Sales in the fourth quarter increased organically by 7% to SEK 7,530 M (6,263). Sales for 2005 totaled SEK 27,802 M (25,526), with 5% organic growth.
The operating margin, EBIT, was 14.1% (14.7) for the fourth quarter and 14.7% (14.4) for the full year.
Net income totaled SEK 691 M (586) for the fourth quarter and SEK 2,613 M (2,356) for the full year.
Earnings per share were SEK 1.84 (1.57) for the fourth quarter and SEK 6.97 (6.33) for the full year.
Operating cash flow amounted to SEK 1,150 M (1,090) for the fourth quarter and SEK 3,702 M (3,439) for the full year.
The proposed dividend is SEK 3.25 per share (2.60).
"2005 was another successful year for ASSA ABLOY. Sales were relatively weak at the start of the year but then improved steadily to end with a strong fourth quarter," says President and CEO Johan Molin. "To achieve our long-term goals, we are now reviewing current plans for further restructuring that we need to carry out during coming years."
SALES AND INCOME
Sales, SEK M
Operating margin (EBIT), %
Income before tax, SEK M
of which, exchange-rate effects
Net income, SEK M
Operating cash flow, SEK M
Earnings per share (EPS), SEK
The Group's sales in the fourth quarter totaled SEK 7,530 M (6,263), an increase of 20% on the previous year. Organic growth was 7%. Translation of foreign subsidiaries' sales to Swedish kronor had a positive effect of SEK 642 M due to changes in exchange rates. Newly acquired companies contributed 3% to sales.
Sales for 2005 totaled SEK 27,802 M (25,526), which represents an increase of 9%. Organic growth was 5%, and acquired companies contributed 1%. Exchange rates affected sales positively by SEK 643 M compared with 2004.
The fourth quarter's results were burdened by restructuring costs totaling SEK 70 M and costs relating to the change of CEO totaling SEK 32 M. Operating income before depreciation, EBITDA, for the fourth quarter amounted to SEK 1,298 M (1,150). The corresponding margin was 17.2% (18.4). The Group's operating income, EBIT, amounted to SEK 1,063 M (920) after positive currency effects of SEK 102 M. The operating margin (EBIT) was 14.1% (14.7).
The year's operating income before depreciation, EBITDA, amounted to SEK 4,960 M (4,606). The corresponding margin was 17.8% (18.0). The Group's operating income, EBIT, amounted to SEK 4,078 M (3,683) after positive currency effects of SEK 97 M. The operating margin (EBIT) was 14.7% (14.4).
Income before tax for the fourth quarter was SEK 923 M (802), including positive currency effects of SEK 74 M due to translation of foreign subsidiaries. The Group's tax charge for the quarter totaled SEK 232 M (216), corresponding to an effective tax rate of 25% on income before tax. Income before tax for the full year was SEK 3,556 M (3,199), including positive currency effects of SEK 73 M. The Group's tax charge for the year totaled SEK 943 M (843), corresponding to an effective tax rate of 27% on income before tax.
Earnings per share for the fourth quarter amounted to SEK 1.84 (1.57). Earnings per share for the full year totaled SEK 6.97 (6.33).
Operating cash flow for the quarter, excluding payments of the restructuring program, amounted to SEK 1,150 M - equivalent to 125% of income before tax - compared with SEK 1,090 M last year. Working capital fell seasonally by SEK 322 M during the quarter, mainly as a result of reduced capital tied up in accounts receivable. Operating cash flow for the full year totaled SEK 3,702 M (3,439).
THE 'LEVERAGE AND GROWTH' ACTION PROGRAM
The two-year action program initiated in November 2003 was concluded during the fourth quarter. Cost savings are projected to reach SEK 450 M a year from the start of 2006. Savings of around SEK 350 M were realized in 2005. During 2005, payments totaling SEK 298 M relating to the action program were made and the total number of employees leaving the Group reached 1,300. The last 100 of the employees affected will leave the Group during the first quarter of 2006.
COMMENTS BY DIVISION
Sales for the fourth quarter in the EMEA division (Europe, Middle East and Africa) totaled EUR 330 M (307), with 6% organic growth. Operating income amounted to EUR 48 M (44) with an operating margin (EBIT) of 14.5% (14.5). Return on capital employed amounted to 16.9% (16.6). Operating cash flow before interest paid totaled EUR 86 M (69).
Sales growth strengthened during the fourth quarter, partly because of weak comparative figures. The United Kingdom and eastern Europe are generating strong organic growth while France, Benelux and Germany are exhibiting an improved sales trend. New structural measures had a negative effect on operating margin.
Sales for the fourth quarter in the Americas division totaled USD 293 M (275) with 5% organic growth. Operating income amounted to USD 54 M (50) with an operating margin (EBIT) of 18.3% (18.2). Return on capital employed amounted to 19.9% (18.3). Operating cash flow before interest paid totaled USD 71 M (66).
Americas' positive sales trend continued in the fourth quarter. The Door Group and the Residential Group report strong growth during the quarter. The Architectural Hardware Group is showing improved growth with continuing strong margins. Sales in Mexico showed signs of recovery during the quarter.
