TIDM77BL
RNS Number : 5664E
ASSA ABLOY AB (publ)
19 July 2016
Organic growth
+4%
Operating income
+6%
Earnings per share
+7%
Strong growth in mature markets
Second quarter
-- Net sales increased by 5% to SEK 17,894 M (17,082), of which
4% (4) was organic growth and 4% (3) was acquired growth
-- Strong growth in Americas, EMEA and Global Technologies and
good growth in Entrance Systems
-- Negative growth in Asia Pacific owing to weak demand in China
-- Contracts have been signed for the acquisition of six
companies with combined expected annual sales of about SEK 950
M
-- Operating income (EBIT) increased by 6% to SEK 2,910 M
(2,742). The operating margin was 16.3% (16.1)
-- Net income amounted to SEK 2,026 M (1,888)
-- Earnings per share rose by 7% and amounted to SEK 1.82 (1.70)
-- The quarter's operating cash flow increased by 27% to SEK 2,519 M (1,991).
Sales and income
Second quarter First half-year
================= ======== ================== ========
2015 2016 <DELTA> 2015 2016 <DELTA>
--------------------------- -------- ------- -------- -------- -------- --------
Sales, SEK M 17,082 17,894 5% 32,334 33,785 4%
Of which:
Organic growth 656 650 4% 1,336 1,099 4%
Acquisitions 453 593 4% 829 1,083 3%
Exchange-rate effects 2,008 -431 -3% 3,900 -730 -3%
Operating income (EBIT),
SEK M 2,742 2,910 6% 5,071 5,321 5%
Operating margin (EBIT),
% 16.1% 16.3% 15.7% 15.7%
Income before tax, SEK
M 2,551 2,729 7% 4,735 4,938 4%
Net income, SEK M 1,888 2,026 7% 3,504 3,664 5%
Operating cash flow,
SEK M 1,991 2,519 27% 2,511 3,017 20%
Earnings per share (EPS),
SEK 1.70 1.82 7% 3.15 3.30 5%
Comments by the President and CEO
"The second quarter of the year showed strong demand for ASSA
ABLOY," says Johan Molin, President and CEO. "The mature markets in
general produced strong growth, something we have not seen since
the financial crisis, at the same time as the emerging markets
continued their slowdown. Sales increased by 5% during the quarter,
of which 4% was organic growth. Operating income outstripped sales
growth and increased by 6%.
"Organic growth during the quarter was affected by a positive
calendar effect of approximately one day. In Americas, EMEA and
Global Technologies an encouraging sales growth continued, while
Entrance Systems showed a rather weaker growth. The downturn in
Asia Pacific continued because of a weak demand situation,
especially in China. The emerging markets also remained weak, but
with some bright points in eastern Europe and in Latin America
apart from Brazil.
"ASSA ABLOY has once again been named as one of the world's one
hundred most innovative companies by Forbes magazine. It is
pleasing to see that our innovative new products are growing
strongly. During the quarter a so-called multi-family solution was
launched, whereby ASSA ABLOY for the first time offers a total
solution for multi-family buildings where all lock units are both
electronic and connected. The electronic content is growing
steadily on the market, and there is great potential for the
future.
"A further six companies were acquired during the quarter.
Consolidation of the market for entrance automation continued with
the acquisition of Nassau, which is a regional leader primarily in
Denmark. Another interesting acquisition was the company Mauer, the
market leader in locks in Bulgaria. ASSA ABLOY has been building a
market leadership in eastern Europe for a number of years, which
Mauer complements very well.
"Operating income for the quarter increased by 6%. At the same
time the operating margin rose to 16.3% in spite of negative
effects from both acquisition dilution and exchange-rate effects.
The improvement in the margin was mainly due to good organic growth
of 4% and lower raw-material costs.
"My judgment is that the global economic trend remains weak, but
with a positive trend in America and parts of Europe. Elsewhere,
many of the emerging markets are stagnating. However, our strategy
of expanding on the emerging markets remains unchanged, since in
the long term they are expected to achieve very good economic
growth. We are also continuing our investments in new products,
especially in the growth area of electromechanics."
