Very welcome, everyone, to our full year report of Securitas, and we'll go straight into the slides, which I'll start with here. We for the full year had 1% organic sales growth, so still tough conditions on the marketplace. I will give you more details in a minute. We continue to improve our margins, so up compared to last year. The fourth quarter last year was very weak, so that helped a lot in the fourth quarter. So margins are still in the right directions. We had delivered on our cost-saving program, basically according to plan, which I think is an achievement. So now we can kind of take that off agenda that we're supposed to give a full year effect of 2 in 2013, and it did. And we had a very good cash flow in the fourth quarter as well as in the third quarter.
So we delivered SEK 2.1 billion, approximately free cash flow, which means that we are better than our financial target on the balance sheet. And the dividend is proposed to remain the same as the year before. I come back to the market conditions in a minute when I talk about the different divisions. Here you see the numbers. I think it's important to say that we improved in real terms, bottom right corner, 27% if we exclude the one-offs. So that is the real improvement compared to the year before. A lot of that was, of course, generated in the fourth quarter, but still so, it was, it was a good improvement compared to the previous year.
The interest rates you see now, we are now interest financial net is now down on a level substantially below 2012, which we have talked about many times before, as we have refinanced the group on much better conditions than we had in 2012. Yeah, I go straight to the divisions. I think that will interest most, a little bit more details about that. Organic sales growth in the quarter, -2%. I would start by saying we lost a couple of contracts which were terminated in the midst of the fourth quarter and one larger one as well. Those -2% don't make any conclusions out of those because we have got one other contract that starts January 1st, which means that most of the -2% will be compensated by the startups that we have now January 1st.
So, the -2 is not a trend. It's just, it's just a blip on the curve. So don't make too many conclusions. So most of that has been compensated by startups. Not all of it, but most of it has been compensated by startups January 1st. I think it's important to say. Other than that, I will say that there are some positive signs, more optimism, more positive atmosphere in the U.S. economy, gradually. We are late cyclical, so it takes a while before we can enjoy that. But anyhow, I, I think that my judgment is that there will be growth in the security market in 2014 in the U.S. How much? Hard to tell. I will not predict that, but it's kinda the trend is in the right direction.
We continue to focus on our Integrated Guarding Solutions, and, of course, the interest for that has been reduced due to the postponement of many important parts of the healthcare, the ACA, plan, until January 1st, 2015. We start to see more and more activities now, and hopefully that will start to materialize. We have put a target. We disclosed that more in detail if you'd like to have more details as in our Capital Markets Day, how we think that will progress during the year. We hope to start to see some traction now during the first six months of this year. And then that all our portfolios should, which is applicable to this ACA, should be compliant by the end of the year. We have also made a change in the organization in order to strengthen our national sales team.
We have a good organization for more global, really large contracts and when we have our very strong regional presence. But in the area in between, which are national or semi-national or multi-regional contracts, there we need to strengthen our sales organization in order to be better prepared and win more contracts in that area. So that change was made during the second half of last year. So we are now up and running, and hopefully that should pay off gradually during 2014. Margins were all right in the fourth quarter, as well. So we improved compared to the previous year, and that's mainly due to the cost saving that we did in 2012, in the end of 2012, and the turnaround that we did in the federal government business. So that is pretty much on track.
Not much more to say about that, I would say. In Europe, it's a little bit more gloomy, the picture. But even so, what I think I should mention, which is important to say, that we have had a number of large contracts in the especially in our Aviation business, which we have, all, won or kept or renewed, during the second half and especially during the fourth quarter, which gives us stability in the portfolio for, for, for years to come and, and number of years to come, which means that there is really no big contract in Europe up for renewal, during 2014. So that has been good news, to be able to not to lose anything there but to protect our portfolio and keep what we had, and also to prolong those contracts for they are between 3 and 6 years, most of those contracts.
So that gives us a good stability for years to come. Germany and Turkey, good growth. It continues to grow very well. Very double-digit growth in Turkey, for example. Very nice development. The French market has been declining. The security market has declined about 4% in 2013. We think it's gonna be flat in 2014, so an improvement, but not, not, not, not a good situation. But even if we are doing well in France, the market is at least improving during 2014. In the U.K., we have had a negative growth for most of the year, the first three quarters. But in the fourth quarter, it became flat. So there is also a move in the right direction. And we think the U.K. market will be kind of flat during 2014.
