Good morning, everybody. This is Martin Möllmann of adesso IR speaking. First of all, I'd like to thank you for joining our Q4 and full year earnings call regarding our annual report we've published today. Within our release this morning, you found adesso confirming the preliminary figures published in February. adesso again managed to outgrow the markets with sales growing by 14% organically to around EUR 1.3 billion. 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 2024. However, with 10.6% margin in H2, adesso came close to its midterm target and utilization develops better in the first months of 2025 than last year.
Outlook for full year 2025 remains largely positive with further growth in sales and improvements in margin. I'd now like to welcome as well our new CFO, Michael Knopp, and as well departing CFO, Jörg Schröder, who will leave the company in April. He and Jörg 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&A session afterwards. Participants on phones may want to mute or unmute their microphones via the star key, followed by the number 6 of their phones. Thank you so far. Michael, please, your turn.
Good morning, everybody. My name is Michael Knopp. I joined adesso at the January 15th, and Jörg and I, we are organizing now the handover since almost two months. At the end of this month, everything will be finalized and the handover will be finished. I will take over the responsibility for finance and controlling, M&A, corporate development, investor relations, and adesso ventures. A little bit about my CV. For the last three years, I was in the private equity sector with 2 portfolio companies, Waterland and Deutsche Beteiligungs AG. The last one was akquinet Holding, which is an IT services company, located in Hamburg, specializing in running data centers and providing services in this area for their customers.
Between 2017 and 2021, I was member of the board and CFO of Materna Information & Communications, a company also located in Dortmund, so kind of a neighbor of adesso. Pretty similar in the setup, focusing on SAP, IT service management, and especially the public sector. Between 2007 and 2017, I was member of the board and CFO of SÜSS MicroTec SE, located in Garching by Munich. This is an IT services and semiconductor company, providing equipment for the semiconductor industry, pretty international and stock market listed at that time in TecDAX.
Maybe what's also, kind of an importance between 1999 and 2005, I was also CFO of BearingPoint AG. At that time, an international IT service provider for the SAP sector, and at Basis, providing Basis consulting. I started my professional career in 1995 with an university degree from the University of Bayreuth as Master of Business Administration.
Yeah. Thank you, Michael, for the brief introduction. Now, as usual, Jörg, it's your turn, the beginning of the presentation of the full year figures.
Thank you, Martin. 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. The guidance for 25 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. Starting out, looking at sales growth for 2024, we came out at roughly EUR 1.3 billion 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 adesso, 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%. The story behind that is that we had this hiring freeze, so over the year, new recruiting, recruited people, did not came on board. On average, this evens out. If you look at year-end figures, we see the slowdown already happening, and we will probably have to do something that 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 around 23%, 24% of revenues.
No single customer does more than 3% or 4% of revenues. 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 ones who only have single-digit growth figures like insurance and banking, the financial service industry. Insurance is largely driven by the still weak in|sure business on the license side, and banking is also lacking a little bit behind. 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. We see only 5% growth for manufacturing and only 6% for automotive in 2024.
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. We caught up in the rest of the year, so 12% is a good result overall. The retail business grew by 10% and cross-industry 12%. 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. The winner for 2024 is actually healthcare with plus 44%, and this is really driven by our bread and butter business, core healthcare 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 Germany, another 10% in Switzerland, another 2% in Austria. The German-speaking area is still 95%. We see growth rates pretty much everywhere in the big countries at least. 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%. Italy is also the most profitable country in the group, with double-digit EBIT margins. That works out pretty nicely. That was the WebScience acquisition that we did two years ago, and it worked out quite well. Yeah.
Coming to earnings, we see a little bit of an improvement in earnings. This is, 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. The EUR 98.3 million and 23% increase is for the whole year of 2024 compared to the EUR 80 million of 2023 that we see. 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 is slightly improved, not super good. With 7.6% EBITDA, this is not the level we target. We are not happy about the profitability in itself, but we are happy about the direction. 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. The capacity utilization improved in the second half of the year, and this was not only true for Q3, also in Q4, we continued 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%-13%. We are well under that.
If you look at the profit drivers, utilization is key, of course. The first half of the year, we had really the worst utilization rates we ever had. We improved on that in second half, but it was just only the second half. Daily rates improved, single-digit percentage figure, pretty much to cope with inflation, and with the increase of personnel cost per FTE, even a little bit more. We are able to get our pricing power in the market. That works out. What didn't work out was the license sales in 2024. We had another bad year after 2023. 2024 was also very bad in that regard for the segment of IT solutions.
