Ladies and gentlemen, welcome to the Kardex publication annual report 2018 conference call and live webcast. I am Sherry, the conference call operator. I would like to remind you that all participants will be 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 is my pleasure to hand over to Mr. Edwin van der Geest, Investor Relations. Please go ahead, sir.
Yes. Hello everybody today. Welcome to our year-end conference call. We are happy to discuss our annual report and the outlook. I hope that the ones that are not in the webcast but only in the call, that they have found the presentation on the website in the IR section, as well as the annual report. As usual, we start with Thomas, who will lead us through the figures of 2018. Thomas, please.
Yes. Thank you, Edwin. Good day and welcome also from my side. It is a pleasure to guide you through the introduction and the financials on the group level. First, we start with the highlights and key achievements 2018. For Kardex Group, it was another very successful year, not only based on the very good market conditions, but also on very solid sales performance, leading to double-digit growth on all levels. Kardex Remstar successfully focused in the second semester on the realization of net revenues, and therefore could report a significant increase of volume and EBIT. Very positive was also Kardex Mlog, which achieved an EBIT margin of 6.7% and reached a new profitability level. The order intake was also in the second semester, very strong and above previous year. This resulting into a comfortable level of backlog for both divisions.
Based on the very strong results, the Board of Director proposes to increase the distribution by roughly 11%, from CHF 3.60 to CHF 4 per share. Now let us have a look on the key figures of the past five years. I am on page five of the presentation now. Looking at the net revenues, there we see that the compound annual growth rate has increased quite heavily from 5.6% of previous year to 8.2% this year. This is mainly due to the over proportional high increase of the net revenues in 2018. Looking at the operating results and the EBIT margin, we also see here a very good performance, an increase compared to previous year. The compound annual growth rate of 16% has slightly decreased compared to last year, but anyhow, it is as double as high as the compound annual growth rate of the net revenues.
Looking at the net cash flow from operating activities, we see that the ups and down trends could be broken. This is due to the high level of customer prepayments. Net profit and payouts, also here, quite a heavy increase in 2018 of the net profit. The payouts, this you see in the line graphics. There, we report a yearly average increase of around 12%. Let's have a look at the income statement. At the financials of the Kardex Group. The income statement, we see that the bookings have increased compared to last year by roughly 17%, mainly based on the performance of new business of both divisions, but also refurbishment section of Kardex Mlog. There we report a book-to-bill ratio of 1.14. The order backlog has heavily increased by 32.5% or CHF 56.5 million. This is representing roughly 6.5 months of net revenues.
The net revenues increased by 12.6%. This is mainly due to the new business of Kardex Remstar, while Kardex Mlog showed only a moderate growth. The gross profit margin remained on more or less the same level than previous year. The gross profit margin of Kardex Remstar reduced slightly, but was mostly compensated by good margin levels of Kardex Mlog. The OpEx have increased by 10.4%, mainly based on investments in marketing and communication section, R&D and also IT. Resulting EBIT was at CHF 53.2 million. The EBIT margin amounted to 12.6%, both representing once again record values. The financial result is EUR 200,000 below previous year's result. This is mainly due to Kardex Mlog interest expenses for pension liabilities. Very positive news on the tax front. The tax rate has decreased by roughly three percent points from 28.5% to 25.6%, which is mainly based on the US tax reform.
Result for the period, CHF 38.3 million or 9%. Also here, we report record high levels. EBITDA increased by roughly 15% to CHF 59 million. Looking at the balance sheet, we see on the position non-current assets that we have invested in our factories to address the capacity constraints. The gross investments there amounted to CHF 9.7 million compared to last year's investments of CHF 5.5 million. The current assets have increased by CHF 20.1 million, mainly due to the increase of the cash and cash equivalence position of CHF 14.3 million. The equity has increased by the same amount, and this despite the reduction of the nominal value of EUR 24.1 million. The equity ratio remained on exactly the same level of roughly 58%. The liabilities position increased by CHF 10.4 million or 10.3%. This is mainly because of the increased position of POC over financed position. Coming to the cash flow statement.
