REG - ASSA ABLOY AB - Final Results

Assa Abloy ABAnnouncement

06/02/2020 09:05

RNS Number : 1831C
ASSA ABLOY AB (publ)
06 February 2020
 






 




Organic growth




+1%




 




 




Operating income1




+8%




 




 




Earnings per share1




+7%




 




Lower organic growth with strong profit and cash flow
Fourth quarter
●       Net sales increased by 8% to SEK 24,946 M (23,167), with organic growth of 1% (6) and acquired net growth of 3% (3)
●       Strong organic growth in Americas, good growth in Global Technologies and stable in EMEA and Entrance Systems, while sales declined in Asia Pacific
●       Two acquisitions signed with expected combined annual sales of SEK 800 M
●       Tax decision in Finland reconsidered to ASSA ABLOY's disadvantage. Estimated tax exposure of SEK 920 M, but no material effect on the Group's net income
●       Operating income (EBIT) increased by 8% and amounted to SEK 4,047 M (3,746), corresponding to an operating margin of 16.2% (16.2)
●       Net income1 amounted to SEK 2,767 M (2,588)
●       Earnings per share1 amounted to SEK 2.49 (2.33)
●       Operating cash flow increased by 6% to SEK 5,235 M (4,923)
●       The Board of Directors proposes a dividend of SEK 3,85 (3.50) per share for 2019
Sales and income




 


Fourth quarter


 


 


 


January-December


 




 


 


 


 


 


 


 


 


 




 


2018


2019


 


Δ


 


2018


2019


Δ




Sales, SEK M


23,167


24,946


 


8%


 


84,048


94,029


12%




Of which:


 


 


 


 


 


 


 


 




Organic growth


1,281


147


 


1%


 


3,901


2,652


3%




Acquisitions and divestments


714


760


 


3%


 


1,793


3,063


3%




Exchange-rate effects


1,063


872


 


4%


 


2,217


4,265


6%




Operating income (EBIT)1 , SEK M


3,746


4,047


 


8%


 


12,909


14,920


16%




Operating margin (EBITA)1 2, %


16.7%


16.8%


 


 


 


15.8%


16.4%


 




Operating margin (EBIT)1 2, %


16.2%


16.2%


 


 


 


15.4%


15.9%


 




Income before tax1 2, SEK M


3,515


3,779


 


8%


 


12,110


13,883


15%




Net income1 2, SEK M


2,588 


2,767


 


7%


 


8,984


10,243


14%




Operating cash flow, SEK M


4,923


5,235


 


6%


 


11,357


14,442


27%




Earnings per share1 2, SEK


2.33 


2.49


 


7%


 


8.09


9.22


14%





 

Comments by the President and CEO

Lower organic growth with strong profit and cash flow

In the fourth quarter, total sales grew by 8%, driven by organic growth of 1%, acquired net growth of 3% and positive currency effects of 4%. Organic growth was strong in Americas (5%) and good in Global Technologies (2%). EMEA (1%) and Entrance Systems (0%) reported stable growth, while organic sales growth in Asia Pacific was negative (-10%).
Operating income increased by 8% to SEK 4,047 M, which is the first time we have exceeded SEK 4bn in a single quarter. The operating margin was unchanged at 16.2%. The operating leverage was strong due to lower raw material costs, together with mix and efficiency improvements, but this was offset by higher acquisition and integration costs. Operating cash flow improved by 6% to a record high SEK 5,235 M, driven by the improved earnings and positive evolution from working capital. Our cash conversion in the quarter was strong at 139%.
For the full year 2019, total sales grew by 12%, driven by an organic growth of 3%, net acquisitions of 3% and positive currency effects of 6%. The operating income reached SEK 14,920 M with an improved operating margin of 15.9% (15.8) excluding items affecting comparability. Operating cash flow was at a record high SEK 14,442 M.
Stable development in the fourth quarter

Market conditions continued to be mixed during the quarter. New construction indices have remained unchanged in several important markets and geopolitical challenges continue to be a concern.
Despite very tough comparable sales, the Americas division developed strongly, supported by good demand in the commercial and institutional markets. Markets conditions in Europe were mixed with good growth in Scandinavia and Germany, while the UK and Finland were weak. Asia Pacific's negative development was driven by lower intra group sales and a weak South Korea due to low domestic construction activity. The implementation of our new strategy in China with a more selective sales approach has also had a negative effect on our sales in the short term.
Global Technologies growth was lower due to delayed projects in HID, but Global Solutions performed strongly. Entrance Systems had good growth in service, while sales growth for equipment was slightly negative. During the quarter we announced our new organizational setup for Entrance Systems, which creates four business segments and will become effective in the first quarter.
Acquisitions to drive growth in 2020

