Ladies and gentlemen, welcome to the Analyst and Investor Call First Half 2020 conference call and live webcast. I am Sandra, the conference call operator. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Ms. Eva Borowski, Head of Communication and Investor Relations. Please go ahead, madam.
Thank you, Sandra, and good morning, everyone. As you know, earlier today, Landis+Gyr issued our first half financial year 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, and for more information, we refer to page two of the presentation and 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 half year 2020 financial results. I'm here with Jonathan Elmer, our CFO, and we are very pleased you have all been able to join this morning, especially given the short notice. As you might have seen this morning's press release, we have a significantly lower result to report, and we wanted to get this information out as soon as it was available. Thank you for making the time. 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, the situation and current environment are difficult. However, we are getting the house in order. Second, despite almost 30% revenue decline, we were able to produce a solid free cash flow of $45.9 million and traded profitably with an 8% adjusted EBITDA margin.
Third, I am convinced that we have the right strategic focus to drive leading-edge technology and transform the company. Let's talk about what's been happening over the last six months and move on to slide three. The COVID-19 pandemic has affected all aspects of our lives in unprecedented ways. This has also had a significant impact on our customers and our company and is reflected in our financial results and forecasts. We are glad to say, thanks to the proactive measures we have taken, our teams around the globe have managed the crisis well and shown an incredible amount of resilience and dedication. That said, the safety, health, and well-being for our employees, customers, and partners remains our top priority. Following local rules and regulations, we continue to utilize home office policies and enforce strict adherence to safety measures.
Our efforts have paid off with very few cases amongst our employees, and these have not impacted the business negatively. We have not experienced any supply chain issues and remain dedicated to meeting the commitments we have made to our customers. Even though 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. Let's have a look at some of our key metrics. Starting with the order intake. Our book-to-bill ratio was 0.73, which is unsatisfactory. It is largely a result of delayed project approvals in the U.S. due to COVID-19 and the fact that customers and regulators are widely working from home. This is slowing down approval processes even further. Getting the ratio back up remains my top priority. Our committed backlog fell by 17% to roughly $2.1 billion.
Americas and EMEA both contributed to the decrease while Asia-Pacific held up pretty well. Net revenues came in at CHF 623 million, a decrease of 27% in constant currency. While both Americas and EMEA were seriously impacted by the crisis and associated lockdowns, our business in Asia-Pacific largely managed to maintain its revenues. Adjusted EBITDA for the first six months came in at CHF 50.1 million with an EBITDA margin of 8%. We see a significantly lower top line and reduced operating leverage despite adjusted OpEx being lower by CHF 32.2 million. Free cash flow, excluding M&A, remained positive with CHF 45.3 million, up from H1 of last year and demonstrating again the cash-generating power of our company. One of our great strengths has always been our balance sheet. This remains very solid, ending the first half of the financial year with a net cash position of CHF 12.1 million.
Additional revolving credit facilities of CHF 200 million were established during H1, and these facilities remain undrawn. In May, we postponed the decision on last year's dividend as a precautionary measure given the global economic uncertainty. I'm very pleased to tell you that our board of directors has decided to propose a distribution from capital reserves of CHF 2 per share based on a prudent approach given the current environment. This distribution is free of Swiss withholding tax and will go to vote at the extraordinary general meeting on November 24th, next month. Let's talk about what we have achieved in the last half year on slide four. During the full-year results presentation, I shared a list of my key priorities. I'm happy to tell you that to a large degree, we have delivered on these commitments in my first six months at Landis+Gyr.
First of all, I promised that we would manage for cash. We have delivered a free cash flow of CHF 45.3 million, excluding M&A, while still maintaining a high level of R&D investments. This is higher cash flow than the first half of last year, despite the COVID impact on our top line. Second, converting opportunities into top-line growth. We did win some customer projects, delays in the U.S. due to regulatory project approvals continue, and this has been worsened by COVID-19. Of course, there's still a lot of work to do, we are laser focused, this remains my top priority. Third, R&D. We redesigned our R&D organization by empowering our local teams and centrally driving technology strategies and global platforms. We've already seen good results with respect to customer intimacy and speed to market.
In addition, we have enhanced technology roadmaps with emphasis on digital transformation to ensure we develop and deliver leading-edge innovation for our customers. Fourth, driving efficiencies. To implement all of these changes, I put together a strong leadership team, and we are fully aligned to drive our strategic key initiatives. This is the first step in getting the house in order, and our restructuring initiative, Project Hermes, is progressing swiftly and according to plan. Hermes is also aimed at driving efficiencies, and we have made good progress on optimizing product costs and simplifying processes across the organization. I will tell you more about this later. Fifth, ensuring customer satisfaction and readiness for the future. The key to this is to push grid edge intelligence and smart infrastructure. We are actively pursuing strategic partnership, such as Vodafone, and looking into viable and meaningful M&A options to drive growth and profitability.
Additional information and strategic direction, as well as possible update on midterm guidance and dividend policy, will be given at the Capital Markets Day on January 27th. Turning to slide five. Since I arrived in April of this year, I've made several changes to our management team. We now have a highly motivated leadership team, and I'm convinced that we are well-positioned to elevate the company to the next level. The regional heads, Susanne, PV, and Steve, remain unchanged and do a very solid job. New appointments include Eva in investor relations and corporate communication, who is with us here today. Jeff in the technology office, Sean in supply chain operations, and starting on November 1st, Holger as General Counsel. Bruno was internally promoted to lead the strategy function and soon will also be able to announce a new Head of HR.
