Getinge AB (publ)

Mattias Perjos - President & CEO Reinhard Mayer - CFO

Kristofer Liljeberg - Carnegie Investment Bank Scott Bardo - Berenberg

Thank you very much, 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's also available on our web page under the investors' section/presentations.

Together with me on the call I have our CFO, Reinhard Mayer, who will support me during the call and he will also be presenting the Q1 financials and join the Q&A session little bit later. If we start with Page 2 you find today's agenda, where we start off with an overview of the business performance during the first quarter.

So without further ado, I'd just like to move over to slide number 3 and some initial reflections from my personal perspective. I joined getting as President and CEO on March 27 of the transition period that started effectively in November of last year and the positive first impression that I had of the people in the company and what we do for our customers and of course ultimately the patients, I have to say I've been reinforced during my first month with the company.

I've been using the time this first month to dive into some of the most important short-term and long-term challenges that we still have in front of us. There are several of those as you already know and I'll come back to that little bit later in the presentations.

But first I'd like to move over to slide number 4 and what we call takeaway number one of three from the first quarter. First and foremost, we saw a moderate increase in both organic order intake and net sales which is basically in-line with our outlook for the full year.

The outlook of slight organic growth. Secondly, we saw as well healthy improvement in our margins and the cash flow, the gross margin increased 2.2 percentage points to 49.4% and the EBITDA one margin rose to 12.3%.

The cash flow from operations improved by 24% to SEK868 million. And thirdly, as you can see this enabled us to reach a lower level of net debt in relation to adjusted EBITDA.

If we then move onto slide number 5 and takeaway number two, we can conclude that the improved margin largely is attributable to increased net sales, we can also see that we have enhanced efficiency in the supply chain and in the quarter we also had a favorable product mix that helped us. We also saw lower restructuring and integration cost in total amounting to SEK97 million compared to SEK127 million the same quarter last year.

These costs are mainly right-offs of IT systems and such they are non-cash related. Altogether and this picture boils down to significantly improved earnings per share, so amounting to SEK1.16 compared to SEK0.46 from last year.

If we then move to slide number 6, I'll talk a little bit about the challenges that we mentioned in the beginning of this quarter. We grouped them into the four main blocks here and I -- when I underlined that we do see continued challenges when it comes to organic topline development; we saw growth in surgical workflows in EMEA but the underlying momentum could still be stronger.

For example with a decline in organic quarter intake within acute care therapist and also in patient of post-acute care, our estimates for the full year however remained the same as in the previous quarter which means that we keep the outlook unchanged for the full year. If we then move to our efficiency enhancement program which is called Big Five [ph], we continue to deliver according to the plan for the program.

The overall direction and also the content of the program remains firm and intact but I also want you to be aware that the spin-off process related to patient and post-acute care has added a layer of complexity to this program which we need to take into account as well. The third block area is our quality remediation program as we continue with high intensity at the four plants which are covered by the Consent Decree with FDA.

In both Wayne and the Hudson sites we are progressing according to early communicated plan, in hashing [ph] under the situation is a little bit more complex and at the end of the quarter we concluded that we need to do a replanning of the remediation work at this site. The reason for this is that we're not happy with this even the quality of the progress as we see at the moment, it was a discovery late in the quarter and the potential business consequences of this planning we'll communicate not later than in the interim report for the second quarter.

And finally the fourth challenge here; where the preparation of the proposal of the potential spin-out of page and approved post-acute care, it is progressing according to plan and we have a first estimate of costs associated with this operation and the cost there are in the range of SEK400 million to SEK500 million. We are close to half or non-recurring costs.

Also here we will provide a more detailed information; as we go along the overall plans as well for both entities during the second half of the year. Next we can move to slide number 7 and the overall distribution of our top line between business areas and regions.

Getting the order intake for the first quarter amounts to SEK7.249 billion which is equal to an organic growth of 0.7%. This is driven by strong performance in surgical workflows and in the EMEA region growing organically by 5.2% and 5.8% respectively.

