Good morning, and also in Carolina's name and my name, welcome to ASSA ABLOY Capital Markets Day 2018. Thank you for being here, and so many on time. I guess there's not too many Belgians. That helps to be on time. In the next 80 minutes or so, we will walk you through an update on the group strategy, starting with our vision and our values, explaining a bit the dynamics of the market we operate in and our market leader position in that market. Going through our strategy, our financial targets, zoom in on organic and acquisition growth initiatives and cost efficiency initiatives, and then end with an update on our financial results and a small summary. In the end, we should have enough time for questions and hopefully answers. This is the agenda. I'm a little bit confused.
There's two screens, one screen you see, and one screen with another slide. This is the right one. All right. We used to say that we are the global leader in door-opening solutions. We have changed that, and we say now that we have the ambition to be the global leader in access solutions. We felt that the word door solutions or the words door solutions were limiting ourselves too much. If you see what we do in the group, it's much more than just door solutions, and we felt that access solutions was much better covering the scope of what we do in our group. Our group purpose is to everyday help people feel safe, secure, and experience a more open world. It's really about making it seamless for our customers, make it easy and convenient for our customers.
I think there's two words very important in this sentence that is safe and secure. That's really two words that make the difference in our industry. People want to have a more open world, but in a safe and secure way. Our group mission is to offer, obviously, an attractive company to our employees, existing employees, and potential future employees. Obviously, to build sustainable shareholder value and to conduct business in an ethical, compliant, and sustainable way. Often people ask me: What do you do in ASSA ABLOY? I've tried in a couple of slides to give at least a wider overview of what we do in the group. On this slide, we show a couple of verticals in which we are active: hotel, retail, multifamily, and of course, enterprise. We are, of course, in hardware, but we are also in service.
You see a nice ASSA ABLOY service van on the slide. You could say that we secure buildings from the perimeter, as you see here, over the shell with a sliding door from Entrance Systems and a nice access control solution of HID into the core. The core being our door-opening solutions with the door and all the hardware around the door. Here on this slide, we show just a couple of hardware components. I think in our industry, we have for sure one of the most vast product offerings. This is an example for enterprise. We can do the same thing for multifamily, again, from shell to core with smart digital door locks, smart home security products, residential doors, residential window hardware, and so on.
Similar for hotel and retail with guest access solutions for hotel customers, revolving pedestrian doors from Entrance Systems, garage doors, and so on. If you zoom into our core, access solutions, you could say that on one side, we have the openings with cylinders, locks, doors, and so on. The other side, we have the identity in a traditional mechanical world, a key. Today, also a card or another kind of biometric identity. Of course, the sweet spot of our business is really where those two circles overlap in the middle, where we have our master key systems, because it's really combining the opening and the identity that drives value creation, that drives differentiation, and creates network effect.
In a pure mechanical world, that combination is on one side a lock and the other side a unique key that you combine together in a master key solution, which really adds value for a customer and which makes also that relation with the customer very sticky. Especially when that master key is a patented solution, customer has to come back to you when he does extensions, when he upgrades, when he loses the key. Of course, over time, that mechanical link between the lock and the key has evolved into electromechanical solutions with an electromechanical lock, a digital key. Over time, we also go to readers and cards and more and more other biometrics, where at the bottom you could even say that there is no key anymore.
It's the person himself who is the key, the person himself or herself who is the identity, and where then you really manage the life of that identity from the creation when that identity starts working in an enterprise until when that person is no longer working in the company, and you have to kill, so to speak, the identity. You also see around the two circles a nice thick skin that is service. It's a nice thick skin because, one, it protects your hardware business. It makes it much more sticky, but it's also nice because it's very good profitable business as we know. We are a young company. We are only 24 years old. To a big extent, we have been a company that was bought together. You could say that in five, 10 years ago, we were perhaps more a consortium than a group.
In a pure mechanical world, a lock being different in Italy from Germany, from Sweden, there was not so much need to work together cross market areas, cross business areas, and cross divisions. Today, in an electromechanical digital world and with all the extended businesses we do, for instance, in HID, there is much more need to work together cross market areas, cross business areas, and also definitely cross divisions. We really want to strengthen our corporate identity. We really want to move much more to a decentralized group. We still want to be decentralized. We want to take decisions close to the customer, but it's not because you are decentralized that you cannot be also a group. A group is what holds us together. Group is also where we can find synergies cross divisions.
In order to strengthen that corporate identity, we have also defined them for the first time, I would say, in our history, corporate values. We did not have corporate values yet in our company. Why do we exist? We exist to every day help people feel safe, secure, and experience a more open world. What do we do and who we are? We are the global leader in access solutions. How do we guide our actions? We guide our actions with three strong corporate new values: empowerment, innovation, and integrity. Empowerment, we have the trust in people. Innovation, we have the courage to change, and integrity, we stand up for what is right. Like I mentioned, these are new values. We will do a soft kickoff in Q4. This is the first day, and then we will have an official launch going into 2019.
We will also translate those values into what it means for the different stakeholders. What does it mean, those corporate values for you investors? What does it mean for customers and suppliers? Very important also, what does it mean for our employees? We believe it's important that our employees have a framework, a skeleton in which they can recognize themselves, a culture in which they believe and a culture in which they can also evolve. We want to promote much more internal promotion. I think historically, we have been hiring very much from outside. Until yesterday, two out of three or more than two out of three vacancies were filled from outside.
We have the ambition to change that and promote much more from within, for two reasons. We believe if we promote more from within, we will get much more cross-fertilization of experiences, cross-fertilization, cross market areas, cross countries, cross business areas, and also cross divisions. We will also have a much more important cross-fertilization of that corporate culture that we want to strengthen the corporate culture we want to stand for. Market dynamics and our position in that market. We are in a good market, in a good market with very strong short-term positive market drivers, and in a good market also with very strong positive long-term market drivers. We are in a good industry to be in. I give a couple of examples. Increased demand for security.
If you like it or not, today, people have at least the impression that the market is less secure than yesterday. I just take one unfortunate example. All the shootings that are going on in the U.S. in general, and the shootings in schools and universities in particular, that creates for us a complete new business because all those schools, K-12, universities, now are at a rapid pace being upgraded from mechanical security solutions into electromechanical and digital solutions where you have automatic lockdown systems, standard integrated and these type of things. Urbanization, increased wealth. I take the country of China as an example. It's forecasted that by 2030, another 300 million Chinese will move from rural areas into cities. The population of the U.S. will move into cities. All of them will need locking solutions, hopefully from ASSA ABLOY.
That's true for China, obviously, it's true for India. It's true for big countries with high population like Indonesia. It's definitely also true for a continent like Africa, where it's forecasted that in the next 50 years, the people living in cities will triple. That will create a high demand for our market. Of course, we have the shift to new technologies, the shift from mechanical to electromechanical and digital, where we have said at different occasions that if you take a residential digital door lock, the price is more or less double of a mechanical solution, and the lifetime is half. Also there you create an additional market. Sustainable buildings, more and more projects are built according to one or the other sustainable standard.
Big projects in the world today, one out of five, almost one out of four big projects is built according to a sustainable standard, be it a LEED certification or another standard. That drives, of course, technology up in our market. It takes the pure cost competitors out of the game. That's definitely something we like. We are a company that wants to make the difference through innovation. This helps us. This one also definitely helps us change more stringent codes. Unfortunately, there always has to be a disaster before people start to adapt codes. You have to have a big fire or a big shooting or a big natural disaster, and then the governments implement more stringent codes. What's good here is that we see also in emerging markets the level of codes going up, again, there the same thing.
That drives technology up, takes the pure cost competitors out of the game. Good to remind that we still have a lot of local market regulations. The requirements and the configuration of a lock in Italy is different from Germany, is different from Sweden. That makes it still a very local business, very difficult for a global cost cutter to come in and conquer the world. A good industry to be in with positive short-term market drivers and very strong positive long-term drivers. Those trends create, obviously, a strong underlying demand. In that market, we have a unique market leader position with leading brands, a lot of local leading brands that we then endorse with a dual branding, with the strong group ASSA ABLOY brand. You see a couple of examples on the slide.
We have also other global leading brands like HID, like Yale, and like ABLOY. All three will have a presentation today. We have also by far the largest install base in the market, an install base that we can in a proactive way upgrade to new technologies, shift from mechanical to electromechanical and digital, and an install base that is also rather sticky, giving you a good aftermarket revenue. As we are the leader in most markets, we have also the best partner in the different channels to market, be it a locksmith channel, be it a DIY channel, retail channel, access control partners, or system integrators as partners. Often we work with the best partners and the best people in that channel to market.
The last point, I think a very important thing for new projects, bigger projects, we have a large specification team working together with architects, working together with contractors, making sure that they spec in the right solution, an ASSA ABLOY solution in their projects. Once it's spec-ed in, it's also much easier afterwards to sell your products and your solutions.