Already in January of this year, we've announced Jonathan's retirement and Elodie's arrival as the new CFO. I'm pleased that she will join the team in the next few weeks. On behalf of all of us at Landis+Gyr, I would like to thank Jonathan for his unwavering support, expertise, and dedication over the years. I'm also glad to say that he has agreed to support us until next March to ensure a smooth transition working with Elodie and me. Let's move on to slide six. I'd like to talk more about Project Hermes. On August 5th, we announced Project Hermes, a global savings initiative aimed at further optimizing our cost structure and simplifying the organization. This will reduce our workforce by around 12% globally. In the past weeks, we have made significant progress in executing this initiative. Let me add a little bit color on that.
When I took over as CEO in April, I conducted a thorough analysis of the business and identified several areas with room for opportunity. Unlike previous restructuring initiatives, this program targets the entire organization on a global level, including group overheads. Our teams are working hard on implementing the measures, but you will appreciate that every country has different timelines and implementation, given local laws and regulation. In North America, for example, we were able to implement measures swiftly, while in other jurisdictions, we are still in discussion with work councils and unions. We aim to have the program completed by the end of our financial year 2020, so by the end of March 2021. We should see the full benefits of the program in fiscal year 2021. Once completed, we expect this initiative to result in annual run rate cost savings of approximately $30 million.
Of this, about CHF 14 million relate to manufacturing and supply chain personnel. This will help to offset the lower revenue and support our gross profit margins. The remaining CHF 16 million relates to operating expenses, both R&D and SG&A. I would add one comment on how fully we will see these savings in our results next year. We see the need to increase investments in some key areas of our portfolio, plus this half has benefited from some one-off effects in our costs, mainly due to COVID-19, as we have benefited from government schemes and low travel expenses.
In terms of restructuring costs, we already booked CHF 14 million in H1. We expect around another CHF 5 million, bringing the total restructuring costs to approximately CHF 19 million. Before we move on to the regions, let's talk for a minute about the impact our technology has had on social and environmental factors.
Over the past few months, we have seen the importance of smart meters for utilities in managing grids and loads, but also for end customers, helping them to manage energy consumption in a more informed and sustainable way. Looking at the U.S. This spring, we have seen a temporary drop in overall energy demand for many utility systems. This was largely driven by commercial industrial facilities shutting down during shelter-in-place orders. While this got reasonable attention, there's another trend in the data we find even more interesting, and that suggests a longer-term change. Overall usage was offset by a notable rise in residential energy usage as people shifted from traditional office spaces to work from home. By June, that number went up to 42% in the U.S., and that's really a disruptive change for utilities and consumers.
Virtually overnight, energy had to be redirected to suburbs and residences in a completely different usage pattern than ever before. Weekdays start to look like weekends with ACs and internet running all day. In many cases, this resulted in home energy spikes of about 20% more demand than usual. The shift of energy during this pandemic is just one example of the dynamic condition utilities must be prepared to manage while maintaining uninterrupted service to their customers. It requires technology and expertise provided by Landis+Gyr to surgically manage energy so it can flow to the right place at the right time. Grid Intelligence will continue to be a critical tool for utilities as they serve customers transitioning to this new normal. Additionally, this technology will grow in importance to consumers as well, providing them with greater awareness and control to make flexible and sustainable energy choices.
Working actively towards a greener future, sustainability is embedded in our DNA as we help manage energy better. On October 28, we will publish our Sustainability Report 2019/2020, and I encourage you to take a look. In addition, for 2020, we have introduced a sustainability component in our short-term incentive for all eligible employees with a rate of 10%. We've also signed up to the UN Global Compact and Global Reporting Initiative. We are very proud of the progress we've made, but also acknowledge there's still room for improvement. Our portfolio of products and services offer unique opportunities regarding environmental and social benefits, and we strive to advance our efforts to support a positive impact for a more sustainable world and more empowered energy consumers. Let's turn to slide seven, and we 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. We recently had some good wins. For example, Indianapolis Power and Light, Sacramento Municipal Utility District, and Piedmont EMC. Over the last few weeks, we have seen increased movement in the regulatory decision-making process, and I would also like to highlight that our products and services are considered to be part of critical infrastructure. Nevertheless, regarding our top line, we've had a tough first six months. Looking at North America, I'd like to point out a few things. First, COVID-19 slowed down installation of various projects. Secondly, the pandemic has extended decision-making timelines for regulatory approvals even further. I'm personally in close contact with our customers, and we support them wherever possible to speed up the process. I'd expect news flow towards the end of this year or in Q1 calendar year 2021.
Please keep in mind, from the time we sign a contract until it translates into meaningful revenues, it takes approximately another 18 months. Means we are talking financial years 2022, 2023. Thirdly, recent project roll-offs were not replaced by new business, and we see slower tendering activities. Creates pressure on our top line due to conversion cycle of our orders mentioned earlier. We remain committed to continued investment in our R&D programs, such as Revelo Grid Edge Intelligence Sensors, and Gridstream Connect IoT platform. Customers have shared consistent and positive feedback on our technology roadmap. That's an important reinforcement of our vision and reputation we hold for innovation. Recently, we have announced our partnership with Vodafone. Provides flexible communication options as part of the Gridstream Connect offering and expands our customers' access to a global base of cellular networks.
