DKSH Holding AG (DKSH) Earnings Call Transcript & Summary

Welcome to DKSH's Virtual Capital Market Day 2020. Before we start, let me give you some general information. On the webcast top speakers, about the videos and slides, you may find the overview of today's presenters. Under downloads, you can download the presentation as a PDF. Under agenda, you will find timings and details of all topics today. [Operator Instructions] Following each presentation, there is a Q&A session. [Operator Instructions] At this time, I am pleased to hand over to Stefan Butz, CEO of DKSH. Please go ahead, sir.

Good morning, good afternoon, ladies and gentlemen, and welcome to the DKSH Capital Markets Day 2020. On behalf of DKSH, I'm excited that after the initial postponement, we can connect digitally with you today. The theme of this year's Capital Markets Day is delivering growth in Asia and beyond. We want to make this theme more tangible for you with today's round of speakers, which consist of our Chairman, Marco Gadola; our CFO, Bernhard Schmitt; and our Business Unit Heads in order of their appearance, Bijay Singh, for Healthcare; Terry Seremetis for Consumer Goods; Hanno Elbraechter for Technology; as well as Natale Capri and Thomas Sul for Performance Materials. They are all well-established experts in their fields and will offer you first-hand insight into our businesses. Let me provide you with a closer look on today's agenda for your easy reference. I will kick off with an overarching perspective on our strategy. This will be followed by a personal welcome from our Chairman, Marco Gadola. Then we will dive into the business unit update, starting with Healthcare and Consumer Goods. After a short coffee break, we will then continue with Technology and round the business units deep dives up with Performance Materials. Last but not least, our CFO will give you an overview of our financials before I will conclude this Capital Markets Day with some final remarks. There are 4 main objectives that motivated us to conduct this event: first, to give you an update on our strategic priorities and actions to deliver sustainable growth; second, to point out the progress in our evolution and where we stand today; third, and very important for today, to give you the chance to get know our great leadership team and their focus areas going forward; and finally, we want to provide you as key stakeholders with a better understanding of our business model and our growth drivers. So where are we today? DKSH provides companies with access and expertise to grow in and with Asia. We call this Market Expansion Services. Our business partners can choose the services they need to grow their business from our comprehensive and ever-growing omnichannel portfolio along the entire value chain, ranging from sourcing, market insights, marketing and sales and e-commerce to distribution and logistics as well as aftersales services. We take on a profound responsibility to grow our clients and customers' businesses. Our specialists proactively provide strategic advice based on their experience, know-how and networks, gathering data from our more than 0.5 million customers and translating it into detailed, up-to-date market information. We operate in 36 markets with 33,350 specialists on the ground, generating net sales of CHF 11.6 billion in 2019. Taking all this together, we are the trusted partner for companies seeking to grow business in Asia and beyond. As the future builds on the foundation of the past, it is important to also recollect DKSH's history. We have a rich heritage and can look back on more than 150 years of experience in Asia. Over time, we reinvented our business model from being a traditional trading house to a specialized market expansion service provider. During this time span, we have reached considerable milestones, such as the formation of DKSH in 2002 under the name we all know it by today as well as the IPO at the SIX Swiss Exchange in 2012. We admittedly did not fully capitalize on our growth strategy to exploit the potential in Asia in the last decade. To fully reach our future potential, we have made important adjustments in recent times, which I will elaborate on in a few minutes. Governed by a strengthened Board of Directors and management team as well as our recently launched new identity, we embarked on a transformational journey for DKSH to deliver growth in the future. Now you might wonder what exactly our growth ambition of the future is. Standing here today with all the uncertainties surrounding COVID-19, it is more difficult than ever before to give a precise answer to that question. We will focus on key growth drivers for our business in the medium to long run. We are positioned in fast-growing, and at the same time, resilient markets in Asia Pacific. Current market studies unequivocally agree that economic fundamentals, demographic trends as well as consumption levels are going to increase over time. Second, there are favorable industry trends. Just to name a few, we have the continued outsourcing trend, digitization, our clients further consolidating the distributor network. We, as a leading and truly regional payer, will benefit from those trends. Third, we see more potential for M&A. We continue to have a very strong balance sheet that can be leveraged up to 2x net debt to EBITDA, and that gives us an additional firepower of up to CHF 1 billion. Combining these 3 growth drivers, we see a potential to grow GDP plus in returns post-COVID-19. We have a clearly defined strategy for growth in place to achieve our objectives. It focuses on 6 main areas: first, we invest in people and nurture high performance; second, we drive our business unit strategies and strengthen their service offering to generate value in the long term; third, we expand our regional footprint via value-accretive acquisitions; fourth, we drive operational excellence by focusing on better execution, sustainability and good corporate governance; fifth, we champion digitization through digital business models, transforming as well as leveraging data and analytics; and finally, we strengthen our supply chain to have more modernized facilities and work processes. So let me talk about these 6 pillars a little bit more in detail. Driving change and aiming higher always starts with our people. At DKSH, we have an interest in not only finding, but also developing and retaining the best talent while nurturing our performance culture of trust and empowerment. The recent launch of our new identity and the appointment of our new Chief Human Resource Officer a testament to this. To upgrade our capabilities, we recalibrated our management team, and we replaced 25% of our top 50 management in recent years. We cascaded our long-term incentive plan further down the organization, which now includes 4.5x more people than 3 years ago. In addition, we initiated several employee recognition programs and launched new tools to drive continuous learning across our group. One of our targets for 2025 is to increase the amount of employee training at 25%. With all these initiatives, we develop future leaders and ensure high education levels at DKSH. For each of our 4 business units, we have a dedicated and updated strategy in place. Our focus in Healthcare is to leverage our strong position and drive into higher-value segments and services. In Consumer Goods, we capitalize on our leadership position in Asia Pacific. The emphasis in Technology lies on building resilience and delivering growth to exceed pre-COVID-19 levels. And in Performance Materials, we will expand our leading position aggressively in specialty chemicals and ingredients distribution. My colleagues will give you more insights about the strategic direction in their business units later. Let's move to another strategic focus areas, mergers and acquisitions. We have substantially accelerated our M&A execution since 2017 and closed 10 deals since then. In total, we acquired around CHF 530 million of net sales on accretive terms. We have clear criteria for our targets, such as gaining additional value-added services and capabilities, expanding our geographic footprint and ensuring a cultural fit. We have a proven track record of expansion in our European specialty chemicals business, and we are continuously driving market consolidation in Asia Pacific across all 4 business units. The ambition for the future is clear. We want to close more accretive deals. We currently see activity to come back to the transaction market, and our balance sheet enables us to quickly execute deals when they arise. Operational excellence and the stringent execution of projects is among the major target of our management team. In the last 2 years, we reduced overhead costs by around 5%, while we continued to invest in IT and digital, for example. Going forward, we will focus on further midterm efficiency improvement. Sustainability is an integral part of our mindset. For us, a successful business is taking environmental, social and economic sustainability issues into account. As outlined in our sustainability report published this July, we have, for example, committed ourselves to the UN Sustainable Development Goals, and in line with that, for the first time, also set sustainability targets for all members of the Executive Committee. We are seeing the first fruitful results of our efforts in the field as our external ratings keep improving. Another key aspect of our strategy is digitization. We have made very good progress in recent years in our e-commerce business, which is now an integral part of our service offering. E-commerce net sales are targeted to reach over CHF 150 million, and with that, would have increased tenfold during the last 4 years. To further accelerate transformation in DKSH, we have recently appointed a Chief Digital Officer. We will roll out additional digital business models and leverage data and analytics. In terms of our objective to strengthen and update our supply chain, we rolled out our new data-driven transport management system in 4 key markets, and we are currently in the process of implementing it in Vietnam and Taiwan as well. This system will enable us to gain efficiency and transparency by digitizing the planning, control and tracking of orders and collections. Overall, we have already saved millions in 2019. And while COVID-19 has disrupted order volumes, we still aim to double this amount for 2020. We also deploy more automated processes across our distribution network. This gradual automation increases our efficiency and reduces the overall error rate with B2B and B2C fulfillment capabilities. As you see, our strategy for growth is based on these 6 pillars, which make us confident that we are heading in the right direction to achieve our growth ambition. Our strategy also proved to be the right one in those uncertain times. The COVID-19 outbreak demonstrated that our business is not necessarily immune, but certainly resilient against unexpected market challenges and changes in demand and consumer behavior. What makes us especially resilient are many different factors, and I just want to highlight a few here, such as the focus on attractive industry like life science, our high share of 8 items of daily use or our broad diversification across markets as well as clients and customers. On a group level, for instance, our top 10 clients and customers each only account for 20% and 15% of our business, respectively. As a result of all of this, and thanks to the unwavering commitment of the whole team, in every market, we continued to deliver every day during the peak of the crisis, and we recorded, as you know, solid half year results of 2020. Net sales almost matched last year's level. At the same time, our free cash flow grew as well. We also continued with our progressive dividend policy and distributed an ordinary dividend of CHF 1.90. We are prepared and able to master the challenges of COVID-19. At the same time, we see favorable market and industry trends in the long term, which, combined with our M&A strategy, provide us with the potential of achieving GDP-plus growth in real terms and margin enhancement post-COVID-19. Thank you very much for your attention, and let's move on to Q&A, please. Thank you.

Thank you very much, Stefan, and thank you very much to everybody on the call of submitting the questions. We have them in front of us. I will take out the first 3 ones. The first question, we have from [ Peter Gilen ]. He's asking how important are personal relationships and networks in Asia, and how does this relate to our changed slogan of Asia and beyond. So how important are our personal relationships and networks and how does this relate to our changed slogan? Bernhard and Stefan, one of you, please?

