Welcome to everyone here in the room and welcome to our participants on the web call. This call is recorded and be downloaded later on for review. Ladies and gentlemen, I'm now going to read to you the whole Safe Harbor statement. I'm going to follow the lead of Thomas Switzer, Investor Relations of last night. So please do respect our Safe Harbor statements.
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 data will be around our future. We're going to discuss with you our strategic thoughts going forward. We will explain to you in some experts talks, technology backgrounds that we have, and why we are proud of our technology, 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 future, and I will put some extra color on the guidance that we provided the day before. So again, 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 Technologies, 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. And Kevin from that business will talk about that more in detail later today.
In the mid 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've announced the acquisition of 5 Lakes Technology. 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%, so more than 9% in previous year. And profitability has expanded by roughly 70 basis points to now 10.4 percent EBIT margin in relation to our revenues. And 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. So in summary, again, I think 2017 has been a very, very successful year.
And Hans Dieter, our CFO will now come on stage and put some more light on the last year. Yes.
Yes. Good morning to all of you from my side as well. Welcome to the Capital Market Day 2018. We are still in the process of finalizing our fiscal year 2017 in terms of accounting bookings still under evaluation concerning the notes, especially in discussions with the auditors. But we obviously have already some concrete ideas about revenue, earnings and so on.
So 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's €221,000,000 which is one of our highest Q4 revenue figures we ever reached. In total, this ended up with EUR748,000,000 which is, as Stefan Regg already mentioned, above 9%, 9.2% above prior year, which is mainly organic. We have roughly around about €6,000,000 to €7,000,000 with first consolidation impact from the acquisitions, Esa and 5 Lakes Automation in the figures.
So it's 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. But 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 point 8% and the EBIT margin by more than 17%, reaching up to 10.4%.
And when Stefan Weger mentioned it, 70 basis points more than prior year, then we are relaying on the ongoing businesses. You know, we have reached 10% last year 2016, but some non ongoing businesses impacts have been included, taking them out. So to be 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. So in total, we are very happy that we have reached more than the 10% which we have guided.
And let me say it in these words, we have made a very, very good lending concerning the earnings. So we are quite happy that the year end rally that 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 3 weeks. So very strong year end value in December. Including in the EBIT figures, you see in front of you, there are roughly around about €2,000,000 from the purchase price allocation impacts from the acquisitions.
And some millions 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. And 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 tall wind in the order intake from Optic and Life Science, and it's still going on in 2018. There's no calming down in 2018.
We have reached with €803,000,000 roughly order intake, an increase of 9% as well as the sales, the revenue. And so our book to bill is clearly above 1, which is an indication that also on the order intake side, we are well prepared for the 2018 order backlog, which is more important even because a lot of it more than 60% will be sales in this year. It's €453,000,000 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 the €29,000,000, €30,000,000 from the frame contact 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 solution business, which will have an influence, a strong influence in Q1 and Q2 2018 in terms of sales and profitability in this segment, positive obviously. Yes, having said this, we have, as I already mentioned, very strong basis for our further development. The we have 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 €200,000,000 cash on hand. So we are net at €70,000,000 plus. So 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.
So 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. So we are well prepared for future development and we intend to increase further our revenues and earnings. So 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. And having said this, as a starting point for the future, I'd like to hand over now to our CEO again, Stefan Reger, 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 strategic plans. Before I start talking about future though, let me have a quick really brief look into the rearview mirror here. And let us remind of the journey that Genoptix 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 Genoptix. Genoptix has steered through some choppy waters at times. There was a 2,008 financial crisis that needed to be managed. There was a pretty high amount of debt within the company or the company had to deal with, an amount of that that at times I would say has limited the ability of the company to invest to growth. Ladies and gentlemen, these days are over.
I think by now we have a very good financial position. Our balance sheet is strong and we have the financial means and certainly the willingness to invest into growth going forward. And in order to do that, we have developed a strategy for the next 5 years. And the strategy of our company for the next 5 years is based on 3 major building blocks, based on focus, based on innovation and it's based on internationalization, as a little movie clip that we showed in the beginning has already indicated. I'll go ahead and tell you more about those 3 building blocks.
But first of all, let me summarize what I 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 ENOPTIC and to transform ENOPTIC 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 the Anoptic about 9 months ago, I looked at the thing and what I found was a company that's financially on a good and solid ground, a company that is pretty diversified, a company that has a pretty broad portfolio of products and businesses. And 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, we want to do at the same time with the full intention and intensity that it requires. And I believe that's quite a challenge. Therefore, I believe we should focus somewhat, we should concentrate focus on something we are really good at, focus essentially in our core competencies. Now the question is what are our core competencies and I think it doesn't come as any surprise if I'm saying the core competencies of the optic really should be optics and photonics. After all, it's even in our name.
Optics and photonics though is not just our core competency. Optics and photonics is something that's deeply ingrained in the DNA of the Inoptix. 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 evermore ways in our everyday life.
Without Photonics, there wouldn't be any digitization. The whole 4th Industrial Revolution we'll talk about wouldn't be possible without photonics. There wouldn't be any more modern life sciences and health care innovations without photonics. We've seen those of you who had been with us last night, we've seen 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. And thus, it's a marketplace that offers to us fascinating entrepreneurial opportunities and chances.
So at Genoptix going forward, we will focus even more on our photonic core competencies And we will combine that with a more active portfolio management. I'll talk about that a bit more in detail going forward. As you all know, we don't have the 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 Photon, 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, and we go to our customers with a Genoptix business card, customers tend to say, look, I don't want to buy a laser here. I want a generator. Why is Genoptic 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. And 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 ENOPTIC.
However, 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, the Anoptic is pretty fragmented, pretty complex and at times not easy to understand. We've organized our business today in 3 segments, but we're actually running the business and manage the business more or less in 5 so called Spartan and German 5 divisions if you want.
And 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 3 segments and 5 divisions, but in just simply 4 major divisions overall. And I will talk about those 4 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 world market is a market of about €600,000,000,000 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 €600,000,000,000 that we're quoting here is essentially the world markets in sort of a more of a core sense of photonics, photonics businesses, 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% to 6% is what we anticipate the market to grow over the next 5 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 are pre commoditized. Markets more market segments, I should say, around the heavy price pressure such as photovoltaic, for example, or direct display businesses, consumer electronic businesses based on photonics are fairly large businesses and finally large marketplaces, which are, however highly commoditized and under a large price pressure.
There are other markets and segments in this marketplace jaws are growing very fast, but which are not as commoditized and which allow for technology differentiation. And that is what we aim to do. In OPTIX stands for technology, in OPTIX stands for outstanding products and outstanding quality, and OPTIX stands for application know how. So therefore, 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. But 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, is actually 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 4th Industrial Revolution, so that 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. So 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.
And I think I could show you that it's an attractive marketplace for us. And 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 2nd big pillar of our strategy, let me talk about more about a bit more about innovation. Innovation really fuels our business. In particular, in all marketplaces, innovation is a very, very important thing.
We are based on innovative product. And in order to become even more innovative, we aim to step up our R and D efforts And we shoot for a level of R and 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 in spend on innovation. On the direct R and D work that you see in our OpEx line as well as on customer specific development work, which often appears in our COGS.
To give you a comparison, today the level of R and D spend in total, including customer specific development is about 8.5%. In addition to that, we will enhance our with that, I should probably say, we will enhance our application and our expertise in application. We aim to expand our application center network. We just communicated that we have opened up a new application center in the Silicon Valley, and we'll certainly do that in other regions as well. And the particular region of interest going forward for us is going to be Asia.
So 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 and D work. Innovation to us means to have faster processes. I did say the night before last actually, at time, seeing uptake is a bit too aggressive.
We're not always the fastest if it comes to decision making, and there's a reason for that. Yes, we have at times a bit of an over engineered process landscape.
