A very warm welcome, ladies and gentlemen. My name is Martin Link, I'm very happy to welcome you today to Frankfurt for the first time in person after three years. The numbers in which you've turned up on a Friday afternoon show that your interest in Bechtle and the interest in meeting each other personally again is indeed quite present. The procedure will be, as always, for those familiar with it, this conference will be held in German. We've provided for simultaneous translation to English, though, for our non-German speaking participants, and it's a hybrid conference, so we've got participants who've dialed in by phone. Later on in the Q&A session, it'll be handled like this. If there's a question in German, we'll answer in German. If there's a question in English, we will, of course, answer in English. With that, I'm happy to pass on to Mr. Olemotz.
Thank you very much, Mr. Link. Welcome, ladies and gentlemen, to today's analyst conference on the 2022 financial year of Bechtle AG. I'm very pleased about your interest. As we look back on 2022 today, it has been a year of contradictions for us as a company. I've said it to various people before this meeting why I think that is the case. Well, first and foremost, of course, we are appalled at the Russian war of aggression on Ukraine and the suffering of the people affected. The year was also characterized by economic upheavals with high inflation, increasing economic gloom, and the supply bottlenecks that lasted longer than we had hoped, at least in our industry. On the other hand, Bechtle had another record year in 2022 with business volume growth of over 16% and an EBT margin of almost 6%.
However, it is precisely this ambivalence that has made the past financial year one of the most challenging that I have had the privilege of being responsible for at Bechtle so far, and as most of you will know, that has been quite a few years now. As usual, the contents of today's presentation are subdivided into four major parts. We'll start with a look on business development, the key ratios for the 2022 financial year, of course, the share and dividend. There are good news to share when it comes to the dividend. Most of you will have read about that, I'm sure. Traditionally, we will then afterwards speak about the highlights. That is, we'll be talking about some strategic, qualitative or non-financial events that are material for the future development of Bechtle.
We will then end, as usual, with our 2023 outlook as far as it is possible at all at this point in time. We will focus on the framework conditions and the goals we have set ourselves for the current year. First of all, let's start with business development. As already mentioned, 2022 was another successful year for Bechtle. However, with all the self-confidence we are entitled to at Bechtle, we must be careful not to take such reports for granted. On the other hand, 16% growth in the face of numerous global trouble spots. Who would have thought that possible at the beginning of the year? Well into last autumn, we tended to be confronted with recession fears in our discussions with investors and analysts. Our performance is therefore truly exceptional.
Once again, we have proven the strength and resilience of our business model. We continue to see consistently high demand from our customers for IT solutions, even in difficult times. Maybe especially so. Against this background, let us first take another look at the fundamentals during the 2022nd financial year. It is at times of crisis and headwind that you can prove your strength. The wind blowing in our face in 2022, to remain in this image, was indeed fierce, even if you can't tell by looking at the numbers alone. Of course, we are all painfully aware of the difficult macroeconomic situation. Having said that, Bechtle has been able to weather this crisis, not least because we've always relied on a diversified customer portfolio, and especially recently, have successfully expanded our involvement with major international accounts.
Supply bottlenecks have been and still are a challenge, even though there are noticeable improvements. In this context, it pays off that we have always maintained close relationships with our vendors. Bechtle is valued by vendors in our industry, not only because of its size and growth potential, but also because of its reliability. Our almost stable margin and a cash flow of well over EUR 100 million should actually constitute a very positive message for many of Bechtle's observers, considering the, at times, very tense circumstances in the course of the year. Let's now take a closer look at the figures. First, revenue trends and business volume. When it comes to our business volume, that is our gross revenues before IFRS 15, you're all familiar with the rule, of course, shows very good value at 16.6%.
We grew significantly here. Growth is noticeably higher than full revenues at 13.6%. This is mainly thanks to the very successful development of our software business. According to IFRS standards, however, revenues from software business may only include the respective margin. Regardless of whether we look at revenues or business volume, one thing is obvious, it was another very successful financial year for Bechtle. This is something that cannot be overrated considering the difficult framework conditions. This is also reflected in the quarterly development. The start into the year was rather restrained. At 6.8% revenue growth, the first quarter should remain the weakest of the year. The mere fact that growth of almost 7% can be considered weak by comparison, once again shows our outstanding performance last year.
In Q2, we then grew our revenues significantly at 14.5%. We were able to maintain this pace in the third quarter, despite the further deterioration of the overall economic environment. What helped us along to some extent in Q3 was the reduction of our high order backlog. The fourth quarter was our personal highlight. Almost 18% growth in revenues shows that customer demand is high and also remains intact, regardless of the general environment. Our order intake too, picked up significantly in Q4. Let's take a look at the sales development in the segments and regions. The segment view seems relatively balanced. That is always a good sign for us as a group. We experience growth across the board, across all industries and customer segments.
When we compare the development in Germany with that abroad, the revenues perspective alone distorts the picture significantly. Thanks to a very successful software business, especially in Germany, IFRS 15 makes the situation in this segment view appear more unbalanced than it actually is. If we look at the development of the business volume, on the other hand, we see that both segments are much closer together with growth of about 17% in Germany and about 15% abroad. Let's continue with the earnings side. We start, as usual, with a look at the gross margin. Up 14.5% gross profit outperformed revenues. The gross margin of 17.5% is therefore above that of the previous year, and you can see it in the slide behind me, is also above the long-term average. This is where two factors come into play.
On the one hand, the cost of materials grew, but at an only slightly faster rate of 14%. On the one hand, price effect had a positive impact. In addition, the increase in our share of services also had a positive impact. Especially for projects related to digital transformation, Bechtle proved to be a sought-after partner for our customers. On the other hand, personnel expenditure increased less than revenues. We will come to that later. This basically serves as a blueprint for the current year. Strong top-line growth may help us compensate unexpected increase in personnel costs. Having said that, the gross margin is only one indicator of profitability, and this brings us to EBIT. EBIT development was very positive overall in 2022, with a plus of 9.1%.
