Cicor Technologies Ltd. (CICN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Annual Media and Analyst Conference Call and Live webcast. I am George, the Chorus Call operator. [Operator Instructions], and the conference is being recorded. [Operator Instructions]. At this time it's my pleasure to hand over to Alexander Hagemann, CEO. Please go ahead.

Good afternoon. Thank you very much, George. Yes, good afternoon, ladies and gentlemen. I'm very happy that you are here in large numbers. So, that is very pleasing and shows a certain interest in the company that all of you have. So, it's a big pleasure for us, that's Peter Neumann, our CFO; and myself, to present the highlights of 2023 to you. First of all, for those who are new to us, like usual, I spend just a couple of minutes on introducing the Cicor Group and the most important thing is that what you find from Cicor is high-end electronics, developed, manufactured by Cicor and with a total focus on 3 markets. These 3 markets are the medical, industrial, aerospace and defense markets. The fastest growth and we'll come to that later, we had this year in the medical sector, it's now 29% of our sales. We have very strong business in areas like surgical robots, smart drug delivery systems. We have also very high growth and expect further very high growth in the aerospace and defense sector, where we support safety, reliability, communication, on many different platforms for our customers. These are the 2 areas that are specific focus because here, we cannot only differentiate ourselves because of strong regulation, very high-quality requirements. This is also where we have this very close synergy with our AS Division where we are manufacturing high-end substrates. Still the largest area growing a little bit slower than the others, and especially at the moment, is the industrial sector. Still 39% of business, where we are driving electronification, miniaturization and automation. Cicor as a company, we are growing for quite a few years now, quite strong. You will see the numbers a little bit later. We are on a growth trajectory, very important for us. It's a combination of external and internal growth. But even more important than top line growth is margin expansion. And what you will see and Peter will explain more in detail is that we have achieved the highest EBITDA margin ever, the highest core EBIT margin ever for many, many years. What we are doing is that we are very close with our customers and we are very close with our customers for a very, very long time. It's all around the customer and it's all around the products that they want to have developed, where we support them that they need to be brought into manufacturing. This is what we do for them, manufactured and really we are with the products until the end of their life cycle. So, being a strategic partner to our customers over the life cycle of a product, this is what we do. And we are doing that with an expanding footprint, and I mean expanding because we have the ambition to be market leader in our target markets in Europe. And here, we are very strong, Switzerland, Germany and the U.K., where we have just adjusted the process of acquiring 2 new sites. So, now let me switch over to the highlights of 2023. Yes, the financial numbers were extremely pleasing for us and you will see definitely then the details from Peter. Also in the present environment, a positive book-to-bill rate, so book-to-bill ratio over 1, is critically important to us. It has come down in the second half from 1:1 to 1:03. However, we still see a positive book-to-bill ratio, which is exceptional because of the very high bookings in previous years during the times of the material supply crisis. Now, most industries are working down their order books, we don't. We have still an order book of about 1 year. Our market focus extremely important and you will hear that again and again during these presentations. You will also hear more about what we are doing in M&A. What is important to us is that we are acquiring the businesses and then we help them to outperform. And that's what happened also in the past year that the acquired businesses have not only achieved our expectations they have overachieved and outpaced our most optimistic expectation, I have to say, as far as top line growth and margin expansion goes. We have done other important things during the year, like the strategic partnership with Clayens. I'll say a few words about that later. And at the beginning of the year, the expansion of our factory in Vietnam. We will continue to grow in 2024, that's our clear expectation and we'll come to that later. Now, I've mentioned already our target markets, industrial, medical, aerospace and defense. And if you look at the growth rate of Cicor overall, which is 24.5%, then our strategic markets, there we have grown 28% with the highest contribution out from the medical market, with a growth of 43%, and that is in Swiss franc, 43% top line growth in the medical market, very, very important for us. Again, the other 2 markets have also seen very good growth, albeit at a lower rate. The nonstrategic markets have also grown but at a much smaller rate, at a rate of 9%. Now, if we go by region, Switzerland still is and remains a very important market for us. We have seen growth in Switzerland but slower growth than the rest, and that is fueled by M&A mostly by the consolidation of our division and the businesses that we had acquired at the beginning of the year from Phoenix Mecano. So, that has led to an increase of the European share. The A when Peter presents the EMS division, 90% of sales and growing has made very, very important steps forward, both operationally and strategically. The Asian share have gone down from 14% to 11%, which means the total number has been pretty much stable. Why didn't we see growth? The reason is that there is an important customer who did destocking already in 2023. So, that's a customer who is coming back to normal in '24. So, destocking after the component crisis has been resolved is something that is not starting this year. You see here one example, it started last year already. If we look at the 2 divisions, of course, you will see the detailed results later. Operationally, what is most important for us right now, winning new customers. We are in a situation where many customers are seeing a slowdown in demand and we are compensating that by winning new customers. I've said it a few times, we are winning new customers at a rate that is about 5x more than some customers or some business that are lost. Also, our progress in operational excellence and working capital efficiency is very important, has made a big contribution to the numbers that you will see later in detail, especially the EBITDA margin of the EMS Division, but also the very pleasing free cash flow that we are able to report. We have just closed in January on STS Defense, I will go into detail a little bit about that company and I mentioned the partnership with Clayens. Clayens is one of the world's leading manufacturers of engineered polymer components. And together, between Cicor and Clayens, we are