Earnings Call: Q4 2012

Mar 7, 2013

Ladies and gentlemen, welcome to the Investor Call and Presentation for the Full Year Results 2012. Please be aware that our announcement, the report as well as the slides used for this call can be found on the website, where the webcast will also be available following the call. I would like to draw your attention to slide number 2 regarding the forward looking statements. If you turn to slide number 3, you will find the agenda for this call. We'll go through a few key events for 2012 as well as to give you a business update. Following this, we'll go through the annual results, including capital structure as well as the further details on the refinancing launched this Monday. We'll conclude with an outlook for 2013 followed by a Q and A session. With me today, I have Group CEO, Jeff Gravenhorst Group CFO, Henrik Andersen and Group Treasurer, Barb Brock Plogner Jensen, who will take you through the presentation. I'll therefore give my word to Group CEO, Jeff Gravenhorst, on the key events and business update. Thank you, Martin, and good afternoon to everybody and welcome to the annual results for ISS for 2012. Please turn to slide number 5. So we start with the key events for 2012 for ISS. Overall, there's no doubt that 2012 has been an extremely eventful year for ISS. 1st and foremost, of course, we're working in the macroeconomic conditions, which are a little bit of a mixed bag throughout the world. Despite that, we have been able to generate a very stable result, both on the top and the bottom line for the organization. We've had some very good breakthrough on the IFS organization. But I think most importantly is that when you look at 2012, our transformation of the business had continued in both the strategic and operational way that we set forward when we started the year. So the key point here is that we continue to become stronger in our emerging markets that it takes a bigger portion of our business. We wanted to become even better at the broader service palette of our products. That means that we can service IFS Integrated Facility Services, I. E. All the services needed to run facilities for our customers. This means that we have moved further away from being the original cleaning company in Northern Europe back in the 1990s. This has made us a stronger organization, which also led to that we've had 2 new investors coming into the family. Teachers and Kirkby came in, made an investment midyear or around August this year, investing around €500,000,000 into IHS, basically to support the strategy that we're on the path that we're on. On this strategic review and on this strategic path, obviously, we're also focusing our business even harder. So during the year, we have identified further businesses, which we should enhance and that means, of course, entering into more strategic partnerships with our customers, but also businesses where we are not the right owners. Most importantly with that is that by divesting some of those businesses, we will further focus our efforts on the business that's core to our customers. And on the side of that, also it will lead to some deleveraging from selling off some of our non core activities. We will therefore expect to sell to the net proceeds of around DKK 2,000,000,000 or at least DKK 2,000,000,000 in 2013 in our focus on streamlining further our business in 2013. Key point though, the overall biggest successes for the year has been the groundbreaking contracts with both Barclays and Novartis, which are both of them up and operating now. And we're, of course, delivering the results to our customers. So, these are all the overall key events for 2012. If I can ask you to turn to page 7. With this transformation in mind, ISS today is a global leader in Facility Services. We are present in more than 90% of the world's GDP with the right services to be able to service international, regional as well as local customers in most of the world. If you turn to Page number 8, obviously, we have a very strong foundation in our developed markets. This is the market where it represents about 80% of our turnover, but it's a little bit smaller than the year before because the emerging markets have actually grown more, of course, than the developed markets. We have maintained a 0% or flat growth in this region. And then because it is such a mix back, it actually is quite a good result overall. We've had very good growth in some of our countries like Italy, Norway, Turkey, U. K, just to mention a few of them. But at the same time, we also have to admit that the Southern European part is suffering. So we have decided on deliberately to exit some of the either loss making contracts or contracts where it's very difficult to get paid from our customers, particularly in Greece, some contracts in Spain. And that, of course, has also led to some negative significant negative organic growth, in particular, Greece, but also negative growth in Spain and Portugal. This is, of course, because a lot of our customers in Greece are public. I think most of our business in Europe is still commercial. So with this in mind, it is a very, very strong platform we have, and