In the IT System House & Managed Services segment, EBIT increased by 7% in the year under review. The margin declined again somewhat from the very high level of the previous year. The value of 5.9% can still be considered very good. In this segment, we clearly felt the discontinuation of COVID-related cost savings, with a strong increase of vehicle and travel costs of our sales team, that is, but also inflation-related costs in buildings, that is, energy costs. In the IT E-Commerce segment, we were able to increase the margin slightly to 6% in the year under review. In this context, our ongoing internal digitalization efforts help us make our already lean processes even more efficient and thus more productive.
The overall EBIT margin is at 5.9%, almost 6%, and thus only slightly below the high value of the previous year. Proof of the fact that we have managed to cope well with the increased cost pressure. This also makes us confident for the current year. Let's take a look at EBIT trends over the quarters. There are two notable developments. In the first half of the year, EBIT was characterized by one-off effects of the previous year, which had a strong impact on the year-on-year figures. In the second half of the year, the cost base increased significantly due to the discontinuation of COVID measures and due to high inflation. Against this backdrop, our development in Q4 is all the more remarkable.
We not only recorded a plus of 9%, we also made provisions for the payment of an inflation bonus for our employees, which of course, weighed on our bottom line with a net additional impact of around EUR 5 million. To conclude our analysis of key ratios, all that remains for us to look at is the operating cash flow. Cash flow from operating activities was EUR 116 million in the year under review. This constitutes a decrease year-over-year. If you look at the year to date figures, you see a major success story. After nine months, the cash flow was still at -EUR 224 million.
As you can see, we caught up considerably in Q4, and in an impressive swing, not only compensated the minus of the first nine months, but also clearly exceeded the EUR 100 million mark. This was made possible by a turnaround in inventory levels, among other things. We have not yet reduced our inventory significantly so far, and you can see that looking at the individual items on our balance sheet. We have at least been able to stop the build-up. Similar to the previous year, we were able to extend some of our payment terms for accounts payable beyond the balance sheet date. Let us now take a look at headcount development. As of the 31st of December, 2022, Bechtle had 14,046 employees, which amounts to a year-on-year increase of 9.1% or 1,166 people.
The staff increase is mainly due to new hires, 844 people, which corresponds to an organic increase of 6.6%. 322 new colleagues joined Bechtle in the course of acquisitions, and I will come back to that later in my presentation. Headcount growth, thus, did not match revenue growth, a fact which constituted a conscious entrepreneurial decision. In times of uncertainty, we wanted our staff build-up to be moderate. Now let's take a look at the development of our share price. Unfortunately, as I would like to add. You're all well familiar with the situation on the stock markets and also with the less than pleasing developments in the past year. The war in Ukraine, with all its economic repercussions, such as energy crisis and increased inflation, weighed heavily on the capital markets.
In conjunction with this, there were also concerns about overall economic development. Ultimately, the interest rate policy of the central banks did not really help the economy either, although it certainly made economic sense. This unpleasant mix also had a negative impact on the performance of our Bechtle share. Since the beginning of the year, our share price declined with minor interim highs in March and August, and at least we saw a small upward trend at the beginning of 2023 again. However, and you're all aware of that, the same applies unchanged. Tech stocks are currently under greater pressure worldwide. The sector rotation that began in 2021 is still continuing in the investors' portfolios. Also, tech stocks are often said to be more cyclical, even though in the Bechtle case, as we've just seen from our figures, this is not actually true.
As unpleasant as this may be for our shareholders, we will still not allow ourselves to be distracted. We will continue to focus on our operating business. We are convinced that sooner or later, the valuation on the capital markets will again reward our successes with rising share prices. This confidence and trust in our own economic strength incidentally also guided us in our dividend proposal to the AGM. You will already have seen from our press release this morning that the management's proposal to the annual general meeting is to make a payment of EUR 0.65 per no-par share, representing an increase in the dividend of 18.2%. This constitutes the 13th consecutive increase, which is, in my view, a strong expression of a reliable dividend policy and appropriate shareholder participation in the company's success.
The increase in the dividend is thus almost twice as high as that of the after-tax result. On the one hand, we want to once again underline the shareholder-friendly dividend policy of Bechtle AG. On the other hand, both the executive board and the supervisory board also associate this increase with a sign of confidence as regards to the future and further economic development of Bechtle AG. This brings the payout ratio to 32.6%, which is significantly higher than the previous year's 29.9%. We are thus following our long-standing dividend policy, according to which our aim is to distribute around 1/3 of our EAT to shareholders. Let us now turn to what we consider to be the non-financial special events in fiscal 2022, which decidedly deserve mentioning here from my point of view.
We have already reported on numerous highlights during the year, and therefore, at this point, we will limit ourselves to just a few points that are also, as announced at the outset, groundbreaking or at least strategically important for the further development of Bechtle. Let us start with an announcement from May that is important for the reliability of our shareholder structure. Our anchor investor, or shareholder rather, Karin Schick, has announced the establishment of a foundation under the name of her parents, Gerhard and Ilse Schick. Gerhard Schick, as most of you will know, is one of the founders of Bechtle and has shaped the company over decades and led it to great successes. At an unchanged share of 35%, the Schick family is the largest shareholder of Bechtle AG.
Karin Schick initially contributed 4.5 million Bechtle shares from her personal shareholdings to the foundation's assets, which corresponds to a share of 3.57% of the share capital of Bechtle AG. The other shares held by Karin Schick are to be transferred to the foundation upon her death at the latest. This is intended to secure an anchor shareholder for Bechtle AG over generations who will safeguard the company's entrepreneurial long-term development. At this point, let us take another look at our international M&A strategy. In the reporting year, we acquired three system houses, all of which are outside of the so-called DACH region. With us, systematically keep implementing our acquisition strategy, which is geared more strongly to Europe and which, since 2021, also envisages locations outside Germany, Austria, and Switzerland for the IT System House & Managed Services segment.
