ASSA ABLOY: A good start to the year

  • Sales totaled SEK 8,699 M (8,345), representing an increase of 4%, made up of 6% organic growth, 7% acquired growth and exchange-rate effects of -9%.
  • Strong growth in Asia and in North and South America.
  • Subdued but stable development in Europe, with good growth in Germany, Sweden, Finland and Eastern Europe. Other markets in Europe were weaker.
  • Operating income (EBIT) amounted to SEK 1,377 M (1,295), representing an increase of 6%. The operating margin increased to 15.8% (15.5).
  • Operating cash flow was normal for the season and amounted to SEK 448 M (870).
  • Acquisitions of Cardo, Swesafe and FlexiForce. Agreement signed for the divestment of Cardo Flow Solutions.
  • Reduced tax charge to 22% (24).
  • Net income amounted to SEK 943 M (880).
  • Earnings per share rose by 7% to SEK 2.53 (2.36).

 

SALES AND INCOME

  Full year First quarter
  2009 2010 Change 2010 2011 Change
Sales, SEK M 34,963 36,823 +5% 8,345 8,699 +4%
  of which,            
  Organic growth     +3%     +6%
  Acquisitions     +8%     +7%
  Exchange-rate effects   -1,626 -6%   -666 -9%
Operating income (EBIT), SEK M 5,413* 6,046 +12% 1,295 1,377 +6%
Operating margin (EBIT), % 15.5* 16.4   15.5 15.8  
Income before tax, SEK M 4,779* 5,366 +12% 1,158 1,215 +5%
Net income, SEK M 2,659** 4,080 - 880 943 +7%
Operating cash flow, SEK M 6,843 6,285 -8% 870 448 -49%
Earnings per share (EPS), SEK 9.22* 10.89 +18% 2.36 2.53 +7%

 

*   Excluding restructuring costs in 2009 amounting to SEK 1,039 M.
** In 2009, net income excluding restructuring costs was SEK 3,474 M.

 

COMMENTS BY THE PRESIDENT AND CEO
"The year started promising for ASSA ABLOY, with 13% growth in local currencies made up of 6% organic growth, 7% acquired growth" says Johan Molin, President and CEO. Asia, North America and South America showed strong growth, while the trend in Europe was more restrained but nonetheless stable. I am pleased to see that the R&D investments in electromechanical lock solutions and access control are developing well and where HID in particular showed more than 20% organic growth in the quarter.

 

"Earnings rose by 6% despite the negative exchange-rate effect and the relatively low contribution to the earnings from newly acquired companies. The profit margin rose supported by volume growth and that the successful efficiency and restructuring measures continued to give good contribution.

 

"The integration of Cardo Entrance Solutions proceeded at a fast rate and I look forward to the realization of good marketing and cost synergies between them and ASSA ABLOY.

 

"It is also very pleasing that an agreement has been signed with Sulzer Ltd concerning the sale of Cardo Flow Solutions. Through this, Cardo Flow Solutions gets a long-term owner that will give them an industrial home and thus create conditions for a continued good development.

 

"In the areas of logical access and secure identities, we have acquired both ActivIdentity and most recently LaserCard, which together with our existing businesses in HID and Fargo has greatly strengthened the Group's market position. I would like to take the opportunity once again to wish these companies and their highly skilled employees a warm welcome to the Group.

 

"Looking forward to the remainder of the year, we see that the underlying economic trend is positive in the majority of our markets, but that budget restraints are continuing to affect those market segments that are dependent on public financing."

 

FIRST QUARTER
The Group's sales totaled SEK 8,699 M (8,345), an increase of 4% compared with 2010. Organic growth for comparable units was 6% (-3). Acquired units contributed 7% (5). Exchange-rate effects had a negative impact of SEK 666 M on sales, that is -9% (-8).

 

Operating income before depreciation, EBITDA, excluding restructuring costs, amounted to SEK 1,630 M (1,536). The corresponding EBITDA margin was 18.7% (18.4). The Group's operating income, EBIT, amounted to SEK 1,377 M (1,295), an increase of 6%. The operating margin was 15.8% (15.5).

 

Net financial items amounted to SEK -162 M (-137). The Group's income before tax, amounted to SEK 1,215 M (1,158), an improvement of 5% compared with the previous year. Exchange-rate effects had a negative impact of SEK 104 M on the Group's income before tax. The profit margin was 14.0% (13.9). The Group's tax rate declined to 22% (24) and the tax charge totaled SEK 268 M (278). Earnings per share amounted to SEK 2.53 (2.36), an increase of 7%.

