All right. Hello everyone. Welcome to Securitas and our January to September 2017 interim report. As usual, I will go through relatively quickly the result and then allow for questions. We had a quarter in summary, I would say, which is pretty much in line with our expectations, our own expectations. And the good news is on the growth side, we had a good growth in the quarter, 5% organic sales growth, which we are pleased with, and gives us here today at 4%. Good market dynamics in North America, gradual recovery of the portfolio in Europe as we have expected and said in Q1, Q2. That is what we have planned for.
So what is happening is more or less, basically along the lines that we were expecting, and that's why we were bridging some of the resources as well, as we have also commented in Q1 and Q2. We see in Ibero-America very good growth in Spain and Portugal, where we're really taking market share, and also taking advantage of the situation that one of the main competitors in Spain went bankrupt in Q2 and picking up some quite some contracts from that bankruptcy. In Latin America, Argentina is weakening. We have had, it's a poor economy to start with. Secondly, we've had a number of reductions in some of our larger contracts. And then inflation is coming down as well, which has an effect on organic growth. Come back to that in a minute.
Operating margin, along with what we were expecting in the quarter, we were 1/10 below last year. Come back to that for the divisions as well. 7% real change. Cash flow, kind of okay, but still a little bit weak. I'll be commenting that also a little bit later. And the strategy works, and we continue to deliver on that. So here you have the numbers, and I think I'll just flip straight into North America. Very strong market dynamics in North America, very strong interest among our customers and potential customers of our strategy, how we are really ahead of every other guarding company when it comes to being able to offer security solutions and electronic security in North America.
That strategy allows us to win contracts, and then on top of that, we had to some extent support by the hurricanes in September that gave us a little bit of extra sales, almost 1% on the top line. But still, we're growing well. In North America, I mean, we are growing 6% in the quarter. When we look on the number of guards employed in Q3 compared to the equivalent quarter last year, it's basically the same. So when you look on the number of people for the last 3-4 months, I would say, it has not really; there is no growth. But still, the market is growing, including price adjustments, in the range of, I would say 3%, 4% still.
But even so, the reason for why we have this slowdown when it comes to number of guards is because it's shortage of labor in a number of places. We think this is of a temporary nature because the market and the companies will adjust. They will either improve their recruitment processes or increase the wages better than we have done in the past, and then try to manage the situation. So we have a bit of a temporary let's call it a slowdown on the market because of a shortage of labor. I think this is a temporary situation.
My expectation is that the market will continue to grow in the 4% range next year as well as it basically is doing this year, a little bit less because of a slowdown in the last three, four months because of a shortage of labor. That also means that we will see more wage inflation going forward next year in North America. That I would be certain that that will happen. We feel very confident that we are able to mitigate that and compensate that by increasing our prices to the same extent that wages will go up. So, but in any case, we will see more wage inflation in the year to come. Margin, good development, 6.2% in the quarter, versus 6% last year. So 2/10 improvement. Impressive and well done.
Very strong team, very good performance by our North American team, and very consistent in delivering improving margins over time. So, very pleased with the development, and a good momentum in the North American market, both from a top-line point of view but also from a margin point of view. In Europe, we had a sales growth of 2% in the quarter, which we were pleased with, given still somewhat difficult comparatives of the refugee-related business and some large contracts, which I guess you have heard about many times by now. So, but given that, a good 2% in the quarter, we are, so to say, putting in. Yeah, we can see a recovery of our portfolio business.
When it comes to the margins, we have now made the adjustments to our overcapacity, one part we kept and one part we adjusted. The adjustments are now made by the end of the quarter, so we now have the right structure when we enter Q4, in relation to and in balance with the expected market development. So I think we made the right choices two quarters ago, beginning of the year, to bridge this situation because we still see a recovery of the portfolio, and we now have made the adjustment necessary. But we didn't cut and made mistakes, and then we had to rehire people. So we bridged that in a sensible way.
