Ladies and gentlemen, welcome to the publication of the half-year results 2021 conference call and live webcast. At this time, it's my pleasure to hand over to Edwin van der Geest, investor relations. Please go ahead, sir.
Yes, thank you very much. Welcome, ladies and gentlemen, to our call. I'm very sorry that we picked such a wonderful day as today. It's the first day not raining since days, and now you have to stay in your office and listen to us, but I hope some of you are already somewhere on holidays and listening from the beach or wherever. We start our call as usual with Thomas, our CFO, who will go through the figures, and then Jens, our CEO, will go in detail into the divisions and give you an outlook of where we are after this very interesting and demanding half year. That was the short half year that is influenced by the pandemic. Thomas, please, may I ask you to start?
Yeah, sure. Welcome everybody to this conference call from my side. We look back to a very positive first half year 2021, with very positive and good market condition. This was also affected by customers investing in automation because of their learnings and experience during the pandemic. Last year, we mentioned that we expect a rebound in order intake and also net revenues. This is what is happening and materializing right now. We see a rebound in order intakes, and this is really boosting our order intakes in the first half year 2021. Unfortunately, this is not resulting in higher revenues for the time being. For this, I will come on later. Profitability has been increased on all levels and in both divisions. We continued with our strategic investments and pushed the programs further down the road.
Let's have a look at the key figures over the last cycle of the last 5 years. This becomes more and more important, especially based on the pandemic, because we don't want to look back only 1 year. We want to see how the performance is compared to the pre-pandemic period. Looking at the net revenues, we see that net revenues amount on the same level as past year. There is only a slight decrease compared to 2020. If we compare net revenues to 2019, the pre-pandemic period, we see a decline of 10%. If you look at the CAGR, the CAGR from last year was 5.1%, and this year it amounts to 3.8%, so a slight decrease based on non-increase of the net revenues. If you have a look at the EBIT, there we see an increase of 12% compared to last year.
Again, if you compare it to the pre-pandemic period, there it is a decline of 5%. We're 5% below half year 2019. On the other side, if you look at the EBIT margin, the EBIT margin went up to 13%, it's very strong. Again, looking at the CAGR, the CAGR went up from last year's 7.5% to this year's 7.7%. The net cash flow from operating activities amounts to around EUR 25 million. This is the second-best result looking at the cycle here of five years, and it was only beaten by 2020, EUR 26.3 million. All equity and equity ratio are very strong and remain strong and confirm a healthy and solid company. Let's look into the details of the income statement of this year. There on the bookings level, we see the increase of a bit more than 50% compared to last year.
This EUR 302.5 million bookings represent the book-to-bill ratio of 1.46. The order backlog of EUR 313.4 million also represent almost an increase of 50% and are also representing a visibility of around 9 months. Net revenues, as explained before, remained on the previous year's level. Looking at the gross profit, the gross profit went up by around 5%. The gross profit margin was further increased from past year's 34.6% to now 36.3%. Main reason behind this increase is the sales split. We have a higher share of LCS business compared to the share of new business. As you know, LCS business is likely higher margined than new business. The operating expenses, they are under control. You see an up of only 1%. The EBIT. EBIT of EUR 26.9 million, representing an up of 12.1%. The EBIT and also the EBIT margin of 13% were never achieved before by Kardex.
The EUR 26.9 million EBIT. There is also close to EUR 1 million extra cost for the new kits, Robomotive and AutoStore. Looking further down the income statement, the financial result is EUR 400,000 better than last year. The main impact there are positive exchange rate impacts, or less negative impact than last year to be more precise. The tax rate remains on 24.3%. This despite the guidance of around 26%, but this year we had exactly the same geographical split of revenues and therefore also the profits. This is the reason why the tax rate travels below the guidance of 26%. Looking at the cash flow statement, there I want to explain beforehand one topic. This is that we have started to reallocate cash into financial assets, mainly to avoid negative interests, and this has impacted the cash flow statement.
