Alfen Nv

Hello, welcome to the ALPHA 2025 Half Year Results Conference Call, hosted by Marco Ruhlefeld, CEO, and Ono Kraut, CFO. For the first part of this call, all participants will be in listen-only mode. And afterwards, there will be a question and answer session. If you wish to ask a question, please press pound key five on your telephone keypad. I would now like to hand the call over to Marco Ruhleveld. Mr. Ruhleveld, please go ahead.

Thank you. And good morning and welcome to this webinar regarding the 2025 first off-year trading update of Alphen. We appreciate the fact that you have taken the effort to participate. As indicated by the moderator, this webcast and the questions that may come forward are handled by the management board of Alphen, being Onno Krupp, CFO, and myself, Marco Rulleveld, CEO. In this webcast, we will start with the highlights of the first half year of 2025, followed by a short review of the business line. Next, we will go in more detail regarding our financials and outlook. We continue with slide four with the highlights of the first half of 2025. In the first half year, we realized €211.5 million in revenue. This represents a 13.9% reduction compared to the first half year of 2024. It was mainly driven by low revenues in energy storage systems and EV charging. The overall gross margins was 29.1% of revenue compared to 22.3% of revenue the first half year of 2024. Please note that 2024 gross margin was impacted by moisture issue provisions. As a percentage of revenue, the adjusted EBITDA improved from 5.5% to 6.2% as a result of cost saving measures. Personnel costs decreased by 9.8% and other OPEX decreased with 18.3%, showing that the cost reduction measures have been effective. We reiterate our 2025 guidance as communicated at the Q1 trading update. For our mid-term ambition, we are considered as the continued challenge in market conditions that we experienced in 2025 are expected to persist in 2026. Onno will go into more detail on the financials and outlook later on in this presentation. As last point in this highlight and further detailed in the next slide, I would like to draw your attention to the appointment of Michael Colline as per the 1st of October. We are convinced that he has the right background and personality to guide the company forward in the coming years. With the appointment of Michael Colline, we are assuring a careful and timely succession following my decision to retire early. Michael brings a strong background in leadership within the energy and technology sector with extensive relevant experience as former CEO of Heliox, a market leader in smart energy management solutions and fast charging systems for public transport, e-trucks, and port equipment. Next, we will go in more detail regarding our three business lines, starting with the next slide with smart grid solutions. Smart Grid solutions revenue in the first half of 2025 was 97.1 million euro, which is 3.9% more than last year. Grid operators drove 65% of the revenue, and the private domain clients accounted for 35% of our revenue. We produced 1,628 substations in the first half year compared to 1,548 in the same period last year. In the Netherlands, that were 1,273 stations, and in Finland, 355. The gross margin increased from 31.1% to 22.4%. Adjusted for one-off costs, the gross margin decreased from 26.5% last year to 22.4% in the first half of this year. This decline is primarily related to the increased component cost in response to the moisture issue and a relatively higher share of revenue coming from grid operators. A nice commercial win to mention is the electric acre polder, where we carry out medium voltage installation activities for the 200 megawatt peak solar path. Regarding the technical innovations, we have certified our Pacto, Diabolo, and Altro stations with SS6-free components. The usage of SF6 elevation gas is prohibited by the European environmental regulation in greenhouse gases, and the new equipment is not allowed anymore as per January 2026. On the next slide, we elaborate on the weakness we see in the markets of smart grid solutions. Our clients in the Netherlands are hampered in scaling by several aspects. Those aspects are firstly obtaining permits, Next to that is available transmission grid capacity. Thirdly, available land to place the required extra substations. Fourth, the availability of main components, partly related to the SF6 translation. And lastly, the fifth point, available human labor capacity for site installations. For our business with the grid operators and also in the private domain, we do not see short-term improvements due to the mentioned aspects and we expect the situation to continue into 2026. A positive note is the rollout, is the acceleration of the rollout of the connection between stations, the connection station between the TSO grid and the DSO grid. It is good to note that the margin profile of this revenue is in line with other business with the grid operators. Ono will now continue with the next slide regarding EV charging business line review. Thank you, Marco.

