Aalberts N.V. (AALB) Earnings Call Transcript & Summary

Welcome, people in the room and people joining our webcast. The agenda for today is that we go through our full year results. But also we want to touch a little bit about Aalberts first. So Aalberts is -- Aalberts, actually what is very important is the first sentence. And it is that you will find Aalberts where technology really matters and where we can really make progress. It sounds like a simple sentence, but there's a lot in it because everywhere where we can make an innovation or can really make progress, humanly, environmentally or financially, we want to be there in our selective end markets. The essential thing of ours is that we engineer mission-critical technologies for several selected industries, combined with a culture where good is never good enough and also where we continue to try to exchange knowledge because greatness is made of shared knowledge. Continuously, we are pursuing that excellence. Our way of value creation is based on these 3 pillars, so that we strive for leading niche technology positions, high entry barriers in our markets, pricing power and also high added-value margins and sustainable profitable growth, continuously looking for uniqueness. Good is never good enough. Operational excellence, a continuous driver of results and our success, continuously working on improving our EBITA margins. Focusing on cash conversion and allocate our capital on the best disciplined way where we can get the highest returns. Greatness is made of shared knowledge, continuously technology exchange, innovation speed, fast learning and adaptation to the market changes because there's a lot of change at the moment in the world, and I think our business model is very, very suitable for that. The Aalberts' playbook. We look to how can we create a compelling competitive advantage. What are the growth drivers? So every time trying to leverage operationally our companies but also our businesses and look for margin expansion. When we look for margin expansion, we continually strive for better cash flow, for a better margin and also the investments we do, we try to do in a disciplined way there where we can allocate our money the best. It means also that you have continuously optimize your portfolio, which is a continuing process. And by doing that, you create long-term shareholder value. Compounding returns, investing the money where you have the highest returns, and that's a continuous long-term process. Our track record on this, we do that already 40 years of sustainable profitable growth. You can see what is the Aalberts' playbook, a proven, sustainable business model. Our shareholder value creation, where you can see the share price over the years and also the earnings per share, dividend per share and also the long-term shareholders. Nice to mention, and we also did that in December, is that our long-term shareholders, more than 3% holdings is more than 50% of our shareholder base. Our relentless pursuit for excellence drives true shareholder value. It's not that you run a company on a quarter, it's not that you run a company on a half year, it's a long-term strategy, which we have to pursue. And that's what we do. Our key strengths are our people, mission-critical people. The Aalberts way, winning with people, is the biggest asset we have. Being an entrepreneur, take ownership, go for excellence, share and learn, act with integrity, winning with people. Our strategic objectives, as again explained, how we want to reach them in December last year, are here also presented. Important is that these financial objectives are presented in 2017 before the IFRS 16. So to be very clear, it's before IFRS 16. So also when you look to return on capital or the other objectives is before IFRS 16. Innovation is driving our organic growth. Innovation takes time. Innovation is very important to create uniqueness in your markets. The moment you don't innovate, the moment you don't invest anymore in your markets, you can better step out. So innovation for us is a key thing to become mission-critical, but also to create the unique market positions, where you have pricing power. So we will continue with doing that. The situation now is that more than 4% of our total revenue is invested in R&D, which is more than EUR 120 million. I think when we look 4, 5 years ago, it was roughly between 2% and 3% or close to 3%. Mega trends are shaping our future. Rapid urbanization, climate change and also Internet of Things are very important for the future markets because these markets will also adapt these kind of trends, as also presented during our Capital Markets Day. There are 2 things which are very important to be successful in these changes, which in our opinion is, globalization and co-development and connectivity and integration. So we have to adapt our organization and company to these 2 very important drivers for growth. We made choices, the last years, to focus ourselves on 5, you could say, niche technologies and 4 selective end markets, embracing the SDGs, sustainable development goals, which we support. By doing that, we see more and more an Aalberts growing to less activities, and we also want to allocate the capital to these lesser activities, achieving unique market position with sustainable impact. The highlights of 2019. We reached a revenue, which was 3% higher than last year, of EUR 2.8 billion. Very important. And also, my colleague will come back to that, is our added value stays roughly in the same base as '18 despite lower activity in, especially material technology. As you probably know, we have a high added value. Organically, we were still able to grow despite more difficult market circumstances. As I also said last year, especially after summer is that also Aalberts is not immune for the developments in certain markets. Also, we have to send an invoice to our customer. And in the end, when a customer has lesser volume, we will also see that in certain businesses. Despite we were able, in our opinion, to deliver a solid and resilient performance in a more difficult market. Operating profit was EUR 363 million with a margin of 12.8%. Net profit, EUR 267.4 million with an earnings per share of EUR 2.42, where it's important that only the tax rate and the IFRS impact was already EUR 0.05 compared to '18, where we also see the operating profit where we had not the benefit of '18 of roughly 10.6%, then you could say that operationally, the company did better than '18. In the CapEx, I think it's very important to notice that roughly EUR 10 million or EUR 15 million of the CapEx of material technology was used to replace the equipment because of the fire. So when you get a real picture, you should also look really like-for-like. The return on capital before IFRS is 15.1%. And of course, it is affected by a lower performance of our existing business, especially material technology, and of course, a higher capital employed because we did also 2 acquisitions via our goodwill. But don't forget that material technology business will come back. Because also, we had this period on a slightly different way in the past, and we have a strong position, and we think this business will recover gradually during this year. Operational development. And it's a nice sheet because it gives the total overview of, let's say, all the segments, what has really happened within Aalberts. You could say, and that's only important for the background, that when you look to the right side of the sheet, to the market, that 44% of the business of Aalberts was, in some way, affected by the situation in the market environment. Eco-friendly buildings was not affected, it was very good level. But the other markets, industrial niches but also sustainable transportation but also semicon efficiency faced all inventory reductions. They faced all postponement of orders. They faced all uncertainty. Do not forget that the fantastic market of semicon efficiency, we had a few years where we grew almost 20%. And last year, we also grew, but it was roughly 4%. And of course, it's still not so bad, but it's less than 20%. So in the eco-friendly buildings market, we saw a nice growth also in climate, also in industrial technology, despite the developments, which were also taking place in that market. I must say, and that's also what I tried to say at midyear, most of the growth were driven by own initiatives. New products, better sales because also in certain markets in installation technology, America, we also saw a softening after the summer, which we did not expect as it came. Organic revenue declined in material technology in Europe. As I said already, market uncertainty, postponement of orders, inventory reduction, important is that it also stabilized after a certain period. So we see now a stabilized situation in that business. We initiated efficiency and restructuring actions, additional cost we made roughly, but also my colleague will guide a little bit more, we made roughly EUR 3 million, maybe a little bit more a little bit less, of restructuring costs in material technology, which is included in the bridge. And North America and aerospace did very well. So they compensated partly the downturn we faced in Europe, which was mainly in Germany and France, but also in Benelux, and it has to do with the uncertainty in the markets, people reduced their inventories, postponed ordering but there's in the end, also inventory reduction and postponement, you cannot do forever. We reached a solid and resilient EBITDA performance. It showed, therefore, a mixed picture. 