securitas debt investor presentation 160308 · q4 2015 q4 2014 2015 2014 operating income before...

March 2016

Securitas Bond Investor Presentation

Content

• Securitas in Brief

• Business Strategy

• Business Area Overview

• Financial Highlights and Debt Overview

Securitas Bond Investor Presentation March 2016 2

Securitas in Brief

A World Leader in Security

We are the leading international security company, specializing in protective services

• Well positioned in a rapidly changing security industry

• On-site, mobile and remote guarding combined with electronic security services

• #1 market position in North America and Europe – operating in 53 countries globally

• 2015 total sales: ~ 81 BSEK (security solutions and technology: 9.3 BSEK)

• Responsible business for sustainable growth – CSR integral part of everyday work


…53 Countries and over 320,000 Employees…

Security Services

North America (2015)

Sales, MSEK 31 108

Operating margin, % 5.6

Employees 107 000

Security Services

Europe (2015)

Sales, MSEK 37 573


Employees 117 000

Security Services

Ibero-America (2015)

Sales, MSEK 10 886


Employees 58 000

New Markets

Employees 31 000

The presentation currency of the Group is Swedish Krona, SEK. FX rate EUR/SEK: 9.173 as of December 31, 2015.


Cost of manpower

Cost of technology

The speed and the

security of transfer of

data, images and

videos

Increasing

demand for

security solutions

... in a Changing World


A New Security Market is Emerging

• Traditional guarding growing in-line with GDP

• Rapid growth of technology driven security solutions in mature markets

• Customers looking for complete, cost efficient security solutions

• Increasing complexity and scale of customers’security requirements

• A heightened sense of terror alert is becoming more widespread in western economies

• Large scale migration from developing countries into Europe is creating extra demand for private security to help ensure the safety and welfare of the migrants and their families.


Remote guarding On-site guarding

A Complete Integrated Security Solutions Service

Mobile guards

Physical toolsIntelligent cameras

Securitas

Cloud

Interface

Remote video

solutions

Video management

Monitoring

On-site guards


Financial Overview

Sales & Income 2010 2011 2012 2013 2014 2015

Sales, MSEK 61 340 64 057 66 458 65 700 70 217 80 860

Organic sales growth, % 1 3 0 1 3 5

Acquired sales growth 4 8 4 1 1 1

= Real sales growth, % 5 11 4 2 4 6

Operating income 3 724 3 385 3 085 3 321 3 505 4 089

Operating margin, % 6.1 5.3 4.6 5.1 5.0 5.1

Debt ratios 2010 2011 2012 2013 2014 2015

Free Cash Flow/Net Debt 0.24x 0.08x 0.21x 0.22x 0.18x 0.22x

Interest Coverage 7.4x 6.1x 5.0x 7.9x 10.4x 13.1x

Net Debt Equity Ratio 0.92 1.12 1.15 1.02 0.92 0.79

Note : Ratio calculations are outlined in Securitas Annual Report – Note 3.

* Restated for IAS19 revised


10

Cash flow

MSEKQ4

2015Q4

2014 2015 2014

Operating income before amortization 1 133 1 017 4 089 3 505

Investments in non-current tangible and intangible assets -332 -296 -1 329 -1 113

Reversal of depreciation 280 251 1 072 967

Net investments in non-current assets -52 -45 -257 -146

Change in accounts receivable -47 313 -707 -115

Change in other operating capital employed 76 -43 274 -381

Cash flow from operating activities 1 110 1 242 3 399 2 863

Cash flow from operating activities, % 98 122 83 82

Financial income and expenses paid -42 -39 -322 -311

Current taxes paid -261 -131 -914 -697

Free cash flow 807 1 072 2 163 1 855

As % of adjusted income 117 146 78 75

Free cash flow to net debt -- -- 0.22 0.18

The net investments include capex in security solution contracts, reflecting our strategy to increase sales of security solutions and technology. These investments affect free cash flow and are depreciated over the contract period.

Securitas Bond Investor Presentation March 2016

A Strong Credit Investment Rationale

Predictable debt service underpinned by stable cash flows

• Contract business provide for good and long customer relations

• No dependency on large customers

• Services provided to most sectors in society including governments, utilities, financial,

travel, logistics and industrial

• Customer base widely dispersed geographically, diversification spreads risks

• Very high customer retention rates

• Strong brand and premium position in business

Commitment to financial policies in line with solid investment grade rating

Growth opportunities can be pursued without compromising credit profile

Strong financial flexibility based on strong drivers

• Flexible cost base

• Capex needs are low, with the exception of technological acquisitions that are in line with

the strategy

• Liquidity secured through cash flow stability and unutilised committed credit lines


Business Strategy

Taking the next step: Securitas Vision 2020

• Securitas is in the forefront of the transformation in the security industry

• We are fine-tuning our Group strategy to become even stronger in the years ahead

