TAKKT AG (TTK) Earnings Call Transcript & Summary

[Audio Gap] today's Analyst Conference 2024 of the TAKKT AG. Warm welcome to the CEO, Maria Zesch; and CFO, Lars Bolscho, who will start with the presentation shortly. After the presentation, we will move forward with the Q&A session. And with this, let's start. Maria Zesch, the stage is yours.

Welcome. Welcome to our Analyst Conference. I'm hosting the call together with our CFO, Lars Bolscho. This morning, we have published our annual report for 2023 with an update on our strategy and the outlook for the current year. In today's call, we will focus on our strategy progress and what we are working on at the moment. We'll give you some insight into our midterm strategic targets that we have set ourselves for the coming years. Lars will then take a brief look at our financial results 2023, and I will close with our expectations and the guidance for 2024. Before we go into details, I want to give you a quick overview and a reminder of our business model and our positioning. At a glance, we are active in a huge market that offers enormous growth opportunities. In total, we are talking about an addressable business equipment market of more than EUR 110 billion in Europe and the U.S. This market is characterized by a very fragmented customer base, but also the supplier structure and also the competition is very fragmented. So on the competition side, even larger players account only for a few percentage points in terms of market share. For us, this is and remains a very attractive niche where we can generate attractive margins. In this market, we've positioned ourselves as a B2B distributor focused on 3 worlds of work, where we combine long-standing relationships with our customers and suppliers. This is the manufacturing industry and warehouse world for I&P for industrial and packaging, the service industry for OF&D and Office Furniture & Displays, and the restaurant and catering world for FoodService. We follow a clear strategy with Growth, OneTAKKT, and Caring. We are convinced that we have an attractive and sustainable offer, which will allow us to gain market share while also improving efficiency as a highly integrated setup. I will give you more details in a minute. And while we are facing a very challenging environment in our markets in '23 and '24, we have the huge advantage to operate from a position of strength and stability. We have shown that we have a very resilient business model during previous recessions, and we will continue with our focus on gross profit margin on cost management and cash flow by offering an attractive dividend yield to our shareholders. Let me come to our vision. We believe in our vision, bringing new worlds of work to life as NorthStar for everything we do in our 3 divisions and in our 4 group functions. We offer products and solutions. We offer consulting advice and also installation support. Our vision is to have customers to overcome the shortage in manpower to retain workforce better by understanding the needs and requirements of the new work environment. We offer sustainable options that's also the area where we achieved the biggest progress. Yet there's more work to be done, and we need to accelerate on delivering scalable proof points. Proof points we have seen so far, our own production in I&P is building more solution like offerings. We have packaging stations or economic work benches where we combine several products with a comprehensive solution for our customers. We also won several key accounts in industrial and packaging through sustainable assortment. Customers reach out to us with a demand and specific requirement for sustainable products. We offer more and more health wellness assortments each in the warehouse and in working stations. In our furniture offering, we are showing not only stand-alone products, but instead showcase rooms and ensemble such as collaboration rooms or entry hall. Let me also give you an update on our strategy. Our strategy with Growth, OneTAKKT, and Caring is showing positive impact. On Growth, we are implementing major value levers in the areas of product, cross-selling of smart pricing, and e-commerce excellence. With these measures, we focus very strongly on our customer base and expect to benefit from increased scale in '24 and beyond. More on that when we talk about our progress later on. In addition, we work on our transformation to achieve efficiency improvements with OneTAKKT in a more harmonized and integrated setup across the group. Part of this is the buildup of the group functions and operations in tech, in finance and HR. In '24, we will focus on improving our cost base and the structures. Let me come to the third pillar, Caring. We are pushing our focus on sustainability. This is a major differentiator for us to position ourselves as a more responsible and a more sustainable alternatives in the market. We are seeing good success here. This also includes our employees' perspective because I'm convinced that engaged employees are a prerequisite for happy customers. M&A also is an integral part of our growth plan. We do that with care and we prioritized invest areas. We are continuously evaluating targets and are very much focused on potential value accretion. So looking at our growth value levers, I want to give you a quick overview of where we stand and what we have achieved in '23 and what we are currently working on. Let me start with product. On the product value lever, that's the one we added last year. Here, we are making sure that our product range offers the right options for our customers' current demand, but also the future needs. Part of this is expanding the range with combined solutions instead of individual products. We are intensifying our marketing of enkelfähig products. These are products that are more sustainable and have a good rating. We have grown the share of these products to almost 1/4 of sales. So compared to our non-enkelfähig products, we observed significantly higher conversion