Securitas AB (publ)

Alf Goransson - President & CEO

Srinivasa Sarikonda - HSBC Bilal Aziz - UBS Stefan Andersson - SEB Mikael Holm - Danske Bank Andrew Farnell - Morgan Stanley Henrik Nilsson - Nordea Markets Allen Wells - Exane BNP Paribas

Hello, everyone. [indiscernible] Securitas calling and we'd like to present to you the second quarter of 2017.

So if we just give you - the quarter in summary is a pretty decent quarter. It's pretty much in line with what we expected ourselves and very much the same story as we conveyed a quarter ago, so not very many breaking news, but still a few minor things which we will like to highlight.

We're happy we're still growing. We are growing on top very tough comparatives this quarter both in North America and Europe, but even so still 3% growth, so we'll come back to that, but we expect we think is good.

And we also - in the quarter we had a positive growth actually in Europe, which didn't expect. It was a little better than we expected in the quarter in spite comparatives.

The operating margin pretty much line with last year, we'll get back to the details there and we improved a real change when we leave out the FX, we still improve the earnings per share. Cash flow was okay.

In the quarter we'll have a good cash flow now in the second half of the year. So we should reduce the leverage now when are coming closer to the end of the year.

The numbers you see, I guess you've always seen most, I could come back to that in case you need to. We can also mention that we have a little bit lower tax rate than you've usually seen us having.

So that is the mix I'll say of the different taxations throughout the group and also a little bit more positive development on the tax rate, so that is a little bit lower and that has an impact on the quarter, but also on the year-to-date number. So a little bit lower there on the tax rate to be used I'd say going forward.

In North America, we have on the growth side, very tough comparatives. We had a lot of extra sales in May and June last year.

So, that's why the growth is on 2% this quarter. If we wouldn't have had that that would compare without it will be 4 or even little bit higher than 4 actually in the quarter, but that was just a peak in Q2 last year.

So, now when we come to the coming quarters we'll get back sort of the normal on the comparatives. So, good activity in the North American market, a lot of things going on, we seen no signs of any reduction or decline in the market activities.

A lot of tenders, lot customer activities, lot of meetings, very good interest of the combination of electronic security and manned guarding and we are now spending a lot of time with existing and potential clients explaining and marketing our story because we have done all the integration work of the Diebold acquisition and now we are on the market place telling our story. And that is giving us very good traction and a lot of activity in the tender [ph] phase, so good activity in the North American market, good market activity, no signs of decline.

What we do see is a little bit more of wage inflation in North America and unemployment sector is coming down in North America, in the US and I would expect to see a little bit more a wage inflation there increases on prices going forward. We have said that before and those signals are getting stronger and stronger.

In a good macro situation, we've a booming economy, but it's usually not a problem, so if we would have a little bit higher wage inflation, we would increase the prices accordingly. And sometimes that's even good news when you get a bit of leverage on your indirect cost.

The margin was very good in the quarter. We had a tough quarter to compare to because Q2 of last year we had temporary extra sales, had a very good margin.

But still we are improving point one on the margin compared to last year in Q2. And the support we had last year in Q2 helping our margin last year is basically equivalent to the run off releases from various different cases that we've had that related in Q2 this year.

So those two extras - last from extra sales and the run offs this year are basically of the same size. Meaning that with or without that we improved the margin point one.

In Europe, a little bit better situation than we ourselves expected. We were on zero before and we are back year-to-date, but a little bit of growth in Europe.

Good activity in the market places, still tough comparatives, we are going to fight tough comparatives also in Q3. I am not going to speculate what our growth rate will be in Q3, but we still have tough comparatives.

But we have good new sales in Europe, good activity in number of markets and we still believe and the same message has we had Q1 that we will have a gradual recovery towards the end of 2017. And if you sorts of add the two year together then you get, you will see that we are growing fast in the European security market.

We're just growing in the 2%, 3% range. In North America, I forgot to say, but that's in a range of 4% to 4% plus.

