ASSA ABLOY AB (publ) Final Results (3573O)

TIDM77BL

RNS Number : 3573O

ASSA ABLOY AB (publ)

08 February 2016

8 February 2016

No. 1/16

A strong end to the year for ASSA ABLOY

Fourth quarter

-- Net sales increased by 15% in the quarter to SEK 18,301 M (15,847). Organic growth was 5% (3).

   --    Strong growth in Americas, Global Technologies, Entrance Systems and EMEA. 
   --    Negative growth in Asia Pacific due to continued weak demand in China. 

-- Agreements have been signed for the acquisition of six companies, including CEDES in Switzerland, with combined expected annual sales of about SEK 1,100 M.

-- Operating income (EBIT) for the quarter increased by 13% to SEK 3,038 M (2,681). The operating margin was 16.6% (16.9).

   --    Net income amounted to SEK 2,120 M (1,889). 
   --    Earnings per share rose by 12% and amounted to SEK 1.91 (1.70). 
   --    Operating cash flow increased by 33% to SEK 4,625 M (3,469). 

Full year

   --    Net sales increased by 20% to SEK 68,099 M (56,843). Organic growth was 4% (3). 
   --    16 acquisitions with total annual sales of about SEK 2,500 M have been consolidated. 

-- Operating income (EBIT) increased by 20% to SEK 11,079 M (9,257). The operating margin was 16.3% (16.3).

   --    Net income amounted to SEK 7,693 M (6,436). 
   --    Earnings per share rose by 20% to SEK 6.93 (5.79). 
   --    Operating cash flow increased by 21% to SEK 9,952 M (8,238). 
   --    The Board of Directors proposes a dividend of SEK 2.65 per share (2.17). 

SALES AND INCOME

 
                                Fourth quarter                   Full year 
                         -------------------------  -------------------------- 
                          2014     2015    Change     2014     2015    Change 
-----------------------  -------  -------  -------  --------  -------  ------- 
Sales, SEK M              15,847   18,301     +15%    56,843   68,099     +20% 
 of which, 
 Organic growth                                +5%                         +4% 
 Acquisitions                                  +4%                         +3% 
 Exchange-rate effects    +1,129     +983      +6%    +2,138   +6,544     +13% 
Operating income 
 (EBIT), SEK M             2,681    3,038     +13%     9,257   11,079     +20% 
Operating margin 
 (EBIT), %                  16.9     16.6               16.3     16.3 
Income before tax, 
 SEK M                     2,552    2,851     +12%     8,698   10,382     +19% 
Net income, SEK 
 M                         1,889    2,120     +12%     6,436    7,693     +20% 
Operating cash flow, 
 SEK M                     3,469    4,625     +33%     8,238    9,952     +21% 
Earnings per share 
 (EPS), SEK(1)              1.70     1.91     +12%      5.79     6.93     +20% 
 

1) Earnings per share has been recalculated for all historical periods reflecting the stock split (3:1) in 2015.

COMMENTS BY THE PRESIDENT AND CEO

"The final quarter of the year continued strongly for ASSA ABLOY, with a rise in sales of 15% for the quarter and totaling 20% for the year," says Johan Molin, President and CEO. "Operating income also grew very satisfactorily by a full 13% for the quarter and a total of 20% for the full year.

"Organic growth was strong, at a full 5% for the quarter. The strong sales trend in the USA, Europe and the Pacific region continued unchanged. The sales trend in the developing countries remained good except in China, where sales continued to fall. However, a weaker demand picture can be perceived in many developing markets, linked to a shortage of financing for major projects. This principally affected Global Technologies.

"The strong development of electromechanical products continued during the year as our customers are converting from mechanical locks to an ever-increasing extent. It is clear that ASSA ABLOY has established a leadership in this area for both commercial and residential applications. Particularly striking during the year was the strong demand for digital door-locks for so-called home automation in the USA, and for the Cliq system based on the new cloud technology.

"During the quarter CEDES was acquired - an interesting technology company that adds intelligence to connected doors, mainly in Entrance Systems. Another technology acquisition was made in HID through the purchase of IAI, which is a leader in advanced printers mainly for the Government sector and banks. Three acquisitions were also made in Brazil, where ASSA ABLOY has built a market-leading position over a short period.

"Operating income increased by a full 13% during the quarter. The organic growth of 5% resulted in a good underlying growth in the operating margin, to which continued efficiency improvements contributed strongly. Operating margin remained on virtually the same level as in the fourth quarter of 2014 despite higher negative impacts from exchange-rate effects and dilution from acquisitions as a consequence of the many acquisitions made at the end of the year.

"My judgment is that the global economic trend remains weak. Although America is showing a positive trend, Europe and many of the Emerging Markets are stagnating. However, our strategy of expanding in the Emerging Markets remains unchanged,

since they are expected to achieve very good economic growth long term. We are also continuing our investments in new products, especially in the growth area of electromechanics."

FOURTH QUARTER

The Group's net sales totaled SEK 18,301 M (15,847), an increase of 15% compared with the fourth quarter of 2014. Organic growth for comparable units was 5% (3). Acquired units contributed 4% (8). Positive exchange-rate effects had an impact of SEK 983 M (1,129) on sales, that is 6% (9).

