Welcome, ladies and gentlemen, here in Frankfurt. Welcome to everyone who's dialed in the webcast or the telephone conference. I'm Martin Link. I'm here together with our CEO, Dr. Thomas Olemotz, and as you all know, we are presenting the figures for last year's fiscal year 2024 and an outlook on the current business year. One little comment: we are at the Deutsche Börse for good reasons. Normally, we're elsewhere. In two weeks' time, we celebrate an anniversary—that is, 25 years—at the stock exchange, the listing, that is. Briefly, a word on the sequence. After the presentation of Dr. Olemotz, we will first answer the questions raised here on site, then we'll go virtually to the non-speaking, non-German speakers, and also any questions from participants online in German will be answered.
Thank you very much, Mr. Link. That means it's my turn. Welcome, ladies and gentlemen, from me as well to our press and analyst conference for the financial year 2024 of Bechtle AG. As Mr. Link has hinted at, I also assume that the question on everybody's mind will be the outlook on the coming year and not what happened last year. I am going to deliver some structural background that is relevant for the future. I am delighted that you have appeared in such large numbers, and I also truly appreciate everyone connected online. As usual, today we're going to focus on figures and Bechtle's business. Gerhard Schick, one of Bechtle's founding members, was a man whose life was shaped by these two elements: Bechtle on the one hand and numbers on the other hand.
As some of you may already know, we had to bid him farewell last week. I've already answered a few questions from people from the audience today. However, many of the values Mr. Schick embodied remain deeply ingrained in Bechtle's DNA. Above all, reliability, pragmatism, and perseverance. These principles are more relevant than ever today and are experiencing a true resurgence, particularly in the capital markets, which are shaped by great turbulence. We will come back to this topic in our outlook later. As always, today's presentation is structured into four main sections, as you can see here. We are going to kick things off by having a look at our business performance. We will have a look at our key financial figures for 2024 and for the last quarter. Then we'll have a look at our dividend, and we will talk about the proposed distribution to our shareholders.
You were able to read more about that in our press release. We are going to talk about current developments. That is, significant strategic events beyond the numbers. Last but not least, we are going to talk about the main part, in my view, and that is the outlook 2025, the context and objectives for economic development in the current year for Bechtle and the IT market. First, let's begin with our business performance. We cannot be satisfied with Bechtle Group's overall performance in the fiscal year 2024, and we've said that both internally and externally. Of course, general conditions were more challenging than ever. That needs to be said, but this does not change our fundamental objective, that is, profitable growth. In 2024, we fell short of this goal. In my view, two key factors played a decisive role.
First, throughout the year, our SME customers were highly reluctant to invest, particularly in our two largest markets, Germany and France. One major factor was the delayed replacement of outdated PC infrastructure, which continues to be postponed. That is, in our terminology, the classic client business. Secondly, our public sector customers, unsettled by the political climate, invested significantly less than usual and below expected levels. That, although we know that here and there, it would have been really important to invest. With limited top-line growth, we were unable to offset costs, even though they did not rise that dramatically. We will come to that in a moment. First, let's take a closer look at the top-line development I have just mentioned. That is, the development of our business volume and revenue.
In terms of business volume, that is, the gross revenue before IFRS 15, we achieved a solid 2.0% growth, while organic growth remained at the previous year's level. This result is still respectable. The decline in reported revenue reflects the strong performance of our software business, which, due to accounting regulations, is not included in this figure. In this context, the revenue decline is not a negative indicator. Quite the opposite. Software remains a key driver of technological advancement, particularly in the areas of digitalization and network investments. What we lacked, however, was momentum across the board, both in our so-called running business, often referred to as our bread-and-butter business, and in lighthouse projects, which were still prominent in 2023. Unfortunately, our broad diversification, both in terms of customer base and regional presence, offered little relief last year.
As previously mentioned, our two most significant customer segments and largest national markets were particularly impacted by economic challenges. That said, a look at our quarterly performance offers a glimmer of hope. In the first three quarters, we experienced a downward growth trend. You can see it in the slides behind me. The French elections in June and the ongoing political uncertainties in Germany, particularly regarding government stability and budget approval, had a noticeable impact on our figures. In the fourth quarter, however, we achieved our highest growth rate of the financial year at 4.4%. While this year-end development was encouraging, I would hesitate to call it a sustainable trend reversal. The fourth quarter followed the usual seasonal patterns, albeit at a subdued level. These patterns were also visible at a low level in 2024. Overall investment reluctance, however, remains unchanged.
Let's now take a closer look at developments across segments and regions. With a view to our segment performance, one thing becomes very clear. We are on the right track with Bechtle's internationalization and our M&A strategy, which increasingly focuses on Europe. Not all countries face the same challenges. Our businesses in Belgium, the U.K., and Spain performed exceptionally well. While this may not be immediately visible in the consolidated figures, we are successfully mitigating weaknesses in certain national markets, at least to a certain degree. The restatement of prior year figures reflects the reallocation of specific units to different segments. As previously announced, we will introduce a new segment structure starting with the 2025 annual report, reflecting the changes in management responsibilities already implemented within the Executive Board. I'm going to comment upon that at a later point. This brings us to earnings performance.
