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ASSA ABLOY

Annual Report Feb 6, 2018

2882_10-k_2018-02-06_ad70c430-dd9f-4999-ae40-aa21fb6c6ec3.pdf

Annual Report

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Quarterly Report Q4 2017

Full-year summary 2017

6 February 2018 The global leader in

door opening solutions

A strong finish to 2017

Fourth quarter

  • Net sales increased by 3% to SEK 20,109 M (19,484), with organic growth of 5% (1) and acquired net growth of 3% (2)
  • Strong growth has been exhibited by Global Technologies and EMEA and good growth by Americas, Entrance Systems and Asia Pacific
  • Contracts have been signed for the acquisition of two companies with combined expected annual sales of about SEK 400 M
  • Operating income1) (EBIT) was SEK 3,359 M (2,913), corresponding to an operating margin of 16.7% (15.0)
  • Net income1) amounted to SEK 2,385 M (2,088)
  • Earnings per share1) amounted to SEK 2.15 (1.88)
  • Operating cash flow remained strong and amounted to SEK 4,876 M (4,620)
  • Nico Delvaux has been appointed as the new President and CEO of ASSA ABLOY with effect from 15 March 2018
  • The Board of Directors proposes a dividend of SEK 3.30 (3.00) per share for 2017.

Organic growth

Operating income1)

Earnings per share1)

Sales and income

Fourth quarter January-December
2016 2017 Δ 2016 2017 Δ
Sales, SEK M 19,484 20,109 3% 71,293 76,137 7%
Of which:
Organic growth 120 878 5% 1,428 2,834 4%
Acquisitions and divestments 455 480 3% 1,967 1,753 2%
Exchange-rate effects 609 -733 -5% -201 257 1%
Operating income1) (EBIT), SEK M 2,913 3,359 15% 11,254 12,341 10%
Operating margin1) (EBITA), % 15.2% 17.1% 16.1% 16.5%
Operating margin1) (EBIT), % 15.0% 16.7% 15.8% 16.2%
Income before tax1), SEK M 2,767 3,226 17% 10,549 11,673 11%
Net income1), SEK M 2,088 2,385 14% 7,874 8,635 10%
Operating cash flow, SEK M 4,620 4,876 6% 10,467 10,929 4%
Earnings per share1), SEK 1.88 2.15 14% 7.09 7.77 10%

1) Excluding costs for a new restructuring program for the fourth quarter and full year 2016, totaling SEK -1,597 M before tax, corresponding to SEK –1,221 M after tax.

Comments by the President and CEO

"ASSA ABLOY ended 2017 with strong growth in the fourth quarter," says Johan Molin, President and CEO. "Organically we grew by 5%, with positive trends for all divisions. Global Technologies and EMEA had strong growth of 9% and 5% respectively, and Americas, Entrance Systems and Asia Pacific all had good growth of 3-4%. Demand was positive for nearly all regions and business units, with strong demand for our electromechanical products and smart door locks. In EMEA we saw sales increase in all regions. All business units in Americas also showed growth – even Brazil. In Asia Pacific we had growth in Pacific, South Korea and Southern Asia, while sales in China were stable. Our digital and mobile solutions continue to be very successful on the market. We saw strong growth in Global Technologies for access control products and mobile keys for both hotels and companies. In Entrance Systems we had strong growth for door automation, industrial doors and high-speed doors, among others.

During the quarter our leadership in smart door locks was confirmed by our collaboration with Amazon, where they chose our Yale locks for their new investment in home deliveries. Collaboration in smart door locks was also initiated with Walmart and Google during the quarter, to start in 2018. I am confident that the majority of all private residences will be converted to smart door locks during the next decade. A gigantic market is opening up! Our acquisition during the third quarter of August Home, a leading supplier of smart door solutions for the residential market in the USA, was therefore of strategic importance.

Our acquisition activity remained high during the fourth quarter with two acquisitions. We have signed a strategic contract to acquire Phoniro, a Swedish specialist in smart locks, personal alarms and access-control systems adapted to the care of the elderly – a growth segment that is rapidly being digitalized. We have also acquired Dale & Excel, which complements very well our market offer in the UK.

Operating income for the quarter increased by 5%* and amounted to SEK 3,359 M with an operating margin of 16.7% (16.5*). The margin improved in EMEA, Global Technologies and Entrance Systems but was lower for Americas and for Asia Pacific.

My judgment is that the global economic trend has improved to some degree compared with last year. On most markets, especially in Europe, there is a positive trend, but on some markets, such as China and Brazil, demand remains weak. However, our strategy of expanding our market presence, even on the emerging markets, remains unchanged. We are also continuing our investments in new products, especially in the growth area of electromechanics.

In December Nico Delvaux was named as the new President and CEO of ASSA ABLOY AB. He began his employment with us on 3 February and during the next six weeks I will ensure a good handover to him before he takes over as CEO on 15 March. Nico is a strong and experienced leader of global businesses and I am confident that ASSA ABLOY's journey of profitable growth will continue under Nico's leadership.

With these comments I want to express my own thanks to all ASSA ABLOY's employees and to wish them and my successor Nico Delvaux a continuing successful journey".

* Excluding restructuring costs and the write-down in China in Q4 2016.

Operating cash flow, 12 months

Fourth quarter

The Group's sales increased by 3% to SEK 20,109 M (19,484). Organic growth amounted to 5% (1). Acquisitions and divestments were 3% (2), of which 5% (3) were acquisitions and -2% (-1) were divestments. Exchange-rate effects affected sales by -5% (3).