Acute care therapies reported a 1.5% decrease due to lower order intake within cardiopulmonary and in cardiac assist. In patients of post-acute care we saw a 1.2% decrease due to weak performance in rental and service mainly.

All our businesses reported organic growth in EMEA in terms of order intake, mainly driven by Northern Europe, Middle East and also Africa. Americas reported decline of 3.6% due to weak performance in the U.S.

within acute care therapy and also patient and post-acute care. The decline in Asia Pacific is largely explained by weak demand in East Asia.

If we then move to sales; getting as net sales amounted to SEK6.664 billion which is organic growth of 0.6%. Acute care therapies grew by 3.5% mainly driven by cardiopulmonary; surgical workflow -- so it was basically flat, we had growth of 0.5% and this is attributable to positive development in life science and in surgical workplaces.

Patient in post-acute care had a 3.4% decline, and this is due to lower sales in capital goods and the rental business. It was partly offset by a more positive development in patient handling.

Net sales rose by 3.8% in EMEA mainly driven by acute care therapies in Northern Europe and surgical workflows in Southern Europe. Americas reported decline of 1.7% largely due to weaker sales in patient of post-acute care in the U.S.

In Asia Pacific we had 1.5% decline driven by lower sales in Japan, in Australia and in New Zealand. So after that summary we can move to page 8 where we take a closer look at acute care therapies.

In ACT in the quarter we saw a slight decline in organic order intake but net sales improved in all the regions. We also saw improvement in gross profit and EBITDA margin driven by higher net sales, enhanced efficiency in the supply chain and also a favorable product mix.

So all this contributed to significantly higher EBITDA for ACT before restructuring an integration cost; so the total amount it was SEK557 million and EBITDA increased to 19.7%. With that we can move over to page 9 and to surgical workflows.

Surgical workflows order intake rose organically by 5.2% in the quarter and all regions supported growth but the largest impact came from EMEA. Net sales improved slightly attributable to strong performance in EMEA basically.

The gross profit and EBITDA margin showed healthy increase, mainly due to higher efficiency in the supply chain and higher net sales. So all this contributed to significantly improved EBITDA before restructuring and integration costs for surgical workloads.

Then we can move to page 10 to take a look at patient and post-acute care. Within PPAC [ph], order intake declined 1.2% in the quarter due to weak performance in Americas.

Net sales declined by 3.4% driven by Americas and Asia Pacific while EMEA was basically flat for PPAC. Gross profit and EBITDA margin rose by 2.3% and 0.9 percentage point despite the weak performance in net sales.

Also here the improvement is attributed higher efficiency in the supply chain. In terms of results for PPAC, higher OPEC drag down EBITDA before restructuring integration cost.

We landed on SEK238 million for PPAC and the increase in OPEC is mainly explained by currency effects in the quarter. Then we can move over to page 11, I will talk a little bit about the efficiency enhancement program that you know as a Big Five.

This program continues to deliver according to our plans; in the first quarter the savings amounted to approximately SEK100 million, mainly driven by higher efficiency in direct sourcing and also within the in-sales and admin. In total the savings from the program so far amounts to approximately SEK500 million.

The savings from the programs are mainly allocated to reinforce the quality organization and to product development in order to secure long-term competitiveness and also compliance. We will need to continue to allocate savings from the program to a higher degree into organization development, partly because of the quality and regulatory compliance work but also because we've had a significant unwanted attrition in the last twelve months and this has created some competence gaps that we need to fix, this is important to be aware of in the context of Big Five.

With that said I think we can move to page 12 and the innovation agenda. As mentioned, while talking about Big Five we need to channel some of the savings from Big Five to product develop to secure future growth and margins.

During the quarter we've increased our spending in R&D, both in actuals and in relation to net sales. Allocation of the funds for the program obviously needs to be done in efficient and focused manager manner in order to reach a critical math in each of the product that we decide to go forward.

The areas that we prioritize for in terms of innovation are asking are cardiac, vascular and respiratory, and also hospital infrastructure and services and integrate that an effective solution for mobility. Where we see the possibility and the need we will also use strategic cooperation's in order to enhance the output but also to mitigate risk in our innovations.

