Good morning, everyone, and welcome to our Q4 and full year 2021 call. Andreas and I will go through the performance for the quarter and the full year, but we will also cover some strategic highlights towards the end of the presentation. First, I would like to share three highlights from 2021. We had a good finish to the year with consistent improvement in profitability, and we delivered significant growth in operating results and the highest margin in more than a decade. Our ambition in terms of margin improvement is much higher for the coming years. The good performance is the result of strong execution of the strategy across all parts of the business. The investments we have made in modernization and digitization of the business are starting to generate good returns
At the end of 2021, we closed two large transformation programs and also the COVID-related program. The first two, North America and Global IT, have been instrumental in creating a more modern and more efficient operation. In early December, we announced the acquisition of Stanley Security. Joining forces with Stanley Security is a game changer for Securitas and our clients, and it's also instrumental in changing the profile of Securitas to more technology and solutions and significantly higher margins. We will share a little bit more about the value creation benefits of the North America program and an update regarding Stanley Security after the results overview. Shifting then to the numbers and the performance, we are executing on our strategy, and this is generating results.
The organic growth in the quarter was 4% despite significant temporary negative impact from C-19 related extra sales, primarily in North America, but previously also the announced low margin contract terminations. Momentum in solutions and electronic security improved further in the fourth quarter with growth of 10% in real terms. The quality and the profitability of the portfolio is our highest priority, and we are winning more business at improved margins versus last year. Good commercial momentum also in the fourth quarter. The operating margin improved to 5.9% in the quarter, and the full-year operating margin came in at 5.6%, and that is also significantly higher level than what we have achieved in recent time.
Strong development, like I mentioned across all business segments, was the result of clear focus on continuously strengthening the client value proposition, active portfolio management, and also cost savings that we have initiated over the last couple of years. After a turbulent 2020, when we increased bad debt provisions, we have kept provisions largely unchanged during 2021. In terms of the COVID related impact, we currently have around 600 people on temporary unemployment support, and this is the lowest level since the beginning of the pandemic. Government grants and support were also significantly reduced in the fourth quarter, which is also something that we consider very positive because it means that we now have more of a business as usual situation again. The labor market is challenging, and we have seen rising inflation.
Having said that, we have been successful in working with clients to balance wage increases with price increases up until now, and we believe that we are in a good position to manage also in the months ahead. With solid cash flow throughout 2021 and in Q4, we are also in a good position now in terms of debt and well prepared for the Stanley acquisition. Related to the dividend, the board is proposing an increase of 10% to SEK 4.40. With that overview in terms of the group level, we're then shifting the focus to North America. The organic sales growth was flat in North America in the quarter. We have good portfolio development thanks to strong new sales and also price increases that play an important role, and those are supporting the top line.
From a volume perspective, these positive developments are offset by temporary negative impact from the C-19 related extra sales, where we have very high comparatives, and also negative impact from the previously announced low margin contract terminations. If you're looking at the extra sales, we are now back at pre-COVID levels, and this is negatively impacting the growth in guarding until approximately the middle of this year. The previously announced healthcare contract was terminated in December, with some negative impact in the quarterly organic sales growth, but will have a full impact in the first quarter. As I stated earlier, these are temporary factors, and most important is the development of the portfolio, which is good, and also the overall profitability of the portfolio. We feel really good about that development in the North American business.
Electronic security was negatively impacted by component shortages, but we saw some positive growth in critical infrastructure services in North America. Shifting then to the profitability, despite some of the temporary volume headwind, as you can see in this chart, the margin development follows a very positive curve in North America, also in the fourth quarter, with significant improvement versus last year and also versus 2019. This is the result of a number of factors. But we're now starting to see, and I think this is an important one. Clear returns from the North America transformation work, with a good impact in Q4, but where we also expect further improvements in 2022.
This impact is most visible in our guarding operations, where we have seen significant improvement in profitability despite having some of these reductions in C-19 related extra sales. Strong performance in our corporate risk management team, the Pinkerton business, and also electronic security profitability development contributed in a good way to the overall margin development in North America. In summary, looking at North America, we have solid development in terms of profit growth and margin development, but some headwind temporarily in top line growth for the coming quarters. Turning then to Europe, where the good momentum continues in the fourth quarter with solid growth in most countries. After a tougher period during the pandemic, I'm also very glad to see improving momentum and double-digit growth in solutions and electronic security.
These higher value businesses are now representing 25% of the total business in Europe. We've also seen improving demand in aviation that had some positive impact on the growth in the quarter. Also very positive in terms of the profitability development in Europe, where we have generated consistent improvement in margins throughout all quarters of 2021, also when comparing versus pre-pandemic times, so 2019 and 2018. This margin improvement is broad-based. Cost reduction programs are generating results, but here we actually also have some positive impact from COVID-related extra sales. As commented at the beginning, government support and grants are materially lower in the fourth quarter, so now coming into hopefully more of a business as usual situation in the coming quarters.
Our European team drove solid performance in 2021, and at the same time have been investing significant time and effort in the transformation program, which will help us achieve a stronger business mix and structurally higher profitability in the midterm. Shifting then to Ibero-America. Solid growth in Ibero-America of 11% was primarily driven by Spain and Latin America with price increases in Argentina. We recorded double-digit growth in solutions and electronic security in the quarter, which is also very positive in terms of recovery after the pandemic and building more momentum. Ibero-America now leading the way with more than 30% of sales from solutions and electronic security, and also very good client retention.
From a profitability perspective, we have taken extensive actions in the last few years to create a sharper, more focused, but especially also more profitable business in Ibero-America. These actions are now starting to pay off, and this is visible in significant margin improvements and a very positive margin curve. The operating margin here of 6% is recorded in modern times. Very positive on the profitability. Spain is the main driver of this development, and in light of the Stanley acquisition, this is an important reference case from my perspective because it shows what we can achieve when we have strong leadership, strong electronic security capability, solutions and guarding offerings, and also where we're working in close partnership to enhance the value together with our clients.
