TAKKT AG (TTK) Earnings Call Transcript & Summary

Thank you, and welcome to our earnings call for the preliminary results 2023. I'm hosting the call together with our CFO, Lars Bolscho. And today, we will present you our preliminary results and give you more insights into Q4 financials. As you have seen, the development in Q4 was in line with expectations. We have shown that this is -- in this challenging environment, we managed cost effectively and improve our cash flow significantly. Before we go into the Q4 financials, I want to give you a high-level understanding about our view on the full year of '23. The headline for '23 would be TAKKT showed resilience. And let me explain what this means. So coming from an already weak environment in the first half, we saw a further decline of economic and also general conditions in the second half. The GDP growth in Europe slowed down with a clear recession environment in Germany, and the lowest PMI since spring 2020. In the U.S., the Restaurant Performance Index showed a negative trend over the course of the year with a score below 100 in December. And the near shutdown led to much less demand from government customers in half year 2, especially in our OF&D division. So looking back on TAKKT's 2023, we saw 2 different halves. First 2 quarters were in line with our expectation of a somehow softer start into the year. And then going into half year 2, we were more optimistic. We expected a slight acceleration in growth, which was supported by a very positive trend in July. But instead, we saw a significant decline in demand since mid-August. This weakness in our markets continued also in Q4. To counter the soft top line development and mitigate the financial impact we clearly focused on improving our resilience and efficiency. We worked on improvements of our gross profit margin and doubled down on our efforts in cost management and also cash management. So we have shown already in Q3 that our focus on gross profit margin, the cost management, and the cash generation deliver results. This has been even stronger in Q4. So for the full year, despite the weakness in the top line, we achieved a significant improvement in gross profit margin to 39.8%. We managed costs and we delivered EBITDA in the middle of the range we guided for in October. And we increased the pretax cash flow very strongly to EUR 92 million. That's an increase of more than EUR 20 million compared to last year. So let me also once again highlight that we have an important asset. It's a very solid balance sheet. So while we manage costs very tightly in '23, we consciously ring fenced our strategic initiatives to not lose speed with our transformation. And I'm happy with the progress we have achieved in our strategic pillars, Growth, OneTAKKT, and Caring in the last year. We have transformed the company towards 3 divisions and 4 group functions, and we have also made significant progress in implementing our value levers. Currently, we are operating in a difficult and challenging environment. And you could say we focus more on the resilience than on growth at the moment. At the same time, I'm convinced that the potential in our markets is huge and that we have a lot of undealt potential to accelerate our organic growth. We have until continue to build our foundation for future growth and also efficiency. So let me give you more details on what we have done and achieved in '23, along the 3 strategic pillars, Growth, OneTAKKT and Caring. Let me start with growth. Two of our 3 divisions now operate with integrated commercial functions. We have merged the previously separate teams of different brands for marketing, sales, and category management. This allows us to be more efficient and offer customers a broader range of products and increase cross-selling. We also relaunched kaiserkraft, our biggest brand to address next to the industrial equipment packaging needs of our customer also in the packaging side. In e-commerce, we see a great growth momentum in our e-procurement channel in I&P, and which we definitely will also further focus on. As we have further harmonized our brand landscape with the closure of the Certeo brand and the integration of ratioform in the kaiserkraft, we will see more brand power from kaiserkraft, and this will help us increase our marketing efficiency. Less visible but equally important is our push towards smart pricing and margin management. We go for more differentiated and also flexible pricing approach. We have developed capabilities for a more automated pricing, and we will continue to implement this further. Let me come to our second pillar, OneTAKKT. In our push for more scalability and efficiency, we have made a lot of progress with building up our group functions. In tech, we are reducing the number of tools we use and integrate our core systems, especially in I&P and in FoodServices. This will enable further growth as cross-selling will become simpler to execute. Additionally, we will save costs in development. In operations, we are already seeing improvements, for example, by reducing the number and the cost of our warehouses in Europe. And our supply chain integration is helping us to realize savings in freight costs and improve our gross profit margin. In procurement, we profit from bundling our purchasing efforts in the divisions. And group finance and operations did a really great job with cash steering and managing down inventory levels in a centralized approach last year. This has helped us substantially to get to the free cash flow target that we have set ourselves. Last but not least, our Caring pillar. So looking at our Caring initiative, we see very good customer feedback for our push towards a more sustainable product range. We have increased the share of enkelfähig products to 24% at year-end. And we are very happy that our commitment and also the approach to sustainability is being recognized externally. In November, we won the German Sustainability Award in investment goods distribution category. Our team is super proud of this recognition. Getting better through diversity is one of our key beliefs. We are proud of our 50-50 female/male quota in our extended executive team. So let me conclude. We will continue with our strategy execution in the coming years and further evolve our growth and value levers. We will present our view on our strategic way forward in more detail when we publish our annual report end of March. But let me also be clear, we will continue with our focus on efficiency, lean cost structures and cash in the current environment. So before I hand over now to Lars, let me share with you a quick overview about our financial achievements in '23 and the dividend proposal. As mentioned before, customer demand was slow. Sales and earnings development in '23 was in line with our forecast from October. Sales reached EUR 1.240 billion, and with a minus a 5.9% organic growth, that's what we have achieved. As already mentioned, the improvement in our gross profit margin for the full year. So we have achieved the target we've set ourselves in '23. EBITDA full year was EUR 111.8 million, and with that in the middle of our guidance range. And as I've touched before, our free cash flow increased by 30%. This results in an improvement of our equity ratio to 64% and allows us to propose a total dividend of EUR 1 per share. We believe this is quite an attractive dividend yield of 7%. We want to let shareholders participate in our strong cash generation last year. For now, I will now hand over to Lars, who will give you more details on our financials.

