Securitas AB (publ)

Good afternoon, everyone, and welcome to our Q3 update. We are maintaining a steady focus and executing on our strategy, and this is visible in the financial performance. And in Q3, we're seeing margin improvements in all three business segments. We recorded 8% organic sales growth, And on the services side, the main driver of the growth was price increases and portfolio growth of the aviation business. But we also had good growth in technology and solutions. The operating margin improved to 6.9% versus 6.5% last year, and technology and solutions business line is the main driver of the margin improvements. We are on par in terms of price wage in the first nine months. And I just want to make a comment here that's similar to Q2. We have seen some improvement in the labor market with improved availability of qualified people, but the market is still fairly tight. The operating cash flow was 84%, which is below our internal targets for the quarter, and generating a strong cash flow in Q4 is an important focus area. But we have driven continued improvement in terms of leverage. We netted to EBITDA reducing to 3.1 in the quarter. The integration of Stanley is progressing well in terms of the integration process and cost synergies. And we have now realized vast majority of 50 million US dollar target and that has been achieved. But we've also identified materially more to be executed and we will come back to that in due time. And it is now more than a year ago since we acquired Stanley Security and created Securitas technology. And from a value creation perspective, there is a negative impact related to significantly higher interest rates, but we are driving the integration according to plan and we are delivering operationally. And with our enhanced technology and solutions capabilities, our offering is stronger than ever. And from a commercial synergy perspective, we have a good pipeline. And we just recently awarded a 40 million US dollar contract over a number of years, I should say, in North America with an existing guarding client. And I think that this is just one proof point of the strength of the Securitas offering that we can now start to see. And it is really another proof point that we're becoming the choice for demanding clients who are looking for a strong partner with a number of capabilities between technology and people. And we continue to assess all parts of the business to ensure that they are fully aligned with the strategy and our financial objectives. And as previously announced, we divested our business in Argentina in July, and this has an immediate positive impact on the margin in Ibero-America in the quarter and we are operating in an uncertain world from an economic as well as a geopolitical perspective and with regards to israel and hamas i would just like to to clarify that we have very limited operations in israel and only in the technology part of our business but we continue to serve global clients through local partners and with that let us then shift the focus to the performance in the business lines. And the growth in security services was 7% and the EBITDA margin improved sequentially from 5.1 in Q2 to 5.4% in Q3. And the growth in security services is mainly the result of price increases and volume growth in the aviation segment. The real sales growth in technology and solutions was 7% in the quarter with a strong 11.5% margin compared to 10.3% in Q2. And we have a continued robust order intake and backlog for our installations business. And as I previously mentioned, the growth in technology and solutions is the main driver of the group margin improving to 6.9%. And shifting then to the performance in our three segments, and starting with North America, we recorded 5% organic sales growth. And as of the third quarter, the business unit Securitas Critical Infrastructure Services has been moved from the business segment North America to other. And the Critical Infrastructure Services business is fully dedicated to US government business and operated separately. And with this change, we're enhancing understanding of performance and comparability between North America, Europe, and Ibero-America is enhanced. But coming back to the growth, price increases in combination with good portfolio new sales drove good growth within security services. Technology business also supported the growth with improved installation sales and a healthy backlog. And our technology and solutions business is now representing 36% of the total sales in North America. And I should also highlight that as expected, we're also improving the client retention rate to 87%. And looking then at the profitability, we recorded a new margin record with 9.2% versus 8.7% in Q3 last year. And for clarity, all the figures have been restated to reflect the move of SEIS to the other category. And the technology business was the driver of the improvement with positive impact from cost synergies, good installations and healthy development of the recurring revenue portfolio. And we are ahead of plan in terms of cost synergies in North America. The garden business was stable with positive contribution from active portfolio management and leverage, and also from somewhat improved labor markets, but burdened by medical costs and also higher cost of risk. Our client offering is now stronger than ever in North America, and the team is leading the way towards our target of 8% as a group by the end of 2025. And shifting then to Europe, where we had another quarter with 13% organic sales growth. High price increases, including the impact from the hyperinflationary environment in Turkey, is an important driver of the growth, but sales growth in solutions, increased installations, and aviation also contributed. And client retention was stable at 91%. And looking at the profitability, we had continued good improvement with a 7% operating margin for the first time. And the improvement was driven by technology and solutions and active portfolio management. And while we are seeing some improvement in the labor market in Europe, it is still challenging. Continued improvement in sickness rates have benefited profitability, but we still have elevated costs for subcontracting that had a negative impact on the margin. And as commented earlier in the year, our European team have a few key focus areas to ensure performance. First is to increase the margin requirements for the new contracts. Second, working actively to convert, renegotiate or terminate low-margin contracts. Three, to accelerate the standard integration. And four, continued cost management. But from my perspective, after a week started the year, Our European team is on the right track with positive development in Q2 and also in Q3. And moving then to Iberoamerica, where we recorded 5% organic sales growth in the quarter. And the growth now decreased due to the divestment of our operations in Argentina. And the organic sales growth in Spain was 3%. Growth was supported by price increases and strong technology sales. But as in the previous quarter, negatively affected by active portfolio management. Technology and solution sales represented 34% of sales in the quarter. Client retention was solid at 92%. Looking then at the profitability in the Bay of America, where our team delivered a margin of 7%. And the margin uplift was driven by the divestment of Argentina, where we had below average margins. but good performance within technology and solutions and in airport security supported the operating margin as did active portfolio management. And the operating margin improved in the important markets of Spain and Portugal, even though wage pressure in Spain still hampered the results somewhat. So to conclude the division overview, I'm pleased to note that there is progress in all divisions, 7% in Iberoamerica, 7% in Europe and 9.2% in North America. And with that, handing over to you, Andreas, for more details regarding the financials.