rates for enkelfähig products on our web shop. Second point, cross-selling. We started with this initiative at Industrial & Packaging in 2022 and then have rolled it out to FoodService in '23. So what we are seeing is increasing contributions over the months. So far, we have generated EUR 11 million last year on additional sales. We will continue to scale these measures, both with the use of the integrated IT infrastructure at FoodService and with the brand migration from ratioform to KAISER+KRAFT in I&P. And, clearly, we expect increasing contributions on sales and earnings. With smart pricing, we decided to start this initiative in I&P and go for a more dynamic pricing strategy. This has worked well in a limited scope we started with. We significantly improved our gross margin and got additionally on top sales. We are now starting to use an automated approach, and we will see increasing benefits and contributions in the months to come. The last point on this slide is e-com. After the strong e-commerce growth during pandemic, this channel performed weaker in '23. That's in line with what we see and hear from other companies. We have set ourselves clear priorities and continue to work on them. One such priority is e-procurement, where we achieved significant positive growth of 30% against the negative trend in '23. In our I&P division, we also connected more than 100 additional customers to our e-proc solutions, which will help us to increase order volume and frequency and improve customer retention. In addition, in our web shops, we invested into improving user experience for our customers, and we focused on improving organic visibility and expect e-com order intake to benefit from that. To summarize, we are operating in an environment where low demand for our products is impacting the top line. But at the same time, we are making progress with our growth initiatives. We see that we -- the confirmation that we're on the right path in many key metrics. We have built a foundation for future growth and we will now start to scale with the initiatives. So let me come to OneTAKKT. On OneTAKKT, after giving you a broader overview on our last call, today, I want to focus on the progress we achieved in our operations group. So talking about logistics and warehousing, which plays a very important role in our service-oriented positioning. We have improved our supply chain efficiency with several measures. This includes lowering costs for outbound transport by bundling volumes and contracts across the divisions in Europe. We cut freight distance and lowered CO2 emissions by improved inventory allocation closer to customer demand, and we actively integrated suppliers via freight tenders. And we have cut costs by closing several third-party warehouses and improved inventory management in our push towards a more integrated setup. Even more important strategically, we developed, signed off, and started implementing our North American warehouse network plan, which we now realize within the next years. This will allow us to achieve additional cost savings and efficiency gains. As you know, we were able to significantly release inventory in '23, which contributed to our strong free cash generation last year. We worked on both optimizing the inbound, so how much we take on stock, but also on the outbound to selling of slow-moving inventories. In total, we have reduced inventories in '23 by EUR 35 million, while keeping product availability in the same high level or even improving here, a significant contributor for our good cash flow development. This is only possible by a joint global initiative from group operations and group finance to transform inventory management structurally across all our divisions. I'm really happy about what we achieved here. And we have made additional progress in streamlining and standardizing delivery processes and with that, improved our customers' delivery experience and important logistics KPIs. So really, a lot of progress here in '23 with our integrated Ops function, which has grown together over the last 2 years and has enabled us to improve with a standardized steering and common KPI set globally while keeping execution on a regional level to fulfill market-specific expectations and, of course, the different customer demands of our different divisions. Last but not least, Caring. An important aspect of our strategy is our Caring initiative. Sustainability is an integral part of our strategy and has been for a long time. Our approach here is that we integrate sustainability and responsibility with economic success. Here, I want to highlight our focus on products where we have very successfully introduced our enkelfähig product trading, a sustainability rating. And the increased share of these products to 1/4 of total sales shows we're right. The success of this product underscores the increasing importance of sustainability in B2B purchasing decisions. More and more customers, especially larger customers are focusing on sustainability and selecting the suppliers and products. More and more companies have integrated sustainability goals and guidelines into their procurement strategies. With a clear, transparent, and comprehensible presentation of sustainability performance in the categories of circular economy, climate protection, biodiversity, economics, and innovation, the enkelfähig rating shows the customer how sustainable a product is and enables a sustainable purchasing decision. And we are taking responsibility for climate action. We've reduced our emission footprint by 11% compared to our base year. We will realize additional savings this year by installing a large area with solar panels in '24. Photovoltaic systems are currently being installed at TAKKT German site in Pfungstadt and Haan. The system in Haan will go into operation in April. Once the system in function is up and running, we expect to save more than 1,300 tons of CO2 emissions per year. I'm very excited that our positioning and effort in this area is