Thanks to all the good work in Ibero-America, we have a sharper business as we enter 2022. I think with that, happy to hand over to you, Andreas, for some more details regarding the financials.
Thank you, and very good morning, everyone. We start by looking at our income statement. Q4 was a good quarter as Magnus has referenced to here, where we continued to see a good recovery in the business and we had solid organic growth at 4%, supported by Europe and Ibero-America. North America's growth was hampered by reduced Corona related extra sales and the previously announced low margin contract losses. The operating margin came in strong in the quarter at 5.9%. This is 0.6% better than last year, which had increased provisioning levels of SEK 80 million. However, it is also a material improvement looking at 2019 when we had a 5.3% margin before the pandemic started.
It is encouraging to see positive impacts from our transformation and cost saving programs combined with the strong portfolio and profitability focus from the organization. We saw continued decline in Corona-related government support in the quarter. As you may remember, we received SEK 100 million in the third quarter and SEK 195 million in the second quarter. Now in Q4, this was SEK 50 million mainly related to Europe. This is also substantially less than the SEK 230 million we received in Q4 last year. As we have highlighted earlier, this government support is mostly related to temporary unemployment and has partly compensated for the related idle time cost that we have had.
This trend is also in line with us having reduced number of people on temporary unemployment, which now in January was approximately 600, and which has continuously declined from the peak of approximately 10,000 in April 2020. If we then go below operating results, amortization of acquisition related intangibles was a bit higher than the run rate the previous quarters after making some one-off adjustments to the portfolio at year-end. We expect to be back on normal levels again here in Q1. On acquisition related costs, basically no major news here. The cost is mainly related to integration and restructuring costs for the previously announced acquisitions during the year, and they are also on track versus the plans. Looking then at items affecting comparability. Here we had SEK 356 million of cost in the quarter.
SEK 111 million of this was related to the C-19 cost saving program, and SEK 183 million was related to our ongoing transformation programs. This totals to SEK 294 million. We also had transaction costs related to the Stanley acquisition of SEK 62 million coming in at the end of the year. This is part of the $135 million transaction integration restructuring cost that we announced here in December. These costs will be reported as items affecting comparability going forward for ease of comparability. Looking at the financial net, it came in at SEK 83 million in the quarter and SEK 364 million for the full year.
This is a bit lower than what we mentioned to you here in Q3, and it's mainly related to the strong year-end cash flow and some FX gains we had during the fourth quarter. The tax rate for the full year came in at 27.6% compared to 27.4% last year. This is a bit higher than the full year forecast of 27.0%, and this is mainly related to tax effects on non-deductible transaction expenses related to the Stanley transaction, and then some year-end true ups here as well. If we are moving then to the next slide, where we have some more information related to the different programs under items affecting comparability.
Here I should first mention briefly that we have an accounting change related to cloud computing, which you'll find more information about in note one of the report. The change has no material historical impact, it has no cash flow impact, nor does it have any impact on any business cases related to the transformation programs. It do have an accounting impact related to the split between CapEx and OpEx for our European and Ibero-America programs going forward. In Q4, going into the programs, we have now closed both the global IS and IT program and North America transformation programs, as well as the COVID-19 related cost-saving programs. These programs close within the budget we announced initially.
As Magnus mentioned earlier, these programs have been successful and we have achieved the set savings targets for the IT and COVID-19 program, and we see positive impacts from the North America Business Transformation in Q4. The transformation program in Europe and Ibero-America are on track, and we had a cost of SEK 380 million here in 2021. As you remember, we announced the total cost of these programs to SEK 1.4 billion items affecting comparability and SEK 1.1 billion CapEx. With the announced accounting changes, the items affecting comparability increases to SEK 150 million, while CapEx decreases with the same amount here. For these programs, we estimate the IAC for 2022 to be in the range of SEK 500 million-SEK 600 million, then also including the 2022 impact of the cloud computing accounting changes that I mentioned.
As I also mentioned earlier, we have some costs related to the STANLEY transaction here as well. Summarizing 2021, on the left-hand side, we end up with the net items affecting comparability of SEK 871 million for the full year, and that is in the middle of the range we communicated in Q3 when we exclude the cost for Stanley, which was not known at that time. Moving to the next page, looking at the currency impact in the quarter. In the fourth quarter, we saw a positive FX impact on sales and operating result of 2%, mainly due to the weakening Swedish krona, especially when comparing to the US dollar. This is a change of trend versus previous quarters, where we have seen a negative effect from currencies.
When you go to the EPS, you see a slight change of the currency impact, which is mainly due to a different currency mix below operating result. For the full year, we still have a negative -5% impact from currencies on sales and a bit higher impact the further down you go in the income statement. The EPS, adjusted for both currencies and items affecting comparability, improved 23% in the quarter and 37% for the full year. We move on to cash flow, which is something we are very happy about in the quarter. Cash flow from operating activities was SEK 2.2 billion in Q4 or 131% of the operating result. We had very good collections of accounts receivable and a reduced DSO, which are the main drivers behind the positive cash flow.
Even better, also considering that we had solid growth in the quarter, which normally also consumes some cash. For the full year, we had an operating cash flow of SEK 5.6 billion, which is 93% of the operating result. This includes SEK 2.8 billion of CapEx, which is then basically 2.6% of sales. CapEx continues to have a run rate below 3%, as we have earlier also communicated. This includes, for clarity, all CapEx related to the transformation programs as well. Comparing to last year, we should remember that 2020 was supported by corona-related timing relief measures of SEK 1.3 billion, mainly then related to North America. We have paid approximately SEK 600 million of this in this year so far.
