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Edited Transcript of LOOM B.ST earnings conference call or presentation 5-Feb-20 8:00am GMT

Q4 2019 Loomis AB Earnings Call

Feb 8, 2020 (Thomson StreetEvents) -- Edited Transcript of Loomis AB earnings conference call or presentation Wednesday, February 5, 2020 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Kristian Ackeby

Loomis AB (publ) - CFO

* Patrik Andersson

Loomis AB (publ) - CEO, President & Director

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Conference Call Participants

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* Carina Elmgren

Handelsbanken Capital Markets AB, Research Division - Research Analyst

* Daniel Thorsson

ABG Sundal Collier Holding ASA, Research Division - Research Analyst

* Henrik Mawby

Nordea Markets, Research Division - Senior Analyst

* Johan Dahl

Danske Bank Markets Equity Research - Analyst

* Johan Eliason

Kepler Cheuvreux, Research Division - Analyst

* Karl-Johan Bonnevier

DNB Markets, Research Division - Analyst

* Matija Gergolet

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Peter Testa

One Investments S.A.G.L. - Analyst

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Presentation

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [1]

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Yes. Hello. Good morning, everyone. It's Patrik Andersson here. And today -- with me here today on the call, I have our CFO, Kristian Ackeby; and also Anders Haker, who is our Chief Investor Relations Officer. So good morning, and welcome, everyone, to the fourth quarter presentation from Loomis.

So let's start the presentation and turn to the next page where we have all the highlights for the quarter. I will come back to many of them later on in my presentation, but let me just go through them quickly.

So on the recent events, mostly on the M&A side, we have now acquired Nokas cash handling in Sweden from January 2020. We are -- we believe we can close that deal in April of this year. So actually, in effect, Sweden will be actually the first 1-player market, which we know of. Unfortunately, the German acquisition was stopped by the competition authorities, as we have announced before.

When it comes to growth, we had a regrowth of 5%. And what's driving that is, of course, the 2 acquisitions we have in France: CPoR, which is the FX company; but also the acquisition of the French business of Prosegur, which is then CIT/CMS.

The organic growth was 1% in the quarter. We see that many countries in Europe continue to deliver very positive result in the -- on the top line when it comes to Europe, despite the fact that we had protests in France and Chile.

The U.S. growth opportunities remain very strong. We see that there is a lot of potential still within the CMS and SafePoint side in the U.S.

The operating margin was really excellent in the quarter, coming in at 13% versus 12% last year. That's all-time high for the fourth quarter when it comes to margin but also profit in absolute terms.

We had a record margins in the U.S. on 15.8%. EPS grew by 5% in the quarter. And the operating cash flow was 46% in the quarter, and that temporarily weakened by some timing effects when it comes to working capital.

But if you look at the full year, the conversion was 81%, which is on a more normal Loomis level, if I can express it like that. The proposed dividend is at SEK 11 a share, which is an increase by 10%.

So let's turn then to next page, which is operating margin development. And this slide is just to give you a historical perspective on the margin development. And as I mentioned, before, we have all-time high margin when it comes to fourth quarter but also when we look at profit in absolute numbers. And when it comes to the full year, we are now on a 12.4% margin for 2019. So a very strong development indeed.

Let's turn then to the next page and look at Europe. We had a very good development in Europe, I would say, also in the quarter. Real great -- growth came in at 8%, and as I mentioned, these 2 acquisitions, which is really driving the top line in Europe.

And FX will -- the CPoR acquisition and the platform we have in France will be the platform for further expansion within FX in Europe. And so that's a very strategic move. And now we're working full focused on developing that platform for the rest of Europe.

We also acquired Prosegur, as I mentioned before, cash handling, and the integration goes according to plan. And France is -- will be, in effect, the 2-player -- is a 2-player market, as we speak. But if we take Prosegur into account and looking at the margin further down, we would be at about 13% or above 13% for the quarter. So that has a sort of a bit of a hampering effect, but that will change over the course of 2020.