We will
trim that and we'll prune our process landscape a bit. But there is more to it. ENOPTIC 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 and D work to become more agile. We want faster. And with that, we want our R and D teams to get a bit more, let me say, freedom to express their creativity. And 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 and 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 and want to again shape markets, set trends in the market place 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. Want to have faster development cycles, more freedom to explore and we are going to encourage the competition of ideas within the company. Now let me come to the 3rd big building block for our strategy and that's more international. Look, Enoptic is a global company. There's no doubt about that.
We have offices around the world. We have offices in many, many places. We have offices God knows where, in Guadalupe or in Bangalore and many, many different places. But 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 are aimed 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 enforce for that by our goal to have at least 1 of our major divisions with its headquarters outside of Germany in future.
Now I can't tell you which one that will be.
I don't know. I really don't.
But we have the full willingness and the attention to have one of our major businesses with its headquarters outside of Germany. And by that, adding to it way more diversified leadership team than we have at a moment. We want to create more international culture in a more diversified leadership team. So in summary, our strategy is built around 4 major pillars for building blocks. We talked about more focus, 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 or 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 and D work. We've talked about more international and the fact that we want to transform Genoptix in a truly global enterprise, it's a more intercultural culture and then a more international culture. Writing down the strategy is one thing.
It's an important thing, important to have a good strategy, But you have it on a paper on a piece of paper, it doesn't have 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 is 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 will not be successful. So you will also see us working on the company culture quite a bit, talking about who we are as Genoptix, 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 ENOPTIC soul if you want going forward.
In order to do that, we are going to kick off a program within the company that will use the headline and to see 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 remember that we have these 3 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 5 divisions, our optics divisions, our healthcare and industry division, our automobile division, our traffic solutions division and again ECS, which in itself is a if you want the holding and holding actually combining lots of different businesses.
Let me start with the DCS segment first. In DCS, we have essentially 2 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 Helos AG. Those two businesses together, by the way, they stand for roughly a mid double digit €1,000,000 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 aviation 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. So what's labeled light and optics and please those titles are working titles that you want, although we kind of like them at the moment because they indicate some very, very important features of that business. You see that all the 3 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. Midting light, sensing light, working with light is what they really, really do in those three divisions. And 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 our 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 and 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. So we organized basically our 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 next to the other two divisions. They have something in common, the division of Light and Production and Light and Safety, because they're all or both of them are actually engaged in direct sales. They have direct sales channels to end customers and 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 nut solutions, enabling, if you want, razor razorblade 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 group 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, something completely different from selling through a private industry customer. And so 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 solution to expand. We believe that the future is not just monitoring speed violation or 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. And 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 in modern ways of traffic management and we will tap into that. On the light and production side, whilst at the moment this is predominantly a business that provides automated processes and measurement tools for the automobile industry, we believe that the change in the automobile industry actually is a lot of it's actually a chance for us.
We will hear later more about ways cars are produced today. But 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, and 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 small manufacturing. 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 setup 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. And 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, so associates on making that work and making that happen.
We intend to start with the new structure beginning of 2019, and of course, we will start providing financials in beginning of 2019. We will also help to consolidate backwards to the old structure when we start with the new reporting. With that said, let me hand over now to Jay Kumbler. Jay is not just running our optics business in Florida. Jay is a part of the optics division.
But Jay is actually
a 4th leader
in photonics. Jay is a fellow of the Optics Society of America and Jay is one of our real technology experts. And 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 Genoptix. Okay, thanks very much.
Good morning.
Thank you, Doctor. Traeger for that presentation. Thank you, Mr. Schumacher. Thank you for the opportunity to speak today.
Like Doctor. Traeger said, if I didn't meet you last night, I'm Jay Kumbler. I'm helping to run the business for an ENOPTIC optical systems in North America. Greetings from our colleagues in Rochester Hills and Jupiter, Florida and Huntsville, Alabama. I don't think they're listening live right now.
It's 3 in the morning, but I think 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. And 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. So you've seen this slide before. Doctor.
Traeger explained that photonics is a big marketplace 600 €1,000,000,000 and 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. So we welcome the opportunity. And 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.
So, 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. And 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. And laser material processing, as Doctor. Traeger said, is changing factory floors today, leading to a cleaner, more accurate and more energy efficient production. And one area that I'm excited to tell you about today is optical communications.
This may be an area that you haven't heard Yanoptic talk as much about, but I'm hoping to share a couple of specific projects with you. But first, in healthcare, Doctor. Pop 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 $2,000,000,000 to sequence and took almost 13 years to accomplish. But I think most of the people in this room know that now you can have your genome sequenced for about $1,000 and it's photonics technology that helps that be realized. So you can get results within a day. Also, our customers can make available sequencing equipment that's only $20,000 So the instrument, desktop instrument gives you high accuracy sequencing, which can be used to diagnose a tumor profiling and even targeted gene expression. So these desktop sequencers have an incredible ability to transform infectious disease surveillance and really put DNA sequencing where it's needed most.
And Craig Ventura, 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. But the early detection has really proven to have high success rate in treating those early cancers as long as they're detected. So personalized medicine, we are just scratching the surface and it's really optics is at the core. Optics and Photonics enabling that kind of advancement. That helps you, it helps your families.
Inoptic is also very active in lasers. Inoptic lasers enable medical applications and solutions. We have a broad portfolio of lasers as you might be aware of, but also Unoptic 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.
So really, imaging is at the core of the Genoptix DNA. So 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 scions that you saw last night. I believe it's out in our lobby area as well. So 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.
So, 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 Chavis will tell us more about this. But I'll just mention the fact that it's definitely photonics that's at the core of our traffic systems. So 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. But this may be a little bit more new to you. This is a LiDAR product, which is being developed. So we've got a long history in single line of sight laser range finders. And so now there's new opportunities in the marketplace to develop LiDAR systems, which cover wide fields of view.
So we took what we knew about our technology in single line of sight and have developed this product, the I3s nanoptic 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. So, it's interrogating 90 degree area. So, we're not just looking at autonomous vehicles. I mean, 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. And also you can imagine or we are starting to talk to customers about other kinds of unmanned ground vehicles and also agricultural machines. So we're just now starting to introduce these beta test units and show it at different trade fairs. And so we're excited about the opportunity.
Moving now into the smarter factories with the laser material processing. So, 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. So 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 YAN OPTIC IPS 100, which is surface inspection for the inside of the bores of engine blocks.
So 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 3 60 degree images of the inside of the bores. So the team in Yanopin in Germany and in Rochester Hills, Michigan came to the optics team that was in Jupiter and asked for help in developing this probe. So custom optics, custom cameras, zoom system, LED lighting. So that probe that you see on the slide is able to go through the bore looking for porosity. So these are defects that are in the coatings of these aluminum engine blocks.
And so 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. So now enabling the digital world, which is a broad, 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.
And this is a pretty small picture of only a part of a hyper data center. You've probably seen the pictures. But, Yanoptic is enabling these type of hybrid data centers. And it's why do we need the hyper data centers? I mean, really, we're learning that 82% of the Internet traffic very soon is going to be videos.
So, it's really Netflix and Facebook and live sports being shown on Twitter and all this video demand is creating these huge data centers and people aren't watching all of this video content in the ways that we used to. I mean, obviously, they're watching it on mobile devices. And so 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 a direction which helps get optic in the marketplace because of our drive to higher and higher accuracy inspection equipment. So, the transceiver business is where we plug into those hyper data centers, hyperscale data centers.
This is a little bit of a busy slide, but trust me that there is incredible demand and growth need for 40 gs and 100 gs transceivers to fill up all of those hyperscale data centers. And where our products plug in is at the transceivers and specifically at the transmit and receive where you're coupling light in and out of these transceivers. So our optics are helping our customers realize the efficiencies. They have big challenges in terms of cost and integration. And so 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. So that kind of covers the way that we move all this video around the Internet. So on the end where we're interfacing to people who are watching all these videos, Yanoptic is heavily involved in the flat panel display inspection marketplace and the impact on AR and VR in addition to all of this Internet video is that it's driving higher and higher performance display and more and more sophisticated consumer electronics. And so we're partnering with our customers to support the metrology requirements for all of those new devices, which are going on your consumer electronics. And eventually, our customers are also looking towards even flexible OLED displays.
