Executives: Daniel Julien - Chairman & Global CEO Olivier Rigaudy - Group Deputy CEO & Group

CFO
Analysts: Katrina Menzigian - Everest Group

Daniel Julien: Good morning, ladies and gentlemen. I would like to wish a good day to all the people who are here and also the people who are connected. I want to emphasize that the people who are connected will have the opportunity to ask questions at the end of the presentation. So it will hopefully make the Q&A more lively. And, we start.

We are going to start by a short video that is going to show you what is exactly the activity and the job of LanguageLine Solutions that we integrated in the group 18 months ago. And you are going to see how it fits extremely well in the panorama of the activities of the group. So please, video. Let's start, there is a formal presentation of our 2017 results. First by a picture of the group today.

The group today, as you know, we started exactly 40 years ago here in Paris. We are operating now in 76 countries, little bit more than 223,000 employees, 171,000 workstations, 350 contact centers. The revenue in 2017 were very close to €4.2 billion. We are serving 160 markets in 265 languages. All numbers, but it means a lot of activity.

In 2017, we built something like 12,000 additional workstations and we opened two new countries, one in Peru which serve the market in Peru, the demand in Peru and one in Kosovo; that is mostly a near-shore solution for Germany, we call that little Germany. The key facts and figures of 2017, I think that you saw that since yesterday night. We had a growth of plus 9% like-for-like, including a strong growth in Q4. The EBITDA was at 17.2% ratio, plus 29%. The EBITA, plus 36%, in a ratio of 13.3%, plus 210 basis point.

Of course, the consolidation full year of LanguageLine Solutions helped. The net profit was plus 46%. The diluted earnings per share is at €5.31 versus €3.67 in '16. The net free cash flow is plus 37%. And finally, due to this performance, we reduced our leverage and the net debt versus EBITDA is below 2x EBITDA, exactly at 1.88x.

The key development during 2017 while serving our existing client base has been to, of course, increase our presence worldwide, fully consolidating LanguageLine, strengthening our digital solutions by providing a bulk solution also for our customer service, but also integrating a startup called Wibilong, and that helps to transform the customers into promoters of a company. Specifically, in 2017, after many years of efforts, we have been awarded, recognized and awarded by the International Association of the Privacy Professionals in California in October 2017, and that was something extremely important for us, because with exponential growth of the fraud in the current environment, we want to be the safe solution for our clients and partners. By the way, we have been the very first customer experience company to get accredited with Binding Corporate Rules, also GGRP in January 2018, and today if you go through the site of the European community, you will Teleperformance with several great names, or great companies all over the world. Finally, we decided after 40 years to put together all the knowledge that we have in the field of customer experience management to offer a down-to-earth consulting practice for our clients and also specifically for the in-house market, the one that we want to outsource, but want to benefit of the best world-class practice of Teleperformance. How is it built? Very simple.

As the name says, Praxi, it starts with the field and goes to the boardroom. In fact, we take our different level of expertise, the field analytics from the front line, the assessment of the customer service organization with process engineers, the customer insight and experience transformation with a multi-disciplinary team, Six-Sigma, sociology, project leaders and using also our predictive model. On the side, we have our subject matter experts who are experienced in the vertical we are working in and we have the incredible base of the yearly survey made by our customer experience lab, where you know we make 180,000 surveys every year to get the trend by verticals. So Praxidia is a new activity that we launched from scratch in 2018. Okay, this is what I've explained, so we can pass directly to Teleperformance strategy, objectives, strategy and then I will pass to Olivier for the financial results.

We did something pretty important last year. First, as you know, we regrouped the leadership of the company to make it more agile and better on serving the expectation of the shareholders. We also decided to have a better compliance with best practice for parent companies by strengthening the Board of Director and naming a lead independent director that at least the French community will know extremely well, Mr. Patrick Thomas who used to be the CEO of Hermès and who is a member of several very prestigious boards, including the one of Verno International. We continued a five-year strategic plan with objective for 2022 to be a company above €6 billion in revenue, based on a like-for-like growth of 6% average per year, with an EBITA around €850 million, which means more than €1 billion in EBITDA, with a split in our activities -- 80% to our business and 20% Specialized Services, like the one that you saw in the video at the introduction, and also continuing to be on the market, to identify the specific business that would enrich the global offer of Teleperformance.

Clearly, we are going to continue to make acquisitions, specifically have a financial plan unfold perfectly. But these acquisitions, we don't want to acquire more of the same. These acquisitions are going systematically to extend the span of Teleperformance So regarding the strategy. First, let's speak about the Teleperformance differentiator, very basic. We are the worldwide leader in customer experience management for the last 10 years.

I think that the results of 2017 increased probably our leadership, consolidate probably our leadership and this guarantee to our partners, our clients, a strong delivery all around the world. There is a Teleperformance all around the world. By the way, 350 sites in 76 countries. We have a very diversified client base, which mean that for every single industry we have subject matter experts, who know in that an industry and at the same time share the best practice that Teleperformance can have in the different geos of the world, from east to west, from north to south. We are extremely consistent across the geographies, this is a TV product and I can tell you this is something that takes years, maybe decades to be built, with documented, standardized, and audited operational procedure around the world.

Everywhere you see Teleperformance, you get the same quality. This is a most difficult thing to achieve in a service company that delivers such an intangible service and we make it tangible with our sets of operational procedures. We have developed integrated omnichannel solutions, thanks to our CRM, TP Client that we have developed for more than 15 years and we have invested dozens of million in this year, but now we have a very seamless omnichannel solution, so the customer can pass from one channel to another in a very seamless way. We have become, in our field, in the field of outsourcing the worldwide leader in data security protection, in terms of culture, organization, process and tool. And this has been recognized, as I said, and I think this brings some kind of peace of mind in every day most scary environment.