That's about sort of the market and the branding and where we are there. Let's have a look at the whole market as it is and where we are in this market. First of all, I should say that it is a very fragmented market. When we look globally, as Nico said, there are a lot of local regulations, especially on the locking side. There are a lot of local players. This is what it looks like when you try to make a global picture. The reality is that ASSA ABLOY, we are larger than number two, three, and four of our competitors globally. An interesting point is also to see how we have grown and how they have grown for the last years, which you can see then on the arrows. We have significantly outgrown our competition in the last eight years.
A very strong position. This, some of you know, is probably one of my favorite slides because it explains a lot about how ASSA ABLOY works, and it also explains a lot about why we have lower cyclicality, and sort of why the sales are stable and why we have a high and stable profitability and really nice margin. Of course, it starts with what solutions we are in. Here we have segmented between what we call commercial institutional versus residential. Three quarters of our sales are still in commercial and institutional. Of course, here you do have high-end solutions. It's highly regulated. Big, complex solutions, which therefore, of course, also bring high, nice margins. On the residential side, I would say I spent many years explaining why that's not so interesting to be in.
With the changes that we see and really the technology moving not only in the commercial institutional side with electromechanical, but also moving in to the resi side, it's now becoming much more interesting for us to be part of. You'll have to wait and see how this split develops. I hope both parts grow significantly, and therefore, we'll still have a healthy split here. The other part is really on the stability of the company, of the sales, and the margin. That's the other pie. 2/3 of our sales come from aftermarket and 1/3 from new construction. I would say when times are tougher, it's probably even three quarters that come from aftermarket and one fourth from new construction.
Really it is about the aftermarket and the stickiness of the installed base, that when times are tough, you do continue to maintain your hospital or your schools that Nico talked about, but even if you do not build new ones, you do upgrade. We will talk more about that, because what happens with the aftermarket now is that the upgrades are becoming not only necessary, but also wanted by the customer. With the new technology and electromechanical solutions, the upgrades are becoming more frequent within the installed base, thanks to innovation. That finishes off the market dynamics and our position, and then we move into the strategy and our financial targets. Let me start by saying, no, I will not change the financial targets, even though some of you thought that that would be a really funny thing to do today.
The financial targets stay the way they are. They are 5% on organic growth and 5% on acquired growth as an average over a cycle. Also a margin, to keeping a margin, with that mix of growth between 16% and 17%. Basically also how we do that by an evolution of our classic stone with the strategy.
A boring Capital Markets Day. No change in the financial targets. I got that question many times since I started, "When are you going to change the targets? Because you never reach this 10% of growth." It is true. If you look over the last 10 years, we only grew 9%. You can say that we failed miserably. I would like to fail miserably again the next 10 years. If I can grow 9% again the next 10 years, I will be very happy, and I am sure that most of the people in the room will be very happy as well, because this will create a lot of value and a lot of shareholder value if we can keep that EBIT margin between the 16% and the 17%, which is also our commitment.
If we zoom a little bit in first on growth, 5% acquisition growth and 5% organic growth. How do we want to do that? We will discuss a little bit on divisional priorities, some commercial development initiatives, and then talk a bit on some growth enablers. If we start with divisional priorities, my predecessor, around two years ago, has said that he had the ambition to double the size of HID. I can reconfirm today that that is still our ambition, and I can go a bit wider, and I can say that we have the ambition to double the size of Global Technologies division over this five-year period. Not only the HID side, also the ASSA ABLOY Global Solutions side, as we call hospitality nowadays. We also have said that we want to grow Entrance Systems with another EUR 1 billion, another SEK 10 billion.
That obviously has to come from acquisitions, but also from fast organic growth. That fast organic growth has to come in the first place from an accelerated field service growth, where we have said that we have the ambition to grow field service and Entrance Systems with high single digits for the coming years. Obviously geographically, we have to become successful in China. China long term will definitely be the biggest potential market. If we want to be the global leader, we have to make sure that we're also one of the leaders in China. Double size of HID. Stefan Widing will give a focused presentation on HID, so I will not go too much in detail. You see on the slide that we are on track to reach that ambition of doubling HID.
I just wanted to highlight one other thing in HID, that's location services, where we will also have a deep dive later today. I think it's a very good example of an acquisition, a technology acquisition we did, where there is a lot of spin-off, a lot of synergies towards other divisions. These location services we can use in different verticals in ASSA ABLOY Global Solutions. We can use those location services also in the different geographical divisions. From there, also the need to work together more close in the future. We go to market in different ways. We can be a component supplier. I would say that our three geographical divisions are mainly a component supplier, sometimes a little bit a solution enabler. What we do in Global Technologies, and definitely in ASSA ABLOY Global Solutions, is really being a solution provider for specified verticals.
Why did we change the name from Hospitality to ASSA ABLOY Global Solutions? Because we felt that Hospitality was no longer covering what that organization is doing. Historically, they have been very active on the hotel business, doing a little bit also on the marine side with cruise ships and so on. Today, that organization does much more. They also focus on other verticals like elderly care with the acquisition of Phoniro, like student accommodation, and now also in solving the last mile solution for the retail sector. In that organization, we really have the ambition to focus on specified verticals, build a complete ecosystem around that vertical, and really become a solution provider. Elderly care, I think, is a good example. Phoniro, what do they do? You are younger than me, so I will talk about your grandmother or your grandfather.
You don't want to send grandmother or grandfather to a retirement place. Grandmother, grandfather wants to stay home, but needs help. They will do the brokerage of the access to your grandmother's house. We will make sure that the nurse can come in between 9:00 and 10:00 in the morning, and only between 9:00 and 10:00 in the morning. We will make sure that the cleaning person can come in between 2:00 and 3:00, and only between 2:00 and 3:00. We will monitor, we can do time and attendance, and so on. We will build a whole ecosystem around this, where, for instance, the example I gave before on Bluvision on our positioning services also comes into play. When your mother goes to the bathroom, we can see and detect that she is in the bathroom.
We can decide if after 15 minutes she's not out of the bathroom, something happens, most probably she fell or something happens. We can automatically activate an alarm. A nurse can come and check, and we can give credentials to that nurse to come into the home. Just one example of the ecosystem that we built around that specific vertical. The good thing there is that you can sell, obviously, the hardware, but there is also a good potential to sell recurring revenue, because obviously, children want to pay for their mother, for their grandmother well-being. Also all the nurse organizations, the local community, they want to pay for this because they want traceability on the work that has been done by the cleaning services or the nursing organizations. Field service, I will not go too much in detail.
Like I said, we have the ambition to grow high single digit for the coming years. Our field service in Entrance Systems, we will have after this presentation, a deep dive on this. Then, of course, taking action to win in China. We have commented on China at several occasions during previous calls. We have now established a new strategy for China, where we will go to market with three strong consolidated brands, one being the PANPAN brand, a strong high-level quality Chinese brand. PANPAN has more than 2,000 outlets in China that traditionally were selling doors, metal doors. We want to use that channel in the future with a consolidated sales organization also to sell PANPAN-branded hardware, and we want to use that channel also to go more into the replacement market. That's on the residential side.
Second brand on the residential side is the Yale brand, where we also have consolidated the sales organization, and Yale will be positioned as a high-end international residential brand. Then the third brand will obviously be the ASSA ABLOY brand, mainly on the commercial side in two directions, in a kind of direct business where we go to the architects, the contractors, and spec in our ASSA ABLOY hardware for big projects like hospitals, airports, and so on. We will also use the ASSA ABLOY brand through the distributor channel to distribute our hardware in China. Again, we have a dedicated sales organization. Then the fourth pillar in our strategy is a dedicated key account organization focusing on the 100 main contractors in China that become stronger and stronger and that represent a bigger part of the total business in China.
We'll have a dedicated team that has access to the complete product offering, be it Yale, be it PANPAN, be it ASSA ABLOY, in order to attack those 100 contractors. We will also further consolidate our operations and our R&D activities. Where today we have, I think, five locations in China where we make digital door locks. We will bring that down to two to start with. We will also, as today we have five places where we do R&D for digital door locks, we will bring that also down to one location, really consolidating all our R&D effort in order to get more scale, more competence, be faster, be more agile, and be also more efficient. All this strategy is work in progress. We have hired the leaders for those different brands and different organizations.
They are building their team, all this should be up and running by the end of this year, then we should start to see the results going into 2019. On the commercial development side, we have, of course, the shift from mechanical into electromechanical and digital. We have the smart offering solution that we are building. Like I mentioned, we have the ambition to actively upgrade our installed base and further increase service penetration. Of course, pricing. Pricing is the easiest way from top line to bottom line. Further optimize pricing and generate more recurring revenue. If we zoom in a little bit on the different points.
Okay. You say about change and innovation and so on. Some people say the proof is in the pudding. I would say the proof is in the numbers. This is a slide that really shows by numbers the shift that we see in our industry and what innovation can do. If you look at the world around you, or especially in mature markets and in cities like this, most buildings are built. How do you create sales then? Of course, with the new buildings that are being built, but also by offering innovation and getting the installed base to have a relevant new offering so that you can partly upgrade whatever you feel is right. I think this picture really shows that. It is a 10-year overview of our product split. If you look 10 years ago, almost half of our sales were in mechanical locks.
