TAKKT AG (TTK) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining Tech Analyst Conference 2022. [Operator Instructions] I would now like to turn the conference over to Maria Zesch. Please go ahead.

Good afternoon, ladies and gentlemen, and a very warm welcome to our 2022 analyst conference. Today, we will present you our audited 2021 numbers and our new strategy focusing on more profitable growth. I took over as the CEO in August last year, and I took the time to review the company's market position in each division and in each region very thoroughly. I talked extensively to senior management, to employees in different parts of the world, and I had very good exchanges also with suppliers and customers to understand their needs better and to understand what we can do even better. Personally, I'm a digital enthusiast and definitely also a team player. My strengths are to set a position, to communicate that strongly, and work with the team to get results, results in terms of profitable growth. You know my professional background is in the telecom sector, in the B2B digitalization, in consulting, and I believe this will help me and helped me already to look at our various business processes and customer segments from a somewhat different perspective. So let me be clear. It paid off to take the time, not only to grasp the implications of the pandemic for the new worlds of work but also to stress test it, to stress test our new strategy in a fast-changing economic and geopolitical environment. When we presented last time to you our preliminary results 2021, this was 24th of February and the war in Ukraine had literally just started a few hours earlier. We're now in the fifth week of the Russian military invasion and it becomes clear that inflationary trends, supply chain constraints, shortages in raw materials as well as impact in energy and labor got even more aggravated. And despite these adverse developments, I'm still strongly encouraged not only by the market opportunities we see but also by our achievements so far but also especially by the enthusiasm and support from our great employees. Therefore, I believe I can present our new strategy today with much greater detail and definitely with passion and conviction. Here with me today is our CFO, Claude Tomaszewski, who will take you through the financials in a few minutes. But let me start first with the highlights for the day, the strategy and our ambitions for 2025. And then Claude and myself as you are at -- will be at your disposal for any questions and myself. So let me start with the summary, with the highlights of our new story. TAKKT's vision is to bring new worlds of work to life, shaping the worlds of work we see currently changing so shaping the worlds of tomorrow, supporting our customers in being successful in the future. We address a huge market which offers significant growth opportunities because there are many changes ongoing. So our strategy is very clear and is based on 3 pillars: growth, OneTAKKT and caring. Our ambitions are also very clear. In 2025 we aim at sales of EUR 2 billion, EBITDA of EUR 240 million and a free cash flow of EUR 150 million. We are committed to the environment, to people, so to our employees but also to suppliers and of course to customer success because we are convinced that this will be the basis for our ongoing success in the future. Let me now go into the vision and why we believe that's the right thing to do for the moment. So what we see, there are 3 specific developments we focus on and we took into consideration when we came up with our vision. First, the megatrends. Second, the customer behavior, and last but not least, accelerators who even accelerate the change we see on a daily basis now. The megatrends which influence our work and influence our industry, you can see on the chart that definitely new work is something we learned within the last 2 weeks -- the last 2 years that this has changed a lot. Positively, we also see the trend towards sustainability, and we also see a huge demand for health-oriented equipment. So that also will influence what we can offer. On the customer behavior side, we did a big, big study, not only in Europe but also in the U.S. to understand how our customers are changing, how the behavior is changing. So there's a clear trend towards e-commerce as the #1 purchasing channel. But we also see that B2B buyers are much more looking for a B2C experience. And as I said before, sustainability is increasingly important for also B2B companies. As I said, there are accelerators, and we saw the last 2 years COVID and then the war in Ukraine. We don't know what's coming next, but we are sure that there will be another change coming. And what we can do from ourselves so from backside to be prepared for these challenges. So that's why we came up with something with a vision we strongly believe in, bringing new worlds of work to life because we care. We care not only about our environmental resources but also about the people we work with and the success of our customers. So what does it mean to us? We strive to actively develop new worlds of work. We will support our customers to become more successful, to offer their employees a better working environment. I feel strongly that in order to bring new worlds of work to life, we have to care, to care about the resources we use but also the people who help us to bring this vision into place. And as a result, this will ultimately lead to our customers', but also to our own, success. So what we did, and you will find it on the next page, we set up 3 divisions. These divisions are supporting our customers in 3 specific worlds of work. So with our division industrial and packaging, we're addressing the manufacturing and warehouse industry. With the second division, office furniture and displays, a clear focus towards the service industry is there. And last but not least, we see that for hotels, restaurants, catering the demand is changing. Also the environment is changing. So therefore, we have set up our foodservice industry who helps on the equipment side but also perhaps to present food in the right way. So let me now switch to the next page, and you will see there our market. So we operate in a market which is around EUR 110 billion altogether. So depending on the industry, we see it growing with or even above GDP. What you see is that we operate with a fragmented supplier structure. You see also that the competition is very fragmented. There's no clear market leader, which is good for us and for our industry. So -- and on the customer side, we also serve customers from solos to small offices, home offices to midsized companies, to big international companies. So what you see is big, big room for growth for TAKKT. And why is that? You will find on the next page. Currently, we have sales at around -- our sales are around EUR 1.2 billion out of EUR 110 billion market with a very strong presence in all