TIDM77BL
RNS Number : 0224E
ASSA ABLOY AB (publ)
06 February 2018
Organic growth
+5%
Operating income(1)
+15%
Earnings per
share(1)
+14%
A strong finish to 2017
Fourth quarter
-- Net sales increased by 3% to SEK 20,109 M (19,484), with
organic growth of 5% (1) and acquired net growth of 3% (2)
-- Strong growth has been exhibited by Global Technologies and
EMEA and good growth by Americas, Entrance Systems and Asia
Pacific
-- Contracts have been signed for the acquisition of two
companies with combined expected annual sales of about SEK 400
M
-- Operating income(1) (EBIT) was SEK 3,359 M (2,913),
corresponding to an operating margin of 16.7% (15.0)
-- Net income(1) amounted to SEK 2,385 M (2,088)
-- Earnings per share(1) amounted to SEK 2.15 (1.88)
-- Operating cash flow remained strong and amounted to SEK 4,876 M (4,620)
-- Nico Delvaux has been appointed as the new President and CEO
of ASSA ABLOY with effect from 15 March 2018
-- The Board of Directors proposes a dividend of SEK 3.30 (3.00) per share for 2017.
Sales and income
Fourth quarter January-December
================= ======== =================== ========
2016 2017 <DELTA> 2016 2017 <DELTA>
----------------------- -------- ------- -------- --------- -------- --------
Sales, SEK M 19,484 20,109 3% 71,293 76,137 7%
Of which:
Organic growth 120 878 5% 1,428 2,834 4%
Acquisitions and
divestments 455 480 3% 1,967 1,753 2%
Exchange-rate effects 609 -733 -5% -201 257 1%
Operating income(1)
(EBIT), SEK M 2,913 3,359 15% 11,254 12,341 10%
Operating margin(1)
(EBITA), % 15.2% 17.1% 16.1% 16.5%
Operating margin(1)
(EBIT), % 15.0% 16.7% 15.8% 16.2%
Income before tax(1)
, SEK M 2,767 3,226 17% 10,549 11,673 11%
Net income(1) ,
SEK M 2,088 2,385 14% 7,874 8,635 10%
Operating cash
flow, SEK M 4,620 4,876 6% 10,467 10,929 4%
Earnings per share(1)
, SEK 1.88 2.15 14% 7.09 7.77 10%
(1) Excluding costs for a new restructuring program for the
fourth quarter and full year 2016, totaling
SEK -1,597 M before tax, corresponding to SEK -1,221 M after
tax.
Comments by the President and CEO
"ASSA ABLOY ended 2017 with strong growth in the fourth
quarter," says Johan Molin, President and CEO. "Organically we grew
by 5%, with positive trends for all divisions. Global Technologies
and EMEA had strong growth of 9% and 5% respectively, and Americas,
Entrance Systems and Asia Pacific all had good growth of 3-4%.
Demand was positive for nearly all regions and business units, with
strong demand for our electromechanical products and smart door
locks. In EMEA we saw sales increase in all regions. All business
units in Americas also showed growth - even Brazil. In Asia Pacific
we had growth in Pacific, South Korea and Southern Asia, while
sales in China were stable. Our digital and mobile solutions
continue to be very successful on the market. We saw strong growth
in Global Technologies for access control products and mobile keys
for both hotels and companies. In Entrance Systems we had strong
growth for door automation, industrial doors and high-speed doors,
among others.
During the quarter our leadership in smart door locks was
confirmed by our collaboration with Amazon, where they chose our
Yale locks for their new investment in home deliveries.
Collaboration in smart door locks was also initiated with Walmart
and Google during the quarter, to start in 2018. I am confident
that the majority of all private residences will be converted to
smart door locks during the next decade. A gigantic market is
opening up! Our acquisition during the third quarter of August
Home, a leading supplier of smart door solutions for the
residential market in the USA, was therefore of strategic
importance.
Our acquisition activity remained high during the fourth quarter
with two acquisitions. We have signed a strategic contract to
acquire Phoniro, a Swedish specialist in smart locks, personal
alarms and access-control systems adapted to the care of the
elderly - a growth segment that is rapidly being digitalized. We
have also acquired Dale & Excel, which complements very well
our market offer in the UK.