The Group's operating income, EBIT, excluding restructuring costs, amounted to SEK 3,359 M (2,913) a rise of 15%. The operating margin, excluding restructuring costs, was 16.7% (15.0).

Operating income before amortizations from acquisitions, EBITA, excluding restructuring costs, amounted to SEK 3,446 M (2,965). The corresponding EBITA margin was 17.1% (15.2).

Net financial items amounted to SEK -133 M (-146). The Group's income before tax, excluding restructuring costs, was SEK 3,226 M (2,767), an increase of 17% compared with last year. Exchange-rate effects had an impact of SEK -130 M (148) on income before tax. The profit margin, excluding restructuring costs, was 16.0% (14.2).

The effective tax rate on an annual basis was 26.0% (26.0) and was affected positively by 0.8 of a percentage point by the new tax reforms in the USA. Earnings per share, excluding restructuring costs, amounted to SEK 2.15 (1.88), an increase of 14% compared with last year.

Full year

The Group's sales for the full year 2017 increased by 7% to SEK 76,137 M (71,293). Organic growth was 4% (2). Acquisitions and divestments contributed 2% (3), of which 3% (4) came from acquisitions and -1% (-1) from divestments. Exchange-rate effects affected sales by 1% (0).

The Group's operating income, EBIT, excluding restructuring costs, amounted to SEK 12,341 M (11,254), which was an increase of 10% compared with last year. The corresponding EBIT operating margin was 16.2% (15.8).

Operating income before amortizations from acquisitions, EBITA, excluding restructuring costs, amounted to SEK 12,584 M (11,450). The corresponding EBITA margin, excluding restructuring costs, was 16.5% (16.1).

Earnings per share, excluding restructuring costs, amounted to SEK 7.77 (7.09), an increase of 10% compared with last year. Operating cash flow totaled SEK 10,929 M (10,467), an increase of 4%.

Restructuring measures

Payments related to all restructuring programs amounted to SEK 286 M (235) in the quarter. The restructuring programs proceeded according to plan and led to a reduction in personnel of 723 people during the quarter and 13,564 people since the projects began in 2006.

At the end of the year provisions of SEK 944 M remained in the balance sheet for carrying out the programs.

Organization

Nico Delvaux has been named as the new President and CEO of ASSA ABLOY with effect from 15 March 2018. Nico Delvaux was until recently President and CEO of Metso Corporation in Finland and has previously held management positions in Atlas Copco for more than two decades. Nico Delvaux has a M.Sc. in Engineering and an MBA from Handelshogeschool Antwerp in Belgium.

Thanasis Molokotos, Executive Vice President and Head of Americas Division, has decided to leave ASSA ABLOY during 2018 after nearly 14 years' service as a Divisional Head. Recruitment of a successor has begun.

Chris Bone has been appointed Executive Vice President and Technical Director with effect from 1 March 2018. He succeeds Ulf Södergren, who retires this year. Chris Bone has worked at ASSA ABLOY since 2010 and has acted as Head of the Digital and Access Solutions business unit in EMEA Division. Chris Bone is an engineer and holds a degree from the University of New South Wales in Australia.

Tax matters

In the USA a comprehensive new tax reform has recently come into force, whose provisions include a lower rate of income tax for companies. The initial positive one-off effect of the tax reform on the effective tax rate for ASSA ABLOY in 2017 was 0.8 percentage points, equivalent to SEK 91 M. Based on currently known information, the new tax rules in the USA, considered in isolation and all other things being equal, will reduce the Group's effective tax rate by one percentage point. Underlying effective tax rate 2017 was 26.8 percent and the estimated effective tax rate for 2018 is therefore around 26 percent.

The Finnish Tax Administration decided in 2015 not to allow tax relief for interest costs in ASSA ABLOY's Finnish business for the years 2008-2012. The decision was appealed to a superior court and a new judgment, in ASSA ABLOY's favor, was delivered during the third quarter. During the fourth quarter repayment was made to ASSA ABLOY of advance tax payments made earlier, which affected cash flow positively by just over SEK 800 M. The latest judgment in ASSA ABLOY's favor has been appealed to a superior court by the Finnish Tax Administration during the fourth quarter.

Comments by division

EMEA

Sales for the quarter in EMEA division totaled SEK 4,869 M (4,557), with organic growth of 5% (3). Growth was strong in Finland, Britain, France, Southern Europe, Eastern Europe and Africa / Middle East, and was good in Germany. Scandinavia and Benelux also showed growth. Electromechanical products showed strong growth, and demand was especially strong for smart door locks for the private residential market. Acquired growth was 2%. Operating income excluding restructuring costs totaled SEK 842 M (766), which represents an operating margin (EBIT) of 17.3% (16.8). Return on capital employed amounted to 22.9% (21.2). Operating cash flow before interest paid totaled SEK 1,489 M (1,407).

Americas

Sales for the quarter in Americas division totaled SEK 4,243 M (4,362), with organic growth of 4% (1). Growth was strong for Electromechanical and Highsecurity products, for the Private residential market in the USA, and for Canada, Mexico and South America apart from Brazil. Traditional lock products, Security fencing and Security doors, and also Brazil, showed growth. Acquired growth was 1%. Operating income excluding restructuring costs totaled SEK 847 M (908), which represents an operating margin (EBIT) of 19.9% (20.8). Return on capital employed amounted to 21.6% (23.3). Operating cash flow before interest paid totaled SEK 1,085 M (1,031).

