technotrans SE (TTR1) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, welcome to our webcast about the financial year 2023. My name is Frank Dernesch, and I am responsible for Investor Relations at technotrans. Together with me are the members of the Board of Management, Michael Finger and Robin Schaede. In today's webcast, the Board members will present the performance of technotrans Group in the financial year 2023. We would like to focus on the following topics: the highlights of 2023, the development in our markets, a deep dive into the financials. And finally, the outlook for this year and beyond. After the presentation, Michael and Robin are looking forward to answering your questions. [Operator Instructions] For further information, please refer to the quick reference guide, which was attached to your invitation. Please note that the following presentation contains statements on the future development of technotrans Group. These reflect the present views of the Board of management and are based on the corresponding plans, estimates and expectations. These statements are subject to certain risks and uncertainties, which could mean that the actual results differ considerably from those expected. Now please let me hand over to our CEO, Michael Finger. Michael, the floor is yours, please.

Thank you, Frank, and a warm welcome from me as well. Before I start with a reflection of 2023, I would like to give you an update about the current changes to the Board of Management. You may have seen this already in today's press release. Our colleague and Board member, Peter Hirsch, is leaving technotrans by mutual agreement. Peter resigned on March 11, 2024 due to different views on the future direction of technotrans. The Supervisory Board and we from the Board of Management would like to thank Peter for his personal commitment and wish him all the best for the future. 2023 was another stormy year and we expect more to come. So it's even more important to be well prepared. Nevertheless, we managed to improve most of our key financials. We have demonstrated our strength and resilience once again. A key factor in this achievement is an extraordinary commitment of all of our 1,600 employees. Without our employees, this performance would not have been possible. And therefore, I would like to express my sincere thanks to each and everyone. So let me start with the highlights of 2023. In a difficult environment, we have increased revenues by 10% to a new all-time high of EUR 262 million. This strong revenue reflects the lower end of our midterm guidance, and we have reached this goal already 2 years earlier. We kept EBIT already nearly on previous year's level, although we had to cover temporary effects. EBIT margin decreased slightly to 5.4% according to that. I am delighted to present the improvement in free cash flow. Our team has done a great job and increased free cash flow by EUR 16.5 million to EUR 12.8 million. Robin will explain financials later in more detail. Almost all our focus markets contributed to growth. Energy Management performed exceptionally well, and we have increased -- and we saw an increase of almost 80%, another outstanding year for this market segment. We have been very successful by winning new business, and we got access to the very important data center market with our liquid cooling solution. As I said at the beginning, times are stormy, therefore, it's even more important to have a clear strategy. Phase 2 of our strategy has started as planned. A strategy review, which we have initiated last year has confirmed our strategic direction and our midterm goals. We have defined a road map with strategic topics and we have started our efficiency program, technotrans Sprint, called TT Sprint. TT Sprint is all about customer focus, speed and profitability. This program will support our midterm ambitions. Robin and I will talk about this later also in more detail. So let's move on to our markets. Our expertise in thermal management continued to gain in importance in the last year. In almost all our markets, we could record an increase in revenue. In Plastics, revenue rose by 3% to EUR 57 million. This corresponds to a share of group revenue of around 22%. Innovations energy efficiency and the use of natural refrigerants was a key driver to increase our market share. We have received orders, especially for various thermal temperature control units, deep freeze systems and systems using natural refrigerants like propane. Another highlight