Earnings Call: Q3 2018

Nov 2, 2018

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Q3 report. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to your speaker today, Mr. Patrick Anderson. Please go ahead, sir. Good morning, everybody. Welcome to the Q3 presentation from Loomis. As said before, I'm Patrick Anderson. I'm the CEO of Loomis. And with me here today, I have Christian Akerbe, who is the new CFO for Loomis and also Anders Harker, who is our Chief Investor Relations Officer. So let's start the presentation by turning to next page. And these are the highlights of the quarter. So we had a regrowth of 8%, fueled by some acquisitions, of course. We had an organic growth of 2%, and we had quite a strong growth in the U. S. As we have seen the previous quarters. But we also this quarter can announce 2 major contract wins in Europe, which I will talk to you more about later. We have effects in France and in Sweden, which is, of course, affecting both the top line and the bottom line. But it's getting more and more under control, which I'll also touch upon later. Operating margin was at 12.7 percent for the quarter. And as you can understand, the restructuring programs we have in specifically in France but also in Sweden have an effect on the margin in the quarter, but that will become better. We also have our acquisition in Germany, which is which on a group level is affecting the margin by 0.3%. EPS improved by 14% to SEK 5.61 and the operating cash flow was 60 9% in the quarter, and that's affected a bit by timing effect, but also some investments we have done in the U. S, but also in Europe to build a new branch in outside Paris. If we then turn to the next page, we start talking a bit about United States. As I mentioned, we're growing 6% in the quarter. We have growth in all business lines. In this quarter, we're growing CAT by 2%, and that's fueled by extra ATM business. We're doing more and more ATM business in Europe, which is supporting the growth in CIT. We also continue to grow in CMS. And at SafePoint, this quarter is growing by 19%. We have then the share from coming from SafePoint is 13%, so it's growing by 1 percentage point compared to last year. And we are now also, as we have talked about the previous quarters, investing in the U. S. Business to support future growth. As you remember, we have we gained the volumes from Bank of America some years ago, and that's what we have been working with to get that under control and get the margin up. But we have not expanded the business and we need to do so when it comes to hiring new salespeople, we need to invest into IT, IT solutions, and we need to invest into customer support. If we then turn to next page and talk about SafePoint, we have now approximately 26,000 installations in the U. S. Markets. As I mentioned, we have had 90% growth coming from SafePoint. And in the quarter, we have 971 new installs done. We have now a lot of contracts that are expiring as we are now have worked with SafePoint for many years. And as you know, the contracts are at 5 year length or so. But the retention rate is very high. We are keeping many of these contracts, not to say all of them. And in this quarter, we refreshed or renewed 560 safe points. So this will be, of course, a very high focus area for us also in the future to continue to keep these contracts. Let's then turn to the next page and talk a bit about the margin. Margin expanding a bit, and we have an increased share of high margin services like CMS, of course, and SafePoint. But we're also having economies of scale coming from more volumes, pure volumes effect from CMS. But also we are focusing very much on the branch efficiency to continue to be even more effective and efficient in our branches in our operation. If we turn to next page, we can then see the revenue split by business line, and it's encouraging to see that the CMS part of the total is growing, and now we're at 34% in the quarter. So we're getting close to European levels, I would say, in the U. S. Market, And that's have been that has been a sort of a strategic target for many, many years to grow this part. If we then turn to next page and talk about Europe. So the real growth in Europe for the quarter was 10%, and that is fueled very much by the acquisitions we have made in Chile, Germany and the software company we bought in Finland some time ago. All these integrations or acquisitions are going according to plan. We had an organic growth of minus 1%. But I have to say that many of the European countries are contributing with very good growth. We have Spain, which is doing very good Portugal, of course, Argentina with or without inflation Turkey, Belgium and Austria to mention a few. We're also continuing our rollout of SafePoint in Europe, investing quite a lot both in terms of sales organization, but also in terms of software. France is doing very good when it comes to SafePoint. Spain, but also Sweden, I would say. We had won a couple of contracts previously to which we're now rolling out, but also some new ones. France, let me talk a bit about France. And we are very happy to see that the program we have initiated in France is going according to plan. We're on the right track. We are seeing positive effects from the restructuring programs already now in Q3, but we will see the main positive impact from Q4 and onwards. And we will also see a stabilization