What I also should mention is that we are in the markets where we in Europe, where we are successful and have come far when it comes to implementing technology, we are taking market share. We have proof of that now. We see that, for example, in an important market like Sweden, we are for certain taking market share because we have better solutions at lower costs for our clients, and we still make good, decent margins on those contracts. So good development in that respect. The operating margin in Europe was okay. It was good in Q4 and also for the full year. Good improvement, mainly driven by the cost-saving program, of course. But we also had weak comparatives in Q4 the year before.
We kept the price-wage balance basically everywhere except in France where we had to be more careful given the fact that we have a reduced social cost. So we did not push on the price increases as much as we would have done if we didn't have that impact. So the balance is all right. And of course, our ambition in all our markets is to keep those in the same on par for 2014. In Ibero-America, growth driven very much by Argentina with high inflation, of course. So very good double-digit growth, over 20% as it has been for quite a while now in Latin America, mainly coming from Argentina. But also other countries are doing well.
In Spain, we think that the security market declined in the range of 10%-12% in 2013, and it's gonna be not as bad in 2014 as Spain is improving macroeconomically. But it takes a while before we enjoy that being late cyclical. So we think that number's gonna be more like minus 5% in that range during the Spanish market in 2013. We have good development in the implementation of technology, though, especially in Spain and Portugal, where we do a really good job in speeding up that. So, to reach our target of 18%, in summary, one can say that we are behind in the U.S. because of the delay on the healthcare reform, and that hopefully is gonna speed up now during 2014.
We are basically on par in Europe, and we are ahead in Ibero-America, mainly driven by Spain. When it comes to the margin, it was a dip in Q4, and that is because we had less reversal of wage-related or labor-related accruals in Q4 in primarily Spain this year or in 2013 compared to in 2012. So that was one of the reasons. And the second reason was we had some timing effects in Argentina. We have raised our prices according to at the same level as wages have gone up in Argentina, but we had more retroactive price increases coming in in Q4 in 2012 and in 2013. So then the comparatives are different. And we have some small restructuring costs in Peru as well in Q4. So on the quarter was not satisfactory.
But if we look, which is the most important, we should look on the full year. And if we do that, we are basically on the same level as we were in 2012, 5.2 versus 5.3. And Spain is delivering basically the same result in 2013 as they did in 2012. So that has been satisfactory. What I think is important also to say is the situation in Spain, which is a bit complicated, but it's quite a bit of turmoil right now. And the short version of that is because we have a collective bargaining agreement that would enforce us to raise wages quite substantially. And I think everyone, including the unions, understand and agree that that is impossible. And that has been discussed for quite a while, but no agreement reached.
On top of that, the Spanish government put a new legislation in force, just before Christmas, increasing our cost in social cost with about EUR 7 million per year, for the full-year effect in 2014. Given those two facts, we have to take actions. One is, of course, that we need to try to push some of those, taxes or those cost, cost increases or, or legislation increases onto our clients. We will do as much as we can on that, but that will not be enough. We also need to reduce our cost, our labor cost. The short version of those discussions is that we have decided to, terminate the, the collective bargaining agreement in Spain, which we can do according to the new labor legislation from 2012 in Spain.
So we have stepped out of that formally, and so have many other companies in the security sector in the industry. And that is, of course, not appreciated by everybody in the market, and especially not by the unions. So now there is a lot of discussion, a lot of fight, a lot of noise and turmoil and discussions going on in Spain. But at the same time, in parallel, the clock is ticking. So there is a formal process of how that runs, which in the end will lead to arbitration in case the parties cannot agree, which will be before the end of March. So in the case that we cannot agree, in the meantime, the process is running. The clock is ticking.
And we have put forward a proposal, which means a cost reduction in different ways for the labor cost in order to compensate for the cost increases imposed by the government and to mitigate the effect of the old collective bargaining agreement. And in case we cannot agree by the end of March, there will be an arbitrator making a decision, and then the parties have to follow that. So we don't know the outcome of that, but we have taken very severe measures in order to be able to compensate for those cost increases, which is our target, to be able to compensate for the cost increases in the old labor agreement plus what the government gave us just before Christmas. So that's the process there.
