KONE Oyj ($KNEBV)

Good morning, everyone. My name is Natalia Valtasaari. I'm Head of Investor Relations here at KONE. And I want to start by apologizing for the delay to start to this webcast. We had some network issues here on our end. I would suggest that everyone who is only following on the webcast also dial in, the number should be visible to you. Just in case this is not smooth sailing going forward, which I very much hope it will be. So that's that. Let's get started. Very pleased to be joined today by our CEO, Philippe Delorme, and our CFO, Ilkka Hara. As you know, we published our Q1 results today, but clearly, today's big news is our announcement that we plan to combine with TKE. And this will, of course, be the main focus of the webcast. Once you have heard from our key speakers, we'll be opening the lines for Q&A. So with that, Philippe, please.

Thank you, Natalia, and welcome, everyone. This is indeed an exciting day for KONE and I'll come back shortly to why the combination with TKE is so compelling. But let me first set in with a brief look at our first quarter performance. So we had a solid start of the year with in-line results and good progress in strategy execution. Two things stand out. First, sales grew by nearly 7%. Second, Service and Modernization increased to 67% of sales. This mix supported margin expansion, but more importantly, underscores the resilience of our business, the key strength in the current geopolitical environment. Importantly, we continued to execute readily on our strategy. And one clear example is continued increase in connectivity of our maintenance base, which has now reached over 42%. Now let me hand over to Ilkka to give you some background on the financials.

Thank you Philippe and welcome also from my side as well. Let's start with orders where growth of 3.9% at the comparable currencies is a solid outcome. Modernization increased modestly from a strong comparison base while Newbuilding Solutions delivered a good quarter, particularly in Europe and Middle East and Africa. Sales growth was broad based, 6.9% in the quarter with contributions from all businesses and all regions. As Philippe mentioned, a favorable mix reported adjusted margin expansion to 10.8%, further helped by the fixed cost leverage. Foreign exchange, on the other hand, was a headwind with an impact of approximately 15 basis points on the margin. We expect this to ease in the coming quarters. Cash flow improved to EUR 500 million in the quarter as cash conversion was healthy. Then turning to our market outlook, which we have kept unchanged. We continue to see growth opportunities in all regions, especially in Services and Modernization despite increased uncertainties related to war in the Middle East. Let me pause here for a moment to discuss what we are seeing in the region. Our first priority is to ensure the safety of our people and our customers. The resilience they have shown is admirable, and the business disruptions have so far been limited and mainly related to logistics of getting material to the sites. So far, we have seen very little financial impact. But if the conflict prolongs, we will face more cost pressure, which we would look to mitigate as far as possible. Then to our business outlook. Following the strong Q1 performance, we have specified our sales growth guidance at 3% to 6%, while our EBIT guidance remains unchanged at 12.3% to 13%. Headwinds and tailwinds remain broadly unchanged, with the exception of increased geopolitical risks, which have already resulted in increased transport and fuel costs. That said, we are confident in our ability to deliver margins within the guidance. That's the short summary of our results. So back to you, Philippe.

