Getinge AB (publ)

Mattias Perjos - President & CEO Lars Sandstrom - CFO

Hans Mahler - Nordea Annette Lykke - Handelsbanken Kristofer Liljeberg - Carnegie Scott Bardo - Berenberg David Adlington - JP Morgan Peter Ostling - Pareto Ines Silva - Banc of America

Thank you very much, and warm welcome to all of you. Thanks for joining the earnings call today.

As usual, the presentation that we’ll go through today is accessible via a link in the auditor report and it’s also available on our web page under the Investors section under Presentations. For the first time on the call I have with me as well our new CFO, Lars Sandstrom, who will support me during the call today and of course a very warm welcome to him as well.

On page number 2 you have the agenda for today which is the same format that you’re probably used to by now. We start up with an overview of our business performance in the fourth quarter, so if we can skip straight away to slide number 4 and the key takeaways for the quarter.

If you look at the – excluding non-recurring items, our gross profit performance was in line with the year earlier period, while EBITDA one is obviously below. The EBITDA was negatively impacted mainly by stranded group by cost of about SEK250 million following the distribution of Arjo that is something that we had mentioned also on earlier calls.

We are tackling this now by gradually reducing of OpEx in relation to the same, and this is both by making sure that we grow in to this suite and it’s also addressed through eliminating some of these costs gradually during 2018. I think it’s very positive that you can see that our increased focus on customers and our offering is starting to show positive effects on the top line.

So organic order intake is up 6.6% in the quarter and next stage by 2.5% organically. It’s also good to see that we have a positive momentum in both our business areas both acute care therapies and surgical work flows and good momentum in all our regions as well from an order intake perspective.

When in comes to sales our net sales increased organically in both business areas and also in Americas and in Asia Pacific in the fourth quarter. In EMEA, we had a little bit slower quarter and this was burdened mainly because of lower sales in surgical work flow compared to last year and this is linked to the weaker order intake in the previous quarter, the first half of 2017.

It’s mainly related to surgical workplaces and life science, the sales performances. Also want to highlight that the Board of Directors propose a dividend of SEK150 per share and we’ve looked at auditors report closer this morning and you can take their dividend in to account.

We end up in my terms where there’s already a combined dividend from what used to be getting a group and the dividend per share is unchanged if you look at the two companies’ combined. With that we can move over to the organic topline development in the fourth quarter.

As I mentioned this rolls with 6.6% in the quarter. Both our business areas like acute care and surgical workflows showed good growth and also our new business areas that you will see in a moment see from 2018 life science had a very good momentum in the last quarter.

If you look at the order intake of our acute care therapies, it increased organically by 3.8% year-on-year. I’d like to mention clinical care which stood out with particularly high order intake specially ventilators in EMEA had a really good momentum.

From a surgical workflow perspective, order intake rose organically by 9.9% during the quarter and this was mainly attributable to really good trend in infection control and also in life science. All of our three sales region reported organic growth in the fourth quarter.

So EMEA had the biggest increase, both acute care and surgical workflows performed very nicely in EMEA. In Americas, the growth was mainly driven by good trend in infection control inside surgical workflows and our critical care inside acute care therapies.

If you look east towards Asia Pacific growth was primarily driven by a really good performance in surgical workflows and again its infection control that had a really strong quarter, and also life science where we had good momentum and one particular good order when it came the sterilizers business as well. We move then to the next slide, I’d like to touch a little bit on some of the key activities in the fourth quarter.

When it comes to our consent decree with FDA and the remediation progress, we continue to make good strides forward on all the different types during the fourth quarter. If you look at it from a financial perspective, in 2017 296 million of the provision had been utilized for remediation measures, 84 of this was in the fourth quarter and we left 2017 with an unutilized provision of 556 million at the end of the fourth quarter.

I’d also like to mention a little bit about some of the news when it comes to our product, services and solutions. We’ve announced earlier the strategic partnership with Verb Surgical Inc.

This is really a key strategic building block for us for the longer term. It’s an important elementary in our updated strategy.

We also launched an upgraded version of our heater unit that’s called HU-35, on the CE market which is the European economic area essentially and it is within cardiopulmonary. So this was one great launch in the fourth quarter.

