Getinge AB (publ)

Mattias Perjos - President and CEO Niclas Sjöswärd - CFO

Chris Cooper - Jefferies Hans Mähler - Nordea Kristofer Liljeberg - Carnegie Investment Banking Ines Silva - Bank of America Merrill Lynch Alex Gibson - Morgan Stanley David Adlington - JP Morgan Scott Bardo - Berenberg Peter Testa - One Investments

Thank you very much. Welcome to all of you and thanks for joining the Q3 report call today.

As usual, the presentation is accessible via link in the report and it’s also available on our web page under the Investors section under Presentations. And together with me today I have our Interim CFO, Niclas Sjöswärd, who will support me during the call today.

The agenda for the call, you can see on page number 2 where we start-off with an overview of our business performance. And with that said, we can move directly to slide number 4 and the key takeaway for the quarter.

To start with, we still have the challenges that I’ve addressed in both Q1 and Q2 which we have worked and continued to work with during Q3 and will also continue during the rest of 2017. First and foremost, you can see that the weak Q2 organic quarter intake is impacting net sales for the quarter.

However, we do see promising growth in order intake for the third quarter and most encouraging is the performance in acute care therapies when it comes to the business area and Americas when it comes to the sales region. And I’m particularly happy with the good traction in terms of workforce in the Americas during the quarter.

Overall, the order intake for the quarter makes us staying with our outlook for the full year on slight positive organic net sales. We do see increase in cost during the quarter and I think it's important to keep in mind that we’ve reached a point now where we have come very far in the preparation for the potential spin-off of orders and we’re practically now two companies in the same structure with all the cost associated with this, but none of the synergies left.

So, some of the increased cost that you see now is related to the spin-off of patients and post-acute care, but also to R&D to quality and to sales improvements that we have informed about before. Our efficient enhancement program, the Big 5 continues to deliver and hence to mitigate the negative impact from the cost increases that I just mentioned.

And we’ve also addressed now towards the end of the year the cost incurred in connection with the preparation for the distributions, the potential distribution of patients and post-acute care, and also the preparation for the implementation of the updated strategy going forward and the organizational changes related to this. I also want to highlight that our quality remediation program has continued with high intensity at the plans that are covered by the Consent Decree with FDA.

In both Wayne and also Hudson Merrimack when progressing according to earlier communicated plans. In Hechingen, we started working according to the adjusted plan that was created during the second quarter.

And during the third quarter, we’ve also now appointed a new managing director for the cardiopulmonary business including the production in Hechingen and the purpose there is obviously to drive and create higher efficiency in the remediation process. When it comes to the preparation of the proposal for the potential spin-off of patients and post-acute care, this has progressed very well in the quarter.

As a consequence, our ambition is to finalize the spin-off before the end of this year and we reiterate that the estimate on cost associated with the separation is in the range of 400 million to 500 million, close to half of those are non-recurring. And in the first nine months of the year, the cost amounted 360 million where 144 million are one-off.

During the quarter, we’ve also been making some adjustments in the organization in order to reduce complexity and enhance efficiency. In short to describe this, we're dividing the supply chain function into and moving the production in the factory back to the business area in order to create increased clarity and efficiency all the way from R&D to production and also improve the accountability for the business areas.

Direct purchasing and logistics is moved to a group function in order to continue to carve out some of the synergies that we do have as a group. So, we don’t intend to lose anything in this regard.

When it comes to the sales organization, we decided to simplify further and move from the three sales regions that we have to one global sales organization with one Chief Commercial Officer in order to enhance sales management efficiencies. And I am going to highlight that because we’re moving these three macro regions and we are working with 10 regions instead of these are sub-regions that already existed.

So it’s not something that we’ve created in addition to what we had in place before. And I am confident that these adjustments will be beneficial going forward together with the revised strategy that we expect to present in the middle of November.

Finally on the takeaway, we have completed the rights issue which was oversubscribed and a much successful, and the funds have been used to pay down debt and thereby decreasing our leverage significantly. And now I think we can now move on to page 5 and take a closer look at the top line and the operational performance during the quarter.

We've always satisfied with the organic order intake for the quarter. We saw an increase with 4.7% year-on-year.

The organic net sales was down due to the weak second quarter we had order intake wise. On the gross margin front, we had a slight improvement due to continued efficiency improvements in the Group.