So, all in all if you add all things together, we are still growing faster on a market given and very much driven by that power strategy of which is better than most of our competitors, simply. Margin, also very much in line with what we said in Q1.

We had taken actions on the operational overcapacities. Some of those resources are now being discontinued in Q2 and gradually more and more so in Q3 and Q4, so we started to get more full year effect of that.

We will have no restructuring costs related to that and the ones we had were minor and managed within the resource I'd say that had we had allocated for such things or other things. So we could use those of that space I'd say.

So those actions were taken on the cost side and we will have a gradual support of that in the quarters to come. But some of the overcapacity we will also keep because we expect a recovery on the sales side towards the end of the year.

Other than that it's basically the same situation as it was a quarter ago. Ibero-America, still good growth, a little bit tough for macro-economic situation in Latin America, Argentina is in a recession.

How that will impact us is difficult to say, but still a concern that the macro economic situation is weakening in Latin America in general very much because of the indirect impact of Brazil situation and Argentina in poor conditions right now. Even so we still grow well, very much driven by inflation in Argentina in all honestly, but even so, I mean we're doing well on the growth side.

And what has been very encouraging is the situation Spain and Portugal. We have had a very good development in Spain and Portugal and the one important explanation of that is that some of our competitors had gone bankrupt or in difficulties and those customers are then switching supplier and we can then benefit from that.

So we picked up a number of contracts actually during Q2, especially in Spain from one large competitor going in liquidation and that is helping our situation. So we are growing in Spain 7% organically first half and normally the market is more like 1% to 2%.

So good development in Spain and, but also in Portugal historically good numbers for various reasons in Portugal. From a margin side, we had difficulties improve same as we had in Q1.

We have taken actions there, we are reducing cost and also taking all actions where we can to - on contracts which are not good enough or on the indirect cost that we can reduce. So we have been also making improve all the way up till the end of May.

June was black numbers, black figures in June, in the month for June. So hopefully the situation will now - during the second half of the year will be improving - improve us we turned it around in June.

So we expect that to last and that the performance improve will be better in the second half than the course of the first half. Cash flow okay in Q2 better than last year, but okay.

And we expect to have a very good cash flow now in the second half as we usually have. Net debt is just a mathematical consequence of the cash flow.

Dividend was paid of course in Q2. So that's a big chunk of money.

Translation is positive to us, but still the leverage EBITA to net debt is not dramatic, but it will be reduced. Now the leverage will be reduced during when we come towards the end of the year.

And of course our strategy is you have heard many times, we keep executing that so, we keep - we have a good pace in the electronic security sales and the relative share is improving. So that is moving on in a good way and we expect it to be - continue to be at high pace of growth in that piece of our business during 2017, but the final number will be disclosed in Q4.

All right, so that's the short version of the Q2. So we will see if you have any questions.

Please go ahead.

Hi, good morning. I have a couple of questions.

First in US, what are the underlying margins in US this run off in this quarter and last year extra sales? Will this continue going forward?

Well, in the US and maybe we had - the margin was supported I will say, 0.1, 0.2 last year by the temporary sales, a high margin development last year and the same probably run offs, so they even out, so you need to take that into consideration and you look on the seasonality of the quarters in the past. So when you get to factor from there.

So it was - even so, even if - no matter how calculate and I was trying to explain before, if you take it with or without the run– the extras are both quarter - Q2 this year and Q2 last year we are still improved the margin 0.1.

Okay, but going forward in Q3, Q4 probably the next years, we'll be happy -

But we're not making - I'm not making any forecast. So I won't give you a number for the coming quarter.

But I mean we have - so we have a good margin development in North America. And I mean all in all however you calculate, we have - improve in margin in North America.

And so margin has been gradually improving over the past years. And year-to-date, we have improve in margin 0.1.

Thanks. Got it.

And outside of Americas, it's just like 6% of your business there. So what other factors dragging your margins?

Margins were down 30 basis points in this quarter?

Sorry, I didn't get the question. Could you repeat it please?

It's just a small part of your relatively small part of your business.

Yes.

