Earnings Call: Q2 2018

Jul 26, 2018

Yes. Good morning. Hello. Welcome to the Q2 presentation of Lumis. I am Patrick Anderson, the CEO of the company. And today, I have also with me here, Anders Harker, who is the CFO. So if we then turn to Page number 2, we have the content of today's presentation. We will go through the highlights, the different segments, the financials and then finally, Q and A. And then we turn to Page 3. And these are the highlights of the quarter. I will go through some of these points in more detail later on in the presentation. But let's start with the growth. We had a real growth of 7% in the quarter versus 2% last year. We had an organic growth of 3%. We have a strong growth in the U. S. As we haven't seen in the last quarters and years. We're taking market shares in the U. S. Markets. We have a negative organic growth in Europe, and that's affected very much by France and also to some extent in Sweden. We have made acquisitions, which is very much according to the plan and the strategy we have. We have acquired a company in France called CPOR dealing with FX foreign exchange. We have bought a company called Chile Valores in Chile, and we now have a 30% market share in the Chilean market. When it comes to the margin, the margin ended up at 10.6%. And the difference versus last year is very much due to France, where we have lower volumes, lower profitability, but also then restructuring cost that takes the result down in France. I will touch a bit more on that later on. In the quarter, we have positive items affecting comparability amounting to SEK 98,000,000 and that is a revaluation of the UK pension scheme. And that is then SEK 178,000,000 and we have that at the same time written down goodwill in 2 of our countries and also some other write down costs. So the net is then 19 $8,000,000 All of them are non recurring items. EPS is then, of course, positively impacted by the what I just mentioned. So EPS is up 24%. And the operating cash flow is good in the quarter 90%, which is very much in line with historical levels. So if we then turn to Page number 4, we see the margin development. And as you can see that the margin came down versus same quarter last year. We have had a very we had last year very strong development. As you can see, we were up 1.2% in Q2 2017. And we have been aiming for 0.5% growth year over year when it comes to margin. But as I said, this is due to the situation we're having in France. If we then turn to Page number 5 and look at our segments and then immediately turn to Page number 6, we start with United States in the quarter. As I said before, we had a good and strong organic growth of 7% and we are growing in all business lines. So, CAT, including ATMs, we're growing by 3%, CMS 3% and then SafePoint 18%. SafePoint is now accounting for 13% of the total revenue, so very much in line with our plans and targets. And we see that we are increasing volumes and gaining market shares. And we are winning contracts now more smaller and mid sized customers, but we're also gaining volumes from customers. So the trend we have seen in the last couple of quarters is continuing. Then if we turn to Page 7, we have a look at the SafePoint development in the U. S. And by now, we have in total installed close to 25,000 units in the U. S. Markets. And the revenue, as I mentioned, is 18%. And what's very encouraging is that in the quarter, we had 1301, to be precise, in new installations. And that's very I think that this is the best quarter we have ever had when it comes to save points in a single quarter. And we are now very confident that we will reach the 5,000 units for the year as such. And just to mention that we also had 461 refreshes, and that is existing customers that is continuing or refreshing the contracts. And I think that's very important that we see that the customers we have won, they continue with the concept. And in many cases, they change the SafePoint as such or the software. So that is, of course, taking some time as well. But it's very encouraging to see that, that number is high and it's increasing. We are at the same time also investing in the sales organization, building up the key account management parts, IT, customer service, etcetera, to be able to continue to fuel the growth of SafePoints. And we had actually 150 new customers in Q2 and we have close to we have 2,900 in total and we have more than 200 provisional credit banks supporting the growth in the U. S. Market. If we then turn to Page 8, we look at the margin. We had a margin of 13.1% in the quarter. And of course, it's coming from more high margin services like CMS, more safe points. But we also have economies of scale due to efficiency, due to efficiency in routing, efficiency when it comes to branch efficiency and so on and so forth. We also have invested not only in the sales organization, but also investing in a rollout of a software program called track and trace, which we're now having in most of our branches. And that is taking some costs as well. But in the long run, that would be very good for the efficiency going forward. We can also mention that the San Juan branch is back on track after the