ASSA ABLOY AB (publ) (STO:ASSA.B)

CMD 2018

← View all transcripts

Nov 14, 2018

Good morning. And also in Carolina's name and my name, welcome to Assambloy Capital Markets Day 2018. Thank you for being here in so many on time. Guess there is not too many Belgians that helps to be on time. So 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, explain a little bit the dynamics of the markets 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. And then at the end, we should have enough time for questions and hopefully answers. This is the agenda. I'm a bit confused with 2 screens, one screen you see and one screen with another slide. So 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, because we felt that the word DORF solutions or the words DORF 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. So it's really about making it seamless for our customers, make it easy and convenient for our customers. But I think there's 2 words very important in this sentence that is safe and secure. That's really 2 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. And I've tried in a couple of slides to give at least a wider overview of what we do in the group. And on this slide, you show a couple of verticals in which we are active, hotel, retail, multifamily and of course enterprise. And we are of course in hardware, but we are also in service. You see a nice Asabloy service event on the slide. And you could say that we secure buildings from the perimeter, as you see here, over the shell we have 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. And 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. And 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. And similar for hotel and retail, with guest access solutions for hotel customers, revolving pedestrian doors from entrance systems, garage doors and so on. And then 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. And on the other side we have the identity in a traditional mechanical world, key today also a card or another kind of biometric identity. And of course, the sweet spot 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 effects. 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 because 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. And 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 with the key, it's the person himself or herself with 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 identity, 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 2 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. And you could say that in 5, 10 years ago, we were perhaps more consortium than a group, because in a pure mechanical world, a log being different in Italy from Germany from Sweden, there was not so much need to work together across market areas, across business areas and across 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 across market areas, across business areas and also definitely across divisions. So we really want to strengthen our corporate identity, and 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're decentralized that you cannot be also a group. The group is what holds us together. Group is also where we can find synergies cost divisions. And 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. So why do we exist? We exist to everyday 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. And how do we guide our actions? We guide our actions with 3 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 kick off in Q4. This is the 1st 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? And very important also, what does it mean for our employees? Because 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, 2 out of 3 or more than 2 out of 3 vacancies were filled from outside. We have an ambition to change that and promote much more from within. For two reasons, because we believe if we promote more from within, we will get much more cost fertilization of experiences, cost fertilization, cost market areas, cost countries, cost business areas and also cost divisions, but we will also have a much more important cost 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-twelve universities now are at a rapid pace being uncurated from mechanical security solutions into electromechanical and digital solutions where you have automatic lockdown systems, standard integrated and these type of things. Urbanization increased 12. I think the country has China as an example. It's forecasted that by 2,030, another 300,000,000 Chinese will move from rural areas into cities. So the population of the U. S. Will move into cities. All of them will need locking solutions hopefully from Assemble. And that's true for China, obviously it's true for India, it's true for big countries like 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. So that will create a high demand for our market. Then of course, we have the shift to new technologies, the shift from mechanical to electromechanical and digital, where we have set the 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. So also there you create an additional market. Sustainable buildings. More and more projects are built according to 1 or the other sustainable standard. Big projects in the world today, 1 out of 5, almost 1 out of 4 big projects is built according to a sustainable standard, be it a lead generation or another standard. And that drives, of course, technology up in our market. 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. And this one also definitely helps us change more stringent codes. Unfortunately, Dolby 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. And again, they are the same thing that drives technology up, takes the pure cost competitors out of the game. And then good to remind that we still have a lot of local market regulations. Again, the requirements and the configuration of a lock in Italy is different from Germany, is different from Sweden. So that makes it still a very local business, very difficult for a global cost cutter to come in and conquer the world. So a good industry to be in with positive short term market drivers and very strong positive long term drivers. And those trends create obviously a strong underlying demand. And in that market, we have a unique market leader position with leading brands, a lot of local leading brands that we then endorse with dual branding with the strong group Assa Abloy brand. You see a couple of examples on the slide. But we have also other global leading brands like HID, like Yale and like Abloy. And all 3 will have a presentation today. We have also by far the largest installed base in the market, an installed base that we can, in a proactive way, upgrade to new technologies, shift from mechanical to electromechanical and digital and an installed base that is also rather sticky, so giving you a good aftermarket revenue. And as we are the leader in most markets, we have also the best partner in the different channels to market, be it the locksmith channel, be it the 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. And 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 packed in, then it's also much easier afterwards to sell your products and your solutions. [SPEAKER KARL HENRIK SUNDSTROM:] Okay. So that's about the market and the branding and when 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. And when we look globally, as Niko said, there are a lot of local regulations, especially on the locking side, there are a lot of local players. But this is what it looks like when you're trying to make a global picture. And the reality is that ASSA ABLOY, we are larger than number 2, 3 and 4 of our competitors globally. And 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. So we have significantly outgrown our competition in the last 8 years. So very strong position. And 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. And of course, it starts with what solutions we are in. And here we have segmented between what we call commercial and institutional versus residential. And 3 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 spent many years explaining why that's not so interesting to be in, but with the