But what other factors are causing your margin declines in that segment?

I mean, it's Peru. I mean basically it's all Peru.

Peru, it's a small part of our business but we have had severe losses and due to the situation that there's been a very tough price pressure in the marketplace and we had to adapt the cost structure for that. So we have taken costs during Q1, Q2 to adapt the structure and the losses of the business, adaptation of the business to reduce the size of the business and to lay off people that is what has caused the losses.

And those loss even if it's a small part, those losses on the margin is basically the whole difference of why we have a lower margin in the division compared to last year. Now we turned it around so hopefully it will be black numbers during the second half that's the way it looks last year was positive.

So that gap should now reduce going forward.

Got it. Thank you.

And one last question on Europe, you're still saying that you'll keep some of the costs in Europe. But going forward this margin decline of 30 basis points year-on-year will come down, will moderate going into Q3, Q4?

I mean, we are keeping some of overcapacity. And yes, we are keeping that because we think it will be - if we think it's rather not very clever to lay off people and take costs so that and then we need to re-employee people six months later.

So that's why we decided to keep some of these resources. So we will have some overcapacity until we see the growth coming back and that will of course that will put some pressure on the margin.

We will also in Q3 - more so in Q3 than Q4 still have tough comparatives with high refugee sales, related sales in Q3 that then reduced quite sharply in Q4. So Q4 will be easier subset comparatives and a different mix in that portfolio.

Thank you.

Thank you.

Good morning everyone. And just three quick questions for me please.

And you mentioned wages in the US and [indiscernible] continue US kind of now at 75%, which is the highest it has been for a while. So I suppose how confident are you in managing that without any negative spillover for the margin over the next 12 months?

And sorry, yes, I'll ask the other two later.

It is a concern. We're on the highs.

I mean we manage, it's on, it's very much on the high side, it's being - it's close to a little bit too high I would say. I mean it happened before and we have managed before.

So and you will also need if you're looking back, I mean, depending on what kind of projects that we have and how we staff those projects, some will have a very high turnover and many don't have any turnover at all depending on what we pay people for different positions on the quality and the quality or the qualifications needed I should say of those posts, of those guards at those posts. Anyhow we are on the high side now.

We were in those levels before just before the Lehman Brothers crash. So you go back 2007 and 2008, you will find more or less the same numbers.

So it's not unusual for us to manage, but it's on the high side. And that's why I think that we will start to see more wage inflation in order to keep or to reduce the turnover of the people.

And I think it's a good timing to manage that because the economy is good and the probability to push those wage cost increases to the market is good. So I wouldn't say that we are at the limit but we are on the high side.

And yeah, I think that's the best I can say.

Sure, brilliant. And just on the remaining two questions.

In Europe, I believe you flagged that the margin was impacted by reduced client retention. And I know you've previously already flagged the contracts in the UK and Sweden, is anything over and above that and then if so which regions where those contracts in?

And finally and just to clarify the comments on Peru, I know you mentioned some of the trading in June, is now the expectation now the business should be profitable in the whole of the second half? Thank you.

Question on the second one, yes. On the first one, I mean, yes, I mean we have a relatively low client retention, 89%, which is historically low, we are usually at 90% or above.

That means that we have had a higher turnover in that portfolio and when we start many contracts that has a bit of a pressure on the margin and that's why we have used this as an explanation as well. We usually, as a rule of thumb, to give you any guidance is that when we mention something it has an impact of 0.1 on the margin.

So, yes, it does. We hope to be able to improve the client retention going forward and then of course as we do that that will improve also, that will have a positive impact over margin.

Brilliant. Thank you.

Thank you. Two questions, first, little bit may be an overview question or a broader question.

I mean you've been working on the technology side and growing that rather well and margins should be high in that area. Looking at the last few years, going into a strong economy, leveraged on some growth, extra sales on that should also contribute to the margins.

So we don't see much of a margin movement. So my question is really do you, I mean, certainly on the technology side you need density, you need high utilization to really get, to get more good margins, are you not really there yet?

