Ladies and gentlemen, welcome to the Cicor Half Year Report 2025 conference call and live webcast. I am Matilde, 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&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Alexander Hagemann, CEO. Please go ahead.
Thank you very much, Matilde. Good afternoon, everybody on this call. Very happy that we have a very large number of participants here. Today, as most of you have participated already, we will again present our numbers and, of course, some of the background information in the first half of this year, which will be done by Peter Neumann, our CFO, and myself. Moving to the next slide. This year was so far clearly a year with marked great steps towards the pan-European leadership in our chosen markets that we are looking for. Our chosen markets, as most of you know already, are those where we are talking about mission-critical electronics, electronics where lives depend on, where the safe operation of important assets depends on. These are the markets of aerospace, defense, industrial, and healthcare technology.
Now, if you are looking into these three markets, what they do really have in common is an extremely high demand to quality reliability of what we are doing. First and foremost, the market for aerospace and defense, 28% of pro forma sales this year are in this market, where Cicor is present on above-sea, below-sea ships, in the air, and satellites, etc. The industrial market is still our largest market, where Cicor drives miniaturization, automation, and very important applications, sensors, semiconductor equipment, and so on. Healthcare technology, 19% of pro forma sales, where Cicor has a leading position in medical wearables like hearing aids, but also present in fast-growing markets like surgery, robots, implants, and so on. Going to the next slide. That is what Cicor is really looking for. We are looking for pan-European leadership.
We have made, over the past six months, major steps in expanding our position in the European market, and I will discuss that later. The vision for 2028, towards which we have made these important steps forward, is to become the leading pan-European electronics design and manufacturing partner for the markets that we have chosen. Being pan-European for us means a very strong market presence, but also a presence in engineering and manufacturing wherever it is needed. That is a clear USP of Cicor that is extremely important, especially for the market of aerospace and defense, where domestic manufacturing is absolutely key. Now, when we are discussing the first half of this year, we need to understand that the numbers of Cicor that Peter will present in detail are impacted by a number of effects that need to be reconciled to understand the true and underlying performance of Cicor.
First of all, what you will see, it is the timing of M&A. If we are reporting net sales growth of 21.4% year on year, which was driven mostly by acquisitions, of course, this is very much impacted by the timing of our acquisitions, where in January we already consolidated Profectus Solutions. Then in April, we took over Éolane France and Morocco, and in June, one factory of Mercury Systems International. So, you can see that the numbers are heavily impacted by the timing of those acquisitions. Additionally, what you will see is for a proper reconciliation of our segment profitability that we have started to allocate corporate costs in a more proper and transparent way to our segments. Therefore, you need to add 85 basis points to segment profitability to make them comparable to the previous year.
Now, talking about the business and looking at how the EMS market in Europe looked like over the past year and also the first half of this year, we are especially satisfied with the fact that we are returning to growth. We are returning to organic growth and record a positive book-to-bill ratE for the full first half of this year, whereas last year was still marked by a significant contraction of the order book as the result of inventory reduction from our customers. As the effect and as a result, you can see a positive organic growth in quarter two. When the first half of the year was still a slight negative on organic growth, the second quarter really marked the turnaround back to growing business.
We are very satisfied with the profitability of our business on a comparable level that is when reconciling for the effects of the Éolane France integration, about which Peter and also I will talk more about. You saw an increase of 50 basis points in the operating margin, EBITDA margin, to 11.2%. Peter will comment on the free cash flow. We continue to work very disciplined on net working capital to make our capital investments also very effectively and thus can report a significant free cash flow before acquisitions and also adjusting, of course, for the Éolane France acquisition. Last but definitely not least, I will come to that at the end. As usual, we are able to increase our full-year guidance. Now, timing of acquisitions I've already mentioned. It is especially important when we are looking at sales by industry. Here, you see two charts today.