As I mentioned at the outset, our results clearly reflect the challenge we faced. Without sufficient top-line growth, we were unable to offset our costs. Consequently, our earnings came under significant pressure, declining by about 8% year on year. Despite this, our gross margin developed positively. The increasing share of software and services kept material costs in check, allowing us to close the year with a record-high gross margin of 18.1%. However, this was offset by a disproportionate rise in personnel costs, other operating expenses, and depreciation. We continue to invest in Bechtle's future, and these costs could only be avoided if we were to question the company's long-term viability. That is an option that, from a business perspective, is purely rhetorical. Moreover, as mentioned earlier, the 7.6% increase in personnel costs is not excessive in itself.
However, in the context of declining revenue, it is simply too high to sustain our earnings at previous levels. Let's now take a closer look at the development of EBIT over the course of the year. Once again, we observe a slight improvement toward the end of the year, driven by two key factors. Stronger top-line growth in Q4 allowed us to better offset costs compared to previous quarters. As a result, our contribution margin, an important internal metric for operational management, also showed positive development in Q4. Secondly, other operating income was EUR 3 million higher than the previous year, primarily due to increased marketing subsidies from our manufacturing partners. As we had communicated earlier in the year, bonus payments in 2024 were more back-end loaded, if you want to put it like that, meaning they were received predominantly in the later months.
This was largely a consequence of the subdued growth momentum throughout the year. We maintained strict cost discipline throughout 2024, and this focus will remain unchanged in 2025. However, as I mentioned earlier, there is always a trade-off between cost savings and ensuring Bechtle's long-term viability. With that, ladies and gentlemen, we conclude our review of the key financial figures. Finally, I would add and turn to the operating cash flow. The operating cash flow is a true bright spot for the year. Cash flow from operating activities reached a new all-time high of EUR 558 million in the reported year. That is nearly EUR 100 million more than the already exceptional previous year. The free cash flow also hit a record level at EUR 377 million.
While this strong performance is, to some extent, a mathematical consequence of subdued business activity, it also reflects the success of our ongoing efforts to optimize cash flow and working capital while actively managing key financial drivers. Throughout our day-to-day operations, we have consistently kept cash management in focus and, as the results show, with great success. A look at our cash flow, at the equity ratio and debt position, makes one thing very clear, ladies and gentlemen. Bechtle is a financially robust company. Despite the current challenges, we are well positioned to emerge, as I'm convinced from this period, even stronger. With that, let's turn to the development of our workforce. As of 31st December 2024, Bechtle employed 15,801 persons. That's an increase of 642 employees, or 4.2% compared to the previous year. Acquisitions accounted for 381 of the new colleagues, representing nearly 60% of the total increase.
This means that purely organic growth in our workforce was a modest 1.7%. As I mentioned earlier, we are keeping a close eye on costs. Our cautious approach to hiring is a deliberate business decision to ensure we do not overextend on personnel expenses during a period of significant economic uncertainty while still safeguarding Bechtle's long-term viability. That is why we continue to invest in training. At year-end, 883 young professionals were undergoing training at Bechtle, keeping our training rate in Germany almost stable at 7%. Let us now turn to shareholder profit sharing.
Ladies and gentlemen, you all know very well that we have a clear guiding principle in our dividend policy. It should be reliable and sustainable. That is why we have been paying a dividend every year without interruption since the IPO, which, as you've just heard, will celebrate its 25th anniversary this year.
The dividend has never been lower than in the previous year. Either it was stable or we increased it. These considerations also guided us in our dividend proposals for the 2024 financial year. As you may have already gathered from this morning's press release, the management's proposal to the annual general meeting is to make a payment of EUR 0.70 per share. This means that we are maintaining the previous year's level. However, the conditions for this decision are anything but ideal. Our after-tax earnings, which are the mathematical basis for the dividend distribution, fell by 7.5%. For the first time in a long while, fiscal year 2024 was not yet another record year for Bechtle. We want to send a clear signal to our shareholders and the capital market with a stable dividend. First, Bechtle can be relied on.
In 24 years, there has never been a decline in the dividend payout, and this will not be the case for 2024 either. Our financial strength and high liquidity give us the necessary backing to do so. Secondly, we believe in Bechtle and in our successful business model. That is why the dividend distribution is also a clear sign of confidence in our future development. At almost 36%, the payout ratio is well above the previous year's level and also above our target of distributing about one-third of our earnings after tax to our shareholders. Now, as I've mentioned before, for some additional news that go beyond the figures but are of greater strategic relevance for our company. These latest news concern three very important fields for us. First of all, our multi-channel strategy, and with that, the associated reorganization of the Executive Board.
Second, the successes in business with public sector clients. Third, our social commitment with the Bechtle Foundation, which we established last year. Let's start with the reorg of the management responsibility within the Executive Board. As of January 2025, we are bundling responsibility for all distribution channels in the national markets at the Executive Board level with a single point of contact for each market. This allows us to focus clearly on expanding our multi-channel offering in all markets and on further internationalization. The aim is to implement a holistic market strategy and to provide customers with optimal demand-oriented services across all channels. That is why we call it internally OptiChannel. Michael Guschlbauer, as COO, is responsible for the business in Germany and Austria, as well as for all of the Bechtle Group's specialists.
