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Edited Transcript of SECU B.ST earnings conference call or presentation 6-May-19 12:00pm GMT

Q1 2019 Securitas AB Earnings Call

Stockholm May 10, 2019 (Thomson StreetEvents) -- Edited Transcript of Securitas AB earnings conference call or presentation Monday, May 6, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bart Adam

Securitas AB - CFO

* Magnus Ahlqvist

Securitas AB - President & CEO

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Conference Call Participants

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* Allen David Wells

Exane BNP Paribas, Research Division - Research Analyst

* Bilal Aziz

UBS Investment Bank, Research Division - Associate Director and Equity Research Analyst

* Carina Elmgren

Handelsbanken Capital Markets AB, Research Division - Research Analyst

* Chirag Vadhia

HSBC, Research Division - Research Analyst

* Edward Stanley

Morgan Stanley, Research Division - Equity Analyst

* James Peter Winckler

Jefferies LLC, Research Division - Equity Analyst

* Karl-Johan Bonnevier

DNB Markets, Research Division - Analyst

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Presentation

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Magnus Ahlqvist, Securitas AB - President & CEO [1]

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Good afternoon, everyone, and welcome to our Q1 call. We have a busy day today. We've had the board meeting in the morning and we're now presenting the results and then we have an AGM here in Stockholm, which is starting in a few hours. So Bart and I'm going to try to be a little bit briefer than normal and wrap up at 3:00, but still giving good amount of time for questions.

If we are looking then to the results on Q1, we've had a good start to the year with 7% organic sales growth. All the segments have contributed to the improvement. And as we have commented in previous quarters, we have continuously tight labor markets, but we've been able to balance the wage cost increases with price increases.

Good top line growth together with cost control contributed to operating results, real change of 11% in the quarter, which we are proud of. And we also had an improved operating margin to 4.8%. And in terms of earnings per share, we have a positive growth of 3% real change.

Our cash flow improved significantly in Q1 versus Q1 last year, but cash collection and cash management remain important areas of focus for us during 2019. We should also note that we have adopted IFRS 16 leases without restatement of the comparative periods. But if you look then at the quarter, all in all, we feel that we're off to a good start to the year.

And then we turn into the strategically important area of security solutions and electronic security. And here, we continue with good activity in security solutions and electronic security in Q1. This sales now accounted for 21% (sic) [20%] of the total sales of the business and 17% real growth -- real sales growth. And obviously, as we have had a quite strong growth, the base also keeps getting bigger, but good momentum in terms of solutions and electronic security.

And we also completed a few important acquisitions during the quarter that will help and enhance our protective services offering in a few important markets.

And starting with commenting on the Staysafe acquisition, Australia, this is an important for us because we will essentially strengthen our protective services offering, improve the guarding service delivery, but also then with state-of-the-art monitoring capability, also we'll able to offer remote data services and alarm monitoring in our solutions.

If we're looking at Allcooper in the U.K., another fine company that we have partnered with for a number of years. And with Allcooper, we would also then strengthen our protective services capability in the important U.K. market. So we are very happy to welcome the teams from Staysafe and Allcooper to the Securitas team as of Q1.

But one of the most important priorities for us is to continuously strengthen our protective services offering and to do that and for the benefit of our customers. So as in previous quarters, I would like now to share a new customer reference case, and in this case, it's a reference case from the Danish company Maersk. So if we can please play that video.

(presentation)

Good. So this I believe is a good example where we started with a risk assessment, sitting down with Maersk, understanding their needs and then we had developed, as you can see in this video, a comprehensive solution, leveraging a number of our protective services. What I also believe is good about this case is that we're also saying that we are able to deliver the solution not just in one location but in numerous locations in different regions and different countries around the world. So we're leveraging the presence of Securitas but also then to the great value to our customer in this case Maersk.

