TIDM77BL
RNS Number : 0794X
ASSA ABLOY AB (publ)
25 April 2019
Organic growth
+5%
Operating income
+15%
Earnings per share
+13%
Good start to 2019
First quarter
-- Net sales increased by 16% to SEK 21,505 M (18,550), with
organic growth of 5% (4) and acquired net growth of 3% (2)
-- Strong growth in Americas, Global Technologies and Asia
Pacific, good growth in Entrance Systems and EMEA
-- Agreement signed to acquire a 54% holding in agta record, a
Swiss manufacturer of automatic pedestrian doors with sales of SEK
3.9 billion in 2018. Closing is conditional upon authorities
approval
-- Three other acquisitions signed with combined expected annual sales of about SEK 650 M
-- Operating income (EBIT) increased by 15% and amounted to SEK
3,246 M (2,829), corresponding to an operating margin of 15.1%
(15.3)
-- Net income amounted to SEK 2,218 M (1,964)
-- Earnings per share amounted to SEK 2.00 (1.77)
-- Operating cash more than doubled to SEK 1,171 M (575)
Sales and income
Full year First quarter
=================== ======== ================ ========
2017 2018 <DELTA> 2018 2019 <DELTA>
------------------------------ ------- ---------- -------- ------- ------- --------
Sales, SEK M 76,137 84,048 10% 18,550 21,505 16%
Of which:
Organic growth 2,834 3,901 5% 705 1,006 5%
Acquisitions and divestments 1,753 1,793 2% 268 689 3%
Exchange-rate effects 257 2,217 3% -565 1,260 8%
Operating income (EBIT),
SEK M 12,341 12,909(1) 5% 2,829 3,246 15%
Operating margin (EBITA),
% 16.5% 15.8%(1) 15.7% 15.6%
Operating margin (EBIT),
% 16.2% 15.4%(1) 15.3% 15.1%
Income before tax, SEK
M 11,673 12,110(1) 4% 2,654 2,997 13%
Net income, SEK M 8,635 8,984(1) 4% 1,964 2,218 13%
Operating cash flow,
SEK M 10,929 11,357 4% 575 1,171 104%
Earnings per share, SEK 7.77 8.09(1) 4% 1.77 2.00 13%
(1) Excluding costs for a new manufacturing footprint program in
Q4 2018, totaling SEK -1,218 M before tax, corresponding to SEK
-961 M after tax. Excluding impairment of goodwill and other
intangible assets in Q2 2018, totaling SEK -5,595 M before tax,
corresponding to SEK -5,268 M after tax.
Comments by the President and CEO
Strong growth and doubled cash flow
We had a good start to 2019 with the first quarter's sales
growing by 16% to SEK 21,505 M. This resulted from strong organic
growth of 5%, acquired net growth of 3%, and positive currency
effects of 8%.
All divisions reported organic growth. Growth continued to be
particularly strong in the Americas and Global Technologies
divisions. Entrance Systems and EMEA reported good growth while
Asia Pacific's external growth was flat. Sales growth for
electromechanical products remains particularly strong and now
represents 31% of total sales.
Operating income increased by 15% to SEK 3,246 M, driven
primarily by good operating leverage in Americas and Global
Technologies. This was partly offset by weaker performance in Asia
Pacific due to flat external growth, increasing low-margin
intra-group sales and build-up of the new Chinese organization.
Seasonal effects always impact the operating cash flow in the
first quarter, but this year cash flow more than doubled versus
last year. The improvement was driven by the higher earnings
combined with actions taken in Q4 2018 to balance the seasonal
variations between Q4 and Q1.
Innovation enables growth and leadership
One of ASSA ABLOY's strategic objectives is product leadership
through innovation. To maintain our leading position, more than
2,000 engineers are dedicated to continuously developing new
solutions for our customers, and this is reflected in that close to
4% of our sales were invested in R&D in the quarter.
Customer focus and innovation efforts pay off in growth and
leadership. Sales of electromechanical products increased 30% in
the quarter, driven by strong sales in the commercial/institutional
segment and by smart locks in the US residential segment. The
global sales potential for smart locks is significant, but we
expect the growth rate to slow down from the second quarter onwards
due to tougher comparatives. Our innovation efforts are also
recognized by independent parties. In March, for instance, our new
Tanzanian e-Passport, which has been designed and delivered by HID,
won an award at the High Security Printing conference in
Europe.
ASSA ABLOY to acquire majority stake in agta record
In March we announced the intention to acquire a majority stake
in agta record. Subject to anti-trust approval, this will be ASSA
ABLOY's largest acquisition in eight years, and it is expected to
add 5% to the revenue base. ASSA ABLOY and agta record complement
each other very well, and I am confident that our customers and
shareholders will benefit from the strong value we can create
together. Our intention is to keep the 'record' brand and operate
it as a separate unit within Entrance Systems Division.
