Agfa-Gevaert NV

I will now hand you over to your host, Pascal Jouery, CEO, to begin today's conference. Thank you.

Thank you very much, and good morning, everyone. I'm sitting today in the room with Vivian Dictus, the head of industrial relations at ACFA and the executive committee team. For your information, our CFO, Dirk de Man, is still absent due to medical reasons, but And we're not expecting him to be back in the next month. So we'll give you more information as soon as we can. I wanted to say that. So therefore, I'm going to walk you through today the Q2 results, of course. Key message, I think it was a solid quarter for us after a Q1 that was a little bit subdued, as you know. And three very positive events. First, healthcare IT, we are demonstrating this quarter a clear transition to the cloud journey and a significant increase in order intake. The P&L delivery was okay and it's showing the fact that we can continue to improve our margins. But really for me, the highlight of the quarter is the order intake, which was the highest ever. It's cloud, it's net new customers, and it's a very dynamic order intake. So that's strong positive. DPC also was very positive for the quarter and more here in the delivery side. And I want to stress that it's across the board. Zirphan was up significantly, up in volume, but also I would say we're still making progress in our productivities. We're improving also the way we make Zirphan, and that reflects also on our margins, of course. And also DPS had good growth in the quarter, 8%, but more importantly in the ink side, which is exactly what we are. trying to do. So we're pleased with the delivery of EPC. So very positive impact. I think the third item that I believe is very positive is we're launching a $50 million productivity program for the film-related activities. Why do I believe it's positive? Because we have confirmed the potential to significantly rebase our cost setup. It's confirmed. I'm not yet in a position to give you all details regarding this plan that will be done at the next results call. Today, I can show you that we have the potential to significantly change the competitiveness of our operations for film, which is mainly in Belgium, but not only, by the way. The two other points, you know, that I would say we are working on is the fact that if we launch this productivity plan for mortal and the field-related operations globally, it's also because we are seeing a volume weakness in the field area in radiology. So that's something that we have seen already since the beginning of the year that has a bit improved in Q2, but that will remain for the next quarter, right? So that's why it's also important for us to have this transformation program to mitigate what we are seeing here. Another point is the cash outflow of the quarter was still significant on the strength of the working capital buildup, which is, frankly speaking, a bit higher compared to our expectations. But this being said, it's temporary. It's seasonal. And just like last year, we're going to get back to normal by the end of the year. So it's... It's a seasonal impact. I think point number five, and I'm going to come back to that a bit later. We had a significant milestone for the Aurelius settlement in payment, final payments of the offset business. We've been trying for the first half of the month to get the expert nominated, the expert that will define the final price. It's done. After a bit of difficulty, this is done. Therefore, the process is, so to speak, back on track. We're expecting a report by the expert in September that should trigger a cash payment in Q4. So, yes, it was probably too late. It was probably later than I expected, but it is happening, actually. The outlook for the rest of the year is pretty much what we are seeing this quarter. I still expect a good drive of healthcare IT and VPC. I'd like to remind ourselves also that we have a seasonality and the control, again, will be the strongest quarter of the year, very clearly. This is the way the markets work, and it's also the way our own dynamics in, for instance, in VPS works, right? Yes, ideal, for instance, is really taking place in the second half, not the third half. And for radiology, we continue to see what we've seen already, meaning a weakness in this area. So it's not anecdotal, but I want also to point out that we have a positive net profit during the quarter that's also reflecting the fact that we have less restructuring and non-recurring. These programs are coming more or less to an end, and although we are launching a new transformation program, therefore we will continue to have a restructuring effort. We expect also that this transformation program will have some positive cash elements that will make up for any restructuring in the United States in this program. So if I look at the numbers, The cells are pretty flat for the quarter, but it's a flat overall with very two distinct trends. The weakness of radiology, you can see it. Within radiology, film is decreasing a bit more, and DR is actually growing, but it's decreasing overall. You can see the dynamic of DPC, 8% on the quarter. I think it's a good and solid growth. And healthcare IT is below last year. I think for two reasons. The first one is we are seeing, and that's totally in phase with what we are seeing in terms of cloud development. The fact that our hardware sales are decreasing rapidly. That's really an external sign that our customers are moving to the cloud. Therefore, they stopped buying the bit imagined hardware. And also, that's reflective, I would say, of the cycle. We had a bit, the order group was a bit lower. And the ordering phase that we have today will show the next quarter that we had a bit of a lower delivery, P&L delivery. This is a combination of the same. Overall, so stable, but as you see, very different dynamics between these. In terms of EBITDA, in spite of this bit quicker sales in SKIT, you can see that we manage very well our P&L. Efficiency, cost efficiency, increasing margin, and therefore, it has no bearing, it has no bearing, this decreased sales on our profits To be noted also that the cells, part of the cells that are decreasing are the less margin producing cells. DPC, no need to exemplify, that reflects the growth of DPS and Xerfone. And Xerfone is volume, but it's also the fact that we're making progress in making Xerfone. We are also improving our margin here. Remember, their fund is a relatively young product. We are not yet at the end of the road in terms of productivity. Radiology, we limited, I think, given what we see in the market, we limited the damage, but it's below last year. In fact, that's a trend that will continue for the next quarter. We're not expecting a bounce back for radiology. what we're expecting is to make it up with our self-help transformation program. Now, if I turn to the P&L, ourselves already commented on it, gross profit, well, you see a significant improvement versus last year in both absolute terms, but also relative terms, reflecting the number of actions we are making, but also a better mix. Let's face it, we have a better mix in the business. Operational expenses well under control, below last year. We continue to develop our productivity programs and we're able to do more than just offsetting cost inflation. So that reflects in positive EBITDA and EBIT for the quarter. If I turn to the lower part of the P&L, You see that indeed, as I was mentioning, less restructuring and more