STOCKHOLM — Swedish security firm Securitas (OTCPK: SCTBF), based here, reported first-quarter core earnings slightly below market expectations on Wednesday, while emphasizing it had balanced wage cost increases with price increases during the period.
The company reported first-quarter earnings before interest, taxes and amortization (EBITA) of 1.09 billion Swedish crowns ($123 million), up from 1.06 billion ($119 million) in the prior year quarter, and below the 1.12 billion ($126 million) forecast in a Reuters poll.
The company reported organic sales grew 6% in the quarter, in line with forecasts.
During an earnings conference call with analysts on Wednesday, Securitas President and CEO Magnus Ahlqvist said the company’s operating margin was stable at 4.7%. It was flat in North America, while Europe declined slightly and Ibero America improved.
Earnings per share, adjusted for changes in exchange rates, improved by 13%, supported by a lower tax rate reflecting the impact from the U.S. tax reform in December.
Favorable macroeconomic conditions in the company’s main markets will likely lead to higher wage inflation in 2018. During the first quarter, the company said it balanced wage cost increases with price increases. Higher wage inflation will be mitigated by offering end users security solutions using technology, according to the company.
Weak cash flow in the first quarter was attributed mainly to Europe where the timing of Easter had a negative impact. Cash flow then improved significantly during the first part of April, the company reported.
The company’s security solutions and electronic security division had organic growth of 16% in the quarter “and reassess growth of 20%,” he said. In North America, sales of security solutions and electronic security represented 16% of total sales in the quarter.
“It is a quarter with strong growth and our team in North America leading the way. We also have good recovery in Europe in the fourth quarter in terms of the growth. And we achieved organic sales growth of 6%. It’s good to see that we have solid growth rates across all the different business segments,” Ahlqvist said.
Securitas completed a number of strategic acquisitions to boost electronics security solutions business. These included Automatic Alarm in France and Alphatron in the Netherlands. In March, the company announced a deal to acquire Kratos Public Safety & Security.
“This is one of the top 10 systems integrators in the U.S., and with a Kratos acquisition we’re able to build on the strong foundation that we have put in place in electronic security after the acquisition of Diebold in 2016,” Ahlqvist said. “And then if you ask the question, ‘What will then Kratos really add?’ Well, it’s a good team, but it will also give us a footprint and proximity to the customer through the regional branch network across the United States.”
