DORMAKABA HOLDING AG 
Half-year Report 2023/24
dormakaba Holding AG
dormakaba | Half-year Report 2023/24 | 2 |
Table of contents
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Consolidated financial statements
- Key figures
- Consolidated income statement
- Consolidated balance sheet
- Consolidated cash flow statement
- Consolidated statement of changes in equity
- Notes to the consolidated financial statements
dormakaba | Half-year Report 2023/24 | Letter to shareholders |
Svein Richard Brandtzæg (Chairman) and Till Reuter (CEO)
Dear Shareholders,
Our new CEO, Till Reuter, and I are pleased to give you an overview of our business performance for the first half of the financial year 2023/24. During this reporting period, we were able to take further steps towards organic growth and profitability. dormakaba has achieved organic sales growth in line with our guidance, primarily due to price initiatives. In addition, we achieved a significant year-on-year improvement in our gross and adjusted EBITDA margins; both benefited from sequential improvements driven by the S4G transformation program announced in early July 2023.
Business and financial performance
Our customers and dormakaba operate in a macroeconomic environment with limited forward visibility: among other variables, inflation continues to be a live issue, but demand remains solid, and our commercial business reports a good intake of orders.
Early in the reporting period we announced our S4G transformation program. It is geared towards a sequential improvement of our own performance, combining organizational efficiency and cost management measures to support further innovation and a sustained path to profitable growth. We are pleased to report that the program implementation is on track and delivering its first positive impacts. Operational footprint optimization initiatives are proceeding according to plan, and operational efficiency and procurement measures have already led to gross margin improvements. Furthermore, dormakaba has started to build up shared service centers in America, Europe, and Asia for the Finance and HR Functions, as well as a dedicated Hub for Product Development in Europe.
Group organic sales for the half-year grew by 3.9%, (CHF 51.9 million), principally driven by pricing initiatives. Total sales growth was negatively impacted by a considerable currency translation effect stemming from the strong Swiss franc. Gross margin rose by 130 basis points over the previous year to 40.7%, benefiting from increased operational and procurement efficiencies generated through our S4G transformation program, as well as normalizing supply chains and a favorable product mix.
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Consolidated financial statements
dormakaba | Half-year Report 2023/24 | Letter to shareholders |
Adjusted EBITDA (which excludes items affecting comparability) rose by 8.7% over the previous year to CHF 200.7 million. The significant 160 basis-point rise in adjusted EBITDA margin to 14.6% reflects contributions from both the Access Solutions, and Key & Wall Solutions and OEM business segments. We remain strongly committed to improving gross margin and profitability, and it is gratifying to see that initiatives across the Group are delivering as planned. Furthermore, our efforts to strengthen our cash flow from operations have borne fruit: we achieved continuous improvement in our net working capital through an enhanced focus on trade receivables collection.
Performance by business segments
Access Solutions had total net sales of CHF 1,167.1 million (previous year: CHF 1,198.5 million) impacted by a negative currency translation effect of CHF 81.2 million due to the very strong Swiss franc. Organic sales growth was CHF 49.8 million (4.5%), driven primarily by good price realization (3.4%). Adjusted EBITDA increased to CHF 177.1 million (previous year:
CHF 162.9 million), while the adjusted EBITDA margin increased to 15.2% (previous year: 13.6%); this significant margin improvement was largely due to the positive measures noted above for the Group.
Key & Wall Solutions and OEM had total net sales of CHF 234.1 million (previous year: CHF 252.1 million) impacted by a negative currency translation effect of CHF 16.6 million. Organic sales declined by CHF 1.4 million (0.6%) (previous year: +9.0%). Adjusted EBITDA increased to CHF 44.1 million (previous year: CHF 41.8 million) and the adjusted EBITDA margin was 18.8% (previous year: 16.6%). This significant increase was driven by expanding margins in the Movable Walls business unit, with margins protected in Key Systems and OEM.
Sustainability
We believe that sustainability is a key driver in differentiating us in the market while providing a firm foundation for future growth. We are ensuring dormakaba's alignment with the European Union's forthcoming Corporate Social Responsibility Directive as of the next financial year. In September 2024 we are also issuing our first annual sustainability report in compliance with the standards of the Task Force on Climate-Related Financial Disclosures. We have recently installed 21,000 solar panels on three of our production facilities, saving 7,000 tons of CO2 equivalent (CO2e) per year. Renewable energy projects such as these will help us to achieve our goal of a 42% reduction in operational CO2 emissions from 2019 to 2030. We have maintained our Prime Status in the ESG ratings of Institutional Shareholder Services, making us eligible as a responsible investment for their over 3,000 clients. Further, we are classified as being in the low-risk group and a top performer in the Building Product industry by the Sustainalytics rating agency.