Thank you, Magnus, and good afternoon, everyone. Starting with the income statement, where we continue to see good 8% organic growth in the third quarter, comparing to the second quarter, the growth is down from 11%, and that is mainly due to the divestment of our business in Argentina. Our operating margin increased 0.4 percentage points to 6.9, with the main driver is strong growth and modern development in our technology and solutions business. Looking below operating result, the amortization of acquisition-related intangibles was 157 million in the third quarter, stabilizing over the last quarters after the Stanley acquisition, and the difference to last year is due to that we consolidated Stanley in the middle of the third quarter 2022. Items affecting comparability is minus 3.7 billion, and here the majority, 3.3 billion, is related to the divestment of Argentina. 181 million is related to the Stanley acquisition, and 171 million is related to the ongoing European and Ibero-America transformation program. And as usual, I will come back with more details here shortly. The financial net is coming in at 518 million, which is materially higher than last year and where the main reason are increased interest rates and increased debt related to the Stanley acquisition. We had around 320 million higher interest costs related to the Stanley acquisition financing compared to last year, explained by increased interest rates and also the fact that we in 2022 did not have the full quarterly effect as we closed the transaction the 22nd of July. The IAS 29 hyperinflation effect was 75 million more positive in Q3 this year, and we also had 60 million higher FX gains when comparing to last year. And the remaining increase of approximately 70 million is related to increased interest costs related to our legacy pre-Stanley debt. And for the full year, we remain with the expectation of the financial net to land slightly above 2 billion. Going to tax, here the Argentina divestment has a material impact as the capital loss is not tax deductible. Adjusted for this, the full year forecasted tax rate remains unchanged compared to the second quarter at 26.8%. Looking at the Q3 net income, you see that the result is negative minus 2 billion, which is then again mainly due to the 3.3 billion capital loss recognized related to Argentina. And before moving on, I want to remind everyone again that the number of shares used for calculating earnings per share are adjusted for the bonus element of the rights issue in line with IS33. And you find more information here on page 20 in the report. Then we have a look at the change to the reported segments in the third quarter. Here we moved the business unit Securitas Critical Infrastructure Services from the reported segment North America to Other, where our business in AMEA, Africa, Middle East and Asia and the group Costa are also reported. All comparatives have been restated in the report and we have also provided further details around the SCIS financials and impact on our homepage. And to be clear, this has no impact on the overall group financials, but as you can see, it has an impact on this segment, North America and other. SCIS represented approximately 2.5 billion of sales in the third quarter and had an operating result of 22 million. And as you can see in the table, the North America segment has an operating margin of 9.2% in Q3 in the new reporting structure compared to 8.1% in the previous structure. When then looking at other in the third quarter, we had an operating result of minus 152 million in Q3 and minus 170 million last year, where the development mainly is explained by SCIS, partly offset by good group cost control. Then we have a more detailed look into our IEC programs, where the two remaining ongoing programs are the European and Ibero-America transformation program, and the program related to the Stanley acquisition. And in the quarter we also have material IEC impact from the Argentina divestment. Looking first at the European and Ibero-America transformation program where we are continuing to execute on our implementation plans. Here we had 478 million of spend year to date. The full year IEC estimate of 650 to 700 million and 150 million in 2024 are unchanged compared to our previous estimate, and the same applies to capital expenditures. And this also means that the total program spend over all years are within the originally estimated budget as we highlighted further in the second quarter, although some of the spend goes into 2024. Moving on to the IEC related to the Stanley transaction, and here we announced total cost of approximately 135 million US dollar after the acquisition, The integration and synergy take-out continues to progress well, but as we have mentioned before, we are also going through a period of heavy lifts in the carve-out from Stanley, mainly on the IT and support services side, which will continue over the coming quarters. As we had longer time than expected between signing and closing of the Stanley transaction, and we also saw weaker Stanley results in the first half year of 2022, We have accelerated the synergy take-out and have today executed the vast majority of the 50 million USD cost synergy target set. We continue to have additional material synergy opportunity in the plan, which will support our margin development going forward. However, we will also see some operational cost increases related to taking support services and systems in-house after the carve-out, which to some extent will mitigate the cost synergy effects. In the first nine months we had 466 million of cost here and we estimate to land between 600 and 650 million for the full year. The program then finalizes throughout 2024 where you will see the residual budget of maximum 400 million being recognized. So looking then at the total IEC for the two programs we are estimating to land between 1.25 to 1.35 billion for the full year 2023 with a material decline next year when we are planning for a combined IEC of around 550 million. Looking then at the Argentina divestment where we in Q2 provided you with an estimated capital loss from the divestment of approximately 3.5 billion. The final amount has now been concluded and is 3.3 billion where the vast majority of the impact is related to accumulated non-cash FX translation losses. The total cash flow impact from the transaction is minus 122 million, and as I mentioned earlier, the capital loss is non-tax deductible. Concluding here, positive that we have managed to close this divestment, as this is improving our margins and our cash flow generation, and we are also reducing complexity in our operations given the difficult business environment in Argentina. Moving then to an overview of the FX impact on the income statement. And here we had continued positive impacts from currencies, although much less than in the second quarter, mainly as the comparable US dollar