Loomis : publishes the interim report for January - September 2020 and removes the revenue target for 2021

Interim Report

January - September 2020

Loomis Interim Report January - September 2020

Third quarter 2020

Nine months 2020

• Revenue SEK 4,709 million (5,492). Real growth -7 percent (6) of which organic growth -9 percent
  (3).
• Operating income (EBITA)1) SEK 517 million (737) and operating margin 11.0 percent (13.4). Exclud­ ing Loomis Pay, the operating margin amounted to 11.5 percent (13.4).
• Income before taxes SEK 361 million (660) and income after taxes SEK 246 million (492).
• Earnings per share before and after dilution was SEK 3.27 (6.54).
• Cash flow from operating activities2) SEK 587 mil­ lion (712) equivalent to 117 percent (99) of operat­ ing income (EBITA)2).
• The ongoing coronavirus pandemic had an overall negative impact on revenue and operating income during the quarter. The significant differences com­ pared to the third quarter of 2019 are related to the pandemic.
• Due to the coronavirus pandemic, several restruc­ turing programs have been initiated in Europe to improve efficiency and increase the operating mar­ gin.

• Revenue SEK 14,277 million (15,702). Real growth -8 percent (5) of which organic growth -10 percent
  (3).
• Operating income (EBITA)1) SEK 1,308 million (1,908) and operating margin 9.2 percent (12.2). Excluding Loomis Pay, the operating margin amounted to 9.4 percent (12.2).
• Income before taxes SEK 893 million (1,658) and income after taxes SEK 613 million (1,239).
• Earnings per share before and after dilution was SEK 8.15 (16.47).
• Cash flow from operating activities2) SEK 1,856 million (1,732) equivalent to 147 percent (93) of operating income (EBITA)2).
• Overall, the ongoing coronavirus pandemic had a limited negative impact on revenue and operating income during the first quarter. In the second and third quarters both revenue and operating income were affected by the pandemic.
• Due to the ongoing corona pandemic, Loomis believes the previously communicated revenue
  target,­ of SEK 24 billion for 2021, will likely not be achieved. As the market conditions for 2021 are still uncertain, due to the pandemic, Loomis has decided to remove the revenue target.
• Proposed dividend SEK 5.50 per share (10.00) for 2019.

KEY RATIOS
	2020	2019		2020	2019
				Nine	Nine
SEK m	Quarter 3	Quarter 3	Change (%)	months	months	Change (%)
Revenue	4,709	5,492	-14	14,277	15,702	-9
Of which:
Organic growth	-478	136	-9	-1,494	367	-10
Acquisitions and divestments	68	169	1	244	365	2
Exchange rate effects	-373	269	-7	-175	758	-1
Total growth	-783	575	-14	-1,426	1,490	-9
Operating income (EBITA)1)	517	737	-30	1,308	1,908	-31
Operating margin (EBITA), %1)	11.0	13.4		9.2	12.2
Operating income (EBIT)	414	700	-41	1,054	1,813	-42
Earnings before tax	361	660	-45	893	1,658	-46
Profit for the period	246	492	-50	613	1,239	-50
SEK earnings per share, SEK1)	3.27	6.54	-50	8.15	16.47	-50
Tax rate, %	32	25		31	25
Cash flow from operating activities2)	587	712	-18	1,856	1,732	7
Cash flow from operating activities as %
of operating income (EBITA)2)	117	99		147	93

1. Earnings Before Interest, Taxes and Amortization of acquisition-related intangible fxed assets, acquisition-related costs and revenue, and items affecting comparability. For informa- tion on the effects of IFRS 16, see Note 9.
2. Cash flow from operating activities excluding the effects of IFRS 16. The adoption of IFRS 16 has therefore had no net impact on cash flow from operating activities according to
   Loomis's­ defnition. See also under Defnitions on page 25-26.

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Loomis Interim Report January - September 2020

Comments by the President and CEO

Loomis and the pandemic

Similar to the second quarter this year, the third quarter was characterized by the impact of the ongoing coronavirus pande­ mic. The challenges for society and Loomis are extensive, but the negative impact that the pandemic has had on our business is gradually diminishing. We are making progress and have quickly managed to adapt to the prevailing conditions. All of our branches have remained in operation since the pandemic broke out, enabling us to maintain a high level of access to our ser­ vices and personnel. The health and safety of our employees is paramount and is also key to ensuring we can maintain the quality of service our customers expect from us. We are carefully following advice from local public health authorities as well as international medical organizations. The loyalty of our employees is impressive and we are proud of the high quality of service we are delivering in these difficult times.