You have the four categories here. We have split it, mechanical, electromechanical, security doors, and entrance automation. For a second, let's take out the doors part, because you do not replace a door with a lock, and just look at the big shift that we have seen within the locking solution. Just comparing mechanical locking solutions with electromechanical. Here you see then, 10 years ago, almost half of the group sales came from the mechanical side. What we can say now, 10 years later is, first of all, we have more than doubled the size, of course, going from 35 to a run rate of SEK 81 billion, it is a big shift in itself. Within that, there is significant move from mechanical to electromechanical. You can really see how the technology has driven the development of our sales here.
Even a little bit shorter perspective, just looking at three years, you have this graph, this is only organically. Really comparing the different parts, I have also split out HID here. Look at the first two columns. If you look for the last three years and you compare mechanical growth and electromechanical growth, because most of you ask me this on a regular basis, here it is, what you can see. On average, on an annual base for the last three years, the mechanical has grown around almost 2% organically, while electromechanical, we usually say it grows at least double digit, and here you can see it has actually grown 12% on average year-over-year organically. A significant shift in growth.
Security doors has been weak in the last couple of years, but a lot of that comes from the decline in China, which has a big door business. Global Technologies, healthy growth here on the organic side as well, above our group average with 6% on an annual basis, also good organic growth. Entrance Systems, electromechanical, but on the door side, a little bit less than that, but still on 5% growth. You have to remember, of course, that these buckets are different size, so when you weigh it all together, ASSA ABLOY as a group has then grown with around 4% organically on an annual basis for the last three years.
Residential side, smart home, definitely a field heating up with all the big players, Amazon, Google, Apple, going into this field. How do we want to position ourselves in that complicated landscape? We want to be seen as the smart security provider for smart home. You could see a little bit like a value ladder. We don't know in which direction that that market will go. What we believe is that for the coming years, there will be enough room for all the different players to be successful. We want to be in that field just a component supplier. We will deliver digital door locks through the different channels. That's, I would say, on the bottom of the value ladder.
We have the corporations like we have with Google Nest, where we have developed together with them a unique lock for them that they sell on an exclusive basis. That's something we obviously prefer because we like that one-on-one relation. A little bit higher on the ladder, we say we want to be an open source for security solutions for residential, for all those people that want to do smart living. There's many, many companies like that that will really make a smart living. We have said we don't want to go into music. We don't want to go in heating, HVAC, whatever. No, we want to stay close to our core, close where our really added value is the lock and the security around the lock.
If somebody want to do home automation, he can buy that secure or that safety solution from us and integrate that in his complete home solution. Obviously on the top of the value ladder, we have what we have with Yale Smart Living or with August Smart Living, complete security solution. You can go to a DIY store, buy a basic kit. I don't know how much it costs. I think it costs EUR 250- EUR 300, SEK 3,000. You get two alarm detectors, you get a camera, you get a lock, you get an app, you can start building your own smart security solution for your home. It's like a Lego system. You can then build on it. That's, of course, the highest value driver in this. Obviously, when we can sell that directly on our website, that would be our preferred choice.
Like I said, the market is still very low penetrated. There is still so many opportunities. We believe there is enough opportunities for all players in this field to be successful for the coming years. With Yale, we had a very strong hardware platform in the world. Now with the acquisition of August, we have also the best software platform to realize this. Combining both together really gives us a very strong position in that market. We will later have a deep dive on this Martin Huddart who heads this organization will explain this, because that's something else we did. We have seen that in this field, you need much more global approach. I think where a mechanical lock is different country by country, the software solution is the same in the world.
The needs for an American or a European or an Asian are very similar. You also see that the big players like Amazon, Google, they want to have one partner to talk to. What we have done here is we have created one global organization that does smart residential, headed by Martin Huddart. Martin reports directly to me into a board. In that board, we have the three presidents of the three geographical divisions and Chris Bone, our CTO. Martin is responsible with his team for all product development on global level and all operations on global level. We continue to do the sales in the three geographical divisions, and in that way, we combine, I would say, the best of both worlds.
On R&D, we can centralize, get more critical volume, go faster, more agile, and can be faster with new product development in a more efficient way. By combining our operations, we do the same thing on the operation side with the factories, realize operational efficiencies. By having the sales team still in the regions, we also are close to the customer and can give the personalized solution country by country, region by region. After market, the 75% Carolina was talking about, of course, a large, to a big extent, captive installed base with patented keys, identity, and credentials, which gives us profitability and loyalty, but which gives us also a big opportunity to upgrade in a more active way that installed base. That's definitely one of the ambitions for us for the future.
We want to more in an active way upgrade our mechanical installed base into electromechanical and digital. For instance, with the CLIQ solution, where we want to upgrade a mechanical master key solution into electromechanical CLIQ solution, which would then also create additional market and additional business for us. I already mentioned the acceleration of field service growth in Entrance Systems. That's going to be the focus, we believe there's also opportunities for service, for field service in the three geographical divisions, either direct, but definitely also working together with our distributors around the door opening. As more and more of our equipment gets connected, definitely the remote management and Internet of Things will give us great opportunities in the future. That brings me to the last point around aftermarket recurring revenue.
More and more, we also become next to a mechanical company, a software company. Software as a service gives us great opportunities to create that additional recurring revenue. I would say that is today still in infant stage. The organization which is most evolved is ASSA ABLOY Global Solutions, where on the hotel business side, software as a service represents already a big substantial part of their revenue. We have initiatives in HID. Stefan will talk a bit about it, where it's also a significant part of HID business. In the rest of the group, this is still in early stage, represents a big potential. I already mentioned price as the easiest way from top line to the bottom line. What is good in our industry is that it is an industry where you can increase prices.
We being the market leader, often we are the first one coming with price increases. We see that the market follows. If we increase prices because of inflation, other players in the market have similar challenges. When we increase prices, they follow. Of course, pricing is important on existing equipment and solutions. To get good pricing, what is also important is new product development. We, on a permanent base, will upgrade our existing product ranges. Every time when we come with a new product range, we have the ambition to add features, add benefits for the customer. If the customer gets more benefits with the same, he will pay more because he gets more value. When we do this new product development, we also have the ambition to bring those extra features with lower cost.
We sell a product with a higher price because it has higher features, and we produce it with a lower cost, really maximizing our margins and giving us the margins that we, as ASSA ABLOY, strive for and deserve. Over time, as that product becomes older, the margins slowly dilute, and then by the time it's time to do something, we make sure that we have the next version of that product released. That's how we do pricing. Pricing on existing and then through new product development, also make sure that we add value that we can price new launches at a better price. Some growth enablers, continued focus on sales excellence, continued focus on innovation as an enabler. We see sales more and more as a process. We have an admin process. We have a finance process.
We believe we can also see sales as a process. In that process, we also see that a shift from traditional sales to digital sales and managing your process in a digital way. Going from manual to CRM, going from traditional marketing to digital marketing and digital lead generation. We, of course, want to excel our sales performance by focusing on sales pipeline management and distributor management. Very important, because a significant part of our business comes through distributors. Using all the tools that we have available in our group, I just mentioned one here, that is BIM and Openings Studio, which gives us really a significant competitive advantage in the market. We just launched a new version of Openings Studio. Openings Studio is a software that architects and contractors can use when they price and quote for a new project.
Basically, we gather for them all the information they need around the door opening, making it easy for them, one, to quote, and make it easy for them to use our products in their project. We do that not only on the mechanical side, we do that also on the electrical side. If you have a door opening, you can see it on the picture. We now also specify how the contractor has to do the electric wiring, high voltage, low voltage. When he installs the door opening, every door opening has a barcode. He can scan the barcode, and he gets automatically a bill of material of what is the scope of that door opening. With that bill of material, he will get all the instructions, all the certificates, all the documentation needed.
Making it very easy for the contractor to do business for him, making it very easy for the architect to make his project, but mainly also to make it easy for the architect and the contractor to do business with us. It's a very important competitive differentiator.
If that is on the sales excellence side, you can say that what I will talk about then is innovation excellence. We not only truly believe that innovation brings organic growth, we have seen in the numbers that it really does. What do we do then to fuel our growth? First of all, we add resources. If we look at our R&D spend, and especially at our R&D engineer, we have tripled the number of engineers in the last 10 years from around 600 to over 2,000 R&D engineers. Also within that is also a significant change, going from only mechanical engineers to electrical engineers, to now software engineers and even app developers, basically. A big investment, but also increased scope then on the R&D side for us.
As Nico mentioned, a lot on the platforms as well, to make sure that we use the platforms for using our size to have critical mass and being able to develop software solutions that we then can deploy into the local mechanical solutions and thereby having the best of two worlds. We have also set ourselves targets to measure that what R&D does is really making a difference, that we develop the right things. With our 5% organic growth target, we said, "Okay, we believe that 25% is a good level." We want 25% of our sales to come from new products. That's really products that have been introduced into the markets in the last three years. To also see that R&D is developing what we are able to sell in a good way.