Outlook
In our continuingly challenging macroeconomic environment, we focus on ensuring that we continue to innovate, sustain close customer relations, and continuously improve our operational delivery. Projections for the construction business vary widely between markets, but the general industry trends favor the intelligent, networked, and increasingly cloud-based technologies that are dormakaba's strength. Our order books are at satisfactory levels with a good order pipeline. We therefore confirm our guidance for the financial year 2023/24: we continue to expect organic growth to be in line with our 3-5%mid-term guidance, and expect profitability to show sequential improvement above 2022/23 performance (13.5%).
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Consolidated financial statements
dormakaba | Half-year Report 2023/24 | Letter to shareholders |
New CEO
As of 1 January 2024, Till Reuter is dormakaba's new CEO, succeeding Jim-Heng Lee, who is returning to Asia after two years at the helm and ten years althogether of successful service with dormakaba. The Board of Directors sincerely thanks Jim-Heng Lee for his many contributions to the Group's transformation and wishes him all the best for the future.
Separately, dormakaba announced that Chief Operations Officer Alex Housten will leave the company by the end of March 2024 latest to take a leadership position at a US-based company. The Board thanks him for his great commitment and achievements at dormakaba. The search for a successor has begun and will continue under the leadership of the new CEO.
Board of Directors
In order to take up his role as CEO, Till Reuter resigned his position as member of the Board of Directors as of 1 January 2024. The Board of Directors intends to propose a successor at the upcoming Annual General Meeting.
Our thanks
At the 2023 ICONIC AWARDS: Innovative Architecture, our EntriWorX EcoSystem door system and the Argus V60 sensor interlock were both winners in the "Building Technologies" category. It was a reminder that our employees, as well as delivering the transformation that enables dormakaba's future profitable growth, are continuing to transform our industry through their customer-centric innovation. We are grateful every day that we can count on the global teams and every single person to help make our vision a reality.
We also highly appreciate the continued confidence of you, our shareholders, in our ability to deliver on our transformation targets to create long-term value. Your commitment is the foundation for our future success.
With our best regards and wishes.
Svein Richard Brandtzæg | Till Reuter |
Chairman | CEO |
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Consolidated financial statements
dormakaba | Half-year Report 2023/24 | Business performance |
Access Solutions
Since 1 July 2023, dormakaba operates in a simpler organizational structure that merges all Access Solutions commercial business into a single global unit under the leadership of the Chief Commercial Officer. To match this organizational structure, external reporting summarizes all three former Regions, as well as Operations and Product Development, as one unified business segment.
Initiatives under the Shape4Growth transformation program, announced on 3 July 2023, continue on track. Operational footprint optimization, efficiency, and procurement measures have already led to gross margin improvements. dormakaba has started to build up shared service centers in America, Europe, and Asia for Finance and HR Functions, as well as a dedicated Hub for Product Development in Europe.
This business segment achieved total net sales of CHF 1,167.1 million in the first half of the financial year 2023/24, compared to CHF 1,198.5 million in the previous year. Organic sales grew by 4.5%, driven by good price realization (3.4%) and volume growth (1.1%); negative currency translation effects had an impact of 6.8% due to a very strong Swiss franc.
Most markets and almost all product clusters contributed to increased sales, with double- digit growth in Access Hardware Solutions and Access Automation Solutions. Services and Access Control Solutions saw high single-digit growth. Sales for the Safe Lock and Lodging business were slightly lower than in the previous year.
One aspect of dormakaba's simplified organizational structure is its focus on five core markets: America/Canada, Germany, Australia/New Zealand, Switzerland, and United Kingdom/Ireland. Most of these markets showed organic sales growth in the first half of financial year 2023/24. High single-digit organic sales growth in Germany was driven mostly by volume increases. Sales growth in Switzerland (low single-digit), Australia/New Zealand (low single-digit) and United States/Canada (mid-single-digit) was predominately driven by pricing. UK/Ireland showed a single-digit decline in organic sales growth, mainly due to volume declines which reflected increased challenges in the competitive landscape that could not be offset by price increases.
The Rest of World Access Solutions market saw mid-single-digit organic growth, driven equally by price realization and volume. India recorded high single-digit organic sales growth, reflecting both increased price and volume. Organic sales in China declined due to a reduction in volume. Increased volumes were recorded in Iberia, Eastern Europe, and Asia, and good price realization in France, Austria, Scandinavia/Baltic, and the Netherlands. Middle East recorded a decline in sales.
Adjusted EBITDA increased to CHF 177.1 million (previous year: CHF 162.9 million), with an
adjusted EBITDA margin of 15.2% (previous year: 13.6%). This significant margin improvement resulted mainly from a favorable product mix; it also reflects positive effects of the transformation program, such as increased operational efficiency and procurement savings, as well as good overall price realization. Access Solutions further benefited from lower raw material and freight expenses, which, together with operational efficiencies, offset cost increases for labor and semi-finished goods.