3 business segments, we were able to grow organically in EBIT, and our European service technology activity, we saw an organic EBIT decline. As said, more in Europe, partly compensated in service technology in the U.S. and with our aerospace activities. The less incidental benefits compared to '18 was a difference of roughly EUR 10.5 million compared to the EBIT of '18. As always, we have a roughly holding correction between EUR 10 million and EUR 12 million. Last year we had EUR 0, now we have, again, a small, EUR 12 million. CapEx increased to EUR 148 million. You should include here or exclude, however you want to calculate, the EUR 10 million to EUR 15 million of fire CapEx related to the equipment, which we installed to replace, and that is then the real number. So roughly EUR 133 million, which we added to that. We facilitated mainly with the CapEx, organic growth and innovations, also a lot of efficiency because that goes mostly hand-in-hand, but also, we launched more than 15 new product lines. Most of them were in climate technology, but also industrial technology. We launched some very nice full flow valves, also other valves, regulators, and in installation technology, we launched some nice connection systems in combination with valves, only to have the right service for a new product line, and there's only one product line in installation technology, which we launched or launched in a bigger way. It costed us or was an investment also of $10 million in stock. So also that is important to know when we look to the financial numbers. In the end, our opinion is that we made a solid and resilient performance in a more difficult market environment, which was actually in the course of the year deteriorated further through uncertainty. I said here in the same room that we expect, for example, that the American industrial markets had a good quote offering, and we expected the second half that when this quotes could become order, it could be a nice half year. What happened in August, we saw a lot of uncertainty through the China and the U.S. trade disputes and a lot of orders were postponed. Okay. We did not see that. And that was also one of the things where you saw that we saw more deterioration than we expected. What we also tried to guide in September, but also during our Capital Markets Day, where we said that we can also have a dip or you have also a market environment, which is maybe less where you are not immune for. When we look to installation technology, we have here a nice example of a new distribution center in Belgium, which we are now -- it's not standing there yet because this is a drawing, but we are expanding in Belgium, a fantastic business we have there. And also there, you see a lot of growth potential. It's just 1 example. So we are actually expanding a lot of buildings at the moment. So it will also mean that this year, we will have a pretty high CapEx, I think, probably in the range of this year -- of last year because we see a lot of growth potential, especially organically. So despite some headwinds, you still have a good future. Installation technology, good organic growth, Europe, America, commercial good level; U.K., America, industrial challenging; U.K., very volatile, building up stocks, reducing stocks, building up stocks, reducing stocks. Why? Don't ask me because the customers ordered, and then they don't order. It has to do something like Brexit. The portfolio we further optimized, we improved the quality of the inventory. And I think we made very big steps also in cash generation with the new management, which we installed in America and the successful launch of innovation in the fresh portfolio and new innovations are coming to be launched this year. We gained several large key accounts, and I must say that we are really positive about the future effects of all these changes we made. I think we get really the business together. A big headache, as I told you many half years and years, was our distribution setup in America, but it's really streamlined. We could now, as we also promised in '19, streamline also the setup, we could reduce inventories and costs because we knew now what the customer need is in which region, and we will, of course, continue that. As said, our American organization streamlined the organization, overhead was reduced, but also we made there additional redundancy costs, which we did, of course, on purpose because we want to improve the business. Our new European assembly and distribution center is constructed. We are now implementing the operational, let's say, phase. We think we have to move equipment around, that we have all the equipment end of first quarter, we really start up second quarter, and hopefully, we have it fully operational in the second half of '20. And as I said, we will integrate roughly 7 to 8 warehouses in that period also to streamline the complete setup in Europe, what we did already in America. Efficiency improvements in the manufacturing, combined with capacity expansion. Especially in 1 specific product line, we really expanded heavily. We can't even fulfill completely the demand. So we had to invest heavily to facilitate the growth in combination with efficiency. As said, U.K., we streamlined the organization because we had a volatile situation. It's also that we want to invest more in our local manufacturing because we really think that U.K.-made is an advantage, but we want to, of course, also to streamline the organization, reduce the cost to be in line with the market developments. And also, we have further plans to optimize the factory in combination with other locations in Europe. Further consolidation, we will initiate the coming periods. Capital allocation in installation technology. We increased the capacity of the fast-growing product lines, combined with higher efficiency. Our European assembly and distribution centers, we -- yes, one is already constructed. The other one we are constructing now in Belgium. Operational excellence and our innovation projects, we spend a lot of money on, and we will continue doing that. And as we already said and as already my colleague, André in het Veld, said in December, we have a huge potential in growth and operational leverage and excellence in this business segment. Material technology. A nice example of new technology we added. It's related to additive manufacturing. It's a specialized thermal processing equipment, which we added in accurate brazing in our company there, a very nice business. And also here, you first have to invest and then you get the revenue. Material technology, organic growth, innovation. The European business deteriorated gradually. We showed that a little bit this summer, but it's really graduated further after summer. I already said what was the reason for that uncertainty, postponement of orders. Also, what you see is that due to the new emission ruling that -- yes, companies, the OEMs, are looking more, what is the right portfolio for their automotive. What we also saw and also what we said in July, there comes maybe a little bit of tick up at the end of the year, we showed this tick up also because the inventory stabilized. So that really happened. But the tick up was at a smaller rate, let's say than we hoped for or expected. But I'm sure it will come, that tick up will come, and we think it will come already during this year probably in the second half, but it's very difficult to predict the speed of this recovery. But one thing