If you look at the net cash flow from operating activities, there the displayed amount is around EUR 25 million, there we have a shift of cash to financial assets of EUR 21 million. Neutralized, we look at the net cash flow from operating activities of around EUR 46 million compared to the EUR 26 million last year. The net cash flow from investing activities travels around EUR 45 million. This is a high increase compared to the last year, also here impact of around EUR 14 million of reallocated cash to financial assets. If we neutralize this amount, we see that the CapEx are lower than previous year. Reason behind this is that last year we invested around EUR 10 million into our U.S. manufacturing building. Resulting free cash flow, EUR 26 million compared to EUR 10 million last year, up by EUR 16 million.
This was driven by the CapEx and also by net working capital. The net cash flow from financing activities is below last year, with around EUR 28 million. Reason here is that we paid lower dividend this year than last year. Looking at the balance sheet, there I want to highlight only three lines. One is the current assets, which went down by roughly 13% or EUR 27 million. Reason there is again, the reallocation of cash into non-current financial assets, which is exactly the reason why the non-current assets went up accordingly. On the passive side of the balance sheet, liabilities, also here, this went up quite heavily compared to last year. Reason here is that the business picked up. Last year we had the negative impact on the business, therefore slight positive impact on the net working capital, which went down last year because of reduced operation.
This year we have exactly the contrary effects in the net working capital, and this is reason why the liabilities went up. With this, thanks a lot for your interest. I would like to hand over to Jens for the next slides.
Good afternoon, everybody, also from myself. Very shortly on Kardex Remstar. The first division we want to talk about today, Kardex Remstar had a pretty healthy booking in the first half of 2021 with EUR 228 million compared to EUR 156 last year or up by 46%, which mostly comes from new business, but we've also been able to drive our service business further. In the targeted mix between new business and service, we've been able to increase our bookings accordingly. Order backlog as a resultant of net revenues and bookings went up to EUR 204 million, which you can see is substantially up on previous year's levels, 42%, which means we are really looking with a healthy and good order backlog into the, let's say, at least six months, if not nine months, ahead of ourselves. Net revenues have been trailing.
We call that trailing mostly because of ongoing site restrictions on customer sites. We've been reporting this about these restrictions already with the full-year closing, and that partially continued. It will ease up towards the middle of the year. Therefore it had not the full effect like last year, but still we've not been able to fully access customer sites for either new installations or for service works. We also, like many other companies, have seen shortages in our global supply chains, from delayed deliveries to us, up to non-deliveries, which actually put a bit of a stop on our manufacturing from time to time. That resulted in lower than expected net revenues of EUR 167 million, which is down by 4%, which is something we carefully monitor. I will get back to this in our outlook. The EBIT itself, EUR 26.7, 16% on EBIT margin, improved over last year.
Revenues mix is one of the elements that contributed to it. Economies of scale. We've been talking about certain volume costs in our factories, but also good cost management. Some of them being a continued saving on travels and marketing costs or exhibition costs, but also in other parts of the company, we've been able to manage the costs reasonably well. We continued with our investments in our strategic program to prepare ourselves for the future, They are pretty proud what Remstar has achieved despite these investments, to actually create a margin of 16% on lower than expected net revenues. Over to the next page. You see the development over the years. 16% at half year is also something new for Remstar in terms of EBIT margin.
We see the revenue mix on the lower left, where we see that service business for Kardex Remstar has increased to 34% compared to the 30% we have seen in 2020 half year. Something which I consider a little temporary, because we expect that net revenues in new business will pick up again, and we will get back to ratios more like the 30/70, compared to what we are seeing now, 34% and 64% that we are showing here. Over to Kardex Mlog. Kardex Mlog, little bit of a surprise also to all of us in terms of order intake. I think we already, with the full year, started seeing some upturn in bookings for Kardex Mlog in the last quarter, last year, and that continued. We had a very strong bookings semester, I would say, with EUR 73 million.
That is above, I believe, 2019 total numbers and also substantially higher than in the first half of 2020. 66% increase, something this organization has delivered, and I'm very happy about that. Net revenues, not quite the same pace. It's mostly driven, again, also by projects in new business, where projects are in-house. They are safe. However, they have their ramp-up periods and they have their percentage of completion and therefore net revenue is not yet in line with the bookings levels. Order backlog, as a result, also increased by 60% to EUR 108 million. I think that's a number that Mlog has not seen in the years at least that I've been party to this company. Something that this organization now has to manage in the months and years to come.