Thank you, Maria. Welcome, everyone, from my side as well. And now let's go a bit deeper into the financials for Q4 and the full year 2023, then later talking about our preliminary numbers. And I want to start with a look at the key financial topics of last quarter of the fourth quarter 2023. Overall, our cautious expectations heading into the fourth quarter were confirmed. We had negative GDP growth in Germany. Stagnation in many other European economies and softer market environment in the U.S. Overall, weak specific indicators for our business. Against this background, we saw a continued negative top line trend with organic sales in the quarter at minus 11.3%. While top line development remained challenging, we did a good job in adapting to this environment. We can see good results from our intensified focus on gross profit margin, on cost management, and on cash generation. On gross profit margin, we improved by almost 2 percentage points compared to the fourth quarter of last year. And yes, the fourth quarter '22 was a weak gross profit margin quarter. Anyhow, we brought gross profit margin in the fourth quarter '23 to 39.9%. We also significantly reduced our cost base compared to last year's quarter despite adverse effects from inflation and also transformation costs. noncash, we continued our strong cash generation also in the fourth quarter and generated an additional EUR 31.5 million free TAKKT cash flow. Before looking at sales and EBITDA in more detail, I want to give you an update on a goodwill impairment we had to realize for our cash generating unit, Displays2go. We have highlighted the increased impairment risk due to higher interest rates in our last call. And now after having completed our impairment test, we had to adjust the value of our D2G cash-generating unit by EUR 37 million. As you're all aware, this impairment has no cash impact, and therefore, also no impact on our dividend policy. The impairment was mostly due to the increase in interest rates, but also a consequence of missing sales recovery after the COVID pandemic. For other goodwills within TAKKT Group, there was no risk identified despite the higher interest rates. Looking now at more detailed numbers for the fourth quarter. And I will start with the TAKKT Group. On sales, top line came in as expected at EUR 285.4 million, which is 13.3% lower than prior year. Adjusting for a negative 2 percentage points of currency impact, the organic growth was at minus 11.3%. Looking at our divisions. FoodService activities continued to perform better than Industrial & Packaging, and Office Furniture & Displays. More on this on the following slides. Let's continue with the profit development. EBITDA in the quarter was at EUR 24.6 million, which implies a margin improvement from 8.2% to 8.6%. So an increase in profitability despite a double-digit decline in top line might be a positive surprise for some of you. Two comments on that from my perspective. First, it shows that we know how to adjust in a weak environment and that our increased efforts paid off in the fourth quarter. At the same time, to some extent, the improvement in profit margin versus prior year is also due to a weaker Q4 in 2022. This is also true for gross profit margin, where we improved versus prior year by 1.7 percentage points. Here, we manage down our cost of goods sold and also our freight costs in addition to ongoing sales price increases and optimizations. We finalized the fourth quarter right at our threshold of 40%, which is good and important for us. While last year, we ended up way weaker in the fourth quarter with 38.2%. On costs, we had in the fourth quarter substantially lower marketing costs, but also less personnel and less other costs bringing us to a leaner cost base compared to prior year. Therewith, our further intensified cost management showed traction. Onetime effects contributed about positive EUR 1 million to EBITDA in both years, so in '23 and in '22. Main positive impact in the fourth quarter '23 was a planned sale of an office building in France after we have moved our activities into a new office in 2022. Let's have look now at the division, Industrial & Packaging. Sales came in at EUR 162.7 million and down 11.3%. Almost no currency impact here, so organic growth was very similar at minus 11.5%. In an environment that was characterized by very visible weakness in European manufacturing. And this pretty much affected all of our sales regions to somewhat