Asia Pacific

Sales for the quarter in Asia Pacific division totaled SEK 2,400 M (2,427), with organic growth of 3% (-8). Strong growth was achieved in South Korea, Southern Asia and Pacific. Sales in China were stable, with a positive trend for lock products while sales of fire and security doors continued to decrease. Smart door-locks grew strongly in the region. Acquired growth was 0%. Operating income excluding restructuring costs totaled SEK 232 M (-47), which represents an operating margin (EBIT) of 9.7% (-2.0). Return on capital employed amounted to 7.5% (-1.8). Operating cash flow before interest paid totaled SEK 742 M (769).

Global Technologies

Sales for the quarter in Global Technologies division totaled SEK 2,835 M (2,687), with organic growth of 9% (1). Access control, Secure issuance, Citizen ID and Identification technology had strong growth within HID Global, while Logical access had a slightly negative sales trend. Hospitality showed continued strong growth. Sales of cellphone-based solutions continued to grow strongly. Acquired/divested growth was 2%. Operating income excluding restructuring costs amounted to SEK 608 M (500), which represents an operating margin (EBIT) of 21.5% (18.6). Return on capital employed amounted to 17.5% (18.0). Operating cash flow before interest paid totaled SEK 791 M (778).

Entrance Systems

Sales for the quarter in Entrance Systems division totaled SEK 6,072 M (5,772), with organic growth of 3% (4). Door automation, Door components and Industrial and High-speed doors showed strong growth. Garage doors showed good growth, while solutions for warehouses and logistics in the USA showed negative sales trends. Acquired growth was 5%. Operating income excluding restructuring costs totaled SEK 966 M (888), which represents an operating margin (EBIT) of 15.9% (15.4). Return on capital employed amounted to 20.2% (18.9). Operating cash flow before interest paid totaled SEK 1,174 M (1,062).

Acquisitions and divestments

A total of two acquisitions were consolidated during the quarter. The combined acquisition price for the 16 companies acquired during the year amounted to SEK 6,862 M, and preliminary acquisition analyses indicate that goodwill and other intangible assets with indefinite useful life amount to SEK 5,111 M. The acquisition price is adjusted for acquired net debt and estimated deferred considerations. Estimated deferred considerations amounted to SEK 365 M.

On 2 February it was announced that ASSA ABLOY has signed a contract to acquire Phoniro, the largest player within integrated digital key management solutions and alarm for homecare and nursing homes in the Nordic region. Phoniro has about 80 employees and its sales in 2018 are expected to amount to about SEK 175 M.

On 5 February it was announced that ASSA ABLOY has signed a contract to acquire Dale & Excel, the leading suppliers of architectural hardware to builder's merchants in the UK. Dale & Excel have about 70 employees and their sales in 2018 are expected to amount to SEK 210 M.

Sustainable development

The demand for sustainable products is growing. For ASSA ABLOY this provides a commercial opportunity since customers are choosing energy-effective solutions and products with Environmental Product Declarations to an everincreasing degree. The Group is continuing to launch environmentally friendly products at a high rate.

Traditionally, many visible parts of locks are manufactured of brass, which requires surface treatment to protect the surface. The surfacetreatment processes often involve environmentally hazardous substances, and the processes are energy-intensive and also prolong the lead-time. To create more environmentally friendly products, ASSA ABLOY Hospitality has progressively replaced brass with stainless steel for many important lock components. During 2016 and 2017, 50 percent of the handles for hotel locks have been replaced by stainless steel, and the remainder of the volume will be converted during 2018. The changeover to stainless steel has reduced consumption of materials by 5 percent, energy consumption by 28 percent and calculated carbon-dioxide emissions by 9 percent. The change gives products improved quality and longer durability, eliminates one production process and reduces consumption of resources and lead times.

The Sustainability Report for 2017, with reviews of the Group's targets and other information about sustainable development, will be available from 21 March 2018 on the company's website, www.assaabloy.com.

Parent company

Other operating income for the Parent company ASSA ABLOY AB totaled SEK 4,063 M (4,023) for the full year. Operating income for the same period amounted to SEK 1,701 M (1,687). Investments in tangible and intangible assets totaled SEK 3,291 M (224). Liquidity is good and the equity ratio was 43.0% (45.8).

Dividend and Annual General meeting

The Board of Directors proposes a dividend of SEK 3.30 (3.00) per share for the 2017 financial year, an increase of 10%. The Annual General Meeting will be held on 26 April 2018. The Annual Report for 2017 will be available from 21 March 2018 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 68-73 of the 2016 Annual Report. This Report was prepared in accordance with IAS 34 'Interim Financial Reporting' and the Annual Accounts Act. The Interim Report for the Parent company was prepared in accordance with the Annual Accounts Act and RFR 2 'Reporting by a Legal Entity'.

IFRS 9 and IFRS 15 came into force on 1 January 2018 and are being adopted by the Group from that date. The project that began in 2016 in response to the introduction of IFRS 15 has progressed according to plan during 2017 with evaluation and analysis of its effects on the Group's financial reports. The Group's judgment of the financial effects has been regularly reported in ASSA ABLOY's quarterly reports during the course of the project. The project was brought to an end in the fourth quarter of 2017 with the conclusion that the present reporting of revenues is in accordance with IFRS 15 in all important respects. The new Standard will thus have no impact on the Group's income or financial position.