But lower net sales and higher OpEx combined related to the spin-off but also to R&D quality and sales had a negative impact of EBITDA 1 in absolute terms and obviously also the EBITDA 1 margin. When you compare to last year, we had lower restructuring costs during the quarter which explains the improvement in EBIT.

We do see decline in cash flows from operations and lower cash conversion, and this is mainly a consequence of higher inventory level which has built up working capital. And finally with the decrease in leverage due to the pay down of debt with the funds from the rights issue.

We can then move to page number 6 and I'll talk a little bit about the top line per business area and the sales regions. So, on that page you can see the overall distribution of our top line between our business areas and regions.

Our order intake for the third quarter amounted to 7,334 million. So organically this was an increase with 4.7% with growth in all of our business areas.

If you look at it from a capital good perspective, we had an increase of 6.6% and disposable increase of return items by 2.9% year-on-year. The increase is most obviously in the acute care therapies increasing with 7.7% in the quarter.

This is mainly supported by strong development in ventilators in critical care and disposables within cardiopulmonary. In surgical workflows, the growth is mostly related in tables and lights within surgical workplace.

We're seeing patients and post-acute care is mostly driven by service. From a geographic perspective all the business areas reported growth in Americas, which showed strong performance during the quarter.

And the same goes for Asia-Pacific where all business areas improved the numbers year-on-year. In EMEA, we reported a 1% decline due to lower organic order intake within surgical workflows and also patient and post-acute care.

If you then look at net sales, our net sales declined organically by 0.7% due to weak performance in Americas in terms of delivery. Sales in capital goods fell by 1.2% and the sales in disposables decreased by 0.3% year-on-year.

The organic net sales decreased by 1.1% in acute care therapies. This was primarily the result of lower order intake in Americas and EMEA in the previous quarter in Q2 of 2016.

Surgical workflows net sales increased by 0.5% mainly as a result of strong development in life science. Net sales per patient and post-acute care fell organically by 1.8%, and this was the result of lower sales on capital goods in patients handling, hygiene, in wound care and DVT.

This was partly offset by higher net sales in medical beds and in the bariatric product group. Seeing from the region standpoint, all of the business areas reported decline, net sales in Americas during the quarter leading to the 3.2% decrease for the region.

EMEA reported a 1.2% growth due to growth in surgical workflows and patients and post-acute care, while Asia Pacific reported growth of 0.9% as favorable to acute care therapies. With that, we can move to the next page and have a closer look at the cost increases for the quarter and the period.

The Big 5 efficiency enhancements program is progressing according to plan and the saving is mitigated some of the impact from cost increases that we had because of the spin-off R&Ds and the investments in quality and sales. The savings for the quarter amounted to slightly more than 100 million mainly as a result of improved efficiency in direct and indirect sourcing.

The total savings in 2016 and first three quarters of 2017 amounted to approximately 700 million. And this takes us to the next page, we walk about R&D, quality and spin-off related costs.

During the quarter, we've increased our spending in R&D and in actual and also in relation to net sales. And we're trying to remain stringent and due to this an efficient and focused manner in order to reach a critical mass for each of the products that we decided to go forward with.

And where we see the possibility and the need, we will use also corporations from partnerships in order to enhance both the output and we offer to our customers and also to mitigate risk. As we stated before also quality remains a top priority for us going forward and as a consequence of this that will continue to strength in the organization and really trying to spread best practice in all regions and on-site going forward.

In the short-term, this does have cost and year-to-date, we’ve added approximately 150 million year-on-year on the saleable side. As I mentioned earlier, also the spin-off process represents significant part of the increased OpEx related costs.

The total cost for the first three quarters adds up approximately 350 million, and the ambition now is to finalize this spin-off during the fourth quarter, and therefore we're also confident that the estimate given earlier of a range between 400 million and 500 million is still valid. We can move to the next page and I’ll talk a little bit about the FDA and the remediation process.

We've had continued intense activity during the quarter at all of our sites and the sites are still in different phases in their remediation process. In Merrimack, we see a stable performance.

In Wayne, we also continue to see progress in the right direction. In Hechingen which I repeat is the most complex site that we have under the Consent Decree, we did re-plan the process in the second quarter.

