Bechtle AG (BC8.DE) Earnings Call Transcript & Summary

Good day, everyone, and welcome here in Frankfurt. A warm welcome to all of you joining via the webcast or the telephone conference. My name is Martin Link, and I'm joined by our CEO, Dr. Thomas Olemotz, and as all of you are aware, today we're walking through the numbers for the 2024 fiscal year just ended, along with an outlook for the business year now underway. One quick remark: there's a good reason we're gathered at the Deutsche Börse. Usually, we hold this elsewhere. In 2 weeks, we'll be marking an anniversary — 25 years — at the stock exchange, that is, the listing. A brief note on how things will proceed: once Dr. Olemotz has finished his presentation, we'll take the questions from those here on site first, after which we'll go virtually to the non-speaking, non-German speakers, and questions from online participants in German will be answered as well.

Thank you very much, Mr. Link. So that makes it my turn. Ladies and gentlemen, welcome from my side as well to our press and analyst conference for the 2024 financial year of Bechtle AG. As Mr. Link has hinted, I also assume that the question on everybody's mind will be the outlook on the coming year and not what happened last year. I am going to deliver some structural background that is relevant for the future. I am delighted that you have appeared in such large numbers, and I also truly appreciate everyone connected online. As usual, today we're going to focus on figures and Bechtle's business. Gerhard Schick, one of Bechtle's founding members, was a man whose life was shaped by these two elements: Bechtle on the one hand and numbers on the other hand. As some of you may already know, we had to bid him farewell last week. I've already answered a few questions from people from the audience today. However, many of the values Mr. Schick embodied remain deeply ingrained in Bechtle's DNA. Above all, reliability, pragmatism, and perseverance. These principles are more relevant than ever today and are experiencing a true resurgence, particularly in the capital markets, which are shaped by great turbulence.

Later in our outlook, we'll return to this subject. As you can see here, today's presentation follows the same four-part structure as always. First, we're going to kick things off by taking a look at how our business performed. We'll review the key financial figures for 2024 and for the last quarter. After that, we'll turn to our dividend and discuss the distribution proposed to our shareholders. You can read more about that in our press release. Next, we're going to talk about current developments — that means significant strategic events beyond the numbers. Last but not least, we're going to discuss what I consider the main part, and that is the outlook 2025: the context and objectives for economic development in the current year for Bechtle and the IT market. First, let's begin with our business performance. We cannot be satisfied with Bechtle Group's overall performance in the fiscal year 2024, and we've said that both internally and externally. Of course, general conditions were more challenging than ever. That needs to be said, but this does not change our fundamental objective, that is, profitable growth. In 2024, we fell short of this goal.

From where I sit, two main things were decisive. First, all year long, our SME customers showed great hesitation about investing, especially in Germany and France, our two biggest markets. A big reason was that replacement of aging PC infrastructure kept getting pushed back. In our jargon, that's the classic client business. Second, our public sector customers, made uneasy by the political climate, invested far less than they typically do and below what we had expected. And that's even though we know that in various places, investing would have been truly important. With top-line growth limited, we couldn't offset costs, even if those costs didn't climb all that sharply. We'll get to that shortly. First, let's examine more closely the top-line development I just referred to. That means how our business volume and revenue developed. On business volume — that is, gross revenue before IFRS 15 — we posted solid growth of 2.0%, while organic growth stayed at the prior year's level. That outcome is still respectable. The drop in reported revenue mirrors the strong showing of our software business, which, under accounting rules, isn't counted in this figure. Seen that way, the revenue decline isn't a negative signal.

