dormakaba Holding AG (DOKA) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Half Year Results 2024-2025 dormakaba Holding AG Analyst Conference Call and Live Webcast. I am Yosef, the Chorus Call operator. [Operator Instructions] And that the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or for broadcast. I would like to remind you that the conference call does include forward-looking statements, which are subject to risks and uncertainties. Listeners and readers are, therefore, strongly encouraged to refer to the disclaimer included in the presentation. At this time, it's my pleasure to hand over to Till Reuter, CEO. Please go ahead.

Thank you, and good morning, everybody. It's my pleasure to talk to you about our half year results for 2024-'25. I'm joined today by our new CFO, René Peter. I'm pleased to welcome him to my team. With his experience, industry knowledge, he is my ideal partner to drive our transformation. And he will bring also, what's very important for dormakaba, continuity in this demand environment and continuity in the team to really transform our journey, and we are just on the way to meet our 16% to 18%. He will also be a great successor to Christina Johansson, who has sadly passed away in early February. And I think it's always important to remind that, on the personal side, we're very sad. At the same time, we have to work on the company and see that we continue. So let's welcome René and let's start on the financials and look at what we have today for you to present. So I will start with the highlights, the key highlight and development in the first half. Then René will walk you through to our figures. And then for sure, I will conclude with an outlook on '24-'25, before we are going into the Q&A. So what happened? We had a strong first half year of '24-'25, Strong organic growth and margin expansion in the first half year. We are on track to deliver our midterm targets. We know the midterm targets are the 16% to 18% for '25, '26. The net debt growth for the first half year was organically 5.1% supported by all core countries. The EBITDA margin, another semester of improvement increased to 15.2%, up 60 basis points year-on-year. The free cash flow ended up at 50.9% -- CHF 50.9 million, and the balance sheet remains strong. Our transformation program continues to deliver tangible, sustainable results, and that I will talk a little about what we have achieved and what are our key achievements in the first half year. We have closed 3 divestments successfully. You've seen we are closed -- we sold our U.K. service, part of that business for automatic doors. We have sold our South African business and we also lately sold our Kuwait business. Very important on the sales processes, we changed the go-to-market wise. We have been very diversified in some small countries. We were selling to partners to continue our distribution that we stay in the market, but have a different channel. I think it's important to still serve the market, however, in a different approach. I think that is the plan here. On the products side, on the company side, we had a very strong start in '25 with the BAU fair trade in Munich, record-level visitors and really like -- a nice booth, a great booth, new product. I will also tell you more about our booth at BAU. And we also -- which I will have also an highlight on, we, as mentioned, organically, 3% to 5% our guidance. We also told you that we want to start to do M&A. So we did 2 small M&A, 1 bolt-on in the Netherlands and 1 in the U.S. I will also give some highlights on these 2 acquisitions, because it's important that in the consolidated market, we also are participating in this consolidation. We have a good order backlog. And that's also why we want to update our outlook. We expect also for the full year of '24-'25, net sales growth of 3% to 5% and adjusted EBITDA margin of around 15.5%. Looking at the 3 main figures. So 5.1% organic net sales growth, organic; 15.2% EBITDA margin, 60 basis points up; and 29.9% return on capital employed, which means like 240 basis points up. And René will give you later details on the numbers to have more flesh on the bone. The numbers are one part, but clearly the company is about people and products. So a couple of reference projects, which we could win last half year. One is in the U.K., Premier Inn, a hotel chain for almost 20 years, one of our partners and we could win in '24, a multimillion project, replacement of 90,000 locks and the software system. It's going to happen over the next 2 years, and I think it really shows the close cooperation between dormakaba and the customer in the U.K. Another project, a reference project, Victorinox, a product everybody -- at least in Switzerland knows. And we can have an ACS solution for the headquarters and European distribution center in Switzerland. And one of the features will be Mobile Access and key cabinets. So it's also a very nice project in Switzerland, which we could achieve -- which we could win in the last half year. Another project in Australia, build-to-rent projects. The 4 biggest build-to-rent project in Queensland multihousing. Total volume above CHF 1 million, and products are hardware automatic. And it's just a couple of examples, how we win projects, where we won project. And it's about our solutions, our hardware and our portfolio of what dormakaba has to offer. On the BAU fair, I mentioned many, many products on the hardware side, on the automatic side and also on the Access Control Solutions side. 2 things to mention, one is it automated personnel screening. Some people remember the pictures of the Munich Airport 2 years ago at the -- that's the reason where the people were waiting for screening, security screening until outside of the airport. So we have now the face screening, which was starting in Las Vegas, where we have a trial operation in Munich Airport to be launched in the quarter. And was very good cooperation between dormakaba and Rohde & Schwarz, where we helped our customers become more efficient, more cost-effective and even make the journey for the customer more easy. And I think it's also a good example, which we showed at airports, where we can be more solution also for critical infrastructure. We have kind of the same screening of people, because you only will allow people access who really pass the control, and here you can do more control, more efficient control. The second part of solutions of ideas goes also in the critical infrastructure, here it's skyra. It's for airport utilities in particular, it allows just the field -- we are now in field tests, going to launch in the second quarter. And the idea would be that, for