We also said you can have sales excellence, you can have operational excellence, but you can also have innovation excellence. Really setting ourselves targets, saying, "Okay, with the same amount of resources, we want to double the speed of innovation, and we have basically double the number of projects and also be done in half the time that it used to take." I would say traditionally, this is not an industry which has been fast to introduce innovation, so this has been something that really has helped us also, by becoming much more Lean and agile in the R&D departments. We've done that through, as we talk about here also, a common standardized structured process, working with Lean, using platforms, and also building up the shared technologies R&D centers. Did it work? Yes, it did.
This one only starts in 2013, where we are a little bit above 20%. I can tell you before that it was significantly lower as a percentage of sales. Today, we have been already on 30%, but we are basically trending towards 25% of sales from new products, which I think is a very good level to be at. Because, of course, it shouldn't be too high, because then the complexity will really increase, and you have to take care of the tails. I think we've seen a significant shift in both speed of introductions to market, but also in the amount of new product development that has come out to the market. Really the payoff that we're doing the right things we see from this.
If you spend all that money and also that effort in innovation, it's also good, of course, to see that it then get recognized for that innovation work. It's especially rewarding when you see that the professionals in your industry, so people that really have the expertise to judge, give you these rewards. I will not go into details in all of them. I will just mention one, the Forbes top 100 list of most innovative companies in the world. We are now in that list for the fourth time. Very happy to be there in that list of 100 companies together with people like Google and Apple. Then I would like to finish the organic growth part with what I believe is a very good example of what we want to do more in the future. That is a critical infrastructure application focused on one specific vertical.
We will have a more deep dive later, but I will just take one example. Telecom business, all the masts that you have here in Sweden spread all around the country. When there is a problem with such mast, you have to send a service technician to go on site. What happens, the service technician first has to come to the office, get the mechanical key, drive up far away in remote locations, do his job, and come back to the office. A lot of inefficiency, a lot of driving, a lot of standing in traffic here in Stockholm, but also risk for keys getting lost, keys getting stolen, and therefore also other stuff getting stolen.
We have a unique technical solution for this, where now every technician from the telecom operator will have a unique key, his key, and he just drives to the mast where he has to do the job. He doesn't go to the office, he goes straight to the mast. When he arrives at the mast, he holds his key close to his mobile phone. He gets the credentials on his key to enter that specific mast, he gets the credentials, he gets the rights to enter one hour, two hours, the time it takes to do the job. Afterwards, those credentials become void. If he has to go urgently to another mast, he can do the same game there. A lot of operational efficiency gains, much lower risk for things being stolen or things being lost.
A lot of money to be made for the telecom companies, and those telecom companies are then also willing to share a little bit of that profit they make with us for giving us recurring revenue. Why it's good? It's a typical technology solution. A unique solution that we have in a specific vertical is very important. Where through selling the hardware, we also now have the potential to get a good recurring revenue business model. That's one of the examples of things that you will see much more for us in our company going into the future. That summarizes a little bit the organic growth initiatives, the 5% organic growth ambition, which we believe is very ambitious, but still achievable, and that's how targets should be.
Year to date, we are at 5% organic growth, or at least this year we are within the target. We go to acquisitions, same thing, we have 5% ambition for growth through acquisitions. That means that every year we have to do around EUR 400 million of acquisitions. How do we want to do that? In four directions. We want to continue to build our core, do acquisitions like we have done the last 10 years, buy small competitors in a market. When we buy that competitor, close down his operations, his factory, integrate his operation in one or more of our factories, through which we get the volume leverage, giving that organization access to our complete product offering and realizing also sales synergies.
Those two synergies obviously will pay for the goodwill or the badwill we have to pay when we acquire the company. Is there still enough potential there? Yes, there is enough potential there. If you look, most markets, top three players have less than 50% market share, it's still very scattered out there, and we can continue to play that game in the coming years. Second thing is we want to expand the core. A good example there is the acquisition of Swiss company Planet GDZ that we did a couple of months ago. They make innovative door sealing solutions, very close to our core, but expanding our core. Also there is different other products or other technologies that we can still buy.
The third point is definitely on the service side, mainly for Entrance Systems, rolling up the distributor channel, buying distributors, and getting ourselves access to the lucrative service business. The fourth point, acquiring for technology. I would say that's mainly also in Entrance Systems where we still have some technologies missing, and then definitely in Global Technologies as well on the HID side, as on ASSA ABLOY Global Solutions side. SEK 400 million to be acquired. We do traditionally around 15 smaller companies, between 10 and 20 smaller companies. If you say that those smaller companies are SEK 20 million, 15 times SEK 20 million, that's SEK 300 million. That means that every year we have to do one of SEK 100 million, or every two years, one of SEK 200 million, or every three years, one of SEK 300 million. This year, at least we are on track.
You can see we have done 14 acquisitions year to date. We are confident we will get those 15 by the end of the year. We also did an acquisition of SEK 100 million. As you know, we announced the acquisition of Crossmatch a month ago. Crossmatch has a turnover of $125 million, so EUR 100 million. That's our strategy around acquisition. Also here, it looks like my voice disappears now. Oh, okay. 5%, I think very ambitious, but also achievable. We go to the 16%-17% EBIT margin bandwidth where we want to stay in. Here, I often get the questions, are you going to prioritize EBIT margin improvement over growth? No, on the opposite. We want to grow faster than further improving the EBIT margin. Obviously, we want to keep the EBIT margin within 16%-17%. Why do we say that?
We believe growth is a better value enabler, also better share value creator than EBIT improvement. That's, of course, true if you are at 16%-17% level. It's a different story if you are at 3% or 4% level. We want to keep the 16%-17%. Why is that ambitious? Obviously we want to continue to invest in salespeople. We want to continue to invest in service people to realize that accelerated growth. We also want to continue to invest in R&D to make the difference. What we often forget, we also continue to invest in operations. We continue to invest in automation, robotization. On the other side, of course, we'll continue to buy companies that at the beginning are dilutive, and then over time, with all the hard work we put into them, become within that 16%-17% bandwidth.
I think Crossmatch is a very good example. Crossmatch is definitely dilutive for HID and for Global Technologies. Crossmatch made a margin slightly below our 16%-17% bandwidth. Now, obviously, with the amortization of the intangibles, it's even lower. Over time, we would then make sure that that business comes back into that 16%-17% bandwidth. Initiatives here, again, we split them up a little bit, things around manufacturing footprint, specific actions around cost efficiency, and then some comments on operational performance. Carolina will first give an update on the manufacturing footprint.
I would say that we do a lot of different things within cost. Of course, cost and cost-cutting and savings are critical because with those cost savings, we fuel our investments. Also we create bottom line that we then use to invest in acquiring new companies. If we start with the biggest, most structural changes that we do on the cost side, it is what we call the manufacturing footprint programs. By buying almost 300 companies, almost all of them come with a factory, and we don't really buy them for the capacity. As Nico said, it's really about consolidating and integrating, I would say sometimes it's basically consolidating into our own specialized factories, and sometimes partly it is staying assembly and outsourcing parts of it. It's a big, big shift and it's something that takes time to do.
As we acquire more companies, we continue with more manufacturing footprints. Because I got the question, "Are you going to stop doing manufacturing footprints?" I said, "That depends on if we stop doing acquisitions." Since we are not planning to stop doing acquisitions, we will continue to see restructuring and basically improving our cost base. We have so far had six manufacturing footprints. Number five and six are, I would say, in the last year, the phase of going out, giving really nice savings. As you know, we have also announced a new one that will come together with more information together with the fourth quarter reporting. Basically, I would say it's sort of more of the same.
We see that the factories, basically with the consolidation and outsourcing, we can still have the closeness to our customers and also with sometimes local assemblies, as said. With that, we basically generate a lot of very healthy savings that we can then either reinvest or let them drop through to the bottom line. Speaking of that, I try to sort of find ways of measuring efficiency, there are lots of KPIs, of course there are. If you're in operations, there are a lot of more detailed KPIs that you would work at. Something that we look at is sort of putting the relationship between how much we grow organically and how much we develop on the cost side when it comes to headcounts.
Basically what you see here is, over the last 10 years, you can see how much we've grown organically per year, and you can also see the change in headcounts or full-time employees equivalent. The trick here is to have a healthy gap so that you grow more than you develop number of people. As you can see, we have a very nice gap basically every year. If you continue to do this year over year, you get a very good leverage and very good improvement. If you just take from 2010 till now, we have basically a gap of 50%. Sort of 30 growing and 20 cutting on the headcounts. Compared to 2010, it's sort of a 50% difference in efficiency when it comes to this.
If the manufacturing footprint is one of the ways of doing it, there are many other ways that we do, but sort of more of a bottom-up solution. One of them is automation. We have automation in different ways, but one thing that we talk about is robotization. Basically becoming much more automated within the factories. This is an example of Americas, I will not steal Lucas' thunder. He will talk more about this later. As you can see, we have really invested in this. We believe that this gives us a really significant shift in automation in the factories in the U.S.. Of course, we do similar exercises in the other divisions with also increasing focus here.