Finally, we've taken a disciplined approach to our operating expenses, with a priority on driving process efficiency and right-sizing our resource to ensure costs are streamlined. In South America, the situation remains challenging, driven by intense international competition and marked by uncertainty related to funding, policy, and economic stability. We have put in place sustained cost savings as a critical part of managing through this type of climate. We've also shifted our strategic focus to areas that are well-aligned to our core competency, namely high-value metering and our IoT connectivity platform. These are designed to address the critical energy management challenges this region faces around revenue protection and grid operations. In Japan, our technology has now enabled in excess of 26 million grid sensors of the 29 million contracted for deployment. This project continues to be a global showcase of the largest utility IoT platform in the world.
It's not just the size that is impressive, but the performance of the system, which is exceeding very stringent SLA requirements. Our end-to-end scaling capability is the best in the industry, with over 1.3 billion reads per day with 99.99% accuracy. Also, you may recall, by law, meters will be replaced every 10 years, and the next nationwide replacement cycle is due to start around 2024. We also anticipate an acceleration of gas smart metering and adoption of smart metering for water. Our track record of providing future-proof technologies will enable us to maintain our leadership position. Let's move to slide eight and take a closer look at EMEA, led by Suzanne. Under normal circumstances, the U.K. is our largest and most important market, having contributed approximately 40% to EMEA revenues in financial year 2019.
Due to the pandemic, non-essential smart metering installations stopped in the U.K. in mid-March and resumed only in July. At a slow pace. Currently, we are back at around 60% pre-COVID installation levels. As I have mentioned before, there have been no cancellations so far, but the revenue stream will now be extended over a period of two to three years. On a positive note, we have signed a contract extension with Capita for an additional 2 million electricity and gas meters, mainly focusing on independent energy suppliers. We have already delivered or secured contracts for approximately 23 million smart meters. Of the entire rollout of approximately 50 million electricity and gas meters, about 40% has already been completed. The implementation targets set by the U.K. government have now been extended to June 2025.
At this time, we see installation peaking around 2022, with an additional potential of approximately 15 million meters to be awarded. In France, Linky installations were also suspended, but rebounded to pre-crisis level earlier than the U.K. The French market has shaped up favorably for us, where we are now one of three remaining suppliers. We are well-positioned as a strategic partner to Enedis, and currently in conversations regarding follow-up approaches for around 8 million additional meters as part of the Linky rollout. Other important markets like the Netherlands, the Nordic countries or Switzerland, were negatively impacted by COVID-19, but installations came back fairly quickly. Over 1 million meters were contracted in Sweden and Denmark. We have an excellent momentum in the Nordics, winning the N1 and Vores Elnet in Denmark, and C4 in Sweden.
Our E360 has become the most popular next-generation energy meter in the Nordics, backed up with our narrowband IoT communication solution. We also have strengthened our position in managed services by extending several customer contracts in Finland. In the Nordics, the second wave rollout is still expected to provide additional opportunities of around 10 million meters. COVID-19 led to a slowdown of business. We implemented cost-saving measures, partially mitigating the negative impact. Governments through EMEA remain committed to their smart meter rollouts. In addition, we believe the large install base of our technology is a solid foundation to leverage service opportunities. Let's take a look at the APAC, led by Steve on slide nine. Asia Pacific is a bright spot in our results. Adjusted EBITDA margins are the highest since our IPO, despite a very challenging environment. Asia Pacific is the region least impacted by COVID-19.
In Australia, the energy sector is considered critical infrastructure, and installations largely continued. Also, our Intellihub joint venture is performing as expected. In Hong Kong, we have two major rollouts with CLP Group and Hongkong Electric for our Gridstream solution as the key technology provider. The programs are continuing as scheduled and contribute to the revenue growth in the half year. The market in India was impacted the most due to prolonged lockdowns. Overall, it is mission critical that we win projects and execute in a challenging environment. Let me now hand over the call to Jonathan to give you a more detailed review of the financials. Afterwards, I will walk you through some thoughts about financial year 2020 before opening up the call for questions. Jonathan, please.
Thanks, Werner. Let's turn to slide 10 to get an overview of our consolidated results for the first half of financial year 2020. As we said when we released full year 2019 results in May, we've been seriously impacted by COVID, and our revenues are well down. Inevitably, our profitability has taken a hit. That said, we've seen a significant reduction in our cost base already, with more to come from Project Hermes. Also, we've increased our cash generation compared to H1 last year, and both of these positives position us well to recover from the COVID crisis. Just walking through the key numbers on the slide. Order intake was $456.9 million, down 43.7% in constant currency, and all regions are down year over year as customers and regulators delayed making decisions due to COVID.
Net revenue is down 27.1% in constant currency, mainly due to COVID-19 impacts, and I'll unpack the details later. Recorded EBITDA fell to $31.8 million, and adjusted EBITDA was down by 59.9% to $50.1 million as COVID-19 hit sales and margins. This meant that overall, we fell to a net loss of $2 million. Free cash flow, excluding M&A, was a bright spot of $45.3 million for the half, an increase of $12.2 million compared to the first half of last year as we managed cash tightly. Let's turn to slide 11, and I'll briefly walk you through the constant currency revenue bridge. The Americas revenue was down by $137.2 million, 29.2% decline in constant currency. EMEA was down $93.2 million or 30.4% in constant currency. Asia Pacific was down by $1.7 million, 2.2% in constant currency compared to last year.
