Securitas Annual Report 2007

Loomis provides a complete range of integrated cash handling solutions and has almost 21,000 employees in eleven countries in the USA and Europe. Services are primarily targeted at central banks, commercial banks, retail chains and shops. Loomis provides customers with a secure and efficient service for cash handling. Loomis’ services are divided into three areas: cash transport, cash handling and technical services. Loomis is a separate legal entity within the Securitas Group.
Financial information
The organic sales growth was 1 percent (5). In the United Kingdom sales were below the previous year due to a loss of volume within the Loomis Cash Management (LCM) operation, which was sold at the end of the year. In Sweden, volume was reduced due to the loss of the Swedbank contract in early 2007. The growth rate remains moderate in the USA. The decrease in organic sales growth in Denmark and France also explains the division’s lower growth. Spain and Norway showed good organic sales growth.
The operating income was MSEK 293 (838). Operational losses, costs for legal investigations and audits of the LCM operation explain MSEK 357 of the decline compared to the previous year. Higher cost of risk in the USA of MSEK 25 also affected the result. The year was negatively affected by an impairment loss of MSEK 29 relating to premises in Austria. Provisions for onerous customer contracts of MSEK 13 have negatively affected Loomis Denmark. Provisions relating to the organizational restructuring of Loomis affected the 2007 results in the amount of MSEK 41. Costs relating to wage harmonization in France have also impacted the year.
The weaker US dollar has negatively affected the US operation’s operating income compared to 2006.
The operating margin was 2.6 percent (7.3).
Excluding LCM’s operational losses, legal investigations and audits, Loomis’ operating margin was 5.7 percent (7.5) and the operating income was MSEK 601 (789).
Service offering
Loomis manages the flow of cash in society by offering retailers and banks products and services to handle all of the logistics surrounding cash handling. This means secure solutions for the transportation, storage, processing, replenishment and recycling of cash, including the distribution of cash vault solutions and so-called night boxes to the retail industry. These services are divided into three areas: cash transport, cash handling and technical services.
By managing all of the logistics of cash handling, Loomis is able to offer customers economies of scale and provide them with ready access to cash.
Loomis offers national banks and governments all they need to run their commercial activities efficiently and with a minimum of cash in circulation. This is made possible partly by the size and diversification that the aggregate customer base represents, and partly by the wide-ranging, highly integrated offering.
Market
The market for outsourced services is estimated at BSEK 23 in the European countries where Loomis is present, and at BSEK 18 in the USA. Loomis has a strong market presence in Western Europe and in the USA with a total of around 440 branch offices. Its market share in Western Europe is estimated at 21 percent and in the USA at over 20 percent.
Today Loomis has operations in 11 countries. In three of these – France, Sweden and Denmark – Loomis is the market leader. In Spain, Austria, Finland, United Kingdom, Norway and USA Loomis is number two and in Portugal and Switzerland the company is number three.
Loomis’ primary customer segments are banks and the retail sector. For Loomis as a whole the banking sector accounts for more than 50 percent of sales. However, the proportional share varies substantially from country to country depending on to what extent the banks have traditionally outsourced their cash handling operations.
Loomis’ main competitors within cash transport and cash handling are G4S in Europe and Brinks in the USA.
Strategy and objectives
Loomis prioritizes profitability – even at the expense of growth – in order to restore acceptable profit margins in markets where profitability is unsatisfactory. An important objective is to offer integrated service solutions where cash transport and cash handling as well as technical solutions are combined into tailor-made solutions for the customer.
Our employees
Loomis’ business is very much local in nature and therefore demands hands-on, goal-oriented management. Risk management permeates everything Loomis does and the employees strive after operational superiority by developing processes for best practice where they learn from one another.
Alf Göransson, President and CEO, Securitas AB, Acting Divisional President for Loomis during parts of 2007
Lars Blecko, Divisional President, Loomis as of February 1, 2008
Key figures and events in 2007
  • Total sales amounted to MSEK 11,397 (11,474). Organic sales growth amounted to 1 percent (5).
  • Operating income amounted to MSEK 293 (838). The operating margin was 2.6 percent (7.3).
  • Three acquisitions were made during the year: the G4S cash handling services in France, the British cash handling services of Brinks and of Guardian Armored Securities Inc. based in Michigan.
  • On November 24, 2007, Loomis’ cash handling operation in the United Kingdom, Loomis Cash Management Ltd (LCM), sold its fixed assets and operations to Vaultex UK Ltd., which is jointly owned by HSBC Bank plc and Barclays Bank PLC.
  • Lars Blecko was appointed the new Divisional President of Loomis AB. He took up his position on February 1, 2008.
  • On January 25, 2008, the County Administrative Court in Stockholm decided to grant Loomis’ appeal and thereby reversed the ruling made by the Stockholm County Administrative Board to withdraw Loomis’ permit to operate cash handling services in Sweden.
  • Securitas plans to list Loomis on the OMX Nordic Exchange Stockholm in late 2008.
Financial key ratios    
MSEK 2007 2006
Total sales 11,397 11,474
Organic sales growth, % 1 5
     
Operating income before amortization 293 838
Operating margin, % 2.6 7.3
Real change, % –63
     
Operating income before amortization, excl. LCM 601 789
Operating margin, excl. LCM, % 5.7 7.5
     
Cash flow from operating activities 460 715
Cash flow from operating activities, % 157 85
     
Operating capital employed 1,109 1,158
Operating capital employed as % of sales 9 10
     
Total capital employed 3,717 3,674
Return on capital employed, % Neg Neg
Loomis provides a complete range of integrated cash handling solutions and has almost 21,000 employees in eleven countries in the USA and Europe. Services are primarily targeted at central banks, commercial banks, retail chains and shops. Loomis provides customers with a secure and efficient service for cash handling. Loomis’ services are divided into three areas: cash transport, cash handling and technical services. Loomis is a separate legal entity within the Securitas Group.
 