Thank you, Ilkka. So turning now to today's announcements. Our plan to combine with TKE to create a world-class player in our industry. This is a rare opportunity to bring together two exceptional and highly complementary businesses, redefining the industry and creating meaningful value for our customers, our people and our shareholders. Both companies have tried histories, stretching back to the turn of the century. We share a deep passion for customers, engineering excellence and an entrepreneurial spirit. At the same time, we each bring distinct strengths. By combining them, we can drive greater growth, resilience and performance. Together, we are laying the foundation for an even more innovative company. We also accelerate the shift to Service and Modernization, which is fundamental to our strategic ambition. The transaction will be funded in cash and shares. Importantly, there will be continuity in ownership as [ anti Airline ] retains over 50% of the voting rights. At the same time, TKE shareholders becoming a shareholder in the combined company reflect their confidence in the value we can create together. The cash and share transaction structure preserves our financial flexibility, allowing us to continue investing in accelerating our Rise to Lead strategy. So now a few words on why. As many of you know our strategy, focus on strengthening resilience and performance by capturing opportunities in Service and Modernization. It builds on clear market trends with digital services, modularity and sustainability as the cornerstones of customer value creation and growth. We've made excellent progress since it launched and are well positioned to continue executing successfully on our own. That said, we have always been clear that M&A could act as a catalyst. And today, we have a truly unique opportunity to accelerate momentum. Together with TKE, I'm confident that will rise faster. This means that we can achieve our ambition of being #1 for our customers and our people and becoming an industry leader in growth and profitability significantly sooner. So let me say a few words about TKE, [indiscernible] I hold in very high regard. Since it carved out from Tecan Group, TKE has gone through a very strong transformation. The TKE team has successfully pivoted the company towards a more service focus, agile and customer-centric model at the same time establishing a clear performance culture. This transformation is clearly visible in their financial results, the strong growth in Service and Modernization and impressive EBIT margin progression. I have great respect for what they have accomplished, and I'm confident that together, we can create something truly exceptional. So why does this combination makes such strong sales? The industrial logic is very straightforward. Geographically, our complementarity means we are very well matched. KONE has a strong presence in Asia with attractive exposure to structural growth markets such as India. TKE in turn has a sizable footprint in the U.S. and meaningful presence in regions where we do not operate today, including South America and Korea. Both companies have a strong track record of bringing breakthrough technologies to market. By combining our capabilities, we create a powerful platform to accelerate technology development and scale digital innovation to the benefit of our customers. Fundamental to the strategic rationale is a combination of our service networks with roughly twice as many elevators under maintenance, we gain exceptional service coverage. For customers, this density means faster response time and higher reliability. At the same time, the digital value proposition becomes stronger. The more units we maintain, the smarter our service becomes while data-enabled service delivery drives productivity gains. At the same time, we unlock significant growth opportunities in Modernization. A larger installed base means more unit entering prime Modernization age. Together, we are uniquely positioned to serve them with a high-quality and highly complementary offering. Ilkka.

My turn. This strong strategic rationale turns into a substantial value creation as well. We estimate EUR 700 million of synergies, broadly evenly split across 3 areas. First is the service density effect, which drives higher field productivity and scalable growth. Second, or product-related synergies, including platform simplification benefits from food R&D resources and procurement efficiencies. And the third is SG&A, particularly improved fixed cost absorption optimized IT spend and other nonpersonnel cost efficiencies. Overall, synergies represent approximately 3% to 4% of our illustrative combined sales, with a full P&L impact expected by the end of year 3 post closing. The related one-off costs are estimated to be approximately 1 to 1.2x expected synergies incurred over 2 years. Let's look at what we look like as a combined entity. On an illustrative basis, using the reported numbers for '25. The combined group would generate over EUR 20 billion in sales, and more than EUR 2.7 billion in adjusted EBIT, implying an adjusted EBIT margin of approximately 13.4%. This demonstrates the robust financial profile of the combined business, even without taking into account the value of the integration and synergies. Together, we would have more than 100,000 experts across over 100 countries. I'm truly excited by these capabilities, reach and depth we will have to serve our customers consistently across the regions and segments and to compete at the very highest level in our industry. In terms of business mix and geographic reach, we would have approximately 45% of the sales come from the Recurred Services business with further nearly 20% for Modernization. Both are attractive, structurally growing markets, and as noted when running through our Q1 results. Geographically, the combined group would be more balanced across regions with increased exposure to attractive U.S. markets. This creates more resilient profit pools supporting our long-term growth and profitability ambitions..