So with that, let us now then turn to the performance in the different segments, and starting with North America where we had a solid start to 2019. We showed 6% organic sales growth despite strong comparatives from last year. But we should also highlight that we lost a few large contracts in the quarter, but we have healthy overall commercial activity in our North American segment.

And if we then turn into profitability, solid improvement of 5.7% in the quarter and this is based on good performance across all areas of the business.

Looking then at Europe, we had solid growth also in Europe in the quarter and organic sales growth came in at 4%. And this was supported by strong contribution from Belgium, Germany and Turkey, but some negative impact from France and Sweden.

If you're looking at security solutions, electronic security, we had 22% of the sales in the quarter from solutions and ES.

If you're looking then from a profitability perspective in Europe, we saw an improvement of 5% and this was supported by good leverage and some impacts from the cost-reduction program, which is going according to plan. So the margin was hampered by start-up costs in a few contracts, the loss of a profitable contract in Sweden and we also face challenging or continued challenging conditions in our French market.

And looking then at Ibero-America, we had a good quarter overall and strong support from solid performance in Spain. Spain once again is setting a very good example in terms of top line as well as bottom line developments. Organic sales growth in this segment of 19% in Q1 and we had strong double-digit growth in Spain.

And if you're looking then at profitability perspective, Spain, like I mentioned, are clearly contributing, and this is very much thanks to our successful solutions business. But we should highlight, like we've done in the previous quarter, that we have some short-term contracts, and we highlight that more to be prudent because we do not know when those might be terminated.

The operating margin in Argentina burdened the results in Q1. As we commented in the previous quarter, we are not happy with the performance and we expect continued challenging conditions in the near term.

And with that, I am happy to hand over to you, Bart, for some more details on the financials.

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Bart Adam, Securitas AB - CFO [2]

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Okay, and many thanks, Magnus.

Before we go into the numbers, today it's a bank holiday in the U.K. and to the people based in U.K., a very sorry for breaking into your bank holiday, but especially thank you very much for being with us here today as well. Thank you.

So let's take a look into some further financial details into the quarter, and we start with the income statement and some details around that.

I believe, as Magnus said, also that we had a very good start to the year. And as of Q1 now, we have adopted the IFRS 16, which is the standard that deals with leasing contracts. In essence, as of 2019, all equipment that is leased is considered as assets for accounting reasons. We've implemented this standard without any restatement of comparatives, so all of our existing contracts we have accounted for as if they started on January 1.

There is an effect on our income statement, and as you can see here in the small table in the right upper corner, there's a positive effect of plus SEK 17 million on operating result but then a negative effect on financial items of SEK 36 million, so a net negative of minus SEK 19 million on income before tax.

And then moving to the next item here. We accounted for SEK 20 million as items affecting comparability in the first quarter, and this, of course, relates to the transformation programs we commented upon before. We have now made a further level of detail in the planning related to 2019, and we currently expect that we will recognize around SEK 200 million of items affecting comparability for 2019. Everything depends a bit on how fast we can implement certain matters and when exactly will we incur then the cost connected to that. Then the remainder will come in 2020 with potentially some costs running into 2021 or we will take everything at the end of 2020. The total cost of SEK 650 million is still the relevant amount to account it.

Then as to the financial income and expenses, that is minus SEK 139 million in the quarter. As said before, being negatively impacted through the adoption of IFRS 16 leases for $36 million and then further some negative impact compared to last year through increased net debt and then also the development of the U.S. dollar currency rate compared to the Swedish krona.

Let's go further down then and we take a look at our tax line, our current estimate is that the full year group tax rate in 2019 will be around 27.8%. That is an increase compared to 2018 and it's mainly due to reversed effects from the U.S. tax reform. And this is then related to the introduction of the tax on foreign payments, the so-called BEAT. This BEAT then reduces quite importantly some of the positive effects from the nominal tax reduction in U.S. I should also add that the BEAT by itself makes the calculation of the effective tax rate a bit more difficult to forecast as it is more sensitive to certain elements in the income statement.