And after that summary I think we can move over to page 13 and I'll talk a little about the quality remediation process in relation to the Consent Decree that we have with FDA. Before going into details, I'd just like to give you a brief recap on why we are in this place to start with.

I think we all need to be aware that this is a truly complex Consent Decree, this is most due to external and internal factors; one complicating factor is that it comprises sides both in the U.S. and in Europe.

And yes, they normally operate in the U.S. only.

Secondly, I also want to point out the regulatory demands have grown more rigorous compared to one side -- besides since scope [ph] were established. We also have a legacy factor we're getting a sense where we have a history of decentralization with no common quality system between the different parts of the organization and the different sites.

I also want to highlight again that the comment and the observation from FDA and the independent auditors that these are not related to the product, they are related to the production and process control; the lack of adequate quality management system procedures and design control documentation. With that background I'd like to take a look at where we stand on the first -- after the first quarter.

There has been intense activity during the quarter and there has been progress in all of the sites but they are in different faces in the remediation. Half of them show some stable performance according to plan and the move to Merrimack is also progressing well even this coming quarter is really a critical phase for the work.

Also at the Wayne factory we see a progress in the right direction. In [indiscernible] pictures is a bit different, this is the most complex site that we have and here we do see a risk for another delay in the process.

So therefore we have decided to do a replanning for the hashing and site; this was a conclusion we arrived at quite late in the quarter and we need to come back as soon as possible with an update on this and we'll -- the update will take place in connection to the interim report for the second quarter at the latest but we will give the information as soon as we have it here. In terms of where we stand, financially we did utilize SEK65 million of the provision for remediation leaving us with SEK302 million in provision by the end of this quarter.

Thank you, Mattias. So let us move to our results; performance on group level.

As Mattias mentioned, the order intake in the quarter grew slightly. Geographically EMEA showed organic growth while both, Americas and Asia Pacific had a negative development.

When looking at net sales, we had a modest organic increase of 0.6% in the quarter. Due to positive currency transaction effect, a favorable product mix and good cost control and supply chain we see a growing gross profit margin.

Spending and admin expenses are flat in relation to net sales. EBITDA before restructuring increased with a very strong 31.9% to SEK818 million as a consequence from higher net sales, increased efficiency in supply chain and the favorable product mix.

Now let's change to slide 17 and the foreign exchange effect. As we have stated before, getting ahead two dimensions of exposures; the first dimension is currency transaction exposure.

This relates to when the group factories are selling to the groups on subsidiaries which we had swapped. The other that I mentioned is the translation exposure, this relates to when the group's company result are translated into Swedish Kronor; this effect is not hedged.

You can see that on the EBITDA before restructuring cost the transaction impact was SEK77 million and the translation effect was minus SEK44 million resulting in the total effect of SEK33 million for Q1. It is also worth mentioning that currency transaction effects are expected to have a positive impact of approximately SEK200 million of the group's earnings for the full year 2017.

Let me move to slide 19 and our balance sheet. Net debt amounted to SEK22.74 billion at the end of the period.

The change in net debt adjusted for currency effects and acquisition amounted to minus SEK451 million and the net debt to equity ratio respectively decreased to 110.1%. Our leverage, the net debt to EBITDA before restructuring ratio increased from 3.9 prior year to 3.67 for the period which is calculated on a rolling twelve month basis.

Finally go to slide 21. If you take a look at cash flow improves -- operating cash flow increased by a strong 24% to SEK868 million and the cash conversion amounted to a healthy 72%.

During Q1 2017, we have seen investments of SEK406 million which is an increase of 12.8% and has resulted to a cash flow after net investments of SEK462 million. This represent a growth of 35.9% versus last year.

And then I hand over to you again, Mattias.

Thank you, Reinhard. We can move to the next slide.

So before we open up for questions we will have a brief summary of the first quarter. We had slight organic top line growth as you've seen despite the modest growth, we did see significant growth in earnings and cash flow.

And this is said, as we touched on earlier in this presentation mainly thanks to continued efficiency enhancement. All in all, the sentence reached lower level the level of net debt to adjusted EBITDA.

