Good morning, ladies and gentlemen. Welcome to this conference call following our publication of our preliminary figures for 2024 this morning. As always, here with me are our CEO, Marika Lulay, and our CFO, Jochen Ruetz. Both will give you an insight in our numbers for the last year and our outlook for 2024. The press release, as well as the corresponding slides for this call, you will find on our website. Last housekeeping remark from my side before we move straight into the details: this webcast is recorded and will be available on our website afterwards. Having said that, I would like to hand over to Marika.
Thank you, Andreas, and also welcome from me to everybody in this call. Let's immediately jump into the presentation to slide number 3. Our preliminary results for 2023 definitely demonstrate our ability to grow profitability, generate cash, and manage a robust balance sheet. Total revenue for 2023 was a record EUR 802 million. This was in line with our revised guidance, and it represents a 10% year-over-year growth. In line with this, we also improved the EBIT adjusted by 9%, and if we were to exclude FX, currency exchange effect, it was even 14%, which proves we are improving profitability while growing. As a fact, in 2023, the industry overall had slowed down, especially in the first half, after two years of record growth. Now, we reacted fast, and despite the headwinds, we brought GFT to new highs.
We began exciting relationships with more than 50 new clients, and we keep expanding and diversifying our service offering. We finalized the integration of targens as planned in 2023, and we also improved various ESG ratings. Some of you might remember, we launched the AIDA marketplace in October, the marketplace for AI-based solutions, and since we have seen a rising demand to integrate AI technology into the IT landscape of our clients. This altogether, the whole performance in 2023, which was not the most easiest year, demonstrates our agility, the quality of our management teams, and above all, the strength of our positioning. In 2023, we also started engaging into an M&A, into an M&A, and we made significant investment into Latin America with the acquisition of Sophos. We completed that in February, to be precise, on February 1st.
With that, we are now the number 3 in whole Latin America serving financial services clients with IT professional services. That clearly is helping us in order to, you know, get the demand from that really vibrant market. Now, I say vibrant market because during 2023, we had some issues in Mexico. We had difficulties to grow in Brazil. Both are back on growth, back on profitability. This is now accelerated with a recent acquisition in Colombia. We already identified new joint business opportunities, and we definitely see a robust pipeline in Latin America. Now, let's go to slide number 4. Slide number 4 gives you a simple overview of solutions, and these are just 3 out of 20 on our AIDA marketplace. For example, the Banking Agent, it answers queries from clients, I mean, the queries from the clients of our clients.
And because we could connect this directly to the core banking system, it could also execute transactions. And definitely, when banks are using it, it delights the clients of our clients and simply stands for digital leadership in banking. So the clients who are using it obviously can improve their front end and their client relationship management. The second use case, totally different use case, GFT AI Impact Beta, combines various AI technologies and approaches and actually to improve productivity in software development largely. So we use it ourselves together with our clients, but we also implement it and help our clients to improve their software development cycle. And we are also now doing first attempts to use GenAI for migrating old legacy code to new code.
The last solution, Visual Inspection, is a solution which uses predictive AI technologies and is already used by various industrial companies to improve the production quality. So just to see, it's not just talk and hype. There are real solutions already out there. Let's go to slide number 5. Slide number 5, it's important for us that the industry analysts confirm our positioning, simply because several clients sometimes use those reports from industry analysts to validate whether a partner is the right partner. And, as a special market solutions provider where we work especially with industry-specific solutions, it's important to be part of very specific reports like the leader in digital banking or the winner for the Guidewire Award. I'm personally really proud of this, just to share a bit the background. Literally, eight years ago, we did not even appear in any of these reports as a footnote.
So the team really has done a fantastic job, first, in gaining the knowledge, second, we applied it to the market, and third, then we were able to explain it properly to the industry analyst, and they do now even recognize that. With that, I hand over to Jochen to go into the details of our financials.
Thanks, Marika. Let's directly jump into slide number 7 and look at the 2023 key figures. Revenue came in at exactly EUR 801.7 million, which is a 10% increase versus last year. This year, we had no FX effects on a group level, which was pushing or pushing down the revenue. Last year, we had 7%, so that's a big shift. This is pure business, no FX effects on the revenue side. The order backlog is up 7% and now includes Targens. Last year, it did not include Targens. And this is good from our perspective despite the shorter order cycles that we currently see. The number for order backlog for sure does not yet include the Colombian Sophos Solutions organization that we have just acquired.
EBITDA is up 4%, only 4% because some M&A effects from the targens acquisition also hit the EBITDA, which is the order adjustments, order book adjustments to be precise. Therefore, let's look at the EBIT adjusted, where we adjust for all M&A effects and virtual share effects that we have in the group. And the EBIT adjusted has grown to EUR 73.3 million, which is growth of 9%. On the right side, you see the third bullet point with a bit more explanations on the smaller bullet points. Capacity adjustments burdened the EBIT adjusted. They stood at EUR 5 million in 2023. You see the number for 2022 was 2.7. 2.7 is kind of the floor that we always have, as capacity adjustments in the size of the group that we are today. With EUR 5 million, we spent nearly double. On the FX side, FX was not our friend in 2023.
We have a negative effect of minus EUR 1 million or EUR 2 million. The year before, it was a plus EUR 2 million. If we only exclude the FX effects, the EBIT adjusted would have grown by 14%. And the FX effects, in the end, hindered us to reach the EUR 74 million EBIT adjusted, which was the lower point of our last guidance, which was EUR 74 million-EUR 76 million. Go for the EBT, earnings before tax, which is, of course, heavily hit by the M&A effects from the targens acquisition. This grew by 3 percentage points. The net income and earnings per share grew by 5% because the overall average tax rate was a bit better than the year before. It was 29% versus 30% the year before.