You then notice in the bottom here a small difference between EPS and EPS before items affecting comparability relating, of course, to the earlier mentioned items affecting comparability of SEK 20 million related to the transformation programs.

Okay. Then we turn to the next page and we take a look at the effects from the different currencies. And as always, the numbers here mentioned to the right are the foreign exchange end rates in Swedish krona measured at quarter end and compared to the same quarter last year. And as you can see, the U.S. dollar has further strengthened to the Swedish krona during the quarter, and at the end of the quarter compared to the same quarter, it means it increased actually more than 12%.

The euro during the quarter was more around 10.3% to 10.4%, so much more stable compared to the U.S. dollar.

The Argentina peso continued to be around minus 50% compared to 12 months ago. And the drop is especially then -- that happened since May to September last year. So then it has been more stable since October, you could say, the Argentina peso.

Due to then a special end effect from the U.S. dollar, as you can understand, our quarterly consolidated income was positively affected comparing to last year and so our nominal numbers got quite some tailwind from the currency. On sales level, there is a 6% tailwind and that you can see from the difference between total change and real change, and on operating result, the difference was 7%.

And then I would just also like to point for a second at the deleverage that happens in between operating result and net income. Mentioned also at the outset of the presentation. The real change on operating income level is 11% while the real change on EPS before items affecting comparability is 3%. And that difference is then entirely due to the higher financial items and also due to the higher tax rate.

Then turning to the cash flow and the balance sheet. It shall be noted that the net cash flow is not impacted from IFRS 16. So the impact is on the income statement and on the balance sheet, but there is no impact on the net cash flow. However, while the net amount -- I mean, the net cash flow is not impacted, some of the individual lines are actually impacted in the calculations.

We see here net investments of minus SEK 67 million and that results from investments of minus SEK 707 million and reversal of depreciation of SEK 640 million. One shall then understand that IFRS 16 leases impacted the investments with a bit over SEK 200 million actually and it impacted the reversal of depreciation also with a little bit over SEK 200 million.

So with IFRS 16, our CapEx gets now inflated and that is around -- from around SEK 2 billion per year to an amount now of more -- SEK 2.9 billion under the new measurement -- under the new accounting. Meaning that you could, for instance, expect sizable impact in a quarter where we would sign a new rental contract for a large office building with a long duration. That could then in that quarter have a larger impact on the measurement of the investments in that quarter.

As you know, there is some seasonality in our operating cash flows. We had a substantial cash flow improvement compared to the same quarter last year. So a good improvement, but all in all, we are not fully happy yet with the DSO achievement, so we have further analyzed and we've further worked with issue and action plans are ongoing.

Moving to the next slide, and we look at the net debt. And this stands now at SEK 19.3 billion, up from SEK 14.5 billion at the beginning of the year and this is here where you need to get a little bit more acquainted actually with the numbers after IFRS 16 also. The main difference relates to the implementation of IFRS 16, which made the net debt increase with almost SEK 3.5 billion. Then, of course, we had the development from the operating cash flow, as just explained. And then, the net debt was also impacted from the foreign exchange development largely from the U.S. dollar. As you can see here on the slide, that added SEK 451 million in translation to net debt since January 1.

Then to the far right of the slide, the net debt in relation to EBITDA is on 2.8 and that is after IFRS 16. As I said, IFRS 16 had a quite substantial impact because now the net debt fully includes the entire effect from IFRS 16 while 10 or 12 months rolling EBITDA only includes one quarter with the effect from IFRS 16. The net debt to EBITDA before IFRS 16 then stands at 2.4. So only by including more quarters with EBITDA measured after IFRS 16 our leverage start going down by itself with 0.3 and then -- with about 0.3.

And then the seasonality of our cash flows will normally increase the leverage at Q2 and then go down again in the second half of the year.

