Dear Shareholders,

Another chapter of Allegion’s story was written in 2017, as we completed our fourth year as a publicly traded company.

By remaining focused on our core strategies, we delivered a strong 2017, outperforming the market. Allegion’s full-year organic revenue growth of 5.7 percent, and our full-year adjusted earnings per share growth of 18.6 percent, were among the best in our peer group. We were profitable in all three of our geographic regions, and our investments in the business are providing solid returns as we continue to deliver strong cash flow.

Allegion’s 2017 success was made possible because of the outstanding efforts of our workforce. First, I am pleased to acknowledge the tremendous commitment of the 10,000+ Allegion employees around the world. They are dedicated to innovation, quality and customer service, and their devotion to safety and enterprise excellence is steadfast. We were recognized by the National Safety Council for making safety a priority, and it remains our goal to become one of the healthiest companies in the world.

Our Board of Directors and my executive leadership team continue to provide sound leadership and strategic governance. Allegion was identified by The Wall Street Journal as one of the best managed companies. Security and access is a great global business for Allegion, driven by the need to secure assets and provide seamless access to the people of the world. Allegion is in a good position to leverage our historic strengths as a global security provider in a world that is moving toward connectivity and digitization.

Commitment to our 5 growth pillars

We remain committed and focused on our overall strategy. By focusing on our five pillars and core business strengths in specification writing, new construction and innovation, we believe our opportunities to make the world safer and more secure will continue to expand. 

Our capital allocation through acquisitions and investments – sixteen in four years – has allowed Allegion to continue expanding our core business in areas that benefit from our expertise and adding new technology to advance our position in a connected world. The recently announced acquisitions of Technical Glass Products, QMI and AD Systems provide opportunities to enhance our presence in the specification-driven applications for which Allegion is known. 

Allegion’s global scale, channel relationships and market expertise in the institutional, commercial, residential and multi-family markets have been important elements in our acquisition strategy and internal investments. By leveraging our strengths and expertise globally in the market segments we know well, Allegion is positioned to continue leading our industry in global organic growth. 

All three of our regions achieved impressive market growth in 2017, and we once again increased our Vitality Index. Our innovation and leadership in electronics and the Internet of Things (IoT) remain strong around the world. Allegion continues to grow in an electronics market that is in its infancy – led by the Americas region, which grew in the mid-teens in 2017. This progress was driven by customer-centered, connected products and regional solutions that drove top-line and bottom-line growth.

Built on our five pillars, our strategy has helped us deliver growth and increased profitability in our four years. We believe it will produce expanded opportunities to deliver against our vision of making the world safer as a company of experts, securing the places where people thrive. 

Future

I love our business, and I’m very optimistic about Allegion’s future. I firmly believe that our best days are ahead of us. Our heritage of global brands, great products and the convergence of connectivity will drive growth for both the security industry and Allegion, but we cannot rest on the success of the past. The world is constantly changing, and serving our customers in the future will be enhanced by digital connectivity.

The growth in seamless access through smart devices, increasing digitization and the global adoption of connected products are accelerating this change, and Allegion is committed to leading innovation and customer value in a connected world. In particular, multiple digital technologies have the potential to directly or indirectly impact our business: artificial intelligence, sensors and eco-system designs are redefining the way people interact and move about within their homes, businesses and social lives, and Allegion will be ready.

While the early chapters of this digital transformation are still being written, Allegion is taking this opportunity to sharpen our strategic thinking and consider our future business. We are investing time and resources to better understand which technologies will likely impact our business so we can make the best decisions for investments, partnerships and acquisitions. Customer experience through great products and connectivity will drive our future. Allegion is in a great position.

As global experts in safety and security, Allegion will continue to play an important role in this changing digital landscape. Our plan is to be there when our customers are ready to make an important security decision, delivering the best products or solution.

Final thoughts

We have a strong Allegion team. Our employees, executive leadership team and Board of Directors are committed to our strategy. Everyone is likewise committed to our unique company culture and to deliver results based on our vision, purpose and values to create peace of mind by pioneering safety and security. Optimism resonates through our entrepreneurial spirit, which drives us to do the right thing for our shareholders, employees and the communities where we operate.

The first four years of Allegion’s history have been successful, and our goal is to deliver long-term, sustainable growth throughout our journey.

With the best team in our industry in place, our best days are ahead of us.

Sincerely,

David Petratis
Chairman, President and Chief Executive Officer 
Allegion plc 

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Media:
Maria Pia Tamburri - Director, Public Affairs
+1.317.810.3399
Maria.Tamburri@allegion.com

Analysts:
Mike Wagnes - Vice President, Treasury and Investor Relations
+1.317.810.3494
Michael.Wagnes@allegion.com

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