rate increased significantly, especially towards the end of the quarter. The total FX impact on sales and operating result was 3% in the third quarter, with larger positive impact year to date. The EPS real change excluding items affecting comparability was minus 25%, with negative impact from the adjusted number of shares by IS33 from the rights issue. On a constant share basis, the real change excluding items affecting comparability was minus 2%. This is derived from the real change on operating income being 16%, positively impacted by the Stanley acquisition, good organic growth and margin development, while mainly the increase in the financial net impacted negatively, leading them to the minus 2%. We then move to cash flow, which is a prioritized area for us across the business to ensure we continue to deleverage our balance sheet after the Stanley acquisition. The third quarter is coming in at 2.3 billion operating cash flow, or 84% of the operating result, which is half a billion less than in 2022. We saw broad-based strong cash flows in most business units, but we had some negative impact from ERP implementations and integrations under the European transformation and the Stanley integration programs, where this had an impact on our invoicing and collections. This together with higher organic growth were the main reasons to the negative impact on the account receivables in the quarter. Our ambition is to improve the situation in the fourth quarter and also deliver a solid cash flow The areas with negative impact are well-defined, with action plans in place to address them in the fourth quarter. Within the European transformation program, we expect to catch up on collections by the end of the year. And within the Stanley integration program, we expect to see good recovery in the fourth quarter and the coming quarters as well. As I mentioned earlier, we are now going through a period of heavy lifts in our programs, which will continue the coming quarters. If we look at CAPEX, we spent 1.1 billion or 2.7% of sales, which is at the same level as in Q3 last year, mainly driven by our solutions and transformation program investments. And looking at the full year, we expect to land below 3% of sales, and this includes then also IFRS 16. On the operating capital employed side, there is no major movement in the quarter and we had no significant payroll time and differences neither. Looking at the free cash flow, which was 1.5 billion in the third quarter, here we had negative impact from financial items due to the increased net debt and due to the increased interest rates when we compared to last year. Q1 and Q3 this year, is when we are making the large payments related to our debt and we also paid fees for the newly issued bond. Paid tax developed positively 66 million compared to last year and is mainly related to received tax refunds in our treasury operations. We continue with high cash flow focus across the organization to deliver a strong end of the year. Important to remember for Q4 that we this year have no further payments related to corona government relief measures in North America, which hampered Q4 2022 operating cash flow with 700 million. We then have a look at our net debt, which has increased approximately 2 billion since the beginning of the year. The positive free cash flow of 1.4 billion impacted positively, but we have seen a material negative FX impact of minus 1.8 billion. We have paid the first part of our dividend of 1 billion and had approximately 1 billion in IEC spend. The acquisition-related spend is mainly related to Argentina, and I should mention that we had a 260 million positive adjustment to our IFRS 16 lease liability related to Stanley. as we now concluded our bottom-up valuation of these assets. Looking at Q3 alone, we reduced our net debt with 1.2 billion, mainly due to the positive free cash flow of 1.5 billion. The reported net debt to EBITDA was materially impacted by the Argentina divestment in the third quarter. However, when looking at the more relevant adjusted net debt to EBITDA before items affecting comparability, we landed at 3.1 times, which is 0.2 times lower compared to the second quarter. So, solid deleveraging driven mainly by the positive free cash flow and EBITDA development. Looking into the fourth quarter, we expect to see free cash flow support in the deleveraging, but also remember that we will pay the second part of our dividend in November. Moving on to have a look at our financing and financial position. And here we continue to have a solid financial position overall. None of our facilities have any financial covenants and the liquidity position was strong in the quarter at 5.2 billion. We also have our RCF of more than 1 billion euro in place until 2027 and it is fully undrawn as per the quarter end. In the beginning of July, we repaid the final $160 million of the Stanley Bridge to Debt facility, which then means that we have now secured long-term financing, including the rights issue, for the whole purchase price related to Stanley. So here we are in a solid position. Our margins in the debt markets have consistently gone down since October last year, which we have benefited from as we have taken the bridge out. But this has also given us the opportunity to continue to refinance part of our debt at lower cost. And this was the main reason why we now in the third quarter issued a five and a half year 600 million euro bond in the euro market. We mainly use these proceeds to repay approximately half of the 1.1 billion euro term loan we have in place since the beginning of the year. We will continue to work on further pricing improvements in our debt portfolio in the coming quarters, which is reducing the negative impact from increased interest rates. Looking into 2024, we have approximately 9 billion of maturities. Slightly less than two thirds has floating interest rates and the remaining part have fixed interest rates. From a timing perspective, around 5.5 billion of the 9 billion are maturing in the first quarter and the remaining part is maturing during the second half of the year. And I should say the majority of the fixed debt are maturing in the first quarter. So all that is equal. We will see increased interest costs from the refinancing next year. However, we will also generate cash flows which will reduce debt. and see positive impact from the refinancing at lower margins, which will partly offset the increase. All in all, we see a slight increase of the financial net into 2024, and we will come back with further guidance here the coming quarters. Related to our S&P rating, it was positive to see that they revised their outlook to BBB- with positive outlook. Here, we previously had a stable outlook. And we continue in an unchanged way, to be committed to our investment grade rating and to continue our deleveraging of our balance sheet. And with that, I hand over back to you, Magnus.

