Getinge AB (publ)

Joacim Lindoff - Acting President and Chief Executive Officer Reinhard Mayer - Chief Financial Officer

Kristofer Liljeberg - Carnegie Investment Bank Lars Hevreng - Danske Bank Scott Bardo - Berenberg Annette Lykke - Handelsbanken Capital Markets Hans Mähler - Nordea Johan Unnerus - Swedbank

Thank you very much, and a warm welcome to all of you and thanks for joining the earnings call today. The presentation for today is accessible via a link in the report and it is also available on our web page under the investors' section/presentations.

Together with me I have our new CFO, Reinhard Mayer who will support me during today’s call and he will be presenting the Q4 financials in more detail and obviously join me also during the Q&A session. I would like to begin with slide number 3 in the presentation deck which gives you the fourth quarter in brief.

As a starting point, I would like to highlight that has been a quarter with continued focus on both short and long term improvements within the group. Despite the challenging development with negative order intake and net sales which impacted the gross profit negatively, we delivered an EBITDA before restructuring cost in the quarter of SEK1,970 million which is an improvement of 2.6% versus last year.

This is very much thanks to our efficiency enhancement program that continues to develop well. The restructuring and integration costs for the quarter were higher than last year due to the transformation process which still continues within the company with good speed.

In the quarter we had larger write downs of intangible assets mainly related to IT systems and R&D which is also included in the numbers. I am really pleased to see the strong cash flow from operations during the quarter which increased to 20.2% to SEK1,783 million and we also saw the cash conversion increasing to 80.4% compared to 68.5% in Q4 2015.

During the quarter we launched a new governance model for the sites under the Consent Decree in order to further enhance the level of control and progress. The remediation process continued with very high activity and inspections all carried out on a regular basis in line with the CD and our ongoing discussions with FDA.

As mentioned before we are in close contact with the FDA and follow their guidelines and requirements very closely. However, as we have also stated before, we cannot rule out new requirements or additional costs from the FDA and rest assured we will get back to you with an update as soon as we would have new information from the agency.

In October 2016 we announced that the Board of Directors has tossed the Executive Team in Getinge to prepare for a listing and distribution of Patient & Post-Acute Care to our shareholders. Obviously this is pending a shareholder decision and we will do this in order to capture the full potential of the business.

The preparation project has progressed very well during the quarter and we have named the executive management team for the new company which will come into effect April 01, 2017. Our plan is that the business area will start working as a standalone business within the group from that same date.

The Board of Directors is proposing a dividend of SEK2 per share corresponding to approximately 40% of our net profit in 2016 which is in line with our dividend policy and according to us a well-balanced proposal. In summary, the quarter has been challenging from a topline perspective, yet encouraging with actions, both short-term and long-term positioning of the group of the company.

We have gained substantial operational efficiency thanks to our Big 5 program and we have made progress in key areas ensuring our long-term profitable growth. So I'll take it step by step now and move over to slide 4.

The organic order intake in the quarter was minus 1.1% which obviously is not on a satisfactory level. The main reason for the decline is a significant drop in Surgical Workflows which did not live up to last year's strong performance in Q4.

At the same time it is encouraging that Acute-Care Therapies is performing well in the quarter and Patient and Post-Acute Care showed order intake growth after a period of negative trend. Our region APAC and Americas reported organic order intake growth of 5.5% and 2.4% respectively while EMEA reported a disappointing 6.9% decreased performance, to a large extent related to the decline within Surgical Workflows in Northern Europe, UK, DAC [ph] and Benelux areas.

If we then move over to the organic net sales, we had a decline of 2.3% compared to Q4 last year. This was due to mainly two reasons; firstly as you know we had a negative order intake of 3.2% in Q3 2016 which is clearly reflected in the level of net sales in Q4, secondly Surgical Workflows reported a decline of 7.2% compared to a strong quarter last year.

Acute-Care Therapies reported a 2.5% growth in organic net sales while Patient & Post-Acute Care was down 0.9% mainly due to weak order intake performance in previous quarters. The organic sales declined in all three regions.

EMEA and APAC declined around 1% while Americas saw a more significant drop of minus 4.8% mainly due to lower sales within Surgical Workflows. Moving over to slide 5, and I will try now to provide you with a high level update on the performance in the respective business areas and we will start with Surgical Workflows.

