Welcome to the Alfen 2025 Half Year Results Conference Call hosted by Marco Roeleveld, CEO, and Onno Krap, CFO. For the first part of this call, all participants will be in listen-only mode, and afterwards, there will be a question and answer session. If you wish to ask a question, please press the pound key five on your telephone keypad. I would now like to hand the call over to Marco Roeleveld. Mr. Roeleveld, please go ahead.
Thank you, and good morning and welcome to this webcast regarding the 2025 First Half Year Trading Update of Alfen. We appreciate the fact that you have taken the effort to participate. As indicated by the moderator, this webcast and the questions that may come forward are handled by the Management Board of Alfen, being Onno Krap, CFO, and myself, Marco Roeleveld, CEO. In this webcast, we will start with the highlights of the first half year of 2025, followed by a short review per business line. Next, we will go in more detail regarding our financials and outlook. We continue with slide four with the highlights of the first half of 2025. In the first half year, we realized EUR 211.5 million in revenue. This represents a 13.9% reduction compared to the first half year of 2024.
This was mainly driven by low revenues in energy storage systems and EV charging. The overall gross margins were 29.1% of revenue compared to 22.3% of revenue in the first half year of 2024. Please note that the 2024 gross margin was impacted by moisture issue provisions. As a percentage of revenue, the adjusted EBITDA improved from 5.5% to 6.2% as a result of cost-saving measures. Personnel costs decreased by 9.8% and other OpEx decreased with 18.3%, showing that the cost reduction measures have been effective. We reiterate our 2025 guidance as communicated at the Q1 trading update. For our midterm ambition, we are considered as the continued challenging market conditions that we experience in 2025 are expected to persist in 2026. Onno will go into more detail on the financials and outlook later on in this presentation.
As the last point in this highlight and further detailed in the next slide, I would like to draw your attention to the appointment of Michael Colijn as per the 1st of October. We are convinced that he has the right background and personality to guide the company forward in the coming years. With the appointment of Michael Colijn, we are ensuring a careful and timely succession following my decision to retire early. Michael brings a strong background in leadership within the energy and technology sector, with extensive relevant experience as former CEO of Heliox, a market leader in smart energy management solutions and fast charging systems for public transport, e-trucks, and port equipment. Next, we will go in more detail regarding our three business lines, starting with the next slide with smart grid solutions.
Smart grid solutions' revenue in the first half of 2025 was EUR 97.1 million, which is 3.9% more than last year. Grid operators drove 65% of the revenue, and the private domain clients accounted for 35% of our revenue. We produced 1,628 substations in the first half year, compared to 1,548 in the same period last year. In the Netherlands, that were 1,273 stations, and in Finland, 355. The gross margin increased from [13.12%] to 22.4%. Adjusted for one-off costs, the gross margin decreased from 26.5% last year to 22.4% in the first half of this year. This decline is primarily related to the increased component costs in response to the moisture issue and the relatively higher share of revenue coming from grid operators. A nice commercial win to mention is BELECTRIC Eekerpolder, where we carry out medium voltage installation activities for the 200 MW peak solar park.
Regarding the technical innovations, we have certified our Pacto, Diabolo, and Altro stations with SF6-free components. The usage of SF6 aeration guards is prohibited by the European Environmental Regulation in greenhouse gases, and the new equipment is not allowed anymore as per January 2026. On the next slide, we elaborate on the weakness we see in the markets of smart grid solutions. Our clients in the Netherlands are hampered in scaling by several aspects. Those aspects are, firstly, obtaining permits. Next to that is available transmission grid capacity. Thirdly, available land to place the required extra substations. Fourth, the availability of main components, partly related to the SF6 translation. Lastly, the fifth point, available human labor capacity for site installations.
For our business with the grid operators and also in the private domain, we do not see short-term improvements due to the mentioned aspects, and we expect this situation to continue into 2026. A positive note is the acceleration of the rollout of the connection station between the TSO grid and the DSO grid. It is good to note that the margin profile of this revenue is in line with the order of business with the grid operators. Onno will now continue with the next slide regarding EV Charging business line review.
Thank you, Marco. EV Charging revenue decreased by 22.8% from EUR 80.1 million in H1 2024 to EUR 61.8 million in H1 2025. As communicated during the Q1 earnings release, we currently do see increased competition in our core markets, which we are countering with selective pricing programs and new product introductions and innovations.
