Earnings Call: Q1 2016

Apr 27, 2016

Ladies and gentlemen, welcome to Assa Bloy and the 1st quarter reporting. A good quarter again for Assa Bloy, which I feel very good about. So let's now dive into the numbers as such. So we saw a good start of the year, very much driven by America that continued in a strong way with strong growth. Goods growth in EMEA and Entrance Systems, and Entrance Systems is a mix of America and Europe primarily. And we saw growth in Global Tech despite very strong growth last year and negative in APAC as we have been used to see mainly due to or only due to China more or less, which continued weak in the quarter. And of course, this quarter, as we have talked about earlier, it was a little bit shorter in number of working days due to the Easter. Turnover increased by 4% or SEK 15,900,000,000 on the back of 3% organic, 3% acquired growth and a minus two percent currency. So now we see that the currency that was so positive last year starts to turn slightly negative. EBIT also follows suit by growing by 4% to SEK2.4 billion and we had here a negative currency effect of SEK76 1,000,000 and earnings per share increased by 1 percent, SEK1.47 and this was due to that we saw somewhat higher interest rates mainly in the U. S. On the U. S. Side. Carolina will give a little bit more highlights on the interest later on. Underlying tax rates remained stable on 26%. Turning now to the market. Here, I always get excited and this time is no different. We had a big show in the U. S. And we got 6 number one prices. I will not go through all of them, even though I would love to do that. We may have no time for it. But number 2 there, GoID, virtualized identity platform. That is in fact what I think will happen in the future. A lot of what you have in your thick wallet will move into the mobile phone. And in this case, it's about driving license and other IDs, so national IDs and car licenses, etcetera, etcetera, that will move into the mobile phone and that will become the device of either complementary or the only device where you identify yourself. So this is something where ASSA ABLOY has taken a lead in and has been seen also by the market as something very interesting. Looking in also to the other things like KS200, M380, some strange names. I will come back to that on another slide. But here, we talk about the green wave that is taking place in our industry. And we see there is a lot of demand building up for green solutions. And of course, we have then on the innovation side started to come out with a complete range of products that will meet that kind of demand. So I'll come back to that. We saw also strong growth of door closers. Those of you who have followed us for a long time, 3, 4 years ago, we launched Door Closers for the 1st. And now we see that it's really growing, has been growing for several years. And the last addition to our range was, in fact, a small closer for hotels mainly, but those other environments where you can't take noise. And this closer, even if you slam it, will never make any noise because it has a dampener built in and that is a raw innovative thing where we have a nice patent on, if you will become a big product in environments like hotels and hospitals and the kind. And the other one is a complete green door closer, which is in fact a small battery backup inside the box that you see there. Otherwise, it's a genset inside. So every time you go through the door, the door is generating power. And when you have a handicapped person coming, he pushes the push bar on the wall, the door goes up and it uses the power of the non handicap people. So it's a rather clever solution unless you have many handicap because then the battery needs to be supported the evolution. But it's a very nice smooth solution for the market as well. We saw also strong growth in pedestrian door automation. We have been developing a completely new range, very good features relative to what the market has today and we see a very strong pickup of demand. So growth is coming very strongly on pedestrian doors recent time. The whole range has been renewed, by the way. So it's really an exciting evolution. And then I mentioned the Eco hardware. So let's turn into that. And here we see to the left there, it looks like a mirror, perhaps not a good picture here, but it is like a mirror, but beneath that mirror or black panel is a solar panel. So this lock is something that you install and forget provided that you have a reasonable light in your corridor because it lives from the light of the corridor. And this again is something for hotels and the kind where you sort of have a long lasting time and you don't want to have maintenance. So this is a sort of maintenance free lock. If you cannot trust the power of the corridor, you can also add induction to it. So you put some power induction like your stove at home and the lock will operate eternally, so to speak. And then you see then the door operated with the genset, again, something where you don't need power. So it's very exciting evolution. We also have this EcoFlex lock. It won the price again. It has faced 99% power when you install it