securitas - the leader in protective services...bbb, stable outlook securitas bond investor...

Securitas Bond Investor Presentation, February 2017

Securitas - The Leader in Protective Services

A World Leader in Protective Services

North-America

#1 position

18% market share

Europe

#1 position

19% market share

Latin-America

#2 position

14% market shareAMEA

growingpresence

17 countries

employees330,000

53 countries

2016 growth electronic security & solutions56%

The leading international security company, specializing in protective services

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

• Well positioned in a rapidly changing security industry

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

2016 sales88 BSEK

Securitas Bond Investor Presentation, February 2017 2

Market Drivers

UrbanizationInfrastructure development

Global tension DigitalizationSectors sensitive to disturbances


”Detect the Crime Before it Happens”


We Improve Customer Value

Traditional guarding

Future security industry

• Electronic security

• Mobile and remote guarding

• Professional risk analysis ValueValue

• Protective services

• Fire and safety

• Corporate risk management

• Big data

• Predictive security


Clear Goals to Drive Performance

2016 2015 2014

EPS real change 9% 8% 8%

Free cash flow to net debt

0.13 0.22 0.18

Dividend in SEKAs % of net income

*3.7552%

3.552%

3.053%

Real growth electronic security and solutions

56% 38% 28%

1. Financial performance targetAnnual average increase in EPS of 10%

Incomestatement

Balancesheet

2. Financial stability targetFree cash flow to net debt above 0.20

Return toshareholders

3. Dividend policy 50 to 60% of net income

The future

4. Strategic developmentGrow electronic security and solutions at a high pace


*proposed dividend

Operating income, BSEK

from 2.9 to 4.6

Sales, BSEK

from 51.5 to 88.2Avg. acquired growth 3%Avg. organic growth 3%

Growth of top-line

Income Statement – Main Drivers

Strong focus on price / wage throughout the company

Growth of electronic security and solutions changing revenue mix

Opportunity to leverage the cost structure

Investing into the execution of the strategy

Competitive environment

Supported by a strong performance culture and incentive structure

+

+

+

+

/

/

/

+

+

+

–

–

Growth of operating income

+

–

Performance during theperiod 2007-2016

A growing need for security

Supported by strategy of electronic security and solutions

Supported by acquisitions

Growing role of private security

Economical climate is OK

Well diversified business (geography and industries)

Good resilience for downturns

Competitive environment


From 2.7 to 2.3 x EBITDA

Average of 2,2 x EBITDA

Average of 82%to adjusted income

Average of 88% to operating

income before amortization

Strong operating cash flows

Performance During the Period 2007-2016

Strong focus on DSO and AR Overdue

Organic growth

Investments into customer site equipment

Strong free cash flow Good financing in place

Stable tax rates

Controlled Net Debt Clear dividend policy

Selective acquisitions

+

–

–

+

+

+

/


Executing on our Strategy

8%*

Guarding

solutions4%*

Guarding

* Operating margin

Security Solutions and Electronic Security – Sales

2014 : 6,5 BSEK (9% of total, +28%)

2015 : 9.3 BSEK (11,5% of total, +38%)

2016 : 14.1 BSEK (16% of total, +56%)

Guarding – Sales

2014: 63,7 BSEK2015: 71.6 BSEK2016: 74.1 BSEK

10%*

Security

solutions6%*

Specialized

guarding


Security Solutions Reduces the # of Competitors

Security Solutions = adding skills and capabilities

One amongst

many

Fewer Few

Traditional guarding

+ Electronic security+ Mobile

guarding

+ Remoteguarding

+ Professional risk analysis

+ Investment into customer site+ Protective

services

� Strong balance sheet required


Security Solutions Drives the ROCE

Example of a contract conversion: from manned guarding to security solutions KEUR Guarding Solution

Annual sales 400 386

Direct & indirect cost -380 -349

Operating income 20 37

Operating margin 5% 10%

Capital employed 116 176

as of % sales 29% 44%

Return on capital

employed

17% 21%

Reduce on-site guarding

Introduce remote monitoring and technology

Invest 60 KEUR capex = 15% of the first year’s sales

Sign 5 year contract

Depreciated over contract duration = 12 KEUR annual depreciation


Selective Acquisitions

Clear Acquisition Strategy

Strategy Pre-Acquisition Acquisition Post-closingPost-acquisition

follow-up


Highlights January – December 2016

� Organic sales growth 7% (5) in the year and 5% (7) in Q4

� Operating margin 5.2% (5.1)

