Securitas Direct AB: Interim report 1 January-31 March 2008

STABLE SALES GROWTH AND STRONG PROFITS

  * 14,795 customer cancellations in the first quarter
  * Payback period for investments in new customers of 4.4 years* in
    the first quarter
  * Net addition of 30,200 new customers in the first quarter
  * Operating profit includes a reversal of SEK 9.4 million for
    non-utilised provisions relating to the public offer

*The payback period does not include costs relating to the public
offer.
 

SALES AND INCOME
                                            Jan-Mar 2008 Jan-Mar 2007
Net sales, SEK thousand                     1,068,244    911,907
Sales growth adjusted for currency effects, 15           19
%    
Operating profit, SEK thousand              96,377       70,619
Operating margin, %                         9.0          7.7
Profit for the period, SEK thousand         67,006       44,994
Earnings per share, SEK                     0.18         0.12

 
OPERATING TARGETS

  * Customer cancellation rate was 6.3%² (6.4)
  * Payback period for investments in new customers was 4.4 years¹
    (4,1)
  * Net customer portfolio growth was 14.8%² (19.3)

1) The payback period does not include costs relating to the takeover
bid.
 
2) Net growth and the cancellation rate have been adjusted for 6,419
income-neutral cancellations which arose during the second quarter of
2007.
 
PRESIDENT'S COMMENTS
 
The first quarter of 2008 was one of steady performance across the
business. We gained around 45,000 new customers in a market that
remains sluggish. This was 2,700 more than in the preceding quarter.
Continued sales growth, combined with a positive underlying trend in
the cancellation rate, saw a net addition of more than 30,000
customers to the portfolio during the quarter. The portfolio
increases a new customer every five minutes around the clock, which
is a strong showing.
Our focus throughout 2007 on improving customer care paid dividends
in the second half of the year as cancellations decreased to around
14,000 per quarter. This trend was maintained in the first quarter of
2008, although the total of 14,795 cancellations was slightly higher
than expected. This was due to the higher proportion of business
customers in the portfolio and a slight increase in cancellations
resulting from our annual price increase.
However, the metric we use to measure cancellations is moving in the
right direction and fell by 0.3% to 6.3% compared to the prior
quarter. The metric measures the cancellation rate over a rolling
12-month period, which limits the impact of quarterly fluctuations.
The aim this year is to reduce the cancellation rate to 6.0%. Because
cancellations are a key driver of value and a measure of how good we
are at serving our customers, management is committed to maintaining
the strong focus on delivering an improved service to customers and
thereby limit cancellations.
Underlying operating profit in the first quarter was SEK 87 million.
This figure does not include a reversal of SEK 9 million for
non-utilised provisions for costs relating to the public offer. The
underlying operating margin was 8.1%.
The cost of gaining a new customer is relatively stable and the
payback period was 4.4 years in the first quarter. We still have some
work to do to reduce this figure to our long-term target of 4 years.
In the first quarter our monthly cost per customer increased by SEK
8. We succeeded in offsetting this through a higher average monthly
fee, which meant net monthly income per customer was more or less
unchanged. The cost increase was primarily due to increased expenses
for service, materials and warranties.
Cash flow during the quarter was negative and thus impacted net debt
negatively.
Let me conclude by noting that Securitas Direct is facing challenges
regarding both strategy and growth. The new board of directors has
addressed these questions, which is promising for the future. 

 
GROUP KEY DATA
 

OPERATING                            31 March         31 March
                                     2008             2007
Cancellation rate, %                 6.3²             6.4
Payback period, years                4.4¹             4.1
Net customer portfolio growth        14.8²            19.3
Customer portfolio                   979,626          860,039
                                                       
1) The payback period does not include costs relating to the public
offer.
 
2) Net growth and the cancellation rate have been adjusted for 6,419
income-neutral cancellations which arose during the second quarter of
2007.
Including these, net growth and customer cancellations were 13.9% and
7.1% respectively.

 

FINANCIAL                          
                                            January - March
SEK thousand                      2008                      2007
Net sales                         1,068,244                 911,907
                                     
Sales growth adjusted for         15                        19
currency effects, %          
Operating profit                  96,377                    70,619
Operating margin, %               9.0                       7.7
EBITDA                            223,696                   183,096
EBITDA margin, %                  20.9                      20.1
Profit for the period             67,006                    44,994
Earnings per share, SEK           0.18                      0.12
Capital employed                  1,814,074                 1,641,650
Return on capital employed, %     21                        14
Net debt                          67,802                    117,749
Free cash flow                    -28,499                   34,591

 
TARGETS AND OUTLOOK
 
Securitas Direct has three long-term operating targets

  * Cancellation rate of less 6% per year
  * Payback period for investments in new customers of less than 4
    years
  * Net customer portfolio growth exceeding 20% per year

The growth strategy is based on long-term value creation, and the aim
is that growth should not be at the expense of a higher cancellation
rate or longer payback period. Hence, the Group's targets for the
cancellation rate and payback period take precedence over customer
portfolio growth.
 
Management's expectation is that the positive trend in customer
cancellations will continue due to an ongoing focus on developing and
improving customer service and a high degree of proactivity in
relation to changes in the portfolio that arise when customers move
to new properties or transfer their subscriptions.
 
However, management does not expect the company to meet its long-term
target for net customer portfolio growth during 2008.

The board of directors will during the course of the year evaluate
the levels of the operating targets.
 
CONFERENCE CALL
 
A conference call will be held on 6 May 2008 at 15:00 CET. Management
will make a brief presentation of the results and take questions. If
you wish to participate, please call +44 (0) 20 7162 0025, allowing
yourself 10 minutes for registration. The conference call will be in
English.
 
At 9:00 AM, a PowerPoint presentation relating to the report will be
published at www.securitas-direct.com. Management will refer to
information in this presentation during the conference call.
 
A recording of the conference call will be posted on the Securitas
Direct website.
 
FOR FURTHER INFORMATION CONTACT
 
Dick Seger, President and CEO, tel +46 (0)708 218817  
 
Lars Andersson, CFO, tel +46 (0)706 327580
 
Michael Peterson, Investor and Media Relations Manager, tel +46
(0)733 221814
email: ir@securitas-direct.com, www.securitas-direct.com
 
 
The information in this report is such that Securitas Direct AB
(publ) is required to disclose under the Securities and Clearing
Operations Act and/or the Financial Instruments Trading Act. The
information was announced to the market at 08:00 CET on 6 May 2008.