Good morning, everybody. This is Martin Melman of Odessa IR speaking. First of all, I'd like to thank you for joining our q four and full year earnings call regarding our annual report we've published today. Within our release this morning, you found Adeso confirming the preliminary figures published in February. Adesa again managed to outgrew the markets with sales growing by 14% organically to around €1,300,000,000 Although earnings figures grew disproportionately higher, profitability only improved slightly to 7.6% EBITDA margin.
This is mainly due to still high burdens from the product business as well as weak utilization in the first half of twenty twenty four. However, with 10.6% margin in h two, ADESA came close to its midterm target and utilization develops better in the first month of twenty twenty five than last year. Hence, outlook for full year 2025 remains largely positive with further growth in sales and improvements in margin. I now like to welcome as well our new CFO, Michael Knopf, and as well, departing CFO, Jorg Schroeder, who will leave the company in April. He and Jorg will be available to answer your questions after the presentation.
Michael will introduce himself very briefly beforehand. As always, I'd like you to mute yourself during his presentation. Feel free to open up the channels for the Q and A session afterwards. Participants on phones may want to mute or unmute their microphones via the star key followed by the number six of their phones. Thank you so far. And Michael, please, your turn.
Good morning, everybody. My name is Michael Knopf. I joined Adeso at the January 15. And, Jorg and I, we are organizing now the handover since, almost two months. So at the end of this month, everything will be finalized and handover will be finished. I will take over the responsibility for finance and controlling m and a corporate development, investor relations and, Artisa Ventures.
A little bit about my my CV. For the last three years, I was in the private equity sector with two portfolio companies, Voteland and Deutsche Bitterlingsaghi. The last one was, Acinet Holding, which is an IT services company, located in Hamburg, specializing in running data centers and providing services in this area for for their their customers. Between, 02/2017 and 02/2021, Arvar was member of the board and CFO of Maternal Information Communications. The company also located in in Dortmund, so kind of a neighbor of, Adeso.
Pretty similar in the setup, focusing on SAP, IT service management, and, especially, the public sector. Between 02/2007 and 02/2017, I was member of the board and CFO of Swiss MicroTech SE, located in Garching, by Munich. This is an IT services and and semiconductor company providing equipment for the semiconductor industry, pretty international. And stock market listed, at that time, in in at. And maybe what's also kind of has kind of an importance between 1999 and 02/2005, I was also CFO of Birtech AG.
At that time, I am international IT service provider for the SAP sector, and at basis providing basis consulting. I started my professional career in 1995 with a as, with a university degree from the University of BioID at master of business administration.
Yeah. Thank you, Michael, for the brief introduction. And now, as usual, Juergen, it's your turn, the beginning of the presentation, of the full year figures.
Thank you, Martin, and thank you, everybody, for attending this meeting today. We will make it such that I will present the past, So the figures for 2024 and everything that is future related. So the guidance for 2025 and onwards will be held by Michael. And we will do accordingly when you ask questions, everything to the past, I will answer and for the future, Michael will probably take the questions. So starting out, looking at sales growth for 2024, we came out at roughly 1,300,000,000.0 revenues, which is a 14% increase.
And we did that almost entirely by organic growth in an environment that is not growing that much. This is still good for a deco that feels slow, but it's still double digit growth. So we are happy about that. It's also you see the headcount growth on average. We grew the headcount by 12%.
But if you just look purely on year on year end figures, the growth is only 8%. And the story behind that is that we had this hiring freeze. So over the year, new recruiting recruited people did not came on board. So on average, this evens out. But if you look at year end figures, we see the slowdown already happening.
And we will probably have to do something that slow doesn't grow too much for us. Okay. If we look at the industries, you see the pretty usual picture. We are still pretty well diversified. No sector has more than 20% of the business.
Same is true for customers. The top 10 customers make them around 2324% of revenues. A single customer does more than 3% or 4% of revenues. And if you look at the industry growth rates, that's the second column in the table on the right hand side, you see that we are growing in all businesses, in all industries that we are working in. There are a couple of ones who only have single digit growth figures like insurance and banking, the financial service industry.
Insurance is largely driven by the still weak insurer business on the license side and banking is also lacking a little bit behind. Then we have the big German industry verticals like automotive and manufacturing. The industries themselves are a little bit struggling and we feel that pressure. Yeah. So we see only 5% growth for manufacturing and only 6% for automotive in 2024.