Organic growth was 1% in the quarter. We have a very strong contribution from Spain, Belgium, Turkey and Argentina in the quarter. As everybody could read in the papers, we had some challenges in France and Chile due to political demonstration and strikes and protests. And when it comes to margin, I mentioned that before, we are now restructuring the French business. And we are spot on when it comes to the plan we're having for integrating the business.

Also to mention, the German operations has a diluting effect on the margin. And we expect also here that we will see gradual improvements throughout 2020. So indeed, a really good and strong and solid performance in Europe.

Let's turn then to next page and look at U.S. Also, here, very, very strong result in the quarter. Organic growth was 2%, and we are now -- we have had close to 18% revenue growth when it comes to SafePoint, really strong indeed. And now SafePoint accounts for 15% of the total U.S. revenue.

And if you look at CMS, CMS is also developing positively. And 35% of the total revenue is now coming from CMS cash handling, cash management services. And that has, of course, a good effect on the margin. And as I mentioned before, we have a strong outlook for growth opportunities when it comes especially to SafePoint but also to CMS in the U.S. market.

When it comes to margin, a fantastic margin, I would say, 15.8% versus 12.8% the year before. SafePoint, as I mentioned, is helping to expand the margin. But we're also now focusing very much on customers, which are interested in high-quality and high-quality services. And we are not sort of chasing the lost contract with low prices.

We also had favorable net development when it comes to our medical and casualty expenses and reserves, which is good because that means that we have less casualties and less people being treated by medical people, and that's a good thing. So we also had a very positive impact of the restructuring of the international business in the quarter. That has been going on throughout the year, and -- but also in this quarter. So that's U.S.' excellent result.

So let's turn then to next page and just look at the statement of income. As I mentioned before, we are making the best Q4 ever and the best year ever. We have SEK 2.6 billion in EBITA for the year. And now we are in the range between 12% and 14%, which was our long-term goal for 2021. We're at 12.4%, which is really encouraging. And all in all, I would like to also thank all employees for their great effort during 2019. I also would like to thank all investors and other stakeholders for their support during 2019.

And then let's turn to the next page and go to the Q&A. And operator, we are now open for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we have no questions -- oh, yes, we do have a question. So it's Carina Elmgren who's asking the first question.

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Carina Elmgren, Handelsbanken Capital Markets AB, Research Division - Research Analyst [2]

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It's Carina Elmgren at Handelsbanken. I have a few questions. The first one would be for the U.S. You say that you're refraining from entering less profitable contracts. Should we view this as there is -- like there's more competition in the market and perhaps price pressure?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [3]

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No, I wouldn't say that. I mean, there's always -- I think that what we have done -- just to take you back in history, I think that what we have done during the last couple of years is really improving our quality and improving our systems when it comes to IT and how we respond to customer requests and so on and so forth. We don't want to jeopardize that. Customers need to pay for that service. And some customers are not maybe willing to do that, and then they're not -- I don't think they are suitable customers for Loomis. So I don't think that, in general, there is any price pressure. It's just that some customer segments maybe are not suitable for our services. That's how I would express it.

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Carina Elmgren, Handelsbanken Capital Markets AB, Research Division - Research Analyst [4]

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Okay. And given this, what would you say is a fair assumption for the midterm organic growth in the U.S.? You previously mentioned 5% to 10% or 6% to 8%. Then what is your assessment at the moment?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [5]

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Yes. No, I think that -- I mean, this always goes a bit in weight. But nothing has changed when it comes to how we look at the U.S. market, both when it comes to SafePoint and CMS. So we are still saying that top line growth should be between 5% and 10% going forward.

