Good morning. Good morning to all of you here in the room. Welcome to our Capital Markets Day 2022. Also, welcome to the people that follow us digitally. I must say it's good to meet a lot of you again face-to-face after two pandemic years. We believe we put an exciting program together for you today. Up to you to judge, of course. The program also where you will be able to meet most of the executive management team. We have the heads of Americas, Entrance Systems, HID and Global Solutions participating in the presentations. We have also the head of EMEIA here with us.
Before I start with my presentation, I would like to give the word to Björn and Christiane, who will give us some practical details, I understood, and go through the agenda, right?
Yes. Thank you, Nico. We will go through some of the practicalities. We will soon take the agenda. Before we go there, we want to take you back to our Capital Markets Day 2021, where we opened the CMD by asking the question: How will ASSA ABLOY access further growth opportunities? How are we working to accelerate our profitable growth going forward in line with our financial targets?
Since then, we have been through a period where we have exceeded the financial growth very much. The agenda today will therefore focus on how we can continue to execute on the sales growth while improving the margin.
To improve your understanding for how we will do this, we have prepared an agenda with objective to illustrate how we will continue with both our growth and margin-generating initiatives.
In the first session now, Nico and Erik will take us on that journey, and talk and give us a strategic update. We'll have a break after that, and after the break, we will get an overview of the Americas division by Lucas Boselli, followed by a discussion, how we look at the opportunities in relation to mobile credentials together with our heads of Global Solutions and HID.
After lunch, we will continue with breakout sessions. We will divide you into three groups, so you will circulate all three stations. One will be led by Massimo Grassi and Markus Kast, who will take you through how we agta record into entrance Systems. One station will be with Lucas Boselli, who more in detail will take you through how we work with our growth in emerging markets with Brazil as a case study. Finally, Björn Lidefelt will provide an overview of HID and walk you through our product offering with focus on mobile credentials.
After the breakout session, we will gather here again in this auditorium for a final Q&A together with all the presenters. That should finish around just before 4:00 P.M., we expect. For those people who are here in the venue, we'll have networking drinks in the lobby afterwards. Please join us for that one.
Yes. We also have many participants, just as Nico said, joining us online. For you online, via the Zoom tool, when you want to ask a question, you click the Q&A button to send a message to Carl Wahlberg, our Investor Relations Officer, and you will look after that queue and all those participants, making sure your questions get asked. Click the Q&A button, and you can start doing that right away.
That means that we are done with the practicalities. Let's get into the proper CMD. Nico, you ready? Please, I'll hand over to you.
Thank you, Björn and Christiane. Let's get started. Let's take the clicker. What we will do, you know, in the first presentation, I will guide you together with some of my colleagues through these four points. I'll give you an overview of where we stand today as ASSA ABLOY as a company. We'll zoom in a bit on the market we operate in and our position in that market. We will explain to you a little bit more in detail our strategic framework with our strategy house and leave you at the end with some key takeaways.
If I start with where we stand today as a company and recap to our capital markets day, the virtual one of last year, where we expressed our ambition to further accelerate our profitable growth in general and accelerate our organic growth in particular, where we also said that we had the ambition to reach under SEK 50 billion top line by 2026 and reach an operating profit of SEK 25 billion in that same year. I would say that despite very turbulent times, we are well on track to reach that ambition. Our sales has increased by around 20% since the base year of 2019, and our operating profit is up 17%. We are further evolving the core.
If we go back, what is it, 28 years since, at the moment when we were born, when we merged ASSA and ABLOY together. At the time, we had the ambition to be one of world's leading lock companies. Throughout the years, our ambition evolved. Around 2008, we changed our vision to be the global leader in door-opening solutions, adding other things to our core like entrance automation, Elmechh electronic locks, cards, and readers. Four years back, we further widen that ambition to be the global leader in access solutions, again, further expanding our core with software solutions, perimeter security, field service, and so on.
We define access solution as the combination of from one side, an opening, you could say a cylinder in a pure mechanical world, and on the other side, an identity, a mechanical key. We have the combination of the cylinder and the mechanical key. You could say that on the opening can be just a standard door opening for people, which would be the core of our geographical divisions, of our Opening Solutions division. It can be an industrial door, a garage door, the core of Entrance Systems. On the other side, we have the identity, again, in a pure mechanical world, a key, but can be a reader, it can be a tech, whatever, the core of our HID division. We build services around that access.
We do the man in the van, mainly in Entrance Systems, but I would say service man in the van becomes also more important in our geographical divisions. We have, of course, all the software as a service opportunities as we move now more to electromechanical solutions. That is obviously valid for all our divisions. We build specific end-to-end solutions for end-customer problems in specific verticals, and that would be the core of our Global Solutions division. They would say, well, you know, the opening and the identity overlaps in the middle is where magic happens. That is where traditionally we would have our patented master key system, so patented key with a patented cylinder unique combination.
That combination has and is evolving over time. That mechanical key, mechanical cylinder is changing into an electromechanical key cylinder combination. The key is more and more replaced by a digital identity, can be a card, a mobile credential, or ultimately the person itself can be the identity. On the cylinder side, of course, you get then the reader or other identification instruments. We have the ambition to be the global leader in access solutions. We are truly global but uniquely local company. Truly global, we have operations in more than 70 countries. We have more than 1,000 sites, more than 100 R&D centers, and around 130 production facilities. We have the ambition to produce locally for the local market. Very important, we also operate locally.
We take decisions in France for France with a local team on the ground in France. We take local decisions for Sweden in Sweden with a local management team in Sweden. We take local decisions in U.S. with a local team in U.S. We believe this is a very strong competitive advantage for us, that decentralized organization. We are close to the customer. We take decisions. It gives us agility in good and in bad times. It also gives us the possibility to understand in a much better way what the specific needs are of those local customers in the different markets. Because clearly, we operate in an industry where the requirements, product requirements, solution requirements are still very different local market by local market.
We have also seen in history that our business model is much more resilient during economic downturns than many other industries. We've seen that in the global financial crisis, we have seen that in the euro crisis, we have seen that to a certain extent even in the COVID-19 crisis, at least for the top line. The same is also true for the bottom line. We have the exception perhaps on the COVID-19 crisis, where clearly it was a very different crisis. It was a crisis about trust. If there was no trust, there was no mobility, and mobility is very important driver for our industry. In normal downturns, as two-thirds of our business is aftermarket business, that aftermarket business continues to go.
It has also better margins than new build, and therefore, we are able to protect the bottom line also in more difficult market conditions. If we look how we recovered now after COVID-19, you see that three, almost four you could say, out of the five divisions are back and above pre-pandemic levels. It's only APAC, and then mainly because of situation in Greater China that is still below those 2019 levels. If we zoom in a little bit on the different divisions, starting with EMEA, a very good, strong recovery after the pandemic. We still see good market conditions in general in EMEA. As we mentioned in the Q3 call, we see a weaker residential demand in certain markets in France, U.K., and Benelux.
On the other hand, we see still very strong market dynamics in Eastern Europe, Africa, Middle East, India, and other parts of Europe. Clearly, the higher inflation is something we have to tackle. It's true for all our businesses. Perhaps it's more true for EMEA in the sense that they also have the general inflation, they also have the material inflation, but the labor inflation is perhaps a bit more outspoken with the systems we have on automatic salary corrections in many markets here in Europe. Then definitely we also have the energy inflation, where today we still profit in many factories and in many entities from older contracts with lower energy prices. Once they expire, obviously, we will see a significant increase of the energy cost.
It's clear that EMEA is in a more volatile market environment. EMEA, we are also more exposed to residential than, for instance, the Americas. Around 45% of our business in EMEA is residential, which has a shorter cycle, you could say, and where we watch very close what is happening around us. We are definitely very excited about the continued shift, and I would say the accelerated shift from mechanical to electromechanical and digital, as well on the residential side as on the commercial side, and the opportunities that come together with that for more cloud-based solutions and software as a service.
Then definitely also excited about the green drive for green building standards opening new possibilities for us, and we will touch in more detail on this subject later in the presentation. America's a very strong story since 2019. We continue to see a strong non-residential activity in the U.S. I know the ABI measurement came out today. It was for the first time in a long time below the 50 levels, so that means decrease rather than increase. We don't see that in the market yet. We still see very good market dynamics. We still see double-digit growth of our specification business.
We also see good residential activity in the U.S. that most probably also has to do with the fact that we are much more focused on aftermarket refurbishment upgrade rather than are less dependent on new build. We see a normalized growth in Latin America. Of course, it's very difficult if a market and yourself in the market grows very high double-digit on top of very high double-digit a year ago, on top of very high double-digit two years ago. At a certain moment, you know, you are beaten by mathematics. Obviously, also in Americas, there is the challenge of the higher inflation. Also in Americas, we are excited of the shift towards electromechanical digital, the software, hardware bundling. e-commerce delivery through our Luxer One acquisition.
Lucas will go in more detail on this in his part of the presentation. Clearly also very excited about the HHI acquisition that we now confidently will be able to close in the second quarter of next year. APAC, I would say dual story. China, Greater China, still very depressed with a construction market that continues to decline. But solid activity in Pacific and a good recovery after pandemic in the Southeast Asian markets. Also smart residential gaining traction in Pacific. Excited about our product pipeline, sorry, on the smart residential side.
About the commercial opportunities in China, as a matter of fact, we have positive growth on the commercial side in China, despite market conditions going down, but that part of our business is still too small to see it in the bigger picture. We did some recent very interesting acquisitions in Australia that should give us very good possibilities in the near future. When I go to Global Technologies, almost back on the 2019 level. Global Technologies was hit the most by the pandemic because they are very dependent on mobility. The good news is that mobility is back to and above pre-pandemic levels. The only two business areas in Global Technologies that are still below the 2019 level are hospitality and citizen ID.
That's perhaps a misconception from many of us, that they believe that hospitality is again booming because you see in hotels, you know, hotels are fully booked again. Yes, it's true that our aftermarket is back on a very good level, our cards, our credentials, but that's only 20%-25% of our hospitality business. 75%-80% of hospitality business is project upgrades of access solutions in hotels. Yes, the big chains like the Marriott, the Hilton, they continue to invest and upgrade, but if you're a smaller chain or if you're a family-owned company and you didn't see a customer for two years, obviously, it's not your first priority to now upgrade your access solution.
That will take some time, perhaps longer than most people expect before hospitality is back on good level. We have seen in recent weeks, perhaps recent months, the component shortages pressure easing. I talk about electronic components because I think components in general has improved since several months. Component shortages in general should not be a reason anymore. It can perhaps still be an excuse. Clearly, the shipping shortages is still a challenge today. It's still very volatile. If situation improves, it's just because, you know, consumer demand is down and therefore certain shipping is more available on the market. It's not because extra capacity came on board, that will not happen before second half of next year.
It's also not because we or other people have changed our irrational behavior. We still try to buy every dip we can buy in the market. Very excited also here on the shift from mechanical to electromechanical. This opens all the possibilities that gives for our Global Technologies. Stephanie and Björn , head of HID and Global Solutions, will elaborate on that together with Björn later during the day. We are leading the shift towards mobile, and then definitely our solution provisioning in the other new verticals that we have in Global Solutions, in verticals like construction, time and attendance, access for construction workers on the construction site, senior care, self-storage, and so on. Last but not least, Entrance Systems, I think a fantastic success story.
Continued good positive market environment in North America. I would say perhaps a little bit more normalized growth levels in Europe, because obviously they work in similar market environment as EMEA. Also here, the higher inflation on the steel, on the energy side in Europe and on the labor side, I would say as well in the Americas, as in Europe, is a challenge. Very excited about our service growth. You know that we have the ambition to grow our service high single- digits for the coming years. As a matter of fact, the last quarters we were growing service double- digits. We are definitely where we want to be with that service strategy. We had some very nice recent acquisitions we are excited about.
I would say despite the very good improvement of the bottom line, we still see many efficiency opportunities still to be captured in Entrance Systems in that new organization with the four segments. If we then look a little bit at the market we operate in and our position in that market, we can say that we are part of a very good industry. We are operating in an industry with very strong, positive market drivers. We mention here five on which we will zoom in a little bit more. If I start with increased demand for safety and security, it's just the fact that people have the perception at least today that we live in a less secure world and perhaps a less safe world than, let's say, five, ten years ago.
That drives really a demand for more access solutions, secure and safe access solutions. Drivers include, I would say, robustness, resilience, reliability, extreme weather conditions, you know, everything to do with the pandemic, where people don't want to touch and want to have touchless solutions, but also everything to do with terror, the active shooting in schools, universities in the U.S., riots, you name it. This one we used to call urbanization. We have widened a little bit the concept in movement of people and geographic change, because for us it's not so important if it's urbanization, as long as people move from one location to another, it's good news because then they need new access solutions.
If you talk about urbanization, it's projected that the urban population will grow with 50% by 2050. All these people will need access solutions confidently. A lot of them will need access solutions from ASSA ABLOY. You see also the opposite effect after COVID-19. You see perhaps the deurbanization, people moving from bigger cities back into more rural areas. That's good for us too, because they also will need then new access solutions. We have the aging population, and we have, of course, the millennials that now enter the housing market. Digitalization and the new technologies, connectivity, IoT, touchless, biometrics, mobile, creating opportunities for us for new business models, software as a service, cloud, ecosystems, shared economy. Another very positive driver. Sustainability, something we are very excited about.
We see a much stronger demand today from customers asking for green buildings. More and more new projects, but also refurbished projects are now built according to one or the other green standard. It can be a LEED certification or something else. We're also helped by regulation. We see regulation increasing for more energy efficient buildings and access solutions that really create much more demand on, let's call it, the green side. You see here, for instance, that in EMEA, our green specifications in order value are up 45% on a compound annual growth rate over the last four years. We want to zoom in a little bit more in detail on sustainability, and therefore, I would like to ask Robert Siegmund to come on stage.
Robert is our Chief Commercial Officer in the EMEIA division, and he is also an expert when it comes to green buildings.
Thank you.
The floor is yours, Robert.
Thank you, Nico. A very warm welcome to all of you. My name is Robert Siegmund, as I was introduced by Nico before. I'm heading the commercial development in EMEIA. Sustainability is an area that my team and I are very passionate about. I mean, really passionate. We really drive this in the EMEIA organization to develop further. We've got a couple of levers to drive that, but we see that the demand for green specifications is growing. As you know, we work with architects and construction companies to help them understand and conform to all the local requirements and regulations. We have about 200 dedicated specification specialists that do this every day.
We have seen that there is a real demand in the market for buildings, old and new buildings that offer sustainable benefits. In fact, we have seen an unprecedented increase of number of specification projects for green building by over 150% in the last two years. In addition, we have also seen that the average value for an opening that is specified under green standards is much higher, up to 25% on average. This positive growth has led us to develop processes and methodologies for our products to support this. For example, we have developed a green specification guide that provides guidelines and tools for specification delivery on green projects that follow major environmental schemes such as BREEAM or LEED or DGNB.
We see a growing need for this, with our own specifiers, but also with our customers and the architects. In addition, we see a growing need for so-called environmental product declarations or EPDs as they are known in the industry. These are EPDs to help our customers and the architects achieve the certifications and give them the security that they have made the right product decision. A second lever that we are using is Openings Studio. In addition to the green specification guide, there is Openings Studio, which is our end-to-end BIM-enabled information sharing solution that creates, visualizes and performs openings for the planner and for the architect. By using Openings Studio, our specifiers work with the architects and customer to identify, customize and build access solutions and hardware specifications for the green building requirements.
The tool supports real-time costing, and we see a 20% share already in green building specs, and the demand is there and growing. Solution also provides the customer with seamless updates on changes and variations of their projects that allows them to be involved in the whole process from start to end, and supports them in managing their time better and much more efficiently. Now, I would like to share with you a couple of examples of where we have been successful with this approach, with this two-level approach. This project that you see behind me is in Abu Dhabi. It follows the LEED certification, following on energy efficiency and environmental design. We've done the specifications with the customer. We provided the EPDs on our products to support this, the customer certification.
Those EPDs provided the customer with a format where they can compare the published product's specific environmental performance. That allows the customer to understand and compare the environmental impact between goods and services on the one hand, and the building element on the other hand. These declarations also serve as a valuable inspiration for us for innovation, because we use the declared data to improve sustainability on our products overall. Another example that I would like to share with you is what our specification team has done here in Poland with this customer. Customer Cavatina is a developer that is well-known for their green building projects.
In this instance, we provided EPDs for the products we specified under the BREEAM scheme, which is focusing on the environmental performance of the building, and how our products contribute to that. We also provided EPDs for WELL. WELL is another scheme that focuses on the health and well-being of those in the building. You can see that there are multiple layers of sustainability in a building. We continue to embrace, of course, the need for efficient environmental reporting and reducing our overall impact. We expect to see many benefits and a continued acceleration of green building specification growth. We aim to become market leader in green specification, for sure, and we really want to contribute to a sustainable future.