Then we go to the next slide, and here, we have tried to summarize the effects from IFRS 16. So as a summary here, there's a net negative impact to the income statement. We do see an important impact to the balance sheet with an increased net debt of assets -- increase of net debt and assets with about SEK 3.5 billion. And then, the EBITDA, of course, changes also substantially because previously what was operating expenses has now become depreciation and interest. Then there is no impact with the net cash flow, but we do see increased amounts recognized for investments and for reverse of depreciation.

For your reference here, we have included some KPIs before and after IFRS 16, so that you can see the impact and the development of the different KPIs. This table, you'll also find in the note to the report together with all the other explanations on IFRS 16.

The good news is, so to say, that the rating agencies followed already for quite some time, the KPIs pretty much in line with how IFRS 16 treats leases, and Securitas is rated BBB from Standard & Poor's, but maybe you noted that our outlook was changed recently from stable to a positive outlook.

And with then this positive outlook, I would like to hand back to Magnus, but also would like to say one more thing. We have reworked a bit the quarterly report with the main goal to make it as clear as possible for the readers, for the audience. We worked a bit with the tables and headers and all the different smaller and bigger things, and I hope you like it, but I wanted to specially take the opportunity here also to thank all of our teams, the people that are producing the numbers and the tables and wording and so -- and many thanks for that to all of our teams.

And with this, I'm happy to hand back to Magnus.

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Magnus Ahlqvist, Securitas AB - President & CEO [3]

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Very good. Thank you, Bart, and you have no small role yourself in that work. So with that, before we open up to Q&A, I would just make a few updates related to the strategy work. And if you're looking at the position that we have today, we have a strong position. And as we have shared in some of the previous updates, we have a good position and presence, but we also see good opportunity to leverage this presence and our customer relationships to drive the development in the next phase. And part of this is obviously related to how do we work to strengthen our protective services, our ability to respond. The other one is then also related to how do we leverage the vast amounts of data that we generate to be able to enhance the quality and the security to our customers.

So when you're looking at what are we focusing on in terms of delivering 2020, it's focused on 3 different areas. One is on our client engagement and this is then looking at all the ways that we are interacting with customers. And second one is continue to strengthen the protective services leadership. And like I mentioned earlier, we are happy to also then complete a few new acquisitions in Q1, and we're continuously looking at acquisitions that are attractive to especially then enhance our electronic security capability. And then, the last effort is related to modernization and digitalization and also then enhancing efficiency. And a lot of that is important because that is why we also have the enablers of building a platform, which will enable us to launch more digital products at scale as we go forward.

But if you're then looking back a few months, in early February, we announced 2 major transformation programs to help and drive these changes. And the objective of the first program is to radically modernize our global IS/IT, building a strong platform and capabilities throughout the group, and we do that with 2 main objectives. One is efficiency and the other one is to be able to launch more digital products and to scale those across countries and regions more quickly. And the second program, which we are in the middle of as well, is our North American business transformation program, where we're looking at a number of different activities to help and operate our business in a more effective way. And both of these programs are long-term programs, as we have communicated previously, but I'm also glad to say that we are progressing according to plan.

So when you look at Securitas today, we have a strong foundation, and we also have very exciting opportunities ahead. So looking at the lower parts, which is really representing our foundation, we are looking continuously at how do we strengthen our core, which is our guarding. We continue to invest in what is here the middle layer in terms of our protective services capability to ensure that we don't only have the best offer to the customers today but also in the future. And now taking the first steps in terms of launching more data-driven products and driving more data-driven innovation for many years to come.

So to conclude, we have had a good start to the year, solid growth and year-on-year operating results improvement, and we continue to invest in our strategy and are also excited about the opportunities that we have in the mid and the long term to ensure that we continue to lead the development of this industry and that we bring the best value to our customers.

So with that, I think Bart and I are happy to open up for questions, but like I mentioned at the beginning, we have an AGM here in Stockholm right after this call, so we will try to wrap up at the latest at 3 p.m. CET. But now then happy to open up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from the line of Chirag Vadhia of HSBC.

