Status Update

Dec 18, 2017

Good morning, and welcome to this telephone conference. My name is Lars Renstrom. I'm the Chairman of NSA BLOIT, and the purpose of this call is to introduce the new CEO of AssaBLOY, Nico Delvaux. Also present are AssaBLOY's CFO, Carolina Dubeckape and Head of Investor Relations, Matias Olsen. With Nico Delbos, we have found a strong and experienced leader of large global businesses with a strong track record. Nico has vast experience in successfully managing large international operations, and he has also the experience of working in many countries. Nico has managed 2 business areas within Atlas Copco and is presently CEO of Metso Corporation in Finland. Nico has a strong experience from leading complex and decentralized organizations, and he has a strong focus on innovation and technical development, which is also important. Atlas Copco is an excellent company that has delivered several successful leaders over the years, like, for example, Johan Molin, Ron Elieten, Bjorn Roosengren, Nico Dilbo and myself. So AssaBLOY has made a fantastic journey since the foundation in 1994 and is the true global leader in its industry. And I am convinced that nickel successfully will continue to develop the group. And before we start the Q and A, I would like Nico to introduce himself. So the word is over to you, Nico. Thank you, Ulas, and good morning, everybody. My name is Nico D'Algo, and I'm really looking forward to assume the position as new President and CEO of Arthur Abloy next year. A few words about myself, an Avazian citizen, 26 years married with Carla, my wife, and together, we have a son of 20 years old. I'm an electromechanical engineer, and I added also a master in business administration to that. Like Lars said, I have a solid experience in running large international organizations similar to Assar Abloy. I started actually my career in a sugar factory in a small city where I was living in the center of Belgium, but it was still before my military service. And then after my military service, I joined Atlas Copco, and I worked 26 years for Atlas Copco. Mainly on the competitive side, so I held positions in sales, in marketing, in service, in acquisition, integration management and also in general management. And for Atlas Copco, I lived and worked in Belgium, in Italy, in Canada, in the U. S. And in China. And therefore, I will say that I also have good knowledge from within of the 3 main markets in the world: Asia, Europe and North America. Perhaps a couple of things, what I did in Atlas Copco that I believe are relevant also for the Assariboine position. 1st of all, as you know, Atlas Copco has really R and D and innovation in their genes. Atlas Copco uses innovation in really everything they do, and that's not only for new product development but also the way they run processes and so on. Another relevant experience is definitely my service experience. Back in 2008, I was the one who created the 1st service division in the Atascopco Group, splitting out service activities from the equipment divisions and putting together all the service activities in a newly created service division with the aim to see really service as a business and also to improve customer satisfaction. I would say this has been really an important strategic decision for the actual success of the Atlas Copco Group. And in that position and then also later as the Business Area President, Construction Technique where I was based in Shanghai for 3 years And then also my last 3 years in Atlas Copco as Business Area President for Compressor Technique, we did frequent acquisitions, many smaller ones similar to what Assar Bloy is doing with their strategy. There's also some bigger acquisitions, acquisitions of adverts and labels to market leaders on the vacuum side to which we bought ourselves into the vacuum market and that then also led to the creation of a new dedicated vacuum business area within the Atlas Copco Group. Now I work as the CEO for Metso, a Finnish leader in the mining, aggregate and valves industry. I would say that I'm a promoter of decentralization with clear authority and responsibility, meaning that an organization can combine speed and agility of the different business units with utilizing the strengths of the larger organization, for instance, strong processes and economics of scale in product development or in manufacturing or in sourcing. I'm particularly passionate about people, and I consider myself as a true people manager. I really like motivating people to strive forward and achieve results. Are very much result driven, and I want my colleagues to be the same. I would say that I have a rather inclusive management style and definitely want to be close to the people and to the operations. And in that aspect, I also travel quite intensively because I really want to be close to customers, close to suppliers and close to our people. I really consider our people as the most important asset in an organization. People say that I have a lot of energy, and I like definitely to win, both in business and in sports. I'm a fan of football, and my favorite team is a Belgian team called Ambrellicht. I'm definitely looking forward very much to the World Cup. By the way, Belgium was the 1st European Cup to