And finally, due to our economic performance, Teleperformance is an investment grade company. And this brings a lot of security also to our clients, specifically, when we sign contracts in which we sign some warranties, they know that we'll be here to face the consequences of any shortfall. Let's go to the strategy, which again is something very simple. Geographically speaking, we want to be stronger, more presence, where we overall continue to grow. I know that it's not exactly extremely modern to speak about that, but the BRICS and the MIST are still where the world is going.

China, India, but there is still a growing potential in Brazil, even with the crisis in Brazil, in Russia, in South Africa and of course in Indonesia, South Korea, Turkey, Mexico and some other Latin American countries. Verticals, yes, there are some verticals that are contracting. The telecommunication, where there has been some kind of maturity/challenge via -- from the Internet companies. But there are other companies -- there are other verticals that are expanding, blossoming and where there is a need for our service. The e-companies, where they are e-service company, e-commerce company, etail company, we call them the where you want.

The IT continues to produce at an extremely high-speed new products that are always complicated and that needs to be supported. The financial service, the insurance, CSK and of course, the connected economy, whether you are the new world, maybe not for today, but for tomorrow. The car; the car is not anymore a closed cave, the car is becoming the next frontier, the next connected world, rather [indiscernible]. But also the Internet of Things in the house. Anytime it's connected, it is more sensible, it's smart but it's more sensible.

If it's not sensible, there are opportunities for issues, bugs, adjustments and we are here to help. This is the role of Teleperformance, we are here to help. Innovation. Innovation, in fact, we are embracing the digital and the omnichannel integration to optimize the dollar amounts used in customer experience management. The more we are able to offer a seamless quality service to the customer at the best possible investment level, the more our clients are loyal and the more we win, very simple way of thinking.

We put a lot of effort right now in developing a down-to-earth consulting practice and you are going to see that developed over the coming years; '18, '19, '20, and it starts from scratch, it's not going to be a big boom in the first year, but it's a long-term commitment on that. And finally, the external growth. And for the external growth, what we want is much more to add specialized services, to continue to ensure that Teleperformance is a worldwide customer experience leader and a business transformation optimizer. So having said that, several of the business analysts are in the room I think, so thank you very much for all your recognitions, but I think Teleperformance has been -- has got its fair share of recognition by the different analyzing business and specifically, I would like you to pay a little bit of attention, it's a great place to work and to Aon Hewitt, because sees our recognition that represent all our people culture, how we want our people to work in a world-class environment for them to be -- happy to be there and dedicated to the clients. I will not finish without speaking about something that is extremely important for us.

And by the way, the leader of Citizen of the World is here in the room, Mr. Frifort [ph]. Restorative Citizen of the World something like 10 years ago, Mark, or more? 2006, 12 years ago and it has been a growing success, extraordinarily popular across the network and everybody takes a lot of pride to the contribution we bring to the communities where we operate. So thank you very much. Since it's for the business presentation, now you have [indiscernible].

Olivier Rigaudy: Good morning to all and good morning to those who are connected. So let's start with the figure. So as mentioned by Daniel, just a quick word about this first year. There are 2 or 3 things to be told. First one it's again a record year in term of growth, in term profitability and in term of cash flow.

So I'm going to come back on this three items in a minute. Just the first point to mention is that I'll first look at the level of the dollar. As you can see, the average dollar is roughly the same for '16 into '17. Most of you know that '18 will be a little bit down and I'll come back later on that. So on top of that, before I'm jumping into figures, there are two things that I just wanted to tell.

A part of the accounts, especially the P&L's -- the tax reform has a huge impact on our results this year, I'll come back in a minute to that. And I just wanted to mention it from that. So sales, sales are growing by close to 15% on a reported basis, which is a 9% like-for-like growth, again. On top of that we have been able to increase EBITDA either in term of volume, but also in term of rates. As you can see, [indiscernible] EBITDA which is what you're following, as a criteria for our result.

Most interesting also is the net profit is jumping to €312 million, it's a 46% increase, which is partially linked to the tax reform, the impact of the tax reform front. So diluted earnings per share are also growing close to 45% at €5.31 per share. Coming to the analysis of the revenue. As you can see, the revenue growth is 14.6% and 9% like-for-like. You have an impact of the currency, which is only €72 million, if I may say, knowing that the average dollar was flexibly different from a [indiscernible], but at the end of the day, we have €72 million impact into the full year, mainly coming from the dollar and pound sterling that reduced our expense.

In the meantime, we have been able, of course, to consolidate LanguageLine Solutions for the full year, so it's a positive impact of €282 million, on top of it, you have the organic growth, which is €321 million, which is a 9% like-for-like growth, which has been mentioned a minute ago. You will find here the revenue breakdown by currency, just to help you to compute for the next coming quarter and weeks as the impact of the law of the -- evolution of the currency. What is more interesting is to see that we are achieving with this quarter and this full year the 23rd quarter in a row of growth, which is above 5%, since 2012. Of course, it might change form a quarter to another and it has been said that the Q4 has been also very good. We are announcing a 9% like-for-like growth, which is a very good figure, probably above what people were waiting to.

So what does it mean? It means that this growth is sustainable and it will not probably, will continue over the next year. So it's not just something that will not continue for the future. A part of the story is probably coming from that. And Daniel mentioned it earlier on, is the ability of the group to diversify its client base. Here you have on the left side of the slide, the breakdown of our sales versus different industries in 2013 and in 2017.

Just to give you an idea, in 2013, what we call the telco sector, which is made of telco, Pay TV, was 35% of our sales. I'll recall you that in 2012 and 2010 it was 60%. This year it is 21%. It shows that, of course, we have [indiscernible] business, but this business, it's contracting as mentioned earlier on, is now a smaller part of our business as a percentage, not as a volume, and that's part of the story of the result today. On the right side, we put on a figure, the figure of the new economy, I would say a part of our business over the last year.

We took the first 60 top clients, they were representing in term of new economy, 3% of our sale in '13, they are now at 10%. It shows you the switch that has been made versus last year and explains this growth, it's continuous growth over the 23rd quarters that we've achieved over the last 46 years. Now coming to this template, which is a little more -- I would say, a figure again. Two or three things to be told here. The first thing is that, as you can see the two legs, I called them the legs of the group, are growing at a high level.

