Earnings Call: Q3 2020

Nov 3, 2020

So good afternoon everyone and welcome to our Q3 update. The Securitas team has shown strong resilience in the handling of COVID-nineteen situation and working closely with our partners and our clients during the last 10 months. And before we look at the performance I would just like to express my deep respect and gratitude to every great colleague in the Securitas team. So let us now shift to the performance in Q3 and I should mention that I am in Stockholm and Bart, our CFO is dialing in from Brussels today. So coming from a challenging quarter in Q2 we have seen clear improvement during Q3. Organic sales growth was flat versus last year and a significant sequential improvement versus the negative 4% that we had in Q2. And we had a positive development during the quarter which I think is also important to highlight where the organic sales growth if you look in the quarter we had around minus 1% in July and then 1% positive in August and about 1.5% positive in the month of September. So clearly ended the quarter on a more positive note. The operating income and margin were impacted by COVID-nineteen across all segments and the largest negative impact was in Europe mostly related to our larger aviation presence. The operating margin of 5% was also a clear improvement versus Q2 but lower than the 5.6% that we had last year. The margin was supported by various government grants but hampered by increased provisions and we come back and comment on this in more detail later on. But importantly we're on par in terms of price wage balance year to date. The operating cash flow was solid in the quarter also when excluding some of the positive impact from timing effects related to payroll and VAT in Europe and North America. But in light of the improved financial performance the Board of Directors have reinstated the original dividend proposal related to 2019. In conjunction with the Q2 report we announced the cost savings program and we are progressing well with the related activities and will start to see gradual positive impact during the Q4. Looking ahead we do face continued uncertainty though related to COVID-nineteen and we continue to take actions to ensure that we come out stronger from this situation. This is a slide that you have seen me share a few times before now, but it's important given the context that we are operating in. And when you look at the response related to COVID-nineteen from Securitas we initiated our first crisis response team at the end of January to handle the situation and we have been working relentlessly since then in managing the situation with a steady focus on 4 main priorities that we have outlined in this slide. Secured services are essential services and while we have seen some significant reductions in some areas such as aviation we have been able to assist clients and meeting the demand for temporary services in a number of different areas. So on the totality we're generating significantly higher extra sales in Q3 versus a normal situation in previous years. We currently have around 3,000 people on temporary unemployment schemes and this tend to be compared with around 10,000 people at the end of March beginning of April timeframe. But in light of the current situation and the continued uncertainty we have taken a conservative approach and increased provisions primarily related to potential bad debt. So now let us shift to the focus to the progress I should say of solutions electronic security and the performance in the business segments. Our electronic security and solutions businesses have been affected by the corona pandemic. Installations have been severely impacted but the situation improved in the Q3 versus Q2. Solutions conversions and sales have also been negatively impacted due to reduced commercial activity and the ability to have physical meetings etcetera. But rebuilding solutions momentum is now a key priority across the entire business in the coming months quarters. But we did receive some important acquisition activities in Q3 and closed the acquisition where we are acquiring 5 Stanley entities in a number of key markets for Securitas around the world. And these businesses will greatly enhance our electronic security presence and capability a number of these markets. So we are very excited to welcome the teams to Securitas and further strengthening our electronic security offering to our clients. Shifting then to the performance in North America. We had a strong improvement in North America from negative 2% organic sales growth in Q2 to 2% positive in Q3. And while we had a negative impact from the corona pandemic on electronic security related installation business and critical infrastructure services but the situation did improve during the quarter. And we had strong performance in guarding where temporary reductions in portfolio sales were compensated by a significant increase in extra sales and these extra sales accounted for 19% of total sales in the quarter. The operating margin in the quarter was 6.4% and the margin in guarding was supported by the corona related change in the business mix and significantly higher extra sales that I mentioned earlier. Margin was negatively impacted by increased provisions to reflect increased risk in the business environment primarily related to collection of accounts receivables. And the cost savings actions that we initiated in March helped limit the negative leverage from reduced sales. So on the totality our North America team have delivered a robust performance in the quarter. Shifting then to Europe. In Europe we had negative 1% organic sales growth compared to minus 6% in Q2. And while there was a negative impact from COVID-nineteen mostly related to our aviation business several countries had positive growth in the quarter and extra sales as a percent of total sales were 2% higher versus the same period last year. So in Q3 this year at 19%. The operating profit margin in Europe in Q2 was 5.1% and the decline was primarily related to the negative impact from COVID-nineteen and aviation. Negative impact has to some extent been offset by corona related government grants in several countries but like in North America we have increased provisions related to potential bad debt due to high risk levels in the business environment. Bad debt due to high risk levels in the business environment. And the operating