Securitas AB (publ)

Alf Göransson - President & CEO

Srinivasa Sarikonda - HSBC Nicholas de la Grense - Bank of America Merrill Lynch Robert Plant - JP Morgan Bilal Aziz - UBS Investment Bank Andrew Farnell - Morgan Stanley Paul Checketts - Barclays Allen Wells - Exane BNP Paribas Henrik Nilsson - Nordea Markets Carina Elmgren - Handelsbanken Capital Markets David Phillips - Redburn

Hello, everyone. Very welcome to our First Quarter Presentation for Securitas.

We'll go straight to the highlights. We had a fantastic year last year.

2016 was our record year. Had very good growth last year.

And on top of that growth, we're still growing this year with 4% in the first quarter, which we consider to be a good result. We have some backdrop in Europe given the extraordinary high comparatives and also that we lost a few contracts last year.

But still, all in all, good growth very much driven by North America and, to some extent, also by Ibero-America. Markets are growing well in North America.

The market growth is about 4%. We grow a little but faster than the market.

The European is to 3% growth. The Spanish market, 1% to 2%.

And in Spain, we are actually growing very, very well in the first quarter. We'll come back to that in a minute.

The operating margin is close to flat at 10 basis points below last year due to some of the issues that we have in Europe, and I'll get back to that in a minute. We're still improving earnings per share in real terms 3%, and in total change, a bit more than that.

Cash flow, always week in the weak in the first quarter. Net debt, low hearing still even though the cash flow will catch up during the year.

I think we will have a very good year in the cash flow, and we will recover what we missed in the last quarter last year. So it should be very, very good cash flow year this year.

That's what I expect. And the strategy that we are driving to increase the solution electronic security piece of our business is continuing to deliver, and we grow at a good pace in that respect in the first quarter.

The numbers on the next slide, of course, here you see it, basically the same thing as I just explained on the highlight slides. Not more to dig into there.

North America, doing well. We grow a bit faster than the market.

We have a good momentum in the market. You know that we have been spending basically all of 2016 in the integration and takeover of Diebold Electronic Security.

Now it is Securitas, SES, Securitas Electronic Security. And we really good get traction in the marketplace, where a lot of customers are very interested in how we can combine the man guarding piece with the electronic security.

And that gives us good interest, good traction, good prospects, a lot of activities, a lot of interest in the marketplace, so we expect to see and benefit from the commercial synergies from that acquisition during 2017 and forward. A small detail but still important is that we have won three small aviation contracts in the U.S.

in Q1. Still not a dramatic amount of money, but it's important from a reference point of view that we are winning and we hope to see that we will be able to continue now to see a little bit more activity in using private security in the airports in the U.S.

So that's a good positive sign in the U.S. in Q1.

Good, fantastic retention also in the clients, so we really had record high retention, which indirectly generates the organic sales growth that we have. Margin, good development; strong team doing a great job.

Very consistent, very good execution of our strategy. And we also get the leverage from the growth.

So continuous improvement, and we have seen that for quite a while now in the U.S. A good trend, and it continues in a good pace improving operating margins.

So a lot of good work from our North American U.S. organization.

In Europe, we have tough comparatives; we lost a contract. You heard us saying that many, many times.

But if we take it from the positive side, even though we do lose those contracts, and we have a backdrop and the reduction on the refugee- and terror-related business, we compensated all of that by other contracts. So I think that's good work from the Europeans.

So it's basically as we expect it to be in the range of 0% organic growth in Q1. And we have changed a little bit our projection for the year.

We said before that we will see a gradual recovery in the second half of 2017. We now move that to the end of '17, so that's a little bit of a nuance to that predication.

And the reason being that, first, we have more information. We see reality in a better way now than we did a quarter ago.

And secondly, we have tough comparatives in Q3. We know that, and we're going to meet those.

The good news in Europe is that we have a good momentum in new sales. New sales is up compared to last year in the Q1.

