Datagroup SE
XETRA:D6H
Earnings Call Analysis
Q1-2024 Analysis
Datagroup SE
The company demonstrated a commitment to organic growth through client retention and new client acquisitions, leading to a service revenue increase of 4.2% compared to the previous quarter. Despite facing overall revenue decline, caused partly by cyclical effects and the loss of pandemic-related businesses like vaccination centers, there was an encouraging development in service revenue. In addition, the company has pursued inorganic growth through strategic acquisitions of CONPLUS and iT TOTAL, aligning with its annual target of 2 to 4 acquisitions.
Approximately EUR 1.5 million have been allocated towards investments in emerging technologies such as AI, cloud computing, and cybersecurity. This investment aims to automate the company's core CORBOX production and reinforce the newly established DATAGROUP Cybersecurity unit. These moves suggest a forward-looking stance to secure future competitiveness and meet the evolving needs of IT service production with an emphasis on security as a key success factor.
The company secured important contracts, including a EUR 5.3 million annual revenue contract with a chemistry enterprise for on-site support and a similar valued contract with a power generation enterprise for managed IT services, indicative of the company's growing capabilities in cloud services. These wins, in part driven by the company's investment in technology, have set a solid base with more than EUR 15 million in new revenue, boosting confidence in the company's ability to support organic growth once transition periods conclude.
CONPLUS offers an entry into the smaller enterprise segment with about 250 customers, complementing the company's existing services and enabling cross-selling opportunities. iT TOTAL strengthens the company's foothold in the Southwestern German market with a diverse range of 200 customers. These acquisitions, valued at EUR 11.2 million and EUR 6 million respectively, represent a firm step in the company's inorganic growth and are expected to contribute to revenue from Q2 onwards.
You don't have any saved screeners yet
Welcome to the DATAGROUP SE conference call on the Q1 figures for the financial year 2023-2024. [Operator Instructions] The presentation is also available for download in the Investor Relations section on DATAGROUP's website.
I would now like to hand over to Mr. Andreas Baresel, CEO; and Mr. Oliver Thome, CFO of DATAGROUP. Please go ahead.
Yes. Good morning, everybody, in this round. I hope I'm a bit better to hear than Anke and I'm very happy to welcome all of you together with my colleague, Oliver Thome, to present our Q1 figures.
And let me say, we have a quite a remarkable Q1, first quarter where we were extremely successful in new order entry. We will show you more details on this during this presentation, but also a quarter where we are in full speed mode, what means investing in our future topics, which are AI technology, security and cloud technology, and also a first quarter where we've started first fiscal year without any special effects. So quite remarkable and Oliver and I will show you more details about this now. And I think it will be a very interesting presentation, and I'm happy to have more than 30 participants in the call now, and we can start.
So -- but for the start, as always, for these of you who might be the first time in the call and the first time in contact with DATAGROUP, I would like to say some words at the beginning about who are we, what are we doing? DATAGROUP, we are the leading German IT full service provider in the German IT service market. We have about EUR 500 million in revenues and up to now 3,500 employees, all of them are more or less in Germany. So we are making IT purely made in Germany, and we are doing this with 30 locations all over Germany quite close to our customers. And we have a quite solid balance sheet ratio you will see more details on this.
What means IT full service? IT full service means we are helping companies to increase efficiency, save costs and skilled labor in running their IT -- in running their IT environment. We are doing this with the so-called CORBOX. The CORBOX is a full service suite where a midsized company or midsized public organization can purchase all IT services they basically need to run their IT and we are doing this with a high share of long-term contracts. So we are typically making a 3- to 5-year contract with our customers about running their IT in the next years.
These contracts are typically started with the transition period and then are run for 3 to 5 years. And if the customer, what in most cases the case, is happy and satisfied with our service, they prolongate these service contracts for another contract period. And typically, these customers stays for 3 to 5 contract periods. So what you have to keep in mind, if we win a new customer, that's the start of a relationship for more than 15 years, very often.
We are doing this for a quite wide customer base. None of our customer exceeds 5% of our revenue. So no cluster risks. And also, we are doing this for a quite wide range of industries and [ branches ]. So we have real industry, automotive, chemistry, but also public sector and the financial sector, so well diversified all over the different industries because our basic product, the CORBOX IT service, is more or less the same independent of the different industries, the topics and the core competencies are the same for all these industries.
