Letter to the shareholders
Good start into the financial year 2016/2017
dormakaba had a successful start into the 2016/2017 financial year: we are pleased to report good operating performance for the first half-year. Our merger-related integration process is on track and we have reached major milestones that we set ourselves for 31 December 2016. In addition, we were able to further strengthen our existing market position by announcing two important acquisitions in the United States, which will enable us to offer the full portfolio of door hardware and access control solutions to our customers in North America.
The financial year 2016/2017 started well with an increase in consolidated net sales of 3.4% to CHF 1,173.7 million for the first half-year compared with CHF 1,135.5 million in the previous year period (the year-on-year comparison is based on previous year pro forma figures, as if the merger had already taken place on 1 July 2015). Organic sales growth was pleasing with 3.4%. During the period under review, we made further progress in our merger-related integration process. As a result, we achieved synergies and cost savings that overcompensated merger-related costs for IT and branding and led to an improved operational efficiency and a higher profitability. EBITDA rose to CHF 175.4 million (previous year CHF 165.4 million), representing a higher EBITDA margin of 14.9% compared with 14.6% in the previous year. dormakaba closed the first half of the 2016/2017 financial year with a net profit of CHF 95.8 million, compared with CHF 67.1 million in the previous year.
During the period under review, the global economic sentiment has slightly improved, however, the economic output varied considerably between different regions and countries. Business activities in the segments Access Solutions AMER, Access Solutions APAC and Key Systems performed very well. The segments Access Solutions DACH and Movable Walls achieved organic sales growth, however, the EBITDA profitability was below the previous year, and Access Solutions EMEA showed moderate organic sales growth and a stable EBITDA margin.
Since the start of the new 2016/2017 financial year, we have been operating as one company in the new structures and acting globally under the umbrella brand dormakaba. The post-merger integration process is well on track. As an example of the benefits of our combined product portfolio we won several attractive new projects such as the Changi Airport in Singapore, where five different dormakaba Product Clusters from the joint offering were involved. In the current phase of the integration process, our key priorities are the implementation of the defined integration projects, which include the continuing consolidation of legal entities as well as the further investments in a joint global IT infrastructure and in establishing our new brand. In addition, we are focusing on further growth and efficiency initiatives. With this, we are convinced to largely complete the projects of the post-merger integration process by the end of the 2017/2018 financial year as planned. We continue to expect that the full financial impact of all measures will materialize in the financial year 2018/2019 for the first time.
At important trade fairs dormakaba introduced a series of innovations, which were well received by our customers. At the trade fair Security Essen (Germany), we presented our new dormakaba brand and joint product portfolio for the first time. At the BAU in Munich (Germany) in January 2017, we presented ourselves as a strong partner for smart and secure access solutions. Our innovations range from a new generation of door closers to a modular glass partition system, all providing a high degree of flexibility and functionality to our customers.
By the end of 2016 we announced two strategically important acquisitions which will strengthen our market position in North America and globally in our industry. In December, we closed the acquisition of Mesker Openings Group, a leader in the commercial door and hardware industry. With this acquisition we are expanding our product portfolio in North America. Doors and all related components essential for access and security solutions for buildings and rooms can now be provided from a single source. We also expand our distribution network and will be able to take advantage of additional sales channels. In the same month we also announced the acquisition of certain Mechanical Security businesses from Stanley Black & Decker, which are mainly active across North America offering a broad range of mechanical products and security solutions as well as wireless and cloud-based electronic locks. It gives us the ability to offer the full portfolio of door hardware and access control solutions to our customers and makes us one of the top three providers in the attractive North American market. In terms of vertical markets, we will benefit from the strong position in the growing verticals education and healthcare. The broad range of products and security solutions which is installed in hundreds of thousands of end-user sites across North America provides us with an attractive and stable repeat and upgrade business. In addition, the acquisition includes the brand BEST, one of the most recognized brand in our industry, as well as established spec-writing capabilities, that will open access to new construction projects. This acquisition, which was closed on 22 February 2017 includes businesses in Taiwan and China.
Based on the merger, the ongoing integration process and the operational performance of the Group we can confirm our financial targets for full financial year 2016/2017: Organic sales growth expected around 3% and an EBITDA margin around the previous year’s level. We can also confirm our financial mid-term targets: In financial year 2018/2019 the EBITDA margin is targeted at 18% for the first time and organic sales growth is supposed to reach 200 bps above adjusted GDP in dormakaba’s relevant markets.
A word of thanks
On behalf of the entire Board of Directors and the Executive Committee we would like to extend our thanks to you, our dear shareholders, for continuously sharing and strongly supporting our aim of building a company recognized as the trusted industry leader. We also thank our customers and business partners for their trust in our products, solutions and services. And we would like to thank all our employees worldwide for their remarkable dedication to ensure the successful progress of dormakaba.
Chairman of the Board of Directors