Ladies and gentlemen, welcome to Assa Abloy and the second quarter reporting. Yet another report full of sunshine where I feel very proud over. Let's turn over to the highlights on the profitability side. We saw strong development in the quarter with strong growth in Global Tech, Americas, and Entrance, and EMEA had also good growth in the quarter as such. APAC continued negative, mainly due, or only due to China, which is still negative for us when it comes to development. Sales improved by 22% to SEK 17.1 billion, with 4% organic, 3% acquired growth, and 15% currency effect. The EBIT improved in the same way, 24% up to SEK 2.7 billion, with a currency effect of SEK 300 million. Earnings per share improved also by 22% to SEK 1.70. Turning now to the first half year, it looks pretty much the same.
Very nice evolution, I must say. Strong growth in Americas and Global Tech. Here, Americas has grown 6% since the beginning of the year, and Global Tech more than 10% since the beginning. Good growth in EMEA and Entrance. Really in this quarter, I think EMEA is really the positive point in the sense that we saw an acceleration of growth in the quarter. APAC was also a little bit weak for the first half year, a little bit less negative in China in the second quarter to the first quarter, but not a big difference. China, unfortunately, continues in a weak direction. Sales improved by 23% on the back of 4% organic, 3% acquired growth, and 16% currency, and attained SEK 32.3 billion in total turnover. EBIT improved even better, 24% to almost SEK 5.1 billion, with currency effect of SEK 550 million.
Earnings per share improved by 25% to SEK 3.15. In the marketplace, it's difficult for me to choose really what I should talk about, because we have so many good things happening around in the world. One thing we haven't discussed before is the Entrance Systems development, which has been growing at 5% pace, which is rather high in a difficult market, considering also that a large portion are industrial doors here. We see more and more large projects that we win, where we go in and specify a full building with all moving doors included. It's a very positive evolution, and we can see clearly that their total door solutions is also interesting, not only inside the building, but also on the exterior of the building. A very positive evolution. On Identity Assurance, we bought that company a few years back.
It has been a difficult time for us in the sense to get that growing. We decided a few years back to invest much more in R&D, we are investing about $4 million extra in R&D for this company. We saw now in this quarter how we start to get high acceptance with the customers by introducing cloud services, threat detection, and also together with Microsoft, that you can use your mobile for authentication and tap onto your computer. A number of things that are driving demand in a positive sense. On hospitality side, we have discussed it before, but I couldn't leave it out. It's simply good.
Many hotels are standardizing our mobile key locks. They see a good chance to improve their revenues, and that is the main driver for them, meaning that they don't pay commissions to their partners, but rather take the money in their own pockets. Apart from that, the administration to check in and check out simplifies quite a bit. On the DDL side, we have taken global leadership on the digital door locks. We see a very positive evolution here as well. Especially home automation companies are rather excited about the opportunity to let the lock arm and disarm their alarm systems and sort of regulate what happens in the house. This means that people will start to get a relation to the lock that they haven't had in the past and probably also exchange their locks on a higher frequency.
We see clearly that there's a strong demand in this field and also in Europe and in Asia. Far, we have mainly broken through in the U.S. market, where we've seen high acceptance for these solutions, but now also Europe and Asia is integrating into this direction. You see the little gray thing there, which is the round thing in the right corner. That is our new knob lock electronic lock that we have launched in Europe, because half of the European doors have knob locks and not handles. This has became very popular in only a few months' time. A promising development. Turning to group sales, difficult markets, but when I look to the numbers, it doesn't look so difficult. They're quite good. We have emerging markets improved by 2% this point, 25%, despite then the decline in China.
That means that other markets are developing in a very positive way. Looking to then the growth in the different regions, organically, Americas grew 8% since the beginning of the year. Very solid growth. That means that other divisions in Americas are growing faster in North America, and it's mainly then the industrial side, but also Global Tech that is growing very fast in North America. Europe grew 3% organically. Pacific 8%. If you add those three, those are the mature markets. The mature markets have behaved very well in the beginning of the year, or the first half of the year. Looking to Latin America, 6% organic growth. Africa, only 3% growth, but there we have a rather large relation with Angola. They run out of money in the first half. We expect to see money in the second half.
That means we can start delivery again. Taking that away, it's growing more than 10% organically. Looking to Asia, we had 1% organic growth. There, of course, if you take out China, we're up into 6%. It's a reasonably good situation, where all parts of Asia is growing except China itself. This curve looks a little bit flat, but it isn't. If you look to 2010, our turnover was there back then in SEK 35 billion, and now it's SEK 66 billion. We've grown 87% since then, and this is of course, without currency. Out of currency, and a portion of that is organic growth, which I feel very good about. We have been growing 2%-4% organically year after year after the crisis, despite an anemic market. Acquisitions have given us more than 5% per annum. Altogether, it's 87% growth.
