REG - ASSA ABLOY AB - Final Results <Origin Href="QuoteRef">ASSAb.ST</Origin>

Assa Abloy ABAnnouncement

02/02/2017 09:05

RNS Number : 8614V
ASSA ABLOY AB (publ)
02 February 2017

Organic growth
1%


Operating income1)
-4%


Earnings per share1)
-2%

Solid underlying development in the fourth quarter
Fourth quarter
 Sales increased by 6% to SEK 19,484 M (18,301), with organic growth of 1% (5). Acquisitions and divestments were 2%, with 3% acquisitions and -1% divestments
 Good growth for Entrance Systems and EMEA and growth for Americas and Global Technologies 
 Negative growth for Asia Pacific, mainly due to weak demand in China
 The previously announced restructuring program has been launched with an operating cost of SEK 1,597 M
 Operating income1) (EBIT) was SEK 2,913 M (3,038), corresponding to an operating margin of 15.0% (16.6)
- Adjusted operating income excluding a write down in China of SEK 300 M, was SEK 3,213 M (3,038) corresponding to a margin of 16.5% (16.6).
 Net income1) amounted to SEK 2,088M (2,120)
 Earnings per share1) amounted to SEK 1.88(1.91)
 Operating cash flow remained strong and amounted to SEK 4,620 M (4,625)
 The Board of Directors proposes a dividend of SEK 3.00per share for 2016.
Sales and income

Fourth quarter



January-December











2015 
2016 


2015 
2016 
Sales, SEK M
18,301
19,484 

6%

68,099 
71,293 
5%
Of which:








Organic growth
827
120 

1%

2,634
1,428 
2%
Acquisitions and divestments
643
455 

2%

2,078
1,967 
3%
Exchange-rate effects
983
609 

3%

6,544 
-201 
0%
Operating income1) (EBIT), SEK M
3,038 
2,913 

-4%

11,079 
11,254 
2%
Operating margin1) (EBIT), %
16.6% 
15.0% 



16.3% 
15.8% 

Income before tax1), SEK M
2,851 
2,767

-3%

10,382 
10,549 
2%
Net income1), SEK M
2,120 
2,088

-2%

7,693 
7,874
2%
Operating cash flow, SEK M
4,625 
4,620 

0%

9,952 
10,467 
5%
Earnings per share1), SEK
1.91 
1.88

-2%

6.93 
7.09
2%
1) Excluding costs for a new restructuring program for the fourth quarter and full year 2016, totalingSEK
-1,597 M before tax, corresponding to SEK -1,221 M after tax. See also financial information on pages 9-16.



Comments by the President and CEO
"The fourth quarter of the year had, as expected, somewhat lower growth for ASSA ABLOY since sales in the previous year were very strong," says Johan Molin, President and CEO. "In general, the mature markets had a good development, while many growth markets, especially China and the Middle East, had a weak demand.
"It was very positive that Entrance Systems maintained its strong performance in both Europe and the USA, supported by a number of new products and service concepts that have been launched in recent years. It was pleasing that the demand for electromechanical lock solutions remained strong in EMEA and that sales in Americas continued at a high level. At Global Technologies interest in virtual keys remained strong and many customers are rolling out SEOS solutions. Also, sales of solutions using mobile keys to hotels continue to be successful. The demand remained weak in China, as expected.
"Acquisitions during the quarter included Bluvision, a leading supplier of location-tracking systems inbuildings. Bluvision complements our range of access-control products well. The industrial-door company Construction Specialties, a leading distributor and service company for industrial doors in Mexico, was also acquired. Another important step was taken in eastern Europe through the acquisition of LOB, the market leader for locks in Poland.
"A new restructuring program was launched at year-end. The program aims to further rationalize our business and should be viewed against the background that the Group has acquired around fifty companies since the previous program. The restructuring cost amounts to SEK1,597 M.
"Excluding the cost of the restructuring program, operating income for the quarter amounted to SEK 2,913 M, with an operating margin of 15.0%. The underlying operating margin, excluding a write-down of operating assets in China totaling SEK 300 M, remained very good and reached 16.5% (16.6). Operating cash flow was seasonally very strong.-
"My judgment is that the global economic trend remains weak. On most markets in North and South America and in parts of Europe there is a positive trend, but on many markets in Asia and the Middle East the trend is 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."