increasingly being recognized externally. For example, by winning the prestigious German Sustainability Award, but also by very successful ratings and scores for our brands like NPS and KAISER+KRAFT. We will continue here with a clear focus on sustainability because it helps us to differentiate ourselves from the competition. Let me now come to our strategic midterm targets. As I've just shown you on the previous slides, we have achieved good progress in the last few years with our transformation, but it's also true that we will still have a lot ahead of us. From today's perspective, I would describe the implementation of our strategy in 3 phases, each with different environment and its own set of operational priorities and strategic focus areas. Let me start with the first phase, the Restart Phase. In '21 and '22, we placed significant emphasis on transforming our culture towards a more integrated growth-oriented customer-centric company. In addition, we integrated commercial functions in I&P and FoodService and are now benefiting from leaner structures and a more efficient setup. We built up the global group function, and we have navigated the challenges associated with inflation quite successfully and generated profitable growth. The second phase, which we are currently in is the Resilience Phase. In '23 and also now in '24, we were and are confronted by very challenging conditions and a weak demand. In this environment, we are talking active -- we are taking active measures to strengthen our gross profit margin, improve our cost structures, and generate cash. You have seen this in '23, and we continue and intensify with a stronger focus on structural adjustments in this year. Strategically, the focus is on implementing our value and growth drivers and such as generating additional sales through cross-selling. We have also taken steps to establish global structures in IT and logistics, and we continue to work on that. We are already seeing efficiency gains. Let me come to the third phase. We call it Acceleration. The current economic forecasts anticipate a more favorable economic outlook from '25 onwards, particularly in Europe. This means we will return to our growth trajectory and focus on accelerating our value and growth drivers in the coming years. Part of this is also a better scaling of our infrastructure. And, of course, we will also continue to further develop our business model and our strategy. Our aim is to intensify customer loyalty through stronger brand management to continue evolving from a product to solution provider and strengthening our omnichannel sales approach and our marketing capabilities. So let me now talk about our midterm ambition. So back in October last year, we decided and informed that we will no longer adhere to our original midterm financial targets, the sales of EUR 2 billion for '25. We have revised our targets and will present and explain them to you today. So while we are on track with our transformation, as you have seen in the examples we have discussed just now, the impact of the difficult economic environment and the challenges in our markets are overshadowing the positive impact of our measures. We have clearly not anticipated this challenging economic context or the geopolitical challenges when setting up the midterm targets back in late '21. So this is true for '23 and also for '24. In this environment, we are focusing on quality. We're focusing on resilience, on our ability to bounce back. So this includes improvements in our cost base and focus on cash generation. So for the medium term, we remain committed to growth. We have set new targets until '28. Our clear objective is to accelerate growth and to outgrow our competitors. We stick to our ambition to generate significantly stronger organic growth than the low single-digit average we achieved before our transformation. Our growth initiatives will make a significant contribution towards achieving this goal. We continue with our opportunistic M&A strategy. We have enough firepower and our internal setup is ready to add another business or even division. But we also remain very disciplined, and we will make sure that the transaction is adding value before we go through with it. In addition to growth, we were also focusing on scaling effects. Our ambition is to maintain our gross profit margin at 40% and gradually improve our EBITDA margin to 12% from 25% to 28%. We are slightly managing cost structures and adjusting them to the lower demand. With the return to positive growth, this will allow us to increase EBITDA stronger than sales and return to higher profitability levels. In addition to greater scaling, we also expect higher efficiency gains from the integrated group functions, for example, in operations and technology and data. By reducing the number of warehouses and pooling locations, we can leverage the existing infrastructure across divisions. Similarly, in IT, we are harmonizing our IT landscape step-by-step. So both developments will lead to a more efficient setup than in the past. And, yes, we will continue to work on maintaining a very good cash generation. This includes tight inventory management but also measures to improve DSO and TPO. On average, we aim to convert between 50% and 60% of our EBITDA into free cash flow. So on Caring, we'll continue to offer outstanding services to our customers, and we work on further increasing the share of women in leadership positions as well as increasing our positioning as a sustainable leader through increasing the share of enkelfähig products. To wrap it up, I remain committed to our targets on growth, on earnings and cash. And due to the current challenging environment, it will take us longer to reach these targets than initially planned, but I'm convinced that our market offer huge growth potential and that we will unlock them in the upcoming years. With that, I will hand over to Lars for a quick recap of our financials '23, and then I will show you the outlook on what we expect in '24.

