Intercos S.p.A. (ICOS) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Intercos First Half Financial Results Conference Call. [Operator Instructions]. At this time, I would like to turn the conference over to Renato Semerari, CEO of Intercos. Please go ahead.

Thank you very much. Good evening, everybody, and thanks for joining our call. In a market which is showing some signs of a slowing growth pace and despite the aftermath of the cyber attack were more difficult than we anticipated. And also, despite very challenging comps, as you will remember, first half of last year, we grew 33%. Intercos posted its best-ever quarter in Q2 2024 with double-digit increases in top and bottom line. And this allowed to offset most of the negatives registered in Q1 due to the cyber attack. If we look at the key numbers and, actually the top 5 achievements, I think, we got in the quarter. First of all, our net sales were back to double-digit growth at EUR 279 million, which is a 10% gain over last year. Second. Adjusted EBITDA reached EUR 43.2 million, which is a 15% growth with a 70 basis point margin gain versus a year ago. Third. Our order book is particularly strong at the end of June, growing 12.5% over a year ago. And with an order and free flow that after all the records that we beat in the past 6 months, kept being very strong and solid also in May, June of this year, and we will see that at the end of the presentation. Fourth. In the ESG terms, for the third year in a row, we were awarded platinum medal by EcoVadis, putting us in the top 1% of companies in terms of ESG performance in our sector on a global basis. And fifth. Our net debt was at EUR 114 million, keeping debt leverage well below 1. And with a real net debt, excluding the IFRS16 accounting consequences, which is well [ between ] EUR 100 million. So all in all, pretty strong results. Now let's look a bit closer to our KPIs. So second quarter net sales, as I said, were 10%, up with marginal currencies impacts. So we had a negative 30 bps impact from currencies. Not much headwind on that sense, but still a negative headwind. Second. EBITDA growing 15%. It's a very comforting result because it shows clearly a very significant increase in our profitability, which is something we've been working for since a while. Thanks to this quarter results, we landed the first semester with net sales up plus 3% at constant rate versus 2023, which, as you will remember, was a 33% growth semester. EBITDA was minus 5% below a year ago, absorbing most of the quarter 1 set back, actually, more than half of the setback of the first quarter. And net debt was about EUR 8 million, below a year ago with a leverage ratio of 0.85 on EBITDA. Let's now deep dive in the top line dynamics, starting with business unit -- results by business units. So the second quarter sales were driven by Hair & Body and Skincare with Make-up landing in line with a very high 2023 level, which was, I remember, just for the record, last year saw a growth of 23%. Hair & Body was the star posting a 39% growth driven by European emerging brands and still profiting from fragrance momentum. This performance allowed us to close the first half at plus 19% versus 2023. Skin reduced again a strong quarter at plus 9%, profiting from Asia momentum. Also, this view closed first half with a double-digit growth at plus 15%. Make-up was instead [ BU ], which still suffered from cyber attack aftermath, which I will try to summarize in a few words. When system went down due to the cyber attack, we could not run MRP system and place components orders appropriately. The shift to manual was very partial and inaccurate in a category demanding thousands of components. Hence, we had raw material scarcity, first, then a bottleneck in bulk capacity and then in filling and assembling. This long wave of difficulties had an impact, which affected about half of the second quarter results. As such, Make-up would not absorb all the order backlog we had and closed only in line with last year, very strong second quarter. As a consequence, first half remained in negative territory, minus 7%, and BU weight on total sales went down to 56%. We will see conversely that in terms of order entry, so the underlying trend of the business in Make-up is, instead, very positive. Moving on to sales by region. Second quarter saw Asia confirming its super strong trend and EMEA coming back to double digits. Only soft region was Americas due to the cyber attack aftermath. As you know, this region is particularly exposed to Make-up complexity. And also, Americas is the region which has witnessed some overall market trend softness. Asia, and this is a point that I'm particularly proud of, posted a plus [ 33 ]% growth with both Korea and China displaying strong double-digit increases. I'm particularly proud of this because as you've seen from many of our clients are declaring and witnessing difficulties, particularly in China, due to the overall market trends. For us, Asia has been a very bright spot in -- throughout the semester. This is due to the fact that we gain new clients but also to the fact that the existing clients, so the local clients, are gaining market share over Western brands in the region. Growth was exceptional, both in Make-up and in Skincare. As a result of this very strong quarter, we ended the first half at plus 28%. EMEA had a double-digit bounce back from the first quarter challenges posting a 12% increase, obviously helped by Hair & Body results. This allowed region to close the first half in a positive territory at plus 2% despite the big difficulties of the first quarter. Americas remained negative, minus 5% in the quarter due to raw material late arrivals and the fact that market has slowed in terms of pace. And overall volume is stable, especially in mass, and this had an impact on multinationals, especially in Make-up. Therefore, we closed the first half in Americas at minus 10%. If we now move to the picture of sales by customer type, I will be repeating once more myself. But second quarter confirmed the trend we've been seeing over and over again. And this is to see that the market dynamics are really led by emerging brands. China is no more the fantastic growth driver, growth engine that it used to be for many Western [ national ]. And the past COVID market euphoria has a bit faded away in the West, especially in U.S. So this has created obviously a cooling down of establishments expansion. Emerging brands registered an exceptional plus 34% growth, thanks to the strong results of all geographies and all the business units. We see emerging brands gaining shares in China, in U.S. and in Europe, at least for what we are concerned. And this allowed the cluster to close first half at plus 25% with a weight on our total sales of almost 50%, hence, higher than multinational for the first time. Multinationals, on their end, closed second quarter overall in line with a very strong year ago. As a reminder, year ago quarter was plus 22% over the period. So we closed overall in line with that. And on top of what I just said a few minutes ago, it must be noted that this is the cluster most affected by the production difficulties I explained in Make-up since they buy almost exclusively makeup from us. So as a consequence of that, first semester was down 10% for multinationals. Last but not least, retailers are clearly the segment losing steam. Mass retailers are more and more exiting from beauty, but especially makeup private labels. And monobrand retailers are not winning either. So this segment is suffering and shrinking little by little in our total business. I now give space to Pietro for the last time.

