Hello, and welcome to the Agfa Q1 2023 Results Conference Call. Please note this call is being recorded. For the duration of the call, your lines will be on listen-only. However, you will have the opportunity to ask questions at the end. [Operator Instructions] I will now hand you over to Pascal Juéry, CEO, to begin today’s conference. Please go ahead. Pascal Juéry: Thank you very much, and good morning, everyone. I’m sitting here in Mortsel with the Executive Committee Team and Viviane Dictus in charge of Investment Relation. So we’re going to walk you through the Q1 results for Agfa. Of course, it’s a quarter we’re also going to explain the treatment of the divestment of offset and its impact on the group. But if I first turn to the business, rather good start of the year for the group overall, let me start with HealthCare IT and let me start by reminding everyone that HealthCare IT is a business that is 50% project based that, therefore, we have quite some variation in terms of level of activity mix and project implementation quarter-by-quarter. So, indeed, after very strong Q4, the Q1 activity was, of course, more subdued. But it doesn’t mean that there is a chance whatsoever, I know business. Two things: first, we continue to have a very, very dynamic order intake with 25% increase over the last 12 months. And this order intake is also as a good mix, meaning the high value part of what we do is over represented in these groups. So there is nothing broken here. On the contrary, we continue to have momentum in the market shutdown itself to say that, yes, I mean, we’re impacted by cost inflation, but also by the mix of projects that we’ve been implementing in Q1. I’ll come back to that in the outlook. But I want to stress again, that 50% of this business is a project based business and, therefore, the ideation quarter-to-quarter and especially this year, first semester will be a lot weaker than second semester, which was already, by the way, the better on last year kind of thing. DPC very pleased with the strong recovery of the business, basically firing on all cylinders, price, constructions, and as well, volume growth in our target in our growth engine, especially Zirfon and Digital Painting, I’ll come back to that. Radiology Solutions are rather stable in first quarter, I mean, Radiology in the first quarter is always a weak quarter, also on the base of a [a1 to 4a] [ph] quarter in 2022. Here, I would say film volumes are quite okay. And we’ve seen the end consumption in China going back to normal now for some time and staying at the same level. However, we still have margin pressure in China coming from the inability to increase price specifically in China. DR actually has been delivering quite well for the quarter, positive trends in sales and profitability. So overall, in the new payment of the growth in EBITDA of €13 million. Net result is very much impacted by, of course, the impact of the offset divestiture we’ll come back to that in more detail. But, first, I would like to hand over to Dirk De Man, our CFO will walk us through basically what the completion of the sale of the asset is impacting the group.