recurring, which is also normal. We've been doing a lot of transformation programs in the company in the past years. We still are today continuing to deploy it, and therefore, indeed, we're still spending cash in this area, but much less we have initiated significant new programs. And as I said, we'll guide specifically on the transformation programs when we issue two, three results. But again, I repeat, we do have also some positive cash impact involved in this program, while we will also have this factor. So non-operating results, it's mainly financial results. And therefore, at the end of the day, well, for the first time in quite a number of clusters, I guess we have a positive net profit. Working capital, working capital, you know, we always have a build-up, actually, during the first half. I said it a number of times. Look at 23 patterns. It's always the peak working capital for the business, and then it decreases quite significantly during the second half. We're expecting a similar pattern this year. No change, and we expect to be at the same level as last year in terms of percent of sales. To be noted that in this number, what's not helping us are two things. Indeed, the fact that shipping routes are disrupted now for many, many months, and it means more product in the water, on the water, not in, on the water. Of course, and as well, the silver price means our inventory is a bit more costly. So free cash flow has been negative on the strength of two things. Of this significant capital, working capital outflow for the quarter, which was probably also a bit higher than expected for us. but for specific reasons, as I told you. CAPEX is a kind of a peak CAPEX. We are in the full swing of building reserve fund plans. So it's representative of a high CAPEX environment. And pension this quarter actually was higher. But in fact, if you take six months, it's absolutely in line with the guidance, which explains the cash outflow of this quarter. Now, if I turn to business, I already commented on the sales of SKIT. I think really, again, the news of the quarter is more about the order intake, which is basically double the previous quarter, to be clear, than anything else. To be noted, given the nature of the contract we're taking and the move to cloud, it's a larger contract. It takes a bit longer to be written and contracted, especially as it's a transition to the cloud. And therefore, the order is a quarter by quarter will ease and will be lumpy. It's not, we're not the only one. Everybody operating in this same pattern. We have a lumpy order intake. What's important is also the last, the comparison to last 12 months. And we are plus 42% versus last 12 months. And we expect to finish up the year. But again, the... The big news here is the cloud transformation train has left our station, and we are very successful today in this area. I'd like to remind you that this year, last year at this time, we had no cloud solution. And today, which represents already a significant portion of what we do. So we are, I think it's a good sign for us. What is reflected on the right-hand side of the slide is a good management of the PML. In spite of lower sales, we had more profitable sales, actually, and a better management of overall efficiency and cost. So kudos to the team. If you look at the numbers, so lower sales, but same gross profit, 3% more margin. Operational expenses well under control. It's not because you are in a growing business that you shouldn't take care of your operational expenses. And that also reflects on your efficiencies. And therefore, it's a good quarter for SAP IT. The main command is really, our business is changing. 40% of the deals in Q2 are cloud-based. For the first half, it's about a third. So this is happening. Net new customers, 35% of our ordering time. It does reflect the fact that we have momentum in the market. We are winning new accounts and significant ones. Project business is now 60% of our business. It was 90 plus percent last year, right? Here it's 60% with recurring business, 42% for the quarter. So you see the nature of the business is changing. When we say recurring, it's a kind of pay-as-you-go model. I'm not using the word SaaS because SaaS is one of the ways we can do it for you. And for the time being, we do assess the numbers, but it will develop further in the next quarter. But here is the shift. And the good news is we are part of the shift, we are in the market, and we have success in order. I think that's really the highlight of the quarter. Good example is one of the contracts we landed this year. Alliance Medico, which is UK-based. 120 sites. We won this contract. This is the largest contract we won during the quarter. So that's a good example of that. And cloud, by the way, is not only in the US, but it is in the UK. And that's a cloud. Okay, so... I continue, as we told you, to invest in this transition to go a bit faster with a specific innovation program that is underway. So that's where we are. This being said, the transition to cloud has also a consequence. The revenue recognition timing and the margin recognition timing will be spread over time. So the net consequence is the short term. You will see less growth, so to speak, revenue and margin. We'll probably try to give a lot more guidance on that when probably at the end of the year. But that is the impact whereby a project, you know, we recognize most of the revenue in one go and then we have an SMS. A recurring contract is higher in value, is higher in margin, but is spread out over a certain number of times. But that gives also great visibility on the business, these long-term contracts. So this transition has really started now. For DPC, as I was saying, you know, a dynamic quarter plus 8% actually. 62% increase in year funds. I know it might be surprising to you because you hear in the newspapers that the green hydrogen market does not develop as fast as probably the ambitions were. Yes, but it's still happening. Not as fast, but this is still happening and we have a global footprint and we are pretty much the reference in this market. Therefore, we have growth. 60% growth is not the yearly growth. I always say, and I repeat, the yearly growth will be around 30%, okay? But I want also to make clear, you know, we are, of course, we are very close to our big customers and we look at their announcements. But when you need to realize that we never took their announcements in our plans, we always were a lot more conservative, okay? So when we said, when we communicated about our prospects, it was taken into account the fact that we never believed what our customer told us, in fact, and that we were a lot more cautious. So there is no negative performance in their fund and everything is well. BPS, sales growth of 8%. What I like is the fact that, you know, during the first quarter, months, we kind of renewed a very important part of our portfolio. So it's always very delicate when you do that. And I can tell you today with a bit of confidence that it's a success. We are seeing good momentum in order in the part we are doing. We are seeing the EFI collaboration develop as we planned. But most of it is, of course, in the second half, as we told you. And when you look at... So that works. Overall, the equipment sales in the first half were not great, I would say, due to all these conditions. But when I look at the Q3 and Q4, I'm very confident that we're going to get where we need to be. Inks, 24% growth. I mean, that reflects also