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Edited Transcript of ROS.VA earnings conference call or presentation 9-Aug-19 9:00am GMT

Half Year 2019 Rosenbauer International AG Earnings Call

Leonding Aug 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Rosenbauer International AG earnings conference call or presentation Friday, August 9, 2019 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Sebastian Wolf

Rosenbauer International AG - CFO & Member of Executive Board

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Conference Call Participants

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* Markus Remis

Raiffeisen CENTROBANK AG, Research Division - Chief Analyst

* Thomas Deser;Union Management;Portfolio Manager

* Volker Bosse

Baader-Helvea Equity Research - Co-Head of Equity Research

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. I am Emma, your Chorus Call Operator. Welcome and thank you for joining the Rosenbauer Half Year Results 2019 Conference Call. (Operator Instructions) I would now like to turn the conference over to Sebastian Wolf, CFO. Please go ahead.

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [2]

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Yes. Good morning. Good day, everybody, and thank you for joining our half year presentation today.

Today, we would like to take you through our -- give you a short overview about Rosenbauer, for those of you who don't know us as well and then turn immediately to the half year figures, ending with an outlook and of course, enough time for a Q&A session afterwards.

So before we speak about financials, let me give you a short summary again about our equity story. Who is Rosenbauer? We are the market leader in a niche industry. We are the innovation leader. We have the biggest network, the biggest global network in that industry and a very resilient business model.

What is that about? I mentioned we are in a niche market, so the total market volume in that industry is 21,000 vehicles only where we have the market share of 15%. This data was confirmed by our latest market survey, which we will present later.

Innovation leader, we have 180 patents in our hands and we are at the moment, in the last stage of our lighthouse project, the Concept Fire Truck, which we will launch at the INTERSCHUTZ which is the biggest exhibition in the fire industry next year.

The network, we are working with 280 sales partners worldwide. We are present in 130 countries and almost in 100 countries for example you can see our airport truck, the PANTHER.

And the business model, last but not least, also an important part of our equity story. Obviously, which is -- which comes together with a very broad diversification by both geographies and products.

So we are very [reluctant] to local turndowns by the economy or similar themes happening to specific products or locations in the world.

Yes, that is a short overview for those who don't know us so well. So we are producing mainly in Austria, Germany and the United States.

We have 9 production sites in Europe, 3 in the United States and 4 in Asia. There were no changes on this -- on our global footprint since the Q1 presentation and we have in total still 27 legal entities we are working with in both production and sales and service entities.

So I mentioned our latest market survey, which we did. You see that after [it in] 2017, we are relying here on import -- on governmental data for import statistics and this is why we are always a little bit behind the time. But what you see here is -- and this is what I mentioned at the beginning, that we were increasing our turnover in the Rosenbauer Group and that is why we and Oshkosh did not increase its turnover since the last year figures so we could expand our advantage in terms of the top line figure and we are still the biggest producer in that industry.

So the other -- So I mentioned Oshkosh stayed on the same level, Morita went a little bit down, REV Group went down as well. A little bit NAFFCO went up a little bit. We have NAFFCO for the first time in our analysis because there was data available this time. It's from 2016, so it's quite difficult to get information from this company. They are mainly involved in the station and fire protection business and also in the ambulance business. But you see, it's quite a substantial player. It's the fifth-biggest player in that market.

You see also that Magirus went up a little bit with the turnover. EBIT was down by minus EUR 90 million in the year 2017. So you'll see another big loss from Magirus in the last published financial data.

Ziegler stayed on the same level. And the year before, Spartan went down quite a lot and it too has stayed on the same level. [This hotel] is the first time it is top list because they also were involved in some M&A going on in France, into '18, actually, in the last quarter of 2018. It truly acquired the German sites of [chima x] in [Wilsdorf], which is having 85 employees and the French sites were sold to this hotel, and they are located in [wamee] and they are doing the [sondables] in Tours.