Thank you, Pascal, and good morning, everyone. So, indeed, we completed the sale successfully on April 4, so the closing of the transaction. Now, obviously that has quite some impact on our reporting. So we are now grouping the activity in a new division called Contractor Operations & Services former Offset, for short we’ll just call it, CONOPS as an acronym. And as of Q2, the CONOPS division will represent all the agreements that we have with the external parties. And the rebranding of offset is ECO3. The turnover in that division will be the supply agreements with obviously the cost of goods related to those products, but will also have a number of support services that will be accounted for as other income and the costs related to those services will be covered in the different G&A lines. Now, as the transaction closed in Q2, we are already reflecting the as if situation previously. So in Q1, we reflect the financials as if it was already in place. And also the comparative period of Q1 last year hasn’t been represented according. There is, however, one key difference to show is that in the standard costs related to offsets, they have been treated differently in the 2 years. In the Q1 2022, the standard costs are reported on the CONOPS. And then, as of Q1 2023 and going forward, these are already absorbed by the 3 remaining business divisions. As Pascal already said, the impact of the offset sale resulted in the remaining impairment on the offset assets, which came in at €47 million, which was at the lower end of the range we gave at the Q4 results. And we do expect the cash impact of the offset transaction to be around €28 million spread over Q2, being the proceeds in Q3, the closing balance sheets. And the number is a bit higher, as you may recall. So that is the base price, but it’s also the variance in working capital. And the increase to €28 million is related to the working capital that was built up. Thank you, Pascal. Pascal Juéry: Thank you very much, Dirk. So if we look at the P&L real quickly, you see top-line growth and it’s mainly coming from DPC and to a lesser extent by HealthCare IT, Radiology being more or less flat. I would say very happy to see gross profit increasing significantly personal returns but also in margin, are reflecting the emphasis we have on pricing and a lot of price increase initiative has been implemented across the businesses. But also very pleased in the context of extremely comp inflation by the performances in SG&A due to a confirmation for not only we can eliminate the impact on inflation, but even go further in terms of cost reduction. What you see in R&D is really the reflect of scope actually the integration apart from that R&D remains flat the group level. So they’re all an adjusted EBITDA [that is another high level that is invested last year.] [ph] If I turn to net result, well what’s influencing really the net result two things, we continue to have a lot of restructuring and non-recurring items in fact as well, and the offset divestiture as I already explained. So overall happy with the top-line for DPC and what I like very much in the top-line, it’s really the area we want to grow the Agfa ink. I’m really happy to report that we have sold during the quarter our first Onset machines are leaning in integrated with Agfa inks, it took us 9 months actually to do that. So believe me 9 months to develop and sell commercially a new set is it good performance actually. Zirfon membrane, so we’ll come back to that as well. But very strong quarter that we’ll continue throughout the year, but really taking off. HealthCare IT as I said activity of order intake is high and revenue has increased and small pricing factors and probably going to impact nevertheless. This also good performance in the bottom line, I think we are going to see a year in which HealthCare IT EBITDA will improve quarter by quarter. In Q4, just like that will be the strong quarter of the year. So overall, I would say, very reassured also specifically by the fact that we could turn around the DPCs for our actions swiftly back to profit and loss mode. I’m going to turn it back to you, Dirk, to comment on the cash flow. A - Dirk De Man: Yeah. So, in terms of the cash flow, you can see as usual, the seasonal buildup of working capital, and I will get back to that later, CapEx pretty much in line with last year. Pensions is maybe a bit higher than we would expect, but that’s mainly related to the timing of some pension payments, which normally fall into Q2, this year fell into Q1, many for practical reasons not having to buy and sell assets in a very short period of time. So, overall, our guidance for the year remains the same, as well as then restructuring at a relatively high level of €11 million. But there again, for the year, the P&L guidance was on non-recurring and restructuring remains at a level, which we communicated before, let’s say around €35 million, so leading to a negative net cash flow of €39 million. And if we switch to the next slide, as you can see on the net cash position, the impact is actually higher. And there’s two elements I would like to highlight: one is that in the context of the transaction, we were repatriate in cash, in line with the agreements with the buyer, that included cash also in joint venture for which, obviously, when we dividend back, we need to dividend also to the joint venture partner. So that was a material impact, as well as the results of the assets held for sale. As I mentioned, the working capital also increased in Q1. And that also has a negative impact on the net cash flow. So, obviously, the working capital is being as I said before, recuperate it in the cash proceeds that we expect at a later point in time. So let’s maybe move to the working capital, and indeed, the working capital increase versus Q4, but also versus Q1 last year. The key [corporate sets] [ph] in inventories. Now, I have to remind you also that last year, we did not yet have Inca included that represents about €16 million of the €26 million of increase in inventories. So you can see now that also on the days on hands for inventory, we are seeing a decreasing trend. DSO, while increasing an absolute, also decreased in days, so showing that this is mainly related to the growth that we’re seeing. And on the other hand trade payables that’s a negative impact in terms of days, where, obviously we’re working on spend reduction, which is also reflecting an inventory reduction, which is reflecting on the DPO overall versus last year, we had the same percent of sales. So at least, we tried, if we were able to undo some of the increases that we have seen across last year. And as it was a question last time, this is actually representing the 3 divisions added. So before we statement, they would have been around 28 last year. And that went