Loomis AB (publ) (LOOMIS) Earnings Call Transcript
February 2, 2023
Earnings Call Speaker Segments
Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the Q4 2022 Report of Loomis AB. [Operator Instructions] I would now like to turn the conference over to Aritz Larrea, President and CEO. Please go ahead.
Thank you very much. Good morning, everyone, and welcome to the fourth quarter presentation for Loomis. My name is Aritz Larrea, and I'm the CEO of Loomis. And with here me today, I have Kristian Ackeby, our CFO. I will give a short overview of the fourth quarter and then open up for questions. Let's start the presentation by turning to Slide 3. Despite the current economic uncertainties, we continue seeing volumes increasing. Even in the face of sharp price rises and rising interest rates, consumers show resilience. International tourism has been showing good indications of revival since travel restrictions were loosened and lifted, which is supporting our FX business as well as domestic business since tourists tend to use cash. Despite that the tourism industry has not yet recovered from pre-pandemic levels, our FX business has surpassed those levels in 2022. We're sure that the reopening of China, the tourism industry will keep recovering, which will bring us new opportunities for revenue growth. The outsourcing trend has continued this quarter, where our automated solutions business shows strong organic growth. With the combination of our front office solutions together with the back office ones, including SafePoint and recyclers, we have the best proposition for the merchants to run their business more efficiently while being able to concentrate on their customers. As a result of our solid balance sheet and ability to generate cash flow, we will also concentrate on inorganic expansion in the 3 business areas, core, adjacent and Loomis Pay. Let's move on to the next page where we have the highlights for the quarter. This has been the best fourth quarter ever for both for revenue and operating profit. When it comes to revenue, we reached SEK 6.7 billion, which is not only the highest revenue for a fourth quarter but also the second highest quarterly revenue ever. The revenue has been mainly supported by strong organic growth in all segments and favorable currency movements, mainly driven by a strong U.S. dollar versus the Swedish krona. Organic growth keeps being strong with close to 12% in the quarter. As I mentioned, open societies and increased travel have supported our growth. It has been our fifth consecutive quarter with higher organic revenue than before the pandemic. When it comes to the operating margin, that was at 11.2%. This margin has been positively impacted by the increased volumes and the efficiency measures initiated during the pandemic, but negatively by challenges in the labor market as well as the inflationary pressure on the cost base. Our cash conversion was at 80% for the quarter and 87% for the full year. Despite the increase in accounts receivable due to our strong growth, we have been able to keep our days sales outstanding stable. Let's turn to the next page. Here, you can see how the revenue and the margin have developed over time. We have had a steady increase in our revenue throughout the year, and revenue of SEK 6.7 billion is close to SEK 1.4 billion higher than Q4 2019. Of this increase, more than SEK 900 million is real growth. In the fourth quarter, we achieved an 11.2% operating margin in line with the prior year. It's a very good margin considering the headwind we have been facing during the year with high inflation, supply chain issues and challenges on the labor market. Excluding Loomis Pay, the margin was 11.8%, which brings us close to pre-pandemic levels. Let's have a look at our segments. We turn to the next page and start with Europe and LatAm. The positive trend in Europe and Latin America continued, where we had another strong quarter. Regarding revenue, we were at SEK 3.2 billion with organic growth of 9.7%, with good development in all countries. The operating margin is at 10.3%, supported mainly by the increase in volumes and tourism increasing, but impacted negatively by inflationary pressure on cost base and employee shortages. Turning on to the next page and focusing on the trend of both revenue and margin. We see that the actual growth was at 16% when looking at the top line trend. From the beginning of 2021, we have seen a positive recovery expanding quarter-by-quarter in our main markets. Regarding the operating margin, as I have already mentioned, it's been impacted by a challenging market and the impact of inflation. We did see these impacts already earlier this year and a sequential decline follow normal seasonality pattern, where we have a much lower margin in fourth quarter compared with the third quarter, and that is also what we see this year. As we have mentioned many times before, there is a time lag between the impact of cost increases and the price increase to our customers that is key to protect our margins. Let's turn to the next page over to the U.S. The strong momentum continues in the U.S. business. Revenue was at SEK 3.6 billion with continued increase in recurring revenue. Our revenue related to automated solutions and ATM represents 43% of our U.S. revenue. As a point of reference, in the fourth quarter 2019 revenue related to automated solutions amounted to 15% of our U.S. revenue. And in the fourth quarter