Let's move to slide number 8, and look first on the right side at the growth of our three sectors that we report on. Industry and other clients grew by 12% versus last year. They now represent 11% of our portfolio. We see the insurance clients decline by 2%. We saw 2 major programs with industrial clients come to an end in the year 2023. We were just able to replace them, so nearly a zero, but it was, in the end, a small decline of 2 percentage points. And the number three, the biggest block in the GFT portfolio is banking. Banking is up 13%, of which 5% come from the targens acquisition, and the rest is organic growth. It represents 73% of the overall GFT business.
Looking at the left side at our client portfolio and looking at the left, left side of that graph, which is the clients above EUR 50 million. Well, it's one client, it's Deutsche Bank. A bit against the trend of the last years, we saw Deutsche Bank increase somewhat to 16% of our overall revenue. So Deutsche was strong in 2023. It's not our fundamental goal to grow the share of Deutsche inside our portfolio. We'd rather keep it below 15%. But we see this happening again in 2024. So the, the share of Deutsche will probably come back somewhat in the new business year. Our clients, bigger 10, bigger EUR 5 million, pretty much in line with previous year. No big changes. Therefore, we believe we have a well-balanced client portfolio, including a nice funnel with clients below EUR 1 million of revenue with GFT in the year 2023.
Let's move forward, look at the quarter itself. The quarter four of the year 2023 had revenues of EUR 207.1 million, which is a growth of 10% versus the previous year. On the EBIT adjusted side, it was a bit more than EUR 21 million, which is an increase of 12%. This was despite the FX headwinds that we have experienced. It was mainly driven by the good top line in some of our markets and improved utilization. When we compare versus the previous quarter, so Q4 versus Q3 of 2023, it's obvious that growth was pretty slim, 2 percentage points up, and EBIT adjusted also only up 1 percentage point. It's still reflecting the high utilization that we have.
But of course, the December was hit by the, in the last call discussed, M&A effects, so the saving of spending in the weeks or days before Christmas by clients, especially in the Anglo-Saxon region. Therefore, we always see a bit of a challenge for the fourth quarter. Brings me to slide number 10, looking at the revenue and earnings by business segment. Start with Americas, U.K., and APAC. The revenue's up 2 percentage points, so that's quite a slim growth this year. Organic 3, FX was a bit negative with -1. Let me mention that we have grown in the U.S. and especially in Mexico, but we already talked about our challenges in Brazil and a bit also in Canada on the revenue side. And last but not least, we have moved business due to client request from the U.K. to Poland.
It was anyway delivered from Poland, but the client now asked for invoicing from Poland directly. This cost the UK, and therefore the segment, Americas, UK, and APAC, nearly EUR 12 million of revenue. Sorry, let's look at the margin. This all led to a margin which was slightly below the previous year, slightly, especially because the Brazil challenges we had and the move of those projects. FX effects were also mostly hitting Americas, UK, and APAC, as Continental Europe, which I now come to, is mostly euro-based. Continental Europe grew by 23%, which of course includes the Targens acquisition for the first time. But we also saw growth in France, in Spain, in Italy, and in Poland. Poland was supported by the already mentioned project moves of EUR 12 million, which came from the UK.
On the margin side, we see an improvement of 28% as well, so a bit stronger than the revenue improvement, mainly because of good utilization, the Targens contribution, and those project shifts from UK. So overall, we're up 6% organically, 4% come from FX, 10% revenue growth in total. And on the EBIT adjusted side, we grew it by 9 percentage points. Let's get to slide number 11, revenue by markets. Brazil, we were talking about it in all the last calls. It was growing in Q4 2023 versus Q3 2023. So I think we're back on track. It's not jumping ahead, but we're back on track. So overall, for the whole year, it was a decline of 3 percentage points. The UK is down 5%. I already mentioned the EUR 12 million we moved to Poland.
Therefore, we should add that to the real performance of the UK, which would show growth, but it wouldn't show major growth. So the UK, especially in the second half, was for sure challenging for us and our competitors, and it will continue to be in the next two quarters. Germany up 62%, mainly because of the targens acquisition, but some organic growth helped as well. Maybe also to mention the US, overall growth 7%. I think when we looked at this table in Q1, it was still roughly 30% growth in the very first quarter of the year. Then the Silicon Valley Bank crisis came along, and the US contracted as well. It's the second half year of 2023, and I believe the first half year of 2024 will be continuing to be a challenge for financial service business in the US.
And this is exactly what some of our peers have been highlighting before us. Poland, Poland is up 76%, but mostly due to the project moves they saw coming from the UK. All this said, let's move to slide number 12 and look at the clients' diversification. I go to the bullet points first. So the large client accounts above EUR 5 million and EUR 10 million revenues remain stable. One client grew in the bigger than EUR 5 million block. One client came in from the targens acquisition, so no real organic major change. But overall, good performance for the year 2023. And we see that our land and expand strategy is working. We saw 57 new qualified clients who generated more than EUR 100,000 with GFT and who were not working with GFT before. So we believe overall, the client group list is absolutely qualified.
