Ladies and gentlemen, welcome to the Analyst and I nvestor Call FY 2020 conference call and live webcast. I am Paolo, the conference 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 question 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 Eva Borowski, SVP, IR and Corporate Communication. Please go ahead, madam.
Thank you. Good morning, everyone. As you know, earlier today, Landis+Gyr issued our full year FY 2020 results press release and accompanying presentation. You can find these documents on our website. Before we get started, we want to emphasize that some of the information discussed today contains forward-looking statements. For more information, please see page two of the presentation in our press release issued today. Today's conference call will follow the presentation. We suggest that you have it on your screen or otherwise available to follow along with our comments during the first part of the presentation. With that short introduction, I'd like to turn over the call to our Chief Executive Officer, Werner Lieberherr.
Thank you, Eva. Good morning, everyone, and welcome to our full year 2020 financial results. I'm here with Elodie Cingari, our CFO. We are very pleased you have all been able to join us this morning. Look, before we start with the presentation, I would like to give you a brief overview of the key messages of today's call. First, this has been a challenging year. However, our transformation to expand critical intelligence and smart infrastructure is well underway. Second, despite 20.8% revenue decline, we were able to achieve a 10.3% adjusted EBITDA margin and produced a solid free cash flow of $97.6 million. Third, I'm convinced that we have the right strategic focus to drive leading-edge technology and transform the business. Let's talk about what's been happening over the last year and move on to slide three.
The COVID-19 pandemic has affected all aspects of our lives in unprecedented ways. This has also had an impact on our customers and our company and is reflected in our financial results and forecasts. Just this past week, we have taken the decision to temporarily close our Yercaud facility to protect our employees from the rising case numbers in India. Whenever possible, employees continue to work from home. We have not experienced any major project cancellations. We have seen the impact on revenues in markets where installations have slowed down or been temporarily suspended. That said, installation rates have picked up a great deal over the course of H2, which is a positive sign for recovery. Let's have a look at some of our key metrics. Starting with the order intake. Our book-to-bill ratio was 0.96%, which is an improvement from 0.81% in FY 2019.
Improving the ratio going forward remains my top priority. Our committed backlog fell by 2.6% to roughly $2.2 billion. Americas and EMEA both contributed to the decrease, while Asia Pacific was able to increase its backlog by 8.4%. Net revenues came in at $1,357.4 million, a decrease of 20.8% in constant currency. While both Americas and EMEA were seriously impacted by the crisis and associated lockdowns, our business in Asia Pacific managed to improve its revenue by 0.4% in constant currency. We saw good recovery in H2, which was up nearly 18% versus H1. Adjusted EBITDA came in at $139.6 million, with an EBITDA margin of 10.3%. A decline of 370 basis points only despite 20.8% lower net revenue. Free cash flow excluding M&A remained positive with $97.6 million, down 18.9% year-over-year, yet demonstrating again the cash generating power of our business.
One of our greatest strengths has always been our balance sheet. This remains very solid with a net debt to adjusted EBITDA of 0.05%. Undrawn credit facilities at the end of FY 2020 were CHF 270 million and $130 million, or $416.6 million in total, while we repaid a total of $204.3 million. I'm pleased to say that our board of directors will propose a distribution from capital reserves of CHF 2.10 per share. This distribution is free of Swiss withholding tax and will go to vote at the extraordinary general meeting on June 24th. Let's talk about what we have achieved when it comes to sustainable impact on slide four. We are proud to say that we are reporting according to GRI Core and have signed up to the UN Global Compact.
We see our efforts recognized by the recent global EcoVadis Gold Medal, rating us in the top 5% of sustainable companies. In addition, we continue to maintain high ratings with ISS, MSCI, and Inrate. These accomplishments drive us to elevate our sustainable impact to the next level, and I'm very pleased to announce that we have set ourselves the target to be carbon neutral by 2030, the latest, with focus on scope 1 and scope 2. Our portfolio of products and services enables us in a unique way to have a direct sustainable impact on social and environmental aspects. Working actively towards a greener future, sustainability is embedded in our DNA as we help manage energy better. Turning to slide five.
In addition, for 2020, we have introduced a sustainability component in our short-term incentive for all eligible employees with a weight of 10%. In 2021, we will increase this number to 20%. We have developed a comprehensive set of goals to empower our employees to have a direct impact on environmental and social topics. Hereby, the overarching categories of climate, resource, trust, and equality are guiding our way forward to further improve our sustainable impact. Let's move on to slide six and take a look at the recent awards we have won. We are proud of the strong partnerships we have with our customers around the globe. To name just a few, in the U.S., we have been awarded contracts by Puget Sound in Washington, Polk-Burnett in Wisconsin, and Evergy in Kansas. In the U.K., we have signed agreements with Smart Choice Metering and EDF, for example.
We are excited about this project and others of course, and continue to be committed to delivering leading-edge technology to our customers and value to our shareholders. Let's turn to slide seven and review the past year briefly. When I look at this timeline, I'm proud that we have picked up the pace quite a bit over the course of the year. Since the list is quite comprehensive, let me pick a few highlights. Next to some additional wins listed here, I'm personally very excited about our seven-year strategic partnership with Google, and I will provide an update on our strategic initiative here in a moment. To further accelerate the transformation of our company, we have acquired Etrel and EV companies, Etrel and True Energy. This opens up new markets and revenue streams for us.