In the quarter, this quarter was no exception. We grew 7% nominally. Looking to profitability, it's even better. We had SEK 5.5 billion back then, or a little bit more than SEK 5 billion back then. This is the first quarter we shot through the SEK 10 billion mark, SEK 10.2 billion or SEK 10.3 almost, an increase over last year by 23%. You can see the inclination of the curve. Here, of course, is doped a little bit by the currency, like for everybody else, reporting in Swedish krona. This one I think doesn't look much, but it is very important, at least to us. What we see here is a rather flat curve, where we are between 16% and 17% profitability, which we said many years ago, that's where we're going to be.
This is due to dilution that we get from acquisitions that continues to pull the curve down. We have leverage. In this quarter, we had leverage of 0.4%, and we have dilution, and we have currency in this quarter of 0.2%, which improved our profitability by two tenths of a percent. Looking to the 12 months, which you see there in the run rate, we are 16.3%, up one-tenth from last year, which was then 16.2%. Here is one of the secrets how we have achieved this. We have continuous programs to savings. Carolina will tell you more what savings there are, but we feel rather good about it. We saw in the quarter continued savings, 139 people left.
We have closed 71 factories since we started these programs, and we have still quite some provision to provide for the remainder of the closures, SEK 770 million in the balance sheet. This side, it looks pretty good when it comes to continued programs and savings. On the other side, a good evolution also. I mentioned that two-tenths of a percent improvement in the quarter, a leverage of 0.4%, very good from the organic growth. Here you can see that price has taken a bigger percentage than we have seen in the past. This is not because it's easy to increase price, it's because many currencies have devaluated. We have taken several rounds of price increases in Europe and in the emerging markets where we have seen quite heavy drops of the currencies.
This is a reflection of that we are compensating for declines of value of various currencies across the globe. The margin increased by 0.2%, with organic growth driving and manufacturing footprint, as we already saw, currency acquisition took out two-tenths of a percent. As I mentioned, the leverage was 0.4%. Acquisitions, a lot of activity. Unfortunately, you guys are driving the share values very high, the expectations from the sellers are rather high as well, which is no wonder. That means that we are a little bit careful to move in right now simply because the multiples are moving up in number quite a bit. It's fully active. We have many dialogues going, we have refrained from doing a few acquisitions in the quarter that we could have done simply due to price. I'm very positive about our ability.
Short-term, however, with the pricing, we are a little bit careful. Despite that, we have added 3% turnover from acquisitions, so we are well in the target of 5% per annum. There is no real problem in itself. It's just that we like to keep the money if we can. Looking to the acquisitions we did in the quarter, L-Door, a typical bolt-on for Entrance Systems, 175 employees, busy in Belgium with sales and service in industrial doors and docking stations and residential doors. Very strong coverage in a specific region. A beautiful bolt-on acquisition with the margin due to that they have a small body mass is rather low, where we can go in and lift it and improve the situation. Very nice to the group and accretive from start. Flexim in Finland, this is an exciting acquisition.
SEK 340 million turnover, rather big for Finland. It's the leading company on access control in Finland. A little bit more than half of their turnover is access control, and the other half is locksmiths. We already bought Turvaykköset in the first quarter, no, last year. Which means that we have now a rather large locksmith chain, just like we have in the rest of Scandinavia. We cover especially specification market in Finland in a very good way, just like we do in the Scandinavian markets. This gives us good domestic cover, but also in the important access control market, which is a growing segment in the total market segments. Accretive to earnings per share as well.
Prometal in Dubai, Middle East, even though the oil price is low, it's likely that we will see some dampening of demand in the Middle East, we believe that Middle East is an interesting sector long term. Turnover SEK 225 million, leading in high-security doors of various kind, gives us really access to total specification in that region. We can go in and specify a complete building, which is really a strong ability, which we are alone in that market to be able to do. This is really a positive addition to us. Also accretive to earnings per share. Turning now to the divisions. Europe, very positive when it comes to growth. We see here that Europe, especially the southern part of Europe, is now coming up, at least not negative anymore.
We have had a drag for years from Southern Europe, also a very good evolution in the northern part. Scandinavia is doing very well, Finland is doing very well, also to our joy, Eastern Europe is growing double digit, the same is in Africa. Very positive evolution also from the emerging side of the business. Good growth in Germany and Iberia. You see here Spain is coming higher and higher, starts to grow in a good way. In this quarter, U.K. was flat. Italy and Israel was also flat, but Italy used to be very negative. We see clearly an improvement in the Italian market as such, however small to us as a whole. Holland or Benelux, it says here, but it's Belgium is growing, but Holland is negative for us still and France.
