Agfa-Gevaert NV

Hello and welcome to the Agfa Full Year 2023 results. My name is Caroline and I'll be your coordinator for today's event. Please note this call is being recorded and for the duration of the call your lines will be on listen only mode. However, you'll have an opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star 0 and you'll be connected to an operator. I will now hand over the call to your host, Pascal Jury, the CEO, to begin today's conference. Thank you.

Thank you very much, Operator, and good morning to everyone. I'm sitting in a room in Mortsal actually with my colleagues, Vivian Dictus, our investor relationship person, and with my executive committee colleagues, Vincent Willer and Jeroen Spruyt. Unfortunately, Dirk Doman, our CFO, cannot be with us today. He's suffering from a health issue that means he cannot be with us today. He'll be back in a few weeks, okay? So Viviane and I, we will ensure, I would say, the presentation today. So time to come back and wrap up on the year 23, and we're going to walk you through the elements of the results of the group. So clearly the headline is a very strong increase in EBITDA, 52% in the year, and I think the key message is this growth is really coming from the growth engines, and for me it's a the validation of the repositioning of the company portfolio and activity to future-oriented activities. That's really the main message. If we look at quick comments for each of the components, healthcare IT, just very simple, the highest results ever for healthcare IT. So fair to say that during the year we had less visibility on how we were going to finish up the year. The truth is we finish the year extremely well, probably a bit higher compared to our expectations. And we do that on the strength also of improved customer satisfaction and innovation that we brought to the market rather at the end of the year. DPC, very strong evolution, but very contrasted. Actually, what works very well in DPC, these are the growth engines, Zirphone. Zirphone starts contributing to profitability. We are very happy. In less than a year, we could industrialize very successfully. But digital print, as well, on the strength of the Inca integration, is very well-oriented and delivers a very good performance. However, in DPC, film activities are suffering from indeed the demand, and pressure from macroeconomic conditions. So radiology is the only division that is under pressure. Actually, again, it's contrasted. The DR business, the direct radioactive business, improved very much during the year, and the film and CR, are under pressure. This being said, I want also to stress for this division that most of the profit decrease during the year is actually currency-driven. Most of this profit decrease comes from the currency, mainly the renminbi exposure. So an adjusted EBITDA at 76 million, and again, growing in the right categories, which for me validates our strategy. Also, very significant improvement in working capital management, from 32% of sales to 27% of sales in a year. And here again, we ended up in a very good place in terms of working capital. Needless to say, as you see, we are a business with seasonality system. This is the way it is, and we have a similar seasonality in health care IT, in radiology in a way, and even in part of the PC, actually. This is the way the market works. meaning actually we delivered 42% of the yearly EBITDA in one quarter, in Q4. It's not my choice, but this is the way the market operates, especially in healthcare and also in the equipment side of digital printing, which is always strong at the end of the year. We have delivered all that in a context that is not very supportive, in fact. When you look at the macroeconomic environment, it was not supportive for us. We had an adverse currency effect in all our businesses. And actually, we did that in a year where we had to cope with stranded costs coming from the divestment of assets, which represented 40% of the group activity. In spite of all this, we have delivered as described. Now, if I turn to numbers, plus 3.2% on the top line, again, it's very contrasted. as we are a company in full transformation. Actually, we have a very dynamic sales growth in our growth engine and a decline in some of our legacy and film segments, in fact. But the compounded rate is still positive top-line growth when adjusted for currency. Significantly, BDA grows, and I think the message is very clear. It's all coming from growth engines. And actually, we're going to show you in the next slide maybe a different way to look at the numbers compared to our published division to illustrate what I'm saying. look at this slide when i look at what i call our future oriented businesses meaning to make a long story short our digital solutions and their phone in digital solutions you've got msit of course you've got digital printing as well as direct radiography and they're from the green membrane so if you look at the top line and here we took four years plus 24 percent for this gross oriented businesses and the message is the growth is accelerating between 22 and 23. As you know, the maturity of these gross engines is improving. And at the same time, we have, of course, a specific decline of what we call the film and legacy business. When we turn to profit and when we look at actually the underlying improvement of the gross engines within the group, you can see that it's worth 32 million in just one year. So, the message here is we are positioned in the right segment, and the growth is accelerating. The underlying growth is accelerating, which is, of course, validating the transformation of the company. If I turn to the P&L right now, what I want to stress here is, again, we are improving our gross profit not only in absolute terms, but also in margin percent. better mix and again the impact of we are growing the right part of our businesses. And I want also to stress that we are doing that in a very good mastery of our operational expenses. This is due to the transformation program that we have launched already. some years ago that are multi-year programs that continue to deliver, and it's a very good illustration that even in an environment that is still inflationary, we are able to master pretty well this expansion. So overall, I think a very good profit recovery during the year. If we turn to the lower part of the P&L, Of course, we still have a significant loss for the year, but half of this loss is actually related to the offset divestment. So that's rather something that is now behind us, I would say. And the rest of the loss is still very much influenced by