similar degree. The decrease versus prior year was also impacted with 3 percentage points by the closure of our Certeo activities we have done earlier in 2023. On the right-hand side of that slide on profit, EBITDA at I&P was almost stable at EUR 23.2 million. This is an improvement in EBITDA margin to 14.2%, which shows the good resilience of our European division in the fourth quarter. We achieved a strong increase in our gross profit margin. We reduced the marketing spend and other costs while keeping personnel costs stable despite wage inflation. And we benefited from a onetime gain of EUR 1.5 million from the already mentioned sale of real estate of our French office. As mentioned before, this was planned for the fourth quarter after we had moved our office to a new site earlier. But also adjusted for this positive onetime impact, the profitability increase in I&P would still be 0.5 percentage points to 13.3% of sales. Now over to the U.S. and our Office Furniture & Displays division. Let's start with sales development again. Our top line performance was similar to the third quarter with sales coming in at EUR 61.4 million, which is an organic decline of 14.7%. Both NBF and D2G were in the double-digit negative growth area. You might remember that we talked about the weakness in the government business, and the near government shutdown, which have a clear negative effect on order intake at NBF in September. This development also affected sales in the fourth quarter, especially in October. We already talked about D2G at the beginning. Here, we also saw a similar performance in Q4 as in Q3. Overall, the weakness in demand we were facing was somewhat confirmed by unstable market indicators and also some weak results of other players in the Office Furniture & Displays market. Looking at profit, we see the second division where we achieved a profitability increase despite very weak sales development in Q4. EBITDA was EUR 5.0 million and with that, an improvement in our EBITDA margin from 7.4% last year to 8.1% in 2023. Biggest impact here was an improvement of our gross profit margin of more than 4 percentage points, driven by lower cost of goods sold as well as especially lower freight costs compared to prior year and consequent pricing towards our customers. We succeeded here in gross margin, especially at our brand NBF. In addition, we significantly managed down our marketing spend and also personnel costs. With that, we overall compensated the effect from the positive onetime impact of prior year. At that time, a EUR 2 million positive impact in the quarter out of sales tax releases. Let's continue for the fourth quarter with our third division, FoodService, and again, with sales. Still, organic sales growth in FoodService was less negative than the other divisions with a minus 6.8%. At the same time, we also saw the trend to continue with a visible softening of the sales growth. Looking at sales, the Hubert brand performed well here with slightly positive organic growth, while Central brand was down in Q4 in sales. EBITDA was EUR 2.4 million with a 3.8% margin. The decrease in profitability despite being stronger in sales than our other divisions is at first sight surprising. The main reason is the decline in gross profit margin compared to prior year with almost 2 percentage points lower gross profit margin compared to Q4 2022. So after the improvement we had shown in Q3, we now again see a relatively weak gross profit margin in the fourth quarter. Reasons are mostly still the sales mix with a larger share of project business and a lower gross profit margin generated while selling down old inventories. In addition, last quarter, so fourth quarter, we had some negative gross margin effect from our contract business large project business in FoodService. This was leading to negative impact on gross margin in Q4, but we do not expect this to be on a recurring level. So excluding this specific contract business impact, our margin, our gross margin was more in line with the third quarter, and we continue to expect a gross margin increase in 2024. On gross margins, also at FoodService, we did a good job in managing down advertising and also personnel costs, where other costs were slightly higher than prior year. Overall, a reasonable reduction in the cost lines, but due to the gross margin development we are facing an unsatisfying profitability development in the fourth quarter. After this more detailed look at