Securitas AB (publ)

Good morning everyone and warm welcome to our Q4 results presentation. We've had good progress in 2024 in terms of executing on our strategy and similar to the last couple of quarters we are glad to finish the year with significant performance improvement versus last year. So let's go straight into some of the highlights of the quarter. We delivered 4% organic growth for the group and 6% sales growth in technology and solutions. And the operating margin improved to 7.3%. Similar to the third quarter, Europe with security services contributed with good results, but we also had good contribution from security services North America, and our global technology and solutions businesses. The operating cash flow was very good at 153% in the quarter and 84% for the full year. And improved profitability in combination with strong cash flow are contributing to continued e-leveraging, and we're close to a year with a net debt to EVTA ratio of 2.5%. So the performance across the group is good, and the board of directors propose a dividend increase to 4.50 Swedish krona to the annual general meeting in May. But as we build in the new securities, we have identified further opportunities to optimize how we run the business, and primarily in Europe. And to this end, we have initiated an optimization program that we will execute in 2025, and that we generate savings of approximately 200 million SEK on an annual basis. And the business optimization program is really the result of a stronger, more digital, scalable Securitas after having finalized now the Stanley integration successfully and making good progress in our transformation. So thanks to increasing usage of AI that we have been investing in since 2018, we can now leverage that to also then optimize how we run the business. And we're increasing automation thanks to more modern platforms. And we're able to run the business at a structurally lower cost base. So all of that, I think, is really positive opportunity that we have now and that we decided to execute on during this year. And as previously communicated, we continue to assess all parts of the business, and we have initiated a process to divest the aviation business in France. But looking then at the business line, we recorded good improvement in both areas, and the growth in security services was 3% in Q4. The commercial momentum is good, and we're continuously developing our value proposition, and new sales across the group are coming in at higher levels than before. And the IDTA margin of 5.5% represents continued improvement versus last year, and Europe is the main driver here. The resale growth in technology and solutions was 6% in the quarter, and we're now finalizing the standard integration work, and this will enable us to put more focus on commercial development as we go forward. Operating margin within technology and solutions improved 20 basis points to 11.6. So all in all, good development across the different lines of business. Let's then move to the segments. And as always, we are starting with North America, where we recorded 2% organic sales growth in the quarter. Good momentum in technology contributed. But then, as previously communicated, we have a termination of an aviation contract from the beginning of 2024. I think it was in March-April timeframe. That had a negative impact on the growth in services there. But commercial activity is good, and I expect stronger top-line momentum in guarding in 2025. Technology and solutions represent 37% of total sales now, and the client retention at 87%, a little bit lower where we would normally be, but that's related to the termination of the aviation contract that I mentioned before. And turning then to the profitability, we record an operating margin of 9.3%. Operating modern and guarding improved in the fourth quarter, but the modern technology was good, but slightly behind last year where we had a strong comparative. System implementation challenges at Pinkerton hampered the results in Q4, but we are on a better path now. We have a good grip on the situation, and I expect performance to continue to improve in the coming quarters. So when looking at the totality, our teams in North America have been doing a solid job in 2024. Shifting then to Europe, where we recorded 5% organic sales growth. And healthy price increases in the services business are contributing. And similar to previous quarters, the hyperinflationary environment in Turkey account for a significant share of the growth. But it's important to highlight, and also visible in the slide here, that we are now coming out of the inflationary period, which means that the price-driven growth is coming down as expected. And while there is a negative impact from active portfolio management, we feel very good about the new sales that are coming in at high margins. And that's essentially based on a stronger value proposition, more digital capabilities than what we've had an opportunity to offer the clients in the past. Technology and solutions supported with decent growth in the quarter. And technology and solutions now represent 34% of sales. Client retention is good at 92%. And looking then at the profitability, we received an operating margin of 7% in the quarter. And this represents a good improvement versus the same period last year. And improvement in services is the main driver. High margin on new sales in services and active portfolio management are the two main drivers of the improvement in the services part of the business. But as commented in the Q3 report, we have been driving a focused agenda for a number of years now to change the way that we are doing business with a firm approach in terms of guarding services profitability. And this means prioritizing quality over volume. And while there is more work to be done, Our European team have done a really good job in driving a positive impact on a broad basis in 2024, and this work will continue in 2025. The airport security business supported the margin, but the margin in technology and solutions was slightly behind last year on a strong comparative. But when looking at the totality, the performance improvement in Europe is one of the important achievements across the Securitas group. in 2024 and i just want to share that recognition also for the entire team moving then to iber america where we've had good continued development organic sales growth was three percent and good momentum in technology and solution sales is the main driver organic growth in the spanish market was three percent in the quarter And we continue to drive a positive exchange. Technology and solution sales represented 37% of sales in the quarter. Time to retention healthy at 90%. And shifting then to the profitability with 7.5% operating margin. And this is the highest operating margin, to my knowledge, that we have achieved in Ibero-America. So very strong performance in technology and solutions is the main driver with a positive impact from the revenue mix change. And we also have a number of markets across Liberia, America that have been driving good progress in 2024. And that's not only Spain and Portugal, but also across Latin America. And our team have been driving on the totality significant improvement. So that concludes the overview of the performance in the different segments. Now happy to welcome you, Andreas, for some more details and the finance update.

