Welcome to everyone here in the room, and welcome to our participants on the web call. This call is recorded and can be downloaded later on for review. Ladies and gentlemen, I'm now going to read to you the whole safe harbor statement. No, I'm going to follow the lead of Thomas Witscher, our Investor Relations of last night. Please do respect our safe harbor statement. I'm not going to read that out to you in full today. Ladies and gentlemen, we're going to kick the day off with a short review of 2016. The main body of the day, though, will be around our future. We're going to discuss with you our strategic thoughts going forward.
We will explain to you in some expert talks technology backgrounds that we have and why we are proud of our technology, of our products, and what we can achieve in the marketplace. We'll have planned for you a series of what we call flash talks or high-speed talks, going deeper into our individual businesses. At the end of the day, at least of this morning, I'll come back to you with thoughts about our future, in particular around our future business setup, and I'll give some guidance for the future, and I will put some extra color on the guidance that we provided the day before. Again, a very warm welcome, and let me just briefly have a look at 2017. I think you all agree that 2017 has been a very successful year for our company.
In the beginning of the year, we have communicated the acquisition of ESSA Technology, a company in the U.K. that brought to us very important back-office solutions, software technology that enables our traffic solutions business to become even more a full solution provider. Kevin from that business will talk about that in more detail later today. In the middle of the year, we have celebrated the grand opening of our new technology campus in Detroit, Michigan, really right at the heart of the U.S. automobile industry. We now have in Detroit, Michigan, not only a very modern facility, we have the ability to develop new products there and to produce our products, as I said earlier, right at the heart of the U.S. automobile industry. In the second half of the year, we have announced the acquisition of Five Lakes Automation. Again, a company in the U.S., in Michigan.
Also, a nice addition to our automobile business. A company that will enable us to, again, develop ourselves forward into a full solution provider in that type of business. All of that expresses itself in what I believe are pretty strong financials for 2017. We've grown the business successfully. The company has grown by about 9.2%, more than 9% in the previous year. The profitability has expanded by roughly 70 basis points to now 10.4% EBIT margin in relation to our revenues. That's quite a bit more than we've anticipated or we originally guided for, I should say, and we're pretty proud of that. In summary, again, I think 2017 has been a very successful year. Hans-Dieter, our CFO, will now come on stage and put some more light on the last year.
Thank you, Stefan.
Hey.
Thank you. Good morning to all of you from my side as well. Welcome to our Capital Market Days 2018. We are still in the process of finalizing our FY 2017 in terms of accounting bookings. Still under evaluation concerning the notes, especially in discussions with the auditors. We obviously have already some concrete ideas about revenue earnings and so on. If you look at our revenue development over the quarters in the last year, you see it 2016 compared to 2017. You have not been informed about Q4. You see it now. It is EUR 221 million, which is one of our highest Q4 revenue figures we ever reached. In total, this ended up with EUR 748 million, which is, as Stefan Traeger already mentioned, above 9%, 9.2% above prior year, which is mainly organic.
We have roughly around about EUR 6 million-EUR 7 million with first consolidation impact from the acquisitions, ESSA and Five Lakes Automation in the figures. It is still a great organic growth rate, and it was obviously driven, you know it, we have discussed it, by our optics and life science business. Also already in the mobility segment, we have gained some speed, and I will show it to you later on. If you look at our earnings figures, EBITDA and EBIT, you see that it is also very strong. We have an increase which is above the sales increase. EBITDA increases by 12.8% and the EBIT margin by more than 17%, reaching up to 10.4%. When Stefan Traeger mentioned it, 70 basis points more than prior year, then we are relying on the ongoing businesses.
We have reached 10% last year, 2016, but some non-ongoing businesses impacts have been included, taking them out. To make it comparable, we have reached 9.7% in 2016. The EBITDA in the Q4 as well as the EBIT has been influenced by year-end procedures, inventories, bookings around warranties and so on. In total, we are very happy that we have reached more than the 10%, which we have guided. Let me say it in these words, we have made a very good landing concerning the earnings. We are quite happy that the year-end rally, this took place. We will publish our detailed figures a little bit later, but I can tell you already today that the month of December has been already the highest sales month in the whole year in three weeks. A very strong year-end rally in December.
Including in the EBIT figures you see in front of you, there are roughly around about EUR 2 million from the purchase price allocation impacts from the acquisitions and some EUR million we've already talked about, extraordinary costs with the big project in the mobility segment all around Toll Collect. Here you see our figures looking in the future. Order intake, order backlog, frame contracts, with this solid order position and project pipeline, we think that we have a good basis for further growth in 2018 and ongoing. We have a tailwind in the order intake from optic and life science, it's still going on in 2018. There's no calming down in 2018. We have reached with EUR 803 million, roughly, order intake, an increase of 9% as well as the sales, the revenue.
Although our book-to-bill is clearly above one, which is an indication that also on the order intake side, we are well prepared for 2018 order backlog, which is more important even because a lot of it, more than 60%, will be sales in this year. It's EUR 453 million, which is an increase of 12%. Strong basis, as I already mentioned, for our development in 2018. Looking at the frame contract, they developed as expected. For example, you should take into account that EUR 29 million, EUR 30 million from the frame contract has been booked into order intake because we now start to deliver out the 600 pillars to our customer Toll Collect in traffic safety, Traffic Solutions business, which will have a strong influence in Q1 and Q2 2018 in terms of sales and profitability in this segment. Positive, obviously.
Having said this, we have, as I already mentioned, a very strong basis for our further development. We have an excellent asset position, long-term oriented financing structure. We have now all financing instruments available. We have already a club deal arranged, which we did not take into usage, so to speak. We are net debt-free. We have roughly EUR 200 million cash on hand, so we are net at EUR 70 million plus. The club deal arrangement we did not even touch. We have talked already to our financing banks that in case we need more, they will be ready. Our financing situation, our financing structure as well. We also have own capital measurements as a possibility instrument available because our annual shareholder meeting agreed to our proposal. You may have recognized. We are well prepared for future development, and we intend to increase further our revenues and earnings.
In case organic growth, which also needs cash in terms of inventory, trade receivables, working capital growth always goes in line with an increasing working capital. We are well prepared as well as for acquisitions. Having said this as a starting point for the future, I'd like to hand over now to our CEO again, Stefan Traeger, who will show you, explain to you what will go on in the next years. Stefan, the stage is yours again.
Thanks a lot. Thanks, Dietz. Ladies and gentlemen, I'm going to talk about the future now. I'm going to talk about our strategic thoughts and the strategic plans. Before I start talking about future, though, let me have a quick, really brief look into the rearview mirror here. Let us remind of the journey that Jenoptik has taken thus far. I think it's fair to say that in particular in the last 10 years, things haven't always been easy for Jenoptik. Jenoptik has steered through some choppy waters at times. There was a 2008 financial crisis that needed to be managed, and there was a pretty high amount of debt within the company, or the company had to deal with. An amount of debt that at times, I would say has limited the ability of the company to invest into growth.
Ladies and gentlemen, these days are over. I think by now we have a very good financial position. Our balance sheet is strong, we have the financial means and certainly the willingness to invest into growth going forward. In order to do that, we have developed a strategy for the next five years. The strategy of our company for the next five years is based on three major building blocks. It's based on focus, it's based on innovation, and it's based on internationalization, as the little movie clip that we showed in the beginning has already indicated. I'll go ahead and tell you more about those three building blocks. First of all, let me summarize what it basically, at least in my point of view, means to the company.
I think in essence, what we want to do with the strategy is to take Jenoptik and to transform Jenoptik from a pretty diversified industrial conglomerate into a focused technology group. Let me start with talking about focus and what I mean by focus, and why I actually believe focus is an important, and very important, part of our strategy going forward. When I started with Jenoptik about nine months ago, I looked at a thing and what I found was a company that's financially on a good and solid ground. A company that is pretty diversified, though. A company that has a pretty broad portfolio of products and businesses. Quite honestly, I think we have to ask ourselves all the time, can we all do all of that with equally good attention, equally good quality, and with enough, again, focus and power?
In essence, do we have the bandwidth to do all of the things we should do and we want to do at the same time with the full intention and intensity that it requires? I believe that's quite a challenge. Therefore, I believe we should focus somewhat. We should concentrate, focus on something we're really good at. Focus essentially on our core competencies. The question is, what are our core competencies? I think it doesn't come as any surprise if I'm saying the core competencies of Jenoptik really should be optics and photonics. After all, it's even in our name. Optics and photonics, though, is not just our core competencies. Optics and photonics is something that's deeply ingrained in the DNA of Jenoptik. Photonics is, in essence, the heart of our company. Photonics is more than that, though. Photonics is also an enabling technology.
A fascinating technology that manifests itself in ever more parts of our society, that expresses itself in ever more ways in our everyday life. Without photonics, there wouldn't be any digitization. The whole fourth Industrial Revolution we'll talk about wouldn't be possible without photonics. There wouldn't be any modern life sciences and healthcare innovations without photonics. We've seen, those of you who had been with us last night, we've seen a very fascinating talk last night about biophotonics and what that all means. Without photonics, there wouldn't be any modern public security. In other words, photonics is everywhere these days. Sometimes hidden, because it's an enabling technology, sometimes more visible. Photonics is more than just a cool technology, though. Photonics is also a very interesting marketplace. It's a market that grows on average twice as fast as the global GDP.
Thus, it's a marketplace that offers to us fascinating entrepreneurial opportunities and chances. So at Jenoptik going forward, we will focus even more on our photonic core competencies. We will combine that with a more active portfolio management, and I'll talk about that a bit more in detail going forward. As you all know, we don't have just photonic businesses within the portfolio. In particular, in our DCS business, we have a large part of the business that has got nothing to do with photonics. Part of the business that's engaged in mechatronic technologies. For that business, we will create a new brand, a brand that fits better to the needs of that business, a brand that will enable that business to be better positioned in the marketplace.
As of today, if you want to sell, say, a generator, for example, we go to our customers with a Jenoptik business card. Customers then say, "Look, I don't want to buy a laser here. I want a generator. Why is Jenoptik coming to me?" So giving that business a name that fits better to the needs of this business, of its products, and position it better into the marketplace is part of that strategy. As I said in our earnings call already, anticipating a question, I did say the other day, look, as of today, we don't have any concrete plans to discontinue that business or to not continue with that business under the roof of Jenoptik. We explicitly don't want to rule that out for the future. Focus for us means more than just focusing on certain markets.
Focus for us also does mean that we want to further develop organization and frankly, de-complex our organizational structure. Today, Jenoptik is pretty fragmented. It's pretty complex, and at times, not easy to understand. We've organized our business today in three segments, but we're actually running the business and manage the business more or less in five so-called "Sparten" in German, five divisions, if you want. There are lots and lots of little legal entities underneath that structure. Focus to us means that we will also change our structure, make our structure easier. We will combine businesses, we will combine legal entities, and in future, are going to run the company not in three segments and five divisions, but in just simply four major divisions overall. I will talk about those four divisions a bit more in a few minutes.
With that said, just a brief look at photonics marketplaces. Again, photonics is a very attractive market. Photonics, in terms of a world market, is a market of about EUR 600 billion. There are many different definitions. If you look into the literature, people define photonics in many, many ways. You can define photonics in a very narrow sense or in a very, very broad sense, adding all sorts of marketplaces that are actually leveraged by photonics, which would double the size of the marketplace. The EUR 600 billion that we're quoting here is essentially the world market in sort of a more of a core sense of photonics businesses driven directly by photonics, services within photonics, and components within photonics.
The marketplace, as I said earlier, on average grows about 2x the global GDP, so roughly 5%-6% is what we anticipate the market to grow over the next five years. Photonics is not just a big market, it's also in itself a fairly diversified market. You have segments in that market that are fairly large, yet they're pretty commoditized. Markets, more market segments I should say, that are under heavy price pressure, such as photovoltaic, for example, or direct display businesses, consumer electronic businesses based on photonics are fairly large businesses and fairly large marketplaces, which are, however, highly commoditized and under large price pressure. There are other markets and segments in this marketplace which are also growing very fast, but which are not as commoditized, and which allow for technology differentiation. That is what we aim to do.
Jenoptik stands for technology, Jenoptik stands for outstanding products and outstanding quality, Jenoptik stands for application know-how. Therefore, it's our intent to focus on applications within photonics that enable technology differentiation and in turn, price premiums. We want to compete on price premiums, not necessarily on cost leadership. Of course, we will continue to work on our costs, no doubt about that. Our strategy is more based on technology differentiation and price premiums. Areas of focus in particular for us and applications that are of particular interest for us in our business is everything around information processing. In other words, semiconductor manufacturing equipment. It's exactly what we are pretty strong at the moment already. Communications using optical means. Biophotonics, we heard a lot about that last night already. Smart manufacturing, Industry 4.0 as it's called in Germany, or the fourth industrial revolution.
As I said earlier, wouldn't be possible without photonics and optics. Sensing, monitoring, measuring for public safety, for traffic safety, and for other applications in that arena. Again, photonics, for us, a very important fast-growing marketplace. It's our core competence. We are going to focus on photonics more than we've already did in the past. I think I could show you that it's an attractive marketplace for us. Please, again, keep in mind, we want to compete on price and compete on our core competencies and our technology differentiation. With that said, let me talk a bit more about the second big pillar of our strategy. I'm going to talk a bit more about innovation. Innovation really fuels our business. In particular, in all marketplaces, innovation is a very important thing. We are based on innovative products.
In order to become even more innovative, we aim to step up our R&D efforts, we shoot for a level of R&D spend in ratio to sales of about 10%. Now let me qualify that a bit more. By 2022, we aim to have 10% of our sales spent on innovation on the direct R&D work that you see in our OpEx lines as well as on customer-specific development work, which often appears in our COGS. To give you a comparison, today, the level of R&D spend in total, including customer-specific development, is about 8.5%. In addition to that, we will enhance our application and our expertise in application. We aim to expand our application center network.