That's one part of the question. The other part would be is it so that when you combine solutions that you had to give away a little bit of that upside to get those contracts?

Or yeah, if you could elaborate on how you see that - this mix change actually playing out in the longer term? Why aren't we seeing it clearer at the moment?

That's the first question. The second question, is your thinking around M&As at the moment, how to see the balance sheet?

Are you willing to do more M&A in these areas? Thank you.

We are - on the last part first, it's a shorter answer. That yes, we are, I mean, we are not concerned about the leverage.

We are very confident. We have a good cash flow, so we've reduced the leverage and it's not high at the point being anyway.

So, yeah, absolutely, I mean we will - we are active in the M&A field. We are looking for small medium sized technology acquisitions primarily.

And we have the couple that we are working on, which looks pretty encouraging. And we see if they will materialize say during the second half.

So, yeah, we continue very in a sensible way given the situation we have but we're not slowing down really we could keep entertaining the opportunities we find. On the first question is a really very relevant question and that one is - the answer to that one is if everything else was equal then you would have seen the margin improvement because that is the reality but everything else is not always equal, you have bits and pieces, up and down diluting that picture.

But certainly the margin on electronic security solutions sales is improving the way we always say and especially on this live that we are using here all the time. But those mathematics works all the time.

Still the part is when you have all the ups and downs of all kinds of reasons, with little refuge sales, temporary things, other things going the wrong way in Peru right now in Ibero-America, etcetera, etcetera, etcetera. But also is the fact that still we have a margin dilution on the guarding piece, which is I mean it's 85% of our business in that range, 80%, 85% of our business and that margin dilution I mean if that increases a little bit on the traditional man guarding piece and if that changes 0.1, 0.2 that margin dilution then of course that eats the very much of the improvement we do on the electronic security sales.

So, going forward, I mean, we have to keep changing that balance between the 85% and the 15% or 16% or whatever it's going to be this year. And as that balance changes, you will see an exponential effect because of the dilution will reduce on the guarding sales and be it a security solution, electronic security piece will grow in proportion to the total sales.

So I'm convinced that this is going to work. But picture is mudded a little bit by different other things plus that guarding erosion I should say not dilution, erosion on the guarding sales is constantly there.

And it's tough to win both contracts and if you have all kinds of issues affecting that. So that margin erosion is always there.

But I mean if we wouldn't have driven the strategy the way we have and moved ourselves the way we have, our margin would have been much lower than they are today for sure.

Okay. Thank you.

Very clear answer. Thank you.

Good morning, everyone. Thank you for taking my questions.

On the previous question here on the margin pressure you are seeing on the man guarding side, if this dilution broad-based are related to all markets or is there any specific markets where this is coming from?

I mean that's a general. I would say you will see that in all markets.

I mean we have it in all markets. And yes, the answer is yes, it's in all markets.

And I need to reiterate that I mean this - the way we are driving our strategy you need to have patience but one that will definitely without any doubt have a very positive impact on our margins going forward. And again if we wouldn't have done what we did the margins would have been much lower than they are today.

So this is the right way to go. And I am 100% convinced because we follow his weekly, monthly, branch by branch, 2,500 branches around the world, all the areas, all the countries, is this equation really working, do we improve the margins from the 4%, 6% to 8%, 10% when we do sell solutions, yes, we do.

Yes, we do. Yes, we do everywhere, all the time.

But we have to fight this still proportionate balance between what that piece of the business and the guarding piece and the erosion of that. So the strategy works.

You will be happy shareholders going forward because this will just we don't need the bank keep banging on with that strategy. I mean it's going to work.

And I'm sure it's going to work. And you will see margin improvements in the long run because of that.

Okay. Thank you for that elaboration, but that still sticking to this question, I mean, man guarding has been around for a decade if not much longer and it's always been quite a pressured industry.

What do you think if this margin pressure dilution you're seeing in this business, is this something new over the past few years?

No.

And what is this?