Operating income before depreciation and amortization, EBITDA, amounted to SEK 3,406 M (2,990). The corresponding EBITDA margin was 18.6% (18.9). The Group's operating income, EBIT, amounted to SEK 3,038 M (2,681), an increase of 13%. The operating margin was 16.6% (16.9). Operating income was affected negatively by provisions made for feared credit losses of SEK 250 M in China. The generally weak demand in the Emerging Markets has also meant that SEK 245 M of performance-based deferred acquisition payments, so-called earn-outs, have been recognized as income because the payments are not expected to happen.

Net financial items amounted to SEK -187 M (-129). The Group's income before tax amounted to SEK 2,851 M (2,552), an improvement of 12% compared with the previous year. Exchange-rate effects had an positive impact of SEK 73 M (196) on the Group's income before tax. The profit margin was 15.6% (16.1). The effective tax rate on an annual basis amounted to 26% (26). Earnings per share increased by 12% to SEK 1.91 (1.70). Operating cash flow was SEK 4,625 M (3,469), an increase of 33%.

FULL YEAR

Net sales for the full year 2015 increased by 20% to SEK 68,099 M (56,843). Organic growth was 4% (3). Acquired units contributed 3% (9). Exchange-rate effects affected sales positively by SEK 6,544 M (2,138), representing 13% (5), compared with 2014.

Operating income before depreciation and amortization, EBITDA, for the full year amounted to SEK 12,512 M (10,419) and the EBITDA margin to 18.4% (18.3). The Group's operating income, EBIT, increased by 20% to SEK 11,079 M (9,257). The corresponding operating margin was 16.3% (16.3). Earnings per share for the full year increased by 20% to SEK 6.93 (5.79). Operating cash flow totaled SEK 9,952 M (8,238), an increase of 21%.

RESTRUCTURING MEASURES

Payments related to all existing restructuring programs amounted to SEK 145 M in the quarter and SEK 375 M for the full year. The restructuring programs proceeded according to plan and led to a reduction in personnel of 481 people during the quarter and 10,750 people since the projects began.

At the end of the year, provisions of SEK 551 M remained on the balance sheet for carrying out the programs.

COMMENTS BY DIVISION

EMEA

Sales for the quarter in EMEA division totaled SEK 4,411 M (3,979), with organic growth

of 5% (2). The markets in Scandinavia, Finland, Benelux, Iberia and central and eastern Europe showed strong growth. Britain, Germany and Israel produced good growth, while sales in Africa were stable. Growth was weakly negative in France and Italy. Acquired growth amounted to 5% (6). Operating income totaled SEK 705 M (694) and the corresponding operating margin (EBIT) was 16.0% (17.5). Return on capital employed amounted to 20.3% (22.2). Operating cash flow before interest paid totaled SEK 1,408 M (1,011).

AMERICAS

Sales for the quarter in Americas division totaled SEK 3,984 M (3,283), with organic growth of 8% (8). Growth was strong for traditional lock products, electromechanical products, and in Canada, Mexico and South America. The private residential market

and the door segment had good growth. High-security products showed a stable sales trend. Acquired growth amounted to 1% (5). Operating income totaled SEK 838 M (690) and the corresponding operating margin (EBIT) was 21.0% (21.0). Return on capital employed amounted to 24.1% (23.0). Operating cash flow before interest paid totaled SEK 1,162 M (795).

ASIA PACIFIC

Sales for the quarter in Asia Pacific division totaled SEK 2,580 M (2,327), with organic growth of -4% (-7). Australia and South-East Asia showed strong growth. New Zealand and South Korea showed a good sales trend. China continued to show a weak sales trend due to low domestic demand. Acquired growth amounted to 8% (8). Operating income totaled SEK 381 M (340), and the corresponding operating margin (EBIT) was 14.8% (14.6). Return on capital employed amounted to 12.3% (14.5). Operating cash flow before interest paid totaled SEK 869 M (553).

GLOBAL TECHNOLOGIES

February 08, 2016 03:26 ET (08:26 GMT)

Sales for the quarter in Global Technologies division totaled SEK 2,504 M (2,076), with organic growth of 8% (5). AdvanIDe, Identification Technology (IDT) and Quantum Secure showed strong growth. Sales were stable for Access Control and Logical Access (IAM), while Government ID and Biometrics showed negative growth. Hospitality showed continued strong growth and rising income driven by new innovative products. Acquired growth amounted to 2% (5). The division's operating income amounted to SEK 460 M (415), and the corresponding operating margin (EBIT) was 18.4% (20.0). Return on capital employed amounted to 18.5% (21.2). Operating cash flow before interest paid totaled SEK 706 M (554).

ENTRANCE SYSTEMS

Sales for the quarter in Entrance Systems division totaled SEK 5,097 M (4,440), with organic growth of 6% (4). Growth was strong for High-speed Doors, Ditec, Amarr and 4Front. The sales level was good for Door Automation and European industrial doors.