the success of our strategy, right? like to remind you that we are always being upmarket with machines consuming more ink, but also we are very successful with the ink at swaps. And, you know, out of these both, ink at swaps is probably already a third of it. So, it is working, this strategy. Therefore, it completed, indeed, in a strong quarter for DPC. Indeed. And when we talk about improved manufacturing efficiency, most of it is here. So it's the future. If you look at the P&L here, what is, I think, very interesting in terms of the transformation of DTC is the gross profit from 2014 to 32. Okay, it's a good quarter, okay? But that shows the direction of travel and the fact that, indeed, DPS and Zerfonds, when you have INX and Zerfonds increasing, these are good margin projects, as it should be. Operational expenses are also under control, although you see here it's an investment area, and indeed we have invested a bit, especially in Zerfonds, to help save the growth of Zerfonds. I'm not going to repeat what I already said. The only thing that I would add on this slide is really the fact that as we speak, and I have pictures in my computer of a speed set being installed at Delta. It's almost done. It will be installed when I look at it, and it will be started by the end of September. This is the goal. In the meantime, clearly, we have a lot of what I would call very hot prospects, people who are ready to close to conclusion in terms of speed sets. So in 2.4, we'll be in a position to have our first running customer in place for speed sets. That's it. That's a very important milestone for us because, as you know, this represents the entry in packaging and, therefore, represents a significant growth area for us. In the meantime, we continue to be recognized. That's very good with some of the new products that we are putting to market. I'm not repeating about Speedset or CAR because I just mentioned it. But also on our new range of products, low-to-mid-end equipment. So overall, very positive for DPS. Green hydrogen solutions, well, sales increased 60% this quarter, because we are comparing ourselves with the first quarter, with the second quarter of last year. But again, for the year, it's more 30% than we were expecting in terms of growth, so nothing is broken with the economy. The market development, of course, was slower for a number of reasons. First, all regulatory, the rules of the game were not clear for the people having to make final investment decisions. And in some cases, by the way, in some countries, it's still not fully defined. So that delayed a bit. Some of the FIDs are fully aware of that. But again, we never took it to the bank. We were extremely cautious in the way we were planning for the fund. And therefore today we are not surprised by the announcement being made in the market. We already had it in our forecast. This being said, we are also seeing some problems. FIDs are increasing since a few months. And we remain confident that it is going to happen. And in the meantime... we are continuing to do manufacturing efficiency improvements. So, Zircon is already, indeed, a profitable product. This being said, it's still a very cash-negative aspect because we are investing in the plant. So, let's also remind everyone that. But, again, we know about the lull in the market, but we are seeing today the early signs, we are seeing already, for example, few months, the early signs of the positive developments. Radiology is a totally different story for radiology. So negative cells evolution, the only thing that grows in radiology is VR, and it's mid-single digits, which is kind of okay-ish when I look at the market. But a lot of challenges in film, in film and CR, where CR is declining technology, but in film and And on top of that, as you know, we have totally reorganized our go-to-market in China, and it has an impact when you do that. I mean, we have disciplined differently in our distribution channels, and we are also changing some practices. So it has an impact on us, but there is also a market impact as well, a volume decrease in film. So that is translated, of course, by profitability, which is negatively impacted by all that. And although we tried to, as you can see, the gross profit is almost online last year. So that you can see it in the P&L, less sales, less gross profit. We make it up partly with operational expense, but we cannot compensate the full impact of volume. So I repeat, this is also why we are launching this transformation program to significantly reduce our cost savings in the field-related activities. So I'm not going to repeat all this. The only thing that I want to add is the way we do DR today. We believe it's as much an AI play than it is actually a modality play. All our innovation is really directed to offering customers software-powered solutions, and most of them AI-based, in order to differentiate our products. Codops, nothing really to report. I will skip it here. And I'm coming to the outlook. The outlook is pretty much a continuation of what we are seeing, actually. We confirm the growth and also further progress in DPC and healthcare IT. Healthcare IT with the caveat of the impact of the cloud transition, right? But overall, all this goes in the right direction for the future. Radiology solution, we're not expecting any improvement in the market in the next quarter. We are very clear. And the necessity for us to deliver a cost reduction plan to make it up. Working capital, back to normal by the end of the year. All the actions are already in place and are shifting, so that is already, by the way, delivered. And as I told you, the last and final payment for the offset disposal is progress. I mean, it took time, but finally the expert has been appointed, and therefore the process is, as you said, back in the tracks. So, of course, I'll give you more news as soon as we have a view on that. Because I fully understand it's a material amount of cash for us. It's about 30 million. By the way, the full 30 million are not in this book. A part of it is already fully agreed. But a significant part is being... is being discussed. We expect, as I told you, the expert to give the report by the end of September. Just a word on sustainability. We continue to make progress in terms of CO2 footprint and we are committing to an objective of reduction that is aligned with the Fit for 55 package. And we are also joining a science-based target initiative, meaning we will continue this drive in a very committed way, I would say. is also something that is dear to my heart, and we are making specific progress in the area with now very concrete initiatives for our employees. Gender balance, we have an objective, you know, to basically increase the percentage of females in our workforce, and for the time being, we are doing well. We are hiring at a much higher rate than the current and we continue this program. And I would say for us, the next subject is really the compliance with CSRB. CSRB is a new, as you know, a new reporting guidelines, which supposed to be a bit very comprehensive and very, I would say, very complete. And that's really what we are working on today. in terms of sustainability or roadmap. So I'm going to stop here and I will take the questions. I suggest we take the questions from the room where we have the analysts and the press. And from the web, I will take any questions from the press. Alexander. If you can speak in the microphone so that everyone can hear you. Good morning.