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Carina Elmgren, Handelsbanken Capital Markets AB, Research Division - Research Analyst [6]

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Okay. Great. Then on SafePoint installation, sorry if I didn't see this in the report, but how many did you install in the U.S.? And could you comment something about the pipeline in Europe?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [7]

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Yes. We did about 1,000 installations in the quarter and about 4,000 for the year. So now we're close to 31,000 installations in the U.S. In Europe, we are progressing very well. Actually, we have the same growth rate in Europe as we had in the U.S., however, from a much smaller base. But we are doing really good when it comes to SafePoint in Europe as well.

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Carina Elmgren, Handelsbanken Capital Markets AB, Research Division - Research Analyst [8]

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Okay. Then some other -- quickly before I leave over. You said the margin was impacted in U.S. by less medical costs. Is that something that will last in 2020 and be adjusted once a year? Or was it more of a one-off in the quarter?

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Kristian Ackeby, Loomis AB (publ) - CFO [9]

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Sorry. Kristian here. Yes, this is the onetime effect. It's when you do the recalculation of your actuarial assumptions based on your performance. So this should be viewed as a onetime effect. But of course, if we continue to improve, it can have a further positive impact. But it should be viewed as a onetime.

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Carina Elmgren, Handelsbanken Capital Markets AB, Research Division - Research Analyst [10]

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Okay. And then a final question, maybe a little bit broader one, your margin target for 12% to 14% by 2021. Now without Ziemann, would you say that you can come up to closer to 14%? Or how do you look at the guidance range?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [11]

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No. As I said all the time is that, of course, if we don't do any margin-diluting acquisitions, we should be closer to the top of the range. And you can argue that Ziemann would be a bit diluting it. They had a margin between, yes, around 7%, 7.5%. So I think that all in all, it's more likely that we get up to the higher range of the spectrum now without Ziemann.

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Operator [12]

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And we will now take our next question.

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Daniel Thorsson, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [13]

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Daniel from ABG. A quick one on Germany. Is it necessary to increase your size in Germany through more acquisitions to reach group margin? Or can you do that only with the KÖTTER business?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [14]

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I think that, as it is right now, let's call it, short term, it's very much a CIT business. And CIT business is very difficult to get up to group margin. So I don't think that in the near term, you should expect that Germany is coming up to group average. However, in the midterm, long term, it should because we believe that CMS outsourcing and SafePoint will -- I mean, the demand for SafePoint will increase, and thereby sort of mid-term, long term, it should be able to get to group average.

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Daniel Thorsson, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [15]

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Okay. And can you capture that part of the business with the KÖTTER platform? Or do you need to expand?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [16]

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No. I think that we can do that, to a large extent, with the footprint we're having right now.

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Daniel Thorsson, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [17]

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Okay. Excellent. A question on Argentina. You highlight that as a positive organic growth driver in Q4. Is that also when you adjust for FX?

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Kristian Ackeby, Loomis AB (publ) - CFO [18]

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Yes, that's correct. We grow faster than inflation and also with FX. If you recalculate Swedish krona, we have an increase in Swedish krona as well.

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Daniel Thorsson, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [19]

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Okay. Excellent. And then a question on future acquisitions. Do you look in any geographies outside your current market that you think looked more attractive than others?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [20]

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No, we actually don't. So we still stick to Latin America, U.S. and Europe for the time being. I think that we have enough targets in those geographies, at least for this strategy period, to meet the target. And that's still the focus. So the pipeline is full with acquisition targets from these areas, I would say.

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Operator [21]

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We will now take our next question.

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Matija Gergolet, Goldman Sachs Group Inc., Research Division - Equity Analyst [22]

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Yes. It's Matija Gergolet from Goldman Sachs. A couple of questions for me. Firstly, I would like to dwell a little bit more on what happened to the U.S. margins in the fourth quarter because it's a very sizable increase. We don't usually see many companies having this type of, say, big increases. I appreciate you have a little bit of a one-off, say, tailwind in the U.S. of 60 bps or so, 70 bps. But still, there's more than 200 basis points of margin improvement in the U.S. Now is it like a sustainable margin improvement now that we should expect it will carry in the coming quarters? Or not really? If you can just elaborate a bit more on that. That's the first point.