in a building. So it's principally it has only 1% power consumption left, so to speak. Strikes are also a source of powered things and the strike in this case will be safe something like 90 percent plus energy when you install this new strike. And a magnet, those of you especially those of you who come from England, there when you have a magnet, it always stands on power. And it only goes off power when you open the door. So that means that you're only goes on power when it feels that you approach the doors. It's a sensor that feels your proximity of you and then it closes the door unless you have access rights. So this one saves more than 80% power. So also very interesting evolution. So in principle, we have created a complete suite of products in the U. S. In this case, but Europe has similar products, which means that we can take a total door opening solution where we are close to new consumption of power, quite a revolutionary thing for green buildings. Turning now to turnover. We see we saw in quarter strong and good growth in the U. S, 7% organic growth. Europe had a little bit less, 2% altogether, where EMEA was growing 3%, but and then Pacific, 0%, and mainly due to Australia had a weak start of the year, while New Zealand is doing very well. And so we see still the picture we have from last year where the mature markets are really driving growth on a global scale. Europe is, of course, due to the 2% is due to that we have Easter effect much stronger in year 1, so 3 times down. And considering then that we did quite some acquisitions in Brazil in the quarter, in Q4 last year, we're going to see some dilution during this year. So I'm very pleased with the evolution of the U. S. A, considering also that we have some heavy load from Brazil where we went in, in a situation where the economy is in recession, but a positive situation. Asia Pacific, flat evolution like we've seen for several years, also very pleased with because it's not easy in China, I can tell you. Very heavy pressure, but we have now reduced workforce with close to 50% since 3 years back, a little bit more than 3 years back because we started before the downturn hit us. And in fact, that is what saves us and mitigates really the decline as such. On the growth side, we saw South Asia continue to grow strongly and also New Zealand, while Australia, as I already mentioned, was a little weaker and North Asia was also weaker. North Asia last year had very big exports into home automation, which was less in this quarter, which drove growth quite a bit. And as I mentioned, in China was, of course, not an ideal situation. For the group, it was minus 6% and for APAC, it was also in the same of the same magnitude. Global Tech, here, every time I stand there and say, oh, we sold more projects, and that is low margin. And that means that we have some dilution effect here. Globaltech as such, 16.9%, down from 17.4% last year. Here also, we acquired Quantum Secure and those of you that know that you buy acquired tech companies, you have a lot of depreciation in those. So the EBITDA is okay, but sorry, yes, and the EBIT is not and we measure EBIT here. So we had quite some dilution from Quantum Secure as well. So in fact, that was so in fact, without those things, Global Tech was in a good shape in the sense that despite then only 1% growth, we kept the margin intact, not accounting then this acquisition of Quanti Secure. Hospitality, last year, we had Starboard and we came in at the same number more or less, a little bit growth relative last year, despite that we had a very big spike in our invoicing. So, a very good evolution here as well. And profit wise, I'm rather pleased. Things develop as they should. You can see there on the decline side that gov ID is among again on the negative. What we see now is that some of these countries where we had problems to get money seems to get money liberated because they like to have passports and national IDs, so which is no wonder, but some of them have decided not to have it for a while. So, I think we're going to hopefully, this is the last quarter we see decline because order intake on GAVA ID has been very positive in the last 4 quarters. So, it should start to follow. I probably have to eat it up next time when we meet, but it looks good from that point of view. And that's a reasonably profitable business. And Entrance Systems, here again, fantastic leverage, 0.9%. Again, we see the consolidation gives very good results. So from 12% to 12.3%, EBIT improvement despite a heavy dilution from acquisitions, in this case, 0.6. We're adding quite some Bodymaster entrance systems. Strong growth in the American sector, just like America, strong growth in Forefront MR, which are American. High speed doors also partly American, door automatics also partly American, all growing strongly in the U. S. Market, while we saw flat EU in all areas, so weaker there. And no wonder, if you look to industrial companies reporting, most of them, if not all of them, have negative growth in the industry. So, we also feel that on the industrial door side. But apart from that, a very positive picture and good leverage