Another way to become more efficient is to really work hard on Lean and making sure that the factories are really pushing the envelope when it comes to Lean. Again, here is a way of how do you measure that and how do you push and make sure that everyone improves. What we have is really, we have a scale. It's a classical one that you can have, be it gold, silver, or bronze, in this case, as a factory. You are really being assessed every year or every 18 months where you are and if you are improving. You can't really compare everyone to the same average or something, especially when you have a business like ours, which is so decentralized. You have factories in many different places. You also have many different, I would say, prerequisites.
The trick here is really to see where you are, sort of a little bit of healthy competition within the division, but also within the group, making sure that you are improving. If you are on the lower end, on the bronze side, the whole thing is then you try to move up to become silver. If you're silver, you go for gold. If you're gold, you want to be on the top level of gold. Really pushing the Lean technology or methodology in the factories in combination then with the automation that I talked about before. Of course, as a start, you can say then deciding which factories overall should be part of our footprint.
There's some specific things around cost efficiency. Of course, we will continue to outsource everything what is non-core. A couple of words on suppliers. If I simplify a little bit our strategy, we want to reduce the number of suppliers. We want to get more volume out of the existing suppliers. By more volume, of course, we have volume leverage, we have power over the suppliers. We can get better costs out of the suppliers. Like for like, we were able to almost reduce suppliers with 30% over the last five years. Still a long journey to go. Obviously, what we buy is the most important cost component for us. The direct material and the indirect spend are the two most important cost families in our P&L. If you really want to work on cost, we have to work on the sourcing side.
That we do through good category management and through a lot of different specific initiatives. I will mention one, the VA/VE process, where engineering and sourcing work together with the supplier to see if we can re-engineer that component from that supplier, doing the same or even doing better at a lower cost. A couple of examples here on VA/VE. We saved more than EUR 200 million-EUR 210 million with VA/VE activities over the last 10 years. Of course, as we become bigger as a group, the savings also become bigger. We believe we can even reinforce our activities here and get more out. When I talk about consolidation of suppliers, it's of course also important that we consolidate our product ranges. I think a very good example here of our door closer business in EMEA.
Historically, we were making door closers, I would say, almost in every country. We have seen that the application is very similar, so the solution can be very similar in the different markets, and decided then to come with one door closer range for the whole EMEA organization. Consolidating the product range, reducing the complexity, getting synergies in logistics, and of course, getting scale in sourcing, buying at a lower cost, getting better opportunities in the market to boost your sale. You can see that this has been a very successful journey. Watch out to somebody falling. Okay. I hope the person is okay. Yeah. Okay, he's okay. I think if you do this, again, this type of R&D initiatives, it's also then very good to see that you then also get recognized for the effort you do.
We won for this door closer also, an Industrial Design European Award.
If you talk about efficiency, it's the natural thing for an industrial company is you start with the factories, and you look at the manufacturing part, and we've talked about that both on the manufacturing footprint, but also on the Lean and so on. An area that becomes more and more relevant once you are relatively far down the consolidation road and the outsourcing road, is that you look at your internal processes. What we have, what we call seamless flow, is really about digitalization in internal processes. It's really about moving the processes from being manual to semi-manual processes to being digital processes internally. To do that, we have different sort of actions and measures and programs to, well, basically move the needle. We've worked on this for now seven, eight years to really work on the automation here. The results?
Well, the results are here. What we can see is, you have processes on purchasing, you have processes towards the customers, you have processes in the R&D with the PDM. You also need within production, you need the flow of information to be automated, and you need the base for it, a standardized ERP. Today, we are on almost 50% digital processes within the group or seamless processes. I actually tried to calculate what it would've been without the acquisitions, and we would've been on almost 80% then. This is just like the other measures. This is an ongoing project, and this is an ongoing theme that significantly helps us become more efficient. Also by having the processes automated and digital really means that they are scalable. They are faster, and the quality is also improving.
What we see today, it starts to become a necessity for our products to work in that ecosystem, also for our customers, really requiring that we have those kind of solutions like e-commerce for them to wanting to do business with us and also really to increase the stickiness of our relationship with the customers. Really good improvement here as well.
We will continue to work on our quality excellence initiatives. One domain where we believe there is still a lot of potential for us is everything around logistics. As we are a very decentralized organization run in a very decentralized way, we do, of course, also logistics in a very decentralized way. We believe by having a more holistic view on a region, a country, or even the group, we believe we can do logistics in a better way, giving better customer satisfaction, also do it in a more cost-efficient way. There we are launching different new initiatives. We will continue to work on sustainability and health and safety. Couple of examples around sustainability, in KPIs we measure around water, energy, and waste, all going very much in the right direction.
Injury rate also going down significantly, 60% reduction over the last six years. Of course, every injury is one too much, so we still have a long way to go there to come to zero. As a summary, cost efficiency measures on one side, we have, of course, cost inflation. We have raw material inflation, labor inflation, and general inflation. How do we compensate that? By actions on the pricing side, top line, and by actions on the cost side. We are in a market where it is possible to pass through cost inflation into the market. That's what we also do. Through price optimization, we believe we can even do a little bit more than inflation and realize a positive price effect on the income statement. New product introduction is there very key.
Like I mentioned before, when we do new product introductions, we have the ambition to bring a new product with more features, more value for the customer, and therefore we can sell it at a higher price. We bring that new product at a lower cost, so we optimize our margins. On the cost side, of course, consolidation of suppliers, working together with the suppliers to get the cost down, a lot of VA/VE initiatives. In our factories, continued operational efficiency projects around Lean and automation, MFP programs, a new MFP 7 coming. If needed, we can also activate contingency plans. Here we have the advantage that in the construction cycle, we are late in the cycle. Often we see things coming because other people start to see it before us being late in that cycle.
We can adapt to things going up or going down, especially also because we have a good agile cost base and therefore can switch gears in a fast way. As a summary, like I said, boring, our strategy is not changing, our strategy is evolving. No revolution, but evolution. We are committed to our 10% growth, 5% organic growth, 5% growth through acquisitions, and that with an EBIT margin within the 16%-17% bandwidth. These are very ambitious financial targets to realize over a business cycle, but we believe they are achievable, and we believe that's how targets should be very ambitious, but still achievable. Our strategic stone will remain three pillars, increased market presence through customer relevance, product leadership through innovation, and then radically reduce our break-even cost through cost efficiency. That brings us to the last point on the agenda, financial results.
I will start with the sales development. Sales up 133% since 2008, 22 consecutive quarters with positive organic growth, complemented with nice acquisition growth. I think there's not so many companies in the industry that can show that track record.
Yeah. That sort of shows the overall top line and top-line development, which is great. I think to understand ASSA ABLOY, you need to look sort of under the bonnet and really look at the divisions because there are significant changes happening sort of within the group. This picture really, starting from the top line, shows that. If we look at where we were 10 years ago and sort of starting with EMEA, well, we can start with saying, first of all, again, we have significantly grown the company from around SEK 35 billion to over SEK 81 billion run rate. In absolute numbers, basically everyone has increased. There's been a big difference between the divisions.
If you take EMEA has had good organic growth and done some acquisitions, during this period of time, some within the mature markets, but quite a lot in East Europe as well, so emerging markets, has grown, but not as much as the other parts of the group. We have Americas, strong organic growth during this period of time. Also adding acquisitions, a lot in emerging markets there as well with Latin America. You have APAC. Here you see APAC goes from 9% to 11%. Although China has been tough the last three years, basically, we have still increased the size of APAC, in absolute terms, but also relative the group size, now 11% of the group. A lot of that comes from organic growth and some also from acquisitions. Global Tech.
Global Tech has had very good organic growth during the years and also added technology acquisitions. The combination there, which means basically has held its relevant relative size within the group. Of course comes the big difference, that is Entrance Systems. Really going from being the smallest division in 2008 to now being the largest division. Here, of course, a lot comes through acquisitions and really about rolling up a market that has been very fragmented and still is very fragmented, sort of really doing what the locking divisions did basically 10 years before. Today, this is how our composition looks like. Moving down from the top line to the bottom line, we get this picture.
Here, of course, you have to remember sort of the relative sizes of the division, but also it shows that we do have differences on margin within the group. I would say starting with EMEA. EMEA is typically sort of ASSA ABLOY. It's the average. A bit lower sort of relative size on profitability compared to the group as it is today compared to what it was 10 years ago. We have Americas. Americas with the good, nice growth, including the high margin. Of course, that has then continued to give really good, basically parts to the overall group profit. APAC has grown as a relative size, but due to the profitability level that we have now, especially in China, it is clearly below the group average then, and also then on contribution for the group as a whole on the profit side.
Global Tech increased significantly in size, relatively sort of basically on the same level as percentage of group, but also significantly improved the profitability. Basically, the underlying profitability has gone up significantly within Global Tech. Entrance Systems. Of course, the size has been a big change, but since they are slightly below our average, they are still sort of lower as a contributor, considering the relative size in the group. Overall, this development also on the profitability, I'll come back to that a little bit later also on the margins to give a little bit more flavor and detail on that to try to explain even better, what our margin looks like. This slide I showed you before, sort of as a reminder, because this is a significant change that we see.
