CMD 2012

Jun 5, 2012

Slides

Good afternoon, everyone. We need to talk about dress code. I was instructed to go and change and I just see dark suits there. But you've taken your ties off and I've heard that's very Swedish. All right. We're going to talk about an update on our financial targets. So let's recap what we said last year in Orlando. We talked about base case and a more sort of negative case that we call the ugly fish scenario. The base case was based on global growth of roughly 4.5% GDP. We also talked about this ugly fish scenario where we would have a recession about now. And if you read the news that might even happen. But still we presented a financial plan that's at €3,500,000,000 in sales by 2015 and increased the EBIT margin to 25%. When we concluded that, we basically talked about the synergy projects and how we're going to enhance margins by bringing more profit rich projects through the P and L statement. What happened in 2011 since we left Orlando? Well, we saw the debt crisis getting worse in Europe. For Hexagon specifically, we were hurt and hit by not a high speed train, but the high speed train segment collapsed. We had roughly an annualized sales of €50,000,000 in China at the peak and it almost disappeared overnight. Another thing affecting the Hexagon Group is the Swiss franc. Now we don't have much sales in Swiss franc, but we have a manufacturing base and even more importantly an R and D base in Switzerland. And as the Swiss franc appreciates, of course, it becomes more expensive putting pressure on our EBIT margins. But we also had positive news. There is a boom. Currently, there is a boom in the global automotive industry. The energy sector is growing very fast and we do see a recovery here in America. So all in all, we had organic growth of 12% recorded growth of 46% consolidating into graph our operating cash flow increased by 30 5%. And MT, our core business recorded an EBIT margin of 21%. So what does it look like right now standing here early June? Well Q1 we reported organic growth of 6%. Another record quarter in metrology fueled by what Norve talked about this morning, the expanding automotive industry and also a surge in aerospace investments. Geosystems, we talked about high speed rail, which had a negative impact on geosystems growth in Q1. PP and M, strong double digit growth basically on fire. And then SD and I reports negative growth for the 3rd consecutive quarter. And this has to do with delays in projects plus our restructuring program. Still we reported a 21% EBIT margin in our core business in the Q1. This is a quite interesting slide actually. Here we've compared Q1, 2008 as a reference to Q1, 2012. And it's done in an organic growth structure. So in 2,008, sales that we recorded in 2,008 per region is 100%. Now as you can see from this picture, Asia has continued to grow for Hexagon throughout the financial crisis and is actually at peak level. We see Americas recovering from a very low trough in the Q1 of 2009 And we see how difficult it is to get to recovery in EMEA. EMEA is really now sort of leveling out at 85% of the 8.11. We look at the business by application area. We have a similar situation. You see the big negative development in the Q1 of 2,000 and And then we see the very, very strong recovery thereafter. And if we look at metrology, no one anticipated that. I remember when we discussed automotive in 2,000 and automotive in 2,009 and everybody said it's a dead industry. And now it's live and kicking and expanding and investing again. You see technology is really consolidated as of the Q4 because that's the Q1 when we have comparable numbers for the previous year. So let's talk a bit about currencies. It's true that Hexagon has a benefit on the top line as the U. S. Dollar strengthens against the euro or the Chinese renminbi strengthens against the euro. But then we have the €300,000,000 of costs, fixed costs and variable costs in Switzerland that are affected by the Swiss franc euro relationship. And it's important to remember that as we forecast the quarterly statement that we still have a negative impact even though the year on year effect might disappear as of the Q2. Because if you look at this graph, it was roughly around summertime. I think this big dip that's August. And from there on, it's sort of stabilized around 120. So we can record a positive impact on the top line and still have a negative impact on the bottom line given the piece of information good to remember. The EBIT margin has continued to improve. So we see the financial crisis in 2009 where we dropped down to 15%, but we fairly quickly recovered and reached our target of a 20% EBIT margin last year. And this is a constant improvement and it stems from mix and moving the company towards solutions and software content. And I think that came across fairly clear in the keynote President earlier today. Some other housekeeping that is good to know. This is the situation when it comes to our balance sheet. So you see the percentages of our gross debt to the left in this table. 40% is the term loan with the majority in 2015 and so forth. And then you see the interest rate that we're paying on that loan. So the blended interest rate right now is 2.7 percent. And the reason why we're being able to bring down our financing costs by 1 percentage point compared to this period last year is this commercial paper program, which has been very successful for us indeed. In average, the maturity for our debt is 2015. And our borrowings currently are 70% in euro, 15% in Swiss francs, which are pegged to the euro. So to simplify things, you could say 85% euro denominated borrowing and then another 15 percent in U. S. Dollars. 