This weeks article – “Loomis – the Whole World to Go For” is provided courtesy of Currency News, from their February edition. If you haven’t subscribed to CN yet, you can do so here.
Loomis is the only major company in the cash handling sector that does just that, ie. handles cash and nothing else, on the back of which it has turned in a solid performance in recent years, despite the economic climate. Having just announced its results for 2013, the past year is no exception and it is within a hairâ€™s breadth of achieving its long-term goal of a 10% profit margin in 2014. This is in spite (or perhaps because) of the fact that it is based in Sweden, which is the most advanced country in the world in terms of moving towards â€˜cashlessâ€™. Currency News spoke to Jarl Dahlfors, who took over as CEO last year and was also appointed President of ESTA (the European Security Transport Association), on the challenges and opportunities facing Loomis in particular, and the sector as a whole.Â
CN: Can you give some information on your personal background, i.e. education and career to date?
JD: I have a masters in Science in Business and Economics from the University of Stockholm, and underwent management training programs at IMD Lausanne and Cranfield University. I joined Price Waterhouse as an auditor, followed by Trygg Hansa Insurance and Asset Management as a controller, the education company EF Education as CFO and then Attendo Care Group, a health care company, as a CFO. I joined Loomis in 2007 â€“ first as the CFO and then CEO for the US group and, since last September, CEO for the Loomis Group.
CN: You did a â€˜job swapâ€™ last year with the then CEO, Lars Blecko. This is unusual â€“ what was the reason?
DJ: Yes, it was somewhat unorthodox. But having been in the US for four years, I was ready for a change and wanted to go back to Sweden. I assumed it would be to do something else as I hadnâ€™t expected that Lars would step down as CEO. But he wanted a more operational role, and to work in the US, so the timing was perfect. We had already worked together very well for many years, so simply stepped into one anotherâ€™s shoes.
CN: Can you give some basic background now to the company?
JD: Loomis is the amalgamation of a number of different companies that were developed or acquired over many years. In the US, Wells Fargo was founded during the Gold Rush of the 1850s, while Loomis Armored Car Service was set up in the 1920s, acquiring Wells Fargo Armored in 1970 to form Loomis, Fargo & Co. In Sweden, meanwhile, a number of different security companies dating back to the 1930s were united under the name Securitas in 1972. This expandedÂ rapidly in the 1980s and 1990s and, having entered the US market in 1999, acquired Loomis Fargo in 2001. In 2006 Securitas split the business into separate, specialised security companies, with Securitas Cash Handling Services, as it was then known, taking the name Loomis. It was floated on the Stockholm Stock Exchange in 2008.
We now operate in 16 countries â€“ other than the US and Argentina, the others are all in Europe â€“and have 400 branch offices and nearly 20,000 employees. Our turnover for 2013, which we have just announced, was SEK 11.364 billion (â‚¬1.25 billion), an increase of 2% in real growth over 2012. Around 38% of our turnover is in the US, and the remainder in Europe. EBITDA was SEK 1.1 billion, up 7.85% on 2012, resulting in a EBITA margin of 9.7%. This makes 2013 our most successful year since the listing in 2008 both in terms of operating margin and net income.
CN: Loomis has performed consistently well in recent years, despite the economic background, and in contrast to others in the industry. To what do you attribute this success?
JD: Our focus is on cash only while theÂ rest are conglomerates in security.
CN: What will be your focus, and your priorities, in the next few years.
JD: When I joined, the company was a mess â€“ the quality was poor and it wasnâ€™t profitable. We have turned this around, to the extent that we have more or less reached our target of 10% profit margin.
As for moving forward, we have a three-step approach. First, improve the quality and stabilise the company â€“ which has happened. Second, make it profitable, which has also happened. And third, grow the company. This is the phase we are now moving into.Â For any company, you need a solid foundation. Once you have this, profits will follow, and then growth.
CN: Where will this growth come from? For example, other than Argentina, you only operate in Europe, and also the US. Do you have plans to extend beyond this â€“ to go global, in other words?
JD: Yes – we need to diversify and be more like the other players. Loomis is the only company that operates only in the west, while for our competitors, around one third of their revenue comes from new markets. That is a weakness in Loomis that needs to be corrected.But the answer to future growth isnâ€™t only in entering new markets, it is also in offering new products and services, and that is where we have been stronger than the others.
CN: Such as?
JD: The best example is our Smartsafe â€“ 15,000 of which have now been installed. These are â€˜reverse ATMsâ€™ which are deployed by retailers and enable them to deposit takings in-store, which are then collected by Loomis. But the deposits are credited instantly to their accounts. So these serve as virtual money rooms. The US is a very large market for theseÂ Smartsafes, but they are coming to Europe now too.