The decline in order intake for the quarter amounted to minus 9.2% and was mainly due to weak performance in the infection control part and Integrated Workflow Solutions where the main drop came from delays in projects around our integration side. We also saw a drop in order intake in our Life Science business for the quarter.

All of these areas did not live up to the strong performance with double-digit growth that we saw in Q4 2015. APAC grew slightly in order intake mainly due to strong performance with operating tables in Eastern Asia, a significant decline took place in EMEA driven as said before by our regions in Northern Europe, UK, DAC [ph] and Benelux.

And we also saw Americas declining mainly driven by U.S. and Canada.

The organic net sales development of Surgical Workflows was disappointing as well with a decrease of 7.2% versus Q4 last year. This is a result of the lower sales primarily in Infection Control and Integrated Workflow Solutions.

The net sales trend was positive in Life Science, thanks to extensive deliveries during the quarter. Life Science in general presented a very positive year, both in net sales and profitability which is very good to see.

All regions saw organic net sales decline in the quarter, most notable was the decline in the Americas mainly caused by reduced revenues from Surgical Workplaces and Infection Control in the U.S. The lower net sales had an impact on the gross profit and EBITDA before restructuring for the quarter, but I would like to say that the effect was to some extent offset by savings coming from our efficiency enhancement program.

In Surgical Workflows we have launched a plan in order to reignite growth in Surgical Workflows especially addressing the U.S. and EMEA markets and obviously also a longer perspective addressing the tier 2 value segment marketing targeting especially the growing demand in emerging markets for our products.

In 2017 we will also launch more products and solutions in Surgical Workflows than ever before. These launches includes new operating tables, new pendent range, new operating light range, new solutions for low temp sterilization, new solutions for our Integrated Workflows area, et cetera.

We feel very confident that these launches will drive positive development of the business and in the business area going forward. Moving over to slide 6, Acute-Care Therapies where the organic order intake totaled at plus 5.4% due to an increase more or less all across the portfolio.

Best performance was seen in Cardiopulmonary and Vascular Interventions with an increase of 13.5% and 21.9% respectively. The net sales increased organically by 2.5% despite the 4.1% drop in organic order intake that we saw in Q3 last year.

The increase is again broad, but we see especially strong performance with Cardiac Surgery, Cardiopulmonary and Vascular Interventions. All regions are showing growth, both in organic order intake and in net sales.

Strongest growth in the order intake took place in APAC which was up with 9.3% and the best performance in organic net sales took place in EMEA with a positive of 4.5%, a good performance [indiscernible] Middle East and Africa. Higher net sales contributed to strength and EBITDA before restructuring which increased by healthy 11.9% and amounted to SEK923 million for the business area.

All-in-all a good performance, both for the quarter and full year, and we will obviously continue to build on this in 2017 and onwards, both in terms of sales and R&D investments. If we move over to slide 7 and our Patient & Post-Acute Care where we saw order intake increased organically by 1.4% compared to the same period last year primarily as a result of strong growth in capital goods, especially among our IDC [ph] pumps preventing deep vein thrombosis.

The organic order intake growth was strong in Americans mainly within the capital segments. APAC increased its organic order intake as well while we saw reduced order intake in EMEA mainly caused by the development in our Hygiene product ventures and Medical Beds.

Organic net sales decreased by 0.9% in the quarter as a result of declined sales in hygiene products and medical beds. On the other hand we saw growth in several product groups such as main products for prevention of deep vein thrombosis.

Capital goods increased their share of the total sales marginally versus rental and service. APAC and EMEA so organic sales declined in the quarter with 6.1% and 1.8% respectively while the Americas grew 1.8% thanks to positive development in medical beds.

The gross profit and overall margins were strengthened as a consequence of favorable product mix and higher efficiency as a result of the ongoing efficiency program. As a consequence, EBITDA before restructuring increased by 3.4% to SEK630 million versus Q4 last year.

We continued to strengthen our product line in this area as well and we will continue to support this and support our growth in both in acute-care and in the long-term care arena. Next slide please and going into FDA and as you know we continue to work hard and focused with our remediation program as previously described and we are in close contact with FDA.

