Kion Group Ag Unsp/Adr

Ladies and gentlemen, welcome to the Key On Group Q3 2024 update call. Today's presenter will be Rob Smith, CEO of Key On Group, and Christian Horn, CFO of Key On Group. I'm Sandra, the chorus call operator. I would like to remind you that all participants have been listened only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one in your telephone. please limit yourself to two questions only. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rob Smith, CEO of Keon Group. Please go ahead, sir.

Thank you very much, Sandra. Good afternoon, ladies and gentlemen. Welcome to our update call on our third quarter results in 24. And I refer you to our IR website for the presentation that's online. I'm going to start with a summary on the third quarter and give you a short update on our business. And then Christian will take you through our detailed Q3 financials and our outlook for the full year, which we've not only confirmed this morning, but we once again narrowed the guidance ranges following the good performance in the first nine months and our view on this final fourth quarter of the year. After Christian, I'll take you through our key takeaways. and then we'll go into our questions and answers. Let's start together on page three. Group order intake at 2.4 billion euros reflected seasonal softness at ITS and the ongoing customer hesitation to sign new contracts as well as tough comps in our Domatic business. We had another good quarter with revenues at 2.8 billion euros. and adjusted EBIT at €220 million remained at the high level of the prior quarter, with the adjusted EBIT margin increasing sequentially to 8.1%. This improvement was driven by the higher margin in our SCS business and lower corporate expenses, which more than compensated for the mixed-driven lower margin in our ITS segment. In a year-on-year comparison, both adjusted EBIT and the corresponding adjusted EBIT margin were only slightly down compared to the strong prior year levels. Despite various crises worldwide, material availability continued to be good in the supply chain, and we diligently monitor and track the situation of our suppliers and their supply chains, giving us an opportunity and the ability to initiate mitigating measures early and as necessary. Free cash flow in the quarter was a positive 229 million euros, driven by good EBIT and a slight improvement in net working capital. And earnings per share were 55 euro cents. The year-on-year decline, despite a nearly unchanged adjusted EBIT, resulted from higher net financial and tax expenses with an adverse impact on net income. Let's look at some business highlights and business developments on page four. We've recently opened our Center of Excellence for Automation in Antwerp, Belgium, which is now our primary R&D hub for automated solutions in EMEA. The new center features a modern standards of sustainable design and brings our Keyon brands, Linda Material Handling, Stihl, and Domatic, all together under one roof. The mission of our team is to deliver intelligent, driverless, and interoperable robotic products, solutions, and services that are easy to deploy, easy to operate, easy to maintain and support throughout their lifecycle. Automation plays a key role in our industry, and I'm very excited about this new center that allows us to respond to market needs and deliver automation projects faster, more innovatively, and cost-effectively. Following our longstanding cooperation with pallet shuttle maker Eurofork, we've entered into a strategic partnership this past quarter, which enhances our solution portfolio with automated high-density cubic storage and retrieval solutions for pallets. Automated shuttles independently on rail systems through the racks and transport palletized goods to the picking station, allowing high-density storage while offering a high degree of flexibility with high throughput rates, and high levels of operational safety. And finally, Keon Group is funding an endowed professorship for safe autonomous systems at the Technical University of Dortmund. The endowed professorship will complement Keon's group internal research and development activities in the exciting fields of artificial intelligence and machine learning. And it underlines our pioneering role in one of the most promising technological fields for the future. I'll hand now to Christian, and he'll take you through our Q3 financials and the outlook for 2024. Christian?

