Alfen N.V. (ALFEN) Earnings Call Transcript & Summary

Hello, and welcome to the Alfen Webcast Half 1 2020 Results Call. My name is Courtney, and I'll be your coordinator for today's event. Please note that this conference is being recorded. [Operator Instructions] And I will now hand you over to your host, Marco Roeleveld, Chief Executive Officer, to begin today's conference. Thank you.

Okay. Courtney, thank you for this introduction. Good morning, everybody. Welcome to this webcast about results of Alfen in the first half of 2020, and we appreciate the fact that you have taken an effort to participate. This webcast and the questions that may come forward are being handled by the Management Board of Alfen: Jeroen van Rossen, CFO; Richard Jongsma, CCO; and myself, Marco Roeleveld, CEO. Business-wise, our first half of 2020 was positive, with limited impact from the COVID-19. To cope with COVID, we've implemented additional safety measures to continue safe and responsible operation. Nevertheless, we are relieved that none of our employees have encountered real problems with COVID and that everybody has done his utmost best to keep working with due respect to all safety measures to safeguard health and safety of us all. Also, our suppliers and customers have been very cooperative to keep business going. We are very grateful for everybody's enormous efforts. In this webcast, we will start with an update of COVID in relation to Alfen, and we will continue with the highlights of the first half of 2020, followed by a short review by business line of the most important topics in the first half of this year. Next, we will go in a little more detail regarding our financials and outlook. Assuming you have noted the use of disclaimer, we can now go to Sheet 3 with an update of the COVID situation in relation to Alfen. As stated in the introduction of this presentation, in order to cope with COVID, we have implemented additional safety measures to continue safe and responsible production. And we have experienced limited interruptions of the business up to this point. Our order intake in the first half of 2020 was reasonably strong, and we have accounted no canceled orders. And the supply kept functioning, and production has been up and running. Of course, there remains an inherent macroeconomic uncertainty as a result of the COVID pandemic. We continue now with Slide 4 with the highlights of the first year of 2020. We realized EUR 90.3 million in revenue compared to EUR 61.6 million in the first half of 2019. This represents a growth of 47%. This growth was driven by a 23% growth in Smart grid solutions, 154% growth at EV charging equipment, and 67% growth at Energy storage systems. As a percentage of revenue, the adjusted EBITDA improved from 7.9% in the first half of 2019 to 11.1% this year, which amounts to EUR 10 million. Jeroen will go in more detail on the financials later on in this presentation, and Richard will go in more in detail on new important project wins and client wins in this -- later on in this presentation. With the presentation of the Q1 trading update, we stated that we could not give any further guidance due to the early stage of the COVID crisis. Now we can state that we reconfirm the initial revenue outlook for the full year of 2020 in the range of EUR 180 million to EUR 200 million. In the commentary sheets, I will go in a little bit more detail on the highlights of the first half of 2020. We start on Sheet 6 with the overall revenue growth and split by business line. Overall revenue growth was 47% compared to the first half of last year. As a business unit, Smart grid solutions, we continue to benefit from grid investment projects in the solar PV sector and revenues from service. COVID had limited effect on the first half as we experienced a continued focus on grid expansions by the grid operators, and microgrid projects regained momentum after some project execution delays due to the COVID lockdown. In the EV charging equipment business unit, we have realized a revenue growth of 154%. And the main elements for this growth are: first, an increasing volumes under framework agreements that have been set up over the past years, new client wins and further internationalization. And although the market for light-duty vehicles has been impacted by COVID, the electrical vehicle segment has proven to be more resilient. Of course, it is also very good to mention that governments across Europe have announced additional incentive packages to further support and transition towards electric driving. We successfully completed the relocation of the EV charging production. With this relocation to 5 times larger building, we significantly expanded the production capacity for our EV charge points. The relocation has been executed without interrupting of the production, and the layout of the production line has been optimized to the latest insight in quick and efficient assembly and testing of this EV charging. In the Energy storage business unit, we have realized a revenue growth of 67%. Revenue increase was driven by strong market momentum, resulting in contract wins in the last months of 2019 as well as Q1 2020. However, as a result of COVID, market circumstances were again challenging in the second quarter as decision-making was postponed across the industry, similar as we experienced in the first half of 2019. In this market dynamic, our proven track record across multiple storage application is playing to our advantage as well as our strong market position. On Sheet 7, you can see that we increased our profitability by driving the growth of our revenue and operational leverage through leveraging the fixed cost base, such as R&D and overhead costs. Going forward, our strategy is a continuation of strong revenue growth and further leverage of our fixed cost base. It is very important for us to keep investing in development. On Sheet 7, I have given -- we have given some examples of recent innovations. First, I would like to mention the development of the direct payment functionality for EV charge points in Germany. We get developed direct payment functionality for Alfen charge points using the Giro-e technology. And with this Giro-e technology, it allows payments to be transferred directly between banks and accounts -- bank accounts. And Alfen Connect, our cloud-based back-office system, establishes the relevant bank connections for the exchange. In this way, EV drivers in Germany can pay directly at Alfen charge points using their debit card instead of using a dedicated EV charging card. And we're convinced that this future will further improve acceptance and easy operation of electrical cars. The second development is a dedicated substation for onshore wind installations. Alfen Elkamo developed a 36kV substation especially for onshore wind farms. With the substation closely placed to the windmills, the onshore wind park developers can supply the generated electricity more efficiently and at lower cost to the grid. Now our CCO, Richard Jongsma, will continue with his commercial aspects and growth progress.

