Strong organic growth and margin expansion in 2023/24 – Strategy reiterated and enhanced

Rümlang, 3 September 2024 - Till Reuter, CEO dormakaba, comments: “In 2023/24, we have made good progress on our strategy execution supported by the transformation program. This led to a strong financial performance with strong organic growth and a significant margin expansion. Our team has secured major wins. We innovate for growth, partnering with other technology leaders to deliver cutting-edge solutions that meet customer needs. Like Motion IQ and the Door Efficiency Calculator which help our customers achieve their sustainability goals.”

 

“We have reiterated and enhanced our strategy to advance from shape to growth. Looking ahead, while continuing the ongoing efficiency and cost initiatives, we will launch new efforts designed to further drive profitable growth. These include building on our leadership in core markets, leveraging key offerings beyond their home markets, and simplifying our portfolio to free resources for more investment in innovation.”

 

 

Group performance: Strong organic growth and margin expansion

dormakaba posted strong organic net sales growth of 4.7% despite a challenging market environment, driven by higher volume (1.9%) and pricing (2.8%); volume growth showed an even stronger development in the second half of the financial year. Total sales amounted to CHF 2,837.1 million and were impacted by the appreciation of the Swiss franc against all major currencies.

 

The adjusted EBITDA increased by CHF 32.1 million to CHF 416.9 million, and the adjusted EBITDA margin significantly expanded to 14.7% (+120bps). This marks a continuous margin improvement over the last four semesters. The execution of the transformation program launched in July 2023 significantly contributed to the expansion of the adjusted EBITDA margin through operational efficiency and procurement initiatives.

 

Net profit was slightly lower at CHF 82.2 million, mainly due to one-off charges related to the ongoing transformation program.

 

Strong balance sheet, significantly reduced net debt and substantially increased ROCE

The company delivered a solid free cash flow of CHF 204.6 million (+15.9%), driven mainly by strong operational performance. This allowed dormakaba to significantly reduce its net debt by CHF 142.1 million to CHF 454.8 million with a resulting net debt to adjusted EBITDA ratio of 1.1x. Return on capital employed (ROCE) increased substantially to 29.0% (+390bps), profiting from improved average net working capital and increased adjusted EBIT.

 

Business Segment Access Solutions: Organic net sales growth across core markets

Access Solutions recorded strong organic net sales growth of 4.9%, driven by volume (1.9%) and pricing (3.0%); volume growth was greater in the second half-year. Total sales was at CHF 2,405.9 million. All major product clusters as well as After Sales Services contributed to growth. Core markets recorded positive organic net sales growth. In Germany, growth was supported by a strong project business. Both North America and Australia/New Zealand posted solid growth. The United Kingdom/Ireland returned to positive growth in the second half-year. Switzerland recorded a strong performance in Access Solutions, driven primarily by the project and service business, which was offset by softer demand for contactless smart cards.

 

Adjusted EBITDA rose to CHF 366.3 million, and the adjusted EBITDA margin increased to 15.2% (+80bps). This increase in profitability was due to improvements related to the transformation program, lower raw material expenses and price increases offsetting inflation.

 

Business Segment Key & Wall Solutions and OEM: A record year in profitable growth

Key & Wall Solutions and OEM recorded organic net sales growth of 4.5%, driven by volume (3.1%) and pricing (1.4%). Main growth drivers were an exceptional performance by Movable Walls, mainly due to its leadership position in the North American market, and increased volumes in OEM in the second half-year. Key Systems recorded a decline in sales due to softer demand primarily in the North and Latin American markets as well as for key blanks in Europe. Total net sales was at CHF 484.4 million.

 

Adjusted EBITDA rose to CHF 95.2 million and the adjusted EBITDA margin increased to 19.7% (+270bps). This significant increase was driven by strong growth in Movable Walls, with margins of Key Systems and OEM protected by operational improvements and a favorable product mix.

 

Transformation program delivers tangible improvements

dormakaba launched its transformation program in early July 2023 to support strategy execution over three years. In its first year of implementation, the program has made considerable progress, resulting in tangible improvements. dormakaba has set up the three planned regional shared service centers, improved plant productivity, further consolidated its supplier its base, and detailed the optimization of its operations network for implementation. The company reached agreements with its social partners in Germany, Switzerland and Austria which enabled it to enter the execution phase of major transformation initiatives and to realize the corresponding cost savings.

 

Continued sustainability progress

dormakaba has reached important milestones on climate change, health and safety, human rights, and product innovation in 2023/24. The company has hit its ambitious CO2 emissions targets for the third year in a row, with a savings of 12,500 tons of CO2 equivalent (CO2e) since the baseline. It increased the share of self-generated solar energy by more than five times with 21,000 newly installed solar panels at production sites in China and Malaysia. The company has also made significant progress in its health and safety management, resulting in a substantial reduction of our recordable injury rate of around 21%.

 

Strategy reiterated and enhanced: From Shape to Growth

The Shape4Growth strategy is about transforming the company, shaping it to achieve its full potential and accelerating sustainable, profitable growth. In 2023/24 strategy execution progressed well with focus on efficiency and cost improvements, supported by the transformation program. Given the good progress, management has reiterated the strategy, consistently further developing and enhancing it to advance from shape to growth. Strategy execution will focus on the following value drivers:

• Elevate performance:  adding commercial transformation to the scope, while executing the ongoing efficiency and cost initiatives as planned.
• Reduce complexity: further increasing resilience and efficiency in operations while continuing streamlining the product portfolio to free up resources to innovate for growth.
• Innovate & Grow: capitalizing on further growth opportunities by building on leadership positions in key markets and leveraging the core portfolio beyond home markets.

The company confirms its mid-term targets: an annual organic sales growth of 3-5%, 16-18% adjusted EBITDA margin reached in 2025/26, and a Return of Capital Employed (ROCE) of above 30% from 2025/26 onwards.

 

Outlook 2024/25

dormakaba is well positioned to leverage market trends and growth opportunities. The company is confident that it will continue growing profitably in 2024/25 despite a continued challenging environment, supported by a strong order book and new, innovative products. For 2024/25 dormakaba expects organic net sales growth in the range of 3-5% and an adjusted EBITDA margin of at least 15%. 

 

Dividend proposal

The Board will propose to the 2024 Annual General Meeting that a dividend of CHF 8.00 per share be paid out for the financial year 2023/24 (previous year: CHF 9.50). This corresponds to a payout ratio of 51.1%. This reflects the strong operational performance and the impact of one-off restructuring expenses for dormakaba’s transformation on this financial year’s net profit.

 

Key figures of the dormakaba Group1

 

CHF million, except where indicated	Financial year ended 30.06.2024	Financial year ended 30.06.2023	Change  in %	Organic in %
Net sales	2,837.1	2,848.8	-0.4	+4.7
Adjusted EBITDA	416.9	384.8	+8.3
Adjusted EBITDA in % of net sales	14.7	13.5	+120bps
Net profit	82.2	88.5	-7.1
Net profit after minorities	42.2	45.7	-7.7
Free cash flow	204.6	176.6	+15.9
Net debt	454.8	596.9	-23.8
Net debt / adjusted EBITDA	1.1x	1.6x
ROCE (Return on capital employed)	29.0%	25.1%	+390bps

1) For definition of alternative performance measures, please refer to the chapter 5.2 of the notes to the consolidated financial statements of the Annual Report 2023/24 of dormakaba.

 

The full Annual Report of dormakaba Holding AG including consolidated financial statements as well as financial statements and the Sustainability Report for the financial year 2023/24 are available online at report.dormakaba.com. The analysts' presentation is available at dk.world/publications.

 

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