My colleague Konstantin Ebert, as COO, is responsible for all other national markets in which Bechtle is active with its own companies. This consistent multi-channel approach should not only further strengthen customer loyalty and improve market penetration, but also have a positive economic impact by increasing process efficiency at the back end. This is a step that we are initially taking internally, as I have said before. However, from next year onwards, we will also be reporting externally using this modified country-specific segment logic. Let's take a look at our business with public sector clients. Even though we have pointed out that public clients are currently rather reluctant to invest in IT, this does not mean that there is a standstill in this field.
There are many very interesting tenders on the market, and for our future business, it is extremely important for us that we continue to be present and successful here, particularly in the area of cloud services. There is a certain backlog in the public sector in many areas. This makes it all the more important for us to position ourselves clearly here. We are the perfect partner that navigates customers towards a functioning multi-cloud infrastructure. As you can see from the two news shown here, we do this both nationally and more and more internationally. Even if the call-offs from existing and newly acquired framework agreements are not yet at the expected level, the potential for the future is promising indeed. Our last announcement is also future-oriented. It concerns an initiative of our newly founded Bechtle Foundation.
With Female Upgrade, our Bechtle Foundation, which we founded in June 2024, is launching the first scholarship program for the long-term support and advancement of girls and women in the IT environment. The program is aimed at schoolgirls, apprentices, and female students, as well as young professionals, managers, and experts. It especially supports current and future female IT employees in different phases of life and career. A truly unique approach in our sector. We focus here on measures ranging from vocational orientation all the way to career management, and this includes network events, cross-generational mentoring, practical training, all the way to financial support where required. The aim is to attract more girls and women to a career in IT, to support them for up to 15 years on their way to specialist and management positions, and to support them in their future development once they're there.
Incidentally, we work very closely with the foundation of our anchor shareholder, the Gerhard and Ilse Schick Foundation. Ladies and gentlemen, this brings us to the outlook for the 2025 financial year. Quite frankly, and I've mentioned this in plenty of discussion, it has never been harder for me to talk about our prospects than it is right now. Not because I don't believe in Bechtle, far from it. I'm still firmly convinced that our company will be successful as well as our business model. Likewise, I'm a big fan of reliability, and let's be honest, who can reliably make a forecast about how the next nine months will pan out? The range of possible scenarios is immense and was never wider. We all have extremely limited visibility. However, one thing is clear in my view. We are currently seeing mostly an economic problem.
Structurally, the IT market continues to be a high-growth and therefore attractive market for the future. Bechtle is very well positioned in this market as a forward-looking IT partner for its customers. Nevertheless, we are somewhat cautious in our estimates for the current year. We should not expect any revival, if at all, before the back end of the year. The first half will still be heavily constrained by the overall conditions. Despite the current economic uncertainties, we have to invest into the future orientation of Bechtle, be it in the form of consistent IT investment in our own platforms or else by courageous M&A activities and follow-up adaptations of our management organization. The macroeconomic uncertainties shape our outlook for 2025 decisively, and these uncertainties have even increased in recent weeks, as we all know too well, in the year of geopolitical developments.
In this respect, we should actually have to broaden the range of our expectations even further. There are opportunities in 2025, but also very, very high risks. Currently, we see no reason for euphoria. That holds particularly true for the first half of the year. None of the political announcements is specific, not even the most recent ones. Much remains vague and uncertain. That is why we cannot issue any other guidance than we have already communicated in the annual report and in the press release. Summing up, that means we want to increase the business volume slightly. We expect revenue to develop below the business volume due to the continued positive software business. The EBT could decline by up to 5%, but there are also opportunities for a correspondingly positive development. However, only at the back end of the year.
We see the EBT margin in the best case at around the previous year's level. Ladies and gentlemen, that is our development in 2024 and the outlook for the rest of 2025. Thank you very much for your attention, and I'm happy to take your questions now.
Thank you very much, Dr. Olemotz. As announced, we are going to take the questions from the audience in this room first, then the questions from the non-German speaking participants in the virtual room, and last but not least, the questions of the German-speaking persons on the internet. In order to ask a question, you need to be logged into the webcast. The webcast itself is listen-only. First question. Good afternoon, Dr. Olemotz. My first question is this: I probably think you already know what I'm driving at.
The current situation is full of challenges, and I think that you've described these challenges very well in your presentation. Do you think they're going to change? The second is also maybe a look into the crystal ball. Do you think that your guidance will actually change over the year? Do you think there will be additional economic stimulus from policy changes in Germany, which will lighten the mood? Thank you very much for this question, which would probably afford us hours of discussion. I'll try to be as brief as possible. I think that we see some developments which are going in different directions and sometimes also overlap. I think that your first question can be answered quite easily. We had a slow start to the year. We had a very good business development in December, which was better than expected at the end of Q3.
We had the usual seasonal up and downs, but the pattern changed last year, especially as far as the development of revenue in the various quarters was concerned. In December, we stepped on the gas, to put it bluntly, and in other words, that meant that we had actually depleted all our resources at the end of the year and started from a low position in the new year. It sounds like a contradiction, but we've never had a larger contract for the public sector at the beginning of the year than this year. You see that there is a lot of ambiguity we need to deal with, and we need to adjust to that over the course of this year. Unfortunately, I might add, because that is what makes it so difficult to come up with a robust outlook for the year.
