ASSA ABLOY Q4 Report 2019 Public Stable growth and strong EBIT in - - PowerPoint PPT Presentation

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ASSA ABLOY

Q4 Report 2019

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• Organic sales development

– Strong growth in Americas – Good growth in Global Technologies – Stable growth in EMEA and Entrance Systems – Negative growth in APAC

• Strong EBIT growth of 8%

– Unchanged margin – higher M&A and R&D offset by

mix, efficiencies and lower raw material costs

• Strong cash flow of SEK 5.2 bn
• Provision for manufacturing footprint

program of MSEK 312

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Stable growth and strong EBIT in Q4 2019

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Q4 2019 figures in summary

• Sales SEK 24,946 M

+8%

– 1% organic – 3% acquired – 4% currency

• EBITA-margin* 16.8% (16.7%)
• EBIT-margin* 16.2% (16.2%)
• EBIT* SEK 4,047 M

+8%

• EPS

SEK 2.49 +7%

3 746 4 047 3 000 3 200 3 400 3 600 3 800 4 000 4 200 4 400 4 600 17 000 18 000 19 000 20 000 21 000 22 000 23 000 24 000 25 000 26 000 Q4 18 Q4 19 Sales, MSEK EBIT, MSEK 3

Sales +8% EBIT* +8%

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Full year 2019 figures in summary

• Sales SEK 94,029 M

+12%

– 3% organic – 3% acquired – 6% currency

• EBITA-margin* 16.4% (16.3%)
• EBIT-margin* 15.9% (15.8%)
• EBIT* SEK 14,920 M

+12%

• Cash flow SEK 14,442 M

+27%

• EPS

SEK 9.22 +14%

• Proposed dividend 3.85 SEK

+10%

13 309 14 920 9 000 10 000 11 000 12 000 13 000 14 000 15 000 16 000 17 000 60 000 65 000 70 000 75 000 80 000 85 000 90 000 95 000 100 000 2018* 2019 Sales, MSEK EBIT, MSEK 4

Sales +12% EBIT* +12%

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Sales by region Oct – Dec 2019

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ASSA ABLOY 100 +4 +1 Emerging markets 18

• 2
• 4

Emerging markets comprise follows IMF’s definition as per 2018-12-31

43 +8 +4 3 +16 +15 37 +1 +0 1

• 15
• 19

12

• 7
• 8

4 +38 +3 Share of sales, % Change in local currencies QTD 2019 vs. QTD 2018, % Organic change QTD 2019 vs. QTD 2018, %

Market highlights

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• Strong project wins
• Argentina Selects HID goID to Provide Citizens with World’s First

Mobile National ID Program

• US large retailer selects Entrance Systems loading dock

solutions

• New products in our mechanical core
• Korea launched waterproof floor hinges
• Global launch of new padlocks range
• Strong recognition for our innovative products
• 4 products in top door locks of 2019 in Consumer reports in

the US

• Several HID awards, e.g. China Intelligent Architecture

Brand Award

• Global Solutions wins HotelTechAwards, best mobile key solution

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CES Highlights

• New product launches
• August: August Wi-Fi Smart Lock
• Yale
• Liftmaster Lock, Linus Smart Lock and Smart

Cabinet Lock

• Smart Storage Line - & Smart Safe, Smart

Delivery Box and Yale Access

• Yale and Samsung reveal concept UWB lock

for automatic unlock

• Nine product awards at the CES 2020

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Sales growth

8 50 000 55 000 60 000 65 000 70 000 75 000 80 000 85 000 90 000 95 000 100 000 2 4 6 8 10 12 14 16 18 20 2014 2015 2016 2017 2018 2019 Organic growth, % Acquired growth, % Sales in fixed currencies, MSEK MSEK %

27 Quarters with positive OG

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Operating margin

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13 14 15 16 17 18 13 14 15 16 17 18 2014 2015 2016 2017 2018 2019 Quarter EBIT Rolling 12-months EBITA** Rolling 12-months

Run rate: EBIT-margin 15.9% (15.8%*)

% % Long term target range (average)

**) Operating margin before amortization of intangible assets recognized in business combinations.

Public 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 2014 2015 2016 2017 2018 2019 Quarter Rolling 12-months MSEK, 12 months MSEK