I think now I would just say that if you compare here on the mechanical versus electromechanical, within the last 10 years, the mechanical side has grown 32%, while the electromechanical side has grown 167%. Of course, this is a significant change to our business. Finally, another way of looking at the top line, and that is really where we are present in the world today. This shows our geographical footprint. We can see, well, this is a year-to-date picture. As you see, we have nice, well, good to strong organic growth in all areas except in Asia-Pacific, and there it is really China who is still dragging. It also shows that we have 22% of our sales in emerging markets. Just looking at overall sort of macroeconomics, that means that we still have a lot more to do in the emerging markets.
Still clearly room to grow in the markets. Also the fact that the mature markets are much higher on, you can say, on the regulatory side, and also therefore on the hardware side. What we see is a continuous trend on increasing that in emerging markets, which means that over time, also the emerging markets are moving into higher-end products and solutions. Sort of a double reason for going into the emerging markets. Then I have a couple of comments then on the margin, and I would say this year's big topic, and that has been on direct material or practically on raw material. This picture you recognize, it's a year-to-date one, and it shows on our P&L composition that direct material has increased. Even like for like, we've gone from 36.1 to 36.6 as direct material. What have we seen there?
Well, we've talked a bit about the different reasons and also the different, you can say, reactions in the different divisions. We have basically with the steel and the compensation for price, we have managed that pretty well in most of the divisions. Americas a bit late, but closing the gap now, while still APAC with China not being able to compensate for this increase. That said, I wanted to show you what our direct material consists of. It's clearly the biggest part of the P&L. 36% of our sales goes into direct material. This is really the split. What you can see is that, of course, we are tilted towards also the raw material exposure. With our consolidation and outsourcing, a lot of what we do goes from raw material to components or even to finished goods.
You can see here, what we still have is that around 30% of the direct material is really coming from raw materials, then 45% from components, which still have, you can say, raw material component in it. Then you have traded products, which are a quarter of our sales. Within traded products, the raw material part is usually not that relevant for the pricing or for the cost effect here. If you look then within the exposure of raw materials, what is it really that we are buying? This has changed a bit as well. As you can see from the picture, the biggest one is now steel, and that comes then from the high security doors that we see. Of course, there's a lot of steel in steel doors.
That's also why it's a heavy lift when you have significant increases in that material to compensate for in price. I would say we have the ones that we've always had, like brass, aluminum, and zinc, still being large contributors, but where it has been easier to compensate for with price also because it's not as big part of the price for the product as a whole compared to the steel in the steel doors.
This is nice to put in the Excel sheets and do the simulations. Steel price development. We have been talking about steel prices over the last quarters. We thought it would be useful to show you a little bit the evolution of the indexes over the last three years. We put here cold rolled steel for U.S. and China. Last three years up, you could say almost 100%. Definitely, as of middle of last year, you see the strong increase in the U.S.. It's clear that if those things go up 100%, you cannot compensate that in one go with price increases. That's also the main reason why we lack with our price increases vis-à-vis the cost increases in the U.S.. I think the good news here is that at least now, indexes have leveled out on a high level, on a perhaps too high level.
Let's see also what will happen with import tariffs in the future. At least when this trend continues, this should be good news going into 2019, because normally we see around a lack of six months between indexes going up or down and us seeing that in our cost, in our P&L. As we are realizing more and more the price increases, as price increases stick in, if then material prices don't go further up or even go down, that should be good news.
In the presentation from Lucas for the Americas, he will explain a little bit, but we had a very big gap between price and cost in Q1, still a very big gap in Q2, and we were able to bridge that gap in a significant way in Q3, and we are confident that going forward Q4 and 2019, then we should be able to bridge that gap. A similar but different picture for the other materials, aluminum, zinc, and brass, also very strong increases, but there, at least in the last months, we have seen indexes going down again. Here, the same story, you have a more or less six months delay between indexes and the cost popping up in our income statement. This has, of course, an important negative effect on our operating margin.
You see that today our EBIT is on the lower end of the 16%-17% bandwidth. We are working hard to keep it within that 16%, 17%, or at least not let it go too much out of the 16%-17% bandwidth. The main reason here, or the main challenge here is definitely material cost increases that we are compensating with price increases and other operational efficiency measures. We show on this graph also the corrected, well, EBITDA figure. It's actually an EBIT corrected only for PPA. You see that that one is nicely within the 16%-17% bandwidth. We start to show that, and we will continue to show that also in the future because we believe it's important for you to have the right information when you decide investing in the right company.
We don't want to jeopardize our relative performance if you compare companies with other companies that do perhaps less technology acquisitions than we do. I want to re-emphasize that we are committed on EBIT level, to keep the EBIT level over a business cycle within the 16%-17% bandwidth.
Okay, that is the overall group margin, right? Very flat. You see it here. If you can see the colors, yeah. It's the blue one that you compare to the previous slide, it's the same. Really what I tried to do here is to show you a little bit the underlying development of the different divisions and really what that does to our group. Again, the group margin is really the average of the divisions, and the divisions have a bit different trends. I would say to start with, you have to realize that, first of all, the divisions are working in a little bit of a different universes. They have different products that they sell, which comes with an incumbent margin, and they are in different markets that are also more or less regulated and therefore driving solutions of a higher value or lower value.
Everyone is working out of in their own context. Starting with the context, it's also, of course, the development of the division, both from organic and acquisition side, but also then really on the cost efficiency side, as well as if there's been any specific hiccups, and as you know, I will mention one. If I start then, let's start with the hiccup one. If we take Asia-Pacific, the red one. You can see that a couple of years ago, we have been on a stable margin of around 14%. That is, up until a couple of years ago, including significant organic growth, but also acquired growth. Of course, in emerging markets overall, you have the mature part of Asia-Pacific with Australia and New Zealand being on a good level margin, but you also have the emerging markets with clearly a lower structural margin.
For the last couple of years then, without organic growth, but no acquisitions as well, and also with the significant drop in China on the margin side. We are now you can say on a 10% for that group, Asia-Pacific. You can see the line is there, and that's also what we communicated already during last year, but this year. If you look at that from a group perspective, considering its size and the development that has then diluted the margin with 60 basis points. If you take Entrance Systems, that's the purple line. You can see here in the last five years, that has significantly improved their margin. Here it is still with acquisitions, so we do have dilution from acquisitions, but we also see really nice underlying improvement of margin.
Part of that is thanks to the organic growth, but also the increase of service element within Entrance Systems, and also the good savings from the restructuring that they do by consolidating the factories. Since they are below group average and growing significantly in size, even if they are improving their margin, they are still being dilutive on a group level because my mix changes, so it dilutes me as an ASSA ABLOY group. EMEA, I would say, as usual, on average. EMEA is really a mini ASSA ABLOY. Here, as I mentioned before, they have continued to have good organic growth. They have done some acquisitions that have been dilutive, but they've also done a lot on the cost side. Basically, they've been able to keep their margin during this time.
Since they are basically on the group average, they have been flat to our overall margin as ASSA ABLOY. We move over to Americas. During this period of time, Americas to start with, is in a market which has really nice and healthy margins. We have a really good margin to start with. If you come back to what Nico said, if you have above 20% margin, of course, the important thing is to grow, and Americas certainly has grown. We have seen really nice organic growth, but also adding acquisitions. That is really what you see the dip in the last year. It's partly due to the material and not compensating fully on the door side, but it is also because of the dilution of acquisitions, for example, like August. Overall, good performance there as well.
What you see then is because they are significantly above the group average, and they are growing on that level, even if it's dipping in the end, they have still significantly improved the group margin as well with 30 basis points. Finally, you can see on Global Tech. If you take Global Tech, we have seen a really good margin on Global Tech, and you have a good Global Tech margin development as well. Stefan and I, we talk about that the underlying margin, and then what happens when you add acquisitions. Here we have a combination of very good organic growth, but also adding acquisitions that are dilutive. Doing a really good trick towards the end here, and that is divesting something that had a very low margin and still adding good acquisitions on at least a good level.
Not as good as Yale, but at least a good level, which means they haven't been diluted as much, but really good operational underlying improvement in combination with a healthy acquisition pipeline. Basically, we've had a really good accretion from Global Tech with 50 basis points. Sometimes we get the questions: Do you really want to continue to do acquisitions? Does that bring anything? There are so many, they are small, and what does it really bring? This slide shows that it does. The red dots show how many acquisitions we do per year, and as you can see, on average, it's around 15, and it's been like that for many years. As you can also see that they are pretty small because the gray bars show the added sales from acquisitions per year. It's moderate.
There's a little bit more in 11 and 12, but again, it's rather moderate every year. But if you look at that accumulatively, by doing this consequently every year, what we can see then is that we have had a really good development over the years in total, and that is the blue bars. What you see is that we've done 187 acquisitions since 2006, but we've also added SEK 35 billion of sales thanks to those. So yes, they dilute, and yes, there's a lot of work with it, but clearly, it's a really good value for shareholders by adding them, and then integrating them, and improving the underlying margin, and growing them together with the rest of our business. Even if I love EBIT, I love cash flow even more.
