TAKKT AG (TTK) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the analyst conference of TAKKT AG, hosted by CEO, Felix Zimmermann; and CFO, Claude Tomaszewski. [Operator Instructions] Let me now turn over the floor to your host, Felix Zimmermann.

Yes. Thank you very much for the brief introduction. Also a warm welcome, and good afternoon from our side to the Analyst Conference 2021 after a very challenging year. I think a couple of important things I would like to share with you. First of all, I would like to give you an update on the organization and the vision for the TAKKT Group. We have published our annual report this morning. And I think -- I hope that you had the chance in the meantime to look at the changes we have made here to the organization, we'll explain that later on. And also give you further insights into our thoughts and ideas about the new vision for the TAKKT Group. After that, I would like to give you an update on the strategy and what we would like to implement in order to achieve and to reach our vision for the year 2025. And after that, I would like to hand over to Claude, who will give you further insights and information about the financial year 2020. And then at the very end, I will update you on the outlook for the year 2021. So overall, we believe we need about 60 minutes for the presentation, and then the floor is yours for any questions you might have. So let me start with the update on the organization and division for the TAKKT Group. And on Page 4 of our presentation, you see that the TAKKT Group will continue to specialize on B2B distance selling for business equipment, and I will talk about that later on why we believe that it's important that we keep that clear focus on B2B distance selling and business equipment. And at the same time, you'll remember, we run the company more as a kind of a portfolio with 7 different business units. And then we have within our project, TAKKT 4.0, decided to consolidate our activities on 2 business models, the omnichannel commerce business model and the web-focused commerce business model. And with that, we have created those 2 segments. And with an omnichannel commerce, we have so far, Hubert and Central, included and have always said that we are exploring strategic options for those 2 businesses that are serving more the foodservice equipment and supplies market in the U.S. Now we have decided that it's better for our organization, in terms of transparency and also in terms of better steering and leading the different segments, to separate Hubert and Central into their own segment. And therefore, we have created with the effective 1st of January this year, that third segment, FoodService Equipment & Supplies now containing Hubert and Central. That does not mean that we are not continuing to explore strategic options. And there are now 2 left. The first one is a potential sale of those 2 businesses and the other one is merge those 2 businesses to keep them within that segment and run them under the umbrella of the TAKKT Group. Besides that, within the omnichannel commerce and web-focused commerce have been no major changes. Omnichannel commerce consists now out of KAISER+KRAFT, ratioform as well as National Business Furniture, while the web-focused commerce segment consists now out of Newport and Displays2Go. We run about 18 brands in our group of activities; cover about, yes, 70 locations across the world, predominantly in Europe as well as in the U.S.; offer about 1 million products to our customers; and run within the 3 segments, 7 business units. So that's about the update on the organization. On the next slide, you see the new structure of the TAKKT Group, again, starting with omnichannel commerce on the left side, serving the, yes, value-oriented customer base, looking for additional services and value add, looking for high-quality products and would like to buy a solution rather than just the product. While in the web-focused commerce segment, we are serving more the transaction-oriented customers. More the smaller business, the home offices, mom-and-pop shop and the, let me say, smaller businesses out there with value-oriented products where value and quality of the product is in a good and, let me say, efficient relation to the price. And it's more transaction-oriented, so people who are looking for a broad selection. They want to do the transaction, they want to place the order, but they're not expecting additional advice or any kind of after-sales service or something like that. So it's really focused on the, let me say, clear needs of smaller businesses. And now with Foodservice Equipment & Supplies, Hubert and Central, serving as the name is indicating, that with their product offerings and with their services, the foodservice equipment and supplies industry, predominantly the catering and the food retail and the restaurant industry in the U.S. Now after the update about the organization, some thoughts about our vision for the year 2025 on next slide. And that was an important exercise we have done here within our own organization because we have said we need that clear vision in order to make clear where we want to go, who we want to be in the year 2025, so 5 years down the road. And that was a very good exercise within the organization. And we came up with, I think, a very clear vision. And so that vision is stating that we want to be in we -- yes, I want to be, and we are in the year 2025, the most sustainable provider of workspace equipment. And there are a couple of things that sentence. And the first one is, we. And I think that's a really major shift in the mindset within the organization. We are not any longer a portfolio of 7 independent business units. No, we are we. A group of activities that are working together and developing together the TAKKT Group. So we is an important statement. Then most sustainable. We have discussed that, of course, internally how that could be understood. And that does not only mean sustainable in terms of environment, it means sustainable in all the things we are doing. We are in for the long run. And I want to make that clear and sure and to come up with a couple of examples later on. And then I think, provider workspace equipment, is also a clear statement. We want to stick to our product expertise and develop that furthermore that we are an expert for workspace equipment for durables, for, let me say, stuff, equipment stuff you need to run your business. At the same time, we have clearly stated that we want to be -- proceed as a company that is clearly committed to an outstanding customer experience, the responsible use of resources and strong growth. So 3 pillars are actually supporting, yes, that vision and make it a little bit more transparent and, I think, easier to understand. So in terms of being more sustainable, give you the example of customer experience. We want to make it easy to do business with us. And that's a statement, and I think we are the only ones claiming that, but we want to measure that. And for that, we have a clear KPI in place, that is the Customer Net Promoter Score, and our ambition is to keep that number or to bring that number above 60, which is a very high, I think, a number and would add a clear ambition, which should make clear and sure into our organization, but also to our customers. That an outstanding customer experience is key for us in order to be successful in that competition, that environment where we are active in. So Pillar #1, an outstanding customer experience. Pillar #2 is how we are using the resources we need to run our business and want to make sure that everybody in our organization as well as our customers do understand that we do everything to protect our resources. And you know that we have started the score initiative already in the 2012. And since then, we are publishing every year a sustainability report, where we give you an update about the things we have achieved as well as the targets we would like to achieve. And we have published also today an update on where we are, and we'll talk about that later on. But a couple of things I would like to mention here already. The first one is we want to increase the business with sustainable, let me say, products. Means right now, we are generating around 10% of our sales with, let me say, products that are fulfilling certain sustainability criteria. And we want to double that number up to more than 20% till the year 2025. And that is, let me say, a preliminary ambition. Let's see how far we come with our initiatives here in the upcoming years. Then I don't exclude that we will even increase that target because we believe at the Board, this will become more and more important that besides running the business in a sustainable way, we need to offer products that are fulfilling certain requirements that our customers are asking more and more for. In terms of running the business, we are clearly committed to run that business in a carbon-neutral way by the year 2025. And what we cannot really reduce in terms of the carbon footprint or the issue, we will then certainly compensate with the high level, let me say, compensation programs. But the first aim is to reduce the carbon footprint. And we do that in the 2, let me say, most important areas for us when it comes to carbon emission