The second half of financial year 2023/24 does not anticipate any major change in demand for Access Solutions products. Organic growth will continue to be supported by innovative solutions such as dormakaba's Door Efficiency Calculator and Ambiance Cloud. There may be further price increases if costs for labor and intermediate goods remain elevated, but forward visibility continues to be limited.
Consolidated financial statements
dormakaba | Half-year Report 2023/24 | Business performance | 7 |
Key figures − Access Solutions
Change on | |||||
CHF million, | Reporting half-year | Reporting half-year | previous year | ||
except where indicated | ended 31.12.2023 | % | ended 31.12.2022 | % | in % |
Net sales third parties | 1,164.1 | 1,195.9 | -2.7 | ||
Intercompany sales | 3.0 | 2.6 | |||
Total segment sales | 1,167.1 | 1,198.5 | -2.6 | ||
Change in segment sales | -31.4 | -2.6 | 55.1 | 4.8 | |
Of which translation exchange differences | -81.2 | -6.8 | -31.5 | -2.8 | |
Of which acquisition impact | 0.0 | 0.0 | 29.1 | 2.7 | |
Of which divestment impact | 0.0 | 0.0 | -28.0 | -2.4 | |
Of which organic sales growth | 49.8 | 4.5 | 85.5 | 7.9 | |
Adjusted EBITDA (Adjusted operating profit | |||||
before depreciation and amortization) | 177.1 | 15.2 | 162.9 | 13.6 | 8.7 |
Average number of full-time equivalent | |||||
employees | 11,636 | 11,785 | |||
Reporting half-year | Reporting half-year | ||||
CHF million | ended 31.12.2023 | ended 31.12.2022 | |||
Net sales third parties per geographical markets | |||||
USA/Canada | 343.4 | 358.3 | |||
Germany | 154.9 | 147.0 | |||
Australia/New Zealand | 100.1 | 109.9 | |||
Switzerland | 104.5 | 103.3 | |||
UK/Ireland | 52.6 | 56.0 | |||
Rest of the World Access Solutions | 408.6 | 421.4 | |||
Total Access Solutions | 1,164.1 | 1,195.9 |
dormakaba | Half-year Report 2023/24 | Business performance |
Key & Wall Solutions and OEM
As of 1 July 2023, the Key & Wall Solutions business segment has integrated dormakaba's OEM (Original Equipment Manufacturer) business, and now operates under the new name Key & Wall Solutions and OEM (KWO).
In the first half of the financial year 2023/24 the business segment generated total net sales of CHF 234.1 million (previous year: CHF 252.1 million). Total segment sales declined by 7.1%, mostly stemming from a negative currency translation effect of 6.6%. KWO also experienced a slight decline in organic sales growth of 0.6% (previous year: +9.0%). The main driver was a decline in the OEM and Key Systems businesses that was only partially offset by strong organic growth in the Movable Walls business.
Organic sales in the Key Systems business unit decreased due to weaker demand in all markets and strong competition in South America. Although the market for automotive solutions and keys remains relatively stable worldwide, there was continued lower demand for key cutting machines in major markets compared to the first half of financial year 2022/23.
The adjusted EBITDA margin for the Key Systems business unit declined: Good management of selling, general and administrative expenses could not make up for the significant decrease in top line and an unfavorable product mix.
The Movable Walls business unit retained its strong momentum and recorded double-digit organic sales growth. The business unit continued to further strengthen its leadership position in the US, supported by price realizations throughout all regions.
The adjusted EBITDA margin for the Movable Walls business unit continued its strong development due to the expansion of its leadership position in the profitable US market. The business unit was able to benefit from a changed competitive landscape, boosting adjusted
EBITDA.
Despite top-line headwinds, adjusted EBITDA for Key & Wall Solutions and OEM reached a record level of CHF 44.1 million (+5.5%) for the first six months of the financial year, compared to CHF 41.8 million for the previous year. The adjusted EBITDA margin increased by 220 basis points to 18.8% (previous year: 16.6%) mainly due to the higher contribution of the business unit Movable Walls.
Despite some improvement at the end of the first half of the financial year 2023/24, the OEM business unit experienced a decline in sales due to lower demand from the Americas and from residential businesses. Despite these challenges, the business unit was able to safeguard profitability levels with tight cost management.