At the same time I like to underline that we have a couple of challenges still ahead of us, topline development where for example saw a slight incline in acute care therapies in the quarter mainly in the in the US. The big slide will continue the rollout of the program, it going according to plan.

We do have to allocate a significant portion of the savings from the program into reinforcing both the quality organization but also into innovation and market Development and other organization -- portion of the organization. The quality of remediation program continues with the good traction in the U.S sites, but slightly more challenging situation hedging as we will update you as soon as possible on this at the latest in the -- in the report for the second quarter.

And finally, the preparation of the potential spin out where we have a first estimate on cost in the range of SEK400 million to SEK500 million, and we will come back with information; I think most importantly on the strategic plans for both the companies during the second half of the year. That concludes really the overview of the first quarter and the summary.

So with that I open up for questions.

Thank you. I have a few questions.

First on the gross margin improvement, it seems the transaction effect that may be a percentage point to the gross margin. But the remaining improvement is it possible to split that between mix effect and how much is more sustainable from the supply chain efficiencies, and related to that also how would you see the mix effect changing now with orders for Acute Care business being down slightly in the quarter.

Thank you.

Thank you Kris, for your question. Well, you're absolutely right there is a slight effect from the transaction hedge side as we have alluded -- I mean the SEK200 million is the full year, so you can really go in there as well in to first quarter and with the 77 which we had alluded to the after number.

The price effect versus product mix effect that we cannot separate out, because actually both influence each other. The volume of course in term areas have an effect on the pricing efficiency, so here there is no chance to basically give you that detail is any how a combined and in that context we cannot really spread it out further.

Thank you.

Yes. First of all congrats with very solid Q1 results.

And at your presentation you highlighted that a high degree of the cost savings from the Big Five program has to be transferred back to the organization to increase internal competences and maybe invest in frontline and innovation. I'm just wondering if you could give us some sort of feeling on -- on how much of the SEK2.5 billion to SEK3 billion Big Five savings targets you think in -- I think going down to the bottom line?

My other questions will be on -- on the top line growth for the remaining part of it 2017. Could you elaborate a little bit on how you see both market trends, but also how Getinge is doing in particular within Acute Care Services Surgical work flow, and also of course in the PPAC division, how much more improvement should we expect in these areas, and also in connection with that better top line growth, so if you have had -- or a generation you have had in the Q1 how much is this generated from the previously announced part of the [indiscernible]?

Thank you.

Thanks, I can start here. We are not in a position to give any details on how much of the savings of the Big Five will actually go through the bottom line of P&L.

The main reason for this I mean in terms of the quality work we have a solid plan that we're following but when -- what I mentioned about the unwanted intrusion which is in effect allow the program was rolled out in the first place. It is something that's happening on a -- on a weekly, monthly, daily basis it's very difficult to estimate is and given a forecast on it.

So it's -- because not possible to give you much more information in this regard. And when it comes to the top line growth that's when we've guided for slight organic growth this year, we reconfirm this but we we’re not in a position to give more details by segment or business area there.

And how about the new product, how much -- have they started to influence yet or it is more an influence you will see in the second half of 2017.

Also new product is difficult to -- we're not in a position to give you detailed numbers on this but we are -- we have a good launch pipeline for surgical work goes for 2017, this you don't see much effect of it at the moment, I mean the most of the launches haven't even been done yet.

Okay. Can I ask just to be frank here how can you not be in a position to know how much new products will help you looking forward.

I didn't say that we don't know, I just said that is not the information that we make public.

Okay, thank you.

Thanks very much for taking my questions. First question for you; it's obviously a few months within your organization now, I wonder if you could share some broader thoughts as to what you see of the -- some of the key opportunities and challenges within the organization, and also extend upon that please to talk a little bit about your thoughts on this PPAC spin out, given you far highlighted hint with a nice presentation some relatively high separation costs and the potential for reduction and savings due to the complexity of the spin out.

So I am just wondering if you could share thoughts as CEO of compliant [ph] company, your views on value creation and sustainability of that spinout business please, so that is the first question, [indiscernible] so I will follow up after that if possible.

