TKH Group N.V. (TWEKA) Earnings Call Transcript & Summary

Good morning to everyone here in Amsterdam. We have a small audience here in Amsterdam, who dare to come over here to the TKH presentation of the half year results. Also a warm welcome to everyone in the webcast. I hope you will enjoy what we present. We released this morning our press release, and we can see that we did a little bit better than that we forecasted on the 18th of June. So the month of June was, in the end, a little bit better than that we expected. Of course, there is a quite substantial impact of COVID-19 on the activities of TKH. We will come back to that in a few slides. And yes, if we look then at the result, we saw a decline of around 11% and mainly driven by the organic growth, which was negative. And so an impact of about 10% in total turnover, including the divestments. And besides that, we also had some acquisitions that came in last year but not yet accounted into the turnover. Organically, 7.5% decline. And it's, yes, a little bit a mix picture that you get. Telecom mainly declined because of France, where we had a quite strong lockdown. So no activities for installation. And France is, at the meantime, a quite substantial market for resin fiber optic. Building Solutions, a minor drop of 0.8%. And we would have loved to see it without COVID, but we cannot present that to you. Of course, we make our estimations. But I believe Building Solutions did a real good job. Also, if we look at the profitability, about 25% more profit than we had last year. And of course, a major impact in the Industrial Solutions, also driven by the COVID measures that it was very difficult for us to be at customer locations. And also the illness rates in manufacturing -- within manufacturing had its impact. Of course, that's a more short-term impact. The illness rate has normalized now. It is still a little bit higher than it is normal, but not as much higher as it was in May. May, we had [ any ] production location, even up to 20% illness rates. What is very good is that the margin rose, so part of the Simplify & Acceleration (sic) [ Simplify & Accelerate ] program. Divestments helped us there, but also in the mix of activities, we saw that some of the activities that have gross margins above 50% contributed really very good. Especially in the Machine Vision, we see very high gross margin, and that helped us to get in the end to a 2% -- 2 points percentage improvement. And that's really substantial, and that's a good fundament for the expectations and forecast that we gave in respect of the return on sales improvement that we are focusing on. The target is to get above 15%. I believe we are well on track and especially if we are normalizing the COVID aspects and the short-term economic effects. One-off expense, mainly related to our integration activities within the cable group and some smaller additional one-off expenses related to, yes, reducing our cost and with a few layoffs in the group. And then, of course, if you look at the net profit, Elling will explain a little bit more. The net profit decrease was somewhat higher than the operational profit mainly because of higher tax rate because we have now less turnover coming from the industrial innovations, VMI, where we have the innovation box. So when we see turnover coming up, again, we will also see that the mix, in respect of the tax, will also change again and lower our tax rate. But Elling will explain a little bit more the gap to the net profit from the EBITA. Order book, a little bit lower, but I have to say it doesn't look too bad, especially in effect of the Industrial Solutions activities, where we saw that the order intake in the Tire Building was very good in the first quarter. We were above EUR 100 million, which is a really good rate. It was a little bit lower than last year. But the second quarter was disappointing. Originally, we expected more orders in June that did not come in. And we have not lost them. Part of it will come in Q3, we believe, but we just missed that. But in the end, the order intake, because of that, was relatively low in Q2. And that is also what you see in the kind of translation to the second half year, where we also guide now for somewhat lower profitability in the Industrial Solutions segment because of a relatively low order intake. Especially within the top 5, we have seen that they have completely stopped supplying us with orders. And outside of the top 5, especially in Q1, we saw really good appetite for orders with the top 5 is completely stopped. And that might take a half year or 12 to 18 months, difficult to predict. What is interesting, we have some innovations in the pipeline. And in 2009, if we look back, we heavily invested in 2009 additional resources also into innovation. And most of you know that we have the UNIXX, which is a really high-end innovation. And yes, that might be a key to get out of this and to increase the appetite of the top 5 again for investment. And because this is such a breakthrough technology with so many advantages that it could be that we get a high priority, again, higher priority because they always will invest something. So that is where we focus really very strong at this moment, in the UNIXX, where we also had some delay because we couldn't be present at the site where we have installed the equipment. But we will -- we are focusing to get the site acceptance test by the end of this year. And yes, that should be a big driver for investments in the Tire Building industry. I already mentioned the margin increase, which is really very good. And that is, yes, really due to the good strategic development we see in the group. We were able to close the divestments of ZTC and Cruxin in the first half year. And we have now realized about EUR 260 million turnover of divestments. Our target is to -- remember, that is EUR 300 million to EUR 350 million. We foresee that in the coming half year, it might be difficult to divest. And so we have reduced the pressure there and are looking more into 2021 to move forward with divestments and perhaps even half the way to 2022. The companies are performing well. So we have no problems to divest. But yes, what we see is that it is more difficult to get the financing in for these kind of acquisitions. So integration was a very strong focus. We had, as part of the Simplify & Accelerate program, very, very good progress with a very high motivation level in the group. It is not good if it's only top-down driven. But this is also really bottom-up activity with eager people to make it happen. And I believe we were spot on last year to introduce this program so that we don't lose time this year. And that helps, of course, also, yes, the profit and the margin improvement and the synergies that we get out of these activities. And yes, of course, what is also very good that some of you might remember that we had also in our presentation, at one point of time, 20 building blocks. We don't show that anymore because some of these building blocks have been realized. But if you look at the successful introduction and the progress we make in our innovations, those were part of the 20 building blocks. We see very good, let's say, execution. And even in the COVID situation, we didn't see any negative impact there on our innovation road map. We also hardly didn't reduce our R&D cost. And we believe we also have to continue because there are still a lot of potential for TKH related to innovations. And that is also very important for the future of and the continuity of the TKH Group. But yes, the breakthrough here is really amazing, I have to say. And a good example is also the Indivion. Some of the building blocks, we have invested for 5 to 7 years, you have to be patient. You can have a nice technology, but the market, in the end, needs to accept it. But the breakthrough that we see now is bigger orders, and that is -- yes, the engine is going to really -- is revving more and more at higher reps, and that will support us in the coming 1 to 2 years to compensate for weaker economic circumstances as, for instance, in the industrial activity, industrial area related to capital investments. Yes, and we also decided to further invest in power cable to support our high-voltage program where we have set about 2 years ago, 3 years ago, to also take part in the high-voltage market, preparing also for potentially array, not only the array cables, but also the export cables. That's a medium-, longer-term road map. The execution of subsea is moving in the right direction to turn over of EUR 50 million to EUR 75 million. It looks like next year, we could be close to EUR 35 million, based on the orders that we already have in the books now. So we have set to prepare further for the expansion that we see progressing in the production utilization that we have to add additional capacity. And that will be operational in Q3. Yes, major lockdowns in some countries. Yes, if you look at certain websites, you can follow it yourself. It is very easy to see where it is difficult and not. But yes, it has really eased. So we see that the impact of COVID is now really small. That does not mention or is not -- it could be that new lockdowns come in because of the developments of COVID. But we are well prepared. We take all the measures. Health of our people and employees in the group is our first priority. We really play it safe to continue our business, which is very important also for our customers. Could you imagine what would happen if we would not be able to supply for 3 months, and customers would be in need of our technology? So we are really taking -- are very conservative in all the measures that we take and try to also mitigate all kinds of risks by having more locations where we can produce. That cannot be the case for all the technologies that we have, but in the majority, we have more locations, and that is a good risk mitigator. We have seen working capital at a similar level as half year -- 1 last year. That is -- last year was not a normal level. And we saw that we reduced that by the end of the year. And it was normalized by the end of the year. And now we see also some impact because of inventories that developed in Q2. And we believe that a big part of this working capital increase will be normalized by the end of the year. Yes, the vertical markets, we see here the overview. And yes, some markets did really well, especially Machine Vision, with more than 40% increase in turnover, partly driven also by acquisitions, but the organic growth was 12%. And I believe that was really, really good. Of course, there were effects also