Earnings Call: Q4 2020

Feb 12, 2021

Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Interpol's Fourth Quarter twenty twenty Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Luca Mirabelli, Head of Investor Relations. Please go ahead, sir. Thank you. Good afternoon, everyone. Good morning to those connected from The States. Welcome to this call. As usual, I'm here with Executive Board Member, Fabio Marazzi, with the precious help of our CFO, Carlo Banshi. And today, we are going to comment on the results for the 2020. And what a year it was. The COVID-nineteen pandemic brought some entirely new challenges to the world, but also provided a good demonstration of Inspump's flexibility and resilience, attaching a real life meaning to these two words that we use so frequently in our presentations. We will also remember it as the year we finally made it to the main index of the Italian Stock Exchange, the Fultimide, and our market capital at the EUR 4,000,000,000 mark, thanks to the appreciation shown by the markets. And there is no doubt that we are all very proud of these results, and we are very well motivated to face 2021, which is expected to be a year of recovery. Let's take a look at what we have achieved. Considering how quickly the situation changed throughout the year, it makes sense to focus on the quarter first. In the last quarter of the year, we had a confirmation, in some cases, an acceleration of encouraging trends seen in Q3 despite an expected somewhat expected strong headwinds from the currency exchange. Sales in the quarter amounted to €340,100,000 minus 0.7% year on year. This is the result of organic sales down 1.7%, a negative 3.4% from the currency exchange, so a very strong one, and a 4.4% increment due to the perimeter expansion. Sales in Hydraulics amounted to EUR236 €700,000 an increase of 4.2% increase. Let me underline it's an increase of 4.2%, which was partially hidden by the minus 3.3% from exchange rates and helped by the addition of a healthy 6.2% from companies added in the previous twelve months, mostly TransTechno. As a result, revenue sales for Q4 are up 7.1% year on year. In Water Jetting, the top line was organically down 12.4% year on year, slightly better than the previous quarter, but still clearly affected by the pandemic induced slowdown. Many of our customers in this division went on working during the pandemic as they belong to essential industries like food, or pharmaceutical. This is what allowed our water jetting companies to remain operational throughout the darkest months, especially I'm referring to mid March to mid May, while at the same time, hydraulics was suffering from almost complete stop. However, while sales related to maintenance, replacement or small expansions went on as normally as the situation allows, order income will hit much harder as some customers completely postponed their largest CapEx projects before because of the more complex nature of the interaction involved and also because they needed to focus on everyday activity at a time when an instant team presenting presented more logistical difficulties than normal times. So the lack of these orders from the first part of the year is the main driver, the main reason for the sales trend in the last quarter. Currency exchange had a negative 3.4% impact, and one percentage point was added by the recent acquisition of Max Fusion, taking us to a reported figure of EUR 103,400,000.0, down 14.8%. Despite the short term trend, on a full year scale, the water jetting division proved once again more resilient, limiting its organic drop to 10.8 versus a 13.6% registered in hydraulic. After factoring in the negative currency exchange and the acquisitions, the final reported sales came to EUR 8 and 81,600,000.0 for Hydraulics, minus 2.3% compared to the previous year and EUR 412,800,000.0 for water jetting, minus 11.5%, which brings us to the total consolidated yearly sales figure of EUR 1,294,400,000,000.0, down only 5.4% compared to 2019, also thanks to acquisitions worth a good 8.7% of last year. A look at sales by area in the quarter reveals that Italy and Europe are flat year on year. North America is down 11.6%, but this is the performance in Europe, and more than half of it is due to the weakening of the U. S. Dollar. Latin America is lagging behind, still minus 25% compared to one year before. China is, let's say, catching breath after two quarters of strong growth and registered a minus 14% year on year, but the year the performance remains positive. China is poised to reach 7% of our consolidated sales, and it's already reached that rate on a quarterly basis. South Korea grew 12% in the quarter, reached 2% of our total consolidated sales, and seems overall to be enjoying a very positive momentum. Good news also from India, where a solid 41% increase in the quarter brings the unit performance in line with the group average, probably even better than the group average in local currency. And hopefully, this is the first signal of the end of a long crisis. Looking at sales by application sector, The best year on year performance in the quarter belongs to agriculture, which is up 40% compared to one year before. Construction was still strong at plus 24%. Trucks are up 13%. First moving and lifting are also