Bechtle Ag

Welcome, ladies and gentlemen, here in Frankfurt. Welcome to everyone who's dialed in in the webcast or the telephone conference. I'm Martin Link. I'm here together with our CAO, Dr. Thomas Olemoz. And as you all know, we are presenting the figures for last year's fiscal year 2024 and outlook on the current business year. One little comment. We are at the Deutsche Börse for good reasons. Normally, we're elsewhere. In two weeks' time, we'd celebrate an anniversary that is 25 years at the stock exchange listing, that is. So, briefly, a word on the sequence. After the presentation of the Orlemans, we will first answer the questions raised here on site, then we'll go virtually to The non-speaking, non-German speakers and also any questions from participants online in German will be answered.

Thank you very much, Mr. Link. That means it's my turn. Welcome, ladies and gentlemen, from me as well, to our press and analyst conference for the financial year 2024 of Bechtle AG. And as Mr. Link has hinted at, I also assume that the question on everybody's mind will be the outlook on the coming year and not what happened last year. So I'm going to deliver some structural background that is relevant for the future. I am delighted that you have appeared in such large numbers and I also truly appreciate everyone connected online. As usual, today we're going to focus on figures and Bechtle's business. Gerhard Schick, one of Bechtle's founding members, was a man whose life was shaped by these two elements. Bechtle on the one hand and numbers on the other hand. As some of you may already know, we had to bid him farewell last week. I've already answered a few questions from people from the audience today. However, many of the values Mr. Schick embodied remain deeply ingrained in Bechtle's DNA. Above all, reliability, pragmatism and perseverance. These principles are more relevant than ever today and are experiencing a true resurgence, particularly in the capital markets, which are shaped by great turbulence. We will come back to this topic in our outlook later. As always, today's presentation is structured into four main sections, as you can see here. We are going to kick things off by having a look at our business performance. We will have a look at our key financial figures for 2024 and for the last then we'll have a look at our dividend and we will talk about the proposed distribution to our shareholders. You were able to read more about that in our press release. Then we're going to talk about current developments, that is significant strategic events beyond the numbers. And last but not least, we're going to talk about the main part, in my view, and that is the outlook 2025, the context and objectives for economic development in the current year for Bechtle and the IT market. But first, let's begin with our business performance. We cannot be satisfied with Bechtle Group's overall performance in the fiscal year 2024. And we've said that both internally and externally. Of course, general conditions were more challenging than ever, that needs to be said, but this does not change our fundamental objective, that is, profitable growth. In 2024, we fell short of this goal. In my view, two key factors played a decisive role. First, throughout the year, our SME customers were highly reluctant to invest, particularly in our two largest markets, Germany and France. One major factor was a delayed replacement of outdated PC infrastructure, which continues to be postponed. That is, in our terminology, the classic client business. And secondly, our public sector customers, unsettled by the political climate, invested significantly less than usual and below expected levels. And that, although we know that here and there, it would have been really important to invest. With limited top line growth, we were unable to offset costs. even though they did not rise that dramatically. But we'll come to that in a moment. First, let's take a closer look at the top-line developments I've just mentioned, that is, the development of our business volume and revenue. In terms of business volume, that is, the gross revenue before IFRS 15, we achieved a solid 2.0% growth, while organic growth remained at the previous year's level. This result is still respectable. The decline in reported revenue reflects the strong performance of our software business, which, due to accounting regulations, is not included in this figure. In this context, the revenue decline is not a negative indicator, quite the opposite. Software remains a key driver of technological advancement, particularly in the areas of digitalization and network investments. What we lacked, however, was momentum across the board, both in our so-called running business, often referred to as our bread and butter business, and in lighthouse projects, which were still prominent in 2023. Unfortunately, our broad diversification both in terms of customer base and regional presence offered little relief last year. As previously mentioned, our two most significant customer segments and largest national markets were particularly impacted by economic challenges. That said, a look at our quarterly performance offers a glimmer of hope. In the first three quarters, we experienced a downward growth trend. You can see it in the slide behind me. The French elections in June and the ongoing political uncertainties in Germany, particularly regarding government stability and