And during the third quarter, we’ve appointed a new managing director for cardiopulmonary, who is responsible also for the production site and responsible for driving the remediation process in Hechingen forward with the right speed and the right quality. During January through September of this year, 212 million of the provision had been utilized for improvements, 71 million of those relates to the third quarter.

And the provision totaled 615 million at the end of the third quarter. Just turn to next page and a little bit more detail on the spin-off process.

It’s been progressing really well during the quarter, which makes us comfortable. But we had communicated that our ambition is to finalize the process in the fourth quarter of this year, which the Board decides to go forward the proposal and it’s the EGM both in favor.

This mean, we end to 2018 with two well prepared companies and one project less on our table. So that will leave much more root of focusing on the respective businesses going forward.

In conjunction with this processes well, we are now finalizing or review of the strategy for both companies and also were financial targets for both companies both on the remaining getting it. And our aim is now to present this information to the capital markets in the middle of November.

We can move to the next page and I’ll touch a little bit about on the organizational adjustments that we made as well. The first thing is that we’ve decided to divide a supply chain into two parts where we move the responsibility for productions to the manufacturing sites to the business areas and we move direct spend and logistics in group function in order to make sure that we still get the synergies from this part of the business.

We’re also simplifying the sales organization going from three sales areas and direct us to one global sales organization, leaving sales with one representative in the management team as well, so the effective management team becomes a little bit smaller also. And this is I was just highlighted.

It's a consequence of the strategy work that we've done and it's a natural modification that we do in order to reduce organizational complexity and increase accountability and efficiency and everything from R&D to production, to sales and service. It is also way of sharing best practices across the different parts of our geographical footprint in a better way than this.

We will then move to the next page which is about the rights issue. As I mentioned in the beginning, the rights issues was successful and gave us the opportunity to reduce debt quite significantly.

As you can see on the left of the slide, the net debt reduced to SEK17.6 billion which leave us with a leverage of 2.93 compared to 3.90. With that said we can move to the next page and talking a bit about the business area and their performance.

We'll start with the acute care therapy and we see a strong order intake mainly due to strong performance in ventilators in critical care and in disposables in cardiopulmonary and this is across all regions. From a net sales perspective, we had a decrease organically by 1.1% mainly due to the weak order intake in the first half of the year in Americas and in the second quarter in EMEA.

Our gross margin increased nicely, but lower sales and the consequence of gross profit and also the increased R&D spend contributed to lower EBITDA 1 and also EBITDA 1 margins. EBIT increased compare to last year mainly due to lower restructuring cost compared to the same quarter last year.

If we then move to surgical workflows, we see a positive development in order intake and surgical work flows where Americas stands out in a really good way. Good order intake in both surgical workplaces primarily within tables and lights and also in infection control.

We see a slight increase in organic net sales mainly due to good performance in EMEA despite the negative top line in actual we see a slight positive development in gross margin and this is due to a combination of FX and efficient supply chain. EBITDA 1 however was negatively impacted by increasing FX mainly within sales quality and R&D.

If we move to patient and post-acute care, reported organic and actual growth in order intake with good progress in Americas and in Asia Pacific. Net sales were down 1.8%.

This was mainly drive by capital goods and the performance in Americas because of weak order intake in the previous quarters. Gross profit declined slightly due to lower net sales, but gross margin improved thanks to efficiency enhancement in the supply chain of the FX.

Increasing OpEx related to the spin-off such impacted both EBITDA 1 and the EBITDA 1 margin negatively. And with that overview, I leave over to Niclas Sjöswärd for a brief presentation and deep dive into the financials.

Okay, thank you Mattias. So let us move to the results on Slide 18 and an overview of the quarter.

As said earlier, we had a net sales decline, a slight decline of organic 0.7% amounting at revenue of SEK6.696 billion. Due to FX and higher efficiency in supply chain, we have a slight improvement in gross margin.

However, our high OpEx driven by the spin-off but also R&D, quality and sales, net decreased in the EBITDA 1 margin which ended up at 9.3% versus last year 13.9%. However, the lower restructuring cost in the quarter compared to last year contributed an increase in earnings per share of minus SEK0.36 to plus SEK0.26.

With that said, we can move over to Page 19 and overall distribution of our top line between the top line and the margin development. As Mattias mentioned, we reported 4.7% growth in organic order intake, but we had FX headwind which took us down to 2.2% in actual.