hurricane we had last year and actually having higher margin than last year. Let's then turn to Page 9. And there you can see that the CMS share of the total revenues continue to increase and now we're up to 34% CMS turnover in comparison to the total turnover. So that's encouraging to see. If we then turn to Page 10 and talk about Europe, We had a real growth of 8% in the quarter. And what's adding on top of the organic growth is, of course, the acquisitions we have made in Chile, Germany and then also what we call Lumi's value solutions or intermarketing from Finland. We a FX company, a very successful company, high margin company, and that's very much in line with our a turnover a turnover of our company in the Nordics already, and now we're expanding those operations into Europe or main Europe, so to say. And we are continuing that process, and we think that this is a very interesting opportunity for the future for more M and A activities within FX. When it comes to the organic growth, it was negative in the quarter. However, I'd like to mention that we had a very strong growth in Argentina, close to 70% Spain, growing 3% Turkey 13% Belgium 13% as well Austria 7% and Portugal 9%. So there are many countries in Europe, which are really contributing positively to the top line. And what's also encouraging to see is that we are now moving ahead with the SafePoint concept in Europe, and we have very positive development in many countries, especially I would like to mention Spain, France and actually in Sweden as well, where we made a big contract with 1 of the leading retailers on the in the Swedish market. When it comes to France, it's negative on the top line. That is what we have communicated before that it's contract losses during mid-twenty 17. I'd like to say that we are now, of course, working very, very hard to make a change in France. And we have a program, which we launched, of course, immediately after we made the losses. And we are going to reduce the number of employees by 150. And we're now a good way through that program. We have taken out 110 FT feet feet feet feet feet feet feet feet feet feet feet feet feet Es. And we are saying that now that during the rest of the year that the situation in France will stabilize. And we think that when we are through this program, it will be better and we will come back to the margins we had before. And on top of that, we will incorporate a CPO of our company, which we bought recently. And I think that, that mix, that combined effects of merging these two companies and the trimming of the LumiSurance, it will make a very good and strong company in the end. When it comes to Sweden, we had some we had the notes and coins exchange program in 2017. And of course, we're meeting those numbers. So on the top line, it's, of course, negative. And when it comes to the margin, of course, as I mentioned, France, both the profitability in the French business, but also the restructuring costs are lowering the margin in Europe in total. So the margin is 10.7% versus 13.1% last year. And on top of that, we have a bit of a diluting effect from the acquisition in Germany. So it's a €45,000,000 business with lower profitability. However, that profitability will increase over the quarters to come. So if we then turn to Page 11, looking at international, just a few comments, back to growth again, which is nice to see. So we see more stabilized markets for cross border transport, and we have a positive trend for the storage business. Operating margin is slightly down. We have higher profits in storage, somewhat lower margins in the forward in business and we have invested a bit into or not a bit, we have invested into the Asian business and also into the diamonds and jewelry business that we bought some time ago in the U. S. So it's encouraging to see that we're back to growth at least now in the international business. So we then turn to Page the international business. So we then turn to Page number 12 and then immediately to Page number 13. We just I just highlighted a couple of points from the statement of income. Real growth is 7%. Items affecting comparability, as we said, SEK 98,000,000 coming from the revaluation of the U. K. Pension scheme. And then, as I mentioned, the earnings per share up 24% in the quarter. Having said that now, I hand over to the operator. Operator, do we have any questions to me or Anders? Our first question comes from the line of Mikael Holm. Please ask your question. Yes. Hello. I have two questions. The first is on European margins where you in Q1 said that adjusting for workdays nonrecurring items and the acquisitions, the operating margin was basically flat year on year. Now you have help from more workdays compared to last year. And still the margin decline accelerated. How much of this drop would you say are related to more of the costs that are more nonrecurring to its nature? That's the first question. The margin drop is entirely due to the if you French situation, I mean, the margin drop is entirely due to restructuring programs ongoing and the dilution of the German business. And once we get back on track in France, the margins will come back to historical