Don't say that, otherwise, I move. Okay. Now let's give a closer look to our performances in terms of P&L, cash generation and the consequence on the net debt. As already well explained by Renato, our sales were at EUR 499.9 million, missing by 1 inch, EUR 0.5 billion. Basically, we have been able to recover all of the downside that we had in the first quarter due to the cyber attack. We are above prior year by 2.4%, 3% at constant exchange rate. The exchange rate basically did have an effect of EUR 3 million. The recovery that we have been able to achieve was thanks to the exceptional performance of the second quarter, with sales up 10% on prior year, on second quarter of last year with Make-up, which is basically the same level of last year, but with a strong recovery of Skincare and Hair & Body at plus 9% and 39% versus a year ago. The adjusted EBITDA is at EUR 64 million, which is slightly below the results that we achieved last year. If you remember, our EBITDA at the end of the first quarter was down previous year by EUR 9 million. So basically, we are really closer to the full recovery of the effect caused by the cyber attack. This, obviously, is thanks to what we had in terms of sales, the growth of 9% in sales that we had in the second quarter. But also with a recovery in terms of profitability, thanks to higher absorption rate that we have been able to have, our absorption on the fixed cost. And also a recovery in terms of profitability with mix, which is moving in the right direction of -- for the group. The EBITDA that we have been able to generate in the second quarter is above last year by 15% with an EBITDA margin of 15.5%, which is highly -- higher than what we were experienced in the last quarter. So a full recovery of the profitability. Adjusted net income at end of the first half is slightly below last year by EUR 4 million, basically following the effect of EBITDA. We were much better than last year in financial expenses, being able to keep the same level of interest cost and with a positive development of the currency effect on the financial cost. Though we had a higher tax rate that we have experienced in the first half that will be recovered in the second part of the fiscal year. Then if you look at the results that were achieved by the different business units. Make-up did have a result of EUR 38.3 million in terms of EBITDA, which is below last year by 16%. And this is basically all caused by the cyber attack that we experienced in the first half since the result that we had in the second quarter was extremely positive, both in absolute terms and also in profitability terms. Skincare EBITDA grew by 16%, following the development of the sales, so basically remaining at the same level in terms of profitability. And benefiting on the development of the business, both in Asia and in America. Hair & Body, also with EBITDA growing by 16%. This is, again, a very positive result with the same level, slightly below in terms of profitability, but basically at the same level in terms of profitability, but really with an exceptional result in terms of -- in absolute terms. Cash generation. We ended the start of the fiscal year with an operating cash flow of EUR 23 million, which is above the last year by EUR 16 million. We have been able to have a positive development in cash absorption, meaning that the trade working capital was better than last year by EUR 1.8 million. We have been able to offset the higher inventories that we do now have in order to cope with the growth that we are foreseeing in the next quarter with the higher payables that are basically offsetting these results while the receivables are flat in terms of day sales outstanding. This good results in terms of cash development did allow us to close the first half of the fiscal year with a net debt of EUR 114 million with our leverage ratio remaining at the same level of last year, well below the 1x at 0.85.

