ASSA ABLOY Annual Report 1998

Plain-text annual report

C O N T E N T S Financial information from ASSA ABLO Y . . . . . . . . . . . . . 2 The year in brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Statement by the President . . . . . . . . . . . . . . . . . . . . . . . 4 Group development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 The ASSA ABLOY share. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ASSA ABLOY and the lock industr y. . . . . . . . . . . . . . . . . 10 Strategy and ﬁnancial objectives . . . . . . . . . . . . . . . . . . 12 Management philosophy. . . . . . . . . . . . . . . . . . . . . . . . . 14 Environmental management and quality . . . . . . . . . . . . 15 The trend towards higher security . . . . . . . . . . . . . . . . . 16 ASSA ABLOY in development . . . . . . . . . . . . . . . . . . . . . 18 ASSA ABLOY’s products . . . . . . . . . . . . . . . . . . . . . . . . . 20 Group History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Sweden. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Finland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Denmark. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 United Kingdom / Ireland. . . . . . . . . . . . . . . . . . . . . . . . . 34 France/ Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Czech Republic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 New Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 VingCard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 F I N A N C I A L S TAT E M E N T S : Report to the Board of Directors. . . . . . . . . . . . . . . . . . . 48 Consolidated statement of income and cash ﬂow analysis. . . . . . . . . . . . . . . . . . . . . . . . . . 52 Consolidated balance sheet . . . . . . . . . . . . . . . . . . . . . . 53 Parent Company statement of income and cash ﬂow analysis. . . . . . . . . . . . . . . . . . . . . . . . . . 54 Parent Company balance sheet . . . . . . . . . . . . . . . . . . . 55 Notes to the income statements and balance sheets. . . 56 Auditors’ report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 ASSA ABLOY’s Board of Directors. . . . . . . . . . . . . . . . . . 68 ASSA ABLOY’s Group management. . . . . . . . . . . . . . . . . 69 ASSA ABLOY’s organisation . . . . . . . . . . . . . . . . . . . . . . 70 Addresses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 A S S A A B LO Y 1 9 9 8 Financial information from ASSA ABLOY will be published as follows: Interim reports January 1–March 31: May 5,1999 January 1–June 30: August 9, 1999 January 1–September 30: November 8,1999 Year-end report for 1999: February 9,2000 Annual report for 1999: March 2000 Annual reports and other reports may be ordered from: ASSA ABLOY AB, P.O. Box 703 40,SE-107 23 Stockholm,Sweden Tel: +46-8-698 85 70. Fax: +46-8-698 85 85. www.assaabloy.se Welcome to the Annual General Meeting ASSA ABLOY AB (publ.),registered corporate number 556059-3575 will hold its Annual General Meeting on Wednesday, May 5,1999, at 2:00 p.m.in Industrisalen, at Industrihuset,Storgatan 19,Stockholm. Who is entitled to participate in the Annual General Meeting? The right to participate in ASSA ABLOY’s Annual General Meeting is limited to shareholders who are listed in the printout of the share register made on April 25,1999,and who notify ASSA ABLOY AB of their intention to participate in the Annual General Meeting not later than 4:00 p.m.on Friday, April 30,1999. How to register in the share register ASSA ABLOY AB’s share register is maintained by the Swedish Securities Register Center (VPC AB).Only holdings registered in the owner’s name are reported under the shareholder’s name in the share register. To be entitled to participate in the Annual General Meeting, shareholders who have registered their shares in the name of a trustee must re-register the shares in their own names. Shareholders who have registered their shares in the name of a trustee,should request the bank or stockbroker acting as trustee to temporarily register the shares for voting-right registration a few banking days prior to Friday, April 23,1999. How to submit notice of intention to participate Notice of intention to participate in the Annual General Meeting may be submitted by mail to ASSA ABLOY AB, P.O.Box 703 40,SE-107 23 Stockholm,Sweden or by telephone:+46-(08)-698 85 70. Notiﬁcation must include the shareholder’s name,personal identity number (registration number),address and telephone number, as well as information regarding the number of shares.Shareholders wishing to participate in the Annual General Meeting must submit notiﬁcation of their intention to participate not later than 4:00 p.m.on Friday, April 30,1999,when the notiﬁcation period expires. The Board of Directors and President propose that a dividend of SEK 2.50 per share is to be paid to shareholders for the 1998 ﬁnancial year. In addition,the Board proposes a share split corresponding to one share for four new shares (1:4). A S S A A B LO Y 1 9 9 8 THE YEAR 1998 IN BRIEF: All units con tri buted to high er proﬁt l Sales amounted to SEK 8,582 M (6,968), corre s ponding to an increase of 23 percen t . l P r o ﬁt after ﬁnancial income and ex p e n s e i n c re a s ed by 39 percen t , and amounted to SEK 748 M (537). l Earnings per share i n c re a s ed by 43 percent to SEK 7.28 ( 5 . 0 9 ) . l Cash ﬂow before tax a m o u n ted to SEK 1,023 M (841), corre s ponding to an increase of 22 percen t . l Organic growth of com p a ra ble units in local currency a m o u n ted to 6 percent (8). l Continued benchmarking, coord i n a ti on and tra n s fer of k n ow - h ow bet ween units is providing the impetus for i m proved proﬁts and cash ﬂow. l Nine companies were acquired du ring the ye a r, of wh i ch t h ree were in the Un i ted State s , and one each in G erm a ny, Mex i co, Hong Kon g, Po l a n d , Romania and Ca n ad a . The major acqu i s i ti ons are : U r b i s, the leading lock manu f actu rer in Rom a n i a , w a s acqu i red in Apri l . M e d e c o, the leading manu f actu rer of h i gh sec u ri ty c yl i n ders in the Un i ted State s , was acqu i red in Ju ly. S e c u r i t r o n, the leading Am erican manu f actu rer of m a gn etic locks and el ectronic panic bars , was acqu i red in Novem ber. In Apri l , 49 percent of Cerrajeras Scov i l was acqu i red in Mex i co. ASSA A B LOY has an opti on to purchase the remaining 51 percent of the share s . ASSA ABLOY: summary Stable organic growth l Higher Security trend. l After market sales more than half the volume. l Electromechanical products – cross sales – new markets. Increasing margins l Improvements in each unit – benchmarking/know-how transfers. Cash ﬂow even stronger l Work ﬂow and balance sheet rationalization. l Goodwill amortization. Consolidation opportunities – focus on EPS l Fragmented industry – harmonization and R&D requirements lead to consolidation. l Strong cash ﬂow funds acquisitions. A S S A A B LOY 1 9 9 8 THE PRESIDENT AND CEO, CARL-HENRIC SVA N B E R G : S trength based on trad i ti ons and vi s i on s Ea rnings per share have incre a s e d m o re than eightfold since the compa- ny was ﬁrst listed, and in 1998 the i n c rease was 43 percent. Pro ﬁt before tax i n c reased to SEK 748 M and pro forma sales, including our most recent acquisition in Australia, now amount to more than SEK 10 billion. Cash ﬂow befo- re tax exceeded SEK 1 bil- lion, which is a good testi- monial to achievements t h roughout the Gro u p . The lock business has an unu su a lly long history. Our oldest com p a ny date s b ack to 1645. Th ere has a lw ays been a need for l ocks to pro tect live s , property and bu s i n e s s opera ti ons and this need is con s t a n t ly growing as vu l n era bi l i ty, property va lues and crime incre a s e . Th ere has been a high degree of c re a tivi ty in this a re a , and there are con- s i dera ble va ri a ti ons in the s t a n d a rds adopted in d i f ferent co u n tri e s . Th i s re s tri cts ex port po s s i bi l i- ti e s . Local actors have dom i n a ted the scen e ,a n d most of t h em have not opera ted at the intern a- ti onal level . A lock com p a ny ’s sales n orm a lly show stabl e growt h . Ha l f the sales are of ten gen era ted by ex i s ting install a ti on s . Our own install ed base amounts to more than half a bi ll i on l ock s . A con ti nuous need for bet ter and s a fer lock produ cts cre a tes sati s f actory growt h . The demand for user- f ri en dly produ cts and fast em er gen c y - exit fe a tu re s a re important driving factors . E l ectro - m echanical produ cts show the faste s t growt h , and it is essen tial that they are com peti tive at both the local and the gl obal level . Ma ny of these produ cts are A S S A A B LO Y 1 9 9 8 b a s ed on adva n ced tech n o l ogies but requ- i re ad a pt a ti on to meet local requ i rem en t s . All lock companies were fo u n ded by f a m i l i e s , m a ny of wh i ch are sti ll active . Ex ten s ive produ ct portfolios and uniqu e l ocks per door make con s i dera bl e demands on produ ct de s i gn ,l ogi s tics and produ cti on proce s s e s . Th ere are con s i der- a ble differen ces bet ween the va rious pro- du cers in terms of ef ﬁc i en c y, and there is of ten su b s t a n tial po ten tial for improve- m en t . In this envi ron m en t , we have seen inter- e s ting growth opportu n i ties and taken the l e ad in an intern a ti onal con s o l i d a ti on pro- ce s s . Our devel opm ent is based on stabl e or ganic growt h , i n c reasing margins by con ti nu o u s ly learning from each other, ben ch m a rk i n g, and the ex p l oi t a ti on of s y n er gies – mainly in produ ct devel op- m ent and produ cti on . Con ti nuous capital ra ti on a l i z a ti on and co - ord i n a ti on of i nve s tm ents con tri butes to strong cash ﬂow and increases opportu n i ties for f u rt h er acqu i s i ti on s . We have ach i eved a l e ading po s i ti on in the worl d , a l t h o u gh our total market share is on ly 6-7 percen t . We have taken important steps in our devel opm ent in the past ye a r. De s p i te a we a ken ed econ omy in many parts of t h e worl d , or ganic growth of 6 percent was ach i eved . All units report high er earn i n gs and the strong cash ﬂow du ring the ye a r m ade it po s s i ble to implem ent ﬁve major acqu i s i ti on s . Our Finnish business has devel oped well , with growth of 8 percen t . The door cl o s er plant is now in full opera ti on and is producing nearly half a mill i on units. Ex ports to Russia came to a halt in Au g u s t , and although there is evi den t ly a need for good locks in Ru s s i a , it is difﬁcult to assess devel opm ents in the immed i a te futu re . New con s tru cti on in the Swedish mar- ket is increasing sligh t ly, a f ter a historic low wh i ch lasted for several ye a rs . O r ga n i c growth is ﬁve percen t . The Norwegian