All of this activity that we're doing is embedded into many activities that we are driving at ASSA ABLOY to reduce our environmental footprint and to make the company more sustainable. Thank you very much.
Just as a clarification, when Robert says around. Was it 200 you said, spec?
Around 200 specifiers.
That's only for EMEIA.
EMEA, yeah.
In the group, we have more than 500 spec writers. I also think that Robert has been very modest when he talks about Openings Studio. Openings Studio is clearly the best software tool for architects and contractors in our industry. It's for us really a competitive differentiator. We are very excited about the whole sustainability drive, because what it does, it on one side makes the pie for everyone bigger. Robert explained that a green project is around 20%-25% more expensive than a traditional project. It also drives technology up in our industry, and it takes the pure cost competitors out of the equation.
A bigger pie to be divided by less players in the market. If we go to the last driver, we want to highlight local regulations, and then we will have a product display of EMEIA showing that, you know, really with products what I'm telling here. A lock is still very different in Italy versus Switzerland, Germany versus Sweden, and of course because the local legislation is very different. The standards are still very much on a local level. That's also because of history. Nevertheless, those regulations are becoming more stringent and standards are changing all the time. This creates clearly local entry barriers.
It's very difficult for one very low cost player to come and conquer the world because he will have to conquer country by country. It also demands all the demands for upgrading to be compliant with those more stringent standards has to happen on the local level, so it also makes a strong local customer relations. Where do we stand in that market with strong positive market drivers? Well, we are a very clear, I would say indisputable market leader with strong global brands like ASSA ABLOY, HID and Yale, but also very strong local brands that we then often endorse with one of the group brands like for instance, Sargent in the U.S., that we then endorse with the ASSA ABLOY brand.
We have by far the largest installed base in the market and installed base that we can now proactively upgrade from mechanical to electromechanical and digital, and we have also the widest product offering in our industry. We are a company that wants to make the difference through innovation. Innovation is really in our DNA. We have increased our R&D spend with close to SEK 2 billion since 2017, and we launched more than 1,200 new products over the last three years. In that same period, we also filed more than 500 new patents. To come back on the sustainability of Robert, we have more than 300 product families that have EPD certifications, so a green certification.
If we then go to the strategy, we explain the strategy internal to our 53,000 people through a strategy house. In the next slides, I will walk you through the different items on that strategy house. If you start with the vision, we have the vision to be the global leader in providing innovative access solutions that help people feel safe and secure so that they can experience a more open world. If I take a couple of words out, global leader, we are definitely a leader in the Western world, in Europe, in North America. We are a strong leader in many emerging markets like South America, Middle East.
There is clearly still markets where we are just one of the players, markets like China, India, Indonesia, and some other emerging markets. Clearly we have some work to do, and we have some opportunities to grasp. Take the word innovation or innovative access solutions. Like I mentioned earlier, we are a company that wants to make the difference through innovation. Innovation is really in our DNA. For us, innovation is not only about new products, new solutions, it's also the way we run our processes, the way we run an admin process, a marketing process. It's also the way we run our operations with robotization, automation, Industry 4.0, and so on. People of course want to experience a more open world, I would say it's the whole Amazon experience.
When it comes to access control, of course they want to experience a more open world in a safe and secure way. Safety and security are for us two very important words in our vision, two words that we want to use as a differentiator in the market. We have a long legacy. We have a lot of brands. We have a long standing history and are synonym for safety and security. That safety and security then can give us a more open world. Obviously, we want to build as a mission sustainable shareholder value, but we also would like to, I would say, serve a wider purpose. Obviously, we want to provide added value to our customers, our partners, and our end users.
We want to be a world-leading organization where people can succeed, and then we want obviously to conduct business in an ethical, compliant, and sustainable way. We have our core values and beliefs, the values and beliefs that keep us together, as a company, as a family. Empowerment, we have trust in people. Innovation, we have the courage to change, and integrity, we stand up for what is right. If we then go to the financial targets in the strategy house, as you know, they remain unchanged. We have the ambition to grow 10% over a business cycle, 5% organically, 5% growth through acquisitions. We want to do that with an EBIT margin within the 16%-17% bandwidth.
If you look over the last 10 years, we grew 9.2% per year, so very close to the 10% target. Our EBIT margin on average has been 16.1%, so within the bandwidth we aim for. You remember from previous CMDs, previous discussions, that we said that we had the ambition to accelerate our organic growth. We said, if in a country we grow 3%, how can we grow 4%? If we have a vertical where we grow 7%, how can we grow 8%? Because we said that 1% more organic growth in a sustainable way is the difference between a good company and a great company, and obviously, we want to be a great company. We are delivering on that ambition.
If you take the period 2013-2017, our organic growth was around 3%. If you then take the period 2018-2022, year- to- date, our organic growth is around 5%. Clearly, one, acceleration of the organic growth, and two, in line with our target of 5% over a business cycle. I think if you look from 2018-2022, I think you can talk about a business cycle. Yes, we are helped a bit with pricing in recent quarters, but we also had over those four years a COVID pandemic and parts shortages challenge in the world. Very happy with that organic growth acceleration. If we then go to our strategic objectives. Our strategic objectives are a little bit like our compass.
They guide us in everything that we do. They tell us how to achieve our different strategic ambitions. We have growth through customer relevance. We believe, or we are convinced that continued profitable growth starts with understanding our customers. It's an obvious one, I would say. Product leadership through innovation, where we see innovation as an enabler for everything we do, and also the most important driver for our organic growth. Cost efficiency in everything we do, where the realized savings from improved efficiency can then be reinvested in innovation and in activities that accelerate our growth. Then last but not least, evolution through people. People are our most important asset. It's really the people that make the difference for us.
Developing our people is how we secure our future success and our growth. I will zoom in a little bit more in detail on the four strategic objectives, starting with growth through customer relevance. You will see that for all four we have seven to eight specific strategic actions. Here, if I pick a couple of them, obviously price management has been very important in recent times. In recent times, I would say price management has been mainly passing through cost increases through price increases to the market. If you look more over a longer period, it's all about you know, value priced management, making sure that you have the right price in relation to the value that you offer to your customer. Customer experience very important.
We measure customer satisfaction now as a standard in all the divisions through a Net Promoter Score. Perhaps if I pick a third one, e-business. It's clear that the new generation and even if we are in a very traditional, conservative industry, e-business becomes more important in the wider sense, really from potential customers searching and trying to contact with us up till sales, after sales. We believe that the e-stream and the physical stream are very matched in parallel together, and that sometimes a customer will go from a digital contact to us to a physical contact and back to a digital contact. We have to make sure that both are integrated together. If we then take product leadership through innovation.
Also here, if I take a couple of our IPs, of course important, we want to protect our innovations. Sustainability product development is key to reach our sustainability targets. Product quality, safety, and security. In the insecure world, we work together. Cybersecurity is, of course, a very important theme for us, for our products, for our solutions, but also for us as a company, I would say. We transform customer needs into organic growth. We see megatrends accelerating market shifts and creating new customer needs. We use innovation and new technologies to capture these needs. We provide innovative access solutions. For instance, we explore new technologies like energy harvesting, connectivity, seamless access and data analytics.
We drive the next leap in technology when it comes to smart home access. We partner with tech giants like Apple, Google, to deliver mobile access. We more and more also collaborate with industry peers to develop wider ecosystems for the next generation of seamless access. The third one is cost efficiency in everything we do. Therefore, I would like to ask Erik, our CFO on stage, who will take this chapter for me.
Okay. Thank you, Nico. Also from my side, a very good morning. I'll guide you a bit through our strategic objectives when it comes to cost. Cost in everything we do. As Nico said before, we roughly, in each one of them, we then split it up in seven and eight. I'll come back to some of them in the coming slides, but this is of course one thing that's very important for us, the value analysis and the value engineering, which is then a work that is done operations together with engineering as well as sourcing in order then to, let's say, to find things that we can sort of constantly improve also the cost for the products that we have already in the market.
It's a bit then linked to operational excellence or lean, which we today have implemented in most of our factories. We also have that each factory also have a traffic light system or a KPI, where we follow things like, order fill rate, quality cost, and so forth like that. Of course, if we're not happy, we expect to have an action plan. For us, you know this is a bit enterprise IT and digital trust. It's two ways. One is, of course, to reduce the cost of our IT systems and then move more and more things up to the cloud. At the same time, you have the trust part or the cybersecurity, which is, let's say, important in order then to safeguard our operations, as well as of course also safeguard our products.
Enterprise as well as product IT is as important as ever as we go into the software world. If we start with the first one, the MFP, where we have had eight programs since 2006 with an annual saving of more than SEK 6 billion . The MFP9 will now be launched in Q1. The program will be a little bit smaller than one we've had before, but we will have also on this one a very fast saving. The reason why it is a little bit delayed is that there are a few projects that we would like to have in here, which we know will generate good savings. A question that I get a lot of times regarding the MFP is, do you only do this for the acquisitions?
Of course, we get a number of companies in, and then we want to improve there. A part of it is that, but at the same time, it's of course also in the normal operations that we always can find improvements and, let's say, cost reductions, which is important then in order then to continue to have a high profitability in our operations. I can give you an example of our factory in Rychnov, where we have then created a center of excellence for cylinders as well as Elmech. We have moved or closed 12 production sites within EMEIA and moved into the Rychnov factory. Of course, it's better that when you can run a 24/7 compared to, let's say, when you have a factory somewhere else where you only run one or two shifts.
Of course, you get a lot of efficiencies coming out of this. You see, like for instance, the labor efficiency has increased by 5x . You can also get the economies of scale when it comes to sourcing as well as when it comes to production and other support functions. It's also like I talked about with the VAVE, where then the R&D and the production is in the same place. You know, they can talk daily in order then to continue to improve. We also get here that we get the smart factories where we then can connect the machines, we can do online tracking, and by doing that, we can also see how we can also be as efficient as possible.
In Rychnov as well, we have also invested and will continue to invest in solar panels, where the aim is to be self-sufficient when it comes to energy. Next one is our sourcing, where we today work much more as a group, where we then sort of use the benefits of the size of the group of working interdivisional in order then to work with the OEMs. Then we can then sort of use the division as well, and then of course locally in order then to find, let's say, the parts in order then to keep the operations going. Lucas will come back to that today a little bit later on how they work in the Americas. We can also use the info that we get from sourcing in order then to be early in our pricing.
I think especially then Entrance as well as Americas has been very good in using, let's say, the information that they get from sourcing and our experts when it comes to material in order then to be advanced or be early when it comes to the pricing component. If we then start to dissect it a bit, you see the direct material is 37% of our sales. Out of that, 38% comes from the raw material. Roughly one-fourth comes from the electronic components. But you can also see here the main and most important raw material, let's say the most important piece in our direct material is steel. Yes, you have seen that the steel prices has gone up with almost 300%, but you now see that they start to decline.
For us, let's say in the decline that they're doing today is actually quite good because we can maintain our prices. If we then go into logistics and supply chain, I talked before about that we work together when it comes to sourcing. We also work together when it comes to supply chain. We also, I think, have been good in serving our customers in order then to anticipate early when we're gonna have supply chain issues. I think here still, even though that we're doing a lot of things when it comes to inbound in order then to make sure that we have full containers that we can sort of negotiate with the shipping companies.
I still believe that even though that we have done a lot on the inbound, there is still much more that we can do, and I'm sure there is even more we can do on the outbound. Nico talked before about that we are rather. I would say that we are rather resilient. You can see it on the. You see it here, like for instance, also that we have learned a bit also along the way that when you had the raw material went up to 23%, we had an impact of negative - 50 basis points. When the prices went up to 153, we had, let's say, a smaller impact on our result. This comes also, I think, from that we have been much better in working with prices.
We have also been much better in working with operations. A bit also going forward, I think that now when we come to, I would say, more challenging times, we, as long as people can move around, we will sort of continue to sort of leverage from our after-market business. We are also improving and increasing our service as well as our recurring revenue piece. That's also helping us then, I would say, to bridge. We have seen, and that you can also see on this slide, that our decentralized model actually sort of works and helps us to grow rather fast. You can also see here that we are pretty flat when it comes to our margin, which means that we are good, especially then in the economic downturn, in order then to, let's say, to act, in order then to safeguard our profit level.
With that, I hand it back to the boss.
Thank you. Our last but most important strategic objective, our people evolution through people, where like on the customer side, we measure customer satisfaction now standard through Net Promoter Score. We measure also internal employee satisfaction now standard through employee Net Promoter Score. Our people are most important assets. We had the same positive experiences as here with you today in the room. We had our leadership summit two weeks ago, where we gathered the 350 leaders from around the globe for two days in Stockholm. We talked about strategy, a lot of networking. A lot of those people never met before. Of course, we had fun, and we celebrated success.
We are working very hard on further creating a common culture, a decentral organization, but with a common culture, what do we want to stand for as a family. We built that around our core values and beliefs, and we have there together our cultural journey, together we grow, together we innovate, together we have fun and so on. Making very good progress there. Health and safety, obviously very important for us. We want our place to be a safe place for our people to work. It's good to see that we reduced our injuries by 20% since 2019, but definitely not happy with the result because every injury is one too much. Making good further progress. We are a diverse and an inclusive organization.
We have 32 nationalities in leading positions. We have 27% females in a managerial position. Talent management, attract, develop and retain talent, are key for our success. You might remember when I started, I also said that I had the ambition to grow more internal talent and have more internal promotions. When I started, more than 70% of all the managers were recruited from outside, less than 30% recruited from internally. We said we wanted to change that ratio around and have at least 70% internal recruitments. On higher management levels, we are on that ambition level today. In general, for managers, we are only slightly above 50%, so we still have further room for improvement.
We believe that is very key for us to cross-fertilize experiences, our culture in our organization. Good as well as strategic objectives. Going to strategic activities, the next block in our strategy house. There we have five strategic activities to accelerate our profitable growth, continue with successful acquisitions, actively upgrade our install base, generate more recurring revenue, grow in emerging markets, and increase our service penetration. We have three growth enablers that enable those five initiatives. A further consolidation of our footprint and focus our operations on value added, optimize our logistics, as Erik mentioned, and then reduce product costs through VAVE, operation efficiency measurements and orders.
For time reasons, I will not go into the growth enablers, but we will zoom in on the five accelerators for profitable growth, starting with acquisitions. We have done more than 150 acquisitions since 2012. They add almost SEK 30 billion sales. Today we have identified more than 900 potential targets globally. Obviously, we are not talking to all 900 of them, but we have a good filled pipeline of people we are talking to, and we are confident we'll be able to continue, I would say, our acquisition machine. We do around 15-20 acquisitions per year. This year will be a very good year when it comes to acquisitions. Couple of examples, of course, I choose the good examples.
I always say that when you do 10 acquisitions, one, two are fantastic, seven, eight are good, and there's one you prefer not to talk about, so I will not talk about that one today. I will talk about the better ones. LUX-IDent acquired in 2019, a leading provider of RFID components based in the Czech Republic, HID field. The acquisition rationale was to further enhance our position within smart components and have also operational footprint in Europe, and an operations that can also handle smaller volume orders complementing our factory we have in Malaysia, which is more focused on bigger volumes. As you can see, sales and operating profits have improved significantly more than the group average over the period since we bought this company.
Very interesting entity. Another very good example, Biosite, acquired in 2020 in Global Solutions, a leading solution provider of biometric access control to the construction industry on construction sites, access and time and attendance for construction workers. Through a solution provider with a very high share of recurring revenue, that was one of the main reasons why we bought this company. Very strong in the U.K., and now we have the ambition to expand that to other markets and ultimately become also a global player in this access for construction industry. Also here, strong sales growth and really a step change of the operating margin.
I would say we are, as a group, good in buying quality companies that make perhaps high single-digits EBIT margin and then, you know, bring them over time within that 16%-70% bandwidth we aim for, and then further grow and expand them either to other verticals or to other geographies. We have a clear acquisition strategy. We have our acquisition strategy based on four foundations. We have also very clear investment criteria. If the different divisions come with an acquisition target, they know what to look for to get a potential acquisition approved. If I comment a bit on the four, one of them is, of course, to continue to do acquisitions in the core.
I would say continue to do what we have been doing for the last 10 years. We buy a local mechanical competitor. We integrate his operations in our global operations. We give him access to the full ASSA ABLOY product range, so we get operational efficiencies, synergies, and we get SG&A synergies. Still plenty of opportunities on the mechanical side in the world and definitely in emerging markets. We see now also more and more opportunities on the electromechanical side because there is now more sizable companies on the electromechanical side that become an interesting target. You see a couple of names here of acquisitions that qualify under that, expanding the core or growing the core concept. The next one is extending the core. I always take the same example.