What does it mean for this year? As I said, we believe that the first six months will be rather weak. To put a positive spin on it, we think that there is upward potential during the second half of the year. We believe that it is not as relevant what you read on the screens a few moments ago, because the news about the political goals of the new government are goals for the future, and it will take at least a year for everything to be implemented. Short-term mood changes in Germany should be seen as just a picture of the current moment. For us, the long term is important. We've got contracts for the various public sector clients. These contracts are legally enforceable, and the public sector will start actually calling for the services and products they have bought once the budget has been adopted.
It takes some time for the budget to be adopted by Parliament. We hope that this will happen before the parliamentary break in summer, and then the existing framework conditions need to be filled with everything that is necessary. The preconditions seem very good, but if that is enough to compensate for the weak first half of the year, that's the one million dollar question. At this moment in time, it is very difficult to assess this in a reliable way. I think that indirectly, I've also answered your second question. I believe that our guidance remains unchanged. It depends on everything I've just said. I know it sounds boring because I keep repeating that everything depends on the public sector business, which accounts for 40% of our business, and it is also down to our classic SMB and small business environment.
Those are the product groups where we see major challenges at the moment. They were also the reason for the records we achieved before, during, and after the COVID crisis. Today, it's a big challenge because the replacement cycle is overdue and has been overdue for one to two years. Nevertheless, many customers in our client environment are reluctant to invest, although the technological preconditions have never been better because all major vendors have updated their product portfolios with a view to AI and are offering very powerful devices. In normal times, these would be perfect preconditions in order to breathe new life into the client business and make headway. That also tells you that everything I've just described will shape our business, our revenue.
That is true for the big clients, the public sector, and also the SME and small client business, which accounts for 80-90% of our business. We have to see how these customer segments develop over the year. Quite specifically concerning the upper and lower end, bottom line and top line. Last year in Q1, we had EUR 5 million which were received from France as delayed payments, and there were also provisions of EUR 7 million that were then dissolved. That will not happen. We will see how the first six months will develop, and that is why our range is so large, from -5% to +5%. If 2025 will, macroeconomically speaking, be like 2024, then there will be no big change. If there is a positive development, then we will also receive a boost in our business.
That is why we decided to have that wide range.
Thank you, Dr. Olemotz. My question is, well, the elephant in the room, Microsoft. To what extent is that already reflected in your guidance? Can you quantify that? What kind of headwind do you expect for 2025? More on Microsoft. We hear now from other vendors that they think about changing their fee structure, Cisco in brackets. This decision by Microsoft, was that a breaking of the jam, so to speak? Do we expect that all vendors are going to follow? First, that. In the past year, we confirmed that we had this fundamental change in the incentives, which is documented in contracts by Microsoft.
We ask for your understanding that we won't be able to put a price tag on it, because first of all, we had to analyze the customer bases, how many contracts and how many customers are affected and what kind of compensation mechanisms exist. I was surprised that some of the peers quite soon commented on the implications. We did our calculations now. We assume, and I'm talking about net effects. The gross effects are way higher, and I'm going to explain the differences between net and gross in a second. The net effect alone in this year, which we assume, is a high single-digit million number, and the burden will continue for three years with a decreasing dynamism, because that's the usual period we're talking about. That means that we have to deal with this over the next three years.
Why do we distinguish between net and gross? The challenges that result from that is manifested in Microsoft contracts. Maybe some of you are deeply involved in the topic. There are so-called CSP contracts. These are cloud solution provider contracts, and there are EA contracts. These are classical license agreements. Microsoft decided that in the future, for the signing of EA contracts, they will not pay anything, not less, but nothing, not. That is the situation. For us, this means that we have to turn as many EA contracts into CSP contracts as possible. To do that, you need a performant cloud platform, because these contracts are activated via cloud platforms, and they are only running on cloud platforms. You use Microsoft products on a cloud platform. Whether it is a Microsoft platform or one of a reseller such as Bechtle is irrelevant in technological terms.
That is the decisive aspect here. We have to achieve this. We have to make sure that as many customers can be motivated to put their consumption of Microsoft services on a CSP contract and not on a classical on-prem EA contract. That affects the entire industry, by the way. In more general terms, that brings me then to the second aspect of your question. If you want to make money with Microsoft in the future, which is still possible, then you'll make it differently from the past. You have to deploy products. You will measure it against the consumption, which can be measured on a cloud-based solution, which was not the case before, because you had licenses and the customer, whether he was under license or over license, that was irrelevant. Now you can measure it by the consumption.
You're paid for by selling additional products to the customers that you take over responsible for the operation, that you migrate from an EA infrastructure to a cloud infrastructure. You still get a lot of money for that. To be able to do that, on the one hand, and here we're talking millions, you have to invest in the cloud platform, and we're doing that. At the same time, you have to train your staff, which costs more millions indeed. The pre-invest you have to do to be able, at the end of the day, to handle this change business costs millions. Both the decreasing Microsoft earnings as well as these investments, which can be seen in higher write-offs, are also reflected in our P&L, because they directly go to CapEx. To some extent, we are able to activate it.
