Securitas AB (publ)

Good morning, everyone, and welcome to our Q3 report. We continue to develop on a good path, execute on our strategic focus areas, and are glad to report a solid set of results for the third quarter. The organic growth in the quarter was 3%, and North America and Iberia America both contributed with solid growth. And now to a highlight. The operating margin was 8.1% in the quarter. We had solid improvements across all segments, as well as in the services and technology and solutions business lines. And as announced last quarter, we are closing down the government business within critical infrastructure services. And adjusted for this business, the organic sales growth was 4%, and the operating margin was 8.3%. EPS real change was strong at 19%. And the operating cash flow is above 100% in the quarter, and we continued to improve the leverage, and the net debt to EBITDA ratio is now at 2.2. The business optimization program that we initiated at the beginning of this year is contributing, and the vast majority of the cost savings have now been executed. So shifting then to the performance, just for an overview in the business lines and the segments. And as stated, we are recording significant margin improvements in both business lines. Continued strong technology and solutions, margin development with 50 basis points to 11.7. And the real sales growth in technology and solutions was 4% in the quarter. This is below our target, but we have a strong offering, and we have taken actions to increase the focus on client engagement and commercial development, and I expect these actions to generate stronger momentum in the coming quarters. The margin in security services improved 30 basis points to 6.9%, and this was supported by high margin on new sales, portfolio management, and strong development of the aviation business while the SEAS business hampered. Growth in security services was 1% in the quarter, and the growth rate in services is negatively impacted by active portfolio management and the SCIS business. But important, we expect to finalize the active portfolio management work in Europe and Iberia America during the first half of 2026, and that work is progressing according to our plans. So with that, let's move then to the segments, and as always, we start with North America, where we are pleased to report solid organic sales growth at 6% and a record Q3 operating margin. Healthy portfolio volume development and price increases in the Guardian business were key drivers of the growth, and continued double-digit growth in the Pinkton business contributed, and the performance in the technology business also supported. Technology and solutions growth was 2% in the quarter, and similar to the previous quarter, growth in technology was decent, but we had lower solutions growth. And we are fine-tuning our go-to-market approach with solutions in North America, where we leverage our in-house technology capabilities in a much better way than before. And with these changes now being in place, I expect improved growth in the coming quarters. We improved the operating margin in the guarding and technology business units to 9.5%, and this was supported by good cost control and leverage. So all in all, very strong performance and a record Q3 operating margin in North America. And moving then to Europe, where the operating margin improvement stands out as the highlight of the quarter. The organic growth was 2%, price increases, impact from Turkey and aviation supported, while active portfolio management had a clear negative impact on the growth in the quarter. Sales growth in technology and solutions was 4% and slightly below our expectations. The operating margin improved with 70 basis points to 8.4, and this is a significant improvement and is the result of strong execution on all strategic priorities involved. by our European teams. And as commented, we continue to address and renegotiate the low-performing contracts in the services business in Europe. This has a clear negative impact on the growth in the short term, but it's fully in line with our strategy and the plans that we set a couple of years ago. And we expect the work where we are addressing the low margin contracts to be completed during the first half of 2026. So all in all, very good development by European teams and also here an operating margin at a record level. We then shift to Red America, where we're also pleased to report good organic growth and solid margin improvement. The organic growth was 5%. This was driven by high single-digit growth in technology and solutions and price increases in the services business. And similar to Europe, there is a negative impact on the growth from active portfolio management, but we're making good progress and driving conversions to technology and solutions. The operating modern improvement was solid in the quarter, and the majority of the improvement is related to improvement in the services business, but some temporary one-offs also contributed. So all in all, very good quarter also in Ibero-America. And looking then at the performance across the group, we are driving disciplined execution of the strategy, and I'm really pleased to see strong execution across all segments and from all the teams. Our customer offer is stronger than ever before, and we're also glad to report improving client retention. So with that overview, turn to the finance update, and handing over to you, Andreas.