example, infrastructure utilities company can much easier do service to send keys to the mobile phone or to on the key, and to allow access only for people who are really allowed to open critical access points. New products, many more at the BAU fair. And I think that is clearly, for me, one part of the DNA product and people. But looking in the future, it's about our own organic growth but also shifting gears to further growth, also about inorganic growth. So I think something we already announced in the last -- in the numbers for the full year, the previous slide, organic growth also will start to look about bolt-on acquisitions. We have done 2 acquisitions. One is Van den Berg, a company in the Netherlands, which is a provider for service, and project support for access solutions, mainly in the airport sector, it's helping us on the Dutch market. It will be accretive from day 1. So a typical example how we get stronger in a country really go-to-market, and I think a good example and welcome of the Van den Berg team in the dormakaba family. Second part, we just announced last night, it's investing in the U.S. market. It's the fast growing market for global secure identity and touches access. So we took a stake in Safetrust. It's also -- the reader is a data collection point, allowing for better customer experience. It's from our side, clearly, American market is our most important, the biggest market. We want to work -- we are working on a strategy. We want to strengthen our position. And also here with technology, this go-to market, we are going to be stronger in the U.S., which is one of our key markets for the future. After M&A, clearly growing, but on the pillar of continue the transformation, and the transformation is delivering on the numbers. So several workstreams are delivering, and I can tell you some highlights. Clearly, the door closer complexity reduction is a project where we are working to reduce the overall complexity of our product offering. So we want to do the best for the customer, but in a way where we can combine products, have more product families and be more efficient on the production of the supply chain. I think it's one part which is very important, where we showed you also not only door closer, but also software complexity reduction. Then we are expanding our shared service centers. And clearly, what's important, you have seen, and René can give more detail, we have all restructuring-related severance payments already provisioned, which is important from the cost going forward. Maybe some more flesh on the shared service center launch. More than 10 countries are live. Around 370 employees already hired in the shared service centers, one example, Germany finance migration is ahead of plan. And clearly, also one part is that we are launching our global capability center for IT also in the shared service center in Sofia. All programs are on plan and on time to be delivered. We have consolidated our sites in Montreal, it's completed. And I think the second part of -- we have the CHF 70 million of transformation program. In November, we put CHF 40 million for the commercial transformation on top. And also here, we could finalize the negotiation with the works councils and the employee representative in Germany already in February. So also here, we are on a good plan to deliver the CHF 170 million plus CHF 40 million in the time we were planning. Being more efficient on the product side with our shared service, but also on the go-to-market. So as already mentioned, we have successfully closed 3 divestments. The U.K. service business, part of the service business. It was a margin-dilutive service. So we keep the margin with the value added. Clearly, transaction will be value or margin accretive to our EBITDA margin in the U.K. And it's very important that we remain on our important business on the service business, which is part of our DNA, delivering high-value service to our customers. Second was the sub-Saharan business, South Africa, changed to go-to-market. It's exclusive leadership agreement where we do not want to lose top line, we want to keep the top line and have a more efficient go-to-market. And here, Kuwait is a change of go-to-market, but very efficient to reduce complexity also on the go-to-market side. If you look in both business, we saw in both business good organic sales growth. So in Access Solutions, 5%; in the Key & Wall Solutions, 7% growth. And also post margin has been improved in Access Solutions, 15.3%; and in Key & Wall Solutions, 21.1%. Whilst the margin of 15.3% is only 10 basis point up. It's very important since we are building out the shared service centers, we had to do currently some work-shadowing. So work is done twice, one in the shared service center and one at the old location. And when I see the impact of this work-shadowing by somewhat like 70 to 80 basis points, which is the potential we have our shared service, which we will really get the efficiencies out in the coming quarters. But I think that's also one reason, if you look at the Access Solutions, EBITDA margin. For KWO, clearly another record year, and we are on good track for the full year on KWO. If you look at the organic growth and think about from which market the growth is coming, I think the good news is that we are delivering across the globe in all regions and we don't have any outliers, so people are consistently delivering, which also gives us big comfort and confidence on the rest of the year that we are delivering according to plan. Going through market by market. So good organic growth in the U.S. and Canada. We guided -- our goal is to grow 2% above GDP. GDP has been 2.6%. So we were growing the U.S. kind at 5.6%. We did in Germany a very good 10%, plus 10%. Strong volume in all product groups. So it's a strong brand, good investment in the market, 10% growth. Switzerland growing around 3%. Then we have Australia, 4%. U.K./Ireland, approximately 10%. And what we see is clearly that we are delivering across the globe, and that I think all markets are delivering. Some with more challenge, but I think overall a very consistent view on the growth pattern of our company. On KWO, strong top line growth and also profitability, significant margin improvement. The Key Systems with increase in keys and key cutting machines, while the automotive solution remained flat. Movable Walls good order backlog, strong performance. And what we see that the OEM business has more uncertainties in the geopolitical situation, but overall, great performance in the first half year. With this snapshot and this highlight, I will hand over to René who will give you more details on the financials.

