Thank you very much. Good morning, everyone, and welcome to the fourth quarter presentation from Loomis. I am Patrik Andersson, CEO of Loomis, and with me here today I have Kristian Ackeby, who's our CFO, and Anders Haker, Chief Investor Relations Officer. I will give a short presentation in the beginning of the quarter and then open up for questions at the end. Let's start the presentation and turn to next page. Just a few comments on the situation on the coronavirus pandemic. We have been running all our branches across the world, but not everyone at full capacity, so the service level has been very good all through this pandemic period. I also like, again, to stress that there are still false rumors circulating around cash, that it spreads the virus.
That is not true, and that's been denied by medical experts, and there is more information available on our webpage. I would also like to mention that we are taking advantage of the current situation. We are signing new customer contracts, especially in the U.S., and as we see it now, we're taking market shares in the market. Also, I'll come back to that, but I think that during this year, the Loomis employees have done a fantastic job maintaining a very high quality of service, despite then a very challenging situation, as you can imagine. I would say that we have quickly taken a number of decisions to safeguard the operational health of the company. One example is, as you can see, the free cash flow for the year, which is at 129%.
We are well prepared to act on opportunities which are opening up right now, I would say especially in the U.S., that will happen also in Europe. We are on our toes, and we're ready when the European market is also opening up. Let's turn to next page, which is the highlights of the quarter. I will get back to some of these points at a later stage in my presentation as well. We launched Loomis Pay, which is our complete payment platform in Denmark in October last year. The reception has been positive, we have signed already a number of contracts, we are now launching, or we launched on Monday in Sweden. That's our second country to follow.
The plan is then, of course, to roll out in more Nordic countries, but then later also in other Loomis countries. To support and make it more transparent, Loomis Pay will be reported as a separate segment as of Q1 2021, makes it easier for everybody to follow. SafePoint expansion is going very well. We'll talk more about that when we look at the U.S. numbers. We signed the biggest contract ever, 1,700 units at the end of last year. We have now in the light of the continuing coronavirus pandemic, decided to remove the margin target, which is 12%-14%, and we expected a quicker recovery, especially in Europe, during Q3. We're seeing now that Q1 will still be affected by the pandemic.
We are now also planning to have a capital markets day at the end of this year to reveal and present new numbers for the next strategy period. Real growth was at -7%, and the acquisition of Automatia is completed, and that's the Finnish ATM company, and that's a very strategic acquisition, which I could come back to as well later on. Organic growth was at -9%. We can see that the improvements we saw in Q3 has slowed down a bit. That's again, due to the situation with the pandemic. However, we see now a positive growth in U.S. compared to negative growth in Europe. As you know, we have a different customer structure in the U.S. Also we're seeing that the market is coming back in a nice way, and all our branches are open, as I mentioned.
Operating margin including Loomis Pay was at 11%, and then including Loomis Pay, 10.3%, and as you will see later, U.S. is really driving that margin. If you then turn to next page, EPS was to a large extent then impacted by the restructuring programs. Kristian will come back at the end to talk a bit more about the different elements in the P&L. The operating cash flow in the quarter was at 80%, and our programs within cash management and managing the capital expenditures remain to be very high on the agenda, and that's what you see of course, in the cash flow. The proposed dividend is SEK 6 which is then above 60% of net profit. Let's turn to next page and just to illustrate the operating margin development to put that into perspective.
You can see after a dip in Q2, we made quite a strong recovery and the margin is again on a more normal levels. And of course, if you look at Q3, we should always know that that is our strongest quarter because of the holiday period, et cetera, especially in Europe. Let's turn to next page and talk a bit about Europe. We closed the acquisition of Automatia, the Finnish high-quality ATM company with a very strong market position, and that is going to be our platform now for rolling out more ATM services to different customers, especially then across Europe. Of course, to win more advanced ATM business from our customers. I think that that will be a very good initiatives in the coming months.
We are in the process of integrating the businesses we acquired in France, Sweden, then, of course, Finland. Organic growth in Europe was -70%. As everybody can read about the pandemic situation in the newspapers, Europe is highly affected by this. It's a bit tricky because it's very much on and off. We are then staffing up, then there comes new lockdowns, and we have to reduce and back and forth. Planning is quite tiresome and difficult. As I said in the beginning, there are a lot of opportunities out there. The market is changing. I think that this will drive more outsourcing. I think that some of our competitors are in worse shape than we are. I think there will come out more ATM business and SafePoint business.