markets. So we are among the top-10 players in each market. We have a very large assortment, and we have long-term relationship with our customers. And not to forget, we know also the good relationship to our suppliers, which are globally and -- but there's a big, big breadth of suppliers also locally in the markets we are in. So based on what I just said, I'm a strong believer in profitable growth because you see that the market is already there, and there's also a big trend towards e-commerce. So let me now come to our building blocks of our new strategy. So number one, we're clearly committed, committed to Europe and to North America. We prioritize market share wins in the countries we're currently in. We do not plan to regionally expand our businesses to other European and North American countries in the short term but really focus where we are. In the mid-term, we think about expansion of the business in also other European and North American countries. But as I said, only in the mid-term, not in the short term. So focus is to gain. Second, as I said before, we want to play in 3 worlds of work. These worlds are industrial and packaging, office furniture and displays, and FoodService. Last but not least, we give a clear commitment towards B2B and B2B customers. As I said, from small office, home office till big customers, big international companies, we serve both private and public companies in the industry segments I just mentioned before, from manufacturing logistics to service industry to the hotels, restaurants, catering industry. So therefore, we believe with what we have in focus and which is also where our strength is, we are set up for growth. How we do that and what the business model behind this, you will see on the next page. So what you see in the 3D graphics on the left-hand side, you see our business model. On top, you see the customer segments we play in, we operate in, manufacturer and logistics; service industry; hotels, restaurants, caterers. Because we see that their environment is changing, it also requires us to change for the better. That means we have set up 3 specific divisions. You also see our brands there. So we currently operate with a lot of brands. And what you also see at the bottom is the tech platform and the operations platform. So what is it what we plan to set up, one platform to be more scalable and be more efficient. And that's also our strategy, very straightforward, 3 main pillars. One is growth, another 1 is OneTAKKT, and the third one is caring. On the growth side, it's clearly about our setup, 3 divisions, but it's especially also about e-commerce and smart pricing. OneTAKKT is a synonym for integration for scalable platforms in supply chain and tech but also about how we work through a new collaboration and employee empowerment. Last but not least, and it's the frame of the whole picture on the left-hand side, it's about caring. I'm a strong believer in this differentiation -- differentiating factor. So with the focus we will have on customers, employees, but also on sustainability, this will be one of our newest piece. This slide is summarizing and is perhaps one of the most important ones in my presentation as it brings together the 3 main value drivers of our new strategy with what we are trying to achieve and how we implement the strategy by reaching out for new opportunities. Coming to the growth pillar. So we see a huge growth opportunity through stronger customer focus via our new divisional setup. This is supported by e-commerce excellence. Of course, we will do a lot of work in pricing now starting with inflation management and also focusing on our margins that we keep our margins under control. But there is also one part where I believe really that we even could do better. It's the share of wallet we have currently with our customers. I think on the cross-selling side, there is room for improvement. And last but not least, some of our companies were really hit hard during the pandemic, so Hubert, Displays2go and Equipped for Work. And what I see in the last 3 months is really very promising. So we see some relief. We see that these companies are already growing. And so what we will do is really focus on further growth also in these companies and also via repositioning. Let me come to the second pillar, the OneTAKKT initiative. Here, we clearly aim at scalability and more efficiency via integration. We will harmonize our tech platform, also to set up an integrated data platform and work on a global supply chain platform. HR and finance will also become more integrated. Our third lever is caring, and we see that there will be new traditional business opportunities. Not only we are convinced that our success is directly linked to our employee engagement because only happy employees will bring up happy customers. We also believe that additional growth opportunities lie within the increasing assortment of sustainable products and also in new circular business models. M&A is here to help us to further accelerate. And we believe that this can also happen, especially on the caring side. Let me come now to our financial and nonfinancial targets for 2025 with our conviction to reach with our growth program sales of EUR 2 billion in 2025. We believe in an organic growth rate of around 10%, and we believe that a major driver will be our e-commerce growth of annually 15%. Additionally, we see M&A opportunities, which will help us reach our sales goals. Coming to the second point to OneTAKKT initiatives. So these initiatives will help us to increase profitability by 2 to 3 percentage points. Our EBITDA goal for 2025 is EUR 240 million, and our tax cash flow we aim for is EUR 150 million. But as I said, it's also important for us to really focus on the topic of caring. We also set very specific targets here. So we will measure the satisfaction of our employees with the employee NPS and the satisfaction of our customers with the customer NPS. Our target is clear, customer NPS stabilizing at 60 because we believe we have already very good customer satisfaction, and it's our target to keep this high satisfaction. On the employee NPS, we're currently at around 16, and our game is to get up to 50. It is also for importance to us to really make a difference in terms of sustainable products. Currently, we are around 7%. Target by 2025 is to increase that to 40%. And for me personally, diversity is a key, key topic because I believe diverse teams achieve better results. Therefore, we're also committed to increase our woman quota to 45% in 2025 and to 50% in 2026. So with our strong vision, our clear strategy, and together with our employees, suppliers and customers, I'm so deeply convinced that we will be able to reach our strategic goal for 2025. Having said that, I will now hand over to Claude, who will give you a short update on what we have delivered in 2021, and then we will sum up and be ready for your questions. Claude, may I hand over?

