Earnings Call: Q4 2012

Feb 12, 2013

Ladies and gentlemen, welcome to the presentation of the Hexagon Year End Report 2012. Today, I'm pleased to present Ola Rolian, President and CEO. For the first part of this call, all participants will be in listen only mode and afterwards, there will be a question and answer session. Mr. Oliyan, please begin. Thank you. Welcome to this year end report for 2012. If we move to slide number 4, an overview of the Q4 2012. The recorded growth is 7%. Organic growth 4% for the group and 5% for the core business, measurement technologies. Other operations recorded a negative growth in the quarter. All regions reports organic growth in net sales and we do see an improved demand in Europe for the engineering sector sequentially quarter over quarter. Growth in Asia is sequentially accelerating and we see stable growth in North America muted by the defense sector in the Q4. Geosystems is improving in Americas and China, but the European construction market remained weak. The metrology business reports another record quarter. PP and M, Intergraph PP and M record quarterly sales and continues to outgrow its underlying market. SG and I prioritize profitability over growth and reports negative sales growth, but a very positive EBIT margin development in line with HOTMA Group average. We also report strong EBIT and gross margins in the quarter. Gross margin came in at 56% and EBIT margin for the core business at 23%. We also report a strong cash flow as presented a bit further into the presentation. We now move to Slide 5. This is just a reminder that we do have a seasonality in our profitability over a year, where the Q4 still is the strongest. But we can see that the fluctuations are less accentuated after the consolidation of the Inter Draught Group. Key figures, slide 6. We report €629,000,000 in net sales. That is a 7% recorded growth, 4% organic growth over the Q4 of 2011. Operating earnings grew by 11% to €135,300,000 That corresponds to an EBIT margin of 21 point 5%, just shy of 1 percentage points improvement year on year. Earnings before taxes grew by 17% to €124,800,000 and net earnings grew by 19% to €101,100,000 This corresponds to an earnings per share of €0.28 for the quarter. For the full year slide 7, we can see that organic growth was 5% for the year, 6% for the core business. And we ended net sales at €23,800,000 Operating earnings I. E. EBIT came in at €489,500,000 which corresponds to an EBIT margin of 20.6%. Earnings before taxes and non recurring items amounted to EUR 441,300,000 and that is a 19% growth year on year. Net earnings amounted to €357,400,000 and that is a 20% growth in net earnings year on year. Slide 8, cash flow. Cash flow in the quarter from operations before tax interest and working capital and investments amounted to €168,500,000 As you can see, our tax rate is now coming down again. So in the 4th quarter, taxes paid were 15 point $6,000,000 versus $20,300,000 the previous year. And for the full year, we paid $57,200,000 in tax compared to €71,100,000 the previous year. We also see that we've amortized our net debt on the interest received and paid. We paid €7,700,000 in interest in the 4th quarter as compared to €13,700,000 in the Q4 of 2011. We've reduced our interest net by €10,000,000 in paid interest between 20 11 2012. Thus cash flow from operations before changes in working capital amount to €145,200,000 For the full year, it's €100,000,000 better than in 2011 €494,400,000 Changes in working capital. We actually had a positive change in working capital in the Q4, while the full year also record a positive change. Euros 22,700,000 in release capital in the quarter as compared to negative €1,200,000 for the 4th quarter in 2011. Thus cash flow from operations amount to €168,000,000 in the 4th quarter and €497,000,000 for the full year. Ordinary investment activities increase and there are two reasons why they increase. First of all, we've geared up our R and D activities from 9% of sales to 11% of sales. The second reason is that we're now starting to pay on our new facility that we're construing in Huntsville, Alabama, United States. Operating cash flow amounted to EUR 116,900,000 versus EUR 70,000,000 the previous year Q4 and for the full year €325,500,000 versus €200 and €33,100,000 We did not record any non recurring cash flow in the year, while the full year number is the same for as for operating cash flow. This is a 66 percent growth in the Q4. So we're looking forward to a much improved cash flow for the group. Slide 9 currency impact. Compared to the same period previous year in the 4th quarter, the Swiss franc U. S. Dollar and Chinese renminbi strengthened. The U. S. Dollar and the renminbi has a positive impact on our profit, whilst the Swiss franc has a negative impact on our profit. EBIT was affected by €3,200,000 positive in the quarter and sales by €11,800,000 For the full year, we have a