European team to qualify for the World Cup. But I must also congratulate, of course, Sweden and definitely made a good achievement in defeating Italy in the qualifications. With these characteristics, I'm convinced my leadership will sit very well in Assa Abloy. And with that, perhaps I give the word back to Lars for starting the Q and A session. Thank you. We will now begin the question and answer session. And our first question comes from the line of Andre Kukhnin from Credit Suisse. Please go ahead. Your line is open. Yes, good morning. Thanks so much for taking my questions. Nick, I'll just start with a very broad one. I appreciate that you haven't even started yet, but I'm sure you've done a lot of due diligence on Assa Abloy before taking this post and making the change. So in this new role, from what you know so far, do you expect to make a lot of changes at the early stages of your tenure? And looking at the achievements you listed that are certainly highly relevant from Atlas Copco, Where do you think kind of the greatest application of that is going to be at us? And what would be most challenging? Yes. Thank you. No, of course, I think Assaribo, if you look from the start when Assaribo was created as a company, I believe it has been a great success. And definitely also over the last 11 years under the leadership of Johan Molin, and Assar Abdul has made a tremendous track record. And indeed, I look now forward, and I'm very excited to bring Afaroglou in its development now also up to the next level. And my view so far has mainly been outside in. I've talked, of course, to license some other board members to get a better view on our sub grade. But I believe, first of all, we are in a fantastic market. If you just look on the mechanical side, the mechanical log side, I mean, the world is growing. The world urbanization is going on. Countries like China, India, people are moving to the cities. So there will be a lot of locks needed. So the market dynamic definitely are strong. But then next to that, of course, the whole transformation into more electromechanical solutions and then also the whole digital world is something very exciting and something that I definitely also found very interesting for me in this position. So I believe as a marketer, there is great opportunities. Now when it comes to strategy, I believe the strategy has proven to be very successful. Just look at the results, recent results. So definitely now with the information I have today and also with the input I got from the board, I don't see any reason to make big changes on the strategy. The strategy will remain as it is to have strong profitable growth through organic growth and that complement the safe and the right acquisitions. And yes, that's the only thing I can say so far because, again, I don't have that much information yet on some of them. And maybe just a quick follow-up on China specifically. You are inheriting a, I think, somewhat challenging situation there. I think there's a lot been done and it is, I think, under control, but to really take it to another level, as you said, maybe it's more needed. Do you expect that to be an area of disproportionate focus for you? Yes. I'm confident that as I explained, I lived 3 years in Shanghai in China. I traveled also intensively in China itself. So I know China markets rather well. And I believe if you want to be a global leader like we and Assambloy definitely want to be, you also have to be one of the leaders in China. And China is a big market. Therefore, for sure, China must get the right priority and the right attention from management. And I'm confident that my experience will help to bring us up loyalty in China up to the next level. Thank you. Our next question comes from the line of Lars Balsam from Barclays. Please go ahead. Your line is open. Hi, good morning, Lars, Nicole. Good morning. A couple of questions from my side. I guess, Metsu must be busy now trying to find a replacement for you with you spending less than 6 months in that seat. Is there anything other than that, that's holding back an earlier start? I think you mentioned June 2018 as the latest that you would start. That will be question 1. And then maybe just 2 I would be curious as to try to understand how you think about changes to both the management but also to Johan's position, if you like, and role on the board. I guess your Head of Entrance Systems is leaving in a few weeks' time. Is that a position that will be filled before Nico joins or after? And should I expect Johan to retain his board seat after Nico joins? Thanks. Okay. You take the first one. Nico, I take the second. Okay. I can start. No, indeed, we have said that I would start latest somewhere middle of June. Then of course, that will depend on how fast Metso can find a solution for my succession. You can imagine that this came as a surprise in Metso. And I also want to stress that I'm leaving Mezzo and joining Assa Abloy not because of Mezzo, but perhaps thanks to Mezzo in the sense that there is nothing wrong with Metso. I can only say positive things about this company. It's a very good company with a lot of good potential for the future, a lot of good and competent people. It's just that, yes, this opportunity from Assa Abloy came along. And