from our consolidation efforts. That concludes my overview. I'd like now to hand over to Carolina that will take you through the financials. Thank you. Thank you, Johan. Good morning. Well, a good beginning of the year, 2016, for Assa Abloy, especially proud of the 3% organic in a rather shaky world. And with that, I will move into the financial highlights. And if we look at this 3% organic growth, we estimate it to be 1% net price increase and 2% volume. We also have one working day less due to the Easter effect being in the Q1 this year. And as Johan mentioned, quite some difference on the different organic growth in the different divisions, with Americas being the strongest and Apex still having a tough time in China. Acquired growth, 3%. It's a little bit lower than I said last time. We estimated it to be 4%. And the reason for that is that we have divested car So the net effect is then plus 3% on acquired growth in the quarter. And then currency. Last year's big hitter. You can see last year, we had average of 13% impact for the full year, but we had quarters with up to 20% plus. So of course, that was a big change to this year where we have a slight minus, so minus 2 percent on the quarter for currency here. Overall, top line up 4% and also the operating income up 4%. And I think very impressive as well, the margin basically flat, and that is including the dilution that we have both from currency and acquisitions. So good margin development there as well. Cash flow. While cash flow in the Q1 is seasonally weak for us, and this was no exception, It's basically in line with last year, almost SEK 500,000,000 in cash flow. And then EPS, up 1% to DKK1.47. And the difference here between the EBITDA and the EPS is that we have a higher financial net, and I'll come back to that during important one on the organic one, really comparing like for like. And here, we see 3% organic growth. And normally, we would need 3% sort of just to keep our margin to balance off the inflation that we see in the world. But with 3%, we managed to improve our margins with 40 basis points. And we saw really good results, specifically in Americas and Entrance Systems, both 90 basis points up here, both thanks to the growth that they've had, but also really good efficiency savings that they both saw. We also see Global Tech. Global Tech had only 1% growth and basically flat on the margin. And I must say, that's not bad considering how high improvement they had last year, plus that they still have a lot of those project sales that come and go. And in this quarter, they were there. So good margin efficiency, but then we have the investments and inflation sort of on the other side. So how should we think about ahead then when hopefully we have an high organic growth only on the day effect, so to speak? Could you keep this so we could expect a higher leverage with higher organic growth? We have kept it and we try to go in balance and that is what we always aim at. So, if we think it's going to grow more, we're probably going to allow ourselves to add a little bit more body mass in specification people and in R and D. So last year, we opened 2 new tech center and that is where we thought we would have some growth and we saw we some savings, but we are not intending to go to 17%, 18%, 90% EBIT. We rather grow the business. And we have shown over the years that innovation is really a carrier for growth. So I think that is much more worse for us. And that is why we always have savings, but it's also why we always add cost if we can. So it's very difficult to pedal and balance those things. But so far, we've been reasonably successful on that. 30% leverage, but with a lower threshold in the need for organic growth is the answer then. Okay, I'll get back in line. Thanks. Andreas? Andreas from Koelle Asset Management. A question on the direct sales for Entrance System. I find it very interesting, you increasing focus there. How big could that become? Could that over time double the size of Entrance System in the U. S? They are in a market that is if you look to the total market, which they are addressing, they have something like 10% world market, of course, much bigger in Europe and Americas. But in America, the end user segment is quite big, much bigger than indirect for obvious reasons because you have margin in between. So, we talk of a multimillion growth potential here when we move forward. Wonderful. Thank you. Perfect. Then let's jump into the telephone conference. Operator? No? I can do one more question from my side then. If we look at China, I mean, it continued to drop 6% organically in the quarter. How do you see this progressing? I mean, you have previous 16. Is this still something? Has this changed incrementally from last 16. Is this still something? Has this changed incrementally from last quarter or? When I listen to our people, they're always optimistic. When I listen to them at the end of the quarter, they're less optimistic. So, but my own personal view is, I think we are in for a decline of some 40%. And we've seen, to our estimation, something like 2025. Will it come now or later? We don't know because the