The leg of the core service 8.8% on a full year basis. Why? It's a specialized service, 10.4%. That lead us to 9%. But what is interesting is that the two legs are growing fast, even a little more for our specialized service, but even the cross-service is growing fast and will continue to grow at a high speed. This growth has been obviously different from the sector.

So on a region to another, we'll come back to that in a minute. But as a whole, the group is able to swallow, given its network, given its global size, it has the ability to swallow any stuff and being able to deliver always a growth, which is above the competition. I just wanted to point out here that the growth of the Q4 is also solid, with a 9% growth, was roughly the same figure across the two sectors -- across the two legs, if I may say. Last point to be mentioned here is how this growth of operational EBIT has been done, it is 210 basis point on a reported figure. As you can see, the core service has grown also from 9.7% of sales to 10.3%, showing that even in this business our ability to grow the margin at a lower speed than the other leg.

But we are in the sector also able to increase our margin on 85% of our sales. Whilst the specialized services are moving up from 26% roughly to close to 30%, as scheduled when we announced the acquisition of LanguageLine Solutions that was presented a minute ago. So to make it simple, good growth in Q4, good growth for the year, good growth across the two sectors, associated with the improved margin. This is the story that I want you to keep in mind for this line. Let's move now to the result by sector and coming to the core service and the English world.

So the English world has grown by 1.6%, which is roughly in line with what we did in the first half, a little lower. We know that this part of the business is growing less this year for this one reason. You had a part of the switch that has been made from Filipino business to Mexican business, and we mentioned it earlier in the first half. That is also the same story for the full year. We had, I would say, a mixed year in U.K., making money, of course, but the growth in U.K.

is limited, given the global environment. And we have grown in Asia Pacific, but not at this pace which we wanted and it has an impact on our sales. Just wanted -- if you might be disappointed by this figure, I just want you to have a look to the competition that has -- announcing negative figure on growth as on Q4, and also for the full year in this business. If we now move to the EBITA, the EBITA it's still solid, 8.8%, and of course has been partially affected by this mix from Philippines to Mexico, is a very well ground-up of our new facilities in China and Malaysia and the global environment which is much more, I would say, uncertain in the U.K. If we move now to LATAM-Ibero, LATAM is the star of the year, 22.4% of growth for the full year.

I must [indiscernible], but I think we can live with. We have grown everywhere, we have grown in Colombia, we have grown in Mexico, we have grown in Portugal, we have grown in all the components of this region, and we have been able to attract new business we were -- I was mentioning earlier on new economy and we have here some business that has been signed and executed in this region. And as mentioned earlier on, we have just opened Peru and we do believe that Peru is going to grow significantly over the next years. In term of margin, we are flat, but at a high level 12.3%. Coming back in the second half versus H1, you remember that H1 was a little down in term of rates, but we have been able to compensate for in the second part of the year and clearly promising for the next months to come.

So very good result in Ibero-LATAM, better result in Europe too. Not only we grew by 8.1%. These two major steps or ways results -- and the Eastern Europe, I would say, constituting the growth of the region is Egypt, Greece, Poland, Russia, that are able to work with global clients. In fact, that we have operational global procedure helps to grow in these countries. Total growth, has a positive consequence in term of result.

We are achieving 5% of sales in term of margin and I strongly believe that in '18 we will be able again to continue to increase this figure significantly. Let's move to the specialized service. So we had a better growth in Q4 in LanguageLine Solutions, mainly due to the thematic and global environment that U.S. knew at the end of the year. And LanguageLine Solutions is growing exactly in line with what was decided and what was forecast when we made the acquisition.

And we had also very solid performance at TLScontact, not only by increasing application on Visa, but also by being able to sell add-ons to the applicants. So as a result are now €191 million, just wanted to stay a minute on this figure. So a significant amount, and close to 30% of the sales. So that are the result of the main sector of the of the group. Let's move to more technical stuff that might interest you, all of you.

First of all, so we have a significant amount of amortization of intangible assets. So I put back the sales and EBITA figures that you knew. But what's happening, you have an amortization and depreciation of intangible assets that is climbing, from €41 million to €154 million. So there are two things which are happening here. The first one is the full consolidation of LanguageLine that would have led the figure to go to €87 million and you have a €67 million impairment of goodwill that has been gone on two major markets.

One is the German market, one is the French market. The German market, I am going to be a little technical -- but when you are doing a consolidation, when you are making impairments, you're obliged to follow specific rules. And if the country or the division is not achieving its budget, you are obliged to make your own payment on a three-year period. No more on the longer-term period. So that's led us to, I would say, register a charge or an impairment of Germany of €44 million.

We made a different approach for France, and all of knew that one of the major client of France might had some issue last year and given this interest ascendancy in accordance with the auditors, we impaired the goodwill at the level of €23 million. Just wanted to tell that €67 million has no cash impact, and will not be of course incur next year. I just wanted to make it clear. On top of that we have two also non-recurring items; the performance share plan, which is a classical €124 million and also €23 million, which are made of different stuff, of which two are important to notice. A small plan that we are doing in France to adjust the personnel activities and industrial activities, and some, I would say, mandatory non-compete provisions that we were obliged to do following the general agreement of Vasques in 2017.

That lead us to an operating profit of €355 million, that's grown only by 4.6%. But hopefully, we have been lucky, we had some positive, in the meantime, especially in tax, as you can see. The financial results are roughly flat versus last year, which is a performance, given that the fact that here you have 12 months of financing for LanguageLine, instead of three months last year, we have been able to post some positive ethics results that partially offset this growth. But you have the income tax, on which I am going to stay a minute, because it's a little complex. So you have this €9 million positive tax result, which is a new rule, versus a charge of €83 million last year.