But all other industries are growing actually double digits. You see the public sector plus 12%, even though the first quarter of last year was pretty bad due to budget reallocation in Germany. But we catch up in the rest of the year, so 12% is a good result overall. The retail business grew by 10% and cross industry 12%. And we have two sectors that were extraordinarily good.
The one is utilities with plus 41%, which is largely driven by our SAP business that we do in the utility sector in Germany. We are actually the number one SAP player that you can find. And the winner for '24 is actually healthcare with plus 44%. And this is really driven by our bread and butter business, core health care that we do for a lot of years. We just were very successful in that last year.
If we look at the regions, we see the usual picture again. 83% of our business is conducted in Austria. So the German speaking area is still 95%. And we see growth rates pretty much everywhere in the big countries at least. And Germany actually grew over proportionally with plus 15% compared to the 14% for the whole group.
Nevertheless, we also see growth rates for a couple of other countries. We see, for example, Italy growing by 19%. And actually, Italy is also the most profitable country in the group with double digit EBIT margins. So that works out pretty nicely. That was the WebSines acquisition that we did two years ago, and it worked out quite well.
Yes. So coming to earnings, we see a little bit of an improvement in earnings. This is yeah, the title is wrong. That was why I was skipping here. Improved earnings in Q3 is true.
But we also see improved earnings in Q4. So the €98,300,000 and 23% increase is for the whole year of '24 compared to the 80,000,000 of 2023 that we see. So from our operating basis, this is actually the highest value that we have. We have the second half, really good. We grew earnings over proportionally to sales.
Sales growth was 14% for the whole year and EBITDA grew by 23%. So larger than that. That is why Martin pointed that out. Profitability slightly improved, not super good with 7.6% EBITDA. This is not the level we target.
So we are not happy about the profitability in itself, but we are happy about the direction. And we really did a lot of improvements in the second half of last year, but the first half was too bad and we couldn't catch up for that. But the capacity utilization improved in the second half of the year, and this was not only true for Q3, also in Q4, we continue to do so. If we look at the EBIT margins, as pointed out, 7.6% is not yet on the level we feel comfortable with. You know that our midterm goals are 11% to 13%.
So we are well under that. And if you look at the profit drivers, utilization is key, of course. And the first half of the year, we had really the worst utilization rates we ever had. We improved on that in the second half, but it was just only the second half. Daily rates improved, single digit percentage figure pretty much to cope with inflation.
And so with the increase of personal cost per FTE, even a little bit more. So we are able to get our pricing power in the market. That works out. What didn't work out was the license sales in '24. We had another bad year after '23.
'20 '20 '4 was also very bad in that regard for the segment of IT Solutions. So if we go down further on the P and L statement, starting with EBITDA of NOK 98,000,000, we come to consolidated net income of 10,000,000, 10 point 2 million, which is much more than last year, but last year was pretty close to zero. So no surprise there. The earnings per share comes out at EUR 1.25, which is again a big leap compared to last year. But still overall, of course, not a good profitability.
So now we look at some financial KPIs starting out with a couple of items from the balance sheet and the cash flow statement. Yeah. So you see that the net working capital is reduced, although we grew, but we have less net working capital 8%. We look at the receivables and net that out against the payables. And so there we come out.
So we improved on return on net working capital. We improved also on return on equity. Yeah. So and we also improved on free cash flow. We see that on next slide.
You also see that the net debt situation didn't change too much. We have a little less total net debt than last year by 2,000,000. But overall, the situation looks pretty much unchanged. So now coming to the free cash flow, the operating cash flow increased by 44%, which is, of course, not really driven by the increase of profitability a little bit. So we are more profitable than 23%, but not super profitable.
The change is really driven by working capital improvements that you see here. CapEx is actually a little bit less than '23. That is because in '23, we had this new location in Dortmund in the headquarter, which we basically doubled. And we didn't do large building and location projects in 2024, so CapEx came down a little bit. The lease repayments though grew also due to the location that we improved in 2023.
And now you see the full lease repayments in 2024. Overall, the free cash flow, as defined by operating cash flow minus CapEx minus lease repayments, improved significantly. If you look at a per share basis, the free cash flow is EUR 6.92. Included there is the factoring, and we disclosed that it's pretty much on the same level as last year. So there's nothing coming more out of it due to factoring.