So far to our market statistics. You'll see on the next slide portfolio, we are a full venture and this is unique in 2 ways. On the one side we produce everything for the firefighter. This is very obvious from this slide, which makes us unique. We're the only one who can produce according to all global market standards, legal standards. So there is mainly the European standards, [the dean] standards and ISO standards, EN 1846 for the firefighter industry and on the other side, the big NFPA standard from the U.S., the National Fire Protection Association.

Rosenbauer is the only producer of fire vehicles who can produce according to all of these standards.

On the other side, we have a very integrated solution, which means that actually we produce a lot of parts on our own. First to be mentioned, of course, the firefighting pump, which is the heart of the fire truck but also [roller sharpers], monitors, even the ladder sets, the tanks.

So we produce a lot of parts on our own, which give us also integrated solutions and is also part of our full-range strategy to have actually perfect USPs for our clients.

So what's up next? Next year, I was mentioning already, we will have the biggest firefighting exhibition going on globally with 450,000 visitors and this exhibition will take place from the 15th to the 20th June and I can already announce today that we will have also Capital Markets Day in the course of this exhibition, which will take place on the 16th of June and we will, of course, let you have an invitation right in time but you can already save the date, if you are interested, in your diary.

We will position ourselves, obviously, as the #1 system provider in that industry. So we believe the industry turn more to a system provider then to a -- just supplier of equipment business and we will do that by focusing on a city concept. So you will see on the INTERSCHUTZ a municipal lineup. So fire stations where the trucks are based, so it should look a little bit like a fire station there in a city. And we will also design our appearance as a metaphor for interconnectedness. So it's about digitalization and how people can be working in the future.

So we go through more than 30 vehicles and have a quite similar, a little bit smaller size than we had last year with 4,500 square meters there.

We're all very excited for it, and I hope I will see some of you there as well.

One product information I would like to share with you today is that we will launch in September our aerial ladder tactical simulator. What is that about? And this product is actually accomplishing or another addition to our range of products in the field of the simulators. We have the PANTHER simulator for the airport vehicles and we have also emergency response driving simulator and I always say that it is of course difficult to train emergency response drive, because you can only have that in a real incident. And actually, a lot of accidents happen there, so the probability for accidents is 16x higher in a emergency response drive than in a normal drive and that's why we have emergency response drive simulator.

On the other side, it is also very difficult to train on an aerial ladder in a real narrow street situation, because nobody will be happy if there is a traffic jam because of airport -- aerial simulation and that is why we invented this kind of simulation. It is easy to do. It is taking a shorter time than a conventional training and it is of course, at lower cost. You can simulate different operational sites, different cities and it is 100% safe, obviously, for the firefighters.

So our plan is -- and this is part of the our service turnover, should be 10% of our total turnover and that's why I was also sharing these new product with you.

So let us turn to the half-year figures. We were sending out these figures this morning and you'll also find the presentation on our webpage. So you have all the data.

We'll go to highlights for the first half-year. We could again increase our turnover by 12% to a turnover of almost EUR 400 million in the first half. This was coming from North America and Central Europe and also Asia was higher than in the last half year 2018.

The Near East was a little lower. However, we believe that in the full year, the Near East full year 2019, Near East will be above the level of 2018.

So we are in preparation for further increasing our production in second half-year, which was actually lowering our profitability. So EBIT fell to EUR 5.2 million. The main reasons for that I will explain on the next slide. But you see here already, we had a weak June, where we had a EBIT of minus EUR 1 million whereas we had plus EUR 3.7 million in the first half -- in the first -- in June 2018. So alone from this single month June, we have the deviation of EUR 5 million.

IFRS 16, the new leasing standard, had no material effect, I will also come back to that on the next slide. And on the order intake side, we can announce another record because this is the highest order intake we've ever had in the first 6 months of the year with EUR 571 million. And this ensures further on our production -- our utilization of production facilities.

We also grew successfully to bonded loan or placed the bonded loan facility in the first half-year. I'm personally very proud of that. It was a clear commitment from the financial market towards us and towards Rosenbauer. I will also give you some more details about that on the upcoming slides.

And also important obviously, we -- as our profit was much lower than in the last year, in the first half, we did another forecast and we can say today that we will stick with our guidance of more than EUR 950 million turnover and an EBIT margin of 5.5%, approximately.