that is, on the one hand, everything around transportation. Means our ambition is to mail and send our products in a carbon-neutral way to our customers while it is -- via parcel service or LTL, means less than a truckload, carrier service that needs to become neutral as well as the mail of advertising media, whether it's any kind of catalog or printing material, that also needs to be carbon-neutral. Those 2 areas, marketing and transportation, are the, let me say, areas with the highest emission of carbon. And therefore, we focus our activities on those. And in the year 2025, would like to be neutral in those areas. And then last but not least, it's important to mention that under sustainability here in this area, we also have included our aim to be, yes, organized in a way that we are really living diversity. And for that, our aim and our target is to have at least more than 30% of women within our top leadership team. And I think that's also a clear statement that we believe that diversity and inclusion is becoming more and more important and a vital, let me say, precondition for an organization to be successful. And then last but not least, the third pillar here is all about growth. And you might remember that we have started our Project, TAKKT 4.0, because of our, yes, let me say, lack of growth we have seen here in comparison to our competitors. We always grew ahead of the comparable market, but we have seen in one or the other, let me say, comparison that we were a little bit behind our competitors. And with that clear vision, we are also stating that we want to grow, not only ahead of the comparable market, now we want to grow also ahead of our comparable competitors. So 3 pillars, customer experience, the responsible use of resources and a clear commitment to exceptional growth. So that's it about the new organization and the vision for the year 2025. And whenever you have the question about that, we are more than happy to talk about that later on in the Q&A session. Now let's move on to the next part of the presentation, and let's talk about the strategy. And we have set some new ambitions in certain areas for our strategy we would like to achieve by the year 2025. And they are being described on Page #9, and you see the 3 areas here on -- we would like to concentrate our energy. The first one is grow the business in a profitable way. And that means that the long-term organic sales growth of around 5% is our clear target. And at the same time, we would like to increase the absolute EBITDA in a sustainable way. And besides our organic ambitions, we would like to add with acquisitions additional sources for growth for the TAKKT Group. So first pillar here, grow in a profitable way. Second pillar is transforming the business models and transforming the TAKKT organization, means an organizational realignment with the focus on the 2 described business models, the omnichannel commerce and the web-focused commerce business model. Achieving at the same time, with that transformation of the business models and the organization an above-average organic e-commerce growth. And I think with the ratio of the total business we had generated in 2020 with a ratio of 60% e-commerce business, we are already on a good way. But we believe we need to generate more growth via the e-commerce channels in order to increase that share even more, but also to participate from the ongoing and sustainable e-commerce market growth we are seeing out there. And then we believe it's important that we generate consistently high recommendations from our customers as well as from our employees. And we measure those 2 -- yes, important stakeholders and their view on us via the Customer Net Promoter Score and with the same methodology, also the Employee Net Promoter Score. So besides growing in a profitable way, transforming our organization, transforming the business models toward a more digital approach. And then the third one is acting in a sustainable way. And I've talked about that already. The share of women in top executive positions, at least 30%, the share of sustainable products of at least 20%, if not more, and then the 100% carbon-neutral print advertising and shipping processes. So those are the 3 pillars for our strategy. Now in terms of growth, here are the targets we have set ourselves as well as for our segments and the organization. So you see here for omnichannel commerce, we believe the long-term organic growth target should be in the range of 3% to 5% per year. For the web-focused commerce, of course, a higher growth rate of 6% to 8% per annum. And for the Foodservice Equipment & Supplies segment, a very comparable number to the omnichannel commerce segment of 3% to 5%. So overall, of course, depending on the weight of the different segments, we believe, on group level, we should achieve a 5% organic growth per year. And in terms of profitability, we believe an EBITDA target, and its being here described at the margin, an EBITDA target for omnichannel commerce should be at around 15%. For web-focused commerce, since they have a little bit of a different P&L structure, should be at around 10% as well as Foodservice Equipment & Supplies as well, 10%. And on Group level, again, the aim and the clear ambition is here to increase the EBITDA, the absolute EBITDA, in a sustainable way. Now talking about the transformation of the business models. And I think we have talked about that already during -- on the last analyst conference and then one or the other roadshow. But here, kind of a little update. We continue with our activities in terms of the, yes, implementation of TAKKT 4.0 where we want to concentrate our activities on 2 business models for 2 different customer types. And I described at the very beginning, there are 2 different customer types out there in that B2B environment. One, more the transaction-oriented customer, as I've described that with different needs than the more value and lifetime value-oriented customer with, again, a different requirement in terms of product quality and so on and so on. And since we believe that we need to serve those customers in a different way, we need to also separate the organizations, at least, the customer-facing activities, to make sure that we serve those customers in the best way in terms of delivering their needs and expectations. And therefore, we believe it makes sense to have the 2 business models in 2 different segments or at least being organized in 2 different segments with a clear focus. On the one hand, the customer needs, and on the other hand, trying to generate synergies within our own organization by leveraging existing and, of course, important back-end structures. And at the same time, also implementing activities that can be provided in a consistent way on a group level. And that is, bringing me to the next point here, the reallocation of functions and responsibilities. So instead of having each and every function in each and every business unit, we believe it's better to, yes, reallocate those functions across the 3 different levels we have within the organization that is the group level, and the segment level as well as the business unit level. And the logic and the idea is to allocate the function there where they are necessary in order to create the best customer experience, acting in a sustainable way and generate exceptional growth. And then last but not least, strengthening the operational excellence. I think it's an important part of our transformation journey here. And with that, we call it the how operating model. We want to steer our businesses in a different way than we have done that in the past. Because the -- yes, new operating model is giving us a new framework for steering and managing our activities. At the same time, it's also defining new core behaviors and processes across the group. And with that, creating a lot of value for our organization when it's been completely implemented. So that's it about the transformation of our business model and our growth strategy. And last, but certainly not least, before I hand over to Claude, a quick update on the sustainability report. We will publish that interim sustainability report this afternoon on our website, and you will see there an update on our sustainability strategy. And it's giving you a clearer insight about how we have developed that strategy. It's based on a stakeholder dialogue and giving you a very clear update for our customers and what our employees, what our suppliers are expecting from us in terms of sustainability, and they have been very interesting results out there. And at the same time, those results confirmed our decision we have made last year to concentrate our energy on, yes, the -- let me say, following of 4 strategic development goals of the United Nations, and we can talk about that later on. So overall, a much clearer picture now where we want to go with our sustainability strategy. And more than happy to give you an update on that. I personally believe that it is a very important part of our future strategy. So with that, I would like to hand over to Claude, who will give you a little bit more insights into the financial year 2020. And then later on, we are more than happy to answer the questions you might have. Thank you very much so far for your attention.