changes that we see and really the technology moving not only in the commercial institutional side with LMEK but also moving in to the resi side, it's now becoming much more interesting for us to be part of. So you will 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. And that's the other pie. 2 thirds of our sales come from aftermarket and 1 third from new construction. And I would say when times are tougher, it's probably even 3 quarters that come from aftermarket and 1 fourth from new construction. So really it's 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 don't build new ones, you do upgrade. And we'll 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. But with the new technology and electromechanical solutions, the upgrades are becoming more frequent within the installed base, thanks to innovation. And 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 would 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. And also a margin to keeping a margin with that mix of growth between 16% 17 percent. And basically also how we do that by an evolution of our classic stone with the strategy. Yes, so a boring Capital Markets Day, no change in the financial targets. I got that question many, many times since I started when are you going to change the targets because you never reached this 10% of growth. It's true. If you look over the last 10 years, we only grew 9%. So you can say that we felt miserable. So I would like to fail miserable again the next 10 years. If I can grow 9% again the next 10 years, I will be very happy and I'm 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 70%, which is also our commitment. So 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 little bit on some growth enablers. If we talk with if we start with divisional priorities, my predecessor around 2 years ago has said that we had the ambition, 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 little bit wider, and I can say that we have the ambition to double the size of Global Technologies division over this 5 year period. So not only the HID side, also the ASSA Global Solutions side as we call hospitality nowadays. We also have said that we want to grow entrance systems with another €1,000,000,000 another SEK10 1,000,000,000 that obviously has to come from acquisitions, but also from fast organic growth. And that fast organic growth has to come in the 1st 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 digit for the coming years. And then 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 be sure that make sure that we are also one of the leaders in China. Double size of HID. Stefan Wieding will give a focused presentation on HID. So I will not go too much in detail. But you see on the slide that we are on track to reach that ambition of doubling HID. I just wanted to highlight one other in HID, that's location services, where we will also have a deep dive later today. Barrik is 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 a 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 3 geographical divisions are mainly component supplier, sometimes a bit of solution enabler. But what we do in Global Technologies and definitely in Assam Global Solutions is really being a solution provider for specified verticals. So 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 Foneero, like student accommodation and also in solving the last mile solution for the retail sector. And 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. For Niro, 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. So they will do the brokerage of the access to your grandmother's house. So we will make sure that the nerves can come in between 9 and 10 in the morning and only between 9 and 10 in the morning. We will make sure that the cleaning person can come in between 23 and only between 23. We will monitor. We can do time and attendance and so on. But we will build a whole ecosystem around this where, for instance, the example I gave before on BlueVision 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 felt or something happens, we can automatically activate an alarm and nerves 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. And 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. And then, of course, taking action to win in China. We have commented on China at several occasions during previous calls. But we have now established a new strategy for China where we will go to market with 3 strong consolidated brands, one being the Pan Pan 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 Pan Pan branded hardware, and we want to use that channel also to go more into the replacement market. That's on the residential side. 2nd brand on the residential side is the Yale brand. We also have consolidated the sales organization and Yale will be positioned as a high end international residential brand. And then the 3rd brand will obviously be the Assar Bloying 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. And 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. And then the 4th 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. So we'll have a dedicated team that has access to the complete product offering, be it Yale, be it Pampamp, be it Assa Bloy in order to attack those under the contactors. We will also further consolidate our operations and our R and D activities, where today we have I think 5 locations in China where we make digital door locks. We will bring that down to 2 to start with. And we will also, as today, we have 5 places where we do R and D for digital door locks. We will bring that also down to one location, really consolidating all our R and 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. And all this should be up and running by the end of this year and then we should start to see any results going into 2019. On 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. And then of course pricing, pricing is the easiest way from top line to bottom line, further optimize pricing and generate more recurring revenue. So 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. And this is a slide that really shows by numbers the shift that we see in our industry and what innovation can do. And if you look at the world around you or especially in mature markets and in the cities like this, most buildings are built. So 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. And I think this picture really shows that. It's 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 4 categories here. We have split it, mechanical, electromechanical, security doors and entrance automation. So for a second, let's sort of take out the doors part because you don't replace the door with a lock and just look at this big shift that we have seen within the locking solutions. So just comparing mechanical locking solutions with electromechanical. And here you see then 10 years ago, almost half of the group came from sales came from the mechanical side. And what we can say now, 10 years later is, first of all, we have more than doubled the size. So of course, going from 35 to a run rate of SEK 81,000,000,000 is a big shift in itself. But within that, the significant move from mechanical to electromechanical. So you can really see how the technology has driven the development of our sales here. And even a little bit shorter perspective, just looking at 3 years, you have this graph, and this is only organically. So really comparing the different parts. And I've also split out HID here. And look at the first two columns. If you look at the last 3 years and you compare mechanical growth and electromechanical growth, because most of you ask me this on a regular basis, so here it is what you can see. On average, on an annual base for the last 3 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's actually grown 12 percent on average year over year organically. So 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 Technology, healthy growth here on the organic side as well, above our Group average with 6% on an annual basis, so also good organic growth. Entrance Systems, electromechanical, but on the door side, a little bit less than that, but still on 5% growth. And you have