20% - Assa Abloy

Report of the Board of Directors
The Annual Report of ASSA ABLOY AB (publ.), corporate
identity number 556059-3575, contains the consolidated
financial statements for the financial year 1 January – 31
December 2007. ASSA ABLOY is the global leader in door
opening solutions, dedicated to satisfying end-user needs
for security, safety and convenience.
Significant events
Sales and earnings
During the year, sales rose by 8 percent to SEK 33,550 M
(31,137), with organic growth of 7 percent and acquired
growth of 5 percent. Operating income (EBIT) rose by 14
percent to SEK 5,458 M (4,771 1 ), equivalent to an operating
margin of 16.3 percent (15.3 1 ). Income before tax
totaled SEK 4,609 M (2,626).
Operating cash flow, excluding restructuring payments,
amounted to SEK 4,808 M (3,528), an increase of
36 percent. Earnings per share increased by 13 percent to
SEK 9.02 (7.99 1 ).
Restructuring
The comprehensive restructuring program that was initiated
in April 2006 is proceeding according to plan. The program
includes around 50 individual restructuring measures. A large
number of production units will switch focus to concentrate
on final assembly, and some units will be closed. The total
cost of the program is estimated at SEK 1,274 M and it is
expected to generate annual cost savings of approximately
SEK 600 M when the whole program has been implemented
in 2009. The full cost of the program was expensed in 2006.
Payments related to the restructuring program
amounted to SEK 424 M for the year. By year-end cost savings
from measures implemented since the project start
amounted to SEK 90 M a quarter. To date, 1,316 out of the
total of 2,000 employees affected by the restructuring program
have left the Group.
Acquisitions
In January, Americas division acquired Pemko, a leading
US manufacturer of door components. The company has
annual sales of USD 55 M and the acquisition was EPSaccretive
from the acquisition date.
1 Excluding restructuring costs
Report of
the Board of Directors
39
At the end of January, Asia Pacific division acquired Pyropanel,
a leading manufacturer of fire-resistant doors in
Australia. Annual sales amount to AUD 19 M and the
acquisition was EPS-accretive from the acquisition date.
In October, Asia Pacific division acquired Baodean,
China’s leading producer of high-security locks and cylinders,
and iRevo, South Korea’s largest manufacturer of
digital locks for the residential market. The companies
have combined annual sales of approximately SEK 700 M.
iRevo was weakly EPS-dilutive in 2007, while Baodean was
EPS-accretive from the acquisition date.
In July, EMEA division acquired Esety, a manufacturer
and distributor of high-security locks on the Italian market.
The company has annual sales of SEK 60 M. In September
the Israeli company Alba, a manufacturer of mechanical
lock products for the local market, was also acquired.
The company has annual sales of SEK 70 M. In December,
EMEA division acquired Powershield, a leading manufacturer
of high-security steel doors in Northern Ireland.
Powershield has annual sales of approximately GBP 10 M.
All the acquisitions were EPS-accretive from the acquisition
date.
In April, Global Technologies division acquired Integrated
Engineering in the Netherlands. The company
develops and markets advanced smartcard readers based
on RFID technology and has annual sales of SEK 35 M. The
acquisition was EPS-accretive immediately. In July, the
Irish company Aontec Teoranta, which is one of the
world’s largest manufacturers of inlays for electronic
passports, was acquired. The company has annual sales of
approximately SEK 140 M and the acquisition was EPSaccretive
from the acquisition date.
In March, Entrance Systems division acquired the service
companies La Force Associates in south-west USA and
Portronik in Canada. These companies distribute, install
and service automatic doors and have combined annual
sales of approximately SEK 100 M. The acquisitions were
EPS-accretive from the acquisition date.
In addition, a number of smaller acquisitions were
made during the year. These companies have combined
annual sales of approximately SEK 75 M.
The total acquisition price, on a debt-free basis, of all
acquisitions, including estimated earn-outs, amounted to