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

So a lot of the discussions already started. Almost everybody is here. And between now and [indiscernible] thanks for coming. Thanks for coming in good numbers. I must say it's a very exciting day. Definitely very exciting day for me and my team because last night, our Board has approved our new Strategy 2028 Creating Together, and we're very happy to present to you what we intend to do. So can everybody hear me? Or would I have to speak up more? Is it okay? Okay. Yes. So we'll talk about, of course, a brief introduction about the company, introduction to our strategy work that we have done. Then some of the core elements will be presented by my colleagues, about organic growth, the market. Stefan will do that, Marco on operations. Peter will discuss M&A and mid-term targets, and then there will be a quick summary and as I expect plenty of time for a discussion. So let's start. Most of you, of course, know Cicor. So there's not too much to be said in general. This is just a few highlights. Cicor is, in fact, the fastest-growing manufacturer of electronics in Europe. And we'll come to that in a minute -- in a few minutes. It's a big market we're in. It's a market of many players, and we are growing pretty fast. You see that 25% average sales growth partially, of course, from acquisition and also with a good organic growth. Earnings per share developing very well that the first half number from what you see, is 95% above previous year. Free cash flow increasing fourfold over last year as the result of net working capital reduction and EBITDA. What is especially important for me is if you look at sales and EBITDA guidance despite everything we hear from the market we did not have to change that we would not have to revise that downwards. For us, it is about the markets we serve, the customers we serve and the markets we serve. And you will see that on the next 3 slides, we are, for years now, very focused on the key verticals that we are seeing as being the most attractive. And here, we will give some more details from Stefan after this. Today, it's an almost evenly balanced split. So we have seen a big increase in the share of Health Care Technology and the share of Aerospace and Defense. And the share of Industrial has gone down, not that the business has shrunk. It has just grown [indiscernible] . And what do we mean by focusing on these verticals? It is about building strong platforms. It's about building platforms that are appealing to the customers, we have a true competitive advantage and where we can offer exactly what the customers need. And their position like the one acquisition of Evolution Medtec, an engineering firm that we completed in February. We do acquisitions to strengthen our platforms. It's not only about the numbers and the money, it's about strengthening our platform. And that was incredibly important to make us stronger as a development partner to our medical customers. We have in Europe -- and that vertical already achieved #4. And clearly, we are aiming for more. Now Aerospace, Defense, our positions are stronger, growth mostly from acquisitions. Here, it is really something we are very happy about because these companies that we acquired, 2 of them, STS Defense and the sites of TT Electronics, they are already working extremely closely today. So as you also see that across Europe, we have a new presence in Germany, Switzerland and out of the U.K., not in the southern parts of Europe, not in France, in Italy, that's still for us a white spot doing that. And industry is a wide range applications. You see here, Cicor is involved in the manufacturing of the 3 nanometer chips by providing control equipment for wafer [indiscernible] while it's also more mundane applications like control systems for machine tool on this type -- in this case, it's for plastic injection machines. Mostly organic growth, partially also by acquisition, but still nice growth rate we have seen here over the last 2 years. Now we have developed quite fast over the last 2 years. When I joined the company in 2016, we did roughly CHF 170 million, CHF 180 million. And so I have to say that we have developed, especially since 2021, pretty fast. When I joined, we were about #40 in Europe. It is big market with many competitors. In 2021, we were #28, and now this year, we have about #10, overall in the European market. And that includes all applications, that includes everything. So #10 here. In the U.K. already #1. Switzerland, also #1, but I've mentioned here, U.K. as a larger market and as we started there from scratch. I mentioned #1, position in Aerospace and Defense -- very clearly, what is our objective of expanding the lead versus #2. We have created here platform in Aerospace and Defense, where for specific customers, we are pretty much the only choice where they would go. So it is very clear. Health care, I mentioned #4 position, working towards #2. That's clearly the objective we have. There is a lot of growth opportunity in the medical space, and we will focus on growing that position. Now if you look at the AS Division, we shouldn't forget the AS Division, it's small. But it's very strong. And it's a technology beacon and has enormous technological synergies with the rest of the business. In hybrid substrates, so what we do in thin film, we are #1. I don't know, 3x above the size of the #2 in the market and on par with the leading peers in the U.S. So if you're going in the world, the top 3 companies are 2 in the U.S. and Cicor in that area. Very important for health -- miniaturized health care applications and also for high-frequency applications like radar systems. If you are looking into the PCB side, yes, we are a small PCB manufacturer. Since we've been very successful PCB manufacture, #3 position worldwide in PCB for hearing aids and an incredibly strong pipeline of new medical products. We have changed that business massively from a business doing broad applications to business that is about 80% already in medical and health care technology. So it's a very, very strong part of us. So we are -- these repayments, of course, they have certain importance, but it shows the strategy that we've given ourselves, it is working. Now if I talk about acquisitions, there are some acquisitions that are seen, I think, as rather simple add-on STS Defense, incredibly successful business, combining manufacturing and engineering for Aerospace and Defense. Evolution Medtec, just one new customer, just [indiscernible] past few days, were in Romania at a competitive cost price. We have raised -- we have the ability to do complete medical devices. And that's an interesting one, TT Electronics. I got the effect from saying, why on earth did you buy them. They will never be profitable. They are terrible for 20 years. So we pay relatively little money. And I'll tell you, they are already almost at the same margin with Cicor. This is the most beautiful term loan I've seen in a long time. In 6 months only, they more than doubled the EBITDA margin. Why did that happen? Because the way we operate and the culture we have, we give responsibility to the people, to our managers in the regions, we decentralized. We have, for example, decentralized to the financial function. We really gave the manager's responsibility and they are really unleashed. They are running like there's no tomorrow, they love it, and they are so successful. So something I heard a few times, but very funny. This company in Newport, the day we have always given calls to Michael, our head of marketing, before closing. And they ask, are we already allowed to order a new company sign? And now they are the biggest company sign at the Cicor. Among Cicor worldwide, and they are very proud. They're very proud and very, very successful. They have very solid double-digit margin. So the footprint, of course, it's evolving. It is evolving. There are the additions from the acquisitions. There is a rationalization that we have announced. But one thing that you might want to know is if you're going to Southeast Asia, you know everybody wants to move out of China -- not leaving China, but following the China plus one strategy. And there is almost no one from our European peers operating, manufacturing in Southeast Asia. Southeast Asia is the preferred location to move out of China, why? Good infrastructure, good cost, good logistics to the U.S. and also to Europe, better, for example, then India. So there's -- it's an almost unique position and electronic [indiscernible] the next week, we will continue to promote this model very strongly. So very happy with the footprint we have. Now let me spend just a minute about the market. That's what we reported, minus 3.5% year-to-date Q3 organic growth and that is the Q3 results of our listed peers. You see ourselves and 5 listed peers from the Nordic companies in Scandinavia, organic growth Scanfil just reported minus 17%; Kitron, minus 16%; Hanza, pretty good, minus 6%; Note, minus 11%; InCap minus 20%. So that is for what is the market -- why is the market as such. Because there is a considerable element of destocking after everybody has increased inventory now destocking. The strategic reason is that our peers are much more active in automotive, are much more active in renewable energy and EV charging infrastructure and so on and all these markets have collapsed. The EV market, because it's just down, the hype is somewhat over. And in renewable energy, just the equipment is now coming from China and the European manufacturers already changed. So look at Cicor, I'd like to say, they are going down. We are going up. So we are getting closer. These are really the leaders in Europe. So we are working our way up. I'd like that picture because it shows that despite the negative growth, we are -- we have won a very significant market share in the first 9 months of the year. So so much about Cicor, I hope a few aspects that you didn't know already, others, of course, that you know. Let's now talk about Cicor 2028. And we start from -- really start with the basics. Why is Cicor there? What is the focus of the company? And that is what we hear to provide high-end electronic solutions, being the partner of choice for product and that's important, creation and manufacturing services. We are, and you will hear that again and again today, we are transforming the business from a manufacturing partner to a design and manufacturing partner of our customers. So really creating products from the beginning of the product lifestyle. How do we see ourselves in 2028, to be the leading pan-European electronics design and manufacturing partner for the chosen markets we're in; Health Care, Aerospace, Defense and Industrial. And the partner of choice committed, of course, to operating sustainably. Now pan-European, why that? There is EMS firms larger than us. They tend to go with, as they grow, with bigger customers, which are more volatile, more cost pressure, margins are going down. And we are building platforms in the attractive European countries. We are in 3 right now, very present, and we are expanding that. We are expanding our presence in other European areas. And we're really acting local for local. In the U.K., it's our British team that is in power. In Germany, it's our German team, and we are coordinating that through the functions like sales [indiscernible] and our COO. So the leading pan-European electronics design and manufacturing partner, that is how we see ourselves. We have a set of values. Now we are in an industry where I see many competitors in very transaction, working for the day-to-day, being more opportunistic about our business. We are -- mainly because we are Swiss, we are more long-term oriented. For us, it's about really long-lasting relationships with our customers and other stakeholders. And so customer focus is really what our employees see. So we ask them, what do you see as the core values that you observe today in Cicor. They said, customer focus, working together, performance, integrity, respect and trust. So this is what we see as the core values to Cicor. And now we have asked ourselves, how can we summarize this. How can we summarize in a simple and short way, what we are doing and what we want to be. And it is for us Creating Together. Because everything we do is creating products. We create them from scratch by starting with the engineering work and then create them physically in the factories. And the element of partnership of working together is absolutely core to what we do. So when you look at Cicor that creating together, definitely much more in the future. Now about the strategy commitment. First of all, let's start with the market. That's the market development in Europe since 2013. You see here, especially after COVID, some robust growth and we see a shrinkage of the market. So if you look at the market, [2020 COVID], 2021 supply restrictions but also high prices because materials were incredibly expensive sometimes. That was the year of restocking. That was the year when everybody started to fill the inventories, continued in '23. And then -- now what we see this year is really, as I mentioned, the destocking combined with -- sorry, combined with weakness of seller end markets, like building that I mentioned already some of it. That has not changed at all the long-term trend. We have the near-shoring trends. We have the trend to increase outsourcing. We are discussing with several customers right now, outsourcing projects where they want to give up their in-house manufacturing. So we have several of these discussions ongoing right now. We see a normalization of '25. And overall, we see that from the base of 2023, the market really should grow 6.5%. So there is no reason for us to believe that this healthy market growth is changing because it's driven by very strong drivers. Our strategy has a few elements. And most of these elements, you will hear from my colleagues after this. Stefan will talk about focus on high-growth verticals. So we are sharpening again our focus on certain key markets that are the most profitable ones where we want to go. I will give you a very small peek into the transformation into a true product creation company. Marco will talk about business excellence, and he will also talk about sustainability. We have the AS Division, I briefly mentioned and there are a high-tech differentiator, really supporting us in developing our EMS business. M&A, we'll talk about M&A, specifically many details about what we did and how we do M&A and integration, and Peter will discuss this. We do a big boost in our people strategy. Moving forward -- and Peter will also discuss financial value creation and our new midterm financial objectives. So with a clear implementation plan and project management behind to get this into practice. So let me focus just on -- touch very briefly on the 2 elements. One is the transformation to a product creation company or CDMO contract development and manufacturing organization. So what you're seeing here, that's the product life cycle. It starts here. You'll define a business case to the research and development, new product introduction, you assemble the electronics, you assemble the device, you're doing distribution and aftersales and lifetime services. On this axis, you see customer loyalty, but also pricing power. It is highest when you are right at the beginning of the product life cycle. Because here, you don't discuss price and you don't have competitors. You discuss the business case with your customer. The device can cost so many U.S. dollars, Swiss francs, whatever. That's what is discussed. And to develop the product, towards the specifications and the costs. So there is never a need for customers to ask for competitive quotes because you fixed all that together with them. So this is why if you're in this phase, there is the highest customer loyalty. And that is why we are expanding our engineering results so much. If you go to the assembly, that is actually the area with the least differentiation. Electronics -- semi, there is clear differentiation of opportunity. That's why we are pretty profitable in what we do, but it's much more here. So this is why we are expanding the position. And we are entering new regions, a good way to enter a new country is to do it by setting up or acquiring research and development activities. And it's clearly something we intend to do and we intend to do very, very short term. So do this by organically and of course, through acquisition. And then this area, if you think about who we are and that we are already considerable engineering business, if you wish, it is generally a more profitable business than manufacturing. And you can calculate it. There is clearly a profit boost by expanding the research and development portion and to run it as a profitable, solidly double-digit profitable business. So that is a clear reason that getting stronger in this part on the left side of the product life is supporting the whole business up to the end. The second, I want to very briefly touch only because Peter will discuss more, why are we acquiring? I mentioned acquiring to build stronger platforms in our key verticals and to enter new regions. We still have a very fragmented market. So we are #10 out of 1700 EMS and there is not so much consolidation on volumes, it's about 30, 40 transactions a year. So only 2% of EMS [indiscernible] each year. It's a relatively small number. So you can imagine that the consolidation will only continue to accelerate in the next year. Consolidation has just begun. In other areas like the United States, that has the -- U.S. consolidation is much further down the road. The number of competitors is lower. That is also why valuations of EMS companies are significantly higher in the U.S. than they are here. We are in a growing market, as I mentioned. We are addressing a EUR 25 billion market, which is expected to grow. We are in a market with very high customer loyalty. I mentioned in The Time again and again, what is our new customer win ratio to lost customers, and it's 5:1. And Stefan just told me before, this is even better than 5:1. So for each customer we lose, we win more than 5 new customers. And that is true for the last few years, and I have the feeling it's accelerating now. So we are in a market with a lot of customer loyalty and with each acquisition, we are acquiring topnotch customers. With each -- in the small acquisition, EUR 20 million only, let's say, revenue, there are 1, 2, 3 customers, which are absolutely great companies. And with these, we are expanding our share of wallet. We are expanding the business relationship. That's what we do.. And of course, we have clear economies of scale. Today, we have a purchasing volume of about CHF 0.5 billion, and that's slowing. So we are working our way up, not only towards the markets and sales, but also with suppliers. So we're gaining more and more importance, which allows us to get better payment terms and better pricing. So that's why consolidation of the market just makes a lot of sense. Okay. That's my part. I think more details on how we want to grow organically.