to remember, of course, that these buckets are different size. So when you weigh it all together, Assaploy as a group has then grown with around 4% organically on an annual basis for the last 3 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. And you could see a little bit like a value ladder. We don't know in which direction 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. So 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. Then we have the cooperations like we have with Google Nest, where we have developed together with them a unique lock for them that they sell on an exclusive base. That's something we obviously prefer because we like that 1 on 1 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. And there's many, many companies like that, that will really make smart living. So 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 close to our core, close where our really added value is the lock and the security around the lock. But if somebody want to do home automation, he can buy that secure or that safety solution from us and integrate that in its complete home solution. And 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's cost 250, 300 €3000,000,000 You get 2 alarm detectors, you get a camera, you get a lock and you get an app and you can start building your own smart security solution for your home. And it's like a Lego system you can then build on it. And that's, of course, the highest value driver in this. And obviously, when we can sell that directly on our website, that would be our preferred choice. But 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. And 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. And combining both together really gives us a very strong position in that market. And we will later have a deep dive on this. Maarten, Maarten Haddert 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. And you also see that the big players like Amazon, Google, they want to have one partner to talk to. So what we have done here is we have created 1 global organization that does Smart Residential headed by this by Martin Huddert. And Martin reports directly to me into a Board. And in that Board, we have the 3 presidents of the 3 geographical divisions and Chris Bohn, our CTO. And he is responsible, Maarten 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 3 geographical divisions. And in that way, we combine, I would say, the best of both worlds. On R and D, we can centralize, get more critical volume, go faster, more agile and 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. But then by having the sales still in the regions, we also are close to the customer and can get and can give the personalized solution country by country, region by region. Aftermarket, 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. And 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 Click solution where we want to upgrade a master mechanical master key solution into electromechanical click 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, but we believe there's also opportunities for service, for field service in the 3 geographical divisions, either direct, but definitely also working together with our distributors around the door opening. And 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. And 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. And 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 Global Solutions, where on the hotel business side, service software as a service represents already a big substantial part of their revenue. We have initiatives in HID. Stefan will talk a little bit about it, where it's also a significant part of HID business. But in the rest of the Group, this is still in early stage, but represents a big potential. Our re mentioned price is 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. And of course, pricing is important on existing equipment and solutions. But to get good pricing, what is also important is new product development. So we, on a permanent basis, will upgrade our existing product ranges. And 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. And while we, when we do this new product development, we also have the ambition to bring those extra features with lower cost. So 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 Assambloy, strive for and deserve. And then 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. And that's how we do pricing. So 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 and then continued focus on innovation as an enabler. Sales, 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. And in that process, we also see that a shift from traditional sales to digital sales and managing your process in a digital way. So going from manual to CRM, going from traditional marketing to digital marketing and digital lead generation. And 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. And then using all the tools that we have available in our group, and 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 do when they price and quote for new projects. And basically, we gather for them all the information they need around the door opening, making it easy for them to quote and make it easy for them to use our in their projects. And we do that not only on the mechanical side, we do that also on the electrical side. So 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. And with that bill of material, he will get all the instructions, all the certificates, all the documentation needed. So making it very easy for the contractor to do business for him, making it very easy to 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. So very important competitive differentiator. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And if that is on the sales excellence side, you can say that what I will talk about then is innovation excellence. And we not only truly believe that innovation brings organic growth, we have seen in the numbers that it really, really does. So what do we do then to fuel our growth? Well, first of all, we add resources. And if we look at our R and D spend and especially at our R and D engineer, we have tripled the number of engineers in the last 10 years from around 600 over 2,000 R and D engineers. And also within that is also significant change going from only mechanical engineers to electro engineers to now software engineers and even app developers basically. So a big investment, but also increased scope then on the R and D side for us. Lesnica mentioned a lot on the platforms as well to make sure that we use sort of the platforms for having our using our size, types of 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 2 worlds. We have also set ourselves targets sort of to measure that what R and D does is really well, making a difference that we develop the right things. So 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. And that's really products that have been introduced into the markets in the last 3 years to also see that R and D is developing what we are able to sell in a good way. And we also said you can have sales excellence, you can have operational excellence, but you can also have innovation excellence and really setting ourselves targets saying, okay, with the same amount of resources, we want to double the speed of innovation and we want to be we have basically doubled 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 and 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 and D centers. So did it work? Yes, it did. And this one only starts in 2013 where we are a little bit above 20%. I can tell you before that it was even significantly lower as a percentage of sales. Today, we have basically 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. So of course it shouldn't be too high because then the complexity will really increase and you have to take care sort of the tail. So I think we've had 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 and 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 gets recognized for that innovation work. And 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 1, the Forbus Top 100 list of most innovative companies in the world. We are now in that list for the 4th time. So very happy to be there in that list of 100 companies together with people like Google and Apple. And 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, a focus on one specific vertical. We'll have a more deep dive later. 