Hello everyone, and thank you for joining us today. We are very excited to be at this point. We have closed the Stanley acquisition, and we are ready now to talk about how we are shaping the new Securitas. A company which is more focused on Technology and Solutions, stronger client offering, and focused on creating increased shareholder value. We are looking at the day today a little bit like a mini version of a capital markets day. I'm very glad to be here today live, from Stockholm together with our CFO, Andreas Lindbäck , and also joining us from the U.S., Tony Byerly, who is president of Securitas Technology. It's been now a few years since we had the last capital markets day. That was at the beginning of December in 2019, just a few weeks before the start of the pandemic.
We have not been sitting still. We have been driving extensive transformation, modernization and digitization of the business because we set out the objective to come out stronger, come what may out of the pandemic. Our execution of the strategy is generating results. When you look at Securitas today, we are operating at higher margins compared to the years before the pandemic. We also set out an objective back then in 2019 to double what we called solutions and electronic security. With the closing of the Stanley acquisition, we are achieving and delivering on that ambition. We also did quite a lot to sharpen the business. We have exited 11 markets that were low performing and lower relevance for our strategy going forward.
We have turned around the aviation business, and we have invested significant amounts in terms of strengthening our business ethics and compliance function, and we have also accelerated our sustainability agenda. We've also acquired and successfully integrated a number of technology businesses in the last couple of years. Obviously the main trigger for being here today is the fact that we closed the Stanley acquisition just one month ago. What does this actually mean? Well, we are transforming the company, we are shaping the new Securitas, and we're positioning the company to be a company that is better positioned for higher value and higher growth in more valuable services in the years to come. Let us now look at the future, the strategy ahead, and the type of company that we are creating.
With this acquisition, we are creating a unique company now in the security services industry. Stanley Security with leading capabilities in technology and also strong commercial competence in combination with Securitas. We are creating a company which I said is unique. We're positioning ourselves now to be the leading security solutions company with world-leading technology and expertise. Why is this important? Well, simply put, because technology is becoming more important. This is for the security equation of tomorrow. When we were building the strategy for the next phase, we were sitting down with the team and saying, "What will be required to win in the security services industry of tomorrow?" We identified three main capabilities. The first capability is what we call presence.
That's essentially professional people that we have with expertise in security and safety who are able to protect, but who are also able to respond if something happens. The second capability that we consider very important is technology. When we talk about technology, this is the ability then to be able to design and install, serve, and provide maintenance with connected technology, cameras, sensors, and so forth. Third, and this is when it becomes really interesting, we also believe that you need to be good in terms of how you generate data, but also how you leverage data to enhance the security equation for the benefit of the client, but also for driving innovation.
For a leading company, of course, the client should always be at the center and hence the position in the middle of this simple illustration that we have here. When you're looking at the future of Securitas that we are shaping, we will have a tremendous strength in terms of all three areas. Going forward, this is really then the framework as well for what we are bringing to our clients in terms of the value proposition, bring more value to them in the areas of presence, technology, and intelligent use of data. Based on this, we see very significant opportunities of growth across a number of different market segments in the security services industry.
With this page, we're illustrating in this fairly simplified way the size, the growth, and also the margin profiles of the different areas where we are now well-positioned to play. If we're starting with the first one, looking then at the security market is the guarding piece. This is obviously a large market. We believe this is growing in line with GDP, and the margin profile is typically in the single digit range, but depending quite a lot, depending on which market that you are in. The second area, what we call technology, this is then very much focused on the design, installation, service, and maintenance. This is a $70 billion market that we are expecting to grow around 5% per year.
Even more interesting from a client value perspective, but also from a value and a margin generation perspective, is the growing momentum in solutions. This for all of those who know us well, you know, this is a business and market that we are really driving. When we talk about solutions, this is when we are combining and integrating different protective services based on the client needs. This is an area where we expect there is growth opportunity of 10% or above in the coming years. I will explain a little bit more about that later on. Then if you're looking at the top right corner, there is a smaller circle, and that's something that we are defining as data-driven security as a service.
This is the area where we're able to leverage data that we are generating, third-party data, to continuously enhance the security equation and the value that we bring to our clients. Also where we have really interesting opportunities in terms of scalability through innovation. When you're looking at the capabilities, what is required to win tomorrow with presence, technology, and data, and when you're looking at the trends of the market, this combination with Stanley Security is really a catalyst for us to enhance our position in the value chain to higher value services in the next couple of years. Hence, the importance of creating a technology leader. Tony will talk more about this later on.
I just wanted to share a few points here because we are creating Securitas Technology, a company which is gonna be a leader in the industry with global strength and also local execution capability. We're looking at developing the leading propositions when you're looking at the complementarity of these two organizations and the opportunity to drive innovation. That can be internally, it can also be in partnership with others. Then obviously, we're gonna run Securitas Technology as a business. With a combination here, once again, with Stanley, we are greatly enhancing our technology capability, and we expect also significant value to our clients because we're enhancing the technology capability, which is so critical to our clients for the years to come. When you're looking at this from a financial perspective, we're really now starting to shape and to change the profile of Securitas.
Looking back a few years back to 2015 and where we are today, the investments that we are doing and the repositioning of Securitas is really starting to generate results. The operating margin in the last 12-18 months is now significantly higher compared to levels where we have operated before. The most important is where we are heading. When you're looking at the combination with Stanley, already today, 50% of the operating result will come from Technology and Solutions. Looking at the coming three to four to five years, we are expecting around 2/3 of our profit contribution to come from Technology and Solutions and the higher growth in these areas. Based on this, we are excited and really glad to share our new financial targets.
The first target is focused on the growth that matters the most, and that is the growth in Technology and Solutions. Here we target 8%-10% annual average sales growth for the coming period. We will achieve this based on the demands from the clients, but also in combination then with the strengths and the capabilities that we are building in our offering. The margin target, which is perhaps the best reflection of the future profile of Securitas, is to achieve 8% group operating margin by the end of 2025. Then also to transparently reflect our ambition and our expectation for the long term, we've also set the longer-term ambition to be a 10% operating margin business. With strong capabilities and disciplined execution, we will deliver strong shareholder value and growth in the coming years.
Let me now in the next couple of minutes just give you some flavor of how do we make this happen, and starting then with the growth in Technology and Solutions. We have built considerable capability with Technology and Solutions with strong double-digit growth over the last 5-6 years. Today, this is a SEK 38 billion business when you are including Stanley Security. Looking ahead, we are expecting, like I said, annual average real sales growth of 8%-10%. This will then come from two main categories. Technology, where we're expecting to outperform the market, and this is then a market that we expect is gonna grow around 5%. Solutions, where we are really driving the development in the market, and where we're expecting to grow 10% or more.
M&A is not really gonna be a focus in the near term, but once we have integrated Stanley and also deleveraged, we will be in a really good position as well to do bolt-on acquisitions in a few years' time. Let us then shift to the margin where the strategy is also starting to generate results. Looking then at the period of 2010 to 2020, Securitas was roughly a 5% operating margin business. Starting about 18 months ago, we started to realize real improvements in the operating profit margin. This is a result of strategy execution, first of all. We've been continuously shifting more of the business and the portfolio to technology and solution. We have a solid track record in terms of price wage management, which is very important for the people-intensive parts of our business.
We have transformation programs predominantly in North America that is now starting to really have a positive impact. Like I said at the beginning as well, we've also sharpened the businesses. This is also helping us to spend time and efforts and resources where it really matters. We have good confidence and good momentum in that sense. I just then want to share a few drivers in terms of how do we go from the current kind of 6% level up to 8% by the end of 2025. First of all, the Stanley acquisition is margin-accretive from day one. To achieve 8%, there are two main areas of improvement or two sources of improvement. The first one we call taking the lead with Technology and Solutions, and the second one is enhancing our guarding business.
We're going to share quite a lot more in the coming sections, but I want to highlight just a few of the margin-enhancing drivers here. Starting with Technology and Solutions, first of all, with the Stanley acquisition, we have identified cost synergies of roughly $50 million that we are confident to achieve. On top of that, we also have strong commercial synergies. Secondly, it's the second driver is really mix-related, and that is when we're continuously shifting more of the business to higher value Technology and Solutions. The immediate focus is obviously now on integration, like I said, and value realization.
If you're looking a few years out, we will also be very well positioned to do bolt-on acquisitions since we're now establishing real relevance in the technology business in a number of the key markets where or that are the most important to us and to our clients. Shifting then the focus to guarding. We are expecting margin enhancements from the business transformation programs, and we're already delivering above the expectation here with the North America program, expecting as well further benefit there next year. Taking the lessons learned from that program for the programs that we're now running for Europe and Ibero-America. With improved systems and applications, we're also enhancing the transparency that or how we are actually running the business. The second major area for us, for us is what we call Active Portfolio Management.
This is gonna be another important contributor to creating better quality and value to our clients, but also, better profitability across the entire portfolio. In essence, we are shifting more of the business towards more Technology and Solutions, and we are enhancing the quality and profitability of the guarding portfolio. These are the two main drivers in terms of the margin journey to achieve 8% by the end of 2025. Also, as I commented at the beginning, we have also accelerated our sustainability agenda. Striving to be a good force in society has always been part of the Securitas DNA. There is a number of areas we've been doing really good work over many, many years, but this is obviously an area which is extremely important now as well as we go forward.