We can achieve market leadership in our partner markets, how we can outgrow the market. First of all, it is important to take a look into the EMS market where we are in. So you see here on the right -- on the left side, on the top of the left side, this is the electronic assembly market, the worldwide electronic assembly market. We talk about [1,400 million], 2/3 roughly covered by OEMs or ODMs, 1/3 of it is the EMS market. We are mainly focused on Europe. So that's the reason why we are actually interested on this EUR 85 billion. And our 3 target markets, as already mentioned, Industrial, Medical and Aerospace and Defense are roughly EUR 25 billion of this European EMS market. So it's still a quite good number, EUR 25 billion. So that it makes sense that we actually look a bit more closer, let's say, which subverticals are interesting for us. So which subverticals -- on which subverticals we have to be focused to have a higher growth in the market. We have here, especially on the left side, in the Industrial area, we have sensors measuring and testing. This is very important subsegment because very much driven by automation, by the energy transition currently, the same is building technologies, home automation, also here the energy transition, which drives this market, energy mobility where we also see higher growth rates than the average in industrial. On the medical side, we see strong rate -- strong growth rates in the field of medical variables, where we at Cicor already have a very strong position. This is mainly hearing aid, but also other medical variables, medical devices, not fancy gadgets. We already talk about medical devices. Although very interesting vertical is implants. In France, they are more and more applications support patient with some kind of disorders. And the third one, we talked about [indiscernible] devices with more and more diabetes patients, but we also have other applications where actually electronic meet pharmaceutical. On the Aerospace & Defense side, we have defense, very much driven by the prices we have, but also by the backlog in our Defense readiness in some countries and then the satellite technologies and civil aviation. To know on which verticals we should be focused, we consider on the one hand, the growth potential of the vertical. So the target is, for sure, to be focus on the subverticals above the average growth potential. And on the other hand, we are focused on the profitability. I mean, when we hear the typical these areas where we don't want to be, we want to be actually in the areas which are growing fast and which bring us the need to profitability. And here, for example, typical digital markets are automotive, communication, consumer, they might grow fast, but don't bring the profitability we need. Okay. And so this helps us very easily based on growth rates and profitability to address the right market and to sharpen our focus on the right markets. So let's say, the performance we had between '21 and '23 in our target markets. Starting with aerospace defense, we see a strong growth in Aerospace and Defense. In Aerospace and Defense, this growth from CHF 23 million to CHF 63 million between '21 and '23, mainly driven through acquisitions. In '21, Axis Electronics and actually in '24, we will see even more because of the acquisition we took in this year. And as already mentioned, in Aerospace and Defense, we are in the meantime, market leader #1 in Europe. The second one, medical. We also see a very strong growth between '21 and '23 from CHF 65 million to CHF 112. And here, we have a bit another picture, also strong growth through acquisition, roughly 2/3, 2 acquisitions we made in Germany, SMT Elektronik and Phoenix Mecano Digital Elektronik. But here, we also see a very strong organic growth, 35% of this growth driven organically through the different subverticals we have. As I mentioned, we already have a leading position in hearing aid. We could win new customers in this field, and we could also further grow with our existing customers. In the medical, as also already mentioned, we are #4 now in the field of medical customers. Industrial, here, we see a growth from CHF 104 million to CHF 154 million. And here, roughly the same, 60% through acquisitions, but nevertheless also 40% organically. And here, we see ourselves roughly #10. What is important, which elements we have to consider to drive our growth. And we -- the basement of our growth for sure is our existing customers. And if you -- I mean, for example, if you do a good job, if we have a high delivery performance, high OTD, high-quality performance, then we can grow with our existing customers. We can win additional programs and we can participate in the growth of our customers. And here also, as Alexander Hagemann already mentioned, the acquisitions play an important role because every acquisition bring us more customers. So this is the baseline for our growth, growing with our existing customers. The second element, and this is very important, especially if you consider acquisition is cross-selling. Cross-selling means we have a customer in Europe, for example, with demand in Asia, and we can also supply from Asia to the customer. We have a PCB customer. We can also assemble a PCB, we can serve also engineering services. And here, the acquisitions are very important, especially the small acquisitions. So if we acquire a company, a smaller company with maybe only one manufacturing site, they very often have very interesting customers, but they are limited because, for example, they do not have the best cost production location. And therefore, here, every acquisition creates a lot of opportunities. And because we have in -- so really a wide range of different technologies. And also here, actually, acquisition can bring new technologies. For example, the TT Electronics carve-out, we acquired also a power supply business. And actually, this power supply business, we also can sell now of power supplies we can sell now to our existing customers. So a very important part, cross-selling actually to accelerate the growth with our existing customers. And the last element to really outgrow the market is finding new customers. And you already heard, we find roughly 5:1, maybe a bit higher, more customers than we lose. And this is because we are very, very much focused on our target verticals we do only, let's say, what we understand and we try to say as often though as we can. And important for new customer development is also that we can expand our geographical areas by acquisitions. What are our plans to further drive this growth, especially the organic growth. This moving towards a true one-stop shop solution. So this is what you already heard and this is very, very important for our customers. More and more important -- and it is getting more and more important to have one partner to cover the entire product creation process. And here, we have some activities. One of it is we have additional engineering services we can sell to our customers. One is engineering team we are building up in Vietnam to support industrial customers within Europe. We have this acquisition in Bucharest, which increases our capacities and capabilities for medical customers. And an important point as well, I mean, in the past, we had engineering services mainly in Switzerland. And for customers outside of Switzerland, in Italy, in Germany and so on, sometimes they are a bit more price-sensitive. And with the support of Vietnam, we can also address those customers much, much better. Second one is we launched a prototyping shop next week at Electronica. Prototyping are very -- prototypes are very important in the engineering phase, not only externally also internally for our own development engineers. It's just reduce -- if we can deliver the prototypes much faster, it reduces the time to market for our customers. So a very important element of this as well. Our target is to deliver prototypes in 6 days for our customers which is pretty fast and flexible. And then a stronger focus on our box build. So we talk about the vertical integration, so not only manufacturing the PCBs for our customers also doing more and more box build being really a partner instead of only a supplier. We also have to further strengthen our sales activities in our target markets, U.K., Germany, Switzerland. And what we said already, we have to be more and more sharp in our focus on our subvertical to our target market. And this is what I already mentioned, in France, smart drug delivery devices, medical wearables in the field of medical customers and sensors, building technologies, mobility and rail in the field of industrial customers. And the last one here is our partnership with Clayens. This is also an element towards this true one-stop shop solution. So Clayens introduced last year, if I'm not wrong, at the Capital Markets Day, is a European leading injection molding company. And together with Clayens, we can address medical customers which need high-volumes products where we have a combination between -- with electronic and plastics. Here, we also talk very often about smart drug delivery devices, but other active disposables. These are the elements we are planning to further successfully drive our growth.

