Earnings Call: Q2 2018

Jul 27, 2018

Our customers are at the center of what we do, and we are working to deliver the best possible value, to our customers. And we do this through a combination of people, knowledge and technology. And so let us look at, some of the highlights. Of course, you should realize that this, growth is good in the first half we're also facing a tougher comparatives in the second half. There is growth in all business segments and also strong commercial activity. And this, together with excellent customer retention, have contributed to this growth. The customer retention is important since that is one of the indications of how satisfied the customers are in terms of the services that we provide. The wage cost increase in the first half is on par with the price increase, which we are happy about. And we're also delivering an operating margin of 4.9% in the first half, which is slightly better and then the first half of twenty twenty. And the earnings per share, a 15% real change in the first half. So let us now look at the progress in security solutions and electronic security. In the second quarter, we have seen good activity with a number of midsized solutions, where we deliver a range of protective services and the growth is in the first half twenty one percent. We're making good progress with integration of acquisitions in France and the Netherlands and completed the acquisition of Kratos in the month of June. And this acquisition will strengthen our technical capability in these important markets. Good. So let us now then look at the performance in the different divisions. And we've had a very strong quarter and 1st health in North America and solid customer retention. I would also like to highlight that we have good growth in Electronic Security And Solutions that represented roughly 17% of the total sales in the quarter. And when looking at the profitability, in North America. We also see good development, 1st half margin improving to 5.8%. The operating margin was supported by leverage through organic sales growth, but I should also mention that the Q2 operating margin contained a positive one off impact. Looking at Europe, we are very happy about the fact that the recovery is continuing. So we see stronger growth now than what we have seen in the previous quarters. 4% in the first half and 5% in the second quarter. It's also good see that the client retention is improving now at 93%. And when we're looking at the growth, almost all countries in Europe are supporting the growth, but we should highlight Belgium, Germany and also the Garden business in be as important contributors. The refugee related sales continue to decline, and this has had approximately 1% negative impact on the organic sales growth. We have good growth in security solutions and electronic security, which now represented 21% of the sales. But while we have significantly improved, the growth in Europe, we are not. And based on this development, we have initiated a cost savings program for the second half of twenty eighteen. And we estimate that the restructuring costs 93% and good growth overall. And we achieved 10% organic sales growth in the first half. And the decline in organic sales growth is mainly due to Argentina, but we have continued very strong development in Spain, which is helping the growth in the quarter. And when looking at the operating margin, our Eberamerica team has delivered a very strong first half with an increase to 4.6%. Spain is the main driver behind this improvement. We're improving thanks to strong development in security solution sales. But I'm also happy to say that we're also seeing improving margins in the guarding part of the business. And to me, this is also an indication that the customers are appreciating the quality and the value that we bring. We do have a more challenging situation in Argentina with negative leverage and also turnover in the contract portfolio. But all in all, I would say it's a very positive development in the Ibero America division. And with that, I would like to hand over to our CFO, Bart Adam. Bart? Many thanks, Magnus. Hello to all of you, wherever you are in the heat in Europe, So let's now turn to some further financial details to the first half year and the second quarter. And we will start with the income statement here. As mentioned also at our Q1 meeting, I would like to confirm that 2017 comparatives for the group have been restated according to IFRS 15. This results in a relatively minor change for the year. The change is about SEK 20,000,000 positive increase of the operating income for the full year and it relates to that now we need to activate and then further depreciate sales commissions. When we turn now to the numbers, yes, as as Magnus commented, both the quarter and and the first half year showed good organic sales of and the margin operating margin improved 0.1 both in the quarter and in the first half year. When we move to the, acquisition related costs, we move it further down in the income statement. Acquisition related costs, you see that in the first half, year, these were SEK 25,000,000 compared to SEK 30,000,000, in the first half of last year. And then about half of that, 25, relates to the Kratos acquisition in the U. S. And you shall expect that the total estimated acquisition related costs for Kratos are about SEK 75,000,000 for the full year. And we expect that all of these costs will be recognized, as I said, in 2018. When we go further down in the income statement and, we look at the financial income and expenses, these are flat in the first half year compared to the first half last year at, minus SEK 196,000,000. Note, however, that, financial