EBIT and EBIT margin due to the strict cost control and risk management in Mlog, I would say back on track if we keep in mind that we had a minor hiccup last year in 2020. We are back to, I would say, minimum expected numbers with the 5.2% in EBIT margin for Mlog. Over to the next page. You see the development over the annual comparison between net revenues development on the right-hand side, the EBIT development, EBIT and EBIT margin. You see we are slightly behind in comparison, not to 2020, but to 2019, on the same level of revenues. Something to look at specifically as we have a new revenue mix of service, 50% compared to 48 in the last year's first half of the year. Outlook.
As cautious and as always, we believe that we are looking ahead into a good future with some disclaimers, I would say. One cannot ignore that during this pandemic, the automation demand of our customers has substantially increased. Customers who previously did not want to invest in automation have now decided to look into automation. Reason being mostly availability, or rather to say, non-availability of people. During specifically these pandemic situations, people, social distancing played a factor in there. We see a healthy increase in demand for automated solutions. We also see that efficiency in intralogistics becoming more and more important and key success factors for our customers. All in all, we consider that healthy market trends, which should support Kardex's development in the future quite well.
Looking forward into the second half of the year, we expect that Kardex Remstar will turn the very strong order backlog into an increased net revenues level in the second half of the year compared to the previous half. The new manufacturing plant in the U.S. that we've been talking about quite a bit already should start operation in Q4 2021. We will do the final touch-up installation, ramp-up work, starting in August when we can send people over again, and that should help us to secure the opening of the factory in Q4, as we wrote down here.
With that opening of the factory and the first machines to be delivered to the market, Kardex Remstar will then ultimately move closer to its customers in the very important North American market, and that should help us defend and hopefully increase our market position in the U.S. for Kardex Remstar. Similarly, Kardex Mlog should profit from the continued positive market conditions. We do not necessarily expect the same bookings levels for the second half. That would be extraordinary. We should expect a continued strong bookings level for Kardex Mlog. Also the revenues should increase substantially based on what they're having in the books already, knowing that certain projects will have to close by the end of the year based on customer requirements.
We are pretty confident that we will be able to increase net sales and also profitability in Kardex Mlog compared to where we are at half year. We continue with our strategic investments into our supply chain. The U.S. operation is one thing. We're also investing into the Remstar facilities in Neuburg and in Bellheim to get them more competitive, but also prepare them for capacity demands of the future. We continue to develop into technology, added element, added features to our solution portfolio and products. Last not least, also into the digitalization of Kardex, partly, let's say, across all our processes and tools. We believe that with the startup of our new kits, we call them the new kits, Robomotive and Rocket Solution and AutoStore, that we should have a good support to our image in the market as a total solution provider.
It was for the first time this year that we could actually present a digital exhibition booth. It is available from our website as well. There people can see, our customers, but also you guys, can see the total offering of the Kardex Group as a total. I believe if we compare that to five years ago, that picture has substantially changed. That in itself does not provide a good story, but what it does is it gives our customers more choice in terms of fulfilling their needs, in terms of intralogistics or coming from their intralogistics solutions. I cannot close without the disclaimer at the end. Our short-term concerns. I think you hear that in almost every call, that the uncertainty is in the market, and this is twofold. One being what is coming towards us in terms of maybe a fourth wave of the pandemic.
That's one of the elements. The related restrictions that would be imposed on us. Second, also the continued shortages in the global supply chains. We try to actually alleviate that, we have no visibility at this stage, how long it will last, how severe it will continue to be. We hope it will ease over the autumn then ultimately in Q4, that's something that may impact our short-term outlook. Having said that, I would say once we master these challenges, I would say Kardex itself is pretty well prepared for a good future, we should actually continue delivering to our promises. With that, I would like to close and hand back for, I believe, what's going to follow the question and answers. Thank you very much.
Yes. Jens and Thomas, thank you very much. May I ask now the operator to start the Q&A session?
We will now begin the question and answer session. Anyone who wishes to ask a question may press star one on their touch-tone telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star two. Questioners on the phone are requested to use only handsets and eventually turn off the volume from the webcast. Anyone who has a question may press star one at this time. Our first question comes from the line of Walter Bamert with ZKB. Please go ahead.