Let's get to the income statement on slide 13. Quick one here. We discussed revenue. We always combine, that's the fourth bullet point on the right side, our personnel cost and our cost of purchased services, which is mainly freelancers because this represents the overall people cost that we have. And this remained stable in 2023 at 80% of the revenue. Well, if this ratio remains stable, usually the margin remains stable. It's heavily linked. We do see that other operating expenses, depreciation, is growing a bit more slowly than the revenue side. And we see the interest is negative in the year 2023. This was linked to the targens acquisition, which we financed. And therefore, we had a bit more financing cost in 2023 than in 2022. On the income tax side, we have reduced the tax rate by 1 percentage point.
We were able to allocate the first more than EUR 1 million to Brazil, which is helping the tax rate. Therefore, we believe the 29% is also the right number for the next year. Moving forward, slide number 14, cash flow analysis. On the very left of the graph, we see we started the year with nearly EUR 36 million in net cash, and we are ending the year with EUR 4 million in net cash. In between, we had an operating cash flow, which is like in the graph number 4, in the bullet points number 3, of EUR 40 million. This is a bit misleading because we had a very, a very special cash flow effect at the end of the year 2022 and at the beginning of the year 2023. I talked about it last year already.
We received EUR 14 million from the European Union into our Italian organization. This happened before Christmas 2022. This was pushing the cash flow of the year 2022 upwards exceptionally by those EUR 14 million. And then in January, we had to distribute the same amount to our clients, and therefore, it was an outflow in January of 2023. This means, combined, the year 2023 is understated by EUR 14 million, and the year 2022 is overstated by EUR 14 million. The cash flow, if you want to do long-term the correct valuations in your spreadsheets, it would rather be EUR 14 million more in 2023, EUR 14 million less operating cash flow in the year 2022. Cash flow from investing activities. This was the targens acquisition. This was dominating this position plus some more investments. targens acquisition cost us EUR 45 million, the main reason why our net cash reduced.
But as you can see, we kind of earned it back throughout the year 2023, and we're back at a positive net cash at the beginning of the year 2024. We will play the same game in 2024. We just acquired Sophos. So we will dip into financing. Therefore, we will go heavily negative on our net cash, then called net debt, which we believe will be in line with the purchase price of roughly EUR 88 million. And we're gonna have this as net debt until the end of the year 2024. That's the target for the year 2024. Moving forward, balance sheet. Well, not much to mention here. The balance sheet total simply increased because of the targens acquisition. That was the main driver. And looking at ratios, I would only mention the equity ratio, which improved from 40%-43%.
If you have questions on this one, please do it in the Q&A session. Slide number 16, the people slide, moderate employee growth by 3%. Some markets are up, Costa Rica, France, Germany due to Targens acquisition, Italy and Spain. Some markets are down in people, Brazil, Canada, Mexico, a bit in Poland and Vietnam. Overall, 3% increase. We also used less freelancers. Excluding the Targens numbers, we're down 30% in freelancers, which makes a lot of sense when you are not hiring that much and your utilization needs to be optimized. You work with your own people, and you reduce as many freelancers as you can. In our case, this was -13% throughout the year 2023. Looking at the utilization, it came in at 91.7%, nearly as good as in the third quarter, not exactly as good.
I mentioned the M&A effects in December, always a bit disruptive, but overall, a very strong utilization in the second half of the year 2023. Utilization, we see a continuous reduction. It's now 10.3% for the trailing 12 months, which is kind of the COVID number in the year 2020 that we saw. So the market is currently not seeing many people moving around. We believe this will stay low for the next six months, and then let's see where it goes. That. Back to Marika.
Thank you very much, Jochen. Now let's come to the outlook. So after 2023, which again was in absolute numbers, best year ever in GFT history. And, as I keep saying from, obviously since few years and for the future, we hopefully always have best years ever. But let's look into the outlook for 2024.
It's definitely impacted in all aspects by the Sophos acquisition. So, the future growth of our total addressable market remains promising. It even has been expanded via the acquisition, but I'll come to that. In principle, we see the following situation. After an uncertain 2023 for IT spending, we do expect that the market gains momentum back in 2024, but most probably more in the second half. Including now 11 months of Sophos, we see a robust pipeline backing EUR 920 million of revenues, which is a 15% growth over 2023. We continue to improve operation profitability. Therefore, our EBIT adjusted should scale up a bit by 16%, 1 percentage points more than revenues. The EBT is burdened by usual M&A effects, heavily by the Sophos acquisition. Thus, it grows by nearly 6%. This actually brings me also to slide number 19 to talk a bit about the Sophos acquisition.
And I can share with you that the addition of another delivery center in Colombia, which is quite price-sensitive, not price-sensitive, actually, let's say quite interesting from a price point. And the new competencies we gained around market solutions like Flexcube or Finacle really has enlarged our addressable market. We did not only grew by 20% in people. We also gained access to tier one and tier two financial institutions, mainly in Colombia, but also in other Latin American countries. And in total, GFT is now operating in 20 countries. It was a significant investment and so far the largest M&A in our history. The next two slides talk a bit about our strategy, which in a nutshell has not changed. So slide number 20 talks about our way how to kind of predict the future, which is obviously always difficult.
We simply focus on catching the next wave. The ones who follow us now for a while know that since 2 years, we are investing into UDPN. UDPN stands for Universal Digital Payment Network, and it's a solution which addresses the cross-border payment of digital currencies, whether it's stablecoins or fiat-backed digital bank central central bank digital currencies. Today is actually a good opportunity to share the latest news. UDPN just launched a commercialized version of their digital currency sandbox. It enables commercial and central banks to learn about the latest digital currency technology, test built-in use cases, and develop their own custom use cases. The access was we had the sandbox already for a while, but the access was previously limited as it really was at an experimental stage.