Sales for the fourth quarter in the Asia Pacific division totaled AUD 105 M (90) with 2% organic growth. Operating income amounted to AUD 8 M (15) with an operating margin (EBIT) of 8.2% (17.6). Return on capital employed amounted to 9.7% (19.8). Operating cash flow before interest paid totaled AUD 6 M (14).
Sales developed well in Asia and particularly in China. The residential market in Australia and New Zealand weakened to some extent during the quarter, which counteracted continuing good growth in the commercial segment. Restructuring costs related to the transfer of production capacity to China had a negative effect on income.
The Global Technologies division reported sales of SEK 1,639 M (1,269) in the fourth quarter, representing organic growth of 13%. Operating income amounted to SEK 234 M (159) with an operating margin (EBIT) of 14.3% (12.5). Return on capital employed amounted to 15.4% (11.6). Operating cash flow before interest paid amounted to SEK 127 M (163).
Global Technologies continues to report strong organic growth. The Identification Technology Group reports high growth in volume, driven by new products, with high margins. Entrance Systems is consolidating its strong position in Europe and continuing to develop well in the USA. The positive sales trend at Hospitality is continuing and the pace of the restructuring program increased during the quarter, with higher costs.
On the initiative of the Board of Directors, the President, Bo Dankis, left his employment in the company. Johan Molin was appointed as the new President and CEO on 1 December. Bo Dankis has also left ASSA ABLOY's Board.
Two minor acquisitions were made during the quarter. The combined annual sales of the companies are about SEK 50 M. The combined acquisition price, including estimated earn-outs, is about SEK 45 M. Preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite life amount to about SEK 40 M.
From 1 January 2006 ASSA ABLOY Entrance Systems has become a separate division in order to exploit better the business opportunities to be found in existing operations and through future acquisitions.
DIVIDEND AND ANNUAL GENERAL MEETING
The Board of Directors proposes a dividend of SEK 3.25 (2.60) per share for the 2005 financial year. The Annual General Meeting will be held on 25 April 2006.
ASSA ABLOY has adopted International Financial Reporting Standards (IFRS) from 1 January 2005 as endorsed by the European Union. The Group's Year-end Report is prepared in accordance with IAS 34 'Interim Financial Reporting' under the guidelines given in RR 31, 'Interim Reporting for Groups', issued by the Swedish Financial Accounting Standards Council. The Parent Company has adopted RR 32 'Preparation of Accounts for Corporate Bodies'.
The effects of the transition to IFRS regarding the comparative figures for 2004 were described in a separate report, 'IFRS-adjusted 2004 figures for ASSA ABLOY', published on 20 April 2005. The accounting principles applied are described in an appendix to the Interim Report for the first quarter of 2005, published on 27 April 2005. These reports are available on ASSA ABLOY's website.
IAS 39 was adopted from 1 January 2005 and the net effect of the change, SEK -77 M, has been taken directly to shareholders' equity. In accordance with IFRS 1 no adjustment of comparatives has been made. The effect is due to the requirement under IAS 39 that financial instruments are reported at fair value and relates to fair-value adjustments on derivative instruments.
Organic sales growth is expected to continue at a good rate. The operating margin (EBIT) and operating cash flow are expected to develop well, excluding the effects of future restructuring.
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.
Stockholm, 10 February 2006
President and CEO
*The Outlook published in October 2005 read:
Organic sales growth in 2005 is expected to continue at a good rate. The operating margin (EBIT) is expected to rise for the full year, mainly due to savings resulting from the restructuring program. Excluding payments relating to restructuring, the strong cash generation will continue. 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.
AUDITORS' REVIEW REPORT
We have conducted a general examination of the quarterly report for ASSA ABLOY AB (publ.) for the period ended 31 December 2005, in accordance with the recommendation issued by FAR.
A general examination is limited to discussion with the Company's employees and to an analytical examination of financial information and thus provides a lesser degree of certainty than an audit. We have not performed an audit of this quarterly report and thus have not issued an audit opinion.
Nothing has come to our attention that indicates that the quarterly report does not fulfill the requirements for such reports as prescribed in the Swedish Annual Accounts Act and IAS 34.
Stockholm, 10 February 2006
Authorized Public Accountant
The Annual Report for 2005 will be published in March 2006. The First Quarter's Report for 2006 will be published on 25 April 2006. The Annual General Meeting will be held on 25 April 2006.
Further information can be obtained from:
Johan Molin, President and CEO, Tel: +46 8 506 485 42
Göran Jansson, Deputy CEO and CFO, Tel: +46 8 506 485 72
Martin Hamner, Director of Investor Relations and Group Controller, Tel: + 46 8 506 485 79
ASSA ABLOY is holding an analysts' meeting at 12.00 today at Operaterrassen in Stockholm. The analysts' meeting can also be followed over the Internet at www.assaabloy.com. It is possible to submit questions by telephone on+44 (0)20 7162 0025.
ASSA ABLOY AB (publ)
P.O. Box 70340, SE-107 23 Stockholm
Phone: +46-8-506 485 00
Fax: +46-8-506 485 85
ASSA ABLOY is the world's leading manufacturer and supplier of locking solutions, meeting tough end-user demands for safety, security and user friendliness. The Group has some 30,000 employees and annual sales of about EUR 3 billion.
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.