The work that we are doing is also being recognized, so really glad to see the AA A rating from The Upright Project . I was also very proud when we were the first major company in the security services industry to announcing our commitment to the Science Based Targets initiative. This has been very well received by our clients. I should also say that we're working with many of our leading clients as well in the areas of health and safety to make sure that we are enhancing the working conditions of hundreds of thousands of people around the world. When looking from a diversity perspective, we have a rich diversity in Securitas. If you say there is one improvement area is to make sure that we are also reflecting that higher up in the organization in more leading positions.
That is something that we are working on. In the last three years, we have also spent significant effort in terms of strengthening our compliance work and business ethics and the work with what we are calling internally doing the right thing. This is always about the promise of Securitas protecting our values and the foundation that we have. When reflecting on the transformation of Securitas, we are in really exciting journey now, and we have a clear direction and a clear wanted position. To frame it a little bit, the coming parts that we're gonna have in the session today, we are positioning ourselves now to deliver superior growth in higher value businesses. We're gonna do that focused then on four main areas. First one, like I said, taking the lead with technology.
Second one is enhancing the quality and profitability of our guarding operations. Third one, positioning Securitas to be the leading choice for clients in terms of integrated solutions. The last area, which is very exciting and also important for the longer term value creation, is we're also building an innovation platform now which is really strong, an ecosystem that we can leverage for the coming years. We're gonna talk more about this now over the next couple of minutes, Tony and myself. But before I hand over to Tony to kick off with the technology piece, I just wanted to mention as well that when we were joining forces now together with Stanley Security, we decided to also rebrand what we previously called Securitas Electronic Security to Securitas Technology. We did that to also reflect that this is a new company with tremendous opportunities ahead.
It's also a very forward-oriented team and business. Tony is leading Securitas Technology, and he is gonna give you more details now in terms of Stanley Security, but also how we are driving the development and shaping the technology business in the coming period. Glad to hand over now to you, Tony Byerly, in Ohio, and there you are. Welcome.
Great. Thank you very much, Magnus. I'm extremely excited to have the opportunity to share more about Stanley Security, and most importantly, about the combined Securitas Technology business. You know, over the past four weeks since the closing, I've had the privilege to meet and engage several hundred Stanley Security associates and leaders in person at several town hall meetings and multiple locations. You know, the energy and the excitement is palpable. The Stanley team members are genuinely energized by the opportunity to become part of Securitas, where we are focused on security and safety twenty-four by seven, the same as them.
You know, leading up to the close and since the close, I've also had the privilege to speak with numerous clients who are very positive about the acquisition, and who are excited about our expanded coverage, our increased capabilities, and most importantly, about future opportunities to partner for their evolving security needs. These recent engagements have only strengthened my conviction about the Stanley Security acquisition and the opportunities that lie ahead for our business. As we consider the Stanley Security acquisition, we certainly know it's an important milestone in the acceleration of the technology business. However, we have been successfully accelerating our technology business through several strategic acquisitions over the past six years, as reflected on this chart. In each of these acquisitions, we ran a very effective and proven integration governance model.
This disciplined approach in integrating these companies together with Securitas has yielded positive results, advancing our real sales double-digit growth and pre-COVID organic sales growth on average of 8% ahead of the market rate. Core to that has been our increased market relevance in each of the respective countries where the acquisitions took place. Now, Stanley more than doubles our technology business, positioning us globally as the second-largest commercial technology provider, as well as strengthening, importantly, our position in several key markets, which I will cover later. An important aspect of our acquisition strategy has been on the positive development of our recurring monthly revenue, or RMR, as the industry would refer to it, as a percentage of our total sales. Fundamental to our positive margin development has been an increasing RMR mix in our total sales.
Stanley strengthens our RMR mix into these higher margin revenue streams with approximately 40% of their sales being recurring revenue. Now, as I see Stanley Security, it is truly a hand-in-glove fit, complementing and strengthening both our value proposition and our market position. The core of our business and the entire value chain is in a better place with the addition of Stanley in several of our markets across both North America and Europe. Think about it. We add almost 8,000 dedicated security professionals to the team. We're adding critically important field operations such as installation and service, increased capacity, expanded capabilities, and technical resources, adding over 3,000 field technicians as part of this transaction. Stanley's also bringing over 500,000 clients to our portfolio and increases our opportunities to serve them across the entire portfolio of Securitas' protective services.
We're adding a healthy base of recurring revenue, as I mentioned on the prior slide, and we are enhancing our focus on new innovation and different technologies for our future expansion with our clients. This creates a powerful combination when you add this to our legacy Securitas Technology business. Now, as we look at Stanley Security's performance, we see strong commercial momentum and orders growth, yielding a positive installation backlog growth of 33% and organic sales growth of 7% in 2021, and an adjusted EBITDA of 11% in that same period. During the first six months of this year, the business has continued positive commercial momentum, but has been facing temporary margin headwinds as reflected in the results.
Now, these temporary external headwinds are similar to those being faced by others in the technology space, such as the COVID resurgence that occurred at the first part of this year, which negatively impacted labor resources, client availability, and scheduling stability. The continuing effects of supply chain disruption and component shortages continues to challenge the industry, but it will normalize over time. The third area that primarily impacted the margins in Stanley's North America business was their delayed response to effectively adjust price to offset the recent inflationary pressure. The legacy approach of updating prices on an annual or even a semiannual basis does not work anymore in this inflationary environment. The good news is that the Stanley leadership team started to take actions to address the pricing headwind prior to the close, and that'll continue to materialize in the results.
You know, if you think of it this way, as new pricing takes effect, it takes time to work its way through your installation backlog as your mix of legacy jobs is eventually replaced with the newer priced jobs. I'm also confident that we can get past this issue because we did not see a similar impact in our legacy Securitas Technology business in North America. We have a pricing rigor and tools that enable us to maintain current pricing as our suppliers and manufacturing partners update their pricing. You know, in fact, during the same time period, we have seen our margins improve as we've been able to capture price adjustments. It's for these reasons, I believe we will continue to see strengthening profitability in the coming quarters as we move out of these temporary headwinds and we execute on our value creation plans.
I get excited, and you can probably tell why on this next slide, because as we think about the overall growth opportunity we see with the Stanley acquisition, we're adding critical mass and market density in 11 of our key strategic markets, where we will now have an estimated top three market position, meaning we will have a number one, number two, or number three market position in those countries. This local market strength and presence is a significant factor as we look at growth potential as it relates to market relevance to our existing and new potential clients. Our global technology presence, expanded intelligent services, and enhanced capabilities lend themselves extremely well to filling out and addressing an industry void which is in serving global clients in the technology space.
I think it's important as we think about the commercial opportunities to grow the business faster than the market to really address it in these four key pillars. If you look at the first in global sales, we are more than going to triple the number of dedicated sales professionals in the technology space. We are also adding and bringing together our two global clients programs between Stanley Security and the former Securitas Electronic Security or Securitas Technology to address that industry void to really serve global clients in an effective way. If you think about cross-selling opportunities, Stanley is bringing over 500,000 new clients, as I mentioned previously, truly as an opportunity where we can offer the entire holistic Securitas portfolio, increasing our share of wallet.
As Magnus mentioned, there is significant opportunity to drive further innovation and new intelligence services for our clients through technology partnerships internally, as well as increased purchasing power influence in working with key suppliers as we look at new innovation for the future. This is especially true in margin-rich services such as cloud and subscription-based offerings, which further expands our RMR mix of sales. Although in the near term, we are fully focused on the successful integration of Stanley and achieving our business objectives, the highly fragmented industry creates a strong opportunity in the future to continue our successful bolt-on strategy in select markets. That's collectively why we feel extremely confident in our ability to achieve our commercial synergies.
You know, over the eight months between signing and close, our integration efforts have been keenly focused on a smooth and seamless day one close for our clients, our associates, and business continuity across both of our companies. Thanks to the collective efforts and the hard work of all of our team members in both Stanley Security as well as in the Securitas business, that has paid off, and we had a very good day one experience for all stakeholders without any disruption to business. Now, during that same time period and in the months since closing, we've been able to plan and prepare for post-close activities. One of the first steps during the week of close was to name our newly combined executive team to lead the Securitas Technology business.
This step has allowed us to move effectively and at a good pace since closing as we look at value creation activities, such as the cost synergies outlined on this slide, giving us confidence in our ability to not only achieve, but to accelerate the synergy realization, which Andreas will outline in his remarks later. If you look at the synergy opportunities on the left side, we see a real opportunity to drive efficiencies through the combining of the two businesses, creating one common technology organization and eliminating duplicative cost structures. Optimizing a newly combined footprint will also be a key factor, such as consolidation of operational facilities and back office support, and certainly, at the same time, protecting our client-facing commercial efforts and resources such as field technicians and sales associates, as I mentioned previously. An underpinning here is also our ability to leverage our strengthened purchasing power.