Second point is also, say, on the margins in Europe. So you mentioned that in Europe, ex possible France, you were at 13% margin, also like a 50 basis points margin improvement. So again, is this like sustainable level? And if I -- say, from your comments, it seems that you would expect that possible France turnaround is complete by the end of 2020. So probably my reading, but here, I would like to hear your comments, okay, still some margin pressure in -- from possible France in 2020 or by 2021, we should also expect a fairly sizable step-up in margins.

And then thirdly, which is also, say, a sizable item. I don't know, it will probably be a bit annoying, on the working capital. So looking at your statements on Page 13, I see that I got SEK 230 million of change in other operating capital employed and other items. Just if you can give us a bit more detail about what is that, given that it is 20% of your operating cash flow, yes, in the quarter.

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [23]

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All right. I'll start with the 2 first questions. I'll let Kristian answer the third one. So when it comes to U.S., I think that what we have done in the U.S. over this year has really been -- we've been driving operational efficiency in our branches. We have been driving a lot of systems and activities to improve performance, both in the branches, but also when it comes to systems and IT systems and follow-up system when it comes to the headquarter.

So I think that behind these strong numbers is real and there is a real effect of efficiency improvement in the U.S. business. There's no doubt about it. And then we had some tailwind when it comes to medical and so on. So I think that there is an underlying improvement of the margins in the U.S. And I think that I should not guide now, but this is sustainable. This is -- there is an underlying improvement in the U.S. coming from many, many, many activities. There is not just one. There's maybe 10 activities driving that. So that's number one.

Number two, on Europe, you're right, we have -- in Europe, we have an effect of Prosegur France, which is quite sizable. That will change. We are quite certain that, that would change during 2020. That is that we would take that volume coming from Prosegur France and put that on a -- on common platform. And that's been the plan for the year. And then now we also -- as we don't have any possibilities to buy Ziemann, we're also driving the turnaround of the German business, and that also have an impact on the margin. So these are businesses that's not making any profits, on the contrary. And of course, our main focus this year is to turn that around. And we're quite optimistic that, that will happen. So all in all, the European margins should be able to improve over 2020.

So then I leave to Kristian to answer the third one.

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Kristian Ackeby, Loomis AB (publ) - CFO [24]

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Regarding the cash flow and specifically, then Q4, you have quite a number of timing effects. And in the line others, mainly impacted by movement in cash stock and also salaries in the U.S.

If you look into the full year number, you have a more sort of level that gives you the case. And there, you also see its timing effect during the year. And if you look into the full year cash flow at this 81%, we have negative impact from these salaries and from accounts receivables. Underlying compared with the prior year, it looks a little bit better actually than the 81%. But I think it's better to look at the full year number here than the timing you get in Q4. And also to mention, Q4 last year, we had a lot of positive timing effects that messed the comparison up a little bit.

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Matija Gergolet, Goldman Sachs Group Inc., Research Division - Equity Analyst [25]

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Okay. But -- so the biggest item is the timing of salaries, you say?

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Kristian Ackeby, Loomis AB (publ) - CFO [26]

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The biggest impact you see in Q4 is the cash stock movement.

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Matija Gergolet, Goldman Sachs Group Inc., Research Division - Equity Analyst [27]

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Stock movement?

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Kristian Ackeby, Loomis AB (publ) - CFO [28]

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Cash. Cash stock, yes.

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Matija Gergolet, Goldman Sachs Group Inc., Research Division - Equity Analyst [29]

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Cash stock?

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Kristian Ackeby, Loomis AB (publ) - CFO [30]

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(inaudible) of cash.