of the top line when we move into 'nineteen. We also see that the market is more calm in France than it's been previously. They are not the competition we have seen before also when it comes to the smaller customers. So all in all, the situation is very much under control in France. We also, of course, seeing the end of the notes and coin exchange program in Sweden we had last year. So after this quarter, we see a stabilization of the top line. We can also announce that we have won 2 new contracts, one in Norway and one in Belgium. It's in total about SEK 50,000,000. The one in Norway would be start rolling out in 1st Jan, and the one in Belgium would be start rolling out during Q1. Very encouraging to see that our customers are having faith in us and want to work with us, of course. Operating margin, 14.3%. I've touched upon the restructuring programs we have in France, but also in Sweden. We have, of course, a diluting effect from the German acquisition, 0.6 in Europe and then 300 in total. And we expect that to, of course, to improve during 2019. If we then turn to next page and look at international, we are also glad to announce that organic growth in the quarter was 5% versus minus 7% the same quarter last year. The business in Latin America is growing. We see stabilization of the international markets for the cross border transportation, and we see a positive trend for the storage business. And of course, as many of you know, the more volatile the economy is, the world economy, the better it is for the international businesses, and that's the case here in Q3. Operating margin was at 7.2%. So the storage business is really driving the margin here, but this quarter, the growth was in the forwarding business, which is doesn't have the profit impact as growth in the storage business. We are having good success with our integration projects in the U. K. And U. S, and we have a lot of activities going ongoing when it comes to the diamonds and jewelry business to support that growth. So if we turn to next page and the statements of income, 2 things maybe to highlight is the real growth of 8%, but also the growth in the earnings per share to 5.61%, which is growth of 14%, as I mentioned before. So we are very much in line with the financial targets we have for 2021. And having said that, I stop my presentation and hand over to Q and A session. So operator, we are now open for questions. And our and the first question comes from the line of Johan Dao. Your line is now open. Please ask your question. Yes. Hi. Johan Dahl here at SVB. Can you hear me? Yes. Can you just talk about the if you sort of look on the full year 2018, the restructuring actions, Nordics France. If you sort of sum that up, how much is the impact of the current year in Q3? And sort of try to be a bit more detailed on the delta going into next year. Yes. So the EO so the restructuring cost in the quarter was around SEK 20,000,000 for France and for Sweden. Was that less or more compared to Q2? It was less. Right. I guess that's all we want to say on the topic. No. I mean, I can talk a lot about that. But it's we are coming to the end of both programs when it comes to big restructuring. I think that it's fair to say, in Sweden, we need to continue to all the time have the right infrastructure for the size of the business. That's but that's more normal business, business as usual. I think that the big costs, the big downsizing, that should be done when we come into Q4. Got you. Can you also just talk about your sort of view on the U. K. Market currently? There have been some data coming out on cash and circulation, etcetera. What's your view on that going into 'nineteen? And how does it in any way impact your allocation of investments for the coming years? We some years ago, we had some troubles in some issues, some business issues in the UK. We have very much stabilized that. UK is a very good market for us now. It's a pure CIT market. So it's for us, it's 90% is CIT. So I think that margin will be slightly below group average. But we have a very good operations right now in the U. K, and we have some also some projects to move that further. So I think that we're looking very much very positive on the U. K. Market. We are not affected by the Brexit in any way. I mean, we are producing our services in the country and not transporting between countries. So that shouldn't have any effect on us. So all in all, very positive. So there's no sort of negative implication from your end due to the sort of declining year on year cash in circulation? No, no, not at all, no. Okay, I'll get back in line. Thanks. Thank you. And our next question comes from the line of Mikhail Holm. Please ask your question. Your line is now open. Hello? Can you hear me? Yes. Yes. Hi. It's Mikael at Danske. First a question on the U. S. Market. Have you seen any opportunity yet to take market share on the back of the consolidation ongoing there? Potentially some looking for a new supplier. Is that something you've experienced? That's a good question, Mikael. I think that it's a bit too early to see that right now. I think that with Brink's acquiring Dunbar, of course, there will be some turbulence in the market. But I think it's too early to see any consequences of that for any of the other players. So we'll have to wait and see. Okay. And just a follow-up on early questions regarding France and you talked