So let us go a little bit into the details. So I was mentioning already the good output we had in the first half-year. However, we planned for some more output in the second half-year. That was one of the reasons for the worse result in the first half-year 2019.

We also had some preparation for the INTERSCHUTZ. We are still involved in the ERP project, doing some good progress there but this also comes together with some cost which sit on our P&L. And we had a very short June with only 18 working days here in Austria compared to 21 working days last year. So that was also having some effect.

The product mix was a little bit worse than in the last half year 2018 and I also already mentioned that all led to a very weak June result of minus EUR 1 million compared to plus EUR 3.7 million in the previous year.

You see on this slide the IFRS 16 effect. They were very minor. So the EBIT was only EUR 100,000 higher than last year. EBT, the earnings before tax were EUR 100,000 lower than we had -- than we would not have had IFRS 16.

So as I said, we did a planning and we can reassure our guidance of more than EUR 950 million and EBIT margin of around 5.5%.

You also see on this slide the negative cash flow from the negative operating cash flow. Unfortunately, in the last 10 years, cash flow for Rosenbauer in the first half year was always negative. The main reason this year is of course the high increase of our stock of around EUR 100 million, of our inventories. This is the main reason for the negative operating cash flow.

Most of you know that our business is very safe and depends very much on the governmental budget and that they should be exploited towards the end of the year.

So you see the peaks year always in the last quarter, especially last year. There has also been a change in the IFRS 15, which led or which was also leading to the fact that the last quarter was having -- showing a much higher turnover as we are not any longer allowed to use the percentage of completion method in our business.

We expect this also to happen in the year 2019 and this is also part of the reason we are still convinced we can meet our guidance.

It is important to see that our turnover in the first quarter was up by 8.3%, in the second quarter by already 15% so this is exactly what I was explaining when I said we have some startup costs for the high output in the second half.

So where does the turnover growth come from? I was mentioning already, Central and Eastern Europe and North America. So our home markets are responsible for it. It's mainly coming from Germany, also from Austria and our special vehicle division in the States has a very good growth in Rosenbauer Minnesota, where we also launched the new model of the PANTHER. So in the United States, we had to launch a new model and we did even skip the model we launched in Australia [tour pend]. So it was a quite important step there in the United States to be successful in the PANTHER as well now.

So what else can be said here? Yes, MENA, I was mentioning already. We expect the MENA region to be back in the full year. So this decrease of EUR 13.6 million will be overcompensated in the second half year.

I was mentioning the effects for the decrease of our EBIT by 48.5% already. So higher volume in the second half. A weak June and the product mix. However, you see here that the MENA region was hit very hard because of the lower turnover I was mentioning. Albeit we expect the turnover to be positive, we also expect an improvement in the EBIT in the MENA region for the full year.

Yes, speaking about the cash flow and about the high inventories is one thing, which also led to an increase in our balance sheet. However, there is also another reason, which is IFRS 16, which has an effect on our balance sheet. It's EUR 25 million higher because of IFRS 16 as we now have to put all the leasing goods we have into our asset section in our balance sheet and that is worth EUR 25 million.

So you see it here without this effect, our equity ratio wouldn't have gone back to 25.1% but only to 25.8%. And it is also important to say that the equity, as an absolute figure, did not change during that period here. It is just the balance sheet which was longer because of the inventories which increased by 25% and because of IFRS 16 which led to leased goods being on the assets now with EUR 25 million.

It's also important to mention here that the equity ratio in 2018 was also about more than 4% higher because of IFRS 15, as it was at that time still allowed to offset down payments from customers, which is not only allowed since the end of 2018 or yes, which we -- 2018 where we already showed that 30.3% equity ratio.

So without -- and these effects now, of course, have also an implication on capital employed, the return on capital employed and on our net debt. And obviously, also on our gearing ratio debt.

So as a summary, you see the balance sheet structure comparing the half-year balance sheet of the last 3 years. So if you look on the assets, you see they were increasing because of the IFRS 16 asset we had to include, which makes up the EUR 25 million. The receivables were unfortunately also increasing quite strong by almost 30% and I'm personally very unhappy with that and will explain a little bit more a little later when we speak about the working capital and the inventories were increasing.