was the Fakuma trade show in October last year, where we have presented our innovations using natural refrigerants as well. However, some orders for big process cooling systems were delayed due to significant increases in interest rates. In line with the weak economic forecast, this will also be reflected in the first half of this year. We expect the economic -- the economy to pick up in the second half of the year, meaning that the market will perform stable. Energy Management, as I said, another outstanding year of performance, 76% growth rate to a level of almost EUR 30 million. This is really remarkable and represents already 11% of our group revenue. We could expand our position as a Tier 1 supplier in the railway industry by winning further volume orders with battery thermal management systems for trains. In addition, we have received the first high-volume order in 2023 for the ultrafast charging system from ADS Tech Energy. This innovative solution is gaining more and more market share, and we are happy to participate in this. The large follow-up order is already booked as you saw in our latest announcement. Another milestone was the entry in the strong growing data center market. This market is just emerging and has incredible growth potential. With our liquid cooling solution, we have developed a product which meets the high specifications and requirements regarding efficiency and performance for processors and data centers. In November, we received the first major order for these liquid cooling systems for high-performance servers in the U.S. and we expect more to come. Independent of the economic developments, we believe that Energy Management will continue to generate strong growth rates also in 2024. In Healthcare & Analytics, we also pushed the development on thermal management solutions forward. This is mainly based also on the use of natural refrigerants. Another highlight is our clean room. The clean room in [ Bartenbaten ] has established into a core competence. Compared to our competition, this is a USP and helps us to generate temperature accuracy on a level of 0.0 Kelvin. For 2024, the clean room is already booked out with new orders, which is very nice. Alongside of these positive developments, we had to face a temporary consolidation of stocks on customer side after COVID last year. Although the situation normalized after Quarter 3, the decline in revenue could not fully compensated last year. Revenue was EUR 50 million in this segment. For the coming year, we expect to be back on pre-COVID level. Medical analytics systems and cooling solutions for laser-based treatment systems will remain the key growth drivers also for the future. With the stabilization of the economic environment, we expect an increasing momentum in the second half of this year as well. Coming to our legacy business coming to Print. Packaging and label printing were again the main growth drivers last year. Revenue increased by 12% to EUR 92 million, representing 35% of our group revenue. Energy efficiency and environmental friendly systems are becoming more important also in this market. This supports our position as a preferred technology partner. Nevertheless, downturn in the economy, especially in Germany, is also reflected in the brand industry. Orders came in lower than expected in the last couple of months. And in addition, orders are expected to be reduced in the months before [ Aruba ]. We, therefore, expect business to pick up after the big trade show, especially in the second half of this year for this market segment. Finally, let's turn to lasers, which still includes machine tools. We named it just Lasers as this is also our future focus for this segment. Revenue in Lasers was up by 11%, reaching EUR 56 million. This solid growth is mainly based on special laser applications and welder lasings for battery production. And in addition, the EUV business for semiconductors generated continuous growth as well. Regulatory and technological requirements are increasing in here. This is in favor for us to position ourselves as a partner of expertise. Based on the economic forecast, we anticipate the reduced willingness to invest in the first 9 months. The upturn is expected for the fourth quarter. Nevertheless, we expect further growth in the midterm, especially driven by our cooling solutions for battery production and semiconductors. Now with that said, please let me hand over to Robin, who will walk you through the financials in more detail. Robin, please.