On the left, you are seeing the reported numbers from the first half, and that is the consolidated numbers including the acquisitions as per the effective date of closing of the transaction. Again, for Éolane , that was in April. For Mercury Systems , this was in June only. There is no contribution yet from the acquisition of MADES Spain, which will be closed only in the very near future, in Q3. If we are looking at a pro forma basis, with a full-year contribution, which is theoretical but shows the proper run rate of the Cicor group, you are seeing the following distribution. Industrial is still the most important market. It is diverse. It is many high-tech applications, as I mentioned already, being a bit over a third of the business, 36%.
Aerospace defense, already the second largest market, more than a quarter of the business, almost 30% with 28%. That is an increase of three points over the previous year and is driven, obviously, by acquisitions but also organic growth. Healthcare technology as the third of our strategic markets with 19% of sales, a very attractive market for us. However, the share has been reduced because our acquired companies have a little contribution to healthcare technology markets. By regions, we see a continued move towards Europe, again, sales to the Americas and Asia. Let me say one word about the Americas. Direct sales of Cicor that are affected by the U.S. tariff regimes, whatever they will look like after August 1, are only 0.5% of sales. There is almost no direct impact of the U.S. tariff regime on Cicor direct sales.
Special importance for us is the expansion of our presence in the aerospace and defense market. This is to provide a platform for our customers that is capable of not only fulfilling demands of today, but also that is able to scale up with the customer demand. Very honestly, the significant and most significant growth is only happening now and in the years to come. Our aerospace defense programs take very significant timing from the decision of a program until we see the realization. Therefore, we are the one company, the one partner that has the most scalable, robust, and secure platform for aerospace and defense electronics manufacturing throughout Europe. If you look at the map on the right, the pan-European presence of Cicor is a reality. You are seeing a presence in the most important markets for aerospace and defense, which is Great Britain and France.
Germany is a very fast emerging market for aerospace and defense. We are able to offer scalability and attractive costs in Romania, obviously, also a NATO member. Very important for us is also our presence in Spain. Cicor is more of a true one-stop shop than anybody else in the industry because Cicor is able to offer all the services across the value chain, from systems engineering, critical components from our advanced substrates division, assembly, and also the service that is required. What you are seeing in Cicor, a clear USP in the industry, and also in the numbers that you are seeing, leadership in the European market of aerospace and defense. Overall, the division recorded a 26.2% increase in net sales, which was obviously driven by acquisitions. Underlying profitability could be increased again to 11.1%.
This number, which is adjusted for the Éolane France integration, to which I will come in the next slides, has been an increase over the last year when also considering the allocation of corporate costs to the segment. When looking at these numbers, we see roughly a 30 basis point increase in the operating margin. The integration of Profectus Solutions in January and Mercury International in June have worked very well. We are very satisfied with the status where we are. The Éolane France integration, I'll come to that, has been marking a very, very important step, and we are on target to achieve our objectives for this acquisition. The Spanish market entry with the acquisition of MADES, a highly successful business with a seasoned management team and margins slightly above group average, has proceeded very well. Closing is subject to regulatory approvals.
As is usual in the aerospace and defense market, it takes a little bit more time, but we expect to be able to report very soon progress in that area. All this together leads to very satisfying progress towards pan-European leadership in our chosen markets. I've mentioned Éolane France. We need to look at France as being the second largest market for electronics in Europe overall, behind Germany, and being the second most important market in Europe for aerospace and defense, behind the U.K.. It is extremely significant and important for us to be in that market. Establishing this strong position in France, therefore, was absolutely strategic. We were very satisfied that, as an effect of a restructuring of Éolane , we were able to work very closely with the Ministries of Defense and the Ministry of Finance of France to secure this business.
Securing the business is important for many of the leading aerospace and defense integrators and other French customers. Therefore, it was of very major importance to have a smooth transition, which we managed. All the sites remained operational. The social climate was very positive. We were able to do the integration of the businesses smoothly. You also see Morocco, two manufacturing sites in Morocco that we are now operating in Cicor. Morocco is a highly competitive and logistically attractive, politically stable manufacturing location for electronics in Europe. You really have to see Morocco as a country that has very favorable trading terms with many countries in the world, including the U.S., including the E.U., and Asian countries. You see Morocco being logistically, obviously, extremely close to Europe and labor rates being comparable with Southeast Asian nations. Morocco is also a very, very attractive addition to Cicor.