Here, the net cash flow from operating activities has increased by CHF 2.1 million. This is the result of the higher result of the periods, which was partially compensated by higher level of construction contracts. You see that the net working capital has decreased by CHF 700,000. This despite the high volume we have reported. The net cash flow from investing activities is reduced, so the spendings were CHF 1.1 million lower than previous year. This despite the higher CapEx we reported, but the acquisition activities were lower than previous year. The net cash flow from financing activities shows the reduction of the nominal value and resulting net change in cash and cash equivalents amounts to CHF 14.3 million, so CHF 5.1 million more than previous year. Thank you for your attention. I would like to hand over to Jens Fankhänel, which will guide you through the divisional report, strategy and the outlook.
Good afternoon, everybody. It is for me to talk about both divisions, Kardex Remstar and Kardex Mlog. We first start with Kardex Remstar, on the next page. We see a very good result for Kardex Remstar, which already was shown in the half-year reporting and has continued through the second part of the year with new business, with another double-digit bookings increase and a total bookings increase for the entire division of 13.something%. Net revenues grew even further with 14.8% to CHF 347.5 million. Major contributors to this growth have been Europe. Again, some of the expectations, I think Europe has shown a very strong performance also in 2018 throughout the year. North America, where all the investments and the restructuring of the organization now prove to be successful, and they produce the expected results. Also in China, we had a double-digit growth.
All three of them being the major contributors. Due to some delays in net sales, in net revenues, the backlog increased to EUR 157 million, which is a record high for the last years and provides a very solid base for Kardex Remstar's development in 2019. Service business, for the first time ever, achieves CHF 100 million mark, which is part of our growth plans, but it actually came a little earlier than expected. CHF 100 million for the first time, very solid number, very good number, and a good achievement from the organization. We have continued investments in R&D. Approximately 3% of our net revenue went into R&D spend into the technology, but also the maintenance of our existing portfolio.
With that, the division achieved an EBIT of CHF 51 million, 14.9% higher than the previous year, and an EBIT margin of 14.7%, which is the same margin as in 2017, and an EBITDA of 16% versus 16.2%. We were able to also increase the number of employees in Kardex Remstar to 1,511, an increase of 10%, a little less than the net revenues, which also shows some increase in productivity. Overall, the financial KPIs for Kardex Remstar are in the upper target range. EBIT margins, I mentioned, and a ROCE of 43%. We move on to Kardex Mlog. On the next page. Oh, sorry. Kardex Remstar division still with the key figure comparison, a CAGR of 8.5% over the last five years, in net revenues, operating results on the right-hand side with CHF 51 and 14.7%. EBIT margin with a growth of close to 15% over the same period.
The revenues mix is almost unchanged. I say almost because this is in marginal differences when we talk 68% new business, 30% on Life Cycle Service, and 2% in OEM. In this year, in 2018, we show 69%, 29%, and 2% revenues mix. Almost unchanged, which is important because we target the close to 30% Life Cycle Service range, as the backbone of our business. On the geographical side, some movement, some minor contribution from Europe, on increased numbers. Americas, actually here, North, Middle, and South Americas, with the major contributor being North America, moved from 17% in 2017 to 20% in 2018. APAC did remain percentage-wise at the same level. They grew double digit, but due to the growth of the other regions, they stood still at 8%.
The other regions, Middle East and Africa, at 2% or effectively 1%, mainly due to the political and economic turmoil in that region. We really move on to Kardex Mlog. Kardex Mlog, also with a very successful year when it comes to bookings and bottom line. Bookings for the first time hit the CHF 100 million mark in Mlog, and it is exactly CHF 100 million. It is not a manipulation of the numbers. It really came in exactly at the CHF 100 million mark. Strong growth over 2017 with 33%. The net revenues are actually much lower in growth, 3.1%.
That is mainly due to project delays on selected customer sites, which is also shown in the order backlogs that we carry forward into the Q1, Q2, and a little longer of 2019, the CHF 73 million, which provides, again, similar to Kardex Remstar, for a very good and solid starting point for 2019. Profitability levels increased. We were able to increase both the gross profit levels but also the EBIT margins, as you can see. CHF 5.1 million in EBIT in absolute numbers. EBIT margin of 6.7%. That is despite focused and increased investment into the product portfolio and also into the people development. Kardex Mlog exceeded the financial KPIs, target ranges with the EBIT margin of 6.7% and the ROCE at a very healthy and solid 54.8%. On the next page, we see the same development of numbers like we just saw for Kardex Remstar. Division Mlog, the key figures.