Operating income for the quarter increased by 5%* and amounted
to SEK 3,359 M with an operating margin of 16.7% (16.5*). The
margin
improved in EMEA, Global Technologies and Entrance Systems but
was lower
for Americas and for Asia Pacific.
My judgment is that the global economic trend has improved to
some degree compared with last year. On most markets, especially in
Europe, there is a positive trend, but on some markets, such as
China and Brazil, demand remains weak. However, our strategy of
expanding our market presence, even on the emerging markets,
remains unchanged. We are also continuing our investments in new
products, especially in the growth area of electromechanics.
In December Nico Delvaux was named as the new President and CEO
of ASSA ABLOY AB. He began his employment with us on 3 February and
during the next six weeks I will ensure a good handover to him
before he takes over
as CEO on 15 March. Nico is a strong and experienced leader of
global businesses and I am confident that ASSA ABLOY's journey of
profitable growth will continue under Nico's leadership.
With these comments I want to express my own thanks to all ASSA
ABLOY's employees and to wish them and my successor Nico Delvaux a
continuing successful journey".
* Excluding restructuring costs and the write-down in China in
Q4 2016.
Fourth quarter
The Group's sales increased by 3% to SEK 20,109 M (19,484).
Organic growth amounted to 5% (1). Acquisitions and divestments
were 3% (2), of which 5% (3) were acquisitions and -2% (-1) were
divestments. Exchange-rate effects affected sales by -5% (3).
The Group's operating income, EBIT, excluding restructuring
costs, amounted
to SEK 3,359 M (2,913) a rise of 15%. The operating margin,
excluding restructuring costs, was 16.7% (15.0).
Operating income before amortizations from acquisitions, EBITA,
excluding restructuring costs, amounted to SEK 3,446 M (2,965). The
corresponding EBITA margin was 17.1% (15.2).
Net financial items amounted to SEK -133 M (-146). The Group's
income
before tax, excluding restructuring costs, was SEK 3,226 M
(2,767), an increase of 17% compared with last year. Exchange-rate
effects had an impact of SEK --130 M (148) on income before tax.
The profit margin, excluding restructuring costs, was 16.0%
(14.2).
The effective tax rate on an annual basis was 26.0% (26.0) and
was affected positively by 0.8 of a percentage point by the new tax
reforms in the USA. Earnings per share, excluding restructuring
costs, amounted to SEK 2.15 (1.88), an increase of 14% compared
with last year.
Full year
The Group's sales for the full year 2017 increased by 7% to SEK
76,137 M (71,293). Organic growth was 4% (2). Acquisitions and
divestments contributed 2% (3), of which 3% (4) came from
acquisitions and -1% (-1) from divestments. Exchange-rate effects
affected sales by 1% (0).
The Group's operating income, EBIT, excluding restructuring
costs, amounted to SEK 12,341 M (11,254), which was an increase of
10% compared with last year. The corresponding EBIT operating
margin was 16.2% (15.8).
Operating income before amortizations from acquisitions, EBITA,
excluding restructuring costs, amounted to SEK 12,584 M (11,450).
The corresponding EBITA margin, excluding restructuring costs, was
16.5% (16.1).
Earnings per share, excluding restructuring costs, amounted to
SEK 7.77 (7.09),
an increase of 10% compared with last year. Operating cash flow
totaled SEK 10,929 M (10,467), an increase of 4%.
Restructuring measures
Payments related to all restructuring programs amounted to SEK
286 M (235)
in the quarter. The restructuring programs proceeded according
to plan and
led to a reduction in personnel of 723 people during the quarter
and 13,564 people since the projects began in 2006.
At the end of the year provisions of SEK 944 M remained in the
balance sheet for carrying out the programs.
Organization
Nico Delvaux has been named as the new President and CEO of ASSA
ABLOY with effect from 15 March 2018. Nico Delvaux was until
recently President and CEO of Metso Corporation in Finland and has
previously held management positions in Atlas Copco for more than
two decades. Nico Delvaux has a M.Sc. in Engineering and an MBA
from Handelshogeschool Antwerp in Belgium.
