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Good morning ladies and gentlemen. Welcome to our 2018 half-year media conference. We're very happy to have you here today and talk a little bit about how we did in our first half. Let me quickly run through the agenda, what we have prepared for you today.We will start with financial review. You probably wonder why am I kind of alone here in front. Unfortunately, Ms. Weber, our CFO had to undergo a short-term operation on her eyes which went very well, but she is still in a process of recovery which unfortunately prevents her to be with us today. I assume that you're listening today, so best wishes from here and get well soon.I will cover the financial part myself therefore today. We will continue with a short business review to sort of outside of numbers look at what was the progress that we have achieved over the course of the first half. Then I'm very happy to have Mr. Vermeer with us today. He is the CIO of Erasmus Medical Center, one of the major -- not only by size, but I think also by reputation and importance, one of the major academic hospitals in Europe. And we have done some very complex and successful projects together, and we're very happy to have you here today and give us a little bit background on what have we done. We'll finish with outlook and guidance.With this, let me start with our financial review. The first half results show a mixed picture. We had a slow start due to our cyclical business model which has a stronger second half-year. However, many milestones have been reached in order to execute our strategy. Incoming orders increased by 7.2% and come to CHF 169.3 million. Our long-term backlog is strong and ended at a CHF 164 million, an increase of around CHF 27 million compared to the prior year period.Net revenue development was flattish and showed an increase of 2.6%. For the first half of 2018, EBITDA margin came to 6.5% compared to 9.7% in the first half of 2017. This decline in the first half was mainly due to the investments in the future development of the company and I'll get into a little bit more detail later on.We're on track to execute our strategy, and we made tangible progress in both our strategic drivers. In fact, our Healthcare business is growing by 9%. This result was mainly sustained by the strong performance of the Benelux and Nordics regions which contribute to an increase of 19% of the healthcare business in Europe. In addition of our -- in addition our Software and Services revenues, which are indicators of our shift towards more of a solutions company, showed a combined growth of 8%. The downside relates to Enterprise business and OEM.While the evolution of the Enterprise business has various [indiscernible] country-specific reasons, the OEM business delivered solid results, albeit below the very strong performance achieved in the previous year.We are confident about our strategy. Although the full implementation may take longer than originally expected, we keep investing in our future. We strive to develop new solutions and to improve our penetration in the market. As a result, we increased expenses for R&D as well as for marketing and sales.This slide is a summary of our half-year results. We continued to have a positive book-to-bill rate. The bottom line as indicated was impacted by our investments into markets and product.In our financial report, you may find the region on segmenting reporting as requested by Swiss GAAP FER. As an additional information, we show here the development of the Software and Services revenue which year-on-year increased by 8%, for us a strong indicator that we are well underway on our strategy. While the revenue growth of the entire Ascom group was 2.6% in the first half-year, the combined Software and Services grew by 8%. Software and Services revenues represent nearly 47% of our total revenue.On this slide, you see the breakdown of our revenue by customer segment. In line with our strategy, the healthcare segment is growing by 9%. The healthcare segment now represents 63.5% of our total net revenue, while the enterprise segment comes to 26.5% and OEM is around 10%.Ascom continues to be a financially sound company with a solid balance sheet showing a net cash position. The equity ratio is close to 32%. Please note the equity ratio after the first half-year is always lower than after year-end. The reasons are mainly the lower profit and the dividend payments in the first half-year. The decrease of cash has been set off by the increase of net working capital.Despite the lower group profit, we are able to increase our cash flow from operating activities by CHF 2 million compared to prior year period. Our operational activities delivered an increase in cash of CHF 14.5 million. This was offset by the dividends payment of CHF 16 million and CapEx investment of CHF 5.3 million and the contingent purchase payment related to the acquisition of UMS in 2016. We have overachieved on our acquisition objectives related to the UMS acquisition and we're therefore very happy to pay that contracted earn-out payment.With this, I conclude the financial overview and go into our business review. One of the major milestones in the first half of 2018 for us was the launch of our Ascom Healthcare Platform. You may think this is just a marketing campaign. Actually, it's a lot more than that. This is our way to giving a consistent and very flexible visualization of our healthcare story and value proposition. We've launched this early this year and so far feedback from the market and from our customers and in -- from our sales team actually is excellent.The Ascom Healthcare Platform explains our over-arching USP. When we look at healthcare today, we see that patient information actually is digitalizing more and more. However, this is relatively uncoordinated and shattered across silos. Thus workflows are still hard to orchestrate and coordinate in a digital way. They remain analogue in many instances.Ascom with the Ascom Healthcare Platform integrates relevant information from those silos. We orchestrate clinical resources and thus we enable mobile mission-critical workflows. We do that out of one hand, one vendor, one answer.Quick run-through over the major business achievements in the first half of 2018. We had a number of successful go-lives of major projects. We're going to talk about one of these a little bit later, but it's one of them. We had quite a number and we've been very clear end of last year, earlier this year, this year is going to be about -- last year was about winning lighthouse projects. This year is about delivering. We have to deliver those reference projects and start with happy customers from day 1. This is a major milestone for achieving our objectives.We have continued to maintain a very high level of innovation. We have accelerated our rate of innovation over the course of last year. We keep it at that level and the first half is a strong sign of that. We had talked about it, we had significant growth in our strategic areas in Healthcare, Software and Services. We have increased incoming orders and we go with a strong backlog into the second half and we'd talked about it in March, we do have challenges in North America, but our North American business is