• Continue to pursue organic growth in solutions and technology, and acquisition opportunities

• Coordinate investments within IT and Securitas Operation Centers

• Expand mobile patrol – explore new channels

• More focus on fire and safety and corporate risk management

The leading international securitycompany specializing in Protectiveservices based on people, technologyand knowledge


Our largest acquisition in 15 years

• Acquisition of Diebold Electronic Security operation in North America, the third largest electronic security company in the US

• Large, coast-to-coast service organization, 55 000 monitored customers and 200 000 sites services

• A game changer for our offering in North America, combining guarding with mobile, monitoring and technology

• 12-month sales MSEK 2 820

• Purchase price MSEK 2 990

• Transaction costs approximately MSEK 60 in 2016

• Great strategic fit and timing and in line with our Group vision 2020 of being the leading international company, specializing in Protective services

• The acquisition was finalized on February 1, from which point it was consolidated in Securitas


Executing on our strategy

8%*

Guarding solutions

4%*

Guarding

* Operating

Margin

Security Solutions & Technology

- Sales

2014: 6,5 BSEK

2015: 9,3 BSEK

Guarding

- Sales

2014: 63,7 BSEK

2015: 71,6 BSEK

10%*

Security solutions

6%*

Specializedguarding


Business Area Overview

Security Services North America – Sales Development 2015

• Organic sales growth 4% (3)

• Organic sales growth was primarily driven by the five guarding regions

• Good organic sales growth in Pinkerton Corporate Risk Management and in Mobile patrol operation

• Our growth estimated to be slightly ahead of US market growth, supported by our strategy of increasing sales of security solutions and technology

• Net impact on organic sales growth in Security Services North America in 2015 due to ACA was approximately 1%

17Securitas Bond Investor Presentation March 2016 17

Security Services North America – Income Development 2015

• The operating margin was 5.6% (5.3)• Our strategy of increasing sales of

security solutions and technology had positive margin impact

• The margin improvement also relates to the leverage effect from good organic sales growth and positive difference between price adjustments and wage related cost increases


Security Services Europe– Sales Development 2015

• Organic sales growth 4% (2), exceptionally strong in Q4 showing 8% (3)

• In Q4, the increased security needs due to terrorism alerts and the refugee situation impacted organic sales growth in primarily France, Belgium, Germany and Sweden

• Strong organic sales growth in Turkey due to many installations and good extra sales

• Organic sales growth is supported by our strategy of security solutions and technology resulting in a growth pace ahead of the European market’s growth pace


Security Services Europe– Income Development 2015

• Operating margin 5.7% (5.9)

• The decline is mainly due to Sweden, where increased social costs had a negative impact

• The full year negative impact on operating result in 2015 was MSEK -24 and is for 2016 estimated to MSEK -50

• The operating margin in Q4 was burdened by costs relating to the exceptionally high level of extra sales


21

Security Services Ibero-America– Sales Development 2015

• Organic sales growth 13% (8), driven by Argentina, Chile, Colombia and Spain

• In Latin America the organic sales growth was 26%, despite a considerable slowdown in the macro economy

• Our growth rate in the Ibero-American security market is supported by our strategy of security solutions and technology


2222

Security Services Ibero-America– Income Development 2015

• Operating margin 4.5% (4.3) in the period, mainly driven by the improvement in Spain

• The operating margin improvement was hampered by Peru and Portugal


Financial Highlights and Debt Overview

Highlights January - December

• Organic sales growth 5% (3), Q4 exceptionally strong 7% (5)

• Operating margin 5.1% (5.0), driven by SSNA (Security Services North America)

• Price/wage balance approximately on par

• EPS real change 8%

• Free Cash Flow to net debt ratio 0.22 (0.18)

• Proposed dividend SEK 3.50 (3.00)

• Security solutions and technology sales grew 38% (28) in 2015, amounting to BSEK 9.3 (6.5)

• We believe we can continue to grow security solutions and technology sales at a high pace in the coming years

• Acquisition of Diebold Electronic Security in North America finalized on February 1


Financial Highlights

MSEKQ4

2015Q4

2014

Total

change

%

Real

change

% 2015 2014

Total

change

%

Real

change

%

Sales 21 031 18 983 11 7 80 860 70 217 15 6

Organic sales growth, % 7 5 5 3

Operating income beforeamortization 1 133 1 017 11 8 4 089 3 505 17 7

Operating margin, % 5.4 5.4 5.1 5.0

Amortization and impairment ofacquisition related assets -73 -69 -275 -251

Acquisition related costs -8 -4 -29 -17

Operating income afteramortization 1 052 944 11 8 3 785 3 237 17 7

Financial income and expenses -80 -83 -309 -328

Income before taxes 972 861 13 11 3 476 2 909 19 10

Net income for the period 671 634 6 4 2 444 2 072 18 8

Earnings per share (SEK) 1.83 1.74 5 3 6.67 5.67 18 8

The increase of the full year tax rate of 29.7% (28.8) is due to the strengthening of the USD exchange rate and its impact on the income of the Group, and further on a one-off revaluation of deferred tax assets due to new tax rates in France and Norway.