When we are comparing 2021 to 2020, we should remember there is a SEK 2 billion delta related to these corona-related timing differences between the years. The 2021 cash flow, adjusted for this, was actually even stronger. We will also pay the final SEK 600 million of these timing release in 2022. The free cash flow for the year ended at a strong SEK 4 billion after net tax and financial items. We can then move on to the next slide related to net debt. We continued here to strengthen our financial position after another quarter and year with strong cash flow generation. Net debt ended at SEK 14.6 billion at year-end.
This is a reduction of SEK 1 billion compared to Q3 this year, and SEK 200 million higher than in the beginning of the year, where we should highlight that the translation impact was material throughout 2021. We had a positive free cash flow of SEK 4 billion, as I just commented on the previous page. We have made acquisition payments of SEK 1.4 billion, mostly related to the acquisitions of Protection One in Germany, Dansk Brandteknik in Denmark, Tepe Güvenlik in Turkey, and now in the fourth quarter, Supreme Security Systems in the U.S. We paid approximately SEK 600 million related to our transformation and cost saving programs. In Q2, we also paid the annual dividend of close to SEK 1.5 billion.
All in all, these effects decreased the net debt with almost SEK 700 million, and then we had a material negative effect from revaluation and translation of almost SEK 900 million, ending then the net debt on SEK 14.6 billion. The net debt EBITDA reduced during the quarter to 1.9, strengthening our financial position further. As you know, our financial target is 2.5, so we are materially below this target as we speak. We are preparing, of course, the balance sheet ahead of the Stanley Security closing, and we will have focus on cash flow generation also going forward to ensure good deleveraging after the Stanley transaction. Moving on to the next slide and looking at our financial position and debt maturity chart. We have solid financing in place today, as you know, and none of our facilities have any financial covenants.
We also ended the year with a strong liquidity of SEK 4.8 billion after the strong cash flow that we generated here in Q4. As we earlier said, we also have renewed our RCF, a facility with our 10 core banks for a total amount of SEK 9.6 billion. The original facility was for five years. We have extended for one year to 2026, with the option to extend for another year. We have an upcoming maturity here in 2022, where we are currently planning the refinancing. When we communicated the Stanley transaction in December, we also announced that we had signed a bridge facility with SEB to secure the funding of the transaction. This facility was then in December further partly syndicated among seven of our core banks.
The bridge facility will be refinanced after the acquisition closing with a mix of debt and equity, where we will also do a $950 million rights issue. The plan remains here to execute the rights issue as soon as possible after the closing, and thereafter refinance the remaining part of the bridge facility in the debt markets. We will come back here with further details around this after closing. As a consequence of the announced acquisition, Standard & Poor's have put us on credit watch with a negative outlook, where they indicate that a downgrade likely will be limited to one notch. Important to mention here that our commitment to investment grade remains, and as we communicated in December, we will focus on deleveraging our balance sheet after the closing of the Stanley acquisition. With that, I now hand back over to you, Magnus.
Very good. Thanks a lot, Andreas. Before we open up the Q&A, I would just like to share a few updates regarding the progress with the Stanley Security acquisition, and also give some more practical examples in terms of value creation we're starting to realize with the North America Transformation Program. Starting then with Stanley. At the beginning of December, we made the announcement to acquire Stanley Security. By joining forces, we will build the foundation to be the most attractive choice for our clients as a leading intelligent security solutions partner. We continue working expeditiously internally and with the Stanley team on integration planning to prepare for closing. The key customary regulatory processes are progressing well over the last 60 days since we made the announcement.
When looking at the future of the security industry, we see three capabilities that are the most important, and these are related to the power of presence, connected technology, and intelligent use of data. We believe that the winners of tomorrow are the companies that are able to combine these assets and providing the best client experience. With the acquisition of Stanley Security, we are positioning the company for higher margin and also higher growth business in electronic security solutions, and data-driven, so-called SaaS services. Those obviously represented in the right part of the chart that you see to the right here. If you're looking at Securitas and the investments and the changes that we have been driving and the modernization during the last three to four years, we have more modern platforms and a sharper business than ever before.
Technology is becoming more important for our clients, and we have built significant leadership competence in terms of how to run the electronic security business, and we have a strong team in place that is now leading the preparation work ahead of closing the acquisition. Together with Stanley, we are shifting the profile of Securitas in terms of the offering, in terms of the value creation for our clients. It will also be immediately margin accretive to our business, and over 50% of the profit contribution will come from higher value and higher growth security solutions and electronic security. Together with the other initiatives and programs we are driving over the last 24 months, this will also lead to substantial operating margin improvement in the coming years.
Since the announcement, we have received tremendous response from our clients to this announcement with a lot of anticipation regarding the opportunities that this combination will create. This is something that I've also had with a number of our key clients, very similar discussion and clear recognition, but also very positive expectation in terms of the opportunities that we're able to create after having joined forces with the great Stanley Security team. Stanley Security team, they have repositioned the business for growth in the last few years with a more stable and stronger management.
While they will be leaving a leading player like Stanley Black & Decker as a group, which is a leader in its field of tools, the Stanley Security business is at the core of the Securitas strategy, and we are looking forward to welcoming the team to a leading player in security and safety. The reason I say it is that I believe that it is fundamentally important, for the team internally, but also for the quality and how you actually create value over time, being at the core of a business, and that will be the case with the Stanley Security team and the electronic security business in Securitas going forward.
In the current process, we have significant benefit as well from successfully having acquired and integrated the Stanley business in five countries at the end of 2020 with a strong return on those investments. Today, like I mentioned, we have dedicated and strong electronic security leadership team that is managing the integration and together with Stanley leaders then also the creation work after closing. While the cost synergies are important, this combination will position us for strong commercial synergies. Cross-selling opportunities across millions of client sites, high-margin solutions development, and a very strong value proposition for clients globally are some of the examples of critical sources of commercial synergies after close. Together with Stanley, we are in a solid position to create an outstanding team who is perfectly placed to win in the security services industry in the years to come.