positive impact of €15,500,000 and a positive impact on sales of €94,400,000 If we look at market development slide 11, we can see some significant shifts in sales mix over the year for the core Business Measurement Technologies. Western Europe is shrinking at a rapid pace. It represented 31% of sales last year and 35% in 2011. North America is increasing its share from 28% to 29%. South America flat at 4% EMEA, excluding Western Europe, is adding 1 percentage point to 8% and Asia Pacific similar different and China we can also see is adding 1 percentage point. More than 40% of our sales are now outside of the Western European and North American markets. Slide 12 is a busy slide. But just to remind you, the highlighted arrows are changes over previous quarter. We can see, 1st of all, if we look at the total line that Middle East and Western Europe is growing again. So 0% to 8% growth from the Western European market. And what's caused that change is the power and energy sector, the public safety, the automotive and the manufacturing sectors actually improving sequentially its growth. You can also see share of sales for the various segments and that's up take it for the full year for 2012. If we then move to Middle East, it's surveying that started to grow again and thus improving that sub region. In North America, we saw negative trend in the quarter for Aerospace and Defense. And within Aerospace and Defense, we had a strong growth trend from Aerospace, but a very strong negative trend from U. S. Defense. And that was dampening the North American growth. South America still good growth. We saw surveying coming back, construction coming back, automotive a bit slower growth rates and manufacturing slower growth rates. In China, we saw a recovery in surveying, power and energy construction, but public safety saw a reduction in demand in the quarter. All in all, China grew at strong double digit rates. In Asia Pacific, we also saw an increased demand for surveying construction and public safety products and solutions. Slide 13 shows the difference between 11% 12% per customer segment, where surveying lost 1 percentage point, power and energy is now almost as large as surveying. Whilst Aerospace and Defense and this is primarily driven by demand from defense customers lost 1 percentage point. Construction, static at 11%. Same goes for safety and security. Automotive grew its share from 9% to 10% and the others were flat. Moving on to slide 14, EMEA. Market trends in EMEA is that customer demand improved in the Q4 over the Q3. We saw increased activity levels in Western Europe in the engineering sector and primarily driven by automotive and aerospace customers. We saw continuous weak demand in Southern Europe, but Northern Europe and primarily Germany started to improve again after reporting negative growth in the Q3. Demand remained at high levels in enterprise engineering, data management construction software used in power and process industries. Countries in Africa, Eastern Europe and Middle East grew at various rates. And the stars in the quarter were really Russia, Turkey and South Africa showing significant growth. Slide 15, Americas. The Americas growth stand from the recovery in the U. S. Construction sector and primarily residential housing and strong demand in South America. Apart from what I've just mentioned, the deteriorating demand from the defense related products, all market segments are now growing in NAFTA. We also recorded significant organic growth in South America for Intigraf despite the weak macro environment in Brazil that has affected the engineering sector in the Q4. Metrolughe reports that thus modest growth and so does Geosystems in the quarter. Asia, slide 16. All of Hexagon's application areas and products recorded double digit growth in China in the quarter. It was a very strong quarter in China. Strong demand was seen in primarily pickup was recorded related to rail, subway and monitoring, but not high speed rail specifically. Injack Korea and Japan continues to report strong growth. And on slide seventeen, you can see an overview of the organic growth per geographic region since the Q4 of 2,008. We can now see that all regions are above the Q4 of 2,008 level. Segment information, slide 19. Measurement Technologies report net sales of €613,600,000 which is a 5% organic growth in the quarter and 6% organic growth for the year. Operating earnings amount to €139,600,000 driven by good mix. We generated an operating margin of 22.8 percent and that's a new record for this group in a quarter. The overall EBIT margin improvement in the quarter year on year was 1.1% 0.5% for the full year. Slide 20. We can see that there is a slight recovery in the metrology organic growth whilst Geosystems continue to report slow or 0 growth. And this has been the prevailing trend since the second quarter of 2011. Technology is growing at an average rate of between 6% 8% per