Q4, I will keep the overview for full year figures a bit shorter also as we are not seeing surprises here. Looking at sales development for TAKKT Group. Sales are 7.2% for the full year below prior year with a negative currency impact of 1.3 percentage points, still mainly due to U.S. dollar development. So organic growth was at minus 5.9% and in line with the outlook from October. Looking at the 3 divisions, we see slight sales growth at FoodService despite the challenging environment. Both Industrial & Packaging and Office Furniture & Displays are clearly negative, however. This negative development was expected, looking at our market indicators, such as the Purchasing Managers' Index manufacturing in Europe, or also our indicators for our U.S. businesses. On EBITDA, we came in at EUR 111.8 million for 2023, right at the midpoint of the forecast range we gave in October. EBITDA margin for the full year was at 9.0% after a 9.9% in the prior year. On gross profit margin, we did a good job also for the full year and improved to 39.8% despite negative structural impact of around 0.4 percentage points out of sales mix. We did well in gross margin, especially at Office Furniture & Displays, but also in Industrial & Packaging. We also, for the full year generated impact by managing our costs and have significantly reduced our marketing spend. We've also reduced the number of our FTEs compared to the year 2022, and personnel costs were below prior year in the second half. For the full year, personnel costs and other costs are flat overall, impacted by cost increases due to inflation and also the continued implementation of our strategy that we ring-fenced against our cost-saving measures. The implementation of our strategy accounted for slightly less than EUR 14 million in the full year 2023. This is a slight increase versus the EUR 11 million from prior year and shows that we did not slow down on our strategy execution despite the difficult environment. Onetime expenses for the full year were EUR 1 million below prior year. Biggest impact here for this year were the Certeo closure and the organizational integration within the division FoodService on the cost side, partly compensated by the mentioned sale of real estate in France. Looking now at our largest division, Industrial & Packaging. Sales came in at EUR 672.9 million, which is an organic decline of 6.9%. The closing down of Certeo contributed on full year level 2.3 percentage points to the organic decline. We performed above average with positive growth in our East region. And Germany is also doing okay given it's the weakest economy in Europe at the moment. On EBITDA, we generated for the full year EUR 90.6 million and a 13.5% margin. Gross profit margin showed a slight increase versus prior year of 0.3 percentage points and remains with 42.6% well above the 40% threshold. On costs, we managed down advertising spend in line with sales and even slightly more. The slow top line development as well as inflation and transformation costs impacted cost ratios for personnel and other costs in '23. Especially personnel costs in Europe were more sticky due to less flexibility out of labor law and in total only slightly below prior year. Onetime effects were neutral in 2023 with the profit generated from the real estate sale and closing costs for Certeo after having expenses of EUR 2 million in the prior year. Next to Office Furniture & Displays, both business faced with very challenging market conditions in 2023. Sales came in at EUR 281.6 million, down 10.8% when adjusted for currency impact. This best to go performed slightly better with a high single-digit decline, while NBF was down slightly more than 10%. On profit, due to the weak top line, EBITDA was below prior year with EUR 26.4 million. Still, despite the significant lower top line, we were able to keep the EBITDA margin relatively stable at 9.4%. And this is due to the strong development in gross profit margin, which offsets higher cost ratios. Biggest impact on gross profit margin also for the full year is the freight profit. While our freight costs were lower, we were still able to charge our customers on a comparatively high level. Having a closer look at cost positions at OF&D, the advertising costs declined in line with the sales. Other costs were also down nicely when we adjust for the onetime gain in the prior year, and personnel costs were slightly below prior year. And with that, one more division to