As previously stated, we have full focus now on the integration planning and creation work and expecting to close during the first half. Let me now shift to a brief update related to the North America Business Transformation. Before that, this is an overview that we have shown for a couple of years now, I believe. That is because we have been, and we still are to a large extent, in a period of extensive transformation and modernization of Securitas. I'm very glad to reiterate the point that Andreas mentioned, and that is the fact that we are now closing the first two important programs, Global IT and North America Business Transformation.
The Global IT program was a comprehensive change in terms of how we organize and how we operate IT, and we are on track to achieve the targeted savings. As a result of this work, today we are operating on modern platforms with enhanced transparency, efficiency, and also greatly improved resilience. The North America program has also been closed, like I mentioned, and I will share a lot more detail about that on the following page. If you're then looking at the lower part of this picture, we also have the programs in Europe and Ibero-America. Here we are leveraging the significant experience from the first programs, and we are progressing according to plan. With that, let me just share a few details also related to the North America program, because we have talked about these as transformation programs.
When you hear the word transformation, I think that's a word that is quite frequently used, maybe too frequently. The work that we have done in North America truly is transformative. To make it a little bit easier to understand what this means, on this page, we have outlined some of the focus areas of this transformation program, a few of the key targeted benefits, and how we leverage this to create higher value. As you can see, this has been extensive work since we initiated the program, planning in 2018 and announcing it in early 2019. We are now firmly on track to deliver and exceed the targeted returns of these investments.
We have gone from old systems and applications and manual ways of working to modern state-of-the-art applications that enable us to manage core processes and our business in a way like never before. The rollout and critical transitions have been achieved with more than 10,000 clients, 120,000 employees in the division, and 4,000 team members in line or support positions. As you can imagine, a large part of the 120,000 are officers working in the front line that are also now positively going through a number of these changes. Everything has been built with a digital cloud and mobile-enabled future in mind, a future which is now here for us today for our clients and team members in Securitas in North America.
When you then look at the benefits of this and the value creation from this program, they are extensive, and they include all aspects of our operation. First, the way that we work with our clients and our people. In our industry, the company with the best client value proposition and the best employee value proposition will win, and there are numerous benefits in both of these areas. Modern systems and applications will also make it significantly easier to run a more efficient and profitable operation, addressing key areas such as reducing unbilled overtime and wage creep, just to mention two examples. With more data at our fingertips than ever before, we're also in a much better position at all levels and in the front line, to manage pricing and wages together with our clients.
As commented earlier, we're now starting to see positive impact on our operating margins in North America from these investments. As we further optimize the systems and ways of working over the next 12 months, we also expect to generate further improvements that will translate to improved margins and cash flows. North America is a significant part of Securitas global operations, and our team has done a tremendous job in driving this work, and we are very excited about the next phase of development. With that, I think we are good to sum up the quarter. We finished the year in a good way with consistent profitability improvement and significant growth in earnings. We continue with an important agenda for 2022 on building the new Securitas modern, digitized and innovative security solutions company.
I should also mention that, due to the Stanley acquisition, we have decided to arrange a strategy update and that you will receive an invitation to it as soon as we have closed the acquisition in the first half. With that, happy to open up the Q&A.
Thank you. Our first question comes from Rahul Chopra from HSBC. Please go ahead. Your line is open.
Hello. Good morning. Thank you for taking my questions. I have three, if I may. First is that given the labor scarcity situation in North America, maybe could you give us a color of, you know, what is the overtime versus normal peak hours you have typically, and maybe some clarity on how you're dealing with labor scarcity situation in U.S.? That's the first question. The second, in terms of your, now that you're doing planning and, you know, into value creation for Stanley Security, could you have more clarity on revenue synergies besides the cost synergies which you previously alluded to? And maybe and anything in terms of cost synergies that would potentially change during the planning exercise which you're doing that will be helpful.
My final question is in terms of how should we think about excess sales getting to normalized levels towards the 2020 level? Where do you see the normalization or probably further headrooms from there? Thank you.
Rahul, Magnus here. Can you just clarify the first question? Was that related to what that was related to? I picked up labor market potentially and wage, but I just wanted to make sure we answered the right question.
Sorry, it was relating to the overtime. Maybe, how is the overtime versus, you know, the normal peak hours and given the labor scarcity in North America and what you're seeing there?
Thank you. If you look at North America, it is a continuously challenging situation after the most intensive COVID period in terms of labor scarcity. I think that is well documented. There is also good knowledge and awareness of that among the clients. What has that meant? Well, we believe that this has generated some more overtime work in our business and most likely also in that of our competitors. That's something that I mean we are managing through that in a good way, as you can also see in terms of the profitability development. I think that would be the main comment that I would make.
We've also made a comment which I think is related and of high importance related to your question, and that is the price wage balance. We've had solid progress up until now in terms of driving price increases and agreeing price increases with our clients in North America. We believe that we are well-positioned also to do that successfully in the coming months. On the second question in terms of Stanley Security and revenue synergies, well, there are a number of different areas here that we believe are very important. First of all, of course, there will be hundreds of thousands of clients with millions of sites where we are able to drive cross-selling.
We have a very strong offering of protective services, and that will obviously be something that we will also in the future where technology and connected technology is more important than integrated solutions, we will be in a really good position to offer significant value, but also a menu of options that will help and address the client needs. Another one that I believe is important, but just for one category of clients, that is, looking at the presence that we have in Securitas globally, but also combining with the strength of Stanley Security together with all the investments that we have made in acquisitions in electronic security over the last six, seven years.
We will also be a very strong partner, and I would argue a uniquely positioned partner, to our clients as well who can also help them, not only with a global program in terms of strength on the guarding side, but also with technology and integrated solutions. That is also one which we also believe is going to be an important source in terms of value creation as we go forward. The last question that you mentioned was related to extra sales. If you look at the extra sales, we have seen a significant normalization of the extra sales in North America, specifically in the U.S.