budget approval, had a noticeable impact on our figures. In the fourth quarter, however, we achieved our highest growth rate of the financial year at 4.4%. While this year-end development was encouraging, I would hesitate to call it a sustainable trend reversal. The fourth quarter followed the usual seasonal patterns, albeit at a subdued level. These patterns were also visible at a low level in 2024. Overall investment reluctance, however, remains unchanged. Let's now take a closer look at developments across segments and regions. With a view to our segment performance, one thing becomes very clear. We are on the right track with Bechtle's internationalization and our M&A strategy, which increasingly focuses on Europe. Not all countries face the same challenges. Our businesses in Belgium, the United Kingdom and Spain performed exceptionally well. While this may not be immediately visible in the consolidated figures, we are successfully mitigating weaknesses in certain national markets, at least to a certain degree. The restatement of prior year figures reflects the reallocation of specific units to different segments. As previously announced, we will introduce a new segment structure starting with a 2025 annual report reflecting the changes in management responsibilities already implemented within the Executive Board. And I'm going to comment upon that at a later point. This brings us to earnings performance. As I mentioned at the outset, our results clearly reflect the challenge we faced. Without sufficient top-line growth, we were unable to offset our costs. Consequently, our earnings came under significant pressure, declining by about 8% year on year. Despite this, our gross margin developed positively. The increasing share of software and services kept material costs in check, allowing us to close the year with a record high gross margin of 18.1%. However, this was offset by a disproportionate rise in personnel costs, other operating expenses and depreciation. We continue to invest in Bechtle's future, and these costs could only be avoided if we were to question the company's long-term viability. And that is an option that, from a business perspective, is purely rhetorical. Moreover, as mentioned earlier, the 7.6% increase in personnel costs is not excessive in itself. However, in the context of declining revenue, it is simply too high to sustain our earnings at previous levels. Let's now take a closer look at the development of EBIT over the course of the year. Once again, we observe a slight improvement towards the end of the year, driven by two key factors. Stronger top-line growth in Q4 allowed us to better offset costs compared to previous quarters, As a result, our contribution margin, an important internal metric for operational management, also showed positive development in Q4. And secondly, other operating income was 3 million higher than the previous year. primarily due to increased marketing subsidies from our manufacturing partners. As we had communicated earlier in the year, bonus payments in 2024 were more back-end loaded, if you want to put it like that, meaning they were received predominantly in the later months. This was largely a consequence of the subdued growth momentum throughout the year. We maintain strict cost discipline throughout 2024, and this focus will remain unchanged in 2025. However, as I mentioned earlier, there is always a trade-off between cost savings and ensuring bechtless long-term viability. And with that, ladies and gentlemen, we conclude our review of the key financial figures. Finally, I would add and turn to the operating cash flow. And the operating cash flow is a true bright spot for the year. Cash flow from operating activities reached a new all-time high of 558 million in the reported year. That is nearly 100 million more than the already exceptional previous year. And the free cash flow also hit a record level at 377 million. While this strong performance is, to some extent, a mathematical consequence of subdued business activity, It also reflects the success of our ongoing efforts to optimize cash flow and working capital while actively managing key financial drivers. Throughout our day-to-day operations, we have consistently kept cash management in focus and, as the results show, with great success. A look at our cash flow at the equity ratio and debt position makes one thing very clear, ladies and gentlemen. Bechtle is a financially robust company. Despite the current challenges, we are well positioned to emerge, as I'm convinced from this period, even stronger. With that, let's turn to the development of our workforce. As of 31st December 2024, Bechtle employed 15,801 persons. That's an increase of 642 employees or 4.2% compared to the previous year. Acquisitions accounted for 381 of the new colleagues, representing nearly 60% of the total increase. This means that purely organic growth in our workforce was a modest 1.7%. As I mentioned earlier, we are keeping a close eye on costs. Our cautious approach to hiring is a deliberate business decision to ensure we do not overextend on personnel expenses during a period of significant economic uncertainty while still safeguarding Bechtle's long-term viability. That is why we continue to invest in training. At year end, 883 young professionals were undergoing training at Bechtle, keeping our training rate in Germany almost stable at 7%. Let us now turn to shareholder profit sharing.