We've just communicated that we have opened up a new application center in Silicon Valley, we'll certainly do that in other regions as well. The particular region of interest going forward for us is going to be Asia. We intend to have application centers opened up in Asia in future as well. Innovation is more than just spending money, though. Innovation is, in particular, new processes for us, changing the culture of the company quite a bit when it comes to our R&D work. Innovation to us means to have faster processes. I did say, the night before last actually, at times Jenoptik is a bit bureaucracy. We're not always the fastest when it comes to decision-making, and there is a reason for that. Yes, we have, at times, a bit of an over-engineered process landscape.
We will trim that, we'll prune our process landscape a bit, there is more to it. Jenoptik has a tendency to make decisions central, to centralize decision-making processes. I think in our today's world, this is not the right way anymore. I believe in decentralization of decision-making processes. I believe in the fact that if we want to be faster, more agile, we have to empower our operating units to take more decisions locally in future. Of course, within guidance and guidelines that the group will provide. We want our R&D work to become more agile. We want faster, with that, we want our R&D teams to get a bit more, shall we say, freedom to express their creativity. Creativity actually is the most important word here. I fundamentally believe that without creativity, there's no true innovation.
We can follow market trends by planning developments, we want to do that, we continue to do that. That's something we're good at. We'll expand that, though, add to that, want to, again, shape markets, set trends in the marketplace by enhancing the creativity, utilizing the creativity of our people better in future. We'll do that by, as I said earlier, somewhat changing our processes, make them easier, make them faster, become more agile. We want to have faster development cycles, more freedom to explore, we want to encourage the competition of ideas within the company. Let me come to the third big building block for our strategy, that's more international. Look, Jenoptik is a global company. There's no doubt about that. We have offices around the world. We have offices in many places.
We have offices, God knows where, in Kuala Lumpur and Bangalore and many different places. I believe that a truly global enterprise doesn't just have international facilities and offices. A truly global enterprise has, in particular, an international culture, and that's what we elected. We don't have a very international culture. We have, as a matter of fact, a pretty German culture at times, or a bit of a pretty centralized culture is probably the better term to use. What we aim to do is to have a more international leadership team in the future. We'll have more leaders with international backgrounds and intercultural experiences. We'll foster that by our goal to have at least one of our major divisions with its headquarters outside of Germany in future. I can't tell you which one that will be. I don't know. I really don't.
We have the full will, willingness, and the intention to have one of our major businesses with its headquarters outside of Germany. By that, adding to it a way more diversified leadership team than we have at the moment. We want to create more international culture in a more diversified leadership team. In summary, our strategy is built around four major pillars, four building blocks. We talked about more focus, and the fact that we want to leverage our core competencies in optics and photonics. The fact that we want to somewhat carve out our defense, our mechatronic businesses, and organize it under a new brand in future. We've talked about more innovation, the fact that we want to invest more into growth and into innovation, and the fact that we want to become much faster and more agile in our R&D work.
We've talked about more international and the fact that we want to transform Jenoptik in a truly global enterprise with a more intercultural culture, then a more international culture. Writing down a strategy is one thing. It's an important thing. It's important to have a good strategy. To have it on a piece of paper, it doesn't help at all. Most important actually is the deployment of our strategy. If it comes to deploying strategies, the good old phrase comes to mind, culture eats strategy for lunch. In other words, if we don't have the right culture in the organization, we can write down strategies until the cows come home, we'll not be successful.
You will also see us working on the company culture quite a bit, talking about who we are as Jenoptik, who we want to be in future, talking about values of the company going forward, talking about common beliefs and the value system for us globally, talking about the Jenoptik soul, if you want, going forward. In order to do that, we are going to kick off a program as intercompany that will use the headline and the theme more light, as you've seen in the little movie right at the beginning of my talk here. Let me go a little bit more into detail about our future setup. As I said earlier, we intend to consolidate some businesses here.
If you remember the official company organizational structure today, you'll remember that we have these three major segments that we always talk about, our Optics and Life Sciences segment, our Mobility segment, our DCS segment. Underneath that segment, we have today our five divisions, our Optics divisions, our Healthcare and Industry division, our Automotive division, our Traffic Solutions division, and again, DCS, which in itself is, if you want, a holding in a holding, actually combining lots of different businesses. Let me start with the DCS segment first. In DCS, we have essentially two different types of businesses. We have a type of business that is actually using photonic technologies, namely our sensors business and our joint venture with Hilti, the Hillos GmbH. Those two businesses together, by the way, they stand for roughly a mid double-digit million EUR figure in terms of sales.
Those two businesses, we will carve out from under the DCS umbrella, if you want, and move over to the very left side of the chart into a new segment or new division that we'll call Light and Optics. The part that will stay with the DCS business concentrates on its core competencies in mechatronics. That's namely our Aviations business, our Power Solutions business, and our Energy and Drive business. This business, our Mechatronic business, will be organized under a new brand going forward, as I said earlier. Let me go to the very left side. What's labeled Light and Optics, and please, those titles are working titles, if you want, although we kind of like them at the moment because they indicate some very important features of that business. You see that all the three divisions on the left-hand side, if you want, are colored in blue.
They're photonics-based businesses. They're all businesses that use essentially the same core technology or technologies based on photonics. They're using light. Emitting light, sensing light, working with light is what they really do in those three divisions. Again, let me start with Light and Optics, which will comprise in future our OEM business. The business on the left-hand side, essentially what you know today under the headline OLS, will be a combination of our Optics business and our HCI business. We will merge those two businesses together for a very simple reason. Essentially, they follow the very same business model. They bring products with indirect channels to the customer. In other words, this is an OEM business model. It's a key account sales model. We organize basically all businesses in terms of how they sell.
The key account sales model, where we cater for large corporate customers, we develop and produce for them products based on photonics. Applications for that business are today and will be in future, essentially everything around semiconductor manufacturing equipment, about communications, and about biophotonics. I'm using the term biophotonics again like last night. We called it Healthcare and Industry in the past. That's a pretty broad term. We want to be more specific and more focused in explaining what we want to do. We want to concentrate on biophotonics. That's what we are good at. That's what we can do. That's what fits our company. With that said, let me go to the other two divisions. They have something in common, the divisions Light and Production and Light and Safety, because they're all, or the both of them, are actually engaged in direct sales.
They have direct sales channels to end customers, they do have service channels. In other words, those two businesses are already in a position to bring to our customers full solutions, soup to nuts solutions, enabling, if you want, razor blade type business models, placing capital equipment and generating recurring revenue later on, recurring revenue in terms of services, software, and full solutions. There's a difference, though, between the two businesses that are today grouped under mobility. Our Light and Production business essentially sells to industrial customers, private customers, if you want. They sell to automobile companies today, whilst our Traffic Solutions business sells to governmental agencies, governmental bodies. They sell to public customers. Selling to a governmental agency, selling to a public customer is something completely different from selling to a private industry customer.
Therefore, we believe that to run them in somewhat independent businesses makes sense. In addition to that, we want the light and safety business, or today's Traffic Solutions, to expand. We believe that the future is not just monitoring speed violation or a red light violation. The future actually is in modern technologies using video technologies, deep learning technologies. You'll hear more about that in a few minutes. We believe that we can broaden the portfolio of this business towards more public safety type businesses. We can imagine public places to be monitored, railway stations, airports, God knows what. There's a lot of potential in Smart City concepts and Smart Nation concepts and modern ways of traffic management, we will tap into that.
On the Light and Production side, whilst at the moment it is predominantly a business that provides automated processes and measurement tools for the automobile industry, we believe that the change in the automobile industry, it's actually a chance for us. You will hear later more about ways cars are produced today. The fact that e-mobility requires different types of steel, for example, which can't even be welded anymore using classic technology. You need lasers and optical technologies to produce these modern type of mobilities, we will utilize our technology and our business to grow in that arena. We believe that there is more than just the, if you want, the core car industry that needs modern and smart manufacturing, though. We believe that this business in future might actually develop in more than that.
It might develop in a provider of smart manufacturing solutions for every area that produces in masses. We will prepare the new business set up this year. As you know, there are legal aspects that need to be taken into account. There are financial reporting aspects that need to be taken into account. In particular, when it comes to consolidating legal entities, legal entity structure underneath all these divisions, we need to and will actually work very closely with our partners and our workers' councils and all stakeholders within the company, associates on making that work and making that happen. We intend to start with the new structure the beginning of 2019, of course, we will start providing financials in beginning of 2019. We'll also help to consolidate backwards to the old structure when we start with this new reporting.
With that said, let me hand over now to Jay Kumler. Jay is not just running our optics business in Florida. Jay is a part of the optics division. Jay is actually a thought leader in photonics. Jay is a fellow of the Optical Society of America. Jay is one of our real technology experts. I'm glad to have Jay with us here today talking about photonics and how photonics enable technologies, and how photonics is really actually at the heart of Jenoptik. Jay, thanks so much.
Thank you.
Don't know.
Good morning. Thank you, Dr. Traeger, for that presentation. Thank you, Mr. Schumacher. Thank you for the opportunity to speak today. Like Dr. Traeger said, if I didn't meet you last night, I'm Jay Kumler. I'm helping to run the business for Jenoptik Optical Systems in North America. Greetings from our colleagues in Rochester Hills, in Jupiter, Florida, in Huntsville, Alabama. I don't think they're listening live right now. It's 3:00 in the morning. Their greetings, and also from the colleagues in the new application center in Fremont, California. We just had a really successful week at Photonics West last week in San Francisco. I'd love to take a few minutes to tell you about some of the products and markets and customers that we were engaged with last week in San Francisco. You've seen this slide before.
Dr. Traeger explained that photonics is a big marketplace, EUR 600 billion. It's a great idea. I think it's an excellent strategy to focus on only the areas, or especially in the areas where we have differentiated products, where we really have core competencies that helps us compete, rather than being all things to all customers. We welcome the opportunity. My talk today is going to help maybe add some specifics and drill down into a couple of these areas so that we're not talking about just high principles or huge opportunities. I'm hoping to really put some meat on the story so I can tell you about specific projects that are going on today that help illuminate that strategy. Photonics impacts all of our lives. I really believe that.
I've spent my whole career working on that, on finding ways that photonics can help our lives. The first way that we do that is that we help people live longer with better quality of life, for sure. Without imaging technology, diagnostic instruments that are used for cancer research, drug discovery, genome sequencing wouldn't be possible without imaging technology. Photonics is also the building blocks for smarter cities, smarter roads. We've heard that, and we know that. Laser material processing, as Dr. Traeger said, is changing factory floors today, leading to cleaner, more accurate, and more energy-efficient production. One area that I'm excited to tell you about today is optical communications. This may be an area that you haven't heard Jenoptik talk as much about, but I'm hoping to share a couple of specific projects with you.
First, in healthcare, Dr. Popp made an excellent presentation last night. It's talking a little bit about the promise of personalized medicine. We've only begun to realize the potential of personalized medicine. If you think back about 15 years ago, the first human genome cost about $2 billion to sequence and took almost 13 years to accomplish. I think most of the people in this room know that now you can have your genome sequenced for about $1,000. It's photonics technology that helped that be realized. You can get results within a day. Also, our customers can make available sequencing equipment that's only $20,000. The desktop instrument gives you high-accuracy sequencing, which can be used to diagnose a tumor profiling, and even targeted gene expression.
These desktop sequencers have an incredible ability to transform infectious disease surveillance and really put DNA sequencing where it's needed most. Craig Venter, a couple of months ago, wrote about the fact that his company is sequencing large patient populations and finding that about 5% of the people that he sequences over the age of 50 have a serious cancer that they're not even aware of. The early detection has really proven to have high success rate in treating those early cancers as long as they're detected. Personalized medicine, we are just scratching the surface, and it's really optics is at the core. Optics and photonics is enabling that kind of advancement. That helps you, it helps your families. Jenoptik is also very active in lasers. Jenoptik lasers enable medical applications and solutions.
We have a broad portfolio of lasers, as you might be aware of, but also Jenoptik is developing a swept source laser for OCT. Optical coherence tomography is now the dominant diagnostic tool, which is used to diagnose and treat macular degeneration and glaucoma. OCT is also being applied in areas of gastroenterology, dermatology, and oncology. Really, imaging is at the core of Jenoptik's DNA. We do have a wide range of imaging products and cameras. These CMOS cameras are the building blocks that we use to develop products like the SYIONS that you saw last night, and I believe it's out in our lobby area as well.
We can take CMOS technology, our software, and all of our image processing capabilities and develop custom programmable modular platforms that our customers can use for imaging, whether it's the Raman imaging that we heard about last night or fluorescence-based imaging. Going past the biophotonics area now, I'll speak a little bit, just briefly, on the smarter and safer transportation, and we'll have one of my colleagues go into more detail. Kevin Chevis will tell us more about this. I'll just mention the fact that it's definitely photonics that's at the core of our traffic systems. Whether you're talking about red light enforcement or speed control or license plate recognition, at the core, take the systems apart, and it's all about photonics. We have a wide installed base and developing new and more innovative products all the time.
I believe it's because we have that optics DNA, which helps us make those differentiated products and compete in the marketplace. This may be a little bit more new to you. This is a lidar product which is being developed. We've got a long history in single line of sight laser range finders. Now there's new opportunities in the marketplace to develop lidar systems which cover wide fields of view. We took what we knew about our technology in single line of sight and have developed this product, the I3S Jenoptik LiDAR scanner. It has a very impressive form factor, small package size, less than 200 grams, and it covers a 90-degree field of view horizontal, 20-degree field of view vertical, and it puts 360,000 points into that field. It's interrogating a 90-degree area. We're not just looking at autonomous vehicles.