Not at all the case. Software continues to be a major force behind technological progress, especially when it comes to digitalization and network investments. What was missing, though, was momentum pretty much everywhere — in what we call our running business, often described as our bread-and-butter business, as well as in lighthouse projects, which were still prominent in 2023. Sadly, our wide diversification, in both customer base and regional footprint, brought hardly any relief last year. As I said earlier, economic difficulties hit our two most significant customer segments and largest national markets especially hard. Still, looking at our quarterly performance gives us a bit of hope. During the first three quarters, we saw growth trending downward. You can see that in the slides behind me. The French elections in June and the continuing political uncertainties in Germany — particularly around government stability and budget approval — left a noticeable mark on our figures. In the fourth quarter, though, we hit our highest growth rate of the financial year, at 4.4%. Encouraging as this year-end development was, I would hesitate to call it a sustainable trend reversal. The fourth quarter tracked the usual seasonal patterns, albeit at a subdued level. Those patterns were also visible at a low level in 2024.

Even so, the overall reluctance to invest has not changed. Now let's examine more closely how things have developed by segment and by region. When we look at segment performance, one point stands out sharply. Bechtle's internationalization and our M&A strategy, which concentrates increasingly on Europe, show that we are on the right path. The challenges are not the same in every country. Our operations in Belgium, the U.K., and Spain did exceptionally well. Although that may not show up right away in the consolidated figures, we are succeeding in offsetting weaknesses in some national markets, at least to a degree. The restatement of prior year figures mirrors the reassignment of particular units to different segments. As we announced before, a new segment structure will be introduced beginning with the 2025 annual report, mirroring the shifts in management responsibilities that have already been carried out within the Executive Board. I will comment on that later. That takes us to earnings performance. As I said at the start, our results plainly show the difficulty we encountered. Lacking enough top-line growth, we could not offset our costs. As a result, our earnings came under considerable pressure, falling by roughly 8% year on year. Even so, our gross margin moved in a positive direction. A growing share of software and services held material costs in check, which let us end the year with a record-high gross margin of 18.1%.

But a disproportionate increase in personnel costs, other operating expenses, and depreciation offset that. We keep investing in Bechtle's future, and the only way those costs could be avoided would be to call the company's long-term viability into question. From a business standpoint, that option is purely rhetorical. Also, as I said earlier, a 7.6% rise in personnel costs is not excessive on its own. In the context of falling revenue, though, it is simply too high for us to sustain earnings at prior levels. Let's now look more closely at how EBIT developed over the course of the year. Again, we see a slight improvement toward the end of the year, driven by two key factors. Stronger top-line growth in Q4 let us offset costs better than in previous quarters. As a result, our contribution margin, an important internal metric for operational management, also developed positively in Q4. Second, other operating income came in EUR 3 million above the prior year, mainly because of higher marketing subsidies from our manufacturing partners. As we communicated earlier in the year, bonus payments in 2024 were more back-end loaded, so to speak, meaning they arrived predominantly in the later months.

The main reason for this was the weak growth momentum we saw across the whole year. We kept a tight grip on costs during 2024, and that same emphasis will carry over into 2025 without change. But, as I said before, you always have to weigh cost savings against safeguarding Bechtle's long-term viability. That brings us to the end of our review of the key financial figures, ladies and gentlemen. As a final point, I'd like to add something and move on to operating cash flow. Operating cash flow is genuinely a standout for the year. Cash flow from operating activities set a fresh all-time high of EUR 558 million in the reported year. That's almost EUR 100 million above the prior year, which was already exceptional. Free cash flow likewise reached a record figure of EUR 377 million. Although this strong showing is partly a mathematical byproduct of subdued business activity, it also demonstrates how well our continuing work to optimize cash flow and working capital is paying off, while we actively manage key financial drivers. In our day-to-day operations, we have consistently kept cash management front of mind and, as the results show, with great success. Looking at our cash flow, at the equity ratio and debt position, one thing becomes very clear, ladies and gentlemen.

