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Good morning, ladies and gentlemen. Welcome to our webcast about the first quarter of the financial year 2024. My name is Frank Jones, and I'm responsible for Investor Relations at Technical. Together with me are the members of the Board of Management, Michael Finger and Robin Schaede. In today's webcast, we would like to focus on the following topics: the development in our markets, our financial performance, the progress of our strategic agenda and the outlook for this year and 2025. After the presentation, the Board members are looking forward to answering your questions. [Operator Instructions] For further information, please refer to the quick reference guide, which was attached to your invitation. Please note that the formal presentation contains statements on the future development of technotrans Group. These reflect the present views of the Board of management and are based on the corresponding plans, estimates and expectations. These statements are subject to certain risks and uncertainties, which could mean that the actual results differ considerably from those expected. Now please let me hand over to our CEO, Michael Finger. Michael, the floor is yours.
Thank you, Frank, and a warm welcome from me as well. 2024 will be a landmark here for Desiree. With our efficiency program, TD Sprint, we are setting the direction for future growth and for profitability. And we're doing this in a challenging environment driven by the weak economy, we have closed Q1 as expected. Revenue decreased to EUR 56 million, but positive to see that Energy Management is continuing its success story, 38% growth in times like this. As recently announced, we have won contracts for charging infrastructure and liquid cooling for data centers. Another remarkable performance. Book-to-bill was positive with 1.1%. And this will set the direction for our future. Due to the lower revenue, EBIT reached EUR 0.4 million. And important to say that we have considered already EUR 0.7 million of restructuring costs and redundancy payments. Consequently, the adjusted EBIT margin is at 2%. Even if we have expected this weak start into 2024, we are not happy with this performance. But it motivates us to speed up with our efficiency program, TTR. And it improves the importance to have a clear corporate strategy to have the courage to change and above all the right technology and the right products for growing markets. All of this, you will find attention. We will explain it in more detail in our call today. Let's take a look at our markets -- the majority of our markets had a weak start into the new year due to decrease of economy and challenging conditions and environment. At the same time, the future prospects are very promising. In print, we are faced with the lower order intake. Book business was reduced and some orders have been postponed to the second half of this year. It was unexpected as we have discussed, further growth rates with our print customers until December last year. So quarterly revenue went down by 14% compared to last year. In addition to the economy, the Dube trade war is taking place at the end of May in Dusseldorf. The first one after 8 years. As you know from the past, it seems to be a certain reluctance to invest in the run-up to this trade fair. Based on the feedback from our customers, we expect a better second half in this year. Plastics is still suffering from our customers reluctant to invest in large cooling plants. This is again mainly driven by high interest rates. The decline in sales compared to last year was around 22%. However, order intake was positive, and we are -- and it seems that the increasing momentum is coming here as well. The comparison of sales in health care analytics is a little bit misleading. Q1 last year was still on COVID levels. This explains the drift by 21%. The first quarter this year was almost on expected levels, and we expect a stable second quarter as well. Laser has started most due to cyclical effects and the slowdown in economy, especially in Germany. Due to a slight increase in our order book, it seems that we went through the lowest point and there are indications for a better situation in by mid of the second half. So to sum it up, Q1 was the lowest point for these 4 markets. Q2 will already be better, and we are expecting a recovery in the second half -- that leads me finally to Energy Management. Another outperformance in this quarter, a plus in revenue of 38%. This market is performing independently from economic environment. Main drivers are the current developments in liquid cooling for data centers as well as the increasing electrification in rail and road. And there is more to come. Let me share with you 2 areas of success. First one, mobility. As you know, last year, we have acquired the first major order for the charge both from ADS Tech Energy, an ultra fast charging station for E-Mobility. At the beginning of this year, we received the follow-up order in the high 7-digit euro range. This new product was successfully launched last year, and we have set up a live production at our new site in Shanahan. This follow-up order is a strong signal and proof that we are ready for serious production. And this is a key strategic element for us. Volume business is mandatory to increase margins in our Technology segment. Volume business is already daily business for our battery thermal management systems for trains. And we are going to transfer this into road market as well. Our sales team has made significant progress here. We are close to win our first big series order for e-buses. These are the news from this morning, and I'm very assured to announce something in the next future if everything goes well in this area. The second part of the success stories is data center. This market is becoming more and more important to us. Exponential growth is expected here in the coming years. This shows the latest study from Nexmo strategy consulting as well as you can see on the slide. The market for artificial intelligence is expected to show strong growth in the coming decade. Its value of nearly USD 100 billion is expected to grow 20-fold by 2030. We up to nearly USD 2 trillion. The AI market covers advanced numbers of industry and for sure, liquid cooling is one of them. So how do we participate stations? There are some main drivers like the sharp increase of computing power due to artificial intelligence to achieve the required performance, a constant temperature is mandatory, and this is, as you know, our core competence. And even more important, liquid cooling will become a key technology to support an increase of performance of new data centers. Following our successful market entry in November 2023, we have secured a follow-up order in April 2024 as announced. At the same time, this represents a significant expansion of our portfolio with our retrofit product, we now offer customized solutions, not only for new data centers but also for existing ones. With it, we are highly flexible. And with these solutions, we are a strong partner for the growing requirements of the industry. And you may remember, we started this development 2 years ago. That means early development of innovative products based off. We now have 2 products available. They have already passed all validations and all tests. We are ready for serious production. We are ready for growth. We are ready to tap into significant additional growth potential for detonate. And you can see we have the right technology and we have the right products. With that said, I will hand over to Robin, he will talk you through the financials of the fourth first quarter.
