Securitas AB (publ)

Good morning, everyone, and welcome to our Q3 report that Matteo and I are presenting from Stockholm this morning. So let's go straight to the performance highlights. This is the quarter with some clear positive developments, but also a few areas with some weakness. And the justice sales growth was 3%, and at a high level, North America contributed with solid technology and solutions growth. but Europe was weaker. The real estate growth in technology and solutions improved sequentially to 6%, and this was supported by the performance in technology in North America. And similar to the last couple of quarters, the installation's order entry growth was very strong in the technology business. So we had record-level order entry in North America and Iberia, America. And from the strategy execution perspective, I am very pleased with the fact that we're increasing the share of technology and solutions across all segments. The adjusted operating margin was 8.2%, and this was supported by the highest Q3 margin to date in North America, so very good development. But aviation in Europe had a very negative impact, and if we look at the underlying business performance, so that means we exclude European aviation the operating margin for the group is at 8.4%, so 20 basis points impact. And I will go through the main reasons in the European section, but given the poor performance, our team has initiated actions to ensure that the aviation performance returns to acceptable levels. And looking at the earnings growth, the aviation issues in Europe burdened, and we recorded a flat operating margin in the quarter. and ETS improvement is 6% in the first nine months of the year. And the cash flow was healthy at 82%. And as previously commented, the active portfolio management activities in Europe and America were finalized in Q2, but we expect the continued negative top-down impact from the terminated contracts during the coming quarters. And the quality of the portfolio is now significantly stronger today as we transition to driving profitable growth. And related to SCIS, the transfer of the last remaining contracts to the federal government is expected to be concluded by the end of October, so this month. And this means that there is no further government-related revenue recognized in that business, but as previously communicated, we keep the commercial clear business. And we are very glad to have this concluded a few months before the targeted end date, and it also means that we can then focus on the core business. So let's then move to the performance in the business lines and the segments. And as a result of the technology momentum, the share of technology and solutions reached 35% in the quarter. The real sales growth in technology and solutions was 6%, as I mentioned before. and North America technology and solutions contributed together with very strong T&S performance in Ibero-America. The real sales growth in security services was 1% in the quarter when excluding the impact of the government business close down in North America. We had decent growth in North America, but the main negative drivers were aviation and the impact of active portfolio management in Europe and Ibero-America. And when I looked across the different segments, our security services offering continues to be well received in segments such as data centers, defense, and pharmaceuticals, where long-term partnerships and high-quality security services offerings are highly valued. But in certain markets and time segments, demand trends remain somewhat more cautious, and this is resulting in more selective purchasing behavior with an emphasis on price and also with longer decision cycles. And we managed this dynamic effectively in North America while market conditions in Europe and in North America remain somewhat more fragmented. And this is also then something that has impacted the top-line growth in the quarter. So with that, we then move to the segments, and we start with North America, where we recorded a continuous potential sales growth increase and margin improvements. The organic growth of 3% was driven by both the technology and the Guardian business lines. And technology installation sales were strong with continued record level order intake and backlog growth. Strong commercial momentum and good portfolio new sales also supported the organic sales growth in Guardian. The Pinkston business is smaller, as you know, but continues to hamper the North America growth as a result of the termination of a large temporary contract, and that contract I can mention we have until the end of this year in the comparatives. And the recent investment of the GIG Aviation Business also had a negative impact on the real change in operating results in the quarter. But with good commercial momentum, the sales growth in technology and solutions increased to 7%. And the operating margin improved 20 basis points despite the weakness in Pinkerton, So all in all, very good delivery by our North America team. And then we moved to Europe, where the total performance was below our expectations, primarily as a result of negative impact from the airport security business. The organic phase growth was 2%, supported by price increases in Turkey. And in the services business, as I mentioned before, active portfolio management had a negative impact on the growth. but we recorded improved new sales activity in the quarter. Real sales growth in technology and solutions was also below expectations at 3% with decent growth in technology but lower than expected in solutions where we had some terminated contracts. The operating model in Europe was 8.1% in the quarter. This represents a 30 basis point decline versus a very strong comparative. and the main issue was the airport security business with negative impact on the profitability. And just to give some better understanding of this, because this is somewhat of a surprise and definitely a disappointment also from my perspective, there are three main factors behind the port performance in aviation when compared to Q3 last year. And as we commented last year, it was also a very strong third quarter in aviation. But the first one is the situation in the Middle East, that burden will reduce number of flights and similar to last quarter, approximately 20% demand reduction in key markets like Germany. And second, some contracts were converted last year in Germany from price for passenger to fixed hourly contracts. The changes were implemented at the beginning of this year, but the biggest impact of these changes happened during the summer season, which is the peak traveling season. and with the demand picture changing in combination with the new contract, this had a negative, significant negative impact on the profitability and associated negative leverage in the third quarter. And the third issue is related to a very challenging start-up period of a new major contract in the Netherlands. And it goes without saying, this performance is disappointing and well below our expectations, but our team is now taking actions to drive improvement in aviation during the coming quarters. So all in all, weaker development in Europe in the third quarter, but as stated, actions are underway to improve. We then shift to Ibero-America, where we have stable development of the business. Sales growth was 5%, and this was driven by very strong growth in technology and solutions and price increases in security services. So similar to last quarter, there is a negative impact on the growth from active portfolio management, but our team are driving good conversions and new sales for technology solutions, and the real sales growth in technology and solutions was very strong at 14%. The operating margin was stable at 7.9. Strong growth in technology and solutions contributed, but overall margin was held back by negative leverage on the cost base in security services. So overall, solid results from our Ibero-America team, despite some of the near-term headwinds. And if we then look at the totality, we're driving discipline execution of our strategy, and looking at Q3 as a whole, we're very pleased with North America with increase in sequential growth, continued margin improvement. Ibero-America was solid, and we delivered below expectations in Europe, but primarily related to the very significant impact from aviation. And similar to previous quarters, we recorded very good growth and margin development in the EMEA business, which is reported in the other statements. And as commented earlier, we increased the share of technology and solutions to 35%. And time to retention is stable around 90. So that we turn to the finance section, and welcome, Matteo.