government is every now and then stepping in, putting more money into the fire and then it goes for a while. In recent time, they have put some more money into the fire. So hopefully, we see some easening. But I think it's they have a very, very high degree of investment in infrastructure, including housing. And therefore, I think it's only natural that they fall down to a more an emerging market level, which is in fact, in my estimation, some 40% less than when they were 3, 4 years back in time. So, it will probably leak a little bit. The question is then will we leak? We hope not to because we are really doing a lot of efforts in order to grow the business. So, we will see. But it's very tough right now. Heavy price pressure, a lot of irrational activities, but still we feel rather pleased because we dropped, in our opinion, less than the market has done. While on it, you talk about irrational behavior. Can you elaborate a bit about the rest of the world in terms of competition? I mean, we've had some mergers in Europe and then you have a U. S. Competitor, which quite large. Is it a different situation in Europe? Or has it I think you're referring to dormakaba. They are right now going to merge towards the mid of this year. So I think they are busy doing what they do. So it will take some time. But of course, I think it's not bad. In consolidating economy, if 2 becomes 1, I think it's not bad for a company like us. It's a better situation in my opinion. And it's easier then to sort of measure how your competitors, where they are relative yourself. We are a good citizen in the sense that we are not sort of trying to push prices down, but we work in a sort of stabilizing environment. And since we are market leaders, we normally also take the lead increasing the price when necessary. Perfect. Should we try the telephone conference again, please? Yes. Our first question comes from Markus Almerud, Kepler Cheuvreux. Please go ahead. Yes. Hi, Markus Almerat here. I'd like to dig into specific markets in Europe, if I can. So France and also the U. K. So France seems to have turned the corner. Can you just elaborate a little bit on that? Is it something that you think is sustainable? Or is it a full start again? And also in the U. K, U. K. Seems to be having problems on many areas. Is that also temporary? Is it a Brexit? Or is it something else? 1st, France, we see the residential sector has started to pick up in recent time if you look to statistics. So, I think that is what we see in our numbers that they are not going down as they used to do. Will it then start to grow? I don't know. With France, you better be cautious. We've seen many years of flattish at best evolution. If you take the U. K, it's the opposite situation. In the last 12 months, we've seen quite a weak residential construction cycle. And we are quite big in the U. K. On the DIY side. We have felt that decline. So, it's 2 different explanations, I would say. We're still on the non residential side in the UK. We have a very good cycle right now, a very good growth. So, we believe that sector is rather robust. And the end product has been that the U. K. Has only grown with by a few percent in the last year. Okay. Thank you. And then if I can just follow-up, if you could just help us with as you usually do about the trading how trading has started in April, please? Well, April will be looks like a month around in the region of 5% organic growth. But it's difficult to say because it can be more, it can be less simply because at least my experience is when our companies are forecasting, they forget that they have this one extra working day. So, sometimes you have a positive surprise. I hope I will get a positive surprise. But right now, it looks like 5%. And if you look at the daily sales rates in like in March where we had the Easter, was it fairly stable throughout March? Or did you see an acceleration or deceleration throughout? March was January was a slow month, I think, for most industries, very slow. It was a little bit scary, while February, March was solid. So that is the way it looked in the quarter. So, we had growth. January was in fact, I don't remember if it was negative, but it was a surprisingly weak month. Okay. Thank you very much. Our next question comes from Guillermo Beiney from UBS. Please go ahead. Sorry, I was laughing at my name, but it's Guillermo Peigne from UBS. And I wanted to ask a question to Carolina first, FX. You suggested that the bottom line, so at the end of the year, you won't have any dilution from the currency. Is that on a Q4 basis or on an annual basis? Meaning that if it's on an annual basis, then you will have to offset the dilution you have with accretion towards the end of the year. Am I correct? Yes. It is on an annual basis. I mean, we have said that minus 20 basis points in the quarter and similar in the second one, doesn't mean a big plus in the second half to make it flat though, but it is an estimate for the full year that we will be basically flat and no margin dilution for the full year on currency. Thank you very much. And then Hospitality, could you comment a bit on the growth you've