units report growth of ﬁve percen t . The mer ger of Tri o Ving and M ø ll er Un d a ll has been su ccessful and con ti nues to gen era te sati s f actory earn i n gs growt h . The Norwegian econ omy seem s to be en tering a we a ker peri od but upgra- ding of s ec u ri ty standards is ex pected to con tri bute to con ti nu ed growt h . Ru ko in Den m a rk shows growth of 3 t h e percen t , excluding the ef fects of n a ti onwi de stri ke du ring the spri n g. Growth has been in line with the other Nordic co u n tri e s . A stainless steel door h a rdw a re progra m , F U N X I O N , has been i n trodu ced with good growth po ten tial for the en ti re Gro u p. FAB in the Czech Rep u blic has devel oped well , both in terms of vo lu m e and earn i n gs . O r ganic growth is 11 percen t . The need for bet ter locks is in- c reasing ste ad i ly and the car lock unit is doing parti c u l a rly well , with del iveries for a ll Skoda model s . Th ere has been no growth in the insti tu- ti ons and large of ﬁce segm ent covered by Ikon in Germ a ny, a f ter nu m erous proj ect s in con n ecti on with reu n i ﬁc a ti on and the tra n s fer of the capital to Berl i n . De s p i te u n ch a n ged sales, the net margin re ach ed the 10 percent level and is ex pected to ri s e f u rt h er. The Dörrenhaus opera ti on s , wh i ch were recen t ly acqu i red , h ave been con s i dera bly ra ti on a l i zed and unproﬁt- a ble produ cts have been ph a s ed out . The UK units show good growt h . Th e m a rket seems to have we a ken ed som e- wh a t ,a l t h o u gh there is increasing dem a n d for high sec u ri ty lock produ ct s . In tegra ti on of the Fren ch units is proceeding bet ter than ex pected . Th e m o tiva ti on among the pers on n el in the units is high and earn i n gs are devel op i n g f a s ter than ex pected . Du ring 1999, we should be able to ach i eve the ori ginal goa l of an improved net margin of 2-3 percen t . Th ere is a clear po ten tial for con ti nu ed i m provem en t s . The vo lume incre a s ed by 3 percen t , de s p i te the ph a s i n g - o ut of u n- proﬁt a ble items and produ cts not rel a ted to lock s . Du ring 1999, f u rt h er produ ct s with sales of FFR 25-30 M wi ll be ph a s ed o ut . The North Am erican bu s i n e s s con ti nues to devel op well .O r ganic growt h amounts to nine percent and the net m a r gin is increasing in all units. Th e re s tru ctu ring implem en ted in recent ye a rs has led to a con s i dera ble redu cti on in working capital and shorter lead ti m e s . We do not see any clear indicati ons of a we a kening as yet , but assume som ewh a t l ower growth in 1999. E a rn i n gs are ex pect- ed to con ti nue to improve . Vi n g Ca rd , i n cluding Elsafe , s h ows an i n c rease of ei ght percen t , de s p i te a we a ker Asian market du ring the second half of 1 9 9 8 . Eu rope is curren t ly the fastest gro- wing market . Af ter several ye a rs’ s tron g vo lume growt h , a ra ti on a l i z a ti on proj ect is n ow under way. This is ex pected to make an apprec i a ble con tri buti on to earn i n gs . Sales in As i a , excluding Vi n g Ca rd , i n c re a s ed an en co u ra ging 32 percen t du ring the ye a r, de s p i te the crisis in the a re a . Du ring the pre s ent con d i ti ons it has been difﬁcult to retain the ri ght re s o u rce s in the ri ght place at the ri ght ti m e . We ex pect more stable con d i ti ons and con ti nu ed growth in 1999. We have made several import a n t acqu i s i ti ons du ring the ye a r. The acqu i s i- ti on of Medeco en a bl ed us to su pp l em en t our produ ct portfolio with cyl i n ders from the foremost manu f actu rer in the U. S . Medeco has an ex ten s ive install ed base, with a share of a f ter- m a rket sales of over 70 percen t . Du ring the autu m n , we acqu i- red Sec u ri tron , the leading manu f actu rer of el ectro - m a gn etic locks in the U. S . Th e com p a ny has shown strong growth for m a ny ye a rs and is also ex pected to be abl e to play an important part in the Gro u p’s opera ti ons in Eu rope . The integra ti on of the two companies is proceeding accor- ding to plan and they are ex pected to ach i- eve sati s f actory growth and con tri bute to our earn i n gs per share in 1999. Urbis in Romania and 49 percent of S covi ll in Mex i co were also acqu i red in 1 9 9 8 . Urbis dom i n a tes its home market and reports a growing need for sec u ri ty produ ct s . S covi ll has a strong po s i ti on in Mex i co and sales to Latin Am erica are i n c re a s i n g. We made an ad d i ti onal exc i ting and i m portant acqu i s i ti on at the beginning of 1 9 9 9 . We have re ach ed agreem ent wi t h EMAIL Ltd . rega rding the acqu i s i ti on of 50 percent of the shares in Lock wood , Au s tra l i a’s leading lock manu f actu rer. We h ave an opti on to buy the rem a i n i n g s h a res in three ye a rs’ ti m e . The com p a ny wi ll be inclu ded in our managem ent and ben ch m a rking program from the start . Lock wood ’s sales amount to approx . AU D 170 M and proﬁt a bi l i ty before net ﬁnancial items is 7 percen t . We ex pect an i m provem ent po ten tial of at least 4-5 percen t . The com p a ny wi ll stren g t h en our po s i ti on in Asia con s i dera bly. So far, most of the improvem ents in our e a rn i n gs have been due to su b s t a n ti a l ra ti on a l i z a ti on in the units con cern ed . Th ere is cl e a rly scope for con ti nu ed i m provem ents in this are a . At the same ti m e , we are making inten- s ive ef forts to devel op our group stren g t h s . Lock companies are norm a lly strong in certain areas but lack produ cts in others . However, a ll produ cts are pri n c i p a lly ava i l a ble within the gro u p, and there are m a ny opportu n i ties for growt h . Fu rt h er- m ore , in many co u n tries there are produ ct a reas wh ere the sec u ri ty level has been n egl ected and needs have not yet been i den ti ﬁed . One example is em er gency ex i t ﬁt ti n gs in the Scandinavian co u n tri e s . A third of our produ cts are gl obal tod ay, and inclu de com m on and of ten high ly tech n o l ogical com pon en t s ,m a ny of t h em f rom the el ectro- mechanical area wh ere devel opm ent and produ cti on are bei n g coord i n a ted step by step. Ot h er tech n i c a l devel opm ent is coord i n a ted by the Gro u p’s Produ ct Co u n c i l . Coord i n a ti on is also increasing in purch a s i n g, an area wi t h an intere s ting savi n gs po ten ti a l . All in all , we are moving tow a rds an exc i ting futu re with many ch a ll en ges and opportu n i ti e s . Our strong po s i ti on , t h e s ec u ri ty - d riven growt h , the ra ti on a l i z a- ti on po ten tial and a con ti nu ed con s o l i d a- ti on of the indu s try all provi de opportu n i- ties for con ti nu ed favora ble devel opm en t of e a rn i n gs per share . Stockholm, February 1999 Carl-Henric Svanberg A S S A A B LO Y 1 9 9 8 GROUP DEVELOPMENT: Statements of income Net sales Cost of goods sold Gross proﬁt Expenses Operating result before goodwill amortization Goodwill amortization Operating result Net ﬁnancial items 1998 1998 EUR M1) 904 SEK M 8,582 -576 -5,463 328 3,119 -212 -2,018 116 -15 101 -24 1,101 -138 963 -228 1997 SEK M 6,968 -4,496 2,472 -1,662 810 -103 707 -179 Share in earnings of associated companies 2 13 9 Result after ﬁnancial income and expenses Taxes Minority interest Net result of the year Balance sheets Intangible ﬁxed assets Tangible ﬁxed assets Financial ﬁxed assets Inventories Accounts receivable Other noninterest-bearing current assets Liquid assets Total assets 79 -23 -1 55 748 -212 -10 526 1998 1998 EUR M1) 281 293 68 141 150 23 15 SEK M 2,668 2,778 648 1,339 1,427 221 138 537 -183 -2 352 1997 SEK M 1,969 2,559 419 1,179 1,261 179 126 1996 SEK M 4,958 -3,259 1,699 -1,183 516 -56 460 -122 7 345 -97 0 248 1996 SEK M 1,108 1,662 100 849 693 135 137 971 9,219 7,692 4,684 Shareholders’ equity Minority interests Interest-bearing provisions 286 2,715 2,317 1,408 Belgium 3 68 32 650 24 556 9 574 The Netherlands China and Hong Kong Interest-bearing long-term liabilities 381 3,609 2,924 1,626 Asia (excl. China,Hong Kong Other noninterest-bearing long-term liabilities Interest-bearing current liabilities Other noninterest-bearing current 52 14 491 133 421 89 liabilities 167 1,589 1,361 Total shareholders’ equity and 160 22 885 liabilities 971 9,219 7,692 4,684 1) 1 EUR = 9,4954 SEK. Sales per product group total SEK 8,582 M Sales per geographical area total SEK 8,582 M VingCard hotel locks: 11% Mechanical locks, Other 6% VingCard 10% lock systems and accessories: 52% North America 36% Security doors and ﬁttings: 20% ndustrial locks: 5% Electromechanical and electronic locks: 12% Nordic region 22% Europe 26% Sales per organizational unit2) 1998 1998 EUR M1) SEK M 1997 SEK M 1996 SEK M Sweden Finland Norway Denmark Germany France United Kingdom Czech Rep./Slovakia United States Hotel security, VingCard Elimination for internal sales Total 94 85 54 32 61 887 811 513 301 583 158 1,504 28 20 307 100 -35 904 266 186 2,916 952 -337 8,582 2) Including exports from each market. Sales per country2) United States France Sweden Germany Finland Norway United Kingdom Denmark Canada Czech Rep./Slovakia and Japan) Africa Italy Spain Middle East Baltic states Switzerland Russia Australia Poland Japan 1998 1998 EUR M1) 337 138 SEK M 3,198 1,309 69 56 53 51 33 32 18 16 14 9 8 7 6 6 5 4 4 4 3 3 3 1 658 528 505 489 316 308 171 155 134 80 78 63 58 52 48 38 36 35 31 30 26 13 841 744 531 288 533 844 236 68 2,402 794 -313 6,968 1997 SEK M 2,652 735 627 475 471 514 273 287 122 57 95 68 62 93 39 40 39 34 29 28 27 35 17 24 750 620 346 268 501 - 168 - 1,872 681 -248 4,958 1996 SEK M 2,113 30 583 458 402 339 214 254 100 5 52 35 65 55 7 15 35 11 19 25 17 29 13 14 68 4,958 Other countries Total 24 223 904 8,582 125 6,968 2) Sales to customers in each country. Key ﬁgures Net sales,SEK M Gross margin, % Operating margin before goodwill amortization, % Result after ﬁnancial income and expenses,SEK M Proﬁt margin, % Cash ﬂow after tax,SEK M Net investments,SEK M Total assets,SEK M Shareholders equity, SEK M Net debt,SEK M Capital employed,SEK M Equity / assets ratio, % Interest coverage,times Debt / equity ratio Return on shareholders’ equity after tax, % Return on capital employed before goodwill amortization, % Return on capital employed, % Earnings per share after tax and full conversion,SEK Shareholders’equity per share,after full 1998 8,582 18.5 12.8 748 8.7 728 335 9,219 2,715 4,237 7,126 29.8 4.2 1.56 20.9 25.9 15.1 7:28 1997 6,968 1996 4,958 16.8 11.6 537 7.7 676 274 7,692 2,317 3,442 5,909 30.4 3.8 1.49 18.9 24.6 15.2 5:09 14.6 10.4 345 7.0 372 163 4,684 1,408 2,085 3,640 30.3 3.6 1.48 21.2 24.9 17.8 3:86 1995 3,457 12.6 7.5 213 6.2 345 187 2,470 928 659 1,714 37.9 4.8 0.71 16.9 15.4 14.3 2:34 19941) 3,540 