73% of our debt is bank loans and 27% is this commercial paper program. So already now even though it's fairly recently we launched it, it's 25% of our borrowers. Cash conversion. Our average cash conversion since 2007 is 82%. That's a fairly good ratio given that in average we've grown by 12% 13% organic growth over this period. I think as we are expanding 80%, 90% cash expansion and the situation where we expand investments quicker than depreciation. Cash flow seasonality is important to remember. First half week we pay out the dividend this quarter and so forth. 2nd half very strong. Working capital to sales. Here you can see the net sales which are the sort of light blue bars and the dark blue bars are the working capital. And then you have the green line, which is the ratio working capital to sales rolling basis. We had a peak, a hump in 2,009 and that had all to do with the recession. In the Q3 of 2008, our organic growth was 17%. In the Q4, it was minus 7%. And in the Q1, it was minus 22. How do you pull the brakes on a thing like that? And that's basically what we see here. But I think we managed to mitigate it fairly good. And now we're back to actually a lower situation than pre crisis level. I think this is a good target somewhere 17% working capital to sales. Net debt to EBITDA, that's something people discuss with us quite frequently. This is our history when it comes to net debt to EBITDA. The red line represents the upper threshold 3.5 times And the lower green line represents our target that we've set for of this year. And you basically see that we have spikes when we do major acquisitions. But then fairly quickly we amortize our net debt position. And that's what we're going to do this time again. Business update, 2nd quarter. We basically see the similar trends as we saw in the Q1. We do see there is a general slowdown sort of in the weighting in the global economy, but we haven't really seen it in the Q2 and we're actually in mid June right now. We expect all major geographic regions to grow in the second quarter. We expect recover in this quarter compared to last quarter where we had no growth. The negative sales trend in SG and I is expected to stop. And the currency effect is going to be slightly more positive on the top line compared to the first quarter where it was 3%. We'll have a similar negative impact on the bottom line. We recorded minus 1 €800,000 of currency headwind on the EBIT margin last quarter. And you should expect a similar situation in the Q2. If we look at this picture sort of snapshot, this is what it looks like per region and per say customer segment in the Q1. The things that have changed for the better are really standing here in June. North America Public Safety, We have several tenders and we booked large orders for public safety going into the Q2. So it's definitely a much better situation for public safety in North America compared to 6 months ago. The other area that is improving gradually is not big swings. And we haven't factored in this what you've read about high speed rail, but we do see stabilization for geosystem surveying in China. It's not shrinking anymore. So let's update you on the financial plan that we launched about this time last year. Our history and financial plan is described here. This is basically how Hexagon has developed. You see the dark blue bars that's other businesses outside measurement technologies. The light blue on top that's the measurement technology business. We started this business in 2,001. It grew in 2002 through 2003. We continued to outgrow the other businesses in Hexagon. And by 2,008, we paid out a company called HexPol today as an extraordinary dividend to our shareholders. And then we see the acquisition of Intergraph where it really takes off. And the new target, the old plan was called 20,2011. That was when we recorded our numbers in Swedish kronor. The new plan is set in euros where we want to grow from roughly 2 point €1,000,000,000 to €3,500,000,000 over the next coming 4 years. We want to improve our EBIT margin from 21% last year to 25% by 2015. So that's basically the overview and that's how we left it. We talked about an ugly fish scenario. We talked about a base case scenario. And the big difference is really the organic growth in the ugly fish scenario compared to the base case scenario. And organic growth of 12% last year and 6% in the first quarter points that the base case scenario being still valid and that's what we believe at this point in time. However, we read the same news that you do. And the more people that read negative news, the closer you are to a downside in terms of economic output. So is Europe in trouble? China slowing down? Just taking a breather? U. S. Continue this patchy recovery. That's basically what we've seen over the past few weeks. So to summarize, we believe we're still on the base case for this plan EUR 35,000,000,000 sorry EUR 3,500,000,000 in sales, 25 percent EBIT margin. Now let's dissect this plan. Let's look at its components and how they interrelate. Well, if we look at the growth component and the target of €3,500,000,000 in sales, We obviously want to grow our current core business in its current structure. But we have new initiatives and I think you can appreciate that going to the tech center and seeing our divisional precedent presentations earlier on today. We're going to continue to do acquisitions. So those are the 3 growth components I want to discuss with you today. If we look at the margin target, we want to improve the EBIT margin by 4%. Now it's going to come from improved mix. It's going to come from increased gross