Financial information
The organic sales growth was 1 percent (5). In the United Kingdom sales were below the previous year due to a loss of volume within the Loomis Cash Management (LCM) operation, which was sold at the end of the year. In Sweden, volume was reduced due to the loss of the Swedbank contract in early 2007. The growth rate remains moderate in the USA. The decrease in organic sales growth in Denmark and France also explains the division’s lower growth. Spain and Norway showed good organic sales growth.
 
The operating income was MSEK 293 (838). Operational losses, costs for legal investigations and audits of the LCM operation explain MSEK 357 of the decline compared to the previous year. Higher cost of risk in the USA of MSEK 25 also affected the result. The year was negatively affected by an impairment loss of MSEK 29 relating to premises in Austria. Provisions for onerous customer contracts of MSEK 13 have negatively affected Loomis Denmark. Provisions relating to the organizational restructuring of Loomis affected the 2007 results in the amount of MSEK 41. Costs relating to wage harmonization in France have also impacted the year.
 
The weaker US dollar has negatively affected the US operation’s operating income compared to 2006.
 
The operating margin was 2.6 percent (7.3).
 
Excluding LCM’s operational losses, legal investigations and audits, Loomis’ operating margin was 5.7 percent (7.5) and the operating income was MSEK 601 (789).
 
Service offering
Loomis manages the flow of cash in society by offering retailers and banks products and services to handle all of the logistics surrounding cash handling. This means secure solutions for the transportation, storage, processing, replenishment and recycling of cash, including the distribution of cash vault solutions and so-called night boxes to the retail industry. These services are divided into three areas: cash transport, cash handling and technical services.
 
By managing all of the logistics of cash handling, Loomis is able to offer customers economies of scale and provide them with ready access to cash.
 
Loomis offers national banks and governments all they need to run their commercial activities efficiently and with a minimum of cash in circulation. This is made possible partly by the size and diversification that the aggregate customer base represents, and partly by the wide-ranging, highly integrated offering.

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Market
The market for outsourced services is estimated at BSEK 23 in the European countries where Loomis is present, and at BSEK 18 in the USA. Loomis has a strong market presence in Western Europe and in the USA with a total of around 440 branch offices. Its market share in Western Europe is estimated at 21 percent and in the USA at over 20 percent.
 
Today Loomis has operations in 11 countries. In three of these – France, Sweden and Denmark – Loomis is the market leader. In Spain, Austria, Finland, United Kingdom, Norway and USA Loomis is number two and in Portugal and Switzerland the company is number three.
 
Loomis’ primary customer segments are banks and the retail sector. For Loomis as a whole the banking sector accounts for more than 50 percent of sales. However, the proportional share varies substantially from country to country depending on to what extent the banks have traditionally outsourced their cash handling operations.
 
Loomis’ main competitors within cash transport and cash handling are G4S in Europe and Brinks in the USA.
 
Strategy and objectives
Loomis prioritizes profitability – even at the expense of growth – in order to restore acceptable profit margins in markets where profitability is unsatisfactory. An important objective is to offer integrated service solutions where cash transport and cash handling as well as technical solutions are combined into tailor-made solutions for the customer.
 
Our employees
Loomis’ business is very much local in nature and therefore demands hands-on, goal-oriented management. Risk management permeates everything Loomis does and the employees strive after operational superiority by developing processes for best practice where they learn from one another.
 
Key figures and events in 2007
  • Total sales amounted to MSEK 11,397 (11,474). Organic sales growth amounted to 1 percent (5).
  • Operating income amounted to MSEK 293 (838). The operating margin was 2.6 percent (7.3).
  • Three acquisitions were made during the year: the G4S cash handling services in France, the British cash handling services of Brinks and of Guardian Armored Securities Inc. based in Michigan.
  • On November 24, 2007, Loomis’ cash handling operation in the United Kingdom, Loomis Cash Management Ltd (LCM), sold its fixed assets and operations to Vaultex UK Ltd., which is jointly owned by HSBC Bank plc and Barclays Bank PLC.
  • Lars Blecko was appointed the new Divisional President of Loomis AB. He took up his position on February 1, 2008.
  • On January 25, 2008, the County Administrative Court in Stockholm decided to grant Loomis’ appeal and thereby reversed the ruling made by the Stockholm County Administrative Board to withdraw Loomis’ permit to operate cash handling services in Sweden.
  • Securitas plans to list Loomis on the OMX Nordic Exchange Stockholm in late 2008.
 

Financial key ratios    
MSEK 2007 2006
Total sales 11,397 11,474
Organic sales growth, % 1 5
     
Operating income before amortization 293 838
Operating margin, % 2.6 7.3
Real change, % –63
     
Operating income before amortization, excl. LCM 601 789
Operating margin, excl. LCM, % 5.7 7.5
     
Cash flow from operating activities 460 715
Cash flow from operating activities, % 157 85
     
Operating capital employed 1,109 1,158
Operating capital employed as % of sales 9 10
     
Total capital employed 3,717 3,674
Return on capital employed, % Neg Neg