Earnings Call: Q4 2020

Feb 3, 2021

Thank you very much, and welcome everyone to this year end report for 2020. And if we start at Slide number 4, overview of the Q4 2020. As we can see to the right, net sales amounted to EUR 1,059,000,000 in 20 18. And we grew through M and A 3% this quarter. But we had 5% negative FX ex headwind in this quarter, and we grew organically by 1%, thus recording a minus 1% recorded growth of EUR 1,444,000,000. Within that growth, we saw geospatial growing by 7% organic growth. And we saw strong development across all business units within Geosystems fueled by Construction and Infrastructure Demand. Safety and Infrastructure products, we saw solid demand in the quarter. Industrial Enterprise Solutions recorded minus 5% organic growth. We saw sequential improvement in Manufacturing Intelligence, and we had a positive book to bill in the quarter. PP and M faced tough comparison quarter and challenges from the oil and gas markets. China recorded 25% organic growth. And all in all, this comes down to an EBIT of EUR 287,000,000 which is EUR 10,000,000 more than the same period of last year or a 4% growth. EBIT margin, 28% versus 26% in at Q4 of 2019. Now if we go to Slide 5, that is just a reminder that the 4th Quarter is our strongest quarter in a year, and it was the pattern repeated itself in 2020 as well. Moving on to Slide 6, the P and L statement. Operating net sales amount to €1,44,000,000,000 The revenue adjustment is the so called revenue haircut that we have to do for acquired deferred revenue. Operating earnings EBIT1 amounted to EUR 287,200,000 and earnings before taxes, excluding nonrecurring items, roughly EUR 280,000,000. Slide 7 is the full year, where we end the year at at EUR 3,800,000,000 with an EBIT of EUR 956,000,000. Now cash flow was a bit of a surprise for us as well in the quarter, super strong cash cash conversion of 149% in the 4th quarter. And we had Good performance in cash flow from operations before changes in working capital, which increased by EUR 14,000,000 to EUR 334,000,000. But now look at the change in working capital where we have EUR 144,500,000 in capital release in 1 quarter, pushing cash flow from operations to €479,000,000 in the quarter. And all in all, a very strong cash flow. This has to do with good management in accounts receivable, where we traditionally have a very accentuated hockey stick in invoicing, where we and it was a lot in the last 2 weeks of the quarter. This time around though, we had more even invoicing in the Q4, which enabled us to collect cash. At the same time, we reduced our inventories, and we received large order that we booked in deferred revenues that pushed up liabilities giving us a positive cash flow. Now Moving on to Slide 9, effects of FX movements. We have a very strong negative see headwind in the quarter, primarily stemming from the devaluation of the U. S. Dollar and the Chinese renminbi against the euro. But also, we saw negative impacts on the cost side from the Swiss franc. And that means that we have a negative effect of €50,000,000 on sales, but €27,000,000 in earnings. So the incremental margin on the FX impact is substantial. If we now neutralize for FX, we would have reached EUR 1,094,000,000 in sales and EUR 314,000,000 in earnings, thus bringing the EBIT margin to 29% or almost 3% better than responding quarter of 2019. Moving on to Slide 10, coming back to working capital. This is just a visualization, a graph, working capital to sales in the 4th quarter, it amounted to 5.3%. Can't promise that we can keep it at this level. We're probably going to see a little bounce back in Q1, but the long term trend is definitely there. Market Development, we move to Slide 12. The geographic sales mix for the Hexagon Group in the 4th quarter, North America 29% versus 30 2% in Q4 of 2019. And China increased to 15% versus 12%. The rest is the same. And let's move on to Slide 13, an overview per geographic region where we see strong growth, 25% in China and 18% in South America, organic growth in the quarter. See good growth in Asia, excluding China and in Eastern Europe, Middle East and Africa. And Western Europe and North America are really the regions that still territory in the Q4. For your reference on Slide 14, you have the organic growth trend per business segment and geographic region. And let's move on to the various regions starting by Looking at EMEA on Slide 15. Western Europe record minus 5% organic growth. It's driven by 2 countries, and it's Germany and France, where we saw a decline in Automotive and Aerospace and in Western Europe. Russia and Middle East recorded high single digit organic growth. And We move to slide 16, Americas. North America, minus 6% organic growth, Similar pattern as we saw in Western Europe, weakness in the Manufacturing