© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, and welcome to the Hexagon Q1 report 2018 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ola Rollén. Please go head.
Thank you. Welcome to this First Quarter of 2018 interim report presentation. And if you go to Slide #4 in the deck, overview of the fourth quarter. Organic growth came in at 7% and that's equal to the recorded growth, which also was 7% and within those 2 numbers, you have a negative FX impact of 8%, primarily the Chinese renminbi and the U.S. dollar. And then you have a positive impact of 8% from acquisitions. We saw 13% organic growth in China, we had 11% growth in Geosystems and 9% organic growth in Manufacturing Intelligence. And we recorded a 62% EBIT margin -- sorry, gross margin and an EBIT margin of 23.8%. We move to Slide 5. Q1 is now our weakest quarter, and that has to do with geographic mix change away from Europe and North America to Asia. But it was our strongest Q1 ever. On Slide 6, we see the key numbers. Net sales amounted to EUR 834.7 million, which is 7% organic and 7% recorded growth. Operating earnings, EUR 198.3 million, which is 12% up from the same quarter previous year. And for those of you who have the old report from 2017, these are the restated numbers according to the new IFRS rules. Earnings per share, excluding nonrecurring items grew by 10% from EUR 0.39 to EUR 0.43. If we move to Slide 7, cash flow. Cash flow from operations before changes in working capital and taxes and interest paid grew to EUR 255 million. If we look at taxes paid and change in working capital, those are really the 2 items that are materially different from the same period of last year. We can see that we paid almost double as much in taxes paid. We also see an adverse impact on the change in working capital, and this is the normal situation in the first quarter for Hexagon. I would say that we had an exceptionally good working capital development in the first quarter of last year. Do we expect significant growth, adverse growth in the working capital, going forward? No. I think this is roughly the level. Typically, we have an outflow in working capital in the first half, and then we have an influx of capital in the second half. This time it was accounts payables where we simply had an adverse effect in our working capital position. We also want to highlight investment intangible assets. There is nothing exceptional in the first quarter, but planning ahead then for your calculations, going forward, you need to take into account that we will acquire a property, an R&D property in Canada, in Calgary, and we've also started the construction of our new facility in China. So we expect it will increase and be in the range of EUR 145 million to EUR 165 million in this fiscal year. Still, in spite of the adverse development of working capital, if we look at Slide 8, working capital to sales is developing well and is now at 13%. This is the function of increased software content and increased recurring revenues. If we had 100% recurring revenues, this would, of course, be negative. So it shows the difference from 100% to where we're at, at the moment. Market development, if we go to Slide 10, sales mix per geographic region. North America, slightly lower than this time last year, 29% versus 31%. We see Western Europe strengthening its position from 31% to 32%. Asia PAC also grew on the back of good development in Australia and Southeast Asia. Slide 11. China reported strong growth, 13%. Eastern Europe, Middle East and Africa were also double-digit growth, and so was South America. North America, good growth, Western Europe as well, but single digit. Asia excluding China, also single-digit growth in the quarter. Slide 12 is for your reference. It's a lot of information but you can see the various segments per geographic area. Slide 13, EMEA. Western Europe recorded 4% organic growth. We saw good growth stemming from a recovery or a comeback to strong growth in construction and infrastructure segments in Germany and France and Italy. We saw weak development in the U.K. U.K. is at record levels but in recent quarters, growth has been somewhat weaker. I think it's -- it would be a guess to connect it to Brexit or anything else, it could also be just a breather in the market. Growth is mainly driven, as I said, by infrastructure and construction via 4 new products like our BLK 360 gaining traction. We've launched that in Europe and North America, and we yet have to launch it in the rest of the world. The recovery is continuing in Russia, and we saw strong double-digit growth for all business units in Russia, and we also saw Middle East coming back to growth in the quarter. Now as you can see on the table to the right, GES is outgrowing IES in this region. If we move to Americas, Slide 14, North America recorded 8% organic growth, and that was once again on the back of strong infrastructural investments and construction market that was buoyant. We saw mining and public safety solutions grow strongly in North America as well. Industry was somewhat weaker. Aerospace, automotive, not as strong demand as the other sectors. Solid Development in new solutions and recovery for PP&M in the U.S. South America is now returning to growth, and we saw double-digit growth in South America. And it's Brazil recovering for the second quarter in a row. Moving to Asia. China recorded 13% organic growth, and that's on the back of continued strong demand from our electronics customers. And we also saw solid development from tier 2, tier 3 industrial enterprises all across China, and we also saw good development in the Smart City