quarter highlighted by the green line. If we move on to slide 21, gross margin for Measurement Technologies annualized data. We came in at 56% gross margin for the full year and that is 2 percentage points above 2011. The EBIT margin, we record quarterly data on slide 22. EBIT margin came in at a bit shy of 23% for the quarter. And just to remind you, the target for 2015 is 25%. Orders and product releases in the quarter. If we turn to slide 24, we got a project to monitor the Alaskan Way tunnel project underneath Seattle, Washington State, United States. And this is a collaboration between Leica Geosystems and their international partners, Sol Data. And we will be going to monitor all downtown buildings in advance of the world's largest tunneling machine that is going to create a 2 story tunnel underneath downtown Seattle. If we move to slide 25, we also monitor Italy's infrastructure. This is a project in Sicily, which has a high hydro geological risk. And it's the Civil Protection Department that has installed an automatic continuous monitoring system to monitor for lantern slides. Slide 26. Geosystems also monitors the Jiangjing, Jiangsu River Bridge. This is purchased by the Jiangsu River Waterway Administration and its assistant to monitor structural defects in the bridge. Slide 27, an order from the mining industry. Christmas Creek will be our biggest ever single sale for a mining installation. We will equip over 160 machines with high precision GPS guidance systems and software. Slide 28. Geosystems and Integraff PPNM has brought out its first synergy product. We combine like a TrueView integrator with the Intergraph PPNM, Smart Plots Plant Enterprise. And we call it well, it's the first synergy collaboration, which will generate revenue between the 2 entities. Slide 29, another synergy solutions, this time between GEO systems and Intergraph SG and I. We can now create digital terrain models and significantly reduce the labor hours in this workflow by combining our cameras from ZI and Leica Geosystems with the Intergraph software. Slide 30. You can now go log on to amazon.com and buy the first ever iPhone distance measuring app where we've combined our DISTO laser technology with an iPhone. And the price is $149 It's a must have. Slide 31. Leica Scan Station P20, our new high speed laser scanner was introduced in the quarter. Slide 32. Both Hexagon Metrology and Geosystems are participating in a project to try to break the land speed record. The car which looks very much like a jet fighter is called Bloodhound Corp and this will be executed in 2013 2014 in South Africa. We also installed the largest CMM ever in Korea in the quarter. It was a so called gantry machine, which is 6 meters wide, 7 meters deep and 3 meters high. And the application is wind turbine machinery manufacturing. Slide 34. Intergraph continues to expand with its PP and M division in China. We got significant orders from Shandong Powers, Petrochemical Northeast Refining and Chemical and Yantai Wanhua Polyurethane in the quarter. PP and M also continues to penetrate and expand in the Brazilian market. We got several large orders in connection to the energy and oil and gas industry in Brazil. Orders from ECM, Proman, OSX and Syskraf also set up and introduced its new Marine Excellence Center in Rio de Janeiro, Brazil. Other PPNM wins outside these two regions were Reliance in India, Skane, USA, a natural gas utility, ENI Norway and Technip Italy. If we move to Slide 37, another synergy project that is gaining traction is Hexagon's hydrology H2O solution. And we've now booked our first orders in Asia. In China, we booked one solution, which is a collaboration between Leica Geosystems, Intergraph, SG and I and Fab Eye Imaging. And we also got our first order outside China, which was in Kuala Lumpur, Malaysia. Slide 38. China has started to use Intergraph's GIS platform in 7 cities in Southern China in the Guangdong province. It's the China Southern Power Grid that is standardizing on our foundation software. Slide 39, SG and I won 3 orders. Worthwhile mentioning in the quarter with the Knox County in Tennessee Emergency Communications District that standard ISO technology. Bell Canada will use our technology for fiber optical work solution. And Lohlen Forsuning in Denmark selected Intergraph SG and I GIS platform as well. Slide 40. Going into 20 13, we launched a new suite of products, a significantly improved GIS platform photogrammetry and remote sensing software and we call it Geospatial 2013. Slide 41. We also launched a suite of new products in the public safety and security field spanning from integration products like Edge Frontia to video analyst products. Slide 42. Novotel got a large order from Insitu, which is a leading unmanned aircraft manufacturer in North America. Navtech also purchased NovotelliNosian navigation systems for this so called Street View or Street mapping project. Summary