up between 67%. Unsurprisingly, sectors related to hydraulics are showing the best performance. As already discussed, recovery in Food, Cosmetics and Pharma seems to be coming late, and the sector still registered a minus 11% awaiting the return on CapEx. Then we have the cluster that surprised the forest resiliency in the course of the year or to say it more precisely, the cluster that showed how little correlation our business may have with industry wide trends. I'm referring to oil and gas, marine and offshore, which this quarter is down 22% but remains above average considering the entire year. The final comments on our top line. As you have seen, sales at the end of the year are very close to peak prices level, although with a very diverse mix and strong changes from month to month. The road to normality is proving bumpy and full of sudden turns, but we are confident that we have the right vehicle for this kind of road. And this also shows very well in the profitability we expressed during the year and especially at the end, Q4 sports a 23.2% EBITDA margin, equivalent to EUR 78,800,000.0, which is an absolute record both in margin and in absolute value for our fourth quarter, which brings the yearly total to €294,100,000 or 22.7% of sales. It's hard to imagine a better demonstration of the resilience of our model. The EBITDA margin for Hydraulics in the last quarter was even nearly two percentage points higher than one year before, bringing the earning margin above the one of twenty nineteen, 20.8% versus 20.7%. This Q4 improvement was not seen in Waller Jetting, which closed the year with a 26.7% EBITDA margin, 120 bps lower than in the previous year, very similar to the situation at the September. The overall contribution to personnel costs from the welfare systems, Capa Integraciones for Italy and similar schemes in other countries, decreased further as expected, in Q4 and amounted to 0.4% on sales, bringing the yearly total almost exactly to 1%. The higher than usual profitability in Q4 brought to a net income of €49,700,000 which drove the yearly total to €152,700,000 The corresponding tax rate for the year was 24.6%, lower than our historical average, but mainly for the same reasons explained last year, the fiscal benefits resulting from the installation of Industry four point zero compliant machinery in Italy. These benefits are going to last for at least seven years and possibly more if the scheme is renewed. And please note that the net income could get an additional boost, tend to more fiscal benefit granted by the Telenex authorities as a consequence of asset revaluation. At this time, calculations are still going on, so you will have to wait until the final results are announced on March 19 to get a precise idea of the impact. And now we have reached my favorite page of our record for today, the cash flow statement. Cash flow from operations amounted to €229,500,000 As expected, the healthy adjustment of our net working capital went on also in the fourth quarter, a further €25,000,000 for a yearly total of about €55,000,000 CapEx for the year was €61,400,000 which is towards the high end of our usual range of 3% to 5% of sales. As a result of all this, Interfant achieved an unprecedented free cash flow above EUR 200,000,000, EUR 203,800,000.0 to be precise. This is very exciting considering that a low leverage in our balance sheet gives us more firepower for future acquisitions. However, remember that this was not due to a new policy or any out of ordinary effort. This is rather the structural characteristic of the Interpath model, where cash generation is enhanced in low or negative growth period, thanks to the very efficient adjustment of our net working capital, which is quite sizable. Conversely, you should be prepared or hopefully, you should be prepared to see less impressive cash generation in 2021 as a result of the return of organic growth. EUR 16,600,000.0 were spent in the quarter to purchase treasury shares, taking the yearly total spending to EUR 48,500,000.0, and there was no significant disbursement in acquisitions or dividends in the fourth quarter. So in conclusion, our net financial position at the end of the year came to EUR 2 and 69,500,000.0, on top of which we had EUR 62,700,000.0 of commitments related to acquisitions. The increase in the quarter was due to a reassessment following the outstanding performance of Trunk Techno this year. Net debt now stands at less than 1x EBITDA. Although, as usual, we cannot give you any advanced information about ongoing negotiations, it is fair to point out that for M and A an M and A oriented company like Interpol, this extra firepower comes at the right time as the standstill that was due to the difficulty in assessing the value of companies in the middle of the pandemic appears to be heading to an end. At the same time, we are closely monitoring the complex dynamics of organic recovery, which, as mentioned earlier, occurs in many different shapes and timings. There is no doubt that Hydraulics has started earlier than we were projecting due to the stronger compression of the business during lockdowns and also due to easier comparables in the previous year. We are still waiting for Water Jetting to do the same. And so far, I have to say we have started