Comments by the President and CEO

Strong operational execution

We are putting a year behind us that, because of the outbreak of Covid-19, changed the dynamics of many industries and changed most of our daily lives in one way or another. The pandemic resulted in the most challenging operational environment in our history, particularly in the first half of the year. In response, we have quickly adapted to the new reality, making significant adjustments to our cost base, protecting our balance sheet, while continuing to invest in innovation and growth initiatives. This led to an operating margin in the final quarter, excluding acquisitions and divestments, at target level and to a record high operating cash flow for the full year.

In the fourth quarter, our organic growth declined by 5% and negative currency effects were 7%, while acquisitions and divestments contributed a growth of 5%, resulting in a total sales decline of 7%. Sales were stable in EMEA and Entrance Systems, declined in Americas and Asia Pacific and were significantly down in Global Technologies.

Through continued cost-saving measures, we mitigated the negative effects of the newly introduced lockdowns in the fourth quarter and we achieved an operating margin of 16% excluding acquisitions and divestments. Cash flow continued to be very strong and totaled SEK 14,560 M for the full year and SEK 5,529 M in the fourth quarter.    

Operational improvements

The new restrictions and lockdowns put additional pressure on some of our customer segments and continued to affect Global Technologies in particular. EMEA's sales were stable and the underlying margin improved as strong residential demand in core markets, together with cost measures, more than offset the negative effects of the restrictions. In Americas, demand was very strong in Latin America and in the US residential segment, but declined in the commercial segments in the US. The operating margin in Americas was at a high level. Sales declined in all Asia Pacific markets, but we are seeing a gradual improvement of our profitability in China. Demand for Entrance Systems continued to be stable with a strong operating margin.

Our strong cost-saving measures continued and we realized net cost reductions of SEK 0.5 bn in the quarter, including effects from our new restructuring program, MFP8. The restructuring cost of the program amounted to almost SEK 1.4 bn and it will generate annual savings of around SEK 1 bn once fully implemented.

The outbreak of the Covid-19 pandemic led to a much weaker and volatile demand in 2020. As the vaccine program is rolled out, we expect restrictions to be gradually phased out, trust and mobility to return and demand in general to improve.

I am pleased that ASSA ABLOY continues to stand on very solid ground. Thanks to the significant efforts of our employees, I am confident that we will come out of the pandemic as a strong Group, well positioned to continue to lead the access-solutions industry. I look forward to seeing our new products being taken up by our customers and exceeding their expectations.   

Stockholm, 5 February 2021

Nico Delvaux
President and CEO
 

Fourth quarter

The Group's sales decreased by 7% to SEK 23,298 M (24,946). Organic growth amounted to -5% (1). Growth from acquisitions and divestments was 5% (3), of which 6% (3) were acquisitions and -1% (0) were divestments. Exchange-rates affected sales by -7% (4).

The Group's operating income[3] [4] (EBIT) amounted to SEK 3,475 M (4,047) a decrease of 14%. The corresponding operating margin was 14.9% (16.2).  Exchange-rates had an impact of SEK -321 M (137) on EBIT. Operating income before amortizations from acquisitions3 4 (EBITA) amounted to SEK 3,634 M (4,188). The corresponding EBITA margin was 15.6% (16.8).

Net financial items amounted to SEK -169 M (-268). The Group's income
before tax3 4 was SEK 3,306 M (3,779), a decrease of 13% compared with last year. Exchange-rates had an impact of SEK -317 M (126) on income before tax. The profit margin3 4 was 14.2% (15.1).

Earnings per share3 4 amounted to SEK 2.33 (2.49), a decrease of 7% compared with last year. Operating cash flow totaled SEK 5,529 M (5,235), an increase of 6% compared with last year.

Full year

The Group's sales for the full year 2020 totaled SEK 87,649 M (94,029), representing a decrease of 7%. Organic growth was -8% (3). Growth from acquisitions and divestments was 4% (3), of which 4% (3) were acquisitions and 0% (0) were divestments. Exchange-rate effects affected sales by -3% (6).

The Group's operating income3 4 (EBIT) in 2020 amounted to SEK 11,916 M (14,920), a decrease of 20% compared with last year. The corresponding operating margin was 13.6% (15.9). Operating income before amortizations from acquisitions3 4 (EBITA) in 2020 amounted to SEK 12,490 M (15,402). The corresponding EBITA margin was 14.3% (16.4).