able to be a true one-stop shop, for example, for smart drug delivery devices. One of the largest and as we believe, in the next year's fastest-growing segments of the medical industry. The advanced substrate division, although it's only 10% of sales, still plays a very important role. And I mentioned that in the beginning, when I was telling you about our ambitions and our success in aerospace, defense and medical, because specifically for these applications, the AS Division manufactures substrates that are highly differentiating, that division is a true technology powerhouse and it supports the growth of the company overall. Going into the operational details, you have seen a little change to the previous year in the division. That is the result of an excellent progress in not only operations, also on the margin side of our PCB production, whereas the thin-film substrates sites were suffering, especially from shortage of personnel, so they couldn't deliver all the orders and some is shifted into 2024. Now, as I've said, I'd like to give some update on M&A, what we are doing here. And some of you know this picture already. M&A is one of the 3 pillars of our strategy. The first one is the focus on our 3 core markets, and we repeat it again and again, we are really extremely disciplined here. Then it is the building of strategic customer relationships, I have mentioned how we are partnering with our customers throughout the life cycle of the product and the third is M&A. And let me go in detail why M&A is such an important pillar and why we can show to you that value can be created through M&A. We are seeing a market that is large, that is extremely fragmented, that does not have a clear market leader. So, you see the top 10 companies represent only 40% of the total market. These are 2023 numbers that we are having from the industry. So, a very fragmented market where, however, there is a very clear rationale for consolidation for many good reasons. We are in a very large market. Last year, the European EMS market was EUR 57 billion, it's a forecasted growth rate of 6.8% annually. We saw last year somewhat bigger growth, this year we have to expect somewhat lower growth and a normalization than EUR 25 million. Worldwide, the core segments that we are serving, so medical, aerospace, defense and high-end industrial. So, that is the high mix, low volume segment of the market that we like most, because it's the most sticky customer relationships and most profitable. They represent in Europe, a relatively high portion of the market, 40%. So, it is really a large growing market that is fitting exactly to what we can do. As I mentioned, this is a market with really high customer loyalty. Customers just don't want to switch suppliers, they are high entry barriers, especially in mission-critical applications and that is also one of the reasons for consolidation. There are very clear economies of scale. We are showing also in our numbers that better utilization of factories of equipment drives productivity in a very clear way. So, we have a long-term positive market development and we expect that years from now, we'll see a more and more consolidated market. We have announced 2.5 years ago that we would complement our organic growth strategy with acquisitions, and we have delivered. We have started to deliver end of November '21 with our first acquisition as most of you know. Six months later, we have acquired our first German target, then half a year later it was our second German business, 2 months later, carve-out of well, comparably small but strategically important business, thin-film business of AFT microwave. Nine months later, we have closed on the acquisition of STS Defense and 1 month later, we have signed and closed the acquisition of Evolution Medtec. Now, TT Electronics is the latest news, we signed that transaction last week and expect to close by the end of the month. Let me go into these 3 transactions and why they are so important for us. I mentioned already that out of our 3 target segments, especially aerospace, defense and medical, hold the biggest promise for differentiation of Cicor throughout the whole supply chain where we have very strong contributions and thus, it is also the opportunity to expand profit margins further. STS Defense Limited is a very high-tech tests, engineering, manufacturing provider for mostly the U.K. aerospace defense industry. It is a company that realized GBP 27.5 million of sales in the fiscal year that ended in the middle of 2023 and they have strong operating margins ahead of the average of Cicor. And, as we mentioned at the time, the integration of STS Defense leads to an expansion of the overall Cicor operating margins. Now, STS Defense Limited is extremely focused on engineering. So, the offering that we can now make to our customers is the development of complete systems and the manufacturing, something which is very unique in the U.K. and the U.K. is the third largest manufacturing base worldwide for defense products. So, it is the #1 market in Europe to serve. So, then we finalized the acquisition of Evolution Medtec, This is 25 people, but these 25 people in Bucharest do amazing things. They develop wearable devices, Class III, so highest security medical devices, implants, they are having an enormous ability and that's why we were extremely glad when we were approached by the owner of the company, who we know for a very, very long time, and he offered his business to us. These end-to-end engineering services together with the engineering power of STS, double our R&D capacity. So now, through these 2 transactions we have doubled our R&D capacity with a strong focus on medical in the case of Evolution Medtec and aerospace defense and in the case of STS Defense, aerospace defense. So, we are building extremely strong platforms that starts with product development and lead over to manufacturing products. Now, why is also the carve-out of the 3 manufacturing sites from TT Electronics so relevant for us? The first, it's 500 persons, it's GBP 21 million of business -- sorry, that's the price we paid, it's GBP 70 million of business and growing. And why does that fit so perfectly well into Cicor? It fits because we really need capacity for our existing aerospace defense customers in the U.K. And the sites that we acquired from TT Electronics, they are profitable, not as profitable as Cicor but they are profitable and they offer enormous potential for growth. That is true for all 3 sites, the 2 U.K. sites and the China sites that we are acquiring. And that is the reason why we can now announce that the manufacturing capacity that we offer at Cicor is growing from CHF 500 million to CHF 700 million. So, that transaction also makes us the market leader in EMS services in the U.K. and the aerospace defense market leader in Europe. So, what you see here, I won't go into the details as we are focused and we are disciplined in our M&A approach. Our M&A approach is all about driving synergies, managing risks and creating value. And so far, so good, it has worked very well as you will see in the financial results that, Peter, you will present now.