We saw a relatively moderate growth in the first years with 2014 and 2015, then we somehow stagnated a little bit on revenues. If you see CHF 75, CHF 73, CHF 75.9. I think Kardex Mlog has now reached a level from which we can grow in a more profitable way. The operating results, EBIT margins, they show that, with the increase to CHF 5.1 million, respectively 6.7%. The revenues mix has certainly something to do with the very good EBIT margin levels. If you look into the comparison on the left, lower side, the revenues mix in 2017 was 55% new business and 37% service. Whereas in 2018, that changed to 46% in new business and 49% in service. That obviously helps, improving gross profits and also the EBIT margin levels. From a geographical split point of view, the focus on Germany has not lowered, but rather increased in 2018.
There was less business outside the German market, which on one hand is good because it shows a very healthy and steadily growing German market environment. On the other hand, that is one of the negatives of 2017, that we have not been able to grow the Mlog business outside the German market, according to our own expectations. I probably will come back to that when we look into the outlook. We now go one page further. We go to the strategy and outlook. The system is just not playing with me, so I keep going with my own presentation. On page 18, we see the updated position of both divisions with regards to strategic play areas. If you remember, we did explain the chart on that slide, where Kardex Remstar is positioned with automated products, and in the Kardex Mlog with the integrated subsystems.
All of you who have read the strategy papers and the investor reports know that we are striving to actually play in the areas where we expect the highest profitability levels. That is right in the middle, what we call standalone subsystems. For both divisions, where they are positioned well. For Kardex Remstar in automated products, the growth will be upwards, increase business of what we are doing well today, mostly through geographic expansion, but also through different industry segmented approaches. On the other hand, move Kardex Remstar a little further to the center, the standalone subsystems. The same goes for Kardex Mlog. Growth, both in industry segments and to some lesser extent with geographic expansion, in the vertical direction. In the horizontal direction, move Kardex Mlog a little closer to Kardex Remstar.
If you look into where we are today, the geographical expansion for Kardex Remstar has worked quite well. We saw that, especially with the numbers from the North American market. However, the move towards the middle part, we have some room for improvement, as I would call it. The same goes for Kardex Mlog. There is substantial room when it comes to geographic expansion and industry segmented approaches, and also for the move towards the center, the standalone subsystems, which is not developing according to our expectations with the right speed. That will be a focus area for 2019 and 2020 as we go along with our business. Next page. Is the main focus areas that I already started touching on. For Kardex Remstar, the most and utmost important thing will be to keep the positive momentum up that we currently see both in Europe and North America.
We should really start pushing harder for geographic expansion and growth in Asia Pacific. Despite China's development that I reported on, we are not entirely happy with development in other parts of Asia, this will be a focus area for us in 2019 and further. With that, we need to also look into our capacities. We did already talk about quite a few capacity constraints in the organization on one hand, finding the right people, have the right people readily available when it comes to execution and implementation of our backlog on one hand, but also when it comes to manufacturing, and that has two elements. One is capacities in our European facilities, in our German facilities, and also looking into getting closer to the customers, hence enhancing our supply chain capabilities in the continents.
Mostly starting with the U.S. and some manufacturing capabilities in the U.S., followed by a later step than in Asia Pacific. For Mlog, it will be to maintain and improve. First to confirm and maintain, then hopefully also to improve 2018 margin levels. It will be to grow business outside the German market, adjacent countries, to actually focus on established customer base in some of these countries and leverage on those. Last not least, we saw that in the revenue split, focus also to review the go-to-market strategy for products on one hand and standalone subsystems in order to be more successful in that area of our strategic plans. For the group, I think us being a technology-focused company, we need to look into where can we possibly enhance our technology base, increase our portfolio in order to provide our customers with better technology base and solutions.
