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Securitas
Annual Report • Feb 6, 2020
2968_10-k_2020-02-06_8690c3da-4277-4e36-85c6-944d8ed67997.pdf
Annual Report
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SECURITAS AB FULL YEAR REPORT
January–December 2019
OCTOBER–DECEMBER 2019
- • Total sales MSEK 28 257 (26 824)
- • Organic sales growth 2 percent (5)
- • Operating income before amortization MSEK 1 497 (1 475)
- • Operating margin 5.3 percent (5.5)
- • Items affecting comparability (IAC) MSEK –83 (–187), relating to IS/IT transformation programs
- • Earnings per share SEK 2.38 (2.02)
- • Earnings per share, before IAC, SEK 2.54 (2.39)
JANUARY–DECEMBER 2019
- • Total sales MSEK 110 899 (101 467)
- • Organic sales growth 4 percent (6)
- • Operating income before amortization MSEK 5 738 (5 304)
- • Operating margin 5.2 percent (5.2)
- • Items affecting comparability (IAC) MSEK –209 (–455), relating to IS/IT transformation programs
- • Earnings per share SEK 9.20 (8.26)
- • Earnings per share, before IAC, SEK 9.61 (9.17)
- • Free cash flow/net debt 0.19 (0.13)
- • Proposed dividend SEK 4.80 (4.40)
A year of transformation
Contents
| January–December |
|---|
| summary 2 |
| Group development 3 |
| Development in the Group's business segments 5 |
| Cash flow 8 |
| Capital employed and financing 9 |
| Acquisitions and divestitures 10 |
| Other significant events 12 |
| Risks and uncertainties 12 |
| Parent Company operations 13 |
| Review Report 14 |
| Consolidated financial statements 15 |
| Segment overview 19 |
| Notes 21 |
| Parent Company 27 |
| Financial information 28 |
Organic sales growth in the Group was 2 percent (5) in the fourth quarter. Organic sales growth declined temporarily in North America and was also hampered by the previously communicated contracts losses in Europe. Extra sales were generally lower compared to the fourth quarter 2018. New sales in the Group were strong
across all business segments.
Full-year organic sales growth was 4 percent (6), a decline on a strong comparative, but also reflected the slowdown in some key markets during the second half of 2019. We grew faster than the security market in general and we have the strongest offering of protective services, including security solutions and electronic security, which grew by 10 percent in 2019, to represent 21 percent of total Group sales. We recently acquired two strategically important electronic security companies, Fredon Security in Australia and Techco Security in Spain, the latter making Spain the second largest electronic security business in the Group.
The operating margin in the fourth quarter was 5.3 percent (5.5) and was primarily hampered by North America. The full-year operating margin was on par with last year. The price and wage balance improved in the fourth quarter and will remain a key focus area going into 2020.
The operating result, adjusted for changes in exchange rates, grew by 3 percent in 2019. Earnings per share, before items affecting comparability, amounted to SEK 9.61 (9.17).
We achieved the highest operating and free cash flow ever in 2019. Our strong focus on cash management remains a key priority across all business segments.
We have earlier in the year reported on an investigation in Argentina. The findings revealed that certain individuals have engaged in local business activities in violation of the Securitas Values and Ethics Code. During the investigation we have taken decisive actions, including terminations, and worked to improve our internal controls in Argentina as well as globally. As a result of the findings we have proactively contacted the appropriate authorities to ensure that we fulfill all our obligations as a responsible company. We assess that this will not have any material effect on our financial position.
Our success has been built based on good values and we have zero tolerance of misconduct of any type. I am extremely disappointed by the breach of trust displayed by certain individuals and am reinforcing our compliance program to prevent a similar situation from arising again in the future.
Driving the transformation
We continue to execute on two major transformation programs that will bring increased digitalization, efficiency and a platform for innovation. The implementation of these two programs is progressing according to plan and we expect positive impacts starting in 2021 and gradually increasing during 2022, as previously communicated.
We have presented our new management team and launched our strategy to become the Intelligent Protective Services Partner. We focus on the areas; client engagement, protective services leadership and innovation, efficiency as well as our people. Offering solutions to our clients is a core part of our strategy. We continue to build a stronger capability within electronic security to enable further growth. Our ambition is to double sales of security solutions and electronic security to BSEK 40 by 2023.
We have a strong team and we have been pursuing extensive transformation over the last 12 months. We are making good progress towards an even stronger Securitas for the long term.
Magnus Ahlqvist President and Chief Executive Officer
Comments from the President and CEO
January–December summary
Securitas has adopted IFRS 16 Leases as of January 1, 2019. The cumulative effect of the adoption has been recognized without restatement of the comparative periods. Further information can be found in notes 1 and 2 on pages 21–22.
FINANCIAL SUMMARY
| Q4 Change, % |
Full year | Change, % | ||||||
|---|---|---|---|---|---|---|---|---|
| MSEK | 2019 | 2018 | Total | Real | 2019 | 2018 | Total | Real |
| Sales | 28 257 | 26 824 | 5 | 3 | 110 899 | 101 467 | 9 | 6 |
| Organic sales growth, % | 2 | 5 | 4 | 6 | ||||
| Operating income before amortization | 1 497 | 1 475 | 1 | –2 | 5 738 | 5 304 | 8 | 3 |
| Operating margin, % | 5.3 | 5.5 | 5.2 | 5.2 | ||||
| Amortization of acquisition-related intangible assets |
–68 | –65 | –271 | –260 | ||||
| Acquisition-related costs | –28 | –79 | –62 | –120 | ||||
| Items affecting comparability* | –83 | –187 | –209 | –455 | ||||
| Operating income after amortization | 1 318 | 1 144 | 15 | 11 | 5 196 | 4 469 | 16 | 11 |
| Financial income and expenses | –140 | –154 | –578 | –441 | ||||
| Income before taxes | 1 178 | 990 | 19 | 17 | 4 618 | 4 028 | 15 | 9 |
| Net income for the period | 872 | 743 | 17 | 15 | 3 362 | 3 021 | 11 | 6 |
| Earnings per share, SEK | 2.38 | 2.02 | 18 | 15 | 9.20 | 8.26 | 11 | 6 |
| EPS before items affecting comparability, SEK | 2.54 | 2.39 | 6 | 4 | 9.61 | 9.17 | 5 | –1 |
| Cash flow from operating activities, % | 124 | 128 | 85 | 60 | ||||
| Free cash flow | 1 428 | 1 566 | 3 268 | 1 884 | ||||
| Free cash flow to net debt ratio | – | – | 0.19 | 0.13 | ||||
| Net debt to EBITDA ratio | – | – | 2.2 | 2.3 |
* Refer to note 8 on page 24 for further information.
EARNINGS PER SHARE AND KEY RATIOS FOR CASH FLOW AND NET DEBT
Earnings per share amounted to SEK 9.20 (8.26), a total change of 11 percent compared with the preceding year. The real change in earnings per share in 2019 was 6 percent. EPS before items affecting comparability amounted to SEK 9.61, representing a total change of 5 percent compared with the preceding year and a real change of –1 percent in 2019. The real change in EPS was negatively impacted by the adoption of IFRS 16 as well as by the higher tax rate compared to last year. Together, these two factors had an impact of –4.5 percentage points. Adjusted, the real change in EPS before items affecting comparability would have been 4 percent in 2019.
The free cash flow to net debt ratio was 0.19 (0.13) and the net debt to EBITDA ratio was 2.2 (2.3), both impacted by IFRS 16. For further information, refer to note 2 on pages 21–22.
ANNUAL GENERAL MEETING 2020
The Annual General Meeting (AGM) of Securitas AB will be held on Thursday, May 7, 2020 at 4:00 p.m. (CET) at Courtyard Marriott Hotel, Rålambshovsleden 50 in Stockholm, Sweden.
Refer to www.securitas.com/Corporate Governance for more information regarding the 2020 AGM. The 2019 Annual and Sustainability Report of Securitas AB will be published on www.securitas.com on March 25, 2020.
PROPOSED DIVIDEND
The Board of Directors proposes a dividend for 2019 of SEK 4.80 (4.40) per share. The total proposed dividend amounts to 52 percent of net income and 50 percent of net income before items affecting comparability. Monday, May 11, 2020 is proposed as the record date for the dividend.
ORGANIC SALES GROWTH AND OPERATING MARGIN DEVELOPMENT PER BUSINESS SEGMENT
| Organic sales growth | Operating margin | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Q4 | Full year | Q4 | Full year | |||||||
| % | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||
| Security Services North America | 2 | 5 | 4 | 6 | 6.1 | 6.3 | 6.2 | 6.1 | ||
| Security Services Europe | 1 | 3 | 2 | 4 | 6.1 | 6.3 | 5.5 | 5.6 | ||
| Security Services Ibero-America | 10 | 14 | 14 | 12 | 4.8 | 4.0 | 4.7 | 4.5 | ||
| Group | 2 | 5 | 4 | 6 | 5.3 | 5.5 | 5.2 | 5.2 |
Group development
OCTOBER–DECEMBER 2019
Sales development
Sales amounted to MSEK 28 257 (26 824) and organic sales growth was 2 percent (5). Security Services North America delivered organic sales growth of 2 percent (5). Security Services Europe showed organic sales growth of 1 percent (3) and was hampered by previously communicated contract terminations. Security Services Ibero-America delivered 10 percent (14), a development primarily related to Spain.
Real sales growth, including acquisitions and adjusted for changes in exchange rates, was 3 percent (8).
Sales of security solutions and electronic security sales amounted to MSEK 6 145 (5 637) or 22 percent (21) of total sales in the fourth quarter of 2019. Real sales growth, including acquisitions and adjusted for changes in exchange rates, was 7 percent (18).
Operating income before amortization
Operating income before amortization was MSEK 1 497 (1 475) which, adjusted for changes in exchange rates, represented a real change of –2 percent (8).
The Group's operating margin was 5.3 percent (5.5). The operating margin declined in Security Services North America as well as in Security Services Europe, while it improved in Security Services Ibero-America. Continued strategy-related investments at the Group level, included under "Other" in the segment reporting, had an impact of –0.1 percentage points on the Group's operating margin.
The adoption of IFRS 16 Leases had a positive impact on the operating result of MSEK 20 in the quarter. For further information refer to notes 1 and 2.
Operating income after amortization
Amortization of acquisition related intangible assets amounted to MSEK –68 (–65).
Acquisition related costs were MSEK –28 (–79). For further information refer to note 7.
Items affecting comparability were MSEK –83 (–187) and were related to the IS/IT transformation programs. For further information refer to note 8.
Financial income and expenses
Financial income and expenses amounted to MSEK –140 (–154), with the comparative including a one-off effect of MSEK –46 relating to the re-financing of high interest-bearing debt items in Argentina. The adoption of IFRS 16 Leases had a negative impact of MSEK –37. Furthermore, financial income and expenses were negatively impacted by a weaker Swedish krona and increased net debt. Financial income and expenses were positively impacted in an amount of MSEK 12 related to hyperinflation accounting in Argentina. For further information refer to note 3.
Income before taxes
Income before taxes was MSEK 1 178 (990). The adoption of IFRS 16 Leases had a negative effect of MSEK –17 on income before taxes. For further information refer to notes 1 and 2.