We suffered a little bit a few quarters on the margin, but I think we are now well positioned to have the right, so we have the right balance between cost structure and the expected market that we see going forward. The European market is growing this year in the range of 2%-3%, probably closer to 3% than 2%, and basically in the same level next year. So, very strong macroeconomic booming economy, Europe, I would say, in general. So, we have it's a good market situation, good macroeconomic status in Europe. In Ibero-America, good growth again, Portugal and Spain, Spain growing in the 6%, 7% range, which is very healthy in a market which is growing 1%-2%.
But that's very much because we are picking up those projects that came from the bankruptcy, but also growing well in electronic security and solutions as well in Spain and using that as a very strong weapon in the market, so to say. Even also Portugal, with a good growth in the third quarter and the first nine months. Argentina, we'll see a declining inflationary trend. That is basically good news for Argentina, but it means less organic growth because the inflation becomes organic growth. And then we have had a number of contract reductions and, to some extent, terminations also in Argentina in a slow macroeconomic situation in Argentina.
So that means that we will see I mean, the numbers that we have been used to of the 13%, 14% organic sales growth in Ibero-America for a while now will be less for sure in Q4 and onwards, at least as long as the situation in Argentina is as it is expected right now. On the margin side, flat compared to last year in the quarter, 4.2%, 4.2%, still then burdened by the restructuring actions that we have taken in Argentina in the quarter, which is 20 basis points, 0.2, 2/10 . And we will probably have in the same range in Q4 as well, burdening Ibero-America in the coming quarter. Peru has been fixed now, so now we make money in Peru. So that should not be an excuse going forward.
Good development in Spain, should also be mentioned. Cash flow was on the weak side. July was good. August was good. September was good, at least to start with. But as the month was ending and the quarter was ending on a weekend, there was a number of payments that flipped over to first week of October. So cash flow was very good in the first week of October, better than normal, but the last week of September was worse than normal. So we are not happy with that. It's a bit disappointing cash flow in the quarter, but the money was not lost. It just came a week later, basically. That's what happened. So and we don't put too much focus on the quarterly end when it comes to the cash flow point of view. We put a lot of focus on the year-end.
And as year-end is also ending on a weekend, then we are now taking all possible actions, in order for us to pick up what we should have had in Q3, to pick up that in Q4. So I expect still Q4 to be good and the year to be good. And we should have a very strong cash flow now in the last quarter. And we are really on top of that. Net debt, pure mathematics, a little bit helped also by the translation differences on the FX, so no drama there. And the strategy, you know very well. So I'll skip that for now and allow for questions. Any questions, we'll be welcome to, we will try to answer those as well as we can. Please, go ahead.
Ladies and gentlemen, if you do have a question for the speaker, please press zero one on your telephone keypad, and you'll enter a queue. After you are announced, please ask your question. Please hold until we have the first question. Okay. The first question comes from the line of Srini Sarikonda from HSBC. Please go ahead. Your line is open.
Hi. This is Srini from HSBC. A couple of questions from me, please, on North America. What percentage of the growth was from pricing and from volumes, please? And do you see the 5% growth in North America, which is excluding that 1% extra sales, to be sustainable? And second, on margin improvement in North America, how many basis points improvement was due to extra sales, and how much was due to improved sales? Thank you.
On the price and, so to say, volume-based, I mean, we have a— I would estimate that we have price increases in the range of 2% out of the 5%, 6% that we are growing, so to say. If we take the year-to-date number in North America, we have organic sales growth of 5%. And as I would say, about two of those would be price-related, and the rest is positive real change.
Okay.
[crosstalk] I'm just checking if that's the right thing, but I obviously did. I might have— I have my colleagues here in the room, and they're nodding now, so I did not make a mistake. So it's confirmed. So yeah.