in a process to stabilize.A little bit more details on those achievements. We have of course continued to have lighthouse wins across all our geographies and I think that's the important thing about this slide. We were successful across the board, including North America, which for us is a very strong sign that we are able to win and our challenges are tactical, not principle. As a proxy for a number of great reference projects that we have taken live in the first half of this year, we have gone live with the Erasmus Medical Center in Rotterdam, which was a significant achievement on our side for us as a company. This was the largest by scale as well as by complexity project we have handled so far and I'm very happy to say we have a great outcome.But the rest, I leave to our guest. Of the various lighthouse wins we had in the first half of this year, I want to call out one specifically for a reason. We have always said that part of our strategy is establish lighthouse references, which create a reputation of delivery of a solution, not delivery of product, but the delivery of fix a problem for me.And if we do that, if we create that reputation, it will drive more business. And with Erasmus together with a very strong customer, we have achieved that in our Netherlands business and it's already starting to drive similar, very significant project.Quick look at our North American theater. We have talked about our challenges in March. We have taken sometime early in the first half around really deeply analyzing what our challenges are in North America and what are the root causes for our difficulties. We can clearly say it's not the market, you guys are going to say that that's not a surprise, but we wanted to make sure that we're not missing something. It is not the market, we are in the right market and we also have the right portfolio. Our solutions are fit for that market.Our challenges really lie into -- in our go-to-market strategy and very realistically in some elements of sales performance and structure.Actions we've taken is clearly to strengthen our management. We've started with that early this year. We have continued over the course of the first half and we're in a very strong position now to have a replaced leadership in place for our North American market.We have also reviewed our sales structure. If go-to-market is a challenge, if sales performance is a challenge, we need to do something about the structure. We will focus our sales efforts in North America very specifically around professionalizing our channel management, working better with our distributed channels, especially on the nurse call side. And on the other side to increase our efforts and performance around more direct interaction with our customers, especially on large and complex solutions.Current status clearly is we are stabilizing. We had reassuring results in North America in the first half in our segment for mobility were upper single-digit growth in mobility in North America. We had tremendous significant double-digit growth in our software business in North America, but we are still struggling with our nurse call segment for 2 reasons that was the most significant part of our challenge in North America for a number of tactical reasons, the work with our channels has to improve.And the second reason is nurse call is a construction-type business and has very strong sales cycles. We think we have recreated momentum in that market, but it will take time due to the long sales cycles before we can see that in numbers.We feel very confident, but in the first half, on the nurse call side it's not coming through and the other -- in the other areas it will. Those are also the reasons why we look positive onto the second half. We will see a much stronger second half in North America as well.Professional services very briefly. We have now finished the split of our services organization into professional -- professional services organization and into a professional customer care organization, those are 2 different businesses.It was very important for us, especially as a solution provider, to focus our energies on delivery and post-delivery maintenance and care. And by doing that split, we have set up the structure to step up our game and we are already seeing the results from it. We see -- we have had double-digit growth in our professional services revenues over the course of the first half which also is a strong indicator that they're moving more and more towards delivering solutions and not just installing products.Quick flash on our innovation. We have accelerated our rate of innovation over the course of last year. We keep that pace. We have a significant number of new products coming out this year, some of them already delivered in the first half, some of them will come in the second half. Let me give a brief snapshot on some examples. Fairly simple one, but we have developed a simple mobile app with which we can use the camera of Myco to capture vitals data and write it back without having to manually type in, write it back to patient record.We have launched our Elderly Care platform. Usually we are focused on enhancing and integrating our Ascom Healthcare Platform further. This is the only example where we go above and beyond our Ascom Healthcare Platform. We have launched a new platform for the elderly care space to do workflow management and smart intelligence for care organizations.We have launched Myco 2 DECT which is the first -- I think worldwide the first smartphone that uses DECT functionality, very solid resilient radio standard for both voice as well as critical [indiscernible]. And we're on track to deliver our CDAS solution. We've talked about it in the past several times. This will move the meter in critical alerting by moving primary alerting to the mobile space.And last not least, we're on track to deliver our first Myco 3 handsets at the end of this year. This is a significant enhancement of our portfolio. We are -- with Myco 3, we will be in a position to have sort of a high-end mobile device that is also tailored towards -- especially from a North American market perspective towards supporting mobile applications from EMRs. Very important change for us, we will launch this hardware product from day 1 with a full software suite. We will have lots of workflow, enabling software tethered around this device.Last not least, we also made continued progress on our strategic alliances. We have both broadened and deepened our relationships with our existing partners, existing strategic alliances. [ Trigger ] is only one example, but with -- together with Trigger we are now also demoing together in their demo center in East Asia, and we're addressing that marketplace in a joint fashion.But we have also increased a number of our strategic alliances. [ Striker ] is one example, important for us especially in the North American market again. Striker is one of the major manufacturers of hospital beds, they have a smart bed and we connect that smart bed into the mobile mission-critical workflow.With that, I come to the end of our business review. And I am very happy to handover to Mr. Hendricks and Mr. Vermeer to give us a little bit of an insight into what does it mean to deploy the Ascom Healthcare Platform.
