Ladies and gentlemen, welcome to the presentation of the Hexagon year-end report 2012. Today, I'm pleased to present Ola Rollén, President and CEO. For the first part of this call, all participants will be in listen-only mode. Afterwards there will be a question and answer session. Mr. Rollén, please begin.
Thank you. Welcome to this year-end report for 2012. If we move to slide number four, an overview of the fourth quarter 2012. The recorded growth is 7%, organic growth 5% for the group, 5% for the core business Measurement Technologies. Other operations recorded a negative growth in the quarter. All regions reports organic growth in net sales. We do see an improved demand in Europe for the engineering sector sequentially quarter-over-quarter. Growth in Asia is sequentially accelerating. We see stable growth in North America muted by the defense sector in the fourth quarter. Geosystems is improving in Americas and China. The European construction market remained weak. The metrology business reports another record quarter, Intergraph PP&M, record quarterly sales and continues to outgrow its underlying market.
SG&I prioritized profitability over growth. Reports negative sales growth, a very positive EBIT margin development in line with group average. We also report strong EBIT and gross margins in the quarter. Gross margin came in at 56%, 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 five. This is just a reminder that we do have a seasonality in our profitability over a year, where the fourth quarter still is the strongest. We can see that the fluctuations are less accentuated after the consolidation of the Intergraph group. Key figures, slide six. We report EUR 629 million in net sales. That is a 7% recorded growth, 4% organic growth over the fourth quarter of 2011. Operating earnings grew by 11% to EUR 135.3 million.
That corresponds to an EBIT margin of 21.5%, just shy of one percentage points improvement year-on-year. Earnings before taxes grew by 17% to EUR 124.8 million. Net earnings grew by 19% to EUR 101.1 million. This corresponds to an earnings per share of EUR 0.28 for the quarter. For the full year, slide seven, we can see that organic growth was 5% for the year, 6% for the core business. We ended net sales at EUR 2,380 million. Operating earnings, i.e., EBIT, came in at EUR 489.5 million, which corresponds to an EBIT margin of 20.6%. Earnings before taxes and non-recurring items amounted to EUR 441.3 million. That is a 19% growth year-on-year. Net earnings amounted to EUR 357.4 million. That is a 20% growth in net earnings year-on-year. Slide eight, cash flow.
Cash flow in the quarter from operations before tax interest and working capital and investments amounted to EUR 168.5 million. As you can see, our tax rate is now coming down again. In the fourth quarter, taxes paid were EUR 15.6 million versus EUR 20.3 million the previous year. For the full year, we paid EUR 57.2 million in tax, compared to EUR 71.1 million the previous year. We also see that we've amortized our net debt on the interest received and paid. We paid EUR 7.7 million in interest in the fourth quarter, as compared to EUR 13.7 million in the fourth quarter of 2011. We've reduced our interest net by EUR 10 million in paid interest between 2011 and 2012. Thus, cash flow from operations before changes in working capital amount to EUR 145.2 million. For the full year, it's EUR 100 million better than in 2011, EUR 494.4 million.
Changes in working capital, we actually had a positive change in working capital in the fourth quarter, while the full year also record a positive change. EUR 22.7 million in released capital in the quarter, as compared to negative EUR 1.2 for the fourth quarter in 2011. Thus cash flow from operations amount to EUR 168 million in the fourth quarter and EUR 497 million 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&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, U.S. Operating cash flow amounted to EUR 116.9 million versus EUR 70 million the previous year, Q4, and for the full year, EUR 325.5 million versus EUR 233.1.
We did not record any non-recurring cash flow in the year, why the full year number is the same as for operating cash flow. This is a 66% growth in the fourth quarter, so we're looking forward to a much-improved cash flow for the group. Slide nine, currency impact. Compared to the same period previous year in the fourth 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 EUR 3.2 million positive in the quarter and sales by EUR 11.8 million. For the full year, we have a positive impact of EUR 15.5 million and a positive impact on sales of EUR 94.4 million.
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 one percentage point to 8%, and Asia-Pacific, similar trend, and China, we can also see is adding one 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, first of all, if we look at the total line, that Middle East and Western Europe is growing again, 0%-8% growth from the Western European market. 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 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 a negative trend in the quarter for aerospace and defense. Within aerospace and defense, we had a strong growth trend from aerospace, but a very strong negative trend from U.S. defense. 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 2011 and 2012 per customer segment, where surveying lost one percentage point. Power and energy is now almost as large as surveying. Whilst aerospace and defense, this is primarily driven by demand from defense customers, lost one percentage point. Construction, static at 11%. Same goes for safety and security. Automotive grew its share from 9% to 10%. The others were flat. Moving on to slide 14, EMEA.
