Hello, and welcome to the Hexagon Q4 report 2018. Throughout the call, all participants will be in a listen-only mode, and afterwards, there will be a question and answer session. Today, I'm pleased to present Ola Rollén. Please go ahead with your meeting.
Thank you, and welcome everyone to this Q4 earnings call. If we start at slide number four, overview of the fourth quarter 2018. We report an organic growth of 5% in the quarter and a recorded growth of 9%, and very little FX impact in this quarter, as you could see from the report, so it's mostly organic and acquired growth. A solid organic growth in Geosystems continues at double-digit 10% growth. MI, comparison to very strong numbers in the fourth quarter of last year, 6% growth, and PP&M is continuing its recovery, 8%. PI grew by 8% as well. Since the overall growth is 5%, we have negative growth in safety and infrastructure, and actions have been taken to ensure improvements in our growth in safety and infrastructure, for 2019. We have record earnings and profitability in the quarter.
Our growth margin came in at 62.2%, and our EBIT margin was bang on 26%. We benefited from organic growth as well as good product mix in the quarter, but were adversely affected, as you can see from the report, from currency movements. We had a negative impact on EBIT, but a positive impact on sales. Slide five, seasonality and profitability. Q4 is our strongest quarter. It was the strongest quarter this time around as well, and we're first time above EUR 1 billion in sales in a single quarter. Slide six, the quarter in numbers, EUR 1,043 million in net sales, EBITDA of 33.4%, EBIT margin of 26%, and an earnings per share of EUR 0.60 for the quarter. I think I skipped slide seven.
That's just a summary for the full-year, and as you can see, our top line grew by 8% organic growth for the year, 3% above our long-term financial target of 5%. If we move to slide eight, cash flow. The net operating cash flow amounted to EUR 262.5 million, and that is 46% stronger than the corresponding period of last year, where we posted EUR 179.7 million. The cash conversion in the quarter was 115%, and it was 80% for the full-year, but if we exclude the extraordinary investments that we did in Calgary and our ongoing investment in our campus in China, the conversion would have been roughly at 90%, and our target is 80%-90% cash conversion. Positive was the change in working capital in the quarter, and we highlighted that already in Q3, where we had a negative impact on working capital.
We were expecting a relief, and it finally came in working capital in the quarter. Slide nine, working capital to sales is 13% in the fourth quarter. We had a good improvement compared to Q3 in working capital to sales. We'll see if it's sustainable, but the long-term trend is still there, that we're reducing working capital to sales as we change our business model. Market development, if we move to slide 11, sales mix. Not much has changed. South America has gained 1% of sales, and the rest of EMEA, excluding Western Europe, has lost 1%. Otherwise, it's fairly static, and we can see that we got three strong regions geographically. Slide 12. Asia grew strongly, as well as South America and Eastern Europe, Russia, Middle East, and Africa. Western Europe reported and recorded good growth, China as well, and North America, single-digit growth as well.
I'm not going to spend much time on slide 13. It's simply too busy for an earnings call. It's for your review later on and with follow-up questions. If we move to slide 14, EMEA grew by 6% in the quarter, organic growth, Geospatial 7%, and Industrial 4%. In Western Europe, which is the lion's share of our business in EMEA, we grew by 5%. We recorded strong growth in United Kingdom, Germany, Spain, and the Nordics. A bit sluggish in Italy and France. The growth was mainly driven by the construction side of our business, infrastructure and construction projects, Central Europe. Power and Energy had a good quarter, and so did Positioning Solutions. We saw a continuous recovery in our Russian business that grew at double-digit rates. So did Eastern Europe.