You see, we are investing heavily in new technologies, M&A, and partnerships to strengthen our core of smart metering and expand our reach in grid edge intelligence and smart infrastructure. In 2020, we also focused on driving efficiencies. I'm pleased to announce that our global streamlining and restructuring initiative, Hermes, has concluded as of March 31st. Let's turn to slide eight and have a look at the developments in each region. I'll start with the Americas, led by PV. Even with the challenges of COVID-19, there's an active sales pipeline and the clean energy-focused administration and regulatory approvals in New York and New Jersey signal momentum. I'm personally in close contact with our customers, and we are active in negotiations after regulatory project approvals have been granted late last year. I'd expect news flow towards Q2 of FY 2021.
Please keep in mind, from the time we sign a contract until it translates into meaningful revenues, it takes approximately another 18- 24 months. This means we are talking financial years 2022, 2023. I would also like to highlight that our products and services are considered to be part of critical infrastructure in the U.S. In addition, we are leveraging our partnership with Google Cloud, our Edge to Enterprise vision, enabling the digital transformation for utilities, and R&D investments also remain a high priority. South America continues to be a growing market for us, demonstrated by multiple wins. In Japan, the project with TEPCO is rapidly advancing to the next stage, including foundational elements for the next generation of technology deployments planned for commencement in May 2025. Overall, we see solid tailwinds for continuous recovery, especially with the planned U.S. energy infrastructure investments in excess of $100 billion.
Let's move to slide nine and take a closer look at EMEA, led by Susanne. Deployment programs in several European countries are put on hold due to the pandemic, especially in the first half of the year. However, we saw some recovery in the second half of FY 2020. Due to the COVID, the smart metering program in the U.K. has been extended until June 2025. We started to work with government and industry bodies in the U.K. to scope the potential of the SMETS infrastructure to support the U.K.'s 2050 carbon-zero target. The Nordics remain a key region for us, with more than 1 million smart meters contracted in Sweden and Denmark. Second-wave rollouts in the region are expected to provide an additional opportunity of approximately 8 million meters.
Let's take a look at France, where the rollout is in full swing with more than 31 million Linky smart meters already installed and a further 11 million to be deployed until 2026 to Enedis, overseas territories, and medium utilities. In the Netherlands, we confirmed our leading position and extended our relationship and contract with major grid operators, Stedin and Alliander. In Qatar, we have been selected as a supplier to deliver smart meters as well. As a result of the increasing installation rates in H2 of approximately 80% of pre-COVID levels in the U.K. and roughly 100% in France, we see positive momentum in EMEA. Let's take a look at APAC, led by Steve, on slide 10. Asia Pacific is a bright spot in our result. It's the region last impacted by COVID and managed to grow its revenue and adjusted EBITDA year-over-year.
Growth in the region was largely due to continued execution of AMI projects in Hong Kong, which delivered higher revenues in FY 2020, together with the resilience of the business across Australia and New Zealand. In Australia, the energy sector is considered critical infrastructure, and installations largely continued. We have extended our supply contract with our partner Intellihub until 2026, ensuring smart meter supply continues across Australia and New Zealand. Our smart meter programs with CLP in HK Electric and Hong Kong continue, and we are proud to say that CLP will soon install its 1 millionth Landis+Gyr smart meter. Business in India was particularly impacted by the pandemic in the first half of FY 2020.
In the second half of the year, India recovered to pre-COVID levels. Overall, we are very pleased with the resilient performance of our Asia-Pacific segment, which was able to increase revenues despite the challenging COVID-19 environment. Moving on to slide 11 to provide an update on our strategic transformation. Our core smart metering remains important, we are increasing investing in Grid Edge Intelligence smart infrastructure to drive our strategic transformation. In FY 2020, we have taken the decision to invest in the development of smart water and smart gas to propel organic growth in smart metering, as you can see on the left, for example. We are proud to have strong partnerships. Vodafone is enabling meter and sensor communication through cellular technology, and as such, elevating our smart metering and Grid Edge Intelligence portfolio.
The seven-year strategic partnership with Google is a big part of our transformational journey as it allows us to co-innovate new offerings in smart infrastructure. On the M&A front, we were able to share some exciting news most recently. After the acquisition of Rhebo in January, which expands our cybersecurity offering, we are proud to welcome True Energy, and soon also Etrel to Landis+Gyr. These two additions will allow us to strengthen our position in the EV infrastructure technology market. Let me dive a little deeper into this on the next few slides. Starting with our organic strategic initiatives, we are making good progress with the development of our ultrasonic global smart water meter.
Interest continues to grow in smart water metering solutions with Australia, New Zealand, Singapore, and Hong Kong leading the way, and we expect the market introduction with deliveries into selected markets in EMEA starting in 2023. Good developments also for our ultrasonic global smart gas meter. We see strong customer engagement on product requirements and anticipate full market introduction 2023, with volume ramping up swiftly afterwards. These targeted investments in new products and services will drive future organic growth, and we are on the right path to drive these initiatives forward. Let's move on to slide 13 so I can provide a brief update about our partnership with Google. The partnership with Google opens up new markets, and it enables us to offer our customers more insights into the vast amounts of data our smart meters and Grid Edge Intelligence sensors collect on their behalf.