I mean, first of all, we have a very strong position across our 4 business units in this marketplace. But clearly, at the end of the day, people do business with people. And one of the reasons our organization is so much decentralized is that we want to be very close to our clients and customers. And we, from the corporate level as well the heads of our business unit, put a lot of time and effort in there to maintain and build very good client -- a very good relationship with clients and customers across the region. But also our clients, and in particular, they have a structure in their business, and most of them cluster the business into Asia Pacific. So what do -- they do expect from us is that we help them to deliver growth not only in Asia but also in Pacific. And that was the reason why we enhanced our position also down in Australia and New Zealand. And you will hear later on from our business unit heads that even with the most recent acquisitions in Australia, we were already able to leverage those very good relationships we have and secure contracts from the acquired companies in Australia into Asia as well as the other way around.

Thank you. The second question for Bernhard from Jon Cox, Kepler. Does DKSH have RONOC or WACC goals in M&A, and given that M&A seems to be getting more important? So do we have RONOC hurdle rates in the M&A target?

Internally, we have RONOC hurdle rates for all our businesses. That is regardless whether it's a new client coming in, where I have to get more NOC into the business, or whether I purchase a company. And our internal hurdle rate is around 15%.

Thank you very much, Bernhard. Another 2 questions for Stefan from Jon Cox, Kepler again. Is DKSH still committed to Business Unit Technology?

Yes, we are. The vision is clearly -- and our strategy clearly builds on enhancing the position of our 4 business units. And Hanno later on will explain in detail the strategy behind Technology, and we do believe that we can significantly enhance our footprint also in our tech business.

Good. The final question from [ Anik Ball ]. He's asking for Stefan, what are the advantages of being a family-owned company?

I mean, clearly, we are very proud of having a family as an anchor shareholder since many, many years. And the advantage is that we really, with our anchor shareholder, we only don't think short term from quarterly report or half year report to half year report, but we think long term. We are fully committed, together with the anchor shareholder, in enhancing our positions in many years to come in Asia, and we feel fully supported by the Keller family.

Thank you very much. Thanks for all of your questions in the chat. We will now move on to the next presentation of our Chairman, Marco Gadola. So Marco, please go ahead.

Thank you, Till, and welcome to everybody also from my side to this Capital Markets Day. I would like to share with you some of my initial impressions, and then building on the initial comments of Stefan also what I see as the key focus areas for the short and midterm. When it comes to my initial impressions -- can we have the slide, please? I don't see the slide. Is the slide on the screen, Till?

Yes.

Okay. I can see it. Okay. So my initial impressions are that we have a very, very solid position in the key markets in Southeast Asia. I'm talking here mainly Thailand, Malaysia, Singapore, but we still have opportunities to extend our presence through some of the markets where we have still some white spots, and we are talking mainly the Philippines for FMCG and Healthcare and Indonesia. When it comes to Healthcare, we have started to actually penetrate the large and promising Indonesian market through the acquisition of Wicaksana a couple of years ago. The other impression is that -- and that has been proven with our first 6 months results, that our business model is very resilient, and this despite the fact that COVID has also been quite a factor and has had quite some negative impact in many of our core markets. If you take, for example, Thailand, Thailand is still closed for tourism. And I guess you all know how important tourism is for the economy and for the GDP of Thailand. So very resilient business model. We have done very well during the first 6 months. And this is also, in a way, a signal that we're on the right way when it comes to actually developing and implementing our core strategic initiatives. I would also like to compliment Stefan when it comes to building a strong team. You have probably also noticed in our results for the first 6 months, the Consumer Goods, especially FMCG, part of Consumer Goods, has developed very, very positively despite, and I mention it again, the COVID-19 situation. And Terry and his team, they have done a great job. So I'm very confident into the team. Stefan has made some very important changes. And I feel that we have now today, the strongest team in the industry driving the business forward. Stefan mentioned the family, so the anchor shareholders. I just would like to mention, we are not a family business. We're a publicly traded company. But obviously, DKH with 45% has a main say, and they are, by far, the largest shareholder. And being able to rely on a stable shareholder with a long-term strategic perspective obviously allows us also to take the right long-term decisions for the business. Let's now talk about where I see the focus areas for the mid -- for the middle term, and Stefan has already mentioned most of them in his introductory remarks. I strongly believe that we have still a lot of potential to generate more cash flow than we have generated in the last years, on one hand, through being tighter and more efficient in managing our working capital, and I'm talking here mainly about excess inventory, which we still have on our balance sheet; and on the other hand, also in tightening the collection of our receivables: being non-trade receivables on one hand, but also supplier account receivables, so money, which we have outlined on behalf of our clients when it comes to A&P activities. The second driver of cash flow -- of improved cash flow is efficiency and profitability improvement actions. Stefan has mentioned supply chain processes, so the automation -- the further automation of our supply chain. There, we still have a lot of potential. I would also like to mention a secondary, which is the order-to-cash cycle, also there. Through automation to -- through process improvements, efficiency improvements, we should be able to become leaner and generate corresponding cost savings and thus improve cash flow. I would like to mention as a second important focus area, the continued transformation of our FMCG business. I already mentioned before that we have been very happy or we are very happy with the performance of Terry and his team. Terry has had a tremendous impact when it comes to actually transforming FMCG. We are not yet fully through. Obviously, there is still a lot of potential to do even better. New retail as a kind of a buzzword, so to be the first ones when it comes to digitalizing customer-facing processes in some of our key markets, mainly Thailand and the other two I mentioned before, Malaysia and Singapore. But also when it comes to expanding our network of points of sale. We have to make sure that we stay hugely relevant in our core markets. And you only stay relevant if you have actually corresponding power reach when it comes to points of sales. Also there, we still have potential to improve. But overall, I'm very, very happy and very, very positive that actually our FMCG business will yield again returns as we have seen years ago. I mentioned white spot. So geographic expansion, and I know I'm repeating myself. I'm mentioning again the Philippines and Indonesia when it comes to Healthcare and FMCG in Philippines. So these are 2 big markets, 2 growing markets, and our footprint there is still relatively low. We are making efforts, as we speak, to change that. I'm convinced that these 2 markets will actually contribute very positively when it comes to our future organic growth. And finally, Performance Materials. My impression is that it has been underappreciated, how important and how compelling our Performance Material business is. First of all, when it comes to the margin, it's delivering. It's all proportionately delivering gross margins and EBIT margins compared to the rest of the business. And also the fact that we are a clear market leader in the fastest-growing part of this industry, Asia Pacific, and that we have been slowly but surely building a global business. And we are actually competing with the big companies in this industry, and we are very well prepared to actually continue to take share and to further drive this business. And I'm sure that Natale and Thomas, they will actually share with you some more relevant information when it comes to Performance Materials. One final remark on capital allocation. We have a very strong balance sheet. We have been generating nice free cash flows also during the first 6 months, so in a very difficult environment. And we are continuing to be committed to actual return cash that we cannot meaningfully invest -- reinvest into our business to shareholders. So in other words, we are committed to increasing dividends in line with, hopefully, increasing EBIT and profits after tax. So these were some remarks from my side. Again, I think that we will give you a lot of more details and more insights during presentations of our BU heads and the other colleagues presenting during this Capital Markets Day. Till, are there any questions for me?

Marco, we have no questions in the chat. So everything that you have said seems to be pretty clear and well understood. So thank you very much for your time. And we will move on with Bijay from Healthcare in Bangkok, please.

Excellent. Thank you.