obviously, this is fantastic career move for me. I explained already the reasons why. Okay, the timing is as it is. Okay. Thank you, Nicolas. Then coming over to the second question. We have a strong pipeline of qualified people in Assa Abloy and the vacant position as Head of Division Entrance Systems that is filled already filled with an internal person with very solid experience. And then, UN's future role in the board, it's up to the nomination committee to decide on the composition of the board and they will during spring announce the person that they nominate for the board. However, I would say that my personal view is that it's quite rare that a CEO that is stepping down, that he remains on the board. Understood. Thank you. Thank you. Our next question comes from the line of Graham Phillips from Jefferies. Please go ahead. Your line is open. Yes. Good morning. Thanks for taking my call. Congratulations, Nico. Two questions, please. You made the comment about service when you were at Atlas Copco. Can you talk a little bit about what the opportunities, I know it's very early days, you think there could be at Assarab Loy on that side and particularly because I think one of the successes of compressor technique was that you made the intention to make more acquisitions or own the distribution of the dealer points, which obviously gave you much more closer focus on customers, which is something that Asset Abloy doesn't necessarily have. And then just on M and A, perhaps the contrast in part of your due diligence, I guess you looked at how asset ABLOYM and A teams look because obviously, you some of the success and again, you touched on this at Atlas Copco, has been the several acquisitions you made during your tenure and Compressor Technique. How they compare? I mean, are they sort of in terms of the level of people, number of people and how you'll be able to best utilize that? So if you stop, Nico, and I will fill in. Yes. Okay. No. 1st, that's on service and the opportunities. I see, again, with regards outside in view, I would say that it's, in general, good service opportunities because we should look at the complete installed base. And Assa Abloyas, as being a strong market leader, has, of course, the biggest installed base. And that's really something you can then work on with service. And then I would say that in particular, in the entrance systems division, I see a lot of potential to further develop the service activities. When it comes to margin and acquisitions, of course, I don't know the people in the Assa Abloy acquisition team yet. I can only say again from our side, it looks like a very well oiled machine because if you see the frequency with which Plasab Loy has been doing acquisitions of recent years in a successful way. It can only be that the team is a very successful and definitely well trained team. When it comes to how many people in a dedicated team and how many people in the business, I believe in Assaflo, it's very simple as we did in Atlas Copco. We only have a small core team that handles, I would say, the technicalities of mergers and acquisitions, have the initiative of finding the right targets and negotiating with those targets. And then once the company is acquired, integrating the company is really a responsibility of the business. And that's really, I believe, also the way it should be because in that way, you create ownership for the projects you do in the business with the right people. Thanks very much. And it's Lars Erik Heningfeld. No, I have nothing to add, Liam. Jim. It was really yes, Nico covered it all. Thank you. Our next question comes from the line of Tom Skaldman from Carnegie. Please go ahead. Your line is open. Right. So this is Tom Skaldman from Carnegie. In Helsinki, of course, there are a lot of Meso shareholders that are now wondering what you are doing and what's going on. So I hope you could elaborate a bit more. If it seems that the larger company side that has attracted you to Assa Abloy or could you just get some more clarity in that that we don't need to worry about kind of bad issues at Metso coming up? Yes, Tom. I can definitely elaborate on that. Like I said, it's I'm very excited to join Assamblo. First of all, it's, of course, indeed a much bigger company than NetSol from a market cap point of view. It's a bit more than 4x bigger. From a number of people perspective, it's indeed also 4x bigger. But it's also an industry which is closer to my 26 years of experience in Atlas Copco. And it's definitely an industry where a lot of things are happening now, as I explained earlier, with the whole digitalization and the move into that direction. So it's really me taking an opportunity in Assa Abloy. It's not me running away from Metso. And I believe that is very important that I make that statement. Again, there is no single reason for me to leave Mettso. Obviously, there is a lot of good reasons for me to join Assariboi. But again, Metsu, I believe, is a great company, a lot of potential in the company, a good future and a lot of good people in the organization. And in that aspect, of course, it's always a challenge when the CEO leaves. But Mezzo, like all good companies like Gas Abloyo, like Afros Coco, is not made only of a CEO. And there's many other people