registering encouraging signals in terms of order intake. But reality is even more articulated than this, and there are significant differences within each of the two divisions. However, this is a perfectly expected consequence of the diversified nature of our business. We said that from the very beginning that recovery would not have been an orderly phenomenon, but quite a chaotic one. And we have some good reasons for optimism, the rollout of vaccines, the rest of the scientific progress in diagnosis and cure of COVID-nineteen, the willingness of all monetary authorities to help with the recovery, the change in policy by the new U. S. Administration and especially the fact that it is supported by majority of the Senate and even the, hopefully, coming soon, new government in Italy. There are also some downside risks. A lot of things can go wrong in the implementation of initiatives of an unprecedented scale. 2021 doesn't really look like a year for short term predictions. And this brings me to my next and final topic. Almost exactly one year ago, we disclosed our ambitious expectations for a three year period ending in 2022. Okay. If we look back at 2020, to say that 2020 did not go according to plans is a big understatement. So it's about time to update our indications to the market. As you have seen from the press release, after careful consideration, we decided to offer the same indication rose forward one year. So we are envisioning the same growth previously expected for 2020, 2022 for the three years of 2021 to 2023. In numbers, we believe that the combination of organic growth and M and A can result in a top line growth around 33%, the preservation of EBITDA above 22% despite the possible dilution from acquisitions and a net financial position between one and 1.5x the yearly EBITDA. By projecting the same path expected one year ago, we are actually making a significant statement. COVID-nineteen has not forced Interpol to cut, divest, terminate or otherwise sacrifice its potential for growth in any way. And the other underlying message is as strong as last year. Acquisitions should be viewed as a structural part of our model, not as something accidental that may or may not happen. They have played and will continue playing a fundamental role in our growth. And I would encourage anyone relatively new to our story to pay close attention to some almost unique aspects in our targeting, assessment and integration processes, which over the years have proven very effective at minimizing costs and risks and extracting the highest possible value. At this point, we'd love to hear from you. So let's open the lines to the Q and A session. Session. The first question is from Mathieu Bonizzoni with Kepler. Please go ahead. Thank you, and good afternoon. I have three questions, if I may. On your M and A ambitions or in any case, these three years are 10% revenue CAGR. Let's say that historically, if you look at the last fifteen years, your 11% revenues CAGR was split in 4% organic and 7%. I mean if you look to 2023, the organic growth should be stronger than the average because of the fact that clearly 2020 was depressed. So from my estimates, I expect roughly speaking 7% organic CAGR. So it means that to get to 10% per year, you are incorporating a sort of 3% M and A. I would like just to understand if it is based on the fact that on consideration of your pipeline, so your current pipeline is larger, smaller or close to historical average? Then on the second question is on 2021 organic outlook. So you are not providing any yearly guidance, let's say, also last year, you did the same. I just wanted to cross check if an expectation for, let's say, a low double digit organic growth is reasonable? And also, I would like to understand if after a very good margin defense in 2020, it's do you expect a flat margin, improving margin or whatever? And final check on the CapEx and tax rate level for 2021. I think that CapEx this year were, in 2020, around €60,000,000 and tax rate was good because of the reason that you are mentioning. So what about 2021? Thanks. Okay. Let's address your questions one by one. The first about our three years' expectations. Well, as a general note, any kind of forward looking statements must be must come with a good dose of prudence. So there is no doubt that there is an upside risk to what we are indicating. But considering that our previous indication was met by the outbreak of a pandemic, you might understand why we didn't feel like splurging with an extremely, extremely general indication. Jokes aside, is a good possibility that the overall growth in the three years, the organic growth is higher than what we are, let's say, encompassing in these numbers. And so the result would be better than that. But we have three years to adjust our aim and hopefully introduce the positive surprises. We believe that we are still in the middle of the pandemic. Don't forget that the vaccine rollout still has a number of things that could go wrong, especially in terms of mutations of the virus and so on. So although we are overall optimistic, this would not probably be the right time to discharge 100% of optimism. And of course, I will give the microphone to Pablo Meraldi, who is a a big board member, might have more of