Yes. Thank you very much, Holger. Hello, my name is Olaf Hendriks, I'm the Managing Director of Ascom Benelux and I am the happy person here to introduce Simon Vermeer as the CIO of Erasmus. Before I hand over, we started this project 2015 with a letter of intent where we arranged that we would realize Erasmus vision on how will we deliver care in this new building, new organization because the vision of Erasmus was not only building new hospital but also implementing new way of working for nurses in the organization.And as far as I can see, and I have some experience in healthcare, is this is something that's never been done before in The Netherlands and maybe never been done in Europe and other countries outside of Netherlands. We started in 2015. We started with use cases, so before we installed anything, we said let's work at the used cases because we have a new building, in this new building you will work in a new way, but people who have to talk about this new way of working have no idea how it will be in that new building. So we work together on the used cases and eventually that led to a contract early 2017 where Erasmus contracted the whole portfolio of Ascom and then we really started because used cases were there and we had to implement and we have to deliver and that was bumpy, right? Simon will explain that was not easy because we ran into things that we did for the first time.But we learned a lot and we improved ourselves during the project and well, the result I think it was a very good result because we went live with the new facilities without any lives problems.And Simon, I'd like to hand over to you. You can give us some more details on, yes, how we did this. Thank you.
Thank you very much, Olaf, for the introduction. Good morning to you all. Yes, the customer perspective. I'm going to tell something more what has been implemented within the Erasmus MC. I'd like to start with a short 2.5 minutes movie about the Erasmus.[Presentation]
-- movie just something -- just to give you an idea in what sort of environment this project has been realized. And just let me make this a little bit bigger. In our mission, you can see the domains that have been emphasized in the movie as well. Primary, of course, it's health care, but we do that as an academic center based on research and education. We have 16,500 employees and are in the top 20 employer in The Netherlands. We have got 4,500 medical students within Erasmus MC. The turnover yearly is about EUR 1.7 billion.For the new building, the new hospital that -- we moved into the new building on May the 18th this year, and the opening will be on September 6. His Majesty Prince -- King William of Orange will open the Erasmus which we are very proud of, of course. It's a big building, it's not the whole of the Erasmus, it's -- have been built new. The Children's Hospital which you see on the picture on the left corner has not been built new, but 75% has been built new and it's 207 square meters, which was one of the largest building projects in the last years in the Netherlands.What has been built new is 700 beds. The total of Erasmus is about 1,000 beds. That's -- the level of care is quite high, using 22 operation rooms, 4 intervention rooms, 12 bunkers in the cellar of the new building for radiotherapy and in a total of 15,000 square meters of laboratory.The vision for a new building was to create a living environment. One of the most important aspects is stress reduction to make people healthier. And a good example of the stress reduction and a very visible example is the roof gardens we created on the main part of the building. We have beautiful gardens realized where it's possible for employees, but of course for patients even if they are in bed to get outside. The inside of the building, a lot have been done to create an environment for patients to get healthy as soon as possible.That's also in the processes; every patient has his own room. So we have the possibility for patients to have their own privacy, but also have the possibility to interact with the patient on one-on-one basis and to discuss what sort of care will be needed to decide together with the patient what care is possible and needed for the specific patient.What we did is to support this to build a new system. And the idea was, this was regarding a concept from a few years ago about the real-time health care system. We implemented a year ago a new EMR, electronic medical record, which is more or less an administrative system. And we needed more real-time like system like the Ascom Healthcare Platform to support our processes in a more real-time way. And I'm going to tell you a few things about that system.We had a program running around the new building, which was divided in this 3 main parts. One of course was the building. We started about I think over 10 years ago. There was -- one large part was about processes you see on the right. We implemented a lot of new centralized new care processes. And of course, there was a huge amount of technology needed for that and that is the third part.MICIS is a main part of the technology domain we recreated in the new hospital. MICIS stands for a Medical Integrated Communication Information System and stands for 3 main parts which I will detail a little bit more. For -- the most important part is patient