Bechtle is a company with strong finances. Even with the difficulties we face right now, I'm confident that we'll come out of this period stronger, as I said. Now let's look at how our workforce has developed. On 31st December 2024, Bechtle had 15,801 people on staff. That's 642 more employees, a rise of 4.2% versus the year before. Acquisitions brought in 381 of those new colleagues, which is nearly 60% of the overall increase. So purely organic workforce growth came to a modest 1.7%. As I said before, we're watching costs closely. Our careful stance on hiring is a deliberate business choice, made so that we don't stretch personnel expenses too far amid a time of considerable economic uncertainty, while still protecting Bechtle's viability over the long term. That's the reason we keep investing in training. At year-end, 883 young professionals were in training at Bechtle, which kept our training rate in Germany at nearly 7%, essentially stable. Now let's move on to how shareholders share in profits.

Everyone on the call is well aware that our dividend policy follows one clear guiding principle: it must be dependable and sustainable. That's the reason we've paid a dividend annually with no interruption from the IPO onward — which, as you just heard, marks its 25th anniversary this year. The dividend has never come in below the prior year's figure. It was either held steady or we raised it. Those same considerations shaped our dividend proposals for the 2024 financial year. As you may already have seen in this morning's press release, management's proposal to the annual general meeting calls for a payment of EUR 0.70 per share. That keeps us at the previous year's level. The conditions behind this decision, though, are anything but ideal. Our after-tax earnings — the mathematical basis for the dividend distribution — declined by 7.5%. For the first time in quite a while, fiscal year 2024 was not another record year for Bechtle. Through a stable dividend, we intend to send a clear signal to our shareholders and to the capital market. First, Bechtle can be relied on. Across 24 years, the dividend payout has never declined, and 2024 will be no exception.

The strength of our finances and the high level of liquidity provide the backing we need for this. In addition, we have faith in Bechtle and in our business model, which has proven successful. So the dividend payout also stands as an unambiguous signal of confidence in how we will develop going forward. At almost 36%, the payout ratio sits well above the prior year's figure and likewise exceeds our goal of returning roughly one-third of after-tax earnings to shareholders. Now, as I said earlier, there is some further news that falls outside the numbers yet carries greater strategic weight for our company. These latest developments touch on three areas of real importance to us. To begin with, our multi-channel strategy and, connected to it, the related restructuring of the Executive Board. Next, the gains we have made with public sector clients. And third, our social engagement through the Bechtle Foundation, which we set up last year. Let me begin with the reshuffling of management duties on the Executive Board. Effective January 2025, we are concentrating responsibility for every distribution channel across the national markets at Executive Board level, giving each market one single point of contact. That lets us keep a sharp focus on growing our multi-channel offering in every market and on pushing internationalization further.

Our goal is a holistic market strategy that delivers optimal, demand-oriented services to customers across every channel. Internally, that's what we refer to as OptiChannel. As COO, Michael Guschlbauer oversees the business in Germany and Austria, along with all of the Bechtle Group's specialists. My colleague Konstantin Ebert, also as COO, handles every other national market where Bechtle operates through its own companies. This consistent multi-channel approach ought not only to reinforce customer loyalty further and sharpen market penetration, but also to deliver a positive economic effect by raising process efficiency at the back end. As I mentioned earlier, this is a step we are initially carrying out internally. Starting next year, though, we will report externally as well under this revised, country-specific segment logic. Now let's examine our business with public sector clients. We have noted that public clients are presently somewhat hesitant about investing in IT, yet that does not mean activity in this field has come to a standstill. The market holds plenty of very interesting tenders, and for our future business it matters enormously that we stay present and keep succeeding here, especially when it comes to cloud services.

In many parts of the public sector, there is a certain backlog. That makes it even more important for us to position ourselves clearly in this area. We are the ideal partner to guide customers toward a working multi-cloud infrastructure. As the two news items shown here make clear, we do this both nationally and, increasingly, internationally. Although the call-offs from existing and newly acquired framework agreements have not yet reached the expected level, the future potential is genuinely promising. Our most recent announcement is also forward-looking. It relates to an initiative from our newly established Bechtle Foundation. Through Female Upgrade, our Bechtle Foundation, which we founded in June 2024, is launching the first scholarship program for the long-term support and advancement of girls and women in the IT environment. The program targets schoolgirls, apprentices, and female students, as well as young professionals, managers, and experts. It particularly supports current and future female IT employees at various stages of life and career. A truly unique approach in our sector. Here we focus on measures ranging from vocational orientation all the way to career management, and this includes network events, cross-generational mentoring, practical training, and, where needed, financial support.