Thank you, Marco. I will continue with our commercial successes in the first half of 2020 on Slide 9 and consequently take you through the progress against our strategy. In our Smart grid division, we signed a contract with Goldbeck Solar to provide service and maintenance for 6 solar PV parks in the Netherlands. HVC, a Dutch waste management and sustainable energy company, granted us with multiple contracts for new solar PV installations throughout the Netherlands. And Shell expanded the scope, and we are now supplying them with additional installations for ultrafast EV charging stations. For EV charging, Vattenfall and Alfen will tender for the provinces in Southern Netherlands to install up to 4,000 charging points by 2022. And also, Alfen has become the preferred EV charge point supplier of Elexent, a new subsidiary of Groupe Renault, who is dedicated to EV charging. And our reseller Amperio in Germany is supplying the German hypermarket chain Globus with Alfen charges for 48 locations in the coming 2 years. In Energy storage, Vlot Smart Solutions, a transport service provider, ordered multiple mobile storage systems in combination with mobile high power chargers to charge their fleet. Vattenfall, a 20-megawatt hour storage system, and Nuhma, an investment holding of 41 municipalities in Belgium, written Alfen with an order for 3 storage system to provide frequency stability service to Elia, a grid company in Belgium. Let's now move to the progress against our strategy. Our 4 levers of growth on Slide 11 should be well known by now. All markets we work in are fast-growing markets. We have an intensive internationalization action plan. And on top of our growing installed base, we supply service and maintenance. And the true unique opportunity for Alfen is to cross-sell our products over to different business lines. For Alfen, a customer in 1 business unit is automatically a prospect for all other business units. I'm now going to Slide 12. The markets where we operate in continue to grow. As for the Smart grid markets, investments in the grid by grid companies continue to grow, and the number and size of solar PV parks are growing as well. The market of its open has developed a unique and tailored solution. Installed PV capacity in the Netherlands is expected to show a growth of 37% on an annual basis between 2018 and 2023. For EV charging, new EV car registrations throughout Europe are still growing rapidly despite the COVID-19 situation. And the expected growth in new charging stations in Europe within 2020 and 2025 is around 35%. The European Green Deal, the diverse subsidy scheme that Marco was referring to, in, for example, France, Germany and the Netherlands, are supporting these figures. In the Energy storage markets, which is still in a nascent stage, the annual new battery Energy storage capacity in Europe is expected to have a slower growth with a CAGR of 53%. The market fundamentals for Energy storage remain unchanged and strong. I'm now on Slide 13. What we said before, internationalization is very important for Alfen. Therefore, we are happy to share with you that our revenues outside the Netherlands have grown in the first half of 2020 to EUR 26.3 million. Also in 2020, we have added sales capacity in Poland, Italy and Spain. Our internationalization strategy is focused on entering new countries and find new clients. In our Smart grid business, we are looking to maintain our market position in the Netherlands, Belgium and Finland, and we focus on further growth in, for instance, Sweden and on follow-our-customer approach. Also, the strong growth in our EV charging business in our home market contributes, where we grow market share with the presence of our own sales force and with further internationalization of our client base, for instance, with E.ON, Vattenfall and Virta. For our Energy storage business, we are able to scale up with existing international clients and also add new clients. I continue with Slide 14 about service. We are still on track in our ambition to grow our service offering, both in Holland and beyond. In all our business units, we are benefiting from a growing installed base, especially for Smart grids at PV parks and fast charging stations. We continue with our standardized service packets with remote servicing control that goes with storage projects, and further, international rollout of our EV service partners in multiple countries in Europe, so we plan to expand this going forward. We continue to benefit from our true unique possibility to integrate and cross-sell our product solution. As explained before, a customer in 1 business unit is automatically a prospect for another business unit. Shell, for instance, we are now supplying grid connection to facilitate their ultrafast Shell Recharges at around 60 Shell locations. And Shell has decided to add an Alfen Energy storage system to provide peak-shaving at a Shell Recharge location. As for Greenchoice, Alfen combined its expertise in Smart grids, Energy storage and EV charging by developing and delivering a charging hub for mobile storage systems, where these mobile storage systems can be recharged with renewable energy and provide grid stabilization whenever these systems are not deployed at events or at festival. Jeroen will take over with the financials and outlook.

