TIDM77BL
RNS Number : 4845L
ASSA ABLOY AB (publ)
19 July 2017
Organic growth
+2%
Operating income
+7%
Earnings per
share
+8%
Another good quarter for ASSA ABLOY
Second quarter
-- Net sales increased by 8% to SEK 19,387 M (17,894), with organic growth
of 2% (4) and acquired growth of 2% (4)
-- Good growth was shown by EMEA, Americas, Global Technologies
and Entrance Systems and negative growth by Asia Pacific
-- Contracts have been signed for the acquisition of five
companies with expected combined annual sales of about SEK 900
M
-- Operating income (EBIT) increased by 7% to SEK 3,114 M
(2,910). The operating margin was 16.1% (16.3)
-- Net income amounted to SEK 2,179 M (2,026)
-- Earnings per share increased by 8% and amounted to SEK 1.96 (1.82)
-- Operating cash flow increased by 2% to SEK 2,575 M (2,519).
Sales and income
Second quarter First half-year
================= ======== ================== ========
2016 2017 <DELTA> 2016 2017 <DELTA>
-------------------------- -------- ------- -------- -------- -------- --------
Sales, SEK M 17,894 19,387 8% 33,785 37,529 11%
Of which:
Organic growth(1) 602 344 2% 1,002 1,366 4%
Acquisitions 593 451 2% 1,083 900 3%
Exchange-rate effects(1) -383 698 4% -633 1,478 4%
Operating income
(EBIT), SEK M 2,910 3,114 7% 5,321 5,901 11%
Operating margin
(EBIT), % 16.3% 16.1% 15.7% 15.7%
Income before tax,
SEK M 2,729 2,944 8% 4,938 5,537 12%
Net income, SEK
M 2,026 2,179 8% 3,664 4,097 12%
Operating cash
flow, SEK M 2,519 2,575 2% 3,017 3,399 13%
Earnings per share
(EPS), SEK 1.82 1.96 8% 3.30 3.69 12%
(1) The sales components Organic growth and Exchange-rate
effects have been restated for the first half-year of 2016. No
effect on sales figures.
Comments by the President and CEO
"The second quarter was another good quarter for ASSA ABLOY,"
says Johan Molin, President and CEO. Organic growth was 2% because
of the fewer working days resulting from Easter during the quarter.
This means that we have an organic growth of 4% for the first
half-year. Sales in North America continued to develop well. In
Europe the underlying demand is good but we have not seen any
appreciable improvement. Sales in China fell once again, and
disappointingly they also continued to decrease in Brazil and in
the Middle East.
"Entrance Systems, Global Technologies and Americas all produced
3% organic growth, while EMEA grew by 2%. However, Asia Pacific
showed negative growth because of weak demand in China.
"It is pleasing to see that our investments in software
solutions to support architects and others who specify door
solutions are leading to more inquiries and increased sales. It is
also very gratifying that we are launching so many new and exciting
products, primarily electronic and digital solutions. One example
is a new smart handle for inner doors which provides full RFID
compatibility and can be installed and integrated cost-effectively
with virtually all access control systems on the market, but can
also be used as a freestanding unit.
"During the quarter contracts were signed for the acquisition of
five companies, including Arjo, a leading supplier of physical and
digital identity solutions for
national ID documents. The company strengthens our present
offering of secure identity solutions and offers complementary
growth opportunities.
"Operating income for the quarter increased by 7% and amounted
to SEK 3,114 M, with an operating margin of 16.1% (16.3). The
margin increased in EMEA and Entrance Systems divisions and
remained stable for Americas and Global Technologies, but as
expected Asia Pacific was weak. The operating cash flow improved by
2%.
"My judgment is that the global economic trend has improved to
some degree compared with last year. On most markets in North and
South America and in parts of Europe there is a positive trend, but
on some markets, chiefly 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."
Second quarter
The Group's sales amounted to SEK 19,387 M (17,894). Organic
growth for comparable units was 2% (4). Acquired units contributed
2% (4). Exchange-rate effects affected sales by SEK 698 M (-383),
equivalent to 4% (-3). Operating income before depreciation and
amortization, EBITDA, amounted to SEK 3,543 M (3,305). The
corresponding EBITDA margin was 18.3% (18.5). The Group's operating
income, EBIT, amounted to SEK 3,114 M (2,910). The operating margin
was 16.1% (16.3).
Net financial items amounted to SEK -170 M (-181). The Group's
income
before tax was SEK 2,944 M (2,729), an increase of 8% compared
with last year. Exchange-rate effects had an impact of SEK 96 M
(-77) on income before tax. The profit margin was 15.2% (15.2). The
underlying estimated effective
tax rate on an annual basis was 26% (26). Earnings per share
amounted to SEK 1.96 (1.82), an increase of 8% compared with last
year.