The factoring volume on the balance date on '23 was 55,000,000, and this year, we had 57,000,000. So not too much change here. So coming to the share buyback program, we did that or started that in Q4 last year. And at year end, we had roughly bought for 8,000,000 shares, which is around 1.5% that we show now in the balance sheet as treasury shares. And we finished the program in January for a total of 10,000,000 and a total of 1.9% of the company total shares, which will be held as treasury shares.
And we will later decide what to do with that. Okay. So coming to the guidance, I will hand over to Michael to give us a picture of how 2025 will be.
Thank you,
Jorg. Yeah. Let's have a look at our guidance. I mean, Jorg already pointed out, we are highly dependent on the German market. 83% of our revenues last year were generated in Germany.
And therefore, if we look at our environment, Germany now will be the third year in a recession and at some areas, we feel, this impact. On top, we have had an election at the beginning of the year. And, so therefore, we expect that the public business line will have a slow start at the beginning of this year because certain budgets are delayed and will only be approved later this year. So this will also have a certain impact. On the other hand, the overall market for IT services is still very promising.
If we look at bit at at Bitcoin, they expect a growth of around about 5% for this year. And therefore, we are also guiding a growth of our revenues. Last year, 1,300,000.0. This year, we are guiding 1.35 to 1,450,000,000.00 in in revenue. And, actually, this is a growth range between 4% and almost 12%.
It's lower than what you are used to at, I guess, so we are used to but it's still significant growth and probably better than what most competitors are predicting for this year. For the EBITDA, we are forecasting an improvement as well, Having seen 98,000,000 last year, we will now guide for 105 to 125,000,000, because, in general, the the market, we have optimistic view on that. It will be, as I pointed out, a slow start for the public sector. However, there are also certain areas which are very promising. We have, see a strong market in the SAP environment.
We will get some some benefits from, if you look at our our margins. We will get some benefits from our shoring initiatives, especially in India. We are at the moment increasing our workforce significantly, and this will improve our competitiveness and our margins. It's not something which will happen from one day to the other, but it's a continuous improvement of our margins. And, therefore and, we expect that this will have an impact on our EBITDA and, therefore, the EBITDA margins.
And the other thing is, we are still hiring. I mean, we we want to grow. We want to grow our workforce, but we do it a little bit more cautiously than what we have done how we have done it in the past. So we look a little bit more which business line, which area, do where do we need people. And, so therefore, we will see a positive impact on our billable utilization.
And, all these different contributors will help us to improve our margin to an area, EBITDA margin to an area, 8% plus x. This is still not a range, you pointed out a few minutes ago. It's 11 to 13%. It's still below, but we are working on improving that. And because we are optimistic, we have also increased our dividend proposal for the shareholders meeting from 17¢ per share to 75¢ per share.
This shows that we look optimistic in the future. And we feel pretty well, actually, with this guidance and believe that we will get this done.
Thank you, for the introduction to the figures and the additional explanation. So we're now heading to the Q and A session. Do we have questions from your side? Just a small reminder, participants on phones have to unmute the microphones via the star key followed by the number six of their phones. And I see, mister Wolf from Baboqu Research, as usual, as the first questions. Go ahead.
Yeah. Hi. Thank you for taking my question. The first one is on the public sector demand that you've built into the guidance. What scenario was basically built into the guidance?
Are you expecting, a budget release at the middle of the year or would you expect demand to stay about the same as you see it right now? Or would you basically are you betting on a on a strong recovery in H2? I'm I'm just curious to find out what what you have assumed just to better assess how bullish you actually or bearish, you are with regard to that client group. And then the other is obviously mid sized companies. If we look at other IT companies, they say that especially in Germany, mid sized companies, are showing weak demand.
Obviously, that's not the case for Adeso, but maybe you could provide some insights here as well. And then the last and obvious question is on Insure and the associated pipeline. It's the assumption that H2 should show a recovery is still valid. Thank you.
Okay. Let me start with the public sector. This morning, actually, we have looked at, our forecasts for and and the order entry, which we already generated up to now. And it it actually turns out it's exactly what we expected. We are in line with all the business lines, but this also means that we are below prior year for the public sector.
And that's totally normal after a German election. I mean, we always see it in this way. We believe that, this will turn around in the second half of of the year. And, actually, we expect to see a very positive impact to due to the special budgets for infrastructure and the armed forces. This will have an impact, a positive impact on our our business.
