Annual Report 2011 The global leader in door opening solutions WorldReginfo - d7219a64-2e60-4e43-a788-a14d524860e7 Contents Annual Report Report on operations The ASSA ABLOY Group 2011 Statement by the President and CEO 2 The global leader in door opening solutions Vision, financial targets and strategy 8 Market presence 10 Product leadership 20 Cost-efficiency 28 Growth and profitability 34 The divisions ASSA ABLOY divisions 38 EMEA division 40 Americas division 42 Asia Pacific division 44 Global Technologies division 46 Cover photograph: Camille Smith Entrance Systems division 50 CSR Employees 52 Camille Smith, who works in accounting Sustainable development 54 at ASSA ABLOY Americas, pictured in front Report of the Report of the Board of Directors 61 of Yale University – one of ASSA ABLOY’s Board of Directors Significant risks and risk management 63 customers. Corporate governance 66 Board of Directors 70 The Executive Team 72 Remuneration guidelines for senior management 75 Financial statements Sales and income 76 Consolidated income statement and Statement of comprehensive income 77 Comments by division 78 Results by division 79 Financial position 80 Consolidated balance sheet 81 Cash flow 82 Consolidated cash flow statement 83 Changes in consolidated equity 84 Parent company financial statements 86 Notes 88 Comments on five years in summary 114 Five years in summary 115 Quarterly information 116 Definitions of key data 117 Proposed distribution of earnings 118 Audit report 119 Shareholder information The ASSA ABLOY share 120 Information for shareholders 124 Glossary Online Annual Report ASSA ABLOY’s online Annual Report has many user-friendly functions. The texts can be read out loud and the financial tables can be expanded and downloaded in Excel. All information in the Annual Report can be found easily by menu navigation or by using the Search function. The online Annual Report is available at: www.assaabloy.com/annualreport2011. WorldReginfo - d7219a64-2e60-4e43-a788-a14d524860e7 Locks and locking systems Mobile keys Access control Door closers ASSA ABLOY is the global leader in door opening solutions, dedicated to satisfying end-user needs for security, safety and convenience. ASSA ABLOY is represented on both mature and emerging markets worldwide, with leading positions in much of Europe, North America, Asia, Australia and New Zealand. Share of Group sales by region 2011 EUROPE NORTH AMERICA 48 % 28 % ASIA 16 % AUSTRALIA NEW SOUTH AMERICA AFRICA ZEALAND 2 % 1 % 5 % Schools and offices Museums Homes Hospitals WorldReginfo - d7219a64-2e60-4e43-a788-a14d524860e7 Door closers Electromechanical locks Entrance automation Industrial doors Digital locks ASSA ABLOY is the global leader in door opening solutions, dedicated to satisfying end-user needs for security, safety and convenience. As the world’s leading lock group, ASSA ABLOY offers a more complete range of door opening solutions than any other company on the market. Since its formation in 1994, ASSA ABLOY has grown from a regional company into an international group with around 41,000 employees and sales of around Sales of42 SEK 42 billion SEK 42 billion. In the fast-growing electromechanical security segment, the Group has a leading position in areas such as access control, identification technology, entrance automation and hotel security. Hospitals Industry Arenas Airports Hotels WorldReginfo - d7219a64-2e60-4e43-a788-a14d524860e7 Creating opportunities for growth and profitability Today ASSA ABLOY is the leading global supplier of intelligent lock and security solutions. Its products account for more than one in ten of all lock and security installations worldwide. The strategy to further strengthen the Group’s position is divided into three areas: World-leading market presence A world-leading market presence is achieved by exploiting the strength of the brand portfolio, increasing growth in the core business and expanding into new markets and segments. ASSA ABLOY has many of the industry’s strongest brands. The sales teams on the local markets are united under the ASSA ABLOY master brand to better meet the rising demand for more complete security solutions. The Group’s product leadership The Group’s product leadership is achieved through the continuous development of products offering enhanced customer value and lower product costs. A key activity for achieving this is the use of common product platforms with fewer components. New products are also being developed in close collaboration with ASSA ABLOY’s end-users to enhance customer value. Efforts to increase cost-efficiency Efforts to increase cost-efficiency continue in all areas, including common product platforms with fewer components and common product development. Production combines flexible final assembly close to the customer with the transfer of high-volume standard production to external and internal production units in low-cost countries. Increased growth and profitability ASSA ABLOY creates opportunities for SALES AND OPERATING INCOME (EBIT) increase IN SALES increased growth and Sales, SEK M Sales Operating income (EBIT) EBIT, SEK M profitability through 50,000 7,500 a strong focus on the strategy’s three areas 40,000 6,000 +1,100 % of market presence, 30,000 4,500 product leadership and cost-efficiency. 