We continue to work closely together with dedicated teams on both sides and push forward numerous applications that we will start offering via multiple channels, including Google Cloud Marketplace and our own Google Independent Software Vendor program within the year. In addition, we are in the process of expanding our relationships with Google Gov, Google Energy, and several other Alphabet companies. Also, we are partnering with a government solutions provider supporting federal, state, and local government agencies on GSA and other schedules as the GCP provider. As a result, we will be able to offer new software applications and expect to see around $3 million in revenues this year. Our headend system modernization is well underway as we prepare for North American and APAC delivery and sales tenders this year. A global rollout is following in 2022.
Internally, we are migrating all IT and OT systems to the Google Cloud Platform according to plan. In addition, of course, all our recent and future M&A activities will be Google Cloud Platform native going forward. In summary, our Google partnership drives customer benefits, additional revenue opportunities, cost optimization efficiencies, and we expect realization to start this fiscal year through FY 2023 and beyond. With that, we are moving on to slide 14 to provide an update on the acquisition of Rhebo, which we announced shortly before our Capital Markets Day in January of this year. Rhebo is perfectly positioned to cater to the increasing demand for cybersecurity at the grid edge. It allows us to participate in double-digit growth for cybersecurity monitoring and to achieve scalability with the Google technology and our existing customer base.
Let's turn to slide 15 and talk about our just recently added acquisitions in the EV charging smart infrastructure technology business. After the recent announcement of the acquisition of True Energy, the addition of Etrel further strengthened Landis+Gyr's position in the EV market. EV chargers in residential homes and public places will require management of the additional large unplanned load on the grid, which is our expertise. With our two most recent acquisitions, we are well-positioned to participate in double-digit growth for residential EV charging, which are driven by strong market incentives. Let's talk about Etrel and True Energy and what they bring to the table a little bit more on slide 16. Etrel is a recognized player in the EV infrastructure market with expected profitable double-digit million sale in FY 2021, offering a complete range of smart charging stations for home and public.
In addition, Etrel's portfolio includes a comprehensive suite of software for charger management and smart charging. Etrel's charging stations cater to any home or business, providing intelligent user interaction, advanced power management, and flexibility while offering users a seamless transition between charging locations with a single app, keeping track of all deployed charging equipment. Operating and managing charging stations opens new possibilities for services to monetize EV charging infrastructure and connected applications. True Energy's technology enables sustainable electricity on the go, automated EV energy use for times of the day when electricity is most cost-efficient and most climate-friendly . Currently, we are already involved in pilots in the U.K., such as the Smart STEP project, which brings smart EV charging to residential urban streets, and proof of concept activities in France to support our customers in the development of future-proof technology.
Therefore, both Etrel and True Energy are a perfect match with our sustainable mindset and will enable us to drive our initiatives related to EV charging infrastructure technology. Let's turn to slide 17 and take a look at our consolidated results. First, let me point out that despite 20.8% revenue decline, we were able to achieve a 10.3% adjusted EBITDA margin and a solid free cash flow of $97.6 million was a bright spot. Order intake of $1,298.7 million, down 6.2% in constant currency, with an order intake and revenue conversion mostly impacted by U.S. regulatory project approval delays and COVID-19- related installation suspensions and slowdowns. As announced during the Capital Markets Day, we recognized a legacy Toshiba goodwill impairment of CHF 396 million. We were also able to maintain a low net debt- adjusted EBITDA of 0.05%, despite a challenging environment.
Overall, despite lower trading results mainly impacted by COVID-19, we were able to maintain a strong cash generation, resilient margin, and solid balance sheet. Let me now hand over the call to Elodie to give you a more detailed review of our financials. Afterwards, I will walk you through the guidance for fiscal year 2021 before we open up the call for questions. Elodie, please.
Thank you, Werner. Good morning, everyone. I would now like to walk you through the financial details for the fiscal year 2020. Our net revenue results for the fiscal year 2020 was CHF 1.357 billion. This is a decline of 20.8% in constant currency versus prior fiscal year. As mentioned in our H1 earnings call, this is primarily due to COVID-19 impacting our markets by delaying planned deployments and new volumes. In particular, the decline was attributed to the Americas region, where we saw slowdown of project installations and regulatory delays. In EMEA, the lockdown in certain countries, particularly in the U.K., resulted in delayed deployments. The APAC region was resilient overall during the year, with Hong Kong rollout acceleration offsetting some of the impact of India's lockdown. All in all, we are seeing an upward trend from H1- H2.
While H1 revenue was 27% down versus prior year, H2 was down 12% versus H2 2019. I will now move on to the EBITDA bridge, page 19. Our adjusted EBITDA for the fiscal year 2020 declined from CHF 237 million- CHF 139.6 million year-over-year. This translated into an adjusted EBITDA margin down from 14%- 10.3% year-over-year. In particular, our gross profit declined for two reasons. Our volume decline impacted the gross profit by CHF 123 million, driven by Americas and EMEA. Our margin decline accounted for a CHF 19 million impact due to reduced operating leverage, as we could not adjust our costs related to supply chain and manufacturing fast enough to offset the fall in revenues. Lastly, our adjusted operating expenses significantly reduced year-over-year.