Middle East contracted, whilst Africa grew on the back of large mining investments in the region. Moving on to Americas. North America recorded 1% organic growth. It's not a fair representation of the situation in North America. Canada is doing fine, and U.S. grew by 1%. If we exclude our public safety business that hampered growth, it's concentrated to the U.S. market. All other businesses within Hexagon grew at an aggregate 5% organic growth in the quarter, which means that construction, industrial applications, manufacturing, and so on, did well in North America. South America continued to recover. We do see a continuous recovery in our Brazilian business, which represents roughly 70% of South America. We also had strong activity in the Andean countries, where mining activity right now is high for us. Asia, slide 16. China recorded 5% organic growth.
It was a weak quarter for electronics due to tough comps in Q4 of 2017. We had favorable development in automotive and aerospace, infrastructure, and construction. Power and Energy and Public Safety declined on the back of very strong numbers in Q4 of 2017. Japan is doing really well, and India finally recorded double-digit growth. We've had some sluggish growth in India in the past, and we can now see the end to that. Reporting segments. If we go to slide 18, Industrial Enterprise Solutions, organic growth was 6%. MI reported 6% organic growth, and we had a very strong growth in the fourth quarter of 2017. It's record numbers that we're beating with these 6%. PP&M accelerated and recorded 8% organic growth. It was mostly driven by AEC and information lifecycle management solutions, i.e., sales to owner-operators.
The design piece of the business is still growing somewhat slower than these new areas for PP&M. Sales amounted to EUR 946 million, operating margin improved almost by 1%. Geospatial enterprise solutions on slide 19, organic growth of 5%. This is where we have our tr business within security and infrastructure that contracted by 13%. Geosystems grew by 10%, it was strong growth already in the fourth quarter of 2017. We're quite happy with this 10% growth. It was fueled by good demand from Western European infrastructure and construction, North American infrastructure and construction, as well as our content program and the launch and the good reception of several new products from Geosystems. Positioning 8% organic growth, that was driven by a continuous strong demand in the agricultural sector and the automotive sector.
We do see a recovery in positioning vessels in offshore oil fields, so marine is improving. Sales amounted to EUR 497 million, the EBIT margin improved from 25.6%-26.1%. Gross margin, slide 20, is now at 62% for the past 12 months, 1% up compared to the previous period. On slide 21, we can see that the 12-month rolling operating margin is now at 25%, which is 1% up as well. Orders and product releases. If we go to slide 23, things that happened in the quarter, we acquired a company called Bricsys. Bricsys is a fast-growing developer of computer-aided design software for the AEC or construction market. It's a CAD platform software that supports 2D and 3D general mechanical and sheet metal designs, as well as BIM, building information modeling.
Our plans for this acquisition is to connect it with our AEC platform, SmartBuild, and our laser scanners like the RTC360, the BLK360 that we've launched through Geosystems. Now we're beginning to see an ecosystem for the construction industry where we can create end-to-end solutions to improve productivity. Slide 24 is another new product and feature similar to the RTC360, where we simplify the usage of our instruments. This time it's the FlexLine, the new generation FlexLine, which is the mid-range total station that has the first AutoHeight feature, where you simply don't need to calibrate, the system will do it for you. It's also seamlessly connecting the office, the design office, or the architectural office, or the surveying office to the instrument in the field. It's able to seamlessly send data flows back and forth. Slide 25.
We've now launched the next generation terrain mapper, which is an airborne sensor to cover 3D environments just from air. We got some unique features in this next generation airborne sensor. It's very high performing. Slide 26. Hexagon's Multivista got its first orders in the U.K. after we established the service in the U.K. We have contracted services which include live streaming of remote site management on construction projects, and also photo documentation for site survey and other functionalities. Slide 27, we modernized the map production in Ecuador, collaborating with IGM, which is the national mapping agency of Ecuador. They selected the Hexagon Power Portfolio software for orthophoto analysis. Slide 28, the Mexican Aeronautical Academy, Daedalus, they are now developing a command center for the aeronautical industry in Mexico.