That is really like I highlighted at the beginning also, the main negative impact on the organic growth, for you know, currently, but also for the next two quarters, essentially because we have high comparatives. If you're looking at Europe, the extra sales levels are lower now than where we were at the peak of the pandemic, but still a little bit above, I would say, where we would normally be. That is really the situation. On the total picture, Rahul, I would say it's more of a normalized situation.
Because then obviously we also have an ambition that, when some of the COVID-related extra sales are being wound down, that we're also then able to increase, thanks to our good presence, also more normal type of extra sales, which are even, you know, more related to events and activities that haven't been possible due to the impact of the pandemic.
On your first question there, Rahul, I think you're touching an important point when it comes to how we're working with overtime and the other KPIs and the labor scarcity in the market here. I mean, that is what we really want to highlight with the transformation program we had with in North America. We now really have a transparency by contract for all of these KPIs and the cost drivers on the different contracts. That has made us being able to manage this sort of price wage, but also the different cost items as overtime in a different way compared to before. That is why we've always been overall successful here with the margin development in North America, where we see an impact from the program.
There is a direct link there with that increased transparency that we are now having.
Understood. Thank you so much.
Yes.
Thank you. Our next question comes from Kate Somerville from UBS. Please go ahead, your line is open.
Thanks. Good morning, everyone. I've got three questions, if I may. The first is on the 70 basis point improvement in the margin in North America, are you able to break down how much of that was from the restructuring and then maybe from mix, and then from price wage, assuming that's flat? The second question is that the 50 basis point benefit that you're expecting in 2022, is this just from efficiency benefits, or how much of that are you expecting from mix? The final question is on Stanley. You know the 10-year average organic growth was -1%. I understand that, you know, it's a better strategic fit for you, but, you know, at what point do you expect its growth to be more in line with the growth of Securitas Solutions? Thanks.
Thank you, Kate. If you're looking at the profitability in North America, it has been consistent throughout 2021. Where we're starting to see improvement and real impact, like I mentioned, from the transformation program. That is a transformation program because we have essentially modernized and digitized and automated how we are operating and running the business. It's more of transformation and improving efficiency and productivity as opposed to restructuring. That has significant positive impact, and that is primarily on the guarding side, and the guarding operation. We also had very positive development on our corporate risk management business. There was also positive development on the electronic security business, where we also had significant improvement in that quarter.
It is really a mix of different factors, but we don't break out in more detail than that. Generally speaking, good impact and improvement on the margin ambition, when we announced this program, which was back in 2019, we were operating around 6% on margin in North America, and we said up to 0.5% improvement. We feel really good, as you can see, and if you're looking back now in terms of the achievements that we've had to date, but when we are repeating the 0.5, that is also to just underline the message that we believe that there is more opportunity for us for further improvement in 2022.
We don't specify exactly how much improvement, but we do feel confident based on everything that we have done so far and the positive impact that we're on a really good curve, thanks to the investments that we have made and also running the business in a sharper and more data-driven and better way, essentially. On the last question and reflection on Stanley, and you mentioned the 10-year growth there. I mean, we have seen that as well from a distance, of course.
I just want to highlight that when I look at the work that the Stanley team have been doing in recent years in terms of repositioning the business for growth and also for more innovation, they're clearly on a good path. We feel, and when we look at the business and the strength that we're gonna have in our offering, this is the market that is probably growing around 4% or something like that. We believe that we're gonna be able to grow faster than that market in the foreseeable future. That is very much based on the fact that we have built quite a lot of electronic security experience in the last five, six years.
We have a strong and very capable leadership team, which will be complemented by many strong leaders within the Stanley Security business. Then, like I mentioned, I mean, this will be, you know, a home for Stanley Security, where the Stanley Security team is gonna be at the center of our strategy. I think that, in that respect, is something that has resonated very, very well because they also see that we are becoming significantly more attractive as well as a partner when we are strengthening and really building a platform in terms of technology and electronic security, where the ambition is that we will really have the leading offering, but also that we're gonna win significantly more in the market.
Should also say that we actually we also see this effect from the five countries that we acquired from Stanley earlier, as Magnus referenced here earlier. They have now been coming into our business where we see positive impacts on the growth, where we are sort of able to start to grow those businesses in a good way. We also referenced the Techco acquisition that we did in Spain, which was previously owned by Stanley as well, when we discussed this in December. There we have also really seen the same sort of positive impact coming into our business being core of the strategy and driving growth together there.
Yeah, I think that's an important point, Andreas, because that is it's related very much to having critical mass in terms of competence, in terms of having critical mass in terms of technical expertise and also position in the market. Like Andreas says, when we have done that, we have also seen that that has not only helped and enhanced the business that we acquired, but the combination has become significantly stronger. When we look at the combination of existing Securitas electronic security in a country like Germany, for example, or Spain, but then combining with Stanley Security business that we acquired in Germany or what we bought in Techco in Spain, the combination has been significantly stronger and much more profitable business related to some of those factors.
That is obviously something that it's very high on our agenda and clear ambition to make sure that we achieve that, and that I feel very comfortable based on the experience we have, but also based on the combined leadership and competence as well that we're gonna have in this field.
Excellent. Very helpful. Thank you.
Thank you. The next question comes from Sylvia Barker from JP Morgan. Please go ahead. Your line is open.
Thank you. Hi, good morning, everyone. Two questions from me as well, please. Maybe first touching on the price versus volume performance. You have obviously managed your price wage balance in Q4, and you're very confident for 2020. Just to help us think about the organic, could you maybe talk about the Q4 price versus volume components within your organic? Then going into 2022, I presume you've had a lot of your collect-
If you're looking at price volume performance in the fourth quarter, it is significantly higher price increases and price increase level in 2021 than what we would normally have. I think that's important. If we talk about normal years being around two or three or maybe, you know, 3% plus or something like that, it is a higher price increase level in the market and also what we are achieving. If you're looking at organic sales growth, obviously we now have a number of different factors. The extra sales they are you know with a very significant negative impact compared to the previous year in North America. That is then offset by the growth in the portfolio, in the underlying portfolio.