A couple of years ago, we bought a Swiss company called Planet. They do very innovative door seals for you know people doors. Obviously, a door is an important energy consumer or an energy conserver if you seal it off in the right way. We were not in seals, so when we bought Planet, the first seal company, no operational synergies, but clearly G&A synergies because we can sell it to the existing sales channels. Afterwards, we bought more sales companies. We bought Lorient, for instance. Obviously there is also operational synergies. The third one is mainly for Entrance Systems, where we want to buy service companies and distributors and get access directly to the service business.
As you know, as I mentioned, we have the ambition to grow our service business high single-digit% for the coming years organically, and we want to complement it also with growth through acquisitions. You see a couple of examples that fit under that box. Last but not least, new technology. Perhaps in the first place, very important for Global Technologies, for HID and for Global Solutions. I also want to mention Control iD and ALCEA, two very exciting acquisitions we did recently, Control iD in the Americas and ALCEA in EMEA. We also continue to expand our technology offering in our more traditional divisions. Our M&A process is very decentralized. It's really the local organizations that come with potential targets.
It's part of their strategy, which is then obviously part of the divisional strategy. Every division has an acquisition strategy. Every local entity has a derived local acquisition strategy. They go after the targets and they really do all the operational work around acquisition. Every division has a very small acquisition team. They just give support, and they make sure that the process is followed. On group level, we actually only have one person that manages and standardizes the acquisition process and makes sure that, you know, the different cases are presented to Erik and myself in the correct way for approval. We spend a lot of time on the people aspect in acquisitions. As I said, we buy quality companies.
Those companies have very good results because of the people. We always have the ambition to take all the people over when we do an acquisition. We also look very much, is there a good fit from a cultural perspective and obviously from a competence perspective. Then as, unfortunately, we never can buy acquisitions just for the net assets, we have also to pay some goodwill or some badwill. It depends how you call it. We also have to have clear synergies when we buy a company, and we follow up on the realization of those synergies post-acquisition.
We have dedicated integration managers in every acquisition that we do, and also after the acquisition, the different divisions will then come back to us at group to present how that entity is performing vis-a-vis the original plan. If there is deviations, what are then the actions to bring the acquisition back on track. Many of the acquisitions we do are on a lower level when it comes to sustainability, so we really raise the sustainability standard for those acquired companies. There's a couple of good examples here. MR important job done on emission reduction. Record, and Markus will explain a little bit later on the Record acquisition.
They had much higher accident rates than we are used to in, you know, Sablons and bringing that awareness up and lifting that level. Then obviously a lot of operational excellence project in, I would say, most of the acquisitions we do. To finalize on acquisitions, of course, I have to talk about HHI, and I just want to anticipate already some of the many questions you might have later. Be it questions on, you know, have you paid too much for HHI because residential market is down or it's gonna go down. You know, why does it take so long? You know, your financing is gonna cost much more. Does it make sense?
You're spending so much time on that process since a long time. Are you having enough time to run your business? What we can say is that HHI is not for sale today. If HHI would be for sale today, yeah, most probably would have paid a different price than we paid a bit more than a year ago. They ran a process a year ago. It was a competitive process. We were the winner of that process, and we are very happy with that. The HHI acquisition is, for us, a once in a lifetime opportunity to give us also in U.S. a stronger position on the residential side. You know that we are very small on the residential side, in the U.S.
I would say that's a little bit an exception, because if you take Europe, we have 45% of our business, which is residential. If you take Oceania, very similar. If you take South America, the vast majority of what we do is residential. So it's not that the rest is not standard. It's more in the US that we are behind. And now having the opportunity to do HHI gives us that possibility to become also one of the leaders on the residential side. It's true that interest rates have gone up today compared to a year ago. We estimate that our financing costs at the beginning will be around SEK 500 million more than a year ago.
That being said, it also means that, you know, that cost will go down very fast because HHI is a good company, is a good cash generator, and many of the loans will be paid back on a short term. We'll also see how interest rates further evolve going forward. When it comes to management attention, Lucas, the head of Americas and the Americas management team don't have to spend too much time on HHI. It's really a small team. I would say it's Lucas, myself and one or two people in the Americas division and then supported with very good competent outside lawyers that work on this HHI acquisition.
If Lucas would already be distracted by this acquisition, I think it's a fantastic distraction because you can see the results of the Americas. We are committed to the HHI acquisition. What is good is that we will now have a final decision in Q2 next year. The judge will decide and hopefully confidently decide in our favor, because it's clear that we, but definitely also the HHI people cannot wait to join our organization. They see this as a fantastic opportunity. The whole management team of HHI will come over. They know that it will be sold for the last time and then get into a family that, you know, will keep them for the rest of their life. We speak the same language.
They know that we will invest in HHI, grow the product offering through innovation, widening the product range. They know that we will try to build their brands and give them opportunities to be more successful in the market and to serve the American consumer in a better way. When it comes to the U.S. residential market, yes, most probably it's true that the residential market is slowing down, and that you will go through a bit of a downturn. Interest rates are high. You see new housing permits going down. I think you should make a difference between new housing and then repair and refurbishment. New housing short-term will be more of a challenge, sorry.
Again, we don't buy HHI for the next quarter, we buy HHI for the long term. We are very convinced that the residential market is a good market to be in mid and long term for the very simple reason that there is a significant deficit in housing in the U.S. Whatever the economic situation, whatever the interest rates, whatever the Fed decides, sooner or later, they will have to solve that problem that there is not enough houses in the market. You also see that the housing age is aging, getting older, so there is also more need for repair and refurbishment.
You see, as a matter of fact, that repair and refurbishment is still up even today, and that is forecasted to go further up. Everything depends, of course, on how much of your business is on new build, how much of your business is on, you know, repair and refurbishment. We believe as long as the American families have money to invest, which is the case today, the repair and refurbishment will remain a healthy business. Yes, perhaps you will see a little bit of a slowdown of the growth short term, but mid- to long-term, again, we believe or we are convinced it's a good business to be in.
We have also reconfirmed our $100 million bottom line synergies that we will realize with HHI within the first five years. Most of them will come already earlier, I would say year two, year three. We will further increase the brands equity of the brands in HHI and Kwikset in particular, again, through growth, extending of the product range through innovation to adding more value to the American consumer. We will leverage through HHI also more the transition to electromechanical inside the house, because today digital door locks is mainly on the front door. We believe we will have the garage door, perhaps you will have your office door or your sleeping room door. You will have cabinets that become also digital.
HHI has the channel to market and the installed base in the house, something we are missing today. We see good opportunities to grow the sales outside of the U.S. HHI is running that today as an exporter business from the U.S., as having local teams in all the different markets. In the markets where a brand like Kwikset has still very good brand equity, we believe we can do better and grow that sales outside of the U.S. Then clearly, if you are one of the more important suppliers to Home Depot or Lowe's, it means that, and you can do that in a sustainable way, it means that you have also the most cost-efficient operational operations in that industry.
There we can profit from the low-cost operations that HHI has in Mexico and in Asia that we then can leverage to realize cost synergies more on the traditional ASSA ABLOY side. Really very excited still about the HHI acquisition. If you then go to the next growth driver, actually the upgrade installed base, we want to do that on the residential side and on the non-residential side. Penetration rates are still very low in general in the market, with the exception of South Korea, but where penetration is above 90%.
You know that South Korea was the inventor of the digital door lock through company called iRevo that we bought back many years ago, and that plays today still a very important role when it comes to new product development for digital door locks for us. Again, all the rest is still very low penetration, but we see then favorable trends catering for a stronger growth ahead. The millennial entering the housing market, the whole in-home delivery aspect that is increasing, and then, like I mentioned, smart locks penetrating deeper into the homes. If you look on average, a digital door lock has a higher average sales price and has a lower lifetime than a mechanical lock. You again, it's a bigger pie to be divided between us and our colleagues in that market.
That's true on the residential side. It's true on the non-residential side. I would say penetration is still very low. Definitely when you go into the building and the perimeter is perhaps already more from an electromechanical nature, but in an office, in a factory, it's still very much mechanical, so all the work still has to be done. We see there a good increase in investment in upgrade to electromechanical solutions. I would say if something has changed because of COVID-19, it's a further acceleration from mechanical to electromechanical and digital, definitely on the non-residential side. We name here a couple of verticals where this is happening. If I zoom in on one, education, we see here what the shift to electromechanical and digital means for our different divisions.
I always take the same example, the unfortunate shooting in universities and schools in the U.S. that gives us a lot of extra business because all those universities, the K-12 schools are now upgrading from a mechanical solution to an electromechanical solution. Where when a crazy guy with a gun comes into the school, with one push on a button, you can lock down all the classrooms, and the students and the teachers are then locked in the room with bullet proof glass and the shooter can't reach them. That's obviously an unfortunate example of good business for us. We have the generation of more recurring revenue, obviously linked to that upgrade from mechanical to electromechanical and digital.
The fastest-growing family for us, compound annual growth rate of 31% over the last five years and now representing 5% of top line. Back in 2018, that was only 2%. We still see very good significant opportunities to further grow that, software as a service recurring revenue aspect. With mobile keys, credentials, identity access management, and all the other points that you can see on the slide. Perhaps I zoom in quickly on the last mile delivery. Lucas will go more in detail, but we also acquired the company Luxer One back in 2018 in the Americas division. They do the package locker solution for the U.S. market, and they really solve that last mile delivery challenge.
They have over 40% recurring revenue. That was also one of the reasons why we bought the company at that time. We see a very nice strong growth potential in general and very nice recurring revenue potential in particular. Growth in emerging markets. I would say a dual view. There is emerging markets where we are doing very well. There's obviously some markets like China, where we still have a lot of challenges. Emerging markets represent today 15% of group sales, and we really have the ambition to grow in those markets faster than the group average. That has to come from a combination from organic and M&A growth, where we will launch products specifically for specifically developed for those emerging markets.
Obviously, we have to invest in people and organization in those markets. Lucas will later in a breakout session explain you our success story in Brazil, so I will not go into detail here. Another good example is Eastern Europe, example here Poland, where we have a compound annual growth rate of 17% over the last five years. If you see what is for us, I would say success formula is if you enter in a market organically, it's very difficult. Most of the time, we try to acquire a market-leading company in a specific product category, and then use that as a platform to grow from, scale from, and go into then other product categories and then grow in the market. That has been the case in Brazil.
That has been the case in Poland. Again, Lucas will elaborate more on that. Feet on the ground, we want to run that business with strong local knowledge so that we can also develop local solutions that meet the local needs. When we acquire those companies, they come also with strong local brands that we then endorse with the ASSA ABLOY group brand, combining the strength of both. We have, of course, the channel and the vertical focus. We go to the next strategic objective, increase our service penetration. For that, I would like to ask Massimo Grassi on stage.
Massimo is our head of the Entrance Systems division, so where we do most of that service business, and he will dig a little bit deeper on that. Massimo, the floor is yours.
Thank you, Nico. Good morning, everyone. My name is Massimo Grassi. As Nico just anticipated, I'm running Entrance Systems Division for ASSA ABLOY. Service is definitely at the top of our strategic list of priorities, and we truly believe that having different customer touchpoints throughout the entire product life cycle offer us a great opportunity. It start from installation. We sell and install the door. We would hopefully have the opportunity to have a maintenance contract and certainly or very likely to have the opportunity to repair the door if this become necessary.
After a certain period of time, we will have the opportunity to offer an updated model and modernize the installation. When needed, after again a certain number of years, eventually replace the door. We truly believe that so many customer touchpoint are an advantage for us. We try to leverage this advantage with several competitive advantages we have, starting from a...
World-class team of technicians. We have over 3,000 technicians that every day wake up in the morning and strive to make our customers happy and solve their problem. This is one of the most important asset we have, and we are very, very proud of the quality of our service technician. We can certainly offer our customers a quite unique geographical presence, so we can support all of our customers virtually everywhere in the world where they operate. We can do it offering them not only doors from Entrance Systems, but also other product that they may need in terms of their access solution. We have collaborations with our colleagues from Opening Solutions rather than Global Technologies. That's a big competitive advantage we have at ASSA ABLOY. 24/7 availability of parts, which is another very important aspect.
Think about one of our customers in distribution and logistics in about a week, 10 days during the Black Friday weekend. The operations need to be guaranteed, so you can't leave your customer down. Having the ability to make our customer feel safe and taken care and offer them peace of mind with 24/7 availability is fundamentally important. We can service any kind of door, not just ASSA ABLOY, but every possible door you have. Our service technician can help you having efficient operations. As Nico said, innovation is part of our DNA. We are so excited about continued innovation and help our customer to solve their problem. We have been investing quite massively in these last few years in IoT and connecting our doors.
There is outside here in the lobby an example of a nice connected door, and Marty, my colleague, at the break or later, will be delighted to give you some more details. This is something that we consider extremely important to offer more value to our customers and offer the ability to have a better total cost of ownership. We believe is a real differentiator. When you look at our offering in service, we start from a reactive proposal, which is the kind of a standard one, which is thought to be obvious. I think here our KPI are excellent, world-class. You know, service, it's all about KPI, and it's all about performance, day in, day out. We have a more, let me say, developed proposal, which is the preventive.
We engage our customers with contracts that includes visits where we have preventive maintenance. We try to solve the problem before the problem occur. The most evolved one is optimize, which is made possible by the fact that today we have connected doors, so we can have remote monitoring, we can have KPI available in terms of number of openings and at what time. This is a great benefit for our customers and also for us because we can eventually intervene before a problem occur. That's very, very important, and it is possible, thanks to our development in terms of connectivity and connected doors. With this, I will hand it over back to Nico. Thank you for your attention.
Thank you, Massimo. Personally, also very excited, as you might know, about this, service, business. Today, it's around 25% of Entrance Systems sales. Like I mentioned, growing above our ambition of high single-digit growth, per year. Very good job, well done. If we then leave the strategic activities and go to sustainability, I would say sustainability is really embedded in everything what we do. As we are a global leader in our industry, we also want to be the leader when it comes to sustainability. Therefore, we have also committed to the science-based targets. You might have seen this morning in the press release that our targets have now also been ratified by the official body.
We have the ambition to reduce our Scope 1 and 2 by 50% CO2 emission by 2030, and then in Scope 3, reduce by 28%. If you go to Scope 1 and 2, I would say we have a four-pronged approach to reduce CO2 emission by 50% by 2030. I would say that most probably for around 80% of what we have to do, it's clear what we will do. We have identified projects. It's fair to say that for the other 20%, we are not so sure yet. Obviously, we have time till 2030. We are confident that there will be new technologies coming that will help us then to bridge also the gap, the remaining gap of 20%.
What you will see, in order to reach the Paris Agreement for us, Scope 3 is much more important. Scope 3 is 98% of our CO2 emissions. We really have to work very hard on our supply chain, working together with our suppliers, doing product dematerialization to reduce that CO2 footprint over the value chain. We are convinced that if we bring sustainability in the right way into our operations, that it will give us a cost advantage.
If we run our operations in a better sustainable way, we will run them in a more cost-efficient way. We are also convinced if we embed sustainability in the right way in our product development, it will also give us a competitive advantage on the sales side, on the product and solution offering side. Again, sustainability really embedded in everything what we do. Good, that brings us to the end of the presentation. I will leave you with some key takeaways. Our strategy, no revolution, just a further evolution. We explain and we work on our strategy with our strategy house as the guideline. We have our strategic objectives that really are the compass for everything that we do.
They show us the direction to execute on the strategy. We have our strategic activities to accelerate the profitable growth. The five common ones on group level complemented with a lot of local ones on divisional or on regional level. We have the three growth enablers that give us the money to invest in that acceleration of that profitable growth. We have, and we continue to have the ambition to grow sales with 10% over a business cycle, 5% organically, and 5% through acquisitions. We want to do that with an EBIT margin within the 16%-17% bandwidth. I'd say that we are well on track to reach our financial targets that we set for 2026.
You see that our sales has to increase another 33% to reach the SEK 150 billion, 6%-7% per annum, and our operating profit has to grow another 44%, so 10% per annum. We operate in a very good industry with very strong positive general market drivers. In that good industry, we are a clear, indisputable market leader. We have a resilient business. We through our decentralized organization, we can be agile. We have a flexible cost base that supports us in whatever market condition that comes to us. Innovation is, for us, really differentiator. It's embedded in our DNA. Innovation goes much wider than just new product development, new solutions. It's also the way we run our operations and our processes. We believe in a sustainable future.
Sustainability is embedded in everything what we do and is a competitive differentiator for us. Last but not least, we have a very strong team, very proud of our team. Our team is our most important asset. We have, as a team, delivered in recent years in very difficult market circumstances, and we are very convinced we also will continue to deliver going forward. Thank you.
Thank you, Nico. It's time to open up for questions now, and we'll do so that we start with the floor here. If you would like to ask a question, I'm seeing already hands coming up. Raise your hand is what I was gonna say. We'll start down here with Daniela. While you're getting your microphone, can I just inform those of you, or remind you, those of you who are online, that if you would like to ask a question, please click on the Q&A button at the bottom of your Zoom tool and send a message which will go then to Carl here, and he will ensure that you get your say eventually. We'll start, as I said, here online and with Daniela.