solutions. Southeast Asia recorded 28% organic growth. The powerhouse in the quarter was really Vietnam that continues to go from strength to strength. A lot of international companies are relocating their operations to Vietnam at the moment. Weak development in Japan and India. Reporting segments, if we go to slide 17, Industrial Enterprise Solutions. MI grew by 9% organic growth. Auto and aerospace improved globally, but it was really China that was the powerhouse for MI in the quarter. PP&M, 1% organic growth mainly driven by favorable growth in project control software and recent order wins in Korea and China. The Oil and Gas segment was weak, but we do see improvements going forward. So growth is expected to accelerate in the coming quarters. Due to mix, where PP&M didn't grow as fast as MI, we had a slight reduction in operating margin from 24.2% to 24.1% in the quarter. Geospatial Enterprise Solutions, Slide 18, organic growth of 8%. Geosystems recorded a very strong 11% growth, and its new products, the BLK 360, mining infrastructure and construction driving this growth. SI, 5% organic growth. We have good prospects and a good founding for our safe city and public safety solutions. Positioning, still weak market for offshore positioning, but the NovAtel business grew by double-digit growth, backed by strong demand in agriculture and defense. We saw good development for both sales EBIT and operating margin for Geospatial in this quarter. Slide 19, Gross margin. The 12-month rolling is now at 61%, up 1% against this period last year. For the quarter, itself, it was 62%. Slide 20, EBIT margin, 24% in the quarter, which is our seasonally weakest quarter, and 24% on the 12-month rolling. The targets are unchanged. Base scenario 27% and opportunity scenario 28% by 2021. Orders and product releases. We turn to Slide 22. We announced that we're acquiring AGTEK. It's a U.S.-based software company, specialized in planning and productivity software for heavy civil construction and engineering, i.e. roadworks. And our intention is to connect this software to our machine-control solutions, Hexagon machine controlled construction, and have a seamless portfolio of software and hardware solutions for civil engineering and roadworks. On a longer term, we also have plans and roadmaps to connect it to Hexagon SMART Build, where SMART Build would then not only stretch building and construction, but also engineering and infrastructure. Slide 23, driving mine safety through collision avoidance. We've launched a new product called Personal Alert, which is a subproduct for our collision avoidance family of products, where we now have vehicle mounted and personnel mounted sensors that can alert vehicles in the mine, if there is about to be a collision or an accident. And Glencore Coal in South Africa is the first customer that now we'll standardize on the solution. It's actually a -- it's compulsory in South Africa via the Department of Mineral Resources to have collision avoidance systems in South African mines. Slide 24. We've captured a number of orders in the quarter from the mining sector. Reality Capture from Singareni Collieries Company in India, planning software from Fekola Mine in Mali and safety solutions collision avoidance from Codeldo in Chile. Slide 25. We're launching a new product this quarter, called HxGN AgrOn. HxGN AgrOn is a software solution where we connect precision agriculture sensors with the office on large farms to do real-time measurements and resource allocation, sort of ERP system for a farm. And we already closed deals with two Brazilian companies in the quarter involved in the sugarcane industry and that's São Martinho, and then we have Suzano, which is the largest pulp and paper company in Latin America. Slide 26. We got a new order from a major aerospace OEM who wants to remain anonymous, and they will incorporate our simulation solution into their development process for the next-generation aircraft. Major aerospace OEMs use MSC Apex to do conceptual modeling workflows when they design the next generation. And they do this to reduce the design cycle time and avoid potential human errors in the early design stages. Slide 27, we're launching a new product, called BendingStudio with an Absolute Arm and this creates the ability to connect directly to a CNC machine, bending machine, your metrology software. And you have speedy determination of exact geometry to tell whether you're producing scrap or good things. So it's another in-line solution for CNC machines.Slide 28, we're launching the next generation of Adams products. In computer-aided engineering, Adams is a classic software. And we launched the next generation. We acquired MSC in well about this time last year, and we worked hard on refreshing and modernizing this product. And I think it's fair to say that I think we have a really good product in this field now. Slide 29, Managing underground utilities for a Smart City. We got a new order from the third largest city in the Indian state of Gujarat, and they're going to implement our GIS-based project management tool for underground utilities. And that's going to include utilities like water, sewer systems and telecoms. And it's based on our GIS platform, GeoMedia. Slide 30, Predictive analytics for crime prevention. You can use our technology to predict where crime is going to happen and the city of San Pedro Garza García in Mexico is standardizing on our platform and the police will use our platform to predict the likelihood of crime in certain locations. You basically geo-reference incidents and you follow-up over time and you can see when crime happens, where crime