First half-year
The Group's sales for the first half of 2017 totaled SEK 37,529
M (33,785), representing an increase of 11%. Organic growth was 4%
(3). Acquired
units contributed 3% (3). Exchange-rate effects affected sales
positively by
SEK 1,478 M (-633), equivalent to 4% (-2), compared with the
first half of 2016.
Operating income before depreciation and amortization, EBITDA,
for the half-year amounted to SEK 6,752 M (6,092). The
corresponding margin was 18.0% (18.0). The Group's operating
income, EBIT, amounted to SEK 5,901 M (5,321), which was an
increase of 11% compared with last year. The operating margin was
15.7% (15.7).
Earnings per share for the first half-year increased to SEK 3.69
(3.30), an increase of 12% compared with last year. Operating cash
flow totaled SEK 3,399 M (3,017).
Restructuring measures
Payments related to all current restructuring programs amounted
to SEK 136 M (50) in the quarter. The restructuring programs
proceeded according to plan and
led to a reduction in personnel of 158 people during the quarter
and 12,477 people since the projects began in 2006.
At the end of the half-year provisions of SEK 1,342 M remained
in the balance sheet for carrying out the programs.
Organization
Magnus Kagevik, Executive Vice President and Head of Asia
Pacific Division, has decided to leave ASSA ABLOY after ten years'
service in various management positions in the Group. Recruitment
of a replacement has begun. Magnus Kagevik will remain in his
present job until a successor is in post.
Juan Vargues, Executive Vice President and Head of Entrance
Systems Division, has after a long and successful service time
decided to leave ASSA ABLOY for a new positon as CEO of a Swedish
listed company. Juan Vargues will remain in his position until the
beginning of 2018 and the process of finding his successor has been
initiated.
Tax matters
The Stockholm Administrative Court of Appeal decided in June
2017 not to allow tax deductions for interest expenses relating to
one of the Group's subsidiaries for the years 2008-2012 on the
grounds that the deductions were wrongly allocated. The decision
will be appealed.
Including additional tax and other charges, the judgment
involves a total tax payment of SEK 847 M. The judgment will have
no impact on ASSA ABLOY's net income for the second quarter or for
the full year 2017, but will affect cash flow negatively in the
third quarter by the same sum as the payment made.
Comments by division
EMEA
Sales for the quarter in EMEA division totaled SEK 4,529 M
(4,234), with organic growth of 2% (6). Growth was strong in Great
Britain and in eastern Europe. Southern Europe and Israel had good
growth. Scandinavia, Finland, Germany, France and Benelux were
stable, while Africa and the Middle East had negative sales growth.
The positive trend for electromechanical products continued.
Acquired growth was 2%. Exchange-rate effects on sales were 3%.
Operating income totaled SEK 713 M (649), which represented an
operating margin (EBIT) of 15.7% (15.3). Return on capital employed
amounted to 19.0% (18.4). Operating cash flow before interest paid
totaled SEK 461 M (581).
Americas
Sales for the quarter in Americas division totaled SEK 4,704 M
(4,291), with organic growth of 3% (8). Growth was strong for
Security doors, Security fencing and High-security products in the
USA, and also for Mexico and Latin America apart from Brazil. Sales
growth was good for Electromechanical products and in Canada, and
stable for Traditional lock products and for the Private
residential market in the USA. Brazil continued to show a negative
sales development. Acquired growth was 1%. Exchange-rate effects on
sales were 6%. Operating income totaled SEK 1,041 M (949), which
represented an operating margin (EBIT) of 22.1% (22.1). Return on
capital employed amounted to 26.1% (26.0). Operating cash flow
before interest paid totaled SEK 1,163 M (1,127).
Asia Pacific
Sales for the quarter in Asia Pacific division totaled SEK 2,445
M (2,518), with organic growth of -6% (-8). Strong growth was
achieved in Japan and South Asia. Sales growth was good in South
Korea and in Pacific. Digital door locks grew strongly in the
region. However, sales in China fell, mainly because of a strong
decline for fire and security doors. Acquired growth was 0%.
Exchange-rate effects on sales were 3%. Operating income totaled
SEK 274 M (355), which represented an operating margin (EBIT) of
11.2% (14.1). Return on capital employed amounted to 9.0% (11.5).
Operating cash flow before interest paid totaled SEK 116 M
(362).
Global Technologies
Sales for the quarter in Global Technologies division totaled
SEK 2,640 M (2,424), with organic growth of 3% (5). Access control,
Identification technology and Project business had strong growth
within HID Global. However, Secure issuance, Logical access and
Government ID all had a negative development. Hospitality showed
continued strong growth. Acquired growth was 2%. Exchange-rate
effects on sales were 4%. Operating income amounted to SEK 486 M
(447), which represented an operating margin (EBIT) of 18.4%
(18.5). Return on capital employed amounted to 17.0% (17.4).
Operating cash flow before interest paid totaled SEK 511 M
(320).
Entrance Systems
Sales for the quarter in Entrance Systems division totaled SEK
5,381 M (4,767), with organic growth of 3% (4). Door components had
strong growth, as did Industrial and garage doors in the USA. Door
automation, High-speed doors and Gate automation showed good
growth, while sales of Industrial doors in Europe were stable.