We have acquired two companies in the Netherlands, and at the end of the year, ACS Systems in the U.K. Just yesterday, we took the next step in the U.K. With the acquisition of Tangible Benefit in London. This means that we now also have a location in the capital city of the United Kingdom. Now, to anticipate possible questions from you, yes, the M&A pipeline continues to look good and unchanged. We assume that this will not remain the last acquisition to happen over this year. It is worth to keep an eye on the news ticker. The topic of sustainability will continue to accompany us, which is why the next highlight I'll report on is also very important for the future of Bechtle. As I keep talking about it internally, it is a multi-stakeholder matter.
Last year, Bechtle AG presented, amongst others, its climate protection strategy 2030. In it, we state concrete targets and measures for the reduction of CO₂ emissions for the climate neutrality target by 2030. Those reduction targets include direct, indirect, and emissions from the upstream and downstream value chains. The climate protection strategy complements the Bechtle sustainability strategy 2030, which was adopted in 2021 and follows our approach of avoid, reduce, compensate. The core of the climate protection strategy is the targeted balance sheet climate neutrality of the group by 2030, which essentially relies on saving CO₂ emissions. These planned reductions will be flanked by the avoidance and also offsetting of emissions through certified climate protection projects. In view of the shortage of skilled workers, ladies and gentlemen, and of the demographic factor, the topic of training and further education remains very high on our entrepreneurial agenda.
In the 2022 training year, Bechtle set a new record. With 256 trainees and dual students, more young people started their career at Bechtle than ever before. As per the end of the year, we are now training 793 junior employees in 13 technical and commercial apprenticeships and nine dual study programs throughout the group. That's 102 persons more than in the previous year. The training ratio in Germany is 6.6%, and by 2030, we aim to increase this to what we hope will be 10%. The next highlight concerns our successful positioning in a customer segment that goes clearly beyond our traditional focus on medium-sized businesses. In 2022, Bechtle was very successful in business with larger customers who operate internationally, and this success is no coincidence.
On the one hand, our international positioning is of benefit for us here. A company with its own location across 14 European countries in our industry is indeed unique. We have also very deliberately optimized our international organization internally. With ISD, which is the International Sales Division, we have set up and expanded a central unit that offers customized services worldwide and which helps organize and manage the resources of Bechtle employees who may be deployed abroad. This, in conjunction with our Global IT Alliance, GITA, helps us to support our customers worldwide in all business dimensions that are relevant to us. This, ladies and gentlemen, already brings us to the outlook for the current year, 2023. The framework conditions for this are set. Uncertainties at the beginning of fiscal 2023 are above average.
Although the mood in the economy brightened somewhat at the beginning of the year, and also forecasts for overall economic development are no longer quite as pessimistic as they were in the fall of the last year. However, the remaining risks to the economy are still obvious. However, the IT industry is expected to perform better again in 2023, and thus, somewhat independently of the economy as a whole. This should not come as a surprise as the fundamental trends of transformation remain intact and therefore have an impact on demand. IT is becoming increasingly complex and technological progress cannot be stopped. In this respect, investments in IT are inevitable and also cannot be postponed at will.
Therefore, from my point of view, it is not surprising that the average growth rate for the German IT market from 2020 to 2023 is at a good 7.3%. For the current fiscal year, 2023, the industry association, Bitkom, forecast an increase of 6.3% after all. In the area of IT security, Statista sees the average growth in Europe even higher at 10.3%. Incidentally, Bechtle is excellently positioned in this area. Across the group, more than 300 network and security specialists work for us. This is one of the largest expert communities in the area of security across Europe. In the cloud market, Statista sees growth rates of, again, an unsurprising 12% across Europe in the next few years. An important aspect here and following those recent figures, only 41% of companies in the E.U. already use cloud services today. It follows that there is still considerable potential here.
What does all this mean in concrete terms for the 2023 financial year of Bechtle AG? We know that 2023 will be a challenging year, and that goes both top line related, growth related, but also, and especially, with a view to the margin and profitability. The uncertainties are obvious. We do hope that the general conditions will normalize in the course of the year, but of course, we cannot be certain about that either, which was quite impressively demonstrated over the last few days. However, given the intact IT trends and the high demand for IT solutions, as well as our excellent market and competitive positioning in the European IT market, we are nevertheless confident and optimistic.
In concrete terms, this means we want to, again, significantly increase sales once again, as well as our pre-tax profit. The EBT margin is expected to be roughly on a par with the previous year. Much, ladies and gentlemen, for our performance in fiscal 2023, also an initial and first outlook for the current financial year, 2023. Far, thank you very much, ladies and gentlemen, for your attentions. I'm now looking forward to your questions. We will first start with questions here in this room in person, then we'll hear questions from the English-speaking room online and finally, from the German-speaking room online. I think that the operator had to say a few words to explain things.
Yes, ladies and gentlemen, those who are connected via the phone, we are now going to begin the question and answer session. If you wish to ask a question, press star followed by one on your touchtone telephone. If you wish to withdraw your request, press star followed by two. Press star followed by one if you have questions now. We'll start with the questions in the room in Frankfurt. Mr. Woller from Baader Bank first.
Thank you. Three questions. First question on the margin. Dr. Olemotz, you spoke about the SG&A. Some numbers went up a lot. Do you think that these price increases will help you to be compensated by the revenue side? Secondly, contract liabilities on the liability side have been gone up considerably. This is probably also connected to the cloud business, so could you please give us an update here? Third question, looking beyond 2023, the phasing out of Windows 10 should be a driver for demand, come 2025. If we assume that the environment is not going to change, would it be fair to assume that this will cause even more accelerated growth in 2024?
Thank you, Mr. Woller, for your questions. Well, of course, the margin constitutes the central challenge for the current year and also for our earnings. Of course, this goes without saying. You hear people say that at all press conferences because all costs across the board are affected. Let me quickly give you an insight into what we believe we can do in order to counteract that. Some details first. Preliminary remark, most of you have been accompanying Bechtle for many years now.