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Chirag Vadhia, HSBC, Research Division - Research Analyst [2]

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I just got 3 questions. Firstly, could you talk about where the core base of organic growth came from? And if you can -- if you expect to see similar rates throughout the year? Second question, what level is the current employee churn rate? And what mechanism do you use to pass the wage increases on with clients going forward? And finally, on M&A activity, how do you view M&A in the U.S. guarding market given the recent activity by some of the larger competitors in this space?

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Magnus Ahlqvist, Securitas AB - President & CEO [3]

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Yes, so thanks a lot for the question. If you look at your first question, when you say where is it coming from, the fact is that this is fairly broad-based growth. We have contribution from all the segments. We also had -- when you're looking at some of the terminations, et cetera, they did not happen until the end of the quarter. We mentioned a few contracts in North America, for example, so they did not have any material impact in Q1. But I would say that the growth is really coming down to the fact that we have a good offering. Generally speaking, good commercial activity, and we're also retaining -- and pretty good at retaining our customers. But then there is obviously competition and that is the reason that we have lost a few contracts as well that we would have liked to keep.

Maybe I can save question #2 for you later on, Bart. But if you look at the third question, which was done about guarding acquisition interest in North America, if I understood it correctly, we have a very strong team in North America. We're winning organically. And when I look at where are we reinvesting, well, it's strengthening the other parts of the protective services. We have strong guarding capability. We have invested significantly, as you know, in terms of the Diebold and then last year, closed the Kratos acquisition. So from my perspective, guarding acquisitions in North America is not a high priority.

And if you look then and extend that question to global perspective, the focus is really more on electronic security and some of the other protective services more generally when we look at our acquisition interest, but you could see other market still, but that's a different question. Feel free to ask that later on where we could be more interested in -- if good opportunities come up but not primarily guarding in North America. Maybe Bart, if you want to comment on the second question?

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Bart Adam, Securitas AB - CFO [4]

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Yes. On the employee churn, as published in the annual report, we are at around 40% for the totality of the group and that is pretty much in line with the number from the year before. I should mention, however, that we had done a small remeasurement there because our number before included, you could say, temporary staff as well. That for some reason was measured as churn, but it had nothing real to do with churn, probably -- if you take it from a legal angle, yes those people were coming in and out from the company, but -- so that's something we've corrected, but that is only minor correction. But it's on the same level as last year for the totality of the group.

You questioned also about the wage increases. And yes, we pass on that, of course, in the prices. As mentioned about before, we have had quite some discipline and focus on this throughout the years. In -- you could say on average, our price increases are around 2% during any cycle. And then, that turns out to be a bit higher in good economical times to between 2% and 3%, and last year, we were already in the higher end of that 2% to 3%. And now this year, it seems like the price increase will also be a bit ahead of actually where it was last year. Q1 and Q2 are very important for our price increases, that is the key quarters, and so far, we have been good. We have been on par. But of course, also the last negotiations are always the toughest ones, I should say. So we will come back to this matter also at the end of Q2 then.

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Operator [5]

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Our next question comes from the line of Edward Stanley of Morgan Stanley.

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Edward Stanley, Morgan Stanley, Research Division - Equity Analyst [6]

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I'll try to be quick. A couple. If we try to break down the 17% growth in solutions and electronic security, can you give us an idea of which geography that's predominantly coming from? And secondly, in Ibero, Lat Am, you mentioned in the coming quarters or the near term, however you described it, you expect that to remain challenging. Can you give us a feel for how many quarters before you turn a corner there? And finally, on IFRS 16 because of the leverage increase, does that change anything about the way you think about M&A in the coming year or 2?

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Magnus Ahlqvist, Securitas AB - President & CEO [7]

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Could you repeat your last question still?

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Bart Adam, Securitas AB - CFO [8]

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Impact of IFRS 16. If that -- I mean, how that affects leverage and if that has an impact on M&A thinking?