You have to consider that in the first half year 2018, there were EUR 67 million down payments netted in that figure, which you have to adhere to have a [fair] comparison.

Even if you do that, inventories were increasing by EUR 70.5 million or almost 18%, which is of course necessary to have the high output in the second half of 2019 now.

So you see on this slide our working capital, so far and with the lead times of 8 to 12 months, which is now a big bond measures for improvement of the working capital management did not show a positive effect. It's the other way around. We had to increase our trade working capital because all the 3 important figures: the inventories, the accounts receivable and -- were going up and accounts payables were even reduced.

All these 3 effects lead to the fact that the trade working capital was unfortunately increasing.

You see that problems are still the same. We have down payments of approximately 10% from our customers and average payment term of 70 days with together with a long lead time.

What we did on the financing side, however, and this was the very right thing to do is to react on that in time. So we were preparing and now could finish the bonded loan facility still in the first half year 2019, which was for the first time we did such -- we used such financing instrument. And I am personally very happy that it was very well-received seeing and there was a strong interest from the investor side and it was also a big sign of trust from the investor side towards us and to Rosenbauer. And with that our financing strategy has a better plannability and we are also securing the good interest rate we see at the markets at the moment and we have a very solid basis on the financial side for Rosenbauer.

So what did we do? We got EUR 150 million from the financial market and USD 10 million from 50 banks, actually. And the lead times were -- are really 5 and 7 years, it's a mixture of both fixed and variable portions.

We planned for much less. So actually, we had more than double of the volume we originally were seeking for.

So looking at this a little bit closer. As I mentioned most of the things already now you see are here, our maturity profile was changing. So the gray columns are the maturity profile at the end of '18 and we now could change that to the red columns you see on this slide.

So when we had 64% of our debt mature in 2019 before the bonded loan facility. Now we have only 25% in such a short maturity level and everything else is spread over the upcoming years, even 38% longer than 4 years [where] mature after 2023.

So this was important for us, as I said. However, I also mentioned, we have to improve our working capital and we -- I mentioned that already, we do monthly meetings to follow up here, where I am personally also involved and we look at all 3 main levers to do that. So we look on the accounts payable, we look on the accounts receivable and we look on the production process.

Let me just give you one example or 2 examples maybe, 1 for the production process, where we saw the major, time-consuming issue in the loading of the vehicles and the mounting of the equipment, which takes longer actually than the real production process on the line production. So we have to improve that.

There is now a test we are doing to have the [ROPA] meeting recorded and the truck is ready before it's loaded. We want to do that already, when we do the worker education meeting and we can do that with a better visualization of the vehicle and a better discussion with the customer already at the order clarification meeting and then we want to skip that ROPA meeting just not to have so many changes in that very late stage actually of the production process.

On the accounts receivable management, I'm personally very much involved. This is where you see that the working capital management is a real team effort. As it comes to management, everybody can be necessary to help because there can't be a quality issue with the vehicle, which is already delivered to the client and the service department needs to react. There can't be just a follow-up with the client necessary then the sales department needs to react or they can be even from other things.

We are also find that we can be helping with some legal action if really necessary and required.

So let me turn to the investment side. You see that we could continue our consolidation in our investment activities for the full year. And I also stated that we believe and I believe that we will see a short increase compared to the 2018 investments, which were EUR 18.7 million for the full year. So we believe that to increase slightly, simply because we are preparing ourselves for the INTERSCHUTZ and a lot of R&D projects will be finished and activated. Also in the second half of this year, we are parallel to that, working on the modernization of our plant in Leonding, our main production site. And on the production side in Karlsruhe, where we do a welding robot investment of more than EUR 3 million and we will have the Concept Fire Truck activated. As it is not a so-called market-ready product, we are doing the last steps to make it fully market-ready and this has to be activated according to international reporting standards.

In addition to that, we are investing in our ERP system, where we will also see a smaller activation necessary in this year.