Thank you, Michael, and good morning also from my side. I'm happy to share with you the details on the group's financial performance 2023. As Michael has mentioned, our revenues in 2023 reached an all-time high of EUR 262 million, which means an increase of 10% compared to 2022. The growth, as Michael said, was driven by Energy Management with plus 76% year-on-year, Print with plus 12% and Laser with 11%. Plastics grew by 3%, while Healthcare & Analytics has been just suffered from inventory consultation on customer level in Q2 and Q3. Overall, we are very pleased with the revenue development last year. When we look at the quarterly distribution, we see that all quarters were strong, even though the overall economic environment, especially in Germany, increasingly weakened towards the end of the year. Our EBIT reached EUR 14.2 million, which is approximately the level of 2022. The EBIT margin is 5.4%. You may remember from our last call that especially in the first half of 2023, we suffered from temporary effects, which impacted our profitability. The ramp-up costs of our new production site in Stenhagen, the economic downturn in China, temporary workers to reduce our order backlog and the delay in passing on increased material costs to our customers, among others. While we are not happy with the overall profitability level in 2023, we can also see that after a low point in Q2 with only 3.7% EBIT margin. The margin increased significantly in Q3 and Q4, reaching 6.2% and 6.5%, respectively. That shows that without these temporary effects, we're able to deliver the promised increase in profitability in the second half of 2023. Let's have a look at our segments. Revenue in Technology grew by 11% to almost EUR 200 million driven by Energy Management. Due to the mentioned temporary effects, EBIT decreased to EUR 5.2 million, which implies a margin of 2.6%. You can see a margin recovery in the second half of the year. Even though in Q4, we were suffering from an unfavorable product mix and limited inventory write-offs. The overall profitability level for the EN technology is not satisfying and with TT Sprint, which Michael mentioned, which we are going to present in some more minutes, we are working on improving. Service revenues increased to EUR 62.5 million or by 8% year-over-year. EBIT reached EUR 9 million or 14.4%, an increase of almost 30% versus prior year. After the margin dip at the end of 2022, Service came back strong last year and is back on track in terms of EBIT margin. Also here, you can see that we gained momentum in Q3 and Q4. Q4 with the outstanding margin benefited from the strong revenues with an extremely favorable service mix and in addition, lower personnel costs. A quick view on our remaining financial KPIs. ROCE is on a stable level of 13.3%. Also here, we saw a recovery during the year. We are extremely happy with our free cash flow, which turned back into positive in the course of the year and ended at a strong EUR 12.8 million. Gross profit increased by 4.2% to nearly EUR 17 million. Gross margin decreased to 26.6%, mainly driven by the temporary charges mentioned before. EBITDA slightly increased compared to '22 and reached EUR 21.2 million. And last but not least, net profit was at EUR 8.5 million, which is 4% below 2022. This results in earnings per share of EUR 1.24. Equity ratio remained stable at 56%. Net debt decreased to EUR 20.7 million due to the strong cash position at year-end. Consequently, net debt-to-EBITDA ratio decreased to 0.98% remaining on an investment-grade level, which is in line with our financial strategy. With this said, I want to close the chapter on financials 2023 and give you insights on our measures to increase profitability towards 2025. You may remember the pyramid with our strategic agenda from our last call. This is the result of our strategy review last year, which confirmed our overall strategic direction, but also sharpened and defined our way forward to achieve our strategic and financial targets of our strategy future-ready 2025. Based on this strategic agenda and following an analysis of key action items to improve our performance, we have set up an efficiency program called TT Sprint. Why TT Sprint? Because we will run it this year at high speed to have profit contributions from the measures latest in 2025 and whenever possible already in 2024. TT Sprint is the basis for building the new technotrans. It will be a major transformation of the company and pushes us towards better customer orientation, higher speed and increased profitability. We will tackle 4 major elements: portfolio end markets, organization, efficiencies and innovations. The 2023 results show that we are currently not under desired profitability level. We have addressed this with TT Sprint. The project will be a major contributor to boost our profitability and reach our financial targets in 2025. The main contributions will come from: one, growing our markets by focusing on our core business and profitable products; two, adjusting the organization towards a market-oriented approach; three, generating efficiencies and processes and by realizing internal synergies; and four, developing innovative products to improve market share and satisfy our customer needs. You can see an illustrative bridge derived from the project planning, which shows how we want to improve EBIT margin towards 2025. All 4 building blocks will contribute. Portfolio and markets and the adjustment of the organization was 1.5 to 2 percentage points each efficiencies and innovation with 0.5% to 1%, respectively. Of course, we know that this is challenging as we start from 5.4% EBIT margin in 2023. Nevertheless, we keep our ambitious target for 2025 as we want to push the company towards a significantly higher profitability, and we think this is doable. But it is also clear that in addition to TT Sprint initiatives, it will be fundamental for us to achieve our top line target of EUR 265 million to EUR 285 million in 2025 despite a strong headwind we are currently experiencing from general economic conditions, especially in Germany, but also elsewhere. The key message we want to send out today is TT Sprint will have a significant impact on technotrans and on our way forward. The company will transform. The transformation has started and Michael now will explain you in more detail how we do it. Michael, please.