Thank you very much, Stefan. So also welcome from my side, Marco Kechele, COO of Cicor Group. And let's talk a little bit about operations. So you have seen before in the presentation that we have now 20 sites worldwide, right, in Europe and in Asia. And the question is how can we help these 20 sites to be successful. The ones which are for a while in the company, but also the ones which are short time with the company and the result of an acquisition. And so we decided about developing a business excellence model, which should give a framework between mission and values, what we have seen before and key disciplines of being successful. So we started with doing a workshop, and we figured out what are the most relevant disciplines being successful. And we figured out 4 of them, beginning on the left-hand side, customer focus, engineering competencies, a sourcing strategy and manufacturing capabilities. These are the 4 ones which create value. This is what you can see in our service or in our products we deliver to the customer. And then we have support functions on the right-hand side, support functions, people management; support function, compliance; support function, information technology and finance management. And they are as important as the other ones, but they are supporting the value-add disciplines in a certain way. And what we did is we clustered now all of these disciplines and defined the 6 to 8 most relevant aspects within each of these clusters. And this is what every site, every unit should represent, should work for. These are typically processes which are defining ways of working in an efficient way. And complementary to these processes, there are KPIs where we measure where we are, right? And all of these disciplines have levels for one, very basic. We do typically things on demand up to a level of 5, which is an excellence level. That means with the Level 5, we have implemented very, let's say, efficient processes, and we measure the result in a certain way. And there is a KPI in place, which is growing and performing over time up to excellence of world class level #5. And this is the business model every managing director agreed on, and we are doing regularly assessments and see where we are. And this gives guideline for the functional disciplines within the sites about where we are in this excellence approach. Now it's not only about a framework and a nice assessment, it's also about delivering real results. And this model is in connection to the strategic results or achievements we want to see at the latest in 2028. The most important ones, I mean, there is a scorecard, right, which delivers on a monthly basis, individual result in many disciplines like on-time delivery, first pass yield productivity and others. But here as an executive summary for you, what are the most important ones. So we strive for a productivity improvement, labor improvement of 4% to 6% on an annual basis. This is what the individual sites have to deliver with good methods and processes and tools in place. Next one is to achieve a net working capital benchmark level of lower -- of less than 25% of our annual sales, which is a good factor, and we are already improving year-by-year, month by month, and this is the objective we have on the midterm. Material costs are an important factor in our discipline, right? So in the company average around 50%. And it's not only that we have to improve our internal disciplines, we also need to improve our material costs. And the growth path we have seen almost 25% at the moment in total per year helps us that we have growing quantities with the individual suppliers, and that helps us to make global contracts, frame contracts with terms and conditions, making a difference to many other competitors in the market. On-time delivery, no question about that. This is one of the most important factors besides quality where the customers are very sensitive about it. So 95% on-time delivery is the minimum we want to achieve in every of our sites. Some of the sites are already at 98%, 99%. This is the right approach and a very sensitive factor, as I said, to the customer. First pass yield. First pass yield is a reference for our process capabilities and also for most modern technologies we are working with. So with the newest technologies and the right process levels, we can achieve first pass yield rates of 99%. That means that our rework level or our scrap level is straight below 1% in our manufacturing capabilities and also a factor of profitability and differentiation. But also not to forget about what I said before in the support functions, one of the most important ones are people management. So we want to be an attractive, diverse and secure company where people like to work with and people have the chance to grow. This is more and more important nowadays, especially in the Western Hemisphere, right? Last but not least, also a clear commitment to sustainability and full compliance with all regulatory requirements. That gives a framework in the question, what we want to do to perform in the operational disciplines, right? But there is also a consideration of technology trends and capabilities.

So you can ask you a question about that, how is this measured in elements? Sounds very good but what are you doing to minimize these objectives?

These are 2 elements. One is there is more or less an A3 format you can think about and here are the disciplines and here is a description for each level, Level 1, Level 2, Level 3, 4, 5. And if you are, let's say, procurement manager of a site, right? You are owning here the sourcing discipline, right? And you are waiting in these 5, 6, 7 different disciplines, where are you today? And then the result is maybe here, I'm performing on Level 3. Level 3 means typically processes are in place, but the performance is on the medium level. Then this discipline within the sourcing, right, you say this is Level 2. So I act on demand if a complaint comes or a complaint arrives from a supplier. So -- but not really strategic and how to manage this preventive. In the third discipline, you are already on Level 4 means you have processes in place, you measure and perform on a high level. And then together with your Managing Director, you may make objectives as a procurement manager for the next year and say, I want to improve in these disciplines, that means process implementation, KPI measurement performance. And this is a little bit strategic intent on a site level, right, for a period typically of 12 months. And what we do as a group management is on regular business reviews, typically on a quarterly basis, we talk with the people, try to help where we have gaps and also observe a little bit the progress in the individual sites. This is how this model works. And on top, we have, as I said, operational scorecards besides the financial scorecards where we have a pure, let's say, numbers-driven performance indicators in the most regular disciplines. Okay?

Okay.