go, which is the division, FoodService, good performance here in 2023 with organic sales growth of 2.3% to EUR 285.6 million. Most of the growth is driven by Hubert brand, while Central was more flattish for the full year after a very strong year 2022. Order intake was a bit softer, and we also saw some negative trends during 2023. On EBITDA, we are below prior year at EUR 15.4 million. EBITDA margin is at 5.4% compared to 6.9% last year. Biggest impact here is also for the full year, the gross profit margin, which was with 28.2%, 1 percentage point lower than last year. Reasons remain to be higher share of project business and some negative impacts from selling down slow-moving inventories. Cost ratios are overall pretty much stable with a slight increase in other costs, while our marketing cost ratio we even improved in '23 versus 2022. Profitability and especially gross profit margin improvement remain our priority for the division, FoodService. Now over to cash, and a slide that shows on the one hand, the cash strength of our business model in terms of weaker top line development, we can usually compensate in cash development. In addition, the cash development in 2023 shows that it's worth to work on your strength. We have put a lot of efforts into even further improving our cash, and especially our trade working capital management. And we see this focus paying off in 2023. Despite TAKKT cash flow being down almost EUR 30 million, we managed to overcompensate that by stealing net working capital development. We are working on the whole cash conversion cycle and the biggest impact was achieved in '23 by reducing our inventories by EUR 35 million. Capital expenditure was a bit higher compared to last year due to higher investments at FoodService for the integrated web shop platform for both Hubert and Central, and also investments into start-ups made by our TAKKT Beteiligungsgesellschaft. Selling real estate in France after an office move already mentioned several times, helped in cash generation as well. Overall, we increased our free TAKKT cash flow by more than EUR 20 million to EUR 91.9 million, a nice success in such a tough year 2023. And finally, let's look at our balance sheet. We have decreased net financial liabilities by EUR 10 million despite the dividend payments, the high dividend payments made in May 2023. At year-end, we are at EUR 106 million with about half of that being lease liabilities. The equity ratio again increased to now 64%, and with that is clearly above our target corridor of 30% to 60%. This strong balance sheet is leading us to our dividend proposed. You know that we are running and continue to run a share buyback program. In 2023, we have spent EUR 4.4 million on purchasing own shares. In total, of the whole program, we are at EUR 11.3 million, and we continue with the program. In addition, we are happy to talk today about our proposal for the dividend payment for 2023. We have announced this on Tuesday this week, and Maria has already talked about the proposal. Our dividend policy, we are committed to pay a base dividend currently at EUR 0.60 per share. And in terms of strong cash generation, no big M&A deals, and there was a high equity ratio, there's also the opportunity of special dividends. And this is the case for 2023. Hence, we, as management, together with our Supervisory Board proposed to our Annual Shareholder Meeting, a base dividend of EUR 0.60 plus a special dividend of EUR 0.40 per share. The dividend yield based on the current share price is 7%. So overall, very attractive payouts to and for our shareholders. Before I hand back to Maria for our first glance into 2024, let me summarize the year '23 from my perspective as a CFO. We have to operate in a very challenging and weak market conditions, which affected, not very surprising to us, our top line performance. Still, we know how to react and adapt it to the changing environment, especially after the negative trend change in summer with our focus on gross profit margin, cost management, and on cash generation. And we were able to show more and more traction in those focus areas, especially towards Q3 and then Q4. Overall, a tough, and from the growth and absolute profit development unsatisfying year 2023. At the same time, a success looking at our resilience in this situation, especially looking at our cash flow strength and a high dividend payout propose. And with that, over to Maria for a first look into 2024.

