Loomis AB (publ)

Thank you very much. Good morning, everyone, and welcome to the second quarter presentation for Loomis. My name is Aritz Larrea, and I'm the CEO of Loomis. And with me here today, I have Christian Akerby, our CFO, and Jenny Bostrom, our Head of Sustainability and Investor Relations. I will give a short overview of the quarter and then open for questions. Let's start the presentation by turning to slide number three. We had a solid performance during the second quarter. The business in Europe and Latin was supported by continued volume growth, and in the United States, we saw growth across all business lines, and we believe our high-quality services will continue to gain market share. When it comes to Loomis Day, we're now seeing that our efforts in the recent quarters are paying off in terms of both increased revenues and transaction volumes, where we saw strong growth within all markets. Our SafePoint business has continued to perform well. Our commitment to growing and developing our offer of automated solutions is an important part of our strategy. As we announced a couple of days ago, we're expanding further into this field with our strategic acquisition of Tima. I will come back to this acquisition later in the presentation. I would also like to highlight that equal access to cash and payments is an increasingly important issue globally. and we see more discussions around the world on the importance of access to cash. I strongly believe that everyone should be included in the payment ecosystem using whichever payment method they wish or are able to use. At Loomis, we provide a vital service by ensuring cash accessibility, and we will continue to support the central banks in ensuring equality and inclusion within the payment ecosystem. Let's move on to the next stage where we have the highlights for the quarter. We had a strong performance in the quarter and achieved a revenue above 7 billion, which is the highest revenue ever in a single quarter. The revenue was positively affected by volume growth, and we are steadily increasing the recurring revenues from both our automated solutions and ATM businesses. The currency movements in the quarter were also favorable. Despite a high comparison quarter, we had solid organic growth in the quarter across all three segments. I would like to highlight here that at the group level, we recorded double-digit growth for our automated solutions. When it comes to the operating margin, that was at 10.6%. The margin was positively impacted by increased volumes and efficiency measures despite the high inflation rates. Our cash conversion was at 36% for the quarter and was affected by the timing in working capital and CapEx. On a rolling 12-month basis, we are in line with our target range of 80 to 90%. Even after distributing a record dividend of 850 million to our shareholders, our balance sheet remains strong. Our net debt versus EBITDA, including leasing, is at approximately 1.5 times at the end of the quarter. And on a pro forma basis, we expect the team acquisition to add less than 50 pips. That said, we continue to have a strong balance sheet for further growth, both organically and via acquisitions, and with continued shareholder distribution. Let's turn to the next page. On this slide, you can see how the revenue and the margin have developed over time. We have had a steady increase in our revenue since the beginning of 2021. Including the currency impact, revenues increased nearly 14% in the quarter compared to the prior year. For the quarter, we achieved an operating margin of 10.6%, which is 0.7 percentage points higher than the prior year. Let's have a look at our segments. We'll switch to the following page and start with Europe and Latin. The positive trend in Europe and Latin America continued, where we had another strong quarter. We achieved organic growth of more than 8% and reached record high revenues of 3.4 billion. The operating margin is at 10.4%, supported mainly by the higher volumes and efficiency measures. I want to remind you that while we have been diligent in raising prices to share the burden of the higher cost base, if inflation continues at the high level we have seen, we may experience a continued timing effect. The operating income of 353 million SEC is our highest operating income for the second quarter. The announced restructuring plan is ongoing, and in the quarter we reported 13 million Swedish kronor as items affecting comparability. The total cost for this program is estimated to 50 to 60 million SEK, and the remaining costs are to be expected to be reported in the following quarters. Turning on to the next page and focusing on the trend of both revenue and margin, we see that the actual growth was at 13 percent when looking at the top-line trend. From the beginning of 2021, we have seen a positive recovery, expanding quarter by quarter in our main markets, and we are now reaching stronger comparison periods. When compared to the second quarter of the previous year, the operating margin is somehow higher, and it is 10.9% when looking at the rolling 12 months. Let's turn to the next page, over to the U.S. The strong momentum continues in the U.S. business. Revenue reached 3.7 billion, with recurring revenue continuing to rise. Our revenue related to automated solutions and ATM represents 43% of our U.S. revenue. Organic growth was