Another service we offer, in Norway at present, is foreign exchange for tourists, which banks outsource to us. We buy the currency â€“ Thai bahts, or Singapore dollars or whatever â€“ in Zurich, bring it to Oslo and then transport it to the banks. They are able to meet their customersâ€™ needs for foreign currency, without having to take care of sourcing and dealing with it themselves.Â So growth will also come from new technologies and from outsourcing.
CN: Apart from convenience, what is the main driver for the latter?
JD: As with all outsourcing, the incentive is the cost increase in current structures. Basically, the level of cash is decreasing â€“ this is a long-term trend â€“ and results in free capacity, which is expensive. So if there less cash, then the unit cost of dealing with it goes up.
Take the Hilton hotel group as an analogy. In New York, they no longer offer room service directly because theÂ demand is low, so the proportional costsÂ are high. However some people stillÂ want this service so they outsource it. ItÂ is good for them, good for their customersÂ who want room service, and goodÂ for the company to which they outsource.
Banks are the same. Cash is not going away, but as volumes reduce, it is becoming more expensive to deal with. This is particularly the case in the US, where banksâ€™ cash operations deal with checks as well. The number of checks is decreasing dramatically and that drives the cost per processed unit up. Since the same assets are used for cash and checks, we benefit. We have been driving this for the last 4-5 years and it accounts for the fact that we have doubled the size of our non-transport cash business in the US.
So while the growth opportunities for cash transport may be limited, the opportunities for services around this are fantastic. Much of the US and Western Europe is already going this way, but not so much – yet – in Eastern European, nor key markets in Latin America, Asia and Africa. So we have the world to go for!
CN: Closer to home, Sweden is often cited as the country most likely to be the first in the world to go completely â€˜cashlessâ€™. Can you giveÂ some examples of cashless initiatives in the country? And how realistic do you think such claims are?
JD: It will continue to be less cash all over the world – that is the long term trend. But never cash free, just cashless. Since Loomis is already shifting and adjusting to that in our home market, we are in a good position to drive the developments towards outsourcing and other services in the rest of the world.
As an example in Stockholm today, public transport is 100% cash free and the number of ATMs has been greatly reduced. But the public has not been convinced – they still need and want cash. So closing down cash services for customers may be a trend, but customers donâ€™t like it â€“ and there are ways that we can benefit from this, as can banks that go against the trend.
Take the Handelsbanken, for example, which has the highest score in the country in the quality index for customer satisfaction. Handelsbanken also happens to be the only bank in Sweden that accepts all cash at all its branches.
There are other examples, too, including the fact that number of grocery stores offering â€˜cash-backâ€™ solution is increasing.
And another is the â€˜cash officesâ€™ that Loomis now operates in smaller towns without branches, and in suburbs, or shopping malls. These are kiosks that act as local branches, providing cash services for all banks. Again, another example of outsourcing, as it would be too expensive for the banks individually to serve these remote or smaller areas.
And while 95% of our business is outside of Sweden, having the experience of our home market is very good for development. What happens here will happen elsewhere in the world sooner or later, and we are ready to offer solutions.
CN: Moving to Europe more generally, you have recently been appointed President of ESTA. What currently are the main issues/priorities for the European CIT industry?
JD: In recent years, the focus was on the EU Cross Border Regulation, relating to the transport of euro cash over borders. And a lot of work went on with Brussels to make sure the right decisions were made in this respect. This was before my time, but it has now come into effect, and the focus has moved awayÂ from the transport of cash to how to manage cash in society with new technologies.Â We are currently going through a review that will lead to a programme in which we move from just transport to cash and services. This journey has just started.
CN: If that is now the focus of ESTA, wonâ€™t the name (European Security Transport Association) then become something of a misnomer?
JD: Good question! But we are not moving away from transport â€“ that is still important. Instead, we are expanding the focus on cash more generally. And of course, this will include the very good work that ESTA has already been doing, as the â€˜voiceâ€™ of cash in Europe, in publicity on behalf of the whole cash sector.
CN: ESTA has certainly been very proactive in its support of cash. But how can this be relayed more effectively to the public and bodies that influence public opinion? And how can the broader cash industry become more involved?
JD: We need to communicate the benefits of cash to many parties and try to balance the heavy lobbying that credit card companies are doing. But there is no way that ESTA can compete with their budgets. Our biggest advantage is all the people from different sectors who work with cash, and the answer will be for the companies to work more locally. A good example is in Sweden and Norway, where we funded a report that really dug deep into the cost of different payments and found that cash really is more efficient. More of that work needs to be done in order to provide a balanced view.Putting out the message should be done market by market, and country by country, rather than trying to fight the big companies on a global, or even regional, scale.
CN: And that core message, from the perspective of Loomis and the cash management industry more generally, should be?
JD: We must accept the fact that the future will have a higher proportion of alternative payments methods, but that cash will always be around and to survive in that environment we must promote the new technologies for retailers and banks. Basically, ensuring we do more services ie. broader but with less cash circulating.