Teleperformance SE

PAR:TEP

Earnings Call Transcript 2018-Q4

[Daniel Julien, Executive Chairman & Global CEO]

Good morning. So it's a pleasure to see you again. We are going to try to be effective in making the initial presentation to leave more time to the questions. And I'm going to start by the first one, which is this one.Very quickly. We are in 80 countries with 300,000 people handling customer demands. And we achieved EUR 4.4 billion in 2018. If I go a little bit deeper into that, you are going to see that we had plus 9% like-for-like growth, which is the double the average growth of the market. In fact, we had even an acceleration of the revenue growth during Q4, which was close to 11%, plus 11%. Our EBITDA margin is at 7.2% (sic) [ 17.2% ]. EBITA is 13.6%, plus 20 basis point versus last year. And you have the earning per share and the dividend per shares.So basically, what does it mean? It mean that we had -- we continue to have an exceptional run in the Ibero-LATAM region. Europe is continuing to be strong and catching back on the weak years, several years ago. In EWAP, we came back to a positive trend during the second half. And for the Specialized Services, despite a kind of a slight disappointment in the growth, we had extremely high margin. The slight disappointment in the growth in Specialized Service was due to a one-off related to LLS, who had the previous year a specific government program, FEMA program, linked to the hurricane season; and also to a glitch in the technology of one of the provider that impacted the production during Q1. Basically also the other activities of specialized service were not dynamic in 2018, and in fact it triggered a management change. This is a specific area where we are going to put our focus in 2019.So 2018 -- it's magic. 2018, what did we do? We did not just sit on our armchair waiting for the results to come. We continued to strongly increase in CapEx our production capacities, in adding 18,000 workstation. I know that 18,000 seems to be not so much, but there are a lot of companies that would love to add 18,000 workstation in production in 1 single year.We made the acquisition of Intelenet. Intelenet is a superb company in the sense that it's an end-to-end business process management service company managing the front office and the back office for clients in U.S., in U.K., in India, in the Arabic peninsula, mostly for banks, transportation, accommodation and transportation and health care. This is an acquisition that we paid USD 1 billion. Which is important is this acquisition, comparing to the multiple of Teleperformance, is relative clearly for the shareholders. It has been fully financed by debt. And we have been able to finance this acquisition while keeping our investment grade, which is something that we cherish and that drive our financial discipline. We merged Intelenet with our consulting business. At least we merged the knowledge service of Intelenet with our consulting business Praxidia. And now we have an entity called Teleperformance D.I.B.S., Digital Integrated Business Services. That is made -- the base is made by Intelenet, but we are developing this end-to-end business process management service in the other language. Intelenet was just in English; and now we are expanding in the major language, starting by Spanish, Portuguese and, one day maybe, French.And as you can see, we decided that it was time to be a little bit more funky in our approach, and we totally changed our identity to be a little bit more 21st century, digital and millennium (sic) [ millennial ].Okay, we got numerous award. I am not going to mention all of them. I'm just going to mention the people who gave us these award because they are extraordinarily respected institutions: Frost & Sullivan, the Everest Group. And if there is something that we are specifically happy as we are a people business company is the fact that, between Great Place To Work and Aon Hewitt, we got certified in 17 different places, countries.So in making the Intelenet acquisition, we -- in fact, we ticked all the box of our strategy. First, in terms of organic growth, Intelenet, now Teleperformance D.I.B.S., has a growth that is superior to our core service, which we love. Second, is strengthen our expertise in some key verticals that we love to serve, the BFSI, bank finance service industries; and transportation; and health care.Second, the characteristic of Intelenet. And you know how much the giant India and the selective education system in India produce brilliant mind, specifically in technology, is very well advanced in using artificial intelligence, RPA, robotic process automation; and integrating them in their services in order to streamline and make more -- make faster and more effective the interactions. So we inherited all these expertise that we are obviously developing extremely fast throughout all the geographies of the group.Third point, consulting and analytics. The knowledge services of Intelenet, of Teleperformance D.I.B.S., and Praxidia today make us with more than 400 people who are specialized in -- who are business process engineer, who are solution architect. And it help us to build customized solution for our clients. In geography, these give us an extremely strong foothold in India, which has become the country #1 of the group in terms of production of service. And it's extremely interesting for us because India is definitely the voice -- the place for outsourcing for everything that is non-voice in English, but also India is this massive giant waking -- awakening right now. It's probably the country that has the fastest growth of the world. It's not probably. It is. And we also serve the top, top companies of the domestic market.And finally, it's an high-value Specialized Services driving margins that are in the high end of our range of services.So right now, and this is what you are going to see starting now, you are going to see a Teleperformance who is passing from being many, many decades ago a call center to an omnichannel customer service solution, to an integrated business service group. And right now you have 3 line of services in Teleperformance: the Core Services, which are our core business, customer service, tech support, client acquisition; the Specialized Services, which are LLS, TLS and ARM; and now the digital integrated business service, which are the end-to-end solution for our client from the front office to the back office.So regarding our long-term strategy. You know everybody has an eye fixed on are we going to deliver 2022 or not. We think so.So Teleperformance is strong in its Core Service. We are developing specialized service that have higher profitability so it helps to enhance the profile of the group. Our vision is very simple. We want to be an integrated digital business service group serving front and back office in all verticals of the economy; to continue to be high growth, high return. And by the way, we grow significantly faster than the market and we have return that are superior to the average of the market also. And with a clear high-tech, high-touch positioning, and I'm going to come back to that to the next slide. What does it mean, high tech, high touch? High tech for me is very simple. It's 4 level. First, when you are a global company, you need to have an IT network architecture that is very robust, which mean that you