10.0 4.9 76 2.1 139 139 2,850 776 1,055 2,047 27.7 1.9 1.36 7.4 9.4 8.2 0:87 conversion,SEK Number of shares,thousands Number of shares after full conversion,thousands Average number of employees 41:15 71,076 73,862 10,545 35:82 70,732 73,862 8,088 21:75 64,311 66,349 6,317 15:87 53,592 55,421 4,274 12:70 53,592 53,592 4,703 1) The comparative ﬁgures for 1994 are reported pro forma, and calculated using standard tax. Deﬁnitions Gross margin: Operating result before depreciation as a percentage of sales. Operating margin before goodwill amortization: Operating result before goodwill amortization as percentage of net sales. Proﬁt margin: Result after net ﬁnancial items as a percentage of sales. Cash ﬂow: Based on the cash ﬂow analysis,see page 52. Net debt: Interest-bearing liabilities less interest-bearing investments. Capital employed: Total assets reduced by noninterest-bearing current liabilities including deferred tax liability. Equity/assets ratio: Shareholders' equity including minority as a percentage of total assets. Interest cover: Result after net ﬁnancial items in relation to ﬁnancial expenses. Return on shareholders’ equity after taxes: Result after net ﬁnancial items,less full tax,in relation to average shareholders' equity after full conversion. Return on capital employed before goodwill amortization: Result after net ﬁnancial items plus ﬁnancial expenses and goodwill amortization in relation to average capital employed excluding goodwill. Return on capital employed: Result after net ﬁnancial items plus ﬁnancial expenses in relation to average capital employed. Earnings per share after taxes: Result after net ﬁnancial items, less full tax,divided by the average number of shares after full conversion. Sales: n Result after ﬁnancial income and expenses: n Capital employed: n Return on capital employed: n Shareholders’ equity: n Equity / asset ratio: n Cash ﬂow after tax Earnings per share after tax after full conversion Average number of employees A S S A A B LO Y 1 9 9 8 THE ASSA ABLOY SHARE: Con ti nu ed strong share tren d A SSA A B LOY AB has been listed on the Stockholm Stock Exch a n ge s i n ce Novem ber 8, 1 9 9 4 . In Octo- ber 1995,the share was moved to the A list. The pri ce of the ASSA A B LOY share ro s e by 47.6 percent in 1998. Du ring the same peri od , the Stockholm Stock Exch a n ge’s gen eral index rose by 9.8 percen t . Th e closing pri ce at ye a r- end was SEK 310, corre s ponding to a market capitalizati on of SEK 22,006 M. In cluding all shares du e for convers i on , it is esti m a ted that the m a rket capitalizati on was SEK 22,897 M. The nu m ber of s h a reh o l ders at ye a r- en d was approx i m a tely 8,800. In s ti tuti on a l i nve s tors , excluding the main share- h o l ders , repre s ent abo ut 50 percent of t h e c a p i t a l . Non - Swedish inve s tors , i n clu d i n g Metra Oy Ab, account for 61 percent of t h e c a p i t a l . Du ring the ye a r, a total of 16 mill i on s h a res were traded , corre s ponding to an avera ge of a pprox i m a tely 67,000 shares for e ach trading day and corre s ponding to 23 percent of the shares out s t a n d i n g. Share capital ASSA A B LOY ’s share capital amounts to SEK 71 M, d i s tri buted among 4,190,412 Series A shares and 66,885,571 B share s . All shares have a par va lue of SEK 1.00 and provi de the holders with equal ri ghts to the Com p a ny ’s assets and earn i n gs . E ach Series A share en titles a holder to 10 vo te s , while B shares provi de one vo te . Convertible debentures for personnel In 1995, converti ble deben tu res were of fe- red to em p l oyees in the ASSA A B LOY Gro u p. Abo ut 400 em p l oyees parti c i p a ted in the ﬁrst issue in 1995. The deben tu re l oan amounted to SEK 75,004,375 and ex tends from June 29, 1 9 9 5 , to June 30, 2 0 0 0 . Convers i on into Series B shares is in progress and ri ghts may be exerc i s ed in the ASSA ABLOY AB’s share trend A S S A A B LO Y 1 9 9 8 peri od from Ju ly 1, 1998 to Ju ly 15, 2 0 0 0 . Du ring 1998, a request for the convers i on of debt instru m ents with a par va lue of SEK 12,275,981 was su bm i t ted . The Swe- dish Pa tent and Regi s tra ti on Ofﬁce has regi s tered 343,865 of these share s . On full convers i on at an exercise pri ce of S E K 3 5 . 7 0 . Th ere wi ll be a total of 7 2 , 8 3 3 , 0 8 0 s h a re s . A second converti ble deben tu re loa n was issu ed du ring 1997. A total of 1 , 4 0 0 pers ons parti c i p a ted in the of feri n g. Th i s to SEK loan amounts deben tu re 250,000,000 and ex tends from Decem ber 8 , 1997 to Decem ber 2, 2 0 0 2 . Convers i on m ay be exerc i s ed for Series B shares from Decem ber 1, 2000 to Novem ber 15, 2 0 0 2 . At full convers i on , and an exercise pri ce of SEK 243, an ad d i ti onal 1,028,806 share s wi ll be cre a ted . Dividend and dividend policy The Boa rd of Di rectors and Pre s i den t propose that SEK 2.50 per share be paid as a divi dend to shareh o l ders for the 1998 ﬁnancial ye a r, corre s ponding to a direct retu rn on the Series B share pri ce at Decem ber 30, 1 9 9 8 , of 0.8 percen t . Th e aim is that, in the long term , the divi den d should corre s pond to approx i m a tely on e - t h i rd of ASSA A B LOY ’s avera ge earn i n gs a f ter net ﬁnancial items and standard tax, but alw ays taking into account A S S A A B LOY ’s lon g - term ﬁnancial requ i re- m en t s . Data per share SEK/share Earnings after 28% standard tax Earnings after full tax method Dividend2) Dividend, %3) Direct yield, %4) Share price at end of period Highest share price Lowest share price Shareholders’ equity Number of shares (1,000s) 5) 1) 1995 adjusted for new issues. 2) Proposed dividend. 1998 8:15 7:28 2:50 31,0 0,8 310:00 376:00 200:00 41:16 73 862 1997 5:56 5:09 1:75 31,5 0,8 210:00 217:00 121:50 35:82 73 862 1996 3:88 3:86 1:21 31,2 1,0 124:00 126:50 52:40 21:75 66349 19951) 2:47 2:34 0:87 35,2 1,6 56:05 64:18 22:15 15:87 1994 0:87 – – – – 23:05 30:74 18:98 12:70 55421 53592 3) Dividend as a percentage of earnings per share after 28% standard tax. 4) Dividend as a percentage of the share price at the end of the period. 5) After full conversion. Share capital Transaction A-shares C-shares B-shares *SEK Share capital 100:1 split Bonus issue Non-cash issue New share issue 20,000 2,000,000 2,000,000 2,000,000 1,746,005 1,428,550 50,417,555 53,592,110 2,095,206 1,714,260 60,501,066 64,310,532 Conversion of C-shares into A-shares 3,809,466 New share issue 4,190,412 Year 1989 1994 1994 1994 1996 1996 1997 60,501,066 64,310,532 66,541,706 70,732,118 344,000 71,076,118 1,756,962 72,833,080 1,028,806 73,861,886 1998 Converted debentures 2000 2002 Unconverted debentures Unconverted debentures * 1 SEK per share – balanced number of shares. Ownership structure Owner Metra Oy Ab Janus Capital Funds Investment AB Latour with subsidiares SPP Nordbanken Unit Trusts Robur Unit Trusts SÄKI Trygg-Hansa Insurence Data is based on the share register as of Dec.30,1998 and subsequent changes known to the company. A-shares B-shares Capital % Voting rights % Melker Schörling + family and companies 330,000 2,676,966 Carl-Henrik Svanberg + family and companies Other shareholders with more than 50,000 shares Shareholders with 501–50,000 shares Shareholders with up to 500 shares Total number 4,190,412 66,885,571 2,304,726 15,405,234 - - - 7,618,741 5,568,500 3,055,390 - - 2,408,700 1,823,354 1,555,686 124,150 - - - - - 1,198,157 1,162,640 2,032,7018 4,699,984 816,737 29.1 10.7 7.8 4.3 4.2 3.4 2.6 2.4 1.7 1.6 28.6 6.6 1.1 100.0 38.1 7.0 5.1 2.8 5.5 2.2 1.7 14.4 1.1 1.1 18.7 4.3 0.8 100.0 A S S A A B LO Y 1 9 9 8 ASSA ABLOY AND THE LOCK INDUSTRY: A fra gm en ted market is being tra n s form ed in 1999 A SSA A B LOY is the worl d ’s large s t l ock com p a ny, with proj ected of a n nual sales a pprox i m a tely SEK 10 bi ll i on . Its share of a fra gm en ted gl obal market is 6–7 percen t . The Group is based on the Nordic regi on , with market - l e ading po s i ti ons in all the Nordic co u n tri e s . ASSA A B LOY also has s trong po s i ti ons in Fra n ce , G erm a ny, Bel giu m , Un i ted Ki n gdom , the Czech Rep u bl i c , Sl ovakia and Rom a n i a . Th e Group is the secon d - l a r gest player in the North Am erican market . Th ro u gh Vi n g Ca rd , ASSA A B LOY is a world leader in the el ectronic hotel lock s ector. The Group opera tes in the fo ll owi n g produ ct segm en t s : con s tru cti on lock s , i n du s trial lock s , door and wi n dow hard- w a re and other acce s s ori e s , el ectro- m echanical locks and hotel lock s . In the Un i ted State s , ASSA A B LOY is also active in the sec u ri ty door produ ct segm en t , and in autom obile locks in the Czech Rep u bl i c . ASSA A B LOY was cre a ted as a re sult of the spin-of f of ASSA to Sec u ritas A B’s s h a reh o l ders as a divi dend in Novem ber 1 9 9 4 . Abl oy was su b s equ en t ly acqu i red f rom Metra Oy Ab thro u gh a new issue of s h a re s . As a re su l t , Metra Oy Ab bec a m e the majori ty shareh o l der in ASSA A B LOY A B. M a r k e t The gl obal lock market is fra gm en ted and com prises many small and med iu m - s i ze com p a n i e s . Ma ny of these have ex trem ely s trong po s i ti ons in their local market s , with long histories and strong bra n d s . This pri m a ri ly applies to markets in Eu ro- pe and North Am eri c a . On the wh o l e , e s t a bl i s h ed standards and strong loc a l A S S A A B LO Y 1 9 9 8 brands do not exist in other parts of t h e worl d . Th ere are on ly a few mu l ti n a ti on a l p l ayers , and their joint share of the worl d m a rket is rel a tively small . It is esti m a ted that total lock market sales are approx i- m a tely SEK 150 bi ll i on . S trong local brand names and stan- d a rd s ,l ong produ ct lives and a large nu m- ber of i n s t a ll ed locks also con tri bute to s t a bi l i ty. This also applies to prox i m i ty to n a ti onal distri butors and custom ers ,c u s t- om i zed soluti ons and brand loya l ty. Con- s equ en t ly, the after-sales market acco u n t s for abo ut 50 percent of s a l e s , wh i ch redu- ces depen den ce on the cyclical con s tru c- ti on indu s try. Growth fa c t o r s l Trend towa rds high er se c u ri ty The need to pro tect inform a ti on and pro- perty is increasing every wh ere in modern s oc i ety. Ma ny people feel insec u re in an i n c re a s i n gly anonymous soc i ety with gre a ter cri m i n a l i ty. Moreover, tod ay ’s h i gh - tech soc i ety is incre a s i n gly vu l n era- ble to bre a k down s , and the need to safe- g u a rd inform a ti on and knowl ed ge is becoming incre a s i n gly import a n t . As a re su l t , the need for bet ter lock produ cts is i n c reasing ste ad i ly, in app l i c a ti ons ra n gi n g f rom simple balcony doors to com p uter room s . By con ti nu o u s ly devel oping and m a rketing