up to 33, restated for the three divisions. It does not yet include any working capital related to the Contractor Operations division, as you will only find out in the coming months how that working capital evolves. And it was hard to simulate on historical basis. So it only includes the three divisions. So that’s basically it. Thank you, Pascal. Pascal Juéry: Thank you. HealthCare IT, let me switch to HealthCare IT. So sales you see slightly up versus last year. Gross profit was impacted by the mix of projects were then implemented during Q1, it was less survival, I would say. SG&A increased reflecting just the cost of inflation and investment, maybe 2022, R&D online, so EBITDA, but again, it’s a business that you need to look at for the full year and you will have variations quarter-on-quarter, as I said it’s going to be building up during the year. So happy with the order book actually you see your own software order book is increasing even faster. And this is good news because this is really what’s driving the profitability of the business. We landed actually what we call a net new contact, even industrials faster. So actually we have now a contract is a newer hospital chain in the U.S., which consumed significant hospital chain, this is the largest, what we call, net new contract that we have learned over the past year, so a very significant event for us. One thing also I need to explain is indeed order book is growing very nicely, but the portion of the order book that is managed services is growing. What is managed services? It means we have actually a multi-year contract instead of 1-year implemented – well, also one-off implementation from [indiscernible]. Actually we are spreading all the news around more larger, these are very profitable contracts. But that’s also tends to delay a bit the implementation of the order given the nature of this contract. This is good news, because it’s actually sticky business that is more recurring, but shutdown. Of course, it’s costing us a bit compared to taking all the projects in one shot. When we will be moving more and more cloud solutions will certainly adopt the SaaS model. The managed services you could argue is a bit and in between already spreading the news later. Personally, I think it’s good news for the business. So overall, not changing the overall guidance about the potential of the business, remember that we changed, I would say, the vast majority of the leadership team last year. We just still have a lot of new people in the leadership team and I still stand by confident our ability to deliver to our strategic roadmap. Radiology Solution, so rather flattish, we are increasing a bit, film is relatively stable, and CR business is declining. Rather flattish also in terms of in terms of EBITDA that you see that the gross proceeds also here is influenced by price actions that we’ve taken across the business with the exception of China. So, basically DR good improvement in profitability medical film, okay, in volume, still pressure in margins from China and self help measures are also helping us dealing with the situation. Now, let me turn to DPC. DPC, clearly at very complex and bad performance during the second semester of 2022, I was personally confident that indeed, we could recover quite quickly on this home to nice things quarter demonstrated by 12. Actually, DPC is the most dynamic in terms of top-line, of course, you’ve got the impact on top-line, but you don’t without the impact that we’ve seen has been a double-digit growth for the business. Strong recovery also follows of absolute terms, but also margin. SG&A, I would say here again, you see as the impacts of Inca. So that’s why this is a division, also increasing SG&A, but certainly not in terms of sales. And same comment for R&D, the impact of the Inca acquisition. Adjusted EBITDA is probably up and, clearly I would say everything has been contributing. Digital print, it’s a strong validation for us even in a subdued economic environment or in sales continuing to grow very nicely, I mean, people continue to print digitally the image. For us, three Onset, which is the Inca brand actually has been sold in the first quarter. So we have to pretty pleased with that. More importantly, we are also getting ready to start in swap with the installed base. Actually, we are finalizing today the very extensive testing of our things that an existing customer. And that means that we will soon – when I say soon, we’re already starting to do that actually, to swap existing days of unset to accessing, which is also well for us, those of us into business. Industrial inkjet is not yet recovered. But it’s showing, I would say, signs of life. It was a tough market for us in the second half of last year in view of the energy crisis, people start doing the whole new problem. It’s a bit back, I would say, although still a way to go. And even the volumes are OEM inks are starting to pick up as well. So overall, well OEM inks. Zirfon, we sold in Q1 and the full year of 2022, and we almost did in across 3 years of sales, 2021 and 2022. So we are really happy that I want to stress that for the time being is still a product for which we are in full industrial development. And, therefore, it does not contribute yet to the EBITDA of the group it soon will ideally. But for us, we are spending a lot of resources to get to try to find customers in the market. And second, given the very strong quality constraints that we are setting ourselves up for the timing, we still have a weak productivity in our operation. All these will increase on and it will contribute but I want to stress it. We’ve got the top-line on the Agfa, but unfortunately today let’s get contributing to the bottom line. And for me, it’s good news because it means, yeah, we have huge potential to unleash here. This being said not everything is electronics industry continues to be very subdued. Everything that’s related to PCB and expose mainly to China is still impacted by the current economic environment. So PCB films in China operating at a low rate of utilization that reflects on our business. In this context, we had price increase actions pretty much everywhere that has been building up during the quarter on for which we expect a higher impact into Q2 and Q1 actually. We did some cost reduction as well and combined with the growth we have restored. I want to stress as well that we have been setting structuring the business also by adding some talents to the group. And the way we are structuring the DC today is a long business unit on digital painting solutions, business unit on energy transition, meaning the Zirfon membrane and mainly of course, and business units and the rest of the business which is industrial, film and foil and print solutions. So that’s what the DPC. CONOPS the new division. Yes.

