Good day, ladies and gentlemen, and welcome to the Hexagon interim report first quarter 2015 conference call. For your information, today's conference is being recorded. I would now like to turn the call over to your host, CEO, Mr. Ola Rollén. Please go ahead, sir.
Thank you. Welcome to this first quarter interim report of 2015. If you turn to slide four in the presentation, you have an overview of the first quarter. Organic growth amounted to 5% and recorded growth 19%. Recorded growth in a comparable structure was actually 22% since last year, Q1 was the first quarter or the last quarter with other operations. The growth was primarily driven by our industrial activities, IES, where both metrology and PP&M showed continuous strength in the first quarter. All regions showed mid-single digit growth with an acceleration in Western Europe, but a slowdown in Asia. We also saw improved profitability and cash flow. Group gross margin 60% and an EBIT margin of 21% in the first quarter.
As a way to mitigate the very complex FX movements we have in this quarter, we've launched a cost savings program during the quarter, and we're going to come back to that. Operating cash flow improved by 40% in the quarter. If we turn to slide five, just to remind you, over the years, we've seen a transition where Q3 used to be our weakest quarter, but nowadays Q1 is the weakest quarter, and that has to do with the very large holidays we have in Asia and South America in the first quarter. If we move to slide six, we have the P&L table, where net sales amounted to EUR 705.1 million, which is a recorded increase of 19%, whereof organic growth is 5% in the quarter.
EBITDA amounted to EUR 198.6 million, which is a 24% growth over the corresponding period last year, and the margin now corresponds to 28.2%. Operating earnings, EBIT1, amounted to EUR 149.8 million, and that corresponds to an EBIT margin of 21.2%, an improvement of 0.5%, and we can see the EBITDA margin growing by 1.2 percentage points. The difference between the two is the accelerated depreciation and amortization over 2014. Earnings before taxes, excluding non-recurring items, amounted to EUR 142.2 million, which is an increase of 23% over the corresponding period last year. We have this cost restructuring program, which addresses the cost increases we see in the United States organization, sorry, U.S. organizations and the Swiss organizations. It's roughly 420 individuals that will or have left the company.
Net earnings amounted to EUR 84 million, including taxes and non-recurring items, that corresponds to an earnings per share of EUR 0.23. Excluding non-recurring items, the earnings per share grew by 19% to EUR 0.31. If we look at the cash flow on slide seven, cash flow from operations, including taxes paid and interest received or paid net, grew to EUR 157.8 million. Change in working capital was -EUR 33 million. Thus, cash flow from operations were EUR 124.8 million in the seasonally weak quarter for cash flow, which is Q1. Slide eight, just to highlight working capital to sales. Over the longer period, we can see that the consolidation of Intergraph has been beneficial to our working capital development. Lately, though, as of 2013, we can see that we've made little progress from 20% to 19% of sales.
Right now, this has to do with that we're changing generations of products. We're actually running two product lines in parallel in the first quarter. By the end of the second quarter, this will be cleared when we release the next generation products. Effects and actions related to FX movements, slide nine. We do have a positive FX of EUR 66.4 million on sales and EUR 14.1 million on operating earnings. Currency movements have had a neutral impact on our EBIT1 margin. However, the currency movements did have a negative impact on primarily Geosystems and PP&M, but a positive impact on other units with less rich EBIT margins. We have a mix impact in the margin, which is negative, and you could guesstimate that to be -EUR 9 million in the quarter.
However, the cost savings program that we announced on the 31st of March is intended to address that. We will release approximately 400 employees, and it's expected to drive cash cost savings to approximately EUR 35 million per annum, with full effects as of January 2016. Market development. If we turn to slide 11, we can look at the geographic mix in the quarter. North America has significantly grown its share from 27% to 31% of sales. Western Europe is shrinking from 31% to 30% of sales, China and South America remain at 15% and 4%, respectively, and so does Asia Pacific at 13%. Then we see a 2% loss in EMEA outside of Western Europe, and that has to do with the significant decline we saw in the quarter coming from Russia. Slide 12, an overview contributors to growth in descending order in the quarter.