Thank you, Michael, and good morning from me as well. As Michael already outlined, the economic environment had a considerable negative impact on revenue, EBIT and ROCE. Consolidated revenue was EUR 56 million in the first quarter coming down from EUR 68.3 million in the previous year. This represents a decline of 18%. The main reason for this is the weak economy, particularly in Germany, which has already led to a significant reduction in the incoming orders over the course of last year. EBIT fell to EUR 0.4 million as a result of the decline in revenue. However, this result also includes first restructuring costs of EUR 0.7 million from the reorganization of the company, meaning that the adjusted operating result is EUR 1.1 million. Last year, we generated EUR 3.5 million. EBIT margin in the first quarter is 0.7%. The adjusted EBIT margin was 2%. In Q1 2023, the margin was 5.2%. These results are as expected. It was clear to us that the weak economy would put temporary pressure on our revenues and consequently, on our EBIT. To safeguard our short-term profitability, we have responded early by introducing short-time work at almost all German locations. We have also cut operating costs and postponed investments. However, these measures could only partly compensate the impact from the significant decline in revenue. In summary, the performance in the first quarter of 2024 is not satisfactory and shows that we still have some homework to do. Let's have a look at the segments and our financial KPIs. Revenue and Technology segment amounted to EUR 41.5 million in the first 3 months compared to EUR 52.8 million in the previous year. This decline is coming from all our focus markets, except for energy management. We are suffering from postponed orders as a consequence of the weak economic environment and the high interest rates. Segment EBIT decreased from EUR 1.5 million to minus EUR 0.9 million, reflecting the worsened cost digression and one-off costs of EUR 0.3 million from the efficiency program, TDed in the first quarter. Segment profitability came down to minus 2.2% accordingly. As mentioned, we initiated countermeasures, but we are not able to fully compensate the revenue shortfall. Revenue in services was at EUR 14.6 million, which is EUR 0.9 million below previous year. Also here, we see delayed orders from our customers, particularly in the spare parts business in print and laser. The segment generated an EBIT of EUR 1.3 million compared to EUR 2 million in the previous year. This includes restructuring costs of EUR 0.4 million. EBIT margin came down to 9% from 12.8%. The adjusted EBIT margin is 11.6%. Also in services, we have initiated countermeasures to improve top line and profitability. Let's move on to our additional figures. ROCE reached 10.3% compared to 13% in the previous year. An increase in inventories as a result of the high order backlog led to lower net cash flow from operating activities compared to previous year. Despite lower cash outflows from investment, free cash flow decreased to minus EUR 3 million compared to minus EUR 1.7 million in the previous year. For both figures, we expect an improvement over the year as sales and profit increase. Following the decline in sales, gross profit decreased by 20% to EUR 14.3 million. Gross margin declined to 25.5% compared to 26.3% in last year. Unfavorable fixed cost digression is the driver of this development. In line with EBIT development, our EBITDA came down to EUR 2.1 million compared to EUR 5.2 million last year. Net profit dropped to EUR 0.1 million compared to EUR 2.2 million in the previous period. Accordingly, earnings per share decreased from EUR 0.32 to EUR 0.01. Equity ratio increased to 56.9% and remains strong. The weak business performance and scheduled loan repayments led to a decrease of cash and cash equivalents. Net debt increased to EUR 24.4 million compared to EUR 2.7 million on December 31, 2023. Net debt-to-EBITDA ratio increased to 1.36% compared to 0.98% at the end of '23, remaining on investment grade level. The strong equity position in addition to 3 credit lines show that the company is financially stable and able to navigate through rough times as in Q1 2024. With this, I want to close the view on Q1 performance. What do we expect in the remaining year? And what are we doing to improve our financial -- our future financial performance. In terms of sales, we see first signs of recovery. Incoming orders have increased noticeably since the beginning of the year. Our current book-to-bill ratio of 1.1% shows this. As you can see on the chart, we expect business development to gradually pick up and increased significantly, especially in the second half of the year. The worst should be over. We are confident that we meet our guidance of EUR 245 million to EUR 270 million for this year. Increasing top line also means that we go back to higher profitability levels in the next quarters and achieve our profitability guidance for this year. This means that we must get to the weak phase in the first half of the year in the best possible way and then capitalize on the positive momentum which we