IFRS 9 deals with the classification, valuation and reporting of financial assets and liabilities, and replaces those parts of IAS 39 that deal with the classification and valuation of financial instruments. The Group has analyzed the standard and concludes that it will have no significant impact on the Group's income or financial position. No impact on equity due to changes in accounting principles related to IFRS 9 will be reported in 2018. The part of the Standard that has the greatest impact on the Group is the new writing-down model that is being introduced and that is based on expected credit losses instead of actual losses. For the Group, the new model requires a partly new process for the assessment of credit losses.

IFRS 16 will apply to the accounting year that begins on 1 January 2019. Earlier application is permitted but the Group has chosen not to take up this option.

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 17 of this Quarterly 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 2016 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

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 particular risks and risk management, see the 2016 Annual Report.

Review

The Company's Auditors have not carried out any review of this Report for the fourth quarter of 2017.

Stockholm, 6 February 2018

Johan Molin President and CEO

Financial information

The Interim Report for the first quarter of 2018 will be published on 26 April 2018.

The Annual General meeting will be held on 26 April 2018 at the Museum of Modern Art in Stockholm, Sweden.

Further information can be obtained from:

Johan Molin, President and CEO, Tel: +46 8 506 485 42

Carolina Dybeck Happe, Chief Financial Officer, Tel: +46 8 506 485 72

ASSA ABLOY is holding an analysts' meeting at 10.00 today at Operaterrassen in Stockholm, Sweden.

The analysts' meeting can also be followed on the Internet at www.assaabloy.com. It is possible to submit questions by telephone on: +46 8 5055 6476, +44 203 364 5371 or +1 877 679 2993

This information is information that ASSA ABLOY AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 08.00 CEST on 6 February 2018.

ASSA ABLOY AB (publ) Box 703 40 107 23 Stockholm Visiting address Klarabergsviadukten 90, Stockholm, Sweden Tel +46 (0)8 506 485 00 Fax +46 (0)8 506 485 85 www.assaabloy.com Corporate identity number: 556059-3575 No.04/2018

Financial information – Group

CONSOLIDATED INCOME STATEMENT Q4 Q1-Q4
SEK M 2016 2017 2016 2017
Sales 19,484 20,109 71,293 76,137
Cost of goods sold -12,975 -12,185 -44,319 -46,148
Gross income 6,509 7,924 26,974 29,988
Selling, administrative and R&D costs -5,223 -4,608 -17,444 -17,777
Share of earnings in associates 30 43 127 129
Operating income 1,316 3,359 9,657 12,341
Finance net -146 -133 -705 -668
Income before tax 1,170 3,226 8,952 11,673
Tax on income -304 -842 -2,328 -3,038
Profit from discontinued operations 1 - 28 -
Net income for the period 867 2,385 6,653 8,635
Net income for the period attributable to:
Parent company's shareholders 866 2,384 6,651 8,633
Non-controlling interest 1 1 1 2
Earnings per share
before and after dilution, SEK 0.78 2.15 5.99 7.77
before and after dilution and excluding items affecting comparability, SEK 1.88 2.15 7.09 7.77
STATEMENT OF COMPREHENSIVE INCOME Q4 Q1-Q4
SEK M 2016 2017 2016 2017
Net income for the period 867 2,385 6,653 8,635
Other comprehensive income:
Items that will not be reclassified to profit or loss
Actuarial gain/loss on post-employment benefit obligations, net after tax 243 -41 -102 -51
Total 243 -41 -102 -51
Items that may be reclassified subsequently to profit or loss
Share of other comprehensive income of associates -11 58 126 50
Cashflow hedges, net investment hedges and tax 10 57 -5 26
Exchange rate differences 1,121 889 1,955 -1,864
Total 1,119 1,003 2,077 -1,788
Total comprehensive income for the period 2,230 3,347 8,627 6,796
Total comprehensive income for the period attributable to: 2,229 3,346 8,627 6,794
Parent company's shareholders
Non-controlling interest
1 1 1 2

31 Dec

Financial information – Group

CONSOLIDATED BALANCE SHEET
---------------------------- -- --
SEK M 2016 2017
ASSETS
Non-current assets
Intangible assets 57,096 61,409
Property, plant and equipment 8,066 8,065
Investments in associates 2,109 2,243
Other financial assets 86 227
Deferred tax assets 1,899 1,355
Total non-current assets 69,257 73,299
Current assets
Inventories 9,565 9,430
Trade receivables 12,648 13,068
Other current receivables and investments 3,062 3,188
Cash and cash equivalents 750 459
Total current assets 26,025 26,145
TOTAL ASSETS 95,282 99,444
EQUITY AND LIABILITIES
Equity
Equity attributable to Parent company's shareholders 47,220 50,648
Non-controlling interest 5 9
Total equity 47,224 50,657
Non-current liabilities
Long-term loans 16,901 16,859
Deferred tax liabilities 2,344 2,218
Other non-current liabilities and provisions 6,701 5,217
Total non-current liabilities 25,945 24,293
Current liabilities
Short-term loans 3,929 6,151
Trade payables 7,443 7,811
Other current liabilities and provisions 10,741 10,531
Total current liabilities 22,112 24,494
TOTAL EQUITY AND LIABILITIES 95,282 99,444