It's a crowded space with lots and lots of companies pursuing autonomous vehicles. We're also looking at other applications. The small form factor makes it conducive for being used on UAVs and drones. Also, you can imagine, or we are starting to talk to customers about other kinds of unmanned ground vehicles and also agricultural machines. We're just now starting to introduce these beta test units and show it at different trade fairs. We're excited about the opportunity. Moving now into the smarter factories with the laser material processing. I think we know the advantages of using lasers to cut, weld, and drill materials.
The optics, the robotics allow for faster processing, more efficient cutting and drilling, higher accuracies, lower power usage, lower waste, smaller cuts, and then cutting difficult materials like rubbers and hard materials that you can't cut any other way other than with lasers. We're definitely leveraging our optics DNA to be able to develop new robots, which again, will be featured a little bit later this morning, but to do body- in- white processing and bumper cutting and welding, and really developing some innovative products. Also in the same group, a product that we have quite a bit of pride in is the Jenoptik IPS 100, which is surface inspection for the inside of the bores of engine blocks.
This is a very good example of developing an innovative product which relies on the fact that we can develop a custom fisheye camera to capture 360-degree images of the inside of the bores. The team in Germany and in Rochester Hills, Michigan, came to the optics team that was in Jupiter and asked for help in developing this probe. Custom optics, custom camera, zoom system, LED lighting. That probe that you see on the slide is able to go through the bore looking for porosity. These are defects that are in the coatings of these aluminum engine blocks. As a result, because we have that core optics capabilities in-house, we can bring products like this to market a lot faster.
There's over 100, I don't know if this number is accurate now, but over 100 of these systems are deployed on factory floors. Now enabling the digital world, which is a broad area to talk about. When we started our careers, it would have been hard to imagine that we needed hyperscale data centers. It's not really something I thought about very much in graduate school. This is a pretty small picture of only a part of a hyper data center. You've probably seen the pictures. Jenoptik is enabling these type of hyper data centers. Why do we need the hyper data centers? Really, we're learning that 82% of the internet traffic very soon is going to be video. It's really Netflix, Facebook, and live sports being shown on Twitter, and all this video demand is creating these huge data centers.
People aren't watching all of this video content in the ways that we used to. Obviously, they're watching it on mobile devices. That's driving the need for more and more high-performance displays so we can see all that video, and all of these trends, the data centers and the higher and higher performance displays are all megatrends that are going in the direction which helps Jenoptik in the marketplace because of our drive to higher and higher accuracy inspection equipment. The transceiver business is where we plug into those hyperscale data centers. This is a little bit of a busy slide, trust me that there's incredible demands, and growth, and need for 40G and 100G transceivers to fill up all of those hyperscale data centers.
Where our products plug in is at the transceivers, and specifically at the transmit and receive where you are coupling light in and out of these transceivers. Our optics are helping our customers realize the efficiencies. They have big challenges in terms of cost and integration. Our innovative optics are helping our customers meet those targets on cost and simplifying those transceivers as they build out more and more data centers. Our plant in Huntsville, Alabama fabricates millions of parts that go into those transceivers, which then in turn plug into those hyperscale data centers. That kind of covers the way that we move all this video around the internet. On the end where we are interfacing to people who are watching all these videos, Jenoptik is heavily involved in the flat panel display inspection marketplace.
The impact on AR and VR, in addition to all of this internet video, is that it is driving higher and higher performance displays and more and more sophisticated consumer electronics. We are partnering with our customers to support the metrology requirements for all of those new devices which are going on your consumer electronics. Eventually, our customers are also looking towards even flexible OLED displays. To be clear, on this slide, Jenoptik does not make the tools that are on the factory floor doing the inspection of the flat panels, the tablets, the cell phones. We are not building the entire tool.
What we are doing is we are supplying the core imaging technology, the camera systems, the inspection probes, which are used to inspect the displays at very high rates, at very high production quantities, to make sure that whether it is at final quality or in-process inspection points, we are enabling our customers to inspect smaller and smaller pixels, which is driven by the new OLED displays. If you started looking into your book, this might have caught you a little bit by surprise. Why is Jenoptik talking about India? I was surprised to find out recently that there are 4 billion people in the world, on our planet, that do not have broadband internet access. This is a missing link that was a pretty big surprise to me when I learned it a couple of years ago.
Jenoptik is working with our customers to tackle the digital divide, to bring that high-speed connectivity to what is ultimately 4 billion people that do not have high-speed internet access. India is only one of those marketplaces. India has some of the top IT companies in the world, right there located in India. Yet they have 900 million people in India that do not have high-speed internet access. The main reason for that is India is missing a tremendous amount of infrastructure that is common and it is everywhere in other parts of the world, but it prevents them from having traditional links to backbone. Also they have an issue where affordability. If this cannot be provided in a very cost-effective way, then it is not going to be viable in the marketplace.
What's highlighted here on this slide is one of the 29 states in India, which I refer to as AP because I don't want to accidentally mispronounce the name Andhra Pradesh. This is home to 53 million people, and it turns out in this particular state of India, because it's more rural, only 20% of the residents in this state have broadband access. If you think about it, we're not just talking about whether kids have access to YouTube. What you're really talking about is 14.5 million households, village councils, 60,000 schools that don't have any internet access, 10,000 government offices, and 6,000 public health centers. It's really great to develop all these diagnostic instruments, but if you can't connect them to the web or handle the large data sets, what good is it? Why are we talking about it today?
Jenoptik has signed a master purchase agreement to partner with Google X to supply those free space optical communications terminals. Our equipment is the equipment that's shown in the upper right-hand corner of the slide. This is a complex laser system. This is the box that will go on poles or on cell phone towers and give that missing link. Because of the terrain, because of rivers, because of railroads, anytime there's a reason why you have villages which are dark, that don't have internet access, Google X has signed the contract with these Indian states to provide low-cost, free-space optical communications terminals to go ahead and light up all those different rural areas in India. This is actively going on. The master purchase agreement was only recently signed, but the Jenoptik terminals have been deployed in Puerto Rico.
It was only last year when the hurricane hit Puerto Rico, knocked out power, so that there's still today a half a million people in Puerto Rico that don't have power, but they also don't have internet access. The Jenoptik terminals have been deployed in rural parts of Puerto Rico as a pilot program to demonstrate the ability to quickly deploy a network and connect those villages. The point that I'm making there is that Google X could have worked with any photonics company that it wanted to, and because of all the core competencies that we have in-house, Google X chose to work with Jenoptik. Part of what Jenoptik saw was a deep expertise in photonics, which goes throughout all of our divisions.
One way to measure that and to say what is our photonics expertise is to look at the awarded and pending photonics patents. The complete patent portfolio for Jenoptik AG is roughly 1,250 patents with 465 patent families. Of those, there is a wide variety of key photonics patents which are valuable in the marketplace. Optical Systems Division has 274 awarded patents with 85 more patents in progress. I'm not going to read all the numbers on this slide, but you can see even in the divisions which are not the optics division, we have deep optics know-how in all the divisions, in traffic, in defense, and in healthcare. It's not just centralized in Europe. These patents have been awarded around the world, in the United States, and also in Asia.
When the customers come to us and they want to know whether we have all of the technology in-house that we need, this is an infogram that's showing how the IP portfolio extends throughout all the different areas of IC inspection, consumer electronics, telecommunications, lithography equipment. We have a deep talent pool of talented optics experts. This is a snapshot of 35 PhDs and over 200 other graduate degrees in optics just within the former optics division. All of these people are coming from the top schools, and we have the ability to go out and recruit the top talent. These people are covering all the disciplines necessary to be able to provide a complete photonic solution like the one that we're providing to Google X. One last slide.
When we were in the planetarium last night, there was some interesting sort of cartoons that looked a little bit dated about rovers running across the surface of Mars. It was really good. As we know, that's real. The Curiosity rover has been on Mars for seven years, but you may not have heard of Mars 2020. This is the rover that's going to be launched by NASA in 2020, it's got some really interesting missions that it's going to try to accomplish. If you want to talk about autonomous vehicles, Mars rovers are truly the autonomous vehicles. You send it commands at the beginning of the day, tomorrow you find out what happens, right? It's completely autonomous. Curiosity's been a smashing success. The 2020 rover hasn't been named yet. They let school kids come up with the names for the rovers.
We're talking about it today because NASA could have worked with any photonics company in the world, they selected Jenoptik as a sole source provider for all of the cameras that are on the rover. Space optics is not a big part of our business, this is demonstrating the fact that the marketplace recognizes that where the deep talent is to develop the most demanding optics in the harshest environments is inside of Jenoptik. It's not just the lenses, it's also the cameras. It's not just one division, it's all of Jenoptik. Work on this program is going on in Jupiter and in Germany. Camera sensors are being packaged in Germany. Lens systems are being designed and built in Jupiter, Florida, it's a collaboration with those two groups working for NASA. I'm pointing to some of the cameras.
There's navigational cameras, which are just like you have on your SUV, which help you navigate around, that hazard camera to make sure that you don't back into something and bang into a boulder on the surface of Mars. There's also something that's called the cache camera, which is not pointed out on this slide because the cache camera is deep inside of the rover. This mission is going to take samples and drill cores from the surface of Mars, the interesting thing this time is we're going to retrieve the samples and get them back to Earth. The cache cam is inside the rover, it's looking inside of the bore to make sure that the samples are there and that the material is collected properly. Just let your imagination go forward to 2021. It's going to take eight months to get to Mars.
The Jenoptik cameras are on the rover. They will be launched in 2020. In February of 2021, once the rover's landed on the ground on Mars, the first thing that the scientists at JPL are going to do is they are going to turn on Jenoptik's engineering cameras. It will be the Jenoptik cameras that give the world the first opportunity to know whether the mission was successful or not. I thought it was interesting that this picture, Earthrise, was taken almost exactly 50 years ago. This was the picture when they were orbiting the moon, and for the first time, humans saw the Earth from that perspective. This was a Hasselblad that took this picture, but it will be a Jenoptik camera that takes that first picture from this rover.
Photonics is moving markets and changing the world around us, and Jenoptik has the skills and the deep talent pool to be able to help lead the way. Thank you.
Thank you very much, Jay. That was really inspiring. Great talk. Thanks very much indeed. We now have ample time for the first series of questions that you might have. After a question and answer session, we will have our coffee break, so we have ample time for any questions. Again, we will put some more color around our guidance in the later part of today. There will be another opportunity for asking questions around guidance going forward. If you want to talk about guidance, maybe you want to hold that question. If you want to ask it right now, of course, please go ahead and do, but again, we will talk more about it later on today.
If you have any questions about our strategy thus far, about our setup into the future, maybe about our financials 2017, and in particular, of course, about our technology portfolio, to Jay, please don't hesitate to ask. We have about 30 minutes for questions now.
I want to start. Stefan Maichl from LBBW in Stuttgart. A question for you, Mr. Dr. Traeger. You didn't touch on your speech, the current production setup of Jenoptik.
Do you see any necessity or need to relocate value added, i.e. to low-cost countries or more to China in order to be more competitive or to be more stronger to touch these markets?
That's a very good question, actually. To be honest, I'm not a big believer in relocating our type of productions to low-cost countries, if you want. For a start, the question is, are those, shall we say, formal low-cost countries really low cost? On average, I'm not quite sure if one actually saves that much by bringing production from A to B. In particular, for our type of industry and our production setup is way more value chain management than actually production. We are more of an assembly type business. What I would envision brings us more in short term, more cost savings in short term, is to actually expand our supply chain globally. That's the thing that we will work on. Source more from low-cost regions going forward has a bigger impact and a faster impact than actually redeploying existing production facilities.
That said, though, we have started to produce products in other areas. We have started to produce products in our facility in Shanghai, in particular for our automobile industry. We have the full intention to expand the production in these setups. Particular for the local markets there, but not just local markets, for global markets as well, and I believe Volkmar will talk about part of that in his talk later today. Again, in particular for automotive products and for our traffic solutions products, we already do produce some products in China, and I can envision that we will build on that going forward. In essence, again, at least in short term, given our setup as a business, given the fact that we are more of an assembly type, we don't do that much drilling and milling actually.
We purchase a lot of stuff and integrate it. Therefore, I believe the bigger, more short-term potential is actually in sourcing globally, and producing in the centers that we already have.
Thank you for the presentation so far. Kevin Reeder from beteiligungsmanagement thüringen. I just wanted to ask, could you give us a sense of magnitude and prioritization amongst all these interesting applications? Are there any that are so significant that if we saw, for example, Google X rolling out free internet space across Asia, we know Jenoptik is going to have a great quarter, great year or whatever? Maybe it's the OLED space. Is there anything that's so significant that we can perceive in the news flow that we see in these markets that it's going to have a big impact on Jenoptik?
At the moment, in particular in the last few years, our business has been driven very much by the tailwinds that we get in particular from semiconductor manufacturing equipment market spaces. Of course, the big elephant in the room or the question could be, how do we believe these markets will develop? At this point in time, we're very buoyant. The market is good. The market continues to be good. We don't have any signal of particular decline in that market space. We provide products to basically all household names in the semiconductor manufacturing equipment segment. Of course, we don't have a crystal ball. We'll talk about that a bit more in our guidance. We don't quite know for how long the party is going to last in that arena. Again, at this moment, no signs of any cooldown, who knows?
That part of our business is important and will be important going forward. All our business is of course important, that part of the business has driven large parts of the growth and profitability expansion in prior years. As well as, of course, the fact that we get more and more bang for the buck, if you want, get more and more out of the investment the company has done in the healthcare arena, in that type of business. We have established now, I think, a decent footprint in biophotonics. We get more from that than in the past. In our automobile businesses, growth drivers are indeed already around the automated production, around the laser processing business that we have.