I think this is a slide to really show you that a company needs to have sustainable cash flow over many years, and to convert the EBIT to real cash, that is really the check mark that you have a healthy business, and I think that this slide more than well proves that. We have basically converted our profit to cash every year, and then we have used that cash for dividends as well as continuing to acquire companies. Basically, self-financed our expansion. Balance sheet. The gearing also looks good, and you can see that the net debt-to-EBITDA ratio is on 2.1. I would say that it's been like that for a couple of years now, so clearly there's room to do more acquisitions. I would say we're probably a bit cheap, right, Nico? So we don't want to buy too expensively.
I would say what's stopping us is not really the balance sheet, it's more the fact that we don't want to overpay for companies. We want to pay a fair value, but we don't want to overpay for them. But a healthy debt side. I've added a slide, or two slides that I don't usually have. But because of the things that happened this year, also with Asia-Pacific and the impairment, I wanted to show you overall the balance sheet and also what it looks like compared to our goodwill.
And if you look at this, you see we have, well, the active and the passive side with a little bit more than SEK 100 billion. Out of that, SEK 63 billion is intangible. And we have an equity of around SEK 50 billion. And the questions I get, "Okay, so you had to do this in the write-down in China. What about other areas? Do you have other divisions where you also see a problem or where the margin between the value of your assets and the book value is melting away?" That's why I added this slide.
This slide shows ASSA ABLOY as a group, but it also shows all the divisions and basically the headroom that we have in the divisions. It shows, you can say, the value that we have on capital employed versus the value of the business, and really basically doing on a divisional level, making like a DCF, you can say, and seeing what value do we have from the business in that division and seeing what's the delta between those. As you can see here, we are on at least 60% positive gap in the divisions.
Also for the group as a whole, then including APAC, we're also above 60% here. Very solid situation in the other divisions. Then finally, on the finance part, of course, earnings per share. This is what it all comes down to. I would say here, the important thing is to show the development over time and also see that we have a very stable development of the earnings per share. We can see that in the last five years, we have increased our earnings per share with a full 63%. A strong development also when it comes to the end on earnings per share. I give back to you, Nico, then for-
Okay. Before I summarize, I got a message from somebody in the room, a Belgium guy. This seems to be also a Belgium guy in the room, and he wanted to stipulate that he was on time this morning. With this, Steven.
Okay, as a summary, we are operating in a market with very strong positive market dynamics short term and definitely also long term: security, urbanization, environmental codes, higher level of specification. It's all positive drivers in our market. We have in that market a very strong market leader position, a unique position that we also defend through innovation. We have a proven strategy, a proven strategy that has delivered very good results in the past, has created very good shareholder value in the past, and a strategy that we will continue to use in the future.
It will be an evolution of strategy, not a revolution. We are confident that that proven strategy will also continue to deliver good results and create good shareholder value going into the future. We reconfirm our financial targets. We will have an increased focus on organic growth. I always say the difference between a good company and a great company is 1% organic growth in a sustainable way. We really are striving in our organization, how can we boost that organic growth? The easy answer is everywhere. Look in this building, we don't have 100% market share. In fact, we have low market share. We really have to do something in this building. If you look on organic growth, the main drivers, double the size of Global Technologies.
Add EUR 1 billion to Entrance Systems, focusing on the service business that we want to grow high single-digit for the coming years. Stay in the driver's seat when it comes from the shift from mechanical to electromechanical and digital, definitely on the residential side, but also on the commercial side, on the commercial side, where we also have a very good possibility to get recurring revenue. Geographically, definitely emerging markets, China in particular. If you want to be a global leader, we also have to be one of the leaders in China. Continue our successful acquisitions. 5% target here, EUR 400 million. Where will it come from? Around 15 smaller acquisitions of around EUR 20 million per year, and then one bigger acquisition like Crossmatch this year of EUR 100 million.
Both very ambitious but achievable, we want to do that with keeping our EBIT margin within the 16%-17% bandwidth. We continue a strong focus on cost. Cost in our operations, in our factories. Definitely also with our suppliers, the direct and indirect spend. An opportunity we believe on the logistics side, where we believe there is more money to be made. In all this, innovation is a very, very important enabler. Innovation for us is not only innovation in products and solutions. Innovation is also the way we run our processes. Innovation is the way we run admin processes, sales processes, definitely also the way we run our operations with automation and robotization. Last but not least, corporate culture.
We want to be a decentralized group, decentralized, taking decisions close to the customer, where we have the knowledge on the customer, but also a group leveraging more synergies that exist across market areas, across business areas, and also across divisions. Therefore, we want to reinforce that culture also with our three corporate values, because definitely for us, our most important asset is our people. For our people, we really want to give them a good framework, a good skeleton from a corporate culture that they feel comfortable in to work in and to develop in. In that development, we also want to promote much more internal promotion of our people, getting that cross-fertilization of experience and getting that cross-fertilization of our ASSA ABLOY culture. We thank you for your attention, we open the floor for questions and answers.
Great. Good morning. It's Andre from Credit Suisse. Thanks very much for the presentation. I just wanted to pick up on organic growth and the 5% and what can be different in next 10 years versus the prior 10. Do you expect your end markets to perform materially different in next cycle, within the context of that 5% growth target?
Specifically about the markets or?
Yeah. Do you expect more tailwind from the markets within that 5%?
Yeah. Okay. I'm not a macroeconomic. I hear also everybody saying about, "Yeah, the markets are turning." I can say today, we don't see that happening. We see still strong market dynamics in the Americas and in North America in particular. It's true that a lot of KPIs in Europe are indicating the wrong directions. We believe also in Europe, there is still good overall market conditions, perhaps not like two or three years ago, but still solid market conditions. I think the same is true for Asia in general, where, okay, you know the challenges are in China. We are also confident that in China, sooner than later, the market will turn.
For sure, one day the market will turn, and I would say our share prices or our multiples are perhaps sometimes an indicator of what people believe on what's going to happen with the market because what you see, if people believe that you're coming closer to the end of the cycle, you see our multiples going up. Because people go from cyclical investments back to a safe harbor like us, because we are definitely much less dependent on cycles than, for instance, the mining industry or a lot of other industries. If you go back in previous downturns, you can see that we have been much less cyclical, that we even continue to grow in that downturn. Yeah. I can only say that we will react on market conditions.
If market conditions go up or down, the only advantage we have is that we, as I explained before, are later in the construction cycle, we see things happening perhaps a little bit earlier than other people.
Thank you. Can I also ask on price, now that the business mix is changing with this new partnerships with tech giants, does that change the structure of industry at all? In perspective, what you said, this is an industry where you can raise prices.
Yeah. It's a good question because I think we should put it in the right perspective, because I get a lot of questions always on residential digital smart locks. To put that in the right perspective, this is today around a run rate of EUR 250 million, all digital door locks. In the EUR 8 billion, it's still a very small part. In that EUR 250 million run rate, the cooperation with the giants you talk about is very small. In the bigger picture, this is definitely not changing the landscape. Definitely from a pricing perspective, that is not changing the overall picture.
Good morning. I wanted to go back to the 16%-17% margin. You were very-
I think your microphone is not on.
Yeah. We hear you, but not sure about the others.
Is that good now?
That's better, yeah.
I wanted to go back to the 16%-17% margin. You were very clear that your priority is growth rather than pushing for the margin. Just trying to understand it mechanically on the mix side, on the things that you spoke about. Asia is quite depressed versus what it was a few years ago. You did a lot of changes, so hopefully that goes up. Global Tech is also going up. You're pushing for more recurring sales, I guess electromechanical, at some point, should be better margin. What are the things that are increasing as an offset to not just take you above 17%? Is it R&D to sales? M&A is also the same rate as before. Thank you.
Yeah. I think there's, of course, positives and negatives. Some of the positives you mentioned, if we can grow faster in Global Technologies, obviously it has an accretive effect to our overall margin, that's definitely the ambition we have with our ambition to double that division. If we grow faster in the Americas than in Europe or in APAC, again, it has an accretive effect on the margin. On the other hand, there is a couple of things that bring it down. Short term, the raw material inflation that we have talked about in length. Definitely also, APAC. Definitely also the shift from commercial to residential.
Exactly.
As we grow faster on the residential side than on the commercial side, our margins are on the residential side lower than the commercial side, that has the dilutive effect. The big question mark will be in China. In APAC, we make a high single-digit margin. We've always said that there is a big difference between China and the rest of APAC, where in the rest of APAC, we make margins very similar to group level. Our margins in China are low single-digit. Everything there will depend how fast China will grow. Obviously when China picks up again one day, we really see significant growth, that will be growth with very low margins. That will be dilutive for the overall picture, that's a little bit the unknown.
Yeah. I don't think you mentioned it, if you think about the acquisitions, you have a very different story there as well. You have the Global Tech acquisitions, which we said that we want to significantly increase that division also through acquisition. That tend to come with higher margins. We shouldn't forget that if you look at the Entrance Systems, when I showed you the margin slide, they are improving the underlying margin, there will be significant acquisitions growth there as well. That is diluting the group margin because they are the ones that are below the average of the group.