The effective tax rate3 4 was 24.8% (26.2). Earnings per share3 4 in 2020 amounted to SEK 7.54 (9.22), a decrease of 18% compared with last year. Operating cash flow totaled SEK 14,560 M (14,442), an increase of 1% compared with last year.

Restructuring measures

A new restructuring program was launched at year-end 2020. The closures of 10 factories and more than 30 offices are expected to take place over a period of two years. The estimated cost of the restructuring program is SEK -1,366 M, with an expected payback time (inclusive of investments) of around two years.

Payments related to all restructuring programs amounted to SEK 337 M (261) during the quarter. The restructuring programs proceeded according to plan and led to a personnel reduction of 708 Full-Time Equivalents for the quarter and 2,135 for the full year. At the end of the quarter provisions of SEK 1,224 M remained in the balance sheet for carrying out the programs.

Organization

Martin Poxton has been appointed Executive Vice President, member of the Group Executive Team in ASSA ABLOY, and Head of the business unit ASSA ABLOY Opening Solutions Greater China and South East Asia within Asia Pacific division with effect from January 1, 2021. Martin, previously VP Operations for Asia Pacific division, joined ASSA ABLOY in 2017.

Simon Ellis has been appointed Executive Vice President, member of the Group Executive Team in ASSA ABLOY, and Head of the business unit ASSA ABLOY Opening Solutions Pacific and North East Asia within Asia Pacific division with effect from January 1, 2021. Simon, previously Head of Pacific region and Japan in Asia Pacific division, joined ASSA ABLOY in 1999.

The Head of Asia Pacific division, Anders Maltesen, will leave ASSA ABLOY during the first half of 2021. He will be replaced by Nico Delvaux, the President and CEO of the ASSA ABLOY Group, as the head of the Asia Pacific Division.

Comments by division

Opening Solutions EMEA

Sales for the quarter in EMEA totaled SEK 5,242 M (5,525), with organic growth of -1% (1). Sales growth was strong in the UK and France, and stable in Scandinavia and Germany. Sales declined in Benelux, Eastern Europe, Middle East/Africa and South Europe. Net sales growth from acquisitions, divestments and internal segment transfers was 0%. Operating income excluding items affecting comparability totaled SEK 670 M (884), which represents an operating margin (EBIT) of 12.8% (16.0). In the quarter Gardesa, a residential door business in Italy, was divested with a capital loss and related exit costs amounting to SEK -185 M. Return on capital employed amounted to 14.8% (18.0). Operating cash flow before non-cash items and interest paid totaled SEK 1,368 M (1,729).

Opening Solutions Americas

Sales for the quarter in Americas totaled SEK 4,567 M (5,900), with organic growth of -4% (5). Sales growth was very strong in US Residential, US Smart Residential and in Latin America. Sales declined in the USA for Architectural Hardware, Electromechanical Solutions, Security Doors and in Canada, while sales for Access & High Security declined significantly. Net sales growth from acquisitions and internal segment transfers was -10%. Operating income excluding items affecting comparability totaled SEK 915 M (1,182), which represents an operating margin (EBIT) of 20.0% (20.0). Return on capital employed amounted to 26.7% (23.6). Operating cash flow before non-cash items and interest paid totaled SEK 1,578 M (1,612).

Opening Solutions Asia Pacific

Sales for the quarter in Asia Pacific totaled SEK 2,418 M (2,676), with organic growth of -5% (-10). Sales declined in Pacific, South Korea and China, and were significantly down in other regions. Net sales growth from acquisitions, divestments and internal segment transfers was 1%. Operating income excluding items affecting comparability totaled SEK 199 M (220), which represents an operating margin (EBIT) of 8.2% (8.2). Return on capital employed amounted to 9.1% (9.7). Operating cash flow before non-cash items and interest paid totaled SEK 307 M (147).