Thanks a lot. Let me lead you now through some financial results. Overall, the results speak from south. If we start with a long-term view, you can see that the growth strategy that we announced in 2021 is coming alive and you start to see this in the numbers going up. You can see nicely visually here on the long-term chart with Cicor's breaking revenue and profitability records and also, I think, especially, we are consistently building margin in terms of EBITDA progression. One point also as we have seen a lot of cost, well, closing events, STS, Evolution Medtec and the TT Electronics IoT carve-out have no impact on our 2023 results, so, none of those you will see in our financials. Let's dive into the 2023 details. First, very solid order intake, book-to-bill of 1.03, and we have close to one year of orders on hand, overall order book is at record levels. Revenue, we have grown on a reported basis, 24.5% at constant FX 27.5%. So, the Swiss franc has gotten stronger over the year against most currencies, hence, you see a negative impact there of 3%. What I like, especially on the top line, is the balanced contribution of an organic growth of above 11% and the M&A contribution, so, this balance is very important, and we want to continue going forward. On the profitability, strong progression as we have been delivering economies of scale and the focus on our core segment is paying out. We are looking into our business from 2 divisions. The EMS division is by far the largest division with now close to 90%. It has broken a new record with close to CHF 350 million revenue and EBITDA margin of 12.5%. The AS Division is a critical key competitive differentiator contributing in terms of technology to our core segments. What is really pleasing on the AS segment is how it has been coming back to growth in the second half and delivered a very, very strong margin progression in the second half. For perspective, second half AS was plus 400 basis points versus a year ago. So, really back on track with this business. If we dive into the detailed P&L, you can see the material margin, but we have a small improvement as we are executing our focus on the core segments and our pricing activities. Now, the biggest improvement was coming from operation expenses, 100 basis points. Clearly, there you can see our excellence program as well as the economies of scale as we are growing our business. If you go further down, depreciation amortization, clearly, we use our assets more efficiently. The next slide, you will see what we strip out in our core results. So, amortization of M&A goodwill and intangibles where we're really amortizing well in line with the plan and it's mainly the access acquisition. A couple of words on the financial results and the financial results are the key change, from 2022 to 2023 is driven by the negative FX. So, we see a CHF 3 million higher negative FX effect in 2023 because of the strong Swiss franc. And taxes, taxes went up for 2 reasons. Obviously, our absolute profit is significantly higher and secondly, there have been some external changes, external tax effects mainly in the U.K., but also in Romania. If you go to some details here, you see on the sales side, the breakdown, the first number is acquisition. So, this is the acquisition of the EMS business of Phoenix Mecano that we started consolidating as of January 2023 and also 4 months of S&T giving us CHF 51 million more. You see the negative FX impact of 3% as mentioned and you see the organic growth drivers, mainly from EMS. But as mentioned, while AS is negative overall for the year it had a very low first half, but the second half is already back into the growth mode. Balance sheet. Balance sheet is really important because we are well financed. We have a very strong balance sheet and we have very moderate leverage. If you look into details, you see that we have optimized operating net working capital and we have been driving efficiency in our treasury activities. What you can see is, despite a business of 24.5% larger in terms of revenue, we have managed to slightly reduce the total size of our balance sheet. And you can also see that we are very lowly leveraged with a leverage below 1 and have only CHF 43.5 million of net debt. Clearly, we are ready for the next round of acquisitions and the announcement over the last couple of months shows that we are executing along our ambitious growth plan. Cash flow. Cash is king, we all know. What you see here is that because of the efficiencies we've been driving, we have been returning and really delivering strong free cash flow. The core number is the free cash flow excluding acquisitions, we have been delivering CHF 26.3 million of free cash flow. The other impressive number is the free cash flow up solutes CHF 4 million. So, with our operational cash generation, we have more than paid even for Phoenix Mecano, the EMS business and AFT and delivered a positive free cash flow, including these assets. So, really strong performance and what we continue to drive going forward. Operating net working capital. We talked with a lot of previous discussions, we have invested in 2022 to protect our customer base and increased our inventories as the supply chain normalize as we are driving operational excellence, we have been able to reduce it as a percentage of revenue from 35% to 30%. You can see that if you take out the acquisition of Phoenix Mecano and the AFT business, we have even reduced the absolute operating net working capital. So, really, really strong results and we're getting much closer to a 25% to 30% that we see as our goal going forward. CapEx in line with the midterm guidance we have delivered 3%. We had no major capacity increase and we will continue working along this line as a CapEx of around 3% as we announced in our midterm goals. Return on invested capital. This is an important measure. We used a lot as internal steering KPI, it really rallies the teams around growth, profitability and capital efficiencies and the mix was coming nicely together in 2023. We have been growing revenue by 24.5%. We have been driving profitability 130 basis points and we have basically grown our invested capital significantly below the core EBIT number, driving in the end that we are close to our 15% per midterm guidance. For everyone here with key figures per share. This is important because as you recall, we have issued a semantic convertible bond, hence, we look at earnings per share and all numbers, core earnings per share and including fully diluted semantic convertible bond. To note, as of January this year, all holders of the bond can optionally convert and we have seen, obviously, first shareholders converting into shares. But here on a fully diluted basis, core earnings per share, we have shown for this year again, that we can show a growth of 14%. A word on acquisitions. The acquisitions we closed in 2023, where the Phoenix Mecano, EMS business that we bought and the AFT microwave carve-out, you see here the details 2 points that I think are important to mention. One is these acquisitions came with a fairly low goodwill. You see it here of CHF 1.1 million. Basically, we have bought them for close to asset value, that's one. The second one is, you see here the direct costs related to acquisitions. We have, because of our pipeline of acquisitions really developed a playbook to execute acquisitions with moderate costs. So, for the 2 acquisitions, we have paid less than CHF 600,000 of transaction costs. So, to wrap up, 2023 was an excellent year. We continued growth, balanced organic, inorganic, we expanded EBITDA margins, and we have shown that we can deliver sustainable free cash flow, all that is important as we go forward into this year now.