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Matija Gergolet, Goldman Sachs Group Inc., Research Division - Equity Analyst [31]

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Okay. Cash stock movement. Okay, hang on. Sorry, just a quick follow-up on France. In terms of, say, when you move over the volumes to your platform, should we expect any further restructuring charges for that -- for the country, for the region during 2020?

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Kristian Ackeby, Loomis AB (publ) - CFO [32]

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Yes. We have -- what you see in the income statement, we have reported that -- the transaction and integration cost. And there, you will see also cost coming in during 2020. So we do not report that to the newly-acquired unit in the operational EBITA in the transaction and integration cost.

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [33]

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But there will be some costs, but that's more like a normal ongoing business for us. It's nothing exceptional, I would say.

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Operator [34]

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We will now take our next question.

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Johan Dahl, Danske Bank Markets Equity Research - Analyst [35]

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Yes. It's Johan Dahl at Danske. I was just curious to the problems you talked about effects in France, et cetera, on organic growth. Would you be able to give any sort of info how much those problems in Chile and France impacted your organic growth?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [36]

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We -- it's very difficult to give any numbers. What I can say is actually that we had -- despite these issues, we had organic growth in France for the quarter. And we have seen that organic growth has been ticking up in France the last couple of quarters after the issues we had in 2018. So we had organic growth. It's -- I don't dare to speculate about the effect. I mean, if you've been to Paris, you can see that the traffic is chaotic. It's very difficult to make services and so on, but we haven't calculated. But there is some kind of effect. It's very difficult to say how much.

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Johan Dahl, Danske Bank Markets Equity Research - Analyst [37]

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And on the SafePoint in the U.S., I think you've been -- you've expressed yourself very confidently, I would say, throughout 2019 in terms of the future outlook for this. I'm just wondering -- so in short, Q4 was slightly better in terms of net installations. But what really gives you the confidence here to sort of repeat this message looking into 2020, 2021?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [38]

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So I mean, we make careful analysis of the market and the market demand. We're looking at our pipeline of prospects. We're looking at the orders we have in our books and how much we're going to install and so on. Then there's always timing effects, and it takes a bit more time. But the market is there. The pipeline is there. So that makes me still quite optimistic, very optimistic about the future.

And I think that also in the quarter, I mean, to grow 18% with SafePoint in the quarter is really, really strong. What I've said many, many times and what we -- what is -- not a challenge but something we need to look at is to protect the install base. And that we have spent quite a lot of resources and building up the teams, building up systems to track and to monitor and to retain these customers as we won them.

And that is a bit of change because we have quite a -- call it quite an install base that, of course, that our competitors want to take. So that has been a bit of a change. But we are very much up running. I don't see any change in the prospects of growing in SafePoint for the coming years.

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Johan Dahl, Danske Bank Markets Equity Research - Analyst [39]

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Okay. And just a quick follow-up also. Would you say that you lost market share in the SafePoint niche in 2019? And secondly, I was wondering, after the Ziemann acquisition not being carried out, what is the risk do you think that you will be slightly stressed here to achieve your group target here for 2021 in terms of M&A?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [40]

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No, I don't think we lost any market share at all. On the contrary, we are continuing to install a lot of SafePoints. And the pipeline is strong, as I said. No change in that respect. It's always a bit, like, is there a one big contract coming in or not. So that makes any other -- the change of maybe 1,000 or more than 1,000 safes. So you have to be a bit lucky, of course. But still, 4,000 installed in the year is a very strong number, at the same time as we protected our base.

The second question was, again, about...

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Kristian Ackeby, Loomis AB (publ) - CFO [41]

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Revenue target.

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [42]

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Sorry, the revenue target. No, we are not stressed. Of course, we shouldn't make any acquisitions which are bad business for us. But we have a strong pipeline. We have a lot of things on our agenda to achieve. And as I said many times, I'm still very confident that we would make our -- the SEK 24 billion. So that's still -- that's within reach. And as I said today, we're in -- doing really good on the margin side, and we are quite confident that we can hit the revenue targets as well.