and Power and Energy segments. Defense, however, and agriculture recorded robust growth in the region. South America, double digit organic growth, where Brazil was the engine for growth in the region. Strong development also in mining, surveying and public safety. Finally, Asia on Slide 17. China recorded a record 25% organic growth in the quarter. Broad based recovery in both manufacturing, infrastructure, construction And even our oil and gas segment grew in China in the quarter. South Korea and Japan, Strong single digit growth fueled by demand in mapping and autonomous vehicle Solutions, Southeast Asia and India had a weak quarter. Reporting segments, if we start with Geospatial Enterprise Solutions on Slide 19. Geospatial Enterprise Solutions report an organic growth 11%, driven by Geosystems 8% organic growth, where we saw strong development across all business units. Mining segment continued to record solid growth, actions from new products in the quarter. SI, 5% organic growth, and it was supported by the solid development we in public safety and continued traction for our new OnCall software platform. Autonomy and Positioning, 11% organic growth, positively impacted by demand from both defense and agricultural sectors was slight adversely impacted by demand automotive and marine. Sales amounted to EUR 535,000,000, up from EUR 514,900,000 a year ago. EBIT margin improved by 3% to 29.2% versus 26.1% previous year. Moving to Industrial Enterprise Solutions on Slide 20, minus 5% organic growth, But within Industrial Enterprise Solutions, we saw Mi sequentially improve to minus 2% organic growth and a positive book to bill in the quarter. It was supported by a broad based recovery in China, which is the single largest market for Mi and software growth, but hampered by the continued weakness we saw in the quarter for Aerospace and Automotive in Europe and Americas. PP and M minus 12 percent organic growth. Two explanations to that negative growth. We have tough comparisons against Q4 of 2019 that was an all time high, but so a challenging oil and gas market in the Q4, we saw continued solid growth for our AEC portfolio in the quarter. Bookings were positive, and we expect a continuing improvement for segment going into the Q1. Sales amounted to EUR 509,000,000 versus EUR 544,000,000 a year ago. And EBIT margin, in spite of the volume drop, stayed at 27%, posting an EBIT of EUR 138,000,000 Moving on to Slide Dione, our gross margin was 63% for the past 12 months. In the 4th quarter, it was 64%. Slide 22, our rolling twelve Months EBIT margin is 25%, same as a year ago, but with a dip in the first and a record EBIT margin in the second half of twenty twenty. M and A orders some product releases. If we move to Slide 24, we acquired OxBlue, which is a leader in construction and Visualization Technologies. And Oxplo is going to be integrated in our smart build product offering. It will strengthen our capabilities to serve the rapidly evolving AEC, digital ecosystem. And I think it's going to be a great acquisition. Slide 25. We also acquired PaaS Global LLC in the 4th quarter. Now this is a new cybersecurity focused business for Process Industries that Hexagon's PPNM division will provide to its customer base. And it opens up new sales opportunities, not just for PPNM, but also for our Manufacturing Intelligence and Mining divisions. PAS serves some 300 plus customers across 70 countries today. Slide 26, smart manufacturing for any machining application, we also acquired DP Technology, which is a leading developer and supplier of of so called Computer Aided Manufacturing or CAM technology in the quarter. It's based in California, And the flagship product is called Esprit, which is a solution for almost any machining application. If we combine DEP technology With our production software portfolio, we get a very strong position in the market, And this will also enhance and speed up our so called smart manufacturing project. Slide 27, semi automatic machine control solution that reduce fatigue and operational costs. We're launching MC1 software for our Leica machine control solutions for excavators. And it's going to bring a lot of benefit to the operator. He will be able or she will be able to work with less fatigue, less over digging and reduced operational costs. Slide 28, We participate in deploying robot taxis field tests in Tokyo. It's a Japanese startup called Tier 4 that is using our PacMod drive by wire system testing robotic taxes in downtown Tokyo, very exciting project. Slide 29, we're also launching a revolutionary GNSS or GPS service, as RTK from the sky that will bring instant GPS accuracy worldwide. Slide 30, resolving key pain points for manufacturing customers. We launched a new product, which is called NCCIMIL2021-1, which is simulation factors can