Frequentis AG (FQT) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Hailey, your Chorus Call operator. Welcome, and thank you for joining the Frequentis Full Year 2020 Results Conference Call. [Operator Instructions] And I would now like to turn the conference over to Stefan Marin. Please go ahead.

Ladies and gentlemen, good afternoon, and welcome from Vienna. Thank you for taking the time to dial in today. With me are Norbert Haslacher, CEO; Sylvia Bardach, CFO; Hermann Mattanovich, our CTO; and Peter Skerlan, elected CFO. We will start with a presentation about this exceptional past year 2020, followed by a Q&A session. I would like to ask Norbert Haslacher to start.

Yes. A warm welcome from me as well. The past and the present year are defined by the pandemic. As you know, we supply national safety critical infrastructures, we must be upheld and maintained -- which must be upheld and maintained even in periods of crisis. So with a few exceptions, it was possible to continue business unchanged despite the restrictions. So a big thank you to every single Frequentis employee and especially those who also have to cope with family responsibilities at home for mastering the various business challenges of 2020. And I think also, it's worth to mention that the digital mindset of our customers and employees helped to complete many, many projects. And this led to a stable revenue, and exceptional operating profit and a good net cash situation for the whole group. I would like now to start with Slide #2. So the impact from the COVID-19 pandemic on Frequentis' day-to-day operations was limited as the measures taken paid off. So due to pandemic-related restrictions in the contract award processes, some contract awards and tenders were postponed, hence, the slightly lower order intake 2020 compared to 2019. Nevertheless, in general, the tender and requirement pipelines are well filled. Despite the slowdown in order intake, we have a good level of orders on hand, which extends beyond 2021. The excellent teamwork with our customers and within Frequentis helped to get a good number of projects and milestones executed so that revenue was almost unchanged, as you can see here. And EBITDA came in at EUR 41.9 million, and EBIT increased by almost EUR 10 million to EUR 26.8 million EBIT. The reasons for this improvement were mainly lower travel expenses as well as lower advertising expenses due to the cancellation of trade shows. It remains to be seen what level of travel expenses we can compared to the pre-pandemic levels saved on a sustainable basis. Due to the one-off effect of the impairment loss for Commerzialbank Mattersburg, we reported a net result of minus EUR 3.4 million for the group, including 100% write-off. The equity ratio was at 40.7%, only slightly down from the 42.7% as of end of 2019, and total equity was EUR 113 million. Maybe also to give you some facts about our cash position of EUR 91.3 million at the end of December 2020, around 80% of the cash and cash equivalents were deposited with 9 system-relevant major banks in Austria and Germany and the remaining amount of 20% was deposited with about 20 other banks in Europe, Australia, Asia and the Americas. The net cash increased to EUR 85 million, including EUR 50.2 million in advanced payments from customers. So I would like to go to Slide #3. So it provides an overview of our business model and the acquisition steps we have conducted 2020. We are a specialist for safety-critical control centers, and this focus on a global level is unique. So we think that we have proven several times already in the past, 2 decades, that the business model is pretty resilient to any type of crisis. Back in the first half 2020, we even acquired ATRiCS, 51% of ATRiCS in Germany, and we are very satisfied with the input for our group. As you probably remember, we said, especially in ATM, we don't need new customer base as we have a very strong installed base already. We need new products, which we can add to our existing customer base. We also purchased a 15% stake at Nemergent Solutions, a company based in Bilbao, Spain, which gives us more traction on the upcoming expectation in the LTE market for safety critical users. And what we have announced a couple of weeks ago is the intended acquisition of parts of the corporate -- U.S. corporate company, L3Harris. It's a big step forward for us. The largest acquisition in Frequentis' history will be a game changer with respect to the products, the additional customer access as well as the corporation, which gives us potentially the possibility to be part of U.S. contracts we didn't have access to in the past. So when we have a deeper look into the order intake, we had some larger scale orders in 2020, like from Spanish air navigation service provider and new business orders like for the drone flight information system for Norway. We were again strong in order intake for the public safety transport and maritime sector, for example, as we have published recently the fire brigade and police in Hamburg or the Swedish Coast Guard. So the digitalization of almost every aspect of the order intake process like webinars, digital fair booths and our initiative sales goes digital really paid off. Some investments we have postponed. Even our customers have been in lockdown situations. So it was -- and it's almost also difficult for us to estimate the budget behavior of customers in these pandemic times as we do not know how the lockdown situation in all the countries will progress. When we look on Slide #5, the order books, both segments, were able to increase their orders on hand. So orders on hand in total are high at EUR 428 million. That is a plus of 9.2% versus the end of 2019. And the revenue development was stable despite the pandemic and its challenges. So especially the travel restrictions and the current time regulations require significant changes of internal procedures and detailed planning. For more details of the profitability, I would now like to hand over to Sylvia Bardach. Sylvia, please?