So about 2% out of the 5%, I would say, are price-related. Therefore, so we have a positive net change in the portfolio. What is sustainable growth? I mean, I don't want to make a forecast. The market is good. I'm saying, short of 4% this year, probably 4% security market growth next year. Of course, a larger part than historically is right now coming from price and less from number of guards, so to say, especially the last three, four months. It's been basically 0.5, 0.8 if you look on the BLS statistics. So, a larger and larger part will be driven by price. This year, it's relevant to say that and also for next year. But, what will be a sustainable growth for us? I don't want to give a forecast.
Our ambition is, as always, to grow a bit faster than the market average, which we have proven that we are able to do in the last three to four years, I would say, basically consistently. So we continue with that ambition, but I don't want to make a forecast for the coming quarters in that respect. That would be wrong on me doing that. And then on the margin, the extra sales from the hurricanes effect has a minor effect. We mentioned it has a minor effect. So the main contributors to the margin improvement is the fact that we have a good development on the electronic security, sales and contracts related to that, solution contracts, and the leverage from the growth. Those are absolutely the key factors.
I understand. One follow-up on a number of guards. You said, they're stable compared to last year, Q3, and that's mainly due to unavailability of talent in the market. If you start hiring more number of security guards in coming quarters, will there be a margin pressure?
Oh, I don't think so. I think I don't think so. I mean, we are well equipped to doing that. We have a high turnover of people, so that's nothing new. We have not had any difficulties with shortages. We have been able to manage, and I think we've proven 6% growth when the market is probably more or less half. I think we're doing well. But we will have the big factor going forward that we're discussing a lot is the expected wage inflation.
So we just need to be on top of that all the time and don't get behind so that we really make the adjustment to the prices at the same time as we increase the wages. And we will. I mean, that is clearly our target to do that. And we normally manage that extremely well in North America. We rarely get behind on that. And the macroeconomic situation allows us to do that because this situation with shortage of labor is affecting not only our sector but many sectors. And I think many of our customers face the same matter, simply. So the understanding is there.
Got it. Thank you.
Thank you.
And next question comes from the line of Michael Holm from Danske Bank. Please go ahead. Your line is open.
Hello, Michael Holm, Danske . First, a question on wage inflation. And it's been a lot of focus on North America. But what would you say about Europe? What kind of pricing do you have in the organic growth figures for Europe year-to-date there? And do you see that accelerating during the year? That's the first question. Yeah, if you could take that first.
Yeah. I mean, we see a similar pattern. In Europe, I would say, in the range of about 2% would be my estimate of, if we take in the European division, the wage inflation, more or less. That's the status. I think we will see more wage inflation next year than we have seen this year. The pattern is pretty similar to North America. The macroeconomic situation is there. There's good understanding, shortage of labor, not everywhere but somewhere, and customers having the same understanding of the situation. So I feel confident that we are able to push through the wage increases in our prices also for next year.
And a follow-up on that, if you see, I mean, higher wage inflation in 2018 both in Europe and North America, wouldn't it be fair to have an outlook on the market growth being slightly higher than we had in 2017?
I mean, that could be. I don't want— yes, it could be the case. I mean, the drawback is, do we find labor to the same extent that the— is the market is finding labor? And well, we and the market, are we finding labor to fill the gaps?
that we have seen now in the last three, four months that it has had a hampering effect in North America. So, I mean, we can speculate about that. But, if we are optimistic, it will probably be more than what I said. And if we are more realistic, maybe I'm still on the right level. And, if we're so, yeah. It's hard to say. I mean, we make an estimate. What I'm trying to say is that in conclusion or in the big picture is that we think that it will be a very good market climate also next year in the security market in Europe and North America.
Okay. And my last question is on this transformation to more security solution and electronic security. Obviously, a big part of the equity story. But still, I mean, looking at the report, the only thing you mentioned is that it's growing at a good pace and becoming a larger part of total group sales. Could you elaborate a bit more on, I mean, what kind of growth trends are we seeing? Is it a slowdown from last year in organic terms as this business becomes a bigger part of the group? Some more flavor on that development.