achieve quality without sacrificing productivity. So this will drive and productivity throughout setting up of production operations. Slide 31, MSC Apex generative design 21 is another product we're launching in the quarter within the MSC portfolio. It's an end to end solution for designers of high asian metallic components. And this is going to improve performance significantly and some parts up to 85% faster, less human intervention than any other software in the market. So a great development. Slide 32. More farmers now have access to the latest precision agriculture tools. The Hexagon Agron platform has met Italian government requirements, and we have now deployed it in the Q4 in more than 30 farms in Italy. And we will soon roll it out to other countries in Europe. Slide 33, we've also helped Swiss Rail move and grow in the quarter. We signed a 4 year corporate license renewal with Swiss Rail, where we're going to deploy GIS Solutions and web and mobile components for the maintenance of the assets of Swiss as rail. Slide 34, empowering cities to fight cyber attacks and respond to emergencies. We got 2 orders for Hexagon On Call in the quarter. 1 was from the city of New Orleans in the United States And the other one was from the Strathcona County Emergency Services in Alberta that encompass Calgary and Edmonton. Slide 35, Multi product subscription for the largest open pit mine in Finland. This was Yara, the Finnish Mining Company that acquired Hexagon's a suite of software products to improve productivity in its mining operations. Slide 36, collision avoidance systems was implemented in Ghana, in the Goldfields mine in Ghana that bought MineProtect and also MineProtect operator alertness. Slide 37. We had multiple wins in the quarter for our One of the world's largest automotive manufacturers who wish to stay anonymous as we'll use our program in its autonomous vehicle navigation rollout. Intel will also use the hex TAGON content program, aerial imagery to create AI powered analytics and business intelligence. And NAEP, the National Agricultural Imagery Program in United States, contracted Hexagon to refresh 14 states across the United States in 2021. Finally, the Ontario Ministry For Natural Resources contracted Hexagon to provide data for Ontario's forest resource inventory program. Slide 38. Aerial data helps create digital twins of South Korea for national government. Shinhan Aerial Survey will use our city mappers and our HexMap software to capture a 3 d image of the country of South Korea. And that will generate 3 d models that we'll use to will be used to develop the infrastructure in the country. Slide 39, Brussels Airport consolidates construction and infrastructure data. This is our AEC portfolio. And we sold them BRXIS 20 fourseven as a document change platform to keep track of changes within the airport. And that was it for the quarter. Environment, Social and Governance. We launched targets for ESG in the quarter. So if we move to Slide 41. Our overarching targets are carbon neutrality in our Scope 12 emissions by 2,030, Carbon neutrality across the entire value chain encompassing both 1, 2 and 3 emissions engines by 2,050. Sustainability supplier audits across 100% of our direct suppliers in risk areas by 2023, and at least 30% of our leadership positions filled by women by 2025. Moving on to Slide 42, we do not stop there. The Sustainability Revolution will continue, so we're revving up plans to accelerate the world's ashen to a greener economy. And we will introduce this to you very soon, so Stay tuned. And with that, we've come to the dividend proposal from the Board, Slide 44. The Board of Directors proposed a dividend of EUR 0.65, which is a 5% increase over 2020. And the dividend can be paid in euro or Swedish kronor. Furthermore, the Board of Directors proposes a share split 7 to 1 after the AGM, if the AGM accepts it. In summary, if we summarize things, Record operating earnings and margin despite significant currency headwind. Super strong cash flow generation, 1% organic growth, solid growth in China and Geospatial Enterprise Solutions. And we expect a continued sequential improvement in demand for Hexagon going into 20 2021. The Board of Directors proposed a dividend of EUR 0.65 and a share split and to 1. And with that, operator, I believe we've come to the end of the presentation, and we are now ready for any questions there might be. Thank you. The first question comes from Magnus Kruber from UBS. Please go ahead. Your line is now open. Magnus here from UBS. A couple of questions From me, could you comment a bit on the expectations for sequential growth into Q1 in Mi? Is that accounting For normal seasonality, I mean, normally Q1 could be weaker, so it would be interesting to see how we should think about seasonality on that