But the interest is apparently so great and so big that the banks are now prepared to pay for the use of the UDPN sandbox. Hence, we launched it officially. And this is a major step towards the practical implementation of regulated digital currencies. We are at the forefront. And I keep saying it's a business invest into the future. I guess we see revenues and profits behind it rather in the years 2025, 2026. But our aim was, and it looks like we achieved it, that in 2024, the investments we do into that solution are already fully covered by markets, by clients who pay for it. With this sandbox movement seems to go into the right direction. Let's come to our last slide before we go into Q&A, which is our overall strategy slide. It has not changed to the last presentations. And the summary is quite easy.
Growth remains our mission. We continue to focus on custom-developed software and industry-specific market solutions. Profitability should grow over time. We should see economies of scale while growing. Client diversification remains a top priority for us across all countries, all markets. But nevertheless, we do see a lot of value in being a global specialist. Let me especially on the backdrop of the current market development explain this a bit. We do experience currently that for new initiatives, especially when it's about a large transformation program, when they get launched, their CIOs require higher levels of risk mitigation and greater certainty of outcomes than in the last three years. We simply would say the market became much more mature in using cloud, in using new tech. There is less of a hype. There is more focus on true business return.
Gartner, the industry analyst, they even speak a bit. They call it a change fatigue. So people are a bit tired of just changing to change and new doing new tech for new tech, which definitely plays to our strengths. Being a specialist means we fully understand the sector-specific challenges when it comes to platform modernization. We do not just supply capacity. So especially when it comes to regulatory aspects, we know how to cover them and implement them. Therefore, when we work for our clients, we bring solutions in production. We bring them to life and not just spend money. Also, our ability to source and scale quickly, regardless of time zone, culture, or logistics among our global delivery setup, is a success driver.
Especially with the Colombian acquisition, we added now a new delivery center with a very interesting price point, which also plays a crucial role because clients are now focusing also again more on cost saving. As a principal statement, all companies will need to reinvent every part of their enterprise using tech, data, and AI to optimize operations, to invent new services or products, and accelerate growth. To do so, they must build a digital heart of their company. Our pipeline is based on significant demand in areas like cloud migration and modernization, data and AI, and the emergence of GenAI in particular, all of which represent areas of great opportunity. Believe me, it's still early. A lot to be done in 2024 and beyond.
The simple statement we use since years, "Big enough to deliver, small enough to care," describes our uniqueness very well and is proven by the loyalty of our clients and our ability to convince new clients, even in challenging times, to trust us. With that, I'll open our Q&A. Very happy to take your questions.
Ladies and gentlemen, at this time, we will begin the question-and-answer session. Please note, questions can only be asked via telephone and not via webcast. Anyone who wishes to ask a question may press star followed by one other touch to on telephone. The first question comes from the line of Andreas Wolf, Warburg Research. Please go ahead.
Hi. Good morning. Thank you for taking the question. I'm curious about your view on the adjusted EBIT profitability for 2024. You've guided for a slight increase.
I assume that given low utilization during H1 2023, the market expectation was somewhat higher, especially if we look at consensus. So what's your scenario with regard to utilization, throughout 2024? What, what, should we expect in terms of profitability in H1 versus H2? I think a certain assumption is baked into your guidance here. And then on the EUR 9.5 million impact, related, to the Sophos acquisition that is impacting EBIT or is expected to impact, EBT in 2024, how what is the split in terms of, interest rates and other PPA-related effects here? And if we look at your top-line targets, how do you expect the three verticals to develop? Do you expect banking to be more agile again? Do you expect insurance to return to growth? That would be helpful. Thank you.
Let me start. Andreas, thanks for your question. Let me start with the third question. The other two are more financial, I believe, than to our CFO. In terms of sector development for 2024, we continue to see as much as, some banks going to a bit of cost-saving mode, but we still see that there is a lot of demand. We expect them to grow. The insurance companies, we have seen them suffering the high inflation over the last one and a half years, which kind of let them not start new transformation programs.
We can now speculate a bit that when the interest goes down this year, maybe in the second quarter or in summer, that insurance would come back. So I would expect, actually that we will more or less see the same picture as in 2023 in relative size, highest growth in industry and others, also driven by our products. Second is banking, and third should be insurance. So therefore, the overall mix might not change much in GFT. Jochen, to you.
Yeah. Let's go for the EBIT adjusted. First question was where do you believe utilization would go? First half year, roughly 90%, 90.5% if we are on the upside. But the first quarter will, again, not show the best utilization of the year. As Marika already indicated, I think myself as well, the first half year is the challenging part of the year. The second half looks a bit brighter, especially markets in the Anglo-Saxon region. Region we currently see some weakness in demand. We believe we will fight to get the same EBIT adjusted as in the first half of last year. And the growth on the EBIT adjusted will mainly come in the second half. On Sophos, EUR 9.5 million is the effect between EBIT adjusted sorry.
Let's mention Sophos is contributing to the EBIT adjusted margin because you saw we included EUR 60 million of revenues and EUR 8 million of EBIT adjusted. So that is an EBIT adjusted margin above the GFT Group average so far. However, the M&A effects due to the Sophos acquisition are pretty hefty. We see roughly EUR 3 million of more interest coming our way. We have roughly EUR 700,000 of other M&A costs, which are due diligence, and we even have insurance to cover the warranties. So these are all included there. And then the overall PPA effects of the first few cover the remainder. So that's nearly EUR 6 million from that side, EUR 5.5 million. So this is how the Sophos M&A effects come together. Did we answer your question?