A total of 61,245 charge points were produced in H1 2025, which is a 23.7% decrease compared to H1 2024. Although these lower volumes do not affect our gross margin percentage for the product line in total, we do see an absolute gross margin effect of around EUR 7 million due to lower volumes. Gross margin increased by 41.3%, and this is a slight change versus our press release, which stated 42.9% compared to 33.9% in H1 2024. Adjusted gross margin stands at 44.1% compared to 38.4% in H1 2024. These higher adjusted gross margins are mainly due to lower component costs and to a certain extent to the higher margins on Twins in comparison to H1 2024. Together with the Belgium wholesaler CBO, we will roll out 520 charge points in parking garage and semi-public space in Belgium.
These types of wins are important for us since it's our expectation that parking garage and company parking lots will be important growth segments in the years to come. We also announced our Plus models, which are fully compliant with new AFIR requirements that will come into effect in the beginning of 2026. Since the Plus models are built upon a new hardware platform, we had to take an inventory provision of EUR 1.8 million for certain components that will not be used anymore on the new platform. This provision has been booked in Q2 as the European Commission provided clarity on the timelines for the implementation of the Alternative Fuels Infrastructure Regulation, also known as AFIR. The new requirements will come into effect on the 8th of January in 2026. With the launch of new Plus models, we will also be launching a new tool for installers.
Time to install is an important KPI for our installers. Alfen has been working on the development of the [EV Install] app, which will help installers to significantly reduce time required for installation and configuration. This app will be available at the beginning of 2026. Next slide, please. Battery electric vehicles and plug-in hybrids electric vehicle registration growth across Europe has been strong in a number of countries. However, we do not see additional growth since the relaxation of CO2 regulations in March 2025. For Alfen for the Netherlands, we are faced with increased competition in markets where we have been traditionally very strong. As mentioned before, we see increasing competition in the home segment. Alfen continues to maintain a strong position in the public market with its Twin products, although the overall number of installations in the public market has slowed down.
Despite relatively high battery electric vehicle growth rates in Germany, we currently do not see a similar order intake increase in our order books. For Belgium, the market growth rates for battery electric vehicles have been high, but it was offset by a sharp decline in plug-in hybrid cars. Even though overall battery electric vehicles and plug-in hybrid electric vehicles registrations in France are weak, Alfen has seen quite robust growth performance in these markets as we have gained a strong position with a number of larger clients. In Denmark, we have developed a strong partnership with Northleaf, which has been very successful during 2025. As mentioned earlier, after the introduction of our Plus models in Q4 this year, our full product portfolio is compliant with AFIR requirements effective next January, beginning of next year. Revenue for our energy storage product line declined by 27.1%.
2025 revenue performance is in line with our expectation as during Q2 last year, we had an unusually high revenue due to simultaneous delivery of materials on site for several projects, leading to higher revenue recognition in Q2 last year. Gross margins at 27.4% were higher than usual on the back of relatively high margins in Q1. In the second half of 2025, we expect the margin to normalize. Together with E-Connection, we will deliver [20 M W], 40 MWh battery energy storage systems. This system will be co-located with a wind hub at Neeltje Jans in the southwest of the Netherlands. This project will help to maximize the use of wind energy and maintain electricity grid stability, expected to be operational in Q1 2026. Furthermore, we have introduced a new 20 ft containerized solution for our Elements battery storage system.
This innovation is important as it increases the energy density, reducing the length required for battery energy storage projects. The backlog for battery systems is sufficient to cover the 2025 revenue guidance. In addition to the stationary systems that we are realizing and taking revenue for during 2025, we also sold a number of mobile units that we are delivering in 2025. Backlog for 2026 is developing in a positive way. Over a year, we have EUR 72 million of backlog for 2026 revenue, and our pipeline has sufficient prospects to further fill the backlog for 2026. As battery prices continue to decline by about 10% - 20% in 2025, our KWh volume growth is quite significant. Price declines are driven by several factors. Firstly, there is a consistent oversupply of battery energy systems in the market. Secondly, prices of raw materials used for batteries are dropping.
Lastly, battery technology continues to improve. In January, Alfen announced the signature of the agreement with FlevoBESS to build one of the Netherlands' first large-scale four-hour BESS based on a containerized solution. Construction has started, and the completion date of this project is expected to be Q4 2025. I would like to move to the financials. Revenues for Q2 amounted to EUR 107.7 million, which is 3.8% higher than Q1 2025. However, the year-on-year quarterly decline was [-16%], mainly driven by EV Charging and battery systems. Adjusted gross margin year-on-year improved from 26.1% to 30.1%. This was mainly driven by the impact of lower component costs for EV Charging, as we did not see a major shift in mix and sales prices for this product line. For battery systems, we have also seen an improvement in margins for Q2, but not as significant as we had seen in Q1.