Thank you, Magnus. And we start with the income statement, where we had organic sales growth of 3% and improved the operating margin with 60 basis points, leading to a currency-adjusted operating profit growth of 11% in the quarter. As we communicated in Q2, we have introduced two new KPIs, which are adjusting our organic growth and our operating margin for the government business to be closed down within SEIS. In the third quarter, the adjusted organic growth was 4% and the adjusted operating margin was 8.3%. And this is higher than our target to have an adjusted operating margin of 8% the second half year of 2025 and puts us in a good position to achieve the target as we are closing the year in the fourth quarter. The close down of the government business itself is progressing according to the plan that we laid out in the second quarter and had limited impact on the operating result in Q3. Looking then below operating result, there are no material developments in amortization of acquisition related intangibles, nor in the acquisition related costs. Items affecting comparability was 1.5 billion, where we in the third quarter have made a provision of 154 million US dollars for the government business close down, in line with what we communicated in Q2. The remaining 65 million Swedish krona of IEC is related to the ongoing transformation and business optimization programs, Both programs are running according to plan, and the full year forecast of 375 million for both programs combined remains unchanged to our previous guidance. And as Magnus mentioned earlier, we have executed the business optimization program well, and the vast majority of the target 200 million run rate cost savings by the end of 2025 has been executed in the third quarter. And as we are looking into 2026, we are planning to continue to reduce the investments under IEC in comparison to the 375 million this year. I will come back with more details to you in Q4. Our finance net came in at 419 million, which is a reduction of 158 million compared to last year. And we continue the positive trend of reduced financing costs as interest rates and our debt levels are going down. For the full year, we expect the finance net to land in the range of 1.8 to 1.9 billion, which is a material decrease compared to the 2.3 billion we had in 2024. Moving to tax, here our full year forecasted tax rate is 29.2%. The increase compared to our full-year 26.7% estimate in the second quarter is mainly due to the $154 million close-down cost where we expect around 60% of the total cost to be tax deductible over time. Adjusted then for the close-down impact, the full-year forecasted tax rate is 26.8% in line with our previous communication in Q2. All in all, a strong quarter where our currency adjusted EPS growth excluding IC was 19% in Q3 and 18% for the first nine months of 2025. We then moved to cash flow where our operating cash flow was solid at 3.3 billion or 106% of the operating income. This despite some negative timing impacts from Q2 as I mentioned in the previous quarter. Both our DSO and our general working capital position continue to improve and support the good outcome in the quarter. The free cash flow landed at $2.7 billion, supported by solid operating cash flow, the reduced interest payments due to the lower interest rates and debt levels, and temporary positive tax timing impacts in the U.S., and we expect a majority of the positive timing impacts to reverse in the fourth quarter. For the first nine months of the year, we have strengthened our operating cash generation, having an operating cash flow of 74% of our operating income compared to 58% last year. We are in a good position to meet our full-year target of an operating cash flow of 70-80% of operating income, where we always target to be at the upper end of that interval. This despite that we have one additional payroll in our U.S. guarding business in Q4, which will impact the fourth quarter cash flow negatively approximately 40 million U.S. dollars. This is a negative timing impact that we have every fifth or every sixth year in the U.S., and this timing impact is relevant for Q4 as well as for the full year 2025. In 2026, we will then be back to the normal payroll pattern with one less payroll compared to this year. We then have a look at our net debt, which was 33.4 billion at the end of the quarter. This is a reduction of 2.6 billion compared to Q2, mainly supported by the strong free cash flow generation. In the quarter, we also had 308 million of total IC payments, where 175 million of this was the second payment related to the US government and Paragon Settlement. The residual is mainly related to the ongoing transformation and business optimization program and the government business close-down, which was $43 million in the second quarter. And as a reminder, the total Paragon settlement amount is $53 million, which we pay in three approximately equal installments. We have now made two payments, and the third and final payment has been made in the fourth quarter. Moving then to the right hand side, where the net depth to EBITDA was 2.2 times. This is half a turn improvement compared to Q3 last year, where the positive EBITDA development, good cash generation and the strength in Swedish krona all supported positively. And we are well below our target net depth to EBITDA of less than three times and expect to continue to leverage our balance sheet in the short term. Moving on to have a look at our financing and financial position, where we continue to have a strong balance sheet, strong liquidity, and we remain without any financial covenants in our debt facilities. And after a period of important refinancing focus, our main focus the second half of 2025 is to use the strong cash generation from the business to amortize debt. In the quarter, we have repaid 1.4 billion of debt, and in the fourth quarter, we plan to amortize approximately 2 billion on the term loan maturing next year. This will continue to support our cost of financing going forward, and we will have very limited refinancing needs throughout 2026. And as always, we remain committed to our investment grade rating. So with that, I hand over back to you, Magnus.