Much of this was driven by proactive cost control measures and the initial impact of Project Hermes that was launched in 2020. We also benefited from COVID-related savings, such as lower travel expenses and government support schemes. I'm now moving on to the reported EBITDA to adjusted EBITDA bridge on page 20. There are three items as shown on the page. First, restructuring charges. These relate mainly to Project Hermes, the global streamlining and rightsizing initiative that has been completed in FY 2020. Second, the warranty normalization. It represents the amount of provision made in 2020 relative to the average actual warranty utilization for the last three years. The average utilization is trending downwards. You can see that the actual amount of provision is down CHF 13.2 million compared to the three-year average utilization. Thirdly, timing differences on FX derivatives.
Our biggest FX exposure is in the U.K., where we contract revenues in British pounds and incur supply chain costs largely in other currencies. In 2019, 2020, we hedged the British pound up to 24 months ahead, given the uncertainty around Brexit. The adjustments exclude unrealized gain losses of CHF 23.8 million related to mark-to-market differences. Moving on to page 21 and looking at our dynamics in the second half of 2020 compared to the first half. As mentioned, we are seeing a positive trend on the top line in H2, reducing the gap to prior year from -27.7% in H1 to -12.2% in H2. We took early action to preserve cash and tighten cost controls across all levels of the organization. Due to a combination of structural changes like Project Hermes, short-term cost actions and COVID-related cost benefits, we were able to deliver significant OpEx savings in 2020.
In the second half, we saw some of the short-term effects related to COVID that were temporary in nature, move for CHF 21 million in the second half compared to the first half. We expect to see this trend continuing in 2021 as our OpEx level will come back to a more normalized level without the short-term impact of COVID-related measures. At the same time, our structural changes linked to Project Hermes savings are fully implemented and the program is delivering the savings as planned. As a result of the combination of operating leverage from the increased volume and lower OpEx costs, our adjusted EBITDA margin increased to 12.2% in the second half, 4.2 points above the first half. I now look at net income and free cash flow, moving on to page 22. Looking at net income first.
As indicated in our Capital Markets Day early January, we performed and concluded on an assessment of the fair value of our intangible assets and have reviewed all associated parameters. As a result, we booked a non-cash impairment charge of CHF 396 million related to the legacy Toshiba goodwill attributable to the Americas business. In 2020, we recorded a net loss of CHF 392.2 or a -$ 13.6 EPS, including the goodwill charge. Excluding this one-off goodwill charge, our EPS would have been $0.13. Looking at cash flow, and as noted in the financial report 2019, the company has received a sales tax assessment from the State of Washington Department of Revenue, DOR. We strongly disagree with the assessment and believe that it will be overturned on appeal. In order to file an appeal to the court, one must first make payments of the tax assessment.
We have therefore paid CHF 20 million in Q3 2020 and have filed an appeal in November 2020. We do not expect this case to be resolved before FY 2022. Throughout 2020, we delivered a strong cash flow performance showcasing the resiliency of our operating model, our focus on cost, and continuous commitment to optimize our operations. If I turn to the details on the cash flow page 23, you see that in 2020, we generated free cash flow excluding M&A of CHF 97.6 million. This was approximately CHF 22.8 million lower than last year, notwithstanding the lower volume and the one-off water charge of CHF 20 million mentioned earlier. Working capital continued to be a net generator of cash with CHF 51.7 million through strong inventory controls, in particular in the second half in our Americas and APAC operations.
Warranty and warranty settlement cash outs were CHF 17.3 million, down from CHF 45.2 million in the prior year, as payments for Americas legacy component issues were lower, and we completed the M&A-based litigation settlement in fiscal year 2019. Our CapEx remains low at CHF 26.6 million as we continue to benefit from the shift to the asset-light business model. Tax payment was CHF 26.1 million due to lower profitability and partly due to various government COVID-19-related tax payment deferral schemes that we benefited from. Finally, we recorded a cash out of CHF 11.7 million predominantly related to our Rhebo acquisition announced in January 2021. If I move to page 24, looking at net debt. As of 31st of March 2020, we had a net debt position of CHF 6.9 million. This represents a net debt reduction of CHF 25.7 million compared to end of March in the prior year.
Our strong free cash flow generation supported this reduction and as well allowed us for a CHF 63.3 million dividend payment in November 2020. The CHF 11.7 billion M&A cash out relate primarily to our cybersecurity acquisition of Rhebo, as mentioned. The share buyback remains suspended, and during the fiscal year, we have repaid over CHF 200 million of debt, and at the end of the fiscal year, we have undrawn facilities of over CHF 400 million available in addition to our cash position of CHF 140 million. As a result, the net debt position translates into a net debt to adjusted EBITDA ratio of 0.05%. If I now turn to the regions and look at the respective performance starting with Americas on page 25. In the Americas, regulatory delays and COVID-19 impacted order intake and revenue recognition. Order intake grew 2% year-over-year, whilst revenue fell 21.9% in constant currency.
This is due to slower deployment of ongoing contracts, contract phase-outs not being replaced fast enough due to the current market environment, and weak order intake of convertibles within the year. Adjusted EBITDA was at 15.1% compared to 18% in previous year. This is largely due to reduced operating leverage associated with lower volume, partially offset by improved mix and restructuring cost savings. Expenses were well controlled, predominantly driven by the impact of restructuring initiatives and other cost control measures. Moving to our EMEA region. In the EMEA region, COVID-19 impacted order intake negatively as we saw work being delayed. Revenue fell 24.6% in constant currency, predominantly in our largest EMEA market in the U.K., due to slower plan installations during COVID lockdowns. Adjusted gross profit margin decreased by 150 basis points.