of 2022, it represents 20% of our revenue. And this increase has taken place at the same time as our revenue in the U.S. has recorded an organic growth of 27% in total. Organic growth was at 14.3% in the quarter, with our automated solutions business growing above 20% compared to all-time high numbers in the prior year. As we've mentioned in our previous quarterly presentations, the labor shortages and supply chain issues we had in the U.S. market impacted our margins during the first half of the year. We were confident that once the U.S. labor market improved, we're going to be able to increase our operating margins. This quarter, our operating margin was at 15%, showing an improvement versus the prior quarter. Although we see improvements in the labor market, we're still facing a high turnover in the U.S., which requires an extraordinary effort to continue recruiting and training new employees, all to continue providing high-quality service which is key to keep gaining market share. Turning on to the next page and focusing on the trend of both revenue and margin. We see the exceptional U.S. business revenue trend during the last 2 years. We are benefiting from a positive FX impact, but we reached all-time high revenue figures in local currency once again. Regarding the operating margin, we improved the prior year's number by 0.8 percentage points, continuing the margin improvement we expected to see during the second half of the year. In 2023, we will keep focusing on recruitment and retention as well as on efficiency to keep improving our margins. Let's turn to the next page and talk about Loomis Pay. We keep seeing transaction volumes keep increasing as we move ahead. For the quarter, the increase was 52%. Over time, there is a strong correlation between increase in transaction volumes and revenues, however, from quarter-to-quarter, this can vary. For the full year, transaction volumes increased with 82% and organic revenue with 86%. We see that the business has gradually grown during the year. And by the end of the fourth quarter, Loomis Pay has doubled the number of customers compared to the first quarter. The Loomis Pay solution was introduced in Spain at the end of the quarter, and in the following quarters, we will concentrate there while tailoring our offering to the demands of our customers. We see a very positive response from the Spanish retailers and use their suggestions to enhance and adapt our solution to the Spanish market. Turning to the next slide, we see our continued initiatives for our sustainable business. Here, we have the ambition to continue being the leading sustainable business partner within the industry, which means constantly working to reduce the environmental impact of our operations as well as being a responsible employer and contributing to the societies where Loomis operates. As presented previously, we have structured our sustainability initiatives into 3 focus areas: environmental, social and governance. During 2022, we have successfully reduced emissions from transportation and energy compared to the 2019 baseline. This has been possible thanks to switching to lighter vehicles, continued improvement in route optimization, start the journey to utilize hybrids and electric vehicles as well as installation of solar panels in branches. We have continued to invest in vehicles with higher security features and installed telematics to promote safer driving and minimize injuries. Within operations, trainings in risk management take place on a regular basis to ensure the safety of our employees and our customers. Lastly, Loomis has a zero tolerance for bribery and corruption, and our code of conduct is an essential in what we do. The training in the code of conduct is conducted annually for all employees. Let's look more at the details of our environmental initiatives on the next slide. We have made a commitment to reduce the carbon emissions from our business and have set out to lead the transformation in the industry. I would like to highlight a couple of achievements from the year. First of all, although our sales have surpassed the levels of 2019, we have successfully decreased our carbon emissions from transportation and energy compared to 2019. As you know, 2019 is the baseline for both our target to reduce emissions by 15% in 2024 as well as the target with our sustainability-linked bonds to reduce emissions by 20% in 2025. In 2022, we have approximately tripled the number of electric vehicles and hybrid vehicles in our fleet across the global organization. We have also increased the capacity of own energy production with solar panels installed in multiple Spanish branches, with a plan to expand this further during the 2023. Similar initiatives are ongoing in other branches and countries. With the order of 150 new armored electric vehicles for the U.S. market recently announced to be delivered in 2023, we have taken a significant step. I look forward to presenting even more examples and data points of our sustainability initiatives in the annual and sustainability report, which we published in the beginning of April. Let's turn to the income statement slide, where we have highlighted the net financial items and monetary losses due to hyperinflation adjustments related to Turkey and Argentina. It's important to highlight here as well that both in the quarter and full year, we have achieved the highest earnings per share ever. Moving on to the next