Loomis AB

STO:LOOMIS

Earnings Call Transcript 2021-Q1

[Operator]

Hello, and welcome to the Loomis Q1 2021 Report. [Operator Instructions] Just to remind you, this conference call is being recorded.Today, I am pleased to present CEO, Patrik Andersson. Please go ahead with your meeting.

[Patrik Andersson, CEO & President]

Thank you very much. Good morning, everyone, and welcome to the first quarter presentation from Loomis. My name is Patrik Andersson, CEO of Loomis. And with me here today, I have Kristian Ackeby, CFO; and Anders Haker, Chief Investor Relations Officer. I will start by giving a short overview of the quarter and then open up for questions at the end.So let's start the presentation and turn to the next page, which is the disclaimer page, and then we move on to the next one, which is Page #3. So in my role, I get a lot of questions regarding the payment landscape and also the role of cash, of course. I'd like to just make a couple of comments on that questions. Firstly, cash is the most important payment method in the world. First of all, I think that it's worth mentioning that inclusion is very important. Cash is important from a social perspective as many households are unbanked or underbanked globally. So many people are dependent on cash as a payment method.We also see, from a recent ECB study that 70% of the point-of-sales and person-to-person retail transactions are done in cash. So cash is the dominant payment method for smaller amounts, especially.Cash is also growing when it comes to circulation. So if you look at the 2 slides on the right-hand side, you can see the cash in circulation in the eurozone but also in U.S. dollars. And as you can see, it has been growing steadily the last years and at a rate of 5%, 6% CAGR and has been increasing, especially now during the COVID situation where many central banks have printed a lot of money which are now in circulation.How about the market then? What we see very clear is that when countries open up from the pandemic, we see a short-term significant increase in volumes when that happens. We also see -- we also believe that there is a long-term growth -- stable growth in the future. We can see that when countries are opening up and then -- on during a short period of time, the volumes are coming back.However, to be honest, there is a structural decline in the Nordic markets, but that has limited impact on the Loomis Group. And that is nothing new. That's been going on for some years, as you know. And Nordic now it's accounting for about 7% of the total Loomis Group turnover. So it's a limited part of the group still.So when it comes to the pandemic, of course, that has had an impact of Loomis, but it's not as bad as many people believe. When we look at Europe, we had a negative organic growth by 19% in Q1. But we see that people are spending money. The economy is churning, however, on a lower level. But also when we look at the U.S., we had, of course, an impact from the COVID situation in the U.S., but we reported a 3% organic growth driven especially by SafePoint and ATMs. So all in all, cash is important now and will be so also in the future.Let's turn to the next page, which are the highlights for the quarter. I'll go through them quickly and then come back to some of them later in the presentation. So first of all, I'm very pleased that we now have rolled out Loomis Pay also on the Swedish market. That's a big step for us, of course. We have acquired the Swiss -- the cash handling business of the Swiss Post. This is very much complementary to the business we have in Switzerland when it comes to CIT, CMS and also SafePoint. We're acquiring 1,300 SafePoint from the Swiss Post, which are adding now to the portfolio.We had a real growth of minus 6%, and that what's important here is the acquisition we made in Finland of Automatia in Q4, but also the acquisition we made in Sweden in Q2 which is boosting the growth.Organic growth was then at minus 9%. Of course, overall lockdowns affected revenue during the 2 first months, but we saw that March -- the volume started to recover in March, and we are now expecting to improve further with less restrictions. I'll come back to that a bit more.We have also positive -- or we had positive growth in the U.S. compared to Europe. And that is due to the structure of the customer portfolios, also more less close downs than in Europe.Operating margin was at 8.7%. Including Loomis Pay, it was at 8%. And we can see that especially the U.S. operations are really driving the profitability of the group. We'll come back to that as well.Operating cash flow was close to 100% also in the quarter. So what we have done in terms of protecting the cash flow is really working. So let's turn to the next page, and just look at the growth. This is how to illustrate the margin development in a bit of a perspective. We had a low point in Q2 2020, and we have seen a good recovery after that. The issue we've had is that society has been opened up and closing. So