of lockdowns, and it could have been better. But we already very proud on what we achieved here because it was also based on the right investments we did. And also, their lead times take their time, sometimes 2, 3 years before you have to know a new technology. And it was really spot on, already started in Q4 last year with the 5G smartphone business, with new applications in that production technology where, yes, we had a very good technology available. For the second half, we forecast a little bit lower turnover there than in -- compared to the first half year, and that is mainly because the business is really project driven. What we see there is a lot of activity within our group now to prepare for new smartphones that will be introduced in 2021. So we have to invest heavily today in field application engineers in the second half year to cope with all the system integrators that already now have chosen for our technology. So that is good news. But yes, it is, in the second half year, a little bit at a lower level, the turnover, but we are preparing, as I mentioned, for 2021. Marine & Offshore, we saw, of course, the subsea cable contributing there, which -- through which we were able to show a nice growth there. On the other side, there was a negative effect because of -- especially the cruise ship area, where we see a complete stagnation of activity and even closure of some of these companies, and that also had an impact. But again, subsea did quite well and contributed to the growth. Yes, you can see the effect, of course, of the Tire Building, which is also presented in the Industrial Solution area, a quite substantial impact with a decrease of turnover, about 17%. I'm not going in details for all the verticals now. I will come back in the solutions with respect to the verticals. But what I really want to mention actually with this slide is that the growth scenarios have not been changed. So we see a big impact of COVID, a big impact, I believe, of economic, more difficult circumstances in the coming half year, perhaps 1 or 2 years. But we are even more convinced at this moment about the opportunities that we have to achieve the growth scenarios. So that perspective is there. And that is also why we have not changed the growth target for the verticals of EUR 300 million to EUR 500 million in 3 to 5 years. And yes, I believe it's the further focus that we have introduced starting last year. We see Simplify & Accelerate program, that really helped us. I believe, again, a very good decision to have that increased focus because we see a further acceleration in achieving the growth scenarios. And again, the Tire Building, it is difficult to influence that. But even there, with the UNIXX, I believe we can do something. And what you also can see is that the share of the growth verticals today is more than 65%. If we look now at the growth or decrease in turnover in the first half year, then we see that the decrease was almost similar in the other verticals compared to the growth markets. So the other markets, we saw some impact, and one of the markets was the building and construction market, where we saw that the installation companies had really difficulties to work in the projects because most of that work is inside a building. And yes, inside the building, it was, in Q2, not so easy. But there, we see, for the second half, a better outlook as long as COVID -- the COVID impact is not increasing too much. I go to telecom. I already mentioned that the lockdown in France had a substantial impact on the turnover. In all the other countries, it was actually quite okay. Also, the developments of -- within China, with some price pressure there, didn't have really impact at our activities. And what we see is that, especially the connectivity part within the Telecom Solutions, so all the components we need in the network besides the cable -- the fiber optic cable, that did really well. We even saw some growth there without the -- including the impact of France. So we are really well positioned there, nice innovations there. And also there, the perspective is quite good for the coming years, I would say. And then the other markets, we saw that some areas, it was positive that many people worked at home. But also, some projects were postponed in that area. So also there, we saw a small decrease in turnover. Then within Building Solutions, I already mentioned 25% growth of the operational profit. So yes, I believe in -- including the COVID circumstances, a very nice development. We saw a big improvement in the return on sales, 2.6% improvement, and that -- while we had some underutilization in the second quarter because you cannot move out the cost to adopt for your capacity. The high illness rate that we had, yes, that cost is in our P&L, and there was no compensation for that. And also, anyway, because of the lockdown, we had not a lot of compensation. Elling will come back to that. So over there, it was our own strengths that, in the end, realized this 25% increase in profitability, small organic growth impact of 0.8%. Marine & Offshore, I already mentioned what happened there. In the Tunnel & Infra, we saw, especially from the utility companies investing in energy networks, a very big demand. And even -- we were not able to cope completely with the demand, we have some improvement programs running there for the second half year that we can increase our output. So that is good. And from that point of view, we should be able to have also, in the second half year, a good half year, with some growth in the power network applications. Very good news. It took a long time, perhaps you expected already earlier to have a major project order for CEDD/AGL, but it came in. What we saw is that also there, postponements in projects and appetite to invest. But in the end, this was a project we worked on for almost a year. It came in good hands because we have the best technology available, and we were able to convince the customer. And yes, after we sent out a press release, we had many, many telephone calls from everywhere from the world to congratulate us with this order. And yes, it's -- the news is spreading around. And I believe it is a very important confirmation that this -- the Turkish people decided for us. And I can tell you that it was a very deep dive that they did to get confirmation for themselves that we had the best technology and the best performance, also in relation of all kinds of efficiencies, for Airfield Ground Lighting. So we are on track there with our target. I believe I mentioned before, this should have a turnover on the medium term, longer term of EUR 100 million. And the good news is that airports are investing here, and they need to invest. They cannot postpone this forever. There's a specific timing when you have to renew the infrastructure and the lighting systems. You cannot postpone that forever. Of course, for the short term, you can postpone that for a few quarters, but you cannot postpone this for many years. So we believe that, yes, we will have a good building block here to compensate for some of the more difficult areas that we have in the group. Parking, we had a big impact, with about 50% lower turnover. Now it was a little bit less, 20 -- 30%. But we immediately took action there and reduced substantially our cost. We can -- relatively simple, in a simple way, again, add capacity. So we wanted to really focus on keeping the profitability and even have a kind of profitability improvement as we had on our list to improve. And what is positive is that we thought, in April, that, yes, major airports would not come back for perhaps several years for investments in the solutions that we have. It's mainly efficiency solution, and you can do more with it, also differentiating your tariff. But to our surprise, some of the projects that look to be completely off the radar for some time already came back on the radar again. And of course, we try to do our best because some of those projects, we already had almost in our pocket. And we mentioned in March that we didn't have some major projects, larger projects in 2019. And that would be kind of perspective for 2020 that we would have -- we have 4, 5 really big projects above EUR 10 million turnover we're trying to realize this year. And it looks like 1 or 2 might even come back. So not everything is -- in Parking is gone. And we are working very hard further also on our technology to make it even better and position it also for other areas. We mentioned also the smaller parking garages where we want to position ourselves, which is a very big ticket in the parking market. But you have to understand that some bigger parking companies, they only have utilization today of 5%. And that is a real big impact. And that also might take a while before that comes back. Machine Vision, I already have explained, and the other markets. I also explained that the building construction market had some impact because of the installation companies not being able to work at customer sites. Industrial Solutions. I also explained already a few parts there within the Tire Building, about the order intake and also about UNIXX. And so especially within the top 5, we see hesitation for investments. And it looks like companies that are stock listed, that they have more problems to invest at this point of time than the companies that are not stock listed. And I believe all the Tire Building companies within the top 5 are stock listed. So cash is king there. And yes -- and the very good news is the care. I mentioned that already the Indivion, a nice order, about EUR 30 million. And yes, a nice building stone to build further on. This could be a really strong building stone within the group and compensate for the Tire Building activity that might be at a somewhat lower level in the coming few quarters. And then we have the other markets. That's mainly related to the industrial connectivity. There, we have seen a quite substantial impact in the first half year because also, customers reduced their inventory. To remember what happened in 2019 is that we had really long lead times, up to 36 weeks. And so a lot of customers also built up their inventory for that. We had, in the end, inventories to also service customers in some areas. And that came all together. Customers had to reduce their inventory, and we also reduced inventory. And so we believe that the second half year could be better than the first half year. But today, we have taken this market in a conservative way in our outlook. This was my part of the presentation. I'd like to hand over to Elling. Thank you for your attention.

