Interim report Jan-Sept 2021

Interim Report January-September 2021

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Securitas ABInterim Report January-September 2021

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27 338

Total sales, MSEK

5.9%

Operating margin

2.59

Earnings per share, SEK

July-September

2021

• Total sales MSEK 27 338 (26 501)
• Organic sales growth 4 percent (0)
• Operating income before amortization MSEK 1 605 (1 327)
• Operating margin 5.9 percent (5.0)
• Items affecting comparability (IAC) MSEK -120(-112), relating to the previously announced transformation programs, the cost-savings program in the Group and a one-off payment from AFA Insurance of MSEK 114
• Earnings per share SEK 2.59 (2.08)
• Earnings per share, before IAC, SEK 2.82 (2.31)
• Cash flow from operating activities 75 percent (199)

JANUARY-SEPTEMBER 2021

• Total sales MSEK 79 651 (81 477)
• Organic sales growth 4 percent (0)
• Operating income before amortiza­­ tion MSEK 4 332 (3 488)
• Operating margin 5.4 percent (4.3)
• Items affecting comparability (IAC) MSEK -515(-218), relating to the previously announced transformation programs, the cost-savings program in the Group and a one-off payment from AFA Insurance of MSEK 114

• Earnings per share SEK 6.54 (5.18)
• Earnings per share, before IAC, SEK 7.57 (5.63)
• Net debt/EBITDA 2.1 (1.9)
• Cash flow from operating activities 79 percent (163)

CONTENTS
Comments from		Other significant events	14
the President and CEO	3	Risks and uncertainties	14
January-September summary	4	Parent Company operations	15
Group development	5	Annual General Meeting 2022	16
Development in the Group's		Consolidated financial statements	17
business segments	7	Segment overview	21
Cash flow	11	Notes	23
Capital employed and financing	12	Parent Company	30
Acquisitions and divestitures	13	Financial information	31

Securitas ABInterim Report January-September 2021

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Comments from

the President and CEO

"Full focus on ­margin enhancement as the impact from covid reduces"

WE ARE CONTINUING TO EXECUTE ON OUR STRATEGY, AND HAVE DELIVERED SEVERAL QUARTERS WITH STRONG PERFORMANCE

• We have sharpened the business over the last year through focus on profitability and cost management and execution of the transformation programs
• We are managing the remaining
  effects­ of covid with strong perform­ ance across all business segments despite decreasing corona-related extra sales
• We are seeing positive develop- ments in our electronic security and
  solutions­ ­business and accelerating growth is a priority going forward

PROFITABLE GROWTH IN FOCUS The Group's organic sales growth in the third quarter was 4 percent (0), with all business segments ­contributing

to the improvement. The gradual

­business recovery from the corona pandemic continued in the third quarter, with commercial activity and sales ­momentum picking up in all of our business segments, including airportsecurity.

Sales of security solutions and electronic security had a real sales growth of 7 percent (5) in the third quarter. We completed two strategic acquisitions­ within electronic security in the quarter, Protection One in Germany and Tepe Güvenlik in Turkey, both of which will greatly enhance our capabilities in two important ­markets. We are actively exploring further acquisition opportun­ ities within electronic security, and we keep investing in our solutions organ­ ization­ to further accelerate organic sales growth in this business line.

The operating result for the Group, ­adjusted for changes in exchange rates, increased by 24 percent in the third quarter and the operating ­margin was 5.9 percent (5.0). The improving business fundamentals and active portfolio management strengthened all the business segments, and the cost-savings program initiated during 2020 also had a positive impact.

In the quarter we had normal levels­ of provisioning compared to the ­increased levels last year.

Total price adjustments in the Group were on par with wage cost increases year to date. Labor ­shortage and wage pressure remain a challenge. Maintaining the price and wage ­balance is a key priority throughout the Group going into 2022.

Over the past year we have exited from markets with ­limited business opportunities­ and we have ­actively renegotiated or exited low margin ­contracts. We see tangible results in the airport business as well as in

several­ Latin American ­countries.

The Group delivered a good cash flow in the third quarter.

STRONGER AFTER MANAGING COVID The corona pandemic is still present in our day-to-dayoperations as we close the third quarter of 2021. While un­ certainty remains regarding the long- term consequences of the pandemic, we are coming out stronger thanks to having taken action early.

COMMITTED TO TRANSFORMATION TARGETS We are beginning to reap the benefits of the transformation program in North America which was initiated in 2019, and see positive contribution to the operating margin. The business

transformation­in Europe and Ibero- America is also progressing according­ to plan. We are confident that these programs will improve the business mix to achieve the associated margin targets.

The strength of the Securitas team and the progress of our business transform­ ation are deciding factors of our strong performance in the first nine months of 2021.