Also in France we see a leveling of the situation. We have, however, quite some dilution from currency. We make high profits in the Scandinavian region, and have lower profits in the southern part. With the currency now, we get the positive currency effect from the southern part, which of course has an effect on the dilution from currency. We have another thing. We have increased our prices now a third time in Europe, and this is because a big portion of the Europe is buying EUR, and we buy a lot of stuff from China. I think in the second half of the year, we will also see here that we start to compensate for the increased sourcing cost that we have in Europe.
Margin declined to 15.1%, down from 15.4% last year, with a rather heavy dilution of 0.6%, while leverage was three-tenths of a % positive. Americas continued very positive evolution, also growing at a 5% pace, a little bit less than we saw in the first quarter. Strong growth in architectural hardware, which is our locking side, and there both electromechanical and mechanical locks are growing. Residential, and again, the emerging market part, Mexico and South America. Even Brazil grew in the quarter, so we were pretty happy with that as such. Elmech is growing, doors growing, and Canada, I saw in the paper this morning, is in recession apparently, but we are still growing, even though not all that much as such. High security is a little bit more dependent on here and there that we get some rather larger project orders.
Here we have flat situation in this quarter. Profitability of 23% with a dilution here of 0.4%. We have 0.2% dilution from acquisitions in South America, and it's mainly that we have acquisition costs that came in this quarter. Asia Pacific, a good picture despite China. We see continued decline in China, and of course, what we do, we have already more than 40% of our employees that we have reduced our staffing with in the last year. Now we have -9% altogether. While we see strong growth in Australia, South Asia, and North Asia, and also New Zealand is doing quite well for us. In a way, it's only China in this part that is not doing well. This gives us some positive mix because China's margin is a little bit lower, so that came in in the quarter.
0.4% leverage, also the currency dilution in the same direction, -0.4%, so it was flat. In total, we had 14.4% EBIT and 14.4% last year as well, which I feel very proud over because I can tell you it's not easy when you have a market of the size of China going down as it does and still keep the margins intact. So far so good, even though it is a constant battle. Look into Global Tech, another quarter of very strong growth. HID did grow strongly in access control and identity. I did already mention with the progressing development of ID Assurance, where we launched a number of new products. We saw on IDT, on the inline business, and also project sales did well in the quarter. On the R&D side, we had quite some cost increases. We continue to invest.
We see here an increasing need to continue to invest simply because the market, when it comes to technological development, is moving very fast, and we are moving with it. In a way, in our industry, we are leading that development. We think there's a great opportunity to really be ahead of competition on the R&D side, on the technical side, since we see that the market is more and more converting it into electronics. This has a big value for us. Hospitality continued to grow strongly and also the profitability continued to improve. We had a profit altogether of 18.1%, down from 18.4% one year back, and here you see a rather heavy dilution as well. This is Quantum Secure that we bought last quarter, where we took the acquisition cost in this quarter, which gave us a rather heavy dilution. Altogether, a very pleasing evolution.
Entrance Systems here also very pleasing evolution, 12.9% profit, up three-tenths of a percent. Here, the currency. Remember, they are like Europe, very much in European currency, they have a negative currency development. The same thing there, we compensate by price. Still, leverage 0.6%, very strong. We see big savings coming out of what we have done in restructuring in Entrance Systems. We saw strong growth in the quarter in high-speed doors, FlexiForce, Amarr, and 4Front. Good growth in door automatics in the quarter, but flat in Europe industrial, and we have seen many industrial companies not having too good numbers. Ditec and decline in residential. However, we see that those two, the European part of the business, which is not growing, is improving. It looks better for the second half of the year.
Altogether, very pleasing picture with improved margin despite the rather heavy dilution from currency. That concludes my overview. I would like now to hand over to Carolina for a few highlights on earnings.
Thank you, Johan. Second quarter of 2015, financial highlights. It's been a very strong quarter, continued in the same way from the first quarter. As the financial highlights show, we have a strong half year. Starting with the part on the top line and probably the part which I feel at least most proud about is the organic growth. In the quarter, we saw 4% organic growth, and it's the same number of working days in the quarter. We estimate, as Johan mentioned, that the price component is slightly higher in the quarter, 1.5%, while the volume is 2.5% from that. We basically saw a good growth in most parts of the world, except in China. Moving on to the acquisitions, 3% acquired growth in the quarter, actually coming most from emerging markets.
For the full year, we now have around 4% acquired growth in the books so far. The big one continued from the first quarter, currency, a full 15% from currency on the top line. That is similar to the first quarter, slightly lower, and it's mainly a translation effect, but also a transaction. I will talk more about that a little later. The top line overall up a full 22%. If we then add the good drop-throughs that we talked about a lot thanks to the restructuring projects, but also other efficiency savings, we saw a very good evolution on the EBIT, up a full 24%, but also the margin increased from 15.9% to 16.1%, although we saw dilution both from currency and from acquisitions. Cash flow, flat year-over-year, similar to first quarter.