an insider look at this kind of topics. So Pablo? Yes, sir. What I believe is important to underline is, of course, on top of the difficulties in making precise analysis or giving precise targets regarding M and A because, you know, better than us M and A occurs. And also that we have an opportunistic approach. An opportunistic approach means that we are able and prepared to analyze and close small acquisition or also to analyze and approach bigger acquisitions. What is important to underline is related to our strategy and is absolutely clear within the company, within the top management, that we are more committed than ever in reconfirming our M and A strategy, in reconfirming our idea of reinvesting in M and A in the growth of our group and the consolidation of several of the markets in which we are present, almost entirely the cash flow that we generate every year. As we have seen before, we also have a stronger than ever balance sheet, thanks to the fantastic cash flow generation that we have had in 2020. And for this reason, we are also prepared to look after a slightly bigger acquisitions, slightly bigger targets in comparison with what we have done in the past. We are not looking for professional deals. We are not looking for diversifying our or adding another leg. But we are prepared also considering where we are in terms of market capitalization, in terms of size of the company and in terms of strength in our balance sheet and very low leverage, we are prepared to look at some things that is even larger in comparison with what we have done in the past. And one last point that I would like to mention is the landscape in M and A. Of course, 2020 has been a difficulty for negotiating and closing M and A transaction because of the only problem related to COVID logistics and also some gap between the ideas or the evaluation made by the buyers and expectation of the entrepreneurs and the sellers who are still based on previous year of pre COVID situation. I believe and we believe you're seeing in the market in these weeks that this situation is easing a little bit considering that now we are entered in a year that everybody expects to be a little bit more normal. Then if I look in order to make a final statement, if I have to look at 2021 looking further, I really want to underline how important will be and how important we believe will be M and A for Interpol Group growth. Thanks, Stadio. Going on with your question regarding the expectation for organic growth in 2021. You are correct in saying that we are not delivering a set of numbers as the guidance for the one year. You mentioned a low double digit organic increase, which is not reflected in the current consensus. So this question takes me a little bit by surprise. In the current consensus has a very high single digit embedded in it, and I think that it looks doable. In terms of commenting on a significantly higher expectations, I would still be cautious at this time of the year. Again, the year will certainly have two different phases, especially the turnaround of the water jetting business, which is expected to happen, but the timing is not certain yet. So I wouldn't feel very confident in underwriting double digit growth at this time of the year. Of course, this is very well within the reasonable range of expectations. So I would not encourage anyone who has that in mind to change their mind based on any material evidence. It's just a matter of prudence. As you know, in terms of delivering messages for the future, we have always been very prudent in the past. Probably 2020 was one of the few times in history where we had to revise our expectations, and we certainly don't want it to happen again. So that's pretty much everything I could say. Let's stick to the consensus, the one you can find on Bloomberg or also ask me if you don't have it. We also collect the consensus, and I'm going to update it after the set of reports that are going to come out after this call. And I will speak to commenting on that number, not on any particular figure of proposal. Margins and tax rate for 2021 and years to come. In terms of margins, we have different factors that are suggesting that margins could go up or go down. Therefore, it is, let's say, the the more reasonable thing is to be looking at substantial stability of the margins we achieved this year. Although the active speed of 2020 is promising, so I wouldn't rule out maybe inching up a little bit of them. But remember that despite the unflattering behavior of the top line in motor jetting in terms of mix factor, the mix factor in motor jetting is quite favorable. This is why, as a percentage, it expressed a very good margin overall. And this might, of course, change as soon as all the companies in water jetting see the recovery. We are also going to miss that 1% help hopefully, we're going to miss that 1% help from the layoff funds. And hopefully, we are going to start paying travel costs and costs related to trade shows. Of course, the exact point in 2021 when this starts happening again is not known. And so these are the reasons for prudence. Of course, the reasons for optimism are in the fact that our operations in 2020 were anything but optimized. Of course, we have to face a number of continuously developing situations