If you think about it, we are virtually doubling our two businesses, providing us real strength in this regard. While driving cost synergies, we also have the opportunity to drive margin accretion across the business through multiple levers. Just in the first item on the right side of the slide, we have the opportunity to leverage the client density between the two businesses in a market to improve our operational efficiency through reduced labor costs, like driving down overtime, like driving down fuel costs with improved scheduling and routing. What's best about that is we do that all while improving our client experience with better response times and more technical resources. The increasing recurring revenue streams not only provides us more stability, but also better profitability through improved fixed cost absorption, which only improves as you reduce your cost structure.
Having more intelligent services and expanded offerings allow us to not only strengthen our client value proposition, but improve our margin profile in the future. We have an experienced leadership team, a proven governance model, and a structured integration process to identify and deliver on these synergies while strengthening our business commercially, which is why I'm confident in our ability to achieve the $50 million in cost synergies. Our last slide in my section is really a proof point to my prior comments.
In 2020, we acquired Techco in Spain, which combined our existing technology business in Spain with our existing business, creating a market leader, virtually doubling both businesses size and scale, giving us critical mass in the market, expanding our capabilities and technical resources, affording us the opportunity to engage with former Techco clients about the holistic Securitas approach, giving us a strengthened position in front of our own clients and prospective clients with market relevancy, increasing our sales footprint, and more. Virtually all the things that you've heard through this presentation as to the benefits of the Stanley acquisition. Through a structured integration model and best practices, the leadership team in Spain did a great job and was able to achieve significant commercial and cost synergies, yielding today 10% organic sales growth and double-digit margins in technology.
This example, along with the successful integration track record of the five Stanley Security countries we acquired in 2020, along with the successful integration of the other numerous acquisitions outlined on my first slide. In addition to my 30 years of experience in the industry, it gives me great confidence in our ability to successfully execute on our objectives and create the world's leading technology business. With that, Magnus, I'll turn it back over to you.
Many thanks, Tony, and I'm glad the technology is working well here as well. Tony will come back and join us for the Q&A session that we have in a while. I'm now gonna take you through some of the key actions that we are driving in guarding, in solutions, and then also how we think about innovation. Starting then with our guarding business. We have a strong track record in our guarding business in terms of the quality that we are delivering, in terms of client retention, in terms of price and wage management that we're continuously doing. We are proud to serve many of the most admired brands in the world, and we count those as close clients, but also partners in our development.
When you look at a guarding business, the guarding business, be it on-site or mobile or remote, is an important part of the security equation of tomorrow. It can also be a really good business when it's well managed, solid long-term client relationships, stability and resilience, and also good cash generation. If we are looking at ourselves, and we have done that a few years ago when I took over as the CEO, there were two areas that we felt we had to address. One was that our guarding business was quite the manual business. We were not operating in a digital way. If you're not digital, it makes all the processes less efficient, and it's also difficult to really be able to scale with good profitability.
The other area was that we also saw a number of parts of the portfolio that we had profitability that was not satisfactory. We identified two important initiatives to strengthen the guarding business. The first one was extensive transformation programs. There we started the first ones with global IT and North America back in 2019. The second area for us was then to take a much more active view in terms of portfolio management and a stronger grip. With these measures, we're not only gonna enhance the quality of our offering to our clients, but also the profitability and the value that we are generating with the guarding business in the years to come. Starting with the transformation programs. This is a slide that contains a lot of information. I'm aware of that.
We include it here to provide comprehensive clarity as well regarding the objectives, the benefits that we have been seeking, and also the expected financial returns. The global IT and the North America programs. We started at the beginning of 2018, we 2019, we finish now towards the end of 2021. The global IT program, for just simple description, we essentially went from all local operations in 58-country presence that we had back then to one coherent IT organization. This today is one strong platform that is serving the entire business. Shifting then to the North America transformation program, this was extensive work with extensive digitalization of the entire business. When I say the entire business, it's essentially all the processes from recruitment all the way through to paying our people and invoicing our clients.
When looking at the North America program, we are operating the business with the transparency and the speed that we have never been close to in the past. If you're looking then at the other two programs, Europe and Ibero-America, here the starting point is different, but we're leveraging a lot of the lessons learned from North America and the investments for the benefit also of these two programs. Europe is also rather comprehensive, and here two of the differences I should say is that here we're also leveraging this program to harmonize how we are working across all the different markets in Europe, but also how we're harmonizing all critical systems and applications to support the business in the best possible way.
The other objective with the European program is also to help them shift the revenue mix towards more Technology and Solutions. If you're looking then at the financial benefit, we have achieved the targeted savings with the global IT program. If you look at the North America program, we have already achieved the 50 basis points improvement that we set out, but are expecting more in 2023. For those who follow us closely, you will also see that the Ibero-America margins, we're almost at the levels now of the 2024 target. Here this is not related to the transformation programs, but just general improvements in the business that has happened faster than we anticipated. With Europe, we are on track to achieve the targets that we set out and communicated last year.
Going forward with the introduction now of the group level operating margin target, that will replace these divisional targets. That is one area, the transformation programs. Let me now shift then to the other one, which is about active portfolio management. With this work, we started more actively a little bit more than two years ago in the aviation business, and we have now expanded that to the entire portfolio. Because with improving systems, we're enhancing the transparency and understanding of true profitability down to individual branch or client location. What does this mean in practice then in terms of active portfolio management? Well, first of all, we establish transparency in terms of profitability of the entire portfolio.
Secondly then, taking a much stronger and more disciplined approach in terms of margin hurdles for the new business, but also then defining with clarity what does good business look like for the current and the ongoing portfolio that we have. For simplicity, we have categorized this into three different categories on this slide. If you're looking at one of the client contract examples then with the green dots, that essentially represents healthy business. Here the focus for us is to make sure that we continuously enhance the value and the value proposition to those clients over time. If it's yellow or if it's red, it means that it might be close to or it might even be under the margin threshold.
Here then we are applying much higher frequency checks on these clients and then actively working to make sure that we are achieving one of preferably two different outcomes. First outcome is that we just renegotiate the terms with the clients because it's not a sustainable business. Secondly, we have the opportunity to convert an on-site guarding client to an integrated solution. Typically, when we leverage technology, we're enhancing value, but also maintaining cost levels for the clients, which is usually quite attractive. If the first two are not possible, in those cases, we would then work to actively exit that contract, but we would do that at the end of the contract period. We made continuous assessment of the profitability of all parts of the business, and we do that with the portfolio as well.
If you ask the question, well, how much do you have left to do? Well, we believe that over the next 12-24 months, we're gonna be through those parts of the portfolio that are not operating at a satisfactory margin level. One message that I just want to make sure is that any non-performing business will be at risk. This is important because we are investing, we are very confident in the value that we bring. Our customers also recognize that. If you think about even the current context, it doesn't make any sense for us to be doing a lot of volume unless we can protect the value. In the current labor market, for example, there is labor scarcity, it's a known problem for most industries, including for us.
I think that is important and also even more important to be very firm about this. The other reason as well is that we always have an option that we can offer to our clients with a conversion to an integrated solution. Solutions is the next focus of the coming section. Here I'm just gonna talk a little bit about client demands, about the growth trajectory, and also a client reference in terms of an integrated solution. As I highlighted earlier, we have a large client base, and together with Stanley, hundreds of thousands of clients that are ranging from SME clients to large global clients. When we are engaging with the client, we always start with the risk analysis to understand the risk and to understand the needs of the client.
When we talk about the solution, we leverage the different protective services that we have outlined on this page to an integrated solution, which is then based on the client needs. In many cases, we also then deliver standalone protective services. It could be guarding, it could be corporate risk management technology. We also see that the highest value is typically for the client when we are combining different services into an integrated solution. Why is that? Well, because we are matching very closely with the needs, we're optimizing the value for money for the client, and with a close relationship, we're also in a great position to continuously also develop and enhance the services that we provide to them.
We have spent years building expertise in solutions, leveraging our different protective services, and with a combination with Stanley, we are now greatly enhancing our technology capability, and that is, as I mentioned before, one of the key drivers and in-needs that are increasing also from our client base. In this overview, when you're looking at this page, this is referring to the different protective services that we have. What you see here is that most of the protective services are relevant for all clients, but if you're looking at corporate risk management and on-site guarding, those tend to be more skewing towards larger clients in our segments or even global clients for that matter. This strategy is working.
When you're looking then at the growth, which we're outlining here over the last six to seven years, with the exception of the pandemic, we have demonstrated great growth, but also then the opportunity that we have ahead. I'm also really happy about the growth that we have in the first half of 2022 with 13% because we had a couple of years with the pandemic when it was difficult to access client premises and to really drive the momentum. Now we're coming back strong, and this is an important focus area for us to drive. If you think about the contribution here, we have announced today a target of 8%-10% growth in technology solutions, and solutions is gonna be a key contributor here. Which are then the key accelerators?
Well, first of all, the client needs. That is one primary driver of this. It's not only Securitas driving, it's also clients are demanding more integrated turnkey solutions from us. Labor scarcity is another important driver, but then obviously the technology capability with Stanley also enables us to offer more technology capability to more of our clients, partly from Stanley, but also from Securitas. We've also been driving focused investment, and we continue to invest in this space with dedicated solutions organizations to help and make this important work happen. Then obviously, there is also cross-sell opportunities that are critical.