anticipate for the months to come. And in addition, we are working on transforming the company and reshaping it to ensure higher profitability in the future. In our last call, we showed you the TD Sprint initiatives and how they will contribute to increased profitability next year, especially. As I said before, our performance in Q1 shows that we still have some homework to do. It is obvious that we need to significantly improve our cost structure to generate more stable results even in difficult times. Our -- despite efficiency program will do just that. We are becoming leaner and more flexible in terms of costs. We will significantly increase our profitability in the future so that we have a higher and more solid earnings base. This will further strengthen Tecnocom's financial resilience, and it will also increase our cash flow and ultimately, the value of the company. The project is running as planned. By working on our divisional structure, we have identified cost savings potential by realizing organizational synergies. We are also working on increased efficiencies in our processes and on ways to make our overall cost structure more flexible. Of course, this also means that we will incur additional restructuring costs this year. As we are in the middle of the exercise to build the new organization, it is too early to give you a concrete number, but the total this year will be in the low 7 digits. In our Q2 call, we will be in the position to share more details and outline a more concrete number on onetime costs. This was our view on our financials in Q1. With this said, please let me hand over back to Michael, who will give you a more detailed progress report of our transformation program, TT Sprint and the outlook for this year. Michael, please?
Yes, thank you very much, Robin. So even if we want strategically important programs, we are not satisfied with our earnings performance, but we have the college to change. If we do the right things today, our success tomorrow cannot be prevented. Robin just mentioned our efficiency program taking advance TD Sprint. TD Sprint describes the transformation to the new technocrats, -- it's all about customer orientation, speed and above all, increasing profitability. As you already know, we have defined 4 subprojects. -- portfolio and markets efficiencies, innovation and organization. And we are on track in all 4 projects, and I'm happy to share now some more details with you. Let's start with portfolio and markets. The focus is on profitable growth markets and products, and we are streamlining our portfolio. So where are we? The analysis is done, and we have started with the execution already. In addition, we put the regional focus on Europe and North America. Progress also here. For plastics, we have sent a technical sales manager to America to support our team on the ground. In addition, we are participating currently on the NBA trade show, the largest exhibition for plastics in the U.S. The feedback was very positive so far. With a focus on our core business, we consider divestments as an option as well. Therefore, we have identified EUR 15 million to EUR 20 million as a noncore business. For each business, we are preparing a business plan at the moment. And by mid of this year, we are able to make a key or sale decision. We also consider acquisitions. For 2024, we do it opportunistic, but for next year, proactive. These measures will give us an upside of 1.5% to 2% in EBIT. In the subproject efficiencies, we are taking account of the strong growth and the increasing series business. The focus here is on modularization, reducing complexity and leveraging synergy effects. Progress also here in this project. Production lines for volume business like the ADS stake have been installed for all new volume business, modular building blocks and equal parts have been considered already. The efficiency project will contribute to an improvement in EBIT margin up to 1%. The same improvement by another 1% applies to the project innovation -- the innovation project in the innovation project, we are focusing on emission-free mobility, liquid cooling for data center, natural refrigerants and on applications around about the hydrogen process. The hydrogen process from the electrolysis to the final application offers an idle playground for our core technology seal management. And this is further base for future growth as well for Tecnored. So -- and finally, our organization. We will change it from legal entities to markets. This is the biggest and most important change we are doing. We want to transfer responsibility, create transparency and speed. -- entrepreneurship is key. We will implement a decentralized business model. Each division will be fully accountable for their markets and for the P&L. In this way, we consider the dynamics of each market. So where are we and what are the next steps? We've made great progress also here. We have presented the structure to our whole organization, and we have announced the heads of our divisions already. Currently, the hedge of each division are working on their individual structure, and they are defining