EV charging revenue decreased by 22.8% from 80.1 million in H1 2024 to 61.8 million in H1 2025. As communicated during the Q1 earnings release, we currently do see increased competition in our core markets. which we are countering with selective pricing programs and new product introductions and innovations. A total of 61,245 charge points were produced in H1 2025, which is a 23.7% decrease compared to H1 2024. Although these lower volumes do not affect our gross margin percentage, for the product line in total, we do see an absolute gross margin effect of around 7 million due to lower volumes. Gross margin increased by 41.3%, and this is a slight change versus our press release, which stated 42.9, compared to 33.9% in H1 2024. Adjusted gross margin stands at 44.1% compared to 38.4% in H1 2024. These high adjusted gross margins are mainly due to lower component cost prices, and to a certain extent, to the higher margins on twins in comparison to H1 2024. Together with the Belgium wholesaler CBO, we will roll out 520 charge points in parking garage and semi-public space in Belgium. These stack of wins are important for us since it is our expectation that parking garage and company parking lots will be important growth segments in the years to come. We also announced our plus models, which are fully compliant with new APHER requirements that will come into effect in the beginning of 2026. Since the plus models are built upon a new hardware platform, we had to take an inventory provision of 1.8 million for certain components that will not be used anymore on the new platform. This provision has been booked in Q2 as the European Commission provided clarity on the timelines for the implementation of the alternative fuel infrastructure regulation, also known as APHER, The new requirements will come into effect on the 8th of January in 2026. With the launch of new plus models, we will also be launching a new tool for installers. Time to install is an important KPI for our installers. Alphen has been working on the development of the EVE install app, which will help installers to significantly reduce time required for installation and configuration. This app will be available at the beginning of 2026. Next slide, please. Battery electric vehicles and plug-in hybrid electrical vehicle registration growth across Europe has been strong in a number of countries. However, we do not see additional growth since the relaxation of CO2 regulations in March 2025. Often for the Netherlands, we are faced with increased competition in markets where we have been traditionally very strong. As mentioned before, we see increasing competition in the home segments. often continues to maintain strong position in the public market with its thin products, although the overall number of installation in the public market has slowed down. Despite relatively high battery electric vehicle growth rate in Germany, we currently do not see a similar order intake increase in our order books. For Belgium, the market growth rates for battery electric vehicles have been high, but it was offset by a sharp decline in plug-in hybrid cars. Even though overall battery-equipped vehicles and plug-and-habit electrical vehicles registration in France are weak, often have seen quite robust growth performance in this market, as we have gained a strong position with a number of larger clients. In Denmark, we have developed a strong partnership with Northleaf, which has been very successful during 2025. As mentioned earlier, after the introduction of our personals in Q4, This year, our full product portfolio is compliant with a theory crimes affected next January, beginning of next year. Revenue for our energy storage product line declined by 27.1%. 2025 revenue performance is in line with our expectation. As during Q2 last year, we had an unusual high revenue due to simultaneous deliver of materials on site for several projects. leading to higher revenue recognition in Q2 last year. Gross margins at 27.4% were higher than usual on the back of relatively high margins in Q1. In the second half of 2025, we expect the margins to normalize. Together with eConnection, we will deliver 20 million watts, 40 megawatt-hour battery energy storage systems. This system will be co-located with a wind hub at Milche Jams in the southwest of the Netherlands. This project will help to maximize the use of wind energy and maintain electricity grid stability. It is expected to be operational in Q1 2026. Furthermore, we have introduced a new 20-foot containerized solution for our elements battery storage system. This innovation is important as it increases the energy density and reducing the length required for battery energy storage projects. The backlog for battery systems is sufficient to cover the 2025 revenue guidance. In addition to the stationary systems that we are realizing and taking revenue for during 2025, we also sold a number of mobile units that we are delivering in 2025. Backlog for 2026 is developing in a positive way. Over during the year, we have 72 million of backlog for 2026 revenue, and our pipeline has sufficient prospect to further fill the backlog for 2026. As battery prices continue to decline by about 10 to 20% in 2025, our kilowatt-hour volume growth is quite significant. Prices decline are driven by several factors. Firstly, there is a consistent oversupply of battery energy systems in the market. Secondly, prices of raw materials used for batteries are dropping. And lastly, battery technology continues to improve. In January, often announce the signature of the agreement with Flavorbest to build one of the Netherlands' first large-scale four-hour bests based on a containerized solution. Construction has started and completion date of this project expected to be Q4 2025.

And I would like to move to the financials.