Operating profit

10

+61% in 5 years

+8% vs Q4 LY +12% vs FY

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• Fully active pipeline

– 3 acquisitions completed in Q4 and 12 in 2019 – Acquired annualized sales of MSEK 2,500

• Additional acquisitions to be closed

– agta record

• Sales of MEUR 378 and EBITA-margin of 12%* in 2018
• Expected to close early 2020

– AM Group

• Sales of MSEK 800
• Expected to close in Q1

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Acquisitions

* Adjusted for extraordinary personnel expenses of MEUR 8.9

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• Sales of MSEK 800 with 425 employees
• Industrial door company within Entrance

Automation

• Complements product offering and geographic

coverage

• Accretive to EPS from start

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AM Group, Australia

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• Organic sales growth of 1%

– Good growth in Scandinavia, Germany and

South Europe

– Stable growth in France and East Europe – Negative growth in Finland, UK, Middle East & Africa,

and Benelux

• Operating margin 16.0% (16.6%)*

– Negative volume leverage -50bps on low growth and

higher R&D costs

– FX –30bps and acquisitions +20bps

12% 13% 14% 15% 16% 17% 18% 19% 2 500 3 000 3 500 4 000 4 500 5 000 5 500 6 000

Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19

Sales, MSEK Operating margin, % 13

Opening Solutions EMEA

22%

• f Group

sales

Excluding restructuring items.

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• Organic sales growth of 5%

– Very strong growth for Electromechanical Solutions

and Perimeter Security

– Strong growth for Residential Group, Canada,

Security Doors and Architectural Hardware

– Good growth in Latin America and Access & High

Security

– Negative growth in US Smart Residential

• Operating margin 20.0% (19.9%)*

– Strong volume leverage (40 bps) driven by strong

growth, operational efficiencies and raw material tailwind

– FX 10bps and M&A -40bps

16% 17% 18% 19% 20% 21% 22% 23% 24% 2 500 3 000 3 500 4 000 4 500 5 000 5 500 6 000 6 500

Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19

Sales, MSEK Operating margin, % 14

Opening Solutions Americas

24% of Group sales

Excluding restructuring items.

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• Organic sales growth of -10%

– Good growth in South Asia and Pacific – Negative growth in China, India and South Korea – Negative intra group sales

• Operating margin 8.2% (9.6%)*

– Negative leverage of -120bps, due to negative

• rganic growth and weak performance in South Korea

– FX -10bps and M&A -10bps – China business plan according to plan

• Stabilizing performance
• Consolidation of sales and operations is ongoing
• Headcount reduced by 10% in 2019

0% 5% 10% 15% 20% 1 000 1 500 2 000 2 500 3 000

Q4 17 Q1 18 *Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19

Sales, MSEK Operating margin, %* 15

Opening Solutions Asia Pacific

10%

• f Group

sales

*) Excluding restructuring items and China write downs MSEK 400 in Q2 2018.

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• Organic sales growth of 2%

– Very strong growth in Extended Access – Strong growth in Physical Access Control and Global

Solutions

– Stable growth in Identity & Access Solutions – Negative growth in Identification Technology,

Secure Issuance and Citizen ID

• Operating margin 18.3% (19.9%)*

– Strong volume leverage (140bps) driven by

• perational efficiencies, raw material tailwind and mix

– FX +20bps and M&A -320bps

• High acquisition costs for closing De La Rue and Placard

12% 14% 16% 18% 20% 22% 24% 1 500 2 000 2 500 3 000 3 500 4 000 4 500

Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19

Sales, MSEK Operating margin, % 16

Global Technologies

17%

• f Group

sales

Excluding restructuring items.

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• Organic sales growth of 0%

– Strong growth in Pedestrian Doors – Good growth in Logistics solutions – Stable growth in High Performance Doors – Negative growth in Industrial Doors, EU Residential

Doors, US Residential Doors and Door components

– Good growth in service

• Operating margin 16.3% (15.1%)*

– Strong volume leverage (130 bps) due to operational

efficiencies, strong raw material tailwind, good growth in service and other positive mix

– FX -10 bps and M&A flat

• New organizational structure from Q1 2020

11% 12% 13% 14% 15% 16% 17% 18% 4 000 4 500 5 000 5 500 6 000 6 500 7 000 7 500

Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19

Sales, MSEK Operating margin, % 17

Entrance Systems

27%

• f Group

sales

Excluding restructuring items.