that make the success of the company. And in that aspect also, the Chairman has confirmed and reconfirmed that the strategy that we started now is the right strategy and that we will further execute that strategy in NetSol also without me in the future. And of course, I will still be there maximum 6 months. We will see how long I'm still there, but I will be also committed to Metso and making Metso a success till the last day I worked for this company. Okay. Thank you. Thank you. And our next question comes from the line of James Moore from Redburn. Please go ahead. Your line is open. Yes. Hi, Lars. Hi, Nico. It's James from Redburn. Congratulations, Nico. I have a question for Lars and one for you, Nico. Lars, so as Chairman, perhaps I can ask you about the processes, the governance asset when Johan joined back in 2005, the company was a bit of a mess in some sense. It's from an organizational structure. There was a collaboration of good acquisitions. You'd rolled them up. You hadn't integrated them. And for many years, I will start the year and was asset ABLOY. But my sense is that asset has been Atlas Copcoed and many of the decentralized processes have been put in place such that it runs itself better. So to what degree do you think all the processes and governance are in place? Or do you have a vision of something else that now needs to happen? So what do you think is the key strategic changes that need to happen in the business? And Benitez, I just wanted to talk about the time frame. How long do you think it is that you'd like to give to Assa? Well, if I start out first. Well, Niko's mission is to further develop Asabro in line with the successful strategy that has made Asabro the market leader in its industry. So we don't see any need for any major change. And we believe that the processes are in place, but there is always another there is always a better way of doing things and that, of course, also applies for ANSABLOY and that will show itself over the years. And we yes, I think I stopped there and hand over to you, Niko. Yes, Jens, that's on long as I'm employed. It's true that I was only 6 months in Metso, and I understand that it's not common practice to leave after only 6 months. But you should also remember that before Metso, I had 26 years with Atlas Copco. So I would say that I'm very much a 1 company man, and I really like to work on the long term. And that's definitely also the ambition I have now with Assam Boy. This is a function, I believe, that has enough challenges for many years to come. That's a very fair answer. And maybe if I could follow-up and just say if there's one thing that you take from your 26 years at Atlas and when you look at after today, is there if there's one thing that you think you would like to improve on to provide additional value creation to shareholders, What would that be from the early view? In Assa Abloy, you mean then or Yes. No, I think it's too early. Again, I only have the outside in view. And it looks at the first impression that Assa Abloy is a very well run company. Again, I think it has been very successful since its creation and definitely also over the last 11 years when Tier 1 was heading Assambloy. So my first ambition will be to continue the success in a similar manner. Yes. And there, I can add that your background in service is highly relevant. And as you mentioned, it's definitely we believe there is still a potential in the division Entrance Systems for to grow their service business even further. And also, Nico's experience from innovation and how to manage innovation is something important that he brings with him to Assa Abloy. Question comes from the line of Dennis Binksmeyer from Goldman Sachs. Please go ahead. Your line is open. Yes. Hi, good morning from Martin. Nico, congratulations on the new role from us. I have just one question, again, on your commitment to Assa Abloy. I just wondered if you could make any disclosure in regards to the contract you've signed, how long your commitment is with Assa Abloy and whether your compensation targets, whether it's share based or performance based, just any specific targets, just wanted to have any disclosure on this? Yes. Well, I think that I could when it comes to the contract, it's a normal setup that Nico has with a base salary, a short term incentive and a long term incentive program. And we have been running long term incentive programs in Assa Abloy since 2011. And of course, Nico will join the long term incentive program. And you have anything more to add, Nico? No, I think the question was perhaps also on Holland. If you want to stay, I can repeat. I mean, I have the ambition to stay till retirement in Assafloy. I think there is enough challenge in this exciting job for those years to come. Thank you very much. Thank you. Our next question comes from the line of Lucy Coya from Morgan Stanley. Please go ahead. Your line is open. Hi, good morning gentlemen and Carolina. Congratulations on the new position. The question I had, you spoke quite a lot about the digital and digitalization of this industry. I was wondering if you could kind of share with us maybe your view of the Global Tech Business, which is less, of course, now of a hardware business, more becoming on the software side and how you