slide. I just wanted to summarize our fourth quarter performance. To summarize, we had a strong quarter across segments. We had a great organic growth, both in Europe, LatAm and in the U.S., where we had the strongest organic growth year. The good trend on margin improvement continues in the U.S., while Europe and LatAm have had a challenging quarter due to labor market challenges and the pressure of inflation in costs. We expect this to revert when the price increases take effect this year. And transaction volumes keep increasing in Loomis Pay, which we have just launched in Spain, where we have high expectations due to the merchants feedback. Moving on to the last slide, I would like to summarize the record year we had in 2022. Our revenue of more than SEK 25 billion is the highest ever. The second highest year in terms of revenues was 2019, where we had a record revenue of approximately SEK 21 billion. Of this increase over SEK 3 billion is related to real growth and the rest is currency effects. The organic growth of 14.4% in the full year is also the highest organic growth in a single year. The operating margin continued to improve to 10.8%, with an operating profit of SEK 2.7 billion, which is also the highest operating profit ever. Cash conversion continued to remain strong, and the 87% for the full year is in line with the 80% to 90% that we expect to achieve over long term. There have been many milestones achieved during 2022. We started the year by presenting the new strategic periods and targets at our Capital Markets Day in Spain, targets that are still valid, and we are confident that we will reach. From a capital allocation point of view, we have distributed over SEK 1.2 billion to shareholders in 2022 through the annual dividend and share repurchases. The Board of Directors has resolved to continue the repurchase of shares during Q1 and has proposed a dividend of SEK 12 per share for the financial year 2022. With the strong cash conversion, we continue to keep a balanced net debt EBITDA. And during the year, we have refinanced close to SEK 3 billion of our credit facilities, including the refinancing announced last week. Before I end this presentation, I would like to thank our customers, employees, suppliers, shareholders and other partners for our collaboration during the year. I look forward to what we will achieve together in 2023. With this, let's turn to Q&A. Operator, we are now open to questions, please.
[Operator Instructions] Our first question is from Kate Carpenter of Bank of America.
Two on Loomis Pay. So now that you've launched in Spain, could you just give a bit more color around how we should think about the revenue growth prospects for 2023 and also operating costs, just given the dilutive impact that it does have to group margins? And then also, it looks like there was a change in leadership within Loomis Pay. So I was just wondering if you could give a bit more color around that and whether that has any impact on the strategy going forward?
Yes. I mean, starting summarizing, I think we see an increase in transaction volumes, which is an important driver for the revenue longer term. We doubled the customers in Q4 versus Q1. We continue focusing on providing a stable product and growing transaction volumes in the existing countries. And we launched in Spain towards the end of the fourth quarter, with the sales team in place and marketing has become there. We're still in the launch phase in Spain. And as always, when you enter a new market, it takes time to adapt. While certain things that you can scale on from the previous markets, adaptation do take time, and we're in the middle of that process. I think that since cash usage is strong in Spain, we believe we can leverage that position that we have in order to gain the digital side of the business as well. As you commented, we did had a leadership change in Loomis Pay. We have Erik Zingmark joined now us as the CEO for the Loomis Pay. I think with the plan, the future plans that we have, I think that Erik, with his expertise and knowledge in the financial -- with his financial background, sorry, he will be key in order to expand the product throughout the Europe.
Got it. And then maybe 2 other questions, if I may. On pricing, how should we think about the timing of price increases in 2023? And then if you could also give some color around how price increases may differ between the services that you offer, for example, between traditional cash in transit, and CMS versus SafePoint and the ATM services?
Yes. I mean, in our business, the price increases usually take place in the first part of the year. So we've always talked about the time lag in time versus cost increase. But over time, our intention is that our price increase should compensate for the cost increase. For example, I mean, when we -- in the beginning of 2022, when we started negotiating the price increases for that year, the expected inflation was much lower than what we are now facing. So we are aiming to raise the prices during the beginning of this year to cover the cost increases we've seen since mid-last year. It is true that when we talk about the different type of services that we offer, the price increase differs, but it's more or less stable. There's not much of a difference between the core, the adjacent and the digital side. So we hope -- hopefully, during Q1 and Q2, we're capable of transferring that cost increase to our customers.