Yes. Thank you very much, Robin. So picking up your last sentence. The transformation has started and again, TT Sprint is all about customer focus, speed and profitability. Each of these 4 projects will contribute, as Robin said, to meet our midterm guidance. Let's start with portfolio and markets in a little bit more detailed analysis. We will set our focus on Europe and America, and we will streamline our portfolio. The focus is on profitable growth, markets and on profitable products. With the focus on core business, we may consider also divestments, and we will add new companies where we can generate a strategic fit. Efficiencies, synergies, modularization and the reduction of complexity to name only some tasks, all this will help us to gain more cost efficiencies. Innovations: We are a technology company, and we are constantly working on innovations to be ahead of our competition. Emission-free mobility, liquid cooling for data centers, new natural refrigerants or hydrogen applications are some of the most promising programs to make a difference in the future. And finally, our organization, our strategy is based on focus markets. The logical consequent next step is to set up a market-orientated organization. The new technotrans organization is a step change in the history of technotrans. It's all about accountability, transparency and speed. So where are we coming from? Before 2020, we have managed our business by legal entities, functions and regions. With the start of our strategy, future ready in 2020, we have added our focus markets to this model. Now after establishing the markets in our daily business, we need to transform our organization into a decentralized operating model to fulfill the dynamics of each of our markets. I will give you one example. Print as a complete different dynamic than Energy Management. In Print, we know all our customers have established programs and products, and we are the global market leader. In Energy Management, we are developing a completely new market with new customers, products and specifications. Markets like e-mobility and data centers are in the early days, we must be fast and flexible to participate on those dynamics. Therefore, we decided to simple decentralized model with 4 divisions. We want entrepreneurs within the company. All divisions will have a full operational mandate and cost ownership. The divisions will represent our focus markets, Plastics, Healthcare & Analytics, Print and Energy Management with Lasers. Lasers will be part of the division Energy Management to run the business with a lean organization. Every division will have a clear product portfolio and we will integrate all the relevant functions like sales, engineering, operations and project procurement into this division to run the business. The head of each division as full P&L responsibility and is empowered to develop its business on a sustainable and profitable way. Even with 4 divisions, we will make sure that the mindset technotrans stands above everything and above single divisional interests. Corporation is key to success. Every division should benefit from being part of technotrans. And every division is committed to cooperating with each other and with the service functions. So where are we standing and what are the next steps? Last week, we have announced the new format of our structure. We now will start building the divisions. That means we will create a specific structure for each division according to the market needs and according to the dynamics. As I said, Print is different than Energy Management. July 1 will be the start of the transformation process. That means we will start working in the new structure. Official go-live is January 1, 2025. This new structure will make us stronger, faster and more efficient. It will create accountability, transparency and speed. It is a major step to meet our future goals. With that said, let me summarize and close the financial year 2023. Strong growth and revenues plus 10% to EUR 262 million. EBIT and ROCE on previous year's level due to temporary effects and for sure, with room for improvement. Very strong performance in free cash flow, significant improvement by EUR 16.5 million to EUR 12.8 million. And finally, we have generated with 1,600 employees, EUR 1.24 earnings per share. And according to our long-term dividend policy, we will propose EUR 0.62 dividend to our shareholders in our Annual General Meeting on May 17. So this was 2023. Let's move to 2024 and also to 2025. In 2024, we have taken the current weak economy environment into account which, from our point of view, will gain momentum in the second half of the year at the earliest. Revenue in the first quarter came in lower than expected, so that we went into short-time work in some areas. In line with this low economy and uncertainty, we expect revenues for '24 in the range between EUR 245 million and EUR 270 million, with an EBIT range between 5.5% and 7.5%. ROCE is expected to be on a level between 14% and 16%. That leads me to the midterm outlook for the year 2025. Based on our strategy future-ready 2025, which we have adjusted in the review last year. And with the support of our program, TT Sprint, we have -- we are confident to still reach our midterm guidance, as explained before. For 2025, we expect revenues coming in between EUR 265 million and EUR 285 million with an EBIT margin between 9% and 12%. To achieve this goal, we obviously need a year with no further economic and geopolitical impact. It is not a surprise that we will get easier to the lower end of the guidance than to the upper end, but in a perfect year, everything is possible, and we are prepared to capitalize on our efforts. And with that said, I would like to ask Frank to open the Q&A. Thank you very much.

