TIDM77BL
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 <DELTA> 2018 2019 <DELTA>
------------------------------ -------- ------- -------- --------- -------- --------
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) 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.01/2020
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
Financial information - Notes
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
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR GIGDDCSGDGGL
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