If we go down further on the P&L statement, starting with EBITDA of EUR 98 million, we come to consolidated net income of EUR 10 million, EUR 10.2 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. 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, there we come out. We improved on return on net working capital. We improved also on return on equity. 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 EUR 2 million, overall the situation looks pretty much unchanged. 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, we are more profitable than 2023, not super profitable. The change is really driven by working capital improvements that you see here.
CapEx is actually a little bit less than 2023. That is because in 2023 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. 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. We disclose 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 2023 was EUR 55 million, and this year we had EUR 57 million, not too much change here. The share buyback program, we did that in or started that in Q4 last year. At year-end, we had roughly bought for EUR 8 million shares, which is around 1.5%, that we show now in the balance sheet as treasury shares. We finished the program in January for a total of EUR 10 million 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.
Coming to the guidance, I will hand over to Michael to give us a picture of how 2025 will be.
Thank you, Jörg. Yeah, let's have a look at our guidance. I mean, Jörg already pointed out, we are highly dependent on the German market. 83% of our revenues last year were generated in Germany. 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, 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. This will also have a certain impact.
On the other hand, the overall market for IT solutions is still very promising. If we look at Bitkom, they expect a growth of around 5% for this year. Therefore, we are also guiding a growth of our revenues. Last year, EUR 1.3 million. This year we are guiding EUR 1.35 billion-EUR 1.45 billion in revenue. Actually, this is a growth range between 4% and almost 12%. It's lower than what you are used to, lower we are used to, but it's still a 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 EUR 98 million last year, we will now guide for EUR 105 million-EUR 125 million. In general the market, we have a optimistic view on that. 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 benefits from if you look at 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, we expect that this will have an impact on our EBITDA and therefore the EBITDA margins. The other thing is, we are still hiring. I mean, 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. We look a little bit more which business line, which area where do we need people.
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% +X. This is still not a range. Jörg pointed out a few minutes ago, it's 11%-13%. It's still below, but we are working on improving that. Because we are optimistic, we have also increased our dividend proposal for the shareholders' meeting from 17 cent per share to 75 cent per share. This shows that we look optimistic into 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 explanations. We're now heading to the Q&A session. Do we have questions from your side? Just a small reminder, participants on phones have to unmute their microphones via the star key, followed by the number six of their phones. I see Mr. Wolf from Warburg Research, as usual, has 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 strong recovery in H2? I'm just curious to find out what you have assumed just to better assess how bullish you actually or bearish you are with regard to that client group. 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 adesso, but maybe you could provide some insights here as well. The last and obvious question is on in|sure and the associated pipeline. Is 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 the order entry, which we already generated up to now. 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 the year. Actually, we expect to see a very positive impact due to the special budgets for infrastructure and the armed forces.
This will have an impact, a positive impact on our business. That's something which will not happen probably this year, but in the near future. The negative impact from the German election, I think this will turn around in the second half of the year. At the moment, everything actually is in line and how we expected it. The weak demand, I mean, the environment is challenging, and Jörg 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, that's something what we feel as well.
Overall, we believe that there's a good chance to increase our revenues as we expect, have expected this. We see especially a strong demand in the SAP environment. There we more have the challenge to get more people on board to take care of all the orders. The third question, in|sure, we don't expect much license revenues in the first half of the year. There is a pipeline. We expect some orders in the second half of the year. As you all know, this is something which is really difficult to predict because this is always this yes or no decision.
As the pipeline does not have, does not show dozens of opportunities, it's really digital 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. That's also one reason why we believe EBITDA margin will increase because it, the negative impact is expected to be lower than what we have seen last year.
Okay, thank you. Do we have more questions? Mr. 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, it was one-third higher than 2023. Although you have somewhat reduced your debt. Maybe you could explain what was the reason for the increase in interest expenses. The second item is your tax rate, which was better than 2023, still at 40%, quite high. What's the reason for it, how do you aim to reduce this tax rate? The third item was 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 adesso orange? Maybe you could give some details on it. I have last questions regarding the defense sector. Is this 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&L statement, you see the total payments over the year. We had times, 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, at year-end, we are able to pay back. The situation was just that within the year, we took quite some a little bit more loans, so paid more interest.