We don't report that, but it's a piece of information that could be relevant for you to know. And new sales eventually turn into portfolio and organic sales growth as the contract later on starts.

So good activity in Europe, but tough comparatives. But we compensated the losses of the refugee and that big contract by other businesses, which I think is well done still under the circumstances.

Where we are not as happy is on the operating margin. It's a bit too low in the quarter and 40 basis points down compared to last year.

We have a higher cost in a few countries, and some of those costs we need to discontinue, and some of the costs we will keep. So we will keep a little bit higher cost base than we necessarily would have had if this would be -- I'll say continues but we think the recovery is going to come by the end of the year, so we just keep some of the indirect costs for the coming quarters in order to not have to reemploy well-qualified resources just a few quarters from now.

In some other areas, we are now in the process of adjusting our costs, so that's ongoing in Q2 right now. We will continue to invest in the future.

Some of the costs that we have been putting into the European organization, they are supposed to pay off in a little bit longer perspective. And we will keep those as well.

In Ibero-America, very good growth, especially in Portugal and Spain compared to what we've seen for a long time. We are employing people in Portugal and Spain.

We were close to 7% organic growth in Spain in Q1. We haven't seen those numbers in a long time in a market growing 1% to 2%.

The reason being that a lot of competitors in Spain have difficulties. Some have actually gone bankrupt, and we can take advantage of that situation, of their weakness.

And we are gaining market share in Spain simply because we have a better strategy, and we have more strength and muscles than some of our competitors have. Also good growth in Portugal, which it hasn't seen in a very long time.

Latin America continues in a good pace, and Securitas Solutions developing well. It's developing well in all the three divisions actually.

So it's not only Ibero-America, but everywhere. The margin is basically -- the reason we have a drop in the margin is basically in Peru, and that is because we have a market situation which is a bit tricky in Peru.

We had the same thing some time ago. We took some corrective action and recovered a little bit during the second half of last year.

But now we have some competitors who are behaving in a very strange way and a little bit of a price war or price pressure in the marketplace. But also that's one part of the equation; the other part of the equation, which is a Q1-specific effect, is El Nino, the natural disaster that was happening in Q1, which has an impact on our business and our ability to perform work at different sites in a negative way in Q1.

So that we will not suffer from going forward, but the market conditions are tough in Peru. And we are taking corrective actions looking at the cost base and whatever else we can do in Peru in order to mitigate the situation.

The good news in Ibero-America is that we are recovering gradually the price increases that we need to recover that we had an increase of 1.7% in July last year, which we had difficulty to recover last year. But we have launched in the end of last year, and are now executing on a price campaign in Spain and trying to recover basically that whole wage cost increase we had last year.

And our ambition is to recover it during this year. We do not expect any further wage increases in this year also in Spain.

So hopefully gradually we will be able to recover that gap that we carried with us from last year. Cash flow was weak in the beginning.

We had some specific items actually in Q1. We are on the same level as last year in Q1.

We had heavily burdened in Q1 this year by interest payment on the euro bonds, which we pay in advance. And all of that fell in Q1 this year, so we will not have that negative cash flow in the coming quarters since we took all that payments in Q1.

And we also have quite a lot of higher taxes and prepaid taxes that we have to pay due to higher taxable income that has to be paid in Q1. And we also actually had to some extent higher bonus payments in Q1 as well, which we are more than happy to pay.

That's happy cost, so we love that because we had a very good year last year. So those are the reasons we think that going forward we will have a very good year.

And on the cash flow side, we were not performing well last year, especially in Q4, and that is our plan to catch up with that during this year plus the normal cash flow, so it should be a very good cash flow year in 2017. Net debt is basically mathematics.

As a consequence of that gearing of 2.4% to EBITDA is where we are right now, so not a very high gearing, but hopefully improving during the year. And then on our strategy, we keep moving along those lines that many of you have heard us saying for so many times, so I will not dwell deeper into that chapter.

So I'm sure there are some questions and hopefully some answers. So we'll go move forward with that and see what they are.