They have standardized on the Luciad portfolio to doing real-time visual information in the command center for the air traffic flows over Mexico. Slide 29. The Kazakhstan space program continues to invest in Hexagon software. We've delivered the M.App Enterprise solution in the past, and now we got another order. This is for water management, disaster management, forest fire monitoring, and agricultural crop monitoring throughout Kazakhstan. Slide 30. We are enhancing and we're launching a new product in our CAD/CAM portfolio for additive manufacturing or 3D printing. It's Edgecam 2019 R1 that was released. This reduces the processing time for a machining algorithm by between 15% and 60%, depending on the complexity of the component you want to 3D print. Slide 31. BAE Systems is a multinational British-based defense and aerospace company.
They've bought Simufact Additive, which is simulating 3D-printed components before the part is actually printed to find inclusions and defects before you spend the money in the process, so to say. This is a growing area for Hexagon. Simulations before you actually do the physical activity. Slide 32. This is an interesting application. We now introduce civil anti-jam GPS antennas for offshore positioning of oil rigs and drill ships and other things. Civil applications in the oil and gas areas around Eastern Mediterranean and even in Southeast Asia is experiencing higher and higher activity from jammers that try to shut down operations. Interference and jamming are growing threats for all these locations. The antenna has been tested in military applications in the past, and that's where we first launched this product. Slide 33. AutonomouStuff has partnered with Great Wall Motor Company in China.
It's China's largest SUV and pickup manufacturer. This is one step towards Hexagon's strategy to expand the footprint of AutonomouStuff in China. Autonomous vehicles is a huge industry, and it's led by the tech companies in China, and we're signing collaboration agreements with them, and we're building up our presence for autonomous driving in China as we speak. Slide 34. We introduced Hexagon's Connected Worker solution through the PP&M division in this quarter. It improves workforce effectiveness in the field. The Connected Worker delivers a consolidated view so that you can connect frontline workers with different information systems that you have in use in your company and in your organization. You don't have to store or duplicate the data. It's a very powerful IoT tool that is connected to our software platforms. Slide 35.
HGC is a leading Hong Kong-based fixed-line telecommunication service provider. They bought our telecommunication solution to simplify the process of generating facility maps and aligning fiber cables throughout their network. That was it for the quarter. We also need to disclose our dividend. The board proposed in the board meeting held earlier a dividend of EUR 0.59, which is an 11% increase over last year. This will be decided at the upcoming AGM. The dividend can be paid in euros or Swedish kroner, depending on what you prefer. In summary, slide 39. Solid development, 8% organic growth in 9/10 of the group, 5% organic growth for the group total. 9% recorded growth. We see continuous strong growth in the AEC industry as well as in the manufacturing and engineering industries. We do see a continuous recovery for power through PP&M.
Growth was hampered by the decline in sales in safety and infrastructure. Continued margin expansion, strong cash flow, we propose a dividend of EUR 0.59. With that, we are now ready to answer any questions that we can answer. Operator, the Q&A session can start. Thank you.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad now. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Once again, that's zero one on your telephone keypad to register for a question. Our first question comes from the line of Guillermo Pena from UBS. Please go ahead. Your line is now open.
Good morning, all, thank you for taking my question. I just basically limit to one at this point in time. I guess it's just related to the consumer electronic industry, specifically in China, but I guess elsewhere as well. Do you see any potential impact from the 5G launch on your business? Is there any reason for or reason to believe that some of these pending, that some of these consumer electronics players in the industry will be putting in place is being delayed for the implementation of 5G into 2020 and onwards, hence, you should expect actually that spending to recover at some point during 2019 or early 2020? Thank you.
One can only speculate, of course, it's going to mean a lot to the telecommunications industry. We are benefiting from that in two ways. First of all, of course, the handset manufacturers are going to launch new models with 5G. That's a direct impact on our MI business. Then secondly, we do see that solutions in relation to the smart factory applications that we are developing are going to be easier to roll out as you have 5G. With 5G, you have Wi-Fi quality and speed. That's going to mean a lot for us. We will see later in 2019 what the impact is going to be. The direct impact selling to handset manufacturers and the indirect impact from having access to the speeds that 5G can deliver.