of the quarter. If we turn to slide 44, just a reminder, the Board of Director proposes an increase in dividend of 65% from €0.17 to €0.28 per share. And the dividend can be paid in euro to shareholders who wish to receive it in this currency. Other shareholders will receive the dividend payment converted into Swedish kronor on the day of payment. Summary. We've reported another strong quarter with sales growth of 7%, 5% organic in measurement technologies, our strongest gross margins and EBIT margins ever and 17% improvement in net earnings. The record cash flow that we now have enabled us to reach our target levels when it comes to leverage. So we're satisfied with these levels. And we can we believe that we can master a downturn at the same time return to our dividend policy of 25% to 30% payout ratio per annum. And we also believe that we have sufficient room to maneuver to continue to grow and outgrow the market for the future. Thank you very much for listening to this presentation about the full year 2012 and the Q4. I'm now ready to answer any questions I can answer. Our first question comes from Mr. Lars Wursen from DNB. Please go ahead sir. Yeah. Thank you very much. Good morning. Ola, it's Lars Brorson here from DNB. A couple of questions if I could primarily on end markets. First of all on GEO Systems, Western Europe is the only region that's declining in your Construction and Surveying segments. Now if you're growing double digits outside of declining. We're sitting some 20% year over year. Can you give us a sense for your response here both from a product portfolio, but also from a cost and capacity perspective? And just on the product portfolio, I noted the Geospatial 2013 that you're rolling out. Is that that looks like a workflow solution. We've seen some of that from Trimble over the course of 2012. How much of a game changer is that as far as the surveying segment is concerned? That's my first question. Thanks. Geostation 2013 is more directed to mapping and cadastre than pure surveying. But we do have new products that will change the workflow for Soveus and facilitate coming in 2013. When we talk about Geosystems Western Europe, it's been a significant downturn, especially in Southern Europe where we had many projects related to EU funding in the past few years, which basically have drained up. So it's correct that we've seen a double digit negative growth in Western Europe. Our belief is that we've already hit the sort of bottom and that it's not getting worse. Was that a specific comment on 13? Or I mean, when do you you obviously have been declining in Western Europe in construction and survey or specifically in serving at least over the course of 2012. When do you think comes here come easy enough for you to be able to see growth in Western Europe during the course of 2013? Hello? Hello? Yes. Can you hear me? I can. Yes, go on. Okay. No, we can't rely on a recovering market alone. I think we need to see a more stable demand situation in combination with new product launches to see growth for Geosystems in Western Europe. And hopefully, we can achieve that going into 2013. And on GEO systems just for North America, I was somewhat surprised to see that returning to growth or strong growth here in the U. S. After Trimble talked about spending deferrals in the serving segment in Q4 due to lack of clarity I guess on tax policy and public budget outlook here. You haven't seen an impact it looks like. Can you give us a sense for the trends here the growth in North America and your sense for what kind of market share development we've seen over the course of the second half of twenty twelve? We've seen good growth in the surveying segment in North America. And I can't really comment on market share development yet. And finally in Geosystems with the yen depreciating some 20%, 25% in the last few months, how would you expect that to impact pricing in the sector, notably perhaps from your Japanese competitor? Well, we they have very little room. I shouldn't comment on their pricing policies, but they have very little room to maneuver to reduce prices any further if you follow them over the years. But I guess it's primarily we're going to see increased difficulties penetrating the Japanese market. That's useful. Just one final question if I could on KPNM. We've heard about impacts from project delays in Brazil from the offshore supply chain in Q4 and also of course from AVEVA. What are the underlying trends here in PP and M? And how is your SysGraft acquisition performing? Well, we haven't heard about delays. And we report a string of orders in the Q4 from the Brazilian offshore market. I think it's fair to say that there is a delay in the actual construction of projects, but not in the design process where we are active. That's useful. Thanks, Ola. Thank you. Our next question comes from Mr. Erik Gollrang from ABG Sundal Courier. Please go ahead sir. Thank