margins and that's obviously because of the improved mix. And then a tiny portion, but still maybe a percentage point out of the 4% is operational leverage. But we don't factor in too much operational leverage, because you need to remember when you compare us to other companies you might follow that we have a fairly small fixed cost base in our manufacturing. We don't really have manufacturing as such. We have 1,000 blue collars out of 13,000 employees. That tells you the story. And that means that as volumes go down or go up, we don't get economies of scale or significant economies of scale in our gross margin. In order to lift our gross margin, we need to constantly do what we've been talking about all day and that is develop new applications, develop new products, new things to sell that have a richer gross margin. So look at target number 1 organic growth in the core business. And we'll start and we'll dissect it by division. So if we start with Geosystems, these are basically sort of a 5 minute description of the business. Wide array of measurement and protection of infrastructure. We address surveying public sector customers, construction, civil engineering, mining, energy, agriculture and defense. Key competitors in this segment would be Trimble Navigation and Topcon Positioning. Topcon is listed in Japan, Trimble on NASDAQ here in United States. Growth indicators, construction and infrastructure activity is not 100% correlated to it, but I think it's a fairly good estimation to how Geosystems is faring. Historically, if we go back sort of 15 years, Geosystems has enjoyed an organic growth of roughly 8% per annum. EBIT margin is today around group average, but has historically been higher. But we're suffering from the effects of the China high speed rate and the Swiss franc appreciation. I think I'll look at that bar at the bottom. I think that's a good description on software services, recurring revenues, direct sales and so forth. Growth profile for Geosystems 50% of the current portfolio is growing below 8 percent per annum, 25% significantly above 8% per annum and roughly 25% of the product portfolio around 8% growth. And if we look at the region, this is our most Eurocentric business. Europe represents roughly 50% of the total business North and Central Europe 31% Southern Europe 14% and Eastern Europe 4%. Now how we record this, we actually put France in Southern Europe. So remember that when we start discussing pigs. France is not a pig. Asia Pacific 25% and America 17%. Looking at the various regions, we do see a recovery here in the United States. You can look at those bars. That's the predicted growth per construction segment here in North America. So from 2011 and we're at very low levels historically in 2011, We expect growth in construction in North America this year to accelerate to be accelerated in 2013. We've also put in a Brazilian slide here to the right, planned government infrastructure investments in Brazil. And this is quite interesting because if you look at Hexagon as such infrastructure is interesting for intergraph and geosystems. Mining, same thing. Transportation is interesting for metrology, oil and gas, both geosystems and into graph and energy, into graph and geosystems. So we should be able to large chunk of the €2,000,000,000,000 let's say €1,500,000,000 China bottoming out. This is a projection and forecast where we expect the surveying business to go. So we've leveled out on low levels. You can see where we're coming from. And we expect things to look a bit brighter as we progress throughout the year. And then you probably picked up this late news that China Railway Authority has received a credit of well BRL 2,000,000,000. It's roughly no, BRL 2,000,000,000,000, it's BRL 2,000,000,000,000. That's a lot of money. I can only tell you that to resume infrastructure projects. We haven't seen anything from this. And you shouldn't expect us to see it because it takes time for government money to trickle down into the system where it's deployed. 2 Speed Europe. Geosystems see Northern Europe grow at low single digit growth rates. Southern Europe, well, we should all expect that it's strong negative growth. Eastern Europe is doing very well indeed. So all in all, 0% to 8% growth in Europe. And it's becoming increasingly accentuated that we really have 2 different regions in Europe. Moving on to metrology. Metrology, what does it look like the business? Well, look at the bottom again, 50% software and services compared to a much lower portion in geosystems. Recurring revenue significantly larger because that's the way we sell. We sell the system, we install it And then we sell maintenance over the life of the system. We do most of our business is direct sales. And you can see this is the division with the largest portion emerging market Complete range of stationary and portable industrial metrology systems. We have the industry's strongest service organization. And this is important when you deal with large multinationals that they can expect to be serviced wherever they do business. And Norbert talked about that in his speech. Industries, automotive, Aerospace, Electronics, Design, Energy and Medtech. Key competitors: Kansai of Germany Faroe that is listed here and Mitutoyo a Japanese competitor. Trying to find growth indicators for metrology. Automotive growth is always a good correlation to growth. Aerospace production is going to be increasingly important as we go forward. Industrial CapEx is important as well. Historically, metrology has reported an organic growth of around 6%. We'll see where that will land in the future because there is a tendency throughout the 10 