Funding Strategy and Financial Targets

Main principles for funding strategy: to support the group’s long term strategic goals

• To be well balanced and diversified in terms of external funding sources via bank, bond and commercial paper markets

• To be cost efficient

• To be well balanced in terms of maturity of financing

• To be based on long term relationships with financing counterparts

Financial targets

• Financial stability target – free cash flow

to net debt above 0.20x

• Financial performance target – an

annual average increase in Earnings

Per Share (EPS) of 10 percent

• Securitas should be able to sustain a

dividend level of approximately 50% -

60% of net income


Debt Maturity Profile and Liquidity Overview 2015

• RCF 440 MEUR and 550 MUSD matures 2021

• 1000 MEUR in Eurobonds maturing 2017, 2018 and 2021.

• Private Placements 315 MUSD equivalent maturing 2018-2021

• 5 000 MSEK Swedish Commercial Paper program – SEK 250m o/s at year end.

• No financial covenants

Policy: short term liquidity

reserve > 5 % of sales


S&P Rating

Credit Strengths and Challenges

Business Risk

• Securitas is the world's second-largest security services provider by

total revenues.

• The security services market is relatively resilient to the economic

cycle.

• Competitive and fragmented industry with low entry barriers leading to

modest EBITDA margins.

• Successful track record of integrating acquisitions.

Financial Risk

• Low capital expenditure (capex) requirements.

• "Strong" liquidity position.

• Stretched balance sheet due to debt-financed acquisitions.

• Financial Risk Profile “Significant”

Swedish

Agency Long - term Short - term Short - term Outlook

S&P BBB A2 K2 Stable


Integrity | Vigilance | Helpfulness

securitas.com


Appendix

Ten largest shareholders as of December 31, 2015

Largest Shareholders at December 31, 2015 Series A shares Series B shares % of Capital % of Votes

Gustaf Douglas via companies and family 12,642,600 27,190,000 10.9 29.6

Melker Schörling via company and family 4,500,000 15,241,800 5.4 11.6

AMF 0 11,558,413 3.2 2.2

Prudential Assurance Co Ltd 0 10,715,591 3.0 2.1

SEB Investment Management 0 9,954,421 2.7 1.9

Swedbank Robur Funds 0 9,566,714 2.6 1.8

Banque Internationale Luxembourg S.A. 0 8,001,000 2.2 1.5

Clearstream Banking S.A. 0 7,653,391 2.1 1.5

CBNY Norges Bank 0 7,090,223 1.9 1.4

Handelsbanken Funds 0 5,947,910 1.6 1.2

Total, ten largest shareholders 17,142,600 112,919,463 35.6 54.8

Total, rest of owners 0 234,996,834 64.4 45.3

Total as of December 31, 2015 17,142,600 347,916,297 100.00 100.00


Capital Employed and Financing

MSEK Dec 31, 2015 Dec 31, 2014

Operating Capital Employed 4 608 3 924

Operating Capital Employed as % of sales 6 6

Return on operating capital employed, % 96 99

Goodwill 16 428 16 228

Acquisition related intangible assets 987 1 244

Shares in associated companies 369 325

Capital employed 22 393 21 721

Return on Capital employed, % 18 16

Net Debt -9 863 -10 422

Shareholders’ equity 12 530 11 299

Net Debt equity ratio/multiple 0.79 0.92


Summary Balance Sheet

MSEK Dec 31, 2015 Dec 31, 2014

ASSETS

Total non – current assets 23 378 23 315

Total current assets 17 283 17 769

TOTAL ASSETS 40 661 41 084

SHAREHOLDERS’ EQUITY AND LIABILITIES

Total shareholders’ equity 12 530 11 299

Total long-term liabilities 15 470 15 233

Total current liabilities 12 662 14 551

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 40 661 41 084


Group Cash Position – December 2015

Policy: short term liquidity reserve > 5 % of sales

Summary MSEK

Cash on hand 1 147

Available under O/D 15

Available under 2016 RCF 8 654

Total 9 817

Less Commercial Paper - 250

Net Available Funding 9 567

Net Available Funding / annual sales (SEK 64bn) 13.62%

Net Available Funding excludes subsidiaries cash held locally (Dec. Figure) 665


Net Debt Development

35

MSEK

Net debt Jan 1, 2015 -10 422

Free cash flow 2 163

Acquisitions -147

IAC payments -27

Dividend paid -1 095

Change in net debt 894

Revaluation 1

Translation -336

Net debt Dec 31, 2015 -9 863


Integrity | Vigilance | Helpfulness

securitas.com


securitas debt investor presentation 160308 · q4 2015 q4 2014 2015 2014 operating income before...

Documents