ASSA ABLOY AB (publ)

Hello, everyone, and welcome to the presentation of Assa Abloy's first interim report in 2023. My name is Björn Tibela. I'm heading investor relations. And joining me here are Assa Abloy's CEO, Nico Delvaux, and our CFO, Erik Pieder. We will start now with the summary of the report, and then we will open up for your questions, and we plan to round up in about one hour's time. So with that, I'd like to hand over to you, Nico.

Thank you, Bjorn, and also good morning from my side. We can report a very strong start of the year with a very good organic sales growth of 8%, 4% volume and 4% price, with all divisions contributing in a positive way. We have another very strong quarter for the Americas division and also a very strong quarter for global technologies as well on the HID side as on the global solutions side. Then very good complementary growth through acquisitions of 5% in line with our ambition. Very strong execution on the operational side, with very good volume leverage of 33%, an EBIT margin of 16%, and an EBIT of 5.2 billion SEC, almost 30% up. So very good execution. Income statement wise, I think also very good work on the balance sheet side and therefore also a significant improved operating cash flow, record cash flow for Q1. We signed four acquisitions in the quarter and we launched our ninth manufacturing footprint. If you look at the numbers, sales at 32.4 billion SEC, 22% up, 8% organic, like I mentioned, 5% growth through acquisitions, and 9% halved by currency, an EBITDA margin of 16.6%, and an EBIT margin of 16%. EBIT up 30% at 5.2 billion SEC, and EPS up 29%. If you look a little bit at the different regions, starting with North America, continued strong North America, despite a very difficult comparison, double-digit 11% organic growth in that part of the world. But I think you see a bit two realities. You have seen in Q1 definitely an important slowdown on new-built residential, affecting our garage door business in North America, affecting our perimeter security residential part of the fencing business, and definitely also affecting our window hardware business that we sell to OEMs in that part of the world. We have also seen a bit of a deceleration of the R&R side on residential. But despite that, Americas has continued to post high single-digit organic roads for mechanical residential. And then on the commercial side, we continue to see good, strong momentum, also with our specification business still up double-digit. South America, 0% growth. It's mainly related to comparison on projects from HID. the same quarter a year ago, because if you look only at the Americas, they had still good higher single-digit organic growth, I would say despite some of the political challenges we see in South America and despite also here the difficult comparison with a year ago. Europe plus four, very similar picture as in North America, where we have seen new-built residential going down significantly, and also R&R on the residential side weaker, but a continued strong commercial part. But as we are more exposed to residential in Europe, around 40% to 45% of our business in Europe is residential, you see that also more in the organic growth number. A good Africa, plus three. A strong Australia, New Zealand, plus 11, thanks to strong entrance systems and strong HID, mainly, because there also our geographical division was negatively affected by the window hardware OEM business that we have in Australia and in New Zealand. And then a strong Asia, plus 10%, where we still had negative low single-digit growth in China, but much less negative growth than we experienced over the last couple of years, where we are also confident that China is slowly bottoming out and hopefully, confidently, we'll see China to slowly start to grow again in the second half of this year. But a very strong India and China, Middle East and Southeast Asia contributing to the 10% organic growth in that part of the world. So 8% as a group, 7% in emerging markets when it comes to organic growth. Some market highlights for the quarter, also this quarter again, nice important project wins for HID, for instance, mobile access credentials for a very nice innovative new building, the Bishop Gate building in London that we visited with my management team a couple of months ago. I must say fantastic new modern building with a lot of new technology, really good example of how to work in a modern way in the future. And then 10,000 E-click cylinders in the Dag region for an energy utility company, a big, nice order. And also worth mentioning several good residential commercial projects in South Korea. Then our R&D efforts continue to pay off. Also this quarter, we won several awards. I was myself at the Bau exhibition at the beginning of last week, where we got the Product of the Year award from the most reputable magazine in our industry for our security door closer solution. And then you can see several new product launches and extending our products and solutions also this quarter. And the last but not least, also a partnership with LockerOne Venture, where we invest and seed funding for small startups in the locker space, also stimulating our LectureOne locker business in North America. If we then look at the organic growth, it's now nine consecutive quarters again with strong positive organic growth. And that strong positive organic growth is complemented with good growth through acquisition, especially in the last three quarters. So really acceleration of our top line. And then our bottom line really coming back towards that 16% to 17% bandwidth. We are now at 15.6% EBIT margin on a 12-month moving trend. So better operating margin, acceleration of top line, therefore strong acceleration of our operating profit. We signed four acquisitions in the quarter. They represent an annualized sales of around 440 