year tenure that we've had it that it's increased a bit. It seems that the large multinationals are spending more and more money on metrology equipment. EBIT margin is still below group average, but it's improving consistently. If we look at the growth profile 50% of Metrology's business is growing above 8%, 25% around 8% and 25% below 8% growth. And here you really see how multinational metrology really is. 35% EMEA, 35% Asia Pact, 30% Americas. And within those 35% Asia Pact, 25% is China. General Manufacturing is 30 5% of sales Aerospace 25% and Automotive 40%. Now this is numbers given by the global automotive. It's PricewaterhouseCoopers doing something called auto AutoFax. And it's basically they're asking all the major automotive manufacturers what their plans are and how they view the market. And it's usually fairly consistent with the outcome. What you can see here is that total global capacity is expected to grow by 4.9%. Total global production is expected to grow by 6.3%. And what's consistently good for this industry for us being suppliers is they'll always run with overcapacity and they don't address it. But what's happening within this growth is that emerging markets is growing much more rapidly than the mature markets. As a matter of fact, we're going to see a decline in sales in EMEA this year, fairly flattish development in North America, but growth in China, Brazil and so forth for automotive production. What's happening in Aerospace? Well, it's a huge transition right now. At this moment in time, we see capacity expansion in the Aerospace industry like we've never seen before. To simplify things, you can say we've got 20,000 commercial aircraft flying the globe today, 6,000 out of those 20,000 aircraft are going to be retired within the next 20 years. And we're going to replace them with new aircraft, but we're also going to grow the total fleet to 30,000, 40000 units over the next 20 years. So it's a significant expansion for the aerospace manufacturers. It's good news for Boeing and Airbus, but at the same time competition is increasing in this segment. You got Embraer, you got Bombardier and you got commercial aircraft in these segments in the commercial aircraft in these segments in the next coming few years. The good news though is Hex agon is doing business with all of them. Intergraph PP and M. We look at Intergraph PP and M business model, leading global provider. And I know Gerhard would be proud if I said the leading global provider of enterprise engineering and construction Kingdom and BENTLEY Systems, a U. S. Privately held company. The only public peer is really AVEVA. Growth indicators, how do you follow-up on this industry? Oil price is of course one fairly good indication. CapEx for EPCs, owner operator spending as well. Historically, PP and M has reported an organic growth above 15% for the past 5 years. EBIT margin is significantly above group average. And you can see it's 100% software and services business, significant recurring revenue, almost 100% direct sales and fairly big chunk in emerging markets. What could that be? That's roughly 45% of its sales is growing above 8% and 55% of its business is growing below 8%. And we're in a generation shift right now. It's important to remember that the old legacy product still has a much more larger installed base than the new SmartPlan 3 d product that is eating market share into the old legacy product. Americas 35% EMEA 39% Asia Pac 26%. And the dominating segment for this business is oil and gas followed by chemical and petrochemical applications and general power. It could be anything from nuclear and so forth. Growth drivers. What are the growth drivers? That's an iPhone. We like that. We measure the glass. So you're excused. We said oil price. Oil price is probably the best indicator how PP and M is going to fare. And from the oil price, you can basically look at the EPC activity. And from that, we can draw conclusions on how PP and N market is going to grow. And these are selected owner operator annual CapEx that the PP and M division follows. And this is the current outlook up outlook up till 2013. And then we look at the backlog from the select number of EPCs that we do business with. So it's continuing to grow. PP and M Industry Trends. We're happy to report 5% market share growth between 2,008 when we saw SmartPlan 3 d really taking off last year. That's a significant number of 5% market share gain over the past few years. Intergraph SG and I. Let's look at the traits of Intergraph SG and I provides incident management and geospatial software solution to help customers manage, enhance and protect life, infrastructure and property. This is probably the most difficult business to understand if you're a layman, but it's not that difficult actually. Industries, public safety, defense and intelligence, utilities and communications companies. For utilities and communications companies, for example, outage management is one of the more important products we have. Key competitors is a privately held company called Esri. And then we compete primarily with the in house solutions at our customers. Growth indicators, what should we look for here? Well, security concerns, tension in societies, terrorist threats and so forth, need for outage analysis and geopositioning of large events like Olympics, World Cup and so forth. And that's why we believe that Brazil is having a brilliant future because they have both World Cup and the Olympics in the next 4 years. Historically, SG and I has reported an organic growth of roughly 5% or slightly below 5% per annum. EBIT margin is below group average. We launched a restructuring program in