Thank you, Maria. A warm welcome to everybody on today's call. Let me give you a few more details and some more information on our annual report for the year 2021. Key financials for that year, starting with the sales figure, which has come in at an amount of EUR 1.178 billion. This has meant a reported growth of more than 10% and currency adjusted organically sales growth of even 11%. The operational EBITDA has come in at EUR 112.6 million, which is EUR 20 million more compared to the year 2020 and the net profit with a figure of EUR 57 million also has come in similar to the EBITDA, an increase of plus EUR 20 million compared to 2020. Free TAKKT cash flow has come in at a figure of EUR 52 million, which is much less than the year before. And of course, this has a reason. The net working capital cash in, we have seen tremendously happening in the year 2022 -- 2020 has of course then been reversed in the year '21, very similar figure, and that thing has been the major root cause for the free TAKKT cash flow in '21 being much less than the year 2020. A high equity ratio, 62%, which then also has been one of -- not just the only one, but one of the indicators for the management team to propose a dividend of EUR 1.10 per share, which is a EUR 0.60 base dividend plus a special dividend of EUR 0.50, and we'll come back to that in a few minutes. The sales figure I was commenting the growth compared to 2020. It's also interesting to look at that figure compared to the year 2019, which is kind of the pre-COVID period. We have achieved a sales figure, a revenue figure in the year '21 on a reported level, which has come in 3% less than the year '19 and organically 2% less, so we can conclude we have been almost there to achieve the same figure of the pre-COVID period with the year '21. And the profit at EUR 112.6 million. If you look at that operationally, the margin has increased 1 percentage point, going from the -- let me call it -- let's call it the pandemic year 2020 to be at 21%, 1 percentage point more profitability. And if we were to correct for EUR 6 million one-offs in the year '21, we could conclude that the operational profitability has come in with the figure of slightly above the 10% mark. Yes, a little bit gross profit margin, one of the major drivers of our profitability in our business model. We have shown here on next slide the different components of our gross profit margin, which overall in total has increased by 50 basis points. The very good news is that the product margin has come in at a stable margin, which means we were able, in the year '21 to pass on all the cost increases from the vendors and the product vendors towards our customers despite the high inflation we have seen especially in the second half of the year. At the same time, we have not yet been able to pass on all the freight cost increases which have happened, so you can see here the negative influence from the freight -- being in total the freight in, where we have considerably seen huge cost increases, especially from the containers from Asia but also the freight out [ growth ] as costs have been in a strong growth rate. And here, you can see the negative impact in the year '21, which then has been compensated in the inventory obsolescence 1 percentage point higher, or the other way phrased, we have seen quite a bit of inventory obsolescence in the year 2020 due to the slowdown of the sales due to pandemic challenges we have, and this has not repeated itself in the year '21. And so that is here a element which is predominantly coming from previous year, and it has not repeated itself in the year '21. Overall, with our gross profit margin reported above 40%, we are on track to still achieve high gross profit margins despite the inflation [ gearing ]. Operational profit. EBITDA increased stronger than sales. We have seen a increase of 10% in the sales figure here on EBITDA level. We can see a growth, which is around the 20% mark. And if we look into the different components, you can see here that the gross profit coming in at EUR 49 million, and then the marketing cost, the personnel cost and the other costs of course have been higher than the previous year. If we look into the different cost categories, the marketing costs have developed broadly in line with sales. We have seen a slightly better marketing efficiency. So the marketing cost revenue ratio has been reduced by 20 basis points. But overall, in line with the sales figure is the big conclusion. The personnel cost is the one which of course here has increased a lot in the year '21 compared to 2020, and there's 3 main reasons for that. First, we've seen a lot of short-term labor in the year 2020, which then have not been continued in '21. Second, due to the better performance we have seen considerably higher bonuses in the year '21. And third, we have also started to invest in one or the other personnel cost into again another role to get us ready for the strategy which Maria just explained to get us ready for the strong growth we are expecting. If you then look at the other costs and the onetime effects, both are regarding as below EUR 3 million. So the other costs have been managed quite well on a similar level, and also the onetime effects have not created a lot of deviation compared to previous year. We have seen EUR 6 million in '21, and EUR 8.5 million in 2020. So here, rather a comparable level. Let's move on to cash flow and especially free TAKKT cash flow. And of course, the first thing which slides, once I hear on that page is the reduction of cash flow from operating activities coming from EUR 94 million going to 56 million, which is a reduction of EUR 38 million, and that is coming predominantly from trades working capital, so to say from trade payables, trade receivables and inventories, and we have seen almost a similar figure, EUR 38 million cash in, in the year 2020, where now we have seen a cash outflow of EUR 38 million. So that's kind of swinging back when the business first -- as business volume is reduced, and now the business volume is again increasing the other direction. That's the way we look at it. So here, we've got that big thing in overall net working capital with -- in addition to the CapEx fees we had in that year of EUR 18 million and then some perceived some selling to states, which we didn't to companies if you didn't control, so minority states parcel up into the system, some proceeds coming in have led to that EUR 52 million result in free TAKKT cash flow. So how do we look at that development and especially when it comes to these huge amounts on inventories and trade receivables? If you look at the overall level of inventory, you can conclude that we are at the moment, compared to the sales figure at 2 percentage points higher than it used to be in the pre-COVID situation. And this is, of course, predominantly due to the supply chain challenges we see out there. So this has led to a higher figure on inventory. And of course, we are hoping once the supply chain will ease in the future, that that, of course, then would, at least proportionally, compared to sales go down again to pre-COVID levels. And similar on the receivable side. Here, we are 1 percentage point higher than we used to be in the pre-COVID period. And the big reason here is also due to supply chain where it is for inventory, higher lead times, it's parcel shipments on the receivable side, which means that it's much more difficult now these days to get all the elements together for one specific customer order. And so you start to ship out partially the order, and then you try to, of course, finish the order in total, and that mechanism customer pays after we have finished the total order means that there is one or the other higher receivable amount on our balance sheet, and also here, we expect that that should, again, normalize after the supply chain will ease again. In the long run, free TAKKT cash flow has shown a stable long-term positive development, positive trends, that's the yellow curve here. You see also on the red curve, the EBITDA, which has come down massively last year and then now the first big step towards again the pre-COVID level where the yellow curve, the free cash flow has come after a record year last year down to that EUR 52 million. And as I explained that the big swing as cash in from net working capital and not cash out. I think it's fair to say that we would -- we should look at the 2020 and '21 more in total through the cycle and possibly added to figures and averages to something like EUR 90 million is free cash flow. I think that would be in the trend we are seeing here, the amount of money we have been able to achieve on average the last 2 years, EUR 91 million per average for 1 year. I think that's the figure we can conclude. The balance sheet is still very, very solid. It enables dividend payments and enables as well as -- enables as well M&A for the future. On the net financial liability, our figure stands at EUR 105 million now. 3/4 of that is coming from lease liabilities, which is an easy one to explain. Our rental contracts, which we have of course then to pay in the future, and so here, you can see that only EUR 30 million is a bank liability or financial liability, not being a lease liability. So we have here very, very low debt, and that is also expressed in the equity ratio, which has gone down a bit, 62%. The balance sheet has been enlarged here after the working capital has increased but still a very high figure, and that is giving us a lot of comfort to pay also dividends in the future and as well as finance M&A going forward. Two sentences on the TAKKT share performance. We have seen a performance of more than 50% total share return in the year '21. And of course, after a more difficult year 2020, we have to admit, so if you look in total for the 2 years -- for the total period 2020 and '21, we have seen a total share return of 31%. And I think that's at least something where we can conclude we have been able here to go through that difficult period with, at the same time, an increase of share price in total securities. The shareholder structure has slightly changed. We were informed beginning of this year that our major shareholder holds almost 60% at year-end '21, and it has increased its share, which we can see as a very good, positive message that the major shareholder is believing in TAKKT and into the new organizational strategy and has as a consequence here enlarged its share. A word on the dividend proposal. We are proposing EUR 1.10 to pay out for the annual year '21, which is a EUR 0.60 per share base dividend plus a special dividend of EUR 0.50. And for us, it's important then if you look at the longer term that we are very committed and also for the future to say we're committed to a base dividend, which we have now locked in at EUR 0.60. And if you look back here on that chart for years, we have not gone backwards. Of course, there's one specific exception for the annual year 2019, which is the decision we have took in the year 2020 when the pandemic hit us, we didn't know what that would bring to the world. We have done -- last year, decided, as you know, to have just postponed that base dividend rather than to pay it out. And so you can see here that the year 2020 has also seen a dividend of EUR 1.10, which here was consisting of 2 base dividends, this is something we want to be clear on a little over EUR 0.50% for the year 2020 as well as EUR 0.55 for the year '21. So that was just postponed the dividend. And hence, while we paid out here also EUR 1.10. And as I said, the new proposal now for May '22 to be paid out is also EUR 1.10, but the components are different. And the message is we are happy to also pay definitely the base dividend in future. And if we have a high equity ratio and funds, which we cannot reinvest into M&A, we're also happy then to consider a special dividend going forward. Having said that, thanks for listening. Thanks for your attention. I'm happy to hand back to Maria to talk about the outlook.

