SCTBY - Securitas AB (publ) (SCTBF) Q1 2024 Earnings Call Transcript
2024-05-12 02:44:07 ET
Securitas AB (publ) (SCTBF)
Q1 2024 Earnings Conference Call
May 8, 2024 03:30 AM ET
Company Participants
Magnus Ahlqvist - CEO
Andreas Lindback - CFO
Conference Call Participants
Suhasini Varanasi - Goldman Sachs
Remi Grenu - Morgan Stanley
Andrew Grobler - BNP Paribas
Neil Tyler - Redburn Atlantic
Viktor Lindeberg - Carnegie
Raymond Ke - Nordea
Allen Wells - Jefferies
Johan Eliason - Kepler Cheuvreux
Presentation
Magnus Ahlqvist
Good morning everyone and welcome to our Q1 Update. It is a decent quarter overall with continued operating margin improvement versus the same period last year. The organic sales growth was healthy with 7% in the quarter, and the real sales growth for technology and solutions was also 7%. And here the divestment of Argentina last year had a negative impact on the real sales growth in technology and solutions.
The operating margin improved to 6% and North America with strong improvement in technology and also Ibero-America were the main contributors. The airport security business was weak in Q1, and this had a negative impact primarily then on the results in Europe.
Price and wage increases were balanced in the first quarter. And looking at the operating cash flow, it was negative 15% negative, and this was in line with expectations after a very strong Q4. And the net debt-to-EBITDA ratio was 2.9 at the end of the quarter.
The integration of STANLEY Security is progressing well, but we're also working through, as previously announced, some operational impacts related to system and support transitions in Europe and expecting to improve that situation in the second quarter.
But let's then go to the view on the different business lines in our business. And starting then with Security Services, where the growth was 4%. And the EBITA margin of 4.4% represented slight improvement versus Q1 last year, but this is below our expectations, and I come into some of the reasons behind that in a minute.
The European Guarding margin improved in the first quarter as a result of the actions that we have initiated in 2023 and continued into Q1, and this is a positive development on the Guarding margin in Europe.
But when looking at the global picture for services, price wage balance and active portfolio management have helped the margin, but the airport security business and also Securitas Critical Infrastructure Services business both had a negative impact on the margin in the quarter. And the performance of a low-performing contract in SCIS improved in Q1, but further actions have been initiated to drive improvement in Q2.
Looking then at Technology and solutions, where the real sales growth was 7% in the quarter, and the operating margin improved to 10.2%. And we are progressing really well with the STANLEY integration and also their cost synergies that have a positive impact.
And the performance improvement is really most visible in North America, where we're seeing clear benefits from cost synergies but also operating at a larger scale in the business and I will share some more comments on that after Andreas' finance section.
But if we shift them to the performance in the business segments and we start with North America, as usual; and here, we had 4% organic sales growth, thanks to good sales momentum and price increases....
Securitas AB (publ) (SCTBF) Q1 2024 Earnings Call Transcript