Thank you, Alexander. Good morning, everyone. In the next couple of sheets, I'll walk you through the financials of -- in the first half 2020. Important is to look at the geographical distribution of revenue. What you might see here is quite a big delta in terms of the contribution coming out in the Netherlands. Two main reasons. We did the divestment in China. Obviously, that automatically puts a higher share into the Netherlands on the whole of TKH. And the second part, Alexander discussed already about the reduction we saw in tire manufacturing. We don't have a large customer base with tire manufacturing in the Netherlands. So most of it is international. If that shrinks, automatically, the Dutch part improves. Still, 2/3 of total revenue is in Europe and Asia, with close to 20% is still not to be neglected. If we look at the revenue development, from EUR 753 million, down to almost EUR 680 million in sales. There are a few important parts to highlight. Of course, we did some acquisitions. And you can see them listed here, different parts in the year. In total, they had a contribution in the first half of EUR 21.6 million. Divestments were also done. I mentioned ZTC already. That's the biggest part out of the EUR 36 million, which has been divested. About EUR 2 million is related to the divestment of Cruxin. And that leads, in the end, to a organic decline of revenue of 7.5%. And indeed, key to, I would also say, the maintaining of our return on sales in the first half of this year has been the improved added value, up 200 basis points, 49.4% in the first half of this year, coming out of the better distribution of our revenue. So more sales from Machine Vision. The acquisitions also were in that particular area, so higher-margin business as well. And obviously, as we guided already last year, part of the Simplify & Accelerate program, we were divesting the lower added value business. And that's definitely the case when you look, for example, at ZTC. So these 3 elements greatly help us to bring up the added value to close to 50%. If I walk for you from top line to bottom line, then, of course, the next part is operational expense. Operating costs are 39.3% of sales. That's up compared to a year ago. It has a lot to do, of course, with the reduction of top line. If you look at the operational cost itself, I mean, we see a decline of EUR 13 million. Some elements in there. Of course, we had to deal with the new companies coming in with their OpEx. Some companies were divested with their OpEx. So these are the pluses and minuses. Of course, when your top line is a little bit reduced, some elements are also automatically reduced. And of course, we had to deal with the COVID issues as well. Restrictions on travel, all these kind of things have an impact on cost structures. We were not massively using the support programs of the government. Actually, in the Netherlands, we didn't do any. We have seen some, what we call, in good German, [Foreign Language], in the German countries and a little bit in France. And I must say, if you look at the direct support from the government, then we had about EUR 1.3 million direct support, of which even an important part came from China. And China has been very effective in mobilizing the local economy. You're talking about better, let's say, energy, power consumption, tariffs, et cetera, in order to stimulate the economy. And as we use that, we also get this benefit. In the end, with the cost reduction and the better improved added value, we were able to keep the return on sales basically flat compared to a year ago at 10.2%. If I go from EBITA to the net profit, especially the definition which we use, we have an EBITA of EUR 69 million, some one-off expenses. We hardly have any one-off expenses directly related to COVID. Most of the EUR 3.7 million is related to the execution of the Simplify & Accelerate program. Alexander already mentioned the integration of our cable connectivity activities in the Netherlands has a big share in this. So that's mostly driven by our own initiatives and self-help programs initiated in the middle of last year. And if you look at the amortization charges, not surprisingly, I think they are higher than last year. We continue to invest in R&D. We also did the acquisitions last year, so the amortization increased to a level close to EUR 28 million. Impairments, EUR 1.5 million. If you look at all the analysis and scenario plannings we did to look at our intangibles in the current environment, in the end, we had to take an impairment of about EUR 1.5 million, mostly related to the Building Solutions, specifically the Parking cluster. But in itself, if you look at the whole of the intangibles, it's not such a big figure. On the financial expenses, slightly up compared to last year, some effects of foreign exchange. On positive side, we had lower interest charges. Result from associates, maybe that's not something you had in your own models, at least some of you. Two main elements in there. One is, of course, the divestment of ZTC, where we made a profit -- a book profit of EUR 5.6 million. But at the same time, we have also seen a charge, the amortization charge related to the purchase price allocation in a cable connectivity group. Cable connectivity group basically represents the last year divested industrial connectivity activities of TKH where we have a large minority share and of course, as a result of the developments in their performance, we also have to represent the related effects in our P&L. By the way, this EUR 2.2 million for the first half, we expect for your models something for the full year to be close to EUR 3 million, yes, so it's definitely heavily H1 loaded. Then an important part is the tax. If you look at the tax rate, just over 25%, that's 2% up compared to last year. Two important parts here. One is that, I think Alexander mentioned briefly, the effect of having less profit in the Netherlands. That has mostly to do with the reduction in profitability of our Tire Building activities. Means also that we are less able to use the innovation box scheme, it's a specific Dutch scheme related to a tax break on income coming out of specific innovative projects. So that's reduced, that pushes up the overall tax rate. And secondly, also the divestments were a part of this. In China, the ZTC activities, which we divested, were considered locally in China to be a high-tech company and carries a very substantial low tax rate. And of course, that part is lost as well. So we are at 25% at half year, and that's also what I don't see changing towards the full year. This leads, in the end, to our definition of net profit, the net profit before amortization and one-off income and expenses attributable to shareholders of EUR 36 million. And that's a decline of over 21% compared to last year. When I move to the balance sheet, I think there are a few key elements to highlight here. If you look at the balance sheet, you'll see some of the working capital elements in here. And I would like to address your attention to the line of contract assets. Basically, that's the work we perform on contracts we have in place with our customer base. And if you look at, on one side, on the asset side of your balance