Jones Lang LaSalle Inc (JLL) 2003 Q3 法說會逐字稿

Good day and welcome to the Jones Lang LaSalle Incorporated third-quarter 2003 earnings release conference call. Today's call is being recorded.

Any statements made about future result and performance, or about, plans expectations and objectives, are forward-looking statements. Actual results and performance may differ from those included in the forward-looking statements as a result of factors discussed in the Company's annual report on Form 10-k for the year ended December 31, 2002 and in our other reports filed with the SEC. The Company disclaims any undertaking to update or revise any forward-looking statement.

A transcript of this call will be posted and available on the Company's web site within two days of this call.

At this time, we would like to turn the call over to Mr. Chris Peacock, Chief Executive Officer, for opening remarks.

Thank you for joining us for this review of our third-quarter 2003 financial results.

With me on the call today is Lauralee Martin, our CFO.

Let me begin by briefly summarizing the headlines for the third quarter. We achieved earnings in line with our expectations for the third quarter in a global environment that continues to show mixed market trends between regions and between countries.

The U.S. environment continues to display the best signals of improvement and we are securing significant wins, particularly in our Corporate Solutions business.

Asia-Pacific continues to shake off the disruptive impact of SARS with encouraging performance in North Asia and in India, reflecting the global outsourcing and offshoring trends.

Our global hotels business further reinforced its competitive advantage across the world, sustaining record performance with major transactions and new instructions in the quarter.

European performance continues to be fragmented with strength in UK capital markets, Spain and central Europe but continued weakness in Germany, France and the Benelux markets.

After Lauralee Martin talks about our results for the third quarter and our outlook for the fourth quarter, I will review recent market conditions, business highlights and also the progress of pursuing our strategic goals in 2003. Following that, we will be pleased to take your questions.

Let me now hand the call over to Lauralee to talk in detail about our financial performance.

Thank you, Chris. The results for the third quarter, net income of 7.4 million, or 23 cents per share, were in line with our expectations. Importantly, we continued to demonstrate and deliver strong cash flow generation, which is one of the financial success factors of our business model.

Although results were again mixed around the world, based on the varying economic conditions, the diversity of our services and our product offerings are starting to achieve stable revenue performance year-on-year -- being down only 2 percent in local currencies. This more predictable operating environment enables us to manage our costs with a focus on increasing efficiency while also investing appropriately to strengthen the value of the franchise, going forward.

Once again, we had very strong performance in our Hotels group. The Americas continued to experience a modestly improving environment with our outsourcing services having strong appeal for corporate clients who continue to focus on their core strategies and look to outside experts such as Jones Lang LaSalle to reduce their noncore costs.

Asia-Pacific again had strong growth in North Asia and India, but it has not yet made up the first-quarter impact of SARS in the poorest markets of Singapore and Hong Kong in its year-to-date results.

In Europe, we're seeing the UK market is more positive. Central Europe and Spain continue to experience growth. However, Germany, France and the Benelux region remain challenging economic environments for our businesses.

LaSalle Investment Management had lower revenues than the prior year quarter due to timing and incentive fees, as last year included a large incentive fee. The business expects equity gains by year-end to offset the majority of this incentive fee difference and in fact, already realized a large gain in the fourth quarter.

Year-to-date, we reported a net loss of 1.5 million, or 4 cents per share. Included in the year-to-date results is the non-recurring write-off for a property management system in Australia, which impacted results by 11 cents per share.

Our cash generation remains strong. We paid down our credit facility by $60 million from the prior year, bringing the revolver facility to 6 million t quarter end. Since the quarter end, we have paid off the revolver balance in total and are cash-positive. We are positioned to call a Eurobond issue in mid 2004 and refinance this debt with our multicurrency credit facility. The stronger euro increased the Eurobond reported book balance by $19 million versus year-end 2002. This is a currency translation, as we've not increased our obligation on these bonds. The Eurobond interest rate is a fixed 9 percent. Refinancing these bonds with our credit facility will significantly reduce the interest rate for our borrowings and as a result, lower our interest expense.