I also want to mention that we released a new version of our Getinge Online digital service and this is a key building block in driving service revenue for the company. This ensures highest performance and really strong operational reliability for our products as the customers [sites] and it also enhances the mobility when servicing our equipment.

We also launched an upgraded version of the Cart Washer Disinfector Getinge 9100E in the fourth quarter, and this is among other things it’s a product that now uses less water and less energy, and therefore provides additional to our customers. We also had a big milestone, we’ve now installed over 1,000 hybrid operating rooms and this milestone was achieved in November.

It’s really a good evidence of our strong position in this part of business. We can move from the key activities.

I’d like to mention maybe before we move as well that the updated strategy and the financial target that we communicated as well, it is a strategy that now revolves even stronger around the operating room and the hospital, and the connecting rooms like the central sterile supply department and the intensive care unit as well. We’ve made a recent (inaudible) exercise when it comes to masking our product offering across different geographies as well to really access the attractiveness of the segment as such, and our own competitive position in this and really make sure that we have this in all the future strategies.

So lot of work went in to this during the whole year I would say and the communication of it both internally and externally has started in the fourth quarter. And of course we cannot forget to mention the distribution of Arjo as well which we completed ahead of our schedule time, and I’d reiterate that we have two standalone companies now that are clearly focused on their owns strategies, and the atmosphere inside Getinge is really positive there.

We have very good energy in the company now for 2018 and onwards. So another key activity during the fourth quarter.

With that we can move to the – I’ll say a few words before I hand it over to Lars for the underlying performance of the group financially. If you look at the earnings perspective, it goes in two directions.

One is that we have strength in the gross margin, but we have a lower EBITDA. When it comes to the gross margin as such, it’s the good performance there.

It’s mainly attributable to volume and product mix inside acute care therapies, where we see a 7.4% organic increase on sales in the US which is one of our better margin areas. If you look at the decline in underlying in EBITDA1, this is mainly attributable to the higher (inaudible) and is driven partly by quality management that we talked about for the whole 2017.

But would that continue to invest both in the remediation world, and also to make sure that we have an organization that is long term sustainable from a quality management systems perspective. The stranded cost that we have in the group went to around SEK250 million, it’s something that we’re (inaudible) partly through growing in to the slightly oversized suite and partly by addressing some of the cost that will not be necessary for us to carry in the long term.

That’s an overview of the gross margin, EBITDA performance, and with that we can move over to page number 8 and look a little bit more in detail on acute care therapies increased organically by 3.8% year-on-year. Looking at the different sub-segments inside acute care therapies, the performance of critical care was particularly robust.

Again a special event today we set a new record in 2017 in ventilator volumes. We may not perform strongly due to high stakes in critical care and Americas as well we had a slightly positive trend as well.

Asia Pacific was a little bit more difficult from agency perspective and mainly hampered by weak performance in Japan. And in Japan, as I have mentioned on a couple of these quarter calls that we’re still suffering from the turmoil on the people side because of the roll-up of one Getinge.

So we had a lot of people turnout that we’re trying to correct and we are optimistic about the future, but it’s in a difficult year, altogether a difficult quarter for Japan. A few words on net sales as well from ACT, it’s increased organically by 4.8% in the fourth quarter and mainly driven by the healthy performance in critical care.

All of our regions had growth in organic net sales as well in the fourth quarter. When it comes to the gross margin it includes underlying gross margin development thanks to positive product and regional mix within critical care.

It’s been partly offset by weaker performance in vascular systems mainly because of the increased competition in the US I would say. From EBITDA level you can see as well that we have a decrease in results which is illustrated in the graph.

It’s mainly driven by increased quantity cost linked to both the remediation program as such but also the longer term building of the quality organization and the resource on increasing selling expense to drive some of the future growth. With that we can move to surgical work flows on the following slide.

We start with order intake; the order intake for surgical workflows rose organically by 9.9% during the quarter and it’s mainly the result of good trend in infection control and also our future business areas like life science where we had a growth 21.2%, so really robust in the quarter. And within life science it was mainly a result of where we had a number of good orders and when it comes to isolation and sterile transfer and also sterilizations from pharma companies mainly in EMEA.