Good afternoon. This is Walter Bamert from ZKB. You mentioned the booking level that you don't expect at the same level in the second half of the year. Do you have any evidence in the order book that you think, for example, that July wasn't that strong or towards of the first six months you experienced a declining order intake? Do you have the impression that the delivery times that the clients are asking for are getting longer? Could we even speculate that H2 could be as strong as the first half?
I take the question. This is Jens. Thanks for the questions. That's many in one. It's a little stacked, but I try to answer them as good as I can. First one, you can speculate as much as you want and we hopefully deliver to your speculation in the end because that would be the good news for all of us. Second, more serious. Currently, our sales funnels, you know that we monitor all our sales activities from a very early stage that we call the leads. Early intent of our customers to do something where they don't exactly know what they want to do, up to the very last stage in the funnel just before we receive a signed order. We monitor this on a weekly basis, not just on a monthly basis. These do not indicate a decline in the market, I have to say that.
I need to probably be a little more specific with my qualification or my statement when it comes to my expectation that half two may not be as strong as half one. That's mostly related to Mlog. Mlog had quite a few projects booked that go beyond those who partially our expected average order volume, booking volume. Beyond the 10 million mark. Of these, we do not necessarily see endless numbers of orders coming in. For Remstar, however, I would expect if nothing else changes in the market, a continuation of their booking pattern for now. I have no evidence otherwise. What the potential delivery times will do, lead times in our factories, that remains to be seen. We are off the record sometimes also talking to the other people in the market. You call them peers, I call them contenders.
They seem to have similar type of challenges. At least this is one of the good better news, I would say, that we are almost fighting the same weapons. In the end of the day, it's not us with maybe 12 or 13 weeks delivery times against somebody who can deliver in four weeks. Not to our knowledge, at least. Did I manage to answer your question?
That was a very good answer to these questions. I will later come back with follow-up questions.
Okay. Thank you.
The next question comes from the line of Constantin Hesse with Jefferies. Please go ahead.
Hi there. Good afternoon. Thank you very much. Just a few questions on the margin, momentum from me, please. If we could elaborate a little bit on what the impact was from higher raw material prices in H1 and what do you expect to see in H2? How much pricing have you taken? Has competition followed? That's my first one.
Yeah, this is a question for me. Here is Thomas. If we look at Kardex Remstar, their costs went up and were affected by price increases by around 5%-7%. You might remember that in last call we mentioned that we increased prices in the market, this does not positively affect our margins for the first half 2021. This impact will follow. Did I answer your question?
Do you expect potentially then the higher prices to have a more positive impact in H2 than in H1?
To some extent. To some extent, because you asked the other question whether competition follows suit. They partially do, they partially don't. I know this is a vague answer, but that's the reality out there. You find projects where they fight like hell, and some projects we win with our expected or above margin. For now, we've managed to defend our, we call it the commerce margin. The margin we measure in different ways. We measure on one hand what we generate in the sales and service entities out there. That is fairly stable despite increased cost for the sales organizations as well. On the other hand, we have a second contribution to margin from our factories, from the manufacturing. That has been suffering due to these increases in costs, raw material costs, and so on. We can partially hand that on and transfer.
I would say of every price increase, we believe that some 20% or something like this ends up in the margins that we can book.
Okay. In the second half, is it fair to say that COGS could be even more negatively impacted? Because you're basically taking a whole half of higher raw material prices, whereas the first half, I think only the back end was mainly impacted by higher raw materials.
That could happen. We are currently in talks. I'm less concerned about the pricing. It's a margin issue, I'm with you.
Yeah.
I'm much more concerned about capability to deliver when it comes to shortages or non-delivery. That is our bigger problem right now. We've managed to satisfy our customer needs, we even managed to buy stuff, or we had to buy stuff on the spot market.
Yeah
in the, let's say Q2. That was going that far, never seen it before. We seem to have some easing with some of the suppliers and some seem to continue to be a challenge. Did we see the peak of prices? That was more of your question. I don't know yet. We are having intense discussions with our steel trade companies, the guys who provide us with one of the most important raw materials, and we try to fix something for the next six to nine months based on best projections. If you look at MICE, for instance, which is a fairly strong indicator, that varies almost by week as far as I can remember. Going up, going down, going up, going down. I don't know what's going on there, but this is absolutely unpredictable.