This trend, and you're absolutely right, is not happening at Microsoft alone, but also at Citrix. We have the same discussion with Cisco, but at a very early phase, much earlier than with Microsoft. We're not there yet. It confirms our decision to invest in the platform, because you're absolutely right. The way how software providers will deploy their products and of them is going to change fundamentally. Obviously, we have to make sure that we hold the customer interface. There's increasing risk that Microsoft wants to access our customer interface. However, we have to be quite self-confident and say that we don't believe that this strategy will be successful in the SME business, because Microsoft, and we have had these discussions, is faced with big challenges with a sheer number of customers we're talking about.
We're not talking about 1,500 global large accounts, which Microsoft has always handled directly. We're talking about thousands and thousands of mid-sized companies they have to support. If Microsoft is able to do that, generally, I doubt it. There will be sufficient work for us, for someone like Bechtle. Thank you for this comprehensive answer. I haven't, I mean, you've been waiting for this answer quite some time. That is why I was more detailed. I know Christmas is over. If you want to adapt your reporting structure, can we get more detail on hardware and services or consulting revenues, or will both be hidden? I can understand your question, but the logic goes against our business. We don't do the business in that way, and less and less so. I can come back to what I just said in terms of Microsoft.
We are firmly convinced when we talk about multi-channel, we will guide and manage by regions, and that will be reflected in the reporting. How exactly, well, that is something we have to see. There are higher formal requirements as regards cash-generating units and things like that. I do not want to report on that. Everything has been prepared. It is far from trivial, but we are doing this. It is because we are convinced that this regional view in the market against the strategic development of Bechtle, Europeanization or internationalization, is the right one. In future, we have to focus on market penetration independent of the channel.
That is why, I mean, that's a change of paradigm for us after more than 40 years unchanged segment logics to focus on regions or country markets in the future and combination of several countries if the countries are smaller, because we are reflecting this in the structure of the management board.
I don't know whether I can call for the persons that are next to speak in chronologic order, but Mr. Wolf, I think you first. Or Florian Treisch. I'm from Kepler Cheuvreux. You talked about flat revenue and thus a flat EBIT. We heard EUR 5 million in France, and we heard the impact of Microsoft organic growth, positive personnel growth. I mean, where are the supporting factors? Does it mean that you will have to cut costs more aggressively during the next few months? How can we reach the midpoint?
In this current phase, as a service provider, we need to deal with our payroll costs. It's also one of the most difficult questions. To put it bluntly, we don't have anything else. The people that you lay off will not come back when customers start buying again. We've heard that question internally from various departments too, but we need a very good approach. If push comes to shove, you must be able to withstand the criticism that you haven't reduced numbers as strongly as was maybe necessary. We are using short-term work in a few locations as we did during the pandemic. It's not news to anyone. We try to actually make sure that the company remains viable and that costs are kept down as much as possible. You're right. You hit the nail on the head.
You have to ask the question what the midpoint we aim for is. I'll tell you what I see as midpoint. If we were able to achieve the EBITDA of the previous year, the EBIT of the previous year, then that would be a real success. With a business volume growth of 2%, that would be impossible. If you put it the other way around, it means that if we grow just by 1% or 2%, we will not be able to maintain the results of the previous year. That brings us back to our guidance, which was subdivided into aspects. We had the first six and the second six months. During the first six months, we have lots of contracts which we no longer need to acquire.
If we use these contracts to increase our volume, and the volume of these contracts is in the billions, the framework conditions will change fundamentally. That is what everything depends on at the end of the day. May I ask the next question from one French to the next? I've got two questions. One, the first refers to the manufacturer bonuses in hardware. What kind, or in the vendor area, what kind of growth is needed to achieve those bonuses? Has that been communicated by the vendors for each category? The other question concerns M&A. I saw in that your guidance included M&As. Does it mean that in Q1 and maybe also in Q2, there are some mergers or acquisitions in the pipeline already? Okay. The development of our backend margin is actually something that we come up with by looking at the previous year.
I've mentioned this before. As far as operative backends are concerned, we haven't lost ground last year despite not growing. Why? Because many vendors in the markets where we as Bechtle are active were quite weak, a lot weaker than us. In weak and tightening markets, we overperformed vendors. We had very good arguments. That part of backend money that came back during the last year, which was also part of the special effects mentioned by Mr. Link, was then allocated to marketing activities and training. That is, we received funds from vendors so that we could train our staff in new technologies. We received millions, and we reported about that during the year. In other words, it doesn't have to mean that it doesn't mean that when we don't grow, we don't have stable funding from the vendors.
We're still able to generate stable funding when vendors are weaker in the markets where Bechtle is present, weaker than Bechtle. That was, for instance, the case in France last year. From the viewpoint of many vendors last year, France was a disastrous market. We also had lots of challenges to deal with, but fewer challenges all in all than the vendors. That helps you when you start putting forward your arguments. I think as far as M&As are concerned, I think that there might have been a misunderstanding. We mention M&A in the presentations in order to tell you that we continue our strategy, but the figures are not included. I can say that I'm confident that during the first six months, there will be one transaction in the field of system houses, which won't be that small.