about the calmer market situation there. But if you look at the Prosegou Cash, basically the smallest player in the market and their plans to go national from more of a local presence today. Is that something you see in the discussions with clients that they try to get market shares? No. I mean, just to explain the situation, I mean, we had big tenders a year ago. So and that was a big fight for these contracts and a lot of turbulence and some gain, some lost. But then, of course, there is a phase after that where people or the company trying to get the smaller retail customers to get more volumes and so on. So a bit of after aftermath of the big tenders. But now I think we're over that period as well. So I think that what we see now that the situation has stabilized also with the smaller retail customers. And we haven't noticed any activities from Prosguro at least yet. So no, no effect so far at least. Okay. Perfect. And just a final question on the comments you gave on the U. S. Margins and the risk to them short term because, I mean Q4, Q1 last year was all time high for the U. S. Operating margin. So is it fair to assume that you're indicating that, that margins will decline year on year over year in the coming quarters? Yes, Mikael. I think it's reasonable to expect that we will not reach the corresponding margins in Q4 this year. Depending on that, we're now building up for growth. And Q4 and Q1 last year were exceptional quarters with almost 14% margin in the U. S. And the activities ongoing now is putting a little bit of constraint short term on the margin expansion in the U. S, but I think there's more to come over time. But it will you have to give us some time to realize the effects of what we're doing now what we're actually doing for the moment. Thank you. And our next question comes from the line of Victor Lindeberg. Please ask your question. Your line is now open. Hi, Wouter from Carnegie here. Just thinking about SafePoint, the trend you've been rolling out has been slightly below my estimate. But can you comment how you see this going forward? Now you're building up the organization and we know your explicit medium term financial targets, but can you just comment on where you are in 2018, 2019? Will the sort of refurbishment and replacement need be that much higher than you previously anticipated and thereby maybe hamper the rollout of net units in the coming quarters or so? Can you elaborate on where you are and what you see going forward? Yes. That's a good question. Let me elaborate a bit. So first of all, I think that the pipeline is very strong in the The request for the system is good. We're growing. I think that this year, we're missing usually, we have 1 or 2 contracts with sort of 5,000 to 10000 installations. I think that, that's what we're missing a bit this year. But I mean to be really clear, I think that we haven't seen any reason to lower our targets in the short and the midterm and long term. We're going for the 10,000, that's for sure. What we I don't think we need to we should expect any sort of problem to install. I think that it's more that we need to build an organization that's really following up on all the old contracts, contacting those, discussing trying to build up an organization to follow the existing contracts. There is no reason to believe that we don't have the capacity to install the new ones or make the changes in the existing ones. You shouldn't see that. It's more of a head office issue in Houston to build that organization up. So we're still very confident when it comes to SafePoint. And it's just we're missing 1 or 2 of these bigger contracts. That's all. Okay. And then on Argentina, naturally being a small revenue contributor but important for the growth in the European division. But can you comment on where you are now given the turmoil both on inflation, but maybe if there is any impact from an operating environment perspective that you see? I can start then, Victor, with the operating environment. There is no we have never transported as much cash as we're doing right now in Argentina. Inflation is actually helping our business, to be honest. We are growing the top line in Argentina quite considerable. We are between close to 30%, 40% growth without inflation. So the business in Argentina is doing very, very well. We also, this quarter, had a lot of international shipments. As you can understand, when it's that when you have that turmoil in Argentina, there's a lot of U. S. Dollars going in and out and other things as well. So it's been a good quarter also with international business in Argentina. So from an operating standpoint, excellent business in Argentina. And then I hand over to elaborate on the P and L impact and the balance sheet impact maybe. And Christian here then. If we look into the last quarter, we have a monetary loss report in the income statement of $4,000,000 and that the rest of the parties reported in equity. And without going into the details, it's like you referred to the impact on revenue is marginal since Argentina is still a small unit for us, but growing a lot. And then we will see where the currency rate turn out for Q4. So from a financial point of view, also very limited effect for us. Got it. And this was the Q1 that you changed sort of the accounting or reporting on Argentina. Just to understand, it was basically only this impact in the financial net