A very significant fall in revenue for the group, driven mainly by COVID-19, and I'll give more details when we get to the regional slides. Flipping to slide 12, the adjusted EBITDA bridge. If you look at the first two red blocks, you can see that adjusted gross profit declined for two reasons. First, because of the significant fall in revenue, which in constant currency terms accounted for $81.6 million of the decline in adjusted gross profit. Secondly, because of lower adjusted gross profit margins, which in constant currency terms accounted for $24.5 million of the decline. This was largely due to reduced operating leverage, as we could not adjust the fixed cost base in our manufacturing supply chain and services business quickly enough to offset the fall in revenues. We come to a reduction in our adjusted operating expenses of $33 million in constant currency.
This represents a 19% reduction between H1 last year and H1 this year. Much of the reduction comes from cost control measures introduced prior to Project Hermes, but some of the reduction is attributable to lower costs for variable compensation, and some is also due to lower costs associated with COVID, such as much lower travel expenses and the benefit of government support schemes. As Werner mentioned, COVID-related expense reductions will be a headroom for us as they unwind over the next period. As a result, adjusted EBITDA was down over last year, coming in at $50.1 million, a margin of 8%. Moving to slide 13, you see our adjustments to EBITDA. I'll focus on three items in the table. Restructuring charges for the first half were $15.4 million, and of this amount, $14 million relates to Project Hermes.
On the warranty normalization line, the negative amount of $6.7 million represents the amount of provisions made in the half relative to the average six months warranty utilization over the last three years. We've not had any major changes to our warranty provisions this half. Specifically, we've not resized the provision in respect of a legacy component issue in the Americas, where failure rates continue to track in line with our expectations. Finally, timing differences on FX derivatives. Our biggest FX exposure is due to revenue which we generate in the U.K., our single most important European market, and we sell in British pounds and supply chain costs largely in other currencies. We hedge part of our exposure to the pound for up to approximately 24 months ahead.
This adjustment excludes the unrealized losses of $9.7 million in respect of mark-to-market differences on our FX hedges to the extent that the underlying hedge transaction had not taken place by the end of the half. Turning to slide 14 on cash flow. In H1, we generated free cash flow excluding M&A of $45.3 million, an increase of $12.2 million compared to the first half of last year, notwithstanding the much lower profitability. Looking at some of the details. Working capital was a net generator of cash in the first half, contributing $32.1 million. Even though overall working capital declined, inventory actually increased slightly by $1.5 million compared to the start of the year, as we couldn't turn off the tap on our supply chain quickly enough. There's an opportunity to reduce inventory in H2 so that it's more in line with our revenues.
Warranty and warranty settlement cash outs were $7.2 million, down from last year by $16.2 million. This was due to lower cash outs both in EMEA and the Americas with respect to the legacy issues in both regions. On tax claims fell from $16.7, $8.9 million in the first half. This is partly due to lower profitability and partly due to various government COVID-related tax payment deferral schemes. There will be some headwinds on tax payments as these schemes go away. Turning to slide 15 to look at our net cash position. We had net cash at the end of September of $12.1 million, an improvement of $111 million compared to our net debt at the end of September 2019, and an improvement of $45 million compared to the end of March 2020. This reflects our ability to generate cash even in a downturn.
We didn't pay a dividend in H1. Assuming the EGM approves the board's proposal to pay CHF 2 per share in November, this will result in a cash out in H2 of approximately $63 million. We will have a couple of headwinds on cash flow in H2. Firstly, as discussed, we'll have about $18 million of cash out in respect to Hermes restructuring. Secondly, as we disclosed in our 2019 results, we have received a sales tax assessment in Washington State in the U.S. for approximately $22 million. We strongly disagree with assessment and believe that it will be overturned on appeal. However, in order to file an appeal to the state courts in Washington, we must first pay the assessment. It's likely that we will file an appeal to the courts in H2, and therefore, make payment of the assessment in the second half.
Now turning to slide 16 for the Americas. In the Americas, backlogs declined by 18.5% to $1.33 billion, as order entry was weak given continuing regulatory delays and COVID-19 impacts. Revenue fell sharply with the biggest effect being in North America due to COVID-19 and weak order intake, but also we had a tough comp in H1 of last year. We also saw falls across the region, including in Japan, as the TEPCO project nears its end. Adjusted gross profit margin fell by 490 basis points, largely due to reduced operating leverage, as we could not adjust our cost base quickly enough with our level of sales. Expenses are well controlled and declined by $17.3 million.
This decline is attributable to expense reduction measures which we took at the end of last year before Project Hermes, there's also a benefit from lower variable compensation costs, COVID effects and a couple of one-offs. Given the reduced operating leverage, adjusted EBITDA fell to 12.2%, outside the 18%-21% range we targeted. Turning to slide 17 for EMEA. In EMEA, committed backlog fell to $663.2 million, as we continue to execute against the backlog which we have built up in the U.K., Netherlands and France. On the order intake side, we've had some nice wins in the Nordics, as Werner mentioned, with new opportunities emerging in that part of EMEA. Revenues fell by 30.4% in constant currency terms. This fall was mostly due to declines in the U.K., as meter installations slowed dramatically during the COVID lockdown. Adjusted gross profit margin fell by 350 basis points.