Revenues for Q2 amounted to 107.7, which is 3.8% higher than Q1 2025. However, the year-on-year quarterly decline was minus 16, mainly driven by EV charging and battery systems. Due to adjusted gross margin year-on-year improved from 26.1% to 30.1%. This was mainly driven by the impact of lower component costs for EV charging, as we did not see a major shift in mix and sales prices for this product line. For battery system, we have also seen improvement in margins for Q2, but not as significant as we had seen in Q1. Adjusted EBITDA was 7%, which is better than the same period as last year at 3%, as we significantly decreased our cost base during the reorganization at the end of 2024. Also during 2025, we have continued our focus on spend and FTE reduction. For the first half of 2025, revenue declined by 13.9% from 245.7 to 211.5. This is due to lower revenues in EV charging and energy storage systems. Growth margin increased from 22.3% in H1 2024 towards 39.1% in H1 2025. The 2024 numbers were impacted by the moisture provision and to a lesser extent by an inventory provision that we took for EV charging components. It was 3.6 million last year versus 1.8 million this year. Adjusted gross margin increased slightly as we had lower component costs in EV charging and a positive price effect on twins. On top of this, we had somewhat better margins for battery systems, mainly driven by the Q1 performance. Smart Grid solutions had slightly lower adjusted margins due to increased component costs due to product changes in response to the moisture issue and a relatively higher share of revenue coming from grid companies versus private company customers in H1 2025. compared to H1, 2024. Personnel costs decreased by 9.8% year-on-year as a result of the right-sizing program we executed at the end of 2024. In addition, we put stringent cost control measures in place during 2025 to further reduce our cost base. FTEs decreased from 1,053 as of the 31st of December, 2024, to 965. as of the 30th of June, 2025, and in addition, we reduced our external personnel expenses. Other operating expenses decreased by 18.3%, driven by cost-saving initiatives. The net loss for Alphen decreased from 11.1 million in H1 2024 to 1.3 million in H1 2025. On an adjusted basis, we reported 1.4 million positive net results. Non-current asset decreased by 0.6 million, driven by depreciation and amortization of 9.1 million, and partly offset by capitalized development costs, new lease and indexations, and other capex of respect to the 4.8 million, 2.2 million, and 1.5 million. Current asset decreased by 33.5 million, of which 9.8 million was driven by inventory position and related stock down payments, as well as other working capital movements. Non-current liability decreased slightly due to redemptions on our loans and lease payments. Current liabilities decreased by 19.9 million as a result of working capital movements, partly offset by an increase in short-term leases and our factoring position. Cash flow from operating activities was 10.8 million positive as compared to 1.6 million in the first half year of 2024, partly driven by significant lower income tax paid. Our continuous focus on working capital, and specifically inventory, is yielding results. Our inventories are decreasing, both as down payments as well as in the on-hand inventories. Total inventories were brought down by 9.8 million, driven mainly by reduction EV charging inventory. Energy storage showed a slight increase for our batteries, because we always buy batteries once a deal is signed, limit the risk of obsolete inventory. For 2025, we reiterate our guidance as provided during our Q1 earnings release of revenues between $430 and $480 million and EBITDA margin between 5% to 8%. In H1 2025, continue to present challenging market conditions. Alphen expects these challenging market conditions to continue with competitive pressure and labor shortages and permitting delays for grid operators and price declines for megawatt hour for battery systems to carry over into 2026. Therefore, Alphen adjusts its 2026 revenue ambition from between 5 and 10% year-on-year growth to between 0 and 5% revenue growth. This also impacts adjusted EBITDA margin, which Alphen expects to be between 5 and 8% of revenue in 2026. Alpen will continue to focus on margins by driving continued improvement in cost and pricing. Due to the continued uncertainty in our markets, Alpen has decided to refrain from providing guidance on 2007 and beyond.

I would like to hand over back to the moderator.

Thank you, ladies and gentlemen. We are now ready to take your questions. If you wish to ask a question, please press pound key five on your telephone keypad. Our first question comes from Nikita Papacho from Deutsche Bank. Please go ahead.

Yeah, good morning and thank you for taking my questions. I would have three, if I may. So the first one is, on the one-offs of obsolete components in the charging segment. Is this done now, or should we expect further one-offs coming in the upcoming quarters? And then thinking about your H2 adjusted EBITDA margin, I would assume that the margin will be lower than in H1 with similar revenues and lower gross margin in charging and storage. Is this the right way of thinking, or are there any impacts to keep in mind for H2? And the third question is on your smart grid business. You invested several million euros for a new plant to capture the forecasted demand from grid operators, which is now not materializing. So how do you tackle the situation of overcapacity besides workforce reduction?

Thank you.

Let me take the first question on EV charging. I think I explained on the fact that we are moving to a new platform, and based on the usage that we will still see for components on the old platform towards a new version, we have to basically come to the conclusion that we are not going to use all the remaining components for the old platform. So from that perspective, after careful analysis, this is the decision that we have taken. Can I promise you that we will not take any write-off anywhere in the future? I cannot. But if I would have known about it, we would have taken the provision.