Similar to the Americas, this was largely driven by operating leverage, partially offset by favorable mix and cost out on installed base earnings. Adjusted OpEx were lower versus prior year, driven by COVID-19 measures, restructuring, and one-off items. We are seeing early recovery in the U.K., in the second half and expect continuation throughout 2021. Moving to our APAC region on page 27. APAC showed resiliency during the pandemic. Order intake was up due to India, while revenue was increased by 0.5% in constant currency. Growth in Hong Kong offset COVID-19- related weakness in India and Australia, New Zealand. Gross margin expanded by 290 basis points, driven by favorable mix throughout the Southeast Asia volume. As a consequence, we continue to see EBITDA margin improvement that was up to 7% in FY 2020. With that, I am ending the call back over to Werner.
Thank you, Elodie. Turning to slide 28, let's talk about the guidance for our financial year 2021. We still see some level of uncertainty due to COVID-19 and the general business environment. In addition, a global shortage of electronic components and plastic resins, as well as increased freight rates, could pose challenges for cost and on-time delivery performance. However, mitigation actions are in place. With increased vaccination efforts, we see increased levels of installation and anticipate recovery of previous project delays. We expect that full year 2021 revenue will grow organically between 7% and 11% CAGR, while inorganic revenues will come on top of that. We see a good level of recovery, mostly driven through the EMEA region. To ensure we are well-positioned for the future, we are incurring additional expense of approximately 2% of net revenues.
This will support our strategic initiatives and company transformation that we talked about just a moment ago. This directly impacts our adjusted EBITDA margins, which we see then between 9%-10.5% of net revenue. Free cash flow excluding M&A is expected to come in around $80 million-$100 million. On June 24th, the board of directors will propose a distribution of CHF 2.1 per share to the extraordinary general meeting. The distribution will be paid out of capital contribution reserves and is exempt from Swiss withholding tax. Lastly, let me also mention that the Share Buyback Program remains suspended. Now we will open up the call for questions.
We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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 use only handsets and eventually turn off the volume of the webcast. Anyone who has a question may press star and one at this time. The first question comes from Patrick Laager from Credit Suisse. Please go ahead.
Good morning, all. Thank you for taking my questions. A couple of questions here. Regarding the potential successful outcome of the ongoing negotiations with U.S. utilities, which have now received approval from the public regulator. You said you're expecting news flow in Q2. Do you mean Q2 of FY 2021 or calendar Q2?
Yeah. Good morning, Patrick. What I mean is actually our Q2. That would mean actually June, late July, we will hear more. We have two customers as part of this regulatory approval, which we are really in very advanced negotiations and really should be able to conclude June, latest July.
Okay. There is a small delay here because initially you said, I think between March or April to June. I am not sure.
Yeah.
I think initially. Yeah.
That's right. It's more to the end, but we feel very good about it, how the discussions are going and this is a sizable offer. We are pretty excited about that.
Okay, cool. I'm excited too. Yeah.
Very cool.
Good. Second question is, you said you're planning to introduce smart water meters in EMEA in Q1 2023. Why does it take so long given that this is basically based on existing technology you are using for gas metering? What about the U.S.? I thought you would launch this type of water meters also in the U.S., right?
That's right. When we look at water. water is very close to our Nuremberg facilities in terms of what we have, the heat technology. When we look at the moment in the markets, we just see very promising prospects in Australia, New Zealand, which is very interesting for us, Asia in general. Absolutely right, we will also push in EMEA. There are always some specifications which are changing. That's why we really would like to push the Asia piece first, and then the U.S. is also something we see. We shouldn't forget, in the U.S., we have actually three companies with Badger, with Neptune, and with Sensus, who are very strong in water reading. We feel with our technology, we will be able to compete on equal footage. We think that will take a bit longer to really entrench in that market.
Mm-hmm. Okay, good. My last question is regarding APAC. This region remains a relatively small revenue contributor, as your business is, let's say, very much focused on Australia, Hong Kong and India. You said you're now starting the rollout of meters in Malaysia. Can you provide some numbers here around this introduction, and how about expanding into other markets like Indonesia, I don't know, Vietnam, et cetera?
Yeah. You said it rightly, when we look into APAC, it's really our bright star. Yes, they are small, but when you look at the segment, they didn't have any impact. They were even able to slightly grow during COVID, I think 0.4%. Also actually in 2021. They have a healthy growth rate, and we shouldn't forget, Asia Pacific, it's a pretty competitive region. They really do a good job in terms of cost conservation and also compete in a more commoditized environment. Patrick, as you know, I lived in Asia for a few years, and I feel particularly hot about Southeast Asia because I think these are good markets for us. You mentioned, really Philippines, Indonesia, Thailand, Malaysia. These are good markets where I feel that we are underrepresented, and we were able to win there in Malaysia, actually a contract with TNB.
I would like to see now more actually in that region. I think we feel that we should be able to actually do more in that part of the world.
Mm-hmm. Okay. Thank you very much, Werner.
Thank you very much, Patrick. Thank you.
