Thank you. Good morning, everyone, and welcome to the third quarter presentation from Loomis. I'm Patrik Andersson, CEO of Loomis, and with me here today, I have Kristian Ackeby, who is our CFO, and Anders Håker, Chief Investor Relations Officer. I will give a short overview of the quarter and then open up for questions. Let's start the presentation and turn to the next page. Just a few comments on the coronavirus pandemic. I'm not going to go through all of the points on the slide, but just to mention a couple of them. One is that health and wellbeing of our employees, of course, on the top of the agenda.
We have actually spent quite a lot of money and resources to put the appropriate measures in place, and think we now are in a good position when it comes to health and wellbeing of the employees. I will also ask many of the employees who are listening in to this call or later at the taped version, I will just say that all Loomis employees done a great and fantastic job in maintaining high quality service despite a quite challenging situation. All credit and respect to the employees. I also like to mention that there are quite a number of false rumors circulating around the fact that cash should spread the virus. I would really like to stress that these rumors are being denied by all medical or certain medical experts, and there is more information available at our webpage where you can read more about that.
I used to also like to say that we have taken a lot of other measures to safeguard the operational and financial health of the company. We are in good shape. The cash flow is strong, and we have a very strong position in the market. We are also well prepared for the opportunities which are now opening up as we speak, but also for future opportunities. A lot of things will happen in the market, and we are ready for that. Having said that, I'd like to turn to the next page and just go through a couple of highlights from the report. I will come back to some of these bullet points later in my presentation. Just in summary, as we have communicated before, we have now launched Loomis Pay, which is a complete platform for merchants.
We have started a rollout in Denmark. I'll give a couple of comments on that later. Now the plan is, or we will actually launch in Sweden at beginning of 2021. Then we will roll out in additional markets across the Nordics. Some of you might have seen that we sent out a press release yesterday. The Loomis board now is proposing a dividend of SEK 5.5 per share. An extra shareholder meeting will be held at 10th of December 2021 to decide on that proposal. I also like to mention that due to the coronavirus pandemic, we believe that the revenue target of SEK 24 billion in 2021 will likely not be achieved. That's why we have removed that target now from our plans and targets for 2021. In the quarter, we had a real growth of 7%.
We had an acquisition of Nokas Värdehantering AB in Sweden, and that integration process is ongoing. The organic growth was at -9%, and we see significant improvements in the third quarter compared to the second quarter as business is opening up. Of course, now the situation is changing a bit, but I'll come back to that. We have a less negative impact in U.S. compared to Europe, and that's the structure of the customer portfolio that makes that difference. We have had a very high quality of services in all our countries despite the challenging situation. As I mentioned before, new opportunities are opening up in many different areas. The operating margin was at 11.5% if you exclude Loomis Pay. We see that the operating margin is now trending in a positive way, both in Europe and the U.S.
Just to mention, the U.S. operations increased the margin by close to 2% in the quarter despite the pandemic. I'll get back to that more later. The EPS is somewhat impacted by a restructuring program we're now initiating in certain European markets. That will be done at the end of this year and in Q1. That will have a positive impact on the margins and the profitability in Europe in 2021. We also see a strong cash flow in Loomis, and that has to do with the cash management programs, less CapEx. We have been also then very careful with OpEx, and that has had a positive impact on the cash flow. These are the highlights. Let's turn then to next page, which is just a graph showing the margin development in a more historical perspective.
As I mentioned, we had a strong margin recovery in Q3 versus Q2, this is excluding Loomis Pay, it's easy to compare. Let's turn to the next page, which is Segment Europe. The real growth was a -12%. As I mentioned before, we are integrating Nokas Värdehantering AB that we bought some time ago, that integration is ongoing, it's expected to yield positive results during 2021. That integration is going very much according to plan. The organic growth was at -14%. Of course, all is due to the pandemic, we see significant improvements compared to the second quarter this year in basically all our markets. As I mentioned, several growth opportunities are identified, both when it comes to banks outsourcing more, when it comes to central banks wanting to outsource more cash operations.
