Earnings Call: H1 2021

Aug 6, 2021

Ladies and gentlemen, welcome to the First Half twenty twenty one Results Conference Call and Live Webcast. I am Alice, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. The conference must now be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Alex Vazza, CEO of Petronik Group. Please go ahead, sir. Thank you very much, Alice. Good morning, ladies and gentlemen, and thank you very much for joining our half year twenty twenty one report of Bystronic. I'm here together with Behold Neukom, our CFO, and we're looking forward to give you an update today. I go to next page. Before I do go into the details, let me remind you of the usual disclaimer statement as you can see on slide number 2. I will refrain from reading it out loud and move quickly into the agenda for today's call. As you can see, we're going to start with the transformation milestones. We have actually accomplished quite a lot of milestones this half of the year. Following by the name change approval by the General Assembly, we're actually going to then talk about the 2025 execution, the 2021 highlights and the financial review. By that moment, I will hand over to Behat. Following the financial review, I will give an outlook for 2021 and then we'll open the Q and A session. Good. Let's go to our first party. The transformation is concluded. We have really accomplished many milestones in the first half of twenty twenty one. Following the name change approval by the General Assembly, Bystronic has been listed on the 6th since May. This was a magic moment for all of us. In terms of discontinued operations, as you probably heard, Phone Partner was closed in Q1 and Mammut in the Q2. And Beyers will provide you with more detailed view on the discontinued operations in his part in the financial part. Moving to Bytronic as a standalone company since January this year, we have our regional structure in place and that by the way gives us a lot more and direct customer feedback. We hired great leaders into new important roles and have executed on many strategic priorities. We delivered strong service growth and you can see this great demand for automation and we see progress on the smart factory software suite, but also we see great demand coming on the smart factory solutions. You will see the numbers of our strategy soon and you will see that they are serving as well. I go to the next page. What you can see here on the next page is for those that are not familiar, you can see the cornerstones of our growth strategy 2025 on the left hand side as I said. It's really in the core of everything is our customer focus, the regionalization as we have done and that brings us a lot closer to our customers and gives us the voice of the customer directly into the core of Bastropic. The top of it you can see the portfolio expansion not only by applications, but also into what we call market segments is one of the top priorities. Followed on the right hand side by building up software as a business and the results you can see actually soon. And then software and solutions on the left hand side, as you can see, a part of us has become to be a software house and a solutions provider. And to get into this a little bit. On the right hand side, I would like to highlight many only maybe only three elements. The brand experience center in Hoffman Estates in the U. S. Has really started off very, very well. It's the 1st brand experience center that is showing our smart factory concept. But also we have a lot of production that gives us additional capacities for production, in this case for currently 2 d lasers as well as automation in the future. In addition to that, we have also done quite a bit around software and smart factory software suite. We acquired Coraho, as you can see, this year, which is really helping us to accelerate the launch of our smart factory solutions. We are really proud also to say that on the service side, we have been able to really make great progress. And we are about halfway through by hiring a significant amount of service technicians in an environment that is quite difficult to get new service technicians because it looks like the whole world is looking for service technicians currently. Before we go into the numbers, let me also highlight some of our major accomplishments in the field of ESG. We have an aggressive roadmap in place that is not only targeting the reporting aspects, but is also trying to achieve true impact of what we do. In H1, we have conducted our alignment with the sustainable development goals, as you can see. We brushed up our materiality matrix in line with 2025 agenda or strategy, so that we can address future material topics already today. We use the S and P 500 Corporate Sustainability Assessment as a checklist for a GAAP analysis and are on track to define KPIs on all identified topics. In addition, in the second half, we will plan for a leadership meeting to set our targets for the years to come. Based on those, we plan also to link compensation to our ESG execution in the future. In the first half, we have conducted our carbon footprint for Scope 12 for all of our operations. And for the first time, we have reported the carbon disclosure project, CDP, as by Tronic. And lastly, we are on track to publish our 1st sustainability report in 2021. It's probably going to be July 2021. I go to the next page to the numbers. So now let's talk numbers. As you can see from the left to the right, it