their teams. All this will be done by June this year. First, restructuring effects, as Robin mentioned, of EUR 0.7 million have been realized already. The transformation process will start July 1 and the official start of this new structure will be 1st of January next year with a new budget. The new organization will make us stronger, faster and more efficient. A change in organization is always sensitive, but we have the courage to change. And this coverage will pay off. The new organization will contribute up to 2% margin improvement to our future profitability. So we have a strong efficiency program, and we have made good progress. This gives us confidence to achieve our targets. And with that said, we confirm our guidance for this year, as already announced in our call in March. And our explanations for March are still valid. 2024 is a year of transformation for data fans. At the same time, we are currently confronted with a weak economy, as you know. We are experiencing this in print, plastics and laser market, in particular. And these markets are affected by cyclical effects and the weak economy, especially in Germany. We expect a recovery in the second half of this year. In the meantime, we are working hard to implement changes from TD Sprint. In addition, we are using short-time work where it makes sense. We are setting the direction for the future, and we will benefit from TT Sprint measures already in this year. Having said that, we expect sales between EUR 245 million and EUR 270 million with an EBIT margin between 5.5% and 7.5% in 2024. ROCE is expected to be in a range between 4% and 6%. All the measures from TD Sprint will be fully effective in 2025. That leads me to the midterm outlook. With the dynamics in our markets, which are currently also materializing in large orders, we are convinced to generate a range in revenue between EUR 265 million and EUR 285 million. Based on our current earnings performance, we fully understand that our profitability expectations are under discussions. However, with our efficiency program, TD Sprint, with our current to change and we thermal management as a core technology to enable further growth, we are convinced to achieve our margin target of minimum 9% in 2025. As I said earlier, the times are stormy and we are expecting more to come. Therefore, it's mandatory to prepare technotrans to be resilient under difficult conditions and to achieve our goals. We have the right strategy supported by our TD Sprint program. We have the courage to change, and we have the right technology and the right products for the future. And with that said, I would like to Frank to open the Q&A. Thank you very much.
Thank you very much, Michael. So the lines are open for the Q&A session. If you would like to participate, please raise your hand or type in the question, then we put you online. So let's take a look with first. First of all, this one. So I'm seeing that Mr. Augustin has raised his hand. Mr. Augustin, your line is now please.
Yes, no. Great. I have a couple of questions. So the first one is actually on your expectations for the upcoming quarters and the sales development. I understand that you have a couple of, let's say, nice orders in the pipeline. Can you comment a little bit on currently how the tender processes are working and we hear from several other companies that, let's say, the tender activity is quite good? There are more projects coming to the table, but companies remain reluctant to finally place the orders. Is this something you also, let's say, see in your activities? And how much of a macro tailwind, respectively, lower interest rates do we might need for the second half ideas of the sales to materialize?
Mr. Augustin, thank you for your question. Yes. So I'm answering all the points, I think, coming from the last point, do we need lower interest rates to fulfill our revenue this year. So we just finalized our rolling forecast for this year, and that lets us lead us also to the statement to confirm our revenue forecast. So we have a quite nice visibility of our revenue so far. We have won indeed, a very nice business, long-term business, frame contracts are placed. And the call-offs you have mentioned, they are placed most of them already in this year. Some of them, they are running on a longer-term base -- but for this year, the visibility, especially for the next 6 months is quite stable. And as I mentioned earlier, we expect also some short-term business, especially for e-buses, which we expect to materialize also in 2024.
Sorry, maybe to add, as you were also mentioning with regard to interest, I mean we are suffering, especially in the big cooling plants from the high interest rate. Nevertheless, we also here see some kind of well, normalization and demand or in other words, probably some people have gotten used to it to the level of interest rates we have right now. So also there, we see some movement in the markets. All the others are not really depending on interest rate but more on the general demand. And also here, we see, as Michael said, that some positive momentum and some orders placed and some call offs.