Magnus Ahlqvist

President and CEO

Securitas ABInterim Report January-September 2021

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January-September summary

FINANCIAL SUMMARY

		Q3		Change, %				9M	Change, %			Full year		Change, %
MSEK	2021	2020		Total	Real	2021	2020		Total	Real	2020		Total
Sales	27 338	26 501	3	5	79 651	81 477		-2	5	107 954		-3
Organic sales growth, %	4	0				4	0				0
Operating income before
amortization	1 605	1 327	21	24	4 332	3 488		24	34	4 892		-15
Operating margin, %	5.9	5.0				5.4	4.3				4.5
Amortization of acquisition-­
related intangible assets	-63	-66					-191	-207				-286
Acquisition-related costs	-31	-10					-73	-90				-137
Items affecting comparability *	-120	-112					-515	-218				-640
Operating income after
amortization	1 391	1 139	22	24	3 553	2 973		20	28	3 829		-26
Financial income and expenses	-96	-101					-281	-382				-500
Income before taxes	1 295	1 038	25	28	3 272	2 591		26	35	3 329		-28
Net income for the period	946	759	25	28	2 389	1 892		26	35	2 416		-28
Earnings per share, SEK	2.59	2.08	25	28	6.54	5.18		26	35	6.63		-28
EPS before items affecting
comparability, SEK	2.82	2.31	22	26	7.57	5.63		34	43	8.02		-17
Cash flow from operating
activities, %	75	199				79	163				147
Free cash flow	1 070	2 409				2 243	4 524				5 944
Net debt to EBITDA ratio	-	-				2.1	1.9				2.1

* Refer to note 7 on page 27 for further information.

ORGANIC SALES GROWTH AND OPERATING MARGIN DEVELOPMENT PER BUSINESS SEGMENT

		Organic sales growth				Operating margin
	Q3				9M			Q3		9M
%	2021	2020	2021	2020	2021	2020			2021	2020
Security Services North America	1	2	4	1	7.1	6.4			6.7	5.7
Security Services Europe	6	-1	4	-2	6.4	5.1			5.7	4.1
Security Services Ibero-America	10	0	5	3	5.9	4.5			5.5	4.3
Group	4	0	4	0	5.9	5.0			5.4	4.3

Securitas ABInterim Report January-September 2021

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Group development

QUARTERLY SALES DEVELOPMENT

MSEK				%
29 000				10
27 000				7
				27 338
26501	26477		26499	4
25 000		25814
23 000				1
21 000				-2
19 000				-5
Q3	Q4	Q1	Q2	Q3
2020	2020	2021	2021	2021

 Organic sales growth, %

QUARTERLY OPERATING INCOME DEVELOPMENT

MSEK					%
1 700					6.0
1 500				1 605	5.5
			1 471
1 300	1 404				5.0
1 327
1 100		1 256			4.5
900					4.0
700					3.5
Q3	Q4	Q1	Q2	Q3
2020	2020	2021	2021	2021
Operating margin, %

JULY-SEPTEMBER 2021

SALES DEVELOPMENT

Sales amounted to MSEK 27 338

(26 501) and organic sales growth to

4 percent (0). While the comparative was impacted by the corona pandemic, all business segments contributed

to the improvement. Extra sales was 14 percent (17) of total sales, and the decline related primarily to Security Services North America. Organic sales growth in Security Services North America was 1 percent (2), foremost due to the decline in extra sales within the business unit Guarding. Security Services Europe had 6 percent (-1), supported by most countries including the airport security business. Security Services Ibero-America showed

10 percent­ (0), primarily driven by Spain and price increases in Argentina.

Real sales growth, including acquisitions and adjusted for changes in exchange rates, was 5 percent (1).

Security solutions and electronic security­ sales amounted to MSEK 6 030 (5 763) or 22 percent (22) of total sales in the third quarter. Real sales growth, including acquisitions and adjusted for changes in exchange rates, was

7 percent (5).

OPERATING INCOME BEFORE AMORTIZATION

Operating income before amortization was MSEK 1 605 (1 327) which, adjusted for changes in exchange rates, represented a real change of 24 percent (-8). The operating income was supported by corona-related government grants and support measures of MSEK 100

1. in the third quarter, mostly within Security Services Europe. These grants and support measures relate primarily to partial unemployment support and compensate partly for increased cost levels due to idle time.

The Group's operating margin was

5.9 percent (5.0), an improvement seen in all business segments including a normalized level of provisioning com- pared to last year. The operating margin in Security Services North America was supported by the business units Electronic Security and Pinkerton,

whereas Guarding was flat. In Security Services Europe, most countries contributed to the positive development, including the airport security business and ­normalized levels of provisioning compared to the third quarter 2020. The cost-savings program initiated in 2020 supported the improvement in Security Services Europe, as well as in Security Services Ibero-America, where solid development in Spain and improvement in Latin America supported.

OPERATING INCOME AFTER

AMORTIZATION

Amortization of acquisition-­related ­intangible assets amounted to MSEK -63(-66).

Acquisition-related costs totaled MSEK -31(-10). For further information refer to note 6.

Items affecting comparability were MSEK -120(-112), whereof MSEK -234(-112) related to the cost-savings­ program and to the transformation programs in the Group. Items ­affecting

comparability­also included MSEK 114 (0), related to a lump-sum payment in the fourth quarter from the AFA insur­ ance company for the collectively ­bargained AGS group ­sickness insurancepolicy inSweden.

FINANCIAL INCOME AND EXPENSES Financial income and expenses amounted to MSEK -96 (-101).The financial income and expenseswere ­positively impacted by lower ­interest rates, and the exchange rates for interest income and expenses.

INCOME BEFORE TAXES

Income before taxes amounted to MSEK 1 295 (1 038).

TAXES, NET INCOME AND

EARNINGS PER SHARE

The Group's tax rate was 26.9 ­percent (26.9). The tax rate before tax on items affecting comparability was 27.2 percent (26.5).

Net income was MSEK 946 (759).

Earnings per share amounted to SEK 2.59 (2.08). Earnings per share before items affecting comparability amounted to SEK 2.82 (2.31).