Great. Thank you.
Welcome. Thanks. Next question, please.
The next question comes from the line of Wolfgang Günther, Berenberg. Please go ahead.
Yes. Hello. Good morning. Some follow-ups on my side. It was not, not really well recognizable, the impact of interest on this EUR 9.5 million. It would be great to have a clarification here. Then, what can we expect from phasing? Will, will most of the costs pop up in the first quarter already with closing 1st of February? And then, probably switching to another field, dividend. What's the rationale behind increasing the dividend in the light of moving into a net debt position? And then, regarding attrition, which is rather low at 10%, would it be rather healthy to move up here a little bit, at least in the second half of the year, to allow some, let's say, unwanted insurance? Yeah. That's it from my side for the time being.
Let me start with the Sophos effect. So the interest inside the EUR 9.5 million is roughly EUR 3 million. I'm just mentioning it for Andreas's answer. Roughly 3. And without that, we already would have assumed a minus 1. So this will bring our overall interest cost for the year to minus 4. So that the minus 1 is the pure GFT organic. The phasing will be it will be pretty linear over the year. The first 700K all happen in Q1. And the order book adjustments, we're still working on that, as you can believe. It's just in the middle of the analysis.
The order book adjustments will be a bit more heavy in Q1 and Q2, but this will not be a major effect. So the most part of the PPA effects will be phased throughout the year. Same is true for the interest. Will also be phased throughout the year.
Yes, yeah, we're then in deeper net debt territory. But we have secured the financing for the Sophos deal. We have secured or we have the target to pay back within the next two years, which is absolutely in line with our cash flows. And if we don't do further M&As, which would mean we have to rethink the way we finance it, currently, we're settled for the next two years, easily. Marika, on attrition?
Yeah. So you're right. Actually, we think that attrition is too low. It's an alarming signal in the market that the market is, let's say, not, not, as vibrant as it was before. Obviously, the 20%-25% we've seen in the market was unhealthy as well. I would consider a healthy number. We always said around 15% is a healthy number. Obviously, it depends a bit on the countries.
You have countries like Germany, which by tradition are lower. You have countries like Brazil, Colombia, which by tradition are higher. But overall, the number is a signal that the market is a bit stalling. Now, it has a positive effect, though, obviously. The pressure on salaries is also reducing logically, because this is strongly linked to each other. When we had high attrition of 20% north, we were really running behind salary increases. And then we always had to do price increases. And the timing, obviously, was not always perfect. This is now much more, let's say, under control. But I would hope it goes a bit up. So my expectation is it goes a bit up, maybe not yet in 2024 in the second half of 2024. Usually, there is a bit of a time lag, but maybe in 2025.
Rationale of dividend rationale of dividend, you're asking, rightly so, why do you increase dividend given that you have rising net debt? Would it not be more intelligent I guess this is your question, to use the cash to pay back the, the loans, which I think is fair? It's obvious, there is not a zero-one answer. We looked at the dividends. You know that we have a guideline to payout between 20%-50%. The sweet spot is between 20%-30% payout for the dividend. We want to be, let's say, a, a reliable, trusted dividend payer to our shareholders. We have grown last year. We made significant investment into the company. If we would have used the exact same percentage payout than last year, which would be at least logical, another logic, it would have been EUR 0.47, EUR 0.48.
And then we simply thought, "Okay. We either stay at 45," because 47 kind of was a number in between. So we debated, "Do we stay at 45? We don't increase at all, or we do increase and jump to 50?" Given that the company was growing, is growing, will continue to grow, we felt that the shareholders also should have their part. And the nominal impact to our cash is, is, we can manage it. So we have a good, cash flow generation. So therefore, we were easy, to take that decision. Thanks a lot.
The next question comes from the line of Simon Keller, HAIB. Please go ahead.
Good morning, everyone. Thanks for taking my questions. First, how can we think about current trading, i.e., Q1 growth, especially given that Q1 last year did not include Targens yet? So the comp should be rather easy, if I'm not mistaken. Then second question is, how much did Targens contribute in Q4, please? Thirdly, how is your project pipeline with Deutsche Bank evolving, and are you involved in the IT topics at DWS? And finally, what is the tax rate, or what tax rate can we expect for 2024 and also thereafter? Thank you.
Let's start. Q1 growth, indeed, is the challenging part. Last year, we did EUR 190.6 million. If you add Targens for one quarter, which was always around EUR 10.5, 11 million, in the fourth quarter, it was EUR 3.3 million of revenues. We believe, sorry, that's not the right number. It was EUR 10.6 million of revenues. Looked at the wrong line. 10.6. And if you will now looking at the Q1, we believe if we add Targens, we will still see some growth.
Now, still excluding Sophos, we will see some growth versus the first quarter of last year, but it will be a low single-digit number. As said, Q1 is probably the most challenging part of this year because the Anglo-Saxon markets are quite weak at the moment. So single-digit organic plus targets. And targets would be roughly EUR 10.3 million, also again in Q1 of 2024. And then Sophos comes on top, which should be two months out of EUR 60 million in a year. Well, you can make the math. Tax rate 2024, we believe it will be in line with the tax rate 2023, 29%. That's our current prediction. We could get a bit better because we are more allocating to Brazil, which reduces some that double taxation we currently suffer.
