North America helps lift Securitas profit, offsetting Europe wage costs

STOCKHOLM (Reuters) - Securitas SECUb.ST, the world's biggest security services group, reported a rise in third-quarter profit as improved margins in North America helped offset wage cost pressure in Europe and said it outgrew the market in the first nine months.

FILE PHOTO: Securitas CEO Magnus Ahlqvist poses for a picture at the company's headquarters in Stockholm, Sweden August 14, 2017. Picture taken August 14, 2017. REUTERS/Anna Ringstrom/File Photo

Operating profit grew to 1.4 billion Swedish crowns ($149.2 million) from a year-ago 1.1 billion, roughly matching a mean forecast in a Refinitiv poll of analysts.

The operating margin in North America widened to 6.7% from 6.5% while in Europe it shrank slightly to 5.9% from 6.0% on some wage pressure, with salary increases not fully offset by price increases in France and the Netherlands.

Shares in the rival to Britain's G4S GFS.L rose almost 4% in early trade to 9-month highs.

Nordea analyst Henrik Mawby said operating margins in the United States and Europe were better than expected.

“It’s a very good report given that they are known to always have some hiccups in the quarters, but now it’s the other way around,” he said.

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.

“Labor markets are increasingly challenging in all our geographies, and managing the price and wage balance will remain a key focus this year as well as going into 2020,” Chief Executive Magnus Ahlqvist said.

Ahlqvist told Reuters he didn’t see wage pressure easing in the near future.

Organic sales growth at the company, whose services range from manned guarding and alarm surveillance to airport security, slowed as expected, to 4% from 6%, due to earlier communicated contract losses in France and Britain.

Ahlqvist expects market growth of around 4% in North America and of 2-3% in Europe next year, roughly the same as this year, he said in the interview.

Securitas said ongoing cost savings programs were progressing according to plan. It is preparing a new program for its European operations, and Ahlqvist said he hoped to give some guidance later this year on that.

Reporting by Anna Ringstrom, additional reporting by Colm Fulton and Helena Soderpalm; Editing by Emelia Sithole-Matarise