TIDM77BL
RNS Number : 5806E
ASSA ABLOY AB (publ)
19 October 2018
Organic growth
+5%
Operating income
+11%
Earnings per share
+11%
Strong organic sales growth
Third quarter
-- Net sales increased by 15% to SEK 21,191 M (18,499), with
organic growth of 5% (3) and acquired net growth of 2% (2)
-- Strong sales growth in Global Technologies and Americas and
good growth in Entrance Systems. Sales in EMEA and Asia Pacific
were stable
-- Three acquisitions have been signed with combined expected
annual sales of about SEK 1,200 M
-- Operating income (EBIT) amounted to SEK 3,424 M (3,080), with
an operating margin of 16.2% (16.7)
-- Net income amounted to SEK 2,384 M (2,153)
-- Earnings per share amounted to SEK 2.15 (1.94)
-- Operating cash flow increased by 13% to SEK 3,004 M (2,654).
Sales and income
Third quarter January-September
================ ======== ==================== ========
2017 2018 <DELTA> 2017 2018 <DELTA>
------------------------------ ------- ------- -------- --------- --------- --------
Sales, SEK M 18,499 21,191 15% 56,028 60,881 9%
Of which:
Organic growth 590 960 5% 1,956 2,620 5%
Acquisitions and divestments 373 446 2% 1,273 1,079 2%
Exchange-rate effects -488 1,286 8% 990 1,154 2%
Operating income (EBIT)
(1) , SEK M 3,080 3,424 11% 8,982 9,164 2%
Operating margin (EBITA)
(1) , % 16.9% 16.6% 16.3% 15.5%
Operating margin (EBIT)
(1) , % 16.7% 16.2% 16.0% 15.1%
Income before tax (1)
, SEK M 2,910 3,221 11% 8,447 8,595 2%
Net income (1) , SEK
M 2,153 2,384 11% 6,250 6,396 2%
Operating cash flow,
SEK M 2,654 3,004 13% 6,053 6,435 6%
Earnings per share (1)
, SEK 1.94 2.15 11% 5.63 5.76 2%
(1) Excluding impairment of goodwill and other intangible assets
of SEK -5,595 M in the second quarter of 2018. The effect on net
income from the impairment of intangible assets was SEK -5,268
M.
Comments by the President and CEO
Strong organic sales growth in the quarter
The third quarter continued with strong organic growth of 5%.
Organic growth was very strong in Global Technologies (12%) and
Americas (10%) and continued to be good in Entrance Systems (4%),
while EMEA and Asia Pacific reported stable organic sales growth of
2% and 1% respectively.
Accelerated growth in Global Technologies and continued strong
growth in Americas
The demand for our products continued to grow at a good level in
most of our markets during the third quarter and in the Global
Technologies and Americas divisions in particular. Following a
strong start to the year for Global Technologies, the growth
accelerated during the third quarter.
During the last five years ASSA ABLOY Hospitality's performance
has been very impressive, with innovative new solutions, combined
with a solid financial development. The business has expanded from
offering solutions for hotels and marine cruise ships into
solutions for other verticals such as elderly care, student
accommodation and logistics. As a result of this transformation,
the Hospitality organization will now evolve under a new name, ASSA
ABLOY Global Solutions, where we will develop the existing business
and look for new opportunities to build global solutions for our
customers.
HID Global is also developing positively. Two years ago ASSA
ABLOY set a target to double HID's revenue in five years' time
through organic sales and acquisitions. With the recent
announcement of the acquisition of Crossmatch, we are on track to
reach this target. Crossmatch allows us to offer biometric identity
in critical applications and complements our total offering.
In Americas the growth was mainly driven by the development in
the US. It is very encouraging that both the commercial and
residential markets grew well during the quarter. In both segments
our electromechanical products are market leaders and we note a
strong demand for our innovative new solutions.
Strong operating income and cash flow
The third quarter's operating income improved strongly by 11%
year-on-year to
SEK 3,424 M, corresponding to an operating margin of 16.2%. Due
to higher raw material costs and negative currency effects the
margin declined compared to last year, but we continue to work hard
on further offsetting these material price increases.
Operating cash flow was strong in the third quarter and
increased by 13% to SEK 3,004 M.
New CFO appointed
Last but not least, we have recently announced that Erik Pieder
has been appointed as Chief Financial Officer. He will join ASSA
ABLOY in January 2019.
I would like to thank Carolina Dybeck Happe for her invaluable
contribution to ASSA ABLOY over the last 16 years and wish her
great success in her new position.