So turning to stakeholder benefits and starting with customers, where the value is very clear. By combining the innovation strength of both companies, we can deliver an even stronger offering -- better tailored [indiscernible]. Let me share a few practical examples. In the Volume segment, particularly entry-level solution, we see clear opportunities to combine the strength of the EUX platform from TKE and MonoSpace platform to increase -- to improve cost competitiveness for our customers. In the High-Rise segment, the combination of KONE's UltraRope technology with TKE proven twin solution, where you have 2 cars in the same shaft is truly game changing. In Home Lift, a niche but fast-growing segment, driven by accessibility needs, our geographical complementarity creates additional growth potential. And in Modernization, our modular approach optimizing cost and minimizing downtime will be highly attractive for TKE's customer base. And at the same time, we get access to solutions for hydraulic elevators, which continue to play an important role, particularly in the U.S. installed base. And finally, Service underpins everything. So with more than 3 million units under Service, we can leverage our combined firepower to accelerate IoT innovation and roll out productivity enhancing digital tools at scale. So this will translate into higher service quality and reliability and ultimately, stronger, longer lasting customer relationship. Now let's talk about people. So while our cultures are distinct, we share a strong common foundation built on safety and integrity. TKE has excelled in empowering the field while our strength lies in a highly structured and scalable operating model. We share a deep passion for customers and strong commitment to building a high performance culture. We have exceptional talent across both organizations, and I'm confident that our people will benefit from the broader opportunities to the combined group can offer.

More value for customers and a stronger, more diverse team ultimately means more value for our shareholders as well. This transaction clearly resets our financial ambition. We will be better positioned to capture industry growth and synergies, a loan support adjusted EBIT margin moving substantially beyond our current 16% target. The return profile is attractive. Adjusting for PPA and one-off transaction and integration costs, the EPS accrusion is expected in the first full year post-closing and will accelerate thereafter. On leverage, we target a solid investment-grade profile, supported by synergy realization and our cash-generative business model. Deleveraging will be a clear priority. At the same time, we're proud of our dividend track record and are committed to paying out at least 50% of net income over the cycle. The dividend per share is expected to be stable in the initial years following the closing with progression thereafter.

So turning now to leadership and governance. Both companies brings proven leaders and the leadership team led by [indiscernible] CEO, will reflect the strength of both organizations. In terms of ownership, Antti Erlin will remain the principal shareholder, he has committed to purchasing shares to the amount of EUR 1 billion from TKE shareholders at market price immediately after the transaction is completed. And irrespective of this additional share purchase his ownership will continue to represent over 50% of the votes. This ownership continuity is important and supports a long-term focus. Now, TKE shareholders have a customary lockup period, but more importantly, their ownership in the combined group reflect strong conviction in the combined company potential. At Board level, [indiscernible] will continue as Chair, while TK shareholders will have the right to appoint 2 Board members. A new strategy and integration committee will be established to ensure appropriate Board level oversight.

As I said, a significant part of today's story is about value creation. To realize the value, integration execution will be critical. We will place a strong emphasis on clarity, discipline and attention to detail. A dedicated integration team will manage planning and execution. This allows the rest of the organization to remain fully focused on running the business and serving our customers without this structure. Let me briefly cover key transaction terms. As mentioned, this is a cash and share transaction, whereby TKE shareholders will receive EUR 5 billion in cash and up to EUR 270 million newly issued plus B shares, including TKE's EUR 9.2 billion of net debt at the year-end of '25. This implies of enterprise value of EUR 29.4 million, reflecting a significant value creation potential of the combination. We have fully committed financing from Bank of America and BNP Paribas in place, together with the cash on our balance sheet. This will fund the cash consideration and we used to refinance TKE existing net debt. And as mentioned earlier, our aim is to be -- our aim is for the combined group to have a solid investment-grade profile. So what happens next? An EGM is planned for June, where we will seek shareholder approvals. A notice to convene will follow with all relevant details. Regulatory filings will commence in parallel, and we are confident in securing the required approvals. We will work constructively with regulators through the process, which we expect approximately 12 to 18 months. This implies closing will take place earliest in Q2 next year. During this period, we will further detail our integration plans to ensure that we are ready to hit the ground running from day 1.

Thank you. So let's wrap up. This transaction represents a unique opportunity to redefine the future of our industry. Together with TKE we are exceptionally well positioned to leverage our combined innovation capabilities accelerate digitalization and sustainability and create substantial long-term value for the benefit of our customers. By combining, we significantly accelerate our journey towards industry-leading growth, profitability, service and innovation. Thank you for your attention. I suggest now we now move to questions.

[Operator Instructions] We'll now take our first question from Phil Buller of JPMorgan.