Okay. Thank you, Pietro. Let's now move to what we see coming in the next month. First of all, the market. We see and we expect EMEA to remain solid with good pace in terms of growth. This looks like the region that is showing more resilience in total. Asia and China, particularly, we believe at this point will remain quite soft to the end of the year in terms of overall market trend. But we believe that the local brands' strong share gains will continue to the end of the year, which will pay off for us in terms of region development. It's important also to note that we see an increasing sophistication of products offering from local players, and these are allowing them to gain market share in masstige and entry prestige segments, which are the ones where we play better in terms of competitive landscape. America is softer than the past years. There are some hopes of recovery of a growing pace more pronounced in the second half, but this is a bit of a question mark with a lot of questions related also to the overall political environment and the presidential elections that are always a bit influencing consumer confidence there. For what pertains Intercos in particular, we remain confident to continue in our growth trajectory. Our order book is rich, as I said before, is plus 12.5% versus a year ago. It's more balanced than last year in terms of mix of products, and this is a good news, as you all know. Second. Asia is projected to keep momentum, thanks to the local brands' dynamics, which is favoring us big time, as you've seen from the results. And third, we will continue to capitalize on our well-established relations and outsourcing trends, which will bring interesting projects to us. So all in all, we remain confident for the remainder of the year. We confirm our fiscal '24 guidance calling for a growth ranging between plus 10% and plus 13% in the year to go. So a strong second semester, a double-digit pace. Also in consideration of the fact that the comps of the second semester are going to be easier than the ones we faced in the first semester of this year. If we look at the order entry pace and the order book, as you can find in the last slides of our presentation. After 3 bimonthly records in a row from November to April 2024, order entry confirmed momentum in May, June, showing a plus 5% increase versus a year ago, with Make-up up by 7%. This led us to close the semester with a very healthy order book, which is up 12.5% versus a year ago, and the highest ever end of June book we've ever had. So we are pretty happy about the position we are in at the moment. To note that both Make-up and Skincare hold similarly strong positions in terms of order book. So we should have a development in the coming months, which is pretty even and strong across the board. I think that's all on our side. We are ready to take on your questions. Thank you.

[Operator Instructions] The first question is from Kate Rusanova from UBS.