The improvement work in Getinge has continued at the same robust rate as before and we have during the quarter utilized around SEK70 million for remediation covered by the provision made in Q3. During the quarter we have also launched a new governance model for the sites covered by the Consent Decree.

The new model brings further clarity and responsibility and authority and therefore further enhances the level of control in order to meet the time schedule for the remediation process. The development of our remediation program is followed up closely by the Getinge Executive Management Team at least on a biweekly basis.

To the right of this slide you will see real background on the Consent Decree and where we stand as a repetition for those of you who have not seen this one before. Moving over to slide 9, in October 2016 the Getinge Executive Team was tossed by the Board of Directors to prepare for listing and distribution of our business area of Patient & Post-Acute Care to the Getinge shareholders.

During the fourth quarter we have had strong progress in this project in accordance within the quarters with a plan that we have and we are following a structured and very well managed process. Our intention is that the Patient & Post-Acute Care will be a standalone business within the group as of April 1, 2017and the plan is as before that the listing will take place latest in Q1 2018, obviously pending a shareholder decision planned for at an extra shareholders meeting in Autumn 2017.

The Executive Management Team for the new company has been appointed and they will start working as this team from April 1. All positions in this team are recruited internally, except for the new CFO, Mr.

[indiscernible]. [Indiscernible] currently works for Bayer's, which is a listed company in Sweden where he has held the CFO role since 2004.

[Indiscernible] will join us latest on the 15 of July and until he arrives we have an interim CFO in place. As been communicated earlier, the financial terms are being reviewed during this process and this goes both for the new company and for Getinge.

The reviewed targets will be presented as soon as the preparation of the proposal to the shareholders is finished, most probably during Q3 2017. Then I suggest that we move to slide 10 and an up take on the efficiency enhancement program.

As stated in our Q3 report the integration process continues mainly within Acute Care Therapies and Surgical Workflows while further new integration activities including our Patient & Post-Acute Care business has been poorest. This is a natural effect of the preparation for the distribution and listing of the business area.

Obviously, efficiency projects not related to the integration will continue both within the new company as well as in the new Getinge. All in all Big 5, the Big 5 efficiency enhancement program has continued with high speed in the whole organization during the fourth quarter.

The program delivered increased savings amounting to between a SEK140 to SEK150 million and accumulated for the full year we have delivered savings of SEK395 to SEK420 million which is ahead of our initial plan. We see planned progress in our lean sales and admin process and also very progress in our actions from direct sourcing where we have over achieved with regards to the target that we had for the full year.

This for me is very much confirms the commitments within the organization to drive operational efficiency and to be clear our efficiency enhancement program continues within all our entities going into 2017. Before I then have the pleasure of handing over to Reinhard, I would like to update you briefly on our situation when it comes to R&D and this is on slide 11.

We have a large and strong pipeline we are predicting sales for 2017 especially within Surgical Workflows. And we have a long term plan to meet the growing demand within the value segment or take two [ph] and that especially within the emerging markets which is articulated in our newly launched strategic plan for the emerging markets.

As we stated in our Q3 report we need to focus on areas of strength within the business going forward and to grow from these unique positions. One part of the solution is to make complimentary acquisitions, which obviously is always on our agenda and another part is to allocate more and focused R&D resources into the areas where we want to grow.

We as a company will be missing significantly more in these areas in 2017 and onwards and we have therefore increased our gross R&D for 2017 to support our lumbar spine profitable growth in a very tangible way. By that, I would like to hand over to Reinhard for a financial overview and I will then be back for the summing up the outlook.

Reinhard?

Thank you, Joacim. So let us move to our results, slide 14 which shows the performance on group 11.

As Joacim mentions the organic order intake in the quarter was down 1.1% compared to the same quarter of last year. From a region of the practice EMEA showed organic decline in order intake in the quarter leading to a 1.1% decline for the full year 2016.

Americas had a positive augmented order intake in Q4 or 2.4% and admin on a 1.1% declined for the full year. Q2, the decline we have seen in Q2 and Q3.

By looking at the organic net sales we had a decline of 2.3% in the fourth quarter versus last year to a large extent due to reorder intake in Q3. The organic med sales for the financial year were down 0.8% due to performance in Q3 and Q4.