Laser processing automobile production based on automated laser-based machines is driving the growth in our production business, in our automobile business we know today or in our lighting production division going forward. It's not just driving growth, it's also driving and expanding margins based on laser technology. That would be a core part of the technology going forward. In the traffic solutions business, of course, our toll project has consumed quite a lot of investment in 2017. We will see good sales inflow and with that comes profitability, of course, around the toll enforcement project we have in Germany. I think in future, and Kevin will talk about that later today, in future, we will see more and more of imaging-based, video-based technology, more and more around deep learning, image analysis in terms of providing safety on the road and off the road for our customers.
Of course, in our DCS businesses, our mechatronic technologies are very important. We continue to see order intake from military customers, if you want. Our Raytheon is a big partner for us in terms of providing technology for Patriot rockets, and that's an important part of the technology for our mechatronics business.
Sounds like mostly long-wave things that are working very well, but not necessarily any of these specific applications that are going to be, say, in the next six to 12 months, potential big needle movers. Is that accurate?
Again, what I think will carry on and does actually roll on into this year at least, is the semiconductor manufacturing space. I mean, this is very important for us. A big needle mover, if you want, for us in the next six months will be our toll business, toll enforcement business together with our partner Toll Collect, simply because now the revenues are coming in. Of course, with that comes profit. That's a big needle mover in terms of top line in the next six months.
Nick Schlumpf from GIC. One question concerning the restructuring. Do we expect extra costs in connection with the restructuring?
We will, or we might see some, but not a huge amount. We don't intend to do any kind of mass layoffs or anything like that. Not at all. At the moment, the fight is more for talent than anything. At the moment, our challenge is more to get the talented people that we need out there in the labor market. The labor market is pretty challenging. Actually, one of our biggest challenges we have at the moment is to get people and not to lose people. I don't see a lot of extraordinary restructuring costs going forward. It will come with them, though. If you do put together legal entities, you might have the odd spending here or there. Overall, it's basically reorganizing existing businesses. Again, don't foresee a lot of restructuring costs for layoffs. On the contrary, we're fighting for talent.
You might have the odd spending on certain restructuring-related activities.
You plan to separate the non-photonics assets. What could be a possible exit strategy for those assets? When it comes to defense, it's not that easy to find a buyer.
Well, again, at this very moment, we don't have a concrete plan to separate ourselves entirely from that business. All I'm saying is we don't want to rule it out for the future. I don't want to speculate on anything that I don't know. There are many scenarios that we can think of. For now, these businesses do contribute significantly to our success. We are giving them a name that fits better the needs in their marketplaces, and we'll see what the future brings.
Timeframe, maybe two years, three years, until the decision will be made, or any timeframe? No.
Look.
Okay.
Thank you. Uwe Schupp, Deutsche Bank. Just on Nick's question, maybe phrasing it a bit more generally. Whenever we had the discussion with the previous management over the last 10 or 15 years about potentially spinning off the defense unit, the answer was always, "Yes, but" The but typically concerned two main stakeholders, namely Berlin and their political willingness to agree to potential consolidation, however that could look like. B would be your employee representative in the supervisory board. As far as I can see, over the last couple of years, there's now a third stakeholder, namely AfD, i.e., the post-communist party, which is now heading the government here as a potential third party you may be willing to consider.
Could you shed a bit of more light in terms of how you see the three different parties reacting to any kind of potential announcement in one, two, or three years' time? Thank you.
Let me clarify something first. We're not saying, "Yes, but." We're saying we don't have any concrete plans, we don't want to rule it out for the future. In terms of political influence, we don't see any political influence. We're an independent company. State of Thuringia is our biggest shareholder. State of Thuringia, or actually the Beteiligungsmanagement, the vehicle of the Thüringer Aufbaubank, is our main shareholder. Glad to have our representative of our main shareholder here in the room. They own 11%, which is great. They own 11%. Not less than that, not more than that. They own 11%. I will say that before I started in this position, I thought about, do I have to experience lots of political influence or anything like that? After nine months, I can truly and honestly say that's not the case.
We have a stakeholder, a shareholder, which is the State of Thuringia. Other than that, we are making and basing our decisions based on what makes economic sense for our shareholders. We want to manage and create value for our shareholders. We ask ourselves, where do we see the best potential for growth and margin expansion? We are asking ourselves, can we do all that we are doing today with enough focus? Therefore, our answer is we need to focus. Again, that's completely independent of any political discussions. For us, the question is what creates the highest return for our shareholders? How can we leverage value and investment into our company? Full stop.
Regarding potential opinion of the employees of the Supervisory Board?
I'm glad to say that we have full support of our Supervisory Board when it comes to our strategy. We've obviously discussed the strategy with our Supervisory Board up front. We had two sessions, two intensive sessions with the Supervisory Board and our strategy days and strategy meetings and discussions. We have full support of the entire Supervisory Board when it comes to our strategy.
I'll just come on with [Valbook]. Let me ask on lidar, how does the technology differentiate from automotive to non-automotive applications? Secondly, how can you at Jenoptik differentiate from the automotive players to remain cost competitive in a space which is pretty crowded with millions of EUR being spent?
Yeah, very good question. I think Jay pointed out the technology that we have at the moment, for us, is geared towards, and particularly suited to be used in unmanned vehicles in terms of production floor vehicles moving around, drone technologies, and the like. It's not necessarily something that you'll only see on your cars on the road. You're right, it could be used for that as well, and we are in discussions for that as well. That is indeed a very crowded place, and the cost pressure in the automobile supply chain is tremendous. I said earlier, we're not necessarily aiming to play on cost. We want to play on price premiums and to what extent that is possible in the core automobile industry remains to be seen. We are in discussion with tier 1 parties.
Rather than with the actual OEMs, we're discussing with tier 1 parties in terms of the lidar technology. Again, for us, it's a technology that's not just aimed for our cars on the road. It's a technology that's more aimed, or equally importantly aimed for unmanned autonomous vehicles in production environments, all the way to drones and type of things.
Is it possible to differentiate from these systems that might enter the automotive space?
I wouldn't say differentiate, because it is the same. It could be used on a car. Just to be clear, what you have seen today might actually end up in a car. It can be used for that. What we're aiming for is to not develop something just for a car application. If it ends up in a car, great. If we make money on that, fantastic. If there's money on the table, I'll have it. I don't want to develop something that basically would mean that our entire company, the success of our company going forward depends on a particular car supply chain industry. If we develop this, and we did develop that, we develop it in a broader term. It can be used in a car, but it can also be used in other vehicles and other areas and environments.
Share your vision for the traffic technology, public safety technology. How the value chain might change and where Jenoptik might sit in, we might see data center coming up at all. Which spaces Jenoptik might acquire leadership, where you might potentially need to partner up with someone else or acquire some technology and how that space might change.
Yeah. That's a very interesting space, actually. There's lots going on in that space. Kevin will talk about that more in his talk. I, for one, believe that if you go to Shanghai, for example. If you drive on the elevated road in Shanghai, you'll see these billboards, and at times you see a number plate on the billboard. The number plate tells you, if your number plate is showing on the billboard, you have a problem. You just violated speed. With that comes the ability to take out your mobile phone. I don't have my phone here with me, but you take out your mobile phone and you pay your fine immediately. If you think about that in Germany, it would be not possible at the moment because, in terms of data security and the like.
In other parts of the world automatic number plate recognition is a common thing in London. If you drive around London, your number plate is recognized everywhere and you're trapped. Kevin will show how our technology is already able to single out certain vehicles in a swarm of vehicles, if we say, that follows funny patterns. We're able to track speeds over distances and average speed control. As I said earlier, I think this is just the beginning, actually. I think deep learning will enable us in future to control not just speed. It will enable us to deploy that technology on other parts in our public spaces, enabling public safety. The terrorist attacks come to mind, unfortunately. That will be an application. It will also enable smart traffic control in our cities and in our nations.
If you go to Singapore is currently building up a system in which they regulate the traffic and direct the traffic within the city dynamically. They monitor the traffic and dynamically direct and redirect where they want to put the traffic throughout the street system of the city. That type of stuff, I think, will come more and more in the future. The sheer red light control and speed control is not the future. The future is all the services around that. Again, let me just carry on for one more thing. We would be today, for example, already able to monitor if somebody enters a city. We have in Germany, you have these green stickers on a windscreen showing if you have the right engine or something, exhaust stuff. We would be able to control that and monitor that already.
It's just a matter of political willingness to implement that.
What do we expect Jenoptik to operate or being part of a consortium joint venture to operate the infrastructure, analyze the data, and provide the services to governmental bodies?
Yeah. Operating the infrastructure itself is yet another matter. That's a big environment. Big players, big gorillas try their luck in that space. I think for us, it's more suitable to stay in providing data, working with the data. What we already do, which was our back office functions to operate networks of traffic control. The City of Toronto is a good example. If you get a fine from the City of Toronto, if you drive around in the City of Toronto, essentially the way we operate is we deploy the cameras, we deploy the technology, we do the back office functions. We take the picture, we analyze the picture, we print the fine, hand it to the government, and they pop it into a slip and send it off.
That type of stuff I can envision deployed more around the globe and in more than just speed control environments. Operating the infrastructure itself, I think that's for others to do.
Achim Wagner from Crestone Asset Management. A quick question here.
Sorry.
Sorry, in the back. A question on your capital employed. How much of the capital employed is actually tied in the business you identified as core, i.e., those you want to keep long-term? Perhaps if you can, where is actually your high capital intensity at this point in time? If you
For the first question, I'm not quite sure. 50%? Is it 50? Hans-Dieter Schumacher is just saying 50%. Around 50%. The second question, capital intent. If you talk about deployment of capital in terms of plans, equipment, machines, we've deployed a lot of capital in our automobile business in the past 12 months. We've invested into a new production facility, discussed that earlier, in Detroit. It was the biggest single investment of the company in a number of years, actually. We've acquired a new company in the Five Lakes Automation for our automobile business. If you talk about capital from a deployment of capital in terms of M&A point of view, is that?
What I mean is basically just fixed assets and working capital.
Okay. Fixed asset. Okay. Well, in terms of optics, we have a good footprint here in Germany and in Jenoptik. We carry on to invest into new machines, modernizing our equipment there. We have deployed capital in Detroit, Michigan for automobile industry. Those are the capital-intensive businesses, I would say. I'm looking to Hans-Dieter Schumacher here, but I think.
Is it working? Thank you. I'd like to support you a little bit there. If you think what Stefan explained, and maybe Kevin will touch later on in his presentation, the traffic service providing or provision business, where we took into our balance and to our working capital the equipment. We don't sell it. We just offer the service. We activate it, depreciate it over 5 years, I think, in average. We try to intend to get a contract with our customer at least for 5 years. In average it's for 10 years. In the first 5 years, our return is very good. In the last 5 years, in the second half of a contract, with having already depreciated and taking out of the working capital the equipment, it's wonderful. It's similar to the micro-optic business.
In terms of ROCE, return on capital employed, it is really a very good business. We take into account that this working capital is increasing as the business is increasing, but we have business with this. If you look now in 2017 in our balance structure, it is heavily influenced by Toll Collect because at the year-end, we prepared ourselves for the deliveries in the first months of the year 2018 to our customer, the 600 pillars. We bought it from our supplier concerning the pillars. Now we manufactured it to be able to deliver and to make sales and profit in 2018. In the year-end, in the last weeks of the last year, we heavily increased our inventory and our working capital in this part of our business as well.
In the optical and life science, in the optic business, we also increased it because we are all hunted by our customers. It is, for example, customers from Israel who are hunting us. Your delivery times are so long. You may ask our head of the division later on, but we try to be sufficient in our delivery times to our customers, and try to balance out the working capital issue against the needs of our customers. With our strong balance structure, I am supportive for the business to take some hits in the working capital because customers are coming first. We are not in a bad situation, let me say it in these words, concerning our ability, our financing structure to support the business development.
It is a real positive decision from our side to support the businesses to be able to deliver as soon as possible to our customers.
Invest into growth.
Yes.
Look, we've got time for one more question, I believe, and we have another question and answer session later on.
Maybe one question. Stefan Meyer from IBW. I want to again touch the potential DS disposal. You continuously deliver components to the DS Patriot system. Are there any change of control clauses in that contract or with other big clients as Rheinmetall complicating a divest or narrow the field of potential buyers? The second question on that, could you, Mr. Schumacher, you're on the stage, thanks. Could you probably outline roughly potential implications of a divestiture on the balance sheet, working capital or pension?
Look, interesting questions. You will understand that we don't want to speculate on things in the future. Again, for us that business is very important. The business and the colleagues in that business have contributed to the success of Jenoptik over the past years, will continue to contribute to the success of the business and of the company going forward. We're now giving them a new name that fits better their market needs. I'll say it again, we have no concrete plans in disposing that business. We're not ruling that out for the future. You are right. We're not ruling that out for the future. Of course, it would be not fair for me to speculate on that going forward. We would like to leave it there. For now, we don't have any concrete plans.
If there should be any concrete plans, we would be more than happy to discuss it in detail with you at the appropriate point in time.
Not a question about the defense and civil business, you'll be pleased to hear. You highlighted the photonics global market is EUR 600 billion, growing twice the rate of global GDP. Many of the markets, clearly from the presentations we saw already are structural growth markets. Could you address the parts of your markets that are cyclical and your exposure to those markets, where we are in the cycle, and how you would plan to protect the profitability of the business in the event of a downturn? I mean, is your cost base in these areas? I'm thinking particularly the parts of your business that supply to the semiconductor industry and the semiconductor equipment business. I think that that's something that investors really need to get comfortable with. Clearly you've got a bigger agenda to focus on other growth areas.