Thank you, Pietro, for your help through the years. So my first question relates to the very strong growth of Hair & Body division. Can you provide more information on the emerging brands in Europe? Have you recruited any new customers? Or does this still mainly relate to Dolce & Gabbana partnership? And how sustainable is the double-digit growth of this division in the medium term? My second question is related to your EBITDA margin outlook. So with the mix benefit from reorders of prestige customers coming through, would it be reasonable to assume that your EBITDA margin in the second half of the year will be higher compared to Q2? So basically, it would be very helpful if you can walk us through the key building blocks of your margin progression in the second half of the year, including cost inflation. And my last question is more conceptual and relates to your business in China. So if at some point, Chinese consumers will turn back to big multinationals, will this be a headwind to you or, being brand agnostic, you will continue to beat the underlying market?

Kate, thank you for your questions. So first of all, Hair & Body growth driven by emerging brands. Now as I said, there is a fragrance momentum that is continuing to pay dividends in our business, but it's not the only one. So we have other clients in other category and in haircare also that are leading to the growth that we are displaying right now. So again, it's not a one player kind of effect. We have other clients. Yes, we have some new clients that are starting to kick in and bring additional benefits to us. There are established clients that are extending their categories and starting to work with us in other categories like haircare, which is a very good news. By the way, I've said it in the past, I continue to express it. I believe that we will see a lot of dynamics from merging brands in haircare in the coming years, and we are determined to play a role into this trend. So we're pretty positive going forward, not only because of fragrances but also because of the other categories. Now will this mean that we will keep double-digit growth forever? I wish I could say yes. We will certainly try to keep that kind of trend but it will depend from many, many factors. But for the time being, we are positive. We are very encouraged by what we are seeing in this category. EBITDA for the second half. Now will we do better than last year? Yes. I'm very confident about that. Will we be beating quarter 2? Well, quarter 2 was pretty good in terms of profitability. So I would love to see the same results for the second semester, and I think we have a shot to that. Doing better than that will depend on many factors. Clearly, we have a number of elements that are pointing [indiscernible] the run is obviously a mix factor that has been playing against us last year. And now it's coming back to what it used to be, which is a very good point. Pricing effects that are playing in our favor as well. Then it is up to the productivity and industrial productivity part and absorption of fixed cost that will play a very important role. And in terms of productivity, we've done improvements in Q2 for sure. We need to work to get more because when you go through a phase of backlog absorption, there are different dynamics that you need to take care, service to clients is obviously a very important one. So there is more to be done in that area. So repeating the results of Q2, I think it's feasible, and I'm pretty confident on that. Doing more, I hope, but it's to be seen. The third question is a bit more difficult in a way to see. I think that there will be an ongoing rebalancing of the market. So I think that the market and consumers will go back more towards Western brands in the medium term. I personally believe it will be the case. Will it go back to where it was? I don't think so. I think that there are local brands that have gained market share and then will remain significant players in the market in the long term. So there will be a rebalancing, but it won't go back to where it was at the time. I think that the diversification is critical for us. So whether gains market share, the important for us is to have a strong presence with whoever is gaining market share. And this is what we are working against day in, day out. Obviously, the fact that is more positive for us is the fact that the local brands are becoming more sophisticated, upscaling their offer in terms of product quality and sophistication of formulas they sell because that is the territory where we can play a better role. So as you know, we are not a player that is competing that much in pricing. We are known for our innovation quality and the more also local brands pay attention to the quality of innovation and the quality of products, the better for us. So I think that we've been gaining ground in China, thanks to this trend. And I think that this trend is going to stay no matter whether it's coming from the local brands or a rebalancing of Western brands. So I'm pretty positive about the outlook for China for Intercos. I hope I've answered all your questions, Kate.

The next question is from Anna Frontani from Berenberg.

[Foreign language] So I know this is the last earnings results with Pietro, so I just wanted to thank him for the support in his years and also wishing him all the best. And also congrats, Andrea, for his Financial Director role. And now coming to the questions, I have 2. The first one, I appreciate you touched already in Asia. I'm just curious to understand if you know if your Korean competitors are seeing the same benefit, the same kind of support that you are seeing, or it's just Intercos specific? And then the second question. If you can please elaborate on the market trends for America. What is driving the softness, and what are your views going forward?