The next question comes from the line of Andreas Willi from JP Morgan. Please go ahead.
Good morning, everybody, thanks for taking my questions. My first one is on the kind of raw material cost inflation component situation. How do your contracts generally work in that sense, if you have supply contracts for a year or two out, and then you have a meaningful change in your input costs? What can be done, in terms of price escalation clauses or adjustments in these contracts and kind of what you need to do yourself in order to basically offset the potential higher cost for components or freight?
Good morning, Andreas. No, you're absolutely right. Oh, sorry. I apologize.
No, there's an echo.
We had some echo. Sorry. I thought, Andreas, you were still talking. It's an echo, some of which now went away. When we look into these global shortages, we are not the only one. As you know, I've worked in automotive before, automotive alone will see around CHF 60 billion impact in 2021, so very significant. We obviously are much smaller, don't have less muscle. So far, we are able to manage it pretty well. These are daily meetings. These are actually where we do some redesign on components, actually, that we can actually switch supplier and so on. I expect this remains a challenging environment for the rest of calendar year 2021. The main challenges are, Andreas, really that, first of all, material availability, because if we don't have the material, we are not producing in the manufacturing plants.
Then secondly, it's cost increase of materials and also freight costs increase, which are not negligible. Just to give you an example, we have freight increases from Asia to Europe times three and from Europe to the U.S. times two, so significant. What we are doing is obviously, we manage that with our supply base as good as we can, which I think it's very important that we don't see cost creep. We also look into contracts in terms of discussions with customers. Depending on the situation, it's something we clearly watch very carefully. I would say it's the one area when I look into our guidance, I feel we have the right mitigations in place, but something which deserves very special attention to make sure that we are able to deliver the results.
Thank you very much. My second question on the acquisitions in the EV charging space. Maybe you could talk a little bit about the channel to market of these companies and what you can do to help them scale up in terms of customer access. You sell generally to utilities. Do you expect utilities themselves to be a customer group for some of these applications, or do they sell more directly to users? I would like to understand basically a bit better the sales synergies and what you can do.
Yeah.
As a large company for these smaller acquisitions.
Yeah. Exactly, what you said. When we, for example, look now in the U.K., and in the U.K. in particular, where we have very large market shares. We have 50% actually of meters in the U.K., and with our smart technology, and that's a very strong market share. Now discussions are actually taking place, how can actually this technology be leveraged into EV charging? These discussions are going on between the companies and the government authorities. I think we can be very substantial, in the U.K., to help actually Etrel in terms of market access, customers and so on. The utilities, clearly, they would actually expand their reach, in terms also of EV charging. That's why we think EV charging, not only as a segment in itself, but also in what we are actually doing as a company, I think it's a really good fit.
The same we see in France also where we have proof of concept discussions. I think that's very positive. Of course, already what Etrel is doing in their own market, I think that remains very interesting. We feel really good. Etrel, while not the biggest company, but they did a really good job also in terms of managing costs. They are, for us, EBITDA neutral, which is pretty remarkable when you see some of the other companies, what kind of cost structure they produce. I think that's really positive. In summary, our customers clearly look for solutions to manage services around EV and security, and I think we can really do that together very effectively.
Thank you. My last question on working capital. You've had a strong improvement in the last financial year. Looking at your cash flow guidance also implies that you keep probably a lower level of working capital to sales than you had before the crisis, given that you expect a revenue increase, but maybe not such a strong increase in working capital. Maybe you could talk a little bit about that, what you expect from working capital in the new financial year, and what aspects of it were you able to structurally improve?
Yeah. Elodie, please?
Yes, as you rightly said, there was a significant reduction of working capital in FY 2020. Naturally, as we go into FY 2021 and we expect a growth in revenue, this will put some pressure on the working capital. We don't expect to grow the working capital back to levels where it was in the past. We expect that what we were able to achieve in 2020 will be carried forward structurally into 2021. In particular, the working capital in 2020 was decreased both on the receivables section as well as on the inventory section, and we expect structurally to be able to continue to operate in this way. We have a very strong focus on cash and cash generation throughout the organization, and we'll continue to drive this.
I think, Elodie, you gave a very good summary. I would say we will see some increase. Keep in mind that actually we are growing revenues about 10%. For that, we will see some inventories going up. Secondly, I think we need to stay very street smart in terms of the global supply chain shortages. While we don't like to increase inventories, I think there's no other way around that to really make sure actually that we can keep the production going in our production side. That's a little bit what goes. It's counterintuitive, so to speak, but exactly to Elodie's point. Yeah.
Thank you very much for your time.
Thank you, Andreas. Thank you.
The next question comes from the line of Lucie Carrier from Morgan Stanley. Please go ahead.
Hi, good morning, and thank you for taking my question. I guess the first question I had was around kind of the future path from an R&D and innovation standpoint. You were mentioning, obviously, that you are stepping up kind of the investment into innovation this year. I was just curious to understand which type of investment your kind of precisely working on, but also going forward, is it kind of what I would call a one-off, or are you actually looking for a sustained higher R&D to sales in the future?
Good morning, Lucie. When we actually look into R&D, we clearly want to be seen as the technology leader. When we think about that, we think in three categories, Lucie. We have smart metering, we have grid edge, and we have smart infrastructure. When we think about smart metering, clearly, we talked about it, smart water, smart gas. These are not small investments. It costs money, it takes time, it costs resources, but the right thing to do. We also think, Lucie, about grid edge and smart infrastructure.