As a final note, I would once again like to emphasize that ASSA
ABLOY's employees make the difference. In February, we completed
the "Together we grow" leadership conference. The focus was on how
we can further grow ASSA ABLOY and remain the global leader in
access solutions. We have a strong team and we will continue to
deliver innovative and smart solutions to our customers.
Stockholm, 25 April 2019
Nico Delvaux
President and CEO
First quarter
The Group's sales increased by 16% to SEK 21,505 M (18,550).
Organic growth amounted to 5% (4). Acquisitions and divestments
were 3% (2), of which 4% (3) were acquisitions and -1% (-1) were
divestments. Exchange-rates affected sales by 8% (-4).
The Group's operating income, EBIT amounted to SEK 3,246 M
(2,829) an increase of 15%. The operating margin was 15.1% (15.3).
Exchange-rates had an impact of SEK 183 M (-89) on EBIT. Operating
income before amortizations from acquisitions, EBITA amounted to
SEK 3,352 M (2,921). The corresponding EBITA margin was 15.6%
(15.7).
Net financial items amounted to SEK -248 M (-175). The Group's
income
before tax was SEK 2,997 M (2,654), an increase of 13% compared
with last year. Exchange-rates had an impact of SEK 169 M (-80) on
income before tax. The profit margin was 13.9% (14.3).
The estimated effective tax rate on an annual basis was 26%
(26). Earnings per share amounted to SEK 2.00 (1.77), an increase
of 13% compared with last year. Operating cash flow amounted to SEK
1,171 M (575).
Restructuring measures
Payments related to all restructuring programs amounted to SEK
161 M (173)
in the quarter. The restructuring programs proceeded according
to plan and
led to a reduction in personnel of 220 people during the quarter
and 15,582 people since the projects began in 2006. At the end of
the quarter provisions of SEK 1,054 M remained in the balance sheet
for carrying out the programs.
Comments by division
EMEA
Sales for the quarter in EMEA totaled SEK 5,208 M (4,775), with
organic growth of 3% (3). The growth was strong in Scandinavia,
Finland, Germany and Middle East/Africa and good in East Europe,
Benelux and the UK. Sales also grew in South Europe, but decreased
in France. Acquired growth net was 3%. Operating income totaled SEK
841 M (764), which represents an operating margin (EBIT) of 16.2%
(16.0). Return on capital employed amounted to 17.9% (20.0).
Operating cash flow before interest paid totaled SEK 289 M
(262).
Americas
Sales for the quarter in Americas totaled SEK 5,312 M (4,354),
with organic growth of 10% (3). The growth was very strong for US
Smart Residential, Electromechanical & High-security and
Architectural Hardware and in Brazil, while sales were strong for
US Security Doors and the Residential Group. Growth was good in
Canada and stable in Mexico, while sales decreased in Colombia and
Chile and for Perimeter Security in the USA. Acquired growth net
was 1%. Operating income totaled SEK 1,040 M (845), which
represents an operating margin (EBIT) of 19.6% (19.4). Return on
capital employed amounted to 21.5% (21.0). Operating cash flow
before interest paid totaled SEK 260 M (241).
Asia Pacific
Sales for the quarter in Asia Pacific totaled SEK 2,221 M
(1,959), with organic growth of 6% (4) due to strong intra-group
sales. The external sales growth was flat. In Japan, the growth was
strong. There was good sales growth in Pacific and South Korea,
while the growth in India and China was stable. In South Asia sales
declined. Acquired growth was 2%. Operating income totaled SEK 115
M (154), which represents an operating margin (EBIT) of 5.2% (7.9).
Return on capital employed amounted to 5.5% (4.9). Operating cash
flow before interest paid totaled SEK -122 M (-158).
Global Technologies
Sales for the quarter in Global Technologies totaled SEK 3,348 M
(2,477), with organic growth of 9% (6). The growth was driven by
very strong development in Citizen ID, Secure Issuance and Physical
Access Control and by strong sales growth for Identity & Access
Solutions. Sales declined in Identification Technology and for
Extended Access. ASSA ABLOY Global Solutions grew strongly.
Acquired growth was 15%. Operating income totaled SEK 598 M (466),
which represents an operating margin (EBIT) of 17.9% (18.8). Return
on capital employed amounted to 12.2% (11.6). Operating cash flow
before interest paid totaled SEK 345 M (201).