There are even many amongst you who have been with Bechtle for as long as I have been with Bechtle, so that's quite unusual, and you're very familiar with our company. You also will know that compared to many of our peers, we have quite a high variable share of compensation also for those employees who, in many other companies, would only receive a fixed salary. Why am I saying this at this point? Well, up until a certain degree, that gives us the opportunity to be performance-oriented in our approach. The last few years were tremendously strong years for Bechtle. You're all familiar with the growth rates. All employees of Bechtle have benefited from this structural abnormality, if you so will, and it also helps us in years where profitability comes under pressure. That's just a preliminary remark.
If you take a look at the trend last year across the different quarters, I've said it during the presentation, looking at Q2 and Q3 in particular, you will have seen that in our case, too, the increased cost base had an effect, and we do not believe that this is going to change fundamentally this year. How are we going to cope with this? Well, for one, we are closely monitoring productivity. If you look at the relative ratios last year, Mr. Woller, you will find that we managed to do so quite well. We were able to increase profitability quite a lot last year. Despite the lack of skilled labor, I believe that we are going to grow in this field. Let me repeat the number. We grew by 6.6% last year in organic terms, if I'm not mistaken.
That's less than growing, top line. In the past we had a rather linear relationship between FTE growth and revenue growth. Second point, apart from productivity, is our focus on growth. We always managed to deal with cost pressure well over the years when the top line development is right. This is why our focus, even in difficult times, is on growth for many different reasons. That's essential also for the margin, by the way, because only if we manage to grow in the most important fields, and that's defined by vendors in our industry, mind you, if we outgrow the market here, if we manage to grow our market share, only then will our back end margin be right.
Only then will we be able to get interesting incentives and have the productivity buffer in order to compensate for higher costs, in part, at least. It may sound trivial, but profitable growth is basically our motto. It's the be all and end all for us. This is why I kept emphasizing that in my presentation, that it is very important, especially in difficult times like ours. The growth rates last year were indeed impressive, benchmarked against our peers. Although we are rather restrained at the beginning of each year, by way of tradition, we are quite confident that we're going to see healthy growth at the beginning of the year already, because important framework contracts were concluded last year with major key accounts that hadn't even hit our top line last year.
They only show their impact this year. Your question about the cloud business. Here our trend has been very successful in the past financial year, I'm looking for the number now. We grew 60% year-on-year. Sometime during the year, the number was even higher than that. You will remember it. We were at as much as 100% in one of the quarters. The business is a clear triple-digit million amount. By the way, also for the current year, we believe that we'll manage to achieve over 20% growth in this business. Of course, the baseline is much higher now than in previous years. When you're only a single-digit in millions, 70% or 80% of growth in absolute terms are not quite so impressive.
Considering the size we have reached with over EUR 130 million of sales, it is quite something. By the way, here we're talking about the Bechtle Clouds, and that's only part of our cloud business. The decentralized business, unfortunately, cannot be put into numbers because the system houses are not so much reporting in that sense. What we are referring to here is the Bechtle Clouds platform, and we have much more than that in our decentralized units. Now, the Windows 10 operating system upgrade. Well, of course, Woller, all Mr. Woller, these are always good years for IT service providers. Let's wait and see about Windows 10 whether our customers will migrate or not. Or maybe they'll simply skip this operating system and then just take the next one.
It will depend heavily on the performance of the new operating system, and we cannot say how good it is going to be at this point. If it's good, the conditions are very good for our client business, of course. No question about that. We also saw in the past that whenever there is a new operating systems, our customers don't feel they need to be first movers. Whenever contracts are terminated, clients are urged to change their systems as a matter of course. This is definitely going to be different now than when there is something completely new.
Next question. Next question by Mr. Siering, please. Yes, thank you. I've got two questions. First question on, price development for OEMs.
You can see that the numbers are declining already in part, maybe looking at the effect on pricing. Second question on network components. What is your view of the supply chains? Are there any remarkable increases or improvement of the situation by H2, and what impact will that have on the mix?
Well, as far as price development is concerned, your impression is correct. Prices in general have come under pressure, especially when you look at specific product groups. That is basically linked to the second point that you mentioned in your question, because the supply chains are improving in their functioning now. You will remember me saying that during last year, the fight for market share has been rekindled, if you so will.
The stable front-end margin and price development, many thought that this would continue because it was a good thing for everybody involved. I always pointed out that I don't think that this is going to be the case. I believe that once deliveries become more secure, the market share will gain in importance. This is exactly what we see happening now. The front-end margin has come under much more pressure than in the past few years, past two or three years. We're dealing with it quite well. This hasn't come at the detriment of our overall margin because we are still growing in the most important technology segments, and it is important to have a good back-end margin here. Coming to the second part of your question, the supply chain and on-time delivery are decisive.
For the major part of our infrastructure components, we have not yet reached the pre-COVID level. In some areas, yes. The network, for example, is the exception here. By the way, that is true for all our peers. Network components are so critical because they are part of all more complex, larger IT projects. There's hardly any system house project of a certain complexity that would not contain network components, because you won't be renovating your data center without changing the network at the same time, and you're not introducing virtual desktops without enabling the network at the same time. The network very often is the critical component in these project, and that's also the reason why the back log is where it is.
Things have improved, mind you, and we believe that, starting in the second half of the year, we'll begin to see much more improvement. Right now, we're still fighting with long delivery times, but they have improved, and things will improve even more in the second half of the year.
Mr. Wolf, please.
Well, first of all, congratulations on a good year 2022. Couple of questions. First, linking up to the question about product prices and the front-end margin. We've seen that one competitor adjusted their stocks in terms of valuation, but we also know that at Bechtle, stocks are rather project attached, or there's a quick turnover, say. Maybe you could elaborate a bit on that. Question on the new system house markets next. Do you already see the multiples coming down since the valuations of the listed companies have suffered quite a bit as well? As for markets, could you also talk about how much work you're expecting all of this to be? Because with the rollout of the business model in Germany, Bechtle profited from having centralized warehouses and the lot and stocks.