you. I have two questions. First of all, on growth for SG and I in 2013, could you remind us of how the comparisons developed during the year? You did some restructuring in Q1 last year and then growth picked up a bit in Q2 and now in Q4 it was negative again. I guess there's a question here, when have you focused this business sufficiently towards a higher margin for it to start growing again? I think we're there now. So we've used this year to restructure to resize the cost structure and introduce a new pricing policy. And going into 2013, we expect growth. Okay. And then secondly, on the competitive landscape for Intergraph, I guess since that acquisition, we've seen several industry tie ups here Autodesk and Top Con, Trimel and Tekla. Intergraph looks to be doing clearly better than peers, so no sort of stress yet. But could you say something about how the competitive landscape has developed there and if you still have sort of a 1st mover advantage in this area? I mean, first of all, you have the traditional markets where SG and I and PP and M are active. And we haven't SG and I do not have one global competitor. It's a string of local competitors and large conglomerates forming alliances when you bid for a large tender in an installation. So that hasn't changed much really. When it comes to PP and M, I believe that we record good growth and I can't say that we are growing slower than the market. When it comes to the synergy projects, I believe that we have the 1st mover's advantage. As you said, we haven't really launched any big products yet where we combine. I think in this presentation that you've just heard, the Leica TrueView and the PPNM Smart Plant solution is probably the first product out there combining Intergraph and Hexagon Technologies. Okay. Thank you. And then one final just remind us. And then the split Aerospace and Defense 11% of your MT business. How much is Defense out of that? It's roughly half, half. But Defense is shrinking alarmingly quick. Okay. Thank you. Thank you. Our next question comes from Mr. Mikael Lasrien from Carnegie. Please go ahead, sir. Yes. Hi. I would like to have a bit more clarity on the defense side, if that's possible, how that is performing, what the customers are saying, what kind of signals you get, if this is a temporary slowdown due to budget uncertainty? What do you see ahead? And if you can actually achieve growth despite this side declining? Yes. Our largest application area for defense, we've got 2 primary application areas for defense applications. It's the SG and I division that has something called government solutions where we sell software and perform services for the U. S. Defense bodies. And that is in decline and it will continue to decline. And you could roughly calculate with a minus 5% growth per annum going forward looking at the budget challenges that the U. S. Defense has in the future. The other part of our defense related business has to do with sophisticated navigation solutions primarily sold via Novotel. And that is a growth market where we equip unmanned aerial vehicles and terrestrial systems. So that will continue to grow. All in all, we still expect SG and I to be able to grow in 2013 in spite of this decline from the U. S. Defense. Okay. And where would that growth come from? If you could say the regions, regions? No. Public safety and security, primarily Europe and North America. Okay. And just a quick question on R and D costs ahead. You have SEK 255,000,000 were had in 2012. How much of this was affecting the P and L compared with the balance sheet impact? And how would this look like ahead if you could say something about the mix on the split there? Do you mean how much we capitalized? Yeah, yeah. Roughly 50%. And then we had depreciation of a bit more than EUR 120,000,000. So we're not in balance yet. We have a slight positive impact, but it's diminishing. Okay. And when would you reach the balance? Will this be 2015 or 2016 in that time frame? That's the plan. Our long term plan is to lift gross margins to roughly 60%, I. E. 4 percentage points above where we landed this year. But we do believe that OpEx because of this is going to grow by 1% net when we're in balance. Okay. And that's how you reach 25%. Okay. Thank you. Thank you. Our next question comes from Mr. Jon Hiltner from Handelsbanken. Please go ahead sir. Good morning. Can you hear me? I can hear you. Great. I have three questions. The first one is on growth. You've been trending around 5%, 6% organic growth for a number of quarters now. When you look ahead, what is the main things that could happen for this to improve either in the marketplace or with your own efforts? That's my first question. The second one is on working capital and cash flow. If I look back the past 2 years, you tie up capital typically in Q4. Now you had a strong release. Is there a new seasonal pattern here? Or is it just your own efforts to take down