Our goal is to draw more girls and women into IT careers, give them support for as long as 15 years as they progress toward specialist and management roles, and assist their further development after they arrive there. By the way, we collaborate very closely with the foundation of our anchor shareholder, the Gerhard and Ilse Schick Foundation. Ladies and gentlemen, that leads us to the outlook for the 2025 financial year. Frankly, and I've said this in many discussions, talking about our prospects has never been harder for me than at this moment. It's not that I lack belief in Bechtle — quite the opposite. I remain firmly convinced that our company, like our business model, will succeed. In the same way, I'm a great believer in reliability, and let's be honest, who can make a dependable forecast about how the coming nine months will unfold? The scenarios that could play out are enormous in number and never have been broader. All of us face exceedingly limited visibility. Still, one point is clear to me. What we are seeing at present is largely an economic issue. From a structural standpoint, the IT market remains a high-growth market and thus an appealing one for the future.

Bechtle holds a strong position in this market as a forward-looking IT partner for its customers. Even so, our estimates for the current year are somewhat cautious. No revival should be expected, if one comes at all, before the back end of the year. The first half will remain heavily constrained by overall conditions. Despite today's economic uncertainties, we must invest in Bechtle's future orientation, whether through consistent IT investment in our own platforms or by courageous M&A activities and follow-up adaptations of our management organization. Macroeconomic uncertainties decisively shape our outlook for 2025, and as we all know too well, those uncertainties have even increased in recent weeks, in the year of geopolitical developments. In this respect, we should actually have to broaden the range of our expectations even further. Opportunities exist in 2025, but very, very high risks exist as well. At present, we see no reason for euphoria. That holds particularly true for the first half of the year. None of the political announcements is specific, not even the most recent ones. Much remains vague and uncertain. That is why we cannot issue any other guidance than what we have already communicated in the annual report and in the press release.

To sum things up, that means we're aiming for a modest bump in business volume. Because the software business keeps performing well, we expect revenue to come in below that business volume. EBT might fall by as much as 5%, though there are also chances of a correspondingly favorable outcome — just not until late in the year, however. In the best case, we see the EBT margin landing around the prior year's level. Ladies and gentlemen, that covers how 2024 has gone for us and what we expect for the remainder of 2025. Many thanks for listening, and I'm glad to take your questions at this point. Thank you so much, Dr. Olemotz. As previously announced, we'll begin with questions from the audience here in this room, then move to questions from the non-German speaking participants in the virtual room, and finally, last but not least, questions from German-speaking persons on the internet. To ask a question, you must be logged into the webcast. The webcast itself is listen-only. First question. Good afternoon, Dr. Olemotz. Here's my first question: I suspect you already know what I'm getting at. The present situation is full of challenges, and I believe you've done a very good job of describing those challenges in your presentation.

Do you think they're going to change? The second one is also perhaps a peek into the crystal ball. Do you believe your guidance will in fact change as the year goes on? Do you expect there'll be extra economic stimulus coming from policy shifts in Germany, which would lift the mood? Thank you very much for this question, which would probably give us hours of discussion. I'll try to be as brief as I can. I think we're seeing some developments heading in different directions and at times also overlapping. I think your first question can be answered fairly easily. We got off to a slow start this year. We had very good business development in December, which was better than expected at the end of Q3. We had the usual seasonal ups and downs, but the pattern changed last year, particularly when it came to how revenue developed across the various quarters. In December, we stepped on the gas, to put it bluntly, and in other words, that meant we had actually depleted all our resources at the end of the year and started from a low position in the new year. It sounds like a contradiction, but we've never had a larger contract for the public sector at the beginning of the year than this year.