happens. And you can man your resources accordingly. Slide 31. We got a large order from the Viennese Professional Rescue service. It's the largest rescue organization in Austria, and they have more than a 100 ambulances covering an area with 1.9 million residents. They manage roughly a 1,000 incidents per day and they used our dispatch solutions to do -- well to improve productivity for their organization. Slide 32. AT&T is using our technology to extend their footprint to another 90 million customers in North America. AT&T is the world's largest telecommunications company, and they have already used our technology for network, design and installation tools, for its landline footprint in the West and Midwest regions of United States. And now they're extending this into the South West regions of -- region of the United States. So it will add another 90 million customers to our platform. Slide 33, Driving innovation with top-of-the-line enterprise engineering software. The PP&M received orders from, among others, FG LLC, which is an owner operator based in Taiwan. And SINOPEC renewed their commitment to PP&M in the quarter. Finally, Slide 34. Internal investments of large scale. We're opening our new campus in China in Hongdao in the Shandong province in China in 2020. It's a 52,000 square meter, state-of-the-art facility, and we're using all our tools when construing this campus. So we use HxGN SMART Build, we use our surveying equipment, we use our construction equipment to build it. We're going to use our security and safety systems to protect it, and we're going to showcase all our technologies for our Chinese customer base so that we have a Chinese demo center -- state-of-the-art demo center. In July 2018, we inaugurate our new R&D facility in Calgary in Canada. Calgary is our R&D center for the Positioning Intelligence division, and we develop GPS or GNSS technologies in Calgary. It will house roughly 600 employees. I think this is what I wanted to point out when you calculate investments, going forward. We're going to have investments of EUR 90 million to EUR 110 million in this fiscal year, related to these 2 new facilities. So you should budget for tangible assets investments in the range of EUR 145 million to EUR 165 million in 2018. Finally, from advertisement, we have a Capital Markets Day in Las Vegas in connection to our user conference HxGN LIVE 2018. Hexagon LIVE will kick off from the 12th of June and last till the 15th of June, and we will have the Capital Markets Day, the day after the 13th of June in The Venetian, Las Vegas. If you're interested, please contact us at cmd@hexagon.com.So in summary, Slide 37. Strong growth in Geosystems, Manufacturing Intelligence, an excellent start, to a hopefully good year for Hexagon, another good year. 13% organic growth in China, continued robust demand from the electronics industry. Positive development in PP&M. Growth excepted to accelerate in the quarters to come. Strong profitability despite this significant euro strength that we currently see in the market. And with that, operator, we've come to the final Slide of my presentation, and we're now ready to open up for questions.
[Operator Instructions] We will take an opening question from Guillermo Peigneux of UBS.
Guillermo Peigneux from UBS. Just a couple of questions. First regarding China. As you highlighted, China is a little bit slower, but still strong growth in electronics and Smart City. I was wondering whether you could point what was slower in the quarter. What industries were lower? And whether this is just the base effect? So that's the first question on China. The second on PP&M. Can you give an indication of the magnitude of recovery that you point to in the press release regarding PP&M recovering in the subsequent quarters? Is there any orders at hand or any activity that you could highlight us helping for us to address the magnitude of recovery there?
I don't think you can address the magnitude of recoveries, that's up to our salespeople to do. So I will pause on that, I'm just stating that it's -- we believe it's going to grow faster in the quarters to come. And if you listen in on the 31 of July, I will tell you exactly how much it's grown. When it comes to China, yes, it's a slowdown compared to Q4. I still think 13% organic growth is decent growth. What we saw sequentially slowing down, was certain parts of the manufacturing industry, like auto for example that didn't grow as fast sequentially as it did in the fourth quarter. Is that a long-term issue? I don't know, I think long term and then my outlook is the next 4, 5 years. I think we're going to see good growth from the auto industry, simply because all auto manufacturers now need to provide 3 platforms. It's been combustion engines up till now. Now it's going to be combustion engines, hybrids and electric cars. And this is putting a lot of pressure on their investment budgets, and especially in China where we see a lot of local manufacturers switching to electric cars.
And can I explore up on Smart City? Can you comment on how many cities in China have you already received orders from?
It's less than 5, right now.
We will take our next question from Markus Almerud of Kepler Cheuvreux.
Markus Almerud from Kepler Cheuvreux. Starting out with Geosystems, you said that infrastructure is one of the key drivers. Can you talk a little bit about the regions, which regions stick out? And then I -- if I can also ask on the new product, you say that there's about 2 percentage points of the organic growth. This is new products. Which products to account? Is it mainly the BLK 360 or are there others as well?