and unpredictable events. So we clearly have room for working in a in a better way, which is should be expressed in a higher margin. The tax rate, the ones that we we have commented now, so the twenty four point five looks like a reasonable indication because the value of fiscal benefits for related to the hyperamortization of Industry four point zero compliant machinery in Italy are there. They started last year. They will last for seven years. So that's a fairly good indication of what to expect. But remember that you may hear more positive news on the tax rate for 2020 when we announce the final results because calculations are still ongoing regarding another fiscal benefit that will probably be a one off only for 2020. That's I think I've answered your question, Matteo. Yes. Thank you. Thank you. Next question, please. The next question is from Dominik Adilovsky with Repita. Please go ahead. Good afternoon. My first question is a follow-up on the guidance. I'm trying to understand if you see today a pipeline on the M and A that is different, lower in particular compared to, say, twelve months ago. Because at the end, if I put your 33%, I end 2023 with around 1,700,000,000.0 sales compared to 1,800,000,000.0 before. So either you you you see COVID having a a structural impact in 2023, so depressing to the organic recovery, Or you have a lower pipeline for M and A? The second question is some color on what's going on in what's objecting and hydraulics. You were mentioning that water jetting is sign of recovery in the order intake, but I think that probably we will wait for a few quarters before seeing this translate into the plan. So should we expect water jet is still down in the first part of the year and then recovering and while hydro being already continuing the positive trend that we have seen in Q4? And could you give us a sense of so you were commenting on the margins. My third question is give a sense on the margin specifically for the two divisions. So should we see some upside on hydraulic more than we're projecting? Okay. Well, first, I would like to make an observation, which is a very superficial one before leaving the answer to Fabio about your comparison. You said that we are aiming at €1,800,000,000 now we are aiming at 1,700,000,000.0 And you are asking whether this should imply less ambitious plan for M and A. But as a matter of fact, it's not exactly the same kind of attitude because even the companies that we plan to acquire have had exactly the same or in some cases, higher decreases than we are. So by acquiring exactly if we have a set of companies to acquire, by acquiring exactly that set of companies, we will probably achieve, let's say, results in percentage. And this explains why everything being unchanged, the numeric target would go from 1,800,000,000 to 1,700,000,000. But this is, of course, just a very small and superficial observation. Maybe Fabio wants to add something substantial to this. No. On top of this, I would not like you to not to encourage you to take this point, saying that the 1.7 instead of 1.8 means that we are looking for lower turnover or lower M and A activity. It is exactly the opposite. As I've commented before, we are more productive than ever. We don't have any problem in terms of balance sheet, of course, of White Power, also considering the level of the interest rate. We just to add another comment, will probably need to be prepared to enlarge a little bit our evaluation range for the company because of the situation of the market. But when I commented this, I had in mind to add zero point something or at maximum one point to our usual market points. But this is not, in some way, affecting our growth capabilities and our willingness to go ahead with our M and A strategy. But I will not encourage you to take this conclusion that we are looking to easier target for M and A. So just to clarify, so the pipeline is similar or even stronger than last year? And when you are referring to larger, should I assume, say, 100,000,000 to 200,000,000 sales? So this is it. This is absolutely reasonable, yes. And also, another very another superficial observation is that when we issued the same indications last year, we already had in our pocket REGNA, INVENTORY and Transpagno. So we had already an 8.5% of external growth, which we could already count on. So if you wanted, our target was a little bit simpler to achieve than it appears today. But anyway, what Pablo said about the richness and how the pipeline is, of course, much more important. Now on to your question about the trend expected by both divisions. Are seeing a real explosion of orders in hydraulics. So I would expect some very, very strong numbers for the next quarters, especially as we are going to face easier and easier comparison base. So for those of you who would like take a look at year on year trends, this would be a funny year to comment on. In order to get the easier comparison base will not be there until Q2. Q1 last year was still quite good. And so you're right. And you mentioned the second part of the year, I could be a little bit more optimistic and hope that we're going to see the signals sorry, not the signals, the effect in on the top line as early as the second quarter. But of course, your mileage may