Thank you, Till. And also from my side, a warm welcome to our half year '24-'25 webcast. As Till said we had a strong first half of the financial year 2024-'25. And I'm very pleased to tell you more about it. Let's have a look at our key figures. We delivered a strong organic net sales growth of 5.1% and an adjusted EBITDA margin of 15.2%. Return on capital employed significantly increased by 240 basis points to 29.9%. Net profit amounted to CHF 96.7 million, driven by operational improvements, lower restructuring expenses and goodwill amortization, as well as the completion of sites consolidation in Montreal, Canada. Free cash flow stood at CHF 50.9 million. Net debt declined to CHF 466.4 million, down 20.5%. Let's look now in more details starting first with our top line development. Net sales for the first half of current financial year amounted to CHF 1,421.3 billion. Our strong organic net sales growth of 5.1% was driven by volume growth of 3.3% and price increases of 1.8%. Access Solutions delivered robust broad-based volume growth of 3.6%, led by our core access solution markets. In addition, KWO realized strong volume growth of 3.7%, supported by all business units. The appreciation of the Swiss franc against all major currencies led to a negative currency translation effect of minus 1.6%. Adjusted EBITDA amounted to CHF 216.1 million. Excluding currency translation divestment impact, EBITDA moved by CHF 18.6 million. Volume growth contributed CHF 5.1 million, price increases, and efficiency gains from the ongoing transformation program allowed us to more than offset cost inflation, resulting in a positive price of a cost of CHF 13.5 million. And the results, our total margin improved by 60 basis points and amounted to 15.2%, demonstrating fifth consecutive semester of margin improvements. Our transformation program continues to deliver -- the program contributed savings of CHF 31 million in the first half of this financial year. This resulted in total realized savings of CHF 115 million since launch of the program. Main drivers continued to be procurement and operational efficiency. The G&A workstream is currently in implementation, as Till already mentioned. This resulted in onetime transformation expense for work-shadowing and knowledge transfer in the field of finance, HR and IT. These expenses are accounted for as normal cost of doing business and are not part of items affecting comparability. We will continue the strict execution of the transformation program in the coming months. Regarding our income statement, allow me to focus on a few items. Let us first look at the gross margin. Excluding restructuring expense, our gross margin improved by 50 basis points and amounted to 41.4%. This improvement was mainly driven by operational efficiency and net procurement savings. The functional expenses remained flat at 29.2%. Please note that the functional expenses include the costs related to work-shadowing and knowledge transfer mentioned before. Net profit, excluding items affecting comparability, net of tax, increased by 11.9%, resembling the gross margin improvement throughout the whole income statement. The free cash flow margin slightly declined by 40 basis points to 3.6% as the operating cash flow was impacted by higher net working capital. While we have achieved some further improvements in our trade receivables management, inventory grew proportionally to sales due to supply chain constraints and project-specific inventory buildup. CapEx adjusted real estate divestments were in line with prior year. The cash flow from the sale or acquisition of subsidiaries in the prior year included the proceeds from the divestment of 3 Ps. Our balance sheet remains strong. We reduced our net debt by 20.5% compared to the same period in prior year. Net debt amounted to CHF 466.4 million, resulting in a debt ratio of 1.1x adjusted EBITDA. The maturity of our unused syndicated credit facility has been extended by another 2 years to December 2027, which allowed us to further strengthen our financial structure. And now back to Till for some further information on the financial outlook.