It's -- if we start with a new product, I would highlight 3 products -- product lines. It's our GeoRadar solution, where we use radar rather than laser to predict mudslides, landslides, rock falls and so on. And we see really good growth for that. We use a similar technology to create so-called ground penetrating radar where you can locate assets underground like fiber optical cable, sewage systems and so on. And in general, you could say the GeoRadar solution is gaining a lot of traction in the market. The second product line would be BLK 360, which has really good growth in the quarter. And the third solution, I would point that is our new vision technologies in MI directed towards the electronics industry.
Okay, thank you. And when it comes to the infrastructure, what any regions that particularly sticks out across the board?
Now it's Central Europe, driven by France, Germany and Italy, which is coming back. And this is the first time we see solid demand in Central Europe since the financial crisis. But we also saw a return to growth in North America, primarily United States actually.
And then finally, if I can just ask also on manufacturing. I'm a little bit surprised that you see weak demand in manufacturing in the U.S. Can you just talk a little bit about that and what's behind that and the specific area of manufacturing that is behind, et cetera?
It's primarily aerospace, and I think it's a changeover of models.
Our next question comes from Stacy Pollard of JP Morgan.
Just a few from me, please. Operating margin seemed to have held up relatively well, particularly in light of the FX headwinds. Could you provide some more details around product mix and the improvements in your cost structure? How that's progressing? Second one would be just about M&A. And then -- how are you seeing the valuations in the market on that? And then third question, any changes in the competitive position either in PP&M, so for example, of course, we have seen Aveva and Schneider come together. Any thoughts on that? And also within MI or metrology or even agriculture, it sounds like you're trying to be more competitive there as well?
Okay. Cost wise, the benefit we got cost wise. Well we have 2 benefits in our cost structure, or 3 actually. We have product mix, we have the cost rationalization program that we launched in the first quarter of '17. That is now giving us cost reductions of in the tune of EUR 10 million per quarter. And then thirdly, what we do have as an improvement FX wise is the weakening Swiss Franc, where we have cost in Switzerland, which in euro is becoming less expensive. So that's the cost side. And if you do proper calculation on our incremental margin on the EBITDA level, it was actually 60% in the quarter, which is a very good drop-through for a quarter. So cost is under control. If we talk about M&A, I would say that's not under control. Some of the multiples that we see in our market right now are outright crazy. it's -- we backed out of the, I don't know, 4 or 5 processes in the past 6 months, simply because of price. But you can still find really attractive acquisitions, but you need to be very picky right now and buying the stuff that gives you good synergies. And hopefully we're going to come back to that.
And then competitive?
And then -- and competitive situation, no, we haven't seen much change in the competitive landscape this quarter. Agriculture, yes, we were trying hard to catch up with the leaders in that industry. And it's fair to say that apart from our GNSS solution, we're very small at this moment. But AgrOn will hopefully help us grow that segment much -- to a much larger size.
We will take our next question from Mikael Laséen of Carnegie.
All right. I also had a question regarding your margins mainly in the Geospatial segment where incremental margins, were really good. Can you explain this in more detail why they improved so much? I guess, after [switch] from one thing?
Sorry, I can't -- there is a very -- there is a bust on your line.
Okay. I will try to call in again and see if I can get through.
Yes, we will wait for you.
We will take our next question from Daniel Djurberg of Handelsbanken.
Starting again with the PP&M, you stated that you will see pulling improved growth in coming quarters. And then -- is this partly, of course, oil and gas recovery? Or is that more of a 2019 happening to start there?
I definitely hope it's a 2018 happening. It's not oil and gas related. We worked hard on penetrating other segments of the market. So hopefully oil and gas, it seems to be at the bottom. We plotted our sales of seats -- software seats to the CapEx cycle of the oil and gas sector. And there is fantastic correlation between the 2. And CapEx seems to be improving slightly in that market. But as I said, at the same time, we've worked hard in this downturn to penetrate new segments of the market. And we expect good wins from those segments.
Okay, thanks. Another question if I may would be regarding your prediction analytics. There is a lot of talk about artificial intelligence, et cetera nowadays. I was thinking it's -- are you using your own analytics, IPR? Or do you buying this from third party, et cetera? If it's your own, can you [ indiscernible] license this [indiscernible] for selling? Any comments on that.
We have our own analytics and we're building our own AI group right now with competencies from around the world for various applications. We see it being used in all our divisions. So it's a group project and we connect it closely to our IoT platform. And we've been looking at models where we could license out the entire package IoT connections, orchestration, analytics and presentation on the mobile platform via our technology. So it looks quite promising actually.
Interesting, we will hear more about that in Las Vegas. Another -- last question would be on Smart Build. I know it's still early days on them. But now you have also AGTEK integration ahead. So can you say anything about how AGTEK will change size of the frame relative to [indiscernible] trend when that will happen?