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Operator [43]

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We have our next question.

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Johan Eliason, Kepler Cheuvreux, Research Division - Analyst [44]

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This is Johan Eliason at Kepler Cheuvreux. Just 2 questions. First, you mentioned in the U.S. business, the restructuring on the international part, could that have any significant impact on your U.S. margins in 2020?

And secondly, in your M&A pipeline, are you looking at anything from Group 4 S and the cash solutions business there? Or what do you see happening with that process?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [45]

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So the restructuring of the international business is more or less done. I would say, there will be some effects, I guess. But the big part is done in 2019. There's some effect. What is happening with international, we've been quite successful in driving the top line between U.S. and Latin America. That's been a very good thing. And hopefully, that can continue. So that will have -- that part can have or should have a positive impact. But the restructuring is more or less done.

When it comes to -- again, my memory -- what was the question? I mean, can you repeat the second question, please?

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Johan Eliason, Kepler Cheuvreux, Research Division - Analyst [46]

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Yes. Just any view on the Group 4 S cash solutions. So are you looking at anything there? Or what's your view on that process?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [47]

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I don't know what's going on. They have announced that they have -- will have a strategic review, of course. We -- I mean, in this business, everybody is talking to everybody, of course, and we're looking at it. But to acquire the whole G4S part, cash part would be not in our interest, as I've said many times. That's because of different reasons, overlap and things like that. Of course, there are parts of G4S that could be very interesting, in some countries, of course, but also the cash solution. Now we have launched our own recycling concept some months ago, and we are making some progress, at least on that side. So we are taking up that battle. But of course, that could be of interest.

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Operator [48]

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And we have another question as well.

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Henrik Mawby, Nordea Markets, Research Division - Senior Analyst [49]

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Henrik Mawby from Nordea Equity Research. A couple of questions for me, if I may. On Europe, I mean, you commented that you still had organic growth in France and -- but there's still a 200 basis points organic growth slowdown. Is that mainly Chile then, or is a bit France in Q2, Q3 have mid-single-digit growth rates? Or how should we look at that? Or have you seen a significant slowdown in any other markets?

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Kristian Ackeby, Loomis AB (publ) - CFO [50]

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No, I think it's -- the trends are relatively similar if you look overall. I mean, it's like you have strong growth in Latin America in general. But now unfortunately, Chile goes from double-digit growth in the first 9 months to close to 0 in the fourth quarter with the riots. France, as you mentioned, they come from having a couple of percent organic growth, low single digits. And they are still positive, as Patrik said, but it's a very low number. So that gives us a negative impact. So we are now at this 1 percentage point, in the range of 1% to 3%, and we see no reason to have any other opinion about that now.

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Henrik Mawby, Nordea Markets, Research Division - Senior Analyst [51]

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Okay. So should I read that as -- that you've not seen any weakness in the underlying portfolio, and that this is mainly related to, hopefully, temporary factors in Chile and France?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [52]

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Yes, that's right. And I think that I'd like to mention like -- a country like Spain, as I mentioned many times before, doing absolutely fantastic both on the bottom line and top line, growing nicely. We have Belgium growing. We have Turkey growing, Argentina growing. So there is no change. I use -- the difference, the delta is, of course, the riots and the things that we have experienced in Chile and France.

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Henrik Mawby, Nordea Markets, Research Division - Senior Analyst [53]

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Okay. And moving over to the U.S. I mean, earlier in the year, Q1 to Q3, you had a very solid and accelerating growth trend, and then there was a significant slowdown there as well in Q4. How should we look at that? Have you lost any larger contracts? Or is it mainly that you've not been able to add enough new contract wins during the year? Yes.