Thank you, Felix. Good afternoon, everybody. I would love to give you a quick overview of our financial year 2020. Let's start with some development of the key financials in 2020. We came in with a sales figure of more than EUR 1 billion, EUR 1.067 billion, which was better than the guidance we had given in October, the latest guidance in October, which we published a figure of EUR 1.050 billion, so EUR 17 million sales better than the latest guidance. Overall, that figure came in with a minus 12% drop compared to the previous year 2019. Looking at the operational profit before depreciation, amortization, the EBITDA. The figure came in at EUR 93 million, which was also a bit better. It was above the guidance, but it was better than the midpoint of our guidance given in October, which has been EUR 85 million to EUR 95 million. And that includes that figure, a EUR 9 million one-off, which comes from a EUR 15 million one-off expense figure. And at the same time, a EUR 6 million one-off income figure. The income figure predominantly coming from our sale of a building in the Hubert business. We'll come back to that also when we talk about cash and in the expense figure. Most of these one-offs have to do with restructuring costs, about reorganizing our businesses. Overall, the EBITDA figure is on that amount, almost 40% less than the previous year 2019. But correcting for the one-off, we can state that in that pandemic year, we have generated more than EUR 1 billion sales. And the adjusted EBITDA figure, we have been able to generate more than EUR 100 million EBITDA operational profit. Net profit after accounting for depreciation and amortization, roughly EUR 40 million after accounting for our tax expense, roughly EUR 9 million and our finance expense, roughly 6 million. We have generated a net profit of EUR 37 million, which is the lowest in the last 10 years. It is EUR 3 million better than 2010. And it's now even better than 2009 when the large financial crisis hit us. So this figure is rather low, of course, and has to do with the pandemic development we all have experienced in the year 2020. Moving from profit to cash. Exactly the opposite is the main statement. We have generated here a historic record since TAKKT Group listed, with EUR 130 million free cash flow. We were able to generate the highest cash flow in the last 20 years. And that is even true if we deduct the EUR 22.5 million proceeds from the sale of the real estate of that building in the Hubert division. Then even correcting for that on a like-for-like, our free TAKKT cash flow has come in, in the year 2020, roughly EUR 1 million better than 2019. So still there, it's the peak of the history at TAKKT if we even take out that one-off. How was that possible? Well, we had a lot of cost and cash management measures taking place in the year 2020. I will come back on these in detail later on, on some charts. Talking about personnel measures, talking about how we have run the marketing costs. And also, of course, how we have managed receivables, inventories, payables and our tax balances. These all have contributed to that huge free TAKKT cash flow. Equity ratio has come in as a consequence at 65%, also a very high figure, helped by these cost and cash management measures. But not also by these 2, but of course, in addition, the fact that we haven't paid a dividend in 2020 for the profit earned in 2019, of course, also has contributed to that high figure, 65% equity ratio at the end of the year 2020. And so we are happy to be able to propose a dividend of EUR 1.10 per share, which is then proposed together with the Supervisory Board to the general meeting, the Annual General Meeting, which holds place in May. And at EUR 1.10 per share equalizes EUR 72 million dividend paid. And if you look a bit further, that has 2 components. We pay a base dividend for the profit in 2019. And in 2019 at EUR 0.55, and we are happy to propose the dividend for the profit, which we earned in 2020, which is the EUR 37 million. And in total, if you compare the EUR 72 million dividend to -- on the EUR 37 million earned net profit in 2020, that's a payout ratio of almost 200%, 194% precisely. And if you just look at the -- if you split it in 2Q, that we pay a dividend for the profit earned in 2020, then we pay out EUR 36 million dividend out of a net profit, EUR 37 million, which is almost a payout ratio of 100%, which we are proposing now for the Annual General Meeting to be decided. Let's move on to look at the -- very shortly at the next 3 slides, which we have already, I think, very similarly presented in our preliminary figures call. TAKKT Group sales came in, as I said, 12% less than 2019. If you look at the profit figure that came in almost at 40% less. And again, just to make that message again, the EUR 92.6 million included a onetime expense, net expense, of EUR 8.6 million. And the figure in the previous year on onetime expenses was similar. So that, that doesn't dilute the comparison. Looking at omnichannel commerce. Here, the organic sales decline has been minus 13%, so a bit more than the total -- than the group figure. The profit, however, has come in on a reported EUR 102.5 million, which is almost 30% less than last year. So you can see here that the profitability in the omnichannel commerce segment has been comparably better than the average drop in the group. And the reason is, just looking at the web-focused commerce on the next slide, which had an organic sales decline of 6%. Here, the fact that this [ space ] to go -- being part of that segment, had a huge double-digit organic decline in the sales figure, and it was weighing on earnings. You can see here that the drop in profits have been more severe than in the omnichannel commerce. Profit dropped by almost 2/3 here, and that is the reason why then also in the whole group, we had a higher percentage of drop compared to the omnichannel commerce due to the web-focused commerce segment. Moving on to explaining a bit more the gross profit margin. You can see on the next slide here that we had a drop of 1.6 percentage points, so roughly 1.5 percentage points we lost in gross profit margin from one year to another. And we have shown here a few components. And the major statement here is we have not lost on product margin, which is included here in the section, other. We have mainly lost gross margin when it comes to inventory obsolescence. And the major reason here is the fact that we had less sales. So we have now -- and that the stock, of course, have not been