Notes to the consolidated financial statements for the financial year 2021/22

1.1 Segment reporting

Operating model

As part of its new corporate strategy Shape4Growth, dormakaba changed its operating model as per 1 January 2022 with the aim to

• Focus stronger on its customers
• Increase operational efficiency to gain scale
• Increase transparency and accountability

The new operating model drives customer centricity with fewer and more focused regions, leaner organizations, scale, and an ease of doing business.

The Access Solutions (AS) business is divided into three customer-centric regional sales organizations – Americas, Asia Pacific, and Europe & Africa. These three Regions are supported by Global Functions to secure efficiencies of scale and to capture business synergies in product development, product management, and operations. To enable a strong customer focus and sales generation, the three Regions are built around

• Project and solutions sales, focusing on architects, design engineers, and influencers to increase specification capabilities
• Indirect sales, focusing on distributors, general contractors, and project managers to enhance a dedicated offering for key verticals and to push cross-selling
• Services, focusing on facility managers, building operators, or installers to support services growth as part of the company’s global core business

Key & Wall Solutions completes the organizational setup as standalone global segment.

The financial performance of the Regions is measured at full value contribution to the performance of the Group to improve financial steering, transparency, and accountability.

In accordance with the management organization, the reporting to Group management consists of the three regions, Key & Wall Solutions, and the Global Functions, as described above. Segment Reporting is prepared up to the level of adjusted EBITDA/EBIT because these are the key figures used for management purposes. The reporting forms the basis for assessing performance and allocating resources. Financial transactions of Global Functions that are directly attributable or can be allocated on a reasonable basis to a specific segment are reported under the segment concerned. The segment results are based on the same accounting principles that are used to determine the operating profit of the Group. Intersegment transactions are based on the arm’s length principle.

Offering

dormakaba Group provides smart, secure, and sustainable solutions for seamless flow and integrated access. Its portfolio of strong brands offers customers the full range of products, solutions, and services for access to premises, buildings, and rooms. From award-winning, end-to-end access solutions to industry best practices and straightforward installation across a range of markets and industries, dormakaba is a  complete partner for door and access systems, catering to a broad range of industries such as hotels, retail spaces, sporting venues, airports, hospitals, offices, utilities, and multi-housing, as well as in some select residential markets.

The company’s global access solutions portfolio ranges from door solutions, such as automatic door systems, swing and revolving doors and their operators, a wide variety of fittings, door closers and stoppers, and locking systems – from cylinders, keys, and locks all the way to fully networked and Cloud-based electronic access solutions and ecosystem solutions. The range also includes solutions for seamless flow such as sensor barriers, speed gates and self-boarding gates, high-security locks, solutions for workforce management, as well as services for all these applications.

In addition, the company also offers products in the areas of Key Systems and Movable Walls, but under different brands. Key Systems offers a range of high-performance key blanks and mechanical, electronic, and (semi-)industrial key cutting and origination machines. In addition, the portfolio covers solutions for the automotive industry, such as vehicle keys, transponders, and key programming devices and duplication equipment. The Movable Walls unit specializes in acoustic movable partitions as well as horizontal and vertical partitioning systems. The business offers partition solutions that range from manual application to fully automatic/electronic walls. The business units Key Systems and Movable Walls are combined in the global standalone, self-contained segment Key &Wall Solutions.

Transition into the new operating model

The transition into the new operating model contains the following major elements:

• Global Operations and Marketing & Products organizations are separated in the new operating model as Global Functions. Their financial contribution to the Group’s financial performance is allocated to the respective sales Region; either directly attributable or allocated on a reasonable basis.
• Other Organizational Changes reflect the geographical and other structural shifts of responsibility. The change in Region Americas stems mainly from the centralization of the Safe Locks business (share of former AS EMEA segment) while Region Asia Pacific is impacted by the additional responsibility for the Market Middle East (former AS EMEA segment). The impact of above changes on Europe & Africa are partly offset by the Legic SmartCard and Connect technologies (former segment “other”).
• Global Research and Development costs contain the development costs for global products, and are organized as a Global Function (Product Development) and disclosed separately in the new operating model.

The following table bridges current year segment performance to the former operating model, summarized by the changes described above.

Reconciliation of operational figures

1.2 Net sales per major geographical markets

1.3 Personnel expenses

Personnel expenses also contain Covid-19 contributions from governments for short-time work and other compensation. These grants are recorded in personnel costs with a cost-reducing effect to reflect the economic substance and did not have a material impact on the consolidated financial statements (2021/22 and 2020/21).

Share-based payments

The Nomination and Compensation Committee nominates individual Executive Committee (EC) members and other members of Senior Management for long-term incentive awards. The long-term incentive award in the 2021/22 financial year is granted in full in the form of performance share units of dormakaba subject to a three-year performance-based vesting period. The award is designed to reward participants for the future performance of the earnings per share (EPS) and the relative total shareholder return (TSR) of the company over the three-year performance period. Both performance conditions are equally weighted at 50%. The vesting level may range from 0% to a maximum of 200% of the original number of units granted (maximum two shares for each performance share unit originally granted).

In the 2020/21 financial year, one-third of the long-term incentive award was granted in the form of restricted shares of dormakaba subject to a three-year blocking period. 

The restricted shares allocated to the members of the Board of Directors (BoD) are blocked for three years.

The fair value of the performance share units at the grant date comprises adjustments for lost dividends during the vesting periods and the TSR performance condition. The expenses for the performance share units are allocated on a straight-line basis over the vesting period.

The fair value of the restricted shares corresponds to the value of the closing price of the dormakaba Holding AG share on the SIX Swiss Exchange as at the business day prior to the date of the allocation.

Further information about the allocation of treasury shares is disclosed in the note on share capital and treasury shares (3.2), and further details about long-term incentive stock award plans are outlined in the Compensation Report.

1.4 Financial result

1.5 Taxes

Income taxes

The weighted applicable tax rate is calculated using the expected income tax rates of the individual Group companies in each jurisdiction. The decrease in the weighted applicable tax rate is driven by the reduction in the profit from the US, which has a higher than average tax rate.

Deferred taxes