It was a fairly good quarter for Western Europe, both for industrial applications as well as geospatial and construction applications. Western Europe grew above 8% organic growth. So did Asia, excluding China and Australia, and Eastern Europe, Middle East, and Africa. North America, China, and South America were showing growth 0%-8% in the quarter, whilst Australia and Russia had significant negative growth in the quarter, affecting the overall growth. If we then analyze the business segments and geographic regions, slide 13, we can see that surveying is showing a negative trend in emerging markets, whilst the two mature markets, Western Europe and North America, are doing. Energy is growing throughout the world, and we see significant growth coming from Western Europe. We had another good quarter for electronics and manufacturing, where we see significant growth, primarily in China and North America.
Infrastructure and construction, similar trends as we see in surveying. It's the emerging markets where we're suffering at the moment, whilst North America and Western Europe are actually growing quite well. Safety and security, it was good to see growth in Western Europe for the first time in two years. This quarter, we had slight negative growth in North America, which is the biggest market for safety and security. We do believe, however, that that will be corrected in the quarters to come, given that we now have a large order with the Fire Department of the City of New York. Automotive, good and stable growth throughout all regions, slightly slower growth in Western Europe in the quarter, and a similar pattern in aerospace and defense. We move to slide 14, we just visualize what we've just gone through. Asia is outgrowing all the other regions longer term.
Americas is now 30% above the previous peak in Q1 of 2008. EMEA has just recovered to the previous peak that we saw in 2008. We roughly have, as you can see in the pie chart, one third of our business in each region. EMEA market trends, slide 15. Western Europe recorded 9% organic growth. Positive markets were U.K., Italy, and Spain that are recovering, as well as the Nordic region and Germany. France recorded negative growth in the quarter. Segments such as surveying, automotive, power, and energy drove the broad-based organic growth in Western Europe. Middle East, Africa, and Eastern Europe all grew. Russia recorded minus 55% organic growth in the quarter. Americas, slide 16. Demand in NAFTA remained strong, driven by Mexico and United States.
Canada had zero growth. That has to do with the reduced activity in the so-called oil sand fields in northwestern Canada. In United States, we saw automotive, electronics, and surveying grow at good growth rates. Public safety had negative growth. This is simply because We finalized a large installation in Q1 2014. The backlog is reassuringly strong, and we do believe that public safety will have a good year in the United States in 2015. South America recorded growth despite negative development in Brazil, as markets such as Argentina and Colombia showed strong growth rates. Asia market trends, slide 17. 4% organic growth in China. All businesses slowed down, but we saw good growth coming from our industrial applications, whilst the geospatial applications showed negative growth. This is a continuous impact from lower activity in construction.
Apart from China, India, Malaysia, Vietnam, Singapore, and New Zealand all grew at strong double-digit growth rates. Australia, which is a fairly large market for us, 3% of sales, reported a double-digit decline in the quarter. This is connected to the downturn in mining, which also affected the wider surveying business. Segments. We introduced new segments for the first time this quarter. If we start with Geospatial Enterprise Solutions or map-based solutions, slide 19, we can see that the organic growth was fairly sluggish, 2%. Geosystems recorded 1% organic growth, SG&I 0%, and Positioning, which is the merger between NovAtel and Veripos, 6% organic growth. EBIT grew by 20%, and the EBIT margin increased, driven primarily by positioning and an improved margin in SG&I to 19%. It was 18% last year. Industrial Enterprise Solutions, slide 20.
Organic growth of 8%, even though we see a deceleration from Q4, 8% is good considering the markets. Metrology grew at 8% and PP&M at 7% growth. EBIT growth of 24%, we saw a reduced margin from 26.3% last year to 25.6% in the first quarter this year. The margin was negatively impacted by business mix and currency. There are two things going within this division. First of all, Metrology outgrew PP&M. PP&M has a much higher margin than Metrology. Secondly, PP&M itself has most of its cost in US dollars, and with this superb EBIT margin that PP&M is recording, even tiny reductions will have a significant impact on the overall margin. This is one of the things we address with our cost restructuring program.
