GOOD END TO A STRONG YEAR FOR ASSA ABLOY
"2004 was a good year for ASSA ABLOY and well in line with our long-term plan," says President and CEO Bo Dankis. "The fourth quarter shows clear differences between local lock markets. The important American market is continuing to improve while the markets in the United Kingdom and Italy weakened sharply."
SALES AND INCOME
| | Fourth quarter | Full year |
| | 2004 | 2003 | Change | 2004 | 2003 | Change |
| Sales, SEK M | 6,263 | 6,096 | +3% | 25,526 | 24,080 | +6% |
| of which: | | | | | | |
| Organic growth | | | +4% | | | +5% |
| Acquisitions | | | +3% | | | +5% |
| Exchange-rate effects | -244 | | -4% | -982 | | -4% |
| Operating margin (EBITA)*, % | 15.1 | 15,0 | | 14.7 | 13.9 | |
| Income before tax*, SEK M | 588 | 562 | +5% | 2,294 | 1,903 | +21% |
| of which, exchange-rate effects | -18 | | -3% | -78 | | -4% |
| Net income, SEK M | 383 | -845 | | 1,495 | 9 | |
| Operating cash flow, SEK M | 1,090 | 1,069 | +2% | 3,439 | 3,265 | +5% |
| Earnings per share (EPS)*, SEK | 1.03 | 0.97 | +6% | 4.05 | 3.31 | +22% |
| EPS excluding goodwill*, SEK | 1.68 | 1.61 | +4% | 6.66 | 5.89 | +13% |
* Comparative figures are quoted exclusive of non-recurring items (restructuring costs 2003: SEK 1,320 M).
The Group's sales in the fourth quarter totaled SEK 6,263 M (6,096), an increase of 3% compared with the previous year. Organic growth was 4%. Translation of foreign subsidiaries' sales to Swedish kronor had a negative effect of SEK 244 M due to changes in exchange rates. Newly acquired companies contributed 3% to sales.
Sales for 2004 amounted to SEK 25,526 M (24,080), which represents an increase of 6%. Organic
growth was 5% and newly acquired companies contributed 5%. Exchange rates had a negative effect of SEK 982 M compared with 2003.
Operating income before depreciation, EBITDA, for the fourth quarter amounted to SEK 1,158 M (1,135). The corresponding margin was 18.5% (18.6). The Group's operating income before goodwill amortization, EBITA, amounted to SEK 946 M (912) after negative currency effects of SEK 37 M. The operating margin (EBITA) was 15.1% (15.0). Goodwill amortization amounted to SEK 243 M (240).
The full year's operating income before depreciation, EBITDA, amounted to SEK 4,642 M (4,249). The corresponding margin was 18.2% (17.6). The Group's operating income before goodwill amortization, EBITA, amounted to SEK 3,748 M (3,352) after negative currency effects of SEK 146 M. The operating margin (EBITA) was 14.7% (13.9).
Income before tax for the fourth quarter was SEK 588 M (-758) after negative currency effects due to translation of foreign subsidiaries amounting to SEK 18 M. The Group's tax charge totaled SEK 204 M (83), corresponding to an effective tax rate of 35% on income before tax. Income before tax for the full year was SEK 2,294 M (583) after negative currency effects of SEK 78 M.
Earnings per share after tax for the fourth quarter amounted to SEK 1.03 (0.97*). EPS excluding goodwill amortization was SEK 1.68 (1.61*). Earnings per share for the full year amounted to SEK 4.05 (3.31*). EPS excluding goodwill amortization was SEK 6.66 (5.89*).
Operating cash flow for the quarter, excluding costs of the restructuring program, amounted to
SEK 1,090 M - equivalent to 185% of income before tax - compared with SEK 1,069 M last year. Working capital decreased by SEK 366 M in the quarter, mainly referable to a reduction of the capital tied up in accounts receivable. Operating cash flow for the full year totaled SEK 3,439 M (3,265).
THE 'LEVERAGE AND GROWTH' ACTION PROGRAM
The two-year action program initiated in November 2003 is progressing well, with a long series
of specific actions. Cost savings are projected to reach SEK 450 M a year by late 2005. Savings of
SEK 150 M have been realized during 2004 and a further SEK 200 M is expected to be realized in 2005. During 2004, payments totaling SEK 321 M relating to the action program have been made and 750 of the 1,400 employees becoming redundant have left the Group. Negotiations concerning 1,150 of the 1,400 employees have been finalized.
COMMENTS BY DIVISION
EMEA
Sales for the fourth quarter in the EMEA division (Europe, Middle East and Africa) totaled EUR 307 M (291), with 1% organic growth. Operating income before goodwill amortization amounted to EUR 47 M (41) with an operating margin (EBITA) of 15.3% (14.1). Return on capital employed before goodwill amortization amounted to 17.1% (16.3). Operating cash flow before interest paid totaled EUR 69 M (63).