Thank you, Maria, and welcome, everyone, from my side as well. Good to have you here today. As you all know, today's call is very much focused on strategy and outlook. And we had already talked more in detail about our 2023 numbers when we have published our preliminary numbers mid of February this year. So looking back to 2023, I will focus on some summaries for TAKKT Group today. And I'll start first with a quick overview of the key financials. On sales, we reached EUR 1.24 billion and with that, a minus of 5.9% in organic growth, with a clear decreasing trend from August 2023 onwards. EBITDA was at EUR 111.9 million or 9.0% of sales in the middle of our guidance range from October and with that 15% below 2022. Despite the difficult top line and profit development, we have been able to increase our free cash flow by 35% or EUR 90 million by very successfully managing net working capital and our cash conversion cycle. This strong free cash flow and a high equity ratio allow us to propose to our shareholder meeting a total dividend of EUR 1 per share. Overall, 2023 was clearly a challenging year for us at TAKKT in terms of growth and due to the lack of growth also in profit development. At the same time, it was a very good year in terms of cash flow development. And finally, we have achieved what we had forecasted in October. Looking now at sales and at the sales bridge for TAKKT Group and the components of the overall decrease I talked about, we first see in that which the negative currency impact of EUR 18.6 million or [ 1.3 ] percentage points, mainly due to the weaker U.S. dollar. Organically, our divisions I&P and OF&D were clearly below prior year. I&P with EUR 49.9 million or 6.9%. Please remember that we had decided to close down our Certeo business. If we adjust that, the negative sales decrease would have been at minus 4.6% for I&P. OF&D also down with EUR 35.2 million or 10.8% with weak sales development for both brands, NBF and also D2G. On the positive side, our division FoodService was able to grow by EUR 6.9 million or 2.3%, which is a good success looking at the challenging conditions. Overall, this decrease for TAKKT, which hit us especially in the second half of the year 2023 is reflecting the challenging situation we were seeing in our markets. GDP growth in Europe was below expectations. In the U.S., the discussions around potential government shutdowns hurt our demand, and our indicators, especially the PMI manufacturing for our European business were also weak. So overall, a challenging year and due to those conditions also a disappointing sales development. And as you already know from us from TAKKT, our focus in those times is clear then, focus on gross margin, cost and cash. Let's start looking at gross margin. Looking at the gross profit margin bridge, we see that our focus on margin improvement in difficult market conditions was paying off. We had a negative structural impact of 0.4 percentage points due to FoodService with lower margin level growing and with that then increasing share in our sales mix. Looking at the organic development, both I&P and OF&D were able to increase our gross profit margins with impact of 0.2 percentage points and 0.9 percentage points to TAKKT gross margin. I want to point out especially OF&D. At NBF, we increased our gross margin by 4 percentage points, especially by increasing our freight profit. Corporate costs were lower and we were still able to charge our customers on a comparatively high level, great work of the OF&D team in the U.S. Only at FoodService, we were decreasing on gross profit margin. Reasons remained to be higher share of project business and the negative impact from selling down slow-moving inventories. There was negative impact on gross margin, but, of course, a very good impact on cash flow. Overall, an increase in gross margin despite negative structural effect, and this is nice and important for us to see. And we will continue working on bringing our margin above the 40% threshold in 2024. Let's look at costs then. Despite the good improvement of the gross profit margin, our absolute gross profit was down significantly due to the missing sales, I talked about that before. In total, missing gross profit by more than EUR 30 million. Through our strict cost management, which we intensified after the drop of growth in August, we were able to compensate more than 1/3 of this absolute gross profit loss on the cost side with increasing impact throughout the year, as you've seen also in our Q4 numbers. In personnel, we were facing salary increases due to the inflation. So this was first like pushing up our personnel costs. Against this challenge, we were able to reduce our FTEs by around 50 FTEs versus prior year by year-end, using fluctuation and also by realizing structural adjustments especially in the U.S. While we have already seen increasing trend of reduction in the second half of '23, we will continue with this in 2024 with more focus on structural measures, both in Europe and in the U.S. Biggest contribution in cost compensation came from marketing and other costs with a reduction of EUR 10.8 million. The majority of this coming from adjusting our marketing spend to the lower demand and the lower business volume. Also in other costs, we have reduced costs slightly also here in the area of marketing and other costs, we will stick to the strict and disciplined steering and will go in addition for structural adjustments in costs. Coming now to the third focus in tough sales years, which is cash, cash generation. Before we have a look at the figures, you might have noticed that we have changed the definition of our leading cash KPI. We now include lease payments from IFRS 16 and our free cash flow definition. I believe this makes sense to use this definition in order to allow for better comparability. So this definition is probably more market standard and also to draw better conclusions on potential in cash allocation. Looking at the numbers now, despite the decrease in profit, I've talked about that, we managed to overcompensate that by steering net working capital development. With an impact of plus EUR 51 million and as already shared with our preliminary numbers, the biggest impact we achieved was on the inventory side with a decrease of EUR 35 million in 2023. Capital expenditure was a bit higher compared to last year due to some investments. For example, for the integrated web shop at FoodService, also for the web shop of I&P. But overall, with 1.2% of sales, the CapEx ratio was on a normal level for TAKKT. Overall, we increased our free cash flow by EUR 19 million to EUR 74 million, a nice success in such a tough year 2023. And it shows on one hand, the cash strength of our business model. In terms of weaker top line development, we can usually compensate in working capital. And in addition, the cash developed in 2023 shows the structural work we have done on our cash conversion cycle. We see this focus paying off and the field of improvement -- as a field of improvement, we will further focus on it in 2024. This good cash development allows us to once again show very strong balance sheet and strong internal covenants. Equity ratio has increased to 64% and with that is a bit above our internally set target range. The other covenants are within the range we have set ourselves. On interest cover, the increase in net financing expenses, and the lower operating result before goodwill led to a decrease in interest covered to 9%, but with this still well above our internal target. Overall, a good starting point for capital allocation in the interest of our shareholders, and this is leading me to share buyback and dividend. Also in 2024, we continue with our share buyback program, where we still have slightly more than half of the initial volume available for further repurchases. So far, we have spent around EUR 12 million out of a total potential of EUR 25 million. In addition to the share buyback, we will continue to pay attractive dividends, and we propose a total dividend payment of EUR 1 per share to the shareholder's meeting in May, EUR 0.60 per share as a base dividend, and EUR 0.40 per share as a special dividend, leading to a dividend yield of around 7%. And in addition, we have enough credit facility to also do M&A if there is an attractive target in 2024. Acquisitions, Maria has talked about that are an important part of our growth strategy. We are cautious to wait for the right target, but we are ready from our finance and balance sheet structure for this case. So my last summary on 2023, it was a challenging year on sales and top line with weak market conditions. We focused a lot on building up our resilience with focus on gross margin, costs, and cash, and we saw increasing traction in those topics. And with that, over to Maria for the outlook for 2024.