Thank you, René. And I think it's important to see that we have our midterm goals of 16% to 18% EBITDA as a goal, and I think that is our journey, which we want to continue, which will continue. And if you look now at '24, '25, our order backlog remains unchanged. So no change, we -- as you have seen out of Germany is very good on the project business. Our on-time delivery, which is a challenging environment is improving. We have to really closely monitor the macro and geopolitical developments, which we, clearly there will be question on tariffs and what is changing, I can tell you that some of the topics, with respect to China, we already looked at in the last year. So in somewhat we are prepared, but still have to analyze what is happening in the future. I think importantly, we want to continue our journey. Having this in our back pocket, we believe that, for the full year, we want to grow 3% to 5%, and we want to upgrade our guidance of adjusted EBITDA margin from 15% or at least 15% to 15.5% in '24-'25. And with this one, we also believe we are on a good traction, on a good journey for our midterm targets. This is given in a more volatile environment, however, with our transformation program, with the things we have achieved, with the things we have accelerated or put on top, we believe that we will be around 15.5%, which will be the next step in our journey. With these comments, René and I are happy to take your questions. And looking forward to, yes, to the next one.

[Operator Instructions] The first question comes from the line of Martin Flueckiger from Kepler Cheuvreux.

Starting off with the first one, and I suppose I'll take one at a time for convenience purposes. I was just -- Till, you were mentioning earlier on you're still in the process of analyzing the impact from the changing geopolitical landscape and all the talk on U.S. tariffs. Just wondering what your first thoughts are on the U.S. tariffs on steel and aluminum? Because aluminum, if I remember correctly is -- and even steel, are quite important raw materials for you guys. And what you're expecting in terms of your reaction for selling -- for your own selling prices? That's my first question.