Alexander Krimish from Kepler-Chevreux. So just on radiology, you mentioned that trends will continue, but actually your results are up quite a lot, quarter on quarter. Just wondering what you exactly mean in the sense that have we reached now the drop? And do you mean that the level of profitability that we see in Q2 that we can expect is to remain in H2? Or do we mean that volumes are going to continue to decline and that we have not yet seen the growth in this area? And then the second question would be on DPC. So DPC was under pressure for many quarters. And you mentioned that now you have a good quarter. But basically, I think the story almost remains the same, which is around Inks and Zirphon. So I'm just wondering what happened in one quarter here. That is certainly so positive. And then, yeah, is this level of profitability in DPC now driven by CapEx orders, or is it driven by CapEx orders? So then maybe the last question would be on the subsidies from Europe. I think there were some subsidies on Europe related to the hydrogen project. I'm just wondering if you could give us an update on the timeline on one of the expected subsidies directly.

Well, thank you. On radiology, Q1 was a bit impacted, not only by market issues, but quality issues also that we had, which is why the Q1, I told you, was not kind of a repeat quarter. This being said, Q2 was a rather good rebound for us in radiology. Going forward, it's not a question of a trap. It's not a sidecar, right? We monitor the market evolution and we know that the direction of travel in a number of markets is a market decrease. It's not new, by the way. Now the question is the ramp up and how it does. Then on top of that, which is a bit more complex to analyze for us, is a kind of inventory evaluation part. But let me be clear, it's not a cycle. It will continue to go down over the next quarter and the pressure will remain absolutely the same. But again, Q1 was an outlier because we had more issues unrelated to the volume that was self-inflicted, so to speak. So that's for radiology. For DPC, you want to comment on... Just before, Vincent will comment. But just, I mean, DPC, no. I think we had a very good Q4 in DPC last year, but the problem with DPC we have, it's a bit lumpy, quarter by quarter, okay? But here, what is different? Frankly speaking, what is different is the margins, you know, the zero-storm development, the margins are different. That's different, okay? And that's very stable, okay? What is also different is the in-cells are continuing to grow, and that's a good stabilizing factor. Even in the first half, equipment cells were not that great for us, okay? So it shows the resilience on the way forward. Now, will DPC be more regular? That's exactly, I believe so, but you will still continue to see quite early variations in DPC, because half of DPC is still film, and here we have a little bit more of variation on the PML, on the film, on the film power. You want to add on this, CAPEX orders, OPEX orders, what is driving?