Well, thanks Scott. Just to elaborate a little bit on the initial impressions there, I have to say I am positively surprised by the spirit of the organization, the level of passion and professionalism of the people that I meet here as well, I also had time to the public to spend some time with their -- with customers then if it's really good to see in reality that our products are serving our customers in a really good way, we have a strong position in many of our niches, so that's really good.

We touched on some of the challenges here as well, the rollout of the one getting a strategy that we decided to tweak a little bit has obviously created some organizational fatigue as well and change fatigue in the organization, and what shows up as in the last 12 months, and I do expect that we will have to deliver this situation for a while, even though we're trying to mitigate this as much as possible. And then of course the consent decree is not new news, but it's also a dynamic situation I would say specially related to the hedging inside with who we need to do re-planning, and this is of course it's not a situation that we wanted to find ourselves in at the end of the -- of the quarter but we decided to bite the bullet and we have a more thorough look at how we do this work and try to get -- take more internal ownership of the situation and less -- being less reliant on consultants.

And then the spin-off of the PPAC with a potential been up with PPAC has created obviously another layer of complexity when it comes to both, one getting the strategy and the rollout of the Big Five and so on so forth. It is a challenge that we need to manage.

I have to say that the team that works with has been out there now done a very professional job in terms of the intent planning for this and that's why we're in a position to announce the cost related to the spin up, and we are working in parallel on the plans for this, and we feel comfortable that we are able to show you credible plans for growing both the different companies offer new potential spin up that justifies the cost related to the separating the business.

And when we will learn about that actually.

We said the second half of this, so we would like -- we're trying to progress this as quickly as we can, we haven't been more specific than the second half of year, and I don't want to make much -- too much and give you something more optimistic at this moment.

Okay, thank you. And a follow -- up follow up please on hedging in which was a sort of an issue that continue to linger all of last year with the FDA not if you like authorizing your remediation plan was my understanding, but you confident that you are taking the right path there, [indiscernible] additional costs, what has changed actually, has that been an inspection that hasn't confirmed your opinion around the steps you take.

Is there any risk that you could see some manufacturers from this, and saw being forced injunctive from the facility, can you communicate us a little bit more as to where you are and give us some sense of the costs required to complete the plan to your satisfaction. Thank you.

Yes, okay thanks. We haven't had any additional information from the -- from the FDA but we of course internally we follow their mediation both in terms of the quality and -- and we come to the conclusion at the end of the quarter that we were not satisfied with the -- that we need to prioritize and re plan the work for the site, I am not in a position to speculate about the cost of the time band for this unfortunately now, this is something we discovered late in the in the quarter.

But it's not based on any new information from the FDA at this point.

So we shouldn't speculate that there's a material additional cost to come from this facility about that could be some additional costs of that being provisioned.

I would like to avoid any speculation at all at the moment there, we need a month or two to actually work through the plans and to be able to come back with details on this.

Okay, thank you. And last question please this relates to the Big Five initiative which I know was not your plan, I think that you've clearly portrayed messaging have re-investment some of these savings in this CO.

So it's a two quick questions please, first in form based, do you -- where do you -- do you see potential for getting group to restore to historic margins which this plan historically was designed to deliver, or is there some sort of caution statement here that historic targets or historic achievability is no longer structurally possible within the organization. And second point, I see the run rate of cost savings this quarter is probably the same as the run rate last year, my recollection was the plan we should be seeing an acceleration actually 40% of this plan delivered throughout fiscal 2017, so can you talk to a little bit to why we are not seeing an acceleration of savings as part of the initial phasing of this plan.

Thank you.

All right, thank you. Well, in terms of the longer term plans I would like to wait the question then with answers to your questions until we actually have the plans for both the companies ready do in the second half of the year.

When it comes to the Big Five I will see part of the that you mentioned I'm not really in a position to answer, Rein can you share some light on this.

Absolutely will do. I mean on the run rate and under today the impact of Big Five I can say I mean we are delivering very much a head, and according to our plan and the positive momentum is actually seen in the increased result, and as you might remember from earlier discussion, there is actually big five flowing into margin as well as into cost, and when you look both composition developing very well a head, and I think that is clearly a sign that Big Five is delivering according to the plans.

