Welcome to the Getinge Group Q3 Report Conference Call. Today's call is being recorded, and at this time, I would like to turn the conference over to the Acting President and CEO, Joacim Lindoff. Please go ahead, sir.
Thank you very much, and a warm welcome to all of you, and thanks for joining the earnings call today. We have a slightly extended call today to cover all the topics and to allow enough time for questions. We will try to stick to the announced time schedule, which means that we will try to attempt to close the conference at 4:30 P.M.
The presentation for today is accessible via a link in the report and is also available on our webpage under the Investors section. Together with me, I have our new CFO, Reinhard Mayer, who will support me during today's call, and he will be presenting the Q3 financials, and obviously also join me during the Q&A session. We will do our best to take you through the financials and provide all of you with a business update.
I would like to start with slide number three, which gives you the quarter three in brief. Just as a starting point, I would like to highlight that it's been a quarter with focus on both short-term agenda and the long-term direction of the group. We have continued the transformation program and in parallel, been reviewing our long-term strategic direction, and I will obviously come back to that during today's call. I want to share with you my personal overall message for the quarter.
It is now my eighth week as acting president and CEO of the group, and it's been weeks characterized by change, but also high activity. Despite a challenging development with a negative order intake and almost flat net sales, we have delivered an EBITDA of SEK 963 million, which is an improvement of 16.3% versus last year.
This is very much thanks to our Big Five efficiency enhancement program, where we continue to perform according to plan. We had high activity levels in Hechingen, and the improvement work there continues. We have assessed that additional investments of SEK 400 million will be required to get a successful setup, which is the main reason for the increased restructuring cost in the quarter.
The total restructuring cost in the quarter increased to SEK 732 million and had a substantial impact on profit before tax. In addition to the provision of SEK 400 million, cost of write-off of an R&D project, and also costs related to the management changes were included. During the quarter, we also concluded on a strategic review to clarify our long-term strategy that captures growth opportunities for all three business areas.
Based on this, we have decided to focus getting a long term on two business areas, our current business category units, Acute Care Therapies and Surgical Workflows. In light of this, and with the knowledge that our third business area, Patient and Post-Acute Care's potential, the board and, with the board of directors, has tasked us in the management to prepare for a distribution and listing of Patient and Post-Acute Care. A split would increase the ability for the two future companies to realize their strategies and continue to develop attractive products and solutions within their respective areas. If I may summarize already now, the quarter has been very encouraging with both short-term and long-term perspectives. We have gained substantial operational efficiencies thanks to our Big Five program, and we have made some key decisions in ensuring our long-term profitable growth.
So if I then try to break this down step by step and move over to slide four, the order intake in the quarter was not on a satisfactory level and is below our expectations, but it should also be viewed in the light of a strong corresponding quarter last year, where we had an organic order intake growth of 5.2%. The order intake in the quarter declined organically by 3.2%, with a negative trend in all business category units. EMEA reported organic growth of 1.6%, while both Americas and APAC had negative development of -5.5% and -9%, respectively. If we then now move over to net sales, we are more or less flat in the quarter with a modest organic increase of 0.2%.
Acute Care Therapies continue to grow, while Surgical Workflows and Patient and Post-Acute Care remain similar to the same period last year. The organic sales in EMEA region declined by 0.7% and increased by 1.3% in the Americas region. The development in APAC was flat compared to the same period last year. Moving over to slide five, I will now try to give you a high-level update on the performance in the respective business category units, and I will start with Surgical Workflows. The order intake for the quarter declined in Surgical Workflows organically with 1.1% year-over-year. The organic order intake in EMEA increased by 6.6% organically.
which is very nice to see, while the trend was weak both in APAC, at -4.4%, and the Americas, -12.7%, mainly due to very strong comparable Q3s in 2015, where some major Life Science orders were booked. Net sales for Surgical Workflows decreased by 0.1% organically compared to last year, as a result of lower invoicing in the own Surgical Workplaces and Infection Control healthcare side. However, we can see a strong performance in both Life Science and our Integrated Workflow Solutions area, was that, that was reported in the quarter. The gross margin increased in the quarter to 40% compared to a 38.8% Q3 last year, mainly due to better capacity utilization in supply chain.
The selling and admin expenses were down in the quarter and contributed to an improved EBITDA, which amounted to 293 million SEK, compared to 228 million SEK last year. The EBITDA margin improved by 2.8 percentage points. Then moving over to Acute Care Therapies on slide six. The order intake for Acute Care Therapies totaled at -4.1%, mainly as a result of lower order intake in critical care and cardiopulmonary. All geographic markets posted a negative performance with the most marked change in the APAC region. The net sales increased organically by 1.3% due to positive growth in both Americas, 2.2%, and EMEA, 4.8%, while APAC declined with 7.1%, mainly due to weak development in Australia.
The EBITDA before restructuring increased by a healthy 13.4% and amounted to SEK 541 million, and this increase is mainly due to higher gross margin and lower SG&A expenses. The restructuring costs increased in the quarter and are attributable to the provision of SEK 400 million for the FDA-related remediation program and the write-off of an R&D project of SEK 158 million. Moving over to Patient and Post-Acute Care on slide seven, where we can see that the order intake declined organically by 4.9% in the quarter versus last year. The main reason for this trend was the weak performance in the APAC and Americas region and the lower demand in both rental and capital segments. The rental and service were down due to large orders last year.
Net sales fell by 0.9% in the quarter as a result of the weak performance in service and rental segments. The capital segment posted a positive development with specifically strong performance in patient handling at +10%. Gross profit declined as a consequence of the lower sales volumes. EBITDA, however, increased by 8.1% to 187 million SEK compared to 173 million SEK. And this is mainly due to good cost control and thanks to the ongoing efficiency program, Big Five. And moving on to slide eight, and as you know, we are working hard and dedicated with our remediation program.
The improvement work in Hechingen has continued at the same robust rate as before, and we have now made the assessment based on the available information that additional investments of SEK 400 million are required to meet the expectations of the FDA. The cost has been booked as provision in the quarter, and the utilization of this provision will be reported separately when it will be utilized, like the way we have done it before. Moving on to slide nine, and I would like to take the opportunity to take a step back and revisit some of the information that we issued when we entered into the Maquet consent decree with FDA in February last year. Firstly, I just want to repeat what a consent decree means.