Okay. So Anna, first of all, Korean competitors. So we -- I have not seen the Q2 numbers of our Korean competitors. I think they didn't publish them yet. All in all, what we have seen and what we get as a feeling from the market overall is that Korean players are doing pretty well in general, but this is mostly driven by the fact that they are globalizing their offer, and they are doing pretty well also in Western markets. To my knowledge, they are not doing particularly well in China, as a dynamic of what I said earlier. So the fact that the market is becoming more sophisticated with better products, better offer, it's giving us an advantage over China -- in China over our competition. But all in all, they are compensating and also, they are expanding in Southeast Asia with their price offers. So all in all, I think they're doing pretty well despite China is not really driving the growth for the time being. So this is what I see. But again, I didn't see the numbers of their second quarter. The market trend in U.S. Well, you know that the U.S. market is historically the more volatile. So is the one slowing down faster and accelerating faster when things come up back again. We've seen difficulties of the mass market in the past, I would say, 6 months. We've seen a bit of, I would say, an even trend in prestige. As far as we know, Sephora is doing very well. Ulta, not so much. But all in all, there is a bit of softness that is mostly related to the eyes category. Lips are picking up again, and this is very typical of when consumer confidence go down and the economy, in general, slows down, you see lips being the more resilient category. And eyes is going down mostly because of fading away of the eye shadow pallet phenomenon. This is something I've seen over and over. I know that I'm sounding like a grandpa, but unfortunately, it is the case. So I've seen a very cyclical trend in terms of this segment, which is particularly developed in the U.S. So there are periods when the eyes category goes on fire because of -- and also thanks to this pallets trend. But then when the consumer gets oversaturated with dozens of colors they'll never use in their lives, they go back to monos and duals in terms of eye shadows. And this obviously has a big value devaluation effect because they buy one unit that cost much less than a pallet in terms of dollars spent, and this brings the segment down big time. Again, as soon as the consumer confidence will be a bit better, again, the market will restart at a very fast pace. I've seen it over and over in my past career. I hope I've answered everything, Anna.

The next question is from Pinar Ergun from Morgan Stanley.

Congratulations on another great set of results. And also thank you from me to Pietro for all the time over the years. Two questions, if I may. First, just a quick follow-up on the U.S. beauty market. Are you seeing any sort of different trends between your different customer groups, so sort of between the multinational emerging brands? And then my second question, sort of a longer-term question on the competitive landscape within your industry. So I mean, one of the unique things about Intercos has been your ability to innovate ahead of your competitors like some of these Korean players who've traditionally been more tilted towards the contract manufacturing side of things. Have you seen your competitors stepping up their innovation capabilities in recent years? And how do you ensure you maintain the competitive advantage you've historically had on innovation?