Thank you, Michael. Ladies and gentlemen, the lines are now open for the Q&A session. [Operator Instructions] The first one is yours Rees [indiscernible].

You can hear me? Hello, you can hear me.

Yes, we can hear you very well.

A couple of questions to this new structure to a program technotrans first. Maybe -- how much maybe this change in organization and all the things are maybe lead to onetime costs? And is that included in the guidance or maybe coming over the year as a onetime impact in the earnings, which is now not included in the guidance. And also maybe divestments, are they included in the guidance? Or is it also maybe could be something -- the revenue could go out and maybe changing this regard, maybe to forecast.

Yes. Thank you, Mr. Rees for your questions. If we break it down to the guidance, onetime costs are at the moment not in as we don't know how much we will consider for restructuring over the course of this year due to the process, we have just started building up as a new organizational models. Same for divestments, no divestment is considered in the guidance.

Okay. What it could happen. Mechanical engineering is something maybe in the Laser, which is still around, maybe questions, looking a little bit back on the last year, what is the reason for the lower gross margin also it's a mix, so maybe healthcare is a very profitable one. And why was Q4 was so weak at the earnings side. You have the special effect in Q2, about week in the earnings side in technology. We had only this 2% margin. What was the reason?

Overall, our margin was impacted, especially in the first half of the year by those temporary effects. Remember, we built up [indiscernible] temporary workers, and we had price increases on the sales side only affected more or less by May, June, so mid of the year. That was overall an impact on margins last year. Technology Q4 product mix was not favorable. In addition, we had limited inventory write-offs. So that led to that margin decrease in the last quarter in Technology.

But the write-offs are not maybe handled as onetime impact. That sat in the earnings.

We have that fully in.

Okay. For this year, you expect a recovery of the gross margin?

Yes, that's the plan.

That's the plan. Okay.

This is part of our program TT Sprint, which we have explained before. We have really defined clear action items how to improve our profitability, which I've explained to you before and this is strongly monitored by a program management office, which we have installed to really work hard on improvement on gross margin and profitability.

Okay. And on this large contracts in Plastics, have you seen any of these contracts coming back? Or do you expecting, let's say, coming back in this year?

Yes. The Plastic industry is a little bit different to view, as I said, also in the presentation. On one hand, we have our temperature control units, which are running well, also our barrier thermal business, which is the temperature control unit business, is doing good and was gaining market share last year. On the other hand, due to the high interest rates, our big cooling plants have suffered a little bit from that. Companies have reduced their willingness to invest in those areas. We are speaking on really large cooling plants with sales prices around EUR 0.5 million plus and most of those plant investments are moved into this year. And hopefully, we saw no cancellation so far, but also reduce order intakes in this area.

Okay. Finally, you mentioned you are focusing your business in Europe and U.S. now or Americans. Does it mean the China fab, which was also one of your problem cases in the first half, you will move away and close it?

No, the decision is not made yet. Starting with China. China is still suffering even if China has recently announced that the China economy is doing slightly better than anticipated. The business with domestic customers is still a big challenge for international companies, also for technotrans and the international business, which we are supporting from our Chinese factory into Mainland China is also reduced. With that, we have started to reorganize and restructure our Chinese facility to keep it alive. That's what we have done last year. And this year, we will observe the global economy in China as a global economy and the development of the economy in China and we will make a decision over the course of the year how we will proceed. So at the moment, the production location, our entity in China is up and running on a very, very low base. But we are prepared to pick up. We from the Board of Management are also prepared to make a decision by end of the year.

Very fast my most loved question, data centers. We see the AI boom. We hear a lot about liquid cooling. You mentioned maybe more to come. Is anything in the guidance included that maybe -- and could it also maybe upside from this side because it's a booming market there?

Yes. So yes and yes. So on the other question is something in the guidance included, yes, is there an upside possible. Yes. Both is possible. As you said, this is a really incredible and booming market. The dynamics are unbelievable at the moment. We are very well positioned as our product is designed and proven. So at the moment, we are in the discussion on various new programs to take them in and to win. It looks really promising. And I'm sure we are able to announce some news over the course of the next couple of months. And we are working hard with our customers in the U.S. to be even better positioned. And let's see what we can share with you over the course of this year, but this is a really fantastic opportunity for technotrans to grow very fast and beyond expectations which we have set out.

And you would be able to deliver if now some large orders would come in.

In Case, we are prepared. We have already started with [indiscernible] production on the first big order we've received last year, and we are ready to go if an order comes in.

Now I would like to call Stefan Michael.

Can you hear me?

Yes.

I have about 3 questions from my side and ask them one by one, if you may. The first one is on services. Can you give us more details on the reasons for the strong margin we have seen in the fourth quarter in Services and what margin is probably conceivable in 2024? That's the first question.

We had a very favorable mix in the Service segment in terms of the services we provided. In addition, we had lower personnel costs. So overall, that's, for sure, an extraordinary quarter in that sense and a bit unfortunate, it's not sustainable, but we can calculate or we do calculate with continuous margin increase. We expect this year also in the range of 14% to 15% and -- but keep on working to improving also the Service margin.