If we now move to the gross margin, Slide 21, it improved from 56% to 60%. This is also due to FX movements. It's more FX movements than actual improvements in the underlying operational gross margin. The flip side of the coin is that the OPEX is increased as well due to FX. We can see that on the operating margin, Slide 22, where we do see an improvement year-on-year of the EBIT margin, it would have been even greater had we not had the Swiss franc appreciating the way it did. M&A orders and product releases, Slide 24. Our first acquisition this year is Q-DAS.
Q-DAS is specialized in statistic process control. It's a German software company which will be integrated into our MMS package, which stands for Metrology Management System, which is a comprehensive software product that we launched in the second half last year. Approximate turnover last year was EUR 15 million. Slide 25. Hexagon Imagery Program is now launched to external distribution partners. Throughout 2014, we sold it to dedicated sponsors and key customers. We now have a wider distribution channel, including Esri with its ArcGIS marketplace. Hexagon Geospatial division is selling it through its so-called Power Portfolio. Then we have Valtus, which is our own exchange where you can buy aerial data. Slide 26. In Colombia, we installed a system with the largest multi-utility in Colombia.
EPM, which is the name of the utility, has more than 5.2 million customers. It's a combination of our so-called G/Technology with maps provided via GeoMedia, where we can locate and geo-reference outages. Slide 27, we're making an impact in the agro industry in Brazil, India, and United States. We've received orders in the first quarter for our new suite of agro products. Slide 28. Hexagon technology aids real-time surveillance. This is a quite interesting technology project that we've developed together with Selex ES, which is a subsidiary within the Italian group, Finmeccanica. We basically, it's for border patrol, where you can analyze movements of groups of people and you can follow where they're moving and monitor them. Analysts are able to handle large amounts of multi-intelligence data that they can download into server and really use big data to paint a picture of what's happening.
Slide 29. We announced that Hexagon and Esri will collaborate for public safety and security applications, where we will open up our products to be used in collaboration with Esri's ArcGIS platform. This product will be available as of the second quarter this year. Slide 30, New York Police Department signed another five-year contract with Intergraph SG&I for 24/7 on-site support of the software system that we installed last year. The system went live in May 2013 and has improved productivity within the police department significantly. We now move to Slide 31. This is about automating emergency services in this capital of the Pará state in Brazil. We installed a comprehensive system in their control rooms consisting of several software packages from Intergraph. Slide 32, improved fleet operation.
This is a new product called Smart Asset Control, where we basically control and create a large logistics system in workplaces, like when you construe a port. We talk about several hundreds of vehicles that we control using GPS receivers, software, and so forth. Slide 33, General Motors selected Hexagon's 360° SIMS for its Rosario plant in Argentina. Another breakthrough order for the new product 360° SIMS. Slide 34, Daewoo Shipbuilding selected Smart 3D for the so-called INPEX project. Slide 35, we launched a new tracker in the metrology division, the Absolute Tracker AT960, and it's definitely gaining attention and momentum in the aerospace industry. It's our best laser tracker yet. Slide 36. In this quarter, we've launched the next generation land-based correction services via the acquisition Veripos. We have new GNSS service level. We call it TerraStar-C.
It's very accurate. We basically combine GPS, which is the U.S.-based system, with GLONASS, which is the Russian system. We've opened up to cater for also Galileo and BeiDou, which is the European and Chinese satellite constellations. Slide 37. In the quarter, we also launched a new family of laser scanners, ScanStation P30 and 40 and 16 were launched in the quarter. We now cover all aspects of scanning from easy-to-use ScanStation P16 to a very versatile instrument, the P40. In summary, Slide 39, 5% organic growth, primarily driven by our industrial applications in the quarter. Improvement in operating margins in spite of EUR 9 million negative impact from the Swiss franc.