But we have added market Colombia to the portfolio, which has an above average tax rate. It's, I think, 35% in the local market. And therefore, this will push the tax rate up a bit. Last but not least, we have the minimum tax coming up, these 15% global minimum tax agreement. And we still have to see how that works for GFT. So far, we believe it will only hit us in 2025. Now, including Sophos, it will already hit us from a size perspective in 2024. And we're currently analyzing but probably the 29% are the most accurate number I can give right now. Let's forget your questions on the clients. First of all, Deutsche Bank is a very healthy and good relationship. We grew last year.
We have completed the huge migration program together with Deutsche Bank for Postbank at Deutsche Bank last year. Hence, it's actually a good message that although this was finished last year, we still see very stable revenues in 2024 because we were able to also expand into other areas. I can confirm that DWS is a client of us. But other than that, we are not commenting on individual projects.
Great. Thank you very much.
The next question comes from the line of Knut Hinkel, Pareto Securities. Please go ahead.
Yeah. Good morning, everyone. I've got four questions, I guess, regarding the Sophos acquisition. So, you have already a very strong presence in Latin America, in Brazil. Maybe you can talk a little bit or contrast the role of these two areas in your overall strategy.
Will Sophos more concentrate on local customers, and Brazil will do more nearshore business, or what is the sharing here, or is it all the same as for Brazil? Maybe you can say something on that. That would be my first question. Then on the expected growth for 2024, in 2023, my reading is that you saw, ex-Deutsche and ex-targens, very low growth for the remainder of the business. Do I understand your remarks correct, that you expect that picture to change in 2024, that Deutsche should be stable, and we see growth coming back for the remainder of the business? That would be my second question. And the next two questions are the much-beloved household questions. Can you say something already how PPA-related depreciation will look like in the coming years?
You said something on 2024 already, how will that probably evolve in the years after that. And on capacity adjustment, that would be my final questions. You saw a quite high number in 2023. Do we have already a number on your mind for 2024? Thank you.
Thank you very much. I'll start. Yeah. I was looking at Jochen, who starts. So I'll start. So, the role of the countries, let me explain like this. We have yes, Sophos has the majority of their people in Colombia but also in other Latin American countries. We ourselves have a large presence, even bigger than Sophos, in Brazil. And we also had small presence or midsize presence in Mexico and Costa Rica. The future plan positioning is as follows. The Brazil team should mainly work for Brazil. There is a big inner market.
We have large Tier 1 clients there. We have a lot of demand, robust pipeline, much better than last year. The Colombian team in Colombia should work for Colombia but also for other Spanish-speaking countries, definitely in Latin America first because that's very logical. That's what they already do today. We have clients in Panama, in Uruguay, or even in Argentina. Although we do not have a contract in Argentina, but we support the client in Argentina, and other countries. And then the next step is that the Colombian team would also support our Spanish market in Europe, given the attractive price point Colombia can offer. And then the third strategic push, which is obviously the ultimate cherry on the cake, which Sophos had already started, is supporting the US market from Colombia.
Given that 70% of our team speaks only Spanish, not yet full English, it's a bit of a midterm approach. Second, we might actually do not position that so much on the banking side, which is more in the true Anglo-Saxon part of the US, but more on the industrial business, which is more in the southern part of the US, which then the Spanish language could actually fit quite well. Having said that, there's really, let's say, music for the future. This year, we focus on synergies in Latin America and together with Spain. And again, as said, Brazil should focus more on Brazil. Costa Rica remains a nearshore center to the US. And our Mexican team works mainly for Mexico and maybe in the future as well for the US. Then your question towards organic growth in 2024. Yes, you're right.
Or if you take the pure organic growth ex-Deutsche, ex-M&A, I'm glad you do not deduct more clients. Otherwise, the numbers become even more complex. But, sorry. But if you do ex-DB, ex-Deutsche in 2024, we had organic growth. It was definitely below our original expectations. We do believe in 2024, it will be better. But as we explained, the market sentiment in the moment is still a bit more constrained. We are also conscious what our competitors are saying about the market. Hence, we were not going to the, let's say, upper limit. The year is still young. Let's see how it goes. Let me follow up on that. In numbers, from the EUR 802, we commit EUR 920, EUR 60 from Sophos, EUR 10 from targens, which means 850 organically, roughly 6% organic, just to put it in short numbers, which you probably already have done by yourself.
PPA development, EUR 9.5 million. Well, this is, again, not only PPA. It is all M&A related to Sophos. This year cost us EUR 9.5 million. In the year 2025, we believe this will go down to EUR 4.0 million because, A, the interest part will halve, and the order book adjustment will vanish. And therefore, the biggest decline will happen in 2025. And in 2026, assuming no further interest, at least none allocatable to Sophos, it will only be the classic amortization, which we expect to be between EUR 2 million and EUR 2.2 million for the years to come. So a strong decline over the next years. It's especially steep in the year 2024, which was probably very hard for you guys to predict in your guidance or in your analysis so far. Capacity adjustments. Last, the floor is at roughly EUR 2.7 million, as I said. This year, 2023, we had EUR 5 million.
I believe in 2024, although the numbers are still very young, we will end up somewhere in between. We will not be able to be at the low end. There will be some capacity adjustments in the first half year. I hope it's not EUR 5 million, but it will not be as low as the floor, which is the EUR 2.7 million. It will be somewhere in between is what we assume at the moment.
Super. Thank you very much.
You're welcome.
The next question comes from the line of Lucas Spang, Tigris Capital. Please go ahead.