I think that what we see is that technology and automation will also play a bigger role in the cash industry the coming years. We can look at the U.S. at the later stage here. Margin then at 6.1%. That's of course then affected by lower volumes. We have a number of Loomis cost-cutting initiatives going on. It was more normal Loomis work. We also have then a more comprehensive restructuring program ongoing, especially then in the U.K., where we will say, unfortunately, farewell to more than 900 people, I think it was around 920 people, which have or will leave Loomis in the period here, which has passed and will come. If we then turn to the next page, to talk a bit about the U.S. Overall, very strong performance, of course.
Positive organic growth in the quarter, 0.3%, but it's been sort of accelerating throughout fourth quarter. December was a really good month. We have signed the biggest SafePoint contract with one of our bigger customer, 1,700 units. They have not been installed yet. They are about to be installed. SafePoint revenue continues to expand. We have had a 10% growth in Q4, and now all 18% of the revenue in the U.S. is really coming from SafePoint, which is a fantastic number. We expect also that this will and is going to increase in the period to come. We have had very high quality of services in the U.S. market, and we see that that has attracted new customers. We're gaining market shares and new customers, which is very promising for the future. We see also that the trend with accelerating ATM revenue, that is continuing.
More and more banks have outsourced their ATM work to companies like ours, and that has been a good revenue engine for 2020. Operating margin is at 17.5%, which is absolutely fantastic, of course. For the full year, we are at 15.7%, which is also a fantastic number in the light of what's going on. That's all-time high operating margin for a fourth quarter. Of course, there are a number of factors driving that. SafePoint, of course, is one, but also that we are very careful on the customer side, which customers to onboard and sign contract with. We have been very successful in all these efficiency programs in the branches that is driving the margin. Also we have had, of course, as we have had less people and less people on the streets, the cost of medical expenses have gone down.
This is at least one positive effect coming from COVID-19. Before I hand over to Kristian, I would like to take this opportunity to thank all employees of Loomis for their loyalty and hard work during 2020. Really proud of the team. Many listening in now, I know. Thank you very much. Let's then turn to next page, and I hand over to Kristian to comment a bit on the P&L. Please, Kristian.
Perfect. Thanks, Patrik. Looking into some of the items below EBITDA. If we start with the acquisition related costs. Full year, this amounts to approximately SEK 160 million, which is a relatively high number, and it's mainly due to the acquisitions in Sweden and France, and the fact that they are bolt-on acquisitions, as we call them. That includes a lot of overlap in the operations, which is good. It implies high synergies, but also cost to remove. For example, in Sweden, both companies had more or less a full country coverage with branches that duplicates the setup, so many branches are being closed without any impact on the service offering. That's of course part of our business case to acquire this operation. If we then look into items affecting comparability, we have approximately SEK 200 million full year.
This is mainly the restructuring program of approximately SEK 160 million that we communicated in Q3. It also includes the goodwill write-off that we also have communicated earlier this year. Majority of the restructuring charges have now been recorded. These programs are developing according to plan, and we expect to see the full impact at the end of Q2. The reason here is, of course, that not everything has been executed in the detailed level yet. That's also why we are somewhat careful to talk about exactly which countries that are included, except from U.K., of course, because there it has been communicated. We move to the tax rate. Tax rate for the full year at close to 35%, mainly as a result of uneven earnings. Countries with relatively low tax rate have lower earnings, for example, than U.K., coming back here again.
There are also some non-deductible expenses impacting. Earlier this year, we expected that the tax rate would be around 31%. When the pandemic continued in the fourth quarter, this number increased. The very high tax rate you see in Q4, it's a catch-up effect for the full year to get the full year ended correctly. As of today, our current best estimate is that we will come back to the same level as before the pandemic, when the situation stabilized and volumes start to come back, as well as earnings in the different countries. With that, I leave the word back to you, Patrik.
Yeah. Thank you very much, Kristian. Let's turn to the next page and to the Q&A. Operator, we now open up for questions, please.
Ladies and gentlemen, if you have a question for the speakers, please press zero and one on your telephone keypad. Please hold until we have the first question. The first question is from Danny Thorsson of ABG. Your line is now open.