vary. Things will have to really to actually happen before we can comment on that. But there is no doubt that there is a different timing and a different shape in the recovery. The recovery in hydraulics appears to be very, very strong proportion to what happened. Remember that on a yearly basis for 2020, hydraulics still lost more than water jetting. Probably, if we extend this 12 eighteen months into the pandemic, when water jetting is still making its first step step towards recovery and hydraulics is already running. Probably, hydraulics might might appear to be better than than what we're projecting. But this will be probably an anomaly in history that is not going to last very long. In terms of margins by division, I already hinted that the fact that the margin as a percentage towards the jetting is currently in the best range in terms of the mix factor. So I would not expect it to go after. But I could be contradicted very easily, as we've seen in the past, by the appearing of some very large order that comes with a significantly higher than average margin as happened last year. We have seen in the past years that mostly, thanks to Handelman, the order jetting trends have been characterized by some very large orders. So the granularity has become a little bit too big to be able to comment fruitfully on very short term trends. However, I would reiterate my comment that the mix factor in the margin for the water jetting starts the year from a very favorable position. In terms of hydraulics, the increase in margin that has been seen appears to be, let's say, long lasting or at least had or long lasting. There is no expectation or no particular reason why it should go down. If you want to look at another way, to think of a large part or significant part of the water jetting market like India that were have been suffering for two years, well, the the coming back to life of those markets will undoubtedly have a very positive effect on on margins, which is possibly the one that you are seeing in Q4 this year. Before, electrolytes was not only quite high in absolute terms, but the dynamic and the increase seen in Q4 in the last quarter of the year, where usually there is a negative seasonality is quite tally. I expect that kind of benefit to be stable and so to be reflected in 2021 and ongoing years. That's And my follow-up. So you didn't mention raw materials. I know that you have a good backlog inventory level. So you don't see any typically past price increases in raw materials. So you are still confident that raw materials are not an issue on profitability? At this point, we do see, of course, all kinds of crazy things happening on some raw material prices. But at this point, there is no indication that this could have a negative impact on margins unless you want to consider margins on a weekly basis. Then in such case, maybe this could happen. But generally speaking, we are absolutely not moving from our policy. All increases in the production factors should be passed on to customers, and we typically have the, you know, enough strength both towards customers and to work compared to our competitors to pass them on quite nicely. At this point, I would not sound any alarm about that. And very, very last one. On the absolute strong orders that you were mentioning, is it up also compared to 2019? Because the 2020 comparison is a bit, let's say, useless probably. And so I I I tend to look at 2021 versus 2019, so on a normalized basis. So, basically, you had probably just in March some impact on your business. I'm trying to understand if the market is so strong as it was in Q4 twenty twenty to be up compared to 2019. Sorry. Were you referring to hydraulics or to other Yes. Yeah. You are hydraulics, sorry. I don't know. Yes. In hydraulics, yes, I would confirm that the situation is better than than one year before, also in terms of order income. But this is quite an easy answer. Remember that the last part of 2019 saw a top line that was decreasing very fast. So actually, the decrease in the order income was seen from as early as the middle of the year. So there is no doubt that the level of order income that we are seeing now is something which probably is comparable. I didn't make any actual comparison, but I have been pressured that it could be similar to something that we saw in 2018, which is, of course, a very good indication. The next question is from Alessandro Tortora with Mediobanca. Please go ahead. Yes, hi. Good afternoon to everybody. Okay. I have three questions. The first one is on the CapEx side because sorry, I didn't get if you give out any indication on the CapEx, let's say, organic CapEx for 2021. Okay. Well, in terms of CapEx, are looking to a very strong plan for 2021. If everything goes as it should, and this, of course, will depend on how the pandemic develops, might actually exceed our usual 3% to 5% range on sales. It's a bit too early to say whether we'll be able to achieve all of the ambitious plans that we have put together, but the CapEx plan for 2021 looks much richer than in recent years, which can be understood because, of course, 2020 was compressed by the logistic difficulties in implementing some of the plans that have been devised. In terms of The U. S, well, there is not a lot that I could