Ceconomy AG (CEC) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to our Q2 '22/'23 results presentation. On today's call are Karsten Wildberger, our CEO; and Kai-Ulrich Deissner, our CFO. Before we start, let me remind you that the presentation slides can be accessed through our website. During today's call, we will be making certain forward-looking statements, so please refer to the disclaimer for more information. Please note that MediaMarkt Sweden's business is still included in our reported figures, but it is excluded from the guidance-relevant KPIs currency and portfolio-adjusted sales growth as well as adjusted EBIT. Karsten, the floor is yours.

Thank you, Fabienne, and good morning, everyone, and welcome to our today's Q2 results call. So let's get started on Page 5. Well, if I had to sum up our performance in the second quarter in a single word, I would probably use the word robust. We maintained the momentum from our strong start to the financial year, generating high customer demand and achieving year-on-year growth. We managed to increase our sales by around 6% to EUR 5.3 billion despite a decline in the overall consumer electronics market during the second quarter. And our earnings trend is also moving in the right direction. We improved our adjusted EBIT by EUR 35 million year-on-year, and in particular, we continued our positive development in Germany, the Netherlands and in Turkey. Now I would like to -- also like to emphasize that our measures to boost efficiency and strengthen liquidity are yielding tangible results. In the first half of the year, we increased our free cash flow by more than EUR 800 million. To put it simply, our performance in both the second quarter and the first half of the year aligns with our outlook for the full 2022/23 fiscal year. We clearly stand by the statements made in February and continue to view scenario 1 as the more likely outcome, and I will discuss this later. But before delving into the key aspects of our business performance during the second quarter, let's first examine the market environment and turn to Page #6. In the second quarter, our relevant consumer electronics market overall contracted by 3%. This downturn was primarily driven by a noticeable decline in the online sector, while customer demand for brick-and-mortar stores outpaced that of the online businesses. Other retail sectors, by the way, experienced a similar situation during the second quarter. And after COVID, we are currently witnessing a shift in consumer preference towards physical stores as customers increasingly return to the in-person shopping experiences. We as well have seen a 16.5% uptick in the number of customers visiting our stores compared to 1 year ago. And our brick-and-mortar business has continued to rebound also in Germany. And this growth has enabled us to capture more market share in the DACH region. However, our business was affected by competitive pressure in Western and Southern Europe. Despite these challenges, we overall successfully maintained our market share. And now to the key aspects of our performance during the second quarter, and that's on Page 7. In the second quarter, we sustained our growth trajectory. This was underpinned by our robust brick-and-mortar business, where we saw a solid 11% year-on-year increase in sales. And as the brick-and-mortar sector continues its recovery, online sales made up 21% of total sales in the second quarter, slightly below the previous year's figure, but still clearly above the pre-pandemic level. Furthermore, the pickup rate, a key indicator of our omnichannel approach, rose by 3 percentage points year-on-year to reach 39%. And we continue to make operational improvements in key countries. In Germany, our largest market, we increased both sales and earnings, maintaining our upward trend. We experienced similar progress in the Netherlands. Meanwhile, in Turkey, we sustained our dynamic profitable growth. And growth also characterizes our strategic high earnings Service & Solutions business. Compared to the previous year, we grew sales by 5%, raising its share of total sales to more than 6%. And our growth in Services & Solutions is a vital aspect of our strategy, which we're implementing consistently. We are also making significant strides in our new highly promising business areas, Retail Media and Marketplace. Our Retail Media offering is now available in 9 countries with 450 partners taking advantage of our platform's relevant and reach, and that number is growing. And our marketplace is showing a similar dynamic performance. We increased gross merchandise value, GMV, by 90% compared to the previous year and significantly expanded the number of resellers. Currently, 1,200 resellers offer a total of around 800,000 products on our marketplace. And with the marketplace, we offer customers an even more diverse and attractive product portfolio that complements our own range. I'm also especially pleased with our progress in customer satisfaction. As you know, we use the Net Promoter Score or NPS as a performance indicator to measure customer satisfaction. And in the second quarter, we achieved a score of plus 53 matching our record from the first quarter and improving by 4 points compared to the same quarter of the previous year. And now let me share some recent examples from the last weeks that illustrate our commitment to delivering on our transformation. Let's turn to Page 8, please. We've been making steady progress in updating our IT infrastructure. We are gradually replacing outdated and inflexible systems with new technology to accelerate workflows and provide greater service to our customers. And the latest milestone is the introduction of our new order management system in Germany, which enables us to fulfill customer orders more quickly and accurately. And the new order management system is a real breakthrough for us because it links logistic processes across all sales channels in line with our omnichannel approach. And it's a uniform cloud-based system for the entire group. So this means that we will be connecting all our national companies to it step by step. The second point I would like to make is we are also making good progress on launching new store formats. Shortly after Easter, we opened the first 2 Xpress stores in Germany, smaller format stores in city center locations that offer a selected product range, pickup service for online orders and fast repair services. And the Xpress stores are an important factor to improve store productivity and they are a great complement to our overall various store formats. As you know, those store formats range from large technology experience centers in major cities, medium-sized stores with extensive product ranges and ample services and advice. And these smaller stores in city centers complement each other where we're now ready to launch this format in Germany. The third point I'd like to make, we reaffirmed in the past quarter our commitment to sustainability as a cornerstone of our strategy. And we expanded our participation in the European Commission's Sustainable Consumption Pledge and set voluntary goals to improve our carbon footprint and promote sustainable business operations. So for example, we aim to increase the number of BetterWay products, externally certified sustainable items in our range from currently 3,800 to 6,000 by the end of 2025. And this initiative will enable customers to save more energy and promote the growth of the circular economy. And fourth, we have also introduced new innovative offerings focused on sustainability in Germany in recent weeks in partnerships with other companies. Firstly, we launched a project in collaboration with the car subscription service, Like2Drive, offering customers of our MediaMarkt and Saturn stores access to attractive electric car subscription plans with terms of up to 21 months, and the campaign was very well received by our customers. And secondly, we formed an exclusive sales partnership with Coffee B end of April, a new eco-friendly coffee system from Swiss company Delica. And Coffee B does away with traditional capsules compressing the coffee into a fully compostable natural structure. So electric car subscription, environmentally friendly coffee systems are just 2 examples of how we strive to offer our customers appealing shopping experience and explore new promising product categories. And we are determined to continue this path while maintaining a focus on cost, profitability and liquidity as top priorities. So let's turn to Slide 9, please. Our measures to counter inflation-driven cost increases have proven effective, and our CFO, Kai Deissner, will give you more details shortly. Before he does, let me highlight the progress we've made with our efficiency program, which we announced in December '22. The program primarily aims to optimize our workflows in our administrative functions. And by reducing complexity and enhancing collaboration between our corporate headquarters and the head offices of our country organizations, we are striving to become faster and more customer-centric. And as a result, we will also optimize our costs. So our efficiency program is already yielding significant savings this financial year, helping to offset inflation-driven cost pressures. And beyond that, we are building a robust organization that is faster, more cost effective and leaner. And our unwavering focus on liquidity and net working capital continued to pay off in the second quarter. So as a result, our free cash flow increased by more than EUR 800 million compared with the first 6 months of the previous year. And we significantly improved our net working capital by around EUR 640 million year-on-year. And with that, I would like to hand over to Kai. He will guide you through the financial section and give you all the details on our second quarter.