Looking at that acquisition, it has been an acquisition out of a regulated bankruptcy proceeding. That has the consequence that you will need a bit of interpretation of the Cicor results of the first half to understand what it really is. That is the nature of this transition. Purchase price, in this case, is less than half of the cash investment that we did. For a business with CHF 120 million annual business, of course, a very low purchase price of €7.3 million, plus the transaction cost of €2.5 million, and we acquired €3.7 million cash, which came with the business. Now, as out of the seven sites, we have acquired five sites in good standing. That is as shared transactions. We have acquired two sites out of bankruptcy. These were asset transactions. Here, we were investing €9.1 million to pay off certain debts and also to rebuild networking capital.
You have to consider the overall investment of €15.3 million, including all these effects. Now, €15.3 million, that is the investment for a business of roughly €130 million annually. You are seeing that is about 12% of annual sales that were invested. I would say a very unique value creation opportunity as we are now progressing towards making this a good and profitable business. When understanding the annual numbers or the half-year numbers, we also have to see that €2.5 million of these cash investments have been recorded as negative EBITDA, which is integration cost and business continuity. Please look at these numbers in a holistic way, and then it will be easily possible to understand the performance of Cicor. Our other division, the AS division, is a more and more robust business.
It is a business where we have made significant progress by consolidating the Backnang site, a small site that we acquired a few years back. We are progressing now in consolidating our own Germany site into our main site in Switzerland in Wangs. At the same time, our PCB site in Boudry, Switzerland, has finalized very important operational excellence programs and is now very robust in their business. Therefore, even through a reduction of reported sales, which was significant, 19.2% reduction of sales caused by very sharp inventory reduction of the two largest healthcare technology customers, has still seen an almost stable operating margin when considering the shift of corporate allocations with 13.3%.
Now, when the inventory reduction is over, which we believe is pretty much the case now, we can expect a very interesting uptick in margins in the future as that is a business that is very highly volume-dependent. With that, I'm very happy to hand over to Peter to report in more detail on our financial results.
Thanks a lot, Alexander. Let me lead you through some more details of the half-year financials. If we go to the first slide, the key figures. Here, you can see that we are achieving a record revenue in EBITDA in absolute terms as we are successfully implementing our growth strategy. You see the book-to-bill of 1.02 clearly indicating future growth momentum. As Alexander said, we are back to organic growth in Q2.
Also, if you look at the entire half-year, the majority of revenue growth with 25% year- over- year is driven by the acquisitions. If you look at EBITDA profitability, we should look at the base profitability progression at Cicor that is very healthy with 50 basis points improvement versus 2024. We acquired Éolane in Q2, and this had a negative impact on the profitability. This is in line with our business plan, and the negative Q2 Éolane results are non-recurring in nature, and we expect a positive contribution for the second half of 2025. On the base, we have a strong free cash flow performance with a free cash flow to EBITDA conversion of 64%. We remain extremely disciplined as a solid and reliable free cash flow generation is the engine of our growth strategy. You can see this as well in our CapEx that is below 2%.
We have a strong base net earnings performance. FX and Éolane are non-structural impacts that I've explained later that distort the underlying performance. Quick step back on the long term. As you can see, excluding Éolane , first half is a record in revenue, EBITDA, and margin progression. Over the past year, Cicor has proven that it is able to grow profitable with a balanced organic and inorganic growth. The objective is clearly to continue this progression as we announce in our 2028 strategy to reach more than a billion Swiss franc revenue. Now, half-year 2025. Reported growth of 21.4% on revenue. M&A contributed 24.8% sales growth. FX, as the Swiss franc has strengthened mainly against the US dollar, but also against the pound, is - 1.4%. Organic sales is - 2.1%.