Thank you, Lars. So when we talked about strategy and our midterm targets, we already mentioned that we expect '24 to be a challenging year in our target markets. GDP growth rate in Europe and especially GDP growth of our main market, Germany, will likely remain very low. And also for the U.S., uncertainties in the slowdown is expected. European manufacturing PMI, for example, remains firmly in contraction territory, clearly below the level of 50 and even decreased in March after very more positive development in prior months. So indicators for our U.S. market also remains subdued. In this environment, we see the start to the year in Q1 to be very similar on top line as Q4 was on top line. So a low double-digit decline. We expect to then see a gradual improvement over the course of the year, especially comparing to already weak prior year development towards the end of the year. Still, there's a high level of volatility and uncertainty heading into '24. So clearly, looking at our priorities, we continue in the same mode that we finished '23. We focus on gross profit margin on cost management and cash. '24 will be a year where we work on strengthening our resilience. Part of this is a structural improvement in other costs and in personnel costs. And given the weak top-line development, we will push through structural cost savings. We have already executed measures in Q1 and will continue with this in the coming months. So for the full year, we expect cost savings of around EUR 15 million. Additional structural adjustments will be developed and executed if necessary from a top-line perspective. So we are clearly committed to adapt our cost base to the lower demand. These structural adjustments will lead to onetime costs in '24. For the measures that we have already initiated, we'll see a positive net impact in the current year. For additional measures, it could take until early '25 to have a positive net impact. In total, we expect one-time expenses between EUR 10 million to EUR 15 million in '24. A part of that will already come in Q1. So this quarter will be weak on top line, but we will also see one-off costs in the P&L. So we expect Q1 to be the low point in terms of growth with an organic sales decline in the low double-digit percentage range and EBITDA significantly below prior year due to the higher one-offs to slow sales and a relatively strong comparison base from Q1 '23. Very positive is our gross margin development in Q1 and also that we set the basis for structural improvement. So, our focus on quality shows results. And we continue to work on strengthening our cash generation. This includes managing net working capital and release of additional inventories as well as improvement in the cash conversion cycle. I would describe '24 with the following term: resilience or quality before quantity. So with clear focus on gross margin, structural adoptions, and cash focus. So for the full year, we expect organic sales to show a high single to low double-digit decline depending on how much of an improvement we see in the coming months. On profitability, we expect our adjusted EBITDA margin to come in between 8% to 9.5%. Due to the comparatively large amount of one-time expenses in '24, more to come, we decided to go for an adjusted margin guidance in '24. Onetime expenses could impact profitability by 1 to 1.5 percentage points. And we continue to work on cash generation. We will release additional working capital and with that contribute to a free cash flow development that's more stable than EBITDA. To wrap it up, we are in a challenging year, but we operate from a position of strength and are committed to adapt our cost base to the lower demand. We will further optimize our cash conversion structurally. For '24, we'll use the opportunity to work on our resilience and get prepared for better demand and growth in our markets for the future. Before the Q&A, a quick reminder about our investment thesis. We have huge growth potential in a very large and fragmented market. We have an excellent position with our diversified activities, both in Europe and the U.S. This has helped us in the past and will also be important in the future. We have a clear vision to bring new worlds of work to life together with our customers. We've executed thoroughly our strategy along the pillars, 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. We will take the necessary measures to safeguard our financial performance. You see this with cost management and you see that with the strong cash generation in '23. And last, given the current uncertainty, we have the advantage to operate from a position of financial strength and stability. The strong balance sheet, we generate substantial free cash flow, and we are committed to pay dividends to shareholders as you have seen with other -- with our dividend proposal today. In addition, we continue with our ongoing share buyback program. With that said, we are happy to take your questions now. Over to the operator.