million SEC. And then we are still working on HHI. The court case has started there this Monday and we expect an outcome later this quarter towards the end of the quarter. Perhaps a couple of words on Matura, an Italian acquisition. Very happy with that acquisition because Italy was still a bit of a white spot where we were not a strong player yet. Through this exciting acquisition, we become one of the leaders on the residential space in Italy. They have a sales of around 300 million SEC and a very strong brand name and a very nice product range. If we then go into the different divisions, starting with EMEA, organic sales of three percent with strong growth in middle east india and africa good growth in the nordics and in central europe and then stable growth in uk ireland and and south europe and there like i explained you should see a bit difference between residential and and commercial residential definitely new build was challenging in the quarter commercial still strong momentum. You also see that we report slightly different than before. That is because we reorganized this division in five regions. So we have a Nordic region covering Scandinavia and Finland. We have a region UK and Ireland. We have a central region covering DACH, Benelux, and East Europe. And then we have a South Europe covering Spain, Italy, Portugal, France, and Greece. And then we have an emerging region covering Middle East, India, and Africa. And the idea of that new setup that is effective as of the 1st of January this year is to seek more synergies within the different regions to be even faster and even more efficient agile than we were already in the past. Operating margin of 13.8%, a good operating leverage, compensating for high inflation, general inflation, labor inflation, energy cost inflation, and offsetting through price increases also partly the material cost. Negative effects, 60 base points because of a weaker SEC, and then also dilution from an M&A, 20 base points. We then go to America as another very strong quarter with double-digit, 11% organic sales growth. With all countries and all business areas, I would say, contributing, with the exception of U.S. Smart Residential, where it's more a timing issue, where our two biggest customers did not place orders and we did not realize sales in the quarter. But it just, you know... depending on when the timing is of those bigger orders. We should not read too much negative news in that. We also had a sales decline in electromechanical solutions. That was because of a difficult comparison with a year ago and because of some electronic component shortages. But again, also there, if you look at our Helmic business in general in the Americas, it was up very strong double digits, so still very good momentum. An operating margin of 21.7%, very strong performance, very strong operating leverage, good, strong execution. FX10-based points dilution and M&A80-based points dilution, that is the acquisition cost for HHI, which amounted to 114 million SEC in the quarter. If we then go to the third geographical division, opening solutions Asia-Pacific, organic sales growth of 6%, thanks to very strong sales growth in South Korea and strong sales growth in Southeast Asia. And like I mentioned, a smaller sales decline in China, only a small single digit, and then also sales decline in Pacific, mainly because of our window hardware business. Operating margin of 4.6% versus 3.5% a year ago. Good, strong operating leverage. Also helped by FX, 80 base points because of the strong Australian dollar. And then dilution from M&A, 20 base points. If we then go to the geographical divisions and perhaps the highlight of the quarter, global technologies, organic sales growth of 24%, with all business areas, as well in HID as in global solutions, contributing in a strong way to the top line, with the exception of extended access and secure issuance. very good operating margin of 16.8%, where we were, of course, helped by the mix on one way, in the sense that we continue to further invoice the backlog that we build up on our PECS business, our cards and readers business, and that's the more profitable part of our global technology business. And then on the global solution side, very good recovery of the hospitality business with a very strong team, strong leadership doing very nice things. And they also had now again volume levels where they contribute in a good way to the bottom line. said on one side that we should not remember that if you look at the mobility related businesses in in this division that citizen id is still very much lower level than prior to covet 19 despite even the growth in in the quarter and that we continue to have challenges also on the profitability side on citizen id so yes we have a positive mix but we we also have a some other items affecting the result in a negative way. So 16.8, I think, is a very good result for Q1. Helped also by FX, 90 base points because of the stronger US dollar, and then M&A, 40 base points dilution. And then last but not least, entrance systems, continued organic sales of 3%, despite a very difficult comparison. And you see there that pedestrian and industrial are taking over a little bit as a growth engine from residential and perimeter that have, of course, very difficult comparisons now compared to a year ago. Also, very happy to see a double-digit growth on service, over-delivering on our ambition of growing service high single-digit for the coming years. And that obviously also helps from a margin perspective where we even beat this quarter, the very high record quarter of last year. We post an operating margin of 16.2%. with very good operational execution, good operating leverage, FX neutral, and M&A 10 base points dilution. And with that, I give the word to Eric, who will go a little bit more in detail on the financial numbers.