Thank you, Peter. So, what we are seeing is that after a record year '22, '23 was not a recovery year. Now, '23 was building on another record year in '22 where we had grown already 30%. These are the 3 relevant numbers, 25%, 40% and 53%. 25% top line growth, 40% EBITDA growth and 53% core EBIT growth. I think this is how we understand that we can leverage the business. That is the result of 4 important pillars: organic growth by using our USPs in our 3 target markets, M&A-driven growth in a very disciplined and focused manner that is accretive from the day of closing, operational excellence, supporting not only better performance of our existing businesses but also driving the synergies from the newly acquired business, and Peter has mentioned it, capital efficiency, minimize the balance sheet to drive the returns that we have on our invested capital. We will continue in that way. If we do an outlook in 2024, we are seeing a strong order backlog. We are seeing, as I mentioned, many new projects entering serious production. We see on the positive side also, of course, the effect of the acquired companies that we've just presented, 3 companies that are all consolidated within the first quarter, even if some will only be consolidated from the end of the first quarter onwards. But we also need to be very clear that we have also headwinds. We have headwinds from the appreciation of the Swiss franc and even if it appears quite stable right now, a lot of that appreciation has happened towards the end of last year. So, we will have to work at our organic growth against the appreciation for most of the year. And we have a dampening effect as demand declines from some customers related to smart building and other industrial sectors. Now, if we include everything, if we include the consolidation of new businesses, our expectation on currency, our expectation on the overall economy and customer demand put it together with our order book, we are seeing sales expectation of CHF 460 million to CHF 500 million. Pro forma, it would be more. But as some of the acquisitions are only consolidated towards the end of Q1, we will be limited most likely to a number slightly below CHF 500 million and an EBITDA margin in the target range of 10% to 13%. And let me remind you again the acquisition of STS Defense will lead to an increase in operating margin of the group, whereas the acquisition of the 3 entities from TT Electronics will have a somewhat dilutive effect in the beginning at least. So, overall, you can see that likely there will not be a major shift in the operating margin that we see. We have announced our midterm targets, and we have published them in December last year. We don't change them for now. We leave them unchanged until we really see the full effects of the newly integrated businesses. So, for now we leave the numbers there, you see that as far as profitability is concerned we are right there. As far as organic growth is concerned we have overachieved our midterm targets last year. This year will be more challenging in organic growth. And we are very close on the other targets where we see ROIC almost there, our net debt is significantly below the 2.75 CapEx, we are right in the range. And with what we do now, you can also see that the revenue targets getting into a good range. So, what do we see in Cicor? We see strong markets driven by mega trends, robust markets, and I'm here, I'm talking about those 3 target markets that we see, medical, aerospace, defense and industrial. You see the effects of our buy-and-build strategy. You can see it really fully in '23 numbers. And in the meantime, we have experience in doing these transactions and growing the company organically. So, we have a strong and most importantly, stable team right now. So, thank you very much and with that, I'd like to open the forum for questions.