That's something which will not happen probably this year, but in the in the in the near future. But the negative impact from the German election, I think this would turn around in the second half of the year. So at the moment, everything actually is in line and and how we expected it. The the the big demand I mean, the environment is challenging. And, you pointed out for automotive and industry, it was challenging last year.
And, this is still the case. There is, we don't expect much growth there because some of our customers are struggling and have cost cutting measures. So that's something what we feel as well. But, overall, we believe that there's a chance to increase our revenues as we expect expected this. And, what we see, especially a strong demand in the SAP environment, there we more have the challenge to get more people on board to to take care of all the the orders.
And the third question, we don't expect much license revenues in the first half of the year. There is a pipeline. There are we expect some orders in the second half of the year. But as you all know, this is something which is really difficult to predict because this is always this yes or no decision. And as the pipeline does not have, does not show dozens of of opportunities, It's really digital and and, but, the positive impact is probably seen in the second half of the year.
Overall, we expect that, our solutions, segment will show better results than what we have seen in 2024. So that's also one reason why we believe, EBITDA margin will increase because the negative impact will be is expected to be lower than what we have seen last year.
Okay. Thank you. Do we have more questions? Mister Jakubowski from SMC Research, please.
Yeah. Good morning. Can you hear me?
Yes.
Okay. Thank you. First, I have some detailed questions on the income statement for 2024. Maybe you could explain for me the development of these items. First is the financial result, which was negative and it was one third higher than 2023.
Although you have somewhat reduced your debt, so maybe you could explain what was the reason for the increase in interest expenses. The second item is your the tax rate, which was better than twenty twenty three, but still at 40%, quite high. What's the reason for it, and how do you aim to reduce this tax rate? And the third item was yes, the minority interests, which was or were quite higher than in the last years altogether. Is there any relationship to the purchase of remaining stock or shares in Kiwi and Addison Orange.
Maybe you could give some details on it. And then I have last questions regarding the defense sector. It says to be expected that this sector will be booming for a couple of years in the future. How is your footprint in this sector? And have you any strategic plans to increase this footprint? Thank you.
Yes. Thank you, Mr. Jakubowski. I will start with the interest. You're right.
The overall debt situation is pretty much unchanged. The interest payments are a little bit higher. The reason is that you only see the year end situation, of course, in the balance sheet. In the P and L statement, you see the total payments over the year. And we had times where we always have times.
I mean, this is the same every year where we go into the syndicated loan more in the middle of the year and year end, we are able to pay back. So and the situation was just that within the year, we took quite some a little bit more loans, so paid more interest. And the year end was then paid back more than the year before. And that is why the net debt situation didn't change overall so much. The second question I actually didn't get, you talked about the tax rate. I don't know what you mean by that.
Income taxes.
Tax rate. The tax rate. Okay. Sorry. Yes, the tax rate improved.
So 40% is, of course, pretty high. We still have nondeductible items, but much less than last year compared to the overall pretax earnings. So that is the reason why the tax rate now comes to more normal levels. As a German company, you probably should have a tax rate of about slightly above 30%. We have been there in the past, and the 40% now is in direction, but we still have nondeductible items.
And for the minorities, this is a good one because you pointed out that not all of the earnings belong to Adeso as e shareholders. We have minorities included, and this is basically, the what you mentioned, Adeso Orange. So to give you the full picture, we have or we had only 70% on of our SAP businesses, which used to be known as Adeso Orange. It's now actually renamed to Adeso Business Consulting. That will be the new name, but it's still the SAP business.
And we now bought 100%. So we have put call options in place, and we closed the deal in Q1 this year. So minorities in '25 will not happen. We now own 100% of that company. The other one being Kiwi, we also own 70% and we also bought the other 30% in Q1.
So both of these minorities of these main minorities that you see there belong now to us as our SUE shareholders. So minorities should be largely reduced in 2025, which should be, of course, be a small kicker for earnings per share, which is good. Yeah, I think I touched on these questions. And maybe for the defense sector, I don't know. Michael, you want
to take it? Yeah.
It's a pretty good question. And, I mean, there are a lot of political changes and and, and also of the environment and in the past. I mean, there were some customers where we are already which are active in the defense sector, but it didn't have that importance. This has changed, the importance of the sector. And also, we have changed our our our mind on that.