made quite a bit of progress in order intake. We have seen this already starting October November, December last year. And it continues. Maybe we can talk in one of my last slides on the outlook a little bit what we have seen in July as well. But basically, order intake is up over 60% from last year. And what's even more important is actually up against what we call our benchmark 2019. And it's really broad based in all regions. I have a slide prepared to talk about the regions that you will see. The Americas is really leading the pack here. We also see very clearly that the pandemic has been a catalyst for many customers to think about automation and smart factory solutions. And we see that in our order entry as well. In terms of net sales, we are about 19% above last year. And as we said, about 4.4% above 2019. And that's really important because we always said that we wanted to take 2019 as our benchmark because the pandemic year is very hard to take as a start point in a way. What we also see is that we still have supply chain constraint and that's a challenge. We do have other challenges. We're maybe going to talk in the Q and A session a little bit about freight and price increases and things like that. But that is really what's going on. We are happy to see where we are right now and we are even more happy to see significant backlog that is going well into 2022. On the EPYC side, you see that we are currently at about 6.9%. If we were to adjust that to some of the one time costs, it would be around 8%. We do see obviously higher PECs that is hitting us, but we wanted to do this. We are investing in that and that's what we said all the way before. Also of course a higher volume has helped us to get there. We see transportation expenses are obviously not helping in this environment. But all in all, we see that we are on the way, the 1st 6 months of our 5 year plan of our 60 months, the 1st 6 months we think with these numbers we are actually on track. I will go to the next page where we talk a little bit about our regions. And what we'd like to share with you is really the regional growth. And as you can see that sales is more or less in line with about 15%, 20% everywhere. China was early was the earliest region to come back again after pandemic and hence the net sales are a bit higher there. And order intake is strong everywhere, particularly as you can see in EMEA, China and Americas. We see significant growth of large systems in Americas that are helping us with this order intake number. Maybe on the right hand side interesting for you, we always said we would like to get from about 19% or 90.9% in 2019 of service revenue to about 26% in 2025 and now half year into our execution of our growth strategy, you can see that we are like at almost 23%. So we're moving in the right direction. However, this also has to do partially that the first half year might be a little bit smaller than the second half of the year. But all in all, the trend is very clear. We are growing significantly on the service side and makes us happy because that was a very significant plan of ours. With this, I would like to hand over to Bernd Neukom that is going into quite a bit of details on the numbers. Bernd, please go ahead. Yes. Thank you very much, Alex. Ladies and gentlemen, also very good morning from my side. As Alex said, I will walk you through the financial for the 1st semester. The group numbers are somewhat convoluted because of the transformation that was initiated in December 2019. And there is a loss of sales, profitability and balance sheet positions from the discontinued businesses. And secondly, there is there are significant effects on the balance sheet and on the financial statements from the divestments proceeds of those business units. In our consolidated profit and loss statements, we are showing the divested activities in the column discontinued operation and it includes these two effects. As Alex mentioned, the group's transformation is now completed and we're operating as a standalone entity as Pestronic. So, Smidreener was sold in February 2020 and therefore, the 2020 figures include 2 months of sales and costs as well as the transaction gain. The Flow Partner and Mammut businesses were divested on March 31, 2021 and June 30, respectively. Therefore, for 2020, both these businesses are fully included in the P and L and on the balance sheet. And then for this year, 3 months of Phone Partner operations is included in the P and L. And as a result of the goodwill recycling, as required by Swisscap Fair, the phone partner transaction created a significant negative non cash impact on the consolidated results. Mammoth was divested on June 30, and therefore, the H1 2021 numbers include 6 months of Mammoth operations. However, since deconsolidation happened on June 30 this year, the balance sheet positions are no longer included at the end of H1. The Vistronic business unit that was historically called sheet metal processing is now shown on the continuing operations. The continuum operations also include the transformation cost mentioned already by Alex and certain corporate center and stewardship costs, which historically have been incurred by ConSecta and have not been allocated to the business units. Now looking at some of the key figures. In the first half of twenty twenty one, net sales for the group increased by CHF 48,100,000 from CHF576,200,000 to CHF 624,300,000. The net sales from the continuing operations, you