proportionally been able to be reduced compared to the sales figures, so we have now a higher inventory obsolescence when it comes to our stock. The second reason is the freight margin, we lost on freight, freight sales compared to what we have to pay for freight. And the third one is due to the, again, lower sales for them. We have been able -- we have not been able to generate the same supplier discounts compared to the year 2019. So these have been the 3 major reasons for the drop in gross profit margin. Looking a bit more into detail into the EBITDA figure. You can see here on the next slide that we have been able to compensate for the loss in gross profit, the loss in gross profit coming from the lower gross margin but even more predominantly coming from the lower sales figure. We had a drop in gross profit of EUR 78 million, whereas the EBITDA figure has only been dropping by EUR 58 million. So there's a EUR 20 million gap in-between. And that's what -- I mean compensation is mainly predominantly coming from less marketing costs, and the second big lever here is less personnel cost. Less marketing costs means that we try to run the business with a similar marketing cost ratio, also in the year 2020 compared to the year 2019. So what that means, of course, due to the fact that we were able to see lower sales, we have tried to lower the marketing cost accordingly, and that has generated here a compensation. Similar thinking in the personnel costs. Personnel costs, we were able to also lower these during the pandemic. To give you a flavor of what that means, we had a drop of FTE from February to April within 8 weeks, that's 400 FTEs, which -- that was short-term labor in Europe and then you recall, these temporary layoffs in the States. So 400 FTEs less in a period of 6 to 8 weeks. If you look from December to December, for the full year, we had 150 FTE less, which means, of course, after the severe drop in March and April, then we have, of course, then again, gradually increased our labor force up to December. And also, of course, following the sales trend. And so overall, we have been able here to compensate in the cost and personnel, helping the development you see here on that page. Now EUR 78 million less gross profit, EUR 58 million less EBITDA, so EUR 20 million less drop. If we move on to TAKKT cash flow, EUR 38 million compared to the year before. So again, it's EUR 20 million compensation happening from gross margin to EBITDA and again to TAKKT cash flow. And here, the reasons are predominantly 2 levers. One is we have paid less current taxes due to the drop in profit. And the second is, we have digested quite a bit of noncash expenses in the EBITDA figure, in the profit figure, which, of course, then have not been cash relevant, have not been a payout. And the bigger proportion of these noncash expenses comes from inventory obsolescence. So the TAKKT cash flow figure came in at an EUR 82 million in the year 2020, EUR 38 million less compared to 2019. Moving on from the TAKKT cash flow figure to free cash flow. You can see here on that chart, that we were able to manage trade working capital in a way that the trade payables, receivables and inventories had a cash inflow of EUR 8 million altogether. Then there has been a huge positive figure boost coming from the chain in other working capital, in other assets, liabilities and also the change in provisions. The EUR 22 million here is predominantly coming from less receivables from suppliers. That's a consequence of the lower discounts and lower sales figures happening in the year 2020. Then we have a much higher backlog, which means customers have paid us for some product which have not yet been able to ship out. And the third element here is a tax asset and liability reason here on income. And also on value-added tax, we were able here to generate cash in the year 2020 compared to the year '19. And then our provisions are much higher in the year 2020 due to our restructuring reorganization happening. And here there, you can see that we were able then compared to '19, starting from TAKKT cash flow thinking to see a positive figure of plus EUR 8 million. Cash from operating activities came in at EUR 120 million. We have spent less CapEx than the year before, a bit more than half of the year before, so with EUR 30 million. We almost were able to halfen our CapEx in the year 2020. And the sale of real estate, you see here, the sale in the back transaction we did in the Hubert business unit with a positive figure of EUR 22.6 million, and then we are generating EUR 130 million free TAKKT cash flow in the year 2020. On the next page, looking at a broader perspective, since we got listed at TAKKT AG, you can see on the EBITDA figure, 3 downturns, 3 major downturns. Well, I have to correct the first, you almost can't see because that was the recession in 2002-2003. But acquiring Hubert shortly before, it's not so visible here in the EBITDA figure, which is the red figure. And then you can see the huge drop, halving the profit in the financial crisis, 2009. And then the third big drop now in 2020, where we're almost dropping the profit figure by 40%, so that are the 3 big downturns. And at the same time, we see here in the orange color, the free cash flow, which is much more stable and then ends with a record year in 2020. And I think it's worth mentioning here that TAKKT, even in the pandemic, is a cash machine and still generating a huge cash flow figure. This has led on the next page to a significant reduction of our financial debt. We have run out of bank liabilities. So the figure here with EUR 75 million financial debt is purely finance leases and some other financial debt, but no bank liabilities anymore. And that, together with the profit for the period and an overall decrease in total assets resulted in an increased equity ratio of 65%. And as explained already at the beginning, before I hand over to Felix, this has led to our conclusion that we are able to make a proposal for the dividend of EUR 1.10 per share, which hopefully is decided at the shareholders' meeting at the annual meeting. And it's helping our shareholders to also, of course, being compensated for the fact that we, last year, had decided not to pay a dividend, to postpone that. And so with that figure, hopefully, we can then get us back on track as being a very reliable dividend payer to our shareholders. And with that said, I would like to hand over back to Felix who will talk a little bit about the outlook into the year 2021.