As with the Americas, this is largely due to reduced operational leverage on lower sales and some mix effects. Adjusted operating expenses were also lower by CHF 9.2 million. Again, mainly due to lower variable compensation, some COVID related effects, and generally tight cost control. Based on lower sales and lower margins, EMEA fell to a negative adjusted EBITDA of -CHF 4.3 million, a margin of -2.0%. Turning to slide 18 for Asia-Pacific. Asia-Pacific is holding up reasonably well during the pandemic. Net revenue declined by 2.2% in constant currency terms, as growth in Hong Kong offset declines in Australia and India, where both markets are quite affected by COVID. Gross margins ticked up by 160 basis points and adjusted operating expenses remained broadly flat.
Based on this top-line performance and reasonable margin development, adjusted EBITDA was $5.7 million or 7.4% of sales, the highest margin we have seen in Asia-Pacific since the IPO. I'll stop there and turn the call back over to Werner for some closing comments and a discussion of our outlook.
Thank you, Jonathan. Turning to slide 19, let's talk about the dividend and second half of our financial year 2020. After announcing to defer the decision on financial year 2019's dividend during last year's results presentation in May, the board of director will propose a distribution of CHF 2 per share to the extraordinary general meeting on the 24th, next month. This is equivalent to approximately 50% payout of financial year 2019 free cash flow, excluding M&A. The distribution will be paid out of capital contribution reserves and is exempt from Swiss withholding tax. The share buyback program remains suspended. Turning to our future trading. We still see a great deal of uncertainty due to COVID-19 and the general business environment.
The resurgence of the virus in Europe and the continued high levels in the U.S. make it very difficult to be confident about our top line for the second half. That said, we have seen a bit more stability in schedules from our customers recently. We are providing an indication of where we think we will land for the full year. Specifically, we expect that full- year 2020 revenues will be $1.3 billion-$1.4 billion. If we achieve this revenue level, that implies some recovery in the top line from H1, and we should see some benefits in our EBITDA margin, given the improved operational leverage. Now, we will open the call up for questions.
The first question comes from Andreas Willi from J.P. Morgan. Please go ahead.
Good morning, everybody, and thank you for your time. I have two questions for now, one on the U.S. and one in the U.K. In the U.S., in terms of your recovery potentially if orders materialize, what kind of revenue level would we need to see in the U.S. to go back into the margin range, the 18%+, assuming also the cost savings that you will now get from this program? The second question on Europe and the U.K., what have you assumed within your H2 outlook for revenues in terms of what could happen in the U.K. now with potential new lockdowns and what's the access likely going to be like to properties? What have you assumed there? Maybe a third one, if I can, on the CHF 33 million cost savings in H1, what part of that is purely short-term that goes away again?
What part of that is something that stays in terms of the base for next year? Thank you.
Thank you, Andreas. Answering the question, first one, U.S. In the U.S. actually, to have a margin corridor of about 18%-21%, which is a historical level, we will need about $900 million. As I said, at the moment, what we see, it's really predicated by that. The issues we are having at the moment is definitely COVID, as you can imagine, short-term, we also see these regulatory approvals which actually give additional pressure on the top line. In terms, second question, the U.K., in terms of going forward, we assume 60% will come back obviously to higher levels in H2, you can assume roughly about same percentage for EMEA actually, going forward.
The last question, CHF 33 million, as you rightly said, there's CHF 14 million which we really actually see in terms of lower end revenues, which will not flow to the margin. CHF 16 million which flowed to the margin. As I mentioned during my talk, we have initiatives which we want to do portfolio, and I think that's where we want to make further investments. That's something we are still working out. What do we see actually will be sustainable in going forward and what's not? That's something we want to give then further insights about the CHF 60 million at the capital market stage.
Yeah. Just to add a bit more color on the CHF 33 million savings we saw in H1. I think around about half of that we would expect to stay. As I commented when I was speaking, we also got benefit from COVID-related cost avoidance, and also just some effects around lower variable compensation. The COVID aspect is probably around about CHF 10 million, and at some point that will probably go away because that's lower T&E and some of the government furlough schemes.
Yep. Exactly.
The next question comes from Patrick Reitberg from UBS. Please go ahead.
Good morning, everybody. Thank you for taking my questions. The first would be on your working capital assumption for the second half of the year. Jonathan, you talked about inventories that could still be reduced, I assume other components would likely rise given increased activity levels. How should we think about the working capital in the second half of the year? The second question would be around the order intake and the run rates you've seen here, especially in August and September, if you can add some color on that. The last question would be around the buyback. How should we think about the likelihood of this being resumed, and how should we think about potential timing around this? Thank you.
Yeah. Thank you, Patrick. Jonathan, why don't you answer the first question about w orking capital?
On the working capital, as you rightly pointed out that the inventory basically stayed flat over the half. I think, we would expect it to tick down in H2 to reflect the lower revenues, and we've got pretty granular plans to make sure that we deliver that. Therefore, there'll be some offset to that from on the receivables and payables, the net balance between those two. I think we certainly do recognize that our inventory is much higher than it should be. We should see some quite significant reductions in H2. As you correctly point out, they won't fully flow through because there'll be a partial offset on the AR side.
