Loomis AB (publ)

Ladies and gentlemen, welcome to the LUMI Second Quarter 2025 Report Conference Call. I am Jota, the Chorus Call Operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Aritz Larrea, President and CEO. Please go ahead.

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 our CFO, Johan Wilsby, and Jenny Bostrom, our Head of Sustainability and investor relations. I'll start by providing a quick summary of our second quarter performance before taking questions. Let's start the presentation by turning to slide number two. We delivered a solid performance in the second quarter, with revenues reaching 7.4 billion Swedish krona and organic growth of 3.8 percent. Acquisitions supported growth, while the strongest Swedish krona had a notable negative impact across all segments. Adjusted for currency effects, growth was close to 5%. The favorable business mix and improved efficiency led to an operating margin of 12.7%, up from 11.6% last year, making our highest second quarter margin to date. We've grown the business while reducing headcount, contributing to this margin improvement. Quarterly cash flow was affected by timing and working capital movement. However, on a rolling 12-month basis, cash conversion exceeded 100%. We encourage you to focus on the rolling figures for a peer review, unaffected by quarterly volatility. Our strong cash flow continues to support both investment in the business and shareholder returns. Despite the acquisition of borrows, a record high dividend payout, and share repurchases during the quarter, our net debt to EBITDA ratio improved year over year. Our capital allocation priorities remain unchanged. We keep committed to deploying capital to maximize returns. As announced yesterday, the Board has approved a new share repurchase program of 200 million Swedish kronor for the third quarter. Let's now turn to our reporting segments, starting with Europe and Latin America. Our European and Latin America segment delivered a solid performance in the quarter, with revenues reaching 3.6 billion Swedish krona. Despite a significant negative currency impact of 5.5%, organic growth exceeded 4%. We saw strong results in several key markets, and we keep addressing performance in those currently under review. During the quarter, we saw continued strong demand for cross-border valuable transportation and storage solutions within the international business line. At the same time, revenue in our CIT and CMS segments was affected by fewer working days. These developments further reinforce our strategic focus on growing our adjacent business lines. Restructuring efforts are progressing as we continue to optimize our operations across Europe and Latin America. These initiatives are driving improved profitability and enabling us to grow while reducing our workforce. Since the second quarter of 2024, we've reduced headcount in the region by approximately 600 employees. Our operating margin increased to 12.3%, our highest second quarter margin for this segment to date. Yesterday, we signed an agreement to acquire Kipfer Logistics, a leading pharmaceutical logistics provider based in Switzerland. Since 2024, Loomis has operated in this space on a smaller scale under the Loomis Pharma brand. This acquisition significantly accelerates the growth of Loomis Pharma by integrating a well-established company specializing in high-security, temperature-controlled road freight. Together, we will offer a broader range of services to customers and further strengthen our market position. This is a natural extension of our international business line. where we already manage cross-border high-security logistics for banknotes, precious metals, and jewels, including customs clearance. Let's now turn to the page to our performance in the United States. The U.S. segment delivered another strong quarter. If we adjust for the currency impacts, which was negative 10%, the U.S. achieved record high revenues and operating profit. Organic growth was 4.2%, and the acquisition of boroughs contributed positively to the overall growth. Notably, automated solutions delivered another quarter of double-digit organic growth. Our implemented staffing planning measures have enabled a more efficient way of working, allowing us to grow the business while reducing the number of employees. At the same time, we have secured high service quality and maintained customer satisfaction. The volume growth in automated solutions and international business lines combined with improved efficiency, contributed to the operating margin improvement. The operating margin increased to 16.4%, up from 15.2% in prior year. Let's turn to the next page and talk about the SME pay segment. Revenue for the quarter reached 43 million Swedish kronor, reflecting strong growth driven by higher transaction volumes in the Loomis Pay business line compared to the second quarter of 2024. Operating income also improved year over year. While we're still in early stages, digital payments account for the majority of revenue within the SME Pay segment. That said, I remain confident that our cash-related offerings will also contribute to future growth as we continue developing our bundle solutions. Following the end of the quarter, we acquired two point-of-sale companies in Spain, Central Cash, and Sigore. These acquisitions significantly strengthen Lumispace's presence in the Catalunya region, enhance our POS capabilities, and expand our customer base. Let's now move to the next slide where I will share a few updates on the progress we've made in sustainability. Our sustainability initiatives continue to progress well. A key focus remains on reducing emissions from our vehicle fleet And we saw a continued year-over-year decline in emissions this quarter. In May, we announced an agreement with British Petroleum for the supply of BP Bioenergy HVO. By the end of 2030, we aim to use approximately 10 million liters of this biofuel across 10 European countries. This solution will significantly reduce the carbon footprint of our European transport operations without requiring replacement of our existing armored vehicle fleet. As I've emphasized before, ensuring the health and safety of our employees is one of our highest priorities. I'm pleased to report that workplace injuries continue to decline, supported by our safety awareness campaigns and targeted training initiatives. Additionally, the Board of Directors has adopted two new sustainability policies, an environmental policy and a human rights policy, further reinforcing our commitment in these critical areas. Let's turn now to the income statement slide, where I'll begin by noting that despite the significant negative impact from exchange rate fluctuations, we achieved strong currency adjusted growth in the context of the current macroeconomic environment. This quarter includes costs classified as items affecting comparability, primarily related to the ongoing restructuring efforts in Europe and Latin America, as well as net positive effects from M&A activities. Our financial net declined slightly compared to the previous year, mainly due to lower financial expenses driven by declining interest rates. Despite the considerable currency headwinds, earnings per share rose to above 7 Swedish kronor per share. As mentioned earlier, our net debt to EBITDA ratio improved, even after paying a record high dividend, continuing share repurchases, and completing the acquisition of borrows during the quarter. Now let's move on to the next slide where I will provide a longer-term view of our performance. As we can see, we have a stable and resilient business model that has proven its strength over time. On a rolling 12-month basis, we generated over 30 billion Swedish kronor in revenue and achieved an operating margin of 12.5 percent. Our currency adjusted growth was 6.3 percent on a rolling 12-month basis. and we are thus in line with both our financial targets for the strategic period. We had a very strong second quarter, and I'm confident about our journey ahead. We have already started to see the impact of our restructuring initiatives in Europe and Latin America, and I'm pleased to see our margin improvements over the recent quarters. Looking ahead, we will continue to add to our growth by prioritizing value-creating acquisitions and taking a structured approach to gain further operational efficiencies. With that, I'm done with my summary of the second quarter, so let's turn to Q&A. Operator, please, we are now open to questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their 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. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and 1 at this time. The first question comes from the line of Simon Johnson with ABG Sandal Collier. Please go ahead.