A consent decree is a legal agreement entered in voluntarily by a company and the U.S. government, and sets forth a process for completing the required improvements. Secondly, the consent decree applies to four legal entities. That's Atrium Medical Corporation in Hudson, New Hampshire, Maquet Cardiovascular in Wayne, New Jersey, Maquet Cardiopulmonary in Rastatt and Hechingen in Germany, and Maquet Medical Systems in Wayne, New Jersey. The initial investment of SEK 995 million met our milestones to achieve a stable baseline for compliance in our new quality management system, while initiating remediation of findings identified in the consent decree. Under the terms of the consent decree, an annual inspection will occur all designated sites listed in the injunction. These annual inspections will determine whether further investments will be needed until such time as we meet and exceed the expectations of FDA.
In line with the FDA normal procedures, being under a consent decree implies that the company needs to commit to normally a minimum of five-year remediation plan. First phase, to establish the plan and in dialogue with FDA, agree on the remediation plan. Followed by some years of normal business, with annual third-party inspections being carried out during this time. Getinge is still in phase one, while we anticipate that the consent decree could last up to seven years. Given the complexity of the consent decree, we cannot speculate or exclude any potential further actions from the FDA. With that said, we're obviously doing our utmost to complete the remediation program, but we cannot, at current time, rule out that additional sanctions will be made or cost incurred. By that, moving to slide ten.
As you read in today's press release, we have, over the last few months, performed a company-wide strategic review to clarify the most optimal long-term strategy for the company to ensure sustainable and profitable growth that captures the growth opportunities that we have for all business areas. In the process of our ongoing transformation program, it became obvious to us that we need to clarify the vision and the identity of the group to guide both strategic and product decisions, something that we now have done and concluded on. We have decided to focus on core competencies that are really unique and position the company as a natural leader in its chosen playing fields. We will therefore focus our business long-term on two areas, Acute Care Therapies and Surgical Workflows, which we see are characterized by good prospects based on clear customer needs and a growing demand.
We believe that patient and post-acute care has the same type of possibilities and opportunities, but need levers that are different to the two others to be successful. This is the reason why it's deemed to be better off as an independent unit, and the reason why the board of directors is suggesting a listing of PPAC. I will come back to that a little bit more in a minute or two. Let me first give you some more insights to Acute Care Therapies and Surgical Workflows, and we're then moving on to slide 11. The current Acute Care Therapies offering includes solutions for cardiac, pulmonary, and vascular therapies, and a broad selection of products and therapies for intensive care. In this area, we will continue to improve outcome by, via specifically cardiovascular and respiratory therapies in selected areas with a growing unmet need.
The Surgical Workflows business develops products and solutions for Infection Control, equipment for Surgical Workplaces, and advanced IT systems for hospitals. In this area, we will continue to offer integrated solutions to meet customer needs in capital, services, and consultative knowledge and IT. In summary, addressing solutions for patient and instrument flow in a hospital. If we then, on the next slide, page 11, take a look at the PPAC business. While conducting the strategic review, we also identify strong business opportunities for PPAC. However, we believe that this business could better realize its potential if operated under a different strategic approach and focus, given the need for different business levers, which are different from the two other business areas. This is the reason, as said, why it's deemed to be better off as an independent unit. Some key fundamentals worth mentioning.
This area has a large addressable market with recurring revenue and with favorable drivers, like aging population, increased incidence of chronic diseases, et cetera. We have a comprehensive care offering and category leadership across acute and long-term care settings. We have a global footprint, well-established customer relationships, and large installed base. A focused approach to manage this business unleashes true potential and would drive sustainable, profitable growth. If we look at page 13, where you can see the current PPAC portfolio, where the aim of the Patient and Post-Acute Care business is to improve the life of people affected by reduced mobility. The offering, as you can see, encompasses a broad number of products and solutions for safe patient handling, prevention of venous thromboembolisms, medical beds, intensive care units, early mobility, hygiene systems, bariatric care, and pressure ulcer prevention.
We possess world-leading market positions in many of our categories. Based on the long-term strategic direction that we have now decided on, the board of directors has tasked us in management to prepare for distribution and listing of patient and post-acute care. The proposal is subject to a decision by the shareholders at an extraordinary general meeting during the fall of 2017, most probably. Should the EGM approve the board's proposal, the aim is to complete the listing no later than during the first quarter of 2018. Before I hand over to Reinhard, and that will then lead us to the next slide, I would like to update you briefly on the transformation program, and that is what you see here on this slide. As stated in the report, our work on the transformation program continued with intense focus during the quarter.
The Big Five efficiency program continues according to plan, and we have achieved major improvements since we launched the program last year. Savings in the quarter amounted to SEK 95-100 million, and accumulated, we have delivered savings in, within the program of SEK 255-270 million. This very much confirms our commitment and demonstrate that we have solid plans in place, for lean sales and admin, as well as the initiatives around direct and indirect purchasing. To conclude my first section, I want to underline that the One Getinge transformation program continues with ACT and SW, or Surgical Workflows, while further and new integration activities related to PPAC will be paused. This obviously is a natural effect of today's announcement on the intention to prepare for the listing of PPAC.
By that, I hand over to Reinhard Mayer for a financial overview, and I will come back with the summing up and outlook. Reinhard?
Thank you, Joacim. So, let us move to our results, slide 17. Performance on group level. As Joacim mentioned, the order intake in the quarter was below our expectations. However, this should be viewed in the light of the strong corresponding quarter last year. Geographically, EMEA showed organic growth, while both Americas and APAC had a negative development. When looking at net sales, we had a modest organic increase of 0.2% in the quarter. Due to positive currency transaction effects, the reduction of a Medical Device Tax, and good cost control in supply chain, we see a growing GP margin. One can say, Big Five is on plan, with selling and admin expenses down by 2.1%.
EBITDA before restructuring increased with 16.3% to SEK 963 million, which leaves us with an EBITDA margin of 13.9%, compared to 12% for the same period last year, with more or less the same net sales. Let's move over to slide 18 and the restructuring costs. Three factors have had a material impact on our restructuring costs during the quarter. First, we have the SEK 400 million FDA provision, which adds to the SEK 995 million provision made during 2014, related to the remediation program, mainly referring to Getinge. Then we have a write-down of an intangible asset related to a lung resection tool that is out of focus for our core Acute Care Therapies portfolio. We have tried to sell the IP since 2015, without success.