Yeah. Maybe just to add to that, as Jonathan said, we were not able to turn off the tap fast enough on the inventories, but we do feel pretty confident that we will see a pretty different number actually, given the lower revenues. This has to follow. In terms of the second question, order intake. Patrick, we do see some increased activities. We see that in Europe, which is positive. Having said this, don't get me wrong. The book-to-bills are disappointing and we need to work very hard on that. There is no question in my mind. Same goes for the U.S. We do see in terms of, especially this regulatory approval, we see increased level, which I really read as a positive sign that regulators are looking at this stuff again.
Having said this, the proof in the pudding will be, and we see when the commissioner's meeting, there will be these projects on the agenda. So far, we have not seen that, but they will meet every month, and we watch that very carefully. That's what I think is important. We see increased activity, which also led to some good wins. Overall, the book-to-bill is unsatisfactory, and the regulatory approval is still outstanding. I think that's really important. The last point, book-to-bill. Sorry, the last point, share buyback. Apologize. That's something we put on hold, and that's a board decision. I would be surprised if they would change in the near term, but that's definitely the board which will take a decision on that.
Okay. Thank you very much.
Thank you.
The next question comes from Patrick Laager from Credit Suisse. Please go ahead.
Yes. Good morning, gentlemen. Two questions from my side. First on Americas, specifically the U.S. It looks like that Landis+Gyr has lost significant market shares in the U.S. to Itron, your biggest competitor. I estimate this loss to be, I don't know, around 600-800 points, down to 30%, 32% over the last three years. Is this significant loss due to, I don't know, pricing, weaker innovation power or maybe a moving customer base? What are the key reasons for this development?
Hi, Pat, thank you for the question. I share your view. When we look in the U.S. over the last few years, we did have a loss in market share. I think that's a fair assessment. Where we had a few projects which we couldn't win two, three years ago. Having said this, Revelo was our response to that from a technology perspective. I think Revelo has a very good, I would say, reception in the market. When I look now this project on the regulatory approval, I think we are definitely on an equal footing in itron. We believe we have technology leadership. Having said this, Patrick, you're absolutely right.
That's why we'll see in the U.S., this top line compression, which is really driven by these roll-offs of projects which we cannot replace, what you just said, with new projects, and then obviously these regulatory approvals on top of it. That's a very fair assessment from your side.
Okay, good. It's definitely not driven by pricing. It looks like that it's more on weaker innovation power here.
Yeah. I think it's a fair assessment. Now, there's always a mix, as you can imagine, but I definitely think that with Revelo, we were able to close the gap or even achieve technology leadership.
Okay, good. The second question is around EMEA. Here, obviously the big concern about EMEA is the lack of revenues once the U.K. rollout has been completed. This means that finding new sources of revenues will be key for you. However, statements you have made so far remained very vague here. We heard about Landis+Gyr strengthening its footprint in the Nordics, in Eastern Europe, potentially also in Africa and Middle East. That's more for the organic side and inorganically, you mentioned that potentially acquisitions in water metering, in EV, in heat metering, gas metering, and more recently in cybersecurity could be interesting. All this remains very interesting here, however, obviously very vague. Can you provide more insights about your focus here? I know that there's a capital market day in a couple of weeks or months to take place.
It would be nice to have a first indication what could be the most interesting investments or, let's say, focus in the next couple of weeks or months.
No, definitely.
Probably months or years, not weeks. Months or years.
Yeah. Absolutely. In terms of EMEA orders intake, one thing I would like to say before I go into different countries is in EMEA, actually, on a very positive side, the U.K. market is peaking in 2022. I think that for us is very important. It gives us a little bit time in terms of shifting more into new markets. That's the positive thing. As I mentioned in the past, we see interesting opportunities in the Nordics. That's something where we already had wins. As you heard through my first part, I think Heat360 is well accepted. We clearly heavily focus on the Nordics. We see opportunities in Ireland. We see opportunities Eastern Europe. In Eastern Europe, there we have some really strong positions, for example, in countries like Poland, but other countries where actually we have room for opportunity.
Middle East, Africa, definitely, we want to have an increased presence. I think that's important. When you look from a legacy perspective, our legacy markets were really U.K., France, Netherlands. As these roll-outs are coming to an end, it's super important that we are able actually to gain increased traction in this market. I think we made good steps, but obviously, you're right, Patrick, you're absolutely right. Show me the results, and that's something which needs to follow. In terms of acquisitions, I think strong focus on it. We have the balance sheet. Trust me, I'm someone, I made quite a few acquisitions in the past. I'm very hungry to do that. We look at software in particular. We look at grid edge in particular. There were some interesting opportunities. Having said this, it always needs to fit a little bit at the profile.
What do I mean with that? On one hand, when you look at, for example, in a more software environment, you pay for a company 10x revenue, where you pay for a hardware company one times revenue. It needs to fit actually the firing power which we have at the moment, which I think it's important. When I look into grid edge, there are not that many opportunities around. There was one great opportunity which we wanted to get, but obviously became very pricey. I do hope that at the capital markets day, that we can give a little bit more color because we need to be in the target zone that we actually could talk about something.
Thank you very much.
Next question comes from Ben Uglow from Morgan Stanley. Please go ahead.