This has been expected for a long time. The key questions have always been around those antitrust hurdles and he talked that this 12- to 18-month period of [indiscernible], can you help us perhaps region by region or country by country where the potential you see for those improve? And what proportion of TKE do you see presenting those obstacles, just to try and scale the remedies. And follow-up question is in relation to the conversations that you may have already had with regulators and perhaps even your competitors. Can you share any color on when those conversations started and how they've progressed, please?

So I would say, repeat what Ilkka said, which is -- so first of all, we've done a lot of work, and we are confident the transaction will receive all the necessary regulatory approvals, while preserving the strategic rationale of the combination. We are prepared to work constructively with regulators to ensure full compliance. And I guess you will probably understand that we cannot go any further, and we cannot speculate any further.

That I understood. Just in terms of the scale of where you would imagine those [indiscernible] would be. Is it? I'm assuming the work that you've done we imply that it's a relatively small minority component of TKE at this point, [indiscernible].

I think Philip already answered to that question. So we'll work with the authorities on this one.

Constructively.

We'll now take our next question from Vivek Midha of Citi.

My question is on the synergy view. Your target for synergies with TKE are quite substantial, [ GBP 700 million ] pretax, you've identified several areas. But taking a step back, as you rightly pointed out, TKE Elevators has already made substantial progress on margin realization under the current owners are suggesting that the low-hanging fruit and optimizing their business has been taken already. Do you perhaps rank the synergy buckets in terms of your degree and confidence in achieving them? And can you give us more color there?

So first of all, what I can say is that we've been working quite a lot with clean teams and with people from both sides. So we have quite a high level of preparation. So when we quote figure like this, it's not coming in the air. It's a result of a big amount of work assessing the synergies on the combined business. These are cost synergies. I think we've detailed the 3 categories, the field where I repeat, but when you combine a service team and get better density and get more efficient, there is clearly some opportunity here. And we've seen it in many previous cases. Second one is when you combine product platform, you can actually get more scale, get better condition with your suppliers, which is something you cannot do alone. And third, there are SG&A opportunities. There are SG&A opportunities at KONE, there are still SG&A opportunities at TKE. And when you combine things, you need -- I mean, you have one role instead of two, and it's a pretty simple principle. So we feel confident. We feel very confident in this figure. We've made a lot of work around that. And we understand it's an important figure in how to assess the transaction, but we've done our homework very much in detail.

And we'll now take our next question from Vlad Sergievskii of Barclays.

My first question is related to synergies again. Is your synergy scenario assumes full combination without any asset sale at all? And also, would you be able to let us know, is there any breakup fee that KONE is committed to pay in the scenario when this deal doesn't happen?

On the first question on the synergies, that's what we estimate to be achievable for the combined entity. So that's our best estimate for that. And on break fee, yes, there is a customary break fee in place, which is not disclosed as is agreement between two parties, but I would characterize that as a customer to this type of transaction.

Understood. And maybe my follow-up will be on pro forma net debt. Would you be able to give some color on what you expect it to be post-closing on all payments in the core stuff, your target seems to be disclosing about [ EUR 17 billion ] of net debt in the recent results.

Like I said, first, EUR 9.2 billion of net debt on the pro forma figures is the number I used. And we are targeting to be an investment-grade company, post-closing on an ongoing basis. And our target is also to be able to deleverage the company and that's priority with our cash-generative business model and the synergies enabling that.

And I guess we've shown a pretty strong discipline on cash generation, right, Ilkka.

Okay.

And we will now take our next question from Andre Kukhnin of UBS.

Clearly, a monumental day for the whole industry. I wanted to just talk about synergies a bit more. And could you give us some color on phasing? Is it right to think about SG&A coming through first then product and service? And within that kind of -- within the service synergies, in particular, I would expect that to be a bit bigger proportion than just 1/3 of the total. But what would be the cadence of like combining the service and maintenance basis versus kind of standardizing the connectivity because you are on obviously different individual tools. How will you manage that, please?