Yes, so let me turn to the outlook. We have, as I mentioned, a record in our order intake and order backlog again. So we see a good visibility for our production sites for the full year. We believe also that the MENA region, which is here a little bit underrepresented or was already strong in the past, we will catch up. So there are some good projects in the pipeline there, as well as we will also get -- and this is getting to our order books, the extension of the order for the German Ministry of Catastrophic Protection for another 40 units of the emergence of the Efficient Technology vehicle, which will also improve our order intake in the Central and Eastern European Union even further.

So we're very happy on the order intake and the channel outlook. Here we see the global economy slowing down. Further in this year, according to the International Monetary Fund, especially the U.S., China and European Union trade disputes could lower the economic activity. However, in the firefighting industry, we see ourselves not so much dependent on that and our full order book should make us resilient against the issues.

It can also be said that we strongly believe that the firefighting industry has a sustainable growth to come.

Also the North European market seems very positive. This is a very positive changing market, so we monitor that very closely always and we don't see any downturn there.

European fire service market continues to grow. Asia should also show -- also grow again, so we are confident here as well.

And we've got massive order book, as I mentioned. Our production sites are having a good visibility and also in the market we have a good visibility with this is strong order book.

Here we continue our strategy for organic growth and yes, we focus on local market shares and increasing efficiency. This is [very] obviously from what I was presenting.

And that is basically what we are doing. As I mentioned, we reconfirm our guidance of more than EUR 950 million turnover and an EBIT margin of about 5.5%.

So thank you very much for your attention, and we are of course, now ready and happy for your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Volker Bosse with Baader Bank.

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Volker Bosse, Baader-Helvea Equity Research - Co-Head of Equity Research [2]

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Volker Bosse, Baader Bank. I have three questions. First of all, yes also thanks for all the explanation regarding the drop in earnings, for what was different this year and last year. But perhaps a general question. Is it an overall trend towards the more and more back-end loaded earnings generation? So would you see this trend also to continue in 2020, so that the earnings portion of the first half gets less and less meaningful?

Second question regarding free cash flow. Would you expect to achieve a positive free cash flow for the full year '19?

And the third question is a more general, strategic, structural question. Given your positioning, would you say that Rosenbauer is a strategic winner of the global warming? Would you [quote] yourself like that?

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [3]

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Thank you very much for your questions. Yes, regarding your first question, I would say yes on the one side because IFRS 15 is clearly leading to a stronger profitability in the second half, especially in the month where you have really the huge shipments.

I would also -- on the other side, I would also say no because they were already months where and -- we could have put more shipments in the second quarter especially. I have to admit that and therefore, there could have been a higher profitability in the second quarter already.

We could not do that, so we believe that this will -- that this is on the delay, as I was trying to explain and therefore, we stick to our guidance. So yes, there is a little trend in that direction. However, it depends very much on when exactly we ship the vehicles. Regarding the free cash -- free cash flow situation, I stick to what I also said already last time, that we will have a positive operating cash flow. Operating cash flow at the end of the year, it will be very much depending on how successful we are in our working capital management, if also the free cash flow will be positive.

We have said of course in our internal plans, however, there is of course some uncertainty in that. And that's why I say the operating cash flow will be positive at the [end of] this year.

And number three, strategic win off the global warming. I would say that firefighting becomes continuously more important. That's why I said that we believe that in the long term we have a very good outlook because -- and this is not only because of the global warming, this is because of the continuing organization. This is because of a growing population, yes, global population. And these 2 things come together with the global warming, which is also, of course, not a negative thing to our business model. And -- but, and this is also clear, 60% -- 60% to 70% of all incidents are rescue incidents and that's why these two other factors, the urbanization and the population growth are more important to Rosenbauer than the global warming.

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Operator [4]

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The next question is from the line of Markus Remis with RCD.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [5]

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Mr. Wolf, maybe let's start with the positive aspect of the European market dynamics, which seem to be very strong for quite some time now. I was wondering if you could provide more granularity if -- on the drivers behind -- I mean, Europe is a mature market. Are we currently seeing this demand boom being driven by some sort of peaking replacement cycle? I understand you're winning market share. So in that respect, I would be interested to get more color on who's losing, and also in which countries you're gaining market share. So kind of what's driving the strength in Europe?