Is made of different stuff. The first one is the current tax. Current tax is €122 million versus €83 million, which seems natural, even if the level of the effective tax rate has grown up from close to 28% to 33%. This is due to two things. One is the fact that you have a full year of LanguageLine Solutions.

I recall you that LanguageLine Solutions is based in California and as was taxed at the highest level that you can imagine in the U.S. close to 40%. And we had last year some tax losses used that was coming from previous acquisition that have been finalized. So we have a significant increase from €83 million to €122 million, 33% if you forget the €67 million impairment of goodwill in term of tax rates. I'll come back in a minute to that -- I just wanted to be clear, in '18, we do believe that the level of tax will be between 28% and 29%.

The tax from, on a current basis, is going to help us to save roughly €18 million, everything equal, from a year to another. So that's the current tax. Coming to the one shot impact of the [indiscernible] tax. The first one is a positive one, is a reiteration of a deferred tax liability. As you might remember, we have made some acquisitions and we have some tax liabilities that were recorded at 35%, which was the tax rate that was existing before.

Since Mr. Trump decided to move it to 21%, so we have to book the difference between 35% and 21%, that means 14% based on the tax liability that we have. This is a profit of €147 million that we have to book. Finally, you have a second issue in the tax reform, which is taxation of the foreign -- of the result of the foreign company, understood under the U.S. way, that means that all the sub that are abroad for U.S.

where they have some result of tax, should be taxed. That is the impact for us, which is close to €16 million that will be paid over the next eight years, which is a one-shot too that will reduce this €147 million impact of tax to €131 million. What is this measure of? This measure is -- we are not, I would say, [indiscernible], it is just to make sure that the money that is abroad, that was abroad versus the U.S. -- I'm speaking of all [indiscernible] people that have money in island and everywhere will put this money back in the U.S. That's the way it is.

So it's a one-shot impact and it won't continue over the year. So in '18, our tax rate, whatever will be, will be between 28% and 29%, there will more one-offs coming from the tax reform. Minority interest is small, €2 million and net profit has grown up to €312 million as mentioned. I mean it to grew €5.31 per share. Coming to the cash.

I read some analyst report and people say they are disappointed by the level of cash. I am sorry, but we have been able to achieve a 37.3% increase, to €324 million. I must confess it's true, we could have been better. We could have been better and the returns of working capital has two effects. The fact that we grew significantly in Q4, and when you grow at the end of the year you put the cash in your balance sheet.

And secondly, we've not been able to have the best, I would say, working capital inflow by the end of the year, because of the calendar. As you might remember, as the year was starting, Tuesday 2nd of January, so all of our people paid Tuesday and Wednesday. And I'm speaking out of the control of Jerry and his team, we have achieved in January the best cash flow that the group has ever had in months, showing that most of the people have paid that they should have paid on December in January. So that's for the cash flow -- that's for the working capital. I just wanted to point out also that the CapEx ratio has been under control and it was a promise that we made to our French banks and also all the investors.

Last year [indiscernible] 2% raise, as new sales were significantly high and it was exceptional, but beyond that, we have been able to control more and more CapEx and be much more selective in terms of CapEx, that led us to a figure of 3.5%. It's too early to tell, but I believe on a recurring basis, we should be roughly at 4% over the next years, in term of figure. So this movement, plus the change of the dollar, I just want you to have a look to the level of the dollar at the end of the year, which was $1.05 in '16, which is $1.20 in '17, led us to a significant decrease of the debt from €1.7 billion to €1.3 billion. It shows that we made the right choice in putting some debt in dollar at the time of the different acquisitions that we made. On the right side of the slide, you will see the working capital expressed in terms of sales, I frankly believe that the 10.4% that we achieve is roughly where we should be.

It could be a little worse sometimes, but I don't think we can be significantly lower than that, except if we make acquisition in the specialized service, which have cash utilization, so which is lower. Finally, the decrease of the debt, nothing more to say. The level of gearing ratio is below 70%, it was 87% last year. And you have here the impact of the FX cuts on the day for $4, just a word about our debt. The average cost is 2.44%, maturity is 4.8 and we have continued with the team here to diversify our financing source and to be protect against the rising rate.

So we think so our debts in dollar are at a good level. And as far as the euro is concerned, we came back to the variable part, [indiscernible] enabling us to be able to reduce our financial charge in the future of our -- years. I just wanted to mention, I think all the bankers are here. Also, that we had a long discussion and finally we had the negotiation with the bank and we make all covenant and the margin agreed easier in '18, and that will help again for our financial charge in '18 and help us to be flexible and agile in term of acquisition. To finalize the dividend, €1.85, so it's a 42% increase, but we stay with the same payout ratio, which is 35% of the net result.

That's where we are. Maybe I'll tell a word on 2018. So we have as an objective to continue to grow around 6% on a full year for like-for-like basis. Just wanted to point out that the Q1, I would say, comps in '17 is very high, it's 11.7% if I'm not mistaken. That means that the growth will accelerate all along the year and the start might be a little softer.

And we do believe that we have an objective to be at least at 13.5% in terms of EBITA margin, which is a good figure to achieve, given the global environment of the dollar. As you know $0.01 in dollar has an impact of 2 basis points in our margin, mainly for mix. So that means that with the dollar at $1.20, $1.22, it's not exactly the same story at $1.13 that we had last year. Of course, the split of H1 and H2 will be the different, knowing that the H1 the average dollar is $1.08 for '17, and in H2 is $1.18, so the impact of the dollar will be significantly more important in the first half of the year than the second half of the year, except if you can change since the end of the year. And finally, we commit to have a strong net free cash flow again in '18.

I'm over.

Daniel Julien: Thank you very much. I think it's time to pass to the Q&A, which is the most interesting stuff. So let's start early, but let's first take the question of?
Q -

Unidentified Analyst: I have a few questions, first on the guidance. Can you maybe be more specified on what you expect per division in term of organic growth.