Sales increased for Components and for the private residential market in Europe. Acquired growth amounted to 3% (12). Operating income totaled SEK 770 M (685) and the corresponding operating margin (EBIT) was 15.1% (15.4). Return on capital employed amounted to 18.5% (16.7). Operating cash flow before interest paid totaled SEK 981 M (805).

ACQUISITIONS

A total of eight acquisitions were consolidated during the quarter, including Nergeco (France) and Papaiz/Udinese (Brazil). The combined price for the 16 acquisition consolidated during the year amounted to SEK 3,844 M, and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to SEK 3,098 M. The acquisition price is adjusted for acquired net debt and estimated earn--outs. Estimated earn-outs amount to SEK 1,155 M. During the year, complementary acquisitions of non-controlling interests were also made at a cost of SEK 990 M.

On 21 December it was announced that ASSA ABLOY had signed an agreement for the acquisition of the Swiss company CEDES, a leader in sensor technology for the door, gate and lift industry. The company has about 340 employees and its sales in 2016 are expected to total SEK 510 M.

SUSTAINABLE DEVELOPMENT

The subsidiary Pan Pan in China has developed an environmentally friendly production process for foaming the insulation for the company's security doors. Previously, materials with high greenhouse effects were used, which have now been replaced by a water-based technology. The new production process has been introduced at one of the subsidiary's plants, and more production lines will be converted during 2016. The doors produced using the new environmentally friendly technology will also have customer benefits, such as better heat and sound insulation and greater strength and resistance to external impact. The new production technology will have great importance in reducing the subsidiary's emissions of greenhouse gases.

The Sustainability Report for 2015 will be available from 23 March 2016 on the company's website, www.assaabloy.com.

STOCK SPLIT

The total number of shares in the company at 31 December 2015 is 1,112,576,334, of which 57,525,969 are A-shares with ten votes each and 1,055,050,365 are B-shares with one vote each. The increase in the numbers of shares and votes during the year is the result of the stock split (3:1) that was decided upon at ASSA ABLOY AB's Annual General Meeting on 7 May 2015.

Share-based key data have been recalculated for all historical periods in this Report as a result of the stock split.

PARENT COMPANY

Other operating income for the Parent company ASSA ABLOY AB totaled SEK 3,392 M (3,085) for the full year. Operating result amounted to SEK 1,351 M (1,298). Investments in tangible and intangible assets totaled SEK 41 M (11). Liquidity is good and the equity ratio was 46.1% (46.4).

DIVIDEND AND ANNUAL GENERAL MEETING

The Board of Directors proposes a dividend of SEK 2.65 (2.17) per share for the

2015 financial year, an increase of 22%. The Annual General Meeting will be held on 27 April 2016. The Annual Report for 2015 will be available from 23 March 2016 on the company's website, www.assaabloy.com.

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 90-95 of the 2014 Annual Report.

This Year-end Report was prepared in accordance with IAS 34 'Interim Financial Reporting' and the Annual Accounts Act. The Year-end Report for the Parent company was prepared in accordance with the Annual Accounts Act and RFR 2 'Reporting by a Legal Entity'.

The total amount in tables and statements might not always summarize as there are rounding differences. The aim is to have each line item corresponding to the source and it might therefore be rounding differences in the total.

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 risks and risk management, see the 2014 Annual Report.

The Administrative courts in Sweden has decided not to allow tax relief for interest costs relating to one of the Group's subsidiaries for the years 2008-2012 on the grounds that the relief is wrongly allocated. The decision will be appealed to the Administrative court of appeal. The total exposure to tax amounts to just over SEK 800 M.

The Finnish Tax Administration has decided not to allow tax relief for interest costs in the Group's Finnish businesses for the years 2008-2012. The decision will be appealed to a superior court. The total exposure to tax amounts to about SEK 750 M.

ASSA ABLOY's judgment is that the decisions will not affect the Group's income.

AUDIT

The Company's Auditors have not carried out any review of the Report for the Fourth Quarter of 2015.

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 20 October 2015:

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, 8 February 2016

Johan Molin

President and CEO

FINANCIAL INFORMATION

The Interim Report for the first quarter will be published on 27 April 2016. The Annual General Meeting will be held on 27 April 2016 at the Museum of Modern Art in Stockholm.

FURTHER INFORMATION CAN BE OBTAINED FROM:

Johan Molin, President and CEO, Tel: [phone]

Carolina Dybeck Happe, Chief Financial Officer, Tel: [phone]

ASSA ABLOY is holding an analysts' meeting at 10.00 today at Operaterassen 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 [phone], [phone] or [phone].

Click on, or paste the following link into your web browser, to view the associated PDF document

http://www.rns-pdf.londonstockexchange.com/rns/3573O_-2016-2-8.pdf

ASSA ABLOY discloses the information provided herein pursuant to the Securities Markets Act and/or the Financial Instruments Trading Act. The information was submitted for publication at 08.00 CET on 8 February.

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR GIGDDCBGBGLI

(END) Dow Jones Newswires

February 08, 2016 03:26 ET (08:26 GMT)