From a net sales perspective, there was a very small organic growth 0.4%, mainly due to positive trend in patient control. Life science though it did so much lumpy business, it was partly offset by lower sales in life science where in Q4 the previous year we had one significant thing that we did not have in 2017.

In Asia Pacific, we had the strongest performance of the regions, solid growth in infection control and also in life science compared with the year before actually. If you look at the gross margin in surgical workflows, it was 1% lower compared to last year and this is mainly due to regional mix.

We had a slightly higher sales in Americas where we had a weaker market position in surgical workflows compared to Europe. So the margins here are a little bit thinner as well.

So that explains the slight drop in gross margin for surgical workflows. From an EBITDA perspective, there’s obviously the impact from the gross profit itself.

That’s the main thing. Now we can move I think to the following page and look at life science, which is now from 1 January a new business area in Getinge.

And I mentioned also when we had the strategy up that we are excited about the prospect in our life science business. If you look at the addressable market for us, we have a strong position on what is a SEK23 billion global market growing 3% to 5% per year.

Life science shares the same base technology as infection control, but there is also additional product in the portfolio for life science that we don’t sell to other customers. What would make life science different from the rest of the group is that it’s a different customer group.

These are pharmaceutical companies and not hospital, and it’s a much higher degree of specialization and customization needed to serve this market, and in general its larger deals as well when it comes to the capital side. We have a good business model in place.

I also think that now with the organization change that we make during 2017, we have a well-functioning organization. It was one of the parts of getting it that hurt the most by the initial one getting rolled out.

This is an area where our business (inaudible) requires a seamless way of working from the initial inquiry to the end installation and the service of the customers. And with the functional organization that was rolled out in 2016 we were not able to achieve this for our customer.

We are at that point now; it’s a much better way of working and a very good and improving relationship with our customers, so again it will strengthen. It’s about supporting biopharma companies which specialized business for contamination prevention both in the research phase, but also in production.

So we are basically helping them reduce risk and also shorten time to market for new products. So the life sciences will be reported as a business area in the Q1 report that is due for release on April 26.

But before this its important as well to let you know that we will be restating financials for life science and surgical workflows because surgical workflows is obviously impacted also by this change. So that’s something that we will come back to.

But with that I leave over to Lars Sandstrom and to take you a little bit more through the details of our results from the fourth quarter.

Thank you Mattias. Starting with net sales and as already mentioned we reported 2.5% growth organic net sales for the quarter, but 2.8% headwinds from FX to close to minus 0.8% decline in the reported net sales.

Near US dollar is the main driver behind this negative FX impact. For the full year, we had (inaudible) report from FX taking from 31.3% in both organic net sales to 1.5 in the reported net sales.

Looking at gross margin, here it was impacted by write-down of capitalized R&D, an event re-amounting to 197 million, which led to a decrease of or an impact of minus 2.4 percentage points. The (inaudible) gross margin was in line with last year.

For the full year, the gross margin was somewhat higher than last year if you reflect these write-offs. Despite decline in net sales gross margin improved slightly due to FX product mix and efficiency enhancements.

And OpEx, the increase in OpEx is achievable to realization impact from (inaudible) cost increase as well as increased quality cost and currency. And EBITDA1 margin decreased due to the increase in reported OpEx as mentioned and when adjusting for the realization impact and one-offs EBITDA margin close to 100 million or 1.3% lower than last year where the key driver is reportedly related to cost.

And over to page 14 and FX impact. Our currency transaction exposure related to when the groups factories are selling to the groups foreign subsidiaries for which we (inaudible).

This contributed with some 68 million for the full quarter and with 219 million year-to-date. The translation exposure relates to when the group company results are translated in to (inaudible) and this is not hedged.

And as you can see on gross profit that the risk transaction impact was 68 million and the translation effect was 120 million resulting in a total effect of minus [62] million for the fourth quarter. It’s also worth mentioning that currency transaction effects are expected to have a positive impact of approximately minus 100 million on the (inaudible) for the full year 2018.

Then let’s move to page 16 at net debt. Net debt amounted to 12.8 billion at the end of the period.

(inaudible) in 2017 amounted to 10.8 billion. And this remains really the right issue and your dividends, as well as cash flow and sometimes revaluation effects.