heard it from Alex, has increased by 18.3% to CHF440,700,000. This increase of CHF 68,200,000 includes an unfavorable foreign currency translation effect of CHF 3,400,000 which is driven by the weakening of the U. S. Dollar as the Swiss francs, but partially offset mainly by the stronger euro and the Swedish krona. The operating and the net result for the group on the right hand side on this chart have been significantly impacted by the effects of the transformation mentioned before. The operating results of the continuing operations have increased by almost 30% compared to the same period last year. Please note that excluding the transformation costs for the group of CHF 5,100,000, the EBIT margin for H1 2021 would be 8% compared to the reported number of 6.9%. The net result of CHF 23,300,000 for the continuing operation increased by 40% compared to H1 2020. The earnings per Class A share on a pro form a basis are CHF 11.19 compared to CHF 7.45 last year. And as a result of our asset light and efficient business model, the return on net operating assets reached 20% for the 1st 6 months this year. And the equity ratio remains very solid at 69% on June 30, 2021. Looking at the profitability. As I mentioned, the year over year consolidated financials are significantly impacted by the transformation of the group. In 2020, the operating result of CHF 49,900,000 includes the transaction gain from the Schmidrinne disposal of CHF 48,100,000. So the adjusted EBIT figure of CHF 1,800,000 can be split in an operating loss for the discontinued operation of CHF 21,600,000 and an EBIT of CHF 23,400,000 for the Vistronic continuing operations. For H1, 2021, a consolidated operating loss for the group of CHF 55,200,000 at the bottom of this page is being reported. This is mainly driven by the transaction loss of CHF 78,500,000 for Phone Partner, which includes the recycling of the goodwill of CHF152.2 million. The divestment of Mammut resulted in a small provisional profit. Excluding the effects for the divestment, an operating profit for the group of CHF 22,800,000 has been achieved in H1 2021, a loss of CHF 7,500,000 for the discontinued operations, Mammut and Form Partner and a profit of CHF 30,300,000 for Vistronix continuing operations. Now looking at the continuing operations. For those, the increase in profitability of almost CHF 7,000,000 is driven by volume and product mix of almost CHF 41,000,000, offset by higher personnel expenses of CHF 14,400,000 dollars and operating expenses, other income and depreciation of $18,500,000 Both for the operating expenses as well as the operating expenses, there is a lower base last year as a result of some cost containment measures that had been taken during the COVID-nineteen pandemic. Additional effects in the personnel expenses are the investments in the service technicians as part of our 20 25 strategy and the team of around 60 software specialists that came to us with the acquisition of Coravin. The operating expenses also increased because of higher warranty provisions that have been booked in H1, cost for exhibition and fares that didn't happen last year, higher transportation costs and the one time costs associated with the transformation of the group. With regards to our cash flow statement, so before we have a look at the balance sheet, I will walk you through the cash flow for the first half of twenty twenty one. Compared to a negative CHF 24,400,000 last year, in the same period, the continuing operation created a positive free cash flow from operating activities of almost CHF 20,000,000 this year. The other position of negative CHF 10,700,000 mainly results from the operating performance of the discontinued operation. After deduction of the dividends of CHF124 1,000,000 and the proceeds from the 2 divestments from partner and Mammut of CHF 323 1,000,000, Petronic closed the first half of twenty twenty one with cash, cash equivalents and securities of almost CHF481 1,000,000. So what are the highlights of our strong balance sheet? The change in cash, cash equivalents and securities, as Jocelyn mentioned, but I want to make one additional important comment. The Board of Directors proposes not to distribute an interim dividend in 20 21 and will state its position in the context of the annual report in spring 2022. Now looking at the operating net operating assets. With the deconsolidation of the phone partner activities on March 31 and the Mammut activities on June 30, the net operating assets for these two businesses have been taken off our balance sheet. A deferred purchase price payment for Phone Partner of CHF 20,300,000 due in January 2022 is recognized into position other receivables on the balance sheet. With regards to Mammut, the parties have agreed on an interest bearing vendor loan of CHF 60,000,000, which will be repaid by the buyer by January 2027 at the latest and is included in the position financial assets. The transaction with Mammut also includes an earn out structure of up to CHF 45,000,000. Due to the current operating results and the estimation of the earn out relevant impact until December 31, 2021, no fair value for this earn out is included in the provisional gain on the sale. For the continuing operation, the change in net operating assets is minimal. Given the strong order intake, there has been an inventory buildup of CHF 56,000,000 and trade and other receivables have increased by CHF 22,000,000 On the other hand, we do have a policy that at the time of