If you then take that and say, "Okay, how does this actually look from a client perspective?" I just wanna share one client, which is a fairly new client of Securitas, but it's a client that we are proud to consider a client and also partner of our business over the last couple of years. This is Puma, so the athletic and casual clothing and apparel company. This is a good reference case because it represents many other similar types of clients or similar client needs, I should say. Puma was looking for a full-service solutions partner. They had a global view of what they wanted, but they also had a need of local execution.
This is a great case how we are leveraging presence and how we are leveraging technology and increasingly also then how we're leveraging data to enhance the service delivery to them. In this case, we are providing video access control, intrusion. Everything is connected to the Securitas operation center. I highlight this because the data connectivity is important for us to gather insights and to continuously enhance how we are driving the business and the solutions going forward. This is a good case because it's as a service, it provides corporate oversight for Puma, and it's helping them as well to raise the standards in terms of the security equation across their retail footprint. Their message to us was, "You are the experts, help us and take care of this," and this is what we are doing now.
We've started with some stores, but then with a fairly significant ramp-up plan for the next couple of periods. This is one example, but we are selling thousands of integrated solutions today to our clients, and this is really one cornerstone of Securitas of the future as more Technology and Solutions-oriented company. I mentioned connected technology, and I mentioned data, and I just wanted to then link now into the last part of the presentation from my side, and that is how we think about innovation. Let me share just a few points here. Because this is when it starts to become really interesting as well. Of course, with the presence, technology, and data, we have a foundation now to drive new data-driven and enhanced solutions.
With Stanley, we are enhancing the vertical strength and the geographic presence, but also the digital presence in many key markets. We're also getting access to data sets from Stanley that we are able to combine with those from Securitas, and this gives us a very powerful platform to be able to drive innovation for the next phase and to develop new solutions. For that, a couple of months ago, we also announced that we have put together a new and dedicated team, which is called Securitas Digital, and they are tasked with leading this effort with the different businesses to make sure that we are really enhancing now, our work in terms of innovation.
I should say, very important for the longer term ambition with our 10% target because this is an area where we have very promising opportunities in terms of the development over the next 3-5 years. Let me share just a few examples of what we have done and also a few things that we have in the pipeline. We've invested from a Securitas perspective quite a lot in what we call intelligent services in the last couple of years. We have built a platform through digitization, through machine learning and AI, understanding the business, piloting and testing quite a number of different areas, and we now have a few areas where this is really starting to build traction in the real business. I might want to mention two.
First one is risk prediction, and this is something that we've talked a little bit about before as well. Here we're leveraging own and also third-party data to better predict risk. Today, we are receiving prediction levels of 80% or above. What does that mean? Well, it enables us to essentially optimize the security equation. A related service to that is what we call Mobile Patrol 2.0. This is a digital tool. It's AI-based. Here, if you're a Mobile Patrol client of Securitas, you can also get information close to real-time in terms of nearby events, for example.
You're also getting predictions in terms of the coming 30 days, which then enables you as a client as well to opt in and to say, "Yes, I want that enhanced type of service." That we also have now brought into the real business, and we have significantly more in the pipeline. When you're thinking about this, digitalization that we are driving at Securitas in the combination with Stanley, we are building now a tremendous platform to develop new solutions and to drive, innovation. When you compare or contrast this to some of the people-related services, this is not only interesting from a client perspective because we can bring significantly better knowledge. There is also completely different type of scalability here because here we innovate, we're able to deploy digitally with impact on thousands, if not tens of thousands of clients.
The scalability is also really attractive, obviously from our perspective, from a value generation perspective. When you're looking at Securitas versus most of the competitors, it will be difficult as well for the competitors to match this type of capability, thanks to the assets that we have and the work that we are doing. I hope that gives a decent picture now and some context of the four areas. Glad now to welcome our CFO, Andreas Lindbäck, to share some more details about the financials, and then we're gonna open up for the Q&A. Welcome, Andreas.
Thank you. Really good to meet all of you here today. We will then go into the financial section here. Over the last years, we have been focusing on modernizing and digitalizing Securitas and developing our Technology and Solutions business to become a more future-proof company and also driving the margins upwards. We have also managed a challenging pandemic where all of our people working in Securitas has done a truly fantastic job. Combined with this, we have also managed to deliver on our financial targets in a good way with solid EPS growth and solid cash flows. We have, up until recently, kept our leverage below our target of 2.5x, and together with Stanley, we are now also achieving our strategic target of doubling our Technology and Solutions business.
It has also been important to see that we have been able to drive our margins really well after the pandemic, showing that our strategy is paying off. Together with Stanley, we are now in a solid position to continue the transformation of Securitas, both strategically and financially. This is also reflected in our new financial targets. The first one is related to growth, where our ambition is to have 8%-10% average annual real sales growth in Technology and Solutions. We have a strong track record of growing well here, and we expect going forward to outperform the market in the technology space, to continue to grow our solutions business double-digit going forward, and also over time, continue with our bolt-on M&A acquisition strategy in Technology and Solutions.
We are also introducing an operating margin target for the group of 8% by the end of 2025. Here the two key drivers are our shift into the high-margin Technology and Solutions and a strong focus on improving the margin in our guarding business. Looking at the cash flow, here we will remain with the existing target of an average operating cash flow of 70%-80% of operating income before amortization. Related to capital structure, next, here we remain with the net debt to EBITDA target, and the new targets for the net debt to EBITDA is to be less than 3 x to ensure a solid and stable capital structure. Here our target before was an average of 2.5x, and we have also communicated in the past that the ambition was to be between 2x and 3x.
In essence, there is no major change here. The dividend policy in the range of 50%-60% of annual net income is left unchanged. I should also say here that previously we had an EPS target, and that is now replaced with the new growth and the new margin target. When we are executing and delivering well on these two targets, we will also deliver solid EPS growth also going forward. Looking then a bit further into the financial reporting going forward. We will now consolidate Stanley as per July 22nd, and we will start reporting them into our existing geographical segments that we have in place already today.
However, we are also preparing additional disclosures for you, so you will be able then to also see the sales and the operating income for the combined Technology and Solutions business and the guarding business separately. This is something that we target to start in the beginning of next year. Looking at this structure with 2021 as a base, also including Stanley, you see that our Technology and Solutions business was 31% of total sales. We have had strong historical real sales growth here with approximately 13% on average. Together with Stanley, the margin in this business is indicative around 9%-11%. With the target of 8%-10% real sales growth going forward, we will have strong contribution to the group's overall operating margin from Technology and Solutions.
Our guarding business has been growing less in the past and also have a lower margin. We are a leading guarding company. We have really strong presence, and we have the strongest offering to our clients. The key for us here is to continue to modernize the business and digitalizing the business also going forward. Together with that, we will also be strict when it comes to our margin management, both when it comes to new contracts as well as our existing portfolio. When we are executing these two areas well, we will also then be able to deliver on our 8% operating margin target by the end of 2025. We're moving then to cash flow. We are a highly cash flow generating company, and we will remain so also going forward.
Over the last seven years, we have generated over 80% of operating cash flow, which has also been translated into strong free cash flows as well. We are in a low cyclical industry. We have a solid business model with long-term client relationships and a high recurring revenue. This generates a stable and resilient cash flow profile over time. Now we are also integrating Stanley, and looking then into Stanley here, the need for CapEx is generally fairly low in the Stanley business and has been less than 2% of sales, not taking into account any effects from IFRS 16. This is similar to our own CapEx levels in Securitas, also there taking out IFRS 16. From a net working capital perspective, Stanley's installation business is approximately 60% of sales.
This part of the business is a project-based installation business, where the working capital is driven by efficient project management, by efficient inventory management, and solid and frequent invoicing patterns to the clients. The other 40% is related to the monitoring and maintenance part of the business, and it's a recurring revenue business which normally have a strong cash flow positive cash flow profile, as many of the clients are paying either in advance or with shorter payment terms. All in all, the net working capital profile for Stanley is around 20% of sales. We have, I should also say we have really strong best practices when it comes to net working capital management in Securitas, but also in our own technology business.
We will now, together with Stanley, start the work of also implementing that with Stanley to ensure that we are fine-tuning their net working capital model going forward, that will also support our growth journey in the technology space. Based on this, we expect solid cash flows from Stanley, and we are in a good position to continue delivering strong cash flows as a group and meet our targets. Looking at capital allocation and our priorities there. Our strong free cash flow generation have made it possible for us to both invest into our strategy and to give solid returns to our shareholders.
Historically, we have allocated approximately 50% of the free cash flow to dividend, and the other 50% we have invested into our strategy, building our Technology and Solutions position through M&A. We also going forward intend to have solid returns to the shareholders confirmed by the dividend policy remaining in place. Over the coming 18-24 months, we will shift focus though from investing into M&A to make sure that we can pay down our debt and also reduce our leverage. We will also finance our previously announced transformation programs and the Stanley transaction costs. I should say also here that there are no other new programs related to IAC, except the ones that we have already communicated around.
Then in the next phase, when we have deleveraged to a satisfying position, we will then, of course, continue with our bolt-on acquisition strategy in the technology and solution space, and also consider other capital allocation options available to us or continue to pay down debt. If we then have a look at our leverage profile, as I said before here, with our strong cash flows and with the shift in capital allocation priorities in the near term, we will support deleveraging after the Stanley transaction. As you know, we have had a lower net debt to EBITDA than our target for many years to be ready if there would be a major opportunity such as Stanley. We are now increasing the leverage with Stanley, where the net debt to EBITDA is 4.2x, looking at this pro forma Q2 2022.