it's been quite a volatile development during the last couple of quarters.So let's turn to the next page and start with Europe. As I mentioned before, real growth was at minus 14% and what we are now working very much with this is to integrate acquisitions of Automatia and Nokas Sweden, and that are -- that is progressing according to plan. We had an organic growth of minus 19%. Of course, that is due to the pandemic. But we now see -- have a much more optimistic view on Q4 and Q3, based on what has happened at the end of Q1. So we are more optimistic now for the coming quarters.What is driving that is, of course, less restrictions in society. Society is opening up, but also that the vaccination program is rolling out across Europe. We also believe that in Q3, there will be more domestic vacation than before, and that is also helping to drive the economy, drive spending and also helping our volumes.Operating margins, of course, impacted by the lower volumes, but also improving during the quarter. And we have done significant cost-reduction programs across Europe, and that will help us in Q3, Q4 to support the margins.Let's then turn to the next page and turn to U.S. Overall, a very strong performance. Again, I have to say, it's a fantastic result. We see now that organic growth is picking up. It is now at 3%, steadily increasing. SafePoint revenue continues to expand. And we had more than 11% organic growth in Q1, which is really, really nice to see. So we are now exactly at the spot we want to be when it comes to SafePoint. And that is now accounting for as much as 18% of the total U.S. revenue.And we also see a very strong trend when it comes to ATM revenues which are picking up significantly also during the quarter, but that's been doing that throughout the year. And we have been very focused on keeping the high-quality service in our branches. And that strategy has been working very well. We are attracting new customers and market share is increasing for all services. We can say that we have also won a couple of new [ vaults ] when it comes to CMS. So we also see that the CMS outsourcing is taking place or speeding up right now.Operating margin was 16.3%, all-time high for our first quarter ever. And of course, it's a mix from SafePoint and ATM, which is helping, but also the efficiency programs that we're running for some time and we always do. So we are very optimistic about the U.S. short term, midterm and long term.So let's turn to the next page, which is then Loomis Pay. So as I mentioned, launched in Denmark last year and in Q1 in Sweden. We have signed agreements with new customers but also existing customers in all markets. The reception has been positive in all terms. Merchants are prepared to switch to our solution, which is a cloud-based POS system and the technology and the service is working very well. And we also see that by switching to Loomis Pay, the merchants can focus more on customers and revenue than before because the Loomis Pay make their life easier.The market in -- the addressable market in the Nordics is SEK 15 billion, and Sweden and Denmark together is SEK 9 billion out of that SEK 15 billion.The revenue and also operating result, which is not very much, is in line with expectation, and we will see a ramp-up of the revenue as societies are opening up, of course, but also when we have been able to penetrate the market in a better way.So the ambition, as we have said a couple of times, within 5 years, we should have a SEK 3 billion revenue coming from Loomis Pay, and a positive operating result is expected during 2023. And we will invest net about SEK 100 million a year in the last -- sorry, in the coming 3 years to support the launch of Loomis Pay.And it's also supporting our cash business. So when we present Loomis Pay, we also integrate the SafePoint solution, for instance, in that total package to the retailer. So it's a win-win situation for the cash business and for Loomis Pay.Let's turn to the next page. And as we look at the P&L, which I don't have any detailed comments on, I just want to summarize the quarter and where we stand. So U.S. is continuing to perform very strongly also compared to a strong Q1, don't forget that. I expect a very positive development short, mid and long term.Europe has a much lower cost base. And as vaccination speeds up and society is opening up, margins will improve and come back to pre-COVID levels. Loomis Pay is launched in both Denmark and Sweden, and the reception has been positive. Loomis Pay is performing according to plan.We also continue to have a very strong pipeline when it comes to M&A. There are a number of targets that we are continuing to work with, and I'm very happy that we could close the deal in Switzerland to even strengthen our position further in Switzerland.So all in all, we are on the right track. And let's turn to the next page. And I say, operator, we now open up for questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Viktor Lindeberg of Carnegie.