Thank you, Claude. And just let me wrap up a thing that the 2021 dividend proposal should be a clear signal about our -- the Board's confidence both in future business opportunities but also in the strong growth potential I just outlined in our new strategy. So against the backdrop of high inflation, the geopolitical risk following the Russian invasion in the Ukraine, the business confidence is underpinned by the acceleration of change, a change we see towards e-commerce, a change we see towards sustainability, but also a change in how we all work. And with this in mind, I -- we strongly feel that we have created an attractive investment case for profitable growth and high yield. So let me now share with you the framework for our thinking and presenting the outlook for 2021 -- 2022. So it's important to bear in mind that this is unprecedented external factors in regards to the war we see in Ukraine, and after having been 2 years in corona. So -- but still, as I said, we feel strong about the growth opportunities of our new strategy, and we believe that the acceleration we source from megatrends through shifts of customer behaviors and also the ongoing changes in how we work, these trends will help us to deliver. So on the economic environment, I think it's no surprise that the invasion -- the Russian invasion into the Ukraine has already led to higher commodity prices and also reduced business confidence. What we see is higher inflation and some supply chain constraints, which we also saw 2021. So there's still hope that we see an ease in second half of this year. So that's how we see the economic environment. If we go to the focus of TAKKT, clear focus is on 3 topics. But let me start with what I also see that we try to focus on our own capability to really weather the latest storm. So that's what we are here for. And just also to remind you, we decided that we end all business relationships with and in Russia. We did that, so I think also a clear signal from our side. So what are the focus areas? Number one, secure the supply chain and inventory management, especially, of course, on the core and fast-mover topics. Second, inflation management, here also Claude said, clear focus on gross profit margin stabilizing. And third, but not least definitely also on acceleration of our transformation so bringing our 3 pillars into place, growth, OneTAKKT and caring. So assuming a limited economic impact further of the war we see in Ukraine, we have also an ambition for this year, which is a high single-digit organic sales growth and an EBITDA which should range between EUR 110 million and EUR 130 million. Please note that we have incorporated in this outlook all information available at this point in time. The war in Ukraine certainly does already have an economic impact. As of today, we do not expect the impact to worsen even further. So let me now summarize what we presented to you today. So we announced a new vision for TAKKT to bring new worlds of work to life. In this respect, my personal ambition as a CEO is that we become a trend-setter, a digital B2B [ front joiner ] for new worlds of work in Europe and North America. We then talked extensively about the shift in megatrends impacting the B2B equipment market, where we specifically see new growth opportunities for us. And on that basis, we developed our new strategy, 3 pillars, as we said, growth, OneTAKKT, caring, and all of them should definitely support our investment proposition. So the strategy is also results focused. We clearly set 3 major financial targets for 2025. So EUR 2 billion in sales, EUR 240 million in EBITDA and EUR 150 million in free cash flow. This is what we want to be measured at and on what we will frequently also report back to you. So finally, and this is where our vision and future business confidence comes together. We have a clear commitment, a commitment for environmental resources for the people we work with for our employees and our suppliers and, of course, also towards our customers, where we see ourselves obliged to help them be more successful. So new worlds of work will only become reality with highly motivated people, with highly motivated employees, grateful and supportive customers and a long-term sustainable planet. So our claim to ourselves is clear. We want to become a company which is known for caring, and caring for employees, for sustainability, and for customer success. So with this, I have come to an end. Thank you all for your attention, and Claude and I'm now available for your questions.