Okay. I think it is something where we are all following the daily news and see what is the impact. I think on a more strategic level, it is something where I mentioned that we already relocated some business from China to America last year in the light of more, call it, volatile geopolitical situation. And I think in this background, it's very important to know that our business is very local and also our production is very local. And when we shared on the Capital Markets Day, you could see that more than 80%, more than 85% of what we are selling in America is also produced locally, including Nogales and Montreal, which is now something we have to look at. And it's really what we are screening the impact of our business in Canada and Mexico. But I think we are very -- already today. We have a good degree of local-produced business, which means there are certain autonomy. The impact from the China business is limited, and what we are doing is clearly, when you talk about the impact of tariffs, we are not the only company which has the impact. So I think we have to always compare the supply chains of others. And then as you -- if you follow the discussion on tariffs, clearly in somewhat -- everybody will try to give it back to consumers to work on the pricing. So I think here, we are doing analysis, what's possible, what pricing is possible. And I think it's too early. We look at it. I think we have the benefit that we are -- have a good footprint already today in this local regions, means like local for local America, local for local in Europe, local for local in Asia. And from this basis, we analyze the tariff and see what we can mitigate, what we can pass through. And that I think René in my task, and that given that we have a good local footprint, we believe that we will also have a good standing compared to others.

That's helpful. And then on your performance in core and as well as noncore countries. Trying to do the math here, it looks to me like there's a gap, a widening gap now in terms of organic growth performance between the core and the non -- and the rest of the world. I was just wondering -- because that wasn't the case in '23, '24, if I remember correctly. So I was just wondering whether you could explain that widening gap there and whether you think that it's going to persists going forward?

Thanks a lot for the question. First of all, the strategy, obviously, of dormakaba is to focus on our core markets. So that means we, from a financial point of view, we would really would like to see the core market to grow and outperform even the rest of the world's market. You're right, the rest of the world market grew approximately by 2.6%. In this market, we have some regions which are more product-driven, like Southeast Asia or the Middle East/Africa, where we had a very strong prior year, where we actually currently see lower project volume. But on the other hand, in this market, we all see that bigger markets like also Austria or France are performing and South Europe are performing actually very positively.

The next question comes from the line of Patrick Rafaisz from UBS.

Yes. I have a follow-up on what you talked about, the duplication of workforce effects I think you gave us an indication for the margin impact currently. Can you provide a bit more granularity on the phase-out of that margin dilution over the next 2 to 4 semesters? That's the first question.

Patrick, on the, let's say, additional cost that Till already mentioned, it was about on the Access Solution business impact of about 70 to 80 basis points. Now as you can imagine, these are costs where we are investing into the future, cost savings. This includes, among others like the work-shadowing, but it also includes product transfer in operation to our best cost countries also. Also, like as we mentioned in our Capital Markets Day, professional services related to the door closer complexity reduction. We have a very strict review of our items affecting comparability. And therefore, while we do not want to have additional adjustments, we really consider those cost as part of our cost of doing business. We will see the benefit of the shared service center cost reduction program in the coming to 6 to 12 months. Our objective is very clear, to get the full run rate benefit in the year '25-'26, when we are in the 16% to 18% EBITDA margin.

And the second question would be on Germany and the continued very dynamic demand you're seeing there. Till, you mentioned strong demand or strong growth across all product groups. But can you also talk a bit about the main verticals that have been driving this or the ones that stand out?

I think, Patrick, it's something where I already tried to a little bit elaborate. So it is across the offering. So I think one topic is we were benefiting from a more solid portfolio. So we added some products to the portfolio. And secondly, the project and airport business is supporting. So it's a little bit of a strong brand, having more products, how got a more round portfolio. And then the airport and project business. But as you mentioned, clearly, 10% against a more volatile market, a good performance by the team, which clearly is what we recognize and we're I think also looking in the next half year. Momentum continues, so I think it's something where we do not believe -- we believe it's going to continue.

The next question comes from the line of Tobias Woerner from Stifel.