We see that happening in many of our markets. When it comes to the operating margin, that ended at 9.4%, and of course, it's influenced by lower volumes. We see a significant margin expansion if you compare them to the second quarter, and the delta is actually as much as 12.8%, so that's a strong recovery. When it comes to France, we have the integration process ongoing when it comes to Prosegur Cash France that we bought earlier. We are expecting that now to continue with full force, and we will see margin increasing in France in 2021. As I mentioned before, we have now initiated a restructuring program in certain European markets, and we will implement that end of this year and in Q1, and then from Q2, that will have a positive impact on the margins in Europe.
Just having said that, I'd like to thank the European and LATAM team for a great job despite the circumstances. Thank you very much. Let's turn to the next page, which is then United States, USA. The organic growth was at -3%, but I have to say that we saw a positive organic growth actually in September. During the quarter, we saw that the top line was coming back stronger and stronger. SafePoint revenue is expanding and accounted for 17% of total US revenue. We see also that the revenue will come back as the pandemic situation is improving. We have a very strong pipeline when it comes to SafePoint, and this year will be a very good SafePoint year also when we look into Q4. CMS was at 34%.
Of course, this is affected by the pandemic, and that will continue to increase as the situation is normalizing. We also have had a strong focus on keeping a high quality of our service, and we have kept all our branches open during the pandemic, and we see now that we attract new customers who are coming to us because of the high quality of services. That's a very positive effect of focusing on the service quality and keeping our branches open. We see also that revenue from the ATM business is actually accelerating, and that is one of the reasons why we had growth in September. We see that is one element, but there's other elements that's pointing that outsourcing in many different shapes is happening now actually and will continue to happen.
Operating margin was at 15.5%, all-time high operating margin for a third quarter. There are three elements behind that. First of all, SafePoint expansions is helping the margin. We have focused on customer portfolios with high quality people or companies, customers that want to have a high quality. That's been our focus. Also efficiency programs, very strong efficiency programs in branches drives the margin and have, among other things, reduced the number of overtime hours that is helping the profitability. Having said this, I would like also to thank the U.S. team for an excellent performance in the quarter. Thank you very much. Let's turn to the next page, and let me talk a bit about Loomis Pay. As many of you remember, we announced the launch of Loomis Pay some weeks ago. Just a short update on Loomis Pay.
It's a solution, it's a service that is supporting small and mid-sized retailers with all payments in store. It's one contract, one contact, one settlement for all payments, as you can see from this slide. Let's turn to next page. Just to say that now Loomis Pay has been successfully launched in Denmark. We actually launched on October 1, to be specific. It's early days still. So far we have had positive merchant response in all aspects. What we see and what's interesting is that Loomis Pay also drives cash and SafePoint growth. Some of these customers have had done their services when it comes to cash themselves, and now they integrate SafePoint or other cash services into the offering. Next step is now to launch in Sweden in the beginning of next year, and then the rest of the Nordic countries will follow.
Of course, the plan is to launch in more Loomis countries as things evolve. Let me talk a bit more about Loomis Pay, let's turn to the next page, where you can see a case which is quite illustrative when it comes to Loomis Pay. Just to be a bit more specific, this is a customer in Copenhagen. The customer is Copenhagen Downtown Hostel, which I actually visited myself some time ago. If you look at the left hand of the slide, you have a description of the old solution. We had six waiters. They shared two POS systems. All orders were written by hand, that made the customer service and payment quite slow. You actually lost sales in peak hours. People could not order as they wanted. They themselves did the cash management.
They counted all the cash, and then someone went to the bank to put that in. The new Loomis Pay solution is all waiters now have their own mobile POS system. All orders to the kitchen, to the bar are digitalized, and it makes the service very quick and smooth. Sales is up. They can serve more customer, and the sales is up, and they have integrated a SafePoint solution where we take care of the pickup and the cash management. This is very promising and very illustrative for how we want Loomis Pay to work. This is actually what we have hoped for. As we speak now, we are now launching this to many more customers. That was a bit about Loomis Pay. I turn to the next page, which is the P&L, which I'm not intending to go through.
That's more there as a service. I think I've been covering the most important topics, and therefore, let's turn to the next page and to the Q&A. I say, operator, we now open up for questions, please.
Thank you. Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad. Our first question comes from the line of Johan Eliason of Kepler Cheuvreux. Please go ahead.
Yes, good morning. Thank you for taking my questions. Just a question about this revenue target 2021. How do you see the margin development?
As we haven't changed the guidance on the margin, we keep that margin target as it is.
Just remind me what it is?
Between 12% and 14%.
