Good afternoon, everyone, and welcome to our second quarter call. We continue to execute on our strategy, and this is generating results. When looking at the quarter, we increased the business momentum, continued margin improvement and profit growth. The organic sales growth increased to 6% with strong growth in Europe and Ibero-America. We had negative growth as expected in North America, but are now turning the corner and expecting to return to positive growth in the third quarter. The operating margin increased to 5.8%, and we're now almost 1% higher in margin when comparing with the pre-COVID years. North America and Ibero-America are the main contributors, and the margin in Europe was stable when comparing to the same period last year.
The external environment continues to be challenging in terms of labor scarcity and inflation, but we are managing well and have a positive price wage balance year to date. Given the circumstances, we will continue to work with dynamic price increases to balance wage increases, and importantly, to safeguard the quality of our delivery to our clients. As is visible in the numbers, a strong focus on improving profitability is now starting to generate real results. We had 13% real sales growth in solutions and electronic security, which is a very strong performance with good growth across all segments. Our offering is strong, and we are winning more business at improved margins versus last year. This in combination with portfolio management and the impact from the transformation programs is resulting in higher profitability.
Last but not least, we are very proud that Securitas, as the first major security services company, has committed to the Science Based Targets initiative. Sustainability has always been a focus area at Securitas, but this is further proof of our commitment to continue to deliver sustainable security and safety services, and leading the industry also in this important aspect. As you have hopefully noticed, we were also very glad to announce last week that we have now closed the acquisition of Stanley Security. The joint integration preparation work has been solid, and we are very happy and ready to join forces now with the Stanley Security team. We have planned for an investor update on August twenty-fourth to share more about the strategy of the group with new financial targets, and I hope that you are able to join us virtually for that session.
With that, let us now turn to the different business segments. Starting with North America, where as expected, we did have negative organic growth in the quarter due to the termination of announced low-margin contracts, but also a very significant reduction in COVID-related extra sales compared with the same period last year. We have good underlying momentum in the North American business. New sales are strong in the Guarding business, and we're managing price increases successfully and in a dynamic manner. The electronic security installation business improved in Q2 after a challenging start to the year, but we're still facing challenges related to component shortage and labor shortage. It is important to note that we had positive organic sales growth, strong order intake, and record level backlog in the quarter. Our Pinkerton risk management business is also growing at a healthy pace and contributing.
Based on this underlying strength, we are expecting to return to positive organic sales growth in the third quarter. Looking then at the profitability, the margin expansion in North America continues with improvement supported by all business units. The operating margin of 7.4% is the highest ever achieved in North America. There are a number of reasons behind this. Starting with the Guarding business, there are a few key drivers behind the positive development. The business transformation program that we finished last year, active portfolio management, and an increase in solution sales are all contributing to the positive development. Looking at electronic security, we had an improved business mix and also solid execution by our team, and that also contributed to the results.
The development of our Pinkerton business was also solid, and we also had positive contribution from the critical infrastructure services business. When you're looking at North America, we have undertaken significant modernization and digitization of North America business with significant investments over the last couple of years. Our team's execution of the strategy is now generating results with structurally higher margins. With that, let us then shift the focus to Europe, where we had very strong growth of 9% in the quarter. There are a few factors contributing to the growth. First, we had positive portfolio development. That means the strong commercial momentum is resulting in positive portfolio growth, also when excluding price increases. Secondly, the aviation business is returning to more normalized levels of demand. This also contributed.
Third, we are increasing prices at significantly higher rates than normal to balance wage increases. I'm also very glad to report that we had solid growth in sales of solutions and electronic security in Europe in the quarter, and that also had a real positive impact on the sales growth. Looking at the profitability, the margin of 5.5% was stable versus the same quarter last year despite the challenges related to sickness and labor shortages. Active portfolio management as well as previously acquired electronic security businesses contributed positively to the margin. Sickness rates and the cost related to labor shortages improved somewhat versus the first quarter, but are still impacting the bottom line in a negative way.
As was the case in the first quarter, these challenges are more pronounced in a few markets in Europe, and in the rest of the countries, we are managing quite well. Cost measures and some leverage from the strong growth also helped the margin. When looking ahead, we expect the labor market in Europe to remain challenging, and we continue to work in a more dynamic manner to balance wage increases with price increases. Apart from that, we're also actively promoting connected technology and integrated solutions to our clients as a means to improve the security equation and managing total cost for our clients. Moving then to Ibero-America, where we have continued very positive development in terms of top line growth, but also profitability.