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [6]

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Yes. So actually, I was mentioning we have a very strong increase in German market. This is driven by mainly the -- or also by these big orders where the Ministry of Catastrophic Protection but not only. And we see a lot of single orders coming in from the German/Austrian market, which really helps us to increase the volume in the central/Eastern European segment. And on the market side, yes, we see -- and this is something going on over the last years and we are following of course the competition suffering also from the low profitability. I was mentioning Magirus before, which is the main competitor in the aerial section or products field. So step-by-step and unit-by-unit, we're increasing our market share since we stepped into the German market 15 years ago and this is what we're continuing and what we will be successfully continuing because -- and also on the product side in Karlsruhe with the aerials. We have more than 50% of the market share and now, where we started with, I believe it was 20% or 30% 15 years ago. So all this together helps us to improve this segment. We're also doing a lot in the Eastern European market, which is new business for us. We started with sales operation in Russia and Poland and we also hope that we will have good success there in the future. And I also mentioned the consolidation which there was in France. So we are also working continuously on the French market, which is [growing] good for us. On the [hold] Dutch market still. So all these seeds we put into the ground in starting 2014 are now showing a positive development in the European market.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [7]

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Okay. Okay, coming back to the cash flow working capital topic, which is actually quite a weak spot, unfortunately.

We're hearing a lot about measures and determination to improve the working capital ratio. But actually for years, this is deteriorating. And I was wondering, how much more you can do because I've been covering the stock for quite some time. But at least we do not see a tangible inflection point in the figures and I was wondering how we should kind of get more confidence in an improving cash conversion when the growth is tremendous and every quarter, order intake is the bright spot. But on the other hand, the cash conversion is so weak that I'm not sure if all these orders are actually creating shareholder value.

So you kind of give us any more idea on how you think this can be turned around? And I understand that you apparently will step up receivables factoring? Is that what you...

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [8]

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Receivables factoring, we are doing. Yes.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [9]

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Yes, and can you maybe provide us with some figures? And if that non-recurs, factoring, and the -- which receivables are under this factoring program and maturity and a few details on that, please?

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [10]

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Yes, sure. So yes, so we have a new treasurer responsible in my team and he is coming from [schwarzstrassburg] which is [Schwartzstrasse] Bank, yes. He was helping me to do the bonded loan facility and this is one of the next things we want to do. I couldn't understand you and I cannot tell you anything else than I did in the past, maybe because it was about measures, and but what you see on the balance sheet is something which is an increase, which is like you say, it [amounts to] yes, a high increase. However, what we're doing at the moment and what I was doing is, I was establishing and I'm still not 100% finished. I was doing a finance strategy which we will communicate together with the full year results for this year because at the moment, we are putting that into our organization and this will take some more time.

I was calculating the cash conversion cycle. I was taking into the conversion cycles in inventory, in payables and in receivables and even in down payments. And I was setting some targets and in the budget process for this year -- or for the year 2020, we will see a [remade] entity responding very closely to the targets and then, we -- as I said before, we stepped up with this monthly meeting where we are now closely monitoring those figures.

So it's not 100% finished. This is why we don't communicate it now, but we will communicate it together with the full year figures and this is what I am doing here.

On the factoring especially, there are certain possibilities to do that. There is also some fintechs on the market who are providing platforms where you can do factoring. So we will -- we are currently looking for some new partners to do that in an appropriate way. Because actually, it's quite a big effort to do the factoring and it's also not the cheapest way of financing, obviously. So we have to find the right partner to do that and we are just in process of doing that.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [11]

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Okay. So to understand correctly. So far, there's no factoring implemented? And what's the targeted level of this...

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [12]

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No, there is a factoring implemented but this is not -- the volume is about, yes, EUR 10 million to EUR 25 million, which we can use from that.