the order intake, up to 4 payments have to be made by our customers and therefore, we do see an increase in these advanced payments from customers by CHF 39,000,000 at the end of June. Trade payables, accrued expenses and other short term liabilities have increased by CHF32 million and consequently reduced the net operating assets. With this, I'm happy to hand back to Alex. Thank you very much, Peil. I'm going now to Page 16 to talk about the outlook 2021. To summarize our first half of twenty twenty one results in view of our 20 25 financial aspirations, which are mentioned on the right hand side, that is 5% growth or over 5% growth in mid sales. And please keep in mind that that is based on 2019 as well as profitability of over 12% and the capital efficiency of over 25%. Now you have seen actually all of the metrics. We've already talked through those. But being 6 months out of 60 months of our strategic journey, we feel that we have gotten a good start into that and we are on track to get to those aspirations. I change now to Page 17. And Page 17 talks about our outlook for the full year. As you can see, we expect a sales growth or net sales growth of about 50%. And we continue on the EBIT margin to see 8% to 9% for 2021. Obviously, that has to do with certain elements for instance the procurement situation or inflation situation and other things that really shouldn't change. But based on what we're seeing now being in August of 2021, that's currently what we think is a very fair view of what we see for this year. At this point in time, I would like to hand over to the Q and A session to Alice. Alice, please go ahead with the first question. We will now begin the question and answer session. The first question from the telephone comes from the line of Charlie Sorenberg with AWP. Please go ahead. Good morning, gentlemen. I'd like to ask you for a bit more clarity on this your sales guidance is plus 15%. I'm not quite sure. Is the assumption correct that this will bring you back to the pre pandemic level of CHF 935,000,000 in the area at least? Just question one second was a question is the could you give us more light a bit about the bottlenecks in the supply chain and how you're affected there? Is there no problem at all? Or you don't seem to be too worried. And my last question is the raw material and logistic costs, how easy can you give them to your clients? Thank you. Well, thank you very much, Mr. Werybod. We have we are very happy to go through those three questions. Well, the first question was in regards to the 15%. That would bring us currently at about 9, 20, 21 type of region, which technically is not at 2019 level at the current currency, but it's in that region. That's the first question. The second one, in terms of bottleneck, maybe we should show to be more worried about bottlenecks. But I can tell you where our bottlenecks currently are. The bottlenecks in the past, we didn't have really bottlenecks in production. We start to see them in 2 plants at least, and we do have action plans for them. We think we can actually we actually work and get capacity in as we need them as to the current increase of order entry. But in some of our plants, we have order increases of certain products of over 100%. So we are working to get them really done. So the capacity increase in terms of plants, I think we can manage that and that worries us a little bit, but I think we have really good people on that. The second part that's even more important we think is we have currently a double effect, if that's the right word. And when you have an increase such a strong increase as we have now, our service technicians not only have to do all of the installations, but we also have a very strong increase on the service side, which basically means the same people have to do 2 jobs at the same time. And that varies actually more, and we have done a lot of work to get more service technicians on board and find different ways to serve our valuable customers. So that would be my, sorry, long answer to the bottlenecks. And the third question, I think, was in regard to, I think, freight. Is that correct, Mr. Benoit? Raw material and freight costs, yes. Raw material, well, we see what I think we see what the whole world is seeing is that many of our partners or suppliers are trying to get us hit us with higher material costs with price increases. And obviously, some of it we can fight away, some of it we can't. We have done a lot of work to see how we're going to either absorb it or work with price increases towards our customers. And we have done actually we have been successful in quite a few of those. We have started that already beginning of the year, and we had another round just in Q2. But this is obviously a very hard battle to increase prices in this. Our typical strategy in this is we do that wherever that is possible and we think that's the right thing to do and we have done it. On the other hand, with an innovation rate of in the high 30%, close to 40%, what we are seeing is the best way to increase your product margin in the mix is actually to introduce new products. And we have a lot of new products coming this second half of the year. So as you can see, it's a mixed strategy of introduction of new innovative products and solutions and software obviously. And on the other side, find good ways to put freight increases and product increases or cost increases into the customers. Did I answer your question, Mr. Wendel? Okay. In