Second quarter
The Group's sales totaled SEK 17,894 M (17,082). Organic growth
for comparable units was 4% (4). Acquired units contributed 4% (3).
Exchange-rate effects had an impact of SEK -431 M (2,008) on sales,
that is -3% (15). Operating income before depreciation and
amortization, EBITDA, amounted to SEK 3,305 M (3,117). The
corresponding EBITDA margin was 18.5% (18.2). The Group's operating
income, EBIT, amounted to SEK 2,910 M (2,742). The operating margin
was 16.3% (16.1).
Net financial items amounted to SEK -181 M (-191). The Group's
income before
tax was SEK 2,729 M (2,551), an improvement of 7% compared with
last year. Exchange-rate effects had an impact of SEK -77 M (278)
on income before tax. The profit margin was 15.2% (14.9). The
estimated underlying effective tax rate on an annual basis was 26%
(26). Earnings per share amounted to SEK 1.82 (1.70), an increase
of 7% compared with last year.
First half-year
The Group's sales for the first half of 2016 totaled SEK 33,785
M (32,334), representing an increase of 4%. Organic growth was 4%
(4). Acquired units contributed 3% (3). Exchange-rate effects had
an impact of SEK -730 M (3,900)
on sales, that is -3% (16), compared with the first half of
2015.
Operating income before depreciation and amortization, EBITDA,
for the half-year amounted to SEK 6,092 M (5,776). The
corresponding margin was 18.0% (17.9). The Group's operating
income, EBIT, amounted to SEK 5,321 M (5,071), which was an
increase of 5% compared with last year. The corresponding EBIT
operating margin was 15.7% (15.7).
Earnings per share for the first half-year increased to SEK 3.30
(3.15), a rise of 5% compared with last year. Operating cash flow
totaled SEK 3,017 M (2,511).
Restructuring measures
Payments related to all existing restructuring programs amounted
to SEK 50 M in the quarter. The restructuring programs proceeded
according to plan and led to a reduction in personnel of 149 people
during the quarter and 11,356 people since the projects began in
2006.
At the end of the second quarter provisions of SEK 395 M
remained in the balance sheet for carrying out the programs.
Comments by division
EMEA
Sales for the quarter in EMEA division totaled SEK 4,234 M
(4,068), with organic growth of 6% (5). The markets in Scandinavia,
Finland, Africa, Germany, Iberia and eastern Europe showed strong
growth. Britain, Benelux, France, Italy and Israel showed good
growth. The positive trend for electromechanical products
continued. Acquired growth amounted to 1% (2). Operating income
totaled SEK 649 M (614), which represented an operating margin
(EBIT) of 15.3% (15.1). Return on capital employed amounted to
18.4% (17.4). Operating cash flow before interest paid totaled SEK
581 M (355).
Americas
Sales for the quarter in Americas division totaled SEK 4,291 M
(3,953),
with organic growth of 8% (5). Growth was strong for Security
doors, Electromechanical products, the Residential market, Mexico
and South America, apart from Brazil which was negative.
Traditional lock products, High-security products and Canada showed
good growth. Acquired growth amounted to 3% (2). Operating income
totaled SEK 949 M (870), which represented an operating margin
(EBIT) of 22.1% (22.0). Return on capital employed amounted to
26.0% (24.5). Operating cash flow before interest paid totaled SEK
1,127 M (955).
Asia Pacific
Sales for the quarter in Asia Pacific division totaled SEK 2,518
M (2,793), with organic growth of -6% (-2). Sales in the Pacific
showed strong growth, while
the trend was good in South-East Asia and Korea. China continued
to show a negative sales trend due to low domestic demand. Acquired
growth amounted to 1% (9). Operating income totaled SEK 355 M
(403), which represented an operating margin (EBIT) of 14.1%
(14.4). Return on capital employed amounted to 11.5% (14.0).
Operating cash flow before interest paid totaled SEK 362 M
(261).