Good afternoon from me as well. Let's take a look at Slide 6. Based on our stringent execution of projects and on the back of savings, mainly from lower travel and trade show expenses, we report a good operating profitability. It should be noted that there will not be a reduction in travel expenses on the same scale in subsequent quarters because business travel remains lighter for sales activities, on-site acceptance, especially for go-live operations and training. The net result was minus EUR 3.4 million. It was influenced by the full impairment of the deposits at Commerzialbank Mattersburg. We have already filed lawsuits to assert our claims in connection with this case. At present, it appears that these lawsuits and the pursuit of further potential claims will take a significant period of time. A few of the good operating results and our solid financial position, we proposed a dividend of EUR 0.15 per share as in the previous year. Our dividend policy remains unchanged by the decisions. The next, Slide 7, shows our financial policy framework. Our net cash position is well above the target of 10% net cash in relation to group revenues. The equity ratio was 40.7%, again, above our target of 35%. CapEx is mainly maintenance CapEx for IT infrastructure, software licenses and IT equipment, and equipment for production and buildings. We expect it to be about EUR 5 million a year. R&D expenses were lower in the pandemic, due to a focus on software development for customers and temporary savings on development activities. Expenses are expected to be higher in '21. As this is my last conference call as CFO of Frequentis, it is a pleasure for me to see that the Frequentis equity story is appreciated by our employees as well as private and institutional investors. I would like to thank you for the continued dialogue with the capital market even in difficult times last year. Thank you for your trust. We have learned a lot from views and questions. Succession planning at Frequentis is always long term. Preparations for the current change were started more than a year ago, long before any pandemic outbreak. I am happy to -- that we were able to find an internal successor. Peter Skerlan has all the qualities required to lead the Frequentis Group into a successful future with common sense and business expertise. I may ask my successor to introduce himself. Peter, the floor is yours.

Thank you, Sylvia. Some of you already know me personally from the time of the IPO. Now almost 2 years have passed since then, and Frequentis has continued to develop. Now let me talk about myself. I've been with Frequentis for more than 22 years. Back in 1999 when I started, rental revenue was EUR 74 million. Today, we have EUR 300 million. My start in controlling enabled me to acquire extensive know-how in the global project business and the individual departments and processes in detail and bottom up. What excites me and many others in Frequentis is working with a lot of personal responsibility at all levels and, of course, the open and honest feedback culture. It Is only, when discussing openly, that we can stay ahead of the game and move forward. I decided to take part in the assessment center for the CFO position last year, as I believe in the future growth path and the corporate culture of the company. I look forward to the dialogue with you. I shall now hand over to Norbert to explain the rationale of the planned acquisition. Please, Norbert.