Thank you, Magnus, and good morning, all. As usual, we start with the income statements. Reported organic sales growth was 0%, and the operating margin improved by 10 basis points to 8.2%. Adjusted for the SEIS government business being closed down, organic sales growth was 3%, while the adjusted operating margin was 8.2, 10 basis points below last year. Operating income was flat in real terms in the quarter and increased by 4% over the first nine months. Looking below operating results, there are no material developments in amortization of acquisition-related intangibles nor in the acquisition-related costs. Item affecting comparability was 36 million in the quarter. Compared with last year, the year-on-year comparison is heavily impacted by the SES Paragon close down of 1.5 billion reported in Q3 2025. Excluding the divestiture of the SES close down, Item affecting comparability amounted to 46 million in the quarter compared with 65 million in the corresponding period last year. The cost in the quarter were related to our transformation program in Europe and in line with our plans. We continue to expect total cost for 2026, excluding the capital gain for the divestment, to be in the range of 225 to 215 millions. We are currently adjusting the phasing of some elements of the European Transformation Program. This is expected to result in a lower activity level and lower program-related spend in the fourth quarter. However, during quarter four, we expect to utilize part of the remaining amounts for additional restructuring and optimization action across the groups that qualify as items affecting comparability. Year-to-date, ISE remains positive at 102 million due to the capital gain of 223 million, resulting mainly from the investment of a global elite group in the US in the first quarter. Our finance net was 364 million, a reduction of 55 million compared to last year. We continue the positive trends of reducing finance cost and interest rate, and our debt leverage is decreasing. Consistent with our previous communication, we expect finance net for 2026 to continue to improve and come below 1.6 billion compared to the 1.8 billion for the full year 2025. Going forward, the year-on-year benefit is expected to moderate each quarter as leverage normalize and comparatives become tougher. Now, moving to tax, I want to start with some good news. The Supreme Court in Spain has ruled in our favor in the tax case, which dates back many years ago. While this is non-cash item, it had a positive impact on our net income in the quarter through the reversal of the related tax provision. For the full year, we now forecasted a tax rate of 27.9%, excluding the capital gain from the investment of Global Lily Group and the reversal of the Spanish tax provision. This is slightly above our previous forecast of 27.5%, mainly due to the higher tax cost in the U.S. EPS benefited in the quarter from both the lower finance net and the reversal of the Spanish tax provision, which was treated as ISE. Earning per share before item affecting comparability amounted to SAC 3.28, and the real EPS declined by 3% compared with last year. While we continue to see benefit from a lower finance net, this was more than offset by a higher tax charge in the quarter, with operating income remaining flat in real terms. For the first nine months of 2026, our currency adjusted EPS, excluding ISC, increased 6% compared to last year. Now moving to the FX effect in the quarter, currency had a positive translation effect, on reporting operating income in the quarter while the real change was flat. Turning now to cash flow, we deliver another solid quarter ending at 2.6 billion corresponding to 82% of operating income. For the first nine months, as Magna said, cash generation is slightly below last year at 71% versus 74. The cash flow in the third quarter was slower than last year. primarily due to higher CAPEX and change in operating payables. Trade is favorable, improved compared with the second quarter, although the improvement was partially offset by continuous strong installation sales. We remain well positioned to achieve our full year cash flow at 80 to 90% of operating income before amortization. As mentioned, The capital expenditure was higher than last year at 2.9%, but remained below our target. The free cash flow ended at 2 billion, and year-to-date improved by 94 million compared to last year.

I apologize that the presentation froze here, so we're not showing the cash flow side properly. Did we? Okay.