To mitigate this negative impact, which stems from the Swiss franc, but also from the U.S. dollar in certain businesses, we launched a savings program that will more than compensate for the negative Swiss franc impact that we see on our margins. For Q1, we report strong cash flow that underlines the potential for M&A for the group going forward. With that, I open up for questions. Elaine, if there are any questions, we're ready to take them.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press the star or asterisk key followed by the digit 1 on your telephone. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find that your question has already been answered, you may remove yourself from the queue by pressing star 2. Once again, ladies and gentlemen, please press star 1 to ask your question. Our first question today comes from Sidharth Mura of Morgan Stanley. Please go ahead, sir.
Hi. Thanks a lot for taking the question. Just two very quick ones. Number one on the organic growth. I think when we look out into the second half of the year and the base comps often, generally it feels like there might be some concerns that the growth slows further from here. Could you just highlight a couple of points where you see particular strength in the pipeline? I know you mentioned already in the security space. Anything else to get us incrementally confident that that growth can accelerate from this point? Secondly, on the EBIT margins, if you make the adjustment on the FX in one Q14 and one Q15, overall the margins were down somewhat. Could you just talk through some of the gives and takes there? What happened in the quarter? Was this just because of metrology? Thanks very much.
Organic growth, I can't give you a forecast for the second half because we simply don't issue forecasts.
Maybe not a forecast, but just some particular business lines or products where you're seeing solid momentum, a good pipeline, something like that.
I think instead of looking at the 5% in Q1, maybe we should look at the 9% in Q4 and the 5% in Q1 and say that 9% in Q4 was probably a bit better than what we were hoping for or were asking for. 5% was probably a bit on the weak side from what we expected going into this quarter. I think the truth will lie somewhere between those two extremes. I think that's the best guidance I can give you. If we move to margins, I tend to disagree with you that margins are down, but we have to dissect it. If you use the condensed income statement in the interim report, what you need to remember is that we've spread out the non-recurring items in the OpEx in the table that you see there.
Maybe you want to elaborate a bit more on reduced margins.
No, I was making the adjustment for the foreign exchange because if you looked last year, your EBIT was negatively impacted by FX. If you make the adjustment on that side, you get to margins of 21.6% as it would have been without any impact of FX. If I do the same calculation this year, I get to something more like 21.3%, 21.4%. I just wanted to get a sense of what happened in the business mix, that would have led to that type of deterioration without taking into account the impact of FX.
You can't do that because it's two different FX. In 2014 you compare to the situation in 2013, in 2015 you compare to the situation in 2014. The big negative that's happened between the two is really the Swiss franc, where we have lots of operating cost, but we have very little revenue in Swiss franc. That's the single biggest negative item. As I stated previously, that's roughly EUR 9 million. The Swiss franc has been pegged to the euro at 120 for the past four years. Suddenly it was dropped, negative impact on our EBIT margins. That's why we launched this cost-cutting program.
Okay, great. Thank you.
Thanks.
Thank you. Our next question comes from Hailey Chen of Deutsche Bank. Please go ahead.
Hi. Good afternoon. Thank you very much for taking my question. On metrology, you had the easiest comps year-on-year in Q1. Do you still expect organic growth to improve from the 8% this year going forward? I think there was a comment on improving demand in European auto and manufacturing. The second question is around your EBIT margin. Could you please talk us through the kind of net impact, post the restructuring program and given what you're seeing in the market and the relative performance of your business units for the full year, please? Thank you.
I've never said that we expect improved organic growth in metrology going forward. Maybe Europe, but not metrology division as a whole. We don't give forecasts. You're absolutely right, that of course, metrology had a stellar year last year, and it's going to be tougher and tougher for them to beat last year. We have some good things up our sleeve. Let's hope that we can continue on this very positive trend that we've seen in metrology. Regarding EBIT margins, I think you have to do a calculation where the cost-cutting program will contribute with EUR 36 million in reduced cost or improved margin. If we had implemented that on January 1st, we would have basically cut cost in the range of EUR 9 million per quarter.
