STOCKHOLM (Reuters) - Rising wage costs in key markets France and the Netherlands and contract losses held back profit growth at Securitas (SECUb.ST) in the second quarter, offsetting price hikes at the world’s biggest security services company.
Shares in the Swedish group fell as much as 6.5% on Wednesday after it missed operating profit expectations.
Wage costs are a major expense for a company that employs around 300,000 people around the globe, although it is striving to increase electronic surveillance as a share of turnover.
But employment rates are high in many countries, while some are also increasing minimum wage levels.
“In Europe we had challenging labour conditions and were not able to fully offset wage cost increases through price increases in two countries,” CEO Magnus Ahlqvist said in a statement.
“We see that the employment rate, activity overall, is high in most of Europe,” he told Reuters in an interview.
Securitas, whose competitors include Britain’s G4S (GFS.L), said it made a quarterly operating profit of 1.24 billion Swedish crowns (£106.09 million), up from 1.21 billion in the same period last year but below analysts’ average forecast of 1.36 billion, according to Refinitiv data.
Shares in the company, whose services range from manned guarding and alarm surveillance to airport security, were down 6.4% at 1325 GMT, reducing a year-to-date rise to about 9%.
Underlying sales growth slowed to 5% from 7% in the previous quarter and in the same quarter last year, due to contract losses, primarily in France and Britain.
“We had more contract losses than we would have wanted and had planned for in France and Britain. Looking at the competitive landscape overall, traditional guarding is the most exposed segment,” Ahlqvist told Reuters.
Credit Suisse analysts, however, said the core sales slowdown was in line with expectations as some of the contract losses were already known.
Electronic security sales grew by 14% in the quarter to account for 21% of group turnover.
Securitas has several efficiency improvement programmes underway and has said a new programme for its European operations is on the cards.
Ahlqvist said he would give details later this year.
He predicted the security services market would grow 2-3% in Europe this year, and around 4% in North America. Securitas was short of the European forecast in the second quarter, but beat the estimate for North America.
Reporting by Anna Ringstrom; Editing by Simon Johnson and Mark Potter