In Spain, we had organic sales growth of 10% in the quarter with a strong development across the business. Latin America improved compared to last year, but price increases in Argentina were the primary driver from a Latin American perspective contribution to the growth. The good momentum with sales of security solutions and electronic security continued. These sales are now representing 30% of total sales. We also have very strong development in terms of profitability. Our Ibero-America team are executing on the strategy, create a sharper and more profitable business, and this is paying off. The operating margin is 40-50 basis points higher versus the same period last year, and more than 1% higher when comparing with the pre-COVID periods.
The improvement is driven by Spain, Portugal, but we also have positive contribution from most countries in Latin America that are performing at a higher level. All in all, strong quarter, strong continued development of the overall business, and I think with that, I hand over to Andreas for some more details regarding the financials.
Thank you, Magnus, and good afternoon, everyone. We start, as always, with our income statement here. The second quarter was, as Magnus mentioned, a strong quarter with solid growth and an improving operating margin at 5.8%. The operating margin is not only strong when comparing to last year, but also substantially higher than the pre-COVID Q2 levels at around 5%, confirming that our execution of the strategy is on the right way. The margin development was supported by strong double-digit growth in the high margin solutions and electronic security business. The teams have done a really good job with the price wage balance, which so far in the year are contributing to the margin.
I should highlight that the operating result in the second quarter did not include any material government grants related to COVID-19, and the number of people on temporary unemployment was on very low levels. One accounting update here in the second quarter is that Turkey, as from April first, is considered hyperinflationary for the purpose of the reporting under IAS 29 hyperinflation. As you know, we have also applied IAS 29 for our operations in Argentina since Q3 2018. It is a straightforward standard from the perspective that it targets to give better insights into the effect from high inflation, both related to the balance sheet and the income statement. The implementation of the standard is, however, fairly technical in nature.
To keep it simple here related to Turkey, the impact on Securitas is not material, as you can also see on page 9 in the report under the table for Security Services Europe. The impact on the balance sheet related to Turkey is an increase in capital employed of SEK 463 million, and the same amount increased in equity. That relates to the revaluation that we then do on the opening balance sheet on April 1. During the quarter, we have revalued the income statement and the balance sheet as well. The conclusion of that is that there is almost no effect on sales nor operating results. The most significant impact is within the financial items line with a positive effect of SEK 17 million. We have continued to treat the effects from the standard similar to currency impact.
This means that none of our key ratios, such as organic growth or real change, are impacted from bringing Turkey in. You find more details around this in note eight of the report. If we then have a look below the operating results, amortization of acquisition-related intangibles was SEK 61 million in the quarter, basically the same number as in the first quarter and nothing major to report here. Looking at the acquisition-related costs, they were again limited in the quarter as our acquisition activity is reduced after the announcement of the Stanley transaction. We have paused acquisitions to focus on the Stanley integration and deleveraging of our balance sheet position. There may be one or two smaller exceptions to this, but there will be nothing major in the coming quarters. We expect the acquisition-related costs to be lower than 2021 for the full year.
Remember here that the acquisition cost related to Stanley is reported under items affecting comparability. Going then to exactly that items affecting comparability, here we had SEK 226 million of cost in the quarter, which is approximately SEK 30 million less than last year. The reduction is a consequence of us closing down three programs at the end of 2021. Of the SEK 226 million, SEK 169 million was related to the ongoing European and Ibero-America transformation programs, and the residual SEK 57 million was paid transaction costs related to the Stanley acquisition. I will come back with some more information here on the next page. If we then have a look at the financial net, here we had a SEK 30 million reduction in cost in the quarter. The underlying interest cost increased somewhat due to the increased interest rates that we are seeing.
We had some smaller positive FX impacts and together with around SEK 30 million positive impact from IAS 29, that explains the difference here. As I mentioned earlier, SEK 17 million is related to Turkey, and the residual is related to Argentina, referencing then the SEK 30 million IAS 29 impact. Given the high inflation and increased interest rates in the market, we are expecting to see an increased financial net for the full year 2022 when we compare to the 2021, also then excluding the impacts of the hyperinflation. This is of course also excluding the finance cost related to Stanley acquisition. Looking at the tax, the tax rate forecast for the full year remains at 27.0%, and there are basically no major news in this forecast.
On the next slide, we have some additional information related then to the programs we are running under Items Affecting Comparability. Important here is that we closed down three programs at the end of last year, which is reducing the complexity here. In North America, the team is continuing to execute on realizing the benefits from the North America transformation program that we implemented last year. We see positive margin impacts from the program in 2022, and there is further potential here going forward. The European and Iberia America transformation programs are continuing the execution. The programs are on track, and we will over the coming quarters start to go live in phases with new digital platforms in several countries. We have an important year ahead of us in terms of execution here.