monitoring, and not the patient monitoring you see in I would say every hospital, but the patient monitoring in a more flexible way. We don't have a fixed watch in our new hospital, so we decided that all the staff, the medical staff, the nursery staff should be able to work flexible and mobile. So we introduced mobility into our hospital. And that's what we need a task-room for.One of the examples for the patient is that patients should for their health be as mobile as possible, it's in -- for most of the patients, it's really useful to get out of bed as soon as possible. So every patient that will be admitted into Erasmus MC get a sort of wristband with a tag on it. That tag is then the possibility to walk around. And if there's any support needed, they can just push the button, that tag is location where and we will send in the event a message to the nursery staff or the medical staff to provide assistance.The second one is communication. Communication can be to the patient something like I just explained, it can be between employees, medical staff, nursery staff. Therefore we integrated a lot of systems. A few examples are, that's because we don't have fixed wards into the hospital, we integrated the [indiscernible] into the system. And you might think why is a [indiscernible] even used in brand new modern hospitals. This is a really big hospital, so we need for example for a priority medication, but also for the laboratory, so the blood samples or the material taken from patients we need to tube launch. There are not people waiting if there's any tube coming in. So what we created is the integrated system onto the Ascom system to get a signal when you order medication for the patient when it's coming back from -- when it's coming in, you can provide it to the patient.The third part is around patient services. That's where we introduced the [ multi-car ] into the rooms at basis with a tablet to make themselves comfortable, but also to create events, all sort of events, standardized events or just open questions to the medical staff or to facilitating staff and to improve that processes.For us this is the first stage of course when you start with moving into a new hospital, you try to keep your risks controllable. This is a platform we introduced and I will detail a little bit on our plans for the future. This is our first phase which was complex enough for a first step.What are the learnings we -- the system went live when we moved to the new hospital, that's clear. We had a very successful going life, but also in the period afterwards until now I'm standing here quite relaxed, so the system is running very well and the confidence not only of the IT department which I'm responsible for, but also from other people that are working with the system is really high. That's as all of already emphasized, it was a bumpy road, we had to learn a lot together as partners.The first thing was that you never have to underestimate the complexity in an environment like this. It's not only the size, but it's really the complexity, the number of systems we had to move in one weekend to this new building. We tried to get at -- in stages, but that was with the complex logistics not possible. So everything had to be switched on and with one big bang going live and work well. And of course when you have patient monitoring integrated into the system, then it should really work well.Partnership with all the parties involved, it's not only Ascom, but for example the texts Ascom provides are delivered by [indiscernible], we've seen the very good -- in the presentation of Holger that are parties that you have to work very closely with -- very close with to get this sort of integration really well done. There's no room for malfunctioning into the system, so you have to really test it, you have to know what's going on to these systems. So you have to know your partners very well.This is also the partnership between Ascom and Erasmus MC, I think we have -- in this right, we have to -- we have known each other very well and worked very closely together, not only Olaf and myself, but also our teams on different levels and even also on board level with my board and Holger and I think that was really part of the success.Matching expectations, Holger told you something about we want to be a solution provider. Now we've seen part of the journey. We have a lot of discussions in our talk in my perspective about 3 years ago, then I start -- that was the time I started at Erasmus Medical Center that we sometimes had the idea that we were talking to an equipment provider and not to a solution provider and that has been changed now in the past 3 years, I can tell you.And sometimes that went smoothly and sometimes that didn't went very smoothly, but at the end the result is there and I think that we have a system now we also can manage, so it's not a once-off switch it on, but it's working quite well and that also us good cooperation between Ascom as a solution provider and Erasmus MC as a customer.We had a lot of innovation, I only told you very briefly about some nice examples of the innovation we have realized and implemented in the Erasmus MC. But there was a lot of innovation parallel and at once and we had new solutions, there were new business partners also for the Ascom, but sure for Erasmus. Of