Hello, good morning, and a very warm welcome to the presentation of the first half year results, 2023 of the INDUS Holding AG. My name is Dafne Sanac, with me, Dr. Schmidt, CEO, and Rudolf Weichert, CFO, who will guide you through the major events of the last half of this year. I'm looking forward to an exciting presentation and a lot of questions from your side. First of all, let me read out some technical details. At the end, you can ask some questions, you have two tools to do that. You can either do this via Zoom, raise your hand via the taskbar, in the end, I will unmute your microphone, which you have to confirm. You can also ask a question via the telephone key, dialing star nine.
The presentation you can find on our website, on the Financial Publications tab, on the Investor Relations website tab. Now, I think it's time to hand over the presentation to Dr. Schmidt, who will welcome you as well.
Yes, ladies and gentlemen, it's my pleasure to welcome you all for this earnings call for the first half, year of 2023. At my side, I have Rudolf Weichert, who will take over when we get to the numbers. Let me start with a general introduction. So to say, to set the stage for this call by summarizing some major events which we saw in the first half of 2023. Obviously, as we all know, we are definitely operating in a very uncertain economic environment for the time being, and there's obviously also deteriorating tendency, which is nearly, indeed, which is illustrated by nearly all indicators that we have. Nevertheless, we saw a growth of 2% in continued operations in the first half of the year.
We definitely have a good revenue performance in the engineering and materials segment. We have a stable operating income despite the slowdown in the second quarter, and we have an EBIT margin, which is slightly below the previous year level. Important good news, which we will elaborate on later on, we sold SCHÄFER and we sold SELZER earlier than planned in July 2023. The new management structure has been implemented by welcoming Gudrun Degenhardt. We'll get to that as well. We have slightly adjusted the full year guidance for the segments. The overall guidance for the INDUS Group remains unchanged, and we will also confirm the free cash flow forecast for the full year 2023. I mean, in this group that we have here, I mean, there's no need to explain the INDUS business model.
I mean, you all know it for a long time. Let me just reiterate what is our purpose. Our purpose is clearly we want to shape the future with small and medium-sized enterprises, or as we say in our German slogan, it's "Mit dem Mittelstand gestalten wir die Zukunft." One point that I want to make at that point of the presentation, as you know, we have a continuing focus on sustainability. As part of PARKOUR perform, we have our fourth strategic initiative, which is driving for sustainability, and we just published in mid of July, also the third sustainability magazine. It's called Sustain, and I strongly recommend to have a look on it. It's on the website, and it's definitely worth reading.
You will find a lot of specific information on what we do in the field of sustainability and how, how we move forward to really implement sustainable economic activities within the industry. This has also been reconfirmed by our ISS ESG rating. It's now the eighth time in a row that we were rated by ISS ESG, and it is eighth time in a row that we received the C+ rating, which is what they call Prime Status, and that really puts us in the top position or in the top rankings of the whole ISS ESG rating rating for industrial companies. It's also very important for us because it's a prerequisite for our ESG-linked financing activities. Let me move on to our strategy update, PARKOUR perform.
As you might all recall, we published PARKOUR perform midst of December 2022. We set ourselves ambitious goals, which were further elaborated during our Capital Markets Day in March 2023. All the slides from the Capital Markets Day are also available on our website for further reading. When we look on what we said or what core initiatives we had, I mean, we really put it under the headline, "Clearing out and starting fresh at INDUS." This was summarized in three overarching targets, which we will all touch in this presentation today. When we elaborate further on specific developments in the group. On one hand side, we have more focus on future fields.
I mean, we, we identify the megatrends that are important for the INDUS portfolio. We definitely said that we will focus on highly specialized industrial technology. This basically guides us to the, to the next years. Associated with that, we restructured our portfolio, restructuring our portfolio meant we do not pursue medical technology as a key strategic activity any further. This segment was resold, we also resold the segment automotive. As an outcome of this, we also sold our activities in the serial supplies for the automotive industry. Third important element is the management structure of the group. We implemented segment management, I mean, there's a clear responsibility for the segment managers to focus on profitable group growth.
Associated with that, we also complemented our set of KPIs by introducing the free cash flow as an additional KPI, which becomes more and more important for all our activities. Coming back to the issue of discontinued operations, that's a chart that we presented in December. This is basically covering the dissolution of the segment automotive technology. On the left-hand side, you see the four companies that were integrated in the new segments: AURORA Infrastructure, BILSTEIN and SITEK in materials, and IPETRONIK in engineering. We defined two companies, SCHÄFER and SELZER, as discontinued operations, and we put them up for sale with the annual report 2022. That changed the whole reporting structure of the group as well by dividing the reporting structure in continued, continuing operations and discontinuing operations.
