TIDM77BL
RNS Number : 0154V
ASSA ABLOY AB (publ)
18 July 2018
Organic growth
+5%
Operating income
(1)
-6%
Earnings per share
(1)
-6%
Solid underlying performance for ASSA ABLOY
Second quarter
-- Net sales increased by 9% to SEK 21,140 M (19,387), with
organic growth of 5% (2) and acquired net growth of 2% (2)
-- Strong growth was shown by Americas, Global Technologies and
Entrance Systems and stable growth by Asia Pacific and EMEA
-- One-off costs in Asia Pacific during the quarter amounted to
SEK -5,595 M for impairment of goodwill and other intangible assets
and SEK -400 M for write-downs of operating assets
-- Contracts have been signed for the acquisition of eight
companies with expected combined annual sales of about SEK 1,200 M.
The Wood Door business in the USA, with annual sales of about SEK
600 M, has been divested
-- Operating income (EBIT) (1) amounted to SEK 2,911 M (3,114),
with an operating margin of 13.8% (16.1)
-- Net income (1) amounted to SEK 2,049 M (2,179)
-- Earnings per share (1) amounted to SEK 1.84 (1.96)
-- Operating cash flow increased by 11% to SEK 2,855 M (2,575).
Sales and income
Second quarter First half-year
================= ======== ================== ========
2017 2018 <DELTA> 2017 2018 <DELTA>
------------------------------ -------- ------- -------- -------- -------- --------
Sales, SEK M 19,387 21,140 9% 37,529 39,690 6%
Of which:
Organic growth 344 954 5% 1,366 1,659 5%
Acquisitions and divestments 451 366 2% 900 633 2%
Exchange-rate effects 698 433 2% 1,478 -131 -1%
Operating income (EBIT)
(1) , SEK M 3,114 2,911 -6% 5,901 5,740 -3%
Operating margin (EBITA)
(1) , % 16.3% 14.2% 16.0% 14.9%
Operating margin (EBIT)
(1) , % 16.1% 13.8% 15.7% 14.5%
Income before tax (1)
, SEK M 2,944 2,720 -8% 5,537 5,374 -3%
Net income (1) , SEK
M 2,179 2,049 -6% 4,097 4,013 -2%
Operating cash flow,
SEK M 2,575 2,855 11% 3,399 3,431 1%
Earnings per share (1)
, SEK 1.96 1.84 -6% 3.69 3.61 -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 second quarter continued with strong organic growth of 5%.
Organic growth was strong in Americas (9%), Global Technologies
(6%) and Entrance Systems (6%), while Asia Pacific and EMEA
reported stable organic sales growth of 2%.
The second quarter's operating income declined by 6%
year-on-year to
SEK 2,911 M, corresponding to an operating margin of 13.8%. The
Group's adjusted operating income, excluding write-downs of
operating assets of SEK
-400 M, was SEK 3,311 M corresponding to a stable operating
margin of 15.7%.
Operating cash flow was strong in the second quarter and
increased by 11% to SEK 2,855 M. We are continuing with full focus
on our current restructuring programs and, as previously announced,
we expect to launch a new program by the end of 2018.
Strategic overview in China
Since the peak in 2014 we have been exposed to a general market
decline in China. This decline has been particularly evident in the
regions where we had our strongest market presence and we have had
to adapt to the challenging market conditions.
The market situation in China continues to be difficult, as
previously reported. We expect the operating margin to remain low
in the Chinese market for the next few years and this has resulted
in a required write-down of SEK 5,595 M for impairment of goodwill
and other intangible assets. We also made provisions of SEK 400 M
for receivables and inventory in the quarter.
After the events of 2016, our focus was internal and directed to
stabilizing the organization. We are now building a focused China
organization around our main brands: PanPan, Yale and ASSA ABLOY.
China will remain very important to us, and we remain firmly
committed to the market. In China we are now seeing continued
urbanization, a growing aftermarket for our products, and
increasing demand for more advanced security solutions. We are
convinced that with our new business strategy in place China will
give us good returns in the longer term.
Our innovation recognized
I am very proud and pleased to see that ASSA ABLOY is again on
the Forbes list of the top 100 most innovative companies in the
world. I am convinced that our strong focus on innovation in both
products and processes is the best way for us to continue to be the
leader in our industry.
We have the right people and the right culture to make a
difference and the organization's ability to innovate is clearly
reflected in the strong demand for our new products.
Stockholm, 18 July 2018
Nico Delvaux
President and CEO
Second quarter
The Group's sales increased by 9% to SEK 21,140 M (19,387).
Organic growth amounted to 5% (2). Acquisitions and disposals were
2% (2), of which 4% (2) were acquisitions and -2% (0) were
disposals. Exchange-rates affected sales by 2% (4).