Maybe a follow-up on the automotive CapEx. Your clients, do you see spending patterns holding or probably accelerating into 2019? Again, the same question into 2020? Especially driven by the EV content, sorry, the electric vehicle content. Yes.
We have three businesses into automotive. We have our quality systems, the metrology business, the traditional, that is growing at low single-digit growth in the fourth quarter. We did see a slowdown in that. We saw an acceleration in our design and simulation software business, where we see a much greater uptake from our simulation software in the fourth quarter. Of course, autonomous vehicle development is on fire and growing at very strong rates. We expect that to continue into 2019, similar trends.
Thank you very much, Ola.
Thank you.
Bye.
Thank you. Our next question comes from the line of Marcus Almered from Kepler Cheuvreux. Please go ahead. Your line is now open.
Hi, Marcus Almered here. My first question is regarding the Geosystems. What is the contribution that we're seeing here from RTC360? It's very nice, the sixth consecutive quarter with double-digit growth. The RTC360, how much is it contributing? Also the BLK360, has the growth from that leveled out, or is that a big contributor as well? When was the last time you saw this long streak of this kind of growth in that segment?
Wow. I think on group level, you're absolutely right. New products is a significant contribution to Geosystems' 10% growth in the quarter. It's not only RTC360. RTC360 is a great success, but BLK360 is continuing to grow, and now we're launching BLK3D, but we also have a lot of success with these. I gave an example in the earnings call with the total station that auto adjusts the height. We've launched similar products with a tilt adjustment in our GPS product portfolio. This is the new trend. You don't need as much education to calibrate and use these instruments in the field, and that is pushing growth. The honest answer is that it's a significant portion that is driving Geosystems growth coming from new products.
Okay. Interesting. If I can just ask, how much of the margin improvement in Industrial Solutions is driven by margin improvement in PP&M? That is, are you seeing the margin in PP&M come back significantly now that growth is back, or are we still waiting for that?
We're still waiting for that. It was actually MI, through its very strong development of its simulation software business, that pushed margins up in Industrial.
Okay, excellent. Thank you very much.
Thanks.
Thank you. Our next question comes from the line of Alexander Virgo from Bank of America. Please go ahead. Your line is open.
Good morning, Ola. Thanks very much. Couple of ones, if I could. Could you talk a little bit about the moving parts in China? 5% organic growth is very solid against a very difficult comparison. I'd be curious if you could split out maybe the drag from Public Safety, so the underlying ex Public Safety would be super helpful. Secondly, if you could just talk a little bit about free cash flow. Clearly, your guidance around Q3 and the change in customer and the implication for working capital has been proven to be true, of course. Free cash flow delivery in the quarter was very solid. I wonder if you could just make a comment around how we should think about that going forward.
Are we likely to see any potential changes as we saw in Q3, and whether or not that's something we need to think about for 2019? Thanks very much.
Thanks. We will start with China and Moving Parts. I think we can use slide number. Where is the famous arrow slide? Slide 13. In general, the construction industry was slowing down in China, as you can see from the surveying arrow. That is also impacted by one-offs in the fourth quarter, Q4 2017, where we delivered a set of airborne sensors, and that doesn't happen every year. Power energy and mining is doing fine in China, but it was tough comps in Q4 of 2017 that makes that arrow brownish orange or whatever the color is. Electronics and manufacturing, if we dissect that, manufacturing was super strong, and we see a continuous trend towards Manufacturing 2025, where the Chinese manufacturing industry wants to automate and improve quality.
We talked about the negative trend in electronics, but the matter of the fact is that manufacturing outgrew the decline that we saw in electronics. Automotive is super interesting in China. You have a lot of new electrical vehicle manufacturers that are investing. The traditional ones that we mentioned, like Great Wall, are investing as well. We also see a huge investment effort into autonomous, where both the tech people and the traditional auto guys want their fair share of the action. Aerospace and defense was strong. Aerospace civil aviation is a focal point in China, and they're investing in state-of-the-art technologies to produce civil aircraft. Public safety was hampered, and we're still late and delayed in the smart city rollout in China. That was China. If we move on to working capital.