The decline, as Alexander said, is shared in the Q1 results by the exceptional STS materials sales in the base and the de-stacking of two medical customers in the AS division. Excluding these two effects, we are back to organic growth with momentum picking up. On EBITDA, we had a one-time impact, and you see this always. I show this on the white, the elements excluding Éolane , so that you transparently see the performance on the base, excluding the Éolane non-recurrent effect, and with all-in numbers. On EBITDA, we had a one-time impact from Éolane of -CHF 2.5 million, and you can see how the base business is progressing from 10.7% - 11.2%. Net profit is on the base, progressing solid. FX, we saw a big swing. Last year, we had in the first half FX helps.
This year, we saw the opposite effect as the Swiss franc was strengthening. On the free cash flow, Alexander already explained, the CHF 9 million investment in Éolane would have rather been looked at in the context of the M&A business case. Base business free cash flow conversion is really strong. Recall, our objective is to remain above a 50% conversion, and in this case, we are at 64%. Now, if we look at the P&L statement in detail, I mentioned already the key drivers up to EBITDA. I want to draw your attention on if you look into EBITDA to EBIT two elements. One is clearly the depreciation of property, plant, and equipment with 2.5%. On top, we see also an amortization of 1.4% that is driven by the intangible assets that we acquired through our acquisitions.
On the financial income, we continue to see low and reduced interest expenses as the SARON reduced. Even more importantly, and this is that we have a smaller overall financial liability, but I think it's really exciting if you look into the number of acquisitions we have made. In New York, it's showing also the impacts of the free cash flow delivery in the last year. On net FX results, we had a help in the first half of 2024, but we see the negative in 2025, creating a significant swing. This is non-cash impact that comes from our intercompany financing. The tax rate is impacted by this. You should look at the tax rate excluding this net FX result as this is not having an impact on the tax in absolute.
States contribution, you can see M&A there, TT Electronics plc that we only closed in April 1st, 2024, and Éolane are the two major material impacts. You can see that EMS is growing, taking out the one-time STS impact. We would have been growing even CHF 5 million. AS impacted by the two medical customer de-stocking, as Alexander previously shared. Now, moving on to the balance sheet, Cicor continues to maintain a really strong balance sheet. Our balance sheet also shows the focus of Cicor to optimize our invested capital in delivering free cash flow. Net debt increased to CHF 73 million due to the executed acquisitions. Leverage, we are at this point in time at 1.16, giving us significant headroom for further acquisitions.
After assuming, you know, as we expect the MADES acquisition that is pending clearance to be closed in Q3, we would expect that we have afterwards another CHF 100 million for further M&A available. Equity ratio at healthy 30%. Free cash flow, excluding NA and M&A impact, is at CHF 18.1 million, mainly due to a strong operational performance and net working capital improvements. You can also see that we had a total net cash outflow of CHF 18 million for the acquisitions of Profectus, Éolan e, the [car vault] for Mercury International . Generating sustainable free cash flow is a critical priority and a key pillar of our growth strategy. Some words on operating net working capital. We continue to focus on improvement in reducing net working capital as a percentage of revenue versus last year. The absolute increase is obviously driven by the acquisitions.
We are now at 25% in line with what we had at year-end levels in 2024. This is driven by an operational improvement on the base to 23.6% and the new acquisitions that came in at higher operating net working capital levels. I personally always like this one because as acquisitions come in with higher operating net working capital levels, we are able, and this is a significant opportunity, to deliver free cash flow as we are implementing our operational excellence program in the acquired company, as we have done in the past as well. Return on the capital remains our focus. It is really clear growing absolute improved profitability and managed invested capital that is in our business to a large extent operating net working capital.
[June impacted] by Éolane non-recurring effects and M&A coming in at higher operating net working capital levels, overall, we remain at excellent momentum on ROIC. The elements mentioned are rather an opportunity to further improve going forward. We reconfirm our commitment to deliver ROIC above 15% as per our strategic 2028 midterm goals. Here you see some more perspective on the impacts driving net earnings decline, which are important to understand. You see that the base performance in absolute net earnings is strong year- over- year. You see the two FX impacts, the negative, so the help, the one-time help we saw last year that is obviously non-recurring in structure and the one-time hurt we had this year driving this big swing year- over- year. You see also the Éolane impact that on net earnings is close to CHF 3.5 million, CHF 3.4 million of negative.