There's clearly a great deal of uncertainty we have to contend with, and we'll need to adapt as this year goes on. Regrettably, I should say, since that's precisely what makes a solid forecast for the year so hard to put together. What does that imply for this year? As I mentioned, we expect the opening six months to be fairly soft. On a more optimistic note, we see upside potential in the latter half of the year. We don't think what you saw on the screens a few moments ago matters all that much, since the news concerning the new government's political objectives consists of goals for the future, and implementing everything will require at least a year. Short-lived shifts in sentiment in Germany ought to be viewed simply as a snapshot of the present moment. What matters to us is the long term. We hold contracts with the various public sector clients. Those contracts are legally binding, and once Parliament has adopted the budget, the public sector will begin actually requesting the services and products it has purchased. Getting the budget adopted by Parliament takes some time.

Our hope is that this takes place ahead of the summer parliamentary recess, and after that the current framework conditions must be filled in with all that is required. The preconditions look very favorable, but whether that suffices to offset the soft first half of the year is the one million dollar question. Right now, making a dependable assessment of that is extremely difficult. I think I've also answered your second question in an indirect way. My view is that our guidance stays as it is. It hinges on all the things I've just mentioned. I know it comes across as dull since I keep saying that everything hinges on the public sector business, which makes up 40% of our business, and it also comes down to our classic SMB and small business environment. Those are the product groups in which we currently face significant challenges. They were likewise the driver behind the records we posted before, during, and after the COVID crisis. Today it's a substantial challenge, since the replacement cycle is overdue and has been overdue for one to two years. Even so, plenty of customers in our client environment are hesitant to invest, even though the technological preconditions have never been stronger, because every major vendor has refreshed its product portfolios with an eye toward AI and is offering highly capable devices.

Under ordinary circumstances, those would be ideal conditions for revitalizing the client business and gaining traction. That also indicates that all the factors I just outlined will influence our business and our revenue. This applies to large clients, the public sector, and the SME and small client segment as well, which makes up 80 to 90% of our business. We need to monitor how those customer segments evolve throughout the year. Very specifically regarding the upper and lower ends, both bottom line and top line. In Q1 of last year, we had EUR 5 million received from France as delayed payments, and there were also provisions of EUR 7 million that were dissolved at that time. That will not recur. We will watch how the first six months unfold, and that is the reason our range is so wide, from -5% to +5%. Should 2025 turn out, macroeconomically speaking, to resemble 2024, then no major shift will occur. If developments are positive, then our business will likewise get a boost. That is why we chose to set that broad range.

Thank you, Dr. Olemotz. My question is about the elephant in the room, Microsoft. How much of that is already baked into your guidance? Can you quantify it? What kind of headwind should we expect for 2025? More on Microsoft. We're now hearing from other vendors that they're thinking about changing their fee structure, Cisco in brackets. Was this decision by Microsoft a breaking of the jam, so to speak? Do we expect every vendor to follow? First, that. Over the past year, we confirmed that we had this fundamental change in the incentives, which is documented in contracts by Microsoft. We ask for your understanding that we won't be able to put a price tag on it, because first of all, we had to analyze the customer bases, how many contracts and how many customers are affected and what kind of compensation mechanisms exist. I was surprised that some of the peers quite soon commented on the implications. We did our calculations now. We assume, and I'm talking about net effects. The gross effects are way higher, and I'm going to explain the differences between net and gross in a second. The net effect alone in this year, which we assume, is a high single-digit million number, and the burden will continue for three years with a decreasing dynamism, because that's the usual period we're talking about.