is for sure, that business will recover because we have a fantastic position. Last month, our order intake and inventory is already stabilized. But overall, over the year, we faced an organic decline, especially in the second half and mostly in the second half, I should say. Revenue partly compensated, as already said, many new developments in service treatment. It's very good to see. In electrification of vehicles, we have a very, very nice offers, where we are in the process to come to quotes and to start of productions. What you see, in our opinion, is that the automotive industry in Germany is more and more making the new models -- electrical models close to their base. And also shifting production to other countries where we will follow and also precision extrusion in combination with the service treatment did a very nice job. Good progress of the integration of the previous acquisitions, and we acquired PPC and Applied. Important that we also said we should really now leverage also the acquisitions and the business plans, which we made for all these companies and also for North America. So that's also why we were, in December, a little bit more cautious with acquisitions for the coming 3 years because we have so much to gain with our existing business. Eastern Europe performed well and operational excellence and leverage, we took really a lot of actions to reduce the costs already during the year in service locations, but you can only compensate in this business the low volume partly because when you have a furnace or a service treatment line, you still have the energy cost and you still have the personnel expense even when the furnace order service treatment facility is working for 60% or 70%. So you need volume. And then, of course, you can reduce cost, but you can only compensate partly, but a very nice business, as I said, and it will recover. Additional actions to restructure and streamline the overhead in the group structure. We completely streamlined it. We took out a lot of overhead and also based on the merger of the former 2 companies and the acquisition of Impreglon, we took additional steps to do that. In the end still, we made a margin of 12.6%, which I think in these kind of circumstances is actually pretty good when you look what happened in the market. Capital allocation is invested mainly in growth areas, Eastern Europe and America, new technologies additive manufacturing. And again, it's also fire-related CapEx of EUR 10 million to EUR 15 million, let's say, close to EUR 15 million. And of course, we always have your maintenance, and we are looking, also based on what we said in December, to further optimize our service network and footprint because we still have some businesses where we maybe can better say we should divest, but as part of our strategic plan. A solid performance, in our opinion, despite lower order level in Europe. Climate technology, a very nice example, again, of a new digitalized product. It's -- which we also developed, together with our digital hubs in the Netherlands and France, realizing a saving of 30% on energy. Climate technology, good level in all regions, many new product lines. In the end, maybe you could say, maybe even a little bit too many product lines because when you launch a product line, in the beginning, you have a minor sales impact, but you have a lot of costs because you have to manufacture it for the first time, you have to put it on stock. You have service issues, and we had in the beginning of the year '19, really some service issues because we were overwhelmed also with the orders we got, and we didn't have the equipment in time and you -- that is also what manufacturing is. But we solved it towards the end of the year. So we could have reached also there high organic growth when we wouldn't have faced these issues. But that's also part of launching new products. The point is you have to solve it as quick as possible, what we tried to do. Connected products, gaining data, new business models. We are -- it's starting. It's coming more and more, talking to the building owner, how can you reduce the efficiency -- how can you increase the efficiency of your energy use. How can you connect the products so you gain data. It will become a nice business model more and more combined with the products we have. That's what we want to do. We have products. We are a manufacturer. We are an innovator, but you have to combine it with digital models. That is our thinking about the future. Additional costs in sales marketing, as already said, and we have to streamline further also our manufacturing footprint and supply chain in this segment. And there are also possibilities for that also after the transformation to go to 1 cluster in this segment. Capital allocation. We started the construction of the new facility in Almere, where we will have a production plant for one of our product lines because we need to expand in capacity, and we will combine it also with the distribution center, where we will, again, integrate existing centers, which we have in Europe. It will not be 7 or 8, but probably, it will be 4 or 5. And of course, we can also grow there. So it will also be an efficiency improvement in distribution. It will be -- become our new head office of climate technology, of hydronic flow control with a fantastic demonstration center, and we hope it will be ready end of this year. We have to facilitate several product lines, and we optimized the portfolio by divesting the company's stock. We did that in the last quarter, in actually the last month. It is a manufacturing location in Germany, which was a noncore location, but we need further portfolio optimization here because a big part of our business is doing very nicely in high margins and other part is doing low margins, where we think it's also not our core business, but also we think it become better focused on the smaller portfolio, as also already presented last year. Good organic growth, many new product lines, further portfolio optimization is the key thing here. But a nice business. Then industrial technology. We launched a new dispensing bar gun, and we can say now we are almost 2 months in the year '20, it is successful. It's a new bar gun, which we redesigned. It is compatible also with other products, retrofittable. And it looks like a nice success. Industrial technology, organic growth, innovation, semicon efficiency, solid organic growth. A lot of people ask me, semicon will go down? No, it didn't go down for us. Only our growth pace was lower, at a lower level than the years before. But we are ready because we use the time to streamline our organization, we are ready for the next strong ramp-up, which will come in 2020 and 2021, and let's see how it goes after that. Fluid control, market uncertainty, postponement of orders in the industrial area and inventory reductions in the same end markets, as already mentioned. Last month of the year, we saw the inventory reduction stabilize in the order intake, and also for this year, it's still an uncertain situation, but also innovations will bring us further. And I think when the situation stabilize more, especially also in niches, then we also see a recovery here probably during this year. Operational leverage and excellence. We streamlined Advanced Mechatronics, so we took advantage of a little bit lower growth year. Actually, you could say, it's also good that, that maybe sometimes happens because you can really optimize your organization, we are ready for the next ramp up and flow control -- fluid control, we align the cost structure and organization. We did it very thorough, quick. And of course, you have to add on also the full year sales effect of the VAF acquisition. All in all, we made a nice EBIT improvement. We went to 16.7% EBIT, and we had the same capital expenditure. The capital was spent on the new R&D center in Graz, Austria, for our company VENTREX. We further expanded capacity in semicon. We're also looking for a plan now for this year, again, to further expand also this year, for the coming years and our innovations and related manufacturing assembly equipment for our new innovations, therefore, also we spent capital besides the operational excellence initiative. So that is roughly industrial technology where innovation is driving our growth, and we also took advantage of early investment, especially 1 or 2 years ago in our Advanced Mechatronics business, but also in certain fluid control parts. So I give now the word to my colleague, Mr. Monincx.