Here it is so that we are growing, we do need more working capital to fund that growth. We also continue to see tough times in China with the collection, and you'll see more on the cash flow graphs, how that affects us. If we then add to the EBIT, slightly higher financial net due to the higher debt, but the same ratio of interest, and then the tax rate of 26%, you would then see almost the same improvement of EPS that we see on the EBIT with a full 23% improvement in the quarter. The first half year is actually up 25% earnings per share. Moving on then to the P&L and taking a deep dive into that and looking at the bridge and the drop-through. The first one, the very important organic growth.
The 4% organic growth translated into a full 40 basis points improvement on the margin. Here we actually see good drop-through from all the divisions. We had EMEA and Americas on around 30 basis points improvement, as Johan mentioned, Entrance, the star here, with up to 60 basis points improvements on the margin from organic drop-through. I should also mention here that Asia Pacific, because they also had a positive drop-through here, and that's not easy considering that they are actually negative when it comes to the organic with minus 2 in the quarter. Next one, currency, continued in a strong way from the first quarter, 15% improvement on the top line.
A lot of this is, of course, the Swedish krona significantly weakening towards most currencies, I would say, and the biggest impact coming from the US dollar and US dollar-related currencies also like the renminbi. Overall, for the group, the margin from currency is 15.1%, not that big difference from our average margin, and the dilution is only 10 basis points from currency. We saw big differences in the divisions, depending on which currency they are working in. Acquisitions then, 3% acquired growth in the quarter. I would say as expected, lower margins from the acquisitions, and they are in emerging markets. The 3% translated then into 10 basis points dilution on the margin. Looking at the P&L then from a little bit different perspective as components of sales, we get this picture, and trying to compare like-for-like, excluding acquisitions.
Overall, the direct material part increased with 30 basis points, but underlying, the effect from the raw material was actually slightly down. Really overall, the direct material part increase comes from a mix effect, both from currencies, but also from where we are growing organically. The opposite of that effect you see on conversion cost, which is going down significantly, and it's actually going down much more than the direct material is going up. That part we can really relate to the good efficiency savings that we see both from the manufacturing footprint as well as the other programs that we work on continued improved efficiencies. The margin overall actually improved on the gross margin side with 50 basis points in the quarter.
If we then look at the SG&A, we had a good improvement last year already, so we saw Comparing to good numbers year-over-year. SG&A is up 20 basis points. I would say it's a mix of the increased investments in the front end and salespeople as well as R&D projects, and on the other hand, cutting on the support functions. Overall, 20 basis points increase on the SG&A side. If we then add the acquisitions, you can see it's not a dramatic change because there were not that much acquired growth in the quarter. As typical, especially for emerging markets, they are higher on direct material and then lower on the other components. Overall, they are lower on margin than we are. Therefore, you see the dilution of 10 basis points when including the acquisitions.
From the P&L to the cash flow, we get this picture. As you can see, we have a strong seasonality in cash flow with the first half of the year significantly weaker than the second half, and this year is no exception. Overall, though, we are flat when it comes to cash flow, and I would say here, part of that is because we are growing, so we need more working capital to fund that growth. We also see when we look at the efficiency KPIs, looking at the DSO, the DSO has increased with three days year-over-year, and the biggest part of that is China. We have increased our credit policy there, and we continue to be very tough on collection in China, but that still doesn't make it easy. We are three days up year-over-year on DSO.
DPO, on the other hand, has improved a couple of days, and inventories are basically flat, down one day, actually, in the quarter. Good development on those. What does the cash do then to the debt? Well, good things. You can see from this picture. We started the quarter with a little bit more than SEK 25 billion in debt, and we had SEK 2 billion of operating cash flow releasing or lowering the debt side. We had the dividend of SEK 2.4 billion in the quarter. We had an acquisition spend of about SEK 1.5 billion. We also saw, due to currency, we actually had relief on the debt side of roughly SEK 1 billion, and therefore we end with SEK 26.6 billion by the end of the quarter.
As you can see here, we are growing as a company as well, because even if the debt goes up, the KPIs are still moving in the right direction. The gearing is down to 70 compared to 76 a year ago. Maybe more importantly, the net debt EBITDA part is actually at 2.3 compared to 2.4 a year ago. Continues in a good way. This, my favorite slide, very beautiful slide. The only difference compared to last quarter is that we have done the stock split, so please note that the numbers here are a third of what they used to be, but you do have three times as much shares. Overall it's the same. As you can see, we still have a very strong development here.
If you start with the EBIT up on the 24%, we add a financial net that was about SEK 45 million higher, half of that really only coming from financing and the interest rates on the debt, and the other half on currency. We add the tax rate, which is the same estimate as before, therefore we have a very strong development of the overall earnings per share up, both for the quarter and the half year. With this nice graph, I'll give back to you, Johan, for conclusions.