margin was supported by several of the Nordic countries and our electronic security business in Turkey. Shifting then to Iberia America. Organic sales growth in Ibera America was flat in the quarter but we returned to positive growth in Spain and the organic sales growth was negatively impacted due to effects from the corona pandemic in Latin America. Latin America is one region where we're also seeing quite a severe situation related to COVID-nineteen. Those declines were primarily related to airport security in Latin America and a weak performance in Peru. But we had high client retention and a strong share of sales from security solutions and electronic security in the quarter. The operating margin in Avira America was 4.5% and the decline versus Q3 last year was primarily related to the negative impact from the corona pandemic. Government grants and support in several countries helped offset costs for idle time. So that concludes the divisional overview. So now handing over to you Bart for some more details related to our financials. Okay. Many thanks to Magnus and welcome to all of you. As in Q2, quite some underlying pieces that moved in the quarter. This was for sure not a business as usual quarter either. It was a quarter during which the impact from the corona was important, though we should also mention that the impact reduced compared to Q2 and further reduced during the quarter as well. As we can witness from the organic sales growth, as Magnus commented about, negative in July while positive in both August September. And also in September, we had actually positive organic sales growth in all of the business segments. And also, weakness from the number of employees on temporary unemployment that reduced from 7,000 in mid July to 3,000 in mid October. So all our people and our business confirmed great resilience again, and I think we can be very happy about that. And we continue to focus on the 4 key matters, our people, our clients and the financial sustainability of our business to focus on cost control and focus on cash flow. But we also continue to work with the transformation agenda and actually we reinitiated also on the acquisition side, as Magnus also commented about. The operating income has been affected, of course, from the corona situation, mostly then from the airport security business and the idle time of some of our employees. The operating income was supported by proactive cost saving actions as initiated within the different businesses. And further, the operating income has been positively affected by around SEK 200,000,000 in corona related government grants and support in the quarter. This SEK 200,000,000 is then, to some extent, partially offsetting the increased cost levels, mostly from idle time. The amount this SEK200 1,000,000 was distributed over the totality of the business with a bit of an underweight on North America and a bit of an overweight on Ibera America in comparison to the respective size of these businesses. In Q2, this amount in corona related government grants and support was SEK350 1,000,000 back then. So it reduced from SEK350 1,000,000 to SEK200 1,000,000 now in the quarter. And this reduction goes largely hand in hand with reduced number of people on temporary unemployment schemes. In mid April, we had over 10,000 on temporary unemployment and this reduced to 7,000 mid July and further reduced to 3,000 mid October. The operating income was then negatively affected by increasing provisioning levels of SEK 100 and 1,000,000 in the quarter and this to reflect increased risk environment. This amount of SEK 150,000,000 relates entirely then to potential collection risks of receivables, and these provisions were also distributed over totality of the business. When we then look at items affecting comparability here, we accounted for SEK 112,000,000 in Q2. And this item affecting comparability relate to the ongoing transformation programs, that is SEK53 1,000,000 and then SEK59 1,000,000 related to the cost saving programs as announced at the Q2 reporting. And all details on this can be found in Note 6 to the report actually. For the transformation programs, we continued more or less with same speed as in H1, and that is also the average speed we had for the entire 2019. So we can expect some higher amount for the last quarter of 2020. We referred earlier to a total of SEK 650,000,000 of item affecting comparability that shall be accounted for related to the transformation programs and that during the period of 2019 to 2021. For 2020, we set earlier an amount of around SEK 250,000,000, everything depending a bit on the speed of the different implementations. We can confirm that our ambition with the programs has not changed. And broadly speaking, the 2 programs are on track. So the SEK 250,000,000 for 2020 shall continue to be the right guidance for the full year. For the COVID-nineteen cost saving plan, we accounted now for SEK 59,000,000, to which then will further amounts be added as of Q4 as well. As earlier mentioned, that total estimate is a range between SEK 350,000,000 to SEK 500,000,000, but Magnus will also come back to that later on. On financial income and expenses then, if we turn to that line, we see a somewhat lower amount now in this quarter compared to earlier quarters. And the financial income and expenses were positively impacted by the favorable net debt development, we come back to that in a second, and the exchange rates for the interest income and expenses. But also, it was impacted by a nonrecurring foreign currency gain that was realized in the 3rd quarter. Moving then to the tax line, where the estimated full year 2020 tax rate remains on 27.0 in line with what you have seen before. We move into the next page and here we consider the effects from different currencies. And here we can also see that there has been some negative effect actually, a headwind from the foreign exchange during the quarter of around 7% to 8%, as you can see here on the level of sales and operating income. The negative effect from foreign exchange on sales in the quarter was SEK 2,100,000,000 and on operating income in the quarter, it was negative on around SEK 125,000,000. The euro dropped a bit during the quarter compared to the same quarter last year, But then, we were especially affected from the weaker U. S. Dollar compared to a year ago, a continuation of what we started to see happening