Thanks, Peter. I'm on Slide #9 now, which is explaining a little bit the rationale behind the acquisition of units from U.S.-based L3Harris. So the proposed transaction to acquire of those units from the stock exchange-listed U.S. company, L3Harris Technologies, which is a very large company, is around EUR 40 billion market cap and around $18 billion revenue. This acquisition will increase our slice of the EUR 13 billion control center market, of which we can address about 2 -- meanwhile, with the acquisitions, EUR 2.5 billion today. We will increase our customer footprint, and we'll have access to customers in North America and Asia that we did not have before. And the units will also complement our existing ATM portfolio, all the civil and military ATM voice and communication solutions, as well as the arrival and departure management product lines from L3Harris as well as the software and cloud solutions for traffic optimization and traffic synchronization. So the -- these tools and solutions can help reduce air traffic emissions, which will play a major role in the future. The transaction involves also the acquisition of entities in Germany, in Canada, in Australia with around 200 employees. So besides this taking over of those products and entities, what's even more important is that we have signed a cooperation agreement with L3Harris. And as an L3Harris technology partner, we will provide voice communication systems for use in L3Harris large-scale solutions and service businesses. And the cooperation will make us even stronger with a greater scale in the U.S. and also outside of the United States. The acquisition is expected to be completed in the second half of 2021 and is, of course, subject to competition clearance and regulatory approvals. So since closing and thus the full consolidation of the various L3Harris entities is expected to take place at different times in the second half of 2021 and will involve both transaction costs and post-merger integration costs. These entities are not expected to make a significant contribution to revenues and earnings in the 2021 financial year, but we expect this transaction to contribute revenues of around EUR 30 million in 2022. We also expect an acceptable margin at about group level in the medium term with post-merger integration costs to be expected in the short term. Before I go to 2021 the outlook, I would like to say thank you to all Frequentis employees worldwide because I think we can be very proud of our results for 2020. And without the passion and energy and flexibility of our people, we could not have achieved this great result for a very challenging year. When we look into the future, let me conclude with the outlook and our agenda for 2021 a bit. So based on almost EUR 430 million of orders, we are working at a very good capacity utilization level for 2021. As stated, we strive to roughly maintain, if not increase, revenue and order intake this year. Regarding profitability, we expect an EBIT margin in the range of 5% to 7%. It depends on a lot of factors. As you experience yourself in these days, the continued pandemic and the low vaccination coverage is not really helpful to predict the next 8 to 12 months. The savings experience in 2020 will not be repeated because a complete digitalization of, for example, on-site acceptance procedures, training or trade shows and, of course, sales activities is not possible and also not what we want. We need the personal interaction with our customers. So much we will -- much will depend, of course, on the extent to which projects and sales activities can be carried out virtually in the future or whether when the pandemic is contained, customers, suppliers and business partners will move back towards present-based activities. And we see already a first trend that, in October, November, the first trade shows are planned to take place physically in the U.S. and also in Europe. A major focus point of the management for this year, of course, is on the closing of the intended acquisition and subsequent integration of the L3Harris units. And before we are ready for your questions now, I would also like to thank you, Sylvia. Her performance over the past 30 years has been truly exemplary. She has been instrumental in the growth of Frequentis and has shaped the development of the unique corporate culture Peter has mentioned in his words. Not only is she an excellent financial expert, but also a great entrepreneur with heart and soul and a very valuable team player on the Executive Board. Peter, he comes from within the company. He knows our business by heart. He has already proven his comprehensive expertise on several occasions we have together with him. I wish you, Peter, a good start. We are looking forward to working with you, and I would like to assure you all that we will continue to decide what is best for the company. Thank you. Giving back now to Stefan.

Yes. Please, operator, start the Q&A session.

[Operator Instructions] And the first question comes from the line of Daniel Großjohann of BankM AG.

My question is about the Harris units. And is it correct that there is -- after the transaction, no technical overlap between the 2 companies. Has there been cooperating projects before the transaction? And in what degree or what the -- has addressed market grow. You said that total market and safety critical control centers is about EUR 13 billion, and EUR 2 billion are addressable right now. How much larger will the market be? And what is the combined addressable market of Harris and Frequentis in this sector?

I would like to maybe give the question to our CTO, Hermann, when it comes to the product portfolio, and I will answer then the question when it comes to market share and addressable markets. Hermann?

There is a certain overlap in the product portfolio. This past, the majority of the products are no overlap at all. Of course, we will use the coming time to make sure that we select the best fit for the market. And we have to be aware that we do not just take over new products, but we take over a new entity in Australia as well, which is working for air defense market, which was not our core focus in the past. So the market share will be extended by taking over new customers as well in this case. Looking at the product portfolio, we will have a nice trip in the future for the digital power where we have missed some parts of the equipment in our own portfolio. This will be completed with the -- especially the new companies -- the new company that will take over in Germany, the Harris Autocom.