Thank you, Carolina. Conclusions for the quarter are rather easy to give. It's a good quarter altogether. We grew by 22%, 4% organic, and the highlight here is that Europe did better than we have seen in the past, which I think gives hope also for the future. Very encouraging. Emerging markets also continues to expand, which I think considering that 85% of the world population lives in those countries gives also a very good signal for the future for the company. Strong EBIT improvement of 24% and earnings per share improved by 23%. Altogether, a very pleasing quarter. With those words, I open up then the floor for Q&A.
Thank you. We'll, as normal, do one question and one follow-up. Johan, I will start with the normal question. We have seen the beginning of this quarter, what are the trends and what do you see in the current trading?
It looks as if we are continuing at the same trend, around 4% growth. Personally, I don't expect any spectacular things to happen. There are too many markets that have difficult times, but at least this July looks like a 4% growth month.
Okay, thank you. Carolina, currencies had a big impact this quarter as well. What do you expect for the full year?
Well, assuming the currencies stay the way they are, we expect a continued big impact because the full year top line would probably lift around 12% from currencies for the full year. If we look at the mix that we have and the flows, we will also expect to see around up to 30 basis points dilution on the margin from currency.
Thank you, Carolina. We have the first question from the floor here. Andreas?
Thank you. Andreas Braathen from Coeli Asset Management. A question on France. Any signs of improvement in either the resi sector or the non-resi sector? It's a big market for you, and there are some PMI indications that actually things are bottoming out in France. What are you seeing?
I can confirm that we see a leveling of the decline has stopped and looks as if we are going more flat. I wish I could say I see a nice increase, but it's more flattish. Still important for us as we have had quite a drag from France in recent years.
Okay. Thank you. Erik?
Erik Dahlström from Bodenholm Capital. I just had a question on Entrance Systems on the long term. It's almost five years ago since you bought Cardo now. Of course you had a vision back then what you could do in this market. How would you say you have performed over those five years versus that vision? What has been better than you expected, and what has been worse?
First, we've had a rather sad market. That has performed worse than we had hoped for. We thought 2010, 2011, a rebalance of the market, then it sort of disappeared. I'm very happy about the evolution we've seen. This has become a very important part of the group. There's a big market there, SEK 200 billion size market, Swedish, waiting for it to be conquered in a way. Entrance is doing very well. Considering that we have bought from some two and a half billion when I joined the company up to almost SEK 20 billion today without losing control, I think is a strong achievement. I look forward to something where we can continue to develop sales and service, and the next thing to do there is direct sales and service also in the U.S. side.
I believe very much that aftermarket also is an important element for the future. Entrance is very good in this part. That is still to be developed. If anything, I would have wished that is that we already have done that, but it takes some time to put that in place.
As a follow-up, on the U.S. specifically, where you are a little bit less strong than in Europe, where you have really taken the lead here, is there anything you see in the market structure that would think that it's not possible to replicate the European success in the U.S. over time?
Not really. We have a longer road to cover there because we started by the indirect channel. We needed to build a sort of infrastructure. What we have ahead of us now is to build a direct channel. That will take a few years more. I don't see any real reason why we should not be able over time to come higher up in the U.S. also on the profitability side. For Europe is already at the target level of the 15%.
Thank you very much.
With that, we move to the telephone conference. Operator, please.
Thank you. I remind you to ask a question via the telephone, please press 01. It is 01 to ask a question. The first question come from Andre Kukhnin from Credit Suisse. Please go ahead.
Yes, good morning. Thanks for taking my questions. Just on the acquisitions, obviously appreciate that Allegion buying SimonsVoss was four times sales is not helpful for valuations. What about China? Is not this the opportunity to step up there? Also on Entrance Systems, coming back to that, this has been quiet for a while and there has been a period of consolidation. When do you think that will be back on acquisition trail?
If you take Entrance, we just made L-Door, which is of course a small company, Entrance has now go ahead again to do acquisitions. It was in Entrance where we stepped down from a rather large acquisition recently due to valuation. We done it two of the same kind last year as well, also due to valuation. There is a lot of prospects out there, so there's no crisis from that point of view. Entrance is back trying to make acquisitions. When it comes to China, yes, there are many companies for sale, and we are looking to many of those. Still, they haven't felt the heat of the downturn in full yet. That means that they expect to get paid with the ruler going in the wrong direction. They're flat or declining, all of them, and they're losing profitability rather quickly.
They all project that they're going to increase their profitability heavily, which of course makes it difficult to meet when it comes to pricing. There are many companies for sale.
Got it. Thank you. I didn't appreciate that it was actually in Entrance where you stepped down. Can I just ask a follow-up on your comment on Entrance Systems outlook? I think you said that the demand environment in the market should get better in the second half. Can I just confirm that, and could you give some color on why that's expected?