We are comfortably in compliance with our bank covenants this quarter. We continue to aggressively manage expenses. Operating expenses increased 2 percent in the quarter and 9 percent year-to-date, but in local currencies, they decreased 3 percent for the quarter and increased less than 2 percent year-to-date. In local currency, compensation expense decreased 5 percent for the quarter and increased only 2 percent year-to-date, principally due to the timing of incentive compensation.

Operating and administrative expense increased in local currency 6 percent but in comparison to a lower expense prior year, which included a 2 million bad debt recovery from the 1995 period. Year-to-date, excluding this unusual item and increases in insurance expense of 2.5 million, operating and administrative expenses actually decreased by more than 1 percent.

The third-quarter results included an adjustment to previous non-recurring charges that resulted in a net credit of 1.5 million. The actual cost incurred associated with previous restructurings are closely monitored relative to the original assumption and then adjusted accordingly. The adjustments relate principally to severance costs and the cost of excess lease space.

Net interest expense for the quarter was 4.7 million, flat to last year in U.S. dollars but 11 percent lower in local currency, as we continue to lower our debt levels.

We have lowered our estimated tax rate for the year to 32 percent, as compared to the 34 percent rate anticipated at the start of the year and 36 percent last year. The improvement in tax rate is due to proactive tax planning and management to efficiently manage our global tax positions. We continue to take actions to further improve the tax rate this year and are targeting to achieve at least a 30 percent rate by the year-end.

I will now briefly discuss our reported operating segments. In the Americas, revenues decreased slightly from the prior year, down 4 percent in the quarter, but this decline was principally due to timing as several capital market transactions slipped into the fourth quarter. Year-to-date revenues are up 3 percent.

Both the Project & Development Services and the Tenant Representation group continue to see business wins and the expansion of existing client relationships. We are pleased with the global and the regional synergies being achieved with our New York market expansion of last year. We've been awarded several high-profile leasing assignments, which will deliver revenues over the next couple of years as we execute leasings into these assignments.

The Americas operating income for the quarter of 7.8 million was up 1.5 million due to strong cost control and timing of incentive compensation.

Europe continued to experience the challenges of operating within a difficult economic environment. Revenues were up 10 percent and 7 percent in U.S. dollars, but in local currencies were flat for the quarter and down 6 percent year-to-date.

We are seeing a more positive UK marketplace, particularly in capital markets. However, the continent and the leasing markets broadly remain soft to down. Year-to-date, the major revenue declines were in the key markets of Benelux, France and Germany.

European expenses declined in local currencies 2 percent for the quarter and 4 percent year-to-date as the region maintained a focus on cost control.

European operating income for the quarter was 2.6 million, compared to less than a million in the prior year.

Asia-Pacific saw a 10 percent and 5 percent improvement in local revenues for the quarter and year-to-date. The increases were driven by North Asia and India, where we've expanded based on client demand as well as concentrating on building market share and positions. The revenue growth in these new markets has not been sufficient to offset the decline in the larger markets of Singapore and Hong Kong. Expense increases of 8 percent in local currency have offset the achieved revenue increases.

LaSalle Investment Management revenues decreased for the quarter and year-to-date 26 percent and 2 percent respectively. Annuity advisory fees continue to increase, being up 7 percent for the quarter and 16 percent year-to-date. Incentive fees, which have variability as to timing, were down significantly as the prior year included a large incentive fee from a client where our investment performance is measured every four years.

Equity gains are down from the prior year due to the accounting for impairment charges, which requires that impairment be recorded at the asset level while value increases at the asset level are not recognized until the asset is sold. Impairments taken for the quarter and year-to-date are 2.6 million and 3.7 million, respectively.

Fund performance overall continues to perform at generally expected return levels. We are anticipating equity gains from asset sales in the fourth quarter. The challenge for the investment business this year is investing capital prudently, as many markets continue to see real estate prices remain high despite underlying deteriorating property occupancy and rental rates.

The Group is focused on maintaining its excellent performance record for investors and as a result, is focused on selling assets to take advantage of a seller's market.

This completes my review of our third-quarter and year-to-date results.