Taxes, net income and earnings per share
The Group's tax rate was 26.0 percent (25.0). The tax rate before tax on items affecting comparability was 26.3 percent (25.4).
Net income was MSEK 872 (743). The adoption of IFRS 16 Leases had a negative impact of MSEK –11 on net income. For further information refer to notes 1 and 2.
Earnings per share amounted to SEK 2.38 (2.02). Earnings per share before items affecting comparability amounted to SEK 2.54 (2.39).
JANUARY–DECEMBER 2019
Sales development
Sales amounted to MSEK 110 899 (101 467) and organic sales growth to 4 percent (6). Security Services North America delivered organic sales growth of 4 percent (6) on a strong comparative. Security Services Europe showed organic sales growth of 2 percent (4), primarily hampered by the previously communicated termination of a few major contracts. Security Services Ibero-America delivered 14 percent (12).
Real sales growth, including acquisitions and adjusted for changes in exchange rates, was 6 percent (8).
Sales of security solutions and electronic security sales amounted to MSEK 23 290 (20 440) or 21 percent (20) of total sales in the full year. Real sales growth, including acquisitions and adjusted for changes in exchange rates, was 10 percent (21).
Operating income before amortization
Operating income before amortization was MSEK 5 738 (5 304) which, adjusted for changes in exchange rates, represented a real change of 3 percent (9).
The Group's operating margin was 5.2 percent (5.2). The operating margin improved in Security Services North America and Security Services Ibero-America, while it declined in Security Services Europe. Continued strategy-related investments at the Group level, included under "Other" in the segment reporting, had an impact of –0.1 percentage points on the Group's operating margin. Total price adjustments in the Group were slightly behind wage cost increases in the full year.
The adoption of IFRS 16 Leases had a positive impact on the operating result of MSEK 80 in 2019. For further information refer to notes 1 and 2.
Operating income after amortization
Amortization of acquisition related intangible assets amounted to MSEK –271 (–260).
Acquisition related costs were MSEK –62 (–120). For further information refer to note 7.
Items affecting comparability were MSEK –209 (–455), related to the IS/IT transformation programs. For further information refer to note 8.
Financial income and expenses
Financial income and expenses amounted to MSEK –578 (–441), with the comparative including a one-off effect of MSEK –46 relating to the re-financing of high interest-bearing debt items in Argentina. The adoption of IFRS 16 Leases had a negative impact of MSEK –148. Furthermore, financial income and expenses were negatively impacted by a weaker Swedish krona and increased net debt. Financial income and expenses were positively impacted in an amount of MSEK 25 related to hyperinflation accounting in Argentina. Refer to note 3.
23 000 24 000 25 000 26 000 27 000 28 000 0 2 4 6 8 10 Q4 Q1 Q2 Q3 Q4 MSEK % Group quarterly sales development 2018 2019 Organic sales growth, % development
Quarterly sales
Income before taxes
Income before taxes amounted to MSEK 4 618 (4 028). The adoption of IFRS 16 Leases had a negative effect of MSEK –68 on income before taxes. For further information refer to notes 1 and 2.
Taxes, net income and earnings per share
The Group's tax rate was 27.2 percent (25.0). The tax rate before tax on items affecting comparability was 27.2 percent (25.2).
Net income was MSEK 3 362 (3 021). The adoption of IFRS 16 Leases had a negative effect of MSEK –49 on net income.
Earnings per share amounted to SEK 9.20 (8.26). Earnings per share before items affecting comparability amounted to SEK 9.61 (9.17).
Group quarterly operating income development
Quarterly operating income development
Development in the Group's business segments
Security Services North America
Security Services North America provides protective services in the US, Canada and Mexico and comprises 15 business units: the national and global accounts organization, five geographical regions and seven specialized business units in the US – critical infrastructure services, healthcare, Pinkerton Corporate Risk Management, mobile, manufacturing, oil and gas and Securitas Electronic Security – plus Canada and Mexico. In total, there are approximately 720 branch managers and 122 000 employees.
| Q4 | Change, % | Full year | Change, % | |||||
|---|---|---|---|---|---|---|---|---|
| MSEK | 2019 | 2018 | Total | Real | 2019 | 2018 | Total | Real |
| Total sales | 12 389 | 11 523 | 8 | 2 | 48 499 | 42 366 | 14 | 6 |
| Organic sales growth, % | 2 | 5 | 4 | 6 | ||||
| Share of Group sales, % | 44 | 43 | 44 | 42 | ||||
| Operating income before amortization | 752 | 722 | 4 | 0 | 3 003 | 2 589 | 16 | 8 |
| Operating margin, % | 6.1 | 6.3 | 6.2 | 6.1 | ||||
| Share of Group operating income, % | 50 | 49 | 52 | 49 |
October–December 2019
Organic sales growth was 2 percent (5). A temporary decline in the business unit critical infrastructure services, on strong comparatives, hampered organic sales growth by –1 percentage point. Main contribution to organic sales growth derived from the five geographical regions, on strong comparatives, and Pinkerton Corporate Risk Management. New sales in the portfolio ended the fourth quarter on a strong note, with good traction from the national and global accounts organization.
Security solutions and electronic security sales represented MSEK 2 319 (2 048) or 19 percent (18) of total sales in the business segment in the fourth quarter.
The operating margin was 6.1 percent (6.3). The operating margin was hampered by a temporary decline in the critical infrastructure services business unit. The operating margin was supported by the five geographical regions and Securitas Electronic Security. The adoption of IFRS 16 Leases had a positive impact on the operating result in the business segment.
The Swedish krona exchange rate weakened against the US dollar, which had a positive effect on operating income in Swedish kronor. The real change was 0 percent in the fourth quarter.
January–December 2019
Organic sales growth was 4 percent (6), on a strong comparative and a client retention rate of 90 percent (91). The main contribution to organic sales growth derived from the five geographical regions and Pinkerton Corporate Risk Management.
Security solutions and electronic security sales represented MSEK 8 885 (7 365) or 18 percent (17) of total sales in the business segment for the full year.
The operating margin was 6.2 percent (6.1), an improvement supported by several business units, including a good development in the five geographical regions. The operating margin was hampered by a temporary decline in the critical infrastructure services business unit in the fourth quarter. The adoption of IFRS 16 Leases had a positive impact on the operating result in the business segment.
The Swedish krona exchange rate weakened against the US dollar, which had a positive effect on operating income in Swedish kronor. The real change was 8 percent in the full year.
North America quarterly
Quarterly sales
North America quarterly operating income development Quarterly operating income development
Security Services Europe
Security Services Europe provides security services for large and medium-sized clients in 28 countries, and airport security in 15 countries. The service offering also includes mobile security services for small and medium-sized businesses and residential sites, and electronic alarm surveillance services. In total, the organization has approximately 770 branch managers and 128 000 employees.
| Q4 | Change, % | Full year | Change, % | |||||
|---|---|---|---|---|---|---|---|---|
| MSEK | 2019 | 2018 | Total | Real | 2019 | 2018 | Total | Real |
| Total sales | 12 057 | 11 725 | 3 | 1 | 47 248 | 45 040 | 5 | 3 |
| Organic sales growth, % | 1 | 3 | 2 | 4 | ||||
| Share of Group sales, % | 43 | 44 | 43 | 44 | ||||
| Operating income before amortization | 730 | 739 | –1 | –3 | 2 582 | 2 511 | 3 | 1 |
| Operating margin, % | 6.1 | 6.3 | 5.5 | 5.6 | ||||
| Share of Group operating income, % | 49 | 50 | 45 | 47 |
October–December 2019
Organic sales growth was 1 percent (3). The decline was mainly due to the contract losses in France and in the UK as communicated in previous quarters. Organic sales growth was primarily supported by Belgium, the Nordic countries and the guarding business in Turkey. New sales in the portfolio were strong in the fourth quarter, including an increase in an Aviation contract in Germany worth approximately MSEK 200 with operations starting in the second quarter of 2020. However, a large part worth approximately MSEK 280 of a major Aviation contract in Norway has been lost, effective as of March 1, 2020.
Security solutions and electronic security sales represented MSEK 2 881 (2 686) or 24 percent (23) of total sales in the business segment.
The operating margin was 6.1 percent (6.3), a decline mainly attributable to Belgium, Sweden and the Netherlands. France improved on the price and wage balance in the fourth quarter and had a positive impact on the operating margin. The cost savings program initiated during 2018 developed according to plan and supported the operating margin. The adoption of IFRS 16 Leases had a positive impact on the operating result in the business segment.
The Swedish krona exchange rate weakened against foreign currencies, primarily the Euro, which had a positive effect on operating income in Swedish kronor. The real change was –3 percent in the fourth quarter.
January–December 2019
Organic sales growth was 2 percent (4), a decline mainly explained by the contract terminations in France and the UK earlier in the year. The client retention rate was 90 percent (93). The main contribution to organic sales growth derived from Belgium, Germany, the Nordic countries and the guarding business in Turkey.
Security solutions and electronic security sales represented MSEK 10 611 (9 638) or 22 percent (21) of total sales in the business segment.
The operating margin was 5.5 percent (5.6), hampered primarily by Sweden as well as a negative impact from Belgium and the Netherlands. The operating margin was supported by final gains related to the settlement of existing defined benefit pension plans in Norway, and by the cost savings program initiated during 2018. The adoption of IFRS 16 Leases had a positive impact on the operating result in the business segment.
The Swedish krona exchange rate weakened against foreign currencies, primarily the Euro, which had a positive effect on operating income in Swedish kronor. The real change was 1 percent in the full year.
Europe quarterly Quarterly operating income development
Security Services Ibero-America
Security Services Ibero-America provides security services for large and medium-sized clients in nine Latin American countries as well as in Portugal and Spain in Europe. Security Services Ibero-America has a combined total of approximately 170 branch managers and 63 000 employees.
| Q4 | Change, % | Full year | Change, % | |||||
|---|---|---|---|---|---|---|---|---|
| MSEK | 2019 | 2018 | Total | Real | 2019 | 2018 | Total | Real |
| Total sales | 3 263 | 3 111 | 5 | 11 | 13 099 | 12 315 | 6 | 14 |
| Organic sales growth, % | 10 | 14 | 14 | 12 | ||||
| Share of Group sales, % | 12 | 12 | 12 | 12 | ||||
| Operating income before amortization | 156 | 125 | 25 | 21 | 614 | 550 | 12 | 14 |
| Operating margin, % | 4.8 | 4.0 | 4.7 | 4.5 | ||||
| Share of Group operating income, % | 10 | 8 | 11 | 10 |
* As of July 1, 2018, Securitas has adopted IAS 29 Financial reporting in hyperinflationary economies for our operations in Argentina. When calculating the key ratios for organic sales growth percentage and real change percentage, the impact from the remeasurement is treated similarly to currency change. The calculated key ratio percentages are thus comparable as to how these were calculated before the adoption of IAS 29. The impact from IAS 29 is a remeasurement of sales with MSEK –12 (–63) and a remeasurement of operating income before amortization of MSEK –2 (–3) for the full year 2019.
October–December 2019
Organic sales growth was 10 percent (14), a decline primarily related to Spain and reductions of the short-term security solutions contracts referred to during the past 12 months. The organic sales growth continued to be positively impacted by price increases in Argentina.
Security solutions and electronic security sales represented MSEK 871 (857) or 27 percent (28) of total sales in the business segment.