have no downtime. I mean it has to be a Six Sigma uptime. Second, right now, to serve in the best possible way the customer demand, you really need to offer a seamless solution which is an omnichannel solution. What does it mean? It mean that, if you contact us, first, via phone, then via chat, then via e-mail, then via social media, we need to be able to identify you each time without asking you again who you are, why you are calling for and so on. So we keep the historic of that. And by the way, in fact, Teleperformance developed this solution which we call TP Client already more than 10 years ago and -- but we have been enhancing the solution. And it's very, very strong. And it's a solution that we can use as an overlay of the legacy system of a client so we don't have to go to the legacy IT of the client. We can put that, connect that to the legacy system and suddenly offer a solution that helps not to have the kind of nightmare you can have sometime when you call, I don't know, your bank, for example. And each time you ask a question, the people say, "Excuse me. I have to pass you to somebody else because it's not me." So strong architecture, Omnichannel.You need to be smart digital. Smart digital are the integration of the bots and what we call the robotic process automation because they are part of the interaction that are related to objective information that you can get much better, much faster and without mistake in computing this information instead of searching it through different database. This is where we integrate the technology in the interaction with the customer. And this free the time for the customer specialist not to be stressed with finding the information but to be much more empathetic and dedicated to renewing the pact of trust between the customer and the company.And finally, there are 3 buzzword but that are super important, which are, first, the analytics. Okay, now we can always know what is the stature of every single individual. So it helps, of course, to put the individuals in buckets. And you know in fact what kind of specific action to give to the different buckets. Then the security. Security, security, I'm going to pass and I am going to come back after. Security is very simple. Teleperformance, I think, is the only business process outsourcing company to have its binding corporate rules approved. Not only we are GDPR compliant, but here are all the -- some of the example of our key certification. This security has been at the heart of our strategy for years now, and now I think that it bears its fruits.I go back to the previous slide to speak about high touch. What means high touch? High touch is our 300,000 employees, but these 300,000 employees, we are in very high transformation, HR transformation, strategy in the way we hire them, in the way we train them, in the way we manage them to make sure that we get higher professionalism and lower -- and to lower the attrition which is a natural phenomenon in a very demanding business. All that is disciplined right now by the fact that we decided to implement Six Sigma as an operational management system by default, which mean that right now in operation systematically our operation leaders gets the histogram of the distribution of the results versus the different key performance indicators, get the standard deviation and are able to make an objective analysis either to review the process or to review the outliers. Maybe what -- the way I'm speaking seems like Chinese, but I can promise you it's not Chinese. It's very, very -- it's a way to put a lot of positive discipline and to reduce the variance in an operational system.Okay, so basically, where are we? Little by little, we see that the customer outsourcing market grow. It was -- ages ago, it was 22% of the total customer experience market. Now it's 26%. It's a market that grows at 5%, 4%, 5% per year. For Teleperformance, we have been growing more than plus 5% year-over-year for the last 27 consecutive quarters. So I don't know how many years it makes, but it makes a lot of years.The -- okay, here it's a beauty that make our business very exciting. The economy today all around the world is impacted by the digital transformation. And in the digital transformation, at the end of the day, you can say that you have the disruptors and the disrupted. The disruptors are all these apps, magic apps companies; digital companies that grow super-fast because just a click and everything is done. And you have the disrupted that are the brick-and-mortar companies that are suffering because they have all their legacy system and they are suffering the competition of disruptor. By the way, in a competition that is not always easy because typically the financial community values the disruptor on their growth ratio, when the disrupted companies are valued on their ability to deliver profits. So it's not exactly the same constraints. And guess what, our happiness is that in each market we serve the disruptors as well as we serve the disrupted.Why do we serve the magic apps? Because beyond the magic app, there is still the real world, and the real world has friction. You need to send a product. The product can be easy to use, not easy to use, satisfying, not satisfying; and you still have real clients. Too bad the clients are not digitals. Beauty. And as the digital world is growing extremely fast, we are here to help them to grow because we provide them the support of the machine they do not have for their growth. And now the disrupted companies: The disrupted companies, with our 40 years of expertise in streamlining the customer service process, we tend to be efficient. And we are here to help the disrupted companies to optimize their chain of service to their customer so it's they provide a better service at a better price.So we support the 2 kind of economies. And I would say in every segment that you see here we support the traditional banks, but we support the fintechs. And it's very interesting, by the way, for us to see the different mindset. And by the way, do we support so much the disruptors? Yes. Look at this Teleperformance revenue generation with the e-clients. In 2013, 5 years ago, it was 5% of our revenue. Today, 5 years later, it's 19% of our revenue. So we are not left with 19th century business, but we are very much involved in the 21st century business.And I'm going to make a quick conclusion to this presentation before to give to Olivier the pleasure to go in details with numbers.What is our long-term outlook? We told you that -- we told you a year ago or 2 years ago that we wanted to achieve EUR 6 billion for 2022. Guess what. Oh, yes, we are strongly confirming this long-term target, but now we are confirming this long-term target excluding new acquisitions. That's the new element of the information. At the current parameter, we are extremely convinced that we are going to reach this target. And we have a financial discipline. We like to keep our leverage ratio pretty low, so we are not going to go crazy with debt or whatever, but we deleverage pretty fast also. So the likelihood there will be new acquisition in Teleperformance before 2022 is pretty high. And if this would happen, both for the revenue and for the bottom line, that would trigger a revision of our targets to a higher level.This is it for the situation of the group and the perspective. Thank you.