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 things, 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. So 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 and he get the credentials, he gets the rights to enter 1 hour, 2 hours, the time it takes to do the job. Afterwards, those credentials become void. If he has to go urgently to another mass, he can do the same game there. So a lot of operational efficiency gains, much lower risk for things being stolen or things being lost. So 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. So while it's good, it's a typical technology solution, a unique solution that we have in a specific vertical is very important. And where to selling the hardware, we also now have the potential to get a good recurring revenue business model. And that's one of the examples of things that you will see much more for us in our company going into the future. So 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. So at least this year, we are within the target. Then we go to acquisitions. Same thing, we have 5% ambition for growth through acquisitions. That means that every year we have to do around €400,000,000 of acquisitions. How do we want to do that? In four directions. We want to continue to build our core, so do acquisitions like we have done the last 10 years by small competitors in a market. When we buy that competitor, close down his operations, his factory and integrate his operation in 1 or more of our factories through which we get the volume leverage and then giving that organization access to our complete product offering and realizing also sales synergies. And those two synergies then obviously will pay for the goodwill or the bad will 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 3 players have less than 50% market share. So 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 that we did a couple of months ago. They make innovative door sealing solutions, so very close to our core, but expanding our core. And also there, there is different other products or other technologies that we can still buy. And then the 3rd 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. And then the 4th 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 the Assemble Global Solutions side. SEK 400,000,000 to be acquired. We do traditionally around 15 smaller companies, between 10 20 smaller companies. If you say that the smaller companies are SEK 20,000,000, 15 times SEK 20,000,000, that's SEK 300,000,000. That means that every year we have to do 1 of 100,000,000 or every 2 years 1 of 200,000,000 or every 3 years 1 of 300,000,000. And this year, at least we are on track. You can see we have done 14 acquisitions year to date. So we are confident we will get those NOK 15 by the end of the year. And we also did an acquisition of NOK 100,000,000. As you know, we announced the acquisition of CostMatch a couple of months ago. And Crossmatch has a turnover of $125,000,000 or €100,000,000 So that's our strategy around acquisition. So also here it looks like my voice disappears now. Okay. 5%, I think very ambitious but also achievable. Then we go to the 16% to 70% EBIT margin bandwidth where we want to stay in. Also 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% to 17%. Why do we say that? Because 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. But so we want to keep the 16% to 17%. Why is that ambitious? Because 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 and D to make the difference. And what we often forget, we also continue to invest in operations. We continue to invest in automation, robotization. And then on the other side, of course, we will 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% to 17% bandwidth. I think Crossmatch is a very good example. Crossmatch is definitely dilutive for HID and for Global Technologies. Cost match made a margin slightly below our 16% to 17% bandwidth. But now obviously with the amortization of the intangibles, it's even lower. And so over time, we will then make sure that that business comes back into that 16% to 70% 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. And Carolina will first give an update on the manufacturing footprint. Yes. I would say that we do a lot of different things within cost. And of course, cost and cost cutting and savings are critical because with those cost savings we fuel our investments. And also we create bottom line that we then use to invest in acquiring new companies. And 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. And by buying almost 300 companies, they all almost all of them come with a factory and we don't really buy them for the capacity. So as Niko said, it's really about consolidating and integrating. And 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. So it's a big, big shift and it's something that takes time to do. And as we acquire more companies, we continue with more manufacturing footprints. Because I got the question, so are you going to stop doing manufacturing footprints? And I said that depends on if we stop doing acquisitions. And since we are not planning to stop doing acquisitions, we will continue to see restructuring and basically improving our cost base. And we have so far had 6 manufacturing footprints. Number fellas are going out giving really nice savings. And as you know, we have also announced a new one that will come together with more information together with the Q4 reporting. But 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 I said. And 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. And speaking of that, I try to sort of find ways of measuring efficiency. And there are lots of KPIs, of course, there are. And if you're in operations, there are a lot of more detailed KPIs that you would work at. But 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. So 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. And the trick here is to have a healthy gap, so that you grow more than you develop a number of people. And as you can see, we have a very nice gap basically every year. And if you continue to do this year over year, you get a very, very good leverage and very, very good improvement. If you just take from 2010 till now, we have basically a gap of 50%. So sort of 30% growing and 20% cutting on the headcounts. So compared to 2010, it's sort of a 50% difference in efficiency when it comes to this. And 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. And one of them is automation. We have automation in different ways, but one thing that we talk about is robotization. So basically becoming much more automated within the factories. And this is an example of Americas and I will not still look at standards, so we will talk more about this later. But as you can see, we have really invested in this and we believe that this will 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, really pushing the envelope when it comes to lean. And again, here is a way of how do you measure that and how do you push and make sure that everyone improves. So 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. And you are really being assessed every year or every 18 months where you are and if you are improving. So because you can't really compare everyone to the same average or something, and especially when you have a business like ours, which is so decentralized and you have sort of factories in many different places and you also have many different, I would say, prerequisites. So 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, and then making sure that you are improving. So basically, if you are on the lower end, on the bronze side, I mean the whole thing is then you try to move up to become silver. And if you're silver, you go for gold. And if you're gold, you want to be on the top level of gold. So really pushing the lean technology or methodology in the factories in combination then with the automation that