If you divide EUR 9 million on EUR 705, that would have given us an EBIT margin boost of 1.3% in Q1 over the recorded operating margin of 21.2%. If we do a reconciliation, we would have landed at 22.5%. That's why it was so important to give them that we have our long-term targets. We needed to adjust our cost structure to the new currency situation.
Great. Thank you.
Thanks.
Thank you. We will now move to Stacy Pollard of JP Morgan. Please go ahead.
Thank you. Since we were talking about margin, maybe I will lead with that question, which is, you've discussed some product mix a little bit, and the various margins across a few of the products. Can you also talk about certain industry verticals, whether certain industry verticals have higher margins than others? That's question one. The follow-up to that really is, can you remind us, the guidance that you do have for 2015, or is it all laid onto the 2016 targets? Then finally, can you discuss product cycle in metrology and Geosystems? I think you mentioned something up your sleeve, perhaps.
My sleeve is actually, I'm sorry. It's gone. I've rolled it up. Just joking. Let's start with the easy one. We don't have a guidance for 2015. We have a guidance for 2016, so that was an easy question. If we talk about industry verticals, it's obviously so that there is a significant difference in the profitability per vertical. Surveying is very profitable. Power and energy is very profitable. Automotive, safety, and security, less profitable, and so on.
Product cycles? Any comment on product cycles, either in Geosystems or metrology?
I think that the big year for Geosystems was 2013. The big year for metrology was 2014. What we're going to see in 2015 in connection to HxGN LIVE in June in Las Vegas is probably not an as big product launch as the two previous years, I think the two divisions are going to launch significant product releases in June, which could drive growth in the second half. We move to SG&I and PP&M, they have more, I shouldn't call it routine product releases, but it's more next-generation software products that you release twice per year.
When we think about geo and metrology, are they on a sort of two- to three-year cycle, or is it a little bit more of a stretch than that? Are you, at this point, going small launches all along the way?
I think that you could say we have big product launches every 18 months.
Okay, thanks.
It's difficult for us to say how big the launches will be, but I think it's worthwhile a trip to Las Vegas.
Thank you.
Okay, thanks.
Thank you. Björn Enarson of Danske Bank has our next question. Please go ahead.
Yes, Björn Enarson.
Hey.
Can you hear me?
We can hear you well.
Good. It says muted on my phone, though, so must be a little bit puzzled. I have a question on your gross margin and your comments on FX day. You said it was mainly an FX contribution on that line. Looking ahead, are you seeing some drivers for you to keep that level up, or is this mainly based on FX development, or do you have anything else that could offset potential changes to the FX? Then follow-up to that is on the OpEx side, it was, of course, up significant. How much of that is FX, really? I guess that as you were saying, your restructuring is aiming for the OpEx, will we see a positive OpEx development the next few quarters?
Let's start with the easy one. We hope that we'll see a positive OpEx development in the next few quarters. If we move to the gross profit, it's true that the short-term increase is driven by FX. Longer term, we hope to be able to underpin a continuous improvement in gross profits, not by FX, but by new products. What we need to do now, we previously said that 60% would be the target level for our gross margin short term in the current planning cycle, which ends in 2016. With the new exchange rates, we probably need to recalculate that, it's going to be a higher target since we're obviously not at 25% EBIT. If we look at the OpEx in the quarter, it's a bit difficult to dissect what actually happened.
We record, if you go to page seven in the interim report, we report 43.4% OpEx in the quarter. Within that OpEx, you got 4% roughly, which is the non-recurring items that are spread between the lines, administration, research and sales expenses. So the corrected numbers would be instead of 20.4% sales expenses, you would have 18.5%. 9.8% for admin rather than reported 10.6%, and 12.4% for research and development would be 10.9%, if we back out the NRI of EUR 36.6 million in the quarter. If we look at cost savings, that would shave off another EUR 9 million from the OpEx line. Then we have another implication, which is a bit difficult to see if you just read the report on page seven in the interim report. That is depreciation and amortization, which seems to be the same amount year-over-year.