Maybe I'll start and you can continue. So if you look at the synergies, first, when we talk about service density, there's a first is about route optimization. It's pretty simple. You have less driving time between your two sites. And that's something that we do on an ongoing basis with all of the teams optimize the routes. Now we have on each of the team we need to do it in a broader scale. And yes, digital will have an opportunity and so on, on the services. But I think at the end, we have a fairly simple synergies around the services, which are similar to us making small acquisitions for the local team. It just happens in a broader scale. And yes, there are synergies that are more driven by decisions. So for example, SG&A and organizational combinations. And yes, there is also then a product synergies that we're looking for, which likely will take more time. There is a commitment on both sides of the company to deliver certain projects. So that's the rough description, but we will certainly come back with more details. This is now a start of the project to start planning the integration. And as part of that, then fine-tuning the plans, we know what to look for now, how do we go after is the next step.

And the few things I would add is because the regulatory process will take some time, actually, this offers a window of opportunity, especially on the product convergence to have even more detailed conversation than what we've had so far, so that day 1, we are ready to act. And we really want to go in a mindset where day 1 after closing is going very, very fast in terms of executing what we want to do. That's one thing, that's very true for category 2 and 3, let's say, product convergence and SG&A. Now on the first one, there is one thing we've seen with digital, which is another engine of driving productivity. Let's say, when we are growing our service, let's say, around 8%, that means that -- if we were growing with no efficiency, we'll have to hire 8% more people, which, of course, is not what we're going to do because we want to be more efficient. What we see is that actually when we built in better productivity because we have better coverage or digital or both actually helps people to grow faster because they are not busy hiring people. They're just busy growing the business with a base which is more efficient. And that's the basis more efficient, you're more competitive with your customer to grow faster. So some people might ask us later, you're going to fire a lot of people in the field, actually, if we do nothing growing as we grow, the biggest country is actually hiring people. So when we get more efficient, we get on what in more competitive with customers. And on the other side, we get we get -- it's helping us to be more nimble with the growth we need. So I'm not saying all of this is easy. It's going to require hard work. We are prepared for that. But we've seen that case before. And therefore, we are confident we can execute it.

Got it. Got it, effectively acquiring capacity for future growth. And if I may, just a follow-up on the deal structure and the issues of 270 million shares, which is worth EUR 15 billion currently. How should we think about this? Is this a commitment to issue shares that would be worth EUR 15 billion to the TKE Topco? Or is it 270 million shares at whatever price it will be at the time? How do we balance these thing?

Up to 270 million shares. So it's a number of shares commitment.

And it would not change even if your share price is substantially higher than it is right now, and hence, that number becomes substantially higher than EUR 15 billion?

That potentially could happen.

We'll now take our next question from Rizk Maidi of Jefferies.

I'll stick to 2 as well. Congrats on the transaction. Just maybe perhaps on the leverage. I get to 4x sort of leverage at closing. It's very difficult to reconcile that with investment grade. Is there a plan to issue more equity at closing? And how are you planning to get this leverage sort of lower even by 2030, I struggle to get it to that?

So first, as I said, we are committed to having a solid investment-grade rating. And we are now refinancing the debt, which TKE has as well as financing the cash payment. And at the end, we believe that we will have a investment-grade rating. I am at this stage, not prepared to go through in terms of more details as we only can represent on the pro forma financials as they reported.

Okay, understood. And then perhaps just going back to the synergies. Thank you for splitting them out in terms of source, would it be possible to have just a flavor of the weighting between sort of Americas, Asia and Europe, just for us to get a rough sense.

I think the best way to think about it is that it's roughly split according to the business in terms of the synergies. And of course, as I said, we'll come back with more details planned, but Service side of the business is determined then the size of the synergies in business in its respective area and so on.

And we'll now take our next question from Alexander Virgo of Evercore ISI.

I wondered if you could just talk a little bit to the confidence that you've now got in the transaction. And what I mean by that, if I could, I split into two parts. So last time around, you went in with a partner this time you don't. So just wondering if we can read anything into that and what that might or might not mean? And the second question or second part of the question is how do you manage the uncertainty in the business, both from an employee standpoint and a customer standpoint, while the transaction is being reviewed. Because I think if it's 12 to 18 months, then that would be a very successful time line. The risk is, of course, it's longer than that. And that likely is to end up having a detrimental impact on the underlying business, particularly at TKE. So just wondering if you could comment a little bit on that. And then if I could just follow up with a final sort of housekeeping question. What sort of transaction costs are you assuming, which you're then excluding from the EPS comments?