Thank you, Richard. Let us start with the income statement on Slide #17. If we look at revenue and other income, you see that we increased the revenue and other income from EUR 61.6 million in the first half of 2019 to EUR 90.3 million in the first half of 2020. And this revenue growth is driven by strong market growth and further bolstered by internationalization, cross-selling and service. Our gross margin percentage slightly decreased from 36.1% in the first half of '19 to 35.5% in the first half of '20. But compared to the first quarter of 2020, the gross margin improved from 34.8% in the first quarter to 36.2% in the second quarter as we continue to benefit from our strong market position, our leverage from increased scale and a shift towards increasingly complex solutions. Personnel costs increased from EUR 13.3 million in '19 to EUR 17.1 million in 2020, also reflected by the increase in full-time equivalents from 457 at 30 June 2019 to 563 at 30 June 2020. Other operating costs increased from EUR 4.4 million in '19 to EUR 5.3 million in 2020. And if we then exclude one-off items and special items, we arrive at our adjusted EBITDA. And as you can see, we increased our adjusted EBITDA from EUR 4.9 million being 7.9% of revenues in the first half of '19 to EUR 10 million being 11.1% of revenues in the first half of 2020. This increase of 107% on the adjusted EBITDA is the result of strong revenue growth in combination with operational leverage. Finally, our adjusted net profit increased from slightly over EUR 1.4 million in '19 to EUR 5.3 million in 2020. So from the income statement, we now go to the balance sheet on Slide #18. Let's start with the noncurrent assets. We increased the noncurrent assets from EUR 27.7 million at year-end 2019 to EUR 32.3 million at 30 June 2020. The capital expenditures amounted to EUR 4.9 million compared to EUR 3.2 million in the same period of 2019. These capital expenditures include investments in the new molds for our Smart grids business line as well as investments in a new and significantly larger EV charging production facility. Additionally, we capitalized EUR 2.5 million of development costs, which demonstrates our continued efforts to invest in innovations for the future. Then our working capital. That increased from -- to EUR 14.8 million compared to EUR 3.1 million at year-end 2019 and EUR 8.8 million at 30 June 2019, which is due to pre-deliveries in the supply chain to cover for the summer period, some strategic stock for additional resilience related to COVID-19 as well as increased stock levels, reflecting further growth of the business. Furthermore, our contract balances increased as a result of a timing effect in the triggering of payment milestones. Our equity increased from EUR 13 million at the year-end 2019 to EUR 66.7 million at 30 June 2020. Next to the addition of the net profit, this is a result of our share issuance in June 2020. So what does this mean for our outlook? Well, on the next slide, Slide 19, you can see that we are well prepared for further growth in the second half year and beyond. First of all, we anticipate positive market developments in all of our business lines. The markets for Smart grid solutions and EV charging are expected to remain strong. The EV charging market is even further bolstered by the incentive packages across Europe that were announced as a result of the corona crisis. Furthermore, long-term market fundamentals for Energy storage remain solid. We are well positioned to benefit from these market developments based on our strong market position. Nevertheless, while COVID-19 had limited effect on the first half year, there remains an inherent macroeconomic uncertainty for the second half year of 2020. We also continue to invest in our organization, innovation and production facilities. With the additional capital that we raised, we have more financial flexibility to further strengthen and expand our international footprint throughout Europe as well as to invest further in research and development. Next to that, we continue to invest in the further optimization of our businesses and processes. So based on the first half year performance and our current revenue visibility, we reconfirm our 2020 full year revenue outlook in the range of EUR 180 million to EUR 200 million. We are now at the end of the presentation, where I will hand over to the moderator for any questions. Moderator, could you please take over?