Looking into 2020, acquisitions will be a main growth driver once we have consolidated agta record and the AM Group. Because of these businesses current margin levels and their size, our Group operating margin will be diluted. However, as we integrate these highly complementary businesses, they will over time create significant value and margins will improve gradually.
Finally, I would like to thank you for your trust and look forward to a new decade with great opportunities for ASSA ABLOY.  
Stockholm, 6 February 2020
 
Nico Delvaux

President and CEO

 
Fourth quarter

The Group's sales increased by 8% to SEK 24,946 M (23,167). Organic growth amounted to 1% (6). Growth from acquisitions and divestments was 3% (3), of which 3% (4) were acquisitions and 0% (-1) were divestments. Exchange-rates affected sales by 4% (6).
The Group's operating income (EBIT) amounted to SEK 4,047 M (3,746) an increase of 8%. The corresponding operating margin was 16.2% (16.2). Exchange-rates had an impact of SEK 137 M (190) on EBIT. Operating income before amortizations from acquisitions4 (EBITA) amounted to SEK 4,188 M (3,858). The corresponding EBITA margin was 16.8% (16.7).
Net financial items amounted to SEK -268 M (-230). The Group's income

before tax4 was SEK 3,779 M (3,515), an increase of 8% compared with last year. Exchange-rates had an impact of SEK 126 M (187) on income before tax. The profit margin4 was 15.1% (15.2).
The effective tax rate4 was 26.2% (25.8) on an annual basis. Earnings per share4 amounted to SEK 2.49 (2.33), an increase of 7% compared with last year. Operating cash flow totaled SEK 5,235 M (4,923), an increase of 6% compared with last year.
Full year
The Group's sales for the full year 2019 totaled SEK 94,029 M (84,048), representing an increase of 12%. Organic growth was 3% (5). Acquisitions and divestments growth was 3% (2), of which 3% (4) were acquisitions and 0% (-2) were divestments. Exchange-rate effects affected sales by 6% (3).
The Group's operating income4  (EBIT) in 2019 amounted to SEK 14,920 M (12,909), an increase of 16% compared with last year. The corresponding operating margin was 15.9% (15.4). Operating income before amortizations from acquisitions4 5 (EBITA) in 2019 amounted to SEK 15,402 M (13,302). The corresponding EBITA margin was 16.4% (15.8).
Earnings per share4 5 in 2019 amounted to SEK 9.22 (8.09), an increase of 14% compared with last year. Operating cash flow totaled SEK 14,442 M (11,357), an increase of 27% compared with last year.
Restructuring measures
Payments related to all restructuring programs amounted to SEK 261 M (351)

in the quarter. The restructuring programs proceeded according to plan and

led to a reduction in personnel of 646 people during the quarter and 16,729 people since the projects began in 2006. At the end of the quarter provisions of SEK 778 M remained in the balance sheet for carrying out the programs.
Additional restructuring costs of SEK -312 M were taken in the fourth quarter of 2019 for our seventh manufacturing footprint program, launched in 2018.
 
Organization
On October 22 it was announced that a new divisional structure will be formed in Entrance Systems division around four business segments: Pedestrian, Industrial, Residential and Perimeter Security. Perimeter Security is currently part of Opening Solutions Americas division and will be transferred to the Entrance Systems division to create new opportunities to scale up and potentially drive a global expansion. The business segments will be the highest responsible operational entities reporting to the division. This will increase the focus on operation and enable further synergies within each of the business segments.
 
Christopher Norby has been appointed Executive Vice President and Head of Entrance Systems division with effect from February 1, 2020. Christopher, previously Head of the Industrial Door Solutions business area within Entrance Systems, holds a Masters of Business Administration degree from the University of Miami, USA, and a Bachelor of Science degree from Southeastern Louisiana University, USA. The previous Head of Entrance Systems division, Mogens Jensen, remains in the organization as Head of two of the business segments and will continue as a member of the Executive Team. The changes are effective from February 1, 2020.
 