basis Through the course of 2021. No. We believe that we're going to see a sequential recovery in auto and aero, which hampered industrial enterprise solutions in the quarter. And that goes for Q1 as well. Okay. So there is no other there is no unusual patterns in 2021 from a seasonality perspective? No, I don't believe so. It hasn't happened yet, but I don't think so. Perfect. That's very good. And could you comment a bit on the product mix overall? I mean, you had an adverse mix in IES, but does that mean the Positive mix come from GES? Or is it a mix between the business areas? I'm just trying to get a sense for the sustainability of the current mix there. Within IES, you have an adverse impact on margins simply because PPNM, which is pure software contracted. But within Mi, software outgrew hardware, which had a positive impact on our industrial segment. And then if we move to the Geospatial segment, definitely software and services outgrew hardware even though hardware grew as well. So you had a very positive impact there that you can see from the margin development. Excellent. Thank you so much. Yes, the final one there. I think you commented on Aerospace is now seeing a sequential improvement there into Q1. Has that got Do with the production restart in some of the airframe manufacturers? Or what do you see there? No, we see a rebound from very, very low levels in Aerospace. I think our comment is more related to where in the Q4, we saw strong demand for electric vehicles. But in the Q1, we also expect traditional combustion engine products to require investments and thus driving demand for Hexagon in those areas as well. Perfect. Thank you much for that. Very clear. I'll get back to you. Thanks. Thank you. The next question comes from Adam Wood from Morgan Stanley. Please go ahead. Your line is now open. Hi, good morning and thanks for taking the question. First of all, just on 2021, I wonder if there's any help you could give us in terms of the shape of recovery. We've obviously got some very large declines in 2020 as a base comparison. But within that, China was good. I mean, could you maybe help us out a little bit with what you It would be a strong recovery for Hexagon versus what would be more muted. So for example, would it be possible to get back to the type of revenue base that you're doing in 2019? Or do you think it takes longer to get back to that level? And maybe just digging in a little bit on the free cash flow, you commented that in Q1, on you might have to give something back on the working cap. Could you maybe just broaden that comment out to the year? Do you think 2021 runs below the normal conversion Because you have to give something back on working cap given 2020 was so strong. Thank you. Giving you an outlook on 2021, it's not something we do. So I guess we'll see, but we're definitely not going to hold back. We're going to do our very best. Regarding working capital, I don't think we have to give anything back per se because within the working capital Improvement in the Q4 were 3 really large deals software deals where we booked deferred revenue, and we won't have to give that back. But as we return to organic growth, obviously, we have to invest in working capital. Is that clear enough? That's perfect. Thank you very much. Thank you. Thank you. The next question comes from Stacy Pollard from JPMorgan. Please go ahead. Your line is now open. Hi, thank you very much. Just expansion around the Industrial division, how do you think of mid term growth potential in that division. And can you kind of break that out for MI and PP and M? So what we expect is Mi to turn around before PPNM And PPNM could probably see a recovery throughout the year, but maybe with better numbers in the second half than the first half, whilst them, I believe, are much closer to a turnaround. And okay, fair enough. And then just regarding margins, the cost savings program looks to be seeing nice benefits already in Q4. Do you think that means you're on target for the old 27% Remember, you had these midterm targets for 27% to 28% for 2021. Do you think that's a possibility? And then at what point would we be getting some new midterm targets? Well, first of all, we reached our target in Q4. I mean, without currency impact, we did 29% and with currency impact, 28%. So I think it's definitely achievable. It's hard to predict what 2021 will bring, but No, definitely, that's achievable. And we are discussing when to update you on our financial outlook or our long term financial outlook, but it will be definitely during 2021. Okay. No, that sounds encouraging for 2021. I mean, I know there's some seasonality on the margins. So I hadn't necessarily Expect the Q4 to be straight out, but that's very handy. Quick last one for me. Just gross margin, same I'm going for the midterm here. What do you think your midterm target is on gross margins? And I know you'll give them to us eventually, but given this continued mix shift Towards software, I mean, I presume that's not going to stop. So it will come What is midterm for you? 3 to 5 years. Then you have to wait for a Capital Markets Day to get it done. Fair enough. Okay. I will wait. Thank you very much for the questions. Thanks. Thank you. The next question It comes from Alexander Voehrger from Bank of America. Please go ahead. Your line is now open. Thanks very much. Good morning, Ola. I hope you're well. So I wanted to go through, I guess, a little bit more detail the demand dynamics in the software, various elements software business that you're seeing. China, obviously, north of 20% growth. I'm wondering if you can talk a little bit about The demand dynamics in China in software in China. I wonder if you could give us a little bit Specific around software versus hardware in Mi. I'm just trying to understand how that plays out for the balance of the year, Particularly given your comments around the positive bookings in IES and the start to the year in China. And then the second question just on that margin question that Stacy had there. Can you give us any indication of your Expectation for FX headwinds for the year maybe for EBIT, just to give us some idea of how we can break down the, I guess, near on a couple A couple hundred basis points of improvement you need on an LTM basis to get from to get up to that 27%. Yes. I think if we start with China demand. And I think it was was it more towards software? Or was it general on you were querying about? Well, I guess a little bit of both would be helpful. I mean, the question was directed at software. But I mean, if you're talking about China more generally, then it would be helpful to understand the broader dynamics as well given how strong it was and given the comps are pretty easy in this calendar quarter. No, I mean, 1st of all, 65% of Mi Software and Services, and China is the largest market. So obviously, our software portfolio was benefiting from the recovery in demand in China. But what we saw in China was a broad based recovery across the board, we saw our construction and infrastructure products growing significantly. We So our auto, aerospace, electronics products growing. So both electronics, Aero and Auto grew oil and gas grew in China and infrastructure So I don't know if that's enough. But and software versus hardware in Mi, as I said, 65% software services. Okay. So software would be growing above that 90% number presumably. Yes, correct. And then FX, I mean, We don't have a crystal ball on FX. But if you apply the current exchange rates on 2021, we would have a negative impact on sales of 3.3% for fiscal 2021. And we should be applying a similar sort of drop through that So in Q4 to that number for an impact on EBIT? Yes. Unfortunately, since it's the wrong currencies, so to say, moving in the wrong direction. No, that's great. That's very helpful, Ola. Thanks very much. Thanks. Thank you. The next question comes from Daniel Jarwey from Handelsbanken. Please go ahead. Your line is open. Thank you very much and good morning. I have three questions. I will ask them 2 first and then the last one. Can you comment more on the planned cost savings that you implemented in the 2020 program? How much of this is fully in place when entering 2021, I. E. The planned cost savings and not the COVID Cost savings related. And the second question was really on FX. You mentioned as a hurdle of €27,000,000 on the EBIT in the quarter and say how much of this has been mitigated by temporary OpEx savings On back of COVID-nineteen. Thank you. Thanks. I would say the planned cost Savings were around 90%, 95% at the moment. And temporary cost savings have definitely played a role. But it's very hard to say what's temporary and what's longer term right now. If I mean, we have a different behavior in the group today when we look at marketing expenses and travel expenses. And I think that we're going to keep the lion's share of those savings. All in all, we think the cost savings were in the range of €10,000,000 in the 4th quarter. Very helpful. And lastly, on ESG, you screen well in the EU taxonomy, I think, and I like your ESG targets and so on. And also your speech at the Hexagon Live in 2019 was, of course, really good. I was thinking a little bit if you can Comment on your for example, if you look at Brazil, we have good growth in South America. And just to understand how you can secure a full ETA responsibility, for example, in surveying in Brazil with regards For example, rainforest deforestation, for example, how far do you go and when on your ESG responsibility there, for example? I think you have to develop your question a bit