[Operator Instructions] Our first question comes in from the line of Peter Olofsen calling from Kepler Cheuvreux.

Yes. A couple of questions from my side. Maybe starting with EV charging. Could you first shed some light on the momentum that you have seen in that business during the first half, especially in Q2? Did you see a notable difference in growth rates between the months? And what is your visibility for the second half for this business?

Yes. Peter, yes, we see that the EV charging market is still going strong market. So despite the COVID-19 situation and the lockdown from some factories, we see still the business continuing and going strong. We actually believe that not only the owners of new cars installing -- want to install charging stations, but also municipalities and companies are installing large charging plazas to facilitate their employees and customers who drive electric. We foresee that the market will continue to grow and grow fast. You see that all kind of subsidies schemes are in place and even being enhanced and increased, for instance, the Netherlands, France and Germany. So we also see that at the end of this year, there were some tax changes which will boost sales. So we believe that this market is a strong growing market in Europe and will continue to grow.

So -- but it seems that unlike what we saw with EV registrations where there was a big drop in April and then a strong rebound later in Q2, it seems that your EV charging business, it was more stable throughout the quarter. Is that correct?

Well, what we see is that this business is quite resilient, and so not so sensitive for the COVID situation. We saw that everybody, of course, came to a standstill somewhere in the end of the first quarter. But we see that this business is picking up and is very resilient and is growing strongly towards the end of the year.

Okay. And then on the Smart grids business, could you shed some color on, on one hand, what you're seeing in the project business, so solar, greenhouses, et cetera? And then also at Elkamo because it seems that sales at Elkamo were down versus the first half last year.