 

RESTRUCTURING MEASURES
Payments related to all restructuring programs amounted to SEK 48 M in the quarter.

 

The restructuring programs continued according to plan and have led to a reduction in personnel of 96 people during the quarter and 5,483 people since the projects began.
A further 933 people will leave in the next two years.

 

At the end of the quarter, provisions of SEK 872 M were set aside in the balance sheet for carrying out the remaining parts of the programs.

 

COMMENTS BY DIVISION

 

EMEA
Sales for the quarter in EMEA division totaled SEK 3,099 M (3,296), with organic growth of 0% (2). Germany, Sweden, Finland and Eastern Europe showed continued good growth. The division was however affected negatively by cuts in public budgets in a number of countries. The turmoil in North Africa also affected exports from the business units in Spain and Italy. Acquired growth amounted to 3%. Operating income amounted to SEK 518 M (525), which represents an operating margin (EBIT) of 16.7% (15.9). Return on capital employed amounted to 21.0% (19.6). Operating cash flow before interest paid totaled SEK 276 M (429).

 

AMERICAS
Sales for the quarter in Americas division totaled SEK 2,189 M (2,205), with organic growth of 7% (-11). The sales trend during the quarter was good and all business units showed growth, with especially good performance from Canada, South America and Electromechanics. The Door Group, High Security and Residential business units recorded a stable positive trend. Acquired growth amounted to 2%. Operating income totaled SEK 440 M (418) and the operating margin was 20.1% (19.0). Return on capital employed amounted to 22.1% (19.0). Operating cash flow before interest paid totaled SEK 231 M (320).

 

ASIA PACIFIC
Sales for the quarter in Asia Pacific division totaled SEK 1,192 M (1,014), with organic growth of 10% (11). Growth was strong throughout Asia, and especially in China and for digital door locks. Australia and New Zealand recorded a negative sales trend affected by the natural disasters in the region. Acquired growth amounted to 10%. Operating income totaled SEK 146 M (104), representing an operating margin (EBIT) of 12.3% (10.2). The quarter's return on capital employed amounted to 14.5% (12.3). Operating cash flow before interest paid totaled SEK -138 M (-1).

 

GLOBAL TECHNOLOGIES
Sales for the quarter in Global Technologies division totaled SEK 1,306 M (1,085), with organic growth amounting to 19% (-6). HID showed good growth in both access control and identification technology. Hospitality recorded very strong growth driven by the recovery on the renovation market and rising sales of RFID locks and energy-efficiency products. Acquired growth amounted to 14%. The division's operating income amounted to SEK 187 M (184), giving an operating margin (EBIT) of 14.3% (16.9). Acquired units had a negative effect on operating income because of normal seasonal variation, and together with exchange-rate effects this brought down the operating margin by 3.2 percentage points. Return on capital employed amounted to 12.6% (13.1). Operating cash flow before interest paid totaled SEK -51 M (119).

 

ENTRANCE SYSTEMS
Sales for the quarter in Entrance Systems division totaled SEK 1,097 M (954), with organic growth amounting to 4% (-3). There was a return to growth this quarter after two years of weak performance. The positive trend on the service side continued, and automatic doors also showed growth due to continuing strong demand in the retailing segment. Ditec showed a positive trend in income and the integration of Cardo Entrance Solutions proceeded successfully. Acquired growth amounted to 22%. Operating income totaled SEK 158 M (134), giving an operating margin of 14.4% (14.0). Return on capital employed amounted to 8.5% (12.7). Operating cash flow before interest paid totaled SEK 140 M (169).

 

ACQUISITIONS
During the quarter LaserCard in the USA and Cardo in Sweden, as well as two minor acquisitions, were consolidated. The parts of Cardo that are to be divested - that is, Cardo Flow Solutions and Lorentzen & Wettre - have been classified as 'disposal groups held for sale' in accordance with IFRS 5, 'Non-current Assets Held for Sale and Discontinued Operations'. The disposal groups have been valued at fair value with a deduction for costs to sell.

 

The combined acquisition price for the four consolidated acquisitions amounted to SEK 5,063 M, and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to SEK 4,075 M. The acquisition price is adjusted for acquired net debt and estimated earn-outs. Estimated earn-outs amount to SEK 9 M. The acquisition analysis for Cardo Entrance Solutions is presented on Page 15.

 

The acquisition of a share of ownership representing 37.9% of the outstanding shares in the Swiss entry automation company Agta Record was also carried out. The share of ownership is classified under 'Shares in associates' and reported on a current basis in accordance with the equity method.