because I'm not sure what you're alluding to. I'm not sure, Lou, in Emboer that if you look at the next step after deforesting something, You will use, I guess, the surveying equipment to build bridges, houses or whatever in this land. Just thinking broadly on how you think Where your responsibility ends, so to say. Yes. No, it's an interesting and very difficult question to ask. But in general, First of all, our airborne mappers are mapping the deforestation in Brazil. So we are a prerequisite to basically tell the authorities how severe is it, where has deforestation happened And what can you do about it? So I think there, we're on, let's call it, The good side, obviously, you can use our survey equipment if you build a bridge or a road through and you would have to cut down trees if you build a It's a bit hard for us to do anything about that. But I think the biggest problem with the rainforest is really that it's turned into agricultural land. And it's banned. So the quicker we can deliver reports to government bodies about illegal deforestation occurring, the better. And that's where we put as is right now. Perfect. Thank you very much. Thanks. Thank you. The next Question comes from Mikael Lecin from Carnegie. Please go ahead. Your line is open. Yes, hi. One question here. You completed 3 acquisitions in Q4, and I was just wondering if you can comment on your acquisition pipeline And how much financial resources you have available for acquisitions going forward? We have a good pipeline like always. Prices are at record levels, so you have to be very careful making acquisitions at this moment in time. And yes, it might be the peak in the pricing cycle. But Our headroom in with our own targets, we have EUR 2,600,000,000 and that is to be below 2 point times net up to EBITDA. We have SEK 2,600,000,000 in our own balance sheet. And then obviously, we can borrow on the acquired entity sorry, EUR 1,200,000,000 to reach EUR 2.5 billion, EUR 2.6 billion for EUR 3.5 billion, which is our covenant. Okay. Got it. Just one more, if I may. On North America, industrial Segment was down 13%. Is this reflecting the market development in total? Or have you seen any changes in the competitive situation? No, it's the market, and we are late in the cycle in Mi. So I think this comment goes for both what you saw in Western Europe, I. E. France, Germany and United States, that typically our order intake turns around and starts to grow before we see it in invoice sales. And that's where we're at the moment. Okay. Yes. Thanks. Thanks. Thank you. The next question comes from Sundar Nacht from Barclays. Please go ahead. Your line is open. Good morning. Thanks for taking my question. Could you comment if you have seen any impact on your business or Customers from the recent transportation bottlenecks and rising shipping costs, especially between China and Europe. And secondly, you commented earlier that you have seen good growth within your AEC design portfolio. What about the other AC products like SmartBuild? Are you gaining traction with them? Yes. We'll start with SmartBuild. We launched it, and we got sales with 2 large customers. And I think 2021 is a year where we will talk considerably more about smart build. And regarding the transportation bottleneck China Europe, I wasn't aware of that. So we have obviously not suffered from it. Okay. That's very clear. Thank you. Thanks. Thank you. The next Question comes from Mohammad Mualawalla from Goldman Sachs. Please go ahead. Your line is open. Great. Thank you very much. You have commented on sort of breaking out the Pure Software growth relative to the kind of overall group, organic growth. Could you give us a That figure in Q4 and you talked about some of the large deals that you signed which you are not able to recognize. Can you give us a flavor of which sort of segments they Fell into. And then secondly, I think just coming back to the point around growth this year, I think consensus is modeling sort of 8% Organic growth, which is I think clearly the upper band of 5% to 8% organic growth midterm that you've talked about in the past. How feasible does that look this year? And should we expect this to be again more back end loaded? Or should we start to see that More and more evenly come through based on your comments of sequential improvement in Mi starting in Q1. Thank you. If we start with your last questions, we don't give forecasts. So I guess we will see. And In May, we'll do this again, and then we can discuss Q1. The large deals where well, we recognized it, but it wasn't perpetual deals that we got. It was subscription deals. So we recognized the part that we could recognize. Most of it ended up as deferred revenue, and it was both in automotive and other sectors where we had great wins in the quarters. Regarding the