So also there are now branch or industry-specific cluster risk. We are with this business in the core of the overall worldwide digitization trend and also are in the core of the potential of the future topics was also part of our investment strategy at the moment concerning artificial intelligence, AI, security -- IT security, cybersecurity and also the overall cloud trend. So we have a quite dynamic situation on our market concerning new projects growth and also change of the customer environment.
And also part of our DNA is a quite strong and organic growth. We have done more than 30 acquisitions in the last years since we started with this strategy. So an organic growth, what means buying companies, integrating companies into the CORBOX service model is part of our DNA. What also means a lot of transformational work, bringing companies into DATAGROUP, transforming their more or less classical revenues into CORBOX revenues with strong margins.
I have named this CORBOX, our full service IT suite. Let's go a bit more in detail what that means. The idea of the CORBOX is to provide services as a product approach. So standardizing services as much as you know it from a product and that's the idea behind CORBOX. And based on this standardization, we can produce these services like an industrial enterprise. We have economies of scale, the more of the services we provide. And with the standardization level, we also can reach a high quality even if the single customer situation is a bit smaller, and you have a wide standardized production suite for these services.
And the other part of the CORBOX box, you see it here on the right side. It's a modular approach. So a customer don't has to start and decide, I want to fully outsource everything to DATAGROUP, what's kind of a big decision of midsized companies. He can start with only some of these service modules. One of these 9 service families, you see here on the right side, and then can decide to further give us other services on the way in further outsourcing services. So with this modular approach for us also cross and upselling after the first time winning a customer is a quite important part and part of our organic growth.
And with this approach, I've said the single customer situation, it's not this big. We are addressing small- and medium-sized companies with an annual revenue from EUR 100 million to EUR 5,000 million. And for these midsized companies, it's also important to have this close relationship. And that's why we are addressing these customers from a local and a regional approach with a lot of data group units in the different German regions where they can have a close relationship to their customers on an eye height level in the customer relation, but behind, we have a kind of a standardized and industrial life service production with -- where we are producing these 9 service families with all their detailed services behind.
And with this. We call it DATAGROUP production model approach. We are running this business. And as I said, you have to see this as a long-term customer relationship business. So when we win a customer and we will show our track in the first quarter on the next slides, it takes typically 9 months -- 6 to 12 months, 9 in average, where we are first ramping up the customer. So following IFRS principles, you don't see any revenues in this space. And then after this 9-month ramp-up period where we are boarding and building up all the services, the customer will consume in the future, these 3- to 5-year contract period starts.
And that's because this kind of -- this business is quite sticky because after a 9-month transition period, you don't change providers just because it's some [indiscernible] cheaper in the next contract period. So after a contract period, if the customer is satisfied and with our CORBOX approach, we can deliver services on a quite high level of quality, he typically renews his contract in the next period. And on average, our customers [indiscernible] 3 to 5x. So we have a range from 9 to 15 to 25 years in an overall customer relationship. And that's what makes this business quite slower in the development, but very, very long term and sustainable. And like we said it on the first slide, rock-solid.
And you can imagine for this development, the win -- the order intake of new customer is one of the important success factors. And there, we can report for the first quarter that we have a kind of a record quarter. Since this -- I think it's now 12 years that I'm with the company, I think it was one of the quarters with the most and biggest order intake ever. So we have won 30 new CORBOX customers, so totally new CORBOX customers, which are there at the start of this journey I just described with our service approach.
These 30 new customers brought or will bring an annual additional revenue growth of EUR 15 million to DATAGROUP. Of course, like we said, they all have to run through this transitional period of an average 9 months now. But after this period, so maybe in the last quarter of this fiscal year, but definitely in the -- at the start of the next fiscal year, this EUR 15 million will come to additional organic revenue growth. And with this order intake, we have nearly fulfilled our full year targets now and we have still 3 quarters to go. So I'm quite confident that the overall year '23-'24 will be one of our best sales years ever.