Yeah.
You see, I'm sorry, I cannot be more specific because I don't know better. Not that I don't want. I cannot.
That's perfectly. Can I just ask, fundamentally, the margins, obviously this time around, they were supported by the higher share of services, which is of course a positive thing. I'm just wondering if you can provide some color on the actual hardware, meaning the new business segment in terms of number one, the mix and scale within Remstar, as well as Mlog. Have you seen an improvement there?
Did you understand the question? Sorry.
Just in terms of mix, hopefully down-
I did not understand the question.
At Remstar, if you exclude the service business, only looking at hardware specifically, has there been an improvement in mix, a fundamental improvement in mix there as well?
Yep. Okay. I believe I understood your question. You were asking whether it's only the mix between LCS business and new business or if the margin itself in new business and LCS has improved. Is this your question?
Exactly. Yeah. Only at new business. Exactly.
Yeah. We can confirm that also this margin at Kardex Remstar has improved.
Okay. No, it's perfect. Thank you. Just lastly and I'll come back later, I'll go back to the queue. Any margin headwinds from the opening of the plant in the U.S. in Q4?
Margin winds?
Because of the ramp up. Headwinds, yeah. Any negative impact on margins because of the ramp up.
Yeah. He asked for headwinds. That is to be expected, yes, because of the less than needed loading of the factory. We will do whatever we can do with a slow ramp up of the people to follow in line with the machines to be manufactured and distributed to the market. There is some, as you know, capacity cost, like fixed costs, like the factory itself, which will go into depreciation, these type of things. We expect that to actually provide, you called it some headwinds, I called it some dampening on the productivity of the overall supply chain. On the other hand, I also expect that the two factories in Europe should actually work on a better utilization subject to material being available. That should possibly compensate, if I look into the entire supply chain, the effects of a ramping up factory in the U.S.
Understood. That's actually great. Perfect. I'll go back to the queue. Thank you.
As I said, this is my expectation. We will see what it really does.
Absolutely. Thank you.
Okay. Next in line.
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 Alexander Koller with Stifel. Please go ahead.
Good afternoon, gentlemen. In your cash flow statement, we see that you reallocate cash to avoid negative interest. What type of financial instruments you bought and why you still don't return this capital to shareholders? This is my first question. The second one about AutoStore. This product category applies to both Remstar and Mlog or is it just for Remstar? That's my question. How big do you estimate the cannibalization effect to the current product portfolio? Thank you.
Okay. Thomas takes number one. Alex, I take number two.
Yep. Hello, Alex. Thanks for your questions. I expected this question to be honest. It is only fixed term deposits. For the biggest of the portion, we reallocated from cash into financial assets. This is really to avoid negative interests. Fixed term deposits lasting more than 12 months or lasting six months, and this has in the end, no speculative character. This is just parking money. We have a smaller portion, which we invested mid to long-term, and this is dedicated to cover pension liabilities, which sits already on our balance sheet. Does this answer your question?
Yes. Thank you.
Yeah, there is one additional, Alex. Why not return it to the shareholders? This is a question that you should put to the board. I mean, the operational management, it's not the right to ask them. Anyway, I think the board still feels very fine with a solid balance sheet and, maybe shareholders should just stand that we keep that stable balance sheet for the moment.
Okay. I don't think he's happy with the answer. I quickly jump to question 2. To bridge the gap. AutoStore, Alex, I think the question was, do we do it via Remstar and Mlog or else and how much is the cannibalization effect? Is that correctly reflected?
Yes. Correct.
Okay. AutoStore is set up as a separate unit, so not in the organization of Remstar and not in the organization of Mlog. It's a separate unit. You will see that also in the holding reporting, you there see some other costs now that are related to these type of investments. We have set up a small team that actually drives the AutoStore business into the market. This team has two tasks. One is an independent AutoStore business direct with customers as a team. Second, it has the task to actually leverage on Kardex Remstar's and also Kardex Mlog's existing customer base and present solutions like AutoStore to these customers who we never were able to offer AutoStore solutions before. Cannibalization, very limited. Not in Mlog at all because Mlog has no competing product. There is no overlap. There's no nothing.