[Operator Instructions] The first question is from the line of Craig Abbott from Kepler Cheuvreux.

I have 2 questions to start with and may have more later. First one is just if you could maybe break down for us a bit more then the EUR 20 million in, let's call it, cost or investment related to the transformation process in and talk through that as well what activities are being centralized and kind of the road map for that? I'll wait for an answer on that, and then I have one more question.

We have budgeted for EUR 20 million cost to be invested for our transformation for the year 2022, and these are 2 components. There is one component which is a high single-digit figure considering what we call restructuring costs, which means changes in the organization and then, of course, the costs which go along with that. And the remainder is for change costs where we develop, where we build new capabilities and new functions to enable the growth for the future, being it projects, being it personnel costs. And when it comes to what is centralized as a function, I think we...

Yes. So let me answer on this one, Claude. Thanks for the remarks. So we really believe in 2 platforms. One is the operations platform for the supply chain, where we see that we have further opportunities for scale but also opportunities for more efficiency. The second one -- the second big one is the tech platform. So how can you make sure that, on the tech side, on the tech stack side, we are capable to further scale but also to further reduce our investment. Our plan is to have somehow the same CapEx to revenue ratio as we had previously, so around 2%. So if you ask me about specific road maps, of course, we have one. We have set up strategic initiatives, and we are now setting up on a quarterly basis what the deliverables are for technologies, data and supply chains.

Okay. And the second question is as you made very clear many times throughout the presentation, you need motivated employees to buy into the strategy and to make it a success. At the same time, though, you -- if I understood you correctly, the employee morale number appears to be quite low currently. I think you said the employee EPS score was just 16%, and you are targeting bringing this to 50%. Just wondering if you could provide us with sort of -- so a 2-part question on that. The first part is provide us with what concrete measures are you implementing to improve this? And the second part of that question is, obviously, we all know it's a very tight labor market where inflation is an issue for everybody. Would this maybe not mean that you could see a pretty significant wage inflation in order to keep quality staff and to entice new employees?

Yes. Thank you, Craig. So maybe just to give you a short intro on employee NPS, Net Promoter Score. So we ask our employees, so would you recommend TAKKT as an employer to friends, and then only the #9 and 10 answers will count as positive. You have some neutral and then from 0 to 6 are counted as negative. So our -- the 16, so it's not a percentage, it's like the eye test, and it's very diverse. So between the business units we have, so it ranges from 0 to 90, so very different in each and every business unit. But of course, our target is 50, so that we really have employees who are 150% engaged and empowered. And I think that's our job also from the Board but also from the management to empower our employees. So it starts with a clear vision, a clear strategy, and communicating the strategy. And then what I see, at least in my experience, if employees see that they have an impact, that they get appreciation for what they have been -- they have achieved, this motivates. And of course, your second topic was wage inflation. Of course, we have provided financial but also nonfinancial benefits such as mobile working, which are adequate in the markets we are in. So definitely that's something we also have a focus on.

The next question is from the line of Christian Salis from Hauck Aufhäuser Investment Banking.

Christian speaking from Hauck Aufhäuser. I have a couple of questions, please. Maria, thanks for your presentation and for your 2025 vision, very interesting. So my first question would be to you directly. Now that you have been with the company for a couple of months and learned to know the company now probably much better, what do you think are the biggest levers that are untapped yet, both in terms of growth and profitability? And to what extent do you see any low-hanging fruit in the organization?