during Q2 already. Then we move to the cash flow. And here in Q3, as in Q1 and in Q2 as well, I think it's fair to say we had a strong cash flow coming in during the Q3. Capital expenditure is trending to the lower side of 3% of group annual sales and that includes leases for IFRS 16. The operating cash flow was positively impacted by collections. We had good collections, but we shall also add that the operating cash flow was helped by some by the lower organic sales growth, although, as I said, improving during the quarter. Then we also have a positive effect on the operating cash flow of around SEK1.3 billion from timing relief of payroll tax and value add tax payments in Europe and U. S. And that is SEK 400,000,000 then more than what we had at the end of Q2. We will have to repay some of the timing measures, while some new effects will apply. All in all, this SEK1.3 billion is also the amount we more or less expect then to remain at year end. So I believe we can conclude that even if we take away the SEK1.3 billion of relief measures from the cash flow that we had a very good cash flow coming in during the quarter and during the 1st 9 months. We then move to the net debt. And the net debt ended at 13.5 now end of September, considerably down from the 15.9 at the end of Q2 and considerably down then from 17.5 at the start of 2020. Now after 9 months in 2020, we had a positive free cash flow of SEK4.5 billion, as you could also see on the previous page. And then an amount of a bit more than SEK500 1,000,000 has been paid for acquisitions, as we can see here. And we paid a bit over SEK 200,000,000 in items affecting comparability. All in all, this combined effect reduced the net debt with around SEK3.7 billion, that is from around SEK17.5 billion at the start of the year to now SEK13.5 billion with also a little bit of extra help from the translation in between. Then as commented, we would normally have the dividend paid in May, but the proposal was withdrawn back then by the Board. And as communicated, the board has now resolved on a new dividend proposal to the general meeting in line with the earlier proposal. Moving to the graph. The net debt in relation to EBITDA is on 1.9 now compared to 2.1 back at the end of June and compared to 2.2 at the end of 2019. Remember that all of this is after IFRS 16 and I believe this 1.9 can be considered as a strong number. Maybe to remember also that the increase in net debt between 2018 2019 was actually the full result of implementing IFRS 16, which increased the net debt by itself with around SEK 3,000,000,000. Then we go to our financing and our maturity chart. We had very good liquidity at the quarter end with SEK 7,200,000,000 in liquid funds, up from SEK 4,500,000,000 at the end of Q2. As earlier said, we renewed RCF a facility now with 10 core banks for a total amount of SEK 10,000,000,000 and the facility is for 5 years with the option to extend it with another 2 years. And RCF is fully undrawn. We continue to have ample headroom in our rating. And as said before as well, we have no financial covenants in any of our facilities. And as you know, we do not use any off balance sheet factoring or supply chain financing. Based on our strong cash flow or strong balance sheet with net debt to EBITDA at 1.9 and with our solid financing in place, I believe we are very well positioned for the future and in a strong position to accelerate the transformation. And with that, I can hand back to Magnus. Thank you, Bart. So before we open up for the Q and A, I would like to provide just a few updates related to COVID-nineteen and also how we are progressing with our strategic transformation programs. So when you look at the last 9 to 10 months it has been an unprecedented situation in the world, but thanks to a strong global presence like I said earlier we started our first crisis response team at the end of January and we have maintained a steady focus on 4 key priorities ever since. And the Securitas team has done a tremendous job together with our clients in managing this situation. And now as we enter a period of increasing numbers unfortunately again of cases and also increased uncertainty we are maintaining a steady focus on these 4 priority areas while at the same time driving the modernization and digitalization of our business and our strategic transformation programs. Because we are in a period of accelerated transformation We have an ambition to double security solutions and electronic security by 2023 and the recent acquisition in 5 markets is obviously one important step together with the acquisitions we announced at the beginning of this year when looking at the development and growth of our electronic security. Focus now is on achieving successful integration bring our enhanced offering to our clients. But in terms of business transformation which is the lower part of this slide We are progressing according to plan in North America where we recently passed a few key milestones migrating to modern systems and applications to handle key areas such as payroll and billing in our US guarding operations. And while a lot of work remains in North America we are building a modern platform that will enhance productivity in terms of how we operate the business, the service provisioning to our clients, but also how we are engaging with our employees and also enhancing the value being part of Securitas. And as previously shared we are doing a detailed assessment of the right path to drive business transformation also in Europe and we will come back in early February with more details related to that. But last I would also just like to provide a status update related to the cost savings program that we initiated due to the corona situation. So 3 months ago we announced the ambition to manage the COVID-nineteen impact on our business and with this program we are looking at all parts of the business to identify areas of exposure, key opportunities to improve and sharpen the business and importantly to reduce costs. And we estimate the restructuring costs to be in the range of SEK 350,000,000 to SEK 500,000,000 but the final restructuring amount will depend on changes in government grants and the development in the airport security business where we still have quite a lot of work to do to make sure that we are getting back to a sustainably profitable status. But we expect to finalize this program by the