Our (inaudible) net FX duration decreased from 1.12 to 0.65 during the year, and our leverage net debt-to-EBITDA decreased from 3.9 down to 3.1 for the year. Lets’ go to page [24] on cash flow.

Here cash flow from operations decreased by 703 million to 1.80 billion for the quarter, mainly due to weaker or lower earnings this year. And working capital impacted with minus 257 million for the quarter and this was mainly attributable to high receivables partly offset by lower inventories and posted impacts from accounts payable in the quarter.

In Q4, we had net investments of 467 million, which resulted earning a cash flow after net investment of 613 million compared to 1.307 billion last year. Then let’s move to slide 20 and over to you Mattias.

Thanks Lars. Before we go to the summary, just a very brief comments on the outlook for 2018.

We said already earlier that we were moving towards a window of growing at 2% to 4% in 2018 as expected to the ramp up here. I’m really happy with the order intake development in the fourth quarter of 2017.

So we enter 2018 with a good tailwind for this. And it’s also really good to see now the energy of the (inaudible) firmly focused outwards towards our market and the customers again.

It’s a good and complete distribution of volume and really be back to more database as we focus on our customers. So we still expect to help drive positive growth in the year 2018 and we expect a good momentum to continue.

We have been in good relationship with our customers. So I have to say that having visited many of them during 2017, we also have a very good passionate and professional organization supporting these customers and a good atmosphere in the company now having completed the distribution of Arjo and really focusing – being more focused company with its own strategy.

So it’s full focused on execution and the continued organic growth for 2018. As Lars mentioned as well and in terms of currency we do expect negative impact of about SEK100 million on EBIT.

And then we can move over to page 22 and the summary for this quarter. The repeated takeaways from the quarter are EBITDA we are obviously not happy with, but it is impacted by a number of one-offs to start with that impacts also gross margin, and we are stuck with a bit of stranded cost and we need to methodically work down from here and we have good plans in place for this as well.

If you look at gross margin from an underlying perspective though, it’s pretty good development and we believe that we have activities in place also and we are continuing to perform strongly when it comes to gross margin. As mentioned I think the best part of the fourth quarter is the growth in organic order intake, really good evidence that the renewed focus back on the market and the customer is starting to show positive effect, and also good deliveries too in the fourth quarter, so making our organic sales grow by 2.5% also positive.

We’re trying to make 2018 with a good order book now which really is (inaudible) and momentum in a good way. And the Board of Director proposed a dividend of SEK1.5 per share.

And again if we look at all those proposed dividend, the dividend per share for what used to be getting (inaudible) is unchanged compared to before. Finally I’d just like to underline again that we’ve had a year of extensive change for Getinge, and we are following our plan really as I said from the start that our main priority in 2017 was to restart and get a new (inaudible) for the remediation program to work our way out of the Consent Decree with FDA.

We have to reinforce the sales organization that was (inaudible) partly by the initial rollout of the one getting initially. But it’s really crucial today to get back to a position of organic growth.

And we’ve had a strategy review inside the group as well which has led to an adjustment of the organization which we did in the fourth quarter as well, so we are now much better structured to actually deliver on the updated strategy. And we’ve gone through our portfolio and mapped it really with future customer needs and also a comparative position in different areas and really taking actions accordingly some of it now in the non-recurring items in the fourth quarter.

But the positive effect is obviously for the future where we will have the portfolio in a better shape to serve our customers in a good way. We did the right issues during 2017 as well, so we strengthened the balance sheet giving us a little bit more room to maneuver and act on both long and short term opportunities.

I think (inaudible) is one of those kind of opportunities and therefore potential bolt on M&A that we have the possibility to act when those kind of opportunities occur. And last but not least, we’ve completed the distribution and listing of Arjo as well.

So it’s very much been about creating the right preconditions for 2018 now. I’ve said both internally and externally that 2018 now needs to be much more about daily work, really day-to-day interaction with our customers focusing on developing our portfolio to really remain competitive in this segment that we’ve decided to compete in.

We’ve had continued strong focus on the remediation program and in parallel making sure that we have a long term sustainable quality organization and quality system in place as well and also really continuous improvement when it comes to operations and supply chain. We’ve mentioned a couple of times before that we are working actively with every line in the profit and loss statement certainly to make sure that we continue to improve our gross margin and that we become efficient from an OpEx standpoint.