Claude, thank you very much for the additional insights and information. And yes, at the very end of our presentation, a brief, let me say, outlook into the year 2021, we all know that it will be another challenging year, but hopefully a better second half within the year. And we believe that overall, we're going to see a good organic sales growth between 7% and 12% for the full year 2021. But we also see that the current pandemic situation in Europe as well as, still in the U.S., are impacting, of course, our business. So the first quarter will be impacted by that in comparison to prior year where we have had almost no pandemic, that came in mid of March. So first quarter last year was not impacted, let me say, in a significant way. So the real truth, I think, will become visible in the second, third and fourth quarter. But for that, we are, let me say, comparable and cautiously optimistic. And we can talk about that later on why we believe that we can -- that, or achieve that 7% to 12% organic growth. And at the same time, we believe that the EBITDA will come in -- when we achieve the 7% to 12% organic growth, the EBITDA will come in -- yes, with an amount between EUR 100 million and EUR 120 million. Now what will be the key strategic focus in the year 2021? I think pretty obviously, ongoing implementation of our strategic initiatives, as I have described them at the very beginning of our presentation, also in order to drive organic growth in the business units. And at the same time, we continue with the implementation of TAKKT 4.0. It means the development of our segment structures in OCC as well as web-focused commerce. So the year 2021 will be here where we are, yes, setting up and build the infrastructure, the TAKKT 4.0 with, I think, a significant progress. And talking about the economic environment, the economic development is still certainly depending on the course of the pandemic. We believe that the U.S. economy will recover earlier than the European economy because of their, yes, current incident numbers. And their, let me say, better coverage of the vaccination. And together with the huge program that the new President actually, yes, initiated, we believe that as soon as the economy is opening up there in the U.S., we will see a very strong and positive development there. While in Europe, we might have to wait a couple of more weeks, maybe even months. Now the current lockdowns in Europe are certainly impacting our business, not in a comparable way to the impact we have seen last year, not at all. There are a couple of businesses out there doing really great in comparison to last year. And I think it's fair to say for the time being, the start within the -- into the year 2021 was overall in line with our internal expectations. So we are on track with the start into the year 2021. We are looking forward to the second, third and fourth quarter, best to come within the year 2021. And overall, we are pretty optimistic that we can achieve the 7% to 12% organic growth and at the same time, a nice EBITDA between EUR 100 million and EUR 120 million. And with that, I would like to hand over and give back to the operator, who I think will organize the Q&A session. Thank you very much, again, for your kind attention, and we are now looking forward to receive your questions. Thank you.