We urgently need to develop a comprehensive employer branding concept to better position Kardex as the employer of choice. We also will continue on a focused people development across the whole group, mostly to retain people in the company, but also to recruit people to the company, recruit talent that we urgently need in various parts of our organization. On the next page, I think most of you have read the announcements that we made earlier this year. We have slightly changed the management structure as per 1st of January 2019. The major change was that I gave up on my double function as Head of Division, Kardex Remstar and CEO in parallel. We promoted Urs Siegenthaler, who has been with the company since 2011, to the Head of Kardex Remstar Division. Urs has a very well proven track record in the organization and before.
With that, he will focus on the further development of Kardex Remstar, and I will focus more on strategic tasks within the group management to actually do these things that I just highlighted on the page before, which is strategic projects, further development of the group, additions to the group, and similar type of things. Last not least, on the last page for now, what is our assumptions and expectations for 2019? First of all, we currently see no real cooldown in global demand for efficient intralogistics solutions. We are aware this is slightly different to maybe other companies' reports. However, we are monitoring very closely what is happening in the various markets, and despite some indicators that show some negative trends, our current order pipeline and offer pipeline sales funnels is pretty intact.
It is not shrinking, the level of demand in the market we see is currently quite stable. That does not mean it will not go down, but so far we do not see it, and we obviously also benefit from a continued, relatively positive economic environment. We will continue in investment in people development. I said it before, this is our asset in the company. Our people make the difference between us and some competitors. We have to continually invest in our people. We want to continually invest in our people. We also will invest in our technology in order to keep our market position up and alive.
Last not least, into digitalization to become more efficient and to become a partner of choice for our customers also when it comes to interfacing with Kardex and make their life easier in interfacing with us, and that is usually also helped by digitalization. We expect Kardex Remstar to continue its profitable growth based on elimination of bottlenecks in the organization, hence some capacity increases. We should focus and we will focus on our growth markets and leverage in our position there. With some adjusted industry segment approach, we should also be in a position to actually benefit from some strong positions in some key verticals for Kardex Remstar. Kardex Mlog looks into a year with a very solid order backlog that should actually give them some pretty good tailwind into the year.
We expect the consolidation of the new profitability level. We should also look into focusing on the revenue mix, not losing the service side of things and the service progress they've made, but on the other hand, also look into the new business side to increase our install base, which gives the base in the end of the day for later service levels and a continued profitability. Overall, a fairly optimistic outlook into 2019, at least with a visibility of three to six months based on the solid backlog and the strong market position of both divisions. With that, I would like to thank you for your attention and would like to hand back to Edwin. Thank you.
Yes. Thank you very much, Thomas. Thank you very much, Jens. Now, we give back to the operator. It's up to you to shoot some questions. We are happy to answer them.
Anyone who wishes to ask a question may press star one on their touch-tone telephone. The first question comes from the line of Claudia Lanz, Finanz und Wirtschaft. Please go ahead.
Thank you for taking my question. I have two, in fact. The first would be, can you talk a little bit about opportunities you see for inorganic growth? Second is, your EBIT margin target on a group level hasn't been changed. Can you tell me why?
I would say Jens, it's.
Part one. The famous question of acquisition.
Yes, we see opportunities, and this is now, I know, a little tiring for you to listen, for you guys who've been in the calls for the last years. We had other opportunities again in 2018, unfortunately none of them materialized in terms of a positive successful acquisition. Yes, we see some, but with the current overheated market in terms of pricing for the targets, as we call them, we have not been successful because either it was not the right strategic fit in the end when you dig a little deeper, or the price ranges were so crazy, excuse my harsh word, that it was not worth for us to pursue the deal.
Maybe I answer the 6%, more than 6% EBIT level, because that is the board. The board doesn't want to increase that level. It is not saying it's a minimum of 6%. It's more than 6%. It's important to understand the message of the board is that this company will do everything to defend a minimum of 6% EBIT level, even in difficult times. I think for investors, as you, it's more important, since we are organized as a company with two divisions, with full P&L responsibility, it's more for you to look on the target range we have set on the divisional level.
Mm-hmm. Thank you.