As a whole it's 6%, but what is it per division? And for the margins, do you expect to include your EBIT margin in the different divisions? The second question is related to the development of your new co-switching offer. Can you maybe explain us what you expect to offer? And is it a global offer, which kind of client do you target, and what could be your mid-term objective for this new activity? And the last question is just for the working capital, do you expect the working capital to be flat in 2018?

Daniel Julien: I'll start, Olivier is going to complement all your specific question or financial question. Yes, we expect to increase again our ratio of profitability in 2018. We do not expect to increase the ratio of profitability in 2018 with the specialized services, because it's already at a level that we can consider optimum. So we expect to increase the profitability in 2018 from some areas in the core business.

I would say, mostly we expect to gain some profitability in Europe, coming specifically from adjustments that we've been making or we're making in low profit or non-profitable companies in Europe, which are, of course, first of all, Teleperformance in France, and Germany afterwards. Then we also expect -- because I want to take advantage of that, to speak two seconds about EWAP, because I think that EWAP -- and we think that EWAP is going to deliver better results in 2018, due to several factors that are temporary and that have affected EWAP. The very first one has been the lack of effectiveness of the Philippines due to the change of governments, which has put most of our large clients in a situation in which they want to secure, to diversify more, to secure their business and they are being -- really there has been a very strong flow from U.S. companies who decided to be served from U.S. or LATAM versus from off-shore of Philippines.

And as our production region, I mean some negative element that have impacted EWAP has been positive element for the LATAM. The answer on the EBIT is exactly in the same direction as the answer in the revenue. I mean, we expect better growth in Europe and in EWAP for next year. Now I am going to speak about Praxidia. Praxidia is still a baby in delivery, which means that we put together the handful of people that we have in the group and that are resources that were scattered in different pouch of management of the group, and we put that together under a single leadership and for a very specific purpose, which is the purpose of consulting on best practice and consulting from the field to the boardroom.

Today, we have some of these activities, already, we had GN Research which is our analytic company. The CX Lab already exists. The CIET, which is a customer insight, already exists. Okay, the CX Lab is in Portugal, but works for all the world. The CIET is based in Scotland, but works for all the English world.

And our subject matter experts are disseminated in the different geographies of the world, so you can have subject matter experts in the telco, as well in the English world, in the LATAM world, or Europe. Right now, obviously we have plans, but it's way too early to put ourselves in a trap by starting to give you significant numbers on Praxidia. It's an add-on, it's a baby in delivery, we are going to help it. We even plan, and here I give you much of inside information I can give you, we even plan to consider some acquisitions that would strengthen even this concept, because we are totally confident that it's a part of added value that is going to benefit the market and to benefit the company. Right now, the numbers are non-significant and I will be able probably to come with more significant number next year, same meeting.

Olivier Rigaudy: So a quick word on the working capital. As you can see, I'm sure you remember that last year we told to the market that we are close to the bone, If I may say, and there was huge chance to improve again this figure. So you have ups and downs linked to the calendar. But what I suggest you in your model is just to take the growth of the working capital linked to the growth of the sales. There is limited chance that we can reduce it.

You might have some good surprise, but as a whole, on a very long-term basis, on a full year basis it should be in the range of 10% of sales.

Unidentified Analyst: The first question is about EBITA and the contribution of holdings to EBITA, it has increased very significantly from [indiscernible]. So could you explain and maybe help us to go there in the next few years. My second question is on currency. So you have mentioned -- on currencies you've mentioned sensitivity, so could you come back it that? Is it $0.10 on the dollar, is it 20 basis point on the margin, and could you elaborate a bit also on other currency factors, such as dollar versus Mexican peso, dollar versus Filipino peso? And finally, the third question is about dividend.

You have increased your dividend very significantly, in line with the net profit. So you point that net profit includes some one-offs which are, all in all, positive. So what could happen next year if the net profit is lower? Overall, should we consider the dividend €1.85 as a minimum for next year or is it possible that the dividend could decrease? Thank you.

Olivier Rigaudy: So coming to the holdings, so there are different stuffs. First of all, holding, as you might know, is made of [indiscernible] some review based on sales.

So all the core service is paying some, I would say, management fees to the holdings. So the more you are growing here, more you are growing the holding results, that's the first step. Second step, we have been able also to be, I would say, prudent and effective in term of cost cutting. That's far I can tell you. There was no change in the holdings between the different years.

They had some minor, it's not exactly true, but €2 million or €3 million, some minor change that has been made this year, but as a whole, there is no major impacts. The major impact is linked to the growth of the core service business, knowing that the specialized service is not being positively [indiscernible]. Currency, you have two issue as you know, there is translation and transaction. Starting with the translation, it just isn't really a mix effect as you have significant business in U.S. delivering better results in term of margin.

If you reduce the level of the dollar, it doesn't impact. So the impact of this conversion is roughly 20 basis point or $0.10, you are right. So what I was just mentioning earlier on is that it's not exactly the same from a H1 perspective and a H2 perspective, given the level of the dollar that has dramatically decreased in the second part of the year. So we might have an effect that it could be higher in H1 and lower in H2 versus '17. As far as transaction is concerned, you know that we are hedging roughly a little more than $600 million a year.

A big part is coming from the Filipino pesos. That followed the dollar, if I may say. So there will be lethal transaction impacts in '18 versus '17. We had good rates in '17 and in '18 there will be marginal change. What happens if the dollar -- of course, decreases versus the euro, but the Filipino peso has continued to decrease versus the dollar.

It's less so for the Mexican pesos, that's come back a little more firm. Everybody is waiting the general election in July to see what would happen. So we still look to that. And you have also the Colombian pesos that is less good than it was. And we are following also the other currencies that you know, Tunisian dinars or rupee, all this stuff.

So as a whole, you have to keep in mind that the transaction effect is less important than it has been in the past, but still at a good level. As for as dividends, what has been done. Solution has been taken to stick with the 35% payout ratio. That was the idea, just to avoid to enter a specific explanation about current net result. So we stick to that.

