Loomis AB (publ)

Thank you very much. Good morning, everyone, and welcome to the first quarter presentation for Loomis. My name is Harith 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 giving a brief review of our Q1 business performance and an overview of our results 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 quarter. We continue to see high demand for cash-handling automated solutions, and we have a strong growth within SafePoint in both the U.S. and Europe. This is our second quarter with Chima in the group, and I'm pleased to see how well they have integrated. Chima had a strong performance in the quarter with positive sales synergies. While many of our business lines had revenue growth in the quarter, we did see a cyclical volume decline in the international and the FX businesses. As we have communicated since the third quarter last year, we have seen that the higher interest rate environment and metal pricing impact the demand for storage and transportation of cash and valuables, which has a negative impact on the international business line. Similarly, the high metal prices impacted the gold trading within our FX business. We are witnessing an increase in global conversations around the significance of having access to cash due to the present geopolitical environment and growing cybersecurity risks. I would like to highlight that in the Global Payments Report for 2024, it was called out that cash remains relevant amid economic uncertainty. We will continue to support society with providing efficient and sustainable payment flows. We're also pleased to see an increasing interest from many stakeholders when it comes to our work within sustainability. I'm pleased to see that our sustainability metrics are trending in the right direction and we are exceeding the targets set out for the strategic period ending this year. I will share some more details of our progress later in the presentation. Let's move on to the next page where we have the highlights for the quarter. We had a strong, solid revenue growth in the quarter and achieved a revenue of about $7.2 billion, with growth for all three segments. Including the currency impact on acquisitions, revenues increased 6.5% in the quarter compared to prior year, and the organic growth was 6.3%. Chima contributed to the group's revenues with close to 3%. Changes in currency rates had a negative impact on revenues. We recorded double digit growth for our automated solutions even when excluding Tima. Our commitment to growing and developing our offer of automated solutions is an important part of our strategy. Our operating margin was 10.4% in the quarter and the performance across the business was mixed. The US segment had a great performance with volume growth and also successfully continued to implement operational efficiencies. Europe and Latin America had a more challenging start to the year, and actions are on the way for margin recovery. The calendar effect with less days in March due to the timing of Easter had a negative impact of close to 1% in operating margin for Europe and Latin. Allow me to further address these drivers in more detail later when we run through the segments. The operating cash flow for the quarter was impacted by a temporary buildup of stock on foreign currency. which will be reversed in the next quarter. If we exclude the temporary build-up, the cash conversion ratio would have been 78%. Due to timing between the quarters, it is more relevant to look at this metric over a 12-month basis, and then the cash conversion was a strong 89%. We have repurchased 700,000 shares in the share repurchase program, as we announced yesterday, the board of directors has resolved to repurchase shares for an amount of up to 200 million Swedish krona in the second quarter. The annual general meeting yesterday resolved on the cancellation of close to 4.3 million treasury shares that are held by Loomis. Following completion of the transaction, the total number of outstanding shares in Loomis will amount to 71 million shares. In April, we obtained a BBB investment grade rating credit rating with stable outlook from Standard & Poor's global ratings. I'm proud that our fundamentally strong cash flow generation and financial position have been recognized with this rating. This rating provides us with additional flexibility in the financial markets going forward. Let's then turn to the next stage and address our reporting segments, beginning with Europe and Latam. The positive trend in revenue growth in Europe and Latam continued, where we did have a solid quarter. Price increases as well as growth from emerging markets were the main contributors to the organic growth. I would like to highlight that while we have been raising prices, they have not yet been fully implemented in the quarter. The annual price negotiations are ongoing, although not as expected. Shiba had a strong performance in the quarter, and I'm pleased to see that they are integrated well in the group with positive sales synergies. Also, our automated solutions with SafePoint and recyclers had a double-digit growth on a standalone basis as well. The present macro climate with high pricing on precious metals, especially gold, as well as interest rates have negatively impacted our ethics and international businesses. It is too early to say when the cyclical impact will trend back. However, we hope to see it reverse during the second half of the year. Our primary goal for 2024 is to improve and increase our profit margins. Recovering our margin in the Europe and Latin segment will require both efficiency gains and also restructuring strategies. Let's turn to the next page over to the US. The US business is more than 50% of our business and we keep delivering strong performance in this market. The cash handling business in the US is a growing market and we are well positioned as the outsourcing of cash continues. Revenue and operating income were record high in local currency. While there was a slight negative impact from changes in the US dollar against the Swedish krona, revenue reached 3.8 billion with a continued increase in recurring revenues. Our organic growth was