Consistent with previous guidance, we remain committed to exceeding the prior-year adjusted results, excluding the one-time charge we took in the second quarter for the write-off of a property management system in Australia. As a result, our full-year guidance is to meet or exceed $1 per share on a GAAP bases, which includes the 11 cents charge for the system write-off.

We remain cautious as to transaction timing and the continuing economic challenges of Europe, as the majority of the total year profits are achieved in the fourth quarter. Let me now turn the call back to Chris.

You've heard from Lauralee the details of our financial performance in the third quarter. As she highlighted, the Firm continues to demonstrate real strength in cash flow generation and in the management of controllable expenses, while sustaining broadly stable revenue in very diverse market conditions. This success is enabling us to fund investment in a number of high potential growth areas around the world.

In recent calls, I have highlighted the strategic objectives of our global investment management, capital markets, corporate solutions, and hotel businesses. In this call, I would like to spend a few minutes describing additional successes in those businesses while also focusing on investment in emerging markets across the world where we are pursuing and achieving new growth for the Firm.

First, I want briefly to share my perspective on the regional economic environment which is influencing the success of our operations and execution of our strategy. The U.S. economic recovery is clearly accelerating in the second half of the year. Strong third-quarter GDP (ph) growth and early evidence of improvement in corporate profits and business investment are encouraging signals for commercial real estate.

In the property markets, deal flow and transaction volumes are growing across all the major asset types and low interest rates continue to support real estate's appeal to investors. Nevertheless, major markets continue to have significant vacant space that must be absorbed before revenue growth can be expected.

In Europe, the UK and Spain are showing significant economic growth but remained exceptions with most countries recording flat or negative growth. Business and consumer confidence are showing weak improvement, but the effect is muted by rising long-term interest rates and the impact of strong currencies on exports.

Capital continues to flow into the investment markets, particularly from private investors, and volumes are holding up well with the exception of Germany, where the weak market fundamentals remain a deterrent. European prime yields have been stable over the year, despite weak leasing market conditions that seem set to remain with rental recovery now not likely before 2006.

Asia continues to show signs of entering a new economic phase with strong growth signals in most markets, underpinned by the U.S. recovery. Despite the duel blow in early 2003 of SARS and the Iraq war, the speed with which a growth path is being restored demonstrates the underlying positive momentum in the region.

Continued rapid growth in China and recovery in Japan, driven by domestic demand, are important foundations for the region's future success. Office markets are seeing improved net absorption as corporate upgrade. There is very little new demand yet. As elsewhere, investment markets remained robust with low interest rates and international capital flows, particularly to the retail sector.

Overall, the global outlook continues to provide some encouragement, though conditions in continental Europe and the continued vulnerability to unforeseen global shocks of Asian recovery and indeed an U.S. recovery, demand continued caution.

A global recovery in the real estate markets remains difficult to call in the next twelve months. In this environment, Jones Lang LaSalle remains focused on our goals of driving growth and superior returns through the delivery of expert client service. We will continue to build our market share in business areas where we have clear competitive differentiation.

I want briefly to describe further successes for the key businesses I have reviewed in recent quarters. In July, we announced the success of our Corporate Solutions business in securing a five-year mandate across the world from Procter & Gamble for facility management and project management services. We are currently engaged in transitioning the people and the services involved to Jones Lang LaSalle in preparation for full global delivery in the first of January. I'm pleased to report that the transition is progressing extremely well and we're meeting a demanding schedule in all three begins.

On the first of November, we completed the transfer of nine European countries in addition to the U.S. and 18 further countries in Asia-Pacific and the Americas.

Our progress to date reflects our strong teamworking with the client, reinforcing the close cultural fit of the two firms identified by Procter & Gamble in their selection of Jones Lang LaSalle. This major global account will begin to contribute revenue from the first of January, 2004.

In the third quarter, our Corporate Solutions business further demonstrated its competitive advantage with new wins from major clients such as General Motors, Heron (ph) Consulting Group in the U.S. and Kodak and Flextronics in Europe.