The next question is from Daniel Thorsson of ABG.
Yes. Two questions. First one, which markets in Europe have you seen the most effects of the weaker margin from? And also what initiatives outside the price increases should mitigate the cost inflation in Europe in '23 and especially the markets where you see the lowest margin? And then secondly, you mentioned inorganic initiatives ahead, but given your cash distribution to shareholders currently, what should we really expect in terms of M&A, both size-wise, but also what type of businesses?
Okay. So starting -- I mean we don't give any details per country, as you already know, but we do have countries where cash usage has impacted more. We've always talked about the U.K., and we will have a special focus there. When it comes to the inorganic growth, I think we got a strong balance sheet and there's room for the dividend policy that we have to continue buying back shares and to do some M&A as well. When it comes to the M&A, it differs by segment, but we think that inorganic growth one will be crucial in this period. And we're going to focus in the 3 business areas that we have, the core, the adjacent and the digital, in the three of them. In core, we will be focused on those countries where we're already present. In the adjacent, we're looking more into technology-driven acquisitions, which would be complementary to our product offering. And when it comes to digital, it could be either expanding to a different country through a sales company to gain speed and time or it could be just improvements in our product offering. Hope that summarizes your question.
Yes, absolutely. Just a follow-up there on the core. Is that CIT/CMS businesses, how does the market landscape look today after 2.5, 3 years post pandemic? Are there some well-functioning targets out there at all? Or are they suffering a lot still?
You've got many, many successful companies out there, and it's CIT and CMS as you were bringing up, yes. Also, sorry, I would add, sometimes it's between the core and the adjacent, but we also have the international business as well there.
Next question is from KJ Bonnevier of DNB Markets.
And you're right, Aritz, when you said that you believe that you will be fully price adjusted for the inflationary pressure during the first half of this year. How much have you been able to do already by January? .
I think it's too early to talk about that. I mean, although the price increase normally happens during Q1 and the beginning of Q2. So it's a bit early to talk about that now.
And when you look at the labor market shortage and then the turnover of employees, I remember you talked in the Q3 call that you were forced to walk away from volume or new client volumes in the -- particularly in the U.S. market. Have you come into a situation now where you are able to take on new volume? Or are you still trying to manage the existing clients only?
Well, we did say that we had a high turnover, and that continues in the U.S., but we don't stop gaining market share in the U.S. If the labor market would get better and we are capable of retaining people, the market gain share would be even higher, but we are gaining market share already. But yes, it could improve if we are capable of improving retention.
It's easy to some extent for you.
It's never easy, but I think we're in the right spot now.
Excellent. And I see you mentioned quite a few things on SafePoint in the statement, talking about that you're still taking market share in the segment and that you reached your target from a couple of years back with the installed base and so on. Does that imply that you are now surpassing 50,000 units in installed base in the U.S.? And could you give some granularity on how you see your market share developing?
I think, I'm very hesitant to giving any type of numbers when it comes to the SafePoint, especially because for me, it's a broader service, including front-office machines, recyclers, and it's not comparable when you talk about how big a SafePoint is versus recycler or front-office machine. Nevertheless, nevertheless and only this time, I will tell you that we have surpassed the 50,000 units. That's all I can say. And coming back to the growth expectations. We keep on -- the idea is to keep on gaining market share in 2023. I think we have the right product, I think customers love it and I think we're in the right spot to continue growing in that sense.
And when you look at your offering in recyclers and the front-office machines, are -- do you feel that you still have hole in your product range compared to what the clients are asking for? Or do you have the full offering that the clients are looking for?
I think we already have the full offering. It's just a matter of convincing the customers to invest in our solutions. But I think we do have the full offering.
Excellent. One last for me. Looking at FX distribution in Europe, obviously, a very, very strong recovery when -- with the numbers you mentioned. And I remember this business was maybe 30%, 40% bigger a couple of years back than it turned out to be in 2022. Is that a good number to believe that it could recover up to those old levels? Or has the market changed in any meaning or that is unrealistic?
There must be a misunderstanding here because in 2022, we surpassed the 2019 levels.