Thank you, Karsten, and good morning to you all from my side as well. Let me guide you through our core strategy as well as half year figures. First, let's examine the P&L impact of the disposal of Sweden in a little more detail. As you will recall, we announced the sale of our Swedish business to Power on the 14th of February. It is just now classified as disposal group in accordance with IFRS 5. Sweden is thus included in our reported numbers, but excluded from our guidance relevant KPIs. That's currency and portfolio-adjusted sales growth and adjusted EBIT. As you can see on the slide, the disposal of Sweden accounts for most of the difference between our adjusted and reported EBIT in Q2, with EUR 63 million impairment and EUR 6 million operating profit. Now turning to sales on Slide 12. Sales momentum was solid in Q2 with 6.4% growth year-over-year. That's adjusted for currency and portfolio changes of 5.7% compared to Q2 2018/2019 pre-COVID on a reported basis. What's behind this is successful marketing campaigns as well as strong traffic recovery in the stores. These were the main drivers behind our sales development. However, please do remember that last year in Q2, we still had some COVID restrictions in Germany, Austria and also in the Netherlands. Group adjusted EBIT reached minus EUR 23 million, that's EUR 35 million above previous year. And this were strong sales development and continued efforts to offset rising cost inflation and I'll come back to that a bit later. It is important to note that underneath this, our EBIT seasonality continues to normalize towards pre-COVID levels as already indicated in our Q1 call. That's towards pre-COVID levels but not quite reaching them yet. Please also keep in mind that our Q2 from January to March is relatively speaking, not the most important quarter within our financial year in terms of EBIT contribution. Now turning to the performance of our first half year. Looking at our H1 and despite the uncertain macroeconomic conditions and continuing cost inflation, we do stay cautiously optimistic for the remaining part of the year. And as Karsten highlighted already, we do remain on track to deliver the first scenario of our guidance for financial year '22/'23 with a slight sales increase and a clear increase in EBIT. Now on sales. Let me now turn to our operational performance on Slide 14. As you can see, Eastern Europe and DACH were the main drivers this quarter. In DACH, sales increased by 2.6% in Q2. There Austria and Germany showed positive sales development, while Switzerland was stable. Hungary reported a sales decline in a very competitive market environment. In terms of profitability, this region posted the strongest EBIT improvement with plus EUR 40 million, that's driven by Germany, thanks to good sales development and lower advertising and logistics costs. Here, our efficiency programs already start to bear fruits. Profitability was rather stable in the other countries of the region. In Western and Southern Europe, we recorded a sales decline, particularly in Italy, Portugal and Spain. In Italy, we are still comparing ourselves to an unusually high comparison base in the prior year. This is due to the end of the state subsidies for digital TV, which did support us positively 1 year ago. This base of comparison should ease from Q3 onwards. In Spain and Portugal, the competitive environment remained intense, which impacted our sales negatively. Please also note that we announced the disposal of Portugal on the 20th of April. Profitability wise, increased competition in this region, together with an unfavorable product mix, that's in particular, an increased share of GSM. In particular, this special situation in Italy explained our EBIT decline in this segment to minus EUR 47 million. Once again, the highest growth rates were achieved in Eastern Europe, driven in particularly by the strong demand in Turkey. Adjusted EBIT here improved by EUR 27 million in this region. Slide 15 highlights the performance of both our Services & Solutions and of our online sales. The Services & Solutions business remains a key strategic pillar to improve our profitability going forward. As traffic in stores improved, the Services & Solutions sales increased by 5.2% and now accounted for 6.1% of group sales. In terms of service categories, we saw increased demand, in particular for warranty extensions, consumer finance, while GSM contracts declined somewhat. We're pleased to see that most of our Services & Solutions business continues to grow. This highlights that our efforts to enhance our service offerings are really bearing fruits. Our online sales share reached 21.5% on a group level in Q2. This represents nearly 2/3 sales growth versus pre-COVID level. On a year-on-year