Good morning, good afternoon, good evening, wherever you may be. Very happy to present to you today at this Capital Markets Day. My name is Bijay Singh. I'm the Head of Business Unit Healthcare. I've been with DKSH since 2015 and have been in the industry for almost 30 years. Today, what I want to share with you is a little bit about Business Unit Healthcare, our strategy, and then also share with you a little bit the midterm outlook as well as how we're performing during COVID. If you look at our Healthcare business in Asia Pacific, the key point that I'd like to leave with you is that we are a leader in commercial outsourcing and 1 of the top 2 in distribution in health care products in Asia. If you look at our performance last year, our net sales were $6 billion (sic) [ CHF 6 billion ], our or EBIT, of CHF 134.5 million. We operate across 14 markets. And if you look at our net sales split, it's about 64% into pharmaceuticals; 21% into medical devices, which is a faster-growing segment; 13% in over-the-counter consumer health; and 2% in our own brands, and I'll show a bit later how these own brands kicks well above its weight in terms of flow-down performance into our EBIT. One of the things that separates us at DKSH, and I'll touch on this a bit later, is our customer footprint. We go direct and have what we call capillary distribution in many of our markets, covering 130,000 customers, what we call, hospitals, pharmacies, clinics across 14 Asian markets. We have over 500 clients or principals, as you may know, and over 8,000 associates or what we call specialists in DKSH Healthcare. Again, how we add value for stakeholders in Asia is our very large distribution networks. And the beauty of this, going direct, is it allows us to see exactly what's happening in the markets. It allows us to see the inventory. It allows us to make sure we control price and volumes in these markets, which is something that our customers and our clients very much value. We have a leading commercial team in Asia, over 4,000 -- almost 4,500 commercial specialists doing sales and marketing on behalf of clients here in Asia. We also adhere to the highest quality and compliance standards. We have several international certifications, such as good distribution practice, good manufacturing practice, and of course, ISO certifications. And an area I'll touch on in a moment is our growth in driving high value-added services, areas such as patient solutions, regulatory services and analytics and insights. If you look at our client base, you will see and recognize many of these names as household ones in health care. Several of them are blue-chip clients, such as Roche, AstraZeneca, Sanofi, Medtronic, GSK and Abbott Nutrition, again, well-known household names that we represent in several markets across Asia. I'd like to highlight a couple of other ones, particularly Haw Par and especially LifeScan. LifeScan was a division of J&J that was purchased by a private equity company last year. And that private equity company came to DKSH and asked us to represent them across several markets. This is one of our sweet spot areas where we can immediately add value for clients such as private equity looking to accelerate growth where they see potential. We have a variety of partnership models that we can provide for clients. Starting on the left, you see the classic 3PL or 4PL, third-party logistics, fourth-party logistics, essentially, logistics and distribution with an annex of credit and collection, which is often very important for clients who don't have the infrastructure to manage this. As I've said earlier, a key part, a key differentiator of DKSH Healthcare is our commercial outsourcing. This could be an add-on to our 3PL, 4PL through contract sales or contract sales and marketing or it can be a full-service solution, what we call full agency, which is predominantly our sweet spot area where we essentially take over for the client everything from regulatory, all the way to managing HR, finance and sales and marketing on their behalf. In addition, we also have in-licensing and acquisition where we selectively purchase our own brands and own the IP. And I'll touch on that in a moment. Underlying all of this is also a few areas of value-added services, which I will cover in a few moments. I mentioned before the unique direct omnichannel approach that we have, connecting clients to over 130,000 customers in Asia. This covers customers such as the medical channel, hospitals and clinics, which is the predominant channel; also traditional trade, independent pharmacies, about 1/4 of customers; modern trade, about 10% of customers, these mainly our chain pharmacies; and a relatively small part of our business but growing very fast is e-commerce. And the reason that is small is because a big part of our business lines, particularly pharmaceuticals and surgical medical device, cannot be served by e-commerce at this time. It's generally restricted to consumer health. However, we see lots of growth opportunity in this channel. As I mentioned before, DKSH is one of the leading health care distributors in Asia. Here, you see in this chart that we're 1 of the 2 largest health care distributors. And there, we can differentiate by the number of clients that we have, the number of countries we serve, and again, the direct distribution that we offer which, again, becomes a value added to clients. If I touch on the Healthcare strategic direction, I'd like to touch mainly on the top 3 areas: markets, our industries and the business solutions we offer. In terms of market, we segment in terms of maximize, realize, optimize and launch, and this helps guide our investment and our resource allocation. And I'll touch on a little more about that in a moment. In terms of key business lines, I've touched on before, pharmaceuticals, OTC and consumer health. And I'll talk a little bit more about medical devices, which we find particularly interesting and attractive. In terms of business solutions, I'd like to share with you a little bit more about what we're doing in commercial outsourcing, some of the value-added services and our own brands, which I mentioned are a very profitable part of our offering. If you look at the markets, you'll see that there are a number of emerging markets, about 80 million patients in smaller Indochina countries such as Myanmar, Laos and Cambodia. These markets are characterized by a low absolute GDP and a relatively underdeveloped health care infrastructure. It's in these markets that we see very high growth, and DKSH has a very strong market position in each of these markets, generally making us the preferred partner to clients who wish to enter. The next group of markets, Vietnam, Indonesia, Philippines, often termed by our clients as the VIP markets, see higher GDP growth, have the largest proportion of patients, almost 450 million population, and you see a relatively reasonable health care infrastructure and growing. And I would highlight Philippines as one, as mentioned by Marco, as a white spot area that we see lots of opportunity, as well as Indonesia. The next 2 markets, including our home market of Thailand and then Malaysia, represent a population of about 100 million people, relatively well-developed infrastructure, but not growing as fast as the markets I've indicated before, and finally, a group of very developed market, almost OECD-like, high absolute GDP and mature health care infrastructure. And in each one of these markets, we have a slightly different strategy. If we look at health care across Asia Pacific, a recent market study by Fitch shows that a long-term -- or mid to long-term outlook in health care is approximately 5% to 6%, which is pretty much similar to the numbers that we saw in the previous years, 2016 to 2019, of 6% to 7%. Now I'll touch on a bit later that COVID has had an impact in the health care market in 2020, so the mid- to long-term numbers that I'm presenting here, I think, could reasonably be extrapolated to post-COVID. As I mentioned earlier, the growth driver in terms of business lines is coming from medical devices. And again, this is driven by an aging population, aspirational, still relatively low health care spend per capita and a number of innovative therapies that are being launched in Asia today. Touching on medical device. We see this as being the faster growing of the various business lines, and no one distributor is dominant or leading in Asia. So we see a certain opportunity here. Our strategy here is quite simple. We've selected several categories in medical devices that we wish to win in. Diabetes, you would know, is a scourge in Asia, very, very high incidence and prevalence rates and causes a huge burden on society. We see with medical devices, we can operate differentiated distribution solutions. For hospital cases, particularly acute, sometimes you need urgent delivery within 3 to 4 hours. And in certain cases where you have doctors who don't know exactly what unit -- what SKU they may need to use in a patient, they appreciate the type of service that we can provide where we can give what we call a boom box, and they can select which product to use and return the rest, also known as reverse logistics. There's an opportunity for value-add solutions here, such as managing consignment. Again, where you have a plethora of SKUs, the hospital may not wish to purchase all of these, and they need to be held in consignment at the hospital owned by clients. DKSH provides a service of managing that consignment on behalf of our clients. Again, these are some of the reasons why we see medical device as a particularly interesting and high-value area. In terms of commercial outsourcing, we see multiple client trends driving the need for commercial outsourcing solutions. What we see clients focusing on is their own R&D and developing key brands. We also see a prioritization towards key markets: United States, Europe, China or Japan. Price pressures and cost pressures are -- have been there pre-COVID. And I can imagine during COVID, with budget deficits, will only become higher. In addition, what we see is that many of our clients are focusing on specialty products. These specialty products tend to be high-value in the 10s, sometimes even hundreds of thousands of dollars. In this case, every patient counts, therefore, new starts and keeping patients on product is critical. And I'll touch on that as I touch on patient solutions. If you look at DKSH Healthcare's presence from 2017 to 2020, you'll see that our share of commercial outsourcing in new business development has steadily been rising to almost 80% of our business development coming from commercial outsourcing, which, again, is higher-value. If you were to look at DKSH as a stand-alone company in many of these markets, including all of the business that we have in commercial outsourcing, we would rank in the top 10 among these blue-chip pharma companies. In Thailand, Cambodia, Laos and Myanmar, we would rank #1; in Vietnam, #2; and in Hong Kong and Malaysia, we'd be #5. Own brands represents an opportunity to provide continuous shareholder value generation, and we can develop a very attractive long-term pipeline. We have a proven growth track record in own brands, expansion opportunities, including life-cycle management, as I mentioned, very good profitability. We own the IP rights, outsource the production to third parties and carefully manage potential client conflicts in terms of our entry into own brands. Last year, we signed a partnership with Alvotech to bring biosimilars to Asia. Biosimilars are essentially generics of biologics, large products such as HUMIRA, Avastin, Herceptin that you may know multibillion dollars, that we could provide to Asian patients and greatly increase access. And we're in discussion with Alvotech right now to have further opportunities for biosimilars to Asian patients. I'd like to touch on some of our value-added solutions. Regulatory affairs often is an area where we have our first entry, our first discussion with clients, particularly those that are new to Asia. We have almost 90 professionals across Asia managing regulatory, registering products and maintaining dossiers for our clients. Patient solutions represents an opportunity to provide beyond-the-pill support for patients. Through patient solutions, we can provide education, convenience and adherence. Remember, as I shared with you the slides about the evolution of the markets, in many of the markets that are emerging, patients do not have reimbursed access and therefore have to pay out of pocket. There's an incentive for clients to access these patients. However, due to patient confidentiality and compliance reasons, they cannot house that data internally. We had this insight several years ago and have developed a cloud-based solution which is scalable. And through that, we have a real strong differentiator that adds value, and we believe, creates stickiness with clients. We also have omnichannel sales and marketing. I've touched on the various channels. Besides that, we're very strong in digital and teleservices, providing lots of touch points to connect with customers. And finally, analytics and insights. Beyond our transaction data that we can cover to find white spots for our clients, we're also looking integrate both other sources of internal data and external data to provide and share opportunities and white spots for our clients. DKSH has successfully navigated through the COVID-19 crisis, as you can see from our first half year results. This chart shows the evolution of COVID and the impact in our major market of Thailand. In May, patient numbers were significantly affected in the medical channel, both for pharma and medical device as well as the pharmacy channel as patients were either unable or unwilling to visit health care. That slowly improved in June, July and August. However, we do see that the basket size that patients buy is relatively smaller as they feel more uncertain about the future. Finally, I'd like to give you some highlights around DKSH Healthcare. Number one, we're the leader in health care commercial outsourcing in Asia. We run a resilient, asset-light and very cash-generative business model. We're successfully navigating through the COVID-19 challenge. And we see opportunities through the expansion of higher value-added segments and services, and I've touched on commercial outsourcing, own brands and medical devices. Through this, we can expand our strong market position and drive into higher-value segments and services. With that, I'd like to wrap up my presentation, and I'd be happy to take your questions. Thank you very much.

Thank you very much, Bijay. Let's move on to the Q&A session for Business Unit Healthcare. The first question is for you, Bijay, in Bangkok from Jon Cox. He's asking, will you move more into own brands now? And how much of your business today and how much of revenues do you want that to be in roughly 5 years' time?

Thank you. So as I mentioned, own brands is clearly one of the areas that we see an opportunity. The beauty of the own brands is that it can leverage the strong sales and marketing and commercial platform that we have built as well as our distribution. So we see it as an area that we wish to grow. We are in discussions with partners to license in products into Asia. I don't have a particular number to share with you. But I can share that certainly, we expect it to be higher than the 2% that it is today and continue to provide strong, profitable cash generation for DKSH. Thank you.

Thank you. Another 2 questions for Bijay. The first one, again, from Jon Cox from Kepler. He's asking, what is the main weakness during COVID-19? Is it more on the hospital side or with the independent pharmacies?