fact, mostly. In summary, if you don't have any delays in delivery to your customers? I wouldn't call it delays right now in products. But due to a high order backlog, we have longer lead times for new products and that's starting to worry us. And that's one end of it. And the other end of it is transportation capacity isn't really favorable right now as well. So even if we have products, often we run into issues to get transportation organized in time. So clearly, clearly an element of worrying us, but we have really excellent teams in working on that. Okay. Thank you very much. Thank you very much. The next question comes from the line of Serge Roetzer with Credit Suisse. Please go ahead. Yes, good morning, everybody. Hi, Doris, gentlemen. I have also questions on orders. You already mentioned that the lead times increased. You mentioned that Americas, you have larger machines in your backlog. Can you give us more detail about the lead times and when revenue recognition will take place? So and what this mean then really for the second half in sales and also for last year? Because you are guiding a sales decline also from the momentum, isn't it? You're growing 20% in the first half or the first six months, and now you guide for plus 12% for the second half. So this is a clear slowdown of the momentum. So can you put this in relation, please? Yes. Thank you very much. Why don't we divide this question, Beel, for the revenue recognition, maybe I'm going to do it from your side. And why don't I answer the first part of it that is around orders? So just to be clear, when I said longer lead times, I didn't mean it's for all product lines. It's actually just for one product line. For most of our standard products, for laser products and press brake products, we have our standard lead time and we were able to hold it. And that's round about 12 weeks. Their lead time has increased and is sort of against us right now is in larger projects where complex automation has to be being installed. And usually, the time pressure isn't that large on it because often either a new plant has to be built or a new space has to be getting ready. But if there was something in the way of longer lead times, clearly, that's with automation and what we call in the gold segment. What we have done, just for information to counteract on that, is our brand new plant in the U. S, the assembly plant in Hoffman Estate will actually start to assemble exactly the same product early next year. So that will increase the capacity and will reduce also delivery time quite significantly actually. So that's maybe from my side. And with that, I think I will hand over to Beel for revenue recognition. Yes. Thank you, Alex. So the revenue recognition happens so when we deliver a machine, it will be installed and then there is a training organized and then at the end, there is testing. And the revenue recognition happened that happens at that moment. So, not after installation, but after installation, training and testing by the customer. When we have a solution, whether there's more than one machine, automation solution, the revenue recognition happens step by step. So once the once one machine is installed to test it and trained. Okay. Can you give me thanks, it's very helpful. Can you give me a share of the larger projects of the existing backlog of SEK 440,000,000? Well, yes, we can. If you want. Yes and no. So I would love to give you this, but it's a question of what do you define as a system in that case. The very large and very complex system are probably from a revenue side, a smaller part of it, but the middle large, very large part, which is over 2 thirds of everything, really has to do with systems that are standardized systems. Standardized system means we use 2 or 3 modules, laser module or press brake module and an automation module. And those tend to be much easier in terms of delivery time and installation and everything else. So that's what I would say. So if I had to guess, I would need to look it up in exact details, maybe 10%, maybe 60% for standard 10% for very complex system, 60% for standardized systems and the rest is really single machines. But don't hold me accountable for this number. But I can look it up if you want to have an exact No, no, that's good enough. It's only like a certain feeling. But what's about in the margin quality, what you have now in your books? So can you tell us something about that in general? But secondly, also on how much of these awards have a service share? Is this higher as you have reported of this 23%? Okay. Let me try to answer this one as well. Well, the margin quality, to be honest, hasn't really changed from Q1 to sorry, from what we have invoiced to the current order book in large terms. What we see is that we have more systems coming. And usually, that is not a negative impact. Let's put it that way. In terms of service and service contracts, since the beginning of the year, we have started significant initiatives around maintenance packages, service packages. And we have been able to increase the amount of service packages per order up to 80%, 90% currently. Actually, it's right now at the higher end of this. And this is really driving the our journey to go from 19. Something to 26% in 2025. We are quite confident in that and we see that that's working. Okay. But then let's come back again regarding margin 0.1 and 0.2. You are guiding for lower sales growth in second half. So I'm a little bit questioned