income and expenses amounted to a bit over, minus SEK 100,000,000 in the quarter compared to minus SEK94 million Q2 last year. I mean, this step up in the quarter is due to a combination of the development of the U. S. Dollar interest rates also, of course, this weaker Swedish kroner and increase net debt during the quarter as a result of the acquisitions. This step up also happened a bit gradually during the quarter. Then we move the step up I mean compared to last year same quarter. Then we move to the tax line the applied tax rate for the 1st half year is 25.0 percent, and that is compared to 25.5. At Q1 and compared to 20 This this reduction from 29 to 25 is, due to lower, largely due to lower U. S. Tax rates as of 2018 as a result, of course, of the U. S. Tax reform. As you can see, the 20 full year tax rate was 31.5 that is, however, including a 1 off tax expense of 3.1 that was booked in q 4 last year. So excluding this 1 off tax expense, it was And then we will of course continue to we will continue to assess the tax rate going forward as more details and interpretations to U. S. Tax reform become available especially related to the so called beat the base erosion abuse facts. When we move to the next page, And then we take a look primarily at effects from the different currencies. And the numbers mentioned here to the right of the slide are the foreign exchange end rates in Swedish kroner at the quarter end, and we see that both the US dollar and the euro has strengthened now quite a bit versus the Swedish kroner, at the end of Q2, compared to Q2 last year. Respectively plus 5.5 percent and plus 7.2 percent up. The euro has continued from Q1 on, yeah, a 10.3to10.4 level. But the main swing then compared to Q1 is the movement of the U. S. Dollar rate. The U. S. Dollar has continued its increase since the start of 2018, And our Q1 consolidators, so our 1st quarter consolidated results were negatively affected from the U. S. Dollar when comparing to last year whereas now in Q2, we got some tailwinds from the U. S. Dollar development. The Argentina peso, however, further reduced somewhat its valuation against the Swedish kroner, and that is now on close to a minus 37% at quarter end. All in all, the net effects on the different slides and income statement can then be seen from the difference between total change and real change. And then if you turn to the box to the left, you notice that, regarding sales for the first half year, the net effect that is the difference between total change at 7% and real change at 8%, you notice that the net difference is is 1%. So the real change is 1% higher than total change. This difference was more like 3% after q 1. So where q 1 was hampered from the currency rate, asset, we had exchange tailwind in Q2. So the negative currency effect from Q1 has been almost fully compensated by tailwind from currency during Q2, mainly as a result from the swing in U. S. Dollar. As regards to earnings per share, there you can see that there is actually no more difference between total change and real change for the first half year, where the difference was also 3% for Q1. Let's turn then to the next slide, cash flow and balance sheet. Also here, it shall be noted that related to IFRS 15, we have restated, the balance sheet, but there is no change to the cash flow. That remains unchanged after IFRS 15. We had, I would say for Q2, an okay cash flow during the quarter for Q2, In the second quarter, our cash flow from operating activities recovered from the negative cash flow effect at the end of the first quarter You remember there that we had some negative effects from the timing of Easter, and we saw that money coming into the balance from from the balance sheet into the cash flow during, April. However, we also suffered in the second quarter from a few other negative effects then. There is a negative effect related to regulatory change in social security payment timing in France. So we need to pay faster now in France and social security, compared to how it was before. Then we have an invoicing system change transition in the Netherlands. And that is not a major issue, but at least it's causing some invoicing and payment delays from our customers. And then finally, we were also affected from the interest rate hike in Argentina that is causing some payment delays also from our customers in Argentina. That would probably be a bit more difficult to recover from. I mean, not so much concerned about bad debt, but it's just that people companies or customers are paying slower compared to how it was before. So in France, the situation will not change the situation in Netherlands will gradually improve, whereas the situation in Argentina could take a bit longer to resolve. I should also add of course that the strong organic sales growth, especially in North America, resulted in increases in operating capital employed, impacting the cash flow negatively. I mean, when we see this type of strong growth rates we of course need to fund that growth also from the balance sheet. I should also remind you that the quarter 2 ended in the weekend and that did not help either to the cash flow from operating activities and I just want to flag that also the timing of Q3 closing is unfavorable for the cash flow because of the weekend timing in relation to the quarter end. When we then move to the next slides, we look at the net debt. It stands now at 16.7 and the development from year end, of course, reflects the development from the operating cash flow, as as just explained, And then also we paid out a bit more than SEK 1,200,000,000 related to acquisitions, all of which of course were disclosed to the