I think unfortunately one has to expect our working capital to be lumpy and hard to predict. Over time, working capital to sales should go down, and as you see from the graph in the presentation, we've come a long way since the early 2000s, working capital to sales. As we tend to have more and more subscription-based business, it's going to reduce further because you get upfront prepayments. I think we will have a similar situation in 2019 as we saw in 2018, neutral to slightly negative working capital buildup.
Lovely. That is very helpful, Ola. Thanks very much.
Thanks.
Thank you. Our next question comes from the line of Daniel Djurberg from Handelsbanken. Please go ahead. Your line is now open.
Thank you very much, congratulations to a solid year end of 2018. My question would be, coming back to Geosystems, you launched quite recently the BLK3D after some delays. My first question would be on whether the market has received this as of yet, do you consider it a clear application, how many do you plan to manufacture into 2019?
Yeah. We have good reception, but you cannot really say that BLK3D had any impact on the fourth quarter, so that has yet to come in 2019. We have great expectations for it. We will see how many we will sell.
Okay, fair enough. It was launched, I guess, in January, or was it in the December?
We shipped a few late December.
Okay. On the safety and infrastructure, you have some problem projects in the U.S. government, I think it was. Can you give us some more clarity or visibility, perhaps, on your thoughts on the recovery, how you expect it to pan out here in 2019, if it's a specific quarter or if it will be gradual or something?
I think it's defense related where we have a structural issue. It's a generational shift where we're moving from static maps to dynamic maps like the ones Luciad produce. It's a new product for civil public safety, where we have some teething problems in a few installations. By Q2, we hope that we can report some positive news.
That's great. The third would be a little bit on accounting, if it would be possible to give us the level of the quarterly and annual investment in immaterial assets. That was EUR 65 and EUR 227 million, respectively. That is not referring to capitalized development expenses.
You mean the material investment?
Yeah, you have a cash flow-
The reason why that is growing is our ongoing investment in China.
I understand that. If you look at the immaterial assets investments, you had EUR 65 million in the quarter. I was only wondering how much of that is referred to capitalized development expenses.
It's the lion's share.
Yeah, I know. I will use the lion's share then. Thanks.
Yeah.
Thank you. Our next question comes from the line of Mikael Laséen from Carnegie. Please go ahead. Your line is open.
Yes, hi. A couple of questions. In your statement in report, Ola, you say that you are confident in your ability to grow despite uncertainties in the world economy. Can you elaborate a bit on what this means? Is it possible to grow in line with your financial target of 5% or is this not possible given the uncertainties that you mentioned? Can you just comment a bit more on this?
It's very hard to say. We're early. We're in the start of a brand new year. The year has started well, pretty much in line with what we've seen in the second half of 2018. We do know that there are some global macro uncertainties, and we're not immune to those. It would be something that if you were to state what you think, you could have to eat it up later in the year. I think it's nothing different from what you see from other companies. If you're not concerned about the political situation between U.S. and China and the turmoil we do see from Italy, France, and the Brexit talks and so on, and the impact from that on global businesses, you would be naive and stupid.
Yes, I agree. The second part here is if you can update us on the software side and recurring revenue as percentage of total sales and how those grew in 2018.
I don't have it yet. We're going to come back to it later when we issue the annual report.
All right. Thank you.
I think it's fair to say that our software business has outgrown our hardware business in 2018.
All right. Thanks.
Thanks.
Thank you. Our next question comes from the line of Erik Golrang from SEB. Please go ahead. Your line is open.
Thank you. I have two questions. The first one on working capital, I guess a follow-up. You say it's going to be volatile, but if you would relate it to the 27%-28% margin target you have, where would you expect working capital sales to be if you hit that level on margins, given what mix that implies, I guess?