and the balance sheet. So still consolidated as it has been good old fashioned. Is that correct, Andre? Exactly. And you have the small effect also in equity. But also to have in mind, the FX impact we have every quarter when we recalculate to the most current currency rate. Thank you. And our next question comes from the line of Henrik Poulin. Please ask your question. Your line is now open. Yes. It's Rick Poulin from Kepler. I've got 3 questions, if I may. The first is on the U. S. And the slight slowdown in organic growth. I was wondering if you could help us qualify this. I think you answered the question on the SafePoint rollout, but are there other competitive factors that you could point to, especially given the impact perhaps some of the larger cash recyclers of your competitors on the CIT business or also some of the Brink's market share gains. So just to get a sense of whether the costs you're adding are here to protect or secure the current rate of growth? Or if there are probably other initiatives that you are preparing to reaccelerate that organic growth also to qualify the margin comments you made? That would be helpful. Secondly, on Europe, I was wondering again if you could give a more clear estimate of the payback of the restructuring items that you put through in terms of the margin uptick we should expect in from France and Sweden in Q4 and going forward? And 3rd point is on M and A. We see reacceleration of the bolt on M A pace in Europe. But I was wondering, given the very low valuation of the share price, if you're starting to see perhaps more discussion around larger deals in the industry? Thank you very much. So we divide your questions among us here a bit. So I can start with the M and A part. You're right. There is a lot of activity ongoing in the M and A field as the market is getting more and more consolidated. Economies of scale are very large in our business, so there is a lot of activities ongoing. There is always in our industry being discussions around bigger acquisition among the bigger ones, the big five, if you want. We have seen Brink's acquiring Dunbar, which is a case like that. I'm not aware of any other ongoing right now. So if I was, I wouldn't talk about it, so to be honest. So there is a lot of let me put it like that, there is a lot of activities in the M and A field ongoing, and we are part of that as well. And then it's very important for us to keep our heads cool and to be sure that it's value creating the M and A activities we do. So just to comment on that. On the U. S. Growth, I mean, there is a lot to be done in U. S. Both in terms of SafePoint but also CMS. And it comes a bit in shank. I mean, we are growing also with existing contracts on smaller customers, but the big, big customers are coming more in shanks. We should expect the U. S. Market we expect for us to be growing in the range of 5% to 10% still. But to get to that, we need really to strengthen our organization in the U. S. I think that also it's fair to say that it's the customers are getting more and more advanced. They want to have other solutions, more advanced solutions. It's a higher degree of IT involved in the services and so on. So we need to have another upgrade our competence in some areas to be able to cope with that. So but the growth is still in the U. S. Market. And of course, I mean, Brink said, they have started to be more active. The competition is high, but it's nothing that's sort of scaring us or in any way bad. So we have very good prospects for the U. S. Market. Then I'll leave the other the middle question to Anders to answer. Considering the restructuring programs in France and in Sweden, I mean, the rationale is different, why we have them in these two countries. If we start off with France, it's been a program that's been ongoing for 15 months, and it hits the margin for France quite dramatically in a short period for two reasons. I mean, the one is, first, we lost volumes. When you quickly lose volumes, the effect of those drop down quite quickly to the bottom line. And then as well, when you initiate the restructuring programs at the same time, there are cost initiated with those programs. So I mean, you get hit from 2 sides very quickly. But now we are at the very end of the French program, and we look forward and build for the future. So Q4 will be more or less the Q1 where we have the opportunity to work from a much more stable base and start working efficiencies into the operations again. So when we get into 2019, we should be in good shape again and start getting the margins back to where they should be, which is at the historical levels more or less in line with European averages. And when it comes to Sweden, it's also been a substantial program ongoing. But in Sweden, as everyone knows, it's more of a structural challenge we have. And we can probably also looking over the next years that we can expect more programs to come. We're never finished when it comes to keep the efficiencies up. But I think we are now in a much better position than where we were 15 months ago, and we should see the effects already in Q4 when it comes to increased margins. Okay. Thank you. Thank you. And our next question comes from the line of Henrik Moby. Please ask your question. Hi, Henrik Moby, Nordea. Can you hear me? Yes. Okay. A couple of questions for me, please. First of all, I had a bad line on the contracts in