EU CONSUMER CYCLICALS: Securitas | 1Q Results

(SECUSS; NR/BBB) (equities -6%)

Equities weak this morning, but it is only reversing recent strength - it was trading at all time highs earlier this year (market cap ~€7b, trailing P/E 16x). We have no issues with the co and as we said at the start of this year, BBB services was one of the few segments that looked interesting (particularly given no/low tariff exposure). On 5y Securitas has compressed 30bps against Compass (A2/A) and on a -17bp rally YTD (vs. swap) it has outperformed the index by 25bps. It looks fair here with Elis, Bunzl and Rentokil remaining the more interesting names (Bunzl, Rentokil will have beta to earnings).

• SEK 39.6b (€3.6b) in 1Q sales, organic +3%, EBITA margin 6.4% (+60bps)
• By segment: tech solutions +5%, security services +1%.
  • Reminder 1/3 of sales in tech solutions which is the faster growing and more profitable (x2 on margins at ~11%)
• By region: NA +3%, Europe +4%, Ibero-America (mainly Spain & Portugal) +3%
• Retention rates: 88% in NA (vs. 90% LY), 90% in Europe (91% LY) and 91% in Ibero (93% LY)
  • Reminder 40% NA, 40% Europe
• Operating cash flow at SEK +14m (vs. -360m LY), FCF at -1.05b (vs. -1.4b LY)
  it is seasonally weak in 1Q on WC swing
• Net levered 2.5x (-0.4x y/y), has already refi'd this years maturity (did €300m in Feb)
• Re. Tariffs: 'limited exposure' (as expected for a services co)

FY25 Target:

• Committed to 8% EBITA margin (+70bps y/y)