Sales growth in the fourth quarter was widely spread. Scandinavia, Israel and eastern Europe are generating strong organic growth, while France, Benelux and Germany were weaker. The United Kingdom and Italy are showing significantly weaker sales. The implementation of restructuring measures contributed to an improved EBITA margin.
AMERICAS
Sales for the fourth quarter in the Americas division totaled USD 275 M (262) with 8% organic growth. Operating income before goodwill amortization amounted to USD 50 M (46) with an operating margin (EBITA) of 18.1% (17.6). Return on capital employed before goodwill amortization amounted to 18.9% (17.1). Operating cash flow before interest paid totaled USD 66 M (55).
The positive trend in Americas strengthened during the fourth quarter, in terms of both sales and margins. The Door Group, the Residential Group and South America reported very strong growth during the quarter. The Architectural Hardware Group recorded modest growth with continuing strong margins. Sales in Mexico were weak during the quarter.
ASIA PACIFIC
Sales for the fourth quarter in the Asia Pacific division totaled AUD 90 M (84) with 0% organic growth. Operating income before goodwill amortization amounted to AUD 16 M (15) with an operating margin (EBITA) of 17.5% (17.9). Return on capital employed before goodwill amortization amounted to 18.4% (20.7). Operating cash flow before interest paid totaled AUD 15 M (16).
Asia Pacific's sales and margins were good in seasonal terms. The organic growth was negatively affected by changed exchange rates on exports from New Zealand to the USA and continuing weakness in the Australian residential market. Growth in Asia was weak during the quarter.
GLOBAL TECHNOLOGIES
The Global Technologies division reported sales of SEK 1,269 M (1,186) in the fourth quarter, corresponding to 4% organic growth. Operating income before goodwill amortization amounted to SEK 163 M (160) with an operating margin (EBITA) of 12.8% (13.5). Return on capital employed before goodwill amortization amounted to 12.5% (12.3). Operating cash flow before interest paid amounted to SEK 163 M (163).
Global Technologies reported continuing strong organic growth in Door Automatics, while the Identification Technology Group was rather weaker than in the previous quarter. The Hospitality Group reported weak sales during the quarter, which pulled down the division's organic growth and margin. Further restructuring measures were undertaken in North America.
OTHER EVENTS
During the quarter ASSA ABLOY signed a contract to acquire BEST Metaline, one of South Korea's leading companies in the market for lock fittings and door furniture. The company also has a strong position in the customer specification sector, serving architects and building companies. BEST Metaline has sales of around AUD 13 M (SEK 65 M).
In January 2005 ASSA ABLOY acquired Doorman Services, one of Britain's leading door servicing companies. The acquisition strengthens ASSA ABLOY's business in door automatics. Doorman has sales of around GBP 11 M.
In December ASSA ABLOY repurchased MTN bonds with a nominal value of EUR 300 M, and completed the changing of interest rates from fixed to variable. Together, this had a positive effect on
Net financial items.
DIVIDEND POLICY AND DIVIDEND
As previously announced ASSA ABLOY's Board of Directors has decided to adopt a new dividend policy implying a distribution, over the long term, 33-50% of earnings after standard tax of 28%, but always taking into account ASSA ABLOY's long-term financing requirements. The Board of Directors recommends a dividend of SEK 2.60 (1.25) per share for the 2004 financial year corresponding to 40% of the adjusted net income as above. The Annual General Meeting will be held on 27 April 2005.
ACCOUNTING PRINCIPLES
ASSA ABLOY employs the accounting principles described in Note 1 to the Annual Report for 2003, with the additional application of RR 29 'Employee Benefits' from 1 January 2004.
Preparations for the transition to IFRS accounting in 2005 are continuing. See Note 1 in this report for further details.
OUTLOOK
Organic sales growth is expected to continue at a good rate. The operating margin (EBITA) is expected to rise, mainly due to savings resulting from the restructuring program. Excluding restructuring payments, the strong cash generation is expected to 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 positions will accelerate growth and increase profitability.
Stockholm, 16 February 2005
Bo Dankis
President and CEO
REVIEW REPORT
We have reviewed this Year-end Report in accordance with the recommendation issued by FAR. A review is considerably limited in scope compared with an audit. Nothing has come to our attention that causes us to believe that the Year-end Report does not comply with the legal requirements relating to the stock exchange and to annual accounting.
Stockholm, 16 February 2005
PricewaterhouseCoopers AB
Anders Lundin
Authorized public accountant
Financial information
The Annual Report for 2004 will be published in March 2005.
The Annual General Meeting will take place at 15.00 on 27 April at Nybrokajen 11 in Stockholm. Quarterly Reports from ASSA ABLOY AB for 2005 will be published on 27 April, 17 August and
8 November.
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Further information can be obtained from:
Bo Dankis, 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 AB (publ)
Box 70340, SE 107 23 Stockholm, Sweden
Tel: +46 8 506 485 00, Fax: + 46 8 506 485 85
Visiting address: Klarabergsviadukten 90
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 0181.
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