[Operator Instructions]. Our first question comes from Reto Huber with Research Partners.

I have 3 of them. First one is, I mean, yes, your order book is full and I was wondering how is it developing year-to-date, maybe by end market, can you already see a pickup organically from the aerospace and defense sector? Then secondly, the integration or acquisition of TT Electronics, I mean, this is aerospace and defense mainly, as I understand it and then you have one production plant in China, and I was wondering is that a little bit sensitive and are you planning to sell that part of it? And then third one, the tax rate, can you give us please a guidance for this year for the tax rate?

Okay. Let me answer the first 2 questions. The third one, I will hand over to Peter. So, how did we start into the year? Of course, the year is only 2 months right now so this is very early. But we see continued strong development in aerospace defense, I think that is just a megatrend that is there to stay on for a few years. The other areas are exactly what I said, it is a mixed picture. It's a picture where we're seeing some areas like everything that's building related with some headwinds, medical industry more stable. Now, on the TT acquisition, one of the 3 sites is entirely aerospace defense. That's 1 of the 3 sites with roughly 40% of total revenue of what we acquired. The other 2 sites, one in U.K. and the one in China have nothing to do with aerospace defense. It's pure civilian applications and, of course, we need to keep that totally separate from everything. You have normally very well protected IT systems shielded from the rest of the company wherever you have security relevance things. So, China is not an issue as it's only medical and industrial products.

Look, it's a very good question on the tax rate. Obviously, you can see some of it in the disclosures in the detailed tax disclosures but in a simple word, if you strip out some, let's say, past and onetime effects of the external tax rate changes, for example, that are impacting our tax assets and deferred tax asset and liabilities, then we would have been in 2023 at the same effective tax rate as in 2022. So, that's one. So, it's around 27.5%. And look, on your guidance, I mean, we definitely want to be in this range or further improve over time.