I believe Europe is going to improve over what we have seen in the past because Europe has not grown for Entrance at all or has been very difficult for the whole of the group, and we see that the southern part of Europe gets into better health. On the U.S. side, on the other, we've seen four, five years now of a very good demand situation. I hope it will continue, but we saw that industrial companies in this quarter, many of them had a not so positive evolution. I think we have to be realistic. U.S. will probably not continue to grow at a very high pace.
Got it. Thank you very much.
Our next question come from Andreas Willi from JPMorgan. Please go ahead.
Yeah. Good morning. My first question is on the U.S., on where you had a bit of a slowdown in the growth. Could you comment what you see in the non-residential and institutional markets in the U.S. in terms of growth trends underlying in the market and what you're seeing? The follow-up question will be on the acquisition and mix impact, acquisition and currency dilution impact. If I add up the divisional dilution from both of these, I get much more than I get on your group commentary. I just would like to better understand the 20 basis points you had on the group when most divisions were between 40 basis points, 60 basis points, 70 basis points
A difficult question to answer, I'm sure that Carolina has prepared that answer, so please.
We start on the margin. We have two different parts that are diluting. One is on the currency and one is on the acquisitions. On the acquisition side, it is basically as expected, that's not really the big one. If you do add it up, it will actually sum up for the group. If you look at the currency, they are a bit different for different divisions. As I said, the overall is only 10 points for us as a group, but the divisions are very different. You have EMEA, which has a very tough currency situation, making a lot of the money in SEK, but also nowadays having a transaction from China where the CNY is going up, negative for them. U.S. basically doing pretty fine on the currency.
APAC, tougher on currency, with the CNY being USD related and also strengthening, a lot of the cost side in APAC is in CNY, tough from currency there. Global Technologies making a lot of money in the U.S. and U.S. related, good when it comes to currency side. Entrance Systems, quite a lot of that is both making a lot of money in the SEK area, but also the fact that they have a mixed effect of the U.S. growing more where they are lower on margin. Basically, a mixed effect from the stronger USD there. Overall, it only adds up to 10 basis points dilution for the group on currency.
We have three divisions, APAC with the CNY currency, Entrance Systems and EMEA exposed to EUR that are negative, we have Americas and HID, which are USD related, which are positive. The net is 0.1%.
Yeah.
We were surprised ourselves that it came out like that is the situation. You also asked about the U.S. slowdown as such. I don't know if I would rephrase it, slowdown with 5% growth, it was slower than first quarter. What do we see? We saw that ABI index has been weakening for a while, it's going back again. Looking to the different parameters there, institutions are now above the waterline. They have started to grow a little bit. We see it on quotes. Our quotes are quite good, we expect it to continue. We see also the school season this year seems to turn into a normal situation when the schools close after the spring period, they renovate and improve. It's still not new build, it's mainly maintenance, we see a good demand on the maintenance side.
You have some regions like New York and a few other towns and southern part of U.S. where we see strong demand also for new construction, mainly offices. Offices, unfortunately, is not our number 1 item. Altogether, we see a positive evolution, and hopefully it will continue going forward.
I asked just because earlier you had bidding activity up in the double digits in the U.S. Obviously, that only applies to a part of the business, so I would have expected organic growth in the U.S. to maintain the good level of Q1.
We grew 8% altogether, if you add all divisions together. Our industry, remember, we dropped 12% when we had the biggest crisis we've seen. Our industry is not super cyclic. It's rather after market related. It has its ups and its positives and its negatives. When it's high growth, which is not the case right now, then we're growing 8%, and when it's really bad times, we drop 12%. I think those two are related as such. I feel very happy about the 8%, and if we can keep that going, I think you will see our margins will most likely start to expand in a nice way once the currency drops, so it goes out.
Yeah. Thank you.
Our next question comes from Sebastien Grezier from Exane. Please go ahead.
Hi, good morning. First question on China. Could you give us the organic growth rate in Q2, and how has developed the demands throughout the quarter? My second question will be on Europe. It seems that the comps basis of comparison were a bit easier in Q2, growth has accelerated. Is it just due to comps, or have you seen a genuine demand recovery in Europe throughout the quarter? Thank you.
In Europe, we don't have the same drag as we used to have from Italy, Spain, France, Holland. It's simply so that they start to level or even increase to some extent. Then we have a northern region that is doing quite well. That is why you see that our numbers are coming up altogether. I don't see any reason why this situation should disappear. We've seen four or five or even more years in the southern part of decline. Hopefully then if we can get France also on the wagon, then it might even look quite nice because France is a very large market to us. On the China side, we have a decline of 5% in APAC division, a little bit more for the group as a whole. What do we expect going forward? I must say, I don't expect much.
China, I think, I said it before, I think China is up for a decline of, I don't know what magnitude, but we have seen so far a little bit more than 10% in the last year. I think China will probably continue for a while longer to continue to decline because they have, in my opinion, over-invested in construction. They have a very high ratio of investment in construction, they need to change their economy to go more into consumption, that is something that has to take place. They can't maintain this level of construction
Have you seen the demand weakening in Q2 versus Q1, or it's stabilizing at a low level?