Yes. Thank you so much for your insightful presentation, Maria Zesch and Lars Bolscho. Now, let's transition to the Q&A. [Operator Instructions] And we have a first question from Christian Bruns.

My first question is on your market share. You stated that your addressable market is EUR 110 billion, and the target is to gain market share. How do you measure this market share gains? Because I have no figures on your addressable market or the size and the direction. For example, did you gain market share in 2023?

Yes. Christian, thank you for your question. So it's 2 perspective. I think it's very tough and hard on our market to estimate an overall market volume. If we look at market share, which is then more important for us, as you asked, are we winning? Are we losing market share? We usually look at market indicators we have. Let me take the example of our European business of Industrial Packaging. We look at the PMI manufacturing. And we can see out of our historical development, what is an expected growth we should see at certain stages or levels of this PMI manufacturing, and that's how we can derive that. And this PMI manufacturing for Europe, and then especially for Germany, where we have 20% of our volume as you know was quite low in 2023. So comparing to that, we were pretty much in line or even in some cases above what we would have expected from this PMI development. And also, this is, for us, on the one hand side good news. Of course, we always want to gain a bit more of that market share, but we have not seen bigger deviations in the negative side compared to that in '23.

Okay. And a second question on your Board members. The representatives of the Haniel majority shareholder will leave the Board with Mr. Funck and Mr. Schmidt. And is there anything you can derive on what role TAKKT will play in the future Haniel strategy? Because there seems to be a little bit of lack of management at your major shareholder. Is there anything you can say about that?

Yes. So Christian, thanks for the question. And we are sitting here as part of TAKKT, but I will try to answer the question. Maybe we also could then come back to you on it. But what I would say, we see that our major shareholder has a 65% stake in our company. And until the general assembly, Thomas Schmidt and Florian Funck are in our Supervisory Board. For example, had yesterday, also a meeting with the Supervisory Board. So until May, that's the case. And then we have 2 new members, and I'm not sure if you have seen the press announcement today where we also announced the 2 new board members we will have. And I think it's a great pleasure for us to have very strong board members, new ones as well, and there will be also an alignment towards Haniel. So, let's talk about it in April, May then again. So, so far, we see that very positive that they have still a very high share in our company, are committed to our company, and we have also a close alignment then till the general assembly and later on with the new Board members. We also believe that we have a strong Supervisory Board, which will help us to steer through this year and the coming years. Any further question, Christian?

Yes, if I may. Your gross margin will reach 40% in 2024 or above 40% despite the headwinds you faced. So is this improvement in gross margin in all divisions? Or is there only -- which divisions will show this improvement?

Yes. So let me take this question. So yes, clear ambition for us after the improve we have seen in '23 to even improve more. You know like that general threshold we set ourselves is the 40%. Currently, if we look at how first quarter is going, we are happy with that development with -- in all areas, we've seen improvement. Currently, the improvement is a bit stronger in the I&P division. And you also know that from 2023, that FoodService is the most challenging part for us to drive up the gross margin. And we also might come into some situations this year where we need to balance out the gross margin development and cash. So on group level, it remains what we said. We want to keep it above the 40% on the divisional level due to the cash balance, there might be some other movements. But currently, we are happy, especially with the I&P and OF&D development.