seen in Q1? I know I understand this top comps, so just want to see how much is declining or what are the rates there? And actually, what do you see towards 2017 in terms of pipeline? Well, we don't have much visibility since hotels are ordered and shipped in a few months' time. So, it's very difficult to but what we do know and see is that China is weakening like in every other industry and we see a weakening in a number of emerging markets. Apart from that, it looks good and we have new technology that is very popular. But we should remember that we've grown this business tremendously in the last few years And therefore, we are, of course, meeting very high numbers. But the Q1 now was a few percent growth. And I don't know, we normally never give forecast, but I'm not negative to the outlook, but of course cautious in the sense that we have seen very robust hotel market for years now. So by experience, I know that it's not robust internally. Somewhere, we hit sort of where it starts to peak. I'm not sure if you're there now. Orders were very good in the Q1, I'd like to add. So hopefully, we will see some improvement in the Q2. But we are meeting very high numbers of last year. Thank you. And then last question regarding mobile access solutions. Obviously, all the conversation is focused on hospitality, but I wonder when are we going to see office and commercial or non residential construction starting to be part of this growth angle for you? Well, on the mobile side, we run a number of test installations with governments in several locations. So that looks rather positive. And of course, it's an evaluation that most of them are going through. When it comes to virtual keys for office buildings, we see a robust demand picking up now and many companies are preparing. We see very strong sales of sales readers, which are the ones that are suitable for this type of applications. And we have launched full SDKs for all our partners so that they can start selling volumes of these solutions. And so far, it looks very good, even though I don't think we should expect it to explode. But I think it's going to be definitely a complementary solution to opening the door next to the white card that you use the ID card that you use. I used it myself since a year back and I must say, I never pick up my card anymore. Unfortunately, that might be that the cars disappear, but it's because it's extremely handy, very, very handy. Yes, that's very interesting. But do you think that when would be material for you to start to comment on kind of revenues and growth trends? I'm just wondering. Thank you. Could you repeat that question? It was a little bit scrambled. Yes. Sorry. When this is very interesting. And I just wonder when it would be material enough for you to comment any kind of revenue impact, even though I guess at the beginning minor growth prospects? Well, it's already several $1,000,000 coming in. So, it is material even though it's in the total of Global Tech does not have a very strong effect yet. But we see definitely it's picking up at a high pace. And in the hotel side, it has grown quite a bit. So for us and if you look to Global Tech as a whole, it has an impact on the margin already. Our next question comes from Andreas Willi, JPMorgan. Please go ahead. Yes. Good morning, everybody. I have two questions, please, more on the numbers side. If we look at Asia Pac, maybe after declining trends in China and improve elsewhere, maybe you could comment a little bit on margin developments in the 2 blocks separately for us to better understand kind of the mix impact versus the operating leverage impact there. Are margins stable to up in outside China and therefore the margin is all an impact of China? Or is there also something else going on? And secondly, on the working days, it was in Europe, you had the Easter effect, but most companies say Q1 globally had about the same working days as last year given the 29th February and 2 working days more in China this year. So what do you expect for Q2 in terms of year on year working days on your calculations? Okay. So maybe start with the APAC margin there. We have very healthy margins, I would say, outside of China. So yes, there is a of course, China with Chinese New Year is low overall. Of course, China with Chinese New Year is low overall from a sales perspective. But within China, with the drop we see there, see pressure on the margins as well. But part of that is mitigated by deficiencies, but they're not managing totally to hold up on that. And the second question was on working days. Yes, well, we estimate an effect of 1 working day less in the Q1, but that again is more in Europe and less in other parts of the world. So for the second quarter, it's probably 1, maybe 2 working days more compared to last year, but again, a little bit differently in different parts of the world. Thank you. Our next question comes from Ben Mummery, Morgan Stanley. Just on Americas and residential business, particularly segments like health care and education? Thank you. Health care is the weakest sector in right now and it has been so for all the time. In fact, it has never