Thank you. It really depends by country. So if you see countries such as Cambodia and Laos, patients and consumers are moving around very freely. Other markets, there's more of a lockdown. To answer your question directly, I think the one segment that has been most affected in the short term has been elective surgeries. Clearly, where patients have been able to postpone surgeries, they really thought about going into hospitals. So that's probably the most affected. And I think the second most affected is where, in some cases, for the independent pharmacies and some of the chains, depended in certain categories a lot on international tourists. And as Stefan mentioned earlier, Thailand and couple of other countries are essentially in lockdown. And those businesses have seen a tremendous impact, together with private hospitals. As you know, Thailand and Singapore are often centers for medical tourism. So I would say, number one, elective surgeries; number two, certain categories due to international tourists and pharmacies; number three, private hospitals that depend on international tourists. Thank you.

Thank you, Bijay. One more for you from Alain Oberhuber from MainFirst. The question is, what is the highest hurdle to get more outsourcing contracts? And why did we not see so many outsourcing contracts in the past?

So let me tackle the second one. Actually, we've had a very steady growth of outsourcing contracts happen, and you could see from the slide I presented the proportion that was happening. So I see that happening more and more. I think what has changed a lot is how corporates look at the Southeast Asian market. Speaking personally, having been in this industry almost 30 years, back in the late '90s, early 2000s, Southeast Asia was a darling. A lot of companies looked at having their own footprint. I think that's evolved as you've seen the growth of China, and the U.S. has still been an important market. And they're relooking at their business model and their business approach or go-to-market approach, and therefore, looking more at outsourcing. I think the biggest hurdle is clearly the time, the contracting and really when it comes to the mindset of the company. Certain companies really want to outsource, and that's the way they see the future. Others choose to run and own this part of their operation by themselves. I would say that's the #1 hurdle.

Good. The next question related to Healthcare for Bernhard. How do financials, margins, RONOC differ between pharma, medical device, OTC and own brands?

Okay. I'll give you a qualitative answer to that question. Clearly, medical device is the more attractive business among the outsourcing businesses. And as Bijay mentioned, the own brand is, of course, the most attractive from a profitability point of view. Overall RONOC is very strong in Healthcare. That's due to the fact that in many cases, we don't take inventory, and receivables and payables cancel each other out. So it's from a RONOC perspective the most attractive business.

Just seeing there's a last question for Bijay just coming in right now from Pascal Furger from Vontobel. What are the risks in the own brand business? It is only 2% of your business currently because pharma companies don't want to license out their products?

Actually, we see that several of the pharma companies are looking at licensing out. They have huge groups of assets, some of them legacy. They want to focus on their key new launches, and they realize that they can't put the investment behind some of these. So there is an opportunity. I think the challenge for us is we are not a global player always in own brands, and sometimes we are going against that. So we're very much looking predominantly at Asian markets. However, there have been opportunities and there are certain companies that are looking to piecemeal out their own brand into different regions. And I think that's where certainly the opportunity lies because of our commercial acumen here. There's no other company that has the commercial acumen that we have. Thank you.

Thank you very much, Bijay. And as we go, there's another question for Healthcare coming in for Bernhard from Andy Grobler from Crédit Suisse. He's asking what is the margin and RONOC difference between simple distribution and logistics versus commercial outsourcing and own brands?

Okay. So clearly, if we just do simple outsourcing and logistics, the margins are very slim. We don't have to provide sales team so our cost base is also much, much lower. That's why the margins there are very low. Whereas if we do commercial outsourcing, obviously, the margins are higher, and at the end, also the EBIT margins.

Good. Just checking the chat. I think there might be another 1 or 2 questions. No, that's not the case. Thank you very much, Bijay. Thank you very much, Bernhard, for your answers.

We will now move on with Terry Seremetis, Head of Business Unit Consumer Goods. So Terry, please go ahead.