software growth in the quarter, PP and M was as negative, but everything else was growing. So fairly stable software growth. Great. Thank you. Thanks. Thank you. The next question comes from Erik Goran from SVB. Please go ahead. Your line is open. Thanks. A couple of follow-up questions to the last one on the software part there. I mean, you have a number of platforms now software platforms on the industrial side. Is there anyone in particular that is doing really well, MSC or Veer or also within PPNM, but outside oil and gas? And I think you were kind enough to give us the absolute numbers on the pure license subscription revenues you had during the Q3, if you Do that for Q4 as well. And then finally, if you've seen or expect to suffer to any extent from The semiconductor shortage that's happening more or less globally. Thanks. Yes. No, Businesses that were doing really well were MSC, Brixis and our mining software portfolio. SI OnCall was very good as well. So several product lines were doing really well. When it comes to the license revenue, now you catch me Without an answer, I really don't know what the license revenue was in the Q4, but we can dig it up for you offline later on? That will be helpful. Yes. So we'll come back. And then on the semi shortage, any issues for you there? No, not really. We might encounter a problem in autonomy and positioning, which is as dependent on supplies. But so far, it looks good. And I can't say as it's a prime concern for us going into Q1. Very good. Thank you. Thanks. Thank you. The next question comes from Wasi Rizvi from RBC Capital Markets. Please go ahead. Your line is open. Yes. Hi, good morning. A couple of areas left for me. Just firstly on North America, then survey and construction in particular. Are you able to talk about what you're seeing there in terms Momentum. And I know it's difficult for you guys to know for sure, but do you think there's any meaningful difference in the end market exposure you have in North America in those markets, Infrastructure versus commercial, wider markets. And then the second one was, I was hoping to hear a bit more about mining. It feels like there's been a step up there in growth. And Firstly, has there been a year to tell us what the growth looks like last year versus previous years maybe? And then where is that coming from? Is that The miner spending more, is that new products you've got? Or is it just something you've dedicated more resource towards? And what's the runway for growth like in that business? How big could it be? If we start with mining, we had good growth in the Q4 and in 2020 for our mining portfolio. And I think what we're seeing is a strategy shift where the miners are more and more concerned about operational cost, and they realized that by deploying fleet management control software following the life of a mine, as we call it, you can enhance your cost structure quite significantly. And since we are OEM neutral, we can deploy our systems on any OEM's equipment. We can roll it out quite easily throughout the operation of a mine. So mining is a good business for us, and we expect it continue to grow in the years to come. Regarding North America, you talked about survey demand? Or can you repeat your question there? Yes. Just on surveying Construction in those two markets in particular, I think you mentioned in the release that you had a weakness in surveying in GES. I'm just wondering what kind of momentum you're seeing in that market and whether you know whether there's more infrastructure or more commercial construction In your end market mix versus maybe the rest of the world? Now we have Relative outlook on North America, we believe that we will see starting up of a lot of construction sites in relation to both renewable energy and also traditional construction and infrastructure in 2021. So no, I think the outlook is positive. And the weakness in the Q4 in Surveying specifically, I think, might have been related to well, you never know. It could have been weather or whatever. Okay. Got it. Thanks. Thank you. The next question comes from Victor Hobart from Danske Bank. So just a brief question again on the leverage here in operational leverage In GES and IAS, GES very strong leverage in H220. Is it more positive affected by the cost savings? Or is it just Surely due to the differences in growth? Or is the cost savings fairly balanced between the two segments? It's a perfect storm. We have cost savings, and we have mixed improvements. So That's why you can increase earnings in spite of having a weaker top line. Okay. And also on the new ESG targets, how are you tracking today on the things that you point out in the release? We are well, we're still awaiting the final report as as to how we track. So we will come back on that very shortly. But we got 20% women