course, we had a new building. We had new process, a lot of new processes which was for the medical staff and the nursery staff, really challenging and still is challenging. We are still working to get everything on par, but that's not really technically, but it's just getting used and getting into the new routine again. And for part of it for the Erasmus Medical Center we had a new organization, so we had to reorganize. So you can imagine that we were in a very challenging environment.What is the conclusion of that is that Ascom is for us a long-term supplier. This is not the type of system and new type of solution you buy from a partner that for only 1 year. We have plans for the future which we are working on already, at this moment, I will tell you for the next year. So we will work closely together also in the coming period.We have seen the transformation of Ascom from supplier to the system integration and the solution provider as Holger called it in his presentation, partly took place during the projects as a customer. I'm not sure if you really want that, so if you know that on forehand, then there are risks. When I started at 2015, that risks were very quite clear. And I think the conclusion is quite easy afterwards that we were able to manage it and that is really good and the result is there.The challenging rights, as I just already said that on every level we had all hands on deck I would say, but that went well and the result is very successful go-live. MICIS was the most complex and the most [ riskful ] part of our moving to the hospital if you talk about technology. I'm responsible not only for IT, but also for medical technology, as we have tested and did the verification of about 6,000 medical equipment parts that was -- MICIS was -- as a whole was most challenging part of it because it's not only in the heart of patient monitoring and in the heart of the primary processes, but it was also innovative and for some parts really new.End-users are really happy. What we did during go-live and the weeks after and the months after we still do, is that every call from end-users that there might go something wrong somewhere in the system, we challenge with all the lock information we have in the system and until now the system has been -- has proved to operate 100% correct. That is of course really important because the confidence of the end-users is key in this sort of systems. If there is no confidence they will not use it, they start to work around it.The end-user are specifically happy with the Myco 2. When I returned from holiday 2 weeks ago, at our quarterly magazine on my door in my house and one article was about interviewing people about it and how you're feeling in the new building and 2 of -- one of the medical staff and one of the nursery staff said without being asked for that they were specifically happy with the Myco. I said to win of course the Myco is for us is the front end of the whole system and integration that is behind this -- behind it which is very positive.Just some details on the next steps. This is our -- the first part of the implementation. We have sort of 2 stages plans and 1 stage is for the coming half-year which we are discussing now, which is for the few things functionality we couldn't implement before going live, but also things that we learned already from end-users that they really want to have and quickly that's about location-based services, we already have a location of our system, but we want to expand that. We brought for the new -- by moving to the new hospital, we brought all the infusion pumps new that are 1,300 new pumps.So for the first time, we have one make of new pumps and we all going to provide them with the action. We know where they are and what the stages of that pump is, so we are not going -- we're going to buy a few hundred less pumps because of the fact that we now know where the pumps are, where the nearest available pump is, so we're going to implement it.We are working together with Philips on early warning system that is about patient monitoring. Normally you see when a patient goes into the orange or red area and you have to act and what we are trying to implement at Erasmus is a system where we can see much earlier what the stages of patients is and are developing and for us the business case is that ICU beds are really expensive and also there are not enough -- there is not enough capacity in our area, but also in The Netherlands, so that's a problem. And we're trying to move patients earlier to the wards and with this system we think we have a business case for that.For the rest, I told something about phasing and tracking. Way-finding is a question, it's a very large and complex building, so way-finding is one of the things that came up during moving. We have to invest a little bit in that. We see that hospitals, the Amphia Hospital has been stated by Holger is a hospital that's not far from Erasmus MC and we work very well together with the Amphia Hospital. So that is for -- also for us is a very positive sign.I had promised to Ascom that if the implementation will be successful that I would be a reference customer. I think that has been -- that part of the promise has been realized for -- at this moment and we will build upon our partnership with Ascom in the next phases. Thank you very much.