The basic fundamentals are the same and that is we're not a BIM. The BIM is beautiful 3D model. We want to create almost an ERP system, something that you can work with when you build stuff. And so far, we've tried to encompass building construction, i.e. when you erect buildings. With AGTEK, we can now look at connecting infrastructure, civil engineering projects like bridges. I know some people in the construction industry call it flat or horizontal project rather than vertical if that makes sense. Vertical projects would be building and buildings in horizontal would be roads, tunnels, bridges and so on. So we believe that we can finally connect SMART Build with that construction process as well.
We will take our next question from Gal Munda of Berenberg Capital Markets.
Hello, can you hear me?
Yes.
That's perfect. I have got a few questions. The first one is just if you can comment on the recent consolidation in construction industry, especially on the recent build that your competitor in India is there. Is that's something that is adding additional pieces of the BIM puzzle important for you at this stage? Or are you more relying on building your own? How do you think about build versus buy in that sense, especially in light of the multiples you mentioned? And then the second one, which is to be connected with -- in connection with MSC. I don't know if you can comment, give us any clarity on the growth? How it's progressing? You mentioned one important wind on Apex side? If you have any color on that, that would be very helpful.
Thank you. No, we had a vision long ago for the construction industry and thus, we acquired PP&M in the Intergraph, and we got the platform and the foundation to create SMART Build. So I wouldn't say that we're always going to make bolt-on acquisitions when we expand into a market. But I would say that the basic fundamentals for SMART Build are now in the hands of our developers. We don't need to make huge investments in terms of M&A to realize our vision in the construction market. Regarding MSC, they grew 10% organically in the quarter.
We will take our next question from Max Fryden of Danske Bank.
Just 2 questions from me. The -- follow-up on the sales contribution from new product. It's accelerated during the second half and in Q4, and now it seems to have decelerated in the Q1 2018. Is this sort of the contribution profile, if you can say so, from new products? Or should we expect this trend to turn here into the second quarter?
First of all, I need to make a correction because in an interview earlier today, I stated 2%, and we have since checked and it was actually 3%. And that is a sequential slowdown from Q4 where we said it was 5%. I think the cycle for Hexagon is very much connected to Hexagon LIVE. We run Hexagon LIVE in June. All divisions are targeting product launches at that conference. So then you get to cycle where you see some [reduction] in the third quarter, fourth quarter, and then it's trailing off in Q1, Q2 only to strengthen, again, in the third quarter. So that's our cycle typically.
Very clear, thanks. And just maybe on Manufacturing Intelligence organic growth, you have seen very strong growth in electronics then we got a mix of comparables there, and you mentioned automotive CapEx slowing slightly here in the quarter. And then if we look at the historical growth rate in that mile 7% to 8% in the past 2 to 3 years. In comparison to that, what growth drivers should we take into account here in the near term in order to continue that very strong track record?
I think that in the near term, it's the same growth drivers up in Q4 and Q1. It's going to continue to be electronics for a while. It's going to be -- I think we're going to see a return to growth in aerospace. I expect automotive to look a bit better. And what we also saw in the quarter, which hasn't really happened since 2011 that is Tier 3, Tier 4 customers starting to invest heavily in our technology.
We will take our next question from Mohammed Moawalla of Goldman Sachs.
The only question from my end, Ola, you talk a lot about sort of penetrating video solution set in a lot of OEMs, but as you kind of increase your share of wallet in there, how do you think of the extra supply chain opportunity within these OEMs? Is this a sort of further accelerator down the line? I don't know is there a way to kind of size some of these opportunities within supply chains of sort of major OEMs?
It's very difficult to size it, but you're absolutely right. As you penetrate the Tier 1 players in an industry, there is going to be growing demand for Tier 2, Tier 3 and Tier 4 to standardize on the Tier 1 solutions. You've seen that in the software industry where you want to integrate into a large company, CLP System and have seamless deliveries, for example. It's similar in our industry. So think of a construction work site where you have a huge contractor that subcontracts a lot of work to small companies. These companies need to be connected to this information system. Otherwise, it's useless and pointless to be left in that system. So I do believe that over time, you will see an acceleration. We're definitely seeing it in the automotive field where we've been for the past 18 months -- sorry, 18 years. And I expect that to happen in other industries too as they digitalize their workflows.
Okay, and if I can sneak one more in. Can you kind of give us an update on sort of these Smart Solutions and sort of revenue contribution from those also? I know Smart City has been a focus area. And how sort of the pipeline is evolving on those kind of product sets?
Pipeline is evolving. It's -- I think it's a stepwise process. I couldn't back out them right now sitting here but I can give you a number off-line later on.
We will take our next question from Gerardus Vos of Barclays.