The net impact, as you look, of all the exceptional thing is in the range of €30 million, €35 million. So we will see what will be next year. But we hope to be able to swallow this difference.

Daniel Julien: I would just add some things. We should continue to see an Increase as a profit from the year beginning, because we hate bureaucracies.

We really like to manage this group with a light governance. We are much more agile, we know how to control the situation and we are not going suddenly to become a fat-cat bureaucracy at the holding. So clearly, the revenues are going to grow faster than the cost of the holdings. Second, regarding the dividend, we would be extraordinarily disappointed if we would not mention at least €1.85 next year.

Unidentified Analyst: Christophe Chaput from [indiscernible].

Two questions please. The first one is on the CapEx envelope. So you say roughly that for the mid-term we could expect 4% instead of 3.5%. Is the differences linked with the development CapEx, let say, so with basically new contracts and is it going to occur, let's say, in 2018, this 4%?

Olivier Rigaudy: I would tend to believe so, yes.

Unidentified Analyst: Okay.

And the second one is on the specialized service margin. So usually the margin of LLS was 36%. It is also the case. And in other word, do you succeed to improve the margin of the visa business in 2017? Just to be sure about it, because in the press release you say that the results increased. But is it also the case in percentage of the sales? Thank you.

Olivier Rigaudy: So coming just to your question of CapEx, there are two issues in CapEx, different issue. One is to continue to nurture the growth and we are going to continue to invest and to add some CapEx in '18. No, doubt of that. But two things are going to be continued in '18. The first one is just to make sure that the level of the costs across the different regions are, I would say, comparable, and you have some disagreements on which we are working as we speak.

And the second thing is to make sure that we select the right project, to continue to be more selective on the right project. So that means that this potential reducing of the CapEx will not avoid us to grow, if I may say, in the core business. On top of that, you have the impact of the specialized service that is using less CapEx and helping us to reduce this global number to 4%. That's what is happening. But, clearly we are not -- one message I wanted to give despite there are lot of people who are financing us in the room, we are not going to stop to make CapEx, to pay the debt.

We are continuing to invest, but we are going to invest wisely on workstation price perspective, but also on the global perspective on the different projects.

Daniel Julien: Just one thing. 4% is probably a non-material number for Teleperformance, knowing we -- that if you compare with the industry, we tend to believe one of the companies that has the highest CapEx. What does it mean? It means that if you come to our service factories, you are going to see service factories with latest updated technology and this is the key point for us. This is a point of differentiation.

I can tell you, visit all the time all over the world, centers, either Teleperformance centers or competitors' centers, but sometimes some consider that they could sell whatever. It's extraordinarily rare when I see production capacities and production tools are updated as Teleperformance can be. Now, the CapEx, I also want you to understand something, which is the friction of the reality. There is something beautiful in a model and -- but the reality doesn't systematically follow our model. So you foresee a strong growth in a geography.

So you are going to build capacity, because you foresee this strong growth. And Europe clients do not grow as strong as what they were expecting to grow. I'm not going to mention name, but for everyone of you, you should understand that it happens, because there are government pressures, because a product is not as successful as what the client was expecting, because there are new competitors. And suddenly you get at a moment higher CapEx in proportion to your revenue. And then the year after -- because here you have been maybe with some unused new capacities that have not built up as soon as they should, the year after you are going to have less CapEx, because there are going to have an adjustment, but at the same time this is going to bill.

So in fact what becomes very dangerous is when you continue to see a growing level of CapEx that is out of control. But if you see one year your CapEx at 4.8% and the other year a CapEx at 4%, and the other year you might see again a CapEx at 4.5%. I can tell you, our business model will not have changed, it's just the reality you deal with. Sorry to say that, but we do not control the world.

Olivier Rigaudy: Just to answer, let me just answer the question on the profitability of TLS.

What I can tell you is there is not a huge increase in the TLS profitability, but there is -- they are at a very good label already. We put some money on top of that to develop new center and to develop the IT. And we hope to be able to attract, to get new -- I would say -- contract in '18, but finally, very good result after all. And I'm not confirming the 36% that I heard about it, it's far less.

Unidentified Analyst: Daniel Steven [ph], Frost & Sullivan.

I'd love your thoughts, the impacts of exponential technological change, specifically for example artificial intelligence on the industry looking forward 5 to 10 years, what do you see and how you feel about it and just rip off of that a little bit if you could? Thank you.

Daniel Julien: Thank you for your strategic question. First, I feel very good about it. I think recently there was an interview of the Minister of Labor of Sweden or something like that and somebody asked her a question, how are you feeling about the new technology that can destroy some jobs? And the lady said, you know, I'm not afraid of the new technologies, I'm afraid of the old technologies, because the old technologies destroy the job. I am here to create employment, so I am here to train, to adjust, to take advantage of all the possibilities of the human being to deliver a better service.

So the way I see Teleperformance is exactly like that. It's subdues that the artificial intelligence has a role to interact with facts, with questions that tend to be -- that are rational and that can be perfectly delivered without human support. But the role of the Teleperformance is to be much more on the side of the complexity, is to be much more on the side of the emotional, because we are human beings, we are not robots. So when we ask questions, we do not ask question necessarily, rationally. And what we want when we ask question is not necessarily just a rational answer.

It's also an emotional comfort. And so I see the new technology light and help. By the way, I will not call that artificial intelligence, I would call that augmented intelligence. And as a help to deliver a better service, that's what I think is the world is going to be every day more complex and I see that there will be every day more interaction from the individual with the companies they buy project or service from. And as there will be more interaction, some of them will be done without a robot but some of them will be done with human who will deliver better jobs.

And for us, Teleperformance it's a question of being smart, agile, flexible. I mean, it is like these people who are surprised, because their research is not as good, because the telcos are not growing as the way they used to grow and now they are not as profitable as they used to be and they are in a kind of call avoidance logic. It's no more, but life is dynamic. So you need to make your company dynamic to grow with what is dynamic and that's why -- that's my answer to the question. I'm very confident with our five-years plan.

