Morningstar | Securitas Delivers a Reasonable Set of Fiscal-Year Results
No-moat Securitas delivered a mixed set of full-year results. Organic revenue growth reached 6% over the period, a solid result and broadly in line with the average performance over the past three years. Operating margins hit 5.2%, the highest level since 2010, as a combination of business mix improvement and cost-saving initiatives paid off. While these results were in line with our expectations, they came slightly below those of the street, causing a moderately negative reaction in the share price this morning. We maintain our SEK 152 fair value estimate and believe the stock is currently fairly valued.Geographically there were few surprises: North America remains robust, with organic topline growth of 6% over the period. European growth slowed somewhat in the fourth quarter to 3%, however a pick up in margins in to 6.3% over the quarter brings the division’s profitability in line with leader North America. Ibero-America, although just over 10% of group sales, saw the strongest level of growth, rising 12% over the year and accelerating to 14% in the fourth quarter. Most encouraging however was the strong growth in technology-based security. Integrated security contracts, which we have spoken about in depth previously, are the future of the security industry and the path to higher margins for the likes of Securitas. These types of contracts now represent 20% of group sales.
Longer term, we believe that structural trends such as the proliferation of multinational companies and the continued outsourcing of noncore activities such as security and maintenance will continue to benefit the security services sector, and in particular large companies with high capabilities such as Securitas.
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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