Stockholm, 19 October 2018
Nico Delvaux
President and CEO
Third quarter
The Group's sales increased by 15% to SEK 21,191 M (18,499).
Organic growth amounted to 5% (3). Acquisitions and disposals were
2% (2), of which 4% (3) were acquisitions and -2% (-1) were
disposals. Exchange-rates affected sales by 8% (-2).
The Group's operating income, EBIT amounted to SEK 3,424 M
(3,080) an increase of 11%. The operating margin was 16.2% (16.7).
Operating income before amortizations from acquisitions, EBITA,
amounted to SEK 3,516 M (3,132). The corresponding EBITA margin was
16.6% (16.9).
Net financial items amounted to SEK -203 M (-171). The Group's
income
before tax was SEK 3,221 M (2,910), an increase of 11% compared
with last year. The corresponding profit margin was 15.2% (15.7).
Exchange-rates had an impact of SEK 166 M (-74) on income before
tax.
The estimated effective tax rate, excluding impairment of
goodwill, was 26% (26) on an annual basis. Earnings per share
amounted to SEK 2.15 (1.94), an increase of 11% compared to last
year.
First nine months of the year
The Group's sales for the first nine months of 2018 totaled SEK
60,881 M (56,028), representing an increase of 9%. Organic growth
was 5% (4). Acquisitions and disposals were 2% (2), of which 4% (3)
were acquisitions and
-2% (-1) were disposals. Exchange-rate effects affected sales by
2% (2).
The Group's operating income, EBIT excluding impairment of
intangible assets amounted to SEK 9,164 M (8,982), an increase of
2% compared with last year. The operating margin was 15.1% (16.0).
Operating income before amortizations from acquisitions, EBITA,
excluding impairment of intangible assets, amounted to SEK 9,444 M
(9,139). The corresponding EBITA margin was 15.5% (16.3).
Earnings per share excluding impairment of intangible assets
amounted to SEK 5.76 (5.63), an increase of 2% compared with last
year. Operating cash flow totaled SEK 6,435 M (6,053).
Restructuring measures
Payments related to all restructuring programs amounted to SEK
103 M (106)
in the quarter. The restructuring programs proceeded according
to plan and
led to a reduction in personnel of 165 people during the quarter
and 14,400 people since the projects began in 2006. At the end of
the quarter provisions of SEK 507 M remained in the balance sheet
for carrying out the programs.
The planning of a new restructuring program continues. The
launch is scheduled for the fourth quarter and the program is
expected to take place over a period of three years. The total
estimated cost of the restructuring program is in line with
previous programs, with an expected payback time of around three
years. The restructuring cost will be expensed over two years.
Organization
Erik Pieder has been appointed Chief Financial Officer (CFO) and
Executive Vice President of ASSA ABLOY effective January 14, 2019.
He succeeds Carolina Dybeck Happe who will take up a new position
outside the company. Erik is currently Vice President Business
Control at Atlas Copco Compressor Technique and has previously held
various management positions in the Atlas Copco Group.
Comments by division
EMEA
Sales for the quarter in EMEA division totaled SEK 4,872 M
(4,278), with organic sales growth of 2% (4). Growth was strong in
Finland and Scandinavia and good in Germany, Eastern Europe and
South Europe. Sales in the UK and France were stable while Benelux
and Africa & Middle East had negative sales growth.
Electromechanical products continued to show strong growth.
Acquired growth net was 5%. Operating income totaled SEK 774 M
(717), which represents an operating margin (EBIT) of 15.9% (16.8).
Return on capital employed amounted to 17.4% (19.2). Operating cash
flow before interest paid totaled SEK 627 M (640).
Americas
Sales for the quarter in Americas division totaled SEK 5,211 M
(4,426), with organic sales growth of 10% (3). The growth was very
strong in the US Residential market and for Electromechanical &
High-security products while Canada, Brazil and the US markets for
Perimeter Protection, Architectural Hardware and Security doors all
showed strong growth. Growth in Mexico was good, but was negative
in Colombia. The demand for electromechanical products in the USA
continued to be very strong. Acquired growth net was 0%. Operating
income totaled SEK 1,046 M (966), which represents an operating
margin (EBIT) of 20.1% (21.8). Return on capital employed amounted
to 23.8% (25.9). Operating cash flow before interest paid totaled
SEK 1,203 M (1,046).
Asia Pacific
Sales for the quarter in Asia Pacific division totaled SEK 2,627
M (2,448), with organic sales growth of 1% (2). Growth was strong
in South Korea and Japan and stable in Pacific and South Asia. In
China sales of both lock products and security doors declined. The
implementation of a new strategy and new organization is ongoing in
China. Electromechanical locks continued to grow strongly. Acquired
growth was 0%. Operating income totaled SEK 242 M (277), which
represents an operating margin (EBIT) of 9.2% (11.3). Return on
capital employed amounted to 12.3% (9.3). Operating cash flow
before interest paid totaled SEK 120 M (155).