the Q1 and we're addressing that issue. Software and Services is obviously the significant product in this business. Recurring revenues roughly 50% direct sales well close to 90% or slightly above 90%. This is the business where we have the smallest exposure to emerging markets. But it also gives us the largest potential to grow in emerging markets like Brazil, China and India for the next coming few years. Growth profile, some 30% above 8%, 50%, 45% below 8% and then negative growth, which currently would be sales to the U. S. Defense and Federal Solutions, roughly 15% of our total pie. This is a very American focused business. So Americas itself is 32%. IDS which stands for Intergraph Government Solutions I. E. This business that is ring fenced where no one is allowed except for our security cleared employees, 25% of our current business APAC 11% EMEA 32%. Industry trends. Public safety is the growth prospects in Public Safety, so above 8% growth per annum in Public Safety. Utilities and Communication sort of average growth 4%, 5% per annum. Defense and Intelligence well since we're connected to the U. S. Defense primarily we see negative growth for the next coming few years in that segment. Government and Transportation single digit growth. Federal Solutions is the low margin business we'd like to reduce. So this is intentionally. If we look at that business, it's about running systems for public bodies. So we address currently we have 5 mega cities as customers. We've got 44 large cities and 68 medium sized cities, 112 small cities. And this is how we look upon public safety to address mega cities, take the various emergency and response units in those cities, work our way through the large cities and so forth. In security, it's primarily airport, public transportation, public buildings, public areas where you need protection and well, intelligent systems. For Utilities and Communications, we talked about outage management. We've got some 30 telecoms today where we run their infrastructure. We got some 335 local utilities. Government and Transportation is the U. S. Business, but we also have business in Europe with German Rail, Italian Rail and Swiss Rail. When it comes to Defense and Intelligence, you can see it's basically United States and NATO. Novotel, which also is reported into technology. Novotel is a world leading supplier of receivers, casings and antennas and so called middleware for GNSS systems. And for you that haven't heard that acronym before, it stands for Global Navigation Satellite System. And GPS is only the U. S. Satellite. Then we got GLONASS. We got the India. And we're basically being able to receive signals from all of those systems. Industries, surveying, marine, and defense. Key competitor in this area would be Trimble Navigation as well. Growth indicators are very difficult because it's project specific. You can't really say that we're growing because of 1 industry trend. We're basically responsible for our own growth in developing new applications. I think for those of you who were with us last year in Orlando, you remember gadget, the new product that we launched back then and it's doing very well in the market. Novotel has reported double digit organic growth historically and the EBIT margin is roughly at group average. Very small portion emerging markets, very much direct sales to OEMs. So if we conclude everything we've been through, geosystems seem to have bottomed out in China and Europe, knock on wood. No signs of slowdown in Americas. Mix of product supports the theory of 8 percent long term growth, 1 third of its sales in emerging markets. And we can stabilize and improve as the Swiss franc effect wears off. Metrology benefiting from very strong end markets at this moment, automotive and Aerospace. Historical average of 6%. Organic growth might be too low. Maybe it's still too early, but it seems that some of these end markets are growing much faster. Well positioned with 4% to 5% of sales in emerging markets And we expect margins to improve. It's been improving since 2,001 and we believe we can continue to improve them. If we look at the intergraph PP and M benefiting from strong demand from its end markets, smart plant is really taking market share gaining traction with the EPCs and owner operators. 1 third of its sales in emerging markets, well, I think that's an understatement, but it's a satisfactory level of EBIT margins that we have in that business. Intergraph SG and I has only really started. Margin is expected to improve. So we summarize this in a table. You could say historic growth, 2011 growth and long term growth. We expect Geosystems to eventually come back to its long term trend line. Metrology historic growth 6%, grew by 26% organic growth last year. You should expect a slowdown from the very, very rapid growth that we see at the moment in metrology. PP and M historic growth around 15%. We think it can't last in the next few years maybe 10% is a good average. SG and I negative growth in 2011, but should return to its long term trend. And Novotel has grown above 10% historically, 12% in 2011 and we expect it to grow above 10% during this planning period as well. So when you weigh everything in, this is basically pointing at 8% organic growth as a reason and target for the core business. Target number 2 or component number 2 to reach €3,500,000,000 in sales M and A. Technology and Emerging Market Focus. We either want to buy technologies that we do not possess and that we need in order to deliver our comprehensive solutions or we need distribution in emerging markets. Base case scenario currently includes several small acquisitions and a few midsized