Therefore, we have now made the decision to write it down. Finally, we have a cost for changes in the Getinge executive team, amounting to SEK 70 million, which is reflecting the major part of the increase in costs related to group function, which can be seen in the segment overview in the Q3 report. This obviously affects the outlook for our restructuring costs of the year. The new guidance for financial year 2016 amounts now to SEK 1.26 billion. Earlier, we have decided on restructuring costs amounting to SEK 800 million. Let's move and change to slide 19 and the foreign exchange effect. Getinge has two dimensions of exposure. The first dimension is currency transaction exposure. This relates to when the group's factories are selling to the group's foreign subsidiaries, which we hedge for. The other dimension is the translation exposure.
This relates to when the group company results are translated into Swedish krona. This effect is not hedged. I'm not going to go through all the details, but you could see that on the EBITDA, before restructuring costs, the transaction impact was 61 million SEK, and the translation effect was -29 million SEK, resulting in a total effect of 32 million SEK for Q3. It's also worth mentioning that currency transaction effects are expected to have a positive impact of approximately 150 million SEK on the group earnings for financial year 2016. Then we move to slide 21 and our balance sheet. Net debt amounted to 23.293 billion SEK at the end of this period.
Adjusted change in net debt amounted to SEK -690 million, and the net debt to equity ratio decreased to 121%. Net debt to EBITDA before restructuring ratio decreased from 4.0 to 3.9 for the period. Finally, we go to slide 23. If you take a look at the cash flow, the group's operating cash flow was in line with last year, and the cash conversion increased to 89.5%. Cash flow from investing activities amounted to SEK 376 million, and cash flow after investing activities increased to SEK 349 million compared to last year. Then I hand over again to you, Joacim.
Thank you very much, and before I'm summing up, I would like to give you a few comments to our outlook, where we have made some changes. If we move to slide 25, where the overall trend in order intake and net sales has contributed to our adjustment of the organic sales growth for the full year, from moderate organic sales growth to moderate negative organic sales growth. As stated before, the currency transaction effects are expected to have a positive impact of approximately SEK 150 million for 2016. When it comes to the restructuring cost, we have updated the numbers as a consequence of the increased cost for the quarter, and the restructuring costs for the full year are now expected to amount to approximately SEK 1.26 billion.
When it comes to the financial consequences of the Consent Decree with FDA, excluding costs for the remediation program, it remains at the same level as previously communicated, which is 130 million SEK on the group's 2016 operating profit. So finally, before we open up for questions, I would like to do a brief summary. In the quarter, we focused both, as said, on the short-term agenda and also on the long-term direction of the group. If you look at the order intake and net sales development in the quarter, it was not on a satisfactory level. For the remainder of the year, we continue to focus on order generation and to transform these orders into revenue.
As you're all aware of, we do have a heavy Q4 in terms of seasonality, more or less every year, which is obviously also true for this year. Our efforts on the cost side is clearly reflected in the positive trend in EBITDA before restructuring, which on a flat net sales, was increasing by 16.3%. This is a clear proof that our Big Five efficiency program is delivering and contributes to a solid base for the future. As always, our focus on quality remediation program has been and remains a top priority, and we are putting the necessary resources in place to meet the FDA's expectations. I am also confident that with our long-term strategic direction in place and the future listing of our PPAC business, we will continue to build sustainable and profitable businesses. With that summary, I open up for questions. Please, operator.
Thank you. If you would like to ask a question at this time, please press the star or asterisk key, followed by the digit one on your telephone. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. Again, please press star one to ask a question. We will now pause for just a moment to allow everyone to signal. We will now take our first question. The first question comes from Peter Östling, from Pareto Securities. Please go ahead, your line is open.
Yes, thank you. It's Peter Ostling from Pareto Securities in Stockholm. I just wanted to ask you a little bit about the split up of the company and what will actually happen with the post-acute care operations. Is there any part of the business that you showed on one of the slides that will be sold off, or will you work actively to try to restructure it before you make the final decisions a year from now? And my second question is: Why will it take so long to do this spin up split up, since I guess the businesses are more or less functioning independently already today? Thank you.
Yes. Thank you, Peter. I believe that I will take this question here, and what will happen to PPAC, and really, why will it take so long to put it? In terms of the timeline, when we have been analyzing this one, we believe that the timeline now indicated is a very realistic one, based on how the organization is set and the steps that we need to take. And we are going to look into this timeline during Q4 to put a very thorough project timeline in place. When it comes to how PPAC will look, when being a separate company, we will actively work to make sure that PPAC becomes a viable standalone company that can act on itself and being a sustainable and profitable company going forward.
During that work, we would obviously analyze the product categories within there and take decisions needed.
... Thank you.
We will now take our next question from Sten Gustafsson from ABG. Please go ahead, your line is open.
Yes, good morning, Sten Gustafsson from ABG. So a year ago, you sold to the market this idea that more integrated company was the best way forward, both from a sort of cost perspective and also a commercial setup. And now you're making this big strategic U-turn, and you will use your management resources to come up with a sort of a complex carve-out, with duplication of central costs and loss of scale. So my question is, what will happen over the coming 12 months? How will you tackle the real issues with the business, with this sort of lack of management stability, lack of innovation, and the rather poor capital structure?
So, how will you prioritize and come up with a credible plan for the two separate companies that is better than the one you presented to us a year ago?
Yes. Thank you, Sten, for the question. I will try to answer as good as I can, given that we will use Q4 to plan this in great detail. I would also like to emphasize that the One Getinge transformation journey is still very valid. We have implemented a lot of the initiatives that we started in the One Getinge transformation, and those programs will continue both within the One Getinge and the future spin-off, ArjoHuntleigh or PPAC. We will, during the planning, make sure that we are, as I said, putting sustainable companies and profitable companies with a possibility for future profitable growth on the market, and that will be a part of the planning that will now start as of tomorrow.
We do believe, as said, that with the separate listing of PPAC, we will create better opportunities for that part of our business to grow profitable going forward.
All right. And could we get any sense of sort of how much extra costs that we should assume going forward for this?
Reinhard, if you-
Yeah. Yes, Sten, this is, Reinhard, speaking. As you understand, I mean, this is part of our process now in the Q4, to exactly evaluate what additional costs would we need to incur to put this company completely on a stand-alone basis, and what it costs us to carve it out, as you have alluded to. We cannot, at the moment, really say what the pure effects are, but we can also not say what are the positive drivers are. We see much more positive than negative drivers, but that is to be assessed, and, once we really know, we will then inform the board and, also inform the market thereafter.