These are the drivers, but I think it's important to understand that excluding, and we really look at clear FX, we have a very strong continuous progression. That is also what you see on earnings per share. Here you can see the longer-term earnings per share development and the recent positive development as Cicor is executing its growth strategy. Blue are the reported numbers that include the FX variability. From our view, you should look at the red line that excludes the foreign exchange impacts driving a certain variability. The red line for 2025 includes also the negative Éolane impact. Again, our focus is to drive earnings per share longer term in line with our growth strategy and drive shareholder value.
On the capital structure, good news is at this point in time, 99% of our managed to convertible bonds are converted during the optional conversion period, and we are back to a very easy-to-understand capital structure as the number of outstanding registered shares is also the one, pretty much the same as the number of outstanding and conditional MCN shares total number. Second point, market capitalization is above CHF 700 million and even higher looking at current share prices, which I think is also excellent news. Now, you see in the half-year report, we really integrated three acquisitions. The most material one and probably also the most important to understand is Éolane. I think here you see the purchase price allocation of Éolane a bit more in detail. The purchase consideration is CHF 10 million, as mentioned, including transaction costs, and the acquired cash worth CHF 3.7 million.
The deal structure was partially an asset deal for two sites and a share deal for the remaining five sites. The asset deals brought clearly some complexity but came with benefits regarding organizational restructuring and past liabilities. On the share deals, we had similar complexity as French Chapter 11 process led to operational disruption. We have now, in June, normalized most of our operational relationships with customers and suppliers. We have now a solid baseline to drive from gradual improvements as we have done in all our acquisitions, and I see Alexander also elaborate on. Overall, we booked a negative goodwill of CHF 12.9 million for Éolane. Now, if you take the three transactions together, you see this year, a total net cash outflow of CHF 18 million and a total negative goodwill of CHF 8.7 million if you take into account Profectus as well as Mercury acquisitions.
With this, I hand over back to Alexander.
Thank you very much, Peter. It is important to understand, looking at Cicor, and we tried our best to make it as transparent as possible to you that we have seen a first half year with a very strong progression of underlying operational performance. On top of that, the integration of Éolane France and Morocco, where we paid again roughly 12% of annualized sales as a complete cash outflow, has an enormous opportunity for value creation once the margins are coming closer to the Cicor levels, which we expect to happen in the next 18 months. These are truly the two elements to look at: the strong underlying business plus the value creation opportunity from Éolane.
It is also important for us to continue on our growth strategy as we have done in the first half and at the same time be very disciplined as far as cash outflows are concerned and as far as the leverage of the overall balance sheet is concerned. Looking at our expectation for the rest of the year and the total year, we are seeing very clear signs of return to organic growth already happening in Q2 and looking at the larger the EMS division even for the full first half. We discussed progress in integrating the recently acquired businesses, very positive on Mercury , and continuing according to our playbook for Éolane France. Therefore, we are able to increase our guidance on the sales, so on top line and also bottom line.
Talking about our top line, we are seeing now sales of CHF 620 million- CHF 650 million, and these are not pro forma sales. These are reported sales. If you're looking at pro forma sales, you are seeing a number which is roughly at CHF 700 million or higher. On reported numbers, you can expect CHF 620 million- CHF 650 million sales, which is significantly more than the CHF 520 million- CHF 560 million in our former guidance. On operating result, when we are reconciling for the one-off effects from the Éolane integration, we are looking at CHF 64 million- CHF 72 million in EBITDA that we expect for the year, previous guidance was CHF 60 million- CHF 70 million.
If you are including the roughly CHF 2.5 million negative EBITDA from the Éolane integration, you're looking for CHF 62 million- CHF 70 million EBITDA. We are specifically glad that we are able to increase our guidance both on top and bottom line, especially because the significant strengthening of the Swiss franc over the past few months against the euro, and of course, especially against the US dollar, has provided us very, very considerable headwinds slowing down, obviously, our growth. This tells you that underlying and adjusted for forex, we are very positive about our business. With that, I want to thank you very much for your interest, and we are happy to take your questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone who has a question may press star and one at this time. As a reminder, if you wish to register for a question, please press star and one on your telephone. The first question comes from the line of Leah Süss from AWP Finanznachrichten AG. Please go ahead.