Great. Thanks, Till. Hi, everyone. Great to be with you today. Just by way of introduction, my name is Terry Seremetis. I'm the Head of the DKSH Consumer Business Unit. As some of you don't know me, I'll give you a quick update on my background before I joined DKSH. I've been working in Asia Pacific region in senior leadership roles in FMCG organizations for over 25 years, and the last 10 years specifically have been focusing on turnarounds, transformations and integrations. Predating my arrival at DKSH, I was with the Mars organization, another family company, for almost 8 years, initially in Europe, navigating the challenges of the global financial crisis there, looking after a cluster of markets as the regional market director. And then I moved to Malaysia to take up the responsibility for 16 markets at the end of 2014 and have remained in Asia ever since. I joined DKSH in Bangkok in August last year to spearhead the transformation of the Consumer Goods business. Today, I want to share with you how we're transforming the FMCG business specifically amidst the attractive market potential that exists, which is why I joined. In essence, my focus really centers around 2 key themes: driving strategy and leading people. Before I run you through an update of our business today, it's important to understand that our business unit consists of FMCG, which is around 90% of our net sales and specifically in the Asia Pacific region; and Luxury & Lifestyle makes up less than 10% of our net sales and predominantly being in Asia, but also with a small footprint in Europe and the Americas. We have a portfolio of over 700 recognized clients that include multinational and local companies. And today, I'll predominantly focus on FMCG. On this slide, I can speak from personal experience when I was previously heading up my previous organization on the client side and dealing with DKSH. We wanted to move to a strong regional partner who could represent our brands across these channels. And by far, DKSH was the best omnichannel provider of these services across this geography. As my responsibility was to drive these efficiencies in the business, I was looking for a scalable, standardized and pan-regional distribution partner, which allowed me to switch my sunk costs to variable, in essence, describing fundamentally the benefit that our model provides for our clients today. This capability also has other cascading benefits as we're able to simplify -- we were able to simplify our operating model and eliminating the complexity of dealing with hundreds of small distributors to a much more uncomplicated and integrated business model with DKSH, becoming the biggest distribution partner in the ASEAN market catchment. However, back then, DKSH wasn't structured in a way to benefit from the simplification trend that clients like myself are seeking. And I remember having many discussions about this at the time with the people at DKSH to better cater for these consolidation opportunities. Now that I'm here, it's incumbent upon me to focus on this development and build our capability and to ensure that we capitalize on the strategically important advantage that we have. We are positioning our services as the most capable, advanced and the most reliable business partner across the region, focusing on growth through insights and analytics. This approach helps clients reduce complexity in a business versus doing it themselves as they can leverage our scale and helps them avoid taking the risk of building a bespoke and costly infrastructure themselves that provides no guarantee for success. The largest part of our FMCG business is our full-service model. Due to our underdeveloped performance previously, the EBIT contribution of this full-service business has declined over the past few years. But I'm happy to share with you, this has gone up again following the focus in this -- as this being a key area of our transformation. We're also confident that we will grow our share in this attractive business model, which requires a higher caliber of talent to navigate the nuances of this channel as it impacts both growth and EBIT results. Now that I've discussed our service offering, let's take a look at the client and customer portfolio. As you can see here, and this is really a small taste of the organizations we represent -- of the 700 organizations we represent. You see the likes of P&G, Coca-Cola, Lego, Phillips, et cetera, just to name a few. But what I'd really like to emphasize on this chart is really the diversification across all the categories, with no category representing more than 20% of our portfolio. We have a very resilient, diversified business with strong presence in all FMCG categories of daily necessities, which is an important point. Typically, we are active in high-volume business with daily consumption items at lower price points, which addresses over the majority of the pricing petitions we play in. Our categories are evidently balanced to reflect today's decomposition of the grocery basket, which continues to evolve. 60% of our business is in the food portfolio and 40% in the nonfood portfolio. And again, by way of example, we represent leading world-class brands for daily necessities and organizations in big food like Kraft Heinz and Nestle, but also the local jewels, companies like the beverage giant Tipco in Thailand, just many amongst our client list in the region. Let's take a look at our customers now. To drive the growth of our clients, we are present in all relevant channels. We deploy an omnichannel approach. It provides us the scale to represent the leading brands, connecting with the consumers wherever they shop. Modern trade represents 45% of the market and continues to remain very relevant in the future as e-commerce continues to grow. Foodservice is currently temporarily impacted by COVID. You've heard around the tourist impact. But it's also an important channel for us at DKSH as our clients are demanding to reach more consumers through the different product formats and different usage occasions. We've averaged the composition of the channels in this slide, being mindful that this can vary by market. On one hand, we serve markets like Myanmar with a very small profile in modern trade; on the other hand, customer landscape in Hong Kong, which is more skewed towards modern trade. Today, these different profiles and the geographies are a barrier to entry for our competitors. We are building a network that moves insights quickly through the network, combined with a long and strong relationships at both local, country and regional levels. And somebody was asking the importance of relationships, and being here for over 150 years is definitely a huge advantage. As we move on to the next slide, let's look at the growth potential of both categories and markets. We see the growth potential in all FMCG categories and markets. Our markets, no doubt, have been impacted by COVID-19 this year. We don't have a crystal ball to know exactly when COVID will shake out. However, what we've learned from the past is that these disruptions, specifically in the FMCG business, is a resilient business. It's also visible in the market studies, which predicts consumer goods industry to be down 4% to 5% in Asia this year, while other industries suffer much more. People will continue to consume, and market study see a growth potential in the range between 2% and 4% midterm. We'll benefit from this after COVID rebound as we represent our clients' brands in all relevant channels and able to shape our profile accordingly. What makes us confident is that DKSH is the only true regional player to support our clients' needs. And to further labor this point, let me show you the consolidation that's been driven through our clients' recently. As a client, you can't necessarily afford the complexity of dealing with many local distributors. And as I previously highlighted, there is a need simply interface with the markets with a single-solution regional player. This is exactly what I did previously to joining DKSH and what we are seeing driving the client agenda today, a less-is-more approach. This is also what we see in the DKSH numbers. Over the past 5 years, we've increased the number of regional clients by 25%. On top, we expanded the share of our wallet with our top 30 clients. On average, we work within 5 markets, but I can say there's many examples where we can go to 6 and 7 markets. And fundamentally, we embedded ourselves in their ecosystem. I've also -- before I came onboard, I heard that there's a suggestion that maybe the model is not as relevant anymore. Contrary to this, I see clients entrusting us more with their responsibility and would like to provide you a few examples of the work we are doing with some of the important multinational and regional giants that have entrusted us to expand their responsibilities across the region. As you can see here, DKSH remains highly relevant as we represent the leading brands and we continue to benefit from industry trends by being an enabler and trusted partner to deliver. Clients are reducing complexity in their own business, and as such, are outsourcing more. For example, this year, Unilever further expanded our partnership to include new regions in Indonesia. We're distributing and marketing a wide range of products across all channels in this important market. As a second trend, clients are reducing the number of distributor partners. In July, we gained Kraft Heinz in Malaysia, a full-service solution client for several household brands. And it was also reported in the media, Kraft Heinz has simplified its operations in the region and moved away from a multi-distributor model to fewer service providers. There's also a regional component to it as we're already working with them in Singapore and Hong Kong and continue to have dialogue in other important markets to simplify their business while upgrading their impact in these markets. A key client need is also a consistent approach across all channels. Therefore, they're interested to work with us in e-commerce. And as a proof point, we recently won an award from Lazada, a leading e-commerce retailer in Southeast Asia. This is a good example. During COVID-19, toy stores are being closed and how we pivoted quickly to upweight the online sales direct-to-consumers capability and managed every step of that process flawlessly and being recognized for it. Now that I've hopefully explained the business to you, let's have a look at why we've underperformed in the last few years and what we've done to transform our business for a better future. As many of you are aware, the DKSH FMCG business has been underperforming for many years. And the reason for underperformance is a mix of external and internal factors. Clearly, our end markets were challenging. For example, the market that I reside in, Thailand, the consumer confidence has been muted for a very -- for several years. Internally, our setup was not dynamic and agile enough to respond to market trends, and we've been slow to respond to some of these changes. Since the end of 2018, we've been addressing these issues. And as you can see on the charts, the improvements are already visible in our numbers. Please note that these numbers are for the entire Consumer Goods business. But if you call out FMCG, I can tell you that we've made substantial improvements even during COVID in the past first half of the year, where we continue to achieve better results. Let me now focus on the action plan to address the previous issues we faced. Our goal is to be the preferred regional trusted partner for clients, thereby fulfilling our promise to deliver growth and enrich people's lives. To get there, we're working in 2 phases, which I'll explain. First, we're ensuring the focus on fixing the basics, ensuring that we are resetting markets through high-caliber, empowered, in-market leadership capability to ensure that we can continue to scale our performance with our clients. Our clients expect us to move with pace, to capitalize on live data that highlights both risks and opportunities. We've been scrutinizing our portfolio, our investment model and our client profile by market and reducing complexity whilst having the ability to pivot the pace into our model, which is an important differentiated advantage in the fast-moving Consumer Goods business. All of this is now underpinned through insights we gather, the vast amount of data we're able to utilize. We're embedding these changes in our system, and this should be completed by the end of this year. After completing Phase 1, we'll focus on pursuing target market strategies and empowering our step-change capability to pursue accelerated growth opportunities by now which is -- that we built our strengthened platform. Let's now look into the first phase and what we've done so far. In essence, we've been working across 3 key pillars. On people, we've taken a strategic approach to make an intervention to intentionally upscale our capabilities in some specific areas of our network. For example, over the past 24 months, we've recalibrated our management team, introduced a standard set of incentives, aligned our KPIs across the network. We've also delayed the structure to allow the ability to move at pace and make some tough calls on people and focus on training and development exponentially. From a portfolio perspective, we've rationalized nonperforming SKUs, and as such, put a focus on ensuring -- again, through data and insights that we have the right inventory. And our fast-moving environment continues to be crucial to understand the decomposition of the evolving shopper basket, which is shifting at an ever faster pace. I think we've seen that occur this year. On the supply side, we have never collaborated more strongly than we have today with our supply chain network. As an example, on the rationalization of nonperforming SKUs, we put together higher focus of our inventory management as a priority to ensure that we have stronger exit plans for poor performing SKUs. We're doing this at a much faster pace, and thereby, eliminating both cost and complexity. In addition, we're rolling out our new transport management system that I think Stefan touched on earlier and introduced a high developed sales and operational planning system. To evaluate our progress made, I'll let the numbers speak for themselves. The headline here is that we substantially improved our results despite COVID-19, which, as a reminder, no one had planned for this year. We are very satisfied with our EBIT development, our continued focus on the working capital side and have moved the RONOC quite nicely. Let's take a look at phase 2. Phase 2 is about doing 3 things: building our effectiveness in our market strategies, building strong momentum in the business development and continuing to focus on winning channels like e-commerce. Data is the new currency we focus on to drive our behaviors, leading to stronger decision-making through insights gathered at pace. We're sitting on a large amount of data and are now at the center of building our decisions not only for our internal fast decision-making, but also a provider of market insights for our clients and our customers. Again, we are rightly poised to phase 2 shifts. To unlock potential for our clients, we've standardized regional service offering, also enabling commercial pragmatic dexterity in our approach, remembering that within the region, markets are in different growth and development levels of maturity. We're now addressing this with clients by understanding category nuances and geographies instead of a rigid one-size-fits-all approach that left us flat-footed previously. In our largest markets like Thailand and Malaysia, we have a very strong footprint across all channels, and we focus on profitable growth. This means that we're especially keen to have the right product, channel, client mix and monitor our costs carefully. On the other hand, in geographies like Indochina, markets are growing very strongly and have a comparably smaller footprint than, say, in Thailand. We focus resources especially on pushing high organic growth that leads to introduction of many of our clients' brands into this geography for the very first time. In the Greater China region, we want to generate higher value by becoming more efficient, utilizing the advanced productivity and technology available through this region and are pushing more of a niche strategy, working very closely with customers in pursuing the right opportunities. And in ANZ, we've had smaller operations that we've built up through M&A as we come from a small base, Australia and New Zealand, represent the food bowl for the region, and a higher focus for us on higher-margin products that provides us the ability to strongly drive premiumization, which is a leading category trend across our entire network. And finally, in terms of opportunities, the Philippines, where we have aspirations to enter this market midterm through an acquisition to ensure that there's a total end-to-end solution available to our clients. So let's take a look at market -- business market development. Here, we've made very good progress and are driving best business development -- our best business development performance for the past 5 years. And I think this is testament to our relevance, which continues to grow. We repositioned our business development activities as this is driving the growth trajectory of our [ fortunes ]. For example, we have scrutinized the pipeline of some potential clients that were below new operating hurdle rates where the opportunity has been subscale or we were bringing in too much complexity. In other words, we're scrutinizing the company we keep. We're also careful in monitoring market trends to scan for business opportunities. For example, through COVID-19, we see some organizations being called out as they couldn't reduce their sunk costs at a fast pace. For clients that work with us, our platform provides the ability to manage risk and pivot much faster than if they manage everything themselves. The current environment has made our model for potential clients even more compelling, especially with the backdrop of COVID-19, which has amplified the benefit of working with DKSH. Our efforts are already turning into results. And year-to-date, we've gained CHF 180 million in accretive EBIT from new business across these categories, including regional Asian clients, again, I would say our strongest performance versus the past 5 years. These discussions take time. COVID-19 distracted some of those discussions in Q2. But again, we've noticed the pickup and engagement of those discussions once more. Let's take a look at the winning channels we're diligently expanding. We will continue to strengthen our proven omnichannel approach while investing in new winning channels and developing our service offerings. E-commerce is a key offering for many clients. And on one hand, DKSH can align and synchronize the omnichannel marketing approach, pricing and ensure efficient inventory management for products that already exist in our DC. We're building a business that offers outstanding access to off-line and retail channels as we continue to build a multichannel offering through the acceleration of our e-commerce business. We have further work to do, expanding depth and breadth, but we are now delivering significant benefits to the business unit. New retail means that we can reach new consumers in a more efficient way and digitalizing our business to amplify efficiencies. As we connect traditional outlets digitally, shops can order and pay for goods online, therefore, requiring less visits from ourselves, representatives, allowing us to focus more on value-added support. In addition, we can represent clients' brands in developing new channels for them, for example, in rural areas where otherwise they wouldn't deliver to them. Consequently, this is in line with our promise of enriching people's lives as it drives the purpose as we see the emerging middle class in Asia can allow people to experience these products for the very first time. As the term new retail suggests, it's a relatively new approach. And for us, we're testing, learning and graduating our capabilities. And specifically on our foodservice business, following the successful Auric acquisition in Malaysia and Singapore, we're creating further value for our clients as we incorporate this capability in the suite of services that we offer. It's an attractive opportunity to promote products in a new way to consumers and also strengthen their capability of services that we're able to offer our clients and our brand owners. This continues to be an emerging channel and remain confident on its increasing relevance in this region. So far, I focused on -- predominantly my presentation on FMCG. But let me just say a few words on Luxury & Lifestyle business. Even though this segment represents less than 10% of our sales, it remains a good profit contributor. We follow a niche strategy and made the decision to be active in only selected areas. This segment essentially includes watches, apparel as well as household goods and lifestyle items. These industries have been impacted by COVID-19. First of all, many stores were closed, and in addition, we distribute more discretionary products at higher prices, and the spending is taken a hit. Since COVID-19 restrictions have been lifted around June, we see demand stabilizing and some rebound in recent weeks. So let me summarize my final slide. Firstly, we've addressed the highlights and joined with the factors leading to the underperformance of FMCG in recent years. I hope you now understand that we've addressed all factors leading to the underperformance. As you can see, results are still improving. We report higher EBIT levels again. Secondly, we not only remain highly relevant, but our relevance has increased exponentially as we see existing new clients entrusting their business to us. Thirdly, the FMCG transformation is well on track. There's still some homework to do. However, today, we have got a great team of strong leaders. We have rebuilt confidence in the trade at both the local and regional level and are benefiting from the various industry. And finally, our business is now much better positioned to capitalize on our strong regional leadership position during these unprecedented times. So thanks for your time today, and I'll pass on to Till with Q&A.