Yeah, I can come back to the... the several points. So indeed, I mean, I don't think it's more of the same. Absolutely not. If you look two years ago, we had the profitability of 3 million EBITDA. Last year, we brought it back to 19 million. This year, we will have a double-digit growth in that EBITDA. So what we will continue to see is that there will be variations from quarter to quarter. I think Q1 to Q2 now was a bit extreme. But indeed, there are always tons of, it's not one reason, it's tons of reasons, both accounting-wise, both the recognition of equipment. The full P&L impact of a single equipment is always taken when we actually install it and have that final install. That's one of the reasons, for instance, that our Q4 is always a very high and good quarter for DPS. So we will always have some of that seasonality, but I'd just like to stress that, first of all, the profitability is really increasing of DPC as per plan. And also, actually, within DPC, we have a lot of different businesses, and it is shifting from the more mature film businesses. The profitability is going, and the growth is going to DPS and Zircom, where that was a lot lower two years ago, and really that is taking over. So there is a big shift happening there. OPEX to CAPEX, I would say in Q1, Q2, it's mostly, as you have seen, service and inks, so that's more on OPEX. uh related elements pascal mentioned that were the sales of equipment was okayish but not great we will actually see from all of our product launches with this in the first half of the year we will see an effect of that in the second half of the year and those take time typically when a customer orders it takes at least two months but it can easily be four five six months before an install is happening sometimes even longer when the customer is not ready on the side So we will see the effect of that in the second half. The effect of our single-pass machines and the really big machines, like a speed set, that is always actually as per plan. We said this year would be our first beta, but we will not even see the non-PNL. We have some ink sales of that, but the machine will be recognized very likely next year. So as of next year, we will see the really big machines, the speed sets, coming also into our revenues. Maybe also on the funding, the second question. The European subsidy for Zircon. So that's an 11 million-ish subsidy. We have 2 million of that this year. The next milestone is about an 8 million milestone. That's the big one. That should normally happen in the course of next year. But it's also something we do not have fully under our control. So we have a timeline to respect. We have a lot of things to deliver to To Europe, our plans will be ready, but then, of course, there is a certain time, and this is months, that the European Commission has to review this and come back to questions. So, okay, we target for next year, but we don't have it fully under control. And the last million is actually over years after that links to our business plan.