Thank you, Lars. So I think we have shown in '23 that we have a very resilient business model, that we know how to adapt to this environment and at the beginning of the year, this remains an important asset for us. So now looking at '24, we find a situation that has some similarities to last year. We see high political and economic uncertainty. GDP forecast for Europe remain quite muted or even pessimistic. And while the overall market environment looks more promising in the U.S. there are still risks that remain. So looking at the potential trend over the course of '24, we could see an acceleration in GDP growth in Europe after Q1 or Q2. In the U.S., we could see a slowdown in GDP growth in summer before stronger gross returns towards the end of the year. So we expect a challenging start into the year. And looking at January, this has been confirmed. We have not yet seen a trend change in our numbers. So still looking at indicators like the PMI, there are also signs for improvement later in the year, especially also in Europe, but also a lot of uncertainty. So we will remain flexible with our positioning and steering. So to our priorities. Given the challenging environment, we started into '24 in the same mode that we finished '23. We continue the focus on gross profit margin, on cost management, and cash generation. In addition, we are pushing for more efficiency gains by making the most out of our integrated setup and by further driving automation. We continue our strategy execution in Growth, OneTAKKT, and Caring, but we also stayed prepared for an increasing demand from our customers. Definitely, I will look forward to give you more insights into what it exactly means when we publish our annual report end of March. We will then also provide a more detailed outlook on 2024. Before the Q&A, a quick reminder about our investment thesis. So we have huge growth potential in a very large and fragmented market. We have an excellent position with our diversified activities in Europe and the U.S. This has helped us in the past, will also be important in the future. We have a clear vision to bringing new worlds of work to life. Together with our customers, we have executed thoroughly our strategy along Growth, OneTAKKT, and Caring, and we will continue to do so. We have a good financial track record and execution. We know how to adapt and to adjust to a challenging environment, and we will take the necessary measures to safeguard our financial performance. You see this with cost management and a strong cash generation in '23. And last, given the current uncertainty, we have the advantage to operate from the position of financial strength and stability. With a strong balance sheet, we generate substantial free cash flow, and we are committed to pay dividends to shareholders as you have seen with our current dividend proposal. In addition, we continue with our ongoing share buyback program. And with that said, we are now happy to take your questions. Over to the operator for the Q&A.