[Olivier Rigaudy, Group Deputy CEO & Group CFO]

Thank you. I'm going to give you some more detail on the result and specially on some item.So just to start. Just to start about the P&L summary. Little to say that, again, solid revenue growth and margin growth too. That's something that has to be noticed. The dollar effect seems to be low in average but has been up and down all along the year, as you might know, all of you. But clearly, we have achieved a 9% like-for-like growth this year, exactly the same figures on last year where -- versus reported figure of 6.2%. EBITA is growing by 8.6%, achieving 30 basis point growth, again following the path, the journey that we launched some years ago. At the net profit and group share level, we are flat, and I'll come back to that. It's mainly due to the one-off, positive one-off, that we had last year. Probably you remember, but Trump tax reform.Let's move on, revenue growth. Of course, there was a big impact this year of currency effect, which was mainly dollar for EUR 75 million roughly; and 2 major, I would say, South American currency, reais and Argentinian peso, that both of them were exactly around the same amount of EUR 70 million. So you have a negative effect of currency of EUR 200 million. Without this figure, we will have achieved something like 4.6, 4.5 -- more than EUR 4.5 billion. Of course, the change of scope is mainly here Intelenet that has been consolidated for the last quarter.And you have a like-for-like growth. I'll -- just wanted to stay a minute on the figure. It's EUR 356 million. It's a big stuff. It seems to be a percentage, but at the end of the day, it's a lot of money. And I just wanted to make it clear. If we -- if -- I'm stopping on that because I just wanted to highlight the negative foreign impact change from the dollar and from the South American currency just to show that the dollar is still big in our figure. Of course, Brazilian real is big, but what you will see, and this is going to happen in the next year, is increasing part of the Indian rupee, of course, that will be more and more a negative, more than the Mexican pesos and others. And I just wanted to for you -- to give you the key for the next years to understand.Before we move to the precise figure, I just wanted to remind you the 2 stuffs that we are a bit on a regular basis giving you, just to have a look to the industry's breakdown of our business. I don't know whether you remember, but in 2013, what we called telecommunication, which is made of pay TV, telco and Internet, was 47% of our sales. It's now 20% of our sales, while of course health care and insurance have grown. Financial service has grown. Retail has grown. Everything has grown. And you have other, which is -- which are our new sector that Daniel partially mentioned earlier on that are climbing, climbing, climbing. And that's gives ability to grow in the future. So we have an increased contribution of business, e-player client. That's something that is interesting to keep in mind when we speak about Teleperformance.Second stuff, the concentration of our business, not a major change in the figure. Of course, it's continuing to decline for the first 20 and 50 -- top 20 and top 100 client. What is more interesting -- because we are following the path these 4 years now. And what is more interesting is that now today global accounts represent nearly 50% of the total group sales. And that is exactly the result of the discussion of the strategies that have been implemented over the last year, and it shows the resilience of the group across the world.Coming back to the figure. I know this slide is complex, but I just wanted to highlight 2 things. First of all, here you have for the like-for-like growth the breakdown by region, by core service and by specialized, which are 9%. And you have the same figure for Q4. Again if you go to Q4, I just wanted to remind you that we are accelerating this growth. We have a 10.8% growth, with fantastic figure in Ibero-LATAM, 15.2%; 17.9%.And again as mentioned earlier on during your communication, I'll come back to growth to EWAP. I'm just highlighting that point a minute because probably there will be question about cash flow later on. And when you grow at close to 11% in Q4, it means that your working capital is increasing at the end of the year, just to make it clear right now. As far as Specialized Service, I will come back to the breakdown of the growth in a minute, but what you have to keep in mind is that the growth of LLS is also booming and will continue to increase in 2019.At group level, we are achieving 9% growth. And I just want you to remind the figure of -- we had over the last quarter. We had 6.7% in Q1, 9.9% in Q2, 8.3% in Q3. When you deliver a 10.8% Q4 over this figure, it's increased the figure and gives confidence for the beginning of the year, of course.EBITA margin. Just a word about the margin, 30 basis point more, no surprise; a significant improvement in CEMEA, 210 basis point. Again, here I am going to stay a minute on that. Some of you were in the past speaking, asking question about Europe, especially our France, French-speaking market; and Italy; and all these country. We are back on track in Europe. Not only we are back on track in Europe in term of sales, but we are back on track in Europe in term of also results. There is no reason why in the future Continental Europe and Middle East, Africa should not be close from the EWAP market in term of margin. And I just wanted to highlight that point because it's a question that has been raised over the last years and we are in the right way to achieve that.Specialized Service again. And again I know you are disappointed by the growth, but I just want you to remember the question you raised us when we make LanguageLine acquisition: Are these level of margin sustainable? Yes, they are. Yes, they are. As you can see, we are close to 30% of result this year in term of margin, while in the meantime we have invest in 2 specific area which are Praxidia and also we [ belong ] to develop our R&D and commercial business across the network. So despite this investment in term of our costs, we are achieving 30% -- close to 30% margin that are sustainable, again.So let's come back to the region specifically. So English-speaking market, pickup in growth in Q4, 7% like-for-like. I just want you to remind the figures that we achieved in the previous quarter for sales, which were minus 1% in Q1, plus 1.5% in Q2 and plus 3% in Q4. So as announced, we are back on a growth path in EWAP especially in Q4. What we know in this market, that clearly the U.K. market will be -- probably has been flat and will be probably difficult to grow it in the future, but we know that, in the meantime, we have a dynamic growth in Asia driven by China and also by India that is doing well that has -- that has done well this year and will continue to done well -- to do well in the future. North America is, of course, driving the volume.There is a margin improvement. We are back on the level that what -- we used to know in the past. And we have a stronger growth in offshore activities, especially in Philippine, as planned and as disclosed earlier on; and back on with good margin in China and India.Ibero-LATAM, little to say. It start to be boring. 