Are there similar steps to be expected for the countries into which you're now expanding? Does consolidation of warehouses mean there's a chance of increasing the value, or do we have to expect more CapEx as we go into the future? My third question goes to wage inflation. As Bechtle AG, is there a chance of automating managed services or service on the whole using bots and other things conceivable to, yeah, counteract that trend?
The answer. Your question about stocks, Mr. Wolf, yes, indeed, the vast majority of stocks that we have on balance, so that we recognize on the balance sheet, are attached to specific projects, and there's no risk of devaluation or losing value for those. At the same time, of course, we have regular depreciation or devaluation algorithms which go for warehouse time, turnover time, and so on. To give you some more detailed insight, if, say, project stocks are in a warehouse and have been stored there for more than three months, then our financial accounting will check with the sales units saying, "Hey, dear colleagues, are you still sure the customer's ever going to buy those products because they've been sitting in the warehouse for three, four, five, six months?" We would then also ask for a qualified commitment on the side of the customer.
Usually they're already substantiated by concrete orders. If that is not the case, and that's what our algorithms tell us, we would be forced to.
Depreciate them to a certain extent, or impair them for, to a certain extent. We don't see that at the moment. There's individual items here and there which are still on balance in our warehouses, which, at the peak of COVID were important in order to guarantee our capacity to deliver. Also, we have a few items sitting around, say, where we might have been too generous in our purchasing approach. That's non-material, say, to the Group on the whole. If there were to be special write-offs, you would hardly recognize that on the monthly or even quarterly statements. I don't see any increased risk in the inventory. Although we haven't reduced stocks yet, I have to state that here, to quite the extent I would have expected and also hoped for, in a way.
At the moment, what we see is a bit of a mix again of the current ongoing business, which follows the usual rules. We need to look very specifically whether it is revenue or sales generated from standard business with a certain number of days attached, or is it truly a reduction of inventory or destocking, which makes it a bit more complex, let's put it like that. Now, as for multiples for acquisitions. We have seen the first hesitant trend in that direction, let's put it like that. As a matter of fact, there's quite a bit of a time lag between the market valuations or the price at which a company is listed at the stock exchange. As opposed to those that are not listed, they are still at a substantially higher level.
This is commercial speak now, we are paying ambitious prices there at the moment, and that's unchanged. We only do so for companies that help us strategically. That's in a criterion that all of our acquisitions in the past years certainly fall under, and it also goes for the acquisition we announced yesterday. Although that specific acquisition, to possibly preempt a question on that, was classic core business of ours. The U.K. acquisition, which was of a veritable site at EUR 70 million, is a classic e-commerce company, really. Why did we go for it? In order to strengthen our market position in the U.K., and in particular in London. So far, in London, by our standards, we were positioned relatively weakly business-wise. As you know, it's similar to France.
The capitals in the U.K. and in Paris have considerably higher importance than Berlin does for Germany in economic terms. I'm speaking purely economic terms now. It's different in those countries, and that was why we went for that acquisition. That's why the financial aspect is not a major challenge to that. Now, larger warehouse locations, to answer your third question, we did not add through those last acquisitions. The last sizable warehouse location I remember was the location of Inmac. At the moment, we are actually working on a Pan-European warehousing and logistics strategy. You may recall we announced last year that at Hamburg, we now have the second large hub here for Germany, and we are ramping that up at the moment. It's still in the ramp-up phase.
Logistics-wise, that is going to also cover Benelux and the north of France pretty well with the regular SLAs that we give to our customers in terms of capacity to deliver. We're working on it. We're not there yet. We don't yet have this Pan-European warehousing strategy, to call it that. We are working on it. Major system requirement for that is a warehouse management system, which is client-enabled, which we do using SAP, by the way. Substantial CapEx, therefore, to answer that part of the question, given the recent acquisitions, I do not expect at that point. Your final point, wage inflation and possibility to address it via automation and digitalization on our side. Yes, obviously.
Something that we do just as any other good company does, we don't take those cost increases as something God-given, but rather we try to compensate them by productivity increases for which we need to automate certain routine processes to a stronger extent than we may have done in the past. Already, the productivity leap we've seen in the past year would not have been possible without that component in place. In the past year, with an organic employee growth of 6%, we could never have grown 18% top line without going for more automated internal processes.
Fabian Piasta of Jefferies. Thank you.
I have two questions. Firstly, regarding the job market, you just mentioned IT security. What do you make of the job market in that respect over the next one or two years for Bechtle and their growth ambitions?
Second question is on the public sector and whether you may give us some insight into how you started into the year and what you expect for the remainder of the 2023 financial year. Yes. Thank you. By pointing at IT security, you've really hit a soft spot. It's one of the fields of competence where we are faced with the highest problems in recruiting qualified staff. In other areas, such as programming, we find the same situation. We very much depend on really buying in the resources we need for that, and I do not expect that that'll become substantially more relaxed over the next few years. What's our reaction?
We've invested substantially into our employer branding in the last few years in order to be able to properly communicate to the potential new staff, to put it like that. The way this happens has changed dramatically. You've got to go via communities and platforms these days where those people, yeah, essentially are out and about. Especially for individuals at that level, they need to find a community at eye level, as we say. You won't get them through the traditional incentives and won't motivate them to join your company. Obviously, they expect fair pay, no question about that. To them, it's very important to have interesting projects, to have colleagues they can also compare to and with, in technical terms, and that this community thing, to put it like that, is orchestrated, organized in one way or another.
Only if you can do that, people will come and join you. Because they can actually pick out of 10 or more jobs on offer. That's exactly where we want to go. This community of more than 300 security specialists that we have European-wide is, as I mentioned in my talk, the largest one across Europe. They are distributed across these 70-80 locations in all of Europe. I mean, it's not as if all of them were sitting in one place, which is definitely an advantage for us. Given the full coverage of such a wide area and given that we're resident in more than 14 European countries, it means that we can avoid this substantial pressure of having so many FTEs on one single location, because that's something you can't get done these days anymore.