above 6% and includes a significant volume growth. I want to highlight that the automated solutions business with SafePoint achieved double digit growth for yet another quarter in a row, and we see a strong pipeline ahead. Our revenue related to automated solutions and ATMs increased to 45% of our U.S. revenue, which is margin accredit. We reported a strong operating margin of 15.1% thanks to our volume growth and our work on operational efficiency. The labor market trends have also been beneficial compared to prior year. Let's turn to the next page and talk about Loomis Pay. Also for Loomis Day, we had a strong revenue growth in all markets compared to the previous year, and revenues amounted to 16 million Swedish kronor. The sequential decline compared to the fourth quarter follows the normal seasonality pattern in the food and beverage market. Transaction volumes increased compared to the same quarter last year and the fourth quarter, and reached 1.3 billion Swedish kronor. During the quarter, we acquired a Spanish POS provider with a broad distribution network across Spain, which will accelerate our growth journey in Spain. 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 pleased to share that we have succeeded in further reducing the injury frequency rate during the year and will continue 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 use in absolute terms. On a rolling 12-month basis, we have, by the end of Q1 2024, reduced our emissions by close to 19% compared to our 2019 baseline. This should be put into context that we have had an organic growth of 16% during this period. Our investment in a lighter and electrified fleet, smarter route planning systems and technology will contribute to further emission reductions going forward as well. Although the implementation of the Corporate Sustainability Reporting Directive may be delayed in Sweden, we are continuing with our efforts to set our ambitions and targets for the next strategic period. Let's turn to the income statement slide, where I will start by highlighting the strong growth where our real growth excluding currency is above 9%. We also have some costs associated with the restructuring plan in Europe and Latin America. In general, we continue to be delayed with the restructuring, and you can anticipate the remaining portion of the restructuring plan to be recorded in our income statement during the second half of the year. I would also like to highlight that the increase in net financial items is largely a result of increased interest rates. we see the entire impact of the prior interest rate crisis in our finance net for the quarter, since, as you are aware, the majority of our borrowing has variable rates. Moving on to the next slide to summarize our performance, we continue to see a solid organic growth for the group. It is important to remember that when we announced our growth target for the strategic period, we always stated that growth would be higher at the beginning of the period with the COVID recovery. Thanks to growing revenues and structured work on improving our operational efficiency, our margin increased in the US. As I touched upon earlier, there is more to do in terms of margin recovery within Europe and Latin, and this is a high priority for the year. In terms of Loomis Pay, both transaction volumes and revenues rocked up this year, and I'm positive that our efforts and investments in Loomis Pay will continue to generate results. While we did have some timing effects in the quarterly cash flow, the cash conversion ratio on a rolling 12-month basis was strong, and we have the capacity to continue to make both strategic and value-creating acquisitions and distribute return 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 second quarter, in addition to the dividend of 12.5 Swedish kronor per share that will be paid out later in May. The Annual General Meeting has decided to cancel about 4.3 million Treasury shares as well. Lastly, we're making progress within our climate-related sustainability initiatives, and in 2023, we further decreased our absolute 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. As I mentioned before, keeping our employees safe and minimizing the risk of injuries is one of our most important responsibilities. While we are seeing our efforts having the desired effect, we can never be done here, and we will continue to strengthen our proactive measures for our employees' safety. Our investment in a lighter vehicle fleet is thus twofold. With new innovations and higher security features, we can both further improve the safety of our co-workers while also reducing emissions. But before opening up the Q&A session, I wanted to share that we will be hosting a Capital Markets Day on November 13th. We will share the details at a later point in time, but for now, save the date. With that, I'm done with my summary of the first quarter of 2024. So let's turn to Q&A. Operator, we are now open to questions, please.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use only headsets while asking a question. Anyone who has a question may press star and 1 at this time. Our first question comes from Victor Lindenberg with Carnegie. Please go ahead. Good morning, and thank you for taking my question.

I have a couple of questions from my side, maybe some more detailed ones, starting on FX in Europe, where you give us the number of the FX being a negative 5% year over year. And just to try to understand here, given your bulk of your business being Euro denominated and adding to that some Swiss as well as sterling pound exposure, all these currencies are actually plus when looking year over year. So there must be a very, very meaningful impact coming from other markets such as Argentina and Turkey then, but you also give us the impact from Argentina. So I'm just trying to understand, and maybe you can share some more details on the segment split here, because I seem to be quite off when trying to model the effects on Europe and how the countries tie together here. Or if you have changed your definition on on FX as of recently, so maybe I have missed that as well. But starting on that, Nitti Grittiwan.