Thank you, Wim, and welcome, everybody, also from my side, also the people in the webcast. And I want to take you through the revenue bridge that we presented where we explain the improvement of EUR 83 million from '18 to '19 in different items, of course. First of all, the acquisition has caused a positive revenue effect of EUR 78 million. The divestments that we did in 2018 and 2019 caused a negative revenue effect of EUR 59 million. Then the currency impact of -- yes, the translation of foreign exchange, caused an impact of EUR 34.5 million positive this year instead of negative last year. The organic growth of EUR 29.1 million for Aalberts total can be split off, as we've already explained, in 2 parts. Important that we focus on that a big difference because, as said, we faced a stronger organic decline in our European surface technology businesses, causing a negative revenue effect of EUR 21.2 million. And in all the other Aalberts businesses together, we realized an organic revenue growth of EUR 50 million positive. And also in that area, of course, there were markets like already touched, the industrial markets that were not running full speed. At the end, we ended the revenue line with EUR 2.841 billion in 2019. Now the related EBITA bridge from 2018, EUR 365.5 million. Of course, the first step is to make -- to take you back in the memories of the presentation of last year, where we explained that we faced, yes, an incidental benefit of EUR 10.6 million, of which one of the bigger items was, for instance, the property insurance claim that was compensated by the insurance companies to Aalberts and where you make a book profit, so that is really not operational. But that came into our P&L. And that's also the reason why this holding elimination line for full year '18 was certainly around 0 at minus EUR 0.4 million where the first half year was still the normal level of around minus EUR 6 million. I will come back to that later in the segment reporting, to give you also some more, let's say, insight in the half year 1, half year 2 situation. But for the full year comparison, it's very important that everybody understands that this is in our numbers, and that is something that should bring the starting point at a lower level. Now the acquisition's EBITA, the acquisition of '18 and '19, they drove the EBITA with EUR 14.8 million. The divestments of '18 and '19, that caused a negative impact in EBITA of EUR 6.3 million. The currency translation differences for EBITA, EUR 2.8 million positive. And then, again, the organic impact of our revenue in relation to the EBITA, negative for surface technologies Europe, EUR 17.1 million. And part of that -- as a part of that, of course, also some restructuring cost because we took a lot of actions also to adapt to the market situation. So about EUR 3 million of one-off costs is included into that. And on the other side, the organic growth of the other Aalberts businesses together that caused a positive EBITA impact of EUR 13.5 million, which is more than 26% drop-through, which looks quite normal and as expected from our businesses. As we also presented in the Capital Markets Day, how we see that with the future organic growth, what the possible impact will be. At the end, we ended up the year with an EBITA of EUR 362.6 million. The condensed consolidated income statement. First, of course, the revenue line already explained and operating profit. What is not mentioned here, but what I would like to also to stipulate a little bit is the added value that took -- that grew from 62.6% to 62.8%. And that is quite, I think, a good performance because, first of all, maybe you can remember from the first half year figures, we built up, let's say, much more stocks in 2018 than we did in 2019. At the end, we ended '19 with, let's say, EUR 63 million less stock build as we did in '18. So that positive added-value impact of that, we did not have that advantage this year. And secondly, as you know, and also Wim explained, the decline -- the organic revenue decline of surface technologies in Europe is a high-margin business with a very high added value actually in the highest area of our business. So also that decline is going through the added value of Aalberts total. And despite these 2 big effects, the total added value increased with 0.2%, which proves that the portfolio is further improving and getting stronger and also the pricing position of the business that we have with the innovation that we bring to the market is, of course, stimulating that. Now IFRS impact also here, through depreciation for instance, but also for the net finance cost, there we also have an IFRS impact. The income tax expense also already touched, an ETR, going up from 21.4%, as expected because that is also what we guided last year that we expect an ETR of between 24% and 25%, but it was a little bit less than expected, but it went up already to 22.9%, 1.5% in asset also that impacted our EPS with about $0.04, not with about, with exactly $0.04. The non-controlling interest, a little bit higher, and that at the end comes to a net profit before amortization of EUR 267.4 million versus, let's say, EUR 274.9 million last year. EPS asset EUR 2.42 versus EUR 2.49, of which EUR 0.04, the ETR impact and another EUR 0.01 for IFRS. So the total, let's say, operational decline of EPS is $0.02. We believe it's a very solid and resilient performance in a more difficult market environment. The condensed consolidated balance sheet. Yes. There, you see some small change, for instance, in the working capital -- sorry. I'm on the wrong page. The balance sheet, where we see that the equity is remaining strong with 53% and that the net debt is going up quite large with EUR 167 million -- sorry, with EUR 165 million, but a big part of that is IFRS, as already mentioned by Wim. And the net debt excluding the IFRS went up with only EUR 2 million. Despite 2 acquisitions, despite the increased CapEx, that is, of course, also into that number. At the leverage ratio, net debt divided by EBITDA from 1.3 it went up to 1.5, including IFRS. Excluding IFRS, it remained on the same level. Our net working capital increased, but also there, we believe that the balance is much better than last year, and that is also what we already saw in the first half year. We built up much less stocks, which, of course, had a positive impact on the cash. But on the other side, we also received more receivables in the same period. And we paid more to our suppliers. So the net effect of the mutation of working capital is quite small, but the balance, we believe, is much better than last year. Days working capital went up with 1 day at the end. And the big takeaway, I believe, also from this slide is that IFRS 16 has a big impact, mainly on net debt and ROCE, of course, which is a very important KPI for us. The condensed cash flow statement -- consolidated cash flow statement, where we see -- yes, the differences in the working capital, I already mentioned, only EUR 0.9 million, let's say, difference between '18 and '19, but in a very different substance. We paid less income tax than last year because we had to take a conversation within the tax obligation in '18 and '19. So that was an advantage for us in this year. Now the acquisition disposal of subsidiaries is EUR 110 million versus EUR 131 million last year. At the end, the net increase in cash or decrease in cash is EUR 9.5 million. And yes, it's a strong cash flow from ops with a net working capital more in balance, like said. Revenue and CapEx. Now the segment reporting, as you are used to that from our side, and also here, you see, of course, the different developments per segment, again, like already also was taken care of by Wim per segment. I believe that what is interesting to see is that you see that we are really investing in our organic growth plans and the equipment that we need to realize that. And as you, of course, also see a big one, a big plus in material technology, although the market was, of course, lower, but for a big part, about EUR 50 million, that has to do with the replacement of lost equipment from the fires of last year. Total CapEx, EUR 148 million versus EUR 133.9 million last year, an increase of 11%. Operating profit and EBITA margin. Here is the split, you can see the split per, let's say, per segment, where you can see the -- of course, the increase of the 3 segments that are also growing organically and a decrease in material technology. Now that is, I think, what we already have discussed. But what is very important in this overview is the holding elimination line because there, you see what happened last year. We had a EUR 0.4 million full year holding elimination line, where a normal level as we have already -- always guided is between EUR 11 million and EUR 12 million negative because that is the holding cost and some other costs that are booked into that line. And last year, in 2018, the first half year showed a normal picture. And then we had the fires, and we have a lot of incidental topics. And at the end, the full year effect was EUR 0.4 million negative. And that meant that we had about EUR 11 million incidental benefit what was booked in that line. Now for a big part, again, that was done because we had this property insurance return, which caused the book profit. So we had to administrate that in that line. Now if you see going a little bit more into the depth also maybe later for the questions, what impact it has on the second half year, there's also quite a big impact because the first half year, as said, was minus EUR 6.1 million, a normal level. But the second half, of '18, it was booked as a positive of EUR 5.7 million. In this year, we presented already to you, the holding elimination line of the first half year '19 as a minus of EUR 3.9 million because we had some benefit from divestments, the smaller divestment. The full year is minus EUR 11.7 million. So the second half year, correction is minus EUR 7.8 million. The minus EUR 7.8 million in relation to the plus EUR 5.7 million of '18 is a difference of EUR 13.5 million entering in our second half year numbers. So you should take that into account when you look into our performance of '19 and in particular, second half year. At the end, the main takeaway, of course, is that we increased the EBITA margin in 3 segments and that we faced a decline in material technology. Now we have a complete table as also in the press announcement with the adaptation impact of IFRS 16, which is we are also not really happy with it, of course. It's confusing a lot. But at the end, we have to deal with it. So this is the table. And for next year, at least in the comparison, it becomes a little bit more easier. But for EBITDA, it has quite a substantial impact. EBITA, only a little EUR 0.7 million. Now you know the table, of course, big impact in net debt, capital employed and that has impact, again, on the ROCE. So that is what we should take into account analyzing our figures. The dividend proposal, as it was also communicated, we proposed a cash dividend of EUR 0.80 per share, which is a 7% increase. And also there, we believe, we invest a lot in our organic growth plans. And that brings us to the -- it's a nice increase, of course, a 7% increase. And that brings us to the review of the financial objectives 2018, 2022, and that is all presented if applicable before IFRS 16 because that is where we set our goals at, and that is also where we are focusing on. Now the organic revenue growth overview of an average of 5 years, you see that of 2009, and that is then including the 4 years before 2009, '14, including the 4 years before '14, et cetera. And '19, where you see that including the 4 years before '19, we are on an average now of 3%, and our objective is for the full period of '18 to '22, these 5 years, more than 3%. EBITA margin in the same way, let's say, in '19, it was 7%. In 2014, it was 11.2%. In 2019, 12.8%. And there, the objective is, as communicated also many, many times, of course, but also confirmed in the Capital Markets Day, more than 40%. And in the Capital Markets Day, I think we have already shown where we believe the approvals can be made and where we believe how we believe we can realize these goals. ROCE, return on capital employed, also increased over the last years. You see a nice, let's say, trend. Of course, it's not impacted this year when you have a lower performance, that's logic and also, you keep on investing and also acquiring companies. It has impact, but we still see a lot of potential to improve that. We have already announced our divestment program that we will accelerate and that will also support it, but of course, especially the self-help of our internal business, but also the organic growth plans to create more profit for the future. And at the end, we should realize this objective of more than 80% in 2022. Now the free cash flow conversion ratio at this moment, 60.5%. The leverage ratio of 1.3 at the same level of last year and the solvability percentage of over 53%. And that is already above, of course, the goal that we have set. Aalberts accelerates, and we will achieve our strategic objectives, as said in the Capital Markets Day. Wim?