16% growth over the years, but main drivers have remained Portugal, Mexico. Colombia is good. Brazil is acceptable, is good too. And we are growing up in the -- in Peru. So nothing to say, that we are going to continue to grow at a high path in this region. The margin has been a little lower this year in term of rates. It's because we have significantly developed and developed CapEx and increased CapEx in this region, especially in Portugal and in Colombia. And a lot of ramp-ups were done in the Q4 this year but absolutely no doubt of the ability to come back to higher -- even higher level in Ibero-LATAM in the future.Europe, we mentioned that earlier on, 15% like-for-like growth. Just to be clear for those who don't know our Europe: Our Europe is without U.K., without Spain and without Portugal here. So with these -- without these 3 major countries, we are at -- we are close to EUR 1 billion sales. To make it simple, we are doing well in East and South Europe, while for the first time French business as a whole is starting to pick up. And we believe that, next year, we'll make for this market profit in Core Service. So as a consequence, we have an increase of the EBITA margin to 7.1%.Specialized Service. So here we have 2 effects: a growth that is only 4.3%, which is made of different stuff. As mentioned by Daniel a minute ago, we know that we had some negative one-off in Q1 on LLS and unfavorable comparison basis in Q4 that limit the growth. We know that TLS had an impact linked to the change of the contract with the U.K. government that reduced also the growth, but that's one-off. LLS and TLScontact are 80% of the Specialized Service revenue. It's true that we have another business that is ARM, called ARM, which is a debt collection revenue. That is going -- which is flat this year.So when you put that together, it leads you to a 4.3% growth, but if you take that out, I would say this figure -- which would be significantly higher. And we do believe that, in '19, especially in LLS, we should have significant growth more than 5%, significantly higher than 5%, while TLS will be probably still not growing dramatically given the length of the contract. These contract are 3-year contracts. And we have no big contract to be closed in 2019, but a lot of thing in the pipeline. Despite that, either LanguageLine solution and TLS has delivered the best results that they ever made either in term of volume and either in term of rates. And I just wanted to make it clear. It's not seen here because we have some sales and R&D investment which we have made this year in Praxidia and Wibilong.Just to mention Intelenet, which is the -- only the Q4. Of course, this part of the business will be consolidated full year next year and will be split across the D.I.B.S. division, as mentioned by Daniel a minute ago. Profitability is on track. The 17.7% (sic) [ 13.7% ] is including, if I may say, holding costs. That means there are some costs that have been paid to the group at this level. So that means that the Intelenet business delivered more than 13.7% on an organic base.Coming to the P&L, again I will say on this part of the P&L, starting from the EBITDA, little to say, except that we have less, I will say, nonrecurring items this year and impairment of assets. We have our amortization and depreciation and -- of intangible asset charge which is in the range of EUR 90 million, as always. Last year, we had an impairment of goodwill of EUR 67 million, which was a one-off.On term of nonrecurring item, very few things this year, a EUR 23 million which is performance share plan. All these stuff are, of course, noncash. And you have other, which are 2 things: the cost of the acquisition of LLS. And I'm telling that, for those who are here, we are speaking of an amount which is less than EUR 5 million for a company that was worth $1 billion. So we paid less than EUR 5 million. And we had some additional costs linked to the change of the visual identity that we wanted to highlight here.So that's the reason of the [indiscernible] growth of the operating profit at 36% at EUR 485 million.If we move now to the end of the P&L financial results. And again I just wanted to highlight one point. We have the same figures on last year, but with EUR 800 million debt more, and I just wanted to mention that. So that means that the cost of the debt has been under control and will be under control. I'll come back in a minute to that.Income tax. So I'm going to stay a minute here. Last year, you'll remember that we had a positive one-off from the U.S. tax reform on the deferred tax liability of EUR 131 million. That is disappearing this year. And the level of current tax is EUR 122 million versus this year -- exactly the same amount. What is interesting is that the effective current tax is reduced. So we have an effective current tax of 33% last year, while 28% this year. I do not anticipate for the next year, I'm answering the question in advance, that we will be able to significantly decrease this 28% in 2019 and 2020.So after, little to say that we land the net profit at EUR 312 million, like last year.Cash flow. I know there are plenty of question here. So I'm going to stay a minute on the cash flow because, from what I read this morning, everybody is happy with the result, but there are mixed feeling about the cash flow.Two things. First thing is there is a EUR 25 million of negative one-offs that you probably missed. Of course, you'll remember that we made a provision last year to reduce the number of people in France. That caused a lot of -- that has been paid this year, and this is a one-off. Second stuff, you have, of course, the cost of the acquisition of LanguageLine for EUR 5 million on top of that. That will disappear next year. So you have EUR 25 million of one-off cash out that will disappear. Secondly, when you have -- when you are growing at 11% in Q4, you increase your working cap. You could be as good as you can. It's a difficult way to avoid that. I just wanted to tell because I am here, as the people of the finance division, Mr. [indiscernible] and Mr. [indiscernible] that are here, that we collect in January and in February a lot of money. I can tell you we have plenty of cash as we speak, and we collect the cash. We collect the cash. Secondly, you cannot grow at 10% without making CapEx. And of course, last year, it was 3.5% in term of CapEx, and we are here at 4.4%. That mean EUR 50 million more CapEx this year, not a surprise. We do anticipate to stay in this level for the next coming years.And finally, the tax. I know there are question about the deferred tax, about the cash in the P&L and the cash in the -- the cash paid. In the P&L you have the cash paid and you have the deferred tax. So first thing, the deferred tax is increasing, linked to the acquisition that we made in India with Intelenet. Second thing is the cash -- the tax paid is mainly based on last year figure. So that mean, at that time, you had full year of LLS at the time where the level of rates in U.S. were significantly higher than it is today. So that is the reason of this huge tax, difference between tax rate and tax paid. We are going to see that later on and, I would say, coming back to something which is much more normal. And there is no reason to be afraid of this level of cash flow for this year. We do anticipate for next year -- for this year a higher cash flow, of course.I'm now going to spend some time on the balance sheet, but just a quick stuff on the results.So we have our net free cash flow. We have the financial investment which was LLS; the dividend; others, which are mainly led by the FX impact of EUR 92 million. There is a mistake here, I'm sorry, about the level of the dollar in -- closing dollar, which is $1.15 and not $1.18. I'm sorry to mention that. That has a huge, a significant impact on of -- on our debt close to EUR 92 million and after we bet some -- we bought some shares and we had some repayment. So that's the reason why the debt is at this level but without FX impact will be much more at 2x. So the pro forma net debt versus EBITDA is 2.6x, and we do believe that we should be around 2x by the end of this year.Just a question about debt. Again, you saw that the cost of the debt was under control in 2018. It's going to be more under control in 2019. It will be below 2%. The average maturity of the gross debt will be less than -- which is a little less than 5 years. We are diversified. We are secured. We are protected against a potential increase in rate. So we are absolutely sure that there is no risk linked to our debt. And we are working to confirm our BBB rating and stable outlook by Standard & Poor's, and I'm really confident about that in the next weeks.Finally, we are going to increase the dividend to EUR 1.9.What is the outlook? Just to finish. 7% like-for-like growth. I remember [ you said ] last year we were at 6%. And an increase of 20 basis points in EBITA margin from nonrecurring item; and of course, strong net free cash flow.So I think we are now ready for taking your question.