20,000 3,000 increase IN OPERATING INCOME ¹ 1996–2003 have not been 10,000 1,500 adjusted for IFRS. ² Excluding items affecting 0 0 961 971 981 991 001 011 021 031 04 05 062 07 082,3 092,3 10 112 comparability. 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 +4,100 % ³ Reclassification has been made. WorldReginfo - d7219a64-2e60-4e43-a788-a14d524860e7 ASSA ABLOY ANNUAL REPORT 2011 VISION, FINANCIAL TARGETS AND STRATEGY 1 Statement by the President and CEO Winning strategy on a challenging market 2011 was a successful year for the Group despite very challenging market conditions. I am pleased to note that our strategic direction has led to continued profitable growth. Organic growth was a satisfac- tory 4 percent despite weak demand on mature markets throughout the year. Growth slowed gradually during the year on emerging markets except Asia. Long-term growth is generated by investments in the market organization and new products, and these continued even more intensively during the year. 2011 was also the year the Group made its largest ever structural transaction with the acquisition of Crawford, and the subsequent sales of the divisions that were not a good fit with the business in the long term. A total of 18 companies were acquired during the year, increasing sales by 17 percent. Efforts to increase efficiency continued during the year, and a new restructuring program covering all divisions was launched in late 2011. Strong organic growth, major acquisitions and successful efficiency programs resulted in record sales and earnings and a continued robust financial position. Strategic action plans programs can be offered to more customers on more mar- We operate in an industry that is under consolidation and kets. This also results in an increased segment focus and increased presence on existing and new markets is therefore lower costs. crucial for the Group’s growth and position as market leader. ASSA ABLOY not only works with direct customers, par- Organic growth is the single most important driver for ticularly distributors, wholesalers and locksmiths, but also growth and requires strong innovative product leadership. with installers, architects and end-customers at all stages In addition, continuous efforts to increase cost-efficiency to generate increased demand for the Group’s products. are required to secure strong value creation. We create the Specification sales are an important activity in this context, opportunities for future growth with continued high prof- and the number of specification sales representatives in the itability by combining enhanced market presence, strong Group is constantly increasing. Streamlining of the support innovative product leadership and cost-efficiency. organization also means that resources can be transferred from pure administration to customer-related tasks. Market presence Emerging markets accounted for 25 percent of Group Brand consolidation continued during the year and today a sales during the year, a threefold increase in just seven years. full 80 percent of the Group’s products are sold under the A continuing increased presence on emerging markets is ASSA ABLOY brand or the ASSA ABLOY brand combined crucial for sales growth, as these markets will experience with the local brand. The remaining 20 percent of products much higher growth than mature markets in the foresee- are sold under the global brands Yale, HID, ABLOY and Mul- able future. T-Lock, which complement ASSA ABLOY’s market presence 2011 was an intensive year for acquisitions and a total and product range. Brand consolidation and rationalization of 18 acquisitions were completed, with annual sales of SEK of the product segment mean that wide and total product 6,800 M, equivalent to 18 percent acquired growth. These Important events during the year • Sales increased with 13 percent to SEK 41,786 M (36,823) • Operating income amounted to SEK 6,624 M1 (6,046) • Earnings per share after full dilution amounted to SEK 12.301 (10.89) • Operating cash flow amounted to SEK 6,080 M (6,285)2 • Investments in product development continued at an accelerated level and a number of new products were launched • Largest ever structural transaction through the acquisition of Crawford ¹ Excluding items affecting comparability. 2 Excluding restructuring payments. WorldReginfo - d7219a64-2e60-4e43-a788-a14d524860e7 2 STATEMENT BY THE PRESIDENT AND CEO ASSA ABLOY ANNUAL REPORT 2011 acquisitions complemented the product range, provided uct platforms have led to a sharp increase in new products. new technology and increased the Group’s geographical Sales of products launched in the past three years exceeded market presence. The acquisition of the Swedish company 20 percent for the second consecutive year. The target is to Crawford, the Group’s largest ever structural transaction, reach 25 percent.