Many thanks, Andreas. So just a few messages before we open up the Q&A. And as we stated here, we continue to execute on the strategy, clear focus and progress towards our financial targets and importantly, the 8% operating margin by the end of 2025. But it is also a period of extensive work, but we maintain focus on four key areas. Taking the lead with technology, building quality guarding services with good profitability, establishing clear leadership as a solutions partner to our clients, and leveraging technology and digital to drive innovation. And we continue to execute in these areas to make sure that we deliver superior growth and higher margins over time. And the client feedback regarding the transformation, our differentiated offering, is very positive. And as commented, we are starting to realize commercial synergies thanks to the Stanley acquisition and the enhanced strength in our offering. And we are very much looking forward to welcoming you and to talk more about these important matters in our investor update in March. And this will take place on the 7th of March at our headquarters in Stockholm, in Sweden. But to wrap this up then, a few highlights of the quarter. Steady execution of the strategy is healing results and operating margin improvement to 6.9%. Technology and solutions is the strong contributor to the improved profitability. We have price and wage balance that is on par, recording 84% operating cash flow, and the standing integration, which is critical to building the Future Securitas is progressing well with strong costs in the realization and some early commercial wins. And with that, hand over to the operator and glad to open up the Q&A.

If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five. again on your telephone keypad. The next question comes from Johan Eliasson from Kepler Chevreux. Please go ahead.