The items affecting comparability related to these programs were SEK 169 million in the second quarter, and our estimate for the full year is between SEK 550 million and SEK 600 million. This then also includes the impact from the cloud computing accounting regulations implemented and communicated in Q4. We have, as I mentioned, also incurred SEK 57 million of costs related to the Stanley acquisition in the quarter. Totally since the announcement, we have spent SEK 132 million of the approximately SEK 1.4 billion transaction integration and restructuring costs related to the acquisition. The plan is that the majority of these costs will be expensed over 2022 and 2023. Moving then to the next page, where we have an overview of the FX impact on the income statement.
There were major impacts from FX in the quarter, mainly related to the US dollar that appreciated 19% to the Swedish krona compared to last year. The total FX impact on sales was 9% in the second quarter, mainly then driven by the US dollar, while the euro appreciated 5%. Looking at our operating result, the FX impact was a bit higher at 12%, mainly due to the higher profitability levels in our North American business, and the currency impact increased further when looking at EPS. The EPS real change before items affecting comparability was solid at 10% in the quarter and 11% for the first six months, with good cost leverage on the items below operating result. Including the items affecting comparability, the real change was even a bit stronger coming from the reduced IAC spend this year.
We move to cash flow. The cash flow from operating activities was SEK 927 million or 53% of the operating result in the second quarter. A good improvement compared to the first quarter and a solid Q2 outcome, taking into consideration the current high growth that we are seeing in the business. If we look into the larger movements here in the quarter, we saw an increase in CapEx of almost SEK 190 million. We saw an increase in our investments into our solution contracts, which confirms the positive momentum we have in the high margin solutions business. A major part of the increase was also related to the existing transformation programs, which are progressing according to plan.
The CapEx to sales was 2.8% in the quarter, and we continue to expect to come in below 3% for the year. The accounts receivable was -SEK 873 million, and here we see the impact from the strong growth that we are seeing in the business. Growth consumes cash for us as we normally are paying our employees ahead of getting paid from our clients. We also see a slight impact on the DSO from the price increase measures that we have successfully executed, where it takes a bit of time to conclude with the clients on these negotiations and then get back to normal again. We have a strong focus and attention in the divisions and in the countries to ensure we keep this on track in the second half year.
Looking at the free cash flow in Q2, which ended up at almost SEK 500 million. This is an improvement both in absolute and percentage terms compared to last year and was supported by reduced tax payments in the U.S. related to preliminary federal tax. Last year in Q2, we made larger true-up payments related to 2020, and this was now back to normal levels this year, having a positive impact when comparing the quarters. We are reasonably satisfied with the second quarter cash flow. We are still behind for the first half year after the weaker Q1, where the main reasons was related to accounts receivable, where we had flat growth and a low DSO position at the end of last year, which impacted the first quarter.
Last year, we also had positive payroll timing impacts in both U.S. and the Netherlands of approximately SEK 600 million benefiting Q1. These payroll timing differences were neutral on a full-year basis 2021. Going forward, we should also remember that we will still pay the final SEK 600 million of Corona-related timing relief measures that we benefited from in 2020 North America, and this we will pay in Q4 this year. We continue to have high focus on cash flow given the current macroeconomic environment and the Stanley transaction. Combined with the normal seasonality of a stronger second half-year cash flow, we are working here to make sure we have a solid 2022 outcome here. We go to the slide related to net debt.
Our net debt increased with approximately SEK 3.9 billion the first six months compared to the beginning of the year. The main reason for the increase is the regular dividend of SEK 1.6 billion paid in the second quarter, IAC related payments of close to SEK 500 million, and a material FX translation impact of almost SEK 1.3 billion. Combining this with the negative free cash flow for the first half year and an increase in lease liabilities mainly related to new office leases, the net debt ended up at SEK 18.4 billion. Our net debt to EBITDA came in at 2.2. This is flat compared to June last year, but with a 0.2 increase compared to Q1, mainly related to the regular dividend payments.
As you know, our financial target is 2.5, and we continue to be below this target preparing ahead of the Stanley acquisition. Moving on to the next slide and looking at our financial position, debt and debt maturity chart. As you know, we have a solid financing in place today. None of our facilities have any financial covenants, and the liquidity position is strong. In April, we extended our EUR 938 million RCF for another year into 2027. Now in July, we added one more bank into the facility, increasing the number of banks to 11. The total facility amount is then a bit more than EUR 1 billion. Preparing here of course to become a larger group after the Stanley acquisition.
