President & CEO Q3 Report 2010 Johan Molin 1
Financial highlights Q3 2010 � Strong quarter in all parts – Very solid development (+ 26% ) for Global Technologies – Continued strong growth in APAC and South America – EMEA and Americas bottomed and growing – Margin expansion in all divisions – Bid for ActivIdentity and stake in Agta Record � Sales 9 ,4 7 4 MSEK + 1 3 % + 6% organic, + 10% acquired growth, -3% currency � EBI T 1 ,6 3 0 MSEK + 2 1 % Currency effect -28 MSEK � EPS 2 .9 3 SEK + 2 4 % Reduced tax rate & depreciation of earn out 2
Financial highlights Jan-Sep 2010 � Resum ed organic grow th and strong profit developm ent � Sales 2 7 ,1 7 5 MSEK + 4 % 2% organic, + 7% acquired growth, -5% currency � EBI T 4 ,4 4 0 MSEK + 1 1 % Currency effect -191 MSEK � EPS 8 .0 3 SEK + 1 8 % Reduced interest and tax rate 3
Market highlights � Good growth of electromechanical locks in all parts � Strong customer interest for Cliq Remote � WiFi locks increasingly popular in the USA � Residential digital door locks introduced in Australia � Secure delivery infrastructure introduced in October Residential DDL Electric strike W iFi Australia 4
Secure delivery infrastructure Launched October 2010 Secure vault � Secure encrypted delivery of digital keys – Smart cards – Mobile phones - NFC – ID and banking cards � Online card security management – Card personalization service – Cradle to grave � Secure issuance – Online HDP & DTC printers TCP/ IP Ethernet 5
Group sales in local currencies Jan-Sep 2010 4 3 + 7 3 3 -2 1 4 + 6 4 2 -4 2 + 3 0 6 + 8 Share of Group sales 2 0 1 0 YTD, % Year-to-date vs previous year, % 6
Sales growth Q3 2010 - Currency adjusted 39 000 14 -2 % from 2 0 0 8 peak 38 000 12 37 000 10 36 000 8 35 000 34 000 6 33 000 4 Sales, MSEK 32 000 Grow th % 2 31 000 30 000 0 29 000 -2 28 000 -4 2 0 1 0 Q3 + 1 6 % 27 000 Organic + 6 % -6 26 000 25 000 Acquired + 1 0 % -8 24 000 -10 23 000 -12 22 000 21 000 -14 2004 2005 2006 2007 2008 2009 2010 Organic Growth Acquired Growth Sales in Fixed Currencies 7
Operating income (EBIT), MSEK 1 700 6 000 Run rate 5 ,8 3 8 MSEK ( 5 ,4 8 4 ) , + 6 % 1 600 5 800 1 500 5 600 1 400 5 400 1 300 5 200 1 200 5 000 1 100 4 800 1 000 4 600 900 4 400 800 4 200 700 4 000 600 3 800 2005 2006 2007 2008 2009 2010 Quarter 12-months Quarter Rolling 12-months 8
Operating margin (EBIT), % 17,0 16,0 EBI T % 15,0 Run rate 2 0 1 0 1 6 .3 % ( 1 5 .5 ) 14,0 13,0 12,0 2005 2006 2007 2008 2009 2010 Quarter Rolling 12-months Long Term Target 9
Manufacturing footprint � Conversion to assembly or closures in high cost countries – 37 factories closed to date, 14 to go – 34 factories converted to assembly, 19 to go – 19 offices closed, 6 to go � Consolidation of core production to China and Eastern Europe � Personnel reduction 5,179p, + 16% to plan � 1,236 more to go � 1,106 MSEK remains at the end of the third quarter for all three programs 10
Margin highlights Q3 2010 EBI T m argin 1 7 .2 % ( 1 6 .0 ) - Volume increase of 5% , Price 1% - No acquisition dilution - Negative mix effect due to growth in emerging markets -0.2% + Manufacturing footprint gives good contribution + S, G & A cost declining, 23.4% (24.1) 11
Acquisitions 2010 � Fully active on acquisitions – Growing pipeline with target 5% growth � 1 1 acquisitions com pleted in 2 0 1 0 � Annualized 2 3 0 0 MSEK, + 7 % � New acquisitions Q3 � ActivI dentity 4 0 0 MSEK, public offer � 3 3 % stake in Agta Record 12
ActivIdentity, USA � Strengthens HID’s offering in logical access � Products centered around establishing a persons identity when interacting digitally � Strong authentication and card management systems � 2,500 customers worldwide, 38% software � 220 employees and 400 MSEK � Slightly dilutive 2011 13
Agta Record, Switzerland � Same business model as AA Entrance System with end-user focus and service � Reinforces leadership in door automatics � Very complementary with main strength in France and CH � Good synergies within sales, service, products and infrastructure � HQ in Switzerland � 1,700 employees and 2,000 MSEK sales � Ambition to acquire over time 14