Then let's say, from the question how we want to create performance, the question is also where we want to create performance. And we identified these 5 most important technology trends, speaking with the people and reflecting the market requirements. And the 2 top level technology trends we want to consider and we have to consider our miniaturization, high-tech and precision as #1. So just giving you an indication. At the moment, we are working on a project with PC boards, which are 3.4 millimeters in size. And we are integrating 2 chips on these boards, connecting it with the electric connections and then pressing 3 of them together to one subsystem, okay? This is what we are talking about, and there are many components on this 3.4 millimeter electronic chip. Now I think it's easy to understand that this cannot be done with 15-year-old equipment, right? And this needs also to be efficient because this is not only a technical challenge. This is also that we have to be commercially competitive. And this is our commitment, and this is our positioning in the market. We are available to develop with our customers together these high-end solutions, which makes a difference for our customers in the market and which makes a difference for us against our competitors. The second one, our core industries we want to work with are medical and aerospace and defense, especially. But this is not only that we serve PC boards or electronic systems for these markets. We need clean rooms. We need ISO certifications, 9100 for aerospace defense and 13485 for medical. We need integrated quality documentation systems, which are fully automated, documenting the result of each individual manufacturing and quality control step because all of these machines are connected to an automatic documentation system, and we cannot influence that. The machine by itself is automatically uploading the technical result of the test. And this will become automatically part of the documentation we hand over to the customer when delivering the product. Flexible automation, digitization and artificial intelligence, right? Artificial intelligence is a buzzword everywhere, right? But it's already implemented where we do visual controls. So what we see on -- if you take a picture from the parts in the detail and we see shadows and lines and whatever, artificial intelligence has a big advantage against people looking at the defects or potential defects because this algorithm learns very fast, right? And after a while, the results and indications we get out of these tests are very usable for seeing good or defect parts. Box build assembly capabilities, Stefan mentioned it before, it's our chance to vertically integrate and to increase the value add by customer. And this is also something we have to develop and strengthen our capabilities, working with cohorts, drawing market lines. This is in the trend of the industry, requires capital investment, but it's also a format of differentiation against others. Last but not least, test engineering. I mean, every EMS company in the world says we are superstars in test engineering, right? And it's somehow true. But the differentiation is if you are allowed to work with the customer at the early stage of the product development because only in the early stage of the product development, you can influence the design of the product and the way of testing the different layers and levels in a way that it is beneficial at the end of the day. If somebody is developing a product and other people are doing then the test specification, you always have repetitive testing. Suppliers are testing, you are testing, customers are testing and all testing the same. And this can only be efficient if you are really invited into the product development process and you can work with these control plants integrated, right? And this is much more clever and opens doors for being much more competitive on our customer side, right? And therefore, our strategy to become a partner of choice also in the product development is very essential of being successful in the later on processes, like test engineering. These are the trends, but how to follow the trends, how to realize that. And I mean, some information, which I thought is most relevant here for the audience of today, right? So first of all, what about our capacities we have in place. So with the latest acquisitions, we are -- have now capacities available to grow another CHF 250 million without significant investments into new facilities on top, right? And this is a good thing for us because we do not have to spend our money in buildings. And there is really room for growth. We can see also that with our commitment of 2.5% to 3% capital investment in year-over-year, we can -- we have a budget of almost EUR 80 million until 2028, right? Now we did some analytics and said, in the last years, what do we spend just to keep things running. And we can say 40% of the annual investments are in the infrastructure and other costs, smaller things here and there, bits and pieces. This is a little bit given. Another 32%, we have to do replacements, right, because some machines are outdated or it's not beneficial to go into maintenance and repair. So we just buy replacements to be up to date. But on top, there are 28% available, right? And this 28% is in a conversion of CHF 22 million investment until 2028, but we have the choice what do we want to invest. And this is not that we blindly invest just because we want to have it, but we can go to the customers and say, we are available to invest also on a strategic level if there is a chance to buy something which makes a difference for you and for us. And therefore, these technology trends are observed very carefully and gives us guidance and indications where we want to invest and where we can make a difference with investments. Last but not least, even if we perform operationally very good and even if we have the right trends identified and do the right capital investments. This factor, compliance and sustainability becomes more and more an essential part of our strategy, it's a must-have, right? And very clear that we have a high-level commitment also to whatever is required and not only what is formally required, but also what is expected. And on the environmental side, we can -- we have a very clear commitment to a balanced carbon footprint in line with the goals of the Paris Agreement, which is relevant for all companies. And we are on the way to gradually move towards the carbon footprint approaches. Second one, we have a lot of initiatives now in our social engagement. So it's not only that we want to create a culture of equality, fairness and respect. It's also that we don't forget about the trusted relationship with our shareholders, business partners and the stakeholders of the company. And this is part of our people-related engagements in ESG. Last but not least, governance. So very clear that we have to follow all regulations and laws. And what we do is our commitment, the regulations and laws of Europe are also relevant for all of our sites in Asia. So we make -- do not make a difference because of a little bit different requirement of the regulations. So we have a commitment as Cicor company, and this is the same everywhere. And this has these external factors, but also the internal factors like policies, ethical principles and our own that I just mentioned. So how we do it. And here, we are closing the loop a little bit. So we have developed ESG scorecard. And this is a questionnaire that all formal and informal requirements in the ESG sector and the guidance for each individual site, how to move forward and what is the correct way to go because it was always -- it was also not always easy for the managing directors in the different sites to identify what is the right next thing to do, right? It's a complex arrangement. And therefore, I'm very happy to say that this ESG scorecard is a very high level and very appreciated. At the moment, all of these assessments are running. 2/3 are almost done now and 1/3 is in front of us. So until the end of the year, we will have 100% of our units done this assessment and the result of the assessment is a path forward what and when are the right activities to be fully compliant right on time. So in 2026, we have first time to report about 2025 with our CSRD, and we are on time also with the Supply Chain Act and all other formal and informal regulations in place. Yes. So it closes a little bit the loop. This is our way of managing, giving a lot of decision rights and responsibility on the decentral level, but helping and giving guidance from a central point of view and having visibility via KPIs and transparency every day where we are. And this is a little bit of reflecting our work, our way of management and working.