produ cts that meet these need s , ASSA A B LOY is establishing a basis for s t a ble lon g - term or ganic growth wh i ch is 2–3 percent high er than that of the GDP. l E l e ctronic aspe ct s In c re a s ed sec u ri ty requ i rem ents are accom p a n i ed by demands for conven i en- ce and safe evac u a ti on in the event of ﬁre , for ex a m p l e . More soph i s ti c a ted functi on s a re requ i red wh i ch are incre a s i n gly solved by el ectronic or el ectrom echanical means. Sales of el ectrom echanical produ cts are growing more ra p i dly than the market as a wh o l e . The devel opm ent costs are cl e a r- ly high er than for trad i ti onal lock produ cts and thus requ i re a cri tical mass in wh i ch the size of a com p a ny becomes an i m portant com peti tive we a pon . While el ectrom echanical soluti ons are of a universal natu re , su ccess in this are a requ i res ad a pt a ti on to local standards and l ock dimen s i on s , as well as integra ti on with other mechanical locking sys tem s . l New market s In many new market s , su ch as As i a , t h e Ba l tic State s , the Mi d dle East and Lati n Am eri c a , an increasing proporti on of t h e pop u l a ti on en j oys a high standard of l ivi n g, and hen ce the need for sec u ri ty has i n c re a s ed . These groups are dem a n d i n g l ock produ cts that are more adva n ced than those manu f actu red loc a lly. Competitive situation As noted above , the lock indu s try is fra g- m en ted gl ob a lly but is well con s o l i d a ted l oc a lly, with a limited nu m ber of com peti- tors – of ten family - own ed – in each m a rket . Some harm on i z a ti on and inter- n a ti on a l i z a ti on is under way, with a gro- wing proporti on of gl obal produ cts and tech n o l ogi e s , p a rti c u l a rly in the el ectro- m echanical are a . However, su pport for l ocal produ ct s , the long life of the produ ct s and the nu m ber of l ocks install ed pro l on g this process sign i ﬁc a n t ly. In recent ye a rs , a s tru ctu ral tra n s form a ti on has been i n i ti a ted in wh i ch larger corpora te gro u p s a re form ed and local players are uncert a i n a bo ut their abi l i ty to com pete in the lon g term . The major intern a ti onal players inclu de The “Biblioteque National de France” in Paris was equipped with lock cylinders from Vachette, panic bars from JPM and handles from Bezault. In gers o ll Ra n d , the Am erican com p a ny, ( wh i ch owns for example Sch l a ge in the Un i ted States and Newman Tonks in the U K ) . In gers o ll Ra n d ’s lock divi s i on has a n nual sales of a pprox i m a tely SEK 8 bi ll i- on . Wi lliams Ho l d i n gs , a Bri tish com p a ny, ( with Yale in the U. S . and Chu bb in the UK) has sales of a pprox i m a tely SEK 6 bi l- l i on . Ot h er major players are Bl ack & Decker ( Am eri c a ) , whose lock divi s i on – inclu- ding Kwi ck s et in the U. S . and Dom in Ger- m a ny – has sales of SEK 6 bi ll i on . KA BA of Swi t zerland has annual sales of SEK 2.5 bi ll i on . In ad d i ti on there are a nu m ber of l oc a l p l ayers with strong po s i ti on s . This also a pplies within indivi dual produ ct seg- m ents wh ere , for ex a m p l e , Il co Unican of Ca n ada is a world leader in key bl a n k s . S t a n d a rds and produ cts are gl obal in the h o tel lock sector. Te s a , wh i ch is own ed by Wi ll i a m s , p l ays a prom i n ent role in this s egm en t . A S S A A B LO Y 1 9 9 8 S T R ATEGY AND FINANCIAL OBJECTIVES: Ben ch m a rking cre a tes an ef ﬁc i ent or ga n i z a ti on S tra tegy Our products and markets l Focus on the lock segm en t ASSA A B LOY ’s stra tegy is based on foc u- sing on locks and lock - rel a ted produ cts in order to ach i eve maximum ef ﬁc i ency in devel oping market s , produ cts and pro- du cti on . Because all companies within the Group are working in the same area of bu s i n e s s , t h ere is an envi ron m ent for the su ccessful tra n s fer of k n owl ed ge , a n d ben ch m a rking bet ween the va rious units within the Gro u p. The best perform a n ce can alw ays be tra n s ferred direct ly to anot- h er unit, and this sti mu l a tes a genu i n e i n c rease in know - h ow at all levels in the or ga n i z a ti on . l Focus on the trend towa rds h i gh er se c u ri ty ASSA A B LOY ’s produ ct devel opm en t t a kes place in close coopera ti on with cus- tom ers , the po l i ce and the insu ra n ce com- p a n i e s . Com preh en s ive ef forts are also m ade to inform and train the va rious par- ticipants in the market as rega rds to the Gro u p’s produ cts and sec u ri ty soluti on s . Ret a i l ers , a rch i tect s , s ec u ri ty of ﬁcers and en d - u s ers are key target gro u p s . Our management model l Mu l ti - d o m e s ti c ASSA A B LOY is a world leader in its ﬁel d , but prox i m i ty to custom ers and ex peri en- ce of l ocal requ i rem en t s , business arra n ge- m ents and distri buti on patterns are the basic prerequ i s i tes for su ccess in the lock i n du s try.Accord i n gly,re s pon s i bi l i ty is cl e- A S S A A B LO Y 1 9 9 8 a rly decen tra l i zed to a single manager in e ach co u n try. E ach co u n try con s ti tutes a n a tu ral building bl ock in the Gro u p’s ope- ra ti on s . In vi ew of its gl obal market covera ge , Vi n g Ca rd is or ga n i zed sep a ra tely since in m a ny re s pects its opera ti ons invo lve opportu n i ties and threats that requ i re dif- ferent tre a tm ent com p a red with other l ock companies in the Gro u p. l Ex e c u tive managem en t Co u n try managers and Vi n g Ca rd ’s pre s i- dent are mem bers of the Group manage- m ent te a m . The managem ent gro u p’s most ex peri en ced managers – the Gro u p Vi ce Pre s i dents – are re s pon s i ble for a nu m ber of co u n tries and thus help to en su re that ASSA A B LOY ’s managem en t m odel and met h ods are app l i ed . Active internal benchmarking and i n t e r- c o m p a ny learning processes The Group en de avors to ach i eve a “h ori- zon t a l ” and ﬂex i ble or ga n i z a ti on , wi t h active internal ben ch m a rking and inter- com p a ny learn i n g. All co u n try managers meet on a reg u l a r b a s i s , and com p a re their opera ti on s . Su b- s t a n tial improvem ents in ef ﬁc i ency have been ach i eved since everyone has som et- hing to learn . De s p i te con s i dera ble diffe- ren ces in proﬁt a bi l i ty bet ween the va ri o u s i n d ivi dual units, the basic atti tu de is that even the best opera ti ons sti ll have a gre a t deal to learn from the others . l Group stren g t h s A high proporti on of the improvem ent in e a rn i n gs ach i eved in both establ i s h ed and recen t ly acqu i red units is a re sult of ra ti o- n a l i z a ti on measu res in the indivi du a l u n i t s . As de s c ri bed above , this is the re su l t of con ti nuous ben ch m a rking and tra n s- fers of k n ow - h ow bet ween Group units. In areas ex po s ed to a con s i dera ble mea- su re of gl obal com peti ti on – repre s en ti n g a pprox i m a tely one third of the Gro u p’s produ cts – there is increasing coord i n a- ti on of devel opm ent and produ cti on , even t h o u gh sales take place loc a lly under sep a- ra te brand names. Th ere is also su b s t a n ti- al coopera ti on in technical devel opm en t bet ween the va rious units, coord i n a ted by the Group Produ ct Co u n c i l . In ad d i ti on , Group proc u rem ent of raw materi a l s , com pon ents and ﬁn i s h ed produ cts is being coord i n a ted . This is ex pected to re sult in ad d i ti onal savi n gs . In order to prom o te ef ﬁc i ent ﬁn a n c i n g and managem ent of ﬁnancial tra n s ac- ti on s , and to minimize ﬁnancial ri s k s ,t h e Group has a cen tral ﬁn a n ce dep a rtm en t . l Wi d er own ership pa rti ci pa ti o n ASSA A B LOY wants em p l oyees and exe- c utives to parti c i p a te in the com p a ny to the gre a test po s s i ble ex ten t . Approx i m a te- ly 1,600 of the Gro u p’s 11,000 em p l oyee s hold shares and converti ble deben tu re s a m o u n ting to approx i m a tely ei ght per- cent of the shares wh en fully diluted . Group exec utives have su b s t a n tial share- h o l d i n gs . l Group info rm a ti o n In a ra p i dly growing Gro u p, t h ere is a great need for a regular ﬂow of i n form a- ASSA A B LOY ’s stra tegy. The Gro u p’s s trong cash ﬂow helps to ﬁn a n ce this type of ex p a n s i on . In pri n c i p l e , the aim wh en making acqu i s i ti ons is that the com p a ny con cern ed wi ll con tri bute to the growth in Group earn i n gs per share in the year after acqu i s i ti on . Financial goa l s The points noted above con s ti tute A S S A A B LOY ’s stra tegy for the con ti nu ed ach i- evem ent of a sati s f actory earn i n gs tren d , with a focus on earn i n gs per share . The ﬁnancial goal is to have a retu rn of m ore than 20 percent on capital em p l oy- ed . As a re sult of the acqu i s i ti ons that have been made and the goodwi ll items that h ave ari s en in this con n ecti on , m a i n t a i- ning this goal – wh i ch was set wh en the Group was form ed in 1994 – is, in practi- ce , an incre a s i n gly stri n gent obj ective . Th e retu rn in 1998 was 15 percen t . Most of t h e i m provem ent wh i ch is requ i red is ex pec- ted to be ach i eved as a re sult of h i gh er m a r gi n s ,a l t h o u gh there are also po s s i bi l i- ties of reducing the amount of c a p i t a l ti ed - u p. An equ i ty / a s s ets ra tio of 25 percent is con s i dered adequ a te , taking into acco u n t the rel a tive stabi l i ty of the market and the s trong cash ﬂow. ti on . The Group news p a per,ASSA A B LOY News , p l aces special em phasis on the Gro u p’s stra tegy and growt h .Group news , reports on su ccessful proj ects and de s c ri p- ti ons of n ew units and acqu i s i ti ons are pre s en ted in nine language s . Our expansion strategy l Organic growt h ASSA A B LOY ’s abi l i ty to gen era te or ga n i c growth on a con ti nuing basis is a cri ti c a l f actor for the Gro u p’s su ccess in the lon g term . This is ach i eved by inten s ive deve- l opm ent ef forts in both matu re and new m a rket s . In matu re markets wh ere ASSA A B LOY is alre ady establ i s h ed , this is pri m a ri ly a m a t ter of active produ ct devel opm en t , toget h er with custom ers and others with a s t a ke in the market . Cro s s - s elling bet ween Group units redu ces devel opm ent co s t s and permits more rapid market devel op- m en t . In growth markets wh ere there are no s trong local players or brand names, n ew opera ti ons are establ i s h ed via Group su b- s i d i a ri e s . These markets of ten requ i re pro- du cts based on standards wh i ch differ f rom those wh i ch app ly in Eu rope and the Un i ted State s . ASSA A B LOY en j oys a stra- tegic adva n t a ge as a re sult of its com pre- h en s ive produ ct progra m . l Acq u i s i tions in matu re market s Brand names, ex i s ting install a ti on s , a n d l ocal standards and trad i ti ons are sign i ﬁ- cant barri ers to en try in matu re market s . As a re su l t , acqu i s i ti ons of l e ading com p a- nies in su ch markets are a key fe a tu re of Step by step... ASSA ABLOY’s approach to corporate development is based on the corner- stones of our management philosophy: Realism, Vision, Courage and Ethics. The individual company’s traditions, strengths and employees provide the natural starting point. In the case of recently acquired units, however, ﬁnancial information is immediately adjusted to comply with a common format. The aim is to create an environment in which people seek an exchange of knowledge between units and participate in an active benchmarking process, ensuring that everyone gains. The following “ladder” shows the stages taken to achieve the ultimate objective: maximum shareholder value. S a t i s ﬁed owners Increased proﬁt a b i l i t y S a t i s ﬁed customers Committed employees Higher quality Shorter lead times D e clining costs Less bureaucracy Faster ﬂo w s Simpler organization A S S A A B LOY 1 9 9 8 MANAGEMENT PHILOSOPHY: “ Every indivi dual has the abi l i ty and ambi ti on to do a good job” A SSA A B LOY is ch a racteri zed by a E t h i c s within the Com p a ny, reﬂected in both atti tu des and acti on s , determine the degree of tru s t , c re a tivi ty, a m bi ti on and com m i tm ent shown by em p l oyee s . Hi gh ethical standard s , with an em phasis on set- ting a good ex a m p l e , a re essen tial if t h e Com p a ny is to be able to attract and ret a i n the best em p l oyee s . favora ble prerequ i s i tes As a re su l t , the skills and com m i tm ent of em p l oyees and managers are import a n t f actors for ASSA A B LOY ’s con ti nu ed su c- cess and growt h . Accord i n gly, s k i ll - en h a n- cing measu res – job ro t a ti on and tra i n i n g progra m s , for example – are con du cted at a ll levels in the Gro u p. The sharp focus on the lock market and active ben ch m a rk i n g e s t a blish for exch a n ges of ex peri en ce bet ween em p l oy- ees and bet ween units within A S S A A B LOY. As part of this activi ty, the Com- p a ny con du cts the annual “ASSA A B LOY Ma n a gem ent Progra m”in wh i ch approx i- m a tely 25 em p l oyees have an opportu n i ty to hone their leadership skill s . The en ti re program is carri ed out by Group Ma n a ge- m ent and is based on case studies from ASSA A B LOY. Ne a rly 100 managers have p a rti c i p a ted in this progra m . Ever since the Group was establ i s h ed , va rious forms of own ership parti c i p a ti on h ave been an important means of prom o- ASSA ABLOY brings together its 100 most important managers every other year to review the Group’s visions, strategies and objectives. its po s i tive approach tow a rds em p l oyee s . Every indivi dual is con- s i dered a ble and wi lling to make a sati s f ac- tory con tri buti on , and managem ent is re s pon s i ble for cre a ting con d i ti ons that m a ke this po s s i bl e . Re a l i s m , vi s i on , co u ra- ge and ethics are corn ers tones of t h e m a n a gem ent ph i l o s ophy that ch a racteri- zes ASSA A B LOY. R e a l i s m means that dec i s i on s , acti on s and leadership should alw ays be based on t h oro u gh knowl ed ge of the va rious sectors of the bu s i n e s s . It is,of co u rs e ,e s s en tial for a manager to have an overvi ew, but det a i- l ed knowl ed ge of ten provi des the answers to important qu e s ti on s . The Vi s i o n that is an important drivi n g force in each opera ti on must be re a l i s ti c and based on solid ex peri en ce . A S S A A B LOY ’s vi s i on is to be the leading lock com p a ny in the worl d .“ Le ad i n g” m e a n s not on ly being the largest com p a ny, but also the player that cl e a rly sets the pace in the indu s try. C o u r a g e and en er gy are requ i red for su ccess in tod ay ’s dynamic soc i ety, i n wh i ch ch a n ges have to be handl ed ra p i dly. Co u ra ge devel ops natu ra lly wh en it is b a s ed on sound knowl ed ge and a cl e a r vi s i on . A S S A A B LO Y 1 9 9 8 The company’s management philosophy is based on four cornerstones: Realism, Vision, Courage and Ethics. ting em p l oyee and managem ent parti c i- p a ti on and the com p a ny ’s lon g - term growt h . Accord i n gly, converti ble deben tu- re programs were of fered to Gro u p em p l oyees in 1995 and 1997. As a re sult of these programs and their own su b s t a n ti a l i nve s tm en t s , 1,600 em p l oyees joi n t ly own abo ut ei ght percen t of ASSA A B LOY A B. a pprox i m a tely Com mu n i c a ti on is important at all l evel s . “ASSA A B LOY News” is issu ed fo u r times a ye a r, in nine language s , to dissem i- n a te inform a ti on on a con ti nuous basis and keep all 11,000 em p l oyees up-to - d a te on what is happening in the Gro u p. This publ i c a ti on provi des an opportu- n i ty to pre s ent newly acqu i red units and to de s c ri be important or ga n i z a ti onal ch a n- ges and su ccessful proj ect s , f rom wh i ch everyone can learn . A “100 Meeti n g,” wh i ch is arra n ged eve- ry other ye a r, was held in June 1998. This Meeting bri n gs the Gro u p’s sen i or exec utives toget h er, to establish unani- mous su pport for the joint vi s i on s , obj ec- tives and stra tegies – and it provi des an opportu n i ty for an exch a n ge of ex peri en- ce and ide a s . ASSA ABLOY’s annual Manage- ment Program is conducted entirely under the company’s auspices. There are two primary objectives: 1. Increased learning and “cross fertilization” between units. 2. Problem-solvin related to actual challenges faced in the business – for example in the production of cylinders at Vachette in France. E N V I R O N M E N TAL MANAGEMENT AND QUALITY: Mu ch to gain from envi ron m en t a lly com p a ti ble produ cti on As a ru l e , envi ron m ental issues are s traints – to cre a te sec u ri ty produ cts that h ave a low impact on the envi ron m en t . cl o s ely linked with ef ﬁc i ency and .su ccessful business opera ti on s . So it is a simple matter to gain the su pport of m a n a gers and other em p l oyees for a well - t h o u gh t - o ut envi ron m ental stra tegy. E nvi ron m ental issues have high pri ori ty on the Gro u p’s agen d a . In 1996, it was dec i ded in principle that all com p a n i e s should be certi ﬁed in accord a n ce with the ISO 14001 Envi ron m ental Ma n a gem en t S t a n d a rd . E nvi ron m ental managem ent cl o s ely re s em bles qu a l i ty assu ra n ce . It invo lve s d a i ly ef forts and affects all areas of t h e com p a ny, i n cluding the sel ecti on of m a te- rials used in produ ct s , the way materi a l s a re uti l i zed , d i s posal of re s i dual produ ct s and waste , and the cleaning and reuse of ch em i c a l s . It also invo lves the ch oi ce of p ack a ging material and the manner in wh i ch produ cts are distri buted . The lon g l i fe of l ock produ cts obvi o u s ly means that t h ey have less impact on the envi ron m en t s i n ce they are rep l aced at very infrequ en t i n tervals – 30 ye a rs or more is not unu su a l . The envi ron m ental managem ent stan- d a rd helps the com p a ny to focus on envi- ron m ental probl ems in its daily opera ti on s and ﬁnd soluti ons – wh i ch of ten prove to be not on ly less ex pen s ive and bet ter for the envi ron m en t , but also bet ter for em p l oyees working with the produ cts and for en d - u s ers . As s a’s new nickel - f ree key is a good ex a m p l e . It is produ ced spec i ﬁc a lly for pers ons who are all er gic to nickel , a n i n c re a s i n gly com m on probl em . Th ere is strong vertical integra ti on of produ cti on processes at ASSA A B LOY. Sec u ri ty produ cts are manu f actu red from raw materials su ch as steel and brass and proce s s ed into ﬁn i s h ed pack a ged produ ct s re ady to be del ivered to custom ers . As a re su l t , companies in the ASSA A B LOY Group have excell ent con trol over de s i gn , produ cti on met h ods and the uti l i z a ti on of re s o u rce s , en a bling them – with few con- The high qu a l i ty and functi onal requ i re- m ents ex pected of s ec u ri ty produ cts con- s ti tute an important con s tra i n t . Th i s obvi o u s ly affects the ch oi ce of m a teri a l s , m achining requ i rem ents and distri buti on ro utines – wh i ch may occ a s i on a lly con ﬂi ct with envi ron m ental requ i rem en t s . a nu m ber of qu e s ti ons rega rding the abi l i- ty of s of t w a re and hardw a re to handle the “Y2K probl em” in a sati s f actory manner. ASSA A B LOY has con du cted a com pre- h en s ive stocktaking opera ti on and imple- m en ted an acti on plan to en su re that all a pp l i c a ti ons – invo lving ad m i n i s tra tive and technical sys tem s , and also su pp l i ers – wi ll be able to handle the probl em . Ei gh ty percent of the produ cts su pp l i ed by ASSA A B LOY are mechanical and are not affected by the mill en n ium shift. Mo s t of the remaining el ectrom echanical pro- du cts are su pp l i ed as “stand alon e”devi- ce s , a l t h o u gh they of ten form part of va ri o u s s ys tem s . The company’s IT function is certiﬁed in accordance with the Swedish IT Commission’s Year 2000 checklist. The ISO 14001 environmental standard has a high priority. ASSA’s nickel-free key, specially developed for people who are allergic to nickel. This pre s ents a ch a ll en ge , of co u rs e ! Some of the ASSA A B LOY com p a n i e s who have introdu ced the ISO 14001 stan- d a rd and received envi ron m ental certi ﬁc a- ti on are As s a , Abl oy, Ikon and Ru ko. Quality assurance – an area for continuous improv e m e n t Sec u ri ty, trust and qu a l i ty are cl o s ely rel a- ted . ASSA A B LOY companies con ti nu o u s- ly improve the qu a l i ty of t h eir perform a n- ce in all are a s : produ ct s , devel opm en t , del ivery rel i a bi l i ty and,not least, the hand- ling of s ec u ri ty doc u m en t a ti on pert a i n i n g to lock sys tems wh i ch have been install ed . To assist them in this are a ,a ll com p a n i- es in the Group – with few excepti ons – h ave alre ady adopted the intern a ti on a l ISO 9001 (or 9002) standard . This stan- d a rd does not cre a te qu a l i ty in the com p a- n i e s’ processes simply because it has been adopted . The qu a l i ty stamp that a com p a- ny receives wh en it has been certi ﬁed is not a ﬁnal seal of a pprova l . It marks the inau- g u ra ti on of a program of con ti nu o u s i m provem en t . The qu a l i ty sys tem helps companies to m e a su re ,m on i tor and improve their qu a- l i ty – and discover defects and rectify them in time – helping them to learn from thei r m i s t a kes and improve ste ad i ly. That is the way