Page 63 - Loomis Annual Report 2017

Loomis Annual Report 2017 Administration Report 59
Administration Report Loomis AB
The Board of Directors (the Board) and the President of Loomis AB (publ) corporate identity number 556620-8095, registered o ce in Stockholm, hereby present the annual nancial statements and consolidated nancial statements for the 2017 nancial year.
The Group’s operations
Loomis o ers national cash handing services in the USA, in major parts of Europe and in some parts of South America, as well as cross- border transportation of cash and precious metals and storage of valuables. The services are mainly aimed at central banks, commer- cial banks, retailers, other commercial enterprises and the public sector. Loomis o ers a comprehensive range of services in Europe* and in the USA. In Segment Europe, cash in transit (CIT) accounts for 66 percent (67) of revenue while cash management services (CMS) accounts for 34 percent (33). In Segment USA, CIT accounts for 67 percent (67) of revenue and CMS for 33 percent (33). Segment International encompasses the following business areas: cross- border transportation of cash and precious metals, storage of valu- ables and, up until June 30, 2016, general cargo operations.
Loomis’ operations involve taking over the customers’ risks associated with managing, transporting and storing cash, precious metals and valuables. In light of the nature of the business, there is a risk of the loss of cash and valuables due to criminality or failures in procedures, and a risk of personal injury. Managing and control- ling these risks is therefore a key aspect of the Company’s opera- tions, and a total of 150 individuals work on operational risk man- agement at the Group, regional and national levels. Common risk management structures, processes and systems are established at the Group level and employed by all of the local operations and branches. Tools and processes have been established to identify, take action and monitor risk. The risk management organization works both proactively and reactively. This includes implementing preventive measures, monitoring the external environment and carrying out crisis management. The safety of the employees is always the main focus of risk management and employees at all levels must understand and be able to manage the risks associated with their particular operations. A focus on ethics and values as well as well-de ned work routines are key aspects of the employees’ professional development. Actively monitoring the external envi- ronment also enables Loomis to anticipate possible incidents.
Signi cant events during the year
Acquisitions and divestments
In January 2017 Loomis acquired all of the shares in the Belgian company Cobelguard CIT NV. Cobelguard provides domestic cash handling services and is based in Ghent, Belgium. In addition to the purchase price paid of SEK 34 million, the sellers have the right to deferred considerations maximized at EUR 5 million depending on future nancial development. The maximum deferred consider- ation has been calculated at present value and the entire amount has been provided for. The purchase price, excluding any deferred consideration, was paid on closing. Cobelguard has around 170 employees and its annual revenue at the time of the acquisition was around EUR 12 million. The acquisition had a marginally negative impact on Loomis’ earnings per share for 2017.
In September 2017 Loomis acquired all of the shares in the Finn- ish company Intermarketing Oy. Intermarketing’s head o ce is in Helsinki, Finland. The company o ers both bank and retail cus- tomers comprehensive solutions in cash depositing and recycling. 90 percent of the purchase price was paid on the transfer date. Intermarketing has around 30 employees and its revenue for the year time of the acquisition amounted to around EUR 9.5 million. The acquisition had a marginally negative impact on Loomis’ earn- ings per share for 2017.
*Argentina and Chile are included in the European segment because these operations are reported and followed up as part of the European segment.
In December 2017 Loomis acquired all of the shares in Wagner Seguridad Custodia y Transporte de Valores (Wagner) in Chile. Wagner provides domestic cash handling services and its head o ce is in Santiago, Chile. Wagner has around 940 employees and had revenue in 2017 of around SEK 225 million. The acquisition is expected to have a marginally positive impact on Loomis’ earnings per share for 2018.
In August 2017 a small acquisition was made. The acquisition was consolidated into Segment Europe and did not have a signi - cant impact on Loomis’ earnings per share for 2017.
For further information about acquisitions implemented, see Note 15.
Other signi cant events during the year
The Annual General Meeting on May 4, 2017 voted in favor of the Board’s proposal to introduce an Incentive Scheme (Incentive Scheme 2017). Similar to past incentive schemes, the proposed Incentive Scheme 2017 involves two thirds of the variable remuner- ation being paid out in cash the year after it is earned. The remain- ing one third will be allotted to participants in the form of Class B shares at the beginning of 2019. The allotment of shares is contin- gent upon the employee still being employed by the Loomis Group on the last day of February 2019, other than in cases where the employee has left his/her position due to retirement, death or a long-term illness, in which case the individual will retain the right to receive bonus shares. The principles for performance measure- ment and other general principles that already apply to existing Incentive Schemes will still apply. Loomis AB will not issue any new shares or similar instruments in connection with this Incentive Scheme. To enable Loomis to allot these shares, the AGM voted in favor of Loomis AB entering into a share swap agreement with a third party under which the third party will acquire the Loomis shares in its own name and transfer them to the Incentive Scheme participants. The Incentive Scheme will enable around 350 key individuals within the Loomis Group to become shareholders in Loomis AB over time. This will increase employee commitment to Loomis’ development for the bene t of all shareholders.
On September 28, 2017 Loomis published its new nancial and sustainability targets. The new targets for the 2018–2021 strategy period are:
Financial targets
• Revenue: SEK 24 billion in 2021.
• Operating margin (EBITA): 12–14 percent. • Dividend: 40–60 percent of net income
Sustainability targets
• Zero workplace-related injuries
• Decrease carbon emission by 30 percent • Decrease plastic volumes by 30 percent
The timing and size of both acquisitions and investments may have an impact on the operating margin during the target period, which is why a range of 12–14 percent for the operating margin has been set. Assuming that no margindiluting acquisitions take place, Loo- mis is expecting to generate an operating margin of around 14 per- cent for the full year 2021.
Loomis has a strong focus on
sustainability and the activities are integrated into the Company’s business model. The goal is to further elevate the level of ambition for sustainability work and Loomis has therefore decided to include three sustainability targets. These targets have been chosen as they are expected to have a positive impact on the environment while also improving Loomis’ nancial results.