We have said at several occasions, and it's a little bit a general statement, but in normal conditions, if we are not in contingency mode, so to speak, we need around 3% organic growth to compensate for cost inflation and keep our margins on the levels where they are today within that band width.
The one last thing that I would say is also on the PPA, because the technology acquisitions that we buy, we will have the PPA effect within the EBIT. That's why at least we show both EBITDA and EBIT to show what the underlying business is really developing from a margin perspective. That will come in as well.
Hi, Nico. Mark Troman, Merrill Lynch. Just following up on China, how long do you think it will take to get a strong enough footing there? I guess you do a lot of project business now. You probably want to do more after market, before you can build some M&A on top of that base. How long do you think that will take? Thank you.
Yeah. Definitely, China is an interesting country to do acquisitions over time. We said we want to have stability, profitability, and growth. We are still very much in that stability phase, slowly, hopefully moving into the growth phase and then one day come back into profitability. Definitely today it's too early to think about acquisitions in China. On the midterm, that is definitely an ambition we have. How long will it take? I can tell you, I don't know most people in the room, but I can make a statement that I'm less patient than most of you in the room, but China will take time. We are building the organization, as I said, the organization will be up and running now in quarter four. I will be happy if I see the first results towards the end of next year.
For me, the first results is two things, that we still have the team in place, that people have not walked away, so that they really believe in the project, that they have built a team and that we are confident with the team. Two, that we start to see the first wins on the initiatives that we then have initiated. This is not a matter of a couple of quarters, this is a matter of much longer. Guillermo.
Hi, Guillermo Peigneux from UBS. Just a question on electromechanical locks. I guess obviously we certainly see that the growth is accelerating, but it's mostly driven by residential smart locks or implied. I was thinking whether smart solutions and smart locks is also contributing to the growth that you traditionally saw in non-residential. Meaning that you see that acceleration also happening there, not only in the residential part of a business.
Yeah, we can confirm that that is the case.
That's definitely true.
We also see strong growth, strong double-digit growth on electromechanical digital in the commercial side. Like I said, a couple of occasions, I get a lot of questions on the residential side. If I also go to investor meetings, it's all about residential. We believe there is a big potential for us also on the commercial side. The commercial side, we also believe that the potential for recurring revenue is higher than on the residential side.
Second question is probably more for Carolina, regarding the mix, when you talk about the overall ASSA ABLOY top line, obviously volume and pricing, I think going up. We don't know the split actually on what's pricing, what's volume, especially now that electromechanicals will contribute to a higher proportion of revenues and with electromechanical pricing being higher than mechanical pricing. I wonder whether you can give us some kind of numbers around how this mix actually changes and as you grow electromechanicals in your overall growth picture on that 5% target. Thank you.
I can try because it's like this, first you have what we consider price increases, and that is like for like increasing price on a product. That we also specify, and part of that can also be increased due to raw material. What we have seen on average has been basically around 1% price increase that has come through over many years. Last year has been a bit higher. It's been one and a half to two, but a lot of that comes then from the increases of raw materials, right? That's sort of compensating for that as well, or at least partly in some places, and overcompensating in others.
What we see over time is that this like for like is 1%, It's really a sort of volume, but it's also a mix, because the thing with electromechanical is that we say that around 25% of our sales come from new product, and a lot of that is electromechanical. They are, like Nico said, they are higher in price, but we don't consider that a price increase because it's a new product, so it's very hard to say what is really a price increase. It's clearly so that they are being sold with a premium. I would say with electromechanical, like with innovation, the price is highest in the beginning, and over a couple of years, you need to adapt it as competition picks up. You improve again, and you have new innovation from that.
That's why we can't separate out only the price component on new products, because it sort of technically doesn't really work like that. It's definitely part of the growth story, and that's what you can see with the double-digit growth from electromechanical. That is really what is driving the organic growth. I have to say again what Nico said also, that we see really good growth on electromechanical, on the commercial institutional side, and that's, of course, where a CFO is very happy.
Hi, Nico, Caroline. Lars from Barclays over here. Two questions, if I could. One on Entrance Systems services and one on broadening out the core market definition to access solutions. Nico, maybe starting with services first. I had perhaps hoped to hear a little bit more around the specifics on your service strategy. 25 years in Atlas Copco, you've got services running through your veins. I wonder whether you could put a little more meat on the bone. What will be different? What are the top two or three things that you intend to do around the services strategy? How will the service offering be different, and what costs are associated with the push you're doing into services?
If it's okay for you, I will only answer briefly because we will have a focus session on service in Entrance Systems after this presentation, I'm confident that most of your question becomes much clearer, and we can take your question again after that presentation if still not clear. I think it's very similar to a service based on compressors. The game we will play, I think, is also very similar. You could argue that the compressor is perhaps more critical because if you have no compressed air, the factory stops. I think to a certain extent, it's also true for a door. If your door is broken, you don't get revenue in your retail store. If door is broken, you can also have problems in your logistic center. It's also a critical component for the industry or for the retail business.
We do today service in a reactive way. We really want to move there in a more proactive way, really have service agreements with our customers and really climb that service ladder. We are running pilots where we connect now doors over internet, where we believe we will also have a lot of value to be at for the customer, but also for our operation and also for our new product development. It's a very similar story. With that difference, perhaps, that I believe it's easier to do service here on competitor equipment. We have proven also in the past that we can do service on competitor doors in a profitable way, and in that way, of course, you could say that the market is much bigger.
It's not the market which is a limiting factor, it's much more us, how fast can we gear up our organization, hiring service technicians and service salespeople. If you want to grow high single digits, let's say 9%, and you have a little bit of efficiency, you have to hire 8% more technicians, 8% more salespeople every year, train them, and build them, and that is the main challenge.
Can I have a quick one? I'm quite interested in that redefinition, if you like, of your addressable market from the door solution to access solution. It's a very logical redefinition, I think. I wonder whether you could help us assess the risks around that you perhaps moved too far away from the core. Also, what are the implications on your M&A strategy? I presume this will be associated with bigger, more transformational deals in identification, authentication, et cetera. Maybe you could help us understand some of those dynamics. Thanks.
Yeah. Again, here, I don't want to avoid your question, but Stefan Widing is going to present HID. I think during his presentation, a lot of your question will be answered as well. You have heard most probably that I'm rather excited about Global Technologies as well as our Global Solutions, definitely also HID. That's also the division and the domain where we believe that access solutions, or the widening from door solutions to access solutions comes into play. Again, there, if we can be part of the question, if you don't have an answer after Stefan's presentation, you ask again, and then we will try to answer. I think we can have time for maybe one last very good question.
That's a lot of pressure.
So-
Jake Fryer from Peters Asset Management. The question that I have kind of revolves around this 5% acquisition target that we're continuing to keep. What I want to understand better is you talk about the fragmentation in the market with the top three players still being under 50% of the market share. What I'm looking at, looking at the pro forma you put in your annuals over the past four or five years, is that we're acquiring very different businesses from a margin perspective. They're much lower, and we're paying a little bit more for them. I'm trying to understand how we can continue to add value through this strategy when you say it's a fragmented market, what's coming through in the numbers is that we're buying lower margin businesses that require us to do more work on the back end.
Can you help me understand a little bit what's out there for us to do and why this is the profile of what we've been bringing in?
Yep. I think it qualifies as a very good question.
Yeah.
So I will-
Thanks.
I will answer. No, I don't entirely agree with you. I think you should make a distinction between indeed those acquisitions in the core and then the rest. I think if you do the acquisitions in the core, it's very similar today than five years ago. Multiples are very similar today than five years ago. There you buy mainly private-owned family businesses. Often we talk to those people many, many years. We build a relation. At a certain moment, the father is ready and the son is not ready, or the daughter is not ready, and they decide to sell. When you then sell and you have that relation, it is normal, good multiples, I would say, for both sides. We don't have seen there too much difference today to five years ago.
It's a different story when you buy private equity-related or stock market-related companies because there, obviously, multiples have gone up. Our own multiple has gone up as well, where the last month there was a correction in the market, and we have seen that correction on our multiple as well. If you take, for instance, now Crossmatch, where we buy technology, I think we have been able to buy Crossmatch at what we think very healthy multiples for us. I'm sure that the other side thought the same because otherwise they would not have sold. We are very happy with the multiple we paid for Crossmatch. I think it's still possible to, if you have enough choices. I think it's really a matter of have enough meat on the plate. If you only have that one target, you will pay too much.
If you have 10 or 15 and you want to do five and you are a bit patient, you have a little bit ice in the stomach, you can still make good deals. That's why we are really working hard on filling our pipeline, making sure that we have enough alternatives in that field. On technology side, it's of course always a theoretical discussion. If we bought August, we paid a fantastic multiple because they were losing money. What's the multiple? The multiple is infinite. It all depends on what you can do with it and how you can realize the synergies with it.