TIDM77BL
RNS Number : 1800U
ASSA ABLOY AB (publ)
20 October 2017
Organic growth
+3%
Operating income
+2%
Earnings per
share
+1%
Organic growth in all divisions for ASSA ABLOY
Third quarter
-- Net sales increased by 3% to SEK 18,499 M (18,025), with organic growth
of 3% (2) and acquired growth of 2% (2)
-- Strong growth was shown by Global Technologies and good
growth by EMEA, Americas, Entrance Systems and Asia Pacific,
despite weak China
-- Contracts have been signed for the acquisition of five
companies with expected combined annual sales of about SEK 1,200
M
-- Global Technologies' project business, AdvanIDe, has been
sold. The business had annual sales of about SEK 1,250 M
-- Operating income (EBIT) increased by 2% to SEK 3,080 M
(3,020). The operating margin was 16.7% (16.8)
-- Net income amounted to SEK 2,153 M (2,122)
-- Earnings per share increased by 1% to SEK 1.94 (1.91)
-- Operating cash flow decreased by 6% to SEK 2,654 M (2,830)
-- President and CEO Johan Molin is considering leaving ASSA ABLOY during 2018.
Sales and income
Third quarter January-September
================ ======== ==================== ========
2016 2017 <DELTA> 2016 2017 <DELTA>
----------------------- ------- ------- -------- --------- --------- --------
Sales, SEK M 18,025 18,499 3% 51,809 56,028 8%
Of which:
Organic growth 307 590 3% 1,308 1,956 4%
Acquisitions and
divestments 429 373 2% 1,512 1,273 2%
Exchange-rate effects -176 -488 -2% -810 990 2%
Operating income
(EBIT), SEK M 3,020 3,080 2% 8,340 8,982 8%
Operating margin
(EBIT), % 16.8% 16.7% 16.1% 16.0%
Income before tax,
SEK M 2,844 2,910 2% 7,782 8,447 9%
Net income, SEK
M 2,122 2,153 1% 5,786 6,250 8%
Operating cash
flow, SEK M 2,830 2,654 -6% 5,846 6,053 4%
Earnings per share
(EPS), SEK 1.91 1.94 1% 5.21 5.63 8%
Comments by the President and CEO
"ASSA ABLOY grew organically by 3% in the third quarter," says
Johan Molin, President and CEO. This is good growth considering
that we had one working day less in the quarter. Global
Technologies had strong organic growth of 6%. EMEA grew by 4%,
Americas by 3%, Entrance Systems by 2% and Asia Pacific by 2%. In
general, demand continues to be good. In Europe we saw a strong
sales trend in areas including eastern Europe, southern Europe and
France. In Asia Pacific we achieved strong growth in Pacific, South
Korea and southern Asia. However, China remains challenging and our
sales continued to decline.
"The positive trend for our electromechanical solutions is
continuing, with strong growth on most markets. Our mobile key
systems for both hotels and companies are achieving great success,
and sales of smart door locks for the private residential market
are also showing good growth.
"I am pleased to report that we are continuing to launch a large
number of new products and solutions, many with energy-efficiency
features. One example is our new electromechanical cylinder which
auto-generates the electricity needed for a secure passage. These
new locking solutions have very large potential,
and we are seeing just the start of a long period of growth in
electromechanical solutions
"We have also signed contracts for the acquisition of five
companies, including Mercury Security, a leading OEM supplier of
control equipment for access-control systems, and August Home, a
leading smart lock business in the US. Mercury significantly
strengthens the ASSA ABLOY Group's position in access-control
systems. August constitutes a strategic addition to the Group and
reinforces our position in the residential smart door market.
During the quarter too, the project business AdvanIDe, which has
limited synergies with the rest of our business, was sold.
"Operating income for the quarter increased by 2% and amounted
to SEK 3,080 M, with an operating margin of 16.7% (16.8). The
margin improved in EMEA, Americas
and Entrance Systems but was lower for Global Technologies and
for Asia Pacific.
"My judgment is that the global economic trend has improved to
some degree compared with last year. On most markets 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
electromechanicals."
"I have informed the Board of Directors that I am considering
passing on the baton as President and CEO of ASSA ABLOY to someone
else during 2018. It has been wonderfully stimulating to have been
able to lead ASSA ABLOY for more than twelve years on the journey
of acquisition and change that we have undertaken. Today ASSA ABLOY
is the market leader in the whole field of door opening solutions
as a result of our clear strategy, innovative products and
competent employees."
Third quarter
The Group's sales amounted to SEK 18,499 M (18,025). Organic
growth amounted to 3% (2). Acquisitions and disposals contributed a
net 2% (2). Exchange-rate effects affected sales by SEK -488 M
(-176), equivalent to -2%
(-1). Operating income before depreciation and amortization,
EBITDA, amounted to SEK 3,488 M (3,425). The corresponding EBITDA
margin was 18.9% (19.0). The Group's operating income, EBIT,
amounted to SEK 3,080 M (3,020), an increase of 2%. The operating
margin was 16.7% (16.8).