And please let me add one comment to this. You may remember the Service situation exactly one year ago where we started on a lower base. We had a decrease in Service margin and we said this is a temporary effect driven by pricing by commitments to our customers due to long-term contracts inflection of higher material costs in our spare part business, and we said one year ago, this is temporary, and we will be back on track by end of the year, and we could keep our promises in this. We are back on track. And as Robin said, this is the region we want to stay in at least between 40% and 50%, and we take it from there.

And maybe could you more specific on that favorable mix issue, more spare parts, more aftersales, onetime impact.

Spare parts and installation of business.

Yes. Okay, spare parts. Okay. Then going to the second question. I've seen your EBIT margin target for 2024 is set very broadly with 200 basis points. Other reasons for that to be found in the uncertain overall economic situation? Or have you affected in some special effects from your restructuring or something else?

No special effects factored in. Indeed, the only reason for this is the current uncertainty in terms of economic development.

Okay. And my last question is on pricing power. Has there anything changed in the last couple of weeks in your markets?

No, for sure, our customers are expecting ever better prices. That's not a secret. And we try to defend our pricing approach. And for sure, we want to offer profitable programs and innovative programs to our customers, which should reflect also in pricing. So nothing has changed, and this is also one base for reaching our midterm guidance.

And do you plan any price increases in the course of this year?

Well, it's daily business. I would answer it in this way.

The next one, I would like to call is Christophe [indiscernible].

I had 3 questions. One, you answered the Q4 technology and the servicemen. Thank you. But how much revenue do you plan for 2024 in Stenhagen, and how many employees are there in work today? How many percent of the capacity of Stenhagen will be in work planned in 2024. That's the first question. And the second question, your forecast for 2024, we'll see revenue between EUR 20, EUR 45 million and EUR 20 million, EUR 70 million by EBIT margin between 5.5% and 7.5%. Can I say a review, for example, of EUR 20 million, EUR 45 million will have a EBIT near of 5.5% and EUR 20 million, EUR 70 million will have an EBIT margin near of 7.5%? Or can you get with revenue to EUR 45 million, also 7.5% because of better product mix or divestments.

Thank you, Mr. [indiscernible] for those questions. So Stenhagen to start with this question. As you said, first question was answered already. Stenhagen, we are anticipating a revenue between EUR 15 million and EUR 20 million. It can be more depending on big orders coming in as I explained to the question of Mr. Rees. For example, if we are getting a significant volume orders for data center business, we are prepared also to increase this volume. At the moment, we are calculating with EUR 15 million to EUR 20 million. The location is tough to this with around about 30 employees around at the moment, but we are flexible. We are flexible in adjusting. We can move stuff from other plants to Stenhagen. We have qualified our employees over the course of last year, as you remember, and we are prepared to take it to further growth. And finally, regarding -- your question regarding margins and revenues. So for sure, the normal rationale is if revenue is on the lower end, EBIT is on the lower end. If it's on the higher end, EBIT can be will, for sure, be anticipate it coming in on the higher end. But it's a long year with some uncertainties if everything runs in a perfect way, also so better margins are receivable and in the other way around. We really need to say that, and this was also the rationale for us to keep the door a little bit broader open as last year ended and the new year has started with an economic downturn, as you know, really, and this was, for sure, also reflected in some areas in technotrans.

The next participant, let's see Mr. Rees, your hand is raised. Do you have another question?

Sorry, I forgot to bring the hands down. But if I'm in the call maybe M&A, it's in your plan, it was always in your plan. Is it in the focus or is it given that your transformation started internally? Maybe it's not something which maybe we should expect for the next month or then this year because you have to focus on the internal things you published.

You are right, we must focus for internal homework and on the transformation, which Robin and I have explained in the presentation. This is a key priority to be prepared for increasing our profitability. We will focus on our TT Sprint program. We will focus also on our new decentralized organization, which is key to success for the future. Once we have done that, for sure, focus will also be on M&A targets. And as ever, if target comes in, which is really nice to take a look on, we will do so. We are prepared for that in the direction.

