IRM
#No, I think we're happy with the capital structure that we have at the moment, having paid off the very high interest notes that we had.
Effectively what we are looking to do is hold what we have, see what happens through the Recall deal, which, as I say, we anticipate trying to close in early Q1, which we're still working through the regulatory process there.
It gives us some capital to assist with that closure, if you like.
But we're going to hold what we've got and see how we get on with Recall.
I appreciate the question.
I think, as you can imagine, the regulators like these discussions to be kept confidential as we go through them.
But just to give you guidance, I think it's pretty much what we said at investor day.
We are engaged with the four regulatory authorities that have shown interest in the transaction, which is US, Canada, the UK, as you mentioned, and Australia.
We feel that we are well engaged with those authorities so on track for a Q1 close.
And discussions are ongoing.
Where we sit today we feel good that it's in line with our expectations when we set out on the course.
Nothing has changed.
Generally, these things take 6 to 12 months when you go through a regulatory process in the United States, for instance.
But we continue to guide at the lower end of that range because we feel good where we stand.
You're right.
You've watched this for a long time.
There are ebbs and flows.
I am not sure you can always do the cause and effect between term outs and destructions, and customer withdrawals.
But I think there is ebb and flow between the two.
And the other thing I should point out is the new sales growth is part art and part science because some of that new sales growth comes from existing customers.
And it's in that split between new sales growth and what comes from, quote, existing customers is as much to do in terms of the way the compensate our sales force.
In other words, if they get some growth out of an existing customer but we deemed it as a new area or new location or new department, then we call that a new sale.
So, I think there is some ebb and flow between the two.
And, as you know, if we look at the heavily regulated industries, which is a big part of our business, a lot of that is affected by different litigation that's going on around the world.
So I think there is some cause and effect but I wouldn't overplay it.
There's a certain amount of randomness to it.
I will let <UNK> answer that.
I think just on a high level, there's a couple of things.
One is, if you even look over time, we're pretty good at driving productivity out of the business because when you start off, what I was saying earlier, is that we get currently in this low inflation environment we get somewhere between 0.5% to 1% increase in price.
Obviously our labor cost in certain markets goes up faster than that.
So, we continually drive productivity through the business, and that's what really drives our OIBDA growth.
And then I think you can expect, also, when some of the transformation gets fully realized, now that we are through most of the restructuring costs in this quarter, you can expect that will even pick up a little bit more.
But, <UNK>, you may comment further.
Yes, maybe just to build on what you're saying.
You're obviously right in terms of the point that was made.
If you look at our guidance, take the C dollar guidance that we updated at investor day, in effect what we're saying is that from a revenue point of view we see our sales at the middle of the range.
On contribution we see our sales more towards the higher point of the range and obviously therefore the OIBDA margin goes up.
Really what's behind that is the work that we've been doing on efficiencies around service margin and also around the transformation efforts that we have referenced.
Some of that has come through in 2015 faster than we originally anticipated when we set the guidance back in January.
And really that's was behind the improvement we are seeing.
I think on the emerging markets we are seeing it pretty much across the board but it depends on the size of the base.
For instance, I just came back from Eastern Europe and took a couple of members of the Board along with me so that they could see up close what we are doing out there and also see some of the talent we've got.
Eastern Europe continues to grow extremely well.
So, does Latin America.
The challenge in Latin American, Brazil, which is our largest operation, for instance, in terms of growth, if you measure it in Brazilian real, it is strongly double digit and continues to do well.
The issue, of course, in places like Brazil is the translation of that because the real has been under pressure.
And then Asia, which is a smaller portion of our portfolio, but again has very strong growth rates, whether you look at India or you look at places like Hong Kong, Singapore and China.
The one thing I would point out, though, is that in markets ---+ even markets like Brazil where we've been under pressure from a real standpoint, when you translate that in US dollars the growth may be muted slightly ---+ is we've also been able in some of these cases, like Brazil, been able to borrow locally in real, which has helped hedge some of that translation.
I would say pretty much across the board we haven't seen any slowdown in the emerging markets.
And all the countries typically run in that low double digit of internal growth before acquisitions.
Obviously we deal in quite a number of currencies in terms of what's impacting our numbers.
And I think in terms of the short-term impact, where we've seen the hit has been Canadian dollar, Russian ruble, Aussie dollar, the Brazilian reais, and Colombian peso.
They have been hitting us during Q3.
If you take a longer-term view, so more looking year on year, then there's wider effects coming in from sterling, in particular, where obviously we have quite a significant business.
The only thing I'd like to add to that, <UNK>, is that, whilst you are seeing the FX headwinds in revenue, you'll notice that it gets muted pretty quickly as we start going through the OIBDA in the EPS line.
And where we are at a stage is, in some sense, the timing is not bad for us because we are using strong US dollars to invest and build out this portfolio, which is still relatively small portion in terms of the countries where the currency is mostly impacted, which is in the emerging markets.