Net financial items amounted to SEK -171 M (-175). The Group's
income
before tax was SEK 2,910 M (2,844), an increase of 2% compared
with last year. Exchange-rate effects had an impact of SEK -74 M
(1) on income before tax. The profit margin was 15.7% (15.8). The
underlying estimated effective
tax rate on an annual basis was 26% (26). Earnings per share
amounted to SEK 1.94 (1.91), an increase of 1% compared with last
year.
First nine months of the year
The Group's sales for the first nine months of 2017 totaled SEK
56,028 M (51,809), representing an increase of 8%. Organic growth
was 4% (3). Acquisitions and disposals contributed a net 2% (3).
Exchange-rate effects affected sales by SEK 990 M (-810),
equivalent to 2% (-2), compared with the previous year.
Operating income before depreciation and amortization, EBITDA,
amounted to SEK 10,239 M (9,517). The corresponding margin was
18.3% (18.4). The Group's operating income, EBIT, amounted to SEK
8,982 M (8,340), which was an increase of 8% compared with last
year. The corresponding operating margin was 16.0% (16.1).
Earnings per share amounted to SEK 5.63 (5.21), an increase of
8% compared with last year. Operating cash flow totaled SEK 6,053 M
(5,846).
Restructuring measures
Payments related to all current restructuring programs amounted
to SEK 106 M (61) in the quarter. The restructuring programs
proceeded according to plan
and led to a reduction in personnel of 364 people during the
quarter and 12,841 people since the projects began in 2006.
At the end of the period, provisions of SEK 1,212 M remained in
the balance sheet for carrying out the programs.
Organization
Johan Molin, President and CEO of ASSA ABLOY, has informed the
Board of Directors that he is considering leaving his post as
President and CEO of ASSA ABLOY during 2018. The Board has begun
the task of assessing possible successors to Johan Molin.
Anders Maltesen has been appointed Executive Vice President and
Head of Asia Pacific Division from 1 September 2017. He succeeds
Magnus Kagevik,
who is leaving the ASSA ABLOY Group. Anders Maltesen has worked
in Asia
for more than 25 years, principally in China, and has served in
various posts in GE Energy, Power Services and Alstom Thermal
Services. Anders Maltesen has Bachelor degrees in both marketing
and financial and management accounting.
Mogens Jensen has been appointed Executive Vice President and
Head of Entrance Systems Division from 1 January 2018. He succeeds
Juan Vargues, who is leaving the ASSA ABLOY Group for another post.
Mogens Jensen has worked at ASSA ABLOY since 2003 and has recently
served as Head of the IDDS business unit within Entrance Systems.
Mogens Jensen is a mechanical engineer and has an MBA.
Ulf Södergren, Executive Vice President and Technical Director,
has decided to retire during 2018 when he reaches the age of 65.
The process of finding his successor has begun.
Tax matters
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, has now been received. The total
exposure to tax amounts to about SEK 750 M. ASSA ABLOY's opinion is
that the judgment will not affect the Group's income.
The Stockholm Administrative Court of Appeal decided in June
2017 not to allow tax deductions for interest costs relating to one
of the Group's subsidiaries for the years 2008-2012 on the grounds
that the deductions were wrongly allocated. The judgment will have
no impact on the year's net income, but related tax payments of SEK
847 M have been made during the third quarter.
Comments by division
EMEA
Sales for the quarter in EMEA division totaled SEK 4,278 M
(4,042), with organic growth of 4% (2). Growth was strong in
Finland, United Kingdom and eastern Europe. Scandinavia, Germany,
Benelux, France, southern Europe and Africa had good growth, while
the Middle East had negative sales growth. The positive trend for
electromechanical products continued. Acquired growth was 3%.
Operating income totaled SEK 717 M (673), which represented an
operating margin (EBIT) of 16.8% (16.7). Return on capital employed
amounted to 19.2% (18.5). Operating cash flow before interest paid
totaled SEK 640 M (402).
Americas
Sales for the quarter in Americas division totaled SEK 4,426 M
(4,422), with organic growth of 3% (5). Growth was strong for
Perimeter protection, for Canada and for South America apart from
Brazil. Sales growth was good for Traditional lock products,
High-security products and Security doors. Sales in Mexico were
stable, but growth was negative in Brazil and for the Private
residential market in the USA. Acquired growth was 1%. Operating
income totaled SEK 966 M (959), which represented an operating
margin (EBIT) of 21.8% (21.7). Return on capital employed amounted
to 25.9% (25.9). Operating cash flow before interest paid totaled
SEK 1,046 M (1,018).
Asia Pacific
Sales for the quarter in Asia Pacific division totaled SEK 2,448
M (2,486), with organic growth of 2% (-7). Strong growth was
achieved in Japan, South Korea, southern Asia and Pacific. Sales in
China fell, mainly because of a significant decline for fire and
security doors. Smart door-locks grew strongly in the region.
