February 6, 2020 / 3:54 PM / 13 days ago

Securitas shares hit after sales slowdown

STOCKHOLM (Reuters) - Securitas (SECUb.ST), the world’s biggest security services group, on Thursday reported a smaller than expected rise in fourth-quarter operating profit and a slowdown in organic sales growth, sending its shares down more than 7%.

The rival of Britain’s G4S (GFS.L) said in a statement that the weaker sales momentum in North America was partly due to a short-term decline in sales of critical infrastructure services, which had also weighed on profitability in the quarter.

This business provides specialized security services to public and private customers within aerospace, defense and energy industries.

Chief Executive Magnus Ahlqvist said: “Organic sales growth declined temporarily in North America and was also hampered by the previously communicated contract losses in Europe.”

Ahlqvist told Reuters the effect was continuing into the current quarter. “I would say that it is ceasing in the near future. I can’t specify weeks and months,” he said.

Shares in Securitas, which also provides security guard services, alarm surveillance and airport security, fell 7% at 1415 GMT to four-month lows and erasing gains made in the past year.

He stood by an outlook given in November for 2-3% market growth in Europe this year, and around 4% market growth in North America. He predicted it would come on the back of price increases rather than volume growth.

The CEO said a key focus for 2020 was to try to fully pass on wage cost increases to customers this year, after the company did not entirely manage to do so in 2019.

Group operating profit was 1.3 billion crowns ($138 million) against a year-ago 1.14 billion. Analysts had on average forecast a 1.52 billion crown profit, according data from Refinitiv.

Operating profit before amortization was 1.50 billion crowns against a year-ago 1.48 billion. Organic sales growth, which strips out the impact of acquisitions and divestments, slowed to 2% from 4% in the previous quarter and 5% in the same period a year ago.

Wages account for the bulk of costs at the company, which employs around 370,000 people around the world, and there is currently upward pressure on wages in many countries.

Reporting by Anna Ringstrom; editing by Niklas Pollard and Jane Merriman

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