Okay. Because I thought [ see for ] device operation that you bought was maybe 30%, 40% bigger than the current revenue base of the FX distribution.
No, no, that's not the case. I mean...
Okay. Then I might have misunderstood.
Sorry for that. But 2022 has surpassed the levels that we had in 2019, and we still think there's an opportunity to grow, as I've said.
The next question is from Viktor Lindeberg of Carnegie.
A couple of questions from my side, aye and maybe no when it comes to details. But starting up on Turkey and Argentina. Could you tell us a bit on how much this affected growth in Europe in this quarter?
When you look into Turkey and Argentina, they represent less than 3% of the revenues. So that gives you an indication. So I think we have said it before, if they grow with 50%, that gives you 1.5% like depending on what the inflation rates are then, of course.
All right. That's clear. Just double checking again. And maybe on those countries, anything -- I mean Turkey, obviously, politically now infected a bit with Sweden. But just understanding is there any ongoing initiatives in Turkey that may benefit margins or growth as you've seen in the last couple of months quarters? Or anything we should be mindful going forward on those?
No, there's nothing specific. I think Turkey keeps showing a huge organic growth, and that will continue that way.
All right. That's clear. Looking at Switzerland, one of those markets you crystallize in the report, it seems, according to my Excel sheet here, that it's down by more than 5% organically compared to Q4 last year. So how should we read Switzerland in light of this?
So in Switzerland, you know that we have the integration with Swiss Post and that is going according to plan. And we are gaining positive effects from the synergies of and running this as one combined company. We still don't have the full synergy effects, but we do expect to have them at the beginning of 2023. So we -- I think during 2023, we should see the full impact of that synergy.
Okay. So it basically focuses on costs rather than growth, is that how we should read the contraction in organic revenue?
I think also do to comment on the revenue side. In Switzerland, we have a very big portion of international, and that can be more volatile than the domestic business. Most other countries have a more sort of dominant position on the domestic business. So that is where you usually get the volatility.
Okay. Because international was up year-over-year in Q4, but maybe specifically for Switzerland...
Yes. In total...
Yes. In total, yes. In total, it was.
Maybe looking at your comments on the trucks and the fleet and the investments that you now are making here. Just to understand, you provide the numbers here on the electric and hybrid vehicles, and that's very helpful. But just to see share of total fleets, if you could sort of give us any details here so we can put it in perspective. Maybe starting off, I have a couple of notes on [ automatic fee ] as well.
The share of total is to be viewed as we have more than 6,000 operational vehicles in total -- and it's also important, the vehicles we are showing in this presentation are the operational vehicles. So we do not include that we have hybrids and electrics or, you could say, company cars and smaller cars because that's sort of the easy one. And of course, that would look -- make the number look much better, but we focus on the heavy-duty equipment sort of thing. So then when you view this in relation to more than 6,000, it feels small. But I think it's a great step here also to show that we now have this in place, and we have placed this order of 150 vehicles only for the U.S. market.
Understood. Maybe more of a philosophical question on the sustainability side when you migrate to more EV. I mean, obviously, the cost to operate is maybe different, but also the environmental footprint. But taking the broader context of the manufacturing process and post-life cycle in terms of operations when you demand the EVs, it may have a bigger environmental impact very much depending on, I think, the way you recycle, not at least the batteries. But how has that been sort of impacting your decisions in going with a specific supplier? Or is that beyond your scope? Or how do you reason in those terms?
We look into all these different angles as well as you comment around there. And for example, we follow -- we target to follow as much as we can in detail also the Scope 3 emissions. I mean our target is in Scope 1 and Scope 2 because that's the one that we can impact directly. But we also work with Scope 3, where we impact indirectly, covering the areas that you are commenting on. So that is, of course, an important part also in our decisions. It's also important here to see how we how we utilize these vehicles, but it's good because we reduced the CO2 emission in our operations, but this is also viewed from a financial perspective, that it's also financially good to reduce the cost for maintenance, et cetera. And in some cities, it's becoming more and more difficult to work with vehicles that are based on fossil fuel. Actually, it can come with penalties. So that might be a negative side of not changing.