[Operator Instructions] And we have one question, which comes from [ Christian Salas ]

I've got 4, if I may. The first one is on the potential structural changes on your business. So for example, what changes do you expect, for example, when it comes to the working from home trend in the midterm? And also regarding the foodservice market, so which -- what impact do you expect from the potential consolidation in the foodservice market where restaurants might be out of business? And what implications do you expect on your business going forward? And also, when do you expect sales to come back to the 2019 level? Secondly, on the online business, on the accelerating shift towards e-commerce, which we've seen in the B2C space happening quite substantially in 2020. So I was just wondering why that the omnichannel commerce segment recovered relatively well in Q4 compared to Q3, while the web-focused commerce improved only slightly and was still down in the mid-single digits? I think that's on the last slide in your presentation. And then thirdly, on the gross margin, what do you expect here in terms of gross margins for 2021? And how much of the decline in 2020 was driven by COVID-related topics? And how much of this was driven by rather structural topics like, for example, a mix, like, for example, a higher share of e-commerce revenues? And then finally, just quickly on the -- could you maybe give us an update, please, on the one-offs you expect on the EBITDA line in 2021?

Thank you very much. A couple of questions here. And I think Claude is the best one to answer the questions about the one-offs, the gross profit margin as well as the sales development of OCC and web-focused commerce in the third respective and the fourth quarter 2020. And I will start with your questions about the, yes, expected structure changes in the market. The first point you have mentioned there is working from home as a new trend, but that's certainly the question is there. Any company out there still buying office furniture is that now being shipped to completely back to, let me say, home offices. We believe that we're going to see certainly a complete new, let me say, working environment. And there are a couple of studies out there indicating how the future will look like. First of all, there will be a shift from the traditional, let me say, office work to home office work. And we believe that is leading to a higher demand for home office furniture solutions, means not only office desk or office chairs. We'll develop more and more into a direction where customers at home are looking for office furniture solutions that are fitting into their private environment. So there will be, I think, a huge demand for higher value office furniture in order to establish at home. Not only, yes, home office for a certain period of time for a couple of months. No. They will look for solutions that are lasting for a longer time. So we believe that will increase the demand for home office furniture. Within the companies, we believe, and that's the experience we're also making in our own organization, that there is a need for different office furniture. So we have seen already a lot of suppliers coming up with great ideas how the office furniture will look like and the office environment would look like in a kind of a hybrid, let me say, solution where people are working from home and coming to the office maybe once or twice a week. Then we have different needs for conference rooms, for any kind of, let me say, areas where you want to support and facilitate communication. And so we believe there will be also demand for new office furniture solutions. So overall, we believe there will be a shift, certainly, more towards home office with the demand for different products, but also for the companies and for the business, will be a good demand for new solutions. So overall, we believe that this will not impact our business in a negative way. We see there are actually more opportunities than risks. Talking about the consolidation in the foodservice equipment and supplies industry. You have mentioned, as an example, restaurants. We have seen not really a comparable situation, but almost comparable to the 2009, where a lot of restaurants were closed down because they had not the cash to survive. And what the normal reaction is after that, that step-by-step the restaurant facilities are being taken over by new owners that are not having the debt on the balance sheet and can invest. And the number of new openings is driving then the demand for equipment and supplies. So I'm not afraid at all about the development in the restaurant area. We are seeing already within the central business, that there is a demand for larger projects and for installations with a longer term horizon. And so therefore, I think the restaurant industry will not really, let me say, suffer in a way that this will have a negative impact on our business. In the foodservice area, it's pretty much depending on how the schools are being opened up again, how sports stadiums are being opened up again, where the facilities are being managed by large catering companies like Sodexo and Aramark, pretty much depending on that. But we believe the sooner they can open up again, people will be desperate to join the baseball game and the football game. And we'll go back-to-school and back to university. And with that, those companies and those facilities have a demand, maybe a pent-up demand, for new equipment and for supplies, especially in the front of the restaurant and cafeteria in order to be perceived as an attractive place to stay. So I personally believe there are a lot of opportunities out there even under the given, let me say, new market trends as long as we are ready to adjust our product categories, to adjust our product offerings and go with the trend and support those trends. So with that, I would like to hand over to Claude, who will give you a little bit more information about the one-offs, the gross profit margin and the sales development you have asked for. Thank you.

Yes. Let me take the questions. The first one I noted down is when do we think we are back on the sales level from 2019? If you look at our guidance, which organically is between 7% to 12% organic growth for next year, that would mean our midpoint would be 9.5%. Here we have to be careful, our organic growth guidance means currency adjusted, so we're going to lose possibly up to 2 percentage points, at least the way it looks at the moment due to the dollar, which has weakened during year 2020, too. There would be a reported figure of 2 percentage less. And as we redo the calculation, there would be 7.5% at the midpoint of our guidance. And that brings us to a figure where you would add another 5 percentage point growth in 2022 in order to be at the same level. So -- in a conclusion, I think it will take us roughly 2 years to get back to the sales figure of 2019, of course, depending a little bit on how the economy will go now and how we are coming out pandemic, but 2 years is a good assumption. Your question on the quarter 4 development compared to quarter 3 in the OCC segment compared to the web-focused commerce segment. The reason why we recovered that much in the OCC segment in the top line has been because of KAISER+KRAFT seeing a much better demand and strong [ recoverage ] in the industrial customer base. And I guess we see this in a lot of markets out there that the industrial sector has recovered a lot. And the second reason is ratioform, the packaging material, has a significant growth rate in quarter 4 due to the fact that there was more -- apparently more packaging material needs out there when we were getting closer and closer to the Christmas period. So for a lot of reasons, whether it's industrial or whether it's for private usage, packaging material was something which was in a huge growth rate in quarter 4. When we look at web-focused, if we look at the 2 business units here, Displays2Go as well as Newport. It's fair to say that those have developed completely differently last year, and that's also true for the quarter 4. But they have been on the same speed in quarter 4 compared to quarter 3. What means Newport has been still on a very good double-digit growth rate in quarter 4, but it hasn't been higher than quarter 3. At the same time, that means that Displays2Go, unfortunately, has been still in a huge drop in quarter 4 compared to quarter 3. So there has been no [ recoverage ] at Displays2Go in quarter 4. And if you look at the product assortment of Displays2Go and the market they're in, the major reason is because trade shows haven't started yet. So here, definitely, at Displays2Go, out of our 7 business units, we have to be the most patient before we're going to see a recovery because they are suffering the most, still up to today. We definitely need to get out of the pandemic here completely before, of course, huge physical trade shows can happen. And that will, of course, help Displays2Go then also to be back in business and have different sales figures. So these are the reasons for the development in the OCC segment as well as the web-focused segment quarter 4 compared to quarter 3. Your next question has been on gross margin, gross margin in 2021. What can we expect? I think we can expect to be back on the level above 40%, which we are always aiming for. Your other question has been how much of the drop in 2020 has been COVID-related? If we look at the different components I've shown on the slide, I think it's fair to say that the vast majority of the inventory obsolescence has somehow been COVID-related because it has to do with less sales volume, and also some other corrections in the inventory here had to do with articles in the COVID period which needed a revaluation. So a lot of the inventory obsolescence have been COVID-related. If we look at the supplier discounts, again, due to the lower sales volume, I think it's fair to say that a lot of that has been COVID-related. And then if we look at the freight margin, yes, also here, we had, of course, the impact from COVID because we had more multiple shipments than we used to have before because, of course, the supply chain was not as stable as we normally know it. So it is fair to say that a lot, a lot of that impact have -- being observed in the year 2020 was directly or indirectly influenced by that COVID period, which doesn't mean that we got it all -- we will get it back completely. But I think it's fair to say that we should see quite a rebound in our gross margin when we come out of the pandemic period. Your last question has been about one-offs in 2021. We are expecting one or the other one-off in 2021 hitting the P&L, but we are not expecting any figures as high as we have seen them in the year 2020. So hopefully, 2021, we don't see that huge dilution in our profit due to the one-off expenses. I hope that answers all your questions.

