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

Assa Abloy ABAnnouncement

06/02/2018 09:00

RNS Number : 0224E
ASSA ABLOY AB (publ)
06 February 2018

Organic growth
+5%


Operating income1)
+15%


Earnings per share1)
+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 income1) (EBIT) was SEK 3,359 M (2,913), corresponding to an operating margin of 16.7% (15.0)
 Net income1) amounted to SEK 2,385M (2,088)
 Earnings per share1) 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 


2016 
2017 
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 income1) (EBIT), SEK M
2,913 
3,359 

15%

11,254 
12,341 
10%
Operating margin1) (EBITA), %
15.2% 
17.1% 



16.1% 
16.5% 

Operating margin1) (EBIT), %
15.0% 
16.7% 



15.8% 
16.2% 

Income before tax1), SEK M
2,767
3,226

17%

10,549 
11,673 
11%
Net income1), 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 share1), 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 systemsadapted 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 SEK3,359M 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 ASSAABLOY 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 SEK3,359 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 SEK3,226 M (2,767), an increase of 17% compared with last year. Exchange-rate effects had an impact of SEK130M (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 SEK12,341 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 SEK10,929 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 Presidentand 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 Sdergren, 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 ASSAABLOY'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 ASSAABLOY'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 SEK842M (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 SEK847M (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-basedsolutions continued to grow strongly. Acquired/divested growth was 2%. Operating income excluding restructuring costs amounted to SEK608 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 SEK791 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 SEK966M (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 SEK1,174 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 yearamounted 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 2February 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 5percent, 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 SEK4,063 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 21March 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 ASSAABLOY'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, 6February 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 at10.00 today
at Operaterrassen in Stockholm, Sweden.
The analysts' meeting can also be followed on the Internet atwww.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 CEST on 6 February 2018.



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.04/2018
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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

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