Morningstar | Decent Start to Year for Security Giant Securitas
No-moat Securitas delivered a very decent first-quarter trading update, posting organic revenue growth of 7%, a slight improvement on the already high 6% delivered in 2018. Operating margins improved to 4.8% from 4.7% this time last year. Overall, the numbers were broadly inline with our expectations for the full year, and as such, we do not expect to make any material changes to our forecasts nor to our SEK 152 fair value estimate. We believe the shares are currently up with events.North America, which generates more than 40% of group sales, continued its strong pattern of growth. Europe, which generates a similar contribution on the group level, clawed back some of the margin declines of 2018 with a strong performance, as some of the benefits from the cost-saving program that was implemented last year came to fruition. In the near term, we believe the company will continue to generate decent top-line growth and incremental margin improvement as it carefully balances the act of passing on labour cost increases in an ever-competitive pricing environment.
Longer term, the key for Securitas is in increasing the take-up of integrated contracts, where technology is combined with traditional manned guarding. These contracts now constitute 21% of group sales, a marked increase even over the quarter. Integrated contracts not only carry margins of around double those of traditional manned guarding, but also extend the lives of contracts from one year to five years on average. We continue to monitor the company’s progress on this front.
Securitas is engaged in integrated security solutions. Co.'s main service offering categories are specialized guarding, mobile security services, monitoring, technical solutions and consulting and investigation services. Co. operates in 52 countries throughout North America, Europe, Latin America, the Middle East, Asia and Africa. Co. is organized into three business segments: Security Services North America, Security Services Europe and Security Services Ibero-America. In addition to the three business segments, Co. conducts guarding operations in the Middle East, Asia and Africa.
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