Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Securitas AB (SCTBF, Financial) reported a 5% organic sales growth for the group and a 6% real sales growth in technology and solutions.
- The operating margin improved by 60 basis points to 7.5%, marking the highest margin recorded for the group in the last 20 years.
- Strong performance in Europe, with a 7% organic sales growth and a 7.7% operating margin, driven by improvements in security services.
- Operating cash flow was significantly improved at 115% of the operating result, contributing to a better leverage position.
- The company is making steady progress in its strategic transformation, aiming for an 8% operating margin by the end of 2025.
Negative Points
- North America's performance was slightly below last year, impacted by the termination of an aviation contract.
- The technology business in North America faced negative cost developments after the completed carve-out, affecting margins.
- Pinkerton's performance was weak due to modernization efforts, negatively impacting profitability.
- The operating margin within technology and solutions was slightly below last year due to negative cost developments.
- Items affecting comparability included a SEK697 million charge, with SEK536 million related to the Paragon US government investigation.
Q & A Highlights
Q: Can you elaborate on the margin bridge towards the 8% target and any changes in components driving margin accretion?
A: Magnus Ahlqvist, CEO: We are making steady progress with no significant changes in the relative importance of components. We are executing the plan built, managing different dynamics as they arise.
Q: What is the nature of the strong free cash flow in the quarter? Is it timing or structural changes?
A: Andreas Lindback, CFO: The strong free cash flow is due to solid performance with no major timing differences. The net working capital as a percentage of sales remains stable, supported by reduced growth.
Q: Can you explain the improvement in Guarding profitability in Europe and if it can be extrapolated?
A: Magnus Ahlqvist, CEO: The improvement is due to a long-term strategy focusing on quality over volume. While seasonality in aviation contributed, the majority of the improvement is structural.
Q: What are the expectations for technology margins in North America and Europe?
A: Magnus Ahlqvist, CEO: We have seen cost pressures after completing the Stanley integration, but expect to address these in the coming quarters, leading to margin improvement.
Q: How is the pricing strategy impacting profitability?
A: Magnus Ahlqvist, CEO: We are slightly ahead in price increases over wage increases. This is part of active portfolio management, addressing contracts with subpar profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