close to 7% in the quarter, and we believe that we are continuing to take market share, where our automated solutions business with SafePoint achieved double-digit growth for the 10th quarter in a row. Maintaining our service level is key to keep gaining market share, and therefore we have kept investing in recruiting and training new staff, along with the higher costs related to overtime. Despite this, we reported a strong operating margin of 13.9%. The operating income of $515 million is also our highest operating income ever for our second quarter in the U.S. Moving on to the next page and focusing on the trend of both revenue and margin, We see the exceptional U.S. business revenue trend during the last two years. And while we have benefited from favorable currency rates, I want to stress that our performance in local currency has also been very strong. Regarding the operating margin, we improved the prior year's numbers by 0.7 percentage points. We'll keep focusing on recruitment and retention as well as on efficiency to keep improving our margins. In the most recent statistics publicly available, the indication is that the labor market should ease up somewhat during the autumn, which could be beneficial to us. Let's turn to the next page and talk about Loomis Pay. Also for Loomis Pay, we had a strong revenue growth in all markets, both compared to the previous year and the previous quarter. We have more than doubled the number of live and transacting customers by the end of the quarter compared to the end of 2022. We keep seeing transaction volumes increasing as we move ahead. For the quarter, the increase was 74%, and we achieved for the first time a transaction volume above 1 billion. Let's turn to the next slide, where I will share the strategic highlights for our acquisition of TMAF that we announced a couple of days ago. Our automated solutions with Safevoid as the key product has been a great success, and continuing to grow this business is an important part of our strategy. We have been looking for the right acquisition within our adjacent business to add technologies and competencies to expand our offer, and Tima is the perfect fit to complement our current business. The dedicated focus on R&D and technological know-how is a great strength of the company, and I look forward to welcoming the Tima team to Loomis. Our complementary strengths will allow us to develop groundbreaking solutions which add value to our customers. Chima's global sales network will also provide us with additional growth opportunities and access to new markets. Moving to the next slide is a summary of the transaction details, which you will also find in the press release that we published the other day. We're expecting to close the acquisition during the fourth quarter, and it will be consolidated into SafePoint business line, of which approximately 90% will be within the Europe and Latin segment and 10% in the U.S. Through this acquisition, we can accelerate the growth of our automated solutions in Europe, but also broaden our offering in the U.S., while, of course, also prioritizing to deliver a high quality of service for our existing SafePoint portfolio. Let's turn to the income statement slide, where we have highlighted the items affecting comparability, which are related to the restructuring plan in Europe and Latin America. The increase in net financial items is largely a result of the increased interest rates. The majority of our financing is in variable rates that we've mentioned in the past. Moving on to the next slide, I just wanted to highlight our performance in relation to our history. As you can see, also in a rolling 12-month basis, we have achieved record revenues with a continued improvement to our margins and are now at 11.2 percent. When viewed in relation to our target for the strategic period ending 2024 of 12 to 14 percent, we are clearly on the right track. Let's now move to slide 15 to summarize the second quarter. We achieved record revenues with solid organic growth for both Europe, Latam, and the U.S. We increased the margins for both Europe, Latam, and the U.S. compared to second quarter 2022. Both transaction volumes and revenues ramped up this quarter, and I'm positive that our efforts and investments in Loomis Pay will continue to generate results. With that, I'm done with my summary of the second quarter, so let's turn to Q&A. Operator, we are now open to questions, please.

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. So anyone who has a question may press star and one at this time. And we have the first question from Zuazini Varazani from Goldman Sachs. Please go ahead. Hi, good morning.

Just a couple of questions from me, please. Loops paid revenues has picked up very nicely in the quarter. Can you help us understand how you see the revenues for 3Q? Should we expect a similar sequential acceleration? Or maybe you can help us out with exit rates and then we can extrapolate from there for the month of June? And then on SG&A, it's very clear inflation is still having an impact in Europe. U.S. is still getting impacted by overtime trading costs. And I think you gave some helpful color on, you know, maybe the market expects it to ease by autumn. But is it fair to say that you are still not seeing it sequentially, you know, reducing? It's still sequentially accelerating, the SG&A inflation? Thank you.