In Asia-Pacific, we have secured a major instruction from Accenture to provide multiple services in India in support of the client's rapidly growing business process outsourcing and call center activity. This is just one of several substantial client relationships we're building in this high-growth marketplace, where volumes of activity and the demand for service are running at a much higher rate than predicted. We are investing in hiring skilled professionals for this market locally and internationally, particularly in Project & Development Services, in the confident belief that this will continue to be a source of growth for our business for the long-term.

Although resourcing is a challenging thing in the emerging market, enjoying this level of demand, our experience is that excellent service provided to clients as they establish their operations provide a clear competitive advantage and a basis for sustained and profitable relationships.

Staying in Asia and turning to LaSalle Investment Management, in the third quarter, we continued our acquisition activity for the Asia recovery fund, adding two further assets to the three assets previously acquired, representing a total investment in excess of $300 million. Four of these assets are in Japan, a new market for LaSalle Investment Management and an important one in which we have significantly raised our profile as an investor. This activity has been greatly assisted by the existing Jones Lang LaSalle presence in Japan to support the market (indiscernible) and due diligence.

In our last call, I described the success of our global hotels business in establishing a clear, competitive advantage as adviser to the owners and operators of the world's leading hotels. Since then, this position has been further reinforced by the Group's appointment to advise the Savoy Group on the sales of Clarity's (ph) hotel in London, by the sale of Intercontinental Hotels Group of the Mayfair in the Continental and by the sale of the Freehold of the Paris Marriott, the strategic hotel capital.

Also reinforcing our strategy of growth in North Asia, the Hotels Group repeated its first transaction in Japan (sic), disposing of a hotel in Osaka (indiscernible) an offering that attracted high-quality international interest, demonstrating strong confidence in this hotel market.

The Group achieved further penetration of Asian markets with its first disposition in Sri Lanka, the Hilton JIC Tower.

Turning to Europe, our geographic growth focus has been on the Swedish and Central Eastern European markets, which continue to attract high international interest and where we're building a strong market presence for our capital markets business.

In the third quarter, we completed our second office acquisition for (indiscernible) in Sweden, Hilton Two in (indiscernible) for $94 million. Digger (ph) is Germany's largest open-ended fund manager.

In Prague, we acquired the largest mixed-use shopping center, the Slovensky Doom (ph) development for German fund Saxon funds for $67 million.

In Moscow, we continue to build our market position, advising domestic clients. For example, we sold an 1800 square meter prime retail unit for a retailer, Carlo Patzaloni (ph), to a group of private Russian investors.

The depth of the local market knowledge we've acquired is increasingly attracting international investors to seek our advice as they begin to consider entry into this high-potential market.

As for India, we regard our investment in the Moscow market as a long-term one in what will be one of the major international growth areas over the coming years.

All of these examples demonstrate the continued success of our strategy to leverage the global platform of Jones Lang LaSalle and use our cash flow and balance sheet strength to pursue profitable growth opportunities wherever they occur.

I'd like to conclude by commenting on our outlook for the fourth quarter. Caution regarding the unclear economic conditions of key markets has led us to provide only general guidance for the full year on previous calls. Even entering the fourth quarter, it remains challenging to predict the precise outcome for the year, given the impact of deal timing and uncertain movements in market fundamentals and confidence. Nevertheless, we are committed to exceeding our performance in 2002 through continued success in our core markets and increased contributions from new business areas, as well as disciplined expense management.

Our sustained a success in providing excellent service to clients and securing new business wins will accelerate our performance when market conditions improve more consistently across the world.

Now, we would like to open the call for your questions, so operator, would you please explain the process?

(OPERATOR INSTRUCTIONS). Matthew Ostrower of Morgan Stanley.

I was hoping you could just comment a little bit further on the U.S. conditions. Chris, I think you talked about people upgrading their space. Last quarter, you talked about short lease durations. Particularly versus last quarter, has there been any noticeable change in the tenant rep business?

I think it's just a continual process of more activity at this time. Certainly, you know, we've had a busy quarter in our tenant rep group, but I wouldn't say there are any fundamental changes taking place. It is, I think, a growing confidence, but we're not seeing corporates really on the front foot yet, and as you know, there is a weight of vacant combination (indiscernible) most major corporates have warehoused some of their spaces that they can expand into first as things improve before they actually need to go out and acquire additional properties. So, I think it's going to take a little time before we see that net absorption statistic improving.