The question that you were asking, was it about either the margin or about the gross margin?

EBITDA margin, please.

Yeah, there are various factors that are influencing the EBITDA margin. And from that perspective, I would like to basically stick with the guidance that we have given between 5% and 8%. We're currently at 7%, so I'm right in the middle. But the guidance that we have given was between 5% and 8%. And I think for now, I would like to stick to that one.

Regarding the overcapacity, you're right that we anticipated on the growth of revenue due to a number of substations with the grid operators. Due to the fact that that is not there, we have more or less overcapacity. That overcapacity cannot directly be yielded towards other areas. That means also this pressures our EBDA number, because the costs related to the building are still there. And we're now, of course, debating in which direction we should have discussions, whether it is with the grid operators, whether it's to find alternative directions, but say, due to the, say, rather big difference in, and also a short timeframe where the difference were there, we are not on the short term, and also not in the 26, fully able to recover on those elements.

Okay, thank you.

Our next question comes from Luc van Beek from De Groot. Please go ahead.

Yes, good morning. Thank you for taking my questions. First of all, a question on your cost levels. Are they now fully aligned with revenue outlook as you see it, and do you expect a further decline in H2?

First of all, I think we have put very careful cost measures in place to make sure that we stay in control of our cost measures, as well as the FTE numbers, but also from a discretionary spend perspective. And we will continue to do that in the second half of this year, and we will continue to do that towards next year, the fact to 7% more EBITDA margin is not the level that's not where our ambition is our ambition is to increase those margins and of course partly you want to do that by increasing your top line but at the same time you want to make sure that you keep your cost base under control as much as as possible so as a company we we are very focused on making sure that we reducing cost the level of The current level of cost, I expect the second half cost base more or less similar to the first half cost base, and up and down a little bit, but grosso modo, I think you should expect a similar cost base for the second half.

And for next year, you no longer forecast an improvement in the

fda margin range is that because you see still further pressure on on gross margins due to price competition or is there another driver for that um now if you're charging um we have we have actually a number of effects on on the margin um we do see some lower component cost prices um and that's a little bit technical but the way we are valuing our inventory is based on average cost price. And during the COVID years and the years, some period after that, component cost prices were relatively high because of significant shortages. So we had to basically buy it. It was a seller's market, as you could say. Components that we are buying now, are reducing our average cost price of our inventory, and when you then issue them to your P&L, you're basically issuing them at a lower cost price, and therefore that's increasing your margin. That is an effect that will continue in the periods to come. The other effect, and especially when you compare margins Q2 last year versus Q2 this year, as is related to the twins, our public charger. We had extremely low margins in Q2 last year, and they're now being normalized, and we expect those margins to continue going forward. So that uptake in kind of driving up the margins somewhat is something that will stay, because there was a one-time effect last year. At the same time, we also talked about the competitive situation. And we do see a number of competitors that are relatively aggressive from a pricing perspective, and we have to counteract that. And that's also what we're doing. So we do expect downward pressure on our prices in the second half of this year and potentially also next year. So that's the counter effect of the two other items that I just explained.

Okay, that's very helpful. Thank you.

The next question comes from Ruben de Vos from Kepler. Please go ahead.

Yes, good morning. I had a first question on the 26 sales outlook. Just thinking about whether you could give directionally some comments on how you expect the trends to be across the division. So on group level obviously flat to 5% growth. I think consensus was sort of factoring in quite an even growth rate across the three divisions, 8% up, 10%, 8% across the three. So yeah, curious to hear your thoughts where we are directionally for next year.

I think what we try to convey is that we are a little bit careful about say the market developments and our position in the market will develop in the coming year. That's also why we took away a little bit, not a little bit, we took away the forecast for 2027 because there are now so many things coming into play that, say, to give, say, blunt numbers in that timeframe is complicated. Therefore, it's better not to have a discussion on all those elements together. If you look at 2026, where we already indicated that for smart grid solutions, we don't think there are fundamental improvements based on, say, the elements we mentioned during the webcast also to the limitations now, the five limitations that are being ended now, and if we look to the practical situation and how they developed in the past half year, we don't see a fundamental improvement, and we don't expect that fundamental improvement, say, in the second half year, and therefore also we are thinking that this will also play more or less in the same area next year. At the end, of course, because the obligation of the grid operators is still there, their plans to install in the coming five years around 45,000 subsets to be able to cope with the energy transition and to cope with the with restrictions that now in all kinds of areas are there where the energy cannot be distributed in a way more as the users would like it to be, would mean there has to be a ramp-up. How that will materialize, in which time frame, in which lumps, that is for us at this moment quite difficult to grasp. If you look to battery storage, we see also all kinds of different elements coming into play. Battery density, lower prices, competitive position. That's also why we are, say, looking at that market, and we have, of course, an opinion of how it could develop it, but say for 2026, we are expecting some growth, but say also limited growth. due to all kinds of circumstances. For EV charging, the outlook is, say, the most difficult one to predict. We have, of course, only a very short lead time between getting your orders and serving them out, and that's fundamentally different if you compare it to the situation in battery storage, where we have seen already say quite a large number is already in our order book and with EV charging it's quite complicated to fully anticipate on all the elements of say us introducing new products new features how that will play out in the overall market situation okay okay thank you and so for smart grids is it is it fair to say that probably the margins and