Hi, this is Srinivasa Sarikonda from HSBC. Three questions for me please.

First on Europe, what is the impact of declining extra sales on organic growth and margins? And why is the increasing electronic sales unable to offset this margin pressure?

The second question is on [indiscernible] to increase. Do you think the taking back of Obamacare might slow down this a bit?

What is the electronic segment sales growth in the U.S.? And what percentage of this margin increase is because of increased electronic sales?

And the third and last one is on wage inflation. In which regions and which part of the regions, like in which countries do you see the wage inflation?

And do you face any issues in passing through wage inflation in any of these counties? Thank you.

Extra sales in an important part of the decline in Europe without any doubt. It's a combination of different things.

And basically we have given some guidance of what the value of the large contract value losses, and the extra sales is an important part. I prefer not to quantify that as we usually don't do that.

And it has gradually also had a very good margin development in the extra sales. You might remember in Q4 '15, everyone was expecting that we should see an improvement in margins because of extra sales, but that was not the case because the margin was kind of average on those extra sales.

But then as we have kept the people and those contracts have been going on the refugee side, we have built that margin gradually. We had a lot of initial cost in Q4 2015, but then as time went by, we kept the resources and the business, and then the margin has improved.

So now when we lose that extra sales, that put the pressure on the margin in Europe. So even if we have an improvement on the electronic security side and technology and solutions is improving the margin, which is a fact, it's offset unfortunately then by the drop on the extra sales and the loss of the contracts as well, but primarily because of extra sales.

So the extra sales had a good margin now in the end of that boom of extra sales that we've had. The staff turnover in the U.S.

remains high. Absolutely it is.

On your question on the ACA, on Obamacare, now it was postponed or, I don't know, postponed or canceled or had to be reviewed after it was up for the decision. So we see really no change there.

We just have to wait and see what's going to come out of that. For us, it's business as usual and probably it's going to be for the remainder of this year in that respect, and then we'll see if that comes back on the radar screen and in what shape and form that will happen.

But for us, it's not really no impact at all at this point in time, and we don't foresee it, I would think, for 2017 either. The electronic security in the U.S.

is growing well. It's doing well.

It's good growth in that business. Its margin is a little bit higher than the average, so that helps us.

And on the wage inflation, we see a little bit more wage inflation in U.S. without any doubt, that is a fact.

Unemployment are coming down, and in a few cities in Europe, you see the same issue. We have difficulties to find people in a few places, but not very many.

But a little bit more wage inflation, I would say, in general in U.S. Not too much in general in Europe, but no concerns when it comes to passing it through.

We don't see any spikes or any dramatic changes, so we are confident that we should be able to keep the balance between prices and wages during this year.

I understand. In the U.S., could you give us the range of growth in electronic sales?

It's growing extremely well because the base is low. So it's very, very high numbers.

But if you take the Diebold acquisition as such, SES we call it nowadays, Securitas Electronic Security, is also growing well. It also has a positive growth as such.

But you have that piece coming into our numbers, and then on top of that you have the business that we are generating in addition to that, which was in place already before that acquisition. And the base is relatively low, so we have good growth in North America in electronic security.

So we feel very confident that we made the right choice, that we're on the right path. We get good traction in the market, and we foresee what we can continue to build on that.

Okay, I understand. Thank you.

Thanks a lot.

Thank you.

Hi, guys, three quick questions, I think. So the first two are on Europe; I just wanted to clarify the comment and the statement about lower client retention rate.

Are you mostly referring to the big contracts that we know you already lost, or is there something else?

Yes, the answer is yes. The answer is yes on that question, yes.

Okay, perfect. And then the second one just on European margins.

You've indicated that you're going to keep some of the extra costs in kind of expectation that growth will come back a bit in the latter part of the year. Should we therefore assume that margins will continue to be down year-on-year for the next couple of quarters?