Now we can inform you that the target to sell off the operations and discontinuing operations was reached earlier than expected. We sold SELZER and we sold SCHÄFER, SCHÄFER in July 2023. Let me give you some more information on these two sales in the next slide. SCHÄFER was sold in the beginning of July to Callista or to a portfolio company of Callista. It's a medium-sized private equity activity in Munich. The good news also is the closing happened already, so the deal was closed by end of July, and therefore, it's 100% clear that the deconsolidation for SCHÄFER will happen in the third quarter. End of July, July 28, we sold SELZER to Mutares, which you might all know, probably a financial investor in Munich, specialized on restructuring companies.
It was sold to their metals group, or they call it FerrAl United in the future. They have ambitious growth, growth targets there, and SELZER is a good add-on because, after the investment cycle is done, the sales of SELZER will vastly grow to EUR 150 million, and this is exactly what Mutares looked for. This sale is still subject to approval by the Federal Competition Authorities. Both parties expect that there will be no obstacles. The closing should happen until end of August. This is not yet confirmed, we have to wait when the closing can finally happen. The approval of the Federal Competition Authority is the only closing condition we have. As soon as we have this approval, the closing will happen.
You will definitely be interested what, what the influence on, on, on full year 2023 from these two sales, we can tell you that the vast majority of charges from both sales was already recognized in the first half year of 2023. The first half year of 2023 is burdened with a total of EUR 25.8 million for discontinued operations. Thereof, EUR 21 million, let me say, belong to SELZER, and EUR 4.8 million belong to SCHÄFER. From all what we know, from all what we have in the contracts, that should be really more or less it. There might be some minor charges, maybe EUR 500,000 here or there, but this will not change the overall picture.
I think it's, it's very important when you look on the second half of 2023, you will have a clear view on the strengths of our portfolio. You will have a clear view on on the profitability that we have in continued operations, and the discontinued operations should belong to the past as of today, when we talk about the earnings calls. That was definitely something that was extremely important for us, which. It took a lot of efforts, but which was successfully completed much earlier than expected. Second important information when we come to implementation of PARKOUR perform is the management structure. You have all seen this picture already, and as I said before, a very important part of the strategy update PARKOUR is the implementation of segment management.
Segment management will be responsible to drive the portfolio companies in the segment forward, to align these portfolio companies more and more with the well-defined future fields, to define the path for growth, and also to prepare acquisitions that, that fit within the general scope of our acquisition M&A activities. We are very happy to announce today, or actually we announced it yesterday already, that the board of management will be complete as of 1st of October, 2023. Gudrun Degenhardt will join INDUS on 1st of October. Gudrun has a sound background and experience in C-level management functions, on the one hand side, in family-owned business, but as well as in public companies as well.
During her whole career, she had a strong focus on industrial technology, so that fits very well with what she will do at INDUS. I look forward to Gudrun joining us on first of October and taking over segment materials from me. In the future, we'll have the three colleagues which are responsible for the segment management: Axel Meyer for engineering, Jörn Großmann for infrastructure, and Gudrun Degenhardt for materials. We will have Rudolf Weichert as CFO and myself as CEO for the crew. That's good news, so we are really ready to move forward. With that having been said, I would pass on to Rudolf Weichert now, who will guide us through the numbers. Thank you very much.
Okay, thank you. Yeah, good morning from my side as well into, into the group. As Dr. Schmidt said, and I can now only confirm this, we are very happy that Gudrun Degenhardt will join us on first of October, and we are really looking forward having a full management board and, and going forward for the next, next steps. Having said that, I hope you already had had the opportunity to read our press release and our half year's report, which is published- which has been published this morning. If not, anyway, however, we will take you through the financial highlights and financial results through the first half to be prepared for the Q&A session later on.
Let's start with the overview, let's say, top-level view onto the major KPIs for the group, INDUS, INDUS Group as a whole, for continuing operations, just to mention that as well. Let's take a look at sales, EBIT, EBIT margin, and free cash flow at a top level. What Dr. Schmidt already said, we have a slight increase in sales, 2% from to EUR 904 million in the first half year, and this is 1% organic growth and 1% inorganic growth through the acquisition, Heiber + Schröder, which we did in the first half, end of first half last year. This is 1%, 1%.