And it's quite interesting that we see this big demand at the moment, even in a more weaker economic environment in Europe and Germany at the moment. So it's a kind of a proof that even in this situation of the economic environment, IT outsourcing is one of the levers to address the challenges companies have at the moment. And therefore, we are quite confident to continue the strong order intake also in the next 3 quarters.
Besides new customers, we also were very successful in cross and upselling. So as I said, addressing new service families, new projects for the existing CORBOX customers and also with the contract extensions. As I said, it's important not only to get new customers, also renew the one we already have. We have a good basis, which we can set up on for further growth. And you will see this also in the numbers that we have a service revenue growth of 4.2% compared to the last quarter.
Oliver will come to the detailed numbers later on even if we see we have a less overall revenue compared to the first quarter of last year because of special effects, we see that we have a growth in the service revenue. On the other growth column, the inorganic growth, we were also quite successful in the first quarter. We managed to acquire 2 new companies. I will introduce them shortly in the next slide.
It's CONPLUS and iT TOTAL. So for our overall goal of 2 to 4 acquisitions per year. We have also managed to reach a big portion of these goals already in the first quarter, and we will see what the acquisitions, the M&A pipeline will bring up in the next 3 quarters also for this year. On the other hand, we already announced it last year that we will invest strongly in new and future technology topics within this year. We are in kind of full speed mode at the moment now. So part of our results are, at the moment, approximately EUR 1.5 million investments in the technologies, AI into cloud technology and also security.
You might remember, we have taken over an AI team, which brought also a specific AI technology for using AI for IT service production -- to automize IT service production. We took over the team at the end of the last year in the last quarter and they are in full operational mode, and we have started to work on the topics to automate the CORBOX production at the moment.
For security is the same. We have founded our new security team, the DATAGROUP Cybersecurity unit with also an additional team of experts, another investment in future technology because we think security will be the decision-making factor about IT services in the future. Only if you can provide secure services, which make -- keep the customers safe from all these security issues, which are out there, then you can be successful. So that's another part of this investment situation we have at the moment, which you also will see in our results.
So that are the highlights I can summarize for the first quarter. And I now would like to go a bit more into detail that you can better imagine what's behind these -- all these points. I have hear an overview that you see this wide range of new CORBOX customers we've won in the first quarter. And you see also that there quite theare big contracts amongst these.
We have, for example, special chemistry enterprise, where we acquired on-site support contract for the next 3 years, which will be after starting the services end of this fiscal year, an annual revenue of EUR 5.3 million on a total year basis for the next 3 years. We have another example, [indiscernible] power generation enterprise where we have acquired and won the full service contract for all managed IT services, also including a big cloud part, big public and hyperscale cloud service part, which is a quite typical situation and which also shows that our investments in these technologies, which we are doing at the moment, is -- are quite important to be able to win these contracts.
And this contract has a 5-year duration and an annual -- will have an annual duration revenue of EUR 5.3 million per year. And another example in the lower area, defense company part of the public sector, more or less a defense organization or belonging to the defense sector. They also provided us with the management of their IT services for the next 3 years with an annual base of EUR 3 million revenues per year as soon as a transition period is over and they go on to run mode into the service mode.
So if you calculate all these together, you see we are quite really above this more than EUR 15 million. And these are all new wins from the first quarter -- and we will see what the next quarters bring. So I'm quite confident we will make a very big step supporting our organic growth in this year as soon as the transition periods are over and these customers go into service.
The other part of our growth story are the inorganic growth, our acquisitions, and I would shortly introduce to you CONPLUS and iT TOTAL now because they are really good examples for a more strategic M&A we are focusing at the moment. CONPLUS is a company which is focused on the small and medium enterprise segment, which is a bit below the one we typically address with the CORBOX business. The first acquisition we made in this area was the Hövermann Group we acquired some years ago. And the decision with Hövermann was also to enter into this smaller segment of companies as we saw this might be another segment which we could address with this kind of industrialized service approach and which can be very profitable as soon as we grow more service volume in this area.