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Financial summary, Q4 2019

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October-December January-December SEK M 2018 2019 Change 2018 2019 Change Sales 23,167 24,946 8% 84,048 94,029 12%

• Organic growth

1,281 147 1% 3,901 2,652 3%

• Acquired net growth

714 760 3% 1,793 3,063 3%

• FX-differences

1,063 872 4% 2,217 4,265 6% Operating income (EBIT)* 3,746 4,047 8% 13,309 14,920 12% EBITA-margin* 16.7% 16.8% 0.1pts 16.3% 16.4% 0.1 pts EBIT-margin* 16.2% 16.2% 0.0 pts 15.8% 15.9% 0.1 pts Income before tax** 3,515 3,779 8% 12,110 13,883 15% Net income** 2,588 2,767 7% 8,984 10,243 14% EPS**, SEK 2.33 2.49 7% 8.09 9.22 14% Operating cash flow 4,923 5,235 6% 11,357 14,442 27% ROCE 18% 17%

• 1.0 pts

16% 17% 1.0 pts

*) Excluding China write down of MSEK 400 in Q2 2018 **) Excluding the impairment in China of goodwill and other intangible assets FX & acquisition ‘run-rate’ effects in Q1 2020 (31 Dec 2019): SALES FX: +1% Acq: +2%

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Bridge analysis – Q4 2019

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SEK M Q4 2018 Organic Currency Acq/Div Q4 2019 Growth 1% 4% 3% 8% Sales 23,167 147 872 760 24,946 Operating profit* 3,746 163 137 2 4,047 Operating margin, %* 16.2% 110.7% 15.7% 0.3% 16.2% Dilution/accretion 0.6 pts

• 0.1 pts
• 0.5 pts

Sales up MSEK 1,779

• Price +1% and volume +0%
• Driven by Americas and Global Technologies

EBIT up MSEK 302

• Strong contribution from Americas and Entrance Systems

Margin

• Accretion in Entrance Systems and Americas
• Acquisitions and integration costs of above MSEK 60

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Cost breakdown as % of sales Oct-Dec

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% QTD 2018* QTD 2019

• excl. acquisitions*

Δ QTD 2019* Direct material

• 37.0%
• 36.1%

+0.9 pts

• 36.1%

Conversion cost

• 23.6%
• 23.7%
• 0.1 pts
• 23.9%

Gross margin 39.4% 40.2% +0.8 pts 40.0% S, G & A

• 23.2%
• 23.5%
• 0.3 pts
• 23.8%

EBIT 16.2% 16.7% +0.5 pts 16.2%

• Direct Material – lower raw material costs and mix
• Conversion cost – low growth and IT investments
• SG&A – continued investments in R&D and sales

Manufacturing Footprint Program

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• Initiatives in MFP7
• Payback time of <3 years
• Closure of ~15 factories and >30 offices
• Restructuring cost for the full program MSEK 1,530
• MSEK 1,218 in Q4 2018
• MSEK 312 in Q4 2019
• Annual savings of approximately MSEK 800 by 2021
• Status of all MFPs in 2019
• Five factories closed
• 1,367 FTEs left the Group
• MSEK 778 provisions remain for all MFPs

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Operating cash flow, MSEK

22 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000 20 000 1 000 2 000 3 000 4 000 5 000 6 000 2014 2015 2016 2017 2018 2019 Quarter, MSEK Cash rolling 12 months, MSEK EBT rolling 12 months, MSEK

12 months cash flow / EBT = 104%

Quarter 12 months

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Gearing % and net debt, MSEK

23 15 30 45 60 75 90 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 2014 2015 2016 2017 2018 2019* Net debt, MSEK Gearing, % Net debt Gearing

Debt/Equity 56%* (56%)

*) IFRS 16 effect on net debt SEK 3.7 bn.