[Operator Instructions] We will start with the first question from the chat. Does the distribution of a special dividend means that a major acquisition is not to be expected in the coming months?

Yes. Thank you for the question. So as we always say in our dividend policy, yes, it also like depends on what's like our current short-term perspective on that, right? So currently, there is nothing we expect very short term. But our equity ratio, our balance sheet would also allow for acquisitions even if we pay out a special dividend. So that is no limitation for us in our M&A activities, which we are proceeding. We are active there, and we also expect that either in '24 or '25, we will be successful in, again, closing transactions. So overall, no limitations out of that dividend decision.

And let me add to Lars' comment. So we are continuously looking into opportunities. As said, we are not under time pressure here. It's more important for us to find a good target with reasonable valuation and a good perspective for value creation that we can integrate the target into TAKKT.

All right. Thank you very much. We now hear the questions from Christian Bruns.

Yes. Christian here. I have a question on your catch-up in the gross margin. We have seen mainly in the end of the year in Q4, but also for the full year. Is this a level to stay near to -- close to 40%? Or is there another catch up, maybe even an improvement, think of the...

Yes. Thank you for your question, I'm answering that. So we said and we stick to that, our threshold, target threshold for our gross margin for the group is at 40%. So we want to get there, and it was good that in '23, we got back to that level. After '22, it was a bit lower. Our ambition is not to increase significantly above that level of 40%. And why not? Because there's a clear link also to attractive pricing and to growth. And that's why we believe overall the 40% is a good level for us we are targeting.

All right. Christian, is there a follow-up question?

Yes, I will have also a follow-up. Given that you stated that you started the year 2024 in the same mode that 2023 ended. It's quite likely that we see stabilization in the environment in the course of the current year, I would guess. So what would be the measures you would then what was the first takes you would do if you see a stabilization or even improvement in your business environment. Would it be marketing costs -- rise in marketing costs? Or what would be the first reaction to benefit from this?

So Christian, thanks for being with us, and let me give you a short answer. So as I said, we expect a challenging start to the year. So Q1, we believe, could look somehow similar to Q4 from today's perspective. What we see is that PMIs increased slightly in Q4, but we are still significantly below the 50-point threshold. That means we are not seeing a growing market, that means demand is still sluggish. So overall, I see a very volatile and uncertain environment. but it's volatile, as I said. And so we also see now in February, a bit of relief and what we want to do now is, of course, make sure that we prepare ourselves for the increasing demand. Nevertheless, the priority is also clear nowadays, clear focus on gross margin, on cost management, and on cash. On top line, we have for each of the division a clear plan on also how to increase per region, per product line, and of course, also per channel. And what we see from different customer statement is that we also see in some areas on the customer side, already improvement. I mentioned that already also in Q3. So e-procurement, for example, in I&P is developing very nicely, and we will focus further on this channel.

We have received another question from [ James Jaminal ]. We see that you have opened your microphone. But unfortunately, we cannot hear you yet. Could you please check?

Can you hear me now?

Yes. Now we can hear you. Please go ahead.

Okay. I didn't say anything. So you couldn't hear me.

But you can now feel free to go ahead with your question.

Okay. My name is [ Thomas Hoffler ]. I'm with [ ABW ]. Three questions, if I may, at first, looking back to '23. Is my calculation right, that you should have a relatively high tax ratio this year because of the goodwill amortization? My calculation is roughly round about between 14%, 15%. This would be the first question. The second is looking to the current year, based on the information we have right now, would it fair to assume a more or less flattish development for the whole year in '24 and a more or less flattish development of the margin, EBITDA margin, and gross margin? That's the second question. And the third question, if I may, is looking then if you assume a normal environment for TAKKT and all the measures you took to lower costs, should you see then a real jump in profitability if circumstances get normal? And can we assume then a jump back to historically levels of roughly 14%, 15% EBITDA margin? Or would that be too optimistic?

So thank you for your questions. I would start with the middle one. So what do you see -- what do we see for '24. And I think I mentioned it before. As I said, we are currently reworking also our midterm targets and also our guidance for this year. We would love to see what's going on in February. Our plan is to give you more details about this year and also the midterm plan end of March, and we'll, hopefully, we can then answer in more detail your question on what we will see this year. On the gross margin, I think Lars mentioned it already clear ambition is definitely also going towards the 40%. So keeping the gross margin side, and on the cost side, as we have shown in Q3 but also in Q4, really working with full focus on our infrastructure costs to make sure that we keep our productivity high or even improve it. And I would hand over to Lars for the other 2 questions.