Well, if you look -- I'll hand over to Richard with respect to solar PV, et cetera, in projects, but I can give you a bit of flavor on Elkamo. Indeed, Elkamo has a slightly lower revenue in the first half year of this year compared to last year. What you know is that we won a contract in Sweden for Swedish grid operators. And that expansion to Sweden is a bit slower than we anticipated, so it takes a bit more time to ramp up on that contract. Furthermore, if you look at the business in Finland, and I think we also elucidated that at the trading update in the first quarter, you see that there is a growth in the substation business, but at the same time, the switchgear side of the business is a far more challenging year. You see that larger projects are more postponed there, and Elkamo is suffering from those market circumstances. Nevertheless, looking at Elkamo, of course, you know we did not only acquire that company for the growth of the company itself, but also to give us a platform in Scandinavia for the cross-selling of our products, like our charging stations as well as Energy storage. And we have a lot of examples, for example, Fortum and Caruna, the framework agreement, Solarigo, the Energy storage element that we have there, where you can see that, that cross-selling is very prosperous to us. So all in all, yes, the revenue is lower and in the first half of the year. Nevertheless, there is still growth in the substation part, so we continue to execute the strategy that we have at Alfen Elkamo level. And I think from there, I will hand over to Richard for the market on Smart grids.

Yes. So what you see is the Smart grids business, which is divided in substations for the grid companies, but also on the other side, for the project side. We see that the grid companies continue to invest strongly in enhancing the grid in order to cope with the energy transition. And that investment is still going strong, so we see no changes there. On the project side, we see that there is more and more PV parks coming, and they're becoming larger. You also see that the grid companies are facilitating the fact that they need to connect these PV parks. So that is also opening the road. You see that there is -- that the subsidy schemes are fully paid out and fully filled and add to that the possibility of the FTE plus subsidy scheme that is coming, which also enables subsidies on storage combined with PV parks. We see that market as stronger than ever.

And then the greenhouses and industries, et cetera, how is that performing?

Yes. So it's performing well.

Okay. Then maybe on gross margins, which clearly was quite strong in Q2. You mentioned a shift towards more complex solutions. Do you then specifically refer to Smart grids? Or do you also see this in the other segments?

Well, in all segments, because what you see is that complexity of solutions is needed because the problem is also complex, so that needs a far more technological-driven solutions sort of that. But that is what we see. So it's not only in Smart grids where the grids need to be smart, they need to detect, et cetera, but also your charging stations do not need to be an extended power plug. Now they really need to be highly technical devices, able to cope with a lot of elements like smart charging, load balancing and those kind of concepts. So we see it in all of our business lines and also in storage.

Okay. And then in EV charging, you mentioned this innovation in Germany, the direct payment functionality. Is that something that we can also expect in other countries in coming years?

Yes. What you see is that from the start, on EV charging, they were looking for interoperability so that you can actually just with 1 card, you can pay on every public charging stations preferably in Europe. You see now that on hindsight that more and more demand and request are why can't I just pay with my debit card or even with an app? So yes, we see that this is going forward, and this will spread out over Europe.

Okay. Then my last question is around the Energy storage business, where you have seen some hesitation in Q2 when it comes to decision-making by customers. What does that mean for the backlog going into the second half of the year? And could we potentially see a little softer H2 compared with H1?

Yes. What you see, Peter, that -- and this market is [ boardy ]. We've said that it's in a nascent stage. So you saw that we really gained momentum in the second half of 2019 in storage market and also beginning of this year. COVID, of course, caused some headwinds and hesitation, but that is also part of the characteristics of this market, which is in the nascent stage. The underlying fundamentals for Energy storage are still strong, remain unchanged. And the energy transition is in full force in this coming -- and you need to be able to deal with these instabilities on the grid, and Energy storage is one of the main components that can deal with this. So we remain very, very confident that this market is a fast-growing market for the long term. So we invest for the long term, which you also see that there is a couple of projects that are delayed, but we expect that -- assume that there is -- the COVID's clock is clear that this will be back on track.