Adjusted EBITDA was 7%, which is better than the same period last year at 3%, as we significantly decreased our cost base during the reorganization at the end of 2024. During 2025, we have continued our focus on spend and FTE reduction. For the first half of 2025, revenue declined by 13.9% from EUR 245.7 million to EUR 211.5 million. This is due to lower revenues in EV charging and energy storage systems. Gross margin increased from 22.3% in H1 2024 towards 29.1% in H1 2025. The 2024 numbers were impacted by the moisture provision and to a lesser extent by an inventory provision that we took for EV charging components. It was EUR 3.6 million last year versus EUR 1.8 million this year. Adjusted gross margin increased slightly as we had lower component costs in EV charging and a positive price effect on Twins.
On top of this, we had somewhat better margins for battery systems, mainly driven by the Q1 performance. Smart grid solutions had slightly lower adjusted margins due to increased component costs due to product changes in response to the moisture issue, and a relatively higher share of revenue coming from grid companies versus private company customers in H1 2025 compared to H1 2024. Personnel costs decreased by 9.8% year-on-year as a result of the right sizing program we executed at the end of 2024. In addition, we put stringent cost control measures in place during 2025 to further reduce our cost base. FTEs decreased from 1,053 as of 31st of December , 2024, to 946 as of 30th of June , 2025. In addition, we reduced our external personnel expenses. Other operating expenses decreased by 18.3%, driven by cost-saving initiatives. The net losses for Alfen
decreased from EUR 11.1 million in H1 2024 to EUR 1.3 million in H1 2025. On an adjusted basis, we have a report of EUR 1.4 million positive net results. Non-current assets decreased by EUR 0.6 million, driven by depreciation and amortization of EUR 9.1 million, and partly offset by capitalized development costs, new leasing indexations, and other CapEx of EUR 4.8 million, EUR 2.2 million, and EUR 1.5 million, respectively. Current assets decreased by EUR 23.5 million, of which EUR 9.8 million was driven by inventory position and related stock down payments, as well as other working capital movements. Non-current liabilities decreased slightly due to redemptions on our loans and lease payments. Current liabilities decreased by EUR 19.9 million as a result of working capital movements, partly offset by an increase in short-term leases and our factoring position.
Cash flow from operating activities was EUR 10.8 million positive as compared to EUR 1.6 million in the first half year of 2024, partly driven by significantly lower income tax paid. Our continuous focus on working capital and specifically inventory is yielding results. Our inventories are decreasing, both as down payments as well as in the on-hand inventories. Total inventories were brought down by EUR 9.8 million, driven mainly by reduction in EV charging inventory. Energy storage showed a slight increase for our batteries because we always buy batteries once the deal is signed, limiting the risk of obsolete inventory. For 2025, we reiterate our guidance as provided during our Q1 earnings release of revenues between EUR 430 million and EUR 480 million and EBITDA margin between 5% - 8%. In H1 2025, H1 2025 continued to present challenging market conditions.
Alfen expects these challenging market conditions to continue with competitive pressure in EV charging, labor shortages, and permitting delays for grid operators, and price declines for MWh for battery systems to carry over into 2026. Therefore, Alfen adjusts its 2026 revenue ambition from between 5% and 10% year-on-year growth to between 0% and 5% revenue growth. This also impacts adjusted EBITDA margin, which Alfen expects to be between 5% and 8% of revenue in 2026. Alfen will continue to focus on margins by driving continued improvement in cost and pricing. Due to the continued uncertainty in our markets, Alfen has decided to refrain from providing guidance on 2027 and beyond. I would like to hand over back to the moderator.
Thank you, ladies and gentlemen. We are now ready to take your questions. If you wish to ask a question, please press the pound key five on your telephone keypad. Our first question comes from Nikita Papaccio from Deutsche Bank . Please go ahead.
Yeah, good morning, and thank you for taking my questions. I would have three, if I may. The first one is on the one-offs of obsolete components in the charging segment. Is this done now, or should we expect further one-offs coming in the upcoming quarters? Thinking about your H2 adjusted EBITDA margin, I would assume that the margin will be lower than in H1 with similar revenues and lower gross margin in charging and storage. Is this the right way of thinking, or are there any impacts to keep in mind for H2? The third question is on your smart grids business. You invested EUR 7 million for a new plant to capture the forecasted demand from grid operators, which is now not materializing. How do you tackle the situation of overcapacity besides workforce reduction? Thank you.
Let me take the first question on EV charging. I think I explained on the fact that we are moving to a new platform. Based on the usage that we will still see for components on the old platform towards the new factory, we had to basically come to the conclusion that we were not going to use all the remaining components for the old platform. From that perspective, after careful analysis, this is the decision that we have taken. Can I promise you that we will not take any write-off anywhere in the future? I cannot. If I would have known about it, we would have taken the provision.