view, online sales declined by minus 10%. Customers currently prefer to shop back in stores, leading to declining online sales across general retail as a whole. Our omnichannel proposition resonates well with customers, however, which is reflected in a 39% pickup ratio in Q2, an impressive 300 basis points increase year-over-year. As promised, coming back to our EBIT development in Q2 on Slide 16. We are very pleased to have stabilized our gross margin in the quarter to 17.2%. Our gross profit increased by EUR 40 million. The main drivers are the following. Tailwinds came in particular from lower logistics costs and a strong recovery in bricks-and-mortar sales. This enabled us to totally offset the continued pressure on the goods margin. Goods margin was impacted by unfavorable product mix, as mentioned with an increased share of GSM on selling prices. We were able to pass some input cost inflation to consumers, however, not all. At the same time, our OpEx ratio dropped by 50 basis points this quarter to 18.5% of group sales. As already highlighted in previous quarters, we do feel cost inflation in several areas like personnel, location and energy costs. We do continue to work diligently on these headwinds and have mitigated the OpEx increase with strict cost management. This, coupled with positive operating leverage were the main drivers behind this decline in our OpEx ratio in this quarter. Slide 17 summarizes these familiar drivers behind our gross margin, which I highlighted already, so I turn to Page 18. Let me give you a little more color on our efficiency programs. At the end of last year, we already announced that we were taking several efficiency measures to improve our cost structure to offset cost inflation. Those measures include, among other things, streamlining our SG&A functions in Germany and abroad, optimizing our processes through digitalization and reducing our advertising costs through joint marketing campaigns between MediaMarkt and Saturn. At the end of April, we officially announced the streamlining of our SG&A functions, particularly in Germany. In this context, we are working very closely with the Works Council to find a socially acceptable solution for our employees. Overall, we expect to book roughly EUR 100 million of restructuring cost, of which EUR 60 million to EUR 80 million this financial year. This will enable us to deliver roughly EUR 130 million savings run rate in the end of the fiscal year '23/'24. As you can see, this leads to an attractive payback period of less than 2 years for this efficiency program. Now to reported EBIT, down to EPS on Slide 19. As explained earlier, while we recorded only minor restructuring costs in the quarter, we did register EUR 72 million one-offs, almost entirely due to the disposal of Sweden, EUR 68 million. This led to the negative reported EBIT of EUR 106 million. Our financial results reached minus EUR 15 million, that's due to higher interest payments and higher interests on leases. We recorded a 36.6% underlying tax rate for H1. That's thanks to tax optimization coming from the Convergenta transaction. This transaction, coupled with the fact that we bought back most of our store managers stakes in the business also explained the decline in the non-controlling interest. Our business structure is now much more simplified with effectively no minority shareholders. All in all, in Q2, we reported a minus EUR 47 million net results, EUR 26 million below last year, mainly due to the one-offs, which I described linked with the disposal of Sweden. Our key focus remains free cash flow generation and we're pleased with the strong development in H1. Our free cash flow post lease adjustments reached EUR 244 million in H1, a solid EUR 839 million improvement year-over-year. In particular, our actions to reduce stocks paid off. Our overall stock position declined by EUR 557 million year-over-year and our stock turn at the same time increased to 8.6 versus 10.4 weeks in Q2 last year. Both of these translated into a strong net working capital inflow of EUR 236 million. That's EUR 643 million above previous year. Other operating free cash flows is normalizing versus last year. Last year was impacted by the cash out of previously deferred payments. Finally, Slide 21 highlights these net working capital improvements with our focus on stock management. Ladies and gentlemen, this strong free cash flow makes us confident in the execution of our current strategy. Still, let me remind you, in addition, we have no major debt repayment coming due at least until '26. And we do have access to EUR 1.1 billion revolving credit facilities which is still undrawn to date and has never been. This completes the financial section and let me hand back to Karsten for his closing remarks.