Thank you for your questions. While the dynamic in the U.S. market is -- emerging brands have certainly gained market share over multinational. I would say, more than over multinational, I would say, over established brands, and this is a phenomenon that started, I would say, 10 years ago now. And it keeps going like that. Obviously, especially in Make-up, Make-up is a very impulse-driven category. And obviously, any new proposition has the competitive advantage of proposing something new that is different and exciting for -- especially for the younger generation. So emerging brands have gained market share over the years. Multinationals have reacted by buying emerging brands, acquiring emerging brands in the past. This is happening a bit less in this phase, but may we start again. So all in all, I think that we will go through phases where there is a bit of rebalancing, and there is acceleration of emerging brands and all the rest. In the past, I would say, a couple of years, we've seen the success of some emerging brands that have gained significant traction. I'm not unveiling something very surprising or secret, but a Fenty or a Rare or a Haus from Lady Gaga, these are all brands that gain market share, they've gained a significant presence in the market, and they've been stealing market shares from someone else. So there will always be a flow of new brands coming in and brands stopping or getting out. But the overall dynamic of emerging brands, I think, is there to stay for a while. Now this trend is also picking up in Skincare and in haircare. And again, I think I already said it but every time I go to U.S. and I visit an Ulta store, I'm surprised by the level of exposure that new premium haircare brands are taking. So this trend this is "old" for makeup, is becoming more and more present in other segments. And this is a trend, I shouldn't say it and don't write it the way I'm saying it because we have a lot of multinational clients that will not be happy about what I'm saying. But it's good news for Intercos because they don't have R&D. They don't have manufacturing sites. So by definition, our share of wallet within these clients is bigger than what we will ever have in a Estée Lauder or a Maybelline or a L'Oréal of this world. So it's, all in all, is a trend that plays in our direction and that we like. So this is a bit the dynamic we see and we believe is going to stay, at least in the medium term. What are we doing to stay ahead of the curve in terms of innovation. Well, I think that this is the race we've been running since 52 years. Now we are investing more and more. We have developed very strong R&D labs across the different regions. And I must say that particularly the efforts we've put to build very strong R&D labs in Korea and in China is paying fantastic dividends, not only in Asia, but also in U.S. and in other regions because we see more and more clients -- Western clients buying formulas that we have developed in those labs. We are investing more and more to develop our own raw materials and active ingredients. And I believe this is a very strategic move that will help us stay ahead of the curve. We are working on artificial intelligence projects also in that case to stay ahead of the curve. But this is also true for some of our competitors. Not all of them can afford what we're doing. Some of them have the size to do that. But they always do it more looking at their angle, looking at the market from their point of view and their angle. And their angle is more in efficiency, in standardization, in speed to market, which has been historically the winning model in China. Now they are turning this business model to Southeast Asia that has the same dynamics China used to have. I personally think that our business model of customizing products to each client is starting to pay strong dividends in China, too, with local brands. And I think this is going to be complicated for our big competitors, Asian competitors, to match because it's a mindset shift. So it's not only a matter how many muscles I can put in R&D, it's a mindset shift. We are used to that because this is what we have always done for the big prestige clients of the Western world. For them is a revolution and it changes a lot of their business model. So I think that the way things are going, it's playing in our favor. I hope I'm right, obviously.

The next question is from Molly Wylenzek from Jefferies.

It's more of a conceptual one. It's not about '24, but just really over the medium term. How do you think about the growth of the Hair & Body business and improving group profitability? It just feels like it is sort of an ongoing challenge with the outgrowth of that business. And how do you think about sort of, I guess, chasing new areas? You talked a lot about haircare and the excitement you see there. Can you do that and improve group profitability at the same time?

Molly, yes, it's not very conceptual. It's basically going back to what we told as a story when we were in our roadshow for the IPO. At the time, if you remember, we said that we were not expecting to grow faster than market in the Hair & Body because we were going to focus our efforts in converting our production capacity to our own formulations. This is not the strategy we have forgotten at all. We are only being surprised by the level of growth we got in other categories like fragrances and all that. But the underlining work we need to do to make this strategy come to life is existing, is going on, and we're working behind that. So when I mentioned before that in the Hair & Body results, there are clients that we used to have and are entering into haircare as a new category, this is coming with our own formulations. And this is paying dividends because that part of Hair & Body has profitability that is exactly in line with Skincare and Make-up in general. So over time, we will continue to work on that. We will continue to improve our R&D capabilities and our innovation capabilities in general, especially in haircare. And I think that, over time, this will be the #1 engine for EBITDA margin improvement. If we do not move to our formulations, we will always be a bit more fragile in terms of pricing power than what we can be in Make-up and Skincare. So going forward, this is something that we will continue doing. Now there is a learning curve that cannot be underestimated. Haircare is a complicated category. There are players who have the case of experience in formulating and innovating in this arena. Think about the L'Oréals of this world, the P&Gs of this world, the Unilever of this world. They all are mega companies in haircare. We need to -- we have a learning curve to go through. But I must say that the -- let's say, the feedback we're getting from clients on some new formulations we are proposing in haircare are quite encouraging and actually even surprising because they come from big players of the haircare market. So I'm persuaded that we have taken the right path to become a recognized innovator in haircare as well. But it will take some years.