We have an EBIT slight, slight decrease in EBIT, from EUR 87.4 million to EUR 84.9 million. This is not because... if you look at the EBITDA number, that's pretty much the same. We have slightly higher depreciation, so that makes up the, the difference there, but still pretty stable. This, this both impacts slight increase in sales, slight decrease in EBIT, it's also a minor impact on margin from 9.9% to 9.4% in the first half, but it's, it's, well within our expectations. Which is a little bit different is the free cash flow number compared to last year. It's significantly, we have a significantly higher free cash flow.
I have said already that EBITDA is more or less on the same level. The differentiator is basically the working capital development. Last year, and you already know this because we talked a lot about working capital and development of working capital also in the last year, this year we have the same seasonal pattern on working capital development. You know, that we usually build up working capital in the first half of the year, we usually decrease working capital in the second half of the year. Maybe the turning point may be July, it can be, it can be Sep tember, that's usually the pattern.
Last year, due to all, all major issues like price increases, supply chain issues, and so on, we had a huge increase in working capital, which really hit the free cash flow number in the first half. This year, we have way lower increase in working capital, which is basically only half the number of last year, and that really, that leads directly to a way better free cash flow of plus EUR 35.2 million. The working capital development is the, the most important driver to this, to this number. Some other top-level KPIs, operating cash flow, that's pretty much the same development like free cash flow. It's also a significant increase in, in operating cash flow. We, as I said, already said, the main driver is the, the working capital development also for operating cash flow.
If we look at the, the development of net debt, which is also a very important KPI, it's only a slight increase of 5.1% for the first half. You know, we will generate usually more cash in the second half of the year. This is a way lower increase than last year, and it's only half of what we, well, half of our increase of working capital. This is a pretty favorable development and shows the strong cash flow for the first half year of the group. Equity ratio, based on all these impairment charges of last year, we had a drop in equity ratio from close to 40% to 36.3% in the first half, at year-end.
In the first half, this is-- this has not improved, but it's clear because we already paid out the dividend in the first half of 2023. We will expect an increase as planned and budgeted, close to 38% at the end of the year 2023. This is completely in line with, with our expectations. That's a short, brief summary of the major KPIs of the group. I hope that's kind of readable, a little bit more detailed. The key figures, summarized on, in, in this chart, the most of them I've already gone through. There are some, there are some additional numbers on this chart, for example, earnings after tax. There you have a split up between continuing operations and discontinued operations.
Maybe it's again, important to highlight the -EUR 25.8 million earnings after tax for discontinued operations, as Dr. Schmidt already mentioned. We believe that according to all contracts, what we know from the sales processes, and this is basically it for the results, for the full year results from discontinued operations. Even though technically we have to deconsolidate SCHÄFER and SELZER in the third quarter, and SELZER, we, we believe it's the third quarter, it's only depending on the cartel authorities, then we will not have a major or let's say, a significant impact on earnings anymore.
Take the EUR 25.8 million for the first half, 2023, and you can more or less expect that, that, that should it be for the, for the full year, in, for discontinued operations. Cash flows are cash flow numbers, I've already mentioned that we have a very favorable development on the working capital side, so that we have strong cash flow for the first half, and the equity ratio and net debt development I've already, already mentioned. You know that the, the cash flows which we have for the group or in total, will now, will be derived or generated by our three segments: Engineering, Infrastructure, and Materials. If we look into the segments, then you will see that there's a slight difference in development. There are some deviations.
Let's look at the sales development first. You'll see that engineering has a strong performance of +4%. Infrastructure, it slightly decreased by -0.9%, and materials is a +2.9%. That makes up the 2% of the group as a whole. Heiber + Schröder had held the two acquisitions from last year were solely in the engineering segment, so infrastructure and materials are not really affected by any inorganic trends. There's a small acquisition for infrastructure. We'll come to that, I come to that later. That's the overall view, where the cash flows derive from our segments, if sales, depending on sales. If we look at the EBIT numbers for the segments, then you, you will see a, let's say, a larger deviation for the segments.
First of all, engineering, this is more +4.4% EBIT. It's more or less in line with the sales increase, +4%. That's pretty stable, pretty stable development. You will see that infrastructure has a larger drop in EBIT from EUR 35.4 million to EUR 25.1 million, and I think that will be maybe part of the Q&A session later on. I think that this has a lot to do with the, with the general outlook and environment of infrastructure. Still, the level of earnings is still the same level as engineering, just to mention that here. Materials, a very strong performance in the first half, a little bit above our expectations, from EUR 33.1 million EBIT to EUR 38.1 million, +15%.