For Mlog, really, for their existing customers, it's an added benefit. It's actually an extension of Mlog's solution portfolio, which puts Mlog into a better position compared to, say, a year ago. For Remstar, the overlap is fairly limited. It is there. We should not ignore that we do have some overlap in the solution portfolios, mostly with our Vertical Buffer Module, the LR 35 that you've heard of. There, when we move up in the solution complexity with Remstar and AutoStore moves down, we start seeing some form of overlap, but to a very minor extent. Typical AutoStore projects, to give you an indication, EUR 1.5 million and above investment, total investment. Remstar, typically in their systems business with vertical buffer modules, EUR 400,000, EUR 500,000, EUR 700,000. Normally, the requirements from the customers that are to be fulfilled in terms of capacity and throughput do not see much overlap.
With AutoStore wanting to grow, they're coming a little towards that range. Into the 1 million or even less than that range, and Remstar also has plans to move up. However, I don't think there is a lot of cannibalization. It's more of a distinct decision in our own company, which solution we actually position at which customer in order to have the best chances of winning the project. There I see the benefit rather than the challenge, because if it wasn't in-house, Remstar would compete with other AutoStore integrators, and if that's the better solution, Kardex Remstar would lose the deal. Now we are in the position to evaluate the lead, evaluate the opportunity, and position ourselves with the correct solution, something that we should always aim for. Question answered, Alex, with many words?
Yeah. Thank you.
You are welcome.
May I add here something, Alex, and for the others. What we also hear that, with AutoStore in the market, Kardex as a group is really, and we mentioned that in the presentation, is more recognized as a solution provider for a lot of intralogistics questions. That's really helping to build the image of the whole group. There is a certain extra effect. It is one plus one plus one is more than three, rather than one plus one plus one is less than three.
Okay. Operator?
The next question comes from the line of Mark Diethelm with Vontobel. Please go ahead.
Thank you. Good afternoon, everyone. I just have two questions. One is on Mlog. I noticed they made EUR 1 million or a bit more than EUR 1 million sales outside Europe in Asia Pacific. Was that kind of a one-off, or can we expect more of Mlog becoming more international, and was this EUR 1 million actually profitable? The second one is, can you quantify the extra costs you mentioned for the new kits in the first half, and what you expected in the second half? Thank you.
Yep. Thank you. These two questions belong to me. First one, yes, this is sort of a one-off. This is one project we delivered most of the solution as an ex-works solution and some consulting in addition. Yes, profitable. You asked the question in regards to the new kits. There, I mentioned in my speech that in the first half year, there is cost included of close to EUR 1 million. For the full year, we expect to increase this cost to around EUR 3 million effect. Did this answer your question?
Very much. Thank you.
The next question comes from the line of Sebastian Vogel with UBS. Please go up ahead.
Hello and good afternoon. I have a couple of questions. The first would be on the FX impact on Remstar's top line, if you can remind me what the number is there. The second one, in the press release, you mentioned the e-commerce exposure of Remstar that seems to be getting more in focus. Can you remind me how much of Remstar's top line is exposed to e-commerce? The last one would be on, when you mentioned earlier on about the mix services versus new equipment, and you said the normal average mix should be rather 70/30 compared to the one that you have at the moment. If you would assume you would had 70/30 in the first half of this year, at what sort of operating margin we would be looking at?
Yep. I take the first two questions. FX impact is very minor as always. On the top line, there is around EUR 5 million FX impact, but this is reversed in the cost more or less. The impact of FX on the EBIT level is very minor. Not really relevant. I forgot the second question, sorry. What was it?
The second one was on e-commerce exposure at Remstar.
E-commerce exposure. E-commerce represents around 20% of total net revenues at Kardex Remstar. This is an up compared to last year, which was around 17%. We grew quite heavily, in the e-commerce and retail business.
Maybe I have to add here that it's not just that in this segment, e-commerce, that is retail, wholesale e-commerce. It's not really what you would mean pure e-commerce. What we see, and that I think is important to add, is that whereas in the last couple of years, analysts and investors were always asking us, Why isn't your e-commerce share higher? That was in the time when all the big companies like the Amazon and the Zalando were doing their big investments in fulfillment centers, where we are not active. What we saw in this half year, or what we saw now during pandemic, is that the small and mid-size companies with simple web shops or web organizations, that they really started to pick up and that they learned that they have to start to automate their e-commerce businesses.