From a margin, the question that you were asking, was it about either the margin or about gross margin?
EBITDA margin, please.
Yeah, there are various factors that are influencing the EBITDA margin. From that perspective, I would like to basically stick with the guidance that we have given between 5% and 8%. I think we're currently at 7%, so I'm right in the middle. The guidance that we have given was between 5% and 8%. I think for now, I would like to stick to that one. Regarding the overcapacity, you're right that we say we anticipated on the growth of revenue due to a number of substations with the grid operators. Due to the fact that that is not there, we have more or less overcapacity. That overcapacity cannot directly be yielded towards other areas. That means also this pressures our EBITDA number because the costs related to the building are still there.
We're now, of course, debating in which direction we should have discussions, whether it is with the grid operators, whether it's to find alternative directions. Due to the rather big difference in and also a short timeframe where the difference was there, we are not on the short term, and also not in 2026, fully able to recover on those elements.
Okay, thank you.
Our next question comes from Luuk Van Beek from Bank Degroof Petercam. Please go ahead.
Yes, good morning. Thank you for taking my questions. First of all, a question on your cost levels. Are they now fully aligned with the revenue outlook as you see it, and do you expect a further decline in H2?
First of all, I think we have put very careful cost measures in place to make sure that we stay in control of our cost measures, as well as the FTE numbers, but also from a discretionary spend perspective. We will continue to do that in the second half of this year, and we will continue to do that towards next year because at the 5 %- 7% EBITDA margin is not the level that's not where our ambition is. Our ambition is to increase those margins. Of course, partly you want to do that by increasing your top line, but at the same time, you want to make sure that you keep your cost base under control as much as possible. As a company, we are very focused on making sure that we're reducing cost.
The current level of cost, I expect the second half cost base more or less similar to the first half cost base, and up and down a little bit. Grosso modo, I think you should expect a similar cost base for the second half.
For next year, you are no longer forecasting improvement in the EBITDA margin range. Is that because you see still further pressure on gross margins due to the price competition, or is there another driver for that?
EV charging, we have actually a number of effects on the margin. We do see some lower component cost prices. That's a little bit technical, but the way we are valuing our inventory is based on average cost price. During the COVID years and the years, some period after that, component cost prices were relatively high because of significant shortages. We had to basically buy at a, it was a seller's market, as you could say. Components that we're buying now basically are reducing our average cost price of our inventory. When you then issue them to your P&L, you're basically issuing them at a lower cost price, and therefore, that's increasing your margin. That is an effect that will continue in the periods to come. The other effect, especially when you compare margins Q2 last year versus Q2 this year, is as related to the Twins, our public charger.
We had extremely low margins in Q2 last year, and they're now being normalized, and we expect those margins to continue going forward. Also, that uptick in kind of driving up the margin somewhat is something that will stay because there was a one-time effect last year. At the same time, we also talked about the competitive situation, and we do see a number of competitors that are relatively aggressive from a pricing perspective, and we have to counteract that. That's also what we're doing. We do expect downward pressure on our prices in the second half of this year and potentially also next year. That's the counter effect of the two other items that I just explained.
Okay, that's very helpful. Thank you.
The next question comes from Ruben Devos from Kepler Cheuvreux. Please go ahead.
Yeah, yes, good morning. I had a first question on the 2026 sales outlook. Just thinking about whether you could give directionally some comments on how you expect the trends to be across the divisions. On group level, obviously, flat to 5% growth. I think consensus was sort of factoring in quite an even growth rate across the three divisions, 8% up, 10%, 8% across the three. Curious to hear your thoughts where we are directionally for next year.
I think what we try to convey is that we are a little bit careful about, say, the market developments and our position in the market will develop in the coming year. That's also why we took away a little bit, not a little bit, we took away the forecast for 2027. Of course, there are now so many things coming into play that, say, to give, say, blunt numbers in that timeframe, it's complicated. Therefore, it's better not to have a discussion on all those elements together. If you look at 2026, where we already indicated that for smart grid solutions, we don't think there are fundamental improvements based on the, say, the elements we mentioned during the webcast. Also, to the limitations now, the five limitations that are being handled now.
If we look to the practical situation in how they developed in the past half year, we don't see a fundamental improvement, and we don't expect that fundamental improvement, say, in the second half year. Therefore, also, we are thinking that this will also play more or less in the same area next year. At the end, of course, because the obligation of the grid operators is still there, their plans to install in the coming five years are around 45,000 subsidies to be able to cope with the energy transition and to cope with the restrictions that now in all kinds of areas are there, where the energy cannot be distributed in a way more or less the users would like it to be, would mean there has to be a ramp-up.