That growth is healthy. There is a volume component in that portfolio growth. There is also a significant price component there as well. If you're looking at 2022, I mean, we have been expecting and we are expecting significantly higher wage inflation. That also means that our ambition in terms of price increases is significantly higher as well. When we're making the comment that we feel that we are well-positioned, it's essentially because we've had very good traction and understanding in the work together with the clients, understanding the situation, but also then based on the good value proposition and the good relationships and the service delivery that we have, also very successful in terms of achieving those price increases.
That is really the position that we are in right now. If you look at the second question related to the extra sales, that is spread over a couple of different countries, but we call it out because there is a positive impact. Obviously, as the situation is hopefully normalizing over the next couple of quarters, that is something that will then come down. Once again, also seeing that we will also start to resume more normal type of extra sales related activities. I think if you're looking at countries, there is probably four or five countries with, you know, key markets like Sweden and Finland and Germany, et cetera, where this has an impact today.
Like I said, if we hopefully have more of a normalization of the overall situation, those will come down. Andreas, do you wanna comment on the provisions?
Yes. Related to the provisions, they were then largely untouched during the quarter here. We are continuing to assessing this, of course. As you know, we increased provisioning during 2020 in the light of the pandemic and also the more increased risk environment that we're having in place. Now we go ending 2021, the pandemic has continued, of course, and there is continued uncertainty around this going forward as well. That is why we have decided then to not touch these provisions for the year. Then going forward, of course, now we see the pandemic hopefully ending, but we also see then effects coming here in the market with increased inflation and then also increased interest rates, which creates uncertainty going forward.
That is the reason why we decided to keep these provisions and see what impacts this new environment will have. Of course, we will keep you updated around this. What I should say also, we have not seen any increases in, for example, client losses here during 2021, but that can of course change then if the uncertainty would remain or the macro environment would worsen during 2022. That is basically how we're assessing the situation here right now.
Okay, thank you very much for the answers. Could I just follow up quickly on the pricing point? You see the price point in Q4 potentially more of a 3%-4% contribution to organic, and that kind of staying at that higher kind of comment. Thank you.
Sylvia, we don't break out specific numbers, but it's somewhere in that type of a range. Yes.
Perfect. Thank you very much.
Thank you. The next question comes from Andrew Roberts from Credit Suisse.
Hey. Going back to wages and prices, again, you've talked a lot about North America and the trends seen there. Could you talk a little about Europe, and which I guess is lagging in terms of timing of that inflation? What you saw at the end of last year and what your expectations are for this year, if different to the U.S. Then secondly, just on Ibero-America, you talked about strength in Spain and some price increases in Argentina. Could you break that down a little between those component parts? Thank you very much.
Thanks, Andrew. Yeah, so if you look at price wage, I mean, given what we saw in the early parts of 2021, we have been preparing for these price increases since last summer, essentially. That's across all parts of the business, but with a lot of emphasis and focus in North America and in Europe. If you're looking at Europe, as correctly stated, that we are a little bit later in the process there, as normal. I think a few important factors. One is that we are well prepared.
I also believe that it does help us as well, to a certain extent that it's not only, you know, there's not only acceptance of price increases of components, but I think people have also realized in North America and in Europe that there has to be a revaluation as well of people. I think that is an important one, that there is a broader awareness of this particular matter. There I would say that we are later in the process, but we have a team that have put a lot of emphasis and focus on this, also with an ambition to drive significantly higher price increases in 2022 than in a normal year, in light of that context. That's where we are.
We always are humble, but we do say that we feel that we are well positioned, and that's thanks to the good track record that we have in terms of handling this over many, many years, but also then the results that we have achieved, more broadly speaking, to date. I think that is the way that we look at this situation. The other positive thing, of course, is that we are strengthening continuously electronic security and solutions capability.
It's not like we're coming to the client and just saying, "You know, we need to increase the price." Well, if nothing else, I mean, we always have the option as well to look at the security equation and say, "How do we drive improvements, and at the same time also protect the value for money and the value in that security equation with more technology, more integrated solutions?" That is also something which is high on the agenda and part of most of those discussions as well. I think the second question was related to Ibero-America and the performance there. We do have strong performance from Spain.
That is a very significant part of the sales growth, if you look at the organic growth numbers, but also the profitability development. We are also in a better position in Latin America. We have taken extensive actions, as you know, over the last couple of years in terms of leadership and also active portfolio management to make sure that we have a healthy portfolio. All of that is also helping and contributing. We are not that focused on driving top line growth. Most important for us, as you have seen now, especially in all of 2021, is that we're focusing in Ibero-America, but also the other divisions on the quality of the portfolio. That is really priority number one for us.
That I feel really good about is really also starting to come through, and that's the reason that you're seeing margin improvements across all the different business segments as well. Strong offering, but also then very focused on portfolio management and working closely with the clients to make sure that we have a good and healthy portfolio as we go forward.
Great. Thank you. Just one quick follow-up, if I may. You going back to the previous question, you talked on significantly higher price increases in Europe. Should we be thinking that 3%-4% that you mentioned in North America is that the kinda right kinda ballpark?
Yeah. I mean, we don't break out the numbers, but when we highlight, and I think we have historically made references to, you know, where would a normal type of price increase be? In normal years, it would be lower than the interval that you mentioned. The interval that you mentioned is more. I mean, it's on the higher side. We are expecting this, and we are planning for that. That is really the you know the focus in a lot of this work, given the environment that we have, but also to ensure that we can stay competitive in terms of attracting and retaining good people, and delivering really good service to the clients. That is number one priority, and we feel good about where we are in that work.
Great. Thank you very much.
Thank you. The next question comes from Stefan Knutsson from ABG. Please go ahead, your line is open.