We have another question. Unfortunately, I can't really see the name. Could you please introduce yourselves and you could speak now. I think there is another technical issue. We have another question from Thilo Kleibauer.

I have one question regarding, yes, current trading and the outlook for this year. Maybe you can give us a kind of breakdown for the different segments. Do you expect a very similar development within the core regions? Or do you see some differences? And also with respect to the -- to your cost savings measures, is there -- is this across all areas? Or do you have special plans for special subsidiaries to structurally improve the cost base? That's my first question. And the second question may be afterwards regarding the midterm guidance.

Yes. Thanks, Thilo. So let me start, and then I will ask also Lars for giving his view. So your first question was on current trading and what we see currently. And as I said before, in Q1, we see similar trends as in Q4 on the top line side. So I would say that our growth rate will come in slightly below the minus 11% from the previous quarter. And looking at the divisions, all 3 are below prior year. Situation is most challenging in I&P. The U.S. division is a bit more stable, especially in Office Furniture and Display, we see a nice improvement in the recent weeks. So that's what I can tell you on the current trading and on the divisions. So that was your first part, right? So then there was a question on the cost cuts or what we do in the personnel cost, right?

Yes. And then also, if you say, especially I&P is a weak spot currently, then I would assume that I&P is also in the focus of your cost savings measures.

Yes. So -- hi, Thilo. I would take that. So overall, this -- let me differentiate between 2 things. We have the continuous cost management, and we have structural cost adjustments. The continuous cost management, what we usually do, or what you also know from us. This, of course, depends, as you say, a bit on the development we see. But currently, we have in all our 3 divisions, we are working intensively on that, right? And that's one example, for example, is that bringing the sales and marketing cost ratio to the budgeted level or to our ambition level also adjusting that to lower volume, things like that. On the -- so across all divisions. Structural cost measures also across all divisions. There's may be a bit of one differentiation. In the U.S., we usually can be a bit faster in adjusting costs, especially on the personnel side because it's just not as expensive in terms of one-off. So for this year, I expect a bit more in Europe than in the U.S. because we just have to adjust a bit more after also the year 2023. But generally speaking, we see this need and we want to use now also this challenging situation in all divisions to structurally reduce our cost, especially in personnel.

Okay. And then let me come to the midterm targets. So on the growth side, your statement now is accelerate organic growth. To be honest, this is pretty work. I mean, you come from minus 7%. And so it's -- and then this year, it's maybe minus 10%, minus 9%. So it's to accelerate this growth level. It's maybe not very ambitious. So can you try to quantify accelerate growth? What does it mean? I mean in the past, TAKKT had something like an average corridor something like that of growth rate. That would be helpful because I think just purely accelerate, yes, it's not easy to calculate. And the second pillar is the EBITDA. The 12% margin target is now postponed by 3 years to '28. But to get the parameter behind the 12%. So is it purely coming from, yes, from economies of scale and from OpEx improvement, and then you calculate the 12% with the kind of 40% gross margin because in recent years, if you had a kind of 12% margin, also the gross margin was always clearly above 40%. So maybe the structural parameter, how to get these 12% EBITDA margin?

So Thilo, let me start with your challenge, I would call it, on the growth side. So yes, we phrased the growth target differently than before. And I would give you like 3 viewpoints on how we look at it. So first, and I said that before, still, we see enormous market potential. As we said, EUR 110 billion as a market, and we only have 1% out of that, first perspective. Second perspective, it's more like the market developments are different than what we have expected 2.5 years ago. So more volatile, less demand, the PMIs are going in a different direction than what we saw like 2, 2.5 years ago. You have the geopolitical uncertainty, the economic challenges. So what we see is that we need to relate much more to what the market does, and that's what we're also considering now with our acceleration statement. Third, viewpoint, we consciously decided now to focus in this current phase, now current phase '24 on resilience. So, what does that mean? Clear focus on quality before quantity or another, if I say differently. So that means let's focus first on stabilizing or even increasing the gross margin. Let's focus on structurally revisiting the costs and have a clear, clear focus on cash generation. So these were the 3 viewpoints. If you ask now me personally, I'm very and totally convinced that we can achieve the 10% average growth as the markets are huge. And I think we've continuously strengthened our capabilities. So we have the value growth initiatives in place. They are working, and they will not scale. So that's my short answer to your first question. And then you had the EBITDA question, which I hand over to Lars.