How that will materialize in which timeframe and in which lumps, that is for us at this moment quite difficult to grasp. If you look to battery storage, we see also all kinds of different elements coming into play: battery density, lower prices, competitive position. That's also why we are, say, looking at that market. We have, of course, an opinion of how it could develop. Say for 2026, we are expecting some growth, but say also limited due to all kinds of circumstances. For EV Charging, the outlook is, say, the most difficult one to predict. We have, of course, only a very short lead time between getting your orders and serving them out. That's fundamentally different if you compare it to the situation in battery storage where we have seen already that, say, quite a large number is already in our order book.
With EV Charging, it's quite complicated to fully anticipate on all the elements of, say, us introducing new products, new features, how that will play out in the overall market situation.
Okay, thank you. For smart grid solutions, is it fair to say that probably the margins then will likely not come back to the levels where it was maybe, you know, just two years ago? I think in 2023, it was the high 20%. I think now you're at 22%. The range is 20% - 30%. Yeah. Is it fair to say, you know, next two years, probably still low 20% is a fair assumption? Just thinking about these higher component costs impacting margins, how much flexibility do you have in, let's say, your contract structure to pass through inflation to the grid operators or to the private clients?
Also here, we have many elements coming into play at the same time. In order to process, say, normal inflation percentages are part of the contract with the grid operators. They are included. For example, the extra reinforcement we had to add after the moisture issue of last year, those elements are not, of course, part of an inflation correction. Therefore, we also more or less say that for the second half of next year, we are more or less counting with the percentage we have now. On the other hand, of course, we are not happy with this percentage. We will try to bring into motion all kinds of elements to be able to improve that. There is also, of course, a time delay between more or less coming to the conclusion how we can resolve this and the timing we can show that in our results.
Okay. A final question on energy storage. I think you mentioned that that division will have to adjust rapidly to changing battery technology. What is the compatibility of your platform today? Maybe, would you need to re-qualify inverters or battery management systems, or what is the risk of a write-down on existing designs if the battery technologies are changing that fast?
I think, fundamentally, if you look to the way, not only how we approach the market, but also you've seen it also in our stock levels on batteries. We try to, we already anticipated several years ago on charging market conditions to that we offer more or less the latest technology without having all kinds of stock problems and those types of things. That means that, of course, it is not always a problem to have every day something else. Fundamentally, we should be able to directly tap into the latest technologies available. There's also in our approach to the customers where we more or less at the moment, projects are being awarded. At that time, we directly connected to supply of the main components. We already some years ago made a fundamental change in our platform.
At this moment, we don't have an expectation that the basic approach we have to the market with our electronics hardware and software, we have to talk about write-offs.
Okay, great. Thank you very much.
I've communicated before also that the only orders or only inventory that we have on stock for which we don't always have kind of a direct client are the mobiles. That also allows us to, when we get an order in, deliver those relatively quickly. We still have inventory on stock for a more larger client. Apart from that, every order is, when it comes in, it more or less directly goes to the location. The inventory that we do have on stock is when these batteries are coming and being put on the boat in China. According to our incoterms, they're our inventory, and then they come into Rotterdam and are delivered on site. They're basically passing back to the customer. That's kind of the little bit of the mechanism that Marco was talking about. This is more or less all that inventory is fresh.
Okay. Got it. Thanks.
Ladies and gentlemen, as a reminder, you can press pound key five to ask a question. Our next question comes from Jeremy Kincaid from Van Lanschot Kempen. Please go ahead.
Good morning, everyone. I have two questions. The first one is just on the EV charging EV chargers in competition. Obviously, some of your competitors are growing at a faster rate than you are. If I compare your products to theirs, there's obviously a difference when it comes to price, functionality, and design. I was just wondering if the Plus charger, which comes out in the fourth quarter, which of those factors the Plus will address, if any, and if you think it's going to be competitive or result in a step change in your sales. The second question for me is just on your decision to downgrade FY26 guidance. Obviously, you're going to have a new CEO coming in in a couple of months' time. Sometimes that's a trigger for management to reassess the outlook and look at guidance again then.
I suppose there could be a risk that there could be another reassessment of guidance at a future date. My question is, why did you take a look at the guidance now, and why did you reassess it and change it at this earnings update? Thank you.
Maybe to start with your last question first, I think as a company, we have always had a straightforward approach. That means that if we know something, we bring it to the market. There is no, say, political element into play that we wait until the new series is there, and then he can bring the bad message. Of course, everything was wrong, of course, in the situation that it was not there. Fundamentally, whether it is, say, our calculations on stock components, where between the first quarter and now, we're in the moment of the results of the first quarter, there was no exact date of implementation of the new requirements. In the second quarter, the date was clear.