Please, stand up, maybe because I think the online viewers will appreciate that they see you.
All right. Good morning. Thanks for taking my question. I have two things. First wanted to ask you regarding pricing. You clearly stated the intention to try to keep it stable, at least, regardless of whatever happens to raw materials. Can you talk a little bit about your competitors? Do they normally? Do you see them literally following what you are doing, or to what extent? I mean, is there any different by regions where you think if they lower because raw material is lower, at which point you would have to give up, or how much market share would you be willing to give up? The second point, just on China, I think previously, before the pandemic, you aimed to get back to double-digit profitability. We had the pandemic. Lots of things have happened. Now there's a lot.
I know it's early days regarding reopening, but sort of where is it just reopening enough maybe to go back to those objectives, or is there. How's the underlying operation? Will it take a little bit longer? If you can elaborate on that. Thank you.
Yep. If I start with pricing, I would say we continue to increase prices. We have also increased prices in Q3. We will also further increase prices now in Q4 and the beginning of next year in general, for the simple reason that we continue to see inflationary pressure. It's true that some of the material cost is down, steel in particular, but it's also true that general inflation is up and perhaps something people don't talk too much about, labor inflation. We had more than 4% like for like labor inflation this year. We estimate that to be higher next year.
Like I mentioned earlier, definitely also the whole energy inflation, in particular in Europe, where we still profit today from older contracts in many entities that will also kick in. That's the reason why we continue to increase prices, and we'll continue to do so as long as the market follows. We are in many markets the market leader, and therefore we have, I would say, even the obligation to increase prices first and then see what the market does. If the market follows, we will then further increase prices. So far, that has been the case, I think also because our more global competitors see the same challenges as us.
The other competitors are often family-owned businesses that are also in the first place interested in making money and perhaps less interested in how much market share they have. I would say there is one exception on further increasing prices, that is steel. Steel went down 50%-60% in the U.S. in particular. It's clear that there we cannot further increase prices. So far, we can keep prices, and we will, you know, do everything to keep the prices up. That's important for our specialty door business in the Americas, our garage door business, Entrance Systems in the U.S., and then our fencing business, our perimeter security business also for Entrance Systems in the U.S.
I would say it's the most challenging on garage doors because it's obvious that that's just a steel plate, you could say. Whereas on the fencing business, we offer much more solutions. Over recent years, we have also gone more away from the pure commodity fencing offering. On the door business in the Americas, it's perhaps the most protected because often you spec it in together with other things, and so you offer a complete solution to that customer. So far we can keep prices also for steel, and we are confident we will be able to continue to do so if the behavior in the market does not change.
Therefore, like I mentioned earlier, it should give us a good tailwind as of next year. When it comes to China, you know that we have had our challenges back eight to nine years ago when we acquired several companies and had some issues in those companies. Around three years ago, we decided to change our strategy for China. On one side, consolidating our brands and going to market with two strong residential brands and one strong commercial brand. Pan Pan as a quality local Chinese brand on the residential side, and then Yale as an international brand on the residential side.
With a global Yale team for China and a global Pan Pan team for China, where in the past there were more sales teams built around the different individual factories. Then on the commercial side, we have our ABLOY brand, where we invested a lot in spec writers and then focus on specific verticals to spec in our products and then make sure that we sell that through. We also decide to consolidate our operations to get scale effect, and we also decide to consolidate our innovation hubs. I would say on the operations side and on the innovation side, most of it is done. We are also having these three commercial teams up and running in a good way. We continue to invest in them.
Prior to the construction crisis, prior to COVID-19, we were making good progress. We started to grow again in Greater China, and we start to improve our margin. Historically, we made very low single-digit margin in China, and we were able to double that prior to COVID-19. By the way, we never said, Daniela, that we would make double-digit margin in China. We said we will have as an ambition to make high single-digit margin in China. We believe that is possible. We also believe if we are competitive against the local Chinese in China, with those products, we have fantastic products that we can export to Southeast Asia, perhaps even Australia, New Zealand, Africa, Middle East, with very good margins.
Unfortunately, construction crisis hit us. Mr. Xi has decided he wants to change the way they run construction in China. He's right, because the way they were running construction is obviously not sustainable. We have said from the beginning that that change will take much more than just a couple of quarters. It will take a couple of years, because the wealth of the average Chinese sits in construction, and also the money of the local authority sits in construction. It has to be a balanced approach, and that's what we see today. Construction market is still significantly down.
We were very much skewed towards new build in China, something we wanted to change because we wanted to change from residential to commercial and from new build to replacement. Obviously, we are still hit very hard because it's the new build which is hit in the first place. Although we see very good traction on the strategic initiatives that we launched, like commercial, I mentioned we grow on the commercial side despite a declining market. We see a good shift from new build to retail replacement, but those shifts are too small to compensate for the big drop that we see on the key accounts.
Partly because of the market, partly also because we have decided that we don't want to do business with many of those key accounts, because at the end of the day, the ambition is to get paid for what you sell, and that is a challenge with many of them. It will take longer time. We have a double-digit negative growth today in China, and we are having negative profit in China. That will not be solved in the coming quarters. It will, you know, take a longer period. We are confident that our strategy is still the right strategy and that ultimately we will get where we want to be. Obviously the whole zero tolerance when it comes to the COVID is not helping.
There is very little mobility in China. Everybody got excited now because the quarantine was reduced with three days. It's still, you know, a very challenging situation. If you want to go to China, you still have to sit a week in quarantine, and there is still the fear that if you go from one city to the other, you know, there is a COVID outbreak, that you are stuck in that city. I think it's not solved yet.
Thank you. A few hands. We'll take Rizk next, too. Yeah. Yes, sir.
Yes. Hi, Rizk from Jefferies. Just the first one on the opportunity on the green buildings. Can you give us a sense of how big that is in terms of sales? Do you see this as more a new construction opportunity or also more on the renovation side? And is this as big of a theme in Americas as it is in Europe? And my second question, just very quickly, if I could just squeeze one in, it's just thanks for the update on HHI. Can you perhaps just help us with the costs related to the carve-out of Emtek, August, and Yale in the U.S., if you have to do those as well? Thanks.
Yeah. If I start with the first one, obviously G reen is a drive in the first place in Europe today. It's much more important in Europe than in the U.S. or in the rest of the world. We are confident that this is a trend that will become a global trend. We see more green buildings, for instance, in regions where perhaps you would not expect it directly, regions like the Middle East. Today, Europe, spreading around the globe, it's obviously for new build and mainly for new build and for refurbishment. As you know, we have two-thirds of our business which is aftermarket.
It's only on the other part, and it's in that part only on the specified business. Within our spec business is by far the fastest growing sub-family you could say. Like I mentioned earlier, you also heard in the presentation, a green project is on average around 20%-25% more expensive, like for like, with a traditional mechanical project. If every project you can transfer, the pie becomes 25% bigger, and there is less players in the market that can offer a green solution. You take the low-cost players out of the equation, a bigger pie to be divided with less colleagues. When it comes on HHI, there's different costs.
There is, first of all, the running cost of our lawyers, they are expensive. We pay around SEK 20 million-SEK 25 million per month to our lawyers. We had SEK 80 million, I think, in Q3. We had SEK 60 million in Q2. That run rate will continue till the judge decides, so till mid next year. Of course, we have the bankers that helped us and are helping us with the acquisition and the divestment that we will have to pay at that moment when we have a positive outcome by the judge.
I would say that the divestment will happen under the condition that we can or that we get approval from the judge for HHI. It's so that we go to the judge with the divestment proposal in hand. We have also the ambition to have the potential buyer in front of the judge as soon as possible. We are running that process as we speak. We get good traction as well from private equity as from strategic buyers. We are very confident we will have a good buyer in front of the judge soon. It's quality assets. I think it's a very nice business. Our Smart Residential business is a very nice business in the U.S.
It's businesses that we don't want to divest, that we would prefer to keep with us. Unfortunately, that's the only way we can mitigate for, you know, the concerns raised by DOJ. I would say the costs around that are limited. It's just a very simple divestment of those two businesses.
We have the next question. I think we'll take Lars.
Thank you. Lars from Barclays. Maybe just to follow up on Rizk's questions around green and regulation. I'm trying to get my head around the windows opportunity. We've heard a little bit more today about, I guess, green and regulation, but specifically auto glass seals. We've had a year where you've closed Perenial, Caldwell here in the U.K. You know, could windows be the next door opportunity, if you wanna put it that way, in the world of ASSA ABLOY? That's my first question. Second question, I wonder maybe to Nico or Massimo, lots of focus on Entrance Systems, obviously on industrial doors and pedestrian. Haven't heard a whole lot around the two smaller businesses, particularly residential. You know, you closed MR, what, 10 years ago. It's been pretty quiet around that part of the business.
What's the strategic future for that within Entrance Systems? Maybe thirdly, if I can, just on MFP9, Erik, I know there's a limit on how much you can say, but is the reason why it's delayed that you're rolling out maybe some projects in Europe? We've heard you both talk about some additional cost out measures in the Q3 call. On the faster payback, should we think of that similarly to MFP8 as being less around factory consolidation, more around retirement, early retirement options? Are those some of the reasons why we should see a faster payback on this MFP? Thank you.
It's a lot of questions asked. If we start with the windows, we are obviously only in window hardware, and we are only in window hardware in specific markets. We have a good position in the U.S. We have a good position in New Zealand, Australia, Japan, and then we have a good position in some markets in Europe. In Europe, it's in those markets where the channel to market for window hardware is the same as for door hardware. We don't want to be in window hardware in those markets where it's separate channels in Europe because the margins are, I would say, very depressed in those markets and very different from our 16%-70% ambition level.
It's a more selective approach, but it's definitely a very interesting business for us. Difference is perhaps also on the hardware side. It's much more an OEM channel. We deliver that window hardware to the window manufacturers. I would say they offer then the more complete solution into the channel. I think it's a different story than on the door side, where we also sell the door itself as well in U.S. as in Europe as in China. When it comes to your second question, I have-
We haven't talked so much about residential.
Oh, yeah. Okay. In entrance
We would love to talk about residential.
Yeah. In
Residential AMOR.
In Entrance Systems, perhaps if we dissect a little bit the four segments, and we start with the smaller ones, and small is very nice in this case, perimeter security. It's around 20%, a little bit less than 20% of Entrance Systems. Very nice business. Growing very high double-digits on top of very high double-digit a year. To that extent that, again, also there we are now beaten by mathematics. You cannot continue to grow high double-digit on high double-digit on high double-digit. Margins in line with the Americas Division, so very creative when it comes to overall margin for Entrance Systems. Done a very good job by the team in segmenting the market and going now to the market with a solution for the different verticals.
They have a specific fencing solution for data centers, a specific solution for warehouses, specific solutions for high security. They really grew significantly faster than the market in the recent two years. Very, very good job well done. This is a U.S. North American market. The market dynamics in Europe are very different, also very different margins. In U.S. Canada, you can sell the product and then a dealer or a partner will do the project, where in Europe you have to do the whole projects. You also have to dig the holes in the soil and some. The second one you have your question about, second smallest or the third biggest you could say is our residential segment, also around 20%, a little bit more than 20% of Entrance Systems.
Mainly a U.S. business today. We are small in Europe, but we definitely have the ambition to grow significantly in Europe. That was the one when we created the four segments with the lowest margin, mid-single-digit margin at that time. We said that there the focus was in the first place to significantly improve that margin, and we have succeeded in a very good way, I would say, with that ambition. We knew that was possible because we knew our colleagues, competitors in the market showed much better margin than us. We really had a focused approach, and we are there now on nice double-digit margins for that business.
Growing very nicely, of course, also helped by pricing because it's a steel, it's a piece of steel that you sell. Then the third one, the second biggest, is pedestrian, where Markus will later also talk about agta record integration. Nicely growing. agta record, we also got access to a wider product portfolio that we can further widen our scope. We can go into automatic doors. We can go into security systems for airports and so on. I've said often that I'm perhaps one of the few that likes non-food retail because perhaps non-food retail goes down, but what remains of non-food retail is of a higher level. The pure mechanical doors will disappear and are replaced by higher-end sliding automatic doors.
For us, it's good business because, you know, we are not in manual doors, we are only in automatic doors. agta record acquisition gone very well, much faster realized the synergies than we expected. Really very successful acquisition. Although also there we had to wait 18 months, and also there we had to divest some of the business. But with Insight, very, very good addition to the group. Then the biggest one, the industrial segment, I think around 40% if you add them up. Loading docks, sectional doors, high-speed doors, of course, driving on the logistic wave, the building of warehouses, but also with our high-speed doors on the automotive wave. Automotive is an important vertical for high-speed doors.
It's not so important how many cars they make. It's more important how many new models they bring to the market, because then they have to re-lay out the assembly line. They have to re-lay out in tier two and tier three, and then they need a lot of high-speed doors. In pedestrian and in industrial, obviously, our service is very important, and like I mentioned, very happy with the development there.
If we go to MFP, I think there, I mean, if you look on, I think we had a rather fast payback on the MFP 8. What I meant was that it will be similar on the MFP 9. As you rightly said in the MFP 8, yes, we did a round of pre-retirement. Let's say that we did that in the MFP8, so I think in the MFP9 you're gonna see more of the classical mix of factories, offices, et cetera, et cetera. As we have already highlighted, the program as such will be smaller than the ones that you have seen before.
The MFP8 was SEK 1.5 billion. This one we are still consolidating the figures, but it will be somewhere between SEK 1 billion and SEK 1.5 billion. Like Erik said, with similar, perhaps even better payback than MFP8. The reason why we'll do it now in Q1 is that it's only 18 months since we launched MFP8. Then in MFP8 of course there was some extra drive because we just went into COVID-19 crisis everywhere or at least. Either way. The way we run the process, of course, we also discuss those processes with our auditors.
We have to inform the people that are affected by these programs, and therefore we have to make sure that we do it in the correct way, and that's why we come now in Q1.
Thank you. We don't have any questions online at the moment, so I'll continue here. I saw Mattias close here. Then was there any hand over there then later? Yeah.
Thank you. Mattias Holmberg from DNB. A quick one on acquisition targets. I think you mentioned on the last capital markets day that you had identified more than 1,000 potential targets. I would be interested to hear if this number is still accurate or if there's been any development here. Then another question, you've mentioned several areas where you intend to grow faster than group average in service, source and so on. Implicitly, that means there are some other areas where you would allow for below group average growth. I'm curious here which areas those are and why. Thanks.
Yeah, on acquisitions, I think we said in the presentation SEK 800,000, if we said-
SEK 900,000.
SEK 900,000, if we said last time thousand. Yeah, okay, we can debate if it's SEK 900,000 . Depends on, yeah, what you define as an active target. I think the message is there is more than enough meat on the plate to continue to play the acquisition game for the coming years. Like I mentioned earlier, we have a very good well-filled acquisition pipeline. You often hear me saying that I'm happy but not satisfied, and I'm definitely happy with what we have in the pipeline today, and we are confident we will do more acquisitions now also in the coming quarters. Your second question on...
We have areas where we'll grow.
Oh, yeah, right.
Area where we will
Clearly, I mean, if you take mechanical, our mechanical business, which is 25% of group sales, if you look over the last five years, that has only grown around 2%. That's an important one that grows lower than the 5% that we have an ambition. That will continue to do so as we continue to see a shift from mechanical to electromechanical, and digital. We are investing in our mechanical core because obviously it's still a very good core. It's a good cash core, it's a good profitable business, and we believe also there through innovation that we can do more and perhaps we can further increase the growth speed on the mechanical side. Obviously it will be below the 5% group level. That's one important one.
You know, the other one, we will see China, but China will not, you know, turn around, in the very near future. That, like I mentioned earlier, will take a little bit more time.
We have a question down here.
Thanks. Morning. Alexander Virgo, BofA. Question on dynamics, Nico. Wondered if you could talk a little bit to the push versus pull on SaaS and green. How much of this is being driven by you pushing new products and capabilities into market? How much of it's being asked of you? Second question, just on growth. Your five versus three, but if you could give us an impression of what you think is the biggest contributors to that acceleration. As a sort of housekeeping, how much would you expect underlying price to be from your innovation efforts?
On push or pull for green, we will always, I guess, overestimate our own efforts and our own push. I would say that in Europe it's definitely a lot of pull from the market. There is a strong drive also through legislation. In Europe, it's in the first place pull and us following. Clearly we have an active approach when it comes to approaching architects, presenting them our product portfolio, explaining them the advantages. We have also relatively a higher investment when it comes to new product development around green. I would say in the rest of the world it's us in the first place pushing.