Perhaps we could just come back to that part of your business.
Sure. Absolutely. That is a very fair question. No doubt about that. The semiconductor marketplace has traditionally been highly cyclical. We all know that. We all have seen the boom and bust in the area. We have seen the ups and downs. Through the cycle, as they call it always grew and it will continue to grow. There have been deep cycles, no doubt about that. There is a discussion out there at the moment that the cyclicity of that business is not continuing. There are a couple of reasons for that. For a start, the semiconductor market in the past has been driven predominantly by real high-end technology, by the hunt for the smallest and smallest structures.
That drive for the smallest and smallest structures is still going on, additive to that is the fact that the older generations, if you want, of semiconductor, they don't actually disappear, funny enough. With all these new devices, all these mobile devices, all these Internet of Things and all these modern digitization things we're talking about, they don't actually require that much of smaller structures. They require lots and lots and way more midterm, if you want, or mid-segment semiconductors. We are having, in a way, a super cycle. We're having a superimposing of the traditionally very cyclical high end. The underlying, if you want, the underlying generation doesn't disappear all of a sudden. You have two generations in the marketplace.
The fact that this will expand more and more makes some people believe that the cyclicity in the semicon world, as we know it, will no longer be there going forward. However, at Jenoptik, we have a special effect. The special effect is, in particular, in 2017 and 2018, we are participating on a trend to refurbish certain machines. That gives us an even higher growth in our semiconductor business at the very moment. At some point, all these machines will be repurposed, so that additional, if you want, growth will not be there. I am convinced that fundamentally, the semiconductor world is more stable than it used to be. Do I have a crystal ball? I don't. People are telling me the cyclicity in the semiconductor world is over for good, and it will grow, I don't know, double digit into eternity.
I don't quite know if I should believe that. Structurally, the industry changed quite a lot, therefore, many people believe that the cyclicity is not there as much. However, again, let me point out, in our business, we have had special effects in 2017 and the beginning of 2018. They will not be there forever.
Is it possible to measure, without talking specifically about semiconductors, but measure the cyclical parts of your business and the non-cyclical? Have you done that?
Well, if you go across the portfolio, semicon, to what extent that is cyclical is a question, but okay. I would certainly group it as a more cyclical business, shall we say. The communications market that Jay talked about, which used to be very cyclical, I wouldn't call cyclical anymore because this is a market that actually takes off from a different angle at the moment. The healthcare market is not cyclical. Healthcare and life science biophotonics, traditionally at least, is a very stable, growing marketplace. Automotive can be cyclical, will be cyclical, will continue to be cyclical. The traffic safety is a very stable market again. Of course, our mechatronic markets are very stable. So in terms of percentages, overall, the whole portfolio, I would say 50/50, shall we say? More of a cyclical nature and 50% more of a stable nature across the entire portfolio.
You sat there? Yeah. Okay. We're out of time, quite a lot, actually. We will now have time for coffee here for those of you participating in the room. For those of you on the Webex calls, we will be back at quarter to 11, so in about 24 minutes. We'll start again in 24 minutes, quarter to 11. Thanks very much. Quarter to 11, German time, Central European, whatever, Wintertime, I believe it is.
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We will now restart our presentations. Ladies and gentlemen, welcome to the second part of today, the part that we labeled high speed or flash talks. What you're going to see today in the next hour is a series of four 15 minutes talks. You might not be surprised, I believe, when I point out that the topics of the talk intentionally actually line up with our new divisional structure so that you will talk more about the new divisional structures if you want going forward. However, of course, we talk about our businesses, our markets, and not necessarily about our structures. Ralf Kuschnereit will kick it off. He'll talk us through our new OEM partnering business, the business that we label light and optics.
We'll then have Volkmar Hauser, who is going to talk about our Automotive Division and how we develop it further into our new engineering or Light and Production Division. Following that, Kevin Chevis will talk about our ideas around public safety and how we intend to develop our Traffic Solutions going forward. Finally, Stefan Stenzel will talk about our mechatronics business and how we develop that forward and news in that segment. After the next hour of presentations, we'll have another Q&A session and another break, and then we'll conclude it with the third part of today. Ralf, the floor is yours.
Thank you, Stefan. Good morning. Welcome back from the break. I think my job is after the inspiring talk of Jay before the break to kind of get you back to Earth, maybe from Mars, and talk about our new division, the OEM Partnering Division, Light and Optics. As you probably all know, being in the OEM business is nothing new for Jenoptik. I'll show you a slide. Actually, we started in the '90s, mostly in the semiconductor area, semiconductor equipment manufacturing area, where we provided components, small specialized lenses, mirrors, to the semiconductor equipment manufacturing industry. This was a very solid business because Jenoptik had the capabilities, the specialized capabilities, to manufacture these high-precision optical components, and it was highly differentiated and so was a good business.
Over time, we developed more understanding of the application, developed closer relationships to our customers, and we moved from bill of material for non-technical people, from component manufacturing through bigger modules, actually, to entire subsystems today that we provide to our customers in that field. It's quite a journey from a single component to a subsystem, but we still do all of the above. We do components and subsystems. Of course, that gave us a lot of growth because, of course, the value we're providing to these companies is much bigger. On the other hand, we also moved beyond the semiconductor industry. Fortunately, there are many industries, as we heard this morning already, that require optics, high-precision optics, differentiated optics, to be successful. We are becoming more and more partners in these industries.
To name, we had it in the morning, optical telecommunications, where we start having success. We're in the biophotonics, more specific, in vitro diagnostics, where we're active. Last but not least, we're trying also to build our share in AR/VR world, which is a little bit more new and cutting edge. There's many markets, fortunately, that require optics and have fantastic growth rates, and we want to be part of this. Again, since it's a bit still looking back, so how are we actually doing number wise in the OEM business? Is this a good business for us? I've just provided the numbers here. This is not working, but on the right-hand down, sales numbers of the segment that you know, that always has been reported. Just over the last three years, we had an average growth of 10%.
Last year, 2017 estimates, as indicated this morning, we have an EBIT margin of 19%. Obviously, it's a very good business for us. It's working out. Why is that? Why are we specific and what has changed? We have been in the OEM business, I think for the first time with this strategic move, we're putting all the pieces together that we have within the company into one division. There have been, over the history, different setups, but I think for the first time, really all the different areas, technological areas get together. The two so-called Sparten have been merged. There's another piece from another division getting into it, the sensors. We have everything together in one division, and we have a clear commitment and statement focused on the OEM business.
I think that's the first, I think this will help us be more successful and grow further. I have this huge slide with all these technologies. I don't want to go through all the details here. Maybe cluster a little bit that you get an idea. It is a success factor for us, because only if you have that breadth of technology portfolio, we can provide entire solutions to our customers, and that differentiates us from smaller companies specifically that only can take one part of this. Let me just walk you through this. On the left-hand side, the two columns on the left-hand side, this is our system competencies. We can provide entire imaging platforms built from a laser source through the optics, the sensor, and even the software, as you can see also on site, to provide an entire solution as an imaging platform.
If you go to the other column on the left-hand side, well, that's capabilities of packaging, complex packaging, bonding, gluing of sensors, light sources together to build subsystems. The three in the middle actually show you we still have the capabilities to build components. We do optics, we build micro optical components, where I think we can be called world leaders, and then we also have polymer optics. On the component side, we have access to all these technologies. We can build customized components and then put it together to these solutions that you see on the left-hand side. On the right-hand side, of course, these are the two areas, light sources. We have lasers, we have LEDs. If you go through the entire portfolio, there's not a lot that is not included in the technology competencies to build full solutions.
I think this is a big differentiator, again, now all put together into one division. If that is the technology side, now what is the model? Because as we said earlier, part of the whole strategy is being sorted out by models. We actually do what our customers want us to do. We supply components if they like us to do. I think we can say over time, for us and our customers, it turned out to be the most successful if we worked with them from the very beginning to the end. Meaning from discussing requirements, defining specifications, doing a systems design, building the components, building the entire module, measuring down to the service part at the very end.
Actually with our long-term partners, and we love to have long-term partnerships, and these are very successful businesses where we have relationships over 10, 15, even 20 years. Today, we actually do roadmap sharing. Our customers show us their roadmap, we show them our roadmap, and we merge it and build the entire value chain. That actually is a win-win because we have full control and can use all our competencies. On their side, it's clear accountability. If we're in that project, it's clear if it doesn't work, whose fault it is. It's our accountability and responsibility. For them, life gets much easier because there's no finger-pointing between different suppliers. I think this is a strength that has to do, as we said earlier, with the broad technology competencies and with the size of the company.
Of course, it's a lot of theory and talking about technologies, but how do we do this? We have a couple of locations. There was an earlier question about location, I think. We have a couple of locations, and most locations have general capabilities to serve customers, but most of them also have an in-depth competency that we need and that we've built there. If you look at this slide, you see in Jena, which is our biggest footprint, we have optics, we have micro-optics, optoelectronics, lasers in the location. Half an hour from here in Triptis, we provide technologies for polymer optics, which is very interesting for higher volumes. Berlin, we have LEDs and semiconductor lasers. Dresden, we have micro-optics and optoelectronics.
If we jump over to Jupiter, Jay's place, we have a broad range, a very broad range of competencies, including micro-optics, systems design, micro-optoelectronics. Then specifically, I want to mention Huntsville, Alabama, since we talked about optical telecommunication. There we have capabilities in silicon photonics, which is very important there. Then more like getting started in China, we have a handful of people, R&D people working closely with customers, and we're about to build up our first assembly line. As you can see, it's not in one place, it's in different places, but it gives us also an opportunity to be specialized and be closer to our customers. If you look at the little orange needles there, this is where we have our sales offices or application centers. We heard about our new Silicon Valley application center.
That kind of leads to the three building blocks that I want to name here, which we think are important and make us successful. The little needles, and why we also went to the Silicon Valley, is kind of the foundation of the first building block. It's customer proximity. What customers like is if you have these kind of OEM relationships, you're working very closely with the R&D teams together. They want to have somebody in the same time zone they can call and have a quick chat with and clarify problems, right? It's a lot about communications in these close relationships that have to be clarified. They also like having direct access to the R&D teams worldwide.
The office in a certain location in China or Silicon Valley is not all, but it's a combination of proximity and the technology competency in a specialized area. This is what we figured out over time, which is the recipe for success in this area. Second building block has to do with understanding the application. If we understand the application, we can provide ready-to-go solutions, which is great for the customer. We don't have to customize so much, which is, of course, time-consuming and is expensive. Here's one example I just show. We are providing green lasers to the medical industry. We're not building the medical device. Others are specialists in building the medical device for the applications. We're providing a very stable and high-quality laser source. In the world with more diabetes, there's an eye disease called diabetic retinopathy.
We see this more and more in the world, there's a standard treatment with a laser, and pretty much every ophthalmologist has a laser in his office. We as an OEM supplier, we can provide very stable laser sources to many of the manufacturers of the medical devices. They rely on our quality of the product and then build differentiated products in the market. This is a turnkey solution. We provide the laser. We know roughly how it has to look like, and that makes it easy for them and us. The last cornerstone or pillar is platforms. Not always it's just a turnkey solution, but there are applications that are similar from a technology standpoint, from application might be very different.
You heard last night, if you've been there or you can see it outside our imaging platform, it's a platform like you find in automobile concepts, where you have interfaces defined, where you have different modules and they can play together. If we talk to a customer for a very specific application, we can customize that platform to a specific solution very quickly. Again, in much shorter timeframe and more cost effective, but still create an individual, very specialized solution for the customer. This is what we're doing with these concepts. These are three pillars I think that we will continue to build on, and further develop to be successful in the market. Already last slide for that new division.
I think in summary, we can say, with our already experience in the OEM business, with a broad technology portfolio and the capabilities of providing complete solutions from start to the very end, we can be highly differentiated in the market, we can build on our customer relationship we already have. We can be the partner of choice to our customers, the customer perspective. On the other hand, I think we can and could prove that with the OEM approach, although a little harder to explain and sometimes not as interesting to describe, we can build a very successful and very profitable business. I think with a new concept, we can build on this and grow this further. Thank you very much.
Yeah. Dear ladies, dear gentlemen, also warm welcome from my side. It is a pleasure for me to show you today the already ongoing transformation process of the Automotive Division from a product supplier or high-precision metrology and laser machines, to a solution provider for our customers and, to a solution provider in the smart factory. What is our mission? What is our business model? With our products and solutions and services, we ensure efficient and environmentally friendly mobility. We enable our customers for our customers' enhanced production processes and enhanced product quality in the smart factory. We are one of the global leading providers for high-precision, automated measurement and laser processing solutions. We ensure customer proximity and success within our core markets by local presence alongside the complete value chain.
The complete value chain means from pre-sales, business development, marketing sales through the whole order fulfillment process with engineering operations, supply chain, and of course a professional and excellent service after sales. As Stefan mentioned before, we have also in the meantime in China, a team with R&D people, with supply chain people, with purchasing people, with assembly people to produce there an entry level or you can say also a good enough, standard product family for optical measurement technologies. With this product line, we are going for global sales and we ship it out from Shanghai to our global customers. As we all know, the automotive industry is in a change process driven by megatrends.
The most important megatrends we all know are of course CO2 NOx reduction through improvement of combustion engines, through increasing e-mobility, through increasing hybrid engines, through reducing the weight of the cars by lightweighting materials. Additional megatrend is of course the smart factory, the man-less, flexible, self-controlling production of the future. Definitely the automotive markets in Asia and especially in China will get more and more important in the future. All these changes are a transformation process which has already started. Of course the main question is: What will be the influence for our business and what are the opportunities which we could face for the future business? Because everybody has his own mind, for example, about the upcoming e-mobility. The discussion sometimes is a bit emotional. We decided to initiate a strategy project with an external strategy consultant, with A.T.