And CONPLUS is a strategic add-on acquisition for this segment. They have approximately about 250 customers in Northern and Western Germany, primarily with trade and production companies, and their product portfolio is also comparable to Hövermann's SAP licenses, SAP consulting with a small SAP solution, the Business One solution and maintenance and support services. And their portfolio is quite good, comfortable with the Hövermann part because Hövermann in addition has also data center services and infrastructure services, which the CONPLUS customers also can now buy and we can address these customers with this additional Hövermann services in this special segment. So it's a quite strategic expansion of this new segment for DATAGROUP. We get another highly profitable company into the DATAGROUP portfolio, and we see, as I said, significantly cross and up-selling for Hövermann IT.
The other acquisition of the first quarter was iT TOTAL. This one is more, I would say, classical DATAGROUP acquisition where we follow the idea to buy companies which are not this far on the journey from a classical IT service and trade company to a really managed service provider and which could profit under the DATAGROUP model from a much faster development on this journey. So iT Total also already has a good position in the Southwestern German market as a managed service provider. But within the DATAGROUP, they now can address the full CORBOX service portfolio at their customers, and they have a quite interesting and good diversified customer base with 200 customers from various industries in the Southwestern German area, an area where we were not at this present up to now, and by boarding iT TOTAL into the DATAGROUP model, we gain access to this area to this region to these additional customers. And we think we can profitabilize the iT Total company grow stronger in this region by selling additional IT services to their customer base in this area. So overall, you see it here with EUR 11.2 million and EUR 6 million, a good step in our inorganic growth within the first quarter. They will be part of our revenue and quarter results with Q2 numbers now as they will start with in the -- with the revenue being part out of our DATAGROUP numbers within January. Okay, so that were the highlights out of an operational view. So I'm quite happy with all these results we had. What these results also means in the numbers, especially while we are investing also in the strategic part, why we have started new fiscal years without any special effects. We have process in the last fiscal year, these numbers now, Oliver will explain more in detail to you. Thank you.
Okay. Thank you very much, Andreas, and I welcome you from my side as well. And when we have a short look on the sides of the financial data, like Andreas just had explained that our revenue stream declined a little bit, but I think -- and I would please you to be a little bit more concentrate on what happened behind. When we go to the next slide and to the selected balance sheet accounts, I will show you what the result of DATAGROUP will be.
Andreas, I would please you to go to the slide of the selected balance sheet ratios. And there we come to this, what Andreas just explained. And one slide further, please. Andreas, you can push one slide further, would be very nice, thank you. One slide further to the selected balance sheet and profit and loss ratios in detail. Maybe in the meantime, I can give you a short overview for what we have realized in our turnover on the slide of the selected P&L ratios in the first quarter. And they are very, very important is that on the top line, we lost some sales -- sorry, this is the balance sheet ratio. I need the selected P&L ratios. And where you can see that we declined our revenues from EUR 126 million to EUR 121 million. Please, on the Slide #10 that will be -- no, no. Yes, now we have that. Okay. Thank you very much. And I want to please you to be very concentrated on one effect. And this is what Andreas just explained. That means that we lost the tailwind in the first quarter of 2022-2023, and the relation with the vaccination centers and COVID related -- pandemia-related revenues. There, we had 2 effects. One of them has been -- and this is what you can see here in the trade volume, which declined very strong. That has been the digital school pact what we -- where we lost the possibility for the digital boards, which we installed in the school area. This has been mainly trade-based revenue stream. And this is one of the tailwinds we have just explained by what Andreas has told us. On the other side, we were able in the first quarter of the past fiscal year, 2021-2022 and 2022-2023, that we had the possibility for the vaccination centers. That has been in the past fiscal year, the last time we brought them into our business. But in this year, and this is what we are very proud and we are very confident for the fiscal year, we have now that our service and maintenance revenues were -- we were able to grow by 4.2%, and that means we were able to cover the vaccination centers and to increase the revenue streams as well. On the other side, and beside that, we were able and that you can see in the material expenses. The material expenses declined very, very strong. That has mainly 2 effects. The first one is that our trade volume of the digital boards of the COVID, pandemia and the digital school [ pact ] was declining. On the other hand, and this is an effect we just explained in the past fiscal year as well that we changed the staff and external specialists and to own