Yes, 3, if I may. Number one, when I look at your free cash flow in H1, you've seen a deterioration mainly because of the change in net working capital. How would you see the full year unfolding? Last year, you got to a 7.2% free cash flow to sales ratio. Are we still on track for that number?

The first half year in our business is normally the weaker business from a cash flow point of view, because in the first half year, we have especially personnel related cash outflows related to vacation accruals, vacation as well as variable compensation. And in addition, in the second half year, we normally have our annual maintenance contracts, which we are billing on January. So therefore, it's normally a seasonality in that figures with a lower cash flow in the first half year and the stronger cash flow in the second half year. Now in this financial year, we obviously will face in the second half year, some cash that are coming from the restructuring expenses. Therefore, if you look at the cash flow before items affecting comparability, we are expecting to be in the same range as we were in the last year.

The second question, when I look at your bridge in terms of price/cost and prices, you seem -- or price in particular at the top line, you seem to see a slight deterioration or deceleration in that price movement. Would you hope, given what you said earlier, that the year coming should see that at least stabilize or reaccelerate?

So we have seen price increases to become a little more demanding. We have also seen that in the industry overall, from that point of view, the focus certainly on us is currently more on productivity improvement, efficiency improvement, because on the pricing side, we see some headwinds when it comes from a market point of view what's the possibility.

And then lastly, when looking at your transformation story or your transformation as a group, where do you feel in terms of benchmarking against best in class you have most upside, whether this is in context of purely financial but also operational and product-related KPIs?

I think let me try to answer differently. So cost program of CHF 170 million, where we delivered now CHF 115 million, I mean there's kind of a CHF 55 million to come for the cost programs, procurement, finance, IT and HR. We have put in CHF 40 million for commercial, where we showed you that, for example, the negotiation with the German employees what have been done in February and we are now also means that, here we are on execution, and then we have to put top on the door closer complexity, which is another CHF 10 million, which we showed you on the graph. The transformation program did start at a cost program with the benchmark, and you look at the function. And now it's going to be much more like efficiency when you think about our complexity on products on software side, hardware side and on structure. So I think on the benchmark, on the benchmark side, we are over the middle. Maybe if you look at the CHF 115 million out of CHF 200 million, CHF 170 million plus, CHF 40 million plus CHF 10 million, that means CHF 220 million. So I think we're somewhere in the middle of the transformation. On the complexity reduction, which is more like the processes, the things which you discussed for 10 years, are we going to change. If you change the complexity of the product, you have to change the supply chain, the operations. Here, we are at the beginning, and this process takes another 2 to 3 years, because you have to clean up legacy, you have to look about the details of product offering. So cost-wise, 50%, complexity-wise in the first semester.

Just following up on that complexity. I actually went to your stand at the BAU and I was impressed. There was a vibe around the place. At the same time, sometimes one can put forward too many products. Is this something you're considering as well, streamlining the product offering, to reduce the cost base in that context?

I think too many product is -- I think the only guy who can judge on is the customer. So I think what I want to have is, I want to give solution to the customer in the most efficient way. On the fair, you want to know that you are leading innovation or can transform trends into good innovative product, and I think that, really, the team did fantastic at the BAU fair, where, for example, butler existing door closers and new software solutions. But I think then we come back to how it's done, and you know that dormakaba had been -- 2 years ago have been much more decentralized. We have our first global product road map, which means there'd be some parallel and double R&D. I think our goal will be to think about product families on the software and the hardware side to have a similar offering, which allows diversification at the top level, but having a much more like a toolbox system on the lower level so that we can do more or similar with less variety. And that's exactly what I have done in the past on other industries, reducing complexity, which means reducing complexity on the product, reducing complexity in the supply chain, reducing complexity in the operation. And then you have much project to go about. So I think this is a process which goes from sales of a product management to R&D, or from sales of supply chain to operations. And these topics are -- we are -- we just start last year and we have to do more. And this will be changing the way we work and the way we can also act to the market, act on the product and on the customer side. But the idea will be that the customer still feels dormakaba is delivering the right product in the right time.