to establish lon g - term qu a l i ty. Com p uters and microproce s- s ors are to be found every wh e- re tod ay – and ASSA A B LOY is no excepti on . As the new mil- l en n ium approach e s ,t h ere are THE TREND TOWARDS HIGHER SECURITY: Preven ti on is incre a s i n gly important in a vu l n era ble soc i ety T he need for security is nothing new. Safety and security are among m a n ’s fundamental needs. Original- l y, caves were “locked” with a rock in fro n t and ﬂex i bi l i ty are apprec i a ted by custo- m ers , providing that everything works the w ay it should. All these devel opm ents are ex trem ely of the entrance. Locks made of knotted po s i tive , of co u rs e . ropes were used thousands of years ago, and padlocks have been utilized by trave- ling merchants for centuries. The modern lock industry and widespread use of locks began to develop in the 19th century. Modern society Urb a n i z a ti on and con cen tra ti ons of peo- ple in and around large cities have re su l ted in incre a s ed anonym i ty and a sense of i n s ec u ri ty. The likel i h ood that a crime wi ll be solved is small and, s t a ti s ti c a lly, everyo- ne can ex pect to ex peri en ce one or more break-ins du ring their lifeti m e . Su ch ph en om ena as “n ei gh borh ood watch e s a gainst cri m e” a re de s i gn ed to rep l ace the e a rl i er mon i toring of n ei gh bors and loc a l occ u rren ce s . In du s tri a l i zed soc i eties are ch a racteri- zed by the “m ore for less” con cept . Com- panies have to be ef ﬁc i ent in the face of ever keen er com peti ti on . Con cepts su ch as “ just in ti m e” del iveries and “lean produ c- ti on” h ave become incre a s i n gly import a n t guiding pri n c i p l e s . In form a ti on ﬂows are com p uteri zed and com mu n i c a ti on bet- ween different parts of a com p a ny is auto- m a ted . The pace of devel opm ent is incre a s i n g. The peri od from iden ti ﬁc a ti on of a need to devel opm ent and produ cti on is becom i n g s h orter – and the life of produ cts is also being curt a i l ed . In c re a s ed com peti tiven e s s A S S A A B LO Y 1 9 9 8 Increased vulnerability At the same ti m e , this means redu ced safe- ty margi n s . Inven tories are small or n on ex i s ten t , devel opm ent peri ods are rapid and produ ct lives are short . Th ere is no margin for error if the com p a ny wants to con ti nue to be com peti tive . The margi n bet ween su ccess and failu re has narrowed ! Ma ny machines are opera ting 24 hours a day, and the cost of du p l i c a te re s o u rces is too high . Produ cti on equ i pm ent is beco- ming incre a s i n gly depen dent on the com- p a ny ’s inform a ti on tech n o l ogy (IT) sys- tem s . In su ra n ce can provi de pro tecti on a gainst ﬁnancial loss, but not against the loss of c u s tom ers or tru s t . Crime is on the incre a s e . It is a fact of l i fe and is growing in terms of both “con ten t” and met h od s . Ma n’s gre a ter mobi l i ty is h elping to make the ﬁght against cri m e m ore difﬁc u l t . Just as cars became major targets for thi- eves wh en they began to be com m on in s oc i ety, el ectronic equ i pm ent and com p u- ters are now high ly attractive obj ects and can be re ad i ly converted into cash. Th ey a re also loc a ted every wh ere – in homes as well as in com p a n i e s . And the con s equ en- ces of a theft – in the form of lost inform a- ti on – are of ten gre a ter than the immed i a- te loss. S a f e t y, security and user-friendliness – hand in hand The best approach is to prevent attack s . The next best is to detect and provi de war- ning wh en som ething is happen i n g. Th e s e f actors underlie the trend tow a rds high er s ec u ri ty. The ﬁrst important step is to have pro- per doors , wi n dows and locks – prefera bly su pp l em en ted to con trol daytime pers on- n el movem en t s . Not all attacks come from o ut s i de . Wi ll more sec u ri ty arra n gem ents make t h i n gs safer? Un fortu n a tely, this is not a lw ays the case. Exce s s ively ri gorous sec u- More security does not always mean higher securi- ty, if the product is not user-friendly. More security may even make it difﬁcult to evacuate the premises, as in this apartment in Genoa, Italy. ri ty planning can re sult in a sys tem wh i ch is so impractical that it is not used , and the i m pre s s i on given by an otherwise pre s ti- gious building may be impaired by unwi- el dy, conspicuous sec u ri ty sys tem s . An exce s s ively com p l i c a ted sys tem can also j eop a rd i ze safety, making it impo s s i ble to e s c a pe in the event of ﬁre . More is not alw ays bet ter. A lock sys tem that cannot be maintained diminishes ra p i dly in va lue as pro tecti on against ex te- ri or and interi or intru s i on . What is needed is not merely a tech n i c a lly sec u re produ ct but one that can be ad a pted to ch a n ge s and can grow with the bu s i n e s s . This is wh ere modern lock sys tems and produ ct s d i f fer from their predece s s ors . Sa fe em er gency exit requ i rem ents may of ten con ﬂi ct with pro tecti on against thef t or other thre a t s . A dep a rtm ent store is a good ex a m p l e . It must be po s s i ble to lock u n m on i tored exits wh i l e , at the same ti m e it has to be po s s i ble to evac u a te the bu i l- ding ra p i dly in the event of ﬁre . Modern One of ASSA ABLOY’s most important guiding principles for product development is meeting the need for greater security, while simultaneously taking into account user-friendliness and the need for safe emergency exits. s o luti ons are ava i l a ble in the form of a com bi n a ti on of m echanical and el ectron i c devi ces – ti m e - del ayed escape ﬁt ti n gs , ﬁt- ted with alarm devi ce s . Sec u ri ty and safety must go hand in hand. Gre a ter sec u ri ty, in pre s ti gious prem i s e s in parti c u l a r, i m poses gre a ter demands on the de s i gn of s ec u ri ty produ ct s . Pa rts of s ys tems that are cl e a rly vi s i ble should of fer a “s ober ” i m pre s s i on and should ﬁt in a rch i tectu ra lly with va rious envi ron- m en t s . Lock com pon ents should be as i nvi s i ble as po s s i bl e . Opinion leaders create new product needs The growing need for sec u re produ cts and the som ewhat con ﬂi cting demands of s ec u ri ty, conven i en ce , u s er- f ri en dl i n e s s and styling are re su l ting in a mu l ti p l i c i ty of n ew sec u ri ty produ cts that are rep l acing or su pp l em en ting ex i s ting install a ti on s . Th ey a re also con tri buting to an incre a s i n g i n terest in sec u ri ty and sec u ri ty produ ct s . More soph i s ti c a ted functi ons are nor- m a lly solved by el ectronic and el ectrom e- chanical means, but there is also a com p a- ra ble trend for mechanical “basic pro- du ct s .” O r ga n i z a ti ons su ch as the po l i ce and i n su ra n ce com p a n i e s , wh i ch are in a po s i- ti on to inﬂu en ce public op i n i on are con- tri buting actively to the search for new s o luti ons and they are drawing atten ti on to new produ ct s . These op i n i on - l e aders a re playing an important role in the gro- wing trend tow a rds high er sec u ri ty. Toward a growing market Obviously, one important prerequisite for an expanding market is a greater need for security. But this is not enough. Suppliers must actively develop and market a continuous ﬂow of new and improved products to meet this need. The "positive spiral" is based on a keen ear, co- operation, development and customer satisfaction. The positive spiral The vicious spiral l The market grows. l Customers are offered product with added-value. l Investments in research and develop- ment create safer, more secure and more user-friendly products. l Close cooperation with customers, dealers, insurance companies, police authorities and ﬁre departments. l Too little invested in development. l Customers are not offered added value, products become increasingly similar. l Focus on price competition. l Less and less invested in develop- ment. l The market stagnates. A S S A A B LO Y 1 9 9 8 ASSA ABLOY IN DEVELOPMENT: A sec u ri ty sys tem is on ly as strong as its we a kest link Development is a term with many meanings. At ASSA ABLOY, deve- lopment applies not only to pro- ducts, but also to employees, dealers, installers, and end-users. A security sys- tem is only as strong as its weakest link and – in addition to a good product – all locks and security products re q u i re proper instal- lation, operation and efﬁcient maintenance. All aspects are important and impose heavy demands on information, advisory services and training. P r o d u c t s The trend tow a rd high er sec u ri ty, t h e devel opm ent of produ cti on tech n o l ogy and the new opportu n i ties of fered by m odern el ectronics are cre a ting con d i- ti ons for the devel opm ent of l ock and s ec u ri ty produ cts that meet the market’s h i gh ex pect a ti on s . Produ cts introdu ced du ring the past ﬁve ye a rs account for 35 percent of the Gro u p’s sales. “ E l ectrom e- chanical produ ct s” – a com bi n a ti on of m echanical en gi n eering and el ectronics – account for a growing proporti on of A S S A A B LOY ’s sales and have the high e s t growth ra te s . The largest inve s tm ents in devel opm ent are being made in su ch are a s as lock cyl i n ders , el ectrom echanical lock s , h o tel locks and em er gen c y - e s c a pe pro- du ct s . In ad d i ti on , t h ere is growi n g demand for com p l ete sys tems for doors and wi n dows in wh i ch a nu m ber of i n ter- A S S A A B LO Y 1 9 9 8 acting produ cts form a single unit. To an ever- gre a ter degree , con cern for the envi ron m ent is inﬂu encing the de s i gn of produ ct s , the sel ecti on and use of m a te- ri a l s , and rec ycling requ i rem en t s . Th e i n c reasing all er gy - rel a ted demand for keys made of n i ckel - f ree all oys is a good ex a m p l e . M a r k e t s Del ivery of s ec u ri ty is based on tru s t . A l ock com p a ny builds trust by carrying out a lon g - term , m et h odical program based on qu a l i ty in all opera ti on s . This is an i m portant platform for all companies in the ASSA A B LOY Gro u p. Moreover, s ec u- ri ty is mu ch more than the produ cts invo l- ved! Di s tri butors , i n s t a ll ers and lock s- miths need con ti nuous training to en a bl e t h em to solve the en d - u s ers’ probl ems ef ﬁ- c i en t ly, m a ke proper install a ti ons and per- form mainten a n ce ef ﬁc i en t ly. Tra i n i n g and su pport are also requ i red if the sec u ri- ty sys tem is to be uti l i zed and managed properly. This may be provi ded by the dis- tri butor or, in some cases, d i rect ly by the l ock manu f actu rer. The industry Con ﬁden ce in the indu s try, its produ ct s and sys tems is parti c u l a rly important in the sec u ri ty indu s try. People