end of the Q2 2021. So to sum up this quarter, we've had significant positive improvements during Q3 versus Q2. Organic sales growth as mentioned was flat compared to last year but positive towards the end of the quarter. Operating income real change negative 8% and we still see a challenging situation with significant amount of uncertainty regarding the development now externally. But we have shown resilience. We have the strongest offering in the market to our clients. We have a strong balance sheet and a cash position. And in terms of the COVID situation we're actively managing the situation with clear priorities and actions and always ensuring a readiness to take further actions as required. So that concludes the quarterly overview and now glad to open up for the Q and A session. Thank you. So we have the first question from Mr. Eric Balsam from Nordea Markets. Please go ahead, Mr. Eric. Yes. Hi, it's Eric at Nordea. I have two questions. I'll start with the first one regarding those provisions of €150,000,000 Are those related to a specific customer segment? And can we expect continued provisions here for Q4 as well? Yes. So Erik for the question. We are taking a conservative approach. We have many clients, some clients very large, but we also in the 150,000 clients that we have we also have a number of smaller clients. So this is essentially taking a conservative stance in light of the uncertainty that we see. In terms of specific segments that we've had a few significantly smaller impacts in the aviation segments in terms of real bad debt, but I would not argue that we are seeing very specific segments at this point in time. So it's more of a general precaution that we're taking across the business. Okay. And then my second and final one is regarding the price and wage balance going forward. What do you see there? Because you have quite a good balance here in the quarter and has had that during the full of 2020. What do you see for Q4 and going into 2021? So like you highlight we are on balance in the 1st 9 months and this is as always fundamentally important to our business. There is some uncertainty of course in terms of a number of moving parts, but as always we initiate the work with price increases typically in the July August time frame for the following year and it is important, as important as ever obviously in 2021 that we are successful in balancing this high focus from all the countries and the different divisions on achieving this. And there are also a few new components as well that we also need to be successful in communicating to our clients and some of those we have very high emphasis on the health and safety of our employees. That is something that I would say all clients also share that importance that we are placing, but that also comes at a certain cost. So that is one specific example of an element that we also need to be successful in covering because this is our first priority as obviously guiding because we cannot do that and that wouldn't be prudent, but it is a very important area of focus for us for the next 3 to 6 months. All right. Thank you very much. Thank you. So we have the next question from Silvia Ducker from JPMorgan. Please go ahead, Silvia. Thank you. Hi, good afternoon. First question on the organic. You mentioned 1.5% positive in September. Could you maybe talk about the different regions a little bit? And within that, I guess what the impact was of additional COVID related sales? And then secondly, just going back to the provisions. So it seems like they're more broadly spread across the different regions, while in Q2, most of your provisions were in North America. If we think about, I guess, Q4 and what the movement might be at that point, is it fair to say that you have been quite conservative over the last two quarters? So let's say the health care provisions that you took in North America, you haven't necessarily seen any actual impact on impact on, so potentially some of that might come back in the P and L. And similarly, to what extent have you actually seen any bad debts come through on the other part of this? And could we see actually some positives as we go through the next couple of quarters? Thank you. Thank you, Silvia. I will cover the first question and maybe Bart if you want to give some more light on the provisions. In terms of the organic sales growth we did see positive evolution in the different divisions as well. So that was obviously driving the group level improvement when you compare to minus 1% growth in July to a positive 1.5% in September. Should highlight as well that we are seeing a situation with significantly higher extra sales, 3% higher as percent of sales on a group level. I believe around 5% higher in North America compared to the same period last year as percent of sales, 2% higher in Europe. So obviously this is good evidence of the strength of Securitas that we are able to find new solutions to meet demand from our clients and we have seen a fairly steady demand for these services also in the Q3. But then also to shed some light obviously we do make some reference to aviation. By far the biggest impact in terms of negative impact on organic sales growth is from aviation. So I mean if you exclude the impact from the aviation segment then we would have a few percent higher organic sales growth as a group in Q3. But we are dealing with that and happy to discuss that in more detail later on. Bart, do you want to share then a few details also on the provisions? Yes. Silvia, on the provisions in Q2, we had SEK300 1,000,000 in total and half of that related to the employee matters and the other half related also to potential bad debt accounts receivables. At that point in time, we believe that we were well consolidated in our balance sheet. And I think now at the end of Q3, we are even better consolidated. There is, of course, an increased risk environment out there related to COVID-nineteen and that should be reflected in how you calculate your provisions for some of these matters and that is exactly what we have been doing, reflecting the increased risk environment. On the employee related matters, there was absolutely no further need to take any further provisions there, And those provisions are there as they were at the end of Q2 largely. And then on the potential risk for related to accounts receivable, potential bad debt, there we have taken out another