Global Technologies

Sales for the quarter in Global Technologies totaled SEK 3,545 M (4,377), with organic growth of -17% (2). Sales declined in Identity and Access Management Solutions, Secure Issuance and in Physical Access Control. Sales in all other business areas declined significantly, including Global Solutions. Net sales growth from acquisitions and divestments was 5%. Operating income excluding items affecting comparability totaled SEK 582 M (800), which represents an operating margin (EBIT) of 16.4% (18.3). Return on capital employed amounted to 10.5% (14.1). Operating cash flow before non-cash items and interest paid totaled SEK 1,069 M (1,084).

Entrance Systems

Sales for the quarter in Entrance Systems totaled SEK 7,927 M (6,893), with organic growth of -1% (0). Sales growth was strong in Perimeter Security and was stable in Residential and Industrial, but declined in Pedestrian. Net sales growth from acquisitions, divestments and internal segment transfers was 23%. Operating income excluding items affecting comparability totaled SEK 1,251 M (1,125), which represents an operating margin (EBIT) of 15.8% (16.3). Return on capital employed amounted to 15.8% (18.6). Operating cash flow before non-cash items and interest paid totaled SEK 1,350 M (1,086).

Acquisitions and divestments

Four acquisitions were consolidated during the quarter. The combined acquisition price for the businesses acquired during the year, including adjustments from prior year acquisitions, amounted to SEK 12,134 M. The acquisition price on a cash and debt free basis totaled SEK 10,572 M. In the purchase price is included SEK 3,752 M of a non-cash valuation at fair value of previously held shares in associated companies. Preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amounted to SEK 8,325 M. Estimated deferred considerations for acquisitions made during the year amounted to SEK 318 M.

On January 14 2021, it was announced that ASSA ABLOY had sold Gardesa's Italian residential-door business to Italy-based Bertolotto and was in the final stages of selling Gardesa's roller-shutter business. Gardesa is an Italian manufacturer of residential security doors and roller shutters. The company's total sales in 2020 were approximately SEK 100 M. The transaction will have a positive effect on ASSA ABLOY´s operating margin going forward. The divestiture results in a capital loss and related exit costs amounting in total to approximately SEK -185 M.

On September 7 2020, it was announced that ASSA ABLOY had signed an agreement to sell its sensor technology business CEDES in Switzerland to capiton AG. CEDES is a leading sensor technology company in the door, gate and elevator industry. Sales in 2019 amounted to about SEK 525 M. The divestiture of CEDES was completed on 10 November 2020 and resulted in a small capital gain. The transaction will have a neutral effect on ASSA ABLOY´s operating margin going forward.

Sustainable development

ASSA ABLOY has successfully completed its sustainability program for the period 2015-2020, where we have met or exceeded the majority of our sustainability targets. We are now launching an ambitious new sustainability program for 2025, with raised target levels for all indicators. Our new program builds on the momentum and progress gained from ASSA ABLOY's successive five-year sustainability programs since 2010. In tandem, ASSA ABLOY has committed to setting science-based targets, where our ambition is to halve our absolute emissions of greenhouse gases by 2030 and to achieve net-zero no later than 2050. Our commitment to the Science Based Targets initiative complements our new 2025 sustainability program.

The Sustainability Report for 2020, with results for the Group's 2020 targets, details of our new 2025 sustainability program and other information about sustainable development, will be available from 8 March 2021 on the company's website, www.assaabloy.com.

Parent company

Other operating income for the Parent company ASSA ABLOY AB totaled SEK 4,580 M (5,172) for the full year 2020. Operating income for the same period amounted to SEK 868 M (1,523). Investments in tangible and intangible assets totaled SEK 164 M (740). Liquidity is good and the equity ratio is 43.6% (42.1).

Dividend and Annual General meeting

An Extraordinary General Meeting held on 24 November 2020 resolved in accordance with the Board's proposal to pay a second dividend of SEK 1.85 per share for the financial year 2019. The dividend was distributed on 1 December 2020.

The Board of Directors now proposes a dividend of SEK 3.90 (3.85) per share for
the 2020 financial year. In order to facilitate a more efficient cash management, the dividend is proposed to be paid in two equal installments, the first with record date 30 April 2021 and the second with record date 23 November 2021. If the proposal is adopted by the Annual General Meeting, the first installment is estimated to be paid on 5 May 2021 and the second installment on 26 November 2021.