The Group's operating income, EBIT excluding impairment of
intangible assets amounted to SEK 2,911 M (3,114) a decrease of 6%.
The operating result was impacted by a write-down of operating
assets in Asia Pacific amounting to SEK
-400 M. The operating margin was 13.8% (16.1).
Operating income before amortizations from acquisitions, EBITA,
excluding impairment of intangible assets, amounted to SEK 3,007 M
(3,168). The corresponding EBITA margin was 14.2% (16.3).
Net financial items amounted to SEK -191 M (-170). The Group's
income
before tax, excluding impairment of intangible assets, was SEK
2,720 M (2,944), a decrease of 8% compared with last year. The
corresponding profit margin was 12.9% (15.2). Exchange-rates had an
impact of SEK 42 M (96) on income before tax.
The estimated effective tax rate, excluding impairment of
goodwill, was 26% (26) on an annual basis. Earnings per share
excluding impairment of intangible assets amounted to SEK 1.84
(1.96), a decrease of 6% compared to last year.
First half-year
The Group's sales for the first half of 2018 totaled SEK 39,690
M (37,529), representing an increase of 6%. Organic growth was 5%
(4). Acquisitions and disposals were 2% (3), of which 4% (3) were
acquisitions and -2% (0) were disposals. Exchange-rate effects
affected sales by -1% (4).
The Group's operating income, EBIT excluding impairment of
intangible assets amounted to SEK 5,740 M (5,901), a decrease of 3%
compared with last year. The operating margin was 14.5% (15.7).
Operating income before amortizations from acquisitions, EBITA,
excluding impairment of intangible assets, amounted to SEK 5,928 M
(6,006). The corresponding EBITA margin was 14.9% (16.0).
Earnings per share for the first half-year excluding impairment
of intangible assets amounted to SEK 3.61 (3.69), a decrease of 2%
compared with last year. Operating cash flow totaled SEK 3,431 M
(3,399).
Restructuring measures
Payments related to all restructuring programs amounted to SEK
166 M (136)
in the quarter. The restructuring programs proceeded according
to plan and
led to a reduction in personnel of 163 people during the quarter
and 14,235 people since the projects began in 2006. At the end of
the quarter provisions of SEK 619 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 cost of
the restructuring is estimated to be in line with previous
programs, with an expected payback time of around three years.
Organization
Carolina Dybeck Happe, Executive Vice President and Chief
Financial Officer (CFO) has decided to leave ASSA ABLOY at year-end
2018 after six years' service as Group CFO to take up a post
elsewhere. Recruitment of a successor has begun.
Neil Vann has been appointed Executive Vice President and Head
of the EMEA Division. Neil Vann joined ASSA ABLOY with the Group's
acquisition of Yale in 2000 and for the past four years has served
as Market Region Manager for ASSA ABLOY UK within EMEA. He succeeds
Tzachi Wiesenfeld who has decided to leave ASSA ABLOY after 12
years' service as Head of the EMEA Division.
Comments by division
EMEA
Sales for the quarter in EMEA division totaled SEK 5,069 M
(4,529), with organic sales growth of 2% (2). Growth was strong in
Finland, Scandinavia, Germany and Eastern Europe, and was good in
Southern Europe. The UK and Africa/ Middle East also showed growth
while Benelux and France had negative sales development.
Electromechanical products showed strong growth, and demand was
especially strong for smart door locks for the residential market.
Acquired growth net was 5%. Operating income totaled SEK 807 M
(713), which represents an operating margin (EBIT) of 15.9% (15.7).
Return on capital employed amounted to 19.0% (19.0). Operating cash
flow before interest paid totaled SEK 607 M (461).
Americas
Sales for the quarter in Americas division totaled SEK 5,078 M
(4,704), with organic sales growth of 9% (3). Growth was strong for
Architectural Hardware, Perimeter Protection, Electromechanical and
High-security products and the Residential market in the USA and in
Canada, Mexico and for South America apart from Colombia. Security
Doors showed stable growth. The demand for smart door locks for the
residential market in the USA was very high. Acquired growth net
was 0%. Operating income totaled SEK 1,022 M (1,041), which
represents an operating margin (EBIT) of 20.1% (22.1). Return on
capital employed amounted to 23.7% (26.1). Operating cash flow
before interest paid totaled SEK 1,245 M (1,163).
Asia Pacific
Sales for the quarter in Asia Pacific division totaled SEK 2,608
M (2,445), with organic sales growth of 2% (-6). Strong growth was
achieved in South Korea, Pacific and Japan, while South Asia had
negative sales development. Sales in China were weak and declined
for both lock products and security doors. Smart door-locks grew
strongly in the region. Acquired growth was 1%. Operating income,
including write-down of operating assets of SEK 400 M, totaled
SEK
-168 M (274), which represents an operating margin (EBIT) of
-6.5% (11.2). Return on capital employed amounted to -6.6% (9.0).