Kearney. We call this strategy project Roadmap 2022. Of course, with A.T. Kearney together, we did a deep market analysis how the mobility and the automotive industry will develop in the future. As you can see here, until 2030, we will have more than 80% still a combustion engine. Of course, there's a decrease in pure combustion engine, but also a hybrid car has a combustion engine, and that will definitely increase. Of course, the eDrive will also steadily increase. We have also here investigated the battery production, what is needed there, and the good message is that we have, with the metrology as well, with the laser processing, we have some core technologies in our product portfolio where we possibly could also support the production process and improve the quality in the production of batteries. This is definitely a strong increasing market.
We have to investigate some further developments, but as I said before, we have the basic technologies in our product portfolio. Because all cars are getting more and more heavy because of more electronic components in the cars, and the batteries, of course, also have their high weight. More and more lightweighting materials for the car body, for the body in white are necessary, and here, definitely, the so-named ultra-high strength steel will improve a lot in the future. This material can be only processed efficient with lasers, so this will drive our laser processing business in the next years. It means coming from our core competencies in the laser processing business, as you may know, we are perforating airbags and dashboards, but also we have, in the meantime, a new product line.
We call it a 3D BIM solution for cutting and welding steel and plastic parts. From this core competence, we will develop new applications, how to compete. New applications, as I said before, new materials, for example, this ultra-high strengthened steel or leathers. For this, we need also sometimes new technologies or, sorry, new lasers, as for example, femtosecond lasers for leather perforation. With these new technologies and more engineering solutions and automation solutions, especially in China and North America, and a further forward integration and an excellent service after sales, we will grow here, especially in these regions. On the metrology, our core competence is providing optical metrology solutions for the best quality of complex and performance-critical parts, mostly in the powertrain production. You have seen the pictures from Jay of this optical surface inspection, which we developed with our colleagues in Florida.
Also with these core competencies, we will reduce our dependency on combustion engines through entering in new applications, which will fulfill the same criterias: complex and performance-critical. Like for example, hydraulic parts, brake systems, or new powertrain systems, eDrives. I was asked yesterday by a colleague from you, "Did you sell already machines to the new eMotor coming up?" I told him, "Yes, we have sold" Here is the example. For this reason, you know we acquired last year the automation company 5 Lakes in Michigan, and in the meantime, we have integrated them physically in our plant in Rochester Hills and organizationally in our already existing laser processing activities. The strategical ratio behind this, not to be only a product supplier It's just a cutting machine for one part in the entire production process, as you see it on the first.
Imagine that,
Through this, we will drive customer satisfaction by providing excellent service and enabling our profitable growth. Thank you.
Well, good morning, everybody. My name is Kevin Chevis. Greetings from the Traffic Solutions Division. I hope to spend the next few minutes talking to you about our strategy and how our business is evolving going forward. Many of you that know us over the past years will recognize Traffic Solutions being renowned for traffic law enforcement. By that I mean spot speed enforcement, red light enforcement. That's done on a global basis. It's quite a clear sector of the market. We have supplied systems for our customers to use. We have also supplied services where we run that service for our client. That's been very successful over many years. You will notice that we have made a number of acquisitions over the past three years. The first of which is a company called Vysionics from the U.K., which is where I come from.
It's important to understand how we're leveraging these two acquisitions going forward, and how that actually changes the direction of this division. Vysionics gave Jenoptik the ability to get access to the U.K. marketplace. It got access to a new camera called VECTOR, which is an intelligent camera, which is a platform to do multiple things. It gave access to Vysionics' experience in point-to-point enforcement, which is average speed, time over distance. Vysionics had done some very good work in using that same technology to deliver number plate recognition services to the police force. I'll explain why that's important as we go on. Last year, we made an acquisition of a company called ESSA. The relevance of this is that ESSA provide a software system where they manage data, intelligence, and provide services to the police.
The source of much of this data comes from the camera infrastructure. ESSA provide mobile ANPR, so we have applications on smartphones, tablets, in vehicles, and so on and so forth. This is in wide use in the U.K. In fact, the Metropolitan Police use this technology, and it was used very recently, during a terrorist attack, which I'll talk to you about in the next few slides. You can see from this particular chart that in this journey that we're embarking on, we've gone from being essentially an equipment supplier to being a company that has multiple applications, and we're now able to provide a complete solution. We've managed to raise ourselves up one step on the value chain. That's important in terms of where we're headed.
I think it's very important to understand not just about technology, but what it actually is our technology delivers, because it affects people in the real world. There's a common theme to what we do. If there's a dangerous road space, if we manage the speed, we reduce the accidents and the deaths on that road. If we reduce that, we reduce the delays on that road. That's a very important aspect. In the police ANPR sector, if we can make better use of police resources, intelligence-led policing is a name that is used widely throughout the world. If we make better use of their resources, manage their data better, they themselves can be more effective and therefore improve the security of the society within which we all live and within which we are often, hopefully not, the recipient of that service. That's important.
The common theme here is being able to improve society and save lives. I'll give you one example about what we do and how effective that is, because our technology has an outcome. An outcome is what's really, really important. I know Ken lives in Scotland. We were discussing this last night. We put a point-to-point scheme on the A9 between Perth and Inverness in Scotland. At the time, it was the longest stretch of speed enforcement in Europe. It was a highly political thing to do, but they needed to improve safety because a lot of people died on that road every year. From a political perspective, that's not acceptable. You can do two things to this road. Many people thought we should make it a dual carriageway for 220 km. Costs billions of EUR to do that.
For a few million EUR, you can put a speed management system in and have a very good effect. What's the effect? This chart shows the speed profiles in various sections of this road. You can see that back in 2012 and 2013, high proportion of vehicles, up to 40%, are exceeding the speed limit by more than 10 miles an hour. You can see where we started to do the installation because these profiles came down, there's no prizes for guessing when it went live. We had very good compliance with that, and that remains true today. Key issue here, deaths on that road have been reduced by 33%. Very powerful piece of information. The number of events that cause delay have been reduced by around 40%. That means the journey time from the start to the end is more reliable.
It's a very cost-effective way of making good use of that old road infrastructure. One interesting fact from this, there used to be one in 10 vehicles were going faster than 10 miles above the speed limit. Now it's only one in 250, a very big impact. It's interesting when you look at road safety around the world. I think the World Health Organization published some data about a year or so ago saying there's around 1.2 million people killed through traffic accidents worldwide. If that figure is correct, that's approximately the ninth biggest killer of human beings on the planet. Not many people realize that. Of course, there are many reasons why there's a traffic accident. It may be people driving under the influence of drugs and alcohol, not wearing a seatbelt, or using our smartphone while we're driving, all those types of things.
It should be no surprise that our business now, whilst we have optics engineers and we design camera technology and so on, we're actually recruiting data scientists now to use deep learning techniques and video analytics techniques so that we can recognize these behaviors in a vehicle. That very much is part of our strategy going forward. Using the ESSA Technology, we're able to start to predict where suspect vehicles may be, where they may operate. We're able to link them with events in different parts of the country, in different parts of the world, possibly. There was an interesting event, well, a sad event in London some time ago where there was a terrorist incident involving a vehicle.
Our technology, which is being used by the Metropolitan Police, within minutes tracked that vehicle from where it came from in Manchester, the route it took, and it also was suggesting there was a possibility of a second vehicle that may have been driving in convoy with that vehicle. Whilst that incident was being managed and dealt with, the security service were urgently looking for this second vehicle because there could have been a second vehicle. Thankfully, there was not. There was a possibility. You can see that the strength of the solution to be able to handle that data and give the police services the ability to interrogate that data quickly and take action. This chart really seeks to describe our portfolio of technology and products.
You can see here where the ESSA acquisition of January last year provides us a platform, and we're starting to talk about managing data analysis, data processing, and delivering functionality using a standard platform. The exciting thing about this for our client base, clearly is they can buy or have as a service from us any part of this. As they develop and as they get more funding, they can buy the next part and so on and so forth. That gives us the English term is, we've become a sticky supplier. They'll want to work with us for many years. Yeah. One actually aspect in the U.K., we have a contract to deliver intelligence services to a number of police forces. In this scenario, we're not supplying it as a capital supply.
We have a computer system with a database in a secure private data center, and we are running that as a paid-for software as a service solution over a period of 10 years. We don't own the data, but we own the infrastructure, and we run it as a service. Clearly, using this model, we're seeking to offer them more technology as each year goes by. Looking forward from a market perspective, traffic law enforcement, because saving lives on the road is always going to be a political driver. Interestingly enough in Sweden, they have a concept of Vision Zero, and the idea is it's not acceptable to accept one death on the road through traffic violations. Their aim is to try and reduce it to zero. A big task, but nevertheless, there is the motivation to do more things and spend more money with companies like us.
The international security market is growing at around about 9.5% per annum. That's forecast to continue in that rate. It's very much driven by the threat of global terrorism. That's a sad thing, but it's a reality of the world we live in today. Therefore, funds need to be made available to counter that threat to our public safety. You can see converging our products into a single platform, we can make much better use of this technology as a feed into many other applications. The difference in our division now and where it's going, from being traffic enforcement to being a public safety solutions provider, and we're actively doing that right now. You could also describe it as bridging a gap pretty much between what we would know classically as intelligent transport systems and the police intelligence service.
There's ability there to make best use of the same technology. We probably don't need this slide, but it's been discussed already by Dr. Traeger and Mr. Schumacher about the Toll Collect project, which we took on some time ago. It did have some difficulties early days, and that did affect us last year. The positive news is that we started delivering units in Q4, which Mr. Schumacher was very pleased about, I can say. We've shipped about 200 to date, and the remaining 400 sites we completed by the middle of the year. We are now in negotiation to discuss the support contract, which again is a long-term, 10-year contract. Some success from that. Positive revenue recognition and EBIT contribution. Just to finalize that, and I've covered quite a lot of ground, I know in that sense.
We actually do recognize it's something we want to get across to our clients, something we want to get across to our employees and the people that do the innovation and the people that deliver the service, is that our role is about saving lives. We make a difference to that, so we must take that seriously in everything that we do. Okay. That's myself finished.
Yeah. Hello to everybody. Stefan Stenzel talking. I'm responsible for the Defense and Civil Systems division. I will present to you the new Defense and Civil Systems division with the mechatronic focus. As you know, we are active in two main markets. We are active in the civil aerospace industry, as well as in the market for military energy systems. Both of these markets grow stable over the next years to come between 3%-5%. If you first look at the market for civil aviations, we can recognize more or less three relevant trends for us. First is, you mostly will be aware that both Boeing and Airbus have completed their fleet of aerospaces over the last 10 years, there's not many opportunity to sell new products to new planes.
There's the opportunity to grow with innovative products who save either energy or weight and who have to be proven in maturity. There is the chance to make business in existing fleets, in existing planes, with new innovative products. There's another market we are active in. This is the market for rescue hoists. There are only two players in the world who supply rescue hoists to the search and rescue community worldwide from China over Africa to Europe and U.S.A. These are both based in the United States, here's an opportunity. Jenoptik is active in this business of building, developing rescue hoists for over 40 years. I will come to that. In the market for military energy systems, there is an increasing amount for maximized mean time between failure.
Soldiers don't call it mean time between failure, they call it operative readiness. If they are in the field, they want their stuff to work. There's no second chance to save your life or the life of the people you do protect. I think also most of you are aware of the poor standards of the German, but also other armies in terms of operational readiness. If the German Army has to lend a helicopter from ADAC to fly to Mali, this is a clear proof of lack in operational readiness. Here is where we come in. All our new products we develop are focused on maximizing this mean time between failure. There's a trend in the market of customers who are looking for energy efficient solutions.
You need to know that one gallon of fuel in a crisis region costs up to $400 U.S. dollars because they don't pick it from the gasoline station next tent. They fly it in by helicopter. Every fuel saved in the field saves a lot of money for the army. There will also be an opportunity to supply high voltage energy to directed energy, means laser weapons in the future. This is unfortunately a market who will mature over the next eight to 10 years, so over the midterm horizon. In the meantime, we will see a lot of refurbishment and overhaul programs for the existing tank fleets in the world. The German Leopard 2 fleet will be refurbished, the Polish one, the Finnish one, the Swedish one, the Danish one. We have recently won the contract for the Danish one and the Polish one.
Also the U.K. Challenger tank fleet will be refurbished as well as the Israeli Merkava 4 fleet as well as the U.S. American Abrams fleet. There is a lot of demand for components, modern energy-saving components for these tank fleets in the Western world. We only can address the Western world, so our market to that extent is limited, but this market is as huge as I present it to you. This transforms in our strategy. For the aviation market, we want to be the strategic supplier for heaters and rescue hoists for at least two aerospace OEMs. Today, we are a good supplier for Airbus, we want to add other customers to that market and, therefore, we have developed new products, which I will present you later on. In the military arena, we are already the leading supplier for energy systems for military platform.
We support here the customer demand in terms of mobility, of firepower, of precision and fuel consumption. For all of these, you need more power in your vehicle. We do so by offering commercial off-the-shelf and military off-the-shelf products. That means we want to shorten delivery times by having products already ready for shipment. We want to reduce customization costs because customers are not anymore willing to pay development costs in advance. Of course, we always aim to lower the total cost of ownership. To have more success on the customer front, we now address customers very much early on. 3 to 5 years before the specification is drawn up, we contact customers, we talk to them, we address their engineering departments, show what we are able to do, so that we want to be included into their specification.