Two million, is it first half or second half?

First half. First half.

Any other question from the room? Yes. So, Gisips from... Gisips, KBC Security. I have four questions. Yeah. First is on the 50 million productivity... Yeah. You told us that you would get more information at the moment of the 3Q results, but I'm going to make a moonshot anyway. Can you give some coverage in backend loaded or content loaded? Are the Yeah, are there already costs of it in 2024? And is it only at the materials level? So, and is it a coincidence that these are, that's 50 million euros that are equal or close to your investment in the IRF fund? How should I see this? The second question is on healthcare IT. You were mentioning that you, on the slide, there was indicated that you're having a 10 million euro capitalization of a project on top of your R&D investments. Can you give some more color on that one? And third question is related to what Alexander was asking on EPC. Is there some FISPA effect as well in this quarter? And the last question is on Aurelius. And you were saying that the significant part of the 30 million euro, is that still under negotiation or is that fixed? I'm not sure on that. And can you give some more color on significant?

Yeah, sure, sure, sure, sure.

So some more color on, yeah. And to prevent that we are kicking the can down the road, is this now a fixed timeline that... September will be the hearings and the decision and the payment in Q4, or is it still possible that we will kick the can down the road?

Okay. Thanks. Well, on the 50 million program, no, it's absolutely unrelated to the amount of investment of their fund. Absolutely not. It's not. It's what we believe is achievable in terms of reducing our cost base, and that's a significant reduction of the cost base, if you look at it with this amount. Is it front-end or back-end loaded? I'm sorry, but for the timing, I can tell you, yes, there will be a significant impact already in 2025, but some of the measures that we are taking will take time to implement. So, it's a bit too early to answer your question, but I can tell you, impact in 2025 will already be significant, but I will give more guidance a bit on how we see the things developing. in this area. And to be clear, we are leaving no stone unturned. We are looking at capacity rationalization. We are looking at operational excellence. We are looking at maintenance reorganization. We are looking at operating the plant very differently from what we do today and reorganizing the old labor setup of the company. So it's quite a comprehensive program and we are touching a number of elements. To your point, are there any costs already associated with this program? I would say very little. The one cost that I can mention is the fact that we are doing this program with the help of a consulting firm, but I would qualify the investment as quite modest or extremely modest versus the potential rewards. Okay, that's it. Yeah, you had a follow-up question, Alexander?

Maybe if I can just follow up. I know these are always sensitive matters, structuring, but is there like a minimum cost that you can already give us?

