Loomis AB (publ)

Thank you very much. Good morning, everyone, and welcome to the fourth quarter presentation for Loomis. My name is Aritz Larrea, and I'm the CEO of Loomis. With me here today, I have our CFO, Johan Wilsby, and Jenny Bostrom, our head of sustainability and investor relations. I will begin by doing a brief review of our Q4 business performance. I will then review the financials and provide an overview of the year 2023 before taking questions. Let's start the presentation by turning to slide three. Starting with an overview of the market development and how the trends relate to our business, we had a solid performance during the fourth quarter. We continue to see high demand for cash-handling automated solutions, and we have had strong growth within SafePoint in both the U.S. and Europe. I'm happy to have the team on board and to be focusing on creating positive sales synergies in this area. While many of our business lines had revenue growth in the quarter, we did see a cyclical volume decline in our international and FX businesses. We have seen that the higher interest rate environment impacts the demand for storage and transportation of cash and valuables, which has a negative effect on the international business line. Similarly, the high metal prices impacted the gold in our FX business. Globally, equal access to the payment sector is becoming more and more important. We are witnessing an increase in global conversations around the significance of having access to various payment methods, including cash, due to the present geopolitical environment and growing cybersecurity risks. Here, we have an important role to play in supporting society with efficient and sustainable payment flows. We're also pleased to see an increase in interest from many stakeholders when it comes to sustainability. The corporate sustainability reporting directive came into effect at the beginning of 2024, and we are in the process of implementing what will be required of us as a company. Our double materiality analysis will help set LUMIDIS long-term reports within sustainability going forward. I will share some highlights of initiatives within sustainability during the fourth quarter later in the presentation. 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 $7.4 billion, which is the highest revenue ever in a single quarter. The revenue was positively affected by the organic growth as well as the acquisition of FEMA. We saw solid organic growth in the quarter with an increase in all three segments despite a strong comparable quarter. We also recorded double-digit growth for our automated solutions overall. Our commitment to growing and developing our offer of automated solutions is an important part of our strategy. Our operating margin was 10.7% in the quarter. The US segment had a great performance and successfully continued to implement operational efficiencies. The overall business in Europe and Latin America performed well. However, specific areas within the segment didn't deliver according to our expectations, and we are taking action. Our strong cash flow throughout the quarter resulted in over 3 billion Swedish krona in operating cash flow for the year. Despite certain timing issues during the quarter, we were able to lower our day sales outstanding successfully. For the full year, operating cash flow in relation to our operating profit was 100% for the year, which is a strong number. As we announced yesterday, the Board of Directors has announced to restart the share repurchase program and repurchase shares for an amount up to 200 million Swedish krona in the first quarter. The Board has also proposed an increased dividend to 12.5 krona per share for the 2023 financial year. equivalent to about 60% of earnings per share, which is at the higher end of the interval within our communicated distribution policy. Let's turn to the next page where 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 and acquisitions. Revenues increased 10% in the quarter compared to the prior year, and the organic growth was 6.3. Naturally, we would like to see a rise in margin. However, throughout the quarter, our operating margin did not trend positively. Allow me to continue addressing these drivers in detail in our segments. Let's turn to the next stage and start with Europe and Latin. The positive trend in revenue growth in Europe and Latin America continued where we had another strong quarter. With the impact of the acquisition of TEMA, we reached record high revenues of close to 3.6 billion. The organic growth rate was above 4%, and the impact from changes in currency rates was limited. The present macroeconomic climate has negatively impacted our FX and international businesses, which influenced our 9.8 operating margin. In addition to this cyclical impact, we experienced certain operational issues in our FX line of business during the quarter, which negatively impacted our profitability in Europe and Latin America. Additionally, as this is the first quarter with FEMA in the group, integration-related expenditures prevented the acquisition from being completely accretive in the fourth quarter. Turning on to the next page and focusing on the trend of both revenue and margin, we see that the total top-line growth was 12%. Since the beginning of 2021, we have seen a positive recovery, expanding quarter by quarter in our main markets, and we are now reaching stronger comparisons since 2022, which was our big recovery year after the pandemic. Given the lower operating margin in comparison to the previous year, our primary goal for 2024 is to improve and increase our profit margins. Expanding our margin in the Europe and Latin division will need a focus on both efficiency and restructuring strategies. Let's turn to the next page over to the U.S. The strong momentum continued in the U.S. business. Revenues were above $3.8 billion with a continued increase in recurring revenues. Our revenue related to automated solutions and ATMs represents 44% of the U.S. revenue. Organic growth was 6.5 in the quarter with our automated solutions business with PayPoint achieving double-digit growth for yet another quarter in a row. We reported a strong operating margin of 15%, and the operating income of $578 million is a new record for us. Moving on to the next stage and focusing on the trend of both revenue and margin, and here we see the exceptional U.S. business revenue trend during the last three years. And while we have benefited from favorable currency rates during parts of this period, I want to stress that our performance in local currency has also been very strong. We were extremely pleased to preserve the margin of 15% from the previous year, which we achieved via structuring our focused approach towards operational efficiency. Let's turn to the next stage and talk about Lewis Pay. Also for Lewis Pay, we had a strong revenue growth in all markets, both compared to the previous year and the previous