Good morning, or good afternoon, actually. Can you hear me?
Good afternoon. Yes, very well.
Okay, perfect. Thank you for the presentation. I was wondering, looking at this graph of your markets, can you say in what direction you want to steer these percentages in terms of maybe new acquisitions or where do you want to land?
Very good question. Thank you very much for that. We are seeing clearly that we are having significant growth in aerospace defense. It has been our strategic objective to build that European leadership, which we have now achieved. Aerospace and defense will continue to grow organically. I expect in the next few years faster than other markets. At the same time, we want to specifically grow the medical, so healthcare technology markets. For me, the perfect scenario are each of the three core markets, roughly 30% of sales each and 10% for the rest.
Okay, very interesting. What about the regions? Would you also like to go even more into Europe or maybe a bit more balanced?
We have been very clear that we are focusing on the European market. It has served us very well, and we have always said that being a leader in Europe is better than being a follower everywhere. We have to understand that also our Asia sales are mostly driven by companies with headquarters in Europe. The one region where over time you will see more works to grow in that market is North America. I would expect that medium term you will see the American share of sales growing a bit.
Okay, thank you very much.
Thank you.
We now have a question from the line of Alexander Zienkowicz from MWB Research. Please go ahead.
Hello, good afternoon. I have a question on the acquisitions and over what timeframe do you expect to realize the full operational and strategic synergies, especially in regard to Éolane and perhaps also for MADES? When do you expect meaningful contributions in the P&L and also in terms of capital returns? Thank you.
Thank you for the question. If I start with the last acquisition, which has not yet been closed, which is MADES, this is a very robust business with profits above the Cicor average, profit margins above the Cicor average. That will be accretive from day number one. We don't expect any significant integration costs here. It is very much a business like our first acquisition that we had done, which was Axis Electronics three and a half years back. With MADES and Éolane France and Morocco, we are looking at roughly 18 months, so until the end of next year, to realize the full synergies and operational improvements that we want to see.
Okay, great. Thanks.
The next question comes from the line of Bernd Laux from ZKB. Please go ahead.
Thank you. Good afternoon, Alexander and Peter. I have two questions. The first one is also related to Éolane . You reported that CHF 2.5 million EBITDA loss for the first half of the year, and at the same time, CHF 2.5 million transaction costs. Does it mean that the underlying business of Éolane would have been break-even in the first half of the year? Is it also true for Éolane that, as is usual in aerospace and defense, the second half of the year is typically seasonally stronger than the first half of the year, so that profitability should improve, and there will be no further one-off's at Éolane in the second half?
Let me maybe take the first question on the CHF 2.5 million. The CHF 2.5 million transaction cost cash outflow has been before the acquisition and is part of our purchase allocation on the balance sheet, and it's not impacting at all the CHF 2.5 million. The CHF 2.5 million that you see in the P&L in Q2 are really linked to, let's say, after the 22nd of April. It took time for the asset deals, for example, to start up, start being again, start invoicing again, and so on. There are delays that are driving it in terms of a ramp-up operationally. The amounts are the same, but it's a pure coincidence. The purchase price allocation captures the transaction costs in the opening balance sheet.
Thank you.
To maybe provide a bit more background on everything that Peter said, we took over the business 22nd of April , so we had 10 weeks of cost of the business. Due to the restart of the business, we roughly had maybe six to seven weeks of full revenue. Reduced revenues as suppliers had to restart their deliveries. We had to get systems up and running again, as Peter has just mentioned. The cost, of course, was continuing. That is the reason for the losses in the first 10 weeks.
Thank you very much. That's very helpful. My second question is related to the other sales segment. It has, on a pro forma basis, even slightly increased year- on- year to approximately 17% of total. Can you shed some light on what's inside the other sales and what's growing there? Thank you.