Yes. And first of all, yes, you are right, due to the situation we have been in 2023 and now also in 2024, we will reach our profitability target later than we thought like 2, 2.5 years ago just due to the starting point, right, where we are right now. We talked about that we use this phase. We have already started '23, but now also especially in '24 to build up our resilience and also to adjust our cost structure. And generally, the thinking behind the increase of profitability stays the same as we have already exchanged last year. It's always the 2 elements. One is, of course, with higher growth, getting generally more leverage again on our infrastructure. And the second part also remains the same through OneTAKKT and more integrated group functions. We are convinced that we can get to a more efficient way of providing those services to our businesses. And we talked in the past about probably 50% on the scaling, 50% on the OneTAKKT efficiency part that remains the same. So the P&L structure, we see with the 12% is not assuming that we drive up the gross margin to levels way higher than 40%. Now, there can always be a shift in sales mix, right, which is bringing that up for a year or even also a bit down. But generally speaking, we think that the 40% is the right one also in balance with the growth ambition we have. So 40% gross margin. And then with the cost ratios, we anticipated an ambition we think we will reach then the 12%.

We have another question from the chat. We touched upon it a little bit before. What are currently the most severe obstacles in executing value-adding acquisitions from your point of view?

Yes. So I will start with that question. It's -- well, it's -- finally it's the availability of targets where we believe that we have a good case of value creation. We are cautious on that. We talked about that. We think that midterm, this is an important part of our strategy and important factor also like having inorganic growth, but we are cautious on that. And we are looking -- as Maria said, we are looking continuously frequently at targets. It's 2 main directions it could be. It could be a fourth division, bigger acquisitions or it could also be add-ons into our existing divisions. And it's always the same question for us and challenge for us is the value creation high enough, that we are sure that we are at the end also adding value for the whole TAKKT Group. So that's the availability, as I said, from the financial side, looking at our balance sheet and also looking at credit facilities, we would be ready at any time to go into acquisition.

Then we have a last question. One of your target is to increase the share of products, which qualify as enkelfähig? Could you give an example for such an enkelfähig product in each of your 3 divisions?

Yes. Good question. Thanks a lot. So let me start with that. So first of all, we rate all our products according to their enkelfähig. So we rate them and then find out if they are enkelfähig or not. So -- and I would like to share that what we see is also that enkelfähig products, they have a higher margin than non-enkelfähig products, which is quite interesting. And we also see that from a success perspective, we see also higher conversion rates of enkelfähig products in the web shop. So just to give you 2 facts here. And then I was asked for an enkelfähig product example. So in industrial and packaging, for example, we have a shelf truck which is, I think, selling quite well. So what you have here, it's a custom-made shelf track. It has modular storage. So unfortunately, I cannot show you, but it's adapting easily to the needs of the customers. So that's one example from the I&P division. In Furniture, we have set up with one supplier, a specific chair, which is our #1 enkelfähig chair in National Business Furniture so made out of specific material. And what we are working on in FoodService is also especially on how we can reduce plastics and get into more materials like wood, so for disposable plates, for example. So hopefully, these are 3 good examples of our National Business Furniture products.

We have no further questions so far and waiting a little bit. [Operator Instructions] And then we have another question from Christian Bruns again.

On your cost-cutting measures, you stated that you already did some measures in Q1 or you initiated these kind of measures. Can you give us an idea what portion did you already initiate and what portion of measures will come later?

So -- thanks, Christian. So in terms of what we did so far. So maybe just to give you a bit better an understanding. So clearly, we're addressing the improvement in our structure next to like operational improvements, as Lars explained. So what we did, we checked an improved span of controls, reducing layers and across all divisions, across all group functions. So based on our target, I would say we have clearly addressed above 50% already. And that's where we are well in execution. And we have measures in place for, I would say, about 80% to 90%.

As no further questions have come in, we draw today's conference to a close now. A heartfelt thank you to the leadership team for your presentation and your time in participating. Should any additional questions arise in the future, please do not hesitate to contact the Investor Relations department. On behalf of Montega, I thank you all for your attention and hope to see you very soon in another conference, or earnings call, have a beautiful rest of the day. Happy Easter, and we end today's call with some final remarks from Maria Zesch.

Thank you. Thank you for participating. Thank you again for your interest in TAKKT. I hope we hear all each other again on April 25. So looking forward to introducing to you our numbers for Q1. All the best and Happy Easter.