In Americas, in other places around the world, we try to push the concept because we see it as a good business opportunity and a good differentiator for us in the market. Second question was on the 5% growth, which are the main drivers. Clearly price in recent quarters before COVID-19, we were in a low inflationary world where price was 1% per year around. I think if we go forward, and one day we come in a stabilized market, let's see if that happens one day. I think there is consensus that we will be in a higher inflationary world, and then perhaps price will be 2%. I'm just saying something. That means that we need 1% less volume to get the 5%.
That was an important driver in recent quarters. It will, I think, be an important driver also going forward. Clearly service, like we mentioned, our ambition to grow service high single-digits. Where today we grow double, low double-digit service. The third one is everything what has to do with shift from mechanical to electromechanical. We see over the last four, five years, we grow our electromechanical business around 11% or 12% organically versus mechanical only 2%. Like I mentioned in the presentation, the whole recurring revenue aspect with software as a service, which was four years ago, only 2% of top line, today 5% of top line.
We would like to add to that also emerging markets, but obviously with the situation in China, we are not delivering on that ambition yet. Globally, we see good pockets. Like I mentioned, South America, fantastic success story in emerging markets, East Europe, Middle East. China is too big in the total to see that in the total picture. Then, your last question was?
No, you answered it, I think. Price, if you said-
Oh, okay. The price, I said that. Yeah. Okay.
Thank you. I know that there are more questions out here, but, we're a little bit behind the schedule now, so please save your questions for the final Q&A that we will have in the afternoon, and, we'll ensure that you get the opportunity to ask questions then. With this, I'd like to conclude the Q&A. You take over.
Thank you for joining this first session. We will now take a break here in the venue. While the people here are looking at the product displays, we have prepared two videos for you. One with our Head of EMEIA, Neil Vann. He will show you EMEIA's product displays that will provide an overview of the evolution of the lock industry, from mechanical locks to the sophisticated access systems that we offer today. There will also be a second product demonstration of a connected sliding door that we have here in the lobby. This will be demonstrated by Martin Stagnerius, who is Digital Services Manager at Entrance Systems. For those of you who are connected via Zoom, I have circulated a link in the chat forum that you can follow and watch the videos on demand.
If you're following us via the website, we'll now run the two videos at once, starting with EMEIA. After these two videos, there will be a break before we start the next session with Americas.
We have gone through a remarkable transformation over the last 28 years. As the world has changed, so have we, evolving from a lock manufacturer in the Nordics to a world leader in access solutions. At the time, back in 1994, when both ASSA and ABLOY merged, our product offering largely consisted of mechanical locks. 28 years later, our portfolio is the most comprehensive in our industry. However, it is changing fast due to digital transformation. Innovation is at the very core of ASSA ABLOY, and this is what stands us out as the market leader, what gives us that competitive advantage to accelerate our growth and drive the lock industry into the future. The core of the business is what made us great, our heritage, local focus, and local products like our cylinder platforms that continue to be a core element of our product portfolio.
In EMEIA, our division addresses local standards, local needs, hugely strict local regulations. However, the install base around our brands tends to be fantastically loyal. In the past 10-15 years, we have provided hundreds of millions of cylinders to our markets across EMEIA. You may think, where do all those cylinders go? Well, cylinders, like our industry, have local heritage, driven by local systems and local brand confidence. Historically, master key systems have had a long life. In some instances, we have systems that have been in place for 50-60 years and are still active today with replacement products and extensions being provided. Over time, we have leveraged scale from an operations point of view. For example, establishing our Rychnov cylinder factory, which is a state-of-the-art production facility.
We combine Rychnov with local final configuration sites using flexible assembly automation, which enables customization and fast deliveries of cylinders to our customers with really optimized inventory levels. We have so much more potential in our cylinder ranges. We have a huge legacy and recognize the complexity local standards, coupled with the fact that customers want new levels of flexibility. With our expertise, we can drive security and control with cylinders to the next level. A mechanical core is on a journey of transformation. We are seeing a transition from mechanical to digital that is providing us with many opportunities to grow by upgrading our huge install base. We started this transformation with VERSO CLIQ and ABLOY CLIQ many years ago, and this allowed us to start the journey of evolving mechanical systems into electromechanical ones.
An Elmech locking cylinder requires a mechanical key, and in addition, the key carries an electronic code. Innovation has continued, and in 2015, we launched eCLIQ, which is a purely electronic cylinder. CLIQ step changed our cylinder offering, and we have continued to invest in new generations of CLIQ. Our latest generation, both in eCLIQ and PULSE , provide a batteryless offering using energy harvesting for low maintenance and of course, great environmental sustainability. In some of our biggest cylinder markets, digital cylinders have actually overtaken mechanical cylinders, but there is still a huge potential for the installed base conversion. We have a deep heritage with many brands and local standards in the cylinder market, so the upgrade opportunity is vast. It is not just about hardware upgrade. We have another significant opportunity.
We are now taking access management to the next level with our full access control ecosystem known as Incedo, which brings all types of hardware together in one control system, allowing customers to determine the time, the person, and the location of access with full traceability. We have evolved our strategy and have moved from being a component supplier to providing a complete ecosystem. Having more control over all elements allows us to deliver the best performance for our customers, as well as integrating into other building systems. What you can see here is Incedo, our cloud-based access control solution, which brings together electromechanical products such as ABLOY CLIQ, eCLIQ, and ASSA ABLOY readers. Incedo will give us a unified access control ecosystem that integrates our own intelligent devices, but also allows third-party integration to provide the widest choice for our end users.
It will enable us to have multiple hardware solution types under one control system, which is a very powerful proposition. We have seen this part of our business grow strongly, and we expect this to accelerate over the next few years. We have used the group's scale to develop this in collaboration with HID, using their Origo platform enhanced for our own market needs. We continue to invest in innovation, and this will enable us to accelerate our growth in digital transformation and take the company and our industry into the future. We have gone through a remarkable transformation over the last 28 years. As the world has changed, so have we, evolving from a lock manufacturer in the Nordics to a world leader in access solutions. At the time, back in 1994 when both ASSA and ABLOY merged, our product offering largely consisted of mechanical locks.
28 years later, our portfolio is the most comprehensive in our industry. However, it is changing fast due to digital transformation. Innovation is at the very core of ASSA ABLOY, and this is what stands us out as the market leader, what gives us our competitive advantage to accelerate our growth and drive the lock industry into the future. The core of the business is what made us great, our heritage, local focus, and local products like our cylinder platforms that continue to be a core element of our product portfolio. In EMEIA, our division addresses local standards, local needs, hugely strict local regulations. However, the install base around our brands tends to be fantastically loyal. In the past 10-15 years, we have provided hundreds of millions of cylinders to our markets across EMEIA. You may think, where do all those cylinders go?
Well, cylinders, like our industry, have local heritage, driven by local systems and local brand confidence. Historically, master key systems have had a long life. In some instances, we have systems that have been in place for 50-60 years. They are still active today with replacement products and extensions being provided. Over time, we have leveraged scale from an operations point of view. For example, establishing our Rychnov cylinder factory, which is a state-of-the-art production facility. We combine Rychnov with local final configuration sites using flexible assembly automation, which enables customization and fast deliveries of cylinders to our customers with really optimized inventory levels. We have so much more potential in our cylinder ranges. We have a huge legacy and recognize the complexity, local standards, coupled with the fact that customers want new levels of flexibility.
With our expertise, we can drive security and control with cylinders to the next level. A mechanical core is on a journey of transformation, and we are seeing a transition from mechanical to digital that is providing us with many opportunities to grow by upgrading our huge installed base. We started this transformation with VERSO CLIQ and ABLOY CLIQ many years ago, and this allowed us to start the journey of evolving mechanical systems into electromechanical ones. An Elmech locking cylinder requires a mechanical key, and in addition, the key carries an electronic code. Innovation has continued, and in 2015, we launched eCLIQ, which is a purely electronic cylinder. CLIQ step changed our cylinder offering, and we have continued to invest in new generations of CLIQ.
Our latest generation, both in eCLIQ and PULSE, provide a batteryless offering using energy harvesting for low maintenance and, of course, great environmental sustainability. In some of our biggest cylinder markets, digital cylinders have actually overtaken mechanical cylinders, but there is still a huge potential for the installed base conversion. We have a deep heritage with many brands and local standards in the cylinder market, so the upgrade opportunity is vast. It is not just about hardware upgrade. We have another significant opportunity. We are now taking access management to the next level with our full access control ecosystem known as Incedo, which brings all types of hardware together in one control system, allowing customers to determine the time, the person, and the location of access with full traceability. We have evolved our strategy and have moved from being a component supplier to providing a complete ecosystem.
Having more control over all elements allows us to deliver the best performance for our customers, as well as integrating into other building systems. What you can see here is Incedo, our cloud-based access control solution, which brings together electromechanical products such as ABLOY CLIQ, eCLIQ, and ASSA ABLOY readers. Incedo will give us a unified access control ecosystem that integrates our own intelligent devices, but also allows third-party integration to provide the widest choice for our end users. It will enable us to have multiple hardware solution types under one control system, which is a very powerful proposition. We have seen this part of our business grow strongly, and we expect this to accelerate over the next few years. We have used the group's scale to develop this in collaboration with HID using their Origo platform enhanced for our own market needs.
We continue to invest in innovation, and this will enable us to accelerate our growth in digital transformation and take the company and our industry into the future.
Warm welcome. I'm Martin Sagnérius, and today, we will talk about connected doors and what value they bring. We know that you're curious about the added value connected doors can bring. It's actually not about the beautiful door you see behind me, but about connected doors, how it works, and especially what value it brings internally as well as externally. Our installed base consists of millions of automatic doors and entrances, and traditionally, they have been generating data which has been available at the control system at the door. Just like in other industries as with other equipment, we are now able to upload this data in a secure way real-time to the cloud. We then offer value-added digital services through ASSA ABLOY Insight based on remote interaction like remote monitor, remote control, and remote configure.
Let us explain this more in detail with three specific examples, sustainability and energy, service efficiency, and total cost of ownership. As you know, we make high-quality doors, and the customer simply wants them to work all the time. However, sometimes there's an error or an alarm on the door, and then we want to get it back working as soon as possible again. I will now simulate an error on the door. I will disconnect the battery from the automatic door. With a connected door, we will shorten the time to discover that there is a problem with the door. Instead of a person detecting and recording that there's an error, we can through the system get a notification across to the customer or to ASSA ABLOY, if they have a service contract with us.
This will improve problem resolution time, and since we know the problem upfront, we will from our knowledge and experience also bring the right spare parts to the customer, which will improve the first time fix ratio. Data shows that 15% of all service calls coming in could be solved with remote service. With remote service, we could have a better utilization of the service technicians, and they can spend time on qualified visits. We will also be reducing driving, which will improve carbon footprint. Here you can now see the battery error in the system, and I also get notified in my phone via an email. The service efficiency value of connected doors is increased uptime with improved customer satisfaction, as well as an improved margin for ASSA ABLOY.
Let's face it, this is basically just a hole in the wall when the door is open. From an energy perspective, that's the worst case scenario when energy and air flows through it. We have had a pilot in a retail chain over the last few years where we have collected data on door behavior. This is what you see in this picture. We have analyzed over 60 million door openings. You see the sensors being triggered, and then the yellow part is the door opening. Can you imagine, in average, how long time an outer door is open in average? It's 3.5 hours in average per outer door and day that this data shows. That's equivalent to GBP 2,700 with today's energy prices.
With ASSA ABLOY Insight, we visualize this, baseline it, in order to put the actions in place to reduce energy consumption. Traditionally, we have been doing this by avoiding open mode on the mode selector when the door is always open, and during cold days, we put it on winter mode as well, which adjusts the opening speeds, open time, and closing speed, basically. However, with connected doors, we can now dynamically remote configure this according to weather forecasts and scheduling. We also have a great feature within ASSA ABLOY Insight, where we can set the door open too long time individually per customer. If the door has been open too long, the customer will be notified. With connected doors, we commit to reduce energy consumption by supporting an optimized door behavior.
As an experienced service partner, we help our customer gain a good understanding of the cost of their doors. With a connected door, I can interact with it remotely, like a remote reset, which I just did, so the door will open and close in a while and be reset in the control system. This could have a huge impact cost-wise, which I will come back to in a while. With real-time data, we can act more proactively. Since we know the opening cycles of the door, we can avoid breakdown calls and time-based maintenance intervals and move into maintenance when it's really needed. The data gathering is also important for us to move into predictive maintenance in the future. Information on operating expenses are very important in order for the customer to understand their total cost of ownership.
We do this in a transparent way through e-maintenance, where the customer could see their total installed base with their installations. They can see financial information like orders, quotations, but also maintenance reports related to their service visits. We analyze this information together with the customer to make conclusions on their doors. Once improvement areas has been quantified, we can together as partners execute improvement activities and create an implementation plan. The remote reset I did earlier is comparable to rebooting a computer. All this without driving to the door and performing the actual reset here, which will save us a lot of cost and time when driving to the door.
As partners, we advise and support in optimizing the total cost of ownership throughout the entire life cycle of the customer doors with an improved lifetime and uptime as a result, while they have full transparency, which leads to peace of mind.
Hello, everybody. I'm Massimo Grassi, head of Entrance Systems Division at ASSA ABLOY. I'm here together with Markus Kast. Markus is the head of our business segment, Pedestrian, and I'm really delighted to have the opportunity to introduce you this presentation agta record has been one of the largest and most exciting acquisition of ASSA ABLOY, and Markus is the best person to share with you the best practices and the experience made throughout this integration process. Let's start with a quick video.
Every day, millions of people around the world rely on our automatic doors. Doors that ensure peace of mind and improve the security of your building, and that are part of your solution for a more sustainable future.
We are Aiming Higher. Are you ready to join us? With us by your side, you can improve the efficiency and flow of your buildings. You can work smarter using insight and the latest technology. You can open the door to a more sustainable business with greener buildings, better indoor climate, and enhanced energy performance.
With over 5,000 employees, we operate and support customers worldwide in direct and indirect business, supported by our strong brands, such as ASSA ABLOY, Record, and Ditec. For more than five decades, we have led the industry with innovative entrance solutions and specialized service teams that help you maintain and modernize your doors and entrances.
Putting you and your needs first in everything we do is the reason for our success. By combining our engineering experience with application knowledge, you can always count on us to provide you with a safe and sustainable solution for the front, back, and interior of any building.
Every building has unique people flow requirements, and choosing the right solution depends on how it will be used and by whom. That is why our automatic doors, such as sliding doors, swing doors, revolving doors, and special doors, help you connect people and places in every situation efficiently and making your building more sustainable. That is why our hermetic door solutions always keep your environment clean and safe. Our security entrance control solutions help you secure your areas in essential sectors and critical infrastructure to support you with peace of mind, both today and tomorrow. Are you ready to enjoy the strength of a global partner and the convenience of local knowledge and experience whenever you need it?
We are here for you and aim higher to secure the demands of future generations.
Welcome to the presentation of the integration of one of the largest acquisitions in ASSA ABLOY's history. Let me start with giving you some background agta record has been founded in 1953 by Helmut Heinz agta record is headquartered in Zurich and was at that time listed at Euronext in Paris. We had about EUR 400 million sales and 2,500 employees. agta record product offering is about sliding doors, swing doors, and revolving doors. In these product categories, we have an overlap with ASSA ABLOY pedestrian business. agta record offer hermetic doors, security entrance control, and other special agta record is a global company with a strong presence in Europe.
80% of the sales is in Europe and 50% of the sales in North America and the rest around the globe. We have been present directly in 13 countries and had a dealer network around the world. Let me talk about the rationale of this acquisition. First of all, the strong market position in Europe and in North America. Even if ASSA ABLOY in the pedestrian business is strong as well in these two areas, there's still quite some complementarity in this because ASSA ABLOY in Europe is strong in the northern part agta record in the southern part of Europe. In North America, ASSA ABLOY is strong in the direct business and record strong in the indirect business. A second very important point is the strong service business of agta record.
As ASSA ABLOY, service is a key focus topic agta record. before acquisition, service was roughly 40% of the overall business. In the meantime, it's even slightly higher. Third, strong product technology agta record products are known in the market as very reliable products. On top, they are cost efficient and suits to customer needs. Fourth, the powerful brand. The Record brand is one of the most powerful brands in the automatic door business globally. Last but not least, an experienced and knowledgeable team on all levels. This acquisition was definitely a long journey. Basically, it started in 2010, in October 2010, with the acquisition of 33% agta record from Somfy.
I personally remember this day because it happened just 1one day before my second round interview with the chairman agta record. i still remember the discussions we had to protect ourselves against this takeover. That's why we have put in place these days a shareholder agreement between the daughters of the founder and the French bank for five years, and this has been prolonged then in 2015 for another couple of years. In 2018, early 2018, we have decided to enter in a sales process, and that's why in March 2019, we have signed an agreement with ASSA ABLOY to sell 55%-54% agta record's share. After that, we had started a quite lengthy merger clearance process.