This is exactly where Kardex Remstar is in place. This is what we saw and that is what we mentioned in the press release, that from all over the regions, very strong order income was coming from the small and mid-size companies investing in e-commerce solutions. I mean, this is the next step. That's really very nice to see this and this will continue.
Understood. If I would take out of this EUR 20, if I would try to strip out the retail and wholesale, is that possible? If yes, what number would I get?
It's not possible yet because we only recently installed the CRM system, in order to track these. Our e-commerce definition stretches beyond the wholesale and retail because other companies also do e-commerce solutions, their online sales channels. We've established that now in our CRM systems. It's very hard to track it backwards. We should be able in a year from now to see, to give you some better indication for that once we see the bookings and how they categorize.
Understood.
Maybe your last question, even if it's a question to Thomas, but we don't disclose the exact margins of the LCS and the machine business. I mean, you all know that the margins on LCS are higher than on the new machines. New business is profitable as the LCS, but we don't disclose the exact difference. If I would give you the exact figure with this proportion, we will disclose the precise margin then and that's something we count.
Understood. No, fair point. Sorry, one follow-up question. I'm not sure if I was getting that early on. When you were talking about price increases, you were trying to get through, what sort of number you got there?
We mentioned that the COGS in AutoStore went up by 5%-7%.
Okay.
Here you are.
That's the price of what you were paying for, right? I mean, what the price you charge your customers.
I wish it would be as simple as that, but then it's more complicated. We do stage price increases. We do some every year anyways. We do some different by product or solution category, and only some where we had not done price increases, we try to get something into the market. It's not a X% across everything that Kardex Remstar sells. It varies by category.
Understood. Got it. Many thanks.
We always try when we put new features up to also somehow reflect that in the pricing scheme. Somehow you cannot overstretch it to some extent, even though I wish I could.
No, makes sense. Totally. That's all my questions. Many thanks.
The next question comes from the line of Reto Brühwiler with Entrepreneur Partners. Please go ahead.
Yeah. Hi. Thank you very much. On Life Cycle Services, the order intake in Remstar was up 13%. I just wonder a bit, can you maybe explain the dynamics behind this? Your revenues were largely flat or not moving that much over the last semesters in that division. I wonder whether this order intake is driven already by the new business in the new machines or whether this is a result of a higher conversion ratio or from old clients where you could convert, the Life Cycle Management into your books. Can you explain that a bit?
Can you help me, to understand where you have this 30% from?
No, it's 13. one, three.
One, three.
Not three, 0. 1, 3.
Yeah, that's our targeted ranges.
Okay.
It's actually a little more than we wanted to have. That is now half year, half year comparison. We need to be careful because these first half years, they always include contract renewals as well, very often at the beginning of the year for Remstar. That could be simple effect that effectively affect the comparison half year, half year.
Okay.
We expect that to go back to our normal, targeted ranges, how to drive the Life Cycle Services. In other words, that means a miracle in here, we all of a sudden found new products that would substantially over increase the bookings in Life Cycle Services. It's not like this.
Okay. Would you expect that with new clients, for example, e-commerce clients in your order book that the conversion ratio, I don't know how many percentage of your clients or your install base where you do the Life Cycle Services, but can you maybe elaborate a bit how you see that evolving, whether this ratio is going up or stable, or what to expect, in terms of the dynamics, versus the new business?
I think without disclosing numbers, we are okay with the, I call it contract coverage, of new clients or new installations rather to say. It's not always new clients or new customers. It's a new installation that we account for. Something new is installed, and we measure how many of them are getting a contract coverage straight away, where we effectively get a Life Cycle Service contract. That's one of the incentives, a joint incentive for our new business people together with the Life Cycle people in the field. They are incentivized once they also, together with the new machines, the new installations, sell Life Cycle Service contracts. We're pretty happy with this number that has increased over the years, and we're running internal programs to actually continue with these numbers. Of course, it would be ideal if we could also increase them.