No, it's a bit too early. It's a bit too early. The only thing that I would mention is there will be restructuring, of course. There will be some restructuring. There will be some kind of social impact. But keep in mind here that we have a significant demographic situation in which that should... We're not talking here of a massive layer of plants. We don't need it, actually, with the demographics of the plants. That's not what we're talking about. Yes, there will be some impact. And by the way, it's not only Belgium. As I told you, it's global. but don't expect a significant kind of social layoff impact. This being said, I wanted to give the unions are already aware. We have already engaged in preliminary discussions. Everybody is aware internally. That's why we are also communicating externally to be very clear about our intents. But we need right now, we are at the stage where we need to work out all, I would say, the implementation plan. And then we will give a specific update in a few months. Capitalization of projects in LTIP, we are accelerating this transition to the cloud. And therefore, it's a very specific program in which we have the We have actually, we are relying on external contractors. You know, it's well identified. And that's really, I would say, to accompany our cloud transformation. That's really what it's all about. And I think we were right to do it when I see today the market moving quickly to the cloud. DPC, FESPA effect?

Yes. And maybe just bouncing back on one question here, did you ask, because somebody else asked me the same question, and I want to make sure there's absolutely no misunderstanding. So the investment we're making in Zirphong is going on as planned, and we're not stopping anything in that. And it's totally unrelated. This is a one-off CapEx, one-time CapEx. versus the 50 million OPEX recurring savings that we want to have per year.

It has nothing to do, yeah.

I'm a bit surprised. So the two are unrelated, and again, the investment on Zircon is absolutely not impacted by it. So I just want to stress that. FESPA impact, yes and no. I would say on the P&L, not too much yet, because FESPA was in March. As I said, customers at the FESPA show or closely after that start taking orders, and we did indeed do quite some product launches. But we do see in our order book right now, we do see quite a big effect of that. But that is not yet in our P&L, because as I said, we take that in the P&L when actually the machines are installed. So I'm expecting Q3, Q4 to see indeed the benefits of that.

And oil use. Oil use. First question. It's about a third is agreed, two-thirds is not, is still in discussion, technically, right? today. And can it slip? Well, the thing is, you know, we, the expert is a bit, today the master of the clock, so it's difficult. Normally there is a time set, you know, in the contract, but that time could be extended if the expert believes it's necessary. So I'm not fully controlling this timing. But this being said, when I say September, it's what the experts indicated to us in terms of deadline. Now, could the process drag further? Normally not, and especially once the expert is rendering its verdict, it starts to be interest-bearing, okay, which has also probably an impact, right? But is it absolutely ironclad, guaranteed, in terms of timing? I cannot tell you that. I'm not sure. I'm still a bit of a leeway. Laura? Of course, question in the room.

Three questions from my side. First, on health care IT, how should we look at top-line growth for the coming quarter? I understand that with the recurring revenue contract, But my question is, when do you think it will translate into ? Second question on DPC, I understood that there will still be variability, but do you still expect to be the strong scorer of the year? Yeah, you mentioned that the market development has been growing slower than expected initially, but that's what's taken into account. Do you already have a view on when you think that this will accelerate?

All excellent questions. On healthcare IT, the trend we are looking at revenue will continue in Q3, probably less in Q4, and in Q4 it's going to be higher, right? Yes. That's our current plan, Nathalie, who is leading this business. Right, Nathalie? Now, any comments on the transition to cloud and the impact on the top line? Do you want to speak in the mic?

Thank you. So, as Pascal mentioned, a detail that is relevant with your question is that the length of the contract, the cloud contract, is much longer. So, we're looking at 7, 10, even 15 years. With that, the revenue is spreaded over that length of time. As we are acquiring more volume of clouds, it is important we do it fast, and that's how we should see our revenue growing in the recurring space. So I think we should see a decline, as we mentioned, but then followed by a trend up. within the time frame.

Okay. And then, again, we are just at the start of the cloud transition. Our first cloud implementation is forecasted for Q4, beginning of Q4. And therefore, it's just a start. The more we advance, I think you notice that we try to give you more transparency every time, you know, Now we tell you not only what is the order intake, but how much is cloud, how much is project and recurring, how much is native. I mean, we're sharing more and more information. We will continue to do so. We will continue to do so, and we'll try to guide you as best as we can on the impact on the cloud transition. But there are still a lot of moving parts right now. So bear with us. We'll do it. But again, momentum is here, and we're train has left the station. DPC, your question on DPC is about Q4, but yes, we're expecting a response to Q4, right? I don't know why, and I keep asking my teams, but we install an astounding amount of machines, you know, between Christmas and New Year's Eve, okay? And I'm wondering why these technicians, you know, are happy spending their holiday season doing that, But this is the reality of the market.