working capital in Q4 that have had an effect? And going forward, we should look for a normal seasonal pattern in Q4. And my third question is on new accounting rules for pension. If you could help us with any impact that could get on the P and L and also on your net debt when we come into 2013 please? Yes. If we start with growth, it's correct. We've been trending over the past few quarters around 5%, 6%. What's happening underneath is that we see growth regions accelerating in growth and we see Western Europe shrinking as a share of total sales. And that will have a positive impact of approximately 1 percentage point going forward. We also believe that new products in spite of a gloomy demand situation, new products can spur customers to actually buy. So as we launch new products and solutions that should also accelerate growth. We have not factored in a recovery in Western Europe in our less current plans. If we look at working capital, it's I believe that over the past few years we've actually released. But you might be right that we've tied up working capital in the Q4. What happened this quarter was that we had a good mix plus we had prioritized reducing the working capital to target levels. And we reached those levels in primarily Geosystems and Metrology. So if it's a new pattern, I think we're roughly tying up 17%, 18% of sales in working capital today as compared to more than 30% before the crisis. And that you can factor in that we're going to be this much lighter in working capital, where the Q4 will always show these fantastic numbers. I wouldn't dare to say that. And then when it comes to the new accounting standard, the IAS 19, we believe that we will have a P and L impact of between €4,000,000 €5,000,000 per annum. And I'm not sure on the balance sheet impact, but I from top of my head, I believe it was around €25,000,000 Okay. Great. And then just some follow ups on these questions. On the growth, you mentioned that you have a plan ongoing internally, of course. Any possibility to get some input on what that plan consists in terms of growth for this year? I think it consists of continuous improvement in Asia and Americas and no further decline in Europe in combination with product releases as of May and onwards. So Okay. Great. And then on follow-up on working capital, this 17% to 18%, is this a level that you're happy with? So you're not in any projects now to take down working capital in relation to sales any further from here? We've come a long way, but there are always improvements. And as we introduce more and more software related products, This could improve further. I mean our pure software businesses are actually running with negative working capital. Okay. But in the near term, you don't have any live projects targeting, let's say, 15%. You have had a project that's now finalized and you're happy with that. And then we'll see how the business develops. Is that the way I should read this? It's terrible to say you're happy. So I'm thinking because it's been an issue for a while and now it seems like you have sorted this out. So I'm just thinking where to go from here. Okay. I wouldn't say we're happy, but let's say we've reached a target level that we're satisfied with for the time being. Okay, great. Thank you very much for the answers. Thank you. Our next Our next question comes from Mr. Bjorn Iannesholm from Danske Bank. Please go ahead sir. Yes. Thank you. My questions were answered all of them. Thank you. Our next question comes from Mr. Daniel Smith from SEB. Please go ahead, sir. Yes. Thank you. Just wanted to ask you on top line synergies. I know that you've stated that you recorded orders in December, I think, when it comes to China and their water management. How much was that? And what do you see going forward? How should we model that, first of all? You should model it as a gradual increase. And the problem is that I can't give you where to start. But let's say we're talking we're not talking about tens of 1,000,000. We're talking about single million in this quarter. Yeah. And do you see that progressing sort of quarterly? Or and you have stated before of course that you'll see significant impact towards the second half of twenty thirteen and I assume that that hasn't changed? No. No. Okay. Good. Can I just ask you when it comes to U? S. Defense and you said minus 5 when it comes to SG and I there. What will make you sort of outperform? Because I think the budget as what I've seen at least is to be cut by 20% in the coming 2 years. Is that a better exposure in general? Or is that a figure that you recognized? I think that's a good ballpark number and we've suffered most of it now. We still could continue to shrink. But if you compare to the pro form a situation when we acquired Integraff to the 2012 situation, we're not down by 20%, but we're not far off. Okay. So maybe most of the pain has been delivered. Okay. And then just finally on