levels. But it will it's very intense work ongoing now. It will continue into slightly into Q3. And I think when we get to Q4, then we should be pretty much back on track again. And the second question is on the top line development in France. You lost these contracts in midsummer last year. You started to talk about this. But now it seems like the competitive situation has it worsened during the first half of this year? Is that the interpretation we should do? I think that the top line is slightly negative. But the worrying thing I mean, we're not worried about anything in France, but the big negative factor is the profitability. The top line is down a couple of percent and that's actually a bit better than we thought. What's happening is, of course, that when you have like big tenders like that, what we had last year, and in the after that, I mean, some of the competitors trying to regain some volume through smaller customer and that's giving some turbulence in the market. But the big tenders, the big contracts have been settled now. Now it's a bit some small waves continuing still. But I would say that the top line in France for LUMIX France is actually a bit better than when we expected. The big drop is in the profitability due to the fact that we have to reduce the number of employees and that's costing quite a lot of money in France. Okay. Thank you. Our next question comes from the line of Daniel Thorson. Please ask your question. Yes. Thank you very much. So two questions. The first one, the roughly SEK 100,000,000 write down of goodwill in Europe, what does that refer to? It's not SEK 100,000,000 write down. The net amount booked is €98,000,000 which consists of a gain of 138 €1,000,000 based on a revaluation of the UK pension liability plan. And the write down of goodwill is which is roughly a little bit more than 30,000,000 dollars reflects 2 smaller operations in the European segment. It's in the Czech Republic and it's in Belgium. Okay. Okay. Because I understood that the positive effect was 178 percent, and then you had a negative write down effect taking down the net to 98 percent. So that write down effect should be roughly 80 Yes. But it's not I mean, those are the major parts. It's U. S. Pension plan and the write down of goodwill, U. K. Pension plan. U. K. Pension plan, yes. Okay. Okay. So check the cost in there. The goodwill is not the remaining amount. There are some other amounts in there as well. Okay. I see. So write down the goodwill roughly $30,000,000 then? It's actually $50,000,000 Sorry for that. Okay. Okay. That's fine. That's fine. Thank you very much. And then a question regarding to the U. S. Given that CMS share of U. S. Revenues and SafePoint is increasing, why did we not see a year over year margin improvement in the U. S. Larger than the 10 basis points that we saw now? Good question. I think that the change in factor is that we have now quite invested quite a lot into sales people, IT system, track and trace and also some investment into the operation, into new branches and so on. So it's actually costs that we're taking to increase to be able to continue to grow in the U. S. Okay. Okay. That's fine. Do you expect those costs to increase or decrease looking into second half of the year? I think that we have taken quite a major step now. We will continue to increase cost a bit. So it's not just a 1 quarter thing, it will continue in Q3 and Q4, but not on the exactly the same level as this year this quarter. Okay. Excellent. And then a final one on France specifically. The restructuring costs in Q2, were they higher or lower in Q1? And do you expect them to increase into Q3 or decrease? They were higher in the second quarter than the Q1, but they will not increase in the 3rd quarter. I mean, according to the plan, we should be complete in the Q3 when it comes to the restructuring. So we have pretty much of the program behind us. Okay. Yes, that was all from me for now. Our next question comes from the line of Iamrik Kuehling. Please ask your question. Yes, thank you. Good morning. I would like to go back to the question on the restructuring in Europe. You said restructuring were higher in Q2 than in Q1, which makes sense, but you did not quantify then. So if I look at Q1, given the margin dilution of Germany, I think you said flat margin in Europe, excluding these items, that would imply €30,000,000 to €40,000,000 restructuring charge in Q1 in Europe and in Q2, therefore, I would imagine is more like €40,000,000 or 50 €1,000,000 So when you look at Q3, are we talking about a similar €40,000,000 to €50,000,000 or should we assume that because the program is almost done it should come down? And then obviously, you're not doing this for nothing. You expect to pay back with 300 people being taken out of the cost base. Should we assume that the €100,000,000 plus cost of cutting costs would effectively produce €100,000,000 margin improvement in Europe on an annualized basis next year? That's the first question. 