It's going to be at or below 15% of sales. That's the best guess I can give you.
The second one, also a follow-up. You talked about the continued very strong growth within autonomous investments on the auto side. I saw, I think it was in an interview with some of the AutonomouStuff team talking about around 50% expected growth in 2019. Is that something you can confirm that you expect or target?
No, but I'm quite happy if they said that. I haven't read that.
I see. The third one. On the oil and gas side of PP&M, which does not seem to return to growth, is that something you still see happening at some point during 2019 based on the positive tendering activity you've talked about previously? Or has the oil price contraction sort of capped that potential recovery we saw?
No, you shouldn't say firmly, but it has to recover simply because the current activity in the oil and gas industry is not sustainable. With the demand growth of fossil fuels, say, gas and oil, and the current demand levels in the global economy, if you continue to run the oil and gas industry on the levels of investment that we've seen over the past few years, you're simply not going to have enough supply. We do see a funnel and a pipeline of large-scale projects that are going to mean meaningful business for our design software. I think one just need patience. What's interesting is that we have very low growth in that core business, but still we report 8% growth for the division, which means that the AEC and the other industries that we've entered with our product are growing very fast indeed.
Is it the oil and gas part that needs to grow as well for the margin recovery or pickup in PP&M to happen? Or can we start to see that at some point even without oil and gas joining the scene?
No, I think it's as simple as this, that we've seen a top-line drop in the division. We've trimmed our cost. We've invested to cater for new industries. As the top line continues to grow, we're going to see better and better incremental margins.
Thank you.
Thanks.
Thank you. Our next question comes to the line of Toby Elk from JP Morgan. Please go ahead, Toby, your line is open for your question.
Good morning, Ola, thanks for the question. Just looking out to the 2021 targets, particularly on the margin side, the base scenario of a 27% EBIT margin would sort of imply 75- 80 basis points improvement each year on the margin, which is just slightly ahead of the sort of 60- 70 basis points you've been delivering over the last few years. To what extent do you still think this is achievable? I guess how much M&A do you think is needed to get there?
I think it's not a linear development. You can't use a ruler and say, "Okay, this is what we need to do every year." Of course, it's going to be steps, and certain events are going to have more impact on the EBIT margin expansion than others. It's product mix in combination with acquisitions and new product launches.
Thank you.
Thanks.
Thank you. The next question comes from the line of Gautham Pillai from Goldman Sachs. Please go ahead. Your line is open.
Yes, thank you. Morning, Ola. First, I wanted to come back on your comments on the general business environment. While you engaged with customers in Q4 and year to date, did you observe any change in demand or buying patterns at all?
No, we don't. Of course, there is concerns and discussions around what's happening in the global economy. It's people you deal with, and obviously everyone is discussing the trade talks that are ongoing and so on, which is the two largest economies on this planet. Obviously you have to follow very closely what's happening in the relationship between these two countries.
Can I also follow up on the Geosystems growth? Clearly, there is strong momentum in this segment, and you alluded to that part of this was driven by some new products. Historically, the segment has had cyclical characteristics. You have a new product launch in 2019 or already launched in 2019, but once the ramp-up of these products cool down, how should we think about growth in the segment in 2019 and 2020?
I think you can't think like that. What's needed, what's a prerequisite for growth in the economy that we're going to face, all of us in the next few years, is development. You can't stand still. We're going to launch new products in 2019, but we're going to launch new products in 2020 and 2021 as well. I think the future belongs to the ones that innovate.
Would you say that the segment is becoming less cyclical and more structural from advanced standpoint?
No. If you don't develop, it's going to be super cyclical. If you develop, and if you continue to have good ideas for productivity improvement, you can achieve growth even in a bad economy.