Okay. But I would fully agree on the still strong fundamentals. But if I then look at the outlook for this year in Energy storage, you won a couple of sizable contracts in the second half of last year that contributed to the results in the first half of this year. But then with the hesitation in Q2, my feeling that is that H2 might be a bit softer then. So is -- directionally, is that -- make that sense to you or…

Well, I think, Peter, Richard explained it from a market perspective. It's a fair statement that we won large contracts at the end of 2019 and also in the beginning of 2020. As you know, we said at that time that, that would contribute to the 2020 results. They did, and they still will do in the second half of 2020.

The next question comes in from the line of Lotte Timmermans calling from ABN AMRO.

First on the international growth. In the first half of this year, I saw that the growth was stronger in the Netherlands than outside of Europe. How do you plan to increase this and to reach your target of 50% and on -- based on which segments this was based?

Lotte, yes, what you see is that we are -- internationalization is one of our key drivers for growth, 1 of the 4 drivers of growth, as you know. Our focus is still ongoing in Europe. You know that we are expanding our sales teams across Europe and also our sales. And the increase of the revenues outside the Netherlands is clear. But don't forget, we grow also very fast in the Netherlands. And of course, we'd like to grow our figures outside the Netherlands, and we did. But also, we are very happy with the growth in Netherlands, and of course, that influenced that growth figure. But the medium- to long-term objective of 50% revenues outside the Netherlands still stands.

Okay. And was this -- this sales force, was this based on EV charging or this is all 3 of the divisions? I know that Smart grids is mainly locally, but what's the segment outlook?

Yes, that's correct. The main of -- the folks, of course, in outside countries -- outside the country of Netherlands is for EV charging. But don't forget that we -- 1 of the 4 parts is also cross-selling, so -- and 1 prospect or customer for one business division is automatically a prospect also for another business division. So you see that, although they are mainly working for EV charging, there are also -- they also combine all the expertises. And you see that also Energy storage is a product or business unit that is very much suitable for European expansion.

Okay. And so none of the growth was COVID-related that the international growth was less than in the Netherlands?

Well, that's hard to say. But what we said before is that due to the COVID lockdowns, some -- execution of some projects was very hard because simply you could not send your local workers to certain countries or certain areas. So that's hard to say.

Okay. Then on your guidance, you reported strong growth in the first half of this year and ahead of your target, actually. Do you expect diminishing growth into H '20? Or is this somewhat conservative in your outlook?

If we see a full growth, it's always a matter of which figure, do you compare it with other figure. We've seen, of course, in the first half -- the first quarter of 2019, we had, say, a relatively weak revenue. And if we then compare then the figures of this half year, then we could say, yes, we have a very strong growth. But if you take it more in a broader perspective, then you see that our growth in average. Maybe in some measuring point from month-to-month, that could be a difference. But we see in average that we still are more or less in line with our medium-term objectives. And it could well be that in 1 month or quarter or half year, the figures may be deviate a little bit. But in average, we are -- we see that our growth is more or less stable in each different segments and also that we see that the growth of the revenues outside of the Netherlands. We have, say -- we are convinced that the fundamentals we are laying now with hiring more people, making markets also in the markets where the revenues are not fully there at the moment, but to make sure that we are ready for those markets to be -- to starting up, that we, in the coming time, are able to maintain our, say, our growth as we have more stated also during the IPO.

Okay. And then a final question on the proceeds of the capital raise. I saw that the similar statements at that time were published. Could you give an update on the progress of the capital allocation?

Yes. Well, an update, not in numbers, Lotte, as you would have figured out. I think it's still -- of course, we raised it at the end of June. We are looking at that. But the drivers for which we raised the money, investments in net working capital needs to build up capacity, to enhance and increase our internationalization strategy, to enhance the innovations and the research and development as well as, as we also said, some financial flexibility for -- to seize potential investment opportunities. That still stands at the moment.

The next question comes in from the line of Jan Richard calling from Berenberg.