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Magnus Ahlqvist, Securitas AB - President & CEO [9]

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Yes, so thanks for the questions. If you look at solutions and electronic security, we have a healthy growth of 17%. This growth is -- the momentum is pretty good across the different segments. Obviously, you have part of that is organic, part of that is also then helped by acquisitions. But when you're looking at all the different segments, it is fairly good momentum across the board, which is important and it's a good thing because this is obviously an important aspect of our strategy that we continue to drive to really increase our solutions and electronic security share of the total business.

If you look at the second question, I think you asked about the Ibero-America and Argentina, well, we have not been happy with the development in Argentina like we communicated in previous quarter as well. So support to this has been macroeconomic conditions that remain challenging, but we've also done some leadership changes as well. And then we have kind of a long cycle business. So typically when we have some challenges, it typically takes a little bit of time until we're really back to a level where you want to be. So I think that is as much as we can say, but it's difficult to say at this time if it's a matter of 3 or 6 or 9 months, something like that, but this is what we see and obviously putting quite a lot of emphasis on improvement as we go forward. Maybe Bart, do you want to take the IFRS 16?

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Bart Adam, Securitas AB - CFO [10]

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Yes. I mean there's an impact now on our leverage as it is calculated, but as mentioned before as well, the rating agencies already calculated in this way. So from that perspective, there is no real impact in the way we should be rated and that is, of course, what is important also when it comes to acquisitions and the capacity we could have there. By itself, the real effect from IFRS 16 once we have been through the cycle, so to say, 4 quarters further down the road or 3 quarters additional to this first one, we will come back then to around 2.3, 2.4, so that is a very normal level of leverage we have seen before. And then, depending on the cash flow, during the year, it could even be further down from the 2.3, 2.4. So there is no really big effect to be expected from IFRS 16 on our acquisition capacity.

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Operator [11]

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Our next question comes from the line of Bilal Aziz of UBS.

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Bilal Aziz, UBS Investment Bank, Research Division - Associate Director and Equity Research Analyst [12]

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Just 2 from my side, please. And firstly, in Europe, I think you suggested some large contracts were a drag due to ramp-up costs and can you give a bit more detail on where these are based, and how you expect that to fare through the rest of the year? And the second one, just a bit of clarification, Bart, I think you said SEK 200 million of transformational costs this year and the remainder of SEK 650 million last year. Just clarifying, is that correct?

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Magnus Ahlqvist, Securitas AB - President & CEO [13]

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Yes. So on the first question, Bilal, we have won a few contracts, so they're helping the organic sales growth, but like we've highlighted, they are burdening the margin in Q1 and we see that there will be some impact from that as well in the near term. So that is, as we are optimizing and building up and scaling up according to those contracts. I should mention as well that we highlighted in the previous quarter that there is one larger contract in France that we communicated 3 months ago, which is terminating now during Q2. But this is always a part to doing our business. We have a strong offer. We have good commercial activity, but we highlighted this because there have also been more substantial impact from these contracts. Do you want to take the second?

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Bart Adam, Securitas AB - CFO [14]

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Yes. On the items affecting comparability, it is exactly as you phrased it, Bilal, the totality for the 2 programs is still around SEK 650 million, in line with what we've talked about before. The impact for this year is a bit lower maybe than what we have been thinking before. The reason for that is that until we could disclose this to the world, this were insider projects with an insider registration on them. And then, of course, now we have been able to enter into the next level of detailed planning and then for this year, we planned and that we should have around SEK 200 million of items affecting comparability for 2019.

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Operator [15]

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Our next question comes from the line of James Winckler of Jefferies.

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James Peter Winckler, Jefferies LLC, Research Division - Equity Analyst [16]

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I think a lot of them were answered there. I'm just wondering if you could give me any more color on the lost contracts in the U.S. if they happened near the end of the quarter, wondering if they are significant enough that we should be considering any sort of impact from either a growth perspective, margin perspective or both in the coming quarters within that division. And then if you could just reiterate the staff turnover and maybe if you can give any color on a division basis how that's moved, that would be great.