will likely not come back to the levels where it was maybe just two years ago. I think in 2023 it was the high 20s. I think now we're at 22. The range is 20 to 30. Is it fair to say next two years probably still low 20s is a fair assumption? Just thinking about these higher component costs impacting margins, how much flexibility do you have in, let's say, your contract structure to pass through inflation to the grid operators or to the private clients?

Also here, we have many elements coming into play at the same time. In order to process, normal inflation percentages are part of the contract with the grid operators. are included but for example the extra reinforcement we had to add after the moisture issue of last year those elements are not of course part of an inflation correction and so therefore we also say that for second half and next year we are more discounting with the percentage we have now on the other hand of course we are not happy with this percentage So we will try to bring into motion all kinds of elements to be able to improve that. But there is also, of course, a time delay between more or less coming to the conclusion how we can resolve this and the timing we can show that in our results.

Okay. And then a final question on energy storage. I think you mentioned that that that division will have to adjust rapidly to changing battery technology. What is the compatibility of your platform today? Would you need to re-qualify inverters or battery management systems? What is the risk of a write-down on existing designs if the battery technologies are changing that fast?

Fundamentally, if you look at the way Not only how we approach the market, but also you've seen it also in our stock levels on batteries. We already anticipated several years ago on charging market conditions that we offer more or less the latest technology without having all kinds of stock problems, those types of things. That means, of course, it is not always a problem to have every day something else. But fundamentally, we should be able to directly tap into the latest technologies available. That is also in our approach to the customers, where we more or less at the moment, projects are being awarded. At that time, we directly connect it to, say, supply of the main components. And we already, some years ago, made a fundamental change in our platform. So at this moment, we don't have an expectation that, say, the basic approach we have in the market with our electronics hardware and software, we have to talk about write-offs.

Okay, great. Thank you very much.

I've communicated before also that the only inventory that we have on stock for which we don't always have kind of a direct client are the mobiles. And that also allows us to, when we get an order in, to deliver those relatively quickly. And we still have inventory on stock from one larger client. But apart from that, every order is, when it comes in, it more or less directly goes to location. The inventory that we do have on stock is when these batteries are coming and being put on the boat in China, then according to our Incoterms, they're our inventory, and then they then come into Rotterdam and being delivered on site, then they're basically passing back to the uh to to the customer so that's kind of delivered the mechanism that that marco was talking about this is all that inventory is fresh okay got it thanks ladies and gentlemen as a reminder you can press pound key five to ask a question

Our next question comes from Jeremy Kinshead from Van Lanschot Kemper. Please go ahead.

Good morning, everyone. I have two questions. The first one is just on the EV charging, EV charges in competition. Obviously, some of your competitors are growing at a faster rate than you are. And if I compare your products to theirs, there's obviously a difference when it comes to price, functionality, and design. And so I was just wondering if the plus charger, which comes out in the fourth quarter, which of those factors the plus will address, if any, and if you think it's going to be competitive or result in a step change in your sales. And then the second question for me is just on your decision to downgrade FY26 guidance obviously you're going to have a new CEO coming in in a couple of months time and sometimes that's a trigger for management to reassess the outlook and look at guidance again then and so I suppose it could be a risk that there could be another reassessment of guidance at a future date so my question is why did you take a look at the guidance now and why did you reassess it and change it at this earnings update? Thank you.