Yes. Thank you very much, Kai. Before I move on to the outlook and a summary of our call today, let's briefly discuss the latest changes in our country portfolio on Page 23. Look, we continuously assess and review our country portfolio, considering our positioning and how we can sustainably build on our market position. And of course, [ it's ] also important how we can focus. And after reaching a beneficial agreement with the sale of our Swedish operations to the Scandinavian company, Power, in February, we recently also made a strategic decision for our business in Portugal. By agreeing to sell MediaMarkt Portugal, which includes, by the way, 10 stores to Fnac Darty, we paved the way for a successful future for our Portugal business. Over the years, our strong local team has enabled us to perform well there in a highly competitive environment. However, our business is still too small to establish a relevant market position in Portugal. We currently rank #6 in the market, while Fnac is the second largest player in Portugal. And with our operations, Fnac's position will be further strengthened, offering excellent prospects for all employees, customers and partners. And please also note that these portfolio changes slightly alter the baseline for our outlook for the full year '22/'23. And without Sweden and Portugal, the adjusted EBIT for the last financial year '21/'22, now amounts to EUR 208 million instead of EUR 197 million. So by sharpening the focus of our country portfolio, we've also improved our overall profitability. And this brings us now to the outlook. In December, we explained that we had devised 2 scenarios for planning for the remainder of the year given the volatile uncertain economic environment. In scenario 1, we expect a slight increase in sales and a clear increase in earnings for the '22/'23 fiscal year as a whole. This assumes that macroeconomic conditions will not deteriorate and the consumer electronics market will shrink moderately at most. This was the case in the second quarter. Scenario 2 represents a less favorable macroeconomic development than currently anticipated, which would also reduce demand more sharply in the consumer electronics market. In this case, we would have to factor in clear declines in sales and earnings for the '22/'23 fiscal year. In February, when presenting our first quarter figures, we made it clear that we consider scenario 1 to be more likely. And given our company's overall performance in the first half of the year, I can now confirm that although the environment remains challenging, scenario 1 is still the more likely scenario. And that concludes our outlook for the current financial year. Let me say a few words about our Capital Markets Day plan for 2nd of June on Slide 25. Because -- to build on the momentum we have, we also want to discuss the medium and long term direction of the company with you. We will explore how we are implementing our strategy and bringing our purpose. [ Mainly ], we create [ experience ] electronics to enrich peoples' lives to life. So we will also provide more transparency regarding our business and address your questions in depth. Additionally, you will have opportunities to meet our senior operating management live and in-person. And moreover, we will set a clear midterm financial framework based on detailed KPIs. And we will explain all this in detail at our Capital Markets Day on June 2. And the event -- Page #26, the event will take place at our Xperion store in Cologne, which actually has rapidly become a hub for the gaming e-sport and influencer [ scenes ]. And we are looking forward to welcoming many of you to our customer engagement center, which is perfectly suited for this conference. With just 2.5 weeks to go, we hope to welcome you in-person at the venue or digitally via live stream. So in summary, on Page #27, ladies and gentlemen, I'd like to conclude today's call with the following. In the second quarter, we continued our strong start to the financial year. Despite general market trends, we delivered continued growth. And our measures are taking effect, allowing us to perform well in a still challenging environment. Our focus remains on customer experience. And we continue to make progress in implementing our strategy, and strict cost management and the sustainable strengthening of our profitability and liquidity remained top priorities. Therefore, we reiterate our outlook for the full year '22/'23 and believe scenario 1 is more likely. Thank you for your attention, and I'm looking forward now to receiving your questions. Thank you.