When I say this, then clearly Google partnership, which we are doing, where we develop new products and services that cost money, but also in the grid edge, where, for example, Rhebo is a very interesting acquisition in what we are doing, and I think we can also leverage that more and more in the energy sector. In terms of timing, I clearly see that we need to make this investment 2021, also 2022. Don't take it the wrong way, but actually, we made a commitment to you in January about our 2023 midterm guidance. That's really carved in stone. We watch very carefully that we are actually able to achieve that.
I'm not saying this extra, everything will go away, what is 2%, but I do think a midterm at a 9% R&D investment, it's a good number. There's no question about that. At the moment, we need this push to actually position us for mid- and long-term success.
Understood. That's very helpful. My second question was around the revenue dynamic, you are providing the organic growth guidance, 7% to 11%. You're obviously talking about the M&A coming on top, and this is true that you are having three acquisitions coming in the pipeline. Also, possibly the Google partnership, which I understand is going to be a couple of million of revenue already this year. Can you maybe help us understand how much contribution you expect from M&A? If I see some of your disclosure, one asset is you're talking about double- digit million sales in 2021, Etrel, but double double-digit could be CHF 10 million- CHF 90 million, I guess, and you're not giving really information on the other asset from a sales standpoint.
Yeah. No, I think that's a fair point. As when we think about these M&As, you can imagine True Energy is very small, but I think very promising. For 2021, we don't see anything which will be material to talk here. In terms of Etrel, there we see, we hope around CHF 70 million, which I think it's exciting. It's 1% company growth. To think in that terms. Then Rhebo, that's also small, it's a startup also.
Thank you. Then, maybe lastly, just I wanted to clarify two things on the cost dynamic for 2021. First, how much savings you are expecting, because I appreciate this year there was also some government help and one-off cost saving from COVID. What do you see as the run rate in 2021? Just maybe to follow on the question from Andreas, currently, do you expect your mitigation to fully offset the supply chain constraint, or do you have in your guidance some headwinds from this constraint included?
Yeah. Maybe first question, Elodie?
On the OpEx side, Lucie, as I mentioned during the presentation, we saw in H2 part of the temporary COVID-related shorter measures reverse for a part, and we basically saw an uplift of $21 million H2- H1 over our OpEx. I expect this will carry on into 2021 as basically we start to see now these temporary measures fade out. On the other side, as I said, we have implemented our Project Hermes. This has been done fully in H2. We have started to see some of the benefit in H2, and we will see further benefits of that in the full year 2021. This is completely in line with what was previously announced in terms of savings.
Lastly, I will say, when you look at our other OpEx, obviously you have the impact on the investments that we are making, that we just discussed with Werner. You have to take these three elements in combination when you look at our other OpEx for 2021.
Yeah. Very good. Then maybe the second question, Lucie, in terms of guidance and global supply chain shortages and so on, our view is that we should be able to manage these parameters. Now, as you can imagine, if there will be really the sky falls to earth, then that's a different thing. I think given where we are right now, these are obviously daily optimization reviews and mitigation actions, but I feel comfortable that we should be able to do that.
Thank you very much for the help.
Thank you very much, Lucie.
Thank you.
The next question comes from the line of Patrick Rafaisz from UBS. Please go ahead.
Good morning, everyone. Thank you for taking my three questions. I'll start with a follow-up on just the previous one on the supply constraints and freight costs. You mentioned a tripling of Asia freight to Europe, doubling to the U.S. This looks quite significant. I'm still trying to better understand in your guidance range, both on the top line organics and on the margins. Is that already fully reflected or is that just a caveat you add in addition to your guidance? If the supply constraints continue, freight costs remain high, then we're at the lower end. If things get easier, we're at the higher end. Is this range independent of the supply constraints?
Yeah. Good morning, Patrick. When we think about the current situations, I can tell you supply chain, we are not the only company. We see it with competitors, as I spoke before, automotive. Pretty much everybody battles this on a daily basis. You have these components, suddenly then maybe crystal's not available, so on. This is what we are, at the moment, doing very detailed reviews on a daily basis. I expect it stays within a similar range. As long as it stays in a similar range, Patrick, we really see ourselves in this guidance. For me, at the moment, I couldn't give you much more color because it's really hard to say. My personal opinion is, Patrick, that we should have more visibility towards the mid of this calendar year 2021.
By the end of June, I think we should have all of us, including automotive and so on, have better visibility. That's how we think. That's why I think, assuming that it stays with that type of range, we think we will be able to manage within our guidance.
Okay, thanks. That brings me then to the second question also related to your organic growth guidance. Thinking about the range here, what are, in your view, the main building blocks for the upper end and the lower end? What are the variables here?
I would say upper end, clearly, we now need to see this revenue coming through, in particular in Europe, because obviously, as you can imagine, U.K. lockdown, France, we don't expect it anymore. At the moment in the U.K., we are not back to 100%, we are about 80%. I think that situation will further improve. Our view is vaccination plus higher temperatures will actually help the overall COVID situation in a positive way. I think that's important. On the lower end, clearly, global supply chain challenges. That's really how we think about it at this point in time.