Fourth quarter
The Group's sales increased by 6% to SEK 19,484 M (18,301). Organic growth amounted to 1% (5). Acquisitions and divestments were 2%, with 3% acquisitions and -1% divestments. Exchange-rate effects affected sales by 3%. Operating income before depreciation, EBITDA, excluding restructuring costs of SEK 1,597 M (see below), amounted to SEK 3,316 M (3,406). The corresponding EBITDA margin, excluding restructuring costs, was 17.0% (18.6).
The Group's operating income, EBIT, excluding restructuring costs, amounted to SEK2,913 M (3,038) a decline of 4%. The figure was affected negatively by the write-down of operating assets in China by SEK 300 M. The operating margin, excluding restructuring costs, was 15.0% (16.6).
Net financial items amounted to SEK -146 M (-187). The Group's income before tax, excluding restructuring costs, was SEK2,767 M (2,851), a decrease of 3% compared with previous year. Exchange-rate effects had an impact of SEK148M (73) on income before tax. The profit margin, excluding restructuring costs, was 14.2% (15.6). The effective tax rate on an annual basis was 26% (26). Earnings per share, excluding restructuring costs, amounted to SEK 1.88 (1.91), a decline of 2% compared with previous year.
Full year
The Group's sales for the full year 2016 increased by 5% to SEK 71,293 M (68,099). Organic growth was 2% (4). Acquisitions and divestments contributed 3%, with 4% acquisitions and -1% divestments. Exchange-rate effects affected sales by 0%.
Operating income before depreciation, EBITDA, excluding restructuring costs, amounted to SEK 12,833 M (12,512). The corresponding margin, excluding restructuring costs, was 18.0% (18.4). The Group's operating income, EBIT, excluding restructuring costs, amounted to SEK11,254 M (11,079), which was an increase of 2% compared with previous year. The corresponding EBIT operating margin was 15.8% (16.3).
Earnings per share, excluding restructuring costs, amounted to SEK 7.09 (6.93), an increase of 2% compared with previous year. Operating cash flow totaled SEK 10,467 M (9,952).
Restructuring measures
A new restructuring program was launched at year-end 2016. The closing of about fifty offices and factories is expected to take place over a period of three years. The cost of the restructuring is estimated to amount to SEK 1,597 M, with an estimated payback time (inclusive of investments) of less than three years. 
Payments related to all restructuring programs amounted to SEK 235 M (145) in the quarter. The restructuring programs proceeded according to plan and led to a personnel reduction of 246 people in the quarter and 12,162 people since the projects began in 2006. At the end of the year provisions of SEK 1,572 M remained in the balance sheet for carrying out the programs, of which SEK 1,262 M relates to this year's restructuring program.


Comments by division
EMEA
Sales for the quarter in EMEA division totaled SEK 4,557 M (4,411), with organic growth of 3% (5). The markets in Scandinavia, United Kingdom, Benelux, Iberia and Eastern Europe showed strong growth. Germany showed good growth and Finland and Israel showed growth. Italy showed a stable sales level. France and Africa/Middle East had negative growth. The positive trend for electromechanical products continued. Acquiredgrowth, net, was 1%, with 3% acquisitions and
-4% divestments. Exchange-rate effects on sales were 1%. Operating income excluding restructuring costs totaled SEK766M (705), which represents an operating margin (EBIT) of 16.8% (16.0). Return on capital employed amounted to 21.2% (20.3). Operating cash flow before interest paid totaled SEK 1,407 M (1,408).
Americas
Sales for the quarter in Americas division totaled SEK 4,362 M (3,984), with organic growth of 1% (8). Growth was strong in Mexico and good for doors and security fencing and in South America, except in Brazil. High-security products, the private residential market and Canada showed growth, while the trend was negative for traditional lock products and in Brazil. Acquired growth amounted to 3%. Exchange-rate effects on sales were 6%. Operating income excluding restructuring costs totaled SEK908M (838), which represents an operating margin (EBIT) of 20.8% (21.0). Return on capital employed amounted to 23.3% (24.1). Operating cash flow before interest paid totaled SEK 1,031 M (1,162).
Asia Pacific
Sales for the quarter in Asia Pacific division totaled SEK2,427 M (2,580), with organic growth of -8% (-4). There was strong growth for South Korea and Japan, while Pacific showed a stable trend. In China and South-East Asia demand was weak, with declining sales. Acquired growth amounted to 0%. Exchange-rate effects on sales were 2%. Operating income excluding restructuring costs totaled SEK-47M (381), which represents an operating margin (EBIT) of -2.0% (14.8). Operating incomewas affected by a write-down of operating assets in China totaling SEK 300 M. Return on capital employed amounted to -1.8% (12.3). Operating cash flow before interest paid totaled SEK769 M (869).
Global Technologies
Sales for the quarter in Global Technologies division totaled SEK 2,687 M (2,504), with organic growth of 1% (8). Logical access (IAM), Access control (PACS) and Identification technology (IDT) achieved strong growth within HID Global. Secure issuance showed good growth. AdvanIDe and Government ID showed negative growth. Hospitality showed strong growth. Acquired growth amounted to 3%. Exchange-rate effects on sales were 3%. Operating income excluding restructuring costs amounted to SEK500 M (460), which represents an operating margin (EBIT) of 18.6% (18.4). Return on capital employed amounted to 18.0% (18.5). Operating cash flow before interest paid totaled SEK778 M (706).


