2022/23 financial year: dormakaba shows strong organic growth driven by price and continued sequential improvements

Rümlang, 31 August 2023 – dormakaba posted strong organic sales growth of 8.4% in the financial year 2022/23, with an 3.4% absolute rise in adjusted EBITDA and a stable adjusted EBITDA margin of 13.5%. This result was in line with guidance and was supported by a stronger and robust second half-year performance and improvement in all sales regions. Price realization, strict cost management, procurement optimization, and stable volume growth (particularly in the US market) all contributed to the positive development and a stronger second half-year. External headwinds – including cost inflation in Europe, high attrition in the US, and de-stocking along the construction industry supply chain – affected profitability and inhibited yet higher organic growth. The company’s cash flow position improved significantly, thanks to effective reduction of working capital in both receivables management and reduction in manufacturing inventories.

 

Jim-Heng Lee, CEO dormakaba, says: “This good result is indicative of how effective execution of our strategy and transformation enables us to sequentially improve our performance. We exceeded our growth targets, and our increased profitability in the second half of 22/23 was in line with our expectations. We will continue intensifying our efforts to grow profitably so that we can free capacity for further investments in go-to-market and enhancing our ability to innovate.”

 

Net sales, profitability and net profit

dormakaba’s net sales rose by 3.3% to CHF 2,848.8 million in the 2022/23 financial year (previous year: CHF 2,756.9 million). Organic sales growth contributed 8.4% (of which 6.9% relates to pricing) to the overall increase. The impact on sales growth from acquisitions and divestments was -0.5% and translation exchange effects were -4.0%.

 

Adjusted EBITDA, which excludes items affecting comparability, increased by 3.4% to CHF 384.8 million (previous year: CHF 372.3 million). The adjusted EBITDA margin was 13.5% (previous year: 13.5%). Positive contributions to margins from strong price realizations and increased operational efficiency were partly compensating for a negative product mix, higher functional costs from strategic investments in growth and profitability, customer inventory destocking, the residual impact of inflation on freight, labor, and energy costs, and adverse currency exchange effects.

 

Items affecting comparability totaled CHF -59.0 million at the EBITDA level (previous year: CHF -30.3 million). These costs principally relate to the organizational transformation program (CHF 42.4 million) and IT optimization (CHF 14.1 million).

 

dormakaba closed the 2022/23 financial year with a net profit of CHF 88.5 million (previous year: CHF 38.8 million). The net profit figure for the year 2022/23 reflects a negative impact of CHF 59.5 million from goodwill amortization. dormakaba decided to apply the revised Swiss Accounting and Reporting Recommendations standard on Consolidated Financial Statements (Swiss GAAP FER 30) already starting in financial year 2022/23. This led to a change in the standard’s accounting policy choice for goodwill accounting to increase transparency and improved comparability regarding acquired businesses. Goodwill is now being capitalized and amortized in the income statement.

 

Cash flow and balance sheet

Cash flow from operating activities increased to CHF 363.4 million (previous year: CHF 188.4 million). The operating cash flow margin (net cash flow from operating activities as a percentage of sales) increased to 10.1% (previous year: 4.6%) mainly due to tightly managed – and therefore decreasing – net working capital. Free cash flow recovered from CHF -31.6 million to CHF 176.6 million, due to lower M&A activity compared to the previous year.

 

Net financial debt decreased by CHF 111.2 million to CHF 596.9 million as of 30 June 2023 (previous year: CHF 708.1 million). Financial leverage, defined as net debt relative to adjusted EBITDA, was at 1.6x.

 

Performance of Regions (Access Solutions) and Key & Wall Solutions

dormakaba saw solid demand in most of its markets during the financial year 2022/23, with satisfactory order intakes and backlogs. All business segments made positive contributions to organic growth.

 

Region Americas

Organic sales in Region Americas rose by 10.5% and total sales were CHF 781.8 million, driven by higher sales prices, steady US commercial construction activity and robust growth in multi-housing. Adjusted EBITDA increased to CHF 145.7 million (previous year: CHF 130.2 million), while the adjusted EBITDA margin improved to 18.6% (previous year: 17.5%). Price realization offset inflation and dormakaba realized efficiencies in the sales process reaping benefits from an internal reorganization executed earlier in the financial year.

 

Region Asia Pacific

Organic sales in Region Asia Pacific rose by 2.2% year-on-year and total sales were CHF 572.2 million, mainly influenced by the lack of recovery in the Chinese market and a decrease of orders in the OEM business in second half-year. Adjusted EBITDA declined to CHF 92.6 million (previous year: CHF 101.2 million), with an adjusted EBITDA margin of 16.2% (previous year: 17.6%) mainly driven by lower plant outputs.

 

Region Europe & Africa

Organic sales for Region Europe & Africa grew by 8.0% year-on-year and total sales were CHF 1,166.5 million, driven by strong price increases and volume growth. Adjusted EBITDA decreased to CHF 219.8 million (previous year: CHF 232.6 million), which represents an adjusted EBITDA margin of 18.8% (previous year: 20.3%). The reduced margin resulted from a lower global demand for door hardware that led to a decrease in plant outputs.