2nd, on the U. S. Margin dilution, you mentioned 2 things, the inflationary fuel surcharge. So would it be possible to have the percentage impact on the top line, organic top line in this Q2 and also in terms of the sales and IT investment, how much is the extra cost in absolute term, especially are you doing this with a view to support the 7% organic growth or does that reflect the rollout of the larger cash recyclers that you were planning for the year end? And last but not least, you have this German acquisition that is diluting margin and you said it's going to be low margin for the rest of the year, but how far do you think you can raise the margin of that acquisition in the coming year, please? Thank you. I can start with the last question first. Germany, we're making an inroad into the German market. We're number 3. And we are to be honest, we are not making any money in Germany right now. But the plan is, of course, to get to margin, which is somewhere between 7% 10% over the quarters to come. So that is the plan. And anything else would be not good enough. So that is done. But that will take some time. And we are in the German market for the long run. So that's question number 2. Well, there are 3 and I turn it to my CFO to answer the other question. The first question was around Europe and the restructuring programs. And you are correct in your analysis when it comes to the magnitude of the cost we're taking. And it's I mean, we're all currently we're in Q2. We were on a level between SEK 40,000,000 and SEK 50,000,000. And of course, these are nonrecurring. And if you add up what we booked in Q1, I mean, those will be the cost savings going forward as well. But in Q3, therefore, should we assume $40,000,000 to $50,000,000 again? Or should we say No, it will be less As we have the majority of the programs behind us, that number will come down starting in Q3. The programs will continue for a while in Sweden, but from the French restructuring programs, we will have behind us when we leave Q3, and they will be smaller than in Q2. And then when it comes to the U. S. Situation, I think that to just give you a bit of context, I think that over the last 3, 4 years, we have actually not increased the support organization or the sales organization, the IT organization. And we now have we now there is quite a strong need to strengthen that organization. 1, to be able to handle all the customers that we have already, especially in SafePoint and be able to refresh and install and take care of the customers we have. Secondly, to be able to grow SafePoint even further. And thirdly, as you mentioned, we have now in the pipeline to launch the recycler concept, will take some time. But it's really about strengthening the sales organization. Also when it comes to IT, I mean, I think that the technology that goes into the SafePoint is very important and we need to be on top of that development and be able to offer new solutions when it comes to IT. And there's a need to really to invest in software people and so on and so forth. So and then thirdly, I think that also in our branch structure when it comes to what we call track and trace, it's a software system which tracks all the different deliveries, the routing and so on. There is a need to invest in the U. S. Market. And I think that is what we take those costs we take right now to be able to continue to fuel the growth, just to give a bit of context. Okay. And then the fuel surcharge, the percentage impact on the top line and just to get a sense of the real organic growth, so to speak? It's roughly 1%. Thank you. Our next question comes from the line of Garena Elmgren. Please ask your question. Yes, hi. A couple of questions. Most of my questions are already answered. But the German acquisition, are you happy with the development there? And can you tell a little bit more what you expect from the German market? And then also, the margin increase in the U. S, which was lower than in the previous quarter, I understand that it's due to investments, as you have explained. But is there something else that we should know in the market in the U. S, like increased transportation costs or tougher competitions from your peers? Thank you. Germany, Germany is it's one of the most the biggest, I would say, cash markets in the world and in Europe. It's still a market, which is fragmented and a bit underdeveloped, I have to say. But we think as a market leader in Europe, we want to be in Germany. And what we've done now is that we bought the cash part of a guardingcash business. And we're now carving that out and investing into a separate organization to take care of that. And our expectation is that the German market will go undergo same development as many other markets, I mean, being more outsourcing, more consolidation, etcetera. And we want to be in that market. But it will take some time. But as I said, we have great expectation and great plans for Germany. Okay. Our next question comes from the line of Victor Lindbergh. Please ask your question. Thank you. Just a question on this partnership with Sonaeq that you published a few days ago. And just interested in understanding a bit more of this. And I have maybe a threefolded question here. And first, is this the same thing that we basically see and already have here in Sweden when you go to the supermarkets that you can