And the range of 2.5 to 3 at the end of the year, on the next humiliated basis. So I can only say there is no slowdown, pace is ahead and we have good traction on the major drivers there which is direct expense, indirect expense and lean sales [ph].

Thanks, I will jump in the queue. Thank you.

The SEK400 million to SEK500 million, it's -- how would that be visible really or you say what is non-recurring, is that can mean you could take that as a restructuring cost or how will that be visible to us?

Yes, this is Reinhard speaking, yes, absolutely you are correct, I mean half of the cost is related to restructuring, it's actually a part of the information which we have basically gained through the growth as such where in a way need to separate a number of IT systems and other activities which do lead to let's say incremental long time efforts, and that is approximately 200 million to 250 million stack in that range. The other is associated with additional organizational cost in the PPAC function and PPAC organization, which we have in 2017, and I think it's very important that the -- for 2017 and this is already guidance we have given.

From 221 and 250 that’s going to be for the remaining three quarters.

Well, 250 is restructuring related to one timers, and the rest is going to be operational cost in the PPAC business.

Looking at the PPAC business; consecutive quarter with negative organic growth…

I ask you correctly I think that a lot of what we had a positive organic growth in the first place as we have seen their performance -- a weaker performance last quarter, well, I cannot say -- I mean is this now back to the old trends, to what our guidance is today we do see for the total group a slight moderate growth and lets expect that to be across all three divisions to which extent I don't know.

Okay, thank you.

Great, thank you. I have three questions, firstly on the patient and first acute spinout, am I reading your press release correctly that effectively the route EBITDA margin will be negatively impacted by 2 percentage points as a result of recurring charges of approximately called 250 million year.

Secondly on the FX margin impact of 2017 what will be the impact on gross margin and also on the EBIT A margin. And question number three, is on 2017 sales growth, given that Q1 was a very easy come for you and you hardly grew has the risk increased that you may not grow at all this year will make even decline in organic sales growth terms this year, that's all thank you.

Well, I mean let's say on the first question which is there is a that 200 million and 250 million, while we guide only for this year, we are not giving guidance on let's say what is an increased cost base for the business going into 2018, 2019 and 2020 this is due to into second half of the year as stated and you understand that that's a running organization will have ability to optimize as well and the purpose of the spin off which actually to grow those businesses to an extent there which we have not yet seen. And for that we build the organization out of the cost we do actually see now coming up in Q2 to Q4 and that is what guide on.

Financial targets for all business will be provided in the second half of the year, and in term to the foreign exchange effect I mean the 200 million which I have given you a guidance on will fully flow into the gross margin whilst the translation effect can also impact the extent sides. To which extend it effects cost margin or extent I cannot tell you that because we do not make planning on that.

On the hedging side we do we really have a good protective contraction situation so here I can give you the guidance. And the last piece I don't recollect but that was around the…

The organic sales growth that you had in the first quarter was very easy come, so you adjusted for comps it's quite easy to see mathematically why you would have no sales growth at all this year or perhaps even have a slight decline and the question was have a risk increased after the first quarter result that you may not grow or may even decline this year.

I think the risk has not changed our outlook is as much here is confirmed still going forward with a slight positive growth for the full year and we assume today that all three business areas contribute to this growth and the constant perspective this is one thing, but as growth perspective from different markets we have a have incremental product launches is another thing and this all will contribute to the overall perspective of slight moderate growth in 2017.

Okay, and I want to go back to my first question about the guidance of SEK500 million or so of total cost of which half of them will be recurring, so asking you for guidance for 2018 or 2019 but if you take the SEK250 million in recurring costs that seems to mean -- seems to me that you're highlighting that group margins as it is today could be impacted negatively by around 200 basis points is -- is that a correct interpretation of what you've disclosed today.