And the next question comes from Thilo Kleibauer.

Thilo Kleibauer from Warburg Research. I have 2 questions. So one is on your EBITDA guidance. I mean, you mentioned that you expect a significant sales increase, a normalization of the gross margin, no significant one-offs in the EBITDA. And if I put this together, especially at the lower end of the EBITDA corridor, which was EUR 100 million, seems to be pretty low. So maybe you can give us some more insight into the calculation of your EBITDA guidance. And maybe also, at what extent you want to expand marketing expenses or personnel costs to push the recovery of the business? And yes, my second question would be regarding the M&A pipeline. What's your current view there? Are there acceptable prices? Are there any new categories which might be interesting for you? So maybe you can give us some more insight here.

Yes. Thank you very much. Thilo, and let me start with the M&A pipeline. And I think then Claude is more than happy to explain you our thought process when we discuss and develop the outlook for the year 2021. So talking about M&A. Yes, the M&A market in Europe is quite active. So a couple of, yes, interesting opportunities are out there. And as we have mentioned that several times, we like to focus currently our activities on strengthening the web-focused commerce segment. And there, we would be interested in acquisitions that are really strengthening and supporting the development of our infrastructure, so of our, let me say, yes, corporate backbone or however you want to call that. So we are not that much interested in activities where we would just buy another brand and with that an additional complexity in terms of technology. No, we would be interested in someone who's really leading in technology or in one of the areas that are important for us to build up a successful BFT or WFC infrastructure. And of course, within omnichannel commerce, whenever there are opportunities coming up that would -- yes, could help us to strengthen our market presence and to consolidate the market, we are, of course, in a position where we would listen. Our balance sheet is quite strong, so we could afford a major acquisition. And you can be sure we are out there. We are, hopefully, in the deep flow, so get information about the potential acquisition opportunities out there. And we are looking at deals, but we are also crystal clear in -- yes, let me say, the implementation of our strategy and want to stay focused. But I think the year 2021 is a year where M&A or an acquisition opportunity, especially for web-focused commerce is certainly a realistic opportunity in order to generate additional growth above the guidance we have given for the year. So the market is liquid in Europe, a little bit more than the U.S. I think interesting targets are out there, and we are working on the pipeline. With that, I'd like to hand back to Claude.

Yes. Thanks a lot, Thilo, for your question on the EBITDA guidance. It's obvious that when look at the sales growth guidance we are giving and then if you look at the profit that, that's, of course, at first glance, produces a question and looks for some more explanations. If we look at our EBITDA guidance, I think it's fair that there are 3 major components to be aware of. First, we have been able in the 2020 to reduce our personnel costs and also to reduce our marketing costs quite significantly. I was talking about EUR 78 million less gross profit. I was talking about EUR 58 million less EBITDA. So we have been able to compensate for EUR 20 million in the cost section. And at the same time, when you look at personnel, we have not laid off that many people. So we have been able to reduce that personnel cost by the fact that short-term labor or temporary layoff. And so these people are still on the payroll. So we're going to see some, of course, and a lot of -- not just some -- a lot of that personnel cost coming back in 2021, overproportionately coming back because we are not on the [ safety of ] -- back on the year 2019, only halfway. And so personnel costs will overproportionately come back because we're going to need these people in the whole recovery period for the next 2 to 3 years. And also then to have these guys on board for stronger growth ambitions we've got afterwards. So keeping these people, of course, will mean to have an overproportionate burden in the year 2021 for the longer term. And that's, of course, something which then is lowering EBITDA a bit more than possibly, for when you look at the 2020 figures to start from. Similar thinking in the marketing area. Of course -- there is, of course, more in line with sales. So that will hopefully not be that much of a burden. But in order, of course, then to fully exploit our growth opportunities, we're going to spend some more marketing. This -- so marketing personnel cost coming more back is -- and coming overproportionately back is one reason. Second, we're going to have some costs being spent into the investment, into our new, what we call organization -- segment functions in our organization. So when we build our more centrally organized functions such as IT, logistics and data management in each of the 2 segments that, of course, is also then being a factor that our profit possibly isn't quite in line with the growth line, with the growth in profit, with the growth in sales. Because we cannot expect that in the same year already, we're going to see all the benefits from building that organization structure in 2021. And then third, we are, of course, a bit cautious. So we have guidance of EUR 100 million to EUR 120 million. If things perform well and develop well, we can see, of course, that we should be more to the upper half of that guidance and not to the lower half, but we are cautious because of -- when we built the guidance, we have a new pandemic in Europe, possibly less in the States. But at the end, in Europe, we have -- we still face a huge challenge here, which was visible already in the figures in January and February, looking at the British version of the COVID virus. And so we have been also, as a third element, be a bit cautious here. When we put the profit guidance together, we still need to be patient and see how we come out of that pandemic development in Europe, and then hopefully see also our business recovering the way we wish for. So these are the 3 bigger elements to understand and be aware of when you look at our EBITDA guidance.