In Germany, this industry is going through lots of changes after the stagnation of the previous years. There is a consolidation driven by the difficult macroeconomic situation, which is picking up speed. That is why we are focused on Germany. The main focus of our M&A strategy is Europe. I assume that our next transaction will probably be in the south or maybe also in the east of Europe.
That is our focus: Spain, Portugal, Italy, and Poland, to be more specific, which does not mean that acquisitions in other countries are not possible. In the midterm, it is still our objective to be represented in all 14 countries where we are represented with our trade business. Mr. Wolf, your turn now. Andreas Wolf, Warburg Research. A couple of questions. First, the personal expenses.
I don't know whether this is due to the cut-off phase because your employees were stronger than the FTEs. Can you explain the effects behind that? The second question refers to the public sector. How well could you catch up any hesitant development in the backend of the year? With services, it's difficult to do catching up in six months because it requires the service of people. With hardware, it might be easier. These framework contracts, do they refer to hardware or services? The press release also mentions that there is a need to invest in AI infrastructure. The software investment linked to that are obvious. Maybe you could explain what infrastructure components need to be modified, networks and what have you, to get more of a feeling for that. It'd be interesting to hear what you have to say on that.
As an additional question to what you've already said, if you have a flat top-line development, to what extent or why would EBITDA drop by 5%? Would that be linked to lower boni? I'm going to start with the first question because I have the figures here. First of all, I can confirm what you say. Personnel expenditure went up by 7.6%. We've just heard it was 4.7%. I mean, I'm an employee of Bechtle. You assume constant personnel costs. From Mr. Olemotz's point of view, that'd be nice. In view of the inflation we had last year, it's not realistic that we had constant personnel costs. We had increases organically with the existing FTEs. They were at an acceptable level. Yes, we're not at zero, but we don't have an increase of 10% here.
Certain FTE bases we have an increase between 2% and 3%, organic FTE bases, that is. I wanted to add something. You always have to bear in mind that almost half of the growth at FTE is done by acquisitions. That means that we have wage structures we have not negotiated in the past. To give you a specific example, last year as a Bechtle employee, if you were linked to the group EBIT, sorry, we still have this entrepreneurial spirit. Employees have a variable component that is linked to the group EBIT, which is not the case with other companies. My assistant, for instance, she has a variable part of remuneration that is referenced to the group EBIT. You might wonder what kind of options does she have to influence EBIT. That is a discussion we are not having in this field.
It is a fact that due to the fact that we failed our guidance, they had zero claim, but still we paid 75% because these are the central performers, and this is documented also here. Again, we're not talking about 20 or 30 people. There are several hundreds who get a bonus despite the fact that formally they were not entitled to that. So much on that. As regards to your question related to the public sector business, obviously the structure is essential to answer how fast we can ramp up this business. Obviously, if these tenders include services, which as a rule is the case, because there is no 100% infrastructure anymore, sometimes it is rather simple services. You have to patch software or tape the devices somewhere and integrate them into a network. Sometimes it is also complex services.
If you have to deal with the Federal Army, for instance, and there are high requirements in terms of what has to happen before any notebook is even opened there, and things that mustn't happen before it's opened. Basically, when we talk about the volume in these tenders, in most cases, we talk about hardware business. That is why it is so important to know that the tender volume in the past year, and I've mentioned this before, we've won it. These are not contracts that are still under negotiation or could be revoked. I mean, if the vendors can supply, of course, we have to start. I mean, I can't give you the exact locations, but right now we have a lot of people on the payroll who are not fully utilized, which we need in the very second once the products are called off.
You can't tell the customer, "Oh, great that you're back. I'm now going to hire people for the next three months to fulfill the tender based on the SLA we've agreed." No. You have to have the people required. There are lots. The Indigo tender alone with Apple at the Federal Army has an overall volume of EUR 700 million to repeat the figure we communicated last year. We're not talking about a handful of technicians. No, we talk about many, many more. They're not fully utilized right now. What do you do as an entrepreneur in the situation from a cost point of view? You have to say, "Sorry, can't do them. Have to throw them out." Tomorrow the customer will call and say, "Yes, we're going to start tomorrow." These are the daily decisions we have to take.
Here we have to balance costs and prospects. That's our daily business, as I've just said. In a nutshell, yes, it is possible because the tenders are very much focused on infrastructure. It's not a hypothetical option, but it hinges greatly on the behavior of the large customers. Will it actually start as strongly as possible in the backend of the year? In theory, we could compensate a weak half year. If it's not coming, it'll be another weak year, whatever weak means in the current situation. Investment in AI, they are documented in different areas. On the one hand, we have investment in our own platform, the cloud platform that is. I've given the reasons before why that is required to be able in the future to actually offer the services required. We also have investment in our own IT.
We have a large SAP S/4HANA project, which is going on right now. That was never relevant in our external communication, despite the fact that you might imagine how expensive it is, what we're doing right there. Because so far, it was never essential to underpin it. The very moment where earnings are impacted, you will see that. If earnings drop, you might see who's naked. Pardon my French. These costs, of course, impact profitability. Oh, by the way, this is one of the most future-oriented investments we've done. We have our own AI-based bot with standard modules. It's not self-programmed. We are not starting generative AI as Bechtle. No, we use what is available on the market. This bot, which is undergoing a pilot phase, is communicating with selected customers even today. You can place orders as a customer there. You can ask questions.