sheet, that's the work you performed for which you have a claim to the customer base. And of course, on the liability side, you see contract liabilities, that's basically the advanced payments you have received on those -- on that work, which you did so far. Compared to the start of the year, our claim to customers has increased by about EUR 40 million. That has a lot to do with our Tire Building activities. And what I mean with that? We have executed order book. We have executed projects. But due to mostly the lockdown issues, the COVID issues, either our customer base cannot be addressed in the various geographical markets because markets have restrictions, either to travel there or a lot of companies have restricted themselves by not having third parties on their premises for a long period of time to commission equipment. So in the end, it means that we have quite some equipment in our premises waiting for delivery, waiting for commissioning, et cetera. But it also means that at half year, they're on our books. So this has an increase on the working capital. And that doesn't help the working capital obviously. And by the time that, hopefully, things will be more normalized in the near future, that then also can go towards execution in the sense of commissioning. And then you gradually see that normalizing again on our balance sheet. Important also is the net debt, EUR 357 million, which leads to a bank covenant of 1.9. I think this also highlights that even after the dividend payment, which was EUR 62.5 million in cash in May, we still operate in a very solid environment, even despite the higher working capital, which I just highlighted. On the working capital itself, when we quantify this, I mean, we are at a level of EUR 235 million, that's in euros, EUR 10 million lower than it was last year. Of course, there are some moving parts, some of the acquisitions, some of the divestments, as you see in the waterfall here. And of course, the target, which we always refer to, in terms of a level 12% to 15% of sales. That's something we strive for. We are above this level at this point in time, with 16.5%, similar to what it was a year ago. It very much depends a little bit how quickly this can go back to, let's say, the normal bandwidth, related to some of the elements I just discussed about the normalization of getting access to customer sites where we can commission and deliver our equipment. That's an important part, at least. What you also see here is that we have been using, to a lesser extent, the financial instruments. We always disclose this, less factoring and also less supply chain finance. So actually, that accumulates also a little bit more working capital. This leads to a net debt development, as I mentioned earlier, of EUR 357 million, that's EUR 57 million up compared to the start of the year. Cash flow from operations is EUR 52 million. But also what you see here is that if you look at the total investments, which we did: in tangibles, EUR 12 million; and intangible, EUR 17.7 million. So roughly, CapEx has been at the level of EUR 30 million. This is about EUR 7 million lower than it was in H1 last year. We have not stopped all activities, of course. We keep -- I think on the pulse, that's obvious. Some areas of our business require -- some even growth investments. That's, for example, the case in the power cable, where we are expanding capacity as we have reported earlier. That will lead to a slightly higher CapEx in the second half compared to H1. I expect that we will have about EUR 7 million, EUR 8 million more in Q2 -- I'm sorry, in H2 compared to H1. If you look at the CapEx related to the intangibles, the EUR 17.7 million in the first half, about EUR 15.5 million is related to R&D. And the capitalization rate out of R&D expense is still 50% roughly. So if you look at H1 compared to H1 last year, R&D expense as a whole has been slightly reduced by about 10%. And as I mentioned, a big ticket also in the development of net debt is, of course, the cash payout of the dividend, the EUR 62.5 million, but this all leads to the EUR 357 million net debt with the related bank covenant. Free cash flow. Well, as you can see from the previous sheets, with the increase in working capital, et cetera, the first half is not the best example of cash flow generation. Normally, we always see that the first half is not as well as the second half of the year. The second half of the year, normally, we see quite some generation, mostly because of improvement in working capital. That's, of course, what we strive for this year as well, that's obvious, but with a little bit of the disclaimer, as I mentioned earlier. So far, I think the look at H1, if I go back -- or go to the outlook for the full year. And I'm staying a little bit closer to the text here. Of course, the macroeconomic uncertainties have increased. As they did in the first half, we expect that this will also remain in the second half. And barring unforeseen circumstances and an escalation of the aforementioned situation, we expect that the solutions will develop as follows. If you look at Telecom Solutions, we expect that the demand for fiber optics in Europe will further recover. We have a strong position in Europe in quite a few countries, and therefore, we also expect that we will be able to maintain, as a result, with our position which we have, at least the result of H1 in revenue and operating result. For Building Solutions, we have a well-filled order book in Marine & Offshore and Tunnel & Infra. And therefore, we expect these segments to do better in the second half than in the first half of the year. Alexander already mentioned that for Machine Vision, which had a high growth in H1, that we see that growth slightly leveling off in the second half of the year on the back of the cycle of mostly the consumer electronic developments. It leads, all in all for the Building Solutions, basically to a similar kind of H2 revenue-wise and result-wise, as we have seen in H1. For Industrial Solutions, the turnover in Tire Building is expected to decline due to the postponed deliveries of the existing contracts and the reluctance by the tire manufacturers to invest. And this will also have a lower order intake, as a result, in the second half of the year. The other markets in Industrial Solutions, we expect modest recovery. Also, the effect of the inventory reductions will be more limited. Therefore, for Industrial Solutions, we see a decrease, top line and result-wise, compared to H1. Obviously, the current economic uncertainties had quite some impact. And we expect this to continue in the second half. Our financial position is pretty solid and pretty strong as we have also shown you today. And it also means that we are well positioned also to benefit from opportunities which are related to our innovations, might they come up in the coming months. All in all, if you summarize this and quantify this, then we expect a net profit of continued operations before amortization and one-off income and expenses attributable to shareholders of a range between EUR 63 million and EUR 69 million for the full year. This concludes the presentation part. And we would like to open up for questions, which you might have.

