Thank you all for standing by, ladies and gentlemen, and welcome to today's Q4 report conference call. At this time, all participants will be on listen-only mode. There will be a presentation followed by a question-and-answer session, at which time, if you have any questions, you'll need to press star one on your telephone. I would now like to hand the call over to your speaker, Mr. Patrik Andersson. Thank you. Please go ahead.
Thank you. Good morning, everyone, and thank you for joining the fourth quarter presentation from Loomis. My name is Patrik Andersson. I'm CEO of Loomis, and with me here today to answer questions, I have Kristian Ackeby who is our CFO, and Anders Haker, our Chief Investor Relations Officer. Let's start the presentation and turn to next page, which are the highlights of the quarter. I will come back to many of the points later on, but just to give you a brief review of the quarter. We closed the CPoR acquisition in France just before year-end. Now we have a very strong offer in the French market for foreign exchange, but also other precious metals. After the quarter close, we announced the acquisition of Ziemann in Germany, actually yesterday. That's on the acquisition front.
The real growth was 8% in the quarter versus 3% last year. We are seeing now that the acquisitions we have made in Chile, but also the first acquisition in Germany, KÖTTER, is now adding to the top line. The organic growth in the quarter was 3%. The momentum in the U.S. remain really strong. We also signed a significant SafePoint contract in the quarter. We'll talk a bit more about that later. We also see positive growth in Europe, 1% growth in Europe, which is really encouraging to see. The operating margin ended at 12%. We see very much a general positive development of the restructuring programs we have, both in Sweden but also in France. We will see much more effects of that coming into 2019.
We see also that the demonstrations in France, which been going on for some months, is actually holding back that improvement in the quarter. We should also keep in mind that the acquisition we have made in Germany, the first one, is then margin diluted by 0.2%. Operating cash flow 144% in the quarter. We propose a dividend of SEK 10 versus SEK 9 last year. These are the highlights. I turn to next page called acquisition of Ziemann in Germany. As some of you could read in our press release yesterday, we have signed an agreement to acquire the company Ziemann in Germany. This gives us a really good presence in the German market.
This company, Ziemann, has a net revenue of SEK 175 million, a small part of that is actually guarding services, it adds approximately 70% growth in Europe, then 9% in total for the group. We will have about 35% market share in Germany after this close if we combine the first acquisition we made with this one. The combined turnover in Germany is SEK 220 million, and we will be, as I said, market leader together with our competitor, Prosegur. I think it's very important to state that this is a very important acquisition. We get a strong foothold in the most cash-intensive and the biggest economy in Europe. The EBITDA margin of this company is around 7%, and enterprise value of SEK 160 million.
It's also important to state that we now will become a national provider of cash handling service, which gives us a totally different footprint in the German market if we combine the two companies. We also see that this company, Ziemann, actually handles a lot of ATMs. Just to give you a comparison, we today handle 30,000 ATMs in Europe today, Ziemann is on its own handling 11,000. In that sense, a really good footprint in the ATM business. We also see a very positive trend for continued CMS outsourcing in the German market, that will add growth, of course, to us. We also see a strong potential of launching SafePoint in the German market. I think that market is very suitable for SafePoint. Last but not least, we see significant potential for synergies.
First of all, by implying what we call the Loomis model to our acquired company, but also then to combine it and take out synergies with the previous acquisition. We think that also that we see very competent and innovative management in the Ziemann Group which will help us to reach our targets. Very pleased with that acquisition being announced yesterday. Let's then turn to next page, which is USA. We had another quarter of good and strong organic growth, 5% in the quarter. We see continued strong growth in CMS, ATM, and SafePoint. SafePoint now accounts for 14% of the total revenue. As we have mentioned, we have put a lot of attention and focus on activities supporting further growth coming into 2019 and 2020. We added salespeople, IT resources, and invested in support function and so on.
The positive momentum continues in the U.S. Our view is that we're winning customers, we're winning market shares in the U.S. market, that's very encouraging, of course. Let's then turn to next page, which is focusing on SafePoint in the USA. As maybe some of you have noticed, we have signed a new big contract. It's a 5-year contract with a big retail customer in the U.S. market, the total estimated value of that contract is $48 million. In that contract, it's including 1,250 units, of which thousands are completely new. That will help us to reach our targets for SafePoint in the coming years. We now have approximately in total 27,000 installations, the revenue growth from SafePoint in the quarter was more than 17%. We installed more than 1,000 SafePoints in the quarter. The retention rate is very high.