Market trends in EMEA is that customer demand improved in the fourth quarter over the third quarter. We saw increased activity levels in Western Europe in the engineering sector, primarily driven by automotive and aerospace customers. We saw continuous weak demand in Southern Europe, Northern Europe, and primarily Germany, started to improve again after reporting negative growth in the third quarter. 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. The stars in the quarter were really Russia, Turkey, and South Africa, showing significant growth. Slide 15, Americas. The Americas growth stemmed from the recovery in the U.S. construction sector, 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 Intergraph, despite the weak macro environment in Brazil that has affected the engineering sector in the fourth quarter. Metrology reports thus modest growth. 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 infrastructure-related businesses, as well as the automotive and aerospace, power and energy sector. Infrastructure pickup was recorded related to rail, subway, and monitoring, but not high-speed rail specifically. India, Korea, and Japan continues to report strong growth.
On slide 17, you can see an overview of the organic growth per geographic region since the fourth quarter of 2008. We can now see that all regions are above the Q4 of 2008 level. Segment information, slide 19. Measurement Technologies report net sales of EUR 613.6 million, which is a 5% organic growth in the quarter and 6% organic growth for the year. Operating earnings amount to EUR 139.6 million, driven by good mix. We generated an operating margin of 22.8%, that's a new record for this group in a quarter. The overall EBIT margin improvement in the quarter year-over-year was 1.1% and 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 zero growth. This has been the prevailing trend since the second quarter of 2011.
Technology is growing at an average rate of between 6% and 8% per quarter, highlighted by the green line. We move on to slide 21, gross margin for Measurement Technologies, annualized data. We came in at 56% gross margin for the full year, that is two percentage points above 2011. The EBIT margin, we record the quarterly data on slide 22. EBIT margin came in at a bit shy of 23% for the quarter. Just to remind you, the target for 2015 is 25%. Orders and product releases in the quarter. We turn to slide 24, we got a project to monitor the Alaskan Way Tunnel Project underneath Seattle, Washington State, U.S. This is a collaboration between Leica Geosystems and their international partner, Soldata.
We are going to monitor all downtown buildings in advance of the world's largest tunneling machine that is going to create a two-story tunnel underneath downtown Seattle. We move to slide 25, we also monitor Italy's infrastructure. This is a project in Sicily, which has a high hydrogeological risk, it's the Civil Protection Department that has installed an automatic continuous monitoring system to monitor for landslides. Slide 26. Geosystems also monitors the Jiangyin Yangtze River Bridge. This is purchased by the Yangtze River Waterway Administration, it's a system 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 Intergraph PP&M has brought out its first synergy product.
We combine a Leica TruView integrator with Intergraph PP&M SmartPlant Enterprise, we call it the first synergy collaboration, which will generate revenue between the two entities. Slide 29. Another synergy solution, this time between Geosystems and Intergraph SG&I. We can now create digital terrain models and significantly reduce the labor hours in this workflow by combining our cameras from Z-I and Leica Geosystems with Intergraph software. Slide 30. You can now log on to amazon.com and buy the first ever iPhone distance measuring app, where we've combined our Leica DISTO laser technology with an iPhone. The price is EUR 149. It's a must-have. Slide 31. Leica ScanStation 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, and this will be executed in 2013 and 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. The application is wind turbine machinery manufacturing. Slide 34. Intergraph continues to expand with its PP&M division in China. We got significant orders from Shandong Powers Petrochemical, Northeast Refining and Chemical, and Yantai Wanhua Polyurethane in the quarter. PP&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, Promon, OSX, and Sisgraph also set up and introduced its new marine excellence center in Rio de Janeiro, Brazil.
Other PP&M wins outside these two regions were Reliance in India, SCANA U.S.A., a natural gas utility, Eni Norge, 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&I, and SatEye Imaging. We also got our first order outside China, which was in Kuala Lumpur, Malaysia. Slide 38. China has started to use Intergraph GIS platform in seven 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&I won three orders worthwhile mentioning in the quarter with the Knox County, Tennessee Emergency Communications District that standardize on our technology.