You also have a dead end to the overall installed base, where machines are, I call it dying or the aging machines, and there we lose contract coverage. It's really a challenge in itself with every new machine to add to the population, whilst you lose some at the end. I think, with that number that we're currently having, we don't see a decline. We see a gradual incline per year, but very marginal in terms of how many we can cover, because it's so different by region as well. There is more people in Europe who tend to actually go for these coverages. Other people in other regions like Asia, they hardly ever go for it. The acceptance of Life Cycle Services contracts is not yet fully there. That's a development of the market for the years to come.
Okay, thanks. Can I ask a third question on the e-commerce side of things? I'm not an industry expert, it seems like the large e-commerce players, they also more and more try to build decentralized distribution center in order to have same-day delivery. Can you play a role there?
Possibly, we could. If we wanted to. From a strategy point of view, that's typically the field where the biggest price war is happening. We need to differentiate again between very centralized distribution centers, then the decentralized, and then comes the pickup points, where effectively the customer goes and picks the stuff up themselves. Even these decentralized things, like take a metro area like Atlanta. They, I think, have six or seven of these decentralized pickup distribution centers centered around Atlanta area, which then deliver into the urban areas. Each of them is easily in the range of EUR 50 million-EUR 80 million investment. Each of them. That's not Kardex's playing field from a strategic point of view. Simply for the reasons that this would not meet our risk profile that we would accept as a company.
We decided not to enter this market and not fight with the Swisslogs, the Dematics, and others of this world. Profitability is not so appealing in that area.
Thank you.
Difference for the component people, like our friends in Interroll, that's a different discussion because they are not having the risks as such. If you go into the integrated systems element, then you carry a lot of risk, and that typically is not the playing field that we as Kardex decided to target.
Thank you.
Okay. Thank you very much. Ladies and gent, is there some last or second last questions as we are running out of time? May I ask the operator to ask us for a last round?
Yes. We have a question coming from the line of Mr. Remo Rosenau with the Helvetische Bank. Please go ahead.
Yes. Hi. Thank you. I've got a totally different question. Mr. Franke.
I can't wait. Yep.
No, no, that's, for a change, not that one. No, no.
Sorry.
No, I had a look at the annual report of 2020, and I saw that you have 933 shares of Kardex, which is not a lot, actually.
Are you talking now personally to me?
Yes, personally to you. Did you own more in the past? Have you sold some, or did you never own more than these, and why? I mean Yes?
Well, I can answer that. Is this a question for the round? Yes, I still own them. Yes, I did own more in the past. Yes, I did need money for private purposes. I had to sell sometimes. As a CEO, you are always bound if you're holding onto these shares. On the good news side, Remo, you must have read in the same report that we installed a LTI program, which is share-based, which brings us back into a closer connection of the management with the company performance, if that was your question.
No, that's great. By the way, I would like to congratulate you on your job there for 10 years. You're CEO since 2016, but before you were CEO of Remstar, which basically also was Kardex, more or less. Since then, the company has made a tremendous way, of which you have a big contribution. Are you still foreseeing another five to 10 years, or you're getting a bit tired by now? How is your personal situation?
Can I opt to just thank you for the nice words and say that I very much appreciate, but I take it for the team. Because I have to say, without Thomas, Edwin, and all of my team, we would not be where we are. It's not Jens. I may have had a contribution to it, but it's been a great team that I've been able to work with. Now, I'm not talking in the past. I'm here. I'm committed. Am I tired? Maybe I was a little, but we have so many new things that we are currently targeting in terms of also the new kits that you've heard about, which is my personal element that I really much drive now, in my new role. That from my point of view, I don't see me walk out. Not sure what my board of directors thinks about that.
Whether Kardex needs a new fresh blood, which every company needs, to be fair. Also, because every CEO has a certain lifespan, and it is not for me to decide only.
Yeah. Well, from a shareholder's point of view, I wouldn't see any urge to change a lot in the near term.
Okay. Thank you.
Glad to hear the follow-up.
Thank you.
Okay. Ladies and gentlemen, I think we are coming to an end now. I would like to thank you very much for participating. I also would like to address your attention to where we will send out an invitation soon to our next capital market day that will give you the opportunity to learn more about our new kits we are mentioning and to learn more about what is going on in the market. Now, for today, I would like to thank you, and we are happy to answer your questions individually over the next couple of days. Thank you very much.
Thank you.
Thank you. Bye-bye.
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.