withdraw cash in the retail store? Just to understand that. And then second, when we look at this partnership, what potential revenue streams do you see coming out of this? And is there a, call it, cannibalization effect from you servicing the ATM volumes today relative to then servicing the retail segments? Just to understand that dynamic would also be of interest. Thank you. That's good. So Sonnect is a small start up company in Switzerland. And what they do is that you can withdraw cash from the retail store and you can do that you go into your bank account, get a QR code and then you scan it in the store and get money. And then you ask yourself, well, yeah, what's the difference? The difference here is that the retailer gets a fee from doing that. And we many of the bigger banks are now I mean, still on a relatively small scale of building these solutions into their apps, into the banking app, etcetera. And so there is a benefit for the retailer to get people into the store, but and also getting a fee from that. And that's the main difference versus other systems. But our idea is to build in build that into our service. So you can have a recycle concept, you can have a it's basically recycle concept in a way. So you have a SafePoint, you can have CIT, CMS. And we're offering that to our retail customers. But also banks are interested in this solution because it takes down the cost. You don't need to have that many ATMs and so on. For us, it's good because it's supporting cash in the society. So it's still very much on the low scale, but we see that where it's launched in Switzerland, for instance, it gets quite a lot of traction. So we're starting by building this into the offering we have in the Nordic countries. And so it's very exciting and I'm quite hopeful for that in the future. Yes. Sounds exciting. But just to understand, is there when looking at your revenue split between retail and bank today, can you quantify how much is banking and ATM related volumes or revenue? In Europe, I look at Anders and it's about fifty-fifty, I think. Yes. It's pretty much a split fifty-fifty and it's more or less the same situation in the U. S. In certain countries, it's sixty-forty. But it also, of course, depends on the outsourcing level. If you take a country like U. K, it's a minority that would be banking business. It's mostly retail work for us. Okay. And then an additional question for you Anders. I'm looking at the U. S. Division and the reporting. And you mentioned 7% organic growth and there is no acquired growth. But when I calculate the revenue year over year, it is significantly higher than that. And the FX component should actually be negative year over year. So is there some funny stuff in the revenue line this quarter in the U. S? Not really. So what is the discrepancy then? There should be no discrepancy, assuming you're using the same FX rates as last year. Yes. Okay. Maybe we can discuss that later then. And then final from my side for now, looking at margins, just to understand what you're implying here. When you say margins in Europe should recover, when I look at 2017 levels, they were at close to 13.5 percent and you're now talking to get back on track. Is this the level that you target when we look into 2019? And is this on a like for like basis? Or is it including CPOR that should be margin accretive? It's not including CPOR. I mean, the focus we have is to get the margin back on historical level, everything else being equal and you compare the same business operations. Yes. All right. Thank you. I'll get back in line. Our next question comes from the line of Philip Richards. Please ask your question. Hi, there. I had two questions on France, please. Firstly, on the restructuring. Did anything unexpected happen there in the Q2? Because I believe in the Q1, you mentioned that you were 80% done with the restructuring. And then but today, you say that the restructuring costs were high in the Q2 than the Q1 in France. So did it take longer? Or did anything else unexpected happen here? That's the first question. And the second question is, if you could comment on the general pricing environment in France now that the new and other tenders are coming to market after the more difficult situation last year, what are you seeing in terms of pricing of new tenders coming to market? Thank you. Thanks. The first question, I think that what happened is that when you have a big tenders like we had in France, you're switching you're winning some contracts with 1 customer in one region and then you're losing in another. And it takes a bit of time to get that whole routing structure to get that in place. And that has taken a bit longer, I would say. So the complexity of taking out volume in one place and getting it in and out like that has taken a bit more time. And then and also that this is the peak season in France. France is the one of the biggest tourist countries in the world and now the peak season starts. So we need to be we cannot get lose the eye on the quality. So that's why we have been really, really, really careful about cutting to the bones too fast. So those are the two things that sort of impacting France. But