market and we paid over SEK1.4 billion in dividend, which hopefully our shareholders are happy with. Magnus will come with some further details on the acquisitions. The net debt was also impacted from the for an exchange development, you can see there a translation difference of SEK 837,000,000, and that is purely the development also of both the euro then and the U. S. Dollar since, so that compared to January 1st. Still, you then see also that 4Q2 to the far right of the slide the net debt in relation to EBITDA is still on a healthy 2.6. We see here the development over the years and we compare this quarter and then to the end to the year end from previous years. We are now at leverage of 2.6 knowing that our Q2 tends same seasonality. And of course, everything else equals this shall go down by year end. And by this, I would like to hand back to Magnus and then we will be happy to answer any questions later on in the call. Okay. Thank you Bart. Similar to last quarter, I would like to share also a few updates related to the work that we do with our customers but also the work related to the strategy. And when we look at security solutions, we talk quite a lot about them. And, but I think that it's also important that we took a look at these examples also from the customer perspective. So we would like to, to show a brief video, and this is a reference case then from a business park customer in film lamps. So if we can then roll the tape, please. We are operating in 6 different countries there are more than 1700 companies, and we serve more than 50,000 people each day? Well, business parks are actually they're an interesting environment since they are always occupied when you 47. From security point of view and safety point of view as well, they actually create different kinds of challenges. You need to be creative in the sense that you need to use different kinds of solutions to actually maintain a required level of security and also the usability of building. Nobody knows yet what they will be after 2 years, what kind of solution. And that's the reason that we need to have that kind of partner who find out the best solutions and be aware what they will become. So we are providing them with mobile patrol guards that are, circling the sites. And then we have remote services. We can remotely take a look at their, their surveillance cameras, their CCTV systems immediately when there's an alarm, we can see what caused it and then respond accordingly. These are from security point of view. And then we have a lot of safe solutions. When we are building a new construction site, secure does take our security plans. And they are auditing all the time when we have this kind of in billing. We maintain their rescue plans. We have created them, and we annually update them based on that you planning, we have created these, safety organizations in these campuses. So we have rescue and fire safety for technoclass's own stuff and their tenants. And we also provide them with fire drills. And if the customer needs something specific, we offer to segregate as those services and they could feel tailor made solutions, what the customer is. And that one of the reasons that we secured us is our partner because they have almost the same corporate values as we, they have the integrity, vigilance, and healthfulness. And I think the healthfulness same as the service in our side. We take care of the security and safety of technopales so that they can focus on their business. We like to have that kind of partners, which are the pioneer or 4 runners on their own business. And that's make my life much more easier. Well, as you can see, we recorded a video, I think, in the spring or the early spring, it was a bit different temperature with snow than what we are having and seeing right now. And when, when you look at this, this case, I think it's, it's a good example of a solution that we are, that we have developed for technologies because it's a range of protective services, close integration with a customer to add value and to really address their critical needs. And as you can see in this case, it's also a good combination of people, technology and knowledge. If we turn to the next page, looking a bit at the acquisitions, we are making good progress with the acquisitions in the company and have now completed the acquisition of Kratos Public Safety And Security Division in the U. S. And this is an important acquisition because it will help and enhance our proximity to the customers with a, a good branch network across the United States. And this week, we also closed the acquisition of ProNet in Turkey, pronet, will further strengthen our leading position in the security services market. In Turkey. And I would like to say that we are very happy to welcome the teams from not only Creators and ProNet, but also from the other companies, that have been part of Securitas in the last 6 months. And if we turn then to the next picture, this is a picture that we like to show, and it's also important for our strategy. And it does show the development but also then value that we're creating for Securitas as we're developing from our quality guarding to the more integrated security solutions and electronic security. And we have a good recent example, I think from the Spanish market where we have strong momentum with security and solutions in generating higher customer value and also higher value to Securitas. But I would also like to emphasize that we have a big part of the business, which is guarding. We are proud of this business, and it's also a part of the business that we are constantly looking at how can we develop this, how can we protect the value and then