We saw the same impact in organic net sales which was minus 0.7 organically, but ended up at minus 3.4% after that 2.8% headwind from FX. Despite decline in FX, the gross margin improved slightly among other things to FX but also product mix and efficiency enhancements into pricing.

Increasing OpEx contributed unfavorable development in sales and other areas in that space. And all in all, this contributed to our EBITDA 1 growth of minus 31.6% in the quarter, year-to-date down 1.3%.

So from that, let’s move over to Page 20 and look at the FX effects. Our currency transaction exposure relates to when the Group’s factories are selling to our subsidiaries internationally and this we hedge for.

This contributed with SEK65 million for the quarter and SEK198 million year-to-date. The translation exposure relates to when the Group company results are consolidated and translated into SEK, this is not hedged.

We can see that on EBITDA 1, the transaction impact was SEK65 million and the translation effect was SEK2 million, resulting in a total effect of SEK67 million in the quarter. It is also worth mentioning that the currency transaction effects are expected to have a positive impact of approximately SEK250 million on year-to-year EBIT for full year 17.

So let’s move Page 22 on the net debt. Net debt amounted to 7.6 billion at the end of the period.

Then it also decreased in net debt amounted to SEK4.539 billion and this is due to the rights issue. Our leverage net debt-to-EBITDA before restructuring ration decreased from 3.9 to 2.93 for the period and this is calculated on 12 months rolling basis.

And again, net debt-to-EBITDA ratio decreased from 121% to 74.1%. Finally, over to Page 24 on the cash flow situation.

If you take a look at the cash flow, the Group’s cash flow from operations amounted to SEK592 million compared to last year's SEK725 million for the quarter, corresponding to a cash conversion of 66.4% versus last year 89.5%. During quarter three, we have seen net investments of SEK410 million versus last year SEK376 million.

It resulted in our cash flow of the net investments of SEK182 million. With that, I'll leave over to you again Mattias.

Thank you, Niclas. Before moving to the summary, I just wanted to give you few comments on our outlook and we're now on Slide 26.

We still expect the slight organic growth in net sales for the full year 2017. We're confident that the order book that we have and the intake in the third quarter supports this.

And we can also say the currency transaction effects for the full year 2017 expected to have positive impact of approximately 250 million on the Group's earning. And we want to reiterate that the estimated cost related to the potential distribution and listing of patients and post-acute care still amounts to 400 million to 500 million and roughly half of those are one-time costs.

Now we can move to the summary. As we all expect to summarize need before we open up for questions.

So after the third quarter, we see improvements when it comes to order intake and this makes us comfortable keeping the outlook for slight organic net sales for the full year of 2017. We do have an OpEx increase during the quarter.

It's partly linked to the spin-off but also due to the investments in sales, in quality and in R&D. And the impact of this is to some extent mitigated by the savings from our efficiency enhancements primarily when it comes to direct and indirect spend.

When it comes to FDA remediation, we see good progress and we've appointed a new managing director for cardiopulmonary including the production in Hechingen which also related for really driving remediation in Hechingen with good speed forward. Regarding the spin-off process, this is progressing really well especially during the third quarter and our ambition is now to finalize the distribution and listing our patients and post-acute care before the end of 2017.

And finally, I will mention that we've taken number of decisions as a consequence of the updated strategy to adjust the organization and we aim there is to enhance efficiency in production and sales and the same at the time continue to carve out the synergies that we have there as a group. We are also in the end of the process of reviewing our strategy and the financial targets for the Group.

Our aim is to come back with the information on this in the middle of November. And finally, one thing left to do for next year.

We've finalized the rights issue and deleverage the Company a bit, which brings us to a good strong financial position going forward. So as you can see, we have a lot of things that we need to get in place during the fourth quarter, and we need to make sure that we can end the 2018 with less distraction on the table really enabling us to focus on our customers, our offerings and the day-to-day improvements.

Challenging fourth quarter in terms of workload and activities, but I'll comment that we will manage this in a good way and end 2018 in a good place. So with that summary, I open up for questions.

Firstly, just on the spin-off costs, please. So, on my math, 90% of the remaining costs likely to be one-off.

Can you just confirm that you’ve now booked the majority of the recurrence costs ahead of the distribution?