[Viktor Lindeberg, Research Analyst]

I was just looking at the Loomis Pay. This is a very nitty-gritty question that you recorded revenue of SEK 2 million in Q1, and that seems to be a bit lower than the trend you saw in Q4 and also Q3, these new numbers you provided. Can you tell us a bit more about what is going on, on that?And then secondly, you have, of course, the ambition target in the coming years. But can you tell us a bit of how back-end loaded we should expect this to be? Is there a significant ramp-up period before you start to recognize revenue here?Second question then is on client retention. And if you've seen any material change here in this quarter or recent quarters where you may changed the -- either volume or pricing components in some of these contracts or maybe when client basically cancel contracts? Those are my 2 initial questions.

[Patrik Andersson, CEO & President]

Okay. Thank you. I'll start by answering the second question and then Kristian take the first one. So when it comes to client, we haven't lost any clients as we can see. Of course, clients have sort of reduced their services and so on due to the pandemic. We haven't lost any clients. Of course, I mean, everybody wants to have lower prices. But I also think that we have been able to keep prices on a good level, and we have been able to increase prices somewhat in the U.S. market, not so much in the European market, but to -- in the U.S. market.So I'm not worried about the clients. We keep the clients, and we are actually gaining clients in the U.S. market. I'm not worried about the price pressure right now. So yes, that's the answer to that question.

[Kristian Ackeby, Chief Financial Officer]

And regarding the revenue and the trends related to Loomis Pay, most of them sort of revenue in Loomis Pay is from transaction fee and the transactions have been less during this quarter due to the more strict lockdown. So it's more -- it's directly correlated with the restrictions in the society.And when you look into the revenue trend in the future, you should not expect to see the significant increases in next quarter or the quarter after that, since it is a process where we started -- where we are selling first and then the volume starts picking up. And then it will, of course, be a more exponential increase later on in this journey.

[Viktor Lindeberg, Research Analyst]

All right. And maybe I can follow up on SafePoint. It's been a great success in the U.S., and you have also been explicit on your ambitions in Europe, but you've not been talking that much about SafePoint in Europe. Could you maybe provide an update on where you stand now in terms of installations and contract and the pipeline and so forth?

[Patrik Andersson, CEO & President]

Yes, that's right. I mean I think that in comparison to U.S., it's been a bit difficult to sell SafePoint in Europe during this last year, to be honest. But we are making good progress. It's a big focus in the European organization to sell SafePoint and other automized solutions. So we are doing quite good. We have a good installed base in Europe. It's a big focus. I think that also with now the Swiss Post, what we got from the Swiss Post, we have a good number also in the European market. So I'm quite -- I'm really optimistic about SafePoint in Europe.We are making progress in the U.K. now also in terms of SafePoint. It was a bit slow in the U.K. market, but now we're also making progress there. We actually got a couple of new customers in the U.K. market when it comes to SafePoint. So it's moving. It's been a bit slow due to the pandemic, but it's picking up again.

[Operator]

Our next question comes from the line of David Roux with the Bank of America.

[David Roux, Associate]

I've got a few questions from my side. I think just sticking with Loomis Pay, I'd just like to understand as the revenue of this business ramps up, is there perhaps any impact on your traditional services in terms of revenue such as CIT or CMS perhaps being cannibalized in the event that an existing customer adopts Loomis Pay?And then just switching to Europe overall. We are now halfway through the second quarter. Could you perhaps give us some color on what the sort of volume levels are like compared to Q2 last year? Just give us a sense of the sort of environment.And then I think my third question, perhaps leading on from that is, are you able to provide an organic growth exit rate for March for your 2 regions and at a group level?

[Patrik Andersson, CEO & President]

All right. Thank you very much. Well, let's start with Loomis Pay. So what we are trying to do very much is to combine these 2 solutions. So just give you a couple of examples. So we have a customer which has our traditional CIT, CMS service, for instance, or even SafePoint. Then we try to build on that and offer them Loomis Pay. And then we're trying to combine these 2 solutions into 1.And of course, that's the whole idea that we're building on the customer base we are having. So that is quite common that we do it like that. But we've also seen cases on -- which is going in the other direction, so that we have -- customers that don't have any CIT, CMS service. They're doing that themselves. They have a couple of examples like that.And what we do then is then offer them Loomis Pay. And at the same time, we're trying to offer them also the payment service, CIT, CMS. And it's quite remarkable that, that is working very well to start by selling Loomis Pay and then building on that, selling the CIT, CMS service.So we're trying -- if anything, they are complementary, not -- or even that they're building with each other. So I think that this is the way we're trying to sell Loomis Pay. And by doing it like that, I think that both Loomis Pay and then also the traditional business will gain from this.When it comes to Europe and volumes, it's very difficult to say exactly because the issue we're having is that society is closed down and opened up, closed down and opened up. And then, partially they're opening up and partially closing down. So it's very difficult to give some kind of baseline what's going on.What we can see is that when societies are opening up even partially, the volumes are coming back. People are spending money. There's so much money in the wallets of people that they like to spend. So we see very -- quite a quick volume of -- in that sense. So it's very difficult to give you an answer exactly where we stand. And when it comes to March, I can only say that March from a growth point of view, from a volume point of view was much better than January and February.These 2 months were not so good, but March was -- I mean, the U.S. is going very well anyway. But we see quite a significant pickup in March, both in Europe and the U.S. I don't want to get into detailed numbers on each month because then I have to explain that all the time. But it -- there was a significant difference in March compared to the other 2 months.