develop that part of the business also as we go forward. And when you look at the first half in terms of the progress on security solutions and electronic security, we have good growth and security solutions, electronic security are now accounting for approximately 20% of our group sales. And before we conclude, just wanted to repeat the slide that we shared 3 months ago when we presented the Q1 results. And and this is a little bit outlining the journey that we are on, where we're coming from in terms of the the strong foundation that we have built in security services. And then obviously the drive and the transformation towards a richer protective services offering and also then the next phase that we're calling intelligence security and our ambition to be a leader in intelligence security. So I think to wrap this up, we have strong growth across the business 7% organic sales growth in the first half and a EPS improvement of 15%. I would like to emphasize again that we are making a much stronger comparatives in the second half of this year. But we have a feeling that most things have gone well this quarter in terms of the general development. So we have good momentum. And before we start to Q And A, I would also like to highlight that we have an investor update in September on 20th September that we're going to do in Stockholm, but there would also be possibility to follow that on the web as well. And we would be very happy to see you there when we talk a bit more about the business where we are right now and also some thoughts about the future. So I think with that, I'll turn over to the moderator and we open up the Q And A. Our first question comes from the line of Srini Saraconda of H. Please go ahead. Your line is open. Hi, this is Srini. Spain has driven your strong growth in margins. And you have also mentioned that short term contracts has contributed to the growth and growth basically. So may I know like how much growth has come from these short term contracts and what's like short term services to the clients? Is it correct And have they contributed to the margin expansion in this quarter? Yes. Bart here, I take the question. Yes, these are more short term nature contracts. We cannot exactly tell how long they could last or could not last that's that is an unknown to us as well. So I cannot guide you on that one. As to the impact on the volume, that is a bit more than 1% between 1% 2%. And then on the impact on the margin, you could say that has quite also a significant impact on the margin in EBITDA America around 0.3 actually. Okay. Basically, I think 30 basis points improvement has come from these contracts. Yes. For Ibero America? Yes. Okay. Both are too much about it. It is basically, if you look at the comparatives from last year, that is where you can everyone. And just two questions for me, please. Firstly, regarding the one off in North America, can you perhaps quantify that and also review what the exact reason for that one off positive impact was and separately in Argentina. You haven't quite used the phrase and they expect it to get worse from here as you perhaps did in the last quarter. So do you perhaps think you've kind of bottomed out to this in terms of the sales decline and the margin headwinds as well in that business Yes. So I think in terms of the one off in North America, that is related to a revaluation of work in progress. And when you look at Argentina, it is a, a less stable and more uncertain situation. So I think it's difficult to predict at this point in time if it's going to get worse and exactly what the developments are going to be. But we are looking carefully obviously and working with the team as well to make sure that we manage through the situation. So as to the one off that you mentioned for North America, it is when we mentioned one of its normally 0.1s or more. So in this case, it's also 0.1. And it's basically it relates to a revaluation of the work in progress in a larger contract in the U S. But you should also remember that last year as well, we had a positive one off of the same tued in the quarter. Thank you. Our next question comes from the line of Paul Jacobs of Barclays Capital. Please go ahead. Your line is open. Hi, everyone. I've got a couple of questions, please. The first is on wage inflation. Can you give us a sense for the level of wage inflation you're seeing in the market, please, and, a sense of how how pricing negotiations have gone. It it sounds like you've managed to pass it on. And on the same topic in Europe, perhaps you would give us an update on the negotiations, that you've you've already passed through, and those which are which are upcoming in the rest of the year. And and then on a slightly separate topic on the on the restructuring costs, Could you elaborate, please, on on which cost it is that you're intending to take out of that European business and when you talk about the payback, you think the entire amount, will will flow back to the operating profit. Thanks. Yes. So Magnus here, so I can start and then I invite Bartu to make a few additional comments. If you look at the price wage balance in general in North America and also in Europe, we have managed to balance that quite well. And if you were if you're looking then at the specific number, I think in terms of the restructuring program, we estimate the restructuring cost around SEK200 1000000, SEK250 1000000. And then we say 2 years, payback. And there will obviously be some differences in timing of that program. So some things we will be able to start to do in the fourth quarter, this year. And then, obviously expecting to drive full impact the closer we get to the 2 year timeframe as well. But it is correct that when we say 2 years that this is essentially to then recover the restructuring charge that we're taking in the third quarter. Part, do you want to quantify anything more on that to comment? 