were seeing potentially in a preliminary manner, how to develop this business? And also your view on what should be the place of this business within Assa Abloy considering it's kind of more software based? I think it's much too early for me to have a qualified answer on this because for that, I have to be really into the specific industry and the specific application. I can only say that I can definitely use my experience on the digital side from Apostoco, where we were one of the first ones to connect compressed air installations over the cloud. And today, I think Adelscorp has more than 100,000 compressor installations connected where you can read out conditions of compressors from your computer or from your iPhone, wherever you are in the world. And there is a lot of really breakthrough things happening in Atlas Copco around connectivity. When you talk about digitalization, I believe you also should not only look at the way you sell and the way you can eventually improve your sales and or your profitability, but you can also use digitalization to improve your operations. And also there, I think there is a lot of good examples in Atlas Copco. We, at that time and day to day, have improved their service operations to make it really fully automatic in a digital way. But again, too early to comment specifically on the SR Bloy challenges. Thank you. Thank you. Our next question comes from the line of Matthew Spare from Royal Bank of Canada. Please go ahead. Your line is open. Sorry if I missed it earlier, but in terms of transition and overlap with Mr. Meline, is there any? Or with the day that you start, does Mr. Meline leave? And then the second one I had was on you talked about decentralization, you're a fan of that. And just from your outsider perspective, how much further does does that need more decentralization if you're comparing it to Atlas Copco where you used to work? Just your thoughts on how far Assa is down that journey because obviously it can bring disadvantages. You might say that what happened in China was sort of a consequence of decentralization as well. So just your early thoughts on where Assa is on that journey. I can start off with Mr. Moline. Jan Moline will ensure that we have a smooth transition between him and Nico. So there will be overlap and how big that will be, we will decide when that time comes. And then I hand over to you, Nik, regarding the second question. Perhaps first on net on Jan Malin. Of course, I want to gain 11 years of experience of Johan because that will give me a quick start. So definitely, I look forward to that overlap with Q1. When it comes to decentralization, again, a very rough view today, but it looks very similar between Atlas Copco and Assa Abloy, where perhaps some of the activities of Assa Abloy are still a bit more centralized because there is not the right volume yet to bring it more decentralized. And when it comes specifically to China, what you mentioned, I don't believe this has something to do with centralization or decentralization. I believe these type of challenges can also be better solved by decentralization than centralization. It was just over the age of what happened So we have time for a final question. Who gets that one? Thank you. Our final question comes from the line of Gael De Bruy from Deutsche Bank. Please go ahead. Your line is open. Thank you so very much and good morning everybody. I guess an important part of the Assai Abloy business model and success has relied on acquisitions. So perhaps could you talk a bit more about, Nico, about your own experience, expertise and approach, general approach to M and A? And then perhaps, in particular, on the software side? Yes, I can do that. And then I have to go back to my Atlas Copco time when we started the service division, at that time, we started to do very frequent acquisitions, perhaps not with the same pace as Assar Bloy, but we would also do an acquisition, I would say, every 2 months or so. Most of them would also be in that between €30,000,000 and €100,000,000 range. So very similar to Ansan Blore, where either we were acquiring companies for the installed base in order to leverage our service capabilities, and we were acquiring companies for technology. And that journey has then continued when I was having the Construction Technique business area and then definitely also the last 3 years when I was having Compressive Technique business area, where the acquisition of AdWords was made before I became the business area president, but I wasn't very much involved in the integration process. And Veradam was definitely actively involved when we acquired Labels, another vacuum company. So I would say that I have a rather vast experience on one side doing it myself from a practical point of view because also earlier in my career, I was also an integration manager a long time ago at Las Cocobalt Prime Equipment, the biggest rental company in the U. S. So I have really practical hands on experience. And then of course, I've also led and supervised several acquisitions as the business as a President in Rostecorp. And thank you all of you for calling in, and thank you for your attention. And take the chance to wish all of you Merry Christmas and Happy New Year in due course. Thank you and goodbye.