Thank you very much, Terry. Let's move on to the Q&A session, please. The first question is for Terry in Bangkok. It comes from Nicole Manion from UBS. And she's asking, how is your geographic diversification within Consumer Goods? What is the progress with renting your footprint in Indochina and other regions? Terry, please.

I think as I explained, I think we have a strong presence across the ASEAN market. We don't have a presence in the Philippines. What Indochina represents is really a growth cluster opportunity for us. So we see a lot of our clients still in their infancy. So the growth trajectory is going to come a lot from those markets. However, we still continue to see growth opportunities even in the, I guess, the more developed markets, the more advanced markets. So I think there's a balance in terms of our portfolio opportunities. Thailand, Singapore, Malaysia, Hong Kong are much more established markets, and we still feel that there's still a huge opportunity for us to grow in those larger-scale markets. And in terms of trajectory, we see huge inroads from Indonesia, Indochina and even the Australian market, which is, again, fairly relatively new for us as well. So we feel that there's opportunities there as well.

Thank you very much, Terry. There's another question for you from Jon Cox from Kepler. He's asking, how much are impulse confectionary and snacks purchases under pressure currently amidst COVID-19?

You've done your homework. Look, I think as most people know, in terms of confectionery, when the mask-wearing came, it affected some categories, so namely chewing gum. There's usually people that only chew gum when they leave home. And when you've got a mask, it makes it doubly hard. I think what we see is a recalibration of some of those categories to take advantage, I guess, of the fact that, again, no one prepared for COVID. We're seeing a different portfolio in the second half. So we're seeing a lot of our partners change that portfolio that they started the year with. It has taken obviously some pressure, not only on impulse, but also seasonal. So some of the events like Chinese New Year and some of the Ramadan and so forth, obviously, COVID had an impact. But again, what we see is the FMCG clients retooling their businesses very, very quickly to reshape their portfolio in the second half. So I think we'll see a much stronger impact -- positive impact in the back half of the year than we saw in the front half of the year. And I think that, that will lead to a stronger trajectory into -- going into next year.

Thank you very much, Terry. And it's a relatively long list of questions here. Another one for you again from Jon Cox from Kepler. He's asking, under how much pressure is the foodservice business currently? And what is the share of food -- sorry, what is the share of sales of the foodservice business?

I think as you take a look at the business that we acquired in Singapore and Malaysia, we also -- with that, came also our own brands. And so that own brands component of the Auric business has been very powerful even through COVID. On a foodservice aspect, obviously, it's been impacted. It's down, as you would expect, as most foodservice categories have been down this year. It's still only a very small part of our business exponentially. The foodservice business we interface with currently is in Singapore, in Malaysia and a small amount in Hong Kong. So we haven't necessarily had that exposure. Having said that, I think the team's worked very well as foodservice dining -- in-house dining fell, there was still a relatively strong uptake in terms of take-away. And so we've seen that business again pivot, not to the -- it hasn't bounced back to the same degree. But again, I would say it's poised as -- when we have these restrictions loosening up in those 2 markets, again, to take advantage of more people staying in hotels and more increased airline traffic. But I think we've weathered the storm quite well so far, I guess, is my headline.

Good. Terry, I'll give you another one. Andy Grobler is asking, how much of your growth in the past has been driven by outsourcing? And what are our expectations for the next 5 years to come in terms of outsourcing?

I think a lot of it has been driven by the fact that clients either are coming new to the region or have -- this region is a very tough region to make money but a very easy region to lose money. And as they learn their lessons around trying to build their own infrastructure, I think what we're seeing is exponentially, this outsourcing model, which is, again, pre me coming into DKSH which was what I was pursuing, I see that increasing. And again, I think COVID really has accelerated that, where we see a lot of our clients saying, "We want to simplify our business. We want a strong regional partner. We want to focus on innovation and brand. And we want to give everything else to someone who can do that much better than us and much more efficiently than us." So I think there's a dual role for us to play. I think a lot of the next 5 years is going to be driven by clients wanting simplification of outsourcing, not only just market by market, but really consolidation as well.

Super. Thanks, Terry. Here's another one for you, comes from James Filsell from Fidelity. How is the investment and focus on Asian heroes developing? How long does it take to see material growth from these new clients when they are won? And what proportion of our revenues is generated from Asian heroes?

Yes. I think on the Asian heroes side, we need to remember that a lot of multinationals are also buying Asian heroes. So the Asian hero brands don't only live with Asian companies but actually live within multinational companies. What we're seeing is, as these brands start building, I guess, kind of touching the ceiling of opportunities in some of those markets, they're starting to look at growth across all of Asia. And so that's our role. I would say we're much more relevant to them today. A lot of our interface with them are also -- we have the Asian leaders. They're are interfacing there. And there's some really good examples of some of the work that we've been doing in Cambodia, in Thailand that was now -- and Malaysia. We're now exponentially getting much more of the local business as they see us as a step into a regional footprint. And again, I think they're going to follow the same kind of trajectory that a lot of the multinationals have done. Having said that, the multinationals, I still feel will still remain relevant, and they will probably do some M&A with regional local heroes. So I think we can grab them whether they come from the multinational acquisition side or whether we're dealing with them directly.

Thanks, Terry. Another one for you again from Nicole from UBS. What is your progress in FMCG margin only? So excluding the Luxury & Lifestyle, what's the margin doing on FMCG?

Look, I'm very satisfied that we're making really strong progress, so I think some of the decisions that we've made around reshaping our portfolio, taking a lot of the cost drivers out of our business. And I'm confident -- I think we've said that we want to get to 2.5% by the end of next year. I'm confident we're going to hit that target.

Thank you, Terry. A more financial question on Consumer Goods. I'll pass that to Bernhard. From Alain Oberhuber, what are the differences in gross profit and EBIT margin for FMCG and Luxury & Lifestyle?

Yes. Thanks, Alain. Obviously, the gross margin in the luxury business is much higher in than the fast-moving Consumer Goods business. That's mainly driven by the -- also definitely a lot higher advertisement and promotion costs we have in that business. On the EBIT margin side, currently, of course, there's no surprise, the FMCG business has a much better margin because we have practically none in the Luxury & Lifestyle business due to COVID.

Another one, Bernhard, I'll pass that on to you. From Jon Cox, Kepler, is there a difference in profitability by -- within the FMCG categories that we have?

The profitability is more driven by the service model. So the question is how many services do we provide, and what type of products do we have. So to make an example, the gross margin for a bottle of water has to be much higher because the transportation costs are much higher and the warehousing costs are much higher, whereas to stay with Terry, employer, the masks are, of course -- doesn't need that kind of cost structure and the margin is different.

Thank you very much, Bernhard. There's another question, I'll pass that to Stefan. From Jon Cox again from Kepler, can you get back to the 3% margins in Consumer Goods? And what would be the time frame on that?

Good. Thank you very much, Jon. I think as Terry was already indicating, and we did disclose that the objective is to achieve 2.5% margin in the second half of next year. I think Terry and I agree that this is not the end of it, but let's take it from there as we achieve the 2.5% in the second half of next year.

Thank you very much, Stefan. The next question, also from Jon Cox, Kepler. I'll pass that to Terry. Can you give some granularity on EBIT improvements in FMCG or indicate CHF 1 million saving initiative. So maybe you can talk a little bit about the levers that you mentioned before.

Yes. I think as you saw in terms of our first half performance, I won't talk again specifically, but there's an opportunity for us as we consolidate our network to really drive some costs out of our infrastructure. We're also changing our portfolio. We're attacking our inventory, nonperforming inventory, with a kind of breakneck speed because a lot of that has also burdened us previously. So -- what I can share with you is that we're making improvements across every element that builds that EBIT line, and I'm very satisfied with the progress that we've made since, I guess, the transformation started at the back end of 2018. We saw some of that coming through last year, and we're seeing exponentially -- that momentum continue this year.

Thanks, Terry. The next question, from Nicole Manion from UBS. I'll pass that to Stefan. What is your commitment to Luxury & Lifestyle within the Consumer Goods business? Would you prefer to focus on FMCG only?

I mean clearly, our Luxury & Lifestyle business, we pursue a niche strategy. We have no intentions at this point of time to invest heavily into this business line or scale that up significantly. As we discussed also in the past, we are willing to sell our watch business, Maurice Lacroix, as soon as we find a reasonable buyer. And so strategically, to sum it up, the focus is clearly on Terry's FMCG business.

Good. Another follow-up question from Alain Oberhuber from MainFirst for Terry. He's asking, what was the main factor to gain recent outsourcing contracts?

I think it was a multiple of factors. I think confidence in what we're doing today, that the -- the way that we're interfacing with these clients. When clients look at you, they really are trying to measure whether you're equal to or better than the capability that they can build. And I think that, that question is becoming a lot easier for them to answer. So that's what I would say would be, I guess, the main driver.

Thank you very much, Terry. I have 2 more questions here in the chat, again, about the margins. I will pass that to Stefan. Jon is asking, your margin target of 2.5% by the end of next year, is that for FMCG only? Or is it for the entire Consumer Goods business?

I mean at this point of time, it's really hard to predict how the luxury and retail business is going to scope with COVID also moving into 2021. When we disclosed this target, that was pre-COVID. We clearly stated that this is for CG in total.

Good. Another question from Alain Oberhuber from MainFirst for Terry. When will phase 2 be fully implemented and to what levels of margin could we move back by then?

I think it's -- again, it's part of our intent to get this business in terms of its -- structure of the business in a much healthier state. So I would say we will see it start implementation back end of this year. Mid next year, I think most of the changes overlooking that should have been predominantly embedded. And again, the benefit should come through at the back end of next year.