If you add everything up, then you come to the development of INDUS as, as a whole, but you'll see slight differences in, in each segment. Let's take a deeper look into each segment. I'll skip that slide because that gives you a more strategic overview, which companies belong to the segment, what are the key, key drivers, mega trends, and so future fields. You know that from, from our previous presentations. I'll, I'll skip these slides and go directly to the, to the numbers. If you look at engineering, as already said, it looks very stable. First half 2023 compared with first half 2022, sales plus 4%, and this is 2.8% inorganic and 1.2% organic growth. EBIT margin, very stable.
EBIT, EBIT slight, slight increase. Investments looks pretty much different, EUR 64.0 million in the first half 2022. This includes the acquisition of Heiber + Schröder. If you take that out, it's basically around EUR 5 million of investments in machinery and equipment, which compares very good to the EUR 4.8 million, which we have in the first half 2023. We have got good visibility into this segment because the orders, the order intake and orders last for a couple... It's a matter of weeks and months, and what we have orders on hand, that allows us to predict the next upcoming months much better than in the other two segments, actually.
This is what we-- what I want to highlight on, on the next slide. You, you know already the numbers for the, for the engineering segment, but the main question is where we stand now, end of, end of J-- well, this is the, the half-year numbers, end of June, what do we expect for the full year? Giving a little bit more visibility according to order intakes and, and orders in hand in this, in this segment. We'll, we'll keep the forecast unchanged for this segment. We'll still expect a slight rise, rise in sales, which is confirmed by the first half of 2023. Strong rise in income compared for full year, but please remember that we had impairment charges last year coming in the, in the third quarter, 2022.
This, we do not expect it at the same level, so we'll have a strong rise in income already. Also confirmed about pure operational performance in the first half. We expect an EBIT margin from 9%-11%, which is unchanged. Currently, we have 9.2%, which is in this range, and we expect it for the full year as well. It's pretty stable, pretty stable outlook for engineering. If we take a closer look into Infrastructure, then there's one small acquisition. I will just briefly mention it because it was already an action or in a Q1 event. Annual sales of approximately EUR 8 million. We did a small acquisition for our existing company, BETOMAX.
The company is called QUICK Bauprodukte. Just to highlight or just to remember, we have done this, this acquisition already in Q1, which adds roughly EUR 18 million to our balance sheet. Half-year results for infrastructure, as already mentioned, more or less stable sales, despite the industry trend, which I think you all know is negative. We have, we have rise in interest rates, significant rise in interest rates compared to, compared to last year's. We have financing activities from banks, which are decreased, which decreasing very much. We have projects on hold, if you look at the press releases from certain industry associations. This is a more dampened or a more negative trend in the industry.
Our sales are still, still high at the same level as last year, you will see a stronger drop or a sharper drop in, in EBIT, in EBIT, for 25.1% and a drop in margin to only 8.6%. If you compare it with the first quarter in 2023, the EBIT margin for the second quarter is 9.something%, and it was 7.4% in the fourth-- in the first quarter. The EBIT trend now is, is, is raising, we are not there where we expect to be at, at year-end. It's a mixture of decreasing demand and product mix, which, which led currently to this, to this decrease in, in earnings.
Investments is very stable, also around EUR 5 million-EUR 6 million in technology-- in machinery and equipment, and EUR 15.8 million in first half 2023 includes the acquisition of QUICK. This is also pretty stable. Forecast for the full year for the segment, we still expect a slight rise in sales, despite the demanding environment. A strong rise in EBIT, even because we have just seen that we had a drop compared to last year in the first half. Please remember also in infrastructure, we had impairment charges in the third quarter last year, and we had some not so strong results in the fourth quarter last year, which we expect to be better this year.
We've just done our, our, our, let's say, forecast work and just have, have had discussions with every company in this segment, and we believe that we will keep with, with our guidance. The guidance is only slightly adjusted for the EBIT margin. We expect now a margin between 9% and 11%. It was previously 10%-12%. You, you see that we have 8.6% in the first for the first six months. If we expect a margin between 9% and 11%, it's absolutely clear that we will expect way better results in Q3 and Q4 in relation to the, to the sales. The EBIT margin will improve, in our view, in Q3 and Q4.
Coming now to, to the materials segment, last segment, already mentioned, good increase in sales, plus 2.9%. Strong EBIT and EBIT margin development. A little bit above our expectations, yeah. As we, as we said, it's a strong increase, actually, about 15%. Well, we, we, we had some aspects, taking into account in our forecast, where the current and actual development was, was better than expected. Taking into account these numbers, by the way, investment is, is very, very stable. Let me just directly go to, to, to the page where we, where we talk about the forecast from where we stand now and what will happen for the, for the rest of the remainder of the year.