And just to repeat, it was a fantastic event at the BAU.

Thank you.

The next question comes from the line of Martin Hüsler from Zürcher Kantonalbank.

I have 2 questions. First of all, you mentioned projects such as a replacement for hotel Premier Inn in the U.K. Another question a bit more generally, do you see a trend towards more renovation and retrofit project versus new construction? And maybe you could remind us what's the current split between new construction and retro renovation business?

Okay. No, I would not say there's a trend so we have 40% -- 60% of refurbishment, as we call it, and 40% of new construction, which is what we -- we didn't see a change in trends. There's not even less new construction. I think we still work with this number. What we see -- and that's something we also explained that once you think about refurbishment, you refurb products which might be 10, 15, 20 years old, which means you can upgrade and can sell higher value products, which should be beneficial to us. So I think this is somewhat unchanged. We have 90% commercial. We have only 10% residential. We have 60% refurbishment, 40% new. And then also, we have 60% product, 25% project and 50% service. So I think these metrics more or less are stable, but one trend is that refurbishment should be on higher value added.

Okay. That's clear. And then my second question, if worse comes to worst and the Mexican tariffs would unfold, I mean, how flexible would you be to react in Nogales to compensate higher tariff in the U.S.?

Yes, this is a very -- your question raises 10 different answers. So I think, first of all, there is the analyzed tariffs on Canada, on Mexico and also the tariff discussed on steel and aluminum. And you have to look about the whole equation. So we -- the good thing is we have good local and we have lots of business which is produced in the U.S. for the U.S. And as you know, we have some business in Mexico and some in Canada. So if you think of changing something, you have to look at the tariff, but obviously, we have to look at the labor arbitrage. So even if something is changing, the question is, is the underlying business still valid or not, I think that is something we have to do. We have to look about the exposure to Canada. And here, we're doing what we can adjust, maybe already today, which might be adjustable or we changed some stuff. But overall, I think it's very good that we have a strong local-for-local business. That is one topic. And the second topic is tariffs are not hitting only dormakaba. Tariffs are hitting the whole world. And if you look at Powell from the Fed, if you look about tariffs. What is he looking, he doesn't look at the interest rate because the big impact from tariffs might ending up in higher consumer price, which means companies will try to push the price in to the end customer, not only dormakaba. And that means there are different measures. And we have to be smart in looking about what is competition doing, how much are they exposed, doing our analysis, and that's exactly what we are doing. Looking about our exposure compared to the competition, what's our pricing power and then reacting as it's wise. But I think it is something where our strategic rationale of being local for local is still valid. And we have to see how much more we can do local for local. You also remember that last year, we're relocating business from China to the Americas in the light of geopolitical volatility. So I think we are acting on it. And I think it's important that not acting in a rush, but doing like your analysis and see what the right measure to do.

The next question comes from the line of Remo Rosenau from Helvetische Bank.

Yes. In the half year report, there was mention that within the adjusted EBITDA, with a margin of 15.2%, there were also one-off expenses included for work shadowing. Could you quantify that, how much that was and how much that will go down now going forward?

When we look at the total group results, we talked before, 70% to 80% for the Access Solutions. It's roughly about 60 basis points for the total group. This was the impact of the total cost. This will continue in the second half year at a lower level. But keep in mind that we are starting now with the commercial transformation, which, in principle, includes another transfer of activities in the commercial area to Sofia, where we will see a similar impact also in the coming months. From that point of view, it's not something where you can say it will be immediately disappearing. It will continue certainly for the next months ahead.

But just to show you kind of where we -- our running costs should go to, I think that's the indication when in '25, '26, it has to be lowered and then we will be up in the 16% to 18%.

Okay. And for the current year, I mean, your new guidance goes now from 15.5% roundabout, which implies a margin in the second half of around 15.8%, around 100 basis points up versus the previous second half. So is that mainly underlying improvements or also some of these items?