Europe that you commented on. What type of contracts were these? And how large were they in total? Yes. It's 2 contracts. It's one contract with 1 big bank in Norway, which we start rolling out, implementing from the 1st Jan next year. And the second one is a big contract with also a bank in Belgium, which we start rolling out during Q1. So it's a bit later. Both together, they are around SEK 50,000,000 in revenue terms. Okay. And moving on to LIS. You mentioned that you believe that you are nearing the end or that you've passed the bottom of the trend in of the native trend in LIS over the past few years. What makes you confident that, that is the case? No. I mean, we have a lot of hubs sales hub around the world, and they are very close to our customers. And they have the sort of the fingers on the pulse, so to say. And they are feeling that there is more activities from our customers. We also see that in our numbers. So it's more like being close to the market analysis, if you want. Okay. And moving on the balance sheet, I know you've been keeping it relatively strong over the past few quarters years. It should give you quite a healthy headroom to both up the cash distribution without hampering your M and A ability to complete M and A. Why are you so prudent with the balance sheet? And do you see an opportunity to actually raise dividend or commence share buybacks or anything like that? No. We will not raise dividends apart from what we have stated in our financial targets, and we will not buy back shares. That money should be for acquisition, M and A acquisition or acquisitions in any way. And we think that this industry will, over the next year, consolidate even further, and we want to be part of that. And that's yes, that's what we're going to use the money for. And our next question comes from the line of Matti Gergollet. Please go ahead. Your line is now open. Yes, it's Matti Gergolev from Goldman Sachs. A couple of questions from my side. The first one will be on the CapEx. Clearly, there's like a notable increase in CapEx, say, in the quarter year to date. Can you just remind us what do you expect for the full year? And perhaps now whether you see the current rate of CapEx as the run rate? Or would you expect it to come down a little bit, say, in 2019 and in the future years? Second question is just sorry, but a follow-up on the M and A. So it seems you seem to suggest you have a fairly full pipeline. Can you give us any more color whether or no is there any geographical area where you're particularly focused on? Are you looking and also whether you are looking at new geographies or just really on integrating potential companies in the areas where you are already operating? And then lastly, just if any comment on working capital, maybe as we go into the 4th quarter, is there anything that we should be aware of on the positive or on the negative side? Thank you very much. So let's start with the first question. Anders, please. When it comes to the CapEx, I think we can expect that we will invest a little bit more than what we depreciate in 2019, simply because it's the growth that we are experiencing in the U. S. Is requires more CapEx. We need to build new branches. We need to expand some of the present branches. There's been an ongoing program for the last years. And that so we spend it on the new branches and on security equipment that we need to install in connection to that. And this year as well, as Patrick mentioned in his opening remarks, we are building a new branch in the south of Paris, which also required CapEx. But the general sort of forecast that we see is that the CapEx requirements will not go down compared to this year. I think whether it's we invest 10% or 20% more than what we depreciate, it's hard to say. But I think the number will definitely be a little bit more than the depreciation rate that we have currently. Okay. And then on the M and A question. For us, we are looking basically in a couple of areas. 1, we kind of like Europe. So we like to do M and A acquisitions in M and A activities in Europe. We like Americas, both North and Latin America. So from a geographical point of view, these are the areas we focus on. I can talk more about why, but that's and then the last area is technology or software technology. We bought the company in Finland some time ago. We have invested in this Sonnect company from Switzerland. But we're also looking to acquiring software to be able to give what our customers want to have, more and more advanced solutions. So these are the areas we look into. And then finally, there was one final question. Yes, yes. On the working capital, yes. I think when it comes to Q4, we should expect positive effects compared to Q3. Q3, we had some timing differences when it comes to the accounts receivable primarily, and those will roll back into Q4 when we can see the effects. And Q4, by tradition, is usually a very good quarter for us when it comes to the working capital swings. So we should get some of the cash that we lost in Q3 will come back into Q4. And we still stick to our old historic expectations of having 8% to 5% conversion rate in relation to operating results. Okay. So just a quick follow-up on the CapEx question. When you like build new branches, would you say lease them? Or would you say basically invest in the real estate and basically the yes? Typically, we would lease