So I do not see any raised hands at the moment. So I would like to move on -- to the questions which we have received a written form. The first one is by Christian Glowa. I think we answered it already. What are the reasons for the Q4 EBIT margin step-up in Services? And are there any positive one-off items. This is answered already. The second by Christian Glowa is what kind of business is considered to be potentially divested.

I think we've answered that already in the last call, we have EUR 20 million of noncore business. This is, as you know, our technical documentation company, GDS, and these are noncore technologies, which we have in our portfolio. And we are evaluating those over the course of this year, and we will prepare for each a decision for hold or [indiscernible].

Thank you, Mr. Finger. The next question is by Stefan Windlin. He asked, what is the current situation in China? How is it running? And what is the outlook.

I think we have answered this as well in the previous question, and we can move on to the next one.

Yes. Next question also by Stefan Windlin regarding U.S.A. What is the outlook for U.S.A., has the organization, the necessary and critical size? And are you hiring employees and what are you doing regarding the organization? And do you enhance it organically? Or do you plan to acquire externally?

Yes. Regarding U.S., as we said, U.S. will become focus for our market activities, and it's logical that U.S. plays a major role for us speaking just about the data center topic, which is a key for our future development. All our big customers are sitting in the U.S. We are well connected at the moment. We have a facility near to Chicago, where we can scale up a little bit. And we are in discussion with our customers, especially for this topic where and how to produce. At the moment, we start producing, especially the data center stuff from Europe, but it is a start for the ramp-up phase, and we are open to scale our production facilities to a level to fulfill our customer needs if possible. That's on one hand for the Energy Management, the case. For the other areas, let's take another example, Healthcare & Analytics, we are also scanning the market maybe for potential acquisitions, but also for identifying further target customers for the future. So a lot of activities are going on with our team and we do it at the moment by ourselves and potentially also, we are adding some new.

Thanks, Mr. Finger. Also, the next question comes from Mr. [indiscernible] it's about capacities, and he asks or he says, in 2023 from his point of view, the movement from capacities to one segment to the other was a problem from his point of view and has led to low margins and especially healthcare, the capacity utilization was very low and others were very good. And yes, temporary workers have to be paid or hired. And will this also remain a problem in the new plant organization with 4 divisions.

So in 2023, it was a special situation. On one hand, it was all about capacity for the production, especially for the energy management segment to reduce our strong backlog. Therefore, we couldn't hire fast enough resources for ourselves, and therefore, we have used temporary workers. And what Mr. [indiscernible] also mentioned is that it was a problem in shifting programs from one location to the other. Yes, programs are not able to shift as you need a special improvement from the customers and also you need to redirect the supply chain. So that is always a challenge to dislocate lines from one location to the other. What is possible is to move with stuff from one area to the other. And we have done that already over the course of the last couple of months and we have hired a lot of workers for our growing divisions like Energy Management to fulfill those growth rates and they are qualified and cross qualified also to help out in other lines. So that's a different view. One is workers on one hand. One is, on the other hand, we speak about capacity of lines moving from one side to the other. It's a little bit more of a challenge because you need an approval from our customers.

Thanks, Mr. Finger. Let's move on to the next question by Mr. [indiscernible]. He asked for the transition of the free cash flow to the net debt reduction and as if the rest is the dividend mainly.

Yes. Well, free cash flow, EUR 12.8 million. We have some negative cash flow from financing activities, roughly EUR 2.5 million. So biggest part of the free cash flow ended up in our cash position, which was EUR 10 million higher at the end of 2023 than 2022. And correspondingly, our financial debt increased moderately by roughly EUR 5 million. So overall, that's the math behind the decrease of our net debt to EBITDA.

Thanks, Mr. Schaede. Last question by Stefan [indiscernible] regarding the revenue. outlook. Energy Management is growing rapidly, very strong. And the other markets, they seem to be stable or the outlook is stable. So why does the group grow in total this year, not in this year. Yes. That's.

So if you see the different projections by market from our presentation, you see that we are suffering from Print, especially and from Lasers. Orders are coming in lower than expected. That was also the reason why we have explained that we are in some areas already like Lasers and Plastics in short time work. And in the other strong growing areas like Energy Management, we can't compensate it in an extraordinary base that we are growing stronger than we have outlined. But it's possible, as we said already before, if the recovery in those markets is kicking in earlier than we have anticipated. We made a very conservative approach on that. And if we see also big new volume orders kicking in, we are still able to produce it in the second half, and we can capitalize on them.