personnel costs to -- when we can see that we can cover them for the whole contract period. That is shown in the personnel expenses as well. There, we have 3 mainly driven effects that the personnel expenses were growing. The first one, and this is, for us, very, very important because it's the strategic decision to invest in new technologies, AI-driven, security and on the other hand, the cloud as well. On the other hand, we have new acquisitions consolidated into the company DATAGROUP in the acquisition period of the past 12 months. And the other -- and this is the point I've just explained in the material expenses that we switch the external specialists into own staff. That means overall that we were able to stabilize our EBITDA with EUR 12.1 million with more than 10%. What means that is the strength of our business and the strength of our business besides investing in new technologies with an amount of roughly EUR 1.5 million, means that without these investments, we would reach with the declining sales driven by the decline in trade volume, but we had a very strong EBIT and a very strong earnings situation in our company. Next slide, please. Now let us have a short look on the balance sheet. In the balance sheet, you can see it's rock solid. We have a balance sheet total of EUR 493 million. It's especially driven by 2 effects in this case. The first one is that we increased our goodwill by the acquisitions Andreas has just explained. Besides this, there you can see the pension provisions, they rose, but not because we bought companies with pension provisions. This is only a tax effect we have to show here in the balance sheet and on the other side, in the equity as well. That means that when you go to the equity ratio without these effects of the interests of the pensions, we would have an equity ratio by increasing balance sheet total, which is comparable with the amount we had on the end of the past fiscal year as well. The total net debt is with EUR 117 million, EUR 118 million in a way where we are very stable. I will show you the cash flow statement as well. But what you can see is that besides investing in new companies, investing in new technologies we are able to be in a total net debt-to-EBITDA ratio of under 1.6. And this is a very, very good sign. We always get from our financial partners as well, and they are very interested in working together with us and be a partner of DATAGROUP in the rising way we are on the track. The next slide, please. Okay. What you can see is the cash flow from operating activities. And there we are rock solid and when you see that, especially the situation I've just explained with the vaccination centers, which we had in the past fiscal year 2022-2023 as well. The payment contracts to this have been very, very strong. So we had in the past year and when you look in the year 2021-2022 as well a very, very strong Q1. And without these vaccination centers and what you can see, and this is very important, to have the relationship between what EBIT do have we earned in this case and how many of these earnings will come to us as the cash flow for operating activities. And this is very strong, and we are very optimistic that -- and this shows the strength of our CORBOX and our DATAGROUP business that we earn money. And this beside of -- if we can get goods or not, inventory or not, this is not our business. Our business is very operating cash flow stable. The cash flow from investing activities is comparable by the CapEx with the Q1 of '22-2023, especially driven by the outflow of the acquisition of CONPLUS. What you do not see in this case is the outflow of the acquisition of the iT TOTAL. There, we had the closing date on the beginning of January. So it will be part of the second quarter of our now running fiscal year. The cash flow from financing activities is mainly driven by using variable and flexible liabilities to banks and the possibility to finance us only with the amounts we need for our business. And this is what we have just explained 1 year ago by setup or by setting up the new financing structure with more flexibility, and this is shown in the financing activities. So we have roughly a strong cash and cash equivalents which is driven by the new financing structure from the past fiscal year Q1 to the actual fiscal year Q1 in 2023-2024. Okay. Now let us have a little bit closer look for the future. And this is where -- when you look for what I've explained on the first slide with a more detailed view on the profit and loss statement. The first impression is, okay, DATAGROUP is declining on the outside, but you have to understand why. And this is because we lost the tailwind of trade volume, but our CORBOX and our core business of DATAGROUP is just growing. It has been able to compensate the amount we lost by other tailwind situation, by the vaccination centers and is growing further. And this is where we have now reached some of our annual goals right now in the first quarter, and that shows us and gives us the good feeling that we are on the right way. The first one is that our cross-selling and upselling to CORBOX customers. There, we have an annual goal between EUR 10 million and EUR 15 million. We have a very stable and very good results just reached in the first quarter. With new customer acquisitions that are these customers we've just explained you by Andreas some slides before, that new customer CORBOX deals by an annual volume where we have said, okay, we want to reach in our organic growth EUR 10 million up to EUR 15 million we were just able to cover this. And this is where