Olivier Rigaudy: We are going to start to answer the questions that are raised. First one by Marco Corsiglia. So you have grown 3% on average since the last five [indiscernible] below the market growth, despite it includes the fast growing Asia-Pacific area. Do you see this subdued performance in the most technological advanced area might be somewhat connected to the enhancement of [indiscernible] technology combined with AI machine learning?

Daniel Julien: I think that to answer precisely this questions, we should reconciliate all the job that is done for the web market, because a significant part of the LATAM growth is done at the end of the day for the U.S., for the near-shore market. So when you integrate the part of the growth that comes from the near-shore market, the dynamic in the web is better than what it appears in other markets.

Now, yes, I think that the American market is more mature in outsourcing than many markets in the world, so they tend to grow not as fast as some region of the world. Now, if I speak specifically for Teleperformance, you know, even if we are leader on the market, our global market share is 6% to 7% of the market and so we still have a lot to grow just by being better than the competition. So somehow, yes, I want the market to grow, but we've also room to grow whatever is the dynamic of the market.

Olivier Rigaudy: We have also some questions from Karl Green, I'm going to read. What is causing the slower than expected growth in Asia-Pacific and when it is likely to improve?

Daniel Julien: Okay.

In fact, we don't put in Asia-Pacific, we don't put India, because India is not part for us of Asia-Pac and we had a lot of growth in India this year. We have a very specific high-quality iTec, iTtouch boutique in India, what I call a boutique, we have 12,000 people over there, I mean it's not exactly a boutique. And we grew on a positioning which is smart India, keeping India smart and that we decline on the people management that we decline on the technology, that we decline on using more India as a Chat. And so, there is some kind of also a switch from the Philippines to India for what is non-voice. So that's the first point.

The second point is China. Our business in China in 2017 has been growing, but these disappointing, and in China we serve mostly global international companies, multinational companies, and some of them did not have the success they were expecting in China last year. That's why our success was not what we were expecting in China last year. Typically we succeed, over-succeed or under-succeed with our clients and that's why we -- our best asset is our client base and we try to have the best clients of the world and I think we have. But sometimes the plans of our clients do not materialize the way they expect.

And by the way, China, for anybody who follows China you will see that there has been a lot of government attitudes that have not been exactly business friendly in China in 2017. And our clients are dealing with that and so we are still very boorish about China, but okay, it was not what we expected it would be.

Olivier Rigaudy: And Malaysia will grow in '18, specifically?

Daniel Julien: Malaysia is typically the answer to the question about the CapEx. Okay, we made a few from scratch in this month in Malaysia, significant to build a multilingual APAC center in Malaysia and the trigger of the business and specifically of the first anchor client, it is not the first client, but you know the first big client in a place that makes the place successful, attractive and so and so, takes more or less time. We think that Malaysia should be good this year.

Olivier Rigaudy: We have another question from Charles on the [indiscernible] where I believe we covered it. And he is asking, what gives you the confidence that the U.K. will improve this year? Are you now talking to British Airways, and I believe there are major global outsourcing opportunities.

Daniel Julien: Thank you to let me know that British Airways has major outsourcing opportunities. I have no big comments to make to the U.K.

U.K. is a very mature market. It's a very difficult market and some of our competitors have totally collapsed in the U.K., which is not specifically a good sign, because when you have a competitor who collapses, usually it is because they have accepted terms of contracts for the outsourcing that are extremely bad, and that we do not want necessarily to swallow. Each time I see a fish even if it looks beautiful, I say, hey, I don't mind if it is a big fish, I just want to make sure I am not going to be poisoned by the fish.

Olivier Rigaudy: We have a question from [indiscernible] on Praxidia.

I think we covered it. Telco companies are talking a lot about digitalization of customer service and bringing it in-house using chatbot etcetera. Can you tell us what you are seeing in this vertical? Are you seeing sign of increasing sourcing? Is there a risk of accelerated declines from this vertical medium-term as a result?

Daniel Julien: I think that the telcos have started, quite a long time ago, I would say, at minimum two years ago, a transformation of their management priorities and on the way they address their customer. The problem for the C-level at the telco is up to what point, not to go too far. I am going to remind you a very, very simple rule.

Client loyalty is directly correlated with a number of interaction a customer has with the company he buys a product or service from. The less you have direct interaction with the customer, the more you have a chance of churn. And so, you always have to make a trade-off between treating an opportunity of contact with the cheapest way or using an opportunity of contact to create value. It's always a trade-off. It depends on your strategy.

I think that individually each telco is engaged in a program to reduce what they see today as a necessary evil, which is the customer service. When I say each, not all of them. Some of them are leaders on some markets today. And the ones who are winners, strangely, they fight on one single item, which is the customer service. And let's see, you may be surprised next year, because if our business, for the telcos that we are serving today is -- might be a reduction.

Our global telco business might not be in reduction, because we might add new telco.

Katrina Menzigian: Katrina Menzigian with Everest Group. You actually brought up a question that I had in my mind. You cited the fact that you anticipate taking share from other customer experience service provider competitors. But in your last comment you implied the opportunity to potentially take -- is to achieve growth through added scope of shifting in-house spend to outsource spend.

And this is especially important in markets like the United States, where it is a mature contacts. Could you comment a little bit about that move? And I am thinking your Praxidia acquisition has something to do with that as well. So I was curious about your thoughts there.

Daniel Julien: Yes, Praxidia is not an acquisition, it just started. I mean, the fact that we put all our forces together to specifically target the topic that you are mentioning.

The combination between outsourced and in-house continues to be a fact. The point is that it's like the ratio of profitability, it doesn't move fast, I don't know, some of you know better than I do, but there are maybe 12 million people working in what we call the contact center industry all over the world, and maybe out of that there are 2.5 million or 3 million, I don't know, working in the outsourced -- sorry for the numbers -- working in the outsourcing industry, Each time you gain one new client that was in-house to the outsourced, you are going to gain 500 people, 1000 people, 2000 people, 3000 people. So the shift, it tends to be pretty slow. But it's true also that our industry for many decades has been reactive to demand, rather than to be proactive, to show the optimization that could be done -- to show to in-house business the optimization that could be done, and that's the role of Praxidia. But I can't tell you so much more today.