Entrance Systems
Sales for the quarter in Entrance Systems division totaled SEK 5,772 M (5,097), with organic growth of 4% (6). Door automation, US industrial and US residential doors showed strong growth. Industrial doors showed good growth, while high-speed doors and door components had somewhat lower sales. Acquired growth amounted to 5%. Exchange-rate effects on sales were 4%. Operating income excluding restructuring costs totaled SEK888 M (770), which represents an operating margin (EBIT) of 15.4% (15.1). Return on capital employed amounted to 18.9% (18.5). Operating cash flow before interest paid totaled SEK1,062 M (981).
Acquisitions and divestments
A total of five acquisitions were consolidated during the quarter. The combined acquisition price for the thirteen companies acquired during the year amounted to SEK 3,023 M, and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to SEK2,395 M. The acquisition price is adjusted for acquired net debt and estimated deferred considerations. Estimated deferred considerations amount to SEK568 M.
On 1 December it was announced that ASSA ABLOY had acquired Bluvision in the USA, a leading American supplier of solutions in the market for the Internet of Things (IoT). The company has 21 employees and its sales in 2017 are expected to amount to about SEK 160 M.
Sustainable development
In January 2017 ASSA ABLOY became an official regional partner in the World Green Building Council's Europe Regional Network. The Network represents a confederation of 24Green Building Councils, eight Regional Partners and over 5,000 company members who work together to promote the development of sustainability and innovation in the European building sector.
The Sustainability Report for 2016, with reviews of the Group's targets and other information about sustainable development, will be available from 22 March 2017 on the company's website, www.assaabloy.com.
Parent company
Other operating income for the Parent company ASSA ABLOY AB totaled SEK4,023 M (3,392) for the full year. Operating income for the same period amounted to SEK 1,687 M (1,351). Investments in tangible and intangible assets totaled SEK 224 M (41). Liquidity is good and the equity ratio was 45.8% (46.1).
Board, Dividend and Annual General meeting
Ulrik Svensson left his position as a Member of the Board of Directors of ASSA ABLOY AB at the end of 2016 in parallel with leaving his position as Managing Director of Melker Schrling AB at the same time.
The Board of Directors proposes a dividend of SEK 3.00(2.65) per share for
the 2016 financial year, an increase of 13%. The Annual General Meeting will be held on 26 April 2017. The Annual Report for 2016 will be available from 22March 2017 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 92-97 of the 2015 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'.
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 16 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 2015 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 2015 Annual Report.
Review
The Company's Auditors have not carried out any review of this Report for the fourth quarter of 2016.
Stockholm, 2February 2017
Johan Molin
President and CEO


Financial information
The Interim Report for the first quarter of 2017 will be published on 26 April 2017.
The Annual General meeting will be held on 26 April 2017 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 at10.00 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 +1877 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 CET on 2 February 2017.



ASSA ABLOY AB (publ)
Box 703 40
107 23 Stockholm 
Visiting address
Klarabergsviadukten 90, Stockholm, Sweden
Tel +46 (0)8506485 00
Fax +46 (0)8506485 85
www.assaabloy.com
Corporate identity number: 556059-3575
 No.03/2017

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