I talked about before. And then of course, as a start, you can say then deciding which factories overall should be part of our footprint. Some specific things around cost efficiency. Of course, we will continue to outsource everything what is non core. And then a couple of words on suppliers. If I simplify a 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 and we can get better costs out of the suppliers. Like for like, we were able to almost reduce suppliers with 30% over the last 5 years, but still a long journey to go. And obviously, what we buy is the most important cost component for us. The direct material and the indirect spend are the 2 most important cost families in our P and L. So if we really want to work on cost, we have to work on the sourcing side. And that we do to good category management and through a lot of different specific initiatives. I will mention 1, 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. Couple of examples here on VA, VE. We saved more than €200,000,000 €210,000,000 with VAVE activities over the last 10 years. And 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. And you can see that this has been a very successful journey. Watch out to somebody falling. Okay. I hope the person is okay. Okay. It's okay. And then I think if you do this again, this type of R and D initiatives is 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 innovation industrial design European award. And 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 on sort of both on the manufacturing footprint, but also on the lean and so on. But 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. And what we have what we call seamless flow is really about digitalization in internal processes. So it's really about moving the processes from being manual to semi manual processes to being digital processes internally. And to do that, we have different sort of actions and measures and programs to move well, basically move the needle. And we worked on this for now 7, 8 years to really, really work on the automation here. And the results, well, the results are here. What we can see is then you have processes on purchasing, you have processes towards the customers, you have processes in the R and 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. And today, we are on almost 50% digital processes within the group or seamless processes. I actually tried to calculate what it would have been without the acquisitions and we would have been on almost 80% then. So 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. But also by having the processes automated and digital really means that they are scalable, they are much more they're faster and the quality is also 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. So really good improvement here as well. We will continue to work on our quality excellence initiatives. And then 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, but also do it in a more cost efficient way. And there we are launching different new initiatives. And then 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. And then injury rate also going down significantly, 60% reduction over the last 6 years. But of course, every injury is one too much. So we still have a long way to go there to come to 0. 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. So we are in a market where it is possible to pass through cost inflation into the market. That's what we also do. And 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. But 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 VAVE initiatives. And then in our factories, continued operational efficiency projects around lean and automation, MFP programs, a new MFP 7 coming. And if needed, we can also activate contingency plans. And here we have the advantage that in the construction cycle, we are late in the cycle. So often we see things coming and because other people start to see it before us being late in that cycle. So we can adapt to things going up or going down, especially also we have 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. So no revolution, but evolution. We are committed to our 10% growth, 5% organic growth, 5% growth through acquisitions and that's within EBIT margin within 16% to 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 our target should be very, very ambitious, but still achievable. And then our strategic stone will remain 3 pillars, increase market presence through customer relevance, product leadership through innovation and then radically reduce our breakeven cost through cost efficiency. That brings us to the last point on the agenda, financial results. Will start with the sales development. Sales up 133% since 2,008, 22 consecutive quarters with positive organic growth complemented with nice acquisition growth. There's not so many companies in the industry that can show that track record. Yes. And if that shows the overall top line and top line development, which is great. But 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. And 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, we can start with saying, 1st of all, again, we have significantly grown the company from around €35,000,000,000 to over €81,000,000,000 run rate. So in absolute numbers, basically everyone has increased. But there's been a big difference between the divisions. East Europe as well, so emerging markets, and has grown but not compared 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. And then you have APAC. And here you see APAC grows from 9% to 11%. So although China has been tough the last 3 years, basically we have still increased the size of APAC in absolute terms, but also relative the group size, so now 11% of the group. And a lot of that comes from organic growth and some also from acquisitions. And then Globaltech. Global Tech has had very good organic growth during the years and also added technology acquisitions. So the combination there which means basically has held its relative size within the Group. And then of course comes the big difference and that is Entrance Systems, really going from being the smallest division in 2,008 to now being the largest division. And 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. So today, this is how our composition looks like. Moving then from the top line to the bottom line, we get this picture. And 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 ABLO, it's the average, and also therefore, but 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. Then we have Americas. Americas with a good nice growth including the high margin, of course that has then continued to give really good basically parts to the overall Group profit. Then Asia Pac has grown as 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, but relatively sort of basically on the same level as percentage of Group, but also significantly improved the profitability. So basically the underlying profitability has gone up significantly within Global Tech. And then 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. So overall, this development also on the profitability. And 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 try to explain even better what our margin looks like. And this slide I showed you before, sort of as a reminder, because this is a significant change that we see. And 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%. So of course this is a significant change to our business. And finally another way of looking the top line and that is really where we are present in the world today. And this shows our geographical footprint. We can see well, it's a year to date picture. So as you see, we have nice, but good to strong organic growth in all areas except in Asia Pacific and there it is really China who is still dragging. But it also shows that we have 22% of our sales in emerging markets. And just looking at overall sort of macroeconomics, that means that we still have a lot more to do in the emerging markets. So still room clearly room to grow in the markets. And 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. It also 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. And then I have a couple of comments