we've also been able to maintain our good organic our good margins in this region. If we turn to Page number 9. Obviously, the emerging market, we're still having very good growth in this region. This is now 11% or 21% of our total turnover, and it represents a double digit organic growth again this year. The more than half of our employees are represented in this region now is 54%, 200 almost 287,000 people. This represents, of course, also the opportunities for the future because basically, of course, the salaries in these regions are significantly lower than they are in the developed markets, but we are representing services delivered by 200 and almost 90,000 people, which, of course, is a good platform to grow on also in the future and particularly also as the salaries will increase in these regions more than it will in the developed markets. So still very good opportunities on this market side in the emerging markets, and we are very happy with that to go forward as well. Now on Page 10, the reason for this growth, both in the flat growth in Europe but also the high growth in the emerging markets is, of course, based around our unique value proposition and our competencies. It is important to remember that the transformation that we're on is in a number of areas. 1, we wanted to expand our presence in emerging markets. And 2, we wanted to change the way that these the buildings around or the facilities around the world are serviced within this industry. So on the left hand side on Page 10, you can see the self delivery model, which is really the way that ISS works. The way we deliver our services to our customers, we do it with our own people. So the self delivery part is a key differentiator to most of our competitors, particularly in the global scale, but also from a regional and sometimes also from a national perspective. The reason why it's so important for us to deliver the services ourselves is deeply embedded in the value proposition and the demand from the customers. The customers actually demand that we take care of their facilities in a good way. That means a way where we can manage the risk on the Comms customer's behalf, a way where we can protect their brand when we service them day in and day out. It is our people working on the customer's side. It is our people doing the canteen. It's our people doing the catering services, the property maintenance, the cleaning services, etcetera. And we need to make sure that this is done in a way that protects the customers' facilities, but also their brand. In doing so, the customer are asking for consistent delivery. We have to deliver the services in the same way day in and day out, and we have to do it in a flexible way. This can only be done when you really manage the labor force on-site. This is done by our common development programs, our common incentive programs, our common incentive systems to make sure that we meet the customer's demand. This is why this is such an important pillar for ISS. This is the reason why we have 540 odd 1,000 people working for ISS on a global scale. This gives us, of course, the added benefit of being able to give them one point of contact and thereby the convenient solution that the customers are asking for. In one particular case, we have a cut line. We had 4,000 sub suppliers, servicing them throughout Europe. This today is 1 sub supplier, obviously, a much more convenient, much more consistent, much more flexible solution that the customer wanted and at the same time protecting their brand from a blue chip delivery like ISS. The success of this, we can see on Page 11. This is the integrated, the ultimate product now consists of more than a 5th of what we do today. We have had, over the last few years, an enormous growth in this service sector or in this service segment, I. E, that means the integrated facility servicing offering where we provide all of the services to the customers as, for example, on the new contract for Barclays or Novartis. The annual growth has been 16% a year for the last few years. And actually, most of this overall is organic growth because this is not something you can acquire. If you look at it in Europe, this is also a growth engine. And this is why Europe is still a very interesting market in our perspective because there is a big potential to continue the on the IFS delivery to our customers, both in countries and throughout the region. As we can see, this has had an organic growth in Europe over the last few years from 2,006 to 2012 of about 13%. But it's the same trend for the rest of the world. So it's good growth potential, and we are harvesting on that new product that we have established over the last 5 to 7 years. If we turn to page number 12, the other transformation that we have embarked upon is, of course, to have a segmented approach. That means that we want to deliver these integrated services, the broad service provider to selected business segments. And we now have a very, very strong presence within the banking environment, both globally, regional and locally. We also have it within the industry and the food sector and within public and health care. These are the focus