Loomis AB (publ)

Thank you very much. Good morning, everyone, and welcome to the fourth quarter and full year 2024 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'll start by providing a quick summary of our Q4 and full year performance before taking questions. Let's start the presentation by turning on to slide number two. We had a strong finish to the year in Q4 in both revenue and operating income. We achieved revenues above 7.9 billion Swedish krona with growth across our three reporting segments and all business lines. Acquisitions have limited impact to the total growth, whereas currency effects had a negative impact. We achieved an organic growth of 8%. The demand for our solutions continues to be high, and we have had double-digit growth for the automated solutions, international and Lumiste business lines. It is reassuring to see positive development for the international business line, which has had cyclical challenges over the past year. The situation with U.S. increasing tariffs has brought additional one-time volumes in the quarter. While we do not yet see that the business is back to where it was, it was a good quarter. It's also worth highlighting that this is the first quarter that CHEMA is included in the organic growth. after having been with the group since October 23. The operating income surpassed one billion Swedish kronor for the fourth quarter, which is our highest ever. We increased our operating margin to 12.9 percent, reflecting margin expansion in both regions. The U.S. segment delivered a robust performance driven by a combination of volume growth and increasing margin. In Europe and Latin America, we have continued with implementation of restructuring programs, and I'm pleased to see progress in terms of margin recovery. I'm confident that we will see the effect of these initiatives as we move into 2025. The operating cash flow for the quarter was very strong. For the isolated quarter, the cash conversion rate was 123%. As we have mentioned in previous quarters, 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 very strong at 112%. During the quarter, we repurchased about 590,000 shares for a value of 200 million Swedish kronor. In total, during 2024, we have repurchased close to 2.6 million shares for a value of 800 million Swedish kronor. The Board of Directors has proposed a record high dividend of 14 SEC per share to the annual general meeting, corresponding to a value of 959 million. This is a 12% increase compared to the dividend in prior year. The proposed dividend amounts to 60% of the earnings per share for 2024, which is in the upper range of our dividend policy. In November, we held the Capital Markets Day and shared our strategic priorities and targets for 2025-2027. Our focus on revenue growth and operating margin remains crucial, while our commitment to reducing CO2 emissions and workplace injury rates aligns with broader sustainability goals. I will come back to our presented targets later during this presentation. Let's then turn to the next page and address our reporting segments, beginning with Europe and Latin. The positive trend in revenue growth in Europe and Latin continued, and we reached our highest quarterly revenue and EBITDA. We had a double-digit growth within the automated solutions and international business lines, which had a positive contribution to the bottom line. Our operating margin increased to 12.1%, which is strong improvement compared to prior year. As you may remember, the profitability in prior year was impacted by currency headwinds, operational challenges within the FX line of business, as well as acquisition-related costs. Throughout the year, we have focused on increasing our profitability and we remain motivated moving forward. We have taken actions for operational efficiency within our European segment and continue to execute on our communicated restructuring plan, which is why you see restructuring charges in the quarter. Some benefits are seen already in the fourth quarter, but we expect more to come in 2025. For the full year, segment Europe and Latin America reported revenues of close to 15 billion Swedish krona and an operating margin of 11.1%. Let's turn to the next page, over to the U.S. The U.S. segment delivered another strong quarter, reporting record revenues exceeding 4 billion, with growth across all business lines. Organic growth reached 4.7%, driven primarily by volume increases while price adjustments also contributed positively. All business lines experienced year-over-year growth. Notably, the automated solutions business, including SafePoint, achieved double-digit growth for yet another consecutive quarter, and we continue to see a robust pipeline ahead. The continued implementation of operational efficiency programs were positive drivers to the increase in operating margin compared to the previous year. These programs have resulted in higher service quality, allowing the segment to capture higher volumes without increased staffing needs, and the operating margin increased to 16.6%. The higher proportion of revenue coming from automated solutions has also contributed positively to the margin. For the full year, Segment US reported record high revenues of close to 16 billion Swedish krona and an operating margin of 15.6%. Let's turn to the next page and talk about Loomis Pay. Loomis Pay delivered a strong performance in the fourth quarter, generating $31 million in revenue and surpassing $1.8 billion in transaction volumes. The acquisition of Hostel Tactile earlier this year, with its locally tailored POS solutions, has positively contributed to our growth. I'm confident that standing strategic partnerships is the right path forward. Our focus remains on leveraging these established POS solutions as the foundation for introducing Loomis' unique all-in-one payment solution in new markets. By partnering with or acquiring companies with a strong local offer and integrating them with our payment gateway and cash handling solutions, we are well positioned for scalable growth. From 2025, the segment Loomis Pay will be renamed segment SME Pay and will, in addition to revenue from Loomis Pay, also include revenue within other business lines from new SME customers. Loomis Pay will continue to be a reported business line within this segment. 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 initiatives are moving forward. During 2024, work has been ongoing to prepare the organization for the corporate sustainability reporting directive. Our double materiality analysis has provided insight to the focus areas and targets for the upcoming strategic period. With a well-defined sustainability agenda, we are committed to leading the way in sustainability within the industry. Keeping our employees safe and minimizing the risk of injuries continues to be one of our most important responsibilities. Therefore, I'm also pleased to see a continued reduction in the injury frequency rate compared to the fourth quarter in prior year. We will, of course, continue to strengthen our proactive measures for our employees' well-being. As we mentioned earlier this year, we have committed to the science-based target initiative to set carbon reduction targets in line with climate science. Our CO2 reduction targets for 2027 within scope one and two have been developed in accordance with this methodology. We are in the progress of setting our scope three targets, and we'll communicate these once we have submitted and validated by the SBTI. Let's turn to the income statement slide, where I will start by highlighting our revenue growth. The growth for the quarter was very solid with growth across all segments and business lines. We have costs classified as items affecting comparability in the quarter, which relate to impairments of goodwill and intangible assets, a provision for a communicated legal case in Denmark, as well as costs related to the ongoing restructuring in Europe and Latin America. We can see that the financial net is largely in line with the level in the previous year. While our financial expenses have decreased as a result of declining interest rates, we similarly see a decline in our interest income as well. It is worth reminding you that while the majority of our financing has variable rates, our leasing liabilities tend to have fixed interest rates. The monetary losses from hyperinflationary economies have also increased in the fourth quarter compared to prior year. For the full year 2024, our effective tax rate is lower compared to the previous year. A key driver of this decrease is a tax credit related to the EVs rollout in the US, which we expect to be non-recurring. Moving on to the next slide, I just wanted to highlight our performance in relation to our history. Looking at our results in a longer perspective, you can see that we have consistently delivered a strong financial performance over time, except for the impact of COVID-19 in 2020 and 2021. As you can see, we have a stable business model that has shown to be resilient over time. In 2024, we've generated about 30 billion Swedish kroner in revenue, and we've reached 12% in operating margin. Over a 10-year period, we have generated a revenue figure of close to 9%. Looking ahead, we will continue to drive our growth by prioritizing recurring revenues, and increasing margins by a structured approach to gain operational efficiencies.