the cost of the transformation of the company. You see the restructuring non-recurring charge at 40 million. As we advance, restructuring and non-recurring will be will decrease already in 2024 significantly. And of course, the offset impact is, I would say, final. And that explains this loss as we are still a company in full transformation. If we look at working capital, that's clearly one of the success of this year for me, from 32% to 27%. meaning we've been able to decrease working capital by more or less $50 million when I remove the impact of cleanup, which is a different perimeter story. But $50 million, more significant, five points of working capital in a year. It's an excellent job by the operational teams in ACFA. And most of it is related actually to inventory. Most of the decrease is really coming from the inventory, where we decrease the number of days of inventory by 20 days approximately. So rather positive results. Positive free cash flow in Q4, stemming, of course, from the specific improvement of working capital. We are also, I stress that we are a seasonal business and that working capital will always go up during the first six months of the year because we have more or less six months of production and then decrease during the second half of the year where we operate approximately four months. So this is a normal pattern, and here we are seeing the Q4 positive impact of this. If I talk to the full year, we still are consuming cash during the year. Part of it is also due to the cost of the offset transaction and, of course, the cost of the transformation we see with 51 million of restructuring. that corresponds more or less to the negative free cash flow of the year. What I want to stress here is we have all the liquidity we need. We have a revolving credit facility with an access to €230 million that we are hardly using today, or we're using a very small portion of it. And that is until March 26th. I want also to stress that actually we have on our balance sheet an activity where we finance some of our customers, mainly VPC and SKIT, meaning we actually provide loans to our customers to finance their acquisitions. That's also an area that is a source of cash if need be, as we can very well outsource this activity, which we are doing mostly by ourselves today. And third element in terms of cash, we are still expecting, as you know, the proceeds from the offset divestment. It's not a question of if, it's a question of when. It's a bit of a long process in order to come to the definitive conclusion, but we are still expecting to be in a position to receive this cash in Q2. And all the group is really working towards optimizing the cash generation of the group. The culture, I think, is more and more prevalent in the company. If I turn now to the business, and I'm going to start with healthcare IT, what are the highlights for me of healthcare IT during the year? First, we have launched our cloud solutions and our web screening solutions at RSNA. It's very important because basically we are catching up with the best in-class providers in the market. We were a bit behind in these elements. We are not anymore today. And actually, I would even argue that for web streaming, our technology is probably the best in the market today. So that's a significant milestone for us because we are at the eve also of starting the transformation to go to a SaaS model. That's also the message. In this context, we will continue to innovate in this area. And if anything, we want to accelerate it. So we have decided that we are going to invest a bit more in R&D for the next couple of years to speed up this transition to cloud. We are offering cloud, but we need still to optimize it and make it more efficient. And this is an effort that we expect to be 10 million in the two years, so five per year more or less, but it's not totally evenly equalized. And for the first time, we will capitalize this effort. It's a specific project. It's a specific project that we do in a specific context. And therefore, it will be another step to really get to our position of technology-based in-class in SKIT. The other highlight is really the significant improvement in customer satisfaction. We are in a service business, and customer satisfaction for me is the lead to actually success and being able to compete well in the market. And in 23, our customers have become promoters. We have seen a significant breakthrough in customer satisfaction, which is related to the quality of our enterprise imaging systems, which now is running extremely well. And this is further reinforced by the industry recognition. Everybody is looking at class in this market to look at, you know, how we position in terms of competition. For the first time ever, we had a best-in-class award on our universal viewer. This is a viewer to see the medical imaging. And we are also, we are progressing extremely well in all other rankings. So that's something that is for me a leading, saying that we are doing the right things in the market and combined with the innovation, we are in a good place to compete in healthcare IT. So if I turn to numbers, plus 5% in terms of top line, when I exclude the currency effect. And again, here, same comment, you have a positive mixed effect. Actually, we sold less hardware, and we sold more on IP software, which is what we want to do. So top line, as such, is not the only indicator. What we are looking at is really the mix. Order intake, we had a strong increase between 22 and 21. We have a modest increase between 23 and 22. plus 2% in the 12 months rolling. So that's where we are. We have order intake for the year at 125 million. I just want to say that unless some of our competitors do not include the SMA revenue in this number, so it's only kind of a capex part, but not the SMA that will be associated with it. I say it because, you know, it's important to define in terms of numbers. I also want to say that About 15% of this total order intake is already what I would call a delayed revenue and margin model because it's a service model. It's not exactly technically SaaS yet, but this is a similar model in which customers are paying according to what they consume and the service we deliver over a multi-year contract. On the EBITDA, clearly a very good second half. Again, I'm not responsible for the seasonality of the business, but 75% of the EBITDA of this business is actually during the second half. and more than 50% in Q4. I wish it were different, but unfortunately, you know, these are the market practices, and that's probably also the reason why it was a bit difficult for us to pilot exactly