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Magnus Ahlqvist, Securitas AB - President & CEO [17]

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Thank you, James. I mean there are a few large contracts and that's the reason that we highlight, but we don't specify specific numbers. So there will clearly be an impact, but this is also the reality. I mean some years, we might lose a few. Some years, we do not. Now we have lost a few and that's the reason that we highlight it. I should also emphasize that we are meeting strong comparators as well in the second quarter in terms of organic sales growth. So I think that's something which is also just important as to keep in mind.

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Bart Adam, Securitas AB - CFO [18]

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Yes, and maybe to add to Magnus that effect for North America is expected more to be on the organic sales growth than on the margin.

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Magnus Ahlqvist, Securitas AB - President & CEO [19]

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Yes.

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Bart Adam, Securitas AB - CFO [20]

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On the staff turnover, yes, I commented that number is 40% for the totality of the group and we have not split it out per division. We've not reported on that. So we will not comment on it either now in the call.

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Operator [21]

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Our next question comes from the line of Carina Elmgren of Handelsbanken.

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Carina Elmgren, Handelsbanken Capital Markets AB, Research Division - Research Analyst [22]

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I have 2 questions. One is regarding the cost-savings program that you have in Europe that you say is going according to plan. How should we think about it going forward? Do you expect effect to be the same in the coming quarters? Or do you expect a positive effect then to increase going forward? And the second question is related to the contracts that you mentioned. Did I understand it correctly that the big contracts in North America that you have lost was towards the end of the quarter? And is that the same for Sweden where I think you also mentioned you lost a contract? And then if you could maybe say a little bit about in what sectors these contracts are?

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Magnus Ahlqvist, Securitas AB - President & CEO [23]

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Yes. So if I start, Carina, the impact from the cost-reduction program in Q1 in Europe was around SEK 20 million. And we're expecting gradual increase of that for the remainder of the year, just to give a fairly clear view in terms of where we are.

If you look at the contracts in North America, yes, it's correct. They were towards the end of Q1. So no material impact in terms of the Q1 figures. And if you're looking at Europe and more also referenced in the comment that we made related to Sweden, that's a bigger contract that we terminated end of last year. So that will have an impact on a year-on-year comparison basis up until November, early December time frame this year. Then I'm not sure, was there another question related...

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Bart Adam, Securitas AB - CFO [24]

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I could just add that the gradual built up on the saving program we expect to have around SEK 100 million of savings for the totality of the year. And the larger contracts in North America there, they stopped actually on 1st of March. That was when the impact already happened.

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Operator [25]

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Our next question comes from the line of Karl-Johan Bonnevier of DNB Markets.

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Karl-Johan Bonnevier, DNB Markets, Research Division - Analyst [26]

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Sorry for coming back to these lost contracts, but yes, the final one of those. Are they in the technology space or are they pure guarding contracts that you're talking about? And then also on the business transformation started, which you're talking to about doing in Europe to see if there's the same kind of opportunity that you've found in the North American operation. Have you come to any conclusion there?

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Magnus Ahlqvist, Securitas AB - President & CEO [27]

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Yes. So if you look, the North American contracts are primarily guarding contracts. If you're looking at the contract in Sweden, that was a profitable contract and also then a mix of different protective services. And then in terms of the second question, Karl-Johan, you asked about the transformation programs and...

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Karl-Johan Bonnevier, DNB Markets, Research Division - Analyst [28]

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It was understood before that you were looking to do a case study for the European operation, if there was a similar opportunity.

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Magnus Ahlqvist, Securitas AB - President & CEO [29]

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We are right in the middle of that work. So we will come back, as we previously communicated, in the second half of this year with more information in terms of what is feasible or not to do in Europe.

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Bart Adam, Securitas AB - CFO [30]

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And the main guidance there will be the return on investment over longer-term period.

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Magnus Ahlqvist, Securitas AB - President & CEO [31]

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Absolutely.