Maybe to start with your last question first, I think as a company we have always had a straightforward approach. That means that if we know something, we bring it to the market. So there is no, say, political element into play that we wait until the new series is there and then you can bring the bad message. Of course, everything was wrong, of course, in the situation that it was not there. So fundamentally, whether it is, say, our calculations on stock components where between the first quarter And now, in the moment of the results of the first quarter, there was no exact date of implementation of the new requirements. In the second quarter, the date was clear, and with a little bit lower numbers than anticipated, we had to recalculate, and we have recalculated, and the years are transparent in that calculation and also presented more or less as a part of our results for the market. And if you look at the downgrade, It's also a straightforward translation of the market situation we experience now, and we communicate it as it is. And there is no, for us, no political play where we more or less want to give the new CEO the opportunity, say, to think there should be a reset and to come to the next step in the future. I think in this situation, I think we give the opportunity to the new CEO to bring whether it is direction or elements into play. to further grow the company in a way he thinks it has to be. But say for now, I think this is a straightforward translation of the results of Alphen at this moment. And for EV competition, it is always in these markets and elements of the first mover is always at some point also hampered by the elements of these first mover elements, as often we have been the first mover in EV charging. And we have seen that, say, with introduction of AV, we were AV with price transparency, we were one of the first in the markets. where some competitors are a little bit earlier on the AFIA elements that come into play coming January. I think for those elements we will be on par, but also there are elements in our development cycle that will bring us also step forwards in the coming year. So whether it is already directly on the 1st of January, we don't know yet for sure, but we think we will be competitive in our main markets in the coming period. and will the price point of the plus be different to your current offerings i think that's a little bit too early to comment on we have not formally introduced our product but that will happen in say the end of the third quarter or in beginning of the fourth quarter but fundamentally we think let's say price point wise will be targeting that in such a way that will be price for value for price. Of course, we try to evaluate that point into the market area.

And I think on top of that, I mean, price is not just about functionality and design. Of course, they're important, but there are other factors that our customers lack. We have been around for more than 10 years. You take a look in the streets of our church, they're still there. and they're still working, so they are robust. That's what our customers appreciate also in kind of the work that we do. So it's too simple to just look at price, but I mean, at the same time, we are not blind. We see what's happening around us, and if at a certain moment price is important to make sure that we realize our volumes, then we will not hesitate to make sure that we adjust our pricing.

Thank you very much.

The next question comes from David Kirsten from Jefferies. Please go ahead.

Good morning, gentlemen. I've got two questions, please. First, a follow-up on the EV charging business, where you talk about the increase in competition, but at the same time realize a record high gross margin of 48.5%. Can you please explain once more why you expect those margins to come down in the second half of the year? And do you see the increased competition so far mainly on volume, but you expect it to impact pricing in the second half of the year? And then the second question is more the general comments you make on improving pricing. It sounds like that is less likely to be in EV charging and also in energy storage You're seeing the lower impact from lower battery prices. So what areas can you improve pricing going forward? And maybe finally, also the other comments around additional cost savings. I think we're now seeing the benefit of 13 million from the 15% headcount reduction last year. And you have talked about additional cost savings measures. Can you please quantify that impact for 2025 and 2026, please?

Thank you.

The EV charging margins. I think I tried to explain that there are a number of components working against each other. One is component cost prices. are helping margins and basically were the driver for improved margins in Q1 and Q2. I also talked about the twins having a better margin than they used to have last year. But at the same time, what we also see, and I said we were not blind for competition, in certain competitive situations, we have to make sure that we are also competitively priced. And we do expect a downward pressure on margins in the second half of this year due to the competitive situation. And so that's the reason that we expect that margins for the second half of the year for EV charging are not going up and probably going to have a downward trend. I think that's a lot more I cannot say about it. That similar trend will probably be in 2036, where if you have increased competition, you have to counteract that with great products, great service, and to a certain extent also the right pricing. And that's what we will be facing also in 2026. You talked about lower battery prices. lower better but that's in itself not a main driver for our margin to be honest we buy margins for batteries from from an external supplier a significant part of the overall project cost our battery prices we do have a certain uplift um when we buy these batteries and we do all the handling and they can import them in europe and um and bringing them into location we do have a certain uplift over the battery over the battery price but the main part of our margin that we are realizing in battery project is actually called epc type of work system integration type of work so project work and that that drives our margin um and so no and it's not so much different by the by the battery battery prices in itself On the cost savings, we will continue to be extremely careful with cost. That is important. That will be important. And we want to make sure also when we will see revenue growth, that we will start to see a leveraging effect of that. So revenue growth doesn't automatically mean a corresponding increase in cost for us. And there's a lot of cost discipline in the organization at this moment in time. If you take a look at our cost-based first half of the year, My expectation is that the second half of the year will be approximately similar. So I don't expect that cost base will go down significantly by the fact that we will continue to watch that carefully. For next year, the only thing I can say at this moment in time, that cost will be very much a focus and make sure that they don't increase to an extent that they are getting out of record revenue.

Okay, thank you very much.