the landing in Q4, and we did probably, yeah, we did better than expected. We were more cautious during the first part of the year, but we took actions as well in the meantime, and this is for Q4. So I'm pleased with the overall delivery of this business. And again, strongest numbers ever. And if you look at the numbers, you see that gross margin is increasing. Again, absolute terms and concerns reflecting the quality of the mix. You see also that our expenses are under control. The reason being, we are, thanks to the quality of our products, we are driving more efficiency. In fact, we are more efficient when implementing services and whatnot. So overall, I would say positive developments. DPC, and I'm going to start with the two growth engines. DPC, double digit growth in top line for DPC on the strength of the in-car acquisition. And the even better news is actually our consumable business is growing faster than the average growth of EPS. And as you know, consumables is really the profit driver for us. It means our InSwap program for Inca is working well. And it means as well we are in the right segments of the print business. So I can tell you that in the non-digital world, I mean, 23 was not a good volume year for ink and print in general. So very pleased with what we do. Strategic partnership with EFI, acceleration for us. Significant impact on top and bottom line. We are next week at FESPA, which is a yearly fair for digital printing, and we'll be presenting our new model that we're forcing from EFI, and EFI will do the same. I think we'll have a joint PR. It's a good partnership for us. It accelerates the growth, and it also means, you know, EFI, who is larger than Agfa and a market leader, actually does recognize the quality of our solutions. It's a very heavy year for us, 2024, for digital printing. We launched the speed set back in December in Cambridge. We have our first contract signed already today. It's a customer in the UK. It's what we call a beta customer, meaning it's still a development customer, and we're going to have full access to the machine to make sure that we can really develop it further. So we are very pleased, and we're expecting probably another one very soon as well. So as planned, very heavy innovation agenda. We never had so many launches actually in EPS. We have a new generation of mid-range products. uh actually coming up the five meter all-tour machine then that we are supplying from the s5 so very very dynamic and and and really very happy with the results here zircon uh zircon over 100 i think we're at 130 so it's not anymore over 100 but it continues to evolve very well The big news is we've been able to successfully industrialize different production, which is never a given when you go to industrial production, and we make progress almost every month on the way to make it. We have started the work to build the new unit. Well, still a way to go. We don't expect the new unit to be operational before October 2025. but it's in full work. As you know, we have received 11 million of sub-GB from Europe. Again, in terms of cash, it's going to be only 2 this year and 9 in 2025, when the unit will be built, actually. I want to make this precision. and the capacity we are building both is going to be more productive and give us the capacity to access market demand. We have prolonged our cooperation with VITO. Their fund comes from this collaboration from VITO, so we are very pleased to continue to work with VITO. And for 24, it's a business in which we have a very good visibility because we have already more than 80% of the 24 volumes that are committed by our customers. So there will be no surprise here. We are relatively modest in our volume growth for 24 today, so we feel very good overall about it. Now, if you look at the numbers, how does it translate? You see 12% top line growth for overall DPC. Interesting to know that DPC is now our largest business. And all this on the strength of the growth engines. If you look at film and foil, I mean, it's a rather flattish business. The businesses that are increasing are really EPS and Zircon. So overall, very happy with the profit recovery and the profit recovery that we have has a very different profile, of course. Historically, the main profit of DTC was coming from the legacy business of film. Today, it's coming from the gross engines, actually, more and more. So very good evolution. If we look at the P&L, Again, same comment, a strong growth of the gross profit in percentage and in absolute terms. We also took price action. That's an area where we invest. Expenses are a bit higher due to the fact that we're expanding and doing Zerfom. Of course, we resource this part. A good recovery that will be confirmed in 2024, actually. If I turn now to radiology solution, the highlight, really what I want to stress is in our DR business, we believe the innovation doesn't come so much from the hardware, but it comes from the software. And here we have been very diligent in adding artificial intelligence powered solution to our X-ray modalities. So meaning we are able to do at the same time to add value through these modalities by helping to detect pathology in an automated basis, so to speak. And we are also considered as a thought leader in the X-Ray market with various recognition from different markets. So this is really what we are positioned for. Really, the differentiation for us in X-Ray is truly through the software part and the solution part. Overall, for the business, as you know, very difficult year overall, minus 4.5% outside of currency, reflecting, in fact, the difficulties we still have in the film business and especially in China, but not only China. We are also impacted by other geopolitical issues. Russia, for instance, used to be a significant market for us. But BR has been performing quite well, especially on the bottom line. The top line was rather muted. We have seen good dynamism in emerging markets, but rather subdued environment in developed markets. So overall, it's conflated indeed with a profit decrease. I repeat, most of this profit decrease is actually coming from the currency impact and mainly the exposure to China, while we are making progress in India. So profit and loss, very quickly, you see this is the only business where we have a profit actually decrease in terms of gross profit, in spite of the very good control of the operational expenses. You see a significant decrease of these expenses, but we cannot make it all up, you know, given the complex market conditions we have in China. Now, I'm going to turn to you, Viviane, to have a few words about CONOPS.

