Reuters: Hot Stocks: UPDATE 2-Securitas shares jump as cost cuts boost earnings

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UPDATE 2-Securitas shares jump as cost cuts boost earnings Aug 7th 2013, 11:49 Wed Aug 7, 2013 7:49am EDT * Q2 EBITA 809 mln SEK vs consensus 796 mln * Europe remains challenging, margin up on cost cuts * Shares up 8 pct, hit highest in two years (Adds comment by CEO, share price reaction) By Anna Ringstrom STOCKHOLM, Aug 7 (Reuters) - Profits at security services provider Securitas AB grew more than expected in the second quarter thanks to cost cuts, sending its shares to a two-year high on hopes a turnaround is on track despite sluggish markets. Revenue before acquisitions at the world's second-biggest security group grew 1 percent from a year ago, as the economic situation in Europe, where Securitas earns more than half of its sales, remained tough and markets in France, Portugal and Spain even continued to worsen. Still, operating profit before amortisation grew 13 percent to 809 million crowns ($123 million), above a forecast for 796 million, and the Sweden-based group said margins improved in all units despite it not managing to pass on higher wage costs to clients. "The restructuring and cost savings program in 2012 had the biggest positive impact on the development," Chief Executive Alf Goransson said. The group, which trails sector leader G4S by sales, hires out guards and surveillance systems in 52 countries across the globe. Its shares were up 7.8 percent at 1026 GMT on what analysts said was relief the group looked set for a turnaround, helped by cost savings and the absence of bad news on an analyst conference call with management. "I don't think the market situation is going to dramatically change during the coming six months in North America, Europe (or) Ibero-America," Goransson told analysts. Hit by austerity in Europe and a stuttering recovery in the United States, its single-biggest market, Securitas has been slashing costs to return to profit growth. But it has this year also increased investments in high-tech surveillance systems such as intelligent cameras, sales of which it aims to triple by the end of 2015 from 6 percent of sales in 2012. It is hoping such labour-saving technologies will particularly catch on in the United States, where health insurance reforms are expected to lift guarding costs. The United States last month postponed by one year to 2015 the aspects of reform that are seen hitting Securitas's costs and analysts said they were raising profit margin estimates for 2014. "We still expect the cost increase to be in the range of 10 percent but it is going to be in a year and a half from now," Goransson said on the effects of the reform. Securitas shares, which are up 15 percent this year, trade at 11.5 times forecast 2013 earnings, roughly the same as G4S, according to Thomson Reuters data. ($1 = 6.5548 Swedish crowns) (Editing by Patrick Graham and David Holmes) Link this Share this Digg this Email Reprints

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