Securitas AB Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Grobler - BNP Paribas Exane - Analyst : Three from me, if I may. Firstly, just on the margin bridge towards that 8% target that you had talked to before. Just given the movements in the business over time, which of those components are now bigger or smaller relative to previous expectations in terms of driving that margin accretion -- particularly I'm thinking around stuff like strategic assessments, where not much has changed since these were originally set? Secondly, just on free cash flow, which was very strong through the quarter, particularly working capital. To what extent is that timimg? And to what extent is that structural or strategic changes within the business, i.e., sustainably better going forward? And then third, just slightly a housekeeping one. The other segment was materially better than it was in Q3 '23 from a profitability perspective. Could you just talk through the changes there?

Question: Remi Grenu - Morgan Stanley - Analyst : If I may. So the first one is on probably the key highlight of the publication. So the improvement, especially in Guarding, profitability in Europe, it's quite a steep improvement you've delivered. So I wanted to understand what has changed really within that business, if you can elaborate a little REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 8:30AM, SECUb.ST - Q3 2024 Securitas AB Earnings Call bit on that? And if we should extrapolate that year-on-year improvement over the next few quarters, you believe or if there is any one-off effect in there? So that's the first question. The second one is on the US. I picked up on your comment that you want to focus on commercial development now. So if you can elaborate a little bit on that? And when and how fast you believe that we can improve that client retention, which is slightly down versus previous levels? So that's second one. And then the third one is on pricing. You're flagging that over about nine months. The pricing had a positive impact, I guess, running a little bit higher of cost inflation, so positive impact on profitability, I believe you mentioned. So can you just help us quantify a little bit that positive pricing impact? Thank you.

Question: Suhasini Varanasi - Goldman Sachs Group, Inc. - Analyst : Just a couple for me, please. Can you -- you talked about the pressures on the technology margins in both North America and Europe, but it sounds like this can basically continue over the coming quarters. Should we expect this to weigh on margins over Q4 and Q1 next year and then maybe start to show an improvement from Q2? And the second one is on IAC costs. Can you remind us, please, how do you see IAC costs going into 2025? Thank you.

Question: Raymond Ke - Nordea Markets - Analyst : Two questions from me. First, just on extra sales. Was the Olympics a positive contributor to margin here in the quarter? And if so, curious if you've done the exercise to see what European margin would have been without it? And secondly, we've seen the margin improvement in Europe. I just want to ask a bit about the timing of margin development in Ibero-America and how we should think there? Were you disappointed because it didn't keep up with Europe in margin improvement? Or are you prioritizing Europe ahead of Ibero-America and this is pretty much in line with your own expectations? Thank you.

Question: Raymond Ke - Nordea Markets - Analyst : Okay. I could ask one more question, I guess. Just curious on the IAC, I think it was asked before, but you did say that you expect it to come down on the next years from SEK550 million and notthe raised level of SEK750 million. Is that correct?

Question: Raymond Ke - Nordea Markets - Analyst : Right. And just looking at IAC related to the Stanley integration, I expected to reach SEK1.5 billion, the guidance here after 2024. Presumably, I mean, is it fair to assume that this continues? Or do you really expect sort of a hard and abrupt stop here in Q4?

Question: Raymond Ke - Nordea Markets - Analyst : Okay. Great. And just a final quick one. If you compare the organic growth and the drivers there, how much is price versus volume in this quarter?

Question: Viktor Lindeberg - Carnegie Investment Bank AB - Analyst : So trying to follow up again here. On your strategic assessments, could you say how much of this is an internal sort of exercise and preparation, getting the assets in shape versus the market or external perspective on finding prospects and call it negotiation in light of overall market turmoil and so forth? So where are you in that balance? First question. Second, on US corporate tax sensitivity. Could you elaborate a bit on what trickles through from your operating earnings down to bottom line that one should be mindful of when modeling your tax in the US business? Starting with those two. Thanks

Question: Viktor Lindeberg - Carnegie Investment Bank AB - Analyst : Okay. Appreciate that. Some housekeeping from my side and maybe looking at contract expirations around the corner. Any sizable contracts that we should be mindful of when modeling organic growth going into the next year for the different business lines?

Question: Sylvia Barker - JPMorgan Chase & Co - Analyst : Two for me, please. Firstly, on the European margin and the impact from optimizing the profitability. So how much of that is contracts being exited versus you repricing contracts? And how do we think about that of being ongoing or annualizing in any particular fashion over the next few quarters? Second question, Germany and France are your biggest European markets. Just mindful of the macro, can you remind us how much of these markets and how much of the revenue, at least from auto, aerospace or manufacturing customers, please? And then finally, just a very small point, but depreciation stepped down quarter-on-quarter. What's the reason for that? Thank you.

Question: Johan Eliason - Kepler Cheuvreux - Analyst : Good morning. This is Johan at Kepler Cheuvreux. I was wondering a bit about your growth. I mean, you don't have a growth target for the group, but you do have this 8% to 10% growth target for the technology and solutions part of the business. And now, when we look back a bit more than a year, we see that you've been at the very low end of this 8% to 10% target or below. I mean, this quarter, you talked about 6%, and it was just at around 8% in the previous quarters, et cetera. Why is that? And what do you aim to do about it? And then secondly, on Technology, the margin, you have highlighted a number of [issues] on the cost side explaining why it looks like the margin actually fell year-over-year in the technology business. How do you see this? Is this also impacting the next quarter, we should be expecting falling technology and solutions margins year-over-year? Or these cost focus, you mentioned, that will improve over the coming quarters, will it safeguard already the Q4 margin? Thank you.

Question: Johan Eliason - Kepler Cheuvreux - Analyst : Good. Just a follow-up on the margin, I mean it's a pretty good level, I must say, I mean, 11.2% or so. Have you seen a different growth rates from the technology type of business like Stanley and the solutions you add on top of it, if you look at the organic growth? And could that be a positive or a negative margin driver as well?

Question: Stefan Ward - Pareto Securities AS - Analyst : I'd like to ask you a couple of questions regarding Spain and Portugal. If you could break out the performance of those two markets in Ibero-America as much as possible in terms of sales, EBITDA and margin? And also, if you could describe a little bit about the price wage balance in those markets and the demand situation, please?

Question: Stefan Ward - Pareto Securities AS - Analyst : Can you give some -- I mean, I assume that you are around 75%, 80% of sales and possibly even higher of EBITDA. Can you confirm that you are given update on that as a portion of the EBITDA, that is?

Question: Stefan Ward - Pareto Securities AS - Analyst : Then a little bit different question, but wouldn't it make sense at some point to include those markets in Europe instead? Because if Lat Am is such a small portion, and they have increased their size and they are European markets and well performing. What's your view on that?

Question: Stefan Ward - Pareto Securities AS - Analyst : Yeah, I understand. My thought is more like just margins in Europe have been struggling. They're now improving, but you have such well-performing assets actually in Europe. So that could be part of a solution to improve the profitability in Europe. But that's just -- thank you very much and congratulations on a great set of numbers. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 06, 2024 / 8:30AM, SECUb.ST - Q3 2024 Securitas AB Earnings Call

Question: Remi Grenu - Morgan Stanley - Analyst : Yes. Just one follow-up question on my side to a follow-up on one of the questions asked by one of the other analysts and on specifically the margins in Europe, the improvement and the two things you mentioned, so the seasonality of the aviation business. So just to ask the question