Very good. Thanks a lot, Andreas. And before we open up the Q&A, I'd just like to share a few reflections regarding the longer-term development and also a little bit looking ahead. So back in 2022, when we did the Stanley acquisition, we accelerated the work to change the profile of Securitas, to create a company with the strongest technology and digital offering to our clients in combination with high-quality guarding services. We also shared the ambition to improve the operating margin, from the prior decade where we have been around 5% to achieve around 8% by the end of 2025. And we outlined the main focus areas to drive this improvement to 8%, and I think those of you who are following us, you're familiar with the bridge here. We exceeded 8% operating margin in Q3, and Q4 is a somewhat lower margin, but we're on a good track to deliver on this ambition in the second half of this year. And while the impact from M&A activity has been limited in recent years, we have made considerable progress in the other areas. And we are about to finalize the heavy lifting work with active portfolio management and strategic assessments. But this work has been very important to create a sharper and more focused company where all the business that we are running is fully aligned with our strategy. And when you're looking at SCIS, and this is more related to a question we received a couple of times, the close down here and the result doesn't really represent a significant part of our overall business. It is only around 1% of the operating result. So a large volume, very limited in terms of the operating result impact from that close down. And when I look at the strategic assessments, the remaining assessments that we have under consideration now represent approximately 1% of group sales. So we are nearing the completion of an important phase with important work. It has been rigorous and hard work, but it's been important to shape a stronger and a more focused company. And just to repeat the message also from the second quarter, we have received a question on a number of occasions on what basis we consider reaching the 8%. And as communicated earlier, if we reach the 8% operating model in the second half of this year, excluding the SCIS business that we're closing down, we will have achieved the ambition. And delivering on this ambition is an important milestone since it represents a historical shift in the profitability profile of Securitas. But having said that, it's just a milestone on a longer journey. And talking about that journey, we have come a long way in shaping the new Securitas to be a sharper and a much stronger company. And when you take a little bit of a longer-term perspective, we are operating in a market with good growth, which is spurred by increasing threat levels, increased demand for digital and technology solutions, and where we are uniquely positioned with the investments we have done in the last five to six years. And we have intentionally transformed and repositioned our portfolio to the parts of the market where there is good underlying growth and the real security needs are more important than the price per hour. And we partner with our clients for the long term, investing into the relationship, and we are building the best security solutions based on the client needs, leveraging technology, digital people, and more and more real-time insights. And all of this has also led to much more profitable securities today compared to the 5% company we were for many years. Today, we're executing on our plan to get to 8%, as stated in the second half of this year. And we've also been able to lift the margin for 19 consecutive quarters and at the same time deliver strong EPS growth to our shareholders. And in the increasingly complex and volatile macro environment, we're also a resilient business where the majority of our revenue is recurring and with an excellent client retention of 90%. And all of this has also been elevated or translated into higher cash flows, where we are now delivering cash flow above our financial targets. And this has also contributed to an accelerated deleveraging after the Stanley acquisition. So we're now in a position That is much, much stronger, and we can continue to invest into the growth of our business. So as we finalize in this strategic phase, we're a much stronger company, very well positioned in an attractive market to increase our focus on profitable growth. And as more and more units reach the required profitability levels, so that means for good sustainable business, they also gain the right to shift focus on driving profitable growth. And looking at the longer term, we will continue to improve the margin as we are building scalable solutions to our clients. So we stay focused, confident, and also very excited about our longer-term opportunities, and we're looking forward to sharing more in the capital markets day in June. So with those perspectives, we can conclude this Q3 presentation. We're executing according to our plans, deliver strong margin with 8.1% in the quarter, EPS improvement of 19%. So with that, let us open up the Q&A session.