Yes. And starting with the third one because I think there's a good link. So we will be, of course, more precise when we give our guidance end of March. Also like for your question regarding profitability expectation 2024. In general, what we can say and always have said together with our strategy, it's always a link of 2 things. The first one is increase in growth, which is like our midterm ambition is, of course, increasing the leverage of our infrastructure and then like giving higher profitability. And at the same time, in the strategic pillar of OneTAKKT, we are optimizing our structure and with that also wanted to drive up our profitability and our margins. And then for 2024, but we will talk about that end of March. It will be the question how much of growth do we expect for the year, then talking about the true expectation for '24. On the tax ratio, what you said is like the first part is that, of course, there's also then the counter effect of deferred taxes as we show that. But the share or the ratio you estimated is a good estimate. So cash tax ratio around 47%, adjusted around 22%.

We have a follow-up question regarding the long-term target of 40%. So before Corona, the gross margins were 2% to 2.5% higher than 40%. Why is there, at the moment, no ambition to return to the historical values? Could you please give some color on that?

Again, I would say it's 2 things. It's, first of all, and the most important part, the question or the answer I already gave, it's a balance between growth and gross profit margin. And investing more into growth and going for more and a higher growth than we had in the past also means that we have to adjust a bit on pricing, which is not a simplified, we would reduce prices. We talk about smart pricing. So we do have very diversified in the assortment. But that's one part where we think the 40% is the better growth. And then, of course, if we compare that long term. It's also always a bit the question, what are the shares of our sales in our portfolio, you see that I&P with a comparatively high margin with portfolio FoodService comparatively low. So you have to factor that in if you compare long term as well.

And we have a follow-up question from Christian Bruns again. Christian, please open you microphone in order to ask the question.

Sorry, sorry, sorry.

Yes, now we can hear you.

I was talking for 2 minutes already, sorry, but it was just on -- I have a follow-up on your segment. I consider Industrial & Packaging or Office Furniture & Displays, I see that they are cyclical, and that they have cyclical problems but not structural. But I'm not so sure on your FoodService business, because the decline here, I think it could be also a structural problem, which is difficult to solve. What is your opinion on that?

Yes. Christian, thanks again for this question. So let me start with the market on FoodService. So the market environment is challenging. So we have this one indicator, which is called Restaurant Performance Index. It's indicating decreasing demand. And if you see our development over '23, so you see that TAKKT FoodServices outperformed for some months, also this Restaurant Performance Index. Why could we do that? Because we're very strong in also the project business. So I think what we showed is that we can grow, what we, I think, still need to further improve this also on the margin side that we can deliver the corresponding margins. And here, we have set up good programs. So I'm very confident that we also can not only show the top line improvement but also the margin improvement.

[Operator Instructions] For the moment, we have one final follow-up question left in the chat. We already touched that previously as well, but maybe you could give some more color here as well. In order to achieve the EBITDA margins of 12%, again, profitability must be increased by 3,000 basis points. From which cost ratios should this come and to what extent?

Yes. Thank you for the question. It's a bit similar to the profitability question we already had. So yes, we have a vision to improve our profitability. We had set so far to around 12%. And we always set through Growth measures, and then overall better leverage of our infrastructure, and also through OneTAKKT. And in the strategy update we gave, you can already see the measures, both for Growth but also for OneTAKKT, and we also see first impacts on that. If you look at the P&L structure, I want to understand where will that materialize? We have already talked about gross margin where we don't see that we want to bring that up to 42% or 43%. We don't want to. And also on the marketing cost ratio, we think we are quite at a good ratio and balance. We can manage that up and down depending on the demand out there. But there, we are also fine. So then as a consequence, this improvement in margin we will find then in the P&L, in personnel costs, and in other costs.

Thanks for answering the questions. In the meantime, we did not receive further questions, so everything appears to be answered for the moment, and we are coming to the end of this earnings call. Thank you very much for your interest in joining. And I hand over to you, Mrs. Zesch and Mr. Bolscho for some final remarks before closing.

Thanks a lot. So thank you for participating. Thank you for your questions. I hope we will hear and find each other soon. Our next date is the 28th of March. So 28th of March, we will present our figures but also the way forward. So looking forward to talking to you again. Have a good March, until then.

Bye-bye.