[Operator Instructions] And the first questioner is Mr. Volker Bosse of Baader Bank.

Congratulations on the great top line momentum. And the first question would also be regarding top-line, plus 6% like-for-like. Could you break out how much of that is inflation-driven? And in that context, perhaps elaborate a little bit on the -- [indiscernible] strong growth in Eastern Europe is plus 74% to put that into perspective, please? And the second question would be on the gross margin. Encouraging to see that the gross margin stabilized or even slightly increased by 10 bps year-over-year. Is that a sign? And for our modeling, could you confirm that this will be an ongoing trend in the current year? And last but not least, on Spain, a bit struggling here with the performance, as Spain has been, or was the best country in your portfolio, the most profitable country in your portfolio. So what happened here? Is this a temporary weakness currently? Or is it a structural change? And how we have to look at Spain in that regard?

Your first question on top-line inflation, Kai will deal with, as well gross margin, and I will take on Spain.

Now, before commenting on the particularities of the inflation impact on our numbers, let me remind you that in our sector, we are dealing with very short product life cycles. And thus, a general tendency for selling prices to fall over time, not to increase. So it's pretty difficult to track price developments and also inflation in the CE sector in every country. If we look to the main driver of inflation in our portfolio, that being Turkey, we estimate roughly 50% of our sales increase in Turkey to be due to inflation. The other half being a material increase of sales in that period. Then, secondly, on gross margin. Improvement of gross margin, it does -- continues to be our key focus, both in the current quarter and in the final quarter of the year. And it is our clear target to stabilize and over time even to increase gross margin again. Now on Spain, I would hand it to Karsten.

Yes. Thank you, Volker. And on Spain, you're right. Spain is definitely one of our best operations and has always been. And like in the past, let me first of all say that also Spain recovered after a dip during the pandemic. And the current dip, which is also driven largely by increasing interest rates, demand, mix shift, by the way, important. We have put a very solid plan in place and that includes the revision of our marketing plan, working on the mix, because the GSM mix at the moment is very high. We have a special focus also on online because online took a bigger hit and we are confident that this is improving. And as always, there is a strong collaboration with our partners on the assortment, running the right campaigns. And of course, we also actually keep in Spain still a growth mindset. Wherever there's an opportunity in terms of locations, et cetera, we will look into this. And that in mind, we have a clear plan to improve the situation in Spain.

Yes. May I add a follow-up, as you -- just to repeat, you mentioned the figure, I guess, in the presentation, but I did not catch it. It's about the number of store visitors. How did the store frequency develop also in comparison to pre-pandemic levels? Where are we in regards to frequency figures?

Across the board, it's in the last quarter around 16% more than the year before, which is very encouraging, and we've seen that continuous trend. If you then ask the next question, okay, how does this compare with the pre-pandemic level, that depends on country. This is still below that level, roughly 15%, sometimes, 20% depending on country. But there is an increasing trend. And let's not forget those customers visiting also exhibit a higher say conversion rate.

The next questioner is Mr. Clement Genelot of Bryan Garnier & Company.

Yes. 3 questions on my side. So the first one is on the growth. In your view, what is explaining such gap in the consumption and sales growth between DACH and Southern Europe [indiscernible]? The second question is whether on the gross margin, do you see any early signs of competition easing, both at [ Europe ] or [indiscernible] and then in Germany? And my third question is on the Retail Media. Could you give us any update on the ramp-up of this new business?