Morning. Thank you for taking my question. I have two. First one, we've talked a lot of wage versus price increases. Generally on your pricing power, I mean, last year we saw Allied Universal acquiring G4S, and now you're acquiring Stanley Security. To me, that indicates that for the really blue chip customers, the global customers, the competition has decreased quite a lot the last two years. Is that how you view it, and do you expect that you will have a better pricing power going forward?
Thank you, Stefan. Well, I mean, if we talk about us, because this is the business I know, it is a large unconsolidated market when you're looking at guarding and also when you look at electronic security. Yes, I mean, we are strengthening our position, but if you're looking in terms of market shares, largely speaking, I mean, it is. There is still a lot of competition, local and regional and then some global. I think what is so exciting when you're looking at the combination with Stanley is that we, you know, we have one strong leg in terms of guarding, but we're also now creating another strong leg in terms of electronic security.
That gives us an opportunity to also then drive more integrated security solutions for the clients. I mean, we have been investing quite a lot in the global client business for a number of years. We have a strong position. This is a faster growing part of our business. Ambition for us, of course, is to you know, to keep that up and keep building and driving that momentum in the years to come.
Thank you. Secondly, about the working capital requirement. Is there something structurally that has changed with you still being able to keep it at a lower rate than pre-pandemic?
No, I think the good cash flow generation and the sort of lighter balance sheet is mainly due to really strong collection focus from the organization throughout the year. Of course, we are increasing the focus on net working capital now in light of the announcement of Stanley. There is no structural change. It's more really good work and step-by-step improving our processes for collection and how we are driving sort of contract management and other areas as well. I would say it's more an outcome of really solid work and attention rather than anything structural.
You aim to maintain the DSO that we saw in Q4? Or do you see that it will normalize somewhat next year?
If you look historically overall, I mean, of course we are aiming to improve. We're measuring this very much on a year-on-year basis because then you also have some seasonality, where at year-end, as you can see, we normally have stronger cash flow and a reduced DSO, where there is an extra focus also on getting the cash in. We are aiming, of course, to have the same focus and the same level, but we should compare to previous year's quarters, not sort of quarter-on-quarter, given there is some seasonality there.
Okay, perfect. Thank you very much.
Thank you. The next question comes from Allen Wells from Jefferies. Please go ahead, your line is open.
Hey, good morning, Magnus. Good morning, Andreas. A couple of questions from me, please. Just firstly, you pull out in the statement, and you've commented on it, some of the supply chain shortages in the electronic security side of the business. Is there any way you can maybe help quantify or maybe provide some qualitative comments around how that might actually be impacting growth? Then any comments you might have on if you see any easing in that and what the timing of that might be. I'm obviously particularly interested as the Stanley deal closes. I assume you'll be slightly more exposed to some of those shortages, with that higher tech exposure there as well, please. Then the second question, just going back to the North American labor side, but maybe more around labor shortages and staff retention.
Are you seeing any challenges there? Is there actually any real way that is actually inhibiting growth within the business as well, your ability to take on new work or additional work, or you're having to turn down work because you don't have enough kind of flex or capacity within the group at the moment? Thank you very much.
Thank you, Allen. If you look at the component shortages, yes, there is a significant impact. I mean, to quantify that, it's a bit difficult to say how many percent that would be, but that we're talking percentage points, absolutely. I think that is something that if you're looking, you know, how do we actually handle that? Well, it's very actively then prioritizing essentially key components for key clients, depending on urgency. That is one.
I should also say that if you look at the electronic security and the installations business, I mean, there has also been an impact from the recent months in terms of of the pandemic, because a number of clients have also said that, you know, we need to reduce or limit, or not even grant access to our premises. That has also been a factor, and that's something that we are hoping, and I think the entire world is eagerly hoping for this situation to now start to normalize, hopefully in the coming quarters. Those component shortages plus also some of those COVID-related, that has had an impact if you're looking at electronic security in North America, but also elsewhere.
If you look at, I mean, the second question in terms of labor challenges, yes, there has been an impact. I mean, there are some contracts that we are saying no to, and that could be no business, but it could also be, how we are renewing or not renewing existing contracts, related to scarcity in terms of labor.
Just to reiterate that as well, that is why it's so important that we are not too much focused on just the top-line growth, so that when we have lower performing contracts with lower margin, that we also then always as the first attempt is that we then renegotiate, so that we have sustainable and good margins, because that enables us to secure also the quality of the services and how we drive innovation over time with the client. If that's not possible, if it's not possible to convert the solution that we then also or terminate in those contracts, because otherwise it's not gonna be a sustainable situation.
I think that the broader shift that we have been driving in Securitas in recent years is even more emphasis on the quality of the portfolio. Obviously the best metric of the quality is the profitability of the portfolio in each individual contract. That fact, if you're looking at growth impact, yes, there has been a negative impact in North America. I also know a few examples as well in Europe where we've actually had to say no to potential new business because of this situation.
Can I just ask one quick extra question? Sorry. Just to what extent you can comment, obviously the kind of Omicron new restrictions late December and in January. To what extent have they had an impact in the group at all, please?
Primarily on the installations related. I mean, when we talk about electronic security, that has meant that we saw another wave of clients, et cetera, that were very restrictive or not granting access. That has been an impact. You know, having said that, I mean, that is in the last, you know, 60, 90 days, essentially. Now we're seeing that the situation is improving again. Yes, there has been an impact, but it's been fairly temporary.
Great. Thank you very much.
Thank you. The next question comes from Anish Aggarwal from Morgan Stanley. Please go ahead. Your line is open.
Hi. Good morning. Just got a couple of more questions. First, on that accounting change related to the cloud computing arrangement cost, can you just tell us, like historically, if this was treated as CapEx, how was the depreciation related to that or amortization related to that treated? Was it above the line or below the line?