Entrance Systems
Sales for the quarter in Entrance Systems totaled SEK 5,922 M
(5,322), with organic growth of 3% (5). The growth was strong in
Pedestrian Doors, EU Residential Doors and Industrial Doors while
sales for Door components were good. Sales for High Performance
Doors were stable while US Residential Doors had a slight negative
sales development. Growth for service accelerated. Acquired growth
was 1%. Operating income totaled SEK 779 M (710), which represents
an operating margin (EBIT) of 13.2% (13.3). Return on capital
employed amounted to 14.1% (14.5). Operating cash flow before
interest paid totaled SEK 895 M (379).
Acquisitions and divestments
A total of three acquisitions were consolidated during the
quarter. The combined acquisition price for these companies,
including adjustments from prior year acquisitions, amounted to SEK
917 M. The acquisition price on a cash and debt free basis amounted
to SEK 1,076 M. Preliminary acquisition analyses indicate that
goodwill and other intangible assets with indefinite useful life
amount to SEK 872 M. Estimated deferred considerations amounted to
SEK 9 M.
On March 6 it was announced that ASSA ABLOY signed an agreement
to acquire a 54% holding in agta record, a well-established
manufacturer and service organization dedicated to automatic
pedestrian entrance systems. The company has about 2,600 employees
and its sales in 2018 amounted to SEK 3.9 billion. After
completion, ASSA ABLOY will own around 93% of the share capital and
voting rights of the company and will launch a public tender offer
for the remaining shares. The acquisition is conditional upon
authorities approval and is expected to close during the fourth
quarter. The purchase price for the 54% holding amounts to
approximately EUR 502 M. As part of the transaction, ASSA ABLOY's
existing 39% ownership in agta record, a shareholding in an
associate company, will be revalued at fair value through the
income statement at closing. The expected non-cash income in EBIT
amounts to around SEK 2 billion.
On March 29 it was announced that ASSA ABLOY had acquired Spence
Doors, a leading manufacturer of commercial doors in Australia. The
company has about 260 employees and its expected sales in 2019
amount to around SEK 435 M.
On January 14 it was announced that ASSA ABLOY had signed an
agreement to acquire KEYper Systems, a leading supplier of
electronic and mechanical key management systems in the US with a
strong presence in the automotive segment. The acquisition was
completed during the first quarter. The company has about 25
employees and its expected sales in 2019 amount to around SEK 195
M.
Sustainable development
ASSA ABLOY's Sustainability Report for 2018 was published on 21
March 2019 and the report shows that the Group had a positive
development across a majority of the reporting areas. The Group's
materiality analysis was updated during the year with input from
employees, customers and suppliers. The result confirms that the
Group is working with the right priorities. The increased focus on
Health and Safety has led to a decrease of 11% in the injury rate.
The Group's water consumption has decreased by 10% and its energy
consumption has decreased by 5% during the year. The consumption of
organic solvents continued to decrease by switching to more
environmentally friendly processes.
The Group carried out 1,055 sustainability audits of suppliers
in low cost countries during 2018. The extensive auditing program
has increased the portion of spend in low-cost countries
represented by sustainability audited suppliers from 93% to 96%.
ASSA ABLOY had 332 verified and published Environmental Product
Declarations by the end of 2018.
Parent company
Other operating income for the Parent company ASSA ABLOY AB
totaled SEK 373 M (431) for the interim period. Operating income
for the same period amounted to SEK -467 M (-261). Investments in
tangible and intangible assets totaled SEK 6 M (12). Liquidity is
good and the equity ratio is 40.6% (41.5).
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 16. 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 applies 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 16.
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 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 first quarter of 2019.
Stockholm, 25 April 2019
Nico Delvaux
President and CEO
Financial information
The Interim Report for the second quarter will be published on
17 July 2019.
The Interim Report for the third quarter will be published on 18
October 2019.
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/0794X_1-2019-4-25.pdf
ASSA ABLOY is holding a telephone and web conference at 09.30
today
which can be followed on the Internet at www.assaabloy.com.
It is possible to submit questions by telephone on:
+46 8-505 583 68, +44 333 300 9269 or +1 646 722 4902
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 25 April 2019.
ASSA ABLOY AB (publ) Tel +46 (0)8 506 485
Box 703 40 00
107 23 Stockholm Fax +46 (0)8 506 485
Visiting address 85
Klarabergsviadukten www.assaabloy.com No.07/2019
90, Stockholm, Sweden
Corporate identity number:
556059-3575
Financial information - Group
Financial information - Group
Financial information - Group
Financial information - Parent company
Quarterly information - Group
Reporting by division
Reporting by division
Financial information - Notes
New accounting standards
Definitions of financial performance measures
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
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END
QRFCKPDDFBKKKQB
(END) Dow Jones Newswires
April 25, 2019 04:20 ET (08:20 GMT)
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