Thanasis Molokotos, Executive Vice President and Head of
Americas Division,
has decided to leave ASSA ABLOY during 2018 after nearly 14
years' service as a Divisional Head. Recruitment of a successor has
begun.
Chris Bone has been appointed Executive Vice President and
Technical Director with effect from 1 March 2018. He succeeds Ulf
Södergren, who retires this year. Chris Bone has worked at ASSA
ABLOY since 2010 and has acted as Head of the Digital and Access
Solutions business unit in EMEA Division. Chris Bone is an engineer
and holds a degree from the University of New South Wales in
Australia.
Tax matters
In the USA a comprehensive new tax reform has recently come into
force, whose provisions include a lower rate of income tax for
companies. The initial positive one-off effect of the tax reform on
the effective tax rate for ASSA ABLOY in 2017 was 0.8 percentage
points, equivalent to SEK 91 M. Based on currently known
information, the new tax rules in the USA, considered in isolation
and all other things being equal, will reduce the Group's effective
tax rate by one percentage point. Underlying effective tax rate
2017 was 26.8 percent and the estimated effective tax rate for 2018
is therefore around 26 percent.
The Finnish Tax Administration decided in 2015 not to allow tax
relief for interest costs in ASSA ABLOY's Finnish business for the
years 2008-2012. The decision was appealed to a superior court and
a new judgment, in ASSA ABLOY's favor, was delivered during the
third quarter. During the fourth quarter repayment was made to ASSA
ABLOY of advance tax payments made earlier, which affected cash
flow positively by just over SEK 800 M. The latest judgment in ASSA
ABLOY's favor has been appealed to a superior court by the Finnish
Tax Administration during the fourth quarter.
Comments by division
EMEA
Sales for the quarter in EMEA division totaled SEK 4,869 M
(4,557), with organic growth of 5% (3). Growth was strong in
Finland, Britain, France, Southern Europe, Eastern Europe and
Africa / Middle East, and was good in Germany. Scandinavia and
Benelux also showed growth. Electromechanical products showed
strong growth, and demand was especially strong for smart door
locks for the private residential market. Acquired growth was 2%.
Operating income excluding restructuring costs totaled SEK 842 M
(766), which represents an operating margin (EBIT) of 17.3% (16.8).
Return on capital employed amounted to 22.9% (21.2). Operating cash
flow before interest paid totaled SEK 1,489 M (1,407).
Americas
Sales for the quarter in Americas division totaled SEK 4,243 M
(4,362), with organic growth of 4% (1). Growth was strong for
Electromechanical and High-security products, for the Private
residential market in the USA, and for Canada, Mexico and South
America apart from Brazil. Traditional lock products, Security
fencing and Security doors, and also Brazil, showed growth.
Acquired growth was 1%. Operating income excluding restructuring
costs totaled SEK 847 M (908), which represents an operating margin
(EBIT) of 19.9% (20.8). Return
on capital employed amounted to 21.6% (23.3). Operating cash
flow before interest paid totaled SEK 1,085 M (1,031).
Asia Pacific
Sales for the quarter in Asia Pacific division totaled SEK 2,400
M (2,427), with organic growth of 3% (-8). Strong growth was
achieved in South Korea, Southern Asia and Pacific. Sales in China
were stable, with a positive trend for lock products while sales of
fire and security doors continued to decrease. Smart door-locks
grew strongly in the region. Acquired growth was 0%. Operating
income excluding restructuring costs totaled SEK 232 M (-47), which
represents an operating margin (EBIT) of 9.7% (-2.0). Return on
capital employed amounted to 7.5% (-1.8). Operating cash flow
before interest paid totaled SEK 742 M (769).
Global Technologies
Sales for the quarter in Global Technologies division totaled
SEK 2,835 M (2,687), with organic growth of 9% (1). Access control,
Secure issuance,
Citizen ID and Identification technology had strong growth
within HID Global, while Logical access had a slightly negative
sales trend. Hospitality showed continued strong growth. Sales of
cellphone-based solutions continued to grow strongly.
Acquired/divested growth was 2%. Operating income excluding
restructuring costs amounted to SEK 608 M (500), which represents
an operating margin (EBIT) of 21.5% (18.6). Return on capital
employed amounted to 17.5% (18.0). Operating cash flow before
interest paid totaled SEK 791 M (778).