Yes. The first question, I would just like to come back on one previous question from Lotte, on the expansion outside of the Netherlands. We see that the share of revenues from outside of the Netherlands is not growing as quickly as it used to. And I do appreciate that revenues in the Netherlands are growing very quickly. So my question is versus your budget at IPO, do you see revenues in the Netherlands exceeding your expectations? And maybe then as a result of that, do you see maybe a delay of a few quarters or a few years in reaching this 50% share of revenues from outside of your home country?

Well, I think if you look at numbers, Jan, what you also see is that in the first half, as we already explained, the revenue of Elkamo is a bit lower than in the first half year of 2019, which, of course, also put some pressure on that percentage. Nevertheless, of course, it's not a straight line that you can predict, that you just draw a straight line and go to the 50%. I think the medium-term objective for 50% is to enhance and support our internationalization strategy. Internationalization is one of the important growth pillars. It's a focus area. That's what we are focusing on. But of course, in some part, whether it's a quarter or a half of a year, if the growth in the Netherlands is very strong, then, of course, we're very happy with the absolute number of growth of revenues outside of the Netherlands. But as a percentage, it might go a bit down. So I think the strategy is still intact. We want to increase our international portfolio, focusing on Europe. And Richard already explained how we do that with own salespeople, with locations in various countries, with export managers. So there are a lot of elements in place to support that internationalization strategy.

Okay. But then maybe within the Netherlands, which segment is really growing the -- is exceeding your expectations? Is it EV charging, again, since the IPO that would explain that this share of -- that revenues from the Netherlands are growing very strongly. Is it all 3 segments or exceeding your expectations since IPO time or one or another?

Well, what you see is that -- and we also had a little documentary on the TV yesterday. The growth of EV cars and EV charging stations in the Netherlands is extremely high. I don't -- I think it's irrelevant to say whether it exceeds our expectations or not. I think that we -- if you look at what our sales activities and marketing activities, we try to increase our market share as much as possible. And if the market is growing, then we benefit from that. And I think we are quite successful in doing that in the Netherlands and the fact that the Netherlands is growing fast and still trading strong, that is, of course, helping us. If you look at Energy storage and you look at Smart grid, as you know, all the markets that we work in are fast-growing markets, and that's all supported by the energy transition. And you see that despite or maybe even because of the COVID situation, that governments are investing more and more in the energy transition, in supporting the energy transition, with subsidy schemes. And so we see that the long-term fundamental drivers under all of our markets are very strong. And I think that is the main topic. And if you position yourself well and you have the right products and you invest in long term in developing the right products and make sure that you have the right people on the floor and the right partnerships that you can benefit from this energy transition.

Okay. Related to question to your international expansion. We've seen over the last few weeks, either at the European level or each member states, pushing for incentive schemes and then regulatory changes to include basically the energy transition within recovery packages. My question is the following. Do you see a risk that each country in Europe would try and build a moat around its national companies to benefit from this, either in EV charging, storage or Smart grids, which will make it a bit more complicated for you guys maybe to take market share and grow your revenues outside of your home country?

Yes. That's quite a question you asked here. You asked -- I don't have a crystal ball. What do you see is that people like to do business with companies that have years of experience. That's all about risk mitigation. What you see is that we have in all our business lines multiple references and prove that we do -- that we can do the job and we do it right. If we continue to do that, we are confident in ourselves but also in the market. We're in confident -- we have confidence on our people and our products. We see the opportunities. And of course, very attractive markets will attract a lot of people who are looking also for -- to be -- to get a part of that success or that market. But we are very confident that we will get our share fair of the market.

Okay. And very quickly, 2 last questions on my side, on EV charging. The first one is have you seen any fundamental change in the competitive landscape structuring EV charging, either in your key European countries or at the European level, over the last few weeks and since the start of the year? Or is it still the same number of players when you bid?

What you see is that the -- I don't know, the number of players aren't changing, but the structure and the size of the players are changing. And previously, we said that if the market is growing fast, it will attract all kinds of players that want to have part of that market. We will always keep a very close eye on all our markets, all competitions or newcomers to the market. And as long as we keep investing in our company, especially in the products, because the fast -- the energy transition goes, the more demand and need there is for smart products to deal with these complicated situations. I think we are well positioned to benefit from this growth in this market.

