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Securitas Direct AB (publ) STABLE SALES DESPITE SLOWER MARKET
* Customer cancellations totalled 16,326 in the second quarter * Payback period for investments in new customers of 4,7 years in second quarter * Net addition of 30,081 new customers in the second quarter * Securitas Direct's class B shares to be delisted on 15 August 2008
SALES AND INCOME Apr-June Apr-June Jan-June Jan-June 2008 2007 2008 2007 Net sales, SEK thousand 1,102,807 949,304 2,171,051 1,861,211 Sales growth adjusted for currency effects, % 15 15 15 17 Operating profit, SEK thousand 73,934 69,860 170,311 140,479 Operating margin, % 6.7 7.4 7.8 7.5 Profit for the period, SEK thousand 46,878 45,449 113,884 90,443 Earnings per share, SEK 0.13 0.12 0.31 0.25
OPERATING TARGETS
* Customer cancellation rate was 6.4 % (6.7[2]) * Payback period for investments in new customers was 4.6[1] years (4.1) * Net customer portfolio growth was 13.6 % (17.4[2])
[1] The payback period does not include costs relating to the takeover bid. [2] Net growth and the cancellation rate have been adjusted for 6,419 income-neutral cancellations which arose during the second quarter of 2007.
PRESIDENT'S COMMENTS In the second quarter of 2008 Securitas Direct's sales of new alarms remained at the same level as in previous quarters. A decline in housebuilding, combined with a high level of unsold properties - especially in Spain and France - created an element of wait-and-see in the consumer alarm market. Nevertheless, increased marketing efforts, improved customer offers and a stronger focus on the more established business market mean that we continue to gain market share. New installations totalled 46,407 during the quarter, up by more than 1,400 from the previous quarter. In the last 12 months we have averaged more than 45,000 new customers per quarter. On a net basis, this amounts to an increase of 30,000. The operating target for customer cancellations, measured over 12 months, rose to 6.4% during the quarter, up by 0.3 percentage points from the same quarter last year. In absolute terms, however, cancellations rose to just over 16,000 during the second quarter, which was around 1,500 more than in the first quarter. A higher mix of business customers in our portfolios means we expect to remain at around this level, albeit with a continuing slight upward trend. The cost of acquiring new customers has increased. Our net investment in each new customer was SEK 7,400 in the second quarter, up by SEK 600 from the prior quarter. This increase was primarily due to higher sales and marketing costs. The percentage of alarms with photo verification increased from 30% to 50% in the last two quarters. At the same time, net monthly income from the customer portfolio has risen to SEK 130 per month, corresponding to a QTD payback period of 4.7 years. Today we have announced that Securitas Direct has signed an agreement to acquire the home alarms business of Norway's Hafslund. The purchase is subject to approval from the Norwegian competition authorities prior to full completion. Hafslund's customer portfolio is a perfect fit for us as it focuses solely on monitored alarms for consumers. The timing is also good because we completed the integration of our own local portfolios in our new Nordic production platform during the second quarter. Finally, it is pleasing to note that our customer portfolio has passed the 1 million barrier. We are now taking the next step and aiming for 2 million satisfied customers.
OPERATING 30 June 30 June 2008 2007 Cancellation rate, % 6.4 6.7[2] Payback period, years 4.6[1] 4.1 Net customer portfolio growth 13.6 17.4[2] Customer portfolio 1,009,707 888,649
[1] The payback period does not include costs relating to the public offer. [2] Net growth and the cancellation rate have been adjusted for 6,419 income-neutral cancellations which arose during the second quarter of 2007. Including these, net growth and customer cancellations were 16.5% and 7.5% respectively.
TARGETS AND OUTLOOK
FINANCIAL April-June January-June SEK THOUSAND 2008 2007 2008 2007 Net sales 1,102,807 949,304 2,171,051 1,861,211 Sales growth adjusted for currency effects, % 15 15 15 17 Operating profit 73,934 69,860 170,311 140,479 Operating margin, % 6.7 7.4 7.8 7.5 EBITDA 204,891 186,714 428,587 369,810 EBITDA margin, % 18.6 19.7 19.7 19.9 Profit for the period 46,878 45,449 113,884 90,443 Earnings per share, SEK 0.13 0.12 0.31 0.25 Capital employed - - 1,882,826 1,633,296 Return on capital employed, % - - 16 16 Net debt - - 79,212 43,095 Free cash flow -9,421 54,998 -37,920 89,589
TARGETS AND OUTLOOK
* Cancellation rate of less than 6% per year * Payback period for investments in new customers of less than 4 years * Net customer portfolio growth exceeding 20% per year
Securitas Direct's growth strategy is based on long-term value creation, and the aim is that growth should not be at the expense of a higher cancellation rate or longer payback period. Hence, the Group's targets for the cancellation rate and payback period take precedence over customer portfolio growth. Management expects the higher level of customer cancellations, caused by weaker economic conditions, to continue in 2008. The company's drive to strengthen and develop customer service therefore remains undiminished. Nevertheless, management does not expect the company to meet its long-term target for net customer portfolio growth in 2008. - The Board of Directors will review operating target levels during the course of the year.
CONFERENCE CALL
A conference call will be held on 6 August 2008 at 15:00 CET. Management will make a brief presentation of the results and take questions. If you wish to participate, please call +44 (0) 20 7162 0025, allowing yourself 10 minutes for registration. The conference call will be in English. A PowerPoint presentation of the interim results will be published at 09:00 on www.securitas-direct.com and will be used by management during the conference call. A recording of the conference call will be posted on the Securitas Direct website.
FOR FURTHER INFORMATION CONTACT Dick Seger, President and CEO, tel +46 (0)708 218817 * Lars Andersson, CFO, tel +46 (0)706 327580 Michael Peterson, Investor and Media Relations Manager, tel +46 (0)733 221814 e-mail: ir@securitas-direct.com, www.securitas-direct.com The information in this report is such that Securitas Direct AB (publ) is required to disclose under the Securities and Clearing Operations Act and/or the Financial Instruments Trading Act. The information was announced to the market at 08:00 CET on 6 August 2008.