Okay, thank you. If I may add an extra question here, and that's related to the SEK 400 million provision. How did you come up with that number, and what's included in there? That would be helpful. Thanks.
Yeah. This is a very good question, and basically, this SEK 400 million is a composition of the assessment from our quality assurance and quality management organization in working with each and every site being affected, mainly the Hechingen one. We have identified in the aftermath of the inspections, which have happened in Q1, what activities and actions do we need to take place in order to get sort of all FDA questions remediated. We have put aside here for cost for consulting, cost for additional validation activities, so it's external costs, but also some incremental personnel expense on boosting, so to say, our quality management organization in the various sites.
Very detailed breakdown, which we have actually shared, and it has been validated also with our auditors, who confirmed the validity of those SEK 400 million.
All right. Thank you. But do you also expect some sort of a charge, or penalty or fines, to be sort of on top of this SEK 400 million, or is this it? Thanks.
I think that is something which Joacim may explain. I mean, if we are under a Consent Decree. We are in very close contact with the FDA. The SEK 400 million that we have now put aside is based on all the information that we have as of today.
Excellent. Thank you.
We will now take our next question from Johan Orrenius from Swedbank. Please go ahead. Your line is open.
Thank you, Johan Orrenius here from Swedbank. Thanks for taking my questions. Yes, PPAC is obviously in focus, and it's clear now from 2016 that there's pretty broad-based softness on that business, both in orders and sales. I think in this quarter capital goods was doing a bit better. What should we think about that, the ability to stabilize that business and to well, obviously, you're going to do a review on Q4, but perhaps you can give us a bit more flesh to this headwind and softness during this year?
I think it's a, as has been stated before, a very good question again, and obviously one of the reasons why I believe that this strategic decision is absolutely the right one. We need to regain focus in the PPAC area. We need to make sure that we fully understand where we should invest and how we should invest, and how we should drive this business forward, and we believe that this is done best as a standalone company. So I believe that we, by this decision, are, are framing that problem that you're putting the question on. We will, during Q4 and onwards, continue with the plans, again, as I said, to create a long-term sustainable company that will then be spun off on in Q1 2018.
We will also obviously continue with the Big Five plans in, in PPAC, and that will continue also after a possible spin-off. Those plans are planned in a very solid way or under implementation, as we have seen from the results so far, and will continue.
Thanks. That's useful. I guess we should take that as we will get feedback after Q4 or during, well, on the back of Q4, on part of this process, or is that too early? And a follow-up question, also related to PPAC, the growth margins on the group aggregate, it's improving. I think half is from FX, and half seems to be partly better execution. But in the PPAC, it's softer. Could you give us some flavor on the price pressure for PPAC? Is there any considerable price pressure in that division?
If I start with the information part, that is obviously something that we will continue to share with you as soon as we have things to share, as soon as there are material things that would be of interest. When it comes to price pressure, I would say we do have price pressure in our entire business. PPAC is nothing where I would say we have more price pressure than we have in any of the other businesses.
Thank you. Finally, what should we think about the net debt in the context of the spin-off? Will you, to ensure that you can move that PPAC forward, will you—should we rule out any refinancing or any supporting financing in the spin-off process, or is that excluded?
So first of all, let me say, I mean, the net debt is sort of like the net debt of the group, and we need to split it up going forward. How we split this up, we don't know yet. This is part of the planning forward. And then, we will also take into account how we have shown ability to reduce the net debt further by the time we finally spin it off. So this is now taking a couple of variables into account, which I cannot comment on because it takes time and our profitability movement going forward into account. Hence, this is very much also a question to be deferred to a later stage once we have timeline and further input on our operating profitability in the various businesses we pursue.
Thank you very much.
Thank you, everyone.
We will now take our next question from Scott Bardo from Berenberg. Please go ahead. Your line is open.
Thank you for taking my questions. First question, related to the strategic review, and the decision to make PPAC an independent company. Can you confirm whether during this period, you considered or floated the notion of potentially selling this business outright, rather than spinning the business out as a separate listing?
That has, in this process, not been an option to us, no.
And further on from that point, could you discount the possibility of still potentially selling this business outright, should you receive an adequate proposal?
That is a question that the board at such time will need to discuss.
Yeah, thanks for that clarification. It certainly seems to me that it's the fiduciary duty of the board to unlock shareholder value for all shareholders. And so, that's why I asked the question, if there's a proposal to acquire the business and that potentially is more valuable, whether that would still be considered or whether the group is wedded to spinning out this business.
There is no such proposal.
Okay, thank you. Just to understand, as you currently understand the structure, the Chairman, Carl Bennet, is also to maintain his current holding of 18% in the equity of Getinge Group, also a similar holding in the spun out organization, should it take that path?
... Yes?
Okay, thanks. That's all for PPAC. And then on to the Big Five. You know, I'm encouraged to see some of the costs coming down. But I acknowledge that the majority of the savings to come from this outline proposal are to come both in next year and the year after, many of which were to better integrate the organization for which clearly now you've highlighted the potential independence of PPAC going forwards. So what I wanted to understand actually was some of the the central cost buckets for the Big Five, particularly in shared services, where, if my understanding is correct, you were looking to make some 700 or so redundancies next year as part of the shared service initiative in Poland and in Costa Rica.
Is that still going ahead, in entirety? And also, could you please confirm, that the quite significant restructuring costs that we're all modeling over the next, couple of 3 years, related to this plan, are all of those still to be included? It seems very difficult to make that assessment given where you are with the group structure. Thank you.
Yes, thank you for that question. I would like to state very, very clearly that the focus on Big Five continues. We have solid plans in all the areas where we have that we are addressing. I would especially like to point out the continued focus within the lean sales and admin, within the direct sourcing and within the indirect sourcing. Our view is that we are on track with this plan and that we will continue to implement, obviously, with a good view on what the spin-off of ArjoHuntleigh will mean in terms of which programs and initiatives we can run short term. So there I feel very comfortable that we will continue to see the same types of improvements as that we have seen up until now.
And remember that we so far have done SEK 255 million-SEK 270 million as improvements based on this program so far this year, which is at least on plan and in some extents, also ahead of plan. When it comes to the other question, in terms of the restructuring costs, we don't have any, I would say, news in that area right now.