First on the BLK360, when do you expect that to launch in the rest of the world and outside North America and Europe? Should we expect some tick up in Geosystems because of that in the second half of the year? And then, secondly, could you remind me about the negative FX impacts you had on the quarter on the margin?
Okay. BLK360, we are actually trying to fulfill the need in the market in North America and Europe as we speak. So it's going to be an H2 question when we open up in the rest of the world for deliveries. And when it comes to the margin, the impact on the margin, it was EUR 14 million. On the top line, it was EUR 18 million EBIT -- negative adverse EBIT impact on EUR 16 million adverse sales. So it's a 30% incremental margin on the FX.
Okay, so a EUR 16 million impact top line, EUR 18 million on the EBIT.
Yes, 1-8.
We will take our next question from Mattias Holmberg of DNB.
Oli, Mattias Holmberg from DNB here. I have a couple of questions on the BLK360 as well. So you just mentioned here that you are trying to fulfill the need in North America and Europe. Am I reading into this too much by hearing that you're maybe struggling a bit with getting out of volumes that the market is requesting? And then another question on the BLK360. Is that -- please correct me if I have misunderstood this, but I've heard that you only sell this online. So sort of stepping away a bit from your traditional route to market. Is there -- could you please just elaborate a bit on your thoughts of this new approach?
So it's absolutely true that we have -- it's a brand-new product. It's the first in its family of a new generation of products that Geosystems is designing and planning to launch. So we're going to see more black products in for future. But we're catching up. So I don't see this as a long-term problem to gear up and fulfill the needs in the market. It's true that we started launching it as an online product, and we've only sold it online. That was a collaboration with Autodesk where we had a package deal. You could buy Autodesk's BIM software as a package together with BLK360. We are, however, going to sell it through more traditional channels as well as it's maturing.
Great, that is very clear. And a final one from my side. Looking at the FX, we've seen the Swiss franc weaken quite significantly in value versus the euro, and I know you have quite some exposure at least to the Swiss franc. Could you please just remind us a bit about the dynamics here? And if you can expect some kind of offset versus the dollar and other currencies here in the coming quarters?
Yes, I mean, the negative effect is stemming from the Renminbi and the U.S. dollar if you simplify life. And then the risk of positive impact, not on top line but on bottom line from the Swiss franc. So you're absolutely right. We -- it would've been even worse if the Swiss franc have stayed where it were, but it weakened in the quarter against the euro as well.
Would you be willing to share any sort of significance of the Swiss franc in this quarter? How much it would've been without it?
We had a net effect of minus 18, and we had a positive effect of roughly EUR 5 million from the Swiss franc from the bottom line.
We will take our next question from Erik Golrang of SEB.
I've few questions. The first one is returning to the modeling strength in Geospatial. I think if I'm not wrong, it's the first time that we're seeing Geospatial higher than industrial in terms of operating margin. I don't think if you think that most of us probably assume that, that won't be the case long term. But is that something that we would have to rethink perhaps? And then the second question. I had a bad line when you talked about the working capital impact on cash flow. If you could repeat that and also in relation to the increase we saw in prepaid expenses and include income quarter-on-quarter. And then finally, some thoughts on where the new product AgrOn in the agriculture space, how do you think about your position here now? Why it's better compared to when you try to penetrate this segment, perhaps, historically?
Well, I wouldn't bet that Geospatial would have a lower margin than Industrial. I think it's going to be neck-on-neck. And I think they're going to compete fiercely internally who has the better margin. I would definitely not rule out good margin expansion for Geospatial. When it comes to working capital, my comment was that typically, we have a working capital build up in the first half of the year, and then we had working capital release in the second half of the year. And '17 was an exceptionally good Q1 when it comes to working capital. What happened this time around was that it was accounts payables that shrunk in working capital, and thus, we tied up more working capital in the quarter. And then you had a question on AgrOn. And I would say that when we launched our precision agriculture product portfolio from 10 years ago, we were late in the game, and the OEMs had already started integrating precision agriculture functionality into the cab of the tractors. Since then, we've changed strategy and PI, Positioning Intelligence, is now delivering GNSS components to the OEMs to their factory lines. So it becomes an integrated factory option very much like the automotive industry when it comes to SatNavs. And what AgrOn is trying to do is to address the entire farm or plantation where you need to orchestrate and synchronize traffic in the fields, fertilizer, follow-up with satellite imagery and, well, follow through productivity on a farm level rather than on a tractor level. So that's the big difference.
Just a follow-up on the first one in Geospatial. Is it SI and Geosystems both contributing equally to that model improvement? Or is it more Geosystems being given the -- that the new product launches you have there?