The Annual General Meeting will be held on 28 April 2021. The Annual Report for 2020 will be available from 8 March 2021 on the company's website, www.assaabloy.com.

Accounting principles

ASSA ABLOY applies International Financial Reporting Standards (IFRS) as endorsed by the European Union. The same accounting and valuation principles as in the latest Annual Report have been applied. This Report was prepared in accordance with IAS 34 'Interim Financial Reporting' and the Annual Accounts Act. The Report for the Parent company was prepared in accordance with the Annual Accounts Act and RFR 2 'Reporting by a Legal Entity'.

ASSA ABLOY makes use of a number of financial performance measures that are not defined in the reporting rules that the company uses - so-called 'alternative performance measures'. For definitions of financial performance measures, refer to Page 19 of this Report and to the company's latest Annual Report.

To check how the financial measurements have been calculated for current and earlier periods, refer to the tabulated figures in this Quarterly Report and to the company's Annual Report. The Annual Reports for the years 1994 to 2019 appear on the company's website www.assaabloy.com.

Totals quoted in tables and statements may not always be the exact sum of the individual items because of rounding differences. The aim is that each line item should correspond to its source, and rounding differences may therefore arise.

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

ASSA ABLOY is an international Group with a wide geographical spread, involving exposure to various forms of strategic, operational and financial risks. Strategic risks refer to changes in the business environment with potentially significant effects on ASSA ABLOY's operations and business objectives. Operational risks comprise risks directly attributable to business operations, entailing a potential impact on the Group's financial position and performance. Financial risks mainly comprise financing risk, currency risk, interest rate risk, credit risk, and risks associated with the Group's pension obligations.

Risk-taking in itself provides opportunities for continued economic growth, but naturally the risks may also have a negative impact on business operations and company goals. It is therefore essential to have a systematic and efficient risk assessment process and an effective risk management program in general. The purpose of risk management at ASSA ABLOY is not to avoid risks, but to take a controlled approach to identifying, managing and minimizing the effects of these risks. This work is based on an assessment of the probability of the risks and their potential impact on the Group.

The Covid-19 pandemic has had a substantial business impact on ASSA ABLOY during 2020. The continued impact of the pandemic on the business is difficult to predict due to the uncertainty of market conditions, but the health and safety of our employees remains our first priority.

For a more detailed description of particular risks and risk management, see the 2019 Annual Report.

M&A and FX guidance

The guidance below relating to two key figures is provided to facilitate financial modelling but should not be viewed as market outlooks or business performance forecasts.

Acquisitions and divestments                          
It is estimated that completed acquisitions and divestments, on a rolling 12-month basis as per 31 December 2020, will have an effect of 4% on sales in the first quarter of 2021 versus the same period last year, while the effect on the operating margin is estimated to be dilutive in the first quarter of 2021.    

Exchange-rate effects
On the basis of the currency rates on 31 December 2020, it is estimated that the weighted currency effects on sales in the first quarter of 2021 versus the same period last year will be -12%, while the effect on the operating margin is estimated to be slightly dilutive in the first quarter of 2021.

Review

The Company's Auditors have not carried out any review of this Report for the

fourth quarter of 2020.

Stockholm, 5 February 2021

Nico Delvaux
President and CEO

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

http://www.rns-pdf.londonstockexchange.com/rns/6575O_1-2021-2-10.pdf

Financial information

The Annual Report for 2020 will be published on 8 March 2021.

The Quarterly Report for the first quarter of 2021 will be published on 28 April 2021.

The 2021 Annual General Meeting will be held on 28 April 2021.

A virtual capital markets day will be held on 26 May 2021.

Further information can be obtained from: 

Nico Delvaux,
President and CEO, tel. no: +46 8 506 485 82

Erik Pieder,
Executive Vice President and CFO, tel.no: +46 8 506 485 72

ASSA ABLOY is holding a telephone and web conference at 09.30
on 5 February 2021
which can be followed on the Internet at www.assaabloy.com.

It is possible to submit questions by telephone on:
+46 8-566 427 04, +44 333 300 9262 or +1 646 722 4956

Financial information - Group

Financial information - Group

Financial information - Group

Financial information - Parent company

Quarterly information - Group

Reporting by division

Financial information - Notes

Financial information - Notes

Definitions of financial performance measures