Sure. Lastly, on the electronic segment within Manufacturing Intelligence, can you comment on the prospects, given a weaker outlook from Apple? Obviously, Tor touched up on the 5G opportunity. Will that offset any weakness from the Apple supply chain?
We'll see. We don't know yet. It's early days.
Okay. Thank you, Ola.
Thank you.
Thank you. Our next question comes from the line of Fasi Rizvi from RBC. Please go ahead, your line is now open.
Oh, hi. Morning. Thanks for the questions. A couple left from me. Just firstly on MSC, I was just trying to get an idea of how big that is now within IES. I think you mentioned that design and simulation has been having good acceleration and growth recently, in auto in particular. I was trying to get a feel for how big that might be and what the trajectory of that business has looked like in recent quarters. Then my second was on AutonomouStuff. I was wondering how the rollout, I think you were saying you were expanding in China and Germany. I was wondering how that was going, and then whether in the context of the bigger addressable market, whether that 50% growth target that was mentioned earlier, whether that's actually conservative if you think about how much the size of the addressable market might grow.
If we start with MSC, we acquired MSC in 2017. We've been working hard on refreshing and modernizing the product portfolio, also integrating it with our other solutions within MI. That is now paying off. We saw good growth, double digit in the fourth quarter, 9% for the full-year from MSC. This is definitely an application for the future, especially in combination with autonomous vehicles, where it's impossible to simulate an autonomous system by driving on the roads physically. You need simulation models where you can download roads from our imagery program in Geosystems into MSC's products and actually simulate an autonomous system. That is one area which is super interesting for the automotive industry. We also see a good growth from the aerospace industry within MSC.
I think that to simplify things, simulating metallic applications like cars and planes and so on, that is the sweet spot for MSC, and we're seeing good traction with our new products. Moving on to AutonomouStuff. We're investing heavily in our Chinese operation to localize our capabilities for AutonomouStuff in China. We're also looking at building out our correction services in China, which is something you do need to have autonomous traffic and autonomous cars, and that is going to be something we're going to talk more about for 2019, 2020. Europe is probably the third area in terms of activity. It's slightly behind China and the Americas for autonomous, but we are investing in Germany as well, and Germany will be the center for autonomous development. I don't know if that's enough of an answer.
Yes. I was just wondering on the timescale of that expansion and then by how much that increases your addressable market for AutonomouStuff, given, I think it was historically just mainly North American business.
Yeah. It's going to grow significantly. As I said, I think China is right now second to none when it comes to developing and deploying algorithms to drive cars autonomously. Not having had a local organization in China before, but now having it is a huge change for AutonomouStuff.
Okay, go ahead. Thanks.
Thanks.
Thank you. Once again, for any questions, it is zero one on your telephone keypad. Our next question is a follow-up question from the line of Alexander Virgo from the Bank of America. Please go ahead. Your line is open again.
Thanks very much. Ola, just a couple of quick follow-ups. I wondered if you could give us the growth in China in MI or an indication of the growth in China of MI, it's helpful. The last one, just on the SI impact. Just wondering if you can talk a little bit about the impact on margins that has.
If we start with the first one, it's actually stronger than the overall number for China, the 5% for MI. We don't disclose divisions in individual markets.
Okay.
What was your second question?
Just wondering if you can characterize the headwind that we're seeing from SI on the margins.
It's not good for margins, obviously, when you're contracting a business. It hasn't been helpful to expand the overall margin.
No indication of basis points or something that if you're going to see an improvement from Q2 on, just wondering what sort of tailwind from margin we can expect.
You can expect an improvement because right now they're hampering growth and margins, and just neutralizing it and having it at neutral development will make a significant change for the overall group numbers.
That's very helpful. Thank you.
Thanks.
Thank you. As we have no more questions registered , I now hand back to our speakers for any closing comments.
Yes. We're completely exhausted, there are no follow-up comments. Thank you for listening in, we'll do this again in a quarter's time. Thanks.
This now concludes our conference call. Thank you all for attending, you may now disconnect your lines.