﬂuence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.

A further description of our responsibility for the audit of the annual accounts and consoli-dated accounts is available on Revisorsinspek- tionen's website:www.revisorsinspektionen. se/revisornsansvar. This description is part of the auditor´s report.

Report on other legal and regulatory requirements

Opinions

In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Direc-tor's and the Managing Director of AB Fagerhult for the year 2020 and the proposed appropria- tions of the company's proﬁt or loss.

We recommend to the general meeting of shareholders that the proﬁt be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Director's and the Managing Director be discharged from liability for the ﬁnancial year.

Basis for Opinions

We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under thosestandards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accor-dance with professional ethics for accountants in Sweden and have otherwise fulﬁlled our ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is suﬃcient and appropriate to provide a basis for our opinions.

Responsibilities of the Board of Director's and the Managing Director

The Board of Directors is responsible for the proposal for appropriations of the company's proﬁt or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justiﬁable considering the requirements which the company's and the group's type of operations, size and risks place on the size of the parent company's and the group' equity, con-solidation requirements, liquidity and position in general.

The Board of Directors is responsible for the company's organization and the administration of the company's aﬀairs. This includes among other things continuous assessment of the company's and the group's ﬁnancial situation and ensuring that the company´s organization is designed so that the accounting, management of assets and the company's ﬁnancial aﬀairs otherwise are controlled in a reassuring manner.

The Managing Director shall manage the ongoing administration according to the Board of Directors' guidelines and instructions and among other matters take measures that are necessary to fulﬁll the company's accounting in accordance with law and handle the manage- ment of assets in a reassuring manner.

Jönköping 18 March 2021 Öhrlings PricewaterhouseCoopers AB

Peter Nyllinge Authorized Public Accountant

Auditor in Charge

Auditor's responsibility

Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:

• has undertaken any action or been guilty of any omission which can give rise to liability to the company, or
• in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

Our objective concerning the audit of the pro- posed appropriations of the company's proﬁt or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.

Reasonable assurance is a high level of assur-ance, but is not a guarantee that an audit con-ducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropri- ations of the company's proﬁt or loss are not in accordance with the Companies Act.

A further description of our responsibility for the audit of the administration is available on Revisorsinspektionen's website:www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor's report.

Öhrlings PricewaterhouseCoopers AB, Torsgatan 21, 113 97 Stockholm, was appointed AB Fagerhult's auditors by the general meeting of shareholders held on 23 June 2020. We have served as auditors in the company for more than 20 years.

Martin Odqvist Authorized Public Accountant

Sustainability Report

About our Sustainability Report

Our Sustainability Report is prepared in accordance with the GRI Standards: Core option. This covers pages 12-19 and 94-125.

The sustainability report also covers the statutory sustainability report in accordance with Chapter 6, Section 11 of the Swedish Annual Accounts Act.

The report is published once each year and the most recent sustainability report was published on the 20th of March 2020. The sus-tainability report has been subjected to a limited assurance review by a third party, PwC.

For more information about our sustainability work and reporting, please contact:anders.fransson@fagerhultgroup.com

Scope and boundaries of the sustainability report

The Sustainability Report, which comprises a part of Fagerhult Group Annual Report 2020, focuses on the impact from our own operations

on the decision making of stakeholders and their expectations as well as the impact that our operations have on the economy, community, people and the environment.

Reporting of social and economic topics encompasses all of the Group's companies.

Reporting of environmental topics encom-passes information from the Group's production facilities. Our sales companies have a limited impact on environmental topics, which is why these operations are not currently included to full extent. Products that are not produced in our manufacturing facilities but that are sold by the sales companies are also not included.

Changes to the 2020 sustainability report All our companies conduct an annual review and evaluation of the sustainability topics that have been identiﬁed as most material for the Group. The aim is to ensure that each one of the identiﬁed sustainability topics remains one of

Contents

About our Sustainability Report 94

Materiality analysis and stakeholder dialogue 96

Impact across the value chain 98

Focus area: People 99

Focus area: Environment 106

Focus area: Business 111

Governance of sustainability eﬀorts 114

GRI-index 118

Statutory sustainability report 124

Auditor's limited assurance report 125

the most relevant for our sustainability eﬀorts.

Based on the 2020 review, the overall assess-ment was that water as a shared resource has not been identiﬁed as material for any of the companies in Fagerhult Group. The eﬀect of this being that the topic-speciﬁc disclosure GRI 303: Water and Eﬄuents 2018 was not reported on in the 2020 sustainability report.

Sustainability data from iGuzzini illuminazione S.p.A, which was acquired in 2019, has for the ﬁrst time been included in the sustainability report . Sustainability data was also excluded from Lighting Innovations Africa Ltd. as the company was divested in 2020.

