Notes to the consolidated financial statements 

The consolidated financial statements of dormakaba Group (“dormakaba”) includes the operations of dormakaba Holding AG and all direct and indirect subsidiaries in which dormakaba controls more than 50% of votes or otherwise has the power to govern the financial and operating policies. Investments in associates where dormakaba exercises significant influence, but does not have control (normally with an interest between 20% and 50%), and in joint ventures are considered for using the equity method of accounting.

The unaudited consolidated half-year financial statements cover the period from 1 July 2020 until 31 December 2020 and are prepared in accordance with the rules of the Swiss GAAP FER 31 (“Complementary Recommendation for Listed Public Companies”) relating to interim financial reporting (Generally Accepted Accounting Principles/ FER = Fachempfehlungen zur Rechnungslegung).

The consolidated half-year report should be read in conjunc­tion with the consolidated financial statements compiled for the financial year ended 30 June 2020, as it represents an update of the last complete financial statements and therefore does not contain all information and disclosures required in year-end consolidated financial statements. The consolidated financial statements are prepared in accordance with Swiss GAAP FER and comply with the provisions of the listing rules of the SIX Swiss Stock Exchange as well as the Swiss company law.

The Covid-19 pandemic continues to have a significant impact on the global economic environment. The established comprehensive crisis management measures implemented by the Group management in the last financial year are ongoing. The aim of the measures is to ensure the health and safety of all employees, to minimize the impact on business operations and supply chains, and thus on customers, and to focus on cash flow by following a “cash is king” principle. dormakaba adjusted its financial management as well as its forecast structures in order to always retain its entrepreneurial flexibility and financial stability. This includes the daily monitoring of cash flows, liquidity and the status of financial debt at Group level, also regarding available undrawn credit facilities. In November 2020 dormakaba renewed its main credit facility with a new five-year syndicated loan in the amount of CHF 525 million. Further increased attention is on the net working capital management, which also includes a strict credit management and collection discipline on the trade receivables, as well as restrictions on capital expenditures.

The operational performance and the market development are described in the chapter “Business performance” and should be read in conjunction with this consolidated half-year report.

Income tax expense is recognized based upon the best estimate of the weighted average annual income tax rate expected for the full financial year. The preparation of the consolidated half-year financial statements requires manage­ment to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, and disclosure of contingent liabilities at the date of the consolidated half-year financial statements. If in future such estimates and assumptions, which are based on management’s best judgment at the date of the consolidated half-year financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the reporting period in which the circumstances change.

dormakaba treats transactions with minority interests that do not result in a loss of control as transactions with equity owners of dormakaba. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and minority interests to reflect their relative interests in the subsidiary.

Business combinations

The following table summarizes all considerations paid for businesses, as well as the assets and liabilities acquired and recognized at fair value as at the acquisition date in the first half year 2020/21 and for the full year 2019/20 in comparison.

In the first half year 2020/21 dormakaba has acquired E Plus Nominees Pty Ltd., based in Melbourne (AUS), and 1st Access Group Ltd., based in Hertfordshire (UK). The goodwill resulting from these acquisitions is offset in equity against retained earnings.

Divestments

Norwegian project installation business

On 31 August 2020, dormakaba divested its project installation business in Norway. The purchaser of the business is Låssenteret, which is a well-established Norwegian security installation group. With this transaction, Låssenteret and dormakaba will further strengthen their already existing commercial relationship.

Some of the key figures used by dormakaba to measure the financial performance are not defined by Swiss GAAP FER. The comparability of these figures with those of other companies might be limited. Explanations and reconciliations of these APMs are disclosed below.

Capital expenditure

Capital expenditure (Capex) consists of the additions in property, plant, and equipment and the additions of intangible assets.

Free cash flow and free cash flow before acquisitions/divestments

Free cash flow consists of cash flow from operating activities together with cash flow from investing activities. Free cash flow before acquisitions/divestments excludes the cash effective movements arising from acquisitions/divestments.

Net debt

Net debt describes the current borrowings and non-current liabilities minus cash and cash equivalents.

Net working capital

Net working capital is used by the Group to measure the efficiency of the segment in managing financial resources and complements the Group's performance management. dormakaba defines net working capital as trade receivables plus inventories, minus the sum of trade payables, advances from customers and deferred income.

Operating cash flow margin

Operating cash flow margin is calculated as the ratio of net cash from operating activities to net sales.

Operating profit before depreciation and amortization (EBITDA)

Earnings before interest, taxes, depreciation, and amortization (EBITDA) corresponds to the operating result (EBIT) before depreciation on tangible fixed assets and amortization on intangible assets.

Organic sales growth

Organic growth in sales refers to the growth compared to the same period of the previous year adjusted for the impacts from currency translation as well as impacts from acquisition and divestment.