Kion Group Ag Unsp/Adr

A wonderful good afternoon, ladies and gentlemen. Welcome to the Keon Group's Q2 2024 update call. Today's presenter will be Rob Smith, CEO of Keon Group, and Christian Harm, CFO of Keon Group. My name is Francie, the course call operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for question at any time by pressing star and one. Please limit yourself to two questions only. For operator assistant, please press star and zero. At this time, it is my pleasure to hand over to Rob Smith, CEO of PeelCo. Please go ahead.

Thank you, Francie. Good afternoon, ladies and gentlemen, and welcome to our update call on our second quarter results. please refer to our presentation on the IR website for the call. I shall start off with a quick summary on the second quarter results, and I'll give you a business update, and then Christian's going to take you through our detailed financials and our outlook for 2024, which we've not only confirmed today, but we've also narrowed the guidance ranges following a good performance in the first half and our updated views on the market. Then I'll come back and take you through the the takeaways and we'll move into the questions and answers. So let's start together on page 3. Group order intake was 2.6 billion euros and reflects a seasonal improvement in the ITS segment and the ongoing lumpiness in the SCS segment. Tian had another solid quarter with revenues at 2.9 billion euros and our adjusted EBIT at 220 million euros and the adjusted EBIT margin at 7.7%, both increased year on year, driven by improvements in both of our operating segments. Both segments continue to benefit from our measures to improve operational and commercial agility. Material availability continued to be strong, and we monitor diligently and track the situation of our suppliers and their supply chains, allowing us to put mitigation actions in place in good time. Free cash flow came in at 137 million euros positive, driven by the improved adjusted EBIT and an almost stable networking capital. And earnings per share were 52 euro cents from 54 euro cents in the second quarter of last year. Let me give you some insights into our latest business developments on slide four. I'm proud to report that for the 12th time, our brand Stihl has won one of the coveted awards, the IFO Award. Many of you know this is the International Intralogistics and Forklift Truck of the Year Award. And Stihl once again impressed the international jury with its EXV Aigo automated pallet truck, winning first place in the mobile robot category. Stihl's EXV Aigo is... Still's first automated vehicle to be produced in series production at industrial scale and based on a thoroughly modular concept. The central idea is fast availability and maximum scalability for our customer solutions. Thanks to the industrialized production and modular system parameters, our EXV-IGO is quick to be put into operation using our commissioning software, IGOeasy. Service and maintenance are also fast and flexible thanks to our new digital service concept allowing our service technicians to access the machine's digital twin for each of our individual vehicles for diagnosis and troubleshooting even before getting on site. Another innovation this quarter is Dometic's launch of the noise reduction portfolio with comprehensive solutions that cure our customers' noise problems in their operations. Our portfolio reduces noise at source by up to 15 decibels, creating a quieter work environment that supports employee productivity, employee safety, and overall well-being. Furthermore, only Domatic uses 3D noise mapping audits across our customers' facilities to pinpoint noise and measure sound levels before and after the retrofit so our customers can feel, hear, and see the differences. Another highlight in the quarter was on the sustainability front, where Keyon Group was named one of Europe's climate leaders in 2024 by the Financial Times in cooperation with Statistica. We're proud to be recognized for our sustainability efforts and our commitment to reducing our emissions intensity. Christian is now going to take you through the detailed Q2 financials and our outlook for 2024. Christian?