So to be clear, on this slide, YanOptik doesn't make the tools that are on the factory floor doing the inspection of the flat panels, the tablets, the cell phones. We're not building the entire tool. What we're doing is we're 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's at final quality or in process inspection points, we're enabling our customers to inspect smaller and smaller pixels, which is driven by the new OLED displays. So, if you started looking into your slides into your book, you might this might have caught you a little bit by surprise. So why is Genoptic talking about India?
So I was surprised to find out recently that there's 4,000,000,000 people in the world on our planet that don't have broadband Internet access. And this is a missing link that was a pretty big surprise to me when I learned it a couple of years ago. Genoptic is working with our customers to tackle the digital divide, to bring that high speed connectivity to what is ultimately 4,000,000,000 people that don't have high speed Internet access. And India is one of them 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 900,000,000 people in India that don't have high speed Internet access.
And the main reason for that is India is missing a tremendous amount of infrastructure, infrastructure that's common and it's everywhere in other parts of the world, but it prevents them from having traditional links to backbone. And also they have an issue where affordability, I mean, if this can't be provided in a very cost effective way, it's not going to be viable in the marketplace. So what's highlighted here on this slide is 1 of the 29 states in India, which I refer to as AP because I don't want to accidentally mispronounce the name Andhra Pradesh. But this is home to 53,000,000 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.
And if
you think about it, we're not just talking about whether kids have access to YouTube, what you're really talking about is 14,500,000 households, Village Council's 60,000 schools that don't have any Internet access, 10,000 government offices and 6000 public health centers. So it's really great to develop all these diagnostic instruments, but if you can't connect them to the web or handle the large datasets, what good is it? So, why are we talking about it today? So, Yanoptic has signed a master purchase agreement to partner with Google X to supply those free space optical communications terminals. So our equipment is the equipment that's shown in the upper right hand corner of the slide.
So 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. So 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. And so this is actively going on. The agreement, the master purchase agreement was only recently signed, but the Anoptic terminals have been deployed in Puerto Rico.
It was only last year when the hurricane hit Puerto Rico, knocked out power. So there's still today 500,000 people in Puerto Rico that don't have power, but they also don't have internet access. So the Anoptic 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. So, 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 Genoptix. And part of what Genoptix saw was a deep expertise in photonics, which goes throughout all of our divisions.
So one way to measure that and to say what is our photonics expertise is to look at the awarded and pending photonics patents. So the complete patent portfolio for Anoptic AG is roughly 12 50 patents with 4 65 patent families. But 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.
And it's not just centralized in Europe, these patents have been awarded around the world in the United States and also in Asia. And 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. And we have a deep talent pool of talented optics experts. So, this is a snapshot of 35 PhDs and over 200 other graduate degrees in optics just within the optical the former optics division. And all of these people are coming from the top schools and we have the ability to go out and recruit the top talent.
And 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. So one last slide, when we were in the planetarium last night, there were some interesting sort of cartoons that looked a little bit dated about rovers running across the surface of Mars. It was really good. So that's as we know, that's real. The Curiosity Rover has been on Mars for 7 years, but you may not have heard of Mars 2020.
So this is the rover that's going to be launched by NASA in 2020. And 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 the autonomous vehicles. You send it commands at the beginning of the day and then tomorrow you find out what happens, right? It's completely autonomous.
So, Curiosity has been a smashing success. The 2020 Rover hasn't been named yet. They let school kids come up with the names for the rovers. But we're talking about it today because NASA could have worked with any photonics company in the world and they selected YanOptik as a sole source provider for all of the cameras that are on the rover. Now, SpaceOptics is not a big part of our business, but 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 the Anoptic.
And it's not just the lenses, it's also the cameras. It's not just one division, it's all of Anoptic. So work on this program is going on in Jupiter and in Germany. So, camera sensors are being packaged in Germany, lens systems are being designed and built in Jupiter, Florida. And it's a collaboration with those 2 groups working for NASA.
So 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 and 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 cash camera, which is not pointed out on this slide because the cash camera is in deep inside of the rover. This mission is going to take samples and drill cores from the surface of Mars. But the interesting thing this time is we're going to retrieve the samples and get them back to Earth.
So the cash cam is inside the rover and it's looking inside of the bore to make sure that the samples are there and that the material was collected properly. So just let your imagination go forward to 2021. It's going to take 8 months to get to Mars. So the Anoptic cameras are on the rover. They'll be launched in 2020.
So in February of 2021, once the rovers landed on the ground on Mars, the first thing that the scientists at JPL are going to do is they're going to turn on YANOPTIX engineering cameras. And so it will be the anoptic 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. So this was the picture when they were orbiting the moon and for the first time humans saw the earth from that perspective. So, this was a Hasselblad that took this picture.
It will be an optic camera that takes that first picture from this rover. The photonics is moving markets and changing the world around us And Genoptix has the skills and the deep talent pool to be able to help lead the way. Thank you.
Thank you very much, Zaida. It was really inspiring. Great talk. Thanks very much indeed. And we now have ample time for the first series of questions that you might have.
After a question and answer session, we'll 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. And there will be another opportunity for asking questions around guidance going forward. So if you want to talk about guidance, maybe you want to hold that question.
If you want to ask right now, of course, please go ahead and do. But again, we'll talk more about it later on today. So 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 then.
To start. Stefan Meijer from LBBW in Stuttgart. A question for you, Mr. Doctor. Traeger.
You didn't touch in your speech the current production setup of Genoptix. Do you see any necessity or need to relocate where you 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. And before I 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 says 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. So 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. And we have the full intention to expand the production in these setups, particular for the local markets there, but not just for local markets, for global markets as well. And I believe Fagno will talk about part of that in his talk later today. But again, in particular for Automobile 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. But 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. And therefore, I believe the bigger, more short term potential is actually in sourcing globally and producing into centers that we already have.
Yes, thank you for the presentation so far.
Kevin Reeder from Batali Gums Management tuning in. 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 optics going to have a great quarter, great year or whatever or is it, I guess 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 kind of have
a big impact on the Unalto? Yes.
I mean 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 space. So of course, the big elephant in the room or the question could be how do we believe these markets will develop. And 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. And 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, but who knows. So that part of our business is important and will be important going forward. All our businesses are, of course, important, but 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 health care arena, in that type of business. We have established now, I think, a decent footprint in biophotonics, and we get more from that than in the past. Now Automobile Businesses, growth drivers are indeed already around the automated production and 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. So that would be a core part of the technology going forward. And 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. But 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, And we continue to see auto intake from military customers, if you want, our Raytheon. Raytheon is a big part of us in terms of providing technology for Patriot Rockers, And that's an important part of the technology for our Mechatronics business. Sounds like mostly kind of 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 6 to 12 months, but potential big needle movers. Is that accurate? I mean, again, what I think will carry on and roll 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 6 months will be our toll business, toll enforcement business, together with all partner toll collect simply because now the revenues are coming in.
So and of course, there's an excellent profit. So that's a big needle mover in terms of top line in the next 6 months.
It's Jean from Desjardins. 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 like mass layoffs or anything like that, not at all. At the moment, the fight is more for talent than anything. So 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. So I don't see a lot of extraordinary restructuring costs going forward. It will come with Zambo. If you do put together legal entities, you might have the odd spending here or there. But 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, but 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 strategies for those assets? Disposal or when it comes to defense, it's most likely 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. So I don't want to speculate on anything that I don't know. Lots of 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 for the in their marketplaces, will see what the future brings.