I would say all 3 contribute, but of course, Geosystems is contributing the most. But then you shouldn't forget PI, which had a record quarter.
We will take our next question from Wasi Rizvi of RBC Capital Markets.
A couple from me. Firstly, on the FX impact on EBIT, you've given a group level. Is it possible to get an idea of how that split by division? And I guess, in the commentary you mentioned clearly that it may be a bit more [IES]. Some numbers would be helpful. Then also just to understand the dynamic of how that works, whether there's any kind of lag in terms of shared risk we're viewing in the profit impact?
Yes, I mean, if you dissected and we have a positive impact from the Swiss franc, which is almost to its entirety related to [ Geospatial ]. You have a much more severe negative impact on [IES]. So that's absolutely true. But I don't have the numbers from top of my head.
Okay. And then the next one was on electronics. Have you got an idea of your customer concentration? I mean, what is the top 3 or 5 represent of your electronics sales and how does that compare to how it was maybe a few years ago?
A few years ago, it was very easy. We had one customer. And since then, we've penetrated several accounts and now we have maybe 6 to 10 top customers.
Great. And then just finally on autonomous vehicles. Can you give us an idea of kind of what's your total exposure to that through various bits and what kind of growth rates you're seeing? And then in the business you do have, what kind of market positions they have? And what relationship they have, whether it's for the OEMs or whether it's kind of Tier 1 suppliers?
We have a good position in autonomous vehicles, and currently, we're engaged in the positioning side with its Positioning Intelligence, and it's strong double-digit growth. I would say that we're probably involved in all -- almost 100% of all platforms being developed right now. But more on that in Las Vegas. [indiscernible] rainy day, not that it rains in Las Vegas but...
We will take our next question from Alex Tout of Deutsche Bank.
Just a couple. So on the CapEx guidance, the tangible CapEx guidance, just why is it so much higher than we've been used to? It's about -- you're looking -- you're guiding at about 3x the rate of the last few years, and it seems to be driven just by two major side developments. If you can just give us a bit more color on why these are such expensive developments. And does CapEx then drop down back to those more normal levels from FY '19 or even slightly below those levels in compensation for the spend this year? And secondly, just on the growth outlook, I guess, how do you see the net of growing momentum in PP&M, Europe and Brazil potentially for better performances in auto and aerospace versus much tougher comps coming up in China and GES, generally, already having done very well for some time now?
Let's take the first one. The second question was a really long one, so that one we have to come back to and dissect a bit. But take the first one, with CapEx. Well, we're building a state-of-the-art facility in Calgary for 600 people, and that's roughly the cost to do that. Secondly, we're building a state-of-the-art campus in China, where we're going to regroup all our operations, our strategic operations in China, which is our second largest market. So unfortunately, that's the cost you have to pay. Why are we not leasing, like, some companies do, simply because the IFRS rules have changed, and there's very little difference nowadays leasing or outright buying property. But this is just something we have to get used to. What's going to happen in '19? Well, it's going to be around EUR 25 million additional investments in Hongdao in '19 and another EUR 25 million in '20. In '21, we're moving our staff from the current facility to the new facility, and then we're going to have a positive impact on fixed assets simply by releasing the capital currently employed in that facility. So that's the profile of the outlay. Net-to-net, we were not sure if we're actually going to make or if it's going to be cost at the end of the day because the current facility is appreciating every year. And then your second question on outlook, and you've mentioned many segments. Could you pose that question again?
Yes, sure. I was just kind of touching up the puts and takes around growth. I mean, it looks like growing momentum in PP&M, Europe, pretty strong, may be accelerating. Brazil seems like it's certainly accelerating versus the second half of last year and the potential for better performances in automotive and aerospace. And then you set that against what becomes much tougher comps in China from here and the GES part of the businesses being strong for a little while now. I'm just wondering what you make of that in terms of the growth outlook for the year? Can it accelerate from the first quarter over the coming quarters? Or does it look like the headwinds grow?
Well, we're going to see -- the one who lives will see. So if you call back on 31st of July, we will know.
Any difference to that analysis of the headwinds and tailwinds that are coming up? Or is that more or less how you see as well?
I think -- let me put it like this, and this is probably the politically correct answer, and then we have to explore this question a bit further up at the Capital Markets Day. But we're probably going to grow above our long-term target that we set about in 2016 of 5% organic growth between '16 and '21. This is going to be one of the years that -- where we're going to beat that number. That's my firm belief. And then we'll see by how much?
We will take our next question from Alexander Frankiewicz of Berenberg Capital Markets.