So these are the numbers of the CONOPS division, so as already explained the supply agreement and the support services. And as of Q2, it will be the real reflection of the relationship with ECO3. In Q1, we already reflect the financials as if the agreements were already in place. And we also represented the Q1 periods for 2022. As said the turnover represents the supply agreements and the income relate to the support services and other income. The key point here as you can see year-on-year that sales went down which is reflecting activity differences in the Offset division. But you can see the adjusted EBITDA going up and this is related to the fact that in 2022, we are reflecting the standard costs as part of CONOPS, and in 2023, if these have been absorbed by the other three divisions. On the left hand side, you can see the numbers for Q1, so the €4.8 million is part of the CONOPS P&L that you see. The €2.5 million in Q1 is absorbed by the three divisions. So each time when you look at the division of results, these are including those standard costs primarily to DPC and radiology to a lesser extent also in HealthCare IT. For the year 2022, these standard costs are amounting to €14.1 million. So that means that it’s decreasing quarter-on-quarter, but also in 2023, the total is expected to be around €7 million, so also decreasing a bit during the year. So this is basically a division that you can expect to have an adjusted EBITDA of around zero, since it’s really a supply agreement with the buyer of the business, not necessarily designed to make to make profits. Pascal Juéry: Thank you very much. So let me turn now to the outlook and we get an outlook back in March. We said clearly that we were expecting recovering profitability in 2023. We stand by the statement today, no change. HealthCare IT were probably a bit more cautious in the wage we expect, because we’ve seen indeed the more uncertainty regarding the timing of the order book execution and a bit of pressure on costs that we are taking action on now, by the way as a speaker. So we are expecting a weaker first half of the year, in the business when pickup quarter are third quarter. So indeed, there is an uncertainty regarding the delivery of the order book. As I said, it’s a business, so that is project based today, even if now we sell more and more managed services, which are more recurring, still mainly this and that explains the valuation, no change on radiology solutions, and no change on DPC. We just demonstrated that we were going to do it and say we’re probably as are more assured today with this view, then we were done a couple of months ago. So that’s a bit in a nutshell for the group. We’re continuing all the actions we’re having meaning implementing of consolidation on the cost side, meaning implementing price increase actions. And here and now, I would say fine tuning in cost management. For the goals, the overall view is unchanged for the goal for 2023. Just a well done sustainability, we continue to develop our action plan in the [values areas] [ph] we’ve choose them to engage on I would say today that our main focus is safety, we still have a performance that I believe is not up to par with the industry standard and actually should say the industry best in class practices and so it’s an area for us of really highlight and priority. We are making progress on our diversity equality inclusion driver we are now Employee Resource Groups in place delivering already some ideas and initiatives. And we have more initiative also in the shield of CO2 reduction. We indeed are investing in [electric boiler I need to heat them] [ph] in our Belgium size in order to reduce our footprint as well as looking at expanding of activity footprint as well. So I want to stress again, sustainability is part of the player it is in the way we drive our business. I’m going to stop here and, of course, take the questions of our analysts.