� EPS real change 9%

� Proposed dividend SEK 3.75 (3.50), 52% of net income

� 56% (38) growth of security solutions and electronic security

sales, now at BSEK 14.1 of total sales

� We believe we can continue to grow security solutions and

electronic security sales at a high pace in the coming years

Financial Highlights

MSEK

Q4

2016

Q4

2015Total

change %

Real

change % 2016 2015Total

change %

Real

change %

Sales 23 715 21 031 13 10 88 162 80 860 9 11

Organic sales growth, % 5 7 7 5

Operating income before amortization 1 241 1 133 10 6 4 554 4 089 11 13

Operating margin, % 5.2 5.4 5.2 5.1

Amortization and impairment of acquisition-

related assets -87 -73 -288 -275

Acquisition-related costs -47 -8 -113 -29

Operating income after amortization 1 107 1 052 5 1 4 153 3 785 10 11

Financial income and expenses -105 -80 -389 -309

Income before taxes 1 002 972 3 -1 3 764 3 476 8 9

Net income for the period 704 671 5 0 2 646 2 444 8 9

Earnings per share (SEK) 1.92 1.83 5 0 7.24 6.67 9 9

15

Cash flow

MSEK Q4 2016 Q4 2015 2016 2015

Operating income before amortization 1 241 1 133 4 554 4 089

Investments in non-current tangible

and intangible assets -409 -332 -1 658 -1 329

Reversal of depreciation 337 280 1 229 1 072

Net investments in non-current assets -72 -52 -429 -256

Change in accounts receivable -297 -47 -1 039 -707

Change in other operating capital employed 285 76 -47 274

Cash flow from operating activities 1 157 1 110 3 039 3 399

Cash flow from operating activities, % 93 98 67 83

Financial income and expenses paid -33 -42 -301 -322

Current taxes paid -260 -261 -1 017 -914

Free cash flow 864 807 1 721 2 163

As % of adjusted income 94 117 52 78

Free cash flow to net debt -- -- 0.13 0.22

The net investments

include capex in security

solution contracts and for

premises in the US

Change in accounts

receivable affected by

increased DSO’s and from

strong organic sales growth

Change in other operating

capital employed affected

by a one time extra pension

payment

Free cash flow affected by

higher taxes paid, due to

higher taxable income

Measures are being taken to improve the cash flow in 2017 Securitas Bond Investor Presentation, February 2017 15

Net Debt Development

16

MSEK

Net debt Jan 1, 2016 -9 863

Free cash flow 1 721

Acquisitions -3 566

IAC payments -17

Dividend paid -1 278

Change in net debt -3 140

Revaluation 23

Translation -451

Net debt Dec 31, 2016 -13 431

Capital Structure 31 December 2016


8,273 14,787 4,879 27,939

- 3,565 - 7,885 - 1,981 - 13,431

4,706 6,902 2,879 14,487

0.76 1.14 0.69 0.93

Summary of Capital Structure

MSEK EURO USD OTHER

Debt/Equity Ratio

Total Capital Employed

Net Debt

Equity

TOTAL

Strong Financing in Place

� Ample headroom in place � No financial covenants� BBB, stable outlook

Securitas Bond Investor Presentation, February 2017

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

18

Strong Financing in Place

• Recent funding activity.

• RCF USD 1.1 bn extended to 2022 with existing 12 banks:

• BBVA

• Citibank

• Commerzbank

• Danske

• DNB

• ING

• KBC

• Nordea

• RBS

• SEB

• Societe Generale

• Unicredit

• MEUR 350 Bond issued in March 2016, maturity March 2022. Coupon is 1.25%. EUR 287 m swapped into fixed USD for 6 years.


S&P RatingCredit Strengths and Challenges

Business Risk

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

• Wide geographic coverage and well diversified customer base

• Competitive and fragmented industry with low entry barriers leading to modest EBITDA margins.

Financial Risk

• Low capital expenditure (capex) requirements.

• “Exceptional" 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


S&P Forecast 2016* 2016

Adjusted FFO/ Debt 27%

Adjusted Debt / EBITDA 2.8x

*published May 2016• Securitas is committed to solid Investment Grade rating

Interim Report January-March 2010

Integrity | Vigilance | Helpfulness

securitas.com


securitas - the leader in protective services...bbb, stable outlook securitas bond investor...

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