add because, as you know, it is always difficult to identify common trends throughout our very diverse range of companies and customers. Certainly, one significant weakness was noticed in contractors following the oil and gas sector in the Texas area, which is quite a significant component of NLB business. There was also, I would say, general weakness, continued weakness for the power data ops, was seen at month three, looking at month three, which is quite reasonable because when you look at the statistics for for trucks, the good news coming from the truck sector, well, they refer to orders of trucks. But it's not like someone orders a truck and buys a PTO at the same time. The PTO will be bought after the truck is delivered or maybe one day before. So it is not surprising to see that Nancy is not reacting in exactly a linear way to the trends in the truck sector. These are probably the only two significant trends that we can see. Otherwise, I could blame some of the weakness which can be applied to the water jetting sector in many, many other countries in the world to the logistic deficiencies from as a consequence of COVID. So for all those customers that we are serving from Europe or from other countries, in some cases, complex implementations delivering to The States might come with some added efficiencies at this particular time. But this is something that, of course, is going to be sold quite soon and certainly in the course of 2021. We will monitor closely the situation and then let you know in the next presentation how it is evolving. I could also, but just for lack of better ideas, would also consider that possibly the pre election uncertainty had some impact on the the purchasing decision. This is something that we saw in 2016, so it's quite reasonable to imagine that it may have had a role policy in 2020. But again, this is a I I apologize for this. This was a very generic answer. Mhmm. In terms of M and A and integration, of course, I leave the marketing to call you. Yes. I'm taking this answer. I confirm, and it is true that we are looking at larger transactions in comparison with what we have done in the past. This point doesn't mean that we will not be looking for a small acquisition like the one that we have made in 2020 or we have made in the past because we still believe that we have the capability to identify, to execute and to manage even smaller even an acquisition of the size of this business of missionary or this industriali that are both in the €5,000,000,000 range in terms of turnover, we believe that these kind of companies may have significant allowance, significant expertise or some specific experience in the market niche or in application. We believe that that this acquisition will reach even in the future our our know how and our competitors. When we say that we are looking at and we are prepared to to analyze and execute even larger deals, it is the consequence in some way of the size that the group has reached the market cap in the stock exchange. And in order to do this, we are in some way prepared to increase or to pay slightly higher multiples than the average multiples that we've done before, but without changing strategy or without leaving and abandoning what is our usual disciplinary of approach. If I may add a comment, in terms of the validity of our software integration approach, I would point out that a hypothetical large company would probably come with its own organization. So it lend itself very well to maintaining that organization. This is especially evident if you compare that to Fabius Nightmare, the integration of GS Hydro, which came with no organization at all. So it requires some kind of emergency care, if you if you say what I mean, if you see what I mean. So I don't think that our soft integration would change based on the size of what we acquire. It's more of a philosophy than a technical requirement. So we will still consider that the way to go. Okay. Thanks, Luca. Thanks, Spangio. Just, sorry, a quick clarification. When you mentioned about the impact Okay. Sorry. The audio quality sounds like you are speaking from the bottom of the box. So I will try to summarize. Did you ask about CapEx and Grafione and the other layoff teams? Yes. Yes. Okay. So yes, the final contribution for 2020 was almost exactly 1% on sales. It was 0.4% in the last quarter and then going down quite faster. I don't expect it to disappear completely because, of course, there is no reason for refusing this kind of help when it is available, but we expect to have less and less occasions to benefit from it. So hopefully, by the 2021, its contribution will be really minimal. I would not encourage personally, I would not encourage you to factor in any kind of significant contribution from this fund into your margin expectations. Okay. Got you. Thank you. The next question is a follow-up from Dominica Vilosti with Equita. Please go ahead. I had a follow-up on your CapEx plan. So can you elaborate on what are you investing? What are the key drivers for this CapEx plan? What I believe is important to consider for 2021 is a double effect. One is the delay with some of the investments that were planned for 2020 has been had in as a consequence of the COVID. And second aspect is is related to some real