CHANGES IN CONSOLIDATED EQUITY Equity attributable to:

Parent Non
company's controlling Total
SEK M shareholders interest equity
Opening balance 1 January 2016 41,575 4 41,579
Net income for the period 6,651 1 6,653
Other comprehensive income 1,975 0 1,975
Total comprehensive income 8,627 1 8,627
Dividend -2,944 - -2,944
Stock purchase plans -39 - -39
Total transactions with parent company's shareholders -2,982 - -2,982
Closing balance 31 December 2016 47,220 5 47,224
Opening balance 1 January 2017 47,220 5 47,224
Net income for the period 8,633 2 8,635
Other comprehensive income -1,839 0 -1,839
Total comprehensive income 6,794 2 6,796
Dividend -3,332 - -3,332
Stock purchase plans -33 - -33
Change in non-controlling interest 0 3 3
Total transactions with parent company's shareholders -3,366 3 -3,363
Closing balance 31 December 2017 50,648 9 50,657

Financial information – Group

CONSOLIDATED CASH FLOW STATEMENT Q4 Q1-Q4
SEK M 2016 2017 2016 2017
OPERATING ACTIVITIES
Operating income 1,316 3,359 9,657 12,341
Depreciation and amortization 403 430 1,580 1,688
Reversal of restructuring costs 1,597 - 1,597 -
Restructuring payments -235 -286 -442 -612
Other non-cash items -45 -224 -354 -221
Cash flow before interest and tax 3,036 3,279 12,037 13,196
Interest paid and received -179 -189 -597 -557
Tax paid on income -629 203 -2,928 -3,044
Cash flow before changes in working capital 2,228 3,293 8,512 9,595
Changes in working capital 1,939 2,061 62 -347
Cash flow from operating activities 4,167 5,354 8,575 9,248
INVESTING ACTIVITIES
Net investments in intangible assets and property, plant and equipment -411 -561 -1,478 -1,975
Investments in subsidiaries -901 -4,351 -2,640 -6,825
Investments in associates - 0 -1 0
Disposals of subsidiaries 2 40 55 139
Other investments and disposals 0 0 0 0
Cash flow from investing activities -1,310 -4,872 -4,063 -8,661
FINANCING ACTIVITIES
Dividends - - -2,944 -3,332
Acquisition of non-controlling interest -3 34 -40 -130
Net cash effect of changes in borrowings -2,706 -437 -1,287 2,601
Cash flow from financing activities -2,709 -471 -4,271 -861
CASH FLOW FOR THE PERIOD 149 11 240 -274
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of period 604 440 501 750
Cash flow for the period 149 11 240 -274
Effect of exchange rate differences -3
750
8
459
9
750
-17
459
Cash and cash equivalents at end of period
KEY RATIOS Year Q1-Q4
2016
14.1
2016
14.1
2017
16.6
Return on capital employed, %
Return on capital employed excluding items affecting comparability, % 16.5 16.5 16.6
Return on shareholders' equity, % 15.0
49.6
15.0
49.6
17.6
50.9
Equity ratio, % 14.1 14.1 19.1
Interest coverage ratio, times

Total number of shares, thousands 1,112,576 1,112,576 1,112,576 Number of shares outstanding, thousands 1,110,776 1,110,776 1,110,776 Weighted average number of outstanding shares before and after dilution, thousands 1,110,776 1,110,776 1,110,776 Average number of employees 46,928 46,928 47,426

Financial information – Parent company

INCOME STATEMENT Q1-Q4
SEK M 2016 2017
Operating income 1,687 1,701
Income before appropriations and tax 2,952 4,238
Net income for the period 3,619 4,670
BALANCE SHEET 31 Dec
SEK M 2016 2017
Non-current assets 35,670 39,579
Current assets 10,548 12,740
Total assets 46,218 52,319
Equity 21,190 22,494
Untaxed reserves - 565
Non-current liabilities 8,894 10,581
Current liabilities 16,134 18,679
Total equity and liabilities 46,218 52,319