Thank you, ladies and gentleman. [Operator Instructions] And our first question comes from Guy Sips of KBC Securities. Please go ahead.

Yes, thank you. Three questions from my side. First is on the Inca ink swap potential. So can you remind us the installed base? And do you have some targets? How many do you want to swap before the end of the year or in two, three years time? Is it to expect 20%, 30% of the installed base to swap to Agfa inks or is that too optimistic? And is there any impact on working capital as these inks are quite expensive? First question. Pascal Juéry: Thanks, Guy. You have more questions that you want to list or shall we answer first this one?

It’s up to you. So on radiology question is, you’re hinting that in China, yeah, that volumes are recovering, but are there is still margin pressure? Are there any actions taken? And what’s the current situation in China? Do you see any improvement? And then the last question is on CONOPS, can you give us some more color on – yeah, is the first quarter, is that a good guidance for on? Or is there any seasonality mean on the volumes? And also, yeah, on the margins, I think, you already indicated that expecting a zero margin every quarter is best guess or is that wrong? Thank you. Pascal Juéry: Okay. So first, thank you very much, Guy. Vincent [ph] all I’m going to turn to you for Inca ink swap, so timing, potential size of the price.

Sure. Without getting into too many details, but I would say there’s somewhere between 160 and 200 installed printers that are kind of an addressable market for us if you want. Now, this is a multi-year program. It’s not something that we expect to do, of course, in the next 6 months, but we have a very clear plan for ourselves, based on our own sales of new machines, to also our already existing customers, and then also addressing customers that our users have existing inks and to swap them to our instance. So I would say it’s in the next 3 to 5 years, we do plan to be able to switch probably not 100%. And because not all these customers are also using the same ink types and so on some very specific users, but the majority of those inks should be addressable for our ink sets. Pascal Juéry: So over 50% of the install base is our target, right.

Yes. Pascal Juéry: Good. Let me turn, maybe, Dirk, you too CONOPS?

Yeah, on CONOPS, I think the obvious problem is that we have no direct visibility on the evolution of the ECO3 business. But, yeah, I would say it’s a representative quarter in line with what a normal Q1 is. And obviously, the support services will change over time as we hand over, but not a major impact in the first year. And turnover will go with primarily the term business that ECO3 will be doing with the external markets. So it’s hard to give guidance. But I think the key thing is that bottom line wise, it should be nothing [too alarmed as you think] [ph]. Pascal Juéry: Regarding radiology for China. So I said the volume the back, no issue there. The volume based procurement practice of the Chinese government as resumed, actually we are right in the middle of one which has no dependencies. However, I want to stress so that we have a much better understanding of the marketplace in China and the situation on the DPDT. Now remember that during the past 3 years, we could not get to China, but we have been now to China, myself, and with the head of the radiology film business. We know how to play DPDT, we believe we are positioned now to not only maintain our market share, but possibly even manage it a bit from it. So overall, we’re not expecting any deterioration and especially certainly not the assumption we are in our own budget. Things are being deployed as planned. In the meantime, in radiology, as you’ve seen, we have taken a significant restructuring that we announced end of November to address the challenges we have on the margins, you got the inability to comfort price in the China. So we are taking action also everywhere and including, by the way in China, in Afga itself will reflect on the situation.

Last question from my side, during the full year conference call, you were guiding for 37 rebid for 2023? Is that the number that you that you can reiterate?

I am not sure we gave a specific number, but the number on quote is perfectly in line with what we have in mind, I would say.

Okay, thank you.

Thank you. And we now move on to our next question, which comes from Maxime Stranart of ING Bank. Please go ahead.