Yes, so indeed the fourth division and the smallest one, so the contractor operations and services. So that's actually the supply of film and chemicals that we do towards the new owner of our offset business, which is EcoTree, also some other services. And you see, of course, sales-wise, it was stable, 22 versus 23. EBITDA-wise, you do see a nice improvement there. But, of course, the way we report the costs is different. In 22, actually, the costs were still all in the corner division, the stranded costs. In 23, they are allocated to the other divisions. So that's, of course, why you see a huge increase there. On the other hand, we also have cost savings. So structurally, this division actually should run about with a zero EBIT going forward.

Thank you very much. That gets me to the outlook 24. The message is clearly we are going to see the continuation of this trend, meaning we are expecting actually healthcare IT to continue to progress during the year, to continue its journey. And we continue to invest as well, as I told you, to make sure we remain the solution of choice for our customers. DPC, significant top line and profitability growth is expected. Actually, you know, for me, the first source of growth in 2024 will be DPC, then healthcare IT. So significant on the strength of all the initiatives we have and the ramp up also of Zircon. And last but not least on radiology, we're still expecting a similar situation as the 23. The medical field will continue to be under pressure in China, although we are coming to a point where the market evolution will stabilize. And we will continue to make progress in direct radiography in the meantime. So overall, Gross Engines will continue to improve the profitability of the company. I stress again that indeed we are unfortunately a seasonal business, I would say, and that we are going to see a similar pattern as what we've seen in 2023, meaning a much weaker first half than the second half. This is the way it is. Again, we can discuss it a lot, but this is really the seasonality we have in our businesses. And on top of this seasonality, given the fact that some specific elements like the EFI partnership will be more impacting the second half of the year because we are launching these products right now in March, and also that we have a kind of a ramp up for earphones, that also contributes to the fact that the second half of the year is a significantly stronger than the first half. This is the way it is, and I want to stress it again. In terms of cash profile as well, what is different from 23? But first, what's gonna be different? We cannot repeat what we did in terms of working capital improvement every year. That is a given. So we'll continue to be very stringent in managing our working capital, but don't expect another big improvement, that's for sure. We have less restructuring. We are a bit at the end of the restructuring program, We are not launching any new initiatives now for some time. We are just pursuing and delivering the initiatives that were already launched, meaning you can expect a lot less cash out in terms of respect to non-recurring. I would say half of what happened in 23. The tax cash out will be below 10 million as well. However, we will face in 2024 and 2025, by the way, the peak capex. The peak capex for Zerfone. And as I told you, we are not going to receive the subsidy before the end of 2025. So we are facing the peak capex due to Zerfone and also the increase in R&D in El Sky. So that's also what I wanted to share with you in terms of outlook. I'm going to, before leaving the floor for questions, I'm going to just discuss briefly also about sustainability. It's extremely important. But the story here is we are making a lot of progress in CO2 reduction plan. We are now committing 62% reduction according to the FIT455 objective. And we are making commitment. We have joined the Science Day target initiative. to further refine our reduction targets for the group in the next few years, including the Scope 3 reduction. On the people part, safety is an area where we need to make progress. We are not exactly at the safety level that they would like us to be, and we have taken a lot of action in this area, and we have a very aggressive target reducing the number of accidents. At the same time, we continue to increase the share of women in our workforce. We are recruiting about 50% more women than we currently have in the company, so it's in progress. And we have also DEI initiatives that are starting to build. Last but not least, we started to have an external ranking with EcoVedis only two years ago. And in two years, we are now part of the first quartile in terms of performance of EcoVedis. So it shows that we could very fast, very quickly come to the best-in-class part in terms of sustainability management, and I think it's important for us. Before we start the question, of course, a slide on pensions. Of course, it was expected. So I will ask Viviane to take it, please.

Yes, indeed. So once a year we give, of course, an update on the pensions because then we have again an actuarial calculation. And then on this slide, actually, first you can see that the funded status, so the net liability actually of the pension decreased, so moved in a positive way with 54 billion. Most of that is related to the sale of offset solutions. When we dig deeper into the pension costs, so you see that costs move from 28 to 32. And then you have, of course, always two parts in those costs. You have the part which is included in EBIT and the part below EBIT, the interest costs. You see that the first part in EBIT moved from 19 to 30, which is following actually the movement of the discount rate. And when you see the movement of the discount rate of the years before, it shows here actually. And the interest cost, of course, below EBIT, the financial cost, moves in the opposite way, so increasing from 9 to 19. If we look at estimates for 24, you see a decrease in interest costs as well as in service costs, and service costs decrease mainly related to the home cost. So, less active parts of the business in Belgium on Pension cash out, because indeed oil is also an important element to look at, stays stable. 23 versus 22, we did normally expect a bit of decrease because of offset sale, but unfortunately, due to inflation of the salaries in Belgium, it stays stable. You see for the next year that we do forecast again.