Hello, thanks for taking my questions. This is Johan at Kepler Chevreux. I was just curious about this move in the North American business. It seems to be a pretty low margin business. What's the reasoning behind this? Is this part of the portfolio pruning and we could expect it to be divested eventually? Or what's your ambition? Thank you.

The main reason that we are making this change is that it's a different type of business in the sense that it's operated separately. It's a different nature of the business. By doing this separation, Johan, we feel that we are enhancing understanding of performance in the three segments. We're also ensuring that we have better comparability as well, because the nature of the business that we are bringing and delivering in the three segments is also more similar. But having said that, I mean, we never make any comments in terms of any individual business. But when you look at the performance here, it has been lower. It is lower than the average performance of our business. But it is a change in the segment reporting.

And I mean, the The performance is low as you point out, but are there any other benefits with keeping this business? Are the payment terms good or why would you sort of think that this is still something that would be part of Securitas going forward?

Like I said, we never make specific comments. The general comment that I have made on a number of occasions is that we're continuously assessing all parts of the business to make sure that they are in line with the strategy and that they're also supporting us on the journey to 8%. But that's a general comment and not a specific comment related to this part of the business.

Okay, thank you very much.

The next question comes from Raymond from KU. Please go ahead.

Hi, this is Raymond from Nordea. A couple of questions for me. First one, you write in the report that DSO has increased due to integration work with Stanley. But do you see, for example, DSO extending in the underlying operations in any of your service categories such as solutions or technology due to the nature of the type of customers you deal with there?

Thanks a lot, Raymond. Generally speaking, the DSO development is mainly due to the system integration that we have mentioned in the report. Underlying, you see a slight increase as well, but nothing major on the DSO side. Now, if you speak technology, generally speaking, the working capital requirement in that business is higher than in the garden business, as we have mentioned several times before as well. And that is mainly related to that this is a project-based business where you are invoicing as you're progressing in the projects rather than on a monthly basis. So technology as a whole, I think we said around 20% of sales when it comes to working capital requirement. And it is higher than on the Guardian side. Yes.

All right. And speaking of that, you talked, for example, about the installation side of Stanley having a higher networking capital at around 20%. And you're trying to lower it by invoicing after milestones rather than at the end of projects. Where do you see the networking capital in relation to sales stabilizing over time? And when should we expect this to become visible in the P&L and the cash flow side?

I think you should expect that the technology business will have a higher working capital requirement than the guarding business. They will not come down to the guarding levels. Then we have opportunities on the working capital side in the technology business where we see, if you look across the Securitas business, you see some really good business units that have a lower working capital where they manage to invoice the clients more frequently than in other places. definitely there is benefit to improve. It will not become a guarding business in working capital. Having that said, right now, we are going through a heavy integration period. So now it's more focused on making sure that we have efficient, solid and well-running processes in place. And thereafter, we will look into how we can further improve the working capital.