There is a microphone -- yes, okay.

It's Peter Olofsen of Kepler Cheuvreux. Maybe first, a few questions on the Tire Building business, where you expect a lower contribution in the second half. Based on what you said in June, probably not too much of a surprise. But could you maybe indicate the delta that you see there in H2 versus H1 and then looking beyond the second half, based on the weaker order intake? And given that, that will still take some time for the UNIXX to become commercially available, is it then fair to assume that in Tire Building, 2021 will see a further decline in earnings and then a recovery in 2022? Is that the most realistic scenario at this moment?

I believe you already answered your own question. But I believe that is a picture -- that is the right picture. So the impact of the lower order intake will have an effect in the second half but also in 2021. As I mentioned, we try to get the commercialization of the UNIXX in an earlier stage. So we are ramping that up already in Q4, end of Q4, at a earlier time than that we originally planned. That could have some compensation, and on the other side, the Indivion business, which is also in the industrial environment and in the same company.

Okay. And then the delta that you expect for the second half?

I believe Elling can exactly tell you.

It goes a little bit far to get that specific. But I think if you make your analysis in terms of telecom and building being equal and then work from the midpoint in the bandwidth up to an EBITA level, then you expect something like at least a EUR 10 million drop for industrial in the second half.

And coming back on the UNIXX. So I understand there will be site acceptance then Q4. Does that mean it will then become commercially available to all your customers in the course of next year? But then there's a lead time. So in terms of sales, maybe orders, next year, but then sales, 2022?

Yes.

Yes. Okay. Maybe on building and some of the growth verticals and the growth scenarios that you have. You mentioned that at this moment, you don't see any reason to change those scenarios. But if I look at Parking, that's an area where it seems that you are taking more structural measures. It could well be that, that traffic and the number of visitors, the airports will structurally be lower. So why not a more cautious outlook there? Or what is providing compensation there? And then on Tunnel & Infra, there, it seems that the growth scenario might actually be a little bit cautious, especially the lower end of the range, considering that you are expanding in energy cable. And then CEDD/AGL is starting to contribute. So how do you see the scenario?

That's always nice. We have some compensation if something is not going exactly according to plan. But coming back to your first question in respect to Parking, we see that -- and I mentioned that in my presentation that at first, in April, we thought that the bigger projects would be completely off the radar for the coming 2, 3 years. But that is not the case. So we are even in negotiation there. That does not give us a guarantee that we will have, in the second half or in 2021, additional orders. But in the end, we see that for the applications that we are positioned, the parking world will go in our direction. And what we underestimated, I believe, in Q2 from our point of view is that, yes, it is also kind of disturbing, the parking environment, if they do the installations with our technology. And that is also now a driver that we see that, yes, more projects pop up than that we originally had expected. And yes, in some areas, even in malls, it is still quite busy. If we look in the Middle East, yes, there is still a lot of people active in shopping malls. And all the parking areas there are -- that have not yet been installed with our technology are still on our radar to be installed in the coming 1 or 2 years. So the overall market potential is so big that even with the outlook that we give, we are actually only positioning for a small market share. So we have some opportunities in the further expansion of our market share. And we are more positive there because we have more advanced technology. We can also work on the cost price of our technology. We have some very interesting developments there. And that decreases -- and also the investment level and we open up more market. So the balance of this is that we said we don't have to change the forecast there for the coming 3 to 5 years.

And on Tunnel & Infra, do you think you will execute on second...

We thought it is not a good timing to come up now with an increase of a vertical market. But I believe you are right, we are already quite close there. And it will be quite easy to achieve that.

And on CEDD/AGL, I understand the project in Turkey took about a year?

Yes.

Could you maybe talk about the sales in the pipeline there? Are you close to any other projects? Or could it be maybe take another half a year or so before we hear more on this? Or any color you can give on that?

I believe the funnel could be better. So we have seen some impact for the short term that people had other priorities, and we have to see in the second half year if that is reenergized and then have us focus to the CEDD/AGL investments. But many airports had their hands full on other areas. And so I'm a little bit careful there and to be not too optimistic. But there's a potential area in the world with airports that need to do investments to keep up the maintenance, and sometimes the maintenance is not sufficient enough and is getting too costly that you have to replace the technology. And -- but I expect that the coming half year, we'll have some hesitations still. But 2021 might then look better with the sales funnel.

Okay. And then my last question is on care. Correct me if I'm wrong, but I think I heard you met a number of EUR 30 million for Indivion, the order?

Yes.

How does that work? Is it a bit similar to Tire Building where you already book revenues based on production value? Or do you recognize [ orders ] in advance...

Yes, that is the case. So the first part will be 3 machines this year to be delivered this year. And the other 15 will be delivered in the coming year, and that will be then during the year. And that will be -- they'll build it then the production value and also the deliveries during the year.

Okay. But we should assume the bulk will be coming next year then?

Yes.

All right. Yes, Tijs Hollestelle, ING Bank. It's a difficult subject on the tires. But if I understand it correctly, you have, let's say, about EUR 40 million of ready equipment standing in your facilities, waiting for approval from the customer to allow your engineers to install it in their factories and have been -- the costs on that have been already taken. So in theory, if it's very concentrated, I'm not sure whether 2 or 3 customers, but if they pick up the phone and tell you, "Can you come over now?" you have a major boost in the revenue. I mean you probably have no view on how soon that's going to happen. But is that included in the outlook for the tire business for the second half? Because it seems to me as a major bump in revenue and profitability.

Yes. No, it's not only that, let's say, revenue is taken once you ship. We have, of course, call it, in the old days, a work in progress. IFRS 15 got involved, but if I make it simple, I call it work in progress. You have, of course, value created. That value is what you take in your P&L as you go along. And the financial settlement of, let's say, that work which has been executed, that is represented in this concept of contract assets and contract liabilities. So we have work performed. We have value created based on customer contracts. And that, in the end -- it doesn't mean that everything is the EUR 40 million. Everything is ready, but that's work which we did, for which we have not obtained the funding from the customer base. And that includes some equipment, which is just standing, waiting for, let's say, shipments so that it can be commissioned at customer premises. And that part, the final commissioning, then, of course, gets to the last part of your revenue and result taking because that's the last hurdle in completing all your obligations under a contract. But it's not that only by shipping, then you'll see it back in the P&L. It's an ongoing process. So it's not that the entire EUR 40 million comes back in revenue, but it's the financial settlement of the work which has been done. So it's in your working capital, but not EUR 40 million immediately extra coming into your P&L in the second half of the year.

If you wouldn't do that conservatively, then you take most of the profits if the equivalent is up and running at the customer?

Sure.

That's what I would do. Yes, so there is, let's say, some tail of profitability you see in that number?