Hi, good morning. 3 questions on my end as well. First of all, looking at the DPC, which was experience the strong performance over the first quarter. Could you shed some light on what was the pricing impact the volume and the scope impact that would be helpful? Thank you. Secondly, looking at Agfa HealthCare and the guidance you provide us, as you mentioned, in the call, you look more cautious on EBITDA growth. Could you again, explain what you mean by delayed growth compared to the guidance you previously stated of the double-digit EBITDA growth in 223? And finally, looking at working cap 33% of sales? If I understand correctly, now that offset is out. Where do you see this going over the medium term? That’s all for me. Thank you. Pascal Juéry: Thank you very much. On DPC, Maxime, it’s a bit difficult to slice and dice. We do have an impact from everything, clearly pricing. On top of that, as I said it was done, it’s still being done today. So we had the impact is building up over the months on, I build up in the quarter we’ll continue to have an impact in Q2, volumes is positive, almost everywhere except which is related to PCB and some areas of industrial markets as well. But all the rest is contributing very positively to volume. The most important for us being inks and Zirfon in terms of volume growth. So it’s a bit difficult to slice and dice given the complexity of the activity. But clearly, it’s volume and price, and also some action on the cost. That works well in DPC today. Regarding HealthCare, what we mean by that is, we have an order book and we look at the way this order book is going to be deployed in the next quarter with which projects will go live, will be implemented and whatnot. And this is the way we look at our business. But the world is not perfect and we are pretty much also depending on customer readiness for implementation. And that’s what we are seeing right now, we are seeing some delays in implementation of the order book, which means we are slightly more cautious indeed on the delay, and it’s a fine line. And that’s why we are saying, what we’re saying, because when we look at this meaning by the end of March, by the way, order book was actually a lot higher than last year. We took a lot of orders and, of course, we’re not we’re not implemented. So that’s what we mean by that. And, I stress again, the fact that we increase of the order book reflects also an increase in our managed services, which means again that instead of invoicing when go big project, we invoice and the merger comes along the life of contract, and that also as an impact and trying to speak in the success we had in managed services is probably a bit higher than what we expected, actually, Nathalie, which again is a good news. Nathalie, do you want to add anything to that? Or…

No, I want to concur. It’s actually that the volume came 3 times higher than expected. So it’s a good trend in the long-term, but it means slower revenue detection. Pascal Juéry: So it’s not slower revenue recognition over the next month. But again, I repeat nothing. We’re still in good shape in HealthCare IT. And then your third question regarding working capital, Dirk, I think we can say, post offset, indeed, the working capital percentage of sales or status is somewhat lower. Can you comment on that?

Yeah, indeed. So as I said before, it’s a 5 percentage points difference that you take offset out, I think, looking forward, we are working on programs to reduce working capital is a key priority, the focus is really on inventory. And we do see opportunities, some of it may come quicker, some of it may take a lot more time to implement. So it’s not a short-term, but rather a midterm project. But we do see opportunity. And I think it could be in the range of 10% or 15%. But we still need to firm up exactly how that timeline will work and which kind of projects we will be able to implement which points. So there is opportunity plan to reduce the inventory levels versus today. Pascal Juéry: No, indeed, I want to try that as you know, we had a confirmation [indiscernible] that is quite important. And we were doing things we couldn’t do everything at the same time. So we took care of a lot of things. And you see today, by the way, the results in the management of SG&A for the company. But right now, the one major project that we are opening that we have actually opened for 2023 is a structural working capital project and which we are working on. So we shall be in a position, probably the next results and understand to be a little bit precise, not precise, hopefully about what we want to achieve with the order of magnitude that will help on the right one.

Okay. Thanks for that. If I may, just coming back on Agfa HealthCare and what does it mean for the adjusted EBITDA guidance for the full year? Pascal Juéry: Yeah. Well, I told you, I’m not going to give more details to the product.