That is not correct, we given guidance what we hear as cost impact for this year, we have not done an extra palatial or an assumption what will mean for 2018 and 2019 and onwards, those are the figures and targets which we need to investigate much for further, and where we look them out in the second half and I think it's actually good practice that we give you early in the year information about what we know and then not only give them results.

But maybe one last follow up on this, is -- is it correct to say that there are going to be 250 million of recurring costs as a result of the spin out, is that a correct statement of fact?

No, it's just today operational cost which might turn into recurring costs but we cannot tell you that because we don't have those plans. Out of the 200 and 250 is definitely onetime cost related to additional investment into separate IT systems and other investments which we need to do in order to separate the two companies and get listed according to our time plan.

Okay, thank you.

Thank you, two questions. You've talked quite a lot about starting a quarter of the savings program that you have has to be reinvestment to the company and to call it organization and into the pipeline, this quarter you have 4.9% approximately in R&D; what do you see in long term for a company like you if you want to position yourself for as a strong competitor in the tech space, where should you be long term on the R&D side.

Thanks Patrick, it's a good a good question, but it's a little bit too early for me to answer it, by six week on the full time job where we are working with both strategy reconfirmation and also the individual plans for our UN for -- I cannot give you a number on this today but I -- it's a question that I have to do as well for sure.

But we should expect it to be [indiscernible].

Yes.

I also have a short question here. Have you done any acquisitions in the first quarter that you haven't press released.

No, no acquisition.

Could you please explain why the number of same time employees are increased by 342 persons from the 2016 to end of March.

If you can you repeat the question?

Yes. If you look at note number five it looks like your number of employees is up by 342 persons in the first quarter, that seems to be a little bit too much if you haven't done an acquisitions.

Well, as I said I mean they are planning for expansions in the spin off related so we will have hiring there firstly, and as the we recalled here the end of the quarter of triggers will end up the quarter of triggers there could be effect in this context. But further to that we have not done any kind of acquisitions and have not really structurally increased the activity.

So not that something materially has changed.

Okay. Thank you.

Thank you very much, maybe one question at a time. You mentioned supply chain efficiency in all the division and I was wondering if you could give some sort of understanding what the drivers of the price change efficiency in maybe the continue operation, and then associated with that you have mentioned reinvestment and product and so on, do you have a sense of how this may be reinvested to help grow the sales.

When it comes to the supply chain efficiency, I think that the short term benefit that you see are mostly from direct sourcing so purchasing and so on, and to longer term part of the plan it is more effective set up with the -- with warehousing and we're entering into 4P-L set up as well. And now we believe will generate also efficiencies, so that's kind of the high level picture from the supply chain perspective.

And for your second question was about reinvestment from the program.

Yes, reinvesting in product and structure to try to drive sales, maybe from that thought going forward.

General thought I mean this is what we've said that there were we do see the need for investing part of the saving into organic growth not just the innovation but also in the market development in growing in emerging markets and so on. It's not something I can quantify on this call in terms of numbers.

Okay. And then the next question was just on Acute Care order intake, you mentioned Middle East and Africa being particularly interesting, was there any notable large orders in the quarter there.

Nothing that stands out now on the top of my head, no.

Okay, and the last question was under the previous management team, there was some discussion toward the end of how the Big Five restructuring plan may be adapted thinking about some of the differences on views on de centralization coordinating manufacturing sides in the larger units and so on, and I was wondering if you were having a review of this project and have any preliminary thoughts in terms of how some of that dialogue may be considered going forward.

I don't have much to add actually, as you said I'm getting my feet under the desk area as well to understand the problem bit more in in detail, so there's no -- no replanting on the horizon and on the -- it's mostly going according to plan and they're not -- we wouldn't say that anything is changed materially since the previous management.

Okay, thank you very much.

Was that the last question moderator?

Good, all right well, thanks again for joining the call, as we said earlier we just like to summarize very quickly with the main message here that we have seen some slight organic growth in the first quarter. We're starting also to have some traction when it comes to efficiency enhancement that showed in our earnings in the first quarter, and also just remind everybody that we do have some significant challenges still ahead as well these four that we've elaborated on during the course, so well, thanks for your attendance and I look forward to talking to you again next quarter.