It's actually so that we had an impairment in 2014. The true depreciation and amortization going forward in 2014 was EUR 38 million, whilst it's EUR 48.8 million in 2015. That's an increase. Depreciation, amortization, and FX is working negative, have adverse effects on our OPEX. The cost-cutting program and the NRI are really the ones that you can discount in the OPEX going forward.
Okay, good. My next question were actually related to depreciation, amortization. Should we expect a slow increase on that line looking ahead?
It's not a slow increase. As I said.
Yeah, you had a very strong increase this quarter, should we see a similar growth rate looking at on that line?
I think we're growing it at 29% quarter-on-quarter if you back out.
Yeah
The impairment. I think that's probably valid for the year. That's the rate we're going to see. Unfortunately, part of our amortization is in Swiss franc and US dollars, so it's a higher number.
Yep. Get it. Okay. Thank you.
Thanks.
Thank you. We will now move to Daniel Schmidt of SEB. Please go ahead, sir.
Yes, hello. Good afternoon. Could you just give us some help what we should expect on PP&M going forward? You continued to have really good growth in the quarter, and, of course, you highlight a few things there. What do you see in the pipeline going forward, given the concerns in the market? Ola, if you could say something about what really happened in the quarter. As you said, you were a bit surprised or negatively surprised by the growth rate in Q1. I remember you saying that you kept the same pace in connection with the Q4 report that you had in Q4 when you reported the Q4 numbers. What happened in the second half of Q1, basically?
If we start with Q1, I think what happened was that we had a slow start like everyone in January, and the currency movements in combination with what happened in Russia took us by surprise. That's why we're slightly lighter on organic growth than what we hoped for. It wasn't really something happening in the latter part of the quarter. It was sort of a continuous process after everyone came back from winter or Christmas holidays and Swiss franc depreciated. I'd rather say that I think that if anything, the pace increased by the end of the quarter. If we look at growth for PP&M, it's good growth given the backdrop, the market. Having said that, this is a complicated story with large multinationals having CapEx plans that run into 2020, I mean, five years plans.
I guess that what we've read and what we've heard in Q1 reflects an oil price of around $45 per barrel, whilst it currently trading last I looked at $69 per barrel. The recent increase in the oil price makes a tremendous difference for offshore oil operations. Really, the only operations that are now running with red numbers are the oil sand fields in Canada and some of the U.S. shale oil operations. This is roughly the level which is the sweet spot for our business, between $70 up to $100 per barrel. We will see what it means, but no one knows.
Would you say that you are a bit more confident than you were than maybe a month ago, or when we were really in the tank? When it comes to the oil price, are you more confident now that you will keep growth this year? Would you give us any guidance? Try to give us any guidance.
Where was the oil price a month ago?
Okay, when we were down below 50, you feel that that is a big difference for your conviction going forward where we are now compared to at the start of the year then?
The oil price is up by more than 40% since the beginning of the year, and my confidence has grown by roughly 40%. No, it's as easy as that. No, it's a much better outlook with the oil price at 69 compared to the oil price at 45.
Yeah. Do you see that in the trend during the past couple of months, or is it too early to say?
No, you don't see that because we have visibility roughly, more than 70% of the business is recurring revenue. If you translate that, you could say we have visibility three quarters into the future. We don't see any dramatic changes. Q2 looks fairly stable and good, and Q3 so far so good. Beyond that, I think it's very much about the CapEx plans from the large multinationals in combination with an oil price. Given that the oil price is where it is, it gives me much more comfort for 2016 than an oil price at EUR 45.
Yeah. Okay. No, that's good. Thanks a lot.
Thanks.
Thank you. Our next question comes from James Stettler of Barclays. Please go ahead.
Well, thank you. Could you quantify the contribution to metrology growth from any smartphone measurement deals in Q1 that drove the growth in the second half last year? Maybe more generally, just talk about your progress in expanding the customer relationships for those types of deals.