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Consolidated financial statements
dormakaba | Half-year Report 2023/24 | Business performance | 9 |
Key figures - Key & Wall Solutions and OEM
CHF million, | Reporting half-year | Reporting half-year | ||
except where indicated | ended 31.12.2023 | % | ended 31.12.2022 | % |
Net sales third parties | 212.4 | 223.9 | ||
Intercompany sales | 21.7 | 28.2 | ||
Total segment sales | 234.1 | 252.1 | ||
Change in segment sales | -18.0 | -7.1 | 18.7 | 8.0 |
Of which translation exchange differences | -16.6 | -6.6 | -2.2 | -0.9 |
Of which acquisition impact | 0.0 | 0.0 | 0.0 | 0.0 |
Of which divestment impact | 0.0 | 0.0 | 0.0 | 0.0 |
Of which organic sales growth | -1.4 | -0.6 | 20.9 | 9.0 |
Adjusted EBITDA (Adjusted operating profit | ||||
before depreciation and amortization) | 44.1 | 18.8 | 41.8 | 16.6 |
Average number of full-time equivalent | ||||
employees | 3,170 | 3,306 |
Sales (CHF million) - Key & Wall Solutions and OEM
dormakaba | Half-year Report 2023/24 | Financial performance |
Overview
In the first half of financial year 2023/24 (ended at 31.12.2023) dormakaba generated organic sales growth of 3.9% and achieved a significant year-on-year improvement of its adjusted EBITDA margin of 14.6%, an increase of 160 basis points (bps). The general business environment continues to be characterized by high inflation, especially for labor and manufactured goods, but demand levels remained solid. dormakaba's commercial business, which accounts for 90% of our sales, had a good order intake and a strong order backlog.
The S4G transformation program that was announced on 3 July 2023 is progressing as planned. Operational footprint optimization initiatives combined with operational efficiency and procurement measures have already led to gross margin improvements. Shared service centers for Finance and HR functions were established in the Americas, Europe, and Asia, along with a dedicated Hub for Product Development. dormakaba also successfully implemented a new SAP-based enterprise resource planning solution in Switzerland, one of its five core markets.
As of 1 July 2023, dormakaba's Key & Wall Solutions business segment integrated the OEM (Original Equipment Manufacturer) production entities Wah Yuet and THLM. It now operates under the name Key & Wall Solutions and OEM.
The first half-year results for 2023/24 include adjustments stemming from the adoption of the Swiss GAAP FER 30 accounting standard, as did the full-year financial report for 2022/23. Goodwill was previously offset in equity at the acquisition date; it is now capitalized and amortized in the income statement. Since this is a change from dormakaba's former accounting principles, the prior period has been restated accordingly.
Sales & profitability
Organic sales increased in the first half of 2023/24 by CHF 51.9 million or 3.9%, driven both by increased sales prices (3.1%) and higher volume (0.8%). Due to a significant negative translation exchange effect of CHF 95.2 million, total net sales decreased by 3.0% to
CHF 1,376.5 million (previous year: CHF 1,419.8 million). Adjusted EBITDA increased by 8.7% to
CHF 200.7 million (previous year: CHF 184.6 million).
The gross margin for the reporting period was 40.7%, an increase of 130 bps compared to the previous year's level of 39.4%. Increased operational and procurement efficiencies stemming from the S4G transformation program, combined with good price realization, offset inflationary pressure on semi-finished materials and labor costs. Sales, Marketing and General Administration costs increased to CHF 385.0 million (previous year:
CHF 364.0 million), due to planned costs for the ongoing transformation program.
The adjusted EBITDA margin increased by 160 bps to 14.6% (previous year: 13.0%).
Items affecting comparability on EBIT totaled CHF -77.3 million (previous year:
CHF -44.6 million, restated). These were mainly related to goodwill amortization and S4G strategy implementation and included CHF 30.7 million in depreciation and amortization (previous year: 30.6 million), CHF 50.9 million in reorganization and restructuring expenses (previous year: CHF 14.0 million), and CHF -3.9 million in other exceptional items (previous year: CHF 0.0 million). Items affecting comparability included gain on divestment of businesses of CHF -0.4 million (previous year: CHF 0.0 million).
EBIT decreased by CHF 13.8 million to CHF 88.0 million (previous year: CHF 101.8 million); the
EBIT margin was 6.4% (previous year: 7.1%), due to the exceptional items listed above. dormakaba closed the first half of the financial year 2023/24 with a net profit of CHF 48.5 million (previous year: CHF 54.3 million, restated).
Organic sales in the business segment Access Solutions (AS) increased by 4.5% in the first half of financial year 2023/24, driven by higher sales prices (3.4%) and volumes (1.1%). Total segment sales were negatively impacted by translation exchange effects of 6.8%
(CHF 81.2 million). Adjusted EBITDA increased to CHF 177.1 million (previous year:
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Consolidated financial statements
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DORMA+KABA Holding AG published this content on 05 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 March 2024 05:32:03 UTC.