We're keeping existing customers. They're quite happy with the offer we're having. During the year, which is important to state, we refreshed, renewed 2,300 SafePoints during 2018. If you compare, this year we installed 4,200 and last year about 3,700. We're growing the installation base in the U.S. market. Let's turn to next page, which is then the operating margin. As you can see, operating margin came in at 13.5%. We have to state that Q4 2017 was very much an exceptional quarter. If you compare with last quarter, Q3, we actually grew the margin. Here last year at this time, we started to invest in the U.S. market, and that's what we said, that's going to be during a short period, a hampering effect on the margin.
We continue to focus on branch efficiency, we will see further improvements also going forward when it comes to efficiency and density and so on. Let's turn to next page, and that is Europe. Real growth 10%, as I mentioned, the acquisitions in Chile and Germany is adding to the top line. Organic growth 1%, that's very encouraging to see that we're now growing in Europe again. We have very good growth in Spain, which is a very important market for us, both from a size point of view, but also from a profitability point of view. Argentina, of course, continue to grow strongly. Turkey and Belgium, where we, for this year, won a couple of new contracts, is growing as well, and Austria. It's also encouraging to see that France is now in the quarter turning to positive growth.
We added quite some new customers in the quarter, which is also a good sign that the quality in the work we've done in France is paying off. Operating margin 12.4%. We have a very much general positive development from the programs we're running both in Sweden and in France, we will see further effects in 2019. Those programs which are then there to strengthen the margin is very much developing according to plan. Now, I have to say that two things have backed the margin in France somewhat. It's what we call the Yellow Vests, so the demonstrations in Paris, but also in other places. These people, they block the branches. It is very difficult for us to work, especially during Saturdays. Also, as you have seen from television, retail shops closed on Saturdays, it's very difficult to give service.
That has had a hampering effect. We also had a negative effect, what we call from the CICE program. CICE is subsidies from the government given to companies. Actually, there was a gap between two programs which had an effect in France. Also, as we write in the report, the acquisition in Germany had a margin-diluting effect of 0.5%. If you take those two things together, the effect in Germany and the things happening in France all together, we are in the same level as we were last year, which is for us a step forward. International positive organic growth, somewhat lower margin in the quarter. It is much more volatile here than the other business.
The main thing here is that from now on, we're integrating the international business both in Europe and the U.S., we're coming back to what kind of impact that has on the reporting side. We turn to next page, which is statement of income. Just a couple of highlights from that one. Real growth, as I mentioned, both for the quarter and full year, 8%. Earnings per share increasing to SEK 20.745. The main thing I also wanted to state is that with the acquisition in Germany, we have now done SEK 3 billion out of the target of SEK 3.5 billion. We will reach the M&A target, which we set out for 2021, that's very encouraging. Of course, we need to work on the margin side and to get that up in Germany.
From a M&A point of view, we will hit the target. We turn to next page, which is the Q&A page. I say to operator we are now opening up for questions. Hello, operator. We are opening up for questions.
Yes. For the participants over the phone, if you have any questions, please press star one on your telephone keypad and wait for an automated message advising your line is open. State your first and your last name before you ask your question. To cancel your request, you may press star two. Once again, star one to ask a question. Thank you. We will take our first question. Please go ahead. Your line is now open.
Yes, good morning. Karl-Johan Bonnevier here from DNB Markets. Coming back a little to SafePoint. You obviously targeted at the start of the year to get something like 5,000 units installed in the U.S., I guess you have not seen the big order during this year, I guess that 1,000 order that you now have for next year, is that, in your view, you say creating the acceleration opportunity to get SafePoint up to the next level in the U.S.?
Yes, you're right. I think that we should have some bigger orders earlier in the year, but you can never control that. I think that what I've seen now is that we have a very strong pipeline of big potential customer contracts. I think that we will see in 2019 a significant step upwards in the installation of SafePoints.
Looking at, say, net placement market share, what do you believe you had in 2018? What part of the market did you capture?
I think that there are no official figures, but we estimate that we installed the majority of SafePoints which are placed in the market. A hard time to give you, but let's say around 75%-80% of all the installations are done by us.
When you're looking at the refreshed units, what kind of, say, conversion do you have on old customers to retain the product and the service?