Moving on to the next slide to summarize our performance in relation to our committed target. We have made significant progress in the last three years, and I'm proud to conclude

we have achieved all four of our strategic targets for the strategic period 2022-2024. Following our strong performance in the fourth quarter, we have exceeded our growth expectations, where our revenue CAGR currently adjusted over the past three years is 11.8%. On the operating margin side, just a couple of months ago at our Capital Markets Day, we highlighted that while the margin target was within reach, Achieving it would be highly challenging. With a strong finish to the year and solid Q4 results, we closed 2024 within our operating margin target range, achieving an operating margin of 12%. It's also encouraging to see the solid progress we've made on our ESG targets. Regarding the reduction of emissions, we have exceeded our target by achieving a 20% reduction despite the strong growth of our business. And lastly, keeping our employees safe is a top priority, and we are proud to have significantly reduced workplace injury rates over the past three years by 23%. After wrapping up a successful 2024 strategic period, I'm excited about the journey ahead. I would like to remind you of the targets we presented at the Capital Markets Day a couple of months ago. Our four strategic targets for the 2025-2027 strategic period are an average compounded annual growth rate of 5% to 7%, an evident margin of 12% to 14% being at the top mid-range at the end of the strategic period, a reduction of 32% of CO2 emissions compared to 2019, and a reduction of 10% of work injury rates compared to 2024. I remain confident in our business and that we are well positioned to deliver on our strategic priorities and targets for 2025 to 2027. Before heading to Q&A, I would like to summarize our year and the fantastic performance we have had. We continue to see a solid organic growth for the group in 2024, driven by both increased volumes and price increases. Thanks to growing revenues and strong focus on operational efficiency, our margin increased in both the U.S. and Europe. We remain committed to further enhancing margins in the European and Latin American region. Our strong quarterly performance resulted in record high revenue and operating income for the full year 2024. Revenue for the year surpassed 30 billion Swedish krona with an operating margin of 12%, and we met all of our four financial targets for the strategic period ending in 2024. The cash flow from operating activities was more than 4 billion for the year, which in relation to the operating income was 112%. As we mentioned at our Capital Markets Day, we are confident that we should be able to maintain an operating cash flow in relation to EBITDA of above 90% during the upcoming strategic period on an annualized basis. Our strong cash conversion gives us the capacity to both invest in our business and distribute returns to our shareholders. During 2024, we distributed more than $1.6 billion through this corner to shareholders for the annual dividend and share purchases. The Board of Directors has also announced a proposed dividend of 14 Swedish kronor per share, which amounts to a record 959 million kronor to be distributed to shareholders in May. Our capital allocation priorities remain, and we aim to use our capital in the best way to generate returns. This includes making the needed investments in our business, distributing 40% to 60% of our net income to shareholders annually through the annual dividend, and also making value-driven acquisitions. If we have excess funds or do not see the acquisition opportunities in the short term arise, we have to continue to distribute additional funds to shareholders through share repurchases. During the year, we reduced our workplace injuries by 14% compared to the previous year, and we also reduced our CO2 emissions by 3%. Our commitment to be leading within sustainability in our industry is unwavering, and we are dedicated to find new ways to improve our CO2 emission reductions. That is why we are investing in new vehicles with advanced safety features and technology. This upgrade not only protects our employees, but also helps us reduce our environmental impact. We have a strong finish to the year and our strategic period. I look forward to the next three years to deliver on our communicated strategic priorities and targets for 2025 to 2027. With that, I'm done with my summary for the fourth quarter and full year of 2024. So let's turn to Q&A. Operator, we are now open.