I didn't understand the rest of the question, some of it.

Well, in the second half, given your new guidance, this implies a margin of 15.8% versus 15.2% in the first half. So is that mainly driven by underlying improvements, or are they from some extra items in it?

There are no extra items. But what you can expect is, obviously, we have accelerated the transfer of -- into the shared service center, and we will see bigger savings, especially in the finance and HR and IT environment in the second half year, coming out of this transformation.

There's no extra. It's underlying transformation.

The next question is a follow-up from Martin Flueckiger, Kepler Cheuvreux.

It's actually one for René, a financial question, housekeeping, I suppose. To me, like we -- so this year, we reached about half of the targeted incremental cost savings. I was just wondering whether you could confirm that. So we're still talking about roughly CHF 60 million incremental cost savings from the transformation program in '24, '25? And simultaneously, if you could spare a few words on the guidance regarding items affecting comparability in the tax rate. Because I believe the tax rate was a little bit lower than what most people had anticipated.

As on the first question on the savings, yes, I can confirm, we are heading towards CHF 70 million cost savings in the year '25, '26 on the program. And as Till already mentioned, we have then in the capital market increased by another CHF 40 million in the year '27, '28 on the commercial transformation, and another CHF 10 million on the door closure complexity, and we are well on track to deliver this. Regarding the items affecting comparability, we had roughly about CHF 21 million restructuring cost in the first half year. We had some benefit from the divestment of real estate in Montreal. We expect items affecting comparability, the same magnitude as we have seen in the first half year, which will bring us to about CHF 30 million to CHF 40 million items affecting comparability in this financial year and a similar amount in the next financial year. Regarding tax rate, you know we have elements like the goodwill amortization, which is not tax-deductible. On the other hand, we have the benefits, let's say, from restructuring costs from the past, which we actually did not consider as a deferred tax asset, where we will see some impact. So therefore, I'm expecting that the tax rate will be lower because we can benefit from the tax deductibility of the restructuring expense, especially in Germany.

The next question comes from the line of [ Ingo Stössel ], UBS.

I have 2 questions from my side. You have a bond maturing in October. Could you maybe provide us some guidance on what your plans for this? Being CHF 320 million, we expect to probably refinancing, but if you have any input there, that would be great. And regarding M&A, do you have kind of a targeted budget which you're looking at on an annual basis? Or maybe phrased differently, how much inorganic growth do you want to achieve on a regular basis?

Maybe first on the loan. As you know, we are in a very -- let's say, we have in the industry with a strong cash generation. And as already raised the question before, we expect a stronger free cash flow in the second half year. So therefore, we -- unless there will be some major acquisitions, we will target to repay part of the loan which need to be reviewed. But we are still assessing which market and how much we will renew, but we will renew the loan most likely at smaller portion.

On the M&A side, I think also have indicated the last full year figures and also on the Capital Markets Day, that we want to organically grow by 3% to 5%. But it's important because the industry is a consolidating industry. The big 3 are 35%, so I think they are much more smaller and medium-sized players. So clearly, it's one part of us to also buy more companies. I think it's very important that these companies are accretive to our margin targets. And we didn't tell a number of how much to invest, but we told you once that the level of leverage we would maximum have is like 2.5x EBITDA. Just to give kind of a ballpark, we are a cash flow generative business. So in the end, it gives you kind of the cornerstones where we want to go. Clearly, I think today, having the transformation, we will much more do bolt-ons where -- which we can easily digest to grow the business. One focus will be Americas. But I think it's important, accretive, helping us on the go-to-market and not increasing complexity too much for the time.

Ladies and gentlemen, that was the last question. I would therefore like to turn the conference back over to Till Reuter, CEO, for any closing remarks.

Thank you for the questions. Thank you for listening. I think now we have done another step in our transformation towards our midterm targets. Hope to see you soon, and thank you for today's -- for your attendance.

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