Acquired growth was 0%. Operating income totaled SEK 277 M (306),
which represented an operating margin (EBIT) of 11.3% (12.3).
Return on capital employed amounted to 9.3% (9.8). Operating cash
flow before interest paid totaled SEK 155 M (653).
Global Technologies
Sales for the quarter in Global Technologies division totaled
SEK 2,417 M (2,439), with organic growth of 6% (7). Access control,
Secure issuance
and Citizen ID had strong growth within HID Global.
Identification technology was unchanged and Identity & Access
Management had a negative trend. Hospitality showed continued
strong growth. Acquired/disposed growth was -3% net. Operating
income amounted to SEK 431 M (442), which represented an operating
margin (EBIT) of 17.8% (18.1). Return on capital employed amounted
to 14.6% (16.6). Operating cash flow before interest paid totaled
SEK 373 M (517).
Entrance Systems
Sales for the quarter in Entrance Systems division totaled SEK
5,242 M (4,960), with organic growth of 2% (4). Door automation,
Door components and Industrial doors in the USA had strong growth.
High-speed doors and Garage doors in the USA had good growth. Sales
of Industrial doors and Gate automation in Europe were stable.
Acquired growth was 6%. Operating income totaled SEK 762 M (709),
which represented an operating margin (EBIT) of 14.5% (14.3).
Return on capital employed amounted to 15.7% (15.2). Operating cash
flow before interest paid totaled SEK 593 M (617).
Acquisitions and disposals
A total of seven acquisitions were consolidated during the
quarter. The combined acquisition price for the 14 companies
acquired during the year so far amounted to SEK 2,400 M, and
preliminary acquisition analyses indicate that goodwill and other
intangible assets with indefinite useful life amount to SEK 2,209
M. The acquisition price is adjusted for acquired net debt and
estimated deferred considerations. Estimated deferred
considerations amounted to SEK 220 M.
On 19 October it was announced that ASSA ABLOY had signed a
contract to acquire August Home, a leading smart lock business in
the US. August has approximately 90 employees and sales in 2018 are
expected to amount to USD 60 million (approx. SEK 500 million).
On 19 September it was announced that ASSA ABLOY had signed a
contract to acquire Mercury Security in the USA, a leading OEM
supplier of control systems for physical access control. The
company has 45 employees and its sales in 2017 are expected to
amount to SEK 500 M.
On 10 August it was announced that ASSA ABLOY had sold its
project business within Global Technologies, AdvanIDe. The
business's annual sales total about SEK 1,250 M. The disposal will
have a positive effect on the Group's operating margin in the
future.
Sustainable development
Sustainability is an integral part of the Group's various
working processes.
In order to spread good attitudes and increase workers'
involvement and knowledge, HID Global has gradually introduced a
working method called HID Green Team Program during a period of
just over a year. The program takes
a practical approach and focuses on some important areas for the
Group's environmental work, such as reduced energy consumption,
water consumption and waste generation together with recycling.
There is a manual for each
area, with good examples and suggestions of what can be done to
reduce environmental impact. Workers in sales companies, offices
and factories can register their interest in taking part in their
groups' activities. At present HID Global has 22 Green Teams active
in various sales companies and factories around the world. Their
activities have led to increased involvement from workers and
reduced environmental impact.
HID Global's Green Team Program has aroused great interest from
the Group's Divisions. It has therefore been decided to convert HID
Global's manual into a Group-wide manual during 2017. Each Division
individually will prioritize the offices, sales companies and
factories where Green Teams will be started up, with the aim of
reducing environmental impact in the Group as a whole.
Parent company
Other operating income for the Parent company ASSA ABLOY AB
totaled SEK 2,620 M (2,428) for the first nine months of the year.
Operating income
for the same period amounted to SEK 940 M (787). Investments in
tangible and intangible assets totaled SEK 14 M (196). Liquidity is
good and the equity ratio was 42.5% (42.3).
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'.
The new standards IFRS 9 (Financial instruments) and IFRS 15
(Revenue from Contracts with Customers) are to be applied from the
financial year beginning
1 January 2018, while IFRS 16 (Leases) takes effect on 1 January
2019. Earlier application is allowed for all standards. The project
that began last year because of the introduction of IFRS 15 has
proceeded according to plan during 2017 with evaluation and
analysis of possible effects on each division. The Group's earlier
judgment that the standards will have little or no impact on the
Group's income and financial position remains unchanged.
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 third quarter of 2017.
Stockholm, 20 October 2017
Johan Molin
President and CEO
Financial information
The Year-end Report and Quarterly Report for the fourth quarter
will be published on 6 February 2018.
A capital markets day will be held on 15 November 2017 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 20 October 2017.
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. 18/2017
Klarabergsviadukten
90, Stockholm, Corporate identity
Sweden number: 556059-3575
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The company news service from the London Stock Exchange
END
QRTOKKDBOBDKQKB
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October 20, 2017 03:42 ET (07:42 GMT)
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