2% to 3% and basically the same thing overall in the group, it's around 2% to 3%. The restructuring 200 to 250s with a 2 year payback. So meaning that we expect about half of that amount as savings. And they will flow in, as Magnus said, during Q4, but then mostly as of 2019. And we have not seen, I know there are statistics around, which show 5% 6% but that we do not see, we do not recognize that those statistics, I can confirm to you that we think they are right on a long term. So the long term perspective in those statistics is correct, but we cannot confirm the short term like month on month development that sometimes is shown in the statistics. Okay. And maybe when I've got you, I could ask one more, which is around the interest charge. It was $102,000,000 in the quarter. Is that a fair reflection of the quarterly level now? Or were there any one offs in there that meant it was slightly higher? No, there were one offs, no one offs in there, as I mentioned, is it, it's a reflection of higher US dollar interest rate. So that was staged and all the fact that the debt was higher. And it ramped a bit up. The cost ramped a bit up during the quarter. That you should also know. So this is the quarterly average, but it trumped it up during the quarter. Thank you. Our next question comes from the line of Nicole Holm of Tanske Bank. Please go ahead. Your line is open. Yes, first just a question on the organic growth in Peru. Historically, you have given us the organic growth rate for Latin America in the report. Would it be possible to to say something about where it was and also the level of organic growth in Spain for the quarter? Yeah. Okay, we stop putting that. I think we did not really put that in the report, but sometimes we put it as a comment in the report. It was not all the time there. But I think we can confirm. Beer America is still growing. Absolutely. And it's still double digit growth that we see. And then as a consequence, Spain, together with Portugal, should also be around that range in view of the divisional average there. Okay. And just a clarification on the cost savings is roughly 50 basis points on the margin. How much of that that will you invest into, I mean, more of the new strategy and how much do you think you could keep as a gain more long term? Not sure how you get to the 50 basic points. I mean, if you take the average of 200,000,000 dollars, $250,000, say $225,000,000 and then a 2 year payback, that should be then a saving of around half of that. So say $110,000,000 that is how we should reason. So 110 on yes, we have more than 40,000,000,000 sales in Europe. So it's more, I think, on the level of 0.25.3. Okay. Then I understand. And then just my final question is regarding, I mean, looking at the margin development for the group 10 basis points up, but could you say something about the margin development in NAND guarding? Is it still 20 to 30 basis points annual pressure or is it stabilizing? Yes. I mean, there is always pressure on the margins. So I think that that's something that has not fundamentally changed. I mentioned, briefly in some of the comments that in some markets where the margin has been under severe pressure And we do see that in Spain, for example, that some customers are also coming back because they value the quality and they realize that there is value in the service that we bring. And so, that is obviously positive and it's also healthy. There is also companies that have gone bankrupt in the last couple of years. So that's probably also, helped that situation overall. So I think that is the general situation What we obviously focus on is, is to deliver good quality. We're proud of the guarding activities that we have. And we're also looking at How can we become good at also protecting the value and the services that we bring? And that's obviously an important division given that guarding still a very significant part of the overall business, but the price pressure is always always there. Okay. Thank you. Our next question comes from the line of David Fernandez at Macquarie. Please go ahead. Your line is open. I only have one question, if I may, please. In my view, the key attraction of Securitas investment case is a transition from Mangardin to technology. And the impact that that is going to have on organic growth and margins. And I think we are seeing the organic growth coming through. But we are not seeing that margin expansion coming through despite technology growing much faster than Magazines. So you should get a mix benefit. So we have oftentimes discussed what's going on on the Mango and the margin side of things, but I still struggle to understand why are group margins not expanding? And my question is, what are the all in margins as you're currently having in technology because we'll always discuss this 10%, but this excludes ramp up costs and investment on countries which are subscale. So I was really trying to understand, if I may, please, what are the current margins that you're having on technology? Yes. I think this is obviously an important question. And we're building this for the long term. And we are happy about the growth that we have in electronic security and solutions. We are also constantly looking at and making sure that we are also improving or having significantly higher margin. So I think the 10% there is definitely the benchmark, which is, which is fully valid But it's also important because it's like you're pointing out. We're also