really picked up strongly. It's in the positive territory, but not growing very much. Looking to institutions, it has been a similar situation, but we see an improved trend there. So we think it looks good, so to speak. On the coat level, we still see good healthy robust increases of our coats. So, that means most likely that we will see some improvement going forward on growth. It doesn't mean in percentage more, but it will mean more rather that we continue to grow the business. Thank you. And then on the GoID virtualized identity platform that you launched at ISC West, just maybe a comment on just who are the main competitors in this market? It sounds like you move outside of your normal competitive environment. And how fast can this industry develop, do you think? Well, right now, there are not many competitors because it's a new thing. So and CEOS is very unique in this sense. It's a 3 layer encrypted transaction you can have and it also has a full it's very it's similar to the virtual key system in fact. And since we started a few years back, we don't see so many yet. But of course, there will be competition like any other market in that field as well. But for the time being, I think it can become big. It's much more practical to have it and things you don't think about like some countries, they're going for, for instance, car registration where there are many car thefts. They go for car registration when you have your car ID rather on a virtual than have it on a piece of paper or that you normally have in your car that is stolen with the car, by the way. And it's very difficult to force these things. And then the policeman, whoever is an official, he has it in his unit as well. So you have an instant check and you can put bio in and biometrics in as well, if you like. So it's a rather strong authentication system that you can put up. Thank you. And then a final one, just a follow-up. So the kind of early turn maybe you see in markets like France, Spain, just where are your sales in those countries relative to where we were at the peak of the construction cycle back in 'six, 'seven? And how far below are they at that level? You asked my memory here. You put it on hard string pressure. France is probably around 20% 15%, 20% down in absolute value. While Spain, if you look to the domestic market, we've done a lot of we do like to export out Spain as well. It's probably more down like 40%, 35%, 40%. Okay. Thank you very much. More questions from the conference and then we jump back to the venue here in Stockholm, okay? Operator? Next question comes from Sebastian Grouter, BNP Paribas. Please go ahead. Hi, good morning. A question on China first. I'm just trying to understand what is the lifetime between the business, Sabre business in China and the housing start data if you look at historically the performance of the business? Are we talking about a few quarters? It could be or could it come quicker than that? I'm not sure if I understood you rightly, but normally if I understood your question, because it was a bit scrambled. It's a lag from sort of money comes into the economy of something like 9, 12 months, sometimes 15 months, depends on how land is allocated to the construction company or not, because there is a lot of preparatory work to put up a building. And sometimes, if you take the Western world, but you asked about China, they can take 3, 4 years because you have all these protests about buildings that are regular in the Western world. It's not the same in China. It's much faster. But still, lag time is probably average 9 to 12 months at least. Okay. And on the Green Solutions, I mean, it means I mean, it's a new growth story for Assafloi. Just trying to understand what is the average payback you have on those products? What is the electricity consumption in the total life cycle cost of the product? Is it meaningful to trigger replacement cycle from your customer or we are talking many about new buildings, greener buildings? Well, almost all new buildings under construction are having are looking for a green certificate. And that means that and a lock of this kind gives you lead points if you are in the USA. In the USA, they calculate 55% on new constructed buildings this year or more will be green. And that means that there is a very high demand for this type of solutions. And we have also launched the doors as such. In Europe, that percent is probably more the 30% dependent, but it varies between the markets. And in China, even there, there is now in excess of 20% expected to be in 2016. And that means if you have these timely products, they are very they are sort of differentiated from anyone else. So, it's a very important add on to our portfolio and the margins are not bad. Should not trigger replacement cycle, I mean, in existing buildings, there is or does it make sense to change the product with the Krina 1 in existing buildings and given the payback you offer? If you ask me and I had an existing building, I would not hesitate. It's like LED lightning and you save some $15, dollars 30 per year per lock if you have a power full power lock on the front door. You save that