then the margin. And I would say this year's big topic and that has been on direct material or practically on raw material. So this picture you recognize it's a year to date one and it shows on our P and L composition that direct material has increased. Even like for like, we go from 36.1% to 36.6% as direct material. And what have we seen there? Well, we've talked a about the different reasons and also the different because the reactions in the different divisions. We have basically the with the steel and the compensation for price, we have managed that pretty well in most of the divisions. America is a bit late, but closing the gap now, while still OPEC with China not being able to compensate for this increase. But that said, I wanted to show you what our direct material consists of. Clearly the biggest part of the PLL. 36% of our sales goes into direct material. And this is really the split. And 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. But 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. But then and then you have traded products, which are a quarter of our sales. And within traded products, the raw material part is usually not that relevant for the pricing or for the cost effect here. And 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. And 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. And of course, there are a lot of there's a lot of steel in steel doors. So that's also why it's a heavy lift when you have significant increases in that material to compensate for your price. And then I would say we have sort of 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. Yes, 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 was would be useful to show you a little bit the evolution of the indexes over the last 3 years. We put here cold rolled steel for U. S. And China, last 3 years up, you could say almost 100%. And 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. And that's also the main reason why we lack with our price increases vis a 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. But at least when this trend continues, this should be good news going into 2019 because normally we see around a lack of 6 months between indexes going up or down and us seeing that in our cost in our P and L. And 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 you have seen indexes going down again. And here the same story, you have a more or less 6 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% to 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% to 17% bandwidth. And the main reason here or the main challenge here is definitely a material cost increase that we are compensating with price increases and other operational efficiency measures. We show on this graph also the corrected EBITDA figure. It's actually an EBIT corrected only for PPA. And you see that that one is nicely within the 16% to 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. And 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 mean, I want to reemphasize that we are committed on EBIT level just to keep the EBIT level over a business cycle within the 16% to 17% bandwidth. Okay. So that is the overall group margin, right, very flat. You see it here, it's still so if you can see the colors, yeah? It's the blue one that you compare to the previous slide, it's the same. But 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, because 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 sort of that first of all the divisions are sort of working in a little bit of a different universe. They have different products that they sell, which comes sort of with an incumbent margin, and they are in different markets that are also more or less regulated and therefore driving solutions of a sort of higher value or lower value. So everyone is working out of sort of in their own context. Then sort of starting with the context, it's also of course the development of the division, both from organic and acquisition side, but also then on the really on the cost efficiency side as well as if there's been any specific hiccups. And as you know, I will mention 1. So if I start then let's start with the hiccup one. 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%, And that is up until a couple of years ago including significant organic growth, but also acquired growth. And of course, in emerging markets overall, you have the mature part of Asia Pacific with sort of Australia and New Zealand being on a good level margin, but you also have the emerging markets with clearly a lower structurally margin. And then for the last couple of years then without organic growth, no acquisitions as well also with a significant drop in China on the margin side. So therefore we are now on a you can say on a 10% for that group, Asia Pacific. And that you can see the line is sort of there and that's also what we communicated during well, already during last year but this year. So if you look at that sort of from a group perspective, considering its size and the development that has then diluted the margin with 60 basis points. FinTech Entrance Systems, that's the purple line. You can see here in the last 5 years that has significantly improved their margin. And here it is still with acquisitions, so we do have dilution from acquisitions, but we also see really nice underlying improvement of margin. And part of that is, well, 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. But since they are below Group average and growing significantly in size, even if they are improving their margin, they are still being sort of dilutive on a Group level, so because my mix changes, so it dilutes me as an asset aglio group. EMEA, I would say as usual on average, EMEA is really a mini Assa Abloy. So 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. So basically, they've been able to keep their margin during this time. And also since they are basically on the group average, they have been flat to our overall margin as Assa Abloy. Then we move over to Americas. During this period of time, Americas has to start with is in a market which has really nice and healthy margins. So we have a really good margin to start with. And if you come back to what Niko said, if you have above 20% margin, of course, the important thing is to grow. And America certainly has grown. We have really nice organic growth, but also adding acquisitions. And that is really what you saw sort of 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. So overall, good performance there as well. And 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. And then finally, you can see on Global Tech. And 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 sort of the underlying margin and then what happens when you add acquisitions. And of course, here we have a combination of very good organic growth, but also adding acquisitions that are dilutive. And then 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 a just good level, not as good as still, 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. So basically we've had a really good accretion from Global Tech with 50 basis points. And 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? Well, 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. And as you can also see that they are pretty small because the gray bars show the added sales from acquisitions per year. So it's sort of moderate. There's a little bit more than 11% and 12%, but again it's rather moderate every year. But if you look at that accumulative by doing this consequently every year what we can see then is that we've had a really good development over the years in total and that is the blue bars. So what you see is that we've done 187 acquisitions since 2006, but we've also added €35,000,000,000 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 our rest of our business. And even if I love EBIT, I love cash flow even more. And I think this is a slide to really show you that a company needs to have sort of sustainable cash flow over many years and to convert the EBIT to real cash that is really the check, you can say 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, so basically self financed our expansion. Balance sheet, well, the gearing also looks good. And you can see that the net debt 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. So 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, and I've added a slide or 2 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, active on the passive side with a little bit more than SEK 100,000,000,000. Out of that SEK 63,000,000 is intangible. And we have an equity of around SEK 50,000,000,000. 