The next question comes from Thijs Bergwelter from ABN AMRO, ODO, VHF. Please go ahead.

Yeah, morning, gentlemen.

I first want to start with a big thanks to Marco Ruhleveld for having led this company for so many years and very successfully for many years until, let's say, Ukraine started to invade Russia and Europe changed its climate plans. Let's put it that way. Then let's start. with the questions first on inventory per segment going forward and the inventory valuation use that current component prices for the non-sold part are clearly lower than they used to be why they not now decide to impair the inventory which is still there of components at let's say too high prices and what would be the financial impact for such a decision because if you would do that now From an accounting perspective, it would make your margin outlook for next year's better, is my impression.

First of all, thanks for the question, because I think you're asking it every quarter, so I have the list in front of me by segment. Overall inventory is 104 million. That is including what we call the down payments. That's about the stuff that we have physically on stock and the stuff that we have, the components that we have reserved at our supplies. The supplies, that's the down payments. The total, that is 104.1 million. Smart Grid Solutions, we currently have 22.9 million on stock. Energy storage system, we have $50.4 million in stock. And EV charging equipment, we have $30.8 million in stock. And you see the quarter-on-quarter reduction in inventories is mainly in EV charging. That's also where we wanted to be. That's also where we still have inventory that is, I want to call it, slow-moving. And not more than that, because it would be opposite if we would take the provision, but it is slow-moving. So we bought too much in the years for a number of years. The battery inventory is, I think I already explained that most of the battery inventory is just timing, the period that it's on the boat to Rotterdam and the moment that we basically bring it to site, that's more or less a flow and a certain portion of that is on our books, but that's more or less it. except for the mobiles and except for the number of batteries for one specific customer. And the smart grid solutions is also inventory that, if you look at it carefully, has been coming down quarter by quarter by quarter, and we brought it down a little bit again from March to June. Your suggestion of taking a write-off, that's not in our hands. We do have the right margins for products. We're making a profit on these inventories, and you cannot just write down inventory if you feel that that could improve your outlook for next year. There are, for us, rules how to do that. have inventory and stock that we wouldn't be able to sell at a profit anymore, we would have to take a ride out. Um, no, I mean, uh, conclusion is that we don't have inventory on stock that we don't sell, um, at a margin and therefore we cannot take a ride out.

Yeah. Okay.

And then a follow up on personnel. You brought your personnel base down to around 950. Can you tell me what roughly the normal attrition rate is in the personnel base and should we expect you to land at around 900 at year end, something like that?

That's not the way we're working at this moment. You cannot just kind of let people go and then expect that work still is being done. But if somebody leaves, when somebody leaves, we take a careful look at whether we want to replace or not replace, and that's actually at this moment in time a board decision to replace people. So that's the type of gate that we have put in place to make sure that we keep our headcount under control. But that doesn't mean that we're not hiring at all. We're still hiring talent. We still, some people leave us and we'll try to replace people from key position. There are even areas where if it's necessary, we might even increase headcount a little bit and then reduce it somewhere else. But that's a fact of life. If you have around 1,000 people in your company and you basically will just say, I don't hire anymore, that would not be a wise decision. But we are extremely careful and we're placing relatively slowly and relatively carefully.

Okay. Thank you, Dan. For now, my final question is on energy storage business. In the other sectors, you provide, let's say, a breakdown between EV charging in between Netherlands and abroad and in substation business between Finland, Netherlands and between private clients and grid operators. In battery storage you provide large systems to grid operators, but also many smaller other containerized batteries to maybe also the private sector. Can you maybe describe what's happening there in the private sector? The event sector, which was your first big sector, is stagnating, it seems, and maybe coming down. Is construction sector still growing? Fast charging sector still growing? and batteries for onshore wind and solar systems to me also seems to be in quite substantial decline. So can you give an update there?

If you look at, say, the split of revenue, we don't keep track of all those different segments, but to give an answer, you mentioned that we supply battery storage to grid operators. I think we should say energy providers, because grid operators almost nowhere are allowed to integrate the battery storage. They are mostly related to, as you call it, the energy suppliers. So the company maintaining the grid is another one then supplying the energy. Companies like Vattenfall are supplying energy, and they are also in the situation to include battery storage development, but we see also a lot of, say, what we call project developers that are specifically aiming for the segment. The order we got from Semper Power, that's now part of the return. That's a pure project developer in battery storage, like also other players in the market. but sometimes we see smaller initiatives. FlavorBest is a somewhat smaller initiative of a group of people that have been active in the wind in Flevoland and now also see the opportunity to include battery storage in this ecosystem. So fundamentally we see, let's say, where initially the energy provider was doing that we see now different project developers coming into place. where we have two fundamental approaches, where it is to say, the connections to the high voltage grid is more oriented to project, special project developers, but we also see several co-location sites with wind and solar, and then they are mostly related also to the owner of the solar park or the wind park. But at this moment we have no, we're trying to think about it, whether we can give more insight in our in the direction why we supply the unit, but that we don't have available on hand now.