Okay. Helpful. Thank you for that. My last question on the EV charging infrastructure opportunity that you're seeing. Can you share a bit of color on your mid to longer- term planning or business case here for this business? What kind of revenue potential do you see for the group over, I don't know, three to five years or more?
I maybe need to be a little bit careful because we just actually signed the contracts, but we're not that close. You know what I mean? With that, I'm a little bit hesitant to say too much. What I would say, EV charging, when you look from a market segment perspective, Patrick, and I hope you will be one of them who will also call us over time that you need a charging station, we are here. When I look into that, then you clearly see actually that there's this double digits growth. We do think that we will be able actually to grow with the market. That's how we think at the moment. As soon as we close, then I think during H1 results, we should be able to give further color to that.
Okay, great. Thank you.
Thank you very much, Patrick.
The next question comes from the line of Urs Emminger from Research Partners. Please go ahead.
Good morning, everybody.
Morning, Urs.
Thank you. Thank you for taking my questions. I have several add-on questions. First, you said you spend roughly 2% in addition of sales. Is that all in R&D or in other areas, too?
Good morning, Urs. That's really a mix. When we think about this additional investment, it's really the Google partnership between MAST and then Rhebo a little bit and then gas and water. This is actually where we make the investment and some goes directly into R&D engineering, some goes in other cost items, but that's the way we think.
Okay. I saw the reduction in sales and marketing. Was it mainly traveling? I was a little bit surprised that general and administration the cost didn't come down faster. Perhaps my mistake, but perhaps you can say a word or two about those two items.
Sure, yeah. Elodie?
Yes. I think part of that is linked to the short-term related COVID measures where we saw, in fact, in terms of variable compensation, an impact linked to the top line. This is one element, and obviously the other element is the global restructuring that we've done with our Project Hermes. These are the two. You have more short-term and more structural items in both cases.
Excellent. Yeah. Good. Urs, you said you had, I think, two, three other follow-ups.
Just the details of the financial report is not out. Nevertheless, I have a question or two about those.
Sure.
Did the provisions, in summary, increase or decrease? What can be expected from the normalized tax percentage for the near future? That will be it.
Yeah. Elodie?
Okay. In terms of provision, we'll focus on warranty because that's always the big topic. As I said, we are seeing basically warranty expenses going down versus the three-year average. This is what we saw in 2020. In terms of the provisioning on warranty, you will not see any surprising effect, I would say. There was the normal provisioning effect as we are shipping new products and some small readjustments, nothing that will surprise in the financial report. In terms of tax rates, we are running with what I explained, a CHF 26 million tax, we expect about 25%.
Yeah. Urs, you will see the full report, annual report on the 20th of May. That's when we actually publish it.
Yeah. I know, but I have to comment anyway, and I was curious.
No, it's a good question. Very good question. Yeah, it's fine. It's perfect.
Okay. That's it. Thanks.
Good. Thank you, Urs. Thank you.
The next question comes from the line of Daniel Koenig from Mirabaud Securities. Please go ahead. Mr. Koenig your line is open. The next question comes from the line of Jeff Osborne from Cowen and Company.
Hey, good morning, guys. Two quick ones here. One is, can you characterize the level of quoting activity in the U.S., was question one. Question two, as you referenced in the prepared remarks, President Biden's infrastructure plan, I was just curious how you thought that would impact your business.
Yeah. Hey, good morning, Jeff. Sorry. The first question, I kind of missed it. Can you repeat it again?
Yeah. I was curious on the level of quoting activity for new projects. You referenced the ones that have already received regulatory approval. I was curious if you could characterize the pace of business that has not yet received regulatory approval.
No, I think quoting definitely improved. I think we have a good level, in the U.S., also Europe improved, APAC improved. That's positive. For us, you heard during my prepared remarks, Jeff, our priority number one is clearly book-to-bill. There's no question. That's also my priority, which needs to improve. We will improve that. I think, from a quoting perspective, clearly improved, which is positive. Positive momentum. Joe Biden, the $100 billion. At the moment, we cannot earmark and say, "Well, actually, so and so much will go to grid, or so much will go to even smart metering," which would be nice. I'm a member of the Grid Infrastructure Advisory Council in the U.S., which is really good to be closer to actually these discussions. My view is, Jeff, it definitely has a favorable impact.
Not everything will just come through in 2022 and 2023, but I'm absolutely convinced this has a very favorable impact also for us as a company.
That's great to hear. That's all I had. Thank you.
Yeah. I thank you very much, Jeff.
Ladies and gentlemen, that was the last question.
Good. From my side, I'll just look for my paper here. First of all, thank you for your questions. I'm going to close the call in a moment, but before that, I would like to leave you with this slide as a reminder of the key takeaways of today's call. First, it has been a challenging year, however, our transformation to expand Grid Edge and smart infrastructure is well underway. Second, despite 20.8% revenue decline, we were able to achieve a 10.3% adjusted EBITDA margin and produce a solid free cash flow of $97.6 million. Third, and I think most important is I'm deeply convinced that we have the right strategic focus to drive leading-edge technology and transform the business. With that said, thank you for joining us today. Thank you for your great questions. Stay safe and healthy.
We hope that we can actually see you soon, face-to-face again. That would be really cool. In the meantime, I wish you all the best and a very good day. Thank you.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.