It's not new, it's been there all the time. It's been there all the time because of the mechanics of that business, but the cause if you like to fast forward what happens to companies who are not making this shift, a strategic shift, are willing to make that step you can look in Spain because that's where you can fast forward the future of the rest of the world because there has been a crisis where the market collapsed five years ago completely.

And some people made the choice like we did of starting to invest one in the middle of the crisis. We bought companies, we invested, we hired people and we were beaten up by you guys and everybody else in the marketplace but we were considered more or less stupid on investing in the middle of a crisis and we did.

And now we are gaining market share, we're growing 7% in Spain. We are picking up contracts from the companies who stick to man guarding.

And what happens to them, they go bankrupt. They are going out of business.

And this will happen everywhere. This market will consolidate tremendously over the coming 5, 10 years not because companies will buy each other simply because the companies who stick to be old fashioned strategy they will simply die and they will not survive, they will be [multiple speakers] and the cash flow is I mean you [multiple speakers] month of work and then you get paid by the customer two, three months later.

So I think this is we need to - we think we are on the right path and we do the right things and when you see more differentiation in the market as well that w/ill also speed up this process because it's been the company so we just keep hanging on to be old fashioned strategy. On guarding, they will quicker to go out of business because the other ones will create more customer value simply because reducing the cost for the customer, improve in security at the same time.

Okay. Thank you.

And two more question for me if we have time. In Europe, you mentioned this overcapacity that you've chosen to keep on line and if there are any specific markets where this overcapacity is more severe.

So it's really those specific markets we need to see, growing more rapidly for it to be offset?

No, it's mainly the markets where we had a lot of extra sales, where we're making adaptations, we're doing that in the Nordic countries, we're doing about in Belgium, in France. We take some actions.

I mean the sales refugee and care related sales, so which was very much so in France on the latter part in France and Belgium, UK, so it's UK, Belgium, France, a little bit in Germany, and the Nordic that's where most of the actions will take.

Okay. Thank you.

And one last from my side in Ibero-America, I mean Spain has been returning to growth now for the past few quarters. And over the past few years you've taken a massive hit in Spain on the margins if I'm correct.

How is the margin in Spain developing now with these new volumes and can you give us a ballpark indication on the run rate level in Spain?

Slowly improving margins is the case. Improving, yes, it is.

But not very, no big numbers yet, but I think we are creating a good base for improving the margins going forward.

So still below 2 then?

I haven't said that.

Okay. Thank you.

That's it for me.

Yeah. Two questions, first it's a follow up on the one regarding the margin pressure on man guarding, you earlier talked about 20 basis points to 30 basis points annually, is that still –?

Still valid. Just to add to what I said before as well, I mean, you can look in North America where we have had a more steady situation.

Europe is very much diluted by or impacted I should say by the ups and downs of the refugee and terror related and extra sales which has been big numbers going back and forth. But if you look in North America, it's a steady positive trend over past years.

On the margin side, improving the margins, so I think that's another good example of proving that we are in the right path and now the inclusion of Diebold is supporting that or what we now call SES, Securitas Electronic Security, is also supporting the margin in North America so and so that trend is there and it's substantiated subside by the moving our strategic move.

And considering that you have a fairly strong underlying market for the moment, I mean, good growth both in North America and Europe, you think this will become the margin erosion will accelerate if in a market down thing or is it –?

I think regarding erosion margin the 0.2 to 0.3, I think that we will just - I mean that is not going to change overnight because there are still thousands and thousands of thousands of guarding companies fighting for their lives and trying to win contract on the wrong price level. So that margin erosion will remain and then you always have mechanics of this business.

Your startup contracts and if you don't always get X, not everyone is always getting exactly the balance between price and wage increases, you have social cost increases from governments, you cannot always pass things on exactly the same month as the cost is increasing. There is a number of factors influencing that side.

I think you should assume that 0.2, 0.3 will probably last for years to come.

Okay. And I also - just a question on the growth rate of electronic security and solution just looking at the investments I mean they were down 22% in quarter and 6% year-to-date, is that an indication of a slight slowdown in opportunities?