investing, in these contracts and in these relationships and thereby adding more value and it's also competitive edge for us. Other factors, regarding part of the business is still growing fast. And that is obviously reflected also in some of the organic sales growth figures that we are delivering. So I think that the, yes, this is long term work, but we are convinced as well that when we are converting customers bring more value and then we will also be able to improve those margins over time. And we have many good examples when we're looking at that across different divisions, also in different regions and in different countries. But could you at least give us a feeling on when do you think you're going to reach 10% on technology? Yes. I mean, we don't give any Today is clearly lower than 10%. We don't give any guidance, but I think we are convinced about the value of the strategy and the work that we do. So this is just that we keep on driving this. I think one other point as well is that we are also investing and we have been investing quite a lot in the future. Strategy. And that has also then meant also, greatly expanding and improving our technical capability, hiring quite a number of people to also be able to deliver this. So I think the big difference now compared to a few, say 4 or 5 years ago is that now we have more of a strong platform as well. On which we can build and that we can also then really bring that more activity to the customers. Could you at least confirm whether technology margins are higher than group average today? Thank you. And our next question comes from the line of Adam Wells with Exane. Please go ahead. Your line is open. Two quick ones. One clarification question for me. You're talking about the one offs in the U. S. Am I right in thinking you said that was 0.1% or 10 basis point impact on the margin. Just to clarify that. And then second question, is it possible to get a little bit more granularity about exactly what's going on in the restructuring in Europe. I mean, is this headcount reduction, you're looking at sort of reducing HQ or office costs And maybe could you talk a little bit about in regionally what countries you're mainly focused on here? Thank you. I was commenting before on the question related to North America Bart here. I can confirm that is 0 point one, the one off there that we talked about before the revaluation of the WIP, the work in progress in a larger contract in North America. And I turned in the question for Yeah. So I can gladly give it more flavor. So so when you look at Europe, like I mentioned at the beginning, we we have good growth We're also driving the transformation in terms of improving as well the an increase in the share of electronic security and solutions in Europe for a number of years now. But we have no been happy with the margin that we are generating because we do feel that we are adding more value to the customers in the business and that should obviously also reflect over time. And then, in some of the countries, because this program is roughly 10 countries, where we are implementing this. So it's not everywhere. It is around 10 countries and what has been kind of a common trend is that we have had cost increases that have been a little bit too high. And that then when I say too high, obviously, cost and growing at a higher pace than sales or margin. And that is obviously not sustainable over time. So, that has been a trigger to make this program. And When you look at, where? Well, like I said, it's about 10 countries, but we're then primarily as well focused on on management functions and some of the support functions when they look at those cost savings and then it's primarily people related. So that is, the kind of the basics of the program. And we're now rolling this out in the or starting the roll out to this in the third quarter. And maybe just to sort of follow-up there. I mean, my concern would be that that you hired an awful lot of people leading into the migrant contract opportunity that you had there. I mean, is this restructuring basically an effort to reduce headcount off the back of that? Because you carried additional headcount for at least a year as part of that strategy as you expected the markets to pick up? Or am I, am I slightly misinterpreting what you're saying here? Oh, so, I mean, the when you look at the whole refugee situation, that really started in the second half of twenty fifteen and there we peaked during 2016 in terms of that demand. And there, I should just highlight as well. I mean, we fulfilled a very important role from a society perspective. And I see that we have also done a really good and important job with that. But, but most of those activities were also then temporary in nature. So, short term contracts and And then we've seen this kind of gradual decline, of that business in 2017. And we also highlighted, I think, in the comments, around 1% to the organic sales growth also, negative impact in the first half of this year as well. So we still have quite some refugee business. And it's difficult to say, is it only that? I would say no, We have had a situation where some countries are really performing well, strong performance, strong financial management, Others, we felt that it was time to take a stronger grip and that's what we are doing now to realize those cost savings, but also to be able to free up resources to also continue to invest in the strategy in the future. Thank you. Our next question comes from the line of Ann Robler of Credit Suisse. Please go ahead. Your line is open. Hi, good afternoon. Just one for me, if I may. Just on the cash flow, which was weaker again in Q2, but you mentioned