have to be a ble to rely on a su pp l i er of s ec u ri ty. Th i s means that it is important for all com p a- nies in the indu s try to work in the same d i recti on . This takes place , for ex a m p l e ,i n the work of n a ti onal and intern a ti onal tra- de assoc i a ti ons and as a re sult of p a rti c i p a- i n ti on in standard i z a ti on progra m s , wh i ch com m on sec u ri ty spec i ﬁc a ti ons are d rawn up with a focus on functi on a l requ i rem en t s . ASSA A B LOY com p a n i e s p l ay a very active part in this proce s s . Th e va rious co u n tries have mu ch to learn from e ach other, and su b s t a n tial progress has been made in recent ye a rs . On the other hand, in con trast with the s i tu a ti on in many other indu s tri e s , t h ere a re limited opportu n i ties for the mech a n i- cal standards establ i s h ed at the intern a ti o- nal level to ach i eve an immed i a te impact . The indu s try is ch a racteri zed by produ ct s that last a long time – of ten 30 ye a rs or m ore – and they are install ed in bu i l d i n gs t h a t , in their tu rn ,m ay last for 100 ye a rs . The diverse mechanical de s i gns and m a terials used in different parts of t h e world make it difﬁcult to ach i eve appro- pri a te com m on soluti on s . In some parts of the worl d , doors have trad i ti on a lly open ed i nw a rd , and in other regi ons they have open ed out w a rd . Doors in co u n tries wi t h cold wi n ters tend to be thicker. Wood or m etal may the dominant materi a l s , wi t h va rying use of gl a s s . The strength of t h e doors also va ries con s i dera bly. Solid’s card- reader/keypad offers convenience by day and security at night. Assa’s deadlocking latch and Solid’s electrical strike offer controlled, reliable daytime access. The ASSA motorlock provides maximum night-time security. Abloy-Primo door pulls are easy to use – even by the elderly and disabled. The Abloy door clo- ser ensures that the door shuts properly, every time. ASSA ABLOY Selected New Products 1998 Sweden: Combi and 7 0 0 0 – patented cylinders. 179 – panic exit, meeting the new CEN standards. N i c k e l f ree – allergy safe keys and accessories. 8 2 0 – window lock, can be locked whilst still providing ventilation for maximum intrusion security. Finland: EXEC ID – electromechanical cylinder. D C 2 4 0 and D C 2 4 1 – european line of Door closers. 8 1 4 0 and E L 4 4 0 – mortised solenoid locks for central E u ro p e . N o r w a y : Tr i o Ving Twin – high security cylinder with patented key blanks for copy pro t e c t i o n . Denmark: Combi Plus – patented high security cylin- der providing system design also on the side code for l a rger lock systems. F u n x i o n – the “eternal” stainless steel series of SUPERELLIPSE® inspired door furn i t u re Germany: SK6 Sperrwelle – high security cylinder a p p roved in the highest security class with more than 100 million combinations. S K 6 - 1 R P 6 0 , 6-pin high security cylinder. S423 – steel protective plate with anti-panic function. UK: Ruko Flexcore – patented cylinder range to meet demands for key copy protection. Coin locks – meeting severe environmental re q u i rements. Compact 2000 – heavy duty lock case meeting the new CEN standard s . France: 2010 A2P*** – highest security class, up to 7 point rimlock. “ B i g s u r ” – motorised multipoint rimlock for use with access control. N a u t i l – a new series of designed door handles and accessories in anodised a l u m i n i u m . Belgium: MP 75 – security cylinder. US: The Unlatch – patented replacement for electric strikes, strong and invisible. SAM (Shear Aligning M a g n a l o c k ) – unique patented self aligning mortised magnetic lock. Keypad Operated Cylindrical Lever L o c k – wireless single door, low cost access contro l . CTV (Center and Top latch Vertical ro d ) – three point latching with full panic function for double doors. F reewheeling 8200 – mortise lock vandal re s i s t a n t trim for most door types. Czeck Republic: FAB SLS 24 – pick resistant 5 pin & lever cylinder with numerous combinations. FA B 1 5 7 6 / 7 B – heavy duty single and multi-point rim lock. FAB 2035 – new versatile industrial cylinder. S K O D A lock sets – mechanical and transponder based. Vi n g C a rd: PowerSafe – lap-top adapted hotel safe with charging facility. Y 2 K – software and upgrade for hotel lock installations. A-Series – audit trail safe for the middle market. Key Control An example of the use of the security pyramid for key control in the European market. Absolute key control requires an approved and registered authorized service agreement between the system owner and a licensed service centre or the manufacturer. The key must have a unique electronic code and a patented mechanical code. ASSA Twin- tronic, IKON Ikotron and ABLOY EXEC ID are examples of cylinders based on this technology. Patented key control means that extra keys are manufactured only from patented and design-protected key blanks. An approved and registered authorized service agreement is required for follow-up orders for keys and service. ASSA Twin Combi, Ruko Combi II, IKON Sperrwelle, ABLOY Disk-Lock Pro, TrioVing Twin and Vachette Radial are examples of cylinders that use this technology. Limited key control means that the keys can be copied if the customer has a sample key and valid identiﬁcation. Absolute Patented Limited A S S A A B LOY 1 9 9 8 ASSA ABLOY’S PRODUCTS: Con ti nuous produ ct devel opm en t Ag reat deal has happened in the past 100 years – particularly during the .past ﬁve years. New products are being introduced to meet the changing security needs of a new era, and traditional p roducts are gradually being improved to p rovide new functions. The need to service its installed base is one of the lock industry’s most important tasks. After-market sales often account for m o re than half the total volume. This means that lock manufacturers have to be able to replace lock products which may be 30 years old with new items that provide com- parable or upgraded functions and are compatible with the existing apertures in the door. Mechanical locks, lock systems and accessories Lock cyl i n ders are an important produ ct a rea in wh i ch ASSA A B LOY has a stron g po s i ti on in many co u n tri e s . Lock cyl i n- ders , or more of ten lock sys tems based on l ock cyl i n ders with to t a lly different func- ti on s , a re the corn ers tones in all sec u ri ty s ys tem s . While the ex teri or shape of l ock c yl i n ders has been the same for dec ade s , the functi ons provi ded have been devel o- ped con s i dera bly. A nu m ber of lines of devel opm ent have been pursu ed : pin cyl i n ders , disc cyl i n- ders ,s i de bars ,s t a r- s h a ped pin con ﬁg u ra- ti ons – all with a spec i ﬁc purpo s e . The aim of e ach de s i gn is to cre a te wi de opportu n i- ties for va ri a ti on , t hus en a bling the com- p a ny to of fer each custom er a unique lock s ys tem . Pa ten ted keys of fer a high er degree of s ec u ri ty since the keys can on ly be du p l i c a ted by an aut h ori zed de a l er. The level of s ec u ri ty can be furt h er i m proved by a com bi n a ti on of m ech a n i c a l and el ectronic code s . A lost key can simply be “coded ” o ut of the sys tem and wi ll no l on ger con s ti tute a sec u ri ty ri s k . A S S A A B LO Y 1 9 9 8 The Sargent 8200 lock was developed to handle the very high demands for both strength and security in the American institutional market. Elektronics are used in the Sargent Elektroguard and JPM Push Control to prevent misuse of panic bars. They are used only when required in an emergency. Fire-resistant steel doors made by Curries and ﬁre doors with wood paneling produced by Graham prevent the spread of ﬁre while allowing time for safe evacuation. ASSA/Ruko and ABLOY padlocks are available in various security categories. Th ere are lock cases for many differen t types of doors , depending on the materi a l , t h i ck n e s s ,etc .S pec i ﬁc a ti ons va ry,in accor- d a n ce with the sec u ri ty requ i rem ents and the type of u s a ge (ex teri or door, of ﬁce door, ﬁre door, etc . ) . Wh ere there are par- ti c u l a rly stri ct demands for pro tecti on a gainst intru s i on , va rious forms of mu l ti- point locking are becoming incre a s i n gly com m on . Locks of this type , wh i ch have a nu m ber of s i mu l t a n eo u s ly maneuvera bl e l ocking bolts for ex teri or or morti s e m o u n ti n g, a re alre ady com m on , for ex a m- ple in Un i ted Ki n gdom and Fra n ce and in l a r ge cities in the Un i ted State s . Th ey are also being incre a s i n gly used in many other co u n tri e s . Mu l ti point locks are an impor- tant growth area for ASSA A B LOY. Padl ocks are sold in the con su m er mar- ket and also to profe s s i onal custom ers , i n cluding military fac i l i ties and tel ecom opera tors , wh ere padl ocks form part of a n overa ll sys tem . Fittings and security doors Hi n ges must provi de the same high level of s ec u ri ty as locks and cyl i n ders . A sec u re opening must be rega rded as a single unit. Door and wi n dow ﬁt ti n gs , h a n dl e s , s ec u- ri ty plates and decora tive ﬁt ti n gs around a l ock are natu ral el em ents in a com p l ete ra n ge of s ec u ri ty produ ct s . In most co u n tries door and wi n dow companies are important ASSA A B LOY c u s tom ers . Th ey of ten have special de s i gn requ i rem ents to fac i l i t a te factory assem bly. In the U. S . , ASSA A B LOY has its own m a j or produ cti on fac i l i ty of com p l ete s ec u ri ty doors . Locking yo u rs el f in is not en o u gh if yo u want to feel safe . People also have to be abl e to escape , in the event of a ﬁre for ex a m p l e . Si tu a ti ons of this natu re are all too com- m on and there is a growing aw a reness of the danger of being “too locked in.” As a re su l t , t h ere is a growing demand for safe em er gency exit soluti on s . This may con s i s t of a mechanical panic bar, but special esca- pe ﬁt ti n gs , with alarm and ti m e - del ay fe a- tu res have also been devel oped and are sold by ASSA A B LOY all over the worl d . Electromechanical and electronic locks The market for access con trol is ex pected to grow by 8–12 percent a ye a r. An el ectri- c a lly con tro ll ed lock – an el ectric stri ke , a m o torl ock or a magn etic lock – is requ i red for each door con n ected to an access con- trol sys tem . E l ectric stri ke s , the most com m on form of el ectric lock ,a re used in doors with high tra f ﬁc ﬂows . Mo tori zed locks of fer de s i gn and sec u ri ty adva n t a ges and are incre a- s i n gly em p l oyed . Ma gn etic locks have sco- red major su ccesses in the Am erican acce s s con trol market . The com bi n a ti on of m ore doors and i n c re a s ed demands for mod i ﬁc a ti ons to m eet disabl