Then when the public demand is gone through the complete political cycle, they precisely want what we already have on offer. If you have commercial off-the-shelf and military off-the-shelf products, we also do that to address a multiple of customers and a multiple of platforms. We do not want to rely on Patriot alone. We want to serve several air and missile defense systems. We do not want to rely on Leopard 2 tank alone. We want to rely on several tanks. That's why we develop our products in such a way that they can be deployed on various platform. This is really a game changer here. In the past, all our products have been specially designed for one use for one platform.
Of course, because there we earn most of our money, we have to be able to ship our products for 30 years+, not only for 10 or 20 years, but for 30 years+, and also being able to service them and overhaul them. Over 110 people in my division are working in the service department. This all reflects into four new products, which we will be able to bring to market over the next 12 months. I will shortly lead you through our new electrical rescue hoists, which we want to ship as of first quarter 2019 on. Our floor panel heated, which you will be able and have been able to see outside that room, which we will ship to our customers end of that year.
Our new air-cooled 600 amps generator, which we will launch in Q3 this year, as well as our new Patriot ground power unit, which we will ship as of Q2 this year. Let me first address the floor panel heated. This might look as a boring product, but it's only boring when it is working. If it's smoking or if it's burning or if it's not functioning, the plane does not take off. There are today heated floor panels in airplanes from competition, but they sometimes do smoke. That's why customers have approached us and asked us for a new technology. With our 40 years of experience in heating in airplanes, we have been able to come up with a new product, which is extremely robust, which is self-regulating, and which is lower in weight as the existing one, and which is even cheaper.
We are quite confident to be able to sell over EUR 10 million additional with this product alone to one customer. This, as I said, commercial off-the-shelf, is not a customer-specific design. We are owning the IP, we are able to address other customers, that's what we are already doing. The electrical rescue hoist, I think, is the best example of what we want to do in future. There is a market for rescue hoists, this market is growing because the number of helicopters is growing strongly. We have, since 40 years, providing rescue hoists for military helicopters only, now we join the civil arena and have developed a completely from scratch new electrical rescue hoist with that special features, which have USPs compared to our customers. We have a modular service concept. Why is that so important?
When you are using such a rescue hoist, you have to overhaul it any 5,000 or 10,000 flight miles, the overhaul alone is nearly as expensive as the new buy. Customers are very much looking at the overhaul costs. With our new modular service concept, we can reduce the overhaul cost by 50%. We have a longer cable in. We can have more than 30% more weight lifted with the winch, it's remote controlled. All this together is a big jump in functionality compared to the existing competition, customers to whom we talk are very eager to team up with us. In the military arena, we have developed a new air-cooled 600 amps generator. It's only a generator, that's right, it is an air-cooled generator, with this generator we can address the U.S. markets.
European customers rely in oil-cooled or water-cooled generators. They like the high-tech stuff. U.S. Army is for principle reasons only working with air-cooled generators, they also are looking for higher energy output, with air-cooled generators this is not so easy as with oil-cooled generators, for example. Here we come up with a new design, which addresses more than one platform again. The FMTV, the JLTV, even the refurbished Humvees can be equipped with that generators, they all do come with the hundreds per year and not with the dozens as it is in Europe. We're also talking to German customers for these products, French customers, the main market we do address here is the U.S. market. The last product I want to introduce to you is our new Patriot hybrid ground power system.
The Patriot rocket launchers are used in the field, they need energy to move up their launching equipment. We ship for the last 30 years the existing ground power units, they are very fuel consumptive. They need up to 400 liters of fuel per day. We have built a new design where we have a smaller motor, a smaller generator, which stores the energy in a super capacitor battery, this battery then delivers the energy for lifting up the rocket launcher. By using this new innovative technology concept, we save more than 60% fuel. You can easily calculate how much that means if you use it 360 days per year in the field. Today, this equipment has to be refueled three times a day, tomorrow it only needs to be refueled once a day.
If you know that the most soldiers killed in the Iraq wars have not been fighting soldiers but tank lorry driving soldiers, you know that the customer is really urgently in demand of reducing fuel consumption for his fleet. By using a smaller motor and a smaller generator, we also save not only energy, but we also increase mean time between failure because the smaller motor can run always in its perfect idle and so you have less repair. We have integrated a transformer which enables the customer to use the public grid power if there is one, to use this ground power unit because it has to transform energy from 50 hertz or 60 hertz, which is in the public grid to 400 hertz which the system requires.
We are positive to sell the first two prototypes of that system to the Lower Tier Project Office in Huntsville, Alabama this summer and the Lower Tier Project Office is responsible for the complete system design of the Patriot missiles in the United States. All these products we have sold over the last years under the Jenoptik brand. We believe if we have an independent brand which more reflects our competencies in power generation and power management as well as reports better our quality and maximum reliability and that for the aerospace and defense market that this is helpful. We also want to transport our commitment to be there in 30+ years for new products and for overhaul products.
Jenoptik is a good brand, no doubt about that, a brand more dedicated to the aerospace and defense market I think could helpful to speed up our growth. Thank you. Thank you very much my colleagues here for their inspiring talks and for explaining in more detail our ideas and strategies for the individual segments of the company going forward. In the last nine months, I had a number of times the pleasure to try to explain our company's setup
I must admit, it wasn't always easy. At times, it took me 15 minutes to take you all through segments and the divisions and our product lines. Quite frankly, when I talk about focus, when I talk about focus of our businesses, as I said earlier, I also do mean focus of our company structure, making our company structure easier to understand. What I'm going to try now is to show that picture one more time and talk you through our business setup as if this would be beginning of 2019, let's see how long it takes. Jenoptik is actually operating in four divisions. We have our mechatronic business, the DCS business, providing service and solutions to customers in the aviation industry and in the defense industry based on mechatronic technologies, mechatronic techniques, and products.
We have three major divisions providing products based on photonic technologies to their customers. Our OEM business, our light and optics divisions, cater for large corporate customers in a key account manner. This division focuses on solutions in the semiconductor industry, in the optical communication space, and in the biotechnology space, in the biophotonic space. Our light and production business caters to predominantly customers in the automobile industry in an end customer and an end product manner. Our light and production business has its own sales channel, including service and solutions. Finally, our light and safety business caters to public customers, providing technology to save lives on the road and off the road, and services around software and solutions for public environments. That, in a nutshell, is Jenoptik in future.
As I said earlier, we'll prepare that move in 2019 and start reporting in these new divisions, prepare it in 2018 and start reporting in 2019. Focus means focusing on core competencies, means easier to understand business setups, but also does mean, to me at least, making clear what our priorities are. I said the other day, when I started with Jenoptik, I was a bit surprised that when I asked folks about their priorities, they had a list as long as my arm. I think we want to focus. We need to be clear of what our priorities are for a particular timeframe as well. As the management board, we want to walk the talk here, and we've set three priorities for the company, in its entirety for 2018.
Our priorities for this year are going to be to establish our new business structure that we talked about. We want to reorganize our setup in Asia. It's a particular pleasure for me that I can announce here today that we will have a new president for our Asian activities, Jonathan Chu. He's a Chinese national, lives in Shanghai, has a wealth of experience in working in optics and photonics industries. He worked for GE Technologies. He worked for Mettler-Toledo. He worked for Leica Microsystems and Danaher, and he worked for Tecan. I know him since a number of years, and I'm really pleased to be able to report that we can have such a seasoned and inspiring leader for our Asian activities going forward.
The third priority for the business overall for 2018 will be to launch the new brand for our mechatronics businesses in order to help them to be better positioned in the marketplace. With that said, let me put a bit of color around our 2018 guidance. We do guide for 2018, on the sales side, for a revenue range in a corridor of somewhere between EUR 790 million-EUR 810 million. We expect our margins to further expand. We guide for EBIT margin somewhere between 10.5%-11%. Now, we do have some tailwinds from all marketplaces. Our markets continue to be strong, essentially across all arenas. We have a very strong order book that we roll over into 2018. Our order book is 12% higher than prior year. However, we also do see some risks in the market space.
The risks that we do see are around constraint in the supply chain, and we've discussed that in our earnings call earlier. It's getting harder and harder to maintain our supply chains. The strain in our supply chain is ever bigger. In some areas, the question is not around price. It's more about whoever can deliver gets an order. The constraints in our supply chain are getting harder. The risk that we monitor the closest at the moment, though, is around foreign exchange rates. It's around, quite frankly, the dollar to euro rate. The development in the last few weeks, if it comes to dollar to euro, is not in our favor. We all know that. It's of course hard for us to know how that continues. We don't have a crystal ball, as you don't.
The FX risks is probably the biggest risk that we have at the moment, and we'll continue to monitor that very closely. Now, on the strategic horizon, we have said that we want to grow our sales. We continue to grow our sales, and we want to accelerate growth and margin expansion. We want to see that, and I think we have shown with our strategic agenda around more focus, more innovation, more internationalization, that we will develop our business from a diversified conglomerate to a more focused technology group. In that strategic horizon, we would like to see sales to grow on average over the period in a mid to high single-digit range. That should be a CAGR and not a single-year event, obviously. In the same time, we want to see margins expand to around 16% EBITDA of sales.
Now, that does include active portfolio management. In other words, we will see acquisitions and possibly divestments in the period. Obviously, if you see acquisitions and divestments, you have quite some effects and movements within the P&L structures. If one acquires new companies, not always do they come with an initial margin that's higher than ours. In other words, we need potentially some time to leverage the synergies that we expect with potential acquisitions. There's another effect that we have touched on during the question and answer sessions in the earnings call already. The growth and margin expansion of the company in the last few years in particular, have been driven heavily by mix effects. In other words, the tailwind that we have from the semiconductor environment has helped us quite a bit in expanding our margins.
Now, I don't think we should base our forecast on the assumption that strong growth will be only in one segment. We want to develop a portfolio, in particular in our photonics industries, that's a bit broader, and we talked about it today. In other words, if we expect a somewhat slower and not an accelerated growth in the semiconductor arena over the five-year period, we have to accelerate the growth in the arenas and areas of the company that haven't been growing thus far in the past. Obviously, we need to expand the margins in that segment even more in order to expand margins in the whole of the portfolio.
Therefore, we believe that this mix effect gives us a good opportunity to grow the overall profitability of the company, from what is today about, or a bit more than 40% EBITDA to around 16% EBITDA by 2022. We're very upbeat about that. Let me say that I think our markets are very strong. Our markets are very stable at the very moment. I don't see any reason to believe that a photonics marketplace should not grow and continue to grow with growth rates in the area of 2x our global GDP. We believe that we have a good strategy that we've put in place. We believe that our strategy around focus and innovation and internationalization is going to provide the basis for further growth and margin expansions in the future. As I said, we're very upbeat about our potential future.
We are willing to take this place to the next level. That does include the means and willingness to invest into growth going forward. We are looking forward to the future that lies ahead of us. A very bright future. That said, I thank you for your attention for today. We now have ample time for questions again. If you have any questions to me or my colleagues, Hans-Dieter Schumacher, CFO, or indeed our divisional leaders, please don't hesitate. We're happy to take questions now. Maybe my colleagues join me on the stage here.
I have a question with regards to the old Mobility Segment. If I understand you right, that's going to be basically two segments, Light & Production and Light & Safety in the future. If that's the case, can you just provide us with the breakdown of revenue and EBIT in 2017 from this division?
The Mobility Segment today consists of two divisions
Our Automotive Division and our Traffic Solutions Division. In future, essentially, that will be run in these two divisions. We're not going to report only the overarching mobility, but we're going to report under individual divisions. Once we have established the business structure in more detail going forward, we will give you the information about the 2017 and 2018 figure. We'll reconcile it backwards once we have the details around the structure.
Can you not even give a little breakdown on the sales in terms?
Sure. We can. I believe the breakdown of the sales in the Mobility segment is roughly 50/50. It's pretty similar, I believe. Not quite? Maybe. Yeah. Roughly 50/50 between the two divisions.
Yeah.
I think, roughly 50/50 between the two divisions.
Yeah. Stefan Meyer from LBBW. One question for Kevin. Is the traffic solution portfolio from a technological point of view now complete or do you see any white spots? Is it essential for you to have local content to win governmental contracts that would imply that you probably steer your M&A strategy more to get market access? The second question for Mr. Schumacher, maybe. Could you outline the FX sensitivity on sales and EBIT or EBITDA level? As you have pointed out, it is the most negative development you see or risk see for 2018. Thanks.
Okay, from the technology perspective, clearly our emphasis right now is on designing and building more functionality based upon deep learning techniques. That has to go much further forwards in terms of the possibilities of hooking up with biometrics-type activities so that we can provide security services at strategic locations and so on. That is really much a focus of what we're doing. We will continue to develop the camera technology that supports that and provides the data for those type of services. From a localization perspective, there's probably two aspects to that. It's quite clear through Jenoptik, we have subsidiaries and partners in a number of key places in the world. In America, Australia, Shanghai, and so on and so forth. That is important.
If you want to build a relationship with a government organization, you have to demonstrate that you're there, and you have to understand their local issues. There are occasions where we have to make some localizations to reflect local government law and policy, and all of those are built into the structure in terms of how we make those things. Clearly, partnerships in other countries. Some countries, we work with a partner. We have a subsidiary in America, but we also work very closely with another major company called ATS in America. They themselves have, in that case, the relationships on a local basis. It will vary from country to country.
Thank you, Kevin. Mr. Maichl, concerning the FX effects we see in front of us. First of all, it's hard to say how it will develop till the year-end, but we're managing and monitoring it from now on a nearly daily, let me say it in this way. We had finished our budget process during the end of the last year. The exchange rate we calculated for the U.S. dollar versus EUR is already more than 10% difference between our planned exchange rate versus the actual figure. If you calculate the actual figure, U.S. dollar/EUR for the whole year, it's around EUR 50 million less sales in Europe. As we have a big operation in the U.S. with natural hedging, sales, cost structure, and profits in U.S. dollar, it's more a calculating impact because we have to report in EUR.