Morning, Werner, morning, Jonathan. Thank you for taking my questions. The first was just a bit of a clarification. I think, at the beginning, you were talking about the EMEA revenue, and you mentioned this sort of 60% installation rate. Is that what you're basing your kind of future revenue assumption on? Are you basically thinking that you can carry on in EMEA at that type, or you mentioned the U.K., but in EMEA at that type of rate? That was a clarification. Secondly, on EMEA, if we carry on at the current rate and we get the benefit of the Project Hermes savings next year, is your assumption that that market will be profitable? Can it be EBITDA positive if we continue at the same rate with future cost savings coming in? I'll ask that one and then come back, if I may.
No, Ben, very good question. Thank you. As to the 60%, our view is we think it should go up higher than 60% in the U.K., we think that's doable. I need to predicate that obviously with the latest COVID development, which we not just see in the U.K. We see it Switzerland and all over the place. I think that's something we need to watch very carefully. My view is also that all of us learned to deal with it better. The U.K., we expect that actually that should go in the second half, further up above the 60%, close to the 100%. In terms of EMEA, yes, we do see that on current level in terms of the Hermes savings coming in, that we need to get back to profitability, we'll get back to profitability. Jonathan, maybe some color from your side also?
Yeah, I think, Ben, the big impact for EMEA certainly has been the hit in the U.K. Everything we say is very heavily predicated around how the U.K. performs. I think, given some recovery in the U.K., hopefully over the next six months or maybe into next fiscal year, then yes, we should get back to a profitable track. I think, we've talked before about a 10% adjusted EBITDA target. I think that's still a feasible target for the region, but obviously requires a recovery in the top line, and that requires a recovery in the U.K.
Yeah. That will be pre-COVID revenue level.
Yeah. Great.
Yeah, exactly. Yeah.
Understood. Thank you. Can I ask a sort of bigger picture question, just stepping back. None of us know, obviously, when these lockdowns and whatnot are going to end. If I think about your revenue guidance, basically you've done CHF 620 odd in the first half, and what you're thinking at the moment is that there's CHF 730 at the midpoint. Nearly a 20% increase in the second half versus the first half.
Philosophically, is that increase basically being driven simply by your assumption on installation rate? i.e. Is your revenue forecast completely contingent on your view of just being on site, or is there anything else in that number? I guess the follow on to that is, sooner or later, the orders and the revenues do need to connect somehow. If we don't get to that run rate in the H2, how do I think about the revenues as we move into 2022?
Yeah. Ben, I think to a large degree, that this revenue really are predicated on the installation levels. As I mentioned before, for example, France back 100%, Netherlands back 100%, U.K. 60%, but should actually come up. I think that's a fair assumption.
Okay. I understood. Final question, and apologies for being on too long. Jonathan, in that CHF 30 million working capital number, were there any line items in working capital that you considered sort of extraordinary in terms of receivables or payables, or was this a sort of natural kind of inflow?
Yeah, I think on the receivables and payables side, it kind of pretty much followed the revenue track. Obviously significant reductions in both, but that was very much in line with the revenue. There was nothing unusual in that.
Mm-hmm. Okay. Thank you very much, gentlemen.
Thank you, Ben.
The next question comes from Daniel Koenig from Mirabaud. Please go ahead.
Yes. I have also one big picture question, and then I have two Excel question. First, my big picture question is, there is an election on November 3rd, and what is your view? What is the impact of a new president, an other president on your revenue line in the U.S.? The two Excel questions are, the interest income has gone down from $5 billion to $251 million. Is there in 2019, a one-off in there? I'm just wondering what to forecast in the second half. The other one would be the tax expense. You had a positive tax benefit of $13.8 million. What shall I assume for H2? Thanks.
Yeah. Thank you, Daniel. I take the first one, and then Jonathan, I suggest that you talk about two and three. Election, I think I have a pretty clear view who will become president. Either way, I think that either way it will be positive, because if it's Trump, I think he's pushing business. I think that will be a positive in terms of, I'm thinking now in particular about our regulatory approval projects. If Biden were to come, I think Biden also has actually a green plan, which I think it's very good. He wants to push that element quite a bit. Last but not least, we should also not forget, it's not so that this is actually driven by the central government. These decisions about this smart metering second wave really driven by the states.
For example, New York makes a different decision than Texas, and so on. I think from that perspective, I feel that either way, I think we should get to the right answer, but it's frustrating that it takes much longer than we expected.
Okay, thanks.
Let me take up the other two points. On the interest, there was a big one-off last year on the interest income line because, you very recall, we had the settlement of the court case in Brazil on VAT, which went back many years. There's a large interest component in last year's income statement for interest, which hasn't repeated this year and what we don't expect that to repeat in future. On the tax expense line, yes, we had some one-off credits in the first half, which obviously gave us a big income tax benefit. I think for the year as a whole, obviously, we'd expect sort of a more normal level of tax charge, assuming we become cost in the second half.
Okay. Thanks a lot.
Thank you again.
The next question. The next question comes from Jeff Osborne from Cowen and Co. Please go ahead.
Most of the questions have been answered, but I just had two. One, I was wondering if you could just update us on the scope of the awarded business that you have with the new Revelo product, but hasn't been regulatory blessed.
Yeah, Jeff, that's right. Yeah. As when I say regulatory blessed, I don't think necessarily it's a technology issue. The way to think, Jeff, is that, obviously, these are very sizable investments. For example, when you look at our four projects, there are some projects where there will be a combined amount with other suppliers. There will be some projects which we are the sole supplier. In summary, these four projects are valued over $1 billion. When you think about this project, it's a very sizable thing. That combined with actually the rate increase for the end customer, that's where you see a little bit the sensitivity by the regulators, rightly so, or understandably, let me say. It makes a lot of sense for the utilities, that's the way how to think about it.