Well, I think what we’ve stated that we have 360 million year-to-date, right.

Correct. So, if I take a midpoint to you guidance the 400 to 500 that was implied 90 to go, but given [indiscernible] that's the one-off costs that was implied 81 million of one-off costs?

Okay. I can say that we remain with our guidance, but it will be closer to the 500 million and the 400 million in the outcome obviously a little bit depending on the exact timing of the spin-off.

But it will be closer to the upper part of the range.

And just on the order development. I mean the headline numbers clearly move robust position and happen too much of the year.

I mean I know you’re lapping a challenging quarter, but even if I adjust for the favorable comp, I mean there is a pretty nice development in Americas this time around. I know surgical workflow that was a big improvement in that region, which is probably a key driver to that performance.

But could you just provide a bit more color around the general conditions in the U.S. market?

And how you expect that to develop into the fourth quarter and going into next year?

Yes. Look, I mean, it is positive -- I view with this.

There is no major change. We’ve been optimistic about the U.S.

market for a while. And you can see now the good development we have for company in critical cares, ventilators.

It’s not only U.S. related, it’s actually very much product related as well.

I would say really good traction other parts of the world. One thing that I think is positive that we -- you may remember, we develop a new plan for surgical workflows in the U.S.

and it’s not implementing this in the beginning of this year. And we started to see some good momentum from this, which comes in the figures as well.

And it’s a big number for the quarter, but it’s been trend wise we’re optimistic that we will be on the right track for the rest of the year and obviously the coming years as well.

And just lastly, in the release and during this call couple of times you preferred to a challenging fourth quarter. I just wanted to make sure that this is more in reference to the fact that your fourth quarter is very seasonally strong and clearly working very large and important strategic projects on the way.

It’s more referenced to that rather than any sort of incrementally negative expectations about the market or your position within it?

Yes, absolutely. Thanks for making their clarification and you’re absolutely right.

It is more about the activities and workload that we have in terms of the finalizing the spin-off work, continuing the work with quality, finalizing the strategy uptake, testing the organization and anything for 2018, that’s correct.

A follow-up on the order intake here. You mentioned that the gross was partially driven by the launch of new ventilator or maybe I should clarify, is driven by new ventilator in the offering?

And if so, should we see similar impact on the coming quarters? And also if you see some impact on the order development for a more stable sales and marketing organization now and also I would like to ask you about the gross margin given the low volumes in the quarter.

Have you seen less of a pricing issue in the quarter that's just being anything in the pricing condition or being able to price up new products. So could you give us some color on that?

Thank you.

I’ll try to remember all the questions. When it comes to critical care, it is more about ventilators.

In general, it's not materially related to new product in that. And its overall good development for the range as such I would say.

So it's good to clarify. What was the other question there?

If you have seen an impact on the orders from the more stable sales and marketing fronts and in the Company given all the turbulence you’ve seen over the years that has helped anything in the quarter?

Okay, it's difficult to quantify the link. We all seeing a little bit more stability in the sales organization in general, but I really -- it's hard to link it directly to the performance as such.

But we do see more stability that is correct observation.

Maybe you can see something about October, have you seen the development that continue into October?

No, we don't -- I don’t want to talk about October until we talk about the quarter as such. So, we generally remain recent deposited about the market outlook.

And on the gross margin?

Sorry again, what was the of the mean price pressure related to gross margin or.

Yes, I’m surprised to see the strong gross margin given rather low volume, so when you can discuss the pricing environment or if you have launched the products that are out to gross margins.

No, we do have a pricing initiative going and I still think that it's early days for this. I wouldn’t read too much into this.

We don’t see any significant change when it comes to pricing in the market.

Yes, hi. It's Kristofer Liljeberg from Carnegie.

I have a question on the higher cost and the investments you’re doing. So first for the fourth quarter here based on what you see for sales, you expect margins to be down flat or up in the fourth quarter?

And then if you look into next year, I wonder a little bit for how long you expect to continue with this notch-type of investment? Should we see a similar type of increase in operating cost for particular in R&D and in quality on sales in 2018 as we have seen in 2017?

Thank you.

Okay, we don’t really guide on cost of margins going forward. What we can say in general though is that in addition to the spin-off of the cost, we have continued to build, re-build I'd say part of the sales organization.