SEK150 1,000,000 of provisions. You should know, Silvia, that in a regular year or actual cost of bad debt is around a regular year would be around 0.15 percent of sales. Sorry, yes, 0.15 percent of sales. And that is sorry, 0.015% of sales. And that is a rather low amount. And it's very stable over all the years. But now, of course, with COVID-nineteen and the whole environment where we do have, of course, some aviation customers, we do have retail customers, there is an increased risk there. Have we seen a lot of that materializing? No. I think in general, we have seen actually that we get well paid from our customers, from our clients and that is helping on the cash flow then. So that is not what it takes, but it's more reflecting the general risk environment increase that we can see around us. And when it comes to Q4, a bit too early to conclude on that. But as I said, we believe that we are now in a very well positioned, even a better position at the end of Q3 compared to Q2 and that we are well consolidated going into Q4, absolutely. I hope that answered your question. Thank you. So we have the next question from Mr. James Winkler from Jefferies. Please go ahead, sir. Hi, thanks guys. I think most of mine were answered. I just showed, I guess, 2 smaller ones. And one, given the exceptional benefits to net finance costs, is it fair to say that Q4 should be more similar to Q2 in that regard and moving forward? And then also with the timing of the payment of the dividend, I know the extraordinary meeting to be held sort of early mid December. Are you expecting for from a cash perspective that to be paid out this year and then potentially announcing an incremental fiscal year 2020 dividend since this is just reinstated? Thanks. As to the financing cost, I can positively answer there. Yes, that for Q4, you should expect something which is more in line with Q2. Correct. As to the dividend, maybe you can take that, Magnus. Yeah and I think that there was then a question James if there is then a cash impact in 2020. I think that was the first question right which there will be. And then I think you alluded to the future and I think it's the only thing that I would like to comment on here is that the dividend obviously that is now being proposed is related to the result of 2019. But we are not and I'm not in a position to provide guidance related to the dividend going forward. Yes, great. No, that's fine. Thank you. I think that's it. Thank you. Thank you. So we have the next question from Mr. David Ryu from Bank of America. Please go ahead, Mr. David. Sure. Thank you very much. Good afternoon, everybody. Two questions from my side. Firstly, on the margin, there's obviously various moving parts, including the slope of the recovery and then also ongoing cost programs. When do you expect the business to return to pre COVID margin level, say, in line with what we saw in 2019? And then my second question relates to North America specifically. It seems that the industry is catching quite a tailwind in North America, I think in part due to a lot of temporary work. Though Securitas does seem to be growing slower than peers, despite the pickup in extra sales work. What would you put that down to? Thanks very much. That's all. Yes, thank you. When you look at the margin situation we have driven significant improvement in Q3 versus situation in Q2. Cost savings program will start to have a positive benefit gradually starting really in the Q4, but we expect more impact than in the first half of twenty twenty one. When you look from a margin perspective I cannot comment on the timing in terms of returning to pre COVID margins, but the area where we have the most work right now and what we have been working on very actively also in the last 6, 7 months is related to aviation because that is where we have the biggest hit. If we had excluded aviation business at this point in time we would have been in reasonably good shape when you look at the Q3. So there is still a significant impact and the way that we are treating that is first of all is that we're going through short term actions and those we initiated order at the beginning of March working through essentially with our clients all the larger contracts that we have to make sure that we are finding either a new way where they are not financially sustainable that we can make them financially sustainable and that would then be by renegotiating essentially contracts. If the clients are not willing to do that then we have the contractual commitments that we want to live up to and then we would work towards termination so that we are building sustainable business. And that work we are going through and working with very actively but then with the focus on the larger contracts first. And then obviously what then happens in the aviation segment in terms of timing of recovery etcetera difficult to predict but we are taking a cautious approach. So anything that we can do to make sure that we can operate profitably also at significantly lower levels of revenue that is obviously a position we want to be in as soon as we possibly can. So that is also a significant part of or the reason behind us having a fairly significantly large range when you look at the SEK 350,000,000 to SEK 500,000,000 the cost reduction program is that where that will ultimately land is also very much depending on those negotiations. When you look at North America you highlighted the extra sales and yes, that is absolutely the case when I look at the guarding business, but we do see on a top line perspective a lower activity in electronic security in the Q3 compared to last year even though it improved quite a lot compared to Q2. We also have lower activity in critical infrastructure services part of our business compared to the same period last year when you look at the top line. So I would say that if there are differences between us and competitors probably mostly related to the revenue mix that we have in terms of the different protective services. We have 4 highly specialized areas with guarding electronic security, critical infrastructure services and corporate risk management and performing with very strong teams and operations in North America. So this is really the situation that we have and obviously looking to also leverage that strength as we go forward. And I can also comment that the commercial activity when I look at that in