The operating margin was 4.8 percent (4.0). The weak comparative was attributable to the performance in Argentina. The operating margin improvement related primarily to Spain, but was burdened by Peru. The adoption of IFRS 16 Leases had a positive impact on the operating result in the business segment.
The Swedish krona exchange rate strengthened against the Argentinian peso, while it weakened against the Euro. The net effect on operating income in Swedish kronor was positive. The real change in the segment was 21 percent in the fourth quarter.
January–December 2019
Organic sales growth was 14 percent (12). The improvement derived mainly from Spain and from price increases in Argentina. The client retention rate was 92 percent (92).
Security solutions and electronic security sales represented MSEK 3 527 (3 270) or 27 percent (27) of total sales in the business segment.
The operating margin was 4.7 percent (4.5), driven mainly by a strong development in Spain, but burdened by the weak fourth quarter in Peru. The adoption of IFRS 16 Leases had a positive impact on the operating result in the business segment.
As previously communicated, management changes have been made in Argentina. Following internal whistleblowing Securitas has conducted an investigation into potentially improper conduct through specialized external parties. For further information, see page 12 Other significant events. Furthermore, the general environment in Argentina remains challenging.
The Swedish krona exchange rate strengthened against the Argentinian peso, while it weakened against the Euro. The net effect was negative on operating income in Swedish kronor. The real change in the segment was 14 percent in 2019.
Cash flow
The adoption of IFRS16 Leases had no net impact on cash flow from operating activities nor on the free cash flow according to Securitas financial model. The cash flow is consequently prepared on the same basis as in 2018.
October–December 2019
Cash flow from operating activities amounted to MSEK 1 853 (1 882), equivalent to 124 percent (128) of operating income before amortization.
The impact from changes in accounts receivable was MSEK –145 (–387). Changes in other operating capital employed were MSEK 535 (915).
Free cash flow was MSEK 1 428 (1 566), equivalent to 124 percent (146) of adjusted income.
Cash flow from investing activities, acquisitions, was MSEK –185 (–133).
Cash flow from items affecting comparability amounted to MSEK –106 (–93). Refer to note 8 for further information.
Cash flow from financing activities was MSEK –685 (–491) due to a net decrease in borrowings.
Cash flow for the period was MSEK 452 (849).
January–December 2019
Cash flow from operating activities amounted to MSEK 4 902 (3 172), equivalent to 85 percent (60) of operating income before amortization.
The impact from changes in accounts receivable was MSEK –239 (–1 575) with improved cash collections in all
| MSEK Jan–Dec 2019 |
|
|---|---|
| Operating income before amortization1) | 5 738 |
| Net investments2) | –320 |
| Change in accounts receivable | –239 |
| Change in other operating capital employed | –277 |
| Cash flow from operating activities | 4 902 |
| Financial income and expenses paid | –443 |
| Current taxes paid | –1 191 |
| Free cash flow | 3 268 |
1) Effect from IFRS 16 amounts to MSEK 80.
2) Net effect from IFRS 16 amounts to MSEK –80, consisting of investments MSEK –970 and reversal of depreciation MSEK 890. business segments. Changes in other operating capital employed were MSEK –277 (–62).
Cash flow from operating activities include net investments in non-current tangible and intangible assets, amounting to MSEK –320 (–495). The net investments include capital expenditures in equipment for solution contracts and is the result of investments of MSEK –3 010 (–2 188) and reversal of depreciation of MSEK 2 690 (1 693). The adoption of IFRS 16 Leases impacted investments with MSEK –970 and reversal of depreciation with MSEK 890.
Free cash flow was MSEK 3 268 (1 884), equivalent to 83 percent (48) of adjusted income.
Cash flow from investing activities, acquisitions, was MSEK –574 (–1 755), of which purchase price payments accounted for MSEK –533 (–1 700), assumed net debt for MSEK 39 (42) and acquisition related costs paid for MSEK –80 (–97).
Cash flow from items affecting comparability amounted to MSEK –303 (–117). Refer to note 8 for further information.
Cash flow from financing activities was MSEK –1 699 (–376) due to dividend paid of MSEK –1 606 (–1 460) and a net decrease in borrowings of MSEK –93 (1 084).
Cash flow for the period was MSEK 692 (–364). The closing balance for liquid funds after translation differences of MSEK 27 was MSEK 3 948 (3 229).
Quarterly free cash flow Free cash flow Quarterly free cash flow
Capital employed and financing
Capital employed as of December 31, 2019
The Group's operating capital employed was MSEK 13 100 (9 199), corresponding to 12 percent of sales (9), adjusted for the full-year sales figures of acquired units. Adjusted for the impact of IFRS 16 Leases the operating capital employed as percent of sales would have been 9 percent (9). The adoption of IFRS 16 Leases increased the Group's operating capital employed by MSEK 3 433 as of January 1, 2019, while the translation of foreign operating capital employed to Swedish kronor decreased the Group's operating capital employed by MSEK 26.
The annual impairment test of all Cash Generating Units (CGU), which is required under IFRS, took place during the third quarter 2019 in conjunction with the business plan process for 2020. In 2019, IFRS 16 has been adopted on segment level. The Group has changed the level of impairment testing for goodwill from country level to segment level. None of the CGUs tested for impairment had a carrying amount that exceeded the recoverable amount. Consequently, no impairment losses have been recognized in 2019. No impairment losses were recognized in 2018 either.
The Group's total capital employed was MSEK 37 140 (32 170). The translation of foreign capital employed to Swedish kronor increased the Group's capital employed by MSEK 614. The return on capital employed was 15 percent (15). Adjusted for the impact of IFRS 16 Leases the return on capital employed would have been 16 percent (15).
Financing as of December 31, 2019
The Group's net debt amounted to MSEK 17 541 (14 513). The net debt was positively impacted mainly by the free cash flow of MSEK 3 268. It was negatively impacted mainly by a change in lease liabilities of MSEK –3 332, a dividend of MSEK –1 606, paid to the shareholders in May 2019, payments for acquisitions of MSEK –574 and the translation of net debt in foreign currency to Swedish kronor of MSEK –541.
The free cash flow to net debt ratio amounted to 0.19 (0.13). The net debt to EBITDA ratio was 2.2 (2.3). The interest coverage ratio amounted to 9.4 (10.7). Adjusted for the impact of IFRS 16 Leases the free cash flow to net debt ratio would have been 0.23 (0.13) and the net debt to EBITDA ratio would have been 2.0 (2.3), while the interest coverage ratio would have been 12.2 (10.7).
Securitas has a revolving credit facility with its 12 key relationship banks. This credit facility comprises two respective tranches of MUSD 550 and MEUR 440 and matures in 2022. On December 31, 2019, the facility was undrawn. Further information regarding financial instruments and credit facilities is provided in note 9.
Standard and Poor's rating for Securitas is BBB with positive outlook.
Shareholders' equity amounted to MSEK 19 599 (17 657). The translation of foreign assets and liabilities into Swedish kronor increased shareholders' equity by MSEK 73. Refer to the statement of comprehensive income on page 15 for further information.
The total number of shares amounted to 365 058 897 (365 058 897) as of December 31, 2019. On June 24, 2019, 125 000 shares were repurchased. Refer to page 18 for further information.
Capital employed and financing Free cash flow/Net debt
| MSEK Dec 31, 2019 |
||
|---|---|---|
| Operating capital employed | 13 100 | |
| Goodwill | 22 157 | |
| Acquisition related intangible assets | 1 563 | |
| Shares in associated companies | 320 | |
| Capital employed | 37 140 | |
| Net debt | 17 541 | |
| Shareholders' equity | 19 599 | |
| Financing | 37 140 |
Net debt development
| MSEK | |
|---|---|
| Jan 1, 2019 | –14 513 |
| Free cash flow | 3 268 |
| Acquisitions | –574 |
| Items affecting comparability | –303 |
| Dividend paid | –1 606 |
| Lease liabilities | –3 332 |
| Change in net debt | –2 547 |
| Revaluation | 60 |
| Translation | –541 |
| Dec 31, 2019 | –17 541 |
Free cash flow/Net debt
Acquisitions and divestitures
ACQUISITIONS AND DIVESTITURES JANUARY–DECEMBER 2019 (MSEK)
| Company | Business segment1) | Included from |
Acquired share2) |
Annual sales3) |
Enter - prise value4) |
Goodwill | Acq. related intangible assets |
|---|---|---|---|---|---|---|---|
| Opening balance | 21 061 | 1 458 | |||||
| Global Elite Group, the US6) | Security Services North America | Jan 10 | 100 | 290 | 163 | 123 | 70 |
| Allcooper Group, the UK6) | Security Services Europe | Apr 1 | 100 | 88 | 59 | 31 | 26 |
| Staysafe, Australia6) | Other | Apr 4 | 100 | 72 | 83 | 126 | 57 |
| MSM Security Services, the US6) | Security Services North America | Oct 5 | – | 140 | 6 | 42 | 61 |
| Other acquisitions and divestitures5) 6) | – | – | 440 | 183 | 107 | 118 | |
| Total acquisitions and divestitures January–December 2019 | 1 030 | 494 | 429 | 332 | |||
| Amortization of acquisition related intangible assets | – | –271 | |||||
| Translation differences and remeasurement for hyperinflation | 667 | 44 | |||||
| Closing balance | 22 157 | 1 563 |
1) Refers to business segment with main responsibility for the acquisition.
2) Refers to voting rights for acquisitions in the form of share purchase agreements. For asset deals no voting rights are stated.
3) Estimated annual sales.
4) Purchase price paid/received plus acquired/divested net debt but excluding any deferred considerations.
5) Related to other acquisitions and divestitures for the period and updated previous year acquisition calculations for the following entities: Iverify (step acquisition), the US, Nortrax Veg og Trafikk, Norway, WHD Wachdienst Heidelberg, Wach- und Schließgesellschaft Hof Inh. I Müller, Germany, Securitas Interim (divestiture), Cezzam, France, 4CS Security (contract portfolio), Austria, Pronet, DAK, Turkey, Instalfogo, Portugal and Beijing Saikudasi Consultancy Management, China. Related also to deferred considerations paid in Sweden, Germany, France, Austria, Czech Republic, Australia, China and Hong Kong.
6) Deferred considerations have been recognized mainly based on an assessment of the future profitability development in the acquired entities for an agreed period. The net of new deferred considerations, payments made from previously recognized deferred considerations and revaluation of deferred considerations in the Group was MSEK 147. Total deferred considerations, short-term and long-term, in the Group's balance sheet amount to MSEK 425.
All acquisition calculations are finalized no later than one year after the acquisition is made. Transactions with noncontrolling interests are specified in the statement of changes in shareholders' equity on page 18. Transaction costs and revaluation of deferred considerations can be found in note 7 on page 24.
Global Elite Group, the US
Securitas Transport Aviation Services USA has acquired Global Elite Group, a leading security services provider to the aviation industry in the US. The purchase price is approximately MUSD 22 (MSEK 200), contingent upon reaching certain targets. Global Elite Group is based in Garden City, New York, and specializes in providing high level security services to various airlines, airports and airport related customers. The customer base consists of more than 60 commercial airlines and numerous general aviation clients. The growth pattern in the company has been solid over the years. The number of employees is approximately 1 050.