Our focus in the near term is deleveraging, and we estimate to be in our target range related to net debt EBITDA in 2024. Important to mention here as well is that we have no financial covenants in any of our facilities, and we remain committed to our investment grade rating. If we then look further into some details related to the Stanley transaction and Stanley's financials. Here, as you all know, we have now closed the transaction as of the 22nd of July, and that is also the date when we are consolidating Stanley into our books. The purchase price was $3.2 billion, and that was also done on a debt and cash-free basis. We have financed the transaction through a bridge loan, and this bridge loan will then be refinanced through a mix of debt and equity.
Here, we will launch the rights issue in September, as we have previously also said, and the amount is approximately $950 million. More information related to the rights issue will come over the coming weeks here. If we then look into the cost synergy of the transaction, and here we announced $50 million of all the synergies in December, and that remains very much in place. Now we have also had a good eight months to prepare ourselves here, and thanks to that time, we have also been able to make really solid plans on how we're going to execute on these synergies, which also makes us confident we can do this faster than we told you here in December.
We expect now that we will be able to execute this over most of these synergies over 2023 and 2024. If we move on to the partly related and transaction restructuring and integration cost, we expect here a total cost of $135 million unchanged to what we said also previously here. The majority will be recognized over 2022 and 2023. Moving on finally to some further financials related to the Stanley business in itself. First of all, we have now an estimated tax rate here for the Stanley business, which is 28%. That can be compared then to our own forecast tax rate for the Securitas Stanley combined group this year of 27%.
Looking at IFRS 16, I should say that this is then mainly related to leasing related to cars and buildings. Here we expect a net debt impact of SEK 100 million from IFRS 16 and SEK 40 million increased depreciation, and that also means a reduced operating expense. Important to say here is that there will be no material impact to the net income bottom line. We also in the second quarter disclosed numbers related to our purchase price allocation. Here we estimate the PPA to be around $500 million, and that is then mainly related to customer portfolio that will be amortized over 15 years. That means, on average, an amortization cost of $35 million per year. With that, I hand over back to you, Magnus.
Many thanks, Andreas. I think you can stay here. I'm just going to make a few concluding remarks. When you're looking at this, I believe you can see that we are really transforming the company, creating the new Securitas. Securitas, which is well-positioned to deliver superior growth and higher margins during the next phase. To achieve this, we focus on four main areas. Taking the lead with technology, enhancing our guarding business in terms of quality and profitability, accelerating the solutions leadership in this industry, and also leveraging the strong platform to drive innovation. That concludes the presentation for now, and we are now happy to open up for the Q&A session. I think we should then also connect our friend Tony here again from the U.S.
I would also appreciate for the Q&A, if you limit your questions to one, maximum two questions to make it a little bit easier for us to keep track and to make sure that we have a good session here. I should also say we have roughly until the top of the hour with this session, so we dedicated quite a lot of time, depending then on the interest and the questions that you might have. I think with that, I hand over to the operator.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Johan Eliason from Kepler Cheuvreux. Please go ahead.
Yeah. Hi, this is Johan Eliason from Kepler Cheuvreux. Just two questions then if I may. You mentioned the growth target being on the technology business and obviously mentioned not too much about the ambitions on the top line for the guarding business. Can you sort of quantify to some extent what share of guarding is sort of marked red or at risk, so we can sort of get a feel for where that top line could develop in the coming years? Then secondly, just on a bit weaker margins in Stanley Security's security in the first half this year. Were there any specific incentives in place during this interregnum period? Or was that missing basically?
I suppose a lot of managers were thinking where they were going rather than focusing on the profitability in the short term. Can you say anything about what you had in place and what you have now put in place over the last month? Thank you.
Thank you, Johan. On the first question, I mean, we deliberately decided to put a growth target on the growth that matters the most, and that is Technology and Solutions. I think understanding your question, we have been driving and taking a fairly strong approach in terms of active portfolio management over the last couple of years. We still have, like I said, another 12-24 months that we need to work through. What is important here, though, is that when you're looking at the totality of Securitas, the business that we are bringing in this year is essentially on the new business is higher margin than what we did last year, and that margin last year was also higher compared to 2020.
I mean, we don't have a mission in itself to just say, you know, well, we're gonna actually decrease the business. That has not happened. The important thing is that it's profitability first. We then also have to see that we treat a little bit as a consequence as well with clear profitability thresholds than what is the kind of the residual growth on the guarding business. In terms of a timeline, the next 12-24 months, we're starting with better systems and better applications to get a much better grip now in terms of the business. That's really the timeline that we are expecting to be able to work through the remaining contracts that we have.
If you're looking at the incentives, Tony, in terms of Stanley Security, do you wanna maybe comment on that question?
Sure, Magnus. The main incentives were really focused around retention of key talent and the focus on the transition of the business, obviously, leading up to our closing. With respect to the incentives on the Stanley side, they had their normal performance incentives leading up to the close.
If you're looking at the business going forward, I mean, the way that we structure incentives, there is some margin components. You're looking at the relative margin, but we're also then looking at the growth in the operating results. Those are the critical ones. You also mentioned retention. There, happy to just reiterate what Tony mentioned before as well. I mean, Tony announced a new leadership team immediately after the closure of the transaction. We have a strong team, lot of complementarity between Stanley leaders and Securitas leaders that are now coming together to lead Securitas Technology. To my knowledge, there is no one who we didn't want to be on that team who is not there today.
I mean, the team that we have is a strong one, that is going to lead and now getting started here over the last 30 days.
Okay, excellent. I think the 8% margin target is really ambitious. It will be really interesting to see if you can get there already by 2025, obviously. I wish you very much good luck with the journey. Thank you.
Thank you, Johan.
The next question comes from Kate Carpenter from Bank of America. Please go ahead.
Hi, everyone. Thanks for taking my question. Could you just clarify whether the 8%-10% revenue growth target includes the contribution of Stanley Security or if this is also the combined 2021 revenue? Also, how much visibility do you have into the 8%-10% growth target from the existing sales backlog? How much of that backlog covers that? I'll leave it there.
I can take the first question here. Stanley, when we are saying that we are going to grow 8%-10% real growth, that includes Stanley in the base.
We are not including Stanley as a growth number already, so to say as well. When we're looking at this, we're having our own business, our own Technology and Solutions business. We're adding Stanley on top of that, and that base together is going to grow 8%-10% the coming years.
Kate, could you repeat the second question? I think that was related to the backlog, but I didn't catch that properly. Maybe for us to comment on that as well, please.
Yeah, definitely. I'm just wondering how much visibility you have into that 8%-10% growth target, as in how much of that is covered by the current kind of existing sales backlog, and how much is kind of unknown business that you have to generate in the future?
Okay, clear. I understand the question. Like Tony highlighted, I mean, we have a strong backlog position when you're looking at the electronic security business, and that is from Stanley, where there is a record backlog, but also from the Securitas legacy business as well. This target is obviously a multi-year target, so this is until the 25, 26 timeframe, which means that there will also have to be new business created, of course. It does help to start with a healthy backlog, no doubt.
Okay, perfect. Thank you.
Thank you.
The next question comes from Allen Wells from Jefferies. Please go ahead.
Hey, good afternoon, guys. Just a couple from me, please. You obviously split the difference between your guarding and the tech solutions business, but obviously a lot of the growth comes in the solutions and data-driven stuff. Is it possible you can maybe talk a little bit about how much of the technology side is solutions and data-driven versus technology? I'm just thinking technology grows at 5%, the other divisions grow much faster, just to understand what the base is there. The second question, just I'd like to go back to kind of the deal financing and deal terms. Is it possible you can maybe provide an update on timing for refinancing the bridging loan, expected rates here, et cetera?
I'm just mindful of the fact, obviously, since the deal was announced back in December, we've now obviously got new targets, but we're mindful of obviously we're now closing, you know, $900 million of equity at a Securitas share price that's 25% lower. You know, bond yields are 250 basis points higher. Maybe you can provide a bit of a comment around that refinancing and how you see deal economics as well on these new targets. Thank you.
Thank you, Allen. To provide some more flavor in terms of the growth, when you look at the technology business, just to clarify that, I mean, that's what we define as the design, installation, service, and maintenance activity. We expect that market to grow around 5% per year over this period. We are expecting to grow faster than that, based on the reasons that we outlined before, in terms of the strength of our offering, the complementarity, the relevance in the market. That is the first point. If you're looking at what we call solutions, what we define as solutions, I mean, there we are integrating different protective services. It could be a mix of on-site guarding and technology, corporate risk management, fire and safety integrated into one solution for the client.
There, we are expecting to grow 10%+. That has a different growth expectation and profile in this period. If you're looking at the data-driven, we have deliberately kept those fairly small because those are not really main drivers of top line. At this point in time, they're more enhancing the offers that we are having in, specifically in solutions, but it could also be in standalone services. Where we expect that the contribution to top line, but specifically also to bottom line with a better scalability profile, that is gonna be significantly larger in the mid to long term. I would say when you're looking at Technology and Solutions growth, really focus on the growth in technology as I outlined and the growth in integrated solutions.