Okay, thank you. And next question, please, potentially also for Reinhard. I think your predecessor tried to give us some indications of what will be the full year EBITDA delivery from the group. Obviously, the prior year had a lot of one-off costs, and we spent, you know, quite some time and at pains to get what was deemed a clean base this year for Getinge Group. So I appreciate you're now expecting some modest sales decline. And what I'd like, please, is some guidance on where you expect adjusted EBITDA for the full year, please.
Thank you, Scott. Well, firstly, I have to say, I mean, as Joachim stipulated, we expect slight decline on our revenue position. As you mentioned, this will also have an effect on our earnings. On the other side, we have also the good momentum on our Big Five. What the exact outcome of all that will mean, I cannot actually stipulate at that very moment. I'm too young in this position to really have to grasp all dimensions there. We will come back to that at a later stage.
Okay, thank you. But, and I'm sorry to try and push a little bit on this, but clearly there's a lot of volatility and uncertainty in numbers at the moment. Are you in a position to at least provide some sort of floor earnings for 2015 or maybe comment about how you see margins in Q4 versus the prior year? Can you give at least some sort of feeling there so we can better gauge full year delivery?
No, I would actually not be in a position to properly give you a good guidance there, and also not on a floor level. As said, I mean, we see the impact from the revenue side, how this will completely fall through, and what the additional momentum we can generate from our savings program, I cannot conclude at the moment with good, solid numbers.
Okay, thank you. And last question for me, please. You highlighted about the ongoing remediation, and you suggested you are some what you consider phase one through this Consent Decree. I'd like to understand that a little better, please, because it was my understanding that the facility in Hudson had had a positive inspection, also that of Wayne, and that if anything, by now, you should have almost shut that Hudson facility and transferred all product to Merrimack. So, and that, that in terms of previous discussions that the management board have given, would suggest that certainly for those facilities, you're moving north of phase one. So I'd like a little bit of an update, please, as to where you are with those facilities.
I'd also like to understand a little bit more your thoughts as to why it's taken so long, nearly a year, for the FDA to come back and approve the current plan for Hechingen. I'd like to understand how many times you've had meetings and discussions with the FDA and potentially what are the sources of contention. Thank you.
... Yep, what I would like to state first is that we are in very, very close communication with the FDA around this. I would also like to state that the move from Hudson to Merrimack is going according to plan. On Hechingen, what I would say there is that we, as said, are in close communication with the FDA. We cannot govern when FDA is coming back to us.
We are providing FDA with all the information that they are requiring from us, and we are waiting for necessary responses from FDA on in all the discussions that we're having. So I believe that we are truly trying to fulfill all the requests that are coming from the FDA, and then waiting for their response.
When do you think that your remediation for Hechingen will be complete as per your current plan? Have any discussions with the FDA taken the course of enjoining product into North America? They're my last questions. Thank you.
We believe and hope that we would be in the first half of 2018 through with the remediation in Hechingen, obviously, based on the information that we have today.
Okay, thank you very much.
We will now take our next question from Kristofer Liljeberg from Carnegie. Please go ahead. Your line is open.
Yeah, thank you. Yeah, some follow-ups here on the PPAC business, mainly. Could you maybe explain a little bit more in detail what has changed since a year ago now? Then it was focused on integration, now it's more, you know, spinning off this extended care business. Is it due to that you have seen more negative impact on the top line, for example, or is it something else? That's my first question.
Yes, and I would like to answer that as I've answered the question before, Christopher, and that is that the Big Five program runs as planned. We will continue with the saving plans that we have put in place, also in a new structure. The synergies, I mean, during the One Getinge transformation journey, we saw a big need to analyze our strategic intent and create a clear vision for the company. That is what we have done, and in that analysis, we have come to the conclusion that spinning PPAC off would give that part of our business the necessary and needed focus that we need to have to drive that to become an even further sustainable business going forward. But reassuring you that the Big Five program will continue, will continue during 2017 and also onwards according to plan.
But what I wonder is, if something has changed, really, because I guess since a year ago, I guess you have laid off most of the country area managers already for, for extended or for this PPAC business, and, and now you need to hire them again, I guess, because if, if you wanna do this as a separate business. So, I still don't understand what has changed, really. If maybe, if nothing has changed, but-
I think you should see this as, as, from a One Getinge journey, very little has changed. Yes, we have taken the strategic decision to plan for a spin-off of PPAC, and we will, during the analysis phase, make sure that we are putting a plan in place that takes care of the questions around how are we selling our products, how are we developing our products, how do we make sure that we create a long-term profitable company going forward? We will, in the parts remaining in Getinge, continue the One Getinge journey, and we will make sure that we bring out the synergies there. So it's more a review of our strategic intent, and thereby a conclusion that this part of the business will be better off as a focused standalone part.
Okay, and how much more integrated is PPAC into the rest of Getinge today than compared with a year ago?
It is more integrated, but we can, through a good project and a good planning, bring this out as a standalone company, and again, with good analysis around what we need to invest in sales, as we would do with any part of our company, and also when it comes to the analysis around our product generation plans, based on a strategic intent for this unit.
Okay, thank you. The other thing, you talked a little bit about the, the Big Five program going according to plan, et cetera. So does this mean we should still expect additional SEK 500 million-SEK 600 million in savings next year that has been guided for previously?
What we are looking at is a good start of the Big Five, and we have very little reasons to believe that we would not execute according to those plans for 2017, 2018, and 2019.
Okay, so even if you, you know, stop integration of PPAC, it's still the same amount of savings for next year?
That is something that we're analyzing during the Q4 analysis phase, and if there are changes, we will make sure to come back to you.
Okay. My last question is, you know, FDA inspection, et cetera, that you're still in the early phase. Have you had any recent inspections by the agency that has made you more nervous about this, or?
No, as said, with all inspections, takes a lot of work, takes a lot of focus, and with all inspections, we are in close cooperation, or, not cooperation, but, coordination and discussions with the FDA. And as soon as we get any information from them, we handle that information, and we answer and act accordingly.
Okay, thank you.
We will now take our next question from Richard Keoch from SEB. Please go ahead, your line is now open.
Hi, Richard Keoch at SEB. We have some questions on, on the management changes. Could you please comment now a bit more on, on why Alex Myers was leaving? Is it fair to assume that that was related to the spin-off of his, so to speak, his old external care?
No, this is actually a question that you need to discuss with the board, and we don't have more input on that discussion than we had when Alex was leaving.
Well, you didn't comment very much when he left, so it seems logical that you at some point would do that. Then turning to you, instead, Joacim, I mean, when can we expect a permanent solution, or is it likely that you can stay as a permanent CEO?