I mean, we have a very good pace, a good organic growth. The base increases, of course, to keep the same percentage every year will be more difficult as the base increases mathematically. But still a good pace. We're pleased with the pace. It's along the lines we expect.
We see margins are substantially higher when we sell solutions than when we sell a traditional guarding contract. That mathematics still works. It's supporting North America in the quarter and year-to-date. In Europe, it's a more complicated picture because of the reasons we have explained many times. But it's there. It's there all the time. And the long-term improvements are there. And without that, without doing what we are doing, the numbers will be totally different. So it's there. And over time, it's really going to continue to drive margins, apples to apples, without any doubt. And it also drives growth. It allows it to grow faster than the market because we have a better story to tell. And we win contracts simply because we have a better offering in front of our clients.
Then you always have bits and pieces moving in different directions, say, in every quarter, especially Europe now that the picture is more muddy due to the comparatives. But anyhow, it's along the line. It's along the plan, and it's working as we expect. So we will disclose the numbers at the end of next quarter. And then we will see the organic growth for the full year.
Okay. Thanks.
And next question comes from the line of Viktor Lindeberg from Carnegie. Please go ahead. Your line is open.
Yeah. Thank you. Continuing, maybe on the question from Danske Bank on the electronic security. I'm just trying to understand, and maybe you can help us quantify the market size. You had some 14 billion of sales related to technology solutions. I think you have stated at your Capital Markets Day last year that you saw a $9 billion market in the U.S. But can you quantify this maybe on a group level so we can understand how big of an opportunity this is for you?
I don't remember any of these numbers. I'm sorry. But so that will need to come back on that. I mean, the market opportunity is huge. And the strategy we are is to convert the larger and larger part of our guarding traditional man-guarding portfolio to solutions, which doubles the operating margin, the EBIT margin, when we do that. And that opportunity is there.
Then we have some business where we sell standalone into the electronic security, which we now do in North America, in the former Diebold electronic security, nowadays Securitas Electronic Security business. And that market is huge. I cannot from the top of my head quantify that right now. But that's a huge market, of course, where we are a tiny player. But the main reason for making acquisition, and we actually are continuing to look for a number of acquisitions in this field, is to be able to combine the man-guarding piece with a technology and create solutions for our customer, which gives them very much better security at the same or even lower cost than they have today.
Okay. Thank you. I think the number I referred to is on slide number 12.
I don't have them in front of me now, so I don't want to guess. That's why I'm not answering. But if that's a slide from us, then it's correct.
Okay. And continuing then on the U.S. tax plan that the Trump administration has commented on in this weekend, I think, is have you been looking internally on the effect, potential effect this may have on your organization? And also just to understand how you, how is your cost base in the U.S.? Do you basically generate your operating earnings there, or do you have financial costs also allocated in the U.S.?
[crosstalk] No, no. We have, I mean, we have our profit in the U.S. And so, if there is a reduction in the corporate tax rate in the U.S., it has a substantial positive effect for us, not the first year because of the accruals in the balance sheet, but after that, so to say, then you will have a very positive effect on the earnings per share for Securitas if the tax rate is reduced from the present. I guess we pay 37%, 38% tax rate. That's what we pay in the U.S. So any change to that will be positive for our EPS.
All right. And final from me. You comment on investments in Europe, hampering margins in the quarter. Can you talk a bit more about what you have been doing here and if this may be something that will continue in the coming quarters?
I think we are investing in our vision strategy and a number of, I mean, in people, and in the IT field and to digitize our business, etc. So that is what we're doing. We think we have now the right balance when we enter Q4 between the, so to say, the structure and the organization, and the market that we expect. So in that sense, it will continue. But we have now also adjusted the cost structure. So Q4 should be better than Q3, from the, so to say, over capacity point of view. But investment will have to continue.