Thank you, Rob. So let's go to slide 6 for the key financials of the ITS segment. Order intake of nearly 64,000 units was both up sequentially and compared to prior year level. In money terms, new orders declined slightly due to a higher share of APEC and Class 3.1 warehouse equipment in the new business mix, despite a 3% growth in the service business. Overall, the order book remained at a robust level and supports approximately six months of new business revenue. Margin resilience of the order book remains solid despite a mixed skew toward APEC and warehouse equipment in the recent quarters. Revenue at nearly 2.2 billion euros remained on high levels driven by a 3% growth in services. Adjusted EBIT remained at the healthy level of €231 million and continued to benefit from the high production levels and the 2022 price increases. As expected, the adjusted EBIT margin at 10.7% remained in the double digit, but declined slightly sequentially, reflecting a higher share of EPIC and warehouse equipment compared to the first quarter. I continue now on page 7, which summarizes the key financials of SCS. Overall, order intake continues to remain lumpy and is impacted by customers' hesitancy to sign new contracts due to macro uncertainty and postponed expectations and interest rate cuts. Accordingly, business solutions orders were down 27% compared to the prior year quarter. Service orders were down 16% due to the record level booked in the prior year quarter. You may recall that in the first quarter we talked about approximately 100 million euros of expected orders slipping into later quarters. About two-thirds of the spilled over projects from the first quarter were signed in the second quarter. This quarter we once again saw good activity from the PurePlay e-commerce vertical with a share of 61%. As mentioned in the last two update calls, the order book as of the 1st of January 2024 was adjusted due to a change in the presentation of the customer services business that we have aligned to the methodology applied in ITS. The slide which explains and quantifies this change is again included in the appendix of this presentation. Overall, revenue remained close to prior year and prior quarter levels. The service business continued to grow at 11% year over year while the project business declined by 3% as expected, reflecting the lower order intake and the higher share of orders with longer lead times throughout last year. We continue to make further progress in working through the legacy projects. The adjusted EBIT at 24 million euros and the adjusted EBIT margin at 3.2% reflects this and the higher share of service business in the revenue and is in line with our view of a better second half of the year. Let's now quickly run through the key financials for the group on page 8. Order intake reflects the seasonal recovery in ITS and the continued lumpiness in STS. The order book includes the change in the presentation of the service business in STS and continues to provide good workload for the next quarters. Revenue benefited from the solid ITS new trucks business and the resilient service business in both segments, which more than compensated for the slightly softer SCS business solutions revenue. Key and Group improved the adjusted EBIT and the adjusted EBIT margin year over year, driven by both operating segments. Page 9 now shows the reconciliation from the adjusted EBITDA to Group Net Income. Depreciation and amortization followed the usual quarterly pattern. Non-recurring items of minus 14 million euros mainly include the conclusion of a multi-year legal dispute related to an acquisition that DEMATIC undertook in 2015, which was before QM Group acquired DEMATIC. Nevertheless, our full year expectation for NRI remains unchanged at minus 10 to minus 20 million euros as we had positive NRIs from the release of some provisions in the first quarter of this year. PBA items in the quarter included a €22 million goodwill impairment for Kion ITS Americas, which we had pre-announced on July 10th. This was driven by the stronger than expected decline in the Americas market in the first quarter. With the impairment, we have ridden off the entire goodwill related to Kion ITS Americas, which stemmed from the foundation of Kion Group back in 2006 or 2007, when the industrial truck business of Linde AG was sold to private equity. The increase in the adjusted EBIT was more than offset by the two described effects in NRI and PBA, resulting in pre-tax earnings of 118 million euros in the quarter. The tax rate in the quarter was negatively affected by the non-tax deductible goodwill impairment. Excluding this, the tax rate would have amounted to approximately 34%, We have therefore increased our full year 2024 effective tax rate indication to 30 to 35%, from previously 29 to 34%. As always, you'll find a slide on the housekeeping items in the appendix of this presentation. Net income attributable to shareholders amounted to 68 million euros in the quarter, corresponding to earnings per share of 52 euro cents. Let's now continue with the free cash flow statement on page 10. Free cash flow in the quarter reached positive €137 million due to the strong improvement in adjusted EBIT and an almost unchanged net working capital. The triple-digit free cash flow was achieved despite high tax payments of €120 million relating to the improved financial performance in the fiscal year 2023 and high tax prepayments for fiscal 2024. The positive free cash flow did not lead to a decrease in net debt, mainly due to the dividend payment of 92 million euros in June and the complete unwinding of unbalanced sheet factoring. Page 11 shows the development of net financial debt and our leverage ratios. As mentioned on the previous slide, the positive free cash flow did not lead to a decrease in net debt, mainly due to the payment of the dividend and the completed unwinding of unbalanced sheet factoring. In fact, net debt at the end of June 2024 increased by 51 million euros compared to the end of March 2024. Accordingly, the leverage ratio in industrial net operating debt increased slightly, quarter and quarter, by 0.1 to 1.5 times, despite a further improvement in the last 12 months EBITDA. Due to the lower net pension liabilities, the leverage ratio in industrial net debt remains sequentially stable at 1.8 times. We remain committed to improve leverage metrics further to defend our two investment grid ratings as we believe they are supportive to our business model. Slide 13 lays out our updated 2024 view on our respective markets. For the industrial truck market, we now expect orders in units to remain on the prior year level. While we continue to expect growth in the APEC region, the Americas region is showing a stronger decline than previously expected. EMEA is now expected to remain flat compared to our earlier view of slight growth. In the supply chain solutions market, we now expect revenues in 2024 to decline slightly due to ongoing microeconomic uncertainties. We originally expected the market to grow slightly this year. Slide 14 lays out our guidance. The good performance in the first half of 2024 and our updated view on our markets lead us to narrow our guidance ranges for the full year. For ITS, we have taken down the upper end of the revenue guidance range by 300 million euros based on our updated view on the industrial truck market and the recent order intake development. For adjusted EBIT, we have narrowed the guidance range by 20 million euros in each direction, taking into account both the solid performance of the first half 2024 as well as the reduced upper end of the revenue guidance. You can see that we are guiding towards a lower second half of the year profitability in ITS, as already indicated in the quarter one update call. Given our recent order intake pattern, it would not be advisable to extrapolate the first half of the year adjusted EBIT margin for the remainder of the year. In addition, certain cost increases, especially with regards to labor, will start being effective only in the course of the year. We expect to remain above the 10% adjusted EBIT margin mark across the second half of this year. For STS, we have increased the lower end of the revenue guidance range by 100 million euros due to the revenue development in the first half of this year. Our updated view on the supply chain solutions market has not impacted our revenue expectation for this year. Based on the achieved result of the first half, we have also increased the bottom end of the adjusted EBIT guidance range by 20 million euros. For QIUM Group, this results in a narrowed guidance range for revenue in 11.3 and 11.7 billion euros and for adjusted EBIT between 830 and 920 million euros. The corresponding narrowed ROSI guidance range is now between 7.7% and 8.7%. The guidance range for free cash flow remains unchanged. Now I hand back to Rob for our key takeaways.