And there’s still plenty of opportunities in this part of the business. So with that I have closed the presentation part of this conference, and I’d like to open up for questions.

Firstly to understand this issue about prioritization for the year, you booked four quarters of cost that you previously had invoiced to Arjo. So you didn’t adjust for that extra cost in the quarter.

So if you want to adjust for (inaudible) for which you add back the quarters of these costs to get the like for like numbers is that correct?

This is related to 2016 as we own that, but we didn’t do that in the first quarter of 2017, so it was Q2, Q3, and Q4. And exactly how it really impacted, I might have to come back to you on that.

But we are rather evenly spread out between Q2, Q3 and Q4, but not being as it was in Q1.

So going forward this cost will be significantly lower than you had in Q4 correct?

If you look at Q4 2017 the run rate there on the cost that is your good starting point if you take out the significant [priced] that we have reported. So the invoice of the IO is really 2016 no ’17.

And also could you give some more color on the R&D write downs in respective area, what kind of projects are we talking about?

We don’t disclose details on what type of projects there are for competitive reasons, but it is the result of the strategic review that we did. So we’ve gone through the portfolio in both business areas and there’s been a number of products that we’ve decided to start, because there were not going to be viable business cases.

It’s more related to acute care than surgical workflows.

I have two question and one request. Maybe start with the request, could you please when you are now restating your numbers again with infection control provide restated numbers for 2017 both quarterly and full year.

I think I followed you now for 2.5 year and you have I think more than five times changed your way of reporting. So this time it would be really nice to have restated numbers ahead of the Q1 numbers for infection controls and how it impacts to other division.

So that’s a request from here to increase visibility and transparency. Then another question is full year guidance, when you say a slight positive growth should I interpret that to be close to the 2% within your mid-term targets.

And then I would also like to know how much a needle can be moved with your new products that you’re highlighting in your presentation, are they of a significant magnitude and in this respect how many products do you still have after the Arjo spinoff, and are you still willing to slim the tail and how would that work?

Lars you’re going to start with the restatement?

Thank you for your proposal there. Of course yes restate together both full year and quarters.

And I think it will be helpful for you, because they are literally different animals life science and surgical workflow. So I think it will – even as we’re going forward despite a lot of work we have to do through the recalculations.

Good, so that’s coming. And when it comes to the growth guidance, we were not changing anything we said before Christmas.

Here we confirm that 2018 is a ramp up year. I think the performance order intake wise in the fourth quarter maybe gives us a little bit more confidence, but will reshape but we’re not materially changing anything in our guidance.

We expect to be facing in the wind or 2% to 4% towards the end of 2018, that’s what we’ve said and we don’t do any other kind of guidance on this. And when it comes to new products, we’re continuing to invest in this.

I know I’ve mentioned already, its two things to really keep in mind when it comes to R&D and product development, because I get a lot of question whether it would be a significant step up and I’ve said no. And the reason is, because I believe first we need to make sure that we spend the money that we already spend on R&D and brought it out of (inaudible) in an effective way.

So it’s that kind of thinking the result of that that you see in some of the one-offs in the fourth quarter. So we need to be a little bit better when it comes to both selecting the areas that we invest in to make sure that we have a proper risk analysis and business case upfront, and also have a slightly more stringent milestone process than the companies had before.

So we continuously evaluate products as they go along, because these are typically products that run for many years and it becomes rather costly if you don’t stop early enough. I think the market has changed or you’ve made your own assessment when the investment was stopped.

So that’s important to say. We still have a good pipeline of development that we will continue to launch during 2018 and the coming years, but we don’t provide any more detailed on how much it’s from products launched in different years and so on.

So I’m more prepared to give you a split on this.

But can you at least be indicative these products you highlight on page 6 of significant matter.

These were an important piece in the puzzle for the guidance, yes.

Two question from me, first on the very good water intake, could you maybe explain a little bit what that would have been without what appear to be big life science orders? I guess that’s more lumpy business.

I can’t give you the split off the top of my head. I’d just say, it is a lumpy business, but it’s worth pointing out that we had good growth in all quarters of the business.

It’s not just a fluctuation in life science business important to be clear.

But if you take the life science business up 20%, is that a business that’s one quarter up 20%, another one down 20. Is that normal for this type of business or -?