What that means is we've got to work through this across the coming three years. So why do we make a distinction between net and gross? The difficulties stemming from that show up in Microsoft contracts. Perhaps a number of you follow this subject closely. There are what are called CSP contracts — those are cloud solution provider contracts — and then there are EA contracts, which are the classic license agreements. Microsoft has decided that going forward, when it comes to signing EA contracts, they won't pay anything — not less, but nothing, not a thing. That's where things stand. From our side, this means converting as many EA contracts into CSP contracts as we possibly can. To pull that off, you need a high-performance cloud platform, since those contracts get activated through cloud platforms, and they only run on cloud platforms. You run Microsoft products on a cloud platform. Whether that platform belongs to Microsoft or to a reseller like Bechtle makes no difference technologically. That's the decisive point here. We have to get this done. We have to ensure that as many customers as possible can be motivated to move their consumption of Microsoft services onto a CSP contract rather than a classic on-prem EA contract.

That has an impact across the whole industry, by the way. Speaking more broadly, that leads me to the second part of your question. If you're looking to earn money with Microsoft going forward, which remains possible, you'll do so in a different manner than you did previously. Products have to be deployed. You'll measure against consumption, and consumption can be measured on a cloud-based solution, which wasn't the situation before, since you had licenses and it made no difference whether the customer was under license or over license. Today you can measure through consumption. You get paid by selling additional products to the customers whose operations you take responsibility for, whom you migrate from an EA infrastructure to a cloud infrastructure. You still receive a lot of money for that. To be in a position to do so, on one hand — and here we're discussing millions — you must invest in the cloud platform, and that is what we're doing. Simultaneously, you must train your personnel, which indeed costs additional millions. The pre-investment required so that, at the end of the day, you can handle this change business runs into millions.

The drop in Microsoft earnings, along with these investments—which show up as larger write-offs—also comes through in our P&L, since those costs flow straight into CapEx. To a certain degree, we can capitalize on it. And you're absolutely right that this pattern isn't limited to Microsoft; it's happening at Citrix too. We're having the same conversation with Cisco, though it's at a very early stage—much earlier than with Microsoft. We aren't there yet. It validates our choice to put money into the platform, because you're absolutely right. The manner in which software vendors will roll out their products, and which of those products, will shift fundamentally. Clearly, we need to ensure we retain the customer interface. There's a growing risk that Microsoft will try to reach our customer interface. Still, we should be fairly confident in saying we don't think that approach will work in the SME business, because Microsoft—and we've had these talks—faces major difficulties given the sheer volume of customers involved. We're not discussing 1,500 global large accounts, the kind Microsoft has always served directly. What we're discussing is thousands upon thousands of mid-sized companies that they'll need to support.

If Microsoft can pull that off—honestly, I doubt it. There’ll be plenty of work for us, for a company like Bechtle. Thanks for that thorough response. I haven’t—I mean, you’d been waiting a good while to give that answer. That’s why I went into more detail. I know Christmas is over. If you’re looking to adjust your reporting structure, could we get more granularity on hardware and services or consulting revenues, or will both of those stay hidden? I get your question, but that logic runs counter to how we do business. That’s not how we operate, and increasingly less so. Let me go back to what I just said regarding Microsoft. We’re firmly convinced that when we talk about multi-channel, we’ll steer and manage by regions, and that will show up in the reporting. Exactly how—well, that’s something we still have to see. There are stricter formal requirements when it comes to cash-generating units and things of that nature. I don’t want to report on that. Everything has been prepared. It’s far from trivial, but we’re doing it. It’s because we’re convinced that this regional view in the market, set against Bechtle’s strategic development, Europeanization or internationalization, is the right one.

Going forward, our emphasis must be on penetrating markets regardless of channel. That's why — I mean, this represents a paradigm shift for us, since for over 40 years the segment logic stayed unchanged, and now we'll concentrate on regions or country markets in the future, along with combining multiple countries when those countries are smaller, because we are mirroring this in how the management board is structured.