Agile work, working together in agile models, that is what works excellently when it's project related. That's why we hope that via these channels, we continue to hope to attract enough professionals to join Bechtle. Now, as for the development of the public sector, and we've got to be a bit self-critical about this, but, in the past few years, we were somewhat below even our own expectations. We had been hoping for a bit more. At the end of Q3, things looked rather good with the standard rally setting in. A rally did set in, but it wasn't a standard one. On the whole, though, it was a good year for public business. At a 35% share in our total revenue, we should be pretty much on the long year average.
Driven by specific COVID investments, we were at 40% or something around that in the more recent past. We always said we do not believe it to stay there. What's important to me is the prospects. Like with the key accounts in the public sector, we've got rather interesting framework agreements that we signed last year, which are not yet in the full scope, which we now need to fully generate. The challenge being that this must not be to the detriment of profitability. That may sound surprising to you. The thing is, usually such framework contracts in year one are still unprofitable. That is why we can look forward to good top-line development. Profitability needs to catch up as soon as possible by working within those framework agreements. That's the key challenge.
Given the fact that the buying centers on the customer side, especially in the public segment, over the past two or three years have become rather large, sometimes we're talking contract volumes of more than EUR 1 billion here. Something which in the past you had to wait 10 years until you could see a tender of that size, because every individual customer would do the sourcing for themselves separately. By now, at the federal level, for example, the BWI has its own subsidiary with which they cater for more than 100 institutions that are qualified to order. Bundling that and for us, winning such a tender and keeping them is a great opportunity, but it increased the pressure on first-year profitability. We're happy about such framework contracts, but we'd be more than happy to skip the first year, which unfortunately is possible.
Are there any more questions here in this room?
Thank you. I've got three quick questions. Cleff of Deutsche Bank. You already talked about the front-end and back-end margin. Now, could you please quantify that? Tell us about the bonus that you might have received from your big suppliers. When it comes to personnel expenditure, IS service business, and consultancy business, my question is, do you feel in a position to increase prices in such a way that it at least covers the inflation of personnel expenditure? You also said already that you have 300 people working for you in the area of cybersecurity. Can you quantify the share of your revenues that this would account for in the service sector?
Somebody had already asked about the price increase potential, and I had failed to answer that question. I'm sorry for that. Let's start with the back-end margin. If I gave you this information, the market would pay you for that. This is a piece of information that is highly competitive. Well, you know about our back-end margin in the industry. That's really what matters, as you will know. I cannot give you the number as such. I can only tell you that it's highly profit relevant. Here we're not talking about all the numbers behind the comma. Here, we're talking about percentages, percentage point, points.
Now, I would, of course, if I were in your shoes, ask the same question, but please understand that I cannot quantify it here. In general, we can say that the back-end margin went up in parallel with revenues. Of course, it went up, otherwise we wouldn't have been able to keep our profitability up as well. There is not necessarily a linear link between the two. I already told you that for certain parts of the business today, you no longer generate an attractive back-end margin. There are even some parts of the business that will make your margin go down in some areas. You need to have a lot of expertise and know-how in this field. You need to identify those fields of the business that are interesting from the OEM's point of view.
Because at the beginning of the life cycle, this is where you get the highest back-end margins, and these are the fields where you have to grow. For all the rest, well, it's part of the package, no question. This is what matters, as I said. It's not that 100% of the business volume will be strategically relevant for answering the question of where we will be in terms of profitability at the end of the year. What makes this all so very demanding is the fact that you need to renegotiate every year. Only very do you negotiate multi-year plans. We keep mentioning that, but I think, with around 300 such relationships, if we have 10 multi-annual plans that are as detailed as I just described, that's probably going to be much.
It's probably less than that. That's what you need to bear in mind when you ask about the back-end margin. About the options of counteracting personnel expenditure going up. I've already mentioned the most important levers in this field. When it comes to the service area, we have more options than in the classic infrastructure business. In the service area, it is a fact that many customers are ready to pay higher prices, last year, we were able to increase our prices significantly in some areas, which is something that in the 15, 16 years before that, as far as I can remember, was never possible. Here, service prices had always rather gone down, but this has changed. Of course, it's part of our strategy to deal with the cost increases at this point.
As far as the importance of the cybersecurity business field is concerned, the 300 FTEs I referred to do not all have dedicated projects linked to them. What does that mean? If you have a transformation project in a data center today, for example, it would usually also always entail a security project. You won't see that looking at the project from the outside, and you won't be able to tell looking at the invoice either. I can only give you a rough estimate of the size of our business here in this field. If I focus on cybersecurity elements of a project alone, I would say that the project probably had around EUR 300 million and EUR 500 million in total at Bechtle. I would be surprised if it were less than that.
Again, these are solutions, cybersecurity, being part of a larger project, and only in very extreme cases, would it be different. For example, when clients are hacked, then you can have a one-to-one assignment of activities. Even in those cases, and we had one this morning, you would probably need new infrastructure at the customers because you would not be aware of any harm that was done. If the starting point is that you were hacked, well, and you look at the invoice, you see 1,000 notebooks, 1,500 servers.
Cybersecurity services as part of the package. The starting point would be the hack, security event, but the project as such would be a classical IT project with all the components of a classical IT project. Then, of course, there would also be consulting project in the cybersecurity area, which does not entail any hardware. That does exist as well, of course. Unless there are any more questions in this room, I will ask again later. We would now switch to the English virtual room, and we have some questions already. Ladies and gentlemen, we will now switch to the English-speaking room, and this might take a minute. Just bear with us, please.
The first question is of the line of Kathinka De Kuyper with UBS. Your question please.