Thank you, Christian. So what are the -- so thank you also, if you see our 2025 [ presentation ]. So biggest levers. As I said, in the growth area, I believe with our new divisional setup in the 3 worlds of working, so we have clearly a focused customer segment in mind. What I see there is that, due to the setup, we also will understand customer needs better. That means can also do better cross-selling and increase our share of wallet. So share of wallet, cross-selling #1 lever. We already did some good first steps in this direction in Europe so very good signals that this is working. Second one, is the topic of e-commerce. So what we see is already, our e-commerce share is at around 60% so significantly impacting. And as we said, our ambition is over 15% per annum. That's how we also now measure ourselves return on marketing invest. So how can you spend each and every euro more efficient and get more output off it. I would say this is a second key topic. On the profitability side, maybe 1 or 2 examples. So what we see is, especially on the warehouse side, we see some quicker wins we can achieve. So how can we use warehouses in different business units more than we did it so far, so that is one topic. And I would say another topic is also on the margin management on the inflation management so how to deal now with inventory, that is maybe another example I would love to give to you.

Okay. And then the second question would be on the historic -- sorry, on the organic growth number. So 10% organic growth for the year looks quite ambitious to me, particularly, I think TAKKT rather grew by less than 5%, I think in 2018 and '19, and also, I think before 2018, the organic growth was about 5%. And I think back then also the target was 5%. So 10% is really a big step in my view, particularly every year in the next 3 or 4 years. I understand there is kind of a cyclical recovery, hopefully, going on in the next 2 years. But after that, yes, 10% looks pretty bullish. And also particularly, if we take -- if we look at the competitive landscape, remember, we discussed a couple of years ago, we discussed a lot about Amazon going into the space, into the B2B space, particularly in the transactional market segment, which is roundabout 1/3 of your business, if I remember correctly. So how do you see that evolving the competitive landscape? And how do you come then to the 10% organic growth per year?

Yes. So you have seen the numbers from last year. So on an average, we grew already above 10% last year, so just one thing here. We apply for this year for '22 high single-digit growth rate. We see that this year, we're not there yet. But what we will do, and as I said before, we see a very fragmented competitive landscape, where we see a trend towards e-commerce, towards omnichannel. And I think that's where we're really strongly positioned. So we are a B2B player and not focused on B2C, which helps us to keep all of our promises. And you see that also in the high customer satisfaction. So here, it's about reliability of supply. So that's where I also believe we have the big advantage. And as I said before, so we are now set up in 3 divisions. We have -- 40% of our revenue is currently in the U.S., 60% in Europe, which will also help us to take the growth rate of the different continents. And on the other hand, you also see that this packaging, for example, or with FoodService, where you see significant growth rates now after the pandemic, and that's also what we built in, in our belief that we can grow by 10%.

Again, what are you thinking about the working from home trends? How is this affecting your growth strategy?

Yes, so that's a very good one because working from home is for our office furniture and display segment also a trend we need to talk and need to think about what's coming up in the next 3 to 5 years. So what -- and what we see is that, especially for the division, office furniture and display, so we see that there's -- the trend for hybrid will continue. So our belief is also what we see that it's for employers more important to bring all this back to the office. So they have to create new working environments -- and new working environment means all the collaborative zones means being also with a good kitchen facility there, and this is opportunity for us. That's what we see, and where we also now adapt our assortment. And what I meant before with cross-selling, this will always be an opportunity for further cross-selling among the divisions of -- yes.

And then final question, what are the margin drivers behind the margin expansion you described [ to extend ] I think until 2025, right? -- so in 2022, I think the midpoint of the guidance implies a slight margin decline 10 basis points, if I'm not mistaken. And also, I think the trend towards e-commerce is rather providing a negative mix effect to the margin. Could you update us on that, please?

Yes. Thanks for the question, Christian. When it comes to the EBITDA margin, if I understood your question correctly, you referred to how do we achieve a 2 to 3 percentage point higher operational margin in the future by 2025 compared to today. At the moment, we are around the 10% mark or possibly reported 9.6%, and then we have these one-offs. And our 2 big levers to get there is, first of all, the growth. So at the moment, we are a portfolio company with a lot of one bigger and then a lot of midsized and even smaller-ish companies to integrate and then to be able to use that growth rate of 10% to be delivered and executed on a more integrated platform, of course, leads to scalability, and that's, of course, one of the big levers in that thinking how to get to a higher operation margin. At the same time, we want to keep the gross margin stable, as we said, even if there is possibly structure change in different channels but also to repeat, our e-commerce by default has not just a lower gross margin. It depends on a different business model and depending more on the product range than the gross margin we can earn and even not so much on the channel. But besides that, that from a growth point of view, then the scalability on the margin, I think there's a second lever, which has to do by integrating, of course, we are also able to get to one or the other efficiency gains just again to remind, at the moment, we're operating 7, 8, 9 different organizations. They all have their different ERP systems, their different webshop technology, their different CRM systems and so on and so on. So -- and similar on warehousing. So also here to put things together, we would see also not just a higher leverage on a similar platform but also some efficiency gains. And these 2 together, we felt there is a 2, 3 percentage margin improvement available to us coming from a 10% today. If you look backwards to TAKKT, I think we have achieved even in the past but a different story. So that's how we are looking into the future. Thank you.

The next question is from the line of Thilo Kleibauer from Warburg Research.