Global Technologies
Sales for the quarter in Global Technologies division totaled
SEK 2,424 M (2,315), with organic growth of 5% (10). Access Control
(PACS), Government ID and Quantum Secure showed strong growth
within HID Global. Identification Technology (IDT) and AdvanIDe
showed growth. IAM Solutions showed weakening sales. Hospitality
showed stable performance. Acquired growth amounted to 2% (3).
Operating income amounted to SEK 447 M (417), which represented an
operating margin (EBIT) of 18.5% (18.0). Return on capital employed
amounted to 17.4% (16.9). Operating cash flow before interest paid
totaled SEK 320 M (155).
Entrance Systems
Sales for the quarter in Entrance Systems division totaled SEK
4,767 M (4,325), with organic growth of 4% (5). Sales for Door
automation, High-speed doors and European industrial doors
increased strongly while growth for 4Front,
Amarr and Ditec was good. Sales weakened for the Residential
market
in Europe. Acquired growth amounted to 8% (0). Operating income
totaled SEK 628 M (556), which represented an operating margin
(EBIT) of 13.2% (12.9). Return on capital employed amounted to
13.7% (13.1). Operating cash flow before interest paid totaled SEK
632 M (603).
Acquisitions and disposals
A total of three minor acquisitions were consolidated during the
quarter. The combined acquisition price for the companies acquired
in the first half-year amounted to SEK 1,450 M, and preliminary
acquisition analyses indicate that goodwill and other intangible
assets with indefinite useful life amount to SEK 1,043 M. The
acquisition price is adjusted for acquired net debt and estimated
deferred considerations. Estimated deferred considerations amount
to SEK 178 M.
The contract for the sale of the Group's Car Locks business was
signed with the Japanese company Alpha Corporation in March. The
transaction is expected to be completed in the third quarter of
2016 and is dependent on approval by the appropriate authorities.
From 1 January the business has been reclassified under 'Assets
held for sale' in accordance with IFRS 5. As a result, net sales
for the half-year fell by SEK 287 M compared with the previous
year.
Organization
Christophe Sut has been appointed Executive Vice President and
Head of the Hospitality business unit within Global Technologies
from 10 July 2016. He succeeds Tim Shea, who is retiring.
Christophe Sut has worked in several different posts at ASSA ABLOY
since 2001 and was most recently Head of Business Development and
Technology in the Hospitality business unit. Christophe Sut has an
M.Sc. in Marketing and Sales and a Bachelor's degree
in Language and Mathematics.
Sustainable development
Reduced quantities of waste are an important part of ASSA
ABLOY's long--term work to reduce the Group's total environmental
impact. The Group's manufacturing plants are responsible for the
greater part of the waste material. More and more plants are
working with the principle that no waste should go
to landfill. In the EMEA division, 15 plants have recently been
certified by the Carbon Trust as achieving 'Zero Waste to
Landfill'. The certification means that at least 95% of the total
amount of waste is separated into a number of different fractions
and recycled. Other ASSA ABLOY divisions are evaluating similar
certification of their plants.
In parallel with a more effective sorting of waste, other
activities to reduce amounts of waste are in hand, for example
through the use of returnable packaging for purchased components.
The Group's target is to reduce the amount of waste relative to the
size of the business by 20% by the end of 2020.
Parent company
Other operating income for the Parent company ASSA ABLOY AB
totaled SEK 1,963 M (1,518) for the first half-year. Operating
income for the first half--year amounted to SEK 875 M (524).
Investments in tangible and intangible assets totaled SEK 7 M (7).
Liquidity is good and the equity ratio was 42.9% (41.4).
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 92-97 of the 2015
Annual Report. This Interim 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'.
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 18 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 2015 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 2015 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 2016
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 Jan Svensson Ulrik Svensson
President and CEO Board member Board member
Bert Arleros Mats Persson
Employee representative Employee representative
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Report of Review of Interim Financial Information
Introduction
We have reviewed the condensed interim financial information
(interim report) of ASSA ABLOY (publ.) as of 30 June 2016 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 2016
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 21
October 2016.
A capital markets day will be held on 16 November 2016 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 information 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 CET on 19
July 2016.
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. 11/2016
90, Stockholm, Sweden
Corporate identity number:
5560593575
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EAXXNFFDKEEF
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