That's why we have the 6% plus.
Next question comes from the line of Michal Lichvar, Bank Vontobel. Please go ahead.
Good afternoon, gentlemen. I would have several questions, maybe starting with the first one. Just in terms of Mlog, we've seen basically your new business, the product business, falling double digit. On the other side, the service business grew double digit, which more than compensated for the fall in acquiring new business. Is this the fall reason, or is it because of some economic softening? Could we see also going forward a similar trend? Do you expect this to reverse? Also another question regarding this. How does the margins look between the services and the product business? Also given your outlook, where you want to grow outside of Germany. Probably that means less services. You have to first start with new business.
That means that in going forward, the split, the pie chart would look more like what we were used to in the past, the margins could come under pressure again, since you have more new business and less of the services. That would be my first question.
Can you repeat the question? It was multiple in one, I believe.
Yes. First, can you just explain the dynamics why your new business is falling and why services is growing so much? The second part of the question, how the margins look between the services and the product business? Given the outlook, it seems that the new business should grow faster than services again, given that you want to grow outside of Germany.
Thomas, you want-
Yes.
I will take this question. Hi, Michal. Thanks for the questions. First question, why is new business falling at Kardex Mlog and why Life Cycle Service is increasing so heavily? This is based, as we mentioned, due to the time issues of the customer sites. There is no capacity issue we have at Kardex Mlog. We have no capacity issue at Kardex Mlog. It's purely on customer side that there have been postponements on existing projects, and this will come back. This is no trend for the future. We try to keep the level of service business we had last year, to grow in both sectors. The margin split between Life Cycle Service and new business, we are not commenting. We are not giving this figure out. Your last question was, where do we want to grow outside of Germany?
We established kind of an OEM business in Italy, Turkey, and also in other countries, but mainly in Italy and Turkey. We have a good relationship with partners there. This is a very good business where we provide products and standalone subsystems. This is the kind of geographical expansion we want to accomplish in a first step. This means true, we will not have a service business, or at least not have standard service business in these kind of markets. Anyhow, there is no dilution of the margin expected due to this geographical expansion.
Okay. Thank you.
Does that cover your question?
Yes.
If it's just to add, Michal.
Yeah.
If the bookings could have been realized this year, then you would have seen another picture. It was just more difficult to realize the greenfield businesses than the modernization businesses, and that led to this mix.
Okay. That's clear.
It's not that the market would go down. It is there, but all the postponements, delays, were on the customer side, where they had problems with the buildings, with the whole preparations for these new distribution centers. This is just a postponement of some orders in 2019.
Okay. Thank you. Another question just regarding your exposure to Americas or North America business. I was happy to see that you are growing quite strongly in Remstar, 25%, even in Mlog small sales this year. It seems that the strategy that you applied a couple years back is working. Can you tell us a bit more what happened the last year, why the growth was so strong, and what do you expect in 2019 in the Americas region?
This is Jens. What happened last year is that the team finally delivered according to the expectation. That was across multiple industries. Government performed quite well, our government sector in the U.S., also the typical industries that we sell into. We've been able to close some gaps in the network, that was mainly by replacing non-performing dealers with direct salespeople in some territories. It's the mix that I've been talking about for the last years, how we would change the network in the U.S., North America, sorry, not just the U.S., and leverage from the market position. That's finally coming to fruition. Effectively, if you calculate the numbers, that's quite a substantial increase in net sales. It's also, in terms of a market leader position, a clear move forward in our niche market, obviously. In that respect, we've done quite well.
The team has delivered. That's what I would summarize it with.
Just maybe a follow-up here. Do you think there is more improvement to come from North America, or are you now happy with the structure you have there? Are there still some gaps to fill that can fuel more growth and more performance in North America?
There's always room for improvement. I don't think that in North America, we are reaching the ceiling. I think the market itself, for it being not so mature, like for instance, the European market, should provide for more growth in itself. It obviously needs a solid economic environment. That we all understand. As long as the environment is stable, I think, from a market leader position, we can also create demand. It's not just the market that we have to follow. It can also be developed in terms of demand generation by getting in front of more customers, by doing a better marketing job, reputation of Kardex to be improved, and with all of that, more leads to be generated, and from those leads, with a higher sales efficiency, also more volume to be produced.