The margin declined 1.1% point to 46.1 and you saw in 2016 which driven decline in net sales and by pressure especially within the Surgical Workflows. Acute Care Therapies are significant amount of ventilator DOs [ph] with lower margin in this quarter.

Full year is down with minus 0.3% [ph] points driven by net safe decline and vice versa. The operating expenses were down 3.9% in the quarter and 4.9% for the full year, may because of the efficiency enhancement program, Big 5.

Spending and admin expenses increased due to increased brokers within the quality functions, however strengthening the organization and the gross of this which will bring benefit on long term perspectives. While taking current effects into accounts, the increase was only 0.2% which is stating this time our increased brokers within quality which I’ve just mentioned.

EBITDA before restructuring increased with 2.6% to 1.97 billion for the quarter which leaves that within EBITDA margin of 20.7% compared to 20.4% in Q4, 2015. For full year EBITDA before restructuring increased with 3.9% and EBITDA margin increased to 14.6%.

Let's move over to slide 15 and restructuring cost. Two factors that I had a material impact on our restructuring cost during the quarter.

Third we despite down on intangible assets related to IT systems, intangible workflows and Patient & Post-Acute care which are moving those into an SAP environment. We had also seen a write down of R&D projects related to sterilizers and endoscope within the Surgical Workflow business which is bit out of impairment fit undertaken front load in the – in total the write-down of intangible assets had amount to approximately SEK170 million.

Secondly, we have other restructuring and integration costs related to the ongoing transformation within Surgical Workflows and Acute Care Therapies amounting to SEK151 million. In total restructuring and integration process amounted to SEK 1.314 million for the full year 2016.

Now let’s change to slide 16 and the foreign exchange effects. [Indiscernible] and so all of you run you to 18 a group.

The group had two dimensions of exposures, third dimension a consequence exposure these related to when the groups factoring assigning to the groups foreign subsidiaries which we had shown. The other dimension is the translation exposure.

These related to when the group company results are translated into Swedish Krona. These effects industry is grown up.

This effect has not hedged. I’m not going to go through all the details gone the development but you could see that on the EBITDA before restructuring cost that transaction impact was SEK 914 million and translation effect was minus SEK6 million resulting in a total effect minus SEK20 million for Q4.

For the full year 2016, we saw a positive impact from transaction effects amounting to SEK106 million. For 2017 we expect debt currency transaction effect increase to 200 million for group earnings.

Then if we move to slide 18 and our balance sheet, net debt amounted to SEK23.4 billion at the end of the period. Adjusted change in net debt amounted to SEK1,359 million and the net debt to equity ratio improved with 4.9% points to 111.8%.

Net debt before restructuring ration decreased slightly with 3.88 for the period. Finally we go to slide 20 and if you look at the cash flow for the quarter we saw a strong improvement in the operational cash flow and the substantial in cash conversion.

Group operating cash flow increased with SEK300 million, representing a growth of 20% and a cash conversion increased to 80.4%, compared to 68.5 for the current funding cost in 2016. For the full year 2016 cash conversion increased with 6.9% and 73.6.

Cash flow after investing activities increased with 113% in the fourth quarter and 12.6% for the full year 2016. Now I hand over again to you Joacim.

Thank you very much, Reinhard. Before I’m summing up, I would like to give you a few comments to our outlook for 2017 and we are now on slide 22.

We believe that we will see a slight positive growth in organic net sales in 2017 mainly based on our analysis of market growth, our pipeline and as I described before the product launch which has described. As stated before the currency transaction effects are expected to have it positive impact of a SEK200 million for 2017 when it comes to the financial consequences of the Consent Decree with FDA and again then excluding cost for the remediation program we expect a negative impact as an effect of lose of sales of SEK50 million on the groups 2017 operating profit.

And as stated before we will inform you if further material input from FDA is received. And it is in this context also important to underline again that our remediation work is progressing with full speed and according to plan.

We will not be able to give you a deep guidance on the restructuring cost for 2017 mainly due to the ongoing spend off process that our current estimate is however that it will be significantly lower than in 2016. For example we do not foresee additional remediation cost based on our current information from FDA and we also do not see further significant write down needs related to R&D.

These two cost drivers alone added up to more than SEK500 million in restructuring costs in 2016. So finally, before I open up the question I would like to do a very brief summary.