Yeah, so we had a blip due to the high inflation and indexation in Belgium in 22 that has impacted 23 in terms of pension. In fact, that's what happened. One word on Germany and the fact that we have a new actuarial calculation, Viviane?

So maybe, yeah, you see the bit below EBIT also moving. And aside from indeed the higher inflation in Belgium, we also did change the actuary. So it's a new part doing that now for us. And they have a kind of more conservative approach. So that's why you see a bit of, yeah.

Yeah, well, indeed the actual calculation are a bit different and a bit surprising to say that it's not for me in terms of, but okay, this is what it is. So let's now turn to question and answers. I propose to take questions from the room where we have analysts and press. and then to turn to the virtual room for questions. Who wants to start?

Oh, hey, hello.

Alexander. OK, go ahead, Alexander.

Alexander from . So yeah, in health care IT, you have a part of this legacy business systems and have them the new systems, the enterprise imaging, et cetera. Could you give a bit of a granularity on the sales between new systems and old systems? And then, yeah, the order book that is right now, if I calculate it, probably if it's flat to slightly up versus last year, what are the moving parts there? Is there a growth decline in the old system and growth increase in the new system? And then a second question also on healthcare IT. You mentioned 10 million in capitalized costs. That is 10 million on an annual basis, which is 10 million split over two years. And maybe it's over two years that that comes corroded or backcoded. And then, yeah, I just wanted to get a bit of an understanding of the quality of the decision. Is that a specific project there, or is it really an investment in a new technology that you think will lead to an increased goal for most of the clients? And then a question for, a third question for Vincent. If I read through the outlook, I mean, it's clearly that DPC is where you expect probably the strongest possibility increase. Could you shed some light on this and specifically, okay, you have Delta from last year to this year, which was last year a loss, this year a small profit. Can we expect the same Delta maybe for next year?

I don't know.

Or do you think it's maybe less?

Well, okay. Thanks very much, Alexander. On the second question, the capitalization, it's 10 million over two years. Okay, not per year. And the nature of the benefit is actually more to the cost of providing the solution than the benefit to customer. Meaning actually it's a self-serving investment, so to speak, where we're going to improve our cost to deliver. There is a clear payback. In other words, that's what I can say. On your question on healthcare IT, I'm a bit perplexed because we don't look at our business in this way. Actually, everything that we now propose to the market is enterprise imaging. It's not the old solution of the past. That's really what we are. So when you look at the order intake, I would say the best majority in order intake is this. Now, in the order intake, you have different nature of order. a totally new system where we implement it can be adding features it can be you know different different options so there are a lot of different components in fact but to make a long story short today we are fully we are fully towards the enterprise imaging system and not anymore with facts it's not an area of focus and if anything what we are doing migrating or older, I would say, older Pax customers to have an AI system. This is the way it works. For DPC, Vincent, what's your comment?

My comment on DPC would be that, very clearly, Comparing to 2022, we had to indeed restore profitability. In the second half of 2022, we were impacted by high-cost inflation, and on top of that, the electronics market being down. In 2023, the electronics market is actually still quite a bit down, but we restored profitability thanks to overall price increases, thanks to growth in Zircon as well, and growth in ink volumes, and also some restructuring. We did actually end in 2022, beginning in 2023. So, those important price increases and restructuring efforts we did will not necessarily be redoubled, because that was really to restore profitability, but we should see in 2024, indeed, a similar – from the growth businesses, from DTS and from Zircon, from green hydrogen solutions, we should see a similar growth in top line and in profitability. What is a bit more difficult to predict maybe is on the specialties on the chemical side, the legacy business is on that side. Of course, there we have a lot of actions in place to also improve profitability, but there the growth, I mean, there is some... Our areas are growing, but overall, this is a mature and declining business. So, in DPC, you have that mix, of course, of those two.

But again, we say, yes, DPC will be the first contributor of the growth today, and mainly on the strength of Zirphone and digital printing. Look, we have a ton of initiatives in DPS. We are already on a good ramp of growth. And Zirphon, again, we ended up the year in productivity in a very different place when we started the year 23. So today, I mean, together with the volume growth and the productivity improvement, we will see Zirphon evolve very favorably.

And how much is Zirphon right now?

Sorry?

Zirphon, how much is it?

Zirphon today is still about, in sales, less than $25 million. OK?

so but it is already profitable and very profitable some questions on um the speed set um and and then a link to the to the next gen anapurna is it the same kind of numbers that you can expect in that kind of machine so for speed set and sales pricing in the range of five million euros and one million euro ink per year consumption roughly that's a good guideline and and and and what's what it says for um or how could we see that okay let me take this