[Operator]

Our next question comes from the line of Johan Eliason of Kepler Cheuvreux.

[Johan Eliason, Analyst]

Yes. I was just wondering a little bit on the Loomis Pay and the market opportunity you mentioned there in the slide, SEK 15 billion. Is that sort of for the integrated offering? Or is this sort of the market opportunity for the digital payment part, you think?

[Patrik Andersson, CEO & President]

Yes. No, that is for -- no, I hear myself. But that's what we see that sort of the space in-store payments, both digital -- I mean, digital payments in-store for our target customers, which are small and midsized enterprises, restaurants, cafes, bars and so on. That's what we see. So that's the market. The markets for all payments is much, much bigger, but the relevant market for us is around SEK 15 billion.

[Johan Eliason, Analyst]

Okay. Good. And then I was just wondering, I mean we have, obviously, here in Sweden, seen a dramatic drop in cash usage. But I think also sort of spreading to the core of your client base. We saw [indiscernible], for example, a midsized chain that has stopped accepting cash. Is that a threat to this rollout, you think?

[Patrik Andersson, CEO & President]

No, no. No, we don't see that. We -- I mean, we can sell Loomis Pay to both cash customers and noncash customers. What's interesting is that, what we see is that when we offer Loomis Pay and also CIT, CMS services, customers are more prone to accept cash again. Then say, "Okay, fine. If you have this solution, it's much easier for me to accept cash." So again, it's a really win-win situation where we both sort of push for the Loomis Pay solution, but also for our cash services. So we've seen that in a number of cases.

[Johan Eliason, Analyst]

Excellent. And then just finally, on the RCS software that G4S had, have you seen Allied sort of putting out any tender office for that part of the business, would you be interested in acquiring? Or do you think Allied will keep that and expand the cash part of the business?

[Patrik Andersson, CEO & President]

No, I haven't -- we haven't seen anything. But of course, it's early days. I mean I think that Allied just got their hands on G4S. So they are quite busy. Let's see what happens. I think that, that would be interesting for us to have a look and to value the technology part of G4S, for sure. And when that comes to the market, of course, we will be one of those companies looking at that for sure.

[Johan Eliason, Analyst]

But did you look at it the previous round, I guess, G4S had it out for 2 years or so?

[Patrik Andersson, CEO & President]

No. I mean it's -- in our business, it's constant dialogues around different assets all the time and so on. So we have been interested of that for some time, yes. But at the same time, I have to say we are now also pushing our own recycler solution in the U.S. And we have a couple of pilots. We have a couple of customers, so a couple -- a number of customers But we also have a number of pilots going on. So we have our own solution that we are pushing quite hard in the U.S. market as well. So we're not sort of dependent on that. But of course, it's interesting, sure.

[Operator]

Our next question comes from the line of [indiscernible] Industry.

[Unknown Analyst]

I was wondering about the long-term outsourcing trends. How has it been impacted by the pandemic, you think?

[Patrik Andersson, CEO & President]

So if anything, I think that it's been supported by the pandemic. Let me just give you an example, and that's the ATM business in Europe. I don't think, to be honest, that we have seen such a big nice growth in the ATM business if it wouldn't be for the pandemic. So the banks have sort of focused more and more on the ATM side, sort of advising customers to use the ATMs, and then at the same time they have outsourced to us or others. And that -- I think that, that volume will stay outsourced, and that is due to the pandemic.I also think that the SafePoint business is because retail is now looking for more efficient solutions to spend -- to decrease the number of people in store employees. And then SafePoint and also Loomis Pay are 2 really excellent solutions to do that. So if anything, that sounds a bit strange, I think when it comes to the development of the technology part and the outsourcing, I think that COVID has helped that. It's not helped the overall volumes, I agree, but it's helped the development of the cash industry. And here, we are very well positioned, I have to say. So the technology part in Loomis is really good.