I’m not sure if I can invite the people who are speaking next in chronological order, but Mr. Wolf, I think you should go first. Or Florian Treisch. This is Kepler Cheuvreux. You mentioned revenue being flat and therefore EBIT being flat. We heard EUR 5 million in France, and we heard the effect of Microsoft organic growth and positive personnel growth. I mean, what are the supporting factors here? Does that mean you’ll need to reduce costs more aggressively over the next few months? How can we get to the midpoint? At this stage, as a service provider, we have to manage our payroll costs. That is also one of the hardest questions. To be blunt, we have nothing else. The people you let go will not return once customers begin buying again. We’ve also heard that question internally from various departments, but we need a very solid approach. If it comes down to it, you have to be able to take the criticism that you haven’t cut headcount as sharply as maybe was necessary. We are using short-term work in a few locations, as we did during the pandemic. That’s not news to anyone. We try to really ensure that the company stays viable and that costs are held down as much as possible.

You've got it exactly right—that's precisely the point. The real question is: what is the midpoint we're targeting? Let me share what I consider to be the midpoint. If we could match the prior year's EBITDA and the prior year's EBIT, that would constitute genuine success. But with business volume growth of 2%, achieving that would not be possible. Flip it around, and it means that growing by merely 1% or 2% would leave us unable to hold last year's results. That takes us back to the guidance we split into segments. There were the first six months and the second six months. In the first six months, we hold many contracts that we don't need to win anymore. Should we leverage those contracts to lift our volume—and the volume tied to them runs into the billions—then the underlying framework conditions would shift fundamentally. Ultimately, everything hinges on that. May I pose the next question, going from one French person to the next? I have two questions. First, the initial one concerns manufacturer bonuses in hardware.

What type of growth—or in the vendor space, what type of growth—is required to hit those bonuses? Have the vendors communicated that for each category? The other question is about M&A. I noticed your guidance factored in M&As. Does that mean some mergers or acquisitions are already in the pipeline for Q1 and possibly Q2 as well? Okay. The way we arrive at the development of our backend margin is by examining the prior year. I've said this before. Regarding operative backends, we didn't lose ground last year even though we didn't grow. Why? Because a lot of vendors in the markets where we at Bechtle are active were rather weak—much weaker than us. In weak and tightening markets, we outperformed vendors. We had very good arguments. The portion of backend money that came back over the last year, which was also part of the special effects Mr. Link mentioned, was then allocated to marketing activities and training. That is, we got funds from vendors so we could train our staff in new technologies. We received millions, and we reported on that during the year. In other words, it doesn't have to mean—it doesn't mean that when we don't grow, we don't have stable funding from the vendors.

Even when vendors are in a weaker position than Bechtle in the markets where Bechtle operates, we can still generate stable funding. Last year in France, for example, that was the situation. From the perspective of many vendors, France was a disastrous market last year. We faced plenty of difficulties too, though on the whole we had fewer of them than the vendors did. When you begin making your case, that works in your favor. Regarding M&As, I believe there may have been a misunderstanding. We bring up M&A in the presentations to show you that our strategy continues, but those figures aren't included. I can say I'm confident that within the first six months there will be one transaction in the system houses field, and it won't be a small one. In Germany, this industry is undergoing a great deal of change following the stagnation of prior years. Consolidation is being driven by the challenging macroeconomic situation, and it's accelerating. That's the reason our focus is on Germany. Europe is the central focus of our M&A strategy. My assumption is that our next transaction will likely be in the south of Europe, or perhaps in the east as well.

So that's where our attention is: Spain, Portugal, Italy, and Poland, more precisely — which isn't to say deals in other nations couldn't happen. Over the medium term, we still aim to have a presence in all 14 countries where our trade business operates. Mr. Wolf, over to you. Andreas Wolf, Warburg Research. A few questions. First, personnel costs. I'm not sure if this stems from the cut-off phase, since your headcount was higher than the FTEs. Could you walk us through what's driving that? My second question is about the public sector. How much of the hesitant trend could you make up in the back half of the year? When it comes to services, catching up over six months is hard, because services depend on people. Hardware might be simpler. Those framework contracts — are they for hardware or for services? The press release also notes a need to invest in AI infrastructure. The software investment tied to it is obvious. Perhaps you could explain which infrastructure components have to be adapted — networks and so on — so we get a better sense of it. It would be interesting to hear your thoughts on that.