Yes. So, thank you, Guy, for the question. Speedset and Annapurna are actually at the very extremes of our portfolio. So, the Annapurna range is the low end of our machines. These are machines ranging between 100,000 and 250,000 euros in sales price. But, of course, we sell a lot more per year than we will ever sell Speedset. We will never sell 100 Speedset a year. What? I would not say no, but the market is now different. Why not? No, no, it's a totally different animal, and you're really talking totally different ends of the spectrum. So our new Annapurna, by the way, will also be launched at a new name next week. You will see it. At Fespa, we will launch a rebranding of our Intet portfolio. But all of our portfolio is actually moving up in terms of speed, in terms of performance. So the new next-gen Annapurna is actually the higher end. I've seen the features as well. I won't go technical here, but it's upping up the speed. You're talking about 30%, 40% more speed and in consumption than the Annapurnas we have today. And here we're changing or we're bringing into the market the the high runner, let's say, and the biggest of our Annapurnas. Annapurna is one name, but it's actually several machines and several widths and so on. So the idea is in the next two or three years that all of them will be renewed to this new, the next generation. To the new platform. To the new platform. uh speed sets so speed sets uh i think the order of magnitude you're giving there is indeed correct for one machine the ideas we've seen yesterday our press release we signed our first beta customer now for the uk the idea is that this year we will have two betas installed that does not mean that they will necessarily be in revenue recognition and because they will still be investing phases and as you know before they come actually into our revenues uh the final sign off that the customer has to happen so As of 25, as per plan, and I think as per what we've always communicated, as per 25, you should see recurring sales on inks and on equipment for speed sets and all others.

But they will still pay for the ink, the beta customers.

The main question is actually, can we expect from the Annapurna new range kind of same effect on the sale of inks as we can expect from the speed set. So overall, of course, you will sell much more Annapurnas, but will it surpass the inks?

It's a replacement market, okay? It's a replacement, okay? So are we expecting growth from our new initiative in Low-End? The answer is yes, okay? But I wouldn't place it in the same category as speed set, okay? Anapurna is a replacement and an upgrading. I would say it's a kind of incremental growth, so to speak. Speedset is a breakthrough growth for us. So it's totally different ballgame. Here we are managing the portfolio with Anapurna, which is good because we are renewing and coming with a next generation machine to maintain our market share and whatnot. is a weapon to win share, so to speak.

It's very, very different. The second question is on Zirphon. You're doing quite a good job on hiding the success of Zirphon for the moment. You were indicating a little bit less than 25 million of sales, but the growth range is amazing. What is now keeping Zilform back from doubling, tripling again? Is that production capacity?

No, it's not production capacity. It's implementation of projects, okay, in Europe mainly, which takes slower than expected, okay? So that's it. So in a year, we have multiplied by five Zilform between 22 and 23. In 24, we have a much more modest assumption behind our outlook of – about 20% to 30% growth, which will be enough anyway to have significant leverage on profitability. But here, this is the rate at which the projects are being financed and decided. And during the past year, the last 12 months, I would say the rate of implementation of hydrogen projects was rather low in Europe. We believe it's picking up right now, and especially we believe that North America, India are growing faster, okay? And we are also present in these opportunities. So it's more like this, okay? We are ready for our customers. By the way, our customers are giving us, you know, very precise. We have all the orders almost in place for 24 already. We're already working today about 25 with our customers. But the ramp-up is defined by the velocity of projects being financed and built.

Two more questions. First, you were guiding for... higher capex this year and next year, and that that will be the top of the capex?

Yes.

Can you be a little bit more precise and give some exact number?

Sure, 50 million. 50 million is a good number for capex for the next couple of years.

That includes the 10 million?

That includes.

And then you're always... prudent when you talk on the sale of offset solutions and the money that has to come in? You were indicating end of March before. Now it's second quarter. Is it kicking the can down the road?

I'm not prudent. I'm prudent about the timing, not about what we are going to receive. That's more about the timing. Because I, basically, we are in the last phase of, I would say, third-party expertise, you know, and judgment on this matter. And I'm not the one controlling the clock. Actually, the advisor is controlling the clock. That's why I'm more prudent on the timing because I don't master fully the timing. Okay? Okay. but not on the fact that we're going to receive it. The time will be in Q2. I believe it will be in Q2, yes. But again, it's not a question, so I feel extremely good about are we going to receive the money. I have no doubt. But the when is defined by the process we are going through, and that involves the third-party process. A third party for which I do not master exactly is Koch, so to speak.

Just yesterday you had the board meeting and I think some of these board members will also look at the share price. What was the atmosphere around the table related to the share price? Was there Were they agnostic to that?

No, no, nobody is agnostic to share price, although we don't watch it every day. Nobody is agnostic to the share price. And last time we talked to the market was in November. And between November and pretty much today, we've seen a significant decrease of the share price. So nobody is into that. And especially, you know, we are aware about how we did in 23 for a few weeks now. And We expect to answer to the market with our delivery. That's it. We are really focusing on that and doing what's the right thing to do for the company. And here the message is, again, I think the repositioning of the company works. We are exposed to good growth markets in which we are performing. It takes a bit of time because in the meantime, we still have pressure on the legacy business. But overall, I feel very good about, you know, the overall story. And in terms of cash, as I told you, we have enough liquidity to see us through this period without any particular stress, I would say. No, you don't need to push the button.