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 sort of the value of your assets and the book value is melting away? And that's why I added this slide. So this slide shows Assa Abloye as a group, but it also shows all the divisions and basically the headroom that we have in the divisions. So 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. And as you can see here, we are on at least 60% positive gap in the divisions. And also for the group as a whole, including APAC, we're also above 60% here. So very sort of solid situation in the other divisions. And then finally on the finance part, of course, earnings per share. This is what it all comes down to. And I would say here the important thing is to show the development time and also see that we have a very stable development of the earnings per share. And that what we can see that in the last 5 years we have increased our earnings per share with a full 63 percent. So a strong development also when it comes to the end of earnings per share. And I give back to you Niko then for Okay. Before I summarize, I got a message from somebody in the room, a Belgium guy, there seems to be also a Belgium guy in the room and he wanted to stipulate that he was on time this morning. So give 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. So all positive drivers in our market. We have in that market a very strong market leader position, a unique position that we also driven to 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. So it will be an evolution of strategy, not a revolution. And we are confident that, that proven strategy will also continue to deliver good results and create good shareholder value going into the future. We will have an increased or 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. So we really are striving in our organization how we can we boost that organic growth. And 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. But then if you look on organic growth, the main drivers, double the size of Global Technologies, add €1,000,000,000 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. And then 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. Also 5% target here, EUR 400,000,000 Where will it come from? Around 15 smaller acquisitions of around €20,000,000 per year and then one bigger acquisition like Cosmetz this year of €100,000,000 So both very ambitious, but achievable. And we want to do that with keeping our EBIT margin within the 16% to 17% bandwidth. So we continue a strong focus on cost, cost in our operations in our factories, definitely also with our suppliers, the direct and indirect spend and then an opportunity we believe on the logistics side where we believe there is more money to be made. And in all this, innovation is a very, very important enabler. And 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 and definitely also the way we run our operations with automation and robotization. And then last but not least, corporate culture. We want to be a decentralized group. So 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 cost divisions. And therefore, we want to reinforce that culture also with our 3 corporate values because definitely for us, our most important asset is our people. And 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. And in that development, we also want to promote much more internal promotion of our people, getting that cost fertilization of experience and getting that cost fertilization of our Assa Abloy culture. We thank you for your attention and we open the floor for questions and answers. Good morning. It's Andre from Credit Suisse. Thanks so 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 kind of next cycle within the context of that 5% growth target? Specifically about the markets or Yes. Do you expect more tailwind from the markets within that 5%? [SPEAKER STEPHEN ROBERT BINNIE:] Yes, okay. I'm not a macroeconomic. I hear also everybody saying about the markets are turning, 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. But we believe also in Europe, there is still good overall market conditions, perhaps not like 2 or 3 years ago, but still solid market conditions. I think the same is true for AC in general, where, okay, you know the challenges are in China. And but we are also confident that in China, sooner than later, the market will turn. But for sure, one day the market will turn. And I would say our share price is 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, yes, much less cyclical that we even continue to grow in that downturn. So yes, I can only say that we will react on market conditions. And if market conditions go up or down, the only advantage we have is that we, as I explained before, are low later in the construction cycle, we see things happen happening perhaps a little bit earlier than other people. Thank you. And can I also ask on price, now that the business mix is changing with this new partnerships with Tech Giant, Does that change the structure of industry at all in perspective what you said? This is an industry where you can raise prices? Yes. I think we should it's a good question because I think we should put that 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 around is today around a run rate of €250,000,000 all digital door locks. So in the €8,000,000,000 it's still a very small part. And in that €2 €50,000,000 run rate, the cooperation with the giants you talk about is very, very, very small. So in the bigger picture, this is definitely not changing the landscape. And definitely from a pricing perspective, that is not changing the overall picture. I think your microphone is not on. Yes. We hear you, but not sure about the others. Is that good now? That's better. I wanted to go back to the 16% to 17% margin. You were very clear that your priority is growth rather than pushing for the margin. But just trying to understand it mechanically on the mix side, on the things that you spoke about. So Asia is quite depressed versus what it was a And I And I guess, Electromechanical at some point should be better margin. What are the things that are increasing? Has an offset to not AKU above 2017? Is it R and D to sales? Because M and A is also the same rate as before. [SPEAKER STEPHEN ROBERT BINNIE:] Yes, 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, and 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. But 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. But then definitely also APAC and sorry, definitely also the shift from commercial to residential as we grow faster on the residential side than on the commercial side and our margins on our residential side lower than the commercial side, that has the dilutive effect. And the big question mark will be in China because in APAC, we make high single digit margin. We've always said that there's 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. And everything there will depend how fast China will grow because obviously, when China picks up again one day and we really see significant growth that will be growth with very low margin. So that will be, you know, dilutive for the overall picture. And that's a little bit the unknown. Yes. And you I don't think you mentioned it, but if you think about the acquisitions, you have a very different story there as well. You have the Global Tech Acquisitions, which we've said that we want to sort of significantly increase that division also through acquisition that tend to come with higher margins. But we shouldn't forget that if you look at the Entrance Systems and when I showed you the margin slide, they are improving the underlying margin, but there would be significant acquisitions growth there as well. And that is diluting the Group