Thank you, Rob. So let's go now to slide six for the key financials for the IDS segment. Order intake of roughly 52,000 units reflects the seasonal softness typical of the third quarter as two out of the three months affected by the summer holidays. APEC and GAS 3.1 warehouse equipment continue to increase their share in the mix. New orders in money terms increased by 2% year-on-year and showed a less pronounced seasonal decline than the unit orders, mainly driven by the continued growth in the resilient service business. Overall, we continue to make progress in reducing lead times, leading to a normalizing of the order book, which now supports approximately five months of new business revenue. Margin quality of the order book reflects the ongoing shift in new orders towards APEC and smaller warehouse equipment over the past recent quarters. Revenue at nearly 2 billion euros reflected a 4% decline in the new trucks business, partially offset by a 2% growth in the service business. It may be worth noting that the service share reached 50% of the revenues in the quarter, demonstrating the important contribution of the service business to the resilience of our business model. Adjusted EBIT at 202 million euros reflects the seasonal softness and the higher share of EPEC and warehouse equipment, compared to previous quarters. At 10.1%, the adjusted EBIT margin remained in the double-digit territory. I will now continue on page seven, which summarizes the key financials for SCS. Overall, order intake continues to be impacted by the customer's ongoing hesitation to sign new contracts due to macro and political uncertainty and expectations on further interest cuts. Accordingly, business solutions orders were 49% compared to the prior year quarter, which, you may recall, was boosted by a 300 million euro big ticket order. Adjusted for this, business solutions orders remained stable. The service business grew at 16%, and like in ITS, continues to demonstrate the resilience in our business model. Activity from the pure play e-commerce vertical was comparable to the first quarter, with a share of 30% in the quarter. The decline in the order book reflects further progress in completing the legacy projects as well as the substitute order intake over the past quarters. Overall, revenue remained close to prior year level and prior quarter level. The service business continued to grow strongly at 23% year over year, while the project business declined as expected by 15% reflecting the lower order intake and the higher share of orders with long lead times throughout last year. We continue to make good progress in working through the legacy projects. The adjusted EBIT at 28 million euros and the adjusted EBIT margin at 4% reflects this in the higher share of services as well as the initial benefits from measures to streamline our cost base in the SGS segment. Now on page A, let me quickly run through the key financials for the group. Order intake reflects the seasonal softness in ITS and the continuous customer hesitation to sign new contracts in SCS. Additionally, SCS had tough comps due to the big-ticket order that I referred to in the prior year quarter. The order book reflects the normalization in ITS and subdued demand in past quarters in SCS. Revenue benefited from the growth in the resilient service businesses in both segments, thus mitigating the software ITS new truck business and the lower STS business solutions revenue. Adjusted EBIT at 220 million euro and the adjusted EBIT margin at 8.1% remained very close to the strong prior year levels. This was supported by the low corporate services and consolidation line, which was impacted by costs shifting into the fourth quarter of this year. Overall, the services and consolidation line remains within our implied guidance range. Page 9 shows the reconciliation from the adjusted EBITDA to group net income. Depreciation and amortization followed the usual quarterly pattern. Non-recurring items amounted to minus 4 million euros. Due to the postponement of a sale of a building in ITS, we have increased our full year indication for non-recurring items to minus 20 to minus 25 million euros from minus 10 to minus 20 million euros before. PPA are back to the usual quarterly levels as indicated. The sequential increase in the net financial expenses was almost entirely attributable to the fair value of interest derivatives, which reacted to the recent changes in interest rate and is not cash effective. This effect has led us to increase our full year indication for net financial expenses to minus 180 to minus 200 million from before minus 170 to minus 190 million euro. This resulted in pre-tax earnings of 131 million euros in the quarter. Tax rate in the quarter was negatively affected by tax expenses relating to former years. Excluding this, the tax rate would have been comparable to the level seen in the prior quarter. We have therefore increased our full year 2024 effective tax rate indication to 32% to 36% from before 30% to 35%. As always, you will find a slide on the housekeeping items in the appendix of this presentation. The net income attributable to shareholders amounted to €72 million in the quarter, corresponding to earnings per share of 55 euro cents. Let's now continue with the free cash flow on page 10. Free cash flow in the quarter reached positive 229 million euros due to the strong EBIT and some improvement in networking capital, which was mainly driven by the favorable development in trade receivables and the increase in contract liabilities and partially offset by decrease in trade payables. The positive free cash flow led to 163 million Euro degrees in net debt, as shown on the next page. The next slide, slide 11, shows now the development of net financial debt and our leverage ratios. As mentioned on the previous slide, the positive free cash flow led to 163 million Euro degrees in net debt. The leverage ratio across all debt definitions improved by 0.1 times. This also holds true for the leverage ratio in industrial net debt, despite the sequential increase in net pension liabilities resulting from a lower discount rate. Our leverage ratios peaked late 2022 and are now back to the level last seen post our December 2020 capital increase. We achieved this entirely through self-help measures. We continue to remain committed to improving leverage matrix versa to defend our two investment grade ratings as we believe they are supportive to our business model. So slide 13 lays out our guidance. The good performance in the first nine months of 2024 and our recent order intake development and our view on the remaining quarter of this leads us to once again narrow our guidance range for the full year. For ITS, we have lowered the upper end of the revenue guidance range by €100 million, as the recent order intake has a minor impact on our revenue expectations for this year. For adjusted EBIT, we have also lowered the upper end of the guidance range by €10 million, taking into account the continued increase in the APEC and small warehouse equipment share in the order intake in recent quarters. This has marginally reduced the midpoint of our revenue and adjusted EBIT guidance range for ITS. We still see some uncertainties in the mix in the order intake and the revenue in the fourth quarter, as well as possible impacts from current wage negotiations in the General Metalworking Union. We expect, though, to remain at the double-digit adjusted EBIT margin across the second half of the year at the midpoint of our guidance range. For STS, we have increased the lower end of the revenue guidance range by 100 million euros due to the year-to-date revenue development. Based on the achieved results in the first three quarters, we have again increased the bottom end of the adjusted EBIT guidance range by 20 million euros. This increases the midpoint of the SCS revenue guidance by 50 million euros and the SCS adjusted EBIT guidance by 10 million euros. For Kion Group, this results in a narrowed guidance range for revenue between 11.4 and 11.6 billion euros and for adjusted EBIT between 850 and 910 million euros. The correspondent narrow guidance range for free cash flow is now between 570 and 650 million euros and the narrowed ROSI guidance range between 8.1 and 8.7 percent. With that, I hand it back to Rob for our key takeaways.