them. But we need to we lease the walls and so on. But what we need to do then is we need to build the vault, and we need to secure that facility because when we enter into the contract, these are not cash handling facilities. The normal it could be logistics buildings and something like that. So basically, everything we need to spend on the refurbishment of the facilities, including all the security equipment, the cameras, doors, vaults becomes CapEx for us. But the central terms of the buildings are usually leased. But in some cases, we when we build from scratch, then we pay for everything, and we just we book them into the balance sheet. Sorry, last one. With IFRS 16, how much of the leases are going to come out on the balance sheet if you have disclosed this? We haven't disclosed that number yet, and we will do that closer, but it will be a material amount. Okay. Thank you very much. Thank you. And the next question comes from the line of Mikhail Holm. Please go ahead. Your line is now open. Yes. A follow-up here or 2 follow ups actually. The first is on the U. S. Market where we have seen interest rates going up already. Can you see any effects in terms of number of stops clients are demanding as I guess I mean, it should hopefully then increase if this trend continues? We don't see any effects. So it's early days. We haven't seen any effects. What you're thinking is, of course, that when interest rates go up, people want to transfer the money quite quickly. But I honestly, it's too early days, and maybe the rates increases have not been big enough for that, so no effect. Okay. And then just on the organic growth in Europe. You mentioned 5 or 6 markets that reported organic growth in the quarter, but still, I mean, Europe as a whole is at a minus year to date and in the quarter. Still, you expect this to pick up to 1% to 3% for the next year? And could you explain which market that you expect to improve to reach this type of better growth rates in Europe? I think that we're seeing an exceptional year, both in France and Sweden, which is putting a lot of pressure on the top line in Europe. That should stabilize and become better. Basically, we don't see any reason for apart from Sweden and maybe some other Nordic countries that the other countries should not grow. That's our ambition that many other European markets, all of the European markets should grow. And you're right, we are still very much convinced that we should be able to be between 1% and 3% in Europe going forward, fueled by, of course, better numbers in Sweden and France, but also rolling out the more safe points. We have other initiatives going on when it comes to ATMs. We have the FX initiatives. We have these contract wins we did this quarter. So there are many, many positive aspects, I would say, to fuel that growth of 1% to 3%. Thank you. And our next question comes from the line of Victor Lindbergh. Please ask your question. Your line is now open. Yes. Thank you. So I have 2, maybe three questions. First, you commented on the restructuring in Q3. Could you provide us with a number on the year to date cost for the restructuring? Or sorry if I missed that number. Yes. I'll turn to Anders, please. The total restructuring programs in France, Sweden, plus I would include Norway in the restructuring as well because there are activities ongoing there. It's in the neighborhood of SEK 100,000,000, considering that we spent between SEK 14,000,000 and SEK 50,000,000 in Q2, and we had more or less half of that in Q3. And the balance goes into Q1. And so for comparison, we should at least get we should be in a position where we get $100,000,000 of those of that money spent this year already back in next year. Okay. That's quite clear. Then on Sweden, can you talk a bit about the underlying volume development now as we're out of this cash change of coins and cash in circulation. So maybe we can understand the underlying development better. Do you have an update for us on that? Yes. I think it's to be honest, it's a bit hard to say because of course, we had the notes and coin exchange program, which is of course, it was a big thing last year. But then it's difficult to say where all the things that is ongoing, where that ends. My best guess is that we have a structural decline in Sweden around 5%, something like that. That's the best guess I can give you. It could be better because then it could be that we're reaching a new level and it stops there. But I don't know. It's very hard to say. We will see that, I think, when the year has ended, then we know much more what the run rate is because some customers have built out or taken out the cash handling possibilities and so on. And where does that end and stop? What's the new level? That's difficult to say. But that's the best answer I can give right now. But I have to say But I have to say You have a pricing component, I guess. Yes, pricing component, which should be matched with that. I think that we have a strong market position in the Swedish market. We have 75% to 80% of the market. We are we have been I think that we have been very fast on doing taking action in Sweden to really adapt the costs to the new situation. And that and the margin in such in Sweden has not been hurt very much. And it's Sweden, again, it's one of our most profitable countries we have. Got it. Final from my side then. Thinking about your potential technology