And the next question is Mark Josefson.

Can I just start with a follow-up to your answer there to the last question with respect to the guidance, or rather specifically with respect to order intake so far in 2021. So with the evolvement of the third wave, has it been particularly volatile? Is it particularly lower in March compared to January, the order intake? And then I found it useful for splitting out the Foodservice and equipment segment. Thanks for that. I agree. It adds additional transparency, not least with the 2025 target. I just want to touch on the underlying performance of Foodservice and equipment last year. I think that of the group's EUR 15 million expenses and EUR 6 million income, I think the EUR 6 million was a sale and leaseback. So I'm getting that all of that was in the Foodservice Equipment & Supplies. Were there any expenses in that segment as well in 2020? And broadly, what was the 2019 sales base of the 2 businesses that are today, Foodservice Equipment & Supplies? Just give us a bit of a feel for how that has developed on -- if we were trying to strip out the COVID impact?

Thank you very much. I think Claude, the floor is yours.

Yes, I was just trying to think, but yes, possibly, yes. You're right.

Yes.

So let me start with order intake for quarter 1. I think it's fair to say that we haven't seen that much volatility in quarter 1 when it comes to order intake. We have seen a not as good recovery compared to the quarter 4. As you might recall and have seen it, we had a minus roughly 4% growth in quarter 4. And when I look now at the first quarter 2021, we have also seen a single-digit decline, a bit more than minus 4%. So a bit worse, but not that much. At least when we talk about the period up to, you could say, the COVID anniversary. Now it can debate when the COVID anniversary hit us. And in our business, we have seen even a quite stable development in the top line up to the first week of March. And then, of course, the second week turns positive the first time, but that's due to the fact that already there have been one or the other day, very much another baseline in the year before. And now when we look at the third week of March, we can see that we have a huge growth rate, of course, as you would expect, because that was the week when we went down 35% last year. And what we are observing now is that we are not yet close to the year 2019. So we have a huge growth figure, which is higher than the 35% but it doesn't bring us back on absolute terms completely. But it's kind of there in the low-to-mid single-digit decline. That's kind of the speed we see and that would be, again, close to what we have seen in quarter 4. So it feels now just these days that we are there or thereabout to see a top line development, which is close to what we have seen in quarter 4. It was at the beginning of quarter 1, not as good as in quarter 4. That's kind of what we have seen as a trend in the -- so far, quarter 1, which is almost finished, I think, now just 3 days ahead.

And I think also...

And if I can say that just here, this is order intake, very, very important. And that's possible why Felix now jumped in, yes?

Yes.

This is order intake, you have asked for intake. And it's very important to make sure we understand that my comments have been order intake because our sales figure are not as good. Why? We have seen not so much volatility in the top line order intake. But we have seen more severe supply chain problems and issues in all our businesses, and you might have heard that from other businesses, that the supply chain was in a much more difficult shape now entering this year. And even up to now, with container -- containers not hitting the harbor in time was, of course -- even also a lag of container space and so on and so on. So our sales figure will be not as good as I've just described, the order intake, but yes.

Yes. And I think it's fair to say, Claude, just to give you kind of a comfort -- how we look at those developments. As I've said at the very beginning of that call, we are in line with our internal expectations, with our internal budgets. So that should give you also some comfort, but there are no surprises out there. Here and there some deviations where we have caught on, maybe they would be a little bit higher or lower, but in total, in line with our expectations. Sorry, Claude. Yes.

Yes. Yes. It's fine.

All right. And we do not have any more...

Wait. Wait. Wait. I think there's another part of the question, I'm not sure.

With respect exceptionals, both positive and negative. I'm assuming that the sale and leaseback was entirely in the newly created Foodservice Equipment & Supplies? Were there any expenses in that?

Yes. I noted down that you had a question about the one-offs for the new segment and the underlying performance that you can allocate these one-offs. The sale and leaseback, the one-off income has been EUR 4.5 million, so not quite EUR 6 million. And there has been a one-off expense of EUR 0.5 million, so the profit has been helped by EUR 4 million on a net figure.

I hope we have answered your questions. If not, please come back.

Then there are no further questions from the audience now.

Okay. So if that's not the case, then thank you very much for your time, your ongoing interest. And as Claude has mentioned that, if there are any questions left, please don't hesitate to contact our Investor Relations team and come back with any question you might have. We are more than happy to answer those, and we are looking forward to see your comments and your reports. So thank you very much. Have a great afternoon and a good rest of the week. Thank you, take care and stay healthy.