the three reasons for that change. So I guess two questions flowing from that. 1, have you seen a reversal from the quarter ending on a weekend into early July. And secondly, of those 3 issues you highlighted, how much of that is structural? And so we just have to accept that the working capital going forward is going to be more of a drain than it has been historically. And how much is temporary? Yes. The, the, as to the quarter end, yes, we have seen that then the beginning of July was recovering from that. So that is that. Then as to the three reasons mentioned, France will stay I mean, that is just a piece of legislation where we now need to pay it faster. So that will not go away. Netherlands, I mean, that is a matter now of of going through the process and so to say the delay we had in generating the invoices we recovered from that and that should be recovered by year end Argentina, it's a bit more difficult. I mean, the interest rate hike has really been important in Argentina. Which meant that. And to I would say together, there's 2 effects. So it was that one, but it's it was also the fact that the interest starts to move in U. S. Actually, which means that some people are moving their investments or their monies from Argentina to U. S. Dollar. And so there's less cash around in the Argentina interest space. So that is more more difficult to predict. We will work with those customers but we are not willing to accept any bad debt on those customers as well. So it could also mean that that we maybe have to clean out some of our much and say, well, sorry if you cannot pay in time, or I'm not at least within a certain reasonable time frame, we cannot longer serve you. So we have to flush that effect now. And bit more difficult to say how long that will take. But at the end of the day, we should come back to pretty normal rates as well, but I cannot say take 6 months or 9 months or 3 months. I cannot say that. But if we looked over 2 years, say, do you think that working capital as a percentage of sales as a as an easy proxy will revert back to where you have been historically or is it going to be structurally was? Well, that's a good question. There are, of course, reasons why it has increased. The first reason relates to our solutions, I mean, we are consuming cash capital employed, the balance sheet for investing into the solutions. Of course, you don't see that, but that also means that our EBITDA margins are going up, but we never talk about EBITDA margins. So that is that. And that piece will just continue. We should accept that. Second thing is, of course, also that the electronic security business by self is consuming a bit more cash, by the fact that we have inventories and by the fact that we have work in progress, which we don't have so much in the guarding business at month end. So that is also consuming some cash flow. The more electronic security business we add the more working capital we will add and the average will move bit from that. And then of course, there's also the aspect of growth And as you know, a large part of our growth has been coming from North America the last 2, 3 years actually. I mean, they have been really growing very well in North America organically. And the capital the operating capital employed, even in the guarding business, is quite higher in North America compared to, for instance, Europe. There are two reasons for that. One is the fact that in U. S, you have no VAT. In Europe, you get payments from your customers, including VAT, and then you to pass on the VAT later on to the government. So that's the liability that's sitting in your balance sheet. You don't have that in U. S. Second thing is that you have employee employee related accruals in Europe, which are far much higher than in U. S. In U. S, it's more cash based and also in U. S. We actually pay out a lot of our guards to weekly rather than monthly in Europe. So those 2 effects, VAT and employee related to accruals makes that you need more operating capital employed in U. S. To grow the business compared to the average country in Europe. And that has also been sitting behind this driver of operating capital employed that you've referred to over the last 2, 3 years. If what I hope U. S. Could continue to grow on these levels we are very happy to support them further from the balance sheet to make that growth happen. And on top of that, what we also see is payment terms from customers. I mean, some of our larger customers are pushing the payment terms. We are pushing back of course, but there's also an you need to find some equival some balancing that how much you push back and how much you could accept of course. So, I'd, I hope that this is an answer to your question. So in, in summer, you've, it's got progressively a bit tougher over the past 2, 3 years. And it's likely going to stay that way as we go forward. That would kind of be the the reality of the market situation and your strategy. So return on return on capital would be a bit cash return on capital would be a bit lower than it would have been historically. Is that fair to say? I think it's fair to say that that the things I refer to are a bit more structural. It's not just cyclical. And as a consequence, then it's correct what you say. Okay brilliant. Thank you very much. Thank you. Our next question comes from the line of Eric Nelson of Nordea Markets. Please go ahead. Your line is open. I'm focusing on Europe again. Mean, last year you highlighted, I think it was 4 different extraordinary factors pressuring margins year on year than sticking to your rule of 10 basis points. I mean, I guess that would be 40 basis points margin pressure from those. And