related acquisitions and today looking at the retailer, they need to have at least 2 suppliers, 1 for cash and 1 for card or mobile payments. And naturally, I think if I were a retailer, having one supplier would be smoother. But I struggle to see technology companies integrating cash handling in their core activities, whereas from a Lumi's perspective, it makes much more sense to also add that card payment initiative maybe. Can you maybe elaborate where you are in this? And if this is something that is actually an opportunity for you or why it is not and where you are in this phase in such case? It's a very good question, Victor. It's spot on as we think. We are in contact with many retailers, which struggle with all the payment methods now they have with Alipay and Google Pay and cards and debit and credit cards. It's quite tough for the retailers. And I think that our angle into that is, of course, coming from the cash side and then be able to handle other payments. We have now set up an innovation center in Sweden, and one of the tasks they're working with is exactly that what you're talking about. To be able to consolidate all payments for a customer and be able to give them to be able to sort of have the cash on the bank account as they have with SafePoint the next day with all payment methods. That is really an idea we are working on. If it works, I don't know right now because it's a lot of technology that needs to come into place, but that's definitely an angle of project we are working with. And so far, the customers I have been talking to and we have been talking to are very much sort of excited by that idea. And the SailPoint technology can help because you need to have some kind of contact to the store to understand what are the transaction flow. The SafePoint technology can very much help us with that. That's why also from a strategic point of view, SafePoint is very important to have. And our next question comes from the line of Riccardo Romati. Your line is now open. Please go ahead. Hi. It's Riccardo Romati from 1 Investment. Thanks for taking my questions. The first one is on SafePoint in Europe. Can you please talk about the activity and how do you see the development going into 2019? And how should we think about that supporting organic growth in 2019? And the second question is on Argentina. I mean, we've seen some companies moving to hyperinflation accounting. How would that apply to you if you were to do it? Thank you. Okay. Safepoint Europe, we're doing good progress in SafePoint. I think you have we one has to be a bit careful when it comes to SafePoint Europe because in Europe, it's often like the customer has CIT service already with us, and then they go into SafePoint. So from a top line point of view, there is a small effect, of course, but there's much more an effect on the margin, on the profitability of that customer because usually margins are quite substantially higher on the SafePoint concept. So and then, of course, also there's the stickiness. You have a long term relationship with that customer. It goes over 5 years. So there are more many advantages, but for the top line, the impact is limited. We have good traction in all countries, and I'm a bit surprised, to be honest, that Sweden has done so well when it comes to SafePoint. And one reason is, of course, that the store gets very much control of the cash flow in the store. The losses when it comes to theft and stuff like that is minimized to 0 basically. So that's been very much a, I would say, a driving force for the rollout in some of the Nordic countries. So we are on track when it comes to SafePoint Europe. And when it comes to Argentina, we have applied inflation accounting from Q3 here. So that's included in our numbers, and you will see the net monetary loss in the income statement of minus $4,000,000 Okay. Thank you. Thank you. And our next question comes from the line of Emrick Pulleyn. Your line is now open. Please ask your question. Yes. It's Henrik Poulain again. I've got a follow-up question regarding European margin recovery next year and more specifically around the German acquisition, which this year dilutes the margin by 60 basis points. I think you mentioned the importance of economies of scale for your business. So how should we look at Germany next year? Are you obliged to invest further in the business to grow it and build these economies of scale, which means margin should be broadly where they are currently in that market? Or should we assume that you are bringing the margin of the acquisition to your standards? Thank you. We bought the German business in January this year. And at the time of acquisition, we expected that it would probably take us at least 18 months to get this up in shape, so we can see the benefits. Currently, the German margins are more or less 0. We're working hard on including the Luminess way of working when it comes to route optimization and CMS processes. I think it's during 2019, we should see progress from our German business. But I don't think we can expect that we get them up to average European margins during 2019. I think that will take longer, but we should definitely see good progress during next year. And there are no further questions at this time, sir. Please continue. Thank you very much. And that does conclude our conference for today. Thank you all for participating. You may all disconnect.