Thank you, Magnus. And we start with the income statement where we had organic sales growth of 4% in the quarter and a good 0.5 percentage points margin improvement. Looking below operating result, we had 184 million of costs related to amortization of acquisition-related intangibles and an income of 35 million on acquisition-related costs. In the quarter, we had a 32 million revaluation of deferred consideration related to a historical acquisition, explaining the positive amount in acquisition-related cost. And at the same time, we have accelerated the amortization of the client portfolio for the same acquisition, under acquisition-related intangibles, explaining the higher than normal amortization. Net, there is no material impact, no cash impact, and these effects are of non-recurring nature. Items affecting comparability was substantially lower than last year at 128 million, where continued reduced spend both under the transformation programs and in the Stanley integration program supported. And I will come back as usual here with more details related to IEC shortly. The financial net is coming in at 529 million, which is around 100 million lower than last year. And the IES 29 hyperinflation and FX gains and losses was 65 million of that improvement, while the underlying interest net was down 34 million compared to last year. And this is mainly explained by reduced interest rates and also reduced debt levels. For the full year, the cost was approximately 2.3 billion in total and 2.4 billion adjusted for hyperinflation and FX, which is also in line with our previous guidance for the full year. We expect to see continued reduction in our interest net in 2025 as interest rates has come down and as we reduce our debt levels throughout the year. And we estimate our finance net to land around 2.1 to 2.2 billion for the full year 2025, excluding then any impacts from IS29 and FX. Moving to tax, where our full-year tax rate landed at 26.3%, also here in line with our previous full-year forecast we provided in the third quarter. And as a reminder, last year's tax rate was negatively impacted by the 3.3 billion non-deductible capital loss in Argentina, and also positively impacted by reverses of tax provisions related to Spain in Q4. Adjusted for this, the tax rate for 2023 was 26.9%. Let us then move to our programs under items affecting comparability, looking first at the European and Ibero-America transformation programs where we saw good progress in the transformation work and also continued reduced investment levels according to plan. At the end of the year, we closed the Ibero-America program down and moved continued development into the daily operations in the division. In Europe some work is remaining which we plan to execute upon over 2025 and 2026 at continued lower investment levels and we estimate we will have an investment of approximately 150 million in 2025 under items affecting comparabilities and also with limited CapEx needs I should also say. Related to our Stanley integration, we finalized the last activities mainly in Europe in the fourth quarter, and the integration of Stanley has been a large and complex undertaking due to the size of the acquisition we made, as it was a carve-out from Stanley, and as we have also been driving a deep integration into Securitas to build a globally leading technology business. Here our previous acquisition integration experience and strong integration management has been key to the strong position we are in today after completing the integration work. And at the same time as we have managed this, we have also managed to stay market focused, growing the business well, and driving cost synergies and other margin improvement initiatives through. Looking into 2025, we will now turn our focus and efforts to strong operational delivery and accelerated client engagement. Looking at the cost, the full year 2024 landed at 594 million, which is within the cost range we guided for earlier in Q3, and for clarity, there will be no further cost into 2025. With the integration of Stanley now completed, and with an increasingly digital client engagement, digital operations and also digital support services through our transformation programs, We've built a more modern and scalable operations today compared to just a few years ago. And as we also start to increase our usage and to learn from how we can benefit from AI to be more effective in how we run the business, this accelerates the opportunities for us to work more effective as an organization at a structurally lower cost base. Now in January we have started to execute upon an additional 200 million in identified annualized cost savings primarily focused into Europe and we plan to have these activities finalized by the end of the year with full run rate saving effect from the beginning of 2026. There are three main focus areas in the program. The first one is related to our branch network, where digital tools and AI are enabling us to optimize our branch network both from a cost perspective as well as in terms of optimal proximity to our clients and to our people. Secondly, as we have built modern platforms and processes, we are also very focused on maximizing the benefits coming from optimization