As you also know since before, we have a bridge facility in place related to the $3.2 billion Stanley Security transaction, and we use this facility now on July 22nd when paying the purchase price at closing. The bridge facility will be refinanced with a mix of debt and equity, where the right issue will be approximately $950 million. We will launch the right issue now in September, and there will be further details coming around this in the near-term future. We will thereafter also focus on the debt takeouts where the exact timing is still to be decided. Looking at our rating, here we have been on CreditWatch by Standard & Poor's as a consequence of the announced Stanley Security transaction.
As the transaction closed now, S&P confirmed early this week that our updated rating now is BBB- with stable outlook, which was also in line with our expectations. We reiterate our commitment to remain investment grade here, and we will focus on deleveraging our balance sheet going forward. With that, I now hand back to Magnus.
Many thanks, Andreas. I would like to share just a few updates related to our transformation programs and the Stanley acquisition before we open up for the Q&A. Starting with the transformation programs, we concluded the North American global IT programs at the end of 2021. As previously mentioned, the investments made are now starting to generate returns, thanks to modern platforms and tools that enable us to optimize the business like never before. We're also executing according to plan with the programs in Europe and Ibero-America. The European program is comprehensive. If you're looking at the last 12 months, we have strengthened the solutions organization to drive improvement in the business mix. During the coming 6-12 months, we're starting to transition to new systems and applications in some of the key markets.
All this work is fundamentally important to create a modern, digitally capable, and more efficient Securitas. This work also gives us a stronger foundation to leverage modern systems and applications when we are integrating the Stanley Security businesses. A few words about Stanley. By joining forces, we are building the foundation to be the leading intelligent security solutions partner. We become the most attractive choice for clients with a clearly differentiated offering and with world-leading technology and expertise. Technology is becoming increasingly important for our clients. Together with Stanley, we're shifting the profile of Securitas in terms of the offering to our clients and value creation. This is also immediately margin accretive. Over 50% of the contribution to operating results will come from higher value and higher growth solutions and electronic security.
We have received a tremendous response from our clients regarding the opportunities that this combination will bring. Together with Stanley, we are in a solid position to create an outstanding team which is perfectly placed to win in the security services industry. To conclude this before we open up to Q&A, we are executing on our strategy, and this is generating results. We increased the margin to 5.8% in the quarter and recorded 11% EPS growth in the first half of the year. This is despite the turbulent external environment. I am very proud of our team, which is delivering results today and at the same time building the new Securitas, and that is the Securitas which is modern, digitized, and innovative security solutions company.
Before we open up to Q&A related to the Stanley acquisition, I understand that there is a lot of interest and questions. For this reason, I would like to mention once again that we have arranged an investor update on August twenty-fourth. In that session, we will share an update of the strategy, a lot more detail related to the importance of the Stanley Security acquisition, and like I mentioned before, updated financial targets for the group. By the 24th of August, we have also owned the business for a little more than a month. My request today is that we then take all the Stanley related questions in that session. With that, happy to open up the Q&A.
The first question comes from Micaela Sjökvist at UBS. Please go ahead.
Thank you very much for taking my questions. I have three, if I may. The first question is on the margin. I've estimated that about 6 basis points of your margin improvement is from mix. Can you help us understand how much the remaining 14 basis points comes from, you know, the positive price wage balance, the lost contracts, and also your efficiency savings? That would be very helpful. My second question is on volumes. It seems as if volumes have slowed from being flat in Q1 to -3% in Q2. If you could give us any sort of color on what's driven that.
Finally, it seems as if you've reduced the range for your items affecting comparability to, you know, by 50-600 from 550-600. Should we expect any changes to the 2023 expectations? Thanks.
Yeah. Thank you for the questions. On the margin, I mean, we are not breaking out the exact numbers behind, but when you're looking at this, I think number one, we have had a consistent focus on ensuring that we are enhancing the profitability of the business. This work is something that I think when you're looking at North America, even though we have organic sales growth which is negative in the quarter, we are significantly expanding the margin. That's a combination of a couple of different factors. One of course is portfolio management, that we are carefully managing our contracts, and that is more important in this environment than ever before when there is labor scarcity.
Another point is that the transformation program in North America is also operating, I mean, helping us to operate in a more efficient way. Another important driver is that we are driving very strong growth in terms of solutions and electronic security, which has a higher margin profile. There, if you're looking at the overall group, 13% real sales growth compared to the same quarter last year. We've also undertaken quite a number of measures to make sure that we are running the business in a focused way. Obviously also have some positive impact from leverage in terms of the profitability, which is also helping, thanks to the growth. Looking at the volume question, I'm not entirely sure that I understood the analysis there.