It ended only in August 2020 with the final approval. In February 2020, we got conditional clearance. However, we have been asked to sell six of our businesses. Finally, we have completely closed this transaction with the divestment. There's the closing of the divestment of this company in companies in 2020. Now, let me discuss about the integration. In an integration process, governance is absolutely crucial. With this project, we had a very strong governance. Starting with the steering committee, consisting of senior managers, with Erik Pieder, Group CFO, with Christopher Norbye at that time, EVP for the Entrance division, with CFO of Entrance and with as well the business area presidents.
We had a full-time integration manager with a small integration office, and we had nine work streams. Within these work streams, we had shared teams between ASSA ABLOY managers agta record managers. The nine work streams were HR. HR was about HR processes, HR tools, and policies. A very important work stream was as well organization. This was about the overall organization, how to combine these two businesses, but as well about the organization within our business unit in the areas where we had an overlap in the market. Communication, from my perspective, one of the most important subjects in such an integration. I'll come back to this topic in a minute. Service as well crucial for our success. Service is the area where quite an important part of our synergies came from.
In this work stream, we have defined the service strategy, service organization, and as well, shared best practices between the two organizations. In the equipment product work stream, we have defined the product strategy. We have been starting with comparing the cost levels and the features of the different products, and based on that, defined a joint product strategy. We have as well been working on a cross-selling strategy, so to enable the ASSA ABLOY business unit to agta record products. In R&D work stream, we have pretty soon merged the two R&D organizations. This was not at all about cost saving. This was about strengthening our innovation power. In the meantime, we have even more headcount in R&D than we had before in the two teams separate. We really focus on innovation in our journey to growth. Operation.
Operation was about manufacturing footprint on the one hand, and on the other hand, about supply chain, classical sourcing, savings, as you might expect, in an integration. I come to more, to two more technical work streams. IT about IT infrastructure the agta record it infrastructure into the ASSA ABLOY environment. Last but not least, finance and legal. This was about integration agta record into the finance reporting schedule and systems of ASSA ABLOY. I must say this was, it seems to be quite technical, this financial integration. However, we got quite some benefit out of this because with the new reporting, we have significantly better information to take decisions. As mentioned before, communication is crucial in such a journey. Soon after the closing, we have started with providing newsletters.
Newsletters about the organization, about products, spotlight on some employees from both sides. We have as well performed a cultural study. We wanted to know more about the differences of the cultures of the two organizations. In the end, it was quite surprising to see that there are much more things in common than differences. I would say the major difference was about centralization versus decentralization. agta record organization was even more decentralized than the ASSA ABLOY organization, and therefore, slightly more entrepreneurial. What we wanted to do and what we did then in this integration journey is we got the best or tried to get the best out of both worlds. We have checked as well the status of the integration with service.
We have asked regularly our employees about this integration, and I come in a minute to the results of that. Then we have launched a joint communication concept under the claim Growing Stronger Together. We have asked our employees regularly some questions. Here in this case, to what extent do you agree or disagree with the following statements? The company is getting larger and stronger, not surprisingly, more than 90% agrees to this question. As well, more than 80% have agreed to the question that I think the two companies are a good fit together, and only 3% have disagreed or strongly disagreed. I can learn from my colleagues as well here, a large number of our employees have agreed, and I have more opportunities to develop and progress as well.
Here we have a high number of employees that have agreed to this question. Overall, a very positive result and very positive feedback from our employees. I would say that this is as well underlined by the fact that, we haven't lost, or we have hardly lost any of our key employees during this whole process. Where we are today. Today, we are operating as one segment organization. We have roughly 5,000 employees and SEK 1 billion sales. We are operating with five geographical organizations and with five product units. We are operating with three main brands. ASSA ABLOY we use for the direct channel, Record we use for the indirect channel, and Ditec we use for our gate automation business and as a second brand in our indirect channel.
We are present, directly present in 33 countries, and we have distributors in more than 100 countries around the globe. We are number one in the pedestrian business globally. We are as well on track if it comes to capturing synergies. The main contributors to synergies are service. Here we have much better scale and coverage. This gives us a cost advantage. We have shared best practices between the two organizations, best practices around converting service contracts, creating growth, and as well, best practice about preventive spare parts and a lot of other processes. Product and innovation. We have started, as I have mentioned earlier, to cross-sell each other products, mainly the Record products, because this was the broader product spectrum than the ASSA ABLOY one, mainly the Record products into the ASSA ABLOY business units.
Very successful as well was the VAVE work stream, value analysis and value engineering. We had a strong in agta record, working on value analysis and value engineering, and we could benefit from that now in the ASSA ABLOY world. We have, for example, re-engineered motors that allowed us to change suppliers and to have significant, cost savings. Product innovation. Now with the merged R&D team, we are significantly stronger, in R&D, have all of our successes, and will have, a much higher innovation power as well in the near and long-term future. If it comes to operations, it's about the classical sourcing savings, that's not surprising in such an integration.
It's about manufacturing footprint optimization, and it's as well about merging selected business units around the globe, where we had two business units operating in the same market. I come already to the end of my presentation. I would like to give you a short summary and outlook. I think it was very successful integration agta record into ASSA ABLOY. First of all, we retained our key employees, the very vast majority of our key employees. We are successful with the synergy capture. We have as well merged the two businesses into one operational business segment. We have an increased customer focus. We are closer to the customer. We have a higher density in our service business, and therefore, we have much better customer focus than before.
We have as well invested in our product and process innovation. We have jointly defined a new strategy under the claim Aiming Higher. Thank you very much for your attention.
Hello, everyone. I'm Lucas Boselli. In this breakout section, we're gonna talk about profitable growth in emerging markets. Specifically, we're gonna walk through a case of our journey in Brazil, part of Americas division. I'm gonna take you back a little bit before we dive into Brazil to talk about our Latin America expansion. As you can see, in the past 10 years, we've grown dramatically in the region, both from an acquisition perspective, but also from organic growth perspective. We opened several distribution centers throughout the region and invested heavily, not only new product introduction, but also feet on the street. As we take a look back in Brazil as a whole, our business there is about SEK 1.1 billion , with 26% CAGR growth over the past two years.
We have over 1,500 employees with five factories throughout Brazil, both in the northeast, the center of Brazil, but also in the south. Our business is primarily residential, 95%, but I'm gonna talk a little bit of the great opportunity that commercial presents to us. Still a very heavily mechanical market, but we are playing a very instrumental role in transitioning the market from mechanical to electromechanical. If you look at where our portfolio lies in Brazil, we have a vast variety of products and solutions and software to different markets. If we start in the residential, which I mentioned is 95% of our business, we have a vast portfolio, both for single family and multifamily.
When it comes to commercial, we have developed through acquisitions and organically a variety of access control and mechanical commercial solutions, going from the perimeter to the shell to the interior side of the building. What's most important about that strategy is not only from a portfolio perspective, but also from a price point perspective. We have developed a broad portfolio through acquisitions and organically from the opening price point to the medium price points and also to the high price point on the residential side and the hardware. Also looking at other opportunities as window applications, metal fire doors, and also access control, specifically with our recent acquisition of Control iD in Brazil. Speaking of Control iD, Control iD is one of the leading developer of hardware and software for access control and time and attendance in Brazil.
This gives us a great platform not only to grow in Brazil, but also Latin America in the heavily growing biometrics market. Control iD provides a market leading capability from iris- face recognition and fingerprint recognition, both in the commercial and the residential side. It also gives a great operational capability to provide even more capabilities to produce not only the existing portfolio, but other existing portfolios that we have, especially digital door locks for the residential market. If you look at the Control iD portfolio, there's a variety of products that we've developed over the years, both as a point solution, but also as an element of a larger ecosystem.
Control iD has worked with the leading OEM access control manufacturers, not only in Brazil, but also the rest of the Americas, and presents a great platform for us to integrate our existing software and hardware as part of a broader ecosystem, not only for Brazil, but the rest of Latin America. If you look at a little bit of the history of our sales in Brazil, it's been a nice and steady growth. Even during the pandemic, we just had a small dip, and we're able to grow the business dramatically during the past two years. Some of the key drivers that were responsible for that growth varies from the glass hardware, which is a business that we started organically from scratch.
The B2C and both B2B e-commerce, which I'll talk a little bit later, are definitely growth in digital door locks with a specific team dedicated to the region. Some dedicated channel specific home builders, some penetration in retail, and lastly, a non-residential opportunity. Although we have grown tremendously there, which means still a lot of opportunities for us. If I deep dive on the B2C and B2B e-commerce, we are the only manufacturer in the region who provides that direct relationship with the end consumer. We sell direct to customers and consumers in Brazil through our own web shop, and are able to deliver the products in less than 24 hours throughout Brazil. Also, when we talk about the non-residential, it's been a market that I mentioned we have had significant progress, but there's still a huge opportunity ahead of us.
As far as non-residential, we focus in a few critical vertical markets by doing three things well. First one is a dedicated sales force specific to this segment. The second one is a local specification team who can work with the local architects, local end users, and local decision makers. The third one is a portfolio localization. How can we develop a portfolio that's right for the market and right for the end user? As we look at our strategic focus areas, there's three main pillars. The first one is how can we continue to have sustainable profitable growth? The second one, how we can continue to gain market share, and the third one is customer experience. If you start with profitable, sustainable growth, one of the key things that we continue to do is value add and value engineer.
This is a great opportunity from recent acquisitions, especially across product lines who haven't been optimized in the past few years. Here's an example of a . From an acquisition that we did a few years ago. The second one is a continued investment in the localization of products and R&D. This is a great investment that we have done, not only in engineering, but also product management, to make sure that we have the right product for the right market. Third one is NPS. Just like the overall Americas in Brazil, we're very focused on Net Promoter Score and focus around three major areas, which is order entry, customer service, and delivery times. Lastly, a huge important thing for us is feet on the street to generate demand with our end users, with specifications, and our channel partners.
We have over 100 feet on the street in Brazil, and we continue to make investments in that area. Lastly, I would like to leave with three main thoughts. The first one is sustainable and profitable growth throughout the region through operational excellence, local demand generation, and most important, innovation. The second one is building an agile and resilient local bench strength. Having a local organization who is sustainable and stable is. very important for a long-term growth of the country. The third one is accelerating the migration from mechanical into digital, not only on the residential side, but also on the commercial side. With that, thank you for your time.
Hello, my name is Björn Lidefelt. I am the head of HID, and in the next 20 minutes or so, I want to introduce you to HID, the products we have, the businesses, and I also wanna take you through in a mobile setting, the world that we operate in from the identity through credentials, reading of those credentials, and the broader use in the ecosystem of HID Mobile. To start with, I wanna talk a little bit about HID. If we first look at HID, we call ourselves the leader in identity solution, and we power the trusted identities of the world's people, places and things. Every day, millions of people in more than 100 countries use our products and services to securely access both physical and digital places. Over 2 billion things that need to be identified, verified, and tracked are connected using HID technology.
When we do this right, our customers are allowed to work productively, transact securely, and travel freely. We are the leader in enabling trusted identity solutions, and there are really four things that we are focused on to deliver on this mission. Number one, we wanna create significant customer value through the products that I will show you today, but also by being very customer centric. We wanna lead digitization of our industry, and we wanna do that across a number of different product spaces. Third, we talk about leadership. We wanna lead in a global manner, which means leading and being top three in emerging and mature markets. Last, but the most important thing is building and empower an innovative performance-driven culture here at HID, where people come to succeed.
We service our customers across a broad range of different verticals, where the government and public administration, health enterprise, financial and insurance, and educational institutions are by far the larger verticals that we serve. Our business is broken down into six business areas that you can see here on the slide. As we go through the products, I will refer from time- to- time to the products and the different software solutions that we have and how they fit into the organizational structure. What I wanted to do is start by giving you an introduction to these, showing you a few movie clips, as well as introduce you to our head office based in Austin, Texas. Stay with me for a minute where we walk through the HID portfolio in the eyes of the product and business units.
HID is broken down into 6 business areas, and beneath that, 22 business units. We believe organizing ourselves close to the customers in a decentralized way is important to meet the customers and get agility and speed in the organization. One of our BAs, Citizen Identity Solutions, they help governments with citizen and identity solutions across passports, other documents, and software. Inside this building, they make the U.S. green card along with other documents for citizens. Let's go inside and have a look, and I'll tell you more about HID. I just used mobile access to enter the building here. This technology is offered by our Physical Access Control Solutions business area, also known as PACS. PACS help people open doors by offering cards, readers, and controllers. In recent years, we've also invested in building out our cloud platform for mobile access called HID Origo. Hi, Deborah.
Hi, Björn. How are you doing today?
I'm very good, thank you. Our Identity and Access Management Solutions business area offers software for people to securely access physical and digital spaces. People like my colleague Deborah here, she uses visitor management to improve the visitor guest experience, and she uses our authentication technologies like HID Approve to access our VPN. IAMS also puts trust in online transactions. An example of that is how you're interacting with your online bank. Our Secure Issuance business enables the secure issuance of credentials for people working in offices, travelers on buses and trains, student at universities, and people all around the world. Their product portfolio includes printers like the one you see here in our office, but also other ID personalization equipment and software for instant issuance of bank cards, as well as larger scale production of central issued passports and ID cards.
Our identification technology business enables people to authenticate and track billions of things like collectibles or the tickets to the FIFA World Cup finals. They offer RFID components as well as RFID and Bluetooth-enabled services like location services, contact tracing, and condition monitoring. Thank you. They also make cards like this for access to our facility. Finally, we have extended access technologies that extend HID technology by integrating biometrics and access control technology into our partners' applications. For example, embedding RFID technology into office printers, allowing the employees, by using their badge, to securely print while in the office. That's a short way of looking at our product portfolio and our business areas through the lens of the business areas. What I wanna do right now is take a slightly different perspective, and we're gonna do that using the mobile access or mobile as an example.
Everything we do at HID starts with an identity. Identities are created when you're born, but then they're added, information is added to those identities and kept in databases in our partners' ecosystems. That could either be technology companies managing your active directory at work or citizen type databases managed by your government. We integrate with these, and we pull the data we need from these databases to create a credential. That credential is carried using a credential technology. This is something that's very important to HID. It's at the core of what we do. We work across a broad range of different technologies when it comes to credentials. The credentials are really designed for the purpose of which type of application you use for it. Seos is our own credential standard designed specifically for mobile access. We also have external, more market-standardized credentials.
Calypso is one such example used for mass transit ticketing purposes. Like I said, there's wide range of other third-party credentials that we not only use, but also enable our readers to read. Once you take a credential technology, look at it as a code of software, we combine it with the identity of someone, or something, we can now create a, an actual credential. Credential in the mobile space can be carried on phones, on watches, or any other digital device. We talk about BLE or Bluetooth-enabled credentials. We also use RFID credentials, which uses the technology on the phone or the watch, from a near-field or RFID perspective. There's also other types of mobile credentials that use barcodes or other optical type of standards to be read in by different readers.
We now have a technology in which we put the identity, and we issue a credential. The issuing and provisioning of credential and managing of that credential through the life cycle of the credential is very much at the core of what we do at HID. Those softwares are either parts of an ecosystem that we supply to our partners and allowing them to build out their ecosystems on top of, or in some cases, like citizen identity or ticketing, we provide those entire systems or solutions to the integrating customer. We have, for example, access control-specific software and integrations, which allow you to provision a credential onto a phone into an app. That could be an HID app, or it could be into the secure element or digital wallet of a phone.
We also have systems that allow you to manage that credential across a variety of other systems. Think about this. You have a large airport with multiple wings and terminals and systems. They can have up to five or six different access control and security systems that they work with in parallel. At HID, we offer products like HID SAFE in the IAMS business unit, where we essentially allow the provisioning of one credential to flow through these other systems, allowing an individual to move freely through the airport, through different types of systems without having to reissue or manage that credential through the life cycle in five or six different systems. We do the same thing, not for buildings, but for events.
When you walk in to watch a sports event or a type of convention, we manage not only the visitors to that event with a ticket, but also the staff required to move through that building as if it was a normal workplace. Similarly, for citizen identity, our goID program allows you to manage virtual credentials like a driver license or national ID in a phone or an app. One such example of how that representation of a credential looks is through our HID app, which is where you basically store within the HID app a mobile credential. This specific one is for my office in Austin. We also provision these credentials onto the phone's secure element, allowing you to use, in this case, the Apple Wallet to securely store your mobile credential.
Now, once you have this credential and you run it through our ecosystem, one of the most important things you wanna do is read the credential so it can be verified. HID has a very large range of different types of readers that carry across different technologies, different use cases, and different types of applications. If we start with the most traditional and most commonly known, the access control reader, which I, again, will illustrate with a mobile app, Apple Wallet credential here. I take the credential and I read, and the green light indicates that I can get access. Similarly, we use the same mobile credential through our Extended Access Technologies, and we embed it into, for example, a software program.