With a little bit lower numbers than anticipated, we had to recalculate, and we have recalculated, and we just are transparent in that calculation and also present it more or less as a part of our results to the market. If you look at the downgrade, it's also a straightforward translation of the market situation we experience now, and we communicate it as it is. There is no, for us, no political play where we more or less want to give the new CEO the opportunity, say, to think there should be a reset and to come to the next step in the future. I think in this situation, I think we give the opportunity to the new CEO to bring, whether it is direction or elements into play, to further grow the company in a way he thinks it has to be.
For now, I think this is a straightforward translation of the results of Alfen at this moment. For EV competition, it is always in these markets and elements of the first mover is always at some point also hampered by the elements of his first mover elements. As often, we have been the first mover in EV charging. We have seen that, say, with the introduction of AFIR, we were AFIR with price transparency. We were one of the first in the markets where some competitors are a little bit earlier on the AFIR elements that come into play coming January. I think for those elements, we will be on par. There are elements in our development cycle that will bring us also step forwards in the coming year. Whether it is already directly on the 1st of January, we don't know yet for sure.
We think we will be competitive in our main markets in the coming time in the coming period.
Will the price point of the Plus be different to your current offerings?
I think that's a little bit too early to comment on. We have not formally introduced our product, but that will happen at the end of the third quarter or in the beginning of the fourth quarter. Fundamentally, we think, let's say, price point-wise, we'll be targeting that in such a way that we'll be price for, what you also use your words, price for value or value for price. Of course, we try to evaluate that point into the market area. I think on top of that, price is not just about functionality and design. Of course, they're important, but there are other factors that our customers like. We have been around for more than 10 years. If you take a look in the suits of our chargers, they're still there, and they're still working.
They are robust, and that's what our customers appreciate also in the kind of work that we do. It's too simple to just look at price. At the same time, we are not blind. We see what's happening around us. At a certain moment, price is important to make sure that we realize our volumes, and we will not hesitate to make sure that we adjust our pricing.
Understood. Thank you very much.
The next question comes from David Kerstens from Jefferies. Please go ahead.
Good morning, gentlemen. I've got two questions, please. First, a follow-up on the EV charging business where you talk about the increasing competition, but at the same time, realize a record high gross margin of 48.5%. Can you please explain once more why you expect those margins to come down in the second half of the year? Do you see the increased competition so far mainly on volume, but you expect it to impact pricing in the second half of the year? The second question is more the general comments you make on improving pricing. It sounds like that is less likely to be in EV charging and also in energy storage . You're seeing the lower impact from the impact from lower battery prices. What areas can you improve pricing going forward? Maybe finally, also the other comments around additional cost savings.
I think we're now seeing the benefit of EUR 13 million from the 15% headcount reduction last year, and you have talked about additional cost savings measures. Can you please quantify that impact for 2025 and 2026, please? Thank you.
The EV charging margins, I think I tried to explain that there are a number of components kind of working against each other. One is component cost prices are helping margins and basically were the driver for the improved margins in Q1 and Q2. I also talked about the Twins having a better margin than they used to have last year. At the same time, what we also see, I said we were not blind for competition. In certain competitive situations, we have to make sure that we are also competitively priced. We do expect a downward pressure on margins in the second half of this year due to the competitive situation. That's the reason that we expect that margins for the second half of the year for EV charging are not going up and probably going to have a downward trend.
I mean, I think that's a lot more I cannot say about it. That similar trend will probably be in 2026, where if you have increased competition, you have to counteract that with great products, great service, and to a certain extent also the right pricing. That's what we will be facing also in 2026. You talked about lower battery prices. Yeah, lower, but that's in itself not a main driver for our margin, to be honest. We buy batteries from an external supplier. A significant part of the overall project costs are battery prices. We do have a certain uplift when we buy these batteries and we do all the handling and importing them in Europe and bringing them into the location. We do have a certain uplift over the battery price.
The main part of our margin that we are realizing in battery projects is actually, yeah, I call it EPC type of work, system integration type of work, so project work. That drives our margin. It's not so much driven by the battery prices in itself. On the cost savings, I hope.
Yeah, go ahead.
On the cost savings, we will continue to be extremely careful with cost. That is important. That will be important. We want to make sure also when we will see revenue growth, that we will start to see a leveraging effect of that. Revenue growth doesn't automatically mean a corresponding increase in cost for us. There is a lot of cost discipline in the organization at this moment in time. If you take a look at our cost base first half of the year, my expectation is that the second half of the year will be approximately similar. I don't expect that cost base will go down significantly by the fact that we will continue to watch that carefully.