The first one on, let's say, if I would look at the major difference between the trial last time and this time, I would say, this time, we've been able to work very constructively with the other party of course, with Cleanteam and respecting all the competition lows and stuff like this. But One, I think we have a much better understanding of the company. And we've done this, I wouldn't say amicably, but in a very good in a very good way, and we understand much better. So when we sit in -- when we are in front of you talking about all of these and these plans and all the execution that is in front of us we feel confident because we know precisely what needs to be done. And we are aligned with the leaders on the other side with respect and with a good spirit to make things work together. It might look like a detail, but it's very, very important. So that's the first one. Second question was?

Second was how to run ...

It's very simple. We are actually -- and we started this morning and day is going to do the same. In this time period, we're going to compete with each other, and we are telling both teams, you need to do your job and you serve your customer point. The rest let some teams that will prepare the conversion that that's not your topic. And then we are taking care of retention topics and stuff like this that -- and we feel pretty strong on both sides that people will have the work ethic and a clear understanding and trust support system to make things work in that fashion.

And the last question was on transactions. So I'd say, including integration costs, we estimate those to be 1 to 1.2x the synergies and incur mainly in the first 2 years.

Okay. Sorry. Okay. So just to be clear, so the EUR 700 million to EUR 900 million rounded numbers, cost included is included, including the costs to go through the competition review, the cost to integrate and the synergy costs? So that's all in?

That's our best estimate right now.

We'll now take our next question from Tomi Railo of DNB Carnegie.

This is Tomi Railo from DNB. Carnegie. Short question, would you consider the synergies to be gross or net?

Simple answer, more net. So there cost synergies and a net basis. That's what we assume that we will achieve for this combined entity.

We'll take our next vector from Nick Housden of RBC.

It's Nick Housden from RBC. Firstly, on the refinancing of the TKE net debt. Are you anticipating any sort of additional savings that not captured in the EUR 700 million of synergies? And can you also comment on any of the -- or the interest costs associated with the EUR 5 billion cash owner of the deal?

Yes. So we have financing in place for the transaction. And I'm very glad you asked about the synergies in finance. So basically, you're taking a company KONE with a very strong balance sheet, one could even say inefficient in that respect. And then a company which is clearly quite levered when you combine them, yes, you will get benefits in terms of the spreads being much tighter than they are. And we estimate those costs benefits to be in a range of EUR 200 million for the combined entity at that stage. And on the interest rates, so let's come back to that at a closer date to closing when that's relevant.

Okay. And that's to be clear, EUR 200 million of combined financing synergies above and beyond the EUR 700 million. Is that correct?

Yes. That's the spread difference that we estimate to get when combining the 2 balance sheets.

Great. And then just quickly, you mentioned your ambition to get the combined adjusted EBIT margin significantly above 16%. Any comments, a, on the drivers of that? And any kind of rugh indication of the time line? Is that sort of a 2030s ambition? Or could we see it sooner than that?

So naturally, we will come back in more detail when we are actually working together as two companies to set targets and with more clear plans how we work going forward. But along the synergies will mean that we substantially we need to reset our ambition in terms of profitability. So that's what's behind the comment. Both businesses have actually improved their profitability on an underlying basis as well. So all of those 3 components actually contribute to that comment.

And we'll now take our next question from Martin Flueckige of Kaplar.

Just 2 questions. Firstly, we've been talking about cost synergies and financing synergies so far. But we haven't heard anything about your expectations with regards to revenue synergies and dissynergies, if you could elaborate on those 2 items, that would be very helpful. And my follow-up question is on the integration costs, which you Ilkka, have stated to be around 1x to 2x of the total synergies. Could you -- over the next 2 years, can you just provide a little bit more detail with regards to the phasing year 1 and year 2 for those?