And your net profit this year was lowered by the non-cash flow impacting sale of securities as Argentina. Should we view your dividend policy of 40 to 60% as being based on this reported net profit, which would be lower this year, or rather an adjusted net profit? How should we think about that dividend?

That's a decision for the board of directors to take at a later stage.

All right, final one. In the Q2 call, you said you expected the full year 2023 tax rate to be the same as it had in the first half, that's 26.8%. And you saw probably that consensus was pricing in a positive tax impact in the quarter here. Just wondering, why would you not go out to make a simple clarification considering the cash flow implications there?

Well, just to be clear around the Argentinian divestment, the capital loss is non-tax deductible. And that is why our tax rates are going up. So that's just to be very clear. There is no tax benefits from divesting Argentina. And then, generally speaking, from the minus 122 million cash flow from the transaction is not related in any way to tax neither. So I hope that clarifies.

All right. Thanks a lot. Have a good one. Bye.

The next question comes from Victor Lindeberg from Carnegie. Please go ahead.

Thank you. A couple of questions from my side, starting on the cash flow. working capital being a bit higher than I expected. One reason may be that looking at the calendar effect in the sense that you closed the quarter the 30th of September on a weekend. Could you maybe provide some thoughts on the impact in this quarter and maybe also Q4 seems be ending on on a weekend if that is something we should be mindful of one decimal this is more than sufficient on that second looking at the underlying financial net here in q3 it seems to be hovering about 700 million if we adjust for hyperinflation and also the hedge effects in the very near term is that a decent proxy to be mindful of you mentioned that you reiterate about 2 billion or slightly above, but looking into Q4, 700 seems to be slightly more than slightly 2 billion. Starting off on those two things.

Yeah, I think if you go to the first question, when it comes to calendar days, you're right, the third quarter ended on the weekend. This is something that we are fairly used to also handling. So we have good focus and competence, I would say, from the organization to ensure when we have those kind of quarters or mountains that we're also adjusting when our collection, sorry, our invoicing is going out. So we get the invoicing out earlier to make sure that the due dates are then not going into the weekends. So this we have managed well. This did not have any material impact in the quarter as such, but it is a factor, but something that we are fairly good at handling and might have had a small impact in the quarter, but nothing material. On the second question related to the finance net, I think we will... We've said we will come in slightly above 2 billion, and I think I will remain with that statement. There are many moving pieces there as well. So it will be a bit more than 2 billion financial net for the full year. That's what you should expect in totality for the financial net, including the ones that you mentioned, the FX gains and IS29 as well.

Okay. All right. That's clear. You also touched upon the items affecting comparability and provided the good outlook for 2024. But you also mentioned that you are now running according to plan or even find more opportunity to take out costs in relation to the standard integration here. Should I read this correctly that when you find this opportunity to take out costs that will also come with an associated incremental IEC sometime next year or is that something that is purely operational that we will not really see?

No, correct Victor. The IEC that we went through here related to Stanley that remains and that includes the further takeout. Here we generally speaking we have a also had lower cost in certain areas of the integration program and we will use that to execute on these synergies. So no further expected IEC from the Stanley program.

Okay, understood. Thanks. As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. The next question comes from Alan Wells from Jefferies. Please go ahead.

Hey, gentlemen, just a couple from me, please. I just noticed the real sales growth in the technology business has kind of been weakening. If we include Stanley as a pro forma, it's gone from 13 to 12 to 7. It isn't actually outgrowing the main business in the culture. Is there anything we need to be thinking about in terms of exactly what's driving that slowdown? That's my first question. And secondly, just on the over $2 billion of interest number that you talked about for the full year, can you just tell us what the magnitude of the FX and hyperinflation benefits are that you're assuming in that guidance, just so we can get a feel for what the underlying is? And then my third question is just, I think, in the comments in the report, you talk about negative growth in the Pinkerton business. Just want to understand why that business is going backwards as well, please. Thank you very much.