And actually related to that, Turkey had been a margin drag, or rather the lower level of activities, particularly project work in Turkey had been drag on the European margin. I see that's now come back, but there's no comment about that having a positive impact on the margin.

I was wondering if you could clarify that. Thanks.

Yes, it's coming back. In Turkey it's coming back.

We have good growth in Turkey. It's more business as it normally is, and last year was a bit of a deviation.

But it has not had any dramatic impact on the margin. That's why we didn't write about it.

When it comes to -- on the operating margin, everything else equal, yes, the answer is yes. We will have a little bit of pressure on the margin because we're keeping some overcapacity, and we have to adjust the overcapacity in a few countries.

So yes, everything else equal. But everything else is never equal in reality.

You know that. But everything else equal, yes.

We think we are optimistic a little bit later on for the year. We have good indications when it comes to new sales, for example.

We have good activity in the marketplace. And the Europeans are doing well.

You have to remember we had an unprecedentedly high growth, and we're still compensating all the loss in the big contracts on the refugee- and terror-related business. So we do a good job, but we are keeping a little bit more resources, and we have to take some cost -- well, not cost, we have to make some adjustments, and we are doing that gradually now in Q2.

You should not expect any restructuring cost. That's not what I'm saying.

But we are keeping resources a little bit longer than we would otherwise do if we didn't see the recovery. But that will put a little bit of pressure on the margin in Q2, Q3, yes.

Okay, thank you. And may I just clarify the point you made about wage inflation in the U.S.

having picked up? One of the indexes that we all look at, the Bureau of Labor Statistics data, it looks like security industry wages are growing at kind of double-digit wage rates.

Can you just qualify, when you talk about inflation in the U.S., what kind of level are you saying…

I heard that number also, but I don't see that. I don't see where that comes from.

I cannot verify that. Maybe we are in different solar systems, I'm not sure.

But obviously we don't see that. We have seen wage cost inflation of 1% to 2% in U.S.

last year. And we are now around the 2%.

I think that's more relevant numbers. Double-digit wage cost inflation, we don't see that.

I don't see that, no.

Okay, great. Thanks.

I think it's all to do with the mix, and the data isn't particularly…

I think so too, so I think, at least from my perspective, that is not a relevant number. But we do see more wage cost inflation, and normally that is not bad news for us.

If it's not a spike, if it's in control, and it's sensible, and it's 1%, 2% more than you usually have, then we have normally good -- and the market is in a good mood in North America, a good momentum, very good macroeconomic situation in the U.S., a lot of optimism. So to increase your prices and compensate for wage cost should not be an issue.

We should be able to do that. So then you get organic sales growth, you get leverage, etcetera.

So normally a little bit higher wage inflation is not a bad thing. It's good for the guards, it's good for us.

Great. Thank you very much.

Hi, Alf. How big is Peru, and how long do you think it will take until the market rationalizes?

Thank you.

Peru is not that big. My friends here will help me to give you an exact number how much a percent it is of the total division.

So give me a second, I'll dig it out for you. But the behavior of the market, I don't know.

I cannot tell. That's probably going to last.

It's not very sensible. It's a very strange situation.

We will need to take some corrective action to mitigate that, so we are looking into the cost side, what we can do to rationalize because we never want to join these kind of price wars. I think it's better to shrink the business and lose some contracts and adapt the cost structure for a different level and make money on that level.

So we're looking into that and taking some corrective action as we speak basically in Peru. And it's quite easy to do that.

It's no big cost attached to doing that. And on your first question, Peru is a relatively small part of the business, but -- well, it's coming up.

Just a second. We'll see.

We have to translate Peruvian money in Swedish kroner and then make the calculation. And we're looking for the Peruvian exchange rate.

So without me making a guess of a percentage, we will get the exact number. 6% of the division.

Of the whole Ibero-America division?

Yes, 6% of the division.

And are you committed to Peru? Do you think it's a market you can operate well in?

Yes, we think so. Yes, we think so.