 

Key & Wall Solutions

Organic sales in Key & Wall Solutions grew by 12.1% year-on-year and total sales were CHF 395.0 million. The adjusted EBITDA margin substantially improved to 18.0% (previous year: 13.8%). This increase was mainly driven by a strong growth of profitable sales in the US market where Business Unit Movable Walls was able to leverage a changed competitive landscape. Simultaneously, Business Unit Key Systems was able to increase the adjusted EBITDA margin by offsetting inflationary pressure with strong price realization.

 

Sustainability progress

dormakaba is committed to an industry-leading sustainability framework as part of its Shape4Growth strategy, with over 30 ambitious ESG targets. The financial year 2022/23 saw positive performance in several key indicators.

 

dormakaba achieved its annual target to reduce its Scope 1+2 carbon emissions by 4,004 tCO2 in line with the IPCC’s (Intergovernmental Panel on Climate Change) global <1.5°C pathway. Since January 2023, the company’s Chennai (India) manufacturing facility has operated 440 solar panels with a capacity of 240 kilowatts peak (kWp), providing enough on-site solar energy to cover 100% of its electricity needs – just a part of dormakaba’s 50% overall increase in on-site solar energy generation.

As a first step in alignment with the Task Force on Climate Related Financial Disclosures (TCFD). dormakaba has made public its climate transition plan in the Sustainability Report 2022/23.

Outlook

The current business environment remains strongly characterized by uncertainties and a lack of visibility. Geopolitical risks continued to be on a high level, particularly in Asia and Europe (especially from the war in Ukraine). Further increasing interest rates in the fight on inflation might continue to slow down general economic growth including new construction activities.

Based on a healthy order intake and orderbook at the end of 2022/23, dormakaba however expects to continually improve sales on year-on-year basis. For 2023/24, the company expects organic growth to be in line with its 3-5% mid-term guidance and profitability with a sequential improvement above 2022/23 performance.

dormakaba remains focused on the rigorous execution of its Shape4Growth transformation which includes both growth and cost management measures such as pricing, expense management through footprint optimization and organizational efficiency.

Proposals to the Annual General Meeting (AGM) of 5 October 2023

 

Dividend proposal

The Board will propose to the 2023 AGM that a dividend of CHF 9.50 per share be paid out for the financial year 2022/23 (previous year: CHF 11.50). This corresponds to a payout ratio of 51.9%, taking into account the costs for initiatives related to organizational transformation but excluding the effects of the revised goodwill accounting described above.

 

Changes to the Board of Directors (BoD)

Board member Daniel Daeniker will step down as of the AGM on 5 October 2023. All other members will stand for re-election for another one-year term of office. The BoD and the Executive Committee are highly appreciative of the very valuable contributions Daniel Daeniker has made to the development of dormakaba over his tenure. dormakaba wishes him all the best for his future endeavors.

The Board of Directors intends to propose Till Reuter (55) and Ines Pöschel (55) for election as new members at the upcoming AGM. Further information on the proposed new Board members can be found at dk.world/news. Since Svein Richard Brandtzæg took over as Chairman, with Thomas Aebischer, Chair of the Audit Committee, also assuming the role of Vice-Chair on 1 May 2023, all BoD committees are chaired by independent and non-executive members, and the nomination of Ines Pöschel will increase the quota of women at the BoD by an additional 10%.

Key figures of the dormakaba Group

CHF million, except where indicated	Financial year ended 30.06.2023	%	Financial year ended 30.06.2022 (restated) 1)	%
Net sales	2,848.8	100.0	2,756.9	100.0
Organic sales growth in %	8.4		7.7
Acquisition (divestment) impact in %	-0.5		2.9
Translation exchange difference in %	-4.0		-0.1
Adjusted EBITDA (Operating profit before depreciation and amortization)	384.8	13.5	372.3	13.5
Adjusted EBIT (Operating profit)	307.5	10.8	293.4	10.6
Profit before taxes	142.2	5.0	74.9	2.7
Net profit	88.5	3.1	38.8	1.4
Net profit attributable to minority interests	42.8		19.5
Net profit attributable to the owners of the parent	45.7		19.3
Dividend per share (in CHF)2)	9.5		11.5
Other key figures
Total assets	1,946.5		2,071.9
Net debt	596.9		708.1
Market capitalization	1,683.0		1,740.3

1) dormakaba changed the choice of accounting policies for goodwill accounting. To enable a fair comparison with the current year, the prior-year disclosures have been restated. Details are disclosed in Annual Report’s chapter changes in accounting principles and restatement of previous period (5.1).

2) Financial year ended 30.06.2023: proposal to the Annual General Meeting; distribution of an equal share from the reserves from capital contributions and from statutory retained earnings.
 

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 2022/23 are available online at report.dormakaba.com. The analysts' presentation is available at dk.world/publications.