Q1 is a low season in China. It's not significant. Q2 is more important. We have not seen any decline. It is around the 5% I mentioned for APAC. I'm cautious. I think it will be very hard to have the same peak as we have in Q3 and Q4 as we had last year, even though Q4 was weak for us. Q4 should look better. Q3 will probably be very tough.
Okay, thank you.
Our next question comes from Lars Brorsson from Barclays. Please go ahead.
Thanks very much. Good morning, Johan and Carolina. A couple of questions from my side. On Global Tech, after a couple of quarters of strong top-line growth here, but quite weak operating leverage. I wonder how we should think about the cost and earnings progression here for the next few quarters as you ramp up your R&D spending in HID. Maybe just within HID, I wonder whether the change of management means anything from an operational and execution standpoint in the near term. Then, if I could just be allowed to follow up on EMEA, you said you're happy with margins here. I make it a 30 basis point improvement if I exclude dilution and FX. Again, you're seeing 5% organic growth within that price increases. Of course, a lot of the good growth is coming in your higher margin regions in Scandinavia.
You're getting cost savings come through from MSP. Is that really a strong margin progression or is there anything underlying here that we should be perhaps slightly more concerned about? Thanks.
Do you want to answer about-
I can take-
-EMEA?
Yeah. If we start with EMEA, yes, you're right in the calculation. From the 5%, we saw 30 basis points improvement on the organic side, and then we had the dilution both from currency and slightly also from acquisitions. It is a mixed picture with some of the regions growing more and also the lower margin countries in Southern Europe also growing, which of course then sort of dilutes the mix a little bit. We continue to see good savings, both from the restructuring and from the other parts. On the other hand, some of the areas, it's tough to compensate for the renminbi cost increases and some other currencies that EMEA have. I would say it's a good result in a tough market. Yes, we're happy with that, although we always want a little bit more.
Yeah. I think personally that EMEA, they're growing fast in Africa, they're growing fast in Eastern Europe, they're growing very nicely in Middle East, all regions with lower margins. That has, of course, a dilution in itself. Then we happen to make a lot of money in the northern part, as Carolina said. When you then revaluate all the currencies, but the money is in SEK, you don't get any effect from that. You get a rather heavy dilution from currency for that reason. I think it was 0.5%, I don't normally think. It was 0.5% negative in the quarter. Very tough right now. When that goes away, I think we will see a little bit better situation. Looking to Global Tech going forward, I think we can count on that we don't see huge margin expansion.
I think it's too valuable for us to continue to grow in these areas and continue to invest. You heard me before, I'm not striving to get this company to 20% EBIT, rather as a growing company. For us, it's important that we keep ourselves in the span, and Global Tech's mission is to grow the business. That has not been the case for a few years, and it's very tough because also the access control side, and I mentioned before more than once, we lose on our patents that we used to have on the card side and a few other parts of the business. There's nothing we can do about it's just a part of life, and we have to find new revenue streams going forward, and therefore we need to invest into new areas, and that costs money.
I'm not pessimistic, but I cannot stand here and promise we're going to see expansion. That is also one of the reason why I decided to change management. We've had the same management quite a while, has done very well, but I think we need to have new perspectives with the cloud services, numerous other things that come into place. We took our number 1 R&D head and put him responsible for Global Tech, or HID, which I think is a good move for us. That tells you also that we are looking forward to continue to expand when it comes to new innovations.
That's helpful. Thank you.
Our next question comes from Andreas Koski from Deutsche Bank. Please go ahead.
Yes, thank you. On pricing, you mentioned you have raised prices three times in EMEA, and you also said that the price component was plus 1.5% in the quarter. I just wonder, what are your competitors doing? Are they following you or are they staying with stable prices?
Have you talked to them? No, we have problems to get them.
I suppose you talk to your distributors and hear about your competitors' behavior.
Well, price increases are never popular for some strange reason. First, we always do a healthy one in the beginning of the year. We saw what happened to the currencies, so we did another one a few months into the year, now we are into the third round right now. I think as a market leader, we should not be too worried what all the competitors are doing. I think we should give them the ability to increase their prices. Since we are the leaders, we have to show and be bold and show the way forward. I think that is a very important thing for us as market leader. Of course, they have followed, but did they follow to the same extent? You always hear from your salesman, "No, they didn't do anything." Over time, I'm sure they will.
I'm not too worried on that part. Remember, this industry is full of small orders, not big ones. That means that you can tune a little bit if it doesn't work for you, if you go too hard on the price.
The plus 1.5% price component, is it possible for you to split that into price and into mix?
No.
Okay. Thank you very much.
Clear answer.