Yes. Aalberts looking forward, I think what you see here is the key takeaways on the next slide. That's what we said in December. So, of course, 3 months later, it's only 3 months later than beginning December, we still have the same key takeaways. We allocate our capital in the most efficient way. We further narrow our focus. So we are very busy with that achieving unique leading market position with sustainable impact, building an even stronger and better Aalberts, accelerate organic revenue growth, so we are doing that. And our goal is to realize an operational leverage drop-through 25% and accelerate the portfolio optimization with the EUR 300 million to EUR 350 million of, let's say, revenue, where we now did the first thing in December, small thing, roughly EUR 20 million. And further focus on clustering and simplification of the organization where we already made a lot of actions the last months -- in the last 6 months. The driver of the EBITA percentage increase is the operational leverage and excellence, mainly and an efficient capital allocation drives the return on capital employed increase to evolve into a stronger and better Aalberts. And of course, when you have a dip or some headwinds during a certain period, it doesn't mean that you also going to change your strategy. We will pursue and be relentless in our execution. Aalberts looking forward in the segments, we try to give you here a little bit guidance about our thoughts. Of course, it's not in numbers. We will not do that in '20, as we do that, not in any year. We give guidance over our strategic objectives on the long term, but installation technologies in technology, many sales, innovation and efficiency initiatives. We did change the management one half year ago. We have strong, put a strong team in. We see the efforts of that also in '19 where we have really better inventory position, much better. We generated much more cash, and we're also improving despite these cash initiatives our margins. We have a great sales force in Europe and America, which gets more and more traction and that all will have a positive effect. We see that every day now, we feel that it's only very difficult to predict when everything comes together more and more. But it is coming together more and more. There's so much to gain here as you also put here in December. Material technology. The European business will recover. Cars will be sold. Machines will be built. Planes will be built, I think, 40,000 in the coming 10 or 15 years. Gentlemen and ladies, this will not stop. So when people are uncertain, look to yourself, you stop investing a little bit. You are a little more careful. But it doesn't mean that the world we're going to stop. It will recover. And let's see. First half, let's see, second half could be a little bit better, and then it will continue. That's our expectation based on our management, but also based on what we learned from the past. In the meantime, we take the initiative to streamline our organization in a very rigorous way to be much more lean and also realize the business plans of the acquisitions we did in the past. So we will continue -- and we will pursue mainly here organic growth and optimization. Also here, acquisition will be on a lower pace for the coming 3 years, as already mentioned in December. We guided there between EUR 100 million and EUR 200 million over this 3-year period. And that is also what we are doing. We are focusing on improvements, leverage excellence, organic revenue growth creating unique positions with innovations. We are exactly doing what we say. Climate technology. Leveraged the newly launched product lines. It's nice to launch product lines, at least 15 or more. But in the end, we need sales, we need margin. So we have to pursue all these investments and get the returns out of these investments. We have to get the leverage of all the things we did and accelerate that revenue growth. In the meantime, especially climate technology needs portfolio improvement. We need to divest certain activities as quick as possible, as already mentioned earlier. Industrial technology, strong growth in semicon efficiency. We are preparing ourselves at the moment. I'm very happy that we did the investments 2 years ago because otherwise, we could never have gained that position, which we have now. So we did it again last year, and we do it again this year because we believe in this business. We are able to double this business in semicon efficiency, as we said, but you need to invest, and you need to be ready to deliver. Further capacity and footprint expansions, Europe, Asia, we're working on and a very, very nice position we have there with unique IPs, unique patents where we are a pretty unique player in that industry. Fluid control innovations will accelerate organic growth. The full flow valves, the regulators, compressors, high-pressure valves, a lot is going on in Germany in our company, a lot is going on in Denmark, and we will see there some nice innovations coming in the market more and more. On the other hand, there's still also some uncertainty, especially in automotive. You still see that here and there what is going to be developed? Is it hydrogen? Is it LNG for trucks? But we are there. We are talking to the OEMs. It is a very interesting time because a lot of new developments are in the thinks -- in the thoughts of the OEMs and also the automotive will recover. And also, there will be combustion engines also in 10 years. It is impossible to have all electrical cars on the road for 100%. It's impossible. That's our opinion. You still need hybrids. You still need combustion engines. So we have the whole portfolio, and we are alert and investing and also innovating in the new segments like hydrogen, like LNG, like CNG, but also fuel reductions for marine due legislation. So this is how we see the segments. Our outlook -- our Aalberts' outlook is the Aalberts' outlook. We do what we said in December. We will accelerate our actions as presented, and we remain confident in all these plans and all these plans need investments, and we achieved our strategic objectives. That's our goal on the long term. And as we always said, as soon as possible. One remark I want to make when you look to our material technology business, when you have lesser volume in your factories, you get hit hard as we could see. What is also there, you have a lack of cost reductions. That always goes slower than when the revenue goes down, the same effect, but then the opposite, you get when the business goes up. So -- and when the business goes up, you have the same effect but then on the positive side. So don't forget that. We have roughly 90 locations in the world. We have a #1 position in service treatment with fantastic projects in electrification of cars and aerospace, but also in e-treatment, we have a great position in America, Europe, where -- and it's not so easy to copy that business because you need a lot of capital, as you know. So we are confident in the recovery. And then you will probably also see another picture. So thank you very much for listening to me and my colleague, and I hope we have a lot of questions because we are very anxious and motivated to answer them to get the right picture of our performance of '19.