Excellent. On Loomis Pay, it looks interesting, but I'm just a bit curious about the development in Sweden, for example, where we see the main banks, Swedbank and also Handelsbanken now putting their pay solutions up for sale. Why do you think that is happening? Is there a threat coming from Ingenico, Worldline, Bambora, et cetera? What's happening from that point of view, you think?
I think that what I understand is that that's not core business for the banks. They don't focus on merchant payments, and I think that also what I heard is that they don't want to invest in IT systems and so on to continue that development. That's a natural step that they're stepping out, and that opens up for many other players, both fintech players and players like ourselves. I think that in itself, it's positive for us and for the other competitors in the market.
Would you be a buyer of those businesses?
No. We are building our own platform from scratch. We don't want to have any legacy systems. We want to have a modern up-to-date system which is cost-efficient.
Excellent. Thank you very much.
Our next question comes from the line of Daniel Thorsson of ABG. Please go ahead.
Yes, thanks. I start off with a short one. Could you please provide us with the net installations of SafePoint in the quarter would be very helpful.
Yeah, it's more than 1,000 installations in the quarter.
Okay, excellent. A question on the restructuring program in Europe. Can you please explain more what actions you will be taking? I guess it is not really around closing branches, but what could it be?
We have now taken the opportunity to adjust the cost base in some countries, especially in the U.K., where we actually close a couple of branches. We need to reduce the workforce, and we would reduce the fleet. The most of the restructuring will happen in the U.K., but also in some smaller parts in other countries as well. The total restructuring cost is SEK 160 million, which will be taken in some part in Q3, the most part in Q4.
That will have a payback time which is below one year. We will see the effects, all the effects should be seen in Q2 2021.
Okay. That's clear. Related to U.K., a question on that. We saw a 40% decline in U.K. revenues in Q3 now. I guess that you're adjusting cost base based on the lower volume, but what is really reasonable to expect here, going forward? Is it a comeback to maybe 20% to what we saw historically, or how do you think?
It's very difficult to say. If you look at the whole Loomis countries, the one that is sticking out to some extent is U.K. because of the closing down of big parts of society. We believe that it's necessary. We don't think that the volumes will come back exactly to the same level. We think that maybe 20% minus is a bit too pessimistic, but we take note that we need to adopt the cost base also when we look into the future.
Okay. Excellent. A final one on Loomis Pay. If I read the accounting tables here correctly, did we see a SEK 3 million revenue from Loomis Pay in Q3?
Yes, that's correct. That is right.
Excellent. Thanks.
Our next question comes from the line of Mikael Löfdahl of Carnegie. Please go ahead.
Yes. Hi. Follow-up on Loomis Pay. As we move forward now, if this becomes a success, you've said that the costs or the net effect on results will come in the other segment when it comes to reporting. When it comes to sales, because in some cases you will drive the SafePoint and the cash services, in some cases there could be some cannibalization perhaps on existing cash services. How will sales be reported in? Will it come in in Europe or will it show in the other segment? How will that be reported and handled?
Sorry. It will be dependent on what kind of sale it is. When it is related to Loomis Pay, it will be reported as Loomis Pay, so to say. Currently we report Loomis Pay in other, and that is due to the size of it currently and how we run the business. That could, of course, potentially change. When you look into SafePoint sales, for example, if there is a SafePoint, that is part of the more CIT CMS business, and then it's more related to the Europe and the U.S. segments as we have the reporting today.
If you sign a Loomis Pay contract with a customer, part of those revenues will then come to Europe and part will come to the other segment?
It might be technical now. You will get both internal sales and external sales, so it will be part of the consolidation. You will have more. If you look into Loomis in general, we have relatively small amount elimination on the sales line since we have a little cross-border or little between the segments, but that might increase due to what you're referring to.
Okay.
Yes, part of the sales will go into Loomis Pay and part of the sales will go into Segment Europe. Yes.
Okay. Thanks. On the sort of current trading, could you say something about the monthly trend, both in Europe and the U.S., and maybe if you can touch upon October as well?
We haven't got any numbers for October yet, and we're not trying to guide on a monthly basis. What we can say is that operations in U.S. is very stable, and we don't foresee any changes from what we have seen before. It's a very stable operation right now. In Europe, we see now the second or the third wave, whatever you call it, of the pandemic. However, we don't foresee any fall back into April mode or June mode. We are much more prepared now than we were before. However, where the top line goes, it's a bit difficult to say right now. As of now, we don't see any that we're going back to Q2 numbers in any way.