And time frame maybe 2 years, 3 years until the decision will be made or any timeframe now? Look.
Thank you. Ubersch, Deutsche Bank.
Just on Dirk's question, maybe phrasing it more generally. Whenever we had a discussion with the previous management over the last previous management, I should say, over the past 10 or 15 years about potentially spinning off the defense unit. The answer was always yes, but and the but typically concerned 2 main stakeholders namely Berlin and their political willingness to agree to potential consolidation, however, that could look like. And B would be your employee representatives in the Supervisory Board. Now as far as I can see over the last couple of years, there is now a third stakeholder namely airport I.
E. Post Communist Party, which is now heading the government here as a potential third party you may be willing to consider. Could you kind of shed a bit of more light in terms of how you see the 3 different parties reacting to any kind of potential announcement in 1, 2 or
3 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 roll 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 actually, the Vitalibung's management, the vehicle of the Thuringeraufelbank is our main shareholder. So glad to have our representative of our main shareholder here in the room. And 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, is there going to be any like, do I have to experience lots of political influence or anything like that? After 9 months, I can truly and honestly say that's not the case. We have a stakeholder, a shareholder, which is the land of Coringa.
But on 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. So we ask ourselves where do we see the best potential for growth and margin expansion. And we are asking ourselves, can we do all that we are doing today with enough focus? And so therefore, our answer is we need to focus.
And again, there is 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?
Regarding potential opinion of the employees of the Supervisory Board?
Well, we have 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 upfront. We had 2 sessions, 2 intensive sessions with the Supervisory Board and our strategy days and strategy meetings and discussions. And we have full support of the entire Supervisory Board if it comes to our strategy.
I just want to
ask someone with Warburg. Let me ask on LIDAR, what are the technologies differentiates from automotive and non automotive applications?
With 1,000,000 of our key
dollars on the expense.
Yes. Very good question, Martijn. 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 floors production floor vehicles moving around, drone technologies and the like. So 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. But 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 the actual way ends, we're just going to Tier 1 parties in terms of the LiDAR technology.
But 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 equally importantly aimed for unmanned autonomous vehicles and production environments, all the way to drones and that type of thing.
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 the car. I mean, just to be clear, what you have seen today might actually end up in a car. It can be used for that. But what we are aiming for is to not develop something just for a core application.
If it ends up in a core, it ends up in a core, great. If you make money on that, fantastic, right? So if I can if there's money on the table, I'll have it. But I don't want to develop something that is or that basically would mean that our entire company, the success of our company going forward depends on a particular car supply chain industry. So 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.
Your vision for the traffic technology, public safety technology, How the value chain might change where Genoptix might sit and we might see data center coming up a lot. Which spaces will Genopix might acquire leadership where you might potentially need to partner up with someone else or acquire the technology, how that space might change?
Yes, yes. That's a very, very interesting space actually. There's lots going on in that space. Kevin will talk about it more in his talk. I, for 1, 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 if your number plate is showing on the billboard, you have a problem. You just violated speed. And with that comes the ability to take out your mobile phone. I don't have my headphone 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.
But 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. And Kevin will show how our technology is already able to single out certain vehicles in a form of vehicles, if we say, that follows funny patterns. We're able to track speeds over distances and average speed control. But 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, enable us to deploy that technology on other parts in our public spaces, enabling public safety, the tariffs, the tax can come to mind, unfortunately. That will be an application. But it will also enable smart traffic control in our cities and in our nations. If you go to Singapore, Singapore is currently building up a system in which they regulate the traffic and direct the traffic within the city to dynamically. So 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.
So sheer red light control and speed control is not the future. The future is all the services around that. Again, I did sorry, if I let me just go on for one more thing. We would be today, for example, already able to monitor if somebody enters a city with we have in Germany, we have these green stickers on a windscreen showing 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.
So we expect Genoptik to operate or being part of a consortium joint venture to operate the infrastructure, analyze the data and provide the services to governmental bodies?
Operating the infrastructure itself is yet another matter. And that's a big, big environment. Big players, big gorillas try to lock in that space. I think for us, it's more suitable to stay sort of in the in providing data, working with the data. What we already do, do business, our back office functions to operate networks of traffic control.
So 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 file and hand it to the government and they popped it into a slip and send it off. That type of stuff I can envision, deployed more around the globe and in other in more than just speed control environments. But operating the infrastructure itself, I think that's for others to do.
Achim Wagner from Crystal Asset Management. 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?
And perhaps if you can, where is actually your high capital intensity at
this point in time in the region?
For the first question, I'm not quite sure. Is it 50%? Yes. Is it 50%? So Hans Peter is just saying 50%, 150%.
The second question, capital intent if you talk about deployment of capital in terms of plants, equipments, machines, we've seen we've deployed a lot of capital in our Automobile business in the past 12 months. We've invested into a new production facility, as discussed that earlier, in Detroit. It is the biggest single investment of the company in a number of years actually. And we've acquired a new company in the 5 Flex Automation in for our mobile business. If you talk about capital from a deployment of capital in terms of M and A point of view, is that What
I mean is basically just fixed assets and working capital.
Okay. Fixed assets, okay. Well, then in terms of optics, we have a good footprint here in Germany and in Jupiter. 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 hand Sita here, but I think
Yes. Is it working? Yes. Thank you. I'd like to support you a little bit.
If you think what Stephan explained and maybe Kevin will touch later on in his presentation, the traffic service providing our 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. So we activate it, depreciate it over 5 years, I think, in average. And so we try to intend to get a contract with our customer at least for 5 years.
In average, it's for 10 years. So in the 1st 5 years, our return is very good. But 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 is wonderful. It's similar to the micro optic business. So and in terms of ROCE, return on capital employed, it's really a very good business.
So 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, our balance structure, it's heavily influenced by TOLL COLLCT because at the year end, we prepared ourselves for the deliveries in the 1st months of the year 2018 to our customer, the 600 fillers. We bought it from our supplier concerning the pillars. And now we manufactured it to be able to deliver and to make sales and profit in 2018. So in the year end, in the last weeks of the last year, we heavily increased our inventory.
Our working capital in this part of our business as well. So and in the optical and life science and the semiconductor area, in the optic business, we also increased it because we are all hunted by our customers. And it's not only ASML. It's For example, customers from Israel who are hunting us, you are your delivery times are so long. You may can ask our Head of the division later on, but so we try to be sufficient in our delivery times to our customers.
And it's always a try to balance out the working capital issue against the needs of our customers. And with our strong balance structure, I'm 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 this words, concerning our ability, our financing structure to support the business development. Deliver as soon as possible to our customers. Invest into growth.
Yes.
So we've got time for one more question, I believe, and we have another question and answer session later on.
Maybe one question. Stefan Meijer from IBW. I want to again touch the potential DS disposal. You continuously deliver components to the DUS Patriot system. Are there any change of control clauses in that contract or with other big clients as raw material complicating divestiture or narrow the field of potential buyers?
And the second question on that, could you, Mr. Schumacher, you're on the stage, could you probably outline roughly potential implications of a divestiture on the balance sheet, working capital or pension? Look,
look, look, interesting questions. But 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 EN OPTIG 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.
And I'll say it again, we have no concrete plans in disposing that business, But we're not ruling that out for the future. You are right, we're not ruling that out for the future. But of course, it would be not fair for me to speculate on that going forward. So we would like to leave it there. For now, we don't have any concrete plans.
If there should be any concrete plans, we will be more than happy to discuss it into in detail with you at the appropriate point in time.
Not a question about the Defence and Civil business. You'll be pleased to hear. You highlighted the Photonics global market is €600,000,000,000 growing twice the rate of global GDP. And many of the markets, clearly, from the presentations we saw already are structural growth markets. But 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? And I'm thinking particularly the parts of business to supply to the semiconductor industry and the semiconductor equipment business because I think that, that's something that investors really need to get comfortable with. And clearly, you've got a bigger agenda to focus on other growth areas. But perhaps we could just come back to that part of your business.