Securitas runs a twofold strategy in the US aviation market, addressing both the federal government with passenger and baggage screening for the Transportation Security Administration, as well as security services for the commercial market such as airlines, airports and airport related customers (e.g. cargo). The estimated market volume for the latter, i.e. the commercial market related to 450 airports, is between BUSD 1.3–1.8. The acquisition is consistent with Securitas strategy of expanding in the aviation industry. Global Elite Group is considered a premier aviation security service provider in the US. The company will strengthen
and complement Securitas current aviation organization, and the combined network, footprint, licenses and knowhow will increase the value we bring to existing and new customers. The acquisition was consolidated in Securitas as of January 10, 2019.
Allcooper Group, the UK
Securitas has acquired all shares in the electronic security company Allcooper Group in the United Kingdom. Allcooper Group, founded in 1987, specializes in the installation, maintenance and monitoring of a wide range of security and fire systems. It operates from bases in Gloucestershire, the West Midlands and London with around 100 employees. Allcooper's expertise in electronic security and its portfolio of long-term customers will provide excellent support in Securitas' pursuit of its strategic objectives. The acquisition was consolidated in Securitas as of April 1, 2019.
Staysafe, Australia
Securitas is strengthening its client value proposition in the Australian security market through the acquisition of Staysafe, a leading alarm monitoring company in Australia. Founded in 1987 and based in Melbourne, Staysafe is today one of the largest monitoring companies in Australia with 73 employees and 28 000 monitoring connections managed through two grade A1 monitoring centers located in Melbourne, Victoria and Adelaide in South Australia. Since entering the Australian market in 2017 Securitas has experienced strong growth and expanded its geographical footprint and capabilities across the country. The acquisition was consolidated in Securitas as of April 4, 2019.
MSM Security Services, the US
Securitas subsidiary Securitas Critical Infrastructure Services, Inc (SCIS), under the independent direction of its Board, has acquired certain inspection and background investigations assets of MSM Security Services. The purchase price was approximately MUSD 11 (MSEK 102), contingent upon reaching certain business development targets. Securitas Critical Infrastructure Services, Inc is an independent US subsidiary of Securitas AB, which specializes in providing a wide range of security services to federal agencies, aerospace and defense contractors, and federally regulated energy and aviation facilities. The transaction will expand SCIS' federal background investigations business and is anticipated to add MUSD 15 (MSEK 140) of annual sales. The acquisition closed following regulatory approval and was consolidated in Securitas as of October 5, 2019.
ACQUISITIONS AFTER THE FOURTH QUARTER
Fredon Security, Australia
Securitas has acquired Fredon Security, founded in 2012 as a division within Fredon Group, an Australian engineering and building services company. Fredon Security is specialized in high-end electronic security solutions including system design, engineering, installation, commissioning and maintenance. The company has approximately 110 employees with a strong footprint across Australia's key geographical markets; Melbourne, Canberra, Brisbane, Perth and Sydney, where it is headquartered. Through strong organic growth the company has established a robust market position in the technology, commercial and government client segments. Fredon Security's annual sales was MAUD 37 (MSEK 240) in the financial year ending June 2019. The purchase price is estimated to MAUD 32 (MSEK 210). The acquisition was consolidated into Securitas as of January 9, 2020.
Techco Security, Spain
Securitas reinforces its leadership position within the electronic security market in Spain through the acquisition of Techco Security, a leading electronic security company. Techco Security offers a comprehensive range of integrated security services including installation, maintenance and remote guarding services as well as access control, electronic alarm surveillance and fire protection, and supports clients through two operations centers in Madrid and Barcelona. The company has approximately 520 employees with a strong footprint across Spain and Portugal. Techco Security's annual sales was MEUR 50 (MSEK 520) in 2018. The purchase price is estimated to MEUR 22 (MSEK 230). The acquisition was closed and consolidated into Securitas as of January 8, 2020.
Other significant events
For critical estimates and judgments, provisions and contingent liabilities refer to the 2018 Annual Report and to note 12 on page 26. If no significant events have occurred relating to the information in the Annual Report, no further comments are made in the Interim Report for the respective case.
Investigation into improper behavior, Argentina
As previously communicated, management changes have been made in Argentina. Following internal whistleblowing Securitas has conducted an investigation into potentially improper conduct through specialized external parties.
The findings revealed that certain individuals have engaged in local business practices in violation of the Securitas Values and Ethics Code. The investigation indicates compliance
issues, including conflicts of interest and irregular supplier and other business relationships. Disciplinary measures against these individuals, including terminations where appropriate, have been taken and Securitas is considering whether to take further legal action.
Securitas is now proactively collaborating with the appropriate authorities to ensure that Securitas fulfills all obligations as a responsible company. This includes correcting the income and value added tax by paying the corresponding additional tax and interest charges of approximately MSEK 130 to the local tax administration. The tax contingency payment is covered by existing provisions. The Group assesses that the impact of the misconduct will not have a material effect on the result or financial position of the Group.
Risks and uncertainties
Risk management is necessary for Securitas to be able to fulfill its strategies and achieve its corporate objectives. Securitas' risks fall into three main categories; contract and acquisition risks, operational assignment risks and financial risks. Securitas' approach to enterprise risk management is described in more detail in the Annual Report for 2018.
In the preparation of financial reports, the Board of Directors and Group Management are required to make estimates and judgments. These estimates and judgments impact the statement of income and balance sheet as well as disclosures such as contingent liabilities. The actual outcome may differ from these estimates and judgments under different circumstances and conditions.
For the forthcoming 12-month period, the financial impact of certain items affecting comparability, provisions and contingent liabilities, as described in the Annual Report for 2018 and, where applicable, under the heading "Other significant events" above, may vary from the current financial estimates and provisions made by management. This could affect the Group's profitability and financial position.
Parent Company operations
The Group's Parent Company, Securitas AB, is not involved in any operating activities. Securitas AB consists of Group Management and support functions for the Group.
January–December 2019
The Parent Company's income amounted to MSEK 1 449 (1 196) and mainly relates to license fees and other income from subsidiaries.
Financial income and expenses amounted to MSEK 2 209 (2 269). Income before taxes amounted to MSEK 2 553 (2 558).
As of December 31, 2019
The Parent Company's non-current assets amounted to MSEK 46 157 (43 506) and mainly comprise shares in subsidiaries of MSEK 43 911 (41 332). Current assets amounted to MSEK 5 944 (7 329) of which liquid funds accounted for MSEK 1 596 (1 326).
Shareholders' equity amounted to MSEK 29 276 (28 499). A dividend of MSEK 1 606 (1 460) was paid to the shareholders in May 2019.
The Parent Company's liabilities and untaxed reserves amounted to MSEK 22 825 (22 336) and mainly consist of interest-bearing debt.
For further information, refer to the Parent Company's condensed financial statements on page 27.
Stockholm, February 6, 2020
Magnus Ahlqvist President and Chief Executive Officer
Review Report
(Translation of Swedish Original)
Report of Review of Interim Financial Information prepared in accordance with IAS 34 and chapter 9 of the Annual Accounts Act.
Introduction
We have reviewed this report for the period January 1, 2019 to December 31, 2019 for Securitas AB. The Board of Directors and the President and CEO are responsible for the preparation and presentation of this full year report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this full year report based on our review.
Scope of Review
We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily
of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the full year report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.
Stockholm, February 6, 2020 PricewaterhouseCoopers AB
Patrik Adolfson Madeleine Endre Authorised Public Accountant Authorised Public Accountant Auditor in charge
Consolidated financial statements
STATEMENT OF INCOME
| MSEK | Oct–Dec 2019 | Oct–Dec 2018 | Jan–Dec 2019 | Jan–Dec 2018 |
|---|---|---|---|---|
| Sales | 28 125 | 26 133 | 109 560 | 99 707 |
| Sales, acquired business | 132 | 691 | 1 339 | 1 760 |
| Total sales4) | 28 257 | 26 824 | 110 899 | 101 467 |
| Organic sales growth, %5) | 2 | 5 | 4 | 6 |
| Production expenses2) | –23 355 | –22 086 | –91 588 | –83 570 |
| Gross income2) | 4 902 | 4 738 | 19 311 | 17 897 |
| Selling and administrative expenses2) | –3 428 | –3 283 | –13 637 | –12 654 |
| Other operating income4) | 8 | 8 | 34 | 30 |
| Share in income of associated companies | 15 | 12 | 30 | 31 |
| Operating income before amortization2) | 1 497 | 1 475 | 5 738 | 5 304 |
| Operating margin, % | 5.3 | 5.5 | 5.2 | 5.2 |
| Amortization of acquisition related intangible assets | –68 | –65 | –271 | –260 |
| Acquisition related costs7) | –28 | –79 | –62 | –120 |
| Items affecting comparability8) | –83 | –187 | –209 | –455 |
| Operating income after amortization2) | 1 318 | 1 144 | 5 196 | 4 469 |
| Financial income and expenses2, 3, 9) | –140 | –154 | –578 | –441 |
| Income before taxes2) | 1 178 | 990 | 4 618 | 4 028 |
| Net margin, % | 4.2 | 3.7 | 4.2 | 4.0 |
| Current taxes | –202 | –248 | –1 200 | –962 |
| Deferred taxes2) | –104 | 1 | –56 | –45 |
| Net income for the period2) | 872 | 743 | 3 362 | 3 021 |
| Whereof attributable to: | ||||
| Equity holders of the Parent Company | 869 | 738 | 3 357 | 3 016 |
| Non-controlling interests | 3 | 5 | 5 | 5 |
| Earnings per share before and after dilution2) (SEK) | 2.38 | 2.02 | 9.20 | 8.26 |
| Earnings per share before and after dilution and before items affecting comparability2) (SEK) | 2.54 | 2.39 | 9.61 | 9.17 |
STATEMENT OF COMPREHENSIVE INCOME
| MSEK | Oct–Dec 2019 | Oct–Dec 2018 | Jan–Dec 2019 | Jan–Dec 2018 |
|---|---|---|---|---|
| Net income for the period | 872 | 743 | 3 362 | 3 021 |
| Other comprehensive income for the period | ||||
| Items that will not be reclassified to the statement of income | ||||
| Remeasurements of defined benefit pension plans net of tax | 89 | –133 | 31 | –72 |
| Total items that will not be reclassified to the statement of income10) | 89 | –133 | 31 | –72 |
| Items that subsequently may be reclassified to the statement of income | ||||
| Remeasurement for hyperinflation net of tax3) | 2 | 15 | 79 | 314 |
| Cash flow hedges net of tax | 14 | 25 | 36 | 63 |
| Cost of hedging net of tax | –5 | –78 | 12 | –44 |
| Net investment hedges net of tax | 309 | 12 | –346 | –381 |
| Other comprehensive income from associated companies, translation differences | –23 | 10 | 14 | 19 |
| Translation differences | –1 147 | 122 | 405 | 668 |
| Total items that subsequently may be reclassified to the statement of income10) | –850 | 106 | 200 | 639 |
| Other comprehensive income for the period10) | –761 | –27 | 231 | 567 |
| Total comprehensive income for the period | 111 | 716 | 3 593 | 3 588 |
| Whereof attributable to: | ||||
| Equity holders of the Parent Company | 109 | 711 | 3 587 | 3 583 |
| Non-controlling interests | 2 | 5 | 6 | 5 |
Notes 2–10 refer to pages 21–26.