It's very much depending on the single order, so we really have to look into every single order which you ship -- or every single account receivable, and then you have to find out if the bank is willing to accept it or not and to which conditions. And even the details of the letter of credit have to be looked through. So the effort is enormous and that's why we have to find a different way of doing that, which gives us both an easier way of doing it, which we can then roll out for the group and which gives us also a bigger volume.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [13]

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And the targeted level? What would be reasonable for you or feasible?

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [14]

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As I said, this is extremely difficult to say because it's depending on the individual accounts receivable. But my target is to have at least twice, maybe 3x the volume of what we have now and I mentioned that with EUR 15 million to EUR 25 million is what we have now.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [15]

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Yes. Can I then ask you on the net debt figure? You said positive operating cash flow. Not sure if free cash flow will be positive. But just on that -- a rough, back of the envelope calculation would entail something like EUR 280 million net debt at year-end? Is that...

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [16]

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If it would be at the same level of end of 2018, no? Yes, that's correct. Did I get it right, Mr. Remis?

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [17]

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No. If I come here from EUR 400 million net debt by year-end and assume something like, EUR 125 million operating cash flow in the second half, less EUR 15 million CapEx. This would be EUR 110 million free cash flow. So...

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [18]

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I didn't get it, sorry. EUR 400 million was what we had...

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [19]

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EUR 400 million net debt at year-end -- Or sorry, at the half year? And if you then say operating cash flow should be positive say, in the full year maybe something like EUR 10 million, EUR 15 million?

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [20]

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Yes.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [21]

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It implies say, EUR 130 million operating cash flow?

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [22]

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In the second half, yes.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [23]

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If I strip out EUR 15 million of CapEx, which I think is reasonable for the second half, then I get to EUR 150 million free cash flow in the second half and that would get something to -- sorry, EUR 280 million, EUR 285 million?

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [24]

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Net debt, yes.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [25]

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Net debt?

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [26]

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Yes. I think that's the correct calculation, yes.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [27]

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Versus EUR 230 million at the end of 2018?

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [28]

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Yes. Yes, fair calculation. Thank you.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division - Chief Analyst [29]

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Okay. Last question. The cost for INTERSCHUTZ. How much will that impact 2020?

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [30]

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So some of the cost will already appear this year and only the total cost, which will be between EUR 4 million and EUR 5 million and some of these cost and the major part of that cost will be next year, yes.

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Operator [31]

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(Operator Instructions) The next question is from the line of Dr. Thomas Deser with Union Investment.

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Thomas Deser;Union Management;Portfolio Manager, [32]

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I've got 2 questions. The first one, regarding share buybacks. Given the financial restrictions, is it fair to assume that share buybacks are not a priority for the current business year?

And the second question regarding the problems with your software ERP systems. Is that a never-ending story? Or where are you in the process of getting a kind of a proper system there?

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [33]

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Yes. So share buybacks is not a priority, I can confirm. And software, it's not a never-ending story. We are at the moment -- we have implemented a financial module and controlling module from SAP SR4, which is called HANA, here the 1st of July 2019 at 16 -- no, 11 sites. So this is a big step for us. We will also get -- we have interfaced financial data from all other Rosenbauer group companies and we are at the moment doing our first monthly closing in the new system. So this is the first step.

As the next thing, we'll now work on a global template for sales and service entities, which we will then roll out to all of our sales and service entities. And as a next step, afterwards, we will do a global template for our production and our big production sites, which we will then also roll out and then we have at the end -- and it's a long story but not a never-ending story. We will have an integrated and global ERP system at Rosenbauer, which is something which will improve, of course, our transparency dramatically.

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Operator [34]

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At this time, there are no further questions. I hand back to Sebastian Wolf for closing comments.

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Sebastian Wolf, Rosenbauer International AG - CFO & Member of Executive Board [35]

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Yes. Thank you, everybody, for attending our meeting today. Again, I would like to repeat our invitation to our Capital Markets Day already now. We go take this opportunity to also send you maybe a save the date after that meeting. And I am very happy for further questions also after the meeting, together with Tiemon Kiesenhofer and yes, have a good day, have a good weekend and looking forward to hearing from you soon.

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Operator [36]

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