No, it's not, it's a mix depends some contracts have a high content, others has a lower. So there is no indication of any slowdown there.

Are there an exchange in terms of how customers want to have it - they don't want to take more capital and sell so?

No, no, not at all. There is - it's the same mostly and absolutely the majority of the cases we are investing.

And there is no change in that pattern that - and we prefer to invest in our own balance sheet in the equipment on the customer side. As you're also saying on your previous question but last year we moved into US, we had quite substantial investments last year in that move in of CapEx related to the moving into US.

And so when you compare those 20-whatever percent you mentioned that should be taken into consideration.

Okay. Thank you.

Hi there, morning. Just on wage inflation point for North America, I mean, this was something that you expedited at the start of the year.

I'm just wondering I mean at the time you weren't seeing anything coming through just why do you think there has been a delay on that and why is it coming through now as being an issue?

I mean the unemployment rates are very low if you take the higher level positions in the US you start to see quite a wage inflation on indirect people so to say. In the category of people that we - from where we recruit for guards, the unemployment rates are higher, so that is a difference compared to the general economy I would say.

But even so I think we were - it starts creeping on us now. I mean we start to see more wage inflation in the US to retain people, to reduce, to improve the turnover of our employee rate and also to get the right quality people.

So I think going forward that will be the case. It's not necessarily bad news in any way and sometimes even good news because we assume that we can push it onto a marketplace so that gives organic growth and it gives sometimes some leverage as well into your direct cost.

Okay. And also just in Spain employees where you call out bankruptcy as being a support to organic growth, have you seen any other markets where that kind of stress is being supported?

Portugal is similar as another competitor in Portugal in difficulty. So that's happened there as well, other than that not of any significance in any other market.

Okay, fine. And just finally, has anything changed in terms of the pace at which you think the markets will recover towards the end of '17 and therefore the level of overcapacity you're going to keep within your business?

We have made all the choices, the actions are taken, not all people have left yet who should leave. So we would get a gradual effect in during the second half without being splitting it quarter by quarter.

So we are making the adaptation to the structure. And then we see - we expect the growth to come back by improving by the end of the year.

So we keep our total capacity for the coming two quarters. And yeah, I don't, I cannot be much more specific than that.

So I mean, but I mean if you try to make some kind of distinction between Q3 and Q4, I mean, we'll have a gradual effect on that on the adaptation of a structure. We will still have some overcapacity at least in Q3, possibly part of Q4.

Less so but still less so and then we have tougher comparatives in Q3 and Q4.

Okay. It's all helpful.

Thank you.

Hi. Just one follow-up question on US please, what are your emerging thoughts on US healthcare cost?

Arguably 75% churn, recruitment and training cost should be up a lot. If the churn comes down, can it off the wage rate inflation pressures?

I mean you have - it's a very couple of factors implied in that. Of course it's a cost related to the [indiscernible].

I think we are a little bit on the high side now. We have had it before but it's on the higher side.

So if we reduce that that will support our cost. There is - the other side of the same coin is that and we need to push wages, we need to increase wages to reduce that.

That's the only way really. And doing that need to be sure that we can manage that, so we cannot increase too much, we can increase more what we have done, but we cannot increase too much because when there is a risk that we don't get the price increases and the hit from that if you have a delta between price and white shirts that's perhaps much more than having a higher turnover of people.

So we need to manage that in a prudent way, but I can just set the direction, it's hard to give any more specific numbers, but the direction is definite and you will see more wage inflation going forward hopefully that will have a post on the turnover rate among our people.

Got it. Thank you.

Hi. Thank you for taking a few questions again.

Can you quantify the losses during the first half in Peru or at least give us some ballpark indication of how large they were?

I mean that the difference on margin is basically [indiscernible] Peru.

Okay. Thank you.

And coming back to M&A, you completed a small acquisition in Australia after the quarter closed and I think you've been mentioning Australia, Malaysia, Philippines and other markets and solid markets where you're lacking or missing exposure. Two questions on this.