Yes. Some questions have already been answered, but I want to also come back on the growth plan until 2025. And I also try to understand how you can accelerate the organic sales growth to a structural level of 10%. You already mentioned the cross-selling potential where you see some opportunity, but there were also some other keywords like smart pricing and also repositioning of this place to grow and then through that. And maybe you can give us some more insight which in results you plan here in these areas?

Yes, Thilo, thanks and thanks for your question. So I mentioned already the cross-selling part. I mentioned already the e-commerce excellence part where also a significant part of the growth should come from. On the e-com side, we really want to have a 15% growth per annum. So that's what I already mentioned. On the smart pricing side, I believe also Claude said it. So we are at 40% gross margin. And our key topic here is to keep that. And how we do that is really both on the pricing side as well as on the purchasing side to get into deeper levels also to understand where we can still get some more euros and dollars because of different needs from our customers. So it's really about how we price in specific situations. And we will also have 2 automated tools in place in order to become better here. So that is smart pricing and the gross margin perspective where we see improvement potential. We also asked for what we see on Displays2go, Hubert and Equipped for Work. So when you check our numbers, you will also see that we got hit in especially Displays and Hubert but also Equipped for Work in 2020, partially in '21. Now for the first 3 months, I already see, especially from the order intake, a nice development in all 3 companies. That's where we further focus on how to get growth in place in these 3 companies? We have special projects set up in order to make sure that they come back to where they have been in terms of growth. And that is a significant lever also, not only in this year but for the years coming.

And maybe in terms of unorganic growth or M&A, maybe you can comment a little bit if you see currently good opportunities in the market? And if you have -- you have favorite segments, customer groups or regions where you want to acquire additional [indiscernible]. And you also put the foodservice sector as a relevant market in Europe in your presentation. I think up to now, your activities in FoodService in Europe are more or less marginal. So do you plan there to expand your footprint in the European FoodService segment?

So let me start with the M&A question. So of course, we have and we will closely follow the market. So as you are aware, we have not made any significant acquisition over the last year. And therefore, it speaks for itself. We are cautious and financially prudent here, I would say. But what we see is that we still -- as we are very selective and opportunistic, we screen the market, and what we see and like the -- what we do is I think we called it [ pulled on ] acquisition. So really, only we're interested in acquisitions where we release the 10 items with our share or which helps us on our caring approach, becomes a more circular business model or get a better sustainable product approaching. So that would be the answer to the M&A question. On the FoodService, my remark was that I believe in FoodService overall. As you are right, we are very dominant -- or not dominant. We have a very good position in the U.S., which I believe is good. We are a rather small [ food ] player in Europe. So first of all, what we do is focus now on Hubert and make sure that Hubert comes back to the growth we have seen already in previous years and on XXL Horeca, which is our FoodService Europe play, we will make sure that we get -- we keep the growth we are having. To the moment, there is no other specific acquisition planned in FoodService Europe.

[Operator Instructions]

Okay. There seem to be no further questions. So thanks all of you for your participation -- oh, there are some more questions.

Yes, there are. We have a follow-up question from Craig Abbott from Kepler Cheuvreux.

Yes, I mean, you've laid out your road map in terms of your revenue growth targets and your margin target, and you've helped us of course through that very kindly in this call. I was just wondering to what extent improving the overall ROCE longer term has also been embedded in your internal targets. I know it was something the major shareholder [ Haniel ] in the past and so that put a lot of instances on [ EVA ] return monitoring. And Claude, you mentioned, I think a lot of companies are telling us net working capital intensity actually had to increase just in part to ensure that you have a supply that you're going to need to achieve your targeted growth. Let's all hope some of that ends up being relatively short term, but we don't know. So I just wondered if you could just comment on that. Is improving the ROCE in the business structure over the next year is also part of your internal planning?

Yes. Thanks, Craig, for the 2 questions. Let me start with the ROCE question. Yes, at the moment, and similar for what possibly what we call the value-add -- tax value added. Yes, it's still have caused ambition from the TAKKT management to achieve some much better return on capital employed, SME on coming out of the pandemic and with the growth and kind of the CapEx plan we've got in our minds to achieve this, which is still not so tremendously different to what we have disclosed in the past. It's kind of around the 2% mark of sales. So as a matter of fact, if we achieve these plans and with that CapEx need going forward, we would also quite significantly increase by default the return on capital employed if and as an if, the supply chain, of course, at some point, again, eases because one element also of today's capital employees of course the inventory and the receivables, which are a little bit above the normal, you would normally see it. And that's something we are, of course, focused on. We are hoping then once the supply chain will ease and to have to see again similar levels that we've seen in the past when it comes to the ratios, event to sales and also receivables to sales. Other than that, we're also very focused on cash, and despite EBITDA, we have seen -- disclosed the free cash flow figure by 2025. And also there, you can see that -- to answer your question a bit more overall in total, yes, we are still a company who wants to achieve that return on technical parts to manage cash very well on net working capital and to come back on the levels we have seen in the past when it comes to the different ratios and the growth plan, which is costed -- the fundamental driver of that should help us achieving our ambition.

Next question is from the line of [ Tom Dedra ] from [indiscernible].

So only 2 questions left, maybe I was wondering if you can give us some background on the permission of [indiscernible]?

Yeah, and you have second, or shall we start and take a seat.