Acquired growth was 5%. Exchange-rate effects on sales were 5%.
Operating income totaled SEK 720 M (628), which represented an
operating margin (EBIT) of 13.4% (13.2). Return on capital employed
amounted to 14.7% (13.7). Operating cash flow before interest paid
totaled SEK 638 M (632).
Acquisitions and disposals
A total of two minor acquisitions were consolidated during the
quarter. The combined acquisition price for the seven companies
acquired during the half-year amounted to SEK 671 M, and
preliminary acquisition analyses indicate
that goodwill and other intangible assets with indefinite useful
life amount to SEK 535 M. The acquisition price is adjusted for
acquired net debt and estimated deferred considerations. Estimated
deferred considerations amounted to SEK 157 M.
On 29 May it was announced that ASSA ABLOY had signed a contract
to acquire IDS, the leading South African manufacturer and
distributor of electronic security solutions. Its sales in 2017 are
expected to amount to SEK 210 M and the acquisition is expected to
be completed during the third quarter of 2017.
On 4 July it was announced that ASSA ABLOY had acquired Arjo
Systems SAS,
a leading supplier of physical and digital identity solutions
for national ID documents. The company has 100 employees and its
sales in 2017 are expected to amount to SEK 550 M.
Sustainable development
The demand for sustainable products is increasing. For ASSA
ABLOY this provides a commercial opportunity since customers are
choosing energy-efficient solutions and environmentally labeled
products to an ever increasing extent. The Group is continuing to
develop and launch environmentally friendly products at a rapid
pace. During the second quarter Entrance Systems division launched
a new energy-efficient version of its '1042' overhead door. The
product is one of the division's big sellers and is used in
environments with frequent openings, where at the same time a door
with a high insulation effect is required. The new overhead door
opens and closes four times as fast as the standard model. The
increased speed means that the door is open for a shorter time
which, together with improved insulation, is calculated to reduce
customers' energy consumption by up to 12% compared with a
traditional overhead door. The faster opening and closing sequence
also produces less draught and thus improves comfort for the people
occupying the building.
Parent company
Other operating income for the Parent company ASSA ABLOY AB
totaled SEK 2,113 M (1,963) for the first half-year. Operating
income for the first half--year amounted to SEK 950 M (875).
Investments in tangible and intangible assets totaled SEK 12 M (7).
Liquidity is good and the equity ratio was 41.8% (42.9).
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 the first half-year
of 2017 with evaluation and analysis of possible effects on each
division. The Group's judgment is that the standard will have
little or no impact on the Group's income or financial
position.
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 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.
Certification
The Board of Directors and the President and CEO declare that
this half-year report gives an accurate picture of the Parent
Company's and the Group's operations, position and income and
describes significant risks and uncertainty factors faced by the
Parent Company and the companies making up the Group.
Stockholm, 18 July 2017
Lars Renström Carl Douglas Ulf Ewaldsson
Chairman Vice Chairman Board member
Eva Karlsson Birgitta Klasén Eva Lindqvist
Board member Board member Board member
Johan Molin Sofia Schörling Jan Svensson
Högberg
President and Board member Board member
CEO
Rune Hjälm Mats Persson
Employee representative Employee representative
Report of Review of Interim Financial Information
Introduction
We have reviewed the condensed Interim Financial Information
(interim report) of ASSA ABLOY AB (publ.) as of 30 June 2017 and
the six-month period then ended. The Board of Directors and the CEO
are responsible for the preparation and presentation of the Interim
Financial Information in accordance with IAS 34 and the Swedish
Annual Accounts Act. Our responsibility is to express a conclusion
on this Interim Report based on our review.
Scope of Review
We conducted our review in accordance with the International
Standard on Review Engagements ISRE 2410, Review of Interim Report
Performed by the Independent Auditor of the Entity. A review
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing, ISA, and other generally accepted auditing standards in
Sweden. The procedures performed in a review do not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the Interim Report is not prepared, in
all material respects, in accordance with IAS 34 and the Swedish
Annual Accounts Act, regarding the Group, and with the Swedish
Annual Accounts Act, regarding the Parent Company.
Stockholm, 18 July 2017
PricewaterhouseCoopers
Bo Karlsson Linda Corneliusson
Authorized Public Accountant Authorized Public Accountant
Auditor in charge
Financial information
The Interim Report for the third quarter will be published on 20
October 2017.
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 is information that ASSA ABLOY AB is obliged
to make public pursuant to the EU Market Abuse Regulation
and the Securities Markets Act. The information was
submitted for publication, through the agency of the
contact persons set out above, at 08.00 CEST on 19
July 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. 12/2017
Klarabergsviadukten
90, Stockholm, Corporate identity
Sweden number: 556059-3575
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This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EAPXNFLSXEEF
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July 19, 2017 05:03 ET (09:03 GMT)
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