Sure. Absolutely. And that is a very, 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 in Boston area. We have seen the ups and downs through the cycle, as they call it. It's always grew, and it will continue to grow. But there have been deep cycles.
There is a discussion out there at the moment that the simplicity of that business is not continuing. And there is a particular there are a couple of reasons for that. For a start, the market in 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, but it's added or additive to that is the fact that the older generations, if you want, of semiconductor, they don't actually disappear, funny enough, because with all these new devices, all these mobile devices, all these the Internet of Things and all these modern digitization things we're talking about, they don't actually require that much of smaller structures. But they require lots and lots and way more midterm, if you want, or mid segment semiconductors.
So we are having in a way a super cycle. We're having a superimposing of the traditionally very cyclical high end, but the underlying if you want the underlying generation doesn't disappear all of a sudden. So we have 2 generations in the marketplace. And 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 not longer be there going forward. However, at Genoptic, we have a special effect.
And 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. Now 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 simplicity 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. But structurally, the industry changed quite a lot.
And so 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, I mean, 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 kind of like across the portfolio, semicon, to what extent that is, cyclical 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 health care market is not cyclical. Health Care and Life Science, Biophotonics, traditionally at least, is a very stable growing marketplace.
Automobile is can be cyclical, will be cyclical, will continue to be cyclical. Traffic Safety is a very stable market again. And of course, our mechatronic markets are very stable. So in terms of percentages, I mean, overall, the whole portfolio, I would say fifty-fifty, shall we say, more of a cyclical nature and fifty percent more of a stable nature across the entire portfolio. Okay.
We're out of time quite a lot actually. So we will now have time for coffee here for those of you participating in the room and for those of you on the WebEx calls. We will be back in quarter to 11, so in about 24 minutes. And we'll start again in 24 minutes, quarter to 11. Thanks very much.
Quarter to 11, German time, Central European, whatever, winter time, I believe it is.
And as a chairperson will open the conference. Until the chairperson will open the conference. You will hear music You will hear music You will hear music until the chairperson will open the conference. Until the chairperson will open the conference.
We will now restart our presentation. Ladies and gentlemen, welcome to the 2nd 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 4 15 minutes talks. And 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 about 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 Cushnerweit 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 Fotman Hauser, who is going to talk about our automobile division and how we develop it further into our new engineering or light and production division. Following that, Kevin Chavez will talk about our ideas around public safety and how we intend to develop our traffic solutions going forward. And finally, Stefan Stencil 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 and A session and another break, and then we'll conclude it with the 3rd part of today.
Ralf, floor, Royos. Thank you, Stefan. Yes, good morning. Welcome back from the break. So I think my job is after the inspiring talk of Jay before the break to kind of get you back to earth, maybe for 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 Genoptics. And so you 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. And this was a very solid business because Genoptake 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 then, 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. So it's quite a journey from a single component to a subsystem, but we still do all of the above.
So we do components and subsystems. But of course, that gave us a lot of growth because of course the value we're providing to these companies is much bigger. So this is how it started the journey. On the other hand, we also moved beyond the semiconductor industry. And fortunately, there are many industries, as we heard this morning already, that require optics, high precision optics, differentiated optics to be successful and we become 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 are in the biophotonics, more specific in vitro diagnostics where we're active. And last but not least, we're trying also to build our share in ARVR world, which is a little bit more new and cutting edge. So there's many markets fortunately with 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 in the number wise in the OEM business?
So is this a good business for us? And I've just provided the numbers here. On the right hand down, sales numbers of the segment that you know that always has been reported. And just over the last 3 years, we had an average growth of 10%. And last year, so 2017 estimates, as I indicated this morning, we have an EBIT margin of 19%.
So obviously, it's a very good business for us. It's working out. But why is that? So what is why are we specific and what has changed? We have been in the OEM business, but I think for the first time with this strategic move, we're putting all the pieces together that we have within the company into 1 division.
So there has been different over the history different setups, but I think for the first time really all the different areas, technological areas get together. So the 2 so called Spartan have been merged. There's another piece from another division getting into it, the sensors. So we have everything together in one division and we have a clear commitment and statement focus on the OEM business. I think that's the first and I think this will help us be more successful and grow further.
So 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, But it is a success factor for us because only 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. And let me just walk you through this. On the left hand side, the 2 columns on the left hand side, this is our system competencies.
So 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 outside, 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 3 in the middle actually show you we still have the capabilities to build components. We do build micro optical components where I think we can be called world leaders. And then we also have polymer optics.
So on the component side, we have access to all these technologies. We can build customized components and then put it together to the 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. So if you go through the entire portfolio, there's not a lot that is not included in the technology competencies to build for solutions. So I think this is a big differentiator and again now all put together into 1 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. And we actually do what our customers want us to do. We supply components if they like us to do. But 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. So 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.
And 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. So 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. And on their side, it's clear accountability. So if we're in that project, it's clear if it doesn't work, whose fault it is.
So it's our accountability and responsibility. And for them, life gets much easier because there's no finger pointing between different suppliers.
So 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. Well, so of course, it's a lot of theory and talking about technologies, but how do we do this? So we have a couple of locations. There was an earlier question about location, I think. There were a couple of locations and most locations have general capabilities to serve customers, but most of them also have an in-depth competency to that we need and that we build there.
So 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. And then if we jump over to Jupiter, Chase Place, we have a broad range, very broad range of competencies including micro optic systems design, microelectronics.
And then specifically I want to mention Hansel Alabar since we talked about optical telecommunication. There we have capabilities in silicon photonics, which is very important there. And then more like getting started in China. We have a handful of people, R and D people working closely with customers and we're about to build up our first assembly line. So 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.
And if you look at the little orange needles there, this is where we have our sales offices or application centers and we heard about our new Silicon Valley application center. And that kind of leads to the 3 building blocks that I want to name here, which we think are important and make us successful. And the little needles and what we also went to the Silicon Valley is kind of the foundation of the first building block, it's customer proximity. So what customers like is if you have these kind of OEM relationships, you're working very closely with the R and D teams together. So they want to have somebody in the same time zone, they can call and have a quick chat with and clarify problems, right?
So it's a lot about communications in these close relationships that have to be clarified. And they also like having direct access to the R and D teams worldwide. So 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. So this is what we figure out over time, which is the success recipe for success in this area. 2nd building block has to do with understanding the application.
We understand the application, we can provide ready to go solutions and which is great for the customer, we don't have to customize so much, which is of course timely time consuming and is expensive. And 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. But we're providing a very, very stable and high quality laser source.
And in the world, with more diabetes, there's a eye disease called diabetic retinopathy. We see this more and more in the world and there's a standard treatment with a laser and pretty much every ophthalmologist has a laser in his office. And 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. So 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. And the last cornerstone or pillar is platforms. So 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. And you heard last night, if you have 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.
So 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 and this is what we're doing with these concepts. So these are 3 pillars. I think that we will continue to build on and further develop to be successful in the market. So already last slide for that new division. So I think in summary, we can say with our already experience in the OEM business, with the broad technology portfolio and the capabilities of providing complete solutions from start to the very end, we can be highly differentiated in the market and we can build on our customer relationship we already have.
So, we can be the partner of choice to our customers, the customer perspective. And 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. And we I think we can with a new concept we can build on this and grow this further. Thank you very much.