Martijn den Drijver ABN Amro. To start off with installation technology, I actually need a bit of your help. The reported growth is 0.3%. I think you've had some tailwind from the U.S. dollar and the British pound. By my calculations, given the proportion of the U.K. and the U.S. business, some 1.6%. There was no M&A impact. So I come to a negative organic growth, while you're saying that it's positive and actually it's good. So maybe you can help me out here. That's 1 with regards to installation technology. Then if the organic growth is good. I don't know exactly what that means, 1%, 3%, but you may allow -- you may actually provide some color there. I was wondering, given what you said last year, also what you said during the year, the finalization of the D.C.'s, global alignment of integrated piping, many optimization and efficiency initiatives, growing sales from innovations, isn't the 20 basis points margin improvement a little meager? That's the second question on installation. And then the third one on the installation is, what was the fast selling product line? And then...

Which was that, which segment?

Which was that? You mentioned in your presentation...

That's installation technology.

Yes, and I would like to know which one was the fast selling product line? And then on material technology, you are -- have said now at several occasions that you expect a gradual recovery in -- during the year. Is that based on RFQs, RFPs, orders, just discussions or maybe a little bit of color on that? And then a second question, I'm almost finished here. Even if you adjust the CapEx in material technology, EUR 40 million -- tend to EUR 50 million from the fire, it's still high. What have you invested that in? And then my final one. If you look at the cash out from acquisitions, how much of that was actually earn-outs, so we can calculate roughly what you actually paid for those acquisitions.

Okay. Now starting with your first question on, let's say, the organic growth of industrial technology because you said there is no impact of acquisition and divestments. Now there is still because we divested our retail business in 2018, per the 1st of July, so there's still half a year of impact in 2019, negative.

Plus we shifted some business.

And we shifted some business between installation technology and climate technology.

No. I seem to recall that you also explained to me, you sold the business, which you kept on selling to the actual buyer. So it shouldn't have a sales impact?

That's correct. That's the, let's say, the sales that we have to the outside world, we don't have. So the sales to the retail customer is out.

But the total impact was EUR 40 million on annual revenue. We did it the 1st of July, so it's a EUR 20 million impact. And I think the organic growth of roughly the segment was, of course, in material technology was minus but actually, minus 2%, minus 3%, you could say minus 3% because it was compensated by U.S. and also aerospace. Installation and climate, we did pretty well in our opinion because don't forget in installation technology, we're both in industrial components in America, which is pretty big, where we -- that is actually the only thing what I had expected that would be better. But due to the uncertainty, which happened in August, we showed a lot of growth to be postponed. So there also, we did roughly 3%, installation and climate, we do 3% plus. And then you have roughly so -- and in industrial technology, we do also a small organic growth despite a much lower semicon, despite all the headwinds we have there also. So yes, that is roughly the picture. And then your questions are -- yes.

I believe the second question was about the margin in the installation technology that you expected that to improve bigger, faster or higher. As I said, we had -- we have really a big difference with last year where we built up a lot of stocks and mainly also in the area of installation technology, where this year, we did not have that effect. So that is really a big, let's say, impact in the -- for the added value. And nevertheless, we improved the added value. So there is margin improvement, but we are convinced also, therefore, that in the next years, there's further margin improvement possible because that has -- that will come out at the end because you don't have that effect then.

We're focusing in America, mainly on the stock reduction. And partly here will also be this year.

And that has to do -- okay, the moment, you have the distribution setup ready, but it's just a setup ready. And the reason why it took, in our opinion, also long but -- let's agree, we also want to have margin up as soon as possible, is that you first have to set up, then we had the inventory there, but we didn't know what was the regional need of every SKU. We didn't have that knowledge. So in the beginning, we put a lot of inventory in, I tried to explain it also 1 year ago or 2 years ago. So now we have this information more and more, so we can optimize the stock. So we looked really -- we focused mainly on cash and on cost reductions, streamlining where we are not done yet. It's in the press release, you read there as a first step. We see more cost optimizations possibilities. We see also better inventories possibilities. And I fully agree, we should be able to increase further the EBIT margin, and it has also to do with the leverage of your factory. So the moment, of course, lesser absorption, which we had because we've reduced the production. You already start negative, but I think we are in a better and better position. We are now in Europe actually busy with also the centers are there, that's in Zeewolde. So we are now moving the equipment from Amersfoort to Zeewolde at the moment, starting with also there the warehouse that we will integrate the other warehouses. It should be operational in second half. And -- so also there, we made big progress. But yes, we do a lot to optimize the business still in that segment. U.K. didn't help. Don't forget the U.K. that -- not that the business was so bad. That was not -- not even the projects were there. They were at a lower level, and they will also be at a lower level coming years. So our expectations, maybe the government can help, but we're also winning market share. So that was -- but what didn't help is that end of March, everybody ordered to a very high stocks our wholesalers. And so you have to produce, you have to take in people. And then they don't need to, you can stop your production again. And that is so bad for the factory. So that did really not help. Difficult situation for the while, but we managed that and but it didn't help. So -- and that's roughly installation technology, fast-growing product line. It's a very nice product line. We are very happy with it. And it has a certain color, but I don't want to say too much about it. And that's also we write it like we write it in the press release. But when you read well this book, then you can -- it has to do with an integrating piping system where you try to get the connections on the valves and on the product we also make in Hilversum. So the connections with the valves and there we see a really a traction in the market. We also gained some very nice big key accounts in Europe, but also in America, where we actually have the hands full to produce everything. And so that's -- but we have to get it more efficient also. So that's the situation. But I fully agree, the potential of that segment is still the same as we always said. It also had some headwinds there in industrial.

CapEx in material technology?

Yes, material technology, why do you think it will recover? Do you have signs for that? Now the signs for us are, of course, our possible orders and possible orders are our customers, but also our experience and also our management. So the opinion is based on that. So what is the order intake over the last months. What is the -- what do the customers say and what is normally happening when inventory reduction is over. And there, you have also some differences per region. And that's why we also guided in the sheet, it's difficult to predict the speed of the recovery. So I'm also careful. So for the first half, now let's say it will [ stay ] a little bit like this [ stage ]. But it could be that going to the second half, you see some improvements that is difficult to predict that it will recover. And we see already some signs for that. But also some nice projects. High CapEx, where did we invest it? I tried to explain that. They went -- the most CapEx went to Eastern Europe and North America. And we -- on purpose because we were in quarter 3, 4, especially quarter 3, we also already said to each other, should we -- you got CapEx because we can actually cut things where you want. But we see opportunity in Eastern Europe and North America, and we think it's a dip, which will not last forever. So when you cut off investments, then it's very difficult to start them up again. So we believe in investing and also because Eastern Europe and North America, we have very nice position to grow. So there, the CapEx went, the other thing went to new technology. We invested in North America in additional technology for additive manufacturing. That's a certain process where you, under pressure, and also high-temperature, treat the parts. And yes, actually, there is almost no competition besides 1 company. So we see a big opportunity somewhere in the South Carolina, in North Carolina and what we get now back from the market, looks very promising. So we will even go more invest in that area. We should not stop. That is actually what we said because we will overcome this. It's and I think we will even come better out of it because we also streamlined the whole organization. And based on the Capital Markets Day, we also looked to the portfolio of the locations where we will -- and it's part of the divestment program, but we also -- cash out of the acquisition was a question. Arno?

Yes. Let's say, we did 2 acquisitions. We had some deferred payments. And we had some earn-out payments that we had to do. So at the end, that total number is included all in this line. So it's about 6, 7 items.

And would you be able to provide the components for the deferred payments in the earn-out? So we can get to the underlying cash out for the acquisitions?

No. We don't disclose that.

Next question.

Luuk from Banque Degroof Petercam. But first on, you mentioned that towards the end of the year, the markets that were under some pressure had stabilized, but obviously, after that...

Order intake, inventory reduction stabilized.

But after that...

Better to say that the whole market stabilized.