Quarterly information – Group

THE GROUP IN SUMMARY Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
SEK M 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017
Sales 15,891 17,894 18,025 19,484 71,293 18,142 19,387 18,499 20,109 76,137
Organic growth 3% 4% 2% 1% 2% 6% 2% 3% 5% 4%
Gross income excluding items
affecting comparability
6,295 7,031 7,139 7,660 28,125 7,190 7,581 7,293 7,924 29,988
Gross margin excluding items affecting comparability 39.6% 39.3% 39.6% 39.3% 39.5% 39.6% 39.1% 39.4% 39.4% 39.4%
Operating income before depr. & amort. (EBITDA)
excluding items affecting comparability
Operating margin (EBITDA)
2,787
17.5%
3,305
18.5%
3,425
19.0%
3,316
17.0%
12,833
18.0%
3,208
17.7%
3,543
18.3%
3,488
18.9%
3,789
18.8%
14,029
18.4%
Depr. & amort. excl amort. attributable to business combinations -329 -349 -353 -352 -1,384 -370 -376 -355 -344 -1,444
Operating income before amortization (EBITA)
excluding items affecting comparability 2,457 2,956 3,072 2,965 11,450 2,839 3,168 3,132 3,446 12,584
Operating margin (EBITA)
Amortization attributable to business combinations
15.5%
-46
16.5%
-46
17.0%
-52
15.2%
-51
16.1%
-196
15.6%
-52
16.3%
-54
16.9%
-52
17.1%
-87
16.5%
-244
Operating income (EBIT) excluding
items affecting comparability 2,411 2,910 3,020 2,913 11,254 2,787 3,114 3,080 3,359 12,341
Operating margin (EBIT) 15.2% 16.3% 16.8% 15.0% 15.8% 15.4% 16.1% 16.7% 16.7% 16.2%
Items affecting comparability1)
Operating income (EBIT)
-
2,411
-
2,910
-
3,020
-1,597
1,316
-1,597
9,657
-
2,787
-
3,114
-
3,080
-
3,359
-
12,341
Operating margin (EBIT) 15.2% 16.3% 16.8% 6.8% 13.5% 15.4% 16.1% 16.7% 16.7% 16.2%
Net financial items -201 -181 -175 -146 -705 -195 -170 -171 -133 -668
Income before tax (EBT)
Profit margin (EBT)
2,209
13.9%
2,729
15.2%
2,844
15.8%
1,170
6.0%
8,952
12.6%
2,593
14.3%
2,944
15.2%
2,910
15.7%
3,226
16.0%
11,673
15.3%
Tax on income -574 -709 -739 -304 -2,328 -674 -765 -757 -842 -3,038
Profit from discontinued operations 3 7 17 1 28 - - - - -
Net income for the period 1,638 2,026 2,122 867 6,653 1,918 2,179 2,153 2,385 8,635
Net income attributable to:
Parent company's shareholders 1,638 2,026 2,122 866 6,651 1,919 2,178 2,153 2,384 8,633
Non-controlling interest 0 0 0 1 1 0 1 1 1 2
OPERATING CASH FLOW
SEK M
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Year
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Year
2017
Operating income (EBIT) 2,411 2,910 3,020 1,316 9,657 2,787 3,114 3,080 3,359 12,341
Restructuring costs - - - 1,597 1,597 - - - - -
Depreciation and amortization 376 395 406 403 1,580 421 429 407 430 1,688
Net capital expenditure
Change in working capital
-342
-1,836
-394
-139
-331
98
-411
1,939
-1,478
62
-373
-1,882
-593
-207
-448
-319
-561
2,061
-1,975
-347
Interest paid and received -94 -228 -96 -179 -597 -93 -198 -77 -189 -557
Non-cash items -17 -26 -266 -45 -354 -36 28 11 -224 -221
Operating Cash flow2) 498 2,519 2,830 4,620 10,467 824 2,575 2,654 4,876 10,929
Operating Cash flow/Income before tax excluding
items affecting comparability1)
0.23 0.92 0.99 1.67 0.99 0.32 0.87 0.91 1.51 0.94
CHANGE IN NET DEBT Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
SEK M 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017
Net debt at beginning of period
Operating cash flow
22,269
-498
24,681
-2,519
27,122
-2,830
25,571
-4,620
22,269
-10,467
23,127
-824
23,339
-2,575
24,970
-2,654
25,180
-4,876
23,127
-10,929
Restructuring payments 95 50 61 235 442 84 136 106 286 612
Tax paid 1,298 478 523 629 2,928 629 961 -203 3,044
1,656
Acquistions and disposals 1,345 556 145 991 3,037 461 268 1,741 4,319 6,790
Dividend - 2,944 - - 2,944 - 3,332 - - 3,332
Actuarial gain/loss on post-employment benefit obligation
Net debt of disposal group classified as held for sale
221
0
186
0
105
0
-374
-
138
-
-34
-
99
-
-50
-
-40
-
-26
-
Exchange rate differences and other -49 746 444 695 1,836 -104 -590 -590 608 -675
Net debt at end of period 24,681 27,122 25,571 23,127 23,127 23,339 24,970 25,180 25,275 25,275
Net debt/Equity ratio 0.58 0.64 0.57 0.49 0.49 0.48 0.54 0.53 0.50 0.50
NET DEBT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
SEK M 2016 2016 2016 2016 2017 2017 2017 2017
Non-current interest-bearing receivables -34 -36 -41 -41 -41 -39 -212 -171
Current interest-bearing investments including derivatives -270 -222 -168 -169 -113 -211 -161 -150
Cash and cash equivalents
Pension provisions
-578
3,002
-564
3,258
-604
3,406
-750
3,121
-697
3,058
-844
3,109
-440
2,929
-459
2,933
Other non-current interest-bearing liabilities 15,668 15,805 16,205 16,901 16,232 17,450 16,728 16,859
Current interest-bearing liabilities including derivatives 6,893 8,881 6,773 4,065 4,901 5,505 6,336 6,263
Total 24,681 27,122 25,571 23,127 23,339 24,970 25,180 25,275
CAPITAL EMPLOYED AND FINANCING Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
SEK M 2016 2016 2016 2016 2017 2017 2017 2017
Capital employed 67,124 69,449 70,555 70,351 72,333 71,349 72,477 75,932
- of which goodwill 43,098 44,387 45,077 47,544 47,438 46,252 46,573 50,330
- of which other intangible assets and
property, plant and equipment
16,613 17,036 17,264 17,618 17,595 17,309 17,032 19,144
- of which investments in associates 1,970 2,037 2,095 2,109 2,176 2,193 2,147 2,243
Assets and liabilities of disposal group classified
as held for sale
Net debt
111
24,681
126
27,122
-
25,571
-
23,127
-
23,339
-
24,970
-
25,180
-
25,275
Non-controlling interest 4 3 4 5 4 5 5 9
Shareholders' equity 42,551 42,449 44,981 47,220 48,989 46,374 47,292 50,648
DATA PER SHARE
SEK
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Year
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Year
2017
Earnings per share before and after dilution 1.47 1.82 1.91 0.78 5.99 1.73 1.96 1.94 2.15 7.77
Earnings per share before and after dilution and
excluding items affecting comparability 1)
1.47 1.82 1.91 1.88 7.09 1.73 1.96 1.94 2.15 7.77