CapEx given that you're sort of doing this construction in Huntsville, could you just sort of maybe you did it already in Q3, but could you give us any guidance for 2013 or update us on that one? Well, the gross expenditure is going to be close to €200,000,000 for 2013 including this building that is going to cost almost $70,000,000 €50,000,000 euros What we don't know and what we can't tell you today is in at what pace we can dispose of land plots around in this campus which could meet the increased construction cost. All right. Thank you. Thank you. Our next question comes from Mr. Asar Bora from Goldman Sachs. Please go ahead sir. Hi. A couple of questions. Firstly, on the revenue synergy projects, could you give us an idea of how did the pipeline evolve in the Q4? And you mentioned that you still have the confidence to deliver a strong Q4 in 2013 around revenue synergies. And the second point is related to the China hydrology projects which you mentioned. Could you please give us an idea on what are the size of these deals you're talking about? First, if we take the revenue project, the way we operate is we're basically focusing for 2013 on the hydro project and what we call virtual assembly, which is basically a collaboration between metrology and PPNM. And right now we have some 8 beta customers helping us develop these solutions. And as we are satisfied with the results, we can then increase that group of customers that are sort of early adopters fairly quickly. And that's how we target it. When it comes to the hydro projects and how much they cost depends very much on the size of the installation, but anything from $100,000 up to 1,000,000 of dollars per installation. And if you look at the growth numbers, you have delivered around 5% to 6% growth for the last few quarters. Now as the HE and I headwinds subside going into 2013 and going forward and an extra ticker comes from revenue synergies, are we going to move from the 5% to 6% revenue range to more in the 7% to 10% range for the next couple of years? It's too early to give you a specific percentage number. We're still in February. But the way we see it is that we see no reason why the arrow should point down. We should see improved growth. Okay. Thank you. Thank you. Our next question comes from Mr. Max Frieder from Erik Panzer Bank. Please go ahead, sir. Hi, Olar. Thank you for taking my question. I don't know if you mentioned this already, but regarding the margin improvement in SG and I, was this entirely attributable to price increases? Or was there always increased cost efficiency measures in the quarter? It's a combination. What we've done is we've changed our cost structure and basically moved some 300 jobs from Western Europe and North America to low cost countries. And then we've combined that with new pricing structure when quoting projects. Okay. Thank you. And modeling this going forward, is this, how do you say, a margin that will continue into the following quarters? We hope and expect it to be significantly improved in 2013 over 2012. Okay. Thank you. And then my second question, it's regarding metrology. And the software and service content as a percentage of sales, I believe, is around 4% to 5%. Could you just give some granularity regarding how that has developed during the past couple of years? And also what is a reasonable ambition level so to speak going forward? It's not 45% for metrology specifically. It's actually slightly lower. But it's outperforming the hardware business and thus the metrology division is actually improving its margin and going from clarity to clarity. We're very happy with the development of metrology in 2012. Can you say anything about a level that you would like beyond regarding software and service as a percentage of sale? I'm just trying to find kind of a maximum level, so to speak. It's difficult to say because if you look at mature markets like Germany or United States, the software and service portion can be larger than the hardware portion. But in emerging markets, it's the opposite situation where software and services is a fairly tiny bit of the total business in the country since the installed base is still growing. Okay. Thank you, Olaf. Thank you. Frieden from Erik Fencer Bank. Please go ahead sir. Yes, it's Max Frieden again. Just one other question regarding M and A activities going forward. Looking the other way, do you have any divestitures that you can do in the group? I'm not referring to the segment other. I'm just looking at the core business. Is there something you want to, so to speak, slimline to make the core business more effective? We've discussed at times that there is an hand tool measurement business within metrology that we at times have discussed to dispose of, but we haven't really found a good partner. Okay. Thank you. And regarding the other business, how does that develop divesting that as I believe you mentioned before? It develops.