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Karl-Johan Bonnevier, DNB Markets, Research Division - Analyst [32]

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But if you look at your business structure in North America and compare it to Europe, do you think there is a similar kind of group-wide European opportunity as you have found in the U.S. or it would be more a country by country?

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Magnus Ahlqvist, Securitas AB - President & CEO [33]

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Yes. So if you look at North America, it's obviously the way that we operate and also then when you look at the underlying dynamics, it's one big country and then you have Canada and Mexico. We have more of a shared service setup and structure already in place in North America. If you're looking at Europe, we have been growing more on a country-by-country basis. So the starting points are quite different and that is also the reason that we are taking the pre-study and really analyzing this carefully before we are designing and engaging and saying this is what we believe in to do in the short, mid and the long term in Europe. So the starting points, I think, like you correctly assumed, are quite different.

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Operator [34]

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Our next question comes from the line of Allen Wells of Exane BNP Paribas.

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Allen David Wells, Exane BNP Paribas, Research Division - Research Analyst [35]

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Just 2 very quick ones, just around the Ibero-America business. I'm not sure if I missed this earlier, but can you quantify the benefit from the short-term contract uplift that touched on in the report and any sort of comments you can make in terms of timing? Will these still be of benefit in Q2 or will they roll away quite quickly? And then second question, also just on Spain, obviously, we're still seeing pretty good growth there. I do not know if you could just sort of quantify what underlying market growth looks like in Spain at the moment? And exactly who you're taking share from or why you're taking share in that market versus peers?

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Magnus Ahlqvist, Securitas AB - President & CEO [36]

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So these Spanish contracts, I mean the short-term contracts that we mentioned, there is obviously a certain significance when I look at the total impact. But I should also mention that we have strong overall momentum in Spain. So a lot of the progress that we are making is coming from ongoing more normal long-term part of business, if you will. So I think that is one important clarification. So that is one.

If you look then at our Spanish business, I think for those of you who have followed us closely over a number of years, I think this is a very good example where we had a very tough situation in the middle of the financial economics crisis in Spain if you're going back to 2011. We have continuously been investing. And what we have seen in the recent quarters is that we are growing from strength to strength, I would say, thanks to the protective services offering. So we're winning quite a lot with our solutions capability. But we have also seen in recent quarters that some of the guarding customers that we have lost previously are starting to come back as well because they appreciate -- they know now what they lost when they discontinued services with Securitas, and a number of those are also coming back. So I would say that we are really winning with good momentum, thanks to the great work that our Spanish team is doing.

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Allen David Wells, Exane BNP Paribas, Research Division - Research Analyst [37]

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Can I just -- one quick follow up. But in terms of who you're gaining share back from, is this coming from other key larger players, Prosegur, et cetera? Or is it coming from maybe sort of the smaller mom-and-pop shops that were very aggressive on pricing to keep in business during the downturn, that you're now winning stuff back? Just trying to differentiate between who's losing here, is it the bigger guys or the smaller guys?

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Magnus Ahlqvist, Securitas AB - President & CEO [38]

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It's a bit difficult to generalize. I think we're generally winning in the markets. But like you say, I mean there were a few companies that have also gone out of business in the last couple of years because they were too aggressive and not responsible in terms of how they managed their income statement or importantly their people. And that obviously then probably helps us as well. It's a little bit, generally speaking, more healthy situation in the market overall. But it's -- we cannot really say that we're winning more from one specific category of competitors.

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Operator [39]

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(Operator Instructions) And there are no further questions at this time. Please go ahead, speakers.

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Magnus Ahlqvist, Securitas AB - President & CEO [40]

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Okay. In that case, on behalf of Bart and myself, we are happy about the first quarter. Our team is doing a tremendous job across all the different segments and the different countries. So thanks a lot to all of you for dialing in today and good questions. Thank you.

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Bart Adam, Securitas AB - CFO [41]

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Bye-bye.