Then just on the fourth quarter, I know you've clearly expressed that there is -- and I understand it's a difficult quarter to predict -- seeing that we are sort of a third or so into the quarter, can you sort of -- not to get too granular but can you give -- is anything so far in the quarter surprising you, particularly versus last year's result in the quarter?

No, I don't think so. We've talked about a little bit of slippage in the third quarter into the fourth, and it's been gratifying to see a number of those deals actually come through to fruition in the first part of this quarter, so that's encouraging, certainly. I would say no significant changes from our expectation. You know, we've got a lot of work to do in the last quarter, there's no doubt. It's a very busy time for our people across the world but we're confident that we can meet our expectations here.

Is it's safe to say that if there were sort of a disappointment in the fourth quarter, like in the third quarter, it would be -- which is not to say it was a disappointment in the third quarter, because you were within your guidance, but you know, things coming to the low end or even below that, would it be because things are sort of slipping into the first quarter? Is that your biggest concern?

That's always a concern. In these market, everything just takes that much longer. But we build that into our projections, and you know, I remain, as I say, reasonably confident that we will meet our expectations but we are always susceptible to that happening to us, especially on some of the very large, lumpy deals.

Finally, just in terms of 2004, not so much on fundamentals but just in terms of your spending plans for next year, have there been any changes? I know you spent some time on the last call talking about the possibility or your thoughts about the Eurobond. A top of that, do you have any other plans that have changed in terms of capital spending next year?

No, we do -- because we are in such a good cash position, we do have plans to call the Eurobonds when we can in the middle of the year next year. Just as a reminder, there is a 4.5 percent premium on that call, but it's very beneficial economically on a go-forward basis.

We also mentioned -- we will be mentioning in the Q, I guess I should say, which will be out today, that we're going to do a very modest amount of stock buybacks just in regard to offset of the dilution of the grants that we have on an ongoing basis for our employees, so that's a modest use of cash. I would say CapEx continues to be very tightly managed and continues to stay, if anything, at lower levels than even what we had given you guidance in the past. So no change in our cash usage and no change -- (technical difficulty) -- so we've given you more transparency around that.

One of the things that you'll notice is that we have been steadily increasing the quality of earnings that comes out that consistent annuity portion of the advisory fees, which are up very nicely.

When we sell assets, if we have co-investment dollars, we obviously have an advantage for the Firm. Our selling of those assets ultimately will also feed back into the performance that we have for our investors, which in many cases will result in incentive fees at the time the performance is measured. Offsetting that, we will have less assets under management, which means that that advisory piece could come down a little bit. But it's our view that we're going to see the markets continue to get more predictable and stable. Once that happens, we definitely have committed capital and we will put that to work. We think that advisory fee annuity component shouldn't be very stretched on a go-forward basis.

Okay. Lauralee, on the tax rate, you talked about getting down to 30 percent near-term. I mean, as we look to '04, where do you see the effective tax rate for the year?

When we give you guidance for 30 percent, it's our belief that we have ongoing plans that that comes a new, sustainable level. It would be our goal to continue to drive that down, but it's too early to talk about improvements above that level.

Then finally, Chris, maybe you could talk a little bit about your success in India. We've seen a lot of companies outsource their hiring call centers, etc. Maybe you can size up a little bit more the market opportunity there, who the competition is, and what type of products and services you're offering in that country?

Yes, I'd be in a slightly better position to give you a detailed answer to that in a couple of weeks, as I'm spending time there over the next two weeks. Particularly, I would say that the areas of growth that we have been concentrating on -- as we mentioned on the call, our Project & Development Services side. We're seeing a lot of new build taking place, particularly major American corporations with their offshoring plans, as we've all been reading about for some time. That really, on the ground, means that we're growing our staff in that side, particularly strongly. I think the tenant rep aspect of that is hard on the heels, so it's really corporate services there more than any other single area of our business which is seeing the growth. I think that is sustainable. We all know the reasons in terms of the quality of -- availability of staff and indeed, the level of cost of that staff.