These customers want to remain anonymous, we can't comment on individual accounts.
No, not individual names, in terms of your ability to expand those into a number of vendors.
What we've done, we had a breakthrough deal in the electronics area with a large OEM in Asia in the quarter. We've expanded this business further. Instead of having one customer end user, which we had last year, we now have two. Given the size of these businesses and accounts, going from one to two is a significant growth.
That's extremely clear. Thank you. In terms of that business, would you see that as ongoing then with a second vendor? Would you see it as sort of done for the coming period within the first quarter?
It's a bit complicated because our growth is a function of the number of new products they launch in combination with volume. It's not a straight line correlation to volume. It's not a straight line correlation to the number of new products they launch. The trend is very favorable for us because the products are becoming increasingly difficult to assemble. You have bent shapes and so on, and smaller products like smartwatches and things like that, wearables. This is a very good trend for us indeed, and we're quite happy with the development we see in the electronic field in the first quarter.
Great. That's very helpful. Thank you. Could I ask you just quickly on Russia as well, actually. I have in my mind that it was about 3% of sales previously, I guess half that now in terms of what you've just recorded in Q1. Is that sort of the right level? As we look to sort of Q2 to four this year, do those comps weaken as we go through the year already, or did it hang on for quite some time, that business?
First half was very strong. It was like there was a general order to buy as much as you could in Q1, Q2. We saw a softening in Q3, Q4. This significant negative growth, this is the first quarter we've seen that. The comps will get easier as we get into the second half of 2015. It's very difficult to predict what's going to happen in Russia. If we talk to our Russian customers, they say it's a delay, it's a lot of uncertainty, but the large projects that we were connected with that drove growth last year, they will start, and they will resume. It's not the embargo itself. We haven't been touched by the embargo. It's really the negative sentiment and the lack of cash in the system.
Okay. Thank you.
Thanks.
Thank you. We will now move to Erik Golrang of Nordea. Please go ahead.
Thank you. I have only two questions left. The others have been answered. The first one, just to clarify, were there any savings from the cost takeout program in Q1?
No
Then the second one on, you mentioned M&A. Any thoughts on what we should expect there or potential deals of a similar characters that the ones you did last year or something different coming up?
No, I think you should expect right now our agenda is all about technology. We need to add a few technologies that we don't have in our own portfolio. Similar acquisitions as we saw last year, like the Vero Software, the Mintec acquisition, and so forth, similar sized companies.
Thank you. That's it.
Thanks.
Our next question comes from Deepshikha Agarwal of Goldman Sachs. Please go ahead.
Hi, it's actually Gautam on Deepshikha's line. I had a quick question on Smart Solutions. If you could just comment on what contribution was from Smart Solutions for the current growth in Q1.
It was a little less than 1%, maybe somewhere between 0.5% and 1%.
Thanks a lot.
Thanks.
We have no further questions at this time.
Terrific.
Excuse me.
We should call it a day. Oh, there was another one.
Apologies. Yes, we do have a question from Mikael Lassen of Carnegie.
Yeah.
Yeah. Sorry for that. Hi, Ola. Just a question on the SG&I, the order backlog they have there. Can you explain how you plan to start those projects and recognize revenues? Will that start already in Q2?
It will start in Q2. There is a plan, where you agree with the customer on certain points that you need to reach in order to invoice them and recognize revenue. The cash flow, however, has a different projection where they do down payments after a schedule that we've agreed.
Okay. Will that have a material impact already in Q2?
You will have.
Recognition of those projects.
I think the single biggest project that we have going for us is Fire Department of New York, and it will start in Q2. Fairly small impact in Q2, but we expect it to reach sort of full pace of implementation as from Q3.
Okay, thanks.
Thanks.
We have no further questions, sir.
We call it a day. Thank you, everyone, for listening in and talk to you next quarter. Bye.
Thank you, ladies and gentlemen. That will conclude today's conference call. Thank you for your participation. You may now disconnect.