I'll ask two quick questions. Firstly, just what was the contribution of new products in the quarter and where do you see this going additionally on BLK360? What was the contribution from that in terms of the organic growth for Geosystems? And what would Geosystem have been ex BLK360? And then, secondly, for AgrOn, just what were the -- who were the main competitors for AgrOn, and how do you see that developing? How do you see the competitive market for that? And how does Hexagon plan to take share from them going forward?
New product, we commented that before, it's 3% of the organic growth in the quarter, and we've also said the cycle is you release new products in connection to our user conference in June. We've seen upturn in Q3, and then acceleration in Q4, and then typically trails of Q1 and Q2, and then you'll start all over again. So that's a typical cycle for new products. Regarding AgrOn, we haven't seen a head-on competitor, but both Topcon and Trimble would be companies that are aspiring to the same position. And then, you actually have some fertilizer companies exploring if they can launch products in the agricultural area.
Okay, thanks. And then just also on organic growth of Geosystems. Do you know what that would would've -- what BLK360's contribution to that wasn't what it would've been ex BLK360?
It's not just BLK360 fueling growth. We launched a new GPS solution where you can tilt the pole. We've launched new Imagery Programs, and so there's a variety of new products contributing to the 11% growth. But I'm not going to single out one number.
We will take a follow-on question from Guillermo Peigneux of UBS.
Ola, I wanted to know your opinion about agnostic metrology software and the combination of [indiscernible] metrologic. Is it posing a threat for you at all maybe long term? I guess, what's the reason? What acquisition? Also you commented really on the multiples, but I wonder what your opinions are about the combination of those 2 businesses and at mostly software and metrology?
I can't comment on the combination, but I've heard this expression earlier today agnostic metrology software. And I didn't know what it was. But it's sad to say that over the 18 years we've been involved in the metrology industry, there has been a move towards open interfaces. So it's nothing new. We are selling our software on [size] machines and [size] is selling its software on our machines. And it's simply a retrofit package that you offer customers if they do want to change, but I think even more important is what you do with the data from these platforms. And what we worked hard in the industry is to standardize the data format so that the user can download the data from various platforms into one database. And that is really the important angle for the user.
Okay. And can I maybe -- again, it's very early stages, but I think one of the key synergies they're talking about or the combination of, not the specific names you mentioned here, but the combination of potentially cutting tools technologies and metrology technologies is to do in-line measurement as opposed of off-line measurement. Is that something that could be a threat to Hexagon? Or is something that is completely different from the business you're in at the moment?
No, absolutely not. On the other hand, I think that we are the leaders in in-line measurement, and we are driving that change. You need -- if you want to participate in smart connected factories, you need to launch in-line measurements. And that's going to happen in all sorts of production facilities, anything from stamping presses, robot operations to CNC machines to end assembly line. And we've talked about it in our Capital Markets days where we say, quality drives productivity. And we're going to see a new way of using metrology data in the manufacturing chain, and it's quite exciting actually.
We will take our next question from Mikael Laséen of Carnegie.
I have three questions, quick ones. First of all, can you help us with the acquisition-driven growth in Q2? I guess, it will be significantly lower. I mean, I'm just thinking about then they're already done deals?
Yes. If you've done the deals, it should be lower in Q2 absolutely. I mean, MSC is the big acquisition. So I think it was in Q2 of '17 for one month.
Yes, and you've done also other transactions that you have not announced, so that's why I'm asking.
Yes, we'll see.
Okay. And the second one is deferred income. Maybe also that's already explained the increase that you had in Q1, it was 48% of sales, and last year, it was 40% basically. What was the reason behind that?
I think it's the consolidation of MSC.
But it was also lower in Q4 when you had MSC software.
Yes, but then we've grown the deferred income, and that's typical. So we've -- the order growth has been stronger than the invoicing growth in the first quarter. I mean, what happens is you get paid, you book your deferred income, and then in subsequent quarters, you invoice. And if you have a very strong order growth, but maybe not delivery, if you can talk about delivery for software, then this happens.
Okay, so it's mainly organic and also mix effects or IFRS effects or things like that, that is disturbing that?
No, not that comes to mind sitting here. I would explain it with stronger order intake in the software business.
Okay, and good. The last one is regarding the MSC apex order that you got from the cost manufacturing. Didn't you have that already, that customer? So the net effect, what is that really?
The net effect is that MSC is growing by 10% organic growth in the quarter, which is slightly stronger than some competitors.
Okay. So they are expanding a share of wallet, really, with that order.
Yes.
As we have no further questions, I would like to turn the call back to the speakers for any additional or closing remarks.
And this was an exhausting Q&A session so I have no more further comments. And I thank you for listening in, and we can do this again on the 31st of July, if you so wish. Thank you, everyone.
Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.