em ent norms and conven i en ce requ i rem ents is cre a ting a growing need for autom a tic opera ti on . O n ce a pers on has establ i s h ed his or her creden ti a l s , t h e rest takes place autom a ti c a lly. Abl oy ’s a utom a tic swing door sys tems are curren t- ly sold in several ASSA A B LOY market s . Industrial locks Th ere is a large nu m ber of a pp l i c a ti ons in wh i ch locks are built into special equ i p- m ent ra n ging from lockers and mail box- es to pay tel eph ones and gaming mach i- n e s , p a rking meters and vending mach i- n e s . The custom er needs a sec u re lock c yl i n der, gen era lly one that meets high s ec u ri ty spec i ﬁc a ti on s . The lock com p a ny prep a res spec i ﬁc a ti ons for the produ ct j oi n t ly with the manu f actu rer, de s i gning a produ ct based on the com p a ny ’s own l ocking tech n o l ogy. Tod ay, these produ ct s i n c re a s i n gly contain a com bi n a ti on of el ectronic and mechanical locking tech n o- l ogy. As s a , Abl oy and Medeco are worl d l e aders in this ﬁel d . Hotel locks L i a bi l i ty is a cri tical issue for the hotel i n du s try thro u gh o ut the worl d . The abi l i- ty to of fer hotel guests safe accom m od a- ti on imposes con s i dera ble demands on l ocks and the managem ent of keys or c a rd s . Th ere are also increasing demands by h o tels for ef ﬁc i ent ad m i n i s tra ti on and i n tegra ti on with other sys tem s , Ho tel l ocks curren t ly con s ti tute a sep a ra te mar- ket nich e , with a limited nu m ber of m a j or p l ayers . Vi n g Ca rd , an ASSA A B LOY com- p a ny, was the ﬁrst to introdu ce this type of l ock and is a world leader in this ﬁel d . VingCard’s various card- reader systems are available in several upgraded models, depend- ing on the size of the hotel. The principle is always the same: insert the card, pull it out and open the door. Mechanical locks, lock systems and accesso- ries 52% Sales per product group Total SEK 8,582 M VingCard hotel locks 11% Security doors and ﬁttings 20% Industrial locks 5% Electromechanical and electronic locks 12% A strong door and high resistance forced entry is acheived using a multi-point lock Shown here is a 7-point lock from the French company Vachette A S S A A B LO Y 1 9 9 8 GROUP HISTORY: Modern sec u ri ty is based on a long trad i ti on “ I h ave to work ; o t h erwise life is mea- n i n gl e s s ! ” That was the favori te maxim of the legen d a ry August Sten m a n , t h e i n du s trialist wh o, in 1881, s owed the ﬁrs t s eeds of the com p a ny that is tod ay A S S A A B LOY. Wh en he was not qu i te 30 ye a rs o l d , he borrowed mon ey for a for ge in E s k i l s tu n a . In his yo u n ger days Au g u s t S tenman had been a journ eyman in Eu ro- pe and the Un i ted States wh ere he had l e a rn ed tech n i ques and establ i s h ed con- t acts that later proved cri tical for the futu- re of his com p a ny. ASSA A B LOY is now one of the worl d ’s l e ading lock com p a n i e s , with approx i m a- tely 11,000 em p l oyees in 27 co u n tri e s . Th e pre s ent or ga n i z a ti on was form ed in 1994 wh en the lock opera ti ons of the Swed i s h Sec u ritas AB and the Finnish Metra Oy Ab companies were mer ged . In con n ecti on with the mer ger, the com p a ny ’s share s were listed on the Stockholm Stock Exch a n ge . August Sten m a n’s curi o s i ty and en tre- pren eu rial spirit propell ed the com p a ny forw a rd by leaps and bo u n d s . In i ti a lly, h e bo u ght new mach i n e s , but later he learn ed h ow to de s i gn and build special equ i p- m en t . He was a pion eer in the autom a ti c tools ﬁeld wh en he install ed the ﬁrst hinge m achine in 1890. Some of his met h od s would prob a bly be con s i dered indu s tri a l e s p i on a ge tod ay – for example wh en he a rra n ged for one of his cl erks to take a job as a cl e a n er in com peti tors’ f actori e s , wh e- re he had plen ty of time to make drawi n gs of the mach i n e s . Long before the word “ben ch m a rk i n g” was coi n ed ,S tenman establ i s h ed the pri n- ciple that makes ASSA A B LOY so su cce s s- ful tod ay: Ta ke adva n t a ge of e ach others’ opera ti ons and ex peri en ce in the Gro u p’s va rious com p a n i e s . Abl oy in Finland also has a long history that began in 1907 wh en Emil Hen ri k s s on , a mechanic in Hel s i n k i , i nven ted the disk c yl i n der that is sti ll an important part of tod ay ’s produ ct line. The ﬁrst patent was A S S A A B LO Y 1 9 9 8 regi s tered in 1919 and a new com p a ny was fo u n ded – Ab Lu k ko Oy, f rom wh i ch the Abl oy name is derived . Ab Lu k ko Oy even tu a lly became part of the W ä rtsilä Group and the produ cti on c a p ac i ty in Joen suu was ex p a n ded over the ye a rs . Tod ay,750 people are en ga ged in the produ cti on of con s tru cti on lock s , el ectro- m echanical locks and ﬁre door sys tem s . In 1 9 9 7 , the ﬁne working envi ron m ent at Joen su u , wh i ch is a rel a tively spars ely pop u l a ted distri ct , received the Finnish Mi n i s try of L a bor ’s “ Excell ent Employer ” aw a rd . I n t e r n a t i o n a l i z a t i o n ASSA Stenman soon apprec i a ted the i m port a n ce of being seen in the market- p l ace . In 1967, with a to u ch of i rony, t h e com p a ny launch ed a notable campaign in wh i ch it introdu ced a “ Z ”s c rew, a squ a re s c rew, a do u ble screw and an angle screw ! In earl i er days Mrs . S tenman con tri buted to the su ccess of the en terprise by em broi- dering her hu s b a n d ’s initials in revers e . And that is how the ASSA name ori gi n a- ted . August Sten m a n’s “d i s c i p l e” and su cce s- s or, Si x ten Ni l s s on , qu i ck ly adopted su ch m odern marketing met h ods as direct - mail advertising and su cceeded in ex p a n- ding in the world market from his hom e b a s e . Ni l s s on began an era that can be ch a- racteri zed by its strong focus on the ex port m a rket . He travell ed to co u n tries near and far to establish custom er rel a ti onships – and custom ers from as far aw ay as In d i a , Japan and Latin Am erica vi s i ted the facto- ry in Eskilstu n a . ASSA A B LOY has pursu ed a policy of i n tern a ti on a l i z a ti on over the co u rse of ye a rs and is now repre s en ted by its own su b s i d i a ries in Sweden , F i n l a n d , Norw ay, Den m a rk , G erm a ny, Un i ted Ki n gdom , Fra n ce , Bel giu m , the Czech Rep u bl i c , Sl o- va k i a , Rom a n i a , Po l a n d , Si n ga pore , Mex i- co and the Un i ted State s . Its stra tegy in m a tu re markets is to purchase lead i n g com p a n i e s , while new opera ti ons are esta- bl i s h ed in growth markets thro u gh su b s i- d i a ri e s . From hinges to security From hinge s , l ocks and equ i pm ent for em er gency exits to total sys tems for incre- a s ed sec u ri ty – that is one way of su m m a- rizing ASSA A B LOY produ ct devel op- m en t . Ma ny of the requ i rem ents for lock s h ave ch a n ged since the beginning in 1881, but the essen tial need is sti ll the same: to be p a rt of a pro tecti on sys tem for people and property, b a s ed on tod ay ’s requ i rem en t s . S ten m a n’s “s ec u ri ty pyra m i d ” is a ﬂex i- ble sys tem of l ocks that covers every con- ceiva ble level of n eed , f rom housing accom m od a ti on with standard keys to f ac i l i ties su ch as nu clear plants and defen- se install a ti ons that have stri ct sec u ri ty requ i rem en t s . Lock sys tems can also be su pp l i ed for use in hospitals, s ch oo l s , i n du s trial plants and ships. Tod ay there is a strong demand for el ectrom ech a n i c a l l ocks as ef forts are made to increase sec u- ri ty in the retail trade and in banking,wh e- re lon ger opening hours are increasing the risk of c riminal activi ti e s . ASSA A B LOY ’s em p l oyees in the Un i ted S t a tes can be proud of l ock install a ti ons in su ch bu i l d i n gs as the Wh i te Ho u s e , t h e Un i ted Na ti ons He ad qu a rters and the U. S . Su preme Co u rt Bu i l d i n g. Fo ll owing the bomb attack on the World Trade Cen ter in 1 9 9 3 , the need for rel i a ble sec u ri ty bec a m e obvi o u s . The con tract was aw a rded to A S S A , wh i ch curren t ly has approx i m a tely 20,000 locks install ed in the com p l ex . ASSA A B LOY has ten units in the Un i ted S t a te s , the oldest of wh i ch – Sa r gent – has been in business for 135 ye a rs . As early as the mid-19th cen tu ry, Sa r gent was a good example of h ow the trend tow a rds high er s ec u ri ty had devel oped . The com p a ny s t a rted by producing everything from s c rews to too l s . In recent ye a rs it has foc u- s ed on locks and doors . Tod ay, Sa r gent is a l e ader in door locks and equ i pm ent for em er gency ex i t s . In 1976, Vi n g Ca rd , a Norwegian com- p a ny, i n trodu ced another world innova- ti on , e a s i ly re - code a ble card based lock s for hotels and cruise ships. The lock was i n s t a ll ed for the ﬁrst time in what was then the worl d ’s tallest hotel , the Pe ach Tree Pla- za in At l a n t a , opera ted by the West In n ch a i n . Tod ay, t wo mill i on hotel guests in m ore than 135 co u n tries thro u gh o ut the world are able to use an “ i n tell i gen t” l ock that conveys a sense of s ec u ri ty since it is reprogra m m ed for each new guest. Growing range of security serv i c e s Wh en the Danish locksmith Ru do l f Koreska started the Ru ko com p a ny in 1 9 3 0 , its produ cts were hardw a re . But in 1998 the com p a ny fo ll owed the tren d tow a rds high er sec u ri ty by establishing a s pecial sec u ri ty cen ter in wh i ch spec i a lly tra i n ed em p l oyees of fer custom ers ser- vi ces rel a ted to the com p a ny ’s produ ct s . The current leader in the Eu rope a n m a rket for em er gency exits is JPM, wh i ch is undo u btedly the oldest com p a ny in the ASSA A B LOY Gro u p. JPM was fo u n ded in 1645 by Jean Paul Ma qu en n eh en , a F l emish cl ock m a ker. The big bre a k- t h ro u gh for JPM occ u rred nearly 300 ye a rs l a ter, in 1970, with its introdu cti on of t h e worl d ’s ﬁrst sec u ri ty equ i pm ent for em er gency ex i t s . Tod ay the com p a ny has i n s t a ll ed both panic bars and lock cases, for example in the La Défense com p l ex in the ﬁnancial distri ct in Pa ri s . ASSA A B LOY ’s market has thus grown f rom simple locks to tod ay ’s more soph i s- ti c a ted sec u ri ty soluti on s . In all , the com- p a ny has install ed half a bi ll i on lock s worl dwi de . A great deal has happen ed in the past 100 ye a rs but ASSA A B LOY ’s growth has, in fact , been su bj ect to the same drivi n g force the whole time – peop l e’s incre a s ed n eed for safety and sec u ri ty – for them s el- ve s , for those close to them , and for thei r property. A S S A A B LOY 1 9 9 8

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