Yes, thank you very much. My first question is to Kristian. On the non-recurring items of SEK 114 million in the quarter, that was way higher than I expected at least, some SEK 35 million-SEK 40 million above my figure of SEK 80 million. What did I miss there, really? Was it anything new that appeared in the quarter, or did you do the U.K. restructuring earlier than we thought before?
We have included more or less the total restructuring accrual now already in Q4. We state that in conjunction with the Q3 report, we said majority this year, that's also what we see now more or less all I would say. It might be some small impact in Q1, majority of restructuring is now in there. The SEK 163 is the major impact you see in the SEK 114.
Okay. We shouldn't expect another SEK 20 million-SEK 25 million in the first half of 2021 then, I guess?
No, not that much. You will probably see some, but not in that magnitude.
Okay, excellent. A second one on the acquisition-related costs. They continue to be quite high, and now they are also increasing, and you haven't really done any large acquisitions recently. In terms of acquisition contributing to sales, that is obviously very low now. What is that really in this quarter?
Majority part in Q4 is that we are merging the business in Sweden. We acquired Nokas earlier this year, and in the fourth quarter, the operations are being merged, and by that, we also closed down branches. That's the high cost in Q4.
Should we expect that level going forward, or should it come down significantly from next quarter?
It will come down significantly. This is related to Nokas acquisition, and that is more or less completed now. There might be also some small spillover, but not close to these numbers.
Okay, excellent. Final question from me on the U.S. margin. You write later in the report that if you adjust for the provision revaluation of SEK 26 million, that basically drove half of the margin improvement year-over-year. You don't report that as a non-recurring when you report the margin on group level. Why don't you do that? Should we expect to see positive support from that going forward as well?
That's more part of the day-to-day operation. It comes as a result of very well done by the U.S. team related to casualty and medical, so we can reduce the cost. If you look into the last 12 to 18 months, these costs have been included there. That's the reason why we don't have it as non-recurring when it's reversed, because we have taken the cost in the operational result earlier.
Okay, I see. We should not expect that effect going forward, obviously.
No, no.
Okay. That's it. Thanks.
The next question is from Danny Johansson of SEB. Your line is now open.
Good morning, Kristian and Patrik. A few questions from my side as well. First one, Loomis Pay. You said you were going to report it as a separate segment now as of Q1. Do you plan to report other KPIs as well, for example, number of customers, installed units, or is it just relevant to show the revenue and costs perhaps at this stage?
I think we will come back with some KPIs, we haven't decided exactly which KPIs. We have to be a bit careful to really report what is important and driving the business. We will come back to that. Some kind of separate information apart from the P&L and the finance, yes. Exactly what, we'll need to come back on that.
Okay, interesting. Thanks. A question on M&A. How high would you say it's on the agenda currently? Are you more focused on internally getting the operations into shape and then perhaps do M&A, or do you have the capacity to work on both now in the short term?
No, I think we have the capacity to work on both. Of course, high on the agenda is, as you say, we have done a lot of work in the restructuring and taking down CapEx and cutting costs. Of course, we need to see that the top line is coming back, and I think the business is in shape, but we need to see that and manage that situation. There are a couple of very interesting possibilities when it comes to M&A, and we will pursue them. Of course, we have to evaluate each M&A case very carefully, of course, so it doesn't take away focus from our day-to-day operation. Yeah, M&A will be on the agenda, yes.
Thanks. What sort of M&A will be most interesting to you? Is it adding more other types of technology, adding to your ATM capabilities, or adding more scale where you perhaps are sub-scale today, or what's prioritized in terms of M&A?
I think that right now, as we bought the ATM company in Finland, we have that platform. We are also up and running with Loomis Pay, so we don't need more technology there. I think it's two things. One is more bolt-on acquisitions. That's number one, to really drive synergies. Secondly is technology to drive the core business. There are many things happening around technology. I mean, SafePoint is one thing, recyclers i s another thing, there are other types of things you can do to support the core business with technology. I would say these two are right now highest on the agenda.
Okay. Thank you. One final question, if I may. On the large SafePoint contract you signed in the U.S., have you already started rolling out here during Q4, or will it come into play now in Q1? I think you said you're going to roll out across the full stores within the next 12 months. Will it be a gradual rollout or how do you view it?
No, we start now from Q1, and we will gradually increase the number of installations. A little bit lower maybe in Q1, and then gradually we'll increase, but nothing in Q4. They will come now 2021.