The outcome, we do not know until the end of March, unless we can agree in the meantime, which I think will be very difficult, by the way. Yeah. I think that is the main news on that. Cash flow good, SEK 2.1 billion, close to SEK 2.1 billion free cash flow, good cash flow also in the fourth quarter. And we are better than our free cash flow to net debt target of 0.20. So we are at 0.22 at the end of 2013. And our net debt also came down quite substantially by reduced acquisitions, which helps a lot when we do that less. And we still haven't invested a lot in the technology arena yet as we have only moved from 6%-8%.
But that will we will, of course, need some more cash in order to do that. And, and on acquisitions, we are continuing to look for primarily technology acquisitions. We made some in the second half of last year, one in Croatia, one in South Africa. And we have a few that we are looking on presently, small, medium-sized acquisitions to add to, strength to our, our, our strategy. Yeah. Those slides here, which I'm showing now, you have all seen, at the Capital Markets Day. Their presentations are available on the web. And, if you'd like to have more details about that, we continue along this path. We think that we have a very good chance to, to continue to reach to, to reach our goal of 18%. As I said, we are ahead in Ibero-America.
We are on par in Europe and behind in North America, but North America will pick up as the ACA is approaching, and we see that we can confirm all the time that the margin improvement is there. So to improve the margins, it's less of a concern. It's to reach 18%, which takes a lot of efforts, but things are moving on well. And as we have said at the Capital Markets Day and also in the report, we are taking market share as we really implement this and when we have put it in place in the different countries. And Sweden is a good example where we are now winning contracts in a good pace. Yeah. I think, I'll leave it at that.
And then maybe we can come back to different items as we have questions coming in from the audience. So please go ahead if you have any questions.
Ladies and gentlemen, if you have a question for the speakers, please press 01 on your telephone keypad and you'll enter a queue. That's 01 on your telephone keypad. Ask a question. Our first question comes from Mr. Robert Plant from J.P. Morgan. Please go ahead, sir.
Morning, Alf. When I look at the results, the drag on performance was North America with -2%. You're saying on the call that that should get better given the impact of new contract wins. Does that mean, therefore, perhaps the top-line outlook will look better than 1% for the group as a whole in 2014? Thank you.
Yeah. I'm sorry, I mean, we usually don't give any forecast and put in specific numbers. So I will not give a forecast and give a specific number for 2014 because, yeah, you understand, for obvious reasons, then we have to disclose it to everybody. So but I mean, what I can say is that the -2 is a dip in the quarter. And we lost some contracts in the first half of the quarter, and then we didn't enjoy that volume in the second half of the quarter. We had one large contract in the energy sector, and we won another one in the energy sector, which starts January 1st.
So what I'm saying is that most of that -2% will be compensated by that large contract that we start in the energy sector January 1st. And that is as far as I can go. And then I can add also, I'm sorry to interrupt. I can also add that, I mean, we think there will be growth in the U.S. security market in 2014. How much, it's hard to predict. I mean, it takes a while because even if GDP starts to show positive signs in North America and the optimism and the positive atmosphere is improving, we are still late cyclical about one year. So we should not get too excited, but still things are moving in the right direction.
Okay. Thanks, Alf.
Thank you.
Our next question was from Michael Vasiljevic from Deutsche Bank. Please go ahead.
Yes. Hi. Good morning. Just on the price-wage balance, please, can you talk a little bit about Argentina? So you were expecting the whole sort of fall in Q3 to be offset in Q4. Is that catch-up going to continue to affect on negative? And then you spoke about weak pricing in North America. Can you talk a little bit about the pricing on this new contract that you signed, and just the pricing dynamics in general? And then I just want to ask on the other line, we're seeing sales higher year-on-year, but the EBITDA is lower. Can you just talk a little bit about the dynamics within that, please? Thank you.
Well, the price-wage in Argentina is a timing effect.
We have increased the prices as much as the wages have increased in 2012 in the full year of 2013. In 2012, in the fourth quarter, we had a large but we don't take in the price increase in the P&L until we have got it confirmed from a client. And normally, we have quite a lot of retroactive price increases. We always have to do that because otherwise, we lose it. If we have a timing problem, it will cost us too much money. And then we had more retroactive price increases adjustments in Q4 2012 than we had in 2013 in Q4. And that's why there is a difference. So, that explains the Argentina matter, so to say. For the full-year basis, it's okay. Argentina is delivering well.