margin because they are the ones that are below the average of the Group. And 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 benefit. And the 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 EBIT and EBIT to sort of show what the underlying business is really developing from a margin perspective. So that will come in as well. Hi, Nico. Mark Trotman, 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 aftermarket before you can build some M and A on top of that base? How long do you think that will take? Thank you. Definitely, China is an interesting counter to do acquisitions over time. But 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. So definitely today, it's too early to think about acquisitions in China. But 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. And we are building the organization, as I said, the organization will be up and running now in quarter 4. I will be happy if I see the first results towards the end of next year. And for me, the first result is 2 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 and 2, 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 Peigne 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. But I was thinking whether smart solutions and smart locks is also contributing to the growth that you saw in nonresidential, meaning that you see that acceleration also happening there, not only in the residential part of business? Yes, we can confirm that that is the case because we also see strong growth, strong double digit growth on electromechanical digital in the commercial side. And 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. And on the commercial side, we also believe that the potential for recurring revenue is higher than on the residential side. And then second question is probably more for Carolina. But regarding the mix, when you talk about the overall Assa Abloy top line, obviously, volume and pricing, I think, going up. But we don't know the split actually on what's pricing, what's volume, especially now that electromechanical will contribute to a higher proportion of revenues and with electromechanical pricing being higher than mechanical pricing. So I wonder whether you can give us some kind of numbers around how this mix actually changes as you grow electromechanical in your overall growth picture of that 5% target? I can try because the it's like this. First you have what we consider price increases and that is like for like increasing price on a product. And that we also sort of specify and part of that can also be increased due to raw material. And what we have seen on average has been basically around 1% price increase that has come through over the last over many years. Last year it's been a bit higher. It's been 1.5% to 2%. But a lot of that comes then from the increases of raw materials, right? So that's sort of compensating for that as well, while it lost partly in some places and overcompensating in others. So what we see over time is that this like for like is 1% and the rest is then it's really 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 product and a lot of that is electromechanical. And they are like Niko 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, it's very hard to say what is really a price increase. It's clearly so that they are being sold with the premium. And I would say with electromechanical, like with all new with innovation sort of the price is highest in the beginning and over a couple of years you need to adapt it as competition picks up. But then you improve again and you have new innovation from that. And 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. But it's definitely part of the growth story. And that's what you can see with the double digit growth from LMEK. That is really what is driving the organic growth. And I have to say again what Niko said also that we see really good growth on electromechanical on the commercial institutional side. That's of course where CFO is very happy. Hi, Nico. Carolina Lars from Barclays over here. Two questions, if I could. 1 on Entrance Systems Services and 1 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 NatWest 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 2 or 3 things that you intend to do around the services strategy? How would the service offering be different? And what costs are associated with the push you're doing into services? Yes. If it's okay for you, I will only answer briefly because we will have a focused session on service in Entrance Systems after this presentation. And then I'm confident that most of the questions become most of your question becomes much, much clear. And we can take your question again after that presentation if still not clear. But I think it's very similar to service business on compressors. And 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. I mean if your door is broken, you don't get revenue in your retail store. If the door is broken, you can also have problems in your logistic center. So it's also a critical component for the industry of the retail business. And we do today business in a react service in a reactive way. We really want to move there in a more proactive way, really have service agreements with our customers and we declined that service lever. 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. So 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. So 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 on just on the 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, that you perhaps move too far away from the core? And also what are the implications on your M and A strategy? I presume this will be associated with bigger, more transformational deals in identification, authentication, etcetera. But maybe you could help us understand some of those dynamics. Thanks. Again, here I don't want to avoid your question, but Stefan Wiehning is going to present HID. And I think during his presentation a lot of your questions will be answered as well. You have heard most probably that I'm rather excited about Global Technologies as well as our Boeing Global Solutions, definitely also HID. And that's also the division and the domain where we believe that access solutions or the widening from those solutions to access solutions comes into play. But again, 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. Jake Fryer from Lapides Asset Management. So the question that I have kind of revolves around this 5% acquisition target that we're continuing to keep. And what I want to understand better is you talk about the fragmentation in the market with the top 3 players still being under 50% of the market share. But what I'm looking at, looking at the pro form a you put in your annuals over the past 4 or 5 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. And I'm trying to understand how we can continue to add value through this strategy when you say it's a fragmented market, but 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. So 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? Yes. I think it qualifies as a very good question. So I will have an answer. Now 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 5 years ago. Multiples are very similar today than 5 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. And when you then sell and you have that relation, it is normal good multiples for, I would say, for both sides. And we don't have seen that too much difference today to 5 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. But 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 Fjorda said all the same because otherwise they would not have sold. But we are very happy with the multiple we paid for Cosmet. So 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 5 and you have a bit patient, you have a bit eyes in the stomach, you can still make good deals. And that's why we are really working hard on filling our pipeline, making sure that we have enough alternatives in that field. And 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. So what's the multiple? The multiple is infinite, yes, but it all depends on what you can do with it and how you can realize the synergies with it.

• Slides