Yes. I will take question one, consumption sales growth and the comment on the gross margin. And on Retail Media, I'll also add, and maybe Kai can also jump in a bit on the gross margin. So let me, first of all, start with the gap in consumption and sales growth between DACH and Southern Europe. First of all, on DACH, we have gained market share, very happy about the development in Germany. As you know, we put important changes in place in our German operation several months ago, and they are paying off. We are very strong in our campaigns, how we run the channels. We see increasing footfall and we are taking market share. And it's also clear in terms of efficiency, for instance, the campaign we started by combining MediaMarkt and Saturn has been actually very effective, not just from a cost perspective, but also from a performance perspective. So that is very much explaining DACH and how we break away from the overall trend. In Southern Europe, I explained before to Volker, the situation in Spain. Let me turn now to an important market, Italy, where we do not see the same growth as last year. One of the major reasons is that comparing to last year we've seen basically the stop of the subsidies for Internet TV, and that has actually fueled enormous growth in Italy in the brown goods section. And that is actually something that puts a lot of challenges to us to actually change the mix faster. So what we see at the moment is a high share of GSM. And so we have a plan in place to ensure that we improve the mix, we have the right campaigns, we do the right mix online, off-line, very similar to the plan actually in Spain. And I'm sure, because we have a very strong team in place that we will manage the situation well. And on the gross margin, first of all, the gross margin definitely has various elements. Let me, first of all, point out that we have a plan in place and this is also paying off. And Kai will mention that a little bit more how we improve front margin, how we change the mix, how we work with suppliers. Secondly, service growth is an important pillar of that. And in the future -- for sure, in the future, Retail Media will also play a role. But in the short, midterm, it's definitely more work we do, say, on the product side and on services, and then Kai will add a few other things.

Yes. Let me flesh this out perhaps a bit. Karsten mentioned Service & Solutions. But in addition to that, we've been focusing on very, very operational improvements of the margin. I'll give you an example. We've negotiated and renegotiated and recovered conditions which we lost during the COVID period. That's in particular on the front margin -- not so much on the back margin, but it's in particular on the front margin, where we saw a very healthy improvement in Q2. I would also highlight increasing attach rates. Whenever we do sell devices, in particular, mobile devices, we put a very strong focus on attaching accessories and service products to this. And finally, even inventory management and stock turn does help us to recover the margin. So this perhaps just to add a bit of color to this increase in the gross margin. Now on Retail Media, we will share financial data on June 2 in our Capital Markets Day. But let me highlight where we do stand operationally. We're now live in 9 countries in Europe with 4 products. That's sponsored product ads, A+ content and types of different reporting. Again, we will talk about the details on June 2. But key highlights to remember, live in 9 countries with 4 products live on the market.

The next questioner is Mr. Stephen Benhamou of BNP Paribas Exane.

I got 2 questions. First, on the portfolio rationalization. Are you satisfied about the new scope? Or should we expect further disposals? This is my first question. Second question is about the working cap. Are the inventory optimization and improved payment terms sustainable? And if so, what level of working cap should we expect going forward as percentage of sales?

First, on the portfolio side, we are happy with the current portfolio as it is. As I said, we have made 2 major steps with Sweden and Portugal, because in both situations, this was not the best fit and it allows us more focus. There were always a lot of questions, especially around Sweden. We are coming our way. We're finally successful. But now we have the right market mix to focus. Obviously, we continuously look into the portfolio, but that's the current situation. On net working capital, Kai will give a bit more details to it. Let me emphasize, with all the work we have done on net working capital, we are substantially strengthening our capabilities to run better the stock turn, managing also the aging of the stock much, much better. So you will also see a much improved aging of our stock situation. And of course, these capabilities that we use, that also includes data and how you use systems, et cetera, and automate, et cetera, is going to continue, and then Kai will add a bit more color to it.

Stephens, to start with the results, first of all, and then I'll come back to a few more drivers behind this. As Karsten mentioned, optimizing net working capital and in particular, stock management, is a key focus that we have. And yes, for the full year -- for the full financial year, we do expect a positive change in net working capital, roughly low triple-digit million euros. That's what you should assume for this year. Now let me highlight perhaps 2 or 3 more drivers behind this also because you mentioned them. We currently see no deterioration in our payment terms. We see no deterioration in our payment terms. And perhaps one other element, you may be aware that we've optimized our inbound logistical infrastructure, this being able to shift to direct supply from our suppliers, which again does help us to improve stock turn. So just to give you 2 examples, perhaps what's behind this. And just to repeat, end of this year assumed a low 3-digit million euro net working positive swing. I hope that answers your question.