Very clear. Thank you so much.
The next question is from Nils van Dolle of Bank of America. Your line is now open.
Yes, good morning. A couple of questions, please. Firstly, on the restructures going on in Europe, it just seems as if we focus slightly on U.K., that you're setting an organization in the U.K. for the long term, i.e., not only responding to the pandemic weakness as of currently. Will you be thinking in similar ways with regards to other adjacent markets which you are unable to communicate details around?
I think that what we've done in-- U.K. has been very hardly hit by the pandemic, and it's been in lockdown for a long period of time, and our volumes have suffered. We are quite sure that will come back. We are a bit uncertain exactly to what level. First of all, we have tried to adapt the cost base to the current situation, but also look a bit into the future to see what we can expect. We think that the market in the U.K. will come back for sure. Maybe it's a slightly different market than it was before. We think that we will have a very good business in the U.K. going forward when the pandemic is over.
Looking at the plans for the other European countries, I very much respect the fact that we're unable to talk about the detailed numbers, but I presume you will be setting an organization in connection with these restructuring activities that are sustainable for the long term, or is it more of a response to current lockdowns? Do you understand the question?
I see. Of course. Now we're looking into the future, of course. Made different analysis on scenarios on how the market could look like. I think it is also fair to say that when you have a situation like this, you review the business in a different way and look for all opportunities you can save cost. Sometimes you maybe have too many costs in certain areas, and this is also a chance to review that and take away those extra costs, if you like. It's many different aspects, but the U.K. market will be very fit for whatever will come in a couple of months.
Just on the outsourcing trend, cash cycle and ATM, et cetera, you've talked about that for a couple of quarters, Patrik. What tangible evidence can I actually see in Loomis and in the business as such?
I think that you can see two very clear evidence is that the SafePoint market, if you could take that as an outsourcing, it's going very well. Despite not being able to meet customers and so on, I think that we have been able to land a lot of contracts when it comes to SafePoint. That I would say that one part is, of course, due to the pandemic that you optimize, you look for synergies, you look for efficiency. The other one is very much in the ATM, where it's very clear that one of the driving forces behind the revenue growth in U.S. is ATM business. Banks are saying, "No, we don't want to do this ourselves. Our employees should not do that.
We outsource that to companies like Loomis. I think that when the pandemic is over, we will see that in Europe as well. What we also clearly see, a third part, is that central banks also more and more starting now to outsource their business to companies like us. They say, "Okay, we are not really equipped to do that," and now it's time to hand that over to companies like Loomis. There are three very concrete examples, what we see happening in the marketplace.
All right. Just finishing off, can you guide for CapEx 2021, please, in any sort of interval? Finally, you talk about acquisitions, we're looking at the Loomis share price and valuation. When will you guys consider buybacks? Of course, it's a question for the board, but it's very relevant at the moment, I think.
I can start with the last one. Of course, this is highly relevant. There is an ongoing discussion as we speak, not as we speak, but in the board, of course, around this. We see the same thing as you are, but we need to have an approval by the AGM to do that. That's very high on the agenda. Again, I cannot decide that myself. It's the board and the AGM, but high on the agenda for sure.
Looking into the CapEx number, when it relates to CapEx, that's partly related to the question for how long we will see the pandemic. When the pandemic continue, we will continue to, should maybe say squeeze, but we will keep CapEx low as possible. When it starts opening up, we will start investing again. No significant increases above what we have had historically. As long as the pandemic continue, we will continue to keep as low as possible.
As I interpret that as perhaps 2020 is a good indication of where you're planning currently for 2021?
That's probably a good indication depending on how long the pandemic continue.
Of course. Thanks.
The next question is from Karl-Johan Bonnevier of DNB Markets. Your line is now open.
Yes. Good morning. Fantastic margins in the U.S., and I guess also the comparison for last year, you had some accrual right back. I guess even if you look at it from the perspective of a similar effect this year, a tremendous development. What is the opportunity in the U.S. to take margins even further from this level? Is it further growth SafePoint, further growth ATMs that is supposed to drive this? Or where do you see it go?
Thank you very much for that. I think the margins in U.S. is on a very high level. As we said, it's 15.7% in total. We don't expect that to increase. I've said it many times, I've been wrong before, now we're at the level around 15%-16%, which is very high. I don't think we should expect to see that expanding very much beyond that. I think that it can go up a bit, we should be a bit careful because our focus now is very much to gain new customers, to push the SafeCon concept, to gain more customers when it comes to CMS and so on and so forth. Really driving top line growth.