Net debt/EBITDA 1.8 (1.9)

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Earnings per share, SEK

24 2,00 3,00 4,00 5,00 6,00 7,00 8,00 9,00 10,00 0,50 0,75 1,00 1,25 1,50 1,75 2,00 2,25 2,50 2014 2015 2016 2017 2018 2019 Quarter, SEK Rolling 12 months, SEK Quarter 12 months

YTD EPS +14%*

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• Q4

– Stable organic sales growth of 1% – Strong EBIT growth of 8%* – Cash flow of MSEK 5,235

• Full year

– Good organic growth of 3% – Strong EBIT growth of 12%* – Record cash flow of MSEK 14,442

• Proposed dividend of SEK 3.85/share
• Welcoming new heads of HID and Entrance

Systems

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Conclusions

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Q&A

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Appendix

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Cost breakdown as % of sales

% QTD 2018* QTD 2019 excl. acquisitions* Δ QTD 2019* YTD 2018** YTD 2019 excl. acquisitions Δ YTD 2019* Direct material

• 37.0%
• 36.1%

0.9 pts

• 36.1%
• 36.2%
• 36.1%

0.1 pts

• 36.0%

Conversion cost

• 23.6%
• 23.7%

0.1 pts

• 23.9%
• 24.2%
• 24.0%

0.2 pts

• 23.9%

Gross margin 39.4% 40.2% 0.8 pts 40.0% 39.6% 39.9% 0.3 pts 40.1% S, G & A

• 23.2%
• 23.5%
• 0.3 pts
• 23.8%
• 23.8%
• 23.8%

0.0 pts

• 24.2%

EBIT 16.2% 16.7% 0.5 pts 16.2% 15.8% 16.1% 0.3 pts 15.9%

*) Excluding restructuring items. **) Excluding restructuring items and China write down in Q2 2018.

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Opening Solutions EMEA’s bridge

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MSEK Q4 2018 Organic Currency Acq/Div Q4 2019 Growth 1% 2%

• 2%

1% Sales 5,485 32 148

• 141

5,525 Operating income 911

• 25

11

• 13

884 Operating margin, % 16.6%

• 77.0%

7.7% 9.3% 16.0% Dilution/accretion

• 0.5 pts
• 0.3 pts

0.2 pts 12 months figures Sales 20,201 21,144 EBIT 3,256 3,396 Operating cash flow before paid interest 2,819 3,515 Cash flow/EBIT 87% 103%

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Opening Solutions Americas’ bridge

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MSEK Q4 2018 Organic Currency Acq/Div Q4 2019 Growth 5% 5% 4% 14% Sales 5,173 269 248 210 5,900 Operating income 1,027 78 58 19 1,182 Operating margin, % 19.9% 28.8% 23.6% 9.0% 20.0% Dilution/accretion 0.4 pts 0.1 pts

• 0.4 pts

12 months figures Sales 19,817 23,172 EBIT 3,941 4,673 Operating cash flow before paid interest 3,903 5,263 Cash flow/EBIT 99% 113%

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Opening Solutions Asia Pacific’s bridge

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MSEK Q4 2018 Organic Currency Acq/Div Q4 2019 Growth

• 10%

3% 4%

• 3%

Sales 2,756

• 279

85 115 2,676 Operating income* 264

• 57

7 6 220 Operating margin, %* 9.6% 20.5% 7.8% 5.3% 8.2% Dilution/accretion

• 1.2 pts
• 0.1 pts
• 0.1 pts

12 months figures Sales 9,949 10,689 EBIT* 892 879 Operating cash flow before paid interest 811 622 Cash flow/EBIT 91% 71%

*) Excluding China write downs in Q2 2018.

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Global Technologies’ bridge

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MSEK Q4 2018 Organic Currency Acq/Div Q4 2019 Growth 2% 6% 14% 22% Sales 3,602 69 165 541 4,377 Operating income 716 71 35

• 23

800 Operating margin, % 19.9% 102.4% 21.3%

• 4.2%

18.3% Dilution/accretion 1.4 pts 0.2 pts

• 3.2 pts

12 months figures Sales 11,951 15,423 EBIT 2,387 2,890 Operating cash flow before paid interest 2,463 3,183 Cash flow/EBIT 103% 110%

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Entrance Systems’ bridge

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MSEK Q4 2018 Organic Currency Acq/Div Q4 2019 Growth 0% 4% 0% 4% Sales 6,616 8 241 27 6,893 Operating income 998 94 28 4 1,125 Operating margin, % 15.1% 1129.6% 11.6% 15.9 16.3% Dilution/accretion 1.3 pts

• 0.1 pts

0.0 pts 12 months figures Sales 23,762 25,553 EBIT 3,358 3,652 Operating cash flow before paid interest 2,772 3,655 Cash flow/EBIT 83% 100%

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Thank you

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