Yes. My second question would be on current trading. So you're actually guiding for a high mid-single-digit growth in full year 2022. So can you give us some background on what you have seen now in the first quarter. Is that a growth rate we should also assume for the first quarter and also some background on the cost side and how inflation, how you're tracking inflation in the current quarter and so on. That would be also helpful.

So let me start with your first question on [ anchor feet ]. So making it simple, what we see is or how we evaluate, so really, we have evaluated all our product assortment throughout our business unit, and we apply must-have criteria so like no child labor, no corruption. So 2 suppliers really adhere to must-have criteria, one thing. Then we have impact criteria, and then we have into sustainable -- additional sustainable criteria. So for recycling, what's the impact on the climate, what's about the biodiversity. So more or less, it's the mastered criteria, the impact criteria and additional sustainable criteria we apply. So we raid all our products. And then, for example, you see that already this Ratioform with our Ratioform Teva products where we already concluded the rating, and you're seeing that in our offers on their web page. The second question may I hand over to Claude.

Yes, this is the question about current trading. If we look into the first quarter, we, at the moment, can report that we are on a higher growth rate than you're guiding the full year. And of course, there are 2 reasons for that. First, we have been at a lower level in the first quarter '21 before we accelerated last year set as a comps, of course, to take into account which becomes more difficult from the second quarter onwards. And of course, we also see one or the other, of course, influence on our pipeline following, of course, the Ukraine-Russia crisis and the movements overall with inflation, even if we pass it all on to customers. And so -- as I said, here, now we are at a higher growth rate in the first quarter where we guide that we normalize throughout the year due to the 2 effects I've just explained. Inflation, I think there was a third element of your question, how we're doing there and how we're tracking. Of course, we look at our gross margins very regularly, and we have measures in place to, of course, pass on all the price increases, which are coming to the vendors and the freight at the beginning, and that's also, I think, what we have said in our communication today. Again, here, we had a quite high gross margin at the beginning of '21 that's [indiscernible] almost opposite picture to when we talk about growth rate. The gross margin was quite high at the beginning of the year. and then it was lower at the end of the year in '21. So here at the beginning, we might be temporarily a bit below compared to previous year, but we are convinced that, throughout the year, we are able then to achieve a very similar gross margin to the year before. That's kind of how we look at these 2 topics.

All right. And maybe 2 short follow-on questions. And just to confirm your current guidance for EBITDA. This already includes the EUR 20 million one-off effect, right?

That is correct.

All right. Perfect. And then a very final question from my side. You already mentioned that you have no real exposure to Ukraine and also almost no exposure to the Russian market. And Maria, you already mentioned that you stopped doing your business in -- with Russian customers. Can you give us some sales share what you are generating in general in the Eastern European market?

So you're completely right. As I said, we stopped our business in Russia. So we had a business of below 1% of our sales in Russia that we stopped. We have 5 employees in Russia where we offered, of course, drops in Europe because we also see that we have a responsibility towards these employees. So in Ukraine, we don't have any business. But of course, we have employees who are Ukrainian. So therefore, we take also significant measures to help not only the people in the family, but also what we said is the donations our employees do, we are doubling the amounts as a company in one thing. We also -- what we did on the topic of supporting with our products -- we delivered products to Poland in refugee camp. So we take the topic very seriously, and also our U.S. colleagues are supporting. So we see that as a key topic for us to help even if we don't have a business in Ukraine. So I hope that answers your Russia and Ukraine question. And then you said like what I was.

[indiscernible].

Yes. So I give you like my assumption, I don't put it to me on each and everything you said, but I would say around 2% to 3% of our overall business. It's just been recently to the CE region, I would say, something around EUR 25 million. That's -- it can also come back with a better -- more clarified number on this one. Yes.

Our final question is from the line of Catharina Claes from Berenberg.

On topic of inflation, do you believe you've spoken of the development you have [indiscernible] in place to pass on inflation to customers in light of skyrocketing inflation everywhere at the moment. Do you see any risk that you might not be able to pass on the cost inflation you see fully 2022?

So very, very good question. And that's also what is, I would say, also our top priority one. Topic we have in the unit in the business units but also what Claude and myself tries because I think it's our path to make sure that we pass it on. We see different kinds of inflation topics now. So first of all is, as I said, raw material prices increase, that will end up in product cost increase, so how can we make sure that we pass on the increasing cost to our customers. Second one is, especially on the freight, not only in inward but also in outbound freight, so you all know about the shortages of drivers in Europe. You see that fuel costs are increasing. So on the freight cost, same here, a key priority for us is to pass it on, either in the product or as a surcharge. So that's what we're working on. So -- and then I think these are the characteristics we see. Of course, there is an indirect impact. So what happens to the over economy, but it's something we only can marginally influence -- but we also doing everything from our side that we make sure that, as we see currently, the demand is still high. We also help to our business units to have the right inventory in place so that we really can fulfill this demand. Anything else, Claude, which I forgot. Okay. Yes. Hopefully, I addressed your question.

There are no questions at this time. I hand back to Maria Zesch for closing comments.

So thanks a lot for listening. Also, I really like the question session at the end. Thanks also for your continued support and looking forward to speaking to you soon. We also will have the opportunity for meetings with you. So if you want to meet with Claude and myself, please address it to our Investor Relations team. And on the -- on April 28, we have our Q1 results. So looking forward to seeing or hearing you again on the 28th of April. Thanks for the moment and all the best, and stay healthy.

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