The next question is from Francesco Brilli from Intermonte.

Let me add my thanks to Pietro and wish him the best for his future. And a couple of questions from my side. The first -- I mean, my main question has been answered, but I have a few ones. The first one is on the impacts of new clients in the Hair & Body division from a profitability standpoint. Just wanted to better understand the dynamics of this increased profitability in this segment. Is it more a function of operating leverage or on additional volumes and scale or more from the fact that you have more levers, negotiating contracts also from a pricing standpoint? The second one is just on the level of CapEx in the first half. I see probably before the cyber attack, the pace of the investments have probably slowed down. Are you confirming on a roughly base the amount for the full year '24? And the third one is just a clarification on the comments on the EBITDA for the second half, just for the comments we're referring to, to the level of margins compared to the first half.

Ciao, Francesco. So Hair & Body, new clients, profitability and how much the results we're getting related to that. Well, in reality, the EBITDA increases we had in Hair & Body are mostly driven by volumes and scale and therefore, absorption of fixed costs in general. Now does this mean that the new clients we are getting in this category are not driving profitability? No, it is not the case. They are actually quite profitable, so we're satisfied about that. It's only that on the total volumes that we move in that category, these clients and these volumes are still quite marginal on the total scheme of things to show an impact on the total business unit results. But as I said, the direction is correct and is encouraging, but it will take time before these clients and this business takes the space and the scale that will allow it to have a visible impact on the overall profitability of the business unit. Second point you raised was CapEx in first half. We haven't slowed down because of the cyber attack. If there is one investment I didn't want to -- I regret having made is CrowdStrike, which needs to protect us better from cyber attacks, together with all the others. But no, we have kept going. As you know, we have an ambitious program in terms of industrial footprint expansion. We have started the expansion of the Korean plant. We have started expansion of one of our Chinese plants. So these programs that we laid out are going ahead, and we didn't out them by one single inch. So yes, we -- I think that we will end the year at the 6.5%, 7% ratio on sales that we had anticipated many months ago already. So this is what we are -- what we forecasted. This is what we're going to do. And honestly, there is no particular reason to slow it down because on the other side, as I just said, we expect to end the year in terms of top line where we had anticipated it to be. So it's -- we're going ahead with the programs we highlighted.

Just one thing. If you compare the CapEx of the first half of 2023, consider that there was the IFRS16 impact within the cash flow. So you should take out EUR 23.5 million from the EUR 49.3 million of CapEx in 2023. So just from a comparative basis.

The last point you made was about the EBITDA margin of the second half. So Kate was a bit provocative, provoking me to try and promise a better, as usual, trying to make me commit to a higher margin than Q2 of this year, so the 15.5%. What I told her is that I think it is legitimate to expect, at least this is my expectation, and I'm pretty confident that the second half profitability will be in that range, which doesn't mean to be better than that. So for the time being, I think that we will be in that kind of range. So the 15% to 15.5% kind of range, I think it's what we think we can achieve in the second half. So I hope I clarified that part.

Which is what we need in order to reach the consensus that there is today, Francesco.

[Operator Instructions] Management, there are no more questions registered at this time.

Okay. Thank you very much, everybody. I don't know if some of you is going out on vacation, so enjoy the rest if you're going. Just last sentence on my side is to thank Pietro for these many years of partnership, and I wish him fantastic new adventure. Although I regret him leaving, but still, as a friend, I wish him all the best.

Thanks a lot, Renato. Thanks, everybody.

Thank you.

Thank you.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.