money. In a few years' time, you have your lock back. So it's worth quite some money to have that saving. So and apart from then that you get lead points. So if you renovate, at least I would recommend anyone to take those solutions. So let's jump back to the venue in Stockholm. Peter there? Couple of questions related to China, if I may. Firstly, could you update us on the sort of write down earn out net that we saw for the first time in the Q4? Anything to comment upon this one? Yes. No write down and no earn out. So no effects in this quarter. I mean that said, collection in China is really tough and it continues to be tough, and we continue to monitor it as Hawx, even Johan is involved because it's not collected or it's not sold until it's really collected, and the days are on roughly 150 days now. Up from 100 to sort of You have to look at the seasonality. So year over year, it's 25 days more. Okay. Good luck there. On the sort of China strategy, we could really report that despite and listen to you, Johan, that despite you being sort of a bit cautious on China as such, you continue to want to invest in emerging markets and effectively in China as well. So what's the strategy there? And maybe we could start the answer by giving us a view of your exposure in Tier 1, Tier 2, Tier 3 cities? Well, on the rural areas, the demand has more or less gone away. So, it's bigger cities or midsized cities that are having growth, enjoying growth in China. So, of course, we are concentrating on those. When it comes to our manufacturing footprint, we have presently 22 facilities in China in manufacturing because our type of tours are rather local. And there, we are looking then to synergies, which are quite big. And we're also automating. So, I'm rather optimistic in what we do. And I hopefully also corruption in China in the way we know it that some companies are competing outside of the books, to speak, and not on equal terms. I think with the present government in China, hopefully, we get many more companies following the local regulations when it comes to taxes and other things. And then I think we will get become very competitive. Right now, we are competitive, but of course, we are not always competing on equal terms. So, but I'm optimistic in China, remember, 1,300,000,000 people, emerging markets, fantastic, 85% of our world population and they're all getting wealth as we look even in these difficult times. So growth will be there. It's a matter of positioning yourself there and be ready. Thank you. And I mean, you answered that the rural areas demand is basically gone. That needs to imply that you have a quite strong standing in the big cities still. Maybe we could look at that maybe from a year ago or so. Are we talking about 80% to 20% split in terms of revenue distribution back then or I mean if I look at the year on year organic decline the couple of quarters, I'm a bit surprised that your decline has not been larger since you have been I wasn't surprised. But what I can say is on the door side, we've done fantastic. We have continued to the only area where we have really seen quite some loss is on the in the north where you have the heavy industry. For the rest, we've been able to compensate with bigger cities where we have had fallen demand. So, on that side, out of 6 sites, 5 have been growing in the last year. So, we've been very pleased with that. The 6th one is the one is in the north. And on the lock side, on the other side, where we do OEM to other competitors, we have seen quite significant declines. So that tells us the market is probably quite weak. But we have been able to compensate. And I think one thing, we have changed all our names to AssaBLOY and I think big Chinese corporations, they like to work with strong brand names that will be there tomorrow. Unfortunately, they don't pay us so fast as we would like, but at least they are there and they are buying from us. Sorry about all these questions. But if this demand situation is still there for the remainder of the year and with this credit situation, would we see a sort of a reversal of earn outs versus what you have booked? Well, it's an estimate of what we believe. I think it's more looking of what we go forward because the earn outs are staged year after year. You do an estimate as you go. So of course, there would have to be a big pickup to reverse the previous I think important now is to look forward and see if they manage the well, what we believe they will manage. So it's a potential that you actually need to less cash out for 2016 as a full year? If they don't perform, but I would rather that they did perform because it's better companies than I pay for it. Okay. Thanks a lot for all of that answers. Thanks. So time flies, but I think we have time for one more question from the telephone conference or no? So, unfortunately not, Peter, it's your fault. Thank you very much, Johan and Karlina. Thank you, everybody, for coming. As you can see from my smile, I'm rather happy with this quarter. It's another quarter of stability for Masa Abloy with good growth. So I'm looking forward to the continuation of the year. So thank you.