but nothing large for between €100,000,000 €30,000,000 down to tiny companies, €2,000,000, €3,000,000 companies. Other operations are going to be divested during this period. And we're not expecting book losses when we do that. We primarily are go or we are going to finance acquisitions via our own cash flow. We have not planned to do a rights issue to fund this growth. So it's going to be generated from internal funds. The net debt to EBITA target is set at 2.5% by the Q4 of 2012. And in some simulations, we could even bring that down further even though we'll do heavy investments in organic growth as well as this M and A. In a recession scenario, we'd be prepared to do more bold M and A. Like if you think about it, what we did with Intergraph was we analyzed them over a couple of years and then we had the dip in 2009. And already in the Q1 of 2010, we were ready to act. And I don't think we would have gotten into graph for the price we actually paid for them back then right now. Target number yes, sorry, synergy projects, that's the 3rd component to reach €3,500,000,000 We're currently running 7 group projects. The way we operate is we have a central R and D that's developed concept and then we allocate these projects to the divisions that we have inside Hexagon. And right now, we're in the process of allocating these projects so that we get the project owner. But you've seen the dam monitoring projects that we're running in China currently. It's got huge potential and it's a big market. We have a customer that is willing and has money to spend on their monitoring. Virtual assembly, both Norbert touched upon it and we touched upon it in the PPNM presentation earlier today to bring metrology technology together with CAD design. That's the way for the future to really improve all sorts of industries from aerospace, automotive to oil and gas and power generation. We have a small development. This is just a funny thing we've done. We've done an app for an iPhone where you can dehaze or take away clouds when you take pictures with your iPhone. And eventually you're going to be able to download that from the app store. But the commercial application for this is really satellite imagery. Maybe so that currently the operator can only sell maybe 30% of that picture. And with this technology you can sell up to 70% of that picture. And that's a huge yield improvement for the satellite industry. Precision Agriculture is the other project we can talk about and we showed a few examples what we're doing there earlier today. I think if you go to the synergy area in the tech center, you're going to see this dam monitoring project. And we got some eager and willing people there that will tell you all about the benefits having a comprehensive dam monitoring system. The other three projects are in sensitive stages right now. And it's a bit sad that we can't show them to you today, but we're basically filing for patents and so on. And if we showed them, it'd be gone. And that would be a shame. We believe that from these 7 projects, we're going to reap synergies and revenue of roughly €100,000,000 to €200,000,000 by 2015. So expect revenues to trickle in as of the Q2 2013 and grow to €100,000,000 to €200,000,000 by 2015. Margins from these projects are significantly above group average. And this is another way how we can leverage and improve our EBIT margin for the group. So if we summarize sales targets, basically we put sales of €2,100,000,000 in MT last year. We expect that to grow realistically by 8 percent per annum, which would take us to €2,900,000,000 by 2015. Revenue synergies organic growth another €100,000,000 to €200,000,000 depending on how successful we are. So we could grow the organic business to €3,000,000,000 €3,100,000,000 with these initiatives that we presented to you earlier today. Sales and M and A add €200,000,000 to €600,000,000 depending on how the market fares and how things develop. And that's how we reach our €3,500,000,000 Now let's look at the EBIT margin expansion for a while. We've talked about the growth and we've talked about the EBIT where it is right now. So Geosystems at group level, metrology below, PPNM above, SG and I below and Novotel at group level. And we recorded an EBIT of 21% last year. The trend the current trend right now is Geosystems is slowly recovering. Metrologist trend is up. PP and M's trend fairly stable. SG and I is recovering. And Novotel is improving as well. So we believe that in this scenario with organic growth of 8% per annum, we should be able to boost this above 21% by 2015. So if we summarize EBIT margin, the core business will be above 21% 4 years from now or 3 years from now actually. M and A will be below the group average. We'd say above 15%, but below the 20 5% that we're aiming at. So they will be dilutive. But the EBIT margin from these revenue synergy projects are quite rich and they're going to bring us back to the 25%. So that's how the math works. Foundry Capital Markets Day what we've talked about and described is year 1 in our new financial plan, we're basically growing in line with the base case scenario. 8% long term organic growth is supported by the underlying business trends that we do see for the next coming 3 years. Emphasis on organic growth will be to generate substantial free cash flow so that we can meet covenants, finance relatively large acquisitions, finance our own internal development without raising new capital. Revenue synergy projects are starting to materialize and we should see meaningful numbers from them by the second half next year. And that's it. Thank you, ladies and gentlemen, for listening. And I expect that we're sorry,