[Antonin Baudry, Analyst]

Yes. Antonin Baudry, HSBC. I have one question about growth and the sustainability of this growth. Can -- would it be possible to split the growth between your existing clients, the new clients; where you see the more opportunities to grow new sectors? How do you discover all this growth every year? And how do you manage this growth in terms of people, building? Is there a risk on that?

[Daniel Julien, Executive Chairman & Global CEO]

It's not a question.

[Olivier Rigaudy, Group Deputy CEO & Group CFO]

It's a strategy.

[Daniel Julien, Executive Chairman & Global CEO]

I would say that, first, the activity that knows the highest level of growth, as I said, comes from the e-sector, whether it's e-commerce or e-services, because this sector grows super-fast. And we are well present in these sectors. I could probably add something, which is that our group tend to be pretty well known in the Silicon Valley. And this is a place where a lot of companies are growing faster than the average of the world. Now our growth is always made of 2 component, which is the farming, which is the development of the existing client; and the hunting, which is in fact to get new clients. At this stage, the growth projection that we have for 2019, I will say, already secured at probably 80% ratio. And we are just 2 months done within the year. So except drama, we do not expect bad surprises. Now it's true that our growth depends of the global environment, political and economic. And of course, when the world is at peace, open and flat, it's much better than when the world build walls, because when you build walls, you do not create just friends and so it doesn't help the global companies to continue to extend in some markets. So we also have to deal with some challenges. And where I -- where we feel confident is the fact that, due also to the digital transformation, more and more it's impossible for a company not to be super rational about the equation, quality of service and costs, that they deliver. And we think that we are going to continue to see a drive towards more outsourcing. And here I would tend to say that, as years after years, Teleperformance leadership and reliability is more recognized. This strengthen our position as a potential preferred partner for the different companies. Just to give you another example: Remember, I take that because Olivier showed it, 5 years ago, we were probably in this room and it was all about the fact that the telco business was 50% of Teleperformance and so on. And would we be able to continue our growth and to diversify and blah, blah, blah. Right now this is 20%...

[Olivier Rigaudy, Group Deputy CEO & Group CFO]

Yes.

[Daniel Julien, Executive Chairman & Global CEO]

Sorry. This is 20%. So, yes. I mean the limit our growth right now are our own limits. And of course, it means our own limits are made of our capacity to hire, to train, to retain the best possible workforce from the very first level of production to the top management. And here I can tell you, if there is something that is strong at Teleperformance, it's the seniority of the top management. It's not a company where people are on the street sending their CV to the competitors. So all the components seems to be okay. Is it okay as an answer?

[Antonin Baudry, Analyst]

Just the split between the growth between existing clients and new clients.

[Daniel Julien, Executive Chairman & Global CEO]

I don't have it just like that, but I would say that typically the growth of existing clients is necessarily not very much more than the average growth of the economy. And so what makes our superb growth is either the new clients that are on and so there is a bunch of new clients that are on or because we are increasing our share of wallet at existing clients. But here I don't have the exact details because there are plus and minus. And there are also existing large client that used to grow fast and now are not going to grow as fast and so on.

[Olivier Rigaudy, Group Deputy CEO & Group CFO]

Patrick?

[Patrick Jousseaume, Head of Mid and Small caps Europe Research]

Patrick Jousseaume, Societe Generale. I have 3 question, please. The first one is on CapEx. You mentioned a CapEx 2019 in line with 2018. Is it as a percentage of sales or in million euros? Second question, on Intelenet. When you made the acquisition, you mentioned that you want to propose Intelenet solution to your existing client base. When do you think you will be able to, let's say, present successes in this field? And third question, you acquired Intelenet for $1 billion. And when you look, when we look at the cash flow statement, there is only, if I may say, EUR 760 million, which seems to be a bit light for $1 billion.

[Daniel Julien, Executive Chairman & Global CEO]

He answer to all the numbers, and...

[Olivier Rigaudy, Group Deputy CEO & Group CFO]

CapEx is in percentage. And as far as Intelenet is concerned, this is $1 billion enterprise value, and we assumed some debt from the seller. And I'm not going to enter in detail about that, but it was the way we structured the deal.