In the quarter we continued to focus on both the short term agenda and the long term progress of the group and its business areas. Organic order intake in net sales development in the quarter was not on a satisfactory level for the group to a large extent due to disappointing performance within the certain work flows.

However I’m pleased to see an increase in organic order intake in patient and post-acute care in the quarter and the robust growth within acute care therapies. Our efforts on the cost side is clearly reflected in the positive trend in EBITDA before restructuring which continued to increase by 2.6% for the fourth quarter and 3.9% for the full year.

Also cash flow from operations increased with 20% and the cash conversion increased 80.4% in the quarter. Our efficiency program continues to deliver all and in some areas above plan.

We continue our focus in this area, obviously taking this spin off process into account and strongly feel that this will create a good base for continuous improvements and free up resources for further investment in for example R&D. And as always our focus on the quality remediation program has been and remain as top priority and we are putting the necessary resources in place to meet and the exceed the FDA expectations.

And as always I’m also confident with our long term strategic direction in place a plan for handling the challenges within Surgical Workflows and the upcoming future testing of our patient and post-acute care business we will continued to be sustainable and profitable businesses going forward. With that as summary, I would like to open up for questions.

Thank you. The question relates to savings in 2017.

You definitely had a plan for 2016, could you say anything, how you expect or how confident you are in the previous target or maybe 1.5 billion in savings in 2017 and may be also if you could say something how much of this will then be used to increase R&D spending? Thank you.

Thank you very much for your question. I would like - if I start with the first one when it comes to the big drivers I said we continue with high focus in that area and it is really only the integration treads related to the Patient & Post-Acute Care which is post so we go ahead there full speed.

We will come back with detailed plans when we are presenting the new targets for the new company and also for New Year again. So that is something that we hope to so, that is something that we hope to be able to present somewhere had staged in Q3 during 2017, but I would like to ensure everybody that we continue with full speed on this program.

As I said before, this is very much in my view a program which not only will increase our margins and profitability in the company but also allow us to free up funds to invest further in R&D and as I stated before we will do significant investment in gross R&D in all our areas, all our business areas during 2017 and we have both in ongoing and also future pipeline which looks very promising.

But you are not willing to say how much you expect to increase R&D in 2017?

It is very much depending on the business cases that we get presented, but we have as an executive management team put a fairly large amount of gross R&D on the side and going to invest that in the business cases that we see fit in our focus areas.

Okay. And other question I have and I might yes, historical R&D spending might be if you are right, could you elaborate a little bit how, what’s your thinking about the fact that you underperformed at Maquet when it comes to order sales cost?

I would put it like this that we see this mainly in our Surgical Workflows part where the quarter as I alluded to earlier is not on a satisfactory level and we – but I believe that this is not because of a weak product pipeline. We have both the current pipeline and also a future pipeline that looks very good.

It is for us to step up and come back in the areas of Surgical Workflows and therefore we have as I mentioned before, made very tangible plans on how we want to get back on track in U.S and how we want to get back on track in EMEA. And also further detailing out how we want to address the value segment in emerging markets.

So I think with those three things we should be able to get back on track, but again not on a satisfactory level on Surgical Workflows and I think that we could have gone more there.

Okay, thank you.

Yes, thanks. Can you just say something about the new organization as you put in terms of dealing with the FDA, what’s new there and what has been established now which hasn’t been established before?

There is nothing new from FDA as I said. What we have done and that is really to just to further strengthen the focus on the remediation program is that we have put the so called CD sites under a little bit of different type of organization with a very close follow up from the Getinge Executive Team and thereby making shorter or very tight followup that we’re flowing the plans that is required by FDA.

So, really only an organizational change to put additional focus on the work there without no further information from FDA at this point.

Okay, can I just ask in relative to your early guidance for 2016, I mean transaction benefits of SEK150 million FDA related costs operating wise and effect of that SEK130 million what was the actual amounts in terms of transaction on FDA related effects?

I don’t have that exact number here to be honest, but I would be surprised that we are far off that number.

Okay and then finally on the Acute Care Therapy side, the lower margin ventilator sales in Europe and which was the reason for the gross margin, what’s behind that?

The major part there is we have had some major orders in the ventilation side and those big tenders has driven a price pressure that we normally do not see in more transactional business.