A very high retention rate. I would say we lose very few SafePoints. It's about, I would say 95% maybe, or even higher. A very strong offering. We have actually started up a team sort of really looking more and more at just the refreshments and following up on customers and so on. Very high retention rates.
When you look at SafePoint in Europe during 2018, I know that earlier you alluded to that you were going to comment on this on an annual basis as the base is so small. Have you seen any good progress during the year?
Yes, we have. We have actually made very good progress in many of the markets, France, Spain, Sweden, to give you a few. We're installing quite a number of SafePoints in Europe.
You're not giving us any number of on an installed base at this stage or something like that?
Not right now. We don't. I can just say that it's going according to plan, and we're doing very well in Europe. Now, the difference between Europe and U.S., as you know, is that in Europe we changed from CIT to SafePoint, which from a strategic point of view is right, but it hasn't that dramatic impact on the number. It's giving us other benefits, so to say.
Excellent. Looking at Germany, I think you alluded to that, putting it together with KÖTTER, you have good synergies opportunities. How would you see the midterm margin opportunity here? Is it getting up to double-digit territory or getting it up to European levels, or what should we think about?
I think that the first step now is to get this to, let me say between 8% up to 10%. I would say the ambition is around in that area. That will take a bit of time, but that's the first step, get it in that range. Of course, over time, we should get up to European margins.
Looking at Germany, if you try to put it in some perspective, how developed is it when it comes to CMS revenues? Is this that like an early U.S. franchise for you think comparison, or where are we?
I would say it's like a U.S. five, seven years back, something like that, just to give you an. The banks have started to look at other possibilities of handling cash. I think that also the companies in the German market have developed, so they have a better offering, and I think that from a sort of a maturity point of view, I would say, as I said U.S.A. some years back.
Kristian, I wonder if you could give us I've read the part you wrote about IFRS 16 in the report, but could you give us the main points of the implementation of it for you and what kind of impact it will have on the profit and loss and balance sheets?
Definitely. Sorry. If you start by looking at the liability as described on page 12 in the quarterly report, the liability will be approximately SEK 2.8 billion. Of this, the majority relates to buildings premises, so to say. That's close to 80% of this part. With the new standard, you will get depreciations instead of monthly fee, so to say, and you will get interest that we will have to deduct. That means that we will get a positive impact on the EBITDA, slightly positive on EBITA, and negative on finance net. Based on how the standard is built up, it is likely that the impact on net income will then be negative. That is due to that the liability is highest in the beginning of the period, so to say.
Also I would like to highlight here that this is the opening balances, which means that if we, and that will probably happen, enter contracts in January, February, and March, that will change this number. I hope that gives you a feeling for the situation.
Can you give us some sort of thinking about how big the impact will be on the net level in the profit and loss account?
On the net.
Net profit, is it a meaningful number down there also, or is it close to neutral?
Depending on what materiality you have, of course. If you take an average interest of the debt, you will get a feeling for what the impact on finance net will be, and we have communicated that on EBITA, it will be approximately SEK 50 million. That is of course also a rough estimate based on the information we have as of today.
Excellent. Thank you very much.
Thank you.
Thank you very much. We will take our next question. Please go ahead. Your line is now open.
Hello?
Yes. Hello.
It's Emek Poulin from Kepler. Just a clarification. You gave indication of the miss on the European profit coming from the Yellow Vest movement and then Germany dilutive effect. Could you just clarify or confirm that we understand correctly that about 1% margin is due to these two effects and it's split almost equally between the 0.5% margin dilution from Germany, and that would imply that the Yellow Vest and CICE effect are also of around 0.5% for Europe to stay stable otherwise on an underlying basis? Just to make sure I understood correctly. On the consolidation of CPoR, is that right that this starts from the 1st of January? Of course, have you seen any change in the contribution that we should expect from that business in 2019? That's for the first question. Second question is on the synergy from Ziemann.
How fast do you think you can bring the German margins to the European average? The third question is on the consolidation strategy. Of course, you continue to add to your bolt-on M&A targets, there's obviously a spin-off announced by G4S in the course of March. I'm just wondering if that's something that you could also investigate as a type of merger candidate for you on a medium-term basis. Thank you.
Just on the first point, yes, you're right. 0.5% from CICE and Yellow Vests, Yellow Jackets in France, and 0.5% from dilution effects in Germany. That explains the whole gap between this Q4 at 2018 and 2017. That's right. Next question was.
CPoR.