Related to the bridge loan here. We will, as we have said here, we will go out with the rights issue now in September, and that takes approximately a month or so to also execute upon. The amount there is the $950 million that we have denominated it in USD. Thereafter, we will go out as soon as possible to refinance the remaining part of the purchase price in the debt markets. That's really the ambition to do this as fast as possible. Of course, taking market timing and other facts into consideration here as well. Of course, I should say since December, interest rate has gone up.
Where we will land here in terms of cost of the debt part of the financing, we will have to see further on when we're actually starting the execution, given also the volatility in the markets we see today.
There's no guidance at this stage in terms of how to think about interest costs sort of pro forma.
No, I mean, in the end, I also don't know where the markets will be, where we'll be at that point in time. Of course then we also have outstanding bonds that are traded in the secondary market as well, which might be a good reference point for you to look at as well.
Okay. Thank you.
The next question comes from Viktor Lindeberg from Carnegie. Please go ahead.
Thank you. Looking at the synergies and the integration, how should we understand and think about this journey. Is it a big bang or more of a gradual takeout with management layers country by country, to sort of learn the do's and don'ts, sharing of best practices, or will this be a speedy sort of, ripping the bandage off, all at once? That's my first question. Relating to the order book that you have. I understand part of it or most of it may be fixed price, and that is, I guess, short-term hampering the margins, as you can't really raise the prices on the back books.
Can you share sort of at what speed is this order book or backlog being worked out and replaced and hence sort of improved from a price and cost perspective? I'll start with those two. Thanks.
Thank you, Viktor. Tony, are you following well? You pick those two up. First question was about how we should think about synergies and integration. Maybe you wanna comment on that one first.
We have deployed our good governance model with respect to the integration. In fact, we're calling it the integration management office. If you were to think about it, we have a global level, we have a divisional level, and we have an individual country level. We can effectively look at all cost structures, look at all commercial opportunities, and also how the business will operate in the future as a combined business. We're using a very disciplined approach as we continue executing, learning and evaluating, and then moving into the execution phase. However, I will say that, obviously on day one, we already have realized some synergies with respect to some immediate actions with respect to placing our new executive team and having that team in place today. As far as the
I think Andreas also mentioned previously, just to clarify, the synergies we are planning to have most of those realized between 2023 and 2024. As far as the fixed price and how we should think about how that installation backlog develops on the second question, if you think about it this way, you have sold jobs to a client, those are in your backlog, you're working those through the process. Now, that backlog will turn at a variety of levels depending on the specific client, the specific job, and certainly when you look at things such as, is the site ready? Is it a construction project, or is it an existing structure? The complexity, the size of the job. So that backlog turns at a different pace. But as we suggested, I think you'll see that continued improvement over the next subsequent quarters.
I think it's important to also add on here that when it comes to the existing backlog, it's still possible to raise prices in that backlog, and that's the work that we are now doing. We will not have to wait until new business are coming in to start to have new pricing. It's exactly the work that Tony was actually describing before, that we are having a really strong process to manage also within the existing backlog.
All right. Understood. I'll get back in line. Thanks.
Please state your name and company. Please go ahead.
Sylvia Barker, JP Morgan.
Sylvia, we can hear you.
Your line is now unmuted. Please go ahead.
Hi. Good afternoon. Not sure if you can hear me.
Yeah, we can hear you now, Sylvia. Thank you.
Yeah?
Yeah.
Excellent. Thank you. Yeah, a couple questions from me as well. I guess one was before the deal closed, you promised you would tell us why, I guess, the Stanley organic growth has been, you know, has been flattish to slightly negative. Could you maybe talk us through kind of the reasons for that? Again, you know, what are the key reasons why that will change? Maybe you can give us some detail around kind of the installation versus the maintenance piece or any client specificities around it. Then secondly, just interest again on the solutions piece. Obviously, that will carry a lot of the growth going forward. How much of that growth will be, I guess, cannibalizing your existing portfolio, or at least you'll be converting your existing portfolio?
Just going back to that, you know, that was a big driver of the solutions growth in the past. How should we think about you converting existing guarding contracts to solutions contracts as opposed to winning new solutions work? Thank you.
Thank you, Sylvia. I will open for you, Tony, as well to comment, but a few perspectives. I mean, we've been following Stanley Security for many, many years. We were also rather surprised, I would say, to see that the growth. I mean, the company seemed to be moving sideways for a number of years between the kind of period 2013 to 2019. That was also a discussion that we had together with the Stanley team. I think that there are a couple of different reasons, because we didn't understand it. We were seeing for ourselves how the market was growing. We're seeing our own business growing at a really healthy pace, like Tony outlined before.
I think the main reason is that with all due respect to Stanley Black & Decker as a group. The security business was never core focus of the group. It was always somewhat on the side. If you wanna build something successful, you need to really be focused, and you need to be living and breathing that all the time. I think that is one. We also saw that there was a shift going back to the 2018, 2019 period, when I believe also the Stanley team realized that we need to stabilize the management, we cannot change the strategies too often, we need to build more of a kind of a technology-focused strategy for the next phase. They successfully started to do that as well.
That's also the reason that you're seeing 7% organic sales growth last year, for example, which is quite a healthy number. A strong backlog now. Of course, they have been building commercial momentum, but then obviously there's also been a period of pandemic here that has been hurting the entire industry, including Stanley as well, up until just a few months ago. I think that we saw a company that had been moving sideways for the reasons that I mentioned, but also a company that was really starting to be more focused and also starting to be better quality business with better focus. That is also something that we have been able to validate as well after Stanley has become fully part of Securitas, going back one year.
I think that's the perspective that I would say in terms of the growth profile. Before I go to the next question, Tony, any additional comments from your side to Sylvia's first question?
No, just probably two points, Magnus. I would tell you that I think that's why you see the enthusiasm and the energy in the Stanley associates and leaders because they really now feel that they're at a home that really understands their business and obviously can talk their language and is really focused on what they do 24/7. I think that's a very important piece to underpin with as far as the energy and the psyche of the employees then. The second piece, I would just tell you is they've also refocused in that same time period that Magnus was talking about around higher growth areas, such as building up competency in serving clients that are in the tech sector with respect to like such as data centers and such.
I think they've also refocused the business in a good way, and that stability in their leadership has helped them have that organic growth that Magnus mentioned previously.
I mean, it also goes without saying we are in the industry. We're talking to people, we talk to clients, and I mean, we're getting many positive reference points in terms of Stanley as a partner, and quite a lot of similarity in terms of the quality perception and the professionalism. I think when you look at this combination, we are absolutely confident that we're gonna be able to grow the business at a faster pace than the market, thanks to the team and the leadership, but also the capabilities that we have in this combination. Addressing your second question, Sylvia, about solutions. Yes, if you look at last five, six years, I mean, we've been actively working also to convert existing on-site guarding portfolio to integrated solutions. That has been one important focus.
Once you have done that for a while, that also means that, potentially that on-site guarding portfolio is gonna be a bit smaller. As you know, I mean, we've also grown our guarding business quite a lot, and it continues to be an important source as well, based on client needs and client realities to also make that type of shift. What is promising now when you're looking ahead as well, is that we have more and more clients that are coming to Securitas with the similar messages that, Puma shared with us, for example, in the brief reference case that I shared before, where they are saying, "You are the experts. This is too complicated for us.
We need the depth of expertise that you have." They also need, and they realize that they need a combination of presence with our people, but also knowledge of technology and how we are putting solutions and designing solutions together based on their needs. I would also say that if you're looking at new sales, and not only then converting, that will be a growing part of the business also based on the fact that we are now much, much better in terms of also bringing these, and we have many, many strong reference examples as well. We're able to also bring more turnkey solutions to our clients, which they find very attractive.
I think when we have the extensive capital markets day next year, I mean, then we should also share many more client examples as well because there is, Puma is just one case, but it's a great reference point because they have a lot of similarity in needs, but also similarity in terms of how we go about actually addressing those needs successfully for their benefit and also for ours.
Okay, thank you. Maybe just on the Stanley point, I guess it would be interesting just to get a bit of background in terms of, you know, whether the installation versus kind of maintenance and, you know, pieces have done differently over time or whether there's a particular piece of that which is, you know, which has underperformed relative to where you expected it from the outside and where you'll be focusing your efforts now?
Tony, do you want to comment on that? Sylvia's question in terms of the mix over time of Stanley between installations and service and maintenance.
Yeah, I think, you know, the mix that we mentioned earlier in the presentation with installation and the one-time project-based business being about 60% of their business, with the recurring revenue streams being about 40% of the business. Which actually gave them some resiliency during the COVID piece, with respect to having that 40% of their business in those recurring revenue streams. That piece is obviously an area that we are continuing to focus on and continue to develop and focus on building out that recurring revenue. As far as historically for the company, when you have 60% tied to the installation project business, obviously if you're not having good sales or if your sales are a little sluggish in that respect, that would have caused obviously an inability to grow the business, with having 60% tied to that.
They've had healthy orders growth, developing as we mentioned, which has built their backlog. Really, the focus of the team over the last three years is to position the company in a good spot.
Okay. Thanks very much, both.