STATEMENT OF CASH FLOW
| Operating cash flow MSEK | Oct–Dec 2019 | Oct–Dec 2018 | Jan–Dec 2019 | Jan–Dec 2018 |
|---|---|---|---|---|
| Operating income before amortization | 1 497 | 1 475 | 5 738 | 5 304 |
| Investments in non-current tangible and intangible assets | –723 | –570 | –3 010 | –2 188 |
| Reversal of depreciation | 689 | 449 | 2 690 | 1 693 |
| Change in accounts receivable | –145 | –387 | –239 | –1 575 |
| Change in other operating capital employed | 535 | 915 | –277 | –62 |
| Cash flow from operating activities | 1 853 | 1 882 | 4 902 | 3 172 |
| Cash flow from operating activities, % | 124 | 128 | 85 | 60 |
| Financial income and expenses paid | –58 | –100 | –443 | –432 |
| Current taxes paid | –367 | –216 | –1 191 | –856 |
| Free cash flow | 1 428 | 1 566 | 3 268 | 1 884 |
| Free cash flow, % | 124 | 146 | 83 | 48 |
| Cash flow from investing activities, acquisitions and divestitures | –185 | –133 | –574 | –1 755 |
| Cash flow from items affecting comparability 8) | –106 | –93 | –303 | –117 |
| Cash flow from financing activities | –685 | –491 | –1 699 | –376 |
| Cash flow for the period | 452 | 849 | 692 | –364 |
| Cash flow MSEK | Oct–Dec 2019 | Oct–Dec 2018 | Jan–Dec 2019 | Jan–Dec 2018 |
|---|---|---|---|---|
| Cash flow from operations | 1 992 | 2 002 | 5 747 | 3 858 |
| Cash flow from investing activities | –640 | –662 | –2 534 | –3 846 |
| Cash flow from financing activities | –900 | –491 | –2 521 | –376 |
| Cash flow for the period | 452 | 849 | 692 | –364 |
| Change in net debt MSEK | Oct–Dec 2019 | Oct–Dec 2018 | Jan–Dec 2019 | Jan–Dec 2018 |
|---|---|---|---|---|
| Opening balance | –19 415 | –15 749 | –14 513 | –12 333 |
| Cash flow for the period | 452 | 849 | 692 | –364 |
| Change in lease liabilities | 143 | 3 | –3 332 | –31 |
| Change in loans | 685 | 488 | 93 | –1 053 |
| Change in net debt before revaluation and translation differences | 1 280 | 1 340 | –2 547 | –1 448 |
| Revaluation of financial instruments9) | 11 | –69 | 60 | 26 |
| Translation differences | 583 | –35 | –541 | –758 |
| Change in net debt | 1 874 | 1 236 | –3 028 | –2 180 |
| Closing balance | –17 541 | –14 513 | –17 541 | –14 513 |
Notes 8–9 refer to pages 24–25.
CAPITAL EMPLOYED AND FINANCING
| MSEK | Dec 31, 2019 | Dec 31, 2018 |
|---|---|---|
| Operating capital employed2) | 13 100 | 9 199 |
| Operating capital employed as % of sales | 12 | 9 |
| Return on operating capital employed, % | 50 | 58 |
| Goodwill | 22 157 | 21 061 |
| Acquisition related intangible assets | 1 563 | 1 458 |
| Shares in associated companies | 320 | 452 |
| Capital employed2) | 37 140 | 32 170 |
| Return on capital employed, % | 15 | 15 |
| Net debt2) | –17 541 | –14 513 |
| Shareholders' equity | 19 599 | 17 657 |
| Net debt equity ratio, multiple | 0.89 | 0.82 |
BALANCE SHEET
| MSEK | Dec 31, 2019 | Dec 31, 2018 |
|---|---|---|
| ASSETS | ||
| Non-current assets | ||
| Goodwill | 22 157 | 21 061 |
| Acquisition related intangible assets | 1 563 | 1 458 |
| Other intangible assets | 1 813 | 1 450 |
| Right-of-use assets2) | 3 489 | 222 |
| Other tangible non-current assets2) | 3 546 | 3 532 |
| Shares in associated companies | 320 | 452 |
| Non-interest-bearing financial non-current assets | 1 799 | 1 744 |
| Interest-bearing financial non-current assets | 437 | 499 |
| Total non-current assets2) | 35 124 | 30 418 |
| Current assets | ||
| Non-interest-bearing current assets | 22 984 | 21 701 |
| Other interest-bearing current assets | 134 | 121 |
| Liquid funds | 3 948 | 3 229 |
| Total current assets | 27 066 | 25 051 |
| TOTAL ASSETS2) | 62 190 | 55 469 |
| MSEK | Dec 31, 2019 | Dec 31, 2018 |
|---|---|---|
| SHAREHOLDERS' EQUITY AND LIABILITIES | ||
| Shareholders' equity | ||
| Attributable to equity holders of the Parent Company | 19 569 | 17 632 |
| Non-controlling interests | 30 | 25 |
| Total shareholders' equity | 19 599 | 17 657 |
| Equity ratio, % | 32 | 32 |
| Long-term liabilities | ||
| Non-interest-bearing long-term liabilities | 361 | 336 |
| Long-term lease liabilities2) | 2 610 | 116 |
| Other interest-bearing long-term liabilities | 17 216 | 15 858 |
| Non-interest-bearing provisions | 2 484 | 2 527 |
| Total long-term liabilities2) | 22 671 | 18 837 |
| Current liabilities | ||
| Non-interest-bearing current liabilities and provisions | 17 686 | 16 587 |
| Current lease liabilities2) | 944 | 106 |
| Other interest-bearing current liabilities | 1 290 | 2 282 |
| Total current liabilities2) | 19 920 | 18 975 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES2) | 62 190 | 55 469 |
2) Finance leases according to IAS 17 was in 2018 included in tangible non-current assets. For further information regarding right-of-use assets, refer to note 2 on pages 21–22.
CHANGES IN SHAREHOLDERS' EQUITY
| Dec 31, 2019 | Dec 31, 2018 | |||||
|---|---|---|---|---|---|---|
| MSEK | Attributable to equity holders of the Parent Company |
Non controlling interests |
Total | Attributable to equity holders of the Parent Company |
Non controlling interests |
Total |
| Opening balance January 1, 2019/2018 | 17 632 | 25 | 17 657 | 15 518 | 21 | 15 539 |
| Total comprehensive income for the period | 3 587 | 6 | 3 593 | 3 583 | 5 | 3 588 |
| Transactions with non-controlling interests | – | –1 | –1 | –2 | –1 | –3 |
| Share based incentive schemes | –44 | – | –441) | –7 | – | –7 |
| Dividend paid to the shareholders of the Parent Company | –1 606 | – | –1 606 | –1 460 | – | –1 460 |
| Closing balance December 31, 2019/2018 | 19 569 | 30 | 19 599 | 17 632 | 25 | 17 657 |
1) Refers to share based remuneration for the Group's participants in the share based incentive schemes 2019 of MSEK 123, a swap agreement in Securitas AB shares of MSEK –147, hedging the share portion of Securitas share based incentive scheme 2018, and adjustment to grant date value of non-vested shares of MSEK 1, related to Securitas share based incentive scheme 2017. Refers also to repurchase of own shares of MSEK –21.
DATA PER SHARE
| SEK | Oct–Dec 2019 | Oct–Dec 2018 | Jan–Dec 2019 | Jan–Dec 2018 |
|---|---|---|---|---|
| Share price, end of period | 161.45 | 142.25 | 161.45 | 142.25 |
| Earnings per share before and after dilution1, 2, 3) | 2.38 | 2.02 | 9.20 | 8.26 |
| Earnings per share before and after dilution and before items affecting comparability1, 2, 3) | 2.54 | 2.39 | 9.61 | 9.17 |
| Dividend | – | – | 4.805) | 4.40 |
| P/E-ratio after dilution and before items affecting comparability | – | – | 17 | 16 |
| Share capital (SEK) | 365 058 897 | 365 058 897 | 365 058 897 | 365 058 897 |
| Number of shares outstanding1, 3) | 364 933 897 | 365 058 897 | 364 933 897 | 365 058 897 |
| Average number of shares outstanding1, 3, 4) | 364 933 897 | 365 058 897 | 364 993 486 | 365 058 897 |
1) There are no convertible debenture loans. Consequently there is no difference before and after dilution regarding earnings per share and number of shares.
2) Number of shares used for calculation of earnings per share includes shares related to the Group's share based incentive schemes that have been hedged through swap agreements.
3) On June 24, 2019, 125 000 shares were repurchased.
4) Used for calculation of earnings per share. 5) Proposed dividend.