We need to invest in the longer term both for the more technology and solutions and add the right resources and make the right investment, improving our IT structure in a number of places so we become more efficient. And also in the longer perspective, in digitizing our business and how that will impact this sector, which is a chapter by itself. But in the longer perspective, that will be a new paradigm shift to this industry when you will use data to a much higher degree to assess risk. And the company with the most data will also be the one who has the best ability to assess risk. And that will be credible in front of the clients to optimize the security solution based on data.
We'll come back to that at a later stage. But those investments are also being made in both North America and Europe and on central level in the group right now.
So it seems just to see if I understood you correctly, it seems that the investments you're taking now short-medium term is not fully absorbed by the higher margins that you generate in this technology solutions. So that's more of a longer term.
You have to invest. You know, I mean, there is few businesses where you would get the benefit without investing first. So we need to invest in order to continue to improve our margins. But we have, I mean, in order to improve our margins, we will increase the share of Security Solutions. That will drive our margin. And secondly, we have taken medium, short-term actions now during the year, which will have been adjusted by the end of the quarter. So we have a better cost structure when we enter Q4, which should be helping our margin as well going forward.
Okay. Thanks.
And next question comes from the line of Andy Grobler from Credit Suisse. Please go ahead. Your line is open.
Hi. Good afternoon. Just a couple of questions for me, if I may. In terms of Argentina and the impact from lost clients and the slowdown in inflation, how do you expect that to work through Q4 and then into next year? What kind of quantum of slowdown should we be thinking about?
Yeah. I can, unfortunately, not quantify that given the fact that we don't issue forecasts. Then I will break the rules. But I mean, about 25% of the division is Argentina to start with. So then you have that, the dimension, so to say, of the Argentina business in the division. And then there is a slowdown. Inflation is coming down. It has been in the range of 25%, 30%. It's all probably going to come down to maybe half of that. And that has been a component of organic growth of the Argentinian business.
And then we have some reductions as well. So we write about it because it's significant. And otherwise we would not mention it. But it will have an impact in Q4 and probably coming quarters as well, due to the reductions and the inflationary aspect, if inflation now really comes down. But that's what we expect. So that means that the organic sales growth in the division will be less than it has been so far this year.
Okay. And in terms of the restructuring charges or costs that you incurred in Q3 and will incur again in Q4, do you think that is enough to support the margin, or should we expect some negative operational levels?
Well, no. The answer is that. That is, when we are made the budgets and looked into next year for Argentina, we think we're taking the necessary actions. So it will hit us now in Q3, as we explained, at 2/10 impact negatively on the margin. Otherwise, the margin would have been 2/10 better than last year. And we will have the same hit in Q4 probably. After that, we have taken the actions, and we structure the business, so we are on the right level for next year. So you should not expect that to continue next year. No.
Okay. And then just one last one. In terms of the wage inflation you're seeing in North America and other parts of the world, to what extent is that shaping some of the conversations you're having with clients around technology solutions? Do you think that is helping?
At least we have an alternative offer to present to the customers when they do not want to pay with the increased cost. It's real. We had it during the Obamacare or the ACA process, and we were expecting quite a number of customers to go for that option, but they didn't. They ended up simply just paying the increase anyway. But it's a good argument, and it helps you in the negotiations. Probably it's not going to be a large amount that will be converted just because of a higher wage inflation into solutions. I don't think so. But it's a good argument, and it helps us to substantiate and have a discussion with the client, and to get the compensation for the cost increases. So it can be used either way, so to say.
But it's very important that it's there because otherwise, it will be a kind of a one— a very narrow negotiation process, so to say. So it's helpful, but I don't think it'll largely drive substantially larger volumes going to solutions than just because of that. There's a lot of other factors influencing that.
Okay. Thank you very much.
Thank you. And the next question comes from the line of Edward Stanley from Redburn. Please go ahead. Your line is open.