Hi. Thanks very much for taking my questions. Also congratulations with the strong ending to the year. Two for me, please. Firstly, can you talk about how the conversations with your customers have been, especially in the start of 2023, as we hear across the market that there's a lot of delayed decision-making? Secondly, on your free cash flow, you mentioned that part of the development came, the positive development came from delayed vendor payments. Can you quantify that? Can you say how we should think of the reversal of that in 2023? Thank you.
Okay. I'll start perhaps with a first look regarding at the development in the first weeks of the year. If I understood you right, that was your first question. Sorry for that, but the tone was pretty hard to understand. The first weeks of the year, especially in January, were pretty good. We saw double-digit growth in all relevant KPIs. On that background, we expect probably a weak February as well. At the end of the day, which probably is not really surprising, March is key for the question how we can perform in the first quarter.
Question with... Oh, sorry.
No, I had my mic on. The second question regarding the cash flow, you mentioned the trade payables. Just to remind you, the major effect that we have seen regarding our positive cash flow was coming from a decreasing outflow for inventories. We had that in the presentation, that inventories are still high, but they are not increasing, and that is why, compared to the previous year, the cash outflow for inventories was not as high as last year. That was the major positive effect for the cash flow development in 2022. Regarding trade payables, as we did in 2021, we did so in 2022. We tried to have longer payment terms. That is not normal that we do so.
We are known as a very reliable partner. We expect our customers to pay in time, and we do the same as our vendor partners that we normally pay in time. Therefore, it's hoping that the cash flow development in the course of this year will be better than last year. We don't plan to do the same thing this year. If ever it would be possible towards the end, if it would be necessary towards the end of the year, to, let's say, have a positive effect on the cash flow not to show a negative cash flow towards the end of the year, we would think about doing the same thing. Again, that is not our plan.
Our plan is to have a positive cash flow all over the year and towards the end of the year as well, without stressing our payment terms. To be open, historically, the first half of the year is not really a good cash flow year, to be open, which is normal regarding our business model. Don't expect really a cash flow on the same level as you saw it in the last quarter.
Thank you.
The next question is from the line of Aditya Buddhavarapu from Bank of America. Your question please.
Hi, thanks so much for taking my questions. Firstly, on your 2023 outlook, you guided for 5%-10% revenue growth. Can you talk about the underlying assumptions there between the low end and the high end of that range, in terms of the macro or maybe demand from customers? What would get you to, you know, the 5% or what gets you to 10? Secondly, can you talk about the phasing of growth through the year? Should we assume that maybe 1Q should be the strongest quarter given it's, you know, you have the easiest comparables, and then maybe gets a bit weaker through the year? Finally, can you just talk about the main area of focus for M&A during the year? I think you made a comment on the multiples, but how should you think about your plans for maybe which countries or which sort of capabilities you're looking at? Thank you.
You're welcome. I'll start with your first question. From my perspective, the general macroeconomic development is key for the question whether we are able really to grow something around 5% or up to 10%. It mainly depends on the economical development all over Europe. That is the assumption on which we base our, let's say, guidance for the current year. Your last question targeted our M&A strategy. We already announced that we have especially this year, a closer look at Benelux region in Europe again, I have to say, and probably France and Spain. That comes from our competitive strength in the mentioned countries in general. That is one of the main criterias we look at to decide, which country might be of interest for further M&A growth and which country probably not.
I think you mentioned multiples as well. We had that already. Just to remind you, multiples are still very high. They are by really small steps.
Yeah.
Was mentioned before, by small steps going in the, from our point of view, right direction. They are still very high. They are not comparable with the valuation at the stock markets. No. No, it's still really a significant gap, regarding the evaluation at the stock markets and the not listed companies.
Your second question was about the normal cycle, basically in a year, if I understood it right. Please feel free to have the question again if it's not the right answer. You know, at Bechtle it's always every year the same, that the second half of the year is more important, and especially the fourth quarter. In the fourth quarter, December is the most important month for us. This will be more or less the same in this year. This is driven not only by our public sector clients but by all clients. They realize towards the end of the year that they have budget left and they try to invest this money they have left. That's why fourth quarter and December are so important.
If you look at the macroeconomic surrounding for this year, this might be a little bit favorable for us because not only we think, but that is in the forecast of the European Union or other market research institutes as well, that the first half might be a little bit more under pressure and that maybe in the second half we see the overall economy coming back. Which would mean for Bechtle that in the second half, which is more important for us, we will see higher willingness to invest from our customers, which should or could lead to a really successful year for Bechtle as a whole. We mentioned that and you know that the uncertainties are really very, very high.
No one knows at this point, if really in the second half of the year we will see, or in the course of the year, we will see improvements regarding the overall economy. Suppose that this will happen, this will be in favor for us since, again, the second half of the year is the most important time of the year, in the fourth quarter especially. Did this fit to your question, Aditya?
Yes, that's perfect. That's great. Can I just have one follow-up question on the margins? I remember on the 3Q call, you had mentioned that there were a few areas of inflation, not just on wages, but also like energy and car costs, et cetera. Can you just talk about how those are trending at the moment and the flexibility to maybe get savings on those areas as we go through the year?
I think you know and we all know that inflation rates all over Europe are coming down. This effect we have mentioned in the third quarter. Yes, we have seen it in the third quarter, we have seen it in the fourth quarter. Mentioned that already, that the costs for buildings driven by energy costs have been higher in the second half last year. As far as we are right now, we don't see further increases. Uncertainties are high. We don't know if winter already is gone now and no one knows how whole situation will develop. We don't see, hopefully we won't see in the first quarter, increasing costs, energy costs driven by inflation.
On the other hand side, the cost inflation on the people side, so to say, increases, as you might know, all over Europe. At the end of the day, that probably will lead to a situation, kind of a stabilization on a high level. That is what we expect. We don't expect any cost reduces in general, if I add all the cost components, which are, at the end of the day, relevant for our business.
Got it. Thank you very much.
You're welcome.
The next question is from the line of Gustav Froberg with Berenberg. Your question, please.