Bell Canada will use our technology for fiber optical work solution, and Lolland Forsyning in Denmark selected Intergraph SG&I GIS platform as well. Slide 40. Going into 2013, 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 EdgeFrontier to video analyst products. Slide 42. NovAtel got a large order from Insitu, which is a leading unmanned aircraft manufacturer in North America. NAVTEQ also purchased NovAtel inertial navigation systems for their 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 EUR 0.17 to EUR 0.28 per share.
The dividend can be paid in EUR to shareholders who wish to receive it in this currency. Other shareholders will receive the dividend payment converted into SEK 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. We're satisfied with these levels and we believe that we can master a downturn, at the same time, return to our dividend policy of 25%-30% payout ratio per annum. 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 fourth quarter. I'm now ready to answer any questions I can answer.
Ladies and gentlemen, if you have a question for the speaker, please press 01 on your telephone keypad and you'll enter a queue. After announced, please ask your question. Our first question comes from Mr. Lars Brorson from DNB. Please go ahead, sir.
Thank you very much. Good morning, all. Lars Brorson here from DNB. A couple of questions, if I could, primarily on end markets. First of all, on Geosystems, Western Europe is the only region that's declining in your construction and surveying segments. If you're growing double digits outside of Western Europe or close to, that would suggest Western Europe is declining, we're seeing 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? Just on the product portfolio, I noted the Geospatial 2013 that you're rolling out. 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.
Geospatial 2013 is more directed to mapping and cadastre than pure surveying. We do have new products that will change the workflow for surveyors 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. It's correct that we've seen a double-digit negative growth in Western Europe. Our belief is that we've hit the sort of bottom and that it's not getting worse.
Was that a specific comment on 2013? You've obviously been declining in Western Europe in construction and surveying, or specifically in surveying at least, over the course of 2012. When do you think comps here become easy enough for you to be able to see growth in Western Europe, during the course of 2013? Hello?
Hello?
Yeah.
Can you hear me?
I can, yeah. 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. Hopefully we can achieve that going into 2013.
On Geosystems, just for North America, I was somewhat surprised to see that that's returning to growth or strong growth here in the U.S. after Trimble talked about spending deferrals in the surveying 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 2012?
We've seen good growth in the surveying segment in North America, and I can't really comment on market share development yet.
Finally, in Geosystems, with the JPY 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?
They have very little room. I shouldn't comment on their pricing policies, they have very little room to maneuver to reduce prices any further, if you've followed them over the years. 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 PP&M. 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&M, and how is your Sisgraph acquisition performing?
Well, we haven't heard about delays, we report a string of orders in the fourth quarter from the Brazilian offshore market. I think it's fair to say that there is a delay in the actual construction of projects, not in the design process where we are active.
That's useful. Thanks, Ola.
Thank you.
Our next question comes from Mr. Erik Golrang from ABG Sundal Collier. Please go ahead, sir.
Thank you. I have two questions. First of all, on growth for SG&I in 2013, could you remind us of how the comparisons developed during the year? You did some restructuring in Q1 last year, then growth picked up a bit in Q2, now in Q4 it was negative again. I guess the 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. We've used this year to restructure, to resize the cost structure, and introduce a new pricing policy. Going into 2013, we expect growth.
Secondly, on the competitive landscape for Intergraph. I guess since that acquisition, we've seen several industry tie-ups here, Autodesk and Topcon, Trimble and Tekla. Intergraph looks to be doing clearly better than peers. No sort of threats yet. Could you say something about how the competitive landscape has developed there, and if you still have a first-mover advantage in this area?
First of all, you have the traditional markets where SG&I and PP&M are active. SG&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. That hasn't changed much, really. When it comes to PP&M, I believe that we record good growth. 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 first 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 TruView and the PP&M SmartPlant solution is probably the first product out there combining Intergraph and Hexagon technologies.
Okay, thank you. One final, just remind us. That's the split Aerospace and Defense, 11% of your MT business. How much is defense out of that?
It's roughly half/half. Defense is shrinking alarmingly quick.
Okay. Thank you.
Thank you.
Our next question comes from Mr. Mikael Sandén 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 you see ahead, and if you can actually achieve growth despite this side declining.
Our largest application area for defense, we got two primary application areas for defense applications. It's the SG&I division that has something called government solutions, where we sell software and perform services for the U.S. defense bodies. 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 NovAtel. That is a growth market where we equip unmanned aerial vehicles and terrestrial systems. That will continue to grow. All in all, we still expect SG&I to be able to grow in 2013 in spite of this decline from the U.S. defense.
Okay, where would that growth come from?