Thank you. Thank you, Nico. And good morning also from my side to everybody. As mentioned before, we had a very strong sales growth in the quarter where we were up 22 percent with 8 percent coming from organic growth, 5 percent coming from acquisitions. And then we also had help with the currency with 9 percent. A record for the first quarter in both profit and value, which was up 30%, as well as with EBIT margin, which was one point better than the same period last year and ended at 16%. The income before tax is, as you can see, slightly lower. On operating income, it's 30%. On income before tax, it's 27%. This, of course, has to do with the higher interest rates that we are experiencing right now. Another highlight, cash flow, very strong to be a first quarter. We're almost generated 3 billion SEC more, or we actually did even more than that in the first quarter. And then another highlight, I would say the return on capital employed, which is now on a 12-month rolling basis, up 1.7 points and ended at 17.4. If we dissect a bit the organic sales part, roughly half is price and half is volume. And you can see that we have a very strong operating leverage of 33%. This is driven by the lower material cost, price realizations, but also efficiency measures. If we look in Q1, the manufacturing footprint programs, had savings of 195 million SEK. Talked before about the currency. We also have some help from the stronger dollar. And then on the acquisition part, we have this year, we have booked 114 million SEK for HHI. But since this is a bridge, I would also like to remind that last year, we booked 38 million in the same period. As probably doesn't come as a surprise on the direct material, we have a much better outcome this quarter than what we had the last quarter. Yes, we have some help from the mix of roughly 120 base points, which comes from the very good performance from global technologies. And then in a comparable matter, entrance system was a bit lower. But you can see that we have a tailwind of roughly 70 base points. This is something that we... Expect to continue for some quarters, but at the end of the year, we need to see how the prices evolve. Conversion cost, also a positive measure. I talked before about the MFP. And then you can see on the SG&A that we have increased our investments in R&D, but also there we actually suffer a bit from general inflation as well as salary inflation. So that's why you see a negative number there. Talked a bit about the manufacturing footprint program, the ninth program we're up to now. It follows a bit the same as what you've seen before with a number of factory closures, offices, et cetera, et cetera. The restriction cost is slightly above 1.2 billion SEK, and it's the fastest payback that we've ever had. It's roughly two years. The annual saving... When everything is materialized by 2025, it's 700 million. And just so you know, also for reference, if we look for 2023, on all the programs, we expect a saving of about the same size, the 700 million. And in total, roughly 1,300 employees will be affected by the program. Cash flow, I talked before, and that this is one of the better, this is actually the best quarter, Q1 quarter that we've ever had when you look to cash flow. You can see that, of course, it's driven by very strong earnings, but as well, we have been able to work on the working capital, which is actually better. And we especially see an entrance, a very good performance when it comes to this. The cash conversion was in the month 84%, which is an excellent number. This results in that we were actually able to pay back loans of more than 2 billion SEK. We have a net debt to equity, which is also down if you compare the quarters from 38 to 33. And net debt versus EBITDA is now at 1.2, which means that the balance sheet is ready to take on board HHI, as well as to continue with our normal acquisition strategy. Earnings per share, as you've seen before, is up with 29%, so another strong number. If we then go to the dividend, which the board will propose to the AGM today, is at 4.8, which will be paid in two installments. But if you look on a 10-year cycle, see that the dividend payout is almost up with 200%. And with that, I hand the words back to Nico.