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.
Uh.
Elaborate.
Income taxes.
Tax rate.
Oh, the tax rate. Okay.
Sorry.
Sorry. Sorry. Yeah, the tax rate improved, 40% is, of course, pretty high. We still have non-deductible items, much less than last year in compared to the overall pre-tax earnings. 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, the 40% now is a correction, we still have non-deductible items. For the minorities, this is a good one, because you pointed out that not all of the earnings belong to adesso SE shareholders. We have minorities included, this is basically the, what you mentioned, adesso orange.
To give you the full picture, we have or we had only 70% of our SAP business, which used to be known as adesso orange. It's now actually renamed to adesso business consulting. That will be the new name, but it's still the SAP business. We now bought 100%. We have put call options in place and we closed the deal in Q1 this year. Minorities in 2025 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. Both of these minorities, of these main minorities that you see there, belong now to us, as adesso SE shareholders.
Minorities should be largely reduced in 2025, which should be, of course, 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 wanna take it? Yeah.
It's a pretty good question. I mean, there are a lot of political changes and also of the environment. In the past, I mean, there were some customers where we already which are active in the defense sector, but it didn't have that importance. This has changed the importance of the sector. Also, we have changed our mind on that. We are working on that. We have strong focus on that and winning new customers and extending our share in existing customers. It's an important sector. I think we have undergone the same process than probably a lot of other German companies. Defense is always a difficult topic also with our employees.
I mean, to be able to defend your own country, is a very important thing and therefore, we are working on that. We have people who know the sector very well. We are extending our footprint, and actually we believe that this could be a part of the public sector, which will develop very well.
Okay. Thank you very much.
We have another question in line from a participant, dialed in as adesso. If you like, you can introduce yourself to the audience and put your question.
Yes, hello. That's me, Wolfgang Specht from Berenburg. 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 2026, 2027?
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&A side. Could this be a focus now that you have only very limited M&A effects from the last years, everything is integrated? Would you prefer organic growth, let's say, for the next 12-18 months? Finally, we already raised the issue defense to maybe have a higher focus. Could you also think of other verticals that get more attention or are pushed towards a level that allows to make them a dedicated vertical out of the mixed vertical you're currently calling these ones?
Yeah. Let me first, some explanations regarding the hiring process. I mean, we are a little bit more cautious regarding new hires, but this doesn't mean that we don't hire new people. The only difference is in the past, we had years where we had numbers which were 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 ways 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.
There are always some employees sitting on the bench. Therefore, we are hiring and increasing our workforce. I already pointed out that SAP is growing quickly, that's, for example, one area where we're increasing our workforce, but also in other areas. Therefore, yes, it is a challenge always then to have the right people available if certain parts of our business are picking up. It's always easier to get, if we get the orders, everything else is organized later. There are always ways to get it done.
If we get the orders, 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 for the public sector in, let's say in Q2 or beginning of Q3, I mean, you lost already the potential of the first 6 months of the year. That's true. There's still time to get to offset the dip what we have seen in the first half of the year, or we will have seen at that time. Organic growth versus M&A, you pointed already out that we increased our stake in KIWI and adesso business consulting.
This is, let's say, kind comparable with M&A because we needed to spend some cash and it's around about EUR 27 million. Therefore, at the moment, I'd say the potential for M&A this year is a little bit limited. We will focus on that probably more in the second half of the year. Then let's see if there's something which will fit to our business. This year the growth will be, I suppose, more or less 100% organic.
Thanks a lot.
Okay. Do we have more questions at this point in time? Mr. Jakubowski again.
Yeah. Thank you. I have an additional question. You have mentioned the utilization first quarter of 2025. You mentioned it's better than last year in first quarter. Could you maybe compare it with the second half of 2024, or give us a larger picture of where is the 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 second or maybe third week of 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 mid of April. The first half of the year always shows a little bit more a slower market, a little bit less utilization than what you see in Q3 and in Q4.
What we can say is that, 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 is 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 we have another question? No. Just a small reminder, if someone on the phone would like to put a question, just press the star key followed by six of your phone. It doesn't seem to be the case. Thank you for your interest in our call today and your participation. Wish you all the best and see you, hopefully see you in person soon. For now, goodbye.