Segment overview October–December 2019 and 2018
OCTOBER–DECEMBER 2019
| Security Services |
Security Services |
Security Services |
||||
|---|---|---|---|---|---|---|
| MSEK | North America | Europe | Ibero-America | Other | Eliminations | Group |
| Sales, external | 12 383 | 12 056 | 3 263 | 555 | – | 28 257 |
| Sales, intra-group | 6 | 1 | 0 | –2 | –5 | – |
| Total sales | 12 389 | 12 057 | 3 263 | 553 | –5 | 28 257 |
| Organic sales growth, % | 2 | 1 | 10 | – | – | 2 |
| Operating income before amortization | 752 | 730 | 156 | –141 | – | 1 497 |
| of which share in income of associated companies | 1 | – | – | 14 | – | 15 |
| Operating margin, % | 6.1 | 6.1 | 4.8 | – | – | 5.3 |
| Amortization of acquisition related intangible assets | –18 | –39 | –5 | –6 | – | –68 |
| Acquisition related costs | –90 | 63 | –1 | 0 | – | –28 |
| Items affecting comparability | –59 | –14 | –2 | –8 | – | –83 |
| Operating income after amortization | 585 | 740 | 148 | –155 | – | 1 318 |
| Financial income and expenses | – | – | – | – | – | –140 |
| Income before taxes | – | – | – | – | – | 1 178 |
OCTOBER–DECEMBER 2018
| Security | Security | Security | ||||
|---|---|---|---|---|---|---|
| MSEK | Services North America |
Services Europe |
Services Ibero-America |
Other | Eliminations | Group |
| Sales, external | 11 518 | 11 725 | 3 111 | 470 | – | 26 824 |
| Sales, intra-group | 5 | – | 0 | 1 | –6 | – |
| Total sales | 11 523 | 11 725 | 3 111 | 471 | –6 | 26 824 |
| Organic sales growth, % | 5 | 3 | 14 | – | – | 5 |
| Operating income before amortization | 722 | 739 | 125 | –111 | – | 1 475 |
| of which share in income of associated companies | –1 | 0 | – | 13 | – | 12 |
| Operating margin, % | 6.3 | 6.3 | 4.0 | – | – | 5.5 |
| Amortization of acquisition related intangible assets | –15 | –40 | –6 | –4 | – | –65 |
| Acquisition related costs | –58 | –21 | – | 0 | – | –79 |
| Items affecting comparability | –155 | 0 | – | –32 | – | –187 |
| Operating income after amortization | 494 | 678 | 119 | –147 | – | 1 144 |
| Financial income and expenses | – | – | – | – | – | –154 |
| Income before taxes | – | – | – | – | – | 990 |
Segment overview January–December 2019 and 2018
JANUARY–DECEMBER 2019
| Security Services |
Security Services |
Security Services |
||||
|---|---|---|---|---|---|---|
| MSEK | North America | Europe | Ibero-America | Other | Eliminations | Group |
| Sales, external | 48 480 | 47 247 | 13 098 | 2 074 | – | 110 899 |
| Sales, intra-group | 19 | 1 | 1 | 2 | –23 | – |
| Total sales | 48 499 | 47 248 | 13 099 | 2 076 | –23 | 110 899 |
| Organic sales growth, % | 4 | 2 | 14 | – | – | 4 |
| Operating income before amortization | 3 003 | 2 582 | 614 | –461 | – | 5 738 |
| of which share in income of associated companies | –11 | – | – | 41 | – | 30 |
| Operating margin, % | 6.2 | 5.5 | 4.7 | – | – | 5.2 |
| Amortization of acquisition related intangible assets | –68 | –159 | –23 | –21 | – | –271 |
| Acquisition related costs | –99 | 43 | –1 | –5 | – | –62 |
| Items affecting comparability | –119 | –54 | –3 | –33 | – | –209 |
| Operating income after amortization | 2 717 | 2 412 | 587 | –520 | – | 5 196 |
| Financial income and expenses | – | – | – | – | – | –578 |
| Income before taxes | – | – | – | – | – | 4 618 |
JANUARY–DECEMBER 2018
| Security | Security | Security | ||||
|---|---|---|---|---|---|---|
| MSEK | Services North America |
Services Europe |
Services Ibero-America |
Other | Eliminations | Group |
| Sales, external | 42 360 | 45 040 | 12 313 | 1 754 | – | 101 467 |
| Sales, intra-group | 6 | – | 2 | 1 | –9 | – |
| Total sales | 42 366 | 45 040 | 12 315 | 1 755 | –9 | 101 467 |
| Organic sales growth, % | 6 | 4 | 12 | – | – | 6 |
| Operating income before amortization | 2 589 | 2 511 | 550 | –346 | – | 5 304 |
| of which share in income of associated companies | –9 | 0 | – | 40 | – | 31 |
| Operating margin, % | 6.1 | 5.6 | 4.5 | – | – | 5.2 |
| Amortization of acquisition related intangible assets | –54 | –158 | –30 | –18 | – | –260 |
| Acquisition related costs | –84 | –35 | – | –1 | – | –120 |
| Items affecting comparability | –155 | –268 | – | –32 | – | –455 |
| Operating income after amortization | 2 296 | 2 050 | 520 | –397 | – | 4 469 |
| Financial income and expenses | – | – | – | – | – | –441 |
| Income before taxes | – | – | – | – | – | 4 028 |
NOTE 1 Accounting principles
This full year report has been prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The full year report comprises pages 1–28 and pages 1–14 are thus an integrated part of this financial report.
Securitas' consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union, the Swedish Annual Accounts Act and the Swedish Financial Reporting Board's standard RFR 1 Supplementary Accounting Rules for Groups. The most important accounting principles under IFRS, which is the basis for the preparation of this full year report, can be found in note 2 on pages 73 to 79 in the Annual Report for 2018. The accounting principles are also available on the Group's website www.securitas.com under the section Investors – Financial data – Accounting Principles.
The Parent Company's financial statements are prepared in accordance with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board's standard RFR 2 Accounting for Legal Entities. The most important accounting principles used by the Parent Company can be found in note 41 on page 131 in the Annual Report for 2018.
Adoption and impact of new and revised IFRS that have been applied as from January 1, 2019
IFRS 16 Leases came into force on January 1, 2019 and has been adopted by Securitas as of that date. The cumulative effect of the adoption has been recognized without restatement of the comparative periods. For further information regarding Securitas adoption of IFRS 16, refer to note 2 in this full year report as well as to note 2 and note 40 in the Annual Report 2018.
Amendments to IAS 19 Employee Benefits came into force on January 1, 2019 and has been adopted by Securitas as of that date. The amendments clarify the accounting for defined benefit plan amendments, curtailments and settlements. They are not expected to have any material impact on the Group's financial statements.
NOTE 2 Adoption and impact of IFRS 16 Leases
Securitas has adopted IFRS 16 Leases as of January 1, 2019. The cumulative effect of the adoption has been recognized without restatement of the comparative periods. As a consequence, certain lines in the consolidated financial statements and segment overviews are not comparable with the preceding year.
Securitas' lease agreements are mainly attributable to buildings and vehicles. As from the transition to IFRS 16, they are accounted for as right-of-use assets and long-term and current lease liabilities in the consolidated balance sheet.
In the consolidated statement of income, depreciation of the right-of-use assets is accounted for on the lines production expenses and selling and administrative expenses. Interest expenses are accounted for on the line financial income and expenses. In the Group´s segment overviews, the effects of the adoption of IFRS 16 are accounted for under each segment.
The lease liabilities on January 1, 2019 have been measured at the present value of remaining lease payments, discounted by using the incremental borrowing rate for each country. The Group's average incremental borrowing rate on lease liabilities recognized in the balance sheet on January 1, 2019 was approximately 3.9%. The right-of-use assets on January 1, 2019 have been measured at an amount equal to the lease liabilities.
Extension clauses are evaluated for each lease agreement and are applied based on the best estimate at each closing. Payments for short-term leases, where the lease term ends within 12 months of the date of initial application, as well as leases of low-value assets, have been recognized on a straight-line basis as an expense in the statement of income and thus excluded from the lease liabilities accounted for under IFRS 16.
The impact on the consolidated statement of income and the consolidated balance sheet from the adoption and application of IFRS 16 is specified in the tables below.
IMPACT ON CONSOLIDATED STATEMENT OF INCOME
| Operating income before amortization* 20 |
80 |
|---|---|
| Financial expenses –37 |
–148 |
| Income before taxes –17 |
–68 |
| Deferred taxes 6 |
19 |
| Net income for the period –11 |
–49 |
| Earnings per share before and after dilution (SEK) –0.03 |
–0.13 |
| Earnings per share before and after dilution and before items affecting comparability |
|
| (SEK) –0.03 |
–0.13 |
* Depreciation of right-of-use assets included in operating income was MSEK –232 for October–December 2019 and MSEK –890 for January–December 2019.
None of the other published standards and interpretations that are mandatory for the Group's financial year 2019 are assessed to have any impact on the Group's financial statements.
Introduction and effect of new and revised IFRS that are effective as from 2020 and onwards
As from 2019, Securitas has chosen to early-adopt the amendments to IFRS 9 Financial instruments related to hedge accounting, which came into effect as of January 1, 2020. The purpose of the amendments is to reduce the effects on hedge accounting following the IBOR-reform and they should be applied to all hedge relationships that are directly affected by the IBOR-reform. The amendments are assessed to have no impact on the Group's financial statements.
The effect on the Group's financial statements from other standards and interpretations that are mandatory for the Group's financial year 2020 or later remain to be assessed.
Impairment testing
In 2019, IFRS 16 has been adopted on segment level. The Group has changed the level of impairment testing for goodwill from country level to segment level.
Usage of key ratios not defined in IFRS
For definitions and calculations of key ratios not defined in IFRS, refer to notes 5 and 6 in this full year report as well as to note 3 in the Annual Report 2018.
BRIDGE BETWEEN OPERATING LEASES UNDER IAS 17 AND LEASE LIABILITY ACCORDING TO IFRS 16
| MSEK | Jan 1, 2019 |
|---|---|
| Operating leases under IAS 17 at December 31, 2018 | 4 259 |
| Effect of discounting | –504 |
| Finance leases recognized at December 31, 2018 | 222 |
| Short-term leases recognized on a straight-line basis as expense | –269 |
| Low-value leases recognized on a straight-line basis as expense | –53 |
| Lease liability under IFRS 16 at January 1, 2019 | 3 655 |
IMPACT ON CONSOLIDATED CAPITAL EMPLOYED AND FINANCING
| MSEK | Jan 1, 2019 |
|---|---|
| Capital employed | |
| Previously recognized financial lease assets | 222 |
| Additional right-of-use assets under IFRS 16 | 3 433 |
| Operating capital employed Jan 1, 2019 | 3 655 |
| Financing | |
| Previously recognized financial lease liabilities | 222 |
| Additional lease liabilities under IFRS 16 | 3 433 |
| Net debt Jan 1, 2019 | 3 655 |
IMPACT ON CONSOLIDATED BALANCE SHEET
| MSEK | Jan 1, 2019 |
|---|---|
| Assets | |
| Previously recognized financial lease assets | 222 |
| Additional right-of-use assets under IFRS 16 | 3 433 |
| Total right-of-use assets Jan 1, 2019* | 3 655 |
| Liabilities | |
| Previously recognized financial lease liabilities | 222 |
| Additional lease liabilities under IFRS 16 | 3 433 |
| Total lease liabilities Jan 1, 2019* | 3 655 |
* As of December 31, 2019 total right-of-use assets were MSEK 3 489 while total long-term and current lease liabilities were MSEK 3 554.
Note 2, cont.
| Dec 31, 2019 | Less: Impact from IFRS 16 | Dec 31, 2019 adjusted for IFRS 16 | Dec 31, 2018 | |
|---|---|---|---|---|
| Net debt to EBITDA | 2.2 | –0.2 | 2.0 | 2.3 |
| Free cash flow to net debt | 0.19 | 0.04 | 0.23 | 0.13 |
| Interest coverage ratio | 9.4 | 2.8 | 12.2 | 10.7 |
| Operating capital employed as % of sales | 12 | –3 | 9 | 9 |
| Return on operating capital employed, % | 50 | 7 | 57 | 58 |
| Return on capital employed, % | 15 | 1 | 16 | 15 |
| Net debt to equity ratio | 0.89 | –0.17 | 0.72 | 0.82 |
| Equity ratio, % | 32 | 1 | 33 | 32 |
NOTE 3 Remeasurement for hyperinflation
The impact on the consolidated statement of income and other comprehensive income from the adoption and application of IAS 29 Financial reporting in Hyperinflationary economies, as described in note 2 and note 39 in Securitas Annual Report 2018, is illustrated below. The index used by Securitas for the remeasurement of the financial statements in 2019 is the consumer price index with base period January 2003.
EXCHANGE RATES AND INDEX
| Dec 31, 2019 | Dec 31, 2018 | July 1, 2018* | |
|---|---|---|---|
| Exchange rate SEK/ARS | 0.16 | 0.23 | 0.33 |
| Index | 17.15 | 11.15 | 9.17 |
NET MONETARY GAIN RECOGNIZED IN THE CONSOLIDATED STATEMENT OF INCOME
| MSEK | Oct–Dec 2019 | Oct–Dec 2018 | Jan–Dec 2019 | Jul–Dec 2018* |
|---|---|---|---|---|
| Financial income and expenses | 12 | 5 | 25 | 23 |
| Total monetary gain | 12 | 5 | 25 | 23 |
REMEASUREMENT IMPACT RECOGNIZED IN OTHER COMPREHENSIVE INCOME
| MSEK | Oct–Dec 2019 | Oct–Dec 2018 | Jan–Dec 2019 | Jul–Dec 2018* |
|---|---|---|---|---|
| Remeasurement on first time adoption July 1, 2018 | – | – | – | 275 |
| Remeasurement in the period | 2 | 15 | 79 | 39 |
| Total remeasurement for hyperinflation, net of taxes | 2 | 15 | 79 | 314 |
* First time adoption date for IAS 29 was July 1, 2018.