areas that we are really making sure that we can deliver the customer demands and brand protection to our customers. On top of that, of course, global accounts has been a part of our market has never seen before, I. E, self delivery for global accounts throughout the world. This is now 5% of our turnover at the end of 2012. But obviously, with the win on the start of Barclays and Novartis at the end of 2012, this will continue to grow also here in the 1st part of 2013 and continue throughout the year. This gives us bigger big portfolios with big clients and, therefore, a strong portfolio business where we have recurring business day in and day out, which, of course, is the reason for the stability of our company. If you turn to Page number 13, this transformation can only be done because we have excellent services within the different service pillars. So of course, the heritage that we have within cleaning 50% of our business is a very strong excellence pillar of ISS. But we also build our excellence in our property services that is both building services and technical services taking care of both XVAC, but also of data centers for the big banks and other clients. Catering services is also a stronghold now of ISS and we have a strong excellent service in this. Support services like front of house or portering services for hospitals, a very key excellent part of our service delivery. Security goes with that and of course, the ability to overall manage the services and integrate them into one solution is key. So overall, the transformation has continued in 2012, proven by the fact that we have won 2 of the biggest industry 2 of the contracts in the industry in the year and we are delivering them and we have satisfied customers on this, but also the fact that we have now been endorsed by 2 new investors coming in and buying into exactly this strategy. Now this, of course, turns into some manual results. And I will turn over to Henrik, the CFO, to go through the numbers for the 20 12. Thank you, Jeff, and we will definitely do that. So if you turn to Slide 15, we will just quickly run through the summary of, as you are fully aware and appreciate, our key objectives. So if we look at the first, which is the organic growth, The organic growth for the year ended at 1.7% for the year, slightly higher in Q4 with 1.9% with some of the contracts referred to in Jeff's introduction going live. We have seen that Western Europe, Latin America and Asia delivered positive organic growth in 2012 over the year. And again, especially in Asia, we have seen double digit organic growth, but we'll come back to that a little later. We also have to appreciate that 2012 from a macroeconomic point has been and still is a difficult world out there. And therefore, we have seen that the conditions in certain European and especially European countries have required that we have taken actions on especially contract portfolios, but also payment terms. That has led to that we have exited some of these contracts, but also the macroeconomic conditions have led to that some projects and others have probably been delayed or extended to future quarters and maybe 2013. If we look at the operating margin, the margin came in at 5.6%. 5.6% for the full year is slightly lower than what it was in 2011, where we ended at 5.7%. However, we did well in Q4. We'll say we improved slightly in compared with the 1st 9 months, and therefore, we are in the Q4 unchanged compared with Q4 2011. We reached an operating profit at €4,411,000,000 which is actually the highest level in the history of ISS. The other thing which has been one of our key priorities throughout 2012 and of course remains under the current conditions is the cash conversion. We know that the world has had a very tough year in terms of payment and also securing liquidity around not only in Europe, but globally. We reached a cash conversion of 103 in 2012 compared with 93 in 2011. I think this is a thank you to the huge work that has been going on in all our countries and all our operations and also thanks for enormous backup from customers that have been paying on time. It is significant part of achieving 103. We can see that we have during that year been able to also reduce debtor days slightly, but we are still not there and that is still a going focus area going forward as well. So if we flip to page or Slide 16, we'll just shortly touch on the revenue growth by region, where we will illustrate, 1st of all, Western Europe, where you will see that we had a organic growth of 1%, but we also see there that that's part of our divestment strategy. So major in Western Europe and Nordic, that's where you will see the divestments coming through in 2012, which are either carryover effect from divestments done in second half or part of twenty eleven. And of course, some of them also done in 'twelve. So respectively, in Western Europe and Nordic, 2% 3%. A small negative organic growth in Nordic, representing that 2 of the countries Sweden and Denmark were negative and no in Finland were positive. So I would say a little mixed in the Nordic, but just around year 0, but overall, again, a year. That was in