Do you anticipate all four to have clarity by Q1 of next year or just a few?
I would say not all four, but definitely one to two. I definitely see one to two, and then the others will be more timing, but that's how I see this whole thing unfolding.
Got it. The last one I had was for Jonathan. I might have missed it, but the $20 million for the state of Washington, did you already take the charge? If you're taking that in the next period, where will that flow through in the model?
Jeff, no, we haven't taken a charge for that. In fact, we won't take a charge for it even if we make the payment, because we're very confident that we'll finally win this case, and therefore, we will hold it as a prepayment in our balance sheet.
Got it. Thank you. That's all I had.
Yeah. Thank you, Jeff. Thank you.
The next question comes from Peter Feser from Ron Investment. Please go ahead.
Hi. Thank you. Maybe just following on from that first question. When you look at the larger projects and the comments around expecting definitely one or two clarity in Q1 2021, can you give some sort of sense as to what's leading you to that view? Have you seen any change in conversations or tone, or you said it wasn't on the meeting schedules, but could you just give some view on that, please?
Yeah, definitely, Peter. This regulator, utility, and end customer who actually are having these discussions. We are so-called bystander. It's not that we, unfortunately, can directly participate in these discussions. However, we are actually supporting the utility as much as we can. What we do see is, also my conversations directly with these customers, that we have an increased level where they come back and say this question or that question, which we view as positive. I think that leads us to the view that we think, by end of March 2021, there should be some clarity. My view is also, Peter, if by mid-next year these projects are not coming through, we should stop talking about it. Because there's always a time window. I do think in this timeframe we are in right now, I think we should see some movement.
Okay. You see that more on one or two of them than the other two? That's kind of why you say that and give that answer?
I actually see.
Do you see it across?
Yeah, I see it actually. I talk to all four. I see when they have been filed and so on, so there's a certain trajectory, and we see one to two projects a little bit ahead of the other projects. That's why I think it will pan out this way.
Right. Then just on the point you made on Nordic opportunity, you highlighted about 10 million meters opportunity. Do you have any sense of the timeframe of those awards? Are we talking one to three years, one year? Just some view on how that opportunity spells through.
Yeah, I think that probably should. The whole $10 million, I cannot give you a view on that, but I think there are sizable opportunities in the next 12- 24 months coming up. We are just, as we sit here, quoted for one and more to come. For the $10 million, that's something we could provide you later. Which timeframe do we think about that? That's probably more than in the, I would say, three to four year for all of them.
Okay. Last question is just when you look at the point you made about your roll-offs and so on in North America, are you looking at this as being larger projects coming to an end over the next 12 months, or is it just a series of smaller ones and kind of a natural evolution of the backlog?
I made the comment to Patrick Laager's question when he said, "Hey, did you lose market share?" We did lose two, three projects two, three years ago, and therefore we were not able to actually then replenish the top line because old projects actually rolled off, and then we were not able, actually, to bring in the new projects as a company. That's compounded now, obviously, with this situation we are having with these regulatory approval delays.
Sure. I was just wondering, going forward, you made a comment about roll-off continuing, and I was trying to understand whether this was just the series of projects over time or whether there are any particular large projects in that window.
I think it's pretty gradual, in terms of also what we see in terms of backlog and so on. That's why it's so important that we can win new projects. It's not that we would have a cliff or something like that.
Yeah. Okay, great. Thank you very much for the answers.
Thank you, Peter. Thank you.
The last question comes from Andreas Willi from J.P. Morgan. Please go ahead.
Yeah. Thanks. Just had a follow-up question on Brexit deal versus no deal, what that could mean for you, in terms of impact next year, and given that a lot of the costs are outside the U.K. for you for the deployment.
Yeah. No, thank you. We have here a real Englishman with us. Jonathan, why don't you speak?
Thank you. There's always a sort of a supply chain disruption risk, just in terms of physically getting products into the U.K. We think that's probably at worst a short-term impact. The direct impact would be import duties, if the U.K. trades on WTO terms, and those are between 1%-2% for meters, depending on the type of meter, but maximum 2%. That would be a cost that we would have to bear, at least in the short term. We're obviously also conscious around the FX exposure that we have, which obviously is the level of the pound is quite geared to the Brexit, and that's obviously why we've got some quite significant hedges in place to mitigate any impact there. I guess the sort of the most immediate direct impact is the WTO duties, if that's what was to happen.
Yeah. Thank you very much.
Thank you, Andreas. I would like to make some closing comments, and before I do that, thank you really very much for your questions. I think great questions. Just want to have some key takeaway of today's call. First, I do think the situation and the current environment are challenging. However, I really keep it with Winston Churchill, never waste a good crisis. We are making good progress, and we are getting the house in order. Second point I want to make is, despite almost 30% revenue decline, we were able to produce a solid free cash flow of CHF 45.9 million and traded profitably, with an 8% adjusted EBITDA margin. Last but not least, I also like to say that we are convinced that we have the right strategic focus in order to drive leading-edge technology and transform the business.
With that, thank you for joining us today. Stay safe and healthy. Look forward to speaking with you very soon. Thanks a lot. Have a good day.