then further positive impact from volume and product mix in the second half. Is this correct? So maybe we go we look at the first half and then to jump into the second half. So when we look at the material quote as a percent to net sales compared to 2020, yes, there's a significant increase from 50.6% to 53.6%, a 3% increase. But that has mainly to do with the inventory. So, if we exclude that effect, there is about a 0.5% increase and that has mainly to do with increased material costs as we mentioned. So, that is driven by that. What we also do see is there is more demand on solutions, so which have a higher or a healthier margin. And then also the gold segment is coming back, which also have a higher margin, especially in the U. S, there is a higher demand on the gold segment. Okay. Thank you so much. Very helpful. Then I'm happy to hand back to you. Thank you. Your next question comes from the line of Daniel Koenig with Mirabeau Securities. Please go ahead. Hello, everyone. I have two questions. A, I was wondering in terms of personal expenses, you're one of the few companies which have higher personal expenses. Can you elaborate a little bit why that's the case? And then I was wondering some companies have lower marketing and travel expenses in their H1. Can you also spend some thoughts on there? And then finally, I had one question. You mentioned about sustainability and the work you're doing there. Is there a carbon emission target planned like I want to lower I want to be carbon neutral by 2,030 or is there anything planned like this? Thanks. That's it. Yes. Good morning. Thank you for the question. So with regards to personal expenses, so I've shown the increase between 2020 on the chart. So the you basically can split it into 3 main buckets. The first one is an increase in personnel expenses due to some cost containment measures in the last year. And that counts for about $6,000,000 in the first half. And then the second one is the investment in the service technicians. They get the additional hiring, which is which counts for about $2,000,000 And then there is the additional software engineers, the software engineers that came from Corrado, which counts for about $1,000,000 dollars and then there's some other elements with regards to variable hay, etcetera, and some build up of capacity, mainly in our D and E plant in China. Okay. Thanks. And then with regards to the travel expenses, so the travel expenses basically stayed flat compared to they went up by $200,000 So compared to H1 2020, it is more or less flat. So that is not the driver of the additional operating expenses. Does that answer the question with regards to the cost bridge? And then I would hand over to Alex for the sustainability question. Yes. Okay. Perfect. Well, I understood the question around net 0, but this is what we want to do now. I think what we do very early in this journey and what we said in our communication here is that we have in H2 a target setting, including carbon emission. And that, of course, that target setting will then drive the further steps of it. In case you would like to get more of that, we can give you more detail, but that would be probably the outside of this call with our ESG expert, Matt Holpberger. But that is basically the short answer to your question, Mr. Koenig. Yes, they've answered my question. I had actually an additional question. I noticed that Armada today came out with results as well and they increased their guidance. I was just wondering in general how the market share between you and DRAM has developed over H1? Yes. We have just quickly, quickly looked at the results this morning. We haven't really analyzed it. So I can't really give you a professional answer at this point in time. But I'm happy in the next communications to elaborate a little bit about that, if that's okay with you. Okay. Thanks, Elias. Thank you, Mr. Konik. The next question comes from the line of Hande Schneeder with ZEC Capital. Please go ahead. Hi, everybody. Good morning. I would have three questions. First, can you talk about the profitability of the service business in H1? I guess the run rate margins usually here are quite high, probably around 20% to 30%, somewhere in there. But now during the ramp up, was it even a margin drag or where does it stand? And trying to get a handle on that once the ramp up is done, how much that could help the margin compared to where we stand today? Yes. I'll take that. Yes. So you're absolutely right. And good morning, Mr. Schneider. So usually, we would expect a higher contribution margin from the service business. But at the moment, it stands exactly at the same level that we have with the machine business as well. And that's why the service business did not yet help. This has to do with the recruitment of the additional service technicians. So and usually, it's double that of the machine business or triple or? I'm not sure we want to say that specific. But for sure, this is accretive to really accretive to our business. Okay. And then on wage cost inflation, what can you tell us on that topic? The different regions, what kind of inflation are you seeing here? Did you have to check up your wage offers for new hires? And how does it compare to the normal situation over the past few years? What can you tell us about that? Yes. Very happy to get into that a little bit. So in the region, it has developed somewhat differently throughout, let's say, the different job levels and the regions