it's the whole program is well on track, I would say otherwise. When it comes to price pressure, I think that, as I mentioned, the big, big tenders are now through and done. And then, of course, there is some competition for the retail customers, which are not on big tenders. So, of course, there is some competition, but not at all of the magnitude we saw during 2017. It's a much smaller scale. And to be honest, we have also won some of the some customer we talked about the Kingfisher retailer in France, which we won. So I think that also my expectation is that our top line will stabilize also in Q3 and Q4. Thank you. Thank you. Our next question comes from the line of Daniel Porson. Please ask your question. That you mentioned, like Spain, Belgium, Turkey, Austria? Is it higher volumes, better pricing or just outsourcing activity from banks and retailers increasing? That's a bit of a split. If you take Turkey and Argentina, I mean, that basically continue outsourcing. The market is continuing to outsource. When it comes to Spain, Austria and Portugal, for instance, it's basically that there has been some turbulence in the market that's coming down. And we, with our quality, have been able to win contracts. Don't forget SafePoint, which is also helping in supporting the top line growth, maybe not that much in volume, but in terms of a different price set and thereby increasing revenue. So in those sort of more mature markets, it's actually we doing quite a good job in developing the market, getting new customers and taking market shares. And Belgium is growing also by 13%, which is very good. And that's according to the plan we had that we won't take much more part of the outsourcing going on in the Belgium market. So it's a bit of a mixed bag. And I also like to mention U. K. U. K, we had some issues as you remember a couple of years ago here, but U. K, we're actually growing in the U. K. And actually developing the margin as well. So I think that there are many very positive things happening in many European countries for different reasons. So and that's the meaning, I mean, of course, hiding a bit behind France, but I'm quite pleased with many other European countries. Okay. That's excellent. And then the final one on LatAm. How large share is Latin America of Europe today? It's still a fairly small part. Our Argentinian business has total sales of around, say, SEK 200,000,000. And Chile is roughly, I mean, we don't have everything all the effects into the Q2 numbers from the recent acquisition of Chile Valores. So that will come into Q3. But to give you I mean, I think that our expectation is to get closer to $500,000,000 in turnover over by the end of 2019 to give you a rough figure. Okay, okay. That's fine. And a follow-up on that. When increasing your presence in LatAm, how is the situation with organic growth today, inflation, currency weakness affecting fundamentally within the market and also financially when translating into SEK? How do you see the development now? If I comment first on the market, I mean, I been to Lata myself some time ago, traveling around it. It's a very dynamic market when it comes to our business. Still a lot of things to be done when it comes to outsourcing. We are launching actually as we speak SafePoint in Chile right now. And there's been a sort of a great appreciation from the market of that concept. So there are many things to be done in these markets, which I mean, let's say, these markets are like 10, 15 years behind Europe when it comes to outsourcing development. So it's a very, very promising market. It's not that price sensitive either. So from a business point of view, very interesting. And when it comes to inflation and exchange rates, you have a totally different situation in Chile than Argentina. Chile, for instance, is much more stable. You don't have the same inflation and you don't get the same pressure on the FX rate. Argentina, on the other hand, you have very high inflation. But our what's good for us is that our organic growth has been much higher than the inflation rate. But of course, you get with high inflation, you get the same pressure on the FX conversion. So expressed in Swedish currency, you don't get the same benefits. But considering that our growth has been much, much higher than inflation, we still have a very fantastic development in Argentina. Okay. And margin wise, looking into 2019, do you expect it to be higher margin than the rest of Europe or a lower margin region? Argentina is today the country in Jumus where we have the highest margin, and that will continue to develop. And also, Chile has not on the same level, but will increase over the years to come. I think that in a year or 2, Argentina and Chile will be the countries with the highest margin in Lumix. Okay, excellent. That was all from me. Our next question comes from the line of Karina Elmgren. Please ask your Maybe going back to my second question there on the margin in the U. S. So the increase was less than previously due to investing that I understand. But is there something else impacting the margin negatively like transportation costs or tougher competition in the U. S? No, I think everything