Yeah. Perfect. Thank you for your answers. And have a nice day. Pascal Juéry: Thank you, Maxime.

Thank you. And up next, we have Laura Roba of Degroof Petercam. Please go ahead.

Good morning. 2 questions from my side. First question on Zirfon. So as I understand it starts to contribute to the plan. And then my question would be when would you expect it to start contributing to bottom line? And then a question on HealthCare IT as well. Could you elaborate a bit on the evolution of the gross margin? And how confident are you that you will see an improvement quarter by quarter there as well? Thank you. Pascal Juéry: Okay, thanks. Zirfon, indeed, Laura, very good question. No, seriously, I expect the Zirfon to be positive in this year. But again, let’s remember that we started kind of industrial operations for Zirfon in actually Q4 last year. That’s really when we did it. We are still, we are 6 months behind us. We are making a lot of improvement, a lot of changes all the time. But that’s really in full development swing industrially. We know where we’re going, and we’ll expect Zirfon contribution to the bottom line to be slightly positive this year, but nothing spectacular yet. We know we have improvement that are planned in the existing industrial operation, but it takes a bit of time to implement every time you make modification in your hardware. I think so it takes a bit of time, but I’m very confident going forward. We are also at the point where we are learning, we are extra cautious on the quality of the membrane, I would say without a job that everything is being looked at through a magnifying glass in order to make sure that our membranes are absolutely flawless, so we are doing all this work, that is very costly, but that is work that will enable us then to have an automatic quality control through cameras and things like that. But we are doing all this work at home, which is why we are not yet contributing to the timeline. And again, it’s going to turn quickly. But the question of HealthCare IT, the gross margin is influenced, so basically by what you sell in the quarter. We are selling a full solution to customers. So it could start ease our customers are requesting it hardware. But also our own software, third-party software that are embedded in our offer, as well as our services. And all these components have a different margin points you would easily understand. And when we sell hardware, we don’t have a margin of €0.70. [ph] We haven’t much lower margin, which is still pretty decent, but it’s a much lower margin. When we sell our own IP, then the margin is 100%. When we sell third-party software, you will have a different price point, then your maintenance services or your implementation services will be revised also differences. So all this is making actually the mix. And this is a reason why you can have expectations while still on the quarter. Especially in an inflation environment, but Nathalie if you want to give a bit more detail. You’re welcome.

Yeah, we mentioned the cost increase, and that create the situation depending on the mix. So there are variables and based on what is being executed within a given quarter, that results into the gross margin being impacted favorably or not. Pascal Juéry: And today, indeed, we are in a cost inflation environment. We are implementing today, a project that has been sold a year or year and a half ago, as well. And when you set a contract to fix your price, so again, you’re asking Mr. Dirk for delay of inflation but it doesn’t reflect and then added to height. Just a fact you know that, again, this is a market that was set to nowhere. That’s when setbacks really for non-inflation, well, now we are in an inflationary environment. But it’s a bit of a time adjustment as well. We need to have in this. I hope it clarifies or, yes, it’s very clear. Thank you.

Thank you. And our last question for today comes from Alexander Craeymeersch of Kepler Cheuvreux. Please go ahead.

Yes. Hello. Just wondering on HealthCare, how much was the order book were essentially in Q1 last year versus US$245 million [ph], you had a full year base in revenue? The second question would be given the central procurement in China where I remember you recently had some local success in terms of project when we just given some insights into your development and project went at the national level. And then the third question would be how we can now expect working capital move over the rest of the year given that the inventories have increased again first quarter? Thank you. Pascal Juéry: Okay. So thank you, Alexander. So first on HealthCare IT – I’m not sure we fully got the question actually, Alexander, maybe if I can ask you to precise the question just to make sure we are giving you the answer you need.