NOTE 4 Revenue
| MSEK | Oct–Dec 2019 | % | Oct–Dec 2018 | % | Jan–Dec 2019 | % | Jan–Dec 2018 | % |
|---|---|---|---|---|---|---|---|---|
| Guarding services | 21 619 | 76 | 20 749 | 77 | 85 774 | 77 | 79 567 | 79 |
| Security solutions and electronic security | 6 145 | 22 | 5 637 | 21 | 23 290 | 21 | 20 440 | 20 |
| Other | 493 | 2 | 438 | 2 | 1 835 | 2 | 1 460 | 1 |
| Total sales | 28 257 | 100 | 26 824 | 100 | 110 899 | 100 | 101 467 | 100 |
| Other operating income | 8 | 0 | 8 | 0 | 34 | 0 | 30 | 0 |
| Total revenue | 28 265 | 100 | 26 832 | 100 | 110 933 | 100 | 101 497 | 100 |
Guarding services
This comprises on-site and mobile guarding, which is services with the same revenue recognition pattern. Revenue is recognized over time, as the services are rendered by Securitas and simultaneously consumed by the customers. Such services cannot be reperformed.
Security solutions and electronic security
This comprises two broad categories regarding security solutions and electronic security.
Security solutions are a combination of services such as on-site and/or mobile guarding and/or remote guarding. These services are combined with a technology component in terms of equipment owned and managed by Securitas and used in the provision of services. The equipment is installed at the customer site. The revenue recognition pattern is over time, as the services are rendered by Securitas and simultaneously consumed by the customers. A security solution normally constitutes one performance obligation.
Electronic security consists of the sale of alarm installations comprising design and installation (time, material and related expenses). Revenue is recognized as per the contract, either upon completion of the conditions in the contract, or over time based on the percentage of completion. Remote guarding (in the form of
alarm monitoring services), that is sold separately and not as part of a security solution, is also included in this category. Revenue recognition is over time as this is also a service that is rendered by Securitas and simultaneously consumed by the customers. The category further includes maintenance services, that are either performed upon request (time and material) with revenue recognition at a point in time (when the work has been performed), or over time if part of a service level contract with a subscription fee. Finally there is also a to a limited extent product sales (alarms and components) without any design or installation. The revenue recognition is at a point in time (upon delivery).
Other
Other comprises mainly corporate risk management services that are either recognized over time or at a point in time as well as other ancillary business.
Other operating income
Other operating income consists in its entirety of trade mark fees for the use of the Securitas brand name.
Revenue per segment
The disaggregation of revenue by segment is shown in the table below. Total sales agree to total sales in the segment overviews.
Note 4, cont.
| Security Services Security Services North America Europe |
Security Services Ibero-America Other |
Eliminations | Group | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| MSEK | Oct–Dec 2019 |
Oct–Dec 2018 |
Oct–Dec 2019 |
Oct–Dec 2018 |
Oct–Dec 2019 |
Oct–Dec 2018 |
Oct–Dec 2019 |
Oct–Dec 2018 |
Oct–Dec 2019 |
Oct–Dec 2018 |
Oct–Dec 2019 |
Oct–Dec 2018 |
| Guarding services | 9 577 | 9 037 | 9 176 | 9 039 | 2 392 | 2 254 | 479 | 425 | –5 | –6 | 21 619 | 20 749 |
| Security solutions and electronic security |
2 319 | 2 048 | 2 881 | 2 686 | 871 | 857 | 74 | 46 | – | – | 6 145 | 5 637 |
| Other | 493 | 438 | – | – | – | – | – | – | – | – | 493 | 438 |
| Total sales | 12 389 | 11 523 | 12 057 | 11 725 | 3 263 | 3 111 | 553 | 471 | –5 | –6 | 28 257 | 26 824 |
| Other operating income | – | – | – | – | – | – | 8 | 8 | – | – | 8 | 8 |
| Total revenue | 12 389 | 11 523 | 12 057 | 11 725 | 3 263 | 3 111 | 561 | 479 | –5 | –6 | 28 265 | 26 832 |
| Security Services North America |
Europe | Security Services | Security Services Ibero-America |
Other | Eliminations | Group | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| MSEK | Jan–Dec 2019 |
Jan–Dec 2018 |
Jan–Dec 2019 |
Jan–Dec 2018 |
Jan–Dec 2019 |
Jan–Dec 2018 |
Jan–Dec 2019 |
Jan–Dec 2018 |
Jan–Dec 2019 |
Jan–Dec 2018 |
Jan–Dec 2019 |
Jan–Dec 2018 |
| Guarding services | 37 779 | 33 541 | 36 637 | 35 402 | 9 572 | 9 045 | 1 809 | 1 588 | –23 | –9 | 85 774 | 79 567 |
| Security solutions and electronic security |
8 885 | 7 365 | 10 611 | 9 638 | 3 527 | 3 270 | 267 | 167 | – | – | 23 290 | 20 440 |
| Other | 1 835 | 1 460 | – | – | – | – | – | – | – | – | 1 835 | 1 460 |
| Total sales | 48 499 | 42 366 | 47 248 | 45 040 | 13 099 | 12 315 | 2 076 | 1 755 | –23 | –9 | 110 899 | 101 467 |
| Other operating income | – | – | – | – | – | – | 34 | 30 | – | – | 34 | 30 |
| Total revenue | 48 499 | 42 366 | 47 248 | 45 040 | 13 099 | 12 315 | 2 110 | 1 785 | –23 | –9 | 110 933 | 101 497 |
NOTE 5 Organic sales growth and currency changes
The calculation of real and organic sales growth and the specification of currency changes on operating income before and after amortization, income before taxes, net income and earnings per share are specified below. The impact from remeasurement for hyperinflation due to the application of IAS 29 is included in currency change.
| MSEK | Oct–Dec 2019 | Oct–Dec 2018 | Oct–Dec % | Jan–Dec 2019 | Jan–Dec 2018 | Jan–Dec % |
|---|---|---|---|---|---|---|
| Total sales | 28 257 | 26 824 | 5 | 110 899 | 101 467 | 9 |
| Currency change from 2018 | –722 | – | –3 693 | – | ||
| Currency adjusted sales growth | 27 535 | 26 824 | 3 | 107 206 | 101 467 | 6 |
| Acquisitions/divestitures | –132 | –7 | –1 339 | –34 | ||
| Organic sales growth | 27 403 | 26 817 | 2 | 105 867 | 101 433 | 4 |
| Operating income before amortization | 1 497 | 1 475 | 1 | 5 738 | 5 304 | 8 |
| Currency change from 2018 | –53 | – | –255 | – | ||
| Currency adjusted operating income before amortization | 1 444 | 1 475 | –2 | 5 483 | 5 304 | 3 |
| Operating income after amortization | 1 318 | 1 144 | 15 | 5 196 | 4 469 | 16 |
| Currency change from 2018 | –45 | – | –235 | – | ||
| Currency adjusted operating income after amortization | 1 273 | 1 144 | 11 | 4 961 | 4 469 | 11 |
| Income before taxes | 1 178 | 990 | 19 | 4 618 | 4 028 | 15 |
| Currency change from 2018 | –23 | – | –215 | – | ||
| Currency adjusted income before taxes | 1 155 | 990 | 17 | 4 403 | 4 028 | 9 |
| Net income for the period | 872 | 743 | 17 | 3 362 | 3 021 | 11 |
| Currency change from 2018 | –17 | – | –161 | – | ||
| Currency adjusted net income for the period | 855 | 743 | 15 | 3 201 | 3 021 | 6 |
| Net income attributable to equity holders of the Parent Company |
869 | 738 | 18 | 3 357 | 3 016 | 11 |
| Currency change from 2018 | –17 | – | –161 | – | ||
| Currency adjusted net income attributable to equity holders of the Parent Company |
852 | 738 | 15 | 3 196 | 3 016 | 6 |
| Average number of shares outstanding | 364 933 897 | 365 058 897 | 364 993 486 | 365 058 897 | ||
| Currency adjusted earnings per share | 2.33 | 2.02 | 15 | 8.76 | 8.26 | 6 |
NOTE 6 Definitions and calculation of key ratios
The calculations below relate to the period January–December 2019.
Interest coverage ratio
Operating income before amortization (rolling 12 months) plus interest income (rolling 12 months) in relation to interest expenses (rolling 12 months). Calculation: (5 738 + 41) / 617 = 9.4
Free cash flow as % of adjusted income
Free cash flow as a percentage of adjusted income (operating income before amortization adjusted for financial income and expenses, excluding revaluation of financial instruments, and current taxes). Calculation: 3 268 / (5 738 – 578 + 1 – 1 200) = 83%
Free cash flow in relation to net debt
Free cash flow (rolling 12 months) in relation to closing balance net debt. Calculation: 3 268 / 17 541 = 0.19
Net debt to EBITDA ratio
Net debt in relation to operating income after amortization (rolling 12 months) plus amortization of acquisition related intangible assets (rolling 12 months) and depreciation (rolling 12 months). Calculation: 17 541 / (5 196 + 271 + 2 690) = 2.2
Operating capital employed as % of total sales
Operating capital employed as a percentage of total sales adjusted for the full-year sales of acquired entities. Calculation: 13 100 / 111 469 = 12%
Return on operating capital employed
Operating income before amortization (rolling 12 months) plus items affecting comparability (rolling 12 months) as a percentage of the average balance of operating capital employed. Calculation: (5 738 – 209) / ((13 100 + 9 199) / 2) = 50%
Return on capital employed
Operating income before amortization (rolling 12 months) plus items affecting comparability (rolling 12 months) as a percentage of closing balance of capital employed. Calculation: (5 738 – 209) / 37 140 = 15%
Net debt equity ratio
Net debt in relation to shareholders' equity. Calculation: 17 541 / 19 599 = 0.89
NOTE 7 Acquisition related costs
| MSEK | Oct–Dec 2019 | Oct–Dec 2018 | Jan–Dec 2019 | Jan–Dec 2018 |
|---|---|---|---|---|
| Restructuring and integration costs | –3 | –72 | –18 | –90 |
| Transaction costs | –8 | –6 | –24 | –25 |
| Revaluation of deferred considerations | 68 | –1 | 65 | –5 |
| Step acquisitions | –85 | – | –85 | – |
| Total acquisition related costs | –28 | –79 | –62 | –120 |
For further information regarding the Group's acquisitions, refer to the section Acquisitions and divestitures.