the nature of projects, name where we were slightly lowering projects in the Nordic area, and we exited a few contracts around. When we come to Asia, you will see that we have an organic growth for the year of 15%, which is, of course, very pleasing to see. And it is spread over all our countries in Asia, so they have done really well. In terms of Pacific, we are around 0. And I think we came in, and you will see for the ones who followed it quarterly that we ended the year slightly better than where we were mid year. And you also appreciated we had the weather conditions, which actually influenced us negatively in the first half of the year in Pacific. And then when we go to Latin America, it's worth observing here that we have Latin America, which is on 7% and that is a very deliberately exercise from us where we have taken the growth, just slowed it down a bit because we really wanted to focus on what was and what is our business platform in Latin America and how that business platform can be strengthened going forward. So they achieved 7%, which is pleasing under the circumstances and we are tracking that closely. In North America, we have had a slight negative 3%. And again, there we are subject to when large contracts are starting. But I will also say in 2012, we had some projects disappearing out of our North American portfolio. So we realized a slower organic growth there, but that also comes on the back of a 2011 where, of course, we started large contracts in North America overall. In Eastern Europe, we are small negative organic growth, but I think Eastern Europe has done well and they are mobilizing a couple of contracts in Q4, which we will see coming towards 2013 as well. So Eastern Europe did reasonably well and especially also they were in difficult macroeconomic conditions part of Eastern Europe. So overall for the group, you will see we realized 1.7% organic growth. We had overall divestments of 2% and we had currency effect of 2%, which all in all gave us a growth of 2.3%. If we go to the margin, I will say Fozi here is that we went forward in Western Europe from 5.8 to 6.1. And that is covering a number of countries that went forward and also 1 or 2 countries that went backwards. But again, Western Europe progress and we were quite pleased with that. If we see in Nordics, we went backwards with the 3 tens between 11 12. And some of that, of course, cover over that we also were hit by some austerity measures in the Nordic region, which we have commented in previous quarters. When we look at Asia, we were slightly lower. I think we in Asia have we're still seeing a very good growth. Some of that growth, of course, comes that we might have timing gaps in terms of passing on minimum wage increases, etcetera. We are still very positive over the growth. And if we see, of course, a 7.7% margin in Asia, it gives goes without saying that is very margin accretive for the group to continue the growth in Asia. When it comes to Pacific, we've spoken about that in previous quarters as well, slightly below in Pacific 5.2%, Especially, we were hit by the weather earlier in 2012. We had some changes to the workers' comp. And then we also, as we are saying in the annual report, had 1 or 2 contracts where we have been working hard to bring the profitability in line with expectations during the year. In Latin America, I would say we have had a low and to some extent lower than expected 4th quarter where we have adjusted our business platform in Latin America. So Latin America comes in at 2.4% versus 5.9%. But as I said on the organic growth, a pure reflection of that we are changing our business platform there and slowing the growth down in Latin America. In North America, very good progress, 3.4% to 4.3%. So in some ways, you can see the progress that was done in North America in the back of large contracts starting in 2011, which I think is the right development and we were quite pleased with that. Eastern Europe slightly backwards with the 10s. But I will say here, Eastern Europe, we know we are starting some contracts. And again, in Eastern Europe, they have done on average quite well for 12. When it comes to corporate costs, we mentioned earlier that we did a we have done a cost exercise and we are very cautious around our cost in the current climate. And that led to that our corporate cost went from 0.6% to 0.5%. And overall, that of course supported also that we stayed at a margin of 5.6% for the year. If you then turn to Slide number 18, I want to just highlight here, which I think is quite impressive to see that the overall picture for what is where is the cash conversion coming and what are the contributors to the cash conversion when we look at the global picture for ISS. You will find here when you look across all the regions that actually all regions have done exceptionally well in 2012, where it's ranging right from somewhere around 94, which is probably North America, which is pretty good, but also coming up and knocking on 107 and 104 in respectively Eastern Europe and Nordic. We are very pleased with this because it shows that it's diligent, it's working and the working capital and the management