Okay, our next question comes from Peter Riley from Jefferies. Please go ahead.
Well, good morning. I've got two questions, please. Firstly, I presume you're getting towards the end of your current restructuring plan, just still making lots of acquisitions on a regular basis. When does the next restructuring plan come? Is that later this year or more likely in the following year? Secondly, also, you talked about walking away from some acquisitions because multiples are going up. What happens when you walk away? Does someone else come in and do the deal, or do you just walk away and hope you can actually get back in the negotiation at a later time at a more sensible price? Are you missing out on opportunities, or are they just being deferred?
should you take the first, Carolina?
Yes. Which one was the first? Sorry.
Could you repeat the first? It was so long. current position. I thought Carolina listening.
Yeah, I'm not sure about the.
Could you repeat your first question so we are clear about that?
When's the next restructuring plan coming? You must be getting towards the end of your current one.
That's why the long thinking. I'll comment on the existing one. We see good results from the existing one, and it's actually so that we are feeling that it's possible to do more with the existing program. We are doing more, and we sort of delivered almost what we should already by half-year from the existing restructuring program, what we were expecting for the full year. We do more with the existing money, when it comes to the future one, that one I give back to you, Johan.
Well, I think I leave that one. I'll take the acquisitions. What happens with acquisitions? Well, one of them was to a private equity company that apparently has different ideas about return with no synergies. I'm impressed that they can pay up to 15 multiples. That means, of course, that the return is not going to be all that good looking forward, unless there is growth for many years forward. Everything is built on that the market has to expand to give them a good return. I think personally that the markets are not going to grow eternally. Americas grown now for four or five years. I don't know for how much longer, but I prefer a cautious stance. Is it so that our competitor picked them up? I heard you mentioning SimonsVoss.
Yes, to some extent, some of the companies will be picked up. On the other side, we can't acquire everything either. SimonsVoss for us was impossible. We tried eight years ago, we got a no-go from the German authorities. We were not even in this deal. It's not something we could do. On the other side, SimonsVoss has not grown much in many years. That multiple was reasonably hefty, but fine. It gave, for Allegion at least, a very good technology, which I think they're very in need of. Did you get the answer to your question?
Yes, apart from the timing of the next restructuring plan. Thank you.
That I can say that we don't think we need one at probably not this year. We will see. The reason for this, most of the acquisitions we've done in recent years has been in emerging markets, so we do restructuring without restructuring reserves in those cases. We have relaunched a number of other actions in recent time that is sufficient savings for us, at least for the next 12, 15 months. I don't feel uncomfortable about that. There's a limit to how many closures you can manage at the same time.
That's very helpful. Thank you.
Okay, I think we move to the floor. Andreas?
Thank you. For Carolina, on the risk side, on the balance sheet, when it comes to China, I don't know how much data you can give, but how big is the accounts receivable outstanding, and how much of that is over three or six months due? Secondly, are there any off-balance sheet items? There are some Swedish companies who have off-balance sheet items in China. Do you have significant off-balance sheet items in China?
Okay, the first part on the DSO. As a group, we're on 55. China, as it is now, is on 99, and that's around 30 days more than they have been about one year ago. Within that, it's not so that so much is overdue because you don't get paid everything sort of at the instant when you deliver. With that said, when days go up, even if they're not that overdue, we take provisions for everything that is older. I think only time can tell. I'm sure some of them will be needed, and over time, I think we'll have to see. When it comes to the off-balance, no. No, we don't have anything like that, not that type of business.
Okay, last question now, Erik, from the floor.
Erik from Bodenholm again. 30% new products, one of the highest numbers I ever seen. Might be my bad memory, how does the high percentage of new products impact ASPs and margins for the group as a whole? Is that possible to quantify, at least directionally?
Generally, electronic products have a higher margin. It's not day one, but after a few months, they come out with a higher margin. This is not fully valid for residential products, but they're higher than the ordinary residential products. If you take the group average, they are diluting in a way. An average selling price of electronics is, of course, much higher, it depends, of course, what type of solution you sell. On the residential side, it's higher, about 20%-25%. On the commercial side, it's more or less doubling the price per door, or even more sometimes. It's very beneficial to us that it turns electronic, and also the lifetime of an electronic door is, of course, much shorter. Electronics gets older quickly than mechanics.
That means that the recurring revenue, which is very important to the Assa Abloy group, is going to grow in the future.
Thank you.
Thank you very much. With that, I hand over to Johan again for some closing remarks.
As you can see, I have been smiling most part of the day, Carolina as well. I'm very pleased with this quarter, 22% growth and 24% profit, I'm also very pleased about the first half year. Cash flow was a little bit weaker than we are used with, as Carolina also outlined here, we know where it is, we work very hard, China is difficult for us. Altogether, very pleasing picture with good sales and a good pipeline as well of activities. Thank you.