Yes, and maybe I can add something around the addressable market share. So completely right what you just mentioned. The market share, we have calculated based on our own market model because, as you know, there is no study available in the market, which is addressing exactly our market. So therefore, we had to make our own calculation on TAM SAM and SOM, the classical elements of addressable markets. The total market is EUR 13 billion annually in the regions where we are allowed to deliver. And we -- with the current portfolio before acquisitions can address around EUR 2 billion. So what we currently have to calculate is, and that's my first impression, we have to do that after the acquisition, is that with ATRiCS, with Nemergent and with L3Harris together, we probably can address now a market share -- a market volume of around EUR 2.5 billion. That's my first guess. What we have is a rough figure, but we have to substantiate that and hopefully, in the second half year, have a correct figure. But I think it's around EUR 2.5 billion, maybe 2, 3, which we could address with all these new product lines.

The next question is from the line of Adrian Pehl of Commerzbank.

And also from my side, to Sylvia. Thanks for meeting you, actually working with you in the IPO. It's been a great pleasure, and I wish you all the best. And a warm welcome to Peter in his CFO role and a lot of fortune. Just a couple of questions. Well, first of all, you have been saying in your presentation, Norbert, that actually coming back a little bit to the acquisition of L3Harris, that part of the contracts were not addressable to you, but it was just a question of understanding. You've been active in defense in the U.S. already, right? So from a regulatory standpoint, you should have been in a position already to do some business. But you were probably talking about the product range, which you were not able to offer yet. Is this correct or am I getting something wrong here? And in particular, could you a little bit elaborate on the guidance for 2020? Always a little bit struggling with your statement that you do not expect the L3Harris units to contribute to a significant degree to 2020. On the other hand -- sorry, 2021 for sure. On the other hand, I would expect this business also to be quite Q4-centric, right? So if you include this in the second half, likely somewhere maybe early Q4, so -- then shouldn't we expect a significant revenue portion to hit the P&L this year?

Okay. Thanks, Adrian. Maybe we start with the second question. The point is that we currently cannot estimate when the regulatory and authority approvals will arrive. I think we have asked -- had to ask around 6 different authorities worldwide. It's the foreign investment review board in Australia. It's the defense directorate of trade in the U.S. It's the golden law application in Italy. And so it's amazing how many authorities you have to ask before you can close such a deal, and the expectation is that it can meet months to close the deal. So I cannot even estimate if that will be in 2 months or in 4 or in 6 months from now. It depends on the speed of the authorities. In principle, you are right because as they do a similar business in similar segments like we do, probably they have the same phasing in revenue generation and margin generation as we have. But to be honest, we don't know because we have no chance due to the arms-length principles we have to sign to see their working capital development for 2021. That's why I want to set the bar low and not overpromise something we probably then cannot deliver.

All right. And so we should understand the guidance as prior to any integration effects. So on, let's say, organic basis, what you mentioned in terms of revenue at the level of 2020 or better.

Yes. Correct, Adrian. That's correct.

Good. And should you...

I'll go...

Yes. Sorry, go ahead, please.

Your first question, Adrian, was that what additional market can we address after closing, which we could not address before the closing as we are already active in the U.S., that was your question.

Yes, exactly. And is that a regulatory topic? Or is it just from a product standpoint of things?

It's both. I'll give you 2. I would like to answer that in 2 dimensions. One is you probably know Australia and the U.S. are both companies of the 5 Is. So there is a much higher security trust and security level in place between those 2 countries. And the defense product we take over from L3Harris is based in Australia with a special security level. And they also have the [indiscernible] certification, which is required by some U.S. forces, which is not with our current product in Austria available to be met. And that's why we can add a little bit more core defense market in the United States, we could not address up to now.

Okay. Understood. Very good. So -- and then I was wondering if you could talk a little bit about the dynamic in probably both markets in PST and ATM, a little bit of kind of a characterization of the first half 2021 versus the second half of the year, likely under, let's say, the assumption that at least we have overcome some parts of the pandemic. So what do you think how business is evolving? And probably a question a bit linked to that. As you have been speaking about project delays from 2020, is that, let's say, likely resoluting in the second half? Is that rather postponed or pushed out to 2022? What is the status here?