I can also take the same mobile credential and authenticate to log on to my work computer by integrating with an app, with an Apple-enabled embedded reader from the embedded Extended Access Technologies business area, allowing me to log in to the computer at work. We also have readers for other types of application. This is a handheld representation of a mobile access or a physical credential reader that allows you to read at scale, either many applications, or again, scan your mobile device at a venue or an access point of your choice. All these different capabilities in the form of finished readers can also be supplied to you through HID in an embedded or a chip version, which Extended Access Technologies does, and it allows any partner of ours to integrate RFID and credential technology from HID to extend the ecosystem.
Allows you to print or transact with vending machines or access a communal locker at your workplace. There are also other types of readers that allow you to read mobile credentials. In this example here, it's in the shape of a barcode that can be stored on a physical printed version or your mobile phone and read by an optical device. Last, on the reader side, we also have tools that allows you to upgrade and performance manage your install base of readers in the field.
Essentially, all these mobile-enabled or capable readers need constant firmware and software upgrades, and we are able, through HID tools in the physical access control area, to do that remotely. Last, on top of the mobile credential and identity, we can use the power of the phone and the information that we can get from the phone, including location services and analytics, to build out services on top of the access or mobile ecosystem that we already spoke about. We do that to, for example, validate that not only have you scanned your credential on the reader, but you can also put a timestamp and a physical location point knowing that not only the right credential was scanned, but the person was also present at the point of scanning.
We also allow our partners to build solutions on top of this, that extends beyond what we consider to be core for HID, really taking the mobile access as part of a feature and extending other features around that, to build out, for example, occupancy, efficiency, or in the case that I will show you here in a second, onboarding and management of employees in a company. I wanna play you a short video showing how that works with a partner that we recently launched with, called Jamf.
Stacy. Stacy. Come on. Window. Meet me at the door. Benny. Forgot my employee badge. You know how it is. It's on your iPhone now, Roger. Right in Apple Wallet. Claire, you all right?
Who, me? I'm fine. I forgot my employee badge. Again. You'd think something you need every day would be easy to remember, but here we are.
Don't worry. Now we can put your badge on your iPhone.
What?
Yep, it's incredibly easy. Log in with single sign-on, add your employee badge to Apple Wallet, and you're done. Hey, no stress. Only one thing to remember now.
That's a great way of showing how our ecosystem can enable others to build out theirs and provide additional services, which includes mobile access or login. The last thing I wanted to talk about around this is the world in between the mobile credential and the physical credential. We've normally personalized a lot of credential here at HID, and what we've done is taken a digital version of the credential or a mobile version that can be issued to a phone, and instead, we issue it to a printer terminal, allowing you to print a credential, a physical credential, that is a complement to the digital credential that you keep in your phone.
If you look here, this is a terminal, and this terminal can, instead of a phone or a watch, also receive the digital credential, allowing you to issue a physical credential, which essentially is then used as a physical identification at work or for other purposes like scanning in, to work from time and attendance perspective, or allows you to talk about other things like have you taken the right compliance trainings. This essentially covers the simplified version of our mobile ecosystem at HID. Of course, what we do extends far beyond mobile. Actually, our heritage is far more physical and based on physical credentials. The same logic applies.
You have an identity credential technology credentials, but when they become physical, we have a whole different range of different type of credentials that also require a different types of management and provisioning of these credentials, and the readers remain more or less the same. In addition to a simple way of provisioning personalized credential, we have a much larger range of personalization equipment, including room size type printers, which allow you to issue citizen identity type driver's license or national ID credential at the speed of thousands per hour. Now, I'm gonna walk you through a few of those non-mobile related products and show you how they work.
If we start with the broad range of other identity type credentials, they come in many different types of forms, which really allows us to extend the tracking and tracing not only to people, but also to things. Here on the board, you see a large range of RFID tags that works purposely built for different types of application, including tracking of training golf balls, embedding the reader technology into medical type containers, which allows you not only to read the uniqueness of that container, but also track temperature sensitivity. On this side here, we have active tags, which basically means we power them, so they can send signal, making them very well-positioned to drive not only an identity, but also position that identity in an ecosystem that you build out.
You have beacons as well as different types of credentials can now be tracked in an environment like a hospital or a workstation. We also have credentials for identification. This is a range of products from passports to national ID to work IDs, where HID not only supplies the physical credential itself, but we also have, like I said before, the ability to personalize these at scale with central issuance equipment. They range from passports to work IDs and national type IDs. Over here, of course, we have purpose-built readers to read some of these citizen identity type credentials, readers that I'm sure all of you have used as you travel through an airport, you take your personal identification, and you pass it on to the HID passport reader. Now, of course, these readers are typically not positioned like this.
They're embedded into passport control systems, login kiosks, or other type of boarding equipment throughout the journey of a traveler at an airport. Last but not least, in many times, the last credential that you will always carry with you is your biometric credential. In HID, we use all kinds of biometric credentials, but the more prominent is the finger, and that in itself becomes a credential. Although not produced by HID, we provide a large range of different reading equipment or readers for reading and verifying the identity of a person through a biometric credential. Here is an example of an optical biometric fingerprint reader that we can embed in virtually any type of environment, may it be from a citizen ID booking station when you enroll through credential enrollment, or again, passing of a border.
Last, a version of it which allows police officers to carry not only the reader itself, but also the entire device for storing and managing the credential through a standardized Apple device. A mobile booking station used by criminal law in many countries. All right. That concludes the overview of the business areas, the product ranges that we have, both in the shape of the business areas but also throughout the mobile ecosystem and life cycle. The last thing I wanna leave you with is a short snippet through looking at the HID brand and what we deliver to the greater world. Thank you very much for listening, and please enjoy the last clip here of the HID brand movie.
Our identity. It's who and what we are. It can open doors and connect us with others. As a leader with over 30 years' experience securing the world's people, places, and things, we create, use, and manage innovative solutions to meet our customers' needs today while anticipating the needs of tomorrow. HID is synonymous with powering trusted identities worldwide. After all, confidence and peace of mind aren't just what we build, they're our identity.
We have gone through a remarkable transformation over the last 28 years. As the world has changed, so have we, evolving from a lock manufacturer in the Nordics to a world leader in access solutions. At the time, back in 1994, when both ASSA and ABLOY merged, our product offering largely consisted of mechanical locks. 28 years later, our portfolio is the most comprehensive in our industry. However, it is changing fast due to digital transformation. Innovation is at the very core of ASSA ABLOY, and this is what stands us out as a market leader, what gives us our competitive advantage to accelerate our growth and drive the lock industry into the future. The core of the business is what made us great, our heritage, local focus, and local products like our cylinder platforms that continue to be a core element of our product portfolio.
In EMEIA, our division addresses local standards, local needs, hugely strict local regulations. However, the install base around our brands tends to be fantastically loyal. In the past 10-15 years, we have provided hundreds of millions of cylinders to our markets across EMEIA. You may think, "Where do all those cylinders go?" Well, cylinders, like our industry, have local heritage driven by local systems and local brand confidence. Historically, master key systems have had a long life. In some instances, we have systems that have been in place for 50-60 years and are still active today with replacement products and extensions being provided. Over time, we have leveraged scale from an operations point of view, for example, establishing our Rychnov cylinder factory, which is a state-of-the-art production facility.
We combine Rychnov with local final configuration sites using flexible assembly automation, which enables customization and fast deliveries of cylinders to our customers with really optimized inventory levels. We have so much more potential in our cylinder ranges. We have a huge legacy and recognize the complexity, local standards, coupled with the fact that customers want new levels of flexibility. With our expertise, we can drive security and control with cylinders to the next level. A mechanical core is on a journey of transformation, and we are seeing a transition from mechanical to digital that is providing us with many opportunities to grow by upgrading a huge install base. We started this transformation with VERSO CLIQ and ABLOY CLIQ many years ago, and this allowed us to start the journey of evolving mechanical systems into electromechanical ones.
An Elmech locking cylinder requires a mechanical key, and in addition, the key carries an electronic code. Innovation has continued, and in 2015, we launched eCLIQ, which is a purely electronic cylinder. CLIQ has step changed our cylinder offering, and we have continued to invest in new generations of CLIQ. Our latest generation, both in eCLIQ and PULSE, provide a batteryless offering using energy harvesting for low maintenance and of course, great environmental sustainability. In some of our biggest cylinder markets, digital cylinders have actually overtaken mechanical cylinders, but there is still a huge potential for the installed base conversion. We have a deep heritage with many brands and local standards in the cylinder market, so the upgrade opportunity is vast. It is not just about hardware upgrade. We have another significant opportunity.
We are now taking access management to the next level with our full access control ecosystem known as Incedo, which brings all types of hardware together in one control system, allowing customers to determine the time, the person, and the location of access with full traceability. We have evolved our strategy and have moved from being a component supplier to providing a complete ecosystem. Having more control over all elements allows us to deliver the best performance for our customers, as well as integrating into other building systems. What you can see here is Incedo, our cloud-based access control solution, which brings together electromechanical products such as ABLOY CLIQ, eCLIQ, and ASSA ABLOY Readers. Incedo will give us a unified access control ecosystem that integrates our own intelligent devices, but also allows third-party integration to provide the widest choice for our end users.
It will enable us to have multiple hardware solution types under one control system, which is a very powerful proposition. We have seen this part of our business grow strongly, and we expect this to accelerate over the next few years. We have used the group's scale to develop this in collaboration with HID, using their Origo platform enhanced for our own market needs. We continue to invest in innovation, and this will enable us to accelerate our growth in digital transformation and take the company and our industry into the future.
Warm welcome. I'm Martin Sagnérius, and today, we will talk about connected doors and what value they bring. We know that you're curious about the added value connected doors can bring. It's actually not about the beautiful door you see behind me, but about connected doors, how it works, and especially what value it brings internally as well as externally. Our installed base consists of millions of automatic doors and entrances. Traditionally, they have been generating data which has been available at the control system at the door. Just like in other industries and with other equipment, we are now able to upload this data in a secure way real-time to the cloud. We then offer value-added digital services through ASSA ABLOY Insight based on remote interaction, like remote monitor, remote control, and remote configure.
Let us explain this more in detail with three specific examples: sustainability and energy, service efficiency, and total cost of ownership. As you know, we make high-quality doors, and the customer simply wants them to work all the time. However, sometimes there's an error or alarm on the door, and then we want to get it back working as soon as possible again. I will now simulate an error on the door. I will disconnect the battery from the automatic door. With a connected door, we will shorten the time to discover that there's a problem with the door. Instead of a person detecting and recording that there's an error, we can, through the system, get a notification across to the customer or to ASSA ABLOY if they have a service contract with us. This will improve problem resolution time.
Since we know the problem upfront, we will, from our knowledge, and experience, also bring the right spare parts, to the customer, which will improve the first time fix ratio. Data shows that 15% of all service calls coming in could be solved with remote service. With remote service, we could have a better utilization of the service technicians, and they can spend time on qualified visits. We will also be reducing driving, which will improve carbon footprint. Here you can now see the battery error in the system, and I also get notified in my phone via an email. The service efficiency value of connected doors is increased up time with improved customer satisfaction as well as an improved margin for ASSA ABLOY. Let's face it, this is basically just a hole in the wall when the door is open.
From an energy perspective, that's the worst case scenario when energy and air flows through it. We have had a pilot in a retail chain over the last few years where we have collected data on door behavior. This is what you see in this picture. We have analyzed over 60 million door openings. You see the sensors being triggered, and then the yellow part is the door opening. Can you imagine in average how long time an outer door is open in average? It's 3.5 hours in average per outer door and day that this data shows. That's equivalent to GBP 2,700 with today's energy prices. With ASSA ABLOY Insight, we visualize this, baseline it, in order to put actions in place to reduce energy consumption.
Traditionally, we have been doing this by avoiding open mode on the mode selector when the door is always open. During cold days, we put it on winter mode as well, which adjusts the opening speeds, open time, and closing speed, basically. However, with connected doors, we can now dynamically remote configure this according to weather forecasts and scheduling. We also have a great feature within ASSA ABLOY Insight, where we can set the door open too long time individually per customer. If the door has been open too long, the customer will be notified. With connected doors, we commit to reduce energy consumption by supporting an optimized door behavior. As an experienced service partner, we help our customer gain a good understanding of the cost of their doors.
With a connected door, I can interact with it remotely, like a remote reset, which I just did. The door will open and close in a while and be reset in the control system. This could have a huge impact cost-wise, which I will come back to in a while. With real-time data, we can act more proactively. Since we know the opening cycles of the door, we can avoid breakdown calls and time-based maintenance intervals and move into maintenance when it's really needed. The data gathering is also important for us to move into predictive maintenance in the future. Information on operating expenses are very important in order for the customer to understand their total cost of ownership. We do this in a transparent way through e-maintenance, where the customer could see their total installed base with their installations.
They can see financial information like orders, quotations, but also maintenance reports related to their service visits. We analyze this information together with the customer to make conclusions on their doors. Once improvement areas has been quantified, we can together as partners execute improvement activities and create an implementation plan. The remote reset I did earlier is comparable to rebooting a computer. All this without driving to the door and performing the actual reset here, which will save us a lot of cost and time when driving to the door. As partners, we advise and support in optimizing the total cost of ownership throughout the entire life cycle of the customer doors with an improved lifetime and uptime as a result, while they have full transparency, which leads to peace of mind.
Welcome back, everyone, here on site, and also welcome back to our online viewers. We've come now to the last session of the day and the final Q&A. As you can see, we have Erik and Nico on stage, and we have also all the other participating speakers sitting next to us, ready to answer any questions that you may have. I think Carl and Christiane, you're also ready for the online viewers. Excellent. Let's start. The lights are so hard on me, so I hardly see you, but let's start here. Yeah.
Thank you. Mattias Holmberg, DNB Markets. I have a follow-up question on the green specifications business, where it seemed like you didn't want to specify how big this business was yet. I think you mentioned that you had some 200 specialists working in the specification business. How does that compare to the overall workforce in the specifications business in Europe so we can get an idea of roughly the size of this business?
That's perhaps a misunderstanding. What Robert was saying is that he has 200 spec writers in the EMEIA division, and they spec everything. It's not that they are dedicated green spec writers. Of the whole EMEIA division, it's around 200 people. On a global level, it's more than 500 spec writers. But they all spec everything you could say. On how big it is and the potential, perhaps Neil, head of EMEIA, can try to shine a little bit more light on it.
From a total percentage of our total specification value, it's currently around 16%-18%. Going up progressively at the moment. About 18% of our total specified projects are green, and that's increasing continually.
It's the fastest-growing part of the spec business for us.
Yep.
Okay.
Thank you. We'll move to the next question. I think we have the microphone here.
One final question from me. Can you talk a little bit about for your distributors' inventory levels? I think in other areas of construction-exposed business, people are increasingly worried about the risks of fast destocking. What visibility do you have on your distributors' inventory levels and how do they compare with historical levels?
We have quite good visibilities and I ask perhaps Neil or Lucas. Is Lucas still here? Yeah. To comment later perhaps more in detail on their divisions. We have rather good visibility on their stocking levels. We have a close collaboration with our dealers and our distributors. What perhaps I've learned in the four and a half years is, you can have whatever KPI, the best KPI is talking to your channel partners and see what they see in the market. In general, our channel partners are still very optimistic of the business activities that they see in the market. I would say that in general, they have normal stocking levels.
Perhaps nine months ago or so when we started to increase prices significantly, they would overstock a little bit to profit from the lower prices. As we are in most markets for most products at price increase number four, five, six , that is over and it's a normal level. We have only seen that destocking, as I mentioned earlier, in some markets in Europe, in France, in the U.K., and in the Benelux. For the rest, we haven't seen any special movements yet. Clearly we are the most concerned for Europe, because in Europe, we have the highest exposure to residential. That residential business is completely slowing, going through the channel markets.
As we have seen in France, Benelux, and U.K., they can switch very fast from one day to the next. So we have to be ready to adapt costs, if and when they adapt their ordering pattern. I don't know, Neil, if you want to add something or Lucas, if you want to add something. No? Very good. Excellent.
Hello there. It's Nick here again. A question for Erik, please. If the HHI deal goes through, you'll be more financially leveraged than you've probably ever been in the past. At the same time, you've got your 10% a year growth target through a cycle, which does rely on quite a lot of M&A, and you've got a growing, dividend as well expected. There could be some conflict in the capital allocation here. Can you just talk us through whether you see any conflict, whether we should expect a slowdown in M&A for a couple of years? Maybe you're comfortable with the deal, the amount of leverage. Thank you.
I think one thing that is actually one of the few things that, let's say, work in our favor in this case is, of course, that we're able to generate cash in the meantime. Today, if you look, we have a net debt to EBITDA that's 1.3 and 1.4. Now when we will close the deal, of course, including the remedies, I think we will be. Or let's say we will be around three flat. When we've done the calculations on this, I think with a three flat, and then we can continue to generate cash, we can continue with this, I mean, with the traditional ASSA ABLOY way of acquisitions, you know, the 15 per year.