Thank you, Sylvia.
The next question comes from Karl-Johan Bonnevier from DNB Markets. Please go ahead.
Yes, good afternoon. I'm Magnus, Andreas, and Tony. Looking at the targets that your targets you're putting out today, and obviously giving us an EBITDA margin target for end of 2025, do you see it more as a hockey stick to reach that, or is it more of a continuous process to reach that target? And also on that target, how important do you think the M&A component is to reach both, say, the margin target and the growth target coming out towards the end of the period?
Thank you, Karl-Johan. I think you know us quite well. We are not the hockey stick type of a company. We typically build everything for long-term value creation. The plan that we have is obviously when you're looking at legacy Securitas, if we can call it that, I mean, we are on a positive curve. The combination becomes tremendously powerful. I think we presented some of the context here today in terms of when we're combining these technology businesses into something really, really strong. We also have transformation programs that will then affect and value realization. That I would say that's more of a gradual process is clearly our ambition when you're looking at the margin development.
Then on the acquisitions themselves, I mean, this is obviously a very significant undertaking. We have a lot of experience in terms of acquiring and integrating businesses. The main difference now is that now there is a number of different in 12 different markets at the same time. This is gonna be our full focus now for the next 18-24 months, bringing this into a really powerful business. Obviously, we will be in a really attractive position also with strong platforms to do bolt-on acquisitions after that. That is clearly an ambition, but it's not for the immediate near term. It's more for the kind of the midterm perspective that we target to do that.
I agree. If we are outperforming the market in terms of growth in the technology sector and continue to grow more than 10% in our solutions business, M&A will not be critical piece to get to the 8%-10%. We will be able to also get to that range without M&A as well. Although it's very attractive for us to drive M&A, both from the top line perspective, but of course also from a synergy perspective as well.
Yeah.
Excellent. Good answer. I'll take a little bit to sneak in one question for Tony here as well. The case you presented for us on the Spanish business and how well that acquisition and integration has done, how can you leverage that case internally now when you're looking at the U.S., the Nordics, U.K., France, say, the big markets where you are now combining business? Is not a powerful kind of road book to follow?
Yeah. I think if we look at the commonalities of the Techco acquisition, for those who may not be aware, Techco was a former Stanley property that was divested by Stanley, and we bought that business from the private equity firm that had bought that business from Stanley. There are a lot of commonalities. In fact, the process, the integration process, which we're calling the integration management office, the focus on actually building that out, as you look at the business and you look at each functional area and you look at how the business will run collectively together, that same process, that same disciplined approach, down to the detailed level at each function within each country, will be the same approach that was taken with the Spanish acquisition as well.
Obviously, a lot of the core concepts with respect to the scale that brought, the doubling of the business in that market, the market presence that gave us in Spain is replicated now across most of the countries in the acquisition, especially the 11 that I mentioned in the presentation. That good practice, you know, we had a similar approach with the 5 countries previously acquired by Stanley. I'm very confident that we can replicate a really good approach here and a good outcome.
Karl-Johan Bonnevier, I just wanna add as well, I mean, the relevance in the market is one critically important point as well. With this acquisition, just like in the Spanish case, I mean, we go from being a leading player to be a very strong position in the market, and the relevance has real significance 'cause we get to sit at the table, we are invited, and we're also able to address broader parts of the technology needs as well from our clients. That part is also one reason that we put quite some emphasis on that also in terms of the formula of how to really create a strong business in technology on a local level.
Excellent. Thank you very much, and good luck with the execution.
Thank you.
The next question comes from Kate Somerville from UBS. Please go ahead.
Thank you for taking my questions. Just on the 8%-10% Tech and Solutions target, it seems quite a big ask that Stanley will go from being essentially flat to delivering that. Does that assumption, first of all, assume that that will be more back-end weighted for Stanley? And then also, does that assume faster growth for the legacy Securitas business? And then finally, just on the growth so far this year for Stanley, how much of that 3% is price, please? Thanks.
Thank you. I can start, and I then gladly invite you, Tony, to comment as well. Just to reiterate that, I mean, Stanley grew 7% organically last year. First half of this year has been a really challenging period. It was challenging for us on the top line, especially in North America. The first part of the year, same thing also, negative impact for Stanley. We expect the market to be growing around 5%. When we say 8%-10%, I just wanna emphasize as well for clarity that that is really a mix of growing our Technology business above the market growth rate of 5%, and our Solutions business at 10%+.
It's really the kind of average between these two, which is the foundation between or behind the 8%-10%. I think the other question that you asked as well is how does that compare to our growth rates? Tony outlined some of the growth that we have had in electronic security. What we have seen is that the markets where we have been able to build relevance, once again with a critical position, stability and strength of the operation, we have been able to grow strong double-digit levels if you're looking at the last 5-6 years. Yes, it is ambitious, but it's definitely doable. It's based on the combination, but also the opportunities that we see out there from our clients.
Tony, any additional comments on that from your side?
No, Magnus, I think you underscored the key point here is that Stanley has actually grown above the market rate, last year, and has actually had a really healthy orders, which has built the backlog with them. That is honestly the best indicator of your near-term future growth performance. We're encouraged by the backlog and obviously the orders growth that they've had over the recent term.
Kate also asked a question about how we should think about the growth in the first half this year, and how much is price. I think if I understood correctly, Kate, you said how much is price-related there. Do you wanna comment a little bit on the growth in the first half, Tony?
I'd say most of the improvement there has been based on the installation backlog turn and the growth coming out of that. I would say price has not contributed much to that growth rate at the beginning of the year.
Okay, great. Thank you so much.
Thank you, Kate.
The next question comes from Allen Wells from Jefferies. Please go ahead.
Hey, sorry. I just had a couple of follow-ups, if you don't mind, guys. I just wanted to talk through a couple of the financial side of things. The capital intensity of Stanley, I think you guided it at sub 2% of sales, excluding IFRS 16. I think we'd also kind of conclude that the Stanley business had been underinvested in the past in terms of why the growth hadn't been there. So I'd assume that the capital intensity of a tech-led business would have been greater than the base Securitas business. Could you maybe just talk a little bit about what I'm missing there, and maybe also comment on what that CapEx number looks like, including IFRS 16?
Secondly, just looking at the numbers, I think you said depreciation was gonna be about $40 million. I think that's lower than Stanley reported in the past. Are you writing down assets within the Stanley business as well? Sorry if I don't mind, one quick follow-up as well, just on the growth at 8%-10%, what were the working capital requirements if the business is gonna grow at that sort of level? Apologies if I missed that, 'cause I know there were some comments on working capital in the prepared remarks as well. Thank you.
When it comes to Stanley, first of all, from a CapEx perspective, I don't think we have said that they are underinvested, you know, in the recent past. Because what we have also said over the last year, Stanley really invested into management team. They also made an investment plan where they're over the last two, three years, really have invested into the business to turn it around. That is also one of the reasons why we see good commercial traction there. I wouldn't say that they are underinvested from that perspective.
It's important to remember here that 60% of this business is a project installation business where you're basically then buying the equipment to the site at the moment when you're actually installing it as well. I mean, there is no CapEx in this sort of equipment related to video CCTV, et cetera here. So it's more basically maintenance CapEx or in the IT side and operational equipment and so on. So I think that is how you should view the CapEx model related to Stanley. On your question on write-downs of assets, no, we have not done so. So here we have done an estimate and this is something we will work and fine-tune over the coming months, but related to IFRS 16.
We have gone through their core fleet and their buildings and made an estimate on the IFRS 16 impact related to that, and that is the SEK 40 million. You can say the SEK 40 million, if you compare that here to the 2% of Stanley sales, that is what that is.
That is around, what is it? With SEK 1.65 million sales, you can do the math there of 2%. The SEK 40 million, adding on with IFRS 16 is actually quite a big number compared to their normal CapEx without IFRS 16. I wouldn't say that there is something strange there. I mean, we have absolutely not written down any assets in that number neither. When it comes to the 8%-10% real sales growth target and net working capital. I mean, where we are guiding here is around Stanley, where we see that they have a working capital requirement of approximately 20% here as well.
Like, I think if you're thinking about the whole technology business, not only the Stanley piece, you can say, I mean, you will be around 15%-20%, maybe a bit higher than 20%. That's the technology part of the business in terms of net working capital requirements. I hope that helped. Please let me know if I missed any aspects of those questions there.
No, that's fine. Thank you very much.
The next question comes from Yin Wu from Invesco. Please go ahead.
Hello, I hope you can hear me. Thank you for the presentation. I was just wondering on the target you had of less than three times leverage. Could you give me some color on kind of your timeline you have to get back to that level? Also, my second question would be in terms of realizing the synergies that you laid out in your presentation, and what are the sorts of costs associated with realizing those, please? Thank you.
When it comes to the first question here related to the net debt EBITDA target of less than 3x, we estimate it to be lower than 3x in 2024. I think that is a straightforward answer. When it comes to the $50 million of cost synergies, we will have $135 million of cost that we will take as items affecting comparability. You can say approximately 1/3 of that $135 million is transaction costs. The remaining piece here is a combination of restructuring costs directly connected to the synergies, but also integration costs as we are integrating Stanley into our business as well. I hope that answers your questions here.
