Annual Report 2015 The global leader in door opening solutions ASSA ABLOY Annual Report 2015 Contents Report on operations Financial statements ASSA ABLOY in brief Sales and income 80 Statement by the President and CEO 2 Consolidated income statement and Vision, financial targets and strategy 8 Statement of comprehensive income 81 Market presence 10 Comments by division 82 Product leadership 22 Results by division 83 Cost-efficiency 30 Financial position 84 Growth and profitability 36 Consolidated balance sheet 85 Cash flow 86 Divisions Consolidated cash flow statement 87 ASSA ABLOY’s divisions 40 Changes in consolidated equity 88 EMEA division 42 Parent company financial statements 90 Americas division 44 Notes 92 Asia Pacific division 46 Comments on five years in summary 116 Global Technologies division 48 Five years in summary 117 Entrance Systems division 52 Quarterly information 118 Definitions of key ratios 119 Sustainability report Proposed distribution of earnings 120 Sustainable development 54 Auditor's report 121 Report of the Board of Directors Shareholder information Report of the Board of Directors 62 The ASSA ABLOY share 122 Significant risks and risk management 65 Information for shareholders 125 Corporate governance 70 Board of Directors 74 Executive Team 76 Internal control – financial reporting 78 Remuneration guidelines for senior management 79 For further information about the company and its operations visit: www.assaabloy.com Datawatch focuses on mobile access control in commercial buildings CUSTOMER: Datawatch is an integrated supplier of access control sys- SOLUTION: In collaboration with HID Global, Datawatch fitted out a tems with products installed in over 3,000 office buildings worldwide. showroom at 555 12th Street N.W. in downtown Washington D.C., The company offers solutions for new construction and renovation, and where prospective tenants were given an opportunity to look more replacement and upgrade of existing security systems in commercial closely at the concept of mobile access control and other advanced properties. technical solutions. As a result of this successful initiative, Datawatch chose to purchase 15,000 mobile ID cards and over 1,000 iCLASS SE CHALLENGE: Datawatch remotely monitors over 60,000 doors, readers. Today the company uses mobile access control from HID guaranteeing the security of everyone passing through them. The com- Global for access to both common spaces and individual workspaces in pany helps property owners, property managers and tenants protect nearly 20 commercial buildings in the U.S. Datawatch is installing employees, residents and visitors. To date it has issued over one million iCLASS SE readers in all new buildings, so that property owners and code carriers and the number is constantly increasing as more and more property managers can enable tenants to open doors with smartphones global leading companies and organizations become customers. and/or keycards. Datawatch is working actively on the development of new, innovative solutions and services to constantly expand its offering and differentiate itself from its competitors. ASSA ABLOY in brief ASSA ABLOY is the global leader in door opening solutions and a market leader in most of Europe, North America, China and Oceania. The Group has sales of SEK 68 billion and 46,000 employees. Customers in the institutional, commercial and residential market ASSA ABLOY has a complete range of door opening Complete products, solutions and services for the institutional, commercial and consumer markets. With the world’s range and largest installed base, a very large part of sales is to the broad base stable aftermarket. ASSA ABLOY’S DEVELOPMENT 1994–2015 1994 ASSA ABLOY is formed 1997 A French touch The French 1999 Increased security The Group 2001 Global integration through the merger of ASSA lock group Vachette is acquired, with acquires the lock manufacturer Mul-T-Lock ASSA ABLOY takes part in the Volvo (Sweden) and ABLOY (Finland). units such as Vachette, JPM, Laperche (Israel). The acquisition of effeff (Germany) Ocean Race as part of the integration and Bezault in France and Litto in gives ASSA ABLOY a good position in the of over 100 companies worldwide. Belgium. electromechanical lock market. 