What we currently see, Adrian, is that we have a good pipeline and good categorization of maturity levels for each leads we expect to come within this fiscal year. So I think the pipeline looks promising for this year when it comes to overall order intake and comparable figures to 2020. Nevertheless, what we have experienced last year is that due to the lockdown situations in different countries, of course, also our customers have been in lockdown situation, and therefore postponed the process of awarding tenders to the industry. And when I also see the vaccination speed we can experience in a couple of countries, I think it will be again a mix of faster countries versus slower countries and countries who invest in the pandemic versus countries who do not spend any euro or any dollar as the space is closed. So it's really hard to foresee the development, but what I can say is that the sales force and the focus in our pipeline gives us confidence to make the statement that we strive for getting a better order intake, a higher order intake in than 2020 besides the transaction with L3Harris. That's what we can currently say. If it's second half loaded, I would expect that the higher the majority of the vaccination strategies executed, the higher the ambition of our customers is to start new projects. That's what I would say.

Agree. Agree. And then I've got 3 figure -- 3 questions on figures, more or less, kind of -- well, first of all, could you share with us the digital tower sales, remote tower sales actually that you had in 2020? And another question is on the order backlog that you have released for 2020. How much of that is actually turning into revenues in 2021? And the last question is actually on your strong cash flow that you had, in particular, the operating cash flow was pretty, pretty strong. I noticed actually, there has been some change on contract liabilities, which should have helped you. And also on the working capital component, I was just wondering if -- how should we think of it? Is it just that you have been quite successful in just collecting some of the money? Have you been working off some of the respective backlog that's not necessarily going to repeat in 2021. Or what kind of -- I'm just trying to gauge and to get a sense of how these things might develop because it looks like really outstanding and not necessarily repeating. So I would like your view on that.

Adrian, I would like to answer the first question on the remote tower and the other 2 questions, I would like to hand over then to Peter. So on the remote tower side, we do not calculate and therefore not disclose any remote tower specific figures, as you know. But what I can tell you is that we won a contract with the -- with Denmark for the real tower. So we have, again, successfully won this tender against our competition. And what you probably have seen in the press is that we got approval on the first sites of the U.S. military in the United States. We have had the first trials 2, 3 months ago which have been successfully conducted together with the military. So we still believe that this is a huge market. We even think that the market is increasing due to pandemic scenarios. They can imagine on separating teams on a virtual remote tower technology than having all together sitting in 1 tower, in 1 physical tower. So they even think now as a contingency solution for a potential next pandemic situation to implement remote tower. That's a new use case which was developed in last month. And the statement, make a long story short, is we believe in this market, it will be a fast-growing market. The researchers say 30% annually the next 5 years. We see that the opportunities are coming. We win opportunities, but we do not disclose at this stage any value, in euros, how much order intake we have generated out of this business. Peter, cash flow and order intake impact on 2021.

First, I would like to thank you, Adrian, for the wishes. It's a pleasure for me because we had a lot of good, very good discussions in [indiscernible]. And I'm really glad and looking forward to having again these very good discussions with you. Concerning your 2 questions, the first loan was orders on hand, concerning the orders on hand of EUR 427.6 million at the end of 2020. We plan to translate into revenue approximately EUR 241.6 million. And the rest, EUR 186 million, is then for 2022 and 2021. Concerning the second question, cash flow, yes, your prediction is correct. As you can see due to the situation 1 year ago where we had corona on the table, we decided to concentrate on our project milestones. We set up a project steering forward that has to meet twice a week and -- or once a week to steer all our customer projects and to meet project milestones and collect money. In addition to that, we -- you can see that contract liabilities increased that had to do because we achieved a lot of milestones regarding agreements, but there's still some work to do. And this contract liability, it's kind of rounding. So we have received the money, but there's still some work to do.

Right. Okay, but -- so that means, let's say, in a -- I would call it, halfway normal kind of business environment that should revert to some extent. Is that what you're thinking? Or not necessarily?

Yes, because it is in a more comfortable position when we have the money and have to do the work. We prefer this than the other way around.

The next question is from the line of Roger Becker of BankM AG.