of debtors has really been a key focus for everyone around the world, which is a testament to what we have achieved in 2012. So with that in mind, I would just like to pass over to Barbara, who will go through the capital structure and of course, at least some words around the refinancing as well. Barbara? Thank you very much, Henrik. If I may draw your attention to Slide number 20, this is a picture which says many words in itself. As Jeff started to mention, it has been a eventful year with the contracts and the investments from the 2 new owners. And what you can see is that we have now managed to get the leverage of the company significantly down compared to where we have been in previous years. At the end of 2012, we had a leverage below 5 times and an absolute debt net debt of almost DKK 26,000,000,000 The focus and the transformation that we are going through will also continue to prioritize the deleveraging where we have a lot of the initiatives that we have within the company aiming towards bringing the debt leverage further down. When you look at what we did in 2012 that will keep improving also the absolute debt levels going forward, a good example is taking out the senior notes that we did in 2,000 or in December 2012, where just the interest cost on that note alone amounts to DKK 430,000,000 per year, which will further accelerate the deleveraging of the company going forward. On slide number 21, we have wanted to give you some highlights in terms of the refinancing that we announced on Monday this week on the 4th March. What we're aiming to do is to amend and extend the existing senior security credit facilities. And the main purpose of this amendment and extension of the facilities is to extend the maturity of our credit facilities by additional 3 years. We have introduced a number of amendments that should increase the operating and refinancing flexibility of the company. And furthermore, also build in flexibility in order to support the divestments of non core activities in order to use the disposal proceeds towards the most expensive part of our debt. Finally, as this is a long term financing we're looking at, in the end, when we're done with the amend and extend, we will have 5 year facilities in place. We also want to ensure that the facilities have sufficient flexibility to last through post a potential IPO. In parallel with the amend and extend, we also have put in place a transaction where we want to refinance the 2nd lien facility that we have today, which currently sits at €600,000,000 And we want to refinance this facility with new senior term loans, which will be part of the existing senior facilities agreement. The maturity of those new term loans will be aligned with the existing and extended term loans, hence running to 2018 and more specifically to April. In the process, we have now got an affirmation by the rating agencies of our corporate credit rating where Standard and Poor's have us rated with a BB- on positive outlook. And Moody's has put us on B1, but with a positive outlook now. And for the first time, we have actually made sure that we also have assigned ratings to the senior secured credit facilities, which is BB- like the corporate credit rating from Standard and Poor's and a BA3 rating from Moody's. So all in all, following the development in 2012, making sure that we can continue the transformation that Jeff has been talking about and Henrik has proven with the numbers for 2012, we believe that the initiative we have now raised with the refinancing will support that we can continue the journey that we're on. If you turn to slide number 22, you will be able to see the breakdown of the actual facilities that we have in place today. The capital structure that you see in details here is on a carrying amount basis. So all in all, you can see that currently we have total net senior debt of €16,000,000,000 which is €500,000,000 less than what we had last year. And then overall total net debt is down €4,000,000,000 compared to 20 11 numbers, where we are now just below €26,000,000,000 The overall leverage, as mentioned, is now below the 5 times and this is also something that we envisage going forward. So the major events that we saw during the course of 2012 was prepayment of debt. 1st and foremost, of course, following the investment from Caribbean Teachers where we addressed the senior notes, but also addressing the scheduled repayments that we had throughout the year in 2012. Furthermore, the strong focus we've had on cash flow and cash performance will also continue to improve the overall structure. On slide number 23, this is a snapshot of where the maturity profile was sitting at the end of 2012. So just going through the details here, you can see that in 2013, what we have ahead of us here is the remaining non rolled tranches that we will repay by the operational cash flow. In 2014 and 2015, you have the dark blue bars, which consist of the senior secured facilities that we just discussed. The DKK 824,000,000 that you see of the light blue bar is the EMTNs and those we will leave in place until maturity. Securitization, just as we've done before, this has been rolled