[Operator]

Our next question comes from the line of Karl-Johan Bonnevier of DNB.

[Karl-Johan Bonnevier]

A couple of questions. If I start on Pay, It's -- to give us some sort of a better idea about how this business model builds up, as you pointed out, Kristian, it's a back-end loaded model. Would it be possible, say, in the future to maybe start contemplating also giving installation numbers or customer signing numbers so we can get a feel for how the business is ramping in some way? Or maybe that's something you can allude to a little already now?

[Patrik Andersson, CEO & President]

That's -- KJ, that's fine. And it's a question which is valid. We have tried to -- it's early days still. So we have tried not to reveal any sort of numbers on the stores and so on because, firstly, it's a bit of question of confidential numbers, of course. But we need a couple of quarters really to set the ground and get going and speed up the installation and focus on sales.And then we'll come back with the relevant KPIs. So you will be able to track and follow that in a good way. Exactly those KPIs, we'll see. But of course, it should be transparent how that is developing. But let's give us some more time on that one. The only thing I can say that, that the technology is working very well, surprisingly well, very few hiccups. It's smooth and it's working. So the technology part is really there. Service part is really there.Now it's -- for us, it's all about selling, selling, selling. And to be honest, in Denmark, we're not being able to visit our customers. We're not being able to go to our customers and show how it works. So of course, it's been a bit of a challenge in that respect. And despite that, we have been able to sell quite a number of installations. So what I'm trying to say, it's a bit early days. We'll come back, KJ, with more information on that.

[Karl-Johan Bonnevier]

Fully understand, fully understand. And I appreciate all the disclosure you can do it in the future because obviously, it's going to be easier for us to follow the development. Looking at SafePoint in the same way, could you give us any number for the net installations in Q1 or the installed base at the end of the quarter?

[Patrik Andersson, CEO & President]

Yes. No, we are continuing on the same speed as we had last year. It's very difficult now because we have such a big base of installed number that we need to protect. So it's a bit unfair to the people who used to talk about net new installations. But I can say that 2021 will be a new record year when it comes to installation. So it's going very, very well also when it comes to installations.

[Karl-Johan Bonnevier]

And looking at installation numbers, is that something you will give us on an annual basis going forward, so we can follow the base development or...

[Patrik Andersson, CEO & President]

Yes. We can come back to that, so you can get a better understanding of the base. But it's -- as I said, it's a bit tricky now because we have more than 35,000 installations, and it's such a big job just to protect that base. So I think that what we're now focusing much more on is the growth rate of SafePoint. So we will be around between 10% and 15% growth. That's what we said, and that's what we're keeping. And that -- to keep that, we need to really to protect the base of the business, and that's why we're more focusing on the growth rates of Loomis, of SafePoint. But I can tell you, I can assure you, KJ, it's going very, very well.

[Karl-Johan Bonnevier]

Excellent. And on that topic, have you seen any changes in churn rates of [indiscernible] in this offering, looking at what has happened during the pandemic and all the things that must have affected your client base?

[Patrik Andersson, CEO & President]

What we saw in the beginning, of course, that smaller retailers, they had problems to keep the services. But that was a small part. We have bigger clients in the U.S., which are not that dependent, more stable, I would say. So a very little churn. If anything, we can see that they are very high interest from customers in the SafePoint solution based on the discussion we've had before around being more efficient and so on. So if anything, there's more interest right now from customers and it's working very well.

[Karl-Johan Bonnevier]

And now when you acquired SecurePost and you get an installed base in Switzerland of SafePoint, how does their business model compare to the ones you have been driving in the U.S.? Is the same kind of KPIs? Or is the European version that they have been successful very different?

[Patrik Andersson, CEO & President]

No, it's the same technology, same business principles. So then, of course, the hardware is a bit different. The software is a bit different, but it's the same model. So you have long-term contracts. You have the pickups. You have the credit -- provisional credit and so on and so forth. So that's the same model.