[Daniel Julien, Executive Chairman & Global CEO]

So now the Intelenet acquisition, a few months after, 5 months after, is extraordinarily smooth and positive. We have 2 goals with Intelenet. One is to present Intelenet to our large client platform to get more end-to-end services in the English-speaking world. And this is in action, okay? But okay, typically at Teleperformance, to deliver a client, it's like for the human being, 9 months minimum. So I can tell you the -- not the Intelenet, the Teleperformance D.I.B.S. team. Intelenet doesn't exist anymore. So the Teleperformance D.I.B.S. team and the Teleperformance teams in the English-speaking language are very much in activity teaching, explaining to our clients our enlarged expertise. The second point is with Intelenet we want to create center of excellence of end-to-end services in other languages. I can tell you that for the Spanish language, it's already done. I mean the teams are in place. It's already done. It's based in Colombia. There is already a head of D.I.B.S. in Colombia, and it's in action. There are some business analysts that are around that maybe went to Colombia not a long time ago and could see them -- see that in action. We still have to make it a reality in the Portuguese world, which is pretty well advanced. And then for Europe we are going probably to make it a reality, but it's going to take a few more months. In the multilingual hub of Athens. And as soon as possible but also with a strong anchor client, we plan to have one center of excellence for Digital Integrated Business Services in -- probably in Tunisia for the French. So the answer is everybody is at work, but it's exactly like to make a couscous. You don't make it in 5 minutes, except if you buy precooked couscous.

[Olivier Rigaudy, Group Deputy CEO & Group CFO]

[indiscernible].

[David Cerdan, Equity Research Analyst]

David Cerdan, Kepler Cheuvreux. 2 question for you. First is for LLS. You said that you expect the trend to accelerate in 2019. Can you explain why you expect such a performance in 2019 for LLS? Second is regarding your Intelenet. Is it the same kind of cash transformation for Intelenet versus Teleperformance? And can you give us maybe a guidance on free cash flow you could expect for 2019?

[Daniel Julien, Executive Chairman & Global CEO]

Okay, as usual, Olivier for the numbers, and I will answer for LLS.

[Olivier Rigaudy, Group Deputy CEO & Group CFO]

So we are not going to give you a detail of the cash flow, but clearly the one-off will be disappearing. It's too early to tell you. So as far as CapEx is concerned, take 4.4%, 4.5% of the sales that you expected for 2019. I don't know what will be the level of dollar because it doesn't impact. So if you put that together, if you take marginal rates that I just mentioned, you should significantly increase by a certain amount of million in the cash flow. I'm not going to give it because I'm always very cautious about the working cap [ and also ] like that, but we should significantly increase CapEx. Lastly before leaving the end to Daniel, you don't raise any question on France [indiscernible]? Or just...

[Daniel Julien, Executive Chairman & Global CEO]

No. I would like to stress one point, which is that, and this is deliberate, as a global company, we are probably one of the global company that continue to have this level of investment without any doubt on our strategy. We are obsessional about creating the best possible tool for the market. And so we are never going to compromise to have a better bottom line, the CapEx level. Of course, we control. Of course, we make sure that we control, we benchmark, but we are very bully in developing our capacities. Now regarding LLS, I don't expect to have such an incredible dynamic in 2019. It's just that, first, I don't expect to have the glitch that we had in communication and that [ hurted ] us for 2 or 3 days of production in LLS in 2018. Second, as 2018 was [ not unanswered ] by any FEMA -- I mean, disaster recovery -- U.S. government disaster recovery program, going back to normal, the growth of LLS should be more than 5% definitely. Then there is something that is going well. First, LLS is a beautiful machine at all levels. And there is something going very, very well, which is the development of the video interpretation. You know LLS is still mostly an over-the-phone interpretation service, but more and more and specifically in the universe of the hospital, the patient and the doctors love very much the video services. And this can trigger even more growth. I don't want you to dream about an exceptional growth of LLS. It just is going to continue to grow. And the company is strong, strong, strong.

[Olivier Rigaudy, Group Deputy CEO & Group CFO]

France is doing well.

[Daniel Julien, Executive Chairman & Global CEO]

It could do better.

[Stephen Loynd]

Stephen Loynd, Frost & Sullivan. Daniel, if you could -- in the context of exponential technological change and the globalization of ideas, if you could take us all on a journey into the future, say, 10 years, what do you see? What are the highlights for you? Where do you enjoy getting on a plane to go see the business? What's the most exciting? And at the same time, what are some the challenges of that future world that you see?

[Daniel Julien, Executive Chairman & Global CEO]

The challenges that we have are the challenge of everybody. The very first challenge is, in 10 years from now, are we still be alive as human being, or are we be just robots? So we should ask the question to Ray Kurzweil, who is the champion of the Singularity University and who explain us how we as human are going to find our [ growls a day ] we are going to leave our biological nature. So coming from that, the question mark is much more what is going to be the role of the bots, of the artificial intelligence. Are they going to replace our wives or our husband? Or are we going to see a backlash? To me, I think that we are going just to integrate the artificial -- the beauty and the power of the artificial intelligence to enhance our capacities. And I'm a super optimistic guy regarding the role of the artificial intelligence because I think that in our business specifically it's going to -- they have probably 20%, 25% of the interaction that we have that can be done without the support of a human being. And that is going to be freed, but at the same time, what do we notice? We notice that the mass, the volume of the one-to-one interaction is ever growing because the world is more complex and because the customer are much -- are more and more empowered in their mind to interact directly with the companies they buy a product or service from. So we are going to have more volume of interaction. From this more volume of interaction, there is going to be all the simple one that are going to be much more digitalized. And the level of the business that we do is going to raise in proficiency. So I really think that this is calling for multiskilled agents for moving from the current LOB and queues that still exist too much to real omnichannel services that do not exist so much due to the heaviness of the IT legacy of the major companies of the world. And I think that my take is that it's exactly like the cars. You used to have in Europe the car with the shift, and then we Americans, we have the automatic cars so nice to drive. I think it's going to be somehow a little bit the same. We are going to have assisted agents with all the data so they are not going to waste a lot of time searching the right data in the right place. And they are going to be free to enter in more empathetic relationship with the customer. And this is where we are going to see, according to me, a revival of the sales, I mean of what I call as service to sale, because each opportunity of contact is an opportunity of sales. Not only sales of -- you resell the relationship. You sell an additional service. You make sure that every single point of touch is a way to increase the stickiness with the customer. That's my perception.