Andreas said, okay, we are very optimistic that we will have a very strong order intake annual year 2023-2024. Besides this, we have just realized 2 acquisitions. Our internal -- or the goal we've just have for our inorganic growth is between 2 and 4 new acquisitions by year. We just realized 2 by the beginning of January within the first, I would say, 4 months. And the pipeline for new acquisitions is a good fill. So we are on track, and we are very attractive for companies we are in speech with and where you can see and where you have seen that we just realized few acquisitions in the year. I think within 8 months, which are now before us, before closing the year is a very good track. The extension of existing CORBOX customer contracts by a volume of roughly 20% of the order backlog is in a very good way as well. So in the way of our view on the future within the realized CORBOX deals, with the realized acquisitions and with investing in the right things for the future, artificial intelligence with security solutions and cloud, I think we are on a very good way to be successful in the future. Okay. On the next slide, you can see what we are doing to tell our story to the financial markets. Today, you can see in the publication of the first quarter figures, our Annual General Meeting in Pliezhausen -- in physical here in Pliezhausen will be in a little bit more than 3 weeks. And you can see some of the events we are booked and where we can join our investors. I hope so many of you as well and to see you and to keep you on track what the development of DATAGROUP is going for the actual fiscal year. Thank you very much. And now the stage can be open for your questions.
Okay. Thank you also from my side. Thank you, Oliver. And as Oliver said, we will be also happy to see you, maybe some of you on our Annual General Meeting in Pliezhausen, where we traditionally give at this state our guidance for the full year. So another step for more insights on what we then will see what the full year will bring. But as Oliver said, now the stage is open to questions. Anke, do we have any questions already?
[Operator Instructions] The first question comes from Tim Wunderlich.
It's on revenue growth. For the full year, you are giving the indication that you're going to grow revenues in this fiscal year. Could you just tell us what is giving you the confidence that you can achieve this following the decline in Q1? And also, could you give us a bit of an indication on the trajectory? So how back-end loaded is this fiscal year going to be? And are you already expecting a return to revenue growth year-on-year in the second fiscal quarter? And then maybe a similar question on EBIT. Evidently, these growth investments are going to continue, but when would you expect EBIT to return to year-on-year growth on a quarterly basis? Are we talking about Q3, Q4? And then I have a follow-up.
So maybe Oliver, I take the question on revenues, and you will take the one on the EBIT impact. Of course, I can't go too much into detail. As I said, we will give the guidance for the full year on our Annual General Meeting. But as you said and I already explained all this new order entries and they include also some of the order entries of the last fiscal year, they are still in transitional period. So from a revenue base, we will definitely have very strong Q4. And forecasting this in our details brings us to the overall setup that we will grow in the core business that we will grow again in total numbers. How much in detail we will give with our guidance on the Annual General Meeting. But you're right, we will see the effect definitely more at the end of the year than in -- already in Q2 or Q3.
Okay. And then I would hand over to the questions related to the EBIT and our future investments. I think especially the effect by artificial intelligence as well in cybersecurity is a decision we just made, which is -- which has, I would say, where we have a close look for. The first quarter, when we acquired the company, it has been in July last year, has been to onboard the people to make the infrastructure, to have the possibility to work and so on because it's quite new for us and quite new for them. To onboard them to, I would say, to the spirit of DATAGROUP and to define a common goal. And what we have done up to now, and this is our first quarter of the running fiscal year 2023-2024 is to preparing the infrastructure to get -- for [ go live ]. That means when you have, for example, a public cloud based AI solution, you have to make it possible for us, DSGVO confirmed. That means that we install the base that we made the technology running. What we are not doing is to bring it into the real cases. And I cannot give you right now the special effect one in Q2, Q3, Q4, when we see that the cost of these investments come back into the cash, what we can say is that the software is working and that we are very focused and concentrated to implementate this. But right now, we are not able to give you a right sign for in Q2, Q3, Q4, we will invest like this. This depends a little bit on when we see how strong and how good this automation can accelerate our business for the future, then we will go more intensive into the investment. But there, we will keep your mind to show this, but it's right now because it's a quite new technology. It's a quite new way of working for us as well to be so close to give you a detailed plan for the fiscal year, but we are very optimistic that, point one, the software is working and we will see in the next quarter how we can realize and bring it to the market.