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [54]

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I would say that, first of all, there has not been a lot of major contracts up for grab in the quarter. I think that, that is the main reason, bigger CMS contract that is. And then as I said, we have not sort of decided to go in for a low-margin contract in some instances. But I don't see any big change in the -- on a macro level. I think that still that there are a number of interesting prospects in the market when it comes to CMS. And definitely, they are also safe when there are a lot of possibilities. So I'm not worried about the midterm, long-term trend in the U.S. that the growth will come back.

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Henrik Mawby, Nordea Markets, Research Division - Senior Analyst [55]

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I agree with you there, Patrik. What I'm trying to discern here is if we should be concerned that you had a contract loss in the quarter and that might feed into even worse organic growth in the coming quarters.

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [56]

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No. No, no. it's nothing -- I mean, as I said, no, I don't repeat myself. There's nothing that is sort of worrying on that side, no.

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Operator [57]

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Ladies and gentlemen, we will now take our next question.

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Carina Elmgren, Handelsbanken Capital Markets AB, Research Division - Research Analyst [58]

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It's Carina Elmgren at Handelsbanken again. I was wondering a little bit about Germany and your organic growth prospects there. How much have you been growing in '19 organically there?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [59]

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If I recall it right, so Kristian, you take that one.

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Kristian Ackeby, Loomis AB (publ) - CFO [60]

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Yes. Organic growth in Germany is relatively flat. And that's, of course, due to that we have been in a process to acquire a company. So now we need to increase focus on our existing company and the acquisition and integration phase.

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Carina Elmgren, Handelsbanken Capital Markets AB, Research Division - Research Analyst [61]

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Okay. And do you feel that you could step up that growth maybe by taking market shares? Because I assume that the outsourcing of the CMS part still will take some time before it starts.

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [62]

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No. We have a plan to grow both top line and bottom line in Germany for this year. So we would expect some top line growth as well, yes. And that's mainly because we think there are some contracts we can win. We have, for the reasons that Kristian sort of said, we have not been that active on the market, focusing on other things. But I think that there is very good chance that we can grow the top line also in Germany.

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Operator [63]

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And we have another question as well.

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Peter Testa, One Investments S.A.G.L. - Analyst [64]

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It's Peter Testa. I was wondering if you could just help us understand also whether there's pricing going on in SafePoint, so just to try to understand the growth in organic revenue versus the growth in installations. You seemed to be growing revenue faster than installations. Is there anything going on in pricing or maybe just size, average size of contract? That's the first question.

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [65]

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No, I don't -- we increase the price every year a bit. But that -- you shouldn't see that as pricing. It's that when the contracts come in, they are not that -- in the beginning, we need some time to get them under the belt and then we see that top line is coming. So it's a bit of a delayed effect, but there is nothing like we are pushing prices like crazy on the SafePoint side. No, it's not.

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Peter Testa, One Investments S.A.G.L. - Analyst [66]

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Okay. And then just looking in terms of organic growth in Europe, around 1%. I mean, you said that Argentina, Chile, France are all positive. Have you seen any particular change in Spain or Scandinavia or some of your other important markets in Europe in terms of growth trajectory during the, say, end of the year?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [67]

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No. No change. It's very much the same trends we've seen before that we have a slight negative top line in the Nordic countries, especially Sweden. And then we have a very good momentum in many of the other European markets. I'd also like to mention in Austria, Switzerland and the others I mentioned. So it's the same trend we have seen the last year, I would say. So no change.

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Peter Testa, One Investments S.A.G.L. - Analyst [68]

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Okay. And then on the recent acquisition you've announced in Sweden, and previously, we talked a bit about the ATM opportunity in general in Sweden. Can you give any sense as to how you put all these together and maybe with the legislative progress to understand whether there's a significant revenue and profit opportunity building there?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [69]

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So the latest acquisition is the acquisition we bought, the Nokas in Sweden. And that is not ATM. It's a pure CIT/CMS that we are now waiting to close. So that's number one.