terms of winning business, etcetera, has also been healthier in the Q3 compared to Q2. So I hope that answers your two questions. Long answer but they are important matters. So it felt better to elaborate a bit more. That's very helpful. Thank you. Thank you. We have the next question from Mr. Thomas Glove. Please go ahead, sir. Hi, everyone. Thank you for taking my call. Most of my questions have been answered. But we've seen now recently the bids here on G4S. And I know you can't comment on it specifically, but I just wanted to if you can just elaborate a bit on what that sets on the status for the whole security industry and what do you think the rationale might be behind the interest in the bid and so on. If you could just speak a bit around that and what potential acquisition might how might that affect you? If you could just speak a bit around that would be great. Thank you. Yes. Thank you, Thomas. When you look at the security services industry my view is that this is an important service where there is a strong and also for the long term we estimate growing demand. So I can understand that people are interested. It's obviously also a sector where in the COVID-nineteen situation we have also seen internally and also in the work with our clients a lot of people in our Securitas team fulfilling very important work not only for the clients but also for society at large. When you look at the competitive dynamics I mean we have a clear strategy. We are driving our transformation. We have the strongest offering of protective services by a distance I would say in the market ranging from guarding to electronic security, monitoring, corporate risk management, fire and safety. So we are very much focused on continuing to extend our lead and to enhance value that we are bringing to our clients. And when you look at our strategy it's as I've commented also and we had the Investor Day or Capital Markets updates. It's more a strategy of driving focus and real depth in the existing foot print that we have in the key markets because we see a future with significantly higher technology component, electronic security component and where we are integrating successfully different protective services based on the client needs. And this is really the strength of Securitas. It would not be prudent of me to speculate what other companies or competitors will be doing in that respect, but that's clearly our strategy and that's also something that we believe in wholeheartedly. It's also the reason that we are investing significantly in driving transformation in terms of the modernization, the digitalization of Securitas so that we continuously enhance the value that we bring to our clients but also to make Securitas an even more attractive company to be part of. So I realize that that is not directly responding to your question, but I felt it's important to at least highlight what we stand for and also what we are doing on our journey which we believe in. Oh, yes, sure, sure. Go ahead. And maybe if I could add something from my perspective here, Bart talking. I think it's also a little bit of prolongation and even on a higher level of what we have seen since a couple of years now that the private equity has really detected our space in North America than as a start where there has been quite some activities, consolidation, acquisitions, mergers going on, led by private equity, I think, who has detected that this can be an interesting investment space. Driven by needs, there is absolute need for security. I think we witness that again every day. Safety and security is high on the agenda for everyone, driven by the fact that it's also a service industry that does not require a lot of cash tied into the business, driven also by the fact that it's a lot of clients that are a lot of segments. It's not geared towards one specific segment. It's really broadly within society that this is needed from many different customer segments. So, showing also a very great resilience in this type of economical situation we are now in. So, I think that is a bit of a prolongation then on a higher level evil that even that we see that the private equity has interest in our space here. So, that is what I would like to add. I would like to come back to second there to the question of Silvia from JPMorgan. And I confused myself there for a second, sorry for that. But our average bad debt like last year, it was well, it was on 0.15 percent of sales, SEK150 1,000,000 that we spent on bad debt actually. Sorry for the confusion there. Okay. Thank you. I'm happy with those answers. Thank you. Thank you, Thomas. Thank you. Thank you very much. So we have the next question from Mr. Edward Stanley from Morgan Stanley. Please go ahead, sir. All right. Thank you. Some might have been answered. I'm just curious, we've mentioned aviation a lot and Berlin Airport seems to have opened a couple of days ago. So is there any sort of shining lights or green shoots that things are improving? Or do you really need passenger volumes to pick up? The second question on U. S. Wages, you got Biden talking about $15 minimum wage increases, albeit I appreciate over a few years. But can you remind us what your average wage in the U. S. Is or your SKU of wages to understand whether that will have any impact? And finally, on M and A, post the Stanley Security deals, I'm wondering what's going on in the pipeline and whether we should see more of those kind of bolt on deals rather than anything larger or whether there is anything large in the pipeline? Thank you. Thank you, Edward. Related to Berlin, yes. Finally the airport has opened and we are fulfilling an important role there. And I should say that a number of contracts without going into specific details of that airport specifically we had a significant proportion of contracts that have been priced per passenger based contracts in the last 5, 10 years. And obviously with an impact that we've seen from COVID-nineteen that also meant that we ended up in quite a tough situation fairly quickly than with the rapid decline in terms of traffic. A number of these clients that we have realized as well that we cannot in these circumstances work with price per passenger basis. So it's more than of fixed type of SLAs that we would have in terms of the security provisioning. And that is obviously a much better place for us to be. So I think that is really the first