Because if you're looking at the growth in the second quarter, there is a fairly significant piece which is coming from price increases. That's the majority. There is also some volume growth in Europe and in Iberia, America, if you're looking at the portfolio. One area where we are significantly lower today compared to a year ago is in the extra sales. We've highlighted that in 2020 and 2021 when we were operating significantly higher extra sales levels, and that was most pronounced in North America when you're looking at the decline between Q2 2021 to Q2 2022. That is also one important factor.
There we're also expecting that extra sales, and we're also starting to see some indications so that the kind of the normal extra sales that we would typically have, which is more event related, et cetera, I mean, that is also gradually starting to come back. I think that's those are really the key points in terms of volume. Just to reiterate that point is that there is positive volume growth also excluding price increases in Europe and Iberia, America in the second quarter. That is also a driver behind the growth. Maybe on the IAC, Andreas, if you wanna comment on that one.
I can just add there on the margin as well. I mean, we have really strong price wage management as we have said here as well. That is also contributing when you're looking at the margin improvements overall. On the items affecting comparability here, we gave a guidance of SEK 500 million-600 million in the previous quarter here. That was in the first quarter, of course, and then the further we're getting into the years, I mean, the plan gets more and more clear, so then we can narrow down the forecast that we are seeing for the year. You shouldn't see it as anything else than that. I mean, we are now more confident that we will be around the SEK 550-600.
That's why we have made the window more narrow, and it's not any indications of changes for next year in any way.
It's very helpful, thank you.
The next question comes from Sylvia Barker at JPMorgan . Please go ahead.
Thank you. Hi, good afternoon. Question number one, I've got three, please, if I may. Question number one on provisions. I can see that they've reduced by about SEK 200 million on the balance sheet, and I know that you were still sitting on the SEK 530 of COVID provisions, at the end of Q1, so could you maybe just update us if anything has been released during the quarter? Question number two, just to understand. The Turkish official inflation has picked up again in Q2 relative to Q1. I'm making it out as being perhaps up to 300 basis points of your organic growth, but that seems a bit high. Can you maybe just give us some figures on how much Turkey and Argentina contributed to organic growth in the quarter?
Finally, on electronic. Obviously a bit difficult, but it seems like the organic overall for electronic is still kind of neutral to maybe slightly negative if I look at the overall SS and ES sales in the quarter, excluding FX and acquisitions. Could you maybe just comment on that figure and what you might see going forward?
Thank you, Sylvia. I will take questions two and three , and then I hand back to Andreas on the provisions. If you're looking at the Turkey inflation, that and Argentina together, we estimate around 2% impact on the organic sales growth in the quarter, those two combined. On electronic security, important here, I mean, we had and it was a tough start of the year. That was a mix of a couple of different factors. One was COVID-related, and COVID-related, it's sick leave among our people, technicians, for example, to be able to carry out installation projects. Also then COVID-related, in the sense that we had a number of clients also then not allowing due to restrictions, then access to their premises.
We started to see this improving in the second quarter. We expect that to continuously improve as well as the situation is hopefully normalizing. The other aspect of this is also the component shortages because that is still a major factor when you're looking at the electronic security projects and installation business, because there has been a lot of instability and not reliable or availability in terms of supply of components. That has really had an impact. We did have positive growth in North America in the second quarter, that was positive. We also had positive growth in Europe in the second quarter, those are the two major ones in terms of the ES business.
Related to the provisions, basically it's been a normal quarter here, so we have not touched any of the provisions that you mentioned here, Sylvia. Of course, you have ordinary course of business as well during the quarter, but related to the provisions we took in 2020, no, we have not touched those.
Thank you, both. Sorry, just in terms of other ones then, just that obviously the balance sheet reduction doesn't always match against what's happening in the P&L, but is there anything else in any of the regions that's worth picking out?
No, I would say, Sylvia, it's been an ordinary quarter from that perspective, so there is nothing that is sticking out.
Okay, understood. All right. Thanks very much for that. Thank you.
Thank you.
The next question comes from Anvesh Agrawal at Morgan Stanley. Please go ahead.
Hi, good afternoon. I got two questions. First, just on the margin point further, just trying to understand how much really the transformation programs are contributing. I mean, I calculate like half of the margin improvement or 10 basis point is coming from just from FX, given the tailwinds you had, and then, probably there is a little bit of mixed benefit that was there. Just wondering how much these transformation programs are really contributing or if there is anything underlying which is, which is offsetting the impact.
I know you sort of answered the question of the Stanley deal later, but just on the bridge refinancing facility, I wanted to check whether it's on a fixed or a floating rate, and is there any upside risk to that, exceptional item given how the interest rates have fared since you announced the deal, obviously.