Are there any larger assets in these markets that you're looking at or would be interested in buying? And in terms of expansion into new markets, is this something that's still in on your agenda and what is the primary rationale for it?

I mean the primary rationale is about many of our global clients ask us to be there and that we have our own subsidiaries there, so we can call, make the calls and make the decisions quickly instant case that needs, when something needs to be decided. So, basically, it's very much for tenders from the big global clients that decides where we're going to be, which means that we need to be in another 10, 15 countries.

Australia being one, now we are there, which has been on the list all the time, all the time we question about. Malaysia is another one is always on the list, no, we are not there.

So we are actively looking in Malaysia. There are no large assets in any of those countries, it's small assets.

First because it's risky to buy large asset in a market we don't understand. Secondly because if we buy large asset, there is a high risk of noncompliance in those businesses and we don't want to be dirtied by that.

So we're looking for small medium size companies that we can then leverage by bringing the global client portfolio to those companies in Malaysia for example instead of giving back to potential partners or other companies that we partner with. And then we will bring that all in-house and then we can leverage by an acquisition so that makes a lot of financial sense to do a demand, right.

So we're also looking in few other countries. Actually right now to establish ourselves in a minor way but hopefully we'll put up a new couple of more flags here in the coming six to 12 months.

But when - any of those no matter which ones they are in the new markets I'd say will never be large M&A investments. They will be small medium sized, medium sized larger so I would say that's more technology acquisitions in the existing markets because the leverage from that and the shareholder value creation from those acquisitions is much higher because we can leverage the portfolio we have in the guarding side if we can speed up on the electronic security side.

So we create a lot more synergy and customer shareholder value by doing that than expanding into whatever country we need to be. So we will do both for the reasons I mentioned but that's the philosophy so the big cap - big investment on the M&A side is more into the electronic security investments.

Thank you.

Hi. Good morning, Alf.

Two very quick ones for me, just following up on Andrew's question from earlier around the portfolio recovery in the second half and where does the confidence come from on the timing? Is this contract where that you can see coming in already, is it just sort of inquiries from customers?

Just trying to understand where you get your confidence from there? And secondly just in terms of sort of contract attrition, obviously there was a couple of contracts that dropped out earlier in the year.

Anything sort of significant out for rebid or risk over the next 12 months that we need to be aware of? And then finally maybe just on cash and working capital, I just noticed the receivable balance for the first half were much lower and what are the drivers here and would you expect that to reverse in the second half or a normal change in working capital for the year?

Thank you.

Okay. What gives us the confidence in Europe is that we have a good new sales.

That is - I mean, new sales is - we sell a contract, we win the contract, then it takes normally two, three, four months before we start the contract. And it's not until we start the contract that you will see it organic growth.

But we have good activity in the new sales, so we are winning - we have a good - and these are the contracts that that we have won or about the win. So that gives us confidence in this respect.

Also the activity level in Europe is good, I mean the European economy in my book is blooming. So there is a good - it's a good market situation in Europe, a lot of activities, lot of customer interaction, a lot of focus on sales and marketing in our organization.

We have made some - quiet some push in that, we have changed some of our incentive system in that direction. And we are driving that, we have a lot of force in the European organization.

So, that gives me confidence whether we are on the right path and hopefully then this really materialize in the organic growth when we come towards the end of the year. On the large contracts, out for bid in next 12 months, now not really nothing, nothing of any significance and on the cash side on the DSO, it has improved quite a bit and that's helpfully - well I expect it to be a continuous improvement because the - we had a big drop in North America, in the US specifically because we initiated a project driven by our CFO, Bart Adam together with the US organization in the last quarter of last year and that project has been giving the DSO a lot of focus in the US and now we start to see the benefits, especially in the second quarter and towards the end of the second quarter.

So, improvements in our receivables and our DSO in North America we think is an improvement that we can keep going forward.

Great, thank you.

Okay. Thank you very much everyone.

Thank you very much for calling in. If you have a vacation left, enjoy your vacation.

Thank you. Bye, bye.