NOTE 8 Items affecting comparability
| MSEK | Oct–Dec 2019 | Oct–Dec 2018 | Jan–Dec 2019 | Jan–Dec 2018 |
|---|---|---|---|---|
| Recognized in the statement of income | ||||
| IS/IT transformation programs | –83 | –187 | –209 | –187 |
| Cost savings program, Security Services Europe | – | – | – | –268 |
| Total recognized in the statement of income before tax | –83 | –187 | –209 | –455 |
| Taxes | 25 | 52 | 57 | 122 |
| Total recognized in the statement of income after tax | –58 | –135 | –152 | –333 |
| Cash flow impact | ||||
| IS/IT transformation programs | –72 | –51 | –171 | –51 |
| Cost savings program, Security Services Europe | –34 | –42 | –132 | –66 |
| Total cash flow impact | –106 | –93 | –303 | –117 |
NOTE 9 Financial instruments and credit facilities
Revaluation of financial instruments
Revaluation of financial instruments is recognized in the statement of income on the line financial income and expenses. Revaluation of cash flow hedges (and the subsequent recycling into the statement of income) is recognized in other comprehensive income on the line cash flow hedges. Cost of hedging (and the subsequent recycling into the statement of income) is recognized on the corresponding line in other comprehensive income.
The amount disclosed in the specification of change in net debt is the total revaluation before tax in the table below.
| MSEK | Oct–Dec 2019 | Oct–Dec 2018 | Jan–Dec 2019 | Jan–Dec 2018 |
|---|---|---|---|---|
| Recognized in the statement of income | ||||
| Revaluation of financial instruments | 0 | 0 | –1 | 2 |
| Deferred tax | – | – | – | – |
| Impact on net income | 0 | 0 | –1 | 2 |
| Recognized in the statement of comprehensive income | ||||
| Cash flow hedges | 17 | 31 | 45 | 80 |
| Cost of hedging | –6 | –100 | 16 | –56 |
| Deferred tax | –2 | 16 | –13 | –5 |
| Total recognized in the statement of comprehensive income | 9 | –53 | 48 | 19 |
| Total revaluation before tax | 11 | –69 | 60 | 26 |
| Total deferred tax | –2 | 16 | –13 | –5 |
| Total revaluation after tax | 9 | –53 | 47 | 21 |
Fair value hierarchy
The methods and assumptions used by the Group in estimating the fair value of the financial instruments are disclosed in note 7 in the Annual Report 2018. Further information regarding the accounting principles for financial instruments is disclosed in note 2 in the Annual Report 2018.
There have been no transfers between any of the the valuation levels during the period.
| MSEK | Quoted market prices |
Valuation techniques using observable market data |
Valuation techniques using non-observable market data |
Total |
|---|---|---|---|---|
| December 31, 2019 | ||||
| Financial assets at fair value through profit or loss | – | 13 | – | 13 |
| Financial liabilities at fair value through profit or loss | – | –14 | –425 | –439 |
| Derivatives designated for hedging with positive fair value | – | 213 | – | 213 |
| Derivatives designated for hedging with negative fair value | – | –194 | – | –194 |
| December 31, 2018 | ||||
| Financial assets at fair value through profit or loss | – | 16 | – | 16 |
| Financial liabilities at fair value through profit or loss | – | –10 | –272 | –282 |
| Derivatives designated for hedging with positive fair value | – | 356 | – | 356 |
| Derivatives designated for hedging with negative fair value | – | –127 | – | –127 |
Financial instruments by category – carrying and fair values
For financial assets and liabilities other than those disclosed in the table below, fair value is deemed to approximate the carrying value. A full comparison of fair value and carrying value for all financial assets and liabilities is disclosed in note 7 in the Annual Report 2018.
| Dec 31, 2019 | Dec 31, 2018 | |||
|---|---|---|---|---|
| MSEK | Carrying value | Fair value | Carrying value | Fair value |
| Long-term loan liabilities | 14 194 | 14 475 | 13 939 | 14 065 |
| Total financial instruments by category | 14 194 | 14 475 | 13 939 | 14 065 |
SUMMARY OF CREDIT FACILITIES AS OF DECEMBER 31, 2019
| Facility amount | Available amount | |||
|---|---|---|---|---|
| Type | Currency | (million) | (million) | Maturity |
| EMTN FRN private placement | USD | 40 | 0 | 2020 |
| EMTN FRN private placement | USD | 40 | 0 | 2021 |
| EMTN FRN private placement | USD | 60 | 0 | 2021 |
| EMTN FRN private placement | USD | 40 | 0 | 2021 |
| EMTN Eurobond, 2.625% fixed | EUR | 350 | 0 | 2021 |
| EMTN Eurobond, 1.25% fixed | EUR | 350 | 0 | 2022 |
| Multi Currency Revolving Credit Facility | USD (or equivalent) | 550 | 550 | 2022 |
| Multi Currency Revolving Credit Facility | EUR (or equivalent) | 440 | 440 | 2022 |
| EMTN Eurobond, 1.125% fixed | EUR | 350 | 0 | 2024 |
| EMTN FRN private placement | USD | 50 | 0 | 2024 |
| EMTN FRN private placement | USD | 105 | 0 | 2024 |
| EMTN Eurobond, 1.25% fixed | EUR | 300 | 0 | 2025 |
| Commercial Paper (uncommitted) | SEK | 5 000 | 4 250 | n/a |
NOTE 10 Deferred tax on other comprehensive income
| MSEK | Oct–Dec 2019 | Oct–Dec 2018 | Jan–Dec 2019 | Jan–Dec 2018 |
|---|---|---|---|---|
| Deferred tax on remeasurements of defined benefit pension plans | –31 | 45 | –11 | 25 |
| Deferred tax on remeasurement for hyperinflation | – | – | – | –15 |
| Deferred tax on cash flow hedges | –3 | –6 | –9 | –17 |
| Deferred tax on cost of hedging | 1 | 22 | –4 | 12 |
| Deferred tax on net investment hedges | –84 | –4 | 94 | 107 |
| Total deferred tax on other comprehensive income | –117 | 57 | 70 | 112 |
NOTE 11 Pledged assets
| MSEK | Dec 31, 2019 | Dec 31, 2018 |
|---|---|---|
| Pension balances, defined contribution plans | 124 | 128 |
| Finance leases according to IAS 17 | n/a | 222 |
| Total pledged assets | 124 | 350 |
NOTE 12 Contingent liabilities
| MSEK | Dec 31, 2019 | Dec 31, 2018 |
|---|---|---|
| Guarantees | – | 1 |
| Guarantees related to discontinued operations | 16 | 15 |
| Total contingent liabilities | 16 | 16 |
For critical estimates and judgments, provisions and contingent liabilities, refer to note 4 and note 37 in the Annual Report 2018 as well as to the section Other significant events in this report.
Parent Company
STATEMENT OF INCOME
| MSEK | Jan–Dec 2019 | Jan–Dec 2018 |
|---|---|---|
| License fees and other income | 1 449 | 1 196 |
| Gross income | 1 449 | 1 196 |
| Administrative expenses | –1 000 | –778 |
| Operating income | 449 | 418 |
| Financial income and expenses | 2 209 | 2 269 |
| Income after financial items | 2 658 | 2 687 |
| Appropriations | –105 | –129 |
| Income before taxes | 2 553 | 2 558 |
| Taxes | –189 | –289 |
| Net income for the period | 2 364 | 2 269 |
BALANCE SHEET
| MSEK | Dec 31, 2019 | Dec 31, 2018 |
|---|---|---|
| ASSETS | ||
| Non-current assets | ||
| Shares in subsidiaries | 43 911 | 41 332 |
| Shares in associated companies | 112 | 112 |
| Other non-interest-bearing non-current assets | 759 | 520 |
| Interest-bearing financial non-current assets | 1 375 | 1 542 |
| Total non-current assets | 46 157 | 43 506 |
| Current assets | ||
| Non-interest-bearing current assets | 654 | 422 |
| Other interest-bearing current assets | 3 694 | 5 581 |
| Liquid funds | 1 596 | 1 326 |
| Total current assets | 5 944 | 7 329 |
| TOTAL ASSETS | 52 101 | 50 835 |
| SHAREHOLDERS' EQUITY AND LIABILITIES | ||
| Shareholders' equity | ||
| Restricted equity | 7 737 | 7 797 |
| Non-restricted equity | 21 539 | 20 702 |
| Total shareholders' equity | 29 276 | 28 499 |
| Untaxed reserves | 687 | 455 |
| Long-term liabilities | ||
| Non-interest-bearing long-term liabilities/provisions | 296 | 251 |
| Interest-bearing long-term liabilities | 17 189 | 15 818 |
| Total long-term liabilities | 17 485 | 16 069 |
| Current liabilities | ||
| Non-interest-bearing current liabilities | 1 161 | 744 |
| Interest-bearing current liabilities | 3 492 | 5 068 |
| Total current liabilities | 4 653 | 5 812 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 52 101 | 50 835 |
Financial information
PRESENTATION OF THE FULL YEAR REPORT
Analysts and media are invited to participate in a telephone conference on February 6, 2020 at 2:30 p.m. (CET) where President and CEO Magnus Ahlqvist and CFO Bart Adam will present the report and answer questions. The telephone conference will also be audio cast live via Securitas website. To participate in the telephone conference, please dial in five minutes prior to the start of the conference call:
| US: | +1 631 913 1422 |
|---|---|
| Sweden: | +46 8566 426 51 |
| UK: | +44 333 3000 804 |
Please use the following pin code for the telephone conference: 621 490 78#
To follow the audio cast of the telephone conference via the web, please follow the link
www.securitas.com/investors/webcasts.
A recorded version of the audio cast will be available at www.securitas.com/investors/webcasts after the telephone conference.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Micaela Sjökvist, Head of Investor Relations. + 46 761167443
FINANCIAL INFORMATION CALENDAR
May 7, 2020, app. 1.00 p.m. (CET) Interim Report January–March 2020 May 7, 2020, 4.00 p.m. (CET) Annual General Meeting 2020 July 29, 2020, app. 1.00 p.m. (CET) Interim Report January–June 2020 November 3, 2020, app. 1.00 p.m. (CET) Interim Report January–September 2020
For further information regarding Securitas IR activities, refer to www.securitas.com/investors/financial-calendar
ABOUT SECURITAS
Securitas has a leading position in the security services industry with a strong local and global market presence. We currently operate in 58 countries and employ 370 000 people. Our operations have been organized in a decentralized structure and include three business segments: Security Services North America, Security Services Europe and Security Services Ibero-America. We also have operations in Africa, the Middle East and Asia, which form the AMEA division. Securitas serves a wide range of customers of all sizes in a variety of industries and customer segments. Security solutions based on customer-specific needs are built through different combinations of on-site, mobile and remote guarding, electronic security, fire and safety, and corporate risk management. Securitas can respond to the unique and specific security challenges facing its customers, and tailor its offering
according to their specific industry demands. Securitas is listed in the Large Cap segment at Nasdaq Stockholm.
Group strategy
Our strategy is to offer protective services that integrate all our areas of competence. Together with our customers, we develop optimal and cost-efficient solutions that are suited for the customers' needs. This brings added value to the customers and results in stronger, more long-term customer relationships and improved profitability.
Group financial targets
Securitas focuses on two financial targets. The first target relates to the statement of income: average growth of earnings per share of 10 percent annually. The second target relates to the balance sheet: free cash flow in relation to net debt of at least 0.20.
This is information that Securitas AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 1:00 p.m. (CET) on Thursday, February 6, 2020.
Securitas AB (publ.)
P.O. Box 12307, SE-102 28 Stockholm, Sweden Visiting address: Lindhagensplan 70 Telephone: +46 10 470 30 00. Fax: +46 10 470 31 22 Corporate registration number: 556302–7241 www.securitas.com