So that’s absolutely visible in the OpEx and we have continued to build quality as well, so that’s something you can see. There is a bit of build-up in the supply chain organization as well that continued to drive the Big 5 program.

And we’re at a stage as well when it comes to the spin-off where we have now two companies that are practically separated and operating as two companies with the full cost structure that goes with this, but we have none of the synergies. So we’re in a bad position in that sense and the comment I made in report is that we’re aware of this and we'd rather position where we can start to work down as well as some of the costs that are a bit unnecessary have with us going forward, and this relates both to the spin-off costs as such, but also other costs in awake of the strategy rollout and the organization change, addressing the stranded cost that we will have in Getinge going forward.

So, that’s something that we will work now diligently on in the fourth quarter. But we don’t give any details and guidance on cost levers or margins going forward.

But do you see that you have a good organization in place now? Will you have to do similar type of investments in 2018 to be where you want to be?

We're at least much closer to having a good and divide organization in place than we’ve been for a while, that’s much I can say. Whether they're not tied, there has been a little bit way to goal that we finalize during the year.

I think we’re reaching at that position there that we want to be.

There were some issues to follow up from what we were just discussing because I just wanted to sort of clarify. In terms of your average investments in quality and R&D, if we say those should be plateauing in the first half of next year, is that something you will be comfortable with?

Plateauing, I think for sure we’re reaching the end of the investments wave I would say at least in this regards. That's a comfortable state I think.

Okay, that’s fair enough. And the second question is, you said that you’ve transferred the production responsibility from the supply chain to each business area.

I just wanted to confirm, is this effectively and I am doing something that was done a couple of years ago under Big 5?

Yes in a way. If you take a bit longer history, there is a factory it was used to be part of all the business areas and then there was the reorganization and change in the first quarter of 2015 where the factory was paying and were taken out of the business areas and put together with purchasing and logistics in the supply chain function.

And one of the things that we believe hasn’t worked satisfactorily is that this created a little bit of a silo inside the Group and this has reduced accountability across the organization. So it’s actually moving back the factories to where they were before 2016.

In our view it doesn’t do anything of the efficiency enhancements going forward. The efficiency so far has been moved in purchasing than in manufacturing anyway.

And in terms of footprint, if you look at the -- what the factories do, it’s extremely limited the synergies between the business areas. There is much more to do inside the business areas and inside the individual factories from where we are.

So, we think it’s a move that reduces contestability. It increases accountability and it still preserves the possibility to improve efficiency.

Okay, so there shouldn't be material cost associated with this change?

No, absolutely not.

Okay. So, is there is that there are other sort of areas where you could do the same?

Sorry, can you repeat that?

There are other areas where you would think of undoing something what that was done in the last couple of years?

No, we feel it's fine-tuning left. I think the organization announcements that we announced at the end of September are implementing.

And now, we should be done with this before the end of the November. And what remains is fine-tuning more than anything else.

Okay, great. Thank you.

Question is you've mentioned that you should be ready to present the review strategy. In November, I just wanted to confirm it, it would lead to capital markets today or any other form?

There will be -- I can't confirm the format. I don't think it will be full-blown capital market.

We will probably go with the like-to-type of briefing and still face-to-face meetings in the middle of November, but not a full-blown capital markets sale what I ambition. And we'll both talk about strategy and financial goals for both the new Getinge and for Arjo.

Hi, thanks for taking my questions. I'll ask three and I'll ask them in sequential order please.

Obviously SEK216 million of spin-off costs that are recurring in so far this year. Can you identify how much of them were incremental in Q3?

And can you also breakdown these costs attributable to each business division?

Okay, well. So, I'll give that to Mattias.

I don't have the number off the top of my head for this one.

For the quarter, it was SEK92 million in spin-off costs, so that was the amount.

That is the recurring amount?

Yes, that's in OpEx.

Okay.

And that's a little bit -- it's mainly of course in the process of business that will be spin-off -- are in as for it can also get small parts in direct portfolio operation support in the spin-off.

Okay, thank you. And just follow up on the investments.

How long will the elevation in R&D and quality investments they elevated for? You anticipate this for the next two quarters and then it will get almost steady more run rate?

Or is this something that's going in multi-year elevation of investments?