Roger Becker of BankM. I have a question regarding -- on Slide 15, it says that the revenue share in Europe has increased in the last fiscal year. My question is whether this is also due to the fact that travels overseas was limited with respect to the COVID-19 situation. The second question I have is last year, the expenses in R&D decreased compared to the previous year. What was the reason for this? Could you a bit elaborate on this, please? And the last question is that, okay, 2 last questions. What do you expect regarding the shift from hardware to software proportion wise? What is the trend? What can we expect regarding this transformation from the solid things or hardware business to software focused business? And my last question then is, could you please tell us a bit about the current stages of the integration of the companies acquired in 2020, the metrics and the merchant? What is the current status? Is everything being already integrated? Or is there still some work to be done?

Okay, so we have to split the answers up between all of us. So your first question was about the European market share in orders. Why that is so, our explanation for that is we believe that a lot of European MSPs have experienced 9/11 20 years ago, and the consequences of stopping all investments due to the low flight movements, low amount of flight movement and experiencing then that after the flights came back, they had or have lost around 2 to 3 years as they had to reintroduce a new tender, reintroduce a new Board, maybe reshape all the requirements due to the changes. And therefore, especially the European NSPs. They really used the time to conduct programs in Europe. I will never forget the statement of one of the largest European and navigation service provider CEO, not Germany, by the way, who said, "Norbert, I now have the best people available for projects. So I would be stupid in not doing the projects now instead of doing the project in 2 years from now when we have our stress level of a full air space back." And I think also the funding mechanisms, especially in Europe for new tenders have been very beneficial for the ANSBs as they got, most of them, taxpayer money in their respective countries to fulfill their regulatory obligations or obsolescence obligations or a project obligations they want to introduce to their operations. So I think that was a little bit of a learning of 9/11, 2001 and also the available funding of the taxpayers within countries. The second question about the R&D development and R&D costs, Hermann, maybe you can answer that.

Yes, when we are talking about R&D costs here, you have to be -- we added these other R&D expenses that Frequentis does for R&D. It's the net value of R&D and not the gross value of development that we did in that year because value was a little bit lower than the year before but in the same range. The net revenue that we show here was a loss -- a lot lower because we had more customer paid R&D in this year. This was, on the one hand, because we concentrated on getting things done, and on the -- as our customers as well, wherever possible. And on the other hand, caused by the pandemic, where software deliveries were easier to be done than any hardware deliveries. So the customers, as well as we, concentrated more on software change requests and upgrades of systems than on new development of new products or new deliveries of complete systems. We expect that we will see a trend changing back to values like we were used before in the coming years.

The next 2 questions, how is the trend on hardware to software business shifts and the status of integration for ATRiCS and Nemergent. And I think this -- the answer could be in a combination. Because as you see, our acquisitions are mainly 99% software driven. So what we take on board into our portfolio are all software products. So this will, of course, naturally impact the shift between the hardware and the software business and especially when L3Harris' components and solutions are part of our portfolio. The software share will definitely increase significantly as they provide new software solutions to our portfolio. But nevertheless, also the hardware solutions are decreasing as we replace them step-by-step with our new R&D finance software solutions. I think you can see that pretty much in the area of public safety, when you see all the press releases we have generated the last 12 to 18 months compared to the press releases before, you will not find any hardware related press release on public safety anymore as we do not have a hardware-based solution for this market, which is completely replaced by the new platform, LifeX. What's also a trend, what we see is that we go more and more into the cloud business. That's a new segment. The drone operation we have implemented in Norway is a pure cloud solution where no Frequentis technician ever touched Norwegian ground during the during the installation of this software because it's a cloud software out of the data center. So that it's all done remotely. It is a trend which is slow because it's the safety-critical industry, but it's a trend we feel and we anticipate. And therefore, the share for software, including the cloud business and service business will definitely increase due to this trend and due to the acquisitions.

Okay. And 1 item is remaining, about the status of the integration of those acquisitions, of ATRiCS and Nemergent. Just a question of whether all the processes have merged meanwhile, if integration has taken place and is finalized.