Okay, thank you.

Yes, thank you very much for taking my questions. So the first question please just relates to PPAC and/or legacy extended care.

And so, first question here and a short one and can you confirm whether you've been approached regarding this business by a third party that's potentially interested in acquiring this business, so can you confirm whether you have been approach or not please for that business? And secondly, here we are with margins for this business some 13% now and that’s clearly a long shot away from the 22% or so we've seen in the past, it seems that the real problems started to come in with the TSS acquisition which was put out as being quite loss making.

Obviously with your initial plans to spin out this business, can we have an update here as to how profitable the TSS business is now within the context of this division whether they are still having huge problems or whether this has been you’ve got to grips with these issues? So that’s first question, two questions on extended care please.

The second question relates to the underlying margin progression for the group. Last year you delivered 14.6% underlying margin with a whole series of one offs that were pulled out and encapsulated within your adjusted numbers.

This year you delivered around 14.6% margin highlighting no underlying progression this year. I'm not seeing this buy off some 400 million or so in cost savings.

So what I’m trying to understand actually and is, you talked a little bit going full steam ahead with the plan. The plan as we learned and knew about it before with some billion or so contribution from cost savings next year, by and large do you see that's still in effect or should we expect underlying margins to improve getting finally next year or fiscal 2017?

Thank you.

Thank you, Scott. I’ll try to cover the first two questions and then I'll leave over to Reinhard for the third one and the first question is around approaches was it PPAC business.

We discussed with different players, but this is obviously something that we are the broadest approach and I cannot really deem whether they have taken this situation or not, but that would be a question that you would need to ask to the board. When it comes to the financial, the detailed financials of the TSS we don’t have that right now or rather we can't really say too much about that, but what I can say is that the reason for taking the decision to spin off the Patient & Post-Acute Care is obviously to bring back focus to this business across the border categories and making sure that we allow this business to act in both the acute care arena and also in the long term care arena to truly get out the potential of this business and hopefully start our way back from the margins perspective.

So when it comes to the targets, again as I've said already, we will come back with new targets both for New Year and for the new company probably in Q3 2017. Reinhard, if you could elaborate on the third question.

Yes, I mean related to your expense question, I mean one can say and I think we had spoken about that in our presentation that we are seeing significant reductions in the expense side during the full year, however flattened in Q4 as we had started our transformation program Q4 2016 already. So John [ph] I will start taking you through that scene at that point in time.

In parallel we have increased our efforts in the efficiency process in the quality organization and that of course went against that savings program. And then I have to say a large chunk of our realized savings in the Big 5 program actually goes into our margin through direct sourcing and indirect sourcing activity which really had helped to mitigate the revenues from which we have seen.

If you would not have had those programs, the GP margin would have been worse than what we can report today.

Okay. So, maybe just to followup because obviously there is a lot of anxiety in the market environment and consensus will of course look for around SEK 4.9 billion EBITDA next year.

Now given what you have just mentioned about SEK200 million transactional benefit that employs around SEK400 million underlying bridge to get to those numbers more you just delivered, where we were going into this because you were due to deliver some well let's I say 600, 700 incremental profit from you Big 5. So what I am trying to understand actually just to get some sense from you guys, do you see consensus will cost in scope or is that reason to assume that the cost savings plan that you have already publicly disclosed you are going to fall materially short, can you help us understand actually so we can get a feeling of stability in the earnings trajectories for the company?

As we have said before on number of occasions here, we guide on top line where we see a slight positive, where we have the slight positive view on 2017 and I believe we need to leave it by that.

Okay, thank you. Then just last question from me please, I am quite impressed with the cash generation of the business.

I picture some of the one off restructuring items impacting your reported numbers or non-cash charges, despite reasonably good cash generation that play down was quite bold or actually the net debt increased. What I would like to understand and I think this is a live issue in the equity markets today, can you please give us some sense of where your financial covenants are on your debts please, I think you are 1.12 at the moment, how you view that ratio and what your financial requirements are in terms of refinancing all potential equity issues, can you make a very clear statement on that please?

Yes, but let me maybe first reflect on the earlier statement. I think what I had alluded to that we were able actually to bring down debt in comparison to like for like currencies by 1.359 billion.