Our next question comes from Patrick Steiner from Kepler Cheuvreux.

It's Patrick Steiner from Kepler Cheuvreux. 2 questions from my side. Firstly, in the press release, especially you mentioned the temporarily lower demand from customers in the smart building area and other industrial sectors. I mean you answered this partially already, but I was just curious if you could give us more information about the specific industries you see weakness in? And also about what kind of magnitude you're talking about and when do you expect this to change or recover what are you seeing there? That's the first one. And the second one, I mean when talking about TT Electronics, it seems to me that you're implying that the acquired capacities of TT Electronics are substantially underutilized and that the acquisition and the demand coming from your customers can change that. I was curious if that's true? And also how this would affect the operating margin of the target company.

Yes. 2 very interesting questions. On the first one, it is true that we really see delays in customer orders mostly in everything that's building related, but also some areas that are more towards normal manufacturing equipment but the building-related issue is the biggest. How big that is, it's difficult to quantify because it's some number that is moving, it's not the same month after month. But we clearly have seen in the last quarter in this market book-to-bill rate well below 1%, maybe in that segment, clearly below 1. When can we expect that it's recovering? As I mentioned, we have one very large customer who had already reduced his inventory a lot last year in '23 so, that's included in the numbers and helps us with a somewhat lower base from which we are coming. And everything we are seeing indicates that, in the second half, we should see a pickup also in these markets because it is not only demand driven but it's also driven by the inventory cycle that customers are reducing their inventory. Now, your statement on TT is absolutely right. The beautiful part of that transaction is that we are acquiring a business that is 100% mark on in our strategic focus that is profitable, albeit not at the levels that we are used to at being heavily underutilized, and that's beautiful. So, we are buying the business for a significantly lower cost than what we would have to pay to install the capacity. So, if you wish, we are buying the capacity and get the business for free. So, that's the beauty of this transaction and that is what will drive this. However, we have already identified in our integration plan, very considerable cost synergies and also the business started into this year positively. So, we expect that even on a stand-alone basis, the margin would already increase. So, it's a beautiful perspective, this is why we are so confident that made us announce it, that the business should be close to our average operating margins rather soon.

Could you maybe give us some kind of bridge from the current operating margin and how large is the driver of increasing utilization and on the other hand, also in cutting costs? And where would you like to -- I mean, you mentioned you want to get close to the group's operating margin, but how much basically potential you see from both increasing utilization rates currently and where do you want to get it? And also from what kind of cost savings and what kind of [indiscernible] realize?

What I can say, please allow me not to talk about too many details, but what I can say is, Cicor is a very lean company. We are driving our business processes in a lean way and this is, for example, that corporate services from Cicor are much lower cost than corporate services in the present environment. We also clearly have synergies in some areas that we are exploiting but please allow me not to go too much into detail. Let me only say that now we are exactly at what we stated in our press release, we are talking about mid-single-digit EBITDA margin and I'm quite confident that we will bring this to a high single-digit number already on an annualized level in the last quarter of this year.

Our next question comes from Bernd Laux with Zürcher Kantonalbank.

The first one is, do you intend to deliberately give up a portion of the acquired business of TT Electronics? The second question is regarding the larger acquisitions of the most recent time. You've now put together capacity available for sales up to a level of CHF 700 million, do I believe it's right that you will be busy integrating those companies for the next, say, 9 months so that we should not expect any further larger M&A deals before the end of this year? The third question also regarding the acquisitions. If I put together your existing end of 2023 net debt position plus the indication for purchasing prices paid, is it fair to assume that your net debt-to-EBITDA ratio will be slightly under 2x by the end of this year? And the last question, you made significant progress in terms of net working capital reduction in the previous year. Do we expect further improvement this year or will that be overshadowed by the integration of the new entities? And I suppose they are not as efficient in handling net working capital as Cicor is.