Hi, guys. I think most of mine have been answered, but I was on the electronics point. I was interested to know, can you remind us what proportion of the group EBIT is now in electronic solutions, if you can tell us that? And the second question, apologies if I missed it, but in terms of the hurricane, the benefit that came from that, is that very short-term organic growth uplift, or do you expect to see some of that roll into Q4? Thank you.
We have, on the first question, we cannot give you that number because nobody else has been given it. So that one, we cannot disclose. We don't disclose that simply. The second one was that growth was impacting September, obviously. We had a little bit of a spillover the first week in October, but that will be minor. So you will not notice that in Q4 unless there's a new hurricane or flooding or something else happening. But other than that, it was in September, and that's it.
Thank you.
And the next question is from the line of George Gregory from Exane . Please go ahead. Your line is open.
Good afternoon. Just one, please. The impact of reduced payroll taxes, which I think you referenced in your slide pack, in North America. Firstly, could you quantify that impact? And secondly, was that just in the third quarter, or did that benefit through the first few months through the first quarters of this year, please?
We don't give an exact number. When we have an explanation, we usually mean 1/10. That's been kind of a rule of thumb, at least a 1/10 of the explanation. Now, we have three explanations, so mathematically, they cannot be 1/10 each as it's 2/10 difference on the margin. But it has impacted the full nine months, yes.
Okay. Thank you.
And the next question is from Henrik Nielsen from Nordea Markets. Please go ahead. Your line is open.
Hi. Afternoon, guys. Coming back to Argentina, I mean, from a macroeconomic perspective, it is my perception at least that the economy in Argentina rather is turning the page on the negative trends we've seen over the past few years. Are you being hit right now because of the late cyclicality, or are there any other dynamics at play here?
It has. It was in a recession not too long ago. But you're right. It's slightly turning. It's a little bit more optimistic, but we are late cyclical. So, we are facing that some of our clients and some large clients are now executing budget cuts, based on how the macroeconomic situation was a while ago and that we are suffering now. So the late cyclicality is a part of it, yes. It's not a strong economy, I would say, in Argentina. And but still, yes. That's along those lines, yes.
Yeah. Okay. And am I understanding it correctly that then volumes are actually were in decline in Q3 and can be expected to decline in the coming quarters as well, and that the organic growth in that market is mainly related to price inflation?
The main factor for the growth in Latin America has always been the price inflation in Argentina. That's clearly the main factor. If we look at the other countries in Latin America, we have good volume growth, net change, so to say, without the prices. So Colombia is growing well. Chile is growing very, very well. Peru is recovering in a good manner. Uruguay is doing fine. So many of the other countries are, we have a nice, good development. In Argentina, the answer to your question is, yes, it's a volume change because we have lost some contracts. That's still the minor part. But we have quite some reductions in other contracts. So that is volume for a fact.
And then in combination with lower inflation means lower organic sales growth. Now, to put it in perspective, let me remind again that Argentina is 25% of the division. So nobody overexaggerates the impact, so to say. But still, it's important. That's why we write about it, and that's why we mention it.
Okay. Thank you. And then moving on to the slightly bigger market in that segment, Spain, you are mentioning another, or mentioning again in the quarter that the margin has been positively impacted by the good development in Spain. Can you give us any quantification on how large the sequential or the year-on-year improvement has been in Spain?
No. I will not give an exact number. But we have good growth, 6%, 7% organic growth in Spain. We get leverage from the growth. We have a very slim and very efficient indirect cost structure, overhead structure in Spain. So when we get growth, we get good leverage. That supports the margin very well. Secondly, the new sales that we get and the new contracts we have won is to a very high degree solution-based, which gives us a good margin as well. So those factors together allows us to have a very positive development in Spain.
But am I correct to assume that Spain is still below the Ibero-American average in margin?
They're getting close.