Good. I just see that there is one more question coming in from Healthcare or for Healthcare, and I see Bijay is in the room, maybe I'd pass that on to you. This is from Laurent Millet from Artemis out of London. He's asking, how aggressive has Zuellig been recently? And what is the risk of further margin pressure from them? And how can you overcome that?

So Zuellig continues to be the major competitor, particularly in pharmaceuticals. I believe that the area that we have entered and developed strength in, which is commercial outsourcing, is relatively more resilient and -- along with value-added services. So we feel confident there. At the same time, I would indicate that if you look at the top 20 pharmaceutical distribution contracts, my personal view is the levels have reached a threshold now. And probably, there is not much more margin erosion to come in that size of clients. So I believe, yes, a lot of growth in commercial and [ BAS ], which is along our strategy. Thank you.

Good. Just looking at the chat, if there are any more questions. Please stay with me for 2 seconds. I'm just waiting for my question list to refresh. Don't see any -- one more question comes right now in. Again, for Consumer Goods from -- for Terry, again from James Filsell from Fidelity out of London. The question is, what are the biggest opportunities for growth, and where is their main focus? Is the focus, for example, on winning new customers, adding new services or new markets for clients?

I think there's still opportunities for us in terms of new geographies. So I think we've tabled down that opportunity absolutely to do more with our existing clients and to do more with our new clients. So I think it's probably a trilogy of those 3. Obviously, e-commerce, new retail really is also a huge driver for us. And also we see that as being a differentiator versus our competition. So if you take a look at our capability that we're developing versus the capability that exists right now, I would say, again, a lot of the options are either the client has to do it themselves. And as they build their confidence in our capability, they will move across to us. So exponentially, I see a mix of all of that. I think some of the categories, definitely -- we'll see some categories disproportionately growing in the next 5 years than what we've seen previously as behaviors shift and consumer tastes change as well. So for that part, I think it's just making sure that we are as relevant as possible and that we take as much of that shopping basket opportunity that we can leverage.

Good. Thank you very much, Terry. I have a couple of more questions coming in here. One more time for Healthcare, please, for Bijay. Do you anticipate margin improvements with the shift to own brands and medical devices? Or is it really all about maintaining margins?

Well, it's clear that own brands, as I mentioned, are higher margin than the rest. And medical devices, depending on the type of model you have, can be potentially higher margins. So our -- that's our strategy, that's where we aim to go, is to enter some of these areas, yes.

Good. Thank you very much, Bijay. I have another one for Consumer Goods. It's a financial one. I would give that primarily to Bernhard, maybe Terry can also add on the levers. The question, what is the RONOC for the Consumer Goods division by reaching the 2.5% EBIT margin in the second half of 2021? So what's the RONOC level? Maybe you can talk a little bit about the levers of driving the RONOC upwards.

Yes. I mean essentially, we have 2 drivers by definition. One is EBIT. I'm very, very confident that Terry will drive EBIT upwards on Consumer Goods. And as we said before, it's 2.5% of sales. Then we have the [ NOC ] component. There, we are now working on a very diligent S&OP process, which would help us to reduce working capital usage at the same level of sales. So overall, I would expect a better RONOC, and it should come back to group level or even above.

Thank you very much, Bernhard. I have the previous question from Jon Cox from Kepler. He's asked it for Stefan. He's asking about e-commerce statistics. Is it -- is e-commerce through our platforms or through platforms of clients where we are selling? So what is the bigger one? And if you could specify that a little bit.

Okay. So the majority, we use the platforms of e-market retailers, around 70% to 75%. So the key customers there are Tokopedia, Shopee, Lazada or RedMart and 25%, we are selling through our own platforms or specialized dot-com appearances for key clients, Levi's or in the luxury market.

Thank you very much. Stefan, I'm just checking again my chat. Please bear with me for a couple of seconds for refresher, just scanning it one more time. Bear with me. So I'm currently not seeing any questions for Terry or Bijay. Gentlemen, thank you very, very much for your time. A lot of questions. If there are any questions we couldn't cover right now, the Investor Relations team will get back to you. With that, we would close the Q&A session for Consumer Goods, and we will make a short break, and we will be back at 11:10, Swiss time. That is roughly in 25 minutes. So see you soon. We have a short coffee break, and we speak again in 25 minutes. Thank you very much, everybody. [Break]

Ladies and gentlemen, welcome from my side. I welcome you to our Capital Market Day 2020. It's a fresh, windy and rainy day today in Singapore, and I take that as a good sign. My name is Hanno Elbraechter, I'm the Head of Business Unit Technology, and I have been in DKSH since 2014. I've been living and working in Asia for more than 16 years. There are 13 years in China and most recently, 4 years in Singapore. Before joining DKSH, I was the CEO Asia for DMG Mori Seiki, one of the biggest machine tool [ builders ]. In the first half of my talk in today's presentation, I would like to bring our Technology business closer to view. In the second half, I will share with you what measures we took in order to quickly recover profitability. And in the third half, I will share you -- show you our vision to build resilience and deliver growth to exceed pre-COVID-19 levels in the mid-run. Let me start with an overview of Business Unit Technology. We consider ourselves the leading solutions provider for capital investment goods and technical services in Asia Pacific. We generated last year net sales of CHF 431.9 million and an average of CHF 26.8 million. With 1,670 specialized employees on the ground, we are operating in 18 markets across Asia Pacific, serving 25,000 customers and 650 clients and suppliers. Our biggest contributors, our business lines, scientific instrumentation, 27%, and precision machinery, with 26% of our net sales. From 2015 to 2019, we delivered solid growth, with an average 3.8% net sales and 7.5% EBIT growth. We have increased our top line each year, and at the same time, improved EBIT margins. Our asset-light approach enabled us to generate good returns on net operating capital or [ NOC ] as we call it. Now let's take a look at our client portfolio. We have strong and long relationships with industry-leading manufacturers of capital investment goods. The portfolio is diversified, and I'm sure that some of these names are familiar to you such as: Thermo Fisher, the biggest scientific instrumentation player in the world; HP, for 3D printing solutions; Cummins, a renowned producer of power generators and engines with whom we started to work together 50 years ago in Thailand; or Vertiv, a leading provider of equipment and services for data centers. On the other side, we have our customers. Applying the same structure of our business lines to our customer landscape, there are as well many names that are familiar to you like: SGS, who's one of our larger customers that purchases analytical instruments and services from us; Nestlé, to whom we provide instruments for their research and development activities; 7-Eleven, which we supply with equipment for convenience stores, like coffee machines or microwaves; or TSMC, a Taiwanese semiconductor manufacturer whom we supply consumer and conductor equipment and the related technical support; or Indosat, a large telecommunications provider from Indonesia to whom we provide data center solution and the related services. We follow an industry-centric approach in order to provide the most suitable solutions to our diversified customer base of more than 25,000. Let's have a look at another good customer example for our scientific instrumentation business line. DKSH provides the Customs Department in Vietnam with an integrated testing solution to comply with international standards and regulations. Export and import regulations have become stringent, which resulted in an increase of daily testing and analysis requirements. In workshops, we've assessed and defined the exact requirements and ensured -- requirements and provided an integrated solution, including extensive training for the related personnel of the Customs Department. The resulting better control of imports and exports through higher efficiency in accuracies was achieved for a successful outcome. By now, the Customs Department of Vietnam is one of our biggest customers. So why do clients and customers work with us? What is the unique value proposition that we bring to the table? Firstly, we have a Pan-Asian footprint, operating in 18 countries, enabling us to create synergies. And at the same time, we have to offer clients solutions across markets out of one hand. Secondly, with more than 500 service and application engineers and 18 labs and showrooms, we have the capabilities and the infrastructure to cover the entire life cycle of the solutions that we provide. Thirdly, we systematically develop our market using an integrated marketing, sales and service platform with the state-of-the-art CRM system and service management tool, having access to more than 125 existing and potential customers. This is our optimum penetration of the buying centers with its key purchase decision-makers and influences. We can ensure maximum coverage of our installed base to drive our service business. With this platform, we constantly generate market intelligence to anticipate customers' needs and to provide market insight to our clients for future product developments. And fourthly, as we have just seen, we bring well-known brands and high tech solutions to our customers in Asia Pacific. Let's move into the second value proposition in more detail, the coverage of the entire life cycle of the products we provide. Using the example of our clients, HP 3D printing solutions, let me illustrate how we deliver industry, technical and service expertise and cover the entire life cycle of the solutions we provide. The first thing we did when we started to explore our partnership with HP, we developed a market entry strategy for Singapore, Malaysia and Thailand, targeting educational and medical segments. We leveraged our access to our existing and potential customer base and educated the markets through strong online presence, webinars, e-mail campaigns and, of course, seminars and workshops. As customers usually do not just buy stand-alone equipment but an entire process, our application engineers designed solutions, including other complementary products. Being certified by HP, DKSH is also performing the installation, commissioning and training of the customers' personnel, both on-site and in our in-house facilities. To ensure maximum outcome, our service engineers provide on-site and remote maintenance and repair in the frame of service contracts. Last but not least, as to the value-added service, we provide process optimization to increase our customers' productivity and improve the quality of the products they produce. Due to the successes we have in these markets, we've just extended our partnership to South Korea where we will take all of the installed base and continue to grow the 3D printing business with HP. Now that we better understand who we are and what services we provide, let us look at our way forward. We delivered a sound financial track records in the last 5 years, where our EBIT on average grew 7.5%. However, our results have been impacted by COVID-19 recently as many customers having had to shut down or scale down production and delaying CapEx. And we reacted immediately and set out a cost-saving plan to recover our profitability. And we intend to build a more resilient business and deliver growth to exceed pre-COVID-19 performance in the midterm. Before we talk about the midterm, let us focus on our cost saving plan, which contains primarily 3 elements: personnel costs, travel and entertainment, as well as marketing. Across all categories, we diligently cut expenses. But at the same time, we accelerate our digital marketing activities to boost online generation -- online lead generation and sales. Earlier, at our half year 2020 results, we identified some single-digit million cost saving potential that we have been able to increase by 30%. In sum, we now expect a high single-digit million to be saved this year. And so far, we are on plan. As mentioned, our aim is to build a business that is more resilient and delivers growth. So how are we going to do this? Firstly, we will grow our leading position as a Pan-Asian provider of scientific instrumentation solutions. Secondly, we'll streamline our existing portfolio and focus on key businesses and markets for industrial equipment, where we are in a strong position and can capitalize further growth opportunities. Thirdly, we continue to grow our service business, consisting of technical service, consumables and application engineering. And we continue our digital transformation journey to support these strategic directions. You might recall that scientific instrumentation is our largest business line, already accounting for more than a quarter of our business. So how will we further solidify our position here? Firstly, by focusing on life science, pharma and food and beverage as we consider these resilient and structurally growing segments. Secondly, by prioritizing our investments according to market potentials and our own position in these markets. For example, in China, we have a strong position in the scientific instrumentation market, and we just expected our administration [ depth ] to provide more support to our customers. Thirdly, we'll expand the business of the core products that we have in our portfolio while accelerating our service and consumable sales. And finally, as the market is very fragmented, we are scouting for acquisition targets that have been a good pipeline in this respect. You might recall that we have a proven M&A track record with the SPC acquisition in Thailand in 2019. What drives our focus on the scientific instrumentation business is also its market projection. Scientific instrumentation is an attractive market in Asia Pacific, with an expected average growth of 8% until 2025 in a market size of USD 35 billion by then. Around 53% of that market is coming from life science, pharma and food and beverage, segments in which we already have a foothold and where we want to further focus on. I hope you now have better understood why we want to focus and increase investments on the Pan-Asian scale for our scientific instrumentation business. Now I'm coming to the second to that, of streamlining our portfolio and focusing on key businesses and markets for underlying industrial solutions that we have in our portfolio. We will grow and expand our precision machinery, packaging, printing and converting and data center solution businesses and keep growing those businesses, whether it's a good product market fit combined with a strong position of DKSH. Some of our businesses, we streamline while excess -- which is a gradual process over the next couple of years for which we do not foresee any onetime costs. One concrete example of a businesses -- of a business where we want to -- the regional competencies is the growing data center business in Indonesia where we have a strategic partnership with our client [indiscernible] BNI is the leading financial institution offering banking services for businesses in Indonesia. As Indonesian government have mandated for all Tier 1 banks to have their own data center based in-house and locally, the bank needed to have an experienced business partner to help them meet this requirement. The difficulty was to find a partner that understood the challenges of having little space, the technicalities of data center technologies and is familiar with the market's financial regulations. Our approach was to provide the Vertiv SmartAisle solution, which is an integrated solution of data center racks, power, cooling, aisle containment, monitoring and control technologies, resulting in an efficiency increase of 27%. Coming to the third pillar of our strategy. We aim to further grow our service business, which includes consumables, technical services and application engineering. Why? Because it's a growing business and the bigger resource base gets, the more revenues we can generate with the service or aftermarket business. Secondly, in general, the margins are higher in the service business than in the equipment business. And thirdly, we see growth potential as our share of the service business is lower at 39% compared to the market level of 53%. To further increase the share of our service business, we now have dedicated service sales teams approaching our end users to offer customized maintenance and service contracts. As well, our business development teams are onboarding new clients with an attractive consumables portfolio. So the key benefits of growing our service business are growth opportunities, attractive margins, more resilient and recurring business and the increasing stickiness of our clients and customer base. Let's move on to our digital transformation journey. We believe that B2B future will be increasingly digital. Customer journeys change, and we, therefore, aim to provide the better customer experience from awareness to engagement, from purchasing to repurchasing. In the next 2 years, our target is to build a digital ecosystem, consisting of a product management information system, protection tool, growing e-commerce platform and enhanced service management tool. Combined with a strong focus digital marketing, we want our digital transformation to have a tangible impact on decreasing our cost to serve and increasing our sales. With that, I come to the end of my presentation. Before we go on to the Q&A session, I hope you recall that: we have a proven financial track record of 7.5% average growth; we reset -- we set in place a stringent, high single-digit cost saving plan to reach our profitability; we will further develop our business in scientific instrumentation, focus on key industries in strategic markets as well as grow our [ intuitive ] service business; and our digital transformation will support this development. All this tracks these pre-COVID-19 levels again in the midterm. With that, thank you for your attention, and over to the Q&A session.