Then we have another problem, which is the foreign exchange rate, which has been devalued heavily in January, but that's a different story. In the U.S., on the price-wage, I mean, it's, I understood your question. Maybe you have to correct me. But I mean, there is the same philosophy as always to adjust the prices according to the wage increase. So no difference there. The margin on the new contracts are normally always lower. That's the normal cycle. So and if you keep a contract, then you work your margin up year on year on year on year and goes on like that. So there's nothing different there from any other new start, so to say, on this contract. So, yeah. It's normal.
It's a normal contract, on normal conditions, but they always start lower. But that's the normal cycle of a portfolio business, so to say. And the last question, I didn't really catch, actually, if you could please repeat that.
Thank you. Well, the last one was just on the other line. Just can obviously, the sales are a bit higher, while the loss is kind of worse year on year. Can you just talk about is that operation?
Well, it's, I mean, there is no yeah. I understand. It's slightly higher. But, I mean, that's a combination of the new markets that we have in Southeast Asia and the Middle East and South Africa. And it's all the headquarters costs. So, yeah.
I mean, generally speaking, that fluctuates depending on, that always fluctuates, but it's a mix of the two. The business in Southeast Asia and Middle East is kind of flattish, I would say, compared to the year before. We see some good developments. We're winning some contracts in the Middle East, actually, recently. So we hope that will that we have never made much money in both of those regions, and we have spent quite a lot of money for the past five, six years. But hopefully, that will start to pay off gradually now during 2014. It's still small numbers, so don't get too excited about that. But still, things are moving in the right direction, especially in the Middle East region.
Okay. Thank you.
And sorry, can you just add? And South Africa as well, I should say. We made an acquisition. I should also mention that we made a very good acquisition here in the end of last year, which adds a lot to our ability to deliver more technology and more combined contracts in South Africa. So that will also give us some good leverage in 2014.
Thank you. And finally, can you just ask on the dividends? Obviously, the Free Cash Flow continues to be very strong, and you need to make the investments in technology. But then at the same time, you are a little bit above your target. So what is the thinking in terms of proposing a dividend increase when might you be prepared to do that?
Yeah. That's not, that's the question that should be asked, I think, more at the AGM. I mean, now the, the proposal from the board is to keep it flat, which is in line with our policy. And there has been no other. That's not much more I can say on that. It's not my territory. So you have to excuse me for answering in a pretty short way.
Okay. Thank you very much.
Our next question comes from Mr. Rajesh Kumar from HSBC. Please go ahead.
Hi. Good morning, Alf. Just to understand the margin dynamics of the U.S. contracts. So the contracts you lost, obviously, were running at a higher margin, and the ones you're winning will come at a lower because it involves startup.
But in terms of the technology mix of the contracts you lost versus the ones you won, could we get some color there?
No. There was no technology in the contracts that we lost and not in the contracts we won. So that's just normal, so to say, man-guarding businesses.
Understood. So basically, it's a like-for-like replacement with a lower margin contract with.
Normal business cycle. I mean, as long as we keep our retention in the 90% and above, it's a normal business cycle for us. I mean, we lose 10% of our portfolio. We win another 10%, roughly speaking. And then the margins are always higher on the ones we lose, usually speaking, and lower on the ones we win. But as long as the retention stays on a high level, that will normally not dilute the margin.
Understood. And in terms of the U.S. healthcare cost, could you basically run us through the timeline in terms of when by when you have to you have set internal targets for being compliant compliant with the new policies?
I mean, the cost increase what we what I mean, I think if you, we have more details on that, on the web and present it at the Capital Markets Day. And if you need any further more than that, I think Micaela can also help you out on that. But basically, the short version is that what we said in December is still valid. That is 8%-10% cost increase due to the healthcare reform on that part, which where it's applicable to our organization. And that remains the same. We need to mitigate that. We need to compensate that.