It’s normal; it’s that magnitude although I want to comment on. But it is a business that is much more fluctuating than the other parts of our business and that’s also why one of the reason that we’ve made its own business area.

Lars here. As Mattias mentioned yes we have a good effect on life science, but also infection control is really the biggest contributor for the whole surgical workflow order intake this quarter.

And it’s also important with the previous question here. It’s life science that is the business and we’re not making adjustments for infection control, but infection control remains inside surgical workflows and life science share based technology within infection control but infection control remains a business inside surgical workflow as well just for clarity.

Then my second question is on slide 7 in the presentation there. The historical adjustments you’re doing to Q4 ’16, you’re adding like 200 million.

It was 200 million in cost, but that must include some of one-off costs for Q4 because I guess their (inaudible) cost you have is like 50 million to 60 million per quarter, I’m not sure I follow you there.

Again we fully understand its trick here, because this is true near cost that was invoiced to Arjo, so it’s a full year written cost that is impacting one quarter going from the legal group of Arjo and previously we talked about segment with effect etcetera but this is really different and so that’s where we have been very [fickle] from last year that is impacting. We cannot say it’s the same as the common cost.

That’s why I’m just trying to (inaudible) there.

Then why adjusting Q4 ’16? Because at the same time you’re saying that Q4 ’17 is the normal run rate up.

So maybe we should take this offline, I don’t follow.

I’m happy to do this because we’re really getting in how to account for discontinued operations in the big book unfortunately.

Let’s say if you take the 2017 figures you have reported, does that fully reflect now the new structure of the company? Recently you said Q4 was the good run rate, but also the 2017 figure, does that simply include or you have to break (inaudible)?

Exactly, so what you see is the full year 2017 is the cause, that is what you should use on a going forward rate, I’d say. There is no arguing that.

And what do you expect for operating cost now in ’18? It sounds that you want to lure in product, is that more of a [dragon] decrease you’re looking forward to do?

Yes, we don’t guide on OpEx, but we are – as I mentioned in my part of the presentation is two things. One is that we have a possibility to partly grow in to the suite in some areas.

But we have also taken some restructuring cost because of changes that we know that we need to do to bring down the operating costs. There are some costs that we do need for the long term, so that’s the dimension of working with the OpEx.

You will see some result of this going forward as well, but we don’t give any detailed guidance on it.

First quarter please, in the adjusted EBITDA of 1377 where you added this one-off items and periodization effects. Can you please tell you whether you’re making any adjustment for the 197 in capitalized R&D write-down?

So does that number include or exclude the write-down that you see in gross margin please?

In the adjusted EBITDA1 for 2017 including the 197 and the 69 connected to the Brazil additional costs, there are invoicing impacting 2016. So that is not impact the cost in 2017, that’s the impact to be (inaudible).

So do you see my point, 69 plus 197.

So you’re adjusting for the 69 and the 197, but not the prior year Arjo related cost?

No, that’s we are adjusting to numbers of 2016.

So with respect to the base margin as see it now, throughout the quarter of 2018 and in order to make you an earnings guidance, we expect some margin improvement. So are we to expect some margin improvement as in the quarter of 2018?

We only guide on what line we’ve [continued], we don’t do any detailed guidance on earnings as such.

And just to understand, again on the operating cost side, and it’s a bit confusing also the way it’s been laid out. But with respect to the quality costs and the stranded cost, can you talk a little bit more as to whether the fourth quarter was particularly high here, and can you give a little bit beat how as to whether any of that gets work down and come back next year (inaudible).

Quality cost is one of the main contributors for the increase in OpEx. And as I said earlier, it is both supporting remediation to make sure that we work our way out in Consent Decree with the FDA, but it’s also making sure that we have a sustainable set up as a whole when it comes to the QRC equality and regulatory control organization for the longer term.

So it will be some additional build up actually in 2018 of quality related cost both because of remediation, but also because of the long term. And at the end of 2018 we expect to be in a position where we can start to work with more of the productivity also from this perspective and gradually bring it down, because as you may remember from some of these earlier quarterly discussions, when you work through remediation program, you tend to end up with a slightly oversight system for managing quality to really be on the safe side.