Sorry.

No, no, no problem.

Okay, so first question on health care IT. How do you look at the order intake for 2024? And then could you also remind me how the service works? Do they pay six months or do they pay one month?

The service, okay.

And then also a question on the restructuring charges. You said it will be held this year, and how should we look at that then?

So today, as we said, we're talking not about the order book, but the order intake. We say it's basically in line with last year. What I want to say in order intake, it becomes a bit more lumpy. And again, We are doing last 12 months, but it's very dependent. We have more and more large deals, you know, that will influence a lot a given quarter. And that's what we should retain, you know. And, you know, the reason why we are only at 2% is because we had a customer contract that slipped and was signed in the first week of January. Okay? Okay. Just if we included this contract, the number would have been very different, actually. So we need to take it with a pinch of salt in terms of lumpiness of this order intake. If all of a sudden, you know, we have a contract for 20 million, you see the order intake of the year is 125, so it's a significant event, right? so today uh today that's our first priority order intake this is really if you ask me the first priority of the business is really order intake to make sure that we can deliver the year To your question regarding service, we typically, in a traditional business, you pay for the project and the capex when you install. And then you typically have a 15% to 20% service fee every year, which is a service and maintenance fee. This is a classical model. We are going to move more and more to a model For the time being, you know, 15% of our intake is managed services, meaning it's a different model where we actually provide service as we go. So there is less invoicing at the start and more during the next year. And then we will also, we are moving to a SaaS model as well, where it's a similar pattern. You have less and more. and more along the life of the contract with a different pricing mechanism, so to speak. So in a first instance, by the way, when you move, when you have a transition from a CapEx model to a more managed services and SaaS model, it will have an impact on the profile of the business. That's for sure. We will recognize less upfront. Probably we will continue we will modelize it and give probably more details later this year. On the restructuring charge, well, I would expect the restructuring to continue to decrease, but never go to zero, because we will still have in the next year uh things to adjust remember that it's a company with two parts the part that is declining and we will have to take some steps regarding specific businesses that are a bit end of life but the general trend will be a decrease maxim

Good morning. Two questions on my end and one final, a little bit more philosophical, I would say.

Philosophical, okay.

You mentioned significantly a lot of time in this meeting. In my vocabulary, in the way you look at it as well.

For DPC, it should be even more than that.

the real question now. First of all, looking at 2023 and the volume and pricing dynamics, obviously, you have some pricing increases in DPC. I understand in other divisions, like as private carrier, it was more difficult to implement. Could you shed some light on what the pricing and volume dynamics at group level in your division? And secondly, on radiology and stuff, could you shed some light on the way of the film business Okay, so let's start with pricing.

To make a long story short, we had positive pricing everywhere except in film in China. And when I say film in China, it's medical and non-medical. Except from China, pricing, we were okay. In VR, in VPC. In L-scar IT, we have indexes and so on and so on. And I told you it's not perfect, but not a big issue. We're testing, I would say, now. Your second question, just to make sure, can you please?

On radiology, obviously, you have two activities. Yeah, we have two. And the film.

We have three, actually. Two, three activities, the film, the CR, and the DR. Yeah, just two.

Equipment and the homeography, if I may say. which was a big component of the last five years.

We don't disclose this granularity within radiology, but let me tell you that film is still very profitable. Even with the decrease in what we are going through today, it's still a profitable business for AXA. Also in China, although it's much reduced. Also in China.

One follow-up on that. So you mentioned price increase in healthcare. If you look at the top line, I think it's 1.4% increase to two years, basically meaning volumes of blood.

No, well, as I said, there is a significant mix effect as well, Maxime. so we we sold a lot less hardware we sold more services and on ip software so you know we're selling we're selling hardware we're selling on ip software we're selling third-party software integrated in our system we're selling implementation services we are selling professional services and and we are selling maintenance service and maintenance so it's a rather complex uh mix overall and uh And as I told you, you know, the different components of the mix have different evolution. If I look at software to add hardware, it's probably a double-digit decrease. If I look at all IT software, it's a double-digit increase, you know. So, and then it depends pretty much on your activity. So, your question is not that easy to answer. But look at the margins of healthcare. I mean, the gross margin of healthcare for the year has increased. So, I think that's a good response to your question.

That's very clear.

Thank you. Peter Yan, the press. Can you speak in the mic, please? No, no, no problem. No problem.

I have a question about fiscal. So now the revenue is about $35 million. And for this year, 80% of the orders is already there. So you can give me a guideline of the earnings.

Can we give a guidance? I said, you know, that we were expecting for Zerfone 20% to 30% increase in volumes. Okay? Sorry? Price. Is there a price effect as well? There is a positive price effect in Zerfone as well. But when I was talking, I'm talking about the volume here.

I may ask some follow-ups.

I have one other question.

Go ahead, Petarjan.