What we also see, which will have a bit of a hampering effect is, of course, that it's very hard to hire even though there is a high degree of unemployment in U.S., it's not easy to hire for different reasons. I think that that would push a bit of a pressure on the salaries. Also if we cannot hire, that would put pressure on the overtime, and that's what we've been good at handling right now during 2020. These are some of the effects we see in the U.S. market right now.
Now you obviously changed your margin target for this year that you had set already back in 2017. If you look beyond, say, the current challenge in the pandemic, going back, obviously Europe had a higher margin than the U.S. Is that feasible with the current structure to get up to those margins again in Europe? Where do you see this thing balancing out if you take a 12, 18 months view or maybe longer than that?
I think that you're right. If you look back, if we hadn't had a pandemic, where I think we're quite sure that we will be in the margin bracket. That situation isn't there anymore. I think that Europe will come back. Margins will come back to historical levels. We have a management team in Europe who is really expert in driving margin expansion, that will happen. If it's better than the U.S., that's a different question. I think that U.S. has also done a great job as well. They will come back. Europe will come back to more normal European margins when this is over, I'm quite sure.
Excellent. Looking at the pandemic, has that adjusted your rollout ambition for Loomis Pay, so to say, that you're not getting access to the sales that you would have hoped for in the early rollout of it?
No. It makes life tougher for us because it's difficult in Denmark to meet customers, so you have to do that via Teams or Skype or whatever. It's a more challenged situation, but rollout speed, the business plans are to a large extent unchanged.
Excellent. Thank you.
The next question is from Beltrán Palazuelo of Santalucia. Your line is now open.
Hello. Good morning, Patrik, Kristian, Anders, and all the Loomis team. It's Beltrán Palazuelo from Santalucía, Spain. Congratulations for the strong year and difficult situation. I have three questions. First one is regarding opportunities. If you could go a little bit more detail of the size of the opportunities and what's your confidence on, let's say, executing the opportunities and seeing your balance sheet. Second question is regarding share price. I think all of your economic communications are, let's say, always conservative, and when you see, for example, your share price against, let's say, your U.S. competitor, too much conservative communication. Of course, also as a shareholder, we will be very happy about, let's say, a little buyback to show the confidence of the management team. The second question regarding the 2021 targets, of course, if the pandemic is ongoing, it's very difficult to achieve it.
There may be, again, communication and the conservative communication, maybe you would have been better, let's say, to postpone or to say it's difficult to achieve, but how you communicate it seems that even though when the pandemic is not here, that the targets will not be achieved. Yeah. Those are my three questions.
All right. Let's start with opportunities. I think that there are different types of opportunities. One is on M&A. I think that there, as I mentioned before, some companies will be in trouble and will be sold. There is further consolidation in the industry going on. I think that we can see also technology is one very important ingredient for driving the core business, so there are a number of examples for that. There are organic opportunities. I talked about the ATM opportunity. I talked about FX. When FX is coming back, that's also an opportunity. We talked about the central banks outsourcing more and more. There are several organic opportunities right now. When will that happen? It's happening right now as we speak in the U.S., and I think that it will come to Europe as soon as the markets are opening up.
Just to give you a couple of comments on that, the share price, we are, of course, want to have a higher share price. As I said to you, we are having a very intense discussion about possibility to buyback. However, that's not only up to me, it's up to the board and to the AGM. Let's see what happens here. 2021, being a listed company, we need to be very strict on how we communicate and we cannot speculate too much, and right now it's a very uncertain situation. The only thing I can say is that Loomis will come back in a very good shape. It's a bit tricky now in Europe, but I'm 100% sure that Loomis in Europe will come back and Loomis U.S. will continue to prosper, and we will roll out Loomis Pay.
If anything, if you want to have my view, I'm very optimistic about the future. Right now, a couple of more months or one and a half, two quarters will be more difficult.
Okay. Thank you very much for the hard work and for the answers. All our support from here from Spain.
Thank you.
As a reminder, if you would like to ask a question, please press zero and one. If there are no further questions, I hand back to the speakers.
Thank you very much for listening in and thank you for all the good questions. Take care. Bye-bye.