Okay. That sounds good. And just as a clarification, the current guidance does not include any M&A or divestments, right? This would change, let's say, the figures, if anything material would happen here. I think... And possibly here, you mentioned EUR 20 million to EUR 30 million noncore business you're reviewing May I ask the question if this is a business that was in 2023 profitable on EBIT level or rather loss-making?
All the business was profitable. We are talking about we have as now loss-making business in these areas last year, even if the profitability was not unexpected levels, but they have all been profitable...
Okay. Thank you. Then I have just one more on the cash flow. I saw that the receivables actually despite the lower sales, more or less were unchanged versus year-end and the inventory is slightly up. So normally, one expects that working capital is reduced with the lower business volume. So we expect from here a further net working capital increase going into the second half when the business really starts to ramp up again?
Yes. Maybe one word with regard to this. We had some special effects in the first quarter, which led to this development. Receivables, we had one larger overdue, which was just paid after the end of the quarter. So that had a bigger impact on the receivables side. There was a customer optimizing working capital over the quarter. So that impacted us on the receivables side. And with regard to inventories, indeed, we had some buildup -- that was due to the fact that we were already buying materials for some bigger orders, which we are now starting to produce. So also in that regard, it's more of an extraordinary effect, another regular or natural trend in our inventories development. We are working hard to bring working capital down and should also see some progress there over the next months. But of course, as you said, if you do it right from the -- if you do the mathematical logic, there could be some board pressure in the second half of the year, which we try to minimize by other measures, which we have implemented and we are working on.
Final one housekeeping one. The one-offs that we had seen in Q1, are these largely in the gross margin? Or are they actually accounted for elsewhere in the SG&A?
In different P&L in different lines.
In different lines. Okay. Good. Thank you very much.
Thank you, Mr. Augustin. Currently, I do not see any other questions in written form or any way and now they're coming in. So Mr. Agustin I will move to right now. The next one is by Stefan Maichl. Mr. Maichl I have muted you? Does it work? Could you do that for yourself as well? Okay. Stefan Maichl from WW.
I have 2 questions from my side, please. The first one is on TrueCar trade share cost. I've seen a new report that you have booked some in the first quarter. Could you quantify these costs and which should -- which costs should be expected in the second quarter? And the second one is on your restructuring costs. You mentioned that you have booked 0.7% in the first quarter, and they might come more the next quarter. If these costs will be very high, could this [ tapetis ] your full year earnings target? Or is this safe?
Now let me start with the trade fair. Robeco in the mid-6 digits for the first half. Second, as Robin said earlier, we expect overall restructuring costs in the low 7s.
So for the full year of 7 digits?
For the full year in the lower 7 digits.
The next one is Mr. Schramm, Your line is open.
Yes. Good morning from my side. Two clarification questions. First, on the guidance. Is it right that the guidance is without the restructuring costs you're mentioning? And the second question is on the sales volume you like to sell the EUR 15 million to EUR 20 million. Are there any risk of selling losses, impairments or something like that?
Yes. Maybe with regard to the guidance, the guidance is on reported figures. No adjusted figures, but clearly reported figures. And with regard to -- we don't -- to the same potential sale of assets, we don't expect any big effects on impairment. Maybe some minor adjustments have to be made, but that should not be a very high amount.
And that would be also in the guidance, Included?
I mean, as we said before, the guidance does not include any M&A or any of that. So of course, if we would have a negative effect on this one, we would have a positive effect from the sales, so from the earnings we make. So in that regard, that will at least pay off. So in that regard, our guidance, as I said before, does not include any of those activities. Welcome.
Thank you, Mr. Schramm. Let's take a look. I see raised hands by Stefan Maichl, Mr. Augustin and Mr. Schramm, I suppose these are the ones you did before for your questions. Okay, they are all done. So at the moment, I do not see any more raised hands. So is there anyone who wants to ask an additional question... If that's not the case, I thank you for your question, and you have simple opportunity to raise any further questions on our AGM, which is the next event, which will take place on Friday this week already. So if something is still open, you can show up at the Hallinan, and we are happy to welcome you there. And in case of any further questions, if you can't participate, please call us any time as usual. And also on behalf of my colleague, collegial. I would like to thank you for your interest in this call and interpatient. Thank you very much for participating. Have a good day, and bye-bye.