The bot enters the orders directly into our ERP system. The first tests or Turing tests, which we've run, by the way, are very promising indeed. If we succeed to place this tool and use it at the customer interface and also internally, not in the short run, but in the mid to long term, we had tremendous productivity increase gains. We are investing not only in our own infrastructure, but also in AI customer interfaces to be prepared for anything that might happen in the future.
I don't know whether that was part of the question, but quite specifically, you believe that these investments are in the normal headcount costs and administrative costs and also in the right of. Yes, some is subsumed under CapEx, and other aspects are subsumed under OpEx.
You also asked about the scenario for the lower range so that we would have an EBIT of -5% and a flat top line. The scenario is as follows: no economic upswing, especially not in Germany and France, which continue to be our most important countries or markets. I do not want to make things appear brighter than they are, but that is our worst-case scenario. It is not a dramatic situation if everything remains flat and we lose 5% of our EBIT. Other companies would be happy to have similarly good results. Without further macroeconomic changes, especially when it comes to SME customers and our public clients in Germany, that would be our scenario. What would have an impact on the EBIT beyond that? Headcount costs, that is, payroll costs. To pick up on what Mr.
Jungfleisch said, because of our market position, which we've built over the last 10 years, we are relatively well positioned, but nevertheless, we would have costs pushing us from the bottom. We don't want things to sound terrible and paint a very grayish picture, but there are some signs that things could pick up again. For a few days, we've observed a very good development in incoming orders, but it's much too early at the moment to say that this is a trend or to distinguish whether this is a trend or whether it's just a normal fluctuation. In other words, it could be an uptick in incoming orders because the economic situation is changing. It's not a double-digit figure. It's just a one-digit figure in %, but it's not like in the last few months where the developments were different.
We are stable at a low level right now, and we see that order income could increase again. Before we can say that is the case, we need another four to six weeks to be absolutely sure. We will be able to say, "Okay, if this continues, what will be the impact on the rest of the year? What will happen if that uptick in incoming orders will happen more quickly? Is it our classic business with a lead time of 24 hours, or is it business that will change things in the long term?" I have just mentioned that in order to be able to end on a positive note and not with painting a bleak picture as far as this year goes. The situation is difficult to predict. Are there further questions from the floor? That does not seem to be the case.
Now we will ask the operator for any questions. Ladies and gentlemen, if you would like to ask a question via telephone, please press the star followed by one on your touch-tone telephone. If you wish to withdraw your request, press star followed by two. We will now switch to the English-speaking virtual room for the first question.
The first question comes from Michael Briest from UBS. Please go ahead.
Good afternoon. Could you clarify whether M&A is excluded from the objectives? I think you mentioned one deal upcoming, but for deals you closed last year, they seem to add over 1% to growth this year. Is that not included in the guidance for revenues? I know you've talked a lot about seasonality, but could you maybe give a sense of the H1, H2 split on revenues that you see?
Is the first half potentially worse than -3% at any point? Could Q1 or Q2 be -3% or more on revenues, or is it likely to be more steady through the first half? Thank you.
Thanks for your question. I start with your M&A question. The answer is pretty simple. M&A is excluded. So it is not in our guidance, and you are absolutely right. We expect in the first half of the year 2025, at least one transaction. That is what I mentioned before. Regarding your second question, in normal years, and unfortunately, we have not seen normal years since years already. In normal years, we have a split roughly of 40-45% revenue contribution from the first half of the year and then 60-55% in the second half. That was not the case in the last year.
It is hard to give you any concrete figures about the actual year, about 2025. Mr. Olemotz mentioned during the presentation how hard it is to give any guidance, any forecast. To be clear again, we do not think that we will see any positive signs in the first half of the year. We cannot tell you if we will be flattish in top line or if we will see a decrease of 3% or 5%. We will see a situation in the first half where we need to catch up in the second half of the year. We see opportunities, as already mentioned, to catch up.
We do not know how large the gap might be coming from the first half, but looking at the seasonality, surely it would help us if we would see a more or less normal year with a revenue contribution of 40-45% from the first half and then 55-60% in the second half of the year. Again, nothing is fixed, and the range of possible scenarios is very, very broad. Perhaps. To add, the positive potential comes mainly from frame contracts coming from our public customers, which we already had one in the last year. That is the potential regarding the second half of the year Martin mentioned, mainly.
Just to follow on, some other companies have said the low end of their guidance assumes a deterioration in the second half.
Would you say that's your low end, or is this the low end sort of everything continues as it is today?
It's more everything continues as it is today. We don't expect that things get worse since they are already, from our point of view, at a very low level. If things stay as they are right now and as they have been in the last four quarters, we will end up at the lower level of our guidance. If we see any improvements, we have the opportunity to reach higher ends of our guidance.
Thank you. Finally, on Windows 11, are you seeing any signs of a pickup? What is your guidance, I guess, assuming for Windows 11 at the low and the high end? Thank you.
I have to be cautious on that question, but I would say we see first smaller signs, especially in the SMB segment. You're absolutely right. The question is key for the second half of the year from my point of view, especially on the background of the replacement cycle, looking at the infrastructure base of most of our SMB customers. It is a critical question regarding the second half of the year, and we see some first smaller projects, but the development is not really stable and reliable so far.