Unfortunately, I need to have the same answer as I had a few weeks ago. There is a process running that the board is running around both in- I would say, internal and external candidates, and that is a process that is run completely by the board. So I can only refer to the board there.
Would you be open to stay as permanent CEO?
Absolutely.
Turning to PPAC again, then. I mean, so if you're wanting to spin this off or possibly sell it, it's in a very bad shape. It's a negative organic growth for the past nine quarters, if I'm correct. Why has it been underperforming so much, and why do you think it's possible to turn this around?
Well, there are many factors for what we also would underline as an underperformance. What we can say is that based on the strategic review and the analysis that we have made, we believe that we, by doing this, will put this company long-term back on track, or this part of the company back on track. We are a strong believer that the fundamentals in this, both when it comes to the strategic intent and the possibilities to, as a standalone, really focus on the business, will give us opportunities to long-term turn this trend around, which would obviously require a good plan, the investments needed, both in terms of organization and also in terms of R&D. So we wouldn't have done it unless we thought that we could build a long-term sustainable company.
Okay, but why has it been underperforming? Has it had products that hasn't been in demand, or has it been overly exposed to U.K., or what's the reason for this underperformance?
Actually, there are, as I said, there are several factors into this one, but I believe that the main part here is focus in the organization and the possibility to drive and develop a strategy that is working in this area.
Okay, thank you.
We will now take our next question from Hans Mähler from Nordea. Please go ahead, your line is now open.
A question on the more operational performance in the quarter. If you look on the weak orders, was it throughout the quarter, or did the weakness come after the management change? Also, secondly, how did the disruption in Hechingen affect the sales during the quarter?
The order development has been the same throughout the quarter. It has nothing to do with the management change, and Hechingen has not affected us in any extraordinary way during the quarter.
During the second quarter, you said that it held back some growth because you had some bottlenecks in the quality check at the facility. Are they now gone, or how would you describe it?
I would put it as we are improving on that one, and we believe that we are getting out of that one during this quarter.
Okay, so would you expect that to support growth in the fourth quarter, or is it not meaningful in that perspective?
I wouldn't, I wouldn't put too much emphasis on it, no.
Okay. Very good. Thank you so much.
We will now take our next question from Annette Lykke from Handelsbanken. Please go ahead, your line is now open.
Thank you very much. Well, I'd like to, if you could elaborate a little bit again on, on, the expected savings, for 2017. Your original targets were, I think 40% of, the EBITDA savings of, SEK 2.5 billion-SEK 3 billion. That is approximately SEK 1 billion-SEK 1.2 billion. When you made these assumptions, you also highlighted that you expected top line growth of 2%-4%. What assumptions do you have now for, when you're saying that you feel, very confident in terms of, achieving, financial targets for 2017, 2018, and 2019? Does that mean that the top line is not impacting on this at all?
Again, what I stated was that I feel comfortable with the plans that we have in Big Five. And that what we can see so far in the Big Five program is that we are delivering on or above plan for 2016. We do feel comfortable with the plans that we actually have in place, that we will continue to deliver according to that program. For the year, we are guiding on net sales on moderately negative, on the net sales side, and we will need to come back to you with further guidance on 2017 and onwards.
Yes, my question is more that the savings of next year's saving of SEK 1 billion-SEK 1.2 billion, are they not related at all to or how much should you want faster, so to speak, in terms of your savings, to compensate for the lack of growth in your top line?
What we have done is that, I mean, I would be possibly lying if I would say that a huge transformation program like this one is not putting focus internally instead of externally. But I would also like to emphasize that given that we have now planned very well these different parts of the program, I believe that we can, step-by-step, continue to turn our focus to external while delivering on the Big Five.
Okay. Then, in terms of the PPAC, should we expect, due to the new strategic situation for this segment, to see additional disruptions or have there been disruptions at all in this division? It is more price pressure and tough market condition as such that is sort of impacting on the negative top lines.
It is the factors that you're mentioning, it's focus. But I would say that as in any plan, if it's a one-year transformation journey or if it's the PPAC spin-off, there are a number of factors that we need to take into consideration, and we need to make sure that we are building a plan that is mitigating the risks for internal focus and making sure that our organization is focused externally, driving sales in the way it should do.
Okay, thank you very much.
We will now take our next question from Patrik Ling from DNB. Please go ahead. Your line is now open.
Yes, thank you. Could I ask you about your FX guidance? You say that it will have a positive impact of SEK 150 million for the full year. Could you just remind me, how much have you seen in positive FX this far for the first nine months? Or if you could give us some sort of feeling for that.
Well, as I alluded in the Q3 report, basically, we have seen SEK 61 million for the Q3. And, with, so to say, the SEK 150 million guidance, you can basically calculate yourself what the difference now is, what we get for Q4. So, those numbers stay as I have stipulated.
Okay, so the transaction effect that you talked about, 61, that is for not only the third quarter, that's for the first three quarters.
It is the effect of the quarter, and there has been, so there, of course, also effects in earlier quarters, but the starting base, to which I refer, and the guidance of SEK 150 million going towards the end, is giving you the indication on those transactional effects going forward.
Okay, great. I also had another question regarding the FDA here. I mean, to me, it sounds like you haven't got that far in the remediation program, and that the FDA, by not really coming back to you and discussing the plans that you have, might be dragging this process out and making it a little bit more complicated than you initially thought. When you released the news about the consent decree, you also commented a little bit about what you expected the running cost of having all these remediations in place would be.
Would that estimate that you had in early 2015, would that still hold true, or is it significantly higher now, given the development that we've seen in Germany and the fact that you're taking SEK 400 million more in costs here?
First of all, I would like to just emphasize that we are in very close communication with the FDA, and we're responding to the FDA in as diligent a way as we possibly can. I would say that we have used and we have built up our quality system, as I stated before, very closely, and we have closed a number of those gaps that we had before. What we are saying now is that our analysis gives that we will need an additional SEK 400 million to make sure that we meet and exceed the demands from the FDA.
When it comes to the running cost, I believe that the level that we are on right now are probably to be seen as, I would say, from a running cost perspective, the levels where we will be going forward during the time we're on the Consent Decree.
That is for another 3.5 years, approximately?
Possibly even more.
Possibly even more. Okay, great. Thank you.
We will now take our next question from Oliver Reinberg from Kepler. Please go ahead. Your line is open.