estate investments that we have in mind or we have a budget for 2021. On this second aspect, in particular, want to mention that I don't have precise number, but we have, in our budget, we have already decided to go ahead with some new plans for some of our companies. And this is, in some way, a normal real estate process that, like every time, should occur. And in some of the companies is the answer for the growth that we have had in recent years and for the limit that the existing plants are having for future growth. I have in mind, in particular, the plant of energy in The United States that is too small, and it is rented for a very high cost from the previous owner of the company. And last year, we decided to start with a new Greenfield real estate project. And several other example in different companies in the group, and this is contributing to what we are expecting for CapEx in 2020. And this is bringing our expected CapEx for 2021 to a higher level than the average of 3% to 5% of our sales. Of course, as Luca was mentioning before, the final number will depend on the policies that we will make in particular with this real estate development or this new building. Can you share some geographies? So you mentioned NFB, if it it's possible? So just to have a better understanding of what you're driving, if it is really at full capacity or do you see a growth that is exceeding your existing capacity in a couple of years? The three most important new building that we have in mind for the group companies, apart and to precise some minor plan, are related to MLB, to the plant of Marcy in Oklahoma, and to the new plant of Tubi Flex in Turin, ma'am. These are the three most important interventions that we will have to plan in 2021 and 2022. So the first two probably, if I'm not wrong, were already planned before COVID. So as you are mentioning, it's a postponement of some investment that initially may be projected for 2020. Yes. It is something that we have been discussing for a while. Now we started discussion even before COVID. And with COVID, probably, we had some delay, but we are going on lower. Okay. Thank you. The next question is from Bruno Permetti with Intesa Sanpaolo. Please go ahead. Good afternoon. If I may follow-up on your M and A strategy because I'd like to understand if the larger target will translate probably in a different timing distribution of of the acquisition. So we can imagine something in 2021 or we have to imagine something for 2022, I mean, or we have to imagine something equally distributed along the three years period. And the second point is to be I wanted to have clear your additional revenue target from acquisition. So if I assume your indication of high single digit growth in 2021 for the top line and probably a low single digit to be conservative, low single digit organic growth in 2022 and 2023, I would come out with an amount of revenue from external growth between 200,000,000 and €250,000,000 Is this currently reasonable? Or is it in line with your view? Yes. Starting from your first question regarding the execution difficulties of the timing for the execution of the larger deals that I've mentioned as a potential target. Answer is yes. Larger transaction usually takes longer, but it is also important to consider that we are not starting today, then we have not stopped in 2020 our M and A strategy and our M and A activity. And then we have, as always, several to see on the table at different stages. Then I will not say I do not believe that it's fair to say that if we look at larger transaction, we have not just had any closing for 02/2021, and everything should be postponed to 2022 and 2023 because larger deals means longer execution times. It's also important to consider that we have many dossier on the table that has been had or in some way postponed because of the logistical difficulties or the evolution gaps in 2020. Then I'm expecting I will not be happy about my statement, but I'm expecting a very positive 2021 for M and A. In terms of additional contribution of the M and A to the growth in 2021 and following years, want to mention that regarding the top line contribution, it's important, and it will be important, the closing date because if we close an acquisition in June, we will only have half of the year as a contribution. Detailing which will be the contribution from the M and A to the 2021 growth, it will depend also on the timing of the closing that we will be able to do. But I think that on sorry, on a three year period, you believe that if there is no assumption, $100 to $250,000,000 I was focusing on the first part of the period because you mentioned 2021, but if we look at 2022, 'twenty three, it's absolutely reasonable to have these kind of expectations. Thank Thank you, there are no more questions registered at this time. Okay. Thank you. So our next appointment for the quarterly results is set for May 14 for the Q1 results. Well, thanks for attending. Have a Happy New Year for those following the lunar calendar, and have a good Valentine's Day for everyone, which is this Sunday, and I probably saved some online with this piece of news. Goodbye, and stay safe. Ladies and gentlemen, thank you for joining. The conference is now all over. You may disconnect your telephone.