It would come from.
About regions.
No. Public safety and security, primarily Europe and North America.
Just a quick question on R&D costs ahead. You have EUR 255 million, or had in 2012. How much of this was affecting the P&L, compared with the balance sheet impact, and how would this look like ahead? If you could say something about the mix and the split there.
Do you mean how much we capitalized?
Yeah.
Roughly 50%. Then we had depreciation of a bit more than EUR 120 million. We're not in balance yet. We have a slight positive impact, but it's diminishing.
Okay. When would you reach a balance? Will this be 2015 or 2016, in that time frame?
That's the plan. Our long-term plan is to lift growth margins to roughly 60%, i.e., four percentage points above where we landed this year. We do believe that OPEX, because of this, is going to grow by 1% net when we're in balance.
Okay.
That's how you reach 25%.
Okay. Thank you.
Thank you.
Our next question comes from Mr. Johan Dahl 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 two 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 had an effect, and going forward, we should look for a normal seasonal pattern in Q4? My third question is on new accounting rules for pensions.
If you could help us with any impact that could get on the P&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. That will have a positive impact of approximately one 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. As we launch new products and solutions, that should also accelerate growth. We have not factored in a recovery in Western Europe in our current plans. If we look at working capital, 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 fourth quarter.
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. 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. That you can factor in, that we're going to be this much lighter in working capital. Whether Q4 will always show these fantastic numbers, I wouldn't dare to say that. When it comes to the new accounting standard, the IAS 19, we believe that we will have a P&L impact of between EUR 4 million and EUR 5 million per annum. I'm not sure on the balance sheet impact, but from top of my head, I believe it was around EUR 25 million.
Okay, great. 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.
Okay, great. On follow-up on working capital, this 17%-18%, is this a level that you're happy with? 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. As we introduce more and more software-related products, this could improve further. Our pure software businesses are actually running with negative working capital.
Okay. 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.
I'm just thinking because it's been an issue for a while, and now it seems like you have sorted this out. 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 question comes from Mr. Björn Enarson 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 Djurberg 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. The problem is that I can't give you where to start. Let's say we're not talking about EUR tens of millions. We're talking about EUR single million in this quarter.
Yeah. Do you see that progressing sort of quarterly? You have stated before, of course, that you see significant impact towards the second half of 2013, and I assume that that hasn't changed.
No.
No. Okay, good. Can I just ask you when it comes to U.S. Defense, you said -5 when it comes to SG&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 two years. Is that a better exposure in general, or is that a figure that you recognized?
I think that's a good ballpark number, we've suffered most of it now. We still could continue to shrink, if you compare it to the pro forma situation when we acquired Intergraph to the 2012 situation, we're not down by 20, but we're not far off.
Okay.
Maybe most of the pain has been delivered.
Okay. 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 million for 2013, including this building that is going to cost almost $70 million, EUR 50 million. What we don't know, and what we can't tell you today is 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. Asad 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 fourth quarter? You mentioned that you still have the confidence to deliver a strong fourth quarter in 2013 around revenue synergies. 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 we'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 PP&M. Right now, we have some eight beta customers helping us develop these solutions. As we are satisfied with the results, we can then increase that group of customers that are sort of early adopters fairly quickly. 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 millions of dollars per installation.
If you look at the growth numbers, you have delivered around 5%-6% growth for the last few quarters. Now, as the SG&I headwinds subside going into 2013 and going forward and an extra kicker comes from revenue synergies, are we going to move from the 5%-6% revenue range to more in the 7%-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 Fridén from Erik Penser Bank. Please go ahead, sir.
Hi, Ola. Thank you for taking my question. I don't know if you mentioned this already, but regarding the margin improvement in SG&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. Then we've combined that with a new pricing structure when quoting projects.
Okay, thank you. 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 2030 over 2012.
Okay, thank you. My second question, it's regarding Metrology and the software and service content as a percentage of sales, I believe is around 45%. Could you just give some granularity regarding how that has developed during the past couple of years? 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 to be on regarding software and services percentage of sale? I'm just trying to find 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. 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 install base is still growing.
Okay. Thank you, Ola.
Thank you.
I remind you, if you have a question for the speaker, you have to press 01 on your telephone keypad. That is zero one. We have a question from Max Fridén from Erik Penser Bank. Please go ahead, sir.
Yes, this is Max Fridén again. Just one other question regarding M&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. Regarding the other business, how does that develop, divesting that as I believe you mentioned before?
It develops