at a yearly basis and is also something that we expect. But as mentioned regarding the refinancing, the orange bar is the 2nd lien, which we will intend to refinance in the process that we have launched. For further details on the refinancing, there are a few highlights mentioned in the appendix. So you can have a look there for sort of the key points in the refinancing. As mentioned with the initiatives we have now put in place, we want to make sure that we can continue to focus and support the operational performance of the business. And what we envisage on this for 2013, I will let Jeff go through on the following slides. Thank you, Rava. Thank you, Henrik. And just turning to page 25. Obviously, 2012, a year of transformation, but also a year where we continue to see some macroeconomic challenges, particularly in Europe and particularly Southern Europe. On the outlook for 2013, basically, it's a little bit in the same tune. We will continue the transformation of ISS towards the emerging markets, towards the larger IFS contracts being both in country, in region and globally. We will definitely focus on getting the big ticket items up and rolling in a stable way, which basically we're very well placed to do right now both Barclays and Novartis. And we'll continue the path to grow on the global accounts potential in the marketplace. However, we also still see that there will be sort of a mix back of global macroeconomics. So Europe, we continue to see will be structuring somewhat. And particularly also Southern Europe, we don't see a quick turnaround there. So we do see uncertainties around the austerity measures and also about growth potential in Europe. With that in mind, our focus and our expectations for 2013 with a start up of the big contracts as well in mind, we expect to be around 3% organic growth for 2013. Our margins, particularly with a little bit of sort of still expecting the macroeconomics in Europe to be difficult, we expect to see around the same level as 2012. And cash conversion will continue to be very, very focused on collecting our cash. And it is important for us that it's under good conditions that we take on new contracts so that we can continue to collect the cash and we expect that to be above the 90% as mentioned here in the on the slide. So with that, thank you very much for listening into the performance of 2012 and the outlook for 2013, and we'll turn it over to Q and A. Thank you. We will now begin the question and and Mr. Mitch Resnick from Hairraise has a question. Please go ahead, sir. Hi. I've got a couple actually. Just on the outlook, you guys ended the year with a little less than 2% organic growth for 2012, but you started out the year hoping to achieve between 4% 6%. So I wonder if you can talk us through how you get to the 3% in 2013% and how to your degree of confidence that you can actually deliver that? I think the key point is, yes, we ended up the year at 2% or 1.7% organic growth in 2012. I think the biggest ticket question is, of course, the macroeconomic development in Europe. So what we've seen over the last few years, it has been a little bit of a mix back. Obviously, we're helped by the big contract that starts up 1st January. We also have a good pipeline on new larger contracts. But I do also see that there are cost cutting going on in Europe, which will also sort of lower the growth expectations somewhat. And we need to see, following the macroeconomics, whether the customers are going to invest in new projects. And that means what Henrik was talking about. So we expect some of that to come back in the latter part of 2013. So we do have some expectations here that we'll see more projects. In the latter part, we have the start up of the 2 big contracts at the beginning of the year. So that's basically what we have based our outlook on. Okay. And then on the margin side, obviously, the growth in emerging markets, particularly Latin America is very strong, but there's been a lot of margin give back. So I realize you're guiding flat margin, but is there anything more that you can do in those jurisdictions to get the operating margins to rebound? On the emerging markets, it's particularly in Latin America that we have made some investments. And we also have gone out of some contracts, which impacted the margin in 2012. We do expect actually that margin to increase in 2013. But we are in the guidance here. Also again, we know that there are certain areas where the labor reforms gives us it can be both on extra salaries or different social reforms, etcetera, gives us a little bit of sort of prudency in saying we will expect the margin to be flat. But of course, we'll work very hard on everything we do to improve it. But I do believe that the macroeconomic gives us some challenges. Now Spain is a good example of that where we have seen different rules on disabled people, for example, that we use also in our business, which is good from our perspective. But definitely, it gives us different salary levels. This is a challenge we work with. Of course, we then have to improve our efficiencies, and we have to pass on price increase to the customers. But we put up all of