So warm welcome as well from my side. I'm Peter Neumann, I'm the Group CFO. And I have the pleasure to talk about M&A today. And let me start with, I would say M&A has really transformed our company over the last 4 years. To step back, we have been growing above 15% in average over the last 4 years, and we are a very different Cicor today. And you saw it from introduction from Alexander, we have the ambition to continue this journey. M&A is very is really core on the strategy so far and the future strategy. Alexander has talked a lot around the market and the strategic rationale of acquisition. What I want to focus on is really around how do we drive value? What's the playbook? What are the tools, what's the execution on one side? And then obviously, sorry, as CFO, I have to share some numbers. So give some results of the 7 acquisitions we have completed over the last 3 years, okay? So let me first talk about a bit the recipe of our value creation. And then I will elaborate on some elements more in detail. The first one is we are very selective on opportunities that we pursue. Look, I always say the most important element of the strategy is the things we don't do, right? Because on M&A, there's a lot of disruption of value out there by being very much focused and really not go after a lot of opportunities, you're able to deliver value with the acquisitions we are pursuing. It helps in M&A process to be the acquirer of choice. I think we have built up an excellent reputation in the market. And I have a slide on later on why this is the case. Obviously, this helps because in a lot of the processes, if you acquire of choice that the sellers trust and they see the future of the company, you're able to acquire companies at more moderate multiples and hence, create value for us as a company. We have an efficient and trusted M&A process. So after 7 acquisitions, I share some of the results. I can say, look, we have a good process. We have a good toolbox, and we are also very consistent in the results delivery. Yes. Look, I mean, with this, we have -- part of it is a post-merger integration, and the post-merger integration really drives then that you're able to gain share, so grow fast and also create significant profitability and cash pickups after the acquisition. Now before going through some of the elements, I want to say what do we have as foundation. You have seen this in the half year results. We are, despite 7 acquisitions, still very moderately leveraged. We have a leveraged half year results of 1.5. And we have announced a new credit agreement or a renewal of an agreement that if you look where we are today, with available cash, some of the cash we generate in the future, the facilities we have in place, and we have an optional facility that we can work with the banks, gives us ammunition to acquire companies worth CHF 150 million. So we have the foundation and the firepower to grow further via M&A. It's a bit of the foundation. If you don't have this, obviously, the strategy is not built on a solid foundation. Then in terms of strategy, we are very much focused. It's really about the gaining and winning companies that have attractive customers in our segments and really build strong platforms. Alexander and the rest of the team has said this one very nicely. But it also means -- and I come back what we don't do. We don't dilute in terms of going into automotive, into computer, communication, all the elements. We don't get overboard on multiples. It's a competitive process. We remain really rigid to our principles, and we focus clearly on synergies. And if we don't see clear synergies in the path to value creation, we don't go after it. So that's the first one, being very choiceful on this. This is status Q2. When we look at -- if we step back at the history, how much acquisition that we have actually looked at, and it is a big number. We were really surprised. We have reviewed over 100 deals. And I can say, the more we get a trusted acquirer, the more we are currently getting offers for acquisitions. And that helps also and give us the confidence why we have increased our overall guidance because we have delivered over 4 years, and we have a very strong pipeline. So we review a lot. You see that only very small number, 10%, 20%, actually, we pursue and we go deeper and do an offer, a nonbinding offer and we engage personally. That is the big element where I said, look, we do a lot of things we don't do, right? We go after a very selective, where we say, the customers are right, the culture is right, it's a fit and the value creation is there. Once we are here, we are very quickly -- if they accept the offer, we're going into exclusivity. Most of our processes are exclusive. Obviously, you see here, it's a step because sometimes you have a competitive process. I said that some others get carried away. They go away with multiples that are crazy. Obviously, we are not going into exclusivity, but you see we have quite a chance of around 60% that we accept it. Once we are here, we are normally very, very much going into execution and have very high success rate. That helps the sellers and the buyers as us as buyer obviously, so very selective. It's a very important element because, really, if you would have done some of the ones we haven't done, I think you may have destroyed value and that's one we have not done. Why are we the acquirer of choice? There's one element, the trust. I can only say being a Swiss company helps. So the Swissness helps a little bit being acquirer, but there are also other elements that build a lot of trust. I mean we had a track record of acquisitions. Sometimes we even offer, hey, you can talk to some of the acquired companies because they are the best advocates for us, right? Because if they're happy, then they pursue [ belong ] to the next buyer. And we have a track record in terms of industry. We are a strategic buyer. We are not a financial investor but normally, in our industrial environment is highly -- or is well perceived. Then we are working very closely with management and the sellers. So we usually try to understand where the wins are. And we have a lot of personal engagement. I can only say that's also why we are traveling a lot because we're very often on the ground. It's getting to know what people understand and what we're looking for as seller, what is important, right? And then building up trust with management because then, you really get to know them and you're also building to a solid foundation for the post-merger integration. And then -- yes, we have a very [ streamed ] and I believe we have a good team that helps because, in the end, I mean, the last thing is that the seller that wants to go for a long process and then at the end, it doesn't work. So we like the deal certainty, the experience we have, the teams we have. And that helps, again, if there's any choice between different buyers that we are normally the acquirer of choice despite more moderate multiples. We follow a very disciplined approach. I talked a bit about deal flow management. I talked around the personal engagement at all levels. I think we are fair and balanced in the negotiations, after exclusivity, and then we go into deal execution. Deal execution is the part when we have exclusive processes. Where we do a hybrid approach, we take, I call it, the best of both worlds. So the classical financial, tax, legal, we have a good external team that supports us. Internally, the key elements that we believe as strategic buyer, we have the best knowledge because as we go again in the companies that are in the same segments, that are having customers that probably are similar to us in the medical, aerospace, defense and industrial segment, that is where, really from a commercial and operations standpoint, we can assess it's much faster, much better than any of their external consultants or providers. We do obviously the standard SPA. And then the interesting one is here. I want to comment -- this is also a differentiator. I might talk more about it. It's a post-merger integration. We are building in the deal execution the post-merger integration plan. When we are coming to signing and completion, we have a post-merger integration plan ready. It's -- around here, it's less about squeezing the last element but openly getting on what are the risks and opportunities and prepare for them so that on day one, you can get value out of it because that is really important. And we're having some level of continuity because if you have a post-merger integration plan, anyone knows what to go after. Once you can, you can really go full speed. And you see it on results that we are very fast getting very, very solid results. And on post-merger integration, it's still in this space, but it's an important one. Post-merger integration, we have split into 2 areas. One is the foundation. It's just the things you have to do, very important because, obviously, administration, I mean, look, we have from insurance and all these things, core HR, work contracts, certain elements, marketing, branding, right? What do you do in terms of branding? How do you approach it? How do you go with the customers and so on in terms of marketing? Financial reporting and controls, getting this one up and running as it is -- as it should be for a company of our size and to ensure we can trust, I mean, like the numbers that we have. And IT, that is important because IT means that the collaboration flows on one side, and that is a critical element. But also, it means that cybersecurity and all our cybersecurity activities are across all companies consistently implemented. That is the foundation. And then we have called the main areas of synergies. The 2 biggest ones are obviously sales. And Stefan nicely said, right, you're acquiring every time new customers. It's beautiful. And these customers, you can offer all the other services that Cicor has, the full production network that Cicor has. And by way, you can really then penetrate them more. And that is a big value driver. Second one, sourcing, right? I mean I don't need to explain this one, but if you are close to 0.5 billion company or a company of 20 million of revenue, the purchasing power and the conditions you have with suppliers is significant, significant. And it's definitely 2 areas. The first one is obviously absolute costs. As a larger company, you get rebates. You get lower cost also overall with the key suppliers. But secondly, payment terms, right? I mean this is a typical -- this is -- it's already a lot of things here. There is a thing of financing, right, because we do an acquisition, but then we extend the payment terms to the suppliers from 30 days to 120 days plus. And you get within the first couple of quarter -- with the first quarter for a significant cash back because you pay close to 2, 3 months later. And that is a financing mechanism that is excellent, delivering significant cash pickup after the acquisition. Obviously, engineering, manufacturing, they are ones and last and not least others. It may be case by case, right? I mean in Dresden, we had announced in this acquisition. We have one joint leadership team directly [ to our ] facility. So PMI, really important. It seems to be also the reason we had an M&A seminar with 220 people. Everyone was interested on both because that is where a lot of other companies seem to be [ carried ]. But I can say, for us, it really works. Now -- so that is the playbook. Let's talk a bit about results because, I think, these results are excellent. Everyone has worked in M&A. You can just confirm. We have closed 7 acquisitions. Four have been pre-2024, and we have closed this year, 3. So I have obviously shared a bit the one that is all, the 7 but also obviously, the more relevant ones because they are really much more down the road. And we have put 3 measures, and I go a bit more deeper after. One is revenue. And they say, look, how much revenue you have to pick up post -- well, if you take the pre-acquisition LTM revenue versus post-LTM in local currency. And we have picked up for -- with the pre-2024, 30%. Obviously, '24, you look at 12 months rolling, I mean, it's very early, but nevertheless, in average, we would have 16%. Profitability. So EBITDA, that's key because, in the end, very often, in the market, it's an EBITDA-driven multiple. So if you can say that you are tracking now 41% above pre-LTM, as of pre-closing LTM, you really straight have increased value because the multiple would [ go ] then on these numbers. There, we have on the 41% pickup on the pre-2024 and average even 40%. So even on the -- there, you see it actually even on the ones, and I show you some more results later on, some of the acquisitions this year, we have already done a significant EBITDA pickup. And the last one, I think, is fascinating, free cash flow. And I -- people know me. I'm very much focused on free cash flow. If you look at the free cash flow, the net cash outflow for our 7 acquisitions, right, if you take it together, the companies have today already rework in 2024 cumulative 40% of this. Or I say, in other words, the free cash flow generation of this company basically recovers the net cash outflow within 5 to 7 years. So really that is core, and that's why also despite some of the acquisitions, we are very moderately leveraged, right, because EBITDA has been picking up and free cash flow has been delivered. Net-net, you're staying at the same multiple despite the fact you're now twice the size, right? And it's a wonderful funding mechanism and with this, also the foundation for future success. Now I mentioned it. I think it's really around target selection, due diligence and PMI, and results are pretty consistent. To also show this consistently, what I thought is I'd show you some of more detail on the M&A side. I didn't want to go into each M&A because each acquisition is differently. So I said, hey, if you take the 7 acquisitions, what has been the pickup that you've seen on revenue, right? So we said in light blue, these are the most recent one we closed this year, so in Q1. And then the dark blue are the ones that are pre-2024. So what we see is, in average, on the dark blue, we have been above 30% in local currency; and on the light blue -- well, in all together, at 16%. Now you see -- and you are all very good in numbers, so I don't have to say this one. The big swings here and there are obviously the ones -- the smaller ones. If not, if this would have been, let's say, access, then you would have been seeing a high average. So obviously, the smaller ones are the one that are driving [ extreme ]. The one here, it's the one that is a smaller one in 2024, and I can only say in 2025, we're already, by far, above this green line. So it's a great story for us as well. But very consistent in terms of revenue pickup, looking at EBITDA pickup, the same. You see that the EBITDA pickup, same view. Interesting enough, I mean, I don't disclose names, but you see obviously that already in the 2024 acquisitions, in some of them, we have delivered a massive EBITDA pickup and a significant turnaround of the profitability that also Alexander referred to. But again, there is no massive outlier. It's really the right one. Again, I know that next year, it's far above this one. It's very, very strong. And look -- and last but not the least, free cash flow regeneration. Cumulative, we recovered 40%, so it's really nice. And even some of the 2024 acquisitions have already contributed this year, so significant to recover. So again, that's there the payment terms. That's when some of the work on bringing down net working capital is really, really implemented very successfully. And that builds back towards also Marco showed. This operational excellence program is critical on these areas because that's when you quickly can go and deliver significant revenue pickup on the same time, EBITDA and free cash flow as we go on with the operation implementation. But also it shows that the post -- the PMI, the post-merger integration really is successful and it's consistently delivering results. To wrap up, I think we have a strong financial foundation. We have an attractive external market. As Alexander said, we focus on really our core known businesses. Obviously, you're significantly reducing risk. We have a solid M&A process. PMI is, I think, is a real success driver. We -- normally, within 6 months, 90% of our post-merger integration plan is completed. And last [indiscernible] and I think that we are solid. We are -- we can say what we've seen over the last 4 years. We have a proven track record to make M&A work. Okay. So that's a bit on M&A. I will continue -- it actually naturally flows over. We have done over the last 4 years M&A and organic growth actually, yes, in the last 4 years, on average, close to 10% organic growth, above 15% inorganic growth. And that gives us confidence that we also can increase further on midterm targets. So it is all around the same umbrella, creating together, so establishing Cicor as the pan-European leader. There are some increases that I will explain. We will continue to focus on this, gain market share. So the market is growing as you saw in Alexander's section as well. But we will gain share because the CDMO approach, so really across -- from the early development up to the [ box ] will help but also the focus on other segments will help, but we continue to grow above market. So the 7% to 10%, we feel very confident until 2028. On revenue, we increased, from CHF 600 million target over a 3-, 4-year horizon to above CHF 1 billion. Reason being is -- I mean we are just within 1 year we put out. We're actually closer next year to where this target was. And secondly, look, we have proven, over the last 4 years that we can grow organic and we can grow via M&A. So this is including a balanced organic and inorganic growth. Still, for logic, if you grow organically 7% to 10%, I personally believe the Swiss franc will continue to strengthen. We lost over the last 4 years an average 2%, 3% on the Swiss franc strengthening. Then this means inorganic growth of 10% to 15%. That is below what we have delivered so far, but we feel very confident on the pipeline and the market dynamic that we are able to achieve this. On profitability and other -- maybe a word -- also I read some of it, of the first reaction. Previous guidance was on core results. Now we are talking reported results. So actually, this is an increase because, on EBIT, this means around 100 basis points higher. And if you take on 2023 impact, right, the ROIC is a step-up of 300 basis points. So we are, because of the results that we're delivering, feeling strong that we can, despite this accounting change, goodwill and equity, for once -- just to remember, we have an equity. We changed accounting that we can maintain the 15% that is effectively an increase in our ROIC results. Today, we're at 12%, but really from the progression we have seen over the last 4 years, this is the number that is really achievable from our side. The others, net debt, CapEx, EBITDA, we leave as it is. Again, we want to remain moderate leverage. We see the recipe that we have done works. So why changing it? In CapEx, we have spare capacity. We invest probably more cash in acquisitions. Normally, the acquisitions and operation excellence, we deliver also capacity. So CapEx are really the focus on the ones that Marco mentioned. So overall, this is the increase and the [ boulder ] going on in the building is really a continuation and is based on the strong 4 years of balanced growth of organic and inorganic but gives us confidence that we go now to achieve as well as financial objectives by 2028.