It's just -- these things happen from time to time now. It happened in Q1 when we have to make some decision how to adjust and what structure to have and what balance to volume and ambition to have.

And then we make those corrections, and then we should be good again. And then a part of the effect on the margin is also the El Nino effect, so it was a dramatic quarter in Peru.

So we will stay in Peru absolutely.

Thanks.

Good afternoon, everyone. Just two quick questions from my side please.

Just perhaps to understand the margin bridge in Europe a bit better for the rest of the year, can you perhaps help us understand the phasing of the capacity reduction you are planning to do? And do you think you'll be done by the end of the first half?

And separately, what broadly percent of sales-wise in Europe was a non-portfolio business in Europe in the first quarter? And very finally, I know you've suggested some pick up in new sales in Europe.

Can you help us understand which countries that was specifically in? Perhaps just give us a bit more granularity around the organic growth rates in France and Germany.

I didn't get your last question. Can you please -- can you repeat the last one please?

Yes, just a bit more detail around where you've seen the pickup in new sales country-wise in Europe, and specifically around France and Germany, organic growth rates…

We have a pick up everywhere in new sales, I will say, in new sales. We do well in the big countries, in the Nordics, and we do well in Germany, France, for example.

So good pick up in new sales I think I would say more in general. Even in Eastern Europe, we are performing fairly well.

When it comes to electronic security sales as a percentage of the total in Europe, we are at the AGM right now, so I don't have my -- how much of the total sales it was in -- it's about 18% in Q1 of total sales, and it was about 20% last year in Q1. And then on the corrective actions that we're taking in Europe, that's basically been taken in Q2.

We make those adjustments in Q2, but that will -- so we'll hopefully see most of that effect of those corrective actions as of Q3 and onwards.

Brilliant. Thank you.

Hi, there. I was just wondering if you talk about if there's some market share gains that you've seen in the U.S.

How much of that do you think is being driven by the integrated solutions that you're offering, and how much is coming from fallout from market consolidation?

I cannot -- it's impossible to say. I think it's a combination.

You cannot split them in two buckets either. Some of our competitors are busy with other things and have maybe less time to spend on the market.

We have a very, very stable team, a very consistent team in the U.S. and really focus on the market work.

So I think we are gaining from that. But also when we do that, we tell the story we can tell, which is the one you know very well of how we can optimize the value for the client.

So the combination of the two, they kind of go hand in hand, and that helps us in the marketplace to be more successful than competition, I would think.

Okay. And just on that, the technology offering in the U.S., is it stronger relative to other regions, or would you say it's equal in Europe and Ibero-America?

When it comes to offering that, more built it into machinery, let's call it, to the knowledge and the tradition of working with technology is stronger in Europe because we've done that for a very long period of time. In U.S., the collective competence, I would think, is higher actually now with the Diebold acquisition in house than it is collectively in Europe because that is a very, very -- 1,200 engineers, very strong team.

We have a very strong base and have a lot of competence in one place, so to say. So that gives us a real muscle in the U.S.

as such. But it takes a while to create the commercial synergies in the sense that you need to build it into the machinery.

You need to build it into the branches, to the areas, to the sales forces, etcetera to be used to work for that, to be used to the arguments of how to sell and how to do that. And we have prepared all of 2016 for that, and now everything is in place and we start to see the traction of it actually.

And it's working very well, and we can spend 100% of our focus on the marketplace doing that in the U.S. So that gives me a lot of confidence in U.S.

going forward.

Okay. And then just one finally on the problems that you've talked about in Peru.

Is the price competition, is that mainly driven by local operators?

Yes, yes.

It's not really across the rest of the region?

No, it's only some local players in Peru.

Okay, that's great. Thanks.

Hi, everyone. I've got three questions please.

The first, can I just clarify, Alf, that your expectation of recovery in Europe and the fact that it's been pushed back towards the end of the year, can you just clarify what it is that's led to you pushing it back? Obviously the Q3 comp being difficult was something you probably knew about already.