What is growing and what I would consider personally as a highly interesting market is rail technology, mostly railway infrastructure, where we have gained significant new customer relationships. That is a market that, from all of its characteristics, I would even consider strategic. This is several percent of sales now. It has been a very small percentage before, maybe roughly 2%. Now it has grown to 3% - 4% of overall sales. That is the biggest impact that we have seen.
Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question comes from the line of Lukas Spang from Tigris Capital GmbH. Please go ahead.
Yes. Hi, good afternoon, gentlemen. I would like to start with the aerospace and defense segment or the industry segment of aerospace and defense. It was just 7% up in the first half. I would be interested if you have already some visibility that this will accelerate in the second half of 2025, or what is your expectation for aerospace and defense for the next month and quarters?
The biggest impact, as we have said already, is, of course, the timing of the acquisition. This is why we have provided the two views. Reported sales were, yes, we saw a reduction of percentage as those businesses with high aerospace and defense exposure were only joining later. Now, moving forward, we clearly see that increase towards the range, as we mentioned, roughly 28%. We expect organic growth above the average of all the businesses. You can expect a year- over- year a double-digit organic growth of the market. It is not as massive as some might expect because many programs are only starting to lead to high sales numbers in 2026, 2027.
Okay. If we talk about, I know it's just some weeks, but if you talk about the start into Q3 and the auto momentum, did the positive auto momentum continue so far?
It is very difficult to make any statement here because, as you said, we are only three weeks into Q3. We are in a period that in Europe, at least, where, of course, our biggest market is typically a bit softer due to the summer period. I would not be able to draw any conclusion from the last three weeks to the second half.
Okay. Last question regarding the cash outflow in the second half of 2025 for M&A activity. If the closing of MADES has not been finalized yet, is it right to expect that this is the only purchase price you still have to pay this year?
I'll leave this to Peter.
I think it's fair to assume that the majority of cash outflow has happened in the first quarter. There may be some amounts still in the second half, but they're clearly significantly lower than what you've seen in Q2.
Have you already paid the purchase price for MADES?
Sorry, no, I was referring to Éolane.
I know.
MADES, we are awaiting regulatory clearance. You would expect for a business that is more than half in aerospace defense and has margin above Cicor margin, probably the higher end of our guidance, where there's a 4 to 7 EBITDA multiple. If you do the math, then you would come to a net cash outflow of around CHF 30 million.
This is from today's perspective, the only cash outflow for M&A in 2025, right?
Look, we haven't. Exactly.
Yeah.
Okay, that's all you can expect for everything that is announced today.
Yeah, exactly. Perfect. Thanks.
Once again, to ask a question, please press star and one on your telephone. We now have a follow-up question from the line of Alexander Zienkowicz from MWB Research. Please go ahead.
Yeah, thank you. A follow-up on the railway, actually. Given the recurring nature and long design cycles, do you see this as an area of strategic expansion going forward, or is this already baked in in your plannings?
It is a very, very good question. It's actually a question we are asking ourselves. The reality is that from all the characteristics of this market, which is really the closeness to the customers, the difficulty to replace, really the clear USP that you have in that market by being a French supplier, it has all the characteristics of being a strategic market. Of course, at 3- 4%, it is a relatively minor part of our overall business, but we will work to strengthen that market. It is a clear interest that we have.
Okay, thanks.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Alexander Hagemann, CEO, for any closing remarks.
Thank you very much for your interest and for your questions in our company and to our investors for your trust in our business. It clearly has been a very exciting first half year. We have made this very major step towards pan-European leadership, on which we can now build in many ways, both in expanding organically our market presence in the markets and countries where we operate, and also in driving operating margins to create value. We were trying to explain that to you as some of the numbers that you are reading have to be reconciled, and I apologize for the work that we are causing to you for that. It is important that we are reporting our numbers in a way that is transparent and can be understood well. Thank you again for your trust and your interest.
I wish you all a wonderful afternoon and say goodbye for now. 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.