We can't give you a detailed guidance on this, but it's most multi-year. And that's not what I messaged, so we're talking about a couple of quarters.

Okay, thank you, very clear. And one on the capital raise now that is fairly, can you give us details on how you're allocating these funds specifically how much that is going towards spinning off the business to these incremental investments in R&D?

Can you give us percentage terms of how you want to allocate those funds?

I mean the funds were completely allocated to pay down debt.

Fair enough, yes, okay. And on the -- finally on organic growth rate, you've had a couple of quarters where it’s been tougher getting negative organic growth rate coming through or can use constant in the final quarter of an improvement in momentum?

Can you identify any specific products that you anticipate to drive the orders growth? Or is it more of relatively easier comps that you’re looking at?

Okay, it's number of factors. So, I think first of all, we have a better open order book going into the fourth quarter then we did last year, so that’s one competent think.

We can also see that we have a recently good pipeline in most of our business when it comes to inquiries and quotations and the guide of the customers continue to be positive. And there is also the fact that we all now to separate company, so the internal distractions are getting much less as well.

We’re gradually shifting the focus outward again to watch our customers. So I think this will also help going forward.

So it's a combination of those kind of factors that gets us confident.

So according to this Big 5 efficiency program that you’ve outlined and you now make the 700 million savings I think that’s now 300 million cumulative as to last year. However despite that your margins have not improved actually that’s been down year-on-year.

I appreciate there is extra pre-tax costs born within the P&L, but arguably they're offset by the favorable and transactional benefit you’re getting on currencies at the moment. So what I’m saying, it seems to me at least all of these savings are being utilized and reinvested into the business.

I just wonder if you can confirm that and then type I discussion further, and any savings you make going forward. Is there a much greater likelihood of full surge to the bottom line or not, if you could clarify that please?

Thank you.

You’re absolutely. There is all the savings that are freed up to the Big 5.

The program has been channeled back into investments in quality. And primarily, it’s been -- apart from the spin-off, the quality has been the biggest factor that we have the R&D and sales.

And also a bit of supply chain when you look at the OpEx level investments which actually generated the saving. So, it is more that has been consumed and the program has generated.

The process of course not to continue this way, but we don’t give guidance when we reach a point where we will see a net gain from this.

Sorry, just tell us on the last comment. I mean, do you not see that there will be a net gain going forward.

I mean that wouldn’t all that what you commented out reducing the intensity?

No, I didn’t need to say that. I think the program will continue.

We do see concrete savings from this and once a little bit to takedown or reduce the investments that are needed in rebuilding the sales organization and building the quality structure. And so we will see gradually increase go through the saving from Big 5 to the bottom line as well, but I said I cannot give you timing guidance on this.

And just some additional clarity please, I mean obviously there is an external financial guidance in the market suggesting at the moment. And you have now got a reasonable order book into the fourth quarter you know what your nine months and sales are.

So can you give us a sense of what flattening now? Is this 1%, 2% growth?

Can you really give some additional clarity there please?

Yes, sure. We’ve said that slight means 0% to 2% than it's in the lower half of this, so we’re talking about less than a percent this year.

Okay, thank you and last question please. Again just to help us better understand and the beginning of the new two businesses.

And now that you’ve raised capital, can you give us a feeling as to what the leverage position of the Company will be at the end of this fiscal year in its current structure please?

We don’t give guidance on this. We haven’t -- it's not something we disclosed and I don't want to talk now with it.

Okay, maybe just sneak one quick one please. So I noticed that for the acute care therapies business which has had reasonable growth actually for the first few quarters at least.

You had an okay gross margin that didn’t deteriorate but your EBITDA margin fell significantly or fell couple of hundred basis points if you like. You were highlighting those in additional R&D there.

So can you talk a little bit about what sort of projects, what sort of investments you’re making specifically for that division? And why that sort of weighing so heavily this quarter on profitability of that division?

Thank you.

I don’t have. Niclas, do you have something you can…

No. Sorry, I don't have that off the top of my head, again something we'd go back.

Just I wonder are there any significant tenders that you pull out that have included in orders in the quarter. And then I’m sorry for that really, I’m just trying to reconcile the difference between the order growth and the sales decline particularly in the surgical workflows in the U.S., were there any mostly year orders in there?

And what rescue that order growth doesn’t translate into sales growth in the fourth quarter?