Good, thank you. On the margin, in North America, the transformation program is clearly helping. Just to give some flavor, in terms of how, I mean, we have upgraded from old systems, very manual ways of working to completely digitized end-to-end in terms of how we're working with, you know, in everything that we do in terms of our employees in the frontline, like officers, all the way to invoicing our clients. The big benefit here is that we have significantly better transparency and visibility, significantly better decision-making support for our leaders that are managing the business at different levels all the way out to equivalent of a branch manager. That is clearly helping.
There, I mean, we had some benefit in 2021. It's difficult to break out the exact impact, but that benefit is definitely increasing in 2022 and really contributing to the very strong margin delivery, because we're delivering this also in an external environment which is really challenging from a labor scarcity perspective. I think that that is to provide some context in terms of the North America transformation program. When you look at Europe, when you're looking at Ibero-America, I mean there we are at a much earlier stage in terms of the programs. I mentioned a little bit related to Europe that, I mean, there it's much more than just harmonizing the way of working and upgrading systems and tools.
It's also then really helping us starting to shape and change the business mix towards more integrated solutions. There we have done quite some investments and also starting to see some positive result. That is also helping and driving more solutions momentum in Europe, and that by itself also has a positive impact on the margin. Like I said, though, that program, it's much earlier days, and more of the work, but also more of the benefit to come over the next couple of years. Related to the bridge facility there, I mean, first of all, the bridges on normal commercial terms, I would say, without going into the details there, but they are also long in nature here. We have up to 24 months in terms of duration on these bridges as well.
From that position, we're sitting in a good position. You can also say, of course, that we signed these bridge facilities in a different market back in 2021 as well, which is not a negative thing here given the developments in the debt market since. I hope that gives you some flavor here related to the bridge.
Yeah. Sorry, maybe if I can just ask one, which is going back to, I mean, we've seen the sort of pickup in the DSO, and you said that it's essentially because of the price rises, and that takes time before those are settled with the customer. I'm not sure I quite understood that. Like, why would the price increase impact the DSOs?
Because basically we go out to our clients then and need to make sure that we get the right price increases in place. Like Magnus said here, it's a very dynamic market where we have also been pushing out fairly high price increases. Of course, that is always a discussion together with our clients, where you also need to agree in the end on the final number. That takes a bit longer time than in a normal year, where it's less numbers and it's also more straightforward.
Okay. I mean, I can take it offline, but, like, it seems like you recognize revenue anyways and then sort of go for the final settlement with the clients.
No, that's not what I'm saying. It also takes longer time to negotiate as well, which is then also impacting the DSO. The second point to highlight here as well, as I mentioned, if you're looking at the first half year, is that we also had a very low DSO position by the end of last year after a really strong cash sprint. That is also impacting us here negatively as well. Of course, we need to make sure that we have really solid also cash focus in the second half year here as well.
Yeah, that's good. Thank you.
The next question comes from Viktor Lindeberg at Carnegie. Please go ahead.
Thank you. Actually some were answered now, but following up on client retention, and excuse me if I missed this in the beginning, but you mentioned in North America, client retention rates goes from 90% to 85%. Is this purely related to the contracts that you have exited the past year? Or is there, could you sort of provide us with an underlying number here? That's my first. Second question is then on the airport contract portfolio that you had during the pandemic, a strategic review of, and now I guess Q2 has been more or less the first quarter with normalized operating conditions and volumes, give or take.
Any conclusions you can share on this or how we should think about the airport contribution to the group as such? Thanks.
Thank you. Yes, your assumption is correct, that low retention rate is related to those low margin contract terminations. Just to remind, they were very significant in size, around $50 million, an aviation contract that we terminated last summer. Then the other contract was around $150 million, that we terminated in December 2021. That is the reason. The commercial momentum in North America is really strong. We are selling at a high pace, with the good margins, so I would say the commercial activity is positive. I would also just emphasize as well is that, I mean, we are 100% focused on protecting the value of our business.
When we talk about active portfolio management, we are not seeking to just add a lot of volume. It has to be good margins and good values that we can defend the quality and also continuously invest in the relationship and the delivery with our clients, and that we are sticking to that. I think that is also working because we are defending, thanks to very good quality, but also continuously strengthening the offering. Here, obviously in the technology space as well, and with the transformation programs, it also enables us to operate in a stronger way. So that is some of the flavors. No concern whatsoever from my perspective in terms of client retention.
We're obviously always humble in terms of how we are working with the clients, but we are very firm in terms of the profitability requirements for the reasons I mentioned. The airport business, yes, that is now more normalized. That contract portfolio, as you remember, we did very significant portfolio management and clean up activities to make sure that we had a healthy portfolio during the worst part of the pandemic. We are now seeing the results of that. When you're looking from a profitability perspective, that profitability is now up and in line with the group average, more or less. It's a better quality portfolio when things are now hopefully normalizing as we're coming out of the worst year from the pandemic.