Olivier Rigaudy: Excuse we, have to cover four questions, very quick question. Are you planning to expand LLS internationally?

Daniel Julien: Yes, if we find the same good conditions. There is something that amazes me. You know, I am half French, half American, so, in the country I choose to live in, in the U.S.A., there is something great, because there is a regulation that says that if your level of proficiency in English is not good enough, the provider of critical services, whether it's the police, hospital or whatever, have to be able to speak in your language. That creates a market and a professional market.

In Europe, we are seeing not at this level. So somebody comes -- he is Arabic and he doesn't speak the French language, we are going to find somebody who speak Arabic to try to -- I mean it's absolutely not professional. I hope [indiscernible] Europe, including the one of France today, but also the one of Germany. I hope that we are going to see some change in the regulations, specifically with the waves of migrants that comes to Europe, I think it would be a nice thing for our legislature to consider. And then if they consider it, yes, we are going to expand LLS internationally.

Right now, we have LLS in the U.S. and in U.K. U.K. is a decent business, but not as good as in the U.S. due to this lack of regulation.

And by the way, I cannot say that it's my day to day obsession, because as long as LLS grows organically by 6%, 7%, 8%, 9% a year, I have other priorities to address on my desk.

Olivier Rigaudy: The other question, maybe I'll fetch them later on. But I just wanted to have one from -- one more please, in case it hasn't been asked so far. Can you please discuss your view on potential future M&A, given the strong deleveraging in '17. Are you still on track to do a material M&A this year?

Daniel Julien: We are always on track, because we don't like to be off-track.

Yes, last year I was extremely clear to our bankers, to our shareholders, that we will not do any acquisition -- and two significant acquisitions in 2017, because we wanted to fulfill our promise, which was deleveraging. We've done it. So are we active today? Yes.

Unidentified Analyst: You made an interesting comment about the Philippines and the lack of attractiveness there. My question is if you could specifically by country talk a little bit about growth in Central America, the Caribbean and South America, or U.S., English and Spanish please?

Daniel Julien: Okay.

Just quickly, I want to precise what I said regarding the Philippines. I said the Philippines -- I should have said the Philippines lost temporarily some effectiveness, because it's like when throw a stone in the lake, the lake temporarily loses its calmness. And then after a few minutes, the lake is flat again. I really expect and we in the U.S.A. we had more or less the same topic when during the last presidential election, and then -- I mean, the U.S.

business is business as usual. I think the Philippines are going to come back, business as usual. Last, and fairest point and my deep conviction. The second point is that I'm -- we have been by far the pioneer with the near-shore and with our activities in Mexico. I remember myself negotiating with the authorities of Salvador to create a very first center in Salvador where we have today 6000 people.

In Mexico we have, 17,000 people alone. I see -- then it's always a question of adequate resources, price attractiveness, and currency attractiveness. Probably today one of the countries that has become one of the most attractive one for the U.S.A., even though we should be cautious, is Colombia. Colombia has totally lost its self image and has become the kind of new Switzerland of Latin America, It is turning, but it is like it is. Where I'd be a little bit cautious is because I still believe that you find -- you tend to find more English speaking resources in Mexico than in Colombia.

And Mexico should absolutely remain top of priority as long as -- on top that the currency ratio between the Mexican peso and the U.S. dollar is what it is. Mexico, one of the problem of Mexico several years ago, I would say, 4, 5 years ago was that the Mexican peso had become so strong that all other countries were very attractive from a price point of view. Today, Mexico is no more expensive than Salvador or than the American Republic and significantly less expensive than Costa Rica, for example, which has limited capacities also. In Mexico, [indiscernible] it's despite this very strange relationship that exist between Mexico and U.S.

and I'm not going to speak about the world. Mexico is the most North American country you can imagine, except maybe Canada, but Canada is expensive.

Olivier Rigaudy: I don't know if there was a question, but maybe a last one before we close.

Unidentified Analyst: My name is Peter Ryan [ph], Independent Analyst. I would like to find out your vision for work at home agents in Teleperformance through 2018 and beyond?

Daniel Julien: Thank you for this question, because we just did not mention it.

I think that I am a strong advocate of telework and of the work at home solutions, because I think that it give us opportunities to tap another kind of labor pool. It can reduce the churn and it presents really a lot of advantages when you search very targeted profile. Now the work at home agents so far has been limited by -- mostly by security concern, and now IT teams work very much in that -- we have a work at home solutions, we do work at home in the U.S. and in some countries in Europe and now IT teams are working to strengthen as much as possible the security by creating a kind of virtual call center environment, paperless and so on, which has to do with again -- and here you have to check with specific regulations country per country, because it has to do very much with the video being present at the work at home solution to make sure that, yes, you have the right agent, that is not the sister or the broader that is answering, and that they don't take to -- that yes, you need to make sure that the computer and your solution cannot have any kind of external access for the data security. You need to make sure that you have your spy software that identify any abnormal pattern that needs to be immediately checked.

You need to make sure that your supervisor can have exactly like in LLS, at any time randomly visual access to the global environment. So yes, there are still some bricks that needs to be consolidated, but I think that the work at home is going to continue to grow. To me, I'm not surprised that it has not grown the way the people expected it to grow. I think people always dream about the fact that an idea or a technology is going, because it's great, is going to be adopted in the real world and they do not understand that there is a friction and again this is a concept of friction of the conservatism of the human behavior and the conservatism will stop at the C-level in the companies and everywhere. So typically, new excellent solution can take 10 years, 15 years to grow.

I mean I know that there is the Moore's Law that changed everything every two years. It doesn't mean that we human being we've changed our behavior every two years. That's it.

Olivier Rigaudy: Thank you.