is related to the I mean, the expansion projects we have from the U. S. And in order to keep a high growth rate long term between 5% 10%, we need to invest in the business and recruit more people, both on the sales side and on the support side. And that's mostly what's driving the or what has an effect on the margin expansion. U. S. Has really delivered well in Q1 and in Q4 last year as well. And it will not be able to keep that pace of margin expansion. So if we can do roughly 50 basis points per year, we would be very happy with the U. S. Okay, great. Thank you. Our next question comes from the line of Mikael Holm. Please ask your question. Yes. I have a question on the organic growth in Europe. I had some problems getting the breakdowns on the countries correct because you have earlier said that the Nordics are declining mid single digits, I think. And you mentioned France being down 4%, 5% in the quarter. And then I guess that in this particular quarter, Sweden was probably down than, yes, more than double digit. But if every other country in Europe is growing, it's hard ending up at minus 1% organic growth or a minus 1% organic decline. So what am I missing in this equation? Mikael, I think we need to sit down and go through the numbers. I mean, the situation is that a decline in primarily Sweden and France, as you said, and some of the countries are flat and good growth from other countries. And the situation is that what we have lost in France and Sweden over the last quarters has not been compensated by growth in the other countries. And what's the decline in the other Nordic countries? Is it still single digit trends? Yes. It's really you see, it's clearly visible in Sweden, but the other Nordic countries are more on a flat level, just slightly negative. Okay. But the East and Sweden and not the other Nordic countries. And Sweden, that's roughly 10% of Europe? It's more. I mean, you have the effect of the growth rate that we had in Sweden last year because of the change of the notes and coins. So the underlying drop is much smaller than the reported numbers. Okay. Yes, I understand that. Okay, thank you. Our next question comes from the line of Aymeric Biren. Please ask your question. Thank you. Just a quick one on the capital allocation. Obviously, it's been very acquisitive and yet your balance continues to be very solid. So is there a point where you might consider that the share price offer a good alternative use of capital versus acquisitions. So is all of the financial firepower going to be redirected at M and A? And if so, is the pace of M and A that we've seen so far this year likely to continue in the coming couple of years? Yes, that's good. We will use the strong balance sheet to acquire companies. Basically, we want to continue at the pace we're having right now. And as I said on the Capital Markets Day, we have a SEK 10,000,000,000 pipeline of objects. And as you know, it takes 2 to tango, of course. But we have just one thing in mind that is to use the money for M and A, and there is a good pipeline. Our next question comes from the line of Victor Lindeberg. Please ask your question. Yes. Thank you. And just to ensure we understand the dynamics correctly going into Q3 on Europe on organic growth. Sweden was, I think, peaking last year in Q3 when it comes to extra business volumes. So we should then anticipate year over year that it's going to be quite a severe downturn. But when you look at the current run rate with minus 1% in Q2, do you anticipate growth rates to maybe decelerate further down in Q3 temporarily in Q3? Or do you think it's still going to be stable at 1%, give or take minus 1%, give or take also in Q3? What's your gut feeling as of now? We expect the growth rates to be stable, whether they will be negative 1% or on the flat level, of course, we don't know. But we don't expect them to move in the wrong direction. Okay. That's good. And then finally, from my side on Argentina, it seems they might be entering a recession. And just looking at your business in Argentina, how do you think or have you seen any signs of this so far? And what effect do you anticipate this may have given that it's a very profitable and strongly growing business for you? You're correct. We I read about the same thing as you have, but we haven't seen any effect. I was as I said, I was down there a couple of weeks ago and very much we have a strong business plan. We have a strong team. And they we are really going to invest more into new facilities and new trucks and stuff like that in Donatina. So we don't see any sign of that our business is going into any kind of recession. On the contrary, we are continuing to growing. The question is, of course, I mean, will there be a pressure on the prices? I don't see that either right now. So I think that it's in Argentina, it's very much business as usual for the time being. So I don't have any other signals. All right. Sounds comforting. Thanks. No further question at this time. Please continue. Okay. Thank you very much for all the good questions and listening to us. And I wish you all a very nice summer or vacation when for some of you maybe. So thank you very much.