I have mentioned this before, but I want to emphasize once again that cash is not a source of transmission of infection. Sev­ eral central banks have engaged medical experts who have disputed claims that the virus can be transferred via cash. The WHO has also clearly stated that it has never communicated that cash presents an infection risk. On our website, www. loomis.com, we provide information and guidance about cash and transmission of infection. If you have any questions or want to learn more about this, I recom­ mend that you visit our website.

Recent developments

In the third quarter the Group's real growth amounted to -7 percent (6), of which organic growth was -9 percent (3). The Group's operating margin (EBITA %) in the third quarter amounted to 11.0 per­ cent (13.4). The lower operating margin is mainly due to negative impacts of the ongoing pandemic. Excluding Loomis Pay, the operating margin amounted to 11.5 percent (13.4).

The pandemic has a greater negative impact on our European operations than on our operations in the USA. This is main­ ly due to the structure of our customer portfolios. In the USA medium and large retail customers and financial institutions account for a larger share of our revenue than in Europe. In many countries smaller retailers and restaurants have been affect­ ed the most by the decline in economic activity. These customer groups make up a larger percentage of Loomis's revenue in Europe than in the USA. Also, in the USA a larger percentage of our revenue is based on fixed monthly fees. Fixed revenue from, for example, SafePoint and financial insti­ tutions is significantly higher in the USA than in Europe.

Although we have lost revenue in the USA due to the pandemic, we are continuing to increase our operating margin within our US operations. It is impressive that in the third quarter we achieved one of the high­ est operating margin ever for a single quarter. Similar to previous quarters, a more profitable customer portfolio, higher revenue from SafePoint and efficiency improvement programs at our branches are the main reasons for our improved profitability. The efficiency improvement measures have, among other things, reduced the number of overtime hours worked.

In Segment Europe the negative effects of the pandemic were lower in the third quarter than in the second quarter this year. Volumes in our markets have gradu­ ally recovered and the actions we have tak­ en on the cost side have gradually yielded results. We have launched comprehensive

Revenue, SEK billion

24
18
12
6
0
2014	2015	2016	2017	2018	2019	R12*
*Refers to the period October 1, 2019 -September 30, 2020.

Operating margin (EBITA), %

	2018		2019			2020
14
12
10
8
6
4
2
0	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3

Operating margin (EBITA) per quarter Operating margin (EBITA) rolling 12 months

Annual dividend, %

60
40
20
0
2014	2015	2016	2017	2018	2019*

• Proposed dividend for an extraordinary shareholders' mee- ting 2020.

3

Loomis Interim Report January - September 2020

programs in several countries, with the most significant restructuring taking place within our UK operations. The total cost of all of these programs will be approximate­ ly SEK 160 million, of which SEK 49 mil­ lion was expensed in the third quarter this year. We expect to expense the majority of the remaining costs in the fourth quarter and to conclude the ongoing programs by the second quarter 2021. The measures implemented will help improve efficiency and raise operating margins. Integration of acquired operations in Sweden and France is progressing according to plan. We expect to see positive effects from this in 2021 in both countries.

The launch of Loomis Pay

In September we announced the launch of our Loomis Pay service in autumn this year. Loomis Pay represents a major step towards achieving our ambition of

advancing up the value chain. Loomis Pay is a complete payment platform that is particularly well-suited for retailers and restaurants, and is initially aimed at small and medium-sized businesses. The service handles all types of payments - cash, card and other digital options, regardless of whether payment is made in a physical store or online. The rollout of Loomis Pay has started in Denmark and it will be offered in the Swedish market at the begin­ ning of 2021. Thereafter more and more markets will be able to enjoy the benefits of Loomis Pay. The target in the first stage, for the service, is to reach net sales in excess of SEK 3 billion within five years, with an attractive operating margin. We expect Loomis Pay to generate positive operating income (EBITA) in 2023.

We will benefit greatly from the compre­ hensive network we already have in place

when it is time to reach out to our existing and future customers to launch Loomis Pay. If you are interested in learning more about Loomis Pay, please see the press release issued on September 9 and the ­presentation available on our website, www.loomis.com.

Our loyal employees

Despite the impact of the pandemic on our society and our business, Loomis is advancing in the right direction. The local initiatives that are under way and the Group-wide projects taking place will help us grow and improve our profitability. In conclusion I would like to thank all Loomis employees for the loyalty and strong com­ mitment you are showing in the face of

significant­ challenges.

Patrik Andersson

President and CEO

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