Yeah, sure. Is it possible to give some more flavor on the month-by-month trend? July, August, September?
I think that both in Europe and U.S., there is an increasing trend both in the top line and in the bottom line. It has improved every month since April. As you saw also in the report, September, we're showing organic growth in the U.S. That I think is a very positive sign that things are moving in the right direction in the U.S.
In the U.S., just on the ATM side, you're mentioning that you are seeing things happening now on the outsourcing side. Could you perhaps quantify what kind of potential deal sizes are we talking about here?
No, I think that if we just touch on the ATM side, I think what we see here is that the bank branches are either closed down or have limited operational hours. What they do is that they direct people into the ATM to a larger extent. At the same time as they do, they increase the traffic to the ATM side, they have outsourced the services. Sometimes they did some of the services themselves, and now what they do is that they outsource to players like us. It's a double positive effect, in terms of the ATM side, and also a strong focus on keeping the service level at the ATMs must operate at all time. That is driving the increase in revenue in the ATM side.
We also see a huge interest also in SafePoint, due also to outsourcing and to the pandemic and so on. There are many positive aspects when it comes to the U.S. market and outsourcing.
Okay. Thank you.
Our next question comes from the line of Johan Dahl of Danske Bank. Please go ahead.
Yes, good morning. On that same topic of outsourcing, I think you referred to also the European market being upside there in terms of outsourcing. Could you just talk about what tangible signs you're seeing in Europe in that respect?
That's again, the same thing that we're seeing, that central banks, for instance, that they outsource some more of the cash operation due to that they either closed down or that's not been the focus right now. We see also that more commercial banks are outsourcing more of the ATM service or intending to outsource. We also see that based on the service we have been providing, that some customers coming over to us. Now, that's not outsourcing, but it's taking market share, if you like. Just to give you a flavor on the opportunities we see in the market, that's both coming from outsourcing, but also that we are able to take market shares in certain markets.
Our next question comes from the line of Karl-Johan Bonnevier of DNB Markets. Please go ahead.
Yes, good morning. First, coming back to the ATM business. I saw you mention it on the U.S. slide that the revenues are accelerating. How much of your revenues could you say today are related to ATM management?
It's very difficult to say, to have that split. We actually see September, if just to give you a number, try to give you a number, 20% of the revenue if you take U.S., it's coming from ATM service. It's actually growing double digits as we speak. It's quite a sizable portion of our business, and it's growing quite rapidly.
On that topic, obviously, you announced an acquisition in Finland, in the same space. I understand you got some partial clearance for that. How do you see the timeline for that being completed and integrated into operation?
We hope, and plan for a positive reply before the year-end, I would say this year, to be precise. We think there are two elements into that. One element is, of course, to take over the business in Finland, and that's good in itself, but actually that this business should be in platform to be able to have the competence to take over more ATM business, both on a European scale, but also on a global scale. I think that we see here is that we need to have a stronger competence to be able to show to the banks that we have the competence when it comes to all aspects of ATM management, to be able to take that opportunity. That's been in the strategic plan for at least three and a half years to do that.
We realize now that we need to have the platform, and Automatia Pankkiautomaatit Oy in Finland is that platform that will help us to be able to grow in the ATM business.
If you say you have the rough estimates for 20% of revenues related to ATMs in the U.S., what was a similar number for European?
We can try to come back to you on that, KJ. I don't have the numbers, and my CFO is shaking his head here. Can we come back to that in a separate session then, Karl-Johan?
Splendid. Looking at the efficiency program that you now initiate in the U.K. and some other markets, obviously, you did something similar in France and the Nordics, if you go back to 18 months in time. Is it similar kind of action that you're now trying to implement in these markets as you did in those historic actions? What kind of yields did you get out of those actions in the Nordic and France when you look back?
That's right. For us, we have the people cost related to people is a big part, of course. When we do restructuring, it's mainly about people, but also about branches and vehicles. That's in the same situation here, that we are reducing the number of employees, unfortunately for those who lose their jobs, but there is no other way. That is the standard procedure, of course, is to do that. Also looking into how we operate the business, how we can do things more efficiently. It's reducing the number of employees, branches, and vehicles.