Is there something else that is --

No, it's not something else. I might answer right away.

We have a little bit tougher comparatives. We knew that all the time, s that's nothing really new.

But we have more visibility now than we had before, so we decided to change that to the end of last year simply because we have better visibility. I think that's the main reason.

Okay. There's some headlines flashing up on the news wire saying you've shelved plans to enter Malaysia.

Can you just remind us which countries would be at the top of your list to enter, which new countries are those, and the likely timeline?

We have not shelved Malaysia. On the contrary, Malaysia is on top of our list.

Maybe it was -- I said to somebody a few hours ago that we shelved the Philippines. That we have shelved because the ownership structure is too complicated to enter the Philippines, so we put that on the back burner for the time being.

But Malaysia is certainly on the top of our list and Australia as well. Those are the two markets where we are really working hard to try to find a good way to enter through acquisitions in those two markets because they are being asked for all the time in the global tenders that we have a good owned presence in those two markets.

So it's probably Philippines that was shelved, which is different from --

Maybe. I must have read them both.

And Italy we've spoken about in the past. Is that still on the radar?

It's still on the radar, but it's still very difficult. Expectations are on the wrong planet.

Some companies are not something we'd like to touch, and the ones we'd like to buy are not for sale basically. That's how it is, so it's not so easy.

But it's being followed and monitored all the time, but not imminent, no.

And then my last question relates to the U.S. aviation market.

What's your latest assessment of the potential of that market for --

It's a $4 billion market. We have won a couple contracts.

It's in the range of $10, $15 million, so it's not a lot. But still, it's important symbolically, reference-wise, and these are annual numbers I'm mentioning here.

So it's a huge potential, that market. And it's very difficult to enter.

I think we have some good plans, a good team in place. And now finally we've also got some good reference, some wins, three small contracts, but still important from a reference point of view.

And hopefully that will start to give us now some better traction in the U.S. aviation market going forward.

I think that will certainly open up gradually without any doubt. It's not going as quick as we were hoping for some years ago, but now I think we are a little bit more optimistic that we have been for a long time.

Thanks very much.

Hey Alf, just a couple from me. Just following up on the questions on the electronic solutions department.

I noticed in the last few quarterly results you talk about obviously the traction in North America. There's generally less commentary on Europe.

Can I just sort of ask, are you generally happy with the progress that you're making on the tech side, security solutions side in Europe? Maybe you could update where penetration or uptake rates are.

And then the second question is really just on Ibero-America again. Could you tell us how much of the 15% growth was price versus volume please?

Thank you.

Most of the growth in Ibero-America is real growth, so to say. You have a piece of Argentina there, but that is -- I would estimate less than half of the growth is price related, and the rest is real growth.

That's my rough estimate. When it comes to the European side, in generally speaking, I think we are pleased with the development in Europe.

We are growing electronic security sales. We have good organic growth in electronic security in Europe in spite of 0 organic growth in the totals, so that relative share is increasing well in Q1 in Europe.

We have a few countries where we are a bit slow, which we're not that happy with. But they are good plans in place.

It's not very easy. We have given all the support and confidence that we can give.

But we have different pace in different countries, and a few countries are still relatively slow. And we also have many branches still in Europe which have not been able to sell any cameras or any technology yet, so those we are chasing and supporting in different combinations.

So it's quite a big variation between the best and the lowest when it comes to that share. The top performance in Europe, they are about 50% of total sales now in a few countries, while the ones in the bottom, they are more like 4% or 5% of total sales.

So it sounds like there's some, I guess, customer acceptance challenges there. But is there any differences in the competitive landscape in Europe versus the U.S., or does that very much vary country by country as well on the tech side?

Well, it varies a lot. But the main reason is not the clients.

I would not -- that's an easy excuse in a way sometimes. But the reality is that I think the main reason is really our own ability to drive that and our own conviction to take that (inaudible) in the country and in the area and in the branches.