So that was already a lot of stuff. So I won't keep you much longer here before we go into the Q&A session. So if I do an outlook for the year, that is something -- so we're going from 2028 back to 2024. You have heard our targets there, but now if you climb a mountain, you start with the first step, and it's important that we perform this year at that. You have seen that we had organic growth slightly negative in the first 9 months, however, with significant market share gains. So -- and we do see -- we did see -- commented that in Q3 already, order intake and sales to continue the recovery. And that continues into Q4. So we are actually quite optimistic about that. And that is important to see because if you look at the industry recession in Germany, for example, that industry recession is continuing, and there is no short-term signs it's abating. So for us, this is an excellent sign that we're seeing continued recovery of order intake and of course, of sales. So -- then I already mentioned the progress in integrating the newly acquired company. I've already mentioned how satisfied we are with the 3 sites from TT Electronics. It is specifically important here that we are doing the margin pickup because it is large, about GBP 70 million, about CHF 80 million, so top line-wise, very important. And we don't want at all to have that acquisition to dilute our operating performance. And now I can say, it is very good. Peter has shown one number. Imagine, one acquisition we did this year has already earned back in free cash flow 44% of purchase price. That's just amazing. No, that's fantastic. So we are seeing that progress, and it's really proving the volume that we have. So this guidance now stands since mid of the year. So we have increased our guidance when we announced half year results, and we have no reason to reduce it. We feel well on track to be in that bandwidth for both EBITDA and sales. So here, we are really happy, okay, they provided there are no significant changes. Maybe we are now that late in the year that we can drop this, but it's the disclaimer that we always put in. So we see the company strategically on the offensive moving forward, whereas the day-to-day operationally, there, it's really about robustness. It's about resilience also in difficult markets, also in times when as well the Swiss franc continues to strengthen. So overall, if you look at our business case, I hope we were able to demonstrate to you we do have a long-term growth potential. We have -- the megatrends are not changing. They are there. The one area that is accelerating is outsourcing. I mentioned that we are in 2 active discussions about significant outsourcing projects from OEMs. And also, we see -- we didn't mention it earlier. We see an acceleration of nearshoring and moving out of China. There is a very big latency, especially about moving out of China. We have seen that when former U.S. administrations have levied punitive tariffs that has taken years until companies really take the strategic decisions to move out. Most companies have accepted these tariffs, 20%, 30%, in the U.S. But now they are seeing that it doesn't matter who's winning tonight. It will not change. The tariffs will be there. You see the new tariffs for electric vehicles in the U.S. of 100%, and you see the tariffs would not go away. So getting out of China is not serious. And after 2 administrations, Trump and Biden, everybody now knows, the next administration will absolutely not change anything. We are further sharpening our focus on the verticals and sub verticals, and Stefan has mentioned that. On that, what is really most profitable and fastest growing for us, this is one of the major elements that the company is so resilient today. Now here, we are talking about a true USP. We are moving faster, and we'll continue to move fast, so stay tuned, to transform Cicor more and more into a true product creation company. So we have done steps and we're going to do more steps in that way. Then accretive buy and build strategy, Peter has explained that very much in detail, what we are doing. And I think Marco has also explained to you in a good way how we have a pretty disciplined approach to business excellence. And that is the approach that we are applying also to the companies that we acquired to drive value, to drive the numbers that we want. Yes. We have done that. We enjoy it. We have fun doing what we're doing. I hope that this is also something that you see. I'm blessed to have a team not only sitting here but working worldwide that likes doing what they do, who is -- that is really very enthusiastic. And that's also, at the end of the day, important that we at Cicor enjoy what we're doing. So thank you very much. That's it for now. And maybe my colleagues, if you want to stand up, join me here. We are open for your questions.

[ More question ]. With your ambitious plans for the next couple of years, do I assume right, you're not planning any dividend for the time being?

That's right, yes.

Okay. And the second question...

One is we have better uses for [indiscernible]. Yes.

Peter, regarding the low margin, what can we assume what credit margin specific at the moment is?

We -- so strong base, I mean, you can roughly calculate around 3%, 3.5%, 4% -- 3% [indiscernible]. [ All in, really all in ].

Is it right to assume that this plan will be executed without a major change to the capital stock, i.e., outstanding amount of equities, including this convertible and everything? Or will you consider raising equity?

I can -- I mean, look, it's a good question. As I mentioned, we have ammunition and M&A funding for worth CHF 150 million. If you obviously -- look, if you would go significantly faster in our 2028 plan, meaning like I would -- I don't know, we would have a great opportunity to enter France, Italy, Nordics and maybe another market at the same time and we believe we can manage it, then we need to think what is the financing strategy. In the base scenario, right, that we are gradually executing M&A as we have done, we would not require [ actually this ]. We can fund it from, first, existing credit facilities and then obviously refinancing at the leverage that we are having. So the base scenario is a more gradual progression. But look, M&A is not about opportunities, if we see a great opportunity that creates value for you, then we would not probably say no because of this, but rather try to go after it.

Yes. Do you find the access to credit difficult since Credit Suisse [indiscernible] have you seen any change?

I have to say that it's a bit of history of the company, that predates even me that Cicor is very international with the banks and the syndicate. So you see Austria, you see Germany, you see some Switzerland. But somehow with the large Swiss banks, so the 2 large Swiss banks, UBS and Credit Swiss never played that well, honestly so. So I'm very aware of the whole discussion. It's a big measure of Swiss bank, you all know. In other engagements I had, I was saying that Credit Suisse was an excellent commercial bank, very, very business-minded. And I see that these -- that many companies are suffering, but we at Cicor don't suffer because we've never worked too much with the 2 large Swiss banks.

