Notes to the consolidated financial statements for the financial year 2022/23

1.1 Segment reporting

Operating model until 30 June 2023

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 a standalone global segment.

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

With a clear portfolio segmentation, dormakaba focuses on its global core businesses Access Automation Solutions (door operators, sliding doors and revolving doors), Access Control Solutions (connected devices and engineered solutions), Access Hardware Solutions (door closers, exit devices, and mechanical, key systems) and Services. The Group is also a market leader for Key Systems (key blanks, key cutting machines, and automotive solutions such as transponder keys and programmers), as well as Movable Walls including acoustic movable partitions and horizontal and vertical partitioning systems.

Segment Reporting

Reconciliation of operational figures

Operating model and organizational structure as of 1 July 2023

In line with its Shape4Growth strategy to boost profitable volume growth, dormakaba continues to strengthen its operating model by further optimizing its organizational structure.

The organizational structure was simplified by moving all AS commercial business into one functional unit under one leadership of a Chief Commercial Officer (CCO) with continued support by Global Functions Operations and Innovation. The company’s seven key markets (USA/Canada, Germany, Australia/New Zealand, Switzerland, UK/Ireland, China, and India) are now reporting directly to the CCO; together they represent 65% of Access Solutions sales. The original equipment manufacturing (OEM) business of Region Asia Pacific was moved to Key & Wall Solutions and the segment was renamed accordingly to Key & Wall Solutions and OEM.

Operating model

Organizational structure

Segment reporting as of 1 July 2023

1.2 Net sales per geographical markets / business units

1.3 Personnel expenses

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 2022/23 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).

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

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 Other operating expenses

1.5 Financial result

1.6 Taxes

Income taxes

The weighted applicable tax rate results from applying each subsidiary’s statutory income tax rate to the income before taxes. Since the group operates in countries that have different tax rates, the weighted applicable tax rate may vary from year to year according to variations in income per country and changes in applicable tax rates.

The effective income tax rate of 37.8% (2021/22: 48.5%) is significantly impacted by the amortization of goodwill (see note changes in accounting principles and restatement of previous period (5.1)). Amortization of goodwill that is non-deductible for tax purposes results in an increase of the effective tax rate. The impact from “non-deductible goodwill amortization” is disclosed separately in the reconciliation above. Without this impact, the effective tax rate is 26.6% (2021/22: 22.9%). The lower rate in the previous year was mainly due to significant tax charges and credits of CHF 6.1 million relating to years before the financial year 2021/22.

Deferred taxes

These financial statements have been prepared without recognition of deferred tax assets and liabilities nor top-up taxes related to the ‘International Tax Reform – Pillar Two’. Developments are closely monitored, and it is expected that for dormakaba the Pillar Two rules will come into effect for the first time in the financial year 2024/25.