Thanks. Maybe final from my side. Your slide at the very end, Magnus, on the transformation programs and the benefits you expect in Europe by 2024. I understand part of the margin accretion is gonna come from M&A, and now we have the Stanley acquisition, obviously. You also now say you put M&A on hold for the time being, given focus and obviously leverage. How should we read that in that context, given that M&A was expected to contribute, and now that maybe not will happen as much? Obviously Stanley is accretive in itself, but just trying to figure out the bits and pieces here on that.
When you're looking at that, I mean, we feel good about the ambition there and our ability to deliver on the margin improvement. We are obviously significantly accelerating the transformation and realization of the strategy with the acquisition of Stanley Security. There are nine markets in Europe where we are building a real position of strength, either by combining existing electronic security that we have or building. That will definitely also help the overall case. No concerns in terms of temporary. I mean, I think it's just the prudent thing to do that we now have significant integration and creation effort ahead of us in terms of really integrating Stanley over the next three, six , 12 months.
We will also have a significantly stronger offering to the clients and more future-proof position, which I think is important as well because technology is just becoming more and more important, and even more so when you're looking at the challenges that we're seeing in the labor market, just finding people. Yeah, I hope that answers your question.
Got it. Thank you.
The next question comes from Allen Wells at Jefferies. Please go ahead.
Hey, good afternoon, gentlemen. Just two for me. Just firstly, you talked a little bit about the extra sales declines from the numbers we saw during COVID. Is there any way you can try and help us by quantifying the step down you've still seen versus last year? I will also be interested just to hear about where we are in those extra sales versus the pre-COVID levels. i.e., you sort of suggested it was kind of normalizing, but is that back at the kind of pre-COVID levels now? That's the first question.
Secondly, just to follow back on the on the organic growth breakdown and kind of the building blocks, you said that 2% was hyperinflation, but maybe can you split the rest between what's normal price increases, maybe what's kind of COVID recovery, and then what's underlying volume growth in there as well? That type of split would be really helpful. Thank you.
Thank you, Allen. So, I mean, to be specific on the extra sales, it's roughly 3% less as the share of sales this year compared to last year. Significant reduction. That is most pronounced in North America in the second quarter because there we were also running with significantly higher COVID-related extra sales in Q2 last year. That business is no longer there. I think that to your second question related to the extra sales, we are now at levels that are more kind of normal levels. Some quarters it's gonna be a little bit higher than where we are right now if we're looking, you know, if the past is a good guidance related to the future.
We're also starting to see that more and more events are starting to come back, but it's also been a little bit tentative. If you're looking at the things that we are doing, AGMs, for example, we might be doing quite a lot of when it's AGM season, sports events, other industry type of events across different verticals, et cetera. Those, as you know, in some areas they've kind of started to resume normal activity, in some areas not. Those are obviously activities that we will typically also benefit our extra sales and even if on a temporary basis. But that's also the whole definition of the extra sales or the temp business, as we call it. I hope that gives the flavor.
On a year-on-year basis, around 3% less as percentage of sales compared to last year's same period.
I can add on there related to the extra sales. I mean, in normal years, where we normally are around 13%-15% extra sales, and now we are at 13%. I would say we are sort of at the bottom of the normal range here as well. As Magnus is saying here, there are AGMs and other type of temporary business that starts to increase going forward as well. It might be that we have an opportunity here going forward to be a bit higher than we were in Q2.
When it comes to then the organic sales growth overall, I mean, looking at this, we would say overall around 4%, a bit less than that, we would estimate to be price increases and between 4% and 5%, I should say. We estimate to be around price increases and the remaining we see as volume here. That is then derived from the aviation business recovery, the portfolio growth that we've seen in Europe and Iberia, America, but also the strong electronic security and solutions here as well.
Okay, thank you.
As a reminder, it's zero one on your telephone keypad if you have a question, zero one. The next question comes from Karl-Johan Bonnevier at DNB Markets. Please go ahead.
Yes, good afternoon, Magnus and Andreas. I appreciate that you want to wait on talking Stanley until the 24th of August, and looking forward to that event. It would be interesting to hear your comments about the 5 countries that you acquired now in 2020. What from Stanley have you seen in those countries? How have you been able to integrate it? And what kind of impacts and what have you learned, so to say, about the quality of the Stanley business out of that?
Thank you, Karl Johan. So when you look at those, I would also include the case in Spain, a company that we acquired at the beginning of 2020 called Techco. That was also a previous Stanley or Niscayah business. What are the common denominators? Well, first of all, we have built more critical mass in most of those markets in terms of electronic security and technology capability. As I mention that because that is important for relevance in terms of the types of clients and the types of products that we can take on.