Thank you for your question, Mr. Laux. Let me answer the first 2 questions and then 3 and 4, I'll hand over to Peter. We see no reason why we would have to give up some of the TT business because what they have done over the last 2 years is already managing prices, managing the customer portfolio in a way that we see a pretty healthy business. We see actually a business quite interestingly that has done a turnaround, that is really on a very positive trajectory and therefore, you might ask why are they selling this business now? And the answer can only be that -- and we have the same situation by the way, with the Phoenix Mecano businesses. It's the best ownership strategy, it's a best owner strategy. So, TT didn't feel that they are the best owner of the business moving forward. We don't believe that we have to give up some of the business. How busy will we be with the integration? So, integration is already happening, already now. Of course, there's no gun jumping but we are already aligning all the work streams and honestly, we have very capable teams in the different countries. We have a very capable operations team in Asia helping us to integrate and, by the way, also an extremely strong local manager from TT who is the local MD helping us to integrate that business. We have a very strong team from Axis Electronics and FTS in the U.K. that is helping us to integrate these 2 new sites. So, from a corporate perspective, like the people that are sitting here, I would not exclude another transaction this year. It's nothing that we have to announce, absolutely not. But I would not exclude that because honestly, as these are businesses from TT that we know really, really well. It is what we are doing for a living, that's what we are breathing, eating, drinking. It's that type of business, and we really understand what needs to be done, therefore, I don't see that's too complex of an integration. So, for the next 2 questions, net debt/EBITDA and net working capital.

Look, on the leverage, including acquisitions, yes, you're right. I mean we have a strong overall cash performance so, I think it is fair to assume that our leverage has been clearly more in the range of 1.5 to 2 million but clearly below 2. So, that is just the math of the current number, if you take the guidance, if you take what we disclosed on the purchase prices or market multiples are you get into this range. And in operating net working capital, a very strong team that we have really now, very disciplined processes. The supply chain situation is easing so, I would expect that we continue to optimize, but I wouldn't expect such to jump like from 35% to 30% now from 30% to 25%. But clearly, we will go in this range over the coming 2, 3 years.

Our next question comes from [indiscernible] Capital.

I would ask my questions one by one, if that is okay for you. Regarding the order book and the order situation concerning also the lower book-to-bill ratio of 1.03, is there any cancellations you have seen in the orders or in the order book in the last weeks or months? Or is that more or less fully due to normal cancellations?

We don't see any cancellations. So, we don't have any cancellation, we do see some push-outs where the customer says, okay, what I ordered for January, can you please deliver in February or so? So, that's what we see but absolutely no cancellation. And the new orders, I also have to say, are, of course, sometimes driven by very large orders. Large orders are very typical for aerospace, defense, where you can book at CHF 20 million order, for example, and that will change the number for a quarter. And if you don't have such a big order, then you will see a book-to-bill rate, which is lower. But no cancellation, just some pushouts that we see and customers that are revising their forecast downwards. Again, that is really mostly in building related activities.

And then concerning growth in this year, you also mentioned in your presentation that organic growth will be some more challenging this year. Can you give us a feeling of how will be organic growth and also, what is your expectation in terms of the inorganic effect also from the acquisitions last year to have a more clear picture concerning the revenue guidance?

So, if you're looking into what we guided, I really would like to restrain now from going too much into detail here. Why? Because each of the numbers that we are compiling is a bandwidth, is an upper and lower scenario. And then we are combining these scenarios and then we are devising the bandwidth that we see. And therefore, it is difficult to say. What you can say is clearly that, of course, the STS Defense, GBP 27 million that will be not in for the full year. We only closed on that end of January. You see that the GBP 70 million coming from TT will be only there for, I don't know, 8 or 9 months. So, that's the contribution. Then you also see an organic growth contribution against an appreciation of the Swiss franc. But I would rather expect that the organic growth is at the lower end of our midterm target or maybe even somewhat below that. Whereas last year, we had organic growth above the guidance on our midterm targets. So, therefore, mid-single-digit organic growth, that's something which looks realistic for the year to me.

But before FX appreciation?

Yes, yes, yes. Before FX.

[Operator Instructions]. Ladies and gentlemen, there are no more questions on the phone.

So, thank you very much for your interest, for your questions that we have, again, it was an extremely pleasing, also an extremely busy year. I'm extremely glad about the team that I have that is delivering these results. We should not forget that. The teams on all levels which are just doing an amazing job and that is one of the aspects that makes it so much fun to run Cicor as a business. And we stay very busy as you have seen with the announcement that we have made, but this is simply delivering on the strategy that we have announced and we expect to continue doing that. So, thank you all very much. Many of you we will see virtually or in person throughout the year. So, thank you very much. Have a great day.

Ladies and gentlemen, the conference is now over. Thank you for the Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.