I think the best example here was we can bring up Manhattan in New York where we get a lot of penalties for idling. We used to get a lot of penalties for idling and we're not getting those today. So I think that proves that it's the right thing to do. And on top of it, this is -- this forms part, sorry, of a normal substitution and replacement of the fleet that we do actually every year. And we do see that the cost, in this case, is exactly the same as it was in the past. So I think it's a win-win in all situations.
Understood. Final question from my side before I go back in the line. I think you alluded to a previous question on that on the price adjustments, and that you are now in those months when it's either a discussion or if it's an existing contract where you need to adjust prices. But judging where you are now in price negotiations or discussions, would you then imagine that it's going to be a year when clients, to a larger degree, churn out? Or when they sort of change the service that you offer to them, so maybe bundling or tweaking services in a different way? Just to understand how this may impact both top and bottom line here.
I mean, this is a normal activity that we have every year. It is true that inflation is high now. I guess, so that we have a lot of wage cost pressure as well. But it's a normal negotiation we have every year. I don't see any tweaking or any changes in the way that we're negotiating with them or the customer changing the way we service them.
Okay. So there is full acceptance for this price adjustment, you would say?
Yes.
The next question is from Peter Testa of One Investments.
Just a couple of questions on this price cost point in Europe and then also U.S. When you look at the U.S. experience, it took a bit over a year to get the pricing in front of the inflation rate to start to improve margin. I was wondering if you could just explain in Europe, what is to be a bit different in that regard. Because based on your comments, for example, are there any other cost factors which are coming down or you just have a different level of price ambition earlier in this phasing? Just if you could explain that, please?
I think when it comes to Europe the price increase expectation that we have is obviously higher than what it was in prior year, and that's due to all the cost pressure and cost increases that we've had during the last midyear. So that has changed versus prior years. And going back to the U.S., I think it was more about -- I think it was 2021, where we did a very aggressive wage increase introducing over time in those places, where we didn't have it, reducing 5-day work weeks to 4-day work weeks, and a lot of things wage increases as well. And that's what impacted the margins temporarily and now we have recovered from that. So I mean the idea back again is to try and recover all the cost increase that we've had via price increase with our customers in Europe, that will be the summary.
Okay. But are there other factors -- you said, you essentially annualized some of the increases last year in H2, so the cost -- rate of cost increase should slow through the year as well? Or are there other factors in Europe which are bringing that down, transportation costs, et cetera for...
I think in certain countries, the cost is going to come down a little bit. So that will make things easier. But we still have to recover from the increases that we had from mid-last year. So -- but this year, I think costs are going to ease a little bit here.
Right. Okay. And then on the U.S., can you give us a sense as to what -- how your pricing ambition in '23 compares to what you achieved in '22, just to understand which degree to you're just working on price to recover?
I think it's going to be a similar program to what we had in 2022, there's no major change. I'm sure that the fuel will go a little bit down, hopefully, and -- but that would not impact us because we have the fuel fee matrix with the customers, but it will benefit our customers. And on the other side, we will still have to continue putting some pressure on the wage increase because it's -- the market conditions are very -- the labor market conditions are very challenging there. But I don't see anything different to last year.
Okay. And then I was wondering on the U.S., if you could just give us some sort of sense as to where you stand now on over time and maybe staff turnover compared to prior to when the labor market tightened, a degree to which you may still be able to recover over time? Or do you see the turnover situation moderating?
So over time, it's still high. Obviously, it's lower than what it was. It has improved, but it's still high. And it's all based on if we can try to increase the retaining of our employees. Because again, it's not labor shortages, that has already been solved in the U.S., but it's more about retaining the actual employees that we have. We spend a lot of money in training them, and then once they leave, that's a big loss. But I think that's how it is in the U.S.
Okay. But is this turnover still very elevated, somewhat elevated versus before?
It's still high, yes.
[Operator Instructions] We have a follow-up question from Viktor Lindeberg of Carnegie.
Coming back to some details on the P&L, with the adjustments that you've made in the interest net and also the adjustment in the PPA, amortization. If you could give us any numbers but also what it relates to, would be helpful.