point in terms of aviation, but we are as I mentioned earlier working through the top 25 contracts in phase 1 and then we have a fairly high number of other contracts that we're also now reviewing expeditiously to make sure that we are getting to a much better position as soon as it's financially responsible to do so, but also then respecting client contracts that we have in place. In terms of the US wages maybe Bart if you want to weigh in there a little bit, but I can say from the US market perspective and we look at price wage balance the US is a significantly more dynamic market in terms of wages than the European countries if you generalize and obviously this is always something that we would be working with in a more dynamic fashion together with our clients to make sure that we can provide the service level and the quality that they are expecting from Securitas. So I think that is going to be a critical part depending then on how things are developing post the election that you referenced. And then one last comment is related to M and A. We are very excited about the acquisition of the 5 properties from Stanley because they will help us and significantly strengthen our electronic security presence in a number of key countries but highlighting one of course Germany, very important where we order to have a strong overall presence. We can now then also strengthen quite significantly electronic security but same then also in the other markets. We have resumed acquisition activities like we highlighted in the Q3 thanks to the resilience and the stability that we have as a company and electronic security acquisitions are high on the agenda. But then it is always a combination of what we are looking for and also what is available in the market and there we would just have to continue to provide updates as we're making more progress in that space. I don't know Bart do you have any specific data on the U. S. Maybe to Edward's question about the averages? Yes, absolutely. What we normally see in the U. S. With these type of programs is that we are in a way more or less already fulfilling that type of level of wages. Of course, there's no set timing here either what the $15 means. Definitely, if you look at the California wages there, we would be well ahead of the $15 reference. If you can take that reference today, we would be well ahead of that. If you take non California wages, there's quite some big discrepancy between California and non California on average. There, I think we would be a little below the 15 on average. So, that would then mean that you have to go for some price increase again as well. But it would not be too much either. It's not that we are on average on 11 or 12 or something far from that. So that would be my best input today that I can provide to you. What we normally use for comparing average wages is the Web site of CareerBuilder also with our competitors. Thank you very much. And we can see that on average, our wages are at least comparable to and actually usually above our competitors for each local market. Thank you. So we have the next question from Mr. Stephen Golden from Deutsche Bank. Please go ahead, sir. Hi, thanks for taking my question. Just in light of what you were saying earlier on around renegotiating the the airline contracts, I just wondered outside of sorry, the aviation contract. I just wondered outside of that, clearly throughout the year, I think many people have been positively surprised with the resilience of the industry. Clearly, clients have been focused on making sure that their security infrastructure was there and that they have reliable partners at the time of huge disruption to the business. As things have normalized, then maybe your clients are now in a position to sort of think through their cost base, etcetera. Are you seeing a change in the underlying nature of the contracts? And for example, having really thought about it, they don't need as many security guards as they used to have or now they're in a position to potentially think about putting new contracts up for tender or that being a bit more strategic about how and to what extent they can move to an electronic solution. Are you starting to see any kind of negotiations along those lines, any change in customer behaviors? Or is it still relatively stable in line with the kind of price wage comments you had before? Thanks. Thank you, Stephen. Yes, so when you look at the last I mean since March up until now there has been a lot of focus on the short term in terms of managing the situation and that's obviously because we have clients across many different segments and verticals and some of those I mean I should also say there's a number of clients that we have in sectors that are really well positioned that are growing fast. But then we also have clients such as in the aviation space that are really suffering and going through a very tough period. But there's been a lot of short term focus. So a lot of the work that we've had and also all the clients that I'm in regular contact with, I mean that discussion has been very much about how we're working through the near term. But then I would also argue that a crisis like this one also then opens up an opportunity to think about what does the security equation of the future look like And that's something that we have the tools in Securitas. We have all the great people and the competence and we continue to strengthen electronic security technology competence. So we are very well positioned to design new security equations that are emphasizing more technology, more integrated solutions and that is obviously a significant opportunity for us. It's definitely something that we are discussing with a number of clients, but to your questions if it's stable I would say still it's still fairly stable situation when you look at how our clients are operating because they've also had a number of near term or short term priorities that they have been focused on. So those questions will probably come like you said in sectors obviously where there is significant negative pressure there would probably be more pressure as well, but there we also have tools to be able to manage and optimize the security equation while maintaining the strength of the security that we provide. So that is something that we just have to take that and we have to drive that as we go forward. But then it does differ quite a