Thank you, Simon. I have to say it's a privilege and really exciting to have worked together and have gained the trust of leading organizations like yourselves. Let me take 1 minute for answers, I know I should not, but just my good mother always says there is no coincidence in the world, which I always heavily debated. But pure coincidence, the name overarching this partnership is Erasmus of Rotterdam, which is debatably the greatest humanist in world history with strong links to Switzerland as you probably all know.It's doing something for humanity that makes working for Ascom so gratifying and exciting, (on top of all the other things, but it's a very cool component).Back to business, we think we have made major progress in our strategic areas in this first half -- in the last years, but in this first half specifically and we start to see tangible progress, measurable progress as well. We have always said we have 4 strategic areas of metrics of 4 dimensions for executing our strategy.New solutions is a core piece, I think I don't have to talk about it. We'll do the Investor Day in November and we're going to do a deep dive on new solutions, but we're on a very good track here and we grow our Software and Service revenues.New partners, we've made major progress in strategic alliances over the course of last year. We have made further progress in first half of this year and we have a number of I'd say exciting discussions going on which we'll see how that ends up, but we are on a roll in this area. We have opened or we have won our first significant opportunities in Middle East and Europe, which is a new market for us, and we have in a relative short period of time made tangible progress in that new territory or new theater for us.And last not least, we've always said services is a major part of our strategic vision. The most important first step is professionalizing and upgrading our professional services, our implementation system and integrator capabilities and we have made significant progress in that area. We've grown double-digit in that area and we are I think very well-positioned now to step by step enhance our value proposition in that area as well.So -- but in all 4 dimensions, we have made tangible progress in the first half of this year again. Simon said it's an ambition second half for us and there is very little I can do to debate that. It is an ambitious second half, but here is why we're -- we feel confident about our second half. We do have industry seasonality, that's well known. We always have a stronger second half than the first half, but we had that last year.We expect a continuous recovery in our North American business. We have grown in mobility. We've grown in Software and Services. We are turning around on the nurse call side. We'll see how fast that goes, but we feel cautiously optimistic for our second half in North America as well.We have -- it's a bit of a soft factor, but we have significant reputational and market dynamic tailwind from our reference projects. We are delivering now, we're taking things live with happy customers day 1. We have a strong order backlog. We go stronger into the second half this year than we did last year, which will help. We see significant momentum. We only had sort of 2 logos up there, but there is a lot going on, on the strategic aligned side and we feel very bullish for tangible impact from our partnerships and from that side of our business, especially in the second half.And last not least, we have a number of new offerings coming out in the second half. They will probably not have a huge direct immediate impact from a top line perspective, but the sheer fact that we are on a roll in terms of innovation, in terms of delivering our projects, I think this is going to -- is creating momentum for us both within our own sales teams, as well as with our customer base. Those are all reasons why [indiscernible] it's ambitious, but we feel confident for the second half of this year. We confirm our guidance for 2018 therefore with revenue growth expected to be at 3% to 6% growth for the full year and an EBITDA margin of inline with prior year and up to 15%.This brings me to the end of our presentation. And I would like to ask my colleague to step up and we open the Q&A because I'm sure you will have questions. With this, ladies and gentlemen, we come to our Q&A. I welcome my colleagues Claes Ödman, COO; Francis Schmeer, Executive Vice President Marketing, Business Development; as well as André Neu, CTO. Please feel free to ask your question. Of course, you also may do it in German if you prefer this. We'd like to start. Yes, Tobias Fahrenholz.
Tobias Fahrenholz from MainFirst. Starting with the U.S. first, could you indicate the size of the kind of special costs you had in H1 to see your problems you are facing there? And what do you expect there for the second half and with regard to structurally higher cost? I mean, you seem to ramp up your direct sales-force there. What kind of additional people are we speaking about and what does it cost structurally? And then on the industrial business which was down 10%, I think you are speaking about delays here and there. Have you already seen some projects coming back now in course of H2 and what kind of size did these projects have? And last but not least, on the midterm targets you haven't mentioned the 20% 2020. I guess they are still valid. Now the top line development looks more or less on track here and there you need somehow higher cost to implement your product. When you look at your formerly provided P&L items, so cost of sales I think you are looking in the long run for a target of 43% to 45% sales and marketing 2022, admin 4%, R&D 11%, has there something changed in the meantime?
We have here a bundle of questions. We start with the midterm target 2020, then go to the second half. You meant enterprise projects and then coming to the cost questions. So maybe let's start with the 2020 guidance.
Yes, clearly we're focused on achieving our 2018 guidance, that is our predominant focus for the rest of the year. And I think we need to have that clear focus. 2018 is a major milestone on our journey to 2020. As you rightfully indicated we have not recalled our 2020 guidance, but we will take a look at this on an annual basis and we'll revisit early next year when we talk about our full year results. The Enterprise, yes, that was the second one; the Enterprise side of our business is basically divided into 2 parts. One is our OEM business and the other is actually a variety of different verticals in various countries. We have over the years always seen a little bit up and down on the OEM side, so we do not see any fundamental change here. But our first half 2018 has not been our best first half. The strategy around this needs to be what are levers that we can find in order to sort of address a little bit that traditional volatility and we're working on a number of areas in order to address this. I think the 2 major levers here are more partners, so we're working on extending our partnership reach in this area as much as in the strategic alliance area, but also widening and deepening our relationships with OEM partners. We -- traditionally this has been part of our handset business. We think there is opportunity, especially in healthcare, but there is opportunities to leverage those partnerships and go on a journey together around solutions, softwares, potentially even services. So those are things we're working on in order to sort of address the volatility in that area. On the Enterprise side, really we don't have enough time, there is a lot of various relatively specific and local reasons, they all coincided in the first half-year. We don't see a general trend, but that's something we absolutely took a look into because the numbers on the Enterprise side are not great in the first half. But we don't see a trend, it's a number of individual-specific issues. The last question was around the cost side, if I remember.
Yes. There are 2 questions. First is, were there any special costs in H1? And second one, are there structural higher costs in H2?
