Letter to the shareholders
Very good results achieved
The financial year 2016/17 was an eventful and a successful year for dormakaba, and it is a pleasure for us to present very good results to you. dormakaba increased its sales by 9.4% to CHF 2,520.1 million, compared to CHF 2,302.6 million in the previous year. We achieved good organic growth of 4.3%. Operational improvements, a positive effect from acquisitions and divestments and considerable positive impacts from merger-related cost synergies resulted in a higher EBITDA margin reaching 15.4% compared to 14.4% in the previous year. It is worthwhile noting that also our strategically important acquisitions in the US performed well. Inaddition, merger-related IT and branding costs were below plan. dormakaba generated a net profit of CHF 224.6 million compared to CHF 117.2 million in the previous year. The increase was driven by an improved profitability and a lower tax rate in 2016/17. Additionally, the previous year’s figure was impacted by one-time merger-related integration costs of CHF 89.4 million (extraordinary result).
AS AMER continued to deliver very good results. Sales growth was driven by strong demand in the US and Canada and the segment increased its already remarkable profitability. In addition, the segment benefited from the two transformational acquisitions closed during financial year 2016/17. AS APAC showed an excellent performance, recording double-digit growth in China and India and good growth in Australia and the South-East Asian countries, while increasing its EBITDA margin from 9.3% in the previous year to 12.4%. The successful restructuring of Wah Yuet contributed positively to this result. AS DACH reported good results; it experienced good growth in Germany and in Austria, while sales in Switzerland were flat. In addition, the segment was able to increase its profitability. AS EMEA closed the financial year 2016/17 with overall solid results. Sales growth was mixed between individual countries and regions. While business activities were supported by good growth in Europe driven by double-digit growth rates in Central and Eastern Europe, sales in the Middle East and Africa were weak and remained below the previous year. The segment was also able to increase its EBITDA margin slightly. Key Systems achieved very good results; it recorded increasing demand in all its markets, with good growth in Europa, strong growth in North America and double-digit growth in Asia and South America. The segment also increased its remarkable profitability due to higher sales volume and a positive product mix. Movable Walls closed the reporting period rather unsatisfactory. The segment recorded good organic sales growth in EMEA and business activities in Asia Pacific were stable. However, growth was mainly offset by weakness in North America due to customer project delays. In addition, the profitability of the segment was affected by a restructuring project in Germany which started during the year under review.
The 2016/17 financial year was the second year of our post-merger integration process and the first full year we have been operating as one company in the new structures and acting globally under the umbrella brand dormakaba. In the period under review, we continued focusing on the implementation of the defined integration projects, including the ongoing consolidation of legal entities in the individual countries and further investments in a joint global IT infrastructure as well as on establishing the new dormakaba brand. Overall, the integration has made good progress and we are on track, having already achieved a visible impact on our profitability.
Portfolio management activities: Acquisitions and divestments
During the financial year 2016/17 we have executed a considerable number of transactions to strengthen our portfolio. Most important we improved our market position in North America by two transformational acquisitions: in December 2016, we closed the acquisition of Mesker (Mesker Openings Group), a provider of commercial door hardware in North America. In February 2017, we closed the acquisition of Best Access Solutions (Mechanical Security businesses of Stanley Black & Decker), which is offering a broad range of mechanical products and security solutions as well as wireless and cloudbased electronic locks. With these transformational acquisitions, we became a strong number three in the North American market, which is the most attractive market in our industry. In addition, we acquired two small businesses during 2016/17 – ATM, a services business in Austria, and Seca, an expert for physical access control and airport solutions in Norway. After balance sheet date, in July 2017, we acquired Kilargo, an Australian company, to strengthen our market position in the Pacific region. Also in July 2017, we closed the acquisition of Canadian Skyfold, a provider of automated vertical folding wall systems with a strong presence in North America. With Skyfold, our segment Movable Walls achieves the necessary critical mass. On divestments, during 2016/17 we made some adjustments to our portfolio to concentrate on our core business: we sold our low-performing sanitary business, and our business Ascot Doors, an industrial doors activity. After balance sheet date, in July 2017, we sold our low-performing business Dorma Beschlagtechnik.
Change in the Executive Committee
Dieter Sichelschmidt, COO of AS DACH and Member of the Executive Committee, is retiring on 31 December 2017. The Board of Directors and Executive Committee of dormakaba Group appreciate his long and very valuable contribution to the successful development and integration of the company. The Board of Directors of dormakaba Holding AG has designated Alwin Berninger as his successor as of 1 January 2018.
Annual General Meeting of 17 October 2017
At the Annual General Meeting of 17 October 2017 all acting members of the Board of Directors will stand for re-election for a term of office of one year. The Board of Directors also proposes to re-elect Ulrich Graf as Chairman of the Board of Directors. In addition, Rolf Dörig, Hans Gummert and Hans Hess will stand for re-election as members of the Compensation Committee.
We are looking back on a very successful financial year and therefore the Board of Directors proposes to the Annual General Meeting a dividend payment of CHF 14.00 per registered share for the 2016/17 financial year. This represents an increase by CHF 2.00 compared to the previous year. This raise reflects the increased performance and profitability of dormakaba and is fully in line with the Board of Directors targeted pay-out ratio of a minimum of 50% of the consolidated net profit after minority interests.
dormakaba believes that the global macroeconomic and geopolitical environment remains challenging and volatile. Therefore, for financial year 2017/18, we expect organic growth of 150 to 200 basis points above the GDP growth (which is currently estimated at 2.5%) for dormakaba’s relevant markets. We expect a slightly higher EBITDA margin compared to the previous year (15.4%) as the positive effects from operational improvements, post-merger cost synergies and acquisition benefits will be partly offset by further merger-related integration costs, particularly for IT, as well as by integration costs for the acquired companies. In 2017/18, we will continue to focus on our post-merger integration projects such as the relocation of standard door closers from Germany to Singapore, respectively China. The integration projects will be largely completed by end of June 2018. Therefore, we expect to see the full impact of the merger-related cost synergies for the first time in 2018/19. We confirm our target expecting to achieve an EBITDA margin of 18% and organic sales growth of at least 200 basis points above the GDP growth in domakaba’s relevant markets in the 2018/19 financial year.
On behalf of all members of the Board of Directors and the Executive Committee we would like to take the opportunity to thank you, our valued shareholders, for your trust in dormakaba. We also like to thank our customers and business partners worldwide for their cooperation and longstanding relationships. Finally, we extend our special thanks to our employees for their dedication and support throughout the financial year 2016/17 to contribute to the success of dormakaba on ourjourney to become the trusted industry
Ulrich Graf, Chairman of the Board of Directors
Riet Cadonau, CEO