Division - EMEA SALES � Slow recovery in all parts share of Group total % � Weak quarter in Eastern Europe, France, Denmark and the Netherlands 34 � Good growth in Finland, Germany, Italy and Spain � Good effect from manufacturing footprint � Strong efficiency gain from seamless flow EBIT % � Operating margin (EBIT) 18 + Volume 1% 17 + Good response to new products 16 + Strong efficiency gains 15 14 - Raw materials increasing 13 2005 2006 2007 2008 2009 2010 15
Division - Americas SALES � South America, Mexico and Canada in good share of growth Group total % � Electromechanics developing well 27 � Residential growing for first time since H1 2008 � Security doors continued to decline � Strong EBIT performance in all parts EBIT % 21 � Operating margin (EBIT) 20 + Volume + 2% 19 + Strong efficiency improvement 18 - Raw materials increasing 17 2005 2006 2007 2008 2009 2010 16
Division - Asia Pacific SALES � China sales strong on the back of 3rd tier cities share of Group total % � Korean market continued well 15 � South Asia and especially India is strong � Good growth and solid profit in the Pacific � Good efficiency development EBIT % � Operating margin (EBIT) 16 14 + Volume + 15% 12 + Currency effects 10 -Raw materials increasing 8 6 2005 2006 2007 2008 2009 2010 17
Division - Global Technologies SALES � Fantastic evolution in HID share of Group total % – Access control growing in all parts of the world 13 – Secure issuance benefitting from new printers – Identification solutions in strong demand � Hospitality, first quarter of growth since 2008 – Renovation market is back – New RFID systems increasingly popular – Savings and move to China supports profit EBIT % 19 18 � Operating margin (EBIT) 17 16 + Volume + 26% 15 14 + All business units doing well 13 12 2005 2006 2007 2008 2009 2010 18
Division - Entrance Systems SALES � Quotation levels and orders are slightly growing share of Group total % � Service and service contracts growing 11 � Retail coming back, health care weak � Ditec sales stabilised but dilutive by 1.0% � EBIT % Operating margin (EBIT) 18 - Volume -1% 17 + Efficiency gains 16 15 14 13 12 2005 2006 2007 2008 2009 2010 19
CFO Q3 Report 2010 Tomas Eliasson 20
Financial highlights Q3 2010 3rd Quarter Nine months MSEK 2009 2010 Change 2009 2010 Change Sales 8,405 9,474 +13% 26,163 27,175 +4% Whereof Organic growth +6% +2% Acquired growth +10% +7% FX-differences -216 -3% -1,240 -5% Operating income (EBIT) 1,346 1,630 +21% 4,014* 4,440 +11% EBIT-margin (%) 16.0 17.2 15.3* 16.3 Operating cash flow 2,125 1,890 -11% 4,547 4,200 -8% EPS (SEK)* 2.36 2.93 +24% 6.81 8.03 +18% *Excluding restructuring and one off charges of 109 MSEK in Q1 21
Finance net � Interest net on net debt going down 20% � New rules: Earnouts to be discounted MSEK Jan-Sep Jan-Sep 2009 2010 Interest net -403 -320 Exchange effects and other -74 -14 Defined benefit pensions -51 -111 Discounted earnouts n/ a -34 Total other -125 -159 Total -5 2 8 -4 7 9 22
P&L – Components as % of sales Q3 Year-on-Year 2 0 1 0 2 0 0 9 � Direct material 33.0% 35.0% � Conversion costs 26.9% 24.4% � Gross Margin 40.1% 40.6% � S, G & A 24.1% 23.4% � EBIT 16.0% 17.2% 23
Bridge Analysis – Jul-Sep 2010 2009 Acq/ Div Currency Organic 2010 MSEK Jul-Sep Jul-Sep 10% -3% 6% 13% Revenues 8,405 798 -216 488 9,474 EBIT 1,346 127 -28 184 1,630 % 16.0% 16.0% 12.8% 37.7% 17.2% 24
Operating cash flow, MSEK 7 500 7 000 2 000 6 500 6 000 1 500 12-months 5 500 Quarter 5 000 1 000 4 500 4 000 500 3 500 0 3 000 2005 2006 2007 2008 2009 2010 Quarter Rolling 12-months 25
Gearing % and net debt MSEK 16 000 120 14 000 100 12 000 80 10 000 Net Debt Gearing 8 000 60 6 000 40 Debt/ Equity Debt/ Equity 5 5 ( 6 7 ) 4 000 5 5 ( 6 7 ) 20 2 000 0 0 2005 2006 2007 2008 2009 2010 Net debt Gearing 26
President & CEO Q3 Report 2010 Johan Molin 27
Conclusions Q3 2010 � 6% organic growth and 16% total growth in Q3 � Many new exciting products � Margin expansion in all parts � Strong cash flow � Good activity on acquisitions with ActivIdentity and Agta Record 28
Outlook Long Term � Organic sales growth is expected to continue at a good rate � The operating margin (EBIT) and operating cash flow are expected to develop well Outlook for 2 0 1 0 � Organic growth is expected to be slightly positive 29
Q&A 30
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