Yes, we cannot disclose too much things because we haven't closed the deal now. So we still have an arm's length principle at the moment. And on the L3Harris side, we cannot say anything. On the ATRiCS side, they are part, as Hermann has said before, they are part of our digital tower solution. Because we think that ATRiCS, with the SMGCS, can play a major role in a digital tower where we combine our smart vision of the remote tower with the VCS of our communications platform and the SMGCS for the arrangement of aircrafts on the ground. That's a good combination for a digital power solution. And that's where we integrate them on the go-to-market side. On the technical side, they will stand-alone as an IPR, but they have to follow our technical and architectural principles to make sure that with our MosaiX platform, we can ensure data exchange between different solutions to create an operational benefit for our customer. So that's the strategy we have for them. And from a legal side, they will stay, of course, independent as we have 51% of the company and not 100%.

[Operator Instructions] And the next question is from the line of Teresa Schinwald of Raiffeisen Bank International.

Also from my side, let me start with wishing Mr. Bardach and Mr. Skerlan all the best for their future and their new roles. And I have a mix of questions. One, let me start with the more strategic outlook one. Have you had already a chance to look at the infrastructure bills and legislation that's on the way in the EU and particularly in the U.S? If there is any potential for Frequentis? That's my first one.

Teresa, do you want to have the answer directly to your question or do you want to ask the question before.

Whatever you prefer. I can run through it, a few questions or let's do it one by one, whatever you prefer.

Okay, then I think we try to answer the first question, which is if we see any potential from the infrastructure investments in the U.S. or in Europe. Not now, I think it's too fresh to anticipate for the U.S. market what impact it will have to the safety-critical infrastructure. But as I stated in our last call, we saw, already half a year, ago that there are major tenders coming out in the United States for the new network fence, whole U.S. network for the ANSB FAA plus VCS tenders and gateway tenders in large scale. So as the FAA is anyhow financed by the Congress and not by the overflight fees, they never gave us the impression that they have any restrictions on large tenders due to budget issues. If this new 1.7 thousand, billion, trillion, whatever investment in the United States is available and is beneficial for us, we have to find it out because I haven't seen now the breakdown on the different segments. What we see in the European Union is there is a COVID recovery fund where a lot of our customers could benefit out from, so they get funding for their own workforce utilization as well as for third-party investments. So we are working on some of those COVID-19 recovery fund elements. And what we also see and feel is that there is a larger appetite in infrastructure investment when it comes to rail. But this is more not coming out from the COVID-19 recovery funding side. It's more coming from the CO2 emission reduction vision of the European Union. So those are the areas we currently can see.

The next one is mainly driven by your really exceptional margin in public safety and transport. Were there any positive one-offs in this segment in the second half of the year? Or is this the impact of the lower travel expenses? Or even if there's a sign of things to come with more platform sales and the software exposure in particular in this segment?

Yes, Teresa, this is Peter. I would like to answer this question. Also, many thanks for your wishes. The positive FX in Public Safety and Transport, where on the one hand, the savings in travel costs, which also appears in this section as well as the savings of trade fairs, as Norbert mentioned before. And in addition to that, we had some quite good project results in the segment.

But am I getting it right, not to plug-in a similar margin excluding the travel expenses savings?

May I ask you to repeat your question once more? I haven't got it.

Yes, sure. So it would be more sensible not to expect the repeat of this margin winding back the travel expense savings.

Unfortunately, yes, yes. Yes, there are [ sanctions for that ].

Yes. Another one, could you give us an idea in terms of the revenue share of the projects that were accepted on virtual site acceptance tests overall for the group or even on a segment basis? Just to get a feeling of what's benefited from the virtual site acceptance.

Yes, I can give you a valid here. We were able to conduct about 2/3 of our acceptance test virtual as a virtual acceptance. It's not that easy to answer the question about the revenue split figures what project normally has a lot of acceptance tests on the way from the beginning to the end. So if we just take it as a 4-part figure, then we could say that it's expected that 2/3 of the revenue of last year were done in projects which were -- had at least 1 virtual acceptance. But it's not that simple that 1 project just has 1 acceptance test. And you can imagine that mainly the things like what normally is a factory acceptance test can be done virtually, a site acceptance that can be done virtually, the final handover to the end user normally meets the end user and therefore cannot be virtual as the others.

Understood. The next one is on the currency exposure. I noticed that there was a positive currency effect of EUR 1.6 million in other operating income. Can this be seen as a one-off or a sign of things to come and could be repeated?