We are focusing very much on the ATM business, and we have built up a team that is working very hard to get new contracts when it comes to the ATM. So the idea is not only to do the CIT service but to expand that service into CMS, first-line maintenance, IT and so on and so forth. So that's what we're working very hard on then. And I think that, that is a major growth opportunities for -- a growth opportunity for Loomis going forward. That will be outsourced much more from independent ATM deployers but also from banks. So that will happen.

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Operator [70]

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We will now take our next questions, ladies and gentlemen.

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Karl-Johan Bonnevier, DNB Markets, Research Division - Analyst [71]

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Yes. Karl-Johan Bonnevier from DNB Markets. Patrik, just to start with, just to -- so I understand it fully. Have you decided not to challenge the competitive authority's decision or indication in Germany and you walk away from Ziemann? Is that deal totally closed from your point of view now?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [72]

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Yes, it is. We decided some time ago after many discussions with our lawyers that we will not appeal the decision. The reason for that is that is a long process. It can take up to 3 years. And we don't know then what -- if there's anything still to buy, of course, but it also cost quite a lot of money. So taking all these consequences into effect, we have decided not to appeal the sentence or the decision by the competition authority.

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Karl-Johan Bonnevier, DNB Markets, Research Division - Analyst [73]

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Makes sense. Makes sense. On the Nokas transaction in Sweden, is that a completed transaction now? Or is that still pending some -- the approval from the financial inspection?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [74]

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Yes. So the thing is that we need to have approval from the financial inspection, but that is used to check that we are the proper owners of it. It falls below the threshold of SEK 1 billion turnover -- SEK 1 billion in turnover as a threshold. So it should not be tested from that point of view. But it's only tested that we are the right owners, that we are under the supervision of the financial inspection. Yes.

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Karl-Johan Bonnevier, DNB Markets, Research Division - Analyst [75]

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Excellent. And Kristian, just so I understand the rollback of this accrual you made for the medical and casualty in the U.S. Do I understand it right? Obviously, I see this -- obviously, the one-off for the rollback in Q4. But aren't you using the new lower level as the base for 2020? So you can say whichever holdback from the first 3 quarters is something that's now going to be positive during the first 3 quarters of this year in comparison.

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Kristian Ackeby, Loomis AB (publ) - CFO [76]

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Well, I think this is a longer accrual, so to say, that reaches for many years depending on what kind of medical or casualty it relates to. But it's true that now we have a closing balance that will be the opening balance for next year. But then the new year starts, so to say, and this -- the release that is being done now does not relate entirely to this year. So I mean, it's the change in the outgoing balance. Is that helping you?

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Karl-Johan Bonnevier, DNB Markets, Research Division - Analyst [77]

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Okay. Then I understand it better. And looking at those kind of accrual levels in different countries, are you now basically on a same kind of risk level or same kind of cost level in -- across your footprint? Or how does that look?

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Kristian Ackeby, Loomis AB (publ) - CFO [78]

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No, this is more U.S.-specific thing based on how the legislation is and how you work with your employees, so to say, and how the social security system works in different countries.

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Karl-Johan Bonnevier, DNB Markets, Research Division - Analyst [79]

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Excellent. And then, Patrik, just to come back to the earlier question on your view of getting back to 5% to 10% growth in the U.S. footprint. Do you see any signs of this, say, second, third wave of CMS outsourcing materializing for the moment? Or is it still a quiet market out there?

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [80]

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I think that there is -- there are opportunities when it comes to both CMS and SafePoint. It's been a bit of a slower year, especially when it comes to CMS. This year, there's not been a bit -- bigger contracts out for grab. So -- but we see that the prospects are still there. There are opportunities. And I think that in the short term or midterm, we will get back to our growth levels. Yes.

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Operator [81]

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There are no further questions at this time. So please continue.

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Patrik Andersson, Loomis AB (publ) - CEO, President & Director [82]

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All right. Thank you very much, everybody, for listening and asking really good questions. Take care. Thank you. Bye-bye.

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Operator [83]

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Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.