Okay. Thank you. And one question in Europe, if I may. If I adjust for my assumption on immigration and the loss of the two larger contracts, I arrive at your current growth unadjusted underlying, so to speak, being above 6%. Is that a relatively fair assumption, or?
I didn't do that math in that way. So, I'm sorry. I cannot really confirm your number.
Okay. Thank you, anyway.
Thank you.
And as a reminder, ladies and gentlemen, if you do wish to ask a question, please press zero one on your telephone keypad now. And we have a follow-up question from the line of Michael Holm from Danske Bank. Please go ahead. Your line is open.
Hi. I have just one question on the margin in Europe for Q4. Basically, in the latest two years, it has been pressured both by the ramp up of refugee-related sales and then the ramp down. But two years or three years ago, you were actually doing 6.2% EBITDA margin in Q4. Is it fair to assume that now, with the more clean numbers, you will be close to that figure, or have you seen a bit of a structural decline due to the pressure on man-guarding during these latest years?
Well, I think it's fair to say that, at least recently, I would say, we have been a bit unusually low margin in the last quarter. It's been a bit disappointing. Q4 is also a quarter where you make all the reconciliation of all the accounts, and especially the large labor content that we have. All the vacation pays and social costs and all those things have to be reconciled. I mean, I cannot give you an exact specific number. I think you understand that, from what we expect Q4 to be because this is the Q3 report and not the Q4. So I have to be careful there. But I mean, I feel confident that we have taken actions. We have taken actions in order to improve the margin.
So we have made some cuts in a number of countries to be correctly structured. So everything else equal. We are now having a better cost base when we enter Q4 than we have had in the last two, three quarters. So that should support our margin. To what extent, I will refrain from estimating that.
But just on an underlying basis, looking three, four years back, would you say that there's been a bit of a structural margin pressure in Europe due to pressure on man-guarding margins?
I mean, that's always there, but that has always been there. But at the same time, we are increasing the solution sales over time. And now, we are also meeting different comparatives. When the refugee business came down in Q4 last year, which was a good margin business at that moment. So there are many components to that. So hopefully, we will, we are on the right track in that respect. What it will be, we'll see a quarter from now. Yeah. You will not get me to be more specific than that. I'm sorry about that, but because, but I think we are well-equipped for the coming quarters now on the structural side in the way we see the market coming. Also, comparatives will be totally different than we have been having in the first three quarters now going forward.
Just when I get the chance, just on the net financials in the quarter, they were, like, 10% below the consensus expectations. Was there something, I mean, one-off positive effects or anything like that, or is it a good run rate for the coming quarters? The growth about the boundary issue.
Yeah. Sorry. What was it?
The growth about the re boundary issue, the refinancing. Yeah. Just effect from refinancing.
It's just the effect from financing. I don't see here. Yeah. That's what we wrote under in the quarter on the group there. That's the refinance of the EUR 350 million bond at the lower coupon that reduced the average rate interest for the group compared to the first quarter last year. So I think that's the main explanation. And there is also some effects into it as well, but it's minor.
Okay. Thanks.
And the next question comes from the line of Carina Elmgren from Handelsbanken. And please go ahead. Your line is open.
Yes. Hi. Just two questions. Do you still see synergies from the Diebold acquisitions in the U.S.? What tax rate level should we be penciling in going forward? Thank you.
On the U.S. synergies, we still see, I mean, there was never any cost synergies expected on that acquisition. And the effects we see on the commercial synergies are very good, at least in line with what we expected and actually slightly better. So that is working according to plan or even slightly better. And we get good momentum in the market because of that. The tax rate, 28.5%.
Okay. Thank you.
And there are currently no further questions registered, so I'll hand the call back to the speakers. Please go ahead.
Thank you very much for calling in. Sorry. We were a few days earlier than we had planned for special circumstances. But we'll be back in a quarter. Thank you.
And this now concludes the conference call. Thank you all for attending, and you may now disconnect your line.