Ladies and gentlemen, you all know very well that we have a clear guiding principle in our dividend policy. It should be reliable and sustainable. That is why we have been paying a dividend every year without interruption since the IPO, which, as you've just heard, will celebrate its 25th anniversary this year. The dividend has never been lower than in the previous year. Either it was stable or we increased it. These considerations also guided us in our dividend proposals for the 2024 financial year. As you may have already gathered from this morning's press release, the management's proposal to the annual general meeting is to make a payment of 70 cents per share. This means that we are maintaining the previous year's levels. Hi, the conditions for this decisions are anything but ideal. Our after-tax earnings, which are the mathematical basis for the dividend distribution, fell by 7.5%. So for the first time in a long while, fiscal year 2024 was not yet another record year for Bechtle. But we want to send a clear signal to our shareholders and the capital market with a stable dividend. First, Bechtle can be relied on. In 24 years, there has never been a decline in the dividend payout, and this will not be the case for 2024 either. our financial strength and high liquidity give us the necessary backing to do so. And secondly, we believe in Bechtle and in our successful business model. That is why the dividend distribution is also a clear sign of confidence in our future development. At almost 36%, the payout ratio is well above the previous year's level and also above our target of distributing about one-third of our earnings after tax to our shareholders. And now, as I've mentioned before, for some additional news that go beyond the figures but are of great strategic relevance for our company. These latest news concern three very important fields for us. First of all, our multi-channel strategy and with that the associated reorganization of the executive board. Second, the successes in business with public sector clients and third, our social commitment with the Bechtle Foundation which we established last year. Let's start with the reorg of the management responsibility within the executive board. As of January 2025, we are bundling responsibility for all distribution channels in the national markets at the executive board level with a single point of contact for each market. This allows us to focus clearly on expanding our multi-channel offering in all markets and on further internationalization. The aim is to implement a holistic market strategy and to provide customers with optimal demand-oriented services across all channels. That is why we call it internally Opti-Channel. Michael Gusselbauer, as COO, is responsible for the business in Germany and Austria, as well as for all of the Bechtle Group's specialists. My colleague, Konstantin Ebert, as COO, is responsible for all other national markets in which Bechtle is active with its own companies. This consistent multi-channel approach should not only further strengthen customer loyalty and improve market penetration, but also have a positive economic impact by increasing process efficiency at the back end. This is a step that we are initially taking internally, as I've said before. However, From next year onwards, we will also report externally using this modified country-specific segment logic. Let's take a look at our business with public sector clients. Even though we have pointed out that public clients are currently rather reluctant to invest in IT, this does not mean that there is a standstill in this field. There are many very interesting tenders on the market. And for our future business, it is extremely important for us that we continue to be present and successful here, particularly in the area of cloud services. There's a certain backlog in the public sector in many areas. This makes it all the more important for us to position ourselves clearly here. We are the perfect partner that navigates customers towards a functioning multi-cloud infrastructure. And as you can see from the two news shown here, we do this both nationally and more and more internationally. And even if the call-offs from existing and newly acquired framework agreements are not yet at the expected level, the potential for the future is promising indeed. And our last announcement is also future-oriented. It concerns an initiative of our newly founded Bechtle Foundation. With female upgrade, our Bechtle Foundation, which we founded in June 2024, is launching the first scholarship program for the long-term support and advancement of girls and women in the IT environment. The programme is aimed at schoolgirls, apprentices and female students, as well as young professionals, managers and experts. It especially supports current and future female IT employees in different phases of life and career, a truly unique approach in our sector. We focus here on measures ranging from vocational orientation all the way to career management, and this includes network events, cross-generational mentoring, practical training, all the way to financial support where required. The aim is to attract more girls and women to a career in IT. to support them for up to 15 years on their way to specialist and management positions and to support them in their future development once they are there. And incidentally, we work very closely with the foundation of our anchor shareholder, the Gerhard and Ilse Schick Foundation. Ladies and gentlemen, this brings us to the outlook for the 2025 financial year. Well, Quite frankly, and I've mentioned this in plenty of discussion, it has never been harder for me to talk about our prospects than it is right now. Not because I don't believe in Bechler. Far from it. I'm still firmly convinced that our company will be successful as well as our business model. But likewise, I'm a big fan of reliability. And let's be honest. Who can reliably make a forecast about how the next nine months will pan out? The range of possible scenarios is immense and was never wider. We all have extremely limited visibility. However, one thing is clear in my view. We are currently seeing mostly an economic problem. Structurally, the IT market continues to be a high growth and therefore attractive market for the future. And Bechtle is very well positioned in this market as a forward-looking IT partner for its customers. Nevertheless, we are somewhat cautious in our estimates for the current year. We should not expect any revival, if at all, before the back end of the year. The first half will still be heavily constrained by the overall conditions. But despite the current economic uncertainties, we have to invest into the future orientation of Bechtle. be it in the form of consistent IT investment in our own platforms or else by courageous M&A activities and follow-up adaptations of our management organization. The macroeconomic uncertainties shape our outlook for 2025 decisively, and these uncertainties have even increased in recent weeks, as we all know too well, in the year of geopolitical developments. In this respect, we should actually have to broaden the range of our expectations even further. There are opportunities in 2025, but also very, very high risks. And currently we see no reason for euphoria. That holds particularly true for the first half of the year. None of the political announcements is specific, not even the most recent ones. Much remains vague and uncertain. So that is why we cannot issue any other guidance than we have already communicated in the annual report and in the press release. So summing up, that means we want to increase the business volume slightly. We expect revenue to develop below the business volume due to the continued positive software business. The EBT could decline by up to 5%, but there are also opportunities for a correspondingly positive development. However, only at the back end of the year. We see the EBT margin in the best case at around the previous year's level. So much, ladies and gentlemen, for development in 2024 and the outlook for the rest of 2025. So thank you very much for your attention, and I'm happy to take your questions now.