Dear ladies, dear gentlemen, also a warm welcome from my side, And it is a pleasure for me to show you today the already ongoing transformation process of the division automotive 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. So what is our mission? What is our business model? With our products and solutions and services, we ensure efficient and environmental 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 providers, global leading providers for high precision automated measurement and laser processing solutions, And we ensure customer proximity and success within our core markets by local presence alongside the complete value chain. The complete value chain means from presales, business development, marketing, sales through the whole order fulfillment process with engineering, operations, supply chain and of course, a professional and excellent service aftersales. As Stephan mentioned before, we have also in the meantime in China, a team with R and 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. And 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 light weighting materials. Additional megatrend is, of course, the smart factory, the manless, flexible, self controlling production of the future. And 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. And of course, the main question is what would 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 A mobility and the discussion sometimes is a bit emotional, we decided to initiate a strategy project with an external strategy consultant with A. G. Kearney, and we call this strategy project program 2020Q. And of course, with AT Kearney together, we did a deep market analysis, how the mobility and the automotive industry will develop in the future. So as you can see here, until 2013, we will have more than 80% still a combustion engine, of course, with a decreasing pure combustion engine, but also hybrid car has a combustion engine and that will definitely increase.
And of course, the E drive 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. And 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 small electronic components in the cars and the batteries, of course, also have their high weight. More and more light weighting materials for the car body, for the body in white are necessary. And here definitely the so named ultra high strength in steel will improve a lot in the future. And this material can be only processed efficient with lasers.
So this will drive our laser processing business in the next years. So it means coming from our core competencies in the laser processing business, as you may know, we are performing we are perforating airbags and dashboards, but also we have in the meantime a new product line. We call it 3 d 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 steel strengthened steel or leathers. And for this, we need also sometimes new technologies or sorry, or new lasers, as for example, femtosecond lasers for leather performuration.
And with this new technologies and more engineering solutions and automation solutions, especially in China and North America. And further forward integration and an excellent service aftersales, 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 did developed with our colleagues in Florida. And also with these core competencies, we will reduce our dependency on combustion engines through entering in new applications, which will fulfill the same criteria, complex and performance critical, like for example, hydraulic parts, brake systems or new powertrain systems, e drives.
I was asked yesterday by a colleague from you, did
you sell already
machines to the new e motor coming up? And I told him, yes, we have sold Here is the example. For this reason, 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 of just a cutting machine for one part in the entire production process as you see it on the first.
With 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 Chavis. Greetings from the Traffic Solutions division, and 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. And by that, I mean spot speed enforcement, red light enforcement. And that's done on a global basis. It's quite a clear sector of the market. And we have supplied systems for our customers to use, and we have also supplied services where we run that service for our clients.
That's been very successful over many years. You will notice that we have made a number of acquisitions over the past 3 years, the first of which is a company called Visionix from the U. K, which is where I come from. And it's important to understand how we're leveraging these 2 acquisitions going forward and how that actually changes the direction of this division. Busionics gave, Yanoptic 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 has is a platform to do multiple things. It gave access to VISIONICS experience in point to point enforcement, which is average speed, time over distance. And VISIONICS has 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. And 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 AMPR, so we have applications on smartphones, tablets, in vehicles and so on and so forth.
And this is in wide use in the U. K. In fact, the Metropolitan Police used 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.
So we've managed to raise ourself up one step on the value chain. And 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 that our technology delivers because it affects people in the real world. And there's a common theme to what we do. So 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 AMPR sector, if we can make better use of police resources, and 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. And so that's important. So 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. And the outcome is what's really, really important. And I know Ken is lives in Scotland. We were discussing this last night. We put a scheme a point to point scheme in on the A9 between Perth and Inverness in Scotland.
At the time, it's the longest stretch of speed enforcement in Europe. It was highly political thing to do, but they needed to improve safety because a lot of people died on that road every year. And from a political perspective, that's not acceptable. You can do 2 things to this road. Many people thought we should make it a dual carriageway for 220 kilometers.
It costs £1,000,000,000 of pounds to do that. But for a few £1,000,000 you can put a speed management system in and have a very good effect. So what's the effect? These this chart shows the speed profiles in various sections of this road. And you can see that back in 20122013, 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. And there's no prices for guessing when it went live. And we had very, 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%. So 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 1 in 10 vehicles who are going faster than 10 miles above the speed limit. Now it's only 1 in 250. So a very big, 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 1,200,000 people killed through traffic accidents worldwide.
And if that figure is correct, that's approximately the 9th biggest killer of human beings on the planet. Not many people realize that. And 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 seat belt or using our smartphone while we're driving, all those types of things. So 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.
And that very much is part of our strategy going forward. Using the ETA 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. And there was an interesting event, well, a sad event in London some time ago where there was a terrorist incident involving a vehicle. And our technology, which is being used by the Metropolitan Police, within minutes, attract 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. So 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, but there was a possibility. So 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.
And you can see here where the Essar acquisition of January last year provides us a platform. And we're starting to talk about managing data, 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. And as they develop and as they get more funding, they can buy the next part and so on and so forth. And that gives us the English term is we've become a sticky supplier.
They'll want to work with us for many years. Yes. So one actually I expect in the U. K, we have a contract to deliver intelligence services to a number of police forces. And 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. And 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 0.
And this is the idea is it's not acceptable to accept one death on the road through traffic violations. So their aim is to try and reduce it to 0, 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 and 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. And so therefore, funds need to be made available to counter that threat to our public safety. So 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. So 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 Doctor. Traeger and Mr. Schumacher about the Tolcollet project, which we took on some time ago. It did have some difficulties early days, and that did affect us last year.
But the positive news is that we started delivering units in Q4, which Mr. Schumacher was very pleased about, I can say. And 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.
So some success from that, positive revenue recognition and EBIT contribution. So 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 our employees and the people that do the innovation and the people that deliver the service. So our role is about saving lives. We make a difference to that, so we must take that seriously in everything that we do.
Okay. So that's my cell phone.
Yes. Hello to everybody. Stefan Jensen is 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 Mecherotronic focus.
And as you know, we are active in 2 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%. And if you first look at the market for Civil Aviation, we can recognize more or less 3 relevant trends for us. First is, you mostly will be aware that both Boeing and Airbus have completed their fleet of aerospace over the last 10 years.
And so there's not many opportunity to sell new products to new planes. But there's the opportunity to grow with innovative products who save either energy or weight and who have to be proven immaturity. So there is the chance to make business in existing fleets, in existing planes with new innovative products. And there's another market we are active in. This is the market for rescue hoists.
There are only 2 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. And these are both based in the United States. And there are customers in the world who refuse to buy from American suppliers.
And so here's an opportunity. And Genoptix is active in this business of building, developing, rescuers for over 40 years. I will come to that. In the market for military energy systems, there is an increasing amount for maximized meantime between failure. Soldiers don't call it meantime between failure, they call it operative readiness.
If they are
in the field, they want their staff to work. There is no second chance to save your life or the life of the people you do protect. And 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. And here is where we come in.
All our new products we develop are focused on maximizing this meantime between Asia. Also there is a trend in the market of customers who are looking for energy efficient solutions. You need to know that 1 gallon of fuel in crisis region costs up
to US400
dollars because they don't pick it from the gasoline station next hand, they fly it in by helicopter. And 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. But this is unfortunately a market who will mature over the next 8 to 10 years, so over the midterm horizon. But 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. But also the U. K. Challenger tank fleet will be refurbished as well as the Israeli and Merkava IV fleet as well as the U.
S. American Abrams fleet. So 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 very extent is limited, but this market is as huge as I presented 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 2 aerospace OEMs. Today, we are a good supplier for Airbus, but we want to add other customers to that market. And therefore, we have developed new products, which I will present you later on. And in the military arena, we are already the leading supplier for energy systems for military platform.
And 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. And 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 the engineering departments, show what we are able to do so that we want to be included into their specification. And then when the public demand is gone through the complete political cycle, they precisely want what we already have on offer. If we 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. And 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.
And of course, because there we earn most of our money, we have to be able to ship our products for 30 years plus, not only for 10 or 20 years, but for 30 years plus 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 4 new products, which we will be able to bring to market over the next 12 months. And I will shortly lead you through our new electrical rescue horse, which we want to ship as of Q1 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. And there are today heated floor panels in airplanes from competition, but they sometimes do smoke.