We are, of course, fairly conservative. And we follow also the IFRS 15 regulations, which apply to this mostly. So it's not that you can also say we do everything in the end. That's also not a fair representation. This is a material flow of activity. So you also -- at each interval of time, you must be able to represent what kind of value you have added out of your resources on a customer contract, and that's what is represented in this balance sheet post. But it has the financial settlement consequence. And that's where we are now a little bit, I don't want to say, stuck. But COVID really got in the way of getting us to fly out to customer locations and get, with our engineers, the commissioning completed, either to lockdown of countries, restrictions on travel or that our customers simply still have policies in place that they do not allow third parties in their premises, which is, in a way, quite obvious, I would say. But this blocks, let's say, this particular part of the business. And of course, you can say, okay, but if everything is open again, then it would all flow out in a matter of weeks. That's not so easy because we also have a capacity to manage in the sense that our engineers must match, let's say, the work which is to be done at the different locations. We don't have, let's say, triple the number of engineers for that particular function within, let's say, 2 months, yes? We try to pull wherever we need our resources to the most urgent priorities which we have, but it still will take some time, even if the companies or the lockdowns are reduced, to get this rolled out.

Yes. And also in addition to that, I mean, there is also probably a difference in the management of these tire manufacturers, yes, which are indeed stock listed and are running the business on cash and the people on the ground because I can also imagine that because now it's relatively empty in their factories that they prefer to have the new equipment installed. Is there a difference in -- if you speak to the operational side of your customers and the decision-makers on that?

I would say we sympathize a lot with the operational people, but I mean -- of course, it's a balancing act which has to take place. I think Alexander mentioned cash is king. That's a policy many companies use. And we see that back. Of course, it's in many areas. If you're, let's say, having not full operation, it's a good time to do installation, to do maintenance, these all kinds of different things. But it cannot violate regulations concerning COVID in terms of working in a safe environment and protecting your people. We do this from our side. Customers, we expect them to do the same on their side. And that blocks this, of course.

Yes. Okay. But it is good to know that there is a difference in that.

I mean the best would be to work on parking garages at airports. There's nothing going on there, to some extent, but it requires a different kind of structure.

But I have to say it's a little bit strange that these top 5s are so focused on cash management because they are very healthy. It's a different situation compared to 2009. So perhaps we are too conservative in our outlook that they might come back earlier. And that was also the case in 2009. It only took a half year. In our estimates, we taken into account that could take 18 months. But yes, better to be a little bit conservative. But it is strange, to my opinion, that they don't invest. And you make a very good point that it's also an opportunity now to make changes in your organization without too much disturbance of your capacity. So it could change. But for now, we have been a little bit more conservative.

Yes. And one final question on this subject. Could you remind us what the difference in timing is between, let's say, receiving an order and then getting the revenue? And I know that every order probably is different, but how fast was it...

It takes about 6 months, 6 to 9 months, yes.

That can be quite quickly, yes. So the only -- yes, the only problem could be that there's kind of a bottleneck if everybody decides on the same day to have all the equipment, again, coming from you guys.

Yes. We -- it is quite easy for us to have a turnover of EUR 400 million, EUR 450 million. We don't have to do a lot of things today to make that happen. We have the infrastructure there. And so we are ready for that.

You have to ramp up, okay. Yes. And then a more technical question. Maybe it's in the press release, but the -- hold on, I have to put on my glasses. Can you move this a bit? The -- yes, the results from the sales associates, is that included in the full year '20 net profit outlook? Or is that also removed from it? And then probably also the PPA, which is then in the share in which -- I'm looking at the full P&L in the press release, the 5 points...

That's included. And that's also where I mentioned to you the, let's say, the full year effect of -- because there are 2 parts. I mean one is, of course, as I mentioned, the divestment of ZTC in China. That has a component. And the second part is related to the minority stake which we have in the CCC -- CCG Group. And there, the -- our first half amortization on PPA was about EUR 2.2 million. And full year, we expect this to be EUR 2.8 million.

Okay. Okay. Yes. And then one final question. You, of course, announced integration and cost efficiency programs last year at the Capital Markets Day. You probably did additional cost savings because of the COVID-19 outbreak. You indeed managed to keep the margin at very high levels despite the decline in top line. Could you give me 1 or 2 examples of the benefits you achieved from the Capital Markets Day program? Just an easy example how you increase the margin. And I'm not referring, of course, to the disposals, but just an easy to understand example, what you actually did to improve a margin of a certain business within TKH.

I mean if you look, for example, at telecom, I mean, we know already for quite some time and we have been communicating that for quite some time that if you look at the pure optical fiber itself, I mean, we see large capacities around the world, margin pressure ongoing. We have a strong position in Europe. We have good market shares, but we have been shifting more and more towards the contribution coming out of the connectivity part. So we use the optical fiber and then the cables related to that in order to get into projects and then come up with so-called integrated propositions, plug-and-play, because if you look at a fiber to the home project to connect a home to the backbone, cable is only one part. It's also a small part of total investment. With all the other components, that's basically where we get involved. That's optical distribution frames and all kinds of other elements. And there, we have been, let's say, focusing our portfolio on for quite some time. And that is a good balance compared to, let's say, margin pressure on a optical fiber, which in itself is a commodity, but by making it into a particular package and integrated solution, we are able to change the margin in that particular area. So that's one area. But the same applies to some of the other businesses. If I look at, for example, in our [ intracom ] activities. The propositions which we have there are more and more, let's say, driven by the software components. And that addresses also different opportunities, create quite substantial savings on the customer side. And that, in general, should lead to better margins as you're able to price that. It's difficult, and it's not like big jumps, but that continuously work. And again, if you look at 10, 12 years ago, as TKH, we were at the level of gross margin for the entire group, 36%, 37%. And today, we're close to 50%. So it's not that we do this since the last 6 months, it's an ongoing process.

[ Martin Baker here ]. First, a clarification. In most cases, you have made a comparison for your H2 estimate compared to H1. For example, in Machine Vision, you say that growth will level off. So that still implies that you expect growth in H2 to be higher than H1?

We have mentioned in our presentation that for Machine Vision, we expect that growth to flatten, to be reduced compared to H1, that's correct.

Okay. But according to me, when growth levels off, it's a lower rate of growth, but still positive growth?

H1, yes.

But then if I add something to your H1, which is going to H2, and compare it to your H1 figure -- your H2 of last year, then more or less, the growth rates are similar and even -- since the contribution of [indiscernible] will be lower, your organic growth will even be higher in H2 compared to H1.

If you look at, let's say -- what we guided for here is that -- if you look at the second half of Machine Vision last year, which was a good half year in terms of actual result, it will be like kind of similar level, which we will see in the second half of this year.

Okay. Afterwards, have a chat about that one. Then secondly, concerning the airports, you just mentioned that airports are hardly used. So actually, that could bring forward investments in your airport ground solutions. Have you noticed anything about that?

No, not yet. But that is because of the priorities have been in complete different areas. At this moment, it's kind of surviving mode that they are in. So that needs to normalize a little bit. And then this might come in, in Q3 or Q4, and it might be more positive outlook than that we see at this moment.