Yes. Hi. Good morning altogether. I would like to firstly start with the topic of MTA just to, to conclude that. Can you quantify the effect of the, MTA in revenue for Q4? Q4. In Q4 of the of the year 2023? Well, it came in as, on the on the higher side.
Therefore, we are at the lower side of the revenue bandwidth. I think we committed something between EUR 9 million and EUR 15 million. And I think it happened in the area of EUR 12 million. So that's what burdened in the end the Q4 numbers, which was the highest MTA we've seen in many, many years. But nominally anyway, the highest we ever had as our size has grown, but also in percentage to revenue, in one quarter. Yeah. And then if I take your remarks for the first half of the year, you said that it will be hard to fight, hard fight to reach the adjusted EBIT level from first half year last year. But if I take your comments also on, on organic growth, you said, low single-digit, revenue organically growth in Q1. So that's a good base.
then Sophos and also the three-month last year, for targens. And then I don't get really, your conclusion that it will be a hard fight to get the adjusted EBIT level in the first half from last year. So where do you lose, earnings in the first half year of this year? The challenge is simply the Anglo-Saxon markets at the moment. That's everything.
As a reminder, if you wish to ask a question, please press star and one. The next question comes from the line of Johannes Ries, Apus Capital. Please go ahead.
Yes. Good morning. Also some follow-on, question. Maybe, first, how much maybe AI is already con will contribute in this year maybe to your revenues, and how you see maybe your pipeline developing there?
Just a second. We lost the connection with the speaker. Okay. Hello? Yes. Hello. Mr. Yeah. You can hear me now.
Yes. Hello. Good morning.
Yes. Good morning. The line dropped, obviously. Yeah.
Yeah. Now we, but we can. I can speak to you? Give us a second.
Yeah. Okay. Mr. Spang had some questions. I think did everybody drop out or just us? No. I think Mr. Spang's question, your answer, we could hear.
Okay. I was in the middle of answering, and then it made boom. And I was not sure if he has a follow-up question on that. I think he said it's all, that was all. If I got it right, he should if he's still in the call, he should just come in again and go for another question. But let's go, Mr. Ries. Here we go. Yeah. Maybe I'll follow on the drivers of your business.
How much AI will already contribute in this year to revenues, and how's the pipeline developing with all your AI offerings you have in your p maybe in your portfolio? So overall, we do we, we always combine AI and data as a category into one box because very often, the projects are not separated. You need to have a certain, let's say, a database and data structure to then apply AI on it. Both numbers together are at 8% of the total revenues in 2023. And to compare this with the previous year, where it was rather in a comparable 6%-7%. So it has grown more than the other categories. It's obviously still small numbers. Why?
As a matter of fact, if you really only, let's say, add the revenues which are associated to the AI technology part of the project, it's actually small numbers. It still might be the driver to win the project. It might be the driver to do the implementation or to do the modernization of the technology. But the associate revenues actually are small. So there is difference between whether it's a driver for business, which is true. It's driver also for new business. But the associate revenues are more in the low six digits. But do you expect in the coming years that the proportion will increase? I think, yes, it will increase. What will happen it's difficult to predict the percentage. You could even debate how relevant it is to predict the percentage.
What will simply happen is that it will become a standard feature, a standard technology, which is used in all application solutions or whether it's used to even develop the solution, like we do with GFT AI Impact, or whether it's a feature which is then embedded into the solution, for example, like with a Banking Agent. I think it's like databases. You would not ask us today anymore how much of your business is based on databases because it's actually everywhere. There is even a moment we probably gonna drop the cloud-related revenues because cloud becomes standard. Therefore, over time, AI will simply become standard. I think it's still valid as the market is new and just started to share that growth and show that it is growing.
But again, the associate revenues for the concrete technology isolated are rather small, but they're often connected with a bigger investment on, let's say, standard technologies. I, I hope I made it clear.
Oh. It's very, very right here. Very clear answer . Maybe a follow-on question. Maybe you're also in, in standard banking solutions active. You installed some in, in, in Asia, and you have a huge American customer who want to roll out, broadly, this technology with user. I have not the, the name in my head at the moment of the standard solution, but it's very, very, well known. How, how this proceeds, and is it also a driver for this and the following years?
I must admit, y-your voice was a bit fading. Yeah. Okay. No, it goes on. My question was on the, you have installed a couple of standard banking solutions. And a huge American bank wants to roll out US, maybe together with US partners. J.P. Morgan. Or J.P. Morgan.
Exactly. How much is this a driver, and especially for the following years for your growth?
Okay. Okay. Okay. Yeah. This actually, as you can see in our different categories, the percentage around platform modernization is actually 53% of our business. So it's the majority of our business. Why? These are big tickets. These are big tickets. These are large-scale transformation programs. And therefore, very often a market solution like Thought Machine or Starling or Engine from Starling or Tuum, which is a new one. And there are multiple others. Or on the insurance side, maybe Guidewire. Those market solutions are often the core of the transformation program, but then this needs to be integrated. This needs to be customized.
This needs to be individually orchestrated so that it fits to the client landscape. So these are the big tickets. And yes, they drive our growth, obviously. A decision to start such a program can easily be delayed by 2, 3 months, 1 quarter, 2 quarters. But when it starts, it starts. Yes, clients might slow down the rollout. That's another option if they get a bit under pressure. But they usually don't stop it. They may slow down a bit. That's the that's the max risk you see. And definitely, especially the banking clients but also the majority of the insurance clients, they have they have, let's say, they have started their way to modernize their IT landscape. And they will not stop that.