Again, slight rise in sales. We still expect that, proven by 1st half year's results. We expect an increase in EBIT, as we said already. Again, same remark as within the, for, as for the other two segments. We had impairment charges in the last year, which we do not expect to be there this year in the same, same amount. Given the, given the fact that the 1st half results are better than we expected and better than planned, and that we believe that we will take this momentum through the year until the year-end, we expect now a better margin, between 7% and 9%, instead of 6% to 8%. Adding everything up, we expect we, we, we, we confirm our guidance for engineering for the year-end.
For infrastructure, we have lowered the margin range by 1%, for engineering, we have increased the margin range by 1%. Adding everything up, that makes us believe that we have an unchanged, unchanged guidance for the full year. Dr. Schmidt will guide you through, again, through the full year expectations for INDUS. I think, yeah, that was very brief and in short, the highlights for the segments. I think that will help us to prepare for the Q&A session later on. Then we'll come to the outlook for the full group.
Okay, I take over again. Looking on the economic environment, the outlook for full year 2023, we all know there are a lot of dark clouds around us, particular for the German economy. We see economic stagnation, and we generally, I think we see a pessimistic mood in society. We see decreasing incoming orders in the total industry, but we also see that at INDUS, as just mentioned, for infrastructure in particular. Good news is all the bottlenecks that we had in recent years, in 2022, 2021, when it came to material supplies and so on, are basically resolved. Even on the electronic side, the situation improved, which we also see in our measurement activities in segment engineering.
As I said, German economy, the outlook is pretty, pretty damped right now. That is the background when we look on our guidance for the full year. As Rudolf Weichert had already explained, the segment guidance is, were slightly adjusted, but as to make it very easy, I mean, we decrease Infrastructure by 1%. We increase the EBIT margin guidance for Materials by 1%. The segments being approximately the same size, more or less. It's pretty clear what the outcome is for, for the overall INDUS, and this is summarized on this chart here.
We generally see sales are going a little slower, but there's despite the fact that the economy slows down, there's also an effect of decreasing sales prices, which we shouldn't forget about. In particular, in segment Materials, this is clearly seen because we have businesses there with a high material content and with the material prices dropping again, you also have to drop your sales prices without losing margin, as you can well see when you look on segment Materials. We expect the sales now to be at the lower end of our guidance from EUR 1.9 billion-EUR 2 billion. The EBIT, the EBIT guidance, EBIT guidance remains unchanged, so we see as well in the range between EUR 145 million and EUR 165 million.
It's clear if the sales go down a little bit, the EBIT margin, the EBIT expectation remains the same. We see the EBIT margin expectation at the upper end of the bank from 7%-8%. What's also important, Rudolf Weichert had mentioned that already, free cash flow. I mean, you've seen that the free cash flow in the first half of the year was EUR 35.2 million. You may wonder. How the hell are they gonna get to EUR 100 million by the end of the year? It's very clear, and it was explained already. We definitely see a decrease, and I think it will be a strong decrease again in working capital, which can easily add up to EUR 50 million-EUR 60 million.
Adding on the, the free cash flows that is generated from operations, basically with the EBITDA, for us, it's, it's very clear and very obvious that we'll reach the free cash flow guidance of above EUR 100 million in the year 2023. Regarding acquisitions, that's probably a topic that might be discussed later on a little further also. We are still aiming for at least one acquisition on portfolio level. We did one acquisition on, on grandchildren level already with the acquisition of QUICK for BETOMAX, and it's definitely something that we'll focus our activities on in the coming months. Investments expectations are basically unchanged, the EUR 85 million-EUR 95 million, because it is only continuing operations. Might be a little bit on the high side, so we see us rather at the lower end, than at the upper end for, for investments.
Greenhouse emissions, which is becoming, which is becoming a more and more important KPI as well. We will lower our greenhouse emissions again in the year 2023. This is partly due to all the activities that we, we have there, but it will also be partly affected by the deconsolidation of SELZER, which typically has a used to have a high greenhouse emission, specific greenhouse emission as compared to value, how do we call that? Value generated, yeah, you know. Equity ratio was covered by Rudolf Weichert already. We see us around 38% in the second half of the year because we don't pay dividend in the second half of the year, and we, we see stable earnings. I think we'll also be able.
You saw the development of the net debt in the first half of the year, that we, that we get close or reach our target for net debt to EBITDA to be around approximately 2.5 years. With the working capital coming down again in the second half of the year, I think we are also pretty confident that on a year-on-year level, by the end of December 2023, you would basically see unchanged working capital levels at the end of 2023. I think that covers our initial presentation, and I pass over to Dafne Sanac again to handle the discussion now.
Thank you, Dr. Schmidt. Thank you, Mr. Weichert, for this interesting presentation.