Entrance Systems
Sales for the quarter in Entrance Systems division totaled SEK
6,072 M (5,772), with organic growth of 3% (4). Door automation,
Door components and Industrial and High-speed doors showed strong
growth. Garage doors showed good growth, while solutions for
warehouses and logistics in the USA showed negative sales trends.
Acquired growth was 5%. Operating income excluding restructuring
costs totaled SEK 966 M (888), which represents an operating margin
(EBIT) of 15.9% (15.4). Return on capital employed amounted to
20.2% (18.9). Operating cash flow before interest paid totaled SEK
1,174 M (1,062).
Acquisitions and divestments
A total of two acquisitions were consolidated during the
quarter. The combined acquisition price for the 16 companies
acquired during the year amounted to SEK 6,862 M, and preliminary
acquisition analyses indicate that goodwill and other intangible
assets with indefinite useful life amount to SEK 5,111 M. The
acquisition price is adjusted for acquired net debt and estimated
deferred considerations. Estimated deferred considerations amounted
to SEK 365 M.
On 2 February it was announced that ASSA ABLOY has signed a
contract to acquire Phoniro, the largest player within integrated
digital key management solutions and alarm for homecare and nursing
homes in the Nordic region. Phoniro has about 80 employees and its
sales in 2018 are expected to amount to about SEK 175 M.
On 5 February it was announced that ASSA ABLOY has signed a
contract to acquire Dale & Excel, the leading suppliers of
architectural hardware to builder's merchants in the UK. Dale &
Excel have about 70 employees and their sales in 2018 are expected
to amount to SEK 210 M.
Sustainable development
The demand for sustainable products is growing. For ASSA ABLOY
this provides a commercial opportunity since customers are choosing
energy-effective solutions and products with Environmental Product
Declarations to an ever-increasing degree. The Group is continuing
to launch environmentally friendly products at a high rate.
Traditionally, many visible parts of locks are manufactured of
brass,
which requires surface treatment to protect the surface. The
surface-
treatment processes often involve environmentally hazardous
substances,
and the processes are energy-intensive and also prolong the
lead-time. To create more environmentally friendly products, ASSA
ABLOY Hospitality has progressively replaced brass with stainless
steel for many important lock components. During 2016 and 2017, 50
percent of the handles for hotel locks have been replaced by
stainless steel, and the remainder of the volume will
be converted during 2018. The changeover to stainless steel has
reduced consumption of materials by 5 percent, energy consumption
by 28 percent and calculated carbon-dioxide emissions by 9 percent.
The change gives products improved quality and longer durability,
eliminates one production process and reduces consumption of
resources and lead times.
The Sustainability Report for 2017, with reviews of the Group's
targets and other information about sustainable development, will
be available from 21 March 2018 on the company's website,
www.assaabloy.com.
Parent company
Other operating income for the Parent company ASSA ABLOY AB
totaled SEK 4,063 M (4,023) for the full year. Operating income for
the same period amounted to SEK 1,701 M (1,687). Investments in
tangible and intangible assets totaled SEK 3,291 M (224). Liquidity
is good and the equity ratio was 43.0% (45.8).
Dividend and Annual General meeting
The Board of Directors proposes a dividend of SEK 3.30 (3.00)
per share for
the 2017 financial year, an increase of 10%. The Annual General
Meeting will
be held on 26 April 2018. The Annual Report for 2017 will be
available from 21 March 2018 on the company's website,
www.assaabloy.com.
Accounting principles
ASSA ABLOY applies International Financial Reporting Standards
(IFRS) as endorsed by the European Union. Significant accounting
and valuation principles are detailed on pages 68-73 of the 2016
Annual Report. This Report was prepared in accordance with IAS 34
'Interim Financial Reporting' and the Annual Accounts Act. The
Interim Report for the Parent company was prepared in accordance
with the Annual Accounts Act and RFR 2 'Reporting by a Legal
Entity'.