I'm not saying that the other markets aren't a factor.
If you say 40% of our sales are in foreign currency, but the currencies that are impacted typically are in that little less than 15% emerging market area.
And those are areas where our OIBDA margins at this point are lower because we're building scale in those markets.
So, we're taking strong US dollars to build out these markets right now.
And their impact, even with the negative FX impact, the impact on OIBDA in the earnings is muted.
It's obviously fully affected at the revenue line, but when you see what happens to earnings it is muted.
I agree, you need to model it out, but the earnings is not as sensitive as you might think to the FX; whereas, you do see the full sensitivity on the revenue line.
That's why we felt comfortable about already starting to increase our dividend because we feel that we've got enough momentum in the business that we can continue and start back on our growth trend in terms of dividends.
No, nothing particularly unusual in Q3, obviously other than the fact, we actually booked the $9 million restructuring charge, which actually lowered the margin slightly.
I think as we look to Q4, again sitting here today, I am not seeing anything particularly unusual that should come through.
Obviously we won't have a repeat of the $9 million charge and there will be some benefit from that actually hitting us in Q4 as a result of the slightly lower cost base.
But other than that, I think it's pretty much steady as she goes.
Sure, <UNK>.
Let me start off and then <UNK> can add any color that he thinks that I missed out.
I think first let's look at the revenue growth.
If you go back, say, to Q4 2013 and just look at the number of quarters, you will see that North American storage rental revenue growth has gone negative 0.4%, negative 0.3%, plus 0.3%, plus 0.4%, plus 0.9%, plus 0.5%.
And then the last two quarters a negative 0.1% and negative 0.3%.
So, you will see, first of all, which I was referring to earlier, you'll see that moving around.
You can back into that through the supplemental.
On the revenue side, because, as you can appreciate, when we renegotiate large enterprise deals, that in any given quarter you can get a significant impact in terms of the revenue associated per cube.
So there's a disconnect between that volume growth.
Over a long period of time, though, if you look at the trend over a long period of time, we still see, if you take the revenue growth and if you look on an annualized basis, we are getting between 0.5% and 1% in terms of price per cube growth.
Then you get those two bits combined and that will give you a good guide in terms of what the internal storage revenue growth is for a particular market.
You're right to point out that we continue to drive significant, I'd say on a percentage basis, relatively small percentage growth in North America.
But in terms of volume, because of the size of the North American business, the large numbers, we continue to deliver a significant amount of organic cube volume growth in North America.
And over a 12-month period you should think about 0.5% to 1% price growth on top of that cube growth.
But any given quarter, depending on where we are in renewal cycles, especially for the large contracts, if you go back over the last 8, 9, 10 quarters, you will see that movement around where we'll have one or two quarters where it will be negative, two or three quarters will be positive, and it just moves around.
I think is what I think <UNK> asked earlier in terms of the to's and fro's customer cycles.
There is a bit of that.
I think also it's fair to say on a percentage basis it is coming down slightly, partly driven by customer activity, but a big part of it is just the large numbers.
So, if you look at the volume of cubes coming in, we're still seeing very consistently across the board 30 million cubes coming in on a gross level and, let's say, 40 million net coming in.
One of the things where you will see us try to even tap into another market which we think is quite large is what we're doing in the mid market.
I think if you look at where we are on the mid market side, I think actually I misquoted, is we're in low double-digit growth if we look at year-on-year bookings for new sales across the board.
But in the mid markets year to date we're up over 60% in terms of bookings in the mid market where we only have 10% market share.
So, I think there are some things where we can tap into, quote, another large market, but I think it is fair to say that if you look at our normal hunting ground, if you will, it's the law of large numbers and there is a limit in terms of how much more we can get from those customers.
It was actually predominantly to do with our data center business where we had some costs that were in the service line that when we really analyzed we thought they should be in the storage line.
So, that artificially enhanced the service margin in Q3.
We didn't want to give the impression that the true underlying run rate was 28.5% which is what we recorded.
it is more like 26.8%.
It was just a reallocation of costs following a more detailed review.
In that case it has a very minor impact.
So it doesn't affect our assets or anything in any meaningful way.
No.
Obviously we are subject to FX volatility, which during Q3 moved against us.
Actually if you looked during the first few weeks of October it's moved slightly back in our favor.
So, that can swing the numbers around.
But in terms the fundamentals of the business, it's relatively stable.
Okay, thank you, operator.
Thank you everyone for joining us.
I know it's a busy time for everyone.
But just to sum up, we are very pleased the way the quarter came out.
We thought it was a very good quarter driven by the continued strong operating performance.
And that's delivered profit that's at the upper end of our expectations.
So, we feel really good about the quarter and, hence, the recommencing of our dividend increases that we declared this morning.
Thank you, everyone, and have a good day.