and scale in our support services, and we will continue to take costs out and leverage the platforms we have to create a structurally lower cost base. The third area of focus in the program is to restructure or close down non-performing businesses and activities across Europe mainly. The program cost is estimated to around 225 million, which will be reported as an investment under items affecting comparability throughout the year. The 225 million is basically all cash as well, and the same also goes for the cost savings, and there is no major CapEx requirements related to the program. We have been going through a period of investments into our transformation programs and the Stanley integration over the last couple of years. The investments under IEC peaked in 2023 with a total cost of 1.35 billion. In 2024, the investments reduced significantly to approximately 750 million. And in 2025, we will continue to substantially reduce our IEC under the programs and estimate to land at approximately 375 million. Moving then to an overview related to currency and the FX adjusted result development. And here we saw positive impact from currencies in the quarter, mainly related to the US dollar, which strengthened in the quarter, but also had a lower comparative last year. On sales, there was a 2% positive impact from FX with a similar impact also looking at the operating result. The impact on the EPS was higher mainly due to the different currency mix we have below the operating result. The fourth quarter EPS real change was strong at 39%, and this was derived from the real change on operating income also being solid at 11%, and with positive contribution from the reduced investments in items affecting comparability, reduced underlying interest net and lower tax rates. The EPS real change excluding items affecting comparability was 19%. We then moved to the potential divestment of our aviation business in France. And as we've communicated earlier, we are continuing to assess our business mix and presence continuously to strengthen both our strategic position and our performance. And by the end of 2025, we signed a put option agreement to divest our aviation operations in France, where our assessment is that there is limited opportunities for us to develop this business in line with our strategy and with the healthy financial performance in the mid and the long term. The transaction is subject to a mandatory consultation process with the Workers' Council, which is currently ongoing. Looking at the business itself, the business had sales of approximately 1.5 billion Swedish krona in 2024 and with an operating margin well below average in Securitas Europe. We will now await the outcome of the consultation process and thereafter come back with more details, but we do not expect any material impact on our group balance sheet or cash flow. We then moved to cashflow where we delivered a strong operating cashflow in the fourth quarter and exceeded our financial targets for the full year. The Q4 operating cashflow was 4.6 billion or 153% of the operating result supported by continued improvements in our day sales outstanding or DSO and also supported by lower organic growth rates. Our CapEx was 2.4% of sales in the quarter and 2.5% for the full year, and as expected, we see continued reduced CapEx from our transformation programs, and we also benefit from our cloud-first strategy driving the need for CapEx down further. Looking at 2025, we foresee we will remain around the current levels of CapEx to sales of approximately 2.5%. We also saw solid improved cash generation in our technology business, mainly in North America, both in the fourth quarter and over the full year of 2024. As the integration work has come to an end, we have focused our efforts into streamlining and optimizing our order-to-cash process, and together with other working capital improvements, this has further strengthened the cashier generation throughout the year. The full-year operating cash flow landed at 84%, and as we mentioned in the Capital Markets Day earlier in 2024, we are driving a number of projects to structurally improve our working capital position, and this has paid off this year, supporting our cash generation positively. If we then look at the free cash flow, which landed at 3.7 billion in the quarter, this was mainly supported by the strong operating cash flow and lower interest payments as expected and as we have also previously guided for. Looking into 2025, it is important to remember that the first half year, as always, is a seasonally weaker in comparison to the second half of the year. Having this said, we have delivered strong operating cash flows the last years and we are in a solid good position to be able to deliver an operating cash flow between 70 to 80% also in 2025. We then have a look at our net debt, which landed at 37.9 billion by the end of the quarter. This is down approximately half a billion compared to Q3. positively impacted by the 3.7 billion free cash flow we generated and negatively impacted by the 1.1 billion dividend paid in the quarter and also a materially negative translation impact of 1.9 billion due to the weakened Swedish krona. According to Plan, cash out from items affecting