And that's why customers have approached us and asked us for a new technology. And with our 40 years of experience in heating and 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. So we are quite confident to be able to sell over €10,000,000 additional with this product alone to one customer. But this, as I said, commercial off the shelf is not a customer specific design. We are owning the IP and we are able to address other customers and 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 hoist and this market is growing because the number of helicopters is growing strongly. And we have since 40 years providing rescue hoists for military helicopters only. And now we join the civil arena and have developed completely from the stretch new electrical rescue hoist with that special features, which have CUSPs compared to our customers. We have modular service concept.
Why is that so important? Because when you are using such a rescue, you have to use it, you have to overhaul it any 5000 or 10000 flight miles. And the overhaul alone is as expensive, nearly as expensive as the new buy. So customers are very much looking at the overall cost. And with our new modular service concept, we can reduce the overall cost by 50%.
We have a longer cable in. We can have more than 30% more white lifted with the winch. And it's remote controlled. And all this together is a big jump in functionality compared to the existing competition. And customers to who 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. But it is an air cooled generator and with this generator we can address the American markets. European customers rely in oil cooled or water cooled generators. They like the high-tech staff here.
But American Army is for principal reasons only working with air cooled generators, but they also are looking for higher energy output. And with air cooled generators, this is not so easy as with oil cooled generators, for example. But here we come up with a new design and which addresses more than one platform again. The FMTV, the JLTV and even the refurbished Humvees can be equipped with electric generators and they all do come with the 100 per year and not with the dozens as it is in Europe. We're also talking to German customers for these products and French customers, but the main market we do address here is the American market.
And 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 and so they need energy to move up their launching equipment. And we ship for the last 30 years the existing ground power units, but they are very fuel consumptive. They need up to 400 liters fuel per day. And so we have built a new design where we have a smaller motor, a smaller generator, which stores the energy in a supercapacitor battery.
And 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. And you can easily calculate how much that means if you use it 3 60 days per year in the field. Today, this equipment has to be refueled 3 times a day. And tomorrow it only needs to be refueled once a day.
And if you know that the most soldiers killed in the Iraq wars have not been fighting soldiers, but tank lorry driving soldiers, then 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 meantime between phase ramp because the smaller motor can run always in its perfect idle. And so you have less repair. And we have integrated transformer, which enables the customer to use the public grid power, if there is 1, 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 ENOPTIC brand. And we believe if we have an independent brand which more reflects our competencies in power generation and power management as well as Trebot's better our quality and maximum reliability and that for the aerospace and defense market that this is helpful. And we also want to transport our commitment to be there in 30 years plus for new products and for overall products. Enopnik is a good brand, no doubt about that, But a brand more dedicated to the aerospace and defense market, I think, could help you 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. The last 9 months, I had a number of times the pleasure to try to explain our company's setup. And 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. And 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 it as if this would be beginning of 2019. Let's see how long it takes. So you're not exactly operating in 4 divisions. We have our mechatronic business, the DCS business providing services and solutions to customers in the aviation industry and in the defense industry based on mechatronic technologies, mechatronictechnics and products. We have 3 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 bio technology space in the biophotonic space. Our light and production business caters to predominantly customers in the automobile industry in an end customer and in 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 in optics in future. As I said earlier, we'll prepare that move in 2019 and start reporting in these new divisions in sorry, prepare it in 2018 and start reporting in 2019. Focus means focusing on core competencies, means easier to understand business setups, but also it does mean to me at least making clear what our priorities are. And I've said the other day, when I started to see an uptick, I was a bit surprised that when I asked folks about their priorities, I had a list of them as well. I think we want to focus, we need to be clear of what our priorities are for a particular timeframe as well.
So as the management board, want to walk the talk here and we've set 3 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. And it's a particular pressure for me that I can announce here today that we will have a new President for our Asian activities, Jonathan Chu. He is 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 Metro Toledo. He worked for Leica Microsystems in Danaher. He worked for TCAN. And I know him with 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 3rd 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 €790,000,000 810 €1,000,000 And we expect our margins to further expand. We guide for EBIT margin somewhere between 10.5% 11%. Now we do have some tailwinds from our marketplaces.
Our markets continue to be strong essentially across all arenas and we have a very strong order book that we rolled 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 constrained in the supply chain, and we've discussed that in our earnings call earlier. It's getting harder and harder to maintain our supply chain.
The strain in our supply chain is ever bigger in some areas. The question is not is that the run price, it's more about whoever can deliver gets an order. So the constraints on 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.
And 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. But the FX risks is probably the biggest risk that we have at the moment and we'll continue to monitor that very, 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 us our strategic agenda around more focus, more innovation, more internationalization that we will develop our business from a diversified conglomerate to 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. So 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. And obviously, if you see acquisitions and divestments, you have quite some effects and movements within the P and L structures. If one acquires new companies, not always do they come with a 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 gross 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. So in other words, if we expect somewhat slower and not an accelerated growth in the semiconductor arena over the 5 year period, we have to accelerate the growth in the arenas and areas of the company that hasn't been growing thus far in the past. And 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 the 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 future. And 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, very, very bright future.
That said, I thank you for your attention for today. We now have ample time for questions again. So if you have any questions to me or my colleagues, Hansir 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 our mobility segment. And if I understand you right, that's going to be basically 2 segments, light and production and light and 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 2 divisions: our Automobile division and our Traffic Solutions division. And in future, essentially, that will be run-in these 2 divisions. We're not going to report only the overarching mobility, but we're going to report on the individual divisions. And once we have established the business structure in more detail going forward, we will give you the information about the 20 17 2018 figure. We reconcile it backwards once we have the details around the structure.
Can you not even give a little breakdown on the sales?
Sure, sure, sure. We can. I believe the breakdown of the sales in the mobility segment is roughly fifty-fifty. It's pretty similar, I believe, not quite. Maybe.
Yes, so roughly fifty-fifty between the two divisions. I think that's roughly fifty-fifty between the two divisions.
Stefan Meijer 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? And is it essential for you to have local content to win governmental contracts that would imply that you probably steer your M and A strategy more to get market access?
And the second question is for Mr. Schumacher. Maybe could you outline the FX sensitivity on sales and EBITDA level. As you have pointed out, it is the most negative development you see or risks see for 2018.
Okay. So from the technology perspective,
clearly,
our emphasis right now is on designing and building more functionality based upon deep learning techniques. And that has to go much further forward 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. So 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 2 aspects to that.
It's quite clear through Genoptic, we have subsidiaries and partners in a number of key places in the world, in America, Australia, Shanghai and so on and so forth. And 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. And there are occasions where we have to make some localizations to reflect local government law and policy and all of those are built in 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. And they themselves have, in that case, the relationships on a local basis. So it will vary from country to country.
Thank you, Kevin. Mr. Michel, concerning the FX effects we see in front of us. First of all, it's hard to say how it will develop to the year end, but we're managing and monitoring it from now on nearly daily, let me say it in this way. We had finished our budget process during the end of the last year.
And the exchange rate we calculated for the U. S. Dollar versus euro is already more than 10%. There's already more than 10% difference between our planned exchange rate versus the actual figure. So if you calculate the actual figure, euros per €0 for the whole year, it's around €50,000,000 less sales in Europe.
But it's as we have a big corporation in 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 Europe. So if you take into account that we have a lot more than $100,000,000 business in U.
S. And it's more than 10%, obviously, then you end up at the number €10,000,000 €15,000,000 The actual our controlling department is calculating if the exchange rate getting worse and worse to €130,000,000 from €125,000,000 today. And we will check it. So it's a little bit in our guidance already. So concerning the profits, it's not so huge.
Yes. Craig Abbott from Kepler Cheuvreux. I have one set of questions for the Traffic Solutions and one please for Mr. Halder on Automotive. On the Traffic Solutions, I just wondered you could give us a feel for how your pipeline looks, both with further toll collect type projects or 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? And then Mr. Als, on the automotive side, you mentioned that you have the competencies in house for the traction battery production, which has really ramped up over the next decade. I just wonder if you could elaborate on this a bit more on just what exactly optic supplies and whether this is already in commercialization phase, I. E, do you have real contracts with OEM producers?