And once you are through remediation and then you can start working this down. So we are still in a phase during 2018 where you will see some additions when it comes to quality cost.

When it comes to the stranded cost though, as I said earlier, we will partly grow in to this and partly work it down.

Have you quantified how much stranded costs are?

It’s SEK250 million. They are around the quarter a bit.

What you should also remember when talking about the cost is that we did also in the Q4 here some provisioning regarding restructuring that we expect them to give impact in to 2018 and forward and from its restructuring activity that we have already decided.

Two more very quick financial questions from me please. Can you give us some guidance on restructuring cost please for the course of 2018?

Historically this is a line you usually guide on, so that would be appreciated. And also can you give some indications of taxation rates going forward now.

You mentioned some positive effects from the US tax reform; can you give us a sense of what your underlying effective tax rate is going forward now please?

I can answer the first part here, and I just want to reiterate what we said last year when it comes to restructuring. I think what one change that you see in our way of reporting as well as some of the costs have been previously reported as restructuring, they are actually more course of business, for example write-downs when it comes to the capital for R&D projects, for example.

So they will not be reported as restructuring in 2018. What we said earlier as well as in a business of our size, it’s probably reasonable to expect up to 200 million in restructuring cost because of continuous improvement with relocating facilities and those kind of activities.

When it comes to taxation, I’ll leave that to Lars.

We have the impact of course now in the fourth quarter, as you will see which is mainly related to revaluation and connected to the US tax reform. Going forward we don’t see a big impact on the taxable income, let’s say US impacting our tax going forward.

So we are back to historical levels with a slight improvement that is what we expect.

And very quick clarification please sorry, given that you had [759] million in restructuring costs in fiscal ’17. The fact do you now guide for more 200 suggests you made your own (inaudible) and earnings target this year just through restructuring falling away alone without any underlying progress in the business.

Do you follow that logic?

Yes, I follow that logic, but we also said that it’s important to keep in mind that we said that we still opportunities in working with all the lines in the P&L. We still have a lot of work to do when it comes to direct and indirect purchasing and logistics zone and of course our OpEx structure when it comes to working with pricing, with commercial excellence and so on.

So we think we expect underlying improvement as well not just meeting targets because of less restructuring.

Most of my questions been asked, but just a couple please, firstly on foreign exchange just wanted to know the transactional impact would have been without hedging, just trying to get some feel for how we should think about the impact of FX rate as we stand once the hedges start to roll of in to 2019? And then on the order growth, obviously significantly ahead of sales growth, I just wondered those orders that you’re taking are obviously bigger orders.

What sort of timeframe should we thinking about those completing over? Should we expect seeing those orders in the first half of this year or there’s a longer timeframe in that?

Thanks.

We don’t talk about hedge. We don’t guide on hedging because it depends on what we decide during year-to-year etcetera.

So what we have said is that we expect an impact of 100 million. That is what we normally give guidance on.

So you’re fairly well (inaudible).

David when it comes to the conversion of orders to sale, it’s also –I can’t provide any more granularity even if I wanted to hear actually. But some of the more bigger orders, most of it’s for delivery in 2018, but its’ made up over the year.

Some part of the contract may even be 2019, possibly the bulk is 2018. But in terms of quarterly timing I can’t give you any more guidance.

And it’s important to keep in mind that it’s not only large capital orders. There are some fairly quick book in turn business in here as well.

Maybe just one follow-up, you saw a down-turning consumables orders in the quarter, maybe you could just give us some color around that?

Yes, I think the only thing that stands out there is a vascular system in the US because of the continued increased competition. Other than that nothing makes more (inaudible).

We had one that was a little bit stronger in APAC last year as the impact declined in comparison, but that’s really more technical.

Just a short one, you have been continuously giving us updates on the saving from the big five program. I couldn’t find anything about that in this report.

Could you give us a number of what the savings was in the Q4 please?

No, I can’t give you a detailed number on this for the fourth quarter. In fact we hinted earlier as well that we’re not going to report details on this.

It is now as part of the updated strategy and we started the implementation of it. It is weaved in to the daily work in a much more integrated way than before.

So things are progressing according to the initial plan, there’s no change from this. We still see the same opportunities, but it’s much more continuous improvement work now because we believe this is the only way to make it speak for the long term otherwise it tends to be a campaign and once you stop it it’s not growing again.