[Karl-Johan Bonnevier]

Excellent. And just finally for me, looking at Europe and the reopening, we are all hoping for Q3 and Q4, the effect of that. If you are looking, say, midterm to say slightly longer term, is there any reason after reopening that the European margin shouldn't revert up towards, say, its historical levels?

[Patrik Andersson, CEO & President]

No. We expect margins in Europe to pick up to historical levels, yes.

[Karl-Johan Bonnevier]

Excellent. I'm looking forward to the Capital Markets Day and the new outlook when it comes.

[Patrik Andersson, CEO & President]

Thank you, KJ.

[Operator]

And next question comes from the line of [indiscernible] Global.

[Unknown Analyst]

Yesterday, the Board received authorization to repurchase up to 10% of shares outstanding. So given where the share price is today, can you please update us on the latest thinking as it pertains to buying back shares?

[Patrik Andersson, CEO & President]

Yes, that's right. We have that. Now it's 1 tool in the toolbox. We have the mandate now. Let's see what we do with it. We are, of course, evaluating constantly different options. But otherwise from that, I don't have anything to say about that. It's -- of course, it's a signal to the market that if the share price drops too much, we will, of course, act, but it's a bit too early to say exactly how and when.

[Operator]

[Operator Instructions] The next question is from the line of Johan Dahl at Danske Bank.

[Johan Dahl, Analyst]

I appreciate, Patrik, you don't want to talk about monthly performance. But is it fair to say in Europe that all the money was made in March, i.e., loss-making in January and February? Or is that too aggressive?

[Patrik Andersson, CEO & President]

No, it's a fair assumption, I would say, yes.

[Johan Dahl, Analyst]

Okay. Can you just help me out also on the issue? I mean if you look on FTEs for the group, it came down. I think it was some 700 people sequentially in the first quarter. Still, you argue that you will see savings in the group, clearly ramping up here end of Q2 going into H2. I just find it a bit difficult to sort of take those 2 against each other. Can you just help us understand how much of those structural savings have been realized and how that will ramp up?

[Kristian Ackeby, Chief Financial Officer]

Yes, good question. Sometimes FTEs are the most difficult numbers to capture in reporting. But when it comes to the FTE reporting and if you look into our labor cost -- for our direct labor cost, which the restructuring mainly relates to or in -- at the same level as Q1 last year, which means that we've had a good saving in that setup.And if you look to the total revenue, it's down slightly more than SEK 800 million for the group, and the effect on EBITDA is slightly about SEK 200 million. So of course, there are some benefits taken already in that. But the bigger benefit you will see when the volumes [ are back, ] and we don't need to take employees on again to the same extent, that's when we will see the margin expansion that Patrik also mentioned earlier.

[Johan Dahl, Analyst]

So it's really -- I mean, when you look forward from here, if we talk savings, I mean, it's really a revenue recovery. You will have realized sort of full cost reductions pretty much in Q2, I guess, then?

[Patrik Andersson, CEO & President]

We are following the plan that put in place in the autumn 2020. And then we said that we will see the full impact from the savings in the run rate when we end the Q2. We don't have the full impact yet.

[Kristian Ackeby, Chief Financial Officer]

That's correct.

[Johan Dahl, Analyst]

Okay. Can you see anything regarding -- any potential impact regarding the stimulus checks in the U.S.? What have you seen there?

[Patrik Andersson, CEO & President]

I think that what we've seen is that people get more money to spend, of course, and that's positive for us. I don't think that has, let's say, the big driver behind our growth, but it's a positive element for the economy as such and spending levels, I would say.

[Operator]

The next is from the line of Riccardo Romiati of One Investments.

[Riccardo Romiati]

And going back to this last point on the savings, can you maybe please help us understand how the efficiencies that you achieved in Europe will help and support the margin to go back to historical levels and maybe give us also a time frame in -- for the latter part of the year, but mostly in 2022 when the volumes will be back?

[Kristian Ackeby, Chief Financial Officer]

So if we start by looking into where we have made sort of the savings and what they would do, I mean, one part is, of course, short term to support that it doesn't go worse than it sort of is when you don't get subsidies. But the longer-term part is that we have closed a number of branches so that should help the efficiency and that would take out some fixed cost. We have also made changes in the organization to have a more efficient structure.So that are the most important ones. And I mean there are -- the biggest one we have referred to earlier is U.K., but it has also impacted other countries where we have made changes and also other countries where we have closed branches. But that is what you will see. And then how the margins will gradually come back, I will not give the guidance on that.