IFRS 9 and IFRS 15 came into force on 1 January 2018 and are
being adopted by the Group from that date. The project that began
in 2016 in response to
the introduction of IFRS 15 has progressed according to plan
during 2017 with evaluation and analysis of its effects on the
Group's financial reports. The Group's judgment of the financial
effects has been regularly reported in ASSA ABLOY's quarterly
reports during the course of the project. The project was brought
to an end in the fourth quarter of 2017 with the conclusion
that
the present reporting of revenues is in accordance with IFRS 15
in all important respects. The new Standard will thus have no
impact on the Group's income or financial position.
IFRS 9 deals with the classification, valuation and reporting of
financial assets and liabilities, and replaces those parts of IAS
39 that deal with the classification and valuation of financial
instruments. The Group has analyzed the standard and concludes that
it will have no significant impact on the Group's income or
financial position. No impact on equity due to changes in
accounting principles related to IFRS 9 will be reported in 2018.
The part of the Standard that has the greatest impact on the Group
is the new writing-down model that is being introduced and that is
based on expected credit losses instead of actual losses. For the
Group, the new model requires a partly new process for the
assessment of credit losses.
IFRS 16 will apply to the accounting year that begins on 1
January 2019. Earlier application is permitted but the Group has
chosen not to take up this option.
ASSA ABLOY makes use of a number of financial performance
measures that are not defined in the reporting rules that the
company uses - so-called 'alternative performance measures'. For
definitions of financial performance measures, refer to Page 17 of
this Quarterly Report and to the company's latest Annual
Report.
To check how the financial measurements have been calculated for
current and earlier periods, refer to the tabulated figures in this
Quarterly Report and to the company's Annual Report. The Annual
Reports for the years 1994 to 2016 appear on the company's website
www.assaabloy.com.
Totals quoted in tables and statements may not always be the
exact sum of the individual items because of rounding differences.
The aim is that each line item should correspond to its source, and
rounding differences may therefore arise.
Transactions with related parties
No transactions that significantly affected the company's
position and income have taken place between ASSA ABLOY and related
parties.
Risks and uncertainty factors
As an international Group with a wide geographic spread, ASSA
ABLOY is exposed to a number of business, financial and tax-related
risks. The business risks can be divided into strategic,
operational and legal risks. The financial risks are related to
such factors as exchange rates, interest rates, liquidity, the
giving of credit, raw materials and financial instruments. Risk
management in ASSA ABLOY aims to identify, control and reduce
risks. This work begins with an assessment of the probability of
risks occurring and their potential effect on the Group. For a more
detailed description of particular risks and risk management, see
the 2016 Annual Report.
Review
The Company's Auditors have not carried out any review of this
Report for the fourth quarter of 2017.
Stockholm, 6 February 2018
Johan Molin
President and CEO
Financial information
The Interim Report for the first quarter of 2018 will be
published on 26 April 2018.
The Annual General meeting will be held on 26 April 2018 at the
Museum of Modern Art in Stockholm, Sweden.
Further information can be obtained from:
Johan Molin,
President and CEO, Tel: +46 8 506 485 42
Carolina Dybeck Happe,
Chief Financial Officer, Tel: +46 8 506 485 72
ASSA ABLOY is holding an analysts' meeting at 10.00 today
at Operaterrassen in Stockholm, Sweden.
The analysts' meeting can also be followed on the Internet at
www.assaabloy.com. It is possible to submit questions by telephone
on:
+46 8 5055 6476, +44 203 364 5371 or +1 877 679 2993
This information is information that ASSA ABLOY AB
is obliged to make public pursuant to the EU Market
Abuse Regulation. The information was submitted for
publication, through the agency of the contact persons
set out above, at 08.00 CEST on 6 February 2018.
ASSA ABLOY AB Tel +46 (0)8 506
(publ) 485 00
Box 703 40 Fax +46 (0)8 506
107 23 Stockholm 485 85
Visiting address www.assaabloy.com No.04/2018
Klarabergsviadukten
90, Stockholm, Corporate identity
Sweden number: 556059-3575
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Financial information - Group
Financial information - Group
Financial information - Group
Financial information - Parent company
Quarterly information - Group
Reporting by division
Financial information - Notes
Definitions of financial performance measures
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GIGDDRSGBGIL
(END) Dow Jones Newswires
February 06, 2018 03:58 ET (08:58 GMT)
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