Hi, everyone. Thank you for taking mine as well. I just have two. The first relates to the large increase in trade receivables that we saw in Q4. Was there maybe any sales that were pulled forward into Q4, or is there something else that explains the rather large move in trade receivables?
Second question, basically relates to the same thing, but free cash flow generation broadly has been challenging across the whole for 2022. It looks like a little bit less than what you're spending on both dividends and M&A. Kind of how are you looking to increase the company's free cash flow generation in 2023? Would you consider linking free cash flow to compensation maybe as a way of further incentivizing free cash flow in the organization?
Yeah. I'll start with your first question regarding the trade receivables and the high amount of trade receivables towards the end of the year. That was mainly driven by really, I know Mr. Olemotz don't like to such words, but really fantastic December, really high order income in December. Always if we see that, you know, these are two sides of a medal. If we have a very good top-line development in the last months of a quarter or of the year, you will see at the balance sheet date that trade receivables are pretty high. That's the very easy explanation why trade receivables towards the end of the year and in the fourth quarter are as high.
We think that now in the first quarter this year, we should be able to decrease this high amount of trade receivables coming from the high order income of December. If I remember right, it wasn't really extraordinary if you compare with the long-term development in the past. We always had kind of a seasonality regarding the development of our trade receivables.
Yeah. Regarding free cash flow, first step that you know that and we all know that, we must show a good operating cash flow to see a positive development with the free cash flow as well. Free cash flow last year was negative or was under pressure because of a higher cash outflow for M&A, and that was I think your question about. We can never plan M&As. Mr. Olemotz mentioned already that the press release we have seen yesterday should not be the last one this year. We love to make acquisitions. We want to make acquisitions. If the free cash flow is under pressure because we are very successful on the M&A market, I think we should and could stand that.
If I'd like to add, we negotiated bilateral credit lines of something around EUR 400 million last year. You can be sure that we are able to pay acquisitions in the future as well. We don't need a positive free cash flow for being able really to finance acquisitions.
Yeah. The other effect on the free cash flow are the CapEx investments that have been higher last year than normally. Normally we have seen in CapEx of some EUR 60 million-EUR 65 million. Last year it was some EUR 80 million. We think that this year this number should be more or less the same coming from the fact that we increase our own size. You know, it's more or less the same that we see at our customers. We must invest really steadily in our own IT, therefore, with a figure of roughly some EUR 80 million, this should be realistic. It's not only our own IT. There are buildings, not at our headquarters, but, you know, we have more than 100 locations all over Europe. They are increasing as well.
They need new room for new offices and so on. These are the two effects that you see last year in the free cash flow, the negative effects, M&A and investments. As I said, investments should be more or less the same. M&A is not, it's not easy to plan.
Okay, thank you. I guess no, thinking around linking the compensation to free cash flow generation or something like that to emphasize that within the organization.
You know, you can imagine that surely the cash flow development, free cash flow is one of the topics the CEO and the whole management is having a close look on it. Again, we are not, we are not managing the free cash flow, let's say by saying, "Okay, we must stop M&A activities because our free cash flow could be under pressure." We concentrate on our operating business. If we do so, we should have a positive operating cash flow, and this should help to compensate the cash outflow so that at the end of this year, hopefully we will see a positive free cash flow again as well.
Let me put it that way, Gustav. Yes, the cash flow and especially the free cash flow are very important KPIs for us. And I can tell you that I myself has a goal this year regarding the free cash flow development. But on the other hand side, we don't orient ourself regarding strategic decisions regarding the long-term future development from the entrepreneurial point of view by looking at our free cash flow. If we are able to finance all the strategic necessary actions, we will do that.
All right. That's perfect. Thank you very much for the answer.
For those in the virtual English room, if you have further questions, please go ahead. Otherwise, we would change back to
Live in-person German room. Are there any more questions in the virtual English room?
ladies and gentlemen, for English questions, please press star and one on your telephone now. Currently, we do not have any further questions in the English room, and we wait some seconds. We do not have any further questions in the English room. We move back to the German room. Again, due to technical reasons, this might take some seconds, and we ask for your understanding.
Do you have any further questions? We're in the German room now. If you like to ask a question, please press star and one in the German-speaking virtual room. Thank you. A question on pricing and price development. You already mentioned that prices are going down. How did that develop at Bechtle, so purchasing prices and your prices on the other hand? Can you give us some more input here for relating to the prices over the year? So far it has not impacted our gross margin. Last year, we did see this happening because after all, this is the first indicator that shows whether we managed to deal with this or not. In the first few weeks and months of the year, we seem to be doing fine.
That's an important point for us because, in some projects, there may be something like a trade-off. If it's a strategically relevant project, it may very well be that you need to take a decision to the detriment of your gross margin, namely, taking the price decrease at the front end in order to get the project. That's not the rule. We see that in multi-annual agreement in the first year. I said that profitability is usually low in the first year, and then we see, hopefully, that the sales team does a good job and helps to recover margins and gets the products into the basket that are more fun, so to speak.
That is the reason why things that were offered at low prices in order to get the project, and we need to convince our customers that these are indeed not the right product for them, and we convince them to take others that would provide a higher margin. This is not a general way of our doing business. Of course, we try to make sure that the price pressure at the front end doesn't come to the detriment of our margin, and we've been quite successful in doing that so far. Are there any further questions? No questions in the virtual room either? It's been a very intense session. Great. All that remains for me to do is say thank you, as always. It was fun being with you, and it was great seeing many of you here in person.
We did see some of you at roadshows or conferences throughout the year, but the last conference and analyst conference of ours in person was three years ago. I think this is just the right format to do this once a year. Of course, we all know that hybrid formats offer us more flexibility. Having said that, it is great to see that many of you have come here on a Friday afternoon asking your questions. I wish you a good day wherever you may be. Have a good weekend, and I'm looking forward to our cooperation in the future. Thank you. You can also stay around for a bit. We'll have some snacks prepared for you.