Thank you, Mr. Finger. The next question is by Sven Sauer. It reflects on the tax rate. Tax rate has been at 33% to 34% over the past 3 years. Is this also what you're projecting for the future?

No, it's not what we project in the future. Over the last couple of years, we had also some special effects. We had some payments which were nonperiodic due to fiscal audits. For the future, we keep our guidance with regard to tax rate at 30% to 32%. So that should be a bit lower in the future than what we have seen over the last couple of years.

Thanks, Mr. Schaede. Then also by Mr. Sauer, market question, is technotrans delivering components for the Alstom [indiscernible] train?

Yes.

Thanks. Quick answer. And the next question is by [ Bernard Flitman ]. It sounds as follows. The order backlog is rather low end of 2023. Would it be reasonable to expect declining sales in Q1 or H1 or first half?

Declining sales, yes, that's what we've said. We see a very low sales coming in or lower sales coming in than anticipated for the first quarter, and this may also reflect a little bit in the second. But second quarter, we see already an improvement. Second half, we expect an upturn. And that is the reason for our projection, which we have outlined before.

Thank you, Mr. Finger. So a new question by Mr. [indiscernible] reflecting on Healthcare & Analytics. He says is the Healthcare & Analytics division, yes, below the critical size. Healthcare is from his point of view, too small for own division and it's much smaller than the large divisions. And in Healthcare, from his point of view, it is not foreseeable if it will reach the size of the others. How -- what is the outlook here?

So our new organizational model will help us being more transparency and also more focus on customers. And we see this as a huge potential also to grow. If we look how fast we could grow our Energy Management division almost from scratch to EUR 30 million and even beyond in the next years. Then we also are sure that we can grow with a strong focus on this market with a dedicated organization on our customers and also on potential M&A opportunities. This business also to a decent level, which we saw also already in Print and Plastics and Lasers and for sure, Energy Management, we will get there by organic growth.

Thank you, Mr. Finger. So all written questions have been answered. I see a raised hand by Stefan Michael, Mr. Michel, the line is open for you. Or is it just a raised hand from the past? Yes. All right.

Can you hear me?

Yes.

One follow-up question. You mentioned that you expect a decline in sales in the first quarter. Can you probably roughly quantify this mid-single, high single digit and what margin range is likely in the first quarter? And the second one and the last one, can you quantify the short-time working and until then, it is planned in Plastics and Laser.

Yes. Maybe with regard to the last question, answer that first. We look at the short time work, let's say, month by month at the different sites. And we will decide on this also month by month. We are currently in some locations, as Michael said before, we are running it and others not. In April, we will add, for example, here the Satenbergh, and we will have one month of short-time labor or short-term work. But for the moment, it will be April, same as Plastics. And then we will take it from there. As Michael said before, Q2 looks better than Q1. Order entry is -- has increased since year-end. So from that regard, we feel that Q2 should be stable, and we should be back to our initial plan. With regard to Q1, it will be -- let's say, it will be double digit. That's for sure, to the low end. We also see here that January and February were weak, March is picking up, so looks better. So we expect that we have seen the low point really in February. We take it from there. With regard to margins, to be honest, I don't want to speculate here. Of course, we have a view on it. We expect Q1 to be profitable, but to what extent, I really ask for some patients, we will publish the figures middle of May. And by then, we will give you an update on Q1.

So low double-digit sales decline in Q1 expected. Is this right?

Yes.

Yes. And how many people have been affected by short-time work on average in the first quarter or in January, February.

That's tough to say. I would -- let me just do the math. It's probably around 150 to 200.

So I do not see any written questions, new ones or any raised hands anymore. So yes, please let me hand back to Michael.

Thank you for your questions, ladies and gentlemen. And as you know, our next reporting date, as Robin already mentioned, is May 14, when we present our Q1 figures. And it's 3 days after that, on May 17, you will see us or we are happy to see you to our Annual General Meeting in [indiscernible] and in case of any further questions, we are happy to take them as ever. And so also on my colleague, Robin, I would like to thank you for your questions, for your patience and your interest in technotrans. Take care. Thank you very much, and see you soon.