these points into the same bag and say, with the blurry picture of Europe, we guide around the same level despite increase in margin in Latin America. Okay. And then just a couple of questions on the capital structure, particularly as it relates to the 16s. Is there anything with this with the imagine extent that would preclude you from doing a senior unsecured bond to manage the 16? Or is it something you anticipate you fully expect to redeem with an IPO? I think we are saying here clearly, we have highlighted here and we also said and we are asking for permission to use the disposal proceeds going forward, and that is going to be addressed and used to repay part of the 16s, which we are saying that it is addressing the more expensive part of our capital structure. So we won't we haven't considered anything else without asking for that. And that is what is on our mind right now in terms of the refinancing. So just to be clear that the 2016 stay in place through an IPO? We can't say anything about that because in reality an IPO timing is not timed and it's not scheduled. So therefore whenever an IPO happens it shouldn't really be referred to that. Okay. No plans for an unsecured? No. What we address with the amend and extend and the refinancing right now is the senior facilities as well as the 2nd lien. And as also mentioned, we obtained further refinancing flexibility. But it's important to state that these are the things that we focus on at this point of time. Okay. All right. Thanks very much. That's all for me. Mr. Christian Schiller from Ares Management has a question. Please go ahead, sir. Hello, gentlemen. Thank you very much for your presentation. I have a question around your IFS model. And specifically, if you first can just tell me a little bit how your competitors are reacting in this space or if you are the only one that is kind of competitive in a global market? Yes. I'll be very happy to do that. To just put it in perspective, IFS just means, from our perspective, is an integrated facility services where we're delivering catering, cleaning, property maintenance, security and FM. And that means we can take care of all the services in running a big building like a bank or a factory for that matter other than the core of what the customer does. Now the benefit of this is, of course, that we can put synergies in and thereby cost savings. But it also is that all the people working in the facilities are using their eyes and ears on following and servicing as one stop shopping the customer. Now there are obviously local competitors in the various countries that are offering the same offering as we are. There are also some competitors who can do this on a regional level even though that's very few. And when we go into the global environment, then there are basically only one other competitor who can deliver integrated facility services on a global scale. So we have a couple of companies who can do it with self delivery. The alternative to this is companies like Johnson Controls or CBRE, which are more management companies that can manage the services, but via delivery from a whole host of sub suppliers. The big difference is we do it with our employees. The other model does it with a lot of sub suppliers and thereby different sort of sets and values and delivery systems. That's the big difference. So on a global scale, we are a couple of companies that can actually do this. We are the ones with the broadest in our mind, the broadest service offering that's there. And then obviously, apart from that, there's not any global competitors from a self delivery point of view. Thanks. As a follow-up, I'm wondering how do you do you then use these contracts to gain market share? Are you effectively able to price them at a premium? It's not actually asking for a premium because it is utilizing the synergies that you had the opportunity for synergies to share that those with the customers. And that's the reason why you have a value in price reduction to the customer. That's one part. So they will typically see a saving. We will also see that we get some of those synergies, of course. Otherwise, it's not worthwhile. So for us, it is margin accretive, should be. It's, of course, expensive to start up. And I have to say also when we guide for 2013, of course, there are some start up costs on both Barclays and Novartis in that. But overall, we see accretive margins on this. So it's gaining market share, but it's also giving us stability, longer term contracts where we can work year in and year out on efficiency improvements close with the customer where we share the benefits of that and therefore gives us better margin on a longer scale. At the same time, just to remind you of the slide I just showed that we are growing this market both with local, regional and global customers to the tune of 16% a year over the last 5 or 6 years and actually since we started this. So it is gaining market share, but it's also improving the margin for the business overall. Understand. Thanks. Then I have one more question on IFS and then I have one on capital structure, if I may. And so on IFS, can you let us know obviously last year you