Maybe also a comment on this from my side. So if you focus on the investments only, they definitely, like Oliver said, will be in the investment phase within this fiscal year. So we won't see bigger paybacks on them within the results of this fiscal year. But what you, of course, can keep in mind that what I said about the revenue growth in the second half of the fiscal year following the starting of production of these new customers that are all classical CORBOX contracts and they are quite profitable. So what we probably we will see is an additional compensation of the investment effect in the fourth quarter, at least, which will more or less compensate a part of these investments. As you see already now, it's not the case that we see only this investment effect, we have also quite a stable result basis still with our core business. And if you imagine, this business is growing in the fourth quarter, we will also see additional result parts, which are compensating part of the investment case. But these type of investments and especially automatization is -- you can imagine that the situation there, they take some time until they pay back in automatization by having lower production costs in our service production.
Okay. And then just a quick follow-up. Could you remind me the 2 companies that you acquired so far this fiscal year, what is the expected revenue contribution? And that would be it.
I can't answer to this, but we have -- I think we just have shown this on the slide when Andreas explained and presented the companies. With CONPLUS, we expect roughly on an annual basis, EUR 6 million spent. iT TOTAL, I would say, between EUR 11 million, EUR 13 million, something like this on an annual basis.
And they will be part of the consolidation of, Oliver, I think, in January. What's the exact date?
CONPLUS has been as part of DATAGROUP since the 1st of December as part of the consolidation, but only with a small amount in December. iT TOTAL will be consolidated by the 1st of January in the second quarter.
So of this overall full year numbers, you can calculate with more or less 3 quarters of this revenue of these new acquired companies.
And the next question comes from Gustav Froberg.
I just have 1 actually. Just on the incremental investments in AI, sub security et cetera. Could you break this down a little bit more in detail for us and maybe split out between personnel investments and other? And when it pertains to personnel investments, how many people have you hired to help with these type of initiatives? And how do you see the personnel side of this equation developing going forward?
When it's okay, I would answer to this. Maybe at first, we acquired roughly 20 specialists with the acquisition of the AI. And the investments we have now that are depending especially in personnel costs and in other experience -- and other costs, I would say, it will be 2 or 3 -- 2/3 of personnel costs and 1/3 in this moment for costs we just have for infrastructure and other expenses.
For the 2 other areas. For security, you can calculate with approximately 10 additional experts we hired end of last year. But of course, they are not all part of these investments as we have already a good running security practice. Major part of them is already productive already, but what we mean with investing is that we hire here extra capacity, extra capabilities and technology expertise to address new services and new technologies, and that's the same with the cloud situation. We have a bit more additional experts then we would need if we would only focus on daily business and profitability there also for the cloud area.
And the next question is from Oliver [indiscernible].
I have 1 regarding revenues. In Q1, we saw trade revenues of around EUR 16.5 million. Can we see this as a new quarterly run rate? Or should we expect revenues in this segment to exceed EUR 20 million again in the coming quarters?
One short comment on this, Oliver, before I answer -- before you answer. What's important is that we have also in this trade part of our CORBOX business. Because always, when we bring into operation additional new infrastructure components which are dedicated to certain customers. For example, their clients, which are in place on every customer workplace. They are seen as in following IFRS, they are seen as a trade revenue. So what you might -- or what you have to keep in mind in the future that we also will have certain special effects with higher trade impact in certain quarters, which we can't forecast in detail now because we don't know when it will be the exact go live for this dedicated customer infrastructure, but they don't always have to be seen as a classical trade business, so -- which would look like going back to more trade-intensive business again. No, they are also part of the CORBOX business. So even in our trade part, we have to divide in between classical trade business, like we had with the schools, Oliver mentioned, and trade parts, which are only coming to this chapter by this dedicated infrastructures, which are part of new CORBOX.
I have nothing to add. Very good answer, yes. What you do not have to look is that our service and maintenance is CORBOX and trade is trading or others. This is what Andreas just has explained that CORBOX-related trades are CORBOX business, but this is the effect of real classical trade business of the corona tailwind.