1996 Acquisitions show the way 1998 Expansion in the 2000 Double size ASSA ABLOY 2002 New opportunities in The Group increases its product USA ASSA ABLOY expands acquires Yale Intruder Security door automation The Group portfolio with the Sargent, McKinney, in North America through becoming the world’s leading lock acquires Besam (Sweden), a Curries and Graham brands through the acquisition of Medeco. group almost overnight. HID company with door automation the acquisition of ESSEX (USA). The Group opens an office in Corporation (USA) increases the products. China. Group’s offering with electronic identification products. CLIQ technology is launched. ASSA ABLOY has global product leadership through innovation and Innovations product development. Electromechanical products and entrance auto- mation have increased from 27 percent of sales to over 50 percent in and sustain- ten years. Economic resource utilization and cost-efficiency provide cus- ability tomers with added value and contribute to a more sustainable society. ASSA ABLOY is currently creating future digital and mobile security Digital future solutions on its own technology platforms, such as Seos. This plat- form provides customers with an ecosystem in which digital identities can open doors, desktop readers, computers and printers, and give access to many other functions at workplaces and in the home. Simple, flexible access under high security and control is enabled by a smartphone, an ID card or fingerprint recognition. ASSA ABLOY’S DEVELOPMENT 1994–2015 2003 Stronger position 2005 Increased presence in 2007 17 acquisitions A new brand 2010 Mobile Keys ASSA ABLOY Mobile Keys is Nemef (Netherlands) and China ASSA ABLOY forms a joint strategy is launched, with ASSA ABLOY launched. The Group strengthens its customer Corbin (Italy) strengthen venture with Wangli (China), a as master brand. The Group acquires offering in Asia through the acquisition of Pan Pan, the Group’s position in their leading supplier of high-security iRevo (South Korea), a major player in China’s largest manufacturer of high-security respective markets. doors and locks. digital door locks. steel doors, and King Door Closers, South Korea’s leading manufacturer of door and floor closers. 2004 Hi-O is launched The launch 2006 Secure identities 2009 Wireless technology 2011 Global leader in of Hi-O technology involves a new ASSA ABLOY acquires Fargo ASSA ABLOY launches the new entrance automation The concept for electronic door opening Electronics, a company wireless Aperio technology, acquisition of Crawford and solutions, in which connected devices developing secure technologies which enables customers to FlexiForce strengthens the exchange encrypted information, for ID card issuance systems. upgrade their access control customer offering in industrial simplifying both installation and systems simply and smoothly. doors, docking solutions and service. garage doors. Financials in brief Sales increased by 20 percent to SEK 68,099 M (56,843). 2015 Earnings per share after full dilution increased to SEK 6.93 (5.79). Operating income amounted to SEK 11,079 M (9,257). Operating cash flow amounted to SEK 9,952 M (8,238). Investments in product development continued at an accelerated rate and a number of new products were launched. Share of Key data 2013 2014 2015 Change Group sales by region Sales, SEK M 48,481 56,843 68,099 20% 2015 of which: Organic growth, % 2 3 4 of which: Acquired growth, % 4 9 3 EUROPE 37% of which: Exchange rate effects, % –2 5 13 AFRICA 1% Operating income (EBIT), SEK M 7,9231 9,257 11,079 20% NORTH AMERICA 39% Operating margin, % 16.31 16.3 16.3 SOUTH AMERICA 2% Income before tax (EBT), SEK M 7,3811 8,698 10,382 19% ASIA 17% Operating cash flow, SEK M2 6,803 8,238 9,952 21% OCEANIA 4% Return on capital employed, % 17.1 16.9 17.8 Data per share 2013 2014 2015 Change Earnings per share after tax and dilution (EPS), SEK/share 4.951,4 5.794 6.93 20% Equity per share after dilution, SEK/share 25.944 32.504 37.43 15% Dividend, SEK/share 1.904 2.174 2.653 22% Weighted average number of shares after dilution, thousands 1,110,7764 1,110,7764 1,110,776 1 Excluding items affecting comparability. 2 Excluding restructuring payments. 3 As proposed by the Board of Directors. 4 Key data has been restated due to the 3:1 share split in 2015. ASSA ABLOY’S DEVELOPMENT 1994–2015 SALES AND OPERATING INCOME (EBIT) 2013 Focus on innovation 2015 Expansion in Brazil through the acquisition Sales Operating income (EBIT) ASSA ABLOY is ranked 78th on of Papaiz and Udinese. The acquisition of the Sales, SEK M EBIT, SEK M Forbes’ list of the world’s 100 U.S. company Quantum Secure strengthens the 70,000 14,000 most innovative companies. offering in identity and access management. 60,000 12,000 50,000 10,000 40,000 8,000 30,000 6,000 20,000 4,000 10,000 2,000 2012 Increased offering 2014 20th anniversary Today the Group is 0 1 1 1 1 1 1 1 1 2 2,3 2,3 2 2 0 of total lock and security 15 times larger than in 1994. ASSA ABLOY has 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 solutions ASSA ABLOY successfully expanded through a combination launches Seos, the world’s of organic growth and over 200 acquisitions. 1 1996–2003 have not been adjusted for IFRS. first commercial ecosystem During this journey we have grown from a 2 Excluding items affecting comparability. for digital keys. traditional lock company into the global leader 3 Reclassification has been made.