Björn Lidefelt has been appointed Executive Vice President and Head of the HID Global business unit within Global Technologies division with effect from January 13, 2020. Björn previously held the position of Chief Commercial Officer at ASSA ABLOY Group, overseeing branding, communication, commercial development and strategy. Björn holds a Master of Science degree in Industrial Engineering and Management from the University of Linköping, Sweden. He succeeds Stefan Widing who has decided to leave ASSA ABLOY after nearly 14 years' service to take up a new position outside the company.
Tax matters
In 2015 the Finnish Tax Administration decided not to allow tax deductions for interest expenses in the Group's Finnish operations for the years 2008-2012. The decision was appealed to a higher court, and in 2017, the earlier decision was reconsidered to ASSA ABLOY's advantage. After an appeal made by the Finnish tax authority, this decision was recently reconsidered again by the Administrative Court to ASSA ABLOY's disadvantage. This last decision was further appealed by ASSA ABLOY in early 2020.
The estimated total tax exposure is around SEK 920 M, of which SEK 740 M was paid in December 2019 and the remainder in early 2020. The tax exposure and related payments have had no material effect on the Group's income tax expense for the year.
Comments by division
Opening Solutions EMEA
Sales for the quarter in EMEA totaled SEK 5,525 M (5,485), with organic growth of 1% (3). Growth was good in Scandinavia, Germany and South Europe. Sales growth was stable in France and in East Europe but negative in Middle East/Africa, Finland, the UK and Benelux. Acquired growth net was -2%. Operating income excluding restructuring costs totaled SEK 884 M (911), which represents an operating margin (EBIT) of 16.0% (16.6). Return on capital employed amounted to 18.0% (20.6). Operating cash flow before interest paid totaled SEK 1,729 M (1,323).
Opening Solutions Americas
Sales for the quarter in Americas totaled SEK 5,900 M (5,173), with organic growth of 5% (14). Sales growth was very strong for Electromechanical Solutions and Perimeter Security and strong in Canada and for Security Doors, Architectural Hardware and the Residential Group in the US. Sales growth was good in Latin America and for Access & High Security, but was negative in US Smart Residential. Acquired growth net was 4%. Operating income excluding restructuring costs totaled SEK 1,182 M (1,027), which represents an operating margin (EBIT) of 20.0% (19.9). Return on capital employed amounted to 23.6% (22.4). Operating cash flow before interest paid totaled SEK 1,612 M (1,214).
Opening Solutions Asia Pacific
Sales for the quarter in Asia Pacific totaled SEK 2,676 M (2,756), with organic growth of -10% (11). Sales growth was good in South Asia and in Pacific, but for China, India and South Korea growth was negative. Acquired growth net was 4%. Operating income excluding restructuring costs totaled SEK 220 M (264), which represents an operating margin (EBIT) of 8.2% (9.6). Return on capital employed amounted to 9.7% (13.5). Operating cash flow before interest paid totaled SEK 147 M (606).
Global Technologies
Sales for the quarter in Global Technologies totaled SEK 4,377 M (3,602), with organic growth of 2% (8). Sales growth was very strong for Extended Access and strong for Global Solutions and Physical Access Control. For Identity & Access Solutions sales were stable while sales declined for Secure Issuance, Citizen ID and Identification Technology. Acquired growth net was 14%. Operating income excluding restructuring costs totaled SEK 800 M (716), which represents an operating margin (EBIT) of 18.3% (19.9). Return on capital employed amounted to 14.1% (15.3). Operating cash flow before interest paid totaled SEK 1,084 M (947).
Entrance Systems
Sales for the quarter in Entrance Systems totaled SEK 6,893 M (6,616), with organic growth of 0% (2). Sales growth was strong for Pedestrian Doors, good for Logistics Solutions and stable for High Performance Doors. For Industrial Doors, EU Residential Doors, US Residential Doors and Door Components growth was negative. Acquired growth net was 0%. Operating income excluding restructuring costs totaled SEK 1,125 M (998), which represents an operating margin (EBIT) of 16.3% (15.1). Return on capital employed amounted to 18.6% (18.8). Operating cash flow before interest paid totaled SEK 1,086 M (1,224).
Acquisitions and divestments
A total of three acquisitions were consolidated during the quarter. The combined acquisition price for the businesses acquired during the year, including adjustments from prior year acquisitions, amounted to SEK 3,813 M. The acquisition price on a cash and debt free basis totaled SEK 4,551 M. Preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to SEK 3,026 M. Estimated deferred considerations amounted to SEK 249 M.
 