Since we have an international debt structure with a lot of loans from U.S. dollar currency transforming them in today currencies, it does course increasing the nominal value of debt but by eliminating debt and that is really the underlying performance of the company.

We are actually have been able to pay down debt by SEK1.35 billion which is a very good performance in my recollection and I have to say this journey will continue going forward as we have a strong focus on our cash flow positive in 2017. And you have seen in the first quarter some good signs of increased cash flow over prior year periods.

Going down to the covenant question, I think I had alluded to in last earnings call that we have already one covenant in our wet contracts with banks and that is net gearing and that we have covenant of 1.75 and as you can read from reports we are today at 111.8% which is significantly below and nothing more to say today.

Thank you. Very clear, thanks very much.

Thank you very much. Joacim and maybe I mean it is after a couple of years where you have had difficulties to pull your top lines in you could say complicated hospital markets, I'm just wondering on the delta here, you mentioned new products as one could you share a little bit more light on that?

When are these products going to be launched, will that be from are they launched now or will it be from the very beginning? And maybe a little bit on how much of sales do you expect is coming from in the percentage is coming from new products do you have it parked here and it can't be hard to see with older generation down 1% in Q4, how you would manage to grow your business by entering the first quarter and also another question would be on your cash – potential cash mix for the PPAC division once you are going to spin out, would you need to make more radical restructuring effect business units and do you expect to have to potentially buy or do [indiscernible].

So my question is really do you expect to make a cash call in connection with the spin-out?

Thank you, Annette for the questions. Let me start with the question around the product launches where as I said and if we didn’t take the error where we have seen the biggest program during Q4, we can see that we have as I have said before very interesting launches coming up both in terms of new operating tables, new lights, new pendants, additional to our low temperature sterilization range and additions into our Integrated Workflow solutions.

Whether a number of these projects, sorry products has been launched to some markets also during 2016 in the latter part of 2016 where it takes time to get obviously protection on the market for these new products, but some of them are already launched and the rest of the product is in pipeline and well planned for launches in the beginning and in the middle of 2017. Each of these products have their own business cases that we are following very much in detail both in terms of the cannibalization to current product ranges, but also how much new sales that they are generating.

So that is something that we are following up very closely and what I can say that is that the expected slight increase in our net sales for 2017 is obviously supported by these launches. So without those there would have been a bigger program to achieve that.

So the launches will help us to drive that. When it comes to PPAC, we are in - I would say we feel very comfortable with the financials of both companies, but there are no plans there and when it comes to the question around restructuring of PPAC, when it becomes a spun off company that is also nothing major on the agenda there.

We are going to build a new sustainable company that we can drive in a profitable way going forward and that is our main goal right now and obviously the same goes for Getinge where the intention is also to make sure that we use this spin off to really make sure that we are putting this company there to grow in a very long-term and a sustainable way.

Okay. But then let me ask to thank you to the new products, because it is, you have so many different products, so many categories.

The new products are they representing areas of like 10 or 20%, 30% of your sales in Surgical Workflows or is it less or more, so we have a feel for how sort of vital essential these launches are to generate sales?

That is a very tricky question to answer and would probably require much more investigation to give you detailed answer on that one. But let me put it like this that, we have a very competitive product range already now in Surgical Workflows that is my absolute view when it comes to surgical workplaces where the tables, pendants and lights comes in, when it comes to our infection control or healthcare part where for example the lower temperature sterilization and integrated workflows to an extent comes in.

So let me answer it by saying that we see a very good possibility to with the help of these launches to support the needed smaller turnaround of surgical work flows going forward and with those launches I believe that we have a very good possibility to achieve that. Sorry if I am not being able to be more precise there.

Yes, thank you very much.

Yes, first the question on the price pressure, is it correctly understood the pricing pressure have accelerated, through intensify now over the second half of 2016 and then also you mentioned something about delays in the overall area, you start something that will come instead in Q1 or could be potentially last saves there?. Thank you.

Thank you for your question Hans. I would put it like this that we have during 2016 seen a price pressure that has been in line with our expectations where we have seen around minus 1%.