Global Technologies
Sales for the quarter in Global Technologies division totaled
SEK 3,001 M (2,417), with organic sales growth of 12% (6). The
growth was driven by very strong development in Extended Access,
Identification Technology, Identity & Access Solutions, Citizen
ID and Physical Access Control, but growth for Secure Issuance was
negative. ASSA ABLOY Global Solutions also grew very strongly.
Acquired growth net was 4%. Operating income totaled SEK 641 M
(431), which represents an operating margin (EBIT) of 21.4% (17.8).
Return on capital employed amounted to 14.4% (14.6). Operating cash
flow before interest paid totaled SEK 674 M (373).
Entrance Systems
Sales for the quarter in Entrance Systems division totaled SEK
5,909 M (5,242), with organic growth of 4% (2). US Residential
Doors grew strongly and Industrial Doors had good growth. Sales for
Pedestrian Doors and Door Components were stable, while High
Performance Doors and Residential Doors in Europe had a negative
development. Acquired growth was 1%. Operating income totaled SEK
831 M (762), which represents an operating margin (EBIT) of 14.1%
(14.5). Return on capital employed amounted to 15.6% (15.7).
Operating cash flow before interest paid totaled SEK 593 M
(593).
Acquisitions and disposals
A total of five acquisitions were consolidated during the
quarter. The combined acquisition price for the companies acquired
during the year, including adjustments from prior-year
acquisitions, amounted to SEK 4,765 M. The acquisition price for
these companies on a cash and debt free basis amounted to SEK 5,306
M. Preliminary acquisition analyses indicate that goodwill and
other intangible assets with indefinite useful life amount to SEK
4,241 M. Estimated deferred considerations amounted to SEK 764
M.
On September 24 it was announced that ASSA ABLOY had acquired
Crossmatch, a leader in biometric identity management and secure
authentication solutions. The company has about 270 employees and
its sales in 2018 are expected to amount to SEK 1,150 M.
Sustainable development
Reduced energy consumption in the Group's factories and sales
companies is a priority area for achieving a reduced environmental
impact and lower costs. The improvement project is driven locally
in the Group's units, often with support from Kaizen methodology to
identify and prioritize different activities.
To further drive improvements, EMEA has certified three major
production plants to the International Standard for Energy
Management Systems, ISO 50001:2011. The Standard specifies the
requirements for maintaining and improving an energy management
system. The Standard will enable the plants to follow a systematic
approach in achieving continual improvements in energy performance,
efficiency and cost. Two of the plants are located in Germany and
one in France. The plants have energy-intensive production
processes involving for instance machining and die-casting. The
three plants account for approximately 3% of the Group's total
energy consumption.
The Group's ambition is to improve its energy efficiency by 20%
between 2015 and 2020. At the end of 2017 the like-for-like energy
consumption had been reduced by 17% compared to 2015. Further
improvements are expected during the coming years.
Parent company
Other operating income for the Parent company ASSA ABLOY AB
totaled SEK 2,965 M (2,620) for the first nine months of the year.
Operating income for the same period amounted to SEK 829 M (940).
Investments in tangible and intangible assets totaled SEK 21 M
(14). Liquidity is good and the equity ratio is 38.2% (42.5).
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 2018 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 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 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 2017 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 2017 Annual Report.
Review
The Company's Auditors have not carried out any review of this
Report for the third quarter of 2018.
Stockholm, 19 October 2018
Nico Delvaux
President and CEO
Financial information
The Year-end Report and Quarterly Report for the fourth quarter
will be published
on 5 February 2019.
A capital markets day will be held on 14 November 2018 in
Stockholm, Sweden.
Further information can be obtained from:
Nico Delvaux,
President and CEO, Tel: +46 8 506 485 82
Carolina Dybeck Happe,
Chief Financial Officer, Tel: +46 8 506 485 72
ASSA ABLOY is holding a telephone and web conference at 10.00
today
which can be followed on the Internet at www.assaabloy.com.
It is possible to submit questions by telephone on:
+46 8-566 193 53, +44 203 008 9806 or +1 855 831 5945
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 19 October 2018.
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. 22/2018
90, Stockholm, Sweden
Corporate identity number:
556059-3575
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/5806E_1-2018-10-19.pdf
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
Financial information - Notes
New accounting standards and standards not yet effective
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
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