The only question was to get a full picture of the company. In the book, the colleague wrote a citation of the tanker. Where is the tanker now?

well we're trying to you know the story is to try to turn the tanker into a motorboat but uh we're not there yet we're still in full transformation but i think we have enough signs today that this transformation is truly happening uh actually you know there are very tangible signs that this transformation is now in full swing okay and again it's the transformation of the company on the portfolio and the operating model uh also on the people and culture And the nomination of Yeroun, by the way, is a good illustration of the renewal of the leadership also in the company. So it's a full-fledged transformation that we are going on. And that is not done in two years. That takes a bit of time. But indeed, the idea is to transform the tanker into a motorboat.

So to Yeroun, the new president of radiology. I'm just wondering, what's your plan to turn around this business? Because obviously it's been suffering a lot from the central program in China. Is it your plan to travel more to China to get that place? Or how do you want to convince these Chinese officials to buy your films and to buy at a higher price as well? And then also maybe if you could shed some light on the security of that. And then I have a second question, which was around offset technology. a bit longer than expected in the beginning. I guess there's some disputes around the table. Maybe if you could just shed some light on what the third party is looking and why this is a core discussion. And then the third question would be on health care IT, because you mentioned if you would include the order that you had in January this year, the order intake would be higher. How much higher would

So, what are we going to do, Jeroen, to fight the China situation? We have taken action already.

Yeah, so, with regards to China, I think that the most important thing that we have been doing is basically strengthening what I would call a goose on the ground in China, both from a HQ point of view, but also from the activity in that market. And honestly, it's all about having a strong local presence and being really present and early in the market at the moment that the tenders show up. And there we are stepping up compared to what we have done in the period where due to COVID reasons, it was quite difficult for us to be really present in the field on site to follow all these things up. So that is absolutely an action that has already taken place, which is what I would call in flight. At the same time, when you look at the rest of the business, we are really more towards the market, which is still clearly there and really okay. But we have quite some actions with regards to just streamlining the activity and streamlining the operations that are online activities. inside the technology and just improving the overall efficiency of the machine?

Very good, very good. And to be clear, I'm going to be crystal clear. In fact, what happened was we basically are changing our China team. And we had a new GM in China that started actually a couple of weeks ago. And we have replaced, I would say, a number of people in our go-to-market organizations. So we are rebuilding this go-to-market organization in China. So we are not staying idle as well. That's very true. And it's done.

Because, I mean, obviously you're losing out to Chinese players.

Well, let's be careful here. We are not losing out market share. We are not losing out volumes, okay? What is under pressure for us is the margin, meaning the prices, okay? But we are not losing out on volume so much, actually, or in market share, okay? It's purely, and we're not helped, as I told you, by the currency. That makes it a bit more complex. Offset, well, obviously, if it takes time, it's because, you know, the seller and the buyer have different opinions regarding a certain number of elements of the closing statement. That's what it's about, okay? We feel very good about it because we went through a first... I would say first analysis and basically we feel good about it, but there is a recourse that is possible for the buyer and the buyer will utilize to the fullest extent this recourse. And which is why today we are in the second, I would say, and final arbitrage in the matter. So that's why I'm saying I feel very good about the watch. I have a little bit less certainty about the when. When I say when, it cannot go forever. But I feel good about it. And in healthcare IT, well, you know, as I told you, if you have, a $10 or $20 million contract that moves from a quarter to another quarter, you know that our yearly order intake is $125 million. You can do the math. yourself you know i'm not saying it's a 20 million contract but i'm saying i'm saying you know i said 10 or 20 and you have this order of magnitude you know but again it's not super important for me what's important is the fact that we have improved two major points to our offer first We really have cloud solution and web streaming technologies that are now operational, and that's extremely important for us. If we want to be efficient in answering customer needs, and our customer satisfaction is going up very, very much, and recognize that also changes our position in the market. We were in a radiology conference in Vienna a few weeks back, and the attendance at the healthcare IT stand was much higher than the years before, and especially, you know, we had a ton of new customers that came to meet us, okay? So that's what I'm looking at when I want to look at the leading indicator. That's why I feel good. Now, turning this customer satisfaction into order does not happen in a week, of course. But it's a positive trend for the business. It's a very positive trend for the business. Any other question in the room? Then do we have a question operator by the press? We're taking press question only, so just checking. If none, okay, so just a few words. Indeed, I'm pleased with 2023 results and I'm pleased by the nature of the results and where they come from and what they bear as a promise in terms of strategy development for the company. I'm also pleased by the way we are managing costs and working capital as well. And again, I feel confident that we made the right choices in terms of activities going forward. So that's for me very good. Last but not least, we have all the liquidity we need to see us through what is going to be the next two years where we have a peak capex, of course. We'll continue to improve profitability year after year. And therefore, for me, the transformation is in full progress, and these are very clear and factual signs that this is the case. But we are also a company where the seasonality of the business, don't ask us to show you the first half. Remember, the delivery of the business by nature and by some specific elements will be more back-ended during the year. That's very, very clear to me. Thanks a lot. Thank you, operator.

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