Thanks, Alan. So when you look at the real sales growth on the technology side, yes, it is a little bit lower in the third quarter comparing sequentially to Q2. That is correct. But when you look at the total picture, I mean, we have a strong backlog with the positive development when you're looking sequentially, healthy order intake, and also then when you're looking at This period as well, I've also commented on that in the CEO comments as well. It's also a period of quite intensive integration work. If you're looking at North America, we have now done most of the integration work in terms of the operational system. So when we look at CRM, for example, and operational systems in terms of installation, sales, service and maintenance management and things like that. A lot of that is now behind us, which also then means that we're also able to engage with stronger focus as well commercially. And commercially, we haven't dialed up, and that's something that I said from the beginning as well. We need to make sure that we drive all the integration work in a good way, and then we will gradually also start to increase the emphasis in terms of realizing commercial synergies and growth when we know that we have a machine that is really solid and operationally running. So that is just to give some context in terms of the technology growth when you're looking at that one. You also had a question, the third one, maybe I can take that right away. Can you just repeat that, Alan?

So the third one was just on Pinkerton, just exactly what's behind the negative sales growth there.

So there we've essentially done some de-risking because of commercial insurance environment in the US. And it's not a new issue. I commented on that over the last year. But it's also then to be more selective in terms of the assignment so that we have a healthy return on investment, but also risk exposure in terms of the assignments that we are taking on. But my expectation is that we're going to have a positive recovery and turnaround there in terms of growth in the next couple of quarters.

On the financial net, it's a similar question to before here as well. I mean, the guidance is slightly above 2 billion. We are not making any major assumptions around IES 29 development, generally speaking, I can say, right? But we will stick with slightly more than 2 billion for the full year here as a guidance.

Okay, thank you.

The next question comes from Neil C. Tyler from Redburn Atlantic. Please go ahead.

Good afternoon, thank you. Two questions, please. Aviation business in Europe, you mentioned that's performed very well. Can you help us understand to what extent that seasonality might impact that business depending on sort of volume activity? Have you completed the process of renegotiating and pruning any contracts across the European business there? And if you have or haven't, how does the size and profitability now compared to, say, 2019, that's the first question, lots of parts to it, The second one is probably simpler. The slide on items affecting comparability is very helpful as a reminder, but can you help us understand where you are in terms of the phasing of the cash payments, not necessarily CAPEX that you've called out, but the sort of OPEX cash payments that are relevant to those, please? Thank you.

Thank you. So when you look at aviation, yes, it's correct. Q3 is, from a seasonality perspective, a stronger quarter. When you're looking from a profitability perspective, not helping in Europe in Q3. Why is that? Well, because we have quite significant impact in that space related to subcontracting. And part of that is still ongoing challenge to find quality people to the extent that we need for some of the larger contracts that we want towards the end of last year. So that I think is the basic perspective in terms of Q3 alone. We have worked through the majority of the portfolio. Performance today is significantly higher compared to what it was before the pandemic. So on the totality It's a decent business when you look at the full picture. In terms of percentage of sales, I think it's in the 5% to 6%. How much do we have? Around 7% now, because we've added some of the top line with the acquisitions. So around 7% of the total business on a global level.

Related to cash flow from the different programs, here you find also more information in Note 7 as well. If you're looking at the standard security, cash flow so far this year, 565 million, and then a little bit less than 200 million last year. Transformation programs, European and Arbiro transformation program, 463 million cash flow so far this year, 576 million last year. I should say that The absolute vast majority of the cost we're taking is cash flow. And then, of course, there can always be some timing impacts, more generally speaking, as we have payment terms in place. But it should follow each other in a fairly good way. Then, obviously, the CapEx amount you have there as well, which is then fully cash flow as well. So I hope that gives you some flavor, not on the exact timing maybe, but you have more information in Note 7 as well.

Okay, thank you very much.

There are no more questions at this time, so I hand the conference back to the President and CEO, Magnus Alkvist, for any closing comments.

Thanks a lot, everyone, for your continued interest, for joining us. We are making further progress in the third quarter, so looking forward to seeing you soon. and also just to promote as well the investor day when we will share a lot more as well at the beginning of march really hoping to see you or many of you here in stockholm so thanks a lot everyone