Okay. And very last one on my side. We see EV charging becoming a large and larger share of your total revenues and presumably of your earnings as well. So I would like to better understand the leverage model in EV charging. Could you give us -- first, is EBITDA margin in EV charging low teens, mid-teens, high teens? And then if you can't answer this question, could you maybe just give us a bridge between revenues and profitability in this segment to better understand how high margins could go going forward?

Yes. Good question, Jan. Not a detailed answer from my part, I'm afraid. Nevertheless, you're right, and we said that before, the fastest-growing business lines also have the highest operational leverage. So it's fair to say that operational leverage in EV charging is good. Every business line contributes, so we don't look at the individual -- of course, we look at it, but we don't disclose the individual numbers on EBITDA and those kind of levels. I think it's fair to say that the fastest-growing segments also have the highest operational leverage. And of course, looking at that, that's also the aim that we have. We said the profitable growth is about growing the top line, watching the gross margins and getting the operational leverage in place. So that's how we look at the business as a whole, and that's what we see happening there.

Okay. We do have one final question coming through, once again, from the line of Peter Olofsen calling from Kepler Cheuvreux.

Yes. It's related to the working capital where there was quite an increase. You mentioned some COVID-19 and timing effects. Does that mean we will some -- see some of the working capital increase refresh in the second half? And looking more medium to longer term, where do you see working capital relative to sales?

Well, if you look at the working capital, fair to say there's also a seasonality pattern. I think working capital is playing in our favor at the moment due to the fact that we made the decision to increase stock levels in relationship with COVID-19. What we see is that we have been able to keep the supply chain going on. We keep delivering. We keep our delivery times intact, and that's not the situation throughout the whole market. So I think that sets us also apart from some competitors. So it's helpful. As you know, we have strict monitoring controls on working capital. From a contract balance perspective, that's a timing moment. So all in all, monitoring controls are still the same, and we don't see a different trend in payment terms or whatever. So going forward, the situation is still the same. Of course, if you grow the business, you also need, from an absolute point of view, a bit more working capital. But I think we will not reduce the monitoring and enhancement of our working capital.

And -- but relative to sales, is there then a range that you think is reasonable to assume going forward?

Well, I think all in all, that our working capital is relatively low if you compare it as a percentage to revenue. And that's all I can say about that, Peter. I am not going to make any statement on a specific percentage.

Okay. We do also have another question here from the line of [ Martin Bubik ] calling from [ The Idea ].

It's [ Martin Bubik ] from [ The Idea ]. One question. You mentioned you went to a new facility for your EV charging production, which was designed on your latest insight about efficiency on production and testing. Could you give some color how much efficiency you think to achieve? Has there already been some efficiencies booked in the first half? Or when should we expect those?

As you can, of course, in the discussion we had is that we're growing revenues and growing number of production. We have a continuous, say, attention to increase our efficiency. So it's not a step function where we, 1 day need to, say, several hours, and then the next week, it's being reduced with, say, a larger percentage. It's a step-by-step improvement. And we have used then the opportunity when -- with the relocation to optimize, and it will not be a step functioning results, but it will be a gradual improvement that can be seen over time. It's not a step function that we see on, let's say, month-to-month period, but we have a continuous investment in efficiency to able -- not only to cope with the overall growth of the production numbers, but also to cope in this way with the delevering of our production capacity.

Okay. We currently have no further questions coming through. [Operator Instructions] Okay. And we have no further questions coming through, so I shall turn the call back across to yourselves for any closing remarks.

Here, Marco Roeleveld. We want to express many thanks for everybody participating in this call. For everybody this -- with the COVID situation, there has been quite complicated, and wish everybody a healthy time. Stay safe.

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