Securitas AB Interim Report January-September 2020 and reins
Securitas AB reported a third-quarter operating profit and is reinstating its dividends. Operating profit was 1.14 billion Swedish crowns (£97.13 million), down from a year-ago 1.44 billion but up from 882 million in the previous quarter.
- Total sales MSEK 26 501 (28 214)
- Organic sales growth 0 percent (4)
- Operating income before amortization MSEK 1 327 (1 574)
- Operating margin 5.0 percent (5.6)
- Items affecting comparability (IAC) MSEK –112 (–60), relating to IS/IT transformation programs and the cost savings program in the Group
- Earnings per share SEK 2.08 (2.56)
- Earnings per share, before IAC, SEK 2.31 (2.68)
- Cash flow from operating activities 199 percent (138)
- Reinstated dividend proposal SEK 4.80 (4.40) per share to be resolved at an EGM in December
- Total sales MSEK 81 477 (82 642)
- Organic sales growth 0 percent (5)
- Operating income before amortization MSEK 3 488 (4 241)
- Operating margin 4.3 percent (5.1)
- Items affecting comparability (IAC) MSEK –218 (–126), relating to IS/IT transformation programs and the cost savings program in the Group
- Earnings per share SEK 5.18 (6.82)
- Earnings per share, before IAC, SEK 5.63 (7.07)
- Net debt/EBITDA 1.9 (2.5)
- Cash flow from operating activities 163 percent (72)
- Significant impact and uncertainty related to the corona pandemic
Comments from the President and CEO
The corona pandemic continued to have negative impact on the Group’s operations in the third quarter, but the overall business situation improved compared to the second quarter. The Group’s organic sales growth was 0 percent (4) in the quarter and 0 percent (5) for the first nine months, with all business segments improving during the quarter. The airport security business is still heavily impacted by the corona pandemic, with the largest negative impact in Security Services Europe. We have been able to offset some of the portfolio reductions with increased extra sales, helping our clients with their security needs related to the corona pandemic.
Security solutions and electronic security sales was 22 percent (21) of total Group sales. The installation business within electronic security is negatively impacted by the corona pandemic, but improved in the third quarter compared to the second quarter.
The Group’s operating margin was 5.0 percent (5.6) in the third quarter and 4.3 percent (5.1) in the first nine months, with all business segments behind last year mainly due to the corona pandemic. The operating margin was supported by cost saving actions and government grants but hampered by increased provisioning. The price and wage balance was on par in the first nine months.
The operating result, adjusted for changes in exchange rates, declined by 8 percent in the third quarter and by 15 percent in the first nine months. Earnings per share, before items affecting comparability, amounted to SEK 5.63 (7.07).
The Group delivered a strong cash flow in the first nine months, also when excluding the effects from corona-related government support measures. We have re-initiated acquisition activities and in the third quarter we announced the strategically important acquisition of STANLEY Security’s electronic security businesses in five countries. The acquisition was closed on November 2.
In light of the improving financial performance and the solid financial position under a continued prudent approach, the Board of Directors has decided to reinstate the dividend proposal of SEK 4.80 (4.40) per share earlier withdrawn on April 28.
Preparing for a strong future
Although we experienced improvements in the general business environment in the third quarter compared to the second quarter, much uncertainty remains regarding the duration and long-term implications of the pandemic. We maintain focus on our four main priorities to handle the corona pandemic: the health and safety of our employees, delivery of our services to our clients and supporting their new needs, managing cash flow and cost.
In the second quarter we announced a cost savings program in the Group, addressing the profitability in parts of our business due to the corona pandemic. We have started to implement this program in the third quarter and restructuring costs of MSEK 59 were recognized as items affecting comparability. The first savings will start impacting in the fourth quarter and gradually increase thereafter. We earlier estimated a range of restructuring costs of MSEK 350–500 with a payback period of 2 years. The final amount of restructuring will largely depend on changes related to government grants and the development of the airport security business. We expect to finalize the program at the end of the second quarter 2021.
Despite the challenging situation with the corona pandemic we maintain high focus on our transformation programs: the business transformation in Security Services North America and the global IS/IT transformation. During the third quarter, we implemented an important part of the business transformation program in Security Services North America. The Securitas team has shown great strength and commitment throughout these difficult times with a strong focus on adapting to our clients’ needs. Our resilience, combined with our strong offering of protective services and solutions, gives us a competitive advantage also in turbulent times.
President and CEO