There was certainly some element of one-off costs associated with our analysis around the go-to-market strategies, especially in North America. Those won't be repeated in the second half. They're not extraordinary, but somewhat significant. We also have of course the majority of our trade shows and exhibitions in the first half. On the other hand, we will continue to recruit more talent especially in sales and marketing and especially in our North American geography. So between those elements, we do not see major fluctuations, maybe slight increases on the sales and marketing side, but nothing that is anywhere very tangible.
Next question Mr. Iffert.
And the first question please would be on the second half 2018 and can you comment how the start was in July, in the first weeks of August and that you really have already some clarity that the second half should be much, much better? Second question would be please on your competitive environment. There are so many new top modern hospitals out there also in Europe where Ascom is not a supplier. How do you see the current competitive environment? Are there new startups coming in? Are companies where you're looking for and potential corporations becoming your competitors? An update here would also be appreciated. And the last question would be on the margin in general. I mean, gross profit margin, you already explained this with an increase of Professional Services as well as the track on the gross profit margin, but this is likely never to change in the next couple of years because we have these new installations. And then also looking on the EBITDA margin, going a bit further down the P&L, a provision released again was a significant support for your H1 EBITDA margin if you would exclude the CHF 3 million, CHF 4 million, your EBITDA would be then closer to breakeven and what is your assumption here for the second half?
Okay. So we have 3 questions. Maybe we start how did we start into H2 in July and August.
And Francis, you take the...
Francis, maybe you take this afterwards about competition.
Yes, certainly. We had significant momentum going into the end of our first half and we see that momentum continue into July and August. July and August are relatively speaking slow months, they are the holiday months, but in a year-on-year comparison, we carry that momentum into the start of our first half, so we continue to be optimistic here. What was the second part of that?
This was the first -- this was the start into July and August and then the second question is about profit margin.
Yes, we have -- the gross profit is -- has 2 effects that are in there. One is, of course, a slight weakness in the OEM and Enterprise side that we talked about. Those are predominantly hardware or handset business with strong margins. So a reduction or a slight weakness on that side has an impact on the mix in the first half. The second element of the gross profit development is actually a strategic -- a strategic -- or an impact from our strategy. We need to drive more and more deployments of our Ascom Healthcare Platform. Putting in the Ascom Healthcare Platform drives Professional Services. It is a lot of manual labor to bring sort of the foundation to bear to install -- implement, deploy, create the used cases to deliver the Ascom Healthcare Platform. Once the platform is installed, then it's more about what else can we do on top of that platform and I think Simon alluded to a degree to this fact, we have the platform there, now it's about what other used cases can we do. And there is -- probably from a Ascom perspective, there's going to be more software revenues coming and more maintenance and support revenues coming which are from a margin mix, have a stronger impact on our gross profit. So in that respect, we need to drive as many reference and complex installation as quickly as possible which drives more professional services and increases the mix of relatively speaking lower margins in our gross profit, in order to drive the high margin components of our revenue mid and long term. And those are the 2 elements that play a role in our first half and with respect to our gross margin in the first half 2018.
Francis, about competitive environment.
Competitive environment, let me start with a reminder to ourselves that in the first half in healthcare we grew 9% globally and we grew 19% in Europe. Those are very strong growth rates in healthcare that means competitively we have a differentiation, competitively we are found very attractive by our customer-base globally and of course within Europe. Now what provides us with the competitive differentiation? There's a few factors. One is of course as Holger has presented in his section, the Ascom Healthcare Platform is a clear differentiator for us. It's not a branding and marketing exercise, it's actually our value proposition offered to the market. No single competitor has the ability to integrate with medical devices, hospital information systems in the manner that we do. No single competition has ability to integrate, capture that information, orchestrate the value of that and then enable clinicians through mobility, through PCs, through laptops with clinical insight. There are competition of course who do a specific and individual technology component of those 3 aspects, but providing the full and value case, as you will have seen for example from Erasmus, as we've done in [ Sengkang ], as we've done in other major flagship hospitals around the world, it's very difficult for those smaller individual startups I think you referred to, to provide the full value proposition. Now what also protects us from this competition to a certain degree are 2 other things. One is this platform is open. We integrate multiple third parties. In fact some of the startups you may have in your head, we've actually worked with as part of our value proposition that makes us more valuable, more modern and we can move faster with the openness of that platform. The second differentiation and competitive advantage for us is the strategic alliances. That provides us distribution-scale, brand awareness and [ referenceability ] that startups or smaller competitors cannot match. And again I'd like to remind ourselves that on a global basis we are one of the largest revenue and one of the most profitable players in this space. So we have scale, we have platform, we certainly have the technology and we have supporting partners and alliances to drive our tailwind. That helps us drive that 19% growth for example in Europe in healthcare in the first half.
