Securitas AB Annual Report 2005

Financial control and fi nancial objectives
Financial objectives and fi nancial performance
12
9
6
3
0
-3
Organic sales growth
%
01 02 03 04 05
■ Organic sales growth
Objective
The organic sales growth objective is 6-8 percent
over an economic cycle. In the last fi ve years,
organic sales growth has averaged 4 percent a
year. The lower growth rate is mainly due to U.S.
operations, which rebounded in 2005.
External key fi nancial ratios
and Six Fingers
The key factors in Six Fingers are clearly linked to the
Group’s external key ratios, see fi gure on page 25.
The volume-related factors – new sales, net change
in customer contract portfolio and total sales – together
equate with total sales and organic sales growth.
Acquisitions are not reported as organic sales growth
during the fi rst year after acquisition. Organic sales
growth is also adjusted for divestitures and changes in
exchange rates to refl ect real change.
The effi ciency-related factors – gross income and
indirect expenses – defi ne operating income before amortization
and operating margin.
Operating income less amortization of acquisition
related intangible fi xed assets, acquisition related
restructuring costs and fi nancial items as well as the
revaluation of fi nancial instruments and share in
income of associated companies gives the Group’s
income before taxes.
Capital usage related factors: In terms of capital
employed, operating capital employed as a percentage
of total sales is monitored all the way up to the Group
level. Capital employed is defi ned as operating capital
employed plus goodwill, acquisition related intangible
fi xed assets and shares in associated companies. Return
on capital employed is defi ned as operating income
before amortization divided by capital employed excluding
shares in associated companies. Interest coverage
ratio is a measure of the Group’s ability to pay interest.
It indicates how many times operating income before
amortization covers interest expenses. As a measure of
indebtedness, Securitas in 2005 switched from following
8
6
4
2
0
Operating margin
%
01 02 03 04 05
■ Operating margin
The objective is an increase in the operating
margin of 0.2 percentage points a year. In
2005, the operating margin decreased by 0.2
percentage points, mainly due to the divestiture
of the German cash handling operations.
01 02 03 04 05
The income objective was adjusted downward
in 2005 due to the introduction of IFRS. The
objective is an increase in income before taxes
of 10–15 percent a year. The increase in 2005
was 8 percent. The difference is mainly due to
the divestiture of the German cash handling
operations.
net debt equity ratio, measured as the Group’s interest
bearing net debt divided by shareholders’ equity, to instead
follow free cash fl ow in relation to net debt.
A clear fi nancial model for
a better understanding of results
Securitas’ fi nancial control model is basically simple. It
focuses on transparency and the interconnection between
revenue and expense in the statement of income, equity
in the balance sheet and generation of cash fl ow to attain
as much free cash fl ow and value for shareholders as
possible.
Statement of income
The statement of income is functionally divided and
therefore refl ects the organization. As a result, responsibility
for each profi t level is clear and managers with
operational responsibility can concentrate on the factors
they can affect. Gross margin and operating margin are
the key ratios in operational follow-ups at the division
and Group level. Amortization of acquisition-related
intangible fi xed assets, fi nancial items and taxes are
followed up separately.
Statement of cash fl ow
In principle, operating income should generate an equal
cash fl ow from operating activities. However, the cash
fl ow is affected by investments in fi xed assets used in
24 SECURITAS 2005
4
3
2
1
0
Income before taxes
BSEK
■ Income before taxes, Swedish GAAP
■ Income before taxes, IFRS