So it’s extremely important for us to take a bit more of a lean approach to this and makes sure that its weaved in to continuous improvement work in the company.

Just a follow-up on that, previously it’s been around SEK100 million in savings a quarter, and the original program was very backend loaded. How should we see these savings, for instance, is it still backend loaded or will it be considerably less than SEK100 million in savings in the quarter going forward or how should we factor this program in to our estimates?

It’s hard to factor this in to your estimate. I can only say what I said earlier that we don’t’ see material change to the scope and content of the program, but it needs to be executed a bit differently and it needs to be much more part of daily work in the company.

The only main changes we can argue is not part of the group anymore, so there is some loss of synergy in regards to this. But that’s the only impact.

When it comes to direct sourcing to indirect sourcing, commercial excellence and everything, we still see the same potential benefits, just that we’re not going to give any forward-looking guidance on this.

Sorry for dwelling in to this, but will it still be that most of these efforts will bear fruit in 2019?

I don’t want to give it. Can you repeat it, I didn’t hear it Peter.

Is it still so that most of the fruits from this big five program will materialize in 2019, as it was originally presented, even though you won’t give us continuous update on numbers as such?

I can’t give any more detailed guidance on this timing wise. This is all work going on already, but also 2018 now with the new structure that we have, there is dedicated people still working with it that just needs to be more integrated in to the main stream of what we’re doing.

I really can’t give you any more timing guidance on this.

Sorry to go back to this same subject, but I just have a follow-up question on essentially all the questions that were asked around EBIT for next year, because your message is just coming off as a bit confusing, given the amount of non-recurring cost that you’ve talked about. So when we think about EBIT ’17 towards ’18, could you highlight the most important moving parts both on the positive side and on the negative side, so that we can reach?

And I understand you don’t want to give guidance, so if you could just speak in to that action to which you expect the cost to go.

Lars here, (inaudible) I think we have given indications on what we’re going to work on driving organic growth continue to doing that. So I think you will see that is what we think.

And the when it comes to improvements in costs I think we are working heavily and partly on continuing to drive the synergies, that’s why we did the reorganization in keeping this what we call a group functions and focusing on logistic procurement for paying direct, indirect [ISIT] etcetera, etcetera to really continue to drive synergies. And that is of course the work as a positive impact on margins and cost.

And then of course we are growing and we have invested as Mattias mentioned there and continue to invest in quality and to some extend also in selling side of the company. But then these are the main drivers if you try to look in to 2018.

And if you look at ’17, as you asked about ’17, it is the – as 196 as Lars talked about earlier comes to 69 for Brazil most of the main items.

That is the adjustment to have the starting point of 2017.

So what you just said, where is that we should consider the 69 million for next year, right? Which I understand.

We certainly hope that that was Q1. It is related to the Brazilian investigation where there’s been good progress and good cooperation with the authorities.

So that’s why we’ve made this reservation in 2017.

What about the R&D write downs?

It’s really a result of the updated strategy. When we went through in details the portfolio across the different geographic segments and we found a number of capitalized R&D product that were not going to meet their target that which weren’t viable initiatives going forward, so we decided to write those down.

We don’t know many things work like that at the moment, but of course there’s always risk in our type of business that you get something wrong when you decide on investment. So that risk is always going to be with us, but we don’t see anything in addition right now in the pipeline.

And then just a quick question, when are you expecting to give us the [respected] numbers for the infection control?

I can’t give you an exact date, but well in advance before we present the Q1 numbers then.

And I repeat, and it’s for life science it’s not for infection control. Infection control will continue to be a business line inside surgical workflows.

Thank you very much. Again thanks for attending today, and I just want to repeat that we feel good about having finished all the extracurricular activities of 2017 now.

We are not (inaudible) the distribution and listing of Arjo, and there’s generally very good spirit and entity in the organization. Now we’re clearly focused back on our customers, our own product portfolio and the work we have ahead of us when it comes to quality remediation and creating sustainable setup also for the longer term future and of course the continuous improvement initially, it’s when there is an integrated part of our strategy going forward.

So with that really I’d just like to just thank you for attending the call today and wish everyone a good rest of the day. Thank you.