[Olivier Rigaudy, Group Deputy CEO & Group CFO]

[ Thank you, sir ]. So we had some question coming from [ our friends ] -- our wording has changed from confident to committed. So let me read the question. Your wording has jumped from confident on margin improvement in EWAP and CEMEA last year to committed to improvement this year. What explains this change of confidence? Are there any concern of wage inflation in the U.S.? Secondly, how quickly do you expect the second half site expansion to get full utilization? Thirdly, what proportion of your client are now omnichannel client. Thank you, [ Ed ]. I don't see you, but we are -- I don't know whether you have to elaborate so much on...

[Daniel Julien, Executive Chairman & Global CEO]

Yes, yes, it's a super precise question, set of questions. First, the change of wording from confident to committed. I am not so sure that we were so cautious in our semantic, but okay, I can live with committed. I can live with committed. I'm going to put a little bit more pressure of -- on our teams of EWAP and CEMEA, telling them that I am not only specifically confident, but we said we were committed. But I would like to say something: When we say we are confident, it means that we are committed because we hate to disappoint. I will say the beginning of the year start mostly with good news than with bad news, even if there are areas where some of our clients are not going to grow, as usual, for multiple reasons. How quickly -- do we have any concern on wage inflation in the U.S.? Of course, of course. More and more state, more and more cities make, pass laws saying that the minimum wage should be $15 an hour in one place or the other. And it's obviously endless discussions with our dear clients to get the contract adjustment to wage inflation, but at the end of the day, I would say the relationship we have our -- with our clients, we are partners. We work with our clients for 5 years, 10 years, 15 years, 20 years. The average seniority of our clients is probably 13 to 14 years, but it's because we add new clients every year. Our -- my longest-active client is a French client. I'm probably the oldest employee of this client -- I mean almost employee. And it's Orange. I think we've worked with Orange for more than 35 years. So what does it mean? It mean, when -- that is a little bit like in a couple -- in a married couple, excuse me. Yes, you go through discussions. You go through a lot of things, but you have the same interest to make the formula continue to work. Everybody tries a little bit, but at the end of the day, nobody break a formula that works well.Then how quickly do we expect the 2018 site expansion to get full utilization? It's a super complex question because, first, the very nature of our business is that it's almost impossible to have a full utilization towards the year just because of the -- a simple phenomenon that is called seasonality. And when you have a lot of clients in the e-commerce business; or for the U.S. people who can listen here, in the health care, you know that you have a super high seasonality during the last quarter of the year. What it means: It means that you need to build your capacities for the last quarter of the year, but in some other quarters, you don't have the same level of utilization. So if I would give a simple answer to this question, I would misled you. Now to be clear, we never make investment without a clear ROI and a clear objective on the ROI. And everything that has been authorized by the group was because we would have the need to use it in 2018 and, the latest, by the end of the second quarter or the beginning of the third quarter. Because when you make investment, it takes time to make the investment. And then it takes time, even if you have a client, to hire the people. You have 6 weeks, 8 weeks training. So before to be in full operation, I mean, there is some latency.Okay, what else? What proportion of my clients are now omnichannel clients? Still too little. Why do I say, still too little? It's because Teleperformance has a beautiful omnichannel solution called TP Client. That's works extremely well connecting in any kind of CRM platform, but the world, the corporate world, doesn't change so fast its own habits in terms of organization. So we are ready to have more than that. Everybody is about omnichannel. Still today omnichannel is a minority.Okay, 2 question. Can you indicate the level of holding charge? That's for you.

[Olivier Rigaudy, Group Deputy CEO & Group CFO]

No, that, Intelenet will pay to the group for in full year 2019. Intelenet is going to pay the same level of charges that the -- that all the division are paying to the holding. So there is nothing which is material that has to be mentioned here. I just wanted to mention the reason why I mentioned it for 2018. It's because it is -- the figures that were disclosed was not -- was including this charge. Keep in mind that, next year, Intelenet will disappear, anyway. You will have a D.I.B.S. division. And the level of the D.I.B.S. division -- charge that D.I.B.S. will pay will -- exactly is the same than -- they are going to pay to the group than the other division.Are you able to indicate the likely margin for Intelenet's cost service and D.I.B.S. activities this year [ allowing this charge -- for this charge ]? No, it's too early. We are going to disclose that much more precisely next year. We are working, as we speak, to structure all the group reportings this way. So you will have probably that -- you will have the sales in Q1, and you will have the results by the end of -- for the first half.Can you indicate the level of EBITDA profit or loss in France in full year 2018? How big will be the benefit of [[indiscernible] charge taking in full year for 2018, for 2019? There will be no charge in term of figures that has been recorded in '18 as a restructuring for France for '19. There is no charge. Those charge was [ done ] in '17. So there is no charge, additional charge that has been recorded into our accounts. The level of EBITDA, of profit or loss in France in full year 2018: The French market is still losing a little in 2018. I'm not going to disclose that in detail, but what we are sure of, and given the contracts that have been signed, second part of the year in 2018, that the group will deliver profit in 2019, which mentioned by Daniel could be significantly higher than it is. But at least I just wanted to mention that, since the last 10 years, it's the first time that the French market will be in profit.Is the operating margin on Intelenet seasonal for its Q4 a fair indication of the annual level? It's, look, there is little seasonality in Intelenet. So it's going to be -- it's a fair indication for the annual level. Again, again I just wanted to highlight the fact that, next year, you won't have it any more, Intelenet as a division. So it will be part of the D.I.B.S. division that will be disclosed.That ends the questions we have on the tablet. And I don't know whether there are still other question on -- in the...