I think there is nothing significant that stands out within the normal course of the business. There are some large orders, but they are not larger than normal I would say.

So there is nothing that stands out at this course [indiscernible].

Yes, thank you very much. I had three questions please.

The first one -- I'll take one at a time. The first one is, as you change the manufacturing responsibility, what do you think going forward there is also a need to change this manufacturing footprint?

Is in the past the volatility and sales resulted in kind of erratic manufacturing cover and overhead? Do you think you need to consolidate the manufacturing footprint still?

That's above the analysis that we’re doing in conjunction with the updated strategy and I don’t want to disclose information in advance of this, but you’re right in a sense that we have but rather unbalanced footprint than we’ve had for a while. I think argue with being spun-off -- they have a good footprint actually quite well utilized.

On the Getinge side, there is a lot of improvement potential actually from where we stand, but I can’t give you any detailed guidance on changes in the footprint at this stage.

Okay. And then can you give some view based upon your view of the Big 5 program as to what you think the benefit that remained?

We had the total original program guidance on benefit, how much remains to be executed in value?

There is no change to this. The program is progressing according to the plans that we have and we do expect the same kind of gains as well.

It's just back to the discussion we got earlier that we do have a lot of the investments that we're not doing year. We are reaching a stage where I think we can probably lower the reinvestment level a bit, but there is no change to the Big 5 program as such.

We will see same potential as earlier.

And the last question was relating to the quality investments that you’re making, and you said the substantial part of the reinvestment. Are these recurrent investment levels or are they sort of one-off investments in terms of costs that will then wind down?

Are they do you think recurrent cost or one-off cost?

Some of it is recurring for sure in terms of building the organization. The one-offs there is what we made provisions for largely this year.

So there is a recurring part now that we’re building up over time to really make sure that we have a system that works for us and that we’re fully in compliance. I think once we reach that stage, we can look at making the system a bit more efficient.

If you look at that peers in our industry are going through the same kind of challenge. You end up with a slightly oversized, a little bit overcomplicated system to be on the safe side so to speak, and then you work with efficiency as well as you reach this at this point.

Hi, guys. Thanks very much for taking quick follow-up.

So it just relates especially to what one should expect and with respect to your mid-term target. Now, of course I actually don’t expect you to give us some numbers now, but are we to expect a margin figure for you over a defined time period or some sort of growth figures both in terms of EBITDA and sales, if you could at least help that expectation there please?

And also just to understand, you’ve been following very closely to this Big 5 program and as you identified. I think when this program was announced, there’s a whole series of one-off costs which was being flow through the P&L restructuring costs and that’s significantly tapered down according to the previous plan to be relatively negligible from 2018, 2019.

So I just wonder if you can say or talk, do you anticipate additional costs of those that were outlined over and above the Arjo ones which you’ve already taken this year? So in short, are we expecting restructuring cost to come down?

That would be great. Thank you.

So are we expecting to come down?

Restructuring.

Restructuring.

The Big 5 plan had a restructuring cost taken 2015, 2016, 2017 with negligible restructuring cost thereafter. And if you sort of model that plan, I would expect to see the price off the restructuring cost.

I was wondering if you could share most of the new restructuring cost as well to come.

Well, I don’t have any change really to communicate in this regard. We will come back to it in the middle of November where we'll talk a bit more detail.

But I think there is no significant change for this topic I think at least. When it comes to meet the targets as such, I would really like to ask you to wait for another four weeks or so and then we’ll come back.

But it will be both presentations about the strategic priority going forward and also quantitative targets financial targets going forward.

Okay, thank you. And then just lastly then please.

Obviously, there has been a quite a lot of swings and volatility in the Swedish Krona. And can you confirm that you've been out to hedge the successful rates or should we expect this to translate in some sort of translating negative for the Company in the future?

Can you comment a little bit about hedging and when they sort of the currency volatility in the Swedish Krona starts to impact you? Thank you.

I think both presentations we had before that you can see that there is hedge effect that is positive for the full year. And we cannot comment on next year right now that of course we have a translation effect which is [indiscernible] phenomenon, which we have viewed on up to now, but we do not forecast [indiscernible]

Okay, that was the last question. And we say thank you to all participants.

And thank you and good bye.

Thank you very much.