No, no, that's very clear. No, thank you very much.
Thank you.
The next question comes from Karl-Johan Bonnevier from DNB Markets. Please go ahead.
Good, you got time for another follow-up. Just when you get done all these works, putting these strategies together, and as you've alluded to Magnus at start, you didn't want to put up a goal for yourself when it comes to the traditional guarding operation and what kind of growth and what the asset management or the portfolio management would mean in churning out part of it. If you take your base assumption where you stand now, so there's looking after 2025, do you see this as a growing part of your portfolio, or it's a stable part or a shrinking part? Your best kind of approximation where you stand now.
I think we are doing the responsible thing, Karl-Johan, in being very disciplined and very clear in terms of having to protect the soundness of the business. We do have another 12-24 months. After that, we could essentially consider to once again include a growth target. That could very well be a good suggestion actually on that part of the business. Because when you're looking at the security equation of tomorrow, when you're looking at the strategic drivers, presence is and will be important. The important thing from our perspective is that we do that much more in combination with our technology knowledge and empowering that with data to drive innovation to improve the services.
If we provide presence or a lot, which is then essentially a lot of the on-site guarding, I should also say the more that we're shifting over to technology, the mobile guarding capability that we have built, which is second to none in all the markets where we operate, is a tremendous asset as well because that gives us ability to also be able to respond. I mean, if you look for my ideal perspective is that we go through this work, we're enhancing the transparency with our systems, continue to do that work in a very disciplined way in terms of the business we are taking in and also managing the ongoing portfolio.
Once we have done that, I mean, then I would be very happy to see that part of the business is growing, but it has to grow based on very clear thresholds as well in terms of the profitability. That is where if we are self-critical, you can say we grew it a little bit too much in the past, but we also didn't have the transparency or the tools and the applications to be able to understand profitability in the way that we are doing now when you look at North America, for example. That is fundamentally important for also being able to do this work in a good way.
I hope that gives the flavor, Karl-Johan, for the context and how we are looking at this, but definitely a question that we will have good reasons to come back also and report on the progress of this, over the next couple of years.
Oh, very clear. Thank you. I agree with your logic and how you present it, so.
Thank you.
Yeah. Hi everyone, this is Micaela Sjökvist, Investor Relations. I have a couple of questions from the webcast that I'm reading out to you now. A couple of questions from Anvesh Agrawal from Morgan Stanley asking how much of the 7% organic growth in Stanley in full year 2021 was catch-up from COVID or off the low base? And the second one, why is the EBITDA margins 11% versus guidance of 12% in December 2021 when you announced the deal?
Good. Tony, do you wanna take that question, insights on the 7% growth of Stanley in 2021 in terms... I think the other question was how much is catch-up related to COVID, and how much is real growth, if I understand the question correctly.
Yeah. Stanley had some good resiliency during COVID, and their strong orders book and their strong backlog growth has really driven much of that growth in 2021. They're at a good rate when you look at their orders and their backlog growth, and the ability to obviously deliver on that driving their top line growth.
On the second question here, we said that 2021 was close to 12%, so correct from that perspective as well, and now it's 11%. By the end of the year, we started to see some COVID impacts into the business that was hurting the margin by the end of the year. That was one of the reasons, and a bit of supply chain also impacting there as well. That's the key reasons for the lower margin in 2021.
I'll throw in a couple of more. Can you elaborate on the health business of Stanley, how big it is, and what are the synergies? What do you plan to do with it? How much has it contributed to the performance of Stanley organically year to date?
Good. I think the overarching question, what do you plan to do with it, I will let you, Tony, to answer the details. Strategically, this is a strong business, very strong team, strong operation when you're looking at the health business of Stanley, predominantly in North America with a smaller presence in Europe. Our plan is to keep this and to develop this, and we see quite a number of similarities between this business even though that is very much focused on one vertical segment. Happy to have your richer context, Tony, related to the Stanley healthcare business.
Yeah. Very excited about the Stanley healthcare business. In fact, one of my first visits, the week after close was to one of the healthcare facilities in Lincoln, Nebraska, in the United States. I can tell you the energy there is extremely strong about their excitement about being part of the Securitas portfolio. If you think about a lot of their actual products and their technology, it is really strong with respect to some of the leading brands in the healthcare space with respect to Hugs, which is infant security and protection, WanderGuard BLUE, which is obviously safety for senior citizens from helping them for people that may have, like, Alzheimer's as an example. We're very pleased with having that as part of the portfolio.
If you look at, they have a healthy growth rate and a healthy contributing piece to the margin of the business.
Thank you, Tony.
Another question please from the webcast, from Kai Harden. When you say we have deleveraged to a satisfactory position, what is that position, and is there a related credit rating that you're aiming for?
First, I mean, our target is to be below three, so that is what we are discussing. Of course we will be flexible going forward as well. First, what we really want to deleverage, we wanna get down to the three, and if we are getting closer to there, we will see how we move forward from there as well. We wanna be investment grade, and we got that confirmation here also after closing from S&P, and that is really our target also going forward.
A few more from Stefan Wård. What areas within technology would you highlight as specific competitive advantages for Securitas? Which are your main competitors within technology? Is it other security firms and/or tech firms?
In terms of the latter question, JCI is by far the largest player in this industry. When you're looking within the technology space, I know, Tony, you will have quite a lot, but one segment where I'm quite involved myself is in global clients, and potentially also clients that have a presence across multiple location within a certain geography. This combination is very well received by them because many of them have also been looking for a strong partner in the technology space. I would say that is one from a competitive standpoint, where we are gonna be really well positioned, where there is a clear client demand, and where both of us are bringing really strong credibility and momentum as well to the table. I think that is one that I would highlight.
Happy to have additional context and input from your side, Tony.
Magnus, I think, you know, if you follow the same logic as our strength now to serve global clients, and you saw that on one of my slides, but think about also just our ability now to have market relevance in 11 of our strategic markets, and that truly is a differentiator in the marketplace.
If you look at our increased technical competencies, increased number of technicians, our sales presence expansion, those are really fundamental pieces that differentiate us in the marketplace. Although JCI, Tyco, you know, the former Tyco is obviously the largest competitor globally, I will tell you that obviously we're in a good position to compete with local, regional, and national competitors at the country level as well now with the combined businesses being put together in a real opportunity to have market presence in a meaningful way.
I think maybe just to give some additional flavor, Stefan, as well. When you look at technology or what we previously called electronic security, this is not a consolidated market. There are many, many different players, many local players. While we have many clients that have been looking for stronger partners that can help them deploy at scale. I think this is once again why we are so excited as well and convinced about the strength that we are building now and the opportunity that we have to really drive this business going forward. I think you should not only look at it from a competitive standpoint, it's also when you're looking at technology players who are providing hardware, software, et cetera, and the attractiveness of Securitas Technology. Because we're also building a very significant platform.
We become a window as well for them in terms of go-to-market. We're also attracting or enhancing our own attractiveness also for many of the partners that we have in our ecosystem. I think that will also be an important area where I am convinced we're gonna be able to generate real value in terms of how we operate the business, but also for longer term innovation within the ecosystem.
We have time for one more question from the telephone conference.
The next question comes from Viktor Lindeberg from Carnegie. Please go ahead.
Thank you. Been digging into the details in the presentation now and I'm looking at the margin target bridge that you have on slide 14. Using my ruler, I've been looking at sort of the cost synergies and the commercial synergies bar that you have there. Trying to quantify this, you have mentioned $50 million as cost synergies. Just reading this, you know, illustrative chart, it seems implicitly there is very limited commercial revenue opportunities that will fall through to the margin here. Just how should we read this sort of waterfall chart here when it comes to the illustration purposes, so we don't end up on the wrong planet here?
You should read this as indicative from that. From this perspective. We will have $50 million in terms of cost synergies. When it comes to the commercial synergies, I'm sure Magnus and Tony can also fill in here, but we see substantial commercial synergies for us as well here. It's basically starting directly here into 2023, but it will build up and take also a bit longer time than the cost synergies to execute upon. We have massive opportunities, as we've been discussing in the global client space, to cross-sell with all the clients that Stanley is having and with all the clients that we are having, to basically cross-sell our recording and technology services. Now we also have a much stronger foundation and technology capacity to drive our solutions growth even further as well.
There is plenty of commercial synergies here, going forward as well. You should see the bridge there more as indicative, so we're not drawing the wrong conclusions.
I think, Viktor, just to make one final comment, because I know we're coming towards the conclusion of the session here. I mean, we have hundreds of thousands of clients in this base that we are now able to bring our strong competence and the different protective services. Just to reiterate that point, commercial synergies is a very important area. We're gonna track that. We have a framework in terms of what we are expecting, and I'm convinced that this is gonna be an area that will really seriously contribute over time to the value creation. With that, we have now reached the end of the session, so I just wanted to say thank you once again to all of you for joining. We are really excited. We are finally here now.
We closed the Stanley acquisition. We are changing the shape of the company to create the new Securitas, more Technology and Solutions-focused company. We're really well-positioned to drive superior growth with higher value. Looking forward to continuing the dialogue with you on the journey. Thanks a lot to all of you for joining us for the session today. Thank you. Thank you to you, Tony, and to Andreas, of course. Thank you.
Thank you.