I’m trying to quantify a bit, the number of order book in an absolute level. I mean, the order book is up so much percent, 35%. But I was just wondering how much is it in an absolute level? And that’s why I was asking for the order book, how much it was essentially in Q1 versus the full year? Pascal Juéry: In absolute level, the order book, okay. First, we have not communicated at certain levels on the order book, we are communicating here is really the order intake versus the last 12 months. Okay. And this is what is up 25%. Okay. Then that’s order intake for the quarter. Although order intake is a flag so it’s a flow order book is an inventory, okay, the stock. And the order book, actually also for the first quarter as increased quite significantly reflecting exactly what we say, meaning we have a bit of a delay of an implementation in the order book. Okay. That’s what I want to convey to you. And it has nothing, the order book has not increased by 25% that it has increased double-digit versus the end of the year. Okay. But again, order intake is a flow, this is what we take as new orders in the quarter. Order book is offset of order that we have yet to deliver. Okay, I hope it clarifies.

Okay. So on the order book, where there is standing right now? Pascal Juéry: Order book, we are standing at the end of March, double-digit more than the end of the year, thank you. But we have chosen to communicate on order intake, which is a key leading indicator, which is again, the flux, the number of order we take in look after in or that we compare to last 12 months, where are we here versus the last 12 months on a rolling basis. Okay. And we give also the second number we give is actually what we call the highest value component of the order book, which is own software. And here we say the overall order intake for the requester – sorry, for the requester order intake plus 25% own IP plus 75% reflecting the quality of the order intake. Okay. Did you have anything to add? Your second question regarding working capital cost, Dirk?

Yeah, I would continue to say that we’ll see the similar seasonality that we see as before, which means usually in Q1, there’s a strong build up that continues over Q2, and then eases off in the second half of the year getting to the lowest point in Q4. Pascal Juéry: Yeah, we are emptying I would say the inventory on some key products by the end of the year. So you’re absolutely a seasonal pickup during the first half and decrease during the second half of the year, and the share will be probably different. What we’re trying to do is actually to make the increase a lot less than a year before, but we still had an increase in Q1 and absolutely unavoidable course. That was it, or I forgotten something, Alexander? I think you were asking about China, right?

That’s right. Yes. Pascal Juéry: China, as I said, we have learned how to play the game of DPDT. We were indeed had success on tender of share but it was relatively minor, because for us a kind of a good test. The real story is actually there is right now DPDT process on [five currencies] [ph] that I’ve grouped together on this is really where we are expecting right now the results, so I cannot tell you more at this point.

Okay. So at national level you cannot give us any more guidance? Pascal Juéry: No, I cannot tell you that I don’t see anything that would be different that we have planned for. But there are things in our planning right now. I don’t have to get the outcome.

What did you planned for? Pascal Juéry: Sorry?

What did you planned for in the guidance? Pascal Juéry: No, we stay with the same thing. We stayed all along meaning radiology will be stable for the year.

Okay. So if you win the standard of national level, you will be increasing dividends? Pascal Juéry: I’m not sure I got the reasoning, Alexander. If we win, it doesn’t mean we need necessarily to win more volume. In this tender and it’s not the winner takes all kind of tender. It’s basically an allocation of volumes in provinces and I’m not expecting – why I would not expecting – will not be expecting a significant shift in this area. That’s pretty stable. Okay?

All right. Thank you. Pascal Juéry: Any other questions?

At this time, we have no further questions in the queue. So I’d like to hand back over to you for any additional closing remarks? Pascal Juéry: Thank you very much for all being here, I repeat the start of the year indeed, that shows a strong rebound of DPC ideology, which is pretty much in line with our expectations and HealthCare IT implementation that is a bit more complex. But again, I want to stress that nothing is broken and that, on the contrary, we continue to make inroads actually in the market showing that our product and technology are well suited, so no worry there. And again, HealthCare IT is a project business, you will have very different – you can have very different results quarter-to-quarter is being said the more we will go to managed services, and tomorrow, probably to a subscription model as well, the less this will be lumpy, but that’s a transition that will be taking a lot of years, of course. So thanks very much for your attention and speak to you soon. Thank you.

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