There are two ways of doing it, either to increase the price, the equivalent amount, which we will do in case the customer is not willing or interested in accepting an alternative solution, which means that we will change the content of the contract and do replace some of the guarding on site by guarding remotely, and by patrol. And that is what we are suggesting to all our customers, to be, so to say, ACA compliant. And we think that we can now start to move things in a much higher pace as this is approaching and that we will seize some traction during the first half of this year. And then the remainder will be agreed during the second half of the year because, and to be 100% compliant by the end of 2014.
Okay. In terms of that 8%-10% assumption of cost increase, have you assumed the staff turnover to stay at a similar pace in the U.S., or have you assumed it comes down?
No. We have assumed that we have the same situation with our officers as we have had in the past. We are not making any other assumptions of that or taking any other measures to try to do things differently. No.
Thank you. That's very useful.
Our next question comes from Mr. Laurent Monet from Exane BNP Paribas. Please go ahead.
Yes. Good morning, Laurent Monet at Exane BNP Paribas. On your Ibero-America business, can you please describe a bit more the Spanish situation? I mean, looking at what you said, I mean, the situation is a bit complex.
So what kind of top-line dynamics could we expect in 2014? I mean, should it be similar to 2013, down 11% with large contract losses, or could it be a bit better?
I think it will be. And what happens to Securitas? I don't. I, on the same note that we do not give specific forecasts for our different units for 2014. But the security market will be a bit better. It's still negative, but I mean, the macroeconomic situation in Spain is definitely improving. And there is a lot of positive signs, and there is a very good fighting spirit, I would say, throughout the whole country in order to fix the problems. And the government takes good actions. The industry takes actions. There is a lot of things going on.
So I'm very positive that Spain is on the way out of a crisis step by step. It will take some time, and it will be a bit bloody to do that. But even so, it's moving in the right direction. The security market has declined tremendously during the past years. And you have seen that in our numbers, a minus 11%-12% for us in Spain in 2013. And that is pretty much in line with the security market decline. That will be less in 2014. We think more like minus 5% instead of minus 10%-12%. So, well, it's still negative, but it's at least improving. And then, if the general GDP situation will improve, we will, of course, be able to enjoy that as well. We make money in Spain.
We are doing very well in the technology implementation because selling pure man-guarding contracts in Spain today is impossible to make money on. You don't make money on it. You lose money. So you need to make combined contracts. And we are doing good in that. And that we are the contracts with many of the contracts we are winning, we win with decent margins because we have invested heavily, and taken quite a lot of hits and pain for that in the past three years. But it pays off, and it mitigates the pain in Spain. But that's a bit of the answer, at least, to your question.
Okay. Great. And on Argentina, can you remind me, please, what is the percentage of sales done there, please?
Sorry. Sorry. Could you repeat that?
On Argentina? Just to have an idea of your size over there. If you can remind me that.
Yeah. I understand. Argentina is in percent of the total business in Ibero-America approximately 25%, right? Yes. Ibero-America.
And what's your view on the situation today, Amin?
Yeah. That is, I mean, we have a good business in Argentina. We are doing well. We make money. We compensate the wage increases. We price increases. Margins are okay, lower than in 2012. But even so, they are still okay. We have a good team. We have good growth. We grow faster than inflation.
So we have real growth, if we exclude inflation in Argentina in 2013. So we have a good business in Argentina. Our only concern, our only problem, is that when we recalculate pesos to Swedish kronor, when the peso is heavily devalued because of a big gap between the black rate and the official rate, then that, of course, will be less kronor when we recalculate that. I can give you some guidance on that. We made an estimate and recalculated our Argentine business. And we actually also took Turkey because the Turkish lira has also been quite devalued over the past month.
So if we would have taken the exchange rate, in the middle of last week as it was in Argentina and Turkey and applied that to the full-year result of 2013, our earnings per share and the other result lines would have been approximately 1.5% lower for the group.
When Alf okay.
Do you understand?
Yep. Sure.
Okay.
Definitely. Thank you very much.
Our next question comes from Mr. George Gregory from UBS. Please go ahead, sir.
Good morning, everyone. I just wanted to follow up on the current debate around the collective bargaining agreement in Spain. Firstly, what was the proposed wage increase as part of that agreement? Just to clarify, I presume the new proposal would kick in theoretically from the 1st of April as per the change in 2013.