Yes. I will start with the amortization, it's a retroactive adjustment that is obviously positive for the income statement. And that is due to the fact that we have had a small error in our amortization over a period of time. And when we made a detailed review, we corrected it. So you see a positive impact here, representing more or less the difference you have in the amortization compared to prior quarter. So when you look at it for the coming quarters, you should view Q3 as a better indication than Q4. So it's a typical onetime retroactive noncash impact. When you look into the finance net, we have some onetime impact here, and it's partly related to not effective hedges that gives us an FX impact that goes in the income statement, and that represents approximately SEK 40 million, the onetime impact we have here. So when you take that out, you will go from, say, approximately SEK 100 million compared to SEK 30 million last year, you go from SEK 100 million to SEK 60 million to be viewed in relation to the SEK 30 million, and now I have excluded the monetary loss to simplify that. I hope that helps.
And also may be related to financial net, I noted that the pension liability adjustment, it was actually coming from being an asset to being liability, about slightly north of the SEK 500 million swing in the net debt. So is there changes related to discount rates? Or what is driving this one?
Yes, you have the yearly adjustments from the actuarial report impacting this, and especially from an IFRS perspective, when you look into our large pension schemes, that you can read more about in the annual report when you -- when we have that, but also for prior years, that they are relatively stable and the assets are in sort of low volatility more from a bond or debt structure, governmental paper. So of course, they can move. But in the longer term, it should be stable in relation to the debt. But from an IFRS perspective, you can see movements from time to time, and that's what you see in this quarter as well.
Okay. Then on the -- it's maybe a hedging policy, but I noted that a big portion of your funding is actually related to the Swedish krona and not so much in local currency in Europe or in the U.S. So just to understand, is this active decision to have a bit of an open position here between the assets and the liabilities? Just to understand why you do not fund yourself more in U.S. dollars right now.
What we do is that we have most of the funding, as you can see when you look into our debt as such in Swedish krona. But then, of course, we also use financial instrument to swap it to other currencies and so on. So what we measure and follow is how the capital employed in each currency is related to the sort of net debt we have in that currency, including the external loans or bonds, and including the leasing. So that's how we measure it. But from time to time, we can have, as you state, open positions. And that is also why you see -- you can see in the Q4 report now that we have taken quite a significant dividend to the parent company from our U.S. business, and that is part of taking advantage of the strong U.S. dollar compared with the Swedish krona.
We have a follow-up question from Peter Testa of One Investments.
I just wanted to understand a bit more on the recovery potential in Europe and just try to help understand. You give a good understanding of the indication of overall sales versus 2019 organically. But I was wondering, because you're also expanding -- your offer expanding your customers during that period of time, if you had a sense as to whether the like-for-like customer base of recovery potential is somewhat different than that overall number? Or were those 2 are similar, i.e., would you have a greater recovery potential because you've also gained customers during this period?
Sorry, can you repeat the question? We didn't hear you well, sorry.
Okay. Just when looking at Europe and the recovery potential versus pre-COVID, I'm trying to understand the extent to which your growth of your business base through this period as well, it leaves an extra potential beyond just the pure math of 2019 sales versus doing a 2022 sales -- despite you're offering broadening service -- broadening services, customers, markets, et cetera?
Yes, we -- to see if I understood the question right, but we expect Europe to continue to grow. We have no intention to not expect it to grow. And as we stated in the Capital Markets Day, we have this 5% to 8% CAGR target, and that's for the group and that's including also that Europe is going to grow.
But basically, if I understood the question right. Basically, Europe has recovered from the pre-pandemic levels. And I think there's -- it's the same type of services. The only ones that have increased versus pre-pandemic have been related to the FX business. In that case, we have been higher than what it was before, but the rest has been just a pure recovery of what we had in 2019.
I was just wondering on activity level because there's been inflation during that period. It's also been customers won, whether you still, in fact, had some embedded recovery left in the market beyond what your ambition to grow the business?
Yes, we still have markets where we have that recovery pending, like the U.K. It keeps growing. We don't know how much of that will come back. But in the rest of them, I think inflation now is high, but it was lower a year ago, and we didn't have that impact in the price increases. So I think most of it, you can consider, that was volumes coming back.
Ladies and gentlemen, there are no further questions at this time. I hand back to Aritz Larrea for closing comments.
Okay. Thank you very much for listening in. All great questions. Have a good day. Bye-bye.
Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.
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