CPoR, that's good. CPoR is now a Loomis company. First of all, the effect is that, as we have mentioned before, the margin in CPoR is significantly higher than the rest of the CIT CMS business. That should have a positive impact. On top of that, of course, we're now working with the synergies. One part is, of course, where can we find common branches, common head office? How can we integrate back office? So on and so forth. That's what we're starting with right now. That's in the middle. That will have an effect as well on the combined business in France. We also now are having CPoR as a basis, looking for new growth in other European markets. That's of course a top-line effect, which is quite difficult to estimate.
That's a more strategic thing that we will expand the FX part in other European countries. Have the passport, so to say, to work with FX. Ziemann, I think that
The first stage we are looking at is really to bring this company, the German business, closer to the 10%. Don't forget that the Kipfer-Logistik business is very close to zero as it is right now. We have some work to be done when it comes to bringing the margin. The first step is really get closer to 10%. That will take, I would say, 18-24 months after the closing. Because it's not easy always to do these kind of things quickly. I think that when we get SafePoint in place, more CMS outsourcing, more density, there is no reason why the German market should not be on the group average, or at least the European average. That would take some more time, I think, after that. I think we have great prospects in Germany. G4S, that's a good question.
We also see that they are looking into strategic options for the cash business. Of course, we are following the development as anyone else. We think it's an interesting and good company. I think in general, it's good that there are more standalone cash companies, but we haven't done anything. We're just following the development. They have a strong footprint in the U.K., as we have, so that's a bit complicated. Of course, as I said, we're following the development.
Thank you. Once again, to ask a question, please press star one. We will take our next question. Please go ahead. Your line is now open.
Am I next up?
Yeah.
Okay, sorry. It's Michael Lofter at Carnegie. Most of my questions have been answered, one more on France and the CICE effect, because this, judging from other companies, have been in actually a gradual change during 2018, and this sort of tax deduction will be eliminated as from 2019, if I'm not mistaken, or replaced by some other deductibilities. How will this affect Loomis in 2019?
Related to CICE, just to clarify what's happening with the subsidies in France. This CICE system ends end of November. That's why Loomis and other companies get a negative impact on the effect from December, and also partly due to the system they call the 13th month. When you look into 2019, they will change the system, but they will still have the system as a subsidy on Social Security. The difference will be that the CICE was non-taxable and the new subsidy will be taxable. You will get a tax effect. If you look on the EBITA level, we do not expect any significant change in 2019 compared with 2018 based on the information we have today.
Okay, thanks. Also on the Yellow Vest and the impact in Q4, I guess it's not really settled yet in France. Have you seen an impact also in January so far?
That's a good question. It's not settled. Our judgment at least, when talking to the French management, is slowing down a bit. It's not as active as it was before Christmas. As you say, there are still some demonstrations going on, but not on the same level as before Christmas. It's a bit difficult to judge. I think that the big spike has slowed down, I would say.
Okay, final question from me. In the U.S., the sort of investments in growth or growth initiatives, is this something that we should expect to come gradually, or is it more that you employ and invest now in the last two quarters and perhaps one more, and then it sort of will plateau out and we will see margins expand faster again? How should we look at it?
You should see that we are through the big investments. Maybe there is something more to come. I just wanted to maybe also in this to give you some practical example. We have launched our own recycler concept in the U.S. market, which has taken some resources, time, money, and people. That's one example what we've done. I think that we are not going to continue to invest. Maybe there is something more to come, but the big investments are taken in the U.S. Maybe a bit in Q1 as well, then it should be over.
Okay, thanks.
Thank you. We will take our next question. Please go ahead. Your line is now open.
Hello. This is Karina Ofgranat Handelsbanken. Can you hear me?
Yes, we can.
Great. I'm wondering if the government shutdown in the U.S. have had some impact on your numbers.
Not really. We have had, of course, some issues getting the permits for different things, but there is no P&L impact as such, no.
Okay, maybe if you could guide a little bit on how much you expect of integration costs for Ziemann.
There will be some integration costs. They are not significant, I would say, but there is some integration costs to come. I cannot give you any numbers. It's quite a small company, the one we have in Kipfer-Logistik, so I don't expect any significant numbers. Otherwise, we will have the flag for that. Something there will be, but not significant.
Okay. Thank you very much.
Once again, to ask a question, please press star one on your telephone keypad. There are no questions coming in as of this moment, sir. Please continue.
Okay. Thank you to everybody for joining, have a really nice day. Thank you very much.