Okay. Thank you.
The next question comes from Aditya Buddhavarapu from Bank of America. Please go ahead.
Hi, Dr. Olemotz. Thanks for taking my question. Could you just comment on how we should think about the cash flow evolution in 2025? Last year, you had a very strong trade payables.
How should you think about the evolution this year? Y eah. Thank you.
Yeah. Thanks for the question, Aditya. As we mentioned, part of the positive cash flow development last year was driven by the moderate business development. The larger part was the measures we have taken in the last year. Therefore, we expect a positive cash flow development for 2025 as well. Maybe not in absolute figures. Maybe we do not reach EUR 550 million of operating cash flow, but it is clear that the improvements we have especially seen in our trade receivables management, but also in looking at our inventories, will go on. We have a close look, and you know Thomas Olemotz, he is very fond of cash flow figures, and therefore, you must not expect any change there.
A positive development, maybe not on the very high level we have seen this year, but it is clear for us, and Thomas mentioned that we need to invest in our future. We need positive cash flows. We need to see profitable growth to be able to invest in the future. We have, although let's say we have in many occasions in this conference right now mentioned how we are more reluctant, especially towards the first half of the year, looking at our cash flow development, we are optimistic. I mean, we increased the operative cash flow, something around EUR 100 million last year. To be open, you shouldn't expect the same development in the future as well. We do have a strong focus on that KPI, but in a positive way, we talk about an extraordinary year 2024.
Just maybe to add that if we see improvements in the second half of the year, if we see a strong Q4, this will lead to higher trade receivables towards the end of the year. This is natural, though the cash flow always mirrors our operational business. Again, we do not expect a negative development of the cash flow. Maybe not as positive as it has been last year, but still positive.
Understood. Just one follow-up on the previous question around the guidance. At the low end and the high end of the guidance, what are your assumptions around the SME customers and the scope for recovery there?
As mentioned already, we think if we discuss about the opportunities and if we discuss the higher end of the guidance, we have a closer look on our public sector customers because there we have already frame contracts.
It is not based on hope winning new contracts. We have already existing signed contracts where we hope that after the government is built in Germany, after the budget has passed the parliament, that these frame contracts will come more to life than it has been in the last months. A forecast or guidance for the development in the SMB sector is just not possible. Mood indicators or the mood right now is very, very low. Yes, one could think that with the new government in Germany, maybe the mood indicators will improve and maybe the willingness to invest will improve. You can hear from my answer that there is a lot of maybe and if and things like that. Nothing is clear.
It is not really a case or it is not at the upper end of our guidance that we see on a broad range our SMB customers coming back to higher investments. That we will see some improvements, that we will see some effects from Windows 11. Yes, that is part of our upper end of the guidance, but as I mentioned, it is more related to our public sector customers.
Okay. Understood. Thank you, Martin. Thank you, Dr. Olemotz.
It seems there are no further questions at this time in the English room. Yes, we would switch back into the German phone conference for the questions there. One moment for that, please.
The first question here in German from Knut Woller from Baader Bank. Yes, good morning. Just one question regards the momentum of Bechtle Cloud.
Can you give us some more detail on how this has developed, Dr. Olemotz? What about profitability and what are your expectations for 2025? Thank you. Before I forget this, all the best. We would have liked to welcome you here, but I've heard that you're down with the flu. Maybe I can contribute to the recovery with the figures on Bechtle Cloud. It is true that the cloud regarding the business volume developed above average. In the current year, we assume growth between 15%-20% in business volume, that is, with a potential to grow even stronger than that. The growth in the past year was at 40% to some extent, but as I've explained before, there are specific challenges also in the cloud environment in the Microsoft context, which we have to handle.
Fifteen to 20%, which I've mentioned, are quite considerable, I think. Thank you. Can you also comment on the profitability of this business? Is it margin diluted, I guess? No, it's higher. Not significantly higher because we start scaling right now. If it runs in good, we'll talk about EUR 300 million in revenues. The business volume is slightly below that. We see this in profitability. We start this scaling effect, typical platform business. Even today, when we're not there yet, we are 1-2% above group margins, so not diluted, but accretive. Thank you for your good wishes. Currently, there are no further questions on the phone or in the phone conference. Here in the room, there are no further questions either. What I can do now is say thank you for all your interesting questions.
I keep repeating it. I have fun because we have an unusual situation. Many of you know us very well, and this is also reflected in the depth of the discussion. I enjoyed this again. We have a difficult year ahead of us. I think this has become clear. The first six months are really tough. We're all faced by that. We're all together facing that. This year again, we try to do capital market information as detailed as possible, maybe more than in normal years, because we understand that it's not easy for you either due to the higher level of uncertainty to tell your customers what the market is going to do and how Bechtle is going to develop. I'm quite confident that we'll pass this valley of tears and that better times lie ahead. All the best, and thank you once again.
I wish you a nice weekend whenever it starts. All the best, and thank you. There are snacks outside if you have time, and if you're willing to partake, feel free to do so. Ladies and gentlemen, the conference is now ended. Thank you very much for your participation. Goodbye.