With all the good news, you told us today, it's a surprise to see the stock at the level that we are today. Had a liquidity problem? Or is it a market maker problem? Or are you not efficient enough to make the necessary steps to get the stock more popular to investors?

Yes. So if I -- of course, if you make the stock -- if you buy at [ CHF 60 ] then the share price is [ CHF 60 ] That's why not. So that's very simple. But the total truth is that I see everything takes some time. I see that liquidity is about 3x, 4x higher than it was 1.5 years ago. So we have significant increase in liquidity in the Cicor shares. We see that on the roadshows we are doing, for number one, we invited to more; number two, we have more and higher quality contacts we are talking to. But of course, everybody is checking first, and it takes [ half a year, year ], maybe 1.5 years before investing. So we see that the interest is definitely much more there. Liquidity is picking up, and let's see what share price will do. But at the end of the day, as I said, you make the share more or less.

More like a strategic question. You talked about being #1 in Europe, but thinking about your clients, there might be global accounts with product distributor globally and assembled or manufactured globally. How should we think about this so especially looking that you have no U.S. footprint disadvantage. How are you dealing with that?

Well, first of all, we are more on the high end of technology. So we have certain markets that are not so interesting. For example, India will not be so important case was. And then we have decided many years back already, 7 years back or so that we it's better to be a leader in Europe than to be nobody worldwide. So that's why we focus on Europe. Now what you're saying is very true. We started to miss our presence in the U.S. And I would expect that within the next 12,18 months, we makes moves that will provide -- that will give us some U.S. presence exactly for the reasons that you've mentioned. The customer portfolio is so broad now that we have more and more customers who are actively asking us to manufacture for them in North America. So your point is well taken, it's right. And I would assume that within 12 to 18 months, we should have a solution.

I would have a couple of questions. Actually, one for each of you, you and I'll start with you, Mr. Hagemann. You indicated that you're working on 2 larger outsourcing deals with OEM customers. What will be a typical lead time until such a deal as soon as its agreed translates into revenue for Cicor?

This can be anything from 3, let's say, typically, I would say, 6 to 18 months, 6 to 18 months. It can be very fast if you are acquiring manufacturing site or taking over and then we would wind it down. It can take longer if a customer is winding down it's own manufacturing. So 6 to 18 months I think would be a fair assumption.

Next one for Mr. [ Kechele ] you described the benefits from your new Business Excellence Program. And would you be able to put that into perspective relative to the typical price erosion taking place in your industry. Can you overcompensate price erosion with the measures you have initiated?

Marco To a large extent, yes. Because we have different disciplines, right? We have price inflation on the material side, but we are strengthening our sourcing power. So we get better condition. On the other hand, the idea is tobalance these. We have labor cost increase, and we have productivity improvements. We try to balance these. And, what I mentioned before, we have room for organic growth in the range of CHF 250 million. So with every higher utilization of our factories, our leverage on the overhead cost is also going down. So this is our target that we, at minimum, compensate these price increases or inflation increases, let's say, with operational excellence.

The next one is on the market, please. I understand that you're having a real good pipeline in health care, for example, for drug delivery systems. Can you explain in a bit more detail what applications these products are for? For instance, will it be -- somehow be involved in [indiscernible] things or is diabetes the main application?

We have different applications in the pipeline and also in our customer base. It's for sure, I mean, diabetes, insulin pumps, but there are also other pharmaceuticals to be applied by electronic devices. So it's not only really focused on one [indiscernible]. So we see general growth in this market.

And a final one, I guess. If i calculate correctly, then the idea is to acquire revenue, which is in the neighborhood of CHF 250 million to CHF 300 million possibly by the end of 2028. I assume that this requires larger transaction. So is the size that you did with the TT Electronics transaction, the size we should envisage for the coming years? Or would you target any larger concept?

It's a very good question. Obviously, we look mainly in the value creation we can do with the different transactions first. Secondly is let's say, I think, an add-on, let's say, in a large market like Germany, U.K. or Switzerland creates a lot of value, but can be smaller, right? But if you would enter and you want to become European leader, if you want to enter Italy, France, Nordics, you're not going with an acquisition that's extremely small or as Alexander said, in the U.S., right? Don't enter the U.S. with an acquisition of CHF 20 million revenue. I mean you just know what. So I think you have to think about it rather from the strategic view as you enter a new market, you probably will certain scale, because then we have to access an excellent platform in the U.K. that has been growing out. In Germany, we really build it out. And so we will enter new geographies for larger acquisitions. Now smaller acquisitions in some markets are highly value accretive because they're bolt-on, you can drive scale, you can leverage certain elements. I mean that is there. It's obviously also [indiscernible] because a lot of the M&A integration work is straight with the local team, right? I mean, in the example we acquired SMT and from day 1, we had a joint management team. Both sites are in Dresden. I mean the synergies are flowing straight away. So that's how I look at more. It's not that I say, "Oh, I want to have a certain number, and I want to now do a larger deal." It's not at all the intent. It's more from a strategy -- right, from a strategy. If you want to be pan-European player, we are in very attractive markets not present to go when you need a certain scale. And then if we create value with this follow-on, you have to look into the priorities and the complexity for value, but we -- you always should look at it.

Do you use when you make acquisition [indiscernible] substantial liquidity.

In one of the charts I mentioned, we are flexible in the structuring. So we look at what is the key element with the sellers, what do we really look for. Earnout is a tool, right, as others, to bridge some gaps maybe of misunderstanding. We have so far only used them once in seller. So relatively limited, because you shouldn't forget with earnouts, you align incentives short term, right, in terms of delivering short-term results with the seller, but you also bring more complexity. I mean, let's be fair in some areas, it would just not make sense. So if it is 1 tool, if it is a way to bridge gaps between the seller and the buyer, we can use it. But if I don't have to because we can find a more simple structure, then we prefer the simple structure.

There seems to be a trade-off between operational objectives and some financial objectives Not a trade-off. It's another combination. So the investments in technology, capability, working with customers to develop new tools and maximizing free cash flow, reducing CapEx.

Operational -- driving operational performance is absolute key. Driving operational performance in all areas, be it on the sales side, on the operational metrics or on the financial side. Because the day we are closing on the transaction, that is organic business. And it's all about operational performance, like my colleagues mentioned. It's interesting. We have to have both.

And I would really say it's actually the operational excellence that drives the results right? I mean if you think big picture and you're coming probably from other companies at massive CapEx, we're talking 2.5% to 3% in the free cash flow statement, right? If you look into net working capital optimization, productivity, that is the funding mechanism that drives some of the results. I mean, the low leverage that we have today, I only have because, Marco and his team have delivered cash flow improvement on procurement. He has delivered revenue on the different customers. And by the way, we have stepped up the profitability that then flows through to cash flow, on top of some of the procurement elements. So I don't see the -- I mean, especially in our industry, I don't see the massive trade-off. I think that we all agree, we would not have to make massive investment into greenfield site with [ CHF 50 million ] beautiful site or headquarter or whatever. I mean, but I think there, we are very much aligned in terms of priority.

It was mentioned evidence, it's very interesting. The way companies are valued by really this enterprise value as a multiple of EBITDA and that is a very modest number. You're getting so many potentials for free, the potential to improve on operations, operational performance. We mentioned the -- about doubling of EBITDA margin of the TT Electronics acquisitions we did and you get capacity for free. It's amazing. It's amazing. You're buying capacity and instead of putting up a factory or having to rent one, it's just for free as part of the deal. So totally love it. And it's only that, it's also that, Marco you promote a very rigorous approach on OEE, overall equipment efficiency. Very often, the smaller companies we acquire, they don't run their equipment well. And by teaching them how to get more out of the existing equipment or like you tell our managers to do more with less , we are creating even more capacity. So it's a beautiful model that is allowing us on top of the financial returns of the year to get so much more.

Maybe as a follow-up on this CapEx, I mean, you mentioned one of your strategies is to come up with new applications, I mean, high precision, clean rooms. I mean, is that really possible, if your CapEx is at 2.5%? I mean, you have a lot of sites worldwide. I mean, did they invest more in the past and now we don't have to invest in the next 5 years or...

What we can say is that nothing is totally new. For more or less all of our technologies, we have already something in place in some cases, right? And first, we utilize what we have and also answering a little bit the CapEx. I mean all of our CapEx has return on investment, right? This is not that we just invest for the sake of investing. And here, it's very often, I mean, our customers work very often at the edge of technology. They are home-based in Switzerland, maybe in Germany, Northern Italy or U.K. They are not commodity. They are working on the actual technology, and they are looking for partners which follow them on the way to figure out what is possible, right? And therefore, some of these investments have quite a value because it makes a difference. And so return on investments is competitive against investments in others. And what was mentioned before, I mean we don't invest in facility, in things which are just there, right? And is bread and butter equipment, we can also get with acquisitions whatever. So this is not our focus. It's more that we select very carefully where we want to invest and where we can make a difference.