We'll come back with the details. First, we'll need to work with authorities to get first AGM, then the closing and fine-tune in between integration plans, which are then driving the cost assumption and the timing of that. But what I did say is that they are mostly incurring in the first 2 years of -- first 2 years of post the closing.

And on revenue synergies, we've taken a more cautious stance not to include them. I mean, for anyone that has gone through significant deal and I've done a few of them. I think it's good to have a prudent approach there might be some -- I mean, we'll work on this one, but we don't want to put that -- to factor that in that business, please.

But clearly, our ambition is to grow faster than the industry. So that means that we need to be able to continue to gain share.

Okay. And in terms of dis-synergies, there's nothing to point out?

Not really. No.

And we'll now take the next question from John of [indiscernible]. His line dropped. I will now proceed to take the next question from Panu Panu Laitinmaki of Danske Bank.

So I wanted to ask about the synergies and the remedies. So you commented that EUR 700 million is your view on synergies for the whole company, but is there a risk that the number could change if you would need to make substantial remedies? Or have you kind of calculated this conservatively that even if you would need to sell something, this is that you would get achieved?

Well, as I said, synergies are based on our best estimate of what's achievable for the combined company. So that's what we're committing to when looking forward.

I actually had a follow-up related to your Q1 results today. So interestingly, in China, revenue was up modestly, but it was up for the first time in 4 or 5 years. So -- just curious, do you think this was the inflection point where the service and modernization roll is now offsetting the decline in your equipment? Or was this just one quarter of more positive development?

Well, first of all, thank you for also paying attention to our Q1 results. We're very proud of that. And like you said, so we are seeing the market to be over 50% of the value is in services and modernization. And our business is not quite there yet, and we want to get there as fast as possible. That's the priority. And now in the first quarter, we indeed were able to grow slightly the business as our both services contributing to it, but most importantly, we saw very good growth in the Modernization business.

And we will now take our next question from Andre Kukhnin of UBS.

I've got a couple. Firstly, in terms of how will you treat the cash generated by TKE in the meanwhile, while closing the deal? And related to that, do you still intend to pay dividend for 2026, obviously seen the deal, as you said, early close Q2 next year. So do you -- would you still pay the dividend or would you contribute that cash towards the deal and deleverage?

On the first part, so there's a lockbox mechanism that is in place. So part of the combined entity, that's how the agreement has been agreed. On second, yes, I think I also said in my notes that we aim to have a stable dividend in the coming years. And of course, then later on and the development and growth of the business that we can then be progressive about increasing the dividend going forward. So yes, definitely, we're aiming to pay dividend in early part of '27 for the year '26.

Okay. Great. Sorry to labor, but I'm just getting quite a lot of incoming on the kind of questioning how would you remain investment-grade with GBP 13 billion of net debt and the sort of sub EUR 4 billion combined EBITDA on the closing. Is there anything we're missing here, Ilkka, you could help us with?

Like I said, we'll come back to that in more detail towards the closing, but we feel confident that we will have a solid credit -- solid investment credit rating for the company. And with both our cash-generative business model as well as for us to then execute on the synergies on an ongoing basis to have that solid credit rating.

Okay. Okay. And if I may, on antitrust, when you had experience of doing deals and in your conversations with authorities, will they look at combined new equipment or new installations business and service for the HHI's calculations? Or will they look at them separately and will each one of them become kind of very gate for that country to go ahead or not, i.e., do you need to clear it on a combined basis? Or would not clearing it on either of the 2 of either service or new build concentration would be an issue?

I don't think I can speak for the authorities. So we work constructively with authorities and then we expect that process to take 12 to 18 months.

And then we more last experience?

Well, I guess I'm not going to go any further. Good try. Good try.

Thank you. That is all the time for Q&A. I will now hand it back to the host for closing remarks.

So thank you, everyone online, and thank you also for your patience through our issues in the beginning. I hope that you got the answers -- your question is answered well. We're here with the team to answer anything further. So please reach out to me. Yes, exciting day, as I said. So looking forward to continued discussions as we go through the quarter.

Thank you.

Thank you.

Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.