lot also between different segments of course because many different industries and sectors are affected in very different ways because of the COVID-nineteen situation. Thank you. So we have our next question from Neil Taylor from Redburn. Please go ahead. Yes, thanks. Good afternoon. A couple from me still, please. Starting with the margin, you mentioned some temporary savings in Q3. Can you give us some quantum around that figure? And also, are you able to offer any quantification either in absolute terms or in terms of margin around the additional health and safety costs that you've just referred to. Sticking with savings, the new measures that you expect to start to accrue from Q4, you said that you'd expect a bigger impact from those in the first half of next year. Would you expect to be at the full run rate by the middle of next year? And then finally, around the extra sales that you talked it looks like the cadence of those has picked up in the last 3 months. What are the prospects of you translating any of those sort of extra contracts into longer term work? Those are the questions. Thank you. So I'm just taking note. I hope that I captured all the 4 questions correctly here. First question if I understood correctly you wanted some more flavor related to the margin development from some of the temporary cost savings. And I mean cost containment immediately at the beginning of February and then increasingly in March when we saw that this was not only Asia and Europe but also a global pandemic. So those have helped in Q2. They have helped in Q3, but then I would also say and I mean some of those are fairly obvious we reduced traveling for example that have been quite easy to realize because of the situation that we have seen it, but we have also taken a very frugal approach in terms of any discretionary cost and investment given the uncertainty and given the pressure on our margins across all areas of the business because then of the headwinds that we've had in terms of top line and margin development. Then obviously I mean we have a number of kind of self regulating costs as well in a year like this one when you look at variable pay very much related to shareholder value creation and earnings per share and those will obviously also benefit in a very positive way from an income statement to cost perspective when I look at the year like 2020. In terms of the health and safety costs this is very much related to protective equipment but it's also related to making sure that we are able to optimize who is working with which client and what types of positions etcetera. So this is work where there is definitely a significant cost increase, but I'm not able to quantify that at this point in time. We need to work through that and also see a little bit more what is the healthy sustainable investment that is needed in this space because there has been a number of moving pieces in the last 6 months because of the developments. The third question. Cost savings program. Yes. And cost savings program, Bart, do you want to comment on that maybe in terms of the impact in 2021? Yes, absolutely. So we start, of course, with the cost side of that and that is as we expect SEK 350,000,000 to SEK 500,000,000, the range there that we commented on before. A lot of that is still depending on how things will exactly play out. So we remain very vigilant here towards our environment and changes in government grants and what happens also with some of our clients. So that will decide at the end of the day how this will exactly play out. And then we have a payback and expected payback on this of 2 years. So then if we would end with SEK 350,000,000 it would be half of that. If we end on a full year basis, if we would end at SEK 500,000,000 it would be half of that amount on a full year basis. We expect that we should be done by with this program by the end of Q2 next year. So meaning that basically then the remaining benefits will kick in as of Q3 next year. And then, yes, it will just take the necessary time till we have flushed everything through the system, so to say, to have the full year impact which will then only happen really as of 2022. And then maybe to comment on the last question I think that was with a significant increase in extra sales. Will those convert into permanent contracts? Well if you're looking at the last 4 months it has been fairly stable when you look at the extra sales demand in North America and in Europe. It's a bit and so that kind of proportion obviously when you look at the demand has been stable. It's a bit too early to tell how this will play out because we also see in a number of countries a number of companies are also reassessing from a long term perspective what is a good and healthy environment and that is relevant for a number of retail clients. It's relevant for a number of banking clients that we have and obviously very important for a number of health institutions, medical clinics and hospitals, etcetera. But institutions, medical clinics and hospitals, etcetera. But when we do a good job and we always intend and have the ambition to provide really good service to our clients then obviously we position ourselves also to do good things also for the long term and that has to be the ambition with all of this work that we are doing and I feel very good about the quality of work and how we've been able to mobilize and also change the service mix quite significantly in the last 5, 6 months. Great. Thank you very much for the answers. Thank you. We have the next question, the last question from Silvia Ducker again from JPMorgan. Please go ahead, Silvia. Hi, afternoon again. Apologies, something went wrong with my line, so I couldn't say thank you for the answers on the previous ones. Could I just sneak in a quick follow-up on that? Just you obviously commented on September, so thanks for that. But can you also give any indication on October, given we're now kind of early November? So just to see how the SEK1.5 billion might have developed 1 more month further in the year? Thank you. Thank you, Silvia. We ended the quarter on a positive note and that is as much as I can comment on at this point in time. Okay, that's fair. Thank you. Thank you. Thank you. There are no further questions at this time. Please go ahead, speakers. Good. Thanks a lot to all of you for joining us today. Thank you. Thank you, everyone. Take good care.