Securitas AB Interim Report January-June 2020
30 July 2020
- Total sales MSEK 26 556 (27 684)
- Organic sales growth –4 percent (5)
- Operating income before amortization MSEK 1 075 (1 377)
- Operating margin 4.0 percent (5.0)
- Items affecting comparability (IAC) MSEK –61 (–46), relating to IS/IT transformation programs
- Earnings per share SEK 1.50 (2.18)
- Earnings per share, before IAC, SEK 1.62 (2.27)
- Cash flow from operating activities 248 percent (69)
- Cost savings program initiated in the Group
- Total sales MSEK 54 976 (54 428)
- Organic sales growth –1 percent (6)
- Operating income before amortization MSEK 2 161 (2 667)
- Operating margin 3.9 percent (4.9)
- Items affecting comparability (IAC) MSEK –106 (–66), relating to IS/IT transformation programs
- Earnings per share SEK 3.11 (4.25)
- Earnings per share, before IAC, SEK 3.32 (4.39)
- Net debt/EBITDA 2.1 (2.9)
- Cash flow from operating activities 141 percent (33)
- Significant impact and uncertainty related to the corona pandemic.
Comments from the President and CEO
We had significant negative impact from the corona pandemic in the second quarter. The Group's organic sales growth was –4 percent (5) in the quarter and –1 percent (6) for the first six months. The extraordinary situation of the corona pandemic was reflected in all business segments, with the largest negative impact in Security Services Europe mainly from the rapid decline in the aviation business.
Security solutions and electronic security sales was flat in the second quarter to represent 21 percent of total Group sales, with the installation business within electronic security negatively impacted by the corona pandemic.
The Group’s operating margin was 4.0 percent (5.0) in the second quarter and 3.9 percent (4.9) in the first six months. The decline derived from all business segments, predominantly due to the corona pandemic. The operating margin was supported by cost saving actions and government grants during the quarter, but hampered by increased provisioning. The price and wage balance was on par in the first six months.
The operating result, adjusted for changes in exchange rates, declined by 19 percent in the second quarter as well as in the first six months. Earnings per share, before items affecting comparability, amounted to SEK 3.32 (4.39).
The Group delivered a strong cash flow in the first six months, also when excluding the effects from the withdrawn dividend and corona-related government support measures. Our focus on cash management remains a key priority across all business segments.
Preparing for a strong future
Since the start of the corona pandemic, we have focused on four priorities: the health and safety of our employees, maintaining delivery of our services to our clients, cash flow and cost.
While we entered the second quarter at a turbulent moment for the world, we have seen some encouraging signs during the last few months as restrictions and closures eased. However, much uncertainty remains about the duration and long-term implications of the pandemic.
In light of the corona pandemic and uncertainty regarding the profitability of parts of the business, we have initiated a cost savings program. Assessing all parts of the business, we have identified improvement areas that will contribute to the operating result of the business and will enable us to strengthen and accelerate the strategy execution throughout the Group. The program is expected to be executed over the next 12 months and based on our current assessment, the restructuring costs are estimated to be in the range of MSEK 350–500 and will be recognized over the course of the next 4 quarters as items affecting comparability. The payback period is about 2 years and the savings will have a positive impact starting in the fourth quarter 2020.
This has been a very challenging period for our clients and our people but our leaders and teams have been working relentlessly and the Securitas team has shown incredible resilience. All Securitas team members deserve strong recognition for their leadership and professionalism during these challenging times.
We remain focused on winning in the security services industry with our strong offering of protective services and solutions, while we keep investing in our strategic transformation to emerge as an even stronger company tomorrow.
Chief Executive Officer