Okay, thank you.

The next question comes from Thibault Leno from KVC Securities. Please go ahead.

Good morning. I have two questions. So with respect to the smart grid solutions during the presentation, you mentioned that you don't expect any significant changes for the remaining of the year your guidance still implies an improvement in the second half what would drive this improvement and then a second question coming back to reuben his question um with respect to the smart grid the gross profit margins within smart grid solutions um do you feel that your competitive position in the long run has changed due to the moisture issues or do you expect that then after this time with the issues that towards 27 the cross-profit margins could go back to the historical levels, or has that competitive position changed a bit? Thank you.

Okay, with regard to the second half here, we indicated already in the webcast that they do the transition to a different type of switchgear. and availability of those components say in the transition there was a delay in the second quarter and we will have a change of that in the second half year where we expect it to run a little bit more smoothly and that we will have a small uplift and also we have seen with the implementation of one of the grid operators while we're in installation of the which stayed in. We see also a small plus in the transport Fidel sessions, where we have already indicated also that we have a slight more transverse Fidel sessions. But what we're also doing there is what we call the one-stop shop activity, where we not only deliver the substation, but also do all site works. And we expect in the second half year a strong uplift of the site works of that part of our business. And that's also then situated in the smart grids business unit.

and margin long-term in that competitive situation.

Long-term, I expect that we will be able to overcome that, but because of the design elements and the lead time we need to be able to redefine it and also be able to implement it, we will not be able to do that in such a way that you can recognize it in the gross margin of this year and probably also only partly in next year, but in the long-term, we are convinced we're able to be competitive on those aspects and grow our growth margin in the future.

The next question comes from Martin Verbeek from the IDEA. Please go ahead.

Good morning, Martin Verbeek of the IDEA. Two questions left from my side. Firstly, your inventory position has come down nicely, a little bit helped by the write-down. But if you now look at the ratio of your EV charging, That is more or less at the lower end of the normal level you expect as a relationship to revenue. For both SGS and for EVC, do you expect still an improvement in this respect to manage your inventory even better, to get it even a little bit lower?

For EV charging in itself, I think inventory is still too high. And we still have components on stock that have a turnover of more than a year, and that is too high. So I expect this year, and also in 2026, the inventory of EcoCharger to come down. Smart Grid solutions, I think, is going to be a slower process. That is due to continuous improvements within the organization. I think there's still room for a certain improvement in that ratio, but there you won't see the big steps that I'm expecting in energy charging. In energy storage, I expect inventory to come down where if we're selling more of our mobiles and if we're selling the one specific project that I mentioned, then most of our project will be based on this kind of the flow inventory that I explained with this. And then more or less you are the lowest inventory that you can get. So those are the dynamics. If I kind of look from a distance to the inventory, room for improvement, definitely need recharging. Two big events in energy storage systems and smart grid solutions will be a matter of continuous improvement, but there you shouldn't expect Huge importance.

Second question that's concerning your provision for the moisture issue. You took a provision last year. You have only used a modest amount of that provision. And according to me, there's still some 12 million on your balance sheet. When will you attack that issue, and when will we see the cash out of the provision?

Fundamentally speaking, all the costs that are now related to substations that have not been installed and we could repair. We're now in discussion of when can we do, whether it is repair of inveterations of locations on site. But there we are dependent on, say, the grid operators that they more or less, one, make an investigation of the stations on site, and secondly, give us the opportunity to do something with that. And because of the fact that, say, there is no safety issue, no performance issue with the stations, they now prioritize more or less on their side everything to do to create new locations. Therefore, it takes longer for us to come into position that we can execute on those repairs. On the other hand, to take into account that, of course, when we can do it in our factory, it costs us much longer. We have to do site works. That's why also we think that the provision is, I call it, balanced at the moment. We still need, say, this provision to be able to execute on some repairs on site.

thank you timing will be this year next year and could even run into 2027. thank you and with that i would now like to turn the call back to mr rollefeld for any closing remarks okay um thank you and i would like to take the opportunity more or less to thank everybody for participating

in this webcast and to thank Thijs Berkelder for his nice words on my part and I hope that we speak again sometime in the future. Thank you all.