And the world continued with Brexit, the coronavirus and other elements. So do you see that pattern continuing in the first 2 months of this year?

Yes, these are 2 things. I think when you talk to the U.K., look to the U.K., I think the U.K., we took the decision to really take cost reduction actions in the last year already, which will continue. And we also rolled that a little bit more in the press release, but it will continue this year. And that will have effect probably end of this year, but also next year. The second thing we're going to do in the U.K., in installation technology is, we're going to -- we have accelerated our innovations, but we do it already last year to get more market share. Because U.K. main, this becomes really an asset that was already the last year. So we're really accelerating that, but also the innovations we have now are more and more globally launched as also explained in the press release, and we have a much more efficient way of launching the product lines because of our global management structure, which is really getting more and more traction, which we changed 2 or 3 years ago. And we will do further consolidations in Europe. That means that in the U.K., we will probably consolidate some locations inside the U.K. So we get more added value. That are the actions we're going to do in the U.K. The total market had a lot of time uncertainty. I think we coped well with it, but the volatility hurt us. Hopefully, we get now more -- a less volatile situation because there is now a decision. I'm very happy with that, that there is a decision and now you can really become also more efficient in your manufacturing. So that's -- you can almost say every week, unforeseen circumstances. I'm not accountable for it because tomorrow is corona, the day after tomorrow, it is trade wars. And so I don't know what happens in the political environment. We do our thing, and we focus on our business, and we're going to execute our strategy. Regarding corona, it seems to be a virus, corona, and it's in China. We have not a big direct impact because we are not so -- we have a very small position in China. We've only 3, 4 factories and the factories we have there are for -- half roughly based in the south. And there, you see there's roughly yes, maybe not at the moment, it's already increased again. But the last weeks because it did -- we did some tracking, of course, with our people, is that 60%, 70% of the people are working again. And in the area of Shanghai, it was more like 50%, which was working again. But I think more and more people are regaining work. So I think directly, it will hit us a little bit, but it is a very small numbers. What is more the thing, but I think then the whole world has an issue, is when of course, the situation in corona, it takes longer than in our opinion, 8 to 10 weeks longer. And the supply chains of our customers, especially in the industrial arena, where they can't deliver their own OEM products anymore. Then, of course, their sales will go down, and then they also will need -- us lesser. So that's a sort of indirect effect. It's very difficult to predict. At the moment, it's not the case. So we have not real issues at the moment. I think the coming 6 to 8 weeks, I think, is also okay. But when it takes longer, when it takes 3 months still, but then we will not be the only one, but our sales in China, in that area is very small. So the other thing is, Aalberts is as always said, is producing their product very local. In America, we make almost 95% our sales for the local market and also in Europe. So -- and also in the U.K. So that can also be an advantage. We see here and there are some advantages already that they want through our products, especially in certain piping systems, we see that at the moment. But I'm careful. And therefore, I don't know exactly, it's too early. And therefore, we didn't wrote anything in our press release. But of course, we're living in a world, we live in. We have to be alert, we have to react. We also react now on the -- the new electrification of vehicles, but there's also a lot of opportunities. So that would be my answer.

Okay. And then lastly, you had quite some positive one-offs, this year you also had restructuring costs. Would you consider them...

You mean '18? Last year was '19.

Yes. Sorry. I'm saying -- I mean '18 and '19. So the restructuring cost in 2019? Do you consider them to be at a, say, a normal level that we saw of [indiscernible] going forward? Or should that be a positive comparison base effect?

So we have always said that between EUR 11 million and EUR 12 million holding elimination line is a normal level. And that's also what we foresee for the coming year, unless the -- we will do a divestment because, as we also always explained, is that we of course, when we do a divestment and when we make some money on it, which is, of course, also our goal. And when you do a divestment, that you really try to do the best possible deal, and that you can finance with that money the further improvements of the company, and that is how we always have worked, and ...

It's very important.

And that's say that is different, therefore, the difference in 2018 was really that we had of course, also there, we did divestments and also there, we did restructurings and these kind of things. But we had 1 big thing that was really exceptional related to the fires, and it was this property insurance plan. And that's the reason that this line, it shows a different picture in 2018 with right, I would say, it was the right way to show it because it was an incident. And that's also what we try to explain to everybody. But maybe not always too clear.

What we are doing is we have a divestment portfolio of EUR 300 million to EUR 350 million. We're going to divest that in the coming 3 years. We try to do it at the best way. So you optimize what you can and then try to divest it. But of course, when we can make money on it. We are not in a hurry, we're going to do that. When you have that money, you sometimes use it for restructuring or other things. As we always did in the last years to optimize our core. Now when you look to the amount of operational excellence and leverage things, we still can do. Yes, that depends on if you are successful with the divestment or not. We know exactly what we want to do internally. So it's very difficult to guide what is the exact number you have in your holding corrections. But in principle, we have always said also in the past is between EUR 11 million, EUR 12, EUR 10 million and EUR 12 million because we have holding cost of EUR 8 million and EUR 9 million and we have always EUR 2 million to EUR 3 million redundancy costs. So then you come to the EUR 10 million to EUR 12 million.

It's a normal level.

That's the normal level. But when we do additional things, you read that, that we have a lot of thoughts to improve further. We try partly also to finance that with our divestments to optimize, to narrow the focus of the portfolio. So that we're just continuing what we already do for the last 4, 5 years.

And we are going to reduce the number of locations. That's what we also said in the...

Tax rate is the same. Tax rate is by my former colleague, always guided between 24% and 25% that we are now 22.9%. Yes, that is, you could say, yes, this -- it came out better than we thought. Yes, and it is between 24% and 25%.

That's also the expectation for 2020.

Yes, again. So in your spreadsheet, you should put that in. And when it's better, it's better, but it's also difficult to guide the exact number. It's impossible.

And then my final question for now is on the drop-down at the Capital Markets Day, you guided for a number of 25%.

Drop through.

So yes, drop through. But if I now zoom into service technology where you give the revenues and the EBITA impact, then they get to 67%. At the same time, you mentioned that it is obviously a lagging impact of the costs reductions. Is it -- when revenues go down, also fair to expect some time lag to have a 25% drop down or is it asymmetrical? Or is it difficult for business where there's a higher percentage?

Let's say, the number of 25% we gave for the total of Aalberts. So that is what we gave the direction. And what we see in the organic growth of the other hours business that you see that at least a better number than 25%. And you may expect with all the approvals that we make in the company coming years. That also, that number will go up. But in the decrease of this specific area of service technology within, let's say, a very high added value because they don't -- they make it a surface treatment or a heat treatment, there's no raw material, in many cases, involved or only a little. So the added value is very big. So when you go down in that particular area, of course, your drop down is higher. You compensate that with costs, but you cannot compensate everything in the same pace. And besides that, yes, when we face the situation as we have it today, and we also make some extra costs to further decrease the cost...

Yes, roughly on the EUR 21 million, which was mainly happened in the second half, mainly, we lost an EBIT of roughly EUR 40 million, where you have EUR 3 million...

Roughly.

Yes, roughly then you have EUR 3 million redundancy. So that means when we have EUR 21 million going up again.