[Patrik Andersson, CEO & President]

I think that we will see gradually margin improvement in Q3 and Q4. And I think that -- as you said, I think that by the end of this year, beginning of next year, we should -- with the disclaimer that societies need to open up, the vaccination program needs work. Otherwise, it's very, very difficult. But assuming that, I think that, as you say, Q3 and Q4 will be a step in the right direction. And by the end of this year, we should be -- and beginning of next, we should be in a much better shape than now in Europe.

[Riccardo Romiati]

Okay. And maybe a follow-up on France, which is reopening -- should reopen in May. How relevant is that on the performance in Q1? I mean do you expect the reopening of this important market for yourself to give a significant boost to profitability?

[Patrik Andersson, CEO & President]

Yes. France is a very important market for us, and it's been almost completely closed which has a significant impact on us. It's important that France, Spain, U.K., these markets open up now. And there are good signs that, that is happening. That's why we are a bit more -- we are more optimistic now. And France needs to open up. If we should get back to the old levels, these big countries in Europe need to open up. And I don't -- I think what we will see is that when the economies open up, they will be boosting consumption because I think that people are saving quite a lot. There's a lot of money out there, and I think there is a longing for going to restaurants, cafes, bars, pubs, whatever. So if anything, we should see maybe a bump in one way or other before we find a normalized level.

[Operator]

And we have 1 further question in the queue, that's from the line of Viktor Lindeberg of Carnegie.

[Viktor Lindeberg, Research Analyst]

I think we sort of touched upon the topic, but on the reopening now in the U.S., which is maybe this early bird highlighting the trends and where we're heading also then in Europe. But on CIT, that has been a bit muted now during the pandemic. Can you tell us how you've seen this progressing in the reopening of society and also how we should think about this now in the next coming quarters and year when the business mix will sort of normalize and shift a bit to having a bit higher content of the lower-margin business again? Or are you coming from having cost savings, et cetera, or slack in the operation that would allow you actually to keep margins at the current levels, give or take?

[Patrik Andersson, CEO & President]

I -- what we can see is that I think that CIT has not picked up that the same -- back to the same level as we had before because of -- in the U.S. because of the economy has not sort of come back to the same level. I think we will not see the big growth rates in the U.S. coming from CIT. It's more about from CMS, SafePoint, ATM, which is good news because that is helping the mix. And that's what we've seen in the couple of last quarters that the mix is improving.So if anything, there should be a good, a positive mix shift in the U.S. And where, as I said, we're not chasing the last CIT contract with low margins or low prices. That's not what we want to do. We -- then we'd rather wait and then push the SafePoint solution, for instance. So I don't know if that's answering your question, but that's at least how we see the market.

[Viktor Lindeberg, Research Analyst]

So you're saying more of a structural shift now to your CMS-related services, ATM services and maybe CIT will be a structurally lower level also given your churn contract?

[Kristian Ackeby, Chief Financial Officer]

I think just to clarify also, I think when we talk about ATM and SafePoint, that is a combination of CMS and CIT services together with a smart sales and the technology involved. So that also can drive CIT services. So if you look into U.S. numbers for Q1 this year compared with Q1 last year, the CIT in relation to total revenue when we describe it sort of from an accounting point of view, it is at a similar level around slightly above 60%, but that is less retail and more ATM and SafePoint. So I think that's important when we look into the CIT as such as what I think. Maybe you are referring more to the CIT on the specific retail side.

[Viktor Lindeberg, Research Analyst]

Yes. Correct. Yes. Now it has been a bit confusing looking at that ratio, the 33%, 34%, give or take, despite the migration to higher growth in SafePoint and, call it, real CMS services.

[Kristian Ackeby, Chief Financial Officer]

Did that help or no?

[Viktor Lindeberg, Research Analyst]

Yes. I think both yes and no.

[Kristian Ackeby, Chief Financial Officer]

Maybe we can look at it separately, if you want this all.

[Operator]

And as there are no further questions at this time, I'll hand back to our speakers for the closing comments.

[Patrik Andersson, CEO & President]

Thank you very much. Very good questions, and we stop here. I wish you a very nice weekend when it comes. Very much. Bye-bye.