STOCKHOLM (Reuters) - Securitas (SECUb.ST), the world’s biggest security group, reported on Thursday a sharp fall in first-quarter profit as demand for luggage screening at airports and other services slumped due to the coronavirus.
The Swedish group said its operating margin narrowed to 3.8% from 5.3% in the previous quarter, but investors took some comfort from the fact that group organic sales rose 2% from a year earlier, an indication that demand was solid before the impact of the coronavirus hit in March.
Securitas shares rose 3.5% by 1146 GMT, but have fallen 24% since the start of this year.
The provider of guard services, alarm surveillance and airport security said there was significant uncertainty about how the coronavirus would affect the outlook for business.
The group, which employs 370,000 staff, said it had put 10,000 employees across the business on a temporary unemployment scheme. Most of the group’s business is in Europe and North America.
“We are closely managing costs and continuously assessing how to adjust the business,” the company said in a statement.
First-quarter operating profit totalled 952 million crowns ($96.8 mln) against a year-ago 1.2 billion. Analysts had on average forecast a 987 million crown profit, according to Refinitiv data.
Securitas, whose rivals include Britain’s G4S (GFS.L), had warned on March 23 that the pandemic, and initiatives to stem it, would hit sales growth and margins in the first quarter.
It said at the time that sales of passenger and luggage screening at airports had dropped in particular, as had demand from organisers of exhibitions and other temporary events.
Organic sales growth slowed in January-March from 7% a year earlier.
“Organic sales growth declined in all business segments due to the extraordinary situation of the corona pandemic which started to affect our business in the beginning of March and increasingly throughout the month,” CEO Magnus Ahlqvist said.
“Our business segment Security Services Europe was most impacted, mainly driven by a rapid decline in activity in the aviation business.”
Securitas had warned in March of higher sick leave and idle time costs, somewhat offset by lower overtime costs. Wages account for the bulk of the company’s costs.
Reporting by Anna Ringstrom; editing by Johan Ahlander and Susan Fenton