Yes, you have also a higher drop-through than the average. That's how that business works. And the reason why that business worked like that. That is that you have an installed base of equipment, which you have to fill with volume, a certain volume, you have a certain breakeven point what is relatively high. So because you still have to function these equipment. So when this equipment is not fully full. You've still the energy cost and the personnel cost. Yes, you can't save more money. So yes, your leverage goes down. But the other way around is the same story. When you're up again. So what is very important is recovery of the volume. In the meantime, what we do immediately, and we did that very quickly. We've reduced the costs where possible. We have temps, we have -- we streamline, we further optimized. And what we did additionally, and that is really new is that we changed the whole group structure, and we really took out a lot of overhead because we merged AHC in Impreglon. We merged the 2 companies after the acquisition in 2018. So it was really 1 organization now, so we could also now take the step to reduce further overhead. So these things will have an effect also in the coming years. And when the business comes back, yes, you have a nice leverage going the other way around. And that is higher than the 25%, that's correct. But in average, our goal is to have a drop-through of 25% for all the businesses.

Henk Veerman, Kempen & Co. My fist 2 questions are also on the material technology, still trying to wrap my head around the operational leverage in the second half of the year. According to my calculations, minus 5% organic sales growth and about minus 15% to 20% organic EBITA decline...

What do you mean? From material technology or...

Yes. Material technology in the second half of the year. Could you maybe -- because you also keep these graphs, and I think the drop-through as you make it visible as is like, is very significant, as my colleague mentioned.

[indiscernible] business ones?

Yes, exactly. If you include these restructuring efforts you did, like how would the drop-through look like? Can you maybe give us a little bit of a guidance?

Raw material and technology?

Yes.

It was EUR 3 million. We already said.

Sorry?

EUR 3 million.

So you should have -- so the business when the business goes down EUR 21 million, which was -- it did, that's in the bridge. Yes, the bridge, which is mainly has taken place in the second half, then we lost roughly EUR 40 million of EBIT because the other EUR 3 million is restructuring. That's in the service technology activity in Europe. That's what is standing on the bridge.

Okay. And I think, secondly, related to that, regarding your CapEx spending in that division, I think if you -- I mean, it's 1 of the most capital intensive businesses. If the market would remain a bit muted in the upcoming years, as some people expect.

What is muted?

A low growth to no growth. Would you consider, let's say, delaying your investments in that division? Because I think this is also the main strategy return on capital KPI, you spent most of the CapEx here. And if we have to take into account the operational leverage in case the business declines. It could be expensive in KPI.

It's not only CapEx, it's also goodwill of acquisitions.

No, but in general, the comment on material technology. It is a high CapEx business. It is -- we did also acquisitions there. The last years, yes, pretty amount of acquisitions. Where we also paid goodwill. And of course, when then your existing business in Europe has a lesser EBIT, but you still spend the CapEx and also the 2 acquisitions, PPC and Appliance. Yes, it's a simple math, then the return on capital goes down pretty quick. So -- and so that's the case where we are in. What we say this business will recover. It will recover. So we are very happy with that business. Also to be clear there, I'm very happy with that business. It's a great business, but it has also its own characteristics, and it will recover. So you get the other side up, again, where you see now where it goes down. When of course, the market, it is as simple as that, will mute -- will mute for the coming years, low or no growth, yes, of course, when we see no opportunities for growth. And there comes no return out of it, we will also reduce the CapEx. And therefore, also, we've reallocated the CapEx midyear when you read the press release thoroughly. We reallocated to Eastern Europe and America mainly and America mainly to this new technology because there, we can be pretty unique. But also here, you first have to have the equipment, then it can take 2 years before you have these furnaces filled. And we invested much less in Europe. Yes, so there we already acted very quickly in the mid-year. But what I tried to say that, of course, it's our opinion, is we must not become nervous due to this dip in material technology due to very, very clear reasons. The reasons are very clear. The automotive was in turmoil because of all the emission things because of the lack of capacity for testing, which is also the emission ruling is more and more clear. And when they are insecure and they need cash, they're going to reduce the inventories. And parallel, what we see is they also move certain factories away to low-cost countries. Now what we do, that's ours. We follow them. We change also, and we invest in the right technology, but the total business is not gone. We are coating and treating 1 billion parts a year. That is not gone. It is a little bit less. So that will be recover. That is what we say. And then also, return on capital will improve. Of course, you are right. We have to be careful with investing in our capital when there's not growth. And I'm the first one, I can tell you, when I don't see the return on the growth. I will immediately allocate my money somewhere else. That is also part of the strategy, when I want to bring new product lines, and we did now 15. I first had to develop them. So I need R&D people, then I need to buy the equipment, then I need to produce, then I need to build stock. And still I have no 0, not EUR 1 revenue. That's what you see in Aalberts, the last years. That's also why we go to focus on R&D. Yes. And we have no headwinds in certain industrial markets, but it doesn't say anything about our strategic goal. Because -- let's see, let's see. That's -- but of course, we will take action when there's no growth. And maybe more action than just only reducing CapEx.

That's clear. A question to Mr. Monincx. Could you maybe explain why D&A has been stable for the last 4 years despite quite a sharp increase in total assets on your balance sheet as well as obviously, driven by the high CapEx? So it has to do with the time that you discounted assets?

Let's say, the D&A for this year was impacted by -- let's say a correction in a depreciation in a building. So that is an impact of a few million. So normally, the depreciation would be higher for 3 EUR million, EUR 3.5 million. But besides that, the picture is normal.

So you're seeing a EUR 3.5 million, EUR 4 million positive impacts...

EUR 3.5 million.

On your -- in your D&A and...

Yes. And the rest is normal. So we still expect that also for next year because we continue to invest, of course, and that also for next year, the depreciation will go up. So actually...

Just slightly behind, of course.

Actually, this year, it was already expected to go up, but we -- there was 1 correction, which brought it more or less equal to the previous year. And then next year, we expect that mutation at least plus, of course, new CapEx will start to depreciate also to come up. So it will -- we expect it to increase.

So just to be clear, there's been no changes in the lifetime of the [ assets ]?

No, no.

Not absolutely...

CapEx will go up. Of course, when you invest more, it will go up. But we -- and when we don't grow, we have an issue, of course, but we don't do any -- we do not do investments when we don't have plans behind it.

Peter.

Yes, Peter Olofsen, Kepler Cheuvreux. I -- to come back on the holding costs. Do you still get it clear in H2? So you booked EUR 3 million restructuring in material technology. And there was the...

That was not in the holding costs.

No, in material. And then you -- in the holding, you had a typical small cost as well?

In the holding, like Wim also said, we have a normal picture of, let's say, EUR 8 million, EUR 8.5 million holding costs and about EUR 3 million of, let's say, restructuring costs that we more or less have every year. Yes, these are plans that we always work on, execute, that's the normal picture. So we always have between EUR 11 million and EUR 12 million negative line in the holding elimination line because we say that we take the, let's say, this expectation, we've taken in the holding line. The thing in material technology has not to do with the holding line because these costs are booked in material technology EBIT.