We're predicting continued growth and we've identified India as probably our largest growing marketplace for the Firm. That and China very shortly after that. So as I say, I'm visiting there with an intention of really assessing that potentially more detail and making sure that we have the on the ground capabilities to meet our clients' needs there. That is very much the challenge, of course, in all emerging markets.

Will Marks of JMP Securities.

Good morning, Chris and Lauralee. A couple of questions -- one, just a clarification on the quarter -- 23 cents includes the recoup, so without it, it would be about 20 cents?

That's correct.

Looking at the fourth quarter, it looks like -- so you would need to hit the guidance, or to top last year, you need to earn about $1 -- I guess $1.04, right? Is that how we are looking at it on a GAAP basis?

Last year's adjusted earnings were $1.08, and what we said to you is that, as we looked at this year, the item what we gave guidance to beat last year's adjusted earnings was excluding the 11 cents, so what we've given you -- and it is the trend and I think it's appropriate to report completely in GAAP results with the idea that adjusted shouldn't be at ongoing event, I guess. And so if you take the $1 GAAP and add the 11 cents because it's included in the dollar, we're saying that we would, in fact, be in excess of last year's results.

Okay, but I just want to make sure (indiscernible) -- so what you showed -- because in the past sometimes you've showed adjusted numbers in press releases. What you showed in this press release I think is a loss of 4 cents -- nine months -- is that correct?

Yes.

So, that's the number we should use to figure out what you need, going forward, to hit the target, right?

I understand what you're saying. Yes, that's correct.

I just wanted to make sure I was clear on that.

Looking at '04, you've made some general comments. I am wondering if you could comment more on the operating costs line. What would you expect to see actually -- I know you can't give too much guidance at this point, but you know, we're seeing obviously a lot of things like wage inflation and insurance and tax increases, so the comp and benefit line, I would assume, rises up with the earnings line or with the revenue line, but how about the operating, administrative and Other line?

We continue to focus on efficiencies across the board, so what we will have is offsets of efficiency against what would be inflationary increases. But you know, I think we've proven that we are aggressive on the expense line. I think we get more and more focused on integrating the aspects of the Firm and taking advantage of really a lot of what we sell to clients. That's best in practice disciplines around metrics, and that allows us to go in and focus on where there are opportunities for improvement.

So, it's too early to give you guidance, other than to say that we have no plans for any one-time structurings at the end of this year, that we feel that we are sized appropriately for the environments that we're in and that our investments will be made prudently where we can measure quick returns, and we will stay aggressive on costs.

Thank you very much.

(OPERATOR INSTRUCTIONS). Ashish Pant (ph) of Fair Line (ph) Capital Management.

Just a few questions. First, Chris, you mentioned that B&G (ph) is going to start contribute revenues from first of January next year. I think you haven't ever sort of giving any general sense of what the size of the contract is likely to be, and what do you expect in terms of accretion to top line as well as sort of the margins on that. Is it possible to, now or in the fourth quarter, get some sense of that to be able to sort of understand? Because it's a growing part of your business and it is very hard -- we have no visibility on how profitable it is and how large it is.

I obviously understand your question. I don't have those facts at my fingertips at this moment, but I will take the on-board, going forward.

The next question, Lauralee, is that CapEx -- I mean, from the press release, you've spent about $7 million for investing activity. Is there any sort of offset to CapEx in that? What was the CapEx for the first nine months? Do you have that number?

Yes. The CapEx the first nine months has been just a little over $13 million. Now, CapEx, as we define it, is technology, Telecom (indiscernible) leasehold improvements. Co-investment activity is separate from that.

okay. You know, you have D&A of (indiscernible) high 30's million of dollars, right? And now, we've had a few years where CapEx is significantly below D&A. At what stage do we see D&A starting to fall off?