Reporting by division

Q4 and 31 Dec Global Entrance
EMEA Americas Asia Pacific Technologies Systems Other Total
SEK M 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017
Sales, external 4,479 4,767 4,347 4,228 2,240 2,251 2,671 2,817 5,747 6,046 0 0 19,484 20,109
Sales, internal 77 102 15 16 187 150 16 18 25 26 -321 -310 - -
Sales 4,557 4,869 4,362 4,243 2,427 2,400 2,687 2,835 5,772 6,072 -321 -310 19,484 20,109
Organic growth 3% 5% 1% 4% -8% 3% 1% 9% 4% 3% - - 1% 5%
Share of earnings in associates - - - - 9 9 - - 21 34 - - 30 43
Operating income (EBIT) excl.
items affecting comparability 766 842 908 847 -47 232 500 608 888 966 -102 -136 2,913 3,359
Operating margin (EBIT) excl.
items affecting comparability 16.8% 17.3% 20.8% 19.9% -2.0% 9.7% 18.6% 21.5% 15.4% 15.9% - - 15.0% 16.7%
Items affecting comparability1) -781 - -34 - -258 - -148 - -207 - -168 - -1,597 -
Operating income (EBIT) -15 842 874 847 -306 232 352 608 681 966 -269 -136 1,316 3,359
Operating margin (EBIT) -0.3% 17.3% 20.0% 19.9% -12.6% 9.7% 13.1% 21.5% 11.8% 15.9% - - 6.8% 16.7%
Capital employed 13,275 13,865 15,749 16,095 11,803 12,048 11,331 15,615 18,291 18,379 -98 -71 70,351 75,932
- of which goodwill 8,348 8,571 11,012 11,190 7,920 7,752 8,784 11,121 11,480 11,696 - - 47,544 50,330
- of which other intangible assets and
property, plant and equipment 3,296 3,567 3,516 3,310 3,900 3,789 2,499 4,064 4,282 4,273 125 140 17,618 19,144
- of which investments in associates 9 9 - - 496 519 - 17 1,605 1,699 - - 2,109 2,243
Return on capital employed
excluding items affecting comparability 21.2% 22.9% 23.3% 21.6% -1.8% 7.5% 18.0% 17.5% 18.9% 20.2% - - 16.4% 18.0%
Operating income (EBIT) -15 842 874 847 -306 232 352 608 681 966 -269 -136 1,316 3,359
Restructuring costs 781 - 34 - 258 - 148 - 207 - 168 - 1,597 -
Depreciation and amortization 104 101 77 83 75 80 75 109 69 54 3 4 403 430
Net capital expenditure -169 -175 -89 -123 -37 -61 -65 -92 -25 -106 -25 -4 -411 -561
Change in working capital 707 721 136 279 778 491 267 165 130 260 -79 144 1,939 2,061
Cash flow2) 1,407 1,489 1,031 1,085 769 742 778 791 1,062 1,174 -202 9 4,844 5,289
Non-cash items -45 -224 -45 -224
Interest paid and received -179 -189 -179 -189
Operating cash flow2) 4,620 4,876

Q1-Q4 and 31 Dec

2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017
16,535 17,729 16,963 17,873 8,491 8,553 9,619 10,301 19,685 21,681 0 0 71,293 76,137
302 351 81 67 698 658 78 72 104 100 -1,262 -1,249 - -
9,189 9,211 -1,262 -1,249 71,293 76,137
3% 4% 5% 4% -9% 0% 3% 7% 4% 4% - - 2% 4%
- - - - 23 25 - - 104 104 - - 127 129
2,722 2,990 3,640 3,815 787 934 1,752 1,946 2,753 3,087 -401 -432 11,254 12,341
16.2% 16.5% 21.4% 21.3% 8.6% 10.1% 18.1% 18.8% 13.9% 14.2% - - 15.8% 16.2%
-781 - -34 - -258 - -148 - -207 - -168 - -1 597 -
11.5% 16.5% 21.2% 21.3% 5.8% 10.1% 16.5% 18.8% 12.9% 14.2% - - 13.5% 16.2%
75,932
50,330
19,144
2,243
19.9% 21.4% 25.0% 24.2% 6.6% 7.8% 16.6% 14.4% 15.7% 16.4% - - 16.5% 16.6%
1,942 2,990 3,606 3,815 529 934 1,603 1,946 2,546 3,087 -569 -432 9,657 12,341
781 - 34 - 258 - 148 - 207 - 168 - 1,597 -
402 421 330 333 283 310 296 353 257 255 11 15 1,580 1,688
-472 -571 -372 -466 -211 -337 -238 -297 -157 -273 -28 -30 -1,478 -1,975
-75 136 -152 -191 705 -48 -86 -271 -141 -4 -188 30 62 -347
2,577 2,977 3,447 3,491 1,564 859 1,724 1,732 2,713 3,065 -607 -417 11,418 11,706
-221
-557
10,467 10,929
10,835 11,033 8,961 8,836 12,481 11,756 3,907 4,328 10,505 11,211 240 264 46,928 47,426
1,942
13,275
8,348
3,296
9
16,837 18,081
2,990
13,865
8,571
3,567
9
3,606
15,749
11,012
3,516
-
17,044 17,940
3,815
16,095
11,190
3,310
-
529
11,803
7,920
3,900
496
934
12,048
7,752
3,789
519
1,603
11,331
8,784
2,499
-
9,697 10,373
1,946
15,615
11,121
4,064
17
2,546
18,291
11,480
4,282
1,605
EMEA
Americas
Asia Pacific
Technologies
Systems
19,789 21,781
3,087
18,379
11,696
4,273
1,699
-569
-98
-
125
-
-354
-597
-432
-71
-
140
-
-221
-557
Other
Total
9,657 12,341
70,351
47,544
17,618
2,109
-354
-597