Finally, on that subject, what are, you know, Alf, what would you say are the implications of terminating that Collective Bargaining Agreement? Clearly, there are, well, I would assume advantages of having a less unionized workforce. What, in your eyes, would potentially be the disadvantages of that? Thanks.
The agreement for 2014 was close to 5%. And that everyone understands. And that everybody has, I think you understood for quite some time, that that is impossible for 2014. So that is out. It's, that's a number. But, everyone, I think the parties, they never agreed on a number, but they agree that it was not a possible number. We have made a proposal of what we think is what should be the conditions going forward.
I prefer not to go into details about it. There's a lot of different things about work hours. It's about what salary level. It's about seniority and things like that. So we have made a proposal, which is on the table right now. Now, when that comes in effect, that is not necessarily April 1st. It could, I mean, it depends on how you pay your salaries. I mean, just to give you an example, I mean, if you would in Spain, you pay 15 salaries. So, for example, if you would cancel one of those, which is paid in December, then you have an effect for the full year. So it doesn't mean that. I understand your question, but we will not gain the full-year effect if we come to an agreement in March. That is not necessarily the case.
We could get the full-year effect, depending on what, and that is our intention. Our intention is to compensate the full-year cost increases by full-year savings. So April 1st is not necessarily a date when the cost savings comes in effect. Depends on what kind of cost savings we agree on. The decision by the arbitrator will be in the end of March if it goes that far. That's a fact. Disadvantages of leaving the collective bargaining agreement, that is, of course we prefer not to do that, actually. That is not our main preference. But it's necessary. Otherwise, we will, we cannot accept cost increases in Spain in the situation as we have it. And that is clear. So we need to take this fight.
but the disadvantage is, of course, that all competitors could have different agreements and make different agreements, small companies to big companies. Then the advantage with having a collective bargaining agreement in our industry with low margins and transparent pricing is that then we know that everybody has the same cost structure as we have. And that is, of course, a disadvantage not having that. But yeah, we have to, so I mean, our preference is always to have a national CBA. But if it costs us too much money, in this case, in Spain, and it's impossible, it seems like, to get an agreement, we have to take this fight. There is no other way.
Okay. Thank you very much.
Our next question comes from Mr. Andrew Ripper from Merrill Lynch. Please go ahead, sir.
Yeah. Good morning. It's Andrew Ripper from Merrill Lynch. I've got a couple if I may. First of all, just in terms of cash flow looking forward, Alf, I wonder if you could give us a sense of your expectations for capital investment for 2014, please.
Yeah. We gave some guidance on that, on how much it will mean, and Bart made a presentation about that and the capital markets. So you have more details there. And so as the speed improves, on our way to the 18%, we will certainly need some CapEx. So the CapEx need will increase in 2014 compared to 2013 as we think the speed will continue pick up, especially by North America. Then, I mean, you saw that we generate SEK 2.1 billion free cash flow in 2013. About SEK 1.1 billion goes for dividends. So there's SEK 1 billion left.
So we need to monitor that and manage how much we spend on the CapEx need and how much we spend on acquisitions. And we have, as you know, since a long time, we have really reduced the speed on acquisitions in order to make sure that we do not spend more money, so to say, on acquisitions, than so we have money available for the organic growth. Yeah.
Okay. So you wouldn't give us a range in terms of CapEx relative to sales, whatever, for this year?
Not specific number for this year. But we gave the numbers we gave at the Capital Markets Day, and I'm sure you have those; those are still valid. Those are still valid as that rule of thumb that we presented at that moment. Sure.
Okay. Okay. And then, maybe as a sort of a guide, could you give us a bit more color on Sweden and how solution sales are progressing? Maybe give us a feel for the solution sales as a percentage of Sweden in 2013 versus 2012, and how much new business are you adding on the solution side, and what impact is it having on the financial returns on the Swedish business, both in terms of margin and return on capital?
The solution sales in Sweden is about 25%, close to 25% of sales, and improving. When we look on, for example, new we follow as one piece of a new solution sales is the video, remote video solutions, when we use video analytics and smart cameras and so forth.