 

On 25 March it was announced that the acquisition of Swesafe had been approved by the competition authorities and that the acquisition would be completed in April 2011. Swesafe is the largest locksmith in Sweden. Its annual sales total SEK 430 M, split equally between mechanical and electromechanical products. Swesafe has 24 branches and more than 300 employees.

 

On 6 April it was announced that ASSA ABLOY had acquired the Dutch company FlexiForce, a world-leading company in components for sectional doors for industrial use and garage doors for houses. FlexiForce has 300 employees and headquarters in the Netherlands, with subsidiaries in Europe, China and the USA. Its sales in 2011 are expected to total SEK 600 M, with a good operating margin.

 

On 7 April it was announced that ASSA ABLOY had signed a contract with the Swiss company Sulzer Ltd for the sale of Cardo Flow Solutions. The sale price is SEK 5,900 M on a debt-free basis. This sale does not include Lorentzen & Wettre.

 

SUSTAINABLE DEVELOPMENT
ASSA ABLOY's Sustainability Report for 2010 is being issued to coincide with the Interim Report for the first quarter and the Annual General Meeting.

 

Important subjects covered in the Report include the program to assess the Group's suppliers and their sustainability work; water and energy consumption; the reduction of chlorinated organic solvents and environmentally hazardous effluents; independent social audits; and the Group's ongoing activities to spread its message and its goals among its own employees.

 

PARENT COMPANY
'Other operating income' for the Parent company ASSA ABLOY AB totaled SEK 147 M (350) for the first quarter. Income before tax amounted to SEK 21 M (171). Investments in tangible and intangible assets totaled SEK 1 M (1). Liquidity is good and the equity ratio was 38.7% (51.4). The equity ratio has fallen because of borrowing for the acquisition of Cardo.

 

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 86-91 of the 2010 Annual Report. From 2011 ASSA ABLOY is implementing the International Financial Reporting Standard IFRS 5, 'Non-current Assets Held for Sale and Discontinued Operations'. Non-current assets are classified as assets held for sale when their carrying amount will be largely recovered in a sales transaction and a sale is viewed as being highly probable. They are reported at the lower of carrying amount and fair value less costs to sell if their carrying amount can be largely recovered in a sales transaction and not through continuing use and it is highly probable that a sale will occur.

 

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'.

 

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 and financial 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 risks and risk management, see the 2010 Annual Report. No significant risks other than the risks described there are judged to have occurred.

 

OUTLOOK*

 

Long-term outlook
Long term, ASSA ABLOY expects an increase in security-driven demand. Focus on end-user value and innovation as well as leverage on ASSA ABLOY's strong position will accelerate growth and increase profitability.

 

Organic sales growth is expected to continue at a good rate. The operating margin (EBIT) and operating cash flow are expected to develop well.

 

 

* Outlook published on 7 February 2011:

 

Long-term outlook
Long term, ASSA ABLOY expects an increase in security-driven demand. Focus on end-user value and innovation as well as leverage on ASSA ABLOY's strong position will accelerate growth and increase profitability.

 

Organic sales growth is expected to continue at a good rate. The operating margin (EBIT) and operating cash flow are expected to develop well.

 

 

Stockholm, 28 April 2011

 

Johan Molin
President and CEO

 

This Interim Report has not been reviewed by the company's Auditor.

 

FINANCIAL INFORMATION
The Quarterly Report for the second quarter will be published on 27 July 2011.

 

 

FURTHER INFORMATION CAN BE OBTAINED FROM:
Johan Molin, President and CEO, Tel: +46 8 506 485 42
Tomas Eliasson, Chief Financial Officer, Tel: +46 8 506 485 72

 

 

ASSA ABLOY is holding an analysts' meeting at 13.00 today
at Operaterrassen in Stockholm .
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 5052 0270, +44 208 817 9301 or +1 718 354 1226

 

 

This information is that which ASSA ABLOY is required to disclose under the Swedish Securities Exchange and Clearing Operations Act and/or the Swedish Financial Instruments Trading Act .
The information is released for publication at 12.00 on 28 April.

 

About Us

ASSA ABLOY is the global leader in door opening solutions and offers mecahnical and electromechanical locks, digital door locks, security doors, entrance automation, hotel security and secure identity solutions, primarily in identity and access management, as well as a number of other related products and services. Since its formation in 1994, ASSA ABLOY has grown from a regional company into an international Group with some 47,000 employees operating in more than 70 countries and sales of around SEK 71 billion.

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