Yes. This one-off due to the effect of the mark-to-market valuation and happened only in 2020.

Okay. And my last one, right now in the global supply chain. So do you see any hardware supply issues driven by the current chip shortage?

We have not seen special problems in the supply chain for the hardware, but the main reason for that is that we plan our hardware supply normally, at least, 1 year in advance because we need to make sure that we are not hit by obsolescences, and we need to keep enough on stock to avoid this. We did a change there because we, today, plan with the rolling forecast for the next 12 months and we buy, in advance, those supplies for the next 12 months.

And we have a follow-up question from the line of Adrian Pehl of Commerzbank.

Yes, I've got actually 2 quick ones, I guess. So first of all, on your goodwill position, I saw a write-down, actually, about EUR 1 million or so for systems interface limited. I was just wondering actually what has been the case here. And have you actually written off now all the goodwill of this entity? Or is it something still at risk? And the last question is kind of catching up with what's going on, on the M&A side of things. Well, obviously, L3Harris is quite an asset to be integrated, in particular as there are many international sites. But I, nevertheless, was wondering if you still have some targets ahead of you, which you would like to takeover in the course of this year or if you just say, well, let's just do this one and then take a fresh look at the market in 2021, or what is your view on takeovers going forward? Because obviously, your cash pile is still quite attractive to be spent in additional and adjacent markets? So any views would be welcome.

Okay, thanks, Adrian. So maybe the first question will be answered by Peter.

Okay, the depreciation of the goodwill has to do with our shares in system limited interfaces, a British company, where we decided to depreciate the goodwill from approximately GBP 1.3 million down to GBP 200,000 due to the results of the past 3 years where we, relatively, had good results. So the rest of the shares is -- the level amounts to GBP 194,000.

Fine, Adrian? Or any more question to this topic?

No, that's fine for me. That's okay. I mean, it's not a super-material issue, but I was just checking on this topic.

Okay, excuse me, GBP 194,000.

94 -- 1 9 4, okay.

GBP 194,000 because probably you couldn't get it correctly, so I just want to repeat, GBP 194,000

Okay, on the M&A side, yes, I think you're right. It is the largest transaction in Frequentis history, and it is a pretty complex transaction when it comes to geography. But nevertheless, [ Orthogone ] in Germany and C4i in Australia are pretty self sustained companies. So of course, we have some post-merger integration efforts. But that would not limit our appetite for further M&A, I have to say. So we are still hungry for M&A. And I think you mentioned it last time that maybe there are some opportunities coming up due to the long-term pandemic on companies we haven't seen up to now. So we keep our eyes open. And yes, our appetite is still big.

And so you would continue to -- I think last time you mentioned I did sense, potentially, if I'm right, at the beginning of the pandemic or, let's say, in the first couple of months, you mentioned that prices have not changed that dramatically. But then, as it unfolded, and obviously, as we all suffer from a longer duration of this one, prices may have come down. Is that correct? And do you still see some attractive pricing out there? Or has there been a significant change after the release of first vaccines being available in the market? Or has that not had any influence?

Hard to say, Adrian, it depends on the segment. I think PST is not affected at all. So when there is a price decrease, it's probably ATM related and they're not defense-related, because also defense is not really suffering. But this L3Harris acquisition, I think, we have also published the potential purchasing price based on additional working capital adjustments. But I think that's a good price we have achieved. And this was the commitment we now have fulfilled, hopefully soon, with the closing which we have given up to the IPO, because we had, already, discussions around the company we want to buy. It wasn't -- that company, we thought we would buy, but it's another company in the same scale. So this commitment that is then fulfilled.

And there are no more questions at this time. I would like to hand back to Stefan Marin for closing comments.

Thank you very much for your questions and for taking the time. It's again now -- the sun's shining outside in Vienna. So we have a mix of snow and sunshine, but we hope that we get into a summer with less pandemic closures and lockdowns. We will be available for the meetings at the Virtual Zurs Conference hosted by Raiffeisen Bank International and the meetings arranged by BankM and Commerzbank. And yes, we will report the half year results for 2021 on the 17th of August. And you may please feel to drop me a line to arrange for a call at any time. And with this, goodbye, and much more important, stay safe.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.