Yes. Mr. Iffert.
Sorry, if I may quickly follow up then on the margin again. Two things here, I think your Software and Services are now accounting for close to 50% of revenues, if I remember correctly from the slide. If I remember also correctly 2, 3 years ago, this was 30%, 35%, so the mix should have improved or it should have been reflected in a significant improved gross profit margin. And the second question on the margin was the provisions. I understand the CFO is not here, we can also follow up on this at a later point in time.
Professional Services are part of Software and Services. So both software and maintenance and support revenues grew, but our Professional Services revenues grew as well, so the blended margin in this area has not increased just yet. For the strategic reason that I pointed out, we have to drive Professional Services, we have to drive implementation as quickly and as much as we can at this point because we need to have the Ascom Healthcare Platform deployed and implemented in as many of our geographies, countries and customer segments as possible and as quickly as possible. So you're right, this if you want the solution part of our revenue mix has increased, so that's a good sign in the right direction. Within Software and Services there still is a mix because of Professional Services being sort of the low margin element and that has grown as well. It's a bit mathematical if you want and it's a long play. Provisions, we need to hold back and...
Yes, the provisions they come is the question Jörn [indiscernible].
Then unfortunately our CFO is not at the table, but we will provide you with the answer in 5 minutes. Then next question, please? Yes, please.
Yes, just a short one on -- Cédric Lang, Zürcher Kantonalbank. Just a short one on R&D costs. I mean, they've been constantly increasing over the past years and we've seen this substantial ramp up now in the first half. You always mentioned as a key differential factor for you and a key success factor to be innovative and then have a leading technology, so going forward is this 11% of revenue we reach now a substantial revenue or is there more upward pressure to come?
Maybe André has something what we are doing in R&D and then maybe your remarks on some of the costs.
And this is also kind of linked to the margin question, we are coming from value propositions that were always linked to hardware largely, even our software value propositions and we are about to turn the page in the second half of the year to have software-only solutions, so to be able to bring them to market as software-only value propositions which is also likely going to have margin impact. Now with respect to R&D costs, we have been making significant investments and we are developing many new solutions that were also shown by Holger, namely CDAS, which is very unique. There are some regulatory changes especially in the European market that we are proactively addressing, creating additional unique selling points, namely the medical device regulation where we are now in a transition phase and we're very much ahead of the rest of the market addressing that and getting certifications for the value propositions that we have. And I think we will continue on this trajectory of having new solutions and new value propositions that build on the healthcare platform as we have in the past.
So I think in a sense you can say we started from a very solid foundation of elements of our portfolio, but where we had to play catch-up is bring that portfolio together and make it platform, round the edges and be more agile around software development and open as integration capabilities, interoperability where I think that that is where we had the most significant progress in the last 2 years. We brought it together, it's a platform now and we are now starting to be really innovative at the edge. I think CDAS is a perfect example, Myco 2 DECT is a perfect example where we are pretty unique in what we're doing. From a cost perspective, we had to play catch-up in this sense and that meant we had to increase R&D cost to a degree. We don't foresee to increase that further in terms of percentage of revenue, but we do want to continue to increase our R&D as we grow our revenue. We don't want to sort of slowdown, we want to maintain the level of innovation that we have today, and with that, we will continue to grow our R&D cost in the same range that we will grow our top line.
Okay, then we come -- is this okay? Then we come to the next question. Is there any further question? Then we have still opened the question with the provision, it's like this. In the extraordinary result, there is a solution of a provision of CHF 1.1 million. This is related to the former division Network Testing which has been sold 2 years ago and the solution and building of provisions in the ordinary course of business sizing is in line with the last year more or less. It's more or less flat, okay? Maybe I'll give you more details as soon as the CFO is back, this is the overall answer to your question.
That makes within the balance sheet the provision decline of -- sorry, the provision decline in the balance sheet of CHF 3 million is linked with the -- to the other expenses from discontinued operations.
[Indiscernible] [ Americo Group Accounting and Reporting ]. So the main decrease compared to the prior period that you are observing is mainly due to first of all FX effects and secondly to the payment of the one company provision to accounting continuing to pay, that's the main reason. So from an EBITDA, it's effectively 0, so we have no I would say 0.2% bad impact on the EBITDA margin in this though, so no benefits from any release. The main release that we had as Daniel Lack mentioned before is due to the network testing and is one-to-one, so excluded from the EBITDA.
We apologize, we had a special situation because the CFO was not available today, but we're happy we can answer all your question. So is there any further question? Otherwise, we thank you very much for coming and we offer you a little [indiscernible] and we are -- stay here for discussing with you like. Thank you for coming and have a nice day.
Thank you very much.