So the overall answer will be that you will probably see a bit higher portion of trade again than in the Q1 because we had some delays in bringing this infrastructure into operations. Some things were planned already in Q1, which are now in Q2, but also that's a matter of the progress in the transition period. And another point, which is also important to keep in mind as soon as iT TOTAL will come into consolidation, they have all -- so a bigger part of trade business as they are classical IT provider. As I said, on this journey from trade business to managed services. So also from then, we will have an impact on a bit higher portion of trade again.
There's one more question from Yannik Siering, which is, could you provide your view on the current investment sentiment among German SMEs?
Oliver, you want to?
Yes, I can do. maybe this is what we have started maybe what's the thoughts of the strategy? The thought of the strategy for the German SMEs has been that we have seen that there is a customer group, which is too small for our dedicated service for CORBOX. And to solve this because we see that there is a very big need in this customer area and to be more able to go to, I would say, the special situations of these companies. And to do this more dedicated has been with the first move of the Hövermann group we have just done. The second one is now, and this is very good because the relationship we got to the new company, CONPLUS, has been because they heard of the acquisition of Hövermann and saw that this has been a very good move for DATAGROUP for Hövermann as well and to be part of us. We think that, especially the SME segment, is a quite solid strategy base we want to round up across Germany. And -- but there is not so many missing. We are now in the technology stack. We are quite good and stable. With Hövermann and with CONPLUS, we are able for the SAP Business One, we are able for the data centers, we are able for the application and the service desk for SMEs. Now we have to look how we can cover the southern area with this business, and we are looking if we can do this organically or inorganically. But especially there, we are looking for a group, which is like a smaller CORBOX focused on this area, where we are very sure that this business is going quite good and quite well.
Maybe I can add some points on the overall market of midsized companies. What Oliver was addressing are especially the smaller ones, we are now addressing Hövermann and CONPLUS and their investment sentiment. If you look in the overall midsized market, it's definitely at the moment, a matter of the industry. We have some areas where we see kind of -- being a bit of slower investment capabilities. So our offering in fulfilling IT service needs by managed services, you don't have to invest instead you pay an annual service fee to a provider like DATAGROUP despite a kind of a measure to address a bit of an investment, slower investment or lower investment capability in these areas. So that's why we see also in the first quarter, a good demand for managed services, but it's a big trend in full up and running economic environment. If you have a better situation there, these reasons are not this dominant as they are at the moment. Of course, there are only special industries, which are in this situation at the moment.
So we have 1 follow-up question from Oliver [indiscernible].
Just a quick follow-up regarding potential headwinds that might be holding back revenue growth. In the past quarters, for example, you talked about the transformation of low-margin business. Do we have to expect anything from this site in this year? And if so, could you quantify the effect?
In the last year, we quantified you might remember a number of around EUR 40 million of the special effects we had. And we always said we still have this transformation parts to do in some areas. I always have the example with the former HPE business, which is now DXC, which we are transforming year-by-year on letting burn down this revenues. That's, for example, also part of this year, but it's not as big as last year. So approximately, we have calculated with less than half of this EUR 40 million in this year.
But as we have said also in past quarters, we have -- also this year, part of these headwinds, but we have calculated already with this portion of them. And if you're asking for additional headwinds, at least at the moment, we don't see them. But of course, the overall economic environment has some kind of uncertainty for the whole industry at the moment. But what's important to really keep in mind that we are not directly touched from lack of investment capability like other providers are at the moment, which have a much bigger part in trade business where the willingness of customers to invest in new hardware and infrastructure is an impact from them -- for them. That's not the case for managed services. Like I said, managed services are more a measure to address a bit of investment -- lower investment capability.
So at the moment, there are no further questions. [Operator Instructions] We have no further questions. The call will be available on DATAGROUP's website. And with this information, I hand over to Andreas.
Thank you again and following us in this presentation and also for your questions on these quite special and interesting first quarter. And as I said, I will be happy to present our full year guidance on the Annual General Meeting, which definitely will give you some more insights on what we expect for the full year and I'm looking forward to this. And until then, let's keep in touch. And Anke is available for further questions, of course, besides this call. Thank you very much and bye-bye.
Thank you.