That gives you always it's a confidence because it's always a question if I talk with my colleagues why you are so confident, like other service companies. The same came from Capgemini, from Sopra Steria. That the second half will be stronger.
How? What is the visibility, and is it what you'd say can only push out maybe for some time but have to do the projects because otherwise? Yes. Yes. Therefore, is that the reason, or?
Yes. Basically, I mean, as much as nobody can really predict what happens exactly in which quarter, the assumption is simply the follows. If I take and I must look at Jochen now be cautious what I'm saying. If I take the pipeline as it is today bottom up in terms of revenues, I could easily go for a higher number, honestly.
But as it is easy to delay by one quarter, start a bit later. And we do see that the clients are challenging their cost structure. They are looking into cost savings. They double-check whether the outcome of the investment really makes sense. We simply assume that there's still a bit more cautiousness in the first half. And combined with the assumption that the interest rates may go down, which would ease the whole, let's say, industry as such, because then the clients of our clients would become a bit more relaxed, that is purely the basis to assume that in the second half, let's say, latest, it should go up. That's it. That's the whole miracle or the whole explanation of that assumption. Very simple. Thanks a lot. Only maybe a follow-on with the longer-term driver.
UDPN, what potential is really behind it, Na? But I still have a feeling maybe to have an idea of what maybe how big this can get because it's even a different business model, isn't it? Right, Sanya, so far. Well, if I'm bold. But it's action-based, isn't it, Na? It is. So first of all, it is a platform we developed together with a partner. It is the revenue generated by this platform for us would be transaction-based, which obviously would be wonderful to scale up profitability. Second, we also can see normal business around the platform because these, the different nodes have to be integrated into the banks or into the clients we wanna work with, which is, I would consider, normal business. But the real fun, as you rightly so identified, is the transaction-based revenues.
That, obviously, I can put now every angle together you want. My simple answer is you look at SWIFT. SWIFT is doing this today for fiat money on a global basis. UDPN technically could do the same for digital currencies. Now, do I believe that UDPN will simply replace SWIFT? It's a bold statement. Obviously, then, numbers will be huge. I am convinced there will be multiple UDPNs in the future. Also, other people will develop those networks simply because several networks also are connected into different political regimes. And therefore, people wanna have alternatives. So it's not about being a monopolist but simply taking a share of the market. We obviously totally refrain from giving any commitments on that. First of all, the ECB must launch the digital euro. The US government must launch the e-dollar. That is the fundamental basis for that.
Then, regulation must be defined how cross-border payment goes. So, I would say, keep it in your pocket. It's a good story. And the challenge is in 2026 whether you see true numbers coming back. Okay. It's an option, definitely.
Finally, on your personally, you will retire at the end of the year. Is the search of a successor already started? You are focusing more internally or externally? Can you any comment on this?
It's still nine months to go, but, yeah, it's a very important position in the company, therefore. Well, technically, it's nine months to go. Yes, the Supervisory Board has started the search. Yes, they talk internally and externally. And you might appreciate I cannot comment further.
Okay. Thanks a lot. That's all my questions. Thank you very much.
And now we go back to Lucas Spang because he came back via the question line. That's good. I don't know how much we answered on the last question. I'm not sure. Yeah. So first question we have done. But the second question you started with, "It's the Anglo market," and then the line broke up. All right. Okay. Yes. Well, so the Anglo-Saxon market, I said, UK, US, Canada is the challenge in our first half year. We will earn less in those markets versus last year. And that is the challenging part. Then Sophos comes on top. You're right, of course. And that combined should bring us to the EBIT adjusted of the last first half year. But it is more of a struggle than we had anticipated. And there's probably no growth versus the previous year first half. And it is about the Anglo-Saxon markets.
Maybe you've seen the updates that some of our peers have given, Thoughtworks and Endava, First Derivatives, etc. They have the problem more than we do because they're very U.K., U.S.-focused. In our case, it is the problem itself is limited because those two markets don't represent 80% of our revenue. But it is still roughly 25%. And that is hurting us in the first half year. Europe, currently, is the location of stability, which in the past was usually the laggard. Currently, it is the stable market. And Latin America looks quite strong. And Latin America too, yes. Which was last year the issue, so. Correct. Yeah. I would say, in total, actually, you can see many people, we talk a lot about diversification. We have improved diversification on the client side. We have improved diversification in sectors.
And we definitely improved, not only improved. I think we're pretty diverse when it comes to markets. So while we might not then overperform because we focus just on the one market, which in this year is overperforming, but we may also not fall down as much as some others as we are not so concentrated only in a few markets. So simply more diverse. Yeah. And then on the general margin development for this year, if I exclude the Sophos, we have a slight margin dilution from 9.1% to 8.9%. So why, if we call it the GFT old part or the GFT 2023 part, cannot improve the margin? Why is that? It's exactly what I mentioned. It is the first half year in the Anglo-Saxon markets, full stop.
We will come back somewhat, but we will not get those last 0.2 EBIT adjusted percentage points. Okay. Thanks. And then Sophos supports it, and we can exceed it on a group level, including the new acquisition. And again, I, I always like to point out, our acquisitions are self-financed. We are our cash flows. Our number of shares has not changed since 2023. Therefore, there's no dilution for shareholders in our M&A strategy. It's self-financed. And we will plan to continue to go down this route except if we would find a real transformational deal on the M&A side, and we would tap into equity. But so far, we rather focus on the mid-sized and smaller acquisition. Sophos was more a bigger acquisition. targens was a mid-sized acquisition. We will again do smaller acquisitions, and we will self-finance them for the time being.
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