won those 2 big contracts which is fantastic, but how many contracts were up for tender? And then if you can also let us know if there's a pipeline outlook for these kind of contracts for the coming year? Yes. There's actually quite a lot of interest in the large regional and international, even global contracts. This is a market where you have to be a little bit careful because there are a lot of customers that are playing with the idea of consolidating procurement on a worldwide scale only to get cost synergies. We are very selective on what we deal with, what we bid on because it's not just a cost exercise. This is giving the client consistency across the world. It's giving them flexibility across the world. But above all, it gives them a risk management solution which can protect the brand of the customer so they don't run into stupid issues on Facility Services when they run their business in Latin America, Asia or even in Europe for that matter. So it is very important for us that we don't just go out and bid for everything that's out there. It is selecting the customers that we want to deal with, the customers who believe in this as a long term solution. And therefore, it's not that easy to say what are the number of tenders as opposed to the ones that win. We have to have a very high hit rate on these businesses, and we do have that. But there are a lot of opportunities and therefore also good pipeline on this, but the pipelines are in the 3 to 5 where you work on a constant basis and we need to win 2 or 3 out of that 5. So and that's the track record that we have. Thanks. On capital structure, you are obviously trying to refinance the second lien. Now that comes in conjunction with the A and E. Would you consider the new term loan to be upsized if you don't achieve a sufficient amount of consent on the extension of the existing lenders? We have no comments to that. Okay. Thank you very much. Karl Streicher from Guggenheim Partners have a question. Please go ahead. Hi. Thanks very much for taking the question. Could you give some more color on the operating margin in the Latin American segment? It seems to have been a lot of the weakness seems to have come in the Q4. And then the second question is, could you give us some further color on your existing hedging strategy and how would you how you would see that going forward? Thanks. Yes. If I take the Latin American question first, you're absolutely right. I think we try to sort of give a little bit light on it. In Latin America, we've grown quite rapidly over the last few years, extremely quick. And in this, we have gained businesses where it hasn't really been that profitable. We've chosen to go out of some of those and streamline the business significantly. And with that, we've taken some write downs on some of the customers and some of the assets in connections with that. So it's not an ongoing result from Q4, but it really is a structure change and a focus change going forward. It's a little bit result of growing a little bit too fast in a couple of years and being a little bit too opportunistic. Now we are focusing as sharp as we are in Europe on the key customers and customer segments we want for the future. That's the reason why. And that's also why we believe in we will have higher earnings for 2013 in the region. And on the question on the hedging policies in the company, no, we don't we are quite transparent. You can see the notes in we don't intend to change any of the policies. We generally have increased our hedging on the interest towards the second half of twenty twelve. So we've gone a little higher in fixed on the interest. But we're also asking as part of the refinancing to opening a potential dollar tranche because we believe that we need to match a little bit better what we see as our earnings coming in. And therefore, we are taking dollar on our balance sheet as a financing why it is potentially refinancing. Okay. Great. I guess I haven't had a chance to look at the hedging notes in the financial statements. Does it give detail on the total notional amount hedged at present and the fixed rate and the maturities on the hedges at present so we can calculate the kind of the cash interest expense on a go forward basis? Will I see that information if I have a look? Yes. Yes, you will be able to see that in our annual report. And I'm just finding you the note, but it is in the notes. And coming to you here, it's in Note 37. You will find all our liquidity and interest rates risk described. So there that should absolutely give you the details you're looking for. Great. And then just to revisit quickly, Latin America is 2.4% operating margin for the full year. Do you think that's reasonably reflective of what could be expected for 2013? Because obviously, the 1st 9 months of the year were more like say a 4.5% margin and then the Q4 was very weak. So on a go forward basis, is that 2.4% reflective or more reflective? No. I think I'll try to sort of clarify that. No, the 2.4% is a result of us taking some hits in the year and deliberately exiting some segment and customers. So we expect that to be higher for 20 13. Great. Thank you very much.