Collection and reporting of sustainability data

For this year's sustainability report, data has been collected for the period of January - December 2020. The data was recalculated based on the new reporting structure.

SUSTAINABILITY REPORT | MATERIALITY ANALYSIS AND STAKEHOLDER DIALOGUE

Our materiality analysis

The Group's most important sustainability topics are grouped in the three areas: People, Environment and Business.

The starting point for our sustainability eﬀorts is to, from a broad perspective, include the entire value chain of operations in the continuous eﬀorts to minimize negative impact while maxi- mizing positive contribution.

Our fundamental materiality analysis conducted in 2015 identiﬁed and gathered thesustainability topics that are the most important for the Group to address and communicate on. It included an analysis of our business environment and benchmarking against competitors, together with workshops and a number of in-depth inter- views with investors, owners, and customers.

During 2019 and 2020, each company in the Group conducted a review and evaluation of the identiﬁed topics to ensure that they are still the most relevant for the Group's sustainability eﬀorts. Speciﬁcally, they weighed the extent to which the topics inﬂuence our stakeholders' decision-making and expectations together with the impact the operations have on the economy, society, people and the environment.

At large, it was concluded that the topics that were previously identiﬁed remain relevant and material for the sustainability eﬀorts of the Group. The review from all our companies also made it clear that agendas in anti-corruption, business ethics, human rights, health and safety, product safety, materials and energy use should be prioritised. As a consequence of the divestment of Lighting Innovations, South Africa, and the fact that water as a resource was not identiﬁed as a signiﬁcant issue for any of the other companies within Fagerhult Group, Topic speciﬁc disclosure GRI 303: Water is not included in the sustainability report for 2020.

Our most signiﬁcant sustainabilty areas

We have chosen to gather our operations' most material sustainability topics within three areas: People, Environment and Business.

In summary, the topics below are considered to be the most important for the Fagerhult Group to manage, monitor and communicate on:

People

Work conditions

Equality and diversity

Career development

Occupational health and safety

Product responsibility/safe productsEnvironmentLifecycle perspectiveCircular solutionsEnergy-eﬃcient solutionsConscious material selectionUse of resources

Carbon dioxide emissionsSystematic internal environmental work

Business

Code of Conduct

Ethics and anti-corruption

Human rights

Partner collaboration

Supplier reviews

Due diligence processes

MATERIALITY ANALYSIS AND STAKEHOLDER DIALOGUE | SUSTAINABILITY REPORT

Dialogue with our stakeholders

We are surrounded by numerous stakeholders who inﬂuence and are inﬂuenced by our opera- tions to diﬀerent extents. Conducting dialogues with them is central; this occurs with the aim of balancing the various interests, expectations and needs. The hope is that, in the same way,

the dialogues can lead to increased awareness of the Group and how our lighting solutions can contribute to sustainable value creation.

The table below sumerizes our stakeholders. They were identiﬁed in 2015 when we performed a comprehensive analysis. The same stakehold-ers that were identiﬁed then, are still our most important. Our dialogues with each of these groups are held continuously throughout the year, in which the dialogue formats and scope are adapted to the respective stakeholder group's needs and wishes.