That's where it is. Because we can see in one country where we have low performance, we are in the 4%, 5%, 6% of total sales range.

We still have branches doing very, very well while others are doing nothing. So to generalize that, and then to say that, look, it's because of that market or because our customers in that market, I don't believe that really.

So I think it's very much our own ability and our own conviction to really drive that strategy. And the Europeans in general do a very good job at pushing that, and that's why we still have a very good organic sales growth in electronic security in Q1 in spite of a zero on the total division.

Okay, great. Thank you.

Thank you. And coming back to the operational overcapacity in Europe that you've talked about, is it possible to quantify how much negative impact the choice to keep that capacity had in the quarter?

We decided not to do that, not to granulate that too much. So we discussed that a lot in the process before the Q1, but we decided to do away with it, so that's why we'll have to stick to that.

Okay. So if I say it's fair to assume that it's a least 20 million (inaudible), is that --

That's the same question. Sorry.

Good try, but I'm not going to answer it anyway.

Okay, thank you. and if go to Spain here, and you previously stated that margins had dropped from high single digits or above 5 at least down to low single digits in the past few years with the tough market we've seen there.

Where are you seeing profitability in that market right now? And what's your assessment of margins in the new business that you're winning?

Selling guarding contracts, manpower guarding contracts in Spain, you don't make money. In the best case, it's 0 operating margin, so that doesn't make any sense unless you can convert that contract 6 months later to a solution with a better margin.

Then you could suffer the pain for a while and then do that. So the success, where we are selling, where we are gaining market is because we are selling the combination, the solution contracts.

That's where we have a traction in Spain.

Okay, but is it possible to quantify on what type of level that profitability is? Is it above group average or below?

When we do sell those contracts, we have a good profitability. But it's definitely above the divisional average, absolutely.

Okay, very helpful. And coming back to one question.

Maybe I missed this also. In the solutions electronic security sales, have you quantified how rapidly that is growing now on a group level in organic terms?

No. We do that once a year.

That's what we did. That's a [indiscernible].

So we did that in Q4. So if you go back a quarter, you will find the numbers.

Okay. Thank you very much.

Yes, hi. One question on the partnership with Knightscope in California that you extended in the quarter.

Could you give us maybe some more details on that? And do you have the possibility to offer the technology outside the U.S.

as well? Thank you.

For everybody's sake of understanding, Knightscope is a small startup company in the Silicon Valley with which we have an agreement, and we have been buying robots from them. And we have deployed, I think, 15, 20 of those now in California at different customer sites indoor and outdoor.

And for us, it's a very interesting way to test that technology and how it works, and how we can then combine the use of technology and intelligence and digital data, to some extent, gradually artificial intelligence, and how we can use that and then in combination with our guards on site. So we never only have robots, so to say.

That doesn't work yet. You need to have a combination of somebody doing something because if you put a blanket over that robot, it's kind of inactive.

So we have that, and we're testing that in a good way. Knightscope has so far last year only sold those in California, so we've only deployed those in California.

But now they have decided to be able to serve that on a national basis in the U.S., so those robots are only available in the U.S.

Okay, thank you.

Hi, good afternoon. I just wondered if you could give an overview of how you see your M&A pipeline developing over the next 12 months.

Do you expect to conclude a few deals in the remainder of 2017?

I hope so, but you never know, and unfortunately, we are not 100% in control of that process. So we did one yesterday in Mexico.

We bought a small electronic security company in Mexico from Diebold. So that's one of them.

I'm sure we'll do something, but to what extent and what size is hard to predict. We have, as always, a lot of opportunities in the pipeline that we're working on.

And what it is mainly electronic security companies in Europe and North America to some extent as well, and then to establish ourselves in a couple of new markets in countries where we are not active. But I would think we will make some further acquisitions this year.

Yes, I would think so.

Great. Thank you very much.

Okay, thank you very much for calling in. We'll conclude here, and we will be having our AGM here in 45 minutes.

Thank you very much. Bye, bye.