Related to the cloud computing here, historically looking, we have basically expensed these things, and that is why it doesn't have an impact for us historically as well. So
No. The point is, like, you expensed it, but did you expense this above the line or below the line? I mean, like, was it part of the adjusted EBIT number or excluded from the adjusted EBIT calculation as well historically?
It was taken above the line.
Now going forward will be taken below the line, right?
Well,
Is it part of the IAC?
Well, if it is part of the IS/IT transformation programs, yes. If it is more regular business, it would be above the line, but we don't see any material projects there going forward from that perspective.
Okay. Because you said that we need to have around SEK 250 million of IAC in our model from 2022 and 2023, right? I'm just wondering whether this SEK 250 million was above the line historically and now it is taken below the line.
Exactly. If you're looking going forward here, you will have SEK 250 million more items affecting comparability, but you should also expect SEK 250 million less CapEx, and that CapEx would have been above the line.
Okay, fine. That's clear. Just the second question around the North American growth magnets. You sounded like it could be slightly negative in Q1, Q2 because of the contract exits and the unwind of the extra sales. Can you just tell us how much of extra sales you had in Q1, Q2 this year for the comparison basis, please?
On North America, the reason I commented that is that when you're comparing with Q1 and Q2 2021, we were running at very high levels in terms of extra sales. The comparatives are high, and that was also the case Q4 2020 to Q4 2021. For that reason, I mean, if you're looking at the flat growth in North America, the main factors, if I simplify this in North America in Q4, on the positive side, we had very good portfolio development. That was then coming back to the earlier question, price driven, but also some volume impact. Then we had several percents of negative impact related to normalization of the extra sales.
It's not one or two, it's a little bit more than that. Then obviously there was also some negative impact from the aviation contract that we announced termination of, I think, in the summer of last year. There was also a small impact from the larger healthcare contract that we announced with the Q3 results. When you're looking at those, there will obviously be a negative impact over Q1 and Q2, to be clear. After that, I mean, everything else equal, we feel confident in terms of our business and where we are.
The temporary impact, looking at the extra sales reduction then in the first half of 2022, and then also from the larger, but low profitability contract termination, that will be clear in the first half. There you can say, well, that's obviously negative. We don't like negative growth or neutral growth, but it is most important for us that we have good quality in the portfolio, and these factors are of a temporary nature as well, and I think that is important. We feel good about the situation. I mean, the most important is also the profitability development that we have positive profit development and also margin over time.
Yeah. That's very clear. Thank you so much.
Thank you. Our last question comes from Karl-Johan Bonnevier from DNB Markets. Please go ahead. Your line is open.
Yes, good morning. Just coming back a little to the U.S. retention rates that we have obviously talked about it from a lot of different angles here. If you look at that 86%, adjusting back the big contract impact, how would you feel that the retention rate has been in your more normal bread and butter contract, if you put it like that?
Hey, Karl-Johan Bonnevier. Yeah. That is primarily the big impact if you're looking at the retention in North America. The general development of the portfolio is good, and I would say even improving. There is a big impact from that specific one. That was in the range of $150 million on an annual basis, portfolio values around $1.36 billion. It is obviously a large contract, but low margin. Apart from that, we are in good shape and continuously developing the business in a good way.
The part of the business that you talk about being, say, the quality of the portfolio, you still feel there's nothing happening, so to speak, with normal kind of bread and butter kind of customers of yours?
Well, I would say rather the contrary. I think we're becoming better and better all the time in terms of how we're working with the clients. I mean, I spent quite some time talking about the North America Business Transformation today, not only with good leadership, but also with better, more modern applications and tools and better transparency and visibility in terms of performance. All of this is also helping a lot in the client relationship. The trend I would say we feel really good about in terms of the work that the team is doing, but also then starting to see now and realize some of the benefits of extensive modernization efforts that we have been driving over the last couple of years.
Good point. It brings me on to the next question. Looking at the, say, very helpful, the extra comment you gave earlier on the U.S. North America Business Transformation program. Obviously with the knowledge from that now in your bag, so to say, and also the global IS/IT project finalized. When you now then turn focus to the European and Ibero-American program, do you feel, say, more confident in the delivery on those when you look at up until 2024 and maybe that you have built in some sort of extra prudence into the impacts you will see coming through on those programs at the end of it?
Yeah. That's a highly relevant question. We have learned a lot, and we are really also proud about the fact that we have been able to drive these extensive programs on time, on budget and also with now you know emerging returns, which are very positive. I think that is important. There is quite a lot that we're also bringing to the other programs in terms of how we run this and also then how we build platforms and systems and applications to really support the business in the best possible way.
I should also say, so I think that is very positive and that will, I mean, that is giving increasing confidence in terms of the opportunities and what we are able to do, you know, once we are done with the heavy lifting, because these are extensive modernization efforts that we have been driving over the last few years. I should also highlight that if you look at the European program, that is also completely different starting point, many different countries, more difference in terms of legacy systems. That is once a year, it is a multi-year program, but we have a clear view in terms of what we want to achieve, as one important part.
I think the other aspect of the European program as well is that it's not only modernization and harmonization of systems and ways of working, it's also how we are shifting the business mix. That is an important part also of the European transformation program. We're doing the right thing. I feel really confident about you know the reasons why we do it and how our team is conducting the work. They are also multi-year programs. We do feel good in terms of the experience also in the context of Europe and the important investments also in Ibero-America.
Excellent. A final one from me. When you have presented the Stanley Security case now to competition authorities in the relevant geographic regions, have you encountered any feedback that you might feel are a risk to the completion of the acquisition?
No. We made some preliminary assessments ourselves before. If you're looking at these markets, these are still largely unconsolidated markets. There is nothing in the work that we have done that is changing our positive view of that.
Thank you very much.
Thank you. There appear to be no further questions. I'll return the conference back to you, speakers.
Okay. Thanks a lot, everyone, for joining and for your interest as always. Thank you.