I mean, I think three, which we then would work down, would sort of still sort of have, and the balance sheet would be strong enough in order then to continue our acquisition journey.
Was an important criterion when we bought HHI, that the funding was as such that we indeed could continue our day-to-day acquisition journey buying those 15, 20 smaller companies per year, because that is part of our DNA, and that's a wheel that is turning, and that's not something we can stop for a year or two and then start again. It's also not something we want to stop for a couple of years. The financing is indeed as such that we can continue that traditional acquisition strategy.
John, I think we have a question over.
Oh, okay. Well, let's start over there. Andreas, you. Yeah.
All right. Just a question on entrance. I mean, I think if we go back a few years, the communication was that, well, we can't expect the same kind of margins for entrance because the industry is more fragmented, etc. Since then it's become much larger, and now the margin is actually slightly above group. You mentioned something about, you know, efficiency potential there. Could you detail a bit what you see in terms of profitability upside in entrance?
Yeah. Perhaps Massimo should close his eyes because we want to push him harder, of course. We have the ambition, and we have set it at several locations, mid term to bring entrance system close to the 16% EBIT margin. You could say that we are there if you look at the Q3 result. I think there is a couple of things that play on the short term in our favor, and I think we should look more long term, and we believe that long term or mid term, that 16% EBIT ambition is still a very ambitious target.
What is playing in our favor today is one, the pricing as it's a division that has higher steel percentage in their product portfolio. They have also a better pricing than group average, and that gives of course a leverage on all the lines in the income statement. The second thing is that they have a very positive mix. They have been growing much faster in perimeter security, the fencing business which has margins in line with the Americas division, and therefore in the mix is very accretive to Entrance Systems. That of course will not continue. We will see that mix you know normalizing again going forward.
I think the third thing is they have, of course, seen also from a volume perspective, if you exclude price, very strong double-digit volume growth, that gives of course fantastic volume leverage. Of course, we hope to continue with very high growth figures in Entrance Systems, but most probably it's a bit unrealistic to think that we're going to continue double-digit volume growth in Entrance Systems also. That will more level out now as the comparisons become also much more difficult. Q4 was a very good quarter last year for Entrance Systems. We have, I think, an organic growth of 14% last year.
Thank you, Nico.
Thank you. Andreas Koski from BNP Paribas Exane. A follow-up on green buildings. Because I understand the market share gain opportunity when low-cost producers cannot compete on these projects. You are saying that the green building projects are 20%-25% more expensive than other projects. Does that mean that you can sell your products at the price point that is 20%-25% more expensive? Or where does this cost increase come from for the customers? And are you selling totally different products to green buildings compared to other buildings? Thank you.
Neil or Lucas, feel free to add. I think you should look at green in two ways. One is you just need a green certificate? Because the building has to be green certified. Therefore, you have then to use products that have a green certification. We then trace back how our products are produced, that they are produced in an environmental way, that we meet all the green standards. That all process, of course, cost money because some of the processes have to be more sophisticated, and therefore you sell those products in a more expensive way. That's one aspect of green. The other aspect of green is that, like I mentioned before, a door opening can be an important energy consumer or energy conserver.
Depending on how you configure your door opening, and if you make it a richer configuration, it will be a more energy efficient solution. A richer configuration means more hardware and therefore more expensive door opening. Therefore in the total value also an increase. The 20% is coming or 25% is coming from both. That's an average. It's a very big spectrum depending on the project.
One other, I keep running up these stairs. The one other aspect to it is to really maximize the energy efficiency. It's having a system of components that work together very well. You know, maybe a door closer with a correct sealing system, with a correct latching system. We can sell a package of products that work together in a more effective way, and typically that package is of a higher consistent value. Yeah, bringing the packages together also helps a lot on that advantage, yeah. Uh, um, we have a-
Thank you. Vivek Midha from Citi. Just a question on entrance again. We talked about pedestrian service. In industrial in-service, maybe could you give us an update on where you are in that journey? What proportion of sales in industrial or service, and where that can get to mid-term? Thank you.
What we have said is that service is around 25% of the division. Obviously, that 25% sits for 99% in industrial and in pedestrian because a parameter and residential, we hardly do any service, also because it's a complete indirect sales model. The service sits in pedestrian and industrial in our direct part of that business. Therefore, the percentages in industrial and in pedestrian are significantly higher and very similar, and very similar growth figures as well. I think it's very similar to I come from the compressor world, compressor service or elevator service people perhaps sometimes think it's stupid industrial door.
If Amazon can't open or can't close the door, it's a lot of money that goes out. If a door in the factory stays open in wintertime, it's a lot of energy and a lot of complaints of the workers. The very big advantage we have is that there are forklifts in the factory, and those forklifts drive into that door, so that door needs repair. The ticket item of such a repair is EUR 200, EUR 300, EUR 400, EUR 500. It's not EUR 10,000, EUR 20,000, EUR 30,000. The maintenance manager himself can decide on investing that money. He doesn't need five signatures and three RFQs. The price pressure is also much lower.
If you give a good, genuine, service to that, to that customer, he will be loyal, to you, and you will also get the aftermarket, business because it's a critical component and a relatively low, CapEx spend or OpEx spend for that customer.
Thank you, Nico. Carl, you indicated you had a question online, yeah?
A written one, yes. What are some new technologies you're looking to acquire within the global tech space?
Yeah, perhaps Björn can answer for HID. Perhaps I will answer for Global Solutions. We have in Global Solutions our traditional verticals, so the hospitality vertical and the marine cruise ship vertical. Over recent years, we have added on different new verticals, self-storage, construction, time and attendance, and access control, senior care, and critical infrastructure, and we then have our asset management system through Traka. We want to do acquisitions in those different verticals to expand geographically and to further widen our technology scope and our technology offering.
Good example is an acquisition we did in France a couple of months ago, of a company called ALCEA, giving us a much wider product solution offering now for critical infrastructure on a more global level, and we are looking for more of those acquisitions. If the right new opportunity comes up to create a new vertical or new verticals, we will, of course, also buy ourselves into those new verticals. When it comes to HID, perhaps, Björn, you can-
Yeah, sure.
Go more in detail.
Hello? Hello? Yeah. I would mention three things. If I look at the physical access control side, many of you asked about the value-added services for mobile credentials. That is a space that we look both to build out inorganically, but also potentially through acquisitions. Unfortunately, a space where multiples are prohibitive. Usually, companies are small, and they haven't reached critical mass, but that's one area we look at. On the embedded technology side, in biometrics, there's still interesting new biometrics modalities that we continue to look at, either additional types of technologies around fingerprint, but also, of course, other like facial, where again that might be a good complement to the R&D that we do internally.
At last, in terms of new technology, I would say in the IDT area or RFID business that we have, we continue to roll up that component market, but there are also interesting applications where the components that we sell are also integrated into a software solution or a software platform where we can track, for example, a tag in the world, and typically those are specific. It could be laundry in hotels, where in addition to the tag revenue, we would also see a software platform providing intelligence on top of that. There are other interesting applications like that, where we would see not only the value from the consumables, but equally the software side of that. Those are a few, but we're always on the hunt.
Thank you, Björn.
That perhaps didn't.
Yeah.
It came out very clear during the day. HID is in the first place a solution enabler. They work together with, you could say, system integrators, people like Lenel, Genetec to offer them, through them, a solution to the end customer. Global Solutions is more a complete solution provider. You could say that, in a way, Global Solutions is a system integrator, just system integrator which is owned by us and which specializes on specific verticals like hotel business, cruise ship business, and so on, because they also sell them directly to the end customer complete solution. HID is much more about further strengthening that solution enablement, where Global Solutions is more about strengthening the solution, total solution possibilities.
Thank you.
Thank you. It's André from Credit Suisse again. Two questions, please. One, if we just follow up on the service side, could you give us some of those numbers in terms of, you know, doors under service, under service contracts, what penetration of connected is? I think you mentioned some of the doors you monitor remotely and can provide kind of high value-added services. If we can go even as far as maybe some numbers on kind of retention, conversions of new installations, so we can maybe try to build those kind of elevator-like models for this business.
Compare to the past. The second question is, if we just go back to Asia and China, that hasn't got a huge amount of airtime today, and clearly we know the issues there. What I wanted to ask is, with that kind of maturing of the market and the local competitive landscape now there kind of emerging, is your sense of urgency to address China rising or what you're doing and kind of how you're progressing is kind of steady and you're happy with how it's going?
Yeah. Perhaps on your first question, we can't give you the numbers, but I can give you an answer because you want to fill in your model. Let's say that the doors that we have under contract of our own installed base is still very low. It's double-digit, but it's lower double-digit. So only on our own doors we still have fantastic potential to further penetrate the market. The beauty in this industry is that we can also do in a good profitable way service on competitor doors. So in that aspect, you could say that the market is almost infinite. We can go on many years and continue to grow that high single-digit service. That's not a limiting factor.
The limiting factor is more that we have to scale our internal organization. If you have 3,000 service technicians and let's say you grow 10%, that means that you have to add 300 extra service technicians on top of the ones that leave, on top of the ones that retire. That's a huge task to find them, to build them, to train them, and to make them doing their first billable job in the shortest possible period. I would say the ambition of high single-digit is more limited because of internal constraints rather than the market potential not being there. When it comes to APAC, we should make a distinction between the rest of APAC and Greater China.
The rest of APAC is performing on a good level. Of course, we can always do better, and we have to do better. You could say that the rest of APAC has margins very similar to group margins. It's really Greater China that brings APAC down top-line wise and bottom-line wise. We have for many years tried to adapt always our cost structure. Our top line went down, we cut more costs, our top line goes more down. Two years ago, we took the decision to stop that and just invest in those segments where we believe in the future.
We know that we are subcritical, and we know that through those investments, we will make a loss, but we have decided to sit it out because we believe that's the only right strategy mid and long-term. For instance, we continue to invest on the commercial side in spec writers, in product range, in sales people that address the specific verticals like transport, hospitals or medical and so on. We also continue to invest on online channel for our digital door locks and for our retail business moving away from that new build into a replacement market, which is obviously more profitable replacement and more profitable commercial than residential.
It's a matter of time. If we can start to grow again, we will get critical volume, and then profitability will also come back.
Hi, Nico. Lars from Barclays. Want to come back maybe just to the growth versus margin debate. You are very much on a growth journey right now. It's very clear from the presentation. It's very clear from how you've run the business over the last five years. If we look at the underlying margin improvement in the business, like for like, that would have been 400 or 500 basis points over the last 10 years, but that's been diluted primarily from M&A in emerging markets and Entrance Systems. When we look forward over the next five, 10 years, should we think of that margin dilution as increasingly coming from Global Technologies? We've heard a little bit about some of the ambitions you have around ID, identification, authentication.
Is there still a dilutive story coming through in emerging markets as far as M&A is concerned? Maybe look out over the next sort of five years, how to think about that margin corridor and the upside to that, please. Thanks.
Yeah, first of all, obviously, we want to come back in the 16%-17% corridor. We are too long now below, and so we are working hard to get back in that 16%-17% bandwidth. Obviously, the tailwind versus headwind on price versus cost should help us there in an important way. We also need Global Technologies business and hospitality business to come back on a good level that we have the right mix and that we have at least the minimum volume for hospitality that is needed to get Global Technologies EBIT figures above that, you know, 17%, so to speak. I would say the third one is we need 1% or so better margin in EMEIA.
You know that EMEIA has a strong dilution from currency. Off the top of my head, I think it was 140 basis points in Q3, which of course hits us in an important way, EMEIA being a big division. I would say that acquisitions in general are dilutive, unless perhaps they're very small. We buy in a very niche. They are very highly profitable, and then we try to extend them to other geographies. But most of the time, like I explained, we buy quality companies that make high single-digit EBIT, and then over time, we bring them into the 16%-17% bandwidth. That is most of the case, just like that for small acquisitions. For the bigger ones, it's transparent.
When we agta record, they were dilutive around 50 basis points at start. We have said that when we buy HHI at the beginning, there will be around 70-80 basis points dilution. That effect we will have to live with, but that's something that in the comparison doesn't matter because every year is the same. When you look at our existing businesses, obviously, China is very dilutive, and I hope that tomorrow it will be very dilutive. That would mean that we grow 40% or 50% in China. Because even if we deliver on our strategy and have then high growth in China with a high single-digit margin, it will remain very dilutive for the, you know, foreseeable future.
I think the other businesses that are dilutive are mostly those where we invest in a new business and a new technology and a new vertical. At the beginning, of course, you are subcritical, and therefore, you don't make the margins that you need. Good examples are the other verticals in Global Solutions. Hospitality is by far the most profitable vertical in Global Solutions. All the others, I would argue, are still too small to really be on that level that they contribute, you know, even on group level or above group level. But that's just a matter of time. They have to grow. Of course, if you want to invest in software platforms, in cloud solutions, volume matters.
Those verticals in Global Solutions, as a matter of fact, they have grown and continue to grow also during COVID-19 times at a lower pace and not good enough to compensate for the big drop that we have seen in hospitality. For us, it's more a matter of choosing where to invest. It's not that we have limitations on possibilities and opportunities to build those small businesses and make them bigger. It's more to choose the right ones that bring us a good margin and good money and good growth on a shorter term.
Thank you. Do we have any hands left? I guess you have hands left, but not in the air, so that's good. Do we have anything online? Nothing new. In that case, I think we'll conclude the Q&A, and we're now getting close to the finish of the CMD. Before we finish off, I'd like Erik and Nico to say some final words. Starting with Erik.
No. Thanks very much for the interest today, and I hope that it's been an interesting day for you. Of course, also when we look today on the economic climate, I think we also have a very interesting set where I think that on some markets we need to sort of put our foot on the gas and continue to, let's say, invest, whereas then in other ones we need to put the foot on the brake. I hope that we have given you reassurance because you have heard me talk about cost, you have talked about VAVE, operational excellence, MFP, sourcing, and I mean, basically you heard an echo today from Lucas. If Massimo or if Neil would have presented, you would have heard the same.
It is very embedded, and of course, we keep very much, you know, our ear to the ground in order to see what we need to do. We have, as said, we will have a MFP9 coming here in Q1. But also additional to that, we are doing, let's say, efficiency measures in order then to make sure, Lars, to give you comfort that, you know, we are really working on getting up to the margin that we think that we should have and that we think that the business should be able to do. But I think also there, right now, we also, you know, as I said, for the break, we also have, as I think a good company should have, we have the contingency plans. For some, it's in the drawers, for some it's in discussions, and for some it's activated.
I can reassure you that, you know, if we need to, and in some places we have, you know, where we need to focus on cash and cost, we are doing that. I'll stop there and hand it over.
Nico?
No, perhaps I just want to thank first of all the technical team for a smooth day. I also want to thank Björn and the whole team for a well-organized capital markets day and my team for the contribution. We were happy with the way the capital markets day went, but I would say that is not so important. It's much more important what you think about it, and hopefully, confidently, we could contribute or we could give you some insights in what we do, and you go home with some extra useful information, and you become wiser about ASSA ABLOY today than when you came in this morning into this meeting room.
I just want to come back on the people aspect. I mentioned that Lucas was a good example of what we want to do with our people internally. I think the other speakers you have seen, for instance, Björn and Stephanie, are also very good examples for different reasons. Björn also is a very seasoned ASSA ABLOY employee. Björn has worked in Asia in different positions, and he has worked closely to me on group as a Chief Commercial Officer for the group before he took up this HID position. Yes, Björn is older than he looks like. I think it's a good asset to have. Stephanie is, I think, a good example in the other way.
We have also said if we can't find the right candidate internally, we should have somebody from externally that definitely adds value in a big way to the team. It's like a soccer team. If you do a transfer, the person that you bring into the team should be much better than the players you have on the team. Otherwise, you better take a player from the team. That means in our case that when we hire managers from outside, they should have the potential to grow a couple of levels in the organization. Stephanie is a good example. She joined us around four years ago and was doing the digital access solutions with Neil in EMEIA. Then now she's our first female manager running one of our businesses.
I am also very proud about that. Okay, I don't want to exclude the others. I think the truth is for the others, if you take Neil, he was born in our industry. He joined us even before we were born as ASSA ABLOY, right? He has really worked his ranks up. Neil started when he was 16 as apprenticeship in one of the companies we bought. While he was working for us, he went to university, became a wise man, and then he make the different steps, and now he's running one of our bigger divisions.
I think a very good example of, you know, internal promotion and lifelong career that we might sound old-fashioned, especially for the young people, but that's the ambition we have. We want to hire till people retire 'cause we believe we invest from both sides in that person. We should not stop the return on that investment before we have to, and we have to when somebody retires, obviously.