Operating cash flow before interest paid totaled SEK 244 M
(116).
Global Technologies
Sales for the quarter in Global Technologies division totaled
SEK 2,871 M (2,640), with organic sales growth of 6% (3). Physical
Access control, Citizen ID, Extended Access and Identity &
Access Solutions showed strong sales growth, while Secure Issuance
and Identification Technology had stable sales development.
Hospitality showed continued strong growth. Sales of mobile key
solutions continued to grow strongly. Acquired growth net was 2%.
Operating income totaled SEK 564 M (486), which represents an
operating margin (EBIT) of 19.6% (18.4). Return on capital employed
amounted to 13.5% (17.0). Operating cash flow before interest paid
totaled SEK 642 M (511).
Entrance Systems
Sales for the quarter in Entrance Systems division totaled SEK
5,914 M (5,381), with organic growth of 6% (3). Pedestrian doors,
Industrial doors, US Garage doors and Logistic solutions in the USA
showed strong growth while High-speed doors showed growth. EU
residential doors and Door Components showed negative sales
development. Acquired growth was 1%. Operating income totaled SEK
819 M (720), which represents an operating margin (EBIT) of 13.8%
(13.4). Return on capital employed amounted to 15.7% (14.7).
Operating cash flow before interest paid totaled SEK 577 M
(638).
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 2,691 M. The acquisition price for
these companies on a cash and debt free basis amounted to SEK 2,710
M. Preliminary acquisition analyses indicate that goodwill and
other intangible assets with indefinite useful life amount to SEK
2,042 M. Estimated deferred considerations amounted to SEK 741
M.
On July 13 it was announced that ASSA ABLOY had signed a
contract to acquire Planet GDZ, a leading Swiss supplier of drop
down seals and finger protection covers for doors. The acquisition
is expected to be completed during the third quarter. The company
has approximately 55 employees and its sales in 2018 are expected
to amount to SEK 160 M.
On July 3 it was announced that ASSA ABLOY had acquired Door
Systems, an American distributor in industrial doors, residential
sectional doors, high speed doors and docking solutions. The
company has approximately 100 employees and its sales in 2018 are
expected to amount to SEK 230 M.
On June 11 it was announced that ASSA ABLOY had acquired HKC, a
leading Irish manufacturer of alarms and cloud based monitoring
solutions. The company has approximately 45 employees and its sales
in 2018 are expected to amount to SEK 180 M.
On June 4 it was announced that ASSA ABLOY had sold its Wood
Door business in the USA to Masonite. The business has
approximately 275 employees and its sales in 2017 totaled
approximately SEK 600 M. The disposal will have a positive effect
on ASSA ABLOY's future operating margin.
On May 9 it was announced that ASSA ABLOY had signed a contract
to acquire Pioneer Industries, an American supplier of steel doors
and frames for commercial applications. The acquisition was
completed during the second quarter. The company has approximately
100 employees and its sales in 2018 are expected to amount to SEK
180 M.
On May 9 it was announced that ASSA ABLOY had acquired Brüken, a
leading Mexican company in glass- and aluminum hardware. It has
approximately 80 employees and its sales in 2018 are expected to
amount to SEK 260 M.
Sustainable development
In the USA, Entrance Systems Division has converted a production
line for manufacturing door panels, making use of more
environmentally friendly materials. The new process will reduce the
Group's total greenhouse gas emissions by 16 000 tons of CO2
equivalents during 2018, which represents an improvement across the
Group of about 5%. The Entrance Systems Division plans to convert
another similar production line in the same way early in 2019.
Parent company
Other operating income for the Parent company ASSA ABLOY AB
totaled SEK 2,272 M (2,113) for the first half-year. Operating
income for the same period amounted to SEK 878 M (950). Investments
in tangible and intangible assets totaled SEK 16 M (12). Liquidity
is good and the equity ratio is 36.4% (41.8).
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 20. 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 21 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.
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, 17 July 2018
Lars Renström Carl Douglas Nico Delvaux
Chairman Vice Chairman President and
CEO
Ulf Ewaldsson Eva Karlsson Birgitta Klasén
Board member Board member Board member
Lena Olving Sofia Schörling Jan Svensson
Högberg
Board member Board member Board member
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 2018 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, 17 July 2018
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 19
October 2018
The Year-end Report and Quarterly Report for the fourth quarter
will be published
on 5 February 2019.
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
the analysts' meeting can be followed on the Internet at
www.assaabloy.com.
It is possible to submit questions by telephone on:
+46 8 566 19 353, +44 203 008 9806 or +1 855 831 5945
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/0154V_1-2018-7-18.pdf
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 18 July 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.19/2018
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
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
IR EAXXPFSDPEEF
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