I believe, given a solid economic environment, I would expect another good growth in that region. Of course, you always have to look into the organization. Is it fit for the target and make changes as we go? It actually never stops to some extent.
Mm-hmm. Okay. Thank you. My last question, just regarding the Remstar OEM business. Before you basically always said that basically are using unused capacities for this OEM business, and now Remstar is kind of running on over capacities. Is this kind of the explanation why the OEM business is not picking up, and once you have these capacities, we will also see the OEM business in Remstar growing much faster?
No, I thought you are going to ask me whether we stopped the OEM business now. No. It's totally unrelated. It's a mix of non-satisfactory performance by some of our partners. Not to blame those, but that's reality. Also a lack of performance of an internal team, our OEM team. I think we saw some changes there, some organizational changes. These two things together mean that we are not growing according to our expectation and own business plans. We did grow year-over-year, but on a very small level still. It's got nothing to do with the capacities in our factories.
Okay. Thank you.
You're welcome.
Next question comes from the line of Remo Rosenau, Helvetische Bank. Please go ahead.
How much capacity have you left?
Yep. Hello. Thank you.
Hi, Remo.
Hi. I would come back to the theme of capacities. You mentioned in the press release as well that you are running on very high capacity utilization. On the other hand, you just said that there were also a few inefficiencies here and there internally, also with suppliers, but also internally. You mentioned that capacities will be gradually increased through targeted investments in the plants. Do I interpret that correctly that this will be, let's say, soft capacity increases, not involving major CapEx? How much CapEx will be involved, and what exactly will you do when you talk about this capacity increase, and how much will it cost?
Is that Thomas going to answer or Jens?
Yeah.
Thomas, huh?
The CapEx, yes. Capacity, probably back to Jens, but CapEx relates to me. Hi, Remo. You have seen that we invested this year almost double as we have invested in the previous years, so CHF 9.7 million compared to CHF 5.5 million gross investments. This will further increase in the upcoming years. We expect that the CapEx will increase to between CHF 15 million-CHF 16 million per year for the next couple of years. This is a bit more than just soft investments. We are investing in machines and equipment, and we are also a bit expanding our buildings. Is this answering the part of CapEx?
Yes. I didn't understand for how many years, CHF 15 million-CHF 16 million for.
I didn't say it.
Aha.
We expect that this will last for the next two to three years.
Okay. Great.
It, obviously, again, I have to repeat that, means solid economic environment because we have plans in place. Obviously, you always look into it with a positive view, then you say, okay, if everything goes to plan and everything goes according to the last year's developments, we probably need quite substantial capacity increases, as you may imagine.
There's also the downside of things. If the negative guys in the market take the upper hand, then we also have to have a plan in place where we say we don't just increase the capacities and then we're sitting there with idle capacities. It's the opposite to what we are seeing now. That needs careful consideration. What we're doing in terms of capacities is obviously in our main factory in Kardex Remstar in Bellheim. I would call that actually soft increases of capacity. That's possible because this is one product line, and that's pretty well running, the lift systems. Then goes another discussion around our German Neuburg factory, where we, with some of the plans, would need quite a bit of space expansion, but also machinery. That we need to look into very carefully because it's linked to two elements.
It's one linked to the market itself, our sales volumes in the market, sales success for these product lines that we are doing in Neuburg, that we are manufacturing there, but also to the product mix, because it's substantially different if one line increases or both lines increase. We have actually three lines there. If three lines would increase in parallel, because they have different manufacturing methodologies to some extent, and therefore the need to the manufacturing would look totally different. That needs year-on-year planning, or actually we look into it on a quarterly base before we commit to further CapEx. On one hand, we don't want to be too late like we probably had in the last years. On the other hand, we don't want to be too quick if the economic downturn would start kicking in.