Global Entrance

1) Items affecting comparability consist of restructuring costs.

2) Excluding restructuring payments.

Financial information - Notes

NOTE 1 SALES BY CONTINENT

Q4 Q1-Q4
SEK M 2016 2017 2016 2017
Europe 7,537 7,948 26,869 28,961
North America 7,645 7,707 28,427 30,635
Central- and South America 558 578 2,012 2,176
Africa 272 372 923 1,099
Asia 2,816 2,837 10,573 10,617
Pacific 655 667 2,490 2,649
Total 19,484 20,109 71,293 76,137

NOTE 2 BUSINESS COMBINATIONS

Q4 Q1-Q4
SEK M 2016 2017 2016 2017
Purchase prices
Cash paid for acquisitions during the year 1,001 4,345 2,388 6,501
Holdbacks and deferred considerations for acquisitions during the year 365 146 568 365
Adjustment of purchase prices for acquisitions in prior years 0 14 -91 18
Total 1,365 4,504 2,866 6,885
Acquired assets and liabilities at fair value
Intangible assets 0 1,690 69 1,843
Property, plant and equipment 76 4 355 94
Financial assets 12 9 83 34
Inventories 150 70 251 232
Current receivables and investments 155 97 291 416
Cash and cash equivalents 118 3 263 187
Non-controlling interest - -3 - -3
Non-current liabilities -48 -100 -233 -289
Current liabilities -312 -92 -665 -592
Total 151 1,678 415 1,922
Goodwill 1,214 2,826 2,451 4,962
Change in cash and cash equivalents due to acquisitions
Cash paid for acquisitions during the year 1,001 4,345 2,388 6,501
Cash and cash equivalents in acquired subsidiaries -118 -3 -263 -187
Paid holdbacks and deferred considerations for acquisitions in previous years 18 9 515 511
Total 901 4,351 2,640 6,825

Fair value adjustments of acquired net assets from acquisitions made in previous periods are included in the above table.

NOTE 3 FAIR VALUE AND CARRYING AMOUNT ON FINANCIAL ASSETS AND LIABILITIES

Financial instruments
31 December 2017 at fair value
Carrying Fair
SEK M amount value Level 1 Level 2 Level 3
Financial assets
Financial assets at fair value through profit and loss 39 39 39
Available-for-sale financial assets 11 11
Loans and other receivables 13,785 13,785
Derivative instruments - hedge accounting 68 68 68
Financial liabilities
Financial liabilities at fair value through profit and loss 1,660 1,660 100 1,559
Financial liabilities at amortized cost 30,821 30,831
Derivative instruments - hedge accounting 11 11 11
31 December 2016 Financial instruments
at fair value
Carrying Fair
SEK M amount value Level 1 Level 2 Level 3
Financial assets
Financial assets at fair value through profit and loss 78 78 78
Available-for-sale financial assets 11 11
Loans and other receivables 13,476 13,476
Derivative instruments - hedge accounting 88 88 88
Financial liabilities
Financial liabilities at fair value through profit and loss 2,366 2,366 116 2,250
Financial liabilities at amortized cost 28,272 28,381
Derivative instruments - hedge accounting 21 21 21

Definitions of financial performance measures

Organic growth

Change in sales for comparable units after adjustments for Depreciation

Operating margin (EBITDA) Net debt

Operating income before depreciation and amortization as a Interest-bearing liabilities less interest-bearing assets. percentage of sales.

Operating income before amortization of intangible assets bearing liabilities including deferred tax liability. recognized in business combinations, as a percentage of sales.

Operating income as a percentage of sales.

Profit margin (EBT) Income before tax plus net interest divided by net interest.

Income before tax as a percentage of sales.

See the table on operating cash flow for detailed information. For as a percentage of average parent company's shareholders relationship between operating cash flow and cash flow from equity. operating activities see the company's last Annual Report.

Investments in tangible and intangible assets less disposals of average capital employed excluding restructuring reserves. tangible and intangible assets.

acquisitions and exchange rate effects. Depreciation and amortization of intangible and tangible assets.

Capital employed

Operating margin (EBITA) Total assets less interest-bearing assets and non-interest-

Equity ratio

Operating margin (EBIT) Shareholders' equity as a percentage of total assets.

Interest coverage ratio

Return on shareholders' equity

Operating cash flow Net income attributable to parent company's shareholders

Return on capital employed

Net capital expenditure Income before tax plus net interest as a percentage of

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