For next year, the only thing I can say at this moment in time is that cost will be very much a focus and make sure that they don't increase to an extent that they are getting out of record revenue.
Okay, thank you very much.
The next question comes from Thijs Berkelder from ABN AMRO - ODDO BHF. Please go ahead.
Yeah. Morning, gentlemen. I first want to start with a big thanks to Marco Roeleveld for having led this company for so many years, very successfully for many years until, let's say, Ukraine started to invade Russia and Europe changed its climate plans. We did that way. Let's start with the questions. First, on inventory per segment going forward. The inventory valuation used, that current component prices for the non-sold part are clearly lower than they used to be. Why then not now decide to impair the inventory, which is still there of components at, let's say, too high prices? What would be the financial impact for such a decision? Because if you would do that now from an accounting perspective, it would make your margin outlook for next year’s better, is my impression.
Yeah. First of all, thanks for the question because I think you're asking it every quarter. I have the list in front of me by segment. Overall inventory is EUR 104 million. That is including what we call the down payments. The stuff that we have physically on stock and the components that we have reserved at our suppliers, that's the down payment. The total of that is EUR 104.1 million. Smart grid solutions, we currently have EUR 22.9 million on stock. Energy storage system, we have EUR 50.4 million on stock. EV charging equipment, we have EUR 30.8 million in stock. You see the quarter-on-quarter reduction in inventories is mainly in EV charging. That's also where we wanted to be.
That's also where we still have inventory that is, I want to call it slow-moving, and not more than that because if it would be obsolete, we would take the provision, but it is slow-moving. We bought too much in the years for a number of years. The battery inventory is, I think I already explained that most of the battery inventory is just timing. The period that it's on the boat to Rotterdam and the moment that we basically bring it to site, that's more or less a flow. A certain portion of that is on our books, but that's more or less it, except for the mobiles and except for a number of batteries for one specific customer. The smart grid solutions is also inventory that, if you look at it carefully, has been coming down over the quarter by quarter by quarter.
We brought it down a little bit again from March to June. Your suggestion of taking a write-off, that's not in our hands. We do have the right margins for products. We're making a profit on these inventories. You cannot just write down inventory if you feel that that could improve your outlook for next year. There are various rules how to do that. If we would have inventory in stock that we wouldn't be able to sell at a profit anymore, we would have to take a write-off. The conclusion is that we don't have inventory on stock that we don't sell at a margin, and therefore, we cannot take a write-off.
Okay. A follow-up on personnel. You brought your personnel base down to around 950. Can you tell me what roughly the normal attrition rate is in the personnel base? Should we expect you to land at around 900 at year-end, something like that?
No, that's not the way we're working at this moment. I mean, you cannot just kind of let people go and then expect that work still is being done. If somebody leaves or when somebody leaves, we take a careful look at whether we want to replace or not replace. That's actually, at this moment in time, a board decision to replace people. That's the type of gate that we have put in place to make sure that we keep our headcount under control. That doesn't mean that we're not hiring at all. We're still hiring talent. Some people leave us, and we'll try to replace people from key positions. There are areas where, if it's necessary, we might even increase headcount a little bit and then reduce it somewhere else. That's a fact of life.
If you have around 1,000 people in your company and you basically will just say, "I don't hire anymore," that would not be a wise decision. We are extremely careful and replacing relatively slowly and relatively carefully.
Okay. Thank you. For now, my final question is on the energy storage business. In the other sectors, you provide, let's say, a breakdown between EV charging between the Netherlands and abroad, and smart grid solutions business between Finland, the Netherlands, and between private clients and grid operators. In battery storage, you provide large systems to grid operators, but also many smaller containerized batteries to maybe also the private sector. Can you maybe describe what's happening there in the private sector? The event sector, which was your first big sector, is stagnating, it seems, and maybe coming down. Is the construction sector still growing? Is the fast charging sector still growing? Batteries for onshore wind and solar systems, to me, also seem to be in quite a substantial decline. Can you give an update there?
If you look at, say, the split of revenue, we have not that we don't keep track of all those different segments. To give an answer, you mentioned that we supply battery storage to grid operators. I think we should say energy providers because grid operators almost nowhere are allowed to integrate the battery storage. They are mostly related to, I'd call it, the energy suppliers. The company maintaining the grid is another one than supplying the energy. Companies like Vattenfall are supplying energy, and they are also in a situation to include battery storage development. We see also a lot of, say, what we call project developers that are specifically aiming for the segment. The order we got from SemperPower that's now part of Return, that's a pure project developer in battery storage, like also other players in that market. Sometimes we see smaller initiatives.