[Daniel Julien, Executive Chairman & Global CEO]

Maybe last question...

[Olivier Rigaudy, Group Deputy CEO & Group CFO]

Because you need to leave me.

[Daniel Julien, Executive Chairman & Global CEO]

Okay, the 2 last question.

[Olivier Rigaudy, Group Deputy CEO & Group CFO]

Two last question.

[Daniel Hong]

Daniel Hong from Forrester. So over the last few months, I spent a lot of time with senior leaders from customer service. In fact, a lot of them are your clients. And the #1 prevailing theme or challenge that they face is increased average handle time because calls are becoming more complex because of proliferation of self-service. So I guess my question to you: I'm curious to hear your thoughts of, in order to have the agent take these more complex calls, do you need higher-skilled agents? And do you need to pay them more? And what does that do to your strategy and retaining talent and having to pay your agents more?

[Daniel Julien, Executive Chairman & Global CEO]

I love this question. My dream for the majority of the industry is that this industry is going to be managed significantly less with productive [ business ] and more with qualitative [ business ]. At Teleperformance, and this is a multiyear program, change program, on what we call the human touch, we redefine every step of the HR policy. In the recruitment, make sure that you adjust as much as possible with the required profile, thanks to predictive model, thanks to psychographics, in order to have a better adjustment than just this quantitative need to ramp up because it is the season. But the world is not perfect. And as the world is not perfect, we will never be perfect. Second, in the training we are reviewing all our training material, first, in content to put much more empathy and emotional intelligence and soft skills; and in the material, to be much more 21st century material because our agents are Generation Y. And very soon, they are going to be millenniums (sic) [ millennials ]. So I want much more gamification in the training. I want something much more interactive, much more simple, much more fun, much more engaging. In the coaching, Teleperformance has made significant breakthrough in order to have much better resulted with the -- results with the coaching. Maybe some of you are aware about our coaching labs. Because you discover that sometimes a coaching is not as efficient as you want not because the guy you coach is an idiot but because the coach is not so smart. And so we are taking the problem by the roots. We start with the coach. In the management -- and that is something very important. I want really to -- and because we have this frame of the Six Sigma as an operational management system, I want really to evolve from a kind of army-style management to a management with a purpose. What means -- what does it mean? In -- a management of a -- with a purpose is to help every single individual working at Teleperformance to reach his max -- his or her max potential. What does it mean? To reach his or her max bonus. Because if we -- if -- the way we manage the people are in a way to make them more adequate in a more fun environment where they have the feeling that the sky is the limit. And if you make them work in a super environment -- and that's the reason why I'm so obsessional also about the quality of the workforce -- the quality of the workplace, sorry. And that's the reason why also I am so obsessional about corporate social responsibility and about the engagement of our employees and managers in citizen of the world, in citizen of the planet. Because all that make an ecosystem that is changing the -- I hate to -- our assets, the employees, from being just quantitative assets to being qualitative assets. And then AHT, average handling time, is definitely not the best metric in our business because it's a super contradictory metric with the purpose that you want to reach, which is the FCR, the first call resolution, which is the employee satisfaction which is not enough -- not the employee -- the customer satisfaction which is not enough. Because what you want to create is the customer delight. And here if you have customers that become really promoter, here you have made your job. And for me, the customer service is the way, the one-to-one interaction way of making advertising in the 21st century, okay, in short.

[Olivier Rigaudy, Group Deputy CEO & Group CFO]

Last question [indiscernible].

[Daniel Julien, Executive Chairman & Global CEO]

Yes, yes, last question because I have a train.

[Nicolas Tabor, Analyst]

Just quickly. Nicolas Tabor from MainFirst. Just quickly: Will there be new other nonrecurrings like PP amortization next year? Do you have a guidance? And could you give us some idea on your M&A pipeline? Do you have visibility over the next 2 years? Do you have already -- are you already in discussions? And at what leverage will you feel confident that you can pursue this new external growth before 2022?

[Daniel Julien, Executive Chairman & Global CEO]

Okay, on the external growth, first, strategically there will be growth. Tactically, I'm not so inclined to make an acquisition in 2019, but if there is an incredible opportunity, maybe we will consider. But it's not in the planning. We are very -- I think that we are very confident. We feel very comfortable with making acquisition of companies that are significant, but that do not create an identity struggle for the culture of the group, so any company that is between 500 million -- between 300 million and 1 billion is interesting by nature. If this company is well run, if this company has -- what does it mean, well run? Satisfied clients, satisfied employees, good bottom line. So we are only interested by this kind of companies. And if we can pay the company at a decent price, which means we don't want to pay a price that is higher than the multiple that the markets give us. That's it.

[Olivier Rigaudy, Group Deputy CEO & Group CFO]

And in term of amortization of goodwill, let's put this way. It's an average. Let's put 30 million more linked to Intelenet.

[Daniel Julien, Executive Chairman & Global CEO]

So we want to thank you very, very much. Unfortunately, I need to -- I have to leave this beautiful country to go to another beautiful country because I have to go to London. Bye-bye.