The payback when you look back at what you did in the Nordic, that yielded what it was supposed to yield and you got the payback from it?
Yeah. I think that if something Loomis is good at, is really to manage the business and the cost level of the business. Yes, we always achieve the targets we have set when it comes to restructuring in all aspects, or more.
Excellent. Just one final question. On those financial targets you put up for 2021, you also had the SafePoint rollout ambition of getting up to 10,000 units per year or something like that, and speed towards there. How do you feel about that given the current situation?
No, I think that we were a bit afraid. Let's start with U.S. That's the big bulk of the SafePoint business. I think that when the pandemic hit, we were a bit afraid. Can we meet customers? Can we talk to them? Can we make proposals? I think that it has shown that that is possible. It's shown that, if anything, that the demand for SafePoint has increased because people looking for all opportunities to make the business more efficient. If anything, I think that this year will be a very good SafePoint year. Where the numbers end up, I don't dare to speculate, but it will be a very good year. I think that, if anything, the pandemic has given the SafePoint business a push forward together with all the things we have done internally.
We have invested quite a lot of time and money into the sales force and to the concept, developed the concepts. All in all, I'd say the outlook for SafePoint is positive.
Excellent. Kristian, just on the cash flow as well, is there any timing effect that has helped you, say, social costs or tax payment or something like that we should expect roll out of the numbers? Looking at the lower investment CapEx you have done during this year, do you feel that you have built up a legacy cost to some extent that needs to be coming back into the numbers over the next couple of years?
If I start with the cash flow and the timing in taxes and VAT and so on, that amounts to approximately SEK 300 million. That could be expected to be seen over the next, say, 12-15 months coming back. We also have a positive cash stock, as you know, is moving from quarter to quarter, this quarter it was a little bit lower, you might have additionally SEK 100 in that one. Looking into the CapEx, it will be a mix of things that needs to be done later, also a mix of things that have been stopped for now, since when the business go down, you need less vehicles and so on. That will be part of the future, of course, to start changing and improving again, not the full number.
Excellent. Nothing major, at least?
No.
Thank you.
Our next question comes from the line of (Telis Menakes of Talas Partners). Please go ahead.
Hi. Thank you for taking my question. Could you please help us understand the effect of the current cost out exercise on fixed costs? In other words, out of the SEK 160 million exercise, what is fixed, what is variable? In the end of the day, if we look at next year's margin, what will be the main drivers behind this expansion in margins? Thanks a lot.
Okay. If we start with a restructuring program, we can say that it's approximately two-thirds that will be cost out and one-third that is write-off. That gives you the feeling for that it's approximately one-third that is fixed cost and the other one is mainly related to labor and salaries. This should of course be then with a less than one year payback important for the margin expansion.
Yeah, I think that this will absolutely help the European business get back into stronger margins into 2021. We don't want to give you any numbers on that because we don't guide on the different segments, but this is a boost to the margins in Europe for next year, I would say.
That's brilliant. Thanks a lot.
Our next question comes from the line of Thomas Graf of Handelsbanken. Please go ahead.
Yes. Hi, everyone. Most of my questions have been answered, but I'm just curious. I saw that Brink's were, if Biden would win the election, they estimate pretty negative effects. One is regarding that the stricter emissions regulations would affect their fleet, the truck fleet, and also that the country would go into more shutdowns and so on if Trump wins and so on. Can you just comment a bit about the election? What do you think? Especially in terms of the truck fleet.
Of course, we discussed that with our U.S. management team. We don't see any major changes if I should be careful what I say now, but we don't see any big shift if someone is winning or the other ones win. When it comes to emissions and so on, we have a program already that we're working with to reduce the emissions, and that goes into biofuel, we are buying electrical trucks, and that will not change. We're driving that program independently of who is going to win. I think that also the lockdowns and so on, I'm not sure if that's going to happen one way or the other. I don't think there's any big differences. To be honest, we are quite prepared for anything that will happen in the U.S. market.
I don't see, or the management team in the U.S. don't see any big changes when it comes to who's going to win.
No. Okay. Thanks. That's all from me.
Thank you. May I remind everyone that if you wish to ask a question, please press 01 on your telephone keypads. There are no further questions at this time. Please go ahead, speakers.
Yeah, I just want to thank everybody for very good questions and listening to our presentation. Thank you very much and take care.