 
On November 15 it was announced that ASSA ABLOY has signed an agreement to acquire AM Group, an Australian industrial door company within entrance automation. The business group has about 425 employees with the head office located in Sydney, Australia. Expected sales for 2019 amount to around SEK

800 M. The acquisition is expected to close during the first quarter of 2020.
On 29 November, the acquisition of Lux-IDent was completed.
Sustainable development
In the USA, ASSA ABLOY's Division Entrance Systems has finalized the environmental conversion of a major production process started in 2017. The converted production line is estimated to reduce its emissions by 15,000 tons of CO2 equivalents in 2020. The reduction of annual emissions of greenhouse gases from the factory's production processes amounts to 34,000 tons of CO2 equivalents, compared to the emissions before the conversion started. This means the annual emissions of greenhouse gases in 2020 will be reduced with more than half for Entrance Systems compared with the level before the conversion started.
The Sustainability Report for 2019, with reviews of the Group's targets and other information about sustainable development, will be available from 16 March 2020 on the company's website, www.assaabloy.com.
Parent company
Other operating income for the Parent company ASSA ABLOY AB totaled SEK 5,172 M (4,750) for the full year 2019. Operating income for the same period amounted to SEK 1,523 M (1,801). Investments in tangible and intangible assets totaled SEK 740 M (115). Liquidity is good and the equity ratio is 42.1% (41.6).
Dividend and Annual General meeting
The Board of Directors proposes a dividend of SEK 3.85 (3.50) per share for

the 2019 financial year, an increase of 10%. The Annual General Meeting will be held on 29 April 2020. The Annual Report for 2019 will be available from 16 March 2020 on the company's website, www.assaabloy.com.
Accounting principles
ASSA ABLOY applies International Financial Reporting Standards (IFRS) as endorsed by the European Union. The same accounting and valuation principles as in the latest Annual Report have been applied, with the exception of new and changed standards and interpretations that came into force on 1 January 2019 and are described briefly on page 18. This Report was prepared in accordance with IAS 34 'Interim Financial Reporting' and the Annual Accounts Act. The Report for the Parent company was prepared in accordance with the Annual Accounts Act and RFR 2 'Reporting by a Legal Entity'.
From 1 January 2019 ASSA ABLOY is applying IFRS 16 'Leases' and IFRIC 23 'Uncertainty over Income Tax Treatments'. The financial effects of applying these standards are described in more detail on page 18.
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 19 of this 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 2018 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 2018 Annual Report.
Review
The Company's Auditors have not carried out any review of this Report for the
fourth quarter of 2019.
 
 
M&A and FX guidance
ASSA ABLOY does not provide any market outlooks or business performance forecasts. However, below guidance relating to two key figures is provided to facilitate financial modelling.



Acquisitions and divestments                          

Completed acquisitions and divestments as per 31 December 2019 are estimated to have an effect of 2% on sales in the first quarter 2020 versus the same period last year, whereas the effect on the operating margin is estimated to be dilutive in the first quarter 2020.    
Exchange-rate effects

On the basis of the currency rates as per 31 December 2019, the currency effects on sales in the first quarter 2020 versus the same period last year is estimated to be 1%, whereas the effect on the operating margin is estimated to be neutral to slightly negative in the first quarter 2020.
 
Stockholm, 6 February 2020
 
Nico Delvaux

President and CEO
 
 
 Financial information
The Quarterly Report for the first quarter of 2020 will be published on 29 April 2020.
 
The Annual General Meeting will be held on 29 April 2020 at the Museum of

Modern Art in Stockholm, Sweden.
 
A capital markets day will be held on 13 May 2020 in London, United Kingdom.
Further information can be obtained from: 
Nico Delvaux,

President and CEO, tel. no: +46 8 506 485 82
Erik Pieder,

Executive Vice President and CFO, tel.no: +46 8 506 485 72
 
 Click on, or paste the following link into your web browser, to view the associated PDF document. 
http://www.rns-pdf.londonstockexchange.com/rns/1831C_1-2020-2-6.pdf
 
ASSA ABLOY is holding a telephone and web conference at 09.30  on 6 February 2020

which can be followed on the Internet at www.assaabloy.com.
It is possible to submit questions by telephone on:

+46 8-505 583 53, +44 333 300 9272 or +1 646 722 4904
 




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 6 February 2020.
 
 




 


 


 




ASSA ABLOY AB (publ)
Box 703 40
107 23 Stockholm
Visiting address
Klarabergsviadukten 90, Stockholm, Sweden
 
 


Tel +46 (0)8 506 485 00
Fax +46 (0)8 506 485 85
www.assaabloy.com
 
Corporate identity number: 556059-3575


 
 
 
 
                                                                                             No.01/2020




 
Financial information - Group
 
 
 
Financial information - Group
 
 
 
 
 
Financial information - Group
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial information - Parent company
 
 
 
Quarterly information - Group
 

 
Reporting by division
 
 
 
Financial information - Notes
 
 
 
Financial information - Notes
 
 
 
New accounting standards
 
 
Definitions of financial performance measures
 
 
 
 




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END
 
 
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