quarter, and revenues reached 17 million Swedish kroner. Transaction volumes increased significantly compared to the previous year, and were slightly down compared to the third quarter, following the normal seasonality pattern of the food and beverage market. For the fourth quarter, the increase was 92% compared to the same quarter last year, and we achieved about $1.2 billion in transaction volumes. Let's turn to the next slide, where I will share a couple of highlights on our progress on our sustainability initiatives. We can see that our sustainability-related projects are moving forward, and we are clearly on track towards reaching our sustainability targets for the strategic period. Keeping our employees safe and minimizing the risk of injuries is one of our most important responsibilities. Therefore, I'm also pleased to share that we have succeeded in further reducing the injury frequency rate during the year, and we've continued to strengthen our proactive measures for our employees' well-being. Even with our strong organic growth, we have successfully decreased our carbon emissions from fuel consumption and energy usage in absolute terms. We have invested in a lighter and electrified fleet, smarter route planning systems and technology, which all have contributed to emission reductions and have been beneficial from a cost perspective. We continue to gradually raise our ambitions within sustainability. One such step has been to update our code of conduct for suppliers to reflect not only what we expect from our suppliers in terms of ethics and how they handle their workforce, but to also cover the climate impact and supply chain responsibilities. We have also introduced a global training in diversity for our managers within the organization as part of our long-term initiative to promote fairness and inclusion throughout the organization. I'm very proud of the actions we're taking within the organization and the progress we're making. Let's turn to the income statement slide, where I'll start by highlighting the strong growth we have achieved both for the isolated quarter and for the full year, where our real growth is 9%. Apart from the remarks I made on the EBITDA evolution in the previous slides, there were a few things that affected comparability throughout the quarter. One was associated with the Argentine pesos depreciation, and another included the impairment of goodwill in one of our subsidiaries. We also have some costs associated with the restructuring plan in Europe and Latin America for the entire year. We expect to implement the remaining portion of the restructuring plan at the beginning of this year, and you can anticipate that the majority of the remaining restructuring costs will be recorded in our profit and loss statement during the first half of the year. I would also like to highlight that the increase in net financial items is largely as a result of increased interest rates. We see the entire impact of the prior interest rate rises in our finance net for the quarter since, as you're aware, the majority of our borrowing has variable rates. Moving on to the next slide to highlight our performance in relation to our history. In 2023, we have achieved record revenues with strong year-over-year growth. while our margin is stable on a reported basis. Looking ahead towards 2024, we will continue to drive our growth by focusing on recurring revenue at the same time that we focus on our structural work with operational efficiencies in order to increase our margins. In addition, the positive synergies with TEMA will contribute and have a positive impact on our performance. We are thus confident that our business plan and that we will reach our financial targets. Now moving to my final slide to summarize the full year. We achieved record revenues of $28.7 billion with an organic growth of 6%, which is solid growth given that we also had a record year last year. We saw organic growth within our segments for the full year. Thanks to growing revenues and structured work on improving our operational efficiency, our margin increased in the U.S. As I touched upon earlier, there is more to do in terms of margin expansion, and we will continue to execute our efficiency programs and restructuring plans in the coming year in order to reach our target of at least 12% EBITDA margin. In terms of Loomis Bay, both transaction volumes and revenues rocked up this year, and I'm positive that our efforts and investments in Loomis Bay will continue to generate results. We achieved a strong operating cash flow of more than 3 billion SEC for the year, which in relation to our operating profit was 100%. We have a strong balance sheet with the capacity to continue to make strategic and value-creating acquisitions and distribute returns to our shareholders. Our capital allocation priorities remain, and we aim to use our capital in the best way to generate returns and create value for our shareholders. The Board of Directors has decided to continue with share repurchases in the next quarter, in addition to a proposed dividend of 12.5 SEC per share. The dividend, which stands for 60% of earnings per share, is at the top of our declared distribution policy. Lastly, we're making progress within our climate-related sustainability initiatives, and in 2023, we further decreased our offshore emissions from transportation by close to 4% compared to the level of last year. As we get more and more electric vehicles on the road and further work on optimizing our routes, we are decreasing our emissions from transportation despite growing our business volumes. With additional solar panel installation projects and a higher share of renewable energy, I'm confident we will achieve our absolute CO2 emission reduction targets while growing the business. As I mentioned before, keeping our employees safe and minimizing the risk of injuries is one of our most important responsibilities. While our efforts have paid off in 2023, we can never be done here, and we will continue to strengthen our proactive measures for our employees' safety. With that, I'm done with my summary of the fourth quarter and full year, so let's turn to Q&A. Operator, we are now open to questions, please.

Thank you very much. Ladies and gentlemen, at this time, we will begin the question and answer session. If you would like to ask a question, you may press star and 1. If you wish to remove yourself from the question queue, you may press star and 2. Anyone who has a question may press star and 1 at this time. Our first question today is from Daniel Thorson from ABG. Please go ahead with your question.

Yes, thank you very much. I start off with a question on the U.S. market here. You have outperformed key peers in the U.S. quite significantly on organic growth in the recent quarters. Is that the pure strength in the growing market in your view, or do you see any slowdown in the U.S. market that could hit 2024 growth rates as competition could rise?