I think that is one, because there has been a credibility aspect of this in front of the client, that they know that you have the competence, you have the design and the project skills, you have the installations, service and maintenance capabilities to really take on and help us, as a client with these types of projects. I think that has been a very important one. That we have also then seen that and in combination with back-end synergies, and I mean here we have been very clear that synergy is more to be realized in the back end, so that we're protecting commercial capability and resources.
We're protecting technical capability, engineers, but then trying to make sure that we are driving more common and efficiency as well in the back end. The experience that we have from those five plus the sixth one being in Spain. It's highly relevant and also was a strong driver and a reason for our confidence as well about how good it is for us to do this strategic acquisition. Because it is really a game changer for Securitas when you're looking at the acquisition that we are doing.
That is very much based on not only the factors that I mentioned, but also when you're looking at people and culture and what the importance is for a business of also belonging to a company where security and safety is the core. Because that is the important part, and it's also something I've been talking to many of the colleagues as well from Stanley over the last couple of days, when we have welcomed them, when we're now joining forces, is that they are joining a company where, you know, we have 100% focus on security and safety and being the best in this industry, in this field. I think that is something that shouldn't be underestimated in terms of the importance for long-term value creation.
Sounds like good pre-marketing for the 24th. Andreas, just on that note as well, I guess all of us will focus on the deleveraging component going forward. When we look at, say, the normal seasonal pattern, obviously Securitas has a much stronger free cash flow generation in the second half. If you take your comments on organic growth driving some working capital and then there's extra settlement payment in the US, is there any reason, if you think about those, to not expect Securitas to have a good free cash flow in the second half of this year?
Those are two components impacting. You're right about that. In the end, this will also be very much about the work that we can do together with the team the second half year, which we have done previous years as well, to make sure we get strong collections coming in during the second half, and basically work on our DSO list as well. Because that is the main driver, of course, to our cash flow there as well. It is up to us to get back into a normal position here that we have also been able to do in previous years as well. You're right, we have these two components to handle as well in the second half year.
Your definition of being good investment grade, would that be below times net debt to EBITDA, or how would you quantify it?
At what point in time are you referring to now?
No, just what level would you consider being good investment grade for your business?
I think exactly. This will be, of course, one component of interest, and then this is exactly something we will come back to here in August, when we will give you a full brief around that instead of co-commenting around that individually here now.
Lovely. Looking forward to the event in August. Thank you.
Thank you.
The next question comes from Stefan Knutsson at ABG. Please go ahead.
Thank you. Hi. My question is regarding the Iberia and Americas and the operating margin that you already performed there. You're approaching the 6.0% that you aim for in the transformation program. Is it time to raise the ambition, or how do you view it? The second question is regarding the Stanley acquisition. Since you have closed the acquisition now, can you give any guidance on how much you see will go as amortization of intangibles going forward?
Thank you. On Ibero-America, it is true what you are reflecting on here. I mean, we are performing, I would say, driving improvements at a faster pace than what we would've anticipated. That obviously then is. Yeah. That's the simple reality. But we will also, when we are talking on the twenty-fourth, also provide new financial targets. I think it's prudent as well that we then come back and comment, and I promise to come back to that question in some more detail, also in that update. Just on the second question, I mean, the strategic logic is strong here. We feel very good, like I said, about the value creation case. We will provide a lot more detail on the twenty-fourth.
Andreas, maybe you have just one brief comment here before we continue.
Yeah. You have in the report here an estimate here related to the amortization of acquisition intangibles, and this is preliminary, of course, but the total amount allocated here is around $500 million, mainly then related to customer portfolio, which will be amortized over 15 years. You will approximately have an amortization charge per year of $35 million. Still being preliminary, but the information is there in Note two as well.
Okay, perfect. Thank you very much.
As a reminder, it's zero one on your telephone keypad if you have a question. Zero one. There are no further questions at this time. Please go ahead, speakers.
I can also just come back to Sylvia here, who had a question around the provision line in itself, and I think I gave the overall answer, and that still stands, but I just want to make it clear there that the bad debt provisions that we took in 2020 are not on the line provisions here. That is a reduction of accounts receivable. There is no connection there. Then the movement on the provision line is related to a reduction in our pension liabilities, given the increased interest rate environment here as well, and that is something that goes through equity and not the income statement, to be clear there as well. Good. Unless there are any further questions, thank you, everyone, for your engagement.
As we said before, we're looking forward to seeing you for the event on the 24th of August. In the meantime, everyone in the Northern Hemisphere, wishing them good continued, hopefully, summer time. Thank you.