Oh, yeah, good afternoon. Oliver Reinberg from Kepler Cheuvreux. Three questions, if I may. Firstly, can you just talk about the separate listing of PPAC? Is there any kind of dis-synergies involved here? I mean, I would assume that you need separate HR functions, IT, finance, separate cost of listings. If you just can talk about that a bit, that would be helpful. Secondly, I fully understand that you can't comment on the management changes, but something obviously drove it. So can you just elaborate a bit on, is there any kind of changes to expect under your leadership in terms of the strategy as it stood so far, respectively, the execution of the strategy? And then thirdly, I understand from press release that you were going to present financial targets for both entities.
Can you just give us an idea, will this be early, late, or mid-2017? Thank you.
Thank you, Oliver. I will leave the cost on on this, I would say, the listing and the separate cost to Reinhard. When it comes to the management changes, as I've stated after, when Reinhard joined his new position, is that my intention is not to do any further management changes at this time. The management in the new entity, those decisions will be taken as we go along, and as soon as decisions are taken, we will obviously make sure to inform you. The new financial targets or aspirations for both the remaining parts of Getinge and the spin-off company, will be a part of the analysis phase, and we obviously hope to be able to communicate those to you in a realistic time frame.
Whether that is in Q2 or Q3 in 2017, I am not sure. Reinhard?
Good. Thank you, Oliver, on the question. I mean, the topic for the moment is, clearly we cannot guide you on what is additional costs or, what is the synergies. We have not really completed our planning in that respect. We, of course, have clearly the idea that we will continue with the number of shared service agreements, which would then entail that we will have synergies from the Big Five going forward. We also will definitely need separate functions, as you have alluded, for instance, a treasury function or a central accounting function. How much those basically weigh in and how much additional volume and business focus will provide, one cannot say at that very moment in time, and we will give you updates once we have good, solid numbers and plans which we can share.
Okay, thanks. So, briefly, may I follow up? So, can you just confirm there will be no additional changes to the earlier communicated strategy or its execution, beyond the spin-off of PPAC? Is that correct?
I didn't quite understand your question, Oliver.
Sorry, can you-
Can you repeat or rephrase it, please?
Sure. Can you hear me?
Yes. Yes.
Okay. I was just asking, obviously, just coming back to that, that there was some disagreement, obviously, with regard to the old management team. Can you just confirm that outside the spin-off of PPAC, that there will be no changes to the execution of the strategy that was started a year ago, respectively, the way this was executed?
I can confirm two things, and that is that the One Getinge journey absolutely continues, and I can also confirm that this decision and proposal is very well aligned with the board of directors.
Okay, thanks very much.
We will now take our next question from Michael Jüngling from Morgan Stanley. Please go ahead, your line is open.
Great. Thank you. Hopefully you can hear me. I have three questions. Firstly, the breakup of Getinge into two entities, is this a broader initiative of perhaps selling Getinge by division going forward? Secondly, when it comes to the split out, have you spoken to the debt holders already, and are they supporting such a spin-out? And then thirdly, when it comes to PPAC, I really can't understand why suddenly a spin-out would improve the results. It seems to me a little bit like management consulting talk, because in the end, the business will still benefit from improved cost savings, so therefore, a tick. And solving the top line, to me, spinning it out, I don't see how a spin-out in its own right would solve the problem.
To me, it's more about getting the right people on board to make sure it works. So can you explain to me, perhaps in a bit more detail, why a spin-out suddenly solves all the problems in PPAC? Thank you.
Yes, thanks for the three questions, Michael. I will address the one and the three, and Reinhard will take number two. When it comes to further selling off of different divisions, that is not on the agenda right now. So then moving quickly into three and why this would be the right way to do it. I would like to maybe first underline the fact that I believe that. Or rather, I will put it like this, is absolutely not a management consultant idea. This is a work that has been conducted by the Getinge management team under my leadership and Reinhard's leadership. We believe that the increased focus over time will give further possibilities for PPAC to grow. We also believe that it needs a different strategic direction.
There are growth opportunities and possibilities outside of the current strategic intent for Getinge, that I believe that PPAC, under the current organization, will have difficulties to address.
Good. Can I take the question regarding whether we have talked to the banks and the debt holder? We only can say we have not yet talked to them. That will commence post this call and in the next days.
But is it, I mean, to announce a spin-off and cause uncertainty, wouldn't have been perhaps better to talk to the banks first and see whether they will allow you to do so without infringing covenant?
Well, let me maybe phrase the following thing. The spin-off will possibly not endanger anything of the covenant breaking. But of course, we need to look into our contractual obligations. We have, of course, looked into that. And in that sense, we will pursue our discussions with the banks shortly.
Okay. And I guess follow-up questions on the midterm targets. If I look at the reasonably poor performance so far in the spin-out, it seems to me that the risk is clearly increasing, that the midterm guidance that you had given to us at the Capital Markets Day is probably no longer relevant. But yet there is no mentioning in the presentation that you are lowering your expectations when perhaps it's most probable. When will you know that the guidance that you've given to us previously is no longer relevant?
Well, what we have said is that we have given you guidance on top line for 2016. We will, if needed, come back with new targets for the two entities once we have done our analysis. We will obviously, in that work, review the financial targets for both entities, and as said, come back to you as soon as we have more information.
No, I understand that, but in terms of being accurate with, and timely with your disclosure, I mean, is the risk not now or the message now that the margin guidance and the targets that you have given us initially are no longer relevant? Is that not the message from today?
No, and I would like to come back to this topic once we have done our thorough internal analysis regarding the targets and guidance for the two companies.
Yeah. The reason I'm asking is, people are relying on the guidance, and then, and then everything indicates that things are on the downside, yet you're, you're not indicating that, and therefore, some people may still be relying on the old guidance.
Well, again, we will come back to this and, and until something else is communicated, we stick to the current targets.
Okay. Thank you kindly.
We will now take our next question from David Adlington from JP Morgan. Please go ahead, your line is open.
Hi, guys, thanks for taking the questions. First one is on PPAC again, I'm afraid. Just wondering why you'd rather go for the spin-off rather than outright sale. Is there some tax situation we need to be aware of with respect to a sale rather than a spin-off? And secondly, just in terms of, I suppose, why announce it now, given there's lots of uncertainty, I would have expected that part of the part of your investment and thought processes around the strategic decision, you'd need to have some numbers around the additional costs to see whether it would stack up or not. So just your thoughts there in terms of why now? And it sounds like there's still quite a lot to be decided with respect to the numbers. Thanks.