You mentioned that you target a sales level of about EUR 100 million in this area. Could you give more as if a bold figure about how many airports we would talk about?

There, we see now -- let's say that we have around EUR 8 million for 1 airport, and it's not the whole airport. It's an area within the airport. So the projects are really sizable. That does not mean that there are no smaller projects possible. There are also projects of a few hundred thousand up to EUR 1 million. But the main focus is that really, the infrastructure is completely changed into our technology. And then we are talking about some airports where we have for EUR 50 million, EUR 75 million in investment only to completely convert to our technology. That will not be done in one -- at one time. So yes, we look at many airports in the world and see that an average size of a project would be between EUR 3 million and EUR 10 million. And then you can count how many airports there are in potential. It could be more than EUR 100 million. It is not so strange to have 10 or 15 projects in 1 year throughout the world.

You stated that you already made some savings on the back of your strategic program. You had targeted that the savings should result in an integration, which should result in an improvement of profitability of 0.8% to 1.2%. That's about -- around about EUR 50 million, about that number. Could you more or less state how much you have already achieved up to now?

Well, I mean, if you look at also what we communicated in March, we talked about the specific programs which were coming out of the Simplify & Accelerate program, which would, in '21, benefit, EUR 7 million to EUR 8 million in savings, for which we mentioned at that time that we expect, and this was in the first week of March, about EUR 5 million to be executed this year. I think we probably will not fully achieve the EUR 5 million. We had seen that the integration of the connectivity activities in the Netherlands had been slightly delayed compared to the original plan. But I think we will get this year to about EUR 3 million, EUR 3.5 million coming out of that particular set of actions. And that's -- let's say the majority of that will be in the second half of the year as the execution of that plan is ongoing. That's also why we have taken the one-off, as I mentioned earlier.

With your strategic program, you have said, "Okay. This is our midterm target or midterm guidance." It does -- that was not attached to a certain year.

No.

With -- now what's happening today with COVID and all the impact, do you feel that, at the end, you will reach that level a little bit later? Or do you still believe now what we first had envisaged to reach that level, that's still in place?

There is a big impact, of course, of the utilization of the factories that we have. The impact of VMI and Tire Building is a big impact. If we lose EUR 1 of turnover, we lose 50% -- EUR 0.50 of contribution margin. And we are not taking out all the costs because -- there was already a question from Tijs, how fast can we get back. And we don't dare to take all the costs out. We need to have that capacity. It's a kind of investment that you do, but the return is very high if the market is coming back. And we have seen, in 2010, that the market was suddenly back. It was -- were no orders during the half year. And then suddenly, it was booming. And we were ready for that. We were lucky, I would say, or it was a decision not to take out all the capacity cost. And that is a big impact that you see that is hampering now the return on sales development. But if we would look at the first half year, what we achieved, it's really incredible. I believe we already achieved 2% to 3% margin improvement, return on sales improvement, if we would normalize, let's say, our utilization. And yes, so we are really on track there. But we need this capacity utilization. And because we don't dare to take that out at the moment. And also in the second half year with Machine Vision, I also made an example that we need to hire these field application engineers. These are not -- these are quite expensive people. Even in China, you pay $60,000, and we hire 10, 20, 30 of these kind of engineers. And we are not doing that for nothing because there's a request from the end customer that we have to help the system integrators now to prepare for the investments. And that is good because we have this target of EUR 250 million, EUR 300 million, and we are really on track there. And I believe there was some doubt, perhaps in this room also and shareholders that we were not performing in the right way. But it didn't show last year what was really happening, and we are really well positioned there. But also in the second half year, yes, if we could really normalize our cost in relation to the capacity that we need, we would have a much higher profitability. But we are so certain that we will get this business because we know that people have to invest because there will be new technology for smartphones. You cannot stop that anymore. It's the only way how the smartphone manufacturers can make a difference and keep up their business model. But yes -- and if we add that all together, because it's also very interesting activity for the coming years in respect of the gross margin we make, and we make between 20% and 30% return on sales. And so that's a big contributor. Also, in that block that we showed, half from the innovations, I believe it was EUR 200 million, EUR 250 million additional turnover coming from segments like the Machine Vision. And that was very high return on sales, and that is helping us to get on track and to stay on track to achieve this 15% margin target, at least 15%.

Okay. And then for the time being, my last question, concerning power cable, could you mention what kind of sales you have and after the investments made, what kind of sales you're targeting for in the near future?

Now we will be able to add about -- between EUR 30 million and EUR 50 million additional turnover. And part of that is also subsea related because the installation is, yes, similar capacity as we need for land usage networks and -- but let's say, between EUR 30 million and EUR 50 million.

A follow-up question also on Martin's question on the Machine Vision. Because he's running the numbers on first half and second half, and if you're growing 42% in the first half and then slowing growth, so I assume 20% year-over-year in the second half gives you EUR 95 million in the second half in Machine Vision. So that's on first half. Second half, it's about 4% growth. But there's a big difference. I mean, is it 30% versus 10%? Because it's so profitable, it's quite important, yes, because it's the second most important earnings driver for TKH. So a bit more background would be helpful.

Yes. I mean if you -- let me put it this way. If you look at the profitability level, the second half last year was a -- is a -- was a good second half for Machine Vision. And when we talk about the effect of a little bit lower growth in the second half of the year, it basically leads that contribution coming out of Machine Vision will be more or less in line with what we have seen last year.

Okay. Yes. So then it's down further the first half because yes, I also sometimes struggle with how to read it.

Yes. That's what we mentioned.

And in the past, we have discussed it before, part of the, let's say, the EUR 143 million turnover in Machine Vision last year, 20% of that goes to the tire business? Or was it more?

I mean what is reported in the vertical Machine Vision is the Machine Vision systems going to final customers. If we use Machine Vision as part of our Tire Building, it becomes part of a machinery of VMI, which is then sold as a tire machine to the final customer, and that goes into the Tire Building vertical. And so if Machine Vision internally is used as a component of a final product, the final product is decisive in which basket it ends. So if the camera ends up in a tire machine, it goes to the tire vertical as part of the final product. And therefore, if you look at where our vision systems are being used, some of it is coming back, of course, in care. Some is in infrastructure. I mean when we look at the companies which are very much on highway control, toll systems, all these kind of things. Remember -- maybe the acquisition which we did in Italy, Tattile, part of the Lakesight group, I mean it's vision-based systems as well, but they are not in the Machine Vision vertical as they are part of a infrastructure package. So Machine Vision is representing Machine Vision to final customers.

Yes. It's good to know, again.

Industrial...

It's good that you remind me again. It's not always easy to understand. And is there also, let's say, progress on a new or sourcing a new end market for the Machine Vision business, yes? Because the solutions are, yes, it can be used everywhere. So are you also commercially close to making a breakthrough to a potential new cluster of customers or end markets? Or that's probably in your revenue target...