So we are working on that. We have, we have strong focus on on on that and and winning new customers and extending our share in existing customers. So it's an important sector, and I think we have undergone just the same process than probably a lot of other German companies. Defense is always a difficult topic also with our employees. But, I mean, to be able to defend your own country is a very important thing.
And and therefore, we are working on that. We have people who know the sector very well, and we are extending our footprint. And, actually, we believe that this could be could be a part of the public sector which will develop very well.
Okay. Thank you very much.
We have another question online from a participant, Daidan S. Edesel. If you like, you can introduce yourself to the audience and put your questions.
Yes. Hello. That's me, Wolfgang Specht from Berenberg. Good morning. Some additional ones, although a lot has already been answered.
First, on your hiring and onboarding strategy, it sounds a little bit like your current planning is on the personnel side is without any additional contracts potentially coming from the governmental side. Could it be rather that in case we see some new awarding towards mid or end of the year that this most likely will not have any impact on your revenues and earnings for this year, but it's more topic for '26, '20 '7? And if not, if you could think of contracts already starting this year, would you be able to be such quick to onboard people and bring them on the ground in customer projects? Second question would be on the M and A side. Could this be a focus now that you have only very limited M and A effects from the last years, everything is integrated?
Or would you prefer organic growth, let's say for the next twelve to eighteen months? And finally, we already raised the issue defense to maybe have a higher focus. Could you also think of other vertical sets get more attention or are pushed towards a level that allows to to make sense a dedicated vertical out of the mixed vertical you're you're currently calling these ones?
Yeah. Let me first, some explanations regarding hiring process. I mean, we are a little bit more cautious regarding new hires, but this doesn't doesn't mean that we don't hire new people. And the only difference is in the past, we had years where we had a pretty high, 20% per year or even more, I believe. That's something we will not do at the moment, but it doesn't mean that we don't increase our workforce.
I mean, there are two two ways to to cope with new orders. One is to improve the utilization. This is always limited because, you will always have employees There must be a fit to the demand from the market. So there are always some some employees sitting on the bench. Therefore, we are hiring and increasing our workforce.
I already pointed out that SAP is growing quickly. So that's, for example, one area where we're increasing our our workforce cost, but also in other areas. And, therefore, yes, it is a challenge. Always then, we have the right people available if certain parts of our business are picking up. But it's always easier to get, to say, if we get the orders, everything else is organized later.
And, there's there are always ways to get it done. So, if we get the orders, I'm I'm sure, this will have an impact on our revenues also this year despite the fact that, probably if you get budgets approved and from for the public sector and then, let's say, in q two or beginning of q three, I mean, you lost already the potential of the first six months of the year. That's true. But, there's still time to to get, to offset the dip what we have seen in in the in the first half of the year or we will have seen at that time. Organic growth versus m and a.
Your point pointed already out that we increased our stake in Kiwi and business consulting. This is, let's say, kind of comparable with with m and a because we needed to spend some cash, and and it's around about 27,000,000. And, therefore, at the moment, let's say the potential for m and a this year is a little bit limited. So we will focus on that probably more in the second half of the year. And then let's see if there's something which will fit to our business.
But this year, the growth will be, I suppose, more or less 100% organic.
Thanks a lot.
Hey. Do we have more questions at this point in time? Mr. Japerozko again.
Yes. Thank you. I have an additional question. You have mentioned the utilization first quarter of twenty twenty five. You mentioned it's better than last year in first quarter.
Could you maybe compare it with the second half of twenty twenty four or give us a larger picture of where it's for utilization at the moment compared with your normal utilization?
It's always a little bit challenging to compare the first and the second quarter with Q3 and Q4 for several reasons. Q1 always has a slow start because a lot of companies only start in the January. February is a short month. March this year is probably much more positive than other, in other years because the Easter break is a little bit later than usual. It's April.
So the first half of the year always shows a little bit more slower market, a bit less utilization than what you see in q three and and q four. So specifically to compare, but what we can say is that, the the start in January and February was compared to not only the last year, but also years before that comparable good. This does not mean that it's significantly different, but it was better than what we have seen last year and also the year before that.
Okay. That's fine for me. Thank you.
Do I have another question? Now just a small reminder, if someone on the phone would like to put a question, just press star key followed by the number six of your phone. But it doesn't seem to be the case. So then, thank you for your interest in our call today and your participation. I wish you all the best and see you, hopefully see you you in person soon. For now, goodbye.