If you take into account that we have a lot more than $100 million U.S. dollar business in the U.S., it's more than 10%, obviously, you end up at the number $10 million, $15 million. Our controlling department is calculating if the exchange rate getting worse and worse to 1.30 from 1.25 today. We will check it. It's a little bit in our guidance already. Concerning the profits, it's not so huge. Yeah.
Yes. Craig Abbott from Kepler Cheuvreux. I have one set of questions for the traffic solutions and one, please, for Mr. Hauser on automotive. On the traffic solutions, I just wondered if you could give us a feel for how your pipeline looks. In general, or should we be a bit concerned about a potential material drop-off in revenues in 2019 as you complete delivery of these 600 towers in 2018? Mr. Hauser on the automotive side, you mentioned that you have the competencies in-house for the traction battery production as this really ramps up over the next decade. I just wonder if you could elaborate on this a bit more on just what exactly Jenoptik supplies and whether this is already in commercialization phase, i.e., do you have real contracts with OEM producers? Thank you.
The first question regarding our pipeline. Our pipeline is growing, and it's growing in a number of different places. Through the acquisition of the Vysionics technology, the international market has opened up for that quite dramatically, and we're seeing it over the last 12 months. We've installed systems in Australia, we're coming to Lithuania, Singapore, and so on and so forth. That's on a very good growth curve upwards. The civil security marketplace also has the same thing. I was talking to one of the other colleagues earlier over the coffee. We're putting hundreds of cameras into Belgium and Netherlands and various other countries. Those things are on the growth side. In respect of Toll Collect, we are actively looking for more opportunities for that and prosecuting those as we go forward. That really is our strategy.
Just to put some more color on that, whether or not that's going to be enough to actually compensate or overcompensate activities in Toll Collect is another matter. You will see a very strong 2018 in that segment from Toll Collect. There is ongoing recurring revenue from a service perspective, I think the assumption that there is somewhat of a challenge in the business in 2019, in terms of additional growth over and above 2018 is a good assumption.
One thing I would say is the service contract for Toll Collect over 10 years for 600 sites is a sizable contract in its own right. Some of that will be compensated by that deal alone.
We have investigated deeply with A.T. Kearney and then with the university in Aachen, the production process of battery cells, for example, and what is needed during this production process to ensure the quality which is needed or to improve the quality of the battery cells which are needed. It seems that there is a need for optical surface inspection during this production process, and we have, as you may know, the basic technology in our portfolio. We don't have yet a concrete customer order, but we are investigating or talk to our customers at the moment or possible customers at the moment what exactly they need. I would say at least in the next six months, we are clearer what we have to do and what we have to invest to fulfill these customer requests.
Also, on the laser processing side, for example, also during these production processes, you have to sometimes to weld something or when you pack the cells to one package, you need some welding processes, and this is also a possible field for our laser processing technology.
Hello, Peter Hutten here. First on defense and civil systems. I remember in the past there was always mentioned huge potential from the civil business side with generators. I missed this in your presentation. I know you cannot touch every product, but is there still seen very good growth opportunities in this area? I remember the railway business, also construction vehicles. Perhaps could you comment on this? Then question on Dr. Traeger. We touched this yesterday evening already. You have given your guidance on the basis of the acquisitions and divestments. Could you give us perhaps some help? What can we expect in terms of organic growth in sales? Is the outlook regarding the margins, a 16% EBITDA margin, would it be similar on an organic basis, or what can we expect here?
Yeah, on the defense side of the business, you are right that we have investigated a lot the railway market. We have also increased our revenues here by a factor of four over the last years. As most of you will be aware, this is a very competitive market, a consolidating market with a huge price pressure. We are somehow refusing to offer products below costs. The growth potential is not so aggressive as in the past seen by us. On the contrary, we have been able to see that Romania, Poland, as well as Sweden will introduce Patriot rocket systems over the next three to four years, and this will contribute to growth in the power systems business unit.
Construction vehicles was a concept we also followed on. This has proven out to be a market very small in terms of their hybridization potential, and that's why we did not further went into it.
On the long-term guidance again, you're right, we talked about it briefly over dinner last night. Nevertheless, by and large, I would envision that over the period, investments and disinvestments, acquisitions and disinvestments will probably balance out more or less and by and large. In the outer years, probably more growth from the acquired companies, if we can manage to acquire, simply because it takes some time to leverage synergy effects. If we would have guided on the portfolio as we know it today, entirely organic, we would probably have been a bit more cautious on the top line. Not dramatically reducing it, but a bit more cautious on the top line. If we would have guided entirely on the business as we know it today, we would probably have given a similar EBITDA guidance.
Again, probably a bit more cautious, given some of the structural effects, in particular in our mechatronic businesses. Overall, and by and large, the guidance on an entirely organic basis would not be dramatically different.
Thank you. Two questions, please. First for Dr. Kuschnereit. It's your business unit that obviously is taking care of a good amount of the profitability, certainly last year, but even in the years before. That is not least related to one project that Dr. Traeger already indicated may come to an end at some stage, i.e., can you give us an update on where we are standing in the upgrade cycle with your major European litho customer? That would be appreciated. The second question would be for Mr. Hauser. You indicated a few of the chances that come with the proliferation of EV and electric mobility. How much of revenue would you say, in contrast, is potentially at risk on the back of the e-mobility revolution as it comes because your tools and services largely cater towards more legacy, i.e., gasoline technologies? Thank you.
Let me try to answer this question. Maybe one disclaimer is our customers don't really like if we talk about them. That's a little bit my challenge with all presentations and answers to all these things. It's not to say they really don't want it. Let me say it differently. In the simulator business, as you know, it's a very dynamic market, and even upgrading systems that we profit from is a dynamic market. We have benefited from that in the last year, and we are benefiting from it right now. Our forecast, which is also a challenge for us that we get from the industry, is very short, if not close to zero sometimes. It's very hard to predict it.
The only thing I could probably say as a guess is that at the end, it seems to come with the overall industry dynamic, right? There might be some, let's say, it's physically phase difference, phase shift in it, so it might be a little later or earlier to kick in. I think if the investments go down, I think also refurbishments and upgrades will go down. It's very hard to predict it for us and it looks like even for our customers.
First of all, you have to be aware that from our division, we have only on the metrology side, this risk of the upcoming e-mobility, not on the laser side. Only a part of our revenues is maybe affected by the e-mobility. Second, what we see at the moment is still a strong investment in improving the efficiency of the combustion engine. Since second half of last year and currently, we have a strong order entry for these applications, and there are plans of the big OEMs at least to further invest heavily in the improvement of the combustion engine in the next at least two, three years. I would say a possible risk, we maybe have 2021, 2022 from the metrology side, and let's say we assume about 10% of our total division revenue, which could be a risk revenue.
Of course, as I have shown you, we have a lot of possibilities and opportunities to compensate or to overcompensate this 10%-15% risk of our revenues with new applications for different parts in the automotive field and with the stretch and battery coming up and things like this.
Hello, Robin Brass with Hauck & Aufhäuser. I have one question also concerning the M&A opportunities, I guess, in the future. I guess one could be maybe new customers where you get access to maybe new sales channels. What else would be maybe interesting for you to look at? Secondly, also, how do you weigh basically paying higher prices for interesting new opportunities versus you can't really organically get into those markets, so maybe it's worth paying a higher price for those?
Maybe the best way to address that question is by just briefly going through the portfolio, and discuss where we could envision bolt-ons and where we would probably need more transformative deals in order to develop us to the next level. In our automobile business and our traffic solutions business, in the two businesses that you've seen in the center, the lidar production in future and lighting safety in future. In businesses where we do have end customer access already, in businesses where we have direct sales channels and service channels, I think it makes a ton of sense to add product or technology to it, simply because if I have a channel, I can actually just pop more product into the basket of my salesman, and by doing that, generate growth. It would probably make sense to also add regional expansion to the channels that we have.
Not in all geographies we are direct in these two businesses, going more direct or convert deals to direct in some geographies could be a potential way going forward in terms of acquisitions for these two businesses. Technology, product additions, bolt-ons for those two divisions would make a lot of sense. In our OEM business, we have a good product portfolio, I believe. Technology is always something that we can add, but quite frankly, it's a bit difficult and challenging to see who has a better technology base than us when it comes to optics and photonics. I think we have a good strength there. Focus on this business is probably more on organic growth and R&D and into the product development area.
If it comes to biophotonics, healthcare, life sciences, I for one believe that, and we've discussed that last night, building our own sales channel into that segment is very challenging. I come from that area. Life has been around the block a number of times when it comes to life sciences and healthcare businesses. If it comes to regulated environments, building that from scratch and organically is a challenging thing. In other words, if we want to become or have the chance to become the opportunity to become a real solution provider for this business, not an OEM, but an end customer provider, I believe that has to be in a transformative deal, which would come with an established sales channel. That might actually end up in an additional division in future, possibly an end customer business into the life science or healthcare arena.
Again, that would be a transformative deal, not a little bolt-on. I have another question. Price. Yes. Look, the way I view any acquisition, any M&A activity, is the following. The first question I'm asking is: does it make strategic sense? Second question I'm asking is: can we build a growth case out of it? Third question I'm asking is: do I believe that from a cultural perspective, we have a fit? Then and only then I think about price. Because if I can't build a strategic case, if I can't build a growth case, if I don't believe in a cultural fit, it's not even worth thinking about price.
Of course, price is an important factor, but more important to me is if we can make it into a growth case, and then we see if the case flies, and if the case does fly, and if we see a strategic add-on to our business that makes sense, we'll go for it. If not, then we'll pass. There is another aspect of M&A which is very important. It often gets forgotten, and that's compliance. In particular in areas where geographies where compliance might not be at the standard that we as a public company require. Let me disclose that we have just recently passed on actually in the last minute on an acquisition where we have had doubts about the compliance standard in a potential target in Europe. We will be very diligent when it comes to compliance and compliance standards.
Questions. First one, again, on the traffic business. The public safety and your ability to provide public authorities with a lot more data than compared today. In what respect gives that you a competing edge about your competition? How does the competitive landscape look like? Are they also able to provide that kind of services you are providing or might provide in the future?
That's a good question. In many respects from the
Data perspective of our product portfolio. Many companies who do this come from the IT world, and they're not providing the sensor technology to provide the information. Because we work in that particular space, we have a really good understanding for what you can do with this data and how it can be useful, and how our clients can get benefit. From that perspective, where before we were supplying cameras as part of the solution, we are now supplying the overall solution. We can manage that with as a physical implementation, software as a service, as we discussed earlier. We can also drive the portfolio with some interesting new developments. We discussed earlier over coffee that we are currently working on profiling vehicles, not just from a number plate perspective, but utilizing the Bluetooth profile of a vehicle.
Every tire sensor has a Bluetooth profile, which is unique. Most modern cars now have a Wi-Fi signature. The bad guys, and it's mostly bad guys that commit crime, for example, have a smartphone and a work phone. They all have signatures. We're able now with the technology to blend number plate recognition with events, with people, and with the profiles of the technology they themselves are using. That's a key differentiator for us, and we can use that in the intelligence application.
Then on the biophotonics, how mature is your product pipeline, potential upcoming product pipeline? How does your idea pipeline, R&D pipeline, project pipeline, talks with your customers look like? Maybe you can shed some more color on that.
Sure. Let me answer it this way. We have a couple of strong relationships already in that area, as like in the semiconductor business, we're applying the same principle. We look for bigger companies, strong companies in the market and build stronger relationships. It is by far not as mature as it is in the semiconductor business, but we have some good partnerships already, and I think looking forward, we have to strengthen these relationships and keep them going. Of course, we're looking for new ones. Again, I would say compared to the semiconductor business where we're 10, 15, 20 years in, it's a quite new business. But we have a good starting point of a couple of years into these relationships.
It's Stefan Maichl from LBBW again. The civil OEM helicopter market was very soft last year. Might stabilize this year, we'll see, looking at the Leonardo and Airbus helicopter comments. Is this something which might inhibit your market access or is refurbishment a more powerful driver for your helicopter hoist business you want to start?
The growth in the civil helicopter market has slowed down because of the reduction in oil drilling applications on the seaside to, say, 30% of all helicopters are used in the civil space. Will that last forever? I don't think so, and when we talk to others and to other customers, they predict growth of more than 10% of their fleets. But we see next to that a lot of refurbishment business for the existing out-aged rescue hoist fleets. Customers whom we talk would want to exchange existing winches against modern, more powerful one.
I have a question with regards to the new structure. You have basically lined out how it looks like. Does the concept, the responsibility of the individual lines or line managers of capital allocation, capital is incentivized to optimize the return on capital, their use of working capital, their investments, or is this basically down to you and the CFO?
That's a good question. I think it is a question that my colleagues are asking themselves at the moment. Do I or do I not? I do. Come on. Very good question. We intend to empower our leadership. That does mean that our leaders are responsible for their business. It does mean they're responsible to grow the business. It does mean they're responsible to expand the margins of their businesses. It does mean they're responsible for working with their capital in the most effective manner. The three aspects, growth, profitability, and making sure that we actually get the good operating cash flow will certainly be something that our leaders will be responsible for. Of course, the individual incentivization of my management team, I will discuss this with my colleagues. Okay. With that, we would like to draw to a close.
I'll thank you very much for your questions. Thank you very much for your participation today. Again, I have made a reference to a safe harbor statement in the early part of the day, in the beginning of today. Let me do that one more time. Please do respect our safe harbor statement. Again, this call has been recorded. Before we bring it to a close, we would like to end today with our little footage, with our little movie again.