Thank you very much, Hanno. And thank you for all of your questions that we have received. The first question is for you, Hanno. It's from James Filsell, and he is asking, are you exclusive for HP for 3D printing? Or are you able to provide similar services to other manufacturers in Asia?

So that's a good question. Thank you very much. It depends on the markets. And HP has several layers of distribution channels in these different markets. So depending on country by country, it's either exclusive or we are one of these layers within the distribution channels. Certainly, we are also able, in those markets where we are not exclusive, to also offer the same 3D printing solutions as we do for HP.

Thank you very much, Hanno. The second question is also from James Filsell from London. He's asking how much pricing power we have with our clients and customers.

I would say we are working in a competitive landscape in which the pricing is defined based on your competitive position and how much value you can bring to the table, both on the customer side and on the client side. So I wouldn't say really it's power again, but it's much more a question of how much revenue to bring to the table and then both on the client side and on the customer side and the willingness to pay for this kind of [ revenue ] that we bring to table.

Thank you very much. Another question for you, Hanno, from Laurent Millet from Artemis. How much of your revenues are recurring or service business?

So as mentioned in the presentation, overall, it's around 39% in the scientific instrumentation business. It's a bit less for the overall business here in Technology and what we see that has certainly a great potential to further grow that business, both on the technical services side and also on the consumable side.

Great. Next question, from Alain Oberhuber from MainFirst. The question is, could you give a time frame by when the transformation in technology is accomplished? And if accomplished, how will the Business Unit Technology look like?

That's a very visionary question. I would say that the transformation that we are going through now will take a couple of years. And it all depends a bit also how long COVID-19 and what the impact really of COVID-19 will be. But I would say under normalized circumstances, a couple of years as we go through that transformation. And then as we know, it's a combination of organic and inorganic growth, and then we need to see what are the opportunities that we'll find along the way in order to accelerate that growth after we have been going through the transformation.

Thank you. The next question is again from James Filsell from Fidelity. He's asking, historically, the market growth was around 11%. Why do you think it will be slower going forward at 8%? And I think James is hinting here to the scientific instrumentation business. How much above the total -- of the total market do you aim to grow as you are focused on higher growth industries and aim to grow about that? And I -- again, Hanno, I think the question is entirely related to the scientific instrumentation business.

Okay. So if we look at these 3 segments, we believe that their growth potential lays at a CAGR over the next few years of some -- about 8%, around -- above 10%. And then it really depends on how quickly we can track into these life science, pharma, food and beverage segments in order to leverage this growth potential.

Thank you, Hanno. There's another -- two ones coming up for you. The first one is from Laurent Millet from Artemis. He's asking about mergers and acquisitions. How large are the deals you are looking at? And would it be in the area of services mainly? And if Stefan and Bernhard would agree on also a larger deal.

Yes. I guess that question is for me to address and to -- after I answer my half of the question. So it's certainly not purely service business that we would acquire nominally, but it will be a combination of an instrumentation business, which usually also has a very strong and profitable service components in it because we believe that the service business is very important to us.

Great. The last question I see in the chat, Hanno, again to you. Jon Cox from Kepler is asking, is there any underlying problem with profitability? Or is it all linked to COVID-19? How long do you think it will take if we are in a normalized situation next year to get back to former profitability levels?

I'm very convinced that if there wasn't any COVID-19, we will be very much on track in terms of achieving our targets. And we have growth targets that we have set for the year 2020. So we definitely had the hit hard by COVID-19, which is very natural considering the CapEx and nature of the business. Now it's difficult to say how quickly. I would say under normalized circumstances, in a couple of years, we should be back on growth track on pre-COVID-19 levels.

Great. That covers all the question for Business Unit Technology. Thank you very much, Hanno.

Thank you.

We will now have a very short break here before we move on. So please bear with us for a few minutes. We are back, as I said, in a few minutes. Thank you very much. [Break]

Welcome. We are happy to meet you virtually today to introduce Business Unit Performance Materials. It is managed by 2 persons with a very long experience in the specialty chemicals and distribution industries. A few words on ourselves. Natale Capri, Italian, doctor in chemistry and an MBA from Bocconi University of Milan. And...

My name is Thomas Sul. I was born in the Netherlands, raised in Germany, and have I have a business degree.

We both joined DKSH more than 20 years ago, both as sales managers and in different years, we had different local and regional roles. Since 2013, we joined to lead this business unit. We love our jobs and this company. The possibility to run a business that offers so many opportunities for growth is exciting and actually a lot of fun. We enjoy this business every day. And as you will see, it has been a successful ride, and the future is bright. In the years to come, we aim on expanding further our leading position in specialty chemicals and ingredients distribution.

So who is DKSH Performance Materials? We are a top 3 pure specialties distributor of chemicals and ingredients, which creates turnover of about CHF 1.5 billion, with 1,100 employees across 32 different markets. We are focused on the highest growth segments, Asia and life sciences. We have a long history and are proud of our long-standing and well-diversified partnerships with about 1,900 clients and over 20,000 customers. Our business is supported by a comprehensive and differentiated offering of value-added services. This includes a network of 46 innovation centers as well as 80 regulatory experts. We have a track record of organic growth, supported by several successful acquisitions to close geographical and portfolio gaps. We are pursuing additional projects with further value growth potential. Our business model is resilient, asset-light and cash generative.