So, yes, Laura, we are indeed expecting for DPS, for the equipment side, as every year a higher Q4. That being said, on all of DPC, we will probably see some higher impact, cost impacts of silver in the second half of the year. So just like you, we don't like variability. So we are trying very hard to actually get Q3 and Q4 more in line than not having one down, one up. At this stage, I'm actually expecting that both will be in the same ballpark, that will not have one down and one up. But for DPS specifically on the equipment side, yes, that will be the highest quarter.

By far. Okay, so DPC Q4 is done. And so far, I think we already said a lot. What we can probably say is next year, we're still expecting a similar growth as what we've seen this year. in our plan, between about 30%. That's what we expect today. That's what we expect today. So you see, we don't, we are not over-optimistic on the fund. We try to be very realistic, actually. But we keep, when I look at the number of offers, of commercial offers that we are making, it continues to go up at a very fast pace. actually right any more comments no no i think it's correct what you said so i understand you know there were probably like in many markets you know at the beginning there were probably higher expectations in the market because when you look at the number of projects of your phone that exists today you're close to almost a thousand gigawatts okay however today we deliver the equivalent of what 1.5 to 2 Maybe two, yes. Maybe two, okay, per year. So you see where we are versus the stockpile of the project. We monitor all the pipelines of our customers. But again, as we told you, we take a significant, significant cut to the impact, and we never believed that, you know, we would go this year to five or six gigawatts per year. Absolutely not. And actually today we are pretty much on plan. Any other questions?

One follow-up question on the outlook statement. I think the outlook statement, an awful lot of companies can take an example on that, but it's rather qualitative, so can we make it a little bit quantitative? I'm just going to ask the questioner. The consensus of the analysis of the REBIT for this year is 13 million euros. Are you comfortable with that?

I'm okay with that. Yeah, I think it's a good way to put it. We don't give quantitative guidance, but indeed, we look at the consensus for the year, and when I see what you have, it's... Thank you.

Ben. Yeah, thank you. Most of my questions were already asked by the room, so thanks. Just one short follow-up, maybe on Aurelius. I was wondering if you could shed some light or elaborate a bit on what the discussion precisely is about, because it's still pretty unclear to me on what Can you maybe give an indication of what the fork is between what you are asking and what they are offering? Something like that.

Just something more. I fully understand your question. Well, you have very objective elements, you know, like the adjustment for the working capital. It's not a discussion. Okay. But then you have elements that are a bit more complex to apprehend, especially when it comes to liabilities of the business or what is in, what is out. Okay? So that's more about these elements that are not like fully fact-based, but are based on assessment, you know, according to practice. There is a very clear practice for the assessment of some of these elements that they might always have disagreeing views. But I feel good because I would like to remind everyone that this closing statement and the final price determination was audited by KPMG. And that they confirmed basically our view. So today it's a new expert, but it's been looked at by what I believe is a pretty serious audit firm. So we're not starting from scratch in this process. But to your question, some elements are more an appreciation based on commonly accepted practice. Not everything is mathematics, so to speak. Any other questions? Okay.

There are no questions raised by participants on the phone, so I'll hand back to you, Mr. Jouery, to conclude.

Thank you very much. Again, what I believe is a solid quarter on validating the positioning we have on our three growth engines. Momentum in order intake and cloud transition for SKIT, Momentum in DPS, Zerphone Zirphan business that is improving quarter after quarter, even if it's not like the explosive growth that we would like to see, it's still delivering very solidly. A challenge in the film-related area that we are addressing through a self-help program that is one of the clear management priorities for the rest of the year, and Last but not least, a cash situation that will be similar as last year. I mean, a strong build-up of working capital in the first half and a strong decrease in the second half to come back to the level of 27%. So, overall... we'll see you at Q3. We'll give you more details on the transformation plan and we'll continue to also explain as much as we can the cloud transition impact on healthcare IT. So thanks a lot for your attention. Thank you.

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