Then comes a third element, which is closer to the continents, and that is what I talked about before, considerations about local value add in the U.S. to get closer to our customers, because one of the main elements of keeping our competitive position is delivery times. That is probably the biggest hurdle for us these days to actually gain more volume, is our delivery times. If we can get closer to the customers by local value add, I think you guys know well enough that if you can deliver in five weeks or six weeks to the customer as opposed to 20 weeks, that is a big competitive argument. I think we are now reaching at a point where we need to do something there in order to stay competitive in the U.S. market and also gain more market share in the U.S. market.
Could I sum it up in a sense that you have an overall plan, which you just outlined now?
That you will divide this plan into kind of three steps, and along with the implementation of these steps, you look how the markets develop, and you could also stop one or two elements of this expansion plan if the market would turn sour?
It's a very fair and very good summary, Remo. Yes, that's exactly what we now have to do. We have it on hand, this plan that you're talking about. It's well outlined, and it stretches out for four years.
With clear trigger points on one hand, that's commitment to CapEx on one hand. All the review points, before we actually hit the point of no return, and then we are committed to the investment. It's actually more than three. It's actually, I think, five or six of such trigger and stop points in the overall plan.
Okay. Very good. Yeah, got it. Makes sense. Thank you.
Welcome.
Next question comes from the line of Huan Tseng, Nan Shan. Please go ahead.
Yes. Thank you. Congratulations on the strong results. Some of my questions have been answered already, but just to see if I really understood well. Revenue growth in the second half of last year, it looks like it has accelerated quite a bit, 16% year-over-year, compared to single digit in previous half years. This is because of the U.S. breakthrough, right? That's the first question. Second question is, the bookings for Remstar, looks like it's a bit slower in the second half. Still growing, but a bit slower compared to previous half years. Is that because of capacity constraints? The last question regarding Remstar also. The very slight weaker EBITDA margin for Remstar, could you just elaborate a little?
Okay. What was the first question? Sorry. You guys have to bear with us. If you do one by one, it would be a little easier. The first one was which one? Sorry.
Okay. I'll just start with the first one then.
Revenue growth, in second half, increased quite a bit to up 16% year-over-year compared to single digit the previous half years.
I was wondering whether that's precisely because of this U.S. breakthrough that you had.
No. Revenue growth in the second half is actually all regions. Pretty traditional in the Remstar business that the second half has a very strong net sales growth. If you look in the previous years, the strongest month ever is December normally, for some funny reasons, it's mostly also related to customers who want to close the deals, who want to close their budgets before they lose the budgets. It's a very simple-
Right.
- and traditional pattern in the Remstar business that the second half year is usually much stronger in terms of net sales than the first half year. Your question regarding bookings-
Right.
I now remember. No, it's not slowing down. It's a simple year-on-year, half-year comparison. In 2017, we started extremely slow when it came to bookings. In 2018, we had a much better distribution of bookings throughout the year. I was more happy with the first half year in 2018 than I was with the first half year in 2017. That's the half-year comparison, if you know what I mean. If you have a weak 2017 first half year, then it's easier to exceed that and probably be at 16% above, where if you have a strong second half year, it's a little harder to get to the same 16%.
Right.
Does it make sense?
Okay. Yeah. Okay. My first question, actually, I don't know if I got the numbers wrong, but when I look at each half year, each semester over the past few years, your growth tends to be single-digit year-over-year.
In the second half, it jumped to 16%. I understand the seasonality, but the seasonality wouldn't be playing into year-over-year comparisons.
May I step in?
Yes, you are absolutely right. Just compare first half year 2018 to first half year 2017, the net revenues have increased by 9.2%. Whereas in the second half, also compared to the second half of 2017, the half-year-on-half-year comparison amounts to 15.6%. Absolutely right. This is as I mentioned in the call, that the sales organization has really focused on the second semester to realize the bookings we have in the backlog. The realization was more in the focus than gaining more order intake. This is quite a simple explanation.
Okay.
Does it make sense?
Okay. Thank you. Yes, thank you very much for the explanation. Just the last question is regarding the slightly lower EBITDA margin in Remstar.
Jens, would you like to take this one?
No, I don't. Take it.