No. But a market where we are hardly in and some of our bigger competitors are very strong is the logistics market. And that is under investigation and could be, yes, a substantial market. And -- but we need to do some developments there to get there because you also need other technology than just the high-end vision technology. You also have scan technology, scanners. And they are not part of our portfolio at this moment. So we need to have a kind of add-on there to be able to have a one-stop shop supply in the logistics market.

Yes. And your visibility in the Machine Vision is quite okay, yes? It's many different customers?

Yes.

It's not big -- I mean, big economic shocks always have an impact. But if that's not happening, then you have pretty good visibility to base your outlook on?

Yes. But visibility is more, and what I mentioned there, that we have to prepare system integrators to work with our technology for a certain application. But we don't have that order already in our books. So what we see is very short-term notice for the actual orders. We have to be able to source them within 4 weeks. And if we are not able to source them within 4 weeks. And if we are not able to source them, you suddenly see that they are doing big concessions to get, yes, camera in the equipment to make it happen that you can manufacture. But we are well organized. But we see sometimes that we get very big orders with -- and we have just an indication that for the application that we see that we are well positioned, but it's not yet a guarantee that you have the order in the book. But they know also that we have very short lead times. And so we can supply very big volumes in 4 weeks' time. It means that we have a lot of components on stock to be able to serve that demand.

Yes. Okay. One final question. Apart from the implications for the tire business related to COVID, what are currently the biggest supply chain issues for TKH with regards to components, parts, logistics? Which other areas? Or is it...

No. I mean at this point in time, that's not that much. You might have seen that our stock levels, the balance sheet are as higher than what we had in the beginning of the year. What we saw, especially in the -- in Q1 when COVID started in China, there was, of course, at that point in time, I'm talking about February, this kind of time frame, a lot of excitement or dynamics in the supply chain to make sure that whatever was going to happen, we would have enough on stock in order to have continuation of our activities. So at that time, we took quite some steps in order to get stock over from China, physically also coming here, and we had actually made a kind of buffer in our stock positions in order to, yes, to hide the uncertainty which was existing at that point in time. At hindsight, you could look differently. But at that time, you need to take steps. And that is roughly, I would say, around EUR 20 million, which is still on our books, coming out of securing as much as possible that the supply chain would continue as we saw the situation in Q1 when China started to develop because a lot of the supply chain, critical part, has related also to China. But currently, I don't see many issues there. Behind you.

[indiscernible] Two questions, please. On M&A, given the circumstances with COVID, it may be clear that there are no new initiatives. On the other hand, there may be very well some nice opportunities in the process. Can you elaborate on your policy in that end? The second question being the international political environment, the U.S.-China trade tensions, is there an impact at this stage from your business like ASML is envisaging right now in technology end? Please, your comment on that?

Let me start with your last question, there is no real big impact there. And what is good is that we have organized, in several locations, our activities so we have more flexibility to, yes, cope with trade barriers. And -- but of course, no similar situation like ASML, where also politicians are taking -- trying to get grip on TKH. And the other question...

M&A.

M&A. Yes. No, we have full focus at this moment on organic growth. And we don't want to disturb people with the acquisitions. And that worked out very well in the first half year. We see and have seen some companies that could have fitted in our portfolio but had not a 100% fit. So we are also, there, really selective. And so I don't see, in the second half year, any M&A activity. But we would have funds available if there would be an opportunity that would be so great that we should pay attention to that.

Peter Olofsen of Kepler. A few follow-ups. Maybe first on telecom, where on the one hand, you say you see some recovery in demand. At the same time, you say, well, results are stable. Is that because there is some seasonal effect? Or what is keeping back the result then?

I mean if you look at one of the key markets for us, France, it's not that the French, let's say, installation companies and contractors are full operational in the sense of rolling out in the different streets as it had been, call it, 6 months ago or a year ago. And that's a gradual improvement. What you see is that in this kind of areas, in the end, you're still talking about a lot of human involvement in our proposition there in the sense that we sell to installers and contractors who roll out the networks in the field. So there has to be sufficient capacity in terms of skills and manpower and qualified people on our customer side in order to do these projects. So the lost capacity is not something you easily can catch up. It's just going back to that level. And that is not something which, at the 1st of July, started to take a different level. That has a gradual improvement in the second half of the year as we see it right now. Of course, again, as we mentioned in our outlook, if COVID issues escalate, this might be areas in France, where we have more issues. But that's basically where we say that we expect things to be fairly similar. And at the same time, if you look at the challenges which we have to manage in that particular segment, we talked earlier about projects where we need to find better margin projects. That's an area, for example, where we are active here. So even if top line is maybe not yet only recovering, we should at least get some compensation from the better mix in portfolio, compensating with slightly improved margins, also to offset further price pressure of fiber as we have seen in China. Actually, 2, 3 weeks ago, there was a tender of China Mobile, where large quantities of fiber were tendered, talking about more than 100 million kilometers of fiber in 1 tender. And there, we have seen substantial price reduction compared to a year ago. It's not exactly an area where we are active. We focus on Europe, et cetera. But this, on a global perspective, doesn't help, of course, when overcapacities in the market still leads to price reduction. All this, we take into, of course, into consideration when we talk about the next 6 months.

And then maybe on the tire business, well, obviously, COVID-19 having an impact here. But then looking at the U.S., there is some investigation on imports and dumping from Southeast Asia. Is that having an impact on decision-making by customers? Is it leading to some rescheduling of existing projects? Do you see any impact from that?

Yes. What could move is that -- that they move capacity further into the U.S. So what did not help anymore is moving capacity out of China to other Asian companies -- countries. And we know that there have been some bigger projects in the U.S. that didn't come to realization. And that could be that those are -- will be activated again. But it's -- and there will be some order intake. So we will see business, especially the top 5, where we see 0 intake.

And then lastly, on the cost measures, is it fair to assume that the bulk of the charges has been taken? Or should we expect a bit more in the second half?

I mean we -- of course, if you look at, as I mentioned earlier, the one-offs, which we presented at H1, are still very much related to the Simplify & Accelerate program. Of course, the impact or the aftermath of COVID and the economic impact it has, that's full in our analysis and considerations, how to deal with that. And we do not exclude anything. But at this point, at half year, we did not have a position to take additional one-offs. But of course, we are always in review on how business performs and what kind of steps we need to take.

Okay. Thank you very much for your presence here. Again, that you dare to do that is very positive for TKH. And thank you very much for the questions we have been asked. Also, a big thank you for the audience, for those that are still in the webcast and have taken their time of almost 1.5 hour. We hope to see you certainly next year during the annual presentation in March, and we will have an update in November about the developments in the third quarter, in the second half. And yes, we hope to see you all on a short basis. And we hope you all stay healthy. Thank you.