• Organic Growth: 4% for the Group, 6% in Technology and Solutions.
• Operating Margin: Improved to 7.3% for the quarter.
• Operating Cash Flow: 153% for the quarter, 84% for the full year.
• Net Debt-to-EBITDA Ratio: Reduced to 2.5 times.
• Dividend Proposal: Increase to SEK4.50.
• Security Services Growth: 3% in Q4.
• EBITDA Margin: 5.5% for the Group.
• Technology and Solutions Sales Growth: 6% in Q4.
• Operating Margin in Technology and Solutions: Improved to 11.6%.
• North America Organic Sales Growth: 2% in Q4.
• Operating Margin in North America: 9.3%.
• Europe Organic Sales Growth: 5% in Q4.
• Operating Margin in Europe: 7% in Q4.
• Ibero-America Organic Sales Growth: 3% in Q4.
• Operating Margin in Ibero-America: 7.5%, highest achieved in the region.
• Net Debt: SEK37.9 billion at quarter end.
• Free Cash Flow: SEK3.7 billion in Q4.
• CapEx: 2.4% of sales in Q4, 2.5% for the full year.
• EPS Real Change: 39% in Q4.
• Tax Rate: 26.3% for the full year.

• Warning! GuruFocus has detected 7 Warning Sign with SCTBF.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Securitas AB (SCTBF) achieved 4% organic growth for the Group and 6% sales growth in Technology and Solutions, with an improved operating margin of 7.3%.
• The company reported a strong operating cash flow of 153% in the quarter and 84% for the full year, contributing to a net debt-to-EBITDA ratio of 2.5 times.
• The Board of Directors proposed a dividend increase to SEK4.50, reflecting confidence in the company's financial health.
• Securitas AB (SCTBF) successfully completed the STANLEY integration, enhancing its technology capabilities and enabling a focus on commercial development.
• The company initiated a business optimization program expected to generate annual savings of approximately SEK200 million, leveraging AI and digital platforms for efficiency.

Negative Points

• The termination of an Aviation contract in North America negatively impacted growth in services, with client retention slightly lower at 87%.
• System implementation challenges in Pinkerton affected Q4 results, though improvements are expected in future quarters.
• The hyperinflationary environment in Turkey contributed significantly to growth, indicating reliance on price-driven growth rather than volume.
• The divestment of the Aviation business in France is underway due to limited strategic opportunities, with the business performing below average margins.
• The company faces macroeconomic challenges in Europe, with potential impacts on organic growth and margins, particularly in Germany and France.

Q & A Highlights

Q: Can you elaborate on the sustainability of the recent improvements in cash generation and the divestment of the French Airport business? A: Andreas Lindback, CFO, explained that the improvements in cash generation are due to structural initiatives, particularly in the technology business, optimizing cash processes. He expects strong cash flow to continue into 2025. Regarding the French Airport business divestment, CEO Magnus Ahlqvist noted that the market is price-oriented, and the business will be better managed by another entity. The divestment is expected to have a positive margin impact as the business was underperforming compared to the European average.

Q: Are you satisfied with the remaining airport business after terminating contracts in the US and planning to divest in France? A: CEO Magnus Ahlqvist stated that the company has improved the health of its Aviation business significantly since the pandemic. They remain disciplined in ensuring contracts support strategic goals and profitability. The focus is on maintaining quality and ensuring reasonable compensation for services.

Q: How does hyperinflation in Turkey affect your growth, and what are the dynamics in Europe by country? A: CFO Andreas Lindback mentioned that hyperinflation in Turkey contributed to about half of Europe's organic sales growth and one-third of the Group's growth. In Europe, growth is driven by price increases, especially in the Guarding segment, while technology and solutions see volume growth. CEO Magnus Ahlqvist added that Europe is seeing broad-based improvement, with strong new sales at healthy margins despite macroeconomic concerns.

Q: What is your exposure to the US Federal Government, and how is the Pinkerton integration progressing? A: CEO Magnus Ahlqvist noted that the Critical Infrastructure Services business is stable with no significant changes. The Pinkerton integration faced challenges in 2024, but improvements are expected throughout 2025, with a focus on leveraging new systems for future growth.

Q: Can you provide more details on the business optimization program in Europe? A: CEO Magnus Ahlqvist explained that the program focuses on optimizing branch networks, support services, and restructuring non-performing businesses. It aims to leverage digital tools and AI for efficiency, with expected annual savings of SEK200 million by 2026. The program is not significant in terms of revenue impact but is crucial for operational improvements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.