Some projects has been through heavier price competition and so I would say that we probably aligned with many of our competitors when they are stating that we have a prior, as pressure on one to minus 3% on average and that is obviously something that I believe that we have in a fairly good way been able to counter attack through both the activities that we have had in the efficiency enhancement program and especially I would say around our ability to be more efficient in our direct sourcing side. When it comes to the OR integration that is only a smaller product range in our total surgical workplaces set up and the reason for mentioning that in my previous discussion was that from a percentage basis versus where we usually are has a quite significant both of those orders are not lost their postponed to a later date.

I understand and then also a follow up on the impact from the Consent Decree in 2017 when we mentioned 50 million impact, is that the incremental on top of what you’ve seen during 2016 or is that an isolated impact for 2017? s

It is an isolated impact and its then a net operating profit declined of 50 million that we can see them based on what could have been achieved if it was from under the Consent Decree.

Okay, so that is a little smaller then what you had in 2016 then?

That is our analysis as it stands right now.

Okay, thanks so much.

Thank you for taking my questions. Yes I got a few of them and I mean the sense overall is that today you’re doing proper and robust [indiscernible] but you leave us with very extensive uncertainty and importantly.

One thing that to be good to it about on understanding is if you could provide a bridge for the margin what’s currency and what’s price pressured savings and product mix and I think that will be very helpful we get some little bit, get some pieces but not for take picture is that possible to get now or later?

Let me say that I mean we will have no bridge prepared to be shared but they certainly can today in discussions later in the month will be able to get bring that forward, but they’re not in this presentation in its long that everybody understands it.

I think that would be useful and also I think going back some time you also provided us with the sense of market positions and different product line I think that will be also be very useful especially if you now going to put more focus into R&D and innovation is that something that we could get going forward?

Yes, absolutely.

That’s very useful and the R&D should we understand that as the mix of complete and new products or are more of the product upgrades and new versions I expect to get more product upgrade?

Yep. I think you should see it as a mixed back there when it comes to R&D and many of them if it would be in there, I take an example, not taking that we have exactly new products coming up with the steriliser and there it is quite often I mean it's difficult to decide well it's an upgrade or whether it’s a face lift, whether its complete a new product even that it will continued to sterilize with steam.

But you will see a mixed bag in all three business areas with innovations that will take us to the next level, but also a number of good face lifts that both will increase sells possibilities and arguments but also obviously looking at the cost position the different products.

I think this call you gave us impression that you sort of assessing you and opportunities now are ready, could you give us a sense of the lead times frdelete time from decision to go ahead and to for the product to be in the market I guess if you were to access the project or take decision next month I guess it more at least to see it on market perhaps next year or for…

It’s very much dependent on scope of project, what type of project, what type of, of length of validation time you have for a new product et cetera, et cetera, et cetera, but you would be looking at smaller face lifts and would be taking us six months and then you would be looking as up to two years or more complex product on and two and half years were more complex product depending on solution side. I’m not able to give you good and fix number there but we have let me put it like this to give it little bit more flavour and that is we have in all three business areas, very good and detailed product generation plans that in detail described what type of products, when and which markets that we're going to launch those products too.

Including obviously also plans on how we take products out of our product portfolio and I feel very confident with how those plans are looking in all three business areas I feel comfortable with if we take Surgical Workflows where we have issues right now, I feel very comfortable as I said before that the new products are being launched, the products that are in the pipeline to be launched will have supposed to drive that business area going forward.

Hopefully you can give us more detailed finance at Q3 and more specific guidance but it's intended anyway and finally then on acute care as an example which is the business line that seems doing better at least top line wise and if we're looking at gross margins and EBITDA margins for the full year and comparing last year, it is actually level, so it is a bit that you get a sense that savings are being that is fuller gas pipe price pressure and some other issues. So could you give us some flavour on that?

Johan this is Reinhard, I was wondering I can say I mean, I alluded that the enhancement in our quality function it would reside in the ATG business area and that is where you basically see most of the additional cost of those functional activities flying in. And then we have also seen impact on the margins through tightened quality measures put in place subsequent to number of improvements through here and other quality body requirements.

And then staying on the same level it is actually very good achievement and I thinks with volume growth coming forward, we will develop well.

We should expect improved leverage and no major change in price pressure going forward on that side?

I would think so.

Okay, thank you.

Thank you. I would just like to say thank you again to everybody and have a good day.

Thank you.