We should also add that talking about electronics there might be misperception -- so TSMC is also electronics. And Intel is also electronics. When they are investing, they're investing into making semiconductors. The capital outlay is enormous. That's all the numbers we hear all the way to now. If you think about the subsidies, CHIPS Act and whatnot. We're investing USD 10 million, USD 20 million, USD 50 billion into a wafer plant. Our industry, which is about creating products, assembling products is extremely scalable. And so the required capital outlay is massively low. So that's why the scalability of our industry is very high.

Most of our competitors invest between 1.5% and 2%. We between 2.5% to 3%. That means, in average, we invest 1% more than our competitors in average. But this is maybe not relevant in 1 year. But if we say year after year after year, it's 1% of our revenue we invest more in our technology and capabilities over time, it makes a difference.

How is the relationship with your main shareholder? Is it the financial? Or is it giving you some advice and instructions?

Our main shareholder -- so -- by the way, I think you will have ability to have good one-on-one discussion over a client there because of our Chairman, Daniel Frutig, here in the room. And we've also a representative and Board member from main shareholder Konstantin Ryzhkov. So -- and maybe he's the best to respond. But what they do from my perspective, first of all, have 1 representative from the board. So 1 OEP representative. The other 3 is independent. Then what they provide is, of course, let's say, they are acting as a consultant. All decisions, of course, are taken by the Board position about an acquisition and whatnot. So they cannot take a decision, they can only advise. They can only advise management and the Board. And that's a service that under other circumstances would be quite expensive if we get it offering. It is a way for one equity partners to drive their return. But ultimately, of course, they require and they want. And everybody else can also, of course, benefit from that. So there is definitely a clear element of advice, But no influence on decision-making because it's just the normal governance we have in the Board, which is majority independent.

Maybe, I mean, you mentioned also that you want to develop more for your clients. So are you going to increase the R&D personnel? Or is this already included in your target operating model or you have this 6%, I think productivity improvement. So you can compensate with that or you have to invest and you have to invest in which part?

Maybe it's important to understand that we -- if we speak about development, we are typically talking about co-engineering. So our customer engineers something with us or gives us a concrete contract. So this is a contract that we have also reimbursement on what we are doing. It's not that we develop something and then afterwards in the recurring phase, we sell [indiscernible]. So we are paying for the development, in a co-engineering or a contracted engineering mode. So we should be also successful and make some investment during the engineering phase. And then we are, let's say, [ good ] position also to be allowed to manufacture afterwards, right? I mean, sometimes it's independent. It's a different contract. So we get a contract for the development. And then, let's say, we are in a good position to offer also [indiscernible]. And typically we get it, right, but it's not dependent, right? It's independent. So we have a business case for the engineering. We have a business case for the manufacturing.

And this is already in place, okay. So why haven't you done this before in that case?

I mean, to a smaller extent, yes, we are developing these further. We have our new capabilities with the acquisition in Bucharest, for instance. We are developing an engineering department in Vietnam, very competitive on the cost structure and the young guys were really engaged and motivated to learn. So -- and we have our main hub Swisstronics here in Switzerland, where we do more system engineering and coordination project.

The OEM outsourcing contracts that you -- the large ones that you basically preannounced now. How significant are they going to be? Are you going to do a press release anytime?

No. So we are working on this. I'm not saying that they are already -- that they are working on this.

[indiscernible] from the 2.5% or 3% CapEx guidance that we discussed before. I mean, we have to do...

There's all different kinds of models that -- that you can have. It's either just transfer of manufacturing, you can take over some equipment or you take over complete facility. So -- and what it is, if you take over facility, it's very similar to an M&A project, if you wish. If you are taking over equipment, then you have done this. Then in very recent case where a customer, a health care technology customer, has outsourced because he has shutdown manufacturing, his own manufacturing in the Philippines and partially Vietnam and transferred to our factory in Indonesia. And what we do, we would, for example, acquire his equipment at book value. So -- and then move it to us. It's always a negotiation issue. So all the models exist. In that case, again, it was a modest capital investment. And then, yes, this was included in the 2.5% to 3% in that case.

It seems to be that 20 sites is quite a lot for revenue that we generate.

Yes. What site is more? On the engineering side?

More combined side?

One we have announced. So one is really -- not really a full site for manufacturing. It's more engineering and headquarter at Singapore. So make it 19, and we have just announced the consolidation of 1 of our sites, so now that makes 18. And we are looking, of course, at the viability of each site and what are the economies of scale coming to an optimum site. We should also -- in the business that we are in, we can run a site with extremely low fixed cost that we can run certain sites with very low fixed costs. And so we have really to consider the benefits. And so far, now we have decided to shutdown 1 site next year, 1 in Ulm, it was just announced a few weeks ago, and we are always assessing. What we are doing about site consolidation was really depending heavily on our M&A, of course, because new acquisitions provide also new opportunities for potentially site consolidation.

But if I can add on -- when we started thinking about the site consolidation 20 -- 30 years ago, we discussed about fixed cost reduction was very simple. But today, having people in place is a value by itself. I mean in Switzerland, Germany and U.K., if you consolidate sites and you close 1 site with 100 people and you need there for 60,70 at the other site to increase to absorb the volume. It's not easy to get there. And so people are really a factor, which plays a role in site consolidation in the Western Hemisphere. This is different in our Asian sites. But here, we are ready to grow. We want to go for volume. But the site consolidation being close to the customer, having experienced people in place is a value by itself.

When you acquire companies and you say you have a lot of capacity. So -- and you also said you don't have high fixed costs. So do you normally then also reduce demand of personnel when you acquire a company? Or is this one of the ways you can improve the margin quite fast? Or is it to really just the productivity changes plus the cross selling?

I'd say it's more often on materials. It sometimes in the SG&A, but really being able to better coordinate certain functions. If we see -- sometimes you mentioned that in your presentation, we have the must do the admin stuff. Sometimes, I'm surprised how much some companies are paying for insurances, and for example, for their auditors. So I think we've seen numbers that did surprise us. There's not too many auditors, really. But that is really something where we can drive a much harder bar in both. And these costs [indiscernible] on smaller cost elements like marketing. And if you're adding these very small items up, they can already give you 50 basis points of margin for pretty much doing nothing, but other than having them participate in contracts. And then you start on SG&A. Peter has mentioned what we have done in [indiscernible] to combine the management team of 2 sites that gave us roughly CHF 0.5 million in savings, almost overnight. So that's what we're doing. But again, that's why we need an approach that very, very close to the operations and the business because the savings with each acquisition can be totally different.

It's a case by case. That's why that's so important. We do due diligence to think what are the risks and opportunities and knock them all and any easy wins on admin, we take, right? But I mean, if there is a site where it's a really growth story you rather wonder, how can you accelerate maybe the staffing so that we get faster on growth. road. I mean that is maybe more than the question. But it's really case by case, Now overall, you saw significant profitability step-up either by top line or by saying more by a combination.

You have done this acquisition without doing restructuring charges and thing like this, which is usually or very often is the case that companies do M&A. Can we assume that also executing this 2028 plan, what you have given us as a financial framework is that we don't need any restructuring charges, we do not adjust. We can measure you at the reported numbers. And what you do in this post-merger integration is basically everything is included in numbers.

I would -- look, I mean, honestly, we have not planned for any major restructuring. I mean, -- so I would say, yes, but -- so the only thing is a one-off. We will probably disclose it by this. I'm not sure I would do a massive -- it's within our guidance. So it's -- coming back to your example, I'm not trying to kind of then separate it out and say our guidance was excluding. That's not the point. But we may disclose that you see like we have done half year reporting. I mean we have 80 basis points of dilution in the first half, because of M&A PPA status. So we're transparent, we believe the most important for you is all in. So we will not create massive secondary reporting to -- actually, if you look into what we did with the [indiscernible] equity, the whole intention was making very simple communication that everyone understands the value creation in very simple terms. You see the midterm guidance now, no core, very simple profitability. And look, I mean, I may elaborate, if you do the math, if you take all the elements together around the guidance, you actually -- if you take the CapEx, if you take what Marco was saying, net working capital and so on. If you look at what we do in terms of progress, you'll only get also the number [indiscernible] free cash flow conversion. We already in our business have around 50% of EBITDA translating into free cash flow. Sometimes more as we reduce net working capital, maybe in a higher step-up. Maybe some years, the supply chain crisis was challenging. But in average, that is a good assumption, and you can run a simple model with assumptions and you will get to it. So I think overall, we will continue on it. And for us, it's core coming back to [indiscernible] questions as well, why is the share pricing up. We need to make a very transparent, simple what the value creation. Thank you very much. Thanks a lot for your interest. Thanks for the great questions. Now, we can all stand up and enjoy some drinks and enjoy the food. Thank you.