I think that timing is as if I would put it like that, as good as any. We have done a thorough strategic overview, and we have come to the conclusion that what we have presented today is the best solution for the continued improvement of this company. So, I would say that is the answer to that question, and I believe that we are fully aware of the things that we need to take into consideration when we are doing this, both from a strategic and obviously from a tactical and project planning perspective. And we will do that during Q4 and Q1, and we'll revert to all of you as soon as we can with detailed plans. With the tax part, Reinhard, would you like to comment shortly?
Yeah. I think... I mean, your question was, was it a tax-driven guidance from the board, on this dividend distribution? Here I cannot sort of say there was a tax-related issue. It is sort of a strategy going forward, which would be tax neutral for the given shareholders, hence, it is one way to pursue that, and I think there have been recently very good examples on that. But, yeah, there has not been a specific tax issue driving this decision.
I suppose the question was, would a sale have triggered a taxable event and therefore resulted in lower returns for shareholders?
We have not assessed this.
Thanks.
We will now take our next question from Peter Testa, from One Investments. Please go ahead. Your line is now open.
Hi, thanks so much. I've got three questions as well. Maybe ask the question on management slightly differently. If you look at the direction of the restructuring plan and the planning of the savings around that plan, can you give some understanding of how the management changes have influenced or altered that?
They haven't altered at all. We are continuing with the thorough plan that we're having, and what I have done is obviously to review those plan and make sure that we have, I would say, solid plans and action behind it. But there's nothing changed since the management change.
Okay, so your review has not come to any different conclusion than was preexisting?
No, I am-
Even on the timing of taping, re-consolidating of sites, any of these sorts of things, no?
What we are doing is that we constantly reviewing to make sure that we are putting programs in place that takes care of, obviously, operational efficiency, but at the same time, make sure that we can have full external focus, and that is what we will continue to do.
Okay, and then looking at Surgical Workflows and Acute Care, I was wondering if you could give us some understanding of maybe how backlog stands currently, some color between the divisions, and maybe you made some comments earlier that, you know, all business is under price pressure, and it's obviously volume will be, you know, lower in the fourth quarter. How you think that might affect growth profitability?
I can't really comment on the, on the GP margins separately, but what I would say is that we have seen some very, very positive, I would say, sales synergies when moving together Surgical Workplaces and Infection Control into Surgical Workflows. A setup that, in a very direct way, takes care of, patient flow and instrument flow in a hospital, and we can see continued good traction in the AC, in the ACT business. So I would say both business are showing positive signs going forward.
Okay, so when looking at backlog and business, let's say, short-term business development, even despite the change in guidance, you make that comment. So it strikes me that odds with a change in guidance would sell.
No. The change in guidance should be seen in the light of the weak Q3.
Okay. And last question, just on the FDA provision. You'd utilized virtually all of it by the end of the third quarter, and now we have another SEK 400 million, and you gave it a group of different categories. Some of them include, you know, consulting and also even product quality costs, and which seem to be ongoing costs of the business. And you said we may have this, you know, situation with yourself for some years. Can you give a sense as to how the charges have been decided related and the degree to which they are relating to, say, running costs as opposed to capital spending or special projects?
I have to say, I'm not quite clear whether I understood your question in a proper way. I mean, we have to not put the CapEx into those costs. We have basically put in specific costs related to the remediation program. It's external consultants. It's specifically hired people to remediate the program. It is validation costs for setting up new procedures in place. So, that is what we have done and what we have also reported into. And of course, in the remediation program as such, we have used internal resources to comply with documentation requirements and so forth, because the knowledge is there. And those costs were, to an extent, also charged to this program, but not more.
I hope I gave the impression that the FDA provision is very much around this very specific activity and has been calculated in that way, what we have so far incurred and what we will need to basically spend to complete the program in the given timeframe. Joacim alluded to that, that it goes up to Q2 2018. So hey.
Okay, this is SEK 165 million spent this quarter, and you would have been down to SEK 34 million in provision last, and I'm just trying to understand the degree to which, you know, maybe this is all due to hacking, and may, are the other sites, you know, essentially the spending done, or is there still part of this provision covering, you know, quality control costs and other such, monitoring activities required?
The lion's share-
Yeah. Sorry, the lion's share clearly is the hacking and, remediation activity. The other sites have, let's say, some, close-up activities to perform, but the lion's share of the pollution is related to hacking.
Okay. Great, thank you for the answers.
We will then, I believe, take the last question now.
Our next question comes from Paolo Moratti , from Tower House. Please go ahead. Your line is now open.
Yes, good afternoon, gentlemen. Thank you for taking the question. Today we learned that you are intending to spin out a division, which is fine. We're also learning that effectively, no plan has been made yet from a cost standpoint, from a tax standpoint, or a capital structure standpoint, for what it's worth... So we cannot help feeling a bit confused. I would guess that from a stakeholder perspective, so whether it's a shareholder, a debtholder, or an employee, first, do you think that this is good enough, guys? And the second is on the strategy side, you keep saying that you need to enhance focus on the organization, which, frankly speaking, can mean everything and anything.
Are you at least prepared to share more details on the output of the strategic review in a little bit more, you know, concrete details with us today? Thank you.
May, may I ask you to repeat the first question? Because I did not really get that. Sorry for that.
Yeah, no, I just asked if you, if you think that the process is good enough, because, in a normal world, the company would come up with a plan, make an announcement, and execute on the announcement in a relatively short period of time. What you are doing today, if anything, is heightening volatility and lack of focus in organization for the next 15 months, which is probably not really what the doctor would prescribe to Getinge in this situation.
What I would say is that what we have analyzed so far gives us confidence that this strategic decision is absolutely the right one, and as said, we will continue to develop detailed plans around this. But we strongly believe that today's decision is the right one from a strategic point of view, and also the possibilities to build a long-term sustainable company. When it comes to the strategy question, if there are more things to run through, I would say that we have been, hopefully, fairly detailed on this one, with the reasoning around why we believe that ACT and surgical workflows should stick together, and that we believe that PPAC, from a strategic point of view, from a focus point of view, has a better future as a standalone company. Okay. Then if there... Well, the time is running, is running out.
We would be obviously happy to take more questions in our one-to-one meetings, but with that, I would like to conclude the telco of today, and thank you all very much for the attention.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.