Well, depreciation and amortization also includes some amortization of intangibles that relate back to the acquisition that we did in the 1998 period, but that amount will start running off -- will actually be all gone in 2007 and starts to decline slightly in '06. That number runs right now a little over $5 million a year. The balance of the number is our depreciation activity, and you are correct; we've been driving our CapEx activity down, and that will also show a decline in depreciation on a go-forward basis. But the biggest change will come when those intangibles disappear off of our operating statement.

Great. Chris, can you comment a bit on sort of -- is there a way of thinking about what's going on with our win rate and market share in the United States? I mean, I do understand that a bunch of contracts seem to have slipped into fourth quarter, so it's really hard to assess our performance in the Americas in this quarter. But is there -- I just want to get a sense of if there's increasing competition because it seems like America was turning around and then this quarter has been a bit of a disappointment. Is it entirely a timing issue or is the competitive landscape a bit different?

There are really two different concepts there. The wins are when we get business, whether we are in a RFP (ph) the process where we are competitively bidding, which we still believe we get more than our market share of those types of activities. The transactions that slipped were really deal closings of business that we've already won to represent somebody on. That's just a market timing of getting buyer and seller and transaction details together. So, the slippage of the transaction should not be viewed as our performance relative to competition; it's more just the environment of that type of activity.

We continue to believe very strongly that we are retaining or enhancing market share, really, around the world.

I would just add to that, if I may? You're absolutely right. It's something that we are trying to measure more and more as the market share element of it. But you really have to relate it to the market that we are particularly targeting. You know, we have clearly defined business lines in areas that we are targeting, and it's that market share that particularly interests me. It's a way, I think, going forward, of better measuring performance.

If you were to adjust back -- I mean, sort of the transactions that we had already won that slipped into the next quarter, onto third quarter, would the revenues have grown at least as much as they did in the second quarter over the previous year?

Well, we had capital market slips in the United States, and we believe that they were down modestly in the quarter, though they are up you to date -- that with those slips, they would've been ahead of last year.

The other transactions that slipped were in our coinvestment activity, where we get equity gains, and those are really -- it's difficult to compare year-to-year because they relate specifically to investment activity.

Once you get beyond the United States, I think the year-over-year revenues, as we've mentioned, particularly in Europe, are down.

Right. Is the investment management the impact of lower incentive earnings, as you've broken out? You know, the press release says that that was expected to be mitigated through better equity earnings. Have a majority of those been already booked in the fourth quarter?

We have already had one large transaction close in the fourth quarter that would capture a fair amount of that back for the business results, yes.

The size of equity earnings -- would it be as comparable to the fall-off in incentive fees?

No, not completely.

Okay, the last question, on the P&G contract, Chris, is the strategy really -- given your rollout that you talked about, is the strategy now that as you roll out in these different countries, you use this as kind of a platform (indiscernible) to go after newer businesses? And you leverage sort of -- basically billion now you have this asset that you've created with the P&G employees and the systems that you are building for them.

No doubt that's true, and indeed, we've got some high-quality people who've joined the Firm through this. So yes, it gives a very good platform to go out and develop this business further. It's already very strong in America, and one of our key strategies is to build this in Europe and in Asia-Pacific. Yes, you're right; I believe this gives us an excellent platform for us to develop further.

Is there a pipeline concept to think about? I mean, is there a way to think about that there's number of sort of corporate outsourcing contracts in the pipeline and how is that growing and stuff like that? Is that how you guys measure sort of the progress in that business?

Absolutely. There are a number of RFPs (ph) out for significant outsourcings at this time. I would say the pipeline at the moment is steady and demonstrating that this is an ongoing trend rather than a short-term phenomenon in any way. So I would absolutely (indiscernible) to say in measuring that pipeline, going forward, particularly multinational American corporate, because that's where the strength of this demand is coming from -- right across the world, though. We believe that's an ongoing trend, and as I say, one of our core strategies is to pursue that marketplace.

At this time, there are no further questions. Mr. Peacock, are there any further remarks?

Thank you, operator. Assuming that there are no more questions, we will draw this call to a close. Thank you, everyone, for participating today. We look forward to talking to you again after the fourth quarter. Thank you very much.

This concludes today's Jones Lang LaSalle third-quarter earnings conference call. You may now disconnect.