Okay. Well, this is the clear result on the slightly lower gross profit margin we have at Kardex Remstar. This is based on the higher material cost. The material cost have increased, also the salary cost have increased, and I've mentioned several times, also the capacity constraints. We have this third shift
Being in place in one of our factories. This is increasing the cost base, which is reducing the gross profit margin as a result, the EBITDA and also the EBIT margin. No, Thomas, the EBIT margin is the same. That's why I think he's asking about the difference of 14.7%-14.7%, and then we have 16.0% EBITDA margin versus 16.2% EBITDA margin in 2017. The 0.2% you're talking about, right? The difference. Yeah, it's very little. Yeah. That's why I didn't have the answer on hand. Everything else I could have explained, but that's exactly the one I'm sorry, I cannot explain. Well, Okay. It's okay. Very small, but Yeah, we have an increased current asset base. We have invested more and more, and this is increasing the depreciation. Exactly which makes a difference between the EBITDA and the EBIT margin.
It's a very small difference. It's a very small difference. Okay. Yeah. Sorry. Yeah, very small. Yeah. Didn't realize. Okay, thank you very much where you were heading to. Welcome.
Next question.
Okay, yeah.
The next question comes from the line of Sebastian Vogel, UBS. Please go ahead.
Good afternoon. I have also a couple of questions. The first one, we talked a lot about H1 and H2. I was wondering if I look more within H2, can you differentiate a little bit between Q3 and Q4 in terms of top line and order intake growth, what you have seen there? That would be my first question.
Not on the top of my head.
No, on the qualitative phases? Was the business getting stronger over the course of the second half, or was it actually evenly spread or actually at the moderating till they are closer to the end of the year?
On the qualitative statement, I would say it was pretty similar. It was not decelerating, if that was question number 1.
That was question one indeed.
We saw pretty strong order intake even in December bookings, which kind of was a little unexpected. We thought that with all the turmoil in the market and the negative indications, some people mentioned that bookings would actually drop a bit. They didn't. Also net sales was as strong as ever in the Q4. You also had very solid Q3, because we saw very strong September and October. Traditionally the case anyway, but it was reconfirmed. From a qualitative statement, and I hope you don't hold me for it, I would say it's almost the same, the two quarters.
Perfect. The second one would be on organic growth. I am not sure if you can share that, I would definitely appreciate it.
If you can talk about organic growth for the full year for Remstar, for Mlog, and for the Group. Do you have a number there?
Organic growth?
Yeah.
The only inorganic or not organic was the minor acquisition Terminals in the U.S.
Yes.
That came into play. Everything else is organic.
The FX impact?
FX was actually to our disadvantage last year, right Thomas? The effect in total was about CHF 3 million top line.
For the full year for the group?
Full year on group and Remstar. Mlog had no inorganic growth.
Okay, got it. Perfect. One quick one on Mlog. These construction delays you were referring to, can you shed a little bit more light what were the drivers there and how or where you take the confidence that these sort of drivers will turn around and then you will see orders coming through and not getting canceled at some stage later in the process?
Well, maybe, here's Edwin speaking. Sebastian, what we heard from Mlog, it's maybe. There is not only a machinery boom in Germany, but also there were building construction delays. That projects take longer to be realized due to the booming market in Germany. These projects are all on the way, but it takes a bit longer to build the buildings and to whatever it needs to build the infrastructure before we can come and then do the installation of the intralogistics.
Got it. Perfect. One very last one from my side would be on net working capital. You alluded to that shortly in the presentation. How should we think on that going forward, in particular with regard to advanced payments, trade accounts receivables in that regard?
Yeah, it's hard to further reduce net working capital in the end. We had a very positive effect because we had good bookings, especially at the Mlog, the prepayment position sort of has increased quite heavily. This is a spot effect at the year-end. Whenever the volume increases, the capital should also increase in the same proportion.
It should be the net working capital intended should be rather getting higher going forward. I mean, not massively, but generally.
Correct. Absolutely.
Perfect.
This is what we expect, yes.
That's all from my side. Many thanks.
Welcome.
That was the last question.
Okay. No more questions?
No.
Okay. We are happy to answer further questions whenever you send us an email or give us a call. Thank you very much for being with us, and hope to hear you again in five months. Thank you very much and have a good day. 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.