Stakeholder

Customers	Business meetings, business network, trade fairs, seminars, webinars, customer surveys.	Lead times (and how they were aﬀected by the coronavirus pandemic), high-quality products, innovative products, products that help reduce energy consumption and promote a circular economy, certiﬁcation, LCA, quick and accessi-ble technical support, security of supply, market prices, compliance.	Focus on the security of supply and customer support, ensuring good delivery capacity with subcontractors, providing LCAs and EPDs, product development focused on sustainability and a circular economy, the development of IoT.
Employees	Dialogue for personal development and career paths, employee surveys, workplace meetings, daily meetings/reconciliation, trade union meetings.	Safe and healthy work environment, minimize the risk of infection spreading (Covid-19), ethics, inclusion, personal development, competence development, career paths, compliance with applicable work legislation, good leadership, team feeling, respect for human rights, equality, stable employer, transparency concerning the ﬁnancial information of operations.	Employee surveys, performance reviews,meas-ures based on employee dialogue/surveys, safety committees, leadership training, zero tolerance for discrimination, ensuring a safe and healthy work environment, reduce the risk of spreading infection with remote working systems, free protective equipment, minimized contact areas between employees, online meetings, temporary lock- downs and setting up a Covid-19 Response Team.
Shareholders, investors, analysts	Annual and Sustainability report, interim reports, regulatory press releases, the AGM, meetings, surveys (investor community)	Financial performance, growth, responsible and ethical business, risk management, compliance, transparency, product responsibility.	Responsible and ethical enterprise, ongoing ﬁnancial reporting, long-term business relations, environmental consideration, social responsibility, compliance with applicable laws and regulations, ﬁnancial and internal control systems, trans-parency.
Suppliers, business partners	Procurement process, supplier assessments, business meetings, trade fairs, sales networks.	Contract compliance, high-quality sustainable products, reliable and economically stable busi- ness partners, business ethics, quality, eﬃciency, customer satisfaction, service, on-time pay-ments, delivery and lead time issues related to the coronavirus pandemic.	Reliable and economically stable business partner, high business ethics, transparent and responsive dialogue, fair and correct price negotiations, on-time payments, innovative and sustainable products.
Decision makers, authorities	Networks, trade fairs, seminars, collaboration bodies, contact with rele-vant interest groups, direct contact with authorities.	Issues that impact operations and products, new legislation, sustainable products that promote a circular economy, transparency, reliable informa- tion, business ethics, compliance.	Our Code of Conduct, smooth adaptation to legislative changes, transparent and respon-sive dialogue, access to senior management, transparent reporting.
Local communities	Website, meetings, information meetings.	Job opportunities, sustainable enterprise, active role in the local communities' development of services, sponsoring, compliance, stable employer and tax payer, environmental impact.	Our Code of Conduct, transparent and attentive dialogue, sponsorship of local activities, collabo-ration with local schools and colleges, prioritising local suppliers.
Interest groups	Website, Annual and Sus-tainability report, corporate communication, surveys, collaboration bodies.	Transparent and responsive dialogue, access to senior management, product descriptions, environmental impact, energy consumption, emissions, respect for human rights.	Transparent and responsive dialogue, access to senior management, Annual and Sustainability report, our Code of Conduct, transparency concerning sustainability issues.

environment, reduce the risk of spreading infection

Dialogue form

Issues in focus

Our response

Reliable and economically stable business partner,

SUSTAINABILITY REPORT | IMPACT ACROSS THE VALUE CHAIN

Our business model

The business model illustrate the Group's value chain - fromthe purchase of input materials from suppliers, via manufac-turing, to delivery to customers and end-users.

Our business model has a decentralized structure in which each company is aﬀorded the responsibility of adapting their business to the prevailing market conditions and customer needs by means of entrepreneurship, local decision-making and execution. The decentral-ized business model combines with Group-wide functions, support and resources as well as a high level of collaboration between companies with the aim of realising synergies.

Transparency for responsibility and impact across the value chain

The value chain for all companies wihtin the Group remains essentially unchanged. The path toward a more circular economy is becoming clearer, and in turn, so is creating a cycle that operates from the choice of materials, incoming transports, the development of products and connectivity, and manufacturing, to outgoing deliveries to the customer and, ﬁnally, the user phase and the constantly increasing opportunities of recycling and reuse. The goal is to take responsibility across the entire value chain and continuously work to minimize the negative impact of our operations at the same time as our positive contribution is maximized.

1 Focus area - People

Responsibility and commitment to:

• Guarantee our employees' health, safety and human rights.
• Sustainable leadership development, ﬁnding new opportunities for valuable people.
• Ensure our Group values are an integral part of all processes and daily work.
• Facilitate a constructive dialogue and collaboration between Group companies.

1 2 3 4

2 Focus area - Environment

Responsibility and commitment to:

1 2 3

• Maximize energy savings, using the latest LED technology and smart lighting control.
• Ensure that all products and services fulﬁll applicable regulations and standards.
• Lifecycle perspective on our solutions to minimize our environmental impact.
• Environmental consideration throughout our full value chain, internally and externally.

3 Focus area - Business

Responsibility and commitment to:

• All companies and partners conduct business according to current laws and regulations.
• Our shared Code of Conduct forms the basis for everything we do and how we act.
• Ensure a sustainable supply chain, making sure all suppliers meet our requirements.
• Thorough due diligence is conducted for every company acquisition.

1 2 3 4

1 2 3

4 Impact across the value chain

Negative impact across the value chain consists mainly of:

• CO2 emissions from the transportation of purchased input materials to plants.
• The indirect eﬀect of emissions from the energy mix purchased for manufacturing sites and sales oﬃces.
• CO2 emissions from purchased transportation from plants out to the customer.
• CO2 emissions from business trips, for example between plants, supplier visits or visits to customers.
• Environmental impact from when the luminaires are in use.
• Impacts that occur during material extraction, such as the energy required to produce raw materials or interventions in nature and the depletion of its resources.

You can ﬁnd out more about how the Group works to reduce negative eﬀects on pages 15, 106-110.

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AB Fagerhult published this content on 19 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 March 2021 10:15:10 UTC.

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