comparability was also lower in the quarter. As a reminder, we plan to pay the 53 million US dollar settlement related to the US government and Paragon in 2025, and the payment is planned to be executed in three equal installments in the first, the third, and the fourth quarter of the year. Thanks to the strong cash generation and also the strong result development, our net debt to EBTA reduced to 2.5 times, which is down from 2.7, both in Q3 2024 and Q4 2023. And we have a strong balance sheet today and are well below our target net debt to EBTA of less than three times. Moving on to have a look at our financing and financial position. where we continue to have a strong balance sheet, good liquidity and we remain without any financial covenants in our debt facilities. We also have our RCF in place of more than 1 billion euro which matures in 2027 and it remained undrawn as per quarter end. In October we closed out the 1.5 billion private placement with maturity in 2026 This facility was used to partly pay off existing maturities of around 3 billion in the fourth quarter, and the residual maturing amount was paid off with cash at hand, reducing our gross debt. In December, we signed a new short-term bank facility of 400 million euro. This is a backup facility only, to create timing flexibility for us when we are addressing our 2025 maturities, and the facility remains undrawn. Looking at the debt maturity chart on the right hand side, we have approximately 5 billion to refinance in 2025, which is materially less than previous years. And our base plan here is to be active in the euro bond market in the first quarter, but also to ensure we have the ability to continue to repay debt throughout 2025 as we generate cash. To summarize, we have a strong credit position today, where we are focused on repaying debt as we generate cash. We also want to minimize our interest costs and have a solid debt maturity profile. And we will continue to remain committed to our investment grade rating.

So with that, I hand over back to you, Magnus. Very good. Many thanks, Andreas. Just a few minutes on our development, because during the last five to six years, we have been driving active transformation of Securitas, as many of you are well aware. This has been a client-centric transformation, created leading offering to our clients, but also provide higher value to our shareholders. And since we are wrapping up another year now, we thought it would be good to just provide an overview of the development, looking at the few important indicators. And starting with the margin, we're now starting to see the positive impact from the transformation work and the investments that we have done. So historically, we were operating around 5.1, 5.2% operating margin. But after now consecutive years of improvement, we achieved 6.9% for the full year 2024. And we are delivering according to our plan and are fully committed to achieve 8% by the end of this year. Looking at the cash flow, we have a target range between 70 and 80% operating cash flow. And we are delivering within or above that range for a number of years now. And higher profitability together with healthy cash flow have contributed to strongly leveraging, like Andreas highlighted, to a healthy 2.5 by the end of 2024. And as communicated in 2019, when we shared the strategy for this current phase and the priorities for this transformation, we highlighted that this will be a multi-year journey and that the profound modernization and digitalization of the business will together with building up a technology business and capability would also entail significant investments. And when you're looking then at the lower right corner, and here we've then highlighted the IEC trend, you can see an outline of what has been recorded as items affecting comparability in this period. A few years ago, we concluded the global IT and the North America transformation programs successfully. And as we are closing 2024, we are now successfully concluding the Stanley integration, which has been a large and a complex integration effort, but also the Iberamerica transformation program. And in all of those areas, we are now running the business. And at a better level, we have delivered based on what we set out to do, and we're now shifting more focus to business as usual. In Europe, we still have some work remaining, like Andreas highlighted, in 2025 and 2026, but all of the above means that we are driving a material reduction in items affecting comparability And as we've highlighted earlier, we estimate IEC in 2025 of approximately 375 million SEC. And I'm also glad to highlight that our team is executing on the plan we set in 2019 initially, and we're now entering a phase with less heavy lifting and less heavy transformation work. So with that, we are ready to wrap up the presentation. It's a good quarter and end of the year. So operating margin improving 50 basis points to 7.3. Strong cash flow. We have completed important transformation programs and we continue to sharpen and run the business more efficiently. And we are committed, as I said earlier, to achieve the 8% operating margin by the end of this year. So with that, over to the operator and we will open up the Q&A.