in managing positions versus 30 percent as a target. And at the moment, we're not a great we're not a big culprit When it comes to CO2 emissions, we're designing software, and we're assembling precision equipment in air conditioned facilities. So yes, we have a footprint, but It's not manufacturing in the traditional sense that we're doing. So we believe we are very well in line with the targets we've set. Okay. Thank you. Thanks. Thank you. The next question comes from Joachim Gunal from DNB Markets. Please go ahead. Your line is open. Thank you. Good morning. So as the Chinese recovery has obviously decoupled from the rest of the world, can you perhaps just provide your $0.02 On the competitive landscape there, are you seeing any, say, new type of competition emerging? Or is there And is a shift from Chinese customer preferring to purchase from domestic suppliers rather than hexagon? First of all, I think we are very well entrenched. So we are almost a domestic supplier. What's Changed in China is that we're now seeing a lot of Chinese companies becoming global contenders in traditional markets. So I'll give you one example. NIO will probably start challenging Tesla for sales in both North America, Europe and Asia for electric vehicles. And so in high-tech areas is really where we see the Chinese companies expand. That's clear. Thank you. And just finally, would it be fair to To assume that, say, when you decide to provide new medium term targets that they would be more growth oriented given where you are now on profitability? I think we have a bit more to do on profitability, but growth is, of course, at the core now when we start capitalizing and getting momentum with the technology portfolios that we've built over the past 10 years. Thank you. That's all from me. Thank you. The next question comes from Magnus Kruger from UBS. Magnus here. And just a couple of follow ups there. First on the comment, I think you commented something about EUR 10,000,000 in savings in Q4, was that short term savings? And secondly, on to that, did you say that you had reached some 90%, ninety 5% run rate on the long term savings at the moment? Yes. So when we talk about long term savings, it's The reduction in force we're measuring, but there is obviously there is a mix of short- and long term savings in the EUR 10,000,000. But I would say that the lion's share is still short term. And If we're lucky, we can replace that with more longer term savings. Okay. Got it. Yes. Also, I think also to the previous question, could you help us a bit on how much was pure software in Q4? And I think you said you were basically flat on the combined portfolios there. You mean pure or software and services? Because I don't Yes. Exact services part. Yes. We'll see 35%, 40% is the best guesstimate sitting here today. Got it. Thank you so much. That's very good, Ola. Thank you. Thanks. Thank you. The next question comes from Alexander Berger from Bank of America. Please go ahead. Your line is open. Hi, thanks for squeezing me back in, Oleg. Just a clarification, actually, same point. The EUR 10,000,000 sounds quite low, so I just Want to make sure that that's a bridge number, I. E, the incremental year on year rather than the absolute number in Q4. And presumably, therefore, the 90%, 95% You made there on reduction in headcount means that the savings benefit from those people leaving the organization is yet to be seen. I just wanted to clarify. Thank you. Yes. Now you have a lot of moving parts in the quarter. So it is compared to the pre corona situation in Q1. That is when we refer to the EUR 10,000,000. Now looking at it, you have a EUR 27,000,000 adverse FX impact, which obviously also has some cost elements into it. So no, the long term savings have not kicked in fully. We're still living off short term Okay. Thank you. Thanks. And I believe that's it. We have time for one final question, if there is one. Thank you, sir. That's A follow-up question from Erik Goran from SEB. Please go ahead. Your line is open. Yes, thank you. Question On the wins there on the excellent content program with an auto OEM and Intel, just sort of is that how do they Buy your services from the content provider subscriptions? Or do they buy one time data dump? Or what kind of That's up. Do you handle that side? It's a subscription service. So it could be a monthly, a quarterly or an annual invoicing commitment. And if you look on the Contran program now, it's been there for a number of years. What's the growth trajectory been for the past 2, 3 years? It was a very strong start, if I recall correctly. What's happened since? I believe that over the past 5 years, we've averaged around 10%. Thank Thanks. With that, I think we end this Q and A session. Thank you, everyone, for listening in, and we'll do it again in Q1.