FlevoBESS is a somewhat smaller initiative of a group of people that have been active in the wind in Flevoland and now also see the opportunity to include battery storage in the ecosystem. Fundamentally, we see that, say, where initially the energy provider was doing that, we see now different project developers coming into place where we have two fundamental approaches. Where is the, say, with, say, the connections to the high voltage grids is more oriented to special project developers. We also see several co-location sites with wind and solar. They are mostly related also to the owner of the solar park or the wind park. At this moment, we have no, we'll try to think about it whether we can get more insight in our in the direction where we supply the unit, but that we don't have available on hand now.
Okay, thank you.
The next question comes from Thibault Leneeuw from KBC Securities. Please go ahead.
Good morning. I have two questions. With respect to the smart grid solutions, during the presentation, you mentioned that you don't expect any significant changes for the remaining of the year. Your guidance still implies an improvement in the second half. What would drive this improvement? A second question, coming back to Ruben's question with respect to the smart grid, the gross profit margins within smart grid solutions. Do you feel that your competitive position in the long run has changed due to the moisture issues, or do you expect that after this time with the issues, that towards 2027, the gross profit margins could go back to the historical levels, or has that competitive position changed a bit? Thank you.
Okay. With regard to the second half year, we indicated already in the webcast that, due to the transition to different types of switchgear and the availability of those components, in the transition, there was a delay in the second quarter. We will have a change of that in the second half year where we expect it to run a little bit more smoothly and that we will have a small uplift. We have seen with the implementation of one of the grid operators where we're in the installation with Stedin, we see also a small plus in the transport fidelity shows where we have already indicated also that we have supplied more transport fidelity shown. What we're also doing there is what we call the one-stop shop activity where we not only deliver the subsidization but also do all site works.
We expect in the second half year a strong uplift of the site works of that part of our business. That's also then situated in the smart grid solutions business unit. Margin long term, in that competitive situation, long term, I expect that we will be able to overcome that. Because of the design elements and the lead time we need to redefine it and also be able to implement it, we will not be able to do that in such a way that you can recognize that in the gross margin of this year and probably also only partly in next year. In the long term, we are convinced we're able to be competitive on those aspects and grow our gross margin in the future.
The next question comes from Maarten Verbeek from The IDEA! Please go ahead.
Good morning, Martin Baker for The IDEA! Two questions left from my side. Firstly, your inventory position has come down nicely, a little bit helped by the write-down. If you now look at the ratio of your EV charging, that is more or less at the lower end of the normal level you expect as a relationship to revenue. Smart grid solutions and for EV C, do you expect still an improvement in this respect to manage your inventory even better, to get it even a little bit lower?
For EV charging in itself, I think inventory is still too high. We still have components on stock that have a turnover of more than a year, and that is too high. I expect this year and also in 2026 the inventory for EV charging to come down. Smart grid solutions, I think, is going to be a slower process. That is due to continuous improvements within the organization. I think there's still room for a certain improvement in that ratio, but there you won't see the big steps that I'm expecting in EV charging. In energy storage, I expect inventory to come down where if we're selling more of our mobiles and if we're selling the one specific project that I mentioned, then most of our project will be based on this kind of the flow inventory that I explained with this.
More or less you are at the lowest inventory that you can get. Those are the dynamics. If I kind of look from a distance to the inventory, room for improvement definitely in EV charging. Two big events in energy storage systems and smart grid solutions will be a matter of continuous improvement. There you shouldn't expect huge improvements.
Okay. Second question, that's concerning your provision for the moisture issue. You took a provision last year. You have only used a modest amount of that provision. According to me, there's still some EUR 12 million on your balance sheet. When will you attack that issue and when will we see the cash out of that provision?
Fundamentally speaking, say all the costs that are now related to subsidization that are not being called and we could repair. We're now in discussion of when can we do whether it is repair or inventorizations of locations on site. There we are dependent on, say, the grid operators that they more or less, one, make an investigation of the investigations on site, and secondly, give us opportunity.
To do something with it. Because of the fact that, say, there is no safety issue, no performance issue, which is a position they now prioritize more or less on their side, everything to do to create new locations. Therefore, it takes longer for us to come into a position that we can execute on those repairs. On the other hand, take into account that, of course, when we can do that in our factory, it costs us much less. We have to do site works. That's why also we think that the provision is, I call it, balanced at the moment. We still need, say, this provision to be able to execute on some repairs on site.
Thank you.
Timing will be this year, next year, and could even run into 2027.
Yeah.
Thank you. With that, I would now like to turn the call back to Mr. Roeleveld for any closing remarks.
Okay. Thank you. I would like to take the opportunity to thank everybody for participating in this webcast and to thank Thijs Berkelder for his nice words on my part. I hope that we speak again sometime in the future. Thank you all.