now you highlight 2, but you're still down year on year. I guess I I really can't add it up. So can you please can you please elaborate a little bit on what these operational inefficiencies r more specifically, are they related to the restructuring program that you're taking now? And then also on the on the second point you highlight on on Vision 2020. It's been highlighted for a number of quarters now as a as a factor pressuring margins in Europe I assume those investments or or higher costs will not not increase on a never ending basis when should we assume that they would level out or that you you're happy with the with the structure you've put in place? Thank you. Yeah. Hi, Andre. So, I think when you when you look at the, the investments, We make those investments because we have belief in the strategy. And, it is a number of countries, of course, we are in the process of building the capability to be able to bring and to deliver the protective services. I think that one significant difference today versus a, 4 or 5 years ago, like I mentioned earlier, is that today we have more of a platform, that we can leverage and that is obviously then very much related to have more technical expertise and more technical profiles as part of the team who were then helping and also then driving the transformation. You also asked about the operational inefficiencies. I mean, there are a few countries where we've had a more challenging operating environment one of those is in France. And where we have also seen that there are a few areas where we need to to improve efficiency. And in a number of cases, also the costs. So, I think that is one of the examples but that is a combination of few things that we need to address internally, where we need to do a better job. But where there's also some changes in the external environment. So when you look at France, for example, there's also changes in in some of the regulations and the rules, that is affecting as well in terms of the subsidies which are declining this year, with a percent when you look at the SCC subsidies and then plan is then to abolish those next year. And that is also then creating quite a lot of change in the external environment also from a competitive perspective. And so I think that when you look at the restructuring program, I mean, we make this now because we are not happy with the margin development, like I said, So so big part is obviously to, to, to reduce costs, but it's also then to be able to to help and continue to drive the transformation also to free up some resources also to be able to invest as we go forward. But we're doing that then in the selection of countries and also then looking at efficiency as well on a division level to make sure that we can become stronger as we go forward. Okay. Thank you. And one follow-up, if I may, are there any any of the factors you mentioned as a margin pressure in the quarter, any of those, substantially larger than 10 basis points? No. No, no traded. Okay. We have one further question in the queue so far. Our next question comes from the line of Karuna Elmgren of Handelsbanken. Please go ahead. Your line is open. Yes. Two questions for me. The first one, sorry if I missed this, but could you say what the organic growth in security solution was in Q2 and in H2. And then also maybe, a bit still under restructuring. What was it that triggered it? Was it like something that you felt that you need to do to stop the margin to go down further or or is this an opportunity for you to start to increase margins in Europe or in the near term? That was my question. We are looking for the exact numbers on the organic sales growth, in security solution, but The major part of that was organic sales growth. And what was your second question again? Yes. The the trigger for the restructuring program in Europe is it, to prevent the margin to to deteriorate further or is it an opportunity for you to start to increase margins or how should we view this? Well, I think I mentioned that we are not satisfied with the margin. We believe that we should deliver on a higher level. So that has been an important reason for undertaking for undertaking this program. What has happened basically, you could say that together there with a very fast increase in the top line coming from the refugee related activities that in the wake of that, our countries have started to recruit extra people and employ extra people And so to say, and that has been a bit of a triggering point and where the cost started to grow faster than the top line, especially then when the top line was falling back from those refugee related sales and we were sitting still with the recruitments We need to recruit also people to further work with the strategy, but at the same time, of course, the gap that we took there in growing the cost faster than the top line, we now need to correct that. So it's a correction to that. We would have liked to avoid it, I think, if we could It's not something we like to do. It has consequences on people, of course, and we really regret that. But it's something that we need to do then because we need to recover from the period there that the costs were growing faster than the top line. Okay. On mix sales growth, in Q2, 17% was organically out of the 20.1 percent real. I mean, 17% compared to 21. So 4 was coming from acquisitions. Thank you. And there are no further questions on the line at this time. So I'll hand back to our speakers for the closing comments. Okay. So thanks a lot to all you for dialing in. Like I said earlier, we have an investor update in September. Looking forward to hopefully seeing many of you there as well. So, thanks a lot. Thank you