Thank you.
Okay. So, 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 Visionics technology, the market has opened up international market has opened up that quite dramatically. And we're seeing over the last 12 months, we've installed systems in Australia, we're currently in Lithuania, Singapore and so on and so forth. So, 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 colleagues earlier over coffee. We're putting lots hundreds of cameras into Belgium and Netherlands and various other countries. So those things are on the growth side. In respect to Toll Collect, we are actively looking to for more opportunity to that and prosecuting those as we go forward and 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 the Tor Collect is another matter. You will see a very strong 2018 in that segment from Tor Collect. There is ongoing recurring revenue from a service perspective, but 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 that the service contract for Toll Collect over 10 years for 600 sites is a sizable contract in its own right. So some of that will be compensated by that deal alone.
Yes. We have investigated deeply with Ity 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. And 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. No, 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.
And I would say, at least in the next 6 months, we are clearer what we have to do and what we have to invest to fulfill this customer request. Also with the laser process on the laser processing side, for example, when you during this production process, you have to sometimes to weld something or to 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.
Peter Oppenheimer here. First on Defense and Civil Systems. So I remember in the past, there was always mentioned huge potential from the civil business side with generators. So I missed this in your presentation. I know you cannot touch every product.
But is still seeing very good growth opportunities in this area? I remember the railway business, also construction vehicles, perhaps could you comment on this? And then question on Doctor. Dreger. 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? And is the outlook regarding the margin, the 16% EBITDA margin, would it be similar on an organic basis? Or what can we expect here?
Yes. On the defense
side of the
business, you are right that we have investigated a lot of the railway markets, and we have also increased our revenues here by a factor of 4 over the last years. But as most of you will be aware, this is a very competitive market, a consolidating market with a huge price pressure. And we are somehow refusing to offer products below costs. And so the growth potential is not so aggressive as in the past seen by us. But on the contrary, we are we have been able to see that Romania, Polonia as well as Sweden or Poland as well as Sweden will introduce Patriot Rocket Systems over the next 3 to 4 years, and this will contribute to growth in the Power Systems Business Unit.
Construction vehicles was a concept we also followed on, but this has proven out to be market very small in terms of the hybridization potential. And that's why we did not further went into it.
On the long term guidance again, and 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 debt investments, acquisitions and debt investments 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. So if I would have to or 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. And 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, on our microtronic businesses.
But overall, and by and large, the guidance on an entirely organic basis would not be dramatically different, would not be dramatically different.
Yes. Thank you. Two questions, please. First for Doctor. Kusschnerlait.
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. And that is not least related to one project that Doctor. Dregg 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 Litto customer? It 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 if it comes because your tools and services largely cater towards more legacy, I. E, gasoline technologies?
Yes. Let me try to answer this question. So 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. So it's not to say they really don't want it.
So I think what we and but let me say differently. So in the similar two business, as you know, it's a very dynamic market and even upgrading systems that we profit from is a dynamic market. So we have benefited from that in the last year and we are benefiting from it right now. Our forecast, our results are challenged for us that we get from the industry is very, very short, if not close to 0 sometimes. So it's very hard to predict it.
I mean 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? So there might be some physically phase difference, phase shift in this. So it might be a little later or earlier to kick in. But I think if the investments go down, I think also refurbishments and upgrades will go down. So, but it's very hard to predict it for us and it looks like even for our customers.
So, 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, yes? So only a part of our revenues is maybe affected by the e mobility. 2nd, 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 2, 3 years. So I would say a possible risk we maybe have 2021, 2022 from the on the metrology side. And let's say, we assume about 10% of our total division revenue, which could be a risk revenue. But of course, as I have shown you, we have a lot of possibilities and opportunities to compensate or to overcompensate this 10% to 15% risk of our revenues with new applications for different parts in the automotive field and with the stretch in battery coming up and things like this.
Robin Brasse from Houghton Aufeuser. One question also concerning the M and A opportunities, I guess, in the future. I guess one could be maybe new customers will get access to maybe new sales channels. What else would be maybe interesting for you to look at? And secondly, also how do you wait basically paying higher prices for interesting new opportunities versus you can't reorganically get into those markets, so maybe it's worth paying a higher price for those?
Those? Maybe the best way to address that question is by just briefly go 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. So in our Automobile business and our Traffic Solutions business and the 2 businesses that you've seen in the center, the lighter production in future and light and safety in future. In businesses where we do have end customer access already, in businesses where we have sales 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 and going more direct or convert dealers to direct in some geographies could be a potential way going forward in terms of acquisitions for these two businesses. So technology, product additions, bolt ons for those two divisions would make a little 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. So I think we have a good strength there. Focus on this business is probably more on organic growth and R and D and into the product development area.
If it
comes to biophotonics, Healthcare, Life Sciences, I for 1 believe that and we've discussed that last night, building our own sales channel into that segment is very, very challenging. I mean, I come from that area. Radif has
been around the block number of times if
it comes to Life Sciences and Healthcare Businesses. And 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 transformatory deal, which would come with an established sales channel. And that might actually end up in an additional division in the future, possibly an end customer business into the Life Science or Healthcare arena. But again, that would be a transformative deal, not a little bold one.
I have another question. Bryce, yes. Look, the way I view any acquisition, any M and A activity is the following. The first question I'm asking is, does it make strategic sense? 2nd question I'm asking is, can we build a growth case out of it?
3rd question I'm asking is, do I believe that from a cultural perspective, we have a fit? And then and early then, I think about price. 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 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. And if not, then we will pass.
There is another aspect of M and A, which is very, very important and 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. And let me disclose that we have just recently passed on a very actually in the last minute on an acquisition where we had have had doubts about the compliance standard in a potential target in in Europe. So we will be very, 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 is that you competing at net about your competition? So 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. And 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 the client our clients can get benefit. So from that perspective, where before we were supplying cameras as part of a solution, we are now supplying the overall solution. And we can manage that with us a physical implementation, software as a service as we discussed earlier.
And we can also drive the portfolio with some interesting new developments. And 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. Every most cars, modern cars now have a Wi Fi signature. The bad guys, it is mostly bad guys that commit crime, for example, have a smartphone and a work phone.
They all have signatures. So 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. So that's a key differentiator for us and we can use that in the intelligence application.
And then on the biophotonics, how mature is your product pipeline, potential upcoming product pipeline? How does your idea pipeline, R and D pipeline, project pipeline, talks with your customers look like? Maybe you can shed some more color on that?
Sure. So let me answer it this way. So 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 this is in the semiconductor business, but we have some good partnerships already. And I think looking forward, we have to make these relationships and keep them going.
And of course, we're looking for new ones. And I would say, compared to the semiconductor business where we're like 10, 15, 20 years in, it's a quite new business. But we have a good starting point of a couple
of years into that into these relationships. It's Stefan Meisel from BW again. The civil OEM helicopter market was very soft last year, might stabilize this year, but 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 sea side, 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 Airbus and 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 which whom we talk really 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 to optimize the earn on capital, the use of working capital, the investments? Or is this basically down to you and the CFO? That's a
good question. I think it's a question of my colleagues are asking themselves at the moment. So I don't want to do I or you are not, Riju? Come on. Very good question.
We intend to empower our leadership. And 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. And it does mean they're responsible for working with their capital in the most effective manner. So 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. And of course, the individual incentivization of our 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, very much for your questions. I thank you very, very much for your participation today. Again, I have made reference to our Safe Harbor statement in the early part of the day, in the beginning of the day. Let me do that one more time.
So please do respect our Safe Harbor statement. Again, this call has been recorded. And before we bring it to a close, we would like to end today with our little footage, our little movie again.