itself. What we clearly see is that in the U. S, things are a bit heated or overheated when it comes to service technicians. I mean, we have seen examples where service technicians are being offered 50%, 60%, 70% higher salaries. That's an exception. But all in all, we see that for instance for service technicians there is a pressure upwards. Clearly that would be the main element of it. On the sales side, we have seen it less like that because a lot of that has to do with incentives. But in average, we see probably on a worldwide basis, we see that service is something that's going up. I see it less in Asia. I see it partially in China clearly. The highest element of that probably is in the United States where I see that. We do have some elements in Australia, for instance, where we see that or in South Africa, Brazil, for instance. So it's not everywhere, but we see dependency of wage costs in inflation in a way clearly the way you explained it. But that would mean that usually you have over the past few years you had probably 2% a year wage inflation and now we are rather talking with the mix shifting and the pressure in service that it's probably around 3%, 4% or even higher, just to get a simple number on it? Right. Well, what we have seen in the first half, maybe, Beoth, you can talk to that. It's actually in the mix. It isn't that big at all. Yes. So for continuing employees with regards to salary increases and the inflation adjustment, we do see a 0.7% increase compared to H1 2020. So it is not significant. We're talking less than $1,000,000 of cost increase. And you also think that this 1% increase, that will not change going forward? Or do you expect more pressure to come when you look into 2H and probably next year? I think it has to do with the hiring, as Alex has pointed out, right? When we get new people on board, new service technicians on board, that's going to be especially in the U. S. Where inflation rates are higher than 5%, that there will be a pressure there. And what is inflation on the one side, but also just the competitive situation that everybody wants to hire service technicians, it looks like. But clearly, that's going to go up in the second half. That would be our expectation. What do you see? Okay. And then last time we were talking, you mentioned that raw materials aren't a big problem right now, the cost inflation we've seen there, but that you fear that it could become a problem for your clients and they could delay orders and just wait. What do you see here? Is that becoming a problem? Or is it already less of a problem prices peaked a few months ago? What do you see here? Well, it's a little bit of a mixed picture. I mean, higher raw material prices or for instance, steel price, of course, also hit us to a certain extent. But we were more worried what that could do to our customers and I've had a lot of discussions with customers and what they would do with it. And what we see is that different what we thought initially that this could be sort of a breaking situation. We see that a lot of our customers have been able to get the higher prices towards the customers itself. And it was actually quite a positive effect because they had a lot of our customers have significant stock of steel for instance, different types of steel. So they had also an effect that they had lower cost in stock versus what the market is versus what they could charge to their customers. But that's, of course, only temporary effect. So I see less of that worry right now in the horizon, to be honest. And also, we see customers that they see more or less the same as you just said that they said, well, basically, steel price has peaked. We see that changing again. And most of what we have seen has really not affected our business as we thought it could potentially do. Okay, great. Great to hear that. And then the last question on ESG. How do you handle ESG in innovation R and D? Do you have or will you make a new strategy to see more R and D money to improve the environmental aspects, the environmental footprint of your machines? I guess this environmental footprint could become a major selling criteria rather sooner than we think today. Absolutely. Absolutely. You have hit a very significant aspect of what we're working on, which is a life cycle assessment for our products. And you will see that this is becoming a really, really important part of us going forward because we think what that means for their carbon footprint. I mean, I shouldn't say too much about it, but you will see more of that maybe half a year down the road. Certainly, in the report we're going to do, that's exactly our focus we have. And we feel that this is what I mentioned in the ESG slide is that we don't see ESG as just a reporting matter itself. We really want to make an impact with that. And we think we can and we have phenomenal pieces. Okay. Excuse me, I was on mute. Sorry. Let's talk about cash. If I have correctly in mind, you said that from the sale of Mammut EV is €213,000,000 When I make my math, deducting the earn out and the debt, then I get €125,000,000 But in the half year report on Page 20, I see that the net cash was €91,000,000 Can you explain me where this difference is coming from the €125,000,000 to the €91,000,000 you are disclosing now? The same is true for the foreign partner. I have in mind that you should get €250,000,000 this year and €20,000,000 next year. And you disclosed our €231,500,000,000 So I'm always missing some €20,000,000 €30,000,000 Yes, I'm happy to take that question. The EV, as you rightly pointed out, was $230,000,000 and it included the earn out of $45,000,000 So but what you need to take into consideration there is that and I'm taking Mammut now. So there was liquid assets at Mammut of and then a financial debt and intercompany debt financing from the Consepta Group. So if you net that out, you're getting to about SEK 110,000,000. So you take that out and then you get into the and then the vendor loan, you take out SEK 1000000000, then you're getting to about EUR 90,000,000. Okay. Got it. Does that make sense? Yes, it doesn't make sense. It doesn't make sense, but I had so many numbers now. No, no, no. It's quicker to ask you than I, yes. Understand, right. Maybe the debt that intercompany the financial debt and the cash that is Yes, it's mainly the cash I see in our Page 20. The same is true then also for the phone partner situation. Yes. I can see it now here, of course, yes, because you don't get cash for cash or you can't let it out. Then you now have your value broker, you don't have any net debt time. There's no debt. And so net debt or net is net cash. Last year, it was a special dividend. Can you give us some more flavor? Or do you even start a share buyback? Or what's the plan in general? And in what time frame? We'd expect in the future to hear more about it. Maybe not in next 3 months, but in the next 12 months, 18 months, 24 months, you will see what we have been working on. And of course, I can't disclose this. I'm sorry for that. Okay. So you stick to M and A with this CHF440,000,000? We do look for M and A opportunities. That is correct, yes, as a part of what we could do with that cash, correct. And from From the webcast, sorry. I'll hand over to Ms. Rudi Schauser to read out questions from the webcast. Yes. We actually have a couple of questions from Walter Baumer from Zurich Cantonal Bank. I'll start with the first one. It relates to headquarter costs. The question is, does the adjusted EBIT margin of 8% in H1 include all ongoing headquarter costs? Or is there an additional charge to be expected in H2? So I will take that. Good morning. So the adjusted EBIT margin for H1 does include what we call the transformation costs and that has all been booked by the end of H1 2021. So there's nothing to be expected for the remainder of the year. What is included in the 8% is what we call the stewardship cost, which is going to continue. So that will also happen in H2 and going forward in 2022 and 'twenty three. So the adjustment only includes the transformational costs. And as we have communicated historically or Conseca has communicated historically and these costs have actually been borne by Conseca and have not been cross charged to the business units, it is about €3,000,000 a year. So also for the second half then, it's about €1,500,000. So that would be the first question from the chat. Maybe is there another one, Doris? Yes. There's actually another one related to this question to the margin guidance. The question is, is it 8% to 9% guidance for reported or adjusted figures? So the margin guidance is for the reported numbers. So it includes the $5,100,000 that have occurred in the first half of H1 2021. So, if you were to take those out, you could add about 0.5 percentage points if you wanted to calculate an adjusted EBIT number for the full year 2021. So instead of 8% to 9%, it would be 8.5% to 9.5%. Okay. Doris, this host that the last one from the chat? There is actually one more. It relates to the order intake pattern. The question is how did order intake develop on a monthly basis? And has there been a slowdown at the end of the quarter or in July? Yes. So, Q1 was already very strong. We were reporting over 50% of order intake. And then actually, the Q2 has even accelerated. So, that's why we have been reporting over 60% of order intake on a year to date basis at the end of June. July, Alex, you want to comment on that? Yes. July was actually really a really good month for order intake. It was in line with the month we had in before. We would have expected a bit of slowdown, simply because of seasonal effect, vacation effects. We didn't see that. You're probably going to see that a little bit in August for those reasons. Typically then September, October are a little bit stronger month after that. That's what I would see. I hope I've answered that question, the 3rd question from the chat. Doris, over to you. Are we done with the questions from the chat? There are questions the remaining questions from the chat have already been answered before. So we're done on the chat. Yes. Okay. Well, thank you very much, Doris. Alice, I think we have answered now the questions from the phone as well as from the chat. I would like to hand it over to you, Alice. So I'll hand our close here by the Q and A session and hand over to you if you have some closing remarks. Yes. Well, thank you very much. It was a great pleasure to talk to you and get your feedbacks and questions. We are really very happy about what we were able to establish in the first half of the year. We're working very hard to making also the second half of the year a really nice success and looking forward to talk to you in the future about that second half year as well. I wish you a very successful rest of the week. Stay healthy and thank you very much for your attendance. Have a good day. Thank you. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.