And 1/3 of new sales when two thirds are renewing existing portfolio or, so to say, improving existing portfolio and improving the margins but also improving the security solution for the clients. But 1/3 comes from competition. We win from competition. So, I mean, that's why I'm convinced that we are taking market share when we have a better solution than competition has. And in Sweden, that's the case. We can offer better security for less money to our clients than competition can. So and the margins improve according to our plan. That graph that we keep using all the time, which I pressed here now on the slide presentation, that's a fact. I can confirm.
Over time, as we move up this value-added ladder, we see this improvement on the operating margin. So that I'm not concerned about anywhere, basically. I mean, this we have it all the time. We confirm this. It's more the big effort is to move the portfolio and also to win some new contracts, of course, and to get to that 18%. That's where we are spending all our efforts. The margins, we improve. That's for sure.
Sure. Shall I have the Swedish organic growth number for 2013, please? And then to what degree did solutions increase within that?
Oh, Sweden was pretty much flat. We lost some big contracts, which were more like parking contracts and subway ticket control contracts, compared to what we had in 2012 which we had in the comparative.
So if we exclude those, we have, so to say, we would have had an organic growth. But those are in the comparative. So that means that Sweden was flat. But those were large manpower-based contracts with very low added value, doing ticket controls and parking controls in primarily in Stockholm. So if I exclude those, we have a good organic growth in Sweden. And we improve our margins. We improve our operating result in Sweden. So things are moving definitely in the right direction.
Yeah. Is it possible to give an order of magnitude in terms of the growth of solutions 2013, full year 2013 versus full year 2012, and the order of magnitude of the increase in margin?
Can you give us any sense of how return on capital changed year-over-year?
I mean, we increased in the group from 6%-8%, the numbers that we have used in the report. We improve our margins according to the graph I'm showing on the slides here. Yeah. The return on capital employed improves. It follows the guidance we gave on the Capital Markets Day. So, I mean, I'm not concerned about the return. I'm not concerned about the margins. The only thing we have to fight every day is to move contract by contract in the portfolio and win some new ones based on those solutions. So it's the top line there we need to fight in order to achieve the 18%.
Sure. Okay. And then just finally, from me, obviously, there's quite a significant benefit from the restructuring actions in the 2013 financial year. Just want to I mean, in terms of the order of magnitude, was that in line with what you laid out a year or so ago? I think you were talking about.
It was pretty it was, very accurate. We were exactly on that plan. Yes.
It's about SEK 370 million, from memory.
Yes. Yes. Correct.
Yeah. Okay. And is there any full year benefit from that to come? I mean, I know you weren't, you basically said that the 370 would be pretty much in the year 2013. Were there any actions that sort of ran over into the 2013 calendar year where you'd still get some residual benefit, for example, in Q1?
No, not really. No, not really. I mean, very no. The answer is the simple answer is no. When we have taken some actions in the U.K., for example, where we did some cost-cutting this summer and the early fall in order to but that was more to adapt the organization to the existing conditions and improve a little bit the results in the U.K. as well. So but, I mean, from the big restructuring plan, there is no spillover into 2014. It's mission complete in 2013, and we enjoyed that in 2013, and that's done. That's it.
Sure. Finally, just last one from me. Can you just give us the organic revenue growth for Germany, please, for Q4?
For Q4 or what you?
Yeah.
For Q4 in Germany?
Yeah.
3%.
Thank you.
Our next question comes from Mr. Stefan Andersson from SEB. Please go ahead, sir.
Thank you. Three questions. Just the first one, when you calculate the costs in Spain now with this uncertainty, I guess you're waiting and hoping for a decision, and then you use the cost based on the decision that is coming. Is that correct? Or are you going to use worst case, best case scenario in the first quarter?
We will not use the best case, not the worst case. We will not use that. We will make a judgment, what we think is a likely outcome, and that we will use. Hopefully, we know the answer before we close Q1 anyway. But in case there would be for some reason, we wouldn't know that. We will use our best estimate, what we think is realistic.
But again, I think that I mean, the process is formal, and you will know the answer by the end of March, so which means that we can adjust January and February in March.
Okay. Good. When it comes to the work that you've been doing in the U.S. ahead of the cost increase that you're facing in 2015, could you give any indication if you already to what kind of proportion that you already have had discussions with your clients and written this into the contracts, for example, new contracts that you signed, and also, when during 2014 you think you are through the price negotiations with those clients?
Unfortunately, still in a very, very I mean, there is a lot of activity, a lot of meetings with clients, a huge part of the portfolio. We have approached the clients. Most of the portfolio, we have already had discussions with the clients. But from there to signing the contract, it's I mean, the number of contracts signed, so they are it's almost nothing. It's very, very, very, very few. So there has been postponed uncertainty. It's not a hurry yet. It's still a year to go to the ACA and so forth. So, lots of activity, lots of interest, lots of discussions, but hasn't materialized. But that is what Santiago showed, you were there, I know, at the Capital Markets Day.
That plan that he showed there at the Capital Markets Day is still the one that we are working for and working towards and still the one we believe in, how much we can convert of existing portfolio by the first six months and then the rest in the second half of the year.
Okay. Thank you. And then the last question. At the last AGM for 2013, you asked for a mandate to repurchase shares, and we haven't seen any announcement in that direction, nor in this quarter. But you have asked for another mandate for 2000 for the upcoming AGM in 2014. Since we haven't heard any announcement about you starting to repurchase, should we interpret that as there's no not going to be any repurchasing before the AGM when you get your new mandate?
No, that's not, it's not for me to answer that question. I do not want to make any statements in any directions on that. It would be incorrect for me formally to do that, because then we should first of all write it and secondly have a different statement about that in the report. So I prefer not to speculate on that. It's not my decision. It's a decision of a board. But at least I think what should be noted and said is that we have then asked for the renewal of that mandate that we asked for for the first time last year. We will ask for that renewal now in at the AGM. I cannot be more specific than that, Stefan.
That's fine. Thank you.
Our next question comes from Mr. Paul Checketts from Barclays Capital. Please go ahead, sir.
Morning. I've got two questions, please. First one is on Spain again. Alf, are you worried about the risk your employees are going to become a little disgruntled by you withdrawing from the collective bargaining agreement?
Oh, that's why I said it's a bit noisy right now. It's a bit turbulent. So, I mean, there is a lot of activity now. There are protests going on. There is a lot of media activity. There is a lot of internet opinions about the situation. I mean, it's a big, big deal in Spain, and I can assure you. But there is, I mean, it's a tough situation. It's a harsh environment. It's very severe.
We need to protect our business, and also to protect our employees at the end of the day so we can protect the jobs that we are generating because if we would have tremendous cost increases, then the customers will not pay for it. They will reduce the contract, and then we will have to fire a lot of people. So this is a fight, and it's going to be a messy fight, and it's going on right now. So yes, it is a lot of turbulence with our people, and in the industry generally also because many of our competitors are doing exactly the same.
And just to be clear, you are bound by the judgment of the arbitrator. Yes.
And there have been such arbitrations in other industries, in the cleaning industry and in the mechanical industry. And, I mean, generally speaking, you would say that they seem to be in the direction of trying to make Spain more competitive, and to reduce the cost, in order for the country to come out of the crisis. What, how to interpret that for us, we will, but we will be bound by that decision. But, we need to go that way, and we think that is the right way for us to do that.
Okay. And my second question, unrelated, is the big contracts you renewed and won in Europe. Can you just run us through those, please, what they were?
There have been some major Aviation contracts, for example, in Norway, Germany, France, also in Spain, actually, but that comes in a different division. So there has been a number of large contracts. And now, there is not really any of our larger airport contracts up for tender in 2014. So that has been good news. It gives us stability in the portfolio, for years to come. Yeah. So those are some examples.
And large bids coming up for new work?
There is always large bids, so, but, I mean, that's kind of natural. That's kind of normal in our business.
But, I mean, we have improved stability in our portfolio during the second half of 2013, that's for sure, because there